IMPORTANT NOTICE

THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE ADDRESSEES OUTSIDE OF THE UNITED STATES.

IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the attached offering circular (the “Offering Circular”). You are advised to read this disclaimer carefully before accessing, reading or making any other use of the attached Offering Circular. In accessing the attached Offering Circular, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from the company as a result of such access. In order to be eligible to view the attached Offering Circular or make an investment decision with respect to the securities, investors must be outside the United States (as defined under Regulation S under the United States Securities Act of 1933, as amended (the “Securities Act”)).

Confirmation of your representation: This Offering Circular is being sent to you at your request and by accepting the e-mail and accessing the attached Offering Circular, you shall be deemed to represent to Yunnan Energy Investment Finance Company Ltd. (the “Issuer”), Yunnan Energy Investment (H K) Co. Limited (the “Guarantor”), Yunnan Provincial Energy Investment Group Co., Ltd. (the “Company”) and Bank of China Limited, BOCI Asia Limited, CCB International Capital Limited, China Merchants Securities (HK) Co., Ltd., Citigroup Global Markets Limited, CLSA Limited, Guotai Junan Securities (Hong Kong) Limited and The Hongkong and Shanghai Banking Corporation Limited (the “Joint Lead Managers”) that (1) you and any customers you represent are outside the United States and that the e-mail address that you gave us and to which this e-mail has been delivered is not, located in the United States, its territories or possessions and (2) you consent to delivery of the attached Offering Circular and any amendments or supplements thereto by electronic transmission.

The attached Offering Circular has been made available to you in electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of transmission and, consequently, none of the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee (as defined in the attached Offering Circular), the Agents (as defined in the attached Offering Circular) or any of their respective affiliates, directors, officers, employees, representatives, agents and each person who controls the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee, the Agents or any of their respective affiliates accepts any liability or responsibility whatsoever in respect of any discrepancies between the document distributed to you in electronic format and the hard copy version available to you upon request from the Issuer, the Guarantor, the Company and the Joint Lead Managers.

Restrictions: The attached Offering Circular is being furnished in connection with an offering in offshore transactions to persons outside the United States in compliance with Regulation S under the Securities Act solely for the purpose of enabling a prospective investor to consider the purchase of the securities described herein.

THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE OFFERING IS MADE SOLELY OUTSIDE THE UNITED STATES IN OFFSHORE TRANSACTIONS IN RELIANCE OF REGULATION S UNDER THE SECURITIES ACT.

Nothing in this electronic transmission constitutes an offer or an invitation by or on behalf of the Issuer, the Guarantor or the Company or any Joint Lead Manager to subscribe for or purchase any of the securities described therein, and access has been limited so that it shall not constitute in the United States or elsewhere a general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or directed selling efforts (within the meaning of Regulation S under the Securities Act). If a jurisdiction requires that the offering be made by a licensed broker or dealer and any of the Joint Lead Managers or any affiliate is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by such Joint Lead Manager or such affiliate on behalf of the Issuer in such jurisdiction. The Offering Circular and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. You are reminded that you have accessed the attached Offering Circular on the basis that you are a person into whose possession the attached Offering Circular may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver this document, electronically or otherwise, to any other person. If you have gained access to this transmission contrary to the foregoing restrictions, you are not allowed to purchase any of the securities described in the attached Offering Circular.

Actions that you may not take: If you receive this document by e-mail, you should not reply by e-mail to this document, and you may not purchase any securities by doing so. Any reply e-mail communications, including those you generate by using the “Reply” function on your e-mail software, will be ignored or rejected.

YOU ARE NOT AUTHORISED TO AND YOU MAY NOT FORWARD OR DELIVER THE ATTACHED OFFERING CIRCULAR, ELECTRONICALLY OR OTHERWISE, TO ANY OTHER PERSON OR REPRODUCE SUCH OFFERING CIRCULAR IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THE ATTACHED OFFERING CIRCULAR IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.

You are responsible for protecting against viruses and other destructive items. If you receive this document by e-mail, your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. OFFERING CIRCULAR STRICTLY CONFIDENTIAL YUNNAN ENERGY INVESTMENT FINANCE COMPANY LTD. (incorporated in the British Virgin Islands with limited liability)

US$300,000,000 3.0 PER CENT. GUARANTEED BONDS DUE 2019 unconditionally and irrevocably guaranteed by

YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED (incorporated in Hong Kong with limited liability) with the benefit of a keepwell deed and a deed of equity interest purchase and investment undertaking by

YUNNAN PROVINCIAL ENERGY INVESTMENT GROUP CO., LTD. (incorporated in the People’s Republic of China with limited liability)

ISSUE PRICE: 99.815 PER CENT.

The 3.0 per cent. guaranteed bonds due 2019 (the “Bonds”) will be issued by Yunnan Energy Investment Finance Company Ltd. (the “Issuer”). The Bonds will be unconditionally and irrevocably guaranteed (the “Guarantee”) by Yunnan Energy Investment (H K) Co. Limited (the “Guarantor”). The Issuer is a wholly-owned subsidiary of the Guarantor and the Guarantor is a wholly-owned subsidiary of Yunnan Provincial Energy Investment Group Co., Ltd. (the “Company”). The Bonds will bear interest from and including 26 April 2016 at the rate of 3.0 per cent. per annum. Interest on the Bonds is payable semi-annually in arrear on 26 April and 26 October each year, commencing on 26 October 2016. Unless previously redeemed or purchased and cancelled, the Bonds will mature at their principal amount on 26 April 2019. The Bonds will constitute direct, unconditional, unsubordinated and, subject to Condition 4(a) of the Terms and Conditions of the Bonds, unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall at all times rank at least pari passu with all other present and future unsubordinated and unsecured obligations of the Issuer, save for such obligations as may be provided by applicable laws and subject to Condition 4(a) of the Terms and Conditions of the Bonds. Payments on the Bonds will be made without deduction for or on account of taxes of the British Virgin Islands, Hong Kong and the PRC to the extent described in “Terms and Conditions of the Bonds – Taxation”. The Issuer, the Guarantor and the Company will enter into a keepwell deed on or about 26 April 2016 with Citicorp International Limited (the “Trustee”) as trustee of the Bonds (the “Keepwell Deed”) in favour of the Trustee as further described in “Summary of the Keepwell Deed”. The Keepwell Deed does not constitute a guarantee by the Company of the obligations of the Issuer under the Bonds or the obligations of the Guarantor under the Guarantee. The Issuer, the Guarantor, the Company and the Trustee will enter into a deed of equity interest purchase and investment undertaking on or about 26 April 2016 (the “Deed of Equity Interest Purchase and Investment Undertaking”) as further described in “Summary of the Deed of Equity Interest Purchase and Investment Undertaking”. The Deed of Equity Interest Purchase and Investment Undertaking does not constitute a guarantee by the Company of the obligations of the Issuer under the Bonds or the obligations of the Guarantor under the Guarantee. The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at any time at their principal amount together with accrued but unpaid interest up to, but excluding, the date fixed for redemption in the event of certain changes affecting taxes of the British Virgin Islands, Hong Kong or the PRC. At any time following the occurrence of a Change of Control (as defined in the Terms and Conditions of the Bonds), the holder of any Bonds will have the right, at such holder’s option, to require the Issuer to redeem all, but not some only, of that holder’s Bonds on the Put Date (as defined in the Terms and Conditions of the Bonds) at 101 per cent. of their principal amount, together with accrued interest up to, but excluding, the Put Date. See “Terms and Conditions of the Bonds – Redemption and Purchase”.

Pursuant to the Notice on Promoting the Reform of the Filing and Registration System for Issuance of Foreign Debt by Corporates（國家發展改革委關於推進企業發行外債備 案登記制管理改革的通知）(the “NDRC Notice”) promulgated by National Development and Reform Commission (the “NDRC”) on 14 September 2015 which came into effect on the same day, the Company has registered the issuance of the Bonds with the NDRC and obtained a certificate from the NDRC on 15 January 2016 evidencing such registration. Pursuant to the NDRC Notice, the Company will cause relevant information relating to the issue of the Bonds to be reported to the NDRC within 10 PRC business days after the Issue Date. Investing in the Bonds involves certain risks. See “Risk Factors” beginning on page 18 for a discussion of certain risk factors to be considered in connection with an investment in the Bonds. The Bonds and the Guarantee have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any other jurisdiction, and, subject to certain exceptions, may not be offered or sold within the United States and are only being offered and sold outside the United States in offshore transactions in compliance with Regulation S under the Securities Act (“Regulation S”). For a description of these and certain restrictions on offers and sales of the Bonds and the Guarantee and the distribution of this offering circular, see “Subscription and Sale”. The denomination of the Bonds shall be US$200,000 each and integral multiples of US$1,000 in excess thereof. Application has been made to The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) for permission to deal in, and for listing of the Bonds by way of debt issues to professional investors (as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong) only and such permission is expected to become effective on 27 April 2016. Hong Kong Exchanges and Clearing Limited and the Hong Kong Stock Exchange take no responsibility for the contents of this Offering Circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Offering Circular. This Offering Circular is for distribution to professional investors only. The Bonds will be represented initially by beneficial interests in a global certificate (the “Global Certificate”) in registered form which will be registered in the name of a nominee of, and shall be deposited on or about 26 April 2016 (the “Issue Date”) with, a common depositary for Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking S.A. (“Clearstream, Luxembourg”). Beneficial interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream, Luxembourg. Except as described herein, certificates for Bonds will not be issued in exchange for interests in the Global Certificate. Fitch Ratings Inc. (“Fitch”) has assigned a corporate rating of BBB with a stable outlook to the Company. The Bonds are expected to be rated BBB by Fitch. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.

Joint Global Coordinators (in alphabetical order)

Bank of China Citigroup Guotai Junan International HSBC Joint Bookrunners and Joint Lead Managers (in alphabetical order) Bank of China CCB International China Merchants Citigroup Securities (HK) CITIC CLSA Securities Guotai Junan International HSBC Offering Circular dated 19 April 2016 NOTICE TO INVESTORS

Each of the Issuer, the Guarantor and the Company, having made all reasonable enquiries, confirms that (i) this Offering Circular contains all information with respect to Yunnan Energy Investment Finance Company Ltd. (the “Issuer”), Yunnan Energy Investment (H K) Co. Limited (the “Guarantor”), Yunnan Provincial Energy Investment Group Co., Ltd. (the “Company”) and the Company’s subsidiaries and affiliates taken as a whole (the “Group”), the Bonds, the Guarantee, the Keepwell Deed and the Deed of Equity Interest Purchase and Investment Undertaking which is material in the context of the issue and offering of the Bonds; (ii) the statements contained in this Offering Circular relating to the Issuer, the Guarantor, the Company and to the Group, are in every material respect true and accurate and not misleading; (iii) the opinions and intentions expressed in this Offering Circular with regard to the Issuer, the Guarantor, the Company and to the Group are honestly held, have been reached after considering all relevant circumstances and are based on reasonable assumptions; (iv) there are no other facts in relation to the Issuer, the Guarantor, the Company, the Group, the Guarantee, the Keepwell Deed, the Deed of Equity Interest Purchase and Investment Undertaking or the Bonds the omission of which would, in the context of the issue and offering of the Bonds make any statement in this Offering Circular misleading in any material respect; and (v) all reasonable enquiries have been made by the Issuer, the Guarantor and the Company to ascertain such facts and to verify the accuracy of all such information and statements.

This Offering Circular includes particulars given in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited for the purpose of giving information with regard to the Issuer, the Guarantor and the Company. Each of Issuer, the Guarantor and the Company accepts full responsibility for the accuracy of the information contained in this Offering Circular and confirms, having made all reasonable enquiries, that to the best of its knowledge and belief there are no other facts the omission of which would make any statement herein misleading. The contents of this Offering Circular have not been reviewed by any regulatory authority in Hong Kong or elsewhere. Investors are advised to exercise caution in relation to the offering of the Bonds. If Investors are in any doubt about any of the contents of the Offering Circular, they should obtain independent professional advice.

This Offering Circular has been prepared by the Issuer, the Guarantor and the Company solely for use in connection with the proposed offering of the Bonds described in this Offering Circular. The distribution of this Offering Circular and the offering of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes are required by the Issuer, the Guarantor, the Company and Bank of China Limited, BOCI Asia Limited, CCB International Capital Limited, China Merchants Securities (HK) Co., Ltd., Citigroup Global Markets Limited, CLSA Limited, Guotai Junan Securities (Hong Kong) Limited and The Hongkong and Shanghai Banking Corporation Limited (the “Joint Lead Managers”) to inform themselves about and to observe any such restrictions. None of the Issuer, the Guarantor, the Company and the Joint Lead Managers represents that this Offering Circular may be lawfully distributed, or that the Bonds may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. No action is being taken to permit a public offering of the Bonds or the distribution of this Offering Circular in any jurisdiction where action would be required for such purposes. There are restrictions on the offer and sale of the Bonds and the circulation of documents relating thereto, in certain jurisdictions including the United States, the United Kingdom, the PRC, Hong Kong, Singapore, Taiwan and the British Virgin Islands, and to persons connected therewith. For a description of certain further restrictions on offers, sales and resales of the Bonds and distribution of this Offering Circular, see “Subscription and Sale”.

No person has been or is authorised to give any information or to make any representation concerning the Issuer, the Guarantor, the Company, the Group, the Bonds, the Guarantee, the Keepwell Deed or the Deed of Equity Interest Purchase and Investment Undertaking other than as contained herein and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee or the Agents (as defined in “Terms and Conditions of the Bonds” in this Offering Circular). Neither the delivery of this Offering Circular nor any offering, sale or delivery made in connection with the issue of the Bonds shall, under any circumstances, constitute a representation that there has been no change or development reasonably likely to involve a change in the affairs of the Issuer, the Guarantor, the Company, the Group or any of them since the date hereof or create any implication that the information

–i– contained herein is correct as at any date subsequent to the date hereof. This Offering Circular does not constitute an offer of, or an invitation by or on behalf of the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee or the Agents to subscribe for or purchase any of the Bonds and may not be used for the purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in which such offer or solicitation is not authorised or is unlawful.

This Offering Circular is highly confidential and has been prepared by the Issuer, the Guarantor and the Company solely for use in connection with the proposed offering of the Bonds described herein. The Issuer has submitted this Offering Circular confidentially to a limited number of institutional investors so that they can consider a purchase of the Bonds. None of the Issuer, the Guarantor and the Company has authorised its use for any other purpose. This Offering Circular may not be copied or reproduced in whole or in part. It may be distributed only to and its contents may be disclosed only to the prospective investors to whom it is provided. By accepting delivery of this Offering Circular each investor agrees to these restrictions.

No representation or warranty, express or implied, is made or given by the Joint Lead Managers, the Trustee or the Agents (or any of their respective affiliates, directors, officers, employees, representatives, agents and each person who controls any of them) as to the accuracy, completeness or sufficiency of the information contained in this Offering Circular, and nothing contained in this Offering Circular is, or shall be relied upon as, a promise, representation or warranty by the Joint Lead Managers, the Trustee or the Agents (or any of their respective affiliates, directors, officers, employees, representatives, agents and each person who controls any of them). None of the Joint Lead Managers, the Trustee and the Agents (or any of their respective affiliates, directors, officers, employees, representatives, agents and each person who controls any of them) has independently verified any of the information contained in this Offering Circular and can give assurance that such information is accurate, truthful or complete.

To the fullest extent permitted by law, the Joint Lead Managers, the Trustee and the Agents (or any of their respective affiliates, directors, officers, employees, representatives, agents and each person who controls any of them) do not accept any responsibility for the contents of this Offering Circular. Each of the Joint Lead Managers, the Trustee and the Agents accordingly disclaims all and any liability whether arising in tort or contract or otherwise which it might otherwise have in respect of this Offering Circular or any such statement. None of the Joint Lead Managers, the Trustee and the Agents (or any of their respective affiliates, directors, officers, employees, representatives, agents and each person who controls any of them) undertakes to review the financial condition or affairs of the Issuer, the Guarantor, the Company or the Group during the life of the arrangements contemplated by this Offering Circular nor to advise any investor or potential investors in the Bonds of any information coming to the attention of the Joint Lead Managers, the Trustee or any Agent.

This Offering Circular is not intended to provide the basis of any credit or other evaluation nor should it be considered as a recommendation by any of the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee or the Agents (or any of their respective affiliates, directors, officers, employees, representatives, agents and each person who controls any of them) that any recipient of this Offering Circular should purchase the Bonds. Each potential purchaser of the Bonds should determine for itself the relevance of the information contained in this Offering Circular and its purchase of the Bonds should be based upon such investigations with its own tax, legal and business advisers as it deems necessary.

IN CONNECTION WITH THE ISSUE OF THE BONDS, ANY OF THE JOINT LEAD MANAGERS APPOINTED AND ACTING IN ITS CAPACITY AS THE STABILISING MANAGER (EACH, A “STABILISING MANAGER”) (OR PERSONS ACTING ON BEHALF OF THE STABILISING MANAGER) MAY, TO THE EXTENT PERMITTED BY APPLICABLE LAWS AND DIRECTIVES, OVER-ALLOT THE BONDS OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE BONDS AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT THE STABILISING MANAGER (OR PERSONS ACTING ON BEHALF OF THE STABILISING MANAGER) WILL UNDERTAKE STABILISATION ACTION. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE BONDS IS MADE AND SUCH STABILISING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME AND MUST BE BROUGHT TO AN END AFTER A LIMITED PERIOD.

–ii– The Bonds and the Guarantee have not been and will not be registered with the Securities and Exchange Commission under the Securities Act or with any state securities commission in the United States or any other United States regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering or the accuracy or adequacy of this Offering Circular. Any representation to the contrary is a criminal offense in the United States.

In making an investment decision, investors must rely on their own examination of the Issuer, the Guarantor, the Company and the Group and the terms of the offering of the Bonds, including the merits and risks involved. See “Risk Factors”. Investors are advised to read and understand the contents of this Offering Circular before investing and consult their attorney and adviser if in doubt.

Listing of the Bonds on the Hong Kong Stock Exchange is not to be taken as an indication of the merits of the Issuer, the Guarantor, the Company, the Group or the Bonds. The Issuer, the Guarantor, the Company, the Group, the Joint Lead Managers, the Trustee, the Agents and their respective directors, officers, employees, representatives, advisers, agents and affiliates are not making any representation to any purchaser of Bonds regarding the legality of any investment in the Bonds by such purchaser under any legal investment or similar laws or regulations. The contents of this Offering Circular should not be construed as providing legal, business, accounting or investment advice. Each person receiving this Offering Circular acknowledges that such person has not relied on the Joint Lead Managers, the Trustee, the Agents or any of their respective directors, officers, employees, representatives, agents or affiliates in connection with its investigation of the accuracy of such information or its investment decision.

Industry and Market Data

Market data and certain industry forecasts and statistics in this Offering Circular have been obtained from both public and private sources, including market research, publicly available information and industry publications. Although the Issuer, the Guarantor and the Company believe this information to be reliable, it has not been independently verified by the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee, the Agents or their respective directors, officers, employees, representatives, advisers, agents or affiliates, and none of the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee, the Agents or their respective directors, officers, employees, representatives, advisers, agents or affiliates makes any representation as to the accuracy or completeness of that information. In addition, third party information providers may have obtained information from market participants and such information may not have been independently verified. This Offering Circular summarises certain documents and other information, and investors should refer to them for a more complete understanding of what is discussed in those documents.

Presentation of Financial Information

The consolidated financial information of the Company as at and for the years ended 31 December 2013, 2014 and 2015 included in this Offering Circular has been extracted from the Company’s audited consolidated financial statements as at and for the years ended 31 December 2014 and 2015, which are included elsewhere in this Offering Circular. The Company’s audited consolidated financial statements as at and for the years ended 31 December 2014 and 2015 were prepared and presented in accordance with the Accounting Standards for Business Enterprises in China (“PRC GAAP”) and have been audited by Union Power Certified Public Accountants (Special General Partnership) (previously known as “China Audit Asia Pacific Certified Public Accountants LLP”) in accordance with Auditing Standards for Certified Public Accountants in China. PRC GAAP differs in certain material respects from International Financial Reporting Standards (“IFRS”). See “Summary of Certain Material Differences Between PRC GAAP and IFRS”.

The consolidated financial information of the Guarantor as at and for the years ended 31 December 2013, 2014 and 2015 included in this Offering Circular has been extracted from the Guarantor’s audited consolidated financial statements as at and for the years ended 31 December 2014 and 2015, which are included elsewhere in this Offering Circular. The consolidated financial statements of the Guarantor as at and for the years ended 31 December 2014 and 2015 were prepared and presented in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been audited by Union Alpha CAAP C.P.A. Limited.

– iii – The Guarantor’s consolidated statements as at and for the year ended 31 December 2014 contained in its audited consolidated financial statements as at and for the year ended 31 December 2015 has been restated to reflect its acquisition of 57.32 per cent. equity interests in YEIG International Energy Development Co., Ltd. （雲南能投對外能源開發有限公司） (“YEIG International Energy”) at nil consideration in April 2015 (the “Acquisition”) (the “Relevant Adjustments”) which was accounted for as an associate of the Guarantor before the Acquisition. The entity acquired was a subsidiary of the Company, the Guarantor’s immediate holding company.

As a result of the Acquisition, the Guarantor became the holding company of YEIG International Energy. Since the Guarantor and YEIG International Energy were ultimately controlled by the Company both before and after the completion of the Acquisition, the Acquisition was accounted for using the principles of merger accounting.

The consolidated statements of profit or loss, consolidated statements of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Guarantor for the years ended 31 December 2014 and 2015 took into account the results of YEIG International Energy, as if the corporate structure of the Guarantor immediately after the completion of the Acquisition had been in existence throughout the years ended 31 December 2014 and 2015, or since their respective dates of acquisition, incorporation or registration, whichever is shorter.

The Guarantor’s restated consolidated statements as at and for the year ended 31 December 2014 contained in the consolidated financial statements as at and for the year ended 31 December 2015 was prepared to present the state of affairs of the Guarantor and YEIG International Energy as if the corporate structure of the Guarantor immediately after the completion of the Acquisition had been in existence and in accordance with the respective equity interests and/or the power to exercise control over the individual companies attributable to the Guarantor as at 31 December 2014.

The Guarantor’s audited consolidated financial statements as at and for the year ended 31 December 2013 which are contained in its consolidated financial statements as at and for the year ended 31 December 2014 has not been restated to reflect the Relevant Adjustments. Therefore, the Guarantor’s consolidated financial information as at and for the year ended 31 December 2013 contained in the Guarantor’s audited consolidated financial statements as at and for the year ended 31 December 2014, are not directly comparable to the restated consolidated financial information as at and for the year ended 31 December 2014 contained in the consolidated financial statements as at and for the year ended 31 December 2015. Potential investors must exercise caution when using the consolidated financial information of the Guarantor as at and for the year ended 31 December 2013 to evaluate its financial performance.

Rounding

In this Offering Circular, where information has been presented in thousands or millions of units, amounts may have been rounded up or down. Accordingly, totals of columns or rows of numbers in tables may not be equal to the apparent total of the individual items and actual numbers may differ from those contained herein due to rounding. References to information in billions of units are to the equivalent of a thousand million units.

Certain Definitions and Conventions

In this Offering Circular, unless otherwise specified or the contact otherwise requires, references to:

¼ “China”orthe“PRC” are to the People’s Republic of China and, for the purpose of this Offering Circular only, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan;

¼ “Hong Kong” are to the Hong Kong Special Administrative Region of China;

¼ “Hong Kong dollars”or“HK$” are to the lawful currency of Hong Kong;

¼ “PRC Government” are to the central government of the PRC, including all political subdivisions (including provincial, municipal and other regional or local governmental entities) and instrumentalities thereof, or where the context requires, any of them;

–iv– ¼ “Renminbi”or“RMB” are to the lawful currency of the PRC;

¼ “US dollars”or“US$” are to the lawful currency of the United States of America;

¼ “Yunnan Provincial Government” are to the Yunnan Provincial People’s Government; and

¼ “2013”, “2014” and “2015” are to the Company’s financial years ended 31 December 2013, 2014 and 2015, respectively.

In this Offering Circular, “kW” is the abbreviation for kilowatt, “kWh” is the abbreviation for kilowatt-hour, “MW” is the abbreviation for megawatt, “MWh” is the abbreviation for megawatt-hour, “GW” is the abbreviation for gigawatt, and “GWh” is the abbreviation for gigawatt-hour.

In this Offering Circular and unless context indicates otherwise, “consolidated installed capacity” represents 100.0 per cent. of the installed capacity of a power project controlled by the Guarantor or the Company, as the case may be; and “attributable installed capacity” represents the installed capacity of a power project in which the Group has a non-controlling equity interest multiplied by the Group’s ownership percentage in this project.

The English names of the PRC nationals, entities, departments, facilities, laws, regulations, certificates, titles and the like are translations of their Chinese names and are included for identification purposes only.

Solely for convenience, this Offering Circular contains translations of certain Hong Kong dollar amounts and Renminbi amounts into US dollars amounts. Unless indicated otherwise, the translation of Hong Kong dollar amounts and Renminbi amounts into US dollars amounts has been made at the rate of HK$7.7563 to US$1.00 and RMB6.4480 to US$1.00, respectively, the exchange rates set forth in the H.10 statistical release of the Federal Reserve Bank of New York on 31 March 2016. These translations should not be construed as representations that the Hong Kong dollar or Renminbi amounts could actually be converted into any US dollars amounts at the rates indicated or at all. Historical amounts translated into Renminbi have been translated at historical rates of exchange. Such translations should not be construed as representations that the amounts referred to herein could have been or could be converted into Renminbi at those rates or any other rate at all. For further information relating to exchange rates, see “Exchange Rates Information”.

–v– FORWARD-LOOKING STATEMENTS

The Issuer, the Guarantor and the Company have made forward-looking statements in this Offering Circular regarding, among other things, the Guarantor’s and the Group’s financial condition, future expansion plans and business strategies. These forward-looking statements are based on the Guarantor and the Company’s current expectations about future events. Although the Issuer, the Guarantor and the Company believe that these expectations and projections are reasonable, such forward-looking statements are inherently subject to risks, uncertainties and assumptions, including, among other things:

¼ the Group’s business and operating strategies;

¼ the Group’s capital commitment and development plans;

¼ the amount and nature of, and potential for, future development of the Group’s business;

¼ various business opportunities that the Group may pursue;

¼ the regulatory environment of the industries in which the Group operates;

¼ changes in political, economic, legal and social conditions, in particular in the PRC, including the specific policies of the PRC central and local governments affecting the regions where the Group operates;

¼ the prospective financial condition and performance regarding the Group’s businesses;

¼ availability and costs of financing;

¼ changes in competitive conditions and the Group’s ability to compete under these conditions;

¼ the Group’s ability to obtain additional capital on acceptable terms;

¼ reduction or discontinuance of the government subsidies and other government grants or the mismatch in terms of timing of the availability of the government fiscal support and that of the Group’s cash flow requirement; and

¼ other risks identified in “Risk Factors” in this Offering Circular.

The words “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “potential”, “predict”, “project”, “seek”, “should”, “will”, “would” and similar expressions are intended to identify a number of these forward-looking statements. The Issuer, the Guarantor, the Company and any other member of the Group undertake no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Offering Circular might not occur and the actual results of the Issuer, the Guarantor, the Company or the Group could differ materially from those anticipated in these forward-looking statements.

These forward-looking statements speak only as at the date of this Offering Circular. The Issuer, the Guarantor and the Company expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Group’s expectations with regard thereto or any change of events, conditions or circumstances, on which any such statement was based.

–vi– TABLE OF CONTENTS

SUMMARY...... 1

OFFERING STRUCTURE ...... 4

SUMMARY OF THE OFFERING ...... 8

SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY ...... 11

SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF THE GUARANTOR..... 15

RISK FACTORS ...... 18

USE OF PROCEEDS ...... 46

EXCHANGE RATE INFORMATION ...... 47

CAPITALISATION AND INDEBTEDNESS OF THE COMPANY ...... 49

CAPITALISATION AND INDEBTEDNESS OF THE GUARANTOR...... 50

TERMS AND CONDITIONS OF THE BONDS ...... 51

SUMMARY OF PROVISIONS RELATING TO THE BONDS IN GLOBAL FORM...... 68

SUMMARY OF THE KEEPWELL DEED ...... 70

SUMMARY OF THE DEED OF EQUITY INTEREST PURCHASE AND INVESTMENT UNDERTAKING...... 72

DESCRIPTION OF THE ISSUER ...... 75

DESCRIPTION OF THE GUARANTOR ...... 76

DESCRIPTION OF THE GROUP ...... 79

DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF THE COMPANY ...... 103

PRINCIPAL SHAREHOLDERS ...... 109

PRC REGULATIONS ...... 110

TAXATION ...... 120

DESCRIPTION OF CERTAIN MATERIAL DIFFERENCES BETWEEN THE PRC GAAP AND IFRS ...... 123

SUBSCRIPTION AND SALE ...... 125

GENERAL INFORMATION ...... 129

INDEX TO FINANCIAL STATEMENTS ...... F-1

– vii – SUMMARY

The summary below is only intended to provide a very limited overview of information described in more detail elsewhere in this Offering Circular. This summary does not contain all the information that may be important to prospective investors in deciding to invest in the Bonds. Terms defined elsewhere in this Offering Circular shall have the same meanings when used in this summary. Prospective investors should read the entire Offering Circular, including the section entitled “Risk Factors” and the financial statements and related Bonds thereto, before making an investment decision.

OVERVIEW

The Group is a leading state-owned energy company based in Yunnan Province. It has been designated by the Yunnan Provincial Government as its sole strategic platform to engage in the investment and development of the energy sector in Yunnan Province. According to 2015 Chinese 500 Top Enterprises Forum, the Group was the largest energy enterprise in Western China, the eighth largest energy enterprise in China and was ranked 349th among China’s top 500 enterprises, all measured by revenue in 2014. The Group focuses on the investment and development of the energy sector in Yunnan Province and has primarily engaged in power generation and sales, coal production and sales and resources trading (including natural gas). Over the years, the Group has diversified its businesses into financial services, development and management of industrial parks, energy technology and salt and chemical production.

The Company, through its 88 subsidiaries and 47 investee companies (in which the Company holds non-controlling interests), has invested in a diversified portfolio of hydropower, fossil fuel, wind power, natural gas, solar and other new energy projects that are of strategic importance to Yunnan’s economic and urban development. As at 31 December 2015, the Group held controlling interests in eight hydropower stations (all of which were in operation), one fossil fuel power station (one unit of which was in operation), nine wind farm projects (five of which were in operation) and three solar and waste-to-energy power projects (two of which were in operation) in Yunnan Province, and the consolidated installed capacity of the power stations in operation was 1,884.9 MW. In addition, as at 31 December 2015, the Group held non-controlling interests in 16 power companies, including 10 hydropower companies and six fossil fuel power companies. As at 31 December 2015, the total attributable installed capacity of the power stations operated by these investee companies was 11,513.3 MW. The investment income distributed by the Group’s investee companies has historically contributed a material portion of the Group’s revenue and profit.

For the years ended 31 December 2013, 2014 and 2015, the revenue of the Group was RMB26,387.7 million, RMB35,371.5 million and RMB41,887.1 million, respectively. The table below sets forth the revenue from each business segment of the Group in absolute amount and as a percentage of the Group’s revenue during the years indicated:

For the year ended 31 December 2013 2014 2015 Per cent. Per cent. Per cent. Amount of total Amount of total Amount of total (RMB in million, except percentages) Energy business ...... 24,915.7 94.4 32,445.0 91.7 38,514.4 91.9 Power generation and sales ...... 1,532.3 5.8 1,827.4 5.2 2,220.6 5.3 Coal production and sales ...... 1,903.9 7.2 5,298.3 15.0 20.7 0.0 Resources trading(1) ...... 21,479.5 81.4 25,319.3 71.6 36,273.1 86.6 Financial services(2)...... – – 71.0 0.2 29.5 0.1 Other businesses(3)...... 130.5 0.5 216.2 0.6 535.5 1.3 Investment income(4) ...... 1,309.0 5.0 2,529.9 7.2 2,340.7 5.6 Interest income(5) ...... 32.6 0.1 109.4 0.3 467.0 1.1 Total...... 26,387.7 100.0 35,371.5 100.0 41,887.1 100.0

–1– Notes:

(1) Revenue from resources trading includes revenue from the Group’s natural gas business.

(2) Revenue from financial services represents income from equity and debt investment and management, trust asset management, economic information consulting, cornerstone investment in initial public offerings and private placements, financial leasing with focus on energy-related sectors, factoring service to provide small and medium enterprises with funding to meet their liquidity needs and fund investment.

(3) Revenue from other businesses represents the income from investment, development and management of industrial parks and energy technology business. The Company acquired a controlling interest in Yunnan Salt & Chemical Industry Co., Ltd. (“Yunnan Salt”) in October 2015, following which the financial statements of Yunnan Salt were consolidated into the financial statements of the Group. For details about the acquisition and Yunnan Salt’s business, see “– Other Businesses – Salt and Chemical Production Business”.

(4) Investment income represents the dividend income of the Group received from its investee companies in which the Group hold non-controlling interests. Given the nature of the Company as an investment vehicle, carrying out investments constitutes one of its main business activities. The management considers it appropriate to include such investment income in its revenue.

(5) Interest income represents primarily the interest payment received by the Company on the loans granted to its investee companies engaging in the energy business. As those loans generally do not have a maturity date, such interest income is deemed dividend distribution by the relevant investee companies and is included in the Group’s revenue.

The Company was established on 27 February 2012 and is beneficially controlled by Yunnan SASAC. As part of its formation, the Company received the transfer, at book value, of all of the hydro and equity assets of Yunnan Provincial Investment Holdings Group Co., Ltd.（雲南省投資控股集團有限公司） (an investment vehicle of the Yunnan Provincial Government) with the approval of the Yunnan Provincial Government. As at 31 December 2015, the Company had a registered capital of RMB11,660.0 million and total assets of RMB74,187.4 million. The Group has been tasked to represent Yunnan Provincial Government to invest in energy projects and create a platform for implementing the Yunnan Provincial Government’s strategies on the exploitation and development of energy resources in Yunnan Province as well as investment in and cooperation with Southeast Asian nations on the energy sector.

COMPETITIVE STRENGTHS

The Group believes that its success is primarily attributable to the following key competitive strengths:

¼ The sole investment platform to implement the energy strategies of the Yunnan Provincial Government

¼ Strong governmental support and strategic alignment of business with favourable national and Yunnan provincial policies

¼ Well-positioned to capture the growth opportunities in the development of clean energy sector with a diversified portfolio of high-quality clean energy assets

¼ Access to broad financing channels which helps to secure adequate capital resources and achieve optimal capital structure

¼ Sound corporate governance implemented by a team of dedicated and experienced senior management

BUSINESS STRATEGIES

The Group endeavours to transform from an electricity-based production enterprise group to a comprehensive energy enterprise group, which focuses on the exploitation and development of different types of energy, particularly clean energy, and provision of related services. The Group intends to implement the following business strategies to achieve its goal:

¼ Continue to focus on the energy sector and enhance its industry competitiveness

–2– ¼ Actively participate in the “One Belt, One Road” initiative to increase investment in and cooperation with Southeast Asian nations

¼ Continue to develop its diversified business portfolio

¼ Continue to increase investment in clean energy sector

¼ Continue to adhere to prudent financial policies with stringent risk control and enhanced financial management

GENERAL INFORMATION

The Issuer

The Issuer is a limited liability company incorporated in the British Virgin Islands on 6 January 2016. Its registered office is at Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands. The Issuer is a direct wholly-owned subsidiary of the Guarantor and an indirect wholly-owned subsidiary of the Company.

As at the date of this Offering Circular, the Issuer has not engaged, since its incorporation, in any material activities other than entering into arrangements for the proposed issue of the Bonds and on-lending of the proceeds thereof to the Group. As at the date of this Offering Circular, the Issuer has no outstanding borrowings or contingent liabilities. As at the date of this Offering Circular, the Issuer has no subsidiaries or employees.

The Guarantor

The Guarantor, through its subsidiaries in the PRC, operates a number of renewable energy projects in Yunnan Province, primarily wind power, solar power and waste-to-energy generation projects. For the year ended 31 December 2015, the Guarantor’s revenue was RMB1,257.9 million. As at 31 December 2015, the Guarantor had total assets of RMB6,603.8 million.

The Guarantor was incorporated in Hong Kong on 21 January 2013 under the Companies Ordinance (Cap. 32) (re-enacted as the Companies Ordinance (Cap. 622) with effect from 3 March 2014) of Hong Kong (CR number: 1853891). The Guarantor’s registered office is at Flat 2006, 20/F, China Resources Building, 26 Harbour Road, Wan Chai, Hong Kong. The Guarantor is a direct wholly-owned subsidiary of the Company.

–3– OFFERING STRUCTURE

The following is a description of the structure of the offering of the Bonds, which should be read in conjunction with the sections entitled “Risk Factors”, “Terms and Conditions of the Bonds”, “Summary of the Keepwell Deed” and “Summary of the Deed of Equity Interest Purchase and Investment Undertaking”.

The following chart illustrates the structure of the offering as at the date of this Offering Circular:

Yunnan Provincial Investment Yunnan Metallurgical Yuntianhua Group Co., Ltd. Holdings Group Co., Ltd. Group Co., Ltd.

10.149% 83.085% 6.766%

13.949% Yunnan Provincial Energy 11.10% Investment Group Co., Ltd. (the Company)

Onshore (PRC) 100% Offshore

Yunnan Energy Investment Keepwell Undertaking/Equity (H K) Co. Limited Interest Purchase and (the Guarantor) Investment Undertaking (Hong Kong)

100% Guarantee

Yunnan Energy Investment Finance Company Ltd. Trustee/Bondholders (the Issuer) Bonds (BVI)

The Bonds and the Guarantee

The Bonds will be issued by the Issuer. The Bonds will constitute direct, unconditional, unsubordinated and (subject to Condition 4(a) of the Terms and Conditions of the Bonds) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a) of the Terms and Conditions of the Bonds, at all times rank at least equally with all the Issuer’s other present and future unsecured and unsubordinated obligations.

The Bonds will have the benefit of a Guarantee provided by the Guarantor. Pursuant to the Guarantee, the Guarantor will unconditionally and irrevocably guarantee the due payment in full of all sums expressed to be payable by the Issuer under the Trust Deed (as defined in the Terms and Conditions of the Bonds) and the Bonds. The obligations of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a) of the Terms and Conditions of the Bonds, at all times rank at least equally with all the Guarantor’s other present and future unsecured and unsubordinated obligations.

–4– The Keepwell Deed

The Issuer, the Guarantor and the Company will execute the Keepwell Deed (as further described in “Summary of the Keepwell Deed”) in favour of the Trustee (for itself and the Bondholders) on or about the Issue Date. Pursuant to the Keepwell Deed, the Company will undertake with the Issuer, the Guarantor and the Trustee that it shall directly or indirectly own and hold all the outstanding shares of each of the Issuer and the Guarantor and will not directly or indirectly pledge, grant a security interest, or in any way encumber or otherwise dispose of any such shares, unless required to dispose of any or all such shares pursuant to a court decree or order of any governmental authority.

In addition, the Company will undertake, among other things, to:

¼ cause each of the Issuer and the Guarantor to have a Consolidated Net Worth (as defined in the Keepwell Deed) of at least US$1.00 at all times;

¼ cause each of the Issuer and the Guarantor to have sufficient liquidity to ensure timely payment by each of the Issuer and the Guarantor of any amounts payable in respect of the Bonds and the Guarantee (as applicable) in accordance with the Terms and Conditions of the Bonds;

¼ grant to the Issuer or the Guarantor, as the case may be, a standby facility pursuant to which the Company will remit an amount in Renminbi or US dollars that can be converted (as necessary) by the Issuer or the Guarantor, as the case may be, into the Relevant Amount;

¼ not to amend or agree to any amendment to the articles of association of each of the Issuer and the Guarantor to the extent that any such amendments may adversely affect the Issuer’s or the Guarantor’s operational sustainability or the Issuer’s or the Guarantor’s ability to make timely payment of any amounts payable under or in respect of the Bonds, the Trust Deed and the Guarantee, as the case may be, in accordance with the Terms and Conditions of the Bonds, the Trust Deed, the Guarantee and its other indebtedness;

¼ cause the Issuer to remain in full compliance with the Terms and Conditions of the Bonds, the Trust Deed, the Agency Agreement and all applicable rules and regulations in the British Virgin Islands and Hong Kong;

¼ cause the Guarantor to remain in full compliance with the Terms and Conditions of the Bonds, the Trust Deed, the Agency Agreement, the Guarantee and all applicable rules and regulations in Hong Kong;

¼ promptly take any and all action necessary to comply with its obligations under the Keepwell Deed;

¼ cause each of the Issuer and the Guarantor to take all action necessary in a timely manner to comply with its obligations under the Keepwell Deed;

¼ ensure that the Issuer has sufficient funds to meet its obligations with respect to any and all fees, costs, expenses and other payment obligations of the Issuer, including but not limited to fees, costs and expenses with respect to the corporate formation and administrative matters of the Issuer;

¼ maintain the Guarantor as its primary platform for executing the overseas business strategy of the Company; and

¼ procure that the Issuer will not carry on any business activity whatsoever other than in connection with the Bonds (which activities shall, for the avoidance of doubt, include the on-lending of the proceeds of the issue of the Bonds to the Guarantor or as it may direct), and cause such recipient of the Proceeds of the Bonds to pay the interest and principal in respect of such intercompany loan on time.

–5– The Keepwell Deed will not, and nothing therein contained and nothing done pursuant thereto by the Company shall be deemed to constitute, a guarantee by the Company of the payment of any obligation, indebtedness or liability, of any kind or character whatsoever, of the Issuer or the Guarantor under the laws of any jurisdiction.

The parties to the Keepwell Deed will acknowledge that in order for each of the Issuer, the Guarantor and the Company to comply with its respective obligations under the Keepwell Deed, each of them may require governmental or regulatory approvals, permits and filings pursuant to applicable laws.

The Keepwell Deed may only be modified, amended or terminated by the written agreement of the parties thereto.

See “Risk Factors – Risks Relating to the Bonds, the Guarantee, the Keepwell Deed and the Deed of Equity Interest Purchase and Investment Undertaking” for the risks associated with the Keepwell Deed.

The Deed of Equity Interest Purchase and Investment Undertaking

The Company intends to assist the Issuer and the Guarantor in meeting their respective obligations under the Bonds and the Guarantee by entering into the Deed of Equity Interest Purchase and Investment Undertaking (as further described in “Description of Deed of Equity Interest Purchase and Investment Undertaking”) in favour of the Trustee (for itself and the Bondholders) on the Issue Date. While the Keepwell Deed will contain a general obligation requiring the Company to ensure that the Issuer and the Guarantor have sufficient liquidity to meet any payment obligations under the Bonds and the Guarantee, the Deed of Equity Interest Purchase and Investment Undertaking will provide specified means by which the Company could assist the Issuer and the Guarantor to meet any outstanding debt obligations under the Bonds and the Guarantee upon the occurrence of an event of default under the Bonds.

Equity Interest Purchase Undertaking

Pursuant to the terms of the Deed of Equity Interest Purchase and Investment Undertaking, subject to obtaining all required approvals, the Company will agree to purchase or procure any of its PRC incorporated subsidiaries to purchase from relevant transferors (each, a “Relevant Transferor”) upon receiving a written purchase notice (the “Purchase Notice”) from the Trustee following an event of default under the Bonds. The purchase price (the “Purchase Price”) will be determined by the Company provided that it meets the minimum amount (the “Shortfall Amount”) as specified in the Deed of Equity Interest Purchase and Investment Undertaking, which shall include an amount sufficient for the Issuer and the Guarantor to discharge in full their respective obligations under the Bonds and the Trust Deed.

The Company shall, and shall procure the relevant parties to, use their respective best efforts to do all such things and take all such actions as may be necessary or desirable to (i) procure the completion of the purchase, provide information and apply with a view to obtaining relevant approvals as soon as reasonably practicable within three months from the date of the relevant Purchase Notice; and (ii) procure the remittance of the sum of the Purchase Price to or to the order of the Relevant Transferor(s) in accordance with the Deed of Equity Interest Purchase and Investment Undertaking.

Upon the completion of the purchase of the relevant equity interest, (i) in the event that a Relevant Transferor is not the Issuer or the Guarantor, the Company shall procure such Relevant Transferor to promptly on-lend or distribute in full the relevant portion of the Purchase Price received by such Relevant Transferor to the Issuer or the Guarantor prior to any other use, disposal or transfer of the proceeds received; and (ii) the Company shall promptly do all such things (including entering into and executing any agreements or arrangements required) and take all actions necessary for the Purchase Price received by the Issuer or the Guarantor from the Company or the purchaser or pursuant to any on-loan or distribution referred to in (i) above to be applied solely towards the payment, in accordance with the Trust Deed, of any outstanding amounts under the Trust Deed and the Bonds (including any interest accrued but unpaid on the Bonds) prior to any other use, disposal or transfer of the proceeds received.

–6– Investment Undertaking

Upon the receipt of a written notice provided by the Trustee in accordance with the Trust Deed and the written notification from the Company that it has reasonably determined that (i) the Purchase Price will be less than the Shortfall Amount; or (ii) any necessary approvals in relation to the Purchase is unlikely to be obtained, the Company agrees that it shall, subject to obtaining all required approvals, the Company will either itself invest or procure any of its PRC incorporated subsidiaries to invest a certain amount (the “Investment Amount”), by equity investment (the “Investment”) in the relevant investees as specified in the Deed of Equity Interest Purchase and Investment Undertaking (the “Relevant Investees”). Such Investment Amount shall include the amount sufficient to enable the Issuer and the Guarantor to discharge in full their respective obligations under the Bonds and the Trust Deed.

The Company shall, and shall procure the relevant parties to, use their respective best efforts to do all such things and take all such actions as may be necessary or desirable to (i) procure the completion of the Investment, provide information and apply with a view to obtaining relevant approvals as soon as reasonably practicable within three months from the date of the Investment Notice; and (ii) procure the remittance of the sum of the Investment Amount to or to the order of the Relevant Investee(s) in accordance with the Deed of Equity Interest Purchase and Investment Undertaking.

Upon the completion of the Investment, (i) in the event that a Relevant Investee is not the Issuer or the Guarantor, the Company shall procure such Relevant Investee to promptly on-lend or distribute in full the relevant portion of the Investment Amount received by such Relevant Investee to the Issuer or the Guarantor prior to any other use, disposal or transfer of the proceeds received; and (ii) the Company shall promptly do all such things (including entering into and executing any agreements or arrangements required) and take all actions necessary for the Investment Amount received by the Issuer or the Guarantor from the Company or relevant designated investor or pursuant to any on-loan or distribution referred to in (i) above to be applied solely towards the payment, in accordance with the Trust Deed, of any outstanding amounts under the Trust Deed and the Bonds (including any interest accrued but unpaid on the Bonds) prior to any other use, disposal or transfer of the proceeds received.

See “Risk Factors – Risks Relating to the Bonds, the Guarantee, the Keepwell Deed and the Deed of Equity Interest Purchase and Investment Undertaking” for the risks associated with the Deed of Equity Interest Purchase and Investment Undertaking.

–7– SUMMARY OF THE OFFERING

The following is a brief summary of the terms of the offering of the Bonds and is qualified in its entirety by the remainder of this Offering Circular. For a more complete description of the Terms and Conditions of the Bonds, see “Terms and Conditions of the Bonds” and “Summary of Provisions Relating to the Bonds in Global Form”. Some of the terms described below are subject to important limitations and exceptions. Defined terms used in this summary shall have the meanings given to them in “Terms and Conditions of the Bonds”.

Issuer Yunnan Energy Investment Finance Company Ltd.

Guarantor Yunnan Energy Investment (H K) Co. Limited.

Keepwell Provider and Equity Yunnan Provincial Energy Investment Group Co., Ltd. Interest Purchase and Investment Undertaking Provider

Guarantee The Guarantor will unconditionally and irrevocably guarantee the due payment in full of all sums expressed to be payable by the Issuer under the Bonds and the Trust Deed. The Guarantor’s obligations in respect of the Bonds and the Trust Deed will be contained in the Trust Deed (and any supplement thereto).

Issue US$300,000,000 in aggregate principal amount of 3.0 per cent. Guaranteed Bonds due 2019.

Issue Price 99.815 per cent. of the principal amount of the Bonds.

Form and Denomination The Bonds will be issued in registered form in the specified denomination of US$200,000 each and integral multiples of US$1,000 in excess thereof.

Interest The Bonds will bear interest at the rate of 3.0 per cent. per annum, payable semi-annually in arrear on 26 April and 26 October in each year from and including 26 April 2016.

Issue Date 26 April 2016.

Maturity Date 26 April 2019.

Status of the Bonds The Bonds will constitute direct, unconditional, unsubordinated and (subject to Condition 4(a) of the Terms and Conditions of the Bonds) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a), at all times rank at least equally with all the Issuer’s other present and future unsecured and unsubordinated obligations.

Status of the Guarantee The obligations of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a) of the Terms and Conditions of the Bonds, at all times rank at least equally with all the Guarantor’s other present and future unsecured and unsubordinated obligations.

–8– Negative Pledge The Bonds contain a negative pledge provision as further described in Condition 4(a) of the Terms and Conditions of the Bonds.

Events of Default The Bonds contain certain events of default provisions as further described in Condition 9 of the Terms and Conditions of the Bonds.

Taxation All payments of principal, premium (if any) and interest by or on behalf of the Issuer or the Guarantor in respect of the Bonds or under the Guarantee shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within the British Virgin Islands, Hong Kong or the PRC or, in any such case, any authority therein or thereof having power to tax, unless such withholding or deduction is required by law, as further described in Condition 8 of the Terms and Conditions of the Bonds. In such event, the Issuer or, as the case may be, the Guarantor shall, subject to the limited exceptions specified in the Terms and Conditions of the Bonds, pay such additional amounts as will result in the receipt by the Bondholders of such amount as would have been received by them had no such withholding or deduction been required.

Final Redemption Unless previously redeemed or purchased and cancelled, the Bonds will be redeemed at their principal amount on Maturity Date.

Redemption for Tax Reasons The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ notice to the Bondholders and the Trustee at their principal amount (together with interest accrued but unpaid interest up to, but excluding the date fixed for redemption), in the event of certain changes affecting taxes of the British Virgin Islands, Hong Kong or the PRC or any political subdivision or any authority thereof or therein having power to tax, any change in the application or official interpretation of such laws or regulations (including a decision by a court of competent jurisdiction), as further described in Condition 6(b) of the Terms and Conditions of the Bonds.

Redemption for Change of At any time following the occurrence of a Change of Control, Control the holder of any Bond will have the right, at such holder’s option, to require the Issuer to redeem all, but not some only, of that holder’s Bonds on the Put Date at 101 per cent. of their principal amount, together with accrued interest up to, but excluding, the Put Date, as further described in Condition 6(c) of the Terms and Conditions of the Bonds.

Clearing Systems The Bonds will be issued in registered form and represented initially by beneficial interests in the Global Certificate, which will be registered in the name of a nominee of, and deposited on the Issue Date with, a common depositary for Euroclear and Clearstream, Luxembourg. Beneficial interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream, Luxembourg. Except as described in the Global Certificate and this Offering Circular, certificates for the Bonds will not be issued in exchange for beneficial interests in the Global Certificate.

–9– Clearance and Settlement The Bonds have been accepted for clearance by Euroclear and Clearstream, Luxembourg under the International Securities Identification Number (“ISIN”) of XS1396364496. The Common Code of the Bonds is 139636449.

Governing Law English law.

Rating Fitch has assigned a corporate rating of BBB with a stable outlook to the Company. The Bonds are expected to be rated BBB by Fitch. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.

Trustee Citicorp International Limited.

Principal Paying Agent and Transfer Agent Citibank, N.A., London Branch.

Registrar Citigroup Global Markets Deutschland AG.

Listing Application has been made to the Hong Kong Stock Exchange for the listing of, and permission to deal in, the Bonds by way of debt issues to professional investors only.

Further Issues The Issuer may from time to time without the consent of the Bondholders create and issue further securities either having the same terms and conditions as the Bonds in all respects (or in all respects except for the issue date, issue price and first payment of interest on them and, to the extent necessary, certain transfer restrictions as a result of applicable securities law) and so that such further issue shall be consolidated and form a single series with the Bonds, as further described in Condition 13 of the Terms and Conditions of the Bonds.

Use of Proceeds See “Use of Proceeds”.

Risk Factors For a discussion of certain risk factors that should be considered in evaluating an investment in the Bonds, see “Risk Factors”.

Keepwell Deed The Issuer, the Guarantor, the Company and the Trustee will enter into the Keepwell Deed, as further described in “Summary of the Keepwell Deed”.

Deed of Equity Interest Purchase The Issuer, the Guarantor, the Company and the Trustee will and Investment Undertaking enter into the Deed of Equity Interest Purchase and Investment Undertaking, as further described in “Summary of the Deed of Equity Interest Purchase and Investment Undertaking”.

–10– SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY

The summary consolidated financial information of the Company as at and for the years ended 31 December 2013, 2014 and 2015, as set forth below, has been extracted from the Company’s audited consolidated financial statements as at and for the years ended 31 December 2014 and 2015, which are included elsewhere in this Offering Circular. The Company’s audited consolidated financial statements as at and for the years ended 31 December 2014 and 2015 were prepared and presented in accordance with PRC GAAP and have been audited by Union Power Certified Public Accountants (Special General Partnership) in accordance with Auditing Standards for Certified Public Accountants in China. PRC GAAP differs in certain material respects from IFRS. See “Summary of Certain Material Differences Between PRC GAAP and IFRS”.

The summary consolidated financial information as set forth below should be read in conjunction with, and is qualified in their entirety by reference to, the relevant consolidated financial statements of the Company and the notes thereto included elsewhere in this Offering Circular.

SUMMARY CONSOLIDATED INCOME STATEMENT DATA

For the year ended 31 December 2013 2014 2015 (audited) (audited) (audited) (RMB’000) Revenue ...... 26,387,705 35,371,540 41,887,112 Operating cost...... (25,071,410) (33,109,312) (39,426,098) Sales tax and additions ...... (13,365) (24,279) (64,679) Operating expenses...... (41,152) (46,683) (133,961) Management expense...... (153,488) (296,780) (447,360) Finance expenses ...... (362,482) (562,546) (361,774) Impairment losses of assets ...... (6,132) (117,344) (104,808) Loss from change in fair value...... – – (6,076) Investment income...... 7,394 – – Operating profit ...... 747,070 1,214,597 1,342,355 Non-operating income...... 12,363 484,022 56,290 Non-operating expenses...... (8,069) (40,436) (16,414) Profit before tax...... 751,363 1,658,183 1,382,232 Income tax expenses...... (22,879) (42,739) (71,691) Net profit ...... 728,484 1,615,444 1,310,540 Net profit belonging to parent company...... 772,117 1,816,732 1,178,876 Minority interests...... (43,633) (201,288) 131,665

–11– SUMMARY CONSOLIDATED BALANCE SHEET DATA

As at 31 December 2013 2014 2015 (audited) (audited) (audited) (RMB’000) Assets Current assets Monetary capital...... 3,959,646 7,175,347 12,475,491 Financial assets at fair value through profit or loss ...... 49,000 – 59,786 Notes receivable ...... 24,124 45,929 94,340 Accounts receivable...... 790,839 989,996 1,972,845 Advances to suppliers...... 836,321 1,031,999 803,885 Interest receivable...... 6,135 15,743 37,755 Dividend receivable ...... 15,732 – 53,230 Other accounts receivable...... 828,598 1,011,059 860,014 Inventories ...... 601,477 1,080,326 1,513,371 Assets held for sale ...... – – 12,300 Non-current assets due within one year...... 161,519 1,463,838 3,250,245 Other current assets ...... 433,218 930,042 1,026,536 Total current assets...... 7,706,609 13,744,279 22,159,296 Non-current assets Loans and payments on behalf ...... 20,000 867,250 49,750 Financial assets available for sale ...... 7,973,103 9,077,136 9,614,249 Held-to-maturity investment ...... – – 304,857 Long-term receivables ...... – – 902,663 Long-term equity investment...... 13,782,599 17,916,986 19,389,861 Real estate as investment...... – 120,701 185,445 Fixed assets ...... 7,783,040 8,257,776 12,624,571 Construction in progress...... 4,007,446 5,414,968 6,238,280 Construction materials ...... 91,917 44,917 47,611 Fixed assets pending for disposal...... 21 – – Intangible assets ...... 268,136 402,191 1,154,531 Research and development expenses ...... – 1,947 6,169 Goodwill ...... 80,235 151,002 244,874 Long-term prepaid expenses ...... 33,411 15,515 71,367 Deferred income tax assets...... 1,636 11,032 69,953 Other non-current assets ...... 234,017 403,325 1,123,447 Total non-current assets ...... 34,275,562 42,684,747 52,027,627 Total Assets...... 41,982,170 56,429,027 74,187,423

Liabilities and Owners’ Equity Current liabilities Short-term loans ...... 4,826,610 4,043,549 4,110,192 Notes payable ...... 262,214 84,349 170,332 Accounts payable...... 1,340,836 1,619,462 1,882,171 Advances from customers...... 123,432 152,081 234,000 Payroll payable ...... 35,365 28,648 46,526 Taxes payable ...... (339,052) (239,285) 137,274 Interests payable ...... 116,614 466,830 589,422 Dividends payable ...... 390,020 392,896 370,491 Other accounts payables ...... 349,597 373,042 592,384 Non-current liabilities due within one year ...... 526,408 2,486,944 6,579,857 Other current liabilities...... 996,667 5,491,517 6,690,717 Total current liabilities ...... 8,628,710 14,900,033 21,403,366

Non-current liabilities Long-term loans...... 9,767,603 9,183,160 8,525,280 Bonds payable ...... 3,967,782 9,046,082 14,189,775 Long-term payables ...... 1,336,899 1,577,787 1,189,055 Long-term payroll...... – 541 14,946 Accrued liabilities...... – – 32,357 Deferred income ...... 85,492 108,586 277,524 Deferred corporate tax liabilities ...... 18,780 18,780 19,235 Other non-current liabilities...... – – 80,000 Total non-current liabilities...... 15,176,556 19,934,936 24,328,171 Total Liabilities ...... 23,805,266 34,834,969 45,731,537

–12– As at 31 December 2013 2014 2015 (audited) (audited) (audited) (RMB’000) Owners’ Equity Paid-in capital...... 11,614,767 11,659,998 11,659,998 Other equity instruments ...... – 886,500 4,283,500 Capital reserve...... 4,082,970 3,909,345 3,817,748 Other comprehensive income...... – – 11,837 Special reserve...... 298 2,009 2,534 Surplus reserve ...... 81,029 277,187 384,516 Undistributed profit ...... 240,455 1,860,153 2,859,197 Total owners’ equity attributable to parent company...... 16,019,519 18,595,191 23,019,329 Minority interests...... 2,157,385 2,998,866 5,436,556 Total Owners’ Equity ...... 18,176,904 21,594,057 28,455,886

Total Liabilities and Owners’ Equity ...... 41,982,170 56,429,027 74,187,423

SUMMARY CONSOLIDATED CASH FLOW STATEMENT DATA

For the year ended 31 December 2013 2014 2015 (audited) (audited) (audited) (RMB’000) Net cash flows from operating activities ...... 1,042,301 2,041,598 1,388,400 Net cash flows used in investing activities...... (7,045,833) (9,809,098) (10,782,979) Net cash flows from financing activities ...... 6,652,492 9,970,095 15,349,940 Effect of changes in exchange rate on cash ...... (1,508) (2,503) 5,454 Net increase in cash and cash equivalents...... 647,452 2,200,092 5,960,815 Closing balance of cash and cash equivalents ...... 3,822,048 6,002,971 11,963,786

NON-GAAP FINANCIAL MEASURES

The Company uses EBITDA to provide additional information about its operating performace. EBITDA is not a standard measure under the PRC GAAP. Capital expenditure requirements and levels of debt and interest expenses may have a significant impact on the profit for the period of companies with similar operating results. EBITDA is a widely used financial indicator of a company’s ability to service and incur debt. ln evaluating EBITDA, the Company believes that investors should consider, among other things, the components of EBITDA such as revenue and operating costs under the amount which EBITDA exceeds capital commitments and other charges. The Company has included EBITDA because it believes that it is a useful supplement to the cash flow data as a measure of the Company’s performance and its ability to generate cash flow from operations to cover debt service and taxes. EBITDA presented herein may not be comparable to similarly titled measures presented by other companies. Investors should not compare the Company’s EBITDA to EBITDA presented by other companies because not all companies use the same definitions.

–13– The table below reconciles the Company’s operating profit under the PRC GAAP to the Company’s definition of EBITDA for the years indicated:

For the year ended 31 December 2013 2014 2015 (RMB’000) Operating profit ...... 747,070 1,214,597 1,342,355 Add: Finance expenses ...... 362,482 562,546 361,774 Depreciation of fixed assets...... 217,237 325,655 402,493 Amortisation of intangible assets...... 7,613 18,118 23,250 Amortisation of long-term prepaid expenses ...... 8,619 22,570 24,916 EBITDA ...... 1,343,021 2,143,486 2,154,788

The Company’s definition of EBITDA should not be considered in isolation or construed as an alternative to cash flows, net income or any other measure of performance or as an indicator of the Company’s operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. EBITDA does not account for taxes, interest expenses or other non-operating cash expenses.

CERTAIN FINANCIAL INDICATORS

The following table sets forth certain financial indicators of the Group as at and for the years indicated:

For the year ended 31 December 2013 2014 2015 EBITDA (RMB’000) ...... 1,343,021 2,143,486 2,154,788 EBITDA margin(1) (per cent.)...... 5.09 6.06 5.14 Total debt(2) (RMB’000)...... 20,085,070 30,251,252 40,087,380 Net debt(3) (RMB’000) ...... 16,093,519 23,075,905 27,620,330 Total debt/EBITDA...... 15.0x 14.1x 18.6x Net debt/EBITDA ...... 12.0x 10.8x 12.8x

Notes:

(1) EBITDA margin is calculated as EBITDA divided by revenue.

(2) Total debt represents current indebtedness and non-current indebtedness. See “Capitalisation and Indebtedness of the Company”.

(3) Net debt is equal to total debt less monetary capital.

–14– SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF THE GUARANTOR

The summary financial information of the Guarantor as at 31 December 2013, 2014 and 2015, as set forth below, has been extracted from the Guarantor’s audited consolidated financial statements as at and for the years ended December 2014 and 2015, which are included elsewhere in this Offering Circular. The consolidated financial statements of the Guarantor as at and for the years ended 31 December 2014 and 2015 were prepared and presented in accordance with HKFRS issued by the HKICPA and have been audited by Union Alpha CAAP C.P.A. Limited.

The summary financial information as set forth below should be read in conjunction with, and is qualified in their entirety by reference to, the relevant financial statements of the Guarantor and the notes thereto included elsewhere in this Offering Circular.

SUMMARY CONSOLIDATED STATEMENT OF PROFIT OR LOSS DATA

For the year ended 31 December 2013 2014 2015 (audited and (audited) restated) (audited) (RMB’000) Continuing operations Revenue ...... 327,291 914,984 1,257,910 Cost of sales ...... (301,463) (767,857) (1,035,585) Gross profit...... 25,828 147,127 222,325 Other gains/(losses), net ...... 2,794 (8,295) 2,578 Selling expenses ...... – (203) (363) Administrative expenses ...... (24,762) (46,647) (69,916) Profit from operations ...... 3,860 91,982 154,624 Finance costs, net ...... (40,524) (90,779) (157,596) Share of profits of associates...... – 630 18,931 (Loss)/Profit before taxation ...... (36,664) 1,833 15,959 Income tax ...... (3,300) (2,834) (3,807) (Loss)/Profit for the year from continuing operations ...... (39,964) (1,001) 12,152 Discontinued operation Loss for the year from discontinued operation...... – (30,815) (9,858) (Loss)/Profit for the year...... (39,964) (31,816) 2,294

SUMMARY CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME DATA

(Loss)/Profit for the year...... (39,964) (31,816) 2,294 Other comprehensive expense (items that may be reclassified subsequently to profit or loss) ...... – – (1,415) Total comprehensive (expense)/income for the year...... (39,964) (31,816) 879

–15– SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION DATA

As at 31 December 2013 2014 2015 (audited) (audited and (audited) restated)(1) (RMB’000) Non-current assets Property, plant and equipment ...... 1,204,807 2,309,507 4,271,537 Lease prepayments...... 55,413 62,443 107,273 Intangible assets ...... 95 66 71 Deferred income tax assets ...... 3 1 2 Goodwill ...... – 26,044 26,044 Investments in associates...... – 138,919 282,858 Deposits paid for investments...... 272,378 – – Other non-current assets ...... 104,762 330,851 365,866 Total non-current assets ...... 1,637,458 2,867,831 5,053,651

Current assets Inventories ...... 1,040 170,799 184,758 Trade receivables ...... 55,343 296,041 153,041 Deposits, prepayments and other receivables ...... 153,404 557,190 166,722 Cash and cash equivalents ...... 512,192 1,818,257 1,045,624 Total current assets...... 721,979 2,842,287 1,550,145

Current liabilities Trade and other payables ...... 640,583 713,294 637,878 Obligations under finance leases ...... – – 21,655 Borrowings ...... 1,136,610 2,062,449 788,359 Income tax payable ...... 3,303 2,262 2,246 Total current liabilities ...... (1,780,496) (2,778,005) (1,450,138)

Net current (liabilities)/assets ...... (1,058,517) 64,282 100,007

Non-current liabilities Obligations under finance leases ...... – – 175,320 Borrowings ...... 200,000 1,042,892 2,262,612 Corporate bond ...... – 588,936 592,565 Deferred income ...... 28,547 53,815 78,543 Total non-current liabilities ...... (228,547) (1,685,643) (3,109,040)

Net Assets ...... 350,394 1,246,470 2,044,618

Capital and reserves

Share capital ...... 3,900 567,656 2,022,656 Share subscription monies ...... – 455,000 – Reserves...... 67,017 (21,711) (64,151) Total equity attributable to equity holder of the Company...... 70,917 1,000,945 1,958,505 Non-controlling interests ...... 279,477 245,525 86,113 Total Equity...... 350,394 1,246,470 2,044,618

Note:

(1) The Guarantor’s consolidated statements as at and for the year ended 31 December 2014 contained in its audited consolidated financial statements as at and for the year ended 31 December 2015 has been restated to reflect its acquisition of 57.32 per cent. equity interests in YEIG International Energy at nil consideration in April 2015 which was accounted for as an associate of the Guarantor before the Acquisition. The entity acquired was a subsidiary of the Company, the Guarantor’s immediate holding company.

Pursuant to the Acquisition, the Guarantor became a holding company of YEIG International Energy. Since the Guarantor and YEIG International Energy were ultimately controlled by the Company both before and after the completion of the Acquisition, the Acquisition was accounted for using the principles of merger accounting.

The consolidated statements of profit or loss, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Guarantor for the years ended 31 December 2014 and 2015 took into account the results of YEIG International Energy, as if the corporate structure of the Guarantor immediately after the completion of the Acquisition had been in existence throughout the years ended 31 December 2014 and 2015, or since their respective dates of acquisition, incorporation or registration, whichever is shorter.

–16– The Guarantor’s restated consolidated statements as at and for the year ended 31 December 2014, which is contained in the consolidated financial statements as at and for the year ended 31 December 2015 was prepared to present the state of affairs of the Guarantor and YEIG International Energy as if the corporate structure of the Guarantor immediately after the completion of the Acquisition had been in existence and in accordance with the respective equity interests and/or the power to exercise control over the individual companies attributable to the Guarantor as at 31 December 2014.

The Guarantor’s audited consolidated financial statements as at and for the year ended 31 December 2013 contained in its consolidated financial statements as at and for the year 31 December 2014, has not been restated to reflect the Relevant Adjustments. Therefore, the Guarantor’s consolidated financial information as at and for the year ended 31 December 2013, which are contained in the Guarantor’s audited consolidated financial statements as at and for the year ended 31 December 2014, are not directly comparable to the its restated consolidated financial information as at and for the year ended 31 December 2014 contained in the consolidated financial statements as at and for the year ended 31 December 2015. Potential investors must exercise caution when using the consolidated financial information of the Guarantor as at and for the year ended 31 December 2013 to evaluate its financial performance.

SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS DATA

For the year ended 31 December 2013 2014 2015 (audited and (audited) restated) (audited) (RMB’000) Net cash generated from/(used in) operating activities...... 23,403 (681,606) 20,799 Net cash used in investing activities ...... (681,674) (1,261,862) (2,145,536) Net cash generated from financing activities...... 916,030 2,629,455 1,352,104 Net increase/(decrease) in cash and cash equivalents...... 257,759 685,987 (772,633) Cash and cash equivalents carried forward...... 512,192 1,818,257 1,045,624

–17– RISK FACTORS

An investment in the Bonds is subject to a number of risks. Investors should carefully consider all of the information in this Offering Circular and, in particular, the risks described below, before deciding to invest in the Bonds. The following describes some of the significant risks that could affect the Issuer, the Guarantor, the Company, the Group and the value of the Bonds. Some risks may be unknown to the Issuer, the Guarantor, the Company and the Group and other risks, currently believed to be immaterial, could in fact be material. Any of these could materially and adversely affect the business, financial condition, results of operations and prospects of the Issuer, the Guarantor, the Company and the Group. The market price of the Bonds could decline due to any of these risks, and investors may lose part or all of their investment.

This Offering Circular also contains forward-looking statements that involve risks and uncertainties. The actual results of the Issuer, the Guarantor, the Company or the Group could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this Offering Circular. The Company and the Group may be affected materially by requirements and restrictions that arise under PRC laws, regulations and government policies in nearly all aspects of its business in the PRC. All of these factors are contingencies which may or may not occur and the Issuer, the Guarantor or the Company is not in a position to express a view on the likelihood of any such contingency occurring. The Issuer, the Guarantor or the Company does not represent that the statements below regarding the risk factors of holding any Bonds are exhaustive.

RISKS RELATING TO THE GROUP’S BUSINESSES

The seasonal change in water supply may affect the output and earnings of the power generation plants of the Group.

As at 31 December 2015, the Group controlled and operated eight hydropower plants (all of which were in operation) and held non-controlling interests in 10 hydropower companies. The power generation and results of operations of hydropower plants are heavily affected by hydro resources and the seasonal change in water supply. The more even the water supply for the various seasons, the greater the output revenue of such plants. Yunnan Province has had years of dry weather since 2009, which has resulted in many of the Group’s hydropower plants running at less than full capacity. Meanwhile, the hydropower plants in which the Group holds controlling interests are small in scale (with an installed capacity of 50,000 kW or less) and their ability to adapt to changes in reservoir capacity requirements is limited. If the water supply for the Group’s hydropower plants does not improve in the future, the power generation and sales of the Group and its business, financial condition and results of operations of power generation and sales may be adversely affected.

In addition, in selecting sites for the development of its hydropower or solar power plants, the Group makes its decisions based on the meteorological and topographical data of the proposed area as well as the on-site exploration conducted by the Group’s technicians. There can be no assurance that the actual natural conditions will conform to the historical measured data or that the assumptions the Group makes during its assessment are correct. Moreover, even if actual natural conditions are consistent with the Group’s assessment, such conditions may be affected by variations in weather patterns, which may change over time to the detriment of the Group’s projects. As a result, the power generated by the Group’s hydropower and solar power projects may fall below the Group’s expectations, which could in turn materially and adversely affect the Group’s business, financial condition and results of operations.

Risk of raising water prices will impact the Group’s profit margins.

Water prices are subject to various laws and regulations. To ensure that water resources in the PRC are managed appropriately and to promote efficient water use, entities and individuals who collect water directly from rivers, lakes or underground water supply must apply to the water administration departments for a water collection licence, extract water in accordance with the provisions of the water collection licence and pay a water resource fees pursuant to the Water Law of the People’s Republic of China（中華人民共和國水法）, Measures on the Implementation of Water Law of the People’s Republic of China in Yunnan Province （雲南省實施中華人民共和國水法辦法）, Procedures on Collection, Use and Management of Water Resource Fees（水資源費徵收使用管理辦法）and Measures on Water Collection Resource Fees for Power Enterprises of Yunnan Province（關於對在滇電力企業全面徵收水資源費辦法）.In

–18– accordance with the Notice of the Ministry of Finance, the NDRC and Ministry of Water Resources (“MWR”) on the Standard for Collecting Fees Relating to Water Power Construction in the Central Authorities and Cross-Provinces（國家發改委、財政部、水利部關於中央直屬和跨省水利工程水資源費徵收標準 及有關問題的通知）, from 1 September 2009, water resources which are used for hydropower generation are charged at RMB0.3-0.8 cents per kWh. Water used for hydropower generation will be charged at RMB0.3 cents per kWh in the provinces, autonomous regions and municipalities controlled directly by the PRC Government where the water source is located if the fees charged in those areas at that time are lower than RMB0.3 cent per kWh. If fees charged in those areas is higher than RMB0.8 cents per kWh, then the price of water will be RMB0.8 cent per kWh. If the fees charged in those areas are between RMB0.3-0.8 cents per kWh, then the price shall remain as it is. Yunnan Province determines the price of water in accordance with the total water installation capacity and the sources of water. The Group pays RMB0.4-0.7 cents per kWh for its water resources determined in accordance with the total capacity of its power plants. The Group’s profit margins will be affected if the PRC Government decides to increase water fees in line with the overall strategy to create an energy-saving society.

Increases in the supply of or decreases in demand for power may materially and adversely affect the Group’s power sales.

The Group’s power sales depend on the net generation volume sold to state-owned power grid companies by its power plants and projects, and demand from the state-owned power grid companies is generally affected by the local demand for power and the amount of generation capacity available in the grids. The dispatch centre under the jurisdiction of each applicable power grid company oversees such dispatch of power and determines the planned output of power to be dispatched by each power plant. In recent years, the power generation sector in the PRC has been growing as a result of rapid industrialisation and rising residential power demand. However, there can be no assurance that the current demand for power in the PRC will continue to increase or be sustained. A slowdown in certain industries, or in the PRC economy generally, could result in a decrease in demand for power. In addition, as the Group competes with other power plants and projects in the areas in which it operates, and there can be no assurance that the dispatch centres will give dispatch priority to the Group’s power plants and projects operating in such areas. As a result, the Group’s revenue from power sales is heavily influenced by the demand for and supply of power in each province in which it operates and the policies of the power grid companies to which the power is sold. Any reductions in the Group’s net generation volume will reduce the Group’s revenue and may have a material adverse effect on its business, financial condition and results of operations.

The fluctuation in commodities price may pose uncertainty to the Group’s business.

The Group’s resources trading business primarily focuses on trading in steel and other metals. The Group also sells sand and gravel, cement and other building materials and accessories to construction companies and energy construction projects. Revenue from resources trading contributes a substantial part in the Group’s revenue. For the years ended 31 December 2013, 2014 and 2015, the Group’s revenue from resources trading accounted for 81.4 per cent., 71.6 per cent. and 86.6 per cent. of its total revenue, respectively, and its gross profit from resources trading accounted for 2.1 per cent., 3.4 per cent. and 12.5 per cent. of its gross profit, respectively.

The price, supply and demand of steel, metals and other commodities are directly affected by government policies and macroeconomic factors, including currency exchange rates, interest rates and the level of inflation, global economic trends, inventory levels, actions of participants in the commodity markets and other factors beyond our control could result in a significant oversupply or decreased demand. Steel trading is an important part of the Group’s resources trading business, however, the steel traders in current domestic market are generally small-scale and have a limited ability to anticipate and manage commodity price fluctuations. The competition is increasingly fierce and profit margins are gradually narrowing and are expected to further reduce due to the slowdown of economy. There can be no assurance that the market price of any or all metals will not decline in the future or that such prices will otherwise remain at sufficiently high levels to support the Group’s profitability.

In addition, fluctuations in the performance of the related downstream industries will cause the demand for the Group’s energy-related products and consequently the selling prices of the Group’s products, to fluctuate significantly. Material fluctuations in the Group’s resources trading business could cause the Group’s results of operations to vary significantly and may materially and adversely affect the Group’s business, financial condition and results of operations.

–19– The Group’s coal production and sale business is influenced by coal prices, which are cyclical and subject to significant fluctuations.

The Group is engaged in the coal production and sale business. The Group’s coal production and sale business and its operating results are heavily affected by the volatile price movement of coal in the PRC market and the factors affecting such price movement, such as regional and national supply and demand for coal, competition from other energy sources, and regulations and policies introduced by the PRC Government and general economic conditions. The PRC’s coal market has historically exhibited significant fluctuations in supply, demand and prices from year to year. According to the China National Coal Association (the “CNCA”), in the first half of 2015, domestic coal sales decreased by 8.1 per cent. to 1.6 billion tonnes compared to the first half of 2014, and domestic production also decreased by 5.8 per cent. to 1.79 billion tonnes compared to the first half of 2014. There can be no assurance that the demand for coal and coal-related products will increase in the future.

As a result of volatile price movement, revenue from the sales of coal may significantly fluctuate from time to time. If the coal price increases and the Group cannot pass on the price increases to its customers due to fixed price arrangements, the profitability of its coal supply business will decline and this could have a material adverse impact on the Group’s business, financial condition and results of operations.

The Group is facing increasing competition from other renewable energy companies and conventional energy companies.

The PRC’s power industry is highly competitive. The Group competes with other renewable energy companies and conventional energy companies for fuel, labour and capital required to develop and operate its power plants and projects. Some of the Group’s competitors have access to greater financial, infrastructure or other resources than the Group. The ability of the Group’s competitors to access resources that the Group cannot access may prevent the Group from acquiring additional land use rights or power plant projects in strategic locations or from increasing its generating capacity, each of which may materially and adversely affect its business, financial condition and results of operations.

Renewable and clean energy projects in the PRC, including wind, solar, hydro, biomass, geothermal and ocean power, benefit from various governmental incentives such as on-grid tariff premiums and dispatch priorities. If the PRC Government strengthens its support for other renewable energy projects, competition with other renewable and clean energy companies may intensify and the results of operations of the Group may be adversely affected if the Group fails to compete successfully.

The Group also competes with oil, coal and other conventional energy companies. Any technological progress in the exploitation of other energy sources or discovery of large deposits of oil or coal, resulting in a decline in the price of those fuels, could increase the competitiveness of power generated from conventional sources. A reduction in demand for renewable energy could have a material adverse effect on the Group’s business, financial condition and results of operations.

Delays in power plant development may adversely affect the expansion plans of the Group.

The Group invests in, develops, and manages large power plants and projects in the PRC. The process of identifying potential opportunities for the development of power plants and projects, obtaining government and other approvals, completing acquisition or construction and commencing commercial operations requires time and effort and incurs costs. The Group’s ability to expand and its continued success depends on its ability to secure, in a timely and cost-effective manner, the required approvals, financing, power sales and dispatch agreements, construction contracts, fuel supply and transportation and power transmission arrangements. There can be no assurance that the Group will be able to secure all necessary approvals, permits or agreements for these projects in a timely manner or at all, and any delay or failure to secure such approvals or agreements may increase costs and delay or prevent commercial operation of the affected power plant. If the Group is unsuccessful in resolving or addressing any of these matters in a timely manner, such failure or delay may materially and adversely affect its business, financial condition and results of operations.

–20– In addition, the development of an investment project and the construction of a power project, including its ancillary facilities, such as transmission lines or substations, may be materially and adversely affected by many factors commonly associated with the construction of infrastructure projects that are beyond the Group’s control, including shortages of equipment, materials or labour, work stoppages, labour disputes, weather interference, natural disasters, accidents, and unforeseen mechanical, technical, engineering, design, environmental or geological problems, any of which could give rise to delays or cost overruns. Furthermore, the construction of most of the Group’s power projects, transport and other ancillary facilities is undertaken by third-party contractors. There can be no assurance that such contractors will be able to complete construction in a timely or cost-effective manner or that the Group will be able to adequately control or monitor the contractors to ensure the quality of such construction. If the Group is unable to complete the construction of its power plants and projects and/or ancillary facilities on schedule and according to specifications, its business, financial condition and results of operations may be materially and adversely affected.

The Group will continue to develop its diversified business portfolio as part of its growth strategy. The success of such growth by diversification is subject to various factors and there can be no assurance that the Group will be able to successfully implement its growth strategy.

With the strategic role as a platform for investing in and developing energy-related operations in Yunnan Province, the Company has been engaged in the power generation and sales since its establishment. In recent years, the Company has been vigorously developing its resources trading business. The Group has also been developing financial services through its subsidiary, Yunnan Energy Financial Services Co., Ltd.（雲南能投金融控股有限公司）(“Yunnan Financial Services”). As at the date of this Offering Circular, the Group has established six funds. For more details, please see “Description of the Group – Description of the Group’s Business – Financial Services – Fund investment”.

As part of its growth strategy, the Group will continue to develop and/or invest in power generation, resources trading as well as other complementary businesses. If the Group decides to undertake new types of energy projects, such diversification may place significant demands on the Group’s management and resources as the success of the Group’s new operations requires, among other things, the research and development of new technologies and the Group may not be able to develop the relevant technology in a safe, timely and cost-efficient manner, or at all. The Group may be unable to effectively control operating costs and increase profit margins from its new operations and face competition from similar operations or enterprises, some of which may have more experience and resources than the Group. As the Group may not have the experience or expertise necessary for the successful development of such projects on its own, it may enter into new strategic alliances and partnerships or seek to acquire existing producers. The Group’s success in implementing such growth and diversification will depend on, among other things, its ability to identify and assess potential partners, investments and acquisitions, successfully finance and integrate such acquisitions, control costs and maintain sufficient operational and financial controls. Any potential acquisition, alliance or joint venture could involve a number of risks, including diversion of management’s attention, higher costs, unanticipated events or circumstances or failure of the newly developed energy sources, some or all of which could have a material adverse impact on the Group’s business, financial condition and results of operations.

Coal supply disruption or unavailability may adversely affect the operation of the Group’s fossil fuel power plants.

The Group currently satisfies part of the coal demand of its Weixin Power Plant Phase I（威信電廠一期） with the coal purchased from major coal suppliers through procurement agents or from its direct coal suppliers pursuant to annual coal supply agreements. Self-production capacity is expected to increase as the Guanyin Mountain Coal Mine − No. 2 commenced its trial operation in July 2015. Notwithstanding its coal supply agreements, there is no assurance that the Group can avoid any disruption in, unavailability of, or changes to the commercial terms of, its coal supplies, or that it will be able to purchase sufficient supplies of coal in the open market, at commercially reasonable prices or at all, to meet its future uncontracted requirements.

Delivery disruption could occur for a variety of reasons beyond the Group’s control, including transportation bottlenecks, accidents and natural disasters. There is no assurance that the Group can avoid disruption in or unavailability of coal transportation services, which could have a material adverse effect on its business, financial condition or results of operations.

–21– The Group relies on local grid companies for grid connection, power transmission, dispatch and approvals for its power projects development.

The Group relies on local grid companies for grid connection, power transmission and dispatch services. The Group’s revenue from power generation and sales and profitability depend, to a large extent, upon the sale of power which is subject to dispatch to power grids. Currently, sales to the Yunnan branch of China Southern Power Grid（南方電網雲南分公司）contribute to over 90 per cent. of the Group’s revenue from power sales. The dispatch of power generated by the Group’s power plants and projects is controlled by the dispatch centres of the relevant local grid companies pursuant to applicable laws and regulations as well as dispatch agreements between such local grid companies and the Group’s relevant subsidiaries. Dispatch centres consider a variety of factors when dispatching power, including, but not limited to, local demand for power, interconnection agreements between power grids, grid congestion, restrictions on transmission capacity, grid connectivity and stability of the grids. As a result, the sale of power generated by the Group’s power projects may be limited by such factors.

In addition, the Group’s power projects may compete with other power generation companies for grid connection in the event that the local grid does not have sufficient capacity to dispatch all the power produced by the power generation companies within its coverage. In granting consents, local grid companies consider a number of factors, many of which are beyond the Group’s control, including the availability and stability of existing grids and the costs of grid connections. There can be no assurance that the Group will be able to obtain all necessary consents from local grid companies in a timely manner, or at all. Failure or delays in obtaining such consents may prevent the Group from selling its power as planned. The Group’s power plants may also experience power output constraints due to grid companies’ failure to expand or upgrade local grids in a timely manner. Such output constraints could have an adverse effect on the Group’s business, financial condition and results of operations.

The Group’s revenue and profit from power generation and sales business may be adversely affected by the PRC Government’s control over tariffs.

Power sales account for a substantial part of the Group’s revenue. The revenue from power sales is affected primarily by two factors: on-grid tariffs and the on-grid power generation of the Group’s power plants. Accordingly, the results of operations and financial condition of the Group’s power generation and sales business are directly and significantly affected by the on-grid tariffs at which the Group sells the electricity generated by the power projects to the local grid companies. The on-grid tariffs in China are determined by government authorities. See “PRC Regulations – Laws and Regulations Relating to PRC Energy Industry”. There is no assurance that the on-grid tariff of the Group will not decrease in the future due to changes in government policies or change of the project mix of the Group. Any material decrease in the on-grid tariff may have an adverse effect on the Group’s business, financial condition and results of operations.

Risk of relocation of local communities affected by the flooding resulting from hydropower projects.

Hydropower projects require the construction of storage dams. The surrounding reservoir areas may become submerged by the flooding resulting from the hydropower projects. Handling the relocation of people who live in affected reservoir areas is a matter of great importance to both the Group and the affected communities. Relocation is currently handled by an external company and funded by the Group through the Yunnan Provincial Government. The Group’s reputation, day to day management activities and production may be impaired if the relocation work is not handled properly.

RISKS RELATING TO THE GROUP IN GENERAL

The Group’s business and operating results to a large extent depends upon the local economy and public policy of Yunnan Province.

The Group is the sole energy investment platform of the Yunnan Provincial Government and is the designated entity to implement the provincial government’s strategy of developing the energy sector as a powerful pillar industry in Yunnan Province. The investment portfolio of the Group consists of hydropower, fossil fuel power, wind power, solar power, natural gas, resources trading, financial service and other businesses.

–22– Substantially all of the Group’s investment portfolio and operations are concentrated in Yunnan Province. Some of the Group’s businesses are for public interest in nature and governmental agencies and state-owned enterprises are among the Group’s major suppliers and customers. The Company’s businesses are to a large extent supported by the Yunnan Provincial Government. For the years ended 31 December 2013, 2014 and 2015, a majority of the Group’s revenue was derived from its operations and investment in Yunnan Province. As such, the local economy and public policy of Yunnan Province has had and will continue to have a significant impact on the Group’s business, financial condition, results of operations and prospects.

The Group’s operations require significant capital and failure to obtain capital on reasonable commercial terms may adversely affect its business performance and future development.

The Group requires significant capital outlay to fund its investment and operating activities. The Group’s capital expenditure for the year ended 31 December 2015 was approximately RMB10,898 million. As the key player in the energy sector of Yunnan Province, the Group will continue to require additional capital resources to acquire and develop additional energy projects. To successfully implement this growth strategy, the Group may need to raise substantial additional funds. As at 31 December 2015, its capital commitment was approximately RMB13,277.91 million.

The Group has historically satisfied its cash needs with internally-generated operating cash flow, proceeds from bank and other borrowings, funds raised in the PRC domestic and international capital markets and the financial support from the Yunnan Provincial Government. Due to the nature of power generation business, it usually takes a long period of time for the Group to complete the construction of the power generating facilities and to recover its investment in the relevant power projects. As a result, the cash generated from operations may fluctuate from time to time and may not be sufficient to meet the Group’s capital needs. For the years ended 31 December 2013, 2014 and 2015, the Group recorded net cash generated from operating activities of RMB1,042.3 million, RMB2,041.6 million and RMB1,388.4 million, respectively, while its net cash used in investing activities was RMB7,045.8 million, RMB9,809.1 million and RMB10,783.0 million, respectively. As such, the Group will have an increasing reliance on external financing to satisfy its cash needs.

The Group’s ability to obtain external financing and the cost of such financing are dependent on various factors, such as general economic and capital market conditions, credit availability from banks or other lenders, its ability to obtain PRC governmental approvals, if applicable, required to access domestic or international financing; and the performance of the Group’s operation. There can be no assurance that international or domestic financing will be available on terms acceptable to the Group, or at all, which could increase the Group’s financing costs and cause a delay in its expansion plans, and may adversely affect its business, financial conditions and results of operations.

The Group has significant indebtedness and may incur additional indebtedness in the future, which could increase the Group’s vulnerability to market fluctuations and adversely affect its business, financial condition, results of operations and prospects.

The Group has, and may continue to have, a substantial amount of indebtedness. As at 31 December 2013, 2014 and 2015, the Group’s total indebtedness (comprising short-term and long-term loans, bonds payable, long-term loans due within one year, bonds payable due within one year and other current liabilities) was RMB20,085.1 million, RMB30,251.3 million and RMB40,087.4 million, respectively. The Group’s indebtedness could have an adverse impact on the Group’s business as follows:

¼ require the Group to dedicate a substantial portion of its cash flow from operations to service and repay its indebtedness;

¼ increase the costs of additional financing, thus affecting the overall profits of the Group;

¼ limit, along with the financial and other restrictive covenants of its indebtedness, among other things, its ability to borrow additional funds;

¼ limit the Group’s flexibility in planning for or reacting to changes in its businesses and the industries in which it operates; and

¼ increase the Group’s vulnerability to adverse general economic and industry conditions.

–23– In the future, the Group may from time to time incur substantial additional indebtedness and contingent liabilities. The Group continually reviews its current and expected future funding requirements and evaluates and engages in discussions with financial institutions and other market participants, from time to time, on proposals regarding different sources of funding. The Bonds do not prohibit the Group from incurring additional debt and contingent liabilities. If any member of the Group incurs additional debt, the risks that the Group faces as a result of its already substantial indebtedness and leverage could intensify. In particular, a negative change in one or more of the Group’s credit ratings could, notwithstanding that it is not a rating of the Bonds, adversely impact the market price and the liquidity of the Bonds.

Certain financing contracts entered into by any member of the Group contain operational and financial restrictions on the Group or, as the case may be, the relevant subsidiary’s business, that prohibit the borrower from incurring additional indebtedness unless it is able to satisfy certain financial ratios, restrict the borrower from creating security or granting guarantees or prohibit the borrower from changing its business and corporate structure, without the lender’s prior approval. The ability of the Group or the relevant subsidiary (as borrower) to meet such financial ratios may be affected by events beyond its control. Such restrictions may also negatively affect the Group’s ability to respond to changes in market conditions, take advantage of business opportunities the Group believes to be desirable, obtain future financing, fund capital expenditures, or withstand a continuing or future downturn in its business. Any of these factors could materially and adversely affect the Group’s ability to satisfy its obligations under the Bonds and other debt.

If the Company, the Guarantor or the relevant subsidiaries are unable to comply with the restrictions (including restrictions on future investments) and covenants in its current or future debt obligations and other agreements, a default under the terms of such agreements may occur. In the event of a default under such agreements, the holders of the debt could terminate their commitments to the Company or its subsidiaries, accelerate the debt and declare all amounts borrowed due and payable or terminate the agreements, as the case may be. Some of the financing contracts entered into by the Company and its subsidiaries may contain cross-acceleration or cross-default provisions. As a result, a default by the Company or any of its subsidiaries under any of such agreements may cause the acceleration of repayment of not only such debt but also other debt, including the Bonds, or result in a default under other debt agreements. If any of these events occur, there can be no assurance that the Company or its subsidiaries will be able to obtain the lenders’ waiver in a timely manner or that the assets and cash flow of the Company or its subsidiaries would be sufficient to repay in full all of their respective debts as they become due, or that the Company or its subsidiaries would be able to find alternative financing. Even if the Company and its subsidiaries could obtain alternative financing, there can be no assurance that it would be on terms that are favourable or acceptable to the Company or, as the case may be, its subsidiaries.

As at 31 December 2015, a total book value of approximately RMB3,172.8 million in assets of the Group were provided as security for bank loans provided to the Company and its subsidiaries. Third-party security rights may limit the Group’s use of the underlying collateral assets and adversely affect its operation efficiency. If the Company and its subsidiaries are unable to service and repay their debts under such bank loans on a timely basis, the assets provided as security for such bank loans may be subject to foreclosure, which may adversely affect the Group’s business, prospects and financial condition.

The Group may be exposed to liquidity risk.

A large percentage of the Group’s assets are non-current assets, which cannot be readily converted into cash. As at 31 December 2013, 2014 and 2015, the Group’s non-current assets amounted to RMB34,275.6 million, RMB42,684.7 million and RMB52,027.6 million, respectively, representing 81.6 per cent., 70.1 per cent. and 75.6 per cent., respectively, of the Group’s total assets, and the balance of long-term equity investments was RMB13,782.6 million, RMB17,917.0 million and RMB19,389.9 million, respectively, representing 32.6 per cent., 31.8 per cent. and 26.1 per cent. respectively, of the Group’s total assets. As at 31 December 2013, 2014 and 2015, the ratio of the Group’s current assets to current liabilities was 0.9, 0.9 and 1.0, respectively, and the quick ratio was 0.8, 0.8 and 1.0, respectively. Large proportion of non-current assets may increase the liquidity risk of the Group. If the Group experiences any shortage in working capital or cash, there is no assurance that the Group is able to convert its non-current assets into cash in a timely manner, or on terms acceptable to it. If there is any adverse change in the operation or equity value of the companies in which the Group invested, the

–24– Group’s business, financial condition, results of operations and prospects may be adversely affected. The Group’s liquidity position in the future will continue to depend largely on its ability to maintain adequate cash flow operations to meet its liabilities as they became due and the Group’s ability to generate sufficient cash flow from its operations and maintain adequate external financing to fund its operations. In the event that the Group fails to do so, the Group’s financial position will be adversely affected, which will in turn weaken the Group’s financing ability and the performance of the Group is likely to be adversely affected.

The Group historically experienced net current liabilities and continued negative working capital may increase the Group’s liquidity risk.

As at 31 December 2013 and 2014, the Group had net current liabilities in the amount of RMB922.1 million and RMB1,155.8 million, respectively. The general increase in the negative working capital of the Group was primarily the result of a significant increase in its short-term loans, short-term financing bonds and interest payables on outstanding indebtedness. The proceeds of these indebtedness were largely used to fund the Group’s investment in and development of its energy projects. The Group’s ability to improve its working capital depends on a combination of factors, such as the Group’s future operating performance, prevailing market and economic conditions and changes in the regulatory environment, many of which are beyond their control. There is no assurance that the Group is able to achieve and maintain a positive working capital in the future. Continued negative working capital may increase the Group’s liquidity risk, restrain its operational flexibility, and in turn have a material adverse impact on the business, prospects, financial condition and results of operations of the Group.

The Group’s overall profit and profitability may be heavily affected by its business portfolios which have different profit margins.

The Group’s businesses consist primarily of power generation and sales, coal production and sales, resources trading (including natural gas), financial services and other businesses. For the years ended 31 December 2013, 2014 and 2015, the Group’s gross profit margin was 5.0 per cent., 6.4 per cent. and 5.9 per cent., respectively. Resources trading contributes the largest portion of the Group’s revenue but its gross profit margin is relatively low. For the years ended 31 December 2013, 2014 and 2015, the Group’s revenue from resources trading accounted for 81.4 per cent., 71.6 per cent. and 86.6 per cent., respectively, of the reveune of the Group, while its gross profit margin was 0.1 per cent., 0.3 per cent. and 0.9 per cent., respectively, during the corresponding years.

The Group’s financial services business has the highest gross profit margin among all business segments. For the years ended 31 December 2014 and 2015, the revenue from the financial services was RMB70.7 million and RMB29.5 million, respectively, accounting for 0.2 per cent. and 0.1 per cent., respectively, of the reveune of the Group while it represented 4.3 per cent. and 2.1 per cent., respectively, of the total profit of the Group. The profitability of financial services business is heavily influenced by the market environment and other factors which may be beyond the Group’s control. As the Group continues to diversify its investment and business portfolio, its business, financial condition, results of operations and prospects may continue to be affected by the combination of its business portfolios.

The Group’s revenue is heavily affected by the performance of its investment portfolio.

As at 31 December 2015, the Group invested, without controlling interests, in 16 power generation companies, including 10 hydropower companies and six fossil fuel power companies. The investment income mainly includes cash dividends that the Group received from its investments in such power generation companies. For the years ended 31 December 2013, 2014 and 2015, the Group’s investment income was approximately RMB1,309.0 million, RMB2,529.9 million and RMB2,340.7 million, respectively, accounting for 5.0 per cent., 7.2 per cent. and 5.6 per cent., respectively, of the Group’s revenue for the corresponding years.

–25– As the Group has no controlling interests in such companies, there is no assurance that the Group would continue to receive dividends in the future. In addition, the amount of dividends declared and paid by these investee companies is affected by their performance. If the performance of its investment portfolio does not improve as expected, or at all, the Group’s business, results of operations and financial conditions would be adversely affected.

The Company’s limited operating history may not serve as an adequate indicator of its future results of operations.

The Group’s businesses of power generation and sale, coal production and sale and resources trading commenced from 27 February 2012 when all of the hydro and equity assets of Yunnan Provincial Investment Holdings Group Co., Ltd. (an investment vehicle of the Yunnan Provincial Government) was transferred, at book value, to the Company with the approval of the Yunnan Provincial Government. The Group commenced its financial investment business in 2014.

The operating history of the Group is relatively short and many of its businesses and projects are in the development and establishment stages, resulting in limited potential for short-term profits. In addition, as the overall profitability of each project can only be measured after the project has been completed, the current profitability of the Group’s projects may not be an accurate reflection of future profits. There is no assurance that the Group will effectively manage and develop such businesses or projects, or succeed in achieving its goal of expanding these businesses.

The Group’s business may be affected by fluctuations in interest rates.

The Group relies on bank and other borrowings to satisfy part of its cash needs to fund its investment and business expansion. Changes in interest rates have affected and will continue to affect the Group’s financing expenses and ultimately, its profit. In recent years, the People’s Bank of China (“PBOC”) promulgated a number of policies and adjusted the benchmark one-year RMB lending rate for several times as monetary measures to control the supply of liquidity in the market. While starting from 20 July 2013, commercial banks in China are permitted to set the lending interest rates for their loans at their own discretion, the benchmark lending rates published by PBOC remain an influential reference to commercial banks to determine the rate of the loans they grant to borrowers, such as the Group. Any increase in the benchmark lending rate may affect the prevailing interest rate offered by the commercial banks and in turn increase the interest expenses of the Group for its bank borrowings. This may also affect the Group’s ability to obtain additional financing and in turn have a material adverse impact on the Group’s business, financial condition and results of operations.

The Group is exposed to risks in relation to the inventory it maintains.

The Group needs to maintain sufficient inventory, especially finished products, to meet the market demand and its sales. The principal inventories of the Group are steel, iron ore and thermal coal. The Group endeavours to manage its inventory level by aligning its procurement with its sales based on confirmed purchase orders and projected sales. However, making an accurate estimate is difficult. Inaccurate demand forecasts and the time lag between when the inventory of raw materials is ordered from the Group’s suppliers and when its finished products are sold could expose the Group to inventory risks. As at 31 December 2013, 2014 and 2015, the balance of the Group’s inventory was RMB601.5 million, RMB1,080.3 million and RMB1,513.4 million, respectively, accounting for 7.8 per cent., 7.8 per cent. and 6.8 per cent., respectively, of the current assets.

The increase in Group’s inventory balance is mainly due to an increase in the inventory of resources trading business and the increase in the development cost of construction projects. Influenced by the slowdown of macro-economy, the price of its inventories is subject to greater volatility, which may lead to increase in the Group’s inventory impairment provision and adversely affect the Group’s overall profits and profitability. There can be no assurance that the Group can manage its inventories effectively and any failure in its inventory management could materially and adversely affect its business, financial condition and results of operations.

–26– The Group may not be able to expand its business effectively through acquisitions, investments and joint ventures.

Since its reorganisation and establishment in early 2012, the Group’s total assets have increased from RMB33,647.8 million as at 31 December 2012 to RMB74,187.4 million as at 31 December 2015. This increase has largely been due to the Group’s business strategy of investing in new assets and businesses and entering into new strategic alliances and joint ventures.

The Group’s ability to achieve and benefit from such acquisitions, investments, alliances and joint ventures will depend upon a number of factors, some of which are beyond its control. These factors include, but are not limited to, the Group’s ability to:

¼ maintain, expand or develop its customer relationships; identify assets or businesses for acquisition, investments, joint ventures or alliances that suit its development strategy;

¼ execute the acquisition, alliance or joint venture or complete the investments within the timeframe or budget anticipated or integrate any business it acquires;

¼ identify additional new markets; work with its joint venture partners or other shareholders; and

¼ train and retain qualified personnel to manage and operate its growing business and any new business lines.

There can be no assurance that any or all of the proposed acquisitions, investments, joint ventures or alliances will be consummated on commercially acceptable terms, if at all. Acquisitions of or strategic investments in other power plants may result in the incurrence of debt and the impairment or amortisation of expenses related to goodwill and other intangible assets. In addition, acquisitions and strategic investments involve numerous risks, including difficulties in the assimilation of operations, corporate culture and personnel of the acquired business, diversion of management’s attention from other business concerns, risks of entering into new markets and the potential loss of key employees of the acquired business. Furthermore, such expansion will require the Group to continuously upgrade and improve its risk management controls and systems. The failure to manage any of these factors effectively may have a material and adverse effect on the Group’s business, financial position, results of operations and prospects.

Business growth could place a significant strain on the Group’s managerial, operational and financial resources. Integrating new assets or businesses into the Group’s operational framework and ensuring their proper management may involve unanticipated delays, costs and operational problems, in particular with respect to business lines with which the Group has not had extensive experience. The Group may encounter unexpected problems or difficulties in realising anticipated synergies or have disagreements or conflicting interests with its joint venture or alliance partners or the other shareholders of its acquisitions. As a result, the Group may be unable to derive profit from such acquired businesses. Any such problems may impair the Group’s competitiveness or growth prospects and have a material and adverse effect on the Group’s business, financial condition, results of operations and prospects.

In addition, with respect to some joint ventures or equity investments in which the Group holds only a minority stake, the Group may not have any board representation or veto power. In case of disagreements with the Group’s partners, management may be required to divert attention away from other aspects of its businesses to address these disagreements. Acquisitions also pose the risk that the Group may be exposed to successor liability relating to actions by an acquired company and its management before and after the acquisition. The due diligence the Group conducts in connection with an acquisition may not be sufficient to uncover unknown liabilities, and any contractual guarantees or indemnities that it receives from the sellers of acquired companies may not be sufficient to protect it from, or compensate it for, actual liabilities. A material liability associated with an acquisition could adversely affect the Group’s reputation and reduce the benefits of the acquisition and may have a material and adverse effect on the Group’s business, financial position and results of operations.

–27– The Group relies on the performance of its contractors.

The Group has arrangements with contractors that are essential to its operations, such as construction agreements in relation to power plants. The Group endeavours to engage construction contractors with good reputations, strong track records, and adequate financial resources. It has also formed quality control procedures and routinely monitor works performed by third-party contractors. However, the Group cannot assure you that any third-party contractor will provide services that satisfy its required standard of quality or in a timely manner. If any of these key counterparties fails to perform its obligations or if the credit-worthiness of any of these counterparties deteriorates, the Group may not be able to find suitable alternative contractors at commercially reasonable contract terms if contracts with its current counterparties terminate and it may result in delays in the completion of the Group’s projects or incurrence of additional costs, which could materially and adversely affect the Group’s business, financial condition and results of operations.

The Group undertakes additional operational risks in its overseas investment projects.

The Group conducts its operations and investments mainly in Yunnan Province. As part of its business strategies, the Group has expanded its investment portfolio to include some energy projects in Laos and Myanmar. Overseas markets and countries may differ from those in Yunnan Province and China in a number of ways, such as the level of economic development, topography, real estate trends and regulatory practices. As the Group enters into new markets, it may not have the same level of experience with local business practices, customs and customer tastes, behaviour and preferences as compared to its home markets. Therefore, the Group may not be able to successfully leverage its experience in China to expand its business into international markets. In addition, when the Group enters into new geographical areas and markets, it may face competition from local energy companies with established experience or presence in those areas. Any failure to leverage its experience or to understand the energy market in those countries may have a material adverse effect on the Group’s financial condition and results of operations relating to such overseas investment. The Group’s overall business, results of operations and prospects may be adversely affected as a result.

The Group’s activities in Myanmar could result in negative media and investor attention and materially and adversely affect investment in the Bonds due to U.S. sanctions.

The Group is developing a hydropower plant project in Myanmar. In July 2010, YEIG International Energy obtained from the Burmese authorities the development rights for the Ngaw Chan Hka River（諾 昌卡河）hydropower project in Myanmar. As at the date of this Offering Circular, the Group has not made a substantial investment in this project. For further details about the project, please see “Description of the Group – Description of the Group’s Businesses – Energy Business – Power Generation and Sales – Future hydropower projects”.

Except for the hydropower project in Myanmar, the Group does not engage in any activities in any countries or with any targets, whether directly or indirectly, that are the subject of any United States economic sanctions regime. In addition, the Group does not plan to use any of the proceeds from the offering of the Bonds in the project described above or in any countries or with any targets, whether directly or indirectly, that are the subject of any United States economic sanctions regime. Myanmar is currently the subject of a United States economic sanctions regime, although such sanctions regime has been eased in recent years. The Group cannot predict the interpretation or implementation of government policy at the U.S. federal, state or local levels with respect to any current or future activities by the Group or its affiliates in Myanmar. There is no assurance that the Group’s investment activities in Myanmar will not have an adverse impact on an investor’s investment in the Bonds. It is also possible that, as a result of activities by the Group or its affiliates in Myanmar, the Group may be subject to negative media or investor attention, which may distract management, consume internal resources and affect investors’ perception of the Group. In addition, because many sanctions programs are evolving, new requirements or restrictions could come into effect which might increase regulatory scrutiny of the Group’s business or result in one or more of its business activities being deemed to have violated sanctions, or being sanctionable.

–28– The Group operates facilities that may cause significant harm to the natural or human environment or for which accidents, natural disasters or external attacks may have serious consequences.

Power generation and coal mining operations involve significant risks and occupational hazards that are inherent in such activities and may not be completely eliminated through the implementation of preventive measures. Factors such as insufficient attention to safety or maintenance and working conditions associated with production could result in accidents. The main types of accidents are explosions, collapse of retention walls, flooding and short circuits resulting in electrical fires. In addition, the Group uses explosives and other detonators in its coal mining projects. The use of explosives and detonators are strictly regulated by the PRC Government. If the Group breaches any of the regulations, it could be subject to fines or, in a worst case scenario, may lose its exploration or mining licence. There can be no assurance that the safety measures currently implemented by the Group are sufficient to prevent potential accidents. An accident at any of the Group’s projects could have serious consequences for persons, property, corporate image and business continuity, and could have a material adverse effect on the Group’s business, financial condition and results of operations.

Furthermore, even if accidents do not occur at the Group’s coal mines, accidents or safety hazards occurring at neighbouring mines could create safety hazards affecting the Group’s coal mining operations or even result in a suspension of the Group’s coal mining operations by the relevant authorities. There have been a number of significant mining accidents in the PRC in the last decade which have prompted the PRC Government to strengthen safety regulations, and future accidents may result in the imposition of further regulations. The Group may be required to devote additional financial and other resources to comply with such regulations. Any suspension of business or increase in the compliance cost could have a material adverse effect on the Group’s business, financial condition and results of operations.

The Group maintains insurance to cover certain risks but there can be no assurance that the insurance maintained by the Group will provide adequate coverage in certain circumstances. See “— The Group may not have adequate insurance to cover all potential liabilities or losses”.

The Group’s operations are subject to natural disasters and outbreaks of contagious diseases.

Natural disasters, catastrophes or other events could result in severe personal injury, property damage and environmental damage, which may curtail the Group’s operations, cause delays in estimated completion dates for projects and materially and adversely affect its cash flows and, accordingly, adversely affect its ability to service debt. The Group’s operations are mainly based in Yunnan Province, which is exposed to potential natural disasters including, but not limited to, earthquakes, flooding, landslides, mudslides and drought. If any of the Group’s developments are damaged by severe weather or any other disaster, accident, catastrophe or other event, the Group’s operations may be significantly interrupted. The occurrence or continuance of any of these or similar events could increase the costs associated with the Group’s operations and reduce its ability to operate its businesses effectively, thereby reducing its revenue. Risks of substantial costs and liabilities are inherent in the Group’s principal operations and there can be no assurance that significant cost and liabilities will not be incurred, including those relating to claims for damages to property or persons.

Insurance policies for civil liabilities and damages taken out by the Group could prove to be significantly inadequate, and there can be no assurance that the Group will always be able to maintain a level of cover at least equal to current cover levels and at the same cost. The frequency and magnitude of natural disasters seen over the past few years, in particular the nuclear accident that occurred in Fukushima, Japan in March 2011 and the earthquake in Yunnan Province in August 2014, could have a significant impact on the capacities of the insurance and reinsurance market and on the costs of civil liability and damages insurance cover for the Group. See “– The Group may not have adequate insurance to cover all potential liabilities or losses” below. Such accidents could also lead to the shutdown of the facility affected and, potentially, of similar facilities that may be considered to present the same risks.

In addition, the Group’s operations may be affected by outbreaks of contagious diseases. For example, the outbreak of Severe Acute Respiratory Syndrome (“SARS”) that began in the PRC and Hong Kong in early 2003 had an adverse effect on all levels of business in Hong Kong and the PRC. There have been sporadic outbreaks of the H5N1 virus or “Avian Influenza A” among birds, in particular poultry, as well as some isolated cases of transmission of the virus to humans. There have also been recent

–29– outbreaks among humans of the influenza A/H1N1 virus globally. On 11 June 2009, the World Health Organisation raised its global pandemic alert to Phase 6 after considering data confirming the outbreak. The outbreak of SARS and the influenza A/H1N1 virus led to a significant decline in travel volumes and business activities throughout most of the Asian region. The occurrence of another outbreak of SARS, the influenza A/H1N1 virus or of any other highly contagious disease may result in another economic downturn and may have an adverse effect on the overall level of business and travel in the affected areas. It may also disrupt the Group’s business operations and consequently have an adverse effect on its financial condition and operating results.

The Group’s operations are subject to operational risks customary to the power generation industry, which may result in lost revenues, increased maintenance costs and the Group owing damages for failing to perform under power sales agreements.

Operating power plants and projects involves many operational risks customary to the power generation industry. The breakdown of generation equipment or failure of other key equipment or of a civil engineering structure in one or more of the Group’s power plants and projects could disrupt the generation of power and result in revenues being lower than expected. Further, any breakdown or failure of one or more of the Group’s transmission systems could disrupt transmission of power to the power grid. In addition, if there is a breakdown or failure of the power grid, the Group’s affected power plants or projects will be unable to dispatch power until the grid company carries out the necessary repairs.

Furthermore, older generating equipment may require significant capital expenditure to maintain and upgrade. Breakdown or failure at one of the Group’s power plants or projects may also prevent the Group from performing under the applicable power sales agreement, which in certain situations, could result in termination of the agreements or incurring the liability of liquidated damages.

Operation of the Group’s power plants and projects may also be disrupted by a number of other factors including, but not limited to, improper installation or operation of equipment, substandard performance of equipment, natural disasters, labour disturbances, environmental hazards, fuel supply disruptions, and disputes with contractors and industrial accidents. The occurrence of any such operational disruptions at the Group’s power generation plants could result in lost revenues and increased maintenance costs, which in turn could materially and adversely affect the Group’s business, financial condition or results of operations.

The Group’s business operations may be materially and adversely affected by present or future environmental regulations.

The Group’s power generation and coal mining operations produce gaseous emissions, dust, waste water, sound pollution and solid waste materials. Accordingly, the Group is subject to extensive and increasingly stringent environmental protection laws and regulations that impose fees for the discharge of pollutants and waste substances, require the establishment of reserves for reclamation and rehabilitation, and impose fines for serious environmental violations.

In particular, the Group’s fossil fuel power plants are subject to various environmental, health and safety regulations and requirements. Like all coal power plants, the Group’s coal power plants discharge pollutants into the environment and are subject to central and local government environment protection laws and regulations, including requirements to pay discharge fees for various pollutants and waste. Compliance with such laws and regulations increases the Group’s operating and capital expenses. These laws and regulations also impose fines and provide for the closure by the PRC Government of any power plant that violates environmental laws, regulations or decrees.

There is no assurance that the PRC Government will not adopt stricter environmental laws and regulations. In addition, the PRC Government is moving towards more rigorous enforcement of applicable environmental laws and regulations and the adoption of more stringent environmental standards. Any enhanced standards of these laws and regulations may require the Group to incur substantial additional costs in order to comply with such enhanced environmental, health and safety laws and regulations, including costs relating to maintenance and inspection, development and implementation of emergency procedures, and additional insurance coverage, or other financial assurance of the Group’s ability, to address pollution, health and/or safety incidents. Any failure by the

–30– Group to control the costs associated with any enhanced standards in these laws and regulations could have a material adverse effect on its business, financial condition, results of operations, profitability and prospects.

The Group is subject to extensive laws and regulations and there can be no assurance that the Group has obtained all necessary regulatory approvals or will always be in full compliance with such laws and regulations.

The Group’s business is subject to extensive laws and regulations of the PRC Government, provincial and local authorities and agencies, which regulate many aspects of its operations, including the connection and dispatch of power generation, setting of on-grid and retail tariffs, compliance with power grid control and dispatch directives, granting and renewal of coal exploration and mining permits, and environmental, safety and health standards. Compliance with such laws and regulations may require the Group to incur significant capital expenditures or may impose other obligations or liabilities which could create a substantial financial burden on it. There can be no assurance that the Group possesses at all times adequate certificates, authorisations, licences, orders, consents, approvals or permits required by all applicable laws and regulations in the PRC. A breach of the laws or regulations to which the Group is subject may result in the imposition of fines and penalties or the suspension or closure of the relevant power plant operations.

In particular, the Group’s hydropower plants, coal power plants and other renewable energy projects are subject to strict PRC laws and regulations relating to their development, construction, licensing and operation of power plants. These laws and regulations relate to, among other things, project approval and other government approval and licensing requirements for power companies, building and construction of new projects, landscape conservation and power dispatch and transmission. Before the Group constructs and operates its wind farms or coal power plants, the Group must first obtain operational and construction permits from various authorities. Procedures for granting operational and construction permits vary by local area. Furthermore, third parties may challenge a decision to grant the Group operational and construction permits after the Group has been granted the permits. Finally, the Group must comply with laws and regulations and the conditions contained in the operational and construction permits, and failure to do so may result in fines, sanctions, criminal penalties and/or the suspension, revocation or non-renewal of approvals, licences or permits. These factors could have an adverse effect on the Group’s business, financial condition or results of operations.

Additionally, the PRC power generation industry has undergone and will continue to undergo regulatory reform. There can be no assurance that future regulatory reform will not have a material adverse effect on the Group’s business, financial condition or results of operations. Changes in the regulatory regime governing the PRC’s power generation industry, particularly with regard to the on-grid tariffs, will impact the Group’s business and may have an adverse effect on the Group’s results of operations.

The Group may be involved in legal and other proceedings arising in the ordinary course of its business.

In the ordinary course of the business of the Group, claims involving its suppliers, contractors, customers, employees and other third-party entities may be brought against the Group or by the Group. Claims may be brought against the Group for liabilities for personal injuries, damage to or destruction of property, breaches of warranty, termination of contracts or delayed payments to its suppliers or contractors. The Group may also bring claims against counterparties to preserve or enforce its contractual rights. The claims and charges may involve actual damages and contractually-agreed-upon liquidated sums. If the Group is found to be liable on any of the claims, it would have to incur a loss against earnings to the extent a reserve had not been established for the matter in its financial statements, or to the extent the claims were not sufficiently covered by the insurance coverage of the Group. Both claims brought against the Group and by the Group, if not resolved through negotiation, are often subject to lengthy and expensive litigation or arbitration proceedings. Amounts ultimately realised from project or other claims by the Group could differ materially from the balances included in the financial statements, resulting in a loss against earnings of the Group to the extent profit has already been accrued on a project or other contract. Charges and write-downs associated with claims brought against the Group have a material adverse impact on the financial condition, results of operations and cash flow of the Group. Moreover, legal proceedings resulting in judgments or findings against the Group may harm its reputation and damage its prospects for future contract awards and business.

–31– Certain negative findings by an inspection team from the Central Leading Group for Inspection Work may have an adverse impact on the Group’s reputation and business.

Following the 18th Party Congress in 2012 and the wide-reaching anti-corruption campaign in China, the Central Leading Group for Inspection Work （中央巡視工作領導小組） (the “Inspection Leading Group”), a coordination body set up under the Central Committee of the Communist Party of China (the “Party”) for the purpose of managing party disciplinary inspections nationwide, has dispatched inspection teams（巡視組）to provinces and central government organs and SOEs, such as the Group, in China to conduct inspection work on party disciplinary enforcement. The inspection team found that the Group failed to fully implement the Party’s internal disciplinary procedures in certain respects and breaches had occurred occasionally within the Group. The inspection team also discovered that some Party members made misrepresentations when filing their personal information with the Party committee. In addition, the findings revealed that some transactions of the Group had not been properly recorded, which may put the state-owned assets at risk.

The Group believes that the inspection team’s findings will not materially and adversely affect its business, financial condition and results of operations. However, there is no assurance that there will not be any further investigations or actions against the Group, its officers or employees resulting from the findings taken by the Inspection Leading Group or other governmental authorities or that such investigations or actions would not affect the Group as a result.

The Group cannot assure you that it will be able to detect or prevent fraud or other misconduct committed by its employees in a timely manner, which may have a negative impact on its reputation and business. Although the Group has been making increasing efforts to detect and prevent employee misconduct, it is not always possible to deter or prevent employee misconduct, and the precautions the Group takes to prevent and to detect such activities may not be effective in all respects. The Group could also suffer from negative publicity, reputational damage, monetary losses or litigation losses as a result of the misconduct of its employees.

The Group may not have adequate insurance to cover all potential liabilities or losses.

The Group faces various risks in connection with its businesses and may lack adequate insurance coverage or may have no relevant insurance coverage. There can be no assurance that the insurance maintained by the Group will provide adequate coverage in certain circumstances. In particular, in accordance with industry practice in the PRC, the Group does not currently carry business interruption insurance, and the Group would not be compensated for any loss arising from the interruption in the Group’s production operations. Although each of the Group’s power plants and projects and coal mines has a track record of safe operation and none of them has suffered any material hazards to date, there can be no assurance that incidents, accidents or mishaps will not occur in the future. The occurrence of any such incident for which the Group is uninsured or inadequately insured may materially and adversely affect its business, financial condition and results of operations.

The Group’s insurance policies are generally renewed on an annual basis, and there is no assurance that the Group will be able to renew these policies on similar or otherwise acceptable terms, if at all. If the Group were to incur a serious uninsured loss or a loss that significantly exceeded the limits of its insurance policies, it could have a material adverse effect on its business, financial condition or results of operations.

The Group may have difficulties in implementing and monitoring corporate policies across its subsidiaries and affiliated companies.

The Group strives to implement its corporate governance and operational and safety standards across each of its subsidiaries and affiliated companies in a uniform manner. Due to the Group’s recent expansion in the number of new projects, implementing and monitoring these standards may prove difficult and a failure to do so may result in violations of local regulations or the Group’s own internal policies. There can be no assurance that the Group can effectively monitor each subsidiary and affiliated company and prevent non-compliance. This may result in violations that could adversely affect the Group’s reputation and business prospects, which could materially and adversely affect its business, financial condition and results of operations.

–32– The Yunnan Provincial Government can exert significant influence on the Group, and could cause the Group to make decisions or modify the scope of its activities, or impose new obligations on the Group that may not be in the Group’s best interest.

The Company is a state-owned company and the Yunnan Provincial Government is in a position to significantly influence the Group’s major business decisions and strategies, including the scope of its activities, investment decisions and dividend policy. The Yunnan Provincial Government may use its ability to influence the Group’s business in a manner that may not be in the Group’s best interest. The Yunnan Provincial Government may also change its policies, intention, preferences, views, expectations, projections, forecasts and opinions, as a result of changes in the economic, political and social environment, its projections of population and employment growth. Any amendment, modification or repeal could modify the existing regulatory regime and materially and adversely affect the Group’s financial condition and results of operations.

The Company may fail to manage successfully the assets, projects and subsidiaries in which the Company does not have majority interests, or the Company’s relationships with local partners.

The Group may not be able to execute successfully or fully the Group’s business strategy with respect to assets, projects or subsidiaries in which the Company has minority interests. The Company’s control over such assets, projects and subsidiaries is generally subject to the terms of applicable agreements and arrangements. For example, through contractual arrangements with other equity owners, the Company has the power to exercise control over the management, policies, business and affairs of certain of its subsidiaries in which the Company does not have majority interests.

Furthermore, the Group conducts its project development activities through one or more joint venture companies with local partners. In general, local partners may be involved in sourcing new projects and carrying out various activities during the development phase. The Group generally enters into such partnerships where it believes it is able to benefit from the strong local insight and experience of local partners.

Under the current contractual arrangements, if other equity owners or the Company’s local partners fail to perform their respective obligations or otherwise breach the terms and conditions of the Company’s shareholding arrangements or partnerships, it could have a material adverse effect on the Company’s business, financial condition or results of operations.

If the Group fails to obtain or experiences material delays in obtaining the land use rights or the building ownership certificates for its operations, its business, financial condition and results of operations may be materially and adversely affected.

The Group acquires land and properties for its business operations from time to time, such as construction of project facilities. According to applicable PRC laws, the granting of land use rights is customarily conducted through a public tender and bidding process. The government determines the granting of the land use rights based on a numbers of factors, such as the reputation, track record and financial conditions of the bidders and project budgeting. The granting of the building ownership certificates is also subject to a number of conditions and procedures and sometimes requires documents and cooperation from contractors and third parties. Many of these factors are beyond the Group’s control.

As at the date of this Offering Circular, the Company is in the process of applying for the land use rights certificate for a parcel of land in Kunming, Yunnan Province. The Company purchased an office building on such land from a property developer and has already obtained the relevant building ownership certificate. In addition, Weixin Yunnan Investment Guangdong Electricity & Zhaxi Energy Co., Ltd.（威信雲投粵電扎西能源有限公司）, an indirect majority owned subsidiary of the Company, has operations on two parcels of land without land use rights certificates. According to the preliminary evaluation opinions issued by the relevant authorities, such land was approved to be used for construction of power generating facilities and coal mining facilities. Weixin Yunnan Investment Guangdong Electricity & Zhaxi Energy Co., Ltd. has constructed certain ancillary facilities (including office buildings, dormitory buildings and dining halls) on such land, but it has not obtained the relevant land use rights certificates or building ownership certificates. There can be no assurance that the Group will be able to obtain the necessary land use rights certificates or building ownership certificates in a timely manner or at all. If the Group fails to obtain the requisite certificates or experiences significant

–33– delays in obtaining them, it may be required to suspend its operations, the construction of facilities, demolish the buildings, restore the site or may be subject to other administrative sanctions, and it may also be forced to relocate operations and incur additional costs associated therewith, which could materially and adversely affect the Group’s business, financial condition and results of operations.

RISKS RELATING TO CONDUCTING BUSINESSES IN THE PRC

Substantially all of the Group’s assets are located in the PRC. Accordingly, its results of operations, financial position and prospects are, to a significant degree, affected by the economic, political and legal developments of the PRC.

The Group’s business, financial condition, results of operations and prospects could be adversely affected by slowdowns in the Chinese economy.

A substantial part of the Group’s revenue is derived from the PRC. The Group relies, to a significant degree, on domestic demand for electric power and energy resource to achieve revenue growth. Domestic demand for power and energy resources is materially affected by industrial development, growth of private consumption and overall economic growth in the PRC. The global crisis in financial services and credit markets in 2008 caused a slowdown in the growth of the global economy. In 2015, the PRC Government adopted intensive reforms with the primary aim of restructuring and rebalancing the PRC economy towards a more sustainable model by focusing more on domestic consumption and away from investment and export fuelled growth. As a consequence of these reforms and instability in the recovery of international economy, China reported a gross domestic product of RMB67.67 trillion in 2015, representing year-on-year growth of 6.9 per cent. which was a record 25-year low. In the fourth quarter of 2015, China reported a gross domestic product of RMB18.9 billion, representing year-on-year growth of 6.8 per cent., according to the statistic released by National Bureau of Statistics of China. In March 2016, Moody’s Investors Service and Standard & Poor’s Ratings Services changed China’s credit rating outlook to “negative” from “stable”, which highlighted the country’s surging debt burden and questioned the government’s ability to enact reforms. The continuing effects of reform in the PRC and the sovereign debt crisis in Europe may have an adverse effect on the global and the PRC economies resulting in continuing uncertainty for the overall prospects for the global and the PRC economies this year and beyond. Any slowdown of the PRC economy may create a credit tightening environment, increase the Group’s interest expense, or reduce domestic demand for power, resulting in a material adverse effect on its business, results of operations and financial condition.

Changes in the economic, political and social conditions in the PRC and policies adopted by the PRC Government could adversely affect the Group’s results of operations and financial condition.

The PRC economy differs from the economies of most developed countries in many respects, including with respect to government involvement, level of development, economic growth rate, control of foreign exchange and allocation of resources. The PRC economy has been transitioning from a planned economy to a more market-oriented economy. In recent years, the PRC Government has implemented a series of measures emphasising market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises.

However, a large portion of productive assets in China remain owned by the PRC Government. The PRC Government continues to play a significant role in regulating industrial development, the allocation of resources, production, pricing and management, and there can be no assurance that the PRC Government will continue to pursue the economic reforms or that any such reforms will not have an adverse effect on the Group’s business.

The Group’s operations and financial results could also be affected by changes in political, economic and social conditions or the relevant policies of the PRC Government, such as changes in laws and regulations (or the interpretation thereof). In addition, the growth of power and energy resources demand in the PRC depends heavily on economic growth. If the PRC’s economic growth slows down or if the PRC economy experiences a recession, the growth of power and energy resources may also slow down, and the Group’s business prospects may be materially and adversely affected. The Group’s operations and financial results, as well as its ability to satisfy its obligations under the Bonds, could also be materially and adversely affected by changes to or introduction of measures to control changes in the rate or method of taxation and the imposition of additional restrictions on currency conversion.

–34– China’s inflation and deflation may affect the prices of energy and various materials purchased, generated or sold by the Group.

Economic growth in the PRC has historically been accompanied by periods of high inflation. The PRC Government has implemented various policies from time to time to control inflation. The PRC Government has periodically introduced measures in certain sectors to avoid overheating of the economy, including tighter bank lending policies, increases in bank interest rates and measures to curb inflation, which has resulted in a decrease in the rate of inflation. The global economic crisis resulted in a slowing of the rate of inflation in January 2009 and thereafter into negative territory until November and December 2009 according to the National Bureau of Statistics of the PRC. In 2011, the annual inflation rate was 5.4 per cent. which led to the PRC Government raising lending interest rates and the reserve requirements for banks six times in 2011 to counter accelerating inflation. According to the National Bureau of Statistics of the PRC, the annual inflation rate for 2012 and 2013 fell to 2.6 per cent. as a result of the slowing economy and weakening further to 2 per cent. in 2014, below the 3.5 per cent. target set by the PRC Government. China’s central bank, in its quarterly monetary policy report issued on 10 February 2015, noted that inflation figures had dropped to its lowest level in more than five years and that it would continue with its prudent monetary policy to ensure continuity and stability as the economy undergoes structural adjustments to its economic model. Recently, concerns have arisen over deflationary pressures in China as a result of weak domestic demand. A prolonged period of deflation may result in falling profits, closure of plants and shrinking employment and incomes by companies and individuals, any of which could adversely affect the Group’s business, financial condition or results of operations.

Interpretation and implementation of PRC laws and regulations involve significant uncertainties.

The Company is incorporated and exists under the laws of the PRC. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, the PRC Government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organisation and governance, commerce, taxation and trade. However, as these laws and regulations are relatively new, and due to the limited volume of published cases and judicial interpretation and their lack of precedential force, interpretation and enforcement of these laws and regulations involve significant uncertainties. In particular, the PRC power generation industry is a highly regulated industry. Many aspects of the Group’s business such as the connection and dispatch of power generation and the setting of on-grid and retail tariffs are subject to negotiations with the PRC Government and the relevant government authorities’ approval. As the PRC legal system develops together with the PRC power generation industry, there can be no assurance that changes in such laws and regulations, or in their interpretation or enforcement, will not have a material adverse effect on the Group’s business operations.

Furthermore, the administration of PRC laws and regulations may be subject to a certain degree of discretion by the executive authorities. This has resulted in the outcome of dispute resolutions not being as consistent or predictable compared to other more developed jurisdictions. In addition, it may be difficult to obtain a swift and equitable enforcement of laws in the PRC, or the enforcement of judgments by a court of another jurisdiction. These uncertainties relating to the interpretation and implementation of PRC laws and regulations may adversely affect the legal protections and remedies that are available to the Group in its operations and to holders of the Bonds.

Certain PRC regulations governing PRC companies are less developed than those applicable to companies incorporated in more developed countries.

Most members of the Group are established in the PRC and are subject to PRC regulations governing PRC companies. These regulations contain certain provisions that are required to be included in the joint venture contracts, articles of association and all other major operational agreements of these PRC companies and are intended to regulate the internal affairs of these companies. These regulations in general, and the provisions for protection of shareholders’ rights and access to information in particular, are less developed than those applicable to companies incorporated in Hong Kong, the United States, the United Kingdom and other developed countries or regions.

–35– It may be difficult to effect service of legal process, enforce foreign judgments or bring original actions in the PRC based on other foreign laws against the Group, its directors or senior managers in the PRC.

The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the United Kingdom, Japan and many other countries. Therefore, it may not be possible for investors to effect service of process upon those persons in the PRC or to enforce against them in the PRC any judgments obtained from non-PRC courts. In addition, recognition and enforcement in the PRC of judgments of a court of any other jurisdiction in relation to any matter not subject to a binding arbitration provision may be difficult or even impossible.

The payment of dividends by the Company’s operating subsidiaries in the PRC is subject to restrictions under the PRC law.

The PRC laws require that dividends be paid only out of net profit, calculated according to the PRC accounting principles, which differ from generally accepted accounting principles in other jurisdictions. In addition, the PRC law requires enterprises set aside part of their net profit as statutory reserves before distributing the net profit for the current financial year. These statutory reserves are not available for distribution as cash dividends. Since the availability of funds to fund the Company’s operations and to service its indebtedness depends upon dividends received from these subsidiaries, any legal restrictions on the availability and usage of dividend payments from the Company’s subsidiaries may impact the Company’s ability to fund its operations and to service its indebtedness.

Any withdrawal of, or changes to, tax incentives in the PRC may adversely affect the Group’s results of operations and financial condition.

On 16 March 2007, the PRC passed a new enterprise income tax law, or the Enterprise Income Tax Law (the “EIT law”), which took effect on 1 January 2008. The EIT law imposes a uniform income tax rate of 25 per cent. for domestic enterprises and foreign invested enterprises, except for a number of preferential tax treatment schemes available to various enterprises. Pursuant to the Notice of the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation on Tax Policy Issues Concerning Further Implementing the Western China Development Strategy（財政 部海關總署國家稅務總局關於深入實施西部大開發戰略有關稅收政策問題的通知）, the Announcement of the State Administration of Taxation on Issues Concerning Enterprise Income Tax Related with Enhancing the Western China Development Strategy（國家稅務總局關於深入實施西部大開發戰略有關企業所得稅問題的 公告）, certain of the Group’s subsidiaries are entitled to preferential tax treatment, allowing them to enjoy a lower effective enterprise income tax rate until 2020. To the extent that there are any withdrawals of, or changes in, its preferential tax treatment, or increases in the applicable effective tax rate, the Group’s tax liability may increase correspondingly.

Higher labour costs and inflation in the PRC may adversely affect the Group’s business and its profitability.

The PRC Labour Contract Law（中華人民共和國勞動合同法）became effective on 1 January 2008 in the PRC and was amended on 28 December 2012. It imposes more stringent requirements on employers in relation to entry into fixed-term employment contracts and dismissal of employees. Labour costs in the PRC have also risen in recent years as a result of the enactment of new labour laws and social development. Because the Group expects its production staff to increase, rising labour costs may increase the Group’s operating costs and partially erode the cost advantage as a result of the business expansion of its PRC-based operations and therefore negatively impact the Group’s profitability.

There can be no assurance of the accuracy or comparability of facts, forecasts and statistics contained in this Offering Circular with respect to the PRC, its economy or its power generation industry.

Facts, forecasts and statistics in this Offering Circular relating to the PRC, the PRC’s economy and the power generation industry, including the Group’s market share information, are derived from various official and other publicly available sources which are generally believed to be reliable. However, the Issuer, the Guarantor and the Company cannot guarantee the quality and reliability of such official source materials. In addition, these facts, forecasts and statistics have not been independently verified by the Issuer, the Guarantor, the Company and the Joint Lead Managers nor any of their respective

–36– affiliates or advisers, and therefore each of the Issuer, the Guarantor, the Company and the Joint Lead Managers make no representation as to the accuracy or fairness of such facts, forecasts and statistics, which may not be consistent with other information compiled within or outside the PRC and may not be complete or up to date.

Each of the Issuer, the Guarantor and the Company has taken reasonable care in reproducing or extracting the information from such sources. However, because of the possibly flawed or ineffective methodologies underlying the published information or discrepancies between the published information and market practice and other problems, these facts, forecasts and other statistics may be inaccurate or may not be comparable from period to period or be comparable to facts, forecasts or statistics produced for other economies. In all cases, investors should give consideration as to how much weight or importance they should attach to or place on such facts or statistics.

Fluctuations of the Renminbi exchange rate could affect the Group’s financial condition and results of operations.

Most of the Group’s revenues are generated by its subsidiaries in the PRC and are denominated in Renminbi. A portion of such revenues must be converted into other currencies to meet the relevant subsidiary’s own foreign currency obligation. The value of the Renminbi against other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. On 21 July 2005, the PRC Government reformed its exchange rate regime by adopting a managed floating exchange rate regime based on market supply and demand. Under this regime, the Renminbi is no longer pegged to the US dollar but is permitted to fluctuate within a narrow and managed band with reference to a portfolio of currencies. On 11 August 2015, the PBOC adjusted the mechanism for market makers to form the central parity rate by requiring them to consider the closing exchange rate of the last trading date, the supply and demand of foreign exchange and the change of rate of the primary international currencies. For three consecutive days commencing 11 August 2015, PBOC devalued the Renminbi against the US dollar, leading to declines in the value of the Renminbi versus the US dollars of up to 2.8 per cent. in currency markets, which was also the largest single-day drop in the value of the Renminbi since 1994. On 11 December 2015, the China Foreign Exchange Trade System (the “CFETS”), a sub-institutional organization of PBOC, published the CFETS Renminbi exchange rate index for the first time which weighs the Renminbi based on 13 currencies, to guide the market in order to measure the Renminbi exchange rate from a new perspective. There can be no assurance as to how and to what extent the exchange rate of the Renminbi will fluctuate against the US dollar or any other foreign currency in the future.

The Group has some overseas operations and is expected to expand its business in overseas countries, which requires the Group to make further investment dominated in foreign currencies, mostly US dollar. In the meantime, The Group’s US dollar-denominated borrowings has been on the rise. The value of the RMB reached the five-year low since March 2011, from RMB6.5700 to US$1 on 1 March 2011 to RMB6.5932 to the US$1 on 8 January 2016 according to the H.10 statistical release of the Board of Governors of the Federal Reserve System of the United States. For details of foreign exchange information, see “Exchange Rate Information”. There is no guarantee that Renminbi would not continue to depreciate. As such, the Group’s operational cost and financing cost will increase as a result of depreciation of the Renminbi against the US dollar or any such other relevant foreign currencies and thus could have a material adverse effect on the Group’s business, financial condition and results of operations. Furthermore, the Group is also subject to translation risks as its consolidated financial statements are denominated in Renminbi while the financial statements of its subsidiaries are measured and presented in the currency of the primary economic environment in which the entity operates.

RISKS RELATING TO THE BONDS, THE GUARANTEE, THE KEEPWELL DEED AND THE DEED OF EQUITY INTEREST PURCHASE AND INVESTMENT UNDERTAKING

The Bonds and the Guarantee are unsecured obligations.

The Bonds and the Guarantee are unsecured obligations of the Issuer and the Guarantor, respectively. The repayment of the Bonds and payment under the Guarantee may be adversely affected if:

¼ the Issuer or the Guarantor enters into bankruptcy, liquidation, reorganisation or other winding-up proceedings;

–37– ¼ there is a default in payment under the Issuer’s or the Guarantor’s future secured indebtedness or other unsecured indebtedness; or

¼ there is an acceleration of any of the Issuer’s or the Guarantor’s indebtedness.

If any of these events were to occur, the Issuer’s or the Guarantor’s assets may not be sufficient to pay amounts due on the Bonds.

The Keepwell Deed is not a guarantee of the payment obligations under the Bonds and the Guarantee and there is limited protection for investors in the event that the Company directly issues or guarantees other bonds.

The Bonds have the benefit of the Keepwell Deed. The Company will enter into the Keepwell Deed in relation to the Bonds. See “Summary of the Keepwell Deed”. Upon the occurrence of an event of default as set out in Condition 9 in the Terms and Conditions of the Bonds, the Trustee may take action against the Company to enforce the provisions of the Keepwell Deed. However, neither the Keepwell Deed nor any actions taken by the Company thereunder can be deemed as a guarantee by the Company for the payment obligation of the Issuer under the Bonds or the Guarantor under the Guarantee. Accordingly, the Company will only be obliged to cause the Issuer or the Guarantor to obtain, before the due date of the relevant payment obligations, funds sufficient by means as permitted by applicable laws and regulations so as to enable the Issuer or the Guarantor to pay such payment obligations in full as they fall due, rather than assume the payment obligation as in the case of a guarantee.

Furthermore, the performance by the Company of its obligations under the Keepwell Deed may be subject to regulatory approvals. Even if the Company intends to perform its obligations under the Keepwell Deed in causing the Issuer or the Guarantor to obtain, before the due date of the relevant payment obligations, funds sufficient to meet its obligations under the Bonds or the Guarantee, depending on the manner in which the Company performs such obligations, such performance may be subject to obtaining prior consent, approvals, registration and/or filings from relevant PRC Governmental authorities, including but not limited to the National Development and Reform Commission of the PRC or its competent local counterpart (the “NDRC”), the Ministry of Commerce of the PRC or its competent local counterpart (“MOFCOM”) and the State Administration of Foreign Exchange of the PRC or its competent local counterpart (“SAFE”).

Similarly, even if the Company intends to, in accordance with its obligations under the Keepwell Deed, grant the Issuer or the Guarantor, as the case may be, a standby facility pursuant to which the Company will remit an amount sufficient to discharge the Issuer’s and/or the Guarantor’s payment obligation, as the case may be, under the Bonds, the Guarantee, the Trust Deed, the Agency Agreement and/or the Keepwell Deed, the Company may not be able to grant such standby facility due to reasons beyond its control, such as the failure or inability to obtain any required consents, approvals, registrations and/or filing from relevant PRC government authorities and unforeseeable changes in government policies or regulations.

In addition, under the Keepwell Deed, the Company will undertake to cause each of the Issuer and the Guarantor to have sufficient liquidity to ensure timely payment by each of the Issuer and the Guarantor of any amounts payable in respect of the Bonds and the Guarantee (as applicable). However, any claim by the Issuer, the Guarantor and/or the Trustee against the Company in relation to the Keepwell Deed will be effectively subordinated to all existing and future obligations of the Company’s subsidiaries (other than the Issuer and the Guarantor), particularly the onshore operating subsidiaries of the Company, and all claims by creditors of such subsidiaries (other than the Issuer and the Guarantor) will have priority to the assets of such subsidiaries over the claims of the Issuer, the Guarantor and the Trustee under the Keepwell Deed.

