IMPORTANT NOTICE

Ⅰ. The Board of Directors, the Board of Supervisors, and the Directors, Supervisors and senior management of the Company confirm that information contained in this annual report is true, accurate and complete without any false records, misleading statements or material omissions, and severally and jointly accept legal responsibility for the above.

Ⅱ. All directors of the Company have attended the meetings of the Board.

Ⅲ. Zhongxi CPAs (Special General Partnership) has issued a standard audit report without qualifying opinions for the Company.

Ⅳ. Mr.Wu Muhai, the principal of the Company, and Mr. Zeng Fei, the Accounting Director, and Mr. Li Qing, the Accounting Manager (accountant in charge), have declared that they guarantee the truthfulness, accuracy and completeness of the financial statements contained in this annual report.

Ⅴ. Resolutions of profit distribution and capitalization from capital reserves of the Company for the Reporting Period examined and reviewed by the Board: Resolution of profit distribution in 2017 is as follows: allocating RMB0.5 (tax included) for every 10 shares to all shareholders based on the Company’s total number of 1,577,205,702 shares, with the total cash dividends of RMB 78,860,285.10 to be distributed. The resolution is required to be submitted at the shareholders’ meeting for consideration and approval.

Ⅵ. Declaration on risk from forward-looking statements The forward-looking statements involving future plans, development strategies in this annual report do not constitute substantial undertakings of the Company to investors who are advised to be cautious about investment risks.

Ⅶ. Important risk warning The risks which might exist have been described in this annual report in detail. Please refer to the “Possible Risk” in “Discussion and Analysis on the Companys development in the future” in Section Ⅳ“ Management Discussion and Analysis of the Operations”. CONTENTS

Section Ⅰ Definitions ...... 1

Section Ⅱ Company Profile and Major Financial Indexes ...... 2

Section Ⅲ Company Profile...... 5

Section Ⅳ Management Discussion and Analysis of the Operations ..... 9

Section Ⅴ Important Notice ...... 25

Section Ⅵ Changes in Common Stocks and Stockholders ...... 26

Section Ⅶ Directors, Supervisors, Senior Management and Employees .. 30

Section Ⅷ Financial Report ...... 34 Section I Definitions KEDA i. Definitions In the report, unless otherwise specified, the following terms are defined as follows Definitions Company, the Company, Refers to KEDA Clean Energy Co., Ltd. KEDA Clean Energy KEDA (Anhui) Industrial Refers to KEDA (Anhui) Industrial Co., Ltd. KEDA (Anhui) Clean Energy Refers to KEDA (Anhui) Clean Energy Co., Ltd. KEDA Hong Kong Refers to KEDA Industrial (Hong Kong) Limited Henglitai Company Refers to Foshan Henglitai Machinery Co., Ltd. Wuhu Suremaker Machinery Co., Ltd., Wuhu KEDA Suremaker Company Refers to Suremaker Co., Ltd. KEDA Hydraulics Refers to Foshan KEDA Hydraulic Machinery Co., Ltd. Xincheng Investment, Anhui Refers to Anhui Xincheng Investment Co., Ltd. Xincheng Investment Anhui Xincheng Financing Refers to Anhui Xincheng Financing and Leasing Co., Ltd. Guangdong Xincheng Financing Refers to Guangdong Xincheng Financing and Leasing Co., Ltd. Xincheng International Refers to Xincheng International (Hong Kong) Co., Ltd. Changsha Aer Refers to Changsha Aer Compressor Co., Ltd. Anhui Hudu KEDA Refers to Anhui Hudu KEDA Fluid Machinery Co., Ltd. Guangdong Taiwei Refers to Guangdong Taiwei Digital Ceramics Printing Co., Ltd. Henan Dongda Tailong Metallurgy Science& Technology Co., KEDA NEU Refers to Ltd., Henan KEDA Dongda International Engineering Co., Ltd. Dongda Science & Technology Refers to NEU Science & Technology Industrial Group Co., Ltd. KEDA (Shenyang) Clean Energy Refers to KEDA (Shenyang) Clean Energy Gas Co., Ltd. Zhuolitai Company Refers to Foshan Zhuolitai Machinery Co.,Ltd. Jiangsu Cohen Environmental Protection Technology Jiangsu Cohen Refers to Co.,Ltd., Jiangsu Cohen Environmental Protection Co.,Ltd. Ningxia Cohen Refers to Ninxia Cohen Environmental Protection Engineering Co.,Ltd. KEDA Clean Energy New Materials Refers to KEDA (Anhui) Clean Energy New Materials Co., Ltd. Zhangzhou Juming Refers to Zhangzhou Juming Graphite Co., Ltd. Guangxing Lithium Refers to Sichuan Guangxing Lithium Science & Technology Co., Ltd. New Energy Automobile Company Refers to KEDA (Anhui) New Energy Automobile Sales Co., Ltd. KEDA (Anhui) Huadong New Energy Automobile Travel Huadong Travel Refers to Service Co., Ltd. Ceramics Refers to Foshan KEDA Ceramics Co., Ltd. KEDA Energy Sale Refers to KEDA (Anhui) Energy Sale Co., Ltd. Keneng Energy Sale Refers to KEDA (Anhui) Keneng Energy Sale Co., Ltd. Anqing Suoxiang Electricity Refers to Anqing Suoxiang Electricity Sale Co., Ltd. Company Delitai Refers to Foshan Delitai Science & Technology Co., Ltd. Guangzhou SUNDA Refers to Guangzhou SUNDA International Trading Co., Ltd. Qinghai Fozhao Lithium Energy Development Co., Ltd., KEDA (Qinghai) Lithium Refers to KEDA (Qinghai) Lithium Co., Ltd. Qinghai Weili Refers to Qinghai Weili New Energy Material Co., Ltd. Lanke Lithium Refers to Qinghai Salt Lake Fozhao Lanke Lithium Co., Ltd. Keda Holding Refers to Keda Holding (Mauritius) Limited Brightstar Investment Refers to Brightstar Investment Limited Keda India Refers to Keda Industrial (India) Limited Twyford Kenya Refers to Twyford Ceramics Company Limited Twyford Ghana Refers to Twyford (Ghana) Ceramics Company Limited Twyford Tanzania Refers to Twyford (Tanzania) Ceramics Company Limited SRC, CSRC Refers to China Securities Regulatory Commission Zhongxi CPAS Refers to Zhongxi CPAS (Special General Partnership) yuan, 10 thousand yuan, Refers to RMB yuan, RMB10 thousand yuan, RMB100 million yuan 100 million yuan

Annual Report 2017 1 KEDA Section II Company Profile and Major Financial Indexes

I. Corporate Information Chinese name 广东科达洁能股份有限公司 Abbreviated Chinese name 科达洁能 Company name in foreign language Keda Clean Energy Co., Ltd Abbreviated company name in foreign language KEDA Companys legal representative Wu Muhai

II. Contact and liaison Secretary of the Board of Directors Representative of securities Name Li Yuejin Feng Xin No. 1, West Huanzhen Road, Guanglong No. 1, West Huanzhen Road, Guanglong Liaison address Industrial Park, Chencun Town, Shunde Industrial Park, Chencun Town, Shunde District, Foshan City, Guangdong Province District, Foshan City, Guangdong Province Tel 0757-23833869 0757-23833869 Fax 0757-23833869 0757-23833869 Email [email protected] [email protected]

III. Basic information No.1, West Huanzhen Road, Guanglong Industrial Park, Chencun The Companys registered address Town, Shunde District, Foshan City, Guangdong Province Postal code of the Companys registered 528313 address No. 1, West Huanzhen Road, Guanglong Industrial Park, Chencun The Companys office address Town, Shunde District, Foshan City, Guangdong Province Postal code of the Companys office address 528313 The Company website http: //www.kedachina.com.cn Email [email protected]

IV. Information disclosure and placement location Media for information disclosure appointed by the Company Shanghai Securities News, Securities Times Website of China Securities Regulatory Commission for publishing www.sse.com.cn annual report Placement location for the Companys annual report The Company, Shanghai Stock Exchange

V. Information of company stock Information of Company Stock Type of Abbreviated stock Abbreviated name of Listing stock exchange Stock code stock name stock before change Share A Shanghai Stock Exchange KEDA Clean Energy 600499 KEDA Industrial

VI. Other related information Name Zhongxi CPA Firm (special general partnership) CPA Firm engaged by the 11F, Block A, Xincheng Wenhua Mansion, No.11, Office address Company Chongwenmenwai Street, Beijing Names of signing CPA Su Zhijun, Liu Min Name Zhong De Securities Co., Ltd. Sponsor institution 22F, Deutsche Bank Tower, China Central Place, No.81, exercising supervision Office address Jianguo Road, Chaoyang District, Beijing duties in the reporting Names of signing sponsors Xia Yuehua, Luo Min period Supervision period November 30, 2017 to December 31, 2018

2 Annual Report 2017 Section II Company Profile and Major Financial Indexes KEDA

VII. Major accounting data and financial indicators for the past 3 years Major accounting data Unit:10 thousand yuan Currency: RMB Increase/decrease of the current reporting period Major accounting data Year 2017 Year 2016 Year 2015 compared with the same period of last year (%) Sales revenue 572,851.36 438,048.17 30.77 359,368.43 Net income (loss) attributed to 47,889.13 30,328.95 57.90 54,131.76 shareholders of parent company Net income (loss) attributable to shareholders of parent company after 30,017.13 29,045.47 3.35 400.49 deduction of non-recurring profit or loss Net cash provided by (used in) operating -25,596.46 44,655.81 -157.32 56,493.88 activities Increase/decrease at the end of the End of year End of year current reporting End of year 2017 2016 period compared 2015 with the end of last year Net assets attributable to equity holders of 543,801.60 404,709.42 34.37 410,826.43 the Company Total assets 1,225,075.77 842,944.43 45.33 842,057.19

Major financial indicators Increase/decrease of the Year Year current reporting period Year Major financial indicators 2017 2016 compared with the same 2015 period of last year (%) Basic earnings (loss) per share (Yuan per share) 0.336 0.215 56.28 0.385 Diluted earnings (loss) per share (Yuan per share) 0.336 0.215 56.28 0.385 Basic earnings (loss) per share after deduction of non- 0.211 0.206 2.43 0.003 recurring profit or loss (Yuan per share) Weighted average return on net assets (%) 11.27 7.24 Increase of 4.03% 14.04 Weighted average return on net assets after deduction 7.07 6.94 Increase of 0.13% 0.10 of non-recurring profit or loss (%)

Description of major accounting figures and financial indexes at the end of the reporting period for the past 3 years √Applicable □Not applicable As of 25 July, 2016, the Company has implemented the plan for capitalization from capital public reserve for the year 2015. Base on the total capital shares of 705,732,161.00, capitalization of the reserve will be 10 shares upon each 10 shares for all shareholders. The total capital shares amount to 1,411,464,322. Therefore, the Company retroactively adjusted earnings per share of the early period and diluted the total capitalized shares, 1,411,464,322, altering earnings per share for the year 2015 from 0.771RMB to 0.385RMB.

Annual Report 2017 3 KEDA Section II Company Profile and Major Financial Indexes

VIII. Major financial figures of each quarter in 2017 Unit: 10 thousand yuan Currency: RMB 1st quarter 2nd quarter 3rd quarter 4th quarter (Jan. to Mar.) (Apr. to Jun.) (Jul. to Sep.) (Oct. to Dec.) Sales revenue 146,907.30 103,421.98 144,542.15 177,979.93 Net income (loss) attributed to shareholders of parent company 17,625.81 10,180.78 12,649.31 7,433.23 Net income (loss) attributable to shareholders of parent 15,831.61 8,933.47 9,933.57 -4,681.52 company after deduction of non-recurring profit or loss Net cash provided by (used in) operating activities -14,168.51 -22,939.14 5,519.38 5,991.81 □Applicable √Not applicable

IX. Non-recurring profits or losses items √Applicable □Not applicable Unit: Yuan Currency: RMB Amount of Amount of Amount of Non-recurring profits or losses items year 2017 year 2016 year 2015 Proceeds from disposition of fixed assets, intangible 4,495,093.41 -78,799,202.23 581,119,655.21 assets and other non-current assets Government subsidy accounted into current profits and losses (except for the government subsidy closely related to enterprise business, and in 86,309,651.21 68,240,793.94 78,313,724.07 accordance with the generalized quota or standard by the government) Gains recognized from the re-measurement of fair value of the equity held at the purchase date by the 108,390,756.70 acquired in business under different control Reversal of the provision for receivables that had 30,327,007.25 been subject to individual impairment assessment Other non-operating income and expenses other than -1,257,023.32 5,964,906.62 3,469,777.07 aforesaid items Impact on the minority interests -4,355,512.77 8,380,785.95 6,699,573.86 Impact on the income tax -14,862,978.50 -21,279,493.00 -132,290,054.16 Total 178,719,986.73 12,834,798.53 537,312,676.05

Businesses of KEDA by geographic region 4 Annual Report 2017 Section III Company Profile KEDA

I. Description of major business, business model and industrial details of the Company in the reporting period The major business of the Company covers production of construction material machinery, clean energy machinery and material for lithium battery. 1.Building material machinery includes ceramic machinery in construction, wall material machinery and stone machinery, in which ceramic machinery in construction plays the major role. Meanwhile, the Company has developed ceramic business in the downstream parts of the industry overseas and explore the ceramic market of developing countries. In recent years, as with the slowing growth of domestic economy, the Company has sought transformation from a machinery supplier to an industrial service provider, and exploration and innovation of service modes. Driven by the purpose of providng optimal parts and maintainence service timely, the Company improved the development of ceramic industry by setting a branch office in the industrial district in Jiangxi province. Besides, by establishing a company of ceramic technology to complement the business division of parts, enhancing R&D, production and sales of raw and auxiliary material of ceramic based on the business of parts consumablesthe Company further strengthened its business of consumbles and its comprehensive competitiveness. During the reporting period, the Company has been the domestic pioneer of the industry of ceramic machinery in construction, supported by the upgrade of the existing domestic market. While forging ahead with domestic businesses, the Company is expanding its businesses in the global market. During the reporting period, it has established subsidiaries in India and Turkey and boosted the sales of compact lines and spare parts, so as to increase its international market shares and stimulate its global sales of ceramic machinery. In 2017, propelled by the stable development of internationalization, the Company has made remarkable progress in offshore business of ceramic machinery. Inspired by the Belt and Road Initiative, the Company has seized the opportunity of lagging growth of the emerging market and responded to the need for better infrastructure. To put it into practice, the Company took the imitative to start its business of ceramic machinery, the downstream industry, in the countries whose markets were considered to be of great potentials after investigation, and set joint ventures with overseas professional partners to build plants of ceramic machinery. Such acts have promoted the export of ceramic machinery on one hand, and on the other hand, increase the composition of income and the revenue for the Company by producing the machinery in the local plant and selling the product directly to the customers. In 2016, the first joint venture in Kenya, Africa, has gained profits in the first month when the plant was put into operation. Following the case, the Company has successively set up plants of ceramic in Ghana, Tanzania and Senegal. Until now, production capacity of the ceramic plants in Africa is estimated to be over 60 million square meters each year. The Company has designed a development strategy for the future based on the establishment of joint ventures and plants with overseas professional partners, and sales of the compact lines and the provision of technical service, to seek new opportunities for development in the international market and expand its ceramic business offshore. 2. The machinery for construction is sold mostly by three models of sales, namely, direct sales model in the domestic market plus sales through agents in foreign markets or sales of the compact lines plus establishment of plants by setting overseas joint ventures; equipment is manufactured according to the bidding order, supported by the financial services of financial leasing companies under the control of the Company; the sales of ceramics for construction is ensured by the mature channel marketing systems of partners, so as to provide a perfect connection between production and marketing and an all-round service. The environmental business of the Company covers coal gasification and flue gas treatment, etc. The coal gasification system, independently created by the Company, provides the downstream industry with a gasification equipment that is as environmentally-friendly as natural The factory of Lanke Lithium

Annual Report 2017 5 KEDA Section III Company Profile gas. At present, the system has been widely promoted in the industry of aluminum oxide and firmly acknowledged by its customers by being eco-friendly and cost-effective, marking itself as the prototype for the industry of ceramics and carbon. So far, the business of flue gas treatment mainly offers equipment and service of dust, sulfur and nitrate removal in industries of power, chemical engineering, construction materials, metallurgy, waste treatment, biomass power generation, etc. Since the governmental policies of treatment for waste have been introduced in non-power industry, the Company has made proactive arrangements to prevent and treat air pollution in non-power industries. During the reporting period, the Company has met the ultra-low-emission targets of several projects of chemical engineering and put over 70 model projects of environmental protection into operation, which brings a steady growth of the environmental business for the Company. In recent years, as the government pays much attention to environmental protection, the Company is likely to make considerable advances. In the environmental business, the Company get orders by direct sales model or competitive tenders, running the production and marketing model to produce in line with sales volume and purchase with output. Meanwhile, the design will be transferred to holding companies that are EPC contractors, bolstered by financial service provided by financial leasing companies in the charge of the Company, so as to provide a complete solution for customers. 3. The business of lithium battery materials of the Company is the production and marketing of anode materials and lithium carbonate for the lithium-ion battery. In recent years, driven by the rapid expansion of the industry of new energy vehicle and the steady growth of consumer electronics industry, lithium battery as and cathode materials and lithium carbonate for the lithium-ion battery have expanded their shares in the market. During the reporting period, on the basis of the existing businesses related to anode materials, the Company has acquired 43.58% shares of Qinghai Salt Lake Fozhao Lanke Lithium a leading company in extraction of lithium from natural brine sources, and finally put all lithium carbonate businesses into a systemic structure. In 2017, the Lanke Lithium made a breakthrough in producing lithium carbonate of industrial grade with over 8000 tons, part of which were processed and then sold to Wu Zhen (director and vice president of KEDA) recommend new products the top power battery manufacturers such as Xiamen Tungsten Co., Ltd., Guizhou Zhenhua Electronics Group Co., Ltd., Hefei Guoxuan High-Tech Power Energy Co., Ltd., etc. The incorporation of the lithium carbonate has complemented the operations of the Company, enhanced its competitiveness and earned it a better position in the industry chain.

II. Core competence analysis during the reporting period √Applicable □Not applicable 1 Technological innovation leads to a promising future Driven by the operation philosophy of never stop from being innovative, the Company maintain its innovation strategy that encourages technological progress and proficiency for further The award of Foshan Model Enterprise of Quality Manufacturing was bestowed upon KEDA

6 Annual Report 2017 Section III Company Profile KEDA development of the enterprise, and it also pays much attention to research and development and the prospective technology that focuses on sustainability. During the reporting period, by virtue of R&D, the Company has invented hydraulic presses for big size tiles, KD20008 and KD16008, weighing over ten thousand tons, a record for the whole industry of pressing machines for ceramics. At the same time, products such as glazing machine, digital printing machine and packaging line for large tiles, introduces the whole industry into an era of large size tiles. Besides, after the pass of the final check, the project of Guangdong Provincial Key Laboratory of Ceramic Machinery of Energy Saving and Environmental Protection, has helped transform the machinery for construction KEDA large tonnage hydraulic presses to be more eco-friendly, energy-efficient and highly intelligent. The development of construction machinery is technologically backed by comprehensive research and development platforms, such as State-Accredited Enterprise Technology Centers, the National Engineering Research Center, Post-doctoral scientific research stations, workshops of academicians, etc. In the operation of clean energy and environmental protection, the gasification system of pulverized coal incorporated with swirl burners and the system with modular heat regenerative unit, have been certified by CAEPI (China Association of Environmental Protection Industry). Both of the systems have overcome disadvantages such as low productivity and efficiency, strict requirement for coal and serious contamination, and achieved the standard of safety, environmental The latest welding robots by KEDA R & D Center protection and cost efficiency. These products are outstanding by the industry standard because of their superb quality, performance and application, which has greatly boosted the development of coal gasification in China. As the pioneer of the industry, the Company attaches great importance to protection of patents and plays an active role in the formulation of national and industrial standards. By the end of the reporting period, the Company has filed 2227 patents and got 1616 patents granted, in which 266 are invention patents, 1256 utility model patents, 62 design patents and 32 PCT (Patent Cooperation Treaty) patents. In addition, 55 items of products invented through R&D are certified as national-level or provincial level achievements and 83 pieces of products are included into the national and provincial programs for new products. Besides, the Company also took the lead or participated in the rule-making of 28 industrial standards and 5 national standards. The persistent pursuit for technological innovation has been bringing fresh vigor to the Companys business over the past twenty years.

2 Proficiency builds brand value After 25 years of development and innovation, KEDA Clean Energy made itself a leading enterprise in the international market of construction machinery and achieved the goal of localization of ceramic machinery. Since then, the Company are always responsive to the needs of the country and society, focusing on environmental protection and upgrading of industrial structure, taking the initiative to save energy and reduce emission, and taking the responsibility to provide environmental equipment and service for the well-being and future of people. To put it into practice, the Company set up new goals for operations in construction machinery, clean energy and lithium material. Now, the Company owns almost 40 subsidiaries, covering famous brands such as KEDA, Henglitai, Kexing, etc. In 2017, the Company has been awarded as Top 500 Machinery Enterprises in China, National Model Enterprise of Technological Innovation, Foshan Model Enterprise of Quality Manufacturing, Well-known Brand of Guangdong Province, Top 500 Enterprises in Guangdong Province, Foshan Backbone Enterprises, etc. As the champion in the industry of construction machinery, KEDA Clean Energy boasts of a multilevel system of production of ceramic, stone and wall machinery, buttressed by all-around EPC service and financing and leasing service. For years, backed by the outstanding innovation in technology, impeccable performance, high quality, meticulous

Annual Report 2017 7 KEDA Section III Company Profile cost control and comprehensive customer service, the Company gained a reputation in the industry and started stable cooperative relations with several competitive and renowned manufacturers of ceramics, including Nabel Ceramic Tile, Monalisa Tiles, Xin Zhong Yuan Ceramics and Marco Polo. To gain further progress in ceramics, the Company also seeks strategic cooperation in R&D, formulation of regulations, foreign investment and so on. The excellent quality of products, a complete set of production lines and a stable source of partners, have enhanced the competitiveness of the Company in the market, earning it a dominant position in the industry. Globally speaking, for the past few years, the Company has expanded its business in overseas market, by setting up subsidiaries in India, Turkey, Kenya, Ghana, Tanzania, Senegal, etc. Backed by the considerable skill in management, the sound capability for technological invention, a wealth of experience in marketing, the comprehensive after-sale service and the cost-efficient Made-in-China products, the brand KEDA has quickly been accepted and recognized by overseas users. The growing reputation of the brand has also laid a solid foundation for the Company to become a multinational leader in the world.