In addition, there is limited protection for investors of the Bonds in the event that the Company directly issues or guarantees another series of offshore bonds in the future. Although the Terms and Conditions of the Bonds and the Keepwell Deed contain an undertaking from the Company that in the event that it directly issues or guarantees another series of offshore bonds that it will provide an unsubordinated guarantee or indemnity in respect of the Bonds or offer to exchange the Bonds for securities issued or guaranteed by the Company with terms substantially identical to those of the Bonds, this undertaking is only given on the basis that the Company uses its best efforts to obtain any required regulatory approvals. Under the prevailing PRC laws and regulations, it is uncertain whether the regulatory

–38– authorities will grant an issuer the requisite approvals required in order to comply with the undertaking. Accordingly, if the Company directly issues or guarantees another series of bonds and the Company, having used best efforts is not able to obtain such regulatory approvals, the Company would then be able to issue a bond that would give investors direct recourse to the Company while the holders of the Bonds would only have the benefit of the Keepwell Deed.

Performance by the Company of its undertaking under the Deed of Equity Interest Purchase and Investment Undertaking is subject to approvals of the PRC governmental authorities.

The Company intends to assist the Issuer and the Guarantor to meet their respective obligations under the Bonds and the Guarantee, as the case may be, by entering into the Deed of Equity Interest Purchase and Investment Undertaking on the Issue Date. Under the Deed of Equity Interest Purchase and Investment Undertaking, the Company agrees to purchase from the Guarantor or any other subsidiary of the Company incorporated outside the PRC (each, a “Relevant Transferor”) their equity interest in certain onshore or offshore subsidiaries at a purchase price, subject to the terms in the Deed of Equity Interest Purchase and Investment Undertaking and the applicable PRC laws and regulations, not lower than the amount sufficient to enable the Issuer and the Guarantor to discharge in full their respective obligations under the Bonds, the Guarantee and the Trust Deed and other amounts as described in the Deed of Equity Interest Purchase and Investment Undertaking. In addition, under the Deed of Equity Interest Purchase and Investment Undertaking, the Company agrees that it shall, subject to the terms therein and obtaining all required approvals, either itself invest or procure its PRC incorporated subsidiary to invest in certain investees, in order to assist the Issuer or the Guarantor to perform its obligations under the Bonds and the Guarantee.

Performance by the Company of the Deed of Equity Interest Purchase and Investment Undertaking may be subject to the approvals of or registrations with relevant PRC authorities, including but not limited to NDRC, SASAC, MOFCOM and SAFE. As the approval process is beyond the control of the Company, there can be no assurance that the Company will successfully obtain either the requisite approvals or registrations in time, or at all, or that the PRC Government’s relevant policies or regulations will not change in the future. In the event that the Company fails to obtain the requisite approvals or registrations, the Issuer and the Guarantor may have insufficient funds to discharge their outstanding payment obligations to the holders of the Bonds.

Furthermore, in the event of an insolvency of a Relevant Transferor, any sale proceeds received by that Relevant Transferor may be subject to the insolvency claims of third parties. The Trustee’s claim against the sale proceeds will be an unsecured claim and may rank lower in priority to any claims by secured third party creditors of such Relevant Transferor where it is the Guarantor. Where a Relevant Transferor is not the Guarantor, the Trustee will not have a direct claim against the sale proceeds received by such Relevant Transferor.

Performance by the Company of its undertaking under the Deed of Equity Interest Purchase and Investment Undertaking may be subject to consent from third party creditors and shareholders, and may also be restricted if any of the equity interests is secured in favour of third party creditors.

Under the terms of the Deed of Equity Interest Purchase and Investment Undertaking, the Company agrees to purchase or procure a subsidiary of the Company to purchase from one or more Relevant Transferor the equity interest held by it upon the occurrence of an event of default under the Bonds. The ability of the Company to perform this undertaking may be affected by any present or future financing agreements of the Company and its subsidiaries:

¼ in the event that such financial agreements contain non-disposal or other restrictive covenants that would prevent the sale of an equity interest by a Relevant Transferor, the Company and its subsidiaries would need to obtain the consent from the third party creditor before the Relevant Transferor is able to proceed with the sale of such equity interest; and

¼ in the event that certain equity interests have been secured in favour of third party creditors, the Company and its subsidiaries would need to arrange for these security interests to be released before the Relevant Transferor is able to proceed with the sale of such equity interests.

–39– Under the Terms and Conditions of the Bonds and the Keepwell Deed, there are no restrictions on the Guarantor or other subsidiaries of the Company entering into financing agreements with such non-disposal or other restrictive covenants or securing the equity interests of the Guarantor and other subsidiaries of the Company in favour of its creditors. In the event the obligation to purchase under the Deed of Equity Interest Purchase and Investment Undertaking becomes effective, there is no assurance that the Guarantor or any other subsidiaries of the Company will be able to obtain any required consents from its creditors or that it will be able to arrange for any existing security arrangement to be released in order for the sale of the equity interest to proceed. If such consents or releases cannot be obtained, the Guarantor and/or any other subsidiaries of the Company, as the case may be, may need to repay the indebtedness owed to its third party creditors in order to be able to sell the relevant equity interests to the Company, failing which, the Issuer and the Guarantor may have insufficient funds to discharge their payment obligations to the holders of the Bonds.

In addition, third party shareholders’ consent may also be required if the Company chooses to acquire the equity interests of certain non-wholly-owned companies of a Relevant Transferor. In such an event, the prospective acquisition may be subject to pre-emptive rights or other restrictions in such company’s articles of association, shareholders’ agreement or otherwise that would require the selling shareholder to obtain consent or waiver from other third party shareholders before any equity interest can be sold to the Company or its subsidiaries or affiliate.

In the event the obligation to purchase under the Deed of Equity Interest Purchase and Investment Undertaking becomes effective, there is no assurance that any required approvals or waivers can be obtained from third party shareholders in a timely manner or at all.

Each of the Issuer and the Guarantor has limited assets, which affects its ability to make payments under the Bonds and/or the Guarantee and to enable the Company to purchase adequate equity interest from it pursuant to the Deed of Equity Interest Purchase and Investment Undertaking.

The Issuer is a special purpose vehicle incorporated for the sole purpose of issuing the Bonds. Since its incorporation, the Issuer has no substantive assets or any business operations. After the Bonds are issued, it will on-lend the proceeds from the issuance to the Guarantor and with a right to repayment of the amount advanced. Until the Guarantor makes a payment of principal or interest to the Issuer pursuant to the on-lending arrangement, or until the Guarantor, the Company or the other members of the Group injects capital into the Issuer via other means, the Issuer will have no substantive assets to finance the payment any amount under the Bonds.

The Guarantor also has very limited business operations. As at the date of this Offering Circular, the Guarantor’s assets are mainly comprised of two wholly-owned subsidiaries, YEIG Renewable Energy Development Co., Ltd. （雲南能投新能源投資開發有限公司） (“YEIG Renewable Energy”) and YEIG International Energy. The Guarantor had consolidated net assets of RMB2,044.6 million as at 31 December 2015. Although the Guarantor will receive an advancement of the proceeds from the issuance of the Bonds by the Issuer, the Guarantor will only retain a portion of such proceeds with the remaining balance further on-lent to other subsidiaries of the Company. Similar to the Issuer, the Guarantor might also be inhibited from meeting its payment obligations under the Bonds and the Guarantee in full due to the limited amount of assets that it holds.

Furthermore, the Company agrees to purchase or procure a subsidiary of the Company to purchase from a Relevant Transferor the equity interest held by it upon the occurrence of an event of default under the Bonds pursuant to the Deed of Equity Interest Purchase and Investment Undertaking. Should the Company decides to acquire equity interest from the Guarantor, the Company will find it difficult to discharge its payment obligations under the Deed of Equity Interest Purchase and Investment Undertaking because the Guarantor has limited equity interest to sell to the Company. In addition, the acquisition of these assets will be subject to regulatory and other approvals.

There is no assurance that such approvals can be obtained in a timely manner, or at all. In the event that such approvals cannot be obtained and there are no other future assets that the Company can purchase, the Deed of Equity Interest Purchase and Investment Undertaking may not be effective in enabling the Company to assist the Issuer and the Guarantor with their respective obligations under the Bonds, the Guarantee and the Trust Deed.

–40– The Issuer may not be able to redeem the Bonds upon the due date for redemption thereof.

The Issuer, at maturity or at any time following the occurrence of a Change of Control (as defined in the Terms and Conditions of the Bonds), is required to redeem all but not some only of the Bonds. If such an event were to occur, the Issuer may not have sufficient cash in hand and may not be able to arrange financing to redeem the Bonds in time, or on acceptable terms, or at all. The ability to redeem the Bonds in such event may also be limited by the terms of other debt instruments. The Issuer’s failure to repay, repurchase or redeem tendered Bonds could constitute an event of default under the Bonds, which may also constitute a default under the terms of the Group’s other indebtedness.

The Issuer may elect to redeem the Bonds in whole, but not in part, if it is required to pay additional tax amounts in respect of PRC withholding tax, and a Bondholder may not be able to reinvest the redemption proceeds in comparable securities at the same rate of return of the Bonds.

As at the date of this Offering Circular, neither the Issuer nor the Guarantor had 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 Law. However, it is unclear whether the Issuer or the Guarantor will be treated as a PRC tax resident enterprise for the purposes of the EIT Law. If the Issuer or the Guarantor, as the case may be, is treated as a PRC tax resident enterprise and is required to withhold tax from interest payments on the Bonds or under the Guarantee, the Issuer or the Guarantor, as the case may be, will, subject to certain exceptions, be required to pay such additional amounts as will result in receipt by the Bondholders of such amounts as would have been received by them had no such withholding been required. As described under Condition 6(b) of the Terms and Conditions of the Bonds, if the Issuer or the Guarantor, as the case may be, is required to pay additional tax amounts as a result of any change in or amendment to, or any change in the application or official interpretation of, the laws or regulations of a relevant jurisdiction (including any change or amendment or change in the interpretation that requires the Issuer or the Guarantor to withhold tax as a result of it being treated as a PRC tax resident enterprise), the Issuer may redeem the Bonds in whole, but not in part, at a redemption price equal to 100 per cent. of the principal amount together with interest accrued to the date fixed for redemption.

The date on which the Issuer elects to redeem the Bonds may not accord with the preference of particular Bondholders. In addition, a Bondholder may not be able to reinvest the redemption proceeds in comparable securities at the same rate of return of the Bonds.

If the Company or any of its subsidiaries, including the Issuer or the Guarantor, is unable to comply with the restrictions and covenants in their respective debt agreements (if any), or the Bonds, as applicable, there could be a default under the terms of these agreements, or the Bonds, as applicable, which could cause repayment of the relevant debt to be accelerated.

If the Company or any of its subsidiaries, including the Issuer or the Guarantor, is unable to comply with the restrictions and covenants in the Bonds, (as applicable,) or current or future debt obligations and other agreements (if any), 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 Company or any of its subsidiaries, including the Issuer or the Guarantor, accelerate repayment of the debt, declare all amounts borrowed due and payable or terminate the agreements, as the case may be. Furthermore, those debt agreements and the Bonds contain or may contain cross-acceleration or cross-default provisions. As a result, the default by the Company or any of its subsidiaries under one debt agreement may cause the acceleration of repayment of debt, including the Bonds, or result in a default under its other debt agreements, including the Bonds. If any of these events occur, there can be no assurance that there would be sufficient assets and cash flows of the Company or any of its subsidiaries to repay in full all of their respective indebtedness, or that they would be able to find alternative financing. Even if the Company and its subsidiaries could obtain alternative financing, there can be no assurance that it would be on terms that are favourable or acceptable to the Company and its subsidiaries.

–41– The Issuer may be deemed to be a PRC tax resident enterprise by the PRC tax authorities and certain withholding taxes may be applicable.

The Issuer is incorporated under the laws of the British Virgin Islands and the Guarantor is incorporated under the laws of Hong Kong. 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 bodies” are within the territory of China will be deemed as PRC tax resident enterprises for the purpose of the EIT Law and must pay enterprise income tax at the rate of 25 per cent. in respect of their income sourced from both within and outside China. The “de facto management body” is defined as the organisational body that effectively exercises overall management and control over production and business operations, personnel, finance and accounting, and properties of the enterprise. In April 2009, the State Administration of Taxation specified certain criteria for the determination of the “de facto management bodies” for foreign enterprises that are controlled by PRC enterprises. Most of the Issuer’s and the Guarantor’s directors and senior management are currently based inside China and they may keep their respective books of account inside China. The above elements may be relevant for the tax authorities to determine whether the Issuer is a PRC resident enterprise for tax purposes. It remains unclear how the PRC tax authorities will interpret such a broad definition. If relevant PRC tax authorities decide, in accordance with applicable tax rules and regulations, that the “de facto management body” of the Issuer or the Guarantor is within the territory of PRC, the Issuer or the Guarantor may be deemed as a PRC tax resident enterprise for the purpose of the EIT Law and be subject to PRC enterprise income tax at the rate of 25 per cent. in respect of its income sourced from both within and outside PRC.

As confirmed by the Issuer, as at the date of this Offering Circular, the Issuer and the Guarantor have not been notified or informed by the PRC tax authorities that they are considered as “a PRC tax resident enterprise” for the purpose of the EIT Law. As such, non-resident enterprise holders of the Bonds will not be subject to withholding tax, income tax or any other taxes or duties (including stamp duty) imposed by any governmental authority in the PRC in respect of the holding of the Bonds or any repayment of principal and payment of interest made thereon by the Issuer or the Guarantor. However, there is no assurance that the Issuer or the Guarantor 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 establishment within the PRC or whose income has no actual connection to its establishment within the PRC must pay enterprise income tax at the rate of 10 per cent. on its income sourced inside the PRC, unless a lower rate is available under an applicable tax treaty and such income tax must be withheld by sources with the PRC payer acting as the obligatory withholder, withholding the tax amount from each payment or payment due. Accordingly, in the event the Issuer or the Guarantor is deemed to be a PRC tax resident enterprise by the PRC tax authorities in the future, the Issuer or the Guarantor will be required to withhold income tax from the payments of interest in respect of the Bonds to any non-PRC enterprise Bondholder, and any gain realised by non-PRC enterprise Bondholders from the transfer of the Bonds may be regarded as being derived from sources within the PRC and accordingly would be subject to a 10 per cent. PRC withholding tax, unless a lower rate is available under an applicable tax treaty.

The liquidity and price of the Bonds following this offering may be volatile.

The price and trading volume of the Bonds may be highly volatile. Factors such as variations in the revenues, earnings and cash flows of the Group and proposals of new investments, strategic alliances and/or acquisitions, interest rates and fluctuations in prices for comparable companies, any adverse change in the credit rating and results of operations could cause the price of the Bonds to change. Any such developments may result in large and sudden changes in the volume and price at which the Bonds will trade. There can be no assurance that these developments will not occur in the future.

International financial markets and world economic conditions may adversely affect the market price of the Bonds.

The market price of the Bonds may be adversely affected by declines in the international financial markets and world economic conditions. The market for the Bonds is, to varying degrees, influenced by economic and market conditions in other markets, especially those in Asia. Although economic conditions are different in each country, investors’ reactions to developments in one country can affect

–42– the securities markets and the securities of issuers in other countries, including China. Since the global financial crisis of 2008 and 2009, the international financial markets have experienced significant volatility. If similar developments occur in the international financial markets in the future, the market price of the Bonds could be adversely affected.

A trading market for the Bonds may not develop.

The Bonds are a new issue of securities for which there is currently no trading market. There can be no assurance as to the liquidity of the Bonds or that an active trading market will develop. If such a market were to develop, the Bonds could trade at prices that may be higher or lower than the initial issue price depending on many factors, including prevailing interest rates, the Group’s operations and the market for similar securities. Although application will be made for the listing of the Bonds on the Hong Kong Stock Exchange, no assurance can be given as to the liquidity of, or trading marked for, the Bonds. The Joint Lead Managers are not obligated to make a market in the Bonds and any such market making, if commenced, may be discontinued at any time at the sole discretion of the Joint Lead Managers. In addition, the Bonds are being offered pursuant to exemptions from registration under the Securities Act and, as a result, the holders of the Bonds will only be able to resell the Bonds in transactions that have been registered under the Securities Act or in transactions not subject to or exempt from registration under the Securities Act. It is investors’ obligation to ensure that offers and sales of the Bonds within the United States and other countries comply with applicable securities laws. Please see “Subscription and Sale”. None of the Issuer, the Guarantor or the Company can predict whether an active trading market for the Bonds will develop or be sustained.

Gains on the transfer of the Bonds may be subject to income tax under PRC tax laws.

Under the EIT Law and its implementation rules, any gains realised on the transfer of the Bonds by holders who are deemed under the EIT Law as non-resident enterprises may be subject to PRC enterprise income tax if such gains are regarded as incomes derived from sources within the PRC. Under the EIT Law, a “non-resident enterprise” means an enterprise established under the laws of a jurisdiction other than the PRC and whose actual administrative organisation is not in the PRC, which has established offices or premises in the PRC, or which has not established any offices or premises in the PRC but has obtained incomes derived from sources within the PRC. In addition, there is uncertainty as to whether gains realised on the transfer of the Bonds by individual holders who are not PRC citizens or residents will be subject to PRC individual income tax. If such gains are subject to PRC income tax, the 10 per cent. enterprise income tax rate and 20 per cent. individual income tax rate will apply respectively unless there is an applicable tax treaty or arrangement that reduces or exempts such income tax. The taxable income will be the balance of the total income obtained from the transfer of the Bonds minus all costs and expenses that are permitted under PRC tax laws to be deducted from the income. According to an arrangement between mainland China and Hong Kong for avoidance of double taxation, Bondholders who are Hong Kong residents, including both enterprise holders and individual holders, will be exempted from PRC income tax on capital gains derived from a sale or exchange of the Bonds.

If a Bondholder, being a non-resident enterprise or non-resident individual, is required to pay any PRC income tax on gains on the transfer of the Bonds, the value of the relevant Bondholder’s investment in the Bonds may be materially and adversely affected.

The insolvency laws of British Virgin Islands and Hong Kong and other local insolvency laws may differ from those of another jurisdiction with which the holders of the Bonds are familiar.

As the Issuer and the Guarantor are incorporated under the laws of the British Virgin Islands and Hong Kong, respectively, any insolvency proceeding relating to the Issuer or the Guarantor would likely involve British Virgin Islands or Hong Kong insolvency laws, as the case may be, 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 Bonds are familiar.

Investment in the Bonds is subject to exchange rate risks.

The Bonds are denominated and payable in US dollars. If a Bondholder measures its investment returns by reference to a currency other than US dollars, an investment in the Bonds entails foreign exchange related risks, including changes in the value of US dollars relative to the currency by reference to

–43– which an investor measures its investment returns. Depreciation of the US dollars against such currency could cause a decrease in the effective yield of the Bonds below their stated coupon rates and could result in a loss when the return on the Bonds is translated into such currency. In addition, there may be tax consequences for Bondholders as a result of any foreign currency gains resulting from any investment in the Bonds.

The Trustee may request holders of the Bonds to provide an indemnity and/or security and/or prefunding to its satisfaction.

In certain circumstances, including without limitation the giving of notice to the Issuer, the Guarantor and the Company pursuant to Condition 9 of the Terms and Conditions of the Bonds and the taking of enforcement steps pursuant to Condition 10 of the Terms and Conditions of the Bonds, the Trustee may, at its sole discretion, request holders of the Bonds to provide an indemnity and/or security and/or prefunding to its satisfaction before it takes actions on behalf of holders of the Bonds. The Trustee shall not be obliged to take any such actions if not indemnified and/or secured and/or prefunded to its satisfaction. Negotiating and agreeing to an indemnity and/or security and/or prefunding can be a lengthy process and may impact on when such actions can be taken. The Trustee may not be able to take actions, notwithstanding the provision of an indemnity or security or prefunding to it, in breach of the terms of the Trust Deed or the Terms and Conditions of the Bonds and in such circumstances, or where there is uncertainty or dispute as to the applicable laws or regulations, to the extent permitted by the agreements and the applicable law, it will be for the holders of the Bonds to take such actions directly.

Modifications and waivers may be made in respect of the Terms and Conditions of the Bonds and the Trust Deed by the Trustee or less than all of the holders of the Bonds.

The Terms and Conditions of the Bonds provide that the Trustee may, without the consent of Bondholders, agree to any modification of the Trust Deed, the Terms and Conditions of the Bonds and/ or the Agency Agreement which in the opinion of the Trustee will not be materially prejudicial to the interests of Bondholders and to any modification of the Trust Deed, the Terms and Conditions of the Bonds and/or the Agency Agreement which in the opinion of the Trustee is of a formal, minor or technical nature or is to correct a manifest error or to comply with any mandatory provision of law.

In addition, the Trustee may, without the consent of the Bondholders, authorise or waive any proposed breach or breach of the Bonds, the Trust Deed, the Terms and Conditions of the Bonds, the Keepwell Deed, the Deed of Equity Interest Purchase and Investment Undertaking or the Agency Agreement (other than a proposed breach, or a breach relating to the subject of certain reserved matters) if, in the opinion of the Trustee, the interests of the Bondholders will not be materially prejudiced thereby.

The Company’s financial statements were prepared in conformity with PRC GAAP, which differs from IFRS in certain aspects, and investors may have less confidence in the reliability of the Company’s financial statements and adversely affect the market price of the Bonds.

The audited consolidated financial statements of the Company included elsewhere in this Offering Circular were prepared in conformity with PRC GAAP which differs in certain aspects from IFRS. See “Description of Certain Material Differences between PRC GAAP and IFRS”. Investors may have less confidence in the audited consolidated financial statements of the Company and the financial information of the Company included elsewhere in this Offering Circular, which may adversely affect the market price of the Bonds. In addition, investors should consult their own professional advisers for an understanding of any difference and how they may affect the financial information contained herein.

The Bonds may not be a suitable investment for all investors.

Each potential investor in any Bonds must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

¼ have sufficient knowledge and experience to make a meaningful evaluation of the relevant Bonds, the merits and risks of investing in the relevant Bonds and the information contained or incorporated by reference in this Offering Circular;

–44– ¼ have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the relevant Bonds and the impact such investment will have on its overall investment portfolio;

¼ have sufficient financial resources and liquidity to bear all of the risks of an investment in the relevant Bonds;

¼ understand thoroughly the terms of the relevant Bonds and be familiar with the behaviour of any relevant indices and financial markets; and

¼ 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.

A potential investor should not invest in Bonds which are complex financial instruments unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Bonds will perform under changing conditions, the resulting effects on the value of such Bonds and the impact this investment will have on the potential investor’s overall investment portfolio.

Additionally, the investment activities of certain investors are 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 (a) Bonds are legal investments for it, (b) Bonds can be used as collateral for various types of borrowing and (c) other restrictions apply to its purchase of any Bonds. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Bonds under any applicable risk-based capital or similar rules.

The Bonds will initially be represented by the Global Certificate and holders of a beneficial interest in the Global Certificate must rely on the procedures of the relevant Clearing System.

Bonds will initially be represented by the Global Certificate. Such Global Certificate will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg, Luxembourg (each of Euroclear and Clearstream, Luxembourg, a “Clearing System”). Except in the circumstances described in the Global Certificate, investors will not be entitled to receive definitive Bonds. The relevant Clearing System will maintain records of the beneficial interests in the Global Certificate.

While the Bonds are represented by the Global Bonds or Global Certificate, investors will be able to trade their beneficial interests only through the Clearing Systems. While the Bonds are represented by the Global Certificate the Issuer will discharge its payment obligations under the Bonds by making payments to the common depositary for Euroclear and Clearstream, Luxembourg, for distribution to their account holders. A holder of a beneficial interest in the Global Certificate must rely on the procedures of the relevant Clearing System to receive payments under the Bonds. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Certificate. Holders of beneficial interests in the Global Certificate will not have a direct right to vote in respect of the Bonds. 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.

–45– USE OF PROCEEDS

The Issuer estimates that the net proceeds from the sale of the Bonds, after deducting commissions to be charged by the Joint Lead Managers and other estimated expenses payable in connection with the offering of the Bonds, will approximately be US$297.2 million. The Issuer proposes to use such proceeds to replenish the Group’s working capital and for general corporate purpose.

–46– EXCHANGE RATE INFORMATION

PRC

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. 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 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 only, 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. PBOC authorised the China Foreign Exchange Trading Centre, 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, 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 per cent. to 0.5 per cent. around the central parity rate. This allows the Renminbi to fluctuate against the US dollar by up to 0.5 per cent. above or below the central parity rate published by PBOC. On 19 June 2010, 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 PBOC will place more emphasis on reflecting the market supply and demand with reference to a basket of currencies. On 12 April 2012, PBOC announced that on 16 April 2012, the floating band for the trading prices in the inter-bank spot exchange market of Renminbi against the US dollar would be enlarged from 0.5 per cent. to 1.0 per cent. around the central parity rate, allowing the Renminbi to fluctuate against the US dollar by up to 1.0 per cent. above or below the central parity rate published by PBOC. PBOC announced on 15 March 2014 that since 17 March 2014, the floating band for the trading prices in the inter-bank foreign exchange spot market of Renminbi against the US dollar was further expanded from 1 per cent. to 2 per cent. On each business day, the spread between the Renminbi and US dollar buying and selling prices offered by the designated foreign exchange banks to their clients shall be within 3.0 per cent. of the published central parity of the US dollar on that day, instead of 2.0 per cent. On 11 August 2015, PBOC adjusted the mechanism for market makers to form the central parity rate by requiring them to consider the closing exchange rate of the last trading date, the supply and demand of foreign exchange and the rate change at primary international currencies. For three conservative days commencing 11 August 2015, PBOC devalued the Renminbi against the US dollar, leading to declines in the value of the Renminbi versus the US dollar of up to 2.8 per cent. in currency markets and representing the largest single-day drop in the value of the Renminbi since 1994. On 11 December 2015, CFETS, a sub-institutional organisation of PBOC, published the CFETS Renminbi exchange rate index for the first time which weighs the Renminbi based on 13 currencies, to guide the market in order to measure the Renminbi exchange rate from a new perspective.

Although PRC Governmental policies were 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 SAFE and other relevant authorities.

–47– The table below sets forth for the periods indicated, certain information concerning the exchange rates between Renminbi and US dollars. For periods after 1 January 2010, the exchange rates reflect the exchange rates as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System of the United States.

Exchange Rate Period Period End Average(1) High Low (RMB per US$1.00) 2010...... 6.6000 6.7603 6.8330 6.6000 2011...... 6.2939 6.4475 6.6364 6.2939 2012...... 6.2301 6.2990 6.3879 6.2221 2013...... 6.0537 6.1478 6.2438 6.0537 2014...... 6.2046 6.1704 6.2591 6.0402 2015 October ...... 6.3180 6.3505 6.3591 6.3180 November ...... 6.3883 6.3640 6.3945 6.3180 December...... 6.4778 6.4491 6.4896 6.3883 2016 January...... 6.5752 6.5726 6.5932 6.5219 February...... 6.5525 6.5501 6.5975 6.5154 March...... 6.4480 6.5027 6.5500 6.4480 April (through 8 April) ...... 6.4628 6.4720 6.4780 6.4599

Note:

(1) Determined by averaging the rates on the last business day of each month during the relevant year, except for monthly average rates, which are determined by averaging the daily rates during the respective months.

–48– CAPITALISATION AND INDEBTEDNESS OF THE COMPANY

The table below sets forth the Company’s consolidated capitalisation and indebtedness as at 31 December 2015 on an actual basis and on an adjusted basis after giving effect to the issuance of the Bonds. The table below should be read in conjunction with the Company’s audited consolidated financial statements and related notes included elsewhere in this Offering Circular:

As at 31 December 2015 Actual As adjusted (RMB’000) (US$’000) (RMB’000) (US$’000) Current Indebtedness – Short-term loans...... 4,110,192 637,437 4,110,192 637,437 – Long-term loans due within one year ...... 2,581,042 400,286 2,581,042 400,286 – Bonds payable due within one year ...... 3,990,374 618,854 3,990,374 618,854 – Other current liabilities ...... 6,690,717 1,037,642 6,690,717 1,037,642 17,372,325 2,694,219 17,372,325 2,694,219 Non-Current Indebtedness – Long-term loans ...... 8,525,280 1,322,159 8,525,280 1,322,159 – Bonds payable...... 14,189,775 2,220,647 14,189,775 2,220,647 – Bonds to be issued(1)(2) ...... – – 1,934,400 300,000 22,715,055 3,522,806 24,649,455 3,822,806 Total Indebtedness(3)...... 40,087,380 6,217,025 42,021,780 6,517,025 Total Owners’ Equity ...... 28,479,263 4,416,759 28,479,263 4,416,759 Total Capitalisation(4) ...... 68,566,643 10,633,784 70,501,043 10,933,784

Notes:

(1) This amount has been translated into Renminbi for convenience purpose at a rate of US$1.00 to RMB6.4480 which is the noon buying rate for US dollars in New York City for cable transfers in Renminbi on 31 March 2016 as certified for customs purposes by the Federal Reserve Bank of New York.

(2) This amount represents the aggregate principal amount of the Bonds to be issued, before deducting the fees and commissions and other estimated expenses payable by the Issuer in connection with the issuance of the Bonds.

(3) Total indebtedness comprises current indebtedness and non-current indebtedness.

(4) Total capitalisation represents total indebtedness and total owners’ equity.

Other than as disclosed above, there has been no material change to the capitalisation or indebtedness of the Company since 31 December 2015.

–49– CAPITALISATION AND INDEBTEDNESS OF THE GUARANTOR

The table below sets forth the Guarantor’s consolidated capitalisation and indebtedness as at 31 December 2015 on an actual basis and on an adjusted basis after giving effect to the issuance of the Bonds. The table below should be read in conjunction with the Guarantor’s audited consolidated financial statements and related notes included elsewhere in this Offering Circular:

As at 31 December 2015 Actual As adjusted (RMB’000) (US$’000) (RMB’000) (US$’000) Current Indebtedness – Borrowings ...... 788,359 122,264 788,359 122,264

Non-current Indebtedness – Borrowings ...... 2,262,612 350,901 2,262,612 350,901 – Corporate bonds ...... 592,565 91,899 592,565 91,899 – Bonds to be issued(1)(2) ...... – – 1,934,400 300,000 2,855,177 442,800 4,789,577 742,800 Total Indebtedness(3)...... 3,643,536 565,064 5,577,936 865,064 Total Owners’ Equity ...... 2,044,618 317,093 2,044,618 317,093 Total Capitalisation(4) ...... 5,688,154 882,157 7,622,554 1,182,157

Notes:

(1) This amount has been translated into RMB for convenience purpose at a rate of US$1.00 to RMB6.4480 which is the noon buying rate for US dollars in New York City for cable transfers in Renminbi on 31 March 2016 as certified for customs purposes by the Federal Reserve Bank of New York.

(2) This amount represents the aggregate principal amount of the Bonds to be issued, before deducting the fees and commissions and other estimated expenses payable by the Issuer in connection with the issuance of the Bonds.

(3) Total indebtedness comprises current indebtedness and non-current indebtedness.

(4) Total capitalisation represents total indebtedness and total owners’ equity.

Other than as disclosed above, there has been no material change to the capitalisation or indebtedness of the Guarantor since 31 December 2015.

–50– TERMS AND CONDITIONS OF THE BONDS

The issue of the US$300,000,000 3.0 per cent. Guaranteed Bonds due 2019 was authorised by a written resolution of the sole director of Yunnan Energy Investment Finance Company Ltd. (the “Issuer”) passed on 26 February 2016. The Bonds are guaranteed by Yunnan Energy Investment (H K) Co. Limited (the “Guarantor”). The giving of the Guarantee (as defined in Condition 2(b)) was authorised by written resolutions of the directors of the Guarantor on 11 April 2016. Each of the Issuer and the Guarantor is, directly or indirectly, a wholly-owned subsidiary of Yunnan Provincial Energy Investment Group Co., Ltd. (the “Company”). The Bonds are constituted by a trust deed (as amended or supplemented from time to time, the “Trust Deed”) dated on or about 26 April 2016 (the “Issue Date”) between the Issuer, the Guarantor, the Company and Citicorp International Limited as Trustee (the “Trustee” which expression shall include all persons for the time being the trustee or trustees appointed under the Trust Deed) for the Bondholders (as defined below). These terms and conditions (these “Conditions”) include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Bonds. An agency agreement dated on or about 26 April 2016 (as amended or supplemented from time to time, the “Agency Agreement”) has been entered into in relation to the Bonds between the Issuer, the Guarantor, Citigroup Global Markets Deutschland AG as registrar (the “Registrar”), Citibank, N.A., London Branch as transfer agent (the “Transfer Agent”) and as principal paying agent (the “Principal Paying Agent”) and other agents named in it. References herein to the “Agents” are to the Registrar, the Transfer Agent, the Principal Paying Agent and any other agents appointed under the Agency Agreement and any reference to an “Agent” is to any of them. The Bonds also have the benefit of (i) a keepwell deed dated on or about 26 April 2016 (as amended or supplemented from time to time, the “Keepwell Deed”) entered into by the Issuer, the Company, the Guarantor and the Trustee and (ii) a deed of equity interest purchase and investment undertaking dated on or about 26 April 2016 (the “Deed of Equity Interest Purchase and Investment Undertaking”), each entered into by the Issuer, the Guarantor, the Company and the Trustee and both deeds being executed in favour of the Trustee. The entering into the Keepwell Deed was authorised by a written resolution of the sole director of the Issuer, the board of directors of the Guarantor and the board of directors of the Company on 26 February 2016, 11 April 2016 and 11 April 2016, respectively. The entering into the Deed of Equity Interest Purchase and Investment Undertaking was authorised by a written resolution of the sole director of the Issuer, the board of directors of the Guarantor and the board of directors of the Company on 26 February 2016, 11 April 2016 and 11 April 2016, respectively. Copies of the Trust Deed, the Agency Agreement, the Keepwell Deed and the Deed of Equity Interest Purchase and Investment Undertaking are available for inspection during normal business hours at the principal office for the time being of the Trustee, being at the date hereof 39th Floor, Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong and at the specified office of the Principal Paying Agent. The Bondholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed, the Keepwell Deed and the Deed of Equity Interest Purchase and Investment Undertaking and those provisions of the Agency Agreement applicable to them.

All capitalised terms that are not defined in these Conditions will have the meanings given to them in the Trust Deed.

1 Form, Denomination and Title

(a) Form and denomination: The Bonds are issued in registered form, in the denomination of US$200,000 each and in integral multiples of US$1,000 in excess thereof. A certificate (each, a “Certificate”) will be issued to each holder of Bonds in respect of its registered holding of Bonds. Each Certificate shall be numbered serially and shall have an identifying number which shall be recorded on the relevant Certificate and in the register of holders of the Bonds (the “Register”), which the Issuer shall procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement.

(b) Title: Title to the Bonds shall pass only by transfer and registration of title in the Register. The holder of any Bond shall, except as otherwise required by law or as ordered by a court of competent jurisdiction, be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it or any writing on (other than the endorsed form of transfer), or the theft or loss of, the Certificate issued in respect of it), and no person shall be liable for so treating the holder. In these

–51– Conditions, “Bondholder”, “holder of the Bonds” and “holder” in relation to a Bond shall mean the person in whose name a Bond is registered in the Register (or in the case of a joint holding, the first name thereof).

Except in the limited circumstances described in the Global Certificate, owners of interests in the Bonds represented by the Global Certificate will not be entitled to receive definitive Certificates in respect of their individual holdings of Bonds. The Bonds are not issuable in bearer form.

2 Status and Guarantee

(a) Status: The Bonds constitute direct, unconditional, unsubordinated and (subject to Condition 4(a)) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a), at all times rank at least equally with all the Issuer’s other present and future unsecured and unsubordinated obligations.

(b) Guarantee: The Guarantor has unconditionally and irrevocably guaranteed, the due payment in full of all sums expressed to be payable by the Issuer under the Trust Deed and the Bonds. The Guarantor’s obligations in that respect (the “Guarantee”) are contained in the Trust Deed. The obligations of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a), at all times rank at least equally with all their other respective present and future unsecured and unsubordinated obligations.

3 Transfers of Bonds and Issue of Certificates

(a) Register: The Issuer will cause the Register to be kept at the specified office of the Registrar and in accordance with the terms of the Agency Agreement, on which shall be entered the names and addresses of the holders of the Bonds and the particulars of the Bonds held by them and of all transfers of the Bonds. Each Bondholder shall be entitled to receive only one Certificate in respect of its entire holding of Bonds.

(b) Transfers: Subject to the Agency Agreement and Conditions 3(e) and 3(f) herein, a Bond may be transferred in whole or in part upon the surrender (at the specified office of the Registrar or any Transfer Agent) of the Certificate(s) representing such Bonds to be transferred, together with the form of transfer endorsed on such Certificate(s) (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 Transfer Agent may require to prove the title of the transferor and the authority of the individuals who have executed such form of transfer. In the case of a transfer of only part of a holding of Bonds 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. In the case of a transfer of the Bonds to a person who is already a holder of the Bonds, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding. No transfer of title to a Bond will be valid unless and until entered on the Register.

(c) Delivery of new Certificates: Each new Certificate to be issued upon a transfer of the Bonds will, within seven business days (as defined below) of receipt by the Registrar or any Transfer Agent of a duly completed form of transfer and surrender of the existing Certificate(s), be made available for collection at the specified office of the Registrar or such Transfer Agent or, if so requested in the form of transfer, be mailed by uninsured mail at the risk of the holder entitled to the Bonds but free of charge to the holder and at the Issuer’s expense to the address specified in the form of transfer. The form of transfer is available at the specified office of the Registrar or any Transfer Agent.

–52– Where only part of a principal amount of the Bonds (being that of one or more Bonds) in respect of which a Certificate is issued is to be transferred, a new Certificate in respect of the Bonds not so transferred will, within seven business days of delivery of the original Certificate to the Registrar or any Transfer Agent, be made available for collection at the specified office of the Registrar or such Transfer Agent or, if so requested in the form of transfer, be mailed by uninsured mail at the risk of the holder of the Bonds not so transferred (but free of charge to the holder and at the Issuer’s expense) to the address of such holder appearing on the Register.

In this Condition 3(d), “business day” shall mean a day (other than a Saturday, a Sunday or a public holiday) on which commercial banks are generally open for business in the city in which the specified office of the Registrar or (as the case may be) the Transfer Agent with whom a Certificate is deposited in connection with a transfer or exchange is located.

(d) Formalities free of charge: Registration of a transfer of Bonds and issuance of new Certificates will be effected without charge by or on behalf of the Issuer or any of the Agents, but upon (i) payment (or the giving of such indemnity and/or security and/or prefunding as the Issuer or any of the Agents may require) in respect of any tax or other governmental charges which may be imposed in relation to such transfer; (ii) the Registrar being satisfied in its absolute discretion with the documents of title or identity of the person making the application and (iii) the relevant Agent (after consultation with the Issuer if so required) being satisfied that the regulations concerning transfer of Bonds have been complied with.

(e) Closed periods: No Bondholder may require the transfer of a Bond to be registered during the period of (i) seven Payment Business Days (as defined in Condition 7) ending on (but excluding) the due date for any payment of principal in respect of that Bond, (ii) during the period of seven days ending on (and including) any Record Date (as defined in Condition 7(a)), and (iii) after the exercise of the put option in Condition 6(c).

(f) Regulations: All transfers of Bonds and entries on the Register will be made subject to the detailed regulations concerning transfer of Bonds scheduled to the Agency Agreement. The regulations may be changed by the Issuer, with the prior written approval of the Registrar and the Trustee, or by the Registrar, with the prior written approval of the Trustee. A copy of the current regulations will be mailed (free of charge to the Bondholder and at the Issuer’s expense) by the Registrar to any Bondholder upon request and is available at the specified office of the Registrar.

4 Covenants

(a) Negative Pledge: So long as any Bond remains outstanding (as defined in the Trust Deed), neither the Issuer nor the Guarantor will, and each of the Issuer and the Guarantor will ensure that none of their respective Subsidiaries will, create, incur, assume, permit to exist, or have outstanding, any mortgage, charge, lien, pledge, security interest or other security arrangement of any kind upon the whole or any part of its present or future undertaking, assets or revenues (including any uncalled capital) to secure any Relevant Indebtedness of the Issuer, the Guarantor or any such Subsidiary (or any guarantee or indemnity in respect of such Relevant Indebtedness) without, in any such case, making effective provision whereby the Bonds will be secured either (i) at least equally and ratably with such Relevant Indebtedness (or any guarantee or indemnity in respect of such Relevant Indebtedness) or (ii) by such other security as shall have been approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders.

(b) Keepwell Deed: For so long as any Bond remains outstanding, each of the Issuer and the Guarantor covenants to take all such actions as may be necessary to be taken by it in order to enable the Company to comply with its obligations under the Keepwell Deed under which the Company has given certain undertakings to the Trustee, as trustee for the benefit of the Bondholders.

–53– (c) Irrevocable Cross-Border Standby Facility: In the event that the Trustee has given the Issuer, the Guarantor and the Company a Trigger Notice, the Company shall in accordance with the Keepwell Deed, subject to prevailing laws, regulations and government policies at such time and if required, the approvals from or registration with competent PRC government authorities, among other things, (i) as soon as practicable grant to the Issuer or the Guarantor, as the case may be, a standby facility in an amount sufficient to satisfy the payment obligations as provided in the Keepwell Deed, (ii) as soon as practicable open with a PRC commercial bank a special account for the transfer and remittance of such amount to the Issuer or the Guarantor, as the case may be, (iii) remit such amount to a specified account of the Issuer or the Guarantor, as the case may be, in Hong Kong through the special account, and (iv) cause the Issuer or the Guarantor, as the case may be, to use such amount received to discharge its obligations under the Bonds, the Guarantee, the Trust Deed, the Agency Agreement and/or the Keepwell Deed.

(d) Deed of Equity Interest Purchase and Investment Undertaking:

(i) Purchase Undertaking: Upon being notified or after the Trustee has actual knowledge of the occurrence of an Event of Default, the Trustee shall give to the Company a notice in writing (the “Purchase Notice”) in accordance with the Trust Deed notifying the Company of its obligations to purchase or procure any of its PRC incorporated subsidiaries (the “Purchaser”) to purchase equity interests from the relevant transferor (the “Relevant Transferor”) under the Deed of Equity Interest Purchase and Investment Undertaking. Upon the completion of any equity purchase made in accordance with the Deed of Equity Interest Purchase and Investment Undertaking, the Company undertakes that (I) in the event that a Relevant Transferor is not the Issuer or the Guarantor, the Company shall procure such Relevant Transferor to promptly on-lend or distribute in full the relevant portion of the purchase price (the “Purchase Price”, being an amount no less than a shortfall amount (the “Purchase Shortfall Amount”), which comprises (A) the amount sufficient to enable the Issuer and the Guarantor to discharge in full their respective obligations under the Bonds and the Trust Deed, (B) an amount equal to US$4,500,000, representing approximately the interest payable in respect of one Interest Period under the Bonds, and (C) all fees, costs, expenses and other amounts payable to the Trustee and/or the Agents under or in connection with the Bonds, the Trust Deed, the Agency Agreement, the Keepwell Deed and/or the Deed of Equity Interest Purchase and Investment Undertaking as at the date of the Purchase Notice plus provisions for fees, costs, expenses and all other amounts which may be properly incurred after the date of the Purchase Notice, as notified by the Trustee in the Purchase Notice), received by such Relevant Transferor to the Issuer or the Guarantor prior to any other use, disposal or transfer of the proceeds received and (II) promptly do all such things (including entering into and executing any agreements or arrangements required) and take all actions necessary for the Purchase Price received by the Issuer or the Guarantor from the Company or the Purchaser or pursuant to any on-loan or distribution to be applied solely towards the payment in accordance with the Trust Deed of any outstanding amounts under the Trust Deed and the Bonds (including any interest accrued but unpaid on the Bonds) prior to any other use, disposal or transfer of the proceeds received.

(ii) Investment Undertaking: Upon the receipt of a written notice (the “Investment Notice”) provided by the Trustee in accordance with the Trust Deed given following the occurrence of an Event of Default under the Bonds and the written notification from the Company that it has reasonably determined that (I) the Purchase Price will be less than the Purchase Shortfall Amount or (II) any relevant purchase approval is unlikely to be obtained, the Company agrees that it shall, or procure any of its PRC incorporated subsidiaries (the “Designated Investor”) to make an investment in a relevant investee (the “Relevant Investee”). Such investment amount (the “Investment Amount”) shall be no less than (A) the amount sufficient to enable the Issuer and the Guarantor to discharge in full their respective obligations under the Bonds and the Trust Deed, plus (B) an amount equal to US$4,500,000, representing approximately the interest payable in respect of one Interest Period under the Bonds, plus (C) all fees, costs, expenses and other amounts payable to the Trustee and/or the Agents under or in connection with the Bonds, the Trust Deed, the Agency Agreement, the Keepwell Deed

–54– and/or the Deed of Equity Interest Purchase and Investment Undertaking as at the date of the Investment Notice plus provisions for fees, costs, expenses and all other amounts which may be properly incurred after the date of the Investment Notice, as notified by the Trustee in the Investment Notice), less (D) the Purchase Price (the Purchase Price shall be deemed to be zero if the Company reasonably determines that any relevant purchase approval is unlikely to be obtained). Upon the completion of any investment made in accordance with the Deed of Equity Interest Purchase and Investment Undertaking, the Company undertakes that (x) in the event that a Relevant Investee is not the Issuer or the Guarantor, the Company shall procure such Relevant Investee to promptly on-lend or distribute in full the relevant portion of the Investment Amount to the Issuer or the Guarantor to discharge in full their respective obligations under the Bonds and the Trust Deed prior to any other use, disposal or transfer of the proceeds received and (y) promptly do all such things (including entering into and executing any agreements or arrangements required) and take all actions necessary for the Investment Amount received by the Issuer or the Guarantor from the Company or Designated Investor or pursuant to any on-loan or distribution to be applied solely towards the payment in accordance with the Trust Deed of any outstanding amounts under the Trust Deed and the Bonds (including any interest accrued but unpaid on the Bonds) prior to any other use, disposal or transfer of the proceeds received.

(e) Definitions: In these Conditions:

(i) “Person” means any state-owned enterprise, individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organisation, limited liability company, government or any agency or political subdivision thereof or any other entity;

(ii) “PRC” means the People’s Republic of China which, for the purposes of these Conditions, shall not include the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan;

(iii) “Relevant Indebtedness” of any Person means any indebtedness incurred outside the PRC that is in the form of, or represented or evidenced by any 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

(iv) a “Subsidiary” of any person means (a) any company or other business entity of which that person owns or controls (either directly or through one or more other Subsidiaries) more than 50 per cent. of the issued share capital or other ownership interest having ordinary voting power to elect directors, managers or trustees of such company or other business entity, or (b) any company or other business entity which at any time has its accounts consolidated with those of that person or which, under the law, regulations or generally accepted accounting principles of the jurisdiction of incorporation of such person from time to time, should have its accounts consolidated with those of that person.

(f) Financial Statements etc.: The Guarantor will be obliged to furnish the Trustee with a copy of its audited consolidated income statement, balance sheet and cash flow statement (in English) prepared in accordance with accounting principles generally accepted in, and pursuant to the relevant laws of, Hong Kong for the relevant financial year within 180 days of the end of such financial year (in each case, together with any statement, reports including any directors’ and auditors’ reports and notes attached to or intended to be read with any of them), and if such statements shall be in the Chinese language, together with an English translation of the same translated by a nationally recognised firm of public accountants.

The Issuer and the Guarantor will use their best efforts to cause the Company to furnish the Trustee with the Company’s audited consolidated income statement, balance sheet and cash flow statement (in English) prepared in accordance with accounting principles generally accepted in, and pursuant to the relevant laws of, PRC for the relevant financial year within

–55– 180 days of the end of such financial year (in each case, together with any statement, reports including any directors’ and auditors’ reports and notes attached to or intended to be read with any of them), and if such statements shall be in the Chinese language, together with an English translation of the same translated by a nationally recognised firm of public accountants.

The Trustee may rely conclusively on any such translation and shall be entitled to assume that it is a complete and accurate translation of the original, and the Trustee shall not be responsible or liable to the Issuer, the Guarantor, the Company, any Bondholder, the Agents or any other person for doing so.

(g) Post-Issuance Reporting Filing: The Company undertakes to (i) report or cause to be reported the relevant information relating to the issue of the Bonds to the National Development and Reform Commission (the “NDRC”), within 10 PRC Business Days after the Issue Date and in accordance with the Notice on Promoting the Reform of the Filing and Registration System for Issuance of Foreign Debt by Corporates（國家發展改革委關於推進企業 發行外債備案登記制管理改革的通知） promulgated by the NDRC and effective from 14 September 2015 (the “Post-Issuance Reporting Filing”) and (ii) comply with all applicable PRC laws and regulations in relation to the Post-Issuance Reporting Filing.

5 Interest

The Bonds bear interest on their outstanding principal amount from and including 26 April 2016 at the rate of 3.0 per cent. per annum, payable semi-annually in arrear in equal instalments of US$15 per Calculation Amount (as defined below) on 26 April and 26 October in each year (each an “Interest Payment Date”) commencing on 26 October 2016. Each Bond will cease to bear interest from the due date for redemption unless, upon surrender of the Certificate representing such Bond, payment of principal is improperly withheld or refused. In such event it shall continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant Bondholder and (b) the day which is seven days after the Trustee or the Principal Paying Agent has notified Bondholders of receipt of all sums due in respect of all the Bonds up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant holders under these Conditions).

If interest is required to be calculated for a period of less than a complete Interest Period (as defined below), the relevant day-count fraction will be determined on the basis of a 360-day year consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of days elapsed.

In these Conditions, the period beginning on and including the Issue Date and ending on but excluding the first Interest Payment Date and each successive period beginning on and including an Interest Payment Date and ending on but excluding the next succeeding Interest Payment Date is called an “Interest Period”.

Interest in respect of any Bond shall be calculated per US$1,000 in principal amount of the Bonds (the “Calculation Amount”). The amount of interest payable per Calculation Amount for any period shall, save as provided above in relation to equal instalments, be equal to the product of the rate of interest specified above, the Calculation Amount and the day-count fraction for the relevant period, rounding the resulting figure to the nearest cent (half a cent being rounded upwards).

6 Redemption and Purchase

(a) Final redemption: Unless previously redeemed, or purchased and cancelled, the Bonds will be redeemed at their principal amount on 26 April 2019 (the “Maturity Date”). The Bonds may not be redeemed at the option of the Issuer other than in accordance with this Condition 6.

–56– (b) Redemption for taxation reasons: The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ notice to the Bondholders and the Trustee (which notice shall be irrevocable), at their principal amount together with accrued but unpaid interest up to, but excluding, the date fixed for redemption, if:

(i) the Issuer satisfies the Trustee immediately prior to the giving of such notice that it (or, if the Guarantee was called, the Guarantor) has or will become obliged to pay Additional Tax Amounts as referred to in Condition 8 as a result of any change in, or amendment to, the laws or regulations of the PRC, the British Virgin Islands (the “BVI”) or Hong Kong or, in each case, any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a decision by a court of competent jurisdiction), which change or amendment becomes effective on or after 19 April 2016, and

(ii) such obligation cannot be avoided by the Issuer (or the Guarantor, as the case may be) 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 the Guarantor, as the case may be) would be obliged to pay such Additional Tax Amounts if a payment in respect of the Bonds (or the Guarantee, as the case may be) were then due. Notwithstanding anything to the contrary herein, the Issuer may not redeem the Bonds in the case that Additional Tax Amounts are payable in respect of PRC withholding tax as a result of the Issuer or the Guarantor being deemed a PRC tax resident, if the rate of such withholding tax is ten per cent. or less.

Prior to the publication of any notice of redemption pursuant to this Condition 6(b), the Issuer or the Guarantor shall deliver to the Trustee a certificate signed by one Director of the Issuer (or the Guarantor, as the case may be) stating that the obligation referred to in (i) above cannot be avoided by the Issuer (or the Guarantor, as the case may be) taking reasonable measures available to it. The Trustee shall be entitled (but shall not be obliged to) to accept and rely upon such certificate as sufficient evidence of the satisfaction of the condition precedent set out in (ii) above without further enquiry and without incurring any liability to any Bondholder or any other person, in which event it shall be conclusive and binding on the Bondholders.

(c) Redemption for Change of Control: At any time following the occurrence of a Change of Control, the holder of any Bond will have the right, at such holder’s option, to require the Issuer to redeem all, but not some only, of that holder’s Bonds on the Put Date at 101 per cent. of their principal amount, together with accrued interest up to, but excluding, the Put Date. To exercise such right, the holder of the relevant Bond must deposit at the specified office of the Principal Paying Agent a duly completed and signed notice of redemption, in the form for the time being current, obtainable from the specified office of the Principal Paying Agent (a “Put Exercise Notice”), together with the Certificate evidencing the Bonds to be redeemed, by not later than 30 days following a Change of Control or, if later, 30 days following the date upon which notice thereof is given to Bondholders by the Issuer or the Guarantor in accordance with Condition 14. The “Put Date” shall be the fourteenth day after the expiry of such period of 30 days as referred to above.

A Put Exercise Notice, once delivered, shall be irrevocable and the Issuer shall redeem the Bonds the subject of Put Exercise Notices delivered as aforesaid on the Put Date.

The Issuer or the Guarantor shall give notice to the Bondholders (in accordance with Condition 14) and to the Trustee and the Principal Paying Agent in writing by not later than 14 days following the first day on which it becomes aware of the occurrence of a Change of Control, which notice shall specify the procedure for exercise by holders of their rights to require redemption of the Bonds pursuant to this Condition 6(c).

–57– Neither the Trustee nor the Agents shall be required to monitor whether a Change of Control or any event which could lead to the occurrence of a Change of Control has occurred and none of them shall be liable to the Bondholders or any other person for not doing so.

For the purposes of these Conditions:

a“Change of Control” occurs when:

(i) Yunnan SASAC or any other agency as designated by Yunnan SASAC ceases to own or control (whether directly or indirectly or in combination) at least 51 per cent. of the Voting Rights of the issued share capital of the Company;

(ii) the Company ceases to own or control (whether directly or through its wholly owned subsidiaries or in combination) at least 100 per cent. of the Voting Rights of the issued share capital of the Guarantor; or

(iii) the Guarantor ceases to own or control (whether directly or indirectly or in combination) 100 per cent. of the Voting Rights of the issued share capital of the Issuer;

“Yunnan SASAC” means the State-owned Assets Supervision and Administration Commission of Yunnan Provincial People’s Government or its successor; and

“Voting Rights” means the right generally to vote at a general meeting of shareholders of a person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency, and any such voting power shall therefore be excluded for the purpose of this definition).

(e) Notice of redemption: All Bonds in respect of which any notice of redemption is given under this Condition 6 shall be redeemed on the date, in such place and in such manner as specified in such notice in accordance with this Condition 6. If there is more than one notice of redemption given in respect of any Bond (which shall include any notice given by the Issuer pursuant to Condition 6(b) and any Put Exercise Notice given by a Bondholder pursuant to Condition 6(c), the notice given first in time shall prevail and in the event of two notices being given on the same date, the first to be given shall prevail.

(f) Purchase: The Issuer, the Guarantor, the Company and their respective Subsidiaries may at any time purchase Bonds in the open market or otherwise at any price. Any Bonds purchased pursuant to this Condition 6(e) may be held, reissued, resold or surrendered to the Registrar for cancellation. The Bonds so purchased, while held by or on behalf of the Issuer, the Guarantor, the Company or any of their respective Subsidiaries, shall not entitle the holder to vote at any meetings of the Bondholders and shall not be deemed to be outstanding for the purposes of, among other things, calculating quorums at meetings of the Bondholders or for the purposes of Conditions 9, 12(a) and 15.

(g) Cancellation: All Certificates representing Bonds purchased by or on behalf of the Issuer, the Guarantor, the Company or any other respective Subsidiaries may be held, resold or surrendered to the Registrar for cancellation. Any Certificates so surrendered for cancellation may not be reissued or resold and the obligations of the Issuer and the Guarantor in respect of any such Bonds shall be discharged.

7 Payments

(a) Method of Payment:

(i) Payments of principal and premium (if any) shall be made (subject to surrender of the relevant Certificates at the specified office of the Principal Paying Agent or any other Paying Agent if no further payment falls to be made in respect of the Bonds represented by such Certificates) in the manner provided in Condition 7(a)(ii) below.

–58– (ii) Interest on each Bond shall be paid to the person shown on the Register at the close of business on the fifth business day before the due date for payment thereof (the “Record Date”). Payments of interest on each Bond shall be made in US dollars by cheque drawn on a bank and mailed (at the expense of the Issuer) to the holder (or to the first named of joint holders) of such Bond at its address appearing in the Registrar. Upon application by the holder to the specified office of the Registrar or any Transfer Agent before the Record Date, such payment of interest may be made by transfer to an account in US dollars maintained by the payee with a bank. In this Condition 7(a)(ii), “business day” means a day, other than a Saturday, a Sunday or a public holiday, on which each of the Registrar and the Principal Paying Agent is open for business in the place of its specified office.

(iii) If the amount of principal being paid upon surrender of the relevant Certificate is less than the outstanding principal amount of such Certificate, the Registrar will annotate the Register with the amount of principal so paid and will (if so requested in writing by the Issuer or a Bondholder) issue a new Certificate with a principal amount equal to the remaining unpaid outstanding principal amount. If the amount of premium (if any) or interest being paid is less than the amount then due, the Registrar will annotate the Register with the amount of premium (if any) or interest so paid.

(b) Payment initiation: Where payment is to be made by transfer to an account in US dollars, payment instructions (for value on the due date or, if that is not a Payment Business Day, for value the first following day which is a Payment Business Day) will be initiated on the last day on which the Principal Paying Agent is open for business preceding the due date for payment and, where payment will be made by cheque, the cheque will be mailed on the last day on which the Principal Paying Agent is open for business preceding the due date for payment, or, in the case of payments of principal and premium (if any) where the relevant Certificate has not been surrendered at the specified office of any Transfer Agent or of the Registrar, on a day on which the Principal Paying Agent or such other Paying Agent is open for business and on which the relevant Certificate is surrendered.

(c) Payments subject to fiscal laws: All payments are subject in all cases to (i) any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 8 and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the “Code”) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or (without prejudice to the provisions of Condition 8) any law implementing an intergovernmental approach thereto. No commissions or expenses shall be charged to the Bondholders in respect of such payments.

(d) Appointment of Agents: The Registrar, the Principal Paying Agent and the Transfer Agent initially appointed by the Issuer and the Guarantor and their respective specified offices are listed below. The Registrar, the Principal Paying Agent and the Transfer Agent act solely as agents of the Issuer and the Guarantor and do not assume any obligation or relationship of agency or trust for or with any Bondholder. Each of the Issuer and the Guarantor reserves the right at any time with the prior written approval of the Trustee to vary or terminate the appointment of the Registrar, the Principal Paying Agent, the Transfer Agent or any of the other Agents and to appoint additional or other Agents, provided that the Issuer and the Guarantor shall at all times maintain (i) a Registrar, (ii) a Transfer Agent, (iii) a Principal Paying Agent and (iv) such other agents as may be required by other stock exchange on which the Bonds may be listed, in each case as approved in writing by the Trustee.

Notice of any such termination or appointment or any change of any specified office of an Agent shall promptly be given by the Issuer to the Bondholders.

(e) Delay in payment: Bondholders will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due on a Bond if the due date is not a Payment Business Day or if the Bondholder is late in surrendering or cannot surrender its Certificate (if required to do so).

–59– (f) Non-Payment Business Days: If any date for payment in respect of any Bond is not a Payment Business Day, the holder shall not be entitled to payment until the next following Payment Business Day nor to any interest or other sum in respect of such postponed payment.

In this Condition 7, “Payment Business Day” means a day (other than a Saturday, a Sunday or a public holiday) on which banks and foreign exchange markets are open for business in the place in which the specified office of the Principal Paying Agent is located and on which banks and foreign exchange markets are open for business in Hong Kong, London and New York City.

8 Taxation

All payments of principal, premium (if any) and interest by or on behalf of the Issuer or the Guarantor in respect of the Bonds or under the Guarantee shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within the PRC, the BVI or Hong Kong or, in any case, any authority therein or thereof having power to tax, unless such withholding or deduction is required by law.

Where such withholding or deduction is made by the Issuer or, as the case may be, the Guarantor by or within the PRC at the rate of up to and including 10 per cent., the Issuer or, as the case may be, the Guarantor will increase the amounts paid by it to the extent required, so that the net amount received by Bondholders equals the amounts which would otherwise have been receivable by them had no such withholding or deduction been required.

If the Issuer or, as the case may be, the Guarantor is required to make a deduction or withholding (i) by or within the PRC in excess of 10 per cent. or (ii) by or within the BVI or Hong Kong, the Issuer or, as the case may be, the Guarantor shall pay such additional amounts (the “Additional Tax Amounts”) as will result in receipt by the Bondholders of such amounts as would have been received by them had no such withholding or deduction been required, except that no Additional Tax Amounts shall be payable in respect of any Bond:

(a) Other connection: to a holder (or to a third party on behalf of a holder) who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond by reason of his having some connection with the PRC, the BVI or Hong Kong, other than the mere holding of the Bond;

(b) Surrender more than 30 days after the Relevant Date: in respect of which the Certificate representing it is presented for payment more than 30 days after the Relevant Date except to the extent that the holder of it would have been entitled to such Additional Tax Amounts on surrendering the Certificate representing such Bond for payment on the last day of such period of 30 days; or

(c) Declaration: to a Bondholder who would not be liable for or subject to such withholding or deduction by making a declaration of identity, non-residence or other similar claim for exemption to the relevant tax authority if, after having been requested to make such a declaration or claim, such holder fails to do so within any applicable period prescribed by such relevant tax authority.

“Relevant Date” in respect of any Bond means the date on which payment in respect of it 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 which is seven days after that on which notice is duly given to the Bondholders that, upon further surrender of the Certificate representing such Bond being made in accordance with these Conditions, such payment will be made, provided that payment is in fact made upon such surrender.

Any reference in these Conditions to principal and/or interest shall be deemed to include any additional amounts which may be payable under this Condition 8.

–60– 9 Events of Default

If any of the following events (each, an “Event of Default”) occurs, the Trustee at its discretion may, and if so requested in writing by holders of at least 25 per cent. in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution shall (subject to it being indemnified and/ or secured and/or prefunded to its satisfaction), give written notice to the Issuer and the Guarantor that the Bonds are, and they shall immediately become, due and payable at their principal amount together if applicable) with accrued interest:

(a) Non-Payment: there is failure to pay (i) the principal or premium (if applicable) of the Bonds on the date such amount is due and payable; or (ii) any interest on any of the Bonds when due and such failure continues for a period of 30 days; or

(b) Breach of Other Obligations: any of the Company, the Issuer or the Guarantor does not perform or comply with any one or more of its other obligations in the Bonds, the Guarantee, the Keepwell Deed (other than where it gives rise to a redemption pursuant to Condition 6(c)), the Deed of Equity Interest Purchase and Investment Undertaking or the Trust Deed (other than those referred to in Condition 9(a)) which default is incapable of remedy or, if remediable, is not remedied within 30 days after notice of such default shall have been given to the Issuer and the Guarantor by the Trustee; or

(c) Cross-Default: (i) any other present or future indebtedness of the Company, the Issuer, the Guarantor or any of the Material Subsidiaries for or in respect of moneys borrowed or raised becomes (or becomes capable of being declared) due and payable prior to its stated maturity by reason of any actual or potential default, event of default or the like (howsoever described), or (ii) any such indebtedness is not paid when due or, as the case may be, within any originally applicable grace period, or (iii) the Company, the Issuer, the Guarantor or any of the Material Subsidiaries fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of, any moneys borrowed or raised, provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this Condition 9(c) have occurred equals or exceeds (either individually or in aggregate) US$20 million or its equivalent (on the basis of the base rate for the purchase of US dollars with the applicable foreign currency as quoted by the Federal Reserve Bank of New York on the day on which this Condition 9(c) operates); or

(d) Judgments and Enforcement Proceedings

(i) any failure by the Guarantor, the Issuer or any Material Subsidiary to pay one or more final judgments from a court of competent jurisdiction, with an aggregate amount in excess of US$20 million or its equivalent (on the basis of the base rate for the purchase of US dollars with the applicable foreign currency as quoted by the Federal Reserve Bank of New York on the day on which this Condition 9(d) operates), which judgments are not paid, discharged or stayed for a period of 30 days; or

(ii) a distress, attachment, execution or other legal process is levied, enforced or sued out on or against any substantial part of the property, assets or revenues of the Company, the Issuer, the Guarantor or any of the Material Subsidiaries and is not discharged or stayed within 60 days; or

(e) Security Enforced: any mortgage, charge, pledge, lien or other encumbrance, present or future, created or assumed by the Company, the Issuer, the Guarantor or any of the Material Subsidiaries over all or a substantial part of the assets of the Company, the Issuer, the Guarantor or the relevant Material Subsidiary, as the case may be, becomes enforceable and any step is taken to enforce it (including the taking of possession or the appointment of a receiver manager or other similar person) and is not discharged within 30 days; or

(f) Insolvency: the Company, the Issuer, the Guarantor or any of the Material Subsidiaries is deemed by a court in a proceeding that has commenced to be insolvent or bankrupt or unable to pay its debts, stops, suspends or threatens to stop or suspend payment of all or a substantial part of its debts, proposes or makes a general assignment or an arrangement or

–61– composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or any material part of the debts of the Company, the Issuer, the Guarantor or any of the Material Subsidiaries, as the case may be; or

(g) Winding-up: an administrator is appointed, an order of any court of competent jurisdiction is made or an effective resolution is passed for the winding-up or dissolution of the Company, the Issuer, the Guarantor or any of the Material Subsidiaries, or the Company, the Issuer, the Guarantor or any of the Material Subsidiaries ceases or threatens to cease to carry on all or a substantial part of its business or operations, except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms approved by an Extraordinary Resolution of the Bondholders, or (ii) in the case of a Material Subsidiary, whereby the undertaking and assets of such Material Subsidiary are transferred to or otherwise vested in the Company, the Issuer, the Guarantor or another of the Material Subsidiaries; or

(h) Nationalisation: any step is taken by any person acting under the authority of any government with a view to the seizure, compulsory acquisition, expropriation or nationalisation of any part of the assets of the Company, the Issuer, the Guarantor or any of the Material Subsidiaries, which individually or in aggregate would have a material adverse impact to the ability of the Issuer, the Guarantor and/or the Company to perform their respective obligations under the Bonds, the Trust Deed, the Keepwell Deed and the Deed of Equity Interest Purchase and Investment Undertaking; or

(i) Authorisation and Consents: any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorisation, exemption, filing, licence, order, recording or registration) at any time required to be taken, fulfilled or done in order (i) to enable the Company, the Issuer and the Guarantor to lawfully to enter into, exercise their respective rights and perform and comply with their respective obligations under the Bonds, the Trust Deed, the Keepwell Deed (other than with regard to the performance of and compliance with obligations thereunder which may be subject to the approval or other authorisation of PRC governmental authorities) and the Deed of Equity Interest Purchase and Investment Undertaking (other than with regard to the performance of and compliance with obligations thereunder which may be subject to the approval or other authorisation of PRC governmental authorities), (ii) to ensure that those obligations are legally binding and enforceable and (iii) to make the Bonds, the Trust Deed, the Keepwell Deed and the Deed of Equity Interest Purchase and Investment Undertaking admissible in evidence in the courts of Hong Kong is not taken, fulfilled or done; or

(j) Illegality: it is or will become unlawful for any or all of the Company, the Issuer and the Guarantor to perform or comply with any one or more of their respective obligations under any of the Bonds or the Trust Deed, the Keepwell Deed or the Deed of Equity Interest Purchase and Investment Undertaking; or

(k) Unenforceability of Guarantee: the Guarantee is or becomes unenforceable or invalid or shall for any reason ceases to be in full force and effect or is claimed to be unenforceable, invalid or not in full force and effect by the Guarantor; or

(l) Keepwell Deed or Equity Interest Purchase and Investment Undertaking: the Keepwell Deed or the Deed of Equity Interest Purchase and Investment Undertaking is not or is claimed by the Company not to be in full force and effect, or the Keepwell Deed or the Deed of Equity Interest Purchase and Investment Undertaking is modified, amended or terminated other than strictly in accordance with their respective terms; or

(m) Analogous Events: any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in Conditions 9(d) to 9(i) (both inclusive).

In this Condition 9:

“Material Subsidiary” means any Subsidiary of the Company:

–62– (a) whose revenue or (in the case of a Subsidiary which itself has Subsidiaries) consolidated revenue, as shown by its latest audited income statement is at least 5 per cent. of the consolidated revenue as shown by the latest published audited consolidated income statement of the Company and its Subsidiaries including, for the avoidance of doubt, the Company and its consolidated Subsidiaries’ share of profits of Subsidiaries not consolidated and of jointly controlled entities and after adjustments for minority interests; or

(b) whose gross profit or (in the case of a Subsidiary which itself has Subsidiaries) consolidated gross profit, as shown by its latest audited income statement are at least 5 per cent. of the consolidated gross profit as shown by the latest published audited consolidated income statement of the Company and its Subsidiaries including, for the avoidance of doubt, the Company and its consolidated Subsidiaries’ share of profits of Subsidiaries not consolidated and of jointly controlled entities and after adjustments for minority interests; or

(c) whose total assets or (in the case of a Subsidiary which itself has Subsidiaries) consolidated gross assets, as shown by its latest audited balance sheet are at least 10 per cent. of the amount which equals the amount included in the consolidated gross assets of the Company and its Subsidiaries as shown by the latest published audited consolidated balance sheet of the Company and its Subsidiaries including, for the avoidance of doubt, the investment of the Company in each Subsidiary whose accounts are not consolidated with the consolidated audited accounts of the Company and after adjustment for minority interests; provided that, in relation to paragraphs (a), (b) and (c) above of this definition:

(i) in the case of a corporation or other business entity becoming a Subsidiary after the end of the financial period to which the latest consolidated audited accounts of the Company relate, the reference to the then latest consolidated audited accounts of the Company for the purposes of the calculation above shall, until consolidated audited accounts of the Company for the financial period in which the relevant corporation or other business entity becomes a Subsidiary are published be deemed to be a reference to the then latest consolidated audited accounts of the Company adjusted to consolidate the latest audited accounts (consolidated in the case of a Subsidiary which itself has Subsidiaries) of such Subsidiary in such accounts;

(ii) if at any relevant time in relation to the Company or any Subsidiary which itself has Subsidiaries no consolidated accounts are prepared and audited, revenue, gross profit or total assets of the Company and/or any such Subsidiary shall be determined on the basis of pro forma consolidated accounts prepared for this purpose by the Company;

(iii) if at any relevant time in relation to any Subsidiary, no accounts are audited, its revenue, gross profit or total assets (consolidated, if appropriate) shall be determined on the basis of pro forma accounts (consolidated, if appropriate) of the relevant Subsidiary prepared for this purpose by the Company;

(iv) if the accounts of any subsidiary (not being a Subsidiary referred to in proviso (i) above of this definition) are not consolidated with those of the Company, then the determination of whether or not such subsidiary is a Material Subsidiary shall be based on a pro forma consolidation of its accounts (consolidated, if appropriate) with the consolidated accounts (determined on the basis of the foregoing) of the Company prepared for this purpose by the Company; and

(v) in the case of a Subsidiary to which is transferred the whole or substantially the whole of the assets of a Subsidiary which immediately prior to such transfer was a Material Subsidiary, the Material Subsidiary which so transfers its assets shall forthwith upon such transfer cease to be a Material Subsidiary and the Subsidiary to which the assets are so transferred shall become a Material Subsidiary upon such transfer but shall cease to be a Material Subsidiary at the date on which the first published audited accounts (consolidated, if appropriate) of the Company prepared as of a date later than such transfer are issued unless such Subsidiary would continue to be a Material Subsidiary on the basis of such accounts by virtue of the provisions of paragraphs (a), (b) or (c) above of this definition.

–63– A certificate prepared by an authorised signatory of the Company, that in his opinion, a Subsidiary is or is not, or was or was not, a Material Subsidiary shall, in the absence of manifest error, be conclusive and binding on the Bondholders and all parties. The certificate shall, if there is a dispute as to whether any Subsidiary of the Company is or is not a Material Subsidiary, be accompanied by a report by an nationally recognised firm of public accountants addressed to the Company as to proper extraction of the figures used by the Company in determining the Material Subsidiaries of the Company and mathematical accuracy of the calculation.

10 Prescription

Claims against the Issuer or the Guarantor for payment in respect of the Bonds shall be prescribed and become void unless made within ten years (in the case of principal and premium (if any)) or five years (in the case of interest) from the appropriate Relevant Date in respect of them.

11 Replacement of Certificates

If any Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Registrar or any Transfer Agent, subject to all applicable laws and stock exchange or other relevant authority requirements, upon payment by the claimant of the fees, costs and expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer and/or the Registrar and/or such Transfer Agent may require (provided that the requirement is reasonable in the light of prevailing market practice). Mutilated or defaced Certificate must be surrendered before replacements will be issued.

12 Meetings of Bondholders and Modification

(a) Meetings of Bondholders: The Trust Deed contains provisions for convening meetings of Bondholders to consider matters affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of any of these Conditions or any provisions of the Trust Deed, the Keepwell Deed or the Deed of Equity Interest Purchase and Investment Undertaking. Such a meeting may be convened by the Issuer, the Guarantor or the Trustee and shall be convened by the Trustee if requested in writing to do so by Bondholders holding not less than 10 per cent. in principal amount of the Bonds for the time being outstanding and subject to the Trustee being indemnified and/or secured and/or pre-funded to its satisfaction against all costs and expenses. The quorum for any meeting convened to consider an Extraordinary Resolution will be two or more persons holding or representing more than 50 per cent. in principal amount of the Bonds for the time being outstanding, or at any adjourned meeting two or more persons being or representing Bondholders whatever the principal amount of the Bonds held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to modify the maturity of the Bonds or the dates on which interest is payable in respect of the Bonds, (ii) to reduce or cancel the principal amount of, any premium payable in respect of, or interest on, the Bonds, (iii) to change the currency of payment of the Bonds, (iv) to modify the provisions concerning the quorum required at any meeting of Bondholders or the majority required to pass an Extraordinary Resolution, (v) to modify or cancel the Guarantee (save for the release of the Guarantor in accordance with the Conditions and the Trust Deed), the Keepwell Deed or the Deed of Equity Interest Purchase and Investment Undertaking (in each case, unless otherwise in compliance with its terms) (subject to Condition 12(b)), in which case the necessary quorum will be two or more persons holding or representing not less than 66 per cent., or at any adjourned meeting not less than 33 per cent., in principal amount of the Bonds for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on Bondholders (whether or not they were present at the meeting at which such resolution was passed). The Trust Deed provides that a resolution in writing signed by or on behalf of the holders of not less than 90 per cent. in principal amount of the Bonds outstanding shall for all purposes be as valid and effective as an Extraordinary Resolution passed at a meeting of Bondholders duly convened and held. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Bondholders.

–64– (b) Modification and Waiver: The Trustee may (but shall not be obliged to) agree, without the consent of the Bondholders, to (i) any modification of any of these Conditions or any of the provisions of the Trust Deed, the Keepwell Deed, the Deed of Equity Interest Purchase and Investment Undertaking or the Agency Agreement which in its opinion is of a formal, minor or technical nature or is made to correct a manifest error or is to comply with any mandatory provision of applicable law 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 these Conditions or any of the provisions of the Trust Deed, the Keepwell Deed, the Deed of Equity Interest Purchase and Investment Undertaking or the Agency Agreement which is in the opinion of the Trustee not materially prejudicial to the interests of the Bondholders. Any such modification, authorisation or waiver shall be binding on the Bondholders and, unless the Trustee so agrees, such modification, authorisation or waiver shall be notified to the Bondholders as soon as practicable.

(c) Entitlement of the Trustee: In connection with the exercise of its functions, rights, powers and discretions (including but not limited to those referred to in this Condition 12), the Trustee shall have regard to the interests of the Bondholders as a class and shall not have regard to the consequences of such exercise for individual Bondholders and the Trustee shall not be entitled to require, nor shall any Bondholder be entitled to claim, from the Issuer, the Guarantor or the Trustee any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders.

(d) Directions from Bondholders: Notwithstanding anything to the contrary in these Conditions, the Trust Deed, the Agency Agreement, the Deed of Equity Interest Purchase and Investment Undertaking or the Keepwell Deed, whenever the Trustee is required or entitled by the terms of these Conditions, the Trust Deed, the Agency Agreement, the Deed of Equity Interest Purchase and Investment Undertaking or the Keepwell Deed to exercise any discretion or power, take any action, make any decision or give any direction or certification, the Trustee is entitled, prior to exercising any such discretion or power, taking any such action, making any such decision, or giving any such direction or certification, to seek directions from the Bondholders by way of an Extraordinary Resolution and to be indemnified, provided with security and/or pre-funded to its satisfaction against all action, proceedings, claims and demands to which it may be or become liable and all costs, charges, damages, expenses (including legal expenses) and liabilities which may be incurred by it in connection therewith, and the Trustee is not responsible for any loss or liability incurred by any person as a result of any delay in it exercising such discretion or power, taking such action, making such decision, or giving such discretion or certification where the Trustee is seeking such directions or in the event that no such directions are received. Neither the Trustee nor any of the Agents shall be under any obligation to monitor compliance with the provisions of the Trust Deed, the Agency Agreement, the Keepwell Deed, the Deed of Equity Interest Purchase and Investment Undertaking or these Conditions.

13 Further Issues

The Issuer may from time to time without the consent of the Bondholders create and issue further securities either having the same terms and conditions as the Bonds in all respects (or in all respects except for the issue date, issue price and first payment of interest on them and, to the extent necessary, certain transfer restrictions as a result of applicable securities law) and so that such further issue shall be consolidated and form a single series with the outstanding securities of any series (including the Bonds) or upon such terms as the Issuer may determine at the time of their issue. References in these Conditions to the Bonds include (unless the context requires otherwise) any other securities issued pursuant to this Condition 13 and forming a single series with the Bonds. Any further securities forming a single series with the Bonds constituted by the Trust Deed shall be constituted by a deed supplemental to the Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Bondholders and the holders of securities of other series where the Trustee so decides.

–65– 14 Notices

Notices to the Bondholders shall be 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, a Sunday or a public holiday) after the date of mailing. The Issuer shall also ensure that notices are duly published in a manner that complies with the rules and regulations of any stock exchange or other relevant authority on which the Bonds are for the time being listed. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the first date on which publication is made.

15 Enforcement

At any time after the Bonds become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Company, the Issuer and/or the Guarantor as it may think fit to enforce the terms of the Trust Deed, the Keepwell Deed, the Deed of Equity Interest Purchase and Investment Undertaking and the Bonds, but it need not take any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Bondholders holding at least 25 per cent. in principal amount of the Bonds then outstanding and (b) it shall have been indemnified and/or secured and/or prefunded to its satisfaction. No Bondholder may proceed directly against the Company, the Issuer or the Guarantor unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.

16 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 payment unless indemnified and/or secured and/or pre-funded to its satisfaction. The Trustee is entitled to enter into business transactions with the Company, the Issuer, the Guarantor and any entity related (directly or indirectly) to the Company, the Issuer or the Guarantor without accounting for any profit.

None of the Trustee or any of the Agents shall be responsible for the performance by the Issuer, the Guarantor, the Company and any other person appointed by the Issuer, the Guarantor and/or the Company in relation to the Bonds of the duties and obligations on their part expressed in respect of the same and, unless it has express written notice from the Issuer, the Guarantor, the Company to the contrary, the Trustee and each Agent shall assume that the same are being duly performed. None of the Trustee or any Agent shall be liable to any Bondholder, the Issuer, the Guarantor, the Company or any other person for any action taken by the Trustee or such Agent in accordance with the instructions of the Bondholders.

The Trustee may rely without liability to Bondholders on any report, confirmation or certificate from or any advice or opinion of legal counsel, accountants, financial advisers, financial institution or any other expert, whether or not addressed to it and whether their liability in relation thereto is limited (by its terms or by any engagement letter relating thereto entered into by the Trustee or any other person or in any other manner) by reference to a monetary cap, methodology or otherwise. The Trustee may accept and shall be entitled to rely on any such report, confirmation, certificate, advice or opinion, in which event such report, confirmation, certificate, advice or opinion shall be binding on the Issuer, the Company, the Guarantor and the Bondholders.

17 Governing Law

(a) Governing Law: The Trust Deed, the Agency Agreement, the Guarantee, the Keepwell Deed, the Deed of Equity Interest Purchase and Investment Undertaking and the Bonds, and any non-contractual obligations arising out of or in connection with them, are governed by and shall be construed in accordance with English law. A person who is not a party to the Trust Deed, the Agency Agreement, the Guarantee, the Keepwell Deed, the Deed of Equity Interest Purchase and Investment Undertaking has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of, or enjoy any benefit under, such documents, unless such documents provide otherwise.

–66– (b) Jurisdiction: The courts of Hong Kong are to have exclusive jurisdiction to settle any disputes, which may arise out of or in connection with the Trust Deed, the Agency Agreement, the Guarantee, the Keepwell Deed, the Deed of Equity Interest Purchase and Investment Undertaking and the Bonds and accordingly any legal action or proceedings arising out of or in connection with the Trust Deed, the Agency Agreement, the Guarantee, the Keepwell Deed, the Deed of Equity Interest Purchase and Investment Undertaking and the Bonds (“Proceedings”) may be brought in such courts. Pursuant to the Trust Deed, each of the Issuer, the Guarantor and the Company irrevocably submits to the jurisdiction of such courts.

(c) Agent for Service of Process: Each of the Issuer and the Company has irrevocably agreed to receive service of process at the registered office of the Guarantor, which is currently at Flat 2006, 20/F, China Resources Building, 26 Harbour Road, Wan Chai, Hong Kong, in any Proceedings in Hong Kong.

(d) Waiver of Immunity: Each of the Issuer, the Guarantor and the Company have waived any right to claim sovereign or other immunity from jurisdiction or execution and any similar defence, and irrevocably consents to the giving of any relief or the issue of any process, including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment made or given in connection with any Proceedings.

–67– SUMMARY OF PROVISIONS RELATING TO THE BONDS IN GLOBAL FORM

The Global Certificate contains provisions which apply to the Bonds in respect of which the Global Certificate is issued, some of which modify the effect of the terms and conditions of the Bonds (the “Conditions”orthe“Terms and Conditions”) set out in this Offering Circular. Terms defined in the Terms and Conditions of the Bonds have the same meaning in the paragraphs below. The following is a summary of those provisions:

The Bonds will be represented by the Global Certificate which will be registered in the name of a nominee of, and deposited with, a common depositary on behalf of Euroclear and Clearstream, Luxembourg.

Under the Global Certificate, the Issuer, for value received, promises to pay such principal and interest on the Bonds to the holder of the Bonds on such date or dates as the same may become payable in accordance with the Conditions.

Owners of interests in the Bonds in respect of which the Global Certificate is issued will be entitled to have title to the Bonds registered in their names and to receive individual definitive certificates if either Euroclear or Clearstream, Luxembourg or any other clearing system (an “Alternative Clearing System”) is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so. In such circumstances, the Issuer will cause sufficient individual definitive certificates to be executed and delivered to the Registrar for completion, authentication and despatch to the relevant holders of the Bonds. A person with an interest in the Bonds in respect of which the Global Certificate is issued must provide the Registrar not less than 30 days’ notice at its specified office of such holder’s intention to effect such exchange and a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such individual definitive certificates.

Payment

So long as the Bonds are represented by the Global Certificate, each payment in respect of the Global Certificate will be made to, or to the order of, the person shown as the holder of the Bonds in the Register at the close of business (of the relevant clearing system) on the Clearing System Business Day immediately prior to the due date for such payments, where “Clearing System Business Day” means Monday to Friday, inclusive except 25 December and 1 January.

Trustee’s Powers

In considering the interests of the Bondholders whilst the Global Certificate is registered in the name of a nominee for a clearing system, the Trustee may, to the extent it considers it appropriate to do so in the circumstances, but without being obliged to do so, (a) have regard to any information as may have been made available to it by or on behalf of the relevant clearing system or its operator as to the identity of its accountholders (either individually or by way of category) with entitlements in respect of the Bonds and (b) may consider such interests on the basis that such accountholders were the holder of the Bonds in respect of which such Global Certificate is issued.

Notices

So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on behalf of Euroclear or Clearstream, Luxembourg or any Alternative Clearing System, notices to Bondholders may be given by delivery of the relevant notice to Euroclear or Clearstream, Luxembourg or such Alternative Clearing System, for communication by it to the entitled accountholders in substitution for notification as required by the Conditions.

–68– Bondholder’s Redemption

The Bondholder’s redemption option in Condition 6(c) of the Terms and Conditions may be exercised by the holder of the Global Certificate giving notice to any Paying Agent of the principal amount of Bonds in respect of which the option is exercised within the time limits specified in the Terms and Conditions.

Issuer’s Redemption

The option of the Issuer provided for in Condition 6(b) shall be exercised by the Issuer giving notice to the Bondholders within the time limits set out in and containing the information required by the Conditions of the Bonds.

Transfers

Transfers of interests in the Bonds will be effected through the records of Euroclear or Clearstream, Luxembourg (or any Alternative Clearing System) and their respective participants in accordance with the rules and procedures of Euroclear or Clearstream, Luxembourg (or any Alternative Clearing System) and their respective direct and indirect participants.

Cancellation

Cancellation of any Bond by the Issuer following its redemption or purchase by the Issuer will be effected by reduction in the principal amount of the Bonds in the register of the Bondholders.

Meetings

For the purposes of any meeting of Bondholders, the holder of the Bonds represented by the Global Certificate shall (unless the Global Certificate represents only one Bond) be treated as two persons for the purposes of any quorum requirements of a meeting of Bondholders and as being entitled to one vote in respect of each US$1,000 of the Bonds.

–69– SUMMARY OF THE KEEPWELL DEED

The following contains summaries of certain key provisions of the Keepwell Deed. Such statements do not purport to be complete and are qualified in their entirety by reference to the Keepwell Deed. Defined terms used in this section shall have the meanings given to them in the Keepwell Deed.

Under the Keepwell Deed, the Company will undertake with the Issuer, the Guarantor and the Trustee that it shall directly or indirectly own and hold all the outstanding shares of each of the Issuer and the Guarantor and will not directly or indirectly pledge, grant a security interest, or in any way encumber or otherwise dispose of any such shares, unless required to dispose of any or all such shares pursuant to a court decree or order of any governmental authority.

In addition, the Company will undertake that it shall cause:

(i) each of the Issuer and the Guarantor to have a Consolidated Net Worth (as defined in the Keepwell Deed) of at least US$1.00 at all times; and

(ii) each of the Issuer and the Guarantor to have sufficient liquidity to ensure timely payment by each of the Issuer and the Guarantor of any amounts payable in respect of the Bonds and the Guarantee (as applicable) in accordance with the Terms and Conditions of the Bonds.

If the Issuer or the Guarantor at any time determines that it will have insufficient liquidity to meet any of its payment obligations under the Bonds, the Trust Deed or (in the case of the Guarantor) the Guarantee as they fall due, the Issuer or the Guarantor shall promptly notify the Company of the shortfall and the Company will cause the Issuer or the Guarantor to obtain, before the due date of the relevant payment obligations, funds sufficient by means as permitted by applicable laws and regulations so as to enable the Issuer or the Guarantor to pay such payment obligations in full as they fall due.

Pursuant to the Keepwell Deed and notwithstanding and without prejudice to the other provisions in the Keepwell Deed, in the event that, among other things, (i) an Event of Default has occurred, (ii) the Issuer or the Guarantor fails to provide the Trustee with a Liquidity Notice in accordance with and by the time specified, (iii) the Consolidated Net Worth of the Issuer or the Guarantor falls below US$1.00, or (iv) the Issuer or the Guarantor determines that it will have insufficient liquidity or cash flow to meet its payment obligations under the Bonds, the Guarantee or the Trust Deed as they fall due on the next Interest Payment Date, the Trustee may provide a Trigger Notice to the Issuer, the Guarantor and the Company, upon which, the Company shall:

(i) as soon as practicable grant to the Issuer or the Guarantor, as the case may be, a standby facility pursuant to which the Company will remit an amount in Renminbi or US dollars that can be converted (as necessary) by the Issuer or the Guarantor, as the case may be, into the Relevant Amount;

(ii) as soon as practicable open with a PRC commercial bank a special account for the transfer and remittance of the Standby Facility Amount to the Issuer or the Guarantor, as the case may be, in accordance with the relevant PRC laws and regulations;

(iii) remit the Standby Facility Amount to a specified account of the Issuer or the Guarantor, as the case may be, in Hong Kong through the special account referred to in (ii) above: (a) if the Triggering Event is a Liquidity Notice Failure Event or a Shortfall Event, at least two Business Days prior to the next Interest Payment Date or (b) if the Triggering Event is an Event of Default or a Financial Ratio Failure, as soon as practicable; and

(iv) cause the Issuer or the Guarantor, as the case may be, to use the Standby Facility Amount to discharge its obligations under the Bonds, the Guarantee, the Trust Deed, the Agency Agreement, the Deed of Equity Interest Purchase and Investment Undertaking and the Keepwell Deed on the due date therefor.

Each of the Company, the Guarantor and the Issuer will agree and acknowledge that the terms of the Standby Facility shall be at arm’s length (or more favourable to the Issuer or the Guarantor, as the case may be) and shall not require any security from the Issuer or the Guarantor.

–70– For so long as the Bonds are outstanding, the Company will further undertake to the Trustee in the Keepwell Deed:

(i) not to amend or agree to any amendment to the articles of association of each of the Issuer and the Guarantor to the extent that any such amendments may adversely affect the Issuer’s or the Guarantor’s operational sustainability or the Issuer’s or the Guarantor’s ability to make timely payment of any amounts payable under or in respect of the Bonds, the Trust Deed and the Guarantee, as the case may be, in accordance with the Terms and Conditions of the Bonds, the Trust Deed, the Guarantee and its other indebtedness;

(ii) to cause the Issuer to remain in full compliance with the Terms and Conditions of the Bonds, the Trust Deed, the Agency Agreement and all applicable rules and regulations in the British Virgin Islands and Hong Kong;

(iii) to cause the Guarantor to remain in full compliance with the Terms and Conditions of the Bonds, the Trust Deed, the Agency Agreement, the Guarantee and all applicable rules and regulations in Hong Kong;

(iv) to promptly take any and all action necessary to comply with its obligations under the Keepwell Deed;

(v) to cause each of the Issuer and the Guarantor to take all action necessary in a timely manner to comply with its obligations under the Keepwell Deed;

(vi) to ensure that the Issuer has sufficient funds to meet its obligations with respect to any and all fees, costs, expenses and other payment obligations of the Issuer, including but not limited to fees, costs and expenses with respect to the corporate formation and administrative matters of the Issuer;

(vii) to maintain the Guarantor as its primary platform for executing the overseas business strategy of the Company; and

(viii) to procure that the Issuer will not carry on any business activity whatsoever other than in connection with the Bonds (which activities shall, for the avoidance of doubt, include the on-lending of the proceeds of the issue of the Bonds to the Guarantor or as it may direct), and to cause such recipient of the Proceeds of the Bonds to pay the interest and principal in respect of such intercompany loan on time.

The Keepwell Deed will not, and nothing contained therein and nothing done pursuant thereto by the Company, shall be deemed to constitute, a guarantee by the Company of the payment of any obligation, indebtedness or liability, of any kind or character whatsoever, of the Issuer or the Guarantor under the laws of any jurisdiction.

The parties to the Keepwell Deed will acknowledge that in order for each of the Issuer, the Guarantor and the Company to comply with its respective obligations under the Keepwell Deed, each of them may require governmental or regulatory approvals, permits and filings pursuant to applicable laws. The Keepwell Deed may only be modified, amended or terminated by the written agreement of the parties thereto.

The Keepwell Deed and any non-contractual obligations arising out of or in connection with it will be governed by and construed in accordance with English law.

–71– SUMMARY OF THE DEED OF EQUITY INTEREST PURCHASE AND INVESTMENT UNDERTAKING

The following contains summaries of certain key provisions of the Deed of Equity Interest Purchase and Investment Undertaking. Such statements do not purport to be complete and are qualified in their entirety by reference to the Deed of Equity Interest Purchase and Investment Undertaking. Defined terms used in this section shall have the meanings given to them in the Deed of Equity Interest Purchase and Investment Undertaking.

The Company intends to assist the Issuer and the Guarantor in meeting their respective obligations under the Bonds and the Guarantee.

Purchase Undertaking

Following receipt by the Trustee of notice in writing or after the Trustee has actual knowledge of the occurrence of an event of default under the Bonds, the Trustee shall as soon as practicable issue a written purchase notice (the “Purchase Notice”) to the Company. Pursuant to the terms of the Deed of Equity Interest Purchase and Investment Undertaking, subject to obtaining all required approvals (the “Relevant Purchase Approvals”), the Company agrees to purchase or procure any of its PRC incorporated subsidiaries (each, the “Purchaser”) to purchase from the following transferors (each, a “Relevant Transferor”) upon receiving the Purchase Notice from the Trustee following an event of default under the Bonds:

(i) equity interests held by the Issuer, the Guarantor and/or any one or more of the other subsidiaries of the Company incorporated outside the PRC as designated by the Company and notified in writing to the Trustee within three business days after the date of the Purchase Notice; or

(ii) in the absence of a designation and notification within three business days after the date of the Purchase Notice as provided in (i) above, equity interests held by all the subsidiaries of the Company incorporated outside the PRC.

Furthermore, the Company shall within 25 business days after the date of the Purchase Notice determine the purchase price of the equity interest (the “Purchase Price”) and the other applicable terms relating to such purchase. The Company is obliged to determine the Purchase Price in compliance with any applicable PRC laws and regulations effective at the time of determination. In any event, the Purchase Price shall be no less than the aggregate of the following amounts (the “Shortfall Amount”):

(i) the amount sufficient to enable the Issuer and the Guarantor to discharge in full their respective obligations under the Bonds and the Trust Deed, plus

(ii) US$4,500,000, representing approximately the interest payable in respect of one Interest Period under the Bonds, plus

(iii) all fees, costs, expenses (including without limitation, legal expenses) and other amounts payable to the Trustee and/or the Agents under or in connection with the Bonds, the Trust Deed, the Agency Agreement, the Keepwell Deed and/or the Deed of Equity Interest Purchase and Investment Undertaking as at the date of such Purchase Notice plus provisions for fees, costs, expenses and all other amounts which may be properly incurred after the date of the Purchase Notice, as notified by the Trustee in the Purchase Notice.

Within 60 business days after the date of the Purchase Notice, the Company shall (or shall procure that the Purchaser will), and shall procure each Relevant Transferor to, obtain the approval of SASAC and execute, and the Company shall procure the board of directors of each of the companies which is subject to the purchase shall execute (where applicable), an equity interest transfer agreement and all other application documents required by applicable laws and regulations of the PRC and shall file the same as required by applicable laws and regulations with the relevant approval authorities, including but not limited to MOFCOM and NDRC (as applicable), for approval of the transfer of the equity interests.

–72– The Company shall, and shall procure each Purchaser and Relevant Transferor to, use their respective best efforts to do all such things and take all such actions as may be necessary or desirable to (i) procure the completion of the purchase of the relevant equity interest, provide information and apply with a view to obtaining relevant approvals as soon as reasonably practicable within three months from the date of the relevant Purchase Notice; and (ii) procure the remittance of the sum of the Purchase Price to or to the order of the Relevant Transferor(s) in accordance with the Deed of Equity Interest Purchase and Investment Undertaking.

Upon completion of the purchase of the relevant equity interest, (i) in the event that a Relevant Transferor is not the Issuer or the Guarantor, the Company shall (or shall procure that the Purchaser will) procure such Relevant Transferor to promptly on-lend or distribute in full the relevant portion of the Purchase Price received by such Relevant Transferor to the Issuer or the Guarantor prior to any other use, disposal or transfer of the proceeds received; and (ii) the Company shall (or shall procure that the Purchaser will) promptly do all such things (including entering into and executing any agreements or arrangements required) and take all actions necessary for the Purchase Price received by the Issuer or the Guarantor from the Company or the Purchaser or pursuant to any on-loan or distribution referred to in (i) above to be applied solely towards the payment, in accordance with the Trust Deed, of any outstanding amounts under the Trust Deed and the Bonds (including any interest accrued but unpaid on the Bonds) prior to any other use, disposal or transfer of the proceeds received.

Investment Undertaking

Upon the receipt of a written notice (the “Investment Notice”) provided by the Trustee in accordance with the Trust Deed following receipt by the Trustee of notice in writing or after the Trustee has actual knowledge of the occurence of an Event of Default under the Bonds and the written notification from the Company that it has reasonably determined that (i) the Purchase Price will be less than the Purchase Shortfall Amount or (ii) any Relevant Purchase Approval is unlikely to be obtained, the Company agrees that it shall, subject to obtaining all required approvals (the “Relevant Investment Approval”), the company will either itself invest or procure any of its PRC incorporated subsidiaries (each, the “Designated Investor”) to invest, by equity investment (the “Investment”) in the following investees (each, a “Relevant Investee”):

(i) the Issuer, the Guarantor and/or any one or more of the other subsidiaries of the Company incorporated outside the PRC as designated by the Company and notified in writing to the Trustee within three business days after the date of the Investment Notice; and

(ii) in the absence of a designation and notification within three business days after the date of the Investment Notice as provided in (i) above, all the subsidiaries of the Company incorporated outside the PRC.

The Company shall within 25 business days after the date of the Investment Notice determine (i) the investment amount in US dollars (the “Investment Amount”) in accordance with any applicable PRC laws and regulations effective at the time of determination; and (ii) the other applicable terms relating to the investment. In any event, the Investment Amount shall be no less than the aggregate of:

(i) the amount sufficient to enable the Issuer and the Guarantor to discharge in full their respective obligations under the Bonds and the Trust Deed, plus

(ii) US$4,500,000, representing approximately the interest payable in respect of one Interest Period under the Bonds, plus

(iii) all fees, costs, expenses (including without limitation, legal expenses) and other amounts payable to the Trustee and/or the Agents under or in connection with the Bonds, the Trust Deed, the Agency Agreement, the Keepwell Deed and/or the Deed of Equity Interest Purchase and Investment Undertaking as at the date of such Investment Notice plus provisions for fees, costs, expenses and all other amounts which may be properly incurred after the date of the Investment Notice, as notified by the Trustee in the Investment Notice, less

(iv) the Purchase Price (the Purchase Price shall be deemed to be zero if the Company reasonably determines that any Relevant Purchase Approval is unlikely to be obtained).

–73– Within 60 business days after the date of the Investment Notice, the Company shall (or shall procure that the Designated Investor will), and shall procure each Relevant Investee to, obtain the approval of SASAC and execute, and the Company shall procure the board of directors of each of the companies which is subject to the Investment shall execute (where applicable), an investment agreement and all other application documents required by applicable laws and regulations and shall file the same as required by applicable laws and regulations with all other relevant approval authorities, including but not limited to the MOFCOM and the NDRC (as applicable), for approval or registration of the investment.

The Company shall, and shall procure each Designated Investor and Relevant Investee to, use their respective best efforts to do all such things and take all such actions as may be necessary or desirable to (i) procure the completion of the Investment, provide information and apply with a view to obtaining relevant investment approvals as soon as reasonably practicable within three months from the date of the Investment Notice; and (ii) procure the remittance of the sum of the Investment Amount to or to the order of the Relevant Investee(s) in accordance with the Deed of Equity Interest Purchase and Investment Undertaking.

Upon the completion of the Investment, (i) in the event that a Relevant Investee is not the Issuer or the Guarantor, the Company shall (or shall procure that the Designated Investor will) procure such Relevant Investee to promptly on-lend or distribute in full the relevant portion of the Investment Amount received by such Relevant Investee to the Issuer or the Guarantor prior to any other use, disposal or transfer of the proceeds received; and (ii) the Company shall (or shall procure that the Designated Investor will) promptly do all such things (including entering into and executing any agreements or arrangements required) and take all actions necessary for the Investment Amount received by the Issuer or the Guarantor from the Company or Designated Investor or pursuant to any on-loan or distribution referred to in (i) above to be applied solely towards the payment, in accordance with the Trust Deed, of any outstanding amounts under the Trust Deed and the Bonds (including any interest accrued but unpaid on the Bonds) prior to any other use, disposal or transfer of the proceeds received.

The Deed of Equity Interest Purchase and Investment Undertaking shall remain in full force and effect so long as any of the Bonds remain outstanding.

The Deed of Equity Interest Purchase and Investment Undertaking and any non-contractual obligations arising out of or in connection with it will be governed by and construed in accordance with English law.

–74– DESCRIPTION OF THE ISSUER

OVERVIEW

The Issuer is a limited liability company incorporated in the British Virgin Islands on 6 January 2016. Its registered office is at Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands. The Issuer is a direct wholly-owned subsidiary of the Guarantor and an indirect wholly-owned subsidiary of the Company.

BUSINESS ACTIVITIES

The Issuer was established only for the purpose of issuing the Bonds. So long as any Bond remains outstanding, the Issuer will not engage in any material activities other than entering into arrangements for the proposed issue of the Bonds and on-lending of the proceeds thereof to the Company and its designated subsidiaries. As at the date of this Offering Circular, the Issuer has no outstanding borrowings or contingent liabilities. As at the date of this Offering Circular, the Issuer has no subsidiaries or employees.

SHARES

As at the date of this Offering Circular, the Issuer is authorised to issue a maximum of 50,000 shares of one class of no par value. As at the date of this Offering Circular, one ordinary share has been issued and credited as fully paid, and is held by the Guarantor. None of the equity securities of the Issuer was listed or dealt in any stock exchange and no listing or permission to deal in such securities is being or is proposed to be sought as at the date of this Offering Circular.

DIRECTOR

As at the date of this Offering Circular, the sole director of the Issuer is Mr. Zhang Jincan. The sole director does not hold any shares or option to acquire shares of the Issuer.

FINANCIAL INFORMATION

As at the date of this Offering Circular, the Issuer has no material business or assets and has not prepared any financial statements since its incorporation.

–75– DESCRIPTION OF THE GUARANTOR

OVERVIEW

Leveraging Hong Kong’s prominence as an international trade, shipping and finance centre, the Guarantor is strategically placed by the Group to develop its investment and asset management operations and diversify its sources of funding with the eventual goal of listing on the international markets. For the year ended 31 December 2015, the Guarantor’s revenue was RMB1,257.9 million. As at 31 December 2015, the Guarantor had total assets of RMB6,603.8 million.

The Guarantor, through its subsidiaries in the PRC, operates a number of renewable energy projects in Yunnan Province, primarily including wind power, solar power and waste-to-energy generation projects. The Guarantor holds 100 per cent. of the equity interest of YEIG Renewable Energy, which primarily engaged in developing and operating renewable energy projects in the PRC. The table below sets forth the installed capacity and power generation (in approximate amounts) of the renewable power generating units operated by the Guarantor as at the dates and during the years indicated:

As at / for the year ended 31 December 2013 2014 2015 Consolidated installed capacity(1) (MW) ...... 82 178 358 Gross power generation (MWh) ...... 82,000 258,000 633,748 On-grid power generation (MWh) ...... 64,000 228,000 585,149 Power sales (RMB in million) ...... 60.9 155.2 323.7

Note:

(1) Represents the installed capacity of the power projects that have commenced commercial operations as at the relevant record dates only.

Wind power projects

Yongsan Wind Farm （永三風電場） is a wind farm with an installed capacity of 48 MW. YEIG Renewable Energy has a controlling interest of 70 per cent. in this project. The project commenced commercial operation in October 2013. Gross power generation of this project was approximately 112,000 MWh and 131,674 MWh for the years ended 31 December 2014 and 2015, respectively.

Huize Dahailiangzi Wind Farm（會澤大海梁子風電場）is a wind farm with an installed capacity of 48 MW. This project, which is wholly owned by YEIG Renewable Energy, commenced commercial operation in August 2014. Gross power generation of this project was approximately 159,116 MWh for the year ended 31 December 2015.

Kongzhaopu Wind Farm（孔照普風電場）is a wind farm with an installed capacity of 48 MW. YEIG Renewable Energy has a controlling interest of 70 per cent. in this project. The project commenced commercial operation in December 2014. Gross power generation of this project was approximately 125,322 MWh for the year ended 31 December 2015.

Malong Duimenliangzi Wind Farm（馬龍對門梁子風電場）is a wind farm with an installed capacity of 90 MW. This project, which is wholly owned by YEIG Renewable Energy, commenced commercial operation in April 2015. Gross power generation of this project was approximately 90,616 MWh for the year ended 31 December 2015.

Toudaoping Wind Farm（頭道平風電場）is a wind farm with a designed installed capacity of 48 MW. This project, which is wholly owned by YEIG Renewable Energy, commenced trial operation in December 2015.

Dazhongshan Wind Farm（大中山風電場）is a wind farm with an installed capacity of 48 MW. This project, which is wholly owned by YEIG Renewable Energy, commenced commercial operation in March 2016.

–76– Laojianshan Wind Farm（老尖山風電場）is a wind farm with an installed capacity of 48 MW. This project, which is wholly owned by YEIG Renewable Energy, commenced commercial operation in March 2016.

Solar power projects

Pilot and Demonstration Project of Shilin 66 MW Grid-connected Photovoltaic Power Station（石林 66MW併網光伏電站試驗示範項目）is a solar power generation project. The Guarantor beneficially hold 100.0 per cent. of interest in this project. Phase I of this project has an installed capacity of 10 MW and was completed in May 2010. Gross power generation of this project was approximately 16,000 MWh, 15,200 MWh and 31,031 MWh for the years ended 31 December 2013, 2014 and 2015, respectively. Phase II of this project has an installed capacity of 56 MW and was completed in 30 January 2016.

Waste-to-energy power generation projects

Qujing Waste-to-Energy Power Generation Project （曲靖垃圾發電項目） is a waste-to-energy power generation project with an installed capacity of 24 MW. YEIG Renewable Energy has a controlling interest of 85 per cent. in this project. Unit 1 of this project commenced trial operation in August 2010, and Unit 2 commenced trial operation in December 2010. This project commenced commercial operation in January 2012. Gross power generation of Qujing Waste-to-Energy Power Generation Project was approximately 66,000 MWh, 78,400 MWh and 95,990 MWh for the years ended 31 December 2013, 2014 and 2015, respectively.

Future renewable energy projects

The Guarantor plans to further expand its renewable energy generation business.

Achao Wind Farm（阿朝風電場）is a wind farm with a designed installed capacity of 48 MW. YEIG Renewable Energy has a controlling interest of 70 per cent. in this project. This project is expected to commence operation in June 2016.

Huize Banbianjing Wind Farm （會澤半邊菁風電場） is expected to be a wind farm with a designed installed capacity of 48 MW and is wholly owned by YEIG Renewable Energy. This project is under construction and is expected to commence operation in June 2017.

In addition, the Guarantor intends to invest in the following solar power projects in the PRC:

Estimated Estimated total investment to investment to be incurred in Project be incurred 2016 (RMB in million) 1. Yongren Xiaomuma Phase I (Photovoltaic) 627 405 （永仁小木馬一期（光伏））...... 2. Binchuan Baofengsi Phase I (Photovoltaic) 636 510 （賓川寶豐寺一期（光伏））...... Total...... 1,263 915

COMPETITIVE STRENGTHS

The Guarantor believes that the following represents the Guarantor’s key competitive strengths:

¼ the financial resources, technical expertise and managerial experience of the Group provide strong support for the Guarantor’s business development;

¼ the Guarantor’s investment activities focus on industries that are promoted and supported by the PRC Government at both the national and local levels; and

–77– ¼ the extensive relationship network of the Group provides the Guarantor with a large range of business opportunities.

DIRECTORS

As at the date of this Offering Circular, the directors of the Guarantor are the Company and Mr. Zhang Jincan.

GENERAL INFORMATION

The Guarantor was incorporated in Hong Kong under the Companies Ordinance (Cap. 32) (re-enacted as the Companies Ordinance (Cap. 622) with effect from 3 March 2014) of Hong Kong (CR number: 1853891) on 21 January 2013. The Guarantor’s registered office is at Flat 2006, 20/F, China Resources Building, 26 Harbour Road, Wan Chai, Hong Kong. The Guarantor is a direct wholly-owned subsidiary of the Company. As at the date of this Offering Circular, the issued share capital of the Guarantor is HK$2,539,417,150. The shares of the Guarantor are not listed on any stock exchange and no listing or permission to deal in such shares is being or is proposed to be sought as at the date of this Offering Circular.

–78– DESCRIPTION OF THE GROUP

OVERVIEW

The Group is a leading state-owned energy company based in Yunnan Province. It has been designated by the Yunnan Provincial Government’s sole strategic platform to engage in the investment and development of the energy sector in Yunnan Province. According to 2015 Chinese 500 Top Enterprises Forum, the Group was the largest energy enterprise in Western China, the eighth largest energy enterprise in China and was ranked 349th among China’s top 500 enterprises, all measured by revenue in 2014. The Group focuses on the investment and development of the energy sector in Yunnan Province and has primarily engaged in power generation and sales, coal production and sales and resources trading (including natural gas). Over the years, the Group has diversified its businesses into financial services, development and management of industrial parks, energy technology and salt and chemical production.

The Company, through its 88 subsidiaries and 47 investee companies (in which the Company holds non-controlling interests), has invested in a diversified portfolio of hydropower, fossil fuel, wind power, natural gas, solar and other new energy projects that are of strategic importance to Yunnan’s economic and urban development. As at 31 December 2015, the Group held controlling interests in eight hydropower stations (all of which were in operation), one fossil fuel power station (one unit of which was in operation), nine wind farm projects (five of which were in operation) and three solar and waste-to-energy power projects (two of which were in operation) in Yunnan Province, and the consolidated installed capacity of the power stations in operation was 1,884.9 MW. In addition, as at 31 December 2015, the Group held non-controlling interests in 16 power companies, including 10 hydropower companies and six fossil fuel power companies. As at 31 December 2015, the total attributable installed capacity of the power stations operated by these investee companies was 11,513.3 MW. The investment income distributed by the Group’s investee companies has historically contributed a material portion of the Group’s revenue and profit.

For the years ended 31 December 2013, 2014 and 2015, the revenue of the Group was RMB26,387.7 million, RMB35,371.5 million and RMB41,887.1 million, respectively. The table below sets forth the revenue from each business segment of the Group in absolute amount and as a percentage of the Group’s revenue during the years indicated:

For the year ended 31 December 2013 2014 2015 Per cent. Per cent. Per cent. Amount of total Amount of total Amount of total (RMB in million, except percentages) Energy business ...... 24,915.7 94.4 32,445.0 91.7 38,514.4 91.9 Power generation and sales ...... 1,532.3 5.8 1,827.4 5.2 2,220.6 5.3 Coal production and sales ...... 1,903.9 7.2 5,298.3 15.0 20.7 0.0 Resources trading (1) ...... 21,479.5 81.4 25,319.3 71.6 36,273.1 86.6 Financial services(2)...... – – 71.0 0.2 29.5 0.1 Other businesses(3)...... 130.5 0.5 216.2 0.6 535.5 1.3 Investment income(4) ...... 1,309.0 5.0 2,529.9 7.2 2,340.7 5.6 Interest income(5) ...... 32.6 0.1 109.4 0.3 467.0 1.1 Total...... 26,387.7 100.0 35,371.5 100.0 41,887.1 100.0

Notes:

(1) Revenue from resources trading includes revenue from the Group’s natural gas business.

(2) Revenue from financial services represents income from equity and debt investment and management, trust asset management, economic information consulting, cornerstone investment in initial public offerings and private placements, financial leasing with focus on energy-related sectors, factoring service to provide small and medium enterprises with funding to meet their liquidity needs and fund investment.

(3) Revenue from other businesses represents the income from investment, development and management of industrial parks and energy technology business. The Company acquired a controlling interest in Yunnan Salt in October 2015, following which the financial statements of Yunnan Salt were consolidated into the financial statements of the Group. For details about the acquisition and Yunnan Salt’s business, see “– Other Businesses – Salt and Chemical Production Business”.

–79– (4) Investment income represents the dividend income of the Group received from its investee companies in which the Group holds non-controlling interests. Given the nature of the Company as an investment vehicle, carrying out investments constitutes one of its main business activities. The management considers it appropriate to include such investment income in its revenue.

(5) Interest income represents primarily the interest payment received by the Company on the loans granted to its investee companies engaging in the energy business. As those loans generally do not have a maturity date, such interest income is deemed dividend distribution by the relevant investee companies and is included in the Group’s revenue.

The Company was established on 11 January 2012 and is beneficially controlled by Yunnan SASAC. As part of its formation, the Company received the transfer, at book value, of all of the hydro and equity assets of Yunnan Provincial Investment Holdings Group Co., Ltd. （雲南省投資控股集團有限公司） (an investment vehicle of the Yunnan Provincial Government) with the approval of the Yunnan Provincial Government. As at 31 December 2015, the Company had a registered capital of RMB11,660.0 million and total assets of RMB74,187.4 million. The Group has been tasked to represent Yunnan Provincial Government to invest in energy projects and create a platform for implementing the Yunnan Provincial Government’s strategies on the exploitation and development of energy resources in Yunnan Province as well as investment in and cooperation with Southeast Asian nations on the energy sector.

–80– CORPORATE STRUCTURE

The chart below sets forth a simplified corporate structure which illustrates the relationships of the Company, its shareholders, the principal subsidiaries and investee companies as at 31 December 2015:

State-owned Assets Supervision and Administration Commission of Yunnan Provincial People’s Government （雲南省人民政府國有資產監督管理委員會）

88.90% 100% 55.05%

Yunnan Yuntianhua Co., Ltd Yunna Provincial Investment Holdings Group Co., Ltd. Yunnan Metallurgical Group Co., Ltd （雲天化集團有限責任公司） （雲南省投資控股集團有限公司） （雲南冶金集團股份有限公司） 10.149% 83.085% 6.766% 11.10% Yunnan Provincial Energy Investment Group Co., Ltd. 13.949% （雲南省能源投資集團有限公司）

100% 50% 100% 51% 100% 40% 74.06% 100% 40% 100% 40% YEIG Youneng Technology YEIG Jiaheng Gas YEIG Natural Gas Production YEIG (Beijing) Investment YEIG Production and Development Company YEIG Logistics Co., Ltd. Yunnan Provincial Power YEIG Medium and Small Yunnan Energy Financial YEIG Weith Technology Co., Ltd. Production Co., Ltd. Yunnan Energy Investment Hydropower Projects Services Co., Ltd. Consulting Co., Ltd. Investment Co., Ltd. Limited （雲南能投物流 Investment Co., Ltd. (H K) Co. Limited Co., Ltd. （雲南能投有能科技 （雲南能投佳亨燃氣 Investment Co., Ltd. （雲南能源金融 （雲能投（北京）投資 （雲南能投產業投資有限公司） （雲南能投天然氣產業 有限責任公司） （雲南省電力投資有限公司） （香港雲能國際投資有限公司） （雲南電投威士科技有限公司） 諮詢有限公司） 股份有限公司） 產業有限公司） 發展有限公司） （雲南能投中小水電投資有限公司） 控投有限公司） 90% 55% 100% 100% 45% 100% 56% 100% 100%75% 100% YEIG Red River Industrial Honghe Energy Fumin County Fengshun Yunnan Baoshan Supa YEIG Renewable Energy Fengqing County Huixin Yunneng Financing Lease Yunnan Wanxi Dehong YEIG Energy YEIG Zhongxin Natural Gas Development YEIG Logistics Lushui Construction Investment and Investment Jiaheng Gas Development Co., Ltd. River Hydropower Development Co., Ltd. Power Co., Ltd. (Shanghai) Co., Ltd. Development Co., Ltd. Energy Co., Ltd. Production Co., Ltd. Company Limited Development Co., Ltd. Engineering Co., Ltd. Development Co., Ltd. （能投物流瀘水 （德宏雲能投能源 （雲南能投眾鑫 （紅河能投佳亨燃氣 （富民縣豐順天然氣 （雲南保山蘇帕河水電開發 （雲南能投新能源 （鳳慶縣匯鑫電力 （雲能融資租賃（上海） （雲南萬璽建設工程 （雲南能投紅河產業投資 發展有限公司） 開發有限公司） 有限責任公司） 有限公司） 開發有限公司） 能源有限公司） 開發有限公司） 產業有限公司） 發展有限公司） 有限公司） 有限公司） 45% 51% 40% 70% 80% 100% 72.30% 100% 100% 80% YEIG Hydropower YEIG Energy YEIG Juzheng Industry Yuxi Energy Investment Zhaotong Fengshun City Shenzhen YEIG Logistics Welxin Yunnan YEIG International Shiping Abaichong Shenzhen YEIG Fund Renewable Energy Conservation Co., Ltd. Investment Co., Ltd. Jiaheng Gas Production Pipeline Gas Co., Ltd. Investment and Investment Guangdong Energy Development Hydropower Development Management Co., Ltd. Technical Engineering Co., Ltd. Development Co., Ltd. Electricity & Co., Ltd. Co., Ltd. Co., Ltd. （雲南能投節能 （雲南能投居正產業 （昭通市豐順城市管道 Zhaxi Energy Co., Ltd. （ 深圳雲能基金管理 （玉溪能投佳亨燃氣 燃氣有限公司） （深圳雲能物流投資 （ 雲南能投對外能源 （石屏阿白沖水電 （雲南能投水電新能源技術

–81– 環保有限公司） 投資有限公司） 產業有限公司） 發展有限公司） （威信雲投粵電紮西能源 開發有限公司） 開發有限公司） 有限公司） 工程有限公司） 有限公司） 40% 100% 100% 51% 100% 100% 100% YEIG Diannan Gas Dali YEIG Logistics Yunnan Diandong YPIC Fortune Sea Yunnan Changning Kunming Private Capital Yunnan Energy Development Co., Ltd. Co., Ltd. Coal Development International Investment Hengchang Power Management Co., Ltd. Trading Co., Ltd. Co., Ltd. Co., Ltd. （雲南能投滇南燃氣 （大理能投物流 Company Limited （昆明雲能民間資本管理 （雲南能投能和經貿 開發有限公司） （雲南滇東雲電投 （蚨海國際投資有限公司） （雲南昌寧恒昌 有限公司） 有限責任公司） 煤業有限公司） 電力有限公司） 有限責任公司）

65% 100% 69.70% 100% 70% 75% 51% Xuanwei City Fengshun Yunnan (Hong Kong) Pingbian County Lahadi Yunnan Sifang YPIC YEIG Business Factoring Yunan Energy Imp & Exp. City Natural Gas Logistics Development Energy Co., Ltd. Yunnan Energy Hydropower Development (Shanghai) Co., Ltd. Development Co., Ltd. Limited Investment (Overseas) Co., Ltd. Co., Ltd. （雲南四方雲電投 Company （屏邊縣臘哈地 （雲能商業保理（上海） （雲南能源達進出口 （宣威市豐順城市天然氣 （雲南能投（香港）物流 能源有限公司） 有限公司） 發展有限公司） 投資發展有限公司） 水電開發有限公司） 有限公司）

60% 51% 100% 100% 60% 40% YEIG Dianzhong Natural YEIG Logistics Co., Ltd. YPIC Coal Development Yunnan Renewable Yunnan Yongde YEIG Haorun (Beijing) Gas Industrial Qujing Office Co., Ltd. Energy Investment (HK) Hengchang Power Investment Co., Ltd. Development Co., Ltd. YEIG Ecological Environment （雲南能投物流 Co., Ltd. Co., Ltd. Technology Co., Ltd. （雲南能投滇中天然氣產業 （雲南電投煤業 （香港雲能國際新能源 （電南省永德恒昌 （雲能浩潤（北京） 有限責任公司 開發有限公司） 發展有限公司） 曲靖分公司） 投資有限公司） 電力有限公司） 投資有限公司） （雲南能投生態環境科技 有限公司） 40% 51.87% 40% Songming Energy 40% Investment New Energy Huaning Tiaoshitou Yunnan International Natural Gas Industrial Hydroelectricity Co., Ltd. Resources Co., Ltd. YEIG Huilong Development Co., Ltd. （華寧跳石頭水電 Technology Co., Ltd. （嵩明能投新能源天然氣 （雲美國際資源 有限責任公司） 有限公司） （ 雲南能投匯龍科技 產業發展有限公司） 股份有限公司） 40% YEIG Huayu Natural Gas YPIC Co., Ltd. 100% Industrial Development Beijing Office Co., Ltd. YEIG Energy Industrial （雲南能投華煜天然氣 （雲南省電力投資有限 Development Research 產業發展有限公司） 公司北京辦事處） Institute （ 雲南能投能源產業 發展研究院）

100%

YEIG Dianzhong Power Sales Co., Ltd. （ 雲南能投滇中配 售電有限公司）

33.43%

Yunan Salt & Salt Chemical Industry Co., Ltd. （ 雲南鹽化股份 有限公司）

40%

YEIG Biological Resources Development Co., Ltd. （ 雲南能投生物資源開發 有限公司）

100%

YEIG Coal Industry Co., Ltd. （ 雲南能投煤業 有限公司）

100%

YEIG Dianzhong Development 31.40% 10% 10% 8% 15% 20% and Investment Co., Ltd. （ 雲南能投滇中開發投資 有限公司） Huaneng Lancang River SDIC Yunnan Dachaoshan Yunnan Huadian Jinsha Huanan Ludila Hydro Anning Haozhong Micro Yunnan Huadian Nu River Hydropower Co., Ltd Hydro Power Company River Hydropower Co., Ltd. Power Company Limited Credit Co., Ltd. Hydropower Co., Ltd. （華能瀾滄江水電 Limited （雲南華電金沙江中游水電 （雲南華電魯地拉水電 （安寧浩中小額貸款 （雲南華電怒江水電開發 有限公司） （國投雲南大朝山水電 開發有限公司） 有限公司） 股份有限公司） 有限公司） 有限公司） –82–

14% 2% 8% 17% 15% 40%

Datang Guanyinyan Hydro Huaneng Yunnan Jin’anqiao Hydropower Guodian Yangzonghai Power Yunnan Datang International Yunnan Zhonghui Bidding Power Development Longkaikou Hydropower Station Company Limited Generation Company Limited Honghe Power Generation Co., Ltd. Company Limited Company Limited （金安橋水電站 （國電陽宗海發電 Company Limited （雲南中匯招標 （大唐觀音岩水電 （華能雲南龍開口水電 有限公司） 有限公司） （雲南大唐國際紅河發電 有限公司） 開發有限公司） 有限公司） 有限公司）

34% 35% 35% 45% 26%

Guodian Xuanwei Power Yunnan Huadian Xunjiansi Yunnan Huadian Zhenxiong Guodian Kaiyuan Power Yunnan Dongyuan Generation Company Limited Power Generation Company Power Generation Generation Company Limited Zhenxiong Coal Company （國電宣威發電 Limited Company Limited （國電開遠發電有限公司） Limited 有限責任公司） （雲南華電巡檢司發電 （雲南華電鎮雄發電有限公司） （雲南東源鎮雄煤業有限公司） 有限公司）

49% 13.04% 15% 15% 35%

Dongyuan Luoping Coal Yunnan Dongyuan Coal and Three Gorges Jinsha River Three Gorges Jinsha River Yunnan Nari Electric Company Limited Electricity Company Chuanyun Hydropower Development Co., Ltd. （雲南南瑞電氣技術 （東源羅平煤業 （雲南東源煤電股份 Development Co., Ltd. （三峽金沙江雲川水電 有限公司） 有限公司） 有限公司） （三峽金沙江川雲水電 開發有限公司） 開發有限公司）

Notes:

Principal Subsidiary

Invested company in which the Group holds a non-controlling interest

Branch COMPETITIVE STRENGTHS

The Group believes that its success is primarily attributable to the following key competitive strengths:

The sole investment platform to implement the energy strategies of the Yunnan Provincial Government

The Company, beneficially controlled by Yunnan SASAC, is the sole investment platform of the Yunnan Provincial Government to implement its energy strategies which focus on the exploitation and development of energy resources in Yunnan Province and energy investment and cooperation with Southeast Asian nations. The Company, through its subsidiaries and investee companies (in which the Company holds non-controlling interests), has invested in a diversified portfolio of hydropower, fossil fuel, wind power, natural gas, solar and other new energy projects that are of strategic importance to Yunnan’s economic and urban development. According to 2015 Chinese 500 Top Enterprises Forum, the Group was the largest energy enterprise in Western China, the eighth largest energy enterprise in China and was ranked 349th among China’s top 500 enterprises, all measured by revenue in 2014.

Yunnan Province, located in Southwest China, has abundant energy resources, particularly hydro resources. The hydro resources in Yunnan Province which span six rivers (namely Jin Sha River, Nu River, Red River, Pearl River, Lan Cang River and Irrawaddy River) are estimated to have a potential power generating capacity of 103,640 MW according to the Statistical Bureau of Yunnan Province. As at 31 December 2015, the Group had invested in 10 hydropower companies (in which the Company held non-controlling interests) with a total attributable installed capacity of 10,551.8 MW, which represented approximately 18.8 per cent. of the total installed capacity of the hydropower stations in Yunnan Province according to the Yunnan Provincial Government. As the sole investment platform of the Yunnan Provincial Government with a focus on the energy sector, the Group has been well-positioned to capitalise the power resources and related business opportunities in Yunnan Province and has achieved steady growth in its revenue and profit. In 2015, the Group’s revenue increased to RMB41,887.1 million from RMB26,387.7 million in 2013 and its net profit increased to RMB1,310.5 million from RMB728.5 million in 2013, making the Group the second largest state-owned enterprise in Yunnan Province according to the statistics of the Yunnan Provincial Government. The Group’s total assets were RMB74,187.4 million as at 31 December 2015.

The Company’s unique background and market position allow the Group to access many business opportunities in the energy sector in the Southeast Asia while it implements the “Go Global” strategy of the Yunnan Provincial Government, which aims to strengthen the cooperation with nearby Southeast Asian nations. As at the date of this Offering Circular, the Company has been commissioned by the Yunnan Provincial Government to open representative offices in Singapore, Hong Kong, Macau and other major member states of The Association of Southeast Asian Nations (the “ASEAN”).

Strong governmental support and strategic alignment of business with favourable national and Yunnan provincial policies

The Group has been tasked to represent the Yunnan Provincial Government in energy investment projects in Yunnan Province and to create a platform for implementing the Yunnan Provincial Government’s strategies in relation to projects involving energy resource development, construction, investments and related financing. Over the years, the Group’s business interest and development plans have been aligned with the Yunnan Provincial Government’s missions to grow Yunnan’s energy sector to “develop local economy, secure power supply, improve environmental condition and enhance cross-border cooperation”. For this reason, the Group has a long standing relationship with the Yunnan Provincial Government and has received strong operational and financial supports from the PRC Government and the Yunnan Provincial Government:

¼ Project procurement. The Company has been the designated entity to represent the Yunnan Provincial Government to engage in the development and construction of four large-scale hydropower stations on the Jin Sha River, which have a total designed installed capacity of 58,960 MW. The Group has also been given the opportunity to participate in a number of energy investment projects of the Yunnan Provincial Government at the early stage and to acquire high quality assets and businesses in Yunnan Province with stable returns.

–83– ¼ Favourable policies. In April 2013, Yunnan SASAC issued the Notice on Supporting the Provincial Energy Investment Group to Conduct Natural Gas Business（《關於支持省能源投資集團有 限公司開展天然氣業務的通知》）, in which it encouraged municipal and local governments to engage the Group in its natural gas pipeline construction, natural gas station concession and infrastructure development and operations.

¼ Government grant. The Group has received long-standing government grants in the forms of subsidies and monetary awards provided by different governmental authorities in Yunnan and other provinces and cities in China to support its business, particularly the development of renewable energy projects. For the years ended 31 December 2013, 2014 and 2015, the Group received government grants in the total amount of RMB5.4 million, RMB13.3 million and RMB23.2 million, respectively, among which the Company received a special subsidy from the Finance Bureau of Kunming Municipality to support its overseas investments.

¼ Preferential tax treatment. Certain subsidiaries and investee companies of the Company are entitled to preferential enterprise income tax rate of 15 per cent. compared to the statutory tax rate of 25 per cent. pursuant to applicable preferential taxation policies that support development of renewable energy and exploitation of Western China, such as Yunnan Provincial Power Investment Co., Ltd., Weixin Yunnan Investment Guangdong Electricity & Zhaxi Energy Co., Ltd., YEIG Weith Technology Co., Ltd., Fumin County Fengshun Natural Gas Development Company Limited and Shenzhen YEIG Fund Management Co., Ltd. In July 2015, the Ministry of Finance and the State Administration of Taxation promulgated a policy which reduces 50 per cent. of the value-added tax chargeable on the revenue generated from the sale of wind power.

¼ Asset injection. In 2012, Yunnan SASAC has caused the transfer of a number of key assets to the Company from the Company’s controlling shareholder, Yunnan Provincial Investment Holdings Group Co., Ltd., including but not limited to the 55.01 per cent. equity interest in Yunnan Provincial Power Investment Co., Ltd.

The Group has strategically aligned its business with favourable policies adopted by the PRC Government and the Yunnan Provincial Government and believes that it will continue to benefit from the government support and favourable policies in its future developments.

Well-positioned to capture the growth opportunities in the development of clean energy sector with a diversified portfolio of high-quality clean energy assets

The Group has historically focused on the energy sector, which contributed substantially all of its revenue during the three-year period ended 31 December 2015. It has invested, either as controlling or non-controlling stakeholder, in diversified portfolio of power projects in Yunnan Province. As at 31 December 2015, the Group held controlling interests in eight hydropower stations (all of which were in operation), one fossil fuel power station (one unit of which was in operation), nine wind farm projects (five of which were in operation) and three solar and waste-to-energy power projects (two of which were in operation) in Yunnan Province, and the consolidated installed capacity of the power stations in operation was 1,884.9 MW compared to 1,635.7 MW as at 31 December 2013. A majority of the hydropower stations invested by the Group are strategically located along the valleys of Jin Sha River, Nu River, and Lan Cang River, which are believed to have abundant hydro resources. More than 90 per cent. of the electricity generated by these stations is sold to the Yunnan Branch of China Southern Power Grid. In 2013, 2014 and 2015, the Group’s revenue from power generation and sales was RMB1,532.3 million, RMB1,827.4 million and RMB2,220.6 million, representing, 5.8 per cent., 5.2 per cent. and 5.3 per cent., respectively, of the Group’s revenue.

The Group holds non-controlling interests in 16 companies which operate high-quality power plants, including 10 hydropower companies and six fossil fuel power companies. As at 31 December 2015, the total attributable installed capacity of the power stations operated by these investee companies was 11,513.3 MW compared to 9,220.5 MW as at 31 December 2013. In 2013, 2014 and 2015, the aggregated cash dividends that the Group received from its investments accounted for under the equity method of accounting under PRC GAAP, derived mainly from Huaneng Lan Cang River Hydropower Co., Ltd.（華能瀾滄江水電有限公司）, Sanxia Jin Sha River Chuanyun Hydropower Development Co., Ltd. （三峽金沙江川雲水電開發有限公司）and Yunnan Huadian Jinsha River Hydropower Development Co., Ltd. （雲南華電金沙江中游水電開發有限公司）, were RMB919 million, RMB1,447 million and RMB2,376 million, respectively.

–84– The Group has engaged in city natural gas pipeline construction, natural gas station operation and energy resource system development and operations. As at 31 December 2015, the Group had established five gas pipeline construction projects and had received the concession to operate natural gas business in Fumin, Zhaotong, Xuanwei, Pu’er, Xishuangbana and Yuxi in Yunnan. According to NDRC and the National Energy Administration (“NEA”), demand for natural gas in China increased from 41 billion m3 in 2004 to 193 billion m3 in 2015, and supply of natural gas in China increased from 150 billion m3 in 2012 to 196 billion m3 in 2015 and is expected to continue to increase to approximately 400 billion m3 by the end of 2020. According to the China Wind Energy Association, NEA and State Grid Corporation of China, the total installed capacity of wind power stations in China increased from 44,733 MW as at 31 December 2010 to 128,300 MW as at 31 December 2015, representing a compound annual growth rate of 23.5 per cent. and the total installed capacity of solar power stations in China increased from 860 MW as at 31 December 2010 to 41,580 MW as at 31 December 2015, representing a compound annual growth rate of 117.2 per cent. According to NEA, China’s new energy market (as measured by the hourly power generation by use of new energy) increased from 1,076,900 GWh in 2013 to 1,284,500 GWh in 2014. The Company believes that its clean energy asset portfolio has allowed and will continue to help it to capture the business opportunities presented by the growth of China’s clean energy sector.

Access to broad financing channels which helps to secure adequate capital resources and achieve optimal capital structure

The Group has access to various sources of capital to secure sufficient liquidity and to achieve optimal capital structure. The Group has cultivated a long-term and close relationship with a number of reputable domestic and international banks. As at 31 December 2015, the Group had obtained credit facilities of approximately RMB95,761 million in aggregate, out of which RMB50,466 million had not been utilised. The Company also participates in the onshore and offshore debt capital markets, issuing multiple series of medium-term notes, short-term financing bills, super-short-term financing bills and privately placed financing instrument in China and CNY bonds with principal amount of RMB600 million in Hong Kong in 2014. As at 31 December 2015, the Company has formed six onshore funds with major PRC commercial banks to provide funding for its subsidiaries and investee companies, which have an aggregate size of RMB3,005 million. In addition, the Company and its subsidiaries have been able to obtain low-cost capital by issuing insurance products, asset management products and entering into financial leasing arrangements with major PRC financial institutions.

The Group’s diversified financing channels have also helped the Group to achieve an optimal capital structure and to increase financial stability. As at 31 December 2015, the Group had total indebtedness (comprising short-term and long-term loans, bonds payable, long-term loans due within one year, bonds payable due within one year and other current liabilities) in the total amount of RMB40,087.4 million, of which 43.3 per cent. were short-term due within one year. The Group has monitored and will continue to closely monitor the changes in the financial markets to select financing channels in a strategic manner to control financing costs and achieve optimal capital structure, particularly in a volatile environment.

Sound corporate governance implemented by a team of dedicated and experienced senior management

The Company has established a sound and efficient corporate governance structure which is in line with the modern corporate practice. The board of directors of the Company is the highest decision-making authority. The Company’s functional departments and committees (namely budget and fund management committee, investment decision and management committee, nomination and compensation committee) supervise the medium-to-long term investments and capital operation across the Group’s business segments and report to the Company’s board of directors. They also lead the major business initiatives of the operating subsidiaries of the Company. The Company’s disciplinary inspection office and legal and audit department are responsible for overseeing the external and internal compliance of members and employees of the Group. The Company has also established an audit and risk management committee to monitor risk management and enhance internal control. By forming detailed internal rules and guidelines and holding individual employees to adhere to those rules and guidelines, the Company endeavours to enhance the impact and function of its internal control system. Yunnan SASAC approves and supervises the implementation of major investment projects of the Company, approves the Company’s bond issuance (including medium to long-term bonds) and material disposal of assets of the Company.

–85– The Group has an experienced management team which possesses extensive investment expertise and leadership. The management team is critical in spearheading and sustaining the Group’s growth and development. Mr. Duan Wenquan, chairman of the board of directors of the Company, has over 20 years’ experience in the hydropower industry and corporate management. The members of the Company’s Board of Directors and senior management on average have over 20 years of experience in the management of large state-owned enterprises and in the businesses and sectors in which the Group operate. See “Directors, Supervisors and Senior Management of the Company”. Most of the Company’s directors and senior management are designated and appointed by Yunnan SASAC, who ensure alignment of the strategies and interest of the Group with the Yunnan Provincial Government’s policies and development plans. The Group’s management team will continue to lead the Group to capture market opportunities, implement the Group’s strategies and enhance its leadership position.

BUSINESS STRATEGIES

The Group endeavours to transform from an electricity-based production enterprise group to a comprehensive energy enterprise group, which focuses on the exploitation and development of different types of energy, particularly clean energy, and provision of related services. The Group intends to implement the following business strategies to achieve its goal:

Continue to focus on the energy sector and enhance its industry competitiveness

The Group intends to continue to direct its efforts in expanding its power generation business which is key to its future growth and stable development. The power generation business plays a critical role in securing the energy supply in Yunnan. The Group will continue to focus on hydropower projects to leverage the hydro resources in Yunnan. Meanwhile, it will continue to increase its investment in natural gas, wind power, solar power and other clean energy projects. The Group plans to increase the consolidated installed capacity of the power stations in which it invests to approximately 2,330 MW and increase the total attributable installed capacity of the power stations in which it invests to approximately 10,308 MW by the end of 2016. By the same time, the Group intends to complete the development of 20 comprehensive city natural gas projects and set up 10 natural gas filling stations. In addition, it also plans to acquire and complete the integration of the pipeline assets in at least five cities in Yunnan in 2016.

Actively participate in the “One Belt, One Road” initiative to increase investment in and cooperation with Southeast Asian nations

The Group intends to actively participate in the “One Belt, One Road” initiative to increase investment in the energy sector in Southeast Asian nations. It will continue to leverage the geographical advantage of Yunnan Province and assist the Yunnan Provincial Government to enhance cooperations with Southeast Asian nations. As at the date of this Offering Circular, the Group has been participating in the development of hydropower projects in Laos and Myanmar. The Group believes that the energy and power projects across the borders between Yunnan Province and those countries will not only provide an increasing number of opportunities to grow its business and revenue, certain projects, such as natural gas pipeline construction projects, may also help to secure additional supply of energy and electricity for Yunnan Province and other cities in Southwest China.

Continue to develop its diversified business portfolio

The Group will continue to develop its supporting energy businesses of resources trading (including the trade of oil and gasoline products, as well as intellectual property rights and technology relating to such trades), energy equipment (such as the development of an industrial park for power equipment and facilities) and energy technology (including the development of a research and development centre for energy-saving and environmental protection) to complement and increase the value of its energy businesses. The Group also operates in a number of ancillary businesses covering finance, hydraulic projects, information technology, international business development, energy conservation and environmental protection and salt and chemical production. The Group intends to further develop these ancillary businesses in order to support and protect its main energy businesses.

–86– Continue to increase investment in clean energy sector

The Group believes the clean energy industry has great potential for future growth. With the relatively strong growth of China’s economy, energy demand is expected to continue to rise. Currently, the PRC Government has set the strategic target to decrease the carbon dioxide intensity per dollar of GDP by 40 per cent. to 45 per cent. by 2020 compared to 2006. In the 13th Five-Year Plan, the PRC Government is expected to set the development of renewable energy resources as one of its main goals and places increasing attention on the importance of environment protection. The Group intends to continue to increase its investments in clean energy industry projects to capture the increasing business opportunities.

Continue to adhere to prudent financial policies with stringent risk control and enhanced financial management

The Group plans to continue to adhere to its prudent financial policies with stringent risk control and enhanced financial management. The Group has established capital management system to monitor capital, capital efficiency and capital risk prevention, thereby effectively enhancing the results and efficiency of the overall management. For financial management, the Group will continue to focus on financial risk control, company growth, value creation, implementation of budget management and establishment of information platform in order to encourage communications and interactions between business operation and financial management, contribute to the sustainable, healthy and rapid development of the Group and provide financial stability. For interest rate risks, the Group will continue to improve its capital structure in accordance with credit policies and market changes. It will also continue to strengthen cooperation with banks and other financial institutions, seek alternative sources of financing and maintain a balanced indebtedness structure.

DESCRIPTION OF YUNNAN PROVINCE

Yunnan Province has rich natural resources. According to the Statistical Bureau of Yunnan Province, the hydropower resources within the Yunnan Province ranks the third in terms of potential installed capacity, and the second in terms of the installed capacity available for development, among all provinces in China in 2015, the total wind power reserve in Yunnan Province is estimated to be approximately 123 GW, with regions available for development at around 45,200 square kilometres, covering 11.48 per cent. of the total land area in Yunnan Province. Due to its high altitude above sea level, Yunnan Province possesses abundant solar power resources. The annual sunshine hours reach 1,000 to 2,800 with annual total solar radiation in most areas being more than 5,000 megajoules per square meter according to the Statistics Bureau of Yunnan Province. In respect of mineral resources, 142 types of minerals have been found in Yunnan Province, 92 of which have identified amount of reserves, 54 of which are among top ten in China in terms of reserve amount, and 25 of which are among top three in China in terms of reserve amount, including lead, zinc, tin and cooper.