3 Adhere to the national development strategy and be a prime mover in the overseas market. Motivated by the One Belt and One Road Initiative and the strategy of cooperation on international industrial capacity, the Company has designed a timely plan - make good use of overseas investment to promote the Chinas model of production and explore foreign markets to sell KEDAs products. To be more specific, dependent on its capital, equipment and management expertise, and the low costs of raw materials, energy resources and labor in the emerging markets, the Company has globally expanded its production model of construction materials, which characterized by small investment, high productivity, low cost and attractive return. Furthermore, in accordance with its overall arrangement for the global ceramic market, it also developed a future strategy that focuses on establishment of joint ventures and plants with overseas professional partners, and sales of the compact lines and the provision of technical service. The strategy strictly adhered to the OBOR Initiative, which gave the Company a strong momentum to the rapid expansion of the overseas business, increased its global shares and helped it become a prime mover in the international market of ceramics.

4 Develop core resource of lithium material and grasp every opportunity of progress In recent years, as new energy vehicle and consumer electronics have been growing brisk, lithium batteries, core part of such emerging products, have been ushered in an era of opportunities of development. Along with the national strategy, the Company has worked with partners related to environmental protection and energy saving, been responsive to the fresh needs of the market and made lithium materials as one of the three major businesses. On the basis of conventional operations, it also prioritizes the overall plan of lithium materials. It makes tremendous efforts to improve the performance and lower the cost of anode materials for the lithium-ion battery. Moreover, the Company has invested a lot in the companies majoring in lithium carbonate - core resource of lithium batteries, in order to improve its position in the industrial chain, enhance its core competitiveness and finally yield greater revenues from the new business.

The ultra-low emission project by Jiangsu Cohen The TIANLON project initiated by KEDA (Anhui) Clean Energy in Xinjiang Province

8 Annual Report 2017 Section IV Management discussion and analysis of the operations KEDA

I. Management discussion and analysis of the operations In 2017, China has maintained steady economic progress, with the GDP over 82 trillion at 6.9% increasing rate for the year. Its transformation of growth model entered a period of stable development from the period of economic fluctuation. However, in the industry of construction materials, the situation is fraught with difficulties. The domestic market is short of demand for construction materials and the exchange rate is in drastic fluctuation. At the same time, the costs of raw materials for all products are increasing, which leads to decrease in gross margin and economic gains and fiercer competition in the industry. In order to keep a sustainable, stable and sound development, the Company has continued to upgrade its business structure and enhance its competence in the industrial chain under the leadership of the board of directors. It upholds the strategic principle of Internationalization, Rejuvenation, Informatization and Servitization, namely, catering to the global needs, rejuvenating the corporate system, expanding information base and providing extensive services. In light of the OBOR Initiative, the Company also actively explored the offshore markets of ceramics and its machinery. As a result, the overall productivity and sales were improved, the influence of the Companys brand enhanced, its transformation into a service- th provider accelerated and finally for the year, a The ceremony of KEDA 25 Anniversary substantial economic result achieved.

1 Quicken the pace of Internationalization and put the marketing strategy into practice. Under the OBOR Initiative and the Companys strategy of Internationalization, KEDA has hastened its marketing plan in foreign countries. In the mature markets of ceramic machinery, such as India and Turkey, KEDA has established subsidiaries to provide timely products and step up its response of service. Meanwhile, the attractive price also gradually enhances its competitiveness in the markets offshore. For the African market whose industry is at a start-up stage, KEDA is implementing its development strategy in three major ways: establish joint ventures and plants with overseas professional partners; sell the compact lines and the provision of technical service; introduce its unique production model of construction material into the target market. As a consequence, the Company took up the largest share of the ceramic market, increased the export of ceramic machinery and boosted its business income. In 2016, the first joint venture in Kenya, has gained profits in the first month since put into operation. Following the successful instance, the Company has successively set up joint ventures of ceramic in Ghana, Tanzania and Senegal in Africa, which built KEDA a successful brand image, enhanced its influence in the market and laid a solid foundation for the its ceramic business overseas. During the reporting period, the joint ventures in Ghana and Tanzania has already gone into operation after the completion of phase one construction, while the one in Senegal has started construction and is expected to work in December, 2018.

2 Continue to improve the service and transformation. In the past few years, as with the slowing growth of the domestic market, KEDA seeks to transform itself from a machinery supplier to a service-provider. It makes an effort to find the potential of the manufacturing industry and explores further development and innovation for the service model. While focusing on the progress in EPC service and industrial services of manufacturing like financing and leasing, the Company has also prioritized the operation of consumables as the principal part in improving its services. On one hand, the Company has established Foshan KEDA Ceramics Co., Ltd. in 2016. The Ceramics is responsible for R&D, production and sales of raw and auxiliary materials, and the compact line of the raw material workshop, which delivers tangible results of the R&D and builds itself a successful example for the ceramic industry. On the other hand, KEDA has captured the overseas market of billions of consumables and invested a lot on developing consumable business, so as

Annual Report 2017 9 KEDA Section IV Management discussion and analysis of the operations to increase the Companys added value of its products. Gradually, it sets 18 contractors overseas for consumables alone. As the Company advances with its plan targeting the global market of consumables and their spare parts, the contractor business of consumables is also on the rise. At the same time, as KEDAs machines are becoming increasingly smart, the research institute is erecting a training center to help customers with the new machines. It instructs users in operating the machines properly so that the production process goes smoothly. In the reporting period, KEDA continued working on combining the manufacturing industry and the service industry. Its expected that the Company will fulfill its transformation into an industrial service provider and unlock greater potential in the oversea market, as the service-oriented operations moves forward.

3 Develop the industrial chain further with capital as the impetus. Recently, as with the constant growth of the new energy vehicle and consumer electronics, the lithium battery - the upstream industry, has shown great potential in the market. So KEDA has devoted great efforts to the business of materials for lithium batteries, in pursuit of the national strategy and the needs of the market. During the reporting period, the Company has acquired 43.58% shares of Lanke Lithium the pioneer corporation in lithium extraction from natural brine sources. Such act provides the Company an effective complement for its business extension in lithium material, and leads to new growth of the operating revenue. Meanwhile, through private placement, the Company has raised capital from strategic investors, Macrolink Group and Wuhu Jishi Equity Investment Fund. The private placement has been checked and approved by China Securities Regulatory Commission on September 5, 2017. On November 30, it has raised capital worth of RMB 1.186 billion, by issuing 165,741,380 new shares. Such fund will be used in the project of anode materials for lithium battery, and the project of intelligent manufacturing of ceramics and its technical improvement. As a result, KEDAs industrial chain will be extended and the foreign market expanded, giving rise to the Companys comprehensive competitiveness.

II. Principal operations in the reporting period In the reporting period, sales revenue of KEDA reached 5, 728, 513, 600 yuan, with a year-on-year growth of 30.77%, wherein revenue of foreign business was 2, 042, 148, 400 yuan with a growth rate of 59.21% on year-on-year basis. Net income attributed to parent company was 478, 891, 300 yuan, 57.90% increase in year-on-year performance. As at the end of the reporting period, the total assets and total net assets were 12, 250, 757, 700 yuan and 5, 668, 997, 100 yuan respectively, with respective growth rates of 45.33% and 36.00% compared to the same period of last year.

(1) Analysis of principal operations Fu Jun (The chairman of board of directors of Macrolink Income statement and cash flow statement analysis Group) visited our factory of changes in related items Unit: 10 thousnd yuan Currency: RMB Current Percentage Item Last period period of change% Total operating revenue 572,851.36 438,048.17 30.77 Cost of sales 454,255.84 337,398.58 34.63 Marketing costs 28,860.78 20,765.00 38.99 Managing costs 44,705.35 36,868.25 21.26 Financing costs 11,779.26 1,147.44 926.57 Net cash provided by (used in) operating activities -25,596.46 44,655.81 -157.32 Net cash provided by (used in) investing activities -140,072.35 -56,381.25 -148.44 Net cash provided by (used in) financing activities 227,255.80 17,339.33 1,210.64 Development expenditure 25,914.99 19,160.96 35.25

10 Annual Report 2017 Section IV Management discussion and analysis of the operations KEDA

The third-party operation center of green cloud platform initiated by Jiangsu Cohen 1. Analysis of income and costs √Applicable □Not applicable In the reporting period, sales revenue of KEDA reached 5,728,513,600 yuan, with a year-on-year growth of 30.77%, wherein revenue from principal business was 5,725,602,500 yuan with a growth rate of 30.90% on year-on-year basis, while costs of principal business reached 4,540,914,000 yuan, 34.8% increase in year-on-year performance.

(1). Principal operations by industries, products and geographical markets Unit: 10 thousand yuan Currency: RMB Principal operations by industries Gross Increase or Increase or Increase or decrease Total Cost of profit decrease of decrease of of gross profit margin Industry operating sales margin revenue compared cost compared compared to last year revenue (%) to last year % to last year % (%) Machinery 410,756.77 322,378.35 21.52 23.66 25.36 Decrease by 1.06% Clean Energy 109,587.94 97,097.78 11.40 24.86 31.97 Decrease by 4.77% Lithium Battery Materials 22,818.50 21,033.45 7.82 430.78 434.14 Decrease by 0.58% Leasing Service 12,102.76 2,071.07 82.89 -8.17 -5.21 Decrease by 0.53% Ceramics for overseas 8,328.56 5,663.51 32.00 market Others 8,965.72 5,847.24 34.78 Details of major business’s branch products Operating revenue Operating costs Gross proft rate Gross increased or increased or Operating Operating increased or Branch products profit rate decreased decreased revenue costs decreased compared (%) compared with compared with with the last year (%) the last year (%) the last year (%) Building material 406,097.21 319,090.54 21.43 23.37 25.13 Decreased by 1.10% machinery Clean energy equipment 98,518.73 77,459.21 21.38 22.86 35.98 Decreased by 7.58% Clean energy service 11,069.21 19,638.57 -77.42 46.05 18.23 Increased by 41.75% Financing and leasing 12,102.76 2,071.07 82.89 -8.17 -5.21 Decreased by 0.53% Lithium battery materials 22,818.50 21,033.45 7.82 430.78 434.14 Decreased by 0.58% Overseas ceramics 8,328.56 5,663.51 32.00 Others 13,625.28 9,135.05 32.96 353.90 327.83 Increased by 4.09% Details of major business areas Operating revenue Operating costs Gross proft rate Gross increased or increased or Operating Operating increased or Areas profit rate decreased decreased revenue costs decreased compared (%) compared with compared with with the last year (%) the last year (%) the last year (%) Domestic 368,345.41 298,824.87 18.87 19.15 23.18 Decreased by 2.65% Overseas 204,214.84 155,266.53 23.97 59.21 64.72 Decreased by 2.54%

Annual Report 2017 11 KEDA Section IV Management discussion and analysis of the operations

Details of major business’s branch industry, branch product and branch area √Applicable □Not applicable (1) Analysis of factors causing changes of operating revenue 1. In 2017, the operating revenue of building material machinery was 4.061 billion yuan, a year-on-year increase of 23.37%, which was mainly due to the substantial increase in the income from sales of overseas building material machinery products. 2. In 2017, the operating revenue of clean energy and environmental protection equipment products was 985 million yuan, a year-on-year increase of 22.86%. 3. In 2017, the operating income from financing and leasing was 121 million yuan, a year-on-year decrease of 8.17%. 4. In 2017, the operating revenue of clean energy services was 111 million yuan, a year-on-year increase of 46.05%, which was mainly due to the increase in unit price and sales volume of clean gas. 5. In 2017, the operating revenue of lithium battery materials was 228 million yuan, a year-on-year increase of 430.78%, which was mainly due to the substantial increase in income from the subsidiary KEDA Clean Energy New Material and Zhangzhou Juming. 6. The operating revenue of other products was 136 million yuan, a year-on-year increase of 353.90%, which was mainly due to the sales revenue of 55,820,600 yuan of KEDA Energy Sale. (2) Inuence analysis of new products and new business 20179-11TwyfordTwyfordTwyford11.00%TwyfordTwyfordTwyford8,328.56In September to November of 2015, the Company acquired 72% shares of the original joint venture of Twyford Kenya, Twyford Ghana and Twyford Tanzania, and expanded products to downstream field of architectural ceramics. During the report period, consolidated statement revenue of Twyford Kenya, Twyford Ghana and Twyford Tanzania was 83,285,600 yuan. In 2017, the Company acquired 43.58% shares of Lanke Lithium. Based on Lanke Lithium’s production platform, the Company actively carried out deep processing and trading business of lithium carbonate. In the future, the Company will explore more diversified new products and new business according to the development trend of the industry.

(2). Analysis of production and sales volumes √Applicable □Not applicable Sales volume Stock increased Production volume Production Sales increased or or decreased Main products Unit Stock compared with the volume volume decreased compared compared with the last year (%) with the last year (%) last year (%) Press Set 531 560 130 2.71 5.26 -18.24 Polishing machine Set 336 334 7 10.53 7.40 40.00 Kiln Set 54 54 0 -19.40 -19.40 0

Ceramic ink tile printers

12 Annual Report 2017 Section IV Management discussion and analysis of the operations KEDA

(3). Form of cost analysis Unit: 10 thousand yuan Details of branch industry Rate of Rate of Ratio of Amount in total cost change of total cost the same Amount in in the same amount Branch industry Cost structure in the period of the Remarks this period period of compared period last period the last with the last (%) Amount year (%) period (%) Direct material cost 273,415.31 84.81 223,826.77 87.04 22.15 Direct labor cost 9,665.72 3.00 7,723.29 3.00 25.15 Machinery industry Manufacturing cost 36,438.62 11.30 22,428.18 8.72 62.47 Depreciation 2,858.70 0.89 3,174.21 1.23 -9.94 Subtotal 322,378.35 100.00 257,152.45 100.00 25.36 Direct material cost 70,272.99 72.37 48,472.67 65.88 44.97 Clean energy Direct labor cost 3,694.90 3.81 3,874.19 5.27 -4.63 and environment Manufacturing cost 15,298.12 15.76 14,592.64 19.83 4.83 protection industry Depreciation 7,831.77 8.07 6,637.10 9.02 18.00 Subtotal 97,097.78 100.00 73,576.60 100.00 31.97 Direct material cost 17,612.69 83.74 2,132.46 54.15 725.93 Direct labor cost 270.87 1.29 163.25 4.15 65.92 Lithium battery Manufacturing cost 2,769.15 13.17 1,379.89 35.04 100.68 materials industry Depreciation 380.74 1.81 262.20 6.66 45.21 Subtotal 21,033.45 100.00 3,937.79 100.00 434.14 Financing and Interest 2,071.07 100.00 2,184.99 100.00 -5.21 leasing industry Direct material cost 3,157.41 55.75 Direct labor cost 167.41 2.96 Overseas ceramics Manufacturing cost 1,520.15 26.84 industry Depreciation 818.54 14.45 Subtotal 5,663.51 100.00 Direct material cost 2,357.27 40.31 Direct labor cost 1,545.99 26.44 Other industries Manufacturing cost 1,733.91 29.65 Depreciation 210.07 3.59 Subtotal 5,847.24 100.00 Deatails of branch products Rate of Rate of Ratio of Amount in total cost change of total cost the same Amount in in the same amount Branch products Cost structure in the period of Remarks this period period of compared period the last the last with the last (%) period year (%) period (%) Direct material cost 271,567.63 85.11 222,799.50 87.37 21.89 Direct labor cost 8,889.13 2.79 7,176.68 2.81 23.86 Building material Manufacturing cost 35,811.85 11.22 21,946.26 8.61 63.18 machinery Depreciation 2,821.92 0.88 3,094.81 1.21 -8.82 Subtotal 319,090.54 100.00 255,017.25 100.00 25.13

Annual Report 2017 13 KEDA Section IV Management discussion and analysis of the operations

Rate of Rate of Ratio of Amount in total cost change of total cost the same Amount in in the same amount Branch products Cost structure in the period of Remarks this period period of compared period the last the last with the last (%) period year (%) period (%) Direct material cost 60,228.74 77.76 41,667.06 73.14 44.55 Direct labor cost 3,202.76 4.13 3,327.91 5.84 -3.76 Clean energy Manufacturing cost 11,270.38 14.55 10,860.98 19.07 3.77 equipment Depreciation 2,757.33 3.56 1,109.83 1.95 148.45 Subtotal 77,459.21 100.00 56,965.77 100.00 35.98 Direct material cost 10,044.25 51.15 6,805.62 40.97 47.59 Direct labor cost 492.14 2.51 546.28 3.29 -9.91 Clean energy Manufacturing cost 4,027.74 20.51 3,731.66 22.47 7.93 service Depreciation 5,074.44 25.84 5,527.27 33.28 -8.19 Subtotal 19,638.57 100.00 16,610.83 100.00 18.23 Direct material cost 17,612.69 83.74 2,132.46 54.15 725.93 Direct labor cost 270.87 1.29 163.25 4.15 65.92 Lithium battery Manufacturing cost 2,769.15 13.17 1,379.89 35.04 100.68 materials Depreciation 380.74 1.81 262.20 6.66 45.21 Subtotal 21,033.45 100.00 3,937.79 100.00 434.14 Direct material cost 4,204.94 46.03 1,027.27 48.11 309.33 Direct labor cost 2,322.58 25.42 546.61 25.60 324.91 Others Manufacturing cost 2,360.68 25.84 481.92 22.57 389.85 Depreciation 246.85 2.70 79.40 3.72 210.89 Subtotal 9,135.05 100.00 2,135.20 100.00 327.83 Financing and Interest 2,071.07 100.00 2,184.99 100.00 -5.21 leasing Direct material cost 3,157.41 55.75 Direct labor cost 167.41 2.96 Overseas ceramics Manufacturing cost 1,520.15 26.84 Depreciation 818.54 14.45 Subtotal 5,663.51 100.00 Other details of cost analysis □Applicable √Not applicable

The opening of Tanzania ceramic factory

14 Annual Report 2017 Section IV Management discussion and analysis of the operations KEDA

(4). Major clients and major suppliers √Applicable □Not applicable The sales volume of the top five was 787,854,500 yuan, accounting for 13.75% of the total annual sales volume; among the top five clients, the sales volume of affiliated parties was 0 yuan, accounting for 0% of the total annual sales volume. The purchase amount of top five suppliers was 598,731,700 yuan, accounting for 10.61% of the total annual purchase amount; among top five suppliers, the purchase amount of affiliated parties was 130,761,600 yuan, accounting for 2.32% of the total annual purchase amount.

2. Expenses √Applicable □Not applicable Unit: 10 thousand yuan Increased or Item 2017 2016 decreased by % Marketing costs 28,860.78 20,765.00 38.99 Managing costs 44,705.35 36,868.25 21.26 Financing costs 11,779.26 1147.44 926.57

Remarks: (1) the sales expense incurred in this period increased by 38.99% compared with the last period, mainly due to the significant increase of the companys sales volume in this period compared with the last period. (2) the financial expense incurred in this period increased by 926.57% compared with the last period, mainly due to the exchange loss due to exchange fluctuations in this period and the significant increase of loan Interest expenses.

3. R & D investment √Applicable □Not applicable Unit: 10 thousand yuan Expensed R & D investment in this period 25,914.99 Capitalized R & D investment in this period 0.00 R & D investment in total 25,914.99 Ratio of total R & D investment to total operating revenue (%) 4.52 Quantity of R & D staff in the Company 521 Ratio of R & D staff to total number of company staff (%) 10.28 Ratio of capitalized R & D investment (%) 0.00

Remarks □Applicable √Not applicable

4. Cash flow √Applicable □Not applicable Unit: 10 thousand yuan, Currency: RMB Increment or Increased or Year 2017 Year 2016 decrement decreased by % Cash from refund of taxes 15,852.57 7,668.63 8,183.94 106.72 Payments for purchase of commodities and receipt of services 364,169.84 258,587.83 105,582.01 40.83 Payments for other operating activities 45,002.17 25,915.62 19,086.55 73.65 Proceeds from disposition of fixed assets, intangible assets 2,727.83 311.08 2,416.75 776.88 and other long-term assets Cash paid for acquisition and construction of fixed assets, 26,674.43 13,340.88 13,333.55 99.95 intangible assets and other long-term investment Payments for investment 75,115.11 43,351.45 53,743.42 73.27 Acquisitions of subsidiaries 43,706.27 43,706.27 Cash received from investment taking 120,631.76 2,806.59 117,825.17 4,198.16 Proceeds from borrowing 332,487.69 147,045.85 185,441.84 126.11 Repayments of debt 187,073.32 116,878.15 70,195.17 60.06

Annual Report 2017 15 KEDA Section IV Management discussion and analysis of the operations

(1) The tax return received incurred in this period increased by 106.72% compared with the last period, mainly due to the significant increase of the companys export rebate received in this period. (2) The cash paid for purchase of commodities and receipt of services incurred in this period increased by 40.83% compared with the last period, mainly due to the significant expanded scale of procurement in this period. (3) Payments for other operating activities incurred in this period increased by 73.65% compared with the last period, mainly due to the borrowings of 60,244,700 yuan by the subsidiary Keda Holding to former joint ventureTwyford Tanzania in this period and the borrowings of 30,602,300 yuan to former joint venture Twyford Ghana. (4) Proceeds from disposition of fixed assets, intangible assets and other long-term assets incurred in this period increased by 776.88% compared with the last period, mainly due to the cash received from the subsidiary Jiangsu Cohen’s disposal of property and land. (5) Cash paid for acquisition and construction of fixed assets, intangible assets and other long-term investment incurred in this period increased by 99.95% compared with the last period, mainly due to the Company’s payment of 59,406,100 yuan for production and technology transformation project of digital ceramics machinery and other projects, the subsidiary Henglitai’s payment of 55,325,200 yuan for project of R&D and industrialization of intelligent manufacturing equipment for architectural ceramics with annual output of 200 sets and other projects and the subsidiary KEDA Clean Energy New Materials’ payment of 43,579,900 yuan for lithium materials project. (6) Payments for investment incurred in this period increased by 73.27% compared with the last period, mainly due to the subsidiary KEDA (Qinghai) Lithium’s payment of 676,620,000 yuan for purchasing 20.89% shares of Lanke Lithium hold by Wuhu Linghang, Wuhu Jishi and other companies. (7) Acquisitions of subsidiaries incurred in this period is 437,062,700 yuan, mainly due to the net cash amount paid by Qinghai Weili and KEDA (Qinghai) Lithium. (8) Cash received from investment taking incurred in this period increased by 4,198.16% compared with the last period, mainly due to the Company’s directional private placement raising fund of 1,187,967,600 yuan. (9) Proceeds from borrowing incurred in this period increased by 126.11% compared with the last period, mainly due to the significant increase of bank loans in this peropd. Repayments of debt incurred in this period increased by 60.06% compared with the last period, mainly due to the increased amount paid for bank loan in this period.