Located at the southwest border of China and adjacent to Myanmar, Thailand, Laos and Vietnam, Yunnan Province is well-located to leverage its favourable geographic advantage to promote border trade in the energy sector. According to the Asian Development Bank, Asia’s annual demand for infrastructure investment is expected to be US$730 billion by 2020. Leveraging on the regional strategy of “One Belt, One Road” and platforms of Asian Infrastructure Investment Bank, China will be able to export more energy resources to the world together with the infrastructure investments, and Yunnan Province is expected to be greatly involved in such process, as well as in other regional strategies including “Bangladesh-China-India-Myanmar Economic Corridor” and “Energy Channel in Southwest China”. According to the Statistical Bureau of Yunnan Province, the investment in fixed assets (excluding farms) increased from RMB412 billion in 2009 to RMB1,107 billion in 2014, representing a compound annual growth rate of 21.9 per cent. and the total value of imports and exports increased from RMB8 billion in 2009 to RMB30 billion in 2014, representing a compound annual growth rate of 29.9 per cent.

According to the Energy Development Strategy Action Plan (2014 to 2020) (the “Plan”) published by the State Council of the PRC (the “State Council”), China aims to build and promote a more efficient, self-sufficient, green and innovative energy production and consumption model. To this end, the Plan aims to (a) diversify energy supply by promoting clean and efficient use of coal and developing non-fossil resources including gas, new energy and renewable energy, (b) develop the energy industry by promoting innovation of technology, industry and business models, and (c) build a competitive

–87– commodity market for resources and promote market liberalisation. Accordingly, the Yunnan Provincial Government aims to make the energy industry larger and stronger. It targets to build a diversified energy industry with accelerated growth in hydropower, fossil fuel, renewable energy and oil refining.

DESCRIPTION OF THE GROUP’S BUSINESSES

Energy Business

Power Generation and Sales

The Group has a diversified portfolio of power projects in Yunnan Province, which include hydropower, fossil fuel power, wind power and other renewable power generation businesses. The Group’s equity interest in most of its power projects is held through Yunnan Provincial Power Investment Co., Ltd.（雲 南省電力投資有限公司） (“YPIC”), a subsidiary of the Company specialising in the construction and operation of power plants. As at 31 December 2015, the Group held 74.06 per cent. of the equity interest in YPIC.

The Group sells power generated from its power projects. The Group sells its electricity primarily through the local power grid operated by Yunnan Power Grid Company （雲南電網公司） (“Yunnan Power Grid”), a wholly-owned subsidiary of China Southern Power Grid Co., Ltd.（中國南方電網有限責 任公司）. Power sold to power grid companies is calculated according to the total net generation volume sold. The power sales income of each power plant is primarily determined by two factors: the net generation volume sold to the grid company by the plant and the applicable on-grid tariff (being the tariff that grid companies pay to power generation companies).

The Group cooperates with leading national power companies in a number of other large-scaled power projects through joint ventures. Such joint ventures (in which the Group has non-controlling interests) form a pivotal part of the Group’s power generation and sales business. The dividends that the Group receives from such joint ventures constitute an important source of the Group’s revenue.

The table below sets forth the installed capacity of the power generating units owned and invested by the Group as at the dates indicated and their power generation (in approximate amounts) during the years indicated:

As at/for the year ended 31 December 2013 2014 2015 Consolidated installed capacity (MW) ...... 1,635.7 1,833.7 1,884.9 Fossil fuel power (MW)...... 1,200.0 1,200.0 1,200.0 Hydropower (MW)...... 353.7 455.7 326.9 Wind power (MW) ...... 48.0 144.0 268.0 Waste-to-energy power (MW) ...... 24.0 24.0 24.0 Solar Power (MW) ...... 10.0 10.0 66.0 Power generation (GWh) ...... 4,946 4,651 3,680.0 Net power generation (GWh) ...... 4,632 4,367 3,423.3 Power sales income (RMB in million) ...... 1,532.3 1,827.4 2,220.6 Attributable installed capacity (MW) ...... 9,220.5 11,686.6 11,513.3 Attributable hydropower (MW) ...... 7,448.5 9,324.6 9,741.3 Attributable fossil fuel power (MW) ...... 1,772.0 2,362.0 1,772.0

Hydropower generation projects

The Group controls and operates a range of hydropower generation projects, which are mainly small- and medium-scaled hydropower plants located in the Supa River（蘇帕河）basin. As at 31 December 2015, the Group had eight hydropower plants with a consolidated installed capacity of 326.9 MW. For the years ended 2013, 2014 and 2015, these hydropower plants generated approximately 1,137,500 MWh, 1,060,000 MWh and 1,091,900 MWh of electricity, respectively, which represented 23.0 per cent., 22.8 per cent., and 29.6 per cent., respectively, of the electricity generated by the Group’s power generation business during the corresponding years.

–88– The table below sets forth the installed capacity of the hydropower plants operated and controlled by the Group as at 31 December 2015 and the power generation (in approximate amounts) of those hydropower plants during the years indicated:

Power Generation For the year ended 31 December Interest Total Date of held by Installed Commencement Project YPIC Capacity of Operation 2013 2014 2015 (Per cent.) (MW) (MWh) 1. Qiezishan Hydropower Plant（茄子山水電站）. . 56.0 16.0 January 1999 48,600 37,000 41,500 2. Xiangda Hydropower Plant（象達水電站）..... 56.0 40.0 October 2006 133,500 135,000 136,700 3. Wunihe Hydropower Plant（烏泥河水電站）.... 56.0 30.0 May 2005 130,100 115,000 125,500 4. Ajiutian Hydropower Plant（阿鳩田水電站）.... 56.0 115.5 October 2004 452,100 418,000 455,200 Longchuanjiang Primary Hydropower Plant 5. （龍川江一級水電站）...... 56.0 24.0 July 2008 93,500 85,000 78,200 Tenglongqiao Secondary Power Station（騰龍 6. 橋二級電站）...... 56.0 81.0 September 2010 204,700 195,000 181,700 Nujiang Fugong Lishadi Hydropower Plant 7. （怒江福貢利沙底水電站）...... 100.0 14.0 September 2005 61,000 55,000 50,400 Yuxi Huaning Tiaoshitou Power Station（玉溪 8. 華寧跳石頭電站）...... 51.9 6.4 June 1995 14,000 20,000 22,700 Total...... 326.9 1,137,500 1,060,000 1,091,900

Investment in hydropower companies

As at 31 December 2015, the Group held non-controlling interests in 10 hydropower companies that operate hydropower plants with a total attributable installed capacity of 11,513.3 MW. The dividend payouts from these power companies have increased in recent years and provide a significant source of income for the Group. For the years ended 31 December 2013, 2014 and 2015, the aggregated cash dividends that the Group received from its investments in hydropower companies which were accounted for under the equity method of accounting under PRC GAAP were RMB919 million, RMB1,447 million and RMB2,376 million, respectively. The chart below indicates the location of the hydropower plants invested by the Group as at 31 December 2015:

–89– The hydropower companies invested by the Group are mainly subsidiaries of leading PRC power companies which are responsible for large-scaled hydropower projects in Yunnan Province, such as China Huaneng Group, China Huadian Corporation, China Guodian Corporation, China Datang Corporation and China Three Gorges Corporation. Huaneng Lancang River Hydropower Co., Ltd.（華能 瀾滄江水電有限公司） is the largest power generation company in Yunnan Province which holds the development rights for hydropower operations in the river basin of Lancang River, Yunnan Huadian Jinsha River Hydropower Co., Ltd. （雲南華電金沙江中游水電開發有限公司） and Three Gorges Jinsha River Chuanyun Hydropower Development Co., Ltd. （三峽金沙江川雲水電開發有限公司） are major developers of hydropower plants in the river basin of Jinsha River（金沙江）.

The table below sets forth the installed capacity of hydropower plants in which the Group invested as at 31 December 2015 and the power generation (in approximate amounts) of such hydropower plants during the years indicated:

Power Generation Interest held by Total Installed Enterprise the Group Capacity 2013 2014 2015 (Per cent.) (MW) (MWh) 1. Huaneng Lancang River Hydropower Co., Ltd.（華能瀾 31.4 23,074 58,040,000 69,000,000 60,500,000 滄江水電有限公司）...... 2. SDIC Yunnan Dachaoshan Hydropower Company 10.0 1,350 6,530,000 6,498,000 5,576,000 Limited（國投雲南大朝山水電有限公司）...... 3. Yunnan Huadian Jinsha River Hydropower Co., Ltd. 10.0 3,200 7,825,000 7,260,000 9,968,000 （雲南華電金沙江中游水電開發有限公司）...... 4. Jin’anqiao Hydropower Station Company Limited（金 8.0 2,400 11,790,000 9,220,000 1,037,800 安橋水電站有限公司）...... 5. Huaneng Yunnan Longkaikou Hydropower Company 2.0 1,800 3,691,000 5,755,000 4,877,000 Limited（華能雲南龍開口水電有限公司）...... 6 Huadian Ludila Hydropower Company Limited（華電 8.0 2,160 1,026,000 – 607,400 魯地拉水電有限公司）...... 7. Three Gorges Jinshajiang Chuanyun Hydropower 15.0 20,260 28,926,000 78,259,000 85,908,000 Development Company Limited（三峽金沙江川雲水電開 發有限公司）...... 8. Three Gorges Jinshajiang Yunchuan Hydro Power 15.0 26,200––– Development Company Limited（三峽金沙江雲川水電開 發有限公司）(1) ...... 9. Datang Guanyinyan Hydro Power Development 14.0 3,000 – – 548,700 Company Limited（大唐觀音岩水電開發有限公司）(2) ..... 10. Yunnan Huadian Nujiang River Hydropower 27.38 –––– Development Co., Ltd.（雲南華電怒江水電開發有限公司） (1) ...... Total...... 83,444 117,828,000 175,992,000 188,768,000

Notes:

(1) Under construction.

(2) Commenced operation in 2015.

Future hydropower projects

The Group invests in overseas hydropower projects through YEIG International Energy.

In July 2010, YEIG International Energy obtained development rights for a hydropower project from the Burmese authorities (the “Myanmar Project”). The Myanmar Project is located on Ngaw Chan Hka River, an area controlled by the Myanmar central army. According to the development plan of the Myanmar Project approved by the Department of Hydropower Planning of the Myanmar government (“Myanmar Hydropower Planning Department”), the project was expected to comprise four hydropower plants, namely Gulang (with an installed capacity of 120 MW), Kangang (with an installed capacity of 140 MW), Tongxin Bridge (with an installed capacity of 340 MW) and Landian Bridge (with an installed capacity of 600 MW). Gulang and Tongxin Bridge hydropower plants are expected to commence operation by the end of 2020, and Kangang and Landian Bridge hydropower plants are expected to commence operation in 2025.

–90– YEIG International Energy conducted a feasibility study after obtaining the development rights for the Myanmar Project. There has not been any significant progress of the Myanmar Project due to various factors, such as the Myitsone Event and the armed conflict in Myanmar since June 2011. YEIG International Energy has resumed development of the Myanmar Project in 2014 and completed the preparatory work in respect of Gulang and Tongxin Bridge hydropower plants and negotiated with the Myanmar Hydropower Planning Department on the investment issues and electricity prices in 2015. On 20 August 2015, YEIG International Energy and the Myanmar Hydropower Planning Department reached an agreement on the investment in Gulang and Tongxin Bridge hydropower plants.

On 9 March 2016, YEIG International Energy and the Myanmar Hydropower Planning Department entered into a joint venture agreement relating to Gulang and Tongxin Bridge hydropower plants. Both parties agreed in principle to establish a joint venture company and to enter into an offtake agreement by the end of 2016. Preparatory work for the construction of the hydropower plants is expected to commence at an appropriate time. As at the date of this Offering Circular, the Group has not made any substantial investment in the Myanmar Project and has derived no revenue or profit from the Myanmar Project in the years ended 31 December 2013, 2014 and 2015.

See “Risk Factors – Risks Associated with the Group’s Businesses – The Group’s activities in Myanmar could result in negative media and investor attention and materially and adversely affect investment in the bonds due to U.S. sanctions” for more details.

Fossil fuel power generation projects

The Group currently operates one fossil fuel power station, Weixin Power Plant Phase I（威信電廠一期）, which has an installed capacity of 1,200 MW and has commenced operation. This project is operated by Weixin Yunnan Investment Guangdong Electricity & Zhaxi Energy Co., Ltd., in which YPIC holds a 72.30 per cent. equity interest. Generating unit 1 of this project commenced operation in July 2012, and generating unit 2 commenced operation in December 2012. For the years ended 31 December 2013, 2014 and 2015, gross power generation of Weixin Power Plant Phase I was approximately 3,626,000 MWh, 3,293,000 MWh and 2,825,000 MWh, respectively, which accounted for 73.3 per cent., 75.4 per cent. and 76.5 per cent. of the total power generation of the Group’s power generation business during the corresponding years.

Weixin Power Plant currently procures coal supplies from both self-operated mines and third-party suppliers to support its power generation operations. The Group expects that once the Guanyin Mountain Coal Mine (No. 1 and No. 2) becomes fully operational, it will help the Group to reduce its reliance on external supplies for coal used in the operations of Weixin Power Plant.

Investment in fossil fuel power companies

As at 31 December 2015, the Group had invested in six power companies operating fossil fuel power plants with a consolidated installed capacity of 5,800 MW. The table below sets forth the fossil fuel power companies which the Group invested in as at 31 December 2015 and the power generation (in approximate amounts) of the relevant power plants during the years indicated:

Power Generation Interest held Total Installed Enterprise by the Group Capacity 2013 2014 2015 ( Per cent.) (MW) (MWh) 1. Guodian Kaiyuan Power Generation Company 45.0 600 2,257,500 1,680,000 551,700 Limited（國電開遠發電有限公司）...... 2. Yunnan Huadian Xunjiansi Power Generation 35.0 600 2,121,600 1,620,000 650,400 Company Limited（雲南華電巡檢司發電有限公 司）...... 3. Yunnan Huadian Zhenxiong Power Generation 35.0 1,200 3,529,400 3,150,000 1,815,600 Company Limited（雲南華電鎮雄發電有限公司）.. 4. Guodian Xuanwei Power Generation Limited 34.0 1,800 5,007,600 4,060,000 2,226,100 Liability Company（國電宣威發電有限責任公司）. 5. Guodian Yangzonghai Power Generation 17.0 1,000 3,559,300 2,400,000 1,549,600 Company Limited（國電陽宗海發電有限公司）.... 6. Yunnan Datang Honghe Power Generation 15.0 600 2,230,700 1,670,000 867,300 Company Limited（雲南大唐紅河發電有限公司）.. Total...... 5,800 18,706,100 14,580,000 7,660,700

–91– Renewable energy projects

All the renewable energy projects of the Group are operated through YEIG Renewable Energy and its subsidiaries. YEIG Renewable Energy is a wholly-owned subsidiary of the Guarantor and the subsidiary of the Group specialising in developing and operating renewable energy projects. See “Description of the Guarantor”.

Power sales

In addition to power generation, the Group also sells electricity generated from its various power projects. The Group currently sells its electricity primarily through the local power grid operated by Yunnan Power Grid.

The Yunnan Branch of China Southern Power Grid Co., Ltd., a shareholder of Yunnan Power Grid, is the major customer of the Group, contributed over 90.0 per cent. of the Group’s power sales for the years ended 31 December 2014 and 2015.

The table below sets forth the top three customers of the Group’s power sales business, as well as the respective on-grid tariffs and contribution to the total power sales during the years indicated:

As percentage of the Group’s total power sales Customer On-grid tariff 2014 2015 (RMB/kWh, exclusive of tax) 1. China Southern Power Grid For the year ended 31 December 77.1 83.4 Co., Ltd., Yunnan Branch – 2013: 0.3606 for Generation Unit #1 Weixin（威信）...... and 0.3426 for Generation Unit #2 2. China Southern Power Grid For Xiangda Hydropower Plant（象達 13.8 13.9 Co., Ltd., Yunnan Branch – 水電站）, Wuni River Hydropower Supa River（蘇帕河）...... Plant（烏泥河水電站）and Ajiutian Hydropower Plant（阿鳩田水電站）: 0.197 from June to October each year, 0.222 in May and November each year, and 0.247 from January to April and in December each year; and For Tenglongqiao Secondary Power Station（騰龍橋二級電站）: 0.26. 3. Baoshan Power Company For Qiezishan Hydropower Plant（茄 2.2 2.7 Limited（保山電力股份有限公 子山水電站）: 0.197 from June to 司）...... October each year, 0.222 in May and November each year, and 0.247 from January to April and in December each year; and For Longchuanjiang Primary Hydropower Plant（龍川江一級水電站）: 0.26. Total ...... 93.1 100.0

Coal Mining and Production

As at 31 December 2015, the Group operated 11 mines through five subsidiaries in Yunnan Province. The coal produced from the Group’s mining operations is used for its fossil fuel power generation operations and for on-selling to its customers. The Group sources its coal from the Zhaotong（昭通）, Qujing（曲靖）, Yuxi（玉溪）and Fuyuan（富源）regions in Yunnan Province.

–92– The table below sets forth details about the Group’s coal mining operations as at 31 December 2015:

Interest held Geological Construction/ by the Recoverable Coal Planned Production Enterprise Project Name Group reserve Reserves Capacity Status (in million (in million (million (Per cent.) tonnes) tonnes) tonnes/year) 1. Weixin Yunnan Guanyin Mountain Coal 50.0 152 207 1.8 Under Investment Mine – No.1（觀音山煤 construction Guangdong 礦一井） Electricity & Guanyin Mountain Coal 50.0 44 59 0.6 Under Zhaxi Energy Mine – No.2（觀音山煤 production Co., Ltd.（威信雲 礦二井） 投粵電紮西能源有 Dajinggou（大井溝井田） 50.0 Unproved 82 0.6 No definite 限公司） construction plan Yujing Mountain（玉京 50.0 Unproved 129 1.05 No definite 山井田） construction plan Ma River Mine – 50.0 Unproved 71 1.05 No definite Weixin segment（馬河礦 construction 區 – 威信） plan Stone Mine – Weixin 50.0 Unproved 121 1.05 No definite segment（石坎礦區 – 威 construction 信） plan 2. Yunnan Diantou Banpo Mine（半坡煤礦） 51.0 5 6 0.06 under Coal production Development Fahong Mining Area 51.0 Unproved 14 No plan No definite Co., Ltd.（雲南電 （法宏礦區） available construction 投煤業開發有限公 plan 司） 3. Fuyuan County Qianyuan Coal Mine 80.0 13 27 0.3 No definite Fangzhou Rui’an （乾源煤礦） construction Mining Co., Ltd. plan （富源縣方舟里安礦 業有限公司） 4. Yunnan Yuntou Niuchang-Yigu Mining 80.0 Unproved 617 3.9 No definite Zhengxiong Area（牛場-以穀礦區） construction mining energy plan development Co., Ltd.（雲南雲投鎮 雄礦業能源開發有 限公司） 5. Yuxi City Huagai Mountain Mine 67.0 7 17 0.15 Under Dongfang Coal （華蓋山煤礦） production Co., Ltd.（玉溪市 東方煤業有限公司）

The Group has obtained all the necessary mining and exploration permits. The table below sets forth the details of the licences the Group had obtained that are material to its mining and exploration operations as at 31 December 2015.

Rights holder Type of rights No. of licence Valid period Weixin Yunnan Investment exploration right T01520090301026062 2014.12.11-2016.12.11 Guangdong Electricity & Zhaxi mining rights C1000002015071110139245 2015.07.30-2045.07.30 Energy Co., Ltd.（威信雲投粵電紮 西能源有限公司） Yunnan Diantou Coal mining rights C5300002011041140111349 2015.03.13-2016.03.13(1) Development Co., Ltd.（雲南電投 煤業開發有限公司） Yuxi City Dongfang Coal Co., mining rights C5300002011011120114464 2015.06.04-2025.06.04 Ltd.（玉溪市東方煤業有限公司） Yunnan Yuntou Zhengxiong exploration rights T01120081201023482 2014.12.25-2016.12.25 mining energy development Co., Ltd.（雲南雲投鎮雄礦業能源開發有限 公司）

Note:

(1) The Group is in the process of applying for renewal of the licence.

–93– As at 31 December 2015, Huagai Mountain Mine and Guanyin Mountain Coal Mine − No. 2 were in operation. The Group acquired the Huagai Mountain Mine which has an output capacity of approximately 150,000 tonnes per year at the end of 2013. For the years ended 31 December 2013, 2014 and 2015, the Huagai Mountain Mine produced approximately 150,000 tonnes, 119,000 tonnes, and 183,200 tonnes of coal, respectively. The decrease in coal production in 2014 was the result of a temporary suspension of operations and internal inspection of Huagai Mountain Mine in response to the local government’s initiative to improve the occupational safety of coal mining companies in Yunnan Province. Guanyin Mountain Coal Mine – No.2 commenced its trial operation in July 2015.

During the period between September 2011 and the end of 2013, the Group had outsourced the operations at Banpo Mine, including mining, production and safety management, where the contractor assumed all economic and legal liability arising from worker injuries and any damage caused to equipment and facilities. During this period, the outsourcing arrangement was renewed on an annual basis for an annual fee of RMB1.5 million, RMB4.2 million and RMB3.7 million, respectively. The Group resumed self-operation at Banpo Mine since 2014 and suspended its operation later for remediation construction. As at the date of this Offering Circular, the Group has not experienced any mining accident and no administrative penalties were imposed in this respect.

Investment in coal companies

The Group invests in other coal companies. The table below sets forth three coal companies in which the Group invested and their production status:

Equity Enterprise Interest Production Status/Timeline (Per cent.) 1. Dongyuan Luoping Coal Co., Ltd.（東源羅平煤 49.0 Production is expected to begin in 2017 業有限公司） 2. Dongyuan Zhen Xiong Coal Co., Ltd.（東源鎮雄 26.0 Two mines have already begun production. Production 煤業有限公司） timeline of one mine remains to be confirmed. 3. Dongyuan Coal and Electricity Co., Ltd.（東源 13.0 Production has been ongoing for 13 years 煤電股份有限公司）

Resources Trading

The Group has a strong resources trading business operated through YEIG Logistics Co., Ltd.（雲南能投 物流有限公司）(“YEIG Logistics”).

The Group’s resources trading business primarily focuses on trading in steel and other metals. The Group also sells sand and gravel, cement and other building materials and accessories to construction companies and energy construction projects. For the years ended 31 December 2013, 2014 and 2015, the Group had revenue in the amount of RMB21,479.5 million, RMB23,319.3 million and RMB36,273.1 million from its resources trading operations, respectively.

The Group has been actively expanding the scale and scope of its resources trading operations in order to meet market demand. Since the Group began its resources trading business in steel in 2011 and copper in 2012, it has expanded its business to include manganese ore, iron ore, iron deposits, lubricating oils and equipment. The scale of the Group’s resources trading operations has grown, particularly through an increase in its trade volume in cement, sand and gravel.

Steel trading

The Group conducts its steel trading business mainly through YEIG Logistics. The Group purchases steel from large-scale steel factories within Yunnan Province and neighbouring provinces to consolidate and centralise the steel supply before on-selling it to third party customers. The Group also purchases a small amount of steel from independent dealers and agents on the market. For the years ended 31 December 2013, 2014 and 2015, the Group sold approximately 1.3 million tonnes, 1.7 million tonnes and 9.6 million tonnes of steel, respectively, generating revenue in the amount of RMB4,311 million, RMB6,098 million and RMB24,136 million, respectively, which accounted for 20.1 per cent., 24.1 per cent. and 66.5 per cent., respectively of the overall revenue from resources trading. The Group targets customers within Yunnan Province, with over 90 per cent. of the overall steel sales made within Yunnan Province and the rest sold to other provinces and Southeast Asia nations.

–94– Since 2012, YEIG has been actively expanding its end market and the business of steel trading has been growing continuously. The clients of steel trading business include a range of large state-owned companies with operations in infrastructure construction, such as Sinohydro Bureau 14 Co., Ltd（中國水 電十四局有限公司）, Yunnan Huaneng Lancang River Hydropower Co., Ltd. （華能瀾滄江水電有限公司）, China Railway Bureau 12 Group Co., Ltd（中鐵十二局集團）, No.14 Metallurgical Construction Group Co., Ltd（十四冶建設集團）, China Railway Bureau 16 Group Co., Ltd（中鐵十六局集團）and PowerChina Road Bridge Group Co., Ltd.（中電建路橋集團）. The Group intends to secure new key customers in the future to further diversify its customer base.

The Group employs three settlement methods: (1) payment-before-delivery; (2) payment-after-delivery; and (3) cash-on-delivery. For larger construction projects with relatively larger demand, the Group normally provides the steel in multiple batches depending on the amount required at each stage of the project. For these clients, the Group settles the transaction on a payment-after-delivery basis. For small and medium-sized customers, the Group usually provides all the required steel in one batch. Transactions with these customers are usually settled on a payment-before-delivery or cash-on-delivery basis.

Metal trading

The metal trading operations is conducted through Yunnan Import and Export and involves the purchase of metals from suppliers before on-selling it to customers. Spot copper trading comprised the largest portion of the Group’s metal trading operations, but the Group has suspended its spot copper business since January 2015 due to the change of its business development strategy.

The Group sources its supply from companies located in surrounding regions supplying non-ferrous metals such as Hebei, Jiangxi and Yunnan provinces. For the years ended 31 December 2013 and 2014, the Group purchased approximately 13,551 million and 11,180 million of spot copper from its suppliers, respectively, 63.1 per cent. and 44.1 per cent. of which were purchased from its top five suppliers, respectively.

The Group’s customers are mainly distributors of non-ferrous metals. The Group considers (1) the financial capability of and the amount of metals required by the customer and (2) the copper prices on the Shanghai Futures Exchange to determine the price and amount of the copper to customers. Sales from the top five customers accounted for 75.7 per cent. and 82.7 per cent. of total copper sales, respectively, of the Group for the years ended 31 December 2013 and 2014.

Settlement with both its suppliers and customers is usually on a payment-before-delivery basis.

Coal trading

In addition to its coal mining and production operations, the Group is engaged in the coal trading business. As most of the mines owned by the Group have not begun production, the Group acquires coal required for its coal trading business primarily from third-party suppliers.

The Group’s coal trading business is primarily developed and operated through Yunnan Diandong YPIC Coal Development Co., Ltd.（雲南滇東雲電投煤業有限公司）(“Yunnan Diandong”) and YEIG Logistics. YEIG Logistics commenced operations in coal trading business in 2013 and Yunnan Diandong suspended its operation in 2015 for remediation construction. For the years ended 31 December 2013 and 2014, Yunnan Diandong sold approximately 1.5 million tonnes and 0.2 million tonnes of coal, respectively, generating RMB676 million and RMB48 million of revenue, respectively. For the years ended 31 December 2013, 2014 and 2015, YEIG Logistics sold approximately 1.3 million tonnes, 8.9 million tonnes and 7.4 million tonnes of coal, respectively, generating RMB1,259 million, RMB5,222 million and RMB3,758 million of revenue, respectively.

Coal trading of the Group is normally made on an advance payment basis.

–95– Natural Gas Operations

Natural gas business is one of the key areas the Group intends to focus on in the future. It is a relatively new business line for the Group but the Group believes it has great potential in terms of profitability. In January 2013, the Group established YEIG Natural Gas Production and Development Company Limited（雲南能投天然氣產業發展有限公司）(“YEIG Natural Gas”) to invest in and develop the Group’s natural gas operations.

Natural gas business receives strong support from the Yunnan Provincial Government. According to the Notice on Supporting the Provincial Energy Investment Group to Conduct Natural Gas Business（《關於 支持省能源投資集團有限公司開展天然氣業務的通知》） issued by Yunnan Provincial Development and Reform Commission in April 2013, Yunnan Provincial Development and Reform Commission urges its local governments to give support to companies that conduct natural gas businesses, including construction and operation of natural gas pipeline, franchise operation and construction of city gas pipeline and various types of gas infrastructure construction and operation.

YEIG Natural Gas is focused on developing the Group’s natural gas operations in a number of areas including: (1) the Group’s branch pipeline network; (2) natural gas pipelines to cities; (3) natural gas filling stations for automobiles and (4) distributed energy resources systems.

As at 31 December 2015, the Group has established five gas pipeline construction projects, including the Zhaotong（昭通）Subline, Yuxi-Pu’er（玉溪-普洱）Subline, Luliang（陸良）Subline, Xishuangbanna （西雙版納）Subline and Fumin（富民）Subline. In addition, the Group has received approval from the relevant authorities in Yunnan Province and has begun construction of the Yuxi Emergency Gas Reserve Centre（玉溪市應急氣源儲備中心）.

The chart below sets forth the natural gas pipeline distribution plan of the Group:

With regards to natural gas pipelines into cities, the Group has been granted franchise right to provide natural gas in the areas of Fumin, Zhaotong, Xuanwei, Pu’er, Xishuangbanna and Yuxi. The Group has also received approval to begin preliminary work on providing distributed energy resources systems to Wuhua Technology Park（五華區科技園）and Kunming Changshui Airport（昆明長水機場）.

–96– In the meantime, the Group strengthened its market position by a series of acquisitions of well-established gas companies in such areas. The Group is also planning to construct compressed natural gas (“CNG”) and liquefied natural gas (“LNG”) filling stations in these cities. By doing so, the Group will achieve integrated business structure in natural gas industry covering upstream, midstream and downstream sectors.

Currently, China and Myanmar are building an oil and gas pipeline from Myanmar into southwest China. Therefore, it is expected that the natural gas supply in the Yunnan province will substantially increase and benefit the Group’s natural gas business.

Financial Services

In July 2013, the Group established Yunnan Financial Services to invest in and develop the Group’s financial services operations. Yunnan Financial Services is positioned to be an innovative integrated financial service provider servicing the energy industry and promoting the integration of industry and financing.

Growth in China’s financial sector has given rise to many opportunities, including but not limited to: (i) large and unfulfilled financing needs of SMEs and individuals; (ii) demand for wealth-management products arising from China’s aging population and the increase in per capita disposal income; (iii) demand for community financial services; and (iv) opportunities to launch new businesses driven by big data through both online and offline platforms.

The Group’s diversified financial services platforms consist of:

¼ equity and debt investment and management;

¼ trust asset management;

¼ economic information consulting;

¼ cornerstone investment in initial public offerings and private placements;

¼ financial leasing with focus on energy-related sectors;

¼ factoring service to provide small and medium enterprises with funding to meet their liquidity needs; and

¼ fund investment.

The Group’s diverse product and service offerings enable it to quickly capture both traditional and innovative financial services opportunities. For the years ended 31 December 2014 and 2015, the Group had revenue in the amount of RMB70.7 million and RMB29.5 million from its financial services operations.

–97– The Group has a prudent and sound investment management system as set below:

The Group conducts investment plan reviews on an annual basis focused on whether:

¼ the invested industry is consistent with the Group’s strategic growth objectives and development direction;

¼ the investment scale matches the Group’s access to funding and financial scale;

¼ the asset being invested is consistent with the Group’s primary business; and

¼ the investment structure and assets layout will be conducive to improving the Group’s asset structure.

The Group’s financial services business faces a variety of risks, including credit risk, operational risk, liquidity risk and legal and compliance risk. Credit risk is the principal risk in this business. The Group has developed a risk management system that has been tailored to comprehensively, effectively and rigorously manage the risks.

–98– Credit risk arises if a customer is unable or unwilling to make timely payments. The Group’s credit risk management procedures mainly consist of customer due diligence reviews, multi-level assessment and approval processes, and post-transaction management. The chart below summarises the key steps that the Group uses to assess and manage credit risk:

Refusal of application

Grant of loans/ Internal Customer Due Execution guarantees/ Post-transaction Application examination Collection identification diligence of contracts financial management and approval leases

Fund investment

As at 31 December 2015, the Group has formed six funds, three of which were RMB funds. The table below sets forth the information relating to the three funds which have commenced fund raising process as at 31 December 2015:

As at 31 December 2015 Total Total Paid-in Fund Commitment (1) Capital (2) Major Partners Key Business (RMB in (RMB in million) million) Yunnan State-owned Total RMB5 100 Shanghai Pudong Provides funding supports Industrial Fund I billion, first Development Bank, to companies under control round RMB1 Shenzhen Qianhai of Yunnan Provincial billion Zhongrun Fuyin Private Government and receives Equity Management Co., an annual management fee Ltd. of RMB300,000 ABC Energy Investment 1,005 100 Agricultural Bank of China Invests in subsidiaries of Fund YEIG Industrial Fund 1,000 100 Ping An Bank Invests in subsidiaries of YEIG Total of RMB funds 3,005 300

Notes:

(1) Total commitment represents the aggregate capital commitment by limited partners of limited partnership or investors for the funds structured as limited liability companies, as applicable, as of the final closing date.

(2) Total paid-in capital includes management fees, before deduction for costs of fund liquidation.

Other Businesses

Industrial Parks

The Group also operates the investment, development, operation and management of emerging industries, industry expansion, industrial estate as well as premium economic resources of industrial parks.

As of 31 December 2015, the Group has one industrial park in Kunming, Yunnan and two industrial parks in Honghe, Yunnan under construction.

¼ Liqi Headquarter Base: it will be an internationally competitive high-end business hub serving the airport economy and key buildings include the YEIG Building, an incubation centre, a five-star hotel, serviced apartments, residential units and offices. The project is under preliminary feasibility study stage.

–99– ¼ Dinazhong Electronic Information Industrial Park: it focuses on electronic information equipment manufacturing and high-tech research and development. Innovative residential communities will also be built in the park, which aims to become a world-class regional base of electronic information industry. The project is under preliminary feasibility study stage.

¼ Dinazhong New Area Industrial part: the Group conducts construction on behalf of the government by leveraging its professional investment and financing platform for energy development. Priority will be given to the Group when it rolls out any construction or service projects in relation to financial services, power, water conservation, gas, renewable energy, energy equipment manufacturing park and IT (cloud computing) base. The project is under preliminary feasibility study stage.

Energy Technology Business

The Group has an energy research institute that is responsible for research and development of energy technologies, industrial promotion and construction of demonstration bases, industry development planning and consulting, training of specialised top talents, establishment of industry think tank, and internationalisation of the industry. It leverages on the technologies, talents, projects, funding and many other resources of the government, enterprises, universities and research institutes. In addition, the Group invests in below three companies operating energy technology business:

¼ YEIG Weith Technologies Co., Ltd.: The Group holds a 40 per cent. equity interest of YEIG Weith Technologies Co., Ltd. Focusing on research and development and production of intelligent control for power, energy, mining sectors and of the information technology industry, it has built presence not only across China, but also in Southeast Asia, Africa and South America.

¼ YEIG Huilong Technologies Co., Ltd.: The Group holds 40 per cent. equity interest of YEIG Huilong Technologies Co., Ltd. It focuses on manufacturing and sale of lithium-ion battery materials and electrolyte, as well as technical development, transfer and sale of battery management systems.

¼ YEIG Youneng Technology Co., Ltd.: The Group holds 50 per cent. equity interest of YEIG Youneng Technology Co., Ltd. It focuses on energy management services as well as development and application of renewable energy technologies and energy-saving and environment-friendly technologies.

Salt and Chemical Production Business

The Group engages in the production and sale of salt and other chemicals through Yunnan Salt, a company listed on the Shenzhen Stock Exchange under the stock code “002053”. Yunnan Salt’s main businesses include development, production and sale of salt and salt-related products, chlor-alkali chemical and its related products, chemical products, raw materials and calcium carbide.

The Group acquired 33.43 per cent. of the issued shares of Yunnan Salt in October 2015 and became Yunnan Salt’s single largest shareholder. As the Group has an effective control over the general meetings and board meetings of Yunnan Salt, the Group considers that it has obtained effective control over Yunnan Salt since the acquisition. Pursuant to the “Accounting Standard for Business Enterprises No. 33 – Consolidated Financial Statements”, the financial statements of Yunan Salt was consolidated into the consolidated financial statements of the Group as a subsidiary as if the acquisition was completed since 1 January 2015.

For the year ended 31 December 2015, the Group had revenue in the amount of RMB474.8 million from its salt and chemical production business, representing 1.1 per cent. of the Group’s total revenue.

EMPLOYEES

As at 31 December 2015, the Group employed, on a consolidated basis, approximately 8,230 employees. The Group is focused on attracting, training and retaining competent management and technical personnel. Training is provided to new employees and existing employees in order to develop their technical and industry knowledge, awareness of work place safety standards and knowledge of the Group’s corporate standards and culture.

– 100 – The Group generally requires its employees to sign labour contracts. Remuneration to employees is based on their respective performance, working experience, duties and the prevailing market rates. As required by applicable laws and regulations, the Group participates in various retirement plans administered by municipal and provincial governments for its employees, including contributions to social insurance and housing fund in the PRC. The total remuneration of the Group’s employees generally includes salaries, bonuses and allowances.

The Group believes that it maintains a good working relationship with its employees. As at the date if this Offering Circular, the Group has not experienced any labour disputes that could cause material adverse effect to the operation and performance of the Group.

INTELLECTUAL PROPERTY

The Group places great importance on the development, management and protection of its intellectual property rights. Most of the patents are held by the Group’s research institute and YEIG Weith Technologies Co., Ltd. As at 31 December 2015, the Group owned 81 registered patents. As at the same date, the Group is authorised to use all patents owned by its joint venture partners and the usage rights are renewable at the same terms at its option.

ENVIRONMENTAL PROTECTION

The Group operates under a number of licences and authorisation that are related to environmental regulations. Under the relevant PRC laws, the Group is not allowed to start any projects until it has obtained the required approvals from relevant environmental authorities and such authorities are satisfied with its environmental impact assessments. The construction and operation of renewable energy power generation facilities and coal power plants generate pollutants, which primarily include exhaust fumes, solid waste, waste oil and water and noise. In this regard, the Group must obtain the relevant emission permits and is required to discharge only the pollutants of the types and quantities specified in the emission permits.

The Group is committed to conducting its operations in a manner that complies with applicable environmental laws and regulations, and endeavours to mitigate any adverse effect of the Group’s operations on the environment. As at the date of this Offering Circular, the Group is not subject to any material environmental claims, lawsuits, administrative penalties due to violations of the environmental laws and regulations with respect to its production facilities.

HEALTH AND SAFETY COMPLIANCE

The Group is exposed to a variety of risks associated with its business operations, in particular the risks associated with the energy business activities of the portfolio companies. These risks and hazards could result in damage to, or destruction of property, personal injury, environmental damage, business interruption and possible legal liability of the portfolio companies, the Company and the Group. The Company’s operations management department and its subordinated offices are responsible for the general safety of its employees and for ensuring a safe work environment. To deal with potential emergency incidents, the Group has also set up the emergency management system, including preventative action plans and formation of an emergency response team. All of the projects of the Group have adopted various policies and taken measures to prevent health and safety risks and hazards.

As at the date of this Offering Circular, the Group has complied with all applicable state and local health and safety laws and regulations in all material respects. The Group has not been subject to any fines or administrative action that has been filed at any PRC Government authorities involving non-compliance with any relevant regulations, nor is it required to take any specific compliance measures, and the Group is not aware of any current material violation relating to environmental health and safety.

– 101 – INSURANCE

The Group carries property-all-risks insurance and machinery damage insurance based on the advice of its insurance advisers. Property-all-risks insurance covers the Group’s fixed assets, properties held for investing purpose, construction projects in progress and inventories against damage caused by accidents. Machinery damage insurance covers valuable machinery and equipment against damage caused by design, installation or operation failures.

The Group believes that its current insurance policies provide sufficient coverage of the risks to which it may be exposed, relating to loss of or damage to its equipment, inventory and claims from its employees, and are comparable to other companies in the industry in China whose business operations and size are similar to it. The Group cannot, however, be ruled out that it could suffer damages that are not covered by the existing insurance policies or that exceed the coverage limits set in these policies. Furthermore, there is no guarantee that the Group will be able to obtain adequate insurance cover at appropriate terms in the future.

LEGAL PROCEEDINGS

Members of the Group are from time to time involved in legal proceedings involving its suppliers, contractors, customers, employees and other third-party entities concerning matters arising in the ordinary course of its business. Claims may be brought against the Group for liabilities for personal injuries, damage to or destruction of property, breaches of warranty, termination of contracts or delayed payments to its suppliers or contractors. See “Risk Factors – Risks Relating to the Group’s Businesses – The Group may be involved in legal and other proceedings arising in the ordinary course of its business.” As at the date of this Offering Circular, there was no existing or threatened litigation, arbitration or administrative proceeding against the Company or any member of the Group that, individually or in aggregate, could have a material adverse effect on the business, financial condition or results of operations of the Group.

– 102 – DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF THE COMPANY

BOARD OF DIRECTORS

The Company’s board of directors consists of five members, including one chairman, one vice chairman and three directors of which one is an employee representative director who is elected by the worker representative assembly with a three-year term, and the other non-employee representative directors are appointed by Yunnan SASAC with renewable three-year terms. The chairman and vice chairman are nominated by the Yunnan SASAC and elected by the majority of the board of directors in accordance with laws and regulations. The board of directors is the final decision-making body of the Company and is primarily responsible for determining business plans and investment proposals, forming the financial budget and major financing plans and appointing the general manager and other members of the senior management of the Company.

The table below sets out the members of the board of directors of the Company as at the date of this Offering Circular:

Name Age Position Duan Wenquan ...... 44 Chairman of the board of directors Liu Wenxian...... 54 Vice chairman Li Xiang...... 44 Director Yang Wanhua ...... 50 Director Geng Shulun ...... 57 Director

Mr. Duan Wenquan, 44, is the chairman of the board of directors and the secretary of the Party Committee of the Company. Previously, Mr. Duan has held the positions of legal representative, deputy secretary of the Party Committee and executive director of the Company. Mr. Duan has been accredited as a senior economist. He graduated from North China Electric Power University in 1994 with a major in electricity systems and obtained doctorate degree in engineering system analysis from Tianjin University in 2004.

From July 1994 to June 1996, Mr. Duan worked at the local Electric Power Bureau of Yunnan Provincial Water Resources Department. From June 1996 to July 1997, he worked at the Administrative Office of the Water and Electricity Department of the Ministry of Water Resources as a part of an exchange program. From July 1997 to June 1998, he worked at the local Electric Power Bureau of Yunnan Provincial Water Resources Department. From June 1998 to July 2003, Mr. Duan worked at Yunnan Provincial Development and Investment Co., Ltd. （雲南省開發投資有限公司） as a project manager in the investment department, concurrently holding the position of deputy general manager at Yunnan Baoshan Supa River Hydropower Development Co., Ltd.（雲南保山蘇帕河水電開發有限公司）from May 2002 to August 2004. Mr. Duan worked as deputy manager of investment department in Yunnan Provincial Development and Investment Co., Ltd from July 2003 to August 2004 and was subsequently promoted to manager.

Ms. Liu Wenxian, 54, is the vice chairman of the board of directors, the deputy secretary of the Party Committee and the president of the Company. Ms. Liu has been accredited as a senior economist. She graduated from Yunnan University in 1996 with a major in economics. She completed further studies at Yunnan University in 2007 with a major in international finance and economics.

From September 1986 to July 1996, Ms. Liu was a Party Committee member and the secretary of the General Planning Division of Yunnan Provincial Planning Commission. From July 1996 to February 2000, Ms. Liu worked at Yunnan Provincial Development and Investment Co., Ltd.（雲南省開發投資有限 公司）as a deputy manager, deputy office secretary and a Party Committee member. From February 2000 to July 2003 she held the office of deputy manager at the delegation department of Yunnan Provincial Development and Investment Co., Ltd. From July 2003 to September 2004, Ms. Liu was the deputy secretary of the Party Committee and deputy manager of human resources and political department at Yunnan Provincial Development and Investment Co., Ltd. From September 2004 to December 2012, she worked as the secretary of the Party Committee at Yunnan Provincial Power Investment Co., Ltd.（雲南省電力投資有限公司）, while holding offices of the chairman of the board of

– 103 – directors at YEIG Renewable Energy Development Co., Ltd.（雲南能投新能源投資開發有限公司）in charge of Diantou Coal Company （電投煤業公司） between December 2006 and April 2012, and officer in charge at the Company between February 2012 and August 2012.

Ms. Li Xiang, 44, is a director and the chief financial officer of the Company. Ms. Li has been accredited as a senior accountant and holds a master’s degree as well as qualifications of Certified Public Accountant and Certified Public Valuer. From February 2012 to October 2012, she was the officer in charge of finance as well as the chief accountant. Ms. Li worked at the finance department of Yunnan Provincial Textiles Co. Ltd.（雲南紡織品公司）from July 1991 to July 1997, concurrently holding the positions of accountant clerk, chief accountant and the officer in charge of finance. She worked at Yunnan Jingwei Accounting Firm（雲南經緯會計師事務所）holding the positions of department head and assistant chief accountant as well as the deputy head of the firm from July 1997 to March 2002. From March 2002 to April 2003, Ms. Li worked at Kunming Gaoxinzhengxin Accounting Firm（昆明高新正信 會計師事務所）as an assistant chief accountant (also the deputy head of the firm). From April 2003 to August 2004, she was the head of the first audit department in Kunminghuaxin Accounting Firm（昆明 華昆華信會計師事務所）. From August 2004 to January 2009, she was the head of finance department at Yunnan Provincial Power Investment Co., Ltd. （雲南省電力投資有限公司）. From January 2009 to February 2012, she worked as the deputy general manager of the planning and finance department and the director of funds centre at Yunnan Provincial Investment Holdings Group Co., Ltd..

Mr. Yang Wanhua, 50, is a director, a Party Committee member and the vice president of the Company. Mr. Yang has been accredited as a senior economist. He graduated from Tianjin University with a major in Hydraulic Work in 1989. He also received a second bachelor’s degree in International Engineering Management from Tianjin University in 1997.

From July 1997 to December 2005, he held the positions of director of planning and management department and secretary of the Party Committee at Kunming Hydroelectric Investigation Design and Research Institute. From January 2006 to February 2008, he was the deputy managing director of Yunnan Jinsha River Hydropower Co., Ltd. From February 2008 to December 2013, he was the managing director of Yunnan Huadian Nujiang River Hydropower Development Co., Ltd.

Mr. Geng Shulun, 57, is the employee representative director, a Party Committee member and the chairman of labour union of the Company. Mr. Geng graduated from Wuhan Military Economics Academy （武漢軍事經濟學院） in 1979, majoring in financial accounting. He completed a degree in economics management at the Central Communist Party School in 1996.

From March 1979 to October 1989, Mr. Geng was a soldier, a quartermaster, deputy political instructor, deputy section chief of the finance unit and a member of the disciplinary inspection commission unit of the First Independent Regiment of Yunnan Provincial Military and Armed Police. From October 1989 to September 1994, he worked in the financial unit of first unit of Yunnan Armed Police Contingents, holding the positions of assistant accountant, sector chief and accountant. From September 1994 to September 2001, Mr. Geng worked at the logistics department of first unit of Yunnan Armed Police Contingents, holding the positions of deputy head of the department, secretary of Party Branch, head of the department and a member of the standing committee of the Party Committee. From September 2001 to July 2002, Mr. Geng was a manager of Yunnan Provincial Development and Investment Co., Ltd.（雲 南省開發投資有限公司）and was seconded to Yunnan Yunjing Forestry and Paper Industry Co., Ltd.（雲南 雲景林紙股份有限公司物業公司）. He worked at Yunnan Baoshan Supa River Hydropower Development Co., Ltd.（雲南保山蘇帕河水電開發有限公司）as the deputy secretary of the Party Committee, the chief accountant and the chairman of labour union. From August 2004 to February 2012, he was a member of the Party Committee, chief accountant and chairman of labour union of Yunnan Provincial Power Investment Co., Ltd. Mr. Geng was the officer in charge of labour union from February 2012 to October 2012 in the Company, holding concurrent positions of a Party Committee member and chairman of the labour union of Yunnan Provincial Power Investment Co., Ltd.

– 104 – BOARD OF SUPERVISORS

The board of supervisors consists of five members, including one chairman, one vice chairman and three supervisors one of which is an employee representative supervisor who is elected by worker representative assembly with a three-year term, and the other non-employee representative supervisors are appointed by Yunnan SASAC with renewable three-year terms. The chairman is nominated by Yunnan SASAC and elected by the majority of the board of supervisors in accordance with laws and regulations. The board of supervisors is responsible for monitoring the Company’s financial matters and overseeing the actions of the board of directors and the management of the Company. The Company’s directors and senior management personnel are not permitted to serve concurrently as supervisors.

The table below sets out the members of the board of supervisors of the Company as at the date of this Offering Circular:

Name Age Position Li Mingqiu ...... 55 Chairman of the board of supervisors Luo Lin ...... 64 Vice chairman Su Lin ...... 47 Supervisor Fan Xuening...... 44 Supervisor He Juanjuan...... 37 Employee Representative Supervisor

Mr. Li Mingqiu, 55, is the chairman of the board of supervisors of the Company. Mr. Li is an economist and holds the qualification of Certified Tax Agents. He graduated from Jiangxi University of Finance and Economics in September 1987 majoring in taxation. He studied law at Southwest Normal University.

From November 1981 to August 1983, Mr. Li was the deputy chief of New Village taxation centre and was transferred to the Taxation Bureau as the deputy chief in September 1983. From September 2001 to February 2009, he was the chief of the local Taxation Bureau of Honghe prefecture. He worked at local Taxation Bureau from August 1991 to September 2001 in Yuxi. From December 2009 to August 2013, he worked as the chief accountant in Yunnan Provincial Local Taxation Bureau. He was the secretary of the Party Commission and the head of Kunming Local Taxation Bureau from March 2009 to November 2009. Since September 2013, Mr. Li has been the chairman of board of supervisors of many state-owned enterprises of Yunnan Provincial Government, including Yunnan Yuntianhua Co., Ltd（雲天 化集團有限責任公司）and Yunnan Coal Chemical Industry Group Co., Ltd（雲南煤化工集團有限公司）.He was appointed as the chairman of the board of supervisors of the Company in June 2014.

Ms. Luo Lin, 64, is the vice chairman of the board of supervisors of the Company. Ms. Luo is a senior auditor. She graduated from Yunnan University of Finance and Economics holding a degree in accounting in October 1978.

From 1986 to 1989, she served as the chief of the planning and financial department of Yunnan Provincial Tourism Bureau. From October 1989 to February 1997, she worked as the vice chief of financial centre of Kunming China International Travel Agency. From March 1997 to July 2005, she served as deputy director of the financial department of Yunnan Tourism Group Holding., Ltd. From 2005 to 2008, she held the offices of a supervisor on the board of supervisors of Southwest Communications Construction Group Co., Ltd （西南交通建設集團股份有限公司）, Yunnan International Trust Co., Ltd（雲南國際信託有限公司）and China State Farms Agribusiness (Group) Corporation（中國農 墾集團總公司）. She was a supervisor on the board of supervisors of Yunnan Coal Chemical Industry Group Co., Ltd（雲南煤化工集團有限公司）from July 2008 to July 2010. From July 2010 to June 2014, she was the chairman of the board of supervisors of China Eastern Air Group（中國東方航空集團）and Yunnan Shengyi Capital Co., Ltd（雲南聖乙投資）. Ms. Luo was appointed as the vice chairman of the board of supervisors of the Company in June 2014.

Mr. Su Lin, 47, is a supervisor of the Company. Mr. Su graduated from Nanjing Political Institute of PLA（解放軍南京政治學院）in 1986, majoring in economic management. Since June 2014, Mr. Su has held the position of supervisor of the Company.

From November 1986 to August 2006, Mr. Su served the army and was an assistant accountant at Air Force No. 95651. Between August 1989 and August 1992, Mr. Su engaged in advanced study in Logistics Institute of Air Force. From August 2006 to February 2008, he was a supervisor on the board

– 105 – of supervisors of Yunnan Tin Group（雲南錫業集團）. From February 2009 to July 2010, Mr. Su was a supervisor on the board of supervisors of Yunnan Coal Chemical Industry Group （雲南煤化工集團）. From July 2010 to June 2014, Mr. Su was a supervisor on the board of supervisors of Yunnan Expo Tourism Group（雲南世博旅遊集團）.

Mr. Fan Xuening, 44, is a supervisor of the Company. Mr. Fan has a Master’s degree. Mr. Fan graduated from Kunming University of Science and Technology with a degree in mining engineering in July 1995, and graduated from the Yunnan Provincial Party School with a major in economic management in July 2009.

From July 1995 to January 2001, Mr. Fan worked at Yunnan Provincial Coal Department where he served as staff member and senior staff member. During this period, from July 1995 to May 1997, Mr. Fan was temporarily assigned to the Bureau of Township Enterprises in the Zhongdian county, Diqin Prefecture（迪慶州中甸縣鄉鎮企業局）where he was the assistant to the chief. From January 2001 to February 2004, Mr. Fan worked at the Yunnan Provincial Workers’ Committee for Enterprises（中共雲南 省委企業工委）where he was appointed as senior staff member and subsequently principal staff member. From February 2004 to March 2008, Mr. Fan worked at the administrative office of Yunnan SASAC. From March 2008 to May 2014, Mr. Fan worked at the Party Building Department of Yunnan SASAC as deputy division director. From May 2014 onwards, Mr. Fan worked as the deputy head at the disciplinary inspection and supervision office of the Company.

Ms. He Juanjuan, 37, is an employee representative supervisor of the Company. Ms. He is an accountant and has a Master’s degree. Ms. He graduated from Kunming Finance and Commerce School in July 1999 where she majored in finance and accounting. Ms. He graduated from the Yunnan College of Finance majoring in accounting in June 2000. Ms. He graduated from the Macau University of Science and Technology in November 2008 where she majored in general business management.

From July 1999 to November 2007, Ms. He worked at Yunnan Provincial Electricity Industry Co., Ltd （雲南電力實業有限公司）, where she held positions of accountant, deputy chief of the finance department and director of the finance department. From November 2007 to December 2012, Ms. He worked at the financial management department of Yunnan Provincial Power Investment Co., Ltd.（雲南省電力投資有限 公司） where she held positions of business manager and deputy general manager of the financial management department. From December 2012 to December 2013, Ms. He worked at the financial management department of the Company where she was appointed as deputy general manager of the financial management department and then general manager. Since December 2013, Ms. He has been working as general manager at the audit department of the Company.

SENIOR MANAGEMENT

The table below sets out the senior management of the Company as at the date of this Offering Circular:

Name Age Position Liu Wenxian...... 54 President Yang Wanhua ...... 50 Vice president Li Xiang...... 44 Chief financial officer Jiang Ping ...... 41 Deputy secretary of the Party Committee and secretary of the Discipline and Inspection Commission Geng Shulun ...... 57 Chairman of the labour union Guo Shuguang...... 44 Vice president Yang Guowen ...... 48 Vice president Liu Xiguang ...... 53 Vice president Huang Ning...... 48 Vice president

Ms. Liu Wenxian, please see the profile of Ms. Liu Wenxian in “Board of Directors”.

Mr. Yang Wanhua, please see the profile of Mr. Yang Wanhua in “Board of Directors”.

Ms. Li Xiang, please see the profile of Ms. Li Xiang in “Board of Directors”.

– 106 – Ms. Jiang Ping, 41, is the deputy secretary of the Party Committee and secretary of the Discipline and Inspection Commission of the Company. Ms. Jiang has been accredited as a senior economist. She graduated from Yunnan Normal University with a major in history in 1997. Ms. Jiang advanced her education at Beijing Institute of Technology from 2011 majoring in engineering management and graduated with a master’s degree. From July 1997 to October 1997, she was a secretary at Tiansheng Bridge project department of Sinohydro Bureau 14 Co., Ltd（中國水電十四局有限公司）. From October 1997 to October 1998, she was an office secretary of Three Gorges of Yangtze River Qingyun Co., Ltd. From October 1998 to November 2007, she held the offices of secretary, assistant politics officer, deputy head of sector, secretary of the Party Branch and deputy director of the office of Sinohydro Bureau 14 Co., Ltd. From November 2007 to January 2008, she was the deputy director at Yunnan Provincial Power Investment Co., Ltd. From November 2008 to May 2010, she was the director of Division of Party and People’s Affairs of Yunnan Provincial Power Investment Co., Ltd. From May 2010 to October 2012, she was the deputy secretary of the Discipline and Inspection Committee and the director of Division of Party and People’s Affairs at Yunnan Provincial Power Investment Co., Ltd. From March 2012 to October 2012, she was the assistant general manager and the principal officer in charge of Party Committee’s affairs and the human resources department. She has been the deputy secretary of the Party Committee and the secretary of Discipline and Inspection Commission of the Company since October 2012.

Mr. Geng Shulun, please see the profile of Mr. Geng Shulun in “Board of Directors”.

Mr. Guo Shuguang, 44, a vice president and a Party Committee member of the Company. Mr. Guo is an economist. He graduated from Yunnan Electric Power School with a major in power equipment of hydroelectric power station in 1991. He obtained a Master’s degree in executive business administration (EMBA) from Shanghai University of Finance and Economics in 2011. From August 1991 to August 1993, Mr. Guo worked at the Water and Electricity Bureau Survey and Investigation Team of Fengqing county（鳳慶縣水電局勘測設計隊）. From August 1993 to April 2002, he was the director of the office in Lincang Audit Office and the head of the 4th secretary section of the Lincang Administrative Office from April 2002 to May 2004. From May 2004 to December 2007, he was a member of the Discipline and Inspection Committee, assistant general manager and director of the office at Yunnan Provincial Power Investment Co., Ltd.（雲南省電力投資有限公司）. From December 2007 to April 2012, he was the deputy director of the office in Yunnan Provincial Investment Holdings Group Co., Ltd.. From April 2012 to October 2012, he was the deputy general manager of Yunnan Provincial Power Investment Co., Ltd. He has held the position of secretary of Party Committee in Yunnan Provincial Power Investment Co., Ltd. since December 2012.

Mr. Yang Guowen, 48, is a vice president and a Party Committee member of the Company. Mr. Yang is a senior engineer. He graduated from Chengdu University of Science and Technology with a major in hydraulic architecture in 1991 and graduated from Tianjin University with a major in water resources and hydropower engineering in 2007. From July 1991 to September 2004, he worked at Kunming Investigation and Design Institute. From April 1996 to July 1998, he held the positions of hydraulic designer at the hydraulic department as well as assistant engineer and deputy director of the fourth office. From July 1998 to July 2001, he held the positions of hydraulic designer, chief project designer, engineer and deputy director of the second office at the second sub-institute. From July 2001 to July 2002, he held the positions of hydraulic designer, chief project designer and, engineer and director of the second office at the second sub-institute. From July 2002 to September 2004, Mr. Yang was a hydraulic designer, senior engineer, the director of the 2nd office of water department and the chief project designer at Hydraulic Institute of Kunming Investigation and Design Institute. From September 2004 to September 2007, he was the manager of project management in Yunnan Provincial Power Investment Co., Ltd. （雲南省電力投資有限公司） From September 2007 to January 2009, he was an assistant general manager at Yunnan Provincial Power Investment Co., Ltd. From January 2009 to October 2012, he was a chief engineer at Yunnan Provincial Power Investment Co., Ltd., and he also assumed the position of principal officer in charge of the Company from March 2012 to October 2012. Since December 2012, he has served as general manager of Yunnan Provincial Power Investment Co., Ltd.

Mr. Liu Xiguang, 53, is a vice president of the Company. Mr. Liu is an economist. From August 1992 to February 1994, he worked at Shanghai business department of Taiyang Securities （泰陽證券） (formerly Hunan Securities （湖南證券）, specialising in securities trading, formation of business department and business management. From February 1994 to August 1999, Mr. Liu formed the Dongtang business department of Taiyang Securities and was the assistant general manager and the

– 107 – deputy general manager. From August 1999 to January 2000, he was the deputy general manager of Changsha West business department of Xiangcai Securities（湘財證券）. From January 2000 to September 2003, Mr. Liu formed the Kunming business department for Xiangcai Securities and served as its deputy general manager and general manager. From September 2003 to May 2006, he was the general manager of Kunming Jianning Real Estate Investment and Development Co., Ltd.（昆明建寧房地產投資開 發有限公司）. From May 2006 to July 2008, he was engaged in corporate financing advisory businesses at Yunnan Province in cooperation with Etech Securities Inc. of the United States. From July 2008 to June 2011, he was the deputy general manager of the investment banking department and institutional business department of Fudian Bank（富滇銀行）. From June 2011 to February 2012, he worked in the preparatory group of the Company. From February 2012 to October 2012, he served as the officer in charge of the capital and equity management department of the Company. Mr. Liu has been the vice president of the Company since October 2012.

Mr. Huang Ning, 48, is a vice president and a Party Committee member of the Company. Mr. Huang is a senior engineer. From March 2012 to October 2012, he was the officer in charge of the Guarantor. Since October 2012, Mr. Huang has served as a member of the Party Committee and a vice president of the Guarantor. He graduated from Wuhan University of Hydraulic and Electrical Engineering with a major in hydrodynamics in 1992 and obtained an MBA degree at Yunnan University of Finance and Economics in 2010. From April 1993 to November 1997, he worked at the Sanjiangkou Power Station of Baoshan Power Company（保山電力公司三江口發電廠）and was the deputy director of the project. From November 1997 to January 1999, Mr. Huang worked at the engineering commanding department of Baoshan Supa River Hydropower Project （保山蘇帕河電站工程） for the construction of the Qiezi Mountain Project and was the chief mechanical and electrical engineer. From January 1999 to June 2001, he worked at Baoshan Supa River Hydropower Development Co., Ltd.（保山蘇帕河水電開發有限公 司）as the director of the Qiezhishan Plant. From June 2001 to October 2002, Mr. Huang worked at Baoshan Supa River Hydropower Development Co., Ltd. as the branch secretary and a director of the Qiezhishan Plant. From October 2002 to November 2003, he worked at Baoshan Supa River Hydropower Development Co., Ltd. as deputy chief engineer, while he was also the director of the Qiezhi Mountain Plant. From November 2003 to October 2004, he worked at Baoshan Supa River Hydropower Development Co., Ltd. as an assistant to the vice president, the manager of the mechanical and electrical department and the deputy chief engineer. From October 2004 to August 2010, he worked at Yunnan Baoshan Supa River Hydropower Development Co., Ltd. as a member of the Party Committee, deputy secretary of the Party Committee and general manager. From January 2006 to August 2010, he was the director of Tengchong Sudian Longchuanjiang Hydropower Development Co., Ltd.（騰沖蘇電龍川江水開發有限公司）and was seconded to Huaneng Lancangjiang Hydropower Co., Ltd. （華能瀾滄江水電有限公司）as the deputy director of its basic construction department between August 2009 and February 2010. From 2010 August to March 2012, he was the deputy general manager of Yunnan Provincial Power Investment Co., Ltd.

CORPORATE GOVERNANCE

According to the Notice on Clarification of Administrative Matters regarding Yunnan Provincial Energy Investment Group Co., Ltd.（關於明確雲南省能源投資集團有限公司有關管理事項的通知）issued by Yunnan SASAC, Yunnan SASAC has the authority to review and approve the amendments to the articles of association of the Company and to appoint or designate any member of the Company’s board of directors and senior management and conduct performance review of the Company’s board of directors and management.

The Company has a sound corporate governance structure in place with established procedure rules which are both in compliance with its articles of association and all relevant laws and regulations in the PRC. The Company has established 10 business divisions, namely: general office, financial management department, strategic development department, property right management department, securities management department, business management development, legal and audit department, risk management department, hydropower and new energy division and energy services division.

To strengthen internal control, the Company has also established a risk management structure consisting of the board of directors and its audit and risk control committee, group office, internal control audit department, disciplinary inspection office to supervise all functional departments and Group’s member companies.

– 108 – PRINCIPAL SHAREHOLDERS

The table below sets forth the information regarding the beneficial ownership of the Company’s shares as at 31 December 2015 by each person known to the Company to beneficially own 5.0 per cent. or more of the Company’s issued and outstanding shares:

Percentage of issued share Principal Shareholder Capacity capital(1) Yunnan SASAC(2)...... Held by controlled corporation 95.832 per cent. Yunnan Provincial Investment Holdings Group Beneficial owner(4) 83.085 per cent. Co., Ltd.(3) ...... Yunnan Yuntianhua Co., Ltd.(5) ...... Beneficial owner 10.149 per cent. Yunnan Metallurgical Group Co., Ltd.(6)...... Beneficial owner 6.766 per cent.

Notes:

(1) The calculation is based on the number of total issued shares as at 31 December 2015.

(2) Yunnan SASAC held interest in the Company through three controlled corporations in which Yunnan SASAC is the controlling shareholder and ultimate owner.

(3) Yunnan Provincial Investment Holdings Group Co., Ltd. is an enterprise wholly owned by and under the supervision of Yunnan SASAC. Yunnan Provincial Investment Holdings Group Co., Ltd. directly owns 83.085 per cent. of the equity interest of the Company.

(4) Beneficial ownership is determined by and includes the power to direct the voting or the disposition of the securities or to receive the economic benefit of the ownership of the securities.

(5) Yunnan Yuntianhua Co., Ltd. is an enterprise 88.90 per cent. owned by and under the supervision of Yunnan SASAC. The Company cross holds 11.10 per cent. of the equity interest of Yunnan Yuntianhua Co., Ltd.

(6) Yunnan Metallurgical Group Co., Ltd. is an enterprise 55.05 per cent. owned by and under the supervision of Yunnan SASAC. 6.766 per cent. of the equity interest of the Company is owned by Yunnan Metallurgical Group Co., Ltd. and the Company cross holds 13.949 per cent. equity interest of Yunnan Metallurgical Group Co. Ltd.

– 109 – PRC REGULATIONS

This section summarises the principal PRC laws and regulations which are relevant to the Group’s business and operations. As this is a summary, it does not contain a detailed analysis of the PRC laws and regulations which are relevant to the Group’s business and operations.

THE PRC LEGAL SYSTEM

The PRC legal system is based on the Constitution of the PRC （中華人民共和國憲法） (“PRC Constitution”) and is made up of written laws, regulations, directives and local laws, laws of Special Administrative Regions and laws resulting from international treaties entered into by the PRC Government. In general, PRC court judgments do not constitute legally binding precedents, although they are used for the judicial reference and guidance.

The National People’s Congress of the PRC (the “NPC”) and the Standing Committee of the NPC are empowered by the PRC Constitution to exercise the legislative power of the PRC. The NPC has the power to amend the PRC Constitution and enact and amend basic laws governing PRC agencies and civil, criminal and other matters. The Standing Committee of the NPC is empowered to enact and amend all laws except for the laws that are required to be enacted and amended by the NPC.

The State Council is the highest organ of the state administration and has the power to enact administrative rules and regulations based on the PRC Constitution and laws. The ministries and commissions of the State Council are also vested with the power to issue orders, directives and regulations within the jurisdiction of their respective departments. All administrative rules, regulations, directives and orders promulgated by the State Council and its ministries and commissions must be consistent with the PRC Constitution and the national laws enacted by the NPC. In the event that a conflict arises, the Standing Committee of the NPC has the power to annul administrative rules, regulations, directives and orders.

At the regional level, the provincial and municipal congresses and their respective standing committees may enact local rules and regulations and the people’s governments may promulgate administrative rules and directives applicable to their own administrative areas. These local rules and regulations must be consistent with the PRC Constitution, the national laws and the administrative rules and regulations promulgated by the State Council.

The State Council, provincial and municipal governments may also enact or issue rules, regulations or directives in new areas of the law for experimental purposes or in order to enforce the law. After gaining sufficient experience with experimental measures, the State Council may submit legislative proposals to be considered by the NPC or the Standing Committee of the NPC for enactment at the national level.

The PRC Constitution vests the power to interpret laws in the Standing Committee of the NPC. The Supreme People’s Court, in addition to its power to give general interpretation on the application of laws in judicial proceedings, also has the power to interpret specific cases. The State Council and its ministries and commissions are also vested with the power to interpret rules and regulations that they have promulgated. At the regional level, the power to interpret regional rules and regulations is vested in the regional legislative and administrative bodies which promulgated such laws.

THE PRC JUDICIAL SYSTEM

Under the PRC Constitution and the PRC laws on Organisation of the People’s Courts（中華人民共和國 人民法院組織法）, the judicial system consist of the Supreme People’s Court, the local courts, military courts and other special courts.

The local courts are comprised of the basic courts, the intermediate courts and the higher courts. The basic courts are further divided into civil, criminal, economic, administrative and other divisions. The intermediate courts have divisions similar to those of the basic courts, and are further divided into other special divisions, such as the intellectual property division. The higher level courts supervise the basic and intermediate courts. The people’s procuratorates also have the power to exercise legal supervision

–110– over the litigation proceedings of courts of the same level and lower levels. The Supreme People’s Court is the highest judicial organ of the PRC. It supervises the administration of justice by all other courts.

The courts employ a “second instance as final” appellate system. A party may appeal against a judgment or ruling of a local court to the court at the next higher level. Second judgments or rulings given at the next higher level and the first judgments or rulings given by the Supreme People’s Court are final. First judgments or rulings of the Supreme People’s Court are also final. If, however, the Supreme People’s Court or a court at a higher level finds an error in a legally effective judgment which has been given by any court at a lower level, or the president of a court finds an error in a legally effective judgment which has been given in the court over which he presides, the case may then be retried in accordance with the judicial supervision procedures.

The Civil Procedure Law of the PRC（中華人民共和國民事訴訟法）(“the Civil Procedure Law”), which was adopted on 9 April 1991 and amended on 28 October 2007 and 31 August 2012, respectively, sets forth the criteria for instituting a civil action, the jurisdiction of the courts, the procedures to be followed for conducting a civil action and the procedures for enforcement of a civil judgment or ruling. All parties to a civil action conducted within the PRC must comply with the Civil Procedure Law. Generally, a civil case is initially heard by a local court of the municipality or province in which the defendant resides. The parties to a contract may, by express agreement, select a jurisdiction where civil actions may be brought, provided that the jurisdiction is either the plaintiff ’s or the defendant’s place of residence, the place of execution or implementation of the contract or the place of the object of the contract. However, such selection cannot violate the stipulations of grade jurisdiction and exclusive jurisdiction in any case.

A foreign individual or enterprise generally has the same litigation rights and obligations as a citizen or legal person of the PRC. If a foreign country’s judicial system limits the litigation rights of PRC citizens and enterprises, the PRC courts may apply the same limitations to the citizens and enterprises of that foreign country within the PRC. If any party to a civil action refuses to comply with a judgment or ruling made by a court or an award granted by an arbitration panel in the PRC, the aggrieved party may apply to the court to request for enforcement of the judgment, ruling or award. The time limitation imposed on the right to apply for such enforcement is generally two years. If a person fails to satisfy a judgment made by the court within the stipulated time, the court will, upon application by any party to the action, mandatorily enforce the judgment.

A party seeking to enforce a judgment or ruling of a court against a party who is not located within the PRC and does not own any property in the PRC may apply to a foreign court with proper jurisdiction for recognition and enforcement of the judgment or ruling. A foreign judgment or ruling may also be recognised and enforced by a PRC court in accordance with the PRC enforcement procedures if the PRC has entered into, or acceded to, an international treaty with the relevant foreign country, which provides for such recognition and enforcement, or if the judgment or ruling satisfies the court’s examination in accordance with the principle of reciprocity, unless the court finds that the recognition or enforcement of such judgment or ruling will result in a violation of the basic legal principles of the PRC, its sovereignty or security, or for reasons of social and public interests.

FOREIGN EXCHANGE CONTROLS

The lawful currency of the PRC is the Renminbi, which is subject to foreign exchange controls and is not freely convertible into foreign exchange at this time. SAFE, under the authority of PBOC, is empowered with the functions of administering all matters relating to foreign exchange, including the enforcement of foreign exchange control regulations.

Prior to 31 December 1993, a quota system was used for the management of foreign currency. Any enterprise requiring foreign currency was required to obtain a quota from the local SAFE office before it could convert Renminbi into foreign currency through PBOC or other designated banks. Such conversion had to be effected at the official rate prescribed by SAFE on a daily basis. Renminbi could also be converted into foreign currency at swap centre. The exchange rates used by swap centres were largely determined by the demand for, and supply of, the foreign currency and the Renminbi requirements of enterprises in the PRC. Any enterprise that wished to buy or sell foreign currency at a swap centre had to obtain the prior approval of SAFE.

– 111 – On 1 October 1993, the State Council, promulgated the Notice on Deepening the Reform of the Foreign Exchange Administration System（關於進一步改革外匯管理體制的通知）(Guo Fa [1993] No.89), effective from 1 October 1993. The notice announced the abolition of the foreign exchange quota system, the implementation of conditional convertibility of Renminbi in current account items, the establishment of the system of settlement and payment of foreign exchange by banks, and the unification of the official Renminbi exchange rate and the market rate for Renminbi established at swap centres. On 26 March 1994, PBOC promulgated the Provisional Regulations for the Administration of Settlement, Sale and Payment of Foreign Exchange（結匯、售匯及付匯管理暫行規定）(the “Provisional Regulations”), which set out detailed provisions regulating the trading of foreign exchange by enterprises, economic organisations and social organisations in the PRC.

On 1 January 1994, the former dual exchange rate system for Renminbi was abolished and replaced by a controlled floating exchange rate system, which was determined by demand and supply of Renminbi. Pursuant to such system, PBOC set and published the daily Renminbi-US dollar exchange rate. Such exchange rate was determined with reference to the transaction price for Renminbi-US dollar in the inter-bank foreign exchange market on the previous day. Also, PBOC, with reference to exchange rates in the international foreign exchange market, announced the exchange rates of Renminbi against other major foreign currencies. In foreign exchange transactions, designated foreign exchange banks may, within a specified range, freely determine the applicable exchange rate in accordance with the rate announced by PBOC.

On 29 January 1996, the State Council promulgated the Regulations for the Administration of Foreign Exchange of the PRC （中華人民共和國外匯管理條例） (the “Foreign Exchange Regulations”) which became effective from 1 April 1996. The Foreign Exchange Regulations classifies all international payments and transfers into current account items and capital account items. Most current account items are subject to the approval by relevant banks that are duly authorised by SAFE to do so, while capital account items are still subject to SAFE approval directly. The Foreign Exchange Regulations was subsequently amended on 14 January 1997. Such amendment affirms that the PRC shall not restrict international current account payments and transfers. On 1 August 2008, the Foreign Exchange Regulations were further amended pursuant to a resolution of the State Council of China and came into effect on 5 August 2008 (the “New Forex Regulation”). Under the New Forex Regulation, foreign currency received under current account by onshore entities will not be asked to be settled into Renminbi automatically, while foreign currency under capital account may also be maintained upon approval. The Renminbi will be convertible for current account items (including the distribution of dividends, interest and royalties payments, and trade and service-related foreign exchange transactions) upon presentation of valid receipts and proof certifying the purposes of the conversion of Renminbi into foreign currency to the designated foreign exchange banks. Conversion of Renminbi into foreign exchange and remittance of foreign exchange funds outside of PRC for capital account items, like direct investment, loan, loan guarantee, securities investment, capital contribution and repatriation of investment, is still subject to restriction, and prior approval from SAFE or its competent branch.

On 20 June 1996, PBOC promulgated the Regulations for Administration of Settlement, Sale and Payment of Foreign Exchange （結匯、售匯及付匯管理規定） (the “Settlement Regulations”) which became effective on 1 July 1996. The Settlement Regulations superseded the Provisional Regulations and abolished the remaining restrictions on convertibility of foreign exchange in respect of current account items while retaining the existing restrictions on foreign exchange transactions in respect of capital account items. Domestic entities seeking to enter into foreign exchange transactions are required to open up foreign exchange accounts for current account or capital account transactions, as the case may be, at banks involved in foreign exchange business. Interest payments for foreign debt may be made from a foreign exchange account of a domestic entity or using foreign exchange purchased at designated foreign exchange banks after the verification of the bona fide nature of the transaction by SAFE. Domestic entities may apply to SAFE for approval to purchase foreign exchange by presenting valid documents required by the Settlement Regulations for repayment of foreign debt principal and such payment can be made upon the approval of SAFE.

On 25 October 1998, PBOC and SAFE promulgated the Notice Concerning the Discontinuance of Foreign Exchange Swapping Business（關於停辦外匯調劑業務的通知）pursuant to which and with effect from 1 December 1998, all foreign exchange swapping business in the PRC for foreign-invested enterprises shall be discontinued, while the trading of foreign exchange by foreign-invested enterprises shall be regulated under the system for the settlement and sale of foreign exchange applicable to banks.

–112– On 21 July 2005, PBOC announced that, beginning from 21 July 2005, the PRC will implement a regulated and managed floating exchange rate system based on market supply and demand and by reference to a basket of currencies. The Renminbi exchange rate is no longer pegged to the US dollar only. PBOC will announce the closing price of a foreign currency such as the US dollar traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each business day, setting the central parity for trading of the Renminbi on the following business day. See “PRC Currency Control” for details.

On 11 August 2015, PBOC adjusted the mechanism for market makers to form the central parity rate by requiring them to consider the closing exchange rate for the last trading date, the supply and demand of foreign exchange and the rate change at primary international currencies. It is possible that the PRC Government could adopt a more flexible currency policy in the future, which could result in further and more significant revaluations of the Renminbi against the US dollar or any other foreign currency. Any future exchange rate volatility relating to the Renminbi or any significant revaluation of the Renminbi may materially and adversely affect the Group’s cash flows, revenue, earnings and financial position, as well as the value of any distributions payable to the Company by its PRC subsidiaries.

LAWS AND REGULATIONS RELATING TO PRC ENERGY INDUSTRY

Renewable Energy Industry

On 28 February 2005, the National People’s Congress Standing Committee promulgated the Renewable Energy Law（可再生能源法）(implemented since 1 January 2006, and amended on 26 December 2009). According to the law, renewable energy includes hydropower, biomass power, wind energy, solar energy, geothermal energy, ocean energy and others. These types of energy are characterised by lower environmental pollution and sustainability. Of which, hydropower is currently the renewable energy power generation with the most mature technology and is being extensively applied worldwide.

The law outlines a regulatory framework to promote the development and utilisation of renewable energy and eventually achieves the sustainable economic and social development in the PRC. The law stipulates that the power grid enterprise should acquire the full amount of grid-connected power generated by the renewable power generation enterprises, laying down the preliminary formulation of on-grid tariff administration measures for renewable energy. In addition, the law also provides certain preferential policies, such as the establishment of renewable energy development fund to promote the development of renewable energy.

The Development Guide Directory for Renewable Energy Industry（可再生能源產業發展指導目錄）was promulgated by the NDRC on 29 November 2005. It tabulates 88 types of renewable energy projects. Those projects that meet the relevant criteria will be supported by favourable policies in the aspect of, among others, tax rates, product price and sales. The Group’s Hydropower Plants, which are small hydropower plants connected to power grids, fall within such 88 types of renewable energy projects.

Electric power Industry

The former State Electricity Regulatory Commission (“SERC”) and the NEA, after the SERC was merged into the NEA in 2013, are responsible for the supervision and administration of national electric power utilities. On 28 December 1995, the National People’s Congress Standing Committee promulgated the

Electricity Law of the People’s Republic of China （中華人民共和國電力法） (the “Electricity Law”) (implemented since 1 April 1996 and amended on 24 April 2015). The Electricity Law is the core regulatory law in electric power industry, the objects of which are to safeguard the legal rights and interests of investors, operators and users of electric power, protect the safe operation of electric power, and to regulate the comprehensive operation of electric power industry from the construction of electric power, electric power generation and electric power grid management, supply and utilisation of electric power, electric power tariffs and charges, and electric power facilities protection. In addition, according to the Electricity Law, the government encourages and introduces domestic and foreign economic organisations or individuals to invest in the development of electric power resources according to law and the establishment of electric power generation enterprises.

–113– (1) Electric Power Business Permit

Pursuant to the SERC’s Provision on the Administration of the Electric Power Business Permit（電力業 務許可證管理規定, the “Permit Provision”), which became effective on December 1, 2005, the electric power business permit should be obtained before engaging in any electric power business in the PRC. Unless otherwise provided by the State Electricity Regulatory Commission (“SERC”), any company or individual in the PRC may not engage in any electric power business (including power generation, transmission, dispatch and sales) without obtaining an electric power business permit from the SERC. According to the Permit Provision, an applicant for the electric power business permit for power generation should obtain relevant government approvals based on the power plant’s construction plan, generation capacity and environmental compliance.

(2) Dispatch

Pursuant to the Regulations on the Administration of Electric Power Dispatch to Grids（電網調度管理條 例, the “Dispatch Regulations”) issued by the State Council, effective on November 1, 1993, and amended on 8 January 2011, all electric power producers and grid companies must comply with the general dispatch of the dispatch centre. Dispatch centres are responsible for the administration and dispatch of power plants connected to the grid. Pursuant to the Dispatch Regulations, dispatch centres are established at five levels: the national dispatch centre, the dispatch centres of the interprovincial power grid, the dispatch centres of the provincial power grid, the dispatch centres of the power grid of municipalities under provinces and the dispatch centres of the county power grid. Each power plant receives on a daily basis from its local dispatch centre an hour-by-hour output schedule for the following days based on anticipated demand on the weather and other factors.

(3) On-Grid Tariff Administration

The Electricity Law sets out the general principles for the determination of power tariffs, according to which, tariffs are to be formulated to provide reasonable compensation for costs and a reasonable return on investment, to share expenses fairly and to promote the construction of further power projects. The on-grid power tariffs of power plants, the supply power tariffs between the grid companies and the sales power tariffs of the grid companies are based on a centralized policy, fixed in accordance with a unified principle and administered at different levels. The on-grid tariffs are subject to review and approval by the NDRC and other competent pricing bureaus.

In July 2003, the State Council approved the Power Tariff Reform Plan（電價改革方案）(the “Reform Plan”) and stated that their long-term objective is to establish a standardized and transparent on-grid tariff-setting mechanism.

On March 28, 2005, the NDRC issued the Provisional Measures for the Administration of On-grid Tariffs（上網電價管理暫行辦法）, which provides regulatory guidance for the Reform Plan. For power plants within the regional grids that have not implemented competitive bidding tariff-setting mechanisms, on-grid tariffs will be set by relevant pricing bureaus based on economic life cycle of power projects and in accordance with the principles of reasonable compensation for costs, a reasonable return on investment and tax compliance. For power plants within the regional grids that have implemented competitive bidding tariff-setting mechanisms, on-grid tariffs are two folds: (i) a capacity tariff determined by the NDRC based on the average investment cost of the power producers competing within the same regional grid and (ii) a competitive tariff determined through the competitive bidding process. This NDRC regulation became effective from May 1, 2005.

The Circular Regulations on the Administration of Issues Related to the Electricity Energy Transaction Prices（關於規範電能交易價格管理等有關問題的通知）issued by the NDRC, SERC and NEA dated October 11, 2009 provides that other than the interprovincial or cross-regional electricity energy transactions, all on-grid power should be priced in accordance with the tariffs set by the pricing bureaus of the government unless otherwise provided by the state. All producers of renewable energy, except the hydropower producers, must comply with the on-grid tariffs approved by the pricing bureaus.

–114– (4) Model Contract form

In 2003, the SERC and the State Administration for Industry and Commerce (the “SAIC”) jointly promulgated a model contract form (“the Model Contract Form”) for use by power grid companies and power generation companies in connection with electricity sale and purchase transactions. The Model Contract Form contains provisions for stipulating the parties’ rights and obligations, amount of electricity to purchase, payment method and liabilities for breach of contract. Such Model Contract Form is applicable to independent hydropower plants with installed capacity of 50 MW or above and independent fossil fuel power plants with single installed capacity of 100 MW or above.

LAWS AND REGULATIONS RELATING TO OVERSEAS INVESTMENT, FINANCING AND ACQUISITION ACTIVITIES

NDRC Supervision

According to the Measures for the Administration of Approval and Filing of Overseas Investment Projects（境外投資項目核准和備案管理辦法）effective from 8 May 2014 and amended on 27 December 2014, the procedure of approval and filing shall be respectively applied to different overseas investment projects. Specifically, if the amount of the investment made by the Chinese party is US$1 billion or more, or if the project is related to the sensitive countries, regions or industries, regardless of the investment amount, the projects shall be subject to the approval of NDRC. If the amount of the investment made by the Chinese party is US$2 billion or more, and the project is related to the sensitive countries, areas or industries, the projects shall be subject to the examination of NDRC and then shall be reported to the State Council for the approval. Other than the projects specified above, the other projects shall be subject to the filing with the competent governmental body.

Specifically, overseas investment projects carried out by enterprises under central management, or those carried out by local enterprises in which the amount of Chinese investment reaches or exceeds US$300 million shall be subject to the filing with NDRC. Those carried out by local enterprises in which the amount of Chinese investment is below US$300 million shall be subject to the filing with competent investment departments of the provincial government.

Investment projects to be carried out in Hong Kong and/or Macau shall be governed by the Measures for the Administration of Approval and Filing of Overseas Investment Projects.

On 14 September 2015, the NDRC issued the NDRC Notice, which became effective on the same day. In order to encourage the use of low-cost capital in the international capital markets in promoting investment and steady growth and to facilitate cross-border financing, the NDRC Notice abolishes the case-by-case quota review and approval system for the issuance of foreign debts by PRC enterprises and sets forth the following measures to promote the administrative reform of the issuance of foreign debts by PRC enterprises or overseas enterprises and branches controlled by PRC enterprises:

¼ steadily promote the administrative reform of the filing and registration system for the issuance of foreign debts by enterprises;

¼ increase the size of foreign debts issued by enterprises, and support the transformation and upgrading of key sectors and industries;

¼ simplify the filing and registration of the issuance of foreign debts by enterprises; and

¼ strengthen the supervision during and after the process to prevent risks.

For the purposes of the NDRC Notice, “foreign debts” means RMB-denominated or foreign currency– denominated debt instruments with a maturity of one year or above which are issued offshore by PRC enterprises and their controlled offshore enterprises or branches and for which the principal and interest are repaid as agreed, including offshore bonds and long-term and medium-term international commercial loans, etc. According to this definition, offshore bonds issued by both PRC enterprises and their controlled offshore enterprises or branches shall be regulated by the NDRC Notice.

–115– Pursuant to the NDRC Notice, an enterprise shall: (i) apply to the NDRC for the filing and registration procedures prior to the issuance of the bonds; and (ii) shall report the information on the issuance of the bonds to NDRC within 10 working days after the completion of each issuance. The materials to be submitted by an enterprise shall include an application report and an issuance plan, setting out details such as the currency, size, interest rate, term, use of proceeds and remittance details. The NDRC shall decide whether to accept an application within 5 working days of receipt and shall issue an enterprise foreign debt pre-issuance registration certificate within 7 working days of accepting the application.

To issue foreign debts, an enterprise shall meet these basic conditions:

¼ have a good credit history with no default in its issued bonds or other debts;

¼ have sound corporate governance and risk prevention and control mechanisms for foreign debts; and

¼ have a good credit standing and relatively strong capability to repay its debts.

Pursuant to the NDRC Notice, the NDRC shall control the overall size of foreign debts that can be raised by PRC enterprises and their controlled overseas branches or enterprises. Based on trends in the international capital markets, the needs of the PRC economic and social development and the capacity to absorb foreign debts, the NDRC shall reasonably determine the overall size of foreign debts and guide the funds towards key industries, key sectors, and key projects encouraged by the State, and effectively support the development of the real economy. When the limit of the overall size of foreign debts has been exceeded, the NDRC shall make a public announcement and shall no longer accept applications for filing and registration. According to the NDRC Notice, the proceeds raised may be used onshore or offshore according to the actual needs of the enterprises, but priority shall be given to supporting the investment in major construction projects and key sectors, such as “One Belt and One Road”, the coordinated development of Beijing, Tianjin, and Hebei province, the Yangtze River Economic Belt, international cooperation on production capacity, and the manufacturing of equipment. As the NDRC Notice is recently published, certain detailed aspects of its interpretation and application remain subject to further clarification.

The Company has made an application for the Pre-issuance Registration of the offering of the Bonds with the NDRC in accordance with the NDRC Circular (the “Pre-issuance Registration”). The Company has received an Enterprise Foreign Debt Pre-Issuance Registration Certificate dated 15 January 2016 from the NDRC in connection with the Pre-Issuance Registration. Pursuant to the requirements of the NDRC Circular, the Company is also required to report certain details of the Bonds to the NDRC within ten working days after the closing date of the offering.

MOFCOM Supervision

MOFCOM issued the new version of the Overseas Investment Administration Rules（境外投資管理辦法） (the “New Overseas Investment Rules”) on 6 September 2014, effective from 6 October 2014. Under the New Overseas Investment Rules, a domestic enterprise intending to carry out any overseas investment shall report to the competent department of commerce for approval or filing and the competent department of commerce shall, with regard to an enterprise so verified or filed, issue thereto an Enterprise Overseas Investment Certificate（企業境外投資證書）. If two or more enterprises make joint investment to establish an overseas enterprise, the larger (or largest) shareholder shall be responsible for the approval or filing procedure after obtaining written consent of other investing parties.

An enterprise that intends to invest in a sensitive country or region or a sensitive industry shall apply for the approval by MOFCOM. “Sensitive countries and regions” mean those countries without a diplomatic relationship with the PRC, or subject to the United Nations sanctions or otherwise under the list of countries and regions published by MOFCOM from time to time. “Sensitive industries” mean those industries involving the products and technologies which are restricted from being exported, or affecting the interests of more than one country (or region). In accordance with the New Overseas Investment Rules, a central enterprise shall apply to MOFCOM for approval and MOFCOM shall, within 20 working days after accepting such application, decide whether or not the approval is granted. For a local enterprise, it shall apply through the provincial department of commerce to MOFCOM for such approval. The provincial department of commerce shall give a preliminary opinion within 15 working days after accepting such local enterprise’s application and submit all application documents to

–116– MOFCOM, while MOFCOM shall decide whether or not the approval is granted within 15 working days of receipt of such preliminary opinion from the provincial department of commerce. Upon approval, the Enterprise Overseas Investment Certificate shall be issued to the investing enterprise by MOFCOM.

Other than those overseas investments subject to MOFCOMs’ approval as described above, all other overseas investments are subject to a filing procedure. The investing enterprise shall complete the filing form through the Overseas Investment Management System （境外投資管理系統）, an online system maintained by MOFCOM and print out a copy of such filing form for stamping with the company chop, and then submit such stamped filing form together with a copy of its business licence, for filing at MOFCOM (for a central enterprise（中央企業）) or the provincial department of commerce (for a local enterprise) respectively. MOFCOM or the provincial department of commerce shall accept the filing and issue the Enterprise Overseas Investment Certificate within three working days of receipt of such filing form.

The investing enterprise must carry out the investment within two years of the date of the relevant Enterprise Overseas Investment Certificate, otherwise such certificate will automatically become invalid and a new filing or verification application has to be made by the investing enterprise. In addition, if any item specified in such certificate is changed, the investing enterprise shall make the change of registration at MOFCOM or the provincial department of commerce (as the case may be).

If an overseas investee company carries out a re-investment activity offshore, the investing enterprise shall report such re-investment activity to MOFCOM or the provincial department of commerce (as the case may be) after the legal process of the investment is completed offshore. The investing enterprise shall complete and print out a copy of the Overseas Chinese-invested Enterprise Re-investment Report Form（境外中資企業再投資報告表）from the Overseas Investment Management System and stamp and submit such form to MOFCOM or the provincial department of commerce.

The New Overseas Investment Rules specifically provide that an overseas investee company cannot use the words of “China” (“中國”or“中華”) in its name, unless otherwise approved.

Foreign Exchange Administration

According to the Notice of the State Administration of Foreign Exchange on Issuing the Provisions on the Foreign Exchange Administration of the Overseas Direct Investment of Domestic Institutions（國家 外匯管理局關於發布《境內機構境外直接投資外匯管理規定》的通知）, which was promulgated on 13 July 2009 and became effective on 1 August 2009, corporations, enterprises or other economic organisations (domestic investors) that have been permitted to make outbound investment shall go through the procedures of registration to the Foreign Exchange Bureau （外匯管理機構）. The Foreign Exchange Bureau shall issue the Foreign Exchange Registration Certificate （外匯登記證） for overseas direct investment to the domestic institution. The domestic institution shall go through the formalities for outward remittance of funds for overseas direct investment at a designated foreign exchange bank by presenting the approval document issued by the department in charge of overseas direct investment and the Foreign Exchange Registration Certificate for overseas direct investment. The scope of foreign exchange funds for overseas direct investment of domestic institutions includes their own foreign exchange funds, domestic loans in foreign currencies in compliance with relevant provisions, foreign exchange purchased with Renminbi, material objects, intangible assets and other foreign exchange funds approved by the Foreign Exchange Bureaus for overseas direct investment. The profits gained from overseas direct investment of domestic institutions may be deposited in overseas banks and used for overseas direct investment.

State-owned Assets Supervision

The Interim Measures for Administration of Overseas State-owned Property Rights of Central Enterprises （中央企業境外國有產權管理暫行辦法） and the Interim Measures for the Supervision and Administration of Overseas State-owned Assets of Central Enterprises（中央企業境外國有資產監督管理暫 行辦法） also apply to overseas investment projects. Where overseas enterprises wholly owned or controlled by central enterprises or their subsidiaries at all levels conduct economic activities such as transferring or acquiring properties, making non-monetary contribution, changing the state-owned shareholding in non-listed companies, consolidation, division, dissolution or liquidation, they shall

–117– appoint a professional agency with the corresponding qualifications, professional experiences and good reputation to evaluate or assess the subject matters, and the evaluation items or valuation results shall be submitted to SASAC for record-filing or approval (as the case may be).

Pursuant to the Interim Measures for Administration of Overseas State-owned Property Right of Central Enterprises, the central enterprise shall, in a unified way, apply for property right registration with the SASAC, where any of the following events take places in connection with a central enterprise or its subsidiaries at all levels:

(1) where an overseas enterprise is established by way of investment, division or consolidation, or the property right of an overseas enterprise is obtained for the first time by way of acquisition or equity investment;

(2) where any change occurs to an overseas enterprise’s basic information including its name, registration place, registered capital and the main business scope, or the overseas enterprise’s property right information changes due to any changes in the capital contributors, amount of capital contributions and proportions of capital contributions;

(3) where an overseas enterprise no longer keeps state-owned property right due to dissolution, bankruptcy, or property right transfer and capital reduction; or

(4) other circumstances in which property right registration needs to be made.

LAWS AND REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION

Pursuant to the Environmental Protection Law of the PRC ( 中華人民共和國環境保護法）, the Prevention and Control of Atmospheric Pollution Law of the PRC（中華人民共和國大氣污染防治法）, Prevention and Control of Water Pollution Law of the PRC （中華人民共和國水污染防治法）, Law of the PRC on Prevention and Control of Environmental Pollution of Solid Waste（中華人民共和國固體廢物污染環境防治 法, Construction Law of the PRC（中華人民共和國建築法）, Environmental Impact Evaluation Law of the PRC （中華人民共和國環境影響評價法） and the Regulation on the Environmental Protection of Construction Projects（建設項目環境保護管理條例）and the Measures on the Inspection and Acceptance of the Environmental Protection Work Upon Completion of Construction Projects（建設項目竣工環境保護驗 收管理辦法）and other relevant laws and regulations, a construction enterprise shall adopt measures to control environmental pollution and damage caused by dust, waste gas, sewage, solid waste, noise and vibration at the construction site in accordance with the laws and regulations on environmental protection and work safety. The PRC implements an environmental impact evaluation system for construction projects. The enterprise that develops the project shall prior to the commencement of construction of the construction project; submit the environmental impact report, environmental impact statement or environmental impact record of the construction project for approval. The competent administrative authorities for environmental protection shall respond and inform the enterprise in writing within 60 days from the date of receipt of the environmental impact report, 30 days from the date of receipt of the environmental impact statement and 15 days from the date of receipt of the environmental impact record, respectively. Supporting facilities for environmental protection required by a construction project shall be designed, constructed and put into operation simultaneously with the main utilities. Upon completion of the main utilities of the construction project, if a trial production is needed, the supporting facilities for environmental protection shall be put into trial operation simultaneously. During the trial production period of the construction project, the enterprise shall oversee the operation of the environmental protection facilities and monitor the environmental impact of the construction project. Upon completion of the construction project, the enterprise shall submit application to the competent administrative authorities for environmental protection for the inspection and acceptance of the environment being protected upon completion of the construction project.

LAWS AND REGULATIONS RELATING TO PRODUCTION SAFETY

On 29 June 2002, The Standing Committee of the National People’s Congress passed the Production Safety Law of the PRC（中華人民共和國安全生產法）(implemented on 1 November 2002 and amended on 31 August 2014), pursuant to which, enterprises engaging in production and business operation activities shall observe the relevant laws, regulations concerning production safety, strengthen the administration of production safety, establish and perfect the accountability system for production safety, perfect the conditions for production safety, and ensure the safety in production. They shall also

–118– set up apparent safety warning signs at the production or business operation sites or on the relevant facilities or equipment that have substantial dangerous elements. Except for enterprises engaged in mining, metal smelting, building construction, or road transportation or an entity manufacturing, marketing, or storing hazardous substances, other production and business operation enterprises with more than 100 employees shall establish an administrative organisation for production safety or have full-time personnel for the administration of production safety. For production and business operation enterprises with not more than 300 employees, they shall have full or part time personnel for the administration of production safety. The safety facilities of the newly built or rebuilt or expanded engineering projects shall be designed, built and put into production and use at the same time with the main subject of the projects. The Measures for Regulating the Production Safety of Electricity（電力安 全生產監督管理辦法）, promulgated and implemented on 17 February 2015 and 1 March 2015 respectively, further emphasised that the electricity enterprises are the accountability subjects for production safety of electricity and shall be responsible for overall production safety of the entity. The electricity enterprise shall build and implement the production accountability system for production safety at all levels, and establish a sound assurance system for production safety in electricity generation and supervision system for production safety in electricity generation.

On 30 November 2009, the MWR, the State Administration for Industry and Commerce, the State Administration of Work Safety and the SERC jointly promulgated the Notice Regarding the Strengthening of the Safety Supervision Work in Small Hydropower Station（關於加强小水電站安全監管 工作的通知）, which emphasised the relevant administrative department shall strengthen the safety supervision on small hydropower stations that are construction in progress and completed small hydropower station with an installed capacity of less than 50,000 kW. For the purposes of the completed small hydropower projects, the relevant dam administration enterprises shall submit registration applications to the competent department or the designated registration authority as prescribed by the regulations. The relevant administrative department shall conduct the safety enforcement inspections on small hydropower stations already in operation, focus on inspecting whether there are potential safety concerns in their engineering equipment facilities, the accountability system for production safety is being implemented, the administration for production safety is sound and the administration system is perfect. The electricity supervision authority shall strengthen the supervision and administration on the network-related safety of small hydropower stations which are consolidated into the power grid connection, to ensure the safety of power grid network and network enterprises.

In addition, according to the Provisional Regulation for Electric Power Production Accident Investigation（電力生產事故調查暫行規定）(implemented since 1 March 2005) issued by the SERC on 28 December 2004, the electricity enterprise shall report to the SERC immediately and within 24 hours in the event of significant human injury, power grid accident, equipment accident or fire accident, dam break of power plant and blackout that causes serious impact to the society.

LAWS AND REGULATIONS RELATING TO LABOUR PROTECTION

Labour laws and regulations of the PRC mainly include the Labour Law（勞動法）, promulgated on 5 July 1994, the Labour Contract Law（勞動合同法）, promulgated on 29 June 2007 and amended on 28 December 2012 and the Regulations for the Implementation of Labour Contract Law（勞動合同法實施條） promulgated on 18 September 2008. The above-mentioned laws and regulations regulate the labour relationship established between the employers and employees, the formation, performance, termination and amendments of labour contracts, confirm the rights and obligations of both parties to the labour contract and protect the legal interest of the employees.

Pursuant to the Social Insurance Law（社會保險法）promulgated on 28 October 2010, enterprises should enter into labour contracts with employees and maintain employees’ social insurance in compliance with the law, including basic retirement insurance, basic medical insurance, occupational injury insurance, unemployment insurance and maternity insurance.

According to the requirements of the Regulations for Administration of Housing Provident Fund（住房公 積金管理條例）promulgated on 3 April 1999 and amended on 24 March 2002, enterprises should make Housing Provident Fund contributions for their employees timely with sufficient amounts, and the contribution ratio must not be lower than 5% of the average monthly salaries of the employees in the previous year.

–119– TAXATION

The following summary of certain British Virgin Islands, Hong Kong and PRC tax consequences of the purchase, ownership and disposition of Bonds is based upon applicable laws, regulations, rulings and decisions in effect as at the date of this Offering Circular, all of which are subject to change (possibly with retroactive effect). This discussion does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Bonds and does not purport to deal with consequences applicable to all categories of investors, some of which may be subject to special rules. Persons considering the purchase of Bonds should consult their own tax advisers concerning the tax consequences of the purchase, ownership and disposition of Bonds.

BRITISH VIRGIN ISLANDS

The Issuer and all dividends, interest, rents, royalties, compensation and other amounts paid by the Issuer to persons who are not resident in the British Virgin Islands and any capital gains realised with respect to any shares, debt obligations, or other securities of the Issuer by persons who are not resident in the British Virgin Islands are exempt from all provisions of the Income Tax Ordinance in the British Virgin Islands.

No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not resident in the British Virgin Islands with respect to any shares, debt obligation or other securities of the Issuer.

All instruments relating to transfers of property to or by the Issuer and all instruments relating to transactions in respect of the shares, debt obligations or other securities of the Issuer and all instruments relating to other transactions relating to the business of the Issuer are exempt from payment of stamp duty in the British Virgin Islands. This assumes that the Issuer does not hold an interest in real estate in the British Virgin Islands.

There are currently no withholding taxes or exchange control regulations in the British Virgin Islands applicable to the Issuer or its members.

HONG KONG

Withholding tax

No withholding tax is payable in Hong Kong on payments of principal or interest on the Bonds or in respect of any capital gains arising from the sale of the Bonds.

Profits tax

Hong Kong profits tax is chargeable on every person carrying on a trade, profession or business in Hong Kong in respect of profits arising in or derived from Hong Kong from such trade, profession or business (excluding profits arising from the sale of capital assets).

Interest on the Bonds may be deemed to be profits arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong in the following circumstances:

(a) interest on the Bonds is derived from Hong Kong and is received by or accrues to a company carrying on a trade, profession or business in Hong Kong;

(b) interest on the Bonds is derived from Hong Kong and is received by or accrues to a person, other than a company (such as a partnership), carrying on a trade, profession or business in Hong Kong and is in respect of the funds of that trade, profession or business; or

(c) interest on the Bonds is received by or accrues to a financial institution (as defined in the Inland Revenue Ordinance (Cap. 112) of the Laws of Hong Kong) and arises through or from the carrying on by the financial institution of its business in Hong Kong.

– 120 – Sums received by or accrued to a financial institution by way of gains or profits arising through or from the carrying on by the financial institution of its business in Hong Kong from the sale, disposal and redemption of the Bonds will be subject to Hong Kong profits tax.

Sums derived from the sale, disposal or redemption of the Bonds will be subject to Hong Kong profits tax where received by or accrued to a person, other than a financial institution, from the carrying on of a trade, profession or business in Hong Kong and the sum has a Hong Kong source. The source of such sums will generally be determined by having regard to the manner in which the Bonds are acquired and disposed of.

Stamp duty

No Hong Kong stamp duty will be chargeable upon the issue or transfer of a Bond.

PRC

The following summary describes the principal PRC tax consequences of ownership of the Bonds 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 Bondholders in this “Taxation” section. In considering whether to invest in the Bonds, investors should consult their individual tax advisers 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 per cent. in respect of their taxable income. If relevant PRC tax authorities decide, in accordance with applicable tax rules and regulations, that the “de facto management body” of the Issuer or the Guarantor is within the territory of PRC, the Issuer or the Guarantor may be held to be a PRC tax resident enterprise for the purpose of the EIT Law and be subject to PRC enterprise income tax at the rate of 25 per cent. on its taxable income. At the date of this Offering Circular, neither the Issuer nor the Guarantor has 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 or the Guarantor 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 acting as a withholding agent, who must withhold the tax amount from each payment. Accordingly, in the event the Issuer or the Guarantor is deemed to be a PRC tax resident enterprise by the PRC tax authorities in the future, the Issuer or the Guarantor may be required to withhold income tax from the payments of interest in respect of the Bonds to any non-PRC Bondholder, and gain from the disposition of the Bonds may be subject to PRC tax, if the income or gain is treated as PRC-source. The tax rate is generally 10 per cent. for non-resident enterprise Bondholders without an establishment within the PRC or whose incomes have no connection to its establishment inside the PRC and 20 per cent. in the case of non-resident individuals, unless a lower rate is available under an applicable tax treaty. The Issuer and the Guarantor have agreed to pay additional amounts to Bondholders, 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 Bonds.

The Proposed Financial Transactions Tax (“FTT”)

On 14 February 2013, the European Commission published a proposal (the “Commission’s Proposal”) for a Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the “Participating Member States”). However, Estonia has since stated that it will not participate.

The Commission’s Proposal has very broad scope and could, if introduced, apply to certain dealings in the Bonds (including secondary market transactions) in certain circumstances.

– 121 – Under the Commission’s Proposal the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in the Bonds where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, “established” in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.

However, the FTT proposal remains subject to negotiation between the participating Member States. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate.

Prospective holders of the Bonds are advised to seek their own professional advice in relation to the FTT.

– 122 – DESCRIPTION OF CERTAIN MATERIAL DIFFERENCES BETWEEN THE PRC GAAP AND IFRS

The Audited Consolidated Financial Statements of the Company have been prepared in accordance with PRC GAAP.

PRC GAAP are substantially in line with IFRS, except for certain modifications which reflect China’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 the Company. The differences identified below are limited to those significant differences that are appropriate to the Company’s consolidated financial statements. Since the summary is not meant to be exhaustive, there is no assurance that the summary below is complete. The Company has not prepared a complete reconciliation of the consolidated financial information and related footnote disclosure between PRC GAAP and IFRS and has not quantified such differences. Had any such quantification or reconciliation been undertaken by the Company, 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 projects ongoing that could affect future comparisons such as this one. Finally, no attempt has been made to identify future differences between PRC GAAP and IFRS that may affect the financial information as a result of transactions 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, you must rely upon your own examination of the Company, the terms of the offering and other disclosure contained herein. You should consult your own professional advisers 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.

GOVERNMENT GRANT

Under PRC GAAP, an assets-related government grant is only required to be recognised as deferred income, and evenly amortised to profit or loss over the useful life of the related asset. However, under IFRS, such assets-related government grants are allowed to be presented in the statement of financial position either by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset.

Under PRC GAAP, the relocation compensation for public interests is required to be recognised as special payables. The income from compensation attributable to losses of fixed assets and intangible assets, related expenses, losses from production suspension incurred during the relocation and reconstruction period and purchases of assets after the relocation shall be transferred from special payables to deferred income and accounted for in accordance with the government grants standard. The surplus reached after deducting the amount transferred to deferred income shall be recognised in capital reserve.

Under IFRS, if an entity relocates for reasons of public interests, the compensation received shall be recognised in profit or loss.

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. The increased carrying amount due to reversal should not be more than what the depreciated historical cost would have been if the impairment had not been recognised.

– 123 – RELATED PARTY DISCLOSURE

Under PRC GAAP, government-related entities are not treated as related parties. Under IFRS, government-related entities may still be treated as related parties if such government-related entities can exercise significant influence over the reporting entity.

FIXED ASSETS AND INTANGIBLE ASSETS

Under PRC GAAP, only the cost model is allowed.

Under IFRS, an entity can choose either the cost model or the revaluation model as its accounting policy.

– 124 – SUBSCRIPTION AND SALE

The Issuer, the Guarantor and the Company have entered into a subscription agreement with Bank of China Limited, BOCI Asia Limited, CCB International Capital Limited, China Merchants Securities (HK) Co., Ltd., Citigroup Global Markets Limited, CLSA Limited, Guotai Junan Securities (Hong Kong) Limited and The Hongkong and Shanghai Banking Corporation Limited as joint lead managers (the “Joint Lead Managers”) dated 19 April 2016 (the “Subscription Agreement”), pursuant to which and subject to certain conditions contained therein, the Issuer has agreed to sell, and the Joint Lead Managers have agreed to severally, but not jointly, subscribe and pay for, or to procure subscribers to subscribe and pay for, the aggregate principal amount of the Bonds set forth opposite its name below:

Principal amount of the Bonds to be Joint Lead Manager subscribed Bank of China Limited...... US$ 33,750,000 BOCI Asia Limited...... US$ 33,750,000 CCB International Capital Limited...... US$ 10,000,000 China Merchants Securities (HK) Co., Ltd...... US$ 10,000,000 Citigroup Global Markets Limited...... US$ 67,500,000 CLSA Limited ...... US$ 10,000,000 Guotai Junan Securities (Hong Kong) Limited...... US$ 67,500,000 The Hongkong and Shanghai Banking Corporation Limited ...... US$ 67,500,000 Total ...... US$300,000,000

The Subscription Agreement provides that the Issuer, the Guarantor and the Company will jointly and severally indemnify the Joint Lead Managers against certain liabilities in connection with the offer and sale of the Bonds. The Subscription Agreement provides that the obligations of the Joint Lead Managers are subject to certain conditions precedent and entitles the Joint Lead Managers to terminate it in certain circumstances prior to payment being made to the Issuer.

The Joint Lead Managers and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities (“Banking Services or Transactions”). The Joint Lead Managers and their respective affiliates may have, from time to time, performed, and may in the future perform, various Banking Services or Transactions with the Issuer, the Guarantor and the Company for which they have received, or will receive, fees and expenses.

In connection with the Offering of the Bonds, the Joint Lead Managers and/or their respective affiliates, or affiliates of the Issuer, the Guarantor or the Company, may place orders, receive allocations and purchase Bonds for their own account (without a view to distributing such Bonds). Such entities may hold or sell such Bonds or purchase further Bonds for their own account in the secondary market or deal in any other securities of the Issuer, the Guarantor or the Company, and therefore, they may offer or sell the Bonds or other securities otherwise than in connection with the offering. Accordingly, references herein to the Bonds being “offered” should be read as including any offering of the Bonds to the Joint Lead Managers and/or their respective affiliates or affiliates of the Issuer, the Guarantor or the Company, for their own account. Such entities are not expected to disclose such transactions or the extent of any such investment, otherwise than in accordance with any legal or regulatory obligation to do so. Furthermore, it is possible that only a limited number of investors may subscribe for a significant proportion of the Bonds. If this is the case, liquidity of trading in the Bonds may be constrained (see “Risk Factors – Risks Relating to the Bonds, the Guarantee, the Keepwell Deed and the Deed of Equity Interest Purchase and Investment Undertaking – The liquidity and price of the Bonds following this offering may be volatile”). The Issuer, the Guarantor, the Company and the Joint Lead Managers are under no obligation to disclose the extent of the distribution of the Bonds amongst individual investors.

In the ordinary course of their various business activities, the Joint Lead Managers and their respective affiliates make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and

– 125 – for the accounts of their customers, and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the Issuer, the Guarantor and/or the Company, including the Bonds and could adversely affect the trading prices of the Bonds. The Joint Lead Managers and their affiliates may make investment recommendations and/or publish or express independent research views (positive or negative) in respect of the Bonds or other financial instruments of the Issuer. the Guarantor or the Company, and may recommend to their clients that they acquire long and/or short positions in the Bonds or other financial instruments.

In connection with the issue of the Bonds, any of the Joint Lead Managers (each, a “Stabilising Manager”) or any person acting on behalf of the Stabilising Manager may, to the extent permitted by applicable laws and directives, over-allot the Bonds or effect transactions with a view to supporting the price of the Bonds at a level higher than that which might otherwise prevail, but in so doing, the Stabilising Manager or any person acting on behalf of the Stabilising Manager shall act as principal and not as agent of the Issuer, the Guarantor or the Company. However, there is no assurance that the Stabilising Manager or any person acting on behalf of the Stabilising Manager will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the Bonds is made and, if begun, may be ended at any time, and must be brought to an end after a limited period. Any loss or profit sustained as a consequence of any such overallotment or stabilisation shall be for the account of the Joint Lead Managers.

General

The distribution of this Offering Circular or any offering material and the offering, sale or delivery of the Bonds are subject to restrictions and may not be made except pursuant to registration with or authorisation by the relevant securities regulatory authorities or an exemption therefrom. Therefore, persons who may come into possession of this Offering Circular or any offering material are advised to consult with their own legal advisors as to what restrictions may be applicable to them and to observe such restrictions. This Offering Circular may not be used for the purpose of an offer or invitation in any circumstances in which such offer or invitation is not authorised.

No action has been or will be taken in any jurisdiction by the Issuer, the Guarantor, the Company, or the Joint Lead Managers that would, or is intended to permit a public offering, or any other offering under circumstances not permitted by applicable law, of the Bonds, or possession or distribution of this Offering Circular, any amendment or supplement thereto issued in connection with the proposed resale of the Bonds or any other offering or publicity material relating to the Bonds, in any country or jurisdiction where action for that purpose is required. Persons into whose hands this Offering Circular comes are required by the Issuer, the Guarantor, the Company and the Joint Lead Managers to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Bonds or have in their possession, distribute or publish this Offering Circular or any other offering material relating to the Bonds, in all cases at their own expense.

If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Joint Lead Managers or any of their respective affiliates is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the Joint Lead Managers or such affiliate on behalf of the Issuer in such jurisdiction.

United States

The Bonds and the Guarantee have not been and will not be registered under the Securities Act and may not be offered or sold within the United States unless pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Bonds and the Guarantee are being offered and sold outside of the United States in reliance on Regulation S.

– 126 – United Kingdom

Each of the Joint Lead Managers has represented, warranted and agreed that:

(i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of the Bonds in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or the Guarantor; and

(ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom.

British Virgin Islands

Each of the Joint Lead Managers has represented, warranted and agreed that no invitation will be made directly or indirectly to any person resident in the British Virgin Islands to subscribe for any of the Bonds but the Bonds may be acquired by British Virgin Islands persons who receive the offer of the Bonds outside of the British Virgin Islands and in a manner which does not contravene the laws of the jurisdiction in which such offer is received.

Hong Kong

Each of the Joint Lead Managers has represented, warranted and agreed that:

(i) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Bonds other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) or which do not constitute an offer to the public within the meaning of that Ordinance; and

(ii) 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 Bonds, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Bonds which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

Singapore

Each of the Joint Lead Managers has acknowledged that this Offering Circular has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each of the Joint Lead Managers has represented, warranted and agreed that it has not offered or sold any Bonds or caused such Bonds to be made the subject of an invitation for subscription or purchase and will not offer or sell such Bonds or cause such Bonds 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 Offering Circular or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of such Bonds, 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.

This Offering Circular has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Offering Circular and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of any Bonds may not be circulated or distributed, nor may any Bonds 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 SFA, (ii) to a relevant person pursuant to Section 275(1),

– 127 – 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 Bonds are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(i) 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

(ii) 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 Bonds pursuant to an offer made under Section 275 of the SFA except:

(i) 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;

(ii) where no consideration is or will be given for the transfer;

(iii) where the transfer is by operation of law;

(iv) as specified in Section 276(7) of the SFA; or

(v) as specified in Regulation 32 of the Securities and Futures (Offer of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

The PRC

Each of the Joint Lead Managers has represented, warranted and agreed that the Bonds are not being offered or sold and may not be offered or sold, directly or indirectly, in the People’s Republic of China (for such purposes, not including the Hong Kong and Macau Special Administrative Regions or Taiwan), except as permitted by the securities laws of the People’s Republic of China.

Taiwan

Each of the Joint Lead Managers has represented, warranted and agreed that it has not offered, sold or delivered, and it will not offer, sell or deliver, at any time, directly or indirectly, any Bonds acquired by it as a part of the offering in Taiwan or to, or for the account or benefit of, any resident of Taiwan, except as permitted by the securities laws of Taiwan.

– 128 – GENERAL INFORMATION

AUTHORISATIONS

The Issuer has obtained all necessary consents, approvals and authorisations in connection with the issue and performance of its obligations under the Bonds, the Trust Deed, the Agency Agreement, the Keepwell Deed and the Deed of Equity Purchase and Investment Undertaking. The issue of the Bonds was authorised by the resolutions of the sole director of the Issuer on 26 February 2016.

The Guarantor has obtained all necessary consents, approvals and authorisations in connection with the giving and performance of the Guarantee and the execution of the Trust Deed, the Agency Agreement, the Keepwell Deed and the Deed of Equity Purchase and Investment Undertaking. The giving of the Guarantee was authorised by the resolutions of the board of directors of the Guarantor on 11 April 2016.

The Company has obtained all necessary consents, approvals and authorisations in connection with entry into the Keepwell Deed and the Deed of Equity Interest Purchase and Investment Undertaking and the entry into the transaction documents in connection with the Bonds was authorised by the resolutions of the board of directors of the Company on 11 April 2016.

The Company has received an Enterprise Foreign Debt Pre-Issuance Registration Certificate dated 15 January 2016 from the NDRC in connection with the Pre-Issuance Registration.

LITIGATION

Save for disclosed in this Offering Circular, there are no legal or arbitration proceedings against or affecting the Issuer, the Guarantor, the Company, any of their respective subsidiaries or any of their assets, and each of the Issuer, the Guarantor and the Company is not aware of any pending or threatened proceedings, which are material in the context of the issue of the Bonds or the giving of the Guarantee.

NO MATERIAL ADVERSE CHANGE

Since 31 December 2015, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in or affecting the general affairs, financial condition, results of operations or prospects of the Issuer, the Guarantor, the Company and any of their respective subsidiaries.

DOCUMENTS AVAILABLE

As long as any Bonds is outstanding, hard copies of the following documents will be available for inspection during normal business hours at the specified office of the Principal Paying Agent following prior written request:

(i) articles of association (or equivalent) of the Issuer, the Guarantor and the Company;

(ii) copies of the audited consolidated financial statements of the Guarantor as at and for the years ended 31 December 2014 and 2015;

(iii) copies of the audited consolidated financial statements as at and for the years ended 31 December 2012, 2013 and 2014 and the audited consolidated financial statements as at and for the year ended 31 December 2015;

(iv) the Trust Deed;

(v) the Agency Agreement;

(vi) the Keepwell Deed; and

(vii) the Deed of Equity Interest Purchase and Investment Undertaking.

– 129 – CLEARING SYSTEM AND SETTLEMENT

The Bonds will be represented initially by beneficial interests in the Global Certificate in registered form which will be registered in the name of a nominee of, and shall be deposited on or about the Issue Date with, a common depositary for Euroclear and Clearstream, Luxembourg. Beneficial interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream, Luxembourg. Except as described herein, certificates for Bonds will not be issued in exchange for interests in the Global Certificate.

FINANCIAL STATEMENTS

The consolidated financial statements of the Company as at and for the years ended 31 December 2013, 2014 and 2015 were prepared and presented in accordance with the PRC GAAP and have been audited by Union Power Certified Public Accountants (Special General Partnership) in accordance with Auditing Standards for Certified Public Accountants in China. The consolidated financial statements of the Guarantor as at and for the year ended 31 December 2014 and 2015 were prepared and presented in accordance with HKFRS issued by the Hong Kong Institute of Certified Public Accountants and have been audited by Union Alpha CAAP C.P.A. Limited.

AUDITOR’S CONSENT

Union Power Certified Public Accountants (Special General Partnership) has given and not withdrawn their written consent to the reproduction of its audit report dated 12 April 2016 with respect to the Company for the year ended 31 December 2015 and its audit report dated 12 April 2016 with respect to the Company for the years ended 31 December 2012, 2013 and 2014 in this Offering Circular and with references to its name in the form and context in which they appear.

Union Alpha CAAP C.P.A. Limited has given and not withdrawn their written consent to the reproduction of its audit report dated 12 April 2016 for the year ended 31 December 2015 with respect to the Guarantor and its audit report dated 25 June 2015 with respect to the Guarantor for the year ended 31 December 2014 in this Offering Circular and with references to its name in the form and context in which they appear.

LISTING OF THE BONDS

Application has been made to the Hong Kong Stock Exchange for permission to deal in, and for listing of the Bonds by way of debt issues to professional investors only, and such permission is expected to become effective on or about 27 April 2016.

– 130 – INDEX TO FINANCIAL STATEMENTS

Page

Audited Consolidated Financial Statements of the Company as at and for the Year Ended 31 December 2015 Auditor’s Report ...... F-2 Consolidated Balance Sheet ...... F-4 Consolidated Income Statement ...... F-6 Consolidated Cash Flow Statement...... F-7 Consolidated Statement of Changes in Owner’s Equity ...... F-8 Company’s Balance Sheet ...... F-10 Company’s Income Statement ...... F-12 Company’s Cash Flow Statement ...... F-13 Company’s Statement of Changes in Owner’s Equity...... F-14 Notes to the Consolidated Financial Statements...... F-16

Audited Consolidated Financial Statements of the Company as at and for the Years Ended 31 December 2012, 2013 and 2014 Auditor’s Report...... F-181 Consolidated Balance Sheet ...... F-183 Consolidated Income Statement ...... F-185 Consolidated Cash Flow Statement...... F-186 Consolidated Statement of Changes in Owner’s Equity ...... F-187 Company’s Balance Sheet ...... F-190 Company’s Income Statement ...... F-192 Company’s Cash Flow Statement ...... F-193 Company’s Statement of Changes in Owner’s Equity...... F-194 Notes to the Consolidated Financial Statements...... F-197

Audited Consolidated Financial Statements of the Guarantor as at and for the Year Ended 31 December 2015 Directors’ Report ...... F-300 Independent Auditor’s Report ...... F-303 Consolidated Statement of Profit or Loss ...... F-305 Consolidated Statement of Profit or Loss and Other Comprehensive Income ...... F-306 Consolidated Statement of Financial Position ...... F-307 Consolidated Statement of Changes in Equity ...... F-309 Consolidated Statement of Cash Flows ...... F-311 Accounting Policies and Explanatory Notes to the Consolidated Financial Statements ...... F-313

Audited Consolidated Financial Statements of the Guarantor as at and for the Year Ended 31 December 2014 Directors’ Report ...... F-377 Independent Auditor’s Report ...... F-380 Consolidated Statement of Profit or Loss and Other Comprehensive Income ...... F-382 Consolidated Statement of Financial Position ...... F-383 Consolidated Statement of Changes in Equity ...... F-386 Consolidated Statement of Cash Flows ...... F-387 Accounting Policies and Explanatory Notes to the Consolidated Financial Statements ...... F-389

– F-1 – – F-2 –  Add˖NoDŽ169 Donghu RoadˈWuchang DistrictˈWuhan UNION POWER CERTIFIED PUBLIC ACCOUNTANTS Postcode˖430077 (SPECIAL GENERAL PARTNERSHIP) TEL˖027 86770549 Fax˖027 85424329 statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entityÿs preparation of financial statements that give a true and fair view 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 entityÿs internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

3.Audit Opinion In our opinion, the accompanying financial statements present fairly, in all material respects , the company and the consolidated financial position of the Company as on December 31, 2015, and the parent company operating results and cash flows in year 2015.

UNION POWER CERTIFIED PUBLIC ACCOUNTANTS (SPECIAL GENERAL PARTNERSHIP)

Chinese Certified Public ccountant: Xu Yi

Chinese Certified Public Accountant: Chen Rongju

Wuhan, China

April ,12, 2016

– F-3 – – F-4 – – F-5 – – F-6 – – F-7 – – F-8 – – F-9 – – F-10 – – F-11 – – F-12 – – F-13 – – F-14 – – F-15 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Yunnan Provincial Energy Investment Group Co., Ltd. Notes to the consolidated financial statements

1 Company’s basic situation

1.1 General information

In accordance with YunZhengFu (2012) No. 4, The Approval of Forming Yunnan Provincial Energy Investment

Group Co., Ltd. issued by the government of Yunnan province, Yunnan Provincial Energy Investment Group Co., Ltd. is funded by Yunnan Provincial Investment Holdings Group Co., Ltd. (hereinafter ‘the Group Company’) with its entire power assets and related equity assets in book value.

Yunnan Provincial Energy Investment Group Co., Ltd. (hereinafter ‘the Company’ or ‘Parent Company’) was established on 17 February 2012. Issued by Administrative Bureau of Industry and Commerce of Yunnan province, its business license number is 530000000036318. Its registered capital is 11,659,997,600.00 yuan , and its registered address is 19th-23rd floor, Meiya Building, Mid Renmin Road, Kunming, Yunnan Province, China. Duan Wenquan is the legal representative.

1.2 Business scope

Company business scope are: investment and management of electric power, coal energy, green energy, new energy and other electric-related resources; investment planning, and its technical, consulting and information services.

It is also involved in co-investment of petroleum and natural gas resources and the pipe networks.

1.3 Actual controller of the company

The controlling shareholder of the company is Yunnan Provincial Investment Holdings Group Co., Ltd., and the ultimate controller is Yunnan Provincial People's government state owned assets supervision and Administration

Commission.

1.4 Approval of the financial statements.

The financial statements shall be approved by the board of directors of the company.

2 Major accounting policies and accounting estimates

2.1 Basis of preparation for financial statements

The financial statements of the Company and its subsidiaries are prepared on going concern basis. They are in compliance with the Accounting Standard for Business Enterprises, based on the following accounting policies and

Page13

– F-16 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements accounting estimates.

2.2 Declaration on abiding by the enterprise accounting standards

The Company follows the requirements of enterprise accounting standards in preparing financial statements, which authentically and completely reflect the consolidated and the Company’s financial status and the consolidated, and the

Company’s operating result and cash flow.

2.3 Accounting period

Accounting period is divided into interim period and full accounting year.Interim period is divided into semi annual, quarterly and monthly. The date of annual, semi annual, quarterly and monthly period is according to the Gregorian calendar date. The company's fiscal year is from January 1st. to December 31st.

2.4 Recording currency

RMB is the monetary currency of the Company.

2.5 Accounting treatment of enterprise merger under the same control and not under the same control

2.5.1 Merger under the same controller

Merger under the same control is that the enterprises involved in the merger are controlled by the same party or the same multi party permanently. Normally merger under the same control refers to the merger between the enterprises in the same group; in addition, others are not merger under the same controller.

Long-term equity investment obtained from the merger of enterprises under the same controller, to which the company's share of the combined date of the merger of the owner's equity in the final control party combined with financial statements in the book value of the initial investment costs, and the relevant accounting treatment refers to long-term equity investments; The assets and liabilities acquired under the same controller, and their book value of the consolidated financial statements of the consolidated party's owner's equity in the consolidated financial statements.

The adjustment of capital reserve (premium on capital stock) is on the basis of the balance between the book value of net assets and the book value of payment (or total issue of shares); if the capital reserve (premium on capital stock) is insufficient to dilute, the retained earnings shall be adjusted.

As the combining party, company's direct related costs include the audit fees, assessment fees, legal service fee, etc., and they shall be expensed in current profit and loss in which they are actually incurred.

The fees paid by the bonds or other debts of the merger, the Commission, etc., are included in the initial measurement amount of the bonds and other debt. The fees and commissions for the issuance of equity securities in the merger, which are offset by the premium income of equity securities.If the Premium income is insufficient to dilute, the retained earnings shall be deducted.

Page14

– F-17 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

The subsidiary acquired through merger of enterprise under the same controller should adjust the initial number of consolidated balance sheet when preparing. At the same time, it should be adjusted on comparative statements related to the project adjustment, and regarded as the reporting entity after the merger since the controlling begins.

2.5.2 Merger not under the same controller

Merger not under the same controller is that the enterprises involved in the merger are controlled by the different party or the different multi party permanently.

Determine the cost of merger: For a long-term equity investment obtained through a business combination not involving enterprises under common control, the initial investment cost comprises of the fair value of assets transferred, liabilities incurred or assumed, and equity securities issued by the Company, in exchange for control of the acquire. A long-term equity investment achieved in stages the initial investment cost comprises the aggregate of the cost of every stage.The direct expense of merger and acquisition is record in profit and loss statement.

The long-term equity investment for the merger not under the same controller, of which the merger costs are determined on the purchase date, is considered as the initial investment cost of the long-term equity investment of the buyer. The assets and liabilities which is identifiable and meet the conditions under the different controller are recognized as the assets and liabilities of the enterprise in accordance with the fair value at the date of purchase.

The Balance that Merging cost's exceeding definable net assets fair proportion not under the same controller is validated as commercial standing; in the absorptive consolidation, the balance is recognised as goodwill in the parent company's individual financial statements; in the share merging, the balance is shown in the consolidated financial statements as the goodwill. The Balance that merging cost's exceeding definable net assets fair proportion is included in the consolidated profit and loss (non-business income). In the absorptive consolidation, the balance is included in the consolidated income statement of the parent company; in the share merging, the balance is included in the consolidated income statement.

2.5.3 To achieve enterprise merger by step

If any of the transactions of the subsidiary company to obtain the control right is to be "package deal", the transaction shall be the transaction as a control of the subsidiary company, and the type of the enterprise merger shall be distinguished for accounting treatment.

2.5.3.1 To achieve the enterprise merger under same control by step

If not belonging to a package deal and the formation of the same control enterprise merger, in the right to obtain control, according to the merger shall enjoy the share of the book value of the consolidated party's net assets in the final control party combined with financial statements, the initial investment cost of long-term equity investments. With

Page15

– F-18 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements the initial investment cost, long-term equity investment, and reached before the merger of the long-term equity investment book value and the combining date further pay for the new shares on the price of the book value and the balance, adjust capital surplus (capital premium or premium on capital stock), capital surplus not foot offset, offset retained earnings. Prior to the date of the merger, the equity investment, which is recognized by the use of equity or financial instruments, and other comprehensive income, which is recognized as a result of the accounting treatment, is not conducted until the disposal of the investment, which is used to deal with the same assets or liabilities; In the event of a change in the net assets of the invested entity, which is recognized by the use of the equity method, the owner's equity, other than the net assets of the invested entity, other than the net profit and loss, the other comprehensive income and the profit distribution, will not be processed until the disposal of the investment. Among them, after the disposal of the remaining stake in the use of cost method or equity method, other comprehensive income and other owner's rights and interests should be proportional to the ratio of the disposal of the remaining shares to the financial instrument to confirm and measurement standards for accounting treatment, other comprehensive income and other benefits should be carried forward.

Consolidated financial statements shall be prepared in accordance with the provisions of the Enterprise Accounting

Standard for Business Enterprises No. 20 - Business Combinations and consolidated financial statements. In the preparation of the consolidated financial statements should be deemed to participate in the merger of the parties in the ultimate controlling party began to control is to the current state of existence to adjust, in preparing comparative statements, to no earlier than the merging parties and merged in the ultimate controlling party control point is limited, the comparison report will be merged with the Party of the relevant assets, liabilities and with the merging party financial statements, and the combined increase of net assets in comparative statements in the adjustment of the rights and interests of the owners under the related projects. Prior to the date of merger, the combined party has confirmed that the date of the merger and the merger between the date and the date of the merger has already confirmed that the income, other comprehensive income and other owner's rights and interests shall be retained earnings or profits and losses.

2.5.3.2 To achieve the enterprise merger not under the same control by step

Enterprises achieve the enterprise merger under same control over and do not belong to a package deal through multiple transactions, in the preparation of individual financial statements, should be in accordance with the book value of the original holdings of equity investment and new investment costs, as the initial investment costs by the cost method. Prior to the purchase date of equity investments, the use of financial instruments and measurement criteria for accounting treatment should be based on the fair value of the equity investment in accordance with the criteria and the

Page16

– F-19 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements new investment costs, as the initial investment costs, the total fair value of the original ownership of equity and the total fair value of the original plan to change the current investment income.

When preparing the consolidated financial statements, the previously-held equity interest in the acquiree shall be re-measured in accordance with the value at the acquisition date, the difference between the fair value and book value shall be Included in the current investment income; The other comprehensive income, which is owned by the parties to the equity interest of other comprehensive income and other owners' rights and interests, shall be transferred to the current income of the purchase date, unless the other comprehensive income generated by the investment party to return to the measurement of net debt or net assets.

2.6 Preparation of consolidated financial statements

2.6.1 Consolidation range

Consolidated range of the consolidated financial statements is based on the control to subsidiary. Control is that the Group Company has the right to control invested company. And the company enjoys returns through active participation in events organized by invested companies; in addition, it also can influence the returns of them. The subsidiary company, is the main body which is controlled by the company (including the enterprise, can be divided in the investment unit, as well as the structure main body which the enterprise controls).

2.6.2 Preparation of consolidated financial statements

The scope of the consolidated financial statements of the company shall be determined on the basis of control.

Control is the power to determine the financial and operating policies of another enterprise, and to obtain the benefit from another enterprise's business activities.

When subsidiary acquired through merger of enterprise under the same control, the incomes, expenses, and profit of subsidiary from the beginning of the current period to 31st Dec 2014 will be incorporated into Consolidated statement of income, and its cash flow will be incorporated into consolidated statement of cash flows. When subsidiary acquired through merger of enterprise under the diffrent controller, the incomes, expenses, and profit of subsidiary from the from the date of purchase to 31st Dec 2014 will be incorporated into consolidated statement of income, and its cash flow will be incorporated into consolidated statement of cash flows.

In the consolidated balance sheet, minority interests which are not owned by the company are listed under shareholder’s equity as individual entry.DŽDŽIn the consolidated statement of income, the minority shareholders' equity share of net profits and losses of the current period is listed under minority interest income. The amount of current loss shared by parent company 's owner's equity surpass minority interest shared at the beginning of the yearDŽ

The transaction that purchase minority stake in the company or due to the disposal of part of the equity investment but doesn’t loss control over the subsidiary, is accounted as equity transaction, and adjust the book value of the owners'

Page17

– F-20 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements equity and minority interests of the parent company to reflect the changes in the relevant equity of the subsidiary company. The adjustment of capital reserve is on the basis of the balance between the book value of net assets and the book value of payment/income, if the capital reserve (premium on capital stock) is insufficient to dilute, the retained earnings shall be adjusted.

2.6.3 Treatment of control right loss of subsidiary

If the company losses the control right of subsidiary because of the disposal of part of the equity investment or other reasons, its remaining equity is measured at the fair value of the control- loss day; The difference between the sum of the fair value of the share price and the fair value of the residual equity and the calculation of the share of the net assets of the corporation shall be entitled to the loss of control over the period from the date of purchase, and writes down the goodwill. The original subsidiary equity investment of other comprehensive income and other changes in the owner's equities shall be in the loss of control transfer as investment income in the current period, other comprehensive incomes due to the invested party remeasurement set plans to use proceeds net liabilities or net assets change are excepted.

2.7 Measurement attributes

2.7.1 Measurement attribute

The company regards the Accrual Basis Accounting principle as the basis for accounting, and the initial value regards the historical cost as the measurement principle.

Financial assets/liabilities are initially recognized by fair value. Of these whose changes are recorded in current profit or loss statement, the costs of related transactions are included directly in current profit or loss; The inventory, fixed assets, etc., over normal credit terms when purchased, measurement shall be on the present value of the purchase price. The inventory with impairment losses shall be measured by net realizable value, and other Impairment

Assets measured by the recoverable amount; Asset inventory surplus measured by the replacement cost.

2.7.2 Report items of measurement attribute change

There is not any Report item of measurement attribute change .

2.8 Recognition of cash and cash equivalents

The term ‘cash’ comprise cash on hand and deposits ready for use. ‘Cash equivalents’ are the investment holdings that are short-term, highly liquid and readily convertible to known amounts of cash, and their risk of changes in value is insignificant.

2.9 Foreign currency transactions

2.9.1 Foreign currency financial statements translation

Page18

– F-21 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Foreign currencies from the foreign currency exchange or foreign exchange transactions are translated into RMB by the actual adopted rate on the transaction (the bank buying or selling price)

2.9.2 Monetary item and non - monetary item on the balance sheet date

For monetary item, the spot exchange rate on the assets/liabilities statements day is adopted for translation.

Accounting Standards for Enterprises No.17 –Borrowing costs The balance sheet date spot exchange rate and the initial recognition or the previous balance sheet date is different result in balance of exchange, in addition according to the < Accounting Standards for Enterprises No. 17 - borrowing costs > the provisions of the purchase and construction or production in line with the conditions of capital related to the assets of foreign currency borrowing exchange differences to be capitalized, included in current profit and loss.

The non monetary items measured in historical cost, which the spot exchange rate is based on the exchange rate of the transaction, and not change the amount of its functional currency. The stocks, funds and other on monetary items are measured on fair value, determine the date of the spot exchange rate conversion, and the balance of the amount of accounting standard and the amount of the original accounting standard currency is regarded as fair value changes

(including exchange rate changes), included in the current profit and loss.

2.9.3 Foreign currency financial statement conversion method

In accordance with the following provisionsˈfinancial statement in foreign currency is converted into financial statement in RMB by the company.

The items of balance sheet adopt the spot exchange rate of the balance sheet date to convert; The items of statement of changes in owner's equity adopt the spot exchange rate at current time to convert except for undistributed profit. The items of income statement adopt the spot exchange rate of the transaction date to convert. According to the above method, exchange differences is listed separately in owners' equity item of balance sheet. Cash flow statement in foreign currency adopt the spot exchange rate of the cash flow occurs day to convert. The influence of exchange rate changes for cash as reconciling item is listed separately in cash flow statement.

2.10 Financial instruments

2.10.1 Recognition of financial instruments

Financial instruments are the financial assets of a corporation, and form the contract of other companies’ financial liabilities or equity instruments. When the company becomes a party to the contract of the financial instrument, it is recognized that a financial asset or financial liability.

It will be derecognized, when financial assets meet anyone of the following conditions: When the contractual rights for collecting the cash flow of the financial asset are terminated; or when the risks and income

Page19

– F-22 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements remunerations of financial asset has been transferred, and in accordance with “Accounting Standard for Business

Enterprises No. 23—Transfer of financial assets”, the recognition of financial assets are terminated.

Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly.

2.10.2 Classification of financial assets and financial liabilities

According to the purpose of investment and Essence of economy, the companies’ financial assets are divided into four categories: a) Financial assets/liabilities are initially recognized by fair value. Of these whose changes are recorded in current profit or loss statement, the costs of related transactions are included directly in current profit or loss; b) Held-to-maturity investment c) Receivables d) Financial assets available for sale.

According to the Essence of economy, the companies’ financial liabilities are divided into two categories: a)

Financial assets/liabilities that are measured at fair value and whose changes are booked into current profit or loss

(including tradable financial assets/liabilities, and the financial assets/liabilities and their derivative instruments that are hold for sale or buy back in the near future) are subsequently measured at their fair values. b) Other Financial

Liabilities.

2.10.3 Recognition and measurement of financial assets and liabilities

Financial assets/liabilities are initially recognized by fair value. Of these whose changes are recorded in current profit or loss statement, the costs of related transactions are included directly in current profit or loss; with regard to other types of financial assets/liabilities, they costs generated in transactions are included in the initially recognized amount.

The main methods of financial assets and liabilities subsequent measurement˖

˄1˅ Financial assets/liabilities are initially recognized by fair value. Of these whose changes are recorded in current profit or loss statement, the costs of related transactions are included directly in current profit or loss

˄2˅After initial recognition, a held-to-maturity investment is measured according to the actual interest rate method with its post-amortization cost.

˄3˅Available-for-sale financial assets are measured at fair value after the initial recognition. The impairment losses and the exchange differences from foreign monetary financial assets are recorded in the current profits and losses. Other gains/losses are directly included in owner’s equity. While the available-for-sale financial assets are transferred out when they are terminated from recognizing, they are recorded into the current profits and losses.

˄4˅The equity instrument investment which has no quotation on active market and whose Fair value can not be measured reliably, and a derivative financial asset that is linked to the equity instrument and shall be settled through the

Page20

– F-23 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements delivery of the equity instrument, they shall be measured according to their cost.

˄5˅Other financial liabilities are measured by the amortized cost. Except for the following circumstances:

ķThe equity instrument investment which has no quotation on active market and whose Fair value can not be measured reliably, and derivative financial liabilities that is linked to the equity instrument and shall be settled through the delivery of the equity instrument, they shall be measured according to their cost.

ĸIs not specified as a financial guarantee contract for the financial liabilities of the current income or loss of the current profit or loss of the current period, or not specified as a measure of the amount of the loan at the current rate, which is the higher of the initial confirmation:

A. The amount of money specified in the Accounting Standard for Business Enterprises No. 13—Contingencies.

B. Initially recognized amount deducted according to the principle of Accounting Standards for Enterprises no. 14, income to determine the accumulative amortization amount of the balance.

2.10.4 Methods for determining the fair value of financial assets and financial liabilities

˄1˅As for the financial assets or financial liabilities for which there is an active market, the quoted prices in the active market shall be used to determinethe fair values thereof. Determine the price according to the following principles:

ķķThe offer of financial assets or financial liabilities held by the company is the current bid of t ਁ he market;

The offer of financial assets or financial liabilities will purchased by the company is the current offer of the market.

ĸThe financial assets and financial liabilities which have no current offer or asking price are offered by the market price of the most recent market quotation or adjusted price, unless there is clear evidence that the market offer is not fair value.

˄2˅As for the financial assets or financial liabilities for which there is not an active marke, whose fair value is determined by valuation techniques.

2.10.5 Counting and drawing method of provision for financial assets impairment

˄1˅ Held-to-maturity investment

If the current value of the predicted future cash flow (excluding future credit losses that have not been incurred) discounting at actual interest of the financial assets is below the carrying amount of the financial asset, the impairment provision of the financial assets are made, recorded into the profits and losses of the current period. If the amount of

held-to-maturity investment is more than 100,000,000.00 yuan (including 100,000,000.00 yuan), it shall be assessed separately; if the amount of held-to-maturity investment is less than 100,000,000.00 yuan, it shall be assessed according to the credit union; Held-to-maturity investment that are impaired after separate assessment shall

Page21

– F-24 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements not provided for provision on a basis of group.

˄2˅Notes receivable

The test method for the impairment and the impairment provision of notes receivable see note 2.11.

˄3˅ Financial assets available for sale

The fair value of the financial assets can be sold to a large extent, or in a comprehensive consideration of various factors, the trend is not expected to be temporary, then according to their fair value less than the difference between the book value, to confirm the impairment loss, in recognition of impairment losses, will be directly credited to the fair value of the owner's equity in the form of a total loss of the formation of the impairment loss.

˄4˅Others

When value decrease occurs in equity investment without quotation and whose fair value cannot be reliably measured in the active market, our company will calculate the difference between the book value off this investment or derivative financial asset and estimated present value, which are determined by the temporal market yield rate to future discounted cash flow of similar financial assets, confirm the difference as impairment loss and record into current profits and losses.

2.10.6 Transfer of financial assets

The transfer of financial assets refers to the transfer of the financial assets or the delivery to another party (the transferee) of the financial assets issuer.

When the risks and income remunerations of financial asset has been transferred, the recognition of financial assets are terminated; when the risks and income remunerations of financial asset has been held, the recognition of financial assets are not terminated

The company neither transfers nor retains almost all of the risks and rewards of financial asset ownership, is handled as the following situation: to give up on the financial assets control, to terminate the recognition of the financial assets and to confirm the assets and liabilities generated; Not give up the financial assets control, the relevant liabilities are confirmed in accordance with the extent of its continued involvement in the transfer of financial assets.

2.11 Account receivable

2.11.1 Confirm standard of bad debts

Due to the bankruptcy of the debrector, the account receivable indeed is unable to be recovered.The debtor has die, which is no heritage for repayment, no obligations, receivables could not be recovered; where the debtor fails to perform its obligations in three years, and after the failure of the shareholders' meeting or the board of directors for the approval of a bad debt, the debt is not recoverable and derecognized.

Page22

– F-25 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

2.11.2 Accounting method of loss on bad debt

The accounting method of loss on bad debt is allowance method.

2.11.3 Provision for bad debt provision method and provision ratio

If the current value of the predicted future cash flow (excluding future credit losses that have not been incurred) discounting at actual interest of the financial assets is below the carrying amount of the financial asset, the impairment provision of the financial assets are made, recorded into the profits and losses of the current period. To floating interest rate financial assets, when calculating future cash flow, the contractual actual interest rate is used as the discounting interest rate.

ķAccounts receivable impairment provision

Receivables comprise accounts receivable and other receivables. Accounts receivable arising from sale of goods or rendering of services are initially recognized at fair value of the contractual payments from the buyer. Receivables between the scope of the Company and all of its subsidiaries and other receivables from petty cash fund are not provided for provision.

ĸRecognition and Measurement

Receivables that are classified as individually significant and others which are insignifican:

Basis of recognition and method for the provision of impairment of receivables that is individually significant

Recognition of individually The company's out of consolidated statements of individual customers, the balance of 1000 yuan significant amounts of receivables If objective evidence indicates the occurrence of impairment of the accounts receivables, the amount of loss is measured at the difference between the asset’s carrying amount and the present value of estimated future cash flows. Receivables that are impaired after separate assessment not provided for Bad debts provision for provision on a basis of group. individually significant amounts If separate assessment indicates impairment of amount of individual account with large amount did not occur, not provided for provision on a basis of group If separate assessment indicates impairment of amount of individual account with large amount did not occur, not provided for provision on a basis of group

Receivables that are classified as individually significant and others which are insignificant

Receivables that are not impaired after separate assessment and remaining receivables not subject to separate assessment are grouped for impairment assessment, and is provided for the impairment, based on the Company’s historical practical loss rate caused by receivables portfolio of similarity or with similar characteristic of credit risk, as well as current situation. Basis on determine the portfolio is as below Group by age analysis) Basis of recognition and method for the provision of impairment of receivables that is individually significant:

Page23

– F-26 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Aging of accounts Provision rates (%) Within 1 year 5% 1-2 years 10% 2-3 years 20% 3-4 years 30% 4-5 years 50% Over 5 years 100%

Objective evidence which indicates the occurrence of impairment of the accounts receivables amount of not individually significant, separate assessment is use to recognition the impairment.

If there is objective evidence that the value of the financial asset recovered and he recovery can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed and the amount of reversal is recognized in income statement.

The company shall be subject to an impairment test separately on note receivable and advance payment. The company shall be subject to objective evidence that the value of the present value of the future cash flow is less than the difference between the values of its book value, and that it is recognised as an asset loss, and be a provision for bad debts.

2.12 Inventories

2.12.1 Classification of inventories

Inventory includes raw materials, packing materials, low-value consumables, unfinished products, homemade semi products and finished goods.

2.12.2 Valuation method of issuing of inventories

he costs of issuing of inventories comprise the weighted averages method.

2.12.3 Deciding of cashable present value of inventory and accrual of inventory depreciation reserve

On the date of balance sheet, the inventories shall be measured whichever is lower in accordance with the cost and the net realizable value. On the basis of a comprehensive inventory of stock, the company for inventory has rotten, market prices continued to decline and in the foreseeable future no recovery hopes, in whole or in part obsolete, product upgrading, reason, inventory cost higher than the net realizable value, provision for decline in value of inventories, and included in the current profits and losses.

The provision for inventories shall be made in accordance with the individual inventories.

The net realizable value in the normal production process is that estimates the cost of inventory, occur, the cost of sales and the amount of the relevant taxes.

2.12.4 Inventory system

Page24

– F-27 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

The Company's inventories inventory system adopts a perpetual inventory system.

2.12.5 Amortization of low-value consumables and packing materials.

Both are amortized with the one-off amortization method.

2.13 Long-term equity investments

Long-term equity investment includes the equity investment held by the company to control, joint control or produce a significant impact on the invested entity.

2.13.1 Criteria for the judgment of joint control and significant impact

˄1˅significant impact is that the company's financial and operational policies to invested entity has the power to participate in decision-making, but it is not able to control or together with other parties to jointly control the development of these policies. In determining whether to be invested in a significant impact on the invested entity, the company and other parties held by the investment unit of the current Switching Company bonds, the current implementation of warrants and other potential voting rights factors should be considered.

˄2˅Joint control refers to an arrangement in accordance with the relevant stipulations on the joint control, and related activities of the arrangement must be sharing the control party agreed to the decision.

2.13.2 Initial measurement of Long-term equity investments

˄1˅The long-term equity investment in the company's merger is determined in accordance with the following provisions:

The company under the control of the same enterprise merger and to pay cash, transfer of non cash assets or assume debt as a combined consideration shall, on the date of merger, according to the achieved the merged party in the ultimate controlling party consolidated financial statements in the net assets book value share as the initial investment cost of a long-term equity investment. Merged parties in the merger, the net book value of the assets is negative, the cost of the long-term equity investment according to the zero to determine, also in the memorandum book in register. Long-term equity investment, the initial investment cost and payment in cash, transfer of non cash assets and the commitment between the book value of the debt balance, adjust capital surplus (capital premium or premium on capital stock). Capital surplus (capital premium or equity premium) is not enough to offset, the retained earnings adjustment. To issue equity securities as a combined consideration shall, on the date of merger, according to the achieved the merged party in the ultimate controlling party consolidated financial statements in the net assets book value share as the initial investment cost of a long-term equity investment. In accordance with the total face value of the shares issued as equity, long-term equity initial investment cost and issued between the total face value of the shares balance, adjust capital surplus (capital premium or premium on capital stock); Capital surplus (capital premium or equity

Page25

– F-28 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements premium) is not enough to offset adjustment, retained earnings.

The company in a business combination not under the same control, on the acquisition date according to the following provisions to determine the investment cost:

ķIn the one swap transaction with the merger, the merger cost of the company on the acquisition date is made to buy control of the party and to pay the assets, or bear the liabilities and the issue of rights securities of fair value.

ĸRealized by multiple exchanges trading enterprise merger, the merger cost is the sum of each individual transaction cost.

ĹThe direct related expenses of the company to carry out the business combination shall be included in the current profit and loss.

ĺIn the combination contract or agreement on the effect of the combined cost of future events made an appointment. In the day of purchase if the estimated future events are likely to occur and the combination costs affect the amount can reliably measured, will be included in the merger cost.

˄2˅In addition to the combined form of a long-term equity investment, long-term equity investment obtained by other means determine the investment cost according to the following provisions:

ķLong term equity investment in cash payments made in accordance with the actual payment of the purchase price, the initial investment cost. The initial cost of the long-term equity investment includes directly related expenses, taxes and other necessary expenses made.

ĸLong term equity investment in equity securities are issued in accordance with the issuance of the fair value of the equity securities as the initial investment cost. Is directly related to the cost of issuing equity securities, shall be in accordance with the relevant provisions of the "accounting standards for Enterprises No. thirty-seventh - presentation of financial instruments" to determine .

ĹLong term equity investment obtained through non monetary assets exchange, the initial investment cost is determined in accordance with the "enterprise accounting standards seventh - non - monetary assets exchange".

ĺLong term equity investment achieved through debt restructuring, its initial investment cost is determined in accordance with the "enterprise accounting standards twelfth - debt restructuring".

2.13.3 The follow-up measurement of the long-term equity investment and investment income confirmation method

˄1˅The company uses the cost method accounting to long-term equity investment that controlled by the invested company.

The long-term equity investment calculated by cost method should be valued in according to the initial investment

Page26

– F-29 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements cost. Additional or recover the cost of investment to adjust the long-term equity investment. Cash dividends or profits declared to be distributed by the investment entity, in addition to the declaration of the dividend as the investment cost of the purchase, the rest is recognized as the current investment income.

˄2˅The company's investment in the joint venture and the joint venture shall be accounted by the equity method.

The initial investment cost of the long-term equity investment is greater than the fair value of the identifiable net assets of the invested entity when the investment is greater than the investment, and the initial investment cost of the long-term equity investment is not adjusted; Initial cost of a long-term equity investment is less than the investment invested units of the fair value of the identifiable net assets, the difference shall be included in the current profits and losses, and adjust the cost of the long-term equity investment.

After the long-term equity investment, the company shall, in accordance with the share of the net profit or loss which shall be enjoyed or should be shared, confirm the investment profit and loss and adjust the book value of the long-term equity investment. The company calculates its share in accordance with the unit of investment profits or cash dividends declared to distribute, and correspondingly reduce the book value of the long-term equity investment.

When the company confirmed the net losses of the invested enterprise, the book value of the long-term equity investment and other essentially constitute the long-term interests of the invested unit net investment reduced to zero is limit, except for that the company is liable to bear the additional loss of obligations. If the company is to achieve net profit in the future, it returns to confirm the amount of revenue share after its share of income to make up for the amount of the share of non recognition,.

When calculate and confirm the net profit or loss that should enjoy or should be shared by the invested entity, the profit and loss of the internal transaction between the joint venture and the cooperative enterprise shall be set off on the basis of the proportion investment share. The loss of internal transaction between the joint venture and the joint venture in accordance with the provisions of the asset impairment standard shall be fully recognized. The transaction of casting or selling assets between associated enterprises and joint ventures should be constituted in accordance with the accounting standards for Enterprises No. 20 -- the merger of enterprises "and" accounting standards for Enterprises No.

33, consolidated financial statements "of the relevant provisions.

When the company confirms the shall of net profits or losses of the invested unit to get investment is investment entity, the recognizable to the fair value of the assets as the basis, and adjusted net profit for the units being invested to confirm. If meet the following conditions, the company calculates return on investment based on the book net income of the invested entity:

ķThe company is unable to determine reasonable investment the invested entity when the fair value of the

Page27

– F-30 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements identifiable assets, etc.

ĸThe difference between the fair value and the book value of the identifiable assets of the invested entity when it is invested is not significant.

ĹOther causes of the invested entity information cannot be obtained, not net profits and losses of the invested entity in accordance with the relevant provisions to adjust.

When the units being invested by the accounting policies and accounting period with the company's accounting period is not consistent, the invested entity financial statements of the company's accounting policies and accounting periods in accordance with the adjustment, and to identify investment gains and losses and other comprehensive income. The company for the units being invested in addition to outside the net profit or loss of the rights and interests of the owners of the other changes, adjust the book value of the long-term equity investment and included in the owner's equity, handling the investment will original included in part of the rights and interests of the owners of the transferred to the profits and losses of the current period according to a certain proportion.

2.14 Joint venture arrangement

Joint venture arrangement is the arrangement of a joint control of two or more than two parties. The arrangement of the joint venture shall be divided into joint operation and joint venture enterprise.If the parties to the joint venture are entitled to the right to be entitled to the assets of the joint venture, and is responsible for the obligations of the joint venture forn return, the joint venture shall be divided into joint operations; if the joint venture partyl enjoys the right to the joint venture arrangement’s net asset only, it is divided into joint venture.

2.14.1 Accounting treatment of the joint venture party in joint operation

The joint venture party shall confirm the following items related to the interests of the joint venture, and the accounting treatment in accordance with the relevant provisions of the enterprise accounting standards: first, to confirm the assets held by the individual, and to confirm the assets held jointly by their share; second is to confirm the liability of the individual, as well as the share of its share to confirm the liabilities; third is to confirm the income of the share of common business output; fourth, is to confirm the income of sale in joint operation; five is to confirm the costs incurred, and the confirmed cost of the joint operation.

2.14.2 Accounting treatment of the joint venture party

The joint venture party should adjust account its investment in the joint venture in accordance with the Accounting

Standards for Enterprises No.2 –Long term equity investment.

2.15 Real estate as investment

Investment of real estate refers to the real estate which is held by the rent or capital appreciation or both. The

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– F-31 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements investment properties of the company include the right to use the leased land, hold and to prepare the land use right and the buildings that have been transferred.

2.15.1 Real estate as investment

Real estate as investment shall be confirmed when meeitng the following conditions:

˄1˅The economic benefits oelated to investment of real estate are likely to flow into the enterprise.

˄2˅The cost of real estate investment can be measured reliably.

2.15.2 Initial measurement of real estate as investment

˄1˅The cost of bought - out real estate investment, includes the purchase price, the relevant taxes and other expenses which are directly attributable to the asset.

˄2˅The cost of building an investment property by itself is a form of necessary expenses incurred by the construction of the assets to which the assets are to be achieved.

˄3˅The cost of real estate investment obtained in other ways, is confirmed in accordance with the provisions of the relevant accounting standards.

˄4˅The follow-up expenses related to the real estate as investment shall meet the conditions of the real estate as investment confirmation and shall be included in the cost of the real estate as investment; if not, it shall be included in current profit and loss.

2.15.3 Follow-up measurement of the real estate as investment

The company adopts the cost mode to carry on the follow-up measurement to the real estate as investment in the balance sheet date. According to "enterprise accounting standards fourth - fixed assets" and "enterprise accounting standards sixth - intangible assets" of the relevant provisions, investment in real estate is expected to be useful in the useful life of the average method of amortization or depreciation.

2.15.4 Impairment of real estate as investment

Using the cost model for subsequent measurement of real estate as investment there is a sign of impairment, after the impairment test to determine the occurrence of impairment, should be provision for impairment.

2.15.5 Transform of real estate as investment

Company has conclusive evidence that the purpose of the real estate has changed and meets one of the following conditions, that real estate as investment transfer into other assets or transfers other asset conversions into real estate as investment, and the value before transfered will be used as the book value of the value after transferred:

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– F-32 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

ķThe real estate as investment begins for self-use;

ĸReal estate as inventory is changed for rent;

ĹThe use right of land use stopped, changes for making rent or capital appreciation;

ĺSelf-use buildings have been changed to rent.

2.16 Fixed assets

2.16.1 Recognition criteria of fixed assets

Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and have useful lives of more than one accounting year.

To be fixed assets, the following conditions should be met simultaneously.

˄1˅Fixed assets are confirmed when financial benefits related will probably flow into the group.

˄2˅The costs of fixed assets can be reliably valued.

2.16.2 Initial measurement of fixed assets

The initial measurement of a fixed asset shall be made at its cost.

˄1˅The cost of purchased fixed assets, including the purchase price, relevant taxes, fixed assets reaches a predetermined can be used before the belonging to the assets of transport costs, handling fees, installation fees and professsional service fees etc..

The difference between actual payment price and the present value of the purchase price, except for be capitalized in accordance with the accounting standards for enterprises no. 17 - Borrowing Costs, which is included in the current profits and losses in the credit period.

˄2˅The cost of a self-constructed fixed asset is formed by the necessary expenses of the asset to the expected conditions for use.

˄3˅Investors invest cost of fixed assets, is determined according to the value of the investment contract or agreement, but except the unfair value of the contract or agreement.

˄4˅The cost of fixed assets of Non monetary assets exchange, debt restructuring, enterprise merger and financing lease is determined according to the relevant provisions respectively of the Accounting Standard for Business

Enterprises No. 7 - Exchange of non-monetary assets,

Accounting Standard for Business Enterprises No. 12 - Debt restructurings,

Accounting Standard for Business Enterprises No. 20 - Business Combinations,

Accounting Standard for Business Enterprises No. 21 – Leases.

2.16.3 Classification of fixed assets

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– F-33 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

The company's fixed assets into housing buildings, pipe network ditches, structures, transportation equipment, electrical equipment, office equipment, instrumentation, tools, and so on.

2.16.4 Fixed assets depreciation method

˄1˅Confirmation of depreciation methods and service life ,the expected net salvage value rate and the annual depreciation rate.

The estimated useful lives and depreciation rates for each category of fixed assets are as follows:

Items Estimated useful lives Residual value(%) Depreciation rate p.a. (%) Production plant 30 5 3.17 Non-production plant 4-35 3or 5 24.25-2.71 Simply constructed house 8 5 11.88 Hydraulic structure 45 5 2.11 Other buildings 15 5 6.33 Substation equipment 18 5 5.28 Power generating equipment 15 5 6.33 Power equipment 11 5 8.64 Electronic equipment 4-10 5 23.75-9.5 Transportation facilities 5-10 5 19-9.5 Telecommunication equipment 10 5 9.5 Power transmission line of 35KV+ 30 5 3.17 Power transmission line of 35KV- 30 5 3.17 Production office appliances 5 5 19 Non-Production office appliances 18 5 5.28 Other equipment 5 5 19

The provision for impairment of fixed assets depreciation accounting method: provision for impairment of fixed assets is depreciated in according to the original price of the fixed asset minus the expected net residual value, depreciation and impairment of the amount and the remaining useful life,.

The fixed assets has reached the expected conditions for use but not yet for the completion of final accounts, and its cost is determined and depreciated in according to the estimated value;and. After the completion of final accounts, it is adjusted to the the original provisional estimate value according to actual cost, but the depreciation will not be adjusted.

˄2˅Check with service life of fixed assets, estimated salvage value and the depreciation method˖When the service life of fixed assets, estimated salvage value and the depreciation is check at the year – end, and if it is found that fixed assets life expectancy is different from the original estimate, its fixed asset service life shall be adjusted; and if it is found that fixed assets expected net salvage value is different from the original estimate, its expected net salvage

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– F-34 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements value shall be adjusted; if there is a major change in expectation of economic interests related to fixed assets, the depreciation method of fixed assets shall be changed.And the change of the service life of fixed assets, estimated salvage value and the depreciation is disposed as accounting estimates.

2.16.5 Disposal of the subsequent expenditure of fixed assets

The subsequent expenditure of fixed assets refers to the expenditures occurs in process, including Repair expenses, Spending on Renewal, repairing cost and renovation expenditures.And its accounting method is˖The subsequent expenses, such as the renewal and reconstruction of the fixed assets, and the fixed assets cost shall be included in the fixed assets, and the book value shall be deducted if the fixed assets are replaced; The fixed assets maintenance expenses, which are not satisfied with the confirmation of the fixed assets, shall be included in the current profits and losses in the event of the occurrence; Fixed assets renovation costs, to meet the criteria for recognition of fixed assets, in the "fixed assets" single set of detailed accounts, and in the use of the twice during the renovation and fixed assets fair period between in a short period, the straight-line method depreciated separately.

Improvements in operating lease expenses into fixed assets are capitalized, as long-term prepaid expenses, shall be amortized reasonably.

2.17 Construction in progress

2.17.1 Valuation of Construction in progress

The company's construction in progress accounted for separately according to the project and be made at its cost.

2.17.2 Point of construction in progress t transfer into fixed assets

When the project under construction reaches the expected condition for use, it is transferred into fixed assets items.

When the fixed assets reaches the expected condition for use but without the completion of final accounts formalities, it is booked by estimate value and adjust the value after determine the actual value.

2.18 Capitalization of borrowing costs

2.18.1 Confirmation principle of the capitalized borrowing costs

The borrowing costs shall meet the following conditions, capitalization begins:

˄1˅Capital expenditures have incurred.

˄2˅Borrowing costs are being incurred.

˄3˅The asset for its intended use or sale of the necessary construction or production activities has already begun.

2.18.2 Capital period of borrowing costs

The capitalization period is refers to the period from the beginning of borrowing costs capitalization to stop

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– F-35 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements capitalization, but the period of suspension of capitalization of borrowing costs is not included.

Assets complying with capitalization conditions are interrupted abnormally in the acquisition, construction or production process, and the interruption lasts over three months, the capitalization of borrowing costs is suspended.

Borrowing costs incurred during the discontinuance are recognized as an expense in profit or loss until the acquisition, construction or production of the asset restarts. If the interruption is the acquisition, construction or production of a qualifying asset for its intended use or sale necessary procedures, the capitalization of borrowing costs continue.

When the asset of acquisition, construction or production intended to be used or saled, the capitalization of borrowing costs stops. Borrowing costs incurred after qualifying asset for its intended use or sale shall be expense in period in which they are actually incurred.

2.18.3 Calculation method of capitalization amount of borrowing costs

During the period of capitalization, the capitalized amount interest of each accounting period (including amortization of discounts or premiums) determined in accordance with the following provisions:

˄1˅The loan borrowed specifically for the acquisition, construction or production of assets eligible for capitalization, which is after determed the amount of income while special borrowing to specialized loan happened in current period interest expense, minus the unused borrowing loans as a deposit interest income in the bank or temporary investment.

˄2˅For the purchase or production of assets under the condition of capital, the company occupies a general loan.

The company is based on the weighted average of the total assets, which is more than that of the loan. The capitalization rate is determined by the weighted average interest rate of the general borrowing.

If there are discounts or premiums, the amortization of discount or premium amount is determined according to the actual interest rate method during each accounting period, the amount of interests in each period shall be adjusted.

During the period of capitalization, the amount of interest capitalized during each accounting period, shall not be more than the actual amount of interest in the current period of the relevant loan.

The ancillary expenses incurred in the purchase of the assets of the capital, which are in accordance with the conditions of capital construction, or may be used or sold. In the event of capital, it included in the cost of capital assets according to the amount of capital. In the event of an asset which is in accordance with the conditions of the purchase or production of assets under the condition of capital to achieve the intended use or sale of the state, and it is recognized as expenses, which are included in the profit or loss of the current period.

2.19 Intangible assets

2.19.1 Recognition criteria of intangible assets

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– F-36 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Intangible asset refers to the identifiable non-monetary assets possessed or controlled by the Company and its subsidiaries which have no physical shape˖To be intangible assets, the following conditions should be met simultaneously:

˄1˅Meet the definition of intangible assets.

˄2˅The expected future economic interests related to the assets are likely to flow into the company.

˄3˅The cost of this asset can be measured reliably.

2.19.2 Initial measurement of intangible assets

The intangible assets shall be initially measured according to its cost˖The actual cost is determined by the following principles:

˄1˅The cost of outsourcing intangible assets shall include the purchase price, relevant taxes and directly attributable to bringing the asset to the intended use of other expenses occurred. When the cost with financing nature of the purchase price of intangible assets exceeds the deferred paid of normal credit terms, the cost of intangible assets is determined to the present value of the purchase price. The difference between the present value of the price and the actual purchase price paid, except in accordance with "Accounting Standards No. 17 - Borrowing costs", others can be capitalized in the credit period profit or loss.

˄2˅The cost invested into intangible assets is determined in accordance with the investment contract or agreement value, but the unfair value of contract or agreement is not included.

˄3˅Self-developed intangible assets.

Expenditures on internal research and development projects are the distinction between research expenditures and development expenditures. Research expenditures for its internal research and development phase of the project, shall be Included in the current investment income.˖The spending of internal research and development project, while meeting the following conditions, is recognized as intangible assets:

ķ To make the intangible assets to be enable to be used or sold in technical feasibility.

ĸ There is the intention to complete the intangible asset and use or sell it.

ĹThe way that the intangible assets to generate economic benefits, including being able to prove that products manufactured by applying the intangible existence of a market or the intangible asset itself, assets will be used internally, and proved their usefulness.

ĺThere are adequate technical, financial resources and other support resources to complete the development of the intangible assets, and there is ability to use or sell it.

ĻIntangible assets attributable to the development stage of the expenditure can be measured reliably.

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– F-37 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Self-developed intangible assets cost of intangible assets including self-satisfied after confirming that the requirements to achieve the intended use of the total expenditure incurred before. The expensing costs of the past shall not be adjusted.

˄4˅The cost of Non-monetary assets exchange, intangible assets debt restructuring, government subsidies and merger of enterprises is determed according to "Accounting Standard No. 7 - the exchange of non-monetary assets," "

Accounting Standards No. 12 - Debt Restructuring "" Accounting Standards No. 16 - Government Grants "," Accounting

Standards No. 20 - business Combinations, "respectively.

2.19.3 Subsequent measurement of intangible assets

The company analyzes and judges intangible assets life at the time of acquiring it.The Service life of intangible assets is limited, and estimated the number of life year or the life of the production constituting units; if the economic benefits that brought by intangible asset is unforeseen, it is regarded as Intangible assets with uncertain service life.

If the service life is certain, it should be amortized over the life of the system in a reasonable amount of amortization. The company is using the straight-line method of amortization. Amortization period of software use rights is five years, and the amortization period of the transfer of land use rights is from the acquired date to the deadline.

The intangible assets amortization amount is that cost minus estimated residual value after deducted. The intangible assets that have been prepared for the provision of impairment shall also be deducted from the total amount of intangible assets that have been accrued. The amount of amortization of intangible assets recognized in profit or loss or costs associated assets.

Intangible assets with with uncertain service life are not amortized and be impairment test on 31 December, 2015.

As the report of December 31, 2015, the land use right for the allocation of intangible assets acquired and is not amortized during the reporting period.

2.20 Research on development expenses

The company makes an internal research on the expenses of development projects, which is divided into research expenditures and development expenditures.

The expenses of the research stage are included in the profit and loss of the current period.

The expenses of the development stage, while meeting the following conditions can be capitalized, which is: To make the intangible assets to be enable to be used or sold in technical feasibility; There is the intention to complete the intangible asset and use or sell it; he way that the intangible assets to generate economic benefits, including being able to prove that products manufactured by applying the intangible existence of a market or the intangible asset itself, assets will be used internally, and proved their usefulness; There are adequate technical, financial resources and other

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– F-38 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements support resources to complete the development of the intangible assets, and there is ability to use or sell it. Intangible assets attributable to the development stage of the expenditure can be measured reliably. The development expenses not satisfied in above conditions are included in current profit and loss.

Capitalized development expenditure in the assets and liabilities table listed as development expenditure, since the project achieves its intended use, which is turned into intangible assets.

2.21 Long-term deferred expenses

Long-term deferred expenses refer to it by 2015 and future periods sharing amortized over one year (one year excluded) that have occurred, including the operating lease expenses and other fixed assets improvement .

Long-term prepaid expenses actual expenses recorded in the project benefit period average amortized. Wherein renovation costs amortized by six years.

2.22 Impairment of assets

2.22.1 The determining method of impairment of other major asset classes prepare besides the stock and financial assets

˄1˅In the balance sheet date, the company may be in the form of a single asset is likely to occur in the event of an indication of impairment. There is a sign of the existence, to carry out an impairment test to estimate the recoverable amount of an asset. The recoverable amount of the asset is lower than its carrying amount, the carrying amount of the asset is reduced to the recoverable amount, and the amount of the write down is recognized as an impairment loss of assets, which is included in the profit and loss of the current period. After the loss of asset impairment has been recognized, the impairment of assets depreciation or amortization expenses shall in future periods to make corresponding adjustment, to make the assets within the residual service life and systematically amortize the post adjustment carrying value of the asset (to deduct expected net salvage value). Once asset impairment provision is made, it shall not be transferred back even though the asset value is resumed in later period.

˄2˅There are the following indications that the assets may be impaired:

ķThe market value of the assets has fallen sharply in the current period, which is significantly higher than the expected decline due to the passage of time or normal use.

ĸThe economic, technical or legal environment of the company's operations, and the market in which the assets are in the current period or will change in the near future, which will have a negative impact on the company.

ĹMarket interest rates or other market investment return rate in the current period has been raised, which affects the company's expected future cash flow forecast value of the discount rate, resulting in a substantial reduction in the amount of assets recoverable.

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– F-39 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

ĺThere is evidence that the assets have become obsolete or the entity has been damaged.

ĻAssets have already been or will be left unused, terminated or planned to be disposed of.

ļEvidence of the company's internal report shows that the economic performance of the assets has been lower than or will be lower than expected, such as the net cash flow generated by the assets or the operating profit (or loss) is far below (or above) is expected to amount, etc..

ĽThere is other suggestion that the assets may have a sign of impairment.

2.22.2 There are indications that an asset may be impaired, the company should be based on individual assets to estimate the recoverable amount. It is difficult for a company to estimate the recoverable amount of an individual asset, and the recoverable amount of the asset group shall be determined on the basis of the asset group of the asset.

The asset group finds that the main cash inflow generated by the asset group is independent of the cash inflow of other assets or assets. At the same time, in the identification of the asset group, the company's management to consider the management of production and management activities of the way (such as in accordance with the production line, business type or in accordance with regional or regional, etc.) and the continued use of assets or disposal decision-making methods, etc.. Once the assets are determined, the assets should be kept consistent, and not to be changed at will.

2.22.3 Because of the intangible assets and the intangible assets that are formed by the merger of enterprises and the intangible assets and the interests of the non proven mining areas, the impairment test should be carried out every year.

2.22.4 After the loss of asset impairment has been recognized, the impairment of assets depreciation or amortization expenses shall in future periods to make corresponding adjustment, to make the assets within the residual service life and systematically amortize the post adjustment carrying value of the asset (deduction is expected net salvage value).

2.23 Sales with buyback agreements

Transfer of assets to the conditions of the repurchase, the company as a financing transaction, not to terminate the recognition of the assets sold, nor does not confirm the relevant income; For the purchase price is greater than the difference between with the original price, the company raise interest charges on schedule in the repurchase period, included in the financial costs.

2.24 Expected liabilities

2.24.1 Recognition criteria of Expected liabilities

When the external guarantee, pending litigation or arbitration, the quality of the products and guarantee, layoffs,

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– F-40 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements loss contract, restructuring obligations, fixed assets retirement obligations such as or matters related to business also comply with the following conditions is recognised as a liability:

˄1˅This obligation is a present obligation of the company.

˄2˅The performance of the obligation is likely to result in the outflow of economic interests of the enterprise.

˄3˅The amount of the obligation can be measured reliably.

2.24.2 Measurement method of expected liabilities

Expected liabilities are initially valued by the best estimates to be spent on fulfillment of related present obligation.

There is a continuous range and the best estimate of the probability of the occurrence of various results in the range is determined by the intermediate value of the range. In other cases, the best estimate is determined by the following method:

˄1˅If there is a matter for a single project, the best estimate is determined by the most likely amount.

˄2˅When a number of projects are involved, the best estimates are determined by the amount of possible occurrence and the probability of occurrence.

The company shall pay all or part of the expected expenses in full or in part to be compensated by the third party or the other party, and the amount of the compensation shall be separately recognized as the assets of the assets.

Confirmation of the amount of compensation can not be more than the carrying value of the estimated liabilities.

2.25 Payroll payable

Payroll payable include short term pay, Post separation benefits, compensation for cancelation of labor relationship, and other long-term employee benefits.

˄1˅During the accounting period of an employee' providing services to the Company, the Company recognizes the compensation payable as liabilities, and relatively increase the cost of assets or current cost.

˄2˅The after - service welfare plan is classified as defined contribution plan and defined benefit plan.When employees provide service during the accounting period, defined contribution plans to calculate the deposit amount is recognized as a liability, and be included in the profits and losses of the current period or the cost of the related assets.The formula will be determined by the cumulative welfare unit method according to the formula, and the benefits of the benefit plan will be vested in the period of service of the staff and workers, and shall be included in the profit or loss of the current period.

˄3˅The company provides the workers with the dismissal of benefits, in the following two or two of the early confirmation of the benefits of workers compensation, and included in the current profits and losses:

˄а˅The enterprise cannot unilaterally withdraw the benefits provided by the termination of the labor relations

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– F-41 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements plan or the reduction of the proposed dismissal.

˄Ҽ˅he enterprise confirms the costs or expenses related to the restructuring of the payment of the benefits of the dismissal.

˄4˅Enterprises provide other long-term employee benefits to workers, in line with the set deposit condition of the plan, the relevant provisions of the applicable defined contribution plans for processing; otherwise, for a defined benefit plan to the relevant provisions.

2.26 Accounting treatment method for other financial instruments such as preferred stock, perpetual debt, etc.

The company issued financial tools according to the accounting standards of financial instruments and the relevant provisions of the initial recognition and measurement; subsequently, on each balance table, accrued interest or dividend distribution, in accordance with related to specific accounting standards for business enterprises. On the basis of the classification of the financial instruments issued, the accounting treatment of the interest expense or the dividend distribution of the instrument is determined. For classified as equity instruments of financial instruments, the interest expense or dividend distribution should be as equity changes as the profit distribution of the enterprises to issue the buyback and cancellation of treatment; the financial liabilities for financial instruments classified, the interest expense or dividend distribution principle, in accordance with the borrowing cost for processing, the repurchase or redemption of gains or losses included in the profits and losses of the current period.

Issuing financial instruments the handling fees, commissions and other transaction costs, such as classification for debt instruments and the amortized cost shall be included in the issued by the tools of the amount of initial measurement, such as classification for equity instruments shall be deducted from equity.

2.27 Revenue recognition

2.27.1 Revenue from selling goods

˄1˅The significant risks and rewards of ownership of the goods have been transferred to the buyer by the

Company.

˄2˅The Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods.

˄3˅The relevant amount of revenue can be measured in a reliable way.

˄4˅Economic benefits associated with the transaction can flow into the enterprise;

˄5˅The relevant costs incurred or to be incurred can be measured in a reliable way.

2.27.2 The company and the business press according to the principle of recognition of revenue:

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– F-42 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

˄1˅Investment revenue

1˅Long term share investment accounted in cost method is valued by original cost. Cash dividend or profit announced by the investee is confirmed into current period’s investment income.

2˅As of long-term equity investment based on equity, gains/losses of investment are recognized by the amount of the invested company’s current period net profit or net loss share enjoyable or bearable by the Company. The Company recognizes the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially from the net investment made to the invested entity are reduced to zero, unless the investing enterprise has the obligation to undertake extra losses. If the invested entity realizes any net profits later, the investing enterprise shall, after the amount of its attribut333able share of profits offsets against its attributable share of the un-recognized losses, resume recognizing its attributable share of profits.

On the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, the

Company recognizes the attributable share of the net profits and losses of the invested entity after it adjusts the net profits of the invested entity. The Company calculates the investment revenue according to the investee’s booked net profit in the following circumstances:

ķ The fair value of recognizable assets of investee is unable to confirm when investment occurs.

ĸ If the difference of the fair value and book value of the invested company’s recognizable assets is not material.

Ĺ The relative information of the invested company is unobtainable.

3˅Other than the above mentioned situations, other investments are recognized as investment revenue when cash dividend is received.

˄2˅Interest income is recognized by the loan amount, deposit term and real interest rate according to the entrusted loan contract or agreement.

˄3˅Revenue from transferring of equity is recognized by the net income of the portion of equity transferred by the

Company or its subsidiaries.

˄4˅Revenue from commission management is recognized according to the charging rate and term agreed in the contract or agreement.

˄5˅Revenue from providing labor servicesThe services that are completed within the same accounting year, and its income of the service is confirmed when completed.

ǒ2ǓIf the starting and finishing of labor belong to different accounting year and service transaction can be estimated reliably, the relevant labor income is confirmed according to the completion percentage method on the

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– F-43 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements balance sheet date. In the case of the results of the provision of labor services can not be reliably estimated, the revenue is confirmed according to amount of labor costs has occurred and expected to be able to compensateon the balance sheet date.

The results can be reliably estimated at the same time to meet the following conditions:

ķThe economic interests related to the contract are likely to flow into the enterprise.

ĸThe actual contract costs can be differentiated clearly and measured reliably;

ĹFixed cost contracts must also meet the total contract revenue can be measured and the completion of the contract and the cost of the contract is still to be determined.

ǒ3ǓThe confirmation method of the the contract completion progress: Company determines the contract completion progress according to the proportion that actual contract costs accounted of the expected costs.

˄6˅Revenue from abalienating the right to use assets is recognized when the relevant economic benefits are likely to flow into the enterprise, and the amount of revenues can be measured in a reliable way. It also has to meet the conditions agreed in the related contract and agreement.˖When the related economic benefits are likely to flow into the enterprise and the amount of revenue can be measured reliably and other two conditions, the Company recognized revenue following circumstances:

ķ Interest income is determined by the time and the actual interest rate of the monetary fund of the company.

ĸ The use of fee income in accordance with the contract or the agreement of the time and method of calculation of the calculation of the time and method.

˄7˅Transfer of land and commercial housing: in the signing of the transfer and sale of contracts, the completion of the contract within the development and construction projects, the company and the company has been transferred to the buyer, the commercial housing and the actual control of the commodity, and the economic interests of the transaction can flow into the company and the company, and related income and costs can be reliably measured, business income recognized.

2.28 Government subsidy

Government subsidy related to assets refers to the government subsidy obtained by the enterprise to use for the construction or make long-term assets in other forms. The government subsidy related to the gains refers to the subsidy rather than the government subsidy related to assets.

A government subsidy related to an asset is recognised as deferred income, and evenly amortised to profit or loss over the useful life of the related asset.

For a government subsidy related to income, if the grant is a compensation for related expenses or losses to be inc

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– F-44 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements urred in subsequent periods, the grant is recognised as deferred income, and recognised in profit or loss over the perio ds in which the related costs are recognised; if the grant is a compensation for related expenses or losses already incur red, the grant is recognised immediately in profit or loss for the current period.

The company received a government subsidy related to assets, recognized as deferred income received, and the average distribution of the relevant assets in the use of life, included in the current profit and loss. However, it is included in the current profit and loss directly in accordance with the nominal amount of government subsidies.

The company received government grants related to income, if used to compensate for the company's subsequent period of the relevant costs or losses; it is recognized as deferred income, and in recognition of the relevant expenses, included in the current profit and loss; If it is used to compensate for the expenses or losses incurred by the company, it shall be included in the profits and losses of the current period.

The company has confirmed that the government subsidies need to return, if there is a related deferred income, then the impact of the deferred income tax related to the book balance, the excess part included in the current profit and loss; there is no related deferred income, the returned amount shall be included in the current profit and loss directly.

2.29 Income tax

The Company adopts balance sheet liability method.

In the acquisition of assets, liabilities, the company to determine the related assets in accordance with the provisions of the state tax law, the tax basis of the debt .If the book value of the assets is greater than the book value of its tax base or liabilities is less than its tax base, the difference as a taxable temporary differences;If the assets book value is less than the book value of its tax base or liabilities greater than its tax base, the difference as deductible temporary differences.

2.29.1 In addition to the deferred income tax liabilities arising from the following transactions, the company shall verify all deferred income tax liabilities arising from the temporary differences in tax payment:

˄˄1˅Initial recognition of goodwill

˄2˅The initial recognition of the assets or liabilities arising from the transaction of the following characteristics:

ķThe transaction is not an enterprise merger;

ĸWhen the transaction occurs, neither the accounting profit nor the taxable income (or deductible loss) will not be influenced.

Unless the company is able to control the timing of the investment related to the subsidiary, joint venture and joint venture, and the temporary difference in the return of the temporary difference in the foreseeable future, the company will confirm its deferred income tax liability.

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– F-45 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

2.29.2 The company shall be limited to the amount of taxable income which is likely to be used to offset deductible temporary differences, and to confirm the deferred income tax assets arising from the deductible temporary difference, but not to confirm the delivery of the income tax assets arising from the initial recognition of assets or liabilities in the same transaction:

˄1˅The transaction is not an enterprise merger;˗

˄2˅When the transaction occurs, neither the accounting profit nor the taxable income (or deductible loss) will not be influenced.On the balance sheet date, there is conclusive evidence that it is likely to obtain sufficient taxable income to offset the temporary difference in the future period, and the company will confirm the deferred income tax assets that were not recognized before. If there’s deductible temporary difference associated with the subsidiary, joint venture and joint venture investment are likely to be reversed in the foreseeable future, and is likely to be used to offset the taxable income, the company will confirm the deferred tax assets corresponding to this difference.

2.29.3 On the balance sheet date, the company is expected to pay (or return) in accordance with the provisions of the tax law to pay (or return) of the amount of income tax in the current period and the formation of the current income tax liabilities (or assets). The expected recovery of the assets or the repayment of the debt is measured in accordance with the deferred income tax assets and deferred income tax liabilities of the applicable.

If applicable tax rate changes, the company will re- measure deferred income tax assets and deferred income tax liabilities that has been confirmed. Except in the event of a transaction or event that is directly recognized in the owner's equity, the impact of the change in the tax rate of the company is included in the income tax expense of the current period.

On each balance sheet date, the company will review the carrying value of the deferred income tax assets. If it is likely to be unable to obtain adequate taxable income to offset the benefits of deferred income tax assets, the carrying value of the deferred income tax assets is reduced. The amount of the write down should be reversed when it is likely to get enough of the taxable income.

The company reckoned the income tax and deferred income tax in the current period in the income tax expense or income of the income statement, in addition to transactions or events recognized by the enterprise merger and directly in the owner's equity.

2.30 Leasing

When all risks and rewards related to assets ownership are actually transferred, the lease is recognized as operating leasing and financing leasing.

2.30.1 Finance lease

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– F-46 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

˄1˅Conforming to one or more of the following criteria, that is the financing lease:

ķWhen the lease term expires, the ownership of the leased asset is transferred to the lessee.

ĸThe lessee has the option to purchase the lease assets, concluded between the purchase price is expected to will be far below the exercise of the option right of the leased asset fair value, so in the lease began, it is reasonably certain that the lessee will exercise the option

ĹEven if the ownership of the assets is not transferred, the lease term is the majority (75%) of the lease assets;

ĺThe present value of the minimum lease payments to the lessee at the start date of the lease is almost equivalent to the fair value of the leased asset (90%), the present value of the minimum lease payment, which is almost equivalent to the fair value of the lease (including) at the beginning of the lease;

ĻThe nature of the leased property is special, if not larger, only the lessee can use.

Not meet the above conditions, it isidentified as operating lease.

˄2˅Financial lease of fixed assets, according to the lease began, lease the assets of the fair value of the minimum lease payments present value of the lowest recorded. According to the self owned fixed assets depreciation policy meter depreciation.

2.30.2 Operating lease

Operating lease

2.31 Pension plan

Pension is built on the basic old-age insurance on the basis of the supplementary pension insurance, according to participate in the plan of workers’ wages, level, length of service and other factors, in workers provide service of accounting period according to the provisions of the standard provision and distribution according to the benefit object, included in the relevant asset costs or profits and losses of the current period.

2.32 Confirmation criteria for termination of operations and Accounting treatment method

Termination of operation, refers to meet one of the following conditions have been disposing enterprises or enterprises are classified as held for sale, in the operation and the preparation of the financial statements to separate part of: ķThe component represents an independent main business or a major operating area.ĸ The component is part of a plan to deal with an independent main business or a major operating area; ĹThe component is only a subsidiary of the sale.

2.32.1 Accounting treatment method related to the share repurchase of the company

Company reported for approval according to legal procedure uses the acquisition of the company shares of the action, according to the cancellation of shares to reduce the total equity at the face value, to buy back shares to pay the

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– F-47 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements price (including transaction costs) and the face value of the stock balance adjustment of the owner's equity, more than part of the total face value, and should, in turn, reduced capital reserves (equity premium), surplus reserve and undistributed profit. Is lower than the face value of the total, lower than the face value of the total amount of the capital reserves shall be increased part (equity premium).

The Company repurchased shares before the cancellation or transfer of shares, as inventory management, all the expenses of the repurchase of shares transferred to the stock cost. When inventory transfer of shares, transfer income higher than the inventory cost shares a portion of the increased capital surplus (the equity premium); lower than the stock cost, in order to offset capital surplus (the equity premium), surplus reserves, undistributed profits. The stock shares of the company to buy back its common stock may not participate in the company's profit distribution, in the balance sheet of the owner's rights and interests of the items listed.

2.33 Accounting treatment method for financial asset transfer and non financial asset securitization business

The whole transfer of the financial assets meets the conditions for recognizing the termination shall be will received for transfer of consideration and that are directly included in the owner's equity changes in the fair value of the total amount, the transfer of the financial assets book value amount of the difference shall be included in the current profits and losses.

The transfer of the part of the financial assets meets the derecognition criteria should be the transfer of the book value of the financial assets as a whole, in confirmation of the termination part and an end part recognized among, according to their relative fair value apportionment, and termination confirmation part of the price and the original directly recorded in the owner's equity changes in the fair value of the cumulative amount corresponding to confirm the termination of part of the amount, to confirm the termination of the part of the book value of the amount of the difference shall be included in the current profits and losses.

Financial assets is not satisfied with the confirmation of the termination conditions, continue to confirm the transfer of financial assets as a whole, because of the transfer of assets and receive consideration, is regarded as a corporate debt financing, confirmed at the received a financial liability.

Company does not transfer did not retain ownership of the financial asset on nearly all of the risks and rewards and did not give up control of the financial asset, it shall in accordance with its continuous involvement in the transferred financial asset confirmation on financial assets and financial liabilities. For the transfer of financial assets involved in the formation of the relevant assets to confirm the relevant income, to continue to involve the formation of the relevant liabilities related to the cost of confirmation.

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– F-48 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

2.34 Assets held for sale

2.34.1 Confirmation standard

Non current assets satisfied the following requirements shall be classified as assets held for sale:

ķThe company has decided to dispose of the non current assets;

ĸAn irrevocable transfer agreement has been concluded with the assignee;

ĹThe transfer will be completed within one year.

2.34.2 Accounting treatment

The company's assets held for sale in accordance with the lower one between book value and the expected net realizable value of Measurement. Non-current assets held for saleˈthe difference between the book value is higher than the expected net realizable valueˈrecognised as assets impairment losses.

An asset or disposal group classified as held for sale, but then no longer meet the recognition conditions of fixed assets held for sale, the company will stop it as classified as held for sale, and according to the following two amount of the lower measurement:

˄1˅The asset or disposal group classified as held for sale before the book value, according to the assumed in not be classified as held for sale shall confirm the depreciation and amortization or depreciation adjusted amount;

˄2˅Recycling amount of the day of the decision not to sell.

Comply with the conditions of the intangible assets held for sale and other non current assets, according to the above principle.

2.35 Changes of accounting policies and accounting estimates

2.35.1 Changes of accounting policies

During the reporting period, the company has not had any changes in accounting policies.

2.35.2 Changes of accounting estimates

1ˊYunnan Baoshan Supa River Hydropower Development Co.is a subsidiary of Yunnan Province Electric Power

Investment Co, it adjusted fixed assets and depreciation in accordance with the energy investment group "fixed assets management approach" and the relevant financial regulations, and reported to the tax bureau for the record to adjust the results, adjusted annual increase of depreciation expense of about 6,520,000 yuan, impact profit and loss 6,520,000

Yuan. List of fixed assets depreciation as follow:

Original Current Categories Detail of categories use life use life Reinforced concrete dam 50 30 House building Structure Stone structure power 50 30

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– F-49 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

station dam Diversion channel, front pool 50 30-40 and tunnel Highway 35-50 40 Other structures 20-40 30 Mechanical equipment  Other mechanical equipment 8 10 Transformer 12 15 Electrical equipment Other electrical equipment 5-15 10 Appliance equipment   20 10 Machinery equipment Conduction device Transmission line 40 25-30 Energy supply and heating Special machinery and  12-20 10 equipment equipment Inspection and testing  5-40 10 equipment Transport tool    6 5 Office furniture   6 5

Office tools and Computer   5 3 equipment Copier   5 3 Network equipment   5-8 3

2ˊWeixin Yuedian company is a subsidiary of Yunnan Province Electric Power Investment Co, it adjusted fixed asset class, depreciation period. According to the "Yunnan Province Energy Investment Group Co., Ltd. fixed assets management approach" Article 15 fixed assets classified depreciation table and Wein Yuedian according to 2015 years

1 month wave fixed assets category change operation manual conducted a change of category of fixed assets and depreciation. The department of a power plant and the Weixin Yuedian company only changed the category of fixed assets, no change in service life, no impact on the profit and loss of the year. Estimated useful life and annual depreciation rate of before and after the change in fixed assets as follow:

The estimated net residual Original anticipation Current anticipation Categories Depreciation rate˄%˅ value rate (%) use life useful life House building 5 20-40 10-45 9.5-2.11 Machinery equipment 5 10-20 10-30 9.5-3.17 Production equipment 5 5-40 5-30 19.00-3.17 Transport tool 5 8-12 5 19 Office tools and 5 5-8 3-5 31.67-19.00 equipment

3.Guanyinshan coal Mine is the branch company of Weixin Yuntou Yudian zhazi energy co., LTD ,it changed the type of fixed assets and depreciation period, annual increase in depreciation costs of about 500 thousand Yuan after adjustment. Because of Guanyin Mountain coal mine is in the capital construction stage, it does not affect the profit and loss of the year. Estimated useful life and annual depreciation rate of before and after the change in fixed assets as Page47

– F-50 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements follow:

The estimated net residual Original anticipation use Current anticipation Categories Depreciation rate˄%˅ value rate (%) life useful life House building 5 20-40 10-45 9.5-2.11 Machinery equipment 5 10-20 10-30 9.5-3.17 Production 5 5-40 5-30 19.00-3.17 equipment Transport tool 5 8-12 5 19 Office tools and 5 5-8 3-5 31.67-19.00 equipment

2.35.3 Corrections of prior period errors

1.The company's shares of the company Huaneng Lancangjiang Hydropower Co., Ltd.adjusted to increase the annual net profit of the parent company of 303,552,319.65 Yuan of 2014, and retrospective adjustment reduced net profit attributable to the parent company of 147,448,510.76 Yuan in 2013, reduced net profit attributable to the parent company 496,290,106.97 Yuan before 2013, the company has carried out the corresponding retrospective adjustment according to the proportion.

2.The company's shares of Yunnan Dongyuan Zhenxiong Coal Industry Co., Ltd.adjusted to increase the annual net profit of the parent company of 46,760,600.31 Yuan of 2014, and retrospective adjustment reduced net profit attributable to the parent company of 59,867,519.27 Yuan in 2013, reduced net profit attributable to the parent company

693,372.1 Yuan before 2013, the company has carried out the corresponding retrospective adjustment according to the proportion.

3.The company's shares of Dongyuan Yunnan Luoping Coal Industry Co., Ltd.adjusted to reduced the annual net profit of the parent company of 29,749,345.24 Yuan of 2014, and retrospective adjustment reduced net profit attributable to the parent company of 483,077.39 Yuan in 2013, reduced net profit attributable to the parent company483,077.39 Yuan before 2013, the company has carried out the corresponding retrospective adjustment according to the proportion.

4.According to the articles of Yunnan energy investment Langchao Technology Co. Ltd. and contribution agreement with substantive judgment, the company should not will be included in the scope of consolidation, and correct the previous year included in the scope of consolidation.

5 .The company will be issued loans and advances will be within a year due to partial classification to a year due to non-current assets according to the stipulations of the contract expiration date, on the previous number of retroactive adjustment.

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– F-51 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

6.The company level 3 subsidiary of Yunnan Diandong Yunndiantou coal co., LTD of inventory and should be paid taxes and other matters to be traced back adjustment, adjust the impact report items are as follows

The number of the approval number / Audit At the beginning of the year the No. Project name amount at the adjustment Audit adjustment credit amount / approval beginning of the debit year 1 Operating cost 48,441,021.93 552,912.92  48,993,934.85 2 Operating income 53,798,242.26 34,238.55  53,764,003.71 Administrative 3 5,393,256.38 788.36  5,394,044.74 expenses Other accounts 4 23,276,350.00  745,891.13 22,530,458.87 receivable 5 Inventory  551,309.80 551,309.80  6 Advance payment 8,195,973.60 -2,803,970.31 -2,803,970.31 8,195,973.60 7 Taxes payable 1,038,185.30 47,436.26 2,420,576.38 3,411,325.42 8 Accounts payable 15,992,416.16  -194,581.33 15,797,834.83 9 Undistributed profit -88,013,899.19 2,971,886.18 47,436.26 -90,938,349.11

7.According to the company's three subsidiaries of Fumin County Fengshun Natural Gas Development Co. Ltd and Yunnan energy investment Diannan Gas Development Co Ltd Original articles of Association of the agreement;

They should not be incorporated into the scope of the company's merger, and in the previous year to incorporate the scope of error correction

According to the company's three subsidiaries of Fumin County Fengshun Natural Gas Development Co. Ltd and

Yunnan energy investment Diannan Gas Development Co Ltd Original articles of Association of the agreement; They should not be incorporated into the scope of the company's merger, and in the previous year to incorporate the scope of error correction;

The company’s three subsidiary of Xuanwei City Fengshun City Gas Development Co., Ltd. according to assets reached predetermined using state of the node retroactive adjustment decrease in construction projects and increased fixed assets.

The above adjustments to the beginning of the financial statements of the project and the amount of the impact as following˖

The impact of the financial statements Before adjustment Retrospective adjustment After adjustment project at the beginning of the year Monetary fund 329,018,571.00 -38,731,521.95 290,287,049.05 Accounts receivable 12,904,793.17 -5,485,593.99 7,419,199.18 Advance payment 22,116,755.32 -13,799,342.67 8,317,412.65

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– F-52 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

The impact of the financial statements Before adjustment Retrospective adjustment After adjustment project at the beginning of the year Interest receivable  332,000.00 332,000.00 Other accounts receivable 5,679,698.83 8,553,471.94 14,233,170.77 Inventory 22,230,629.74 -21,869,377.35 361,252.39 Other current assets 2,017,273.12 2,017,273.12 Long-term equity investment 10,467,018.99 27,703,293.70 38,170,312.69 Fixed assets 73,159,549.75 25,493,918.19 98,653,467.94 Construction in process 85,721,374.36 -49,161,167.11 36,560,207.25 Intangible assets 17,352,638.37 -8,104,130.90 9,248,507.47 Goodwill 75,690,774.25 -5,937,954.02 69,752,820.23 Deferred tax assets 51,765.70 12,465.32 64,231.02 Accounts payable 11,690,351.08 -6,476,796.00 5,213,555.08 Payment in advance 19,797,897.60 -15,763,651.22 4,034,246.38 Payroll payable 180,846.00 -116,774.21 64,071.79 Taxes payable 343,155.11 443,560.22 786,715.33 Other accounts payable 12,631,432.07 -7,044,514.49 5,586,917.58 Special payment 5,555,836.82 -5,555,836.82 Special reserve 5,072.53 28,374.76 33,447.29 Surplus reserve 87,307.68 85,957.15 173,264.83 Undistributed profit 12,555,993.92 -5,895,041.79 6,660,952.13 Minority shareholder’s equity 74,398,448.99 -39,053,715.64 35,344,733.35 Operating income 69,758,459.39 -20,414,516.10 49,343,943.29 Operating cost 44,388,676.38 -11,317,124.67 33,071,551.71 Business taxes and additional 854,563.32 -155,913.15 698,650.17 Selling expenses 1,561,911.37 -103,735.65 1,458,175.72 Administrative expenses 2,714,466.28 3,764,606.56 6,479,072.84 Financial expenses 35,866.00 -304,058.65 -268,192.65 Assets impairment loss 389,794.47 389,794.47 Investment income -855,888.07 2,047,337.60 1,191,449.53 Operating income 639,566.84 -496,800.17 142,766.67 Income tax expense 2,700,049.43 -1,161,590.19 1,538,459.24

8ˊAccording to the matching principle of assets and income, the company is a subsidiary of Yunnan energy investment Industrial Investment Co. Ltd. recover the rent which originally from Yunnan energy investment Juzheng

Investment Limited collection. As a result of the construction of company assets by j Juzheng company, it was incorporated into the scope of consolidation in the period of October 1st, this period also has a retrospective adjustment to the rental income, depreciation and assets. At the same time the company is a subsidiary of At the same time the company is a subsidiary of Yunnan insurable Industry Investment Co., Ltd. occurrence error correction in the prior periods, retroactive reduction should be accounts receivable, to reduce undistributed profit and adjusted, less should pay income tax, reducing surplus reserve. occurrence error correction in the prior periods, retroactive reduction should

Page50

– F-53 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements be accounts receivable, to reduce undistributed profit and adjusted, less should pay income tax, reducing surplus reserve.

The above adjustments to the beginning of the financial statements of the project and the amount of the impact as following˖

The impact of the financial statements Before adjustment Retrospective adjustment After adjustment project at the beginning of the year Accounts receivable 7,473,449.88 6,633,136.16 14,106,586.04 Inventory 451,076,573.69 -33,199,066.70 417,877,506.99 Long-term equity investment 27,654,913.38 -3,055,793.13 24,599,120.25 Real estate as investment 120,701,250.80 120,701,250.80 Fixed assets 92,909,099.71 -90,998,883.40 1,910,216.31 Taxes payable 1,581,735.84 1,907,966.84 3,489,702.68 Surplus reserve 6,628,403.26 -182,732.31 6,445,670.95 Undistributed profit 23,152,156.39 -1,644,590.80 21,507,565.59 Operating income 5,013,953.17 8,076,508.45 13,090,461.62 Operating cost 1,574,193.27 1,922,506.03 3,496,699.30 Business taxes and additional 184,360.00 451,000.00 635,360.00 Administrative expenses 1,386,692.77 785,938.46 2,172,631.23 Investment income 1,661,953.17 -3,055,793.13 -1,393,839.96 Income tax expense 1,319,440.33 1,251,205.96 2,570,646.29 9.The company's subsidiary, Yunnan energy investment financial holdings Limited recover the financial adviser fee

2 million 100 thousand yuan which collected by Shenzhen fund company previously, it affects the consolidated financial statements of the value-added tax and financial holding company surplus reserve, need to be traced back to adjust in this period.

The above adjustments to the beginning of the financial statements of the project and the amount of the impact as following˖

The impact of the financial statements Before adjustment Retrospective adjustment After adjustment project at the beginning of the year Monetary fund 7,225,482,277.50 -50,135,535.18 7,175,346,742.32 Accounts receivable 994,492,004.64 -4,496,385.17 989,995,619.47 Advance payment 1,047,222,874.69 -15,223,757.28 1,031,999,117.41 Interest receivable 15,410,970.11 332,000.00 15,742,970.11 Other accounts receivable 1,006,109,775.81 4,948,977.74 1,011,058,753.55 Inventory 1,140,871,329.34 -60,544,939.77 1,080,326,389.57 Other current assets 928,025,006.11 2,017,273.12 930,042,279.23 Non current assets due within one year 234,465,852.77 1,229,372,500.00 1,463,838,352.77 Loans and advances 2,096,622,500.00 -1,229,372,500.00 867,250,000.00 Long -term equity investment 18,042,130,535.11 -125,144,043.16 17,916,986,491.95

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– F-54 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

The impact of the financial statements Before adjustment Retrospective adjustment After adjustment project at the beginning of the year Real estate as investment 120,701,250.80 120,701,250.80 Fixed assets 8,323,627,695.54 -65,851,647.70 8,257,776,047.84 Construction in process 5,469,887,407.88 -54,919,232.47 5,414,968,175.41 Intangible assets 410,294,765.26 -8,104,130.90 402,190,634.36 Goodwill 156,940,150.87 -5,937,954.02 151,002,196.85 Long-term prepaid expenses 15,886,788.99 -371,772.32 15,515,016.67 Deferred tax assets 11,064,822.15 -32,786.58 11,032,035.57 Accounts payable 1,632,139,105.62 -12,676,694.98 1,619,462,410.64 Payment in advance 171,275,454.28 -19,194,253.54 152,081,200.74 Payroll payable 29,546,775.14 -898,688.71 28,648,086.43 Taxes payable -245,172,260.43 5,887,339.17 -239,284,921.26 Other accounts payable 380,153,164.12 -7,110,885.13 373,042,278.99 Long-term payroll payable 541,170.00 541,170.00 Deferred income 118,141,926.80 -9,555,836.82 108,586,089.98 Special reserve 1,980,510.60 28,374.76 2,008,885.36 Surplus reserve 292,965,692.41 -15,779,154.37 277,186,538.04 Undistributed profit 2,010,550,439.26 -150,397,167.97 1,860,153,271.29 Minority shareholder’s equity 3,052,472,939.58 -53,606,885.30 2,998,866,054.28 Operating income 35,329,952,207.04 41,588,050.12 35,371,540,257.16 Operating cost 33,151,637,063.32 -42,325,179.05 33,109,311,884.27 Business taxes and additional 23,982,841.02 295,750.85 24,278,591.87 Selling expenses 50,118,126.86 -3,434,843.86 46,683,283.00 Administrative expenses 295,799,145.08 981,022.34 296,780,167.42 Financial expenses 562,818,937.22 -273,070.08 562,545,867.14 Assets impairment loss 117,130,965.27 212,557.89 117,343,523.16 Non-operating income 484,518,707.28 -496,800.17 484,021,907.11 Non-operating expense 38,374,366.20 2,061,165.04 40,435,531.24 Income tax expense 42,800,314.50 -61,162.80 42,739,151.70 Net profit 1,531,809,154.85 83,635,009.62 1,615,444,164.47

3 Tax

3.1 Preferential tax policy and the official documents

1 ˅Yunnan Baoshan Supa River Hydropower Development Co., Longling County Local Taxation Bureau applied to Longling local tax bureau to reduce rate of 15% corporate income tax from 1 January 2011 to 31 December 2020, Longling local tax bureau "enterprise income tax relief for tax filing notice" (Long rent Zhengshen prepare enterprises (2012) on the 7th) agreed to record, according to the Ministry of Finance, State Administration of Taxation, General Administration of Customs "on the further implementation of the western development strategy on tax policy issues notice" (Cai Shui [2011] No. 58) spirit of the document.

˄2˅Tengchong Sudian Longchuan River Hydropower Development Co., Ltd., According to the State

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– F-55 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Administration of Taxation on the on the further implementation of the western development strategy about enterprise income tax issues notice "(State Administration of Taxation Announcement No. 12, 2012) from January 2011 to

December 1, to 2020, 31, located in the western region for industrial projects in the western region to encourage industries directory" provisions of the main business, and the when of main business income accounted for more than

70% of the total income of enterprises, reducing pay enterprise income tax at the tax rate of 15%, Tengchong Sudian

Longchuan River Hydropower Development Co., Ltd. with tax exemption and reduction conditions, apply for a waiver of the start date of tax as of January 2012 to 31 December 1, to 2020. This period has been applied to the tax bureau for the record.

˄3˅Huaning Tiaoshitou Hydropower Co., Ltd. reduced pay rate of 15% corporate income tax, the company comply with relief conditions apply for tax relief starting date of January 1, 2012 to December 31, 2020, according to

State Administration of Taxation "on the further implementation of the western development strategy announcement on corporate income tax issues," (State Administration of Taxation Announcement No. 12 of 2012) from 1 January 2011 to

December 2020 31, located in the western region of the "western region encouraged industry directory" provides for the main business of industrial projects, and which, when the main business income accounted for more than 70% of total corporate income enterprises. ˄4˅Weixin Yuntou Yuedian Zhaxi Energy Co., Ltd., gets Weixin County State Revenue approval through the "taxpayer tax credits apply for approval" March 20, 2013, enjoys the enterprise income tax " Two free and three half price " policy (from July 2012 to June 2014 corporate income tax 100% relief, from July 2014 to June 2017 corporate income tax 50% reduction).

˄5˅Yunnan Provincial Energy Investment Group Youneng Technology Co., Ltd.,under fiscal [2010] no. 2010 the ministry of finance the state administration of taxation on promoting energy conservation service industry development of value added tax, business tax and enterprise income tax policy issues notice, on November 5, 2012 in kunming, yunnan province won the national tax authorities the state administration of taxation decided that tax incentives, new technology industrial development zone to enjoy the energy-saving projects to achieve the first subordinate to the production and operation income tax year, the first year to third year shall be exempted from enterprise income tax, 4th to 6th years in accordance with the statutory rate of 25% by half of the collection of enterprise income tax preferential tax policies.

˄6˅Yunnan Provincial Energy Investment Group Youneng Technology Co., Ltd. was authorized by the local taxation authorities in Yunnan province local taxation bureau directly in December 14, 2011, under the Local Taxation Bureau directly of the Bureau of tax preference for the record the examination and approval, the approval number: Direct taxation of the tax collection in Yunnan [2011] no. 2011; enjoys the implementation of contract energy management project of suspension to impose business tax taxable income tax preferential tax policies. Since August 1, 2013, the

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– F-56 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements implementation of tax levying VAT reform within the administrative region of Yunnan Province, the original pay business tax on transportation, part of modern service industry to change VAT, the contract energy management project has been included in the "scope of replacing business tax with value-added tax(VAT)", according to the provisions of the tax of

Yunnan [2013]60 "development of transportation industry and part of the modern service industry of Yunnan province tax levying VAT reform implementation plan" and the national pilot industry of the original business tax preferential policies according to the Ministry of Finance and the State Administration of Taxation issued by the transportation industry and part of modern service industry business tax VAT pilot policy transition, the company in September 2013

27 by the director of the national tax authorities in Yunnan Kunming hi tech Industrial Development Zone, the State Tax

Bureau for approval, enjoy the contract energy management project taxable services shall be exempted from value-added tax Benefit policy.

˄7˅Yunnan Energy Investment Will Technology Co., Ltd. is allowed to enjoy 15% tax rate to pay corporate according to Western Development CIT in 2014.

˄8˅Yunnan Provincial Energy Small Hydropower Investment Co. Ltd., according to the Ministry of Finance and the State

Administration of Taxation on the degeneracy of VAT rate policy notice fiscal [2014] No. 57 provisions, from the beginning of July 1, 2014, for the power of the county and below county small hydropower units production by previous according to 6 per cent of the easy way to levy the tax rate adjustment is in accordance with the 3% of tax levy rate.

˄9˅Yunnan energy financial holding co., LTD obtained the approval of Kunming Local Taxation Bureau tax filing on 23 October 2015, according to the notice of the Ministry of finance, the General Administration of customs and the

State Administration of Taxation on tax policy issues concerning the further implementation of the western development strategy of Taxation (2011) 58, the second and third one, enjoys that the western region to encourage industrial enterprises reduced to 15% enterprise income tax form January 2015 December 1, to 2020 31.

˄10˅Shenzheng Yunneng fund management co., LTD obtained the approval of Kunming Local Taxation Bureau tax filing on 23 October 2015, according to the notice of the Ministry of finance, the General Administration of customs and the State Administration of Taxation on tax policy issues concerning the further implementation of the western development strategy of Taxation (2011) 58, the second and third one, enjoys that the western region to encourage industrial enterprises reduced to 15% enterprise income tax form January 2015 December 1, to 2020 31.

˄11˅Zhaotong city fengshun city gas pipelines co., LTD apply to Yunnan Zhaoyang District National Taxation

Bureau Zhaoyang tax bureau to put forward for the year 2014 reduced according to the tax rate of 15% pay enterprise income tax on 12 January 2015, according to the Ministry of finance, the State Administration of Taxation and the

General Administration of customs, "on the further implementation of the western development strategy on tax policy

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Bureau Zhaoyang tax bureau of the great western development enterprise income tax preferential policy to review confirmation, filing the application form "and agreed to record.

˄12˅Fuming fengshun city gas pipelines co., LTD apply to Yunnan Fumin District National Taxation Bureau to put forward for the year 2014 to 2020 reduced according to the tax rate of 15% pay enterprise income tax on 6 January

2015, according to the Ministry of finance, the State Administration of Taxation and the General Administration of customs, "on the further implementation of the western development strategy on tax policy issues notice" (fiscal [2011]

No. 58) the spirit of the document, Fumin State Taxation Bureau to make the "enterprise income tax exemption and reduction of tax filing notice" to record on January 9, 2015.

˄13˅Fuming fengshun city gas pipelines co., LTD apply to Yunnan Fumin District National Taxation Bureau to put forward for the year 2014 to 2020 reduced according to the tax rate of 15% pay enterprise income tax on 6 January

2015, according to the Ministry of finance, the State Administration of Taxation and the General Administration of customs, "on the further implementation of the western development strategy on tax policy issues notice" (fiscal [2011]

No. 58) the spirit of the document, Fumin State Taxation Bureau to make the "enterprise income tax exemption and reduction of tax filing notice" to record on January 9, 2015.

˄14˅ Yunnan Fugong Huatai Electric power development co., LTD is in the line with the state to encourage industries and the Fugong County State Taxation Bureau whose Bureau identified and Fugong Tax issued by the word board (2014) No. 18 of the reduction, exemption notice, given the reduced enterprise income tax, reduced tax rate of

15% according to the Yunnan Provincial Development and Reform Commission in May 2014 of Yunnan development and reform office [2014]389 file.

˄15˅Yunnan Fugong Huatai Electric power development co., LTD is in the line with the state to encourage industries and the Fugong County State Taxation Bureau whose Bureau identified and Fugong Tax issued by the word board (2014) No. 18 of the reduction, exemption notice, given the reduced enterprise income tax, reduced tax rate of

15% according to the Yunnan Provincial Development and Reform Commission in May 2014 of Yunnan development and reform office [2014]389 file.

˄16˅Yunnan salt & salt chemical Co.,Ltd. , its main business belongs to the industries encouraged by the state according to Yunnan Province Development and Reform Commission documents "on the Kunming Tianrun tax accountants Co., Ltd., 31 enterprises related business belongs to the State encourages industrial confirmation" (Yunnan western office No [2013]766). After the tax authorities for the record, the enterprise income tax may be paid as 15% tax

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˄17˅Yunnan Tianju chemical co., LTD enterprise income tax applicable tax rate of 25%; The competent tax authorities of the company shall adopt the method of verification and collection, and the taxable income shall be determined according to the taxable income rate of 5%.

3.2 Major types of tax and tax rate

Type of tax expense Tax rate, rate Tax base Value added tax (VAT) 3%ǃ6%ǃ13%ǃ17% Taxable added value or sales income Business tax 3%ǃ5% Taxable operating income Urban maintenance and construction 1%ǃ5%ǃ7% VAT and business tax payable tax and education surcharge Extra-charges for education 3% VAT and business tax payable Local educational surtax 2% VAT and business tax payable Corporate income tax 15%ǃ25% Taxable corporate income

Water resources tax˖Yunnan Provincial Energy Small Hydropower Investment Co. Ltd. tax rate:0.4%

Resource tax˖Yunnan Electric Power Investment Co., Ltd. 2.50 yuan / ton˗ Yunnan salt & salt chemical Co.,Ltd. and its subsidiaries : Resource tax standard for wells shall pay 10 yuan per ton; Liquid salt by 2 yuan per ton; Limestone 1 yuan per ton.

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4 Consolidated financial statements

4.1 Group composition

Proporti Type Amount Main on of Le of Registered Registered capital Right to of No. Subsidiaries business Business nature Shareh The way to get vel busine address (in RMB Yuan) vote investment premises olding ss (in RMB Yuan)

Enterprise merger Electric power 1 Yunnan Electric Power Investment Co., Ltd. 2 1 Kunming Yunnan 1,903,476,678.84 74.06 74.06 1,620,304,567.11 under the same investment control Yunnan Provincial Energy Investment Group Haidian District, Nationwid Investment Investment 2 2 1 10,000,000.00 100 100 10,000,000.00 Beijing Investment Consulting Co., Ltd. Beijing e consultation establishment

– F-60 Enterprise merger Yunnan Provincial Energy Investment Group Chengbei District, 3 2 1 Yunnan Energy investment 20,000,000.00 90 90 22,000,000.00 under the same Dehong Energy Development Co., Ltd. Mangshi control Enterprise merger Yunnan Provincial Energy Investment Renmin Road, 4 2 1 Yunnan Material Trade 100,000,000.00 40 40 40,000,000.00 under the same Group Logistics Limited Liability Company Kunming control Yunnan Provincial Energy Investment Group Xuefu Road, Natural gas Investment 5 2 1 Yunnan 1,000,000,000.00 100 100 1,000,000,000.00 Natural Gas Industry Develop Co., Ltd. Kunming development establishment Yunnan Provincial Energy Investment Group Economic District, Electric power Investment 6 Hydroelectricity New Energy Sources 2 1 Yunnan 5,000,000.00 45 45 2,250,000.00 Kunming development establishment Technology Engineering Co., Ltd. Second Ring of Yunnan Provincial Energy Financial Service Investment 7 2 2 West Road, Yunnan Financial investment 3,000,000,000.00 100 100 3,000,000,000.00 Co., Ltd. establishment Kunming Yunnan Provincial Energy Investment Group Economic District, Enterprise merger 8 2 1 Yunnan Asset management 1,000,000,000.00 100 100 1,034,382,592.53 Industrial Investment Co., Ltd. Kunming under the same

Page57 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Proporti Type Amount Main on of Le of Registered Registered capital Right to of No. Subsidiaries business Business nature Shareh The way to get vel busine address (in RMB Yuan) vote investment premises olding ss (in RMB Yuan)

control Enterprise merger Yunnan Provincial Energy Investment Group Economic District, 9 2 1 Yunnan Material Trade 30,000,000.00 100 100 32,678,772.49 under the same NENGHE Economic and Trade Co. Ltd. Kunming control New and Yunnan Provincial Energy Investment Group Investment 10 2 1 high-tech zones, Yunnan Energy saving 31,000,000.00 50 50 21,621,949.91 Youneng Technology Co., Ltd. establishment Kunming Enterprise merger Yunnan Provincial Energy Investment Group Economic District, – F-61 11 2 1 Yunnan Material Trade 50,000,000.00 40 40 16,366,848.48 under the same Weishi Technology Co., Ltd. Kunming control Yunnan Provincial Energy Investment Group Hongta District, Investment 12 2 1 Yunnan Energy saving 129,000,000.00 40 40 51,600,000.00 Huilong Technology Co., Ltd. Yuxi establishment Yunnan Provincial Energy Small Hydropower Economic District, Project investment Investment 13 2 1 Yunnan 100,000,000.00 40 40 40,000,000.00 Investment Co. Ltd. Kunming and management establishment Investment Investment 14 Yunnan Energy Investment (HK) Co., Ltd 2 3 HK HK 2,022,656,150.00 100 100 2,162,563,000.99 management establishment Yunnan Provincial Energy Investment Group Yunnan Investment 15 2 1 Kunming Coal industry 745,505,348.20 100 100 745,505,348.20 coal Co., Ltd. establishment Kunming Yunnan Enterprise merger Salt and its series 16 Yunnan salt & salt chemical Co.,Ltd. 2 1 279,164,668.00 33.43 33.43 923,804,300.00 not under the products same control Yunnan Provincial Energy Investment Kunming Yunnan Investment 17 2 1 Power distribution 500,000,000.00 100 100 500,000,000.00 Dianzhong placement of electric co., LTD establishment 18 Yunnan Provincial Energy Investment 2 1 Kunming Yunnan Project investment 500,000,000.00 100 100 500,000,000.00 Investment

Page58 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Proporti Type Amount Main on of Le of Registered Registered capital Right to of No. Subsidiaries business Business nature Shareh The way to get vel busine address (in RMB Yuan) vote investment premises olding ss (in RMB Yuan)

development investmend co., LTD and management establishment Kunming Yunnan Enterprise merger Yunnan Nengyuanda import and export co., Minerals business 19 2 1 70,943,421.00 51 51 51,000,000.00 under the same LTD etc. control Yunnan province energy research institute Kunming Yunnan Investment 20 2 1 Energy saving 50,000,000.00 100 100 50,000,000.00 co., LTD establishment Yunnan Provincial Energy Investment Kunming Yunnan Ecological and Enterprise merger 21 Group ecological environment technology 2 1 environmental 20,000,000.00 40 40 8,000,000.00 under the same

– F-62 co., LTD protection industry control Yunnan Provincial Energy Investment Group Kunming Yunnan Investment 22 Biological resources investment and 2 1 Biotechnology 9,000,000.00 40 40 establishment development co., LTD

Notes:

Type of subsidiary:

1. Domestic non-financial subsidiary

2. Domestic financial subsidiary 3. Overseas subsidiary 4. Public institution 5. Infrastructure unit

Page59 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

4.2 Reason of the parent company has not more than half of the proportion of the investment unit but can control to the investment unit

Amount of N Proportion of Right to vote Registered capital(in Le Reasons for inclusion in the Subsidiaries investment(in RMB o. Shareholding% ˄%˅ RMB Yuan) vel scope of consolidation Yuan) More than half of the voting 1 Yunnan salt & salt chemical Co.,Ltd. 33.43 33.43 279,164,668.00 923,804,300.00 2 rights in the board of directors Yunnan Provincial Energy Investment Group Logistics Limited Liability More than half of the voting 2 40 40 100,000,000.00 40,000,000.00 2 Company rights in the board of directors More than half of the voting 3 Yunnan Provincial Energy Investment Group Weishi Technology Co., Ltd. 40 40 50,000,000.00 16,366,848.48 2 rights in the board of directors More than half of the voting 4 Yunnan Provincial Energy Investment Group Huilong Technology Co., Ltd. 40 40 129,000,000.00 51,600,000.00 2 rights in the board of directors Yunnan Provincial Energy Investment Group Small Hydropower More than half of the voting – F-63 5 40 40 100,000,000.00 40,000,000.00 2 Investment Co. Ltd. rights in the board of directors Yunnan Provincial Energy Investment Group ecological environment More than half of the voting 6 40 40 20,000,000.00 8,000,000.00 2 technology co., LTD rights in the board of directors Yunnan Provincial Energy Investment Group Hydroelectricity New Energy More than half of the voting 7 45 45 5,000,000.00 2,250,000.00 2 Sources Technology Engineering Co., Ltd. rights in the board of directors Yunnan Provincial Energy Investment Group Biological resources More than half of the voting 8 40 40 9,000,000.00  2 investment and development co., LTD rights in the board of directors

Page60 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

4.3 Situation of important non wholly owned subsidiary

4.3.1 Minority shareholdders

2015 belongs to Dividends paid to Proportion of Dec.31,2015 profit and loss of minority No. Subsidiaries minority Cumulative minority shareholders in shareholders(%) minority interests shareholders 2015 Yunnan Provincial Power 1 25.94 -69,132,640.02  1,081,595,059.68 Investment Co., Ltd. Yunnan Provincial Energy 2 Investment Group Logistics Co. 60 19,646,638.63  81,035,294.17 Ltd. Yunnan salt & salt chemical  3 66.57 49,217,033.05 1,758,257,642.93 Co.,Ltd.

4.3.2 Main financial information

Year2015 Year2014 Item Subsidi Subsidiaries 1 Subsidiaries 2 Subsidiaries 3 Subsidiaries 1 Subsidiaries 2 aries 3 Current 1,925,369,456.80 1,479,652,052.30 739,756,537.86 1,808,385,125.46 862,279,586.16 assets Non-curren 10,527,634,893.71 11,442,381.00 3,304,116,590.03 11,101,540,042.89 2,097,276.91 t assets Total 12,453,004,350.51 1,491,094,433.30 4,043,873,127.89 12,909,925,168.35 864,376,863.07 assets Current 3,472,219,626.11 1,356,035,609.69 1,498,883,295.49 3,337,392,946.49 752,090,920.63 liabilities Non-curren 6,660,578,428.87 562070428.3 7,688,031,964.42 t liabilities Total 10,132,798,054.98 1,356,035,609.69 2,060,953,723.80 11,025,424,910.91 752,090,920.63 liabilities Operating 1,075,908,473.49 35,403,970,806.45 483,168,157.13 1,392,573,599.01 17,628,205,064.99 income Net profit belongs to -136,451,309.93 32,744,397.72 64,645,806.27 -366,329,193.96 11,056,979.72 parent company Total comprehen -136,451,309.93 32,744,397.72 64,645,806.27 -366,329,193.96 11,056,979.72 sive income Cash flow from 529,002,506.33 19,423,114,443.32 363,726,178.60 1,201,348,255.08 14,841,361,975.53 operating activities 4.4 Newly incorporated into the scope of the subject and no longer included in the scope of meger of the subject in 2015.

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4.4.1 Newly incorporated into the scope of the subject

Reason of Net asset at the Net profit in Shareholding Right to becoming new No. Subsidiaries Level end of 2015 2015 ratio (%) vote(%) subsidiary in 2015 Yunnan Provincial Energy Investment Investment 1 679,741,292.02 -4,487,063.70 2 100 100 Group coal Co., Ltd. establishment Enterprise merger under 2 Yunnan salt & salt chemical Co.,Ltd. 1,982,919,404.09 64,645,806.27 2 33.43 33.43 the same control Yunnan Provincial Energy Investment Investment 3 Dianzhong placement of electric co., 506,453,258.61 6,453,258.61 2 100 100 establishment LTD Yunnan Provincial Energy Investment Investment 4 Dianzhong Development investment 501,644,978.60 1,644,978.60 2 100 100 establishment co., LTD Yunnan province energy research Investment 5 54,198,694.54 3,098,694.54 2 100 100 institute co., LTD establishment Yunnan Provincial Energy Investment Group Biological resources Investment 6 8,994,433.00 -5,567.00 2 40 40 investment and development co., establishment LTD

4.4.2 No longer into the scope of subject in 2015

˄1˅This period, Level 2 subsidiary of the company, contain Yunnan Provincial Energy investment Langchao technology Co., Ltd.ˈYunnan Provincial Energy investment Jiaheng gas Industrial Co., Ltd.ˈYunnan electric zhongke photovoltaic technology Co. Ltd , which no longer included in consolidation scope.

˄2˅Yunnan Provincial Energy investment Natural gas industry development co., LTD, according to the company's three subsidiaries of Yunnan energy investment Shaotang Energy Development Co Ltd Original articles of

Association of the agreement; It should not be incorporated into the scope of the company's merger, and in the previous year to incorporate the scope of error correction.

˄3˅Yunnan electric power investment co., LTD will hold its Lincang cloud cast Yuedian Hydropower

Development Co., Ltd. 51% of the equity disposal, this period is no longer included in the scope of consolidation.

4.5 Situation of under the same control enterprise merger in 2015

Nothing.

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4.6 Situation of not under the same control enterprise merger in 2015

Identifiable net assets fair Goodwill Book net assets value Combining Trading on Company on combining Definin date price Defining date Amount g Amount method method Fair value of the identifiable Yunnan net assets salt & salt Evaluat and the Oct. 1, 2015 1,866,537,005.31 2,542,935,365.03 923,804,300.00 90,480,263.33 chemical ion difference Co.,Ltd. between the fair value of the transaction

Goodwill calculation process is as follows˖

Proportion of Yunnan Proportion of the salt & salt chemical company to Attributable to the Company Net assets fair value Co.,Ltd.to subsidiary Yunnan salt & salt company company chemical Co.,Ltd. Yunnan salt & salt chemical Co.,Ltd. 2,246,794,637.00 33.43% 751,103,447.15 Yunnan Tianju Chemical Co., Ltd. 84,424,693.85 100% 33.43% 28,223,175.15 Yunnan Tianye Chemical Co., Ltd. 307,699,231.55 70% 33.43% 72,004,697.18 Yunnan Puyang coal chemical industry -131,812,514.62 limited liability company 55% 33.43% -24,235,708.00 Wenshan City Huang JiaPing hydropower development limited liability 35,829,317.26 company 52% 33.43% 6,228,425.20 Total: 2,542,935,365.04 833,324,036.67

Trade prise 923,804,300.00 yuanˈFormation of goodwill90,480,263.33 yuan.

5 Consolidated financial statements

Note the following items in addition to the specified outside. "At the beginning of the period" refers to the January

1, 2015, "the end" refers to December 31, 2015, the period "refers to the year 2014." this "refers to the year 2015.

Except as otherwise stated, the RMB is an entry - based currency.

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5.1 Monetary captial

5.1.1 Details of monetary capital

Book balance on Dec. 31, 2015 Book balance on Dec. 31, 2014 Item Original currency amount Exchange rate RMB Amount Original currency amount Exchange rate RMB Amount

Cash:   1,376,822.60   1,742,141.28

RMB   794,509.51  1,035,734.52

USD 70,517.08 6.4936 457,909.71 76,910.20 6.119 470,613.53

IDR 102,312,910.70 0.000471 48,189.38 102,312,910.70 0.000499 52,793.46

KIP 88,692,000.00 0.000840336 74,531.09 171,829,845.00 0.00081367 132,278.56

THB  0.1799  268,792.00 0.1887 50,721.21

– F-67 HKD 2,008.73 0.8378 1,682.91 0.7889

Bank deposit:   11,922,467,848.32   5,970,385,191.49

RMB 5,881,959.62  11,688,577,740.86  5,234,416,007.89

SGD 6,845.29 4.5875 31,402.77 4.6396

USD 33,213,539.27 6.4936 215,675,438.60 100,185,877.19 6.119 620,994,389.56

KIP 12,574,923,102.19 0.000840336 10,567,160.58 0.00081367

HKD 9,029,397.79 0.8378 7,564,829.48 139,993,152.24 0.7889 114,918,619.03

IDR 108,866,297.61 0.000471 51,276.03 108,866,297.61 0.000499 56,175.01

Other monetary funds˖   551,646,258.83   1,203,219,409.55

RMB   551,646,258.83  1,110,023,778.12 USD    15,230,533.00 6.119 93,195,631.43

Total   12,475,490,929.75   7,175,346,742.32

Page64 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.1.2 Restricted monetary funds Item Ending balance Beginning balance Restricted reasons Guarantee deposit 401,242,103.33 976,188,417.32 Guarantee deposit Note margin  41,445,578.00 19,067,264.00 Note margin  L/C Guarantee deposits 34,284,000.00 To open a credit Baorongton deposits 93,195,631.43 To open l/c concerning foreign affairs Open an irrevocable letter of guarantee concerning foreign affairs / The standby letter of credit Time deposit 30,000,000.00 40,000,000.00 deposit ledged by time Deposit ަԆ 39,017,301.78 9,640,000.00 Pledge borrowǃDepositǃ pledged capitalǃLitigation to freeze Total 511,704,983.11 1,172,375,312.75  – F-68

Page65 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.2 Financial assets that are measured at fair value and whose movements are included in the profit and

loss of the current period

Item Fair value on Dec. 31, 2015 Fair value onDec. 31, 2014 1ˊTradable financial assets 59,785,617.89 including˖Debt instruments investment Equity instrument investment 59,785,617.89 Derivative financial assets Other Financial assets at fair value through profit or loss including˖Debt instruments investment Equity instrument investment Other Total 59,785,617.89

5.3 Notes recevible

5.3.1 Notes recevible classfication

Type of Notes Book balance on Dec. 31, 2015 Book balance on Dec. 31, 2014 Bank’s acceptance bills 93,640,083.14 41,959,009.02 Commercial acceptance bills 700,000.00 3,969,832.26 Total 94,340,083.14 45,928,841.28

5.3.2 Situation of bills has been endorsed or discounted but has not yet expired

Date of Whether the confirmation has Drawer Due date Amount Notes issue been terminated China water conservancy water and electricity 2015/11/27 2016/3/27 15,023,680.87 No bureau 14 co., LTD Beijing Kaitong Materials Co. , Ltd 2015/12/9 2016/6/9 15,500,000.00 No Yunnan Chubang Trade Co., Ltd 2015/11/6 2016/5/6 7,908,616.35 No Kunming Changpu Trade Co., Ltd 2015/1/7 2016/1/7 6,000,000.00 Yes China building sixth engineering co., LTD 2015/11/20 2016/5/19 5,000,000.00 No Other   233,142,605.81 Total   282,574,903.03  

5.4 Dividends receivable

Dec. Whether Increase in Decrease Reason Item 31, Dec. 31, 2015 impairment and current in current of uncovered 2014 its judgment Dividend Receivable of within 1 year 53,229,674.94 53,229,674.94   Jin'anqiao Hydropower Station Co. Temporarily not 53,229,674.94 53,229,674.94 No Ltd. paid Total 53,229,674.94 53,229,674.94  

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5.5 Intrerest receivable

Item Dec. 31, 2015 Dec. 31, 2014 From entrusted loans 29,542,281.05 4,075,181.97 From bond with fixed income 8,185,969.07 8,849,969.07 From fixed deposit 26,250.00 2,817,819.07 Total 37,754,500.12 15,742,970.11

5.6 Accounts receivable

5.6.1 Classfication

Dec. 31, 2015 Categories Book balance Provision for bad debts Amount Proportion (%) Amount Proportion (%) Individually significant and individual provision of bad debts is 1,673,097,357.50 82.89 12,952,592.00 0.77 made Bad debts provided on group basis Grouped provision of bad debts based on aging of accounts 320,735,192.15 15.89 32,652,318.33 10.18 Subtotal of the group 320,735,192.15 15.89 32,652,318.33 10.18 Insignificant individual amounts but individually made bad debts 24,616,918.45 1.22 provision Total 2,018,449,468.10 100.00 45,604,910.33 2.26

˄Contd˅

Dec. 31, 2014 Categories Book balance Provision for bad debts Amount Proportion (%) Amount Proportion (%) Individually significant and individual provision of bad debts is 554,814,744.81 54.80 9,151,944.00 1.65 made Bad debts provided on group basis Grouped provision of bad debts based on aging of accounts 194,733,275.95 19.24 12,800,614.89 6.57 Subtotal of the group 194,733,275.95 19.24 12,800,614.89 6.57 Insignificant individual amounts but individually made bad debts 262,845,290.48 25.96 445,132.88 0.17 provision Total 1,012,393,311.24 100.00 22,397,691.77 2.21

5.6.2 Accounts receivable of classified by categories

5.6.2.1 Individually significant and individual provision of bad debts is made on Dec. 31, 2015

Provision for bad Proportion Item Book balance Aging Explanation debts (%) The Chinese heavy industry Expected to be (chongqing) sea wind power equipment 334,938,000.00 Within 1 year recovered co., LTD Yunnan Power Grid Co. 237,217,994.29 Within 1 year Expected to be

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Provision for bad Proportion Item Book balance Aging Explanation debts (%) recovered Wuhan Dangdai science and There is a certain 150,000,000.00 750,000.00 Within 1 year 0.50 technology industry group co., LTD risk of bad debts Expected to be Yunnan Shuangxin trade co., LTD 61,719,129.20 Within 1 year recovered Liuzhou RUIYI Internataion Steel Trade There is a certain 61,012,960.00 12,202,592.00 2 to 3 years 20.00 Co., Ltd risk of bad debts Expected to be Other 828,209,274.01  recovered Total 1,673,097,357.50 12,952,592.00   

5.6.2.2 Accounts receivable of provision for bad debts by combination

5.6.2.2.1 Accounts receivable of classified by aging

Dec. 31, 2015 Dec. 31, 2014

Aging Book balance Provision for Book balance Provision for Amount Proportion (%) bad debts Amount Proportion (%) bad debts

Within 1 year 210,905,660.60 65.76 10,545,283.03 157,313,963.80 80.78 7,865,698.19

1 to 2 years 73,242,485.35 22.83 7,324,248.55 28,600,814.80 14.69 2,860,081.48

2 to 3 years 23,345,723.10 7.28 4,669,144.62 5,707,139.85 2.93 1,141,427.97

3 to 4years 4,199,191.39 1.31 1,259,757.42 3,111,357.50 1.60 933,407.25

4 to 5 years 376,494.00 0.12 188,247.00

Above 5 years 8,665,637.71 2.70 8,665,637.71

Total 320,735,192.15 100.00 32,652,318.33 194,733,275.95 100.00 12,800,614.89

5.6.2.3 Insignificant individual amounts but individually made bad debts provision

Item Book balance Provision for bad debts Aging Proportion (%) Explanation Within 1 Expected to be Yunnan Baoshan electric power co., LTD 3,196,853.03 year recovered Within 1 Expected to be Car rental receivable 2,048,648.44 year recovered Within 1 Expected to be Zhongtian chuneng technology co., LTD 884,123.00 year recovered Within 1 Expected to be China tower co., LTD. Yunnan branch 713,200.00 year recovered China united network communications co., Within 1 Expected to be 687,047.82 LTD. Jiangxi province branch year recovered Other 17,087,046.16  

Total 24,616,918.45   

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5.6.3 Situation of actual verification of accounts receivable in 2015

Nature of accounts Amount of Reason of Whether or not because of the Verification Company receivable verification verification associated transactions procedure Internal Yunnan Hua Sheng Intercourse funds 9,476.00 Uncollectible No examination and Chemical Co., Ltd. approval Total  9,476.00   

5.6.4 Top 5 accounts receivable balance on Dec. 31. 2015.

Proportion of total Company Relation Amount Aging accounts receivable (%) China Shipbuilding Heavy Industries (Chongqing) Client 334,938,000.00 Within 1 year 16.59 sea wind power equipment Co., Ltd. Yunnan Power Grid Co. Client Within 1 year Within 1 year 11.75 Wuhan Dangdai science and technology industry Within 1 year Client 7.43 group co., LTD Construction of Luqiao Group Co., Ltd. Jin Hong Within 1 year Client 3.56 highway project general contracting Department Yunnan Shuangxin trade co., LTD Supplier 61,719,129.20 3.06 Total  855,739,706.58  42.39

5.7 Other accounts receivable

5.7.1 Other accounts receivable of classified by categories

Dec. 31, 2015 Categories Book balance Provision for bad debts Amount Proportion (%) Amount Proportion (%) Individual amount is significant, and the individual provision for bad 411,191,474.91 44.06 16,136,761.66 3.92 debts of other receivable Bad debts provided according to the combination Aging analysis combination 410,642,302.87 44.00 55,615,991.93 13.54 Combination of subtotal 410,642,302.87 44.00 55,615,991.93 13.54 Individual amount is not significant, but the individual provision for 111,442,627.18 11.94 1,509,827.88 1.35 bad debts of other receivables Total 933,276,404.96 100.00 73,262,581.47 7.85

˄Contd˅

Dec. 31, 2014 Categories Book balance Provision for bad debts Amount Proportion (%) Amount Proportion (%) Individual amount is significant, and the individual provision for 350,587,094.95 33.58 5,028,541.35 1.43 bad debts of other receivable Bad debts provided according to the combination

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Dec. 31, 2014 Categories Book balance Provision for bad debts Amount Proportion (%) Amount Proportion (%) Aging analysis combination 354,260,772.75 33.93 26,387,765.50 7.45 Combination of subtotal 354,260,772.75 33.93 26,387,765.50 7.45 Individual amount is not significant, but the individual provision 339,184,183.76 32.49 1,556,991.06 0.46 for bad debts of other receivables Total 1,044,032,051.46 100.00 32,973,297.91 3.16

5.7.2 Other accounts receivable instruction by categories

5.7.2.1 Individual amount is significant, and the individual provision for bad debts of other accounts receivable on Dec.31.2015

Item Book balance Provision for bad debts Aging Proportion (%) Explanation Above 3 Expected to be Weixin County People's Government 86,594,990.61 years recovered Above 3 Expected to be Yunnan Investment Holding Group Co., Ltd. 77,000,000.00 years recovered Yuxi city center city gas utilization and Expected to be 1 to 2 development of the work of the Ministry of 44,000,000.00 recovered years construction Within 1 Expected to be Shenwan Hong Yuan Securities Co. Ltd. 40,000,000.00 year recovered Minsheng financial leasing Limited by 1 to 2 Expected to be 32,000,000.00 Share Ltd years recovered Other 131,596,484.30 16,136,761.66  12.26 

Total 411,191,474.91 16,136,761.66  

5.7.2.2 Situation of other accounts receivable provison for bad debts by combination

5.7.2.2.1 Other accounts receivable of classified by aging

Dec. 31, 2015 Dec. 31, 2014

Aging Book balance Provision for Book balance Provision for bad Amount Proportion (%) bad debts Amount Proportion (%) debts

Within 1 year 33,361,786.40 8.13 1,668,089.32 294,894,196.80 83.24 14,744,709.84

1 to 2 years 312,545,394.60 76.11 31,254,539.46 52,908,007.20 14.94 5,290,800.72

2 to 3 years 50,811,144.40 12.37 10,162,228.88 81,200.00 0.02 16,240.00

3 to 4years 1,741,206.00 0.42 522,361.80 55,964.27 0.02 16,789.28

4 to 5 years 347,998.00 0.09 173,999.00 4,357.64 2,178.82 Above 5 11,834,773.47 2.88 11,834,773.47 6,317,046.84 1.78 6,317,046.84 years Total 410,642,302.87 100.00 55,615,991.93 354,260,772.75 100.00 26,387,765.50

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5.7.2.3 Individual amount is not significant, but the individual provision for bad debts of other accounts receivable on Dec. 31, 2015

Item Book balance Provision for bad debts Aging Proportion (%) Explanation Kunming Municipal Bureau of finance Within 1 Expected to be Kunming economic and Technological 6,407,076.40 year recovered Development Zone Finance Branch 2 to 3 Expected to be Hunan thermal power construction company 4,647,118.41 years recovered Kunming economic and Technological Expected to be Within 1 Development Zone Management Committee 3,000,000.00 recovered year Labor Supervision 1 to 2 Expected to be Weixin County Land Resources Bureau 2,102,200.00 years recovered 3 to Expected to be Dayao County People's Government 2,000,000.00 4years recovered Other 93,286,232.37 1,509,827.88  1.62

Total 111,442,627.18 1,509,827.88   

5.7.3 Actual verification of other accounts receivable in 2015

Whether or not Nature of Amount of because of the Verification Company accounts verificatio Reason of verification associated procedure receivable n transactions Yunnan independent choice of Age is too long, can not be electrical and Mechanical Engineering  781.40 No  expected to recover Co., Ltd. Age is too long, can not be China Unicom Kunming branch  690.13 No  expected to recover Total  1,471.53   

5.7.4 Top 5 other accounts receivable balance on Dec. 31. 2015.

Proportion of total other Company Relation Amount Aging accounts receivable (%) Yunnan Tai Yao industrial Refco Group Ltd Client; 225,000,000.00 1 to 2 years 24.11 Non related Weixin County People's Government 86,594,990.61 Above 3 years 9.28 party Controlling Yunnan Investment Holding Group Co., Ltd. 77,000,000.00 Above 3 years 8.25 shareholder Zhenxiong County Zhengxing Coal Mining Co., Non related 1 to 2 years, 2 61,859,563.12 6.63 Ltd. party to 3 years Yuxi city center city gas utilization and External development of the work of the Ministry of 44,000,000.00 1 to 2 years 4.71 merchants construction Total  494,454,553.73  52.98

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5.8 Advances to suppliers

5.8.1 Advances to suppliers by aging

Dec. 31, 2015 Dec. 31, 2014

Aging Book balance Provision for Book balance Provision for bad Amount Proportion (%) bad debts Amount Proportion (%) debts

Within 1 year 677,372,812.90 84.25 808,839,260.65 78.34

1 to 2 years 108,242,26.46 13.46 56,491,974.00 5.47 51,508.15

2 to 3 years 1,635,112.20 0.20 26,132,071.38 2.53 124,116.09

3 to 4years 16,532,055.36 2.06 97,489.46 141,024,324.76 13.66 312,889.14

4 to 5 years 30,365.00 0.01 Above 5 169,959.17 0.02 years Total 803,982,531.09 100.00 97,489.46 1,032,487,630.79 100.00 488,513.38

5.8.2 Aged over one year of advances to suppliers

Debt unit Dec. 31, 2015 Aging Reasons for failure to settl Hekou Yishan trading Co., Ltd. 47,329,596.38 1 to 2 years Did not meet the settlement conditions Yunnan Hong Cheng Mining Co., Ltd. 11,057,009.53 1 to 2 years Did not meet the settlement conditions Yixing Jianhua complete environmental protection Co. Ltd. 7,602,869.70 Above 3 years Did not meet the settlement conditions Jiali oil Tianjin Ltd. 6,783,721.20 1 to 2 years Did not meet the settlement conditions Jin Tianyuan food science and technology Tianjin Co., Ltd. 6,030,832.00 1 to 2 years Did not meet the settlement conditions Total 78,804,028.81  

5.9 Inventories

5.9.1 Classification of inventories

Dec. 31, 2015 Item Book balance Falling price reserves Book value Development costs 590,133,066.62 590,133,066.62 Finished goods 505,755,487.08 6,202,968.74 499,552,518.34 Raw materials 293,965,206.08 3,631,176.51 290,334,029.57 Revolving materials 2,084,257.61 2,084,257.61 Engineering construction 103,580,312.29 103,580,312.29 Goods in process 14,121,242.50 14,121,242.50 Wrappage 13,480,743.40 13,480,743.40 Low-value Consumption Goods 80,651.33 80,651.33 Semi-finished goods 3,931.40 3,931.40 Total 1,523,204,898.31 9,834,145.25 1,513,370,753.06

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˄Contd˅

Dec. 31, 2014 Item Book balance Falling price reserves Book value Development costs 417,852,994.74 417,852,994.74 Finished goods 287,882,481.55 517,205.45 287,365,276.10 Raw materials 335,986,686.99 335,986,686.99 Revolving materials 2,736,929.16 2,736,929.16 Engineering construction 23,626,836.52 23,626,836.52 Goods in process 12,757,666.06 12,757,666.06 Wrappage   Low-value Consumption Goods   Semi-finished goods   Total 1,080,843,595.02 517,205.45 1,080,326,389.57

5.10 Assets held for sale

Asset type Ending book value Estimated disposal costs Estimated time of disposal Yunnan Province energy investment Jia Heng Gas industry 12,300,000.00 Year 2016 Co., Ltd. Total 12,300,000.00 

5.11 Non-current assets due with one year

Item Dec. 31, 2015 Dec. 31, 2014 Long-term entrusted loan 234,465,852.77 Margin of financing lease 8,500,000.00 Loans and advances due within one year 3,241,744,637.00 1,229,372,500.00 Total 3,250,244,637.00 1,463,838,352.77

5.12 Other current assets

Item Dec. 31, 2015 Dec. 31, 2014 Explain Short-term entrusted loans 52,500,000.00 825,888,554.00 loss˖Short-term entrusted loans- provision All borrow all loans 57,376,729.44 After the deduction of input VAT 381,545,794.33 32,356,918.56 Advance payment of business tax  243,435.00 Waiting assets profit and loss 1,642.23 Prepay enterprise income tax 129,013.76 Private placement subscription deposit 14,175,000.00 Subscribe for China railway construction equipment Hong Kong IPO shares the QDII 1,361,331.60 channel deposit Bank financial products 591,000,000.00   Total 1,026,536,139.69 930,042,279.23 

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5.12.1 Details of Short-term entrusted loans:

Item Dec. 31, 2015 Dec. 31, 2014 Hanergy Holding Group Limited   Yunnan huadian Nujiang hydropower development co., LTD  75,440,000.00 Sanxia Jinsha River Yunchuan Hydropower Development Co.  750,000,000.00 Yunnan energy investment science and Technology Development Co Ltd   Yuxi DongfangCoal Co., Ltd.   Kunming Huayi Energy Engineering Technology Co Ltd 52,500,000.00 448,554.00 Total 52,500,000.00 825,888,554.00

5.13 Loans and advances

5.13.1 Situation of loans and advances according to personal and business distribution

Item Dec. 31, 2015 Dec. 31, 2014 Personal loans and advances —Credit card —Housing mortgage —Other Business loans and advances 50,000,000.00 875,000,000.00 —loan 50,000,000.00 875,000,000.00 —Discount —Other Total loans and advances 50,000,000.00 875,000,000.00 Less: provision for loan loss 250,000.00 7,750,000.00 Including: Individual counting Combined counting 250,000.00 7,750,000.00 Book value of loans and advances 49,750,000.00 867,250,000.00

5.13.2 Situation of loans and advances by industry distribution

Industry distribution Dec. 31, 2015 Proportion˄%˅ Dec. 31, 2014 Proportion˄%˅ Agriculture and animal husbandry, fishery  Mining industry  Realty industry 550,000,000.00 62.86 Construction industry Financial and insurance industry  Transportation industry 50,000,000.00 100.00 Other industries 325,000,000.00 37.14 Total loans and advances 50,000,000.00 875,000,000.00 Less: provision for loan loss 250,000.00 7,750,000.00 Including: Individual counting Combined counting 250,000.00 7,750,000.00 Book value of loans and advances 49,750,000.00  867,250,000.00

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5.13.3 Situation of loans and advances by district distribution

District distribution Dec. 31, 2015 Proportion˄%˅ Dec. 31, 2014 Proportion˄%˅

East China 50,000,000.00 100.00 

West China 100,000,000.00 11.43

South China 

North China

Central China

Southwest region 

Other areas 775,000,000.00 88.57

Total loans and advances 50,000,000.00 875,000,000.00

Less: provision for loan loss 250,000.00 7,750,000.00

Including: Individual counting

Combined counting 250,000.00 7,750,000.00

Book value of loans and advances 49,750,000.00 867,250,000.00

5.13.4 Situation of loans and advances by guarantee way distribution

Item Dec. 31, 2015 Dec. 31, 2014 Credit loan Guaranteed loan 265,000,000.00 Secured loan 50,000,000.00 610,000,000.00 Including ˖Mortgage loan 50,000,000.00 450,000,000.00 Pledge loans 160,000,000.00 Total loans and advances 50,000,000.00 875,000,000.00 Less: provision for loan loss 250,000.00 7,750,000.00 Including: Individual counting Combined counting 250,000.00 7,750,000.00 Book value of loans and advances 49,750,000.00 867,250,000.00

5.13.5 Loan loss provision

Dec. 31, 2015 Dec. 31, 2014 Item Individual Combination Individual Combination Beginning balance 15,877,500.00 Accrued in current 43,127,863.00 15,877,500.00 Transfer out in current Write off in current Turn back in current —Take back due to sell loans and advances —Loans and advances for discounted value to rise —Other factors leading to the reversal Ending balance 59,005,363.00 15,877,500.00

Including: Within 1 years maturity loans and advances for loan losses 58,755,363.00 yuan. Page75

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5.14 Financial assets available for sale

5.14.1 Situation of financial assets available for sale

Dec. 31, 2015 Item Book balance Impairment provision Book value

Available for sale securities  

Available for sale equity instruments  

Measured at fair value 277,272,836.48 277,272,836.48

Measured at cost 8,878,656,378.59 2,480,000.00 8,876,176,378.59

Other 460,799,990.00 460,799,990.00

Total 9,616,729,205.07 2,480,000.00 9,614,249,205.07

˄Contd˅

Dec. 31, 2014 Item Book balance Impairment provision Book value

Available for sale securities  

Available for sale equity instruments  

Measured at fair value

Measured at cost 8,693,135,969.27 8,693,135,969.27

Other 384,000,000.00 384,000,000.00

Total 9,077,135,969.27 9,077,135,969.27

5.14.2 Financial assets available for sale measured at fair value

Available for sale equity Debt instruments Financial assets available for sale classification Other Total instruments available for sale Cost of equity instruments / Amortization cost of debt 275,124,654.39 275,124,654.39 instruments

Fair value 277,272,836.48 277,272,836.48

The amount of change in fair value of other 2,148,182.09 2,148,182.09 comprehensive income

Amount of impairment

5.14.3 Financial assets available for sale measured at cost

Book balance

Invested unit Increase in t Decrease in Dec. 31, 2014 Dec. 31, 2015 current current

Yuntian chemical group co., LTD 3,000,000,000.00 3,000,000,000.00

Yunnan metallurgical group co., LTD 2,000,000,000.00 2,000,000,000.00

Yunnan coal chemical industry group co., LTD 1,000,000,000.00 1,000,000,000.00

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Book balance

Invested unit Increase in t Decrease in Dec. 31, 2014 Dec. 31, 2015 current current Yunnan huadian jinsha river middle hydropower 685,600,000.00 73,139,000.00 758,739,000.00 development co., LTD

Yunnan huadian Ludila hydropower co., LTD 228,160,000.00 28,800,000.00 256,960,000.00

Investment in yunnan dachaoshan hydropower co., LTD 177,000,000.00 177,000,000.00

Yunnan dongyuan coal and electricity co., LTD 131,628,000.00 131,628,000.00 131,628,000.00 131,628,000.00

Huaneng yunnan Longkaikou water and electricity co., 49,740,000.00 49,740,000.00 LTD

Guodian yangzonghai power generation co., LTD 147,086,900.00 147,086,900.00

Anning Haozhong small loan co., LTD 33,000,000.00 33,000,000.00

Datang international in yunnan honghe power generation 63,604,469.27 63,604,469.27 co., LTD

Jin Anqiao hydropower co., LTD 250,864,000.00 250,864,000.00

Datang Guan Yinyan hydropower development co., LTD 468,060,000.00 468,060,000.00

Yunnan Taiwan industrial park investment management 500,000.00 500,000.00 co., LTD Yunnan energy investment Jiaheng gas industry co., 3,000,000.00 3,000,000.00 LTD Yunnan GuoziYihao Industrial investment center (limited 109,000,000.00 109,000,000.00 partnership) Kunming longxing investment center entrusted asset 259,572,600.00 259,572,600.00 management plan Kunming longxing investment center entrusted asset 100,000,000.00 91,000,000.00 9,000,000.00 management plan

Yunnan Ruili city nanping rural commercial co., LTD 11,020,000.00 11,020,000.00

Tianjin jin cheng yu pharmaceutical technology co., LTD. 50,000,000.00 50,000,000.00 (limited partnership Shenzhen Haihuajing Lantian photovoltaic industry 30,000,000.00 30,000,000.00 investment center (limited partnership)

Yunnan Yunwei acetylene chemical industry co., LTD 18,000,000.00 18,000,000.00

Huaning county rural credit cooperative association 300,000.00 300,000.00

Yunnan sifang chemical co., LTD 2,480,000.00 2,480,000.00

Yunnan Yuntianhua United Commerce Co. , Ltd 14,310,291.83 14,310,291.83

Yunnan Yuntianhua group finance co., LTD 33,791,117.49 33,791,117.49

Yunnan forestry investment co., LTD 10,000,000.00 10,000,000.00

Total 8,693,135,969.27 185,520,409.32 8,878,656,378.59

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˄Contd˅

Depreciation reserves Decre The current Invested unit Dec. 31, Increase in t ase in Dec. 31, cash dividends 2014 current curre 2015 nt Yuntian chemical group co., LTD Yunnan metallurgical group co., LTD Yunnan coal chemical industry group co., LTD Yunnan huadian jinsha river middle hydropower 51,000,000.00 development co., LTD Yunnan huadian Ludila hydropower co., LTD 14,240,000.00 Investment in yunnan dachaoshan hydropower co., LTD 62,948,021.13 Yunnan dongyuan coal and electricity co., LTD Huaneng yunnan Longkaikou water and electricity co., LTD 1,480,000.00 Guodian yangzonghai power generation co., LTD Anning Haozhong small loan co., LTD 1,140,000.00 Datang international in yunnan honghe power generation co., LTD Jin Anqiao hydropower co., LTD 53,229,674.94 Datang Guan Yinyan hydropower development co., LTD Yunnan Taiwan industrial park investment management co., LTD Yunnan energy investment Jiaheng gas industry co., LTD Yunnan GuoziYihao Industrial investment center (limited partnership) Kunming longxing investment center entrusted asset management plan Yunnan GuoziYihao Industrial investment center (limited partnership) Yunnan Ruili city nanping rural commercial co., LTD Tianjin jin cheng yu pharmaceutical technology co., LTD. (limited partnership Shenzhen Haihuajing Lantian photovoltaic industry investment center (limited partnership) Yunnan Yunwei acetylene chemical industry co., LTD Huaning county rural credit cooperative association Yunnan sifang chemical co., LTD 2,480,000.00 2,480,000.00 Yunnan Yuntianhua United Commerce Co. , Ltd Yunnan Yuntianhua group finance co., LTD Yunnan forestry investment co., LTD Total 2,480,000.00 2,480,000.00 184,037,696.07

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5.15 Hold to maturity investment Dec. 31, 2015 Item Book balance Impairment provision Book value Hybrid instruments part of creditor's rights 304,857,000.00 304,857,000.00 Total 304,857,000.00 304,857,000.00 ˄Contd˅ Dec. 31, 2014 Item Book balance Impairment provision Book value Hybrid instruments part of creditor's rights Total Note:, the "Hengkang Medical Group Co., Ltd. develop non-public A-share stock subscription contract" and the ĀQuewenbin and Hengkang medical non-public offering of stock returns on guarantee agreement on investment projectsā signed by Yunnan energy investment financial holding co., LTD on 2014 August 15 is a complex financial investment tool. Yunnan energy investment financial holding co., LTD split “the Hengkang medical constant increase "and “revenue assurance agreement” into two tools, one is as “held to maturity investment credit investments”, another is as equity investment of “trading financial assets and derivative financial instruments'.

5.16 Long-term receivables

Dec. 31, 2015 Dec. 31, 2014 Discount Item Bad debt Book Bad debt rate Book balance Book value Book value reserve balance reserve interval Finance lease 907,196,639.28 4,533,217.58 902,663,421.70 including ˖ Unrealized 413,448,244.26 413,448,244.26 financing income Sale of goods by installments Installment payment service Other Total 907,196,639.28 4,533,217.58 902,663,421.70 

5.17 Long-term equity investment 5.17.1 Classifications of long-term equity investment Item Dec. 31, 2014 Change of crease or decrease Dec. 31, 2015 Investment to subsidiaries    Investment to associated enterprises 17,918,788,613.54 1,472,879,870.94 19,391,668,484.48 Investment to joint ventures    Other equity investment    Total 17,918,788,613.54 1,472,879,870.94 19,391,668,484.48 less: Prevision for long term equity investment 1,802,121.59  1,807,948.10 impairment Net value of long-term equity investment 17,916,986,491.95 1,472,879,870.94 19,389,860,536.38

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5.17.2 Details of long-term equity investment

Accounting Change of crease or Investment Proportion of voting Name of the invested organization Cost of investment Dec. 31, 2014 Dec. 31, 2015 method decrease proportion (%) rights (%) Yunnan Huadian Nujiang Hydropower Equity method 249,480,684.22 161,285,004.24 69,285,727.57 230,570,731.81 30 30 Development Co. Ltd. Yunnan Nanri Electric Technology Co. Ltd Equity method 3,500,000.00 4,032,011.71 654,021.63 4,686,033.34 35 35 Yunnan Huaneng Lancang River Hydropower Equity method 9,731,248,693.82 10,469,250,044.74 205,462,929.49 10,674,712,974.23 31 31 Development Company Yunnan energy investment Langchao Technology Equity method 8,000,000.00 8,103,289.08 353,796.00 8,457,085.08 40 40 Co. Ltd. Guodian Xuanwei Power generation limited liability Equity method 268,369,281.29  34 34 company Yunnan Huadian Xunjiansi Power Co. Ltd. Equity method 104,882,156.84  35 35 – F-83 Yunnan Huadian Zhenxiong Power Generation Equity method 277,922,600.00 144,067,934.83 -25,156,744.84 118,911,189.99 35 35 Co. Ltd. China Kaiyuan Electric Power Co. Ltd. Equity method 280,922,591.08 31,586,524.17 -31,586,524.17 45 45 Sanxia JinshaJiang chuanyun Hydropower Equity method 5,100,000,000.00 5,634,799,561.29 674,326,269.26 6,309,125,830.55 15 15 Development Co., Ltd. Yunnan Zhonghui Tendering Co. Ltd. Equity method 5,000,000.00 5,939,116.21 459,381.36 6,398,497.57 40 40 Sanxia JinshaJiang chuanyun Hydropower Equity method 1,725,000,000.00 1,050,000,000.00 675,000,000.00 1,725,000,000.00 15 15 Development Co., Ltd. Luoping Dongyuan Coal Industry Co., Ltd. Equity method 211,078,245.58 139,460,132.63 -24,245,833.48 115,214,299.15 49 49 Yunnan Dongyuan Zhenxiong Coal Industry Co., Equity method 123,806,466.66 75,431,295.57 -45,947,882.16 29,483,413.41 26 26 Ltd. Yunnan Hua Oil Natural Gas Co., Ltd. Equity method 12,000,000.00 9,591,379.31 93,467.47 9,684,846.78 40 40 Yunnan energy investment Zhaotong traffic energy Equity method 4,000,000.00  3,933,334.63 3,933,334.63 40 40 development Co., Ltd. Fumin County Fengshun Natural Gas Equity method 17,325,000.00 10,891,924.15 -10,891,924.15   Development Co. Ltd.

Page80 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Accounting Change of crease or Investment Proportion of voting Name of the invested organization Cost of investment Dec. 31, 2014 Dec. 31, 2015 method decrease proportion (%) rights (%) Tonghai County Tong Lu Gas Company Limited Equity method 10,000,000.00  10,003,926.88 10,003,926.88 45 45 Yunnan energy investment Diannan Gas Equity method 12,000,000.00 13,087,800.00 -13,087,800.00   Development Co. Ltd. Yunnan energy investment Shao Tang Energy Equity method 8,000,000.00 4,599,209.23 3,876,156.28 8,475,365.51 40 40 Development Co. Ltd. Yunnan Dianneng Sinanjiang Hydropower Equity method 109,270,375.83 128,165,225.71 1,928,088.24 130,093,313.95 39 39 Development Co. Ltd. Mengla tianmeng foreign trade limited liability Equity method 9,310,000.00  2,598,529.67 2,598,529.67 49 49 company Yunnan Jutong Industry Co. Ltd. Equity method 3,000,000.00  1,728,090.34 1,728,090.34 30 30 Yimen Yunneng Xinfengneng development Co. Equity method 788,900.00 795,500.00 -6,600.00 788,900.00 20 20

– F-84 Ltd. Yunnan energy investment Ju Zheng Industrial Equity method 16,000,000.00 14,597,770.67 -14,597,770.67  Investment Co. Ltd. Agricultural Bank (Beijing) Investment Fund Equity method 14,700,000.00 11,302,768.41 -11,302,768.41  Management Company Limited Yunnan Sifang Chemical Co., Ltd. Equity method 2,480,000.00 1,802,121.59  1,802,121.59 25 25 Total  18,308,084,995.32 17,918,788,613.54 1,472,879,870.94 19,391,668,484.48  

˄Contd˅

An explanation of the inconsistency between the proportion of the invested Provision for impairment of Cash dividend for the Name of the invested organization Final impairment entity and the voting rights the current period period Yunnan Huadian Nujiang Hydropower     Development Co. Ltd. Yunnan Nanri Electric Technology Co. Ltd     Yunnan Huaneng Lancang River Hydropower    1,181,465,516.72 Development Company Yunnan energy investment Langchao     Page81 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

An explanation of the inconsistency between the proportion of the invested Provision for impairment of Cash dividend for the Name of the invested organization Final impairment entity and the voting rights the current period period Technology Co. Ltd. Guodian Xuanwei Power generation limited     liability company Yunnan Huadian Xunjiansi Power Co. Ltd.     Yunnan Huadian Zhenxiong Power Generation     Co. Ltd. China Kaiyuan Electric Power Co. Ltd.     Sanxia JinshaJiang chuanyun Hydropower    1,064,685,480.67 Development Co., Ltd. Yunnan Zhonghui Tendering Co. Ltd.    1,002,260.42 Sanxia JinshaJiang chuanyun Hydropower    

– F-85 Development Co., Ltd. Luoping Dongyuan Coal Industry Co., Ltd.     Yunnan Dongyuan Zhenxiong Coal Industry     Co., Ltd. Yunnan Hua Oil Natural Gas Co., Ltd.     Yunnan energy investment Zhaotong traffic     energy development Co., Ltd. Fumin County Fengshun Natural Gas     Development Co. Ltd. Tonghai County Tong Lu Gas Company     Limited Yunnan energy investment Diannan Gas     Development Co. Ltd. Yunnan energy investment Shao Tang Energy     Development Co. Ltd. Yunnan Dianneng Sinanjiang Hydropower    

Page82 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

An explanation of the inconsistency between the proportion of the invested Provision for impairment of Cash dividend for the Name of the invested organization Final impairment entity and the voting rights the current period period Development Co. Ltd. Mengla tianmeng foreign trade limited liability  5,826.51 5,826.51  company Yunnan Jutong Industry Co. Ltd.     Yimen Yunneng Xinfengneng development     Co. Ltd. Yunnan energy investment Ju Zheng Industrial     Investment Co. Ltd. Agricultural Bank (Beijing) Investment Fund     Management Company Limited Yunnan Sifang Chemical Co., Ltd.  1,802,121.59    – F-86 Total 1,807,948.10 5,826.51 2,247,153,257.81

5.18 Real estate as investment

Item Increase in current Decrease in current Dec. 31, 2014 Transfer Dec. 31, 2015 1.Original book value Outsourcing Transfer in Other Total Disposal Other Total out Total 124,197,950.10 22,411,935.49 51,502,453.23 73,914,388.72 198,112,338.82

House building 90,998,883.40  22,411,935.49 19,107,854.74 41,519,790.23     132,518,673.63

Land use right 33,199,066.70 32,394,598.49 32,394,598.49 65,593,665.19 Depreciation 2.Accumulated depreciation Transfer Balance and Other  Total Disposal Other Total Balance and amortization out amortization Total 3,496,699.30 4,945,303.89 4,225,505.42  9,170,809.31 12,667,508.61

House building 2,797,771.58 2,868,415.88 4,225,505.42  7,093,921.30     9,891,692.88

Land use right 698,927.72 2,076,888.01  2,076,888.01 2,775,815.73

Page83 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Item Dec. 31, 2014 Increase in current Decrease in current Dec. 31, 2015 Combined Transfer 3.Impairment provision Balance Accrued Other Total Disposal Other Total Balance increase out Total

House building

Land use right

4.Book value Book value         Book value

Total 120,701,250.80         185,444,830.21

House building 88,201,111.82         122,626,980.75

Land use right 32,500,138.98         62,817,849.46

Note: the increase in the current period is mainly:

– F-87 (1)In October 2015, the sub firmYunnan Diandong coal company affiliated to the company signed a tripartite agreement with Shizong hengjing trade co., LTD (hereinafter

referred to as the Hengjin trade) and Shizong TaiYu real estate development co., LTD (hereinafter referred to as Taiyu estate): All parties confirm together, as of October 8, 2015,

Hengjin trade owes Taiyu estate 13,401,618.52 Yuan. The Bishui Jiayuan developed by Taiyu estate is used to compensate Hengjin trade arrears 12,535,200 Yuan (compensation area

1,671.36 M², 7500 Yuan / M²), and Hengjin trade promised to Yunnan Diandong coal company that the remaining 866,418.52 Yuan on court lifted Hengjin trade accounts frozen to pay

in cash within 3 days. (With the approval of the provincial state-owned assets supervision and administration of this agreement, and subject to consent by the provincial state-owned

assets supervision and administration for the record of the counter is greater than or equal to the asset price 7,500 yuan/M squared.) On December 30, 2015, the tripartite agreement

obtained by province SASAC, Yunnan Diandong coal companyand Taiyu estate signed a commercial housing sales contracts, and Shizong County real estate management for the

record registration, Yunnan Diandong coal company is expected in the near future for property registration, intends to the business shop lease or held to prepare for value-added. The

Yunnan Diandong coal company will be the reorganization of assets into real estate investment and cost model is used for subsequent measurement.

(2)The book original value and accumulated depreciation of real estate as investment that newly included in the scope of the consolidated subsidiaries in the merger shall be

included into the other increases.

Page84 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.19 Fixed assets

5.19.1 Classification of fixed assets

Item Dec. 31, 2014 Increase in current Decrease in current Dec. 31, 2015

1.Original book value Outsourcing Transfer in Other Total Disposal or Scrap Transfer out Other Total

Total 9,358,432,315.56 164,257,567.75 2,575,937,392.04 3,869,013,282.39 6,609,208,242.18 229,317,389.96 6,265,538.75 18,883,397.68 254,466,326.39 15,713,174,231.35

Including: House building 3,864,649,249.05 68,495,664.68 1,231,796,089.17 1,768,944,920.38 3,069,236,674.23 175,031,958.41 175,031,958.41 6,758,853,964.87

Machinery equipment 5,353,649,898.64 61,784,947.58 1,323,423,596.18 1,935,907,928.24 3,321,116,472.00 41,378,587.90 3,336,990.33 12,918,166.86 57,633,745.09 8,617,132,625.55

Transport tool 76,593,528.36 17,268,707.64 129,197,582.08 146,466,289.72 5,713,238.36 2,827,975.52 1,163,216.98 9,704,430.86 213,355,387.22

Office tools and equipment 59,939,544.05 14,242,268.61 17,319,392.69 4,644,380.72 36,206,042.02 7,193,605.29 100,572.90 2,000,051.66 9,294,229.85 86,851,356.22

Other 3,600,095.46 2,465,979.24 3,398,314.00 30,318,470.97 36,182,764.21 2,801,962.18 2,801,962.18 36,980,897.49 – F-88 2.Accumulated depreciation Balance Accrued Other Total Disposal or Scrap Transfer out Other Total Balance

Total 1,100,656,267.72 412,940,584.55 1,619,535,247.47  2,032,475,832.02 46,075,013.69 2,011,389.56 980,467.33 49,038,815.90 3,084,093,283.84

Including: House building 463,836,129.27 127,503,670.30 485,140,927.50  612,644,597.80 20,041,095.37 28,054.68 20,041,095.37 1,056,439,631.70

Machinery equipment 566,346,635.57 256,929,350.86 1,051,460,232.85  1,308,389,583.71 12,298,100.31 1,824,142.10 2,849.95 14,125,092.36 1,860,611,126.92

Transport tool 43,992,499.79 12,767,458.20 61,079,837.19  73,847,295.39 4,290,963.34 129,105.15 305,242.85 4,725,311.34 113,114,483.84

Office tools and equipment 26,269,946.34 14,361,239.39 388,132.54  14,749,371.93 9,444,854.67 30,087.63 645,645.31 10,120,587.61 30,898,730.66

Other 211,056.75 1,378,865.80 21,466,117.39  22,844,983.19 26,729.22 26,729.22 23,029,310.72

3.Impairment provision Balance Accrued Combined increase Other Total Disposal Combined decrease Other Total Balance

Total 21,640.40 4,488,368.41 4,510,008.81 4,510,008.81

Including: House building

Machinery equipment 4,488,368.41 4,488,368.41 4,488,368.41

Transport tool 14,575.28 14,575.28 14,575.28

Office tools and equipment 7,065.12 7,065.12 7,065.12

Page85 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Item Dec. 31, 2014 Increase in current Decrease in current Dec. 31, 2015

Other

4.Book value Book value         Book value

Total 8,257,776,047.84         12,624,570,938.70

Including: House building 3,400,813,119.78         5,702,414,333.17

Machinery equipment 4,787,303,263.07         6,752,033,130.22

Transport tool 32,601,028.57         100,226,328.10

Office tools and equipment 33,669,597.71         55,945,560.44

Other 3,389,038.71         13,951,586.77

Note: the increase in the current period is mainly: The book original value and accumulated depreciation of fixed assets that newly included into the scope of the consolidated

subsidiaries in the merger shall be included in the other increases. – F-89 The decrease in the current period is mainly: The book original value and accumulated depreciation of fixed assets that never again included into the scope of the consolidated

subsidiaries in losing control day shall be included in the other increases.

5.19.2 Temporarily idle fixed assets

Accumulated Item Original book value Impairment provision Book value ༷⌘ depreciation Machinery 7,117,238.85 2,273,008.50 4,488,368.41 355,861.94 Due to market, technical reasons, layer silicon device is in idle state equipment Total 7,117,238.85 2,273,008.50 4,488,368.41 355,861.94 

5.20 Construction in progress

5.20.1 Basic situation of construction in progress

Page86 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Dec. 31, 2015 Dec. 31, 2014 Item Book balance Impairment provision Book value Book balance Impairment provision Book value

Project of Guanyinshan Coal Mine 3,216,142,231.58 3,216,142,231.58 2,807,634,983.10 2,807,634,983.10

Tianye Chemical chlor alkali project 1,162,487,487.15 12,000,000.00 1,150,487,487.15

Dayao ower project 410,477,480.35 410,477,480.35 32,704,295.43 32,704,295.43

Huize ower project 328,758,078.40 328,758,078.40 23,205,486.41 23,205,486.41

Project of Niuchang-Yigu Coal Mine 244,615,242.53 244,615,242.53 232,712,352.53 232,712,352.53

Sifang energy Xuanwei coal gangue power plant project 241,653,881.93 241,653,881.93 216,661,834.25 216,661,834.25

Fangzhou Qianyuan coal mine project 90,071,764.76 90,071,764.76 84,446,147.00 84,446,147.00

Mengzi free trade zone equipment manufacturing industrial park project 78,373,659.27 78,373,659.27

Lao Jixiang cement plant 70,083,707.48 70,083,707.48 230,686,417.83 230,686,417.83

– F-90 Weixin yuedian stone mine zone 54,082,066.63 54,082,066.63 54,082,066.63 54,082,066.63

Other 415,938,058.47 62,403,753.52 353,534,304.95 1,789,956,724.04 57,122,131.81 1,732,834,592.23

Total 6,312,683,658.55 74,403,753.52 6,238,279,905.03 5,472,090,307.22 57,122,131.81 5,414,968,175.41

5.20.2 Major changes in construction projects

Item Budget number Dec. 31, 2014 Increase in current Transferred to fixed assets Other decrease Dec. 31, 2015

Project of Guanyinshan Coal Mine 2,807,634,983.10 431,359,827.85 22,852,579.37 3,216,142,231.58

Tianye Chemical chlor alkali project 934,831,600.00 1,182,183,559.25 19,696,072.10 1,162,487,487.15

Dayao ower project 32,704,295.43 377,773,184.92 410,477,480.35

Huize ower project 23,205,486.41 307,138,424.71 1,585,832.72 328,758,078.40

Project of Niuchang-Yigu Coal Mine 232,712,352.53 11,902,890.00 244,615,242.53

Sifang energy Xuanwei coal gangue power plant project 291,048,400.00 221,805,925.52 24,404,888.55 4,556,932.14 241,653,881.93

Fangzhou Qianyuan coal mine project 84,446,147.00 5,625,617.76 90,071,764.76

Mengzi free trade zone equipment manufacturing industrial park project 843,880,000.00  78,373,659.27   78,373,659.27

Page87 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Item Budget number Dec. 31, 2014 Increase in current Transferred to fixed assets Other decrease Dec. 31, 2015

Lao Jixiang cement plant 230,686,417.83 402,732,971.49 558,219,345.30 5,116,336.54 70,083,707.48

Weixin yuedian stone mine zone 54,082,066.63 54,082,066.63

Total  3,687,277,674.45 2,821,495,023.80 606,910,761.63 5,116,336.54 5,896,745,600.08

˄Contd˅

Project investment accounted Interest Interest capitalization including: 2015interest Item for the proportion of the Progress of project capitalization rate Sources of funds accumulated amount capitalization amount budget(%) (%) Project of Guanyinshan Coal Mine  Under Construction Own funds Under Construction Shareholders' investment, bank Tianye Chemical chlor alkali 124.35 111,877,957.51 12,353,577.39 6.40 loans and government project subsidies – F-91 Dayao ower project  Under Construction 6,261,617.77 5,249,792.86 Own funds, loan

Huize ower project  Under Construction 14,186,254.81 1,237,822.21 Own funds, loan Project of Niuchang-Yigu Coal Under Construction Own funds, loan  24,597,970.57 9,263,048.34 1.00 Mine Sifang energy Xuanwei coal Under Construction Own funds, loan 83.03 62,989,816.42 12,209,563.97 gangue power plant project Fangzhou Qianyuan coal mine Under Construction Own funds, loan  12,390,775.39 3,345,180.83 project Mengzi free trade zone equipment Under Construction Own funds, loan manufacturing industrial park 9.29    project Lao Jixiang cement plant  Under Construction 12,258,477.93 11,433,548.36 Own funds, loan

Weixin yuedian stone mine zone  Under Construction Own funds

Total   244,562,870.40 55,092,533.96  

Note: The other reduction in the project of the Lao Ji cement plant project will be the 55,116,336.54 yuan of land use rights to be transferred to the intangible assets in this year. Page88 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.20.3 Impairment provision in construction

Increase Decrease in 2015 in 2015 Other Return Turnov Other Reaso Item Dec. 31. 2014 Dec. 31. 2015 Amount of Combined reasons for amount er Combined reasons n Total Total current account increase the due to amoun decrease for the increase asset value t decrease Diandong coal prospecting 57,122,131.81 57,122,131.81 cost Tianye Chemical chlor alkali 12,000,000.00 12,000,000.00 12,000,000.00 project Tianju project 5,281,621.71 5,281,621.71 5,281,621.71

Total 57,122,131.81 12,000,000.00 5,281,621.71 17,281,621.71 74,403,753.52  – F-92 5.21 Construction materials

Increase Decrease Item Dec. 31. 2014 Dec. 31. 2015 in 2015 in 2015 Special-purpose material 3,442,785.39 1,045,682.29 1,117,154.99 3,371,312.69

Special-purpose equipment 40,224,789.91 42,377,546.68 54,488,646.50 28,113,690.09

Other 1,249,866.61 1,249,866.61

Tools and instruments 19,097,302.34 4,221,438.72 14,875,863.62

Total 44,917,441.91 62,520,531.31 59,827,240.21 47,610,733.01

Page89 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.22 Intangible assets

5.22.1 Classification of intangibe assets

Increase Decrease Item Dec. 31. 2014 Dec. 31. 2015 in 2015 in 2015 Disposal or Othe 1.Original book value Outsourcing Transfer in Other Total Transfer out Total Scrap r 433,322,620.4 10,266,410.2 802,767,650.4 829,313,344.8 6,965,864.4 1,255,670,100.7 Total 16,279,284.13 6,965,864.46 3 7 1 1 6 8 180,752,725.3 627,352,036.2 647,734,276.1 6,905,864.4 Land use right 7,273,467.03 13,108,772.83 6,905,864.46 821,581,136.99 2 7 3 6 Software right of use 98,319,509.69 2,992,943.24 2,435,741.26 5,479,646.65 10,908,331.15 60,000.00 60,000.00 109,167,840.84 113,076,534.5 Mining right 24,147,007.69 24,147,007.69 137,223,542.22 3 – F-93 145,788,959.8 145,788,959.8 Prospecting right 40,508,662.00 186,297,621.80 0 0 Royalty fee 665,188.89 734,770.04 734,770.04 1,399,958.93 2.Accumulated Disposal or Othe Balance Accrued Other  Total Transfer out Total Balance amortization Scrap r 23,657,833.6 1,028,651.4 Total 31,131,986.07 47,370,125.88  71,027,959.49 1,028,651.49 101,131,294.07 1 9 Land use right 9,884,582.46 6,472,444.32 30,779,402.68  37,251,847.00 968,651.49 968,651.49 46,167,777.97

Software right of use 13,433,868.44 11,516,366.63 3,217,955.73  14,734,322.36 60,000.00 60,000.00 28,108,190.80

Mining right 7,766,373.42 5,563,295.94 13,372,767.47  18,936,063.41 26,702,436.83

Prospecting right 

Royalty fee 47,161.75 105,726.72  105,726.72 152,888.47 Combined Combined 3.Impairment provision Balance Accrued Other Total Disposal ަԆ Total Balance increase decrease

Page90 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Increase Decrease Item Dec. 31. 2014 Dec. 31. 2015 in 2015 in 2015 Total 6,428.16 1,474.35 7,902.51 7,902.51

Land use right

Software right of use 6,428.16 1,474.35 7,902.51 7,902.51

Mining right

Prospecting right

Royalty fee

4.Book value Book value         Book value 402,190,634.3 1,154,530,904.2 Total         6 0 170,868,142.8 Land use right         775,413,359.02

– F-94 6 Software right of use 84,885,641.25         81,051,747.53 105,310,161.1 Mining right         110,521,105.39 1 Prospecting right 40,508,662.00         186,297,621.80

Royalty fee 618,027.14         1,247,070.46

Note: The current increase in other: the new consolidated subsidiaries on consolidation date of intangible assets book value and accumulated amortization included in the increase of

other;

5.22.2 Development expenditure

Increase Decrease Item Dec. 31. 2014 in 2015 in 2015 Dec. 31. 2015 Internal development Other Included in current profit and loss Recognized as intangible assets Other

Software and system development 1,946,751.99 6,660,487.42 2,438,738.21 6,168,501.20

Total 1,946,751.99 6,660,487.42 2,438,738.21 6,168,501.20

Page91 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.23 Goodwill

Increase Decrease Name of the invested entity or formation of goodwill Dec. 31. 2014 in 2015 in 2015 Dec. 31. 2015 Source of formation Merge formation Other Disposal Other

Fumin Fengshun Natural Gas Development Co. Ltd. 3,380,860.35 3,380,860.35 Enterprise merger not under the same control

Zhaotong City Fengshun Pipeline Gas Co., Ltd. 46,426,888.10 46,426,888.10 Enterprise merger not under the same control

Xuanwei City Fengshun City Gas Development Co., Ltd. 23,325,932.13 23,325,932.13 Enterprise merger not under the same control

Pingbian County Lahadi water and electricity development Co., Ltd. 10,586.95 10,586.95 Enterprise merger not under the same control

Yunnan Baoshan Supa River Hydropower Development Co. 54,191,005.16 54,191,005.16 

Yunnan Fugong Huatai Electric Power Development Co. Ltd 26,043,717.69 26,043,717.69 

Yuxi Dongfang coal Co., Ltd. 1,014,653.77     1,014,653.77 Enterprise merger not under the same control

Yunnan Salt & Chemical Industry co., ltd  90,480,263.33    90,480,263.33 Enterprise merger not under the same control – F-95 Total 151,002,196.85 93,871,710.63 244,873,907.48 

Upon examination, there is no indication of impairment of the company's goodwill.