II Analysis of assets and liabilities √Applicable □Not applicable

1. Details of assets and liabilities Unit: 10 thousand yuan Ratio of Ratio of Ratio of amount at amount at amount at Amount the end of Amount at the end the end of at the end the period Project the end of of the last Remarks the period of the last compared with the period period to total period that at the end to total assets (%) of the last assets (%) period (%) Monetary fund 140,283.06 11.45 72,978.42 8.66 92.23 Notes receivable 20,099.52 1.64 18,046.74 2.14 11.37 Accounts receivable 151,470.42 12.36 128,938.35 15.3 17.48 Advance to suppliers 39,334.34 3.21 34,003.05 4.03 15.68 Other accounts receivable 15,344.33 1.25 12,438.59 1.48 23.36 Inventories 167,959.36 13.71 127,547.22 15.13 31.68 Non-current assets due in one year 99,580.73 8.13 90,378.49 10.72 10.18 Other current assets 25,098.92 2.05 12,805.93 1.52 95.99 Financial assets available for sale 2,186.00 0.18 126.00 0.01 1,634.92 Long-term accounts receivable 40,202.96 3.28 39,698.36 4.7 1.27 Long-term equity investment 99,702.80 8.14 2,511.18 0.3 3,870.36

16 Annual Report 2017 Section IV Management discussion and analysis of the operations KEDA

Ratio of Ratio of Ratio of amount at amount at amount at Amount the end of Amount at the end the end of at the end the period Project the end of of the last Remarks the period of the last compared with the period period to total period that at the end to total assets (%) of the last assets (%) period (%) Fixed assets 225,261.66 18.39 185,326.38 21.99 21.55 Construction in progress 30,641.28 2.50 3,939.07 0.47 677.88 Intangible assets 41,105.96 3.36 43,424.62 5.15 -5.34 Goodwill 118,260.02 9.65 65,243.58 7.74 81.26 Long-term deferred expense 397.07 0.03 Deferred income tax assets 6,061.24 0.49 5,538.45 0.66 9.44 Other non-current assets 2,086.10 0.17 Total assets 1,225,075.77 100.00 842,944.43 100 45.33 Short-term borrowings 130,751.24 19.87 75,345.64 17.68 73.54 Notes payable 68,742.31 10.44 38,039.20 8.93 80.71 Payables 138,056.55 20.98 149,712.53 35.13 -7.79 Advances from customers 59,579.08 9.05 57,486.44 13.49 3.64 Payroll payable 7,609.07 1.16 7,388.77 1.73 2.98 Taxes payable 10,745.15 1.63 9,926.38 2.33 8.25 Other accounts payable 35,216.23 5.35 5,219.22 1.22 574.74 Non-current liabilities due in one year 54,313.21 8.25 26,502.29 6.22 104.94 Long-term borrowings 126,176.97 19.17 39,235.19 9.21 221.59 Long-term accounts payable 10,000.00 1.52 Estimated liabilities 57.08 0.01 -100.00 Deferred income 6,241.50 0.95 7,316.00 1.72 -14.69 Deferred income tax liabilities 1,530.16 0.23 1,915.13 0.45 -20.10 Other non-current liabilities 9,214.58 1.40 7,964.99 1.87 15.69 Total liabilities 658,176.06 100.00 426,108.86 100 54.46 Remarks (1) The closing balance of inventories increased by 31.68% compared with the opening balance of inventory, mainly due to the expanded scale of operation in this period and the amount brought by the new merged companies Twyford Kenya, Twyford Ghana and Twyford Tanzania. (2) The closing balance of other current assets increased by 95.99% compared with the opening balance, mainly due to the increase of input VAT to be credited in this period. (3) The closing balance of financial assets available for sale increased by 1,634.92% compared with the opening balance, mainly due to the new investment of 15,000,000 yuan in Nanguo Taodu (Zhaoqing) Green Ceramics Raw Material Co., Ltd., 3,000,000 yuan in Huizhou Avenue New Material Technology Co., Ltd., and 2,600,000 yuan in Dongguan KEDA Weifu New Energy Technology Co., Ltd. in this period. (4) The closing balance of long-termequityinvestment increased by 3,870.36% compared with the opening balance, mainly due to the investment of 964,676,600 yuan on Lanke Lithium, a joint venture of the subsidiaries KEDA (Qinghai) Lithium and Qinghai Weili, the investment of 14,910,000 from the remaining shares after Changsha Aer’s disposal of 51% shares of its wholly-owned subsidiary Anhui Hudu KEDA, and the new investment of 15,000,000 on Sichuan Guangxing Lithium Science & Technology Co., Ltd. in this period. (5) The closing balance of construction in progress increased by 677.88% compared with the opening balance, mainly due to the amount of 85,375,100 yuan brought by the new consolidated company Twyford Tanzania and 67,023,200 yuan brought by Twyford Kenya, the increased investment of 60,659,500 yuan on the subsidiary company KEDA Clean Energy New Materials’ artificial graphite lithium materials and other projects and the increased investment of

Annual Report 2017 17 KEDA Section IV Management discussion and analysis of the operations

45,094,100 yuan on the Company’s production and technology transformation project of digital ceramics machinery and other projects. (6) The closing balance of goodwill increased by 81.26%compared with the opening balance, mainly due to the acquisition of Qinghai Weili and KEDA (Qinghai) Lithuim with confirmed goodwill of 4,005,397,800 yuan and the subsidiary KEDA Holding’s acquisition of 11% shares of the original joint venture Bright Star Investment, Twyford Ghana, and Twyford Tanzania with confirmed goodwill of 138,198,200 yuan, (7) The closing balance of long-term deferred expense is 3,970,700 yuan, mainly due to the expenses incurred by subsidiary companies DeliTai and KEDA Dongda for the renovation of rented houses. (8) The closing balance of other current assets is 20,861.000 yuan, mainly due to the equipment payment pre-paid by the subsidiary Henglitai. (9) The closing balance of Short-term borrowings increased by 73.54% compared with the opening balance, mainly due to the significant increase of the parent company’s short-term borrowing. (10) The closing balance of other accounts payable increased by 574.74% compared with the opening balance, mainly due to the amount brought by the new merged companies Twyford Ghana and Twyford Tanzania and increase of current accounts. (11) The closing balance of non-current liabilities due in one year increased by 104.94% compared with the opening balance, mainly due to the increase of long-term borrowings due in 1 year of the parent company and the subsidiary Anhui Xincheng Financing. (12) The closing balance of long-term borrowings increased by 221.59% compared with the opening balance, mainly due to the significant increase of the parent company’s long-term borrowings. (13) The closing balance of long-term accounts payable is 100,000,000 yuan, due to the subsidiary Jiangsu Cohen’s absorption of Yancheng Innovation & Venture Capital Co., Ltd.’s investment funds of 100,000,000 yuan.

2. Analysis of investment 1) Overall analysis of foreign equity investment √Applicable □Not applicable Unit: 10 thousand yuan, Currency: RMB Investment during the report period 149,399.31 Increase or decrease in this period 103,241.45 Amount of investment in the same period of the last period 46,157.86 %Increased or decreased by % 223.67

(1) Key equity investment √Applicable □Not applicable 1. On January 4, 2017, the Company and Qinghai Tianji Rare Elements Technology Development Co., Ltd., the former shareholder of KEDA (Qinghai) Lithium, and Tibet Meixing Fueneng Venture Capital Management Co., Ltd. signed the Equity Transfer Agreement, agreeing to transfer 62% equity of KEDA (Qinghai) Lithium in cash. According to the agreement, the Company paid investment funds of 309,702,400 yuan in this period. In July 2017, the Company paid 189,817,600 yuan for the purchase of 38.00% of Qinghai Keda Lithium Industry’s minority equity held by Foshan Zhaoming. After the equity transfer was completed, the Companys shareholding in KEDA (Qinghai) Lithium changed from 62.00% to 100.00%. 2. On January 4, 2017, the Company and shareholders of Qinghai Weili Zhi Xinfa, Zhong Yonghui, Zhong Yongliang and Shou Yongjun signed the Equity Transfer Agreement, agreeing to transfer 53.62% equity of Qinghai Weili in cash. According to the agreement, the Company paid investment funds of 164,316,100 yuan in this period, and the change of industrial and commercial registration was completed on June 1, 2017. 3. In February 2017, the subsidiary KEDA Clean Energy New Materials paid 2,600,000 yuan to purchase 35% equity of Dongguan KEDA Weifu New Energy Technology Co., Ltd. The company specializes in the research and development, production and sales of electronic materials, electronic products, lithium battery products, and electric vehicles as well as the import and export of goods. 4. In April 2017, the subsidiary KEDA (Anhui) Industrial paid 3,000,000 yuan to acquire 10% equity of KEDA Clean Energy New Materials held by Wanxigan and other companies. After the acquisition, KEDA (Anhui) Industrials shareholding in KEDA Clean Energy New Materials changed from 90% to 100%.

18 Annual Report 2017 Section IV Management discussion and analysis of the operations KEDA

5. In June 2017, the subsidiary KEDA Clean Energy New Materials paid 3,000,000 yuan to purchase 12.5% equity of Huizhou Avenue New Material Technology Co., Ltd. The company specializes in the research, development and sales of lithium electronic battery materials, and the import and export trade of goods and technology. 6. In July 2017, the subsidiary Henglitai paid 20,200,000 yuan to purchase 30.00% minority equity of Zhuolitai held by former shareholder Zhang Juanmei, and the change of industrial and commercial registration was completed on July 19, 2017. 7. In August 2017, the subsidiary KEDA (Qinghai) Lithium and natural persons Zhong Yonghui and Zhong Yongliang signed the Equity Transfer Agreement. The agreement stipulated that KEDA (Qinghai) Lithium shall transfer its own funds of 127,200,000 yuan to acquire 4.24% equity of Lanke Lithium held by natural persons Zhong Yonghui and Zhong Yongliang. 8. In September 2017, the subsidiary KEDA Energy Sale paid 3,780,000 yuan to purchase 18.00% minority equity of Keneng Energy Sale held by Zhu Hongmei. After the equity transfer was completed, KEDA Energy Sales shareholding in KEDA (Qinghai) Lithium changed from 62.00% to 76.00%. 9. From June to September 2017, the subsidiary KEDA Energy Sale paid 20,502,000 yuan to establish KEDA (Jiangsu) Power Co., Ltd., holding 51% of the company’s equity. 10. In September 2017, the subsidiary Keda Holding (Mauritius) Limited and Sunda (MU) Holdings Limited, a wholly- owned subsidiary of Guangzhou SUNDA International Trading Co., Ltd., signed the Equity Transfer Agreement, which stipulated that Keda Holding tranfer 6,743,000 US dollar to purchase 11% equity of Brightstar held by Sunda Mauritius. After the equity transfer, Keda Holding held 51% equity of Brightstar. Keda Holding tranfer 11,000 US dollar to purchase 11% equity of Twyford Ghana held by Sunda Mauritius. After the equity transfer, Keda Holding held 51% equity of Twyford Ghana. Keda Holding tranfer 11,000 US dollar to purchase 11% equity of Twyford Tanzania held by Sunda Mauritius. After the equity transfer, Keda Holding held 51% equity of Twyford Tanzania. 11. In September 2017, the Company paid 15,000,000 yuan to establish Nanguo Taodu (Zhaoqing) Green Ceramics Raw Material Co., Ltd. in Zhaoqing, holding 15% of the company’s equity. 12. In October 2017, the Company paid 15,000,000 yuan to purchase 20% equity of Sichuan Guangxing Lithium Science & Technology Co., Ltd., which specializes in the sales of industrial grade lithium carbonate and lithium chloride; the production and sales of battery grade lithium carbonate and industrial grade calcium carbonate; and the production of battery grade lithium hydroxide. 13. In October 2017, the subsidiary KEDA (Qinghai) Lithium signed the Share Transfer Agreement with Wuhu Linghang and Wuhu Jishi respectively. The agreement stipulated that KEDA (Qinghai) Lithium shall transfer its own funds of 355,6400,00 yuan to purchase 10.78% equity of Lanke Lithium held by Wuhu Jishi and 193,780,000 yuan to purchase 5.87% equity of Lanke Lithium held by Wuhu Linghang. 14. In October 2017, the subsidiary KEDA Energy Sale paid 12,180,000 yuan to establish Anqing Suoxiang Electricity Sale Co., Ltd., holding 58% of the company’s equity. 15. In October 2017, the subsidiary KEDA Energy Sale paid 10,710,000 yuan to establish KEDA(Fujian) Power Co., Ltd., holding 51% of the company’s equity. 16. In November 2017, the subsidiary Jiangsu Cohen paid 1,560,000 yuan to establish Jiangsu Zhongchuang Clean Energy Science & Technology Co., Ltd., holding 30% of the company’s equity.

2) Significant non-equity investment √Applicable □Not applicable Unit: 10 thousand yuan, Currency: RMB Investment Accumulative Progress Project Amount during the actual Source of fund (%) report period investment Project of R&D and industrialization of intelligent Raised fund+self- manufacturing equipment for architectural ceramics with 48,000.00 24.29 6,020.86 11,660.40 raised fund annual output of 200 sets Project of production, relocation and technological Raised fund+self- 48,460.00 11.60 2,460.34 5,620.18 transformation of digital ceramics machinery raised fund Project of annual production of 20,000 tons of lithium Raised fund+self- 61,539.00 16.70 7,410.12 10,275.21 battery series anode materials raised fund Total 157,999.00 15,891.32 27,555.79

Annual Report 2017 19 KEDA Section IV Management discussion and analysis of the operations

III. Analysis of main shareholding and joint stock companies √Applicable □Not applicable Unit: 10 thousand yuan, Currency: RMB Ratio of the Registered Companys Company name Nature of business Total assets Net assets Net proft capital shareholding (%) KEDA (Anhui) Industrial Co., Ltd. Manufacturing industry 80,000.00 100.00 139,331.90 79,200.01 -2,617.11 KEDA (Shenyang) Clean Energy Gas Manufacturing industry 40,000.00 82.50 79,868.42 -26,425.31 -12,437.26 Co., Ltd. Foshan Henglitai Machinery Co., Ltd. Manufacturing industry 12,560.00 100.00 108,300.22 73,080.83 13,624.99 Jiangsu Cohen Environmental Manufacturing industry 13636.36 72.00 104,561.93 29,523.59 4,434.67 Protection Technology Co.,Ltd. Henan KEDA Dongda International Manufacturing industry 5,000.00 100.00 44,008.20 23,601.69 2,409.04 Engineering Co., Ltd. Anhui Xincheng Financing and Leasing Commercial service 22,700.67 100.00 171,148.53 32,487.60 6,384.18 Co., Ltd. industry

IV. Discussion and analysis on the Companys development in the future 1. The layout and trend of industry √Applicable □Not applicable Building material machinery industry In 2017, China’s economy maintained a steady growth. However, the contradiction of overcapacity in the building material industry has not been fundamentally resolved and there are still downside risks in the industry’s operation. For the first time, negative growth appeared in the investment in the building materials industry. The growth rate of investment in the infrastructure sector fell at different levels. The domestic demand growth was weak, the industrial strength was insufficient to upgrade and transform, and the operating pressure of enterprises increased. Ceramics is a labor-intensive industry with high energy consumption and high pollution. With the increase in production costs, the strengthening of environmental protection regulations, and the gradual disappearance of Chinas demographic dividend, the building ceramics industry is gradually accelerating its development towards energy conservation, environmental protection, automatization, and intelligentization. In addition, with the consumption upgrade of the ceramic tile market, large-size ceramic tile have become a popular trend in recent years. Over the years, the Company has focused on energy-saving, emission reduction and intelligent manufacturing. We have launched energy- saving, environmentally-friendly and smart devices to greatly reduce labor intensity and applied them in mainstream tile companies while ensuring product quality, improving production efficiency and reducing pollutant emissions. During the report period, aiming at the market of large-size ceramic tile, the company launched over 10 thousand tons of ceramic tile presses to meet the consumer demand for large-size ceramic tile, which is of great significance in enhancing the market competitiveness of ceramic enterprise. Looking at overseas markets, with the proposal of the Belt and Road Initiative, the development potential in 65 countries and over 4 billion people along the Silk Road Economic Belt waits to be released and market demand for infrastructure construction is very strong. However, the restrictions imposed by international anti-dumping measures, tariff barriers, and technical trade barriers have brought a severe test to the export of ceramic products for China. In 2017, the volume of ceramic export fell. Faced with a complex international environment, as a leading company in the ceramic machinery industry, the Company timely adjusted its development ideas, seized opportunities, and actively extended its business to the downstream architectural ceramics field to rapidly expand overseas markets.

Clean energy environmental protection business: In recent years, with the increasingly serious pollution problem, environmental protection issues have attracted widespread attention from all walks of life. The country has ranked the environmental protection industry among the top seven emerging strategic industries and vigorously support to its development. Various environmental protection policies have been introduced frequently, and environmental protection legislation has been gradually regularized and improved. In December 2016, the National Development and Reform Commission and the National Energy Administration issued the Revolution Strategy for Energy Production and Consumption (2016-2030) (Development and Reform Foundation

20 Annual Report 2017 Section IV Management discussion and analysis of the operations KEDA

[2016] No. 2795), proposing to promote the clean and efficient development and utilization of coal and promote the use of clean and highly efficient technologies and equipment for coal in steel and cement and other key industries as well as in key areas such as boilers and kilns so as to achieve the transformation and development of coal. Coal is the main energy source and important industrial raw material in China. It supports the rapid economic and social development in China and will play an important role in the future. Realizing the transformation and development of coal is the foothold and priority of China’s energy transformation and development. The country put the clean and efficient development and utilization of coal at the level of the national strategy, showing recognition and support for the Company’s development direction of clean coal gasification business. In December 2016, the State Council issued the 13th Five-Year Plan for Comprehensive Energy Conservation and Emission Reduction Work Program to support the rapid development of the flue gas treatment industry through the improvement of environmental protection electricity pricing policies concerning desulfurization, denitrification, dust removal, and ultra-low emission. In December 2017, the Department of Raw Materials Industry of the Ministry of Industry and Information Technology publicized the Some Opinions on Accelerating the Transformation and Development of the Sintered Brick and Tile Industry, and advocated the brick and tile industry to actively carry out the technological transformation of clean production and actively develop and promote the application of technology and equipment capable of the comprehensive management of the flue gas desulphurization, denitrification and dust removal in kiln furnaces, pay close attention to pollution reduction and energy saving, and stick to green and low carbon cycle development. In addition, in 2018, the Department of Raw Materials of the Ministry of Industry and Information Technology plans to actively carry out the comprehensive treatment of the flue gas desulphurization, denitrification and dust removal in kiln furnaces and energy-saving and consumption-reduction reforms in order to further optimize and upgrade the traditional industries and improve the quality and efficiency of the development of the industry. Since 2015, the Company has started a new mode of environmental protection for industrial companies, clean energy before+ clean production in the process+control after, and actively lay out the air pollution control in non- electrical areas, creating a new situation for the common development of clean coal gasification and flue gas treatment business. With the countrys growing attention to environmental protection in recent years and the tightening of a series of environmental protection policies, the companys environmental protection business is expected to enter a rapid development path in the future.

Lithium battery material industry: As global industrialization of emerging economies continues to accelerate, global energy consumption continues to increase, and global fossil energy is depleted in a rapid speed. At the same time, the problem of environmental pollution and carbon dioxide emissions has become increasingly serious, and countries around the world are increasingly concerned about energy conservation and environmental protection. Under this situation, the world’s major automobile production countries have accelerated their deployment and took new energy vehicles as their national strategy, accelerating the research, development, and industrialization of new energy vehicles while vigorously developing and promoting the use of automotive energy-saving technologies. With the strong support of national policies, new energy vehicles are ushering in a period of rapid growth. As an important upstream industry in the new energy vehicles industry, the rapid development of new energy vehicles has led to the growth of lithium batteries. According to the data disclosed by the Ministry of Industry and Information Technology, in 2017, the production and sales of new energy vehicles was 794,000 and 777,000 respectively, an year-on-year increase of 53.8% and 53.3% respectively. Among the major products of China’s battery manufacturing industry, the cumulative output of lithium batteries was 1,178,947,000 units, a cumulative year-on-year increase of 31.25%, and the total value of export delivery from the battery manufacturing industry was 92.48 billion yuan, a year-on-year increase of 18.3%. Driven by the continuous demand for new energy vehicles, according to the public statistics of the industry, by 2020, the demand for power batteries will be about 94GWh, the demand for anode materials will be about 70,000 tons, and the market size of anode materials for power batteries will be about 4 billion yuan; by 2025, the demand for power batteries will reach 310GWh, the demand for anode materials will reach 190,000 tons, and the market size of anode materials for power batteries will reach 10 billion yuan, which will drive the demand for anode materials to rise substantially, and the market for anode materials will also expand rapidly. The industry has a good momentum of development. In terms of lithium resources, the annual compound growth rate of lithium consumption in 2016-2020 is expected to reach 16.8%. According to the Lithium Industry Association, the global demand for lithium in 2016 was 200.9 thousand tons of lithium carbonate equivalent (LCE). Combined with public statistics of the industry, the global demand for lithium

Annual Report 2017 21 KEDA Section IV Management discussion and analysis of the operations will reach 227,700 tons and 260,600 tons in 2017 and 2018, with year-on-year growth of 13.3% and 14.4%; by 2020, the global demand for lithium is expected to reach 374,300 tons. The mainstream lithium companies have formulated a clear expansion plan, but there is still risks that the expansion plan will not reach expectations. It is expected that the supply and demand of lithium resources will remain tightly balanced in the next few years. During the report period, the Company completed the layout of the lithium carbonate industry on the basis of the existing anode material business, improved the company’s lithium battery business, and enhanced its position and competitiveness in the industry chain.