Page92 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.24 Long-term prepaid expense

Reasons Increase Amortization of Item Dec. 31. 2014 Other reduction Dec. 31. 2015 in 2015 in 2015 other reduction Software license upgrade fee 86,999.95 404,000.00 137,500.00 353,499.95  Rental fee 12,128,689.49 46,246,793.79 13,372,055.06 138,570.63 44,864,857.59  Other 936,077.75 3,177,843.75 1,716,043.18 2,397,878.32  Decoration cost 2,010,825.88 5,044,943.98 1,678,909.70 349,521.08 5,027,339.08  Equipment repair expenditure 4,089,678.61 340,806.55 3,748,872.06  Dehong immigration Development Bureau of the Qiezishan reservoir 10,000,000.00 70,093.47 9,929,906.53  migrants predicament hedge funds Land compensation fee 41,102.85 337,680.81 52,358.87 326,424.79  Mining right extension fee 311,320.75 311,320.75 16,102.80 606,538.70  Ionic membrane 2,114,888.26 823,215.04 1,291,673.22  Reverse osmosis membrane 1,720,051.52 78,583.59 1,641,467.93  Molecular sieve 462,721.34 55,329.21 407,392.13  Dust collector bag 856,303.50 85,363.23 770,940.27  Total 15,515,016.67 74,766,226.31 18,426,360.70 488,091.71 71,366,790.57 

5.25 Deffered income tax assests and deffered income tax liabilities

5.25.1 The confirmed Deffered income tax assests and deffered income tax liabilities

Dec. 31. 2014 Dec. 31. 2015 Item Deferred income Deductible/taxable Deferred income Deductible/taxable tax temporary tax temporary assets/liabilities differences assets/liabilities differences 1.Deferred income tax assets 69,953,193.99 443,635,046.61 11,032,035.57 47,941,931.16 Impairment of assets 21,464,774.88 128,257,937.20 7,740,773.37 33,966,729.62 Staff education funds 32,112.98 214,086.51 Staff training expense 17,956.05 73,788.38 Pre-tax losses 1,484,486.93 7,830,721.15 706,929.12 3,637,869.22 Special reserve 17,073.83 113,825.53 Labour-union expenditure 54,437.22 217,748.87 Employee compensation 483,026.46 3,220,176.41 465,903.50 1,863,614.00 Valuation of trading financial instruments and 918,017.69 6,120,117.90 derivative financial instruments Pre tax deduction of benefits can not be 3,109,055.71 20,727,038.07 deducted Accumulated amortization difference 294,204.25 1,961,361.66

Page93

– F-96 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Dec. 31. 2014 Dec. 31. 2015 Item Deferred income Deductible/taxable Deferred income Deductible/taxable tax temporary tax temporary assets/liabilities differences assets/liabilities differences Deferred income 4,317,648.48 28,784,323.15 Deductible loss of disposal holding company 35,652,121.40 237,680,809.34 No undisturbed internal transaction gains 2,108,278.11 8,433,112.44 2,118,429.58 8,473,718.32 and losses 2. Deferred income tax liabilities 19,234,568.73 78,150,220.61 18,780,089.07 75,120,356.26 Changes in fair value of real estate as 18,780,089.07 75,120,356.26 18,780,089.07 75,120,356.26 investment Valuation of trading financial instruments and 6,674.68 44,497.84 derivative financial instruments Included in capital reserve can change in fair 435,759.29 2,905,061.90 value of financial assets No undisturbed internal transaction gains 12,045.69 80,304.61 and losses

5.26 Other non-current assets

Item Dec. 31. 2014 Dec. 31. 2015 Upfront cost to be transferred in investment 176,950,641.61 154,343,207.29 Long-term entrusted loan 517,302,300.00 38,736,000.00 Unified lending and borrowing 20,000,000.00 Other long-term assets 336,905,997.76 190,246,217.22 Prepaid long-term asset purchases 87,563,377.55 Low-cost housing projects 4,725,000.00 Total 1,123,447,316.92 403,325,424.51

5.26.1 Details of upfront cost to be transferred in investment

Project Dec. 31. 2015 Dec. 31. 2014 Project of Selalong 430,409.49 152,948.38 Project of Laos Sepone gold mine – Saravane 115KV double-circuit transmission lines 6,042,685.19 5,982,564.96 Project of Nuochangka River, Burma 150,536,732.08 128,558,829.82 Project of PLTA Meranti Utara power plant 2,502,758.96 2,535,280.85 Investment to Laos Ji Xiang by Xipu Investment Co., Ltd. 14,948,099.19 14,420,199.71 Project of Equipment manufacturing industrial park of the comprehensive bonded zone,Mengzi 150,000.00 449,836.57 Project of Dianzhong new industrial park 1,212,250.00 1,118,547.00 Project of Dianzhong new industrial park 775,000.00 775,000.00 Project of Dianxi(Baoshan) equipment manufacturing Industrial Park 350,000.00 350,000.00 Project of Nan Mo 1 Hydropower chuankuang province 2,706.70  Total 176,950,641.61 154,343,207.29 less: Provision for impairment   Total 176,950,641.61 154,343,207.29

Page94

– F-97 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.26.2 Details of long-term entrusted loan

Borrower Dec. 31. 2014 Dec. 31. 2015

Yunnan Huadian Nujiang River Hydropower Development Co., Ltd. 38,736,000.00 517,302,300.00

Total 38,736,000.00 517,302,300.00 less: Provision for impairment  

Total 38,736,000.00 517,302,300.00

5.26.3 Details of other long-term assets

Item Dec. 31. 2014 Dec. 31. 2015

Assets of Shugentian Coal Mine 43,322,869.81 

Coal resource integration fee of Bailonghe ˄Ċ˅ 24,000,000.00 24,000,000.00

To deduct input tax 122,923,347.41 242,144,587.54

Debit balance of value-added tax should be paid  70,761,410.22

Total 190,246,217.22 336,905,997.76

5.27 Assets with limited ownership or use right

Categories Dec. 31. 2015 Limited reason

Monetary capital 511,704,983.11 Margin and deposit certificate

1.Assets used for security  

Yunnan Energy Investment Group Building 664,975,192.87 See notets in detail

Yunnan Energy Investment Group Building 191,394,947.13 See notets in detail

Chaoyang power plant level-2 206,533,249.56 See notets in detail

Wunihe power plant level-3 95,572,332.87 See notets in detail

Ajiutian power plant level-4 258,851,678.71 See notets in detail

Huaneng Lancang River Hydropower Limited by Share Ltd 7% equity 2,379,713,083.43 See notets in detail

2. Other reasons caused limited ownership of assets  

Weinxin company finance lease leaseback customer service equipment 1,843,753,474.00 

Total 6,152,498,941.68 

1.Yunnan Provincial Energy investment Jikong building as the company office building its ownership restrictions, for

2013 and the China Construction Bank- Kunming Chengbei branch 130 million Yuan and Bank of China -Kunming

Xinyun branch of 63 million Yuan, 400 million yuan mortgage collateral, limited term for 10 years.

2.August 1, 2007,< the RMB loan contract >signed by Yunnan Baoshan Supa River Hydropower Development

Co., Ltd. and China Construction Bank -Longling branch. The purpose of the loan: Construction of Chaoyang Power

Plant, Wu Nihe power station and Ajiutian hydropower Station, the amount of borrowing 200 million yuan, Borrowing period: 10 years, from August 1, 2007 to July 31, 2017, borrowing interest rates: the benchmark interest rate down 10%,

Page95

– F-98 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements since the date of interest rates every 12 months to adjust once: Pledge: Yunnan Baoshan Supa River Hydropower

Development Co., Ltd.of Qiezishan power station, Wu Nihe power plant 100% electricity usufruct. As of December 31,

2015, the loan balance of 80 million Yuan.

3.On December 18, 2006, the Yunnan Baoshan Supa River Hydropower Development Co., Ltd. and Bank of

China -Yunnan Branch signed a contract for loan of money,use for the Ukrainian river power plant construction, Loan amount: 130 million yuan, Borrowing period: 192 months, Borrowing period: December 18, 2006. Loan interest rate floating rate: annual interest rate of 6.15%, Interest: monthly savings, interest settlement date for twentieth days at the end of the season. The above contract by the Yunnan Electric Power Investment Co., Ltd., Baoshan Yunnan electric power Limited by Share Ltd, Baoshan City owned Assets Management Co., Ltd. according to equity ratio to provide a common guarantee. Guarantee mode for joint and several liability. And fixed assets in the Wunihe power plant evaluation price to provide collateral, and the Wunihe hydropower station, the charging rights pledge to provide security.

As of December 31, 2015, the loan balance of 70 million Yuan.

4.In December 26, 2006, Tengchong Sudian Longchuan company signed a loan contract and Chinese bank

Limited by Share Ltd Tengchong branch. Borrowing purposes: Longchuan River first class power station construction, the amount of borrowing: 70 million yuan, the loan period: 228 months.

Borrowing rate: the implementation of floating interest rates, Interest: interest from borrowers actually withdrawal date, according to the actual withdrawals and days are calculated, the interest rate on the calculation base for 360 days a year, the borrower quarterly interest payments at a time. The contract from Yunnan Baoshan Supa River Hydropower

Development Co. Ltd. to provide full joint liability guarantee repayment, With the Longchuan River Hydropower Station project all the equipment assessed after (the proportion of loans by the lenders) to provide collateral, at the same time,

Longchuan River, a power plant to provide collateral security charges. As of December 31, 2015, the loan balance of 35 million Yuan.

5.May 27, 2008, Tengchong Sudian Longchuan Hydropower Development Co., Ltd. and the Bank of China

Tengchong branch signed a loan contract. Borrowing purposes: Longchuan River first class power plant construction, the loan period: 108 months, the amount of borrowing: 40 million yuan. Loan interest rates: from the actual drawing, from each of the 12 month re pricing of a, each drawing the initial interest rate for the actual drawing on the day of the people's Bank of China announced the implementation over a period of 5 years loans benchmark interest rate to float downward 10%, each with a floating period, according to the pricing of the people's Bank of China on the date of promulgation of the same grade loans benchmark interest rates downward float 10%. As a cycle of using interest rate.

The Contract by yunnan baoshan Sue palmer river electric development co., LTD. Provide joint liability guarantee. After

Page96

– F-99 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements the completion of power plant, additional power station overall assets mortgage and electricity transferor pledge, (as of

December 31, 2015, yet the assets mortgage and pledge formalities). As of December 31, 2015, loan balance is RMB

60 million.

6.May 27, 2008, Tengchong Sudian Longchuan Hydropower Development Co., Ltd. and the Bank of China

Tengchong branch signed a loan contract. Borrowing purposes: Longchuan River first class power plant construction, the loan period: 108 months, the amount of borrowing: 40 million yuan. Loan interest rates: from the actual drawing, from each of the 12 month re pricing of a, each drawing the initial interest rate for the actual drawing on the day of the people's Bank of China announced the implementation over a period of 5 years loans benchmark interest rate to float downward 10%, each with a floating period, according to the pricing of the people's Bank of China on the date of promulgation of the same grade loans benchmark interest rates downward float 10%. As a cycle of using interest rate.

The Contract by yunnan baoshan Sue palmer river electric development co., LTD. Provide joint liability guarantee. After the completion of power plant, additional power station overall assets mortgage and electricity transferor pledge, (as of

December 31, 2015, yet the assets mortgage and pledge formalities). As of December 31, 2015, loan balance is RMB

60 million.

7.The company provide the maximum 3 billion yuan counter guarantee pledge for Yunnan Investment Holding

Group Co., Ltd .to Huatai asset management Company Ltd by holding 7% stake in Huaneng Lancang Hydropower

Development Company. Period from August 30, 2012 to August 28, 2018.

8.1 The company level 3 subsidiary Weinxin Yuntou yuedian zhaixi energy co., LTD., with the silver financial leasing co., LTD. Signed the prestige 2 x 600 mw on a new phase of the coal and electricity integration project engineering equipment finance lease contract" The contract number: the gold rent [2011] of the first (B - 031), Leasing principal: 978 million yuan. The related equipment sales contracts are shown in the following table:

Original Numb purchase Amount of No. Equipment name Type Unit Purchase contract number er price of individual transfer equipment Pipe fittings Platfor 1 2 2,882.21 YDDT/WXMD-10-DS-03 2,075.19 procurement m/ set High pressure Platfor 2 JG-2200 2 2,726.94 YDDT/WXMD-08-DS-014 2,075.35 heater m/ set Platfor A device out of m/ set 3 1 5,898.59 YDDT/WXMD-08-DS-001 4,521.27 stock

4 Electrostatic dust 2TGD507-5 Platfor 2 7,030.00 YDDT/WXMD-09-DS-005 5,368.40

Page97

– F-100 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

collector m/ set

Double inlet and double outlet ball Platfor 5 MGS4062 2 8,106.00 YDDT/WXMD-08-DS-013 6,160.56 mill and sealing m/ set machine Flue gas Platfor 6 desulfurization 2 10,500.85 YDDT/WXMD-10-DG-007 7,851.04 m/ set device Four pipes and pipe Platfor 7 2 12,655.45 YDDT/WXMD-10-DS-032 9,119.92 factory m/ set 600MW boiler 2 Platfor sets and m/ set 8 DG1962/25.4-8 2 65,021.00 YDDT/WXMD-07-DS-002 49,505.48 corresponding air preheater Platfor 9 Alternator 2 14,268.00 YDDT/WXMD-07-DS-003 11,216.80 m/ set Total    129,089.04 97,893.63

Above table ‘s amount of unit is “10 thousand yuan". The total amount of the individual transfer is the total amount of the contract agreement. The financing lease contract corresponding to the relevant equipment, its ownership has been transferred to the Cdb Leasing Co.

8.2 The company three subsidiary Weinxin Yuntou yuedian zhaixi energy co., LTD and Zhaoyin Financial Leasing

Co., Ltd. signed the "financing lease contract"(contract No: C4411ZZ1103090345), Related to the sale of the contract price of 395.482 million yuan. Related equipment sales contract are shown in table below:

Original Amount of N Numbe purchase Purchase Equipment name Type Unit individual o. r price of contract number transfer equipment Weishi coal power integration Platfor YDDT/WXMD-09 1 project a 2 x 60MW new main  m/ set 1 9,232.20 9,232.20 -DS-019 transformer Weixin coal and electricity integration project power plant (2 Platfor YDDT/WXMD-07 2 N600-24.2/566/566 2 30,316.00 30,316.00 x 600MW) thermal power plant m/ set -DS-001 steam turbine equipment Total    39,548.20 39,548.20

Amount unit in the form above is"million", total single amount of transfer is the total amount stipulated in this agreement , Weixin company has according to the contract agreed to rent to pay installments, corresponding to the

Page98

– F-101 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements financing lease contract related equipment, the ownership has been transferred to CMB Financial Leasing Company

Limited.

8.3 The subsidiary company of tertiary prestige cloud cast Yuedian Tashi Energy Co., Ltd. signed a "financing lease contract" (contract number: MSFL-2014-1752-S-HZ)with Minsheng Financial Leasing Co., Ltd. at price is 42479.57 million Yuan. The contract for the sale of related equipment as shown in the following table:

Original Amount of No Equipment name Type Unit Number purchase price Purchase contract number individual . of equipment transfer Thermodynamic 1  њ 1 24,549.96 MSFL-2014-1752-S-HZ 24,549.96 system 2 Fuel supply system њ 1 2,953.55 MSFL-2014-1752-S-HZ 2,953.55

3 Ash removal system њ 1 784.58 MSFL-2014-1752-S-HZ 784.58 Water treatment 4 њ 1 365.03 MSFL-2014-1752-S-HZ 365.03 system 5 Water supply system њ 1 12,862.68 MSFL-2014-1752-S-HZ 12,862.68

6 Electrical system њ 1 963.77 MSFL-2014-1752-S-HZ 963.77

Total    42,479.57 42,479.57

Amount unit in the form above is"million", total single amount of transfer is the total amount stipulated in this agreement , the company's prestige has according to the contract agreed to rent to pay installments, corresponding to the financing lease contract related equipment, the ownership has been transferred to Minsheng Financial Leasing

Company Limited

5.28 Short-term loans

5.28.1 Classification of short-term loans

Item Dec. 31. 2015 Dec. 31. 2014

Pledge loans 28,395,000.00 265,000,000.00

Mortgage loans 38,000,000.00 12,000,000.00

Guaranteed loans 857,922,480.00 1,250,000,000.00

Credit loans 3,185,874,044.80 2,516,549,127.24

Total 4,110,191,524.80 4,043,549,127.24

Page99

– F-102 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.28.2 Details of short-term loan

Loan Unit Bank Amount Starting date Ending date Rate˄%˅ Type of loan

Yunnan Energy Investment Group Co., Ltd. Bank of communications -Guandu branch 2,190,000,000.00 2015/1/28 2016/1/28 5.9 Credit loans Yunnan Provincial Energy Investment Group Shanghai Pudong Development 55,000,000.00 2015/3/2 2016/3/2 7.5 Credit loans Industrial Investment Co., Ltd. Bank-Kunming branch Yunnan Provincial Energy Investment Group Xuanwei City Rural Credit Cooperatives 13,000,000.00 2015/9/14 2016/9/14 5.52 Mortgage loans Huilong Technology Co., Ltd. Yunnan Provincial Energy Investment Group Yunnan Hongta rural cooperative bank 4,000,000.00 2015/8/14 2016/8/14 4.85 Credit loans Huilong Technology Co., Ltd. -Daying Street Branch Yunnan Provincial Energy Investment Group Yunnan Hongta rural cooperative bank 7,000,000.00 2015/9/24 2016/9/24 4.6 Credit loans Huilong Technology Co., Ltd. -Daying Street Branch Yunnan Provincial Energy Investment Group Yunnan Hongta rural cooperative bank 5,000,000.00 2015/6/9 2016/6/9 5.1 Credit loans

– F-103 Huilong Technology Co., Ltd. -Daying Street Branch Yunnan Provincial Energy Investment Group Kunming City, the Rural Credit 200,000,000.00 2015/4/30 2016/4/30 5.35 Credit loans Logistics Limited Liability Company Cooperatives Union Sales Department Yunnan Provincial Energy Investment (Hongkong) Agricultural Bank of China- Hongkong 27,922,480.00 2015/12/22 2016/12/22 1.65 Guaranteed loans Logistics Investment Co. Ltd. branch Yunnan province Yongde Hengchang Electric Yongde County Rural Credit Cooperative 25,000,000.00 2015/3/31 2016/3/21 9.28 Mortgage loans Power Co. Ltd. Union business department Yunnan Electric Power Investment Co., Ltd. Kunming City Rural Credit Cooperatives 200,000,000.00 2015/4/30 2016/4/30 5.35 Guaranteed loans

Yunnan Electric Power Investment Co., Ltd. Agricultural Bank of China-Kuodongbranch 200,000,000.00 2015/5/25 2016/5/25 5.1 Guaranteed loans

Yunnan Electric Power Investment Co., Ltd. Agricultural Bank of China-Kuodongbranch 200,000,000.00 2015/7/30 2016/7/30 4.85 Guaranteed loans Yunnan Electric Power Investment Co., Ltd. China Merchants -Bank Kunming Xing Ke 100,000,000.00 2015/10/30 2016/10/30 4.57 Credit loans branch China Merchants -Bank Kunming Xing Ke Guaranteed loans Weixin Yuedian zhaxi energy Co., Ltd. 200,000,000.00 2015/6/17 2016/6/17 5.61 branch Weixin Yuedian zhaxi energy Co., Ltd. Agricultural Bank –Weinxin County branch 30,000,000.00 2015/12/22 2016/4/21 4.35 Guaranteed loans

Yunnan Baoshan Supa River Hydropower Industrial Bank -Kunming branch 70,000,000.00 2015/9/1 2016/9/1 4.4 Credit loans Page100 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Loan Unit Bank Amount Starting date Ending date Rate˄%˅ Type of loan Development Co.

Yuxi Dongfang Coal Co., Ltd. Huaning County Rural Credit Cooperatives 23,000,000.00 2015/9/17 2016/9/17 5.06 Credit loans

Yunnan salt & salt chemical Co.,Ltd. Bank of communications -Yunnan branch 20,000,000.00 2015/7/31 2016/7/30 5.34 Credit loans

Yunnan salt & salt chemical Co.,Ltd. Bank of communications -Yunnan branch 20,000,000.00 2015/5/22 2016/5/22 5.61 Credit loans

Yunnan salt & salt chemical Co.,Ltd. Bank of communications -Yunnan branch 30,000,000.00 2015/5/15 2016/5/15 5.61 Credit loans

Yunnan salt & salt chemical Co.,Ltd. Bank of China -Yunnan branch 35,000,000.00 2015/6/15 2016/6/14 5.1 Credit loans

Yunnan salt & salt chemical Co.,Ltd. Bank of China -Yunnan branch 28,395,000.00 2015/5/20 2016/5/19 5.1 Pledge loans

Yunnan salt & salt chemical Co.,Ltd. Minsheng Bank- Kunming branch 45,000,000.00 2015/8/26 2016/8/25 5.06 Credit loans

Yunnan salt & salt chemical Co.,Ltd. Yuntianhua group finance company 50,000,000.00 2015/7/13 2016/1/13 4.8 Credit loans

Yunnan salt & salt chemical Co.,Ltd. Yuntianhua group finance company 35,000,000.00 2015/7/13 2016/1/13 4.8 Credit loans

– F-104 Yunnan salt & salt chemical Co.,Ltd. Yuntianhua group finance company 25,000,000.00 2015/8/12 2016/8/12 4.61 Credit loans Bank of Communications Ltd Hongkong Credit loans Yunnan Energy Investment (HK) Co., Ltd 201,301,600.00 2014/2/17 2016/1/13 5 branch Yunnan Energy Investment (HK) Co., Ltd China Construction Bank -Hongkong branch 70,572,444.80 2015/3/3 2016/2/26 5 Credit loans

Total  4,110,191,524.80

Page101 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.29 Notes payable

Categories Dec. 31, 2015 Dec. 31, 2014

Commercial acceptance bills 170,332,192.75 84,348,864.00

Bank’s acceptance bills

Total 170,332,192.75 84,348,864.00

5.30 Accounts payable

5.30.1 Accounts payable by aging

Aging Dec. 31, 2015 Dec. 31, 2014

Within 1 year 1,331,541,468.95 1,254,245,153.45

1 to 2 years 335,228,301.82 153,927,525.36

2 to 3 years 128,295,935.71 125,038,617.88

3 to 4 years 82,038,935.46 81,400,131.09

4to 5 years 395,633.22 4,763,686.61

Over 5 years 4,670,769.86 87,296.25

Total 1,882,171,045.02 1,619,462,410.64

5.30.2 Accounts payable balance of aging for more than a year

Creditor unit Amount Reason of non-reimbursed

Zhejiang Zhongcai engineering design & Research Institute Co., Ltd. 70,588,638.95 No settlement

DongfangElectric Group Oriental boiler Limited by Share Ltd 41,092,985.00 No settlement

Supa River Longqiao level-2 compensation 39,744,429.72 Pay per year by immigration contract

Dongfang Electric Group Co., Ltd. 24,932,000.00 No settlement

Yunnan Province Coal Geology Bureau 22,012,600.00 Financial strain

Total 198,370,653.67 

5.31 Deposit received

5.31.1 Details of deposit received

Aging Dec. 31, 2015 Dec. 31, 2014

Within 1 year 217,048,037.22 137,787,809.22

1 to 2 years 6,396,253.13 12,942,494.63

2 to 3 years 9,998,962.54 1,143,520.96

3 to 4 years 556,869.00 207,375.93

4to 5 years

Over 5 years

Total 234,000,121.89 152,081,200.74

Page102

– F-105 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.31.2 Deposit received balance of aging for more than a year˖

Creditor unit Dec. 31, 2015 Reason of non-reimbursed Datang Guanyinyan Hydropower Development Co., Ltd. 2,449,157.00 No settlement Tianjin Celion International Trade Co., Ltd. 1,610,961.00 Transaction is not completed Eryuan County Haixi sea water reservoir dam power station 406,658.50 Unfinished project Nanjing Nanri Engineering Technology Co., Ltd. 167,780.70 No settlement Huaneng Lancang River Hydropower Co., Ltd. 167,620.40 No settlement Total 4,802,177.60 

5.32 Payroll payable

5.32.1 Payroll payable by categories Increase of Decrease of Item Dec. 31. 2014 Dec. 31. 2015 including˖within 1year 2015 2015 1.Short-term compensation 27,244,567.46 598,622,747.67 590,105,907.36 35,761,407.77 35,761,407.77 2.After the departure of welfare 1,403,518.97 60,889,265.76 59,915,592.44 2,377,192.29 2,377,192.29 3.Dismiss welfare 17,272,781.44 8,885,142.15 8,387,639.29 8,387,639.29 4.Long-term employee compensation Total 28,648,086.43 676,784,794.87 658,906,641.95 46,526,239.35 46,526,239.35

5.32.2 Long-term employee compensation by categories

Item Dec. 31. 2014 Increase of 2015 Decrease of 2015 Dec. 31. 2015 1.After the departure of welfare 481,335.48 481,335.48 2.Dismiss welfare 12,339,398.78 12,339,398.78 3.Other long-term employee benefits 541,170.00 2,065,662.13 2,606,832.13 Total 541,170.00 14,886,396.39 481,335.48 14,946,230.91

5.32.3 Short-term compensation

Item Dec. 31. 2014 Increase of 2015 Decrease of 2015 Dec. 31. 2015 1.Wages and salaries, bonuses, allowances and subsidies 14,375,309.72 483,253,463.98 480,266,937.94 17,361,835.76 2.Employee services and benefits 68,357.03 30,551,534.73 28,392,143.87 2,227,747.89 3.Social insurance 618,434.31 30,325,347.81 30,588,573.41 355,208.71 Including˖a.Medical insurance 173,642.12 23,990,694.17 23,836,531.90 327,804.39 b.Injury insurance premium 266,624.78 4,042,627.36 4,296,230.00 13,022.14 c. Maternity insurance 178,167.41 2,289,632.28 2,453,417.51 14,382.18 4.Housing accumulation fund 2,394.00 2,394.00 5.Labor union fee and employee education fee 199,965.29 29,378,086.62 29,315,289.52 262,762.39 6.Non-currency welfare 11,982,501.11 22,072,115.02 18,500,763.11 15,553,853.02 7.Redemption for terminations of labor contract 3,025,479.51 3,025,479.51 8.Others 1.Wages and salaries, bonuses, allowances and subsidies 16,720.00 16,720.00 Total 27,244,567.46 598,622,747.67 590,105,907.36 35,761,407.77

Page103

– F-106 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.32.4 After the departure of welfare

5.32.4.1 Defined Contribution Plans

Item Dec. 31. 2014 Increase of 2015 Decrease of 2015 Dec. 31. 2015 1.Basic endowment insurance 1,260,290.39 48,412,436.83 48,168,003.61 1,504,723.61 2.Unemployment insurance 68,247.78 3,179,783.49 3,071,672.59 176,358.68 3.Enterprise annuity payment 74,980.80 9,297,045.44 8,675,916.24 696,110.00 Total 1,403,518.97 60,889,265.76 59,915,592.44 2,377,192.29

5.32.5 Dismiss welfare

Unpaid amount payable Unpaid amount payable at the including˖Amount to be paid Calculation Item at the end of term beginning of the period within one year method and basis Retired personnel 20,727,038.07 8,387,639.29 salary Total 20,727,038.07 8,387,639.29 

5.32.6 Other long-term employee benefits

Dec. 31. Increase of Decrease of Dec. 31. Calculation method and Welfare property 2014 2015 2015 2015 basis Executives are deferred 541,170.00 2,065,662.13 2,606,832.13 compensation Total 541,170.00 2,065,662.13 2,606,832.13 

5.33 Taxes payable

Item Dec. 31. 2014 Payable in 2015 Paid in 2015 Dec. 31. 2015 Business income taxes 44,466,428.24 128,742,747.72 86,625,298.29 86,583,877.67 Value-added tax -308,218,767.97 546,401,835.72 221,931,818.79 16,251,248.96 Property tax 912,710.60 10,544,639.22 10,504,918.13 952,431.69 Land use tax 6,508,617.40 6,191,366.20 317,251.20 Stamp duty 3,244,610.91 17,313,898.79 16,236,358.66 4,322,151.04 Individual income tax 1,165,925.51 23,228,425.60 18,139,208.94 6,255,142.17 Business tax 4,468,638.60 46,302,904.24 36,169,773.04 14,601,769.80 Business tax 129,365.60 4,667,945.60 3,784,136.87 1,013,174.33 City maintenance and construction tax 942,941.82 9,957,756.23 9,318,007.86 1,582,690.19 Land value added tax 499,602.06 290,345.58 209,256.48 Surcharge for Education 690,375.63 6,603,372.61 5,826,613.02 1,467,135.22 Local education surcharge 268,445.91 2,957,146.72 2,650,422.96 575,169.67 Vehicle and vessel usage tax 33,732.30 33,732.30 Deed tax 12,905,507.89 12,869,808.19 35,699.70 Ttariff 455,611.95 455,611.95 Charge for water resources 218,067.01 414,067.35 565,830.93 66,303.43 Reservoir area fund 10,000.00 10,000.00

Page104

– F-107 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Item Dec. 31. 2014 Payable in 2015 Paid in 2015 Dec. 31. 2015 Farmland occupation tax 3,462,389.31 3,417,479.28 44,910.03 River management fee 2,670.43 35,487.92 63,151.71 -24,993.36 Paying taxes 22,858.67 565,488.00 565,488.00 22,858.67 Other taxes and duties 12,400,807.78 12,737,980.24 23,738,465.34 1,400,322.68 Mineral resources compensation 4,840,956.72 3,374,583.98 1,466,372.74 Price adjustment fund 131,089.70 131,089.70 Total -239,284,921.26 839,318,957.49 462,760,174.22 137,273,862.01

5.34 Interest payable

Item Dec. 31, 2015 Dec. 31, 2014 Interest payable for entrusted loans 1,287,305.57 920,729.30 Interest payable for bank loans 78,547,257.44 89,271,377.39 Interest payable for bank loans 509,586,954.40 373,140,194.44 Interest payable for credit loans 3,497,813.57 Total 589,421,517.41 466,830,114.70

5.35 Dividends payable

Item Dec. 31, 2015 Dec. 31, 2014 Notes Yunnan Investment Holding Group Co., Ltd. (the Group Company) 340,000,000.00 380,000,000.00 Unpaid Kunming WEISHI Science and Technology Co., Ltd 695,771.62 695,771.62 Unpaid Yunnan Baoshan Electric Power Co., Ltd 7,535,609.44 7,535,609.44 Unpaid Baoshan City State-owned Assets Management Limited Liability Unpaid 1,264,390.56 1,264,390.56 Company Kunming Huayi Energy Engineering Technology Co Ltd 12,531,162.61 Unpaid Chinese heavy industry (chongqing) sea wind power equipment co., Unpaid 8,464,405.18 3,400,000.00 LTD Total 370,491,339.41 392,895,771.62

5.36 Other accounts payable

5.36.1 Details of other accounts payable

Aging Dec. 31, 2015 Dec. 31, 2014 Within 1 year 229,350,284.25 78,415,207.27 1 to 2 years 100,487,409.25 126,095,483.67 2 to 3 years 67,330,081.89 78,043,753.10 3 to 4 years 195,214,529.78 90,487,834.95 4 to 5 years 2,051.42 Over 5 years Total 592,384,356.59 373,042,278.99

Page105

– F-108 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.36.2 Other accounts payable balance of aging for more than a year

Company Amount Reason

Wenshan Coal Industry Co., Ltd. 76,748,322.90 See estimated liabilities

Hunan thermal power construction company 26,079,822.50 Construction deposit

Zhejiang Zhongcai engineering design & Research Institute Co., Ltd. 20,000,000.00 Deposit

Zhejiang zhejiang university network new mechanical and electrical engineering co., LTD 11,451,767.00 Construction deposit

China Railway eighteen Bureau Group Second Engineering Co., Ltd 9,665,554.62 Construction deposit

Total 143,945,467.02 

5.37 Non-current liabilities due within one year

5.37.1 Classification of non-current liabilities due within one year

Item Dec. 31, 2015 Dec. 31, 2014

Long-term loans due within 1 year 2,581,042,400.00 2,486,943,678.08

Bonds payable due within 1 year 3,990,373,698.97

Long-term accounts payable due within 1 year 8,440,672.34

Total 6,579,856,771.31 2,486,943,678.08

Page106

– F-109 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.37.2 Details of non-current libilities due with one year

Loan Unit Bank Amount Starting date Ending date Rate˄%˅ Type of loan

Weinxin Yuntou Yuedian Zahi Energy Limited Agriculture Bank of China- Weinxin branch 89,000,000.00 2013/5/9 2016/5/8 6.04 Guaranteed loan

Yunnan Energy Investment Group Co., Ltd. Societe generale international trust 1,000,000,000.00 2014/12/11 2016/12/11 6.00 Credit loan

Yunnan Energy Investment Group Co., Ltd. Prudential Bank- Kunming branch 200,000,000.00 2014/11/28 2016/11/28 6.00 Credit loan Yunnan Energy Investment Group Co., Ltd. Rural credit cooperatives Kunming City Rural Credit 30,000,000.00 2013/12/24 2016/12/23 6.15 Credit loan Cooperatives Yunnan Energy Investment Group Co., Ltd. Guangdong Development Bank- Longhua road sub 1,000,000.00 2015/6/17 2016/5/20 5.50 Credit loan branch Yunnan Energy Investment Group Co., Ltd. Guangdong Development Bank- Longhua road sub 1,000,000.00 2015/6/17 2016/11/20 5.50 Credit loan branch Yunnan Changning Hengchang Electric Mortgage loan Agricultural Bank of China- Yongde branch 4,000,000.00 2011/4/19 2016/4/18 6.48 – F-110 Power Co. Ltd. Yunnan Changning Hengchang Electric Agricultural Bank of China- Yongde branch Mortgage loan 4,000,000.00 2011/4/27 2016/10/26 6.48 Power Co. Ltd. Yunnan Yongde Hengchang Electric Power Agricultural Bank of China- Yongde branch Mortgage loan 15,000,000.00 2010/3/10 2016/3/9 6.77 Co. Ltd. Yunnan Yongde Hengchang Electric Power Agricultural Bank of China- Yongde branch Mortgage loan 1,700,000.00 2012/9/21 2016/6/20 8.00 Co. Ltd. Yunnan Yongde Hengchang Electric Power Agricultural Bank of China- Yongde branch Mortgage loan 1,700,000.00 2012/9/21 2016/12/20 8.00 Co. Ltd. Yunnan Electric Power Investment Co., Ltd. Ping An Bank- Kunming branch 196,000,000.00 2015/3/25 2016/9/25 5.48 Guaranteed loan

Yunnan Electric Power Investment Co., Ltd. Ping An Bank- Kunming branch 98,000,000.00 2015/3/26 2016/9/26 5.48 Guaranteed loan

Weinxin Yuntou Yuedian Zahi Energy Limited China Investment Trust Co., Ltd. 400,000,000.00 2013/3/11 2016/3/11 8.00 Pledge loan

Yunnan Tianye Chemical Co., Ltd. Bank of China-Wenshan branch 16,000,000.00 2012/8/20 2016/6/20 5.94 Guaranteed loan

Yunnan Tianye Chemical Co., Ltd. Bank of China-Wenshan branch 35,000,000.00 2012/10/11 2016/6/20 5.67 Guaranteed loan

Yunnan Tianye Chemical Co., Ltd. Bank of China-Wenshan branch 47,000,000.00 2012/11/5 2016/6/20 5.39 Guaranteed loan

Page107 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Loan Unit Bank Amount Starting date Ending date Rate˄%˅ Type of loan

Yunnan Tianye Chemical Co., Ltd. Bank of China-Wenshan branch 3,000,000.00 2012/11/5 2016/12/10 5.39 Guaranteed loan

Yunnan Tianye Chemical Co., Ltd. Bank of China-Wenshan branch 42,000,000.00 2012/12/14 2016/12/10 5.39 Guaranteed loan Wenshan Huang Jiaping hydropower Agricultural Bank of China branch -Xichou County 5,200,000.00 2014//8/6 Year016 7.80 Mortgage loan development investment co., LTD branch Yunnan salt & salt chemical Co.,Ltd. Yuntian chemical group co., LTD 200,000,000.00 2011/7/15 2016/7/15 5.81 Credit loan

Yunnan salt & salt chemical Co.,Ltd. Yuntian chemical group co., LTD 9,500,000.00 2005/8/9 2016/4/14 5.29 Credit loan

Yunnan salt & salt chemical Co.,Ltd. Yuntian chemical group co., LTD 9,500,000.00 2005/9/13 2016/10/15 5.05 Credit loan

Yunnan salt & salt chemical Co.,Ltd. DBS Bank (China) Co., Ltd. 76,000,000.00 2014/10/31 2016/10/30 4.61 Credit loan

Yunnan salt & salt chemical Co.,Ltd. Yuntianhua group finance company 38,000,000.00 2014/10/31 2016/10/30 4.61 Credit loan Yunnan energy investment foreign energy China Import and Export Bank of China Yunnan 29,221,200.00 2014/5/13 2016/11/30 4.42 Credit loan development Co. Ltd. branch – F-111 Yunnan energy investment foreign energy China Import and Export Bank of China Yunnan 29,221,200.00 2014/5/13 2016/11/30 4.42 Credit loan development Co. Ltd. branch Total  2,581,042,400.00   

Page108 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.38 Other current liabilities

Item Dec. 31, 2015 Dec. 31, 2014

Short term bond payable 6,690,716,666.68 5,491,516,666.66

Total 6,690,716,666.68 5,491,516,666.66

Notes˖The Company has issued one-year financing bills amounts to 1 billion Yuan in March 2014. The term of the bills is from May.14, 2015 to May.14, 2016, and the rate is 3.70%. The issuing cost was recorded into the par value accounting of bonds payable. Marketing cost of 4,000,000 Yuan which was paid to Bank of China was recorded in interest adjustment, and is to be amortized within one year. The Company has issued nine-months financing bills amounts to 1 billion Yuan in June 2015. The term of the bills is from June.17, 2015 to Mar.13, 2016, and the rate is 3.90%. The issuing cost was recorded into the par value accounting of bonds payable. Marketing cost of 3,000,000 Yuan which was paid to Bank of China was recorded in interest adjustment, and is to be amortized within one year. The Company has issued nine-months financing bills amounts to 1 billion Yuan in July 2015. The term of the bills is from July.20, 2015 to April.15, 2016, and the rate is 3.60%. The issuing cost was recorded into the par value accounting of bonds payable. Marketing cost of 30,00,000 Yuan which was paid to Bank of China was recorded in interest adjustment, and is to be amortized within one year. The Company has issued nine-months financing bills amounts to 1 billion Yuan in Aug 2015. The term of the bills is from Aug.11, 2015 to May.11, 2016, and the rate is 3.33%. The issuing cost was recorded into the par value accounting of bonds payable. Marketing cost of 3,000,000 Yuan which was paid to Bank of China was recorded in interest adjustment, and is to be amortized within one year. The Company has issued one-year financing bills amounts to 1 billion Yuan in Aug 2015. The term of the bills is from Aug.26, 2015 to Aug.26, 2016, and the rate is 3.48%. The issuing cost was recorded into the par value accounting of bonds payable. Marketing cost of 4,000,000 Yuan which was paid to Bank of China was recorded in interest adjustment, and is to be amortized within one year. The Company has issued one-year financing bills amounts to 0.7 billion Yuan in Sep 2015. The term of the bills is from Sep.17, 2015 to Sep.17, 2016, and the rate is 3.58%. The issuing cost was recorded into the par value accounting of bonds payable. Marketing cost of 2,800,000 Yuan which was paid to Bank of China was recorded in interest adjustment, and is to be amortized within one year. The Company has issued nine-months financing bills amounts to 1 billion Yuan in Oct 2015. The term of the bills is from Oct.30, 2015 to July.26, 2016, and the rate is 3.54%. The issuing cost was recorded into the par value accounting of bonds payable. Marketing cost of 1,500,000 Yuan which was paid to Bank of China was recorded in interest adjustment, and is to be amortized within one year.

Page109

– F-112 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.39 Long-term loans 5.39.1 Classification of long-term loans Item Dec. 31, 2015 Dec. 31, 2014 Interest rate range Pledge loan 4,243,942,352.94 1,304,400,000.00 Mortgage loan 337,271,070.15 165,216,333.27 Guaranteed loan 2,439,510,777.06 3,853,390,000.00 Credit loan 1,504,555,855.24 3,860,153,931.84 Total 8,525,280,055.39 9,183,160,265.11 

Page110

– F-113 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.39.2 Details of long-term loans

Loan Unit Bank Amount Starting date Ending date Rate˄%˅ Type of loan China Life Insurance asset Management Company Guaranteed Yunnan Energy Investment Group Co., Ltd. 1,500,000,000.00 2014/8/21 2021/8/20 7.21 Limited loan Yunnan Energy Investment Group Co., Ltd. National Development Bank- Yunnan branch 129,000,000.00 2015/12/3 2030/12/3 1.20 Credit loan

Yunnan Energy Investment Group Co., Ltd. National Development Bank- Yunnan branch 130,000,000.00 2015/12/30 2030/12/30 1.20 Credit loan Yunnan Energy Investment Group Co., Ltd. Guangdong Development Bank- Longhua road sub 295,000,000.00 2015/6/17 2018/5/14 5.50 Credit loan branch Yunnan Energy Investment Group Co., Ltd. Guangdong Development Bank- Longhua road sub 1,000,000.00 2015/6/17 2017/5/20 5.50 Credit loan branch Yunnan Energy Investment Group Co., Ltd. Guangdong Development Bank- Longhua road sub 1,000,000.00 2015/6/17 2017/11/20 5.50 Credit loan branch

– F-114 Yunnan Energy Investment Group Co., Ltd. Mortgage Huaxia Bank- KunmingXinyun branch 28,000,000.12 2013/1/30 2023/1/30 7.21 loan Yunnan Energy Investment Group Co., Ltd. Mortgage Huaxia Bank- KunmingXinyun branch 34,980,391.95 2013/2/17 2023/2/17 7.21 loan Yunnan Energy Investment Group Co., Ltd. Construction Bank – Kunming Chengbei branch 58,206,841.96 2013/1/28 2021/1/27 7.21 Credit loan Yunnan Energy Investment Industrial Investment Co., Guaranteed National development bank co., LTD. -Yunnan branch 23,000,000.00 2015/7/29 2025/7/28 5.94 Ltd. loan Yunnan Energy Investment Industrial Investment Co., Guaranteed National development bank co., LTD. -Yunnan branch 20,000,000.00 2015/8/13 2025/7/28 5.94 Ltd. loan Guaranteed Yunnan Energy Investment car rental Ltd. Yuxi City Commercial Bank 14,893,130.00 2018/9/22 5.41 loan Mortgage Zhaotong City Fengshun Pipeline Gas Co., Ltd. Yunnan Zhaotong Zhaoyang rural cooperative bank 547,000.00 2013/9/7 2018/9/7 7.04 loan Yunnan Energy Investment Natural Gas Industry National development bank co., LTD. -Yunnan branch 7,000,000.00 2015/9/15 2030/9/14 1.20 Credit loan Development Co. Ltd. Yunnan Changning Hengchang Electric Power Co. Ltd. Agricultural Bank of China Co., Ltd. Yongde branch 57,000,000.00 2011/4/12 2023/4/11 Bank Mortgage

Page111 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Loan Unit Bank Amount Starting date Ending date Rate˄%˅ Type of loan interest loan rate Bank Mortgage Yunnan Yongde Hengchang Electric Power Co. Ltd. Agricultural Bank of China Co., Ltd. Yongde branch 121,400,000.00 2009/9/28 2019/9/27 interest loan rate Yunnan Energy Investment construction Engineering Kunming City Rural Credit Cooperatives-Xi Zhu credit 100,000,000.00 2015/12/23 2017/12/23 4.75 Credit loan Company Limited cooperatives Kunming City Rural Credit Cooperatives-Xi Zhu credit Yunnan Energy Investment Weishi technology co., LTD 50,000,000.00 2015/9/16 2017/9/16 5.00 Credit loan cooperatives Weinxin Yuntou Yuedian Zahi Energy Limited Bank of China -Zhaotong branch 26,000,000.00 2011/4/26 2022/4/26 5.65 Pledge loan

Weinxin Yuntou Yuedian Zahi Energy Limited Bank of China -Zhaotong branch 169,000,000.00 2011/4/26 2022/4/26 5.40 Pledge loan

Weinxin Yuntou Yuedian Zahi Energy Limited Bank of China -Zhaotong branch 555,000,000.00 2011/4/26 2022/4/26 5.15 Pledge loan – F-115 Weinxin Yuntou Yuedian Zahi Energy Limited CITIC Bank China -Kunming Guo branch 340,000,000.00 2012/12/21 2022/12/21 5.64 Pledge loan

Weinxin Yuntou Yuedian Zahi Energy Limited CITIC Bank China -Kunming Guo branch 180,000,000.00 2014/1/2 2023/1/2 5.64 Pledge loan

Weinxin Yuntou Yuedian Zahi Energy Limited National Development Bank -Yunnan branch 657,600,000.00 2013/4/19 2028/4/18 6.49 Pledge loan

Weinxin Yuntou Yuedian Zahi Energy Limited National Development Bank Yunnan branch 786,780,000.00 2012/3/27 2027/3/27 6.49 Pledge loan Yunnan Baoshan Supa River Hydropower Development Mortgage Bank of China -Baoshan branch 60,000,000.00 2007/2/28 2022/12/10 5.54 Co. loan Yunnan Baoshan Supa River Hydropower Development China Construction Bank-Longling County branch 25,000,000.00 2007/8/1 2017/7/31 4.41 Pledge loan Co. Yunnan Baoshan Supa River Hydropower Development China Construction Bank-Longling County branch 15,000,000.00 2007/8/1 2017/7/31 4.86 Pledge loan Co. Yunnan Baoshan Supa River Hydropower Development Guaranteed Bank of China -Tengchong County branch 30,000,000.00 2008/1/15 2019/12/26 5.54 Co. loan Yunnan Baoshan Supa River Hydropower Development Bank of China Tengchong County branch Guaranteed 1,000,000.00 2008/5/29 2017/5/29 5.42 Co. loan Yunnan Baoshan Supa River Hydropower Development Bank of China Tengchong County branch 94,000,000.00 2009/3/31 2024/3/20 5.72 Guaranteed

Page112 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Loan Unit Bank Amount Starting date Ending date Rate˄%˅ Type of loan Co. loan

Yunnan Baoshan Supa River Hydropower Development Guaranteed China Minsheng Bank-Kunming branch 140,000,000.00 2009/2/11 2023/12/20 6.15 Co. loan Yunnan Baoshan Supa River Hydropower Development Agricultural Development Bank of China -Tengchong Guaranteed 26,500,000.00 2008/1/31 2018/12/10 6.15 Co. County branch loan Yunnan Baoshan Supa River Hydropower Development No provisions of Co. Tengchong water authority 6,800,000.00 2011/9/1 the repayment 6.00 Credit loan period Yunnan salt & salt chemical Co.,Ltd. Yuntian chemical group co., LTD 37,675,000.00 2005/8/9 2020/4/15 5.29 Credit loan

Yunnan salt & salt chemical Co.,Ltd. Yuntian chemical group co., LTD 38,000,000.00 2005/9/13 2020/7/30 5.05 Credit loan

Yunnan salt & salt chemical Co.,Ltd. Yuntian chemical group co., LTD 100,000,000.00 2006/4/28 2021/4/27 4.05 Credit loan

– F-116 Wenshan Huang Jiaping hydropower development Mortgage Agricultural Bank of China -Xichou County branch 10,400,000.00 2014/8/6 2018/8/5 7.80 investment co., LTD loan Guaranteed Yunnan Tianye Chemical Co., Ltd. Bank of China - Wenshan branch 5,900,000.00 2012/12/14 2017/6/20 5.39 loan Bank of China - Wenshan branch Guaranteed Yunnan Tianye Chemical Co., Ltd. 45,000,000.00 2013/1/11 2017/6/20 6.77 loan Bank of China - Wenshan branch Guaranteed Yunnan Tianye Chemical Co., Ltd. 20,000,000.00 2013/3/13 2017/6/20 6.49 loan Bank of China - Wenshan branch Guaranteed Yunnan Tianye Chemical Co., Ltd. 15,000,000.00 2013/4/15 2017/6/20 6.49 loan Bank of China - Wenshan branch Guaranteed Yunnan Tianye Chemical Co., Ltd. 19,100,000.00 2013/5/16 2017/6/20 6.22 loan Bank of China - Wenshan branch Guaranteed Yunnan Tianye Chemical Co., Ltd. 15,900,000.00 2013/5/16 2017/12/10 6.22 loan Bank of China - Wenshan branch Guaranteed Yunnan Tianye Chemical Co., Ltd. 29,100,000.00 2013/6/17 2017/12/10 6.22 loan

Page113 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Loan Unit Bank Amount Starting date Ending date Rate˄%˅ Type of loan Bank of China - Wenshan branch Guaranteed Yunnan Tianye Chemical Co., Ltd. 900,000.00 2013/6/17 2018/3/5 6.22 loan Bank of China - Wenshan branch Guaranteed Yunnan Tianye Chemical Co., Ltd. 20,000,000.00 2013/9/3 2018/3/5 5.67 loan Bank of China - Wenshan branch Guaranteed Yunnan Tianye Chemical Co., Ltd. 25,000,000.00 2013/9/18 2018/3/5 6.18 loan Bank of China - Wenshan branch Guaranteed Yunnan Tianye Chemical Co., Ltd. 30,000,000.00 2013/11/5 2018/3/5 5.88 loan Bank of China - Wenshan branch Guaranteed Yunnan Tianye Chemical Co., Ltd. 29,100,000.00 2013/12/9 2018/3/5 5.88 loan Yunnan Energy Investment New energy investment National Development Bank -Yunnan branch 191,000,000.00 2015/11/11 2030/11/10 4.66 Credit loan development Co. Ltd.

– F-117 Yunnan Energy Investment New energy investment Construction Bank -Luxi branch 348,680,000.00 2014/2/24 2026/11/1 6.55 Pledge loan development Co. Ltd. Yunnan Energy Investment New energy investment Construction Bank -Luxi branch 193,740,000.00 2015/2/27 2026/2/27 6.15 Pledge loan development Co. Ltd. Yunnan Energy Investment New energy investment Construction Bank -Huize branch 315,000,000.00 2013/11/4 2026/11/3 6.55 Pledge loan development Co. Ltd. Yunnan Energy Investment New energy investment Construction Bank –Malong branch 472,000,000.00 2015/4/14 2025/12/13 4.90 Pledge loan development Co. Ltd. Yunnan Energy Investment New energy investment Guaranteed Construction Bank –Dayao branch 289,117,647.06 2015/10/30 2025/10/29 4.90 development Co. Ltd. loan Yunnan Energy Investment foreign energy development China Import and Export Bank of China- Yunnan 359,874,013.28 2014/12/3 2019/5/31 4.42 Credit loan Co. Ltd. branch Mortgage Yunnan Energy Investment Group Co., Ltd. Huaxia Bank –Kunming Xinyun branch 3,999,999.96 2013/1/30 2023/1/30 7.21 loan Mortgage Yunnan Energy Investment Group Co., Ltd. Huaxia Bank –Kunming Xinyun branch 6,352,941.24 2013/2/17 2023/2/17 7.21 loan

Page114 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Loan Unit Bank Amount Starting date Ending date Rate˄%˅ Type of loan Mortgage Yunnan Energy Investment Group Co., Ltd. China Construction Bank-Kunming chengbei branch 14,254,736.88 2013/1/28 2021/1/27 7.21 loan Mortgage Zhaotong City Fengshun Pipeline Gas Co., Ltd. Yunnan Zhaotong Zhaoyang rural cooperative bank 336,000.00 2013/9/7 2018/9/7 7.04 loan Yunnan Baoshan Supa River Hydropower Development Guaranteed Bank of China -Baoshan branch 10,000,000.00 2007/2/28 2022/12/10 5.54 Co. loan Yunnan Baoshan Supa River Hydropower Development China Construction Bank- Longling County branch 15,000,000.00 2007/8/20 2017/7/31 4.41 Pledge loan Co. Yunnan Baoshan Supa River Hydropower Development China Construction Bank- Longling County branch 25,000,000.00 2007/8/1 2017/7/31 4.86 Pledge loan Co. Yunnan Baoshan Supa River Hydropower Development Guaranteed Bank of China -Tengchong County branch 5,000,000.00 2008/1/15 2019/12/26 5.54 Co. loan

– F-118 Yunnan Baoshan Supa River Hydropower Development Guaranteed Bank of China -Tengchong County branch 5,000,000.00 2008/5/29 2017/5/29 5.42 Co. loan Yunnan Baoshan Supa River Hydropower Development Guaranteed Bank of China -Tengchong County branch 10,000,000.00 2009/3/31 2024/3/20 5.72 Co. loan Yunnan Baoshan Supa River Hydropower Development Guaranteed China Minsheng Bank-Kunming branch 15,000,000.00 2009/2/11 2023/12/20 6.15 Co. loan Yunnan Baoshan Supa River Hydropower Development Agricultural Development Bank of China- Tengchong Guaranteed 1,000,000.00 2008/1/31 2018/12/10 6.15 Co. County branch loan Yunnan Energy Investment New energy investment National Development Bank -Yunnan branch 4,000,000.00 2015/11/11 2030/11/10 4.66 Pledge loan development Co. Ltd. Yunnan Energy Investment New energy investment China Construction Bank- Luxi County branch 18,260,000.00 2015/2/27 2026/2/27 6.15 Pledge loan development Co. Ltd. Yunnan Energy Investment New energy investment China Construction Bank- Huize County branch 20,000,000.00 2013/11/4 2026/11/3 6.55 Pledge loan development Co. Ltd. Yunnan Energy Investment New energy investment China Construction Bank- Malong County branch 67,000,000.00 2015/4/14 2025/12/13 4.90 Pledge loan development Co. Ltd.

Page115 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Loan Unit Bank Amount Starting date Ending date Rate˄%˅ Type of loan Yunnan Energy Investment New energy investment China Construction Bank- Dayao County branch 10,882,352.94 2015/10/30 2025/10/29 4.90 Pledge loan development Co. Ltd. Total  8,525,280,055.39   – F-119

Page116 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.40 Bonds payable

5.40.1 Details of bonds payable

Item Dec. 31, 2015 Dec. 31, 2014

14Yunnengtou MTN001 1,490,679,578.19 1,490,439,005.60

14 Yunnengtou MTN002 997,000,000.00 997,000,000.00

13 Yunnengtou PPN001 995,157,205.86

13 Yunnengtou PPN002 994,986,490.90

13 Yunnengtou PPN003 994,796,625.80

13 Yunnengtou PPN004 994,347,727.15

14 Yunnengtou PPN001 996,385,252.13 993,419,266.08

14 Yunnengtou PPN002 997,000,000.00 997,000,000.00

15 Yunnengtou PPN001 997,000,000.00

15 Yunnengtou PPN002 997,000,000.00

15 Yunnengtou PPN003 997,021,282.02

The first issue of corporate bonds of year 2015 495,438,777.42

The second issue of corporate bonds of year 2015 3,286,906,318.70

Corporate bonds 1.5 billion of year 2015 - Southwest Securities 1,488,017,386.42

Hydropower assets to support special planned assets 854,761,808.21

Hongkong offshore RMB bond of year 2014 592,564,646.94 588,935,564.84

Total 14,189,775,050.03 9,046,081,886.23

Page117

– F-120 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.40.2 Increase or decrease in bonds payable

Item Par value Issue date Bond maturity Issue amount Initial balance Current issue Current repayment Amortization Ending balance

14Yunnengtou MTN001 1,500,000,000.00 2014/4/14 5 1,500,000,000.00 1,490,439,005.60 240,572.59 1,490,679,578.19

14 Yunnengtou MTN002 1,000,000,000.00 2014/8/27 5 1,000,000,000.00 997,000,000.00  997,000,000.00

13 Yunnengtou PPN001 1,000,000,000.00 2013/7/25 3 1,000,000,000.00 995,157,205.86 2,709,613.97 997,866,819.83

13 Yunnengtou PPN002 1,000,000,000.00 2013/8/14 3 1,000,000,000.00 994,986,490.90 2,739,052.18 997,725,543.08

13 Yunnengtou PPN003 1,000,000,000.00 2013/9/6 3 1,000,000,000.00 994,796,625.80 2,770,769.16 997,567,394.96

13 Yunnengtou PPN004 1,000,000,000.00 2013/10/28 3 1,000,000,000.00 994,347,727.15 2,866,213.95 997,213,941.10

14 Yunnengtou PPN001 1,000,000,000.00 2014/2/21 3 1,000,000,000.00 993,419,266.08 2,965,986.05 996,385,252.13

– F-121 14 Yunnengtou PPN002 1,000,000,000.00 2014/10/17 3 1,000,000,000.00 997,000,000.00  997,000,000.00

15 Yunnengtou PPN001 1,000,000,000.00 2015/2/12 3 1,000,000,000.00 997,000,000.00  997,000,000.00

15 Yunnengtou PPN002 1,000,000,000.00 2015/4/9 3 1,000,000,000.00 997,000,000.00  997,000,000.00

15 Yunnengtou PPN003 1,000,000,000.00 2015/9/25 3 1,000,000,000.00 997,000,000.00 21,282.02 997,021,282.02 The first issue of corporate bonds 500,000,000.00 2015/7/9 5 500,000,000.00 495,000,000.00 438,777.42 495,438,777.42 of year 2015 The second issue of corporate 3,300,000,000.00 2015/12/16 5 3,300,000,000.00 3,286,800,000.00 106,318.70 3,286,906,318.70 bonds of year 2015 Corporate bonds 1.5 billion of year 1,500,000,000.00 2015/11/20 10 1,500,000,000.00 1,487,906,250.00 111,136.42 1,488,017,386.42 2015 - Southwest Securities Hydropower assets to support 860,000,000.00 2015/12/11 108 њᴸ 860,000,000.00 860,000,000.00 5,238,191.79  854,761,808.21 special planned assets Hongkong offshore RMB bond of 600,000,000.00 2014.10.21 3 600,000,000.00 588,935,564.84 3,629,082.10 592,564,646.94 year 2014 Total    18,260,000,000.00 9,046,081,886.23 9,120,706,250.00 5,238,191.79 18,598,804.55 18,180,148,748.99

Page118 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Note: according to non-public debt financing instruments to raise funds to the specification of the provisions, private bond of the first semester, the second semester, the third semester and the fourth semester in 2013 will ended in 2016, the ending balance is 3990373698.96 Yuan, re classification to within 1 year due non current liabilities accounting.

On December 25, 2015, the company's subsidiary Yunnan Baoshan Supa River Hydropower Development Co. signed the "Yunnan Baoshan Supa River Electric asset-backed special plan asset backed securities subscription agreement and risk disclosure statement" with Shenwan Hong Yuan Securities Co. Ltd., Shen Wanhongyuan Securities Company Limited establish and manage Yunnan Baoshan Supa River Hydropower Management asset-backed special plan (by the company and the purchaser signed the "contract" (including the purchase and sale of electricity that signed and will be signed by all "power purchase contract") in the purchase of party "power purchase contract" under the charge of grade two power plants, like the Teng Longqiao power station-level 2, Xiangda power station,A Jiutian power station etc. the bond contract and from the right), and as a basis for asset backed securities to the company sales of assets.

On December 25, 2015, the company's subsidiary Yunnan Baoshan Supa River Hydropower Development Co. signed the "Yunnan Baoshan Supa River Electric asset-backed special plan asset backed securities subscription agreement and risk disclosure statement" with Shenwan Hong Yuan Securities Co. Ltd., Shen Wanhongyuan Securities Company Limited

– F-122 establish and manage Yunnan Baoshan Supa River Hydropower Management asset-backed special plan (by the company and the purchaser signed the "contract" (including the purchase and sale of electricity that signed and will be signed by all "power purchase contract") in the purchase of party "power purchase contract" under the charge of grade two power plants, like the Teng Longqiao power station-level 2, Xiangda power station,A Jiutian power station etc. the bond contract and from the right), and as a basis for asset backed securities to the company sales of assets.

On December 11, 2015, the company's subsidiary Yunnan Baoshan Supa River Hydropower Development Co. signed the "The hydropower assets support special plan assets purchase

agreement" with Shenwan Hong Yuan Securities Co. Ltd., the purchase electricity sales contracts signed between Supa River Hydropower Development Co. and electricity purchasing party (including all the purchase electricity sales contracts signed or will signed ") as determined by the right of the purchase of electricity of the purchase electricity sales contracts " like Xiangda power station, A Jiutian power station, Teng Longqiao power station-level 2 contract bonds and from the right as the underlying asset, ⭣зᆿⓀ䇱ࡨᴹ䲀ޜਨ in accordance with the terms and conditions of the agreement to the Supa River Hydropower purchase and the underlying assets of the transferee, the asset base of the purchase price of 8.6 billion Yuan, Supa River Hydropower undertake asset management service fee 5700000 Yuan. Ending balance of bonds payable is the sum of the interest and the amount of the notes payable in the current period deducts asset management fees.

Page119 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.41 Long-term accounts payable

Item Dec. 31, 2015 Dec. 31, 2014

Volkswagen Finance China Co., Ltd. - Yunnan Yadi 319,268.63

Volkswagen Finance China Co., Ltd. - Yunnan Yingmao 3,490,320.85

Volkswagen Finance China Co., Ltd. - Yunnan Dezhong 1,117,785.95

Volkswagen Finance China Co., Ltd. - Yunnan Xinyuejia 392,291.76

Heyun international leasing co., LTD 664,321.34 811,752.97

Huaning power supply co., LTD 13,350,893.74 13,350,893.74

Minsheng financial leasing co., LTD 74,932,167.83

Yunnan province water conservancy and hydropower investment co., LTD 17,470,000.00

Guoyin financial leasing co., LTD., financing lease 760,870,924.36 945,584,953.46

Financing lease payment ZhaoYin leasing co., LTD 117,268,345.16 160,932,381.76

Minsheng financial leasing co., LTD., financing lease 291,580,505.19 364,704,381.51

Total 1,189,054,656.98 1,577,786,531.27

5.42 Estimated liabilities

Item Dec. 31. 2014 Increase of 2015 Decrease of 2015 Dec. 31. 2015

Other 32,920,150.71 563,172.01 32,356,978.70

Total 32,920,150.71 563,172.01 32,356,978.70

Note:The ending balance of the year is the anticipated interest that sub firm Wenshan Huang Jiaping hydropower development co., LTD affiliated to Yunnan salt & salt chemical Co.,Ltd. Should pay to former shareholders Wenshan coal co., LTD. At the end of 2007, Yunnan salt & salt chemical Co.,Ltd in the form of capital holdings control the

Wenshan Huang Jiaping hydropower development co., LTD, Yunnan Puyang coal chemical co., LTD, the two companies are both borrowed to the former shareholders Wenshan coal co., LTD, but not about loan terms and interest rates. Yunnan salt & salt chemical Co.,Ltd began holding Yunnan Puyang coal chemical co., LTD in 2008, according to the one-year lending rate for the same period calculation and paid interest on the loan to the Wenshan state coal industry Co., Ltd., and Yunnan Puyang coal chemical co., LTD. paid interest to Wenshan coal co., LTD on the basis of the one-year lending rate for the same period. Wenshan Huang Jiaping hydropower development co., LTD also need to pay interest on the loan toWenshan coal co., LTD, so the estimated debts is confirmed by the calculation of the loan interest rate and the capital occupancy time within one year. As of December 31, 2015, the balance of estimated debts is 32,356,978.70 Yuan.

Page120

– F-123 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.43 Deferred income

5.43.1 Details of deferred income

Item Dec. 31. 2014 Increase of 2015 Decrease of 2015 Dec. 31. 2015 Notes Government subsidy 92,859,594.25 177,707,120.42 34,435,355.71 236,131,358.96  Unrealized gains and losses back 543,118.64 176,278.04 366,840.60  customer service The sea wind turbine maintenance 15,726,495.73 25,299,145.30 41,025,641.03  fee Total 108,586,089.98 203,549,384.36 34,611,633.75 277,523,840.59 

5.43.2 Deferred revenue related to government subsidies

Increase of Decrease of Other Item Dec. 31. 2014 Dec. 31. 2015 Notes 2015 2015 changes Allowance to 6,250,000.00    6,250,000.00 Related to assets Niuchang-Yigu Coal Mine Dayakou Hydropower Station Land-transferring 22,064,000.00   22,064,000.00 Related to assets

Fees Refund Financial interest subsidy for Long Shun River 1,923,186.12  83,616.72  1,839,569.40 Related to assets Level-1 Hydropower Station Yunnan Province Development and Reform 1,350,000.00  50,000.00  1,300,000.00 Related to assets Commission Government Subsidies Yunnan Province Development and Reform 1,010,000.00    1,010,000.00 Related to assets Commission Government Subsidies Fund for coal mine safety 2,120,000.00    2,120,000.00 Related to assets reformation Benefits of fine management system 849,056.60  53,615.63 795,440.97 Related to assets development Including:1. preliminary 2,000,000.00    2,000,000.00 Related to assets financial special funds Jintaiyang demonstration 9,813,600.00   9,813,600.00  Related to assets projects fund 2015 annual " Going Global 725,000.00   725,000.00 Related to assets " special subsidies Burma's chang river ‘Going 300,000.00    300,000.00 Related to assets Global’ subsidy Kunming City Finance 650,000.00    650,000.00 Related to assets

Page121

– F-124 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Increase of Decrease of Other Item Dec. 31. 2014 Dec. 31. 2015 Notes 2015 2015 changes Bureau ’Yunnan Province Going Global Project’ Strategic Development Special Subsidies 2013 Foreign Economic and Technical Cooperation 2,000,000.00    2,000,000.00 Related to assets Projects Special Fund Allowance to Nuochangka River ‘Going Global’ 1,500,000.00    1,500,000.00 Related to assets Project, Burma The departments of Related to assets commerce foreign 639,000.00    639,000.00 cooperation special funds 2014 annual " Going Global Related to assets 150,000.00    150,000.00 " special subsidies Spanning development Related to assets 8,241,118.35    8,241,118.35 project funding Public rental housing Related to assets  84,370,000.00   84,370,000.00 project Industrial Park Project  14,400,000.00   14,400,000.00 Related to assets

Special award for 75t boiler  1,080,000.00 90,000.00  990,000.00 Related to assets Subsidies for energy Related to assets equipment upgrading and  710,000.00  710,000.00 transformation Demolition compensation  12,786,771.08 36,551.31  12,750,219.77 Related to assets Special subsidies for Related to assets sewage charges at the  155,000.00 7,500.00  147,500.00 provincial level Technical assistance of Related to assets  153,124.97 3,124.97  150,000.00 fluidized bed boiler Saving energy and Related to assets reducing consumption  163,333.30 4,999.97  158,333.33 subsidies 4*75t/h boiler denitrification Related to assets facilities construction  300,000.00 300,000.00 project governance subsidies Industrial enterprise energy Related to assets management center  6,205,000.06 364,999.98  5,840,000.08 construction demonstration project grants Heavy metal pollution  4,199,999.83 200,000.01  3,999,999.82 Related to assets

Page122

– F-125 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Increase of Decrease of Other Item Dec. 31. 2014 Dec. 31. 2015 Notes 2015 2015 changes special prevention and control of government subsidies Kunming new Related to assets industrialization project  579,999.93 20,000.01  559,999.92 grants Boiler desulfurization Related to assets project transformation  702,000.00  702,000.00 grants Waste water project Related to assets construction government  104,999.83 5,000.01  99,999.82 grants 75t boiler on line monitoring Related to assets and government subsidies  92,500.00 3,750.00  88,750.00 for calcium carbide crushing Waste water project Related to assets  366,666.56 8,333.34  358,333.22 recycling special grants Alumina supporting construction project funds  36,299,261.00 36,299,261.00 Related to assets allowance Return of land transfer  611,796.00 3,652.87  608,143.13 Related to assets payments Sewage equipment subsidy  251,111.26 7,968.25  243,143.01 Related to assets Comprehensive utilization of calcium carbide tail gas  2,590,000.00 53,677.96  2,536,322.04 Related to assets subsidies Kunming science and Technology Bureau of wild Related to  400,000.00 400,000.00 mushroom seasoning salt revenue products Patent transformation and implementation of the application of project grants Related to  150,000.00 150,000.00 for the preparation of revenue pharmaceutical bath containing salt Special funds for the Related to cultivation of intellectual  120,000.00 120,000.00 revenue property rights 45t/h boiler desulfurization  259,000.00 259,000.00  Related to assets transformation grant funds

Page123

– F-126 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Increase of Decrease of Other Item Dec. 31. 2014 Dec. 31. 2015 Notes 2015 2015 changes Boiler desulfurization system transformation  185,000.00 185,000.00  Related to assets grant funds Subsidy for boiler flue gas  185,000.00 185,000.00  Related to assets emission reduction Subsidy funds for boiler  92,500.00 92,500.00  Related to assets dust removal system Solar Power and Building Integrated Photovoltaic 14,940,800.08  649,599.96  14,291,200.12 Related to assets Project Application Paradigm Subsidies Kunming City New-type Industrialization Special 515,199.92  22,400.04  492,799.88 Related to assets Subsidies Interest subsidy of fixed assets investment loans 5,405,000.08  234,999.96  5,170,000.12 Related to assets finance Upfront subsidies for 500,000.00  500,000.00 Related to assets projects Kunming City Development and Reform Commission 2,208,000.00  96,000.00  2,112,000.00 Related to assets Solar Photovoltaic Project Shilin Ministry of Industry and Information Technology 220,800.00  9,600.00  211,200.00 Related to assets subsidies Final payment of subsidies for renewable energy 552,000.00  24,000.00  528,000.00 Related to assets project Specific subsidies for solar photovoltaic development 1,839,999.92  80,000.04  1,759,999.88 Related to assets project Interest subsidy for 2011Renewable Energy 1,104,000.00  48,000.00  1,056,000.00 Related to assets Development Project The specific upfront fund from 2012 Provincial Key 92,000.08  3,999.96  88,000.12 Related to assets Investment Attracting Proposal Building photovoltaic 5,470,889.70  237,864.72  5,233,024.98 Related to assets subsidies settlement money Special funds for science 4,500,000.00   4,500,000.00 Related to assets and technology

Page124

– F-127 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Increase of Decrease of Other Item Dec. 31. 2014 Dec. 31. 2015 Notes 2015 2015 changes Qiaohou financial allocation of low-cost housing 4,725,000.00   4,725,000.00 Related to assets construction funds Related to Other 112,000.00   112,000.00 revenue Total 92,859,594.25 178,424,120.42 3,221,140.08 31,931,215.63 236,131,358.96 

5.44 Other non-current liabilities

5.44.1 Other non-current liabilities by item

Item Dec. 31. 2014 Increase of 2015 Decrease of 2015 Dec. 31. 2015 Note

CDB development fund co., LTD 80,000,000.00 80,000,000.00

Total 80,000,000.00 80,000,000.00 

Note: Development Investment Co., Ltd of China invested other non-current liabilities of 80 million to Yunnan

Energy Investment Honghe Company, according to the stipulations of contract, after the expiration of subject of the project ( Yunnan Energy Investment Honghe Company Bonded Zone Industrial Park) after the expiration, the investment industry Co., Ltd. Yunnan incase have obligation to repurchase equity.

5.45 Paid-in captical

Dec. 31. 2014 Increas Decrea Dec. 31. 2015 Investor Proportion e of se of Proportion Amount Amount % 2015 2015 % Yunnan Investment Holding Group 9,687,766,636.10 83.08   9,687,766,636.10 83.08 Co., Ltd. Yuntian chemical group co., LTD 1,183,338,592.62 10.15   1,183,338,592.62 10.15

Yunnan metallurgical group co., LTD 788,892,395.08 6.77   788,892,395.08 6.77

Total 11,659,997,623.80 100.00 11,659,997,623.80 100.00

5.46 Other equity instruments

5.46.1 Other equity instruments

Item Dec. 31. 2014 Increase of 2015 Decrease of 2015 Dec. 31. 2015 Reason for change Perpetual 886,500,000.00 997,000,000.00 1,883,500,000.00 ticket Sustainable 2,400,000,000.00 2,400,000,000.00 loan Total 886,500,000.00 3,397,000,000.00 4,283,500,000.00 

Note:The main provisions of perpetual medium-term notes in 2014: ˄1˅A total of 900 million Yuan of Page125

– F-128 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements medium-term notes issued in July 2014, is a kind of medium-term notes that can be reemitted by Issuer at the end of each 5 years.(2) In accordance with the terms of the issued agreement the medium-term notes should long term survival before redemption, and expires at the agreed date of redemption. (3) Interest calculated on fixed interest rates. The interest bearing coupon rate of first 5-year is the initial benchmark interest rate plus initial margin, the initial benchmark interest rate is the book building recently five working days Shanghai clearing website˄www.shclearing.com.cn˅ and other dealers association recognized published on the website of the bank debt between the fixed rate bond yield rate curve, to be subordinated to 5 years yields rate arithmetic average (rounded to calculate. 01%). If the issuer does not use the right of redemption, from the beginning of the first six years of interest bearing, breed a coupon rate adjustment for the current benchmark interest rate and initial interest rate plus 300 basis points, in the first six years of interest to the

10 year interest bearing remained unchanged. The current benchmark interest rate is the book building recently five working days Shanghai clearing website˄www.shclearing.com.cn˅ and other dealers association recognized published on the website of the bank debt between the fixed rate bond yield rate curve, to be subordinated to 5 years yields rate arithmetic average (rounded to calculate. 01%). Thereafter every 5 years to reset the coupon rate to the current benchmark interest rate plus the initial spread plus 300 basis points to determine.

The main provisions of perpetual medium-term notes in 2015: ˄1˅A total of 1 billion Yuan of medium-term notes issued in Sep 2015, is a kind of medium-term notes that can be reemitted by Issuer at the end of each 5 years.(2) In accordance with the terms of the issued agreement the medium-term notes should long term survival before redemption, and expires at the agreed date of redemption. (3) Interest calculated on fixed interest rates, using simple interest year-on-year The interest bearing coupon rate of first 5-year is the initial benchmark interest rate plus initial margin, the initial benchmark interest rate is the book building recently five working days Shanghai clearing website˄www.shclearing.com.cn˅(Or other sites recognized by the central government securities depository and clearing limited liability company) and other dealers association recognized published on the website of the bank debt between the fixed rate bond yield rate curve, to be subordinated to 5 years yields rate arithmetic average (rounded to calculate. 01%). If the issuer does not use the right of redemption, from the beginning of the first six years of interest bearing, coupon rate of once every 5 years reset, reset after the coupon interest rate of the current benchmark interest rate plus the initial margin and raised the point, in the 5 year bearing remain unchanged; The current benchmark interest rate is the book building recently five working days Shanghai clearing website

Page126

– F-129 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

˄www.shclearing.com.cn˅(Or other sites recognized by the central government securities depository and clearing limited liability company) debt between the fixed rate bond yield rate curve, to be subordinated to 5 years yields rate arithmetic average (rounded to calculate. 01%). Thereafter every 5 years to reset the coupon rate to the current benchmark interest rate plus the initial spread plus 300 basis points to determine.

The main provisions of perpetual loan in 2015:(1), Industrial bank obtained 2.4 billion Yuan of loans in

December 2015. ˄2˅Interest calculated on fixed interest rates, initial interest rate was 4.9% and reset after the reset each interest rate fixed rate should be in a period of the annual interest rate on the basis of plus

1%, after resetting the interest rate to 8% for cap.

5.47 Captial reserve

Item Dec. 31. 2014 Increase of 2015 Decrease of 2015 Dec. 31. 2015 Reason and basis of change

Capital (equity) premium 3,902,070,290.57  93,879,892.21 3,808,190,398.36

Other capital reserve 7,274,530.00 2,283,207.11  9,557,737.11 

Total 3,909,344,820.57 2,283,207.11 93,879,892.21 3,817,748,135.47 

˄1˅The company confirmed that equity capital reserves changes according to the ownership of the company

˄2˅The company this year to increase investment in Yunnan electric power investment co., LTD., the formation of the minority shareholders' equity capital reserves part write-downs capital reserves (equity premium);

˄3˅unnan electric power investment co., LTD purchased the Weinxin Yuedian minority stake respectively in

2015 the beginning and end of the year, the acquisition of after the completion of its stake by 53.61% increased to

76.3% As a result of the purchase purchase minority interest of the long-term equity investment and the new shareholding proportion shall be calculated according to enjoy subsidiary since the merger, continuous calculation of net asset share between the balance to offset capital surplus capital premium 48,341,107.80 yuan, at the same time the capital reserve is not enough to offset part of the reduction of undistributed profits 846,143.59 Yuan.

Page127

– F-130 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.48 Other comprehensive income

Under the equity method in Under the equity method Hold to maturity Translation Changes in classification into the profits after the invested entity will Changes in the investments are Effective part difference net liabilities Other and losses of the invested be classified into the share fair value of classified as of cash flow of foreign Item or net assets Other comprehensive entity cannot the share of of profits and losses of available for sale available for sale hedging profit currency of the benefit income other comprehensive other comprehensive financial assets financial assets and loss financial plan income income gains and losses statements 1.The beginning balance

of the previous period 2.The amount of changes

of the previous period 3.This period beginning

balance – F-131 4.Current amount 10,124,951.14 1,712,422.80 11,837,373.94

Current income before tax 10,124,951.14 2,148,182.09 12,273,133.23 Less: pre included in other comprehensive income to

profit and loss in the current period Less: income tax expense 435,759.29 435,759.29 After tax attributable to the 10,124,951.14 1,712,422.80 11,837,373.94 parent company After tax attributable to

minority shareholders 5.End balance of current 10,124,951.14 1,712,422.80 11,837,373.94 period

Page128 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.49 Special reserve

Cost expenditure for Capital expenditures for Item Dec. 31. 2014 Increase of 2015 Dec. 31. 2015 Note the period the period Maintenance costs 1,437,208.10 6,340,931.89 5,627,779.81 2,150,360.18 Safety production 2,173.39 823,216.43 821,332.05 4,057.77 costs Security 569,503.87 1,936,979.78 2,126,754.61 379,729.04 governance fund Total 2,008,885.36 9,101,128.10 8,575,866.47 2,534,146.99 

5.50 Surplus reserve

Decrease of Reason and basis of Item Dec. 31. 2014 Increase of 2015 Dec. 31. 2015 2015 change Statutory surplus reserve 277,186,538.04 107,329,132.68 384,515,670.72 Discretionary surplus reserve Reserve fund Enterprise development fund Total 277,186,538.04 107,329,132.68 384,515,670.72 

5.51 Undistributed profit

Extracting or allocation Item Year 2015 Year 2014 proportion Before the adjustment undistributed profit of the previous 1,860,153,271.29 470,145,329.76 period Adjust the total initial undistributed profit(increase +, -  -229,690,386.64 reduction) Undistributed profit at the beginning of late adjustment 1,860,153,271.29 240,454,943.12  add˖Net profit attributable to shareholders of the parent 1,176,673,179.44 1,816,732,253.99 company Surplus reserves to cover company losses   Other transfer-in   Less: statutory surplus reserve 107,329,132.68 196,157,411.68 Discretionary surplus reserve   Extract general risk preparation   Common stock dividend payable 67,500,000.00  Common stock dividends transferred to share capital   Other losses 2,800,778.56 876,514.14 The final undistributed profit 2,859,196,539.49 1,860,153,271.29 

Notes:˄1˅Yunnan electric power investment co., LTD purchased the Weinxin Yuedian minority stake respectively in 2015 the beginning and end of the year, the acquisition of after the completion of its stake

Page129

– F-132 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements by 53.61% increased to 76.3% As a result of the purchase purchase minority interest of the long-term equity investment and the new shareholding proportion shall be calculated according to enjoy subsidiary since the merger, continuous calculation of net asset share between the balance to offset capital surplus capital premium 48,341,107.80 yuan, at the same time the capital reserve is not enough to offset part of the reduction of undistributed profits 846,143.59 yuan.

˄2˅This year the company acquired 33.43% stake in Yunnan salt Limited by Share Ltd, restored the special reserve before the acquisition, and increase investment in Yunnan Electric Power Investment Co., Ltd., reducing capital before the special reserve according to increase its stake. A total of reduce the undistributed profit of 1,623,880 yuan.

5.52 Revenue and operating cost

Year2015 Year2014 Item Revenue Operating cost Revenue Operating cost Prime revenue 39,018,660,776.37 38,064,352,283.17 32,515,961,490.33 32,024,827,995.32 Interest income 466,989,184.52 480,064,881.69 109,424,033.16 112,487,906.09 Investment income 2,340,732,963.72 871,990,348.33 2,529,921,357.27 908,087,706.58 Other operating income 60,729,510.80 9,690,604.16 216,233,376.40 63,908,276.28 Total 41,887,112,435.41 39,426,098,117.35 35,371,540,257.16 33,109,311,884.27

5.52.1 Operating revenue and operating cost classified by industries:

Year2015 Year2014 Product name Revenue Operating cost Revenue Operating cost Income from power generation and sales 2,220,595,928.72 1,805,748,523.88 1,827,440,841.32 1,490,978,825.31 Income from coal production and sales 20,680,617.89 38,817,425.02 5,298,292,445.21 5,290,330,663.62 Income from goods trading 36,273,087,532.53 35,964,393,500.44 25,319,267,838.26 25,242,654,976.39 Income from financial services 29,489,202.46 3,279,651.08 70,960,365.54 863,530.00 Income from salt and chemical production 474,807,494.77 252,113,182.75   Total 39,018,660,776.37 38,064,352,283.17 32,515,961,490.33 32,024,827,995.32

5.52.2 Details of investment income

Investments where income arises Year2015 Year2014 Income from tradable financial assets Income from financial assets available for sale 237,350,416.31 159,238,474.05 Income from held-to-maturity investment 35,596,571.81  Income from long-term equity investment 2,004,277,754.66 2,363,865,690.17 Income from disposal of long-term equity investment 63,353,207.24 6,817,193.05 Income from financial assets that are measured at fair value and whose 155,013.70  movements are included in the current profits and losses Total 2,340,732,963.72 2,529,921,357.27

Page130

– F-133 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.53 Selling expenses

Item Year 2015 Year 2014 Employee compensation 41,307,090.05 9,361,467.60 Social insurance 5,901,534.91 613,828.24 Vehicle usage fee 2,320,165.72 426,406.18 Material consumption 161,149.82 27,939.24 Advertising fees 74,866.01 384,477.79 Loading and unloading charges 5,314,495.01 1,535,482.57 Travel expenses 2,372,321.15 1,678,129.48 Office expenses 505,986.99 705,178.53 Communication fee 52,508.56 14,853.50 Business entertainment fee 2,323,120.09 805,360.00 Depreciation charge 2,746,069.15 149,551.77 Commodity inspection fee 161,095.15 91,289.77 Traffic expense 46,647,457.13 25,984,446.64 Service charge 380,631.15 181,398.04 Meeting fees 349,667.97 521,492.05 Traffic expense 79,545.20 25,751.40 Commission 212,301.11 Agency service fee 657,312.42 410,373.50 Rental fee 4,573,643.41 426,919.86 Storage charge 5,025,327.47 1,458,702.40 Processing cost 313,631.84 60,313.16 Consulting fees 50,339.00 19,500.00 Business publicity expenses 325,656.16 39,624.74 Amortization of long-term prepaid expenses 1,249,199.40 1,249,199.40 Port construction fee 361,060.00 Other 10,856,261.45 150,537.14 Total 133,961,376.32 46,683,283.00

5.54 Adminisstrative expense

Item Year 2015 Year 2014 Wages and benefits 152,121,290.83 95,188,191.42 Travel expenses 11,363,379.38 7,057,726.76 Office expenses 12,869,039.89 7,393,443.14 Communication fee 2,548,815.75 1,028,592.18 Water and electricity cost 1,303,323.30 533,065.85 Vehicle fee 5,846,440.27 5,453,706.95 Traffic expense 350,090.26 167,388.59 Repair cost 13,295,488.65 330,171.47 Depreciation charge 14,661,005.95 8,248,916.54 Management consulting fees 20,353,138.43 743,071.64 Agency fee 19,377,405.56 15,011,566.61

Page131

– F-134 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Business entertainment 6,597,629.06 6,681,516.43 Rental fee 25,968,122.84 17,921,295.32 Taxation 31,698,081.90 14,569,876.33 Business publicity expenses 3,606,042.40 2,128,147.84 Property management fee 9,850,614.10 3,734,972.42 Industry membership fee 743,906.89 1,006,803.38 Meeting fees 1,780,207.81 1,844,482.91 Amortization of long-term prepaid expenses 4,472,413.30 8,909,408.00 Amortization of low value consumables 2,356,241.39 1,502,601.25 Board of directors 234,136.00 622,484.77 Social insurance premiums 20,615,670.63 17,727,690.01 Housing provident fund 6,246,159.04 749,728.32 Enterprise annuity 2,898,400.17 401,158.33 Trade union funds 3,594,166.13 984,168.26 Labor protection 822,485.80 433,771.64 Staff training expense 4,009,020.90 875,249.55 Labor service fee 5,377,186.27 5,074,587.59 Amortization of intangible assets 14,468,479.23 10,009,235.01 Insurance premium 241,386.47 75,539.40 Research and development expense 4,706,363.78 485,689.84 Commission management fee 95,818.00 7,466,200.00 Training fee 2,388,119.00 Pre project cost 51,104,618.80 Other 19,187,149.44 8,541,903.72 Ventory overage -17,173,162.53 -13,581,349.10 Downtime loss 39,422,976.70 3,254,907.76 Safe production cost 1,388,654.27 340,638.49 Party activity fee 62,725.00 370,881.00 Total 447,360,293.26 296,780,167.42

5.55 Financial expenses

Item Year 2015 Year 2014 Interest expense 680,770,537.07 614,444,404.92 less: Interest income 357,998,100.14 168,124,899.93 Net interest expense 322,772,436.93 446,319,504.99

Exchangeloss 22,357,167.86 2,448,695.04 less: exchange earning 6,425,204.79 7,061,193.03 Exchange net loss 15,931,963.07 -4,612,497.99 Bank Charges 9,760,924.90 81,404,094.99 Others 6,331,696.46 33,456,728.76 Acceptance of draft discount interest 6,977,068.04 5,978,036.39 Total 361,774,089.40 562,545,867.14

Page132

– F-135 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.56 Impairment losses of assets

Item Year 2015 Year 2014

Loss on bad debts 91,375,503.24 59,704,185.90

Impairment loss on inventories 1,432,729.72 517,205.45

Impairment loss on financial assets available for sale

Impairment loss on held-to-maturity investment

Impairment loss on long-term equity investment

Impairment loss on long-term equity investment

Impairment loss on fixed assets

Impairment loss on construction materials

Impairment loss on construction in progress 12,000,000.00 57,122,131.81

Impairment loss on productive biological assets

Impairment loss on oil-and-gas assets

Impairment loss on intangible assets

Impairment loss on goodwill

Other impairment losses

Total 104,808,232.96 117,343,523.16

5.57 Changes in fair value gains

Sources of changes in fair value Year 2015 Year 2014 Measured at fair value and the changes are recorded into the profits and losses of the current financial -6,075,620.06 assets including: the changes in the fair value of derivative financial instruments -6,075,620.06 Measured at fair value and the changes are recorded into the profits and losses of the current financial liabilities including: the changes in the fair value of derivative financial instruments

Fair value measurement of the real estate as investment

Other

Total -6,075,620.06

5.58 Non-operating revenue

5.58.1 Details of non-operating revenue

Included in the amount of the non-recurring gains Item Year2015 Year2014 and losses of the current period

Income from disposal of non-current assets 3,292,270.50 8,284,920.95 3,292,270.50 including: Disposal of fixed assets 278,587.55 8,284,920.95 278,587.55

Disposal of intangible assets 

Page133

– F-136 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Included in the amount of the non-recurring gains Item Year2015 Year2014 and losses of the current period

Income from debt restructuring 875,218.52 875,218.52

Income from exchange of non-monetary assets 

Gain from donation 159,500.00 159,500.00

Income from governmental subsidy 23,221,063.87 13,228,065.53 23,221,063.87

Others 28,741,967.27 462,508,920.63 28,741,967.27

Total 56,290,020.16 484,021,907.11 56,290,020.16

Note: Other projects in current mainly include Weixin Yudean engineering engineering coal inventory surplus income 19,672,194 Yuan; Yunnan energy investment small hydropower investment co., LTD. acquired subsidiary identifiable net assets and the investment cost difference

3,868,003.48 Yuan.

5.58.2 Details of government grants

Item Year2015 Year2014 Explain Related to High-tech District Administrative Committee Subsidies 2,931,392.00 871,788.55 revenue Related to Pudong New Area financial subsidies 4,000,000.00  revenue Related to VAT refund income 2,412,985.90  revenue Scientific and technological small and medium enterprise financing service, Related to  20,000.00 listing support project revenue Related to Computer software copyright registration  9,000.00 revenue Related to Enterprise support fund in 2013  117,600.00 revenue Related to Visa management system V1.0 electric power GZS meteorological reward  50,000.00 revenue Related to Enterprise support fund in 2014 268,000.00  revenue Related to Corporate patent grants in 2015 3,000.00  revenue Related to 2014 high-tech enterprises identified funding awards 50,000.00  revenue Related to Special grant funds for innovative ability 300,000.00  revenue Related to 2014 annual growth of the industry's rapid expansion of the scale of the fund 20,000.00  revenue 6 utility model patent grant subsidies 3,420.00  Related to

Page134

– F-137 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Item Year2015 Year2014 Explain revenue "2015 annual capital market development in Yunnan special funds to declare" Related to 1,000,000.00  grant funds revenue Related to Listed companies to support the cultivation of funds 600,000.00  revenue Related to Electronic information industry in 2015 statistical work advanced unit award 1,000.00  revenue mall and medium enterprises to cultivate special funds for poverty alleviation in Related to 300,000.00  2015 revenue Related to 8 science and technology innovation project award 100,000.00  revenue Related to Grant fee for registration of copyright 21,600.00  revenue Related to Industrial steady growth incentive payments 2,000.00  revenue Related to Government support incentive grant funds 649,300.00  revenue Science and technology type small and medium-sized enterprise financing Related to  200,000.00 service, the listing support project revenue High tech Zone non state owned enterprises, the nearest local employment Related to  300.00 incentives to attract local workers" revenue Simao District Municipal Public Utility Management Center 2013-2014 contract Related to 250,000.00  energy management financial incentives revenue Related to Guandu District Finance Bureau of the provincial energy saving projects 70,000.00  revenue Science and Technology Bureau of Kunming city science and technology Related to 300,000.00  funds revenue Related to Economic and Trade Bureau award funds 60,000.00  revenue Related to The Bureau of finance risk compensation equipment -- Huaning County  100,000.00 revenue Related to Laos Nanfeng River Project Department of finance subsidies go out "  100,000.00 revenue Related to Kunming new type of industrialization development of special funds subsidies  3,400,000.00 revenue Related to Fixed asset investment incentives  10,000.00 revenue Related to Enterprise support funds and corporate incentives 21,000.00  revenue Related to Kunming new type of industrialization development of special funds subsidies 22,400.04 22,400.08 revenue Related to Investment in fixed assets loans 234,999.96 234,999.92 revenue

Page135

– F-138 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Item Year2015 Year2014 Explain Related to Building photovoltaic subsidies clearing funds 237,864.72 99,110.30 revenue Related to Provincial Local Treasury subsidies to transfer income  1,000,000.00 revenue Related to Huize wind power project early subsidies  2,000,000.00 revenue Related to Wuhua District Bureau of statistics Award 50.00 50.00 revenue Related to Kunming Wuhua district government bonus 80,000.00 revenue Related to Wuhua District Economic and trade bureau awards 4,000.00 revenue Related to 75t boiler special subsidy 75,000.00 assets Related to Demolition compensation 36,551.31 assets Related to Special subsidies for sewage charges at the provincial level 7,500.00 assets Related to Technical assistance of fluidized bed boiler 3,124.97 assets Related to Saving energy and reducing consumption subsidies 4,999.97 assets Related to Waste water project construction government grants 5,000.01 assets Related to Heavy metal pollution special prevention and control of government subsidies 200,000.01 assets On line monitoring of 75 tons of boiler and government subsidy for calcium Related to 3,750.00 carbide crushing assets Related to Kunming new industrialization project grants 20,000.01 assets Industrial enterprise energy management center construction demonstration Related to 364,999.98 project grants assets Related to Boiler desulfurization project transformation grants 19,500.00 assets Automatic monitoring system of pollution source of 45t/h boiler and the Related to government subsidy for online monitoring of flue gas assets Related to Waste water project recycling special grants 8,333.34 assets Related to Return of land transfer payments 3,652.87 assets Related to Sewage equipment subsidy 7,968.25 assets Comprehensive utilization of calcium carbide tail gas subsidies 53,677.96 Related to

Page136

– F-139 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Item Year2015 Year2014 Explain assets Related to Unemployment insurance steady post subsidy 2,847,628.06 revenue Related to Technician training subsidy 68,000.00 revenue Pharmaceutical bath containing salt and preparation method of patent Related to 150,000.00 - transformation implementation of application project grants revenue Yanshan County Development and Reform Bureau annual work target Related to 21,000.00 management responsibility appraisal Award revenue Related to Financial appropriation 200,000.00  revenue Received the Kunming Municipal Science and Technology Bureau 2MW Related to  700,000.00 plateau type wind turbine research and development revenue Luxi County Finance Bureau received a new financial incentives for Related to  100,000.00 enterprises to fund revenue Shilin received MIIT Bureau 2013 annual new regulations on enterprise Related to  50,000.00 incentive funds revenue Related to Receive the Finance Bureau to support funds and corporate incentive funds  87,000.00 revenue 2013 years of corporate social consumer goods retail promotion work grant Related to  50,000.00 funds revenue Related to Longchuan River Hydropower Station project loans financial discount 83,616.72 83,616.72 revenue Related to Lincang Industrial Park to support the development of industrial funds  131,000.00 revenue Related to Solar photovoltaic building applications demonstration grant funds 649,599.96 649,599.92 revenue Government subsidies, development and Reform Commission of Yunnan Related to 50,000.00  Province revenue Super power generation in Yunnan province industry and Information Related to  2,880,000.00 Committee awards during the dry season revenue Kunming Municipal Development and Reform Commission solar photovoltaic Related to 96,000.00 96,000.00 project assets Shilin County Committee of industry and information technology of new Related to 9,600.00 9,600.00 industrial subsidies revenue Related to Renewable energy subsidies tail 24,000.00 24,000.00 revenue Related to Honghe state industrial development funds in 2015 80,000.00 revenue Kunming Municipal Science and Technology Bureau of innovative pilot Related to 100,000.00 enterprises in science and technology funds revenue Kunming municipal science and technology bureau 2MW plateau type wind Related to 1,300,000.00 turbine research and development revenue

Page137

– F-140 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Item Year2015 Year2014 Explain Economic and technological development zone, high tech enterprise award in Related to 50,000.00 2014 revenue Yunnan province special subsidies for the construction of new high-tech Related to 300,000.00 enterprises revenue Kunming economic development zone, the financial branch of the 2014 annual Related to industrial enterprises to expand the scale of the expansion of the scale of 20,000.00 revenue funds Financial bureau of economic development zone in 2014 the production of Related to 176,000.00 enterprises to support funds and corporate incentives revenue The reward for hiring unemployed workers of kunming city to promote Related to 2,100.00 employment service center revenue Financial branch of economic development zone in the second quarter of Related to 270,000.00 2015, the manufacturing sector expanded to promote production subsidies revenue Economic development zone, the financial branch of the city in 2015 found Related to 100,000.00 that the enterprise technology center where corporate funding grants revenue Economic development zone branch of the provincial industrial development Related to 150,000.00 of special funds for the development of special funds to reward revenue Finance Bureau of economic development zone 15 years of industrial steady Related to 42,000.00 growth to support funds revenue Finance Bureau of Economic Development Zone, Yunnan Province, the Related to manufacturing industry to promote the expansion of production subsidies" of 170,000.00 revenue the third quarter of 2015 Related to 2014 investment incentives 177,857.00 revenue Related to High tech Zone Award 79,125.74 revenue Related to Qujing IRS tax return 214,265.09 revenue Related to High tech Zone enterprises placement of employment incentives 1,200.00 revenue Related to Special subsidies for the development of solar photovoltaic funds 80,000.04 80,000.08 revenue Related to Renewable energy development fund discount Models in 2011 48,000.00 48,000.00 revenue Provincial key investment projects in the preliminary work of special funds in Related to 3,999.96 3,999.96 2012 revenue Related to Financial subsidy funds of science and Technology Bureau 900,000.00  revenue Total 23,221,063.87 13,228,065.53 

Page138

– F-141 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

5.59 Non-operating expenses

Included in the amount of the non-recurring gains and Itm Year 2015 Year 2014 losses of the current period Loss on disposal of non-current assets 1,491,643.28 1,080,435.16 1,491,643.28 including: Loss on disposal of fixed assets 1,491,643.28 1,080,435.16 1,491,643.28 Loss on disposal of intangible assets Loss on disposal of intangible assets Loss on non monetary assets exchange External donation 9,117,918.00 12,700,866.40 9,117,918.00 Other 5,804,136.43 26,654,229.68 5,804,136.43 Total 16,413,697.71 40,435,531.24 16,413,697.71 Note: the other project mainly includes the allocation of Longling County Government Coordination funds 103,333.32 Yuan , share of the Pazhanghe company compensation fee 889,100 Yuan, payment Xiangdaxiang People's Government of damaged compensation fee of 490,447.56Yuan.

5.60 Income tax expenses

5.60.1 Details of income tax expenses

Item Year2015 Year 2014 The current income tax as stipulated in the tax law and the relevant calculation 117,287,654.81 51,962,313.45 Deferred income tax adjustment -45,596,400.87 -9,223,161.75 Others Total 71,691,253.94 42,739,151.70

5.61 Other comprehensive income

Year2015 Year 2014 Item Pre tax amount Income tax Net of tax Pre tax amount Income tax Net of tax 1.Other comprehensive income that cannot be classified into profit or loss later a. Changes in net liabilities or net assets of the benefit plan b.Under the equity method cannot be classified into the profits and losses of the invested entity share of other comprehensive income ҼǃOther comprehensive income will be re classified into the profit and loss in 12,273,133.23 435,759.29 11,837,373.94 future a.Under the equity method cannot be classified into the profits and losses of the 10,124,951.14  10,124,951.14 invested entity share of other comprehensive income Less: pre included in other comprehensive   

Page139

– F-142 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Year2015 Year 2014 Item Pre tax amount Income tax Net of tax Pre tax amount Income tax Net of tax income in the current transfer of profit and loss Total 10,124,951.14  10,124,951.14 b. Changes in fair value gains and losses 2,148,182.09 435,759.29 1,712,422.80 of available for sale financial assets Less: pre included in other comprehensive income in the current transfer of profit and    loss Total 2,148,182.09 435,759.29 1,712,422.80 c.Profit and loss of held-to-maturity investments classified as    available-for-sale financial assets Less: pre included in other comprehensive income in the current transfer of profit and    loss Total    d. Effective part of the cash flow hedging    to profit and loss Less: pre included in other comprehensive income in the current transfer of profit and    loss Adjust the amount of initial recognition of    the item to be recognized Total    e. Translation difference of foreign    currency financial statements Less: pre included in other comprehensive income in the current transfer of profit and    loss Total    f. Other   

3. Total other comprehensive income 12,273,133.23 435,759.29 11,837,373.94

6 Consolidated cash flow statements

6.1 Ajust net income to cash flow management activity by using the indirect method

Supplementary information Year 2015 Year 2014 1ˊReconciliation from the net profit to the cash flows from operating activities   Net profit 1,310,540,290.26 1,615,444,164.47 add: Provision for assets impairment 104,808,232.96 117,343,523.16

Page140

– F-143 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Supplementary information Year 2015 Year 2014 Depreciation of fixed assets, oil and gas assets, and productive biological assets 402,493,080.36 325,655,067.03 Amortization of intangible assets 23,249,643.80 18,117,687.96 Amortization of long-term prepaid expenses 24,916,000.63 22,570,140.85 Losses on disposal of fixed assets, intangible assets and other long-term assets (gain 1,213,055.73 -6,760,610.97 expressed with ‘-’) Losses on scrapping of fixed assets (gain expressed with ‘-’)  Losses on variation of fair value (gain expressed with ‘-’) 6,075,620.06 Finance expenses (gain expressed with ‘-’) 2,032,825,767.09 1,635,020,017.59 Investment losses (gain expressed with ‘-’) -93,579,705.91 -1,245,787,211.62 Decrease in deferred tax assets (increase expressed with ‘-’) -46,463,655.99 -9,395,710.64 Increase in deferred tax liabilities (decrease expressed with ‘-’) -32,847.72  Decrease in inventory (increase expressed with ‘-’) -289,692,281.68 -478,849,218.11 Decrease in operating receivables (increase expressed with ‘-’) -2,315,999,953.85 -624,292,698.16 Increase in operating payables (decrease expressed with ‘-’) 262,132,832.76 672,532,720.31 Others -34,086,372.12 Net cash flows from operating activities 1,388,399,706.38 2,041,597,871.87 2.Major investment and financing activities does not involve cash receipts and cash disbursements Conversion of debt into capital Convertible bonds matured within a year Fixed assets under financing lease 3ǃNet change in cash and cash equivalents˖   Cash balance of December 31, 2015 11,963,785,946.64 6,002,971,429.57 loss˖Cash balance of December 31, 2014 6,002,971,429.57 3,802,879,616.11 add˖Cash equivalents in the balance of December 31, 2015   loss˖Cash equivalents in the balance of December 31, 2014   Net increase in cash and cash equivalents 5,960,814,517.07 2,200,091,813.46

6.2 The major cash flows received from other operation related activities

Item Year2015 Interest income 357,998,100.14 Government grants 22,311,005.19 Intercourse funds 1,012,559,377.94 Total 1,392,868,483.27

6.3 The major cash amounts paid to other operation related activities

Item Year2015

Current expense 289,019,633.02 Intercourse funds 2,418,530,098.04 Total 2,707,549,731.06

Page141

– F-144 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

6.4 The major cash flows received from other investment activities

Item Year2015

Monetary Fund of Yunnan salt at the beginning of the period 1,175,550,970.44

Entrusted loans temporary loans, etc. 64,090,483.33

Total 1,239,641,453.77

6.5 The major cash amounts paid to other investment activities

Item Year2015

Entrusted loans etc. 548,120,725.62

Total 548,120,725.62

6.6 The major cash flows received from other financing activities

Item Year2015

Deposit into monetary fund can pay at any time 3,004,465,433.77

Total 3,004,465,433.77

6.7 The major cash amounts paid to other financing activities

Item Year2015

Margin, financial procedures, etc. 3,314,792,728.62

Total 3,314,792,728.62

6.8 About the information of cash and cash equivalents

Item Year2015 Year2014

1.Cash 11,963,785,946.64 6,002,971,429.57 including: Cash on hand 1,376,822.60 1,742,141.28

Cash at bank that is readily available for payment 11,922,467,848.32 5,970,385,191.49

Other cash that is readily available for payment 39,941,275.72 30,844,096.80

Due from Central Bank that is readily available for payment

Deposit in other financial institute

Loan to other financial institute

2.Cash equivalents including: Bond investment due within 3 months

3.On December 31, 2014 in cash and cash equivalents balance 11,963,785,946.64 6,002,971,429.57 including˖Cash and cash equivalents of the parent company or subsidiary of the group using restricted

7ǃ Related parties and related-party transactions

7.1 Recognition of related parties.

When a party controls, jointly controls or exercises significant influence over another party, or when two or more Page142

– F-145 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements parties are under the control, joint control or significant influence of the same party, the affiliated party relationships are constituted. The company recognizes the following parities as related parties:

7.1.1 The subsidiaries of the Company;

7.1.2 The investors having joint control over the Company;

7.1.3 The investors having significant influence on the Company;

7.1.4 The joint ventures of the Company;

7.1.5 The associated enterprises of the Company;

7.1.6 The main individual investors and the close family members of the Company;

7.1.7 Key managerial personnel of the Company or of its parent company and the close family members;

7.1.8 Other enterprises the main individual investors, key managerial personnel, or close family members of such individuals control, jointly control or have significant influence over the Company.

7.2 Related parties and related-party transactions

7.2.1 Related party relationship where control exists.

Page143

– F-146 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

7.2.1.1 Situation of the parent company of the company and the actual controller of the company

The parent The proportion of Incidence Company Legal Nature of Paid-in company's the parent company Organization Parent company name Registration place Final control party relation type Representative Business capital stake in the to the voting rights code company(%) of the enterprise(%) Yunnan Provincial People's government Final state owned assets control Treasury Kunming,Yunnan       75718792—X supervision and party Administration Commission Yunnan Provincial People's government

– F-147 Solely Yunnan investment Parent Tuodong road Investment state owned assets state-owned Baominghu  83.09 83.09 29199627—3 holding group co., LTD company 15,Kunming management supervision and enterprise Administration Commission

Notes˖Enterprise types include state-owned enterprises (state-owned enterprises), state-owned enterprises, collective ownership, private enterprises, state-owned assets, foreign

joint ventures, foreign owned enterprises, state-owned holding, natural persons, joint-stock companies, limited liability companies, other

7.2.1.2 The situation of the subsidiary company of the enterprise

Sharehol Legal Subsidiary Nature of ding Organizati Subsidiary full Subsidiary full name Company type Registration place Representa Paid-in capital type Business proportio on code name tive n (%) Holding Limited Liability Liu Electricity Yunnan electric power investment co., LTD Kunming 1,903,476,678.84 74.06 74.06 763877740 subsidiaries Company Wenxian investment Yunnan Provincial Energy Investment Group Wholly-owne Limited Liability Haidian Investment Zhangjing 10,000,000.00 100 100 59965494X Beijing Investment Consulting Co., Ltd. d subsidiaries Company district,Beijing Consulting Page144 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Sharehol Legal Subsidiary Nature of ding Organizati Subsidiary full Subsidiary full name Company type Registration place Representa Paid-in capital type Business proportio on code name tive n (%) Holding Limited Liability Chengbei Guo Energy Dehong energy development co., LTD 20,000,000.00 90 90 599323665 subsidiaries Company district,Mangshi Shuguang Investment Yunnan Provincial Energy Investment Group Holding Limited Liability Renming Guo Material 100,000,000.00 40 40 599309177 Logistics co., LTD subsidiaries Company road,Kunming Shuguang trade Yunnan Provincial Energy Investment natural Wholly-owne Limited Liability Xuefu Yang Gas 1,000,000,000.00 100 100 59487925 gas industry development co., LTD d subsidiaries Company road,Kunming Wanhua exploitation Economic-technical Yunnan Provincial Energy Investment new Holding Limited Liability Electricity Development Huangning 5,000,000.00 45 45 64267097 energy technology engineering co., LTD subsidiaries Company investment Zone, Kunming

– F-148 Wholly-owne Limited Liability Erhuanxi Financial Yunnan Energy financial holding co., LTD Lixiang 3,000,000,000.00 100 100 72479647 d subsidiaries Company road ,Kunming Investment Wholly-owne Limited Liability Erhuanxi Financial Yunnan Energy financial holding co., LTD Lixiang 1,000,000,000.00 100 100 790289813 d subsidiaries Company road ,Kunming Investment Yunnan Provincial Energy Investment Nenghe Wholly-owne Limited Liability Kunming high-tech Material Yangjian 30,000,000.00 100 100 577271745 economic and trade co., LTD d subsidiaries Company zone trade Yunnan Provincial Energy Investment Youneng Holding Limited Liability Kunming high-tech Guo Guo 31,000,000.00 50 50 566200001 technology co., LTD subsidiaries Company zone Shuguang Shuguang Economic-technical Yunnan Provincial Energy Investment Weishi Holding Limited Liability Material Development Zone, Qiaosong 50,000,000.00 40 40 584842032 technology co., LTD subsidiaries Company trade Kunming Yunnan Provincial Energy Investment Huilong Holding Limited Liability Hongta Yang Energy 129,000,000.00 40 40 95842090 technology co., LTD subsidiaries Company district,Kunming Chengyun saving Project Economic-technical Yunnan energy investment small hydropower Holding Limited Liability Long investment Development Zone, 100,000,000.00 40 40 309633885 investment co., LTD subsidiaries Company Shangang and Kunming manageme Page145 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Sharehol Legal Subsidiary Nature of ding Organizati Subsidiary full Subsidiary full name Company type Registration place Representa Paid-in capital type Business proportio on code name tive n (%) nt

Investment Wholly-owne Limited Liability Yunnan Energy Investment (HK) Co., Ltd Hongkong  Manageme 2,022,656,150.00 100 100  d subsidiaries Company nt Yunnan Provincial Energy Investment coal co., Wholly-owne Limited Liability Kunming Yang Coal 745,505,348.20 100 100  343769634 LTD d subsidiarie Company Guowen industry Holding Limited Liability Kunming  Yang Salt and its Yunnan Salt & Chemical Industry co., ltd 279,164,668.00 0.3343 0.3343  741451239 subsidiaries Company Wanhua products Limited Liability Kunming Power

– F-149 Yunnan Provincial Energy Investment Wholly-owne Company Liu transmissio 500,000,000.00 100 100  343517141 placement in yunnan electric co., LTD d subsidiarie Wenxian n and distribution Limited Liability Kunming Project Company investment Yunnan Provincial Energy Investment Wholly-owne  Yang and 500,000,000.00 100 100  351830639 Dianhzong development Investment Co., Ltd. d subsidiarie Wanhua manageme nt Limited Liability Kunming Minerals Yunnan Provincial Energy Investment Holding Company Kangjin business 70,943,421.00 51 51  597140646 Nengyuanda import and export Co., Ltd. subsidiaries etc. Wholly-owne Limited Liability Kunming Duan Energy Yunnan Energy Research Institute Co., Ltd. 50,000,000.00 100 100  329255607 d subsidiarie Company wenquan saving Yunnan Provincial Energy Investment Limited Liability Kunming Eco Holding Guo ecological environment science and technology Company environmen 20,000,000.00 40 40  309558758 subsidiaries Shuguang Co., Ltd. tal

Page146 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Sharehol Legal Subsidiary Nature of ding Organizati Subsidiary full Subsidiary full name Company type Registration place Representa Paid-in capital type Business proportio on code name tive n (%) protection industry Yunnan Provincial Energy Investment biological Limited Liability Kunming Holding Chen Biotechnolo resources investment and development Co., Company 9,000,000.00 40 40 MA6K3JA83 subsidiaries Jialing gy Ltd.

7.2.2 Other related parties

7.2.2.1 Situations of the company of the joint venture and associated enterprises.

Shareholdi The company in Legal

– F-150 Registration ng proportion to the Name of the invested organization Company type Represe Nature of Business Paid-in capital Organization code place proportion ( voting rights by the ntative %) invested entity (%) 1.Joint venture

2.Associated enterprises Economic-technicalD Liu Electrical equipment Limited Liability Yunnan Nanrui electrical technology co., LTD evelopment Guanbia research and 10,000,000.00 35 35 05468259-6 Company Zone, Kunming o development Wang Guandu district, Hydroelectric Huaneng lancang river hydropower co., LTD Private co., LTD Yongxia 16,200,000,000.00 31.4 31.4 71944949-0 Kunming development ng Limited Liability Liu Yunnan Huadian Xunjiansi Power Co. Ltd. Xunjiansi, Mile Power development 284,620,000.00 35 35 75356643-9 Company Bangjia Yunnan Huadian Nujiang Hydropower Limited Liability Dianchi road, Cheng Hydroelectric 738,494,618.10 20 20 75068973-2 Development Co. Ltd. Company Kunming Niangao development Sanxia jinshajiang YunChuan hydropower Limited Liability Panlong Fan Hydroelectric 11,500,000,000.00 15 15 06156193-6

Page147 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Shareholdi The company in Legal Registration ng proportion to the Name of the invested organization Company type Represe Nature of Business Paid-in capital Organization code place proportion ( voting rights by the ntative %) invested entity (%) development co., LTD Company district,Kunming Qixiang development

Sanxia jinshajiang YunChuan hydropower Limited Liability Chengdu high-tech Fan Hydroelectric 34,000,000,000.00 15 15 06428711-9 development co., LTD Company zone Qixiang development Limited Liability Huanchengbeilu Li Yunnan Zhonghui Tendering Co. Ltd. Bidding Agent 8,333,300.00 40 40 77267625-4 Company road, Kunming Qiuhog Zhengxiong Yunnan Huadian Zhengxiong powerr Limited Liability Liu county,Tangfang Power development 794,064,500.00 35 35 75359220-7 generation co., LTD Company Bangjia town Limited Liability Zhengxiong county, Xu Yunnan Dongyuan Zhengxiong coal co., LTD Coal development 474,510,100.00 26 26 76386013-X – F-151 Company Wufeng town Dezhi Guodian Xuanwei City power generation co., Limited Liability Thermal power Xuanwei City Wuquan 1,514,840,000.00 34 34 73806200-5 LTD Company construction Limited Liability Luoping County, Luo Yunnan Dongyuan Luoping coal co., LTD Coal development 410,320,000.00 49 49 77858452-9 Company Qujing City Guohui Limited Liability Chengy China Electric Power Co. Ltd. Kaiyuan Kaiyuan City Power development 495,597,500.00 45 45 76044782-5 Company an Yunnan Provincial Energy Investment Limited Liability Oil and gas power  Zhaoyang Zhu Zhaotong traffic energy development Co., Company project construction 50,000,000.00 40 40 329201625 distrit,Zhaotong Benli Ltd. management Limited Liability Energy saving Tonghai County Tonglu gas co., Tonghai Chen Company technology promotion 10,000,000.00 45 45 587365139 LTD County ,Yuxi City Guoping and trade Limited Liability New energy technology Yunnan Provincial Energy Investment Shao Wuhua District, Yang Company research and 20,000,000.00 40 40 83251955 Tang Energy Development Co. Ltd. Kunming City Jian development

Page148 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Shareholdi The company in Legal Registration ng proportion to the Name of the invested organization Company type Represe Nature of Business Paid-in capital Organization code place proportion ( voting rights by the ntative %) invested entity (%) Mengla tianmeng foreign trade limited liability Limited Liability Chengbei Road, Chen Import and export trade 19,000,000.00 49 49 681296643 company Company Mengla County Wei of goods (Technology) Limited Liability Chemical product Tuodong Road, Yunnan Jutong Industry Co. Ltd. Company Ma Lin design, manufacture, 10,000,000.00 30 30 56009034X Kunming installation and sale Limited Liability Renewable energy Yimen Yunneng Xinfeng energy Company Yimen County ,Yuxi project design and Li Guo 10,000,000.00 ⑟ᐱ 20 20 310555001 development Co Ltd City construction, operation and maintenance

– F-152 Limited Liability  Development Industrial construction Yunnan Sifang Chemical Co., Ltd. Wangli 10,000,000.00 25 25 784606480 Company Zone, Xuanwei City project planning Limited Liability Computer hardware and Yunnan Provincial Energy Investment High tech Zheng Company software design, 100,000,000.00 40 40 83274401 Langchao Technology Co., Ltd. Zone ,Kunming Xin development and sales Limited Liability  Zhaoyang Zhu Natural gas sales, Yunnan Hua Oil Natural Gas Co., Ltd. 30,000,000.00 40 40 579836308 Company distrit,Zhaotong Benli business Fumin County Fengshun Natural Gas Limited Liability Fumin County , Yang Natural gas construction 38,500,000.00 6812844837 Development Co. Ltd. Company Kunming City Jian Limited Liability Natural gas clean Yunnan Provincial Energy Investment Yang Company Simao City energy project 30,000,000.00 98391213 Diannan Gas Development Co. Ltd. Jian investment Limited Liability Electric power Company Chen development Yunnan dianneng Sinanjiang Hydropower Mojiang County Yongqin investment, production 280,000,000.00 39 39 741482078 Development Co. Ltd. g and sales, technical services and consulting Page149 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Shareholdi The company in Legal Registration ng proportion to the Name of the invested organization Company type Represe Nature of Business Paid-in capital Organization code place proportion ( voting rights by the ntative %) invested entity (%) Limited Liability Guo Yunnan Provincial Energy Investment Ju Kunming Economic Project investment and Company Shugua 40,000,000.00 40 40 64258270 Zheng Industrial Investment Co. Ltd. Development Zone management ng Limited Liability Investment management Agricultural bank energy investmen (Beijing) Company Changping Zhu and consultation of non - 10,000,000.00 49 49 78565650 investment fund management co., LTD District ,Beijing Bing negotiable securities business

– F-153

Page150 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

7.2.3 Related transactions

7.2.3.1 Pricing policy

The relevant market price reference to market prices

7.2.3.2 Purchase goods

The company no related parties to purchase goods trade in 2014

7.2.3.3 Sale of goods

The company has no related party sales of commodities trading in 2014

7.2.3.4 Bank roll

Borrowing enterprise Relationship with the company Purpose Loan principal Kunming Huayi Energy Engineering Technology Co Ltd Joint venture Project fund loan 52,500,000.00 Yunnan huadian Nujiang river hydropower development co., LTD Joint venture Project fund loan 517,302,300.00 Total   569,802,300.00

7.2.3.5 Fund occupancy fee, interest income

Amount of 2015 Amount of 2014 Proportion of all the Proportion of all Loan unit name Amount same transaction Amount the same ˄%˅ transaction˄%˅ Yunnan huadian Nujiang river hydropower 41,082,933.54 8.80 28,198,214.67 25.77 development co., LTD Yunnan huadian Nujiang river hydropower   7,625,000.00 6.97 development co., LTD Yunnan Juzheng investment co., LTD   764,986.11 0.70 Kunming Huayi Energy Engineering 2,963,321.46 0.63   Technology Co Ltd Total 44,046,255.00 9.43 36,588,200.78 33.44

7.2.3.6 Rendering of service

The company in 2015 with no associated party providing labor services trade

7.2.3.7 Accepting labor services

The company has no related party to accept labor deal in 2015

7.2.3.8 Rent

Amount of 2015 Amount of 2014 Organization name Proportion of all similar Proportion of all similar Amount Amount transaction˄%˅ transaction˄%˅ Yunnan investment holding group co., LTD 1,372,999.41 50.17 2,644,208.40 69.15 Total 1,372,999.41 50.17 2,644,208.40 69.15

Page151

– F-154 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

7.2.3.9 Agent

The company in 2015 with no associated party agent matters.

7.2.3.10 Balance of accounts receivable and payable of related parties

Dec. 31, 2015 Dec. 31, 2014 Item in statement Company Provision for bad Provision for bad Balance Balance debt debt Other accounts Yunnan investment holding 77,000,000.00  77,000,000.00  receivable group co., LTD Yunnan Juzheng investment co., Other current assets   45,000,000.00  LTD Other accounts Yunnan Juzheng investment co.,   96,350,681.39  payable LTD Yunnan investment holding Dividend payable 340,000,000.00 380,000,000.00  group co., LTD Total  418,999,775.98 604,464,507.16 

Page152

– F-155 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

8ǃIllustration of contingency

8.1 Situation of related party guarantee (Unit: RMB 10 thousand)

Guarantee object Actual guarantee amount  Wheth Wheth Expected debt amount Counter Compensa Guarantee Types of er er the Guarantee unit Enterprise guarante Including: this Guarantee tory loss Expected debt including: Expected Name method guarantee Amount overdu accuse property e way period added object amount amount debt amount in 2014 e d Total      846,128.20       

1.Within the group      509,569.00        Weixin Yunnan State-contr Loan Normal Nothin Nothin This company investment yuedian Guarantee Nothing 28,769.00   olled guarantee operation g g zhaxi energy co., LTD Luxi Yundiantou Wind State-contr Loan Normal Nothin Nothin – F-156 This company Power Development Guarantee Nothing 37,000.00   olled guarantee operation g g Co., Ltd. Yunnan electric power State-contr Loan Normal Nothin Nothin This company Guarantee Nothing 29,400.00   investment co., LTD olled guarantee operation g g Yunnan electric investment foreign State-contr Loan Normal Nothin Nothin This company Guarantee Nothing 25,200.00   energy cooperation olled guarantee operation g g development Co., Ltd. Yuxi Dongfang Coal State-contr Loan Normal Nothin Nothin This company Guarantee Nothing 2,300.00   Industry Co., Ltd. olled guarantee operation g g Luxi Yundiantou Wind State-contr Loan Normal Nothin Nothin This company Power Development Guarantee Nothing 21,200.00 21,000.00  olled guarantee operation g g Co., Ltd. Malong Yunneng New State-contr Loan Normal Nothin Nothin This company energy development Guarantee Nothing 26,000.00 26,000.00  olled guarantee operation g g Co Ltd

Page153 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Guarantee object Actual guarantee amount  Wheth Wheth Expected debt amount Counter Compensa Guarantee Types of er er the Guarantee unit Enterprise guarante Including: this Guarantee tory loss Expected debt including: Expected Name method guarantee Amount overdu accuse property e way period added object amount amount debt amount in 2014 e d Malong Yunneng New State-contr Loan Normal Nothin Nothin This company energy development Guarantee Nothing 16,000.00 16,000.00  olled guarantee operation g g Co Ltd Yunnan Electric State-contr Loan Normal Nothin Nothin This company Power Investment Guarantee Nothing 20,000.00 20,000.00  olled guarantee operation g g Co., Ltd. Yunnan Provincial Energy Investment State-contr Loan Normal Nothin Nothin This company Guarantee Nothing 2,300.00 2,300.00  industrial investment olled guarantee operation g g

– F-157 co., LTD Yunnan Electric State-contr Loan Normal Nothin Nothin This company Power Investment Guarantee Nothing 20,000.00 20,000.00  olled guarantee operation g g Co., Ltd. Dayao Yunneng new State-contr Loan Normal Nothin Nothin This company energy development Guarantee Nothing 30,000.00 15,000.00  olled guarantee operation g g co., LTD Dayao Yunneng new State-contr Loan Normal Nothin Nothin This company energy development Guarantee Nothing 25,500.00 15,000.00  olled guarantee operation g g co., LTD Yunnan Electric State-contr Guarantee Loan Normal Nothin Nothin This company Power Investment Nothing 20,000.00 20,000.00  olled letter guarantee operation g g Co., Ltd. Yunnan Provincial Energy Investment State-contr Guarantee Loan Normal Nothin Nothin This company Nothing 20,000.00 20,000.00  Group Logistics olled letter guarantee operation g g Limited Liability Page154 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Guarantee object Actual guarantee amount  Wheth Wheth Expected debt amount Counter Compensa Guarantee Types of er er the Guarantee unit Enterprise guarante Including: this Guarantee tory loss Expected debt including: Expected Name method guarantee Amount overdu accuse property e way period added object amount amount debt amount in 2014 e d Company

Yunnan Provincial Energy Investment State-contr Guarantee Loan Normal Nothin Nothin This company Nothing 500.00 500.00  Huilong technology olled letter guarantee operation g g co., LTD Yunnan Provincial Energy Investment State-contr Guarantee Loan Normal Nothin Nothin This company Nothing 400.00 400.00  Huilong technology olled letter guarantee operation g g co., LTD

– F-158 Yunnan Provincial Energy Investment State-contr Guarantee Loan Normal Nothin Nothin This company Nothing 700.00 700.00  Huilong technology olled letter guarantee operation g g co., LTD Yunnan Provincial Energy investment State-contr Guarantee Loan Normal Nothin Nothin This company Nothing 20,000.00 20,000.00  new energy olled letter guarantee operation g g equipment co., LTD Yunnan Provincial Energy Investment State-contr Guarantee Loan Normal Nothin Nothin This company Nothing 5,000.00 5,000.00  Weishi technology co., olled letter guarantee operation g g LTD Yunnan Baoshan State-contr Guarantee Loan Normal Nothin Nothin This company Supaheriver electric Nothing 7,000.00 7,000.00  olled letter guarantee operation g g development co., LTD This company Yunnan Provincial State-contr Guarantee Loan Nothing 10,000.00 10,000.00 Normal Nothin Nothin 

Page155 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Guarantee object Actual guarantee amount  Wheth Wheth Expected debt amount Counter Compensa Guarantee Types of er er the Guarantee unit Enterprise guarante Including: this Guarantee tory loss Expected debt including: Expected Name method guarantee Amount overdu accuse property e way period added object amount amount debt amount in 2014 e d Energy Investment olled letter guarantee operation g g Construction Engineering Company Limited Yunnan Baoshan State-contr Guarantee Loan Normal Nothin Nothin This company Supaheriver electric Nothing 86,000.00 86,000.00  olled letter guarantee operation g g development co., LTD Yunnan Provincial Energy Investment State-contr Guarantee Loan Normal Nothin Nothin This company Nothing 20,000.00  

– F-159 industrial investment olled letter guarantee operation g g Co., Ltd. Yunnan Provincial Energy Investment industrial Yunnan Provincial State-contr Loan Normal Nothin Nothin investment Co., Energy InvestmentCar Guarantee Nothing 1,800.00 1,489.31  olled guarantee operation g g Ltd. ǃ Yunnan rental Co., Ltd. Juzheng investment co., LTD Yunnan Electric Huadian Xunjiansi State-contr Loan Normal Nothin Nothin Power Investment department power Guarantee Nothing 20,000.00   olled guarantee operation g g Co., Ltd. generation co., LTD Yunnan Baoshan Yunnan Baoshan Supaheriver electric State-contr Loan Normal Supaheriver electric Guarantee Nothing 14,500.00   development co., olled guarantee operation development co., LTD LTD

Page156 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Guarantee object Actual guarantee amount  Wheth Wheth Expected debt amount Counter Compensa Guarantee Types of er er the Guarantee unit Enterprise guarante Including: this Guarantee tory loss Expected debt including: Expected Name method guarantee Amount overdu accuse property e way period added object amount amount debt amount in 2014 e d 2.Outside the   336,559.20       group Yunnan Electric Lincang Yunnan State-contr General Loan Normal Nothin Nothin Power Investment investment yuedian Nothing 1,999.20   olled guarantee guarantee operation g g Co., Ltd. zhaxi energy co., LTD Guodian Xuanwei City State-contr Loan Normal Nothin Nothin This company power generation co., Guarantee Nothing 11,560.00 11,560.00  olled guarantee operation g g LTD Huadian Xunjiansi State-contr Loan Normal Nothin Nothin

– F-160 This company department power Guarantee Nothing 23,000.00 23,000.00  olled guarantee operation g g generation co., LTD Yunnan investment State-contr Loan Normal Nothin Nothin This company holding group co., Guarantee Nothing 300,000.00 300,000.00 olled guarantee operation g g LTD

Page157 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

8. 2 Pending litigation or arbitration is pending formation of contingent liabilities of Yunnan Electric Power

Investment Co., Ltd.

Book balance Provision for bad No. Current unit Account title (Yuan) debts (Yuan) 1 Liuzhou Ruiyu Steel International Trade Co. Ltd. Accounts receivable 61,012,960.00 12,202,592.00 Yunnan Nanlin group Yunling building materials 2 Accounts receivable 2,086,065.76 417,213.15 limited company Other accounts 3 Yunnan Shunfeng Mining Co. Ltd. 3,480,481.44 1,740,240.72 receivable Other accounts 4 Yunnan Xuanwei Fuel Co. 2,785,706.44 1,392,853.22 receivable Other accounts 5 Xuanwei City Yunxiang Mining Co. Ltd. 18,677,266.99 9,338,633.50 receivable Other accounts 6 Bijie City,Hong Yu mining trade Co., Ltd. 4,096,812.56 2,048,406.28 receivable Total   92,139,293.19 27,139,938.87

8.2.1 Yunnan Diandong coal co., LTD which is a subsidiary of Yunnan electric power investment co., LTD. has filed arbitration or a lawsuit against the 6 company's accounts receivable and other receivables: (1) Contract dispute case of Liuzhou Ruiyu Steel International Trade Co. Ltd.

The case came up on December 22, 2014, the applying party Liuzhou Ruiyu Steel International Trade Co. Ltd. consulted the chief arbitrator Su Jianmin about the case, he unknowingly has been received and answer questions on the case,so the chief arbitrator Su Jianmin put forward to avoid. Kunming Arbitration Commission announced in court to select the presiding arbitrator after the scheduled time for arbitration.

The case came up in Kunming Arbitration Commission on September 1, 2015, Liuzhou Realtek Steel International

Trade Co., Ltd. points out the trade with coal mining in eastern Yunnan is false trade, the presiding arbitrator will transfer the case to the Yunnan Provincial Economic Investigation Corps. At present, the case is under investigation, there is a significant uncertainty in the recovery of.

(2) Contract dispute case of Yunnan Shunfeng mining co., LTD (hereinafter referred to as the Shunfeng company)

In December 16, 2014, Qujing Intermediate People's Court of Yunnan province (2014) NO.349th civil judgment:

The defendant Yunnan Shunfeng Mining Co., Ltd. returns prepaid 4000000 Yuan to Yunnan Power Investment Coal

Co., Ltd. within 15 days after the commencement of this sentence and funds occupancy costs 600000 Yuan by July 26.

2014, the funds after July 26, 2014 calculated by the cost of 12% of the annual interest rate to pay off the payment. The defendants Yunnan Panhong Coal Co., Ltd. bear joint and several liabilities.

On 2 June 2015, Yunnan Diandong coal co., LTD applied to the intermediate people's Court of Qujing , Yunnan

Page158

– F-161 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Province to Shunfeng company, Yunnan Panhong coal industry Co., Ltd. (hereinafter referred to as the Panhong coal) to enforce, repayment of principal, funds occupied fees, legal fees, a total of 5058266.67 Yuan. June 10, 2015 (2015), the Qujing Intermediate People's Court of Yunnan No. 00231 accepts the application for compulsory execution.

On 28 October 2015, civil ruling paper of Yunnan Qujing Intermediate People's Court (2015) No. 231), ((2015) No.

231 - 1), ((2015) No. 231-1): Seal the right to mine mining of Panhong coal mine in Lujiagou ,Zhenxiong ,Zhaotong; to freeze the Panhong company's bank deposits 4600000 Yuan (frozen period from October 28, 2015 to October 27,

2016), to freeze the Panhong coal’s bank deposits 4600000 Yuan (frozen period from October 28, 2015 to October 27,

2016), to freeze Zhenxing Coal Mining Co., Ltd. in Zhenxiong, Zhenxiong Lujiagou coal mine Co., Ltd., Zhenxiong

Changwan Coal Co., Ltd. (freezing period from October 28, 2015 to October 27, 2017).

As the audit report, Shun Feng company did not return the money, the recoverability is uncertain.

(3) Contract dispute case of Yunnan Xuanwei Fuel Co. Ltd. (hereinafter referred to as the Xuanwei fuel company)

On January 6, 2015, , the intermediate people's Court of Qujing, Yunnan Province (2014) No. 533 Civil Mediation: the defendant Yunnan Xuanwei Fuel Co., Ltd. pays to Yunnan Province, Yunnan Power Investment and Coal Co., Ltd.

3076706 Yuan, the specific date of repayment are as follows: Monthly 30 of April 2015 to June repay 100000.00 Yuan, monthly 30 of July to December to repay 200000.00 Yuan, monthly 30 of 2016 January to 5 pay 3000 Yuan, repay

9241330 Yuan before June 30,2016. The defendant Wu Kaishun bears joint and several liabilities for above debts.

On 2 June 2015, coal in eastern Yunnan, Qujing City, Yunnan Province Intermediate People's court to apply for compulsory execution Xuanwei fuel company to pay the arrears, costs 3092413 Yuan. (2015)No. 00229 accepted

Diandong coal co., LTD for enforcement.

Xuanwei City Rural Credit Cooperatives provide coordination results show that Xuanwei fuel company bank balance is 106.83 Yuan until 2015 July, Wukaishun’s individual account balances is 5071 Yuan. On November 25,

2015, the intermediate people's court of Qujing, Yunnan Province, executive decision (2015) No. 229: Yunnan Province

Xuanwei Fuel Co., Ltd .and Wu Kaishun is included into the list of the debtor promises.

As the audit report, Xuanwei fuel company did not return the money, expected future cash flows are uncertain.

(4) Contract dispute case of Xuanwei Yunxiang Mining Co. Ltd..

On December 26, 2014 Intermediate People's Court of Qujing, Yunnan province (2014) No.516 civil mediation:

Yunnan Diandong coal co., LTD. and Xuanwei Coal Industry Co., Ltd. both confirmed that cut-off in 2014 September 17, the defendant owes to plaintiff prepaid purchase of coal, taxes and hoard of coal loss and other debts totaling

19058270.45 Yuan, from the beginning of May 2015, the defendant Xuanwei Yunxiang Mining Co. Ltd. repay 400

Page159

– F-162 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements thousand Yuan monthly to Yunnan Diandong coal co., LTD within four years to pay off. The repayment can be advanced if the defendant Xuanwei Yunxiang Mining Co. Ltd. and Ma Gang has a corresponding ability to repay. The defendant Ma Gang bears joint and several liabilities for above repayment. Until May 2015, as long as the plaintiff found that the second defendant has property for execution, or the two defendants not full monthly to fulfill the repayment obligations, the plaintiff shall be entitled to apply for the case enforcement, without the defendant monthly repayment 40 million payment limit.

On 2 June 2015, Yunnan Diandong coal co., LTD. apply on Xuanwei Yunxiang Mining Co., Ltd. and Ma gang to enforce repayment of arrears 19126345.45 Yuan, (2015)No.00227 accepted the enforcement.

The bank of China co., LTD., Xuanwei sub-branch provide coordination results show that bank balance of

Xuanwei Yunxiang Mining Co., Ltd. is 0 Yuan until 2015 July, Ma Gang’s individual account balances is 0 Yuan. On

November 25, 2015, the intermediate people's court of Qujing, Yunnan Province, executive decision (2015) No. 227:

Xuanwei Yunxiang Mining Co., Ltd. and Ma Gang is included into the list of the debtor promises.

As the audit report, Xuanwei Yunxiang Mining Co., Ltd. did not return the money, the recoverability is uncertain.

(5) Contract dispute case of Bijie Hong Yu mining trade Co., Ltd

On July 2, 2015, Qujing Intermediate People's Court of Yunnan province (2014) NO.534 civil judgment: Bijie Hong

Yu mining trade Co., Ltd returns prepaid 4096811.76 Yuan to Yunnan Diandong coal co., LTD within 15 days after the commencement of this sentence and funds occupancy costs (calculated by the cost of 12% of the annual interest rate) by December 31, 2013; Dismissed the claim that nnan Diandong coal co., LTD made to Yunnan Panhong coal.

2On August 3, 2015, Yunnan Diandong coal co., LTD appealed against Yunnan higher people's court to request for the decision of the Yunnan Panhong Coal Co., Ltd. to pay for the payment of the advance payment and funds to bear joint and several liability.

As the audit report, the second trial has not yet, Bijie Hong Yu mining trade Co., Ltd did not return the money, the recoverability is uncertain.

(6) Contract dispute case of Yunnan Nanlin group Yunling building materials limited company

On 16 November 2015, Yunnan Diandong coal co., LTD submitted a civil complaint to Yunnan Xundian County

People's court: request the people's court to execute the judgment according to law that the defendant Yunnan construction industry Yunling cement limited company (formerly Yunnan nanling group Yunling building materials Co.,

Ltd.) to pay for coal 2096132.01 Yuan.

As the audit report, the trial has not yet, the recoverability is uncertain.

Page160

– F-163 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

8.2.2 Pending action of the sub-company Yunnan Diantou coal.

˄1˅On October 14, 2015, Yunnan Diantou coal. submitted a complaint a civil complaint on Magang , asked him to repay the principal and interest 5994578.19 Yuan, On October 14, 2015, Xuanwei people's court of Yunnan accept the case No. 3174th of (2015): Court accepted the dispute case between electric power investment and Ma Gang agreement, as the audit report, the trial has not yet.

˄2˅In September 2010, electric cast coal preparatory group signed a contract for the transfer of coal with

Xuanwei City if Tangtan Banpo coal mine (the legal representative Zhou Yongping), electric cast coal transferee in

Tang Zhen ban Po coal mine mining rights and Banpo coal mine assets (total purchase price for the 48 million 600 thousand Yuan), the unpaid balance is 369706 Yuan in December 2014.

On December 18, 2014, electricity coal received notice the people's Court of Xuanwei, Yunnan of responding to action (2015)No. 56), Zhou Yongping prosecution power cast coal to pay the money they owed 369706 Yuan and funds occupancy interest 898457.22 Yuan, the total amount is1268163.22 Yuan. Power investment coal to jurisdiction grounds raised objections, 2015 January 6, Yunnan Province Xuanwei City People's court civil ruling book (2015)No. 56) ruled that the establishment of the Yunnan Power Investment Coal Industry Development Co., Ltd. proposed to the jurisdiction objection and the case transferred, Wuhua District, Kunming City People's court processing.

On September 17, 2015, Kunming Wuhua District People's court summons (2015) No. 308), the case begin to trial on 27 October 2015, there is not the first instance verdict as of the date of the audit report.

˄3˅ In March 2013, Qin Benyin was injured when he repairs Banpo coal in coal roadway, a diagnosis of left ulna fractures.

On October 28, 2013, Qujing human resources and Social Security Bureau issued decision on work-related injury ascertainment book ( (2013)No.30444): to be identified as work-related injuries (the employer is Xuanwei City in Tang

Zhen ban Po coal mine),on 2014 August 26, Qujing labor ability appraisal committee ([2014]No.972): Qin Benyin’s disability levels set for the nine grade and degree of nursing basis is not up to grade. Qin Benyin did not sign labor contract, did not apply for work-related injury insurance on the grounds, the prosecution of Banpo coal pay inductrial injury treatment a total of 240,793 Yuan.

Banpo coal mine quashed the Work-related injury decision ( [2013)No.30444) justified on the Qin Benyin is not

Banpo coal mine workers, not in accordance with the ascertainment of a work-related injury measures "of the notice in accordance with the Banpo coal mine of respondent and the burden of proof, non delivery of relevant legal instruments, program serious illegal on the grounds of revoked Qujing City human resources and social security Department of the work-related injury decided to book" (song artificial read [2013), 30444) ,and to make conclusions that injuries not

Page161

– F-164 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements identified. 2015 May 28, Yunnan Province human resources and Social Security Department of administrative reconsideration decision book ( [2015] No. 14): revocation of Qujing City human resources and social security department made "to identify injury decision ([2013]No.30444) ".

Qin Benyin disputes if there is a factual labor relations with Yunnan Power Investment Coal Industry Development

Co., Ltd. Xuanwei Tangtan Ban Po coal mine Banpo well, on July 2015 28, Xuanwei City Labor Personnel Dispute

Arbitration Commission to submit written applications shall be submitted for arbitration, On October 2015 10, Xuanwei

City Labor and personnel dispute instrument Arbitration Commission Arbitration Award ( [2015]No.54) decided that Qin the draft with the Ban Po coal mine labor relations.

Banpo coal mine is not satisfied with the decision and appeal against his conviction to Xuanwei Yunnan province people's Court on November 11, 2015, Xuanwei People's court accepted the case notice (2015) No. 347 on 2015

November 12: to accept the labor dispute case between Banpo coal mine and Qin Benyin. As of the day of the audit report is not hearing.

8.3 Yunnan Nengyuanda import & Export Co., Ltd.

8.3.1 Trade dispute case related to Yunnan Tai Yao Industrial Group Co., Ltd.

Yunnan Nengyuanda import & Export Co., Ltd. started to trade cooperation with Yunnan Tai Yao Industrial Group

Co., Ltd.( Hereinafter referred to as Taiyao company) in 2014, by the end of 2015, there is a total of 13 million 300 thousand Yuan of the company's purchase price of Yuan, the company paid 25 million yuan in advance, and paid the deposit of 200 million Yuan. Because of the lost of Taiyao company’s legal person Majian, Yunnan Nengyuanda import

& Export Co., Ltd. filed a criminal lawsuit to the Yunnan Provincial Higher People's court in July 2014, sued that Ma Jian,

Li Yingyan of Yunnan Taiyao industrial Refco Group Ltd, alleged contract fraud; In addition, filed a civil lawsuit to the intermediate people's Court of Kunming, Yunnan Province, the prosecution of Yunnan Taiyao industrial group limited liability company and Chuxiong Lufeng Zhiyuan Mining Co., Ltd. sales contracts and disputes. These cases were commissioned the Yunnan Sheng day law firm as an energy company agent, agent the civil proceedings, apply for preservation, the execution of a case and agents in criminal cases.