2 Development strategies of the Company √Applicable □Not applicable Recalling 2017, the operating revenue of the company has increased significantly, as well as the market share of core products. In order to turn our competitive advantages to development success, the company has taken 2018 as benefit year clearly, and will adopt a business strategy of Focus on benefit improvement, conduct in-depth cultural integration: that is, based on ensuring the steadily growth of operating revenue, being centralized by company benefit, KEDA Clean Energy will adjust its development focus to profits and cash flows, creating greater value for the companys shareholders and employees. In addition, with the increasing number of subsidiaries, the management will conduct a deeper cultural integration and operational integration among brands, seek unity in minds, prioritize corporation interests first clearly, and focus on future development. Meanwhile, at the business level, the company will continue to promote the strategy of development including Building material machineryClean energy and environmental-friendly and lithium-ion battery materials. The company will propagate China model by investing overseas, meanwhile expand overseas market to promote KEDA equipment. KEDA Clean Energy will focus and expand overseas markets to further enhance the companys global market share with the development pattern of Building joint venture factory with advantaged foreign cooperative partners + Whole line sales + Technology and craft services, while continue to promote the production model of China standard building materials with small investment, high output, low cost, and high returns; the section of clean energy and environmental protection strives to achieve steady growth in profitability and strives to become the leader of the industry; the development of lithium-ion battery will be based on Lanke Lithium industry, tamp down on trade and processing operations, and make the production and sales of lithium salt rank the forefront domestically; anode materials start to expand the cost advantage and technology-oriented, strengthen the development to explore the leading negative electrode materials.

3. Business Plan √Applicable □Not applicable In 2018, the company will continue to uphold the development policy of Internationalization, Youthfulness, Informatization, and Service-oriented, focus on international market while consolidate the domestic market, expand the occupancy of overseas market, and promote international cooperation in capital, production capacity, and services. Cultivating a young generation team of talents to maintain the vitality of the organization; actively embrace Internet+, create intelligent enterprises, provide intelligent products and services, strengthen enterprise service management, and rapidly transform the company from a manufacturing type to a service type, and achieve the transformation from equipment manufacturers to industrial service providers that provide comprehensive solutions, constantly enhance the company’s comprehensive strength and market competitiveness, and strive to achieve tax-inclusive income of RMB 8 billion.

The key tasks in 2018 include: (1) Maintaining the growth momentum of overseas markets and rapidly advancing the progress of overseas investment projects Facing the good developing circumstance in overseas markets, the company will continue to implement overseas development strategies. On the one hand, the company will increase investment in overseas joint ventures and rapidly promote the construction progress of projects such as ceramics plants in Senegal in 2018 to ensure that projects will be put into production on schedule; and continue to develop overseas markets in Southeast Asia, Central Asia and other countries which have enormous development space, and build representative ceramics projects, in order to improve the company’s international image. On the other hand, the company will strengthen the overseas sales of construction materials machinery, accelerate the progress of deployment of European branches, promote the key construction

22 Annual Report 2017 Section IV Management discussion and analysis of the operations KEDA materials machinery products into the European and American markets, and realize the globalized layout of the construction materials machinery industry.

(2) Integrating lithium battery material business, accelerating development, promoting the brand image in lithium battery material industry As the second largest shareholder of Lanke Lithium, the company will fully support Lanke’s 20,000 tons of lithium carbonate production expansion project, rely on its superior resources platform to expand the further processing and trading of lithium carbonate and pay close attention to industry integration and development opportunities. The company will strengthen the research and development of lithium anode materials, improve the quality of related products, vigorously develop domestic high-quality customers, and promote the brand image of KEDA in lithium battery material industry

(3) Promoting the co-development of clean coal gasification and several environmental protection businesses to enhance profitability Coal is still the main energy source and important industrial raw material in China. The company will continue to implement the environmental protection control model of front-end clean energy + clean production process + end treatment of industrial enterprises, and promote the joint development of clean coal gasification and flue gas treatment business. On this basis, we will pay attention to the development trend of various environmental protection business markets such as hazardous waste disposal and industrial sewage treatment, and strive to enhance the comprehensive capacity of solving of industrial environmental issues in the future and improve profitability.

(4) Focusing on improving efficiency, optimizing production and operating costs, exerting joint efforts of various subsidiaries In accordance to the "Year of Benefit" business strategy, optimize the company’s production and operating costs, focus on improving benefit. The company will take full advantage of the synergies among each subsidiary, promote the aggregation and integration of internal resources of the company, and make concerted efforts to promote the company’s three major business operations.

(5) Strengthening the integration of enterprise culture, at the same time focusing on cultivating international talent team. Talents are strategic resources of enterprises. The company will continue to attach importance to the introduction of outstanding talents, and will focus on cultivating internationalized talent team. The company will continuously improve the performance assessment and incentive system, strengthen the integration of enterprise culture, improve employees’ sense of recognition, and create first-class working environment, in order to achieve a harmonious and win-win situation between company and employees. The business plan above does not constitute company’s performance commitment to investors. Investors are advised to pay attention to investment risks.

4. Possible Risk √Applicable □Not applicable (1). Industry Extension and Operational Risk The company’s traditional business is the construction materials machinery business. Since 2007, the company has entered the environmental-friendly business field with its self-developed clean coal gasification system. After a decade of development, the product has formed a strong brand influence in the market, however, due to the strong reliance on environmental protection policies, the business promotion progress was slower than expected. Since 2015, the company has aimed at the booming new-energy vehicles and consumer electronics market, and entered the lithium battery business vigorously. It launched a 20,000-ton lithium battery anode series material project, and invested RMB 1.34 billion in domestic high-quality lithium carbonate projects. The company has undergone a comprehensive transformation from a traditional machinery supplier to a clean energy and lithium batteries supplier. As the company’s business scale and business areas continue to expand, operating models, technology R&D, reserve of talents and market expansion are facing new challenges. The company has certain industry extension development risks.

Annual Report 2017 23 KEDA Section IV Management discussion and analysis of the operations

Since 2017, raw materials, logistics costs, and human costs have all increased to varying degrees due to national policies and the international situation. The company’s operating and production costs have further increased. The company has taken active measures, however, there is still the possibility that the unit cost of the companys products will increase and the gross profit margins will be reduced.

(2). Goodwill impairment risk In recent years, according to the needs of business development in three operational areas, the company has successively acquired several companies with methods such as asset restructuring, capital increase and equity transfer. Under the situation of overall macroeconomic downturn, the acquired company may have situations that development is lower than expected. If the performance of the subsidiaries acquired descent sharply in the future and have no hope of reversing, the company may be exposed to the risk of impairment of goodwill.

(3). Risk of assets impairment of Shenyang project In 2010, the company invested the construction of 20 sets of 10kNm3/h clean coal gasification generators and related complete systems in Faku County, Shenyang. The investment amount of this project is relatively large, but the sales situation is greatly affected by the implementation of local environmental protection policies, the project’s rate of capacity utilization is always low, and has suffered long-term losses since its operation. In recent years, some of the apparatus of this project have been seriously depleted, and the maintenance costs have been straight-climbing. In 2016, in order to control expenses effectively, after careful study and decision, the company decided to scrap 5 clean coal gasification generators (including gas generators, high-temperature heat exchangers, waste heat exchangers and bag filters, etc.) in the Shenyang project, and the net loss was RMB 79.8986 million. Due to the fact that rate of capacity utilization of Shenyang project in 2017 has not been increased and project operations continue to suffer losses, during the reporting period, the company made provision for impairment of fixed assets of RMB 30.2297 million. If the operation of the project does not improve in the later period, there may still be a risk of continuation of impairment.

(4) Risk of overseas investment and exchange rate fluctuation To be in line with the national One Belt and One Road initiative, the company has actively deployed overseas markets in combination with its own development advantages. In addition to the traditional equipment sales model, the company has invested and established subsidiaries in India, Turkey, Kenya, Ghana, Tanzania, and Senegal. If a company establishes a subsidiary overseas, there may be overseas operation and management risk due to discrepancy in culture, customs, politics and laws, etc. between different countries and regions; at the same time, on account of companys increase in the volume of export business operation and overseas subsidiary operation, factors like currency increases and exchange rate changes may involved, which might cause risks such as benefit depreciation and return of funds.

In response to the risks depicted above, the company will strengthen the analysis of the macroeconomic situation, actively grasp the market trend, continue to strengthen capital management and risk control, and optimize the product price system. By consolidating management foundation and promoting institutional innovation, the company will steadily develop the business of each section, and smoothly achieve transformation and upgrading.

24 Annual Report 2017 Section V Important Notice KEDA

I. Proposal for common stocks profit distribution or capital transferred from surplus reserve

(I) Development, implementation or adjustment of cash dividend policy √Applicable □Not applicable In order to effectively ensure the rights and interests of investors, the company has made explicit agreements on the principles and requirements for profit distribution in the Articles of Association and the Stockholder Return Planning, which are in line with Listed Companies Supervision Guidelines No.3: Cash Dividends for Listed Companies (put out by China Securities Regulatory Commission [2013] No. 43) and the Guidelines on Cash Dividends for Listed Companies of the Shanghai Stock Exchange and other related normative documents. During the reporting period, the company implemented profit distribution plan for 2016: Based on 1,411,464,322 shares, a cash dividend of 0.80 yuan (taxes included) was distributed for every 10 shares to all stockholders, equal to a total cash dividend of 112,917,145.76 yuan. The company’s profit distribution plan and distribution procedures are in conformity with the Articles of Association and the resolutions approved by the general stockholders’ meeting. The companys independent directors issued independent opinions on the companys profit distribution. The relevant decision- making procedures conformed to the regulations. The company gave non-controlling stockholders full expression opportunities and ensure their legitimate rights and interests The company’s distribution plan for 2017: based on the company’s total capital of 1,577,205,702 shares, the company plans to distribute a cash dividend of 0.5 yuan (taxes included) for every 10 shares to all stockholders, equal to a total cash dividend of 78,860,285.10 yuan. The plan must be approved by the general stockholders meeting for validation.

(II) Proposal or plan for common stock dividend distribution and paid-in capital transferred from surplus reserve in the last 3 years. Unit: yuan; Currency: RMB Rate of net profit Bonus Dividend Stock Net profit attributed attributed to shares distributed dividend to listed companys Dividend Cash dividend listed companys for every for every 10 for every stockholders in the Year (tax included) stockholders in 10 shares shares (yuan) 10 shares Consolidated Statement the consolidated (share) (tax included) (share) of dividend year statements (%) 2017 0 0.5 0 78,860,285.10 478,891,307.30 16.47 2016 0 0.8 0 112,917,145.76 303,289,490.02 37.23 2015 0 2.00 10 141,146,432.20 541,317,578.26 26.07

Annual Report 2017 25 KEDA Section VI Changes in Common stocks and Stockholders

I. Changes in the equity of common stocks (1) Changes in common stock shares 1. Changes in common stock shares Unit: share Before Changes(+, –) After Capital New shares Bonus reserve Shares Ratio(%) Others Total Shares Ratio(%) issued shares transferred shares I. Shares with sale restrictions 33,990,922 2.408 165,741,380 -33,990,922 131,750,458 165,741,380 10.509 1.State shareholding 2.State-owned entity shareholding 3,399,092 0.241 -3,399,092 -3,399,092 0 0 3.Other domestic shareholding 30,591,830 2.167 165,741,380 -30,591,830 135,149,550 165,741,380 10.509 Wherein: Domestic nonstate-owned 0 0 165,741,380 165,741,380 165,741,380 10.509 entity shareholding Domestic person 30,591,830 2.167 -30,591,830 -30,591,830 0 0 shareholding 4.Foreign shareholding Wherein: Foreign entity shareholding Foreign person shareholding II. Outstanding shares without with 1,377,473,400 97.592 33,990,922 33,990,922 1,411,464,322 89.491 sale restrictions 1.RMB common stock 1,377,473,400 97.592 33,990,922 33,990,922 1,411,464,322 89.491 2.Domestic listed foreign stock 3.Foreign listed foreign stock 4.Others III. Total 1,411,464,322 100.00 165,741,380 0 165,741,380 1,577,205,702 100.00

2. Description of changes in common stocks √Applicable □Not applicable According to the Approval of Guangdong KEDA Electromechanical Co., Ltd. to Purchase Assets and Raise Supporting Capital by Issuing Shares to Lv Dingxiong issued by the China Securities Regulatory Commission on January 13, 2014 (License [2014] No. 86), the company issued 16,995,461 shares to 27 members of Northeastern University Science and Technology Co., Ltd. and Lv Dingxiong, KEDA Dongda original stockholders, with an issue price of 13.00 yuan per share. The expiration of the shares was 36 months; according to the company’s 8th meeting of the sixth session of the board of directors held on April 28, 2016, and its 2015 Annual Plan of Profit Distribution and Capital Reserve Transferred to equity approved at the 2015 annual general meeting of shareholders held on June 21, 2016, the company with 705,732,161 total shares converted capital reserve into 10 shares for every 10 shares, so that above-mentioned shares with sale restrictions were changed to 33,990,922 shares; on May 4, 2017, the restricted shares passed expiry date and were listed and circulated on security market, then the shares with sale restrictions were changed to 0 while outstanding shares without restriction were changed to 1,411,464,322. According to the Approval of Non-Public Offering of Shares of Guangdong KEDA clean energy Co., Ltd. issued by the China Securities Regulatory Commission on September 5, 2017 (License [2017] No. 1592), on November 30, 2017 the company was issued 165,741,380 shares to Macrolink Holdings Co., Ltd. and Wuhu Cornerstone Equity Investment Fund (Limited Partnership) at the issue price of 7.24 yuan per share for an expiration of 36 months. After the completion of this non-public offering, the total share equity of the company has increased from 1,411,464,322 shares to 1,577,205,702 shares, of which 165,741,380 shares are with sale restrictions and 1,411,464,322 shares are outstanding without restriction.

26 Annual Report 2017 Section VI Changes in Common stocks and Stockholders KEDA

3. Influence of changes in common stocks on financial indicators such as earnings per share and net assets per share in the last year and the latest quarter (if any). √Applicable □Not applicable After the 2017 non-public offering, the company’s earnings per share and net assets per share were diluted. Based on the former total number of 1,411,464,322 shares, earnings per share and net assets per share of 2017 were 0.339 yuan and 3.853 yuan respectively; based on the changed total number of 1,577,205,702 shares, earnings per share and net assets per share were 0.336 yuan and 3.448 yuan respectively.

II. Securities issuing and listing (1) Securities isuance at the reporting period √Applicable □Not applicable Unit: yuan; Currency: RMB Expiry Types of stocks Issue Listed Date of issue Total issued Date of listing date of and derivatives price/rate shares transaction Common stocks A shares February 26, 2014 13.00 16,995,461 May 4, 2017 16,995,461 A shares November 30, 2017 7.24 165,741,380 November 30, 2020 0 Explanation of securities issuing in the reporting period √Applicable □Not applicable On February 26, 2014, the company issued 16,995,461 shares to 27 members of Northeastern University Science and Technology Co., Ltd. and Lv Dingxiong, KEDA Dongda original stockholders, with an issue price of 13.00 yuan per share. The expiration of the shares was 36 months, and the expiry date of listing was February 26, 2014. According to the company’s 8th meeting of the sixth session of the board of directors held on April 28, 2016, and its 2015 Annual Plan of Profit Distribution and Capital Reserve Transferred to equity approved at the 2015 annual general meeting of shareholders held on June 21, 2016, the company decided to base on 705,732,161 total shares, and convert capital reserve into 10 shares for every 10 shares, so that above-mentioned shares with sale restrictions were changed to 33,990,922 shares. Due to the performance commitments of this issue, on February 27, 2017 the performance commitment has not been fulfilled. To fully protect investors’ interests, this part of shares with sale restrictions was listed and circulated on May 4, 2017 after the fulfillment of this performance commitment. On November 30, 2017, the company non-public offering issued 165,741,380 shares to Macrolink Holdings Lt.co. and Wuhu Cornerstone Equity Investment Fund (Limited Partnership) at an issue price of 7.24 yuan per share with the expiration of 36 months. On November 30, 2020 the restricted shares will list and circulate.

III. Stockholders and Company’s Actual Controller (1) The total number of shareholders The total number of common stockholders at the end of the reporting period 51,425 The total number of common stockholders at the end of the previous month 52,660 before the disclosure of the annual report

Annual Report 2017 27 KEDA Section VI Changes in Common stocks and Stockholders

(2) The top 10 stockholders and the top 10 circulation stockholders( or stockholders unrestricted in terms of sales) at the end of the reporting period. Unit: share Details of the top 10 stockholders Increment or Quantity of Quantity Pledge or freezing Name of stockholders decrement of stockholding Ratio of shares Nature of Status of (full name) the reporting at the end of (%) with sale Quantity stockholders shares period the period restrictions Domestic Bian Cheng 0 173,999,598 11.03 0 Pledged 75,320,000 natural person Domestic non- Macrolink Holdings Co., Ltd 138,119,502 138,119,502 8.76 138,119,502 Pledged 138,119,502 state-owned legal person Domestic Lu Qin 0 125,983,334 7.99 0 None natural person Wuhu Cornerstone Equity Investment 27,621,878 27,621,878 1.75 27,621,878 Unknown Others Fund (Limited Partnership) Domestic Shi Tingbo 26,117,957 26,117,957 1.66 0 Unknown natural person Shaanxi International Trust Co., Ltd- Shan Guotou Yongli 22 Securities -2,703,179 20,000,000 1.27 0 Unknown Others Investment Settlement Trust Plan Domestic non- Huitianze Investment Co., Ltd. -2,437,641 17,226,201 1.09 0 Unknown state-owned legal person Domestic Shi Liyun 16,786,192 16,786,192 1.06 0 Unknown natural person Domestic Zheng Wenping 15,600,141 15,600,141 0.99 0 Unknown natural person Shaanxi International Trust Co., Ltd- Shan Guotou Huqin 13 Securities 11,158,256 11,158,256 0.71 0 Unknown Others Investment Settlement Trust Plan Details of top 10 stockholders without sale restrictions Quantity of outstanding Type and quantity of shares Name of stockholders (full name shares without Type Quantity sale restrictions Bian Cheng 173,999,598 RMB common stocks 173,999,598 Lu Qin 125,983,334 RMB common stocks 125,983,334 Shi Tingbo 26,117,957 RMB common stocks 26,117,957 Shaanxi International Trust Co., Ltd-Shan Guotou Yongli 22 20,000,000 RMB common stocks 20,000,000 Securities Investment Settlement Trust Plan Huitianze Investment Co., Ltd. 17,226,201 RMB common stocks 17,226,201 Shi Liyun 16,786,192 RMB common stocks 16,786,192 Zheng Wenping 15,600,141 RMB common stocks 15,600,141 Shaanxi International Trust Co., Ltd-Shan Guotou Huqin 13 11,158,256 RMB common stocks 11,158,256 Securities Investment Settlement Trust Plan Guangdong KEDA Clean Energy Co., Ltd-2016 Employee 10,442,000 RMB common stocks 10,442,000 Stockholding Plan Liu Dequan 9,132,296 RMB common stocks 9,132,296 Among the above stockholders, Feng Cheng and Lu Qin did not have an affiliated relationship or persons acting in concert. Guangdong KEDA Clean Description of the above stockholders’ Energy Co., Ltd.-2016 Employee Stockholding Plan is a stock account for relationship or concerted action employees from KEDA Clean Energy Co., Ltd. It is not known whether there is an associated relationship among other shareholders or persons acting in concert.

28 Annual Report 2017 Section VI Changes in Common stocks and Stockholders KEDA

Number of shares and sale restrictions of the top 10 stockholders √Applicable □Not applicable Condition of shares with sale restriction available for listing Number and circulation Name of Stockholders of shares New added S/N with shares of sal Sale restrictions with sale Time available shares restrictions restrictions for sales on available for market listing and circulation Not transferable within Macrolink Holdings Co., November 30, 36 months from the 1 138,119,502 0 Ltd 2020 date of completion of equity registration Not transferable within Wuhu Cornerstone Equity November 30, 36 months from the 2 Investment Fund (Limited 27,621,878 0 2020 date of completion of Partnership) equity registration Description of the above The above shareholders did not have an affiliated relationship or were acting stockholders’ relationship or in concert as stipulated in the Measures for the Administration of Disclosure of concerted action Changes in Stockholders’ Shareholding in Listed Companies."

IV. Controlling Stockholders and Company’s Actual Controller (1) Condition of controlling stockholders 1 Special instruction under the condition of no controlling stockholders √Applicable □Not applicable As of December 31, 2017, the stockholders holding more than 5% of the company’s shares were natural person Bian Cheng, Lu Qin, and legal person Macrolink Holdings Co., Ltd., of which Bian Cheng was the largest stockholder held 11.3% of the company’s shares; Macrolink Holdings Co., Ltd was the second largest stockholder with 8.76% of the company’s shares; Lu Qin was the third largest stockholder with 7.99% of the company’s shares. The shares held by any one of the stockholders are not enough to have a decisive influence on the resolution approved by the company’s general meeting of stockholders. The company does not have a situation in which a stockholder controls a majority of seats on the board of directors, and there are no other people who can actually dominate the company’s behaviour. Besides, the stockholders holding more than 5% of the company’s shares did not have an agreement on concerted action. Therefore, the company did not have controlling stockholders or actual controllers.

(2) Condition of actual controller 1 Special instruction under the condition of no actual controller √Applicable □Not applicable As of December 31, 2017, the stockholders holding more than 5% of the company’s shares were natural person Bian Cheng, Lu Qin, and legal person Macrolink Holdings Co., Ltd., of which Bian Cheng was the largest stockholder held 11.3% of the company’s shares; Macrolink Holdings Co., Ltd was the second largest stockholder with 8.76% of the company’s shares; Lu Qin was the third largest stockholder with 7.99% of the company’s shares. The shares held by any one of the stockholders are not enough to have a decisive influence on the resolution approved by the company’s general meeting of stockholders. The company does not have a situation in which a stockholder controls a majority of seats on the board of directors, and there are no other people who can actually dominate the company’s behaviour. Besides, the stockholders holding more than 5% of the company’s shares did not have an agreement on concerted action. Therefore, the company did not have controlling stockholders or actual controllers.

Annual Report 2017 29 KEDA Section VII Directors, Supervisors, Senior Management and Employees

I. Details of shareholding change and remuneration (1) Details of change of appointed and removed directors, supervisors and senior management and remunerations during the reporting period √Applicable □Not applicable Total pre-tax compensation Whether received from Quantity of Quantity of Increment or obtained Reason of the company Effective shareholding shareholding Decrement of compensation Name Title(Notes) Sex Age Expiry Date Shareholding during the Date at the begin at the end of Shareholding from related Change reporting of the year the year in the year parties of the period (ten company thousand yuan) Bian Cheng Chairman Male 54 2015-08-20 2018-09-05 173,999,598 173,999,598 0 150 N Vice Zhang Jian Male 45 2017-12-20 2018-09-05 0 0 0 0 Y Chairman Director, Wu Muhai Male 45 2015-08-20 2018-09-05 1,920,000 1,920,000 0 120 N President Director, Secondary Wu Zhen Vice Male 56 2015-08-20 2018-09-05 1,748,812 1,348,812 -400,000 market 80 N President reduction Director, Zhong Vice Male 54 2016-10-19 2018-09-05 40,000 40,000 0 100 N Yingzhou President Liu Xin Director Male 50 2015-08-20 2018-09-05 198,000 198,000 0 72 N Independent Hao Jiming Male 72 2015-08-20 2018-09-05 0 0 0 10 N Director Independent Luo Jianhua Male 54 2015-08-20 2018-09-05 0 0 0 10 N Director Chen Independent Male 65 2015-08-20 2018-09-05 0 0 0 10 N Xiongyi Director Vice Zeng Fei President, Male 42 2015-08-20 2018-09-05 277,600 277,600 0 80 N CFO Vice Zhou Peng Male 55 2017-12-05 2018-09-05 2,733,122 2,733,122 0 80 N President Secretary of Li Yuejin the Board of Male 32 2017-12-05 2018-09-05 0 0 0 30 N Directors Fu Qingju Supervisor Female 49 2015-08-20 2018-09-05 19,600 19,600 0 48 N Song Yibo Supervisor Male 45 2015-08-20 2018-09-05 0 0 0 20 N Yang Shali Supervisor Female 53 2015-08-20 2018-09-05 0 0 0 16 N Total / / / / / 180,936,732 180,536,732 -400,000 / 826 /

Name Major Working Experience Joined the company in 1998 and became the company’s director and general manager in August 2012. He has been the chairman of the company since August 2012 and is currently the chairman Bian Cheng of KEDA (Anhui) Clean Energy, the chairman of KEDA (Shenyang) Clean Energy, and the director of KEDA Hydraulics, Lanke Lithium, Foshan ZhongTao Alliance Technology Co., Ltd., President of Foshan Enterprises Federation.

30 Annual Report 2017 Section VII Directors, Supervisors, Senior Management and Employees KEDA

Name Major Working Experience Served successively as director of strategic investment department, securities investment department and listed companies department of Macrolink Group since April 2002; currently serves as vice chairman of KEDA Clean Energy, director and senior vice president of Macrolink Group, and concurrently serves as the president of the ceramics and equipment enterprise of Zhang Jian Macrolink Group; concurrently serves as director of Macrolink Cultural Tourism Development Co., Ltd., executive director of New Silkroad Culturaltainment Limited and Dongyue Group Co., Ltd., director of Hunan Hualian Porcelain Co., Ltd., Hengtian Antique Investment Management Co., Ltd., New Power Capital Investment Co., Ltd., Beijing Macrolink Industry Investment Co., Ltd., Macrolink Development Investment Co., Ltd., and Beijing Macrolink Jingcheng Holdings Co., Ltd. Joined the company in 1995, and served as the general manager of the ceramics machinery division from October 2007 to May 2010. He served as the deputy general manager of the company from August 2009 to May 2010, and served as the director of the company from February 2010 to May 2010. He served as the director and deputy general manager of the Wu Muhai company from March 2011 to August 2012. From August 2012 to present, he served as the director and president of the company. He is concurrently the executive director of Henglitai Company, the director of KEDA Hong Kong, Anhui Xincheng Investment, Guangdong Xincheng Financing, KEDA Holding, Brightstar Investment, Twyford Kenya, Twyford Tanzania and executive director of Ceramics Technology Company. Joined the company in 2004, and served as the director and deputy general manager of the company from August 2006 to May 2010. He has been the director of the company since March Wu Zhen 2011 and has served as dean of the KEDA Research and Development Institute since March 2012. He has served concurrently since July 2013 as the vice president of the company. Served as the general manager of export department of Guangdong Xinzhongyuan Ceramics Co., Ltd., general manager of Eagle Holdings Co., Ltd., general manager of operations of Shanghai Asia Ceramics Co., Ltd. He joined the company on October 1, 2015, and now serves as the Zhong Yingzhou director of the company and general manager of overseas divisions. He also serves concurrently as chairman of Xincheng International (Hong Kong), Guangdong Xincheng Financing, director of KEDA Holding, Brightstar Investment, Twyford Kenya, and Twyford Tanzania. Joined the company in 2010 as deputy general manager of KEDA (Anhui) Clean Energy. Served as vice president of the company from August 2012 to November 2014, From September 2015 Liu Xin to present, he serves as the director of the company. He concurrently serves as the chairman of KEDA (Anhui) Clean Energy and executive director of KEDA Dongda. Once was the lecturer, associate professor and professor of Tsinghua University, and serves as the independent director of Zhejiang Tianlan Environment Protection Technology Co., Ltd. from Hao Jiming September 2011 to August 2017. He has been an independent director of the company since September 2015. From 2008 to 2016, he served as the secretary general of the All-China Federation of Industry and Commerce Environmental Chamber of Commerce. From July 2016 to present, he served Luo Jianhua as vice president and chief policy expert of the All-China Federation of Industry and Commerce Environmental Chamber of Commerce. Since September 2015, he has served as an independent director of the company. He has been the general manager of the southern division of Shu Lun Pan CPAs (Special General Partnership) since January 2014 and has served as independent director of Guangdong Guangxin Holding Group Co., Ltd. since October 2012. Since April 2015, he has served as the independent Chen Xiongyi director of Guangdong Huakai Technology Co., Ltd., Since May 2015, he has served as the independent director of Lingwang Elevator Co., Ltd. From September 2015 to present, He has served as the Independent Director of the company.

Annual Report 2017 31 KEDA Section VII Directors, Supervisors, Senior Management and Employees

Name Major Working Experience Joined the company in 2002 and served as the secretary of the company’s board of directors. He has been the CFO of the company since June 2009 and has been the vice president of the company since May 2015. Now he is concurrently the vice chairman of Guangdong Xincheng Financing, the director of Anhui Xincheng Financing, KEDA Hong Kong and Xincheng International Zeng Fei (Hong Kong), the executive director of Changsha Aier and Anhui KEDA New Energy Automobile, supervisor of KEDA Dongda, chairman of Anhui KEDA Electrical and Mechanical Systems and Xinmingfeng Company, director of Jiangsu Kexing, KEDA (Anhui) Clean Energy, supervisor of Shenyang KEDA Clean Energy Gas, supervisor of Henglitai Company, KEDA Hydraulic, Zhuoda Hao and supervisor of Ceramic Technology. Joined the company in 2002 and had served successively as assistant to the chairman of the board, general manager of the deep processing division, director and secretary of the board of Zhou Peng directors. He is currently the vice president of the company, concurrently serves as the chairman and general manager of Anhui Xincheng Investment, chairman of Anhui Xincheng Financing, and director of KEDA (Anhui) Clean Energy and Jiangsu Kexing. Once was the senior consultant and project manager of Peking University Zongheng consulting group, the secretary of the board of directors and the investment principal of Yashili International Li Yuejin Holdings Co., Ltd. He joined the company in 2017, and is now the assistant to the chairman of the company, the secretary of the board of directors, and the manager of the company’s investment and development department concurrently. Joined the company in 1999 and was engaged in international marketing and domestic marketing management. She used to be regional manager of the international department, manager of the company’s marketing center, and deputy general manager of the international marketing center. Fu Qingju She has been chairman of the board of supervisors of the company since December 2010 and served as HR director from June 2014 to June 2015. She has been the marketing center manager since June 2015. Joined the company in 1998 and has been a supervisor of the company since December 2010. Song Yibo He is currently a senior engineer in the maneuvering project office of company’s R&D institute. Joined the company in December 1999 and has been the staff supervisor for the company since Yang Shali November 2010. She is now the deputy manager of the company’s science and technology management department.

II. Details of parent companies and main subsidiaries (1) Details of the staff Quantity of on-duty staff of the parent company 2,225 Quantity of on-duty staff of main subsidiaries 2,841 Total quantity of on-duty staff 5,066 Quantity of the retired to be covered by the parent company and main subsidiaries Professional compositions Types of professional composition Quantity of professional composition Production staff 2,312 Sales staff 213 Technical staff 1,460 Financial staff 90 Administration staff 991 Total 5,066

32 Annual Report 2017 Section VII Directors, Supervisors, Senior Management and Employees KEDA

Education Types of education Quantity (persons) Postgraduate and above 192 Undergraduate 1,204 Junior college 991 Secondary technical school and below 2,679 Total 5,066

(2) Remuneration policy √Applicable □Not applicable The company strictly follows the “Corporate Law”, “Labor Law” and relevant methods of industry management to formulate and implement management methods for human resources and performance appraisal. According to industry and job characteristics, the company provides various and competitive remuneration such as monthly salary, annual salary, commission, hourly and piece wage. The remuneration package is based on the implementation of periodic performance appraisal and scientifically formulate and adjust the remuneration policy in accordance with the company’s development. In 2017, the company developed the “KEDA rank appraisal system” after discussion and carried out employee rank assessment work. It upheld the principle of "fair, open, performance-oriented, and merit-based promotion" and established a new talent flow mechanism. The rank assessment mechanism clearly clarified the rank promotion process of employees, greatly expanded the career development channels of them, mobilized their enthusiasm and sense of responsibility, and further promoted the landing of the company’s position system. At the same time, it also built up more strategic developments for the company’s team of talents.

(3) Training Plan √Applicable □Not applicable The company has established and gradually improved the training system, continued to adhere to the two- tiered training mechanism which includes training in headquarter organized by HR department and the independent individualized training by various departments, and utilized the two platforms of KEDA College and KEDA School to focus on five key talents teams such as management talents, international talents, R&D talents, key skills talents and graduate talents to systematically promoting training activities. In 2017, aiming at the company’s key talents in strategic development, the company focused on promoting the training of three talents teams for graduates, internationalization and management, and launched the training course for 2017 graduates, the second international talents initiate course and international training course for all staff. Along with the developing projects for high-potential leaders, the training courses have provided the company with international and leading talents whom could adapt to rapid development of the company. At the same time, in order to pass on the company’s high-quality knowledge, experience, skills, spirit, and culture, the company has promoted the development of an internal lecturer system, built a curriculum and lecturer system for the company’s top ten career groups, and completed development for 30 courses and 18 internal instructor certification, which had further improved the company’s talent development and training system. In 2018, the company will continue to focus on the cultivation of key talents based on the development strategy, and with the aid of internal and external faculty, coordinating with talent pools, selection mechanisms, training mechanisms, evaluation mechanisms and appointment mechanisms, the company will promote personnel development, improve the efficiency and quality of training to help company’s transformation, upgrading and sustainable development.

Annual Report 2017 33 KEDA Section VIII Financial Report

I. Audit Report √Applicable □Not applicable Audit Report Z.X.S.Z. [2018] No.0697 To all shareholders of KEDA Clean Energy Co., Ltd.:

I. Audit opinions We have audited financial statements of KEDA Clean Energy Co., Ltd. (hereinafter referred to as KEDA Clean Energy), including consolidated asset balance sheet dated on December 31, 2017, consolidated profit statement, consolidated cash statement, consolidated statement of change in shareholders equity of year 2017 and annotations to financial statements. In our opinion, the financial statements of KEDA Clean Energy attached are prepared in accordance with the corporate accounting codes in key aspects, fairly reecting financial conditions of KEDA Clean Energy on December 31, 2017, and business achievements and cash ow of the year 2017.

II. Basis for Audit Opinions We executed audit in accordance with rules and regulations of audit code of CPA of China. The CPAs responsibility to financial statement audit demonstrates our responsibility according to these codes further. According to the occupational morality code of CPA of China, we stayed independent of KEDA Clean Energy and performed other responsibilities related to occupational morality. We believe that the audit evidences acquired are sufficient and proper, and lay a foundation for issuing audit opinions.

III. Key Audit Matters The key audit matters are the matters that are considered most important for the audit of the current financial statements based on our professional judgment. The response to these matters is based on the audit of the financial statements as a whole and the formation of an audit opinion. We do not comment on these matters separately. We confirm that the following matters are key audit matters that need to be communicated in the audit report.

(I) uilding Materials Machinery Equipment Revenue Confirmation 1. Description of Matter In fiscal year 2017, KEDA Clean Energy’s income from building materials machinery equipment was RMB 4.0609721 billion, accounting for 70.89% of total operating revenue. It was the major revenue component of KEDA Clean Energy and related information was disclosed in the Statement of Revenue and Operating Costs in the notes to the financial statements. Due to the growth of export business and the increase in the company’s business scope, the revenue of building materials machinery equipment has continued to grow in recent years. In 2017, it increased by 23.37% compared to 2016. Since the confirmation of revenue from building materials machinery equipment has a significant impact on the financial statements, management may have significant risk of misstatement when confirming and presenting revenue. Therefore, we put confirmation of revenue from building materials machinery equipment as a key audit matter.

2. Audit Response We learned about KEDA Clean Energy’s internal control cycle of sales and collections and performed walk-through tests, and performed control tests on important control points such as customer sign-off and revenue confirmation; Performed analytical procedures on income, including analysis of gross profit margins, comparative analysis of gross profit margin and the previous period, and important business contract revenues, current period income of building materials machinery equipment; Checked the relative terms of the contracts of major customers, and assess whether the sales revenue of the building materials machinery equipment of KEDA Clean Energy meets the requirements of the accounting standards; Selected samples of this year according to the sampling principle, checked sales contracts, account records, and customer sign-off records, and checked whether the sales revenue of the building materials machinery equipment of

34 Annual Report 2017 Section VIII Financial Report KEDA

KEDA Clean Energy is consistent with the disclosed accounting policy; for export business, we obtained export goods declaration, sales contracts, dispatch bills, freight transport orders and foreign exchange settlement data, etc., to confirm whether income is achieved. Performed cut-off tests on operation revenue to confirm that KEDA Clean Energys revenue confirmation is recorded in the correct accounting period; According to the sampling principle, some customers were selected and the accounts receivable as of December 31, 2017, long-term receivable balances and 2017 annual sales were inquired.

(II) Goodwill and goodwill impairment events 1. The description of significant events As of December 31, 2017, the ending balance of goodwill of KEDA Clean Energy was RMB 1.2668319 million, of which RMB 543.7642 million was formed this year, and the ending balance of goodwill impairment provision was RMB 84.2317 million, and the net book value of goodwill was RMB 1.1826002 million, accounting for 9.65% of the total assets at the end of the year, related information was disclosed in the notes of Goodwill to the financial statements. KEDA Clean Energy tests annually goodwill for impairment with special methods, it involves multiple indicators which need company management to judge, including future revenue growth rate, future operating margins and applicable discount rate. As the goodwill formed in this year increased more than the previous year, and the complexity of the goodwill in impairment test, as well as possible subjective influence to the judgement of the key indicators. We will take goodwill impairment as key audit matter.

2. Audit Response (1)The audit response to the goodwill formed in this period Obtained some supporting documents and information about contract agreement, board resolution, review opinion of independent director and payment certificate. The audit reports, asset valuation reports and due diligence reports of consolidated company have been obtained, considering corporate merger audit reports to analyze the rationality of the fair value share of recognizable net assets which is purchased, and to check the validity of accounting treatment We also have special focus on the validity of goodwill calculation when the company merges by step. (2)Audit Response of Goodwill Impairment ① Tested the design and effectiveness of KEDA Clean Energy ’s internal control of goodwill impairment test; ② Assessed the appropriateness of the KEDA Clean Energy goodwill impairment test method; ③ Tested the basic data on which the management goodwill impairment test is based, assessed the rationality of the key assumptions and judgments used in the management impairment test, learned and evaluated the work of management using its valuation experts; ④ Verified computation sheet of the impairment test of goodwill, including the calculation of the recoverable amount of the asset group and the difference between the asset and the carrying amount of the asset group, and confirming whether there is impairment and if any, confirming the amount of impairment; ⑤ Concerned about whether the disclosure of goodwill impairment and the adoption of key assumptions in the financial statements by KEDA Clean Energy meets the requirements of the accounting standards.

(III) Confirmation of Investment Income 1. Description of the matter In 2017, KEDA Clean Energy affirmed investment income of RMB 255.7731 million, which accounted for 45.67% of the total profit for 2017. Among them, long-term equity investment income accounted for by the equity method was RMB 148.2646 million. The investment income confirmed by the re-measurement of the equity held by the purchaser of the business combination not under the same control at the fair value of the purchase date was RMB 108.3908 million, and the relevant information is disclosed in (XLIII) Investment Income in the annotation to the financial statements. As the investment income contributes a lot to the profit of the company in 2017, it is regarded as an important financial indicator. The management may have significant risk of misstatement when confirming and presenting investment income. Therefore, we regard investment income confirmation as a key audit matter.

Annual Report 2017 35 KEDA Section VIII Financial Report

2. Audit Response (1) Audit response to accounting for investment income with the equity method The main investment unit for the calculation of the equity method of KEDA Clean Energy is Qinghai Salt Lake Fozhao Lanke Lithium Co., Ltd. (hereinafter referred to as Lanke Lithium), and executes the following procedures for Lanke Lithium: ① Preliminary understood and evaluated of the basic conditions, business environment and industry conditions of Lanke Lithium by communicating with Lanke Lithium’s management and referring relevant materials; ② Evaluated the independence, objectivity, audit experience and qualifications of Lanke Lithiums accountants; communicated with Lanke Lithiums accountants, understood its risk assessment, importance level, key audit field and major audit procedures, and examined audit evidence obtained by key audit projects, etc.; obtained the audit report and audit opinions of Lanke Lithium, analyzed Lanke Lithiums financial statements, and conducted an on-site review. ③ For the special case of long-term equity investment accounted for by the equity method in which the proportion of equity in the year has changed. We have obtained relevant investment agreements, resolutions of the board of directors, and payment vouchers for equity transfer payments to verify whether the timing of investment income is correct. At the same time, for major investment units, the audit focused on the achievement of profit in each month, and confirmed whether the calculation of investment income and accounting period included in the audit were correct. (2) The audit response to the originally held equity of the purchased party to be re-measured based on the fair value at the acquisition date to confirm the investment income when mergers of enterprises not under same control. ① We obtained information on equity acquisition agreements, board of director resolutions, and equity transfer payment vouchers. We interviewed the relevant person in charge of the KEDA Clean Energy to understand the reasons for the equity transaction. Through investigation of the senior management personnel of KEDA Clean Energy and inquiry of Industry and Commerce system to determine whether there is an associated relationship with the transferor, so as to judge whether the business combination has commercial substance; and verified the appointment status of the board of directors and senior management of the invested company, and confirm whether the purchase date was correct. ② Obtained and verified the valuation report of the company value of the purchased unit on the merger date, analyzed the reasonableness of the fair value of the equity held by the buyer before the purchase date on the purchase date, and verified whether the valuation and accounting were correct.

IV. Other information The management of KEDA Clean Energy (hereinafter referred to as management) is responsible for other information. The other information includes the information included in the financial report but does not include the financial statements and our audit report. Our audit opinions towards the financial statements do not cover other information and we do not announce any form of authentication conclusion on other information. In conjunction with our audit of the financial statements, our responsibility is to read other information. In the process, we should consider whether there is significant inconsistency or misstatement between other information and the financial statements or what we have learned during the audit process. Based on the work we have performed, if we determine that there is a material misstatement of other information, we should report that fact. In this respect, we have nothing to report.

V. Responsibility of the management and governance team for the financial statements The management is responsible for preparing financial statements in accordance with the requirements of the Accounting Standards for Business Enterprises in order to enable them to achieve fair reflection and design, implementation and maintenance of necessary internal controls so that there are no material misstatements due to fraud or errors in the financial statements. In the preparation of the financial statements, the management is responsible for assessing KEDA Clean Energy’s ability to be going-concern and applying the going-concern assumption unless management plans to liquidate KEDA Clean Energy to terminate operations or have no other realistic options. The governance team is responsible for overseeing the financial reporting process of KEDA Clean Energy.