Yunnan Nengyuanda import & Export Co., Ltd. reached a civil mediation((2014) No.30) with Yunnan Thai Yiu

Industrial Group Co., Ltd. for advance payment of 25 million Yuan in November 2014 19, and agreed to advance payment of 25 million Yuan per quarter repayment over 300 million Yuan, to 2017 March 31, repaid in full. In addition,

Kunming City Intermediate People's court on July 2015 27 issued ((2015) No. 20) civil judgment, within 15 days after the decision by Yunnan Taiyao industrial group limited liability company in the entry into force of the decision return energy up to marketing companies the right to compensation 199999000 Yuan and interest (interest since the entry into

Page162

– F-165 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements force of the decision from the earlier bank rates to money paid by check); energy of the company on July 2015 to

Kunming intermediate people's Court of receivable Yunnan Taiyao Industrial Group Co., Ltd. payment of 13.3 million

Yuan lawsuit, Kunming Intermediate People's Court issued a verdict in 2016 January.

According to the legal opinions issued by Yunnan Shengtian law firm, for Taiyao company in a series of cases has through civil litigation compulsory enforcement measures, for Taiyao companies to hold shares of Yuxi sponge iron industry Co., Ltd. equity, Lufeng Zhiyuan Mining Co., Ltd. shares were for the preservation of the and has started the evaluation, auction procedures; At the same time, the guarantor Chuxiong Lufeng Zhiyuan Mining Co., Ltd. is regarded as the person subject to execution, for the company currently holds the license whose number is T53420101102042691

(exploration area is 12.72 square kilometers) is located in Lufeng Zhong village of oats copper polymetallic ore prospecting as the implementation of the subject for the liquidation of the debt, the mining area estimates can be exploitation value has been able to completely cover the debt.

According to the legal opinions issued by Yunnan Shengtian law firm, for Taiyao company in a series of cases has through civil litigation compulsory enforcement measures, for Taiyao companies to hold shares of Yuxi sponge iron industry Co., Ltd. equity, Lufeng Zhiyuan Mining Co., Ltd. shares were for the preservation of the and has started the evaluation, auction procedures; At the same time, the guarantor Chuxiong Lufeng Zhiyuan Mining Co., Ltd. is regarded as the person subject to execution, for the company currently holds the license whose number is T53420101102042691

(exploration area is 12.72 square kilometers) is located in Lufeng Zhong village of oats copper polymetallic ore prospecting as the implementation of the subject for the liquidation of the debt, the mining area estimates can be exploitation value has been able to completely cover the debt.

As the audit report, a series of measures is still in the assessment phase of the assets, the uncertainty is great.

8.3.2 Cooperative dispute case related to Kunming Hengyuan food industry limited company and

Cheyuequan

The subject of cooperative dispute case between Nengyuanda Company and Kunming Hengyuan food industry limited company is 43.0733 million Yuan (including the principal 35 million Yuan, 7 million Yuan of liquidated damages, interest 1073300 Yuan), the case has been filed in Kunming Intermediate People's court and the new trial on March 8,

2016.

Apply for the Nengyuanda Company applied for the preservation to the Kunming City Intermediate People's court to for the Kunming Hengyuan Food Industry Co., Ltd. of land and other mortgage collateral, the Kunming Intermediate

People's court has applied for the preservation of the property.

8.3.3 Contract dispute case related to Yunnan Yuanchang Trade Co. Ltd.

Page163

– F-166 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

The subject of cooperative dispute case between Nengyuanda Company and Yunnan Yuanchang Trade Co. Ltd. is 21.0449 million Yuan (including the principal 10 million Yuan, 9 million Yuan of liquidated damages, interest 2.0449 million Yuan), the arbitration committee ruled Yunnan Yuanchang Trade Co., Ltd. should pay to Nengyuanda Company principal of 10 million Yuan, due to energy companies to award on fund occupation fee shall not be supported refuses to accept the ruling, the company has applied to the Kunming intermediate people's court for dismissal of the case, and the court is still under review.

In addition, Yuanchang company is the creditors of another case, so Yuanchang company has applied for enforcement to the intermediate people's Court of Kunming, house property of the person subjected to execution is being auctioned by the intermediate people's Court of Kunming, Nengyuanda Company has applied for the preservation to the intermediate people's Court of Kunming on the implementation of the auction may be produced, and the preservation application has been accepted.

9. Other important matters

˄а˅Yunnan Provincial Energy Investment Group Co., Ltd.

According to the China securities regulatory commission regulatory license no. 591 [2016] of the approval, China Yangtze power co., LTD., acquisition of the company held by Sanxia Jinshajiang Chuanyun electric development co., LTD. 15% stake through issued 880 million shares and pay cash 132,987 yuan to the company. Trading after the completion of the company will no longer hold the equity of Sanxia

Jinshajiang Chuanyun electric development co., LTD., to hold the Yangtze power shares, 880 million .

˄Ҽ˅Yunnan Provincial Energy Investment Group Weishi Technology Co., Ltd.

˄1˅The company's extraordinary shareholders' general meeting for the first time in 2016 was held on

January 11, 2016, The meeting decided to Yunnan Provincial Energy Investment Group Weishi Technology

Co., Ltd. and Guangdong Guangte electrical co., LTD., kunming Baofu power technology co., LTD. is a joint venture set up joint venture holding company: Yunnan Provincial Energy Investment Group Guangte electrical co., LTD. The investors' investment and shareholding as follows:

Proportion of capital Name of shareholder Capital contribution (10,000 Yuan) Investment way contribution Yunnan province energy investment Weishi 5100 51% Currency technology co., LTD Guangdong Guangte Electric Co., Ltd. 4000 40% Currency Kunming Bao Fu Electric Power Technology Co., 900 9% Currency Ltd.

The shareholders party to pay 10% of the respective capitalcontribution of each party in front of the

Page164

– F-167 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements company's registered in accordance with the proportion of capital contribution, Remaining subscribed capital contribution in installments according to the needs of production and operation, completion of payment before on December 31, 2020

˄2˅2016 second extraordinary general meeting of the company held in January 13, 2016, conference decided to issue no more than 3800000 private placement (including 3800000 shares) to China Galaxy Securities Co., Ltd., Pacific

Securities Co., Ltd., CAITONG Securities Co., Ltd., Kunming Wan Jin Investment Advisory Co., Ltd., Beijing Oulifang network information technology Co., Ltd., for the total amount of funds to be raised is not more than 11,400,000 Yuan

(including 11,400,000 Yuan)

˄й˅Yunnan salt & salt chemical Co.,Ltd.

˄1˅Main contents and major changes of pension plan

According to relevant provisions of the state "enterprise annuity implementation measures", "Yunnan Salt and

Chemical Co., Ltd enterprise annuity plan" by the second session of the board will be the twelfth temporary meeting examined and adopted, through the collective bargaining, the first four temporary workers congress considered and the.

According to the Yunnan Province labor and social security hall "on Yunnan salinization Co., Ltd. enterprise annuity plan record reply" ([2006] No.386) Company, implement enterprise annuity system since January 1, 2006. Enterprise annuity to implement the mechanism of both companies and individuals pay, according to the maximum does not exceed the company's annual total wages of staff and workers in 12 of the company to pay each year to pay, of which

5% of the in the company's operating costs in charged and in pre tax deduction, more than 5% of the part in the company in its own funds are disbursed; to pay employees according to company for 10% of the number of pay; company and worker individual contributions to a maximum of not more than one sixth of the company's annual total wages of staff and workers. Enterprise annuity is executed in 5% in 2015.

˄2˅Others

The company received notice of the controlling shareholder, intends to planning major events, relates to the controlling shareholder of energy assets into matters, in view of the uncertainties related matters, to ensure the fair disclosure of information, safeguard the interests of investors, to avoid the abnormal fluctuation of stock price, according to the Shenzhen Stock Exchange "Listing Rules" and "small and medium sized enterprise board of Shenzhen

Stock Exchange listed companies standardize guidelines for the operation of the relevant provisions, by applying to the

Shenzhen Stock Exchange, the company’s stock suspended since November 19, 2015.

Page165

– F-168 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

10 Notes to financial statements of the parent company

10.1 Other accounts receivable

10.1.1 Other accounts receivable by categories

Dec. 31, 2015

Categories Book balance Provision for bad debts

Amount Proportion (%) Amount Proportion (%)

Individual amount is significant, and the individual provision for bad 44,000,000.00 62.75 debts of other receivable

Bad debts provided according to the combination

Aging analysis combination 3,927,105.70 5.60 256,355.29 6.53

Related party combination 21,668,098.40 30.90

Combination of subtotal 25,595,204.10 36.50 256,355.29 1.00

Individual amount is not significant, but the individual provision for bad 524,096.00 0.75 debts of other receivables

Total 70,119,300.10 100.00 256,355.29 0.37

˄Contd˅

Dec. 31, 2014

Categories Book balance Provision for bad debts

Amount Proportion (%) Amount Proportion (%)

Individual amount is significant, and the individual provision for bad 55,000,000.00 53.00 debts of other receivable

Bad debts provided according to the combination

Aging analysis combination 400,000.00 0.39 40,000.00 10.00

Related party combination 48,000,000.00 46.26

Combination of subtotal 48,400,000.00 46.65 40,000.00 0.08

Individual amount is not significant, but the individual provision for bad 363,346.01 0.35 debts of other receivables

Total 103,763,346.01 100.00 40,000.00 0.04

10.1.2 Individual amount is significant, and the individual provision for bad debts of other receivable on Dec. 31, 2015

Item Book balance Provision for bad debts Aging Proportion (%) Explanation Yuxi city center city gas utilization and 1 to 2 development of the work of the Ministry of 44,000,000.00 years construction Total 44,000,000.00   

10.1.3 Situation of other accounts receivable provison for bad debts by combination

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– F-169 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

10.1.3.1 Other accounts receivable of classified by aging

Dec. 31, 2015 Dec. 31, 2014 Aging Book balance Book balance Provision for bad debts Provision for bad debts Amount Proportion (%) Amount Proportion (%) Within 1 year 3,527,105.70 89.81 176,355.29 1 to 2 years 400,000.00 100.00 40,000.00 2 to 3 years 400,000.00 10.19 80,000.00 3 to 4years 4 to 5 years Above 5 years Total 3,927,105.70 100.00 256,355.29 400,000.00 100.00 40,000.00

10.1.3.2 Other accounts receivable of the provision for bad debts by other methods

Combination Dec. 31, 2015 Dec. 31, 2014 name Book balance Proportion (%) Provision for bad debts Book balance Proportion (%) Provision for bad debts Related party 21,668,098.40 48,000,000.00 combination Total 21,668,098.40  48,000,000.00 

10.1.4 Individual amount is not significant, but the individual provision for bad debts of other accounts receivable on Dec. 31, 2015

Item Book balance Provision for bad debts Aging Proportion (%) Explanation Work funds 200,000.00 Within 1 year Reserve gold 86,697.00 Within 1 year

Collection and payment 237,399.00 Within 2 years

Total 524,096.00   

10.1.5 Top 3 other accounts receivable balance on Dec. 31. 2015.

Proportion of total Company Relation Amount Aging other accounts receivable (%) Yuxi city center city gas utilization and External development of the work of the Ministry of 44,000,000.00 Within 1 year 62.75 merchants construction Yunnan province energy investment new energy Within 1 yearǃ1 to 2 Internal unit 18,000,000.00 25.67 Investment development Co. Ltd. years Yunnan province energy investment property Internal unit 1,500,000.00 Within 1 year 2.14 services limited Total  63,500,000.00  90.56

Page167

– F-170 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

10.2 Long-term equity investment

10.2.1 Classifications of long-term equity investment

Item Dec. 31, 2014 Increase of 2015 Decrease of 2015 Dec. 31, 2015 Investment to subsidiaries 5,256,387,703.03 6,950,583,347.67 374,893,670.99 11,832,077,379.71 Investment to joint ventures Investment to associated enterprises 17,669,987,174.47 3,892,633,914.11 2,464,293,786.01 19,098,327,302.57 Subtotal 22,926,374,877.50 10,843,217,261.78 2,839,187,457.00 30,930,404,682.28 less: Prevision for long term equity investment impairment Total 22,926,374,877.50 10,843,217,261.78 2,839,187,457.00 30,930,404,682.28

Page168

– F-171 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

10.2.2 Changes in long-term equity investment

Change in the current period Investment profit and loss Name of the invested organization Beginning balance Additional Reduce Other comprehensive Other changes in recognised under the equity investment investment income adjustment equity method Subsidiaries       Yunnan Provincial Energy Investment Group Huilong 51,600,000.00      Technology Co., Ltd. Yunnan Provincial Energy Investment Group Logistics 40,000,000.00      Limited Liability Company Yunnan Provincial Energy Investment Group NENGHE 32,678,772.49      economic and trade Co. Ltd. Yunnan Provincial Energy Investment Dehong energy 22,000,000.00      development Co. Ltd. Yunnan Provincial Energy Investment Group Youneng 21,621,949.91      technology co., LTD Yunnan Provincial Energy Investment Group Jia heng 15,300,000.00      – F-172 gas industry co., LTD Yunnan Provincial Energy Investment Group Beijing 10,000,000.00      Investment Consulting Co., Ltd. Yunnan Provincial Energy Investment Group water and 2,250,000.00      electricity of new energy technology engineering co., LTD Yunnan Provincial Energy Financial Service Co., Ltd. 2,000,000,000.00 1,000,000,000.00    

Yunnan Energy Investment (HK) Co., Ltd 1,022,656,150.00 1,139,906,850.99    

Yunnan Provincial Power Investment Co., Ltd. 620,304,567.11 1,000,000,000.00     Yunnan Provincial Energy Investment Group industrial 534,382,592.53 500,000,000.00     investment co., LTD Yunnan Provincial Energy Investment Group Natural Gas 500,000,000.00 500,000,000.00     Industry Develop Co., Ltd. Yunnan Provincial Energy Small Hydropower Investment 12,000,000.00 28,000,000.00     Co. Ltd. Yunnan Provincial Energy Investment Group Weishi 12,000,000.00 4,366,848.48     Technology Co., Ltd. Yunnan salt & salt chemical Co.,Ltd.  923,804,300.00     Yunnan Provincial Energy Investment Group coal Co.,  745,505,348.20     Ltd. Yunnan Provincial Energy Investment Dianzhong  500,000,000.00    

Page169 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Change in the current period Investment profit and loss Name of the invested organization Beginning balance Additional Reduce Other comprehensive Other changes in recognised under the equity investment investment income adjustment equity method placement of electric co., LTD

Yunnan Provincial Energy Investment Dianzhong  500,000,000.00     development Investment Co., Ltd. Yunnan Nengyuanda import and export co., LTD  51,000,000.00    

Yunnan province energy research institute co., LTD  50,000,000.00     Yunnan Provincial Energy Investment Group ecological  8,000,000.00     environment technology co., LTD Yunnan Yuntou Zhenxiong mining energy development 160,219,520.00  160,219,520.00    Co., Ltd. Yunnan Provincial Energy InvestmentForeign energy 139,906,850.99  139,906,850.99    development Co., Ltd. Yuxi Dongfang Coal Co., Ltd. 36,517,300.00  36,517,300.00    – F-173 Yunnan electric power investment Zhongke PV 22,950,000.00  22,950,000.00    Technology Co., Ltd. Subtotal 5,256,387,703.03 6,950,583,347.67 359,593,670.99   

Associated enterprises       Yunnan Huadian Nujiang river hydropower development 107,317,264.24 142,192,500.00  1,560,751.57  -34,824.00 co., LTD Yunnan Nanrui electrical technology co., LTD 4,032,011.71   654,021.63  

Yunnan Dongyuan Zhengxiong coal co., LTD 75,431,295.57  75,431,295.57    Yunnan Huaneng lancang river hydropower development 10,469,250,044.74 671,489,000.00  717,684,833.64 10,124,951.14 -12,370,338.57 company Guodian Xuanwei power generation co., LTD      

Yunnan Huadian Xunjiansi power generation co., LTD  26,923,076.92  -26,923,076.92  

Yunnan Huadian Zhengxiong coal co., LTD 144,067,934.83   -25,156,744.84  

Guodian Kaiyuan power generation co., LTD 31,586,524.17   -31,586,524.17  

Dongyuan Luoping coal co., LTD 139,460,132.63  139,460,132.63   

Page170 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Change in the current period Investment profit and loss Name of the invested organization Beginning balance Additional Reduce Other comprehensive Other changes in recognised under the equity investment investment income adjustment equity method Sanxia jinsha river chuanyun electric development co., 5,634,799,561.29 300,000,000.00  1,439,011,749.93   LTD Yunnan Zhonghui tendering co., LTD 5,939,116.21   1,461,641.78   Sanxia jinsha river chuanyun electric development co., 1,050,000,000.00 675,000,000.00     LTD Yunnan Provincial Energy Investment Langchao 8,103,289.08   353,796.00   technology co., LTD Subtotal 17,669,987,174.47 1,815,604,576.92 214,891,428.20 2,077,060,448.62 10,124,951.14 -12,405,162.57

Total 22,926,374,877.50 8,766,187,924.59 574,485,099.19 2,077,060,448.62 10,124,951.14 -12,405,162.57

˄Contd˅

– F-174 Change in the current period Impairment of the Name of the invested organization Declaration of cash dividends Provision for Ending balance Investment cost Other ending balance or profits impairment Subsidiaries       Yunnan Provincial Energy Investment Group Huilong Technology Co., 51,600,000.00 51,600,000.00 Ltd. Yunnan Provincial Energy Investment Group Logistics Limited Liability 3,988,606.62 40,000,000.00 40,000,000.00 Company Yunnan Provincial Energy Investment Group NENGHE economic and 32,678,772.49 32,678,772.49 trade Co. Ltd. Yunnan Provincial Energy Investment Dehong energy development Co. 22,000,000.00 22,000,000.00 Ltd. Yunnan Provincial Energy Investment Group Youneng technology 21,621,949.91 21,621,949.91 co., LTD Yunnan Provincial Energy Investment Group Jia heng gas industry co., -15,300,000.00 LTD Yunnan Provincial Energy Investment Group Beijing Investment 10,000,000.00 10,000,000.00 Consulting Co., Ltd. Yunnan Provincial Energy Investment Group water and electricity of 64,673.52 2,250,000.00 2,250,000.00 new energy technology engineering co., LTD

Yunnan Provincial Energy Financial Service Co., Ltd. 3,000,000,000.00 3,000,000,000.00

Page171 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Change in the current period Impairment of the Name of the invested organization Declaration of cash dividends Provision for Ending balance Investment cost Other ending balance or profits impairment Yunnan Energy Investment (HK) Co., Ltd 2,162,563,000.99 2,162,563,000.99 Yunnan Provincial Power Investment Co., Ltd. 1,620,304,567.11 1,620,304,567.11 Yunnan Provincial Energy Investment Group industrial investment co., 1,034,382,592.53 1,034,382,592.53 LTD Yunnan Provincial Energy Investment Group Natural Gas Industry 1,000,000,000.00 1,000,000,000.00 Develop Co., Ltd. Yunnan Provincial Energy Small Hydropower Investment Co. Ltd. 40,000,000.00 40,000,000.00 Yunnan Provincial Energy Investment Group Weishi Technology Co., 16,366,848.48 16,366,848.48 Ltd. Yunnan salt & salt chemical Co.,Ltd. 923,804,300.00 923,804,300.00 Yunnan Provincial Energy Investment Group coal Co., Ltd. 745,505,348.20 745,505,348.20 Yunnan Provincial Energy Investment Dianzhong placement of electric 500,000,000.00 500,000,000.00

– F-175 co., LTD Yunnan Provincial Energy Investment Dianzhong development 500,000,000.00 500,000,000.00 Investment Co., Ltd. Yunnan Nengyuanda import and export co., LTD 51,000,000.00 51,000,000.00 Yunnan province energy research institute co., LTD 50,000,000.00 50,000,000.00 Yunnan Provincial Energy Investment Group ecological environment 8,000,000.00 8,000,000.00 technology co., LTD Yunnan Yuntou Zhenxiong mining energy development Co., Ltd. Yunnan Provincial Energy InvestmentForeign energy development Co.,

Ltd. Yuxi Dongfang Coal Co., Ltd. Yunnan electric power investment Zhongke PV Technology Co., Ltd. Subtotal 4,053,280.14 -15,300,000.00 11,832,077,379.71 11,832,077,379.71 Associated enterprises       Yunnan Huadian Nujiang river hydropower development co., LTD 251,035,691.81 249,480,684.22 Yunnan Nanrui electrical technology co., LTD 4,686,033.34 3,500,000.00 Yunnan Dongyuan Zhengxiong coal co., LTD 123,806,466.66

Page172 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Change in the current period Impairment of the Name of the invested organization Declaration of cash dividends Provision for Ending balance Investment cost Other ending balance or profits impairment Yunnan Huaneng lancang river hydropower development company 1,181,465,516.72 10,674,712,974.23 9,731,248,693.82 Guodian Xuanwei power generation co., LTD 268,369,281.29 Yunnan Huadian Xunjiansi power generation co., LTD 104,882,156.84 Yunnan Huadian Zhengxiong coal co., LTD 118,911,189.99 277,922,600.00 Guodian Kaiyuan power generation co., LTD 280,922,591.08 Dongyuan Luoping coal co., LTD 211,078,245.58 Sanxia jinsha river chuanyun electric development co., LTD 1,064,685,480.67 6,309,125,830.55 5,100,000,000.00 Yunnan Zhonghui tendering co., LTD 1,002,260.42 6,398,497.57 5,000,000.00 Sanxia jinsha river chuanyun electric development co., LTD 1,725,000,000.00 1,725,000,000.00

– F-176 Yunnan Provincial Energy Investment Langchao technology co., LTD 8,457,085.08 8,000,000.00 Subtotal 2,247,153,257.81 19,098,327,302.57 18,089,210,719.49 Total 2,251,206,537.95  -15,300,000.00 30,930,404,682.28  18,089,210,719.49 10.2.3 Impairment of long-term equity investments Test was made to the impairment of long-term equity investment and no prevision of impairment was needed

Page173 Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

10.3 Operating income and operating cost

Year 2015 Year 2014 Product name Operating income Operating cost Operating income Operating cost

Operating income    

Interest income 35,720,221.32 1,228,907,346.93 28,936,804.48 898,860,433.56

Investment income 2,273,459,644.01 2,504,910,525.27

Other operating income 2,258,652.00 44,643.80

Total 2,311,438,517.33 1,228,907,346.93 2,533,891,973.55 898,860,433.56

10.3.1 Operating income and operating cost by item

Year 2015 Year 2014 Product name Operating income Operating cost Operating income Operating cost

Interest income 35,720,221.32 1,228,907,346.93 28,936,804.48 898,860,433.56

Investment income 2,273,459,644.01 2,504,910,525.27

Other operating income 2,258,652.00 44,643.80

Total 2,311,438,517.33 1,228,907,346.93 2,533,891,973.55 898,860,433.56

10.3.2 Details of investment income:

Investments where income arises Year 2015 Year 2014

Income from tradable financial assets 

Income from tradable financial assets 184,037,696.07 

Income from held-to-maturity investment 

Income from long-term equity investment 2,081,113,728.76 2,504,910,525.27

Income from disposal of long-term equity investment  Investment income from financial assets that are measured at fair value and whose movements 5,010,000.00  are included in the current profits and losses Other 3,298,219.18

Total 2,273,459,644.01 2,504,910,525.27

11. Further information

The company error correction matters to early traces the adjustment after restatement of consolidated balance sheet as follows:

Item Dec, 31, 2015 Dec, 31, 2014 Jan,1, 2014

Current assets :   

Monetary fund 12,475,490,929.75 7,175,346,742.32 3,959,645,630.77

Deposit Reservation for Balance   

Lending funds   

Financial assets that are measured at fair 59,785,617.89 49,000,000.00

Page174

– F-177 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Item Dec, 31, 2015 Dec, 31, 2014 Jan,1, 2014 value and changes in the current profits and losses Derivative financial assets   

Note receivable 94,340,083.14 45,928,841.28 24,123,940.04

Accounts receivable 1,972,844,557.77 989,995,619.47 790,839,018.47

Advance payment 803,885,041.63 1,031,999,117.41 836,320,826.09

Receivable premium   

Accounts receivable reinsurance   

Reinsurance contract reserve   

Interest receivable 37,754,500.12 15,742,970.11 6,135,186.79

Dividends receivable 53,229,674.94 15,732,000.00

Other receivables 860,013,823.49 1,011,058,753.55 828,597,574.13

Buying back the sale of financial assets   

Inventory 1,513,370,753.06 1,080,326,389.57 601,477,171.46

Assets held for sale 12,300,000.00 

Non current assets due within one year 3,250,244,637.00 1,463,838,352.77 161,518,902.53

Other current assets 1,026,536,139.69 930,042,279.23 433,218,300.97

Total current assets 22,159,795,758.48 13,744,279,065.71 7,706,608,551.25

Non current assets:   

Loans and advances 49,750,000.00 867,250,000.00 20,000,000.00

Available for sale financial assets 9,614,249,205.07 9,077,135,969.27 7,973,103,369.27

Hold to maturity investment 304,857,000.00 

Long-term receivables 902,663,421.70 - 

Long term equity investment 19,389,860,536.38 17,916,986,491.95 13,782,598,871.45

Real estate as investment 185,444,830.21 120,701,250.80 

Fixed assets 12,624,570,938.70 8,257,776,047.84 7,783,040,290.66

Construction in process 6,238,279,905.03 5,414,968,175.41 4,007,446,084.95

Engineering materials 47,610,733.01 44,917,441.91 91,916,931.42

Disposal of fixed assets 21,070.66

Productive biological assets   

Oil and gas assets   

Intangible assets 1,154,530,904.20 402,190,634.36 268,136,424.40

Development expenditure 6,168,501.20 1,946,751.99 

Goodwill 244,873,907.48 151,002,196.85 80,234,722.85

Long-term prepaid expenses 71,366,790.57 15,515,016.67 33,410,654.80

Deferred tax assets 69,953,193.99 11,032,035.57 1,636,324.93

Page175

– F-178 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Item Dec, 31, 2015 Dec, 31, 2014 Jan,1, 2014

Other non current assets 1,123,447,316.92 403,325,424.51 234,016,830.74

Total non-current assets 52,027,627,184.46 42,684,747,437.13 34,275,561,576.13

Total assets 74,187,422,942.94 56,429,026,502.84 41,982,170,127.38

Current liabilities:   

Short -term loan 4,110,191,524.80 4,043,549,127.24 4,826,610,351.00

Borrowing from the Central Bank    Absorption of deposits and interbank    deposits Loans from other banks    Financial liabilities at fair value and    changes in the current profits and losses Derivative financial liabilities   

Notes payable 170,332,192.75 84,348,864.00 262,214,392.55

Accounts payable 1,882,171,045.02 1,619,462,410.64 1,340,836,024.89

Payment in advance 234,000,121.89 152,081,200.74 123,431,975.19

Financial assets sold for repurchase   

Handling fee and commission   

Compensation payable 46,526,239.35 28,648,086.43 35,364,619.65

Taxes payable 137,273,862.01 -239,284,921.26 -339,052,130.62

Interest payable 589,421,517.41 466,830,114.70 116,613,882.98

Dividend payable 370,491,339.41 392,895,771.62 390,019,700.77

Other accounts payable 592,384,356.59 373,042,278.99 349,597,272.40

Accounts payable reinsurance   

Insurance contract reserve   

Acting sale of securities   

Acting underwriting securities   

Classified as held for sale debt   

Non current liabilities due within one year 6,579,856,771.31 2,486,943,678.08 526,407,678.08

Other current liabilities 6,690,716,666.68 5,491,516,666.66 996,666,666.66

Total current liabilities 21,403,365,637.22 14,900,033,277.84 8,628,710,433.55

Non current liabilities:   

Long- term loan 8,525,280,055.39 9,183,160,265.11 9,767,602,590.19

Bond payable 14,189,775,050.03 9,046,081,886.23 3,967,782,225.45

Long -term accounts payable 1,189,054,656.98 1,577,786,531.27 1,336,898,772.29

Long- term compensation payable 14,946,230.91 541,170.00 

Special payment   

Estimated liabilities 32,356,978.70 

Page176

– F-179 – Yunnan Provincial Energy Investment Group Co., Ltd. Note to the consolidated financial statements

Item Dec, 31, 2015 Dec, 31, 2014 Jan,1, 2014

Deferred income 277,523,840.59 108,586,089.98 85,491,921.23

Deferred tax liability 19,234,568.73 18,780,089.07 18,780,089.07

Other non -current liabilities 80,000,000.00 

Total non-current liabilities 24,328,171,381.33 19,934,936,031.66 15,176,555,598.23

Total liabilities 45,731,537,018.55 34,834,969,309.50 23,805,266,031.78 Owners' equity (or shareholders'    equity˅˖

Paid in capital (or share capital) 11,659,997,623.80 11,659,997,623.80 11,614,766,636.10

Other equity instruments 4,283,500,000.00 886,500,000.00 

Capital reserve 3,817,748,135.47 3,909,344,820.57 4,082,970,323.02

Less: stock   

Other comprehensive income 11,837,373.94 

Special reserve 2,534,146.99 2,008,885.36 298,085.91

Surplus reserve 384,515,670.72 277,186,538.04 81,029,126.36

General risk preparation   

Undistributed profit 2,859,196,539.49 1,860,153,271.29 240,454,943.12 Attributable to the owners' equity of the 23,019,329,490.41 18,595,191,139.06 16,019,519,114.51 parent company Minority shareholder rights and interests 5,436,556,433.98 2,998,866,054.28 2,157,384,981.09

Total owners' equity 28,455,885,924.39 21,594,057,193.34 18,176,904,095.60

Total liabilities and owners' equity 74,187,422,942.94 56,429,026,502.84 41,982,170,127.38

Yunnan Provincial Energy Investment Group Co., Ltd.

Legal representative:

Responsible person in charge of accounting institution:

Person in charge of accounting:

April,12,2016

Page177

– F-180 –  Add˖NoDŽ169 Donghu RoadˈWuchang DistrictˈWuhan UNION POWER CERTIFIED PUBLIC ACCOUNTANTS Postcode˖430077 (SPECIAL GENERAL PARTNERSHIP) TEL˖027 86770549 Fax˖027 85424329

AUDITORÿS REPORT

ZhongHuan Shen˄2016˅No. 160765

To the Shareholders of Yunnan Provincial Energy Investment Group Co., Ltd.:

We have audited the attached accompanying consolidated as well as companyÿs financial statements of Yunnan Provincial Energy Investment Group Co., Ltd.(hereinafterĀthe companyā), including the consolidated sheet and the parent company's balance sheet on December 31, 2014. December 31, 2013 and December 31, 2012, the consolidated sheet and profit statement of parent company of year 2014 year 2013 and year 2012, the consolidated sheet and parent companyÿs statement of changes in shareholders' equity of the cash flow statement, and the notes to financial statements.

1. Managementÿs Responsibilities for the Financial Statements Preparation and fair presentation of financial statements is the responsibility of Yunnan Provincial Energy Investment Group managementˈThis responsibility includes˖ ˄1˅Preparation of financial statements in accordance with the provisions of accounting standard for business enterprises, and make them realize the fair reflection˗˄2˅Design, implement and maintain the necessary internal controls to make the financial statements do not exist as a result of fraud or errors lead to major errors.

2. Auditorÿs Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Independent Auditing Standards of China. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of 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 auditorÿs

– F-181 – – F-182 – – F-183 – – F-184 – – F-185 – – F-186 – – F-187 – – F-188 – – F-189 – – F-190 – – F-191 – – F-192 – – F-193 – – F-194 – – F-195 – – F-196 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Yunnan Provincial Energy Investment Group Co., Ltd. Notes to the consolidated financial statements Reporting currency: RMB

1ǃCompany′s basic situation

1.1 General information

In accordance with YunZhengFu (2012) No. 4, The Approval of Forming Yunnan Provincial Energy Investment

Group Co., Ltd. issued by the government of Yunnan province, Yunnan Provincial Energy Investment Group Co., Ltd. is funded by Yunnan Provincial Investment Holdings Group Co., Ltd. (hereinafter ‘the Group Company’) with its entire power assets and related equity assets in book value.

Yunnan Provincial Energy Investment Group Co., Ltd. (hereinafter ‘the Company’ or ‘Parent Company’) was established on 17 February 2012. Issued by Administrative Bureau of Industry and Commerce of Yunnan province, its business license number is 530000000036318. Its registered capital is 11,659,997,600.00 yuan , and its registered address is 19th-23rd floor, Meiya Building, Mid Renmin Road, Kunming, Yunnan Province, China. Duan Wenquan is the legal representative.

1.2 Business scope

Company business scope are: investment and management of electric power, coal energy, green energy, new energy and other electric-related resources; investment planning, and its technical, consulting and information services.

It is also involved in co-investment of petroleum and natural gas resources and the pipe networks.

1.3 Actual controller of the company

The controlling shareholder of the company is Yunnan Provincial Investment Holdings Group Co., Ltd., and the ultimate controller is Yunnan Provincial People's government state owned assets supervision and Administration

Commission.

1.4 Approval of the financial statements.

The financial statements shall be approved by the board of directors of the company.

2ǃMajor accounting policies and accounting estimates

2.1 Basis of preparation for financial statements

The financial statements of the Company and its subsidiaries are prepared on going concern basis. They are in

ㅜ15亥

– F-197 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements compliance with the Accounting Standard for Business Enterprises, based on the following accounting policies and accounting estimates.

2.2 Declaration on abiding by the enterprise accounting standards

The Company follows the requirements of enterprise accounting standards in preparing financial statements, which authentically and completely reflect the consolidated and the Company’s financial status and the consolidated, and the

Company’s operating result and cash flow.

2.3 Accounting period

Accounting period is divided into interim period and full accounting year.Interim period is divided into semi annual, quarterly and monthly. The date of annual, semi annual, quarterly and monthly period is according to the Gregorian calendar date. The company's fiscal year is from January 1st. to December 31st.

2.4 Recording currency

RMB is the monetary currency of the Company.

2.5 Accounting treatment of enterprise merger under the same control and not under the same control

2.5.1 Merger under the same controller

Merger under the same control is that the enterprises involved in the merger are controlled by the same party or the same multi party permanently. Normally merger under the same control refers to the merger between the enterprises in the same group; in addition, others are not merger under the same controller.

Long-term equity investment obtained from the merger of enterprises under the same controller, to which the company's share of the combined date of the merger of the owner's equity in the final control party combined with financial statements in the book value of the initial investment costs, and the relevant accounting treatment refers to long-term equity investments; The assets and liabilities acquired under the same controller, and their book value of the consolidated financial statements of the consolidated party's owner's equity in the consolidated financial statements. The adjustment of capital reserve (premium on capital stock) is on the basis of the balance between the book value of net assets and the book value of payment (or total issue of shares); if the capital reserve (premium on capital stock) is insufficient to dilute, the retained earnings shall be adjusted.

As the combining party, company's direct related costs include the audit fees, assessment fees, legal service fee, etc., and they shall be expensed in current profit and loss in which they are actually incurred.

The fees paid by the bonds or other debts of the merger, the Commission, etc., are included in the initial measurement amount of the bonds and other debt. The fees and commissions for the issuance of equity securities in the merger, which are offset by the premium income of equity securities.If the Premium income is insufficient to dilute, the

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– F-198 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements retained earnings shall be deducted.

The subsidiary acquired through merger of enterprise under the same controller should adjust the initial number of consolidated balance sheet when preparing. At the same time, it should be adjusted on comparative statements related to the project adjustment, and regarded as the reporting entity after the merger since the controlling begins.

2.5.2 Merger not under the same controller

Merger not under the same controller is that the enterprises involved in the merger are controlled by the different party or the different multi party permanently.

Determine the cost of merger: For a long-term equity investment obtained through a business combination not involving enterprises under common control, the initial investment cost comprises of the fair value of assets transferred, liabilities incurred or assumed, and equity securities issued by the Company, in exchange for control of the acquire. A long-term equity investment achieved in stages the initial investment cost comprises the aggregate of the cost of every stage.The direct expense of merger and acquisition is record in profit and loss statement.

The long-term equity investment for the merger not under the same controller, of which the merger costs are determined on the purchase date, is considered as the initial investment cost of the long-term equity investment of the buyer. The assets and liabilities which is identifiable and meet the conditions under the different controller are recognized as the assets and liabilities of the enterprise in accordance with the fair value at the date of purchase.

The Balance that Merging cost's exceeding definable net assets fair proportion not under the same controller is validated as commercial standing; in the absorptive consolidation, the balance is recognised as goodwill in the parent company's individual financial statements; in the share merging, the balance is shown in the consolidated financial statements as the goodwill. The Balance that merging cost's exceeding definable net assets fair proportion is included in the consolidated profit and loss (non-business income). In the absorptive consolidation, the balance is included in the consolidated income statement of the parent company; in the share merging, the balance is included in the consolidated income statement.

2.5.3 To achieve enterprise merger by step

If any of the transactions of the subsidiary company to obtain the control right is to be "package deal", the transaction shall be the transaction as a control of the subsidiary company, and the type of the enterprise merger shall be distinguished for accounting treatment.

2.5.3.1 To achieve the enterprise merger under same control by step

If not belonging to a package deal and the formation of the same control enterprise merger, in the right to obtain control, according to the merger shall enjoy the share of the book value of the consolidated party's net assets in the final

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– F-199 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements control party combined with financial statements, the initial investment cost of long-term equity investments. With the initial investment cost, long-term equity investment, and reached before the merger of the long-term equity investment book value and the combining date further pay for the new shares on the price of the book value and the balance, adjust capital surplus (capital premium or premium on capital stock), capital surplus not foot offset, offset retained earnings.

Prior to the date of the merger, the equity investment, which is recognized by the use of equity or financial instruments, and other comprehensive income, which is recognized as a result of the accounting treatment, is not conducted until the disposal of the investment, which is used to deal with the same assets or liabilities; In the event of a change in the net assets of the invested entity, which is recognized by the use of the equity method, the owner's equity, other than the net assets of the invested entity, other than the net profit and loss, the other comprehensive income and the profit distribution, will not be processed until the disposal of the investment. Among them, after the disposal of the remaining stake in the use of cost method or equity method, other comprehensive income and other owner's rights and interests should be proportional to the ratio of the disposal of the remaining shares to the financial instrument to confirm and measurement standards for accounting treatment, other comprehensive income and other benefits should be carried forward.

Consolidated financial statements shall be prepared in accordance with the provisions of the Enterprise Accounting

Standard for Business Enterprises No. 20 - Business Combinations and consolidated financial statements. In the preparation of the consolidated financial statements should be deemed to participate in the merger of the parties in the ultimate controlling party began to control is to the current state of existence to adjust, in preparing comparative statements, to no earlier than the merging parties and merged in the ultimate controlling party control point is limited, the comparison report will be merged with the Party of the relevant assets, liabilities and with the merging party financial statements, and the combined increase of net assets in comparative statements in the adjustment of the rights and interests of the owners under the related projects. Prior to the date of merger, the combined party has confirmed that the date of the merger and the merger between the date and the date of the merger has already confirmed that the income, other comprehensive income and other owner's rights and interests shall be retained earnings or profits and losses.

2.5.3.2 To achieve the enterprise merger not under the same control by step

Enterprises achieve the enterprise merger under same control over and do not belong to a package deal through multiple transactions, in the preparation of individual financial statements, should be in accordance with the book value of the original holdings of equity investment and new investment costs, as the initial investment costs by the cost method.

Prior to the purchase date of equity investments, the use of financial instruments and measurement criteria for accounting treatment should be based on the fair value of the equity investment in accordance with the criteria and the

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– F-200 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements new investment costs, as the initial investment costs, the total fair value of the original ownership of equity and the total fair value of the original plan to change the current investment income.

When preparing the consolidated financial statements, the previously-held equity interest in the acquiree shall be re-measured in accordance with the value at the acquisition date, the difference between the fair value and book value shall be Included in the current investment income; The other comprehensive income, which is owned by the parties to the equity interest of other comprehensive income and other owners' rights and interests, shall be transferred to the current income of the purchase date, unless the other comprehensive income generated by the investment party to return to the measurement of net debt or net assets.

2.6 Preparation of consolidated financial statements

2.6.1 Consolidation range

Consolidated range of the consolidated financial statements is based on the control to subsidiary. Control is that the

Group Company has the right to control invested company. And the company enjoys returns through active participation in events organized by invested companies; in addition, it also can influence the returns of them. The subsidiary company, is the main body which is controlled by the company (including the enterprise, can be divided in the investment unit, as well as the structure main body which the enterprise controls).

2.6.2 Preparation of consolidated financial statements

The scope of the consolidated financial statements of the company shall be determined on the basis of control.

Control is the power to determine the financial and operating policies of another enterprise, and to obtain the benefit from another enterprise's business activities.

When subsidiary acquired through merger of enterprise under the same control, the incomes, expenses, and profit of subsidiary from the beginning of the current period to 31st Dec 2014 will be incorporated into Consolidated statement of income, and its cash flow will be incorporated into consolidated statement of cash flows. When subsidiary acquired through merger of enterprise under the diffrent controller, the incomes, expenses, and profit of subsidiary from the from the date of purchase to 31st Dec 2014 will be incorporated into consolidated statement of income, and its cash flow will be incorporated into consolidated statement of cash flows.

In the consolidated balance sheet, minority interests which are not owned by the company are listed under shareholder’s equity as individual entry.DŽDŽIn the consolidated statement of income, the minority shareholders' equity share of net profits and losses of the current period is listed under minority interest income. The amount of current loss shared by parent company 's owner's equity surpass minority interest shared at the beginning of the yearDŽ

The transaction that purchase minority stake in the company or due to the disposal of part of the equity investment but doesn’t loss control over the subsidiary, is accounted as equity transaction, and adjust the book value of the owners'

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– F-201 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements equity and minority interests of the parent company to reflect the changes in the relevant equity of the subsidiary company. The adjustment of capital reserve is on the basis of the balance between the book value of net assets and the book value of payment/income, if the capital reserve (premium on capital stock) is insufficient to dilute, the retained earnings shall be adjusted.

2.6.3 Treatment of control right loss of subsidiary

If the company losses the control right of subsidiary because of the disposal of part of the equity investment or other reasons, its remaining equity is measured at the fair value of the control- loss day; The difference between the sum of the fair value of the share price and the fair value of the residual equity and the calculation of the share of the net assets of the corporation shall be entitled to the loss of control over the period from the date of purchase, and writes down the goodwill. The original subsidiary equity investment of other comprehensive income and other changes in the owner's equities shall be in the loss of control transfer as investment income in the current period, other comprehensive incomes due to the invested party remeasurement set plans to use proceeds net liabilities or net assets change are excepted.

2.7 Measurement attributes

2.7.1 Measurement attribute

The company regards the Accrual Basis Accounting principle as the basis for accounting, and the initial value regards the historical cost as the measurement principle.

Financial assets/liabilities are initially recognized by fair value. Of these whose changes are recorded in current profit or loss statement, the costs of related transactions are included directly in current profit or loss; The inventory, fixed assets, etc., over normal credit terms when purchased, measurement shall be on the present value of the purchase price. The inventory with impairment losses shall be measured by net realizable value, and other Impairment Assets measured by the recoverable amount; Asset inventory surplus measured by the replacement cost.

2.7.2 Report items of measurement attribute change in 2014

There is not any Report item of measurement attribute change in 2014.

2.8 Recognition of cash and cash equivalents

The term ‘cash’ comprise cash on hand and deposits ready for use. ‘Cash equivalents’ are the investment holdings that are short-term, highly liquid and readily convertible to known amounts of cash, and their risk of changes in value is insignificant

2.9 Foreign currency transactions

2.9.1 Foreign currency financial statements translation

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– F-202 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Foreign currencies from the foreign currency exchange or foreign exchange transactions are translated into RMB by the actual adopted rate on the transaction (the bank buying or selling price)

2.9.2 Monetary item and non - monetary item on the balance sheet date

For monetary item, the spot exchange rate on the assets/liabilities statements day is adopted for translation.

Accounting Standards for Enterprises No.17 –Borrowing costs The balance sheet date spot exchange rate and the initial recognition or the previous balance sheet date is different result in balance of exchange, in addition according to the <

Accounting Standards for Enterprises No. 17 - borrowing costs > the provisions of the purchase and construction or production in line with the conditions of capital related to the assets of foreign currency borrowing exchange differences to be capitalized, included in current profit and loss.

The non monetary items measured in historical cost, which the spot exchange rate is based on the exchange rate of the transaction, and not change the amount of its functional currency. The stocks, funds and other on monetary items are measured on fair value, determine the date of the spot exchange rate conversion, and the balance of the amount of accounting standard and the amount of the original accounting standard currency is regarded as fair value changes

(including exchange rate changes), included in the current profit and loss.

2.9.3 Foreign currency financial statement conversion method

In accordance with the following provisionsˈfinancial statement in foreign currency is converted into financial statement in RMB by the company.

The items of balance sheet adopt the spot exchange rate of the balance sheet date to convert; The items of statement of changes in owner's equity adopt the spot exchange rate at current time to convert except for undistributed profit. The items of income statement adopt the spot exchange rate of the transaction date to convert. According to the above method, exchange differences is listed separately in owners' equity item of balance sheet. Cash flow statement in foreign currency adopt the spot exchange rate of the cash flow occurs day to convert. The influence of exchange rate changes for cash as reconciling item is listed separately in cash flow statement.

2.10 Financial instruments

2.10.1 Recognition of financial instruments

Financial instruments are the financial assets of a corporation, and form the contract of other companies’ financial liabilities or equity instruments. When the company becomes a party to the contract of the financial instrument, it is recognized that a financial asset or financial liability.

It will be derecognized, when financial assets meet anyone of the following conditions: When the contractual rights for collecting the cash flow of the financial asset are terminated; or when the risks and income

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– F-203 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements remunerations of financial asset has been transferred, and in accordance with “Accounting Standard for Business

Enterprises No. 23—Transfer of financial assets”, the recognition of financial assets are terminated.

Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly.

2.10.2 Classification of financial assets and financial liabilities

According to the purpose of investment and Essence of economy, the companies’ financial assets are divided into four categories: a) Financial assets/liabilities are initially recognized by fair value. Of these whose changes are recorded in current profit or loss statement, the costs of related transactions are included directly in current profit or loss; b)

Held-to-maturity investment c) Receivables d) Financial assets available for sale.

According to the Essence of economy, the companies’ financial liabilities are divided into two categories: a)

Financial assets/liabilities that are measured at fair value and whose changes are booked into current profit or loss

(including tradable financial assets/liabilities, and the financial assets/liabilities and their derivative instruments that are hold for sale or buy back in the near future) are subsequently measured at their fair values. b) Other Financial Liabilities.

2.10.3 Recognition and measurement of financial assets and liabilities

Financial assets/liabilities are initially recognized by fair value. Of these whose changes are recorded in current profit or loss statement, the costs of related transactions are included directly in current profit or loss; with regard to other types of financial assets/liabilities, they costs generated in transactions are included in the initially recognized amount.

The main methods of financial assets and liabilities subsequent measurement˖

δ1ε Financial assets/liabilities are initially recognized by fair value. Of these whose changes are recorded in current profit or loss statement, the costs of related transactions are included directly in current profit or loss

δ2εAfter initial recognition, a held-to-maturity investment is measured according to the actual interest rate method with its post-amortization cost.

δ3εAvailable-for-sale financial assets are measured at fair value after the initial recognition. The impairment losses and the exchange differences from foreign monetary financial assets are recorded in the current profits and losses. Other gains/losses are directly included in owner’s equity. While the available-for-sale financial assets are transferred out when they are terminated from recognizing, they are recorded into the current profits and losses.

δ4εThe equity instrument investment which has no quotation on active market and whose Fair value can not be measured reliably, and a derivative financial asset that is linked to the equity instrument and shall be settled through the delivery of the equity instrument, they shall be measured according to their cost.

δ5εOther financial liabilities are measured by the amortized cost. Except for the following circumstances:

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– F-204 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

ķThe equity instrument investment which has no quotation on active market and whose Fair value can not be measured reliably, and derivative financial liabilities that is linked to the equity instrument and shall be settled through the delivery of the equity instrument, they shall be measured according to their cost.

ĸIs not specified as a financial guarantee contract for the financial liabilities of the current income or loss of the current profit or loss of the current period, or not specified as a measure of the amount of the loan at the current rate, which is the higher of the initial confirmation:

A. The amount of money specified in the Accounting Standard for Business Enterprises No. 13—Contingencies.

B. Initially recognized amount deducted according to the principle of Accounting Standards for Enterprises no. 14, income to determine the accumulative amortization amount of the balance.

2.10.4 Methods for determining the fair value of financial assets and financial liabilities

˄1˅As for the financial assets or financial liabilities for which there is an active market, the quoted prices in the active market shall be used to determinethe fair values thereof. Determine the price according to the following principles:

ķķThe offer of financial assets or financial liabilities held by the company is the current bid of t ਁ he market; The offer of financial assets or financial liabilities will purchased by the company is the current offer of the market.

ĸThe financial assets and financial liabilities which have no current offer or asking price are offered by the market price of the most recent market quotation or adjusted price, unless there is clear evidence that the market offer is not fair value.

˄2˅As for the financial assets or financial liabilities for which there is not an active marke, whose fair value is determined by valuation techniques.

2.10.5 Counting and drawing method of provision for financial assets impairment

˄1˅ Held-to-maturity investment

If the current value of the predicted future cash flow (excluding future credit losses that have not been incurred) discounting at actual interest of the financial assets is below the carrying amount of the financial asset, the impairment provision of the financial assets are made, recorded into the profits and losses of the current period. If the amount of

held-to-maturity investment is more than 100,000,000.00 yuan (including 100,000,000.00 yuan), it shall be assessed separately; if the amount of held-to-maturity investment is less than 100,000,000.00 yuan, it shall be assessed according to the credit union; Held-to-maturity investment that are impaired after separate assessment shall not provided for provision on a basis of group.

˄2˅Notes receivable

The test method for the impairment and the impairment provision of notes receivable see note 2.11.

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– F-205 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

˄3˅ Financial assets available for sale

The fair value of the financial assets can be sold to a large extent, or in a comprehensive consideration of various factors, the trend is not expected to be temporary, then according to their fair value less than the difference between the book value, to confirm the impairment loss, in recognition of impairment losses, will be directly credited to the fair value of the owner's equity in the form of a total loss of the formation of the impairment loss.

˄4˅Others

When value decrease occurs in equity investment without quotation and whose fair value cannot be reliably measured in the active market, our company will calculate the difference between the book value off this investment or derivative financial asset and estimated present value, which are determined by the temporal market yield rate to future discounted cash flow of similar financial assets, confirm the difference as impairment loss and record into current profits and losses.

2.10.6 Transfer of financial assets

The transfer of financial assets refers to the transfer of the financial assets or the delivery to another party (the transferee) of the financial assets issuer.

When the risks and income remunerations of financial asset has been transferred, the recognition of financial assets are terminated; when the risks and income remunerations of financial asset has been held, the recognition of financial assets are not terminated

The company neither transfers nor retains almost all of the risks and rewards of financial asset ownership, is handled as the following situation: to give up on the financial assets control, to terminate the recognition of the financial assets and to confirm the assets and liabilities generated; Not give up the financial assets control, the relevant liabilities are confirmed in accordance with the extent of its continued involvement in the transfer of financial assets.

2.11 Account receivable

2.11.1 Confirm standard of bad debts

Due to the bankruptcy of the debrector, the account receivable indeed is unable to be recovered.The debtor has die, which is no heritage for repayment, no obligations, receivables could not be recovered; where the debtor fails to perform its obligations in three years, and after the failure of the shareholders' meeting or the board of directors for the approval of a bad debt, the debt is not recoverable and derecognized.

2.11.2 Accounting method of loss on bad debt

The accounting method of loss on bad debt is allowance method.

2.11.3 Provision for bad debt provision method and provision ratio

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– F-206 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

If the current value of the predicted future cash flow (excluding future credit losses that have not been incurred) discounting at actual interest of the financial assets is below the carrying amount of the financial asset, the impairment provision of the financial assets are made, recorded into the profits and losses of the current period. To floating interest rate financial assets, when calculating future cash flow, the contractual actual interest rate is used as the discounting interest rate.

ķAccounts receivable impairment provision

Receivables comprise accounts receivable and other receivables. Accounts receivable arising from sale of goods or rendering of services are initially recognized at fair value of the contractual payments from the buyer. Receivables between the scope of the Company and all of its subsidiaries and other receivables from petty cash fund are not provided for provision.

ĸRecognition and Measurement

Receivables that are classified as individually significant and others which are insignifican:

Basis of recognition and method for the provision of impairment of receivables that is individually significant Recognition of individually The company's out of consolidated statements of individual customers in December 31, 2014, the significant amounts balance of 1000 yuan of receivables If objective evidence indicates the occurrence of impairment of the accounts receivables, the amount of loss is measured at the difference between the asset’s carrying amount and the present value of estimated future cash flows. Receivables that are impaired after separate assessment not provided for Bad debts provision for provision on a basis of group. individually significant amounts If separate assessment indicates impairment of amount of individual account with large amount did not occur, not provided for provision on a basis of group If separate assessment indicates impairment of amount of individual account with large amount did not occur, not provided for provision on a basis of group Receivables that are classified as individually significant and others which are insignificant

Receivables that are not impaired after separate assessment and remaining receivables not subject to separate assessment are grouped for impairment assessment, and is provided for the impairment, based on the Company’s historical practical loss rate caused by receivables portfolio of similarity or with similar characteristic of credit risk, as well as current situation. Basis on determine the portfolio is as below Group by age analysis) Basis of recognition and method for the provision of impairment of receivables that is individually significant:

Aging of accounts Provision rates (%) Within 1 year 5% 1-2 years 10% 2-3 years 20% 3-4 years 30% 4-5 years 50% Over 5 years 100%

Objective evidence which indicates the occurrence of impairment of the accounts receivables amount of not

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– F-207 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements individually significant, separate assessment is use to recognition the impairment.

If there is objective evidence that the value of the financial asset recovered and he recovery can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed and the amount of reversal is recognized in income statement.

The company shall be subject to an impairment test separately on note receivable and advance payment. The company shall be subject to objective evidence that the value of the present value of the future cash flow is less than the difference between the values of its book value, and that it is recognised as an asset loss, and be a provision for bad debts.

2.12 Inventories

2.12.1 Classification of inventories

Inventory includes raw materials, packing materials, low-value consumables, unfinished products, homemade semi products and finished goods.

2.12.2 Valuation method of issuing of inventories

he costs of issuing of inventories comprise the weighted averages method.

2.12.3 Deciding of cashable present value of inventory and accrual of inventory depreciation reserve

On the date of balance sheet, the inventories shall be measured whichever is lower in accordance with the cost and the net realizable value. On the basis of a comprehensive inventory of stock, the company for inventory has rotten, market prices continued to decline and in the foreseeable future no recovery hopes, in whole or in part obsolete, product upgrading, reason, inventory cost higher than the net realizable value, provision for decline in value of inventories, and included in the current profits and losses.

The provision for inventories shall be made in accordance with the individual inventories.

The net realizable value in the normal production process is that estimates the cost of inventory, occur, the cost of sales and the amount of the relevant taxes.

2.12.4 Inventory system

The Company's inventories inventory system adopts a perpetual inventory system.

2.12.5 Amortization of low-value consumables and packing materials.

Both are amortized with the one-off amortization method.

2.13 Long term equity investment

Long term equity investment including: Long term equity investment into the Company’s subsidiaries; Long term equity investment into the joint undertaking;

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– F-208 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

2.13.1 Initial recognition of long-term investment cost

˄1˅As of long-term equity investments from enterprise merger:

Long-term equity investment obtained from the merger of enterprises under the same controller by paying cash/noncash assets or merger by assuming debts, investment costs are recognized by the share of the owner's equity book value as of the merger date.The difference between the initial investment cost and the carrying amount of the consideration given is adjusted to share premium in capital reserve. If the balance of the share premium is insufficient, any excess is adjusted to retained earnings.As of long-term equity investments from issuing equity securities, investment costs are recognized by the share of the owner's equity book value as of the merger date. The nominal value of issuing equity securities as of capital, the difference between initial investment cost and nominal value of capital is adjusted to share premium in capital reserve. If the balance of the share premium is insufficient, any excess is adjusted to retained earnings.

Long-term equity investment obtained from the merger of enterprises not under the same controller, investment costs are recognized by the costs of merger:

ķFor a long-term equity investment obtained through a business combination not involving enterprises under common control, the initial investment cost comprises of the fair value of assets transferred, liabilities incurred or assumed, and equity securities issued by the Company, in exchange for control of the acquire.

ĸA long-term equity investment achieved in stages the initial investment cost comprises the aggregate of the cost of every stage.

ĹThe direct expense of merger and acquisition are record in profit and loss statement.

ĺIf future events Stipulated in the investment contract or agreement will affect the cost of merge ,and its amount can be measurement reliably, the amount is a part of the merge cost.

˄2˅In addition to the long-term equity investments formed by the merger of the company, the long-term equity investments made by other means shall be determined according to the following provisions:

ķA long-term equity investment acquired other than through a business combination is initially recognized at the actual consideration paid if the Company acquires the investment by cash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity securities, or at the value stipulated in the investment contract or agreement if an investment is contributed by shareholders.

ĸThe long-term equity investments gained throgh issue equity securities, which fair value of equity securities is regarded as the initial investment costs. The expenses associated with the issuance of equity securities shall be determined in accordance with the relevant provisions of Accounting Standard for Business Enterprises No. 37 -

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– F-209 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Presentation of financial instruments.

ĹA long-term equity investment acquired through non-monetary assets exchange, the initial cost according to the

Accounting Standards for Business Enterprises NO7 non-monetary assets exchange.

ĺA long-term equity investment acquired through debt restructuring, the initial cost according to the Accounting

Standards for Business Enterprises NO.12 - debt restructuring.

2.13.2 A method for the measurement of long-term equity investment and the confirmation of the investment income

˄1˅The company to be able to control by the invested entity of a long-term equity investment cost accounting method

Of a long-term equity investment measured by employing the cost method, according to the initial investment cost in additional or adjust the cost of the long-term equity investment pay off the investment the cash dividends or profits declared to distribute by the invested entity, except when buying has declared a dividend as investment cost recovery, the rest of the recognized as the current investment income.

˄2˅The company's investment in the joint venture and joint venture shall be accounted for by the equity method.The initial investment cost of a long-term equity investment is greater than the investment should be entitled to be investment units can be identified net assets fair value of the share, not to adjust the initial investment cost of a long-term equity investment;the initial investment cost of a long-term equity investment less than investment should enjoy the investee identifiable net assets fair value of the share, the difference shall be included in the current profits and losses, and adjust the cost of the long-term equity investment.

After the acquisition of the investment, the Company recognizes its share of the investee’s profit or loss as investment income or losses, and adjusts the carrying amount of the investment accordingly. Once the investee declares any cash dividends or profit distributions, the carrying amount of the investment is reduced by that amount attributable to the Company.

The Company discontinues recognizing its share of net losses of the investee after the carrying amount of the long-term equity investment and any long-term interest that in substance forms part of the Company’s net investment in the associate or the jointly controlled enterprise is reduced to zero, except to the extent that the Company has an obligation to assume additional losses. Where net profits are subsequently made by the associate or jointly controlled enterprise, the Group resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized.

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– F-210 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

The calculation of the company shall be entitled to or should be shared by the net profit and loss of the investment unit, and the joint venture shall be offset by the calculation of the portion of the investment party, which is attributable to the proportion of the investment party.

In accordance with the joint venture, the loss of the internal transactions between the joint venture company shall be confirmed in full.

With Joint ventures and associated enterprises between cast or sell assets, the assets constitute a business, in accordance with the Accounting Standards for Enterprises No. 20 enterprises merge and Accounting Standards for

Enterprises No. 33 the consolidated financial statements of the relevant provisions of the processing.

The company upon confirmation of the invested entity shall be accorded to the net profits and losses of the share, in order to obtain the invested entity, when the fair value of the identifiable assets such as basis, the net income of the invested entity after adjustment for confirmation If meet the following conditions, the company based on the book net income of the invested entity, calculate return on investment:

ķ The fair value of recognizable assets of investee is unable to confirm when investment occurs.

ĸ If the difference of the fair value and book value of the invested company’s recognizable assets is not material

Ĺ The relative information of the invested company is unobtainable.

If the accounting policies and accounting periods used by the invested enterprise are not consistent with the investing enterprise, the financial statement of the invested enterprise shall be adjusted in accordance with the investing enterprise’s accounting policies and accounting period, and confirm investment gains and losses and other comprehensive income. The company for other changes besides of the net profits and losses of the invested entity occurs and adjust the book value of the long-term equity investment, and included in the owner's equityl, and the disposing of previously is included in the owner's equity part according to the corresponding proportion into the profits and losses of the current period.

2.14 Joint venture arrangement

Joint venture arrangement is the arrangement of a joint control of two or more than two parties. The arrangement of the joint venture shall be divided into joint operation and joint venture enterprise.If the parties to the joint venture are entitled to the right to be entitled to the assets of the joint venture, and is responsible for the obligations of the joint venture forn return, the joint venture shall be divided into joint operations; if the joint venture partyl enjoys the right to the joint venture arrangement’s net asset only, it is divided into joint venture.

2.14.1 Accounting treatment of the joint venture party in joint operation

The joint venture party shall confirm the following items related to the interests of the joint venture, and the

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– F-211 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements accounting treatment in accordance with the relevant provisions of the enterprise accounting standards: first, to confirm the assets held by the individual, and to confirm the assets held jointly by their share; second is to confirm the liability of the individual, as well as the share of its share to confirm the liabilities; third is to confirm the income of the share of common business output; fourth, is to confirm the income of sale in joint operation; five is to confirm the costs incurred, and the confirmed cost of the joint operation.

2.14.2 Accounting treatment of the joint venture party

The joint venture party should adjust account its investment in the joint venture in accordance with the Accounting

Standards for Enterprises No.2 –Long term equity investment.

2.15 Investment real estate

Investment of real estate refers to the real estate which is held by the rent or capital appreciation or both. The investment properties of the company include the right to use the leased land, hold and to prepare the land use right and the buildings that have been transferred.

2.15.1 Confirmation of investment real estate

Investment real estate shall be confirmed when meeitng the following conditions:

˄1˅The economic benefits oelated to investment of real estate are likely to flow into the enterprise.

˄2˅The cost of real estate investment can be measured reliably.

2.15.2 Initial measurement of investment real estate

˄1˅The cost of bought - out real estate investment, includes the purchase price, the relevant taxes and other expenses which are directly attributable to the asset.

˄2˅The cost of building an investment property by itself is a form of necessary expenses incurred by the construction of the assets to which the assets are to be achieved.

˄3˅The cost of real estate investment obtained in other ways, is confirmed in accordance with the provisions of the relevant accounting standards.

˄4˅The follow-up expenses related to the investment real estate shall meet the conditions of the investment real estate confirmation and shall be included in the cost of the investment real estate; if not, it shall be included in current profit and loss.

2.15.3 Subsequent measurement of investment real estate

The company makes subsequent measurement to investment real estate in fair valuet accounting policy choice is based on the:

˄1˅Investment real estate is located in the active real estate market. The company's current investment in real

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– F-212 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements estate projects close to Kunming, which are land and there are active real estate market.And it can be obtained similar real estate or similar to real estate market prices and other related information, the use of fair value of the company's investment in real estate planning and follow-up measures are operable.

˄2˅The company can make reasonable estimate of the fair value of the investment real estate by the same or similar real estate market price and other relevant informations from the real estate market. The company engages intermediary agencies which have relevant qualification to cosulate the trading price of the same or similar assets of the active market, and its amount of value consultation amountvalue is the fair value of the company's investment in real estate. For the company can obtain the market trading prices continuously, the company hired professional market research and consulting institutions to company's investment in real estate market transaction information tracking and periodic feedback. In the end of each year of the balance sheet date, the company is required to invest in real estate fair value of the company's value, in the normal market conditions; the relevant value of consultation is valid for one year.

Financial center and the Department of asset management make the internal review and information feedback to the budget management, investment in real estate revenue tracking and other aspects of the fair value.

˄3 ˅The key assumptions and the main uncertainties when company's fair value of investment real estate estimated are: to invest in real estate transactions in the open market, and will continue to use the existing purpose as a prerequisite; there is not any significant changes of national macroeconomic policy, the social - economic circumstances in the region, tax policy, credit interest rates, exchange rates, etc; there is no other force majeure and non predictable factors that cause significant impact on the enterprise.

The company does not carry out depreciation or amortization of investment real estate, and adjust its book value to the fair value of investment real estate on the balance sheet date; the difference between the fair value and the original book value is included in the current profit and loss.

˄4˅Transform of investment real estate

Company has conclusive evidence that the purpose of the real estate has changed and meets one of the following conditions, that investment real estate transfer into other assets or transfers other asset conversions into investment real estate, and the value before transfered will be used as the book value of the value after transferred:

ķThe investment real estate begins for self-use;

ĸReal estate as inventory is changed for rent;

ĹThe use right of land use stopped, changes for making rent or capital appreciation;

ĺSelf-use buildings have been changed to rent.

2.16 Fixed assets

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– F-213 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

2.16.1 Recognition criteria of fixed assets

Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and have useful lives of more than one accounting year.

To be fixed assets, the following conditions should be met simultaneously.

˄1˅Fixed assets are confirmed when financial benefits related will probably flow into the group.

˄2˅The costs of fixed assets can be reliably valued.

2.16.2 Initial measurement of fixed assets

The initial measurement of a fixed asset shall be made at its cost.

˄1˅The cost of purchased fixed assets, including the purchase price, relevant taxes, fixed assets reaches a predetermined can be used before the belonging to the assets of transport costs, handling fees, installation fees and professsional service fees etc..

The difference between actual payment price and the present value of the purchase price, except for be capitalized in accordance with the accounting standards for enterprises no. 17 - Borrowing Costs, which is included in the current profits and losses in the credit period.

˄2˅The cost of a self-constructed fixed asset is formed by the necessary expenses of the asset to the expected conditions for use.

˄3˅Investors invest cost of fixed assets, is determined according to the value of the investment contract or agreement, but except the unfair value of the contract or agreement.

˄4˅The cost of fixed assets of Non monetary assets exchange, debt restructuring, enterprise merger and financing lease is determined according to the relevant provisions respectively of the Accounting Standard for Business

Enterprises No. 7 - Exchange of non-monetary assets,

Accounting Standard for Business Enterprises No. 12 - Debt restructurings,

Accounting Standard for Business Enterprises No. 20 - Business Combinations,

Accounting Standard for Business Enterprises No. 21 – Leases.

2.16.3 Classification of fixed assets

The company's fixed assets into housing buildings, pipe network ditches, structures, transportation equipment, electrical equipment, office equipment, instrumentation, tools, and so on.

2.16.4 Fixed assets depreciation method

˄1˅Confirmation of depreciation methods and service life ,the expected net salvage value rate and the annual depreciation rate.

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– F-214 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

The estimated useful lives and depreciation rates for each category of fixed assets are as follows:

Items Estimated useful lives Residual value(%) Depreciation rate p.a. (%) Production plant 30 5 3.17 Non-production plant 4-35 3or 5 24.25-2.71 Simply constructed house 8 5 11.88 Hydraulic structure 45 5 2.11 Other buildings 15 5 6.33 Substation equipment 18 5 5.28 Power generating equipment 15 5 6.33 Power equipment 11 5 8.64 Electronic equipment 4-10 5 23.75-9.5 Transportation facilities 5-10 5 19-9.5 Telecommunication equipment 10 5 9.5 Power transmission line of 35KV+ 30 5 3.17 Power transmission line of 35KV- 30 5 3.17 Production office appliances 5 5 19 Non-Production office appliances 18 5 5.28 Other equipment 5 5 19

The provision for impairment of fixed assets depreciation accounting method: provision for impairment of fixed assets is depreciated in according to the original price of the fixed asset minus the expected net residual value, depreciation and impairment of the amount and the remaining useful life,.

The fixed assets has reached the expected conditions for use but not yet for the completion of final accounts, and its cost is determined and depreciated in according to the estimated value;and. After the completion of final accounts, it is adjusted to the the original provisional estimate value according to actual cost, but the depreciation will not be adjusted.

˄2˅Check with service life of fixed assets, estimated salvage value and the depreciation method˖When the service life of fixed assets, estimated salvage value and the depreciation is check at the year – end, and if it is found that fixed assets life expectancy is different from the original estimate, its fixed asset service life shall be adjusted; and if it is found that fixed assets expected net salvage value is different from the original estimate, its expected net salvage value shall be adjusted; if there is a major change in expectation of economic interests related to fixed assets, the depreciation method of fixed assets shall be changed.And the change of the service life of fixed assets, estimated salvage value and the depreciation is disposed as accounting estimates.

2.16.5 Disposal of the subsequent expenditure of fixed assets

The subsequent expenditure of fixed assets refers to the expenditures occurs in process, including Repair

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– F-215 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements expenses, Spending on Renewal, repairing cost and renovation expenditures.And its accounting method is˖The subsequent expenses, such as the renewal and reconstruction of the fixed assets, and the fixed assets cost shall be included in the fixed assets, and the book value shall be deducted if the fixed assets are replaced; The fixed assets maintenance expenses, which are not satisfied with the confirmation of the fixed assets, shall be included in the current profits and losses in the event of the occurrence; Fixed assets renovation costs, to meet the criteria for recognition of fixed assets, in the "fixed assets" single set of detailed accounts, and in the use of the twice during the renovation and fixed assets fair period between in a short period, the straight-line method depreciated separately.

Improvements in operating lease expenses into fixed assets are capitalized, as long-term prepaid expenses, shall be amortized reasonably.

2.17 Construction in progress

2.17.1 Valuation of Construction in progress

The company's construction in progress accounted for separately according to the project and be made at its cost.

2.17.2 Point of construction in progress t transfer into fixed assets

When the project under construction reaches the expected condition for use, it is transferred into fixed assets items.

When the fixed assets reaches the expected condition for use but without the completion of final accounts formalities, it is booked by estimate value and adjust the value after determine the actual value.

2.18 Capitalization of borrowing costs

2.18.1 Confirmation principle of the capitalized borrowing costs

The borrowing costs shall meet the following conditions, capitalization begins:

˄1˅Capital expenditures have incurred.

˄2˅Borrowing costs are being incurred.

˄3˅The asset for its intended use or sale of the necessary construction or production activities has already begun.

2.18.2 Capital period of borrowing costs

The capitalization period is refers to the period from the beginning of borrowing costs capitalization to stop capitalization, but the period of suspension of capitalization of borrowing costs is not included.

Assets complying with capitalization conditions are interrupted abnormally in the acquisition, construction or production process, and the interruption lasts over three months, the capitalization of borrowing costs is suspended.

Borrowing costs incurred during the discontinuance are recognized as an expense in profit or loss until the acquisition, construction or production of the asset restarts. If the interruption is the acquisition, construction or production of a qualifying asset for its intended use or sale necessary procedures, the capitalization of borrowing costs continue.

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– F-216 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

When the asset of acquisition, construction or production intended to be used or saled, the capitalization of borrowing costs stops. Borrowing costs incurred after qualifying asset for its intended use or sale shall be expense in period in which they are actually incurred.

2.18.3 Calculation method of capitalization amount of borrowing costs

During the period of capitalization, the capitalized amount interest of each accounting period (including amortization of discounts or premiums) determined in accordance with the following provisions:

˄1˅The loan borrowed specifically for the acquisition, construction or production of assets eligible for capitalization, which is after determed the amount of income while special borrowing to specialized loan happened in current period interest expense, minus the unused borrowing loans as a deposit interest income in the bank or temporary investment.

˄2˅For the purchase or production of assets under the condition of capital, the company occupies a general loan.

The company is based on the weighted average of the total assets, which is more than that of the loan. The capitalization rate is determined by the weighted average interest rate of the general borrowing.

If there are discounts or premiums, the amortization of discount or premium amount is determined according to the actual interest rate method during each accounting period, the amount of interests in each period shall be adjusted.

During the period of capitalization, the amount of interest capitalized during each accounting period, shall not be more than the actual amount of interest in the current period of the relevant loan.

The ancillary expenses incurred in the purchase of the assets of the capital, which are in accordance with the conditions of capital construction, or may be used or sold. In the event of capital, it included in the cost of capital assets according to the amount of capital. In the event of an asset which is in accordance with the conditions of the purchase or production of assets under the condition of capital to achieve the intended use or sale of the state, and it is recognized as expenses, which are included in the profit or loss of the current period.

2.19 Intangible assets

2.19.1 Recognition criteria of intangible assets

Intangible asset refers to the identifiable non-monetary assets possessed or controlled by the Company and its subsidiaries which have no physical shape˖To be intangible assets, the following conditions should be met simultaneously:

˄1˅Meet the definition of intangible assets.

˄2˅The expected future economic interests related to the assets are likely to flow into the company.

˄3˅The cost of this asset can be measured reliably.

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– F-217 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

2.19.2 Initial measurement of intangible assets

The intangible assets shall be initially measured according to its cost˖The actual cost is determined by the following principles:

˄1˅DŽThe cost of outsourcing intangible assets shall include the purchase price, relevant taxes and directly attributable to bringing the asset to the intended use of other expenses occurred. When the cost with financing nature of the purchase price of intangible assets exceeds the deferred paid of normal credit terms, the cost of intangible assets is determined to the present value of the purchase price. The difference between the present value of the price and the actual purchase price paid, except in accordance with "Accounting Standards No. 17 - Borrowing costs", others can be capitalized in the credit period profit or loss.

˄2˅The cost invested into intangible assets is determined in accordance with the investment contract or agreement value, but the unfair value of contract or agreement is not included.

˄3˅Self-developed intangible assets.

Expenditures on internal research and development projects are the distinction between research expenditures and development expenditures. Research expenditures for its internal research and development phase of the project, shall be Included in the current investment income.˖The spending of internal research and development project, while meeting the following conditions, is recognized as intangible assets:

ķ To make the intangible assets to be enable to be used or sold in technical feasibility.

ĸ There is the intention to complete the intangible asset and use or sell it.

ĹThe way that the intangible assets to generate economic benefits, including being able to prove that products manufactured by applying the intangible existence of a market or the intangible asset itself, assets will be used internally, and proved their usefulness.

ĺThere are adequate technical, financial resources and other support resources to complete the development of the intangible assets, and there is ability to use or sell it.

ĻIntangible assets attributable to the development stage of the expenditure can be measured reliably.

Self-developed intangible assets cost of intangible assets including self-satisfied after confirming that the requirements to achieve the intended use of the total expenditure incurred before. The expensing costs of the past shall not be adjusted.

˄4˅The cost of Non-monetary assets exchange, intangible assets debt restructuring, government subsidies and merger of enterprises is determed according to "Accounting Standard No. 7 - the exchange of non-monetary assets," "

Accounting Standards No. 12 - Debt Restructuring "" Accounting Standards No. 16 - Government Grants "," Accounting

ㅜ36亥

– F-218 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Standards No. 20 - business Combinations, "respectively.

2.19.3 Subsequent measurement of intangible assets

The company analyzes and judges intangible assets life at the time of acquiring it.The Service life of intangible assets is limited, and estimated the number of life year or the life of the production constituting units; if the economic benefits that brought by intangible asset is unforeseen, it is regarded as Intangible assets with uncertain service life.

If the service life is certain, it should be amortized over the life of the system in a reasonable amount of amortization.

The company is using the straight-line method of amortization. Amortization period of software use rights is five years, and the amortization period of the transfer of land use rights is from the acquired date to the deadline.

The intangible assets amortization amount is that cost minus estimated residual value after deducted. The intangible assets that have been prepared for the provision of impairment shall also be deducted from the total amount of intangible assets that have been accrued. The amount of amortization of intangible assets recognized in profit or loss or costs associated assets.

Intangible assets with with uncertain service life are not amortized and be impairment test on 31 December, 2014.

As the report of December 31, 2014, the land use right for the allocation of intangible assets acquired and is not amortized during the reporting period.

2.20 Research on development expenses

The company makes an internal research on the expenses of development projects, which is divided into research expenditures and development expenditures.

The expenses of the research stage are included in the profit and loss of the current period.

The expenses of the development stage, while meeting the following conditions can be capitalized, which is: To make the intangible assets to be enable to be used or sold in technical feasibility; There is the intention to complete the intangible asset and use or sell it; he way that the intangible assets to generate economic benefits, including being able to prove that products manufactured by applying the intangible existence of a market or the intangible asset itself, assets will be used internally, and proved their usefulness; There are adequate technical, financial resources and other support resources to complete the development of the intangible assets, and there is ability to use or sell it. Intangible assets attributable to the development stage of the expenditure can be measured reliably. The development expenses not satisfied in above conditions are included in current profit and loss.

Capitalized development expenditure in the assets and liabilities table listed as development expenditure, since the project achieves its intended use, which is turned into intangible assets.

2.21 Long-term deferred expenses

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– F-219 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Long-term deferred expenses refer to it by 2014 and future periods sharing amortized over one year (one year excluded) that have occurred, including the operating lease expenses and other fixed assets improvement .

Long-term prepaid expenses actual expenses recorded in the project benefit period average amortized. Wherein renovation costs amortized by six years.

2.22 Impairment of assets

2.22.1 The determining method of impairment of other major asset classes prepare besides the stock and financial assets

˄1˅In the balance sheet date, the company may be in the form of a single asset is likely to occur in the event of an indication of impairment. There is a sign of the existence, to carry out an impairment test to estimate the recoverable amount of an asset. The recoverable amount of the asset is lower than its carrying amount, the carrying amount of the asset is reduced to the recoverable amount, and the amount of the write down is recognized as an impairment loss of assets, which is included in the profit and loss of the current period. After the loss of asset impairment has been recognized, the impairment of assets depreciation or amortization expenses shall in future periods to make corresponding adjustment, to make the assets within the residual service life and systematically amortize the post adjustment carrying value of the asset (to deduct expected net salvage value). Once asset impairment provision is made, it shall not be transferred back even though the asset value is resumed in later period.

˄2˅There are the following indications that the assets may be impaired:

ķThe market value of the assets has fallen sharply in the current period, which is significantly higher than the expected decline due to the passage of time or normal use.

śThe economic, technical or legal environment of the company's operations, and the market in which the assets are in the current period or will change in the near future, which will have a negative impact on the company.

ŜMarket interest rates or other market investment return rate in the current period has been raised, which affects the company's expected future cash flow forecast value of the discount rate, resulting in a substantial reduction in the amount of assets recoverable.

ŝThere is evidence that the assets have become obsolete or the entity has been damaged.

ŞAssets have already been or will be left unused, terminated or planned to be disposed of.

şEvidence of the company's internal report shows that the economic performance of the assets has been lower than or will be lower than expected, such as the net cash flow generated by the assets or the operating profit (or loss) is far below (or above) is expected to amount, etc..

ŠThere is other suggestion that the assets may have a sign of impairment.

ㅜ38亥

– F-220 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

2.22.2 There are indications that an asset may be impaired, the company should be based on individual assets to estimate the recoverable amount. It is difficult for a company to estimate the recoverable amount of an individual asset, and the recoverable amount of the asset group shall be determined on the basis of the asset group of the asset.

The asset group finds that the main cash inflow generated by the asset group is independent of the cash inflow of other assets or assets. At the same time, in the identification of the asset group, the company's management to consider the management of production and management activities of the way (such as in accordance with the production line, business type or in accordance with regional or regional, etc.) and the continued use of assets or disposal decision-making methods, etc.. Once the assets are determined, the assets should be kept consistent, and not to be changed at will.

2.22.3 Because of the intangible assets and the intangible assets that are formed by the merger of enterprises and the intangible assets and the interests of the non proven mining areas, the impairment test should be carried out every year.

2.22.4 After the loss of asset impairment has been recognized, the impairment of assets depreciation or amortization expenses shall in future periods to make corresponding adjustment, to make the assets within the residual service life and systematically amortize the post adjustment carrying value of the asset (deduction is expected net salvage value).

2.23 Sales with buyback agreements

Transfer of assets to the conditions of the repurchase, the company as a financing transaction, not to terminate the recognition of the assets sold, nor does not confirm the relevant income; For the purchase price is greater than the difference between with the original price, the company raise interest charges on schedule in the repurchase period, included in the financial costs.

2.24 Expected liabilities

2.24.1 Recognition criteria of Expected liabilities

When the external guarantee, pending litigation or arbitration, the quality of the products and guarantee, layoffs, loss contract, restructuring obligations, fixed assets retirement obligations such as or matters related to business also comply with the following conditions is recognised as a liability:

˄1˅This obligation is a present obligation of the company.

˄2˅The performance of the obligation is likely to result in the outflow of economic interests of the enterprise.

˄3˅The amount of the obligation can be measured reliably.

2.24.2 Measurement method of expected liabilities

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– F-221 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Expected liabilities are initially valued by the best estimates to be spent on fulfillment of related present obligation.

There is a continuous range and the best estimate of the probability of the occurrence of various results in the range is determined by the intermediate value of the range. In other cases, the best estimate is determined by the following method:

˄1˅If there is a matter for a single project, the best estimate is determined by the most likely amount.

˄2˅When a number of projects are involved, the best estimates are determined by the amount of possible occurrence and the probability of occurrence.

The company shall pay all or part of the expected expenses in full or in part to be compensated by the third party or the other party, and the amount of the compensation shall be separately recognized as the assets of the assets.

Confirmation of the amount of compensation can not be more than the carrying value of the estimated liabilities.

2.25 Employee compensation

Employee compensation include short term pay, Post separation benefits, compensation for cancelation of labor relationship, and other long-term employee benefits.

˄1˅During the accounting period of an employee' providing services to the Company, the Company recognizes the compensation payable as liabilities, and relatively increase the cost of assets or current cost.

˄2˅The after - service welfare plan is classified as defined contribution plan and defined benefit plan.When employees provide service during the accounting period, defined contribution plans to calculate the deposit amount is recognized as a liability, and be included in the profits and losses of the current period or the cost of the related assets.The formula will be determined by the cumulative welfare unit method according to the formula, and the benefits of the benefit plan will be vested in the period of service of the staff and workers, and shall be included in the profit or loss of the current period.

˄3˅The company provides the workers with the dismissal of benefits, in the following two or two of the early confirmation of the benefits of workers compensation, and included in the current profits and losses:

˄а˅The enterprise cannot unilaterally withdraw the benefits provided by the termination of the labor relations plan or the reduction of the proposed dismissal.

˄Ҽ˅he enterprise confirms the costs or expenses related to the restructuring of the payment of the benefits of the dismissal.

˄4˅Enterprises provide other long-term employee benefits to workers, in line with the set deposit condition of the plan, the relevant provisions of the applicable defined contribution plans for processing; otherwise, for a defined benefit plan to the relevant provisions.

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– F-222 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

2.26 Revenue recognition

2.26.1 Revenue from selling goods

˄1˅The significant risks and rewards of ownership of the goods have been transferred to the buyer by the

Company.

˄2˅The Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods.

˄3˅The relevant amount of revenue can be measured in a reliable way.

˄4˅Economic benefits associated with the transaction can flow into the enterprise;

˄5˅The relevant costs incurred or to be incurred can be measured in a reliable way.

1.The company and the business press according to the principle of recognition of revenue:

˄1˅Investment revenue

1˅Long term share investment accounted in cost method is valued by original cost. Cash dividend or profit announced by the investee is confirmed into current period’s investment income.

2˅As of long-term equity investment based on equity, gains/losses of investment are recognized by the amount of the invested company’s current period net profit or net loss share enjoyable or bearable by the Company. The Company recognizes the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially from the net investment made to the invested entity are reduced to zero, unless the investing enterprise has the obligation to undertake extra losses. If the invested entity realizes any net profits later, the investing enterprise shall, after the amount of its attribut333able share of profits offsets against its attributable share of the un-recognized losses, resume recognizing its attributable share of profits.

On the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, the

Company recognizes the attributable share of the net profits and losses of the invested entity after it adjusts the net profits of the invested entity. The Company calculates the investment revenue according to the investee’s booked net profit in the following circumstances:

ķ The fair value of recognizable assets of investee is unable to confirm when investment occurs.

ĸ If the difference of the fair value and book value of the invested company’s recognizable assets is not material.

Ĺ The relative information of the invested company is unobtainable.

3˅Other than the above mentioned situations, other investments are recognized as investment revenue when cash dividend is received.

˄2˅Interest income is recognized by the loan amount, deposit term and real interest rate according to the

ㅜ41亥

– F-223 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements entrusted loan contract or agreement.

˄3˅ Revenue from transferring of equity is recognized by the net income of the portion of equity transferred by the Company or its subsidiaries.

˄4˅ Revenue from commission management is recognized according to the charging rate and term agreed in the contract or agreement.

˄5˅ Revenue from providing labor servicesThe services that are completed within the same accounting year, and its income of the service is confirmed when completed.

ǒ2ǓIf the starting and finishing of labor belong to different accounting year and service transaction can be estimated reliably, the relevant labor income is confirmed according to the completion percentage method on the balance sheet date. In the case of the results of the provision of labor services can not be reliably estimated, the revenue is confirmed according to amount of labor costs has occurred and expected to be able to compensateon the balance sheet date.

The results can be reliably estimated at the same time to meet the following conditions:

ķThe economic interests related to the contract are likely to flow into the enterprise.

ĸThe actual contract costs can be differentiated clearly and measured reliably;

ĹFixed cost contracts must also meet the total contract revenue can be measured and the completion of the contract and the cost of the contract is still to be determined.

ǒ3ǓThe confirmation method of the the contract completion progress: Company determines the contract completion progress according to the proportion that actual contract costs accounted of the expected costs.

˄6˅ Revenue from abalienating the right to use assets is recognized when the relevant economic benefits are likely to flow into the enterprise, and the amount of revenues can be measured in a reliable way. It also has to meet the conditions agreed in the related contract and agreement.˖When the related economic benefits are likely to flow into the enterprise and the amount of revenue can be measured reliably and other two conditions, the Company recognized revenue following circumstances:

ķ Interest income is determined by the time and the actual interest rate of the monetary fund of the company.

ĸ The use of fee income in accordance with the contract or the agreement of the time and method of calculation of the calculation of the time and method.

˄7˅ Revenue from selling goods is recognized when: the significant risks and rewards of ownership of the goods have been transferred to the buyer by the Company; the Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; The relevant amount of revenue can

ㅜ42亥

– F-224 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements be measured in a reliable way; and the relevant costs incurred or to be incurred can be measured in a reliable way.

˄8˅Transfer of land and commercial housing: in the signing of the transfer and sale of contracts, the completion of the contract within the development and construction projects, the company and the company has been transferred to the buyer, the commercial housing and the actual control of the commodity, and the economic interests of the transaction can flow into the company and the company, and related income and costs can be reliably measured, business income recognized.

2.27 Government subsidy

Government subsidy related to assets refers to the government subsidy obtained by the enterprise to use for the construction or make long-term assets in other forms. The government subsidy related to the gains refers to the subsidy rather than the government subsidy related to assets.

A government subsidy related to an asset is recognised as deferred income, and evenly amortised to profit or loss over the useful life of the related asset.

For a government subsidy related to income, if the grant is a compensation for related expenses or losses to be inc urred in subsequent periods, the grant is recognised as deferred income, and recognised in profit or loss over the period s in which the related costs are recognised; if the grant is a compensation for related expenses or losses already incurre d, the grant is recognised immediately in profit or loss for the current period.

The company received a government subsidy related to assets, recognized as deferred income received, and the average distribution of the relevant assets in the use of life, included in the current profit and loss. However, it is included in the current profit and loss directly in accordance with the nominal amount of government subsidies.

The company received government grants related to income, if used to compensate for the company's subsequent period of the relevant costs or losses; it is recognized as deferred income, and in recognition of the relevant expenses, included in the current profit and loss; If it is used to compensate for the expenses or losses incurred by the company, it shall be included in the profits and losses of the current period.

The company has confirmed that the government subsidies need to return, if there is a related deferred income, then the impact of the deferred income tax related to the book balance, the excess part included in the current profit and loss; there is no related deferred income, the returned amount shall be included in the current profit and loss directly.

2.28 Income tax

The Company adopts balance sheet liability method.

In the acquisition of assets, liabilities, the company to determine the related assets in accordance with the provisions of the state tax law, the tax basis of the debt .If the book value of the assets is greater than the book value of

ㅜ43亥

– F-225 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements its tax base or liabilities is less than its tax base, the difference as a taxable temporary differences;If the assets book value is less than the book value of its tax base or liabilities greater than its tax base, the difference as deductible temporary differences.

2.28.1 In addition to the deferred income tax liabilities arising from the following transactions, the company shall verify all deferred income tax liabilities arising from the temporary differences in tax payment:

˄1˅Initial recognition of goodwill

˄2˅The initial recognition of the assets or liabilities arising from the transaction of the following characteristics:

ķThe transaction is not an enterprise merger;

ĸWhen the transaction occurs, neither the accounting profit nor the taxable income (or deductible loss) will not be influenced.

Unless the company is able to control the timing of the investment related to the subsidiary, joint venture and joint venture, and the temporary difference in the return of the temporary difference in the foreseeable future, the company will confirm its deferred income tax liability.

2.28.2 The company shall be limited to the amount of taxable income which is likely to be used to offset deductible temporary differences, and to confirm the deferred income tax assets arising from the deductible temporary difference, but not to confirm the delivery of the income tax assets arising from the initial recognition of assets or liabilities in the same transaction:

˄1˅The transaction is not an enterprise merger;˗

˄2˅When the transaction occurs, neither the accounting profit nor the taxable income (or deductible loss) will not be influenced.On the balance sheet date, there is conclusive evidence that it is likely to obtain sufficient taxable income to offset the temporary difference in the future period, and the company will confirm the deferred income tax assets that were not recognized before. If there’s deductible temporary difference associated with the subsidiary, joint venture and joint venture investment are likely to be reversed in the foreseeable future, and is likely to be used to offset the taxable income, the company will confirm the deferred tax assets corresponding to this difference.

2.28.3 On the balance sheet date, the company is expected to pay (or return) in accordance with the provisions of the tax law to pay (or return) of the amount of income tax in the current period and the formation of the current income tax liabilities (or assets). The expected recovery of the assets or the repayment of the debt is measured in accordance with the deferred income tax assets and deferred income tax liabilities of the applicable.

If applicable tax rate changes, the company will re- measure deferred income tax assets and deferred income tax liabilities that has been confirmed. Except in the event of a transaction or event that is directly recognized in the owner's

ㅜ44亥

– F-226 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements equity, the impact of the change in the tax rate of the company is included in the income tax expense of the current period.

On each balance sheet date, the company will review the carrying value of the deferred income tax assets. If it is likely to be unable to obtain adequate taxable income to offset the benefits of deferred income tax assets, the carrying value of the deferred income tax assets is reduced. The amount of the write down should be reversed when it is likely to get enough of the taxable income.

The company reckoned the income tax and deferred income tax in the current period in the income tax expense or income of the income statement, in addition to transactions or events recognized by the enterprise merger and directly in the owner's equity.

2.29 Leasing

When all risks and rewards related to assets ownership are actually transferred, the lease is recognized as operating leasing and financing leasing.

2.29.1 Finance lease

˄1˅Conforming to one or more of the following criteria, that is the financing lease:

ķWhen the lease term expires, the ownership of the leased asset is transferred to the lessee.

ĸThe lessee has the option to purchase the lease assets, concluded between the purchase price is expected to will be far below the exercise of the option right of the leased asset fair value, so in the lease began, it is reasonably certain that the lessee will exercise the option

ĹEven if the ownership of the assets is not transferred, the lease term is the majority (75%) of the lease assets;

ĺThe present value of the minimum lease payments to the lessee at the start date of the lease is almost equivalent to the fair value of the leased asset (90%), the present value of the minimum lease payment, which is almost equivalent to the fair value of the lease (including) at the beginning of the lease;

ĻThe nature of the leased property is special, if not larger, only the lessee can use.

Not meet the above conditions, it isidentified as operating lease.

δ2εFinancial lease of fixed assets, according to the lease began, lease the assets of the fair value of the minimum lease payments present value of the lowest recorded. According to the self owned fixed assets depreciation policy meter depreciation.

2.29.2 Operating lease

Operating lease expenses are recognized as current expenses on straight line basis within lease period. The initial direct costs that company engaged in the business of leasing business are included directly in the current profit and loss.

ㅜ45亥

– F-227 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

The operating lease agreement or the rent shall be included in the profit or loss of the current period when it is actually incurred.

2.30 Assets held for sale

2.30.1 Confirmation standard

Non current assets satisfied the following requirements shall be classified as assets held for sale:

ķThe company has decided to dispose of the non current assets;

ĸAn irrevocable transfer agreement has been concluded with the assignee;

ĹThe transfer will be completed within one year.

2.30.2 Accounting treatment

The company held assets for sale by the book value and the estimated net realisable value is lower measuring hold illiquid assets for sale, the difference between the book value is higher than net realisable value is expected to confirm for asset impairment loss.

Asset or disposal groups classified as held for sale, but then no longer satisfy the conditions of fixed assets held for sale recognized companies stop to be classified as held for sale, and in accordance with the measurement of the amounts of the following lower one:

˄1˅Before the asset group or to the disposition of the book value of the is classified as held for sale, according to the assumption that in the absence of classified as held for sale due to confirm the amortization of depreciation or the amount of impairment of adjusted.

˄2˅Rerecycling amount of decided not to sell the day.

Comply with the conditions of the intangible assets held for sale and other non current assets, according to the above principles.

2.31 Changes of accounting policies and accounting estimates

2.31.1 Changes of accounting policies

2014, Ministry of Finance, respectively accounting [2014] No. 6, 7, 8, 10, 11, 14, 16, issued the " Accounting

Standard for Business Enterprises No. 39 - Fair value", "Accounting Standard for Business Enterprises No. 30 -

Presentation of financial statements (2014 revision), "" Accounting Standard for Business Enterprises No. 9 – Employee compensation (2014 revision), "" Accounting Standard for Business Enterprises No. 33 - Consolidated financial statements (2014 revision), "" Accounting Standard for Business Enterprises No. 40 - Joint venture arrangement ","

Accounting Standard for Business Enterprises No. 2 - Long-term equity investments (2014 revision) "and" Accounting

Standard for Business Enterprises No.. 41 - Interests in other entities disclosure "requirements in all of the accounting

ㅜ46亥

– F-228 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements standard, enterprise-wide implementation from July 1, 2014, to encourage enterprises listed overseas to perform in advance.

The company started on July 1, 2014 except for the preceding financial instrument reporting guidelines promulgated seven new or revised corporate accounting standards, in the preparation of the 2014 annual financial report begins execution of financial instrument reporting guidelines, and in accordance with the respective convergence criteria requirements were adjusted during the comparable impact on the financial statements and amounts as follows: On December 31, 2013/2013 annual On December 31, 2013/2013 annual financial On December 31, 2013/2013 annual financial financial statement related to project the statement related to project the influence of the statement related to project the influence of influence of the amount amount the amount Affect the amount of Affect the amount of Affect the amount of Project Name Project Name Project Name increase + / decrease increase + / decrease increase + / decrease Deferred Income 85,491,921.23 Deferred Income 74,133,019.56 Deferred Income 107,738,036.28 Special payables -2,000.000.00 Special payables -2,000.000.00 Special payables Other non-current Other non-current Other non-current -83,491,921.23 -72,133,019.56 -107,738,036.28 liabilities liabilities liabilities Financial assets Financial assets Financial assets 7,973,103,369.27 7,627,843,369.27 1,341,759,369.27 available for sale available for sale available for sale long-term equity long-term equity long-term equity -7,973,103,369.27 -7,627,843,369.27 -1,341,759,369.27 investments investments investments 2.31.2 Changes of accounting estimates

During the reporting period, the company has not had any changes in accounting estimates.

2.32 Corrections of prior period errors

˄1˅The joint stock company Yunnan Hydrolancang Hydropower Company co., Ltd adjusted to increase of 2013 year net profit attributable to the parent company, and adjusted to reduce the net profit attributable to the parent company 420,163,513.05 yuan, adjusted for 2012 yuan, 169,892,272.04 yuan net profit attributable to the parent company in 2014, and the company has been adjusted in according to the proportion of ownership.

δ2εThe development of highway project of coal mining of third-levle subsidiary company Yunnan Power

Investment Limited company of was completed in November 2012 and put into service, but the amount of the company was transferred to fixed assets in October 2014, Therefore, the company corrects the error caused by this matter, makes mention of fixed assets - depreciation 404,505.17 yuan from December 2012 to December 2013, and adjusts administrative expenses 373,389.39 yuan and retained earnings in 2013, and 2013 December 31, 2013 31,115.78 yuan.

δ3εThe third-levle subsidiary company Yunnan Power Investment Limited company adjusts the gas management fund which included in other payables in early the period into the special reserve, the above adjustment and correction reduces the other account payable of 390,735.00 yuan of 2013, while increases the special reserve of 390,735.00yuan of 2013.

˄4˅The third-levle subsidiary company Yunnan Diandong coal electricity co., LTD trace to adjust to the items , adjusting effect on report project are as follows ㅜ47亥

– F-229 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

On December 31, Examination and approval 2013/2013 annual financial The audit The audit on December 31, NO. Project Name statement related to project adjustment debit adjustment credit 2013/2013 annual financial approval number statements related projects 1 Accounts receivable 135,759,574.40 27,180,523.09 5,916,285.84 157,023,811.65 2 Prepayments 58,305,331.83  21,162,005.39 37,143,326.44 3 Tax payable 1,254,244.63 -398,816.88  1,653,061.51 4 Other payables 45,024,848.77  321,219.78 45,346,068.55 5 Undistributed profit -24,754.12 617,804.80  -642,558.92 6 Revenue 643,271,428.17  27,180,523.09 670,451,951.26 7 Operating costs 631,342,468.29 27,413,773.88  658,756,242.17 8 Selling expenses 2,332,189.38 389,510.56  2,721,699.94 9 Incometaxexpenses 527,865.57  4,956.55 522,909.02 (5˅The subsidiary Yunnan Eenergy Investment Weishi technology co., LTD made up 2012 yuan of bad debts in 985301 yuan, and the corresponding recognition of deferred income tax assets of 246325.25 yuan. ˄6˅The subsidiary Yunnan Eenergy Investment Industrial Co. Ltd. to be included in the investment of real estate land confirmed the fair value of the change of 75120356.26 yuan in 2011 and 2012. Deferred income tax liabilities and deferred income tax expenses are not recognized in 2014. The above adjustment on December 31, 2013/2013 annual financial statement related to project the influence of the amount as follows˖

The report project affected Before adjusting Traces of adjustments After adjusting Accounts receivable 776,699,766.97 17,574,115.34 794,273,882.31 Prepayments 861,414,896.39 -21,899,205.39 839,515,691.00 Other receivables 821,036,168.05 -213,099.82 820,823,068.23 Inventory 604,972,962.52 320,507.64 605,293,470.16 Long-term equity investments 14,175,144,191.88 -164,287,654.24 14,010,856,537.64 Fixed Assets 7,791,993,603.99 -404,505.17 7,791,589,098.82 Deferred income tax assets 1,256,024.30 380,300.63 1,636,324.93 Account receivable 1,340,788,138.83 67,886.06 1,340,856,024.89 Tax payable -339,885,170.33 -144,789.67 -340,029,960.00 Other payables 349,666,787.62 -69,515.22 349,597,272.40 Deferred income tax liabilities - 18,780,089.07 18,780,089.07 Special reserve 188,464.81 109,621.10 298,085.91 Surplus reserves 122,536,817.98 -16,428,765.42 106,108,052.56 Undistributed profit 639,141,326.24 -168,995,996.48 470,145,329.76 Minority interest 2,187,090,878.43 -1,848,070.45 2,185,242,807.98 Revenue 26,341,781,671.16 45,923,197.44 26,387,704,868.60 Operating costs 25,038,271,061.93 33,138,976.79 25,071,410,038.72 Selling expenses 40,762,521.37 389,510.56 41,152,031.93 Adminisstrative expenses 153,114,653.49 373,389.39 153,488,042.88 Asset impairment loss 5,595,953.89 535,901.53 6,131,855.42 Income tax expenses 23,426,953.77 -547,707.21 22,879,246.56 Net profit 710,472,967.02 18,010,950.87 728,483,917.89

ㅜ48亥

– F-230 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

3ǃTax

3.1 Preferential tax policy and the official documents ˄1 ˅Yunnan Baoshan Supa River Hydropower Development Co., Longling County Local Taxation Bureau applied to Longling local tax bureau to reduce rate of 15% corporate income tax from 1 January 2011 to 31 December 2020, Longling local tax bureau "enterprise income tax relief for tax filing notice" (Long rent Zhengshen prepare enterprises (2012) on the 7th) agreed to record, according to the Ministry of Finance, State Administration of Taxation, General Administration of Customs "on the further implementation of the western development strategy on tax policy issues notice" (Cai Shui [2011] No. 58) spirit of the document. (2)Huaning Tiaoshitou Hydropower Co., Ltd. reduced pay rate of 15% corporate income tax, the company comply with relief conditions apply for tax relief starting date of January 1, 2012 to December 31, 2020, according to State Administration of Taxation "on the further implementation of the western development strategy announcement on corporate income tax issues," (State Administration of Taxation Announcement No. 12 of 2012) from 1 January 2011 to December 2020 31, located in the western region of the "western region encouraged industry directory" provides for the main business of industrial projects, and which, when the main business income accounted for more than 70% of total corporate income enterprises. (3)Weixin Yuntou Yuedian Zhaxi Energy Co., Ltd., gets Weixin County State revenue approval through the "taxpayer tax credits apply for approval" March 20, 2013, enjoys the enterprise income tax " Two free and three half price " policy (from July 2012 to June 2014 corporate income tax 100% relief, from July 2014 to June 2017 corporate income tax 50% reduction). ˄4˅Yunnan Fugong Huatai Power Development Co., Ltd. Is given a reduced of corporate income tax, the reduction rate of 15% based in Yunnan Province Development and Reform Commission in May 2014 issued a document in Yunnan Development and Reform Office [2014] No. 389, in compliance with national industries encouraged by the Fugong County State Taxation Bureau Pa Fugong identified and issued tax Teng Zi (2014) No. 18 reduction, exemption notice. ˄5˅Shenzhen Yunnan Energy Investment Fund Management Co., Ltd. can enjoy the enterprise income tax levied by 15% preferential tax policies, according to the notice on the Guangdong Hengqin Fujian Pingtan comprehensive experimental zone of Shenzhen Qianhai Shenzhen-Hong Kong cooperation zone of modern service enterprise income tax preferential policies. ˄6˅Yunnan Energy Investment Will Technology Co., Ltd. is allowed to enjoy 15% tax rate to pay corporate according to Western Development CIT in 2014. ˄7˅Zhaotong City Gas Pipeline Limited Company applied for 2014 reduced rate of 15% corporate income tax to Yunnan Zhaoyang District State Administration of Taxation tax bureau on 12 January 2015, Yunnan Zhaoyang District State Administration of Taxation Taxation Bureau made "western development preferential corporate income tax audit confirmed application form "consent record, according to the Ministry of Finance, State Administration of Taxation, General Administration of Customs "on the further implementation of the western development strategy on tax policy issues notice" (Cai Shui [2011] No. 58) spirit of the document. ˄8˅Fumin Fengshun Gas Development Co., Ltd. applied to reduce 15% rate of annual corporate income tax during2014—2020 on 1st January 2015 to Fumin County, Yunnan Province State Administration of Taxation, according

ㅜ49亥

– F-231 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements to the Ministry of Finance, State Administration of Taxation, General Administration of Customs "on the further implementation of the western development strategy on tax policy issues notice" (Tax [2011] No. 58) spirit of the document, Fumin County State Administration of Taxation made out "corporate income tax relief for tax filing notice" to record on January 9, 2015.

3.2 Major types of tax and tax rate

Type of tax expense Tax rate, rate Tax base Value added tax (VAT) 3%ǃ6%ǃ13%ǃ17% Taxable added value or sales income Business tax 3%ǃ5% Taxable revenue Urban maintenance and construction 1%ǃ5%ǃ7% VAT and business tax payable tax and education surcharge Extra-charges for education 3% VAT and business tax payable Local educational surtax 2% VAT and business tax payable Corporate income tax 15%ǃ25% Taxable corporate income Water resource charge: the Yunnan Baoshan Supa River Hydropower Development Co., Ltd. power plants level-1, level-2 and level-3 are small-sized power station, and they are charged by 0.004 yuan/kwh; the level-4 power plants are medium-sized, and they are charged by 0.007 yuan/kwh; Tengchong Sudian Longchuan River Hydropower Development Co., Ltd. is charged by 0.004 yuan/kwh according to the amount of power sold.

ㅜ50亥

– F-232 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

4ǃCconsolidated financial statements 4.1 Group composition Proportion of Shareholding Amount Type Main Registered capital % Amount of No. Subsidiaries Level of Registered address business Business nature The way to get (in RMB Yuan) of investment business premises investment (in RMB Yuan) (in RMB Yuan) Electric power Enterprise merger under the 1 Yunnan Provincial Power Investment Co., Ltd. 2 1 Kunming Yunnan 1,097,564,723.00 55.01 620,304,567.11 investment same control Yunnan Invest Group Zhenxiong Mineral Zhenxiong commercial Enterprise merger under the 2 2 1 Yunnan Coal industry 200,000,000.00 80.00 160,219,520.00 Energy Development Co., Ltd. district same control Yunnan Provincial Energy Investment Group Haidian District, Investment 3 2 1 Nationwide 10,000,000.00 100.00 10,000,000.00 Investment establishment Beijing Investment Consulting Co., Ltd. Beijing consultation Yunnan Provincial Energy Investment Group Chengbei District, Enterprise merger under the 4 2 1 Yunnan Energy investment 20,000,000.00 90.00 22,000,000.00 Dehong Energy Development Co., Ltd. Mangshi same control Yunnan Provincial Energy Investment Group Renmin Road, Enterprise merger under the 5 2 1 Yunnan Material Trade 100,000,000.00 40.00 40,000,000.00 Logistics Limited Liability Company Kunming same control

– F-233 Yunnan Provincial Energy Investment Group Xuefu Road, Natural gas 6 2 1 Yunnan 500,000,000.00 100.00 500,000,000.00 Investment establishment Natural Gas Industry Develop Co., Ltd. Kunming development Yunnan Provincial Energy Investment Group Economic District, Electric power 7 Hydroelectricity New Energy Sources 2 1 Yunnan 5,000,000.00 45.00 2,250,000.00 Investment establishment Kunming development Technology Engineering Co., Ltd. Yunnan Provincial Energy Investment Group New and high-tech Gas development 8 2 1 Yunnan 30,000,000.00 51.00 15,300,000.00 Investment establishment JIAHENG Natural Gas Industry Co., Ltd. zones, Kunming and investment Yunnan Provincial Energy Financial Service Second Ring of West Financial 9 2 2 Yunnan 2,000,000,000.00 100.00 2,000,000,000.00 Investment establishment Co., Ltd. Road, Kunming investment Yunnan Provincial Energy Investment Group Economic District, Enterprise merger under the 10 2 1 Yunnan Asset management 500,000,000.00 100.00 534,382,592.53 Industrial Investment Co., Ltd. Kunming same control Yunnan Provincial Energy Investment Group Economic District, Enterprise merger under the 11 2 1 Yunnan Material Trade 30,000,000.00 100.00 32,678,772.49 NENGHE Economic and Trade Co. Ltd. Kunming same control Yunnan Provincial Power Investment New and high-tech Energy Enterprise merger under the 12 International Energy Cooperation & 2 1 Yunnan 237,100,000.00 100.00 139,906,850.99 zones, Kunming management same control Development Co., Ltd. Yunnan Provincial Power New and high-tech Enterprise merger under the 13 Investment Zhongke Photovoltaic Technology 2 1 Yunnan Energy saving 45,000,000.00 51.00 22,950,000.00 zones, Kunming same control Co., Ltd. Yunnan Provincial Energy Investment Group New and high-tech 14 LANGCHAO Science and Technology Co., 2 1 Yunnan Computer software 20,000,000.00 40.00 8,000,000.00 Investment establishment zones, Kunming Ltd.

ㅜ51亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Proportion of Shareholding Amount Type Main Registered capital % Amount of No. Subsidiaries Level of Registered address business Business nature The way to get (in RMB Yuan) of investment business premises investment (in RMB Yuan) (in RMB Yuan) Huaning County, Enterprise merger under the 15 Yuxi Dongfang Coal Industry Co., Ltd. 2 1 Yunnan Coal mining 26,000,000.00 67.00 36,517,300.00 Yuxi same control Yunnan Provincial Energy Investment Group New and high-tech 16 2 1 Yunnan Energy saving 31,000,000.00 50.00 21,621,949.91 Investment establishment Youneng Technology Co., Ltd. zones, Kunming Yunnan Provincial Energy Investment Group Economic District, Enterprise merger under the 17 2 1 Yunnan Material Trade 30,000,000.00 40.00 12,000,000.00 Weishi Technology Co., Ltd. Kunming same control Yunnan Provincial Energy Investment Group Hongta District, 18 2 1 Yunnan Energy saving 129,000,000.00 40.00 51,600,000.00 Investment establishment Huilong Technology Co., Ltd. Yuxi Yunnan Provincial Energy Small Hydropower Economic District, Project investment 19 2 1 Yunnan 30,000,000.00 40.00 12,000,000.00 Investment establishment Investment Co. Ltd. Kunming and management Investment 20 Yunnan Energy Investment (HK) Co., Ltd 2 3 HK HK 1,022,656,150.00 100.00 1,022,656,150.00 Investment establishment management Notes: – F-234

Type of subsidiary:

1. Domestic non-financial subsidiary

2. Domestic financial subsidiary 3. Overseas subsidiary 4. Public institution 5. Infrastructure unit

4.2 Reason of the parent company has not more than half of the proportion of the investment unit but can control to the investment unit

Proportion of Registered capital(in Amount of investment(in No. Subsidiaries Level Reasons for inclusion in the scope of consolidation Shareholding% RMB Yuan) RMB Yuan)

ㅜ52亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Yunnan Provincial Energy 1 Investment Group Logistics 40 100,000,000.00 40,000,000.00 2 More than half of the voting rights in the board of directors Limited Liability Company Yunnan Provincial Energy Investment Group 2 Hydroelectricity New Energy 45 5,000,000.00 2,250,000.00 2 More than half of the voting rights in the board of directors Sources Technology Engineering Co., Ltd Yunnan Provincial Energy Investment Group LANGCHAO 3 40 20,000,000.00 8,000,000.00 2 More than half of the voting rights in the board of directors Science and Technology Co., Ltd Yunnan Provincial Energy 4 Investment Group Weishi 40 30,000,000.00 12,000,000.00 2 More than half of the voting rights in the board of directors Technology Co., Ltd. Yunnan Provincial Energy 5 Investment Group Huilong 40 129,000,000.00 51,600,000.00 2 More than half of the voting rights in the board of directors Technology Co., Ltd. – F-235 Yunnan Provincial Energy 6 Small Hydropower Investment 40 30,000,000.00 12,000,000.00 2 More than half of the voting rights in the board of directors Co. Ltd. Yunnan Provincial Energy 7 Investment Group Youneng 50 31,000,000.00 21,621,949.91 2 More than half of the voting rights in the board of directors Technology Co., Ltd.

ㅜ53亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

4.3 Situation of important non wholly owned subsidiary 4.3.1 Minority shareholders 2014 belongs to Dividends paid to Proportion of Dec.31,2014 profit and loss of minority Subsidiaries minority Cumulative minority No. minority shareholders in shareholders interests shareholders 2014 Yunnan Provincial Power Investment 1 44.99 -14,367,780.96 320,318,915.63 Co., Ltd. Yunnan Provincial Energy Investment 2 Group Logistics Limited Liability 60.00 6,634,187.83 5,873,776.39 67,371,565.46 Company Yunnan Provincial Energy Investment 3 60.00 791,312.30 78,191,312.30 Group Huilong Technology Co., Ltd.

4.3.2 Main financial information

Year2014 Year2013 Item Subsidi Subsidiaries 1 Subsidiaries 2 Subsidiaries 3 Subsidiaries 1 Subsidiaries 2 aries 3 Current assets 1,809,131,016.59 862,279,586.16 67,867,355.42 2,436,695,948.59 679,406,432.51 Non-current assets 11,101,540,042.89 2,097,276.91 85,056,006.04 11,708,412,411.62 990,226.61 Total assets 12,910,671,059.48 864,376,863.07 152,923,361.46 14,145,108,360.21 680,396,659.12 Current liabilities 3,335,214,387.70 752,090,920.63 22,604,507.62 6,056,954,941.05 569,378,069.08 Non-current liabilities 7,688,031,964.42 5,664,035,975.17 Total liabilities 11,023,246,352.12 752,090,920.63 22,604,507.62 11,720,990,916.22 569,378,069.08 Revenue 1,392,607,837.56 17,628,455,585.28 35,252,370.24 13,291,906,036.63 8,641,105,129.29 Net profit belongs to -254,207,114.83 11,056,979.72 1,318,853.84 -92,970,638.26 10,885,445.07 parent company Total comprehensive -254,207,114.83 11,056,979.72 1,318,853.84 -92,970,638.26 10,885,445.07 income Cash flow from 368,096,527.85 227,004,900.60 -27,331,888.90 -686,828,675.76 -110,470,790.02 operating activities 4.4 Newly incorporated into the scope of the subject and no longer included in the scope of the merger of the subject in 2014 4.4.1 New subject in the scope of consolidation in 2014

Net asset at the Net profit in Shareholding Reason of becoming new Subsidiaries Level No. end of 2014 2014 ratio (%) subsidiary in 2014 Yuxi Dongfang Coal Industry Not under the same control 1 14,200,189.75 -173,465.12 2 67.00 Co., Ltd. enterprise merger Yunnan Provincial Energy 2 Investment Group Youneng 58,484,629.56 3,933,235.66 2 50.00 Investment establishment Technology Co., Ltd. Yunnan Provincial Energy 3 Investment Group Huilong 130,318,853.84 1,318,853.84 2 40.00 Investment establishment Technology Co., Ltd. Yunnan Provincial Energy Small 4 29,919,663.79 -80,336.21 2 40.00 Investment establishment Hydropower Investment Co. Ltd. 4.4.2 No longer into the scope of the subject in 2014. Nothing 4.5 Situations of under the same control enterprise merger in 2014 Nothing

ㅜ54亥

– F-236 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

4.6 Situations of not under the same control enterprise merger in 2014

Identifiable net assets fair Book net assets Goodwill Combining value Trading on Company on combining date Defining price date Amount Amount Defining method method Fair value of the identifiable net Yuxi Dongfang assets and the Jan. 1, Coal Industry 13,407,086.48 47,913,363.32 Evaluation 36,517,300.00 1,014,653.77 difference 2014 Co., Ltd. between the fair value of the transaction

5ǃNotes to major items in the consolidated financial statements 5.1 Monetary capital

Book balance on Dec. 31, 2014 Book balance on Dec. 31, 2013 Item Original currency Original currency Converted into RMB Converted into RMB amount amount RMB 1,146,243.31 1,146,243.31 1,006,379.96 1,006,379.96

USD 76,910.20 470,613.53 49,781.89 303,515.21

KIP 171,829,845.00 132,278.56 Cash HKD

IDR 102,312,910.70 52,793.46

THB 268,792.00 50,721.21

RMB 5,284,414,467.03 5,284,414,467.03 3,715,258,046.46 3,715,258,046.46

USD 101,485,763.93 620,994,389.56 322,376.63 1,965,498.07

KIP 55,496,345.00 42,600.11 Bank deposit HKD 145,708,328.13 114,945,186.28 27,581,270.00 21,685,221.91

IDR 108,866,297.61 56,175.01

THB 1,550,200.00 286,631.98

RMB 1,110,023,778.12 1,110,023,778.12 251,002,975.25 251,002,975.25 Other monetary funds USD 15,230,533.00 93,195,631.43

Total 7,225,482,277.50 3,991,550,868.95

Other cash and cash equivalents are mainly composed of earnest money deposit.

1.1. As of Dec. 31, 2013, and Dec. 31, 2014, the exchange spot rate announced by the People's Bank of China

Foreign currency Exchange rate on Dec. 31. 2014 Exchange rate on Dec. 31. 2013

USD 6.119 6.0969

HKD 0.78887 0.78623

IDR 0.000516

THB 0.1887 0.1849

KIP 0.0008 0.000768

ㅜ55亥

– F-237 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.2 Financial assets at fair value through profit or loss Item Fair value on Dec. 31, 2014 Fair value onDec. 31, 2013 1κTradable financial assets ˄1˅Tradable bond investment  49,000,000.00 ˄2˅Tradable equity instrument investment   2ˊFinancial assets assigned to be measured at fair value and   whose changes are included in current profit and loss 3ˊOther  Total 49,000,000.00 The asset shown above is a usufruct of Jintong industrial construction and investment Co., Ltd. which was purchased by Yunnan Provincial Energy Financial Service Co., Ltd. via Chongqing Financial Assets Exchange Co., Ltd. 5.3 Notes receivable Type of Notes Book balance on Dec. 31, 2014 Book balance on Dec. 31, 2013 Bank’s acceptance bills 41,959,009.02 24,123,940.04 Commercial acceptance bills 3,969,832.26 Total 45,928,841.28 24,123,940.04 Notes˖1ǃThe company’s no discount or has been transferred to the outstanding notes receivable in 2014˗ 2ǃOn 31 December 2014, the details of the Commercial acceptance bills as follows: Drawer Ticket No Date of issu Maturity date Year-end balance Hengda Xinyuan (Kunming) Property Ltd. 00100061-21962833 2014/7/29 2015/1/28 3,969,832.26 Total 3,969,832.26 5.4 Accounts receivable 5.4.1 Classification Dec. 31, 2014 Dec. 31, 2013 Categories Provision for Provision for Balance Proportion Proportion Balance Proportion Proportion bad debts bad debts Individually significant and individual 560,196,530.99 55.12 9,151,944.00 41.75 552,120,920.76 69.35 provision of bad debts is made Bad debts provided on - group basis Grouped provision of bad debts 193,370,548.65 19.02 12,768,421.48 58.25 102,117,470.03 12.83 1,820,611.00 100.00 based on aging of accounts Subtotal of 193,370,548.65 19.02 12,768,421.48 58.25 102,117,470.03 12.83 1,820,611.00 100.00 the group Insignificant individual amounts but 262,845,290.48 25.86 141,856,102.53 17.82 individually made bad debts provision Total 1,016,412,370.12 100.00 21,920,365.48 100.00 796,094,493.31 100.00 1,820,611.00 100.00

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– F-238 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.4.2 Classified by aging of other accounts receivable˖

Dec. 31, 2014 Dec. 31, 2013 Aging of Bad debts provision Bad debts provision accounts Proportion Balance Balance Proportion % ˄%˅ Balance Proportion % Balance Proportion % Within 1 156,299,786.39 80.83 7,814,989.31 5.00 83,845,961.56 82.11 1,655,424.31 1.97 year 1 to 2 27,776,722.24 14.36 2,777,672.23 10.00 8,240,445.14 8.07 years 2 to 3 6,124,520.65 3.17 1,224,904.13 20.00 5,580,519.49 5.46 165,186.69 2.96 years 3 to 3,169,519.37 1.64 950,855.81 30.00 4,450,543.84 4.36 4years 4 to 5 years Above 5 years Total 193,370,548.65 100.00 12,768,421.48 102,117,470.03 100.00 1,820,611.00

5.4.3 The individually significant amounts are the accounts receivables amounts over 10,000,000 yuan, excluding

the amounts from the consolidated related-parties. The amount and explanations of bad debts provision are shown as

follows: Proportion Aging of Amount of of provision Company Balance accounts Explanation provision for bad receivable debts Sichuan NengTou E&M Material Trade Co.Ltd 140,945,037.72 Within 1 year 

TongYunan Singapore Company 98,168,970.69 Within 1 year 

Yunnan Power Grid Co. 91,351,717.38 Within 1 year  Recognized Liuzhou RUIYI Internataion Steel Trade Co., Ltd 61,012,960.00 1 to 2 years 9,151,944.00 15% individually 81 Electronic Group Liyuan Electronic Co. Ltd. 35,849,669.39 Within 1 year  Sichuan China Railway Third Bureau Group sixteen Engineering Co., Ltd. Shanghai Yunnan railway 32,882,439.95 Within 1 year  passenger dedicated line segment Project Manager Panzhihua City Ding song Trading Co., Ltd. 31,624,156.04 Within 1 year 081 Group Sichuan Tianyuan Electronic Group 23,964,447.27 Within 1 year  Machinery Co. Ltd Henan Huanyu Saier New Energy Technology 16,779,000.00 Within 1 year  Limited Yunnan Yuxi Huilong Technology Co. Ltd. 16,770,382.55 Within 1 year

Jiangsu Province new Mstar Technology Ltd 10,847,750.00 Within 1 year

Tota 560,196,530.99 9,151,944.00

5.4.4 In the accounts receivable without holding more than 5% (including 5%) voting shares of the

shareholders on Dec. 31. 2014.

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– F-239 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.4.5 Top 5 accounts receivable balance on Dec. 31. 2014. Proportion to Aging of accounts Relationship Balance accounts Company receivable receivable (%) Sichuan Energy Investment electromechanical material Client 140,945,037.72 Within 1 year 13.87 Co. Ltd. Huitong company in Singapore Client 98,168,970.69 Within 1 year 9.66 Within 1 year, 1 to 2 Yunnan Power Grid Co. Client 91,351,717.38 8.99 years Liuzhou RUIYI International Steel Trade Co., Ltd Client 61,012,960.00 Within 1 year 6.00 081 Electronic Group Liyuan Electronic Co. Ltd. Client 35,849,669.39 Within 1 year 3.53 Sichuan Total 427,328,355.18 42.05

5.4.6 The accounts receivable without accounts receivable related party funds.

5.4.7 The accounts receivable without use for the pledge of accounts receivable as of Dec. 31. 2014.

5.4.8 As of December 31, 2014 by the transfer of financial assets and the termination of the confirmation of accounts receivable Associated with Termination recognition has been Company confirmation stopped in the profit amount and loss (loss in - # column) 1ǃTransfer accounts receivable into Tianfeng securities 300,000,000.00  China Water Conservancy and hydropower fourteenth Engineering Bureau Co., Ltd. 4,976,486.04  Kunming water plant China railway materials trade limited liability company 2,984,134.19  China water conservancy water and electricity bureau 14 co., LTD. Dali Er source metal 23,022,536.07  structure (wind power tower drum) manufacturing plant Yunnan hydraulic and Hydropower Construction Co., Ltd. 5,140,152.92  China metallurgical group wuhan survey research institute co., LTD 8,539,658.68  Yunnan construction fourth construction co., LTD 7,739,656.27  Yunnan engineering construction general contracting company NO.19 1,315,808.81  Yunnan construction fifth construction co., LTD 4,309,392.94  The third construction engineering company in yunnan province 20,084,457.19  Yunnan energy investment Juzheng industrial investment co., LTD 3,927,798.75  China shipbuilding industry supplies yunnan-guizhou co., LTD 23,363,565.68  Minmetals steel co., LTD 15,148,701.78  Yunnan engineering construction general contracting company 7,849,587.65  Yunnan construction installation co., LTD 6,442,139.88  Yunnan construction machinery factory 5,967,195.27  China water conservancy water and electricity bureau 14 co., LTD., power station project 3,131,960.27  department Railway bureau group co., LTD., shanghai-kunming railway passenger dedicated line 35,130,224.90  section of the project intends toYunnan Yunnan energy investment industry co., LTD 11,778,462.49  China water conservancy water and electricity bureau 14 co., LTD., chongqing Liang Zhong 1,543,808.81  intends to highway project SongMing Jinlima thermal equipment co., LTD 1,089,071.43  Kunming Changpu economic and trade co., LTD 11,580,624.85  Yunnan Chubang investment co., LTD 12,879,175.49  Yunnan Wan Xi construction engineering co., LTD 6,122,940.37 

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– F-240 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Associated with Termination recognition has been Company confirmation stopped in the profit amount and loss (loss in - # column) 1ǃTransfer accounts receivable into Tianfeng securities 300,000,000.00  Sichuan province starts construction engineering co., LTD 10,419,247.92  China Railway twelve Bureau Group Co., Ltd. into Chenggui Railway Project Manager 620,241.83  China Railway fifteen Bureau Group Co., Ltd. 424,211.34  Third Highway Engineering Bureau Co., Ltd. 528,377.65  China Railway Material Group Yunnan Co., Ltd. 2,864,516.69  Luqiao Electric Power Construction Co., Ltd. Jin Hong highway project general contracting 21,628,659.27  Department China water conservancy water and electricity bureau 14 co., LTD. 15,586,912.63  Kunming steel trade Co. Ltd. 5,618,979.18  China Water Conservancy and hydropower fourteenth Engineering Bureau Co., Ltd. Jin 1,804,817.67  highway II 1 standard project manager China Water Conservancy and hydropower fourteenth Engineering Bureau Co., Ltd. Jin 2,345,603.09 highway project manager of the project manager Fourteen Metallurgical Construction Group, Yunnan fifth, construction and Installation 4,084,673.67 Engineering Co., Ltd Fourteen Metallurgical Construction Group Yunnan fifth construction and Installation 5,629,748.92 Engineering Co., Ltd. (Guiyang two) China Nonferrous Metals Industry fourteenth Metallurgical Construction Company 1,634,380.10 (Guiyang) China non-ferrous metal industry fourteenth Metallurgical Construction Company (Vanke 1,197,553.22 Cloud City) China Railway twelve Bureau Group Co., Ltd. Xi'an branch 1,544,536.09 Total 300,000,000.00

Note: ķ In December 2014, the Company and Tianfeng Securities Co., Ltd. (hereinafter referred to as Tianfeng

Securities) signed the "Receivables Assignment Contract" (Contract Number: TFYN-2014-001), according to the contract, the Company should transfer the part of the accounts of receivable credit until December 22, 2014 to Tianfeng securities, transfer amount is 300,000,000.00 yuan. The company paid a one-time-a-days wind securities 3,200,000.00 yuan buyout fee, Tianfeng debt securities to obtain and enjoy the right to full recovery of money transfer and other benefits arising from their; In December 29, 2014, the Company received the transfer money 300,000,000.00 yuan paid by

Tianfeng Securities.

5.5 Advances to suppliers

5.5.1 Classified by aging payments

Dec. 31, 2014 Dec. 31, 2013 Aging of advances Balance Balance to suppliers Provision for Provision for Amount Proportion (%) bad debts Amount Proportion (%) bad debts Within 1 year 824,063,017.93 78.65 659,442,316.31 78.50 1 to 2 years 56,491,974.00 5.39 51,508.15 36,132,507.85 4.30 2 to 3 years 26,132,071.38 2.49 124,116.09 29,817,124.54 3.55 Above 3 years 141,024,324.76 13.46 312,889.14 114,696,219.66 13.65 572,477.36 Total 1,047,711,388.07 100.00 488,513.38 840,088,168.36 100.00 572,477.36

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– F-241 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.5.2 Aging for more than a year of large prepayments

Debt unit Dec. 31, 2014 Aging Reason Lincang Yuedian DaYaKou project land requisition 128,314,902.24 1 to 6years Land requisition compensationˈnot settled compensation Zhenkang county bureau of land and resources 22,400,000.00 4 to 5years Pre paid landˈnot settled Shiling county bureau of land and resources 13,560,772.00 Above 3 years Pre paid land Yixing Jianhua Chengtao environmental protection 7,602,869.70 Above 2 years Not settled co., LTD Chongqing giant can construction (group) co., LTD 6,800,000.00 Above 2 years Not settled Guanyinshan coal mines construction project Dongfang turbine co., LTD., dongfang electric group 2,360,000.00 Above 3 years Construction has yet to start Kunming engineering survey company 2,282,753.00 Above 2 years Not settled FuYuan County Laotanshan coal co., LTD 2,211,500.00 1 to 2years In settlement Xuanwei Cheng Feng trade co., LTD 1,935,891.13 1 to 2years In settlement Xuanwei tiansheng trade co., LTD 1,874,823.83 1 to 2years In settlement Yunnan province Xinzxing coal mine no.2 shaft 1,393,683.50 1 to 2years In settlement mining Total 190,737,195.40

5.6 Interest receivable

Item Dec. 31, 2014 Dec. 31, 2013

From entrusted loans 3,743,181.97 5,971,245.69

From government credit projects

From bond with fixed income 8,849,969.07 163,941.10

From fixed deposit 2,817,819.07

Total 15,410,970.11 6,135,186.79

5.7 Dividend receivable

Item Dec. 31, 2014 Dec. 31, 2013

From Equity investment 15,732,000.00

Total 15,732,000.00

5.8 Other account receivables

Dec. 31, 2014 Dec. 31, 2013 Balance Provision for bad debts Balance Provision for bad debts Categories Provision Proportion Proportion Amount Amount Amount Amount Balance for bad (%) (%) debts Individual amount is significant, 218,182,343.97 21.00 6,223,766.81 18.85 712,186,769.15 86.07 and the individual provision for

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– F-242 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Dec. 31, 2014 Dec. 31, 2013 Balance Provision for bad debts Balance Provision for bad debts Categories Provision Proportion Proportion Amount Amount Amount Amount Balance for bad (%) (%) debts bad debts of other receivable Bad debts provided according to the combination Aging analysis 464,711,038.87 44.72 26,785,386.86 81.15 115,277,419.33 13.93 6,641,120.25 100.00 combination Combination 464,711,038.87 44.72 26,785,386.86 81.15 115,277,419.33 13.93 6,641,120.25 100.00 of subtotal Individual amount is not significant, but the individual 356,225,546.64 34.28 provision for bad debts of other receivables Total 1,039,118,929.48 100.00 33,009,153.67 100.00 827,464,188.48 100.00 6,641,120.25 100.00

5.8.1 Other account receivables that are prepared for bad debts in combination

˄1˅The use of an aged analysis of other receivables provision for bad debts

Aging of other Dec. 31, 2014 Dec. 31, 2013 accounts Proportion Provision for bad Proportion Provision for bad receivable Balance Balance (%) debts (%) debts Within 1 year 405,984,885.76 87.36 20,299,244.30 112,854,649.97 97.90 5,653,387.49

1 to 2 years 57,910,337.16 12.46 5,791,033.71 1,447,817.00 1.26 144,781.70

2 to 3 years 91,700.00 0.02 18,340.00 151,528.70 0.13 30,305.74

3 to 4years 59,047.60 0.01 17,714.28 15,397.63 0.01 4,619.29

4 to 5 years 12,027.60 0.01 6,013.82

Above 5 years 653,040.75 0.14 653,040.75 808,026.03 0.70 808,026.03

Total 464,711,038.87 100.00 26,785,386.86 115,277,419.33 100.00 6,641,120.25

5.8.2 Individual provision for bad debts of other receivables

Individual amount is significant, and the individual provision for bad debts of other receivable on Dec. 31,

2014: Provision for Proportion Debtor Balance Aging Explanation bad debts (%) Intercourse Yunnan Investment Holding Group Co., Ltd. 77,000,000.00 Above 3 years funds Yuxi city center project construction headquarters to develop the natural gas 55,000,000.00 Within 1 year Cash deposit utilization

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– F-243 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Provision for Proportion Debtor Balance Aging Explanation bad debts (%) Kunming Huayi energy engineering Within 1 yearˈ 28,902,076.54 Cash deposit technology co., LTD 1 to 2 years Xuanwei City Yunxiang mining co., LTD 18,677,266.99 4,669,316.75 1 to 2 years 25.00 Cash deposit

Yunnan Coalfield Geology Bureau 15,240,000.00 Above 5 years Cash deposit Huize county industrial economic and 13,000,000.00 1 to 2 years Cash deposit information bureau Bijie city hongyu ore trade co., LTD 4,096,812.56 614,521.87 1 to 2 years 15.00 Cash deposit Intercourse Yunnan Shunfeng mining co., LTD 3,480,481.44 522,072.22 1 to 2 years 15.00 funds Intercourse Yunnan Xuanwei fuel company 2,785,706.44 417,855.97 1 to 2 years 15.00 funds Total 218,182,343.97 6,223,766.81

5.8.3 Situations of the shareholders of holding more than 5% (including 5%) voting shares in the other receivables

in 2014

Dec. 31, 2014 Dec. 31, 2013 Company Amount Provision for bad debts Amount Provision for bad debts Yunnan investment holding group co., 77,000,000.00 77,000,000.00 LTD Total 77,000,000.00 77,000,000.00

5.8.4 Top 5 other account receivables balances Proportion to other accounts Company Relation Balance Aging receivable (%) Yunnan investment holding group co., LTD Parent company 77,000,000.00 Above 3 years 7.41 Yuxi city center project construction headquarters to develop the natural gas Suppliers 55,000,000.00 Within 1 year 5.29 utilization Zhengxiong county Zhengxing coal mine co., Within 1 yearˈ Suppliers 47,542,035.83 4.58 LTD 1 to 2 years Kunming Guoxing venture investment center Suppliers 30,000,000.00 Within 1 year 2.89 (limited partnership) Kunming Huayi energy engineering Within 1 yearˈ Suppliers 28,902,076.54 2.78 technology co., LTD 1 to 2 years Total 238,444,112.37 22.95

5.8.5 Other account receivables without actual verification in 2014.

5.8.6 Related parties in other account receivables Proportion to other accounts Company Relation Balance receivable (%) Yunnan investment holding group Parent company 77,000,000.00 7.41 co., LTD Total 77,000,000.00 7.41

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– F-244 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.9 Inventories

Dec. 31, 2014 Dec. 31, 2013 Item falling price falling price Balance Book value Balance Book value reserves reserves Raw materials 322,247,886.64 322,247,886.64 276,777,522.42 276,777,522.42

Goods in process 695,944.08 695,944.08

Finished goods 329,468,449.49 517,205.45 328,951,244.04 52,217,140.65 213,169.00 52,003,971.65 Package materials and 2,974.36 2,974.36 182,313.15 182,313.15 low-value consumables Revolving materials 2,838,554.63 2,838,554.63 19,566.70 19,566.70

Development costs 447,506,266.38 447,506,266.38 272,338,440.10 272,338,440.10

Project construction 38,628,459.21 38,628,459.21 3,971,656.14 3,971,656.14

Total 1,141,388,534.79 517,205.45 1,140,871,329.34 605,506,639.16 213,169.00 605,293,470.16

5.10 Non-current assets due within one year

Item Dec. 31, 2013 Dec. 31, 2014

Entrust loans 161,518,902.53 234,465,852.77

Total 161,518,902.53 234,465,852.77

5.10.1 Details of entrust loans

Company Dec. 31, 2013 Dec. 31, 2014 Yunnan Huadian Nujiang River Hydropower 161,518,902.53 234,465,852.77 Development Co., Ltd. Total   loss˖Entrust loans- provision  

Total 161,518,902.53 234,465,852.77

5.11 Other current assets

Item Dec. 31, 2014 Dec. 31, 2013

Short-term entrusted loans 825,440,000.00 426,218,300.97 loss˖Short-term entrusted loans- provision

All borrow all loans 57,376,729.44

Short-term fixed-income financial products 7,000,000.00

Pending deduct VAT on purchase 30,788,199.44

Advance payment business taxes 243,435.00

Wait deal assets loss or income 1,642.23

Private placement subscribe margin 14,175,000.00

Total 928,025,006.11 433,218,300.97

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– F-245 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Details of Short-term entrusted loans:

Item Dec. 31, 2014 Dec. 31, 2013 Hanergy Holding Group Limited 180,105,161.51 Yunnan Huadian Nujiang River Hydropower Development Co., Ltd. 75,440,000.00 152,912,000.00 Yunnan energy investment Youneng technology development Co Ltd 70,141,166.67 Yuxi Dongfang Coal Industry Co., Ltd. 23,059,972.79 Sanxia Yunchuan Three Gorges Hydropower Development Co 750,000,000.00 Total 825,440,000.00 426,218,300.97

5.12 Loans and advances

5.12.1 Situation of loans and advances according to personal and business distribution

Item Dec. 31, 2014 Dec. 31, 2013 Loans and advances 2,112,500,000.00 20,000,000.00 loss˖Loan loss reserve 15,877,500.00 Book value of loan loss reserve: 2,096,622,500.00 20,000,000.00

Details of loans and advances:

Company Balance Yunnan Coal Chemical Industry Group Co., Ltd. 300,000,000.00 Kunming Bing Kun Jewelry Co., Ltd 22,500,000.00 Yunnan Zi Yuan Investment Co., Ltd. 300,000,000.00 Xishuangbanna Zhongyuan auto sales Service Co., Ltd. 12,000,000.00 Yunnan cultural industry investment holding Group Ltd 200,000,000.00 Kunming Saiboxing flower garden limited liability company 18,000,000.00 Kunming Shenzhou Tianyu Real Estate Co. Ltd. 100,000,000.00 Yew architectural design co., LTD 70,000,000.00 Yunnan Yujiabao man-made board co., LTD 60,000,000.00 Honghe qianshan mounta Xishuangbanna Zhongyuan auto sales Service 30,000,000.00 Co., Ltd.in bioengineering co., LTD Fujian taihe investment co., LTD 300,000,000.00 Sichuan Trust. Co,Ltd 100,000,000.00 Gansu province industrial group co., LTD. 450,000,000.00 Jiangsu wuxi sun real estate co., LTD 150,000,000.00 Total 2,112,500,000.00

5.12.2 Loan loss reserve

Dec. 31, 2014 Dec. 31, 2013 Item Single Combination Single Combination Beginning balance     Provision of 2014  15,877,500.00   Transfer out of 2014 Cancel after verification of 2014 Back to 2014 —Take back due to sell loans and advances —Loans and advances for discounted value to rise  —Other factors leading to the reversal  Dec. 31, 2014 15,877,500.00

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– F-246 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.13 Financial assets available for sale

Item Dec. 31, 2014 Dec. 31, 2013

Bonds available for sale  

Equity instruments available for sale 8,692,835,969.27 7,973,103,369.27

Others 384,300,000.00

Total 9,077,135,969.27 7,973,103,369.27

Details of equity instruments available for sale as follow:

Name of the invested organization Dec. 31, 2014 Dec. 31, 2013

Taiwan Yunnan Industrial Park Cci Capital Ltd 500,000.00 500,000.00

Yunnan Huadian Ludila hydropower Co., Ltd. 228,160,000.00 183,200,000.00

Yunnan Metallurgical Group 2,000,000,000.00 2,000,000,000.00

Yunnan Coal Chemical Industry Group Co., Ltd 1,000,000,000.00 1,000,000,000.00

The sky of Refco Group Ltd 3,000,000,000.00 3,000,000,000.00

Yunnan SDIC Dachaoshan Hydropower Co. Ltd. 177,000,000.00 177,000,000.00

Yunnan Jinsha River Hydropower Development Co., Ltd. 685,600,000.00 592,000,000.00

Datang Guanyinyan Hydropower Development Co., Ltd. 468,060,000.00 351,060,000.00

Huaneng Yunnan Longkaikou Electricity Co., Ltd 49,740,000.00 45,660,000.00

Jin'anqiao Hydropower Station Co. Ltd. 250,864,000.00 250,864,000.00

China Electric Power Co., Ltd. 147,086,900.00 147,086,900.00 The Red River in Yunnan Datang International Power 63,604,469.27 63,604,469.27 Generation Co. Ltd Yunnan Dongyuan coal and Electricity Co., Ltd. 131,628,000.00 131,628,000.00

Kunming high pressure valve manufacturing Co., Ltd. 2,500,000.00

Yunnan Yunwei acetylene chemical Co. Ltd. 18,000,000.00 18,000,000.00

Yunnan Province Forestry Investment Co., Ltd 10,000,000.00 10,000,000.00

Anning City loan Limited by Share Ltd 33,000,000.00

Yunnan state owned industry investment center (limited 9,000,000.00 partnership) Kunming Longxing asset management plan investment 259,572,600.00 centre Yunnan state owned industry investment center (limited 100,000,000.00 partnership) Yunnan Ruili Nanping rural commercial Limited by Share 11,020,000.00 Ltd Tianjin Jin ChengYu Medicine Technology Co., Ltd. 50,000,000.00 (limited partnership) Total 8,692,835,969.27 7,973,103,369.27

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– F-247 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.14 Long-term equity investment

5.14.1 Classifications of long-term equity investment

Item Dec. 31, 2013 Change of crease or decrease Dec. 31, 2014 Investment to subsidiaries    Investment to associated enterprises 13,992,786,709.33 4,051,145,947.37 18,043,932,656.70 Investment to joint ventures 19,871,949.90 -19,871,949.90 Other equity investment Total 14,012,658,659.23 4,031,273,997.47 18,043,932,656.70 less: Prevision for long term equity investment 1,802,121.59 1,802,121.59 impairment Net value of long-term equity investment 14,010,856,537.64 4,031,273,997.47 18,042,130,535.11

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– F-248 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.14.2 Details of long-term equity investment

Depreciation Depreciation Name of the invested Change of crease Investment Cash bonus of Accounting method Cost of investment Dec. 31, 2013 Dec. 31, 2014 reserves on reserves of organization or decrease proportion (%) 2014 Dec. 31, 2014 2014 1. Joint venture  15,000,000.00 19,871,949.90 -19,871,949.90      Yunnan energy investment Youneng Equity method 15,000,000.00 19,871,949.90 -19,871,949.90  50    Technology Co Ltd 2.Associated  13,573,943,434.40 13,992,786,709.33 4,051,145,947.37 18,043,932,656.70     enterprises Yunnan Huadian Nujiang River Hydropower Equity method 148,575,924.22 161,285,004.24  161,285,004.24 30    Development Co., Ltd. Yunnan Nari Electric Equity method 3,500,000.00 3,507,011.74 524,999.97 4,032,011.71 35    Technology Co. Ltd

– F-249 Yunnan Zhengxiong Dongyuan Coal Equity method 123,806,466.66 107,516,358.51 -28,496,987.25 79,019,371.26 26    Industry Co., Ltd. Yunnan Huaneng Lancang River Hydropower Equity method 7,976,459,693.82 9,085,824,879.78 1,490,243,662.56 10,576,068,542.34 31   816,400,000.00 Development Company In Xuanwei Power generation limited Equity method 268,369,281.29   - 34    liability company Yunnan Huadian Xunjiansi Power Co. Equity method 77,959,079.92 22,063,017.07 -22,063,017.07 - 35    Ltd. Yunnan Huadian Zhenxiong Power Equity method 277,922,600.00 184,308,889.77 -40,240,954.94 144,067,934.83 35    Generation Co. Ltd. China Electric Power Equity method 280,922,591.08 117,089,924.15 -85,503,399.98 31,586,524.17 45    Co. Ltd. Kaiyuan Luoping Dongyuan Equity method 211,078,245.58 190,838,905.04 -3,890,512.89 186,948,392.15 49    Coal Industry Co., Ltd. Sanxia Jinshajiang Chuanyun Equity method 3,000,000,000.00 3,208,328,020.65 2,426,471,540.64 5,634,799,561.29 15   467,696,051.55 Hydropower

ㅜ67亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Depreciation Depreciation Name of the invested Change of crease Investment Cash bonus of Accounting method Cost of investment Dec. 31, 2013 Dec. 31, 2014 reserves on reserves of organization or decrease proportion (%) 2014 Dec. 31, 2014 2014 Development Co., Ltd. Yunnan Zhonghui Equity method 5,000,000.00 6,162,832.92 -223,716.71 5,939,116.21 40   1,046,549.63 Tendering Co. Ltd Sanxiu Jinshajiang Chuanyun Equity method 1,050,000,000.00 750,000,000.00 300,000,000.00 1,050,000,000.00 15    Hydropower Development Co., Ltd. Yunnan energy investment industrial Equity method 8,000,000.00 7,992,960.21 9,660,603.59 17,653,563.80 40    investment Co. Ltd. Yunnan Si fang Equity method 2,480,000.00 1,802,121.59  1,802,121.59 25 1,802,121.59   Chemical Co., Ltd Yunnan dianneng Sinanjiang Equity method 109,270,375.83 127,965,843.89 199,381.82 128,165,225.71 39    Hydropower

– F-250 Development Co. Ltd. Agricultural Bank (Beijing) Investment Equity method 14,700,000.00 14,997,263.77 -3,694,495.36 11,302,768.41 49    Fund Management Company Limited Yunnan China Oil & Equity method 12,000,000.00  10,467,018.99 10,467,018.99 40    Gas Co., Ltd. Fu Hai Investments Equity method 3,103,676.00 3,103,676.00 -3,103,676.00  25    International Ltd Yimen Wanfeng Energy Development Equity method 795,500.00  795,500.00 795,500.00 20    Co. Ltd Total  13,588,943,434.40 14,012,658,659.23 4,031,273,997.47 18,043,932,656.70  1,802,121.59  1,285,142,601.18

⌘˖˄1˅Yunnan Huadian Nujiang River hydropower development limited company is still in the construction phase;

˄2˅Guodian xuanwei power generation co., LTD accumulated losses, net assets is less than zero, the company will be a long-term investment writedowns to zero˗

˄3˅Yunnan Sifang chemical industry co., LTD. has stopped the production and business operation, the company for its long-term investment has a full provision for impairment

loss

ㅜ68亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.15 Fixed assets Increase Decrease Categories Dec. 31. 2013 Dec. 31. 2014 in 2014 in 2014 1.Total original value 8,572,985,750.34 898,661,401.10 49,460,171.99 9,422,186,979.45 including: Buildings 7,092,613,648.24 479,155,675.42 38,780,106.06 7,532,989,217.60 Machinery 1,385,006,592.76 380,878,148.35 8,961,747.08 1,756,922,994.03 Vehicles 54,030,747.83 14,972,086.12 326,467.73 68,676,366.22 Office appliance and equipment 41,228,053.95 19,899,213.77 1,391,851.12 59,735,416.60 Other fixed assets 106,707.56 3,756,277.44 3,862,985.00

2.Total accumulated depreciation 781,396,651.52 329,753,820.77 12,591,188.38 1,098,559,283.91 including: Buildings 433,075,624.07 237,976,325.34 6,002,502.27 665,049,447.14 Machinery 299,860,389.55 77,131,861.30 5,108,930.64 371,883,320.21 Vehicles 28,532,856.40 7,115,276.04 309,387.24 35,338,745.20 Office appliance and equipment 19,895,401.36 7,225,270.97 1,170,368.23 25,950,304.10 Other fixed assets 32,380.14 305,087.12 337,467.26

3.Total provision for impairment

4.Total net book value 7,791,589,098.82 8,323,627,695.54 including: Buildings 6,659,538,024.17 6,867,939,770.46

Machinery 1,085,146,203.21 1,385,039,673.82

Vehicles 25,497,891.43 33,337,621.02

Office appliance and equipment 21,332,652.59 33,785,112.50

Other fixed assets 74,327.42 3,525,517.74

ㅜ69亥

– F-251 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.16 Construction in progress 5.16.1 Situation of construction in progress Project investment Interest including: Increase Transferred to accounted Progress capitalization 2014 interest Source of Dec 31, 2014 Item Dec. 31. 2013 Other decrease in 2014 fixed assets for the of project accumulated capitalization funds balance proportion of amount amount the budget Total 4,008,475,694.77 2,175,399,041.12 598,372,474.70 115,614,853.31 208,927,798.54 78,929,259.96 5,469,887,407.88 including: Projects with

relatively large amount Project of Guanyinshan 2,221,625,609.84 585,958,288.26 2,807,583,898.10 Coal Mine Self - Office building project 466,541,726.59 82,844,977.07 26,437,240.12 13,237,872.53 549,386,703.66 financing Project of Dayakou Power Self - 348,305,989.57 151,492,001.40 65,714,326.81 18,763,895.69 499,797,990.97 Plant financing Self - Luxi wind power project 32,938,178.58 310,241,559.85 8,523,122.10 6,862,700.00 6,862,700.00 334,656,616.33 financing – F-252 Project of Zhenxiong Self - 221,460,722.12 11,251,630.41 15,334,922.23 7,011,537.77 232,712,352.53 Niuchang-Yigu Coal Mine financing Self - Lao Jixiang cement plant 3,856,393.29 226,830,024.54 824,929.55 824,929.55 230,686,417.83 financing Xuanwei coal gangue Self - 206,516,871.40 28,892,240.50 12,642,503.94 960,682.44 53,306,758.30 11,111,010.78 221,805,925.52 power plant project financing Fangzhou Qianyuan coal Self - 78,566,241.59 5,879,905.41 9,045,594.56 2,702,239.76 84,446,147.00 mine project financing Self - Shikan mining area 54,082,066.63 54,082,066.63 financing Self - Yujingshan mining area 47,643,677.08 47,643,677.08 financing Self - Dajingou mining area 45,274,036.31 45,274,036.31 financing Self - Nanrongtianpower station 468,895.00 44,405,896.99 44,874,791.99 financing Plant regeneration and Self - 44,710,298.76 44,710,298.76 transformation financing Self - Natural gas project 44,208,630.25 4,639,694.60 596,483.32 596,483.32 39,568,935.65 financing Self - Mahe mining area 34,245,457.61 34,245,457.61 financing Self - Dayao ower project 5,358,539.58 27,345,755.85 1,011,824.91 1,011,824.91 32,704,295.43 financing ㅜ70亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.16.2 Construction-in-process depreciation reserves˖

Increase Decrease Provision for Item Dec. 31. 2013 Dec. 31. 2014 in 2014 in 2014 reasons Total 57,122,131.81 57,122,131.81 including:Preliminary There is possible 57,122,131.81 57,122,131.81 exploration cost assets impairment The subsidiary of the company Yunnan Diandong coal company in xuanwei include Baoshan districtθTangjia Village θBaicao lawn, eight pieces of coal resources, because in 2013 the government introduced a policy freeze for prospecting, so the eight blocks resources the early stage of the prophase survey fee and other expenses (artificial cost travel entertainment expenses, etc.) 2013 Xuanwei county land and resources bureau to the coal resources as the support projects in the department of homeland WuMengShan report, result in Yunnan Diandong coal company prophase work is not recognized, upfront investment costs are unlikely to recover until December 31, 2014 is not continuous The Yunnan Diandong coal company decided to a full provision for impairment of RMB 57122131.81.