36 Annual Report 2017 Section VIII Financial Report KEDA

VI. CPA’s responsibility for auditing financial statements Our objective is to obtain reasonable assurance as to whether the entire financial statements are free from significant misstatement due to fraud or errors and to issue an audit report containing audit opinions. Reasonable assurance is an assurance of high level, but it does not guarantee that an audit performed in accordance with auditing standards can always be discovered when a major misstatement exists. Misstatement may be caused by fraud or errors, and if a reasonable expectation of misstatement alone or aggregated may affect the economic decision made by users of financial statements based on the consolidated financial statements, misstatements are generally considered to be significant. In the process of conducting audit work in accordance with auditing standards, we use professional judgment and maintain professional suspicion. At the same time, we also perform the following tasks: (1) Identify and evaluate risks of significant misstatement of financial statements due to fraud or errors, design and implement audit procedures to cope with these risks, and obtain adequate and appropriate audit evidence as a basis for issuing audit opinions. Since fraud may involve collusion, falsification, intentional omission, misrepresentation or override of internal controls, the risk of failing to detect a significant misstatement due to fraud is higher than the risk of failing to detect a significant misstatement due to errors. (2) Understand the internal controls related to audit to design appropriate audit procedures. (3) Evaluate the appropriateness of accounting policies selected and used by the management and the reasonableness of issuing accounting estimates and relevant disclosures. (4) Conclusions were drawn on the appropriateness of management’s use of going-concern assumptions. At the same time, based on the audit evidence obtained, it may lead to conclusions as to whether there are significant uncertainties in the matters or circumstances that have major doubts about the sustainability of KEDA Clean Energy. If we conclude that there are significant uncertainties, the auditing standards require us to request the users of the report to pay attention to the relevant disclosures in the financial statements in the audit report; if the disclosure is not sufficient, we should publish modified opinions. Our conclusions are based on the information available as of the date of the audit report. However, future events or circumstances may cause KEDA Clean Energy not to continue operating. (5) Evaluate the overall presentation, structure, and content (including disclosures) of the financial statements and evaluate whether the financial statements fairly reflect the relevant transactions and events. (6) Obtain sufficient and appropriate audit evidence on the financial information of the entities or business activities of KEDA Clean Energy to express opinions on the financial statements. We are responsible for directing, supervising and executing group audits, and take full responsibility for audit opinions. We communicate with the governance team on planned audit range, timing, and major audit findings, including the internal control deficiencies that we identified during the audit. We also provide a statement to the governance team on compliance with occupational moral requirements related to independence, and communicate with the governance team on all relationships and other matters that may reasonably be considered to affect our independence, and relevant preventive measures (if applicable). Among the matters communicated with the governance team, we determine which items are most important for the audit of the financial statements of the current period and thus constitute the key audit matters. We describe these matters in our audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rare cases, if it is reasonably expected that the negative consequences of informing a matter in the audit report will outweigh the benefits in public interest, we would determine that the matter should not be informed in the audit report.

ZX CPA Firm (special general partnership) CPA of China: Min Liu (Project Partner) Beijing, China

CPA of China: Zhijun Su

March 30, 2018

Annual Report 2017 37 KEDA Section VIII Financial Report

II. Financial statement Consolidated Balance Sheet December 31, 2017 Prepared by: KEDA Clean Energy Co., Ltd. Unit: yuan, Currency: RMB Item Annotations Closing balance Opening balance Current assets: Monetary fund VII.1 1,402,830,600.14 729,784,194.88 Deposit reservation for balance Lending to banks and other financial institutions Financial assets measured with fair value with variation accounted into current profit and loss Derivative financial assets Notes receivable VII.4 200,995,231.11 180,467,379.23 Accounts receivable VII.5 1,514,704,166.86 1,289,383,537.91 Advance to suppliers VII.6 393,343,384.02 340,030,517.66 Receivable deposits from the insured Reinsurance accounts receivable Receivable deposits for reinsurance contract Accrued interest receivable Dividends receivable Other accounts receivable VII.9 153,443,333.05 124,385,913.54 Redemptory monetary capital for sale Inventories VII.10 1,679,593,607.97 1,275,472,231.51 Assets held for sale Non-current assets due in one year VII.12 995,807,289.85 903,784,851.74 Other current assets VII.13 250,989,196.56 128,059,285.30 Total current assets 6,591,706,809.56 4,971,367,911.77 Non-current assets: Loans and advances Financial assets available for sale VII.14 21,860,000.00 1,260,000.00 Held-to-maturity investment Long-term accounts receivable VII.16 402,029,597.07 396,983,642.92 Long-term equity investment VII.17 997,027,987.15 25,111,841.94 Investment in real estate Fixed assets VII.19 2,252,616,610.59 1,853,263,842.45 Construction in progress VII.20 306,412,752.01 39,390,661.75 Engineer materials Disposal of fixed assets Productive biological assets Oil and gas assets Intangible assets VII.25 411,059,581.84 434,246,163.56 Development expenditures Goodwill VII.27 1,182,600,197.11 652,435,825.52 Long-term deferred expense VII.28 3,970,725.95 Deferred income tax assets VII.29 60,612,407.72 55,384,450.93 Other non-current assets VII.30 20,861,008.81 Total non-current assets 5,659,050,868.25 3,458,076,429.07 Total assets 12,250,757,677.81 8,429,444,340.84

Legal representative: Wu Muhai Principal in charge of accounting: Zeng Fei Principal of accounting body: Li Qing

38 Annual Report 2017 Section VIII Financial Report KEDA

Consolidated Balance Sheet (Continued) December 31, 2017 Prepared by: KEDA Clean Energy Co., Ltd. Unit: yuan, Currency: RMB Item Annotations Closing balance Opening balance Current liabilities: Short-term borrowings VII.31 1,307,512,404.59 753,456,441.42 Borrowings from the central bank Deposit taking and interbank placement Borrowings from banks and other financial institutions Financial liabilities measured at fair value through profit or loss Derivative financial liabilities Notes payable VII.34 687,423,141.00 380,391,987.54 Payables VII.35 1,380,565,520.15 1,497,125,346.21 Advances from customers VII.36 595,790,840.06 574,864,380.96 Financial assets sold for repurchase Commission payable Payroll payable VII.37 76,090,685.59 73,887,702.95 Taxes payable VII.38 107,451,470.69 99,263,839.61 Accrued interest payable Dividends payable Other accounts payable VII.41 352,162,270.36 52,192,220.91 Dividends payable for reinsurance Deposits for insurance contract Receiving from vicariously traded securities Receiving from vicariously sold securities Liabilities classified as held-for-sale Non-current liabilities due in one year VII.43 543,132,095.04 265,022,929.16 Other current liabilities Total current liabilities 5,050,128,427.48 3,696,204,848.76 Non-current liabilities: Long-term borrowings VII.45 1,261,769,718.14 392,351,898.97 Bonds payable Wherein: Preferred stocks Perpetual bonds Long-term accounts payable VII.47 100,000,000.00 Long-term payroll payable Special accounts payable Estimated liabilities VII.50 570,761.21 Deferred income VII.51 62,415,000.00 73,160,000.00 Deferred income tax liabilities 15,301,586.14 19,151,314.06 Other non-current liabilities VII.52 92,145,844.74 79,649,900.59 Total non-current liabilities 1,531,632,149.02 564,883,874.83 Total liabilities 6,581,760,576.50 4,261,088,723.59 Stockholders’ equity Paid-in capital VII.53 1,577,205,702.00 1,411,464,322.00 Other equity instruments Wherein: Preferred stocks Perpetual bonds Capital reserve VII.55 1,134,884,345.92 278,104,830.51 Less: treasury shares Other comprehensive income VII.57 7,362,752.32 4,935,998.08 Special reserve Surplus reserve VII.59 306,963,861.18 278,320,595.10 Generic risk reserve Retained earnings VII.60 2,411,599,343.24 2,074,268,447.78 Total equity attributed to stockholders of parent company 5,438,016,004.66 4,047,094,193.47 Non-controlling interest 230,981,096.65 121,261,423.78 Total stockholders equity 5,668,997,101.31 4,168,355,617.25 Total liabilities, non-controlling interest and stockholders equity 12,250,757,677.81 8,429,444,340.84

Legal representative: Wu Muhai Principal in charge of accounting: Zeng Fei Principal of accounting body: Li Qing

Annual Report 2017 39 KEDA Section VIII Financial Report

Balance Sheet of Parent Company December 31, 2017 Prepared by: KEDA Clean Energy Co., Ltd. Unit: yuan, Currency: RMB Item Annotations Closing balance Opening balance Current assets: Monetary fund 686,480,798.09 168,553,901.61 Financial assets measured with fair value with variation accounted into current profit and loss Derivative financial assets Notes receivable 29,325,839.04 18,794,102.00 Accounts receivable XVII.1 891,344,027.44 554,641,533.32 Advance to suppliers 67,538,224.27 73,419,406.82 Accrued interest receivable Dividends receivable Other accounts receivable XVII.2 1,926,118,893.07 1,072,224,833.39 Inventories 620,898,395.70 517,981,877.64 Assets held for sale Non-current assets due in one year Other current assets 33,405,851.24 13,697,134.28 Total current assets 4,255,112,028.85 2,419,312,789.06 Non-current assets: Financial assets available for sale 16,260,000.00 1,260,000.00 Held-to-maturity investment Long-term accounts receivable Long-term equity investment XVII.3 4,126,075,282.82 2,902,229,648.47 Investment in real estate Fixed assets 233,128,694.02 253,686,218.96 Construction in progress 46,840,182.68 3,432,482.34 Engineer materials Disposal of fixed assets Productive biological assets Oil and gas assets Intangible assets 39,811,443.77 41,310,868.97 Development expenditures Goodwill Long-term deferred expense Deferred income tax assets 4,351,500.53 2,697,438.68 Other non-current assets Total non-current assets 4,466,467,103.82 3,204,616,657.42 Total assets 8,721,579,132.67 5,623,929,446.48

Legal representative: Wu Muhai Principal in charge of accounting: Zeng Fei Principal of accounting body: Li Qing

40 Annual Report 2017 Section VIII Financial Report KEDA

Balance Sheet of Parent Company (Continued) December 31, 2017 Prepared by: KEDA Clean Energy Co., Ltd. Unit: yuan, Currency: RMB Item Annotations Closing balance Opening balance Current liabilities: Short-term borrowings 712,700,337.89 276,386,000.00 Financial liabilities measured at fair value through profit or loss Derivative financial liabilities Notes payable 387,740,000.00 176,110,000.00 Payables 573,214,293.93 590,456,393.86 Advances from customers 237,306,322.28 307,392,054.46 Payroll payable 28,381,316.75 33,935,652.75 Taxes payable 19,503,972.30 28,583,042.15 Accrued interest payable Dividends payable Other accounts payable 574,322,085.65 200,867,746.74 Liabilities classified as held-for-sale Non-current liabilities due in one year 120,000,000.00 Other current liabilities Total current liabilities 2,653,168,328.80 1,613,730,889.96 Non-current liabilities: Long-term borrowings 943,436,132.01 240,000,000.00 Bonds payable Wherein: Preferred stocks Perpetual bonds Long-term accounts payable Long-term payroll payable Special accounts payable Estimated liabilities Deferred income 2,715,000.00 3,960,000.00 Deferred income tax liabilities Other non-current liabilities 42,544,653.77 45,424,653.77 Total non-current liabilities 988,695,785.78 289,384,653.77 Total liabilities 3,641,864,114.58 1,903,115,543.73 Stockholders’ equity: Paid-in capital 1,577,205,702.00 1,411,464,322.00 Other equity instruments Wherein: Preferred stocks Perpetual bonds Capital reserve 1,594,362,342.20 573,721,036.67 Less: treasury shares Other comprehensive income Special reserve Surplus reserve 299,956,818.15 271,313,552.07 Retained earnings 1,608,190,155.74 1,464,314,992.01 Total stockholders equity 5,079,715,018.09 3,720,813,902.75 Total liabilities, non-controlling interest and 8,721,579,132.67 5,623,929,446.48 stockholders equity

Legal representative: Wu Muhai Principal in charge of accounting: Zeng Fei Principal of accounting body: Li Qing

Annual Report 2017 41 KEDA Section VIII Financial Report

Consolidated income statement January to December, 2017 Prepared by: KEDA Clean Energy Co., Ltd. Unit: yuan, Currency: RMB Item Annotations Current period Last period I. Total operating revenue 5,728,513,617.27 4,380,481,706.41 Wherein: Sales revenue VII.61 5,728,513,617.27 4,380,481,706.41 Interest income Premium income Commission income II. Total operating costs 5,513,797,963.78 4,007,272,591.52 Wherein: Cost of sales VII.61 4,542,558,416.81 3,373,985,786.96 Interest expenses Commission expenses Loan value Compensation expensesnet Appropriation of deposit for duty Dividend expenses for the insured Reinsurance expenses Taxes and surcharges VII.62 44,829,334.15 43,137,016.96 Marketing costs VII.63 288,607,830.23 207,650,035.24 Managing costs VII.64 447,053,497.84 368,682,494.00 Financing costs VII.65 117,792,633.04 11,474,414.00 Assets devaluation VII.66 72,956,251.71 2,342,844.36 AddProfit and Loss from Fair Value Changes for loss Income (loss) on investment for loss VII.68 255,773,095.04 -12,458,677.27 Wherein: Income from investment on joint ventures 148,264,617.76 -8,859,118.21 and associates Income (loss) on disposal of asset for loss VII.69 4,495,093.41 1,099,356.03 Exchange gain or loss for loss Revenues from other operations VII.70 86,309,651.21 III. Revenues from other operations 561,293,493.15 361,849,793.65 Add: Revenue from discontinued operations VII.71 5,867,376.08 76,785,087.36 Less: Expense from discontinued operations VII.72 7,124,399.41 82,477,945.06 IV. Earnings before tax ( “-”for loss) 560,036,469.82 356,156,935.95 Less: Income tax expense VII.73 64,560,771.35 75,804,820.44

Legal representative: Wu Muhai Principal in charge of accounting: Zeng Fei Principal of accounting body: Li Qing

42 Annual Report 2017 Section VIII Financial Report KEDA

Consolidated income statement (Continued) January to December, 2017 Prepared by: KEDA Clean Energy Co., Ltd. Unit: yuan, Currency: RMB Item Annotations Current period Last period V. Net income ( “-”for loss) 495,475,698.47 280,352,115.51 (I) On continuation of operations 1. Net income (loss) of continued operations 495,475,698.47 280,352,115.51 for loss 2. Net income (loss) of discontinued operations for loss (II) On ownership 1. Income (loss) of non-controlling interest 16,584,391.17 -22,937,374.51 2. Net income (loss) attributed to shareholders of 478,891,307.30 303,289,490.02 parent company VI. Other comprehensive net income 4,477,568.23 3,940,651.53 Other comprehensive net income attributable to 2,426,754.24 3,940,651.53 stockholders of parent company (I) Other comprehensive net income cannot reclassified as profit and loss 1. Changes arising from the re-measurement of net liabilities or net assets of defined benefit plan 2. Shares in other comprehensive net income cannot reclassified as profit and loss under equity method (II) Other comprehensive net income will be 2,426,754.24 3,940,651.53 reclassified as profit and loss 1. Shares in other comprehensive net income of the investee that will be reclassified into profit and loss under the equity method 2. Profit and loss from fair value changes of financial assets available for sale 3. Profit and loss from held-to-maturity investment reclassifying as financial assets available for sale 4. Effective part of profit and loss from cash ow hedging 5. Converted difference in Foreign Currency 2,426,754.24 3,940,651.53 Statements 6. Other profit and loss Other comprehensive net income of non-controlling 2,050,813.99 interest VII. Total comprehensive net income 499,953,266.70 284,292,767.04 Total comprehensive net income attributable to 481,318,061.54 307,230,141.55 stockholders of parent company Total comprehensive net income of non-controlling 18,635,205.16 -22,937,374.51 interest VIII. Earnings (loss) per share: (I) Basic earnings (loss) per share (Yuan per share) 0.336 0.215 (II) Diluted earnings (loss) per share (Yuan per share) 0.336 0.215

Legal representative: Wu Muhai Principal in charge of accounting: Zeng Fei Principal of accounting body: Li Qing

Annual Report 2017 43 KEDA Section VIII Financial Report

Income Statement of Parent Company January to December, 2017 Prepared by: KEDA Clean Energy Co., Ltd. Unit: yuan, Currency: RMB Item Annotations Current period Last period I. Total operating revenue VII.4 2,552,953,554.45 2,267,886,668.35 Less: Operating costs VII.4 2,073,083,455.04 1,816,495,510.79 Taxes and surcharges 10,405,856.60 13,437,838.04 Marketing costs 150,422,004.47 117,304,629.50 Managing costs 119,041,125.16 98,848,874.84 Financing costs 69,995,211.32 11,526,839.55 Assets devaluation 13,528,803.53 -7,231,326.00 Add Profit and Loss from Fair Value Changes for loss Income (loss) on investment for loss VII.5 153,107,868.26 10,926,313.14 Wherein: Income from investment on joint ventures and associates -261,548.74 767.70 Income (loss) on disposal of asset for loss -87,480.83 -107,485.13 Revenues from other operations 32,874,181.18 II. Revenues from other operations 302,371,666.94 228,323,129.64 Add: Revenue from discontinued operations 1,987,728.63 9,050,131.51 Less: Expense from discontinued operations 4,348,192.19 1,687,500.00 III. Earnings before tax ( “-”for loss) 300,011,203.38 235,685,761.15 Less: income tax expense 14,575,627.81 7,193,494.81 IV. Net income ( “-”for loss) 285,435,575.57 228,492,266.34 (I) Net income (loss) of continued operations for loss 285,435,575.57 228,492,266.34 (II) Net income (loss) of discontinued operations for loss V. Other comprehensive net income (I) Other comprehensive net income cannot reclassified as profit and loss 1. Changes arising from the re-measurement of net liabilities or net assets of defined benefit plan 2. Shares in other comprehensive net income cannot reclassified as profit and loss under equity method (II) Other comprehensive net income will be reclassified as profit and loss 1. Shares in other comprehensive net income of the investee that will be reclassified into profit and loss under the equity method 2. Profit and loss from fair value changes of financial assets available for sale 3. Profit and loss from held-to-maturity investment reclassifying as financial assets available for sale 4. Effective part of profit and loss from cash ow hedging 5. Converted difference in Foreign Currency Statements 6. Other profit and loss VI. Total comprehensive net income VII. Earnings (loss) per share: (I) Basic earnings (loss) per share (Yuan per share) (II) Diluted earnings (loss) per share (Yuan per share)

Legal representative: Wu Muhai Principal in charge of accounting: Zeng Fei Principal of accounting body: Li Qing

44 Annual Report 2017 Section VIII Financial Report KEDA

Consolidated Cash Flow Statement January to December, 2017 Prepared by: KEDA Clean Energy Co., Ltd. Unit: yuan, Currency: RMB Item Annotations Current period Last period I. Operating activities: Cash from sales of goods and rendering of services 4,267,219,953.80 3,835,618,901.24 Net increment from customer bank deposits and due to placements with banks and other financial institutions Net increment of borrowings from the central bank Net increment of borrowings from other financial institutions Cash from premium income Cash from reinsurance premium income Net increment from deposit of the insured Net increment from disposal of financial assets measured at fair value with variation accounted into current profit and loss Cash from interest and commission income Net increment of borrowings from banks Net increment from repurchase operations Cash from refund of taxes 158,525,731.03 76,686,256.91 Cash from other operating activities VII.75 222,502,864.45 95,739,022.25 Total cash inflow from operating activities 4,648,248,549.28 4,008,044,180.40 Payments for purchase of commodities and receipt of services 3,641,698,422.68 2,585,878,314.89 Net increment from lending and advanced payment of clients Net increment from deposit in the central bank and due to placements with banks and other financial institutions Payments for compensation expenses Payments for interest and commission Payments for insurance dividend Payments for the staff 559,849,092.07 448,247,039.11 Payments for taxes 252,643,906.36 268,204,591.58 Payments for other operating activities VII.75 450,021,735.07 259,156,173.96 Total cash outflow from operating activities 4,904,213,156.18 3,561,486,119.54 Net cash provided by (used in) operating activities -255,964,606.90 446,558,060.86 II. Investing activities: Proceeds from investment recovery 4,620,000.00 Proceeds from investment income Proceeds from disposition of fixed assets, intangible assets 27,278,274.70 3,110,825.61 and other long-term assets Cash receipt from subsidiaries 4,717,166.93 Proceeds from other investing activities VII.75 17,619,156.64 Total cash inflow from investing activities 54,234,598.27 3,110,825.61 Payments for acquisition of fixed assets, intangible assets 266,744,314.56 133,408,759.21 and other long-term assets Payments for investment 751,151,091.99 433,514,536.64 Net increment from asset-pledge loan Acquisitions of subsidiaries 437,062,712.67 Payments for other investing activities Total cash outflow from investing activities 1,454,958,119.22 566,923,295.85 Net cash provided by (used in) investing activities -1,400,723,520.95 -563,812,470.24

Legal representative: Wu Muhai Principal in charge of accounting: Zeng Fei Principal of accounting body: Li Qing

Annual Report 2017 45 KEDA Section VIII Financial Report

Consolidated Cash Flow Statement (Continued) January to December, 2017 Prepared by: KEDA Clean Energy Co., Ltd. Unit: yuan, Currency: RMB Item Annotations Current period Last period III. Financing activities: Proceeds from capital investment 1,206,317,606.20 28,065,860.58 Wherein: Proceeds from non-controlling interests into 18,350,015.00 28,065,860.58 subsidiaries Proceeds from borrowing 3,324,876,921.68 1,470,458,503.38 Proceeds from issuance of debt Proceeds from other financing activities VII.75 255,697,278.37 238,071,462.12 Total cash inflow from financing activities 4,786,891,806.25 1,736,595,826.08 Repayments of debt 1,870,733,217.31 1,168,781,452.75 Payments for interest or dividends 193,832,786.29 213,628,672.94 Whereindividends paid to non-controlling interests by subsidiaries Payments for other financing activities VII.75 449,767,757.68 180,792,426.48 Total cash outflow from financing activities 2,514,333,761.28 1,563,202,552.17 Net cash provided by (used in) financing activities 2,272,558,044.97 173,393,273.91 IV. In fluences on cash and cash equivalent by change of -15,496,391.17 1,879,471.55 exchange rate V. Net increment of cash and cash equivalents 600,373,525.95 58,018,336.08 Add: cash and cash equivalents at the beginning period 644,075,593.63 586,057,257.55 VI. Cash and cash equivalents at the closing period 1,244,449,119.58 644,075,593.63

Legal representative: Wu Muhai Principal in charge of accounting: Zeng Fei Principal of accounting body: Li Qing

46 Annual Report 2017 Section VIII Financial Report KEDA

Cash Flow Statement of Parent Company January to December, 2017 Prepared by: KEDA Clean Energy Co., Ltd. Unit: yuan, Currency: RMB Item Annotations Current period Last period I. Operating activities: Cash from sales of goods and rendering of services 2,022,746,412.03 1,933,707,891.93 Cash from refund of taxes 97,543,594.81 48,540,566.25 Cash from other operating activities 606,794,356.88 760,309,151.09 Total cash inflow from operating activities 2,727,084,363.72 2,742,557,609.27 Payments for purchase of commodities and receipt of services 1,872,767,140.62 1,392,577,412.64 Payments for the staff 241,716,140.32 199,585,555.32 Payments for taxes 54,162,227.60 86,969,762.74 Payments for other operating activities 537,241,788.12 529,509,742.86 Total cash outflow from operating activities 2,705,887,296.66 2,208,642,473.56 Net cash provided by (used in) operating activities 21,197,067.06 533,915,135.71 II. Investing activities: Proceeds from investment recovery 34,651,224.26 Proceeds from investment income 153,369,417.00 7,200,000.00 Proceeds from disposition of fixed assets, intangible assets and other 158,040.00 44,000.00 long-term assets Proceeds from disposition of discontinued operations 3,725,545.44 Proceeds from other investing activities Total cash inflow from investing activities 153,527,457.00 45,620,769.70 Payments for acquisition of fixed assets, intangible assets and other 61,786,583.69 37,448,782.80 long-term assets Payments for investment 1,442,489,551.19 475,671,396.64 Acquisitions of subsidiaries 436,755,870.04 Payments for other investing activities Total cash outflow from investing activities 1,941,032,004.92 513,120,179.44 Net cash provided by (used in) investing activities -1,787,504,547.92 -467,499,409.74 III. Financing activities: Proceeds from capital investment 1,187,967,591.20 Proceeds from borrowing 1,943,758,806.96 447,545,620.15 Proceeds from issuance of debt Proceeds from other financing activities 68,214,117.87 50,918,008.97 Total cash inflow from financing activities 3,199,940,516.03 498,463,629.12 Repayments of debt 686,825,219.99 364,108,867.46 Payments for interest or dividends 148,963,658.62 160,273,225.33 Payments for other financing activities 89,615,285.33 68,052,412.00 Total cash outflow from financing activities 925,404,163.94 592,434,504.79 Net cash provided by (used in) financing activities 2,274,536,352.09 -93,970,875.67 IV. Influences on cash and cash equivalent by change of exchange rate -10,103,142.21 -1,477,952.06 V. Net increment of cash and cash equivalents 498,125,729.02 -29,033,101.76 Add: cash and cash equivalents at the beginning period 123,219,381.68 152,252,483.44 VI. Cash and cash equivalents at the closing period 621,345,110.70 123,219,381.68

Legal representative: Wu Muhai Principal in charge of accounting: Zeng Fei Principal of accounting body: Li Qing

Annual Report 2017 47 KEDA Section VIII Financial Report Total Total equity stockholders stockholders -70,726,508.42 497,902,452.71 -112,917,145.76 -112,917,145.76 4,168,355,617.25 4,168,355,617.25 1,500,641,484.06 1,115,656,177.11 1,186,382,685.53 5,668,997,101.31 Currency: RMB Currency:

interest 18,635,205.16 91,084,467.71 91,084,467.71 121,261,423.78 121,261,423.78 109,719,672.87 230,981,096.65 Non-controlling Non-controlling Unit: yuan, Unit: -28,643,266.08 337,330,895.46 478,891,307.30 -141,560,411.84 -112,917,145.76 Principal of accounting body: Li Qing Li body: accounting of Principal 2,074,268,447.78 2,074,268,447.78 2,411,599,343.24 Retained earnings Retained risk risk reserve Generic Generic 28,643,266.08 28,643,266.08 28,643,266.08 278,320,595.10 278,320,595.10 306,963,861.18 Surplus reserve Surplus Special Special reserve

Other Other This period This income 4,935,998.08 4,935,998.08 2,426,754.24 2,426,754.24 7,362,752.32 comprehensive comprehensive Less: Less: shares treasury treasury 278,104,830.51 278,104,830.51 856,779,515.41 856,779,515.41 Capital reserve Capital -163,861,790.12 Stockholders equity attributed to parent company parent to attributed equity Stockholders 1,020,641,305.53 1,134,884,345.92 January to December, 2017 December, to January Others bonds Principal in charge of accounting: Zeng Fei Zeng accounting: of charge in Principal Perpetual Perpetual shares Other equity instruments equity Other Preferred Preferred

Consolidated Statement of Changes in Stockholders’ Equity Stockholders’ in Changes of Statement Consolidated Paid-in capital Paid-in 165,741,380.00 165,741,380.00 165,741,380.00 1,411,464,322.00 1,411,464,322.00 1,577,205,702.00

Capital invested by other equity instrument equity other by invested  Capital into accounted payment share of Amount from transferred capital) paid-in (or Capital from transferred capital) paid-in (or Capital Change of accounting policy accounting of Change Correction of previous errors previous of Correction control same the under merging Enterprise Others holders equity stockholders surplus capital reserve surplus

Total amount of comprehensive net income net comprehensive of amount Total shareholders by invested shares Ordinary 1. 2.  3. Others 4. reserve surplus Withdrawal 1. reserve risk generic Withdrawal 2. shareholders) (or owners all to Distribution 3. Others 4.  1.  2. reserve surplus by losses of Recovery 3. Others 4. period this withdrawn Amount 1. period this used Amount 2. Increased and decreased capital of owner of capital decreased and Increased stockholders inside carrying-forward Internal reserve Special equity Profit distribution Profit  Others

Closing balance at the end of last year last of end the at balance Closing Add: year current of beginning the at Balance for period this of decrement or Increment (I) (II) (III) (IV) (V) (VI) decrement

Prepared by: KEDA Clean Energy Co., Ltd. Co., Energy Clean KEDA by: Prepared Item I. II. III. period this of end the at Balance IV. Legal representative: Wu Muhai Wu representative: Legal

48 Annual Report 2017 Section VIII Financial Report KEDA equity 1,635,685.18 284,292,767.04 -362,534,814.35 -364,170,499.53 -141,146,432.20 -141,146,432.20 -219,388,479.51 4,387,744,096.76 4,387,744,096.76 4,168,355,617.25 Total stockholders stockholders Total Currency: RMB Currency:

interest -22,937,374.51 279,474,842.49 279,474,842.49 121,261,423.78 Non-controlling Non-controlling -135,276,044.20 -135,276,044.20 -158,213,418.71 Unit: yuan, Unit: -22,850,579.20 139,292,478.62 303,289,490.02 -163,997,011.40 -141,146,432.20 Principal of accounting body: Li Qing Li body: accounting of Principal 1,934,975,969.16 1,934,975,969.16 2,074,268,447.78 Retained earnings Retained risk risk reserve Generic Generic 22,850,579.20 22,850,579.20 22,850,579.20 255,470,015.90 255,470,015.90 278,320,595.10 Surplus reserve Surplus Special Special reserve

Other Other Last period Last income 995,346.55 995,346.55 3,940,651.53 3,940,651.53 4,935,998.08 comprehensive comprehensive Less: Less: shares treasury treasury 1,635,685.18 278,104,830.51 Capital reserve Capital -227,258,770.15 -228,894,455.33 -705,732,161.00 -705,732,161.00 -932,990,931.15 Stockholders equity attributed to parent company parent to attributed equity Stockholders 1,211,095,761.66 1,211,095,761.66 January to December, 2017 December, to January Others bonds Principal in charge of accounting: Zeng Fei Zeng accounting: of charge in Principal Perpetual Perpetual shares Other equity instruments equity Other Preferred Preferred

Paid-in capital Paid-in 705,732,161.00 705,732,161.00 705,732,161.00 705,732,161.00 705,732,161.00 1,411,464,322.00 Consolidated Statement of Changes in Stockholders’ Equity (Continued) Equity Stockholders’ in Changes of Statement Consolidated

Capital invested by other equity instrument equity other by invested  Capital into accounted payment share of Amount from transferred capital) paid-in (or Capital from transferred capital) paid-in (or Capital Change of accounting policy accounting of Change Correction of previous errors previous of Correction control same the under merging Enterprise Others holders equity stockholders surplus capital reserve surplus

Total amount of comprehensive net income net comprehensive of amount Total shareholders by invested shares Ordinary 1. 2.  3. Others 4. reserve surplus Withdrawal 1. reserve risk generic Withdrawal 2. shareholders) (or owners all to Distribution 3. Others 4.  1.  2. reserve surplus by losses of Recovery 3. Others 4. period this withdrawn Amount 1. period this used Amount 2. Increased and decreased capital of owner of capital decreased and Increased stockholders inside carrying-forward Internal reserve Special equity Profit distribution Profit  Others

Closing balance at the end of last year last of end the at balance Closing Add: (I) (II) (III) (IV) (V) (VI) Balance at the beginning of current year current of beginning the at Balance for period this of decrement or Increment decrement 

Prepared by: KEDA Clean Energy Co., Ltd. Co., Energy Clean KEDA by: Prepared Item I. II. III. period this of end the at Balance IV. Legal representative: Wu Muhai Wu representative: Legal

Annual Report 2017 49 KEDA Section VIII Financial Report Total Total equity stockholders stockholders 285,435,575.57 -112,917,145.76 -112,917,145.76 3,720,813,902.75 3,720,813,902.75 1,358,901,115.34 1,186,382,685.53 1,186,382,685.53 5,079,715,018.09 Currency: RMB Currency:

earnings Retained Retained -28,643,266.08 143,875,163.73 285,435,575.57 -141,560,411.84 -112,917,145.76 1,464,314,992.01 1,464,314,992.01 1,608,190,155.74 Unit: yuan, Unit: Principal of accounting body: Li Qing Li body: accounting of Principal 28,643,266.08 28,643,266.08 28,643,266.08 271,313,552.07 271,313,552.07 299,956,818.15 Surplus reserve Surplus Special Special reserve Other Other income comprehensive comprehensive

This period This Less: Less: shares treasury treasury 573,721,036.67 573,721,036.67 Capital reserve Capital 1,020,641,305.53 1,020,641,305.53 1,020,641,305.53 1,594,362,342.20 Others January to December, 2017 December, to January bonds Perpetual Perpetual Principal in charge of accounting: Zeng Fei Zeng accounting: of charge in Principal Other equity instruments equity Other shares Preferred Preferred

Paid-in capital Paid-in 165,741,380.00 165,741,380.00 165,741,380.00 1,411,464,322.00 1,411,464,322.00 1,577,205,702.00 Statement of Change in Stockholders’ Equity of Parent Company Parent of Equity Stockholders’ in Change of Statement

Capital invested by other equity instrument equity other by invested Capital into accounted payment share of Amount from transferred capital) paid-in (or Capital from transferred capital) paid-in (or Capital Change of accounting policy accounting of Change Correction of previous errors previous of Correction Others holders equity stockholders surplus capital reserve surplus

Total amount of comprehensive net income net comprehensive of amount Total owner of capital decreased and Increased shareholders by invested shares Ordinary 1.  2.  3. Others 4. distribution Profit reserve surplus Withdrawal 1. shareholders) (or owners all to Distribution 2. Others 3. stockholders inside carrying-forward Internal equity  1.  2. reserve surplus by losses of Recovery 3. Others 4. reserve Special period this withdrawn Amount 1. period this used Amount 2. Others 

Closing balance at the end of last year last of end the at balance Closing Add: year current of beginning the at Balance for period this of decrement or Increment decrement (I) (II) (III) (IV) (V) (VI)

Prepared by: KEDA Clean Energy Co., Ltd. Co., Energy Clean KEDA by: Prepared Item I. II. III. period this of end the at Balance IV. Legal representative: Wu Muhai Wu representative: Legal

50 Annual Report 2017 Section VIII Financial Report KEDA Total Total equity 1,635,685.18 1,635,685.18 stockholders stockholders 88,981,519.32 228,492,266.34 -141,146,432.20 -141,146,432.20 3,631,832,383.43 3,631,832,383.43 3,720,813,902.75 Currency: RMB Currency:

64,495,254.94 -22,850,579.20 228,492,266.34 -163,997,011.40 -141,146,432.20 1,399,819,737.07 1,399,819,737.07 1,464,314,992.01 Retained earnings Retained Unit: yuan, Unit: Principal of accounting body: Li Qing Li body: accounting of Principal 22,850,579.20 22,850,579.20 22,850,579.20 248,462,972.87 248,462,972.87 271,313,552.07 Surplus reserve Surplus Special Special reserve Other Other income comprehensive comprehensive

Last period Last Less: Less: shares treasury treasury 1,635,685.18 1,635,685.18 -705,732,161.0 -705,732,161.0 573,721,036.67 Capital reserve Capital -704,096,475.82 1,277,817,512.49 1,277,817,512.49 Others January to December, 2017 December, to January bonds Perpetual Perpetual Principal in charge of accounting: Zeng Fei Zeng accounting: of charge in Principal Other equity instruments equity Other shares Preferred Preferred

Paid-in capital Paid-in 705,732,161.00 705,732,161.00 705,732,161.00 705,732,161.00 705,732,161.00 1,411,464,322.00

Statement of Change in Stockholders’ Equity of Parent Company (Continued) Company Parent of Equity Stockholders’ in Change of Statement

Capital invested by other equity instrument equity other by invested Capital from transferred capital) paid-in (or Capital from transferred capital) paid-in (or Capital Change of accounting policy accounting of Change Correction of previous errors previous of Correction Others Amount of share payment accounted into accounted payment share of  Amount holders equity stockholders surplus capital reserve surplus Total amount of comprehensive net income net comprehensive of amount Total owner of capital decreased and Increased distribution Profit stockholders inside carrying-forward Internal reserve Special equity 1. Ordinary shares invested by shareholders by invested shares Ordinary 1.  2. 3. Others 4. reserve surplus Withdrawal 1. shareholders) (or owners all to Distribution 2. Others 3.  1.  2. reserve surplus by losses of Recovery 3. Others 4. period this withdrawn Amount 1. period this used Amount 2.

Closing balance at the end of last year last of end the at balance Closing Add: (I) (II) (III)  (IV) (V) Others (VI) Balance at the beginning of current year current of beginning the at Balance for period this of decrement or Increment decrement period this of end the at Balance



Prepared by: KEDA Clean Energy Co., Ltd. Co., Energy Clean KEDA by: Prepared Item I. II. III. IV. Legal representative: Wu Muhai Wu representative: Legal

Annual Report 2017 51 KEDA Section VIII Financial Report

III. Corporate Profile The Company √Applicable □Not applicable Date of establishment: December 11, 1992, registered address: No.1, West Huanzhen Road, Guanglong Industrial Park, Chencun Town, Shunde District, Foshan City, Guangdong Province, headquarter address: No.1, West Huanzhen Road, Guanglong Industrial Park, Chencun Town, Shunde District, Foshan City, Guangdong Province, and the Companys legal representative: Wu Muhai. Approved by China Securities Regulatory Commission (CSRC) on September 18, 2002, the Company issued 20 million RMB ordinary shares to the public for the first time, and was listed at Shanghai Stock Exchange on October 10, 2002. At present, the registered capital is RMB 1,577,205,702.00 yuan. The Companys business scope: manufacturing of building material machinery for ceramics, stone, wall material, energy saving and environmental protection materials; research, development and manufacturing of automation technology and outfit; sales of: electromechanical product parts, grinding wheel and grinding apparatus, grinding materials and ceramics products; research, development, manufacturing and sales of machinery, equipment, automation technology and outfit related to clean energy; manufacturing and sales of clean coal gas and steam; information and technology service, software development and sales, system integration, hardware equipment leasing and sales, and network technical consultation service; disposal of wastewater, solid waste, and hazardous waste and production and sales of them(operating with valid permits); export business and production of self-made products by the enterprise and member enterprises and relevant technologies; import business of raw and auxiliary materials, machinery and equipment, instrument and meters, parts and relevant technologies required for scientific research (except for commodities restricted or prevented from import or export by the state government); processing incoming materials and assembling with supplied parts, processing with supplied materials and samples, and compensation trade (specifics in accordance with [2000] W.J.M.F.Z.S.Z.H. No.3250)

Industry of the Company: special equipment manufacturing industry Main products of the company: building material machinery, clean gasification outfit, terminal smoke control outfit, high-end parts and other outfits.

Range of consolidated financial statement √Applicable □Not applicable The range of consolidation of the companys consolidated financial statement is determined based on control. All controlled subsidiaries are included in the range of consolidation of the consolidated financial statements, and newly included subsidiaries, structural entities or business entities formed in other forms are listed as follows: Name Acquired via KEDA (Jiangsu) Power Co., Ltd. Newly established Anqing Suoxiang Electricity Sale Co., Ltd. Newly established KEDA (Fujian) Power Co., Ltd. Newly established The Maanshan Branch of Henan KEDA Dongda International Engineering Newly established Co., Ltd. Qinghai Weili New Energy Material Co., Ltd. Merging not under the same control KEDA (Qinghai) Lithium Co., Ltd. Merging not under the same control Ma’anshan Keda Jinxin Automobile Maintenance Service Co., Ltd. Merging not under the same control Brightstar Investment Limited Merging not under the same control Keda Turkey Makine Ticaret Limited Sirketi Newly established Twyford Ceramics Company Limited Merging not under the same control Twyford (Ghana) Ceramics Company Limited Merging not under the same control Twyford (Tanzania) Ceramics Company Limited Merging not under the same control Refer to the Annotation Equities in subsidiaries for details of subsidiaries included in the consolidated financial statements; refer to Changes of consolidation range for changes of consolidation range.

52 Annual Report 2017 Section VIII Financial Report KEDA

IV. Taxes Main tax types and tax rate Main tax types and tax rate √Applicable □Not applicable Tax types Taxing basis Tax rate VAT Taxable income 6% 13% 15% 16% 17% 18% Consumption tax Business tax Urban maintenance and construction tax Taxable turnover tax 7% Corporate income tax Taxable corporate income 12.5% 15% 25% 30% Education fee extra Taxable turnover tax 3% Local education fee extra Taxable turnover tax 2% Dike fee Taxable income 0.72

Where taxpayers with different corporate income tax rates exist, provide details. √Applicable □Not applicable Taxpayer Rate of income tax(%) KEDA Clean Energy Co., Ltd. 15 KEDA (Anhui) Industrial Co., Ltd. 15 KEDA (Anhui) Clean Energy Co., Ltd. 15 Foshan Henglitai Machinery Co., Ltd. 15 Wuhu KEDA Suremaker Co., Ltd. 15 Foshan KEDA Hydraulic Machinery Co., Ltd. 15 Henan KEDA Dongda International Engineering Co., Ltd. 15 Jiangsu Cohen Environmental Protection Technology Co.,Ltd. 15 Foshan Zhuolitai Machinery Co.,Ltd. 15 Changsha Aer Compressor Co., Ltd. 25 KEDA (Shenyang) Clean Energy Gas Co., Ltd. 25 Foshan Henglitai Labor Dispatching Co., Ltd. 25 Anhui Xincheng Investment Co., Ltd. 25 Guangdong Xincheng Financing and Leasing Co., Ltd. 25 Anhui Xincheng Financing and Leasing Co., Ltd. 25 Ninxia Cohen Environmental Protection Engineering Co.,Ltd. 25 KEDA (Anhui) Clean Energy New Materials Co., Ltd. 25 Zhangzhou Juming Graphite Co., Ltd. 25 KEDA (Anhui) New Energy Automobile Sales Co., Ltd. 25 KEDA (Anhui) Huadong New Energy Automobile Travel Service Co., Ltd. 25 KEDA (Anhui) Energy Sale Co., Ltd. 25 KEDA (Anhui) Keneng Energy Sale Co., Ltd. 25 Foshan Delitai Science & Technology Co., Ltd. 25 Foshan KEDA Ceramics Co., Ltd. 25 KEDA (Anhui) Borui Energy Technology Co., Ltd. 25 KEDA Industrial (Hong Kong) Limited 25 KEDA (Jiangsu) Power Co., Ltd. 25 Anqing Suoxiang Electricity Sale Co., Ltd. 25 KEDA (Fujian) Power Co., Ltd. 25 Ma’anshan Keda Jinxin Automobile Maintenance Service Co., Ltd. 25 Qinghai Weili New Energy Material Co., Ltd. 25 KEDA (Qinghai) Lithium Co., Ltd. 25 Keda Industrial (India) Limited 30 Keda Turkey Makine Ticaret Limited Sirketi 20 Twyford Ceramics Company Limited Twyford Ceramics Company Limited 30 Twyford (Ghana) Ceramics Company Limited 12.5 Twyford (Tanzania) Ceramics Company Limited 30

Annual Report 2017 53 KEDA Section VIII Financial Report

Tax rate √Applicable □Not applicable KEDA Clean Energy Co., Ltd. (certificate No.: GR201744003956) and Foshan Henglitai Machinery Co., Ltd. (certificate No.: GR201744000450) were certified as hi-tech enterprises of Guangdong Province in 2017, with corporate income tax rate of 15%. KEDA (Anhui) Industrial Co., Ltd. (certificate No.: GR201534000004) was certified as hi-tech enterprise of Anhui Province in 2015, with corporate income tax rate of 15%. KEDA (Anhui) Clean Energy Co., Ltd. (certificate No.: 201634000175) was certified as hi-tech enterprise of Anhui Province in 2016, with corporate income tax rate of 15%. Wuhu KEDA Suremaker Co., Ltd. was certified as hi-tech enterprise of Anhui Province in 2015 (certificate No.: GR201534000376), with corporate income tax rate of 15%. Foshan KEDA Hydraulic Machinery Co., Ltd. was certified as hi-tech enterprise of Guangdong Province in 2016 (certificate No.: GR201644001898), with corporate income tax rate of 15%. Henan KEDA Dongda International Engineering Co., Ltd. was certified as hi-tech enterprise of Henan Province in 2015 (certificate No.: GF201541000086), with corporate income tax rate of 15%. Jiangsu Cohen Environmental Protection Co.,Ltd. was certified as hi-tech enterprise of Jiangsu Province in 2017 (certificate No.: GR201732001654), with corporate income tax rate of 15%. Foshan Zhuolitai Machinery Co.,Ltd. was certified as hi-tech enterprise of Guangdong Province in 2016 (certificate No.: GR201644000403), with corporate income tax rate of 15%.