5.17 Construction materials

Item Dec. 31. 2013 Increase in 2014 Decrease in 2014 Dec. 31. 2014 Special-purpose material 3,223,932.69 228,532.70 9,680.00 3,442,785.39 Special-purpose equipment 87,566,182.25 81,246,596.81 128,587,989.15 40,224,789.91 Other construction materials 1,126,816.48 123,050.13 1,249,866.61 Total 91,916,931.42 81,598,179.64 128,597,669.15 44,917,441.91

5.18 Disposal of fixed assets

Item Dec. 31. 2014 Dec. 31. 2013 Reason of disposal Jianglin Pickup truck 9,869.10 Nonexistence Disposal of electronic equipment 11,201.56 More than use fixed number of year Total 21,070.66

5.19 Intangible assets

Increase Decrease Item Dec. 31. 2013 Dec. 31. 2014 in 2014 in 2014 1.Total original cost 287,743,294.21 154,248,959.52 441,992,253.73 Land use rights 167,800,876.73 21,616,681.89 189,417,558.62 Software license 18,800,901.48 2,123,408.21 20,924,309.69 Mining rights 60,632,854.00 52,443,680.53 113,076,534.53 Exploration rights 40,508,662.00 40,508,662.00 Patent rights 78,065,188.89 78,065,188.89 2.Total accumulate amortization 13,593,547.71 17,966,224.76 31,559,772.47 Land use rights 7,210,745.44 3,239,179.42 10,449,924.86 Software license 4,389,191.30 4,181,846.11 8,571,037.41 Mining rights 1,993,610.97 3,413,179.17 5,406,790.14 Exploration rights Patent rights 7,132,020.06 7,132,020.06 3.Total provision for impairment 137,716.00 137,716.00

ㅜ71亥

– F-253 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Increase Decrease Item Dec. 31. 2013 Dec. 31. 2014 in 2014 in 2014 Land use rights Software license 137,716.00 137,716.00 Mining rights Exploration rights Patent rights 4.Total net book value 274,012,030.50 410,294,765.26 Land use rights 160,590,131.29 178,967,633.76 Software license 14,273,994.18 12,215,556.28 Mining rights 58,639,243.03 107,669,744.39 Exploration rights 40,508,662.00 40,508,662.00 Patent rights 70,933,168.83 Note: by checking the intangible assets item by item, the net realizable values were larger than book values, therefore no provision for impairment needed to be prepared.

5.20 Development expenditure

Increase Decrease in 2014 in 2014 Dec. 31. Dec. 31. Item Internal Accounted 2013 Confirmed as 2014 development Others into current profit or intangible assets spending loss. Software and systems 3,523,770.04 1,051,490.93 525,527.12 1,946,751.99 development Total 3,523,770.04 1,051,490.93 525,527.12 1,946,751.99

5.21 Goodwill

Impair Impair ment ment loss Name of the invested Source Increase Decrease Dec. 31. 2013 loss on Dec. 31. 2014 on organization in 2014 in 2014 Dec. 31. Dec. 2013 31. 2014 Yunnan Baoshan Supa River 54,191,005.16 54,191,005.16 Hydropower Development Co. Yunnan Fugong Huatai Electric Power Development 26,043,717.69 26,043,717.69 Co. Ltd Fuming Fengshun Natural 3,380,860.35 3,380,860.35 Gas Development Co. Ltd. Not under the Yuxi Dongfang Industry Co., same control 1,014,653.77 1,014,653.77 Ltd. enterprise mergerr Not under the Zhaotong Fengshun City same control 49,575,659.69 49,575,659.69 Pipeline Gas Co., Ltd. enterprise mergerr Not under the Xuanwei Fengshun Gas same control Development Co., Ltd. Xuanwei 22,734,254.21 22,734,254.21 enterprise City mergerr Total 83,615,583.20 73,324,567.67 156,940,150.87 After inspection, the company's goodwill does not exist.

ㅜ72亥

– F-254 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.22 Long-term prepaid expenses

Increase Amortization Other Reasons of Item Dec. 31. 2013 Dec. 31. 2014 in 2014 in 2014 reduction other reduction Integration of resources 18,197,127.58 824,965.54 19,022,093.12

The upfront cost of 9,305,434.85 310,000.00 8,597,834.06 1,017,600.79 investment Renovation cost 1,316,818.40 1,965,141.52 1,513,356.50 1,768,603.42

Investment for suspending operation and reorganizing 1,622,406.98 1,622,406.98 projects Rental expense 1,156,835.09 22,663,651.20 11,681,020.04 12,139,466.25

Rental expense of telecommunication line in 136,704.00 51,264.00 85,440.00 the video conference room Software license and 202,999.99 116,000.04 86,999.95 upgrading fee Aggregate mining rights 238,669.99 311,320.75 238,669.99 311,320.75

Others 1,233,657.92 350,595.91 371,996.22 734,899.78 477,357.83

Total 33,410,654.80 26,425,674.92 22,570,140.85 21,379,399.88 15,886,788.99

5.23 Deferred income tax assets and deferred income tax liabilities The confirmed deferred income tax assets and deferred income tax liabilities˖

Dec. 31. 2014 Dec. 31. 2013 Item Deferred Deductible/taxable Deferred Deductible/taxable income tax temporary income tax temporary assets/liabilities differences assets/liabilities differences 1.Deferred income tax assets 11,064,822.15 50,691,883.89 1,636,324.93 13,338,732.85 Impairment of assets 7,720,851.50 36,505,848.56 1,444,317.15 12,570,701.73 Staff education funds 942.75 3,770.99 192,007.78 768,031.12 Pre-tax losses 758,694.82 3,844,932.02 Employee compensation 465,903.50 1,863,614.00 No undisturbed internal transaction gains and losses 2,118,429.58 8,473,718.32 2. Deferred income tax liabilities 18,780,089.07 75,120,356.28 18,780,089.07 75,120,356.28 Value of trading financial instruments and derivative

instrument Changes in fair value of financial assets available for sale 18,780,089.07 75,120,356.28 18,780,089.07 75,120,356.28 included in caitial reserve

5.24 Other non-current assets

Item Dec. 31. 2013 Dec. 31. 2014

Upfront cost to be transferred in investment 152,071,039.93 154,343,207.29

Entrusted loan 38,736,000.00 38,736,000.00

Borrows all to borrow - long-term borrowing 20,000,000.00

Other long-term assets 43,209,790.81 190,246,217.22

Total 234,016,830.74 403,325,424.51

ㅜ73亥

– F-255 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.24.1 Details of upfront cost to be transfer in investment

Project Dec. 31. 2013 Increase of 2014 Decrease of 2014 Dec. 31. 2014 Project of Nanfeng River, Laos 14,215,176.11 14,215,176.11

Project of Pa Mong, Laos 326,415.83 326,415.83

Project of Xifannuo 363,564.69 363,564.69

Project of Selalong 152,948.38 152,948.38

Project of Laos Sepone gold mine – Saravane 115KV double-circuit transmission 5,386,838.13 595,726.83 5,982,564.96 lines Project of Nuochangka River, Burma 111,385,671.67 17,173,158.15 128,558,829.82

Project of PLTA Meranti Utara power plant 1,314,074.48 1,221,206.37 2,535,280.85

Investment to Laos Ji Xiang by Xipu 14,406,286.70 13,913.01 14,420,199.71 Investment Co., Ltd. Preparatory project team of Nujiang 1,773,012.32 1,773,012.32

Pre project cost of Jinshajiang 2,900,000.00 2,900,000.00

Project of Equipment manufacturing industrial park of the comprehensive bonded 449,836.57 449,836.57 zone,Mengzi Project of Dianzhong new industrial park 1,118,547.00 1,118,547.00

Project of Zhihui Yungu cloud Computing 775,000.00 775,000.00 Cente Project of Dianxi(Baoshan) equipment 350,000.00 350,000.00 manufacturing Industrial Park Total 152,071,039.93 21,850,336.31 19,578,168.95 154,343,207.29 less: Provision for impairment

Total 152,071,039.93 21,850,336.31 19,578,168.95 154,343,207.29

5.24.2 Details of entrusted loans

Increase of Decrease of Dec. 31. 2013 Dec. 31. 2014 Borrower 2014 2014 Yunnan Huadian Nujiang River Hydropower 38,736,000.00 38,736,000.00 Development Co., Ltd. Total 38,736,000.00 38,736,000.00 less: Provision for impairment Total 38,736,000.00 38,736,000.00

5.24.3 Other Long-term assets

Item Dec. 31. 2013 Increase of 2014 Decrease of 2014 Dec. 31. 2014 Assets of Shugentian Coal Mine 43,209,790.81 113,079.00 43,322,869.81 Coal resource integration fee of 24,000,000.00 24,000,000.00 Bailonghe ˄Ċ˅ To deduct input tax 122,923,347.41 122,923,347.41 Total 43,209,790.81 147,036,426.41 190,246,217.22 Note: In 2010, Yunnan Provincial Power Investment Eastern Yunnan Coal Co., Ltd. (the fourth-level subsidiary of the Company) has signed an intentional contract with Shizong Hengjin Commerce Co., Ltd. to transfer its Shugentian Coal Mine to Shizong Hengjin Commerce Co., Ltd. the tentatively determined price was 25,860,000 yuan. By the end of 2013, the Company has actually received 23,530,000 yuan. The Shugentian Coal Mine is the state–owned assets, and the transferring procedure was unfinished, therefore the assets of Shugentian coal mine (including inventories, fixed

ㅜ74亥

– F-256 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements assets, intangible assets and long-term prepaid expenses) were temporarily recorded into ‘other non-current assets’ account in 2013, and adjustment will be made when transferring procedure is accomplished in the following years. In addition, the increase of intangible assets were the mining rights cost paid in accordance with the Circular about Mining Rights Charge (YunGuoTuZiCaiKuangJia [2013] No. 031) issued by Yunnan Office of Land and Resources.

5.25 Assets with limited ownership

Categories Dec. 31. 2013 Increase of 2014 Decrease of 2014 Dec. 31. 2014 1.Assets for security 1,144,033,795.83 112,916.00 39,564,452.16 1,104,582,259.67 Qiezishan power plant level-1 197,271,736.89 5,876,789.76 191,394,947.13 Chaoyang power plant level-2 216,081,696.72 9,548,447.16 206,533,249.56 Wunihe power plant level-3 104,566,113.28 4,577,204.88 99,988,908.40 Ajiutian power plant level-4 269,419,263.79 10,567,585.08 258,851,678.71 Tenglongqiao power plant level-2 87,117,536.44 4,794,102.36 82,323,434.08 Longchuanjiang power plant level-1 59,767,737.69 4,200,322.92 55,567,414.77 Xintangfang fixed assets 209,809,711.02 112,916.00 209,922,627.02 2. Other reasons caused limited ownership of assets Total 1,144,033,795.83 112,916.00 39,564,452.16 1,104,582,259.67 ˄1˅The owenership of Qiezishan power plant level-1, Chaoyang power plant level-2, and Ajiutian power plant level-4 (which are the subsidiaries of Yunnan Baoshan Supa River Hydropower Development Co., Ltd.) are restricted as they were respectively mortgaged to Rural Credit Cooperatives-Longling Branch, China Construction Bank-Longling County sub Branch and Bank of China- Baoshan City Branch for loans. ˄2˅Tengchong Sudian Longchuan River Hydropower Development Co., Ltd. (a subsidiary of Yunnan Baoshan Supa River Hydropower Development Co., Ltd.) has raised a loan of 40,000,000 yuan from Bank of China Co., Ltd.-Tengchong Branch, meanwhile a supplementary contract has been signed that the entire asset and the electricity charging right of Longchuanjiang power plant level-1 will be mortgaged and pledged upon complishment of construction. The mortgage and pledge is not yet made, and the loan is so far guaranteed by the Company. ˄3˅The subsidiary of the Yunnan Baoshan Supa River Hydropower Development Co., Ltd., Tenglongqiao power plant level-2 has sold part of their equipments (original value 288,266,000 yuan) to Minsheng Financial Leasing Co., Ltd. and leased back. ˄4˅In 2013, the Yunnan Baoshan Supa River Hydropower Development Co., Ltd. has pledged its 100% charging rights of Wuni River Power Plant to Bank of China Co., Ltd.-Baoshan Branch, and pledging for the principal (which amounts to 80,000,000 yuan) of a long-term loan raised from Bank of China Co., Ltd.-Yunnan Branch. ˄5˅Yunnan Invest Group Lincang Hydropower Develop Co., Ltd. has done the following borrowings: A. It has signed a loan contract (No. 2006-005) with Bank of China Co., Ltd.-Baoshan Branch on Dec. 19, 2006, with a borrowing amount of 98,000,000 yuan. B. It has signed a contract (No. 2012 Ying Dai Zi 054) with Bank of China-Yunnan Branch on Dec. 18,2012 to borrow 250,000,000 yuan. The actual withdrawal was 100,000,000 yuan. Guarantee contract was signed that these two borrowings were guaranteed by Yunnan Provincial Power Investment Co., Ltd. and Guangdong Electric Power Development Co., Ltd., which are the shareholders of Yunnan Invest Group

ㅜ75亥

– F-257 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Lincang Hydropower Develop Co., Ltd. As mentioned in the contract, the guarantees from the shareholders were to be invested in a 51% and 49% ratio. Therefore Yunnan Provincial Power Investment Co., Ltd. has provided 51% of the guarantees, which was 49,980,000 yuan and 127,500,000 yuan, whereas Guangdong Electric Power Development Co., Ltd. has invested 49% of the guarantees, which were 48,020,000 yuan and 122,500,000 yuan. In addition, the Company has made counter guarantee to the two borrowings and the invested amounts by the fixed assets of the New Tangfan power plant. ˄6˅The subsidiary of the Company, Yunnan Provincial Power Investment Co., Ltd. has pledged its acquired 50% shares of Yunnan Invest Group Weixin Zhaxi Power Co., Ltd. to apply for a 600,000,000 yuan short-term loan from Bank of China Co., Ltd.-Yunnan Branch. ˄7˅The Company has pledged 6.67% shares of Yunnan Metallurgical Group Co., Ltd. and 10% shares of SDIC (State Development & Investment Corp.) Yunnan Dachao Mountain Hydropower Co., Ltd. to AVIC Trust Co., Ltd. for a 3,000,000,000 yuan loan. The term of the loan is from Sep. 10, 2012 to Sep. 9, 2015. ˄8˅The Company has pledged its 15% shares of Yunnan Hydrolancang Hydropower Development Company to China Minsheng Bank-Kunming Branch as a counter guarantee for the Group Company, the term is from Aug. 30, 2012 to Aug. 28, 2018.The Company has pledged its 7% shares of Yunnan Hydrolancang Hydropower Development Company to Huatai Insurance Group Co., Ltd. as a counter guarantee for the Group Company, the term is from Aug. 30, 2012 to Aug. 28, 2018. ˄9˅The level 3 subsidiary Zhaotong City Fengshun Pipeline gas co., LTD borrowed Mortgage loan RMB 883000.00 from Yunnan zhaotong zhaoyang rural cooperative bank with City of Zhao Guoyong (2007) No. 00032 the right to use land of the original value of the book is 685098.87 yuan as a mortgage. The level 3 subsidiaryXuanwei City Fengshun Pipeline gas co., LTD borrowed Mortgage loan RMB 12,000,000.00 from Agricultural bank of China co., LTD., xuanwei sub-branch with City of Xuan Guoyong(2012) No. 001214 the right to use land of the original value of the book is 7,670,561.58 yuan as a mortgage.

5.26 Short-term loans 5.26.1 Classification of short-term loans

Item Dec. 31. 2014 Dec. 31. 2013 Credit loans 2,516,549,127.24 2,650,000,000.00 Mortgage loans 12,000,000.00 390,610,351.00 Guaranteed loans 1,250,000,000.00 1,090,000,000.00 Pledge loans 265,000,000.00 696,000,000.00 Total 4,043,549,127.24 4,826,610,351.00

5.26.2 The following are the details of short-term loans:

Lenders Amount Starting and ending date Lending rate Type of loan Agricultural Bank of China-Xuanwei City sub 12,000,000.00 2014/7/10-2015/7/10 7.80% Mortgage loan Branch China Guangfa Bank- Kunming City Longhua Guaranteed 100,000,000.00 2014/10/14-2015/4/13 6.16% Road sub Branch loan Guaranteed Kunming Rural Credit Cooperative Union 60,000,000.00 2014/6/30-2015/6/26 6.00% loan Hang Seng Bank(HK)- Kunming City sub Guaranteed 50,000,000.00 2014/11/26/2015/5/26 6.00% Branch loan ㅜ76亥

– F-258 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Lenders Amount Starting and ending date Lending rate Type of loan Guaranteed Industrial Bank- Kunming City sub Branch 70,000,000.00 2014/7/16-2015/7/15 6.90% loan Guaranteed Huaxia Bank- Kunming City sub Branch 40,000,000.00 2014/12/10-2015/12/10 6.16% loan China merchants bank- Kunming City sub Guaranteed 300,000,000.00 2014/5/21-2015/5/21 7.80% Branch loan Guaranteed Agricultural Bank of China- Weixin Branch 30,000,000.00 2014/12/8-2015/12/7 6.16% loan Agricultural Bank of China Guaranteed 200,000,000.00 2014/4/23-2015/4/22 6.30% -Kunming City Tuodong sub Branch loan Agricultural Bank of China Guaranteed 200,000,000.00 2014/6/10-2015/6/9 6.30% -Kunming City Tuodong sub Branch loan China Minsheng Bank- Kunming City sub Guaranteed 200,000,000.00 2014/5/7-2015/5/6 7.50% Branch loan China merchants bank- Kunming City 200,000,000.00 2014/3/28-2015/3/27 7.00% Pledge loan Xingkelu Road sub Branch China Guangfa Bank- Kunming City 65,000,000.00 2014/2/18-2015/2/17 6.60% Pledge loan Longhua Road sub Branch PingAnBank – Jingu International Trust 23,000,000.00 2014/9/23-2015/9/23 6.90% Credit loan PingAnBank – Jingu International Trust 23,000,000.00 2014/10/24-2015/1/24 6.90% Credit loan PingAnBank – Jingu International Trust 12,000,000.00 2014/12/1-2015/11/30 6.90% Credit loan Rural Credit Cooperatives-Huaning County 23,000,000.00 2014/9/25-2015/9/25 6.60% Credit loan sub Branch Bank of China-Yunnan Province sub 300,000,000.00 2014/9/26-2015/9/25 6.60% Credit loan Branch China Minsheng Bank- Kunming City 100,000,000.00 2014/12/5-2015/12/5 6.16% Credit loan Minsheng Road sub Branch China Construction Bank-Kunming City 100,000,000.00 2014/12/31- 2015/12/31 5.60% Credit loan Chengbei sub Branch Evergrowing Bank- Kunming City sub 200,000,000.00 2014/11/28-2015/11/28 5.60% Credit loan Branch Bank of Communications -Kunming City 200,000,000.00 2014/1/23- 2015/1/23 7.00% Credit loan Guandu sub Branch Bank of Communications -Kunming City 10,000,000.00 2014/1/23-2015/1/23 6.60% Credit loan Guandu sub Branch Bank of Communications -Kunming City 90,000,000.00 2014/5/29-2015/5/29 6.60% Credit loan Guandu sub Branch Agricultural Bank of China 100,000,000.00 2014/1/7-2014/1/6 6.00% Credit loan -Kunming City Tuodong sub Branch Agricultural Bank of China 100,000,000.00 2014/2/8-2015/2/8 6.00% Credit loan -Kunming City Tuodong sub Branch Agricultural Bank of China 50,000,000.00 2014/3/5-2015/3/4 6.12% Credit loan -Kunming City Tuodong sub Branch Agricultural Bank of China 100,000,000.00 2014/4/11-2015/4/10 6.12% Credit loan -Kunming City Tuodong sub Branch Agricultural Bank of China 50,000,000.00 2014/4/16-2015/4/15 6.12% Credit loan -Kunming City Tuodong sub Branch Bank of Communications –HK sub Branch 189,688,990.13 2014/2/17-2016/1/13 5.00% Credit loan China Construction Bank–HK sub Branch 188,881,320.77 2014/3/31-2015/3/3 5.00% Credit loan Nanyang Commercial Bank–HK sub 362,978,816.34 2014/11/27-2015/11/16 4.60% Credit loan Branch China merchants bank- Kunming City 200,000,000.00 2014/3/27-2015/3/27 7.20% Credit loan Xingkelu Road sub Branch Hang Seng Bank- Kunming City sub Branch 94,000,000.00 2014/9/30-2015/3/2 6.17% Credit loan Total 4,043,549,127.24   

ㅜ77亥

– F-259 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.27 Notes payable

Categories Dec. 31, 2014 Dec. 31, 2013

Commercial acceptance bills 84,348,864.00 93,384,034.51

Bank’s acceptance bills 168,830,358.04

Total 84,348,864.00 262,214,392.55

5.28 Accounts payable

Aging of account payable Dec. 31, 2014 Dec. 31, 2013

Within 1 year 1,266,921,848.44 832,200,778.77

1 to 2 years 154,715,176.77 360,460,683.85

2 to 3 years 123,703,257.92 88,007,609.01

Over 3 years 86,798,822.49 60,186,953.26

Total 1,632,139,105.62 1,340,856,024.89

5.28.1 Top 5 accounts payable balance of aging for more than a year Reason of Creditor unit Amount Aging non-reimbursed Construction land expropriation compensation of 43,358,241.33 Over 3 years Paid yearly Tenglongqiao power station-Level 2 1to 2 yearsǃOver 3 Yunnan Coalfield Geology Bureau 41,679,900.00 No settlement years Guangxi city industrial co., LTD 9,829,500.00 1 to 2 years No settlement

Kunming LingYunTian steel structure engineering co., LTD 6,867,378.00 1 to 2 years No settlement The Supahe river power station construction finishing 6,692,337.49 Over 3 years Paid after disposal reserved funds Total 108,427,356.82

5.29 Deposit received

Aging of deposit received Dec. 31, 2014 Dec. 31, 2013

Within 1 year 155,023,166.46 123,299,225.02

Over 1 year 16,252,287.82 132,750.17

Total 171,275,454.28 123,431,975.19

5.29.1 Top 5 deposit received balance of aging for more than a year˖

Creditor unit Amount Aging Reason of non-reimbursed

Honghe feng co., LTD 5,197,560.00 1 to 2 years No settlement

Kunming Tianercheng packaging materials co., LTD 2,638,866.00 1 to 2 years No settlement Within 1 yearǃ1 to Zhaotong Haohua real estate development co., LTD 2,072,800.00 No settlement 2 years Yunnan Jiaye industry &trade co., LTD 2,051,760.00 1 to 2 years No settlement Yuxi affordable housing investment and development 1,000,000.00 1 to 2 years No settlement co., LTD Total 12,960,986.00

ㅜ78亥

– F-260 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.30 Employee compensation payable

Item Dec. 31. 2013 Increase of 2014 Decrease of 2014 Dec. 31. 2014 1.Short-term compensation 32,508,508.60 380,097,209.21 384,471,048.16 28,134,669.65 2.After the departure of welfare 2,856,111.05 40,989,842.54 42,433,848.10 1,412,105.49 3.Dismiss welfare 66,806.27 66,806.27 4.Long-term employee compensation Total 35,364,619.65 421,153,858.02 426,971,702.53 29,546,775.14

5.30.1 Short-term compensation

Item Amount payable in 2014 Dec. 31. 2014 1.Wages and salaries, bonuses, 288,570,860.81 14,588,737.76 allowances and subsidies 2.Employee services and benefits 30,652,609.12 558,952.36 3.Social insurance 18,621,803.43 623,228.61 Includingφa.Medical insurance 15,115,859.41 177,857.02 b.Injury insurance premium 2,090,533.31 266,884.16 c. Maternity insurance 1,415,410.71 178,487.43 4.Housing accumulation fund 20,527,887.32 204,807.29 5.Labor union fee and employee 18,013,969.86 11,995,586.13 education fee 6.Non-currency welfare 7.Redemption for terminations of labor

contract 8.Others 3,710,078.67 163,357.50 Total 380,097,209.21 28,134,669.65

5.30.2 After the departure of welfare

Item The current payment amount 2014 ᒤ 12 ᴸ 31 ᰕᓄԈᵚԈ䠁仍 1.Basic endowment insurance 32,336,359.69 1,267,401.99 2.Unemployment insurance 3,693,591.98 68,642.70 3.Enterprise annuity payment 6,403,896.43 76,060.80 Total 42,433,848.10 1,412,105.49 5.30.3 Dismiss welfare The company due to terminate the labor relationship termination benefits provided by the RMB 66806.27 5.30.4 Other long-term employee benefits The company has no other long-term employee benefits

5.31 Taxes payable

Item Dec. 31. 2013 Payable in 2014 Paid in 2014 Dec. 31. 2014 Value-added tax -406,497,895.69 377,065,532.89 283,214,418.24 -312,646,781.04 Business tax 8,622,826.21 16,397,059.08 20,897,580.04 4,122,305.25 Resources tax 2,635.49 335,014.56 208,284.45 129,365.60 City maintenance and 1,401,827.19 4,406,296.30 4,904,331.63 903,791.86 construction tax Corporate income tax 21,258,938.92 52,019,016.39 29,095,650.78 44,182,304.53 Extra-charges for 753,261.56 3,108,554.03 3,279,148.17 582,667.42 education ㅜ79亥

– F-261 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Item Dec. 31. 2013 Payable in 2014 Paid in 2014 Dec. 31. 2014 Local educational surtax 458,545.52 1,984,146.38 2,093,184.88 349,507.02 Individual income tax 2,142,055.09 15,305,504.37 16,275,223.80 1,172,335.66 Building taxes 1,742,295.00 1,597,584.40 144,710.60 Land use tax 9,467.25 1,845,566.31 1,855,033.56 Stamp duty 4,817,120.48 11,360,229.25 12,908,345.70 3,269,004.03 Farmland occupation tax 25,012,640.00 868,512.00 15,000,000.00 10,881,152.00 vehicle and vessel use 44,247.50 44,247.50 tax Water reserve ragion 1,002,004.79 6,322,082.52 6,555,595.23 768,492.08 construction fund Water resource fee 916,531.93 6,234,780.22 6,247,821.95 903,490.20 Withholding taxes 58,778.71 -7,745.96 51,032.75 Other taxes payable 11,302.55 46,992.58 43,933.52 14,361.61 Total -340,029,960.00 499,078,083.42 404,220,383.85 -245,172,260.43

5.32 Interest payable

Item Dec. 31, 2014 Dec. 31, 2013 Interest payable for entrusted loans 920,729.30 35,686.62 Interest payable for bank loans 89,271,377.39 20,302,623.64 Interest payable for corporation bonds 373,140,194.44 87,631,388.88 Interest payable for credit loans 3,497,813.57 778,050.33 Interest payable for guaranteed loans 483.53 Interest payable for other types of loans 7,865,649.98 Total 466,830,114.70 116,613,882.98

5.33 Dividends payable

Investors Dec. 31, 2014 Dec. 31, 2013 Notes Yunnan Investment Holding Group Co., Ltd. (the Group 380,000,000.00 380,000,000.00 Unpaid Company) Yunnan Baoshan Electric Power Co., Ltd 7,535,609.44 7,535,609.44 Unpaid Baoshan City State-owned Assets Management 1,264,390.56 1,264,390.56 Unpaid Limited Liability Company Yunnan Yunwei Co., Ltd 523,929.15 Unpaid Kunming WEISHI Science and Technology Co., Ltd 695,771.62 695,771.62 Unpaid The Chinese heavy industry (chongqing) sea wind power 3,400,000.00 Unpaid equipment co., LTD Total 392,895,771.62 390,019,700.77

5.34 Other accounts payable

Aging of accounts Dec. 31, 2014 Dec. 31, 2013 Within 1 year 135,629,012.40 108,037,572.22 1 to 2 years 75,992,563.67 131,918,203.93 2 to 3 years 78,013,303.10 49,679,165.45 Over 3 years 90,518,284.95 59,962,330.80 Total 380,153,164.12 349,597,272.40

ㅜ80亥

– F-262 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.34.1 Top 5 other accounts payable balance of aging for more than a year on Dec. 31, 2014:

Company Amount Aging Unpaid reason Within 1 yearȽ1 to 2 yearsȽOver Zhangdesheng 12,476,845.60 Current money 3 years Yunnan Juzheng investment co., LTD 8,000,000.00 1 to 2 years Yunnan Runyuan trade co., LTD 5,000,000.00 2 to 3 years Margin Yunnan Zhejiang plastic technology co., LTD 4,895,807.00 1 to 3 years Guarantee money Kunming Huayi energy engineering technology co., Generation of 4,200,000.00 2 to 3 years LTD advances Total 34,572,652.60

5.35 Non-current assets due within one year

Item Dec. 31, 2014 Dec. 31, 2013 Long-term loans due within 1 year 2,486,943,678.08 526,407,678.08 Bonds payable due within 1 year Long-term accounts payable due within 1 year Other long-term liabilities due within 1 year Total 2,486,943,678.08 526,407,678.08

Details of non-current assets are shown as follows:

Lenders Amount Rate Type of loan China Constuction Bank-Yunnan Province sub Branch 30,000,000.00 7.00% Guaranteed loan Fudian Band- Zhaotong City sub Branch 4,636,000.00 7.00% Mortgage loan China Import and Export Bank-Yunnan Province sub Branch 4,400,000.00 4.33% Credit loan China Constuction Bank-Kunming City Chengbei sub Branch 14,254,736.88 7.21% Credit loan Huaxia Bank-Kunming City Xinyun sub Branch 3,999,999.96 7.21% Guaranteed loan Huaxia Bank-Kunming City Xinyun sub Branch 6,352,941.24 7.21% Guaranteed loan Catic trust co., LTD 1,000,000,000.00 8.30% Pledge loans Catic trust co., LTD 300,000,000.00 7.00% Credit loan Xinye International trust co., LTD 1,000,000,000.00 6.00% Credit loan Bank of China-Lincang City sub Branch 2,800,000.00 5.90% Mortgage and pledge Bank of China-Lincang City sub Branch 7,000,000.00 5.90% Mortgage and pledge China Development Bank-Yunnan Province sub Branch 6,000,000.00 7.00% Guaranteed loan Rural Credit Cooperatives-Longlin County sub Branch 3,000,000.00 7.00% Mortgage loan Bank of China-Baoshan City sub Branch 20,000,000.00 6.00% Guaranteed loan China Constuction Bank- Longlin County sub Branch 28,500,000.00 6.00% Mortgage loan Agricultural Bank of China-Tengchong City sub Branch 1,000,000.00 7.00% Guaranteed loan China Minsheng Bank-Kunming City sub Branch 30,000,000.00 8.00% Guaranteed loan China Constuction Bank- Huize County sub Branch 15,000,000.00 7.00% Guaranteed loan China Constuction Bank- Luxi County sub Branch 10,000,000.00 7.00% Guaranteed loan Total 2,486,943,678.08  

ㅜ81亥

– F-263 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.36 Other current liabilities

Categories Dec. 31, 2014 Dec. 31, 2013

Short - term financing bonds 5,491,516,666.66 996,666,666.66

Total 5,491,516,666.66 996,666,666.66 Notes˖The Company has issued one-year financing bills amounts to 1 billion yuan in March 2014. The term of the bills is from Mar. 6, 2014 to Mar. 6, 2015, and the rate is 5.77%. The issuing cost was recorded into the par value of bonds payable. Marketing cost of 4,000,000 yuan which was paid to Bank of China was recorded in interest adjustment, and is to be amortized in one year. The Company has issued one-year financing bills amounts to 700 million yuan in May 2014. The term of the bills is from May 7, 2014 to May 7, 2015, and the rate is 5.59%. The issuing cost was recorded into the par value of bonds payable. Marketing cost of 2800,000 yuan which was paid to Bank of China was recorded in interest adjustment, and is to be amortized in one year. The Company has issued one-year Industrial Bank financing bills amounts to 600 million yuan in May 2014. The term of the bills is from May.29, 2014, to May 29, 2015, and the rate is 6.50%. The Company has issued one-year financing bills amounts to 1.2 billion yuan in August 2014. The term of the bills is from August. 22, 2014 to August, 22, 2015, and the rate is 5.10%. The issuing cost was recorded into the par value of bonds payable. Marketing cost of 4800,000 yuan which was paid to Construction bank was recorded in interest adjustment, and is to be amortized in one year. The Company has issued nine-months financing bills amounts to1 billion yuan in October 2014. The term of the bills is from October 24, 2014 to July, 20, 2015, and the rate is 4.50%. The issuing cost was recorded into the par value of bonds payable. Marketing cost of 3000,000 yuan which was paid to China merchants bank was recorded in interest adjustment, and is to be amortized in one year. The Company has issued nine-months financing bills amounts to1 billion yuan in October 2014. The term of the bills is from November 21, 2014 to August, 18, 2015, and the rate is 4.50%. The issuing cost was recorded into the par value of bonds payable. Marketing cost of 3000,000 yuan which was paid to Minsheng bank Minsheng bank was recorded in interest adjustment, and is to be amortized in one year.

5.37 Long-term loans

Item Dec. 31, 2014 Dec. 31, 2013

Credit loan 3,860,153,931.84 2,701,716,315.72

Mortgage loan 165,216,333.27 212,500,000.00

Guaranteed loan 3,853,390,000.00 1,618,386,274.47

Pledge loans 1,304,400,000.00 5,235,000,000.00

Total 9,183,160,265.11 9,767,602,590.19

ㅜ82亥

– F-264 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Details of long-term loans are shown as follows:

Lenders Amont Starting and ending date Lending Rate Type of loan Rural Credit Cooperatives-Zhaotong City sub 883,000.00 2013/9/9-2018/9/9 6.60% Mortgage Loan Branch Huaxia Bank-Kunming City Xinyun 32,000,000.08 2013/1/30-2023/1/30 7.21% Mortgage Loan sub Branch Huaxia Bank-Kunming City Xinyun 41,333,333.19 2013/2/17-2023/2/17 7.21% Mortgage Loan sub Branch China Constuction Bank- Longlin 80,000,000.00 2005/12/26-2017/12/26 5.90% Mortgage Loan County sub Branch Rural Credit Cooperatives-Longlin 11,000,000.00 2013/5/31-2016/5/30 6.77% Mortgage Loan County sub Branch Bank of China-Lincang City sub 29,400,000.00 2006/1/31-2018/12/25 5.90% Pledge loan Branch China Citic Bank-Kunming City 190,000,000.00 2014/1/2-2023/1/2 8.52% Pledge loan Guomao sub Branch China Development Bank-Guangdong Province sub 235,000,000.00 2013/4/23-2028/4/18 7.21% Pledge loan Branch China Development Bank-Yunnan 150,000,000.00 2013/4/19-2028/4/18 7.21% Pledge loan Province sub Branch SDIC TRUST COˊˈ LTD 400,000,000.00 2013/3/11-2016/3/11 8.00% Pledge loan Agricultural Bank of 300,000,000.00 2013/4/28-2028/4/18 7.21% Pledge loan China-Zhaotong City sub Branch China Development Bank-Guangdong Province sub 311,890,000.00 2012/3/27-2027/3/27 7.21% Guaranteed loan Branch China merchants bank-Kunming 300,000,000.00 2012/3/27-2027/3/27 7.21% Guaranteed loan City Xinkelu sub Branch China Development Bank-Yunnan 200,000,000.00 2012/3/27-2027/3/27 7.21% Guaranteed loan Province sub Branch Agricultural Bank of China—Weixin 90,000,000.00 2013/5/9-2016/5/8 6.46% Guaranteed loan County sub Branch Bank of China- Yunnan Province 164,000,000.00 2014/7/25-2034/7 6.88% Guaranteed loan sub Branch China Development Bank-Yunnan 30,000,000.00 2014/7/7-2034/6/4 6.46% Guaranteed loan Province sub Branch China Development Bank-Yunnan 100,000,000.00 2014/7/25-2034/6/4 6.46% Guaranteed loan Province sub Branch China Development Bank-Yunnan 30,000,000.00 2014/1/14-2034/6/4 6.46% Guaranteed loan Province sub Branch China Development Bank-Yunnan 30,000,000.00 2002/12/2-2034/6/4 6.46% Guaranteed loan Province sub Branch Bank of China-Baoshan City sub 70,000,000.00 2006/12/8-2022/12/7 5.90% Guaranteed loan Branch Bank of China-Tengchong City 6,000,000.00 2008/5/29-2017/5/28 6.29% Guaranteed loan sub Branch China Minsheng Bank-Kunming 170,000,000.00 2009/2/11-2023/2/10 6.55% Guaranteed loan City sub Branch Bank of China-Tengchong City 104,000,000.00 2009/3/31-2024/3/30 6.35% Guaranteed loan sub Branch China Agricultural Development Bank--Tengchong City sub 27,500,000.00 2008/1/31-2018/1/30 6.55% Guaranteed loan Branch Bank of China-Tengchong City 35,000,000.00 2007/1/15-2019/1/14 5.90% Guaranteed loan sub Branch China Life Asset Management Co. 1,500,000,000.00 2014/8/21-2021/8/20 7.21% Guaranteed loan China Construction Bank- Huize 335,000,000.00 2013/11/4-2026/11/3 6.55% Guaranteed loan County sub Branch China Construction Bank- Luxi 350,000,000.00 2014/2/24-2026/11/1 6.55% Guaranteed loan County sub Branch Export-Import Bank of 245,892,353.00 2014/12/3-2019/5/31 4.33% Credit loans China-Yunnan Province sub

ㅜ83亥

– F-265 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Lenders Amont Starting and ending date Lending Rate Type of loan Branch China Construction Bank-Kunming 2013/1/28δ2013/2/4ε 72,461,578.84 7.21% Credit loans City Chengbei sub Branch -2021/1/27 Evergrowing Bank-Kunming City 200,000,000.00 2014/11/28-2016/11/28 6.00% Credit loans sub Branch Rural Credit Cooperatives- 35,000,000.00 2013/12/19-2016/12/19 6.00% Credit loans Kunming City sub Branch PingAnBank- Kunming City Xinlong 700,000,000.00 2014/7/31-2016/7/31 6.90% Credit loans sub Branch Xinye International trust co., LTD 1,000,000,000.00 2014/12/11-2016/12/11 7.50% Credit loans Bank of China-Zhaotong City 850,000,000.00 2011/4/26-2022/4/26 6.55% Credit loans sub Branch CITIC Bank- Kunming City 360,000,000.00 2012/12/21-2022/12/21 8.19% Credit loans Guomao sub Branch PingAnBank- Kunming City sub 300,000,000.00 2014/9/25-2065/9/24 7.10% Credit loans Branch Bank of China- Yunnan Province 96,800,000.00 2006/12/8-2022/12/7 5.90% Credit loans sub Branch Total 9,183,160,265.11  

5.38 Bonds payable

Real Coupon Type of bond Duration interest Par value Adjustment in interest Dec. 31, 2014 rate rates 3-years bonds amounts 3 years 5.72% 6.06% 1,000,000,000.00 4,842,794.14 995,157,205.86 to 1 billion yuan 3-years bonds amounts 3 years 5.87% 6.21% 1,000,000,000.00 5,013,509.10 994,986,490.90 to 1 billion yuan 3-years bonds amounts 3 years 6.11% 6.45% 1,000,000,000.00 5,203,374.20 994,796,625.80 to 1 billion yuan 3-years bonds amounts 3 years 6.39% 6.73% 1,000,000,000.00 5,652,272.85 994,347,727.15 to 1 billion yuan 3-years bonds amounts 3 years 7.60% 7.94% 1,000,000,000.00 6,580,733.92 993,419,266.08 to 1 billion yuan 13-year bonds amounts 3 years 6.15% 6.47% 1,000,000,000.00 3,000,000.00 997,000,000.00 to 1 billion yuan 1.5 billion of 5 years 7.20% 7.54% 1,500,000,000.00 9,560,994.40 1,490,439,005.60 medium-term notes 1 billion of medium-term 5 years 6.00% 6.32% 1,000,000,000.00 3,000,000.00 997,000,000.00 notes 3-years bonds amounts 5 years 5.50% 5.50% 600,000,000.00 11,064,435.16 588,935,564.84 to 600million yuan Total   9,100,000,000.00 53,918,113.77 9,046,081,886.23 The Company has issued the year’s first phase of private placement note on 25th July 2013. The actual issued amount was 1 billion yuan, issuing cost 9 million yuan, term 3 years, fixed annual interest rate 5.72%, single interest to be paid once a year, penalty for overdue. The Company has issued the year’s second phase of private placement note on 14th April 2013. The actual issued amount was 1 billion yuan, issuing cost 9 million yuan, term 3 years, fixed annual interest rate 5.87%, single interest to be paid once a year, penalty for overdue The Company has issued the year’s third phase of private placement note on 5th September 2013. The actual issued amount was 1 billion yuan, issuing cost 9 million yuan, term 3 years, fixed annual interest rate 6.11%, single interest to be paid once a year, penalty for overdue. The Company has issued the year’s fourth phase of private placement note on 28th October 2013. The actual issued amount was 1 billion yuan, issuing cost 9 million yuan, term 3 years, fixed annual interest rate 6.39%, single

ㅜ84亥

– F-266 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements interest to be paid once a year, penalty for overdue. The Company has issued the year’s first phase of private placement note on 21th February2014. The actual issued amount was 1 billion yuan, issuing cost 9 million yuan, term 3 years, fixed annual interest rate 7.6%, single interest to be paid once a year, penalty for overdue. The Company has issued the year’s Citic bank non-public directional debt financing tools on 17th October2014. The actual issued amount was 1 billion yuan, issuing cost 9 million yuan. The first payment of 3 million yuan, the rest pay an annual 3 million,term 3 years, fixed annual interest rate 6.15%, single interest to be paid once a year, penalty for overdue. The Company has issued the year’s first phase of medium term note on 4th April 2014. The actual issued amount was 1.5 billion yuan, issuing cost 22.5 million yuan. The first payment of10.5 million yuan, the rest pay an annual 3 million, term 5 years, fixed annual interest rate 7.2%, single interest to be paid once a year, penalty for overdue. The Company has issued the year’s second phase of medium term note on 27th August 2014. The actual issued amount was 1 billion yuan, issuing cost 15 million yuan. The first payment of 3 million yuan, the rest pay an annual 3 million, term 5 years, fixed annual interest rate 6%, single interest to be paid once a year, penalty for overdue. The Company has issued bonds denominated in yuan on 21th October 2014 in HK. The actual issued amount was 600 million yuan, from 21th October 2014 to 21th October 2017, interest rate is 5.5%. The interest cost of bonds payable was recognized by actual interest rate method, and the actual interest rate was calculated according to the 28th October 2013 of the post-amortization cost, the interest rate, the interest payment duration and the due date. The interest cost of the year 2014 is recognized as 435,302,646.46 yuan.

5.39 Long-term accounts payable

Item Dec. 31, 2014 Dec. 31, 2013 Coupon rate˄%˅

Finance lease from Minsheng Financial Leasing Co., Ltd. 439,636,549.34 146,990,572.40 7.04 Finance lease from China Merchants Bank financial 160,932,381.76 250,551,759.25 6.22 Leasing Co., Ltd. Finance lease from China Development Bank Leasing Co., 945,584,953.46 1,245,340,046.34 7.55 Ltd. Huaning Power Supply Co., Ltd 13,350,893.74 13,525,893.74 Yunnan province water conservancy and hydropower 17,470,000.00 investment co., LTD Heyun International leasing co., LTD 811,752.97

Total 1,577,786,531.27 1,656,408,271.73 less: Unrecognized finance fees of Minsheng Financial 26,170,406.93 Leasing Co., Ltd. Unrecognized finance fees of China Merchants Bank 25,248,317.00 financial Leasing Co., Ltd. Unrecognized finance fees of China Development Bank 268,090,775.51 Leasing Co., Ltd. Subtotal 319,509,499.44

Total 1,577,786,531.27 1,336,898,772.29

ㅜ85亥

– F-267 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Top 5 mounts of long-term accounts payable on Dec. 31, 2014:˖

Item Dec. 31, 2013 Dec. 31, 2014 Total 1,336,898,772.29 1,576,974,778.30 Finance lease from China Development Bank Leasing Co., Ltd. 977,249,270.83 945,584,953.46 Finance lease from Minsheng Financial Leasing Co., Ltd. 120,820,165.47 439,636,549.34 Finance lease from China Merchants Bank financial Leasing 225,303,442.25 160,932,381.76 Co., Ltd. Yunnan province water conservancy and hydropower 17,470,000.00 investment co., LTD Huaning Power Supply Co., Ltd 13,525,893.74 13,350,893.74

5.40 Deferred income

Decrease of Item Dec. 31. 2013 Increase of 2014 Dec. 31. 2014 Notes 2014 85,491,921.23 62,598,622.29 29,948,616.72 118,141,926.80 Total Allowance to Niuchang-Yigu Coal 6,250,000.00 6,250,000.00 Related assets Mine Dayakou Hydropower Station 22,064,000.00 22,064,000.00 Related assets Land-transferring Fees Refund Financial interest subsidy for Long Shun River Level-1 Hydropower 2,006,802.84 83,616.72 1,923,186.12 Related assets

Station Yunnan Province Development and Reform Commission Government 1,400,000.00 50,000.00 1,350,000.00 Related assets

Subsidies Coal mine gas power generation and 1,010,000.00 1,010,000.00 Related assets energy saving special funds Fund for coal mine safety 2,120,000.00 2,120,000.00 Related assets reformation New energy company, the original 28,546,400.04 28,546,400.04 -  government subsidies The early stage of the special 2,000,000.00 2,000,000.00 financial work Dayao development and reform 5,555,836.82 5,555,836.82 Related assets grants Enterprise technical reform provincial-level special financial 4,000,000.00 4,000,000.00 Related assets subsidies Jintaiyang demonstration projects 9,813,600.00 9,813,600.00 Related assets fund Allowance to Nanfeng ‘Going Global’ 100,000.00 100,000.00 - Project, Laos Burma's chang river ‘Going 300,000.00 300,000.00 Related assets Global’ subsidy Kunming City Finance Bureau ’Yunnan Province Going 650,000.00 650,000.00 Related assets Global Project’ Strategic Development Special Subsidies 2013 Foreign Economic and Technical Cooperation Projects 2,000,000.00 2,000,000.00 Related assets Special Fund Allowance to Nuochangka River 1,500,000.00 1,500,000.00 Related assets ‘Going Global’ Project, Burma The departments of commerce 639,000.00 639,000.00 Related assets foreign cooperation special funds 2014 annual " Going Global " special 150,000.00 150,000.00 Related assets subsidies Spanning development project 8,241,118.35 8,241,118.35 Related assets funding Solar Power and Building Integrated 15,590,400.00 649,599.92 14,940,800.08 Related assets

ㅜ86亥

– F-268 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Decrease of Item Dec. 31. 2013 Increase of 2014 Dec. 31. 2014 Notes 2014 Photovoltaic Project Application Paradigm Subsidies Kunming City New-type 537,600.00 22,400.08 515,199.92 Related assets Industrialization Special Subsidies Interest subsidy of fixed assets 5,640,000.00 234,999.92 5,405,000.08 Related assets investment loans finance Upfront subsidies for projects 500,000.00 - 500,000.00 Related assets Kunming City Development and Reform Commission Solar 2,304,000.00 96,000.00 2,208,000.00 Related assets Photovoltaic Project Shilin Ministry of Industry and 230,400.00 9,600.00 220,800.00 Related assets Information Technology subsidies Final payment of subsidies for 576,000.00 24,000.00 552,000.00 Related assets renewable energy project Specific subsidies for solar 1,920,000.00 80,000.08 1,839,999.92 Related assets photovoltaic development project Interest subsidy for 2011Renewable 1,152,000.00 48,000.00 1,104,000.00 Related assets Energy Development Project The specific upfront fund from 2012 Provincial Key Investment Attracting 96,000.04 3,999.96 92,000.08 Related assets Proposal Building photovoltaic subsidies 5,470,889.70 5,470,889.70 Related assets settlement money The sea wind turbine maintenance 15,726,495.73 15,726,495.73 Related assets fee in the next five years

5.41 Paid-in capital

Dec. 31. 2013 Dec. 31. 2014 Decrease of Investor Increase of 2014 2014 Amount Proportion% Amount Proportion% Yunnan Investment Holding Group Co., 9,687,766,636.10 83.41 9,687,766,636.10 83.09 Ltd. (the Group Company) Yunnan Metallurgical 771,000,000.00 6.64 17,892,395.08 788,892,395.08 6.77 Group Co., Ltd. Yuntianhua Group Co. 1,156,000,000.00 9.95 27,338,592.62 1,183,338,592.62 10.15 Ltd. Total 11,614,766,636.10 100.00 45,230,987.70 11,659,997,623.80 100.00

5.42 Other equity instruments 5.42.1 Situation of preferred stock outstanding and Perpetual Capital Securitiesor other equity instruments on Dec. 31. 2014 Out of the Dividend issue of Issue Accounting yield or Maturity Date or Renewal Convertible Amount Issue expenses financial time classification Interest situation conditions instruments rate The issuer to redeem according 900 to the terms of the distribution In July Equity Perpetual ticket 7.5% million terms before long-term survivalˈ Nothing 13,500,000.00 2014, instrument yuan with every 5 foreclosure at the end of the issuer 900 Total million 13,500,000.00 yuan 5.44.2 Key terms of the distribution of other equity instruments ˄1˅The company issued a total of 900 million yuan of medium-term notes in July 2014, with the medium-term

ㅜ87亥

– F-269 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements notes of issuer redemption end of the every 5 years. ˄2˅The company issued the medium-term notes in July 2014 to Long-term survival before according to the terms of the agreement, and the notes will expire in the agreed upon redemption. ˄3˅Issue rate Interest method is using fixed interest rate. The nominal interest rate of previous 5 annual interest rate years is that the initial benchmark interest rates plus initial spreads, to which Shanghai Clearing Site (www.shclearing.com.cn) initial b enchmark interest rate to bookbuilding recently 5 working days and other dealers association recognized published on th e website of the bank debt fixed rate Treasury yield rate curve, until the repayment period for 5 years yields rate arithmet ic average (Rounded off to 0.01%). If the issuer does not exercise the right of redemption, interest from the first six years beginning varieties a coupon rate adjustment as the current benchmark interest rate plus an initial spread plus 300 basi s points, it remained unchanged during the first 6 years to 10th annual interest rate years. Profit benchmark interest rate between the coupon rate reset before the five days Shanghai Clearing House website (www.shclearing.com.cn) and oth er authorized dealers association published on the website of the bank debt Solid Fixed-rate bonds yield curve to be co mpensation for the five-year period yields the arithmetic mean (rounded off to 0.01%). After every 5 years, the reset cou pon rate is formed by the current benchmark interest rate plus the initial interest rate, and then plus 300 basis points. The above medium-term notes are using simple interest year - on – year, but if the interest deferred, accrual of deferred i nterest is grounded on current coupon rate. 5.42.3 Changes of preferred stock outstanding and Perpetual Capital Securitiesor other equity instruments

Out of the Dec. 31. 2013 Increase of 2014 Decrease of 2014 Dec. 31. 2014 issue of financial Amount Book Value Amount Book Value Amount Book Value Amount Book Value instruments Perpetual 900,000,000.00 900,000,000.00 ticket Total 900,000,000.00 900,000,000.00

5.43 Capital reserve

Item Dec. 31. 2013 Increase of 2014 Decrease of 2014 Dec. 31. 2014 Capital stock premium 4,075,695,793.02 -173,625,502.45 3,902,070,290.57 Other capital reserve 7,274,530.00  7,274,530.00 including˖ķ Amount transferred from the capital surplus recognised under   previous accounting system ĸCapital reserve from the long-term equity investment measured at equity   method Ĺ Net change in fair value of available-for-sale financial   assets ĺOther capital reserve 7,274,530.00  7,274,530.00 Total 4,082,970,323.02 -173,625,502.45 3,909,344,820.57 The capital reserve in 2014 has been decrease 173,625,502.45 yuan, of which 45,230,987.70 were converted into capital and another 128,394,514.75 yuan was used for acquiring minority interest of Yunnan new energy development co., LTD and Yunnan foreign energy development co., LTD.

ㅜ88亥

– F-270 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.44 Special reserve

Item Dec. 31. 2013 Increase of 2014 Decrease of 2014 Dec. 31. 2014 Notes Maintenance costs 298,085.91 477,803.33 465,424.29 310,464.95 Safety production costs 2,498,251.23 1,397,709.45 1,100,541.78 Security governance fund 1,234,229.78 664,725.91 569,503.87 Total 298,085.91 4,210,284.34 2,527,859.65 1,980,510.60

5.45 Surplus reserves

Item Dec. 31. 2013 Increase of 2014 Decrease of 2014 Dec. 31. 2014 Statutory surplus reserve 106,108,052.56 186,857,639.85 292,965,692.41 Discretionary surplus reserve Reserve fund Enterprise development fund Capital redemption Others Total 106,108,052.56 186,857,639.85 292,965,692.41

5.46 Undistributed profit

Item Year 2014 Year 2013 Year 2012 At the end of 2013 the balance 470,145,329.76 -220,065,318.16 add˖Changes in accounting policies Early error correction -72,108,461.07 Dec 31, 2013 2014 balance 470,145,329.76 -220,065,318.16 -72,108,461.07 Increase in 2014 1,727,262,749.35 772,116,854.57 256,244,988.82 including˖Net profit into in 2014 1,727,262,749.35 772,116,854.57 256,244,988.82 Other adjustment factor Decrease in 2014 186,857,639.85 81,906,206.65 404,201,845.91 including˖The number of extraction of surplus 186,857,639.85 81,906,206.65 24,201,845.91 reserves in 2014 General risk preparation in 2014 Distribution of cash dividend in 2014 380,000,000.00 Transfer to paid-in capital Other reduction Balance of Dec. 31. 2014 2,010,550,439.26 470,145,329.76 -220,065,318.16

ㅜ89亥

– F-271 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.47 Revenue and operating cost

Revenue Operating cost Item Year 2014 Year 2013 Year 2012 Year 2014 Year 2013 Year 2012 Prime operating revenue 32,562,488,675.00 24,915,661,888.39 4,035,753,809.94 32,066,130,497.38 24,460,105,857.83 3,872,630,862.35 Interest revenue 106,261,533.16 32,580,803.93 6,765,112.72 109,236,856.09 33,199,839.20 6,888,914.28 Investment income 2,437,932,094.56 1,308,983,803.23 499,070,056.77 911,338,756.58 495,070,717.20 194,779,411.19 Other revenue 223,269,904.32 130,478,373.05 24,585,205.17 64,930,953.27 83,033,624.49 14,090,998.90 Total 35,329,952,207.04 26,387,704,868.60 4,566,174,184.60 33,151,637,063.32 25,071,410,038.72 4,088,390,186.72

5.47.1 Revenue and cost classified by industries:

Revenue Operating cost Type of Business Year 2014 Year 2013 Year 2012 Year 2014 Year 2013 Year 2012

– F-272 Income from power generation and sales 1,827,440,841.32 1,532,281,327.37 500,255,726.61 1,532,281,327.37 1,126,748,121.42 381,952,473.36 Income from coal production and sales 5,298,292,445.21 1,903,915,311.77 436,462,487.44 5,290,330,663.62 1,881,657,006.35 429,082,388.95 Income from resources trading 25,365,795,022.93 21,479,465,249.25 3,099,035,595.89 25,242,654,976.39 21,451,700,730.06 3,061,596,000.04 Income from financial services 70,960,365.54   863,530.00   Total 32,562,488,675.00 24,915,661,888.39 4,035,753,809.94 32,066,130,497.38 24,460,105,857.83 3,872,630,862.35

5.47.2 The details of investment income

Investments where income arises Year 2014 Year 2013 Year 2012 Income from tradable financial assets Income from Financial assets available for sale 159,238,474.05 Income from held-to-maturity investment  Income from long-term equity investment 2,271,876,427.46 1,273,583,428.30 422,836,472.04 Income from disposal of long-term equity investment 6,817,193.05 35,400,374.93 76,233,584.73 Total 2,437,932,094.56 1,308,983,803.23 499,070,056.77

ㅜ90亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.48 Selling expenses

Item Year 2014 Year 2013 Year 2012 Employee compensation 9,932,580.04 3,681,852.94 1,813,667.65 Employee services and benefits 1,538,113.94 116,324.76 122,141.00 Social insurance 631,888.70 78,047.49 49,044.86 Travelling expense 1,981,077.35 616,103.89 114,831.17 Office allowance 1,115,199.95 243,682.96 100,578.07 Vehicle usage charge 664,117.99 184,498.17 50,698.90 Article of consumption 29,720.04 4,211.50 Intermediary service 24,850.00 30,200.00 Business entertainment 1,105,603.00 588,855.36 185,542.14 Rental fees 489,408.36 20,800.00 Participation fee 714,278.05 854,335.70 70,867.14 Advertising fees 380,160.00 227,916.00 68,374.80 Business Propagandize Fee 293,693.93 -384,118.72 Travelling expenses 25,751.40 67,227.14 Depreciation expense 134,537.44 1,332.39 Computer operating cost 449 - Service charge 420,407.47 446,176.98 Entrusted agency fees 108,165.70 1,200.00 Correspondence Fee 7,611.50 22,340.26 Clothing allowance 16,595.48 11,915.00 Traffic expense 25,984,411.64 27,833,291.15 3,916,320.94 Amortization of long-term prepaid expenses 1,249,199.40 Terminal charges 1,535,482.57 3,270,749.71 490,612.46 Storage cost 1,458,702.40 1,269,410.87 152,329.30 Others 276,121.51 1,965,678.38 982,638.50 Total 50,118,126.86 41,152,031.93 8,117,646.93

5.49 Adminisstrative expenses

Item Year 2014 Year 2013 Year 2012 Employee compensation 94,086,795.55 56,762,508.61 38,673,944.61 Travelling expense 7,041,497.37 4,388,172.76 3,071,720.93 Office allowance 6,486,285.21 4,332,332.59 2,599,399.55 Correspondence Fee 1,164,832.88 580,415.60 127,691.43 Utilities 593,122.91 113,318.16 101,986.34 Vehicle costs 5,596,036.75 2,667,681.08 2,294,205.73 Transportation 168,049.59 275,318.06 132,152.67 Repair charge 301,693.57 632,120.13 493,053.70 Depreciation expense 7,110,943.19 6,148,489.73 5,472,155.86 Management consulting fees 807,701.64 5,035,399.85 3,927,611.88 Agency costs 13,042,625.98 8,331,748.54 4,749,096.67

ㅜ91亥

– F-273 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Item Year 2014 Year 2013 Year 2012 Business entertainment 6,683,656.43 6,427,182.87 4,499,028.01 Rental fees 18,186,856.99 4,909,129.06 4,270,942.28 Taxes 13,717,948.12 13,741,302.88 10,855,629.28 Business propagandize fee 4,029,107.84 234,024.93 46,804.99 Property management fee 3,750,324.12 70,577.09 176,442.73 Industry membership dues 551,771.89 13,000.00 13,000.00 Participation fee 1,861,056.91 2,521,884.05 1,260,942.03 Amortisation of long-term deferred 25,498,950.21 6,998,670.92 4,129,215.84 expenses Article of consumption 1,559,624.28 736,135.24 662,521.72 Board of directors' expenses 670,009.17 2,140.90 Social insurance charges 17,487,693.40 4,374,001.89 2,980,134.44 Housing Fund 680,240.32 61,282.00 79,666.60 Enterprise annuity 391,044.33 42,289.00 Labour-union expenditure 1,042,772.44 2,255,522.74 1,536,753.11 Labor protection fees 380,827.64 297.02 Personnel education 894,077.98 2,114,105.55 1,440,401.47 Professional service fees 5,075,097.59 784,954.77 Amortisation of intangible assets 10,156,810.20 2,481,548.00 1,141,512.08 Premium 75,963.02 18,846.81 Research and development expense 768,100.14 Entrusted management fee 7,466,200.00 Training fees 2,392,119.00 Project cost 12,436,343.70 Others 12,730,671.04 8,433,026.31 332,948.33 Gain on physical inventory -13,581,349.10 -4,435,727.96 Loss on work stoppages 3,254,907.76 To investment costs 33,675,078.72 Total 295,799,145.08 153,488,042.88 95,068,962.28

5.50 Financial expenses

Item Year 2014 Year 2013 Year 2012 Interest expense 614,444,404.92 339,612,014.76 145,420,152.63 less: Interest income 167,852,441.91 29,863,526.50 10,255,755.24 Net interest expense 446,591,963.01 309,748,488.26 135,164,397.39 Exchangeloss 2,448,695.04 1,470,432.20 945,440.51 less: exchange earning 7,061,193.03 Exchange net loss -4,612,497.99 1,470,432.20 945,440.51 Bank Charges 78,903,225.87 49,523,419.32 30,146,398.86 Others 41,936,246.33 1,739,304.32 1,924,238.23 Total 562,818,937.22 362,481,644.10 168,180,474.99

ㅜ92亥

– F-274 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.51 Impairment losses of assets

Item Year 2014 Year 2013 Year 2012 1.Loss on bad debts 59,491,628.01 5,918,686.42 2,726,466.95 2. Impairment loss on inventories 517,205.45 213,169.00 3.Impairment loss on financial assets available for sale 4.Impairment loss on held-to-maturity investment 5.Impairment loss on long-term equity 1,802,121.59 investment 6.Impairment loss on real estate as investment 7.Impairment loss on fixed assets 8.Impairment loss on construction materials 9.Impairment loss on construction in 57,122,131.81 progress 10.mpairment loss on productive biological assets 11.mpairment loss on oil-and-gas assets 12.Impairment loss on intangible assets 13.Impairment loss on goodwill 14.Other impairment losses Total 117,130,965.27 6,131,855.42 4,528,588.54

5.52 Investment income

Investments where income arises Year 2014 Year 2013 Year 2012 Cost accounting method of a long-term equity investment gains The equity method of accounting of long-term equity investment gains Disposing of a long-term equity investment of investment returns Investment returns by holding to fair value and its changes during the recorded into the profits and losses of the current financial assets Investment gains of holding-to-maturity investment period Investment gains of during the period of available for sale financial 7,393,555.19 assets Disposing of investment returns of financial assets at fair value through profit or loss Investment returns of disposaling of the held-to-maturity Investment returns of disposaling of financial assets available for sale Others Total 7,393,555.19

5.53 Non-operating income

Item Year 2014 Year 2013 Year 2012 1. Income from disposal of non-current assets 8,356,293.92 1,904,290.82 including: Disposal of fixed assets 8,356,293.92 22,870.99 Disposal of intangible assets Disposal of construction on progress 1,881,419.83

ㅜ93亥

– F-275 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Item Year 2014 Year 2013 Year 2012 Others 2.Income from exchange of non-monetary assets 3.Income from debt restructuring 4.Income from governmental subsidy 13,228,015.53 5,408,498.33 4,084,916.72 5.Gain on inventory 6.Gain from donation 7.Others 462,934,397.83 5,049,898.96 298,267.61 Total 484,518,707.28 12,362,688.11 4,383,184.33 Notes: ˄1˅Others mainly is the compenation 436,816,004.49 yuan which according to the company and Hanergy Holding Group Limitedˈreached the agreement. ˄2˅The details of governmental subsidy are as follows:

Item Year 2014 Year 2013 Year 2012 Introductions High-tech District Administrative Committee Subsidies 871,788.55 20,000.00 Related income

The open area enterprise production support fund in 2013 20,000.00 Related income

Computer software copyright registration 9,000.00 Related income

Enterprise support fund in 2013 117,600.00 Related income

Visa management system V1.0 electric power GZS 50,000.00 Related income meteorological reward Scientific and technological small and medium enterprise 200,000.00 Related income financing service, listing support project High tech Zone non state-owned enterprises, the nearest 300.00 Related income place to absorb the employment of workers incentives" The Bureau of finance risk compensation equipment -- 100,000.00 Related income Huaning Count The Lao river project Nanfeng Department of finance 100,000.00 Related income subsidies “go out” Kunming new industrialization development special fund 3,400,000.00 260,000.00 Related income subsidies The reward of investment in fixed assets 10,000.00 Related income

Kunming new industrialization development special fund 22,400.08 Related income subsidies Investment in fixed assets loans 234,999.92 Related income

Building photovoltaic subsidies clearing funds 99,110.30 Related income

Provincial library of local fiscal subsidies income 1,000,000.00 Related income

Huize wind power project prophase project subsidies 2,000,000.00 Related income

Kunming city science and Technology Bureau of the science 700,000.00 Related income and Technology Bureau Receipt of luxi county bureau of new enterprise financial 100,000.00 Related income incentives Breau of ministry enterprise reward fund in 2013 in Shilin 50,000.00 Related income

Received financial support funds and corporate incentives 87,000.00 Related income

Enterprises in 2013 retail promotion subsidies 50,000.00 50,000.00 Related income

Special funds for the development of provincial industry 1,558,881.65 Related income

Longchuan level of power station project loan fiscal interest 83,616.72 83,616.72 Related income discount Lincang industrial park industry development support fund 131,000.00 162,400.00 Related income

ㅜ94亥

– F-276 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Item Year 2014 Year 2013 Year 2012 Introductions Coal mine safety reconstruction funds 200,000.00 Related income

Solar photovoltaic building application demonstration subsidy 649,599.92 649,600.00 Related income funds Yunnan province industry and informatization committee 2,880,000.00 Related income during dry super power Kunming municipal development and reform commission 96,000.00 22,400.00 Related income (NDRC) solar pv project New industrial city, ministry committee 9,600.00 96,000.00 Related income

Pre engineering assistance 9,600.00 Related income

Renewable energy subsidies balance paymen 24,000.00 24,000.00 Related income

Solar photovoltaic development special subsidies 80,000.08 80,000.00 Related income

Renewable energy development funds in 2011 earnings 48,000.00 48,000.00 Related income

In 2012 the provincial key investment pre-project special 3,999.96 3,999.96 Related income funds Renewable energy development fund 2,000,000.00 Related income

2013 Upfront Fund in Budget 140,000.00 Related income

Purchasing kungang base the second batch of financial 3,600,000.00 Related income incentives Lincang industrial park enterprise development support funds 216,300.00 Related income subsidies finance bureau Longchuan level of power station project loan fiscal interest 83,616.72 Related income discount Yunnan province development and reform commission, the 50,000.00 Related income government incentives Investment in fixed assets loan discount 100,000.00 Related income

In 2012 the provincial key investment pre-project special 25,000.00 Related income funds Investment promotion projects in 2011 10,000.00 Related income

Total 13,228,015.53 5,408,498.33 4,084,916.72

5.54 Non-operating expenses

Item Year 2014 Year 2013 Year 2012 1. Loss on disposal of non-current assets 1,080,435.16 369,444.34 including: Loss on disposal of fixed assets 1,080,435.16 25,219.29 Loss on disposal of intangible assets Loss on disposal of construction in progress 344,225.05 Others 2. Loss on exchange of non-monetary assets 3.Loss on debt restructuring 4.Public welfare donation 12,700,866.40 7,147,757.00 636,889.00 5.Sponsorship expenditures 100,000.00 6.Loss on inventory 148,271.72 163,146.65 7.Others 24,444,792.92 388,888.39 107,464.18 Total 38,374,366.20 8,069,236.38 844,353.18

ㅜ95亥

– F-277 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

5.55 Income tax expenses

Item Year 2014 Year 2013 Year 2012 The current income tax as stipulated in the tax 51,991,748.07 24,110,548.90 6,604,869.51 law and the relevant calculation Deferred income tax adjustment -9,191,433.57 -1,231,302.34 803,038.24 Others Total 42,800,314.50 22,879,246.56 7,407,907.75

5.56 Other comprehensive Income Nothing

6ǃConsolidated cash flow statement 6.1 Ajust net income to cash flow management activity by using the indirect method

Supplementary information Year 2014 Year 2013 Year 2012 1ˊReconciliation from the net profit to the cash flows from operating activities Net profit 1,531,809,154.85 728,483,917.89 193,635,309.22 add: Provision for assets impairment 117,130,965.27 6,131,855.42 4,528,588.54 Depreciation of fixed assets, oil and gas assets, and 329,753,820.77 217,236,926.68 110,289,030.82 productive biological assets Amortization of intangible assets 17,966,224.76 7,613,088.15 1,979,686.50 Amortization of long-term prepaid expenses 22,570,140.85 8,619,269.09 18,153,186.49 Losses on disposal of fixed assets, intangible assets and other -6,760,610.97 -1,534,846.48 long-term assets (gain expressed with ‘-’) Losses on scrapping of fixed assets (gain expressed with ‘-’) Losses on variation of fair value (gain expressed with ‘-’) -71,205.67 Finance expenses (gain expressed with ‘-’) 1,635,020,017.59 867,882,571.16 347,088,478.10 Investment losses (gain expressed with ‘-’) -1,152,789,493.38 -384,733,124.18 -341,529,449.36 Decrease in deferred tax assets (increase expressed with ‘-’) -9,191,433.57 -1,231,302.34 1,031,562.07 Increase in deferred tax liabilities (decrease expressed with ‘-’) Decrease in inventory (increase expressed with ‘-’) -535,881,895.63 -283,212,595.17 -316,962,836.03 Decrease in operating receivables (increase expressed with ‘-’) -624,292,698.16 -71,437,204.25 -91,892,085.52 Increase in operating payables (decrease expressed with ‘-’) 684,556,674.80 -51,518,048.85 120,174,636.63 Others Net cash flows from operating activities 2,009,890,867.18 1,042,300,507.12 46,424,901.79 2ǃMajor investment and financing activities does not involve cash receipts and cash disbursements Conversion of debt into capital Convertible bonds matured within a year Fixed assets under financing lease 3ǃNet change in cash and cash equivalents˖ Cash balance of December 31, 2014 6,053,106,964.75 3,822,048,404.13 3,174,596,471.28 loss˖Cash balance of December 31, 2013 3,822,048,404.13 3,174,596,471.28 551,554,391.86 add˖Cash equivalents in the balance of December 31, 2014 loss˖Cash equivalents in the balance of December 31, 2013 Net increase in cash and cash equivalents 2,231,058,560.62 647,451,932.85 2,623,042,079.42

ㅜ96亥

– F-278 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

6.2 The major cash flows received from other operation related activities

Item Year 2014 Year 2013 Year 2012 Intercourse funds 1,924,046,304.03 694,530,927.40 580,661,990.31 Interest income 167,852,441.91 29,863,526.50 10,255,755.24 Government grants 11,825,798.85 5,408,498.33 4,084,916.72

6.3 The major cash amounts paid to other operation related activities

Item Year 2014 Year 2013 Year 2012 Current expense 323,868,172.55 193,877,174.86 9,778,783.73 Intercourse funds 896,275,425.48 895,395,072.67 73,004,748.23

6.4 The major cash flows received from other investment activities

Item Year 2014 Year 2013 Year 2012 Entrusted loans temporary 212,104,483.44 16,558,910.51 155,428,090.76 borrowing, etc 6.5 The major cash amounts paid to other investment activities

Item Year 2014 Year 2013 Year 2012 Entrusted loans etc. 265,631,844.69 180,183,875.22 242,745,903.89

6.6 The major cash flows received from other financing activities

Item Year 2014 Year 2013 Year 2012 Deposit to pay monetary funds may at any 399,997,464.82 531,802,577.58 178,000,000.00 time 6.7 The major cash amounts paid to other financing activities

Item Year 2014 Year 2013 Year 2012 Cash deposit 1,639,360,401.76 156,274,047.50 890,000,000.00

ㅜ97亥

– F-279 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

6.8 About the information of cash and cash equivalents

Item Year 2014 Year 2013 Year 2012 1.Cash 6,053,106,964.75 3,822,048,404.13 3,174,596,471.28 including: Cash on hand 1,852,650.07 1,309,895.17 1,033,147.35 Cash at bank that is readily available for payment 6,051,254,314.68 3,820,738,508.96 3,173,563,323.93 Other cash that is readily available for payment Due from Central Bank that is readily available for payment Deposit in other financial institute Loan to other financial institute 2.Cash equivalents including: Bond investment due within 3 months 3.On December 31, 2014 in cash and cash equivalents balance 6,053,106,964.75 3,822,048,404.13 3,174,596,471.28 including˖Cash and cash equivalents of the parent company or subsidiary of the group using restricted

– F-280 Cash and cash equivalents is less than 1,172,375,312.75yuan of monetary funds at the end of 2014 yearˈthe reasons are as follows: ˄1˅The company's other monetary fund is the security deposit for RMB 975,800,000.00 ˄2˅Yunnan Provincial Energy Investment Group Logistics Limited is Level 2 subsidiary of the company , whose other monetary funds - RMB bank acceptance in the margin RMB 18,367,264.00; The guarantee deposit RMB 700,000.00; The l/c deposit RMB 34,284,000.0; And the Guangdong development bank, kunming branch dollar deposits guaranteed accommodation business, due date on June 26, 2015, RMB 93,195,631.43. ˄3˅Yunnan Provincial Energy Investment Group Hydroelectricity New Energy Sources technology engineering Co., Ltd. is Level 2 subsidiary of the company has performance guarantee deposit RMB 388,417.32. ˄4˅Yunnan Provincial energy of import and export co., LTD is Level 3subsidiary of the company , which has Hong Kong's hang seng bank of kunming branch one-year deposit RMB40,000,000.00, for at least six months of the l/c deposit RMB 9,640,000.00. The above monetary funds can not be realized at any time, it is not calculated in cash and cash equivalents.

7ǃ Related parties and related-party transactions 7.1 Recognition of related parties. When a party controls, jointly controls or exercises significant influence over another party, or when two or more parties are under the control, joint control or significant influence of

ㅜ98亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

the same party, the affiliated party relationships are constituted. The company recognizes the following parities as related parties: 7.1.1 The subsidiaries of the Company; 7.1.2 The investors having joint control over the Company; 7.1.3 The investors having significant influence on the Company; 7.1.4 The joint ventures of the Company; 7.1.5 The associated enterprises of the Company; 7.1.6 The main individual investors and the close family members of the Company; 7.1.7 Key managerial personnel of the Company or of its parent company and the close family members; 7.1.8 Other enterprises the main individual investors, key managerial personnel, or close family members of such individuals control, jointly control or have significant influence over the Company. 7.2 Related parties and related-party transactions 7.2.1 Related party relationship where control exists. – F-281 7.2.1.1 Situation of the parent company of the company and the actual controller of the company The proportion The parent of the parent company's company to Legal Nature of Paid-in Final control Organization Parent company name Incidence relation Company type Registration place stake in the the voting Representative Business capital company rights of the party code enterprise (%) (%) Yunnan Provincial People's government state owned Final control party Treasury Kunming,Yunnan       75718792—X assets supervision and Administration Commission Yunnan Provincial People's government Yunnan investment holding Solely state-owned Tuodong road Investment state owned Parent company Baominghu  83.09 83.09 29199627—3 group co., LTD enterprise 15,Kunming management assets supervision and Administration Commission

ㅜ99亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Notes˖Enterprise types include state-owned enterprises (state-owned enterprises), state-owned enterprises, collective ownership, private enterprises, state-owned assets, foreign joint ventures, foreign owned enterprises, state-owned holding, natural persons, joint-stock companies, limited liability companies, other 7.2.1.2 The situation of the subsidiary company of the enterprise Subsidiary Company Legal Nature of Shareholding Organization Subsidiary full name Registration place Paid-in capital type type Representative Business proportion (%) code Limited Holding Electricity Yunnan electric power investment co., LTD Liability Kunming Liu Wenxian 1,097,564,723.00 55.01 763877740 subsidiaries investment Company Limited Yunnan yuntou zhengxiong mining energy Holding Zhenxiong County commercial Liability Du Changhua Mining industry 200,000,000.00 80.00 697984280 development co., LTD subsidiaries city Company Wholly-owne Limited Yunnan Provincial Energy Investment Group Investment d Liability Haidian district,Beijing Zhangjing 10,000,000.00 100.00 59965494X Beijing Investment Consulting Co., Ltd. Consulting subsidiaries Company Limited Holding Energy Dehong energy development co., LTD Liability Chengbei district,Mangshi Guo Shuguang 20,000,000.00 90.00 599323665 subsidiaries Investment Company

– F-282 Limited Yunnan Provincial Energy Investment Group Holding Liability Renming road,Kunming Guo Shuguang Material trade 100,000,000.00 40.00 599309177 Logistics co., LTD subsidiaries Company Wholly-owne Limited Yunnan Provincial Energy Investment natural d Liability Xuefu road,Kunming Yang Wanhua Gas exploitation 500,000,000.00 100.00 059487925 gas industry development co., LTD subsidiaries Company Limited Yunnan Provincial Energy Investment new Holding Economic-technicalDevelopm Electricity Liability Huangning 5,000,000.00 45.00 064267097 energy technology engineering co., LTD subsidiaries ent Zone, Kunming investment Company Limited The fuel gas Yunnan Provincial Energy Investment Jia Holding Liability Kunming high-tech zone Yang Wanhua development 30,000,000.00 51.00 075270304 heng gas industry co., LTD subsidiaries Company investment Wholly-owne Limited Financial Yunnan Energy financial holding co., LTD d Liability Erhuanxi road ,Kunming Lixiang 2,000,000,000.00 100.00 072479647 Investment subsidiaries Company Wholly-owne Limited Yunnan Provincial Energy Investment industry Economic-technicalDevelopm Asset d Liability Guo Shuguang 500,000,000.00 100.00 790289813 investment co., LTD ent Zone, Kunming Management subsidiaries Company Wholly-owne Limited Yunnan Provincial Energy Investment d Liability Kunming high-tech zone Yangjian Material trade 30,000,000.00 100.00 577271745 economic and trade co., LTD subsidiaries Company Wholly-owne Limited Yunnan Provincial Energy Investment foreign Investment d Liability Kunming Huangning 237,100,000.00 100.00 662636171 energy development co., LTD Management subsidiaries Company

ㅜ100亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Subsidiary Company Legal Nature of Shareholding Organization Subsidiary full name Registration place Paid-in capital type type Representative Business proportion (%) code Limited Yunnan electricity zhongke photovoltaic Holding Liability Kunming high-tech zone Wangyu Energy saving 45,000,000.00 51.00 587378263 technology co., LTD subsidiaries Company Limited Yunnan Provincial Energy Investment Holding Computer Liability Kunming high-tech zone Zhengxin 20,000,000.00 40.00 083274401 Langchao technology co., LTD subsidiaries Software Company Limited Holding Yuxi city Dongfang coal co., LTD Liability Huaning county,Yuxi Liu Zengqiang Coal mining 26,000,000.00 67.00 770493702 subsidiaries Company Limited Yunnan Provincial Energy Investment Holding Liability Kunming high-tech zone Guo Shuguang Energy saving 31,000,000.00 50.00 566200001 Youneng technology development co., LTD subsidiaries Company Limited Yunnan Provincial Energy Investment Weishi Holding Economic-technicalDevelopm Liability Qiaosong Material trade 30,000,000.00 40.00 584842032 technology co., LTD subsidiaries ent Zone, Kunming Company Limited Yunnan Provincial Energy Investment Huilong Holding Liability Hongta district,Kunming Yan Chengyun Energy saving 129,000,000.00 40.00 095842090 technology co., LTD subsidiaries

– F-283 Company Limited Project Yunnan energy investment small hydropower Holding Economic-technicalDevelopm Liability Long Shangang investment and 30,000,000.00 40.00 309633885 investment co., LTD subsidiaries ent Zone, Kunming Company management Wholly-owne Limited Investment Yunnan Energy Investment (HK) Co., Ltd d Liability Hongkong  1,022,656,150.00 100.00 Management subsidiaries Company Note: The unit types include: a wholly owned subsidiary subsidiary equity subsidiary holding subsidiary of subsidiary, etc 7.2.2 Other related parties 7.2.2.1 Situations of the company of the joint venture and associated enterprises.

The company in proportion Registration Legal Shareholding to the voting Incidence Name of the invested organization Company type Nature of Business Paid-in capital Organization code place Representative proportion (%) rights by the relation invested entity (%) 1.Joint venture ҼǃAssociated enterprises Electrical Yunnan Nanrui electrical technology co., Limited Liability Economic-technicalDevelopment Liu Guanbiao equipment 10,000,000.00 35.00 35.00 05468259-6 LTD Company Zone, Kunming research and

ㅜ101亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

development Huaneng lancang river hydropower co., Wang Hydroelectric Private co., LTD Guandu district, Kunming 1,530,000,000.00 31.40 31.40 71944949-0 LTD Yongxiang development Limited Liability Power Yunnan Huadian Xunjiansi Power Co. Ltd. Xunjiansi, Mile Liu Bangjia 207,690,000.00 35.00 35.00 75356643-9 Company development Yunnan Huadian Nujiang Hydropower Limited Liability Cheng Hydroelectric Dianchi road, Kunming 536,800,000.00 20.00 20.00 75068973-2 Development Co. Ltd. Company Niangao development Sanxia jinshajiang YunChuan hydropower Limited Liability Hydroelectric Panlong district,Kunming Fan Qixiang 7,000,000,000.00 15.00 15.00 06156193-6 development co., LTD Company development Sanxia jinshajiang YunChuan hydropower Limited Liability Hydroelectric Chengdu high-tech zone Fan Qixiang 32,000,000,000.00 15.00 15.00 06428711-9 development co., LTD Company development Limited Liability Yunnan Zhonghui Tendering Co. Ltd. Huanchengbeilu road, Kunming Li Qiuhog Bidding Agent 8,333,300.00 40.00 40.00 77267625-4 Company Yunnan Huadian Zhengxiong powerr Limited Liability Zhengxiong county,Tangfang Power Liu Bangjia 794,064,500.00 35.00 35.00 75359220-7 generation co., LTD Company town development Yunnan Dongyuan Zhengxiong coal co., Limited Liability Zhengxiong county, Xu Dezhi Coal development 474,510,100.00 26.00 26.00 76386013-X LTD Company Wufeng town Guodian Xuanwei City power generation Limited Liability Thermal power Xuanwei City Wuquan 1,514,840,000.00 34.00 34.00 73806200-5 co., LTD Company construction – F-284 Limited Liability Yunnan Dongyuan Luoping coal co., LTD Luoping County, Qujing City Luo Guohui Coal development 410,320,000.00 49.00 49.00 77858452-9 Company Limited Liability Power China Electric Power Co. Ltd. Kaiyuan Kaiyuan City Chengyan 495,597,500.00 45.00 45.00 76044782-5 Company development 7.2.2.2 Situation of the company of other related parties

Other related party name Other related party relationship with the company Organization code Yuntian chemical group co., LTD Equity shareholders 29199121-0 Yunnan metallurgical group co., LTD Equity shareholders 21652022-4 Yunnan coal chemical industry group co., LTD Equity shareholders 77857831-3 Jinsha river in yunnan middle hydropower development co., LTD Equity shareholders 78168609-1 Yunnan Huadian Ludila hydropower Co., Ltd. Equity shareholders 78735136-4 SDIC Yunnan Dachaoshan Hydropower Co. Ltd. Equity shareholders 21655832-9 Yunnan Dongyuan coal and Electricity Co., Ltd. Equity shareholders 79985016-0 Huaneng yunnan Longkaikou water and electricity co., LTD Equity shareholders 79027235-X Guodian Yangzonghai power generation co., LTD Equity shareholders 21687517-2

ㅜ102亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Other related party name Other related party relationship with the company Organization code Anjing Haozhong small loan co., LTD Equity shareholders 58962859-6 Datang international in yunnan honghe power generation co., LTD Equity shareholders 72729024-8 Jin Anqiao hydropower co., LTD Equity shareholders 74829004-4 Datang guanyinyan hydropower development co., LTD Equity shareholders 78738259-0 Yunnan Taiwan industrial park investment management co., LTD Equity shareholders 09652370-2 Note: Other related party relationship with the company include: equity shareholders of the parent company is a wholly owned subsidiary of the parent company subsidiary, a subsidiary of shareholders Group brothers company associates (associated with the same chairman) people (and) general manager of the company to the same other etc – F-285

ㅜ103亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

7.2.3 Related transactions

7.2.3.1 Pricing policy

The relevant market price reference to market prices

7.2.3.2 Purchase goods

The company no related parties to purchase goods trade in 2014

7.2.3.3 Sale of goods

The company has no related party sales of commodities trading in 2014

7.2.3.4 Bank roll Relationship with the Borrowing enterprise Purpose Loan principal company Yunnan huadian Nujiang river hydropower development Joint venture Project fund loan 342,528,000.00 co., LTD Sanxia Jinnshajiang YunChuan hydropower Joint venture Project fund loan 750,000,000.00 development co., LTD Yunnan Juzheng investment co., LTD Joint venture Project fund loan 45,000,000.00 Total 1,137,528,000.00

7.2.3.5 Fund occupancy fee, interest income

Amount of 2014 Amount of 2013 Proportion of all the Loan unit name Proportion of all the Amount same transaction Amount same transaction˄%˅ ˄%˅ Yunnan huadian Nujiang river hydropower 28,198,214.67 77.07 14,192,257.73 100.00 development co., LTD Sanxia Jinnshajiang YunChuan hydropower 7,625,000.00 20.84 development co., LTD Yunnan Juzheng investment co., LTD 764,986.11 2.09 Total 36,588,200.78 100.00 14,192,257.73 100.00

7.2.3.6 Rendering of service

The company in 2014 with no associated party providing labor services trade

7.2.3.7 Accepting labor services

The company has no related party to accept labor deal in 2014

7.2.3.8 Rent

Amount of 2014 Amount of 2013 Organization name Proportion of all Proportion of all Amount similar transaction Amount similar transaction ˄%˅ ˄%˅ Yunnan investment holding group co., LTD 2,644,208.40 69.15 1,903,206.40 96.29

Total 2,644,208.40 69.15 1,903,206.40 96.29

7.2.3.9 Agent

The company in 2014 with no associated party agent matters.

ㅜ104亥

– F-286 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

7.2.3.10 Balance of accounts receivable and payable of related parties

Dec. 31, 2014 Dec. 31, 2013 Item in statement Company Provision Provision Balance for bad Balance for bad debt debt Other accounts Yunnan investment holding group co., 77,000,000.00 77,013,926.09 receivable LTD Yunnan energy Juzheng industrial Other current assets 45,000,000.00 investment co., LTD Other accounts Yunnan energy Juzheng industrial 10,000,000.00 receivable investment co., LTD Yunnan energy Juzheng industrial Other payables 96,350,681.39 investment co., LTD Other Non-Current Yunnan Huadian Nujiang River 6,113,852.77 16,518,481.56 Assets Hydropower Development Co., Ltd. Non-current assets Yunnan Huadian Nujiang River matured within a 234,465,852.77 161,518,902.53 Hydropower Development Co., Ltd. year Yunnan Huadian Nujiang River Other current assets 75,440,000.00 152,912,000.00 Hydropower Development Co., Ltd. Sanxia jinshajiang YunChuan hydropower Other current assets 750,000,000.00 development co., LTD Other Non-Current Yunnan Huadian Nujiang River 38,736,000.00 38,736,000.00 Assets Hydropower Development Co., Ltd.

ㅜ105亥

– F-287 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

7.2.3.11 Situation of Related party guarantee ˄unit˖RMB yuan˅

Guarantee object Co Expected debt amount mpe Counter Actual Guara Whethe Whether nsat Guarantee Types of Expected including: Guarantee unit Enterprise guarante guarantee ntee r the ory Name method guarantee debt Expected debt property e way amount object overdue accused loss amo amount amount in 2014 unt Total 943,285.51 1.Within the      622,405.51      group Normal Yunnan electric power State-contr Loan This company Guarantee Nothing 20,000.00 operati Nothing Nothing 0 0 investment co., LTD olled guarantee on Normal Yunnan electric power State-contr Loan This company Guarantee Nothing 20,000.00 operati Nothing Nothing 0 0 investment co., LTD olled guarantee on Normal

– F-288 Yunnan electric power State-contr Loan This company Guarantee Nothing 20,000.00 operati Nothing Nothing 0 0 investment co., LTD olled guarantee on Yunnan Provincial Energy Normal State-contr Loan This company Investment Group Logistics Guarantee Nothing 6,000.00 operati Nothing Nothing 0 0 olled guarantee Limited Liability Company on Yunnan Provincial Energy Normal State-contr Loan This company Investment Group Logistics Guarantee Nothing 7,000.00 operati Nothing Nothing 0 0 olled guarantee Limited Liability Company on Yunnan Provincial Energy Normal State-contr Loan This company Investment Group Logistics Guarantee Nothing 10,000.00 operati Nothing Nothing 0 0 olled guarantee Limited Liability Company on Normal Yunnan energy of import and State-contr Loan This company Guarantee Nothing 15,000.00 operati Nothing Nothing 0 0 export co., LTD olled guarantee on Normal Yunnan energy of import and State-contr Loan This company Guarantee Nothing 5,000.00 operati Nothing Nothing 0 0 export co., LTD olled guarantee on Normal Yunnan energy of import and State-contr Loan This company Guarantee Nothing 2,700.00 operati Nothing Nothing 0 0 export co., LTD olled guarantee on Yunnan Diandong power Normal State-contr Loan This company investment energy coal limited Guarantee Nothing 6,500.00 operati Nothing Nothing 0 0 olled guarantee company on

ㅜ106亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Guarantee object Co Expected debt amount mpe Counter Actual Guara Whethe Whether nsat Guarantee Types of Expected including: Guarantee unit Enterprise guarante guarantee ntee r the ory Name method guarantee debt Expected debt property e way amount object overdue accused loss amo amount amount in 2014 unt Normal Weixin Yunnan investment State-contr Loan This company Guarantee Nothing 40,000.00 operati Nothing Nothing 0 0 yuedian zhaxi energy co., LTD olled guarantee on Normal Huize new energy State-contr Loan This company Guarantee Nothing 36,000.00 operati Nothing Nothing 0 0 development co., LTD olled guarantee on Luxi county energy investment Normal State-contr Loan This company electricity wind power Guarantee Nothing 37,000.00 operati Nothing Nothing 0 0 olled guarantee development co., LTD on Normal Lincang Yunnan investment State-contr Loan This company Guarantee Nothing 19,000.00 operati Nothing Nothing 0 0 yuedian energy co., LTD olled guarantee on Normal – F-289 Yunnan Baoshan Supaheriver State-contr Loan This company Guarantee Nothing 7,000.00 operati Nothing Nothing 0 0 electric development co., LTD olled guarantee on Yunnan Electric Normal Weixin Yunnan investment State-contr Loan Power Investment Guarantee Nothing 16,053.31 operati Nothing Nothing 0 0 yuedian zhaxi energy co., LTD olled guarantee Co., Ltd. on Yunnan Electric Normal Weixin Yunnan investment State-contr Loan Power Investment Guarantee Nothing 94,350.00 operati Nothing Nothing 0 0 yuedian zhaxi energy co., LTD olled guarantee Co., Ltd. on Yunnan Electric Normal Weixin Yunnan investment State-contr Loan Power Investment Guarantee Nothing 48,713.40 operati Nothing Nothing 0 0 yuedian zhaxi energy co., LTD olled guarantee Co., Ltd. on Yunnan Electric Normal Weixin Yunnan investment State-contr Loan Power Investment Guarantee Nothing 41,100.00 operati Nothing Nothing 0 0 yuedian zhaxi energy co., LTD olled guarantee Co., Ltd. on Yunnan Electric Normal Yunnan Baoshan Supaheriver State-contr Loan Power Investment Guarantee Nothing 4,480.00 operati Nothing Nothing 0 0 electric development co., LTD olled guarantee Co., Ltd. on Yunnan Electric Normal Lincang Yunnan investment State-contr Loan Power Investment Guarantee Nothing 2,029.80 operati Nothing Nothing 0 0 yuedian energy co., LTD olled guarantee Co., Ltd. on Yunnan Electric Normal Lincang Yunnan investment State-contr Loan Power Investment Guarantee Nothing 8,670.00 operati Nothing Nothing 0 0 yuedian energy co., LTD olled guarantee Co., Ltd. on

ㅜ107亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Guarantee object Co Expected debt amount mpe Counter Actual Guara Whethe Whether nsat Guarantee Types of Expected including: Guarantee unit Enterprise guarante guarantee ntee r the ory Name method guarantee debt Expected debt property e way amount object overdue accused loss amo amount amount in 2014 unt Yunnan Electric Normal Weixin Yunnan investment State-contr Loan Power Investment Guarantee Nothing 18,000.00 operati Nothing Nothing 0 0 yuedian zhaxi energy co., LTD olled guarantee Co., Ltd. on Yunnan Electric Normal Lincang Yunnan investment State-contr Loan Power Investment Guarantee Nothing 9,690.00 operati Nothing Nothing 0 0 yuedian zhaxi energy co., LTD olled guarantee Co., Ltd. on Yunnan Baoshan Supaheriver Tengchong Sudian longchuan Normal State-contr Loan electric river electric development co., Guarantee Nothing 4,000.00 operati Nothing Nothing 0 0 olled guarantee development co., LTD on LTD Yunnan Baoshan Supaheriver Tengchong Sudian longchuan Normal – F-290 State-contr Loan electric river electric development co., Guarantee Nothing 1,100.00 operati Nothing Nothing 0 0 olled guarantee development co., LTD on LTD Yunnan Baoshan Supaheriver Tengchong Sudian longchuan Normal State-contr Loan electric river electric development co., Guarantee Nothing 2,850.00 operati Nothing Nothing 0 0 olled guarantee development co., LTD on LTD Yunnan Baoshan Supaheriver Tengchong Sudian longchuan Normal State-contr Loan electric river electric development co., Guarantee Nothing 20,500.00 operati Nothing Nothing 0 0 olled guarantee development co., LTD on LTD Yunnan Baoshan Supaheriver Tengchong Sudian longchuan Normal State-contr Loan electric river electric development co., Guarantee Nothing 11,400.00 operati Nothing Nothing 0 0 olled guarantee development co., LTD on LTD Yunnan Baoshan Supaheriver TengchongSundian longchuan Normal State-contr Loan electric river electric development co., Guarantee Nothing 7,493.00 operati Nothing Nothing 0 0 olled guarantee development co., LTD on LTD

ㅜ108亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Guarantee object Co Expected debt amount mpe Counter Actual Guara Whethe Whether nsat Guarantee Types of Expected including: Guarantee unit Enterprise guarante guarantee ntee r the ory Name method guarantee debt Expected debt property e way amount object overdue accused loss amo amount amount in 2014 unt Normal Yunnan electric power State-contr Loan This company Guarantee Nothing 20,000.00 operati Nothing Nothing 0 0 investment co., LTD olled guarantee on Normal Yunnan electric power State-contr Loan This company Guarantee Nothing 10,000.00 operati Nothing Nothing 0 0 investment co., LTD olled guarantee on Yunnan Electric Normal Weixin Yunnan investment State-contr Loan Power Investment Guarantee Nothing 9,000.00 operati Nothing Nothing 0 0 yuedian zhaxi energy co., LTD olled guarantee Co., Ltd. on Yunnan Electric Normal Yunnan Baoshan Supaheriver State-contr Loan Power Investment Guarantee Nothing 4,000.00 operati Nothing Nothing 0 0 electric development co., LTD olled guarantee Co., Ltd. on Yuxi Dongfang Coal Industry Normal – F-291 State-contr Loan This company Co., Ltd. Guarantee Nothing 2,300.00 operati Nothing Nothing 0 0 olled guarantee on Yunnan Electric Normal Weixin Yunnan investment State-contr Loan Power Investment Guarantee Nothing 3,000.00 operati Nothing Nothing 0 0 yuedian zhaxi energy co., LTD olled guarantee Co., Ltd. on Yunnan Provincial Energy Normal State-contr Loan This company Investment Group Logistics Guarantee Nothing 8,000.00 operati Nothing Nothing 0 0 olled guarantee Limited Liability Company on Yunnan Provincial Energy Normal State-contr Loan This company Investment foreign energy Guarantee Nothing 24,476.00 operati Nothing Nothing 0 0 olled guarantee development Co. Ltd. on Normal 2.Outside the State-contr Loan Nothing 320,880.00 operati Nothing Nothing group olled guarantee on Normal Yunnan investment holding State-contr Loan This company Pledge Nothing 300,000.00 operati Nothing Nothing 0 0 group co., LTD olled guarantee on Normal Huadian Xunjiansi department State-contr Loan This company Guarantee Nothing 10,000.00 operati Nothing Nothing 0 0 power generation co., LTD olled guarantee on Normal Guodian Xuanwei City power State-contr Loan This company Guarantee Nothing 10,880.00 operati Nothing Nothing 0 0 generation co., LTD olled guarantee on

ㅜ109亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

8. Pending litigation or arbitration is pending formation of contingent liabilities 8. 1 Pending litigation of Yunnan Diandong Yundian Coal Co. Ltd , The company's three subsidiaries in Yunnan Diandong Yundian Coal Co. Ltd., involved five lawsuits, which the sued part owed a total of 90,053,227.43 yuan, and Yunnan Eastern Power Investment Coal Co., Ltd. has a total of 15,375,710.81 yuan provision for bad debts .Which Yunnan Shun Feng Mining Limited contract dispute, Xuanwei City Yunxiang Mining Co., Ltd. v. Contract disputes and complaints Xuanwei Fuel Co. Ltd, contract dispute mediation has been made in the judgment or the judgment in a certain period within repayment deadline 31 December 2014 which will end if not be executed.The present value of estimated future cash flow is uncertain; wherein Liuzhou Ruiyu Iron and Steel International Trade Co., contract disputes and complaints Bijie City Hongyu ore trade limited liability company contract disputes ended December 31, 2014 is still in progress, it is expected present value of future cash flow uncertainty.

8. 2 Pending litigation of Yunnan Energy Import and Export Co. Ltd, The contract dispute of The three subsidiary Yunnan Energy Da Import and Export Co., Ltd. v. YunNan TaiYao Industrial Group Co., involving an amount including the payment by the Company to YunNan TaiYao Industrial Group Co., prepayments and deposit totaling RMB 23,830.00 Wan yuan, of which: the lawsuit of 25 million yuan in November 19, 2014 judged by the Kunming Intermediate People's Court (2014) Queensland ring Minchuzi No. 30 "civil mediation book", has now entered the implementation of the program, as of 2014 On December 31 the end has not been performed, the present value of estimated future cash flow uncertainty; the remaining 21,330 million lawsuit ended December 31, 2014 is still in progress. Total bad debts owed above mentioned 1,191.50 million.

9. Other important matters January 16, 2015, the Company's subsidiary Lincang energy investment Yuedian Hydropower Development Co., Ltd reviewed and approved "on the motion to change the company's shareholders," ,and agreed temporary shareholder Yunnan Power Investment Co., Ltd. with holdings LingCang energy investment Yuedian Hydropower Development Co., Ltd. 51% of the equity swap the stake of Weixin Yuntou Yuedian Zhaxi Energy Co holding by Guangdong Electric Power Development Co, Ltd.,namely the 20,220.99 ten thousand yuan capital in cash(corresponding to a 51% stake) holds by Yunnan Power Investment Co., Ltd swap with the 24,878.19 million in capital in cash (corresponding to 14.34% of the shares) holding by Guangdong Electric Power Development Co., Ltd. According to results of the assessment of state-owned assets management department filing equivalence agreed Lincang energy investment Yuedian Hydropower Development Co., Ltd. shareholders and ownership structure by the Yunnan Provincial Power Investment Co., Ltd. holding 51 percent, Guangdong Electric Power Development Co., Ltd. 49% Guangdong Electric Power Development Co., Ltd. was changed to 100% ownership. The above matters will lead to loss of the Company's subsidiaries control Lincang energy investment Yuedian Hydropower Development Co., Ltd. in 2015 which will no longer be consolidated.

ㅜ110亥

– F-292 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

10ǃNotes to financial statements of the parent company 10.1 Other accounts receivable

Dec. 31, 2014 Dec. 31, 2013

Item Proportion Provision Proportion Proportion Provision Proportion Balance for bad Balance for bad ˄%˅ ˄%˅ ˄%˅ ˄%˅ debts debts Individually significant and individual 103,000,000.00 99.26 118,000,000.00 99.65 provision of bad debts is made Bad debts provided on group basis Grouped provision of bad debts 400,000.00 0.39 40,000.00 10.00 410,333.33 0.35 20,516.67 5.00 based on aging of accounts Subtotal of 400,000.00 0.39 40,000.00 10.00 410,333.33 0.35 20,516.67 5.00 the group Insignificant individual amounts but individually 363,346.01 0.35 made bad debts provision Total 103,763,346.01 100.00 40,000.00 118,410,333.33 100.00 20,516.67

10.1.1 Classified by aging of other accounts receivable :

Dec. 31, 2014 Dec. 31, 2013 Aging of Provision Proportion Provision for Proportion Proportion Proportion accounts Balance Balance for bad ˄%˅ bad debts ˄%˅ ˄%˅ ˄%˅ debts Within 1 410,333.33 100.00 20,516.67 5.00 year 1 to 2 years 400,000.00 100.00 40,000.00 10.00 2 to 3 years 3 to 4years 4 to 5 years Above 5

years Total 400,000.00 100.00 40,000.00 410,333.33 100.00 20,516.67 Net value 360,000.00 389,816.66

10.1.2 Other receivables of individual amount :

Unit name Amount Provision for bad debts Yuxi city center project construction headquarters to develop the natural gas utilization 55,000,000.00 Yunnan Provincial Energy Investment Group Logistics Limited Liability Company 30,000,000.00 Yunnan Provincial Energy Investment new energy Co., Ltd. 18,000,000.00 Total 103, 000,000.00

ㅜ111亥

– F-293 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

10.2 Long term equity investment 10.2.1 Long term equity investment classification Increase Decrease Item Dec. 31. 2013 Dec. 31. 2014 of 2014 of 2014 Investment to subsidiaries 2,103,833,453.12 3,160,554,249.91 5,264,387,703.03 Investment to associated enterprises 13,782,957,103.87 5,502,159,087.64 1,465,337,473.31 17,819,778,718.20 Investment to joint ventures Other equity investment Total 15,886,790,556.99 8,662,713,337.55 1,465,337,473.31 23,084,166,421.23 loss˖Impairment of long-term equity investment The net value of total long term 15,886,790,556.99 23,084,166,421.23 equity investment 10.2.2 Long-term equity investment accounted by cost method

Proportion Increase Decrease Name of the invested organization Dec. 31. 2013 Dec. 31. 2014 ˄%˅ of 2014 of 2014 Yunnan energy Investmen natural gas 100.00 100,000,000.00 400,000,000.00 500,000,000.00 industry development co., LTD Yunnan Provincial Energy Investment 40.00 40,000,000.00 40,000,000.00 Group Logistics Limited Liability Company Yunnan Provincial Energy Investment 100.00 10,000,000.00 10,000,000.00 (Beijing) investment consulting co., LTD Yunnan Provincial Energy Investment Group Dehong Energy Development Co., 90.00 22,000,000.00 22,000,000.00 Ltd. Yunnan Energy Investment Zhengxiong 80.00 160,219,520.00 160,219,520.00 mining energy development co., LTD Yunnan Energy Investment new energy 45.00 2,250,000.00 2,250,000.00 technology engineering co., LTD Yunnan Energy Investment Jiaheng gas 51.00 15,300,000.00 15,300,000.00 industry co., LTD Yunnan Energy financial holding co., LTD 100.00 500,000,000.00 1,500,000,000.00 2,000,000,000.00 Yunnan Energy Investment Langchao 40.00 8,000,000.00 8,000,000.00 technology co., LTD Hong Kong energy international investment 100.00 260,656,150.00 762,000,000.00 1,022,656,150.00 co., LTD Yunnan Provincial Power Investment Co., 55.01 620,304,567.11 620,304,567.11 Ltd. Yunnan Provincial Power Investment 100.00 32,678,772.49 32,678,772.49 Nenghe Jinghe Co., Ltd. Yunnan electricity Zhongke photovoltaic 51.00 22,950,000.00 22,950,000.00 technology co., LTD Yunnan Energy Investment industry 100.00 249,382,592.53 285,000,000.00 534,382,592.53 investment co., LTD Yunnan Energy Investment foreign energy 51.00 60,091,850.99 79,815,000.00 139,906,850.99 development co., LTD Yunnan Energy Investment Weishi 40.00 12,000,000.00 12,000,000.00 technology co., LTD Yunnan Energy Investment Youneng 50.00 21,621,949.91 21,621,949.91 science and technology co., LTD Yunnan Energy Investment Huilong science 40.00 51,600,000.00 51,600,000.00 and technology co., LTD Yuxi city Dongfang coal co., LTD 67.00 36,517,300.00 36,517,300.00 Yunnan Energy Investment small 40.00 12,000,000.00 12,000,000.00 hydropower investment co., LTD Total 2,103,833,453.12 3,160,554,249.91 5,264,387,703.03

ㅜ112亥

– F-294 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

10.2.3 Long-term equity investment accounted in equity method

Proportion Increase Decrease Including: Cash Name of the invested organization Initial investments Dec. 31. 2013 Dec. 31. 2014 ˄%˅ of 2014 of 2014 dividend Yunnan Huadian Nujiang river hydropower 20.00 107,317,264.24 107,317,264.24 107,317,264.24 development co., LTD Yunnan Nanrui electrical technology co., LTD 35.00 3,507,011.74 3,507,011.74 524,999.97 4,032,011.71 Yunnan Dongyuan Zhengxiong coal co., LTD 26.00 107,516,358.51 107,516,358.51 28,496,987.25 79,019,371.26 Yunnan Huaneng lancang river hydropower 31.40 9,250,112,534.02 9,085,824,879.78 2,306,643,662.56 816,400,000.00 816,400,000.00 10,576,068,542.34 development company Guodian Xuanwei power generation co., LTD 34.00 268,369,281.29 Yunnan Huadian Xunjiansi power generation co., 35.00 22,063,017.07 22,063,017.07 22,063,017.07 LTD Yunnan Huadian Zhengxiong coal co., LTD 35.00 184,308,889.77 184,308,889.77 40,240,954.94 144,067,934.83 Guodian Kaiyuan power generation co., LTD 45.00 117,089,924.15 117,089,924.15 85,503,399.98 31,586,524.17 Dongyuan Luoping coal co., LTD 49.00 190,838,905.04 190,838,905.04 3,890,512.89 186,948,392.15 – F-295 Sanxia jinsha river chuanyun electric development 15.00 3,208,328,020.65 3,208,328,020.65 2,894,167,592.19 467,696,051.55 467,696,051.55 5,634,799,561.29 co., LTD Yunnan Zhonghui tendering co., LTD 40.00 6,162,832.92 6,162,832.92 822,832.92 1,046,549.63 1,046,549.63 5,939,116.21 Sanxia jinsha river chuanyun electric development 15.00 750,000,000.00 750,000,000.00 300,000,000.00 1,050,000,000.00 co., LTD Total 14,215,614,039.40 13,782,957,103.87 5,502,159,087.64 1,465,337,473.31 1,285,142,601.18 17,819,778,718.20 δ4εImpairment of long-term equity investments Test was made to the impairment of long-term equity investment and no prevision of impairment was needed.

ㅜ113亥 Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

10.3 Revenue and operating cost

Revenue Operating cost Item Year 2014 Year 2013 Year 2012 Year 2014 Year 2013 Year 2012 Revenue Interest revenue 28,936,804.48 9,309,589.60 1,355,782.52 29,833,845.42 9,514,400.57 1,380,186.61 Investment income 2,411,912,807.03 1,293,044,942.34 352,737,958.78 869,026,588.14 418,731,089.20 95,030,123.64 Other Revenue 44,643.80    Total 2,440,894,255.31 1,302,354,531.94 354,093,741.30 898,860,433.56 428,245,489.77 96,410,310.25

10.3.1 The details of investment income:

Investments where income arises Year 2014 Year 2013 Year 2012 Income from tradable financial assets  ncome from Financial assets available for sale 159,238,474.05  Income from held-to-maturity investment   Income from long-term equity investment 2,252,674,332.98 1,257,644,567.41 352,737,958.78 Income from disposal of long-term equity investment 35,400,374.93 Total 2,411,912,807.03 1,293,044,942.34 352,737,958.78

10.4 Investment Income

Investments where income arises Year 2014 Year 2013 Year 2012 Income from investment to associates Income from transferring inventories equity Income from financing investment 2,189,978.33 Total 2,189,978.33

11ǃ Further information

11.1 The company in 2014, according to the ministry of finance issued the Accounting Standards for Enterprises NO.

2 --Long-term Equity Investment (revised in 2014) and so on eight changes to the relevant accounting policies and accounting standards to compare traces the restated financial statements.

11.2 Early error correction

˄1˅The joint stock company of the company Huaneng Lancang River Hydropower Co., Ltd., which adjusted to increase net profit attributable to parent company RMB 66,846,695.15 in 2013,and traced back to adjustment the annual net profit attributable to the parent company RMB 420,163,513.05, adjusted to decrease net profit attributable to parent company before net profit attributable to parent company before 169,892,272.04 ,the company in 2014 according to the proportion of ownership of the corresponding adjustment.

ㅜ116亥

– F-296 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

˄2˅Yunnan Electric Power Industry Development Co., Ltd.is the Lever-3 subsidiaries of the company, of which coal highway project was completed in November 2012 and put into use, in October 2014 into the fixed assets, therefore, to correct the errors caused by the company, and maked additional depreciation RMB404,505.17 from December 2012 to December 2013, Meanwhile, adjusted 2013 management costs RMB 373389.39 and undistributed profit RMB

31,115.78 on Dec, 31, 2013.

˄3˅Yunnan Electric Power Industry Development Co., Ltd. is the Lever-3 subsidiaries of the company adjust other ccount reviceable gas treatment funds to be paid to special reserve loan, the above adjustment correction to reduce other account payable RMB 390,735.00 in 2013, at the same time increased special reserve loan RMB 390,735.00.

˄4˅Yunnan Diandong energy investment coal electricity co., LTD is the Lever-3 subsidiaries of the company traced back to adjustment of matters, adjustments to its report items are as follows: On December 31, Examination and approval 2013/2013 annual financial Audit adjustment Audit adjustment on December 31, No. Project name statement related to project debit credit 2013/2013 annual financial approval number statements related projects 1 Accounts receivable 135,759,574.40 27,180,523.09 5,916,285.84 157,023,811.65 2 Prepayments 58,305,331.83  21,162,005.39 37,143,326.44 3 Tax payable 1,254,244.63 -398,816.88  1,653,061.51 Other account 4 45,024,848.77  321,219.78 45,346,068.55 payable 5 Undistributed profit -24,754.12 617,804.80  -642,558.92 6 Revenue 643,271,428.17  27,180,523.09 670,451,951.26 7 Operating cost 631,342,468.29 27,413,773.88  658,756,242.17 8 Selling expenses 2,332,189.38 389,510.56  2,721,699.94 9 Income tax expense 527,865.57  4,956.55 522,909.02 ˄5˅The company, a subsidiary of Yunnan energy investment Weishi technology co., LTD maked additional provision for bad debt RMB 985,301.00 in 2012, and confirmed the deferred income tax assets of 246,325.25 yuan. ˄6˅Yunnan energy industry investment co., LTD is the subsidiary of the company, Included in the land confirmed 75,120,356.26 yuan as the changes in fair value of an investment real estate in 2011 and 2012, not confirm corresponding deferred income tax liabilities and deferred income tax expenses,and be adjusted back in 2014. After adjust the restatement of the consolidated balance sheet as follows˖

Asse Dec. 31. 2014 Dec. 31. 2013 Dec. 31. 2012 Jan 1, 2012 Current assets˖ Monetary capital 7,225,482,277.50 3,991,550,868.95 3,699,596,471.28 575,554,391.86 Deposit reservation for balance Lending funds The financial assets measured at fair value and the change in the profit and 49,000,000.00 loss of the current period Derivative financial assets Notes receivable 45,928,841.28 24,123,940.04 16,290,000.00 6,900,000.00 Accounts receivable 994,492,004.64 794,273,882.31 368,644,144.86 59,791,665.44 Advances to suppliers 1,047,222,874.69 839,515,691.00 698,352,302.83 1,627,726,235.82

ㅜ117亥

– F-297 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Premium receivable Accounts receivable reinsurance Reserve for reinsurance Interest receivable 15,410,970.11 6,135,186.79 3,376,421.42 87,803.90 Dividends receivable 15,732,000.00 Other account receivables 1,006,109,775.81 820,823,068.23 543,850,174.25 168,051,864.47 Buying back the sale of financial assets Inventory 1,140,871,329.34 605,293,470.16 321,973,536.35 5,010,700.32 Classified as held for sale of assets Non current assets due within a year 234,465,852.77 161,518,902.53 Other current assets 928,025,006.11 433,218,300.97 680,150,664.56 280,105,161.51 Total current assets 12,638,008,932.25 7,741,185,310.98 6,332,233,715.55 2,723,227,823.32 Non-current assets˖ Loans and advances 2,096,622,500.00 20,000,000.00 Available for sale financial assets 9,077,135,969.27 7,973,103,369.27 7,636,343,369.27 1,341,759,369.27 Hold to maturity investment Long term account receivables Long term equity investment 18,042,130,535.11 14,010,856,537.64 8,897,326,734.23 7,475,638,787.24 Investment real estate 135,533,894.14 135,462,688.47 Fixed assets 8,323,627,695.54 7,791,589,098.82 5,171,749,430.08 1,992,686,301.33 Construction in progress 5,469,887,407.88 4,008,475,694.77 4,681,850,340.13 4,835,569,399.46 Construction materials 44,917,441.91 91,916,931.42 58,189,982.87 30,452,090.27 Disposal of fixed assets 21,070.66 Productive biological assets Oil and gas assets Intangible assets 410,294,765.26 274,012,030.50 212,068,888.76 211,440,677.35 Development expenses 1,946,751.99 Goodwill 156,940,150.87 83,615,583.20 80,234,722.85 80,234,722.85 Long-term prepaid expenses 15,886,788.99 33,410,654.80 36,159,947.16 61,258,621.22 Deferred income tax assets 11,064,822.15 1,636,324.93 651,347.84 1,436,584.66 Other non current assets 403,325,424.51 234,016,830.74 405,480,413.37 181,511,986.20 Total non current assets 44,053,780,253.48 34,522,654,126.75 27,315,589,070.70 16,347,451,228.32 Total assets 56,691,789,185.73 42,263,839,437.73 33,647,822,786.25 19,070,679,051.64 Current liability ˖ Short-term borrowings 4,043,549,127.24 4,826,610,351.00 4,539,300,000.00 1,300,350,000.00 Borrowings from central bank Deposits from customers and interba nk Loans from other banks The financial liabilities that are measured at fair value and change into current profit and loss Derivative financial liabilities Notes payable 84,348,864.00 262,214,392.55 100,380,453.90 192,000,000.00 Payable account 1,632,139,105.62 1,340,856,024.89 914,900,689.06 593,520,144.47 Received in advance 171,275,454.28 123,431,975.19 86,587,267.16 578,297.90 Sell to buy back financial assets Handling fee and commission Employee compensation 29,546,775.14 35,364,619.65 25,061,088.03 12,954,413.79

ㅜ118亥

– F-298 – Yunnan Provincial Energy Investment Group Co., Ltd. Notes To The Consolidated FinancialStatements

Tax payable -245,172,260.43 -340,029,960.00 -329,065,847.57 -14,073,877.08 Accrued interest payable 466,830,114.70 116,613,882.98 35,132,914.24 21,579,049.06 Dividends payable 392,895,771.62 390,019,700.77 388,800,000.00 Other amounts payable 380,153,164.12 349,597,272.40 321,294,655.56 516,512,735.01 Dividend payable for reinsurance Reserve fund for insurance contracts Acting sale securities Agency underwriting securities Classified as held for sale debt Non current liabilities due within a year 2,486,943,678.08 526,407,678.08 454,300,000.00 644,800,000.00 Other current liabilities 5,491,516,666.66 996,666,666.66 697,900,000.00 300,000,000.00 Total current liabilities 14,934,026,461.03 8,627,752,604.17 7,234,591,220.38 3,568,220,763.15 Non-current liabilities˖ Long-term loans 9,183,160,265.11 9,767,602,590.19 7,344,880,000.00 2,756,180,000.00 Bonds payable 9,046,081,886.23 3,967,782,225.45 Long-term accounts payable 1,577,786,531.27 1,336,898,772.29 1,444,087,132.22 1,321,279,094.76 Long-term employee compensation Special accounts payable Expected liability 1,429,248.80 Deferred income 118,141,926.80 85,491,921.23 74,133,019.56 107,738,036.28 Deferred income tax liability 18,780,089.07 18,780,089.07 18,780,089.07 18,762,287.65 Other non current liabilities Total non current liabilities 19,943,950,698.48 15,176,555,598.23 8,881,880,240.85 4,205,388,667.49 Total liability 34,877,977,159.51 23,804,308,202.40 16,116,471,461.23 7,773,609,430.64 Owner's equity (or shareholder's equity)˖ Paid-in capital (or capital) 11,659,997,623.80 11,614,766,636.10 11,614,766,636.10 9,677,758,694.46 Other equity instruments 886,500,000.00 Capital reserve 3,909,344,820.57 4,082,970,323.02 4,081,274,530.00 54,566,129.80 Less:Stocks Other comprehensive income Special reserve 1,980,510.60 298,085.91 154,541.14 154,541.14 Surplus reserves 292,965,692.41 106,108,052.56 24,201,845.91 General Risk Preparation Undistributed profit 2,010,550,439.26 470,145,329.76 -220,065,318.16 -72,108,461.07 Owners' equity attributable to the 18,761,339,086.64 16,274,288,427.35 15,500,332,234.99 9,660,370,904.33 parent company in total Minority interest 3,052,472,939.58 2,185,242,807.98 2,031,019,090.03 1,636,698,716.67 Total owners' equity 21,813,812,026.22 18,459,531,235.33 17,531,351,325.02 11,297,069,621.00 Total liabilities and owners' equity 56,691,789,185.73 42,263,839,437.73 33,647,822,786.25 19,070,679,051.64

Yunnan Provincial Energy Investment Group Co., Ltd.

March 10, 2015

ㅜ119亥

– F-299 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2015

The directors have pleasure in submitting their annual report together with the audited consolidated financial statements of Yunnan Energy Investment (H K) Co. Limited ("the Company") and its subsidiaries (together referred to as "the Group") for the year ended 31 December 2015.

1. PRINCIPAL PLACE OF BUSINESS

Yunnan Energy Investment (H K) Co. Limited is a company incorporated in Hong Kong and has its registered office and principal place of business at Flat 2006, 20/F., China Resources Building, 26 Habour Road, Wanchai, Hong Kong.

2. PRINCIPAL ACTIVITIES

The principal activity of the Company during the year was investment holdings.

Details of the Company's principal subsidiaries and associates as at 31 December 2015 are set out in Notes 14 and 16 to the consolidated financial statements.

3. CONSOLIDATED FINANCIAL STATEMENTS

The results of the Group for the year ended 31 December 2015 and the state of affairs of the Group at that date are set out in the consolidated financial statements on pages 6 to 77.

The directors do not recommend the payment of a dividend in respect of the year ended 31 December 2015 (2014: RMB:Nil).

4. SHARE CAPITAL

Details of the movements in share capital of the Company during the year are set out in Note 28 to the consolidated financial statements.

5. PROPERTY, PLANT AND EQUIPMENT

Movements of the property, plant and equipment of the Group and the Company during the year are set out in Note 11 to the consolidated financial statements.

- 1 -

– F-300 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2015

6. DIRECTORS

The directors of the Company during the year were as follows:

Yunnan Provincial Energy Investment Group Co., Limited Ms. KANG Jin (resigned on 16 February 2015) Mr. ZHANG Jincan (appointed on 2 January 2015)

In accordance with Article 8 of the Company's Articles of Association, the existing directors shall retire from office at the forthcoming annual general meeting and being eligible, offer themselves for re-election.

The directors of the Company's subsidiaries during the year were as follows:

Mr. CAO Jianfeng Mr. CUI Peng Ms. DENG Ping Mr. DU Bo Mr. DU Changhua Mr. DUAN Yingtao Mr. DUAN Yuzhou Mr. FENG Junsong Mr. FENG Tao Mr. FENG Zhaoyun Mr. FU Qizhong Mr. GAO Ping Mr. GUAN Xiaofeng Mr. HUANG Biao Mr. HUANG Ning Ms. HUANG Ping Mr. HUO Su Mr. JIANG Wei Ms. KANG Jin Mr. LEI Jian Mr. LI Chunming Mr. LI Yi Ms. LIU Damei Mr. LIU Jianhua Mr. LIU Yabin Mr. LUO Zhonglin Mr. OUYANG hongjun Mr. QIAN Jianqiang Mr. SUN Ning Mr. SUN Shuming Mr. WANG Fei Mr. WANG Huaisu Ms. WANG Mengting Mr. WANG Songtao Mr. WEN Linqing Mr. WU Xiangquan Mr. XIAO Shuai Mr. XIE Yi Ms. XUE Lei Mr. YAN Yong Mr. YANG Jianjun Mr. YANG Wanhua Ms. YAO Suying Mr. ZHANG Daolu Mr. ZHANG Guohua Mr. ZHANG Jincan Ms. ZHANG Linlin Mr. ZHAO Jin Mr. ZHAO Mao Mr. ZHU Xinghu Mr. ZHU Yonghua

7. DIRECTORS' INTERESTS IN CONTRACT

Excepted as disclosed in Note 34 to the consolidated financial statements, there were no contracts of significance to which the Company, or any of its holding company, subsidiaries or fellow subsidiaries was a party and in which a director of the Company had a material interest, subsisted at the end of the reporting period or at any time during the year.

8. MANAGEMENT CONTRACTS

No contracts concerning the management and administration of the whole or any substantial part of business of the Company were entered into or existed during the year.

9. PERMITTED INDEMNITY PROVISION

At no time during the year and up to the date of this report, there was or is, any permitted indemnity provision being in force for the benefit of the directors of the Company.

10. EQUITY-LINKED AGREEMENT

No equity-linked agreements were entered into during the year.

- 2 -

– F-301 – – F-302 – – F-303 – – F-304 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2015

Note 2015 2014 RMB'000 RMB'000 (Restated) Continuing operations

Revenue 4 1,257,910 914,984

Cost of sales (1,035,585) (767,857)

Gross profit 222,325 147,127

Other gain / (loss), net 5 2,578 (8,295)

Selling expenses (363) (203)

Administrative expenses (69,916) (46,647)

Profit from operations 154,624 91,982

Finance costs, net 6 (157,596) (90,779)

Share of profits of associates 18,931 630

Profit before taxation 7 15,959 1,833

Income tax 9(a) (3,807) (2,834)

Profit / (Loss) for the year from continuing operations 12,152 (1,001)

Discontinued operation Loss for the year from discontinued operation 10 (9,858) (30,815)

Profit / (Loss) for the year 2,294 (31,816)

Profit / (Loss) for the year attributable to equity holder of the Company: from continuing operations (4,365) (7,273) from discontinued operation 14,887 (15,716) 10,522 (22,989)

Profit / (Loss) for the year attributable to non-controlling interests: from continuing operations 16,517 6,272 from discontinued operation (24,745) (15,099) (8,228) (8,827)

2,294 (31,816)

The accompanying Accounting Policies and Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

- 6 -

– F-305 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2015

Note 2015 2014 RMB'000 RMB'000 (Restated)

Profit / (Loss) for the year 2,294 (31,816)

Other comprehensive expense (Items that may be reclassified subsequently to profit or loss) Change in fair value of available-for-sale investments (1,415) -

Total comprehensive income / (expense) for the year 879 (31,816)

Total comprehensive income / (expense) attributable to : Equity holder of the Company 9,107 (22,989) Non-controlling interests (8,228) (8,827) 879 (31,816)

The accompanying Accounting Policies and Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

- 7 -

– F-306 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2015

Note 31.12.2015 31.12.2014 1.1.2014 RMB'000 RMB'000 RMB'000 (Restated) (Restated)

Non-current assets Property, plant and equipment 11 4,271,537 2,309,507 1,393,651 Lease prepayments 12 107,273 62,443 56,322 Intangible assets 13 71 66 95 Deferred income tax assets 9(d) 2 1 43 Goodwill 15 26,044 26,044 26,044 Investments in associates 16 282,858 138,919 - Deposits paid for investments 17 - - 272,378 Other non-current assets 18 365,866 330,851 106,387 5,053,651 2,867,831 1,854,920 Current assets Inventories 19 184,758 170,799 1,040 Trade receivables 20 153,041 296,041 213,613 Deposits, prepayments and other receivables 21 166,722 557,190 428,673 Cash and cash equivalents 22 1,045,624 1,818,257 1,132,270 1,550,145 2,842,287 1,775,596 Current liabilities Trade and other payables 23 637,878 713,294 1,115,792 Obligations under finance leases 24 21,655 - - Borrowings 25 788,359 2,062,449 1,776,610 Income tax payable 9(c) 2,246 2,262 6,929 (1,450,138) (2,778,005) (2,899,331)

Net current assets / (liabilities) 100,007 64,282 (1,123,735)

Non-current liabilities Obligations under finance leases 24 175,320 - - Borrowings 25 2,262,612 1,042,892 200,000 Corporate bond 26 592,565 588,936 - Deferred income 27 78,543 53,815 31,596 (3,109,040) (1,685,643) (231,596)

NET ASSETS 2,044,618 1,246,470 499,589

The accompanying Accounting Policies and Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

- 8 -

– F-307 – – F-308 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015

Attributable to equity holder of the Company Non- Share subscription Merger Other Statutory Fair value Accumulated controlling Share capital monies reserve reserve reserve reserve losses Total interests Total equity RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 (Note 29 (a)) (Note 29 (b)) (Note 29 (c)) (Note 29 (d))

At 1 January 2014 (as previously 3,900 - 114,523 - - - (47,506) 70,917 279,477 350,394 reported)

Effect of business combination - - 110,000 - - - 5,338 115,338 33,857 149,195

As restated 3,900 - 224,523 - - - (42,168) 186,255 313,334 499,589

Issuance of new ordinary shares 563,756 ------563,756 - 563,756

– F-309 Share subscription monies received - 455,000 - - - - - 455,000 - 455,000 (Note 28(iv))

Acquisition of non-controlling interests - - - (3,014) - - - (3,014) (56,586) (59,600)

Capital contribution from the - - 79,815 - - - - 79,815 - 79,815 Company's immediate holding company

Deemed distributions to the Company's - - (257,878) - - - - (257,878) - (257,878) immediate holding company

Capital contribution from ------9,009 9,009 non-controlling interests

Dividends by subsidiaries to ------(11,405) (11,405) non-controlling interests equity owners

Loss and total comprehensive expense ------(22,989) (22,989) (8,827) (31,816) for the year

At 31 December 2014 (restated) 567,656 455,000 46,460 (3,014) - - (65,157) 1,000,945 245,525 1,246,470

The accompanying Accounting Policies Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

- 10 - YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015

Attributable to equity holder of the Company Non- Share subscription Merger Other Statutory Fair value Accumulated controlling Share capital monies reserve reserve reserve reserve losses Total interests Total equity RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 (Note 29 (a)) (Note 29 (b)) (Note 29 (c)) (Note 29 (d))

At 1 January 2015 (as previously 567,656 455,000 (67,986) (3,014) - - (48,682) 902,974 230,895 1,133,869 reported)

Effect of business combination - - 114,446 - - - (16,475) 97,971 14,630 112,601

As restated 567,656 455,000 46,460 (3,014) - - (65,157) 1,000,945 245,525 1,246,470

Issuance of new ordinary shares 1,455,000 (455,000) - - - - - 1,000,000 - 1,000,000

– F-310 Acquisition of non-controlling interests - - - (51,547) - - - (51,547) (167,042) (218,589)

Disposed of subsidiaries ------4,277 4,277

Capital contribution from ------32,600 32,600 non-controlling interests

Transfer to statutory reserve - - - - 4,117 - (4,117) - - -

Dividends by subsidiaries to ------(21,019) (21,019) non-controlling interests equity owners

Profit/ (loss) for the year ------10,522 10,522 (8,228) 2,294

Other comprehensive expense for the year - - - - - (1,415) - (1,415) - (1,415)

At 31 December 2015 2,022,656 - 46,460 (54,561) 4,117 (1,415) (58,752) 1,958,505 86,113 2,044,618

The accompanying Accounting Policies Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

- 11 - YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2015

Note 2015 2014 RMB'000 RMB'000 (Restated) Operating activities Profit / (Loss) before taxation 6,101 (28,942) Adjustments for: Impairment loss on trade and other receivables, net 21,063 16,819 Loss / (Gain) on disposal of property, plant and equipment 286 (25) Gain on disposal of subsidiaries, net (38,757) - Share of profits of associates (18,931) (630) Written off of property, plant and equipment - 14,905 Interest expenses 188,733 163,793 Depreciation 85,089 46,295 Amortisation of lease prepayments and intangible assets 1,741 1,311 Amortisation of deferred income (19,097) (5,305) Interest income (21,362) (21,576) Operating profit before changes in working capital 204,866 186,645 Increase in inventories (73,280) (169,759) Decrease / (Increase) in trade receivables 31,971 (86,938) Increase in deposits, prepayments and other receivables (88,330) (192,645) Decrease in trade and other payables (50,604) (411,410) Cash generated from / (used in) operations 24,623 (674,107) Income tax paid (3,824) (7,499) Net cash generated from / (used in) operating activities 20,799 (681,606)

Investing activities Prepayments of acquisition of property, plant and equipment and lease payments (98,053) (194,954) Payments of acquisition of property, plant and equipment, lease prepayment and intangible assets (1,672,502) (931,088) Payments of acquisition of non-controlling interest of a subsidiary (218,589) (45,100) Payments of acquisition of available-for-sale securities (16,125) - Investments in associates (125,008) (138,289) Net cash outflow from disposal of subsidiaries 30 (77,307) - Proceeds from disposal of property, plant and equipment - 544 Increase in deferred income 43,825 27,524 Interest received 18,223 19,501 Net cash used in investing activities (2,145,536) (1,261,862)

The accompanying Accounting Policies and Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

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– F-311 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2015

Note 2015 2014 RMB'000 RMB'000 (Restated) Financing activities Net proceeds from issuance of shares 1,000,000 563,756 Proceeds from borrowings 1,489,025 6,182,286 Repayment of borrowings (944,395) (5,053,555) Repayment of obligations under finance leases (3,025) - Share subscription money received - 455,000 Net proceeds from issuance of corporate bond - 588,230 Capital contribution from the Company's immediate holding company - 79,815 Capital contribution from a non-controlling interest of a subsidiary 32,600 9,009 Dividend paid by subsidiaries to non-controlling equity owners (21,019) (11,405) Interest paid (201,082) (183,681) Net cash generated from financing activities 1,352,104 2,629,455

Net (decrease) / increase in cash and cash equivalents (772,633) 685,987 Cash and cash equivalents brought forward 1,818,257 1,132,270 Cash and cash equivalents carried forward 22 1,045,624 1,818,257

The accompanying Accounting Policies and Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

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– F-312 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

Reporting entity

Yunnan Energy Investment (H K) Co. Limited ("the Company") is a company incorporated in Hong Kong. Its registered office and principal place of business are situated at Flat 2006, 20/F., China Resources Building, 26 Habour Road, Wanchai, Hong Kong. The principal activity of the Company during the year was investment holdings. The principal activities of its subsidiaries are set out in Note 14 to the consolidated financial statements.

The functional and presentation currencies of the Company and its subsidiaries (together referred to as the "Group") are Renminbi ("RMB") at which the majority of the Group's transactions are denominated.

During the year, the Group acquired 57.32% equity interests at nil consideration in 暚⋿傥㈽⮵⢾傥㸸攳 䘤㚱旸℔⎠("暚⋿⮵⢾傥㸸") which was accounted for as an associate of the Group in prior year. The entity acquired was a subsidiary of 暚⋿䚩傥㸸㈽屯普⛀㚱旸℔⎠("傥㈽普⛀"), the Company's immediate holding company. The transaction is referred to as the "Acquisition Transaction" and the entity acquired in the Acquisition Transaction is referred to as the "Acquired Entity".

In addition, during the year, at a consideration of approximately RMB218,589,000 the Group acquired additional 38.61% equity interest of 暚⋿傥㈽㕘傥㸸攳䘤㚱旸℔⎠("暚⋿㕘傥㸸") a non-wholly owned subsidiary of the Group in prior years, from its non-controlling interest, a fellow subsidiary of the Group. After the acquisition, 暚⋿㕘傥㸸 became a wholly owned subsidiary of the Group.

At the end of the reporting period, the directors of the Company regard 暚⋿䚩㈽屯㍏偉普⛀㚱旸℔⎠(" ㈽屯普⛀"), a state-owned enterprise incorporated in the People's Republic of China (the "PRC") and administered by 暚⋿䚩Ṣ㮹㓧⹄⚳㚱屯䓊䚋䜋䭉䎮⥼⒉㚫, as its ultimate holding company.

1. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance These consolidated financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards ("HKFRSs"), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ("HKASs") and Interpretations issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. A summary of the significant accounting policies adopted by the Group is set out below.

The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for the current accounting period of the Group. Note 1(c) provides information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the group for the current and prior accounting periods reflected in these financial statements.

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– F-313 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Basis of preparation of the consolidated financial statements The measurement basis used in the preparation of the consolidated financial statements is the historical cost basis except certain assets and liabilities are stated at their fair value as explained in the accounting policies set out below.

Merger accounting for business combinations under common control Pursuant to the Acquisition Transaction, the Company became a holding company of the Acquired Entity. Since the Company and the Acquired Entity were ultimately controlled by ㈽屯普⛀ both before and after the completion of the Acquisition Transaction, the Acquisition Transaction was accounted for using the principles of merger accounting.

The consolidated statements of profit or loss, consolidated statements of profit or loss and other comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows of the Group for the years ended 31 December 2015 and 2014 include the results, changes in equity and cash flows of all companies comprising the Group and the Acquired Entity, as if the corporate structure of the Group immediately after the completion of the Acquisition Transactions had been in existence throughout the years ended 31 December 2015 and 2014, or since their respective dates of acquisition, incorporation or registration, where this is a shorter period. The consolidated statement of financial position of the Group as at 31 December 2014 was prepared to present the state of affairs of the Group and the Acquired Entity as if the corporate structure of the Group immediately after the completion of the Acquisition Transaction had been in existence and in accordance with the respective equity interests and/or the power to exercise control over the individual companies attributable to the Company as at 31 December 2014.

The preparation of consolidated financial statements in conformity with HKFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of HKFRSs that have significant effect on the consolidated financial statements and major sources of estimation uncertainty are discussed in Note 3.

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– F-314 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Changes in accounting policies The HKICPA has issued the following amendments to HKFRSs that are first effective for the current accounting period of the Group:

Įġ Amendments to HKAS 19, Employee benefits: Defined benefit plans: Employee Contributions    Annual Improvements to HKFRSs 2010-2012 Cycle     Annual Improvements to HKFRSs 2011-2013 Cycle 

Impacts of the adoption of the amended HKFRSs are discussed below:

Amendments to HKAS 19, Employee benefits: Defined benefit plans: Employee contributions The amendments introduce a relief to reduce the complexity of accounting for certain contributions from employees or third parties under defined benefit plans. When the contributions are eligible for the practical expedient provided by the amendments, a company is allowed to recognise the contributions as a reduction of the service cost in the period in which the related service is rendered, instead of including them in calculating the defined benefit obligation.

Annual Improvements to HKFRSs 2010-2012 Cycle and 2011-2013 Cycle These two cycles of annual improvements contain amendments to nine standards with consequential amendments to other standards. Among them, HKAS 24, Related party disclosures has been amended to expand the definition of a "related party" to include a management entity that provides key management personnel services to the reporting entity, and to require the disclosure of the amounts incurred for obtaining the key management personnel services provided by the management entity.

The adoptions of the above amendments to HKFRSs do not have material impact on these consolidated financial statements.

The Group has not applied the new HKFRSs that have been issued but are not yet effective. The Group is in the process of making an assessment of what the impact of these new HKFRSs is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the consolidated financial statements.

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– F-315 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Subsidiaries and non-controlling interest Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered.

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Group can elect to measure any non-controlling interests either at fair value or at the non-controlling interests' proportionate share of the subsidiary's net identifiable assets.

Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated statement of profit or loss and the consolidated statement of profit or loss and other comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company. Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated statement of financial position in accordance with Notes 1(n) or (o), depending on the nature of the liability.

Changes in the Group's interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised.

When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss.

In the Company's statement of financial position, an investment in a subsidiary is stated at cost less impairment losses (see Note 1(k)), unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale).

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– F-316 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Merger accounting for business combination under common control Business combinations arising from transfer of interests in entities that are under the control of the equity shareholders that controls the Group are accounted for as if the acquisition had occurred at the beginning of the years or, if later, at the date that common control was established. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group's equity shareholders' consolidated financial statements.

Upon transfer of interest in an entity to another entity that are under the control of the equity owner that controls the Group, any difference between the Group's interest in the carrying value of the assets and liabilities and the cost of transfer of interest in the entity is recognised directly in equity.

(f) Associates An associate is an entity in which the Group or Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

An investment in an associate is accounted for in the consolidated financial statements under the equity method, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group's share of the acquisition-date fair values of the investee's identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Group's share of the investee's net assets and any impairment loss relating to the investment (see Notes 1(g) and (k)). Any acquisition-date excess over cost, the Group's share of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognised in the consolidated statement of profit or loss, whereas the Group's share of the post-acquisition post-tax items of the investees' other comprehensive income is recognised in the consolidated statement of profit or loss and other comprehensive income.

When the Group's share of losses exceeds its interest in the associate, the Group's interest is reduced to nil and recognition of further losses is discontinued except to the extent that the group has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Group's interest is the carrying amount of the investment under the equity method together with the Group's long-term interests that in substance form part of the Group's net investment in the associate.

Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group's interest in the investee, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss.

If an investment in an associate becomes an investment in a joint venture or vice versa, retained interest is not remeasured. Instead, the investment continues to be accounted for under the equity method.

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– F-317 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Associates (continued) In all other cases, when the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee at the date when significant influence is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see Note 1(h)).

In the Company's statement of financial position, investments in associates are stated at cost less impairment losses (see Note 1(k)), unless classified as held for sale (or included in a disposal group that is classified as held for sale).

(g) Goodwill Goodwill represents the excess of

(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group's previously held equity interest in the acquiree; over

(ii) the net fair value of the acquirer's identifiable assets and liabilities measured as at the acquisition date.

When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain purchase.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating unit, that is expected to benefit from the synergies of the combination and is tested annually for impairment (see Note 1(k)). On disposal of a cash generating unit during the year, any attributable amount of purchased goodwill is included in the calculation of profit or loss on disposal.

(h) Other investments in equity securities Investments in equity securities are initially stated at fair value, which is their transaction price unless it is determined that the fair value at initial recognition differs from the transaction price and that fair value is evidenced by a quoted price in an active market for an identical asset or liability or based on a valuation technique that uses only data from observable markets.

At the end of each reporting period the fair value is remeasured, with any resultant gain or loss being recognised in other comprehensive income and accumulated separately in equity in the fair value reserve. As an exception to this, investments in equity securities that do not have a quoted price in an active market for an identical instrument and whose fair value cannot otherwise be reliably measured are recognised in the statement of financial position at cost less impairment losses (see Note 1(k)).

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– F-318 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(h) Other investments in equity securities (continued) Dividend income from equity securities are recognised in profit or loss in accordance with the policies set out in Note 1(t). Foreign exchange gains and losses resulting from changes in the amortised cost of debt securities are also recognised in profit or loss.

When the investments are derecognised or impaired (see Note 1(k)), the cumulative gain or loss recognised in equity is reclassified to profit or loss. Investments are recognised / derecognised on the date the Group commits to purchase / sell the investments or they expire.

(i) Property, plant and equipment and intangible assets Property, plant and equipment and intangible assets other than construction in progress are stated at cost less accumulated depreciation / amortisation and impairment losses (see Note 1(k)).

The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs (see Note 1(v)).

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

Depreciation and amortisation are calculated to write off the cost of property, plant and equipment and intangible assets, less their estimated residual value, if any, using the straight-line method over their estimated useful lives as follows:

Estimated useful Residual value (% of cost) Buildings 20-25 years 5% Plant and machinery 10-25 years 5% Furniture, equipment and others 3-5 years 5% Motor vehicle 5 years 5% Intangible assets 3-10 years -

Both the useful life an asset and its residual value, if any, are reviewed annually.

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– F-319 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) Leased assets An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i) Classification of assets leased to the Group Assets that are held by Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases.

(ii) Assets acquired under finance lease Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in property, plant and equipment and the corresponding liabilities, net of finance charges, is recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in Note 1(i). Impairment losses are accounted for in accordance with the accounting policy as set out in Note 1(k). Finance charges implicit in the lease payments are charged to profit or loss over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

(iii) Operating lease charges Where the Group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the period of the lease term.

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– F-320 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Impairment of assets

Impairment of investments equity securities and other receivables Investments in equity securities and other current and non-current receivables that are stated at cost or amortised cost or are classified as available-for-sale securities are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable date that comes to the attention of the Group about one or more of the following loss events:

- significant financial difficulty of the debtor; - a breach of contract, such as a default or delinquency in interest or principal payments; - it becoming probable that the debtor will enter bankruptcy or other financial reorganisation; - a significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and - a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

If any such evidence exists, an impairment loss is determined and recognised as follows:

- For investments in associates accounted for under the equity method in the consolidated financial statements (see Note 1(f)), the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with Note 1(k) below. The impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount in accordance with Note 1(k) below.

- For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities are not reversed.

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– F-321 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Impairment of assets (continued)

Impairment of investments in equity securities and other receivables (continued)

- For trade and other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset's carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

- For available-for-sale securities, the cumulative loss that has been recognised in the fair value reserve is reclassified to profit or loss. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in profit or loss.

Impairment losses recognised in profit or loss in respect of available-for-sale equity securities are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognised in other comprehensive income.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade and other receivable directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

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– F-322 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Impairment of assets (continued)

Impairment of other assets Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased:

- property, plant and equipment; - pre-paid interest in leasehold land and classified as being held under operating lease; - investments in subsidiaries and associates in the Company's statement of financial position; - goodwill; - intangible assets; and - deposits paid for investments.

If any such indication exists, the asset's recoverable amount is estimated. In addition, for goodwill, the recoverable is estimated usually whether or not there is any indication of impairment.

- Calculation of recoverable amount The recoverable amount of an asset is the greater of its fair value less cost of deposed and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

- Recognition of impairment losses An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measurable) or value in use (if determinable).

- Reversals of impairment losses In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset's carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised. - 24 -

– F-323 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(l) Inventories Inventories are carried at the lower of cost and net realisable value.

Cost is calculated using the first-in-first-out method and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

(m) Trade and other receivables Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost using effective interest method, me less allowance for impairment of doubtful debts (see Note 1(k)), except where the receivables are interest free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

(n) Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

(o) Trade and other payables Trade and other payables are initially recognised at fair value. Except for financial guarantee liabilities measured in accordance with Note 1(s)(i), trade and other payable are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(p) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows. - 25 -

– F-324 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(q) Employee benefits

- Short-term employee benefits and contributions to defined contribution retirement plan Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

- Termination benefits Termination benefits are recognised when and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

(r) Income tax Income tax for the year, if any, comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities and all deferred tax assets, to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

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– F-325 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(r) Income tax (continued) The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profit will be available.

Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the related dividends is recognised.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Company or the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

- in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or

- in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

- the same taxable entity; or

- different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

- 27 -

– F-326 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(s) Financial guarantees, provisions and contingent liabilities

(i) Financial guarantees issued Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the "holder") for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee is initially recognised as deferred income within trade and other payables. The fair value of financial guarantees issued at the time of issuance is determined by reference to fees charged in an arm's length transaction for similar services, when such information is obtainable, or is otherwise estimated by reference to interest rate differentials, by comparing the actual rates charged by lenders when the guarantee is made available with the estimated rates that lenders would have charged, had the guarantees not been available, where reliable estimates of such information can be made. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group's policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss on initial recognition of any deferred income.

The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised in accordance with Note 1(s)(ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.

(ii) Other provisions and contingent liabilities Provisions are recognised for other liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

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– F-327 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(t) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

Sale of electricity Electricity revenue is recognised when electricity is supplied to the provincial grid companies. Revenue excludes value added tax ("VAT") or other sales taxes and is after deduction of any trade discounts.

Sale of goods Revenue is recognised when goods are delivered at the customers' premises which is taken to be the point in time when the customer has accepted the goods and the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

Government grants Government grants are recognised in the statement of financial position initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised as income in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are recognised initially as deferred income and consequently are recognised in profit or loss on a systematic basis over the useful life of the asset by way of reduced depreciation expense.

Interest income Interest income is recognised as it accrues using effective interest method.

Dividend income Dividend income is recognised when the right to receive payment is established.

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– F-328 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(u) Translation of foreign currencies Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was measured.

The results of foreign operations are translated into RMB at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Statement of financial position items are translated into RMB at the closing foreign exchange rates at the end of the reporting period. The resulting exchange differences are recognised in other comprehensive income and accumulated separately in equity in the exchange reserve.

On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation is reclassified from equity to profit or loss when the profit or loss on disposal is recognised.

(v) Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

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– F-329 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(w) Non-current assets held for sale and discontinued operation

(i) Non-current assets held for sale A non-current asset (or disposal group) is classified as held for sale if it is highly probable that its carrying amount will be recovered through a sale transaction rather than through continuing use and the asset (or disposal group) is available for sale in its present condition. A disposal group is a group of assets to be disposed of together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all the assets and liabilities of that subsidiary are classified as held for sale when the above criteria for classification as held for sale are met, regardless of whether the Group will retain a non-controlling interest in the subsidiary after the sale.

Immediately before classification as held for sale, the measurement of the non-current assets (and all individual assets and liabilities in a disposal group) is brought up-to-date in accordance with the accounting policies before the classification. Then, on initial classification as held for sale and until disposal, the non-current assets or disposal groups, are recognised at the lower of their carrying amount and fair value less costs to sell.

Impairment losses on initial classification as held for sale, and on subsequent remeasurement while held for sale, are recognised in profit or loss. As long as a non-current asset is classified as held for sale, or is included in a disposal group that is classified as held for sale, the noncurrent asset is not depreciated or amortised.

(ii) Discontinued operation A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the group and which represents a separate major line of business or geographical area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale (see (i) above), if earlier. It also occurs if the operation is abandoned.

Where an operation is classified as discontinued, a single amount is presented on the face of the statement of profit or loss, which comprises:

- the post-tax profit or loss of the discontinued operation; and - the post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal group(s) constituting the discontinued operation.

- 31 -

– F-330 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(x) Related parties (a) A person, or a close member of that person's family, is related to the Group if that person: (i) has control or joint control over the Group; (ii) has significant influence over the Group; or (iii) is a member to the key management personnel of the Group or the Group's parent.

(b) An entity is related to the Group if any of the following conditions applies: (i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of member of group of which the other entity is a member). (iii) Both entities are joint venture of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. (vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

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– F-331 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

2. RESTATEMENT OF COMPARATIVE AMOUNTS

The operating results previously reported by the Group for the year ended 31 December 2014 have been restated to include the operating results of the Acquired Entities as set out below:

The Group (as previously The Group reported) Acquired entity Adjustments (combined) RMB'000 RMB'000 RMB'000 RMB'000 (Restated) Continuing operations Revenue 905,004 9,980 - 914,984 Cost of sales (761,714) (6,143) - (767,857) Other gain / (loss), net 7,839 (16,134) - (8,295) Selling expenses (203) - - (203) Administrative expenses (45,094) (1,553) - (46,647) Finance costs, net (77,708) (13,071) - (90,779) Share of (losses) / profits of (18,582) - 19,212 630 associates Loss on deemed disposal of (1,845) - 1,845 - partied interest in an associate Income tax (2,717) (117) - (2,834) Profit/ (loss) for the year from continuing operations 4,980 (27,038) 21,057 (1,001) Loss for the year from discontinued operation - (30,815) - (30,815) Profit / (Loss) for the year 4,980 (57,853) 21,057 (31,816)

The financial position previously reported by the Group at 31 December 2014 has been restated to include the assets and liabilities of the Acquired Entity as set out below:

The Group (as previously The Group reported) Acquired entity Adjustments (combined) RMB'000 RMB'000 RMB'000 RMB'000 (Restated) Assets Property, plant and equipment 1,893,323 416,184 - 2,309,507 Investments in associates 240,516 - (101,597) 138,919 Other non-current assets 392,466 26,939 - 419,405 Trade receivables 222,184 73,857 - 296,041 Cash and cash equivalents 1,347,613 470,644 - 1,818,257 Other current assets 277,603 518,386 (68,000) 727,989 Total assets 4,373,705 1,506,010 (169,597) 5,710,118

Liabilities Trade and other payables 412,085 369,209 (68,000) 713,294 Borrowings 2,188,049 917,292 - 3,105,341 Corporate bond 588,936 - - 588,936 Income tax payable 2,191 71 - 2,262 Deferred income 48,575 5,240 - 53,815 Total liabilities 3,239,836 1,291,812 (68,000) 4,463,648 - 33 -

– F-332 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

2. RESTATEMENT OF COMPARATIVE AMOUNTS (CONTINUED)

The financial position previously reported by the Group at 1 January 2014 has been restated to include the assets and liabilities of the Acquired Entity as set out below:

The Group (as previously The Group reported) Acquired entity (combined) RMB'000 RMB'000 RMB'000 (Restated) Assets Property, plant and equipment 1,204,807 188,844 1,393,651 Other non-current assets 432,651 28,618 461,269 Trade receivables 55,343 158,270 213,613 Cash and cash equivalents 512,192 620,078 1,132,270 Other current assets 154,444 275,269 429,713 Total assets 2,359,437 1,271,079 3,630,516

Liabilities Trade and other payables 640,583 475,209 1,115,792 Borrowings 1,336,610 640,000 1,976,610 Income tax payable 3,303 3,626 6,929 Deferred income 28,547 3,049 31,596 Total liabilities 2,009,043 1,121,884 3,130,927

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– F-333 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

3. CRITICAL ACCOUNTING JUDGMENT IN APPLYING THE GROUP'S ACCOUNTING POLICIES

The Group's financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the preparation of the consolidated financial statements. The Group bases the assumptions and estimates on historical experience and on various other assumptions that the Group believes to be reasonable and which form the basis for making judgments about matters that are not readily apparent from other sources. On an on-going basis, management evaluates its estimates. Actual results may differ from those estimates as facts, circumstances and conditions change.

The selection of critical accounting policies, the judgments and other uncertainties affecting application of those polices and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing the consolidated financial statements. The principal accounting policies are set forth in Note 1. The Group believes the following critical accounting policies involve the most significant judgments and estimates used in the consolidated preparation of the consolidated financial statements.

(a) Impairment losses for bad and doubtful debts The Group estimates impairment losses for bad and doubtful debts resulting from the inability of the customers and other debtors to make the required payments. The Group bases the estimates on the aging of the receivable balance, debtors' credit-worthiness, and historical write-off experience. If the financial condition of the customers and debtors were to deteriorate, actual write-offs would be higher than estimated.

(b) Impairment losses for non-current assets In considering the impairment losses that may be required for certain of the Group's assets which include property, plant and equipment, lease prepayments, goodwill, intangible assets, investments in associates, and deposits paid for investments, recoverable amount of the asset needs to be determined. The recoverable amount is the greater of the fair value less costs to sell and the value in use. It is difficult to precisely estimate selling price because quoted market prices for these assets may not be readily available. In determining the value in use, expected cash flow generated by the asset are discounted to their present value, which requires significant judgment relating to items such as level of sale volume, selling price and amount of operating costs. The Group uses all readily available information in determining an amount that is reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections of items such as sale volume, selling price and amount of operating costs.

(c) Depreciation Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets, after taking into account the estimated residual value. The Group reviews the estimated useful lives of the assets regularly. The useful lives are based on the Group's historical experience with similar assets and taking into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

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– F-334 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

3. CRITICAL ACCOUNTING JUDGMENT IN APPLYING THE GROUP'S ACCOUNTING POLICIES (CONTINUED)

(d) Income tax The Group files income taxes in numerous tax authorities. Judgment is required in determining the provision for taxation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts originally recorded, the differences will impact on the current income tax and deferred income tax provisions in the periods in which the differences arise.

(e) Provision for guarantees Provision for outstanding guarantees is recognised if it becomes probable that the holders of these guarantees will call upon the Group under the guarantees and the amount of that claim on the Group is expected to exceed the amount currently carried in payables in respect of the guarantee. The Group reviews the financial position of these guarantee holders regularly and estimates the amount to claim on the Group based on historical experience. If the financial position of these guarantee holders were to deteriorate, actual provisions would be higher than estimated.

4. REVENUE AND SEGMENT INFORMATION

(a) Revenue

2015 2014 RMB'000 RMB'000 (Restated)

Trading sales 228,217 264,568 Sales of electricity 316,787 150,807 Rubbish handling income 12,072 16,563 Assembling and sales of wind power plant equipment 685,759 428,472 Sales of cement 10,600 - Others 4,475 54,574 1,257,910 914,984

- 36 -

– F-335 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

4. REVENUE AND SEGMENT INFORMATION (CONTINUED)

(b) Segment information The chief operating decision-maker has been identified as the executive directors and certain senior management of the Group (together, the "CODM") that make strategic decisions. The CODM reviews the internal reporting of the Group in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The CODM assesses the performance of the operating segments based on each segment's profit / (loss) before taxation, finance costs, net and share of profits of associates ("segment results").

The Group has the following major segments: power generation, trading, assembling and sales of equipment, cement and others.

The Group is principally engaged in the development and management of renewable energy power plants in the PRC.

The trading segment is engaged in trading of food, mineral and metal products and power generation equipment.

The assembling and sales of equipment segment is engaged in assembling and sales of wind power plant equipment.

The cement segment is engaged in manufacture and sales of cement.

The Group's other operating segment includes the management and mining which earns consultancy and project management income.

Segment assets exclude investments in associates and deferred income tax assets.

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– F-336 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

4. REVENUE AND SEGMENT INFORMATION (CONTINUED)

(b) Segment information (continued) The segment information provided to the CODM for the reportable segments for the years ended 31 December 2015 and 2014 are as follows:

Assembling and Power sales of generation Trading equipment Cement Others Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

For the year ended 31 December 2015

Continuing operations

Segment revenue 328,859 228,217 685,759 10,600 4,475 1,257,910

Results of reportable segments 162,539 5,028 5,413 3,157 (21,513) 154,624

A reconciliation of results of reportable segments to profit for the year is as follows :

Results to reportable segments 154,624 Finance costs, net (157,596) Share of profits of associates 18,931

Profit before taxation 15,959 Income tax (3,807)

Profit for the year 12,152

Segment results included: Depreciation and amortisation 83,646 - 745 306 1,887 86,584 Impairment loss on trade and other receivables recognised / (reversed) (1,486) - (3) 186 - (1,303)

- 38 -

– F-337 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

4. REVENUE AND SEGMENT INFORMATION (CONTINUED)

(b) Segment information (continued)

Assembling and Power sales of generation Trading equipment Others Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 (Restated) (Restated) (Restated)

For the year ended 31 December 2014

Continuing operations

Segment revenue 167,370 264,568 428,472 54,574 914,984

Results of reportable segments 46,179 6,414 6,191 33,198 91,982

A reconciliation of results of reportable segments to loss for the year is as follows :

Results to reportable segments 91,982 Finance costs, net (90,779) Share of profits of associates 630

Profit before taxation 1,833 Income tax (2,834)

Loss for the year (1,001)

Segment results included: Depreciation and amortisation 46,585 - 512 404 47,501 Impairment loss on trade and other receivables recognised / (reversed) 2,837 - (6) - 2,831 Written off of property, plant and equipment 14,905 - - - 14,905

- 39 -

– F-338 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

4. REVENUE AND SEGMENT INFORMATION (CONTINUED)

(b) Segment information (continued)

Assembling Power and sales of generation Trading equipment Cement Others Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

As at 31 December 2015

Segment assets 4,695,094 58,188 277,860 805,382 484,412 6,320,936

Investments in associates - - - - - 282,858

Deferred income tax assets - - - - - 2 Total assets per consolidated statement of financial position 6,603,796

Additions to segment non-current assets 1,583,715 418 1,652 405,808 6,538 1,998,131

Assembling Power and sales of generation Trading equipment Cement Others Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 (Restated) (Restated) (Restated) (Restated) (Restated) (Note)

As at 31 December 2014

Segment assets 2,856,484 899,141 204,404 500,532 1,110,637 5,571,198

Investments in associates - - - - - 138,919

Deferred income tax assets - - - - - 1 Total assets per consolidated statement of financial position 5,710,118

Additions to segment non-current assets 976,406 683 1,802 226,861 11,824 1,217,576

Additions to segment non-current assets represent additions to non-current assets other than financial instruments.

Note: Segment assets under trading segment included assets of 暚⋿傥㸸忼忚↢⎋㚱旸℔⎠("傥㸸忼"), a former subsidiary of the Group amounting to RMB758,537,000 approximately. 傥㸸忼 was disposed during the year ended 31 December 2015.

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4. REVENUE AND SEGMENT INFORMATION (CONTINUED)

(b) Segment information (continued) The Group principally operates in the Mainland China where its revenue and result are derived mainly therefrom.

The Group's revenue from external customers and information about its non-current assets by geographical location of assets are detailed below:

Continuing operations Revenue Non-current assets 2015 2014 2015 2014 RMB'000 RMB'000 RMB'000 RMB'000 (Restated) (Restated)

Hong Kong and others 10,616 265,739 655,883 236,643

Mainland China 1,247,294 649,245 4,397,768 2,631,188

Consolidated total 1,257,910 914,984 5,053,651 2,867,831

In presenting the geographical information, revenue is based on the locations of the customers.

5. OTHER GAIN / (LOSS), NET

Continuing operations 2015 2014 RMB'000 RMB'000 (Restated)

Government grants 4,424 5,305 Impairment loss on trade and other receivables reversed / (recognised), net 1,303 (2,831) (Loss) / Gain on disposal of property, plant and equipment (286) 25 Written off of property, plant and equipment - (14,905) Loss on disposal of a subsidiary (1,887) - Others, net (976) 4,111 2,578 (8,295)

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6. FINANCE COSTS, NET

Continuing operations 2015 2014 RMB'000 RMB'000 (Restated)

Interest income on financial assets 18,812 17,265 Foreign exchange gains - 6,045

Finance income 18,812 23,310

Interest on bank and other borrowings 142,320 135,014 Interest on corporate bond 36,584 7,122 Finance charges on obligation under finance leases 1,864 - Less: interest expenses capitalised into property, plant and equipment (27,611) (29,506) 153,157 112,630 Foreign exchange losses 20,879 - Bank charges and others 2,372 1,459

Finance costs (176,408) (114,089)

Finance costs, net (157,596) (90,779)

7. PROFIT BEFORE TAXATION

Profit before taxation from continuing operations is arrived at after charging:

2015 2014 RMB'000 RMB'000 (Restated) Staff costs (including directors' emoluments): Salaries, wages and other benefits 64,345 44,564 Contribution to defined contribution retirement plan 9,639 7,096 73,984 51,660 Other items: Amortisation of lease prepayments and intangible assets 1,741 1,311 Auditor's remuneration 1,352 1,034 Depreciation for of property, plant and equipment 84,843 46,190 Cost of inventories sold 898,986 680,289 Operating lease rental in respect of leasehold land and buildings 18,766 14,250

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8. DIRECTORS' REMUNERATION

Directors' remuneration disclosed pursuant to Section 383(1) of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation are as follows:

2015 2014 RMB'000 RMB'000

Fees - - Wages, salaries and other emoluments 251 64 Pension cost - 24 251 88

9. INCOME TAX

(a) Income tax from continuing operations in consolidated statement of profit or loss represents:

2015 2014 RMB'000 RMB'000 (Restated) Current tax Provision for the year - PRC Enterprise Income tax (Note (i)) 885 2,143 - PRC withholding tax 3,167 - - Hong Kong Profits Tax (Note (ii)) - 689 - Over-provision in respect of prior year (244) - 3,808 2,832

Deferred tax (1) 2

Total income tax expenses 3,807 2,834

Notes:

(i) The provision for PRC enterprise income tax is calculated based on the statutory tax rate of 25% (2014: 25%) on the estimated assessable income for the year.

Certain subsidiaries of the Group are entitled to a three-year exemption from income tax when their power generation started, followed by a 50% reduction in income tax rate at 12.5% for another three years, and then taxed at 25% thereafter.

(ii) Hong Kong Profits Tax has been calculated at 16.5% of its estimated assessable profits for the years ended 31 December 2015 and 2014.

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9. INCOME TAX (CONTINUED)

(b) Reconciliation between tax expenses and accounting (loss) / profit at applicable tax is as follows:

2015 2014 RMB'000 RMB'000 (Restated) Continuing operations

(Loss) / Profit before taxation from continuing operations (excluding share of profits of associates) (2,972) 1,203

Applicable tax rate (Note) 25% 25% Notional tax on (loss) / profit before taxation (743) 301 Tax effect of non-deductible expenses 4,310 8,564 Tax effect of non-taxable income (3,269) (2,415) Effect of different tax rate of for the operations in other jurisdictions - (355) Tax effect on utilisation of tax losses not previously recognised (671) (1,350) Tax effect of tax holidays / tax concession (25,066) (10,336) Tax effect of unused tax losses not recognised 25,754 8,967 Over-provision in respect of prior year (244) - PRC withholding tax on distributable profits of PRC subsidiaries / interest income 3,167 - Others 569 (542)

Actual tax expense 3,807 2,834

Note : The applicable tax rate is with reference to the statutory tax rate of the Company's principal subsidiaries.

(c) Income tax payable in the consolidated statement of financial position represents:

2015 2014 RMB'000 RMB'000 (Restated)

At 1 January (Restated) 2,262 6,929 Provision for the year 3,808 2,832 Income tax paid (3,824) (7,499)

At 31 December 2,246 2,262

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9. INCOME TAX (CONTINUED)

(d) Deferred income tax assets

Deferred income tax assets have been recognised in the consolidated statement of financial position in respect of temporary differences arising from allowance of trade and other receivables.

At the end of the reporting period, the Group has unused tax losses of RMB278,779,000 (2014: RMB219,821,000) approximately available for offset against future profits. No deferred tax asset has been recognised due to the unpredictability of future profit streams. Included in unrecognised tax losses are losses of RMB208,173,000 (2014: RMB219,821,000) approximately that will expire within 5 years. Other tax losses may be carried forward indefinitely.

10. DISCONTINUED OPERATION

傥㸸忼 is engaged in general trading business in the Mainland China.

During the year ended 31 December 2015, the Group initiated a plan to sell entirely its equity interests in 傥㸸忼, a non-wholly owned subsidiary of the Company. On 24 November 2015, 暚⋿⮵⢾傥㸸, a wholly-owned subsidiary of the Group entered into a sale and purchase agreement with 傥㈽普⛀, immediate holding company of the Group, to dispose of the entire equity interests in 傥㸸忼 at a cash consideration of RMB51,000,000. The disposal was completed during the year upon the control of 傥㸸忼 was passed to 傥㈽普⛀.

The operating results of 傥㸸忼 for the year are presented as discontinued operation in the consolidated financial statements.

The loss for the period / year from discontinued operation is analysed as follow:

Period from Year from 1.1.2015 to 1.1.2014 to 24.11.2015 31.12.2014 RMB'000 RMB'000

Loss of 傥㸸忼 for the period / year (50,502) (30,815) Gain on disposal of 傥㸸忼 (Note 30(a)) 40,644 - (9,858) (30,815)

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10. DISCONTINUED OPERATION (CONTINUED)

(a) Results of the discontinued operation

Period from Year from 1.1.2015 to 1.1.2014 to 24.11.2015 31.12.2014 RMB'000 RMB'000

Revenue 309,471 12,524,661 Cost of sales (297,233) (12,478,727)

Gross profit 12,238 45,934 Other loss, net (20,654) (2,917) Selling expenses (1,022) (4,747) Administrative expenses (8,004) (16,550) Finance costs, net (33,060) (52,495)

Loss before taxation (50,502) (30,775) Income tax - (40)

Loss for the period / year (50,502) (30,815)

Loss for the period / year from discontinued operation is arrived at after changing / (credit):

Staff costs (including directors' emoluments): Salaries, wages and other benefit 3,243 2,742 Contribution to defined contribution retirement plan 890 703 4,133 3,445

Other items: Interest expenses 35,576 51,163 Interest income (2,550) (4,311) Depreciation of property, plant and equipment 246 105 Cost of inventories sold 296,978 12,476,992 Impairment loss on trade and other receivables 22,366 13,988 Operating lease rental in respect of leasehold land and buildings 956 940

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– F-345 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

10. DISCONTINUED OPERATION (CONTINUED)

(b) Cash flows of the discontinued operation

Period from Year from 1.1.2015 to 1.1.2014 to 24.11.2015 31.12.2014 RMB'000 RMB'000

Net cash used in operating activities (59,350) (410,723) Net cash used in investing activities (162) (553) Net cash generated from financing activities 68,324 9,367

Net increase / (decrease) in cash flows 8,812 (401,909)

11. PROPERTY, PLANT AND EQUIPMENT

Furniture, Plant and equipment Motor Construction Buildings machinery and others vehicle in progress Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

Cost: At 1 January 2014 (restated) 238,227 820,563 3,376 11,317 401,460 1,474,943 Additions (restated) 232 934 7,916 2,521 965,972 977,575 Disposal (restated) (392) - (286) (264) - (942) Written off - - - - (14,905) (14,905) Transfer (restated) 124,760 294,951 306 - (420,017) - At 31 December 2014 and 1 January 2015 (restated) 362,827 1,116,448 11,312 13,574 932,510 2,436,671 Additions 564 2,085 4,478 1,907 2,044,573 2,053,607 Disposal - (570) (445) - - (1,015) Disposal of subsidiaries - - (1,502) - - (1,502) Transfer to lease prepayments - - - - (5,116) (5,116) Transfer 536,599 1,304,538 457 - (1,841,594) - At 31 December 2015 899,990 2,422,501 14,300 15,481 1,130,373 4,482,645

Accumulated depreciation: At 1 January 2014 (restated) 25,997 45,506 1,638 8,151 - 81,292 Charge for the year (restated) 11,684 32,672 821 1,118 - 46,295 Written back on disposal (restated) - - (173) (250) - (423) At 31 December 2014 and 1 January 2015 (restated) 37,681 78,178 2,286 9,019 - 127,164 Charge for the year 16,518 63,239 3,284 2,048 - 85,089 Written back on disposal - (522) (207) - - (729) Disposal of subsidiaries - - (416) - - (416) At 31 December 2015 54,199 140,895 4,947 11,067 - 211,108

Net carrying amount: At 31 December 2015 845,791 2,281,606 9,353 4,414 1,130,373 4,271,537

At 31 December 2014 (restated) 325,146 1,038,270 9,026 4,555 932,510 2,309,507 - 47 -

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` 11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

At 31 December 2015, the net carrying amounts of the Group's plant and machinery held under finance lease were RMB200,000,000 (2014: RMBNil) approximately.

12. LEASE PREPAYMENTS

2015 2014 RMB'000 RMB'000 (Restated)

Cost At 1 January (restated) 65,056 57,653 Additions 41,425 7,403 Transfer from property, plant and equipment 5,116 - At 31 December 111,597 65,056

Accumulated amortisation At 1 January (restated) 2,613 1,331 Amortisation for the year 1,711 1,282 At 31 December 4,324 2,613

Net book value 107,273 62,443

Lease prepayments mainly represent prepayments for acquiring right to use land, which is all located in the PRC, for own use properties with lease period of 20 – 50 years.

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13. INTANGIBLE ASSETS

Software RMB'000

Cost At 1 January 2014, 31 December 2014 and 1 January 2015 131 Additions 35 At 31 December 2015 166

Accumulated amortisation At 1 January 2014 36 Charge for the year 29 At 31 December 2014 and 1 January 2015 65 Charge for the year 30 At 31 December 2015 95

Net book value At 31 December 2015 71

At 31 December 2014 66

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– F-348 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

14. INVESTMENTS IN SUBSIDIARIES

The following is a list of principal subsidiaries as at 31 December 2015:

Place of Attributable to the incorporation Paid up / Company Name of company and operation issued capital Directly Indirectly Principal activity

暚⋿㕘傥㸸 PRC RMB1,526,200,000 100% - Investment holdings

㚫㽌暚傥㈽㕘傥㸸 PRC RMB257,000,000 - 100% Generation and sales of 攳䘤㚱旸℔⎠ electricity

䞛㜿暚暣㈽㕘傥㸸 PRC RMB100,000,000 - 100% Generation and sales of 攳䘤㚱旸℔⎠ electricity

楔漵暚傥㈽㕘傥㸸 PRC RMB169,000,000 - 100% Generation and sales of 攳䘤㚱旸℔⎠ electricity

⣏⦂暚傥㈽㕘傥㸸 PRC RMB343,000,000 - 100% Development of 攳䘤㚱旸℔⎠ power plant

㚚曾暚傥㈽㕘傥㸸 PRC RMB60,000,000 - 85% Generation and sales of 䘤暣㚱旸℔⎠ electricity

⭴㸸䷋㕡凇䐆⬱䣎 PRC RMB40,000,000 - 80% Mining 㤕㚱旸℔⎠ ("⭴㸸㕡凇")

㿀大䷋暚傥㈽桐暣 PRC RMB185,000,000 - 70% Generation and sales of 攳䘤㚱旸℔⎠ electricity ("㿀大桐暣")

暚⋿傥㈽㴟墅㕘傥 PRC RMB30,000,000 - 60% Assembling and sales of 㸸姕⁁㚱旸℔⎠ wind power plant ("㴟墅姕⁁") equipment

暚⋿⮵⢾傥㸸 PRC RMB487,100,000 100% - Investment holdings and development of power plant

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14. INVESTMENTS IN SUBSIDIARIES (CONTINUED)

The following is a list of principal subsidiaries as at 31 December 2015: (continued)

Place of Attributable to the incorporation Paid up / Company Name of company and operation issued capital Directly Indirectly Principal activity ġ ġ ġ ġ 侩㑦⎱尉㯜㲍㚱旸 PRC USD999,980 - 90% Manufacture, sales and ℔⎠ġ trading of cement ġ 暚⋿傥㈽大㘖㈽屯 PRC RMB15,000,000 - 60% Investment holdings 㚱旸℔⎠ ("大㘖㈽屯") ġ 暚⋿䤷届厗㲘暣≃ PRC RMB11,680,000 - 80% Generation and sales of 攳䘤㚱旸℔⎠ electricity ("䤷届厗㲘") ġ Fortune Sea Hong Kongġ HKD7,800,000 51% - Tradingġ International Investment Company Limited ġ Yunnan Renewable Hong Kongġ HKD5,000,000 100% - Investment holdings Energy Investment ġ (HK) Co. Limitedġ ġ ġ ġ ġ Yunnan Energy British Virgin - 100% - Financing Investment Islandsġ (Overseas) Company Limited

Yun Mei United State USD2,400,000 40% - Trading International Resources Limited ("Yun Mei")

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14. INVESTMENTS IN SUBSIDIARIES (CONTINUED)

Set out below are the summarised financial information before any inter-company elimination and reclassification of assets for the Company's subsidiaries which have material non-controlling interests ("NCI").

㿀大桐暣 㴟墅姕⁁ 大㘖㈽屯 ⭴㸸㕡凇 2015 2014 2015 2014 2015 2014 2015 2014 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

NCI percentage 30% 30% 40% 40% 40% 40% 20% 20%

Non-current assets 810,617 778,653 4,576 3,891 14,976 14,458 90,327 84,735 Current assets 71,691 17,177 593,309 510,808 443 918 6,815 5,871 Current liabilities (147,586) (279,585) (524,508) (461,425) (419) (376) (57,308) (50,772) Non-current liabilities (542,420) (350,000) (41,026) (15,726) - - - -

Net assets 192,302 166,245 32,351 37,548 15,000 15,000 39,834 39,834

Carrying amount of NCI 57,691 49,874 12,940 15,019 6,000 6,000 7,967 7,967

Revenue 124,036 55,093 685,761 428,472 - - - -

Profit / (Loss) and total comprehensive income / (expense) for the year 55,775 17,246 7,464 6,249 - - - 10

Profit / (Loss) allocated to NCI 16,733 5,174 2,986 2,500 - - - 2

Dividends paid to NCI 15,954 3,761 5,064 3,400 - - - -

Net cash generated from / (used in) operating activities 131,897 45,586 230,311 318,032 - - - -

Net cash generated from / (used in) investing activities (205,589) (260,787) (1,613) (3,784) 32 5 3,691 2,473

Net cash generated from / (used in) financing activities 119,453 217,409 (170,000) (310,000) - - 4,645 7,177

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15. GOODWILL

Goodwill of the Group arises from the acquisition of 䤷届厗㲘 which is operating a small hydro power generation plant. The recoverable amount of goodwill is determined based on value in use calculation. The calculation applies cash flow projection basing on the financial budget approved by the management covering a five-year period at a pre-tax discount rates of 5.5%.

Cash flows beyond the five-year period are maintained constant. Management believes any reasonably possible change in the key assumptions on which 䤷届厗㲘's recoverable amount are based would not cause the carrying amount to exceed their recoverable amount.

16. INVESTMENTS IN ASSOCIATES

2015 2014 RMB'000 RMB'000 (Restated)

Share of net assets 282,858 138,919

The following is a list of associates as at 31 December 2015:

Place of Equity interest incorporation Paid up / attributable to the Name of company and operation issued capital Group Principal activity

暚⋿圵屯䦇屫 PRC RMB500,000,000 25% Provision of (ᶲ㴟)㚱旸℔⎠ ġ financing services ("暚⋿圵屯䦇屫") to customers under finance lease arrangements ġ ġ 暚⋿⓮㤕ᾅ䎮 PRC RMB49,992,000 25% Provision of (ᶲ㴟)㚱旸℔⎠ ġ financing services ("暚⋿⓮㤕ᾅ䎮") to customers under factoring arrangements ġ ġ 㖻攨暚傥㕘桐傥㸸 PRC RMB3,976,000 20% Development of 攳䘤㚱旸℔⎠ ġ power plant ("㖻攨暚傥")

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– F-352 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

16. INVESTMENTS IN ASSOCIATES (CONTINUED)

The following table shows information of the associates as at 31 December 2015, that accounted for the consolidated financial statements using the equity method.

暚⋿圵屯䦇屫 暚⋿⓮㤕ᾅ䎮 㖻攨暚傥 2015 2014 2015 2014 2015 2014 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

Current assets 313,475 218,154 168,370 112,691 3,218 3,143 Non-current assets 1,685,070 486,857 188 - 791 841 Current liabilities (471,441) (201,800) (116,752) (62,577) (34) (34) Non-current liabilities (450,664) (812) - - - - 1,076,440 502,399 51,806 50,114 3,975 3,950

Equity 1,076,440 502,399 51,806 50,114 3,975 3,950

Revenue 145,281 7,994 13,778 64 - -

Profit and total comprehensive income for the year 74,042 2,398 1,683 122 - -

Reconciliation to the investments in associates:

Group effective interest 25% 25% 25% 25% 20% 20%

Share of net assets 269,110 125,600 12,952 12,529 796 790

17. DEPOSITS PAID FOR INVESTMENTS

At 1 January 2014, the amount of approximately RMB272,378,000 represented deposits paid for acquisition of a subsidiary and an associate. Such deposits were transferred to investments in a subsidiary and an associate during year ended 31 December 2014.

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18. OTHER NON-CURRENT ASSETS

Note 2015 2014 RMB'000 RMB'000

Deductible Value-Added Tax ("VAT") (i) 241,842 122,923 Listed securities, measured at fair value 14,710 - Unquoted equity investment in a non-listed company, at cost (ii) 10,000 10,000 Prepayments for acquisition of property, plant and equipment and lease prepayments 98,053 194,954 Other deposits and prepayments 1,261 2,974 365,866 330,851

(i) Deductible VAT mainly represents the input VAT relating to purchase of property, plant and equipment, which is deductible from output VAT.

(ii) The Group owned 4.26% equity interests in a company incorporated in PRC. Such unlisted equity security was carried at cost as it does not have a quoted market price in an active market and its fair value cannot be reliably measured.

19. INVENTORIES

2015 2014 RMB'000 RMB'000 (Restated)

Raw materials 52,631 71,652 Work in progress - 65 Finished goods 132,127 99,082 184,758 170,799

20. TRADE RECEIVABLES

2015 2014 RMB'000 RMB'000 (Restated)

Trade receivables from a non-controlling interest of a 14,913 - subsidiary Trade receivables from a fellow subsidiary 500 - Trade receivables from external parties 139,044 300,707 154,457 300,707 Less: allowance for doubtful debts (1,416) (4,666) 153,041 296,041

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20. TRADE RECEIVABLES (CONTINUED)

The ageing analysis of trade receivables of the Group is as follows:

(a) Aging analysis

2015 2014 RMB'000 RMB'000 (Restated)

Current 145,181 267,923 Past due 9,276 32,784 154,457 300,707 Less: allowance for doubtful debts (1,416) (4,666) 153,041 296,041

Included in trade receivables of RMB114,071,000 (2014: RMB91,352,000) approximately are mainly electricity sales receivables from local grid companies. Generally, the receivables are due within 30-90 days from the date of billing, except for the tariff premium, representing 30% to 60% of total electricity sales, collected by certain power projects. The collection of such tariff premium is subject to the allocation of funds by relevant government authorities to local grid companies, which therefore takes a relatively long time for settlement.

Pursuant to CaiJian [2012] No.102 Notice on the Interim Measures for Administration of Subsidy Funds for Tariff Premium of Renewable Energy (⎗ℵ䓇傥㸸暣₡旬≈墄≑屯慹䭉 䎮㙓埴彎㱽) jointly issued by the Ministry of Finance, the National Development and Reform Commission and the National Energy Administration in March 2012, a set of standardised procedures for the settlement of the tariff premium has come into force since 2012 and approvals on a project by project basis are required before the allocation of funds to local grid companies. As at 31 December 2015, most of the operating projects have been approved for the tariff premium and certain projects are in process of applying for the approval. The directors are of the opinion that the approvals will be obtained in due course and the tariff premium receivables are fully recoverable considering that there are no bad debt experiences with the grid companies in the past and the tariff premium is funded by the PRC government.

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– F-355 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

20. TRADE RECEIVABLES (CONTINUED)

(b) Impairment loss of trade receivables Impairment losses in respect of trade receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly.

The movement in the allowance for doubtful debts during the year is as follows:

2015 2014 RMB'000 RMB'000 (Restated)

At 1 January (restated) 4,666 156 Impairment loss recognised 3,818 4,510 Eliminated upon disposal of subsidiaries (7,068) - At 31 December 1,416 4,666

21. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

2015 2014 RMB'000 RMB'000 (Restated)

Amount due from immediate holding company 18,737 18,717 Amount due from a fellow subsidiary 566 - Amount due from a non-controlling interest of a subsidiary 52,500 24,702 Deductible VAT - 12,173 Interest receivables 3,139 2,075 Other debtors 44,069 45,035 Other prepayments and deposits 48,054 467,032 167,065 569,734 Less : allowance for doubtful debts (343) (12,544) 166,722 557,190

Amounts due from immediate holding company and a fellow subsidiary are unsecured, interest-free and repayable on demand.

An amount due from a non-controlling interest of a subsidiary is interest bearing at 6% plus People's Bank of China 1 to 3 year base lending rate per annum and repayable within 1 year. The amount due is secured by the shares of a subsidiary owned by the non-controlling interests.

Impairment losses in respect of deposits, prepayments and other receivables are recorded using an allowance amount.

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– F-356 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

21. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES (CONTINUED)

The movement in the allowance for doubtful debts during the year is as follows:

2015 2014 RMB'000 RMB'000 (Restated)

At 1 January (restated) 12,544 235 Impairment loss recognised 17,245 12,309 Eliminated upon disposal of subsidiaries (29,446) - At 31 December 343 12,544

22. CASH AND CASH EQUIVALENTS

2015 2014 RMB'000 RMB'000 (Restated)

Cash at banks and on hand 745,226 1,106,057 Short-term bank deposits 300,398 712,200 Cash and cash equivalents in the consolidated statements of financial position and the consolidated statement of cash flows 1,045,624 1,818,257

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– F-357 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

23. TRADE AND OTHER PAYABLES

2015 2014 RMB'000 RMB'000 (Restated)

Trade payables 292,852 176,561 Payables for construction cost 215,858 230,920 Payables for acquisition of property, plant and equipment 18,176 13,479 and lease prepayments Payables for other tax 4,427 5,612 Interest payables 11,633 8,912 Payables for staff related costs 5,661 3,523 Receipt in advance 986 19,030 Dividend payables to non-controlling interests of 20,996 3,400 subsidiaries Amounts due to fellow subsidiaries 10,475 2,127 Amounts due to non-controlling interests of subsidiaries 4,200 208,326 Others 52,614 41,404 637,878 713,294

The amounts due to related parties are unsecured interest-free and repayable on demand.

All of the trade and other payables are expect to be settled within one year or are repayable on demand.

24. OBLIGATIONS UNDER FINANCE LEASES

At 31 December 2015, the Group had obligations under finance leases repayable as follows:

2015 2014 Present Interest Present Interest value of the expense Total value of the expense Total minimum relating to minimum minimum relating to minimum lease future lease lease future lease payments periods payments payments periods payments RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

Within 1 year 21,655 8,432 30,087 - - - 2 to 5 years 175,320 92,033 267,353 - - - 196,975 100,465 297,440 - - -

During the year, the Group entered the finance leases arrangement with its associate.

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– F-358 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

25. BORROWINGS

Bank and other borrowings are analysed as follows:

2015 2014 RMB'000 RMB'000 (Restated)

Bank borrowings 2,619,871 1,746,841 Borrowing from a fellow subsidiary 21,000 121,000 Borrowing from immediate holding company 410,100 1,237,500 3,050,971 3,105,341

(a) The long-term interest-bearing borrowings comprise:

2015 2014 RMB'000 RMB'000 (Restated)

Bank and other borrowings - secured 2,347,997 955,292 - unsecured 112,600 122,000 2,460,597 1,077,292 Less : Current portion of long-term borrowings (197,985) (34,400) 2,262,612 1,042,892

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– F-359 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

25. BORROWINGS (CONTINUED)

(b) The short-term interest-bearing borrowings comprise:

2015 2014 RMB'000 RMB'000 (Restated)

Unsecured bank and other borrowings 590,374 2,028,049

Current portion of long-term borrowings - secured 178,585 25,000 - unsecured 19,400 9,400 197,985 34,400

788,359 2,062,449

i. Unsecured short-term bank borrowings are guaranteed by:

- letters of credit issued by Bank of Communication Co., Ltd, Yunnan Provincial Branch, China Minsheng Banking Corp. Limited, Kunming Branch and China Merchants Bank, Kunming Branch.

- corporate guarantee given by immediate holding company.

ii. At 31 December 2015, RMB201,302,000 (2014: RMB189,689,000) approximately included in short-term bank borrowings is borrowed from a bank which has the overriding right at any time to require immediate payment of the borrowings, therefore, the bank borrowings are classified as current liabilities.

iii. Secured long-term bank borrowings are secured by:

- trade receivables amounting to RMB93,278,000 (2014: RMB27,508,000) approximately.

- corporate guarantee given by immediate holding company.

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– F-360 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

25. BORROWINGS (CONTINUED)

(c) The effective interest rates per annum on borrowings are as follows::

2015 2014 RMB'000 RMB'000 (Restated)

Long-term (including current portion) Bank and other borrowings 4.42% - 7.5% 5% - 7.5%

Short-term (excluding current portion of long-term borrowings) Bank and other borrowings 1.91% - 8% 1.65% - 8%

(d) The long-term borrowing (including current portion) are repayable as follows:

2015 2014 RMB'000 RMB'000 (Restated)

Within 1 year or on demand 197,985 34,400 After 1 year but within 2 years 241,356 50,000 After 2 years but within 5 years 865,095 322,892 After 5 years 1,156,161 670,000 2,460,597 1,077,292

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– F-361 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

26. CORPORATE BOND

2015 2014 RMB'000 RMB'000

RMB denominated corporate bond 592,565 588,936

Notes:

(i) During the year ended 31 December 2014, Yunnan Energy Investment (Oversea) Company Limited ("the Issuer"), a wholly owned subsidiary of the Company issued to professional investors a three-year corporate bond of RMB600,000,000 at par with a coupon rate of 5.5% per annum. The effective interest rate of the bond is 6.3% per annum. The bond is listing on The Stock Exchange of Hong Kong Limited.

(ii) The bond is guaranteed by the Company. In addition, 傥㈽普⚹, the Issuer, the Company and the trustee of the bond entered into a keepwell deed jointly in favour of the trustee of the bond. Pursuant to the keepwell deed, 傥㈽普⚹undertakes that it shall cause, each of the bond issuer and the Company to have sufficient liquidity to ensure timely payment of any amounts payable respect of the bond.

(iii) The fair value of the bond is RMB581,000,000 (2014: RMB598,458,000) approximately which is based on price quotation from financial institution at the end of the reporting date.

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– F-362 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

27. DEFERRED INCOME

2015 2014 RMB'000 RMB'000 (Restated)

Government grants (Note) 37,517 38,089 Repair and maintenance 41,026 15,726 78,543 53,815

Note:

Amount represented government grants relating to the construction of property, plant and equipment, which would be recognised in other income on a straight-line basis over the expected useful life of the relevant assets.

The movement of deferred income during the year is as follows:

2015 2014 RMB'000 RMB'000 (Restated)

At 1 January (restated) 53,815 31,596 Addition 43,825 27,524 Credited to profit or loss (19,097) (5,305) At 31 December 78,543 53,815

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– F-363 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

28. SHARE CAPITAL

Number of Note ordinary shares Share Capital RMB'000

Issued and fully paid: Upon incorporation (i) 5,000,000 3,900 Issue of ordinary shares (ii) 333,500,000 256,756 Issue of ordinary shares (iii) 386,747,291 307,000 At 31 December 2014 725,247,291 567,656

Issue of ordinary shares (iv) 576,314,123 455,000 Issue of ordinary shares (v) 570,703,868 450,000 Issue of ordinary shares (vi) 667,151,868 550,000 At 31 December 2015 2,539,417,150 2,022,656

(i) At date of incorporation, the Company issued 5,000,000 share of HK$1 at par to the subscriber for cash pursuant to the subscription clause of the Company's Memorandum of Association.

(ii) On 2 January 2014, 333,500,000 ordinary shares for a total sum of HK$333,500,000 equivalent to RMB256,756,000 approximately were allotted to the sole shareholder.

(iii) On 23 June 2014, 386,747,291 ordinary shares for a total sum of HK$386,747,291 equivalent to RMB307,000,000 approximately were allotted to the sole shareholder.

(iv) On 27 October 2014, the sole shareholder of the Company agreed to subscribe additional shares of the Company. On 29 December 2014, a total sum of approximately RMB455,000,000 shares subscription monies was received from the sole shareholder and credit to the "Share subscription monies" account in the equity of the Company.

On 5 January 2015, 576,314,123 ordinary shares for a total sum of HK$576,314,123 equivalent to RMB455,000,000 approximately were allotted to the sole shareholder.

(v) On 18 June 2015, 570,703,868 ordinary shares for a total sum of HK$570,703,868 equivalent to RMB450,000,000 approximately were allotted to the sole shareholder.

(vi) On 31 August 2015, 667,151,868 ordinary shares for a total sum of HK$667,151,868 equivalent to RMB550,000,000 approximately were allotted to the sole shareholder.

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– F-364 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

28. SHARE CAPITAL (CONTINUED)

Capital management The Group's primary objectives when managing capital are to safeguard the Group's ability to continue as a going concern, so that it can continue to provide returns for the sole shareholder and benefits for other stakeholders.

The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

The Group monitors its capital structure on the basis of liability-to-asset ratio, which is calculated by dividing total liabilities by total assets. The liability-to-asset ratio of the Group as at 31 December 2015 is 69% (2014: 78%).

There were no changes in the Group's approach to capital management compared with previous years.

29. RESERVES

The amounts of the Group's reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity of the consolidated financial statements.

(a) Merger reserve The merger reserve comprises the excess of the Company's share of the nominal value of the paid-up capital of the subsidiaries acquired, over the Company's cost of acquisition of the subsidiaries under common control; and the capital contribution from / deemed distributions to the Company's immediate holding company in relation to the business combination under common control.

(b) Other reserve The other reserve represents the difference between the amounts of consideration and the carrying values of non-controlling interests acquired or disposed of.

(c) Statutory reserve As stipulated by the relevant laws and regulations for foreign investment enterprises in the PRC, the Company's PRC subsidiaries are required to maintain a statutory surplus reserve fund. Appropriation to such reserve is made out of net profit after taxation as reflected in the statutory financial statements of the PRC subsidiaries while the amounts and allocation basis are decided by their board of directors annually. The statutory surplus reserve fund can be used to make up prior year losses, if any, and can be applied in conversion into capital by means of capitalisation issue.

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– F-365 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

29. RESERVES (CONTINUED)

(d) Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale securities held at the end of the reporting period and is dealt with in accordance with the accounting policies in notes 1(h) and 1(k).

30. DISPOSAL OF SUBSIDIARIES

(a) The net liabilities of 傥㸸忼 at the date of disposal were as follows:

RMB'000

Property, plant and equipment 591 Trade and other receivables 447,890 Inventories 35,333 Bank and cash equivalents 129,303 Non-controlling interests 19,107 Trade and other payables (22,868) Borrowings (599,000) 10,356 Gain on disposal of a subsidiary 40,644 Total consideration satisfied by cash 51,000

Net cash outflow arising on disposal: Cash consideration received 51,000 Cash and cash equivalents disposed of (129,303) (78,303)

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– F-366 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

30. DISPOSAL OF SUBSIDIARIES (CONTINUED)

(b) On 29 December 2015, 暚⋿㕘傥㸸, a wholly-owned subsidiary of the Group entered into a sale and purchase agreement with 傥㈽普⛀, immediate holding company of the Group, to dispose of the entire equity interests in 暚⋿傥㈽䓇ン䑘⠫䥹㈨㚱旸℔⎠("暚⋿傥㈽䓇ン") at a cash consideration of RMB8,000,000. 暚⋿傥㈽䓇ン is engaged in energy related project management during the year. The disposal was completed during the year upon the control of 暚⋿傥㈽䓇ン was passed to 傥㈽普⛀. Net assets at the date of disposal were as follows:

RMB'000

Property, plant and equipment 495 Other non-current assets 1,210 Trade and other receivables 5,597 Inventories 23,988 Bank and cash equivalents 7,004 Trade and other payables (13,577) Non-controlling interests (14,830) Net assets disposed of 9,887 Loss on disposal of a subsidiary (1,887) Total consideration satisfied by cash 8,000

Net cash inflow arising on disposal: Cash consideration received 8,000 Cash and cash equivalents disposed of (7,004) 996

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– F-367 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

31. FINANCIAL RISK MANAGEMENT AND FAIR VALUES

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group's business.

The Group's exposure to these risk and the financial risk management policies and practices used by the Group to manage these risks are described below.

(a) Credit risk The Group's credit risk is primarily attributable to cash and cash equivalents, trade receivables, deposits, prepayments and other receivables.

Substantially all of the Group's cash and cash equivalents are deposited in the reputable banks and financial institutions which the directors assessed the credit risk to be insignificant.

The receivables from sales of electricity mainly represent receivable from the provincial power grid companies. The Group has no significant credit risk with any of these power grid companies as the Company and its subsidiaries maintain long-term and stable business relationships with these companies. The receivable from the provincial power grid companies accounted for 74% of the Group's total trade receivables as at 31 December 2015 (2014: 30%). For other trade receivables, deposits, prepayments and other receivables, the Group performs an ongoing individual credit evaluation of its customer's and counterparties' financial conditions. The allowance for doubtful debts has been made in the consolidated financial statements.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated statement of financial position after deducting any impairment allowance. The Group does not provide any other guarantees which would expose the Group to credit risk.

(b) Liquidity risk The Group's objective is to ensure continuity of sufficient funding and flexibility by utilising a variety of bank and other borrowings with debt maturities spreading over a range of periods, thereby ensuring that the Group's outstanding borrowing obligation is not exposed to excessive repayment risk in any one year.

The Group's policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirement in the short and longer term. In order to repay the borrowings due within one year, the Group negotiates banking facilities and utilises operating cash flows in its subsidiaries. The Group manages the proportion of its current liabilities with respect to the total liabilities to mitigate the liquidity risk. The directors have determined that adequate liquidity exists to finance the working capital and capital expenditure requirement of the Group during the year.

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– F-368 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

31. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(b) Liquidity risk (continued) The following tables show the remaining contractual maturities at the end of the reporting period of the Group's non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payment computed using contractual rates or, if floating, based on rates current at the end of the reporting period) and the earliest date the Group can be required to pay:

On demand / Carrying Contractual Less than Between Between Over amount cash flows 1 year 1-2 years 2-5 years 5 years RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 At 31 December 2015

Long-term borrowings 2,262,612 2,724,770 135,757 377,113 986,370 1,225,530 (Note 25(a)) Short-term borrowings 788,359 937,760 937,760 - - - (Note 25(b)) Corporate bond 592,565 666,000 33,000 633,000 - - Obligations under 196,975 297,440 30,087 29,135 81,901 156,317 finance lease Trade and other payables 637,878 637,878 637,878 - - -

On demand / Carrying Contractual Less than Between Between Over amount cash flows 1 year 1-2 years 2-5 years 5 years RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 At 31 December 2014 (Restated) (Restated) (Restated) (Restated) (Restated) (Restated)

Long-term borrowings 1,042,892 1,305,299 73,002 123,002 392,395 716,900 (Note 25(a)) Short-term borrowings 2,062,449 2,388,909 2,388,909 - - - (Note 25(b)) Corporate bond 588,936 699,000 33,000 33,000 633,000 - Trade and other payables 713,294 713,294 713,294 - - -

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– F-369 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

31. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(c) Interest rate risk The Group's income and operating cash flows are substantially independent of changes in market interest rates and the Group has no significant interest-bearing assets except for certain interest-bearing receivables and bank balances, details of which have been disclosed in Notes 21 and 22 respectively. The Group's exposure to changes in interest rates is mainly attributable to its borrowings, details of which have been disclosed in Note 25. Borrowings carried at floating rates expose the Group to cash flow interest rate risk. The Group has not used any interest rate swaps to hedge its exposure to interest rate risk.

The following table details the profile of the Group's net borrowing interest-bearing financial liabilities less interest bearing financial assets at the end of the reporting period.

2015 2014 RMB'000 RMB'000 (Restated)

Borrowings 3,050,971 3,105,341 Less : Short-term bank deposits (300,398) (712,200) 2,750,573 2,393,141

At 31 December 2015, it is estimated that a general increase / decrease of 100 basis points in interest rates of borrowings, with all other variables held constant, would have decreased / increased the Group's profit after tax by RMB30,510,000 approximately (2014: RMB29,830,000). The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for non-derivative financial instruments in existence at the end of the reporting period.

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– F-370 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

31. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(d) Currency risk The Group is exposed to currency risk primarily through sales and purchase which give rise to receivables, borrowings and cash balances that are denominated in a foreign currency other than RMB. The currencies giving rise to this risk are primarily Hong Kong dollars and United States dollars.

Management has a policy to require group companies to manage their foreign exchange risk against functional currency. The Group also manages its foreign exchange risk by performing regular reviews of the Group's net foreign exchange exposures. The Group has not used any forward foreign exchange contracts or currency borrowings to hedge its exposure as at 31 December 2015.

Exposure to currency risk The following table details the Group's exposure at the end of the reporting period to currency risk arising from recognised assets or liabilities denominated in a currency other than RMB to which they relate.

Exposure to foreign currencies (expressed in RMB)

2015 2014 HKD USD HKD USD '000 '000 '000 '000 (Restated) (Restated)

Cash and cash equivalents 7,517 197,894 6,892 621,079 Deposits, prepayments and other receivables 1,758 49,577 2,087 43,988 Trade and other payables (1,718) (8,650) (814) (1,874) Borrowings - (690,190) - (986,841)

Net exposure 7,557 (451,369) 8,165 (323,648)

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– F-371 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

31. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(d) Currency risk (continued) A 5% weakening of RMB against the above currencies as at 31 December 2015 and 2014 would have increased / (decreased) the profit after tax by the amount shown below:

2015 2014 RMB'000 RMB'000 (Restated)

HKD 378 343 USD (22,568) (1,244)

A 5% strengthening of RMB against the above currencies as at 31 December 2015 and 2014 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the end of reporting period and had been applied to the Group's exposure to currency risk for non-derivative financial instruments in existence at that date, and that all other variables, in particular interest rates, remain constant.

(e) Fair values

(i) Financial assets and liabilities measured at fair values The HKFRS 13, Fair value measurement to disclose the level of the fair hierarchy within which the fair value measurement are categorised in their entirety. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

- Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

- Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available.

- Level 3 valuations: Fair value measured using significant unobservable inputs.

At 31 December 2015, the financial instrument of the Group carried at fair value was listed securities which fall into level 1 of the fair value hierarchy described above. During the years ended 31 December 2015 and 2014, there were no transfers between Level 1 and level 2, or transfers into or out of Level 3.

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– F-372 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

31. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(e) Fair values (continued)

(ii) Fair value of financial instruments carried at other than fair value The directors considered that the carrying amounts of the Group's financial instruments carried at cost or amortised cost primarily including receivables, payables and borrowings are not materially different from their fair values as at 31 December 2015 and 2014.

The fair value of the corporate bond is disclosed in Note 26 to the consolidated financial statements.

The investment in unquoted equity security (see Note 18) is measured at cost which fair value cannot be measured reliably as this investment in a non-listed company does not have quoted market price in an active market. The Group has no intention to dispose of this investment.

32. COMMITMENTS

(a) Capital commitments outstanding at the end of the reporting period not provided for in the consolidated financial statements were as follows:

2015 2014 RMB'000 RMB'000 (Restated)

Contracted but not provided for in respect of : - property, plant and equipment 763,689 1,436,395 - investments - 221,139 763,689 1,657,534

(b) At the end of the reporting period, the total future minimum lease payments under non-cancellable operating leases are payable as follows:

2015 2014 RMB'000 RMB'000

Within 1 year 16,449 14,704 After 1 year but within 5 years 35,191 43,698 After 5 years 18,000 24,000 69,640 82,402

The Group leases certain buildings though non-cancellable operating leases. The operating leases do not contain provisions for contingent lease rentals. None of the rental agreements contain escalation provision that may require higher future rental payments.

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– F-373 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

33. CONTINGENT LIABILITIES

Other than disclosed elsewhere in these consolidated financial statements, the Group did not have any significant contingent liabilities.

34. MATERIAL RELATED PARTY TRANSACTIONS

(a) In addition to the balances disclosed elsewhere in these consolidated financial statements, the Group entered into the following material related party transactions:

Transactions 2015 2014 RMB'000 RMB'000 (Restated)

Income Sales to a non-controlling interest of a subsidiary (671,041) (450,157) Management fee income received from immediate holding - (36,717) Service fee income received from a fellow subsidiary (943) - Interest income received from fellow subsidiaries (231) - Interest income received from a non-controlling interest of a subsidiary (2,988) (1,983) Other income received from a fellow subsidiary (470) -

Expenses Purchase from a non-controlling interest of a subsidiary 757,985 600,833 Purchase from fellow subsidiaries 28,270 15,057 Consultation fee paid to fellow subsidiaries 2,229 - Interest expenses paid to immediate holding company 75,427 94,718 Interest expenses paid to a fellow subsidiary 4,397 17,191 Rental expenses paid to fellow subsidiaries 9,936 10,000

(b) Remuneration for key management personal of the Group, including amounts paid to the Group's directors as disclosed in Note 8.

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– F-374 – – F-375 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

36. MOVEMENT IN THE RESERVES OF THE COMPANY

(Accumulated losses) / Fair value Retained reserve profits Total RMB'000 RMB'000 RMB'000

At 1 January 2014 - (4,680) (4,680)

Profit and total comprehensive income for the year - 19,200 19,200

At 31 December 2014 - 14,520 14,520

Loss for the year - (27,822) (27,822)

Other comprehensive expense for the year (1,415) - (1,415)

At 31 December 2015 (1,415) (13,302) (14,717)

37. SUBSEQUENT EVENTS

Subsequent to the year ended 31 December 2015, the Group is planning to issue a corporate bond not more than USD300 million to financial institutions. Up to the date of this report, the bond is not yet issued.

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– F-376 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2014

The directors have pleasure in submitting their annual report together with the audited consolidated financial statements of Yunnan Energy Investment (H K) Co. Limited ("the Company") and its subsidiaries (collectively referred to as the "Group") for the year ended 31 December 2014.

1. PRINCIPAL PLACE OF BUSINESS

Yunnan Energy Investment (H K) Co. Limited is a company incorporated in Hong Kong and has its registered office and principal place of business at Flat 2006, 20/F., China Resources Building, 26 Habour Road, Wanchai, Hong Kong changed from Mkm 2130 Room 1007, 10/F., Ho King Ctr., No. 2-16 Fa Yuen St., Mongkok, Kowloon, Hong Kong on 2 January 2014.

2. PRINCIPAL ACTIVITIES

The principal activities of the Company during the year were investment holding and trading of mineral and metal products.

Details of the Company's principal subsidiaries and associates as at 31 December 2014 are set out in Notes 12 and 13 to the consolidated financial statements.

3. CONSOLIDATED FINANCIAL STATEMENTS

The results of the Group for the year ended 31 December 2014 and the state of affairs of the Group and the Company at that date are set out in the consolidated financial statements on pages 6 to 71.

The directors do not recommend the payment of a dividend in respect of the year ended 31 December 2014 (2013: HK$Nil).

4. SHARE CAPITAL

Details of the movements in share capital of the Company during the year are set out in Note 24 to the consolidated financial statements.

5. PROPERTY, PLANT AND EQUIPMENT

Movements of the property, plant and equipment of the Group and the Company during the year are set out in Note 9 to the consolidated financial statements.

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– F-377 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2014

6. DIRECTORS

The directors during the year and up to the date of this report were as follows:

Yunnan Provincial Energy Investment Group Co., Limited Ms. KANG Jin (appointed on 1 September 2014 and resigned on 16 February 2015) Mr. ZHANG Jincan (appointed on 2 January 2015)

In accordance with Article 8 of the Company's Articles of Association, the existing directors shall retire from office at the forthcoming annual general meeting and being eligible, offer themselves for re-election.

7. DIRECTORS' INTERESTS IN CONTRACT

Excepted as disclosed in Note 29 to the consolidated financial statements, there were no contracts of significance to which the Company, or any of its holding company, subsidiaries or fellow subsidiaries was a party and in which a director of the Company had a material interest, subsisted at the end of the reporting period or at any time during the year.

8. DIRECTORS' RIGHT TO ACQUIRE SHARES OR DEBENTURES

At no time during the year was the Company, any of its holding company, subsidiaries or fellow subsidiaries a party to any arrangement to enable the directors of the Company to acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate.

9. AUDITOR

The accompanying consolidated financial statements were audited by Union Alpha CAAP Certified Public Accountants Limited Certified Public Accountants (Practising) who were appointed to fill the casual vacancy left following the retirement of the former auditor, W. H. Shum & Co. Certified Public Accountants. Union Alpha CAAP Certified Public Accountants Limited Certified Public Accountants (Practising) who retire and, being eligible, offer themselves for reappointment. Accordingly, a resolution for the reappointment of Union Alpha CAAP Certified Public Accountants Limited Certified Public Accountants (Practising) as the auditor of the Company is to be proposed at the forthcoming annual general meeting.

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– F-378 – – F-379 – – F-380 – – F-381 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2014

Note 2014 2013 RMB'000 RMB'000

Turnover 3 905,004 327,291

Cost of sales (761,714) (301,463)

Gross profit 143,290 25,828

Other gains, net 4 7,839 2,794

Selling expenses (203) -

Administrative expenses (45,094) (24,762)

Profit from operations 105,832 3,860

Finance costs, net 5 (77,708) (40,524)

Loss on deemed disposals of partial interest in an associate (1,845) -

Share of losses of associates (18,582) -

Profit / (Loss) before taxation 6 7,697 (36,664)

Income tax 8(a) (2,717) (3,300)

Profit / (Loss) for the year 4,980 (39,964)

Other comprehensive income for the year - -

Total comprehensive income / (expense) for the year 4,980 (39,964)

Attributable to: Equity holders of the Company (1,176) (25,014) Non-controlling interest 6,156 (14,950) Total comprehensive income / (expense) for the year 4,980 (39,964)

The accompanying Accounting Policies and Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

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– F-382 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014

Note 2014 2013 RMB'000 RMB'000

Non-current assets Property, plant and equipment 9(a) 1,893,323 1,204,807 Lease prepayments 10 61,548 55,413 Intangible assets 11 66 95 Deferred income tax assets 8(d) 1 3 Investments in associates 13 240,516 - Deposits paid for investments 14 - 272,378 Other non-current assets 15 330,851 104,762 2,526,305 1,637,458 Current assets Inventories 16 88,249 1,040 Trade receivables 17 222,184 55,343 Deposits, prepayments and other receivables 18 189,354 153,404 Cash and cash equivalents 19 1,347,613 512,192 1,847,400 721,979 Current liabilities Trade and other payables 20 412,085 640,583 Borrowings 21(b) 1,408,049 1,136,610 Income tax payable 8(c) 2,191 3,303 (1,822,325) (1,780,496)

Net current assets / (liabilities) 25,075 (1,058,517)

Non-current liabilities Borrowings 21(a) 780,000 200,000 Corporate bond 22 588,936 - Deferred income 23 48,575 28,547 (1,417,511) (228,547)

NET ASSETS 1,133,869 350,394

The accompanying Accounting Policies and Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

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– F-383 – – F-384 – – F-385 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014

The Group Attributable to equity holder of the Company Non- Share subscription Merger Other Accumulated controlling Share capital monies reserve reserve losses Total interests Total equity RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 (Note 25 (a)) (Note 25 (b))

At 1 January 2013 - - 114,523 - (22,492) 92,031 164,043 256,074

Issuance of new ordinary shares 3,900 - - - - 3,900 - 3,900

Capital contribution from non-controlling ------130,384 130,384 interests

– F-386 Total comprehensive expense for the year - - - - (25,014) (25,014) (14,950) (39,964)

At 31 December 2013 3,900 - 114,523 - (47,506) 70,917 279,477 350,394

Issuance of new ordinary shares 563,756 - - - - 563,756 - 563,756

Share subscription monies received (Note 24) - 455,000 - - - 455,000 - 455,000

Acquisition of non-controlling interests - - - (3,014) - (3,014) (56,586) (59,600)

Deemed distributions to the Company's immediate holding - - (182,509) - - (182,509) - (182,509) company

Capital contribution from non-controlling interests ------9,009 9,009

Dividends by subsidiaries to ------(7,161) (7,161) non-controlling interests equity owners

Total comprehensive (expense) / income for the year - - - - (1,176) (1,176) 6,156 4,980

At 31 December 2014 567,656 455,000 (67,986) (3,014) (48,682) 902,974 230,895 1,133,869

The accompanying Accounting Policies and Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

- 10 - YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014

Note 2014 2013 RMB'000 RMB'000 Operating activities Profit / (Loss) before taxation 7,697 (36,664) Adjustments for: Impairment loss on trade and other receivables 2,794 229 Loss on disposal of property, plant and equipment 9 - Share of losses of associates 18,582 - Loss on deemed disposals of partial interest in an associate 1,845 - Interest expenses 97,098 41,224 Depreciation 41,332 23,236 Amortisation of lease prepayments and intangible assets 1,297 1,054 Amortisation of deferred income (5,205) (3,309) Interest income (14,745) (728) Operating profit before changes in working capital 150,704 25,042 Increase in inventories (87,209) (613) Increase in trade receivables (169,704) (8,589) Increase in deposits, prepayments and other receivables (89,990) (62,857) (Decrease) / Increase in trade and other payables (235,318) 70,420 Cash (used in) / generated from operations (431,517) 23,403 Income tax / paid (3,827) - Net cash (used in) / generated from operating activities (435,344) 23,403

Investing activities Prepayments of acquisition of property, plant and equipment and lease payments (194,954) (24,384) Payments of acquisition of property, plant and equipment, lease payment and intangible assets (688,371) (387,781) Payments of acquisition of non-controlling interest of a subsidiary (45,100) - Investment in an associate (185,574) - Deposits paid for investments - (272,378) Government grant received 25,233 2,141 Interest received 13,335 728 Net cash used in investing activities (1,075,431) (681,674)

The accompanying Accounting Policies and Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

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– F-387 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014

Note 2014 2013 RMB'000 RMB'000 Financing activities Net proceeds from issuance of shares 563,756 3,900 Proceeds from borrowings 2,658,994 1,905,110 Repayment of borrowings (1,807,555) (1,075,000) Share subscription money received 455,000 - Net proceeds from issuance of corporate bond 588,230 - Capital contribution from a non-controlling interest of a subsidiary 9,009 130,384 Dividend paid by subsidiaries to non-controlling equity owners (7,161) - Interest paid (114,077) (48,364) Net cash generated from financing activities 2,346,196 916,030

Net increase in cash and cash equivalents 835,421 257,759 Cash and cash equivalents brought forward 512,192 254,433 Cash and cash equivalents carried forward 19 1,347,613 512,192

The accompanying Accounting Policies and Explanatory Notes form an integral part of, and should be read in conjunction with, these consolidated financial statements.

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– F-388 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

Reporting entity

Yunnan Energy Investment (H K) Co. Limited ("the Company") is a company incorporated in Hong Kong. Its registered office and principal place of business are situated at Flat 2006, 20/F., China Resources Building, 26 Habour Road, Wanchai, Hong Kong changed from Mkm 2130 Room 1007, 10/F., Ho King Ctr., No. 2-16 Fa Yuen St., Mongkok, Kowloon, Hong Kong on 2 January 2014. The principal activities of the Company during the year were investment holdings and trading of mineral and metal products. The principal activities of its subsidiaries are set out in Note 12 to the consolidated financial statements.

The functional and presentation currencies of the Company and its subsidiaries (collectively referred as the "Group") are Renminbi ("RMB") which the majority of the Group's transactions are denominated.

During the year, the Group acquired 61.39% interests in 暚⋿傥㈽㕘傥㸸攳䘤㚱旸℔⎠("暚⋿㕘傥㸸") for a consideration of approximately RMB182,510,000. The acquired entity was a subsidiary of 暚⋿暣 ≃㈽屯㚱旸℔⎠ which is a subsidiary of 暚⋿䚩傥㸸㈽屯普⛀㚱旸℔⎠("傥㈽普⛀"), the Company's immediate holding company. The transaction is referred to as the "Acquisition Transaction" and the entity acquired in the Acquisition Transaction are collectively referred to as the "Acquired Entity".

At the end of the reporting period, the directors of the Company regard 暚⋿䚩㈽屯㍏偉普⛀㚱旸℔⎠(" ㈽屯普⛀"), a state-owned enterprise incorporated in the People's Republic of China (the "PRC") and administered by 暚⋿䚩Ṣ㮹㓧⹄⚳㚱屯䓊䚋䜋䭉䎮⥼⒉㚫, as its ultimate holding company.

1. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance These consolidated financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards ("HKFRSs"), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ("HKASs") and Interpretations issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance, which for this financial year and the comparative period continue to be those of the predecessor Hong Kong Companies Ordinance, Chapter 32, in accordance with transitional and saving arrangements for Part 9 of the new Hong Kong Companies Ordinance, Chapter 622, "Accounts and Audit", which are set out in Sections 76 to 87 of Schedule 11 to that Ordinance. A summary of the significant accounting policies adopted by the Group is set out below.

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– F-389 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Basis of preparation of the consolidated financial statements The measurement basis used in the preparation of the consolidated financial statements is the historical cost basis except certain assets and liabilities are stated at their fair value as explained in the accounting policies set out below.

Merger accounting for business combinations under common control Pursuant to the Acquisition Transaction, the Company became a holding company of the Acquired Entity. Since the Company and the Acquired Entity were ultimately controlled by ㈽屯普⛀ both before and after the completion of the Acquisition Transaction, the Acquisition Transaction was accounted for using the principles of merger accounting.

The preparation of consolidated financial statements in conformity with HKFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of HKFRSs that have significant effect on the consolidated financial statements and major sources of estimation uncertainty are discussed in Note 2.

(c) Changes in accounting policies The HKICPA has issued the following amendments to HKFRSs and one new Interpretation that are first effective for the current accounting period of the Group and the Company:

Įġ ġ Amendments to HKFRS 10, HKFRS 12 and HKAS 27, Investment entities   Amendments to HKAS 32, Offsetting financial assets and financial liabilities    Amendments to HKAS 36, Recoverable amount disclosures for non-financial assets    Amendments to HKAS 39, Novation of derivatives and continuation of hedge accounting    HK(IFRIC) 21, Levies

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– F-390 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Changes in accounting policies (continued)

Amendments to HKFRS 10, HKFRS 12 and HKAS 27, Investment entities The amendments provide consolidation relief to those parents which qualify to be an investment entity as defined in the amended HKFRS 10. Investment entities are required to measure their subsidiaries at fair value through profit or loss.

Amendments to HKAS 32, Offsetting financial assets and financial liabilities The amendments to HKAS 32 clarify the offsetting criteria in HKAS 32.

Amendments to HKAS 36, Recoverable amount disclosures for non-financial assets The amendments to HKAS 36 modify the disclosure requirements for impaired non-financial assets. Among them, the amendments expand the disclosures required for an impaired asset or CGU whose recoverable amount is based on fair value less costs of disposal.

Amendments to HKAS 39, Novation of derivatives and continuation of hedge accounting The amendments to HKAS 39 provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria.

HK(IFRIC) 21, Levies The Interpretation provides guidance on when a liability to pay a levy imposed by a government should be recognised.

The adoption of the above amendments to HKFRSs and one new Interpretation do not have material impact on these consolidated financial statements.

The Group has not applied the new HKFRSs that have been issued but are not yet effective. The Group is in the process of making an assessment of what the impact of these new HKFRSs is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the consolidated financial statements.

In addition, the requirements of Part 9, "Accounts and Audit", of the new Hong Kong Companies Ordinance, Chapter 622 come into operation from the Group's first financial year commencing after 3 March 2014 in accordance with Section 358 of that Ordinance. The Group is in the process of making an assessment of the expected impact of the changes in the Companies Ordinance on the consolidated financial statements in the period of initial application of Part 9. So far it has concluded that the impact is unlikely to be significant and will primarily only affect the presentation and disclosure of information in the consolidated financial statements.

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– F-391 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Subsidiaries and non-controlling interest Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered.

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Group can elect to measure any non-controlling interests either at fair value or at the non-controlling interests' proportionate share of the subsidiary's net identifiable assets.

Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of and the consolidated statement of profit or loss and other comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company. Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated statement of financial position in accordance with Notes 1(n) or (o), depending on the nature of the liability.

Changes in the Group's interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised.

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– F-392 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Subsidiaries and non-controlling interest (continued) When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss.

In the Company's statement of financial position, an investment in a subsidiary is stated at cost less impairment losses (see Note 1(k)), unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale).

(e) Merger accounting for business combination under common control Business combinations arising from transfer of interests in entities that are under the control of the equity shareholders that controls the Group are accounted for as if the acquisition had occurred at the beginning of the years or, if later, at the date that common control was established. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group's equity shareholders' consolidated financial statements.

Upon transfer of interest in an entity to another entity that are under the control of the equity owner that controls the Group, any difference between the Group's interest in the carrying value of the assets and liabilities and the cost of transfer of interest in the entity is recognised directly in equity.

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– F-393 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Associates An associate is an entity in which the Group or Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

An investment in an associate is accounted for in the consolidated financial statements under the equity method, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group's share of the acquisition-date fair values of the investee's identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Group's share of the investee's net assets and any impairment loss relating to the investment (see Notes 1(g) and (k)). Any acquisition-date excess over cost, the Group's share of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognised in the consolidated statement of profit or loss, whereas the Group's share of the post-acquisition post-tax items of the investees' other comprehensive income is recognised in the consolidated statement of profit or loss and other comprehensive income.

When the Group's share of losses exceeds its interest in the associate, the Group's interest is reduced to nil and recognition of further losses is discontinued except to the extent that the group has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Group's interest is the carrying amount of the investment under the equity method together with the Group's long-term interests that in substance form part of the Group's net investment in the associate.

Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group's interest in the investee, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss. If an investment in an associate becomes an investment in a joint venture or vice versa, retained interest is not remeasured. Instead, the investment continues to be accounted for under the equity method.

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– F-394 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Associates (continued) In all other cases, when the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee at the date when significant influence is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see Note 1(h)). In the Company's statement of financial position, investments in associates are stated at cost less impairment losses (see Note 1(k)), unless classified as held for sale (or included in a disposal group that is classified as held for sale).

(g) Goodwill Goodwill represents the excess of

(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group's previously held equity interest in the acquiree; over

(ii) the net fair value of the acquirer's identifiable assets and liabilities measured as at the acquisition date.

When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain purchase.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating unit, that is expected to benefit from the synergies of the combination and is tested annually for impairment (see Note 1(k)). On disposal of a cash generating unit during the year, any attributable amount of purchased goodwill is included in the calculation of profit or loss on disposal.

(h) Other investments in equity securities Investments in equity securities are initially stated at fair value, which is their transaction price unless it is determined that the fair value at initial recognition differs from the transaction price and that fair value is evidenced by a quoted price in an active market for an identical asset or liability or based on a valuation technique that uses only data from observable markets.

At the end of each reporting period the fair value is remeasured, with any resultant gain or loss being recognised in other comprehensive income and accumulated separately in equity in the fair value reserve. As an exception to this, investments in equity securities that do not have a quoted price in an active market for an identical instrument and whose fair value cannot otherwise be reliably measured are recognised in the statement of financial position at cost less impairment losses (see Note 1(k)).

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– F-395 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(i) Property, plant and equipment and intangible assets Property, plant and equipment and intangible assets other than construction in progress are stated at cost less accumulated depreciation/ amortisation and impairment losses (see Note 1(k)).

The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs (see Note 1(v)).

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

Depreciation and amortisation are calculated to write off the cost of property, plant and equipment and intangible assets, less their estimated residual value, if any, using the straight-line method over their estimated useful lives as follows:

Estimated useful Residual value (% of cost) Buildings 30 years 5% Plant and machinery 10-30 years 5% Furniture, equipment and others 5 years 5% Motor vehicle 5 years 5% Intangible assets 3-10 years -

Both the useful life an asset and its residual value, if any, are reviewed annually.

(j) Leased assets An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i) Classification of assets leased to the Group Assets that are held by Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases.

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– F-396 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) Leased assets (continued) (ii) Assets acquired under finance lease Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in property, plant and equipment and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in Note 1(i). Impairment losses are accounted for in accordance with the accounting policy as set out in Note 1(k). Finance charges implicit in the lease payments are charged to profit or loss over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

(iii) Operating lease charges Where the Group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the period of the lease term.

(k) Impairment of assets

Impairment of investments equity securities and other receivables Investments in equity securities and other current and non-current receivables that are stated at cost or amortised cost or are classified as available-for-sale securities are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable date that comes to the attention of the Group about one or more of the following loss events:

- significant financial difficulty of the debtor; - a breach of contract, such as a default or delinquency in interest or principal payments; - it becoming probable that the debtor will enter bankruptcy or other financial reorganisation; - a significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and - a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

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– F-397 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Impairment of assets (continued)

Impairment of investments in equity securities and other receivables (continued) If any such evidence exists, an impairment loss is determined and recognised as follows:

- For investments in associates accounted for under the equity method in the consolidated financial statements (see Note 1(f)), the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with Note 1(k) below. The impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount in accordance with Note 1(k) below.

- For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities are not reversed.

- For trade and other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset's carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

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– F-398 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Impairment of assets (continued)

Impairment of investments in equity securities and other receivables (continued) Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade and other receivable directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

Impairment of other assets Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased:

- property, plant and equipment; - pre-paid interest in leasehold land and classified as being held under operating lease; - investments in subsidiaries and associates in the Company's statement of financial position; - intangible assets; and - deposits paid for investments.

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– F-399 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Impairment of assets (continued)

Impairment of other assets (continued) If any such indication exists, the asset's recoverable amount is estimated. In addition, for goodwill, the recoverable is estimated usually whether or not there is any indication of impairment.

- Calculation of recoverable amount The recoverable amount of an asset is the greater of its fair value less cost of deposed and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

- Recognition of impairment losses An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measurable) or value in use (if determinable).

- Reversals of impairment losses In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset's carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

(l) Inventories Inventories are carried at the lower of cost and net realisable value.

Cost is calculated using the first-in-first-out method and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

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– F-400 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(l) Inventories (continued) Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

(m) Trade and other receivables Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost using effective interest method, me less allowance for impairment of doubtful debts (see Note 1(k)), except where the receivables are interest free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

(n) Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

(o) Trade and other payables Trade and other payables are initially recognised at fair value. Except for financial guarantee liabilities measured in accordance with Note 1(s)(i), trade and other payable are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(p) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.

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– F-401 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(q) Short term employee benefits and contributions to defined contribution retirement plan Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(r) Income tax Income tax for the year, if any, comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities and all deferred tax assets, to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

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– F-402 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(r) Income tax (continued) The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profit will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset.

(s) Financial guarantees, provisions and contingent liabilities

(i) Financial guarantees issued Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the "holder") for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee is initially recognised as deferred income within trade and other payables. The fair value of financial guarantees issued at the time of issuance is determined by reference to fees charged in an arm's length transaction for similar services, when such information is obtainable, or is otherwise estimated by reference to interest rate differentials, by comparing the actual rates charged by lenders when the guarantee is made available with the estimated rates that lenders would have charged, had the guarantees not been available, where reliable estimates of such information can be made. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group's policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss on initial recognition of any deferred income.

The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised in accordance with Note 1(s)(ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.

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– F-403 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(s) Financial guarantees, provisions and contingent liabilities (continued)

(ii) Other provisions and contingent liabilities Provisions are recognised for other liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(t) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

Sale of electricity Electricity revenue is recognised when electricity is supplied to the provincial grid companies. Revenue excludes value added tax ("VAT") or other sales taxes and is after deduction of any trade discounts.

Sale of goods Revenue is recognised when goods are delivered at the customers' premises which is taken to be the point in time when the customer has accepted the goods and the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

Government grants Government grants are recognised in the statement of financial position initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised as income in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are recognised initially as deferred income and consequently are recognised in profit or loss on a systematic basis over the useful life of the asset by way of reduced depreciation expense.

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– F-404 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(t) Revenue recognition (continued)

Interest income Interest income is recognised as it accrues using effective interest method.

Dividend income Dividend income is recognised when the right to receive payment is established.

(u) Translation of foreign currencies Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was measured.

The results of foreign operations are translated into RMB at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Statement of financial position items are translated into RMB at the closing foreign exchange rates at the end of the reporting period. The resulting exchange differences are recognised in other comprehensive income and accumulated separately in equity in the exchange reserve.

On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation is reclassified from equity to profit or loss when the profit or loss on disposal is recognised.

(v) Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

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– F-405 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(w) Related parties (a) A person, or a close member of that person's family, is related to the Group if that person: (i) has control or joint control over the Group; (ii) has significant influence over the Group; or (iii) is a member to the key management personnel of the Group or the Group's parent.

(b) An entity is related to the Group if any of the following conditions applies: (i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of member of group of which the other entity is a member). (iii) Both entities are joint venture of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. (vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

2. CRITICAL ACCOUNTING JUDGMENT IN APPLYING THE GROUP'S ACCOUNTING POLICIES

The Group's financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the preparation of the consolidated financial statements. The Group bases the assumptions and estimates on historical experience and on various other assumptions that the Group believes to be reasonable and which form the basis for making judgments about matters that are not readily apparent from other sources. On an on-going basis, management evaluates its estimates. Actual results may differ from those estimates as facts, circumstances and conditions change.

The selection of critical accounting policies, the judgments and other uncertainties affecting application of those polices and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing the consolidated financial statements. The principal accounting policies are set forth in Note 1. The Group believes the following critical accounting policies involve the most significant judgments and estimates used in the consolidated preparation of the consolidated financial statements.

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– F-406 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

2. CRITICAL ACCOUNTING JUDGMENT IN APPLYING THE GROUP'S ACCOUNTING POLICIES (CONTINUED)

(a) Impairment losses for bad and doubtful debts The Group estimates impairment losses for bad and doubtful debts resulting from the inability of the customers and other debtors to make the required payments. The Group bases the estimates on the aging of the receivable balance, debtors' credit-worthiness, and historical write-off experience. If the financial condition of the customers and debtors were to deteriorate, actual write-offs would be higher than estimated.

(b) Impairment losses for non-current assets In considering the impairment losses that may be required for certain of the Group's assets which include property, plant and equipment, lease prepayments, intangible assets, investments in associates, and deposits paid for investments, recoverable amount of the asset needs to be determined. The recoverable amount is the greater of the fair value less costs to sell and the value in use. It is difficult to precisely estimate selling price because quoted market prices for these assets may not be readily available. In determining the value in use, expected cash flow generated by the asset are discounted to their present value, which requires significant judgment relating to items such as level of sale volume, selling price and amount of operating costs. The Group uses all readily available information in determining an amount that is reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections of items such as sale volume, selling price and amount of operating costs.

(c) Depreciation Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets, after taking into account the estimated residual value. The Group reviews the estimated useful lives of the assets regularly. The useful lives are based on the Group's historical experience with similar assets and taking into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

(d) Income tax The Group files income taxes in numerous tax authorities. Judgment is required in determining the provision for taxation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts originally recorded, the differences will impact on the current income tax and deferred income tax provisions in the periods in which the differences arise.

(e) Provision for guarantees Provision for outstanding guarantees is recognised if it becomes probable that the holders of these guarantees will call upon the Group under the guarantees and the amount of that claim on the Group is expected to exceed the amount currently carried in payables in respect of the guarantee. The Group reviews the financial position of these guarantee holders regularly and estimates the amount to claim on the Group based on historical experience. If the financial position of these guarantee holders were to deteriorate, actual provisions would be higher than estimated.

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– F-407 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

3. TURNOVER AND SEGMENT INFORMATION

(a) Turnover

2014 2013 RMB'000 RMB'000

Trading sales 264,568 22,820 Sales of electricity 140,827 47,916 Rubbish handling income 16,563 11,871 Assembling and sales of wind power plant equipment 428,472 242,800 Others 54,574 1,884 905,004 327,291

(b) Segment information The chief operating decision-maker has been identified as the executive directors and certain senior management of the Group (together, the "CODM") that make strategic decisions. The CODM reviews the internal reporting of the Group in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The CODM assesses the performance of the operating segments based on each segment's profit / (loss) before tax, finance costs, net, share of losses of associates and loss on deemed disposals of partial interest in an associate ("segment results").

The Group has the following major segments: power generation, trading, and assembling and sales of equipment and others.

The Group is principally engaged in the development and management of renewable energy power plants in the PRC.

The trading segment is engaged in trading of mineral and metal products.

The assembling and sales of equipment segment is engaged in assembling and sales of wind power plant equipment.

The Group's other operating segment includes the management, mining and energy related project management business which earns consultancy and project management income.

Segment assets exclude investments in associates, deposits for investments and deferred income tax assets.

.

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– F-408 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

3. TURNOVER AND SEGMENT INFORMATION (CONTINUED)

(b) Segment information (continued) The segment information provided to the CODM for the reportable segments for the year's ended 31 December 2014 and 2013 are as follows:

Assembling Power and sales of generation Trading equipment Others Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

For the year ended 31 December 2014

Segment turnover 157,390 264,568 428,472 54,574 905,004

Results of reportable segments 60,029 6,414 6,191 33,198 105,832

A reconciliation of results of reportable segments to profit for the year is as follows :

Results to reportable segments 105,832 Finance costs, net (77,708) Share of losses of associates (18,582) Loss on deemed disposals of partial (1,845) interest in an associate

Profit before taxation 7,697 Income tax (2,717)

Profit for the year 4,980

Segment results included: Depreciation and amortisation 41,713 - 512 404 42,629 Impairment loss on trade and other receivables recognised / (reversed) 2,800 - (6) - 2,794

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– F-409 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

3. TURNOVER AND SEGMENT INFORMATION (CONTINUED)

(b) Segment information (continued)

Assembling Power and sales of generation Trading equipment Others Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

For the year ended 31 December 2013

Segment turnover 59,787 22,820 242,800 1,884 327,291

Results of reportable segments (7,814) 21 13,075 (1,422) 3,860

A reconciliation of results of reportable segments to loss for the year is as follows :

Results to reportable segments 3,860 Finance costs, net (40,524)

Loss before taxation (36,664) Income tax (3,300)

Loss for the year (39,964)

Segment results included: Depreciation and amortisation 24,145 - 42 103 24,290 Impairment loss on trade and other receivables recognised 63 - 10 156 229

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– F-410 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

3. TURNOVER AND SEGMENT INFORMATION (CONTINUED)

(b) Segment information (continued)

Assembling Power and sales of generation Trading equipment Others Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

As at 31 December 2014

Segment assets 2,584,842 140,604 204,404 1,203,338 4,133,188

Investments in associates - - - - 240,516

Deferred income tax assets - - - - 1 Total assets per consolidated statement of financial position - - - - 4,373,705

Additions to segment non-current assets 894,202 - 1,802 11,824 907,830

Assembling Power and sales of generation Trading equipment Others Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

As at 31 December 2013

Segment assets 1,706,194 49,792 46,633 284,437 2,087,056

Deposits for investments - - - 272,378 272,378

Deferred income tax assets - - - - 3 Total assets per consolidated statement of financial position - - - - 2,359,437

Additions to segment non-current assets 395,979 - 2,423 22,288 420,690

Additions to segment non-current assets represent additions to non-current assets other than financial instruments.

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– F-411 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

3. TURNOVER AND SEGMENT INFORMATION (CONTINUED)

(b) Segment information (continued) The Group principally operates in the Mainland China with turnover and result derived mainly from its operations in the Mainland China.

The Group's turnover from external customers and information about its non-current assets by geographical location of assets are detailed below:

Turnover Non-current assets 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Hong Kong and others 265,739 22,820 5,899 651

Mainland China 639,265 304,471 2,520,406 1,636,807

Consolidated total 905,004 327,291 2,526,305 1,637,458

In presenting the geographical information, turnover is based on the locations of the customers.

4. OTHER GAINS, NET

2014 2013 RMB'000 RMB'000

Government grants 5,205 3,309 Impairment loss on trade and other receivables, net (2,794) (229) Loss on disposal of property, plant and equipment (9) - Others, net 5,437 (286) 7,839 2,794

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– F-412 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

5. FINANCE COSTS, NET

2014 2013 RMB'000 RMB'000

Interest income on financial assets 14,745 728 Foreign exchange gains 6,045 -

Finance income 20,790 728

Interest on bank and other borrowings 114,481 49,749 Interest on corporate bond 7,122 - Less: interest expenses capitalised into property, plant and equipment (24,505) (8,525) 97,098 41,224 Foreign exchange losses - 3 Bank charges and others 1,400 25

Finance cost (98,498) (41,252)

Finance cost, net (77,708) (40,524)

6. PROFIT / (LOSS) BEFORE TAXATION

Profit / (Loss) before taxation is arrived at after charging:

2014 2013 RMB'000 RMB'000 Staff costs (including directors' emoluments): Salaries, wages and other benefits 34,962 16,578 Contribution to defined contribution retired plan 5,762 3,114 40,724 19,692 Other items: Amortisation of lease prepayments and intangible assets 1,297 1,054 Auditor's remuneration 870 315 Depreciation for of property, plant and equipment 41,332 23,236 Cost of inventories sold 684,157 251,070 Impairment loss on trade and other receivables 2,794 229 Loss on disposal of property, plant and equipment 9 - Operating lease rental in respect of leasehold land and buildings 14,250 1,778

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– F-413 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

7. DIRECTORS' REMUNERATION

Directors' remuneration disclosed pursuant to Section 78 of Schedule 11 to the new Hong Kong Companies Ordinance, Chapter 622, with reference to Section 161 of the predecessor Hong Kong Companies Ordinance, Chapter 32, is as follows:

2014 2013 RMB'000 RMB'000

Fees - - Wages, salaries and other emoluments 64 - Pension cost 24 - 88 -

8. INCOME TAX

(a) Income tax in consolidated statement of profit or loss and other comprehensive income represents.

2014 2013 RMB'000 RMB'000 Current tax Provision for the year - PRC (Notes (i) and (ii)) 2,026 3,303 - Hong Kong Profits Tax (Note (ii)) 689 - 2,715 3,303

Deferred tax 2 (3)

Total income tax expenses 2,717 3,300

Notes :

(i) The provision for PRC current income tax is calculated based on the statutory tax rate of 25% (2013: 25%) on the estimated assessable income for the year.

Certain subsidiaries of the Group are entitled to a three-year exemption from income tax when their power generation started, followed by a 50% reduction in income tax rate at 12.5% for another three years, and then taxed at 25% thereafter.

(ii) Hong Kong Profits Tax has been calculated at 16.5% of its estimated assessable profits for the year ended 31 December 2014 and 2013.

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– F-414 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

8. INCOME TAX (CONTINUED)

(b) Reconciliation between tax expenses and accounting profit / (loss) at applicable tax is as follows:

2014 2013 RMB'000 RMB'000

Profit / (Loss) before taxation (excluding share of losses of associates and loss on deemed disposals of partial interest in an associate) 28,124 (36,664)

Applicable tax rate (Note) 25% 25% Notional tax on profit / (loss) before taxation 7,031 (9,166) Tax effect of non-deductible expenses 1,661 5,273 Tax effect of non-taxable income (2,415) (181) Effect of different tax rate of for the operations in other jurisdictions (355) - Tax effect on utilisation of tax losses not previously recognised (1,350) - Tax effect of tax holidays / tax concession (10,336) - Tax effect of unused tax losses not recognised 8,967 7,465 Others (486) (91)

Actual tax expense 2,717 3,300

Note : The applicable tax rate is with reference to the statutory tax rate of the Company's principal subsidiaries.

(c) Income tax payable in the consolidated statement of financial position represents:

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

At 1 January 3,303 - - - Provision for the year (Note 8 (a)) 2,715 3,303 444 - Income tax paid (3,827) - - -

At 31 December 2,191 3,303 444 -

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– F-415 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

8. INCOME TAX (CONTINUED)

(d) Deferred income tax assets

Deferred income tax assets have been recognised in the consolidated statement of financial position in respect of temporary differences arising from allowance of trade and other receivables.

At the end of the reporting period, the Group has unused tax losses of approximately RMB84,237,000 (2013: RMB62,579,000) available for offset against future profits. No deferred tax asset has been recognised due to the unpredictability of future profit streams. Included in unrecognised tax losses are losses of approximately RMB84,237,000 (2013: RMB57,180,000) that will expire within 5 years. Other tax losses may be carried forward indefinitely.

9. PROPERTY, PLANT AND EQUIPMENT

(a) The Group

Furniture, Plant and equipment Motor Construction Buildings machinery and others vehicle in progress Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

Cost : At 1 January 2013 110,358 497,622 1,426 5,585 284,940 899,931 Additions during the year 602 - 5,150 1,356 352,052 359,160 Transfer to lease prepayments - - - - (9,417) (9,417) Transfer 80,664 299,275 - - (379,939) - At 31 December 2013 and 1 January 2014 191,624 796,897 6,576 6,941 247,636 1,249,674 Additions during the year 25,666 63 7,045 2,521 694,562 729,857 Disposal during the year - - - (115) - (115) Transfer 98,936 295,879 - - (394,815) - At 31 December 2014 316,226 1,092,839 13,621 9,347 547,383 1,979,416

Accumulated depreciation: At 1 January 2013 3,605 12,764 887 4,375 - 21,631 Charge for the year 4,552 17,989 266 429 - 23,236 At 31 December 2013 and 1 January 2014 8,157 30,753 1,153 4,804 - 44,867 Charge for the year 9,319 30,625 636 752 - 41,332 Written back on disposal - - - (106) - (106) At 31 December 2014 17,476 61,378 1,789 5,450 - 86,093

Net carrying amount: At 31 December 2014 298,750 1,031,461 11,832 3,897 547,383 1,893,323

At 31 December 2013 183,467 766,144 5,423 2,137 247,636 1,204,807

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– F-416 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

(b) The Company Furniture, equipment Motor and others vehicle Total RMB'000 RMB'000 RMB'000

Cost : At 1 January 2013 - - - Additions during the year - 662 662 At 31 December 2013 and 1 January 2014 - 662 662 Additions during the year 3,321 2,193 5,514 Disposal during the year - - - At 31 December 2014 3,321 2,855 6,176

Accumulated depreciation: At 1 January 2013 - - - Charge for the year - 11 11 At 31 December 2013 and 1 January 2014 - 11 11 Charge for the year 11 334 345 At 31 December 2014 11 345 356

Net carrying amount: At 31 December 2014 3,310 2,510 5,820

At 31 December 2013 - 651 651

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– F-417 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

10. LEASE PREPAYMENTS

The Group 2014 2013 RMB'000 RMB'000

Cost At 1 January 56,640 10,148 Additions 7,403 37,075 Transfer from property, plant and equipment - 9,417 At 31 December 64,043 56,640

Accumulated amortisation At 1 January 1,227 203 Amortisation for the year 1,268 1,024 At 31 December 2,495 1,227

Net book value 61,548 55,413

Lease prepayments mainly represent prepayments for acquiring right to use land, which is all located in the PRC, for own use properties with lease period of 20 – 50 years.

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– F-418 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

11. INTANGIBLE ASSETS

The Group Software RMB'000

Cost At 1 January 2013 60 Additions 71 At 31 December 2013, 1 January 2014 and 31 December 2014 131

Accumulated amortisation At 1 January 2013 6 Charge for the year 30 At 31 December 2013 and 1 January 2014 36 Charge for the year 29 At 31 December 2014 65

Net book value At 31 December 2014 66

At 31 December 2013 95

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– F-419 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

12. INVESTMENTS IN SUBSIDIARIES

The Company 2014 2013 RMB'000 RMB'000

Unlisted investment, at cost 702,391 3,104

The following is a list of principal subsidiaries as at 31 December 2014:

Place of Attributable to the incorporation Paid up / Company Name of company and operation issued capital Directly Indirectly Principal activity

暚⋿㕘傥㸸 PRC RMB 803,212,000 61.39% - Investment holdings

㚫㽌暚傥㈽㕘傥㸸 PRC RMB 120,000,000 - 61.39% Generation and sales of 攳䘤㚱旸℔⎠ electricity

䞛㜿暚暣㈽㕘傥㸸 PRC RMB 100,000,000 - 61.39% Generation and sales 攳䘤㚱旸℔⎠ of electricity

楔漵暚傥㈽㕘傥㸸 PRC RMB 169,000,000 - 61.39% Development of 攳䘤㚱旸℔⎠ power plant

⣏⦂暚傥㈽㕘傥㸸 PRC RMB 25,000,000 - 61.39% Development of 攳䘤㚱旸℔⎠ power plant

㚚曾暚傥㈽㕘傥㸸 PRC RMB 60,000,000 - 52.18% Generation and sales 䘤暣㚱旸℔⎠ of electricity

⭴㸸䷋㕡凇䐆⬱䣎 PRC RMB 40,000,000 - 49.11% Mining 㤕㚱旸℔⎠

㿀大䷋暚傥㈽桐暣 PRC RMB 158,000,000 - 43% Generation and sales 攳䘤㚱旸℔⎠ of electricity

暚⋿傥㈽㴟墅㕘傥 PRC RMB 30,000,000 - 36.3% Assembling and sales of wind 㸸姕⁁㚱旸℔⎠ power plant equipment

暚⋿傥㈽䓇ン⺢姕 PRC RMB 10,000,000 - 24.56% Energy related project ⶍ䦳㚱旸℔⎠ management

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– F-420 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

12. INVESTMENTS IN SUBSIDIARIES (CONTINUED)

The following is a list of principal subsidiaries as at 31 December 2014: (continued)

Place of Attributable to the incorporation Paid up / Company Name of company and operation issued capital Directly Indirectly Principal activity ġ ġ ġ ġ Fortune Sea Hong Kongġ HK$ 7,800,000 51%ġ Įġ Tradingġ International Investment Company Limited ġ Yunnan Renewable Hong Kongġ HK$ 5,000,000 100%ġ Įġ Investment holding Energy Investment ġ (HK) Co. Limitedġ ġ ġ ġ ġ Yunnan Energy British Virgin - 100% - Financing Investment Islandsġ (Overseas) Company Limited ġ

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– F-421 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

12. INVESTMENTS IN SUBSIDIARIES (CONTINUED)

Set out below is the summarised financial information for 暚⋿㕘傥㸸 which is a subsidiary with material non-controlling interest to the Group.

Summarised statement of financial position as at 31 December 2014 and 2013 are as follow:

暚⋿㕘傥㸸 2014 2013 RMB'000 RMB'000

Non-current assets 2,279,889 1,364,429

Current assets 648,850 388,401

Total assets 2,928,739 1,752,830

Current liabilities (1,293,123) (1,006,341)

Non-current liabilities (828,575) (228,546)

Net assets 807,041 517,943

Non-controlling interests (60,195) (111,500)

Net assets after non-controlling interests 746,846 406,443

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– F-422 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

12. INVESTMENTS IN SUBSIDIARIES (CONTINUED)

Summarised statement of profit or loss and other comprehensive income for the years ended 31 December 2014 and 2013are as follow :

暚⋿㕘傥㸸 2014 2013 RMB'000 RMB'000

Turnover 601,953 304,181

Profit / (Loss) before taxation 6,877 (31,983)

Income tax (2,029) (3,300)

Profit / (Loss) for the year 4,848 (35,283)

Other comprehensive income for the year - -

Total comprehensive income / (expense) for the year 4,848 (35,283)

Non-controlling interests (7,272) 2,163

Total comprehensive expense after non-controlling interests (2,424) (33,120)

Dividends paid to non-controlling interests 7,161 -

Summarised statement of cash flows for the years ended 31 December 2014 and 2013 are as follow:

暚⋿㕘傥㸸 2014 2013 RMB'000 RMB'000

Net cash generated / (used in) 47,712 (37,905)

Net cash used in investing activities (874,176) (486,986)

Net cash generated from financing activities 951,188 530,117

The information above represents balances before inter-company eliminations, reclassification of assets and remeasurement of assets at Group level.

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– F-423 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

13. INVESTMENTS IN ASSOCIATES

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Unlisted investment, at cost - - 260,154 - Share of net assets 224,094 - - - Goodwill 16,422 - - - 240,516 - 260,154 -

The following is a list of associates as at 31 December 2014:

Place of Equity interest incorporation Paid up / attributable to the Name of company and operation issued capital Group Principal activity

暚⋿傥㈽⮵⢾傥㸸攳 PRC RMB 237,100,000 42.68% Investment in the 䘤㚱旸℔⎠ ġ renewable energy ("暚⋿⮵⢾傥㸸") power plant and tradingġ ġ ġ 暚⋿圵屯䦇屠 PRC RMB 500,000,000 25% Provision of (ᶲ㴟)㚱旸℔⎠ ġ financing services ("暚⋿圵屯䦇屠") to customers under finance lease arrangements ġ ġ 暚⋿⓮㤕ᾅ䎮 PRC RMB 49,992,000 25% Provision of (ᶲ㴟)㚱旸℔⎠ ġ financing services ("暚⋿⓮㤕ᾅ䎮") to customers under factoring arrangements ġ ġ 㖻攨暚傥㕘桐傥㸸 PRC RMB 3,976,000 20% Development of 攳䘤㚱旸℔⎠ ġ power plant ("㖻攨暚傥")

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– F-424 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

13. INVESTMENTS IN ASSOCIATES (CONTINUED)

The following table shows information of the associates as at 31 December 2014, that accounted for the consolidated financial statements using the equity method.

暚⋿⮵⢾傥㸸 暚⋿圵屯䦇屠 暚⋿⓮㤕ᾅ䎮 㖻攨暚傥 2014 2014 2014 2014 RMB'000 RMB'000 RMB'000 RMB'000

Current assets 1,062,886 218,154 112,691 3,143 Non-current assets 443,123 486,857 - 841 Current liabilities (1,023,683) (201,800) (62,577) (34) Non-current liabilities (268,131) (812) - - 214,195 502,399 50,114 3,950

Equity - Attribute to investee's shareholders 199,567 502,399 50,114 3,950 - Attribute to non-controlling interests 14,628 - - - 214,195 502,399 50,114 3,950

Turnover 12,534,640 7,994 64 -

Total comprehensive income / (expense) for the year - Attribute to investee's shareholders (42,871) 2,398 122 - - Attribute to non-controlling interests (14,985) - - - (57,856) 2,398 122 -

Reconciliation to the investment in assets :

Group effective interest 42.68% 25% 25% 20%

Share of net assets 85,175 125,600 12,529 790

Goodwill 16,422 - - -

Carrying amounts of investments in associates 101,597 125,600 12,529 790

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– F-425 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

14. DEPOSITS PAID FOR INVESTMENTS

The Group The Company Note 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Deposits paid for investments (i) - 257,878 - 257,878 Deposits paid for acquisition of additional interest in a subsidiary from non-controlling interests - 14,500 - - - 272,378 - 257,878

(i) Amounts represented deposits paid for acquisition of a subsidiary and an associate. Such deposits were transferred to investments in a subsidiary and an associate during year ended 31 December 2014.

15. OTHER NON-CURRENT ASSETS

The Group Note 2014 2013 RMB'000 RMB'000

Deductible Value-Added Tax ("VAT") (i) 122,923 60,895 Unquoted equity investment in a non-listed company, at cost (ii) 10,000 10,000 Prepayments for acquisition of property, plant and equipment and lease payments 194,954 24,384 Other deposits and prepayments 2,974 9,483 330,851 104,762

(i) Deductible VAT mainly represents the input VAT relating to purchase of property, plant and equipment, which is deductible from output VAT.

(ii) The Group owned 4.26% equity interests in a company incorporated in PRC. Such unlisted equity security was carried at cost as it does not have a quoted market price in an active market and its fair value cannot be reliable measured.

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– F-426 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

16. INVENTORIES

The Group 2014 2013 RMB'000 RMB'000

Raw materials 71,652 911 Work in progress 65 - Finished goods 16,532 129 88,249 1,040

17. TRADE RECEIVABLES

The Group 2014 2013 RMB'000 RMB'000

Trade receivables 225,047 55,343 Less: allowance for doubtful debts (2,863) - 222,184 55,343

The ageing analysis of trade receivables of the Group is as follows:

(a) Aging analysis

The Group 2014 2013 RMB'000 RMB'000

Current 221,447 50,843 Past due 3,600 4,500 225,047 55,343 Less: allowance for doubtful debts (2,863) - 222,184 55,343

Included in trade receivables of approximately RMB91,352,000 (2013: RMB42,228,000) are mainly electricity sales receivables from local grid companies. Generally, the receivables are due within 30-90 days from the date of billing, except for the tariff premium, representing 30% to 60% of total electricity sales, collected by certain power projects. The collection of such tariff premium is subject to the allocation of funds by relevant government authorities to local grid companies, which therefore takes a relatively long time for settlement.

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– F-427 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

17. TRADE RECEIVABLES (CONTINUED)

(a) Aging analysis (continued) Pursuant to CaiJian [2012] No.102 Notice on the Interim Measures for Administration of Subsidy Funds for Tariff Premium of Renewable Energy (⎗ℵ䓇傥㸸暣₡旬≈墄≑屯慹䭉 䎮㙓埴彎㱽) jointly issued by the Ministry of Finance, the National Development and Reform Commission and the National Energy Administration in March 2012, a set of standardised procedures for the settlement of the tariff premium has come into force since 2012 and approvals on a project by project basis are required before the allocation of funds to local grid companies. As at 31 December 2014, most of the operating projects have been approved for the tariff premium and certain projects are in process of applying for the approval. The directors are of the opinion that the approvals will be obtained in due course and the tariff premium receivables are fully recoverable considering that there are no bad debt experiences with the grid companies in the past and the tariff premium is funded by the PRC government.

(b) Impairment loss of trade receivables Impairment losses in respect of trade receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly.

The movement in the allowance for doubtful debts during the year is as follows:

The Group 2014 2013 RMB'000 RMB'000

At 1 January - - Impairment loss recognised 2,863 - At 31 December 2,863 -

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– F-428 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

18. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Amount due from immediate holding company 18,717 - 36,717 - Amount due from an associate 68,000 - 68,000 - Amount due from a non-controlling interest of a subsidiary 24,702 23,681 - - Amounts due from subsidiaries - - 313,694 - Interest receivables 1,410 - 1,465 - Other debtors 45,035 53,392 3,681 93,578 Rental prepayment to a non-controlling interest of a subsidiary - 10,000 - - Other prepayments and deposits 31,650 66,560 41,435 457 189,514 153,633 464,992 94,035 Less : allowance for doubt debts (160) (229) - - 189,354 153,404 464,992 94,035

Amounts due from immediate holding company, an associate and subsidiaries are unsecured, interest-free and repayable on demand.

An amount due from a non-controlling interest of a subsidiary is unsecured, interest bearing at 6% plus People's Bank of China 1 to 3 year base lending rate per annum and repayable on demand.

Impairment losses in respect of deposits, prepayments and other receivables are recorded using an allowance amount.

The movement in the allowance for doubtful debts during the year is as follows:

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

At 1 January 229 - - - Impairment loss (reversed) / recognised (69) 229 - - At 31 December 160 229 - -

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– F-429 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

19. CASH AND CASH EQUIVALENTS

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Cash at banks and on hand 635,413 512,192 263,833 250,940 Short-term bank deposits 712,200 - 682,200 - Cash and cash equivalents in the consolidated and the Company statements of financial position and the consolidated statement of cash flows 1,347,613 512,192 946,033 250,940

20. TRADE AND OTHER PAYABLES

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Trade and bills payables 126,297 23,254 443 - Payables for construction cost 123,337 66,334 - - Payables for acquisition of property, plant 13,479 27,062 - - and equipment Payables for other tax 4,543 2,934 - - Interest payables 6,820 3,553 7,230 - Payables for staff related costs 2,696 1,009 - - Dividend payables to non-controlling 3,400 - - - interests of subsidiaries Amount due to immediate holding - 274,756 - 256,756 company Amount due to a subsidiary - - 591,812 - Amounts due to fellow subsidiaries 2,127 195,266 - - Amount due to a non-controlling interest 109,157 25,555 - - of a subsidiary Others 20,229 20,860 736 22 412,085 640,583 600,221 256,778

The amounts due to related parties are unsecured interest-free and repayable on demand.

All of the trade and other payables are expect to be settled within one year or are repayable on demand.

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– F-430 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

21. BORROWINGS

Bank and other borrowings are analysed as follows:

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Bank borrowings 1,451,549 550,610 741,549 350,610 Borrowing from a fellow subsidiary 121,000 571,000 - - Borrowing from immediate holding company 615,500 215,000 - - 2,188,049 1,336,610 741,549 350,610

(a) The long-term interest-bearing borrowings comprise:

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Bank and other borrowings - secured 710,000 200,000 - - - unsecured 100,000 - - - 810,000 200,000 - - Less : Current portion of long-term borrowings (30,000) - - - 780,000 200,000 - -

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– F-431 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

21. BORROWINGS (CONTINUED)

(b) The short-term interest-bearing borrowings comprise:

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Unsecured bank and other borrowings 1,378,049 1,136,610 741,549 350,610

Current portion of long-term borrowings - secured 25,000 - - - - unsecured 5,000 - - - 30,000 - - -

1,408,049 1,136,610 741,549 350,610

i. Unsecured short-term bank borrowings are guaranteed by:

- letters of credit issued by Bank of Communication Co., Ltd, Yunnan Provincial Branch, China Minsheng Banking Corp. Limited, Kunming Branch and Shanghai Pudong Development Bank.

- corporate guarantee given by immediate holding company.

ii. At 31 December 2014, included in short-term bank borrowings of approximately RMB189,689,000 is borrowed from a bank which has the overriding right at any time to require immediate payment of the borrowings, therefore, the bank borrowings are classified as current liabilities.

iii. Secured long-term bank borrowings are secured by:

- trade receivables amounting to approximately RMB27,508,000 (2013: Nil).

- corporate guarantee given by immediate holding company.

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– F-432 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

21. BORROWINGS (CONTINUED)

(c) The effective interest rates per annum on borrowings are as follows:

The Group The Company 2014 2013 2014 2013

Long-term (including current portion) Bank and other borrowings 6.55% - 7.5% 7.2% N/A N/A

Short-term (excluding current portion of long-term borrowings) Bank and other borrowings 1.65% - 8% 1.95% - 9.6% 1.65% - 2.55% 1.95%

(d) The long-term borrowing (including current portion) are repayable as follows:

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Within 1 year or on demand 30,000 - - - After 1 year but within 2 years 50,000 200,000 - - After 2 year but within 5 years 60,000 - - - After 5 year 670,000 - - - 810,000 200,000 - -

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– F-433 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

22. CORPORATE BOND

The Group 2014 2013 RMB'000 RMB'000

RMB denominated corporate bond 588,936 -

Notes:

(i) During the year, Yunnan Energy Investment (Oversea) Company Limited, a wholly owned subsidiary of the Company issued a three-year corporate bond of RMB600,000,000 to professional investors at par with a coupon rate of 5.5% per annum. The effective interest rate of the bond is 6.3% per annum. The bond was listing on The Stock Exchange of Hong Kong Limited during year ended 31 December 2014.

(ii) The bond is guaranteed by the Company. In addition, 傥㈽普⚹, the issuer, the Company and the trustee of the bond entered into a keepwell deed in favour of the trustee of the bond. Pursuant to the keepwell deed, 傥㈽普⚹ undertakes that it shall cause, each of the bond issuer and the Company to have sufficient liquidity to ensure timely payment of any amounts payable respect of the bond.

(iii) The fair value of the bond is RMB 594,000,000 which is based on price quotation from financial institution at the reporting date.

23. DEFERRED INCOME

The Group 2014 2013 RMB'000 RMB'000

Government grants (Note) 32,849 28,547 Repair and maintenance 15,726 - 48,575 28,547

Note:

Amount represented government grants relating to the construction of property, plant and equipment, which would be recognised in other income on a straight-line basis over the expected useful life of the relevant assets.

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– F-434 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

23. DEFERRED INCOME (CONTINUED)

The movement of deferred income during the year is as follows:

The Group 2014 2013 RMB'000 RMB'000

At 1 January 28,547 29,715 Addition 25,233 2,141 Credit to profit or loss (5,205) (3,309) At 31 December 48,575 28,547

24. SHARE CAPITAL AND SHARE SUBSCRIPTION MONIES

The Group and the Company Notes 2014 2013 RMB'000 RMB'000 Authorised: 5,000,000 ordinary shares of HK$1 each (i),(ii),(iii) - 3,900

Issued and fully paid: Upon incorporation (i) 3,900 3,900 Issue of ordinary shares (ii) 256,756 - Issue of ordinary shares (iv) 307,000 - 567,656 3,900 Notes:

(i) The Company was incorporated with an authorised share capital of HK$5,000,000 divided into 5,000,000 ordinary shares at HK$1 each. At date of incorporation, the Company issued 5,000,000 share of HK$1 at par to the subscriber for cash pursuant to the subscription clause of the Company's Memorandum of Association.

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– F-435 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

24. SHARE CAPITAL AND SHARE SUBSCRIPTION MONIES (CONTINUED)

Notes:

(ii) By an ordinary resolution passed on 20 January 2014, the authorised share capital of the Company was increased from HK$5,000,000 to HK$350,000,000 by the creation of 345,000,000 new shares of HK$1 each ranking pari passu in all respects with the existing shares of the Company. On the same date, 333,500,000 ordinary shares of HK$1 each for a total sum of HK$333,500,000 or approximately RMB256,756,000 were allotted to the sole shareholder.

(iii) Under the new Hong Kong Companies Ordinance, Chapter 622, which commenced operation on 3 March 2014, the concept of authorised share capital no longer exists. In accordance with Section 135 of the new Hong Kong Companies Ordinance, Chapter 622, the Company's shares no longer have a par or nominal value with effect from 3 March 2014. There is no impact on the number of shares in issue or the relative entitlement of any of the members as a result of this transition.

(iv) On 23 June 2014, 386,747,291 ordinary shares of HK$1 each for a total sum of HK$386,747,291 or approximately RMB307,000,000 were allotted to the sole shareholder.

(v) On 27 October 2014, the sole shareholder of the Company agreed to subscribe additional shares of the Company. On 29 December 2014, a total sum of approximately RMB455,000,000 shares subscription monies was received from the sole shareholder and credit to the "Share subscription monies" account in the equity of the Company. On 5 January 2015, 576,314,123 ordinary shares were allotted to the sole shareholder. The consideration of the shares allotment is settled by shares subscription monies.

Capital management The Group's primary objectives when managing capital are to safeguard the Group's ability to continue as a going concern, so that it can continue to provide returns for the sole shareholder and benefits for other stakeholders.

The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

The Group monitors its capital structure on the basis of liability-to-asset ratio, which is calculated by dividing total liabilities by total assets. The liability-to-asset ratio of the Group as at 31 December 2014 is 74% (2013: 85%).

There were no changes in the Group's approach to capital management compared with previous years.

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– F-436 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

25. RESERVES

The amounts of the Group's reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity of the consolidated financial statements.

(a) Merger reserve The merger reserve comprises the excess of the Company's share of the nominal value of the paid-up capital of the subsidiaries acquired, over the Company's cost of acquisition of the subsidiaries under common control; and the deemed distributions to the Company's immediate holding company in relation to the business combination under common control.

(b) Other reserve The other reserve represents the difference between the amounts of consideration and the carrying values of non-controlling interests acquired or disposed of.

(c) The Company's statement of changes in equity

Share (Accumulated subscription losses) / Share capital monies retained profits Total RMB'000 RMB'000 RMB'000 RMB'000

Issuance of new ordinary shares 3,900 - - 3,900

Total comprehensive expense for the year - - (4,680) (4,680)

At 31 December 2013 3,900 - (4,680) (780)

Issuance of new ordinary shares 563,756 - - 563,756

Share subscription monies received (Note 24(v)) - 455,000 - 455,000

Total comprehensive income for the year - - 19,200 19,200

At 31 December 2014 567,656 455,000 14,520 1,037,176

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– F-437 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26. FINANCIAL RISK MANAGEMENT AND FAIR VALUES

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group's business.

The Group's exposure to these risk and the financial risk management policies and practices used by the Group to manage these risks are described below.

(a) Credit risk The Group's credit risk is primarily attributable to cash and cash equivalents, trade receivables, deposits, prepayments and other receivables.

Substantially all of the Group's cash and cash equivalents are deposited in the reputable banks and financial institutions which the directors assessed the credit risk to be insignificant.

The receivables from sales of electricity mainly represent receivable from the provincial power grid companies. The Group has no significant credit risk with any of these power grid companies as the company and its subsidiaries maintain long-term and stable business relationships with these companies. The receivable from the provincial power grid companies accounted for 41% of the Group's total trade receivables as at 31 December 2014 (2013: 76%). For other trade receivables, deposits, prepayments and other receivables, the Group performs an ongoing individual credit evaluation of its customer's and counterparties' financial conditions. The allowance for doubtful debts has been made in the consolidated financial statements.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated statement of financial position after deducting any impairment allowance. The Group does not provide any other guarantees which would expose the Group to credit risk.

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– F-438 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(b) Liquidity risk The Group's objective is to ensure continuity of sufficient funding and flexibility by utilising a variety of bank and other borrowings with debt maturities spreading over a range of periods, thereby ensuring that the Group's outstanding borrowing obligation is not exposed to excessive repayment risk in any one year.

The Group's policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirement in the short and longer term. In order to repay the borrowings due within one year, the Group negotiates banking facilities and utilises operating cash flows in its subsidiaries. The Group manages the proportion of its current liabilities with respect to the total liabilities to mitigate the liquidity risk. The directors have determined that adequate liquidity exists to finance the working capital and capital expenditure requirement of the Group during the year.

The following tables show the remaining contractual maturities at the end of the reporting period of the Group's and the Company's non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payment computed using contractual rates or, if floating, based on rates current at the end of the reporting period) and the earliest date the Group and the Company can be required to pay:

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– F-439 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(b) Liquidity risk (continued)

The Group Carrying Contractual 1 year or more than amount cash flows less 1-2 years 2-5 years 5 years RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 At 31 December 2014

Long-term borrowings 780,000 987,200 54,600 104,600 111,100 716,900 (Note 21(a)) Short-term borrowings 1,408,049 1,471,276 1,471,276 - - - (Note 21(b)) Corporate bond 588,936 699,000 33,000 33,000 633,000 - Trade and other payables 412,085 412,085 412,085 - - -

Carrying Contractual 1 year or more than amount cash flows less 1-2 years 2-5 years 5 years RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 At 31 December 2013

Long-term borrowings 200,000 228,800 14,400 214,400 - - (Note 21(a)) Short-term borrowings 1,136,610 1,205,951 1,205,951 - - - (Note 21(b)) Trade and other payables 640,583 640,583 640,583 - - -

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– F-440 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(b) Liquidity risk (continued)

The Company Carrying Contractual 1 year or amount cash flows less RMB'000 RMB'000 RMB'000 At 31 December 2014

Short-term borrowing (Note 21(b)) 741,549 757,122 757,122

Trade and other payables 600,221 600,221 600,221

Carrying Contractual 1 year or amount cash flows less RMB'000 RMB'000 RMB'000 At 31 December 2013

Short-term borrowing (Note 21(b)) 350,610 357,464 357,464

Trade and other payables 256,778 256,778 256,778

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– F-441 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(c) Interest rate risk The Group's income and operating cash flows are substantially independent of changes in market interest rates and the Group has no significant interest-bearing assets except for certain interest-bearing receivables and bank balances, details of which have been disclosed in Notes 18 and 19 respectively. The Group's exposure to changes in interest rates is mainly attributable to its borrowings, details of which have been disclosed in Note 21. Borrowings carried at floating rates expose the Group to cash flow interest rate risk. The Group has not used any interest rate swaps to hedge its exposure to interest rate risk.

The following table details the profile of the Group's and the Company's net borrowing interest-bearing financial liabilities less interest bearing financial assets at the end of the reporting period.

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Borrowings 2,188,049 1,336,610 741,549 350,610 Less : Short-term bank deposits (712,200) - (682,200) - 1,475,849 1,336,610 59,349 350,610

At 31 December 2014, it is estimated that a general increase / decrease of 100 basis points in interest rates of borrowings, with all other variables held constant, would have decreased / increased the Group's and the Company's net profits by approximately RMB20,657,000 (2013: RMB13,366,000) and RMB6,192,000 (2013: RMB3,506,000). The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for non-derivative financial instruments in existence at the end of the reporting period.

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– F-442 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(d) Currency risk The Group is exposed to currency risk primarily through sales and purchase which give rise to receivables, borrowings and cash balances that are denominated in a foreign currency other than RMB. The currencies giving rise to this risk are primarily Hong Kong dollars and United States dollars.

Management has a policy to require group companies to manage their foreign exchange risk against functional currency. The Group also manages its foreign exchange risk by performing regular reviews of the Group's net foreign exchange exposures. The Group has not used any forward foreign exchange contracts or currency borrowings to hedge its exposure as at 31 December 2014.

Exposure to currency risk The following table details the Group's and the Company's exposure at the end of the reporting period to currency risk arising from recognised assets or liabilities denominated in a currency other than RMB to which they relate.

The Group Exposure to foreign currencies (expressed in RMB)

2014 2013 HKD USD HKD USD '000 '000 '000 '000

Cash and cash equivalents 6,834 374,744 610 248,593 Deposits, prepayments and other receivables 2,087 42,756 455 43,787 Trade and other payables (814) - (22) - Borrowings - (741,549) - (350,610)

Net exposure 8,107 (324,049) 1,043 (58,230)

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– F-443 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(d) Currency risk (continued)

The Company Exposure to foreign currencies (expressed in RMB)

2014 2013 HKD USD HKD USD '000 '000 '000 '000

Cash and cash equivalents 2,126 366,787 610 248,593 Deposits, prepayments and other receivables 2,084 43,059 455 43,787 Trade and other payables (814) - (22) - Borrowings - (741,549) - (350,610)

Net exposure 3,396 (331,703) 1,043 (58,230)

A 5% weakening of RMB against the above currencies as at 31 December 2014 and 2013 would have increased / (decreased) the net profit by the amount shown below:

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

HKD (340) (52) (139) (52) USD 13,529 2,911 13,916 2,912

A 5% weakening of RMB against the above currencies as at 31 December 2014 and 2013 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the end of reporting period and had been applied to the Group's exposure to currency risk for non-derivative financial instruments in existence at that date, and that all other variables, in particular interest rates, remain constant.

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– F-444 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26. FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED)

(e) Fair values

(i) Financial assets and liabilities measured at fair values The HKFRS 13, Fair value measurement to disclose the level of the fair hierarchy within which the fair value measurement are categorised in their entirety. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

- Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

- Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available.

- Level 3 valuations: Fair value measured using significant unobservable inputs.

At 31 December 2014, there were no financial instruments of the Group carried at fair value. During the years ended 31 December 2014 and 2013, there were no transfers between Level 1 and level 2, or transfers into or out of Level 3.

(ii) Fair value of financial instruments carried at other than fair value The directors considered that the carrying amounts of the Group's financial instruments carried at cost or amortised cost primarily including receivables, payables and borrowing are not materially different from their fair values as at 31 December 2014 and 2013.

The fair value of the corporate bond is disclosed in Note 22 to the consolidated financial statements.

The investment in unquoted equity security (see Note 15) is measured at cost which fair value cannot be measured reliably as this investment in a non-listed company does not have quoted market price in an active market. The Group has no intention to dispose of this investment.

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– F-445 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

27. COMMITMENTS

(a) Capital commitments outstanding at the end of the reporting period not provided for in the financial statements were as follows:

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000 Contracted but not provided for in respect of : - property, plant and equipment 852,550 1,050,410 - - - investments 221,139 14,500 - 14,500 1,073,689 1,064,910 - 14,500

(b) At the end of the reporting period, the total future minimum lease payments under non-cancellable operating leases are payable as follows:

The Group The Company 2014 2013 2014 2013 RMB'000 RMB'000 RMB'000 RMB'000

Within 1 year 14,704 1,480 4,704 1,480 After 1 year but within 5 years 43,698 41,110 7,698 1,110 After 5 years 24,000 30,000 - - 82,402 72,590 12,402 2,590

The Group leases certain buildings though non-cancellable operating leases. The operating leases do not contain provisions for contingent lease rentals. None of the rental agreements contain escalation provision that may require higher future rental payments.

28. CONTINGENT LIABILITIES

Other than disclosed elsewhere in these consolidated financial statements, the Group and the Company did not have any significant contingent liabilities.

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– F-446 – YUNNAN ENERGY INVESTMENT (H K) CO. LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

29. MATERIAL RELATED PARTY TRANSACTIONS

(a) In addition to the balances disclosed elsewhere in these consolidated financial statements, the Group entered into the following material related party transactions:

Transactions 2014 2013 RMB'000 RMB'000

Income Sales to a non-controlling interest of a subsidiary (428,472) (242,800) Interest income immediate holding company (4,381) - Interest income from an associate (25) - Interest income from a non-controlling interest of a subsidiary (1,983) (1,884)

Expenses Purchase from a non-controlling interest of a subsidiary 479,942 228,271 Interest expenses paid to ultimate holding company 28,349 5,729 Interest expenses paid to a fellow subsidiary 28,922 39,802 Rental expenses paid to a fellow subsidiary 10,000 -

(b) Remuneration for key management personal of the Group, including amounts paid to the Group's directors as disclosed in Note 7.

30. SUBSEQUENT EVENTS

In February 2015, the Group acquired additional 38.61% equity interest of 暚⋿㕘傥㸸 at a consideration of approximately RMB218,589,000 from its non-controlling interest which is a fellow subsidiary of the Company. After this acquisition, 暚⋿㕘傥㸸 will become a wholly owned subsidiary of the Company.

In the second quarter of 2015, the Group acquired additional 57.32% equity interest of 暚⋿⮵⢾ 傥㸸 at nil consideration from its sole shareholder which is the Company's immediate holding company. After this acquisition, 暚⋿⮵⢾傥㸸 will become a wholly owned subsidiary of the Company.

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– F-447 – ISSUER GUARANTOR COMPANY Yunnan Energy Investment Yunnan Energy Investment Yunnan Provincial Energy Finance Company Ltd. (H K) Co. Limited Investment Group Co., Ltd. Kingston Chambers, Flat 2006, 20/F, 18/F-24/F, Meiya Building PO Box 173, Road Town, China Resources Building Renmin Zhong Road Tortola, 26 Harbour Road Kunming, Yunnan British Virgin Islands Wanchai, Hong Kong P. R. China

TRUSTEE PRINCIPAL PAYING AGENT REGISTRAR AND TRANSFER AGENT Citicorp International Limited Citibank, N.A., London Citigroup Global Markets 39/F, Citibank Tower Branch c/o Citibank, N.A., Deutschland AG Citibank Plaza Dublin Branch Reuterweg 16 60323 Frankfurt 3 Garden Road 1 North Wall Quay Germany Central, Hong Kong Dublin 1, Ireland

LEGAL ADVISERS TO THE ISSUER, THE GUARANTOR AND THE COMPANY

As to English and Hong Kong law As to PRC law As to British Virgin Islands law

King & Wood Mallesons King & Wood Mallesons Maples and Calder 13/F, Gloucester Tower 20th Floor, East Tower 53rd Floor, The Center The Landmark World Financial Center 99 Queen’s Road Central 15 Queen’s Road Central 1 Dongsanhuan Zhonglu, Hong Kong Central, Hong Kong Chaoyang District Beijing, P. R. China

LEGAL ADVISERS TO THE JOINT LEAD MANAGERS

As to English and Hong Kong law As to PRC law Linklaters Jingtian & Gongcheng 10th Floor 34/F, Tower 3 Alexandra House China Central Place Chater Road 77 Jianguo Road Hong Kong Beijing, P. R. China

LEGAL ADVISER TO THE TRUSTEE As to English and Hong Kong law

Linklaters 10th Floor Alexandra House Chater Road Hong Kong

INDEPENDENT AUDITOR TO INDEPENDENT AUDITOR TO THE GUARANTOR THE COMPANY

Union Alpha CAAP C.P.A. Limited Union Power Certified Public Accountants 19/F. No.3 Lockhart Road, (Special General Partnership) Wanchai 6th Floor, 1-C Huidu International Building Hong Kong 131# Baita Road Kunming, P. R. China Printed by EQUITY FINANCIAL PRESS LIMITED 15114121