V. Annotation to items of consolidated financial statements Monetary fund √Applicable □Not applicable Unit: yuan, Currency: RMB Item Closing balance Opening balance Cash on hand 1,533,192.57 1,409,717.62 Bank deposit 1,242,915,927.01 642,665,876.01 Other monetary fund 158,381,480.56 85,708,601.25 Total 1,402,830,600.14 729,784,194.88 Wherein: total amount deposited abroad 124,337,365.16 140,741,293.66

Remarks: The closing balance of other monetary funds includes bank acceptance deposit of RMB 109,707,748.30 yuan, letter of guarantee deposit of RMB 43,469,062.26 yuan and the buyers credit deposit of RMB 5,204,670.00 yuan.

Accounts receivable (1). Classifying disclosure of receivables √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Opening balance Book balance Provision Book balance Provision Category Ratio Accrual Book value Ratio Accrual Book value Amount Amount Amount Amount (%) ratio(%) (%) ratio(%) Receivables with significant single amount and provision 59,321,472.05 3.35 47,821,472.05 80.61 11,500,000.00 69,966,171.21 4.54 58,466,171.21 83.56 11,500,000.00 accrued separately Financing and leasing equipment receivable 216,047,322.07 12.18 43,209,464.41 20.00 172,837,857.66 235,106,438.11 15.26 47,021,287.62 20.00 188,085,150.49 overdue Receivables with provision accrued according to credit 1,483,227,888.39 83.63 152,861,579.19 10.30 1,330,366,309.20 1,211,687,365.65 78.62 121,888,978.23 10.06 1,089,798,387.42 risk feature portfolio Receivables with insignificant single amount 14,896,644.19 0.84 14,896,644.19 100.00 24,359,400.52 1.58 24,359,400.52 100.00 and provision accrued separately Total 1,773,493,326.70 100.00 258,789,159.84 14.59 1,514,704,166.86 1,541,119,375.49 100.00 251,735,837.58 16.33 1,289,383,537.91

54 Annual Report 2017 Section VIII Financial Report KEDA

Receivables with significant single amount at the end of the period and provision accrued separately √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Accounts receivable Accounts Accrual (for each client) Provision Cause of accrual receivable ratio (%) Client A 34,593,059.87 34,593,059.87 100.00 Clients insolvency Clients insolvencyplans to recover Client B 24,728,412.18 13,228,412.18 53.49 properties for payment of goods Total 59,321,472.05 47,821,472.05 / /

In the combination, accounts receivable with provision accrued with aging analysis method: √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Age Accounts Accrual ratio Provision receivable (%) Within 1 year 1,031,652,485.97 51,582,624.30 5.00 1 to 2 years 250,437,955.31 25,043,795.53 10.00 2 to 3 years 106,839,824.25 21,367,964.85 20.00 3 to 5 years 78,860,856.70 39,430,428.35 50.00 More than 5 years 15,436,766.16 15,436,766.16 100.00 Total 1,483,227,888.39 152,861,579.19

In the combination, receivables with provision accrued with balance percentage method: √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Balance percentage Accounts Accrual ratio Provision receivable (%) Financing and leasing companies 216,047,322.07 43,209,464.41 20.00 Total 216,047,322.07 43,209,464.41

In the combination, receivables with provision accrued with other method: □Applicable √Not applicable

(2). Details of accrued, recovered or carried back in this period: Bad debt reserve in this period is 25,534,856.99 yuan; and provision recovered or carried back in this period is 7,439,431.76 yuan.

Significant provision to be recovered or carried back in this period: √Applicable □Not applicable Unit: yuan, Currency: RMB Amount recovered Client Recovered via or carried back Client C 4,000,000.00 Cash Total 4,000,000.00 /

(3). Details of receivables written off in this period □Applicable √Not applicable Unit: yuan, Currency: RMB Item Amount written off Receivables actually written off 18,564,570.78

Annual Report 2017 55 KEDA Section VIII Financial Report

Details of signifcant writing-off receivables √Applicable □Not applicable Unit: yuan, Currency: RMB Whether Writing-off Amount Cause of caused Client Nature of receivable procedures written off writing-off by related performed transactions Bad debt writing-off Client C Goods payment 5,334,361.87 Unrecoverable No approval procedure Bad debt writing-off Client D Goods payment 3,480,000.00 Unrecoverable No approval procedure Bad debt writing-off Client E Goods payment 2,780,000.00 Unrecoverable No approval procedure Bad debt writing-off Client F Goods payment 977,000.00 Unrecoverable No approval procedure Total / 12,571,361.87 / / /

Details of writing-off receivables: □Applicable √Not applicable

(4). Receivables of top 5 debtors according to closing balance √Applicable □Not applicable Client Relations with the company Amount owe Rate of total receivables (%) Client 1 Non-affiliated party 134,282,897.84 7.58 Client 2 Non-affiliated party 58,223,510.62 3.28 Client 3 Non-affiliated party 41,396,260.00 2.33 Client 4 Non-affiliated party 38,290,590.94 2.16 Client 5 Non-affiliated party 36,748,985.49 2.07 Total 308,942,244.89 17.42

Remark: There is no shareholder with 5% or more voting shares of the company among the receivables;

Advance to suppliers (1). Listing of advance to suppliers according to debt age √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Opening balance Age Amount Ratio(%) Amount Ratio(%) Within 1 year 320,406,553.68 81.45 275,083,408.36 80.90 1 to 2 years 38,397,289.18 9.76 35,737,236.68 10.51 2 to 3 years 26,534,729.85 6.75 23,179,396.64 6.82 More than 3 years 8,004,811.31 2.04 6,030,475.98 1.77 Total 393,343,384.02 100.00 340,030,517.66 100.00

56 Annual Report 2017 Section VIII Financial Report KEDA

(2). Accounts prepaid of top 5 prepaying entities according to closing balance √Applicable □Not applicable Unit: yuan, Currency: RMB Rate of total Relations with Name of debtor Amount owe accounts Causes for not settled the company prepaid (%) Supplier A Non-affiliated party 16,218,334.92 4.12 Within delivery period of the Contract Supplier B Non-affiliated party 13,557,459.15 3.45 Within delivery period of the Contract Qinghai Salt Lake Fozhao Lanke Lithium Affiliated party 12,811,241.07 3.26 Within delivery period of the Contract Co., Ltd. Supplier C Non-affiliated party 9,504,000.00 2.42 Within delivery period of the Contract Supplier D Non-affiliated party 8,290,045.00 2.11 Within delivery period of the Contract Total 60,381,080.14 15.36

Remark: There is no shareholder with 5% or more voting shares of the company among the closing balance of accounts prepaid;

Other accounts receivable (1). Classifying disclosure of other accounts receivable √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Opening balance Book balance Provision Book balance Provision Category Ratio Accrual Book value Ratio Accrual Book value Amount Amount Amount Amount (%) ratio(%) (%) ratio(%) Other accounts receivable with significant single amount and provision accrued separately Export rebate 28,576,068.98 17.40 28,576,068.98 34,052,742.55 25.22 34,052,742.55 Bidding security 24,448,172.62 14.88 24,448,172.62 15,681,691.20 11.61 15,681,691.20 Other accounts receivable with provision accrued according to 111,099,062.38 67.64 10,679,970.93 9.61 100,419,091.45 82,286,831.27 60.94 7,635,351.48 9.28 74,651,479.79 credit risk feature portfolio Other accounts receivable with insignificant single amount but 134,910.00 0.08 134,910.00 100.00 3,000,346.95 2.22 3,000,346.95 100.00 provision accrued separately Total 164,258,213.98 100.00 10,814,880.93 6.58 153,443,333.05 135,021,611.97 100.00 10,635,698.43 7.88 124,385,913.54 Other receivables with significant single amount at the end of the period and provision accrued separately □Applicable √Not applicable

In the combination, other accounts receivable with provision accrued with debt age analysis method: √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Age Other accounts Accrual ratio Provision receivable (%) Within 1 year 88,601,400.81 4,430,070.04 5.00 1 to 2 years 11,786,957.24 1,178,695.72 10.00 2 to 3 years 2,001,385.04 400,277.01 20.00 3 to 5 years 8,076,782.25 4,038,391.12 50.00 More than 5 years 632,537.04 632,537.04 100.00 Total 111,099,062.38 10,679,970.93

In the combination, other accounts receivable with provision accrued with balance percentage method: □Applicable √Not applicable

Annual Report 2017 57 KEDA Section VIII Financial Report

In the combination, other accounts receivable with provision accrued with other method: √Applicable □Not applicable Unit: yuan, Currency: RMB Portfolio Book balance Provision Bidding security 24,448,172.62 Export rebate 28,576,068.98 Total 53,024,241.60

(2). Details of accrued, recovered or carried back in this period: Bad debt reserve in this period is 3,591,860.53 yuan; and no provision is recovered or carried back in this period. Significant provision to be recovered or carried back in this period: □Applicable √Not applicable

(3). Details of other accounts receivable written off in this period √Applicable □Not applicable Unit: yuan, Currency: RMB Item Amount written off Other accounts receivable actually written off 3,398,809.52

Details of other significant writing-off accounts receivable: √Applicable □Not applicable Unit: yuan, Currency: RMB Whether Nature of Amount Cause of Writing-off procedures caused Client other accounts written off writing-off performed by related receivable transactions Bad debt writing-off approval Client A Current account 1,711,336.95 Unrecoverable No procedure Bad debt writing-off approval Client C Current account 919,800.00 Unrecoverable No procedure Total / 2,631,136.95 / / /

Details of other writing-off accounts receivable: □Applicable √Not applicable

(4). Other writing-off accounts receivable classsified by nature: □Applicable √Not applicable

(5). Other accounts receivable of top 5 debtors according to closing balance √Applicable □Not applicable Unit: yuan, Currency: RMB Rate of total Provision Nature of Closing closing balance Client Age Closing receivable balance of other accounts balance receivable (%) Company C with current accounts Current account 20,000,000.00 Within 1 year 12.18 1,000,000.00 Company D with current accounts Export rebate 14,682,024.38 Within 1 year 8.94 Company E with current accounts Export rebate 12,265,349.94 Within 1 year 7.47 Company F with current accounts Current account 9,220,470.96 Within 1 year 5.61 461,023.55 Company G with current accounts Current account 2,244,375.00 3 to 5 years 1.36 1,122,187.50 Total / 58,412,220.28 / 35.56 2,583,211.05

Remark: There is no shareholder with 5% or more voting shares of the company among the closing balance of other accounts receivable;

58 Annual Report 2017 Section VIII Financial Report KEDA

Inventories (1). Classification of inventories √Applicable □Not applicable Applicable Not applicable Unit: yuan, Currency: RMB Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserve reserve Raw materials 406,681,498.54 406,681,498.54 306,135,915.40 306,135,915.40 Goods in process 805,751,015.48 805,751,015.48 652,888,216.98 652,888,216.98 Stock commodity 401,849,477.25 401,849,477.25 216,372,206.25 216,372,206.25 Commodity shipped 65,311,616.70 65,311,616.70 100,075,892.88 100,075,892.88 Total 1,679,593,607.97 1,679,593,607.97 1,275,472,231.51 1,275,472,231.51

Remark: The closing balance of inventories increased by 31.68% compared with the opening balance, mainly due to the expanded scale of operation in this period and the amount brought by new merged companies Twyford Kenya, Twyford Ghana and Twyford Tanzania.

Non-current assets due in one year √Applicable □Not applicable Unit: yuan, Currency: RMB Item Closing balance Opening balance Financing and leasing 995,807,289.85 903,784,851.74 Wherein: unrealized financing and leasing earnings 60,141,213.00 62,494,718.44 Total 995,807,289.85 903,784,851.74

Other current assets √Applicable □Not applicable Unit: yuan, Currency: RMB Item Closing balance Opening balance Input VAT to be credited 220,579,849.35 128,059,285.30 Financial products 30,146,000.00 Corporate income tax prepaid 263,347.21 Total 250,989,196.56 128,059,285.30

Remark: The closing balance of other current assets increased by 95.99% compared with the opening balance, mainly due to the increase of input VAT to be credited in this period.

Long-term accounts receivable (1). Details of long-term accounts receivable: √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Opening balance Range of Item discount Book balance Provision Book value Book balance Provision Book value rate Financing and leasing 402,029,597.07 402,029,597.07 396,983,642.92 396,983,642.92 payment Wherein: Unrealized financial 13,606,255.74 13,606,255.74 21,897,942.17 21,897,942.17 earnings Goods sold on instalment Services rendered on installment Total 402,029,597.07 402,029,597.07 396,983,642.92 396,983,642.92 /

Annual Report 2017 59 KEDA Section VIII Financial Report

Long-term equity investment √Applicable □Not applicable Unit: yuan, Currency: RMB Increase or decrease in this period Cash Closing profit and loss Other Opening Other dividend Depreciation Closing balance of Invested company Investment Investment on investments comprehensive balance equity or profit reserve Others balance depreciation increased decreased confirmed under income changes declared accrued reserve the equity law adjustment or issued II. Joint venture Guangdong Taiwei Digital 505,252.65 -100.00 505,152.65 Ceramics Printing Co., Ltd. Twyford (Ghana) Ceramics 816,380.87 -7,115,166.66 -2,811,836.17 9,110,621.96 Company Limited Brightstar Investment Limited 23,790,208.42 37,602,880.00 14,877,340.15 -1,992,195.75 -74,278,232.82 Twyford (Tanzania) Ceramics 2,710,880.00 -6,815,974.82 -1,240,932.26 5,346,027.08 Company Limited Anhui Hudu KEDA Fluid 14,700,000.00 -1,156,651.53 847,680.23 14,391,028.70 Machinery Co., Ltd. Sichuan Guangxing Lithium 15,000,000.00 895,202.79 15,895,202.79 Science & Technology Co., Ltd. Jiangsu Zhongchuang Clean Energy Science & Technology 1,560,000.00 1,560,000.00 Co., Ltd. Qinghai Salt Lake Fozhao 817,251,433.54 147,579,967.83 -154,798.36 964,676,603.01 Lanke Lithium Co., Ltd. Subtotal 25,111,841.94 888,825,193.54 148,264,617.76 -6,044,964.18 -154,798.36 -58,973,903.55 997,027,987.15 Total 25,111,841.94 888,825,193.54 148,264,617.76 -6,044,964.18 -154,798.36 -58,973,903.55 997,027,987.15

Remarks: The closing balance of long-termequityinvestment increased by 3,870.36% compared with the opening balance, mainly due to the investment of 964,676,600 yuan on Lanke Lithium, a joint venture of the subsidiaries KEDA (Qinghai) Lithium and Qinghai Weili, the investment of 14,910,000 from the remaining shares after Changsha Aer’s disposal of 51% shares of its wholly-owned subsidiary Anhui Hudu KEDA, and the new investment of 15,000,000 on Sichuan Guangxing Lithium Science & Technology Co., Ltd. in this period.

Fixed assets (1). Details of fxed assets √Applicable □Not applicable Unit: yuan, Currency: RMB Electronic Land Property and Machinery and Item Transportation equipment and Total (overseas) building equipment others I. Original book value: 1. Opening balance 213,451.82 1,306,916,451.07 1,239,369,008.34 49,525,996.84 60,960,125.97 2,656,985,034.04 2. Increment in this period 21,145,999.93 205,239,204.94 386,106,807.59 17,847,222.76 9,375,180.24 639,714,415.46 (1) Purchasing 32,981.00 37,380,352.09 13,861,737.81 8,114,702.95 59,389,773.85 (2) Transfer from 112,847,044.10 30,133,033.47 142,980,077.57 construction in progress (3) Increment from 21,113,018.93 92,392,160.84 318,593,422.03 3,985,484.95 1,260,477.29 437,344,564.04 enterprise merging 3. Decrement in this period 16,380,136.10 14,736,860.72 3,728,108.86 1,849,510.60 36,694,616.28 (1) Disposal or scrapping 16,380,136.10 14,736,860.72 3,728,108.86 1,849,510.60 36,694,616.28 4. Closing balance 21,359,451.75 1,495,775,519.91 1,610,738,955.21 63,645,110.74 68,485,795.61 3,260,004,833.22

60 Annual Report 2017 Section VIII Financial Report KEDA

Electronic Land Property and Machinery and Item Transportation equipment and Total (overseas) building equipment others II. Cumulative depreciation 1. Opening balance 313,569,463.52 431,009,453.46 20,970,699.44 38,171,575.17 803,721,191.59 2. Increment in this period 64,225,205.86 115,843,869.20 8,391,550.57 7,142,564.43 195,603,190.06 (1) Accrual 60,000,094.60 99,125,694.27 7,566,744.60 6,929,617.15 173,622,150.62 (2) Increment from 4,225,111.26 16,718,174.93 824,805.97 212,947.28 21,981,039.44 enterprise merging 3. Decrement in this period 12,130,096.74 4,976,641.63 3,400,486.09 1,658,641.56 22,165,866.02 (1) Disposal or scrapping 12,130,096.74 4,976,641.63 3,400,486.09 1,658,641.56 22,165,866.02 4. Closing balance 365,664,572.64 541,876,681.03 25,961,763.92 43,655,498.04 977,158,515.63 III. Depreciation reserve 1. Opening balance 2. Increment in this period 30,229,707.00 30,229,707.00 (1) Accrual 30,229,707.00 30,229,707.00 3. Decrement in this period (1) Disposal or scrapping 4. Closing balance 30,229,707.00 30,229,707.00 IV. Book value 1. Closing book value 21,359,451.75 1,130,110,947.27 1,038,632,567.18 37,683,346.82 24,830,297.57 2,252,616,610.59 2. Opening book value 213,451.82 993,346,987.55 808,359,554.88 28,555,297.40 22,788,550.80 1,853,263,842.45

Construction in progress (1). Construction in progress √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserve reserve Equipment and installation 11,731,413.37 11,731,413.37 9,959,392.83 9,959,392.83 Reconstruction of workshop of KEDA 5,340,640.68 5,340,640.68 6,833,786.94 6,833,786.94 (Anhui) Industrial Project of KEDA(India) plant 17,429,327.07 17,429,327.07 7,622,685.30 7,622,685.30 Project of R&D and industrialization of intelligent manufacturing equipment for 8,344,124.57 8,344,124.57 9,232,500.85 9,232,500.85 architectural ceramics with annual output of 200 sets Project of production, relocation and technological transformation of digital 39,096,154.09 39,096,154.09 2,555,473.42 2,555,473.42 ceramics machinery Project of annual production of 20,000 tons of lithium battery series anode 60,659,528.44 60,659,528.44 1,078,492.31 1,078,492.31 materials Construction of the comprehensive 5,547,579.22 5,547,579.22 building of Ghana ceramics factory Kenya ceramics factory phase II project 67,023,188.95 67,023,188.95 Tanzania ceramics factory phase I project 85,375,065.79 85,375,065.79 Other projects 5,865,729.83 5,865,729.83 2,108,330.10 2,108,330.10 Total 306,412,752.01 306,412,752.01 39,390,661.75 39,390,661.75

Annual Report 2017 61 KEDA Section VIII Financial Report

(2). Changes of key construction in progress in this period √Applicable □Not applicable Unit: yuan, Currency: RMB Ratio of Wherein: Amount Other Cumulative Interest Amount cumulative Project amount of Opening transferred into decreased Closing amount of capitalization Source Project Budget increased in investment progress interest balance fixed assets in amount in balance interest rate in this of fund this period to budget (%) capitalization this period this period capitalization period (%) (%) in this period Tanzania ceramics 155,000,000.00 144,839,969.39 59,464,903.60 85,375,065.79 93.45 93.45% factory phase I project Kenya ceramics factory 68,000,000.00 67,023,188.95 67,023,188.95 98.56 98.56% phase II project Project of KEDA(India) 29,250,000.00 7,622,685.30 9,806,641.77 17,429,327.07 59.59 59.59% plant Project of R&D and industrialization of intelligent manufacturing equipment for 274,400,000.00 9,232,500.85 40,174,285.06 41,062,661.34 8,344,124.57 18.01 18.01% architectural ceramics with annual output of 200 sets Project of production, relocation and technological 207,987,100.00 2,555,473.42 36,540,680.67 39,096,154.09 18.80 18.80% transformation of digital ceramics machinery Project of annual production of 20,000 296,620,000.00 1,078,492.31 63,432,455.35 3,851,419.22 60,659,528.44 21.75 21.75% tons of lithium battery series anode materials Total 1,031,257,100.00 20,489,151.88 361,817,221.19 104,378,984.16 277,927,388.91 / / / /

Remark: The closing balance of construction in progress increased by 31.68% compared with the opening balance of inventory, mainly due to the amount brought by the new merged companies Twyford Kenya, Twyford Ghana and Twyford Tanzania and the increased investment on the subsidiary company KEDA Clean Energy New Materials’ lithium materials project and other projects and on the company’s production and technology transformation project of digital ceramics machinery and other projects.

Intangible assets (1). Details of intangible assets √Applicable □Not applicable Unit: yuan, Currency: RMB Application Trademark Non-patented Item Land use right Patent right Total software right technology I. Original book value 1. Opening balance 446,258,045.00 17,631,092.58 66,596,057.27 1,639,800.00 4,500,000.00 536,624,994.85 2. Increment in this period 7,248,800.00 2,172,795.59 9,421,595.59 (1) Purchasing 7,248,800.00 2,172,795.59 9,421,595.59 (2) Internal R&D (3) Increment from enterprise merging 3. Decrement in this period 15,719,399.26 15,719,399.26 (1) Disposal 15,719,399.26 15,719,399.26 4. Closing balance 437,787,445.74 19,803,888.17 66,596,057.27 1,639,800.00 4,500,000.00 530,327,191.18 II. Accumulative amortization 1. Opening balance 55,391,276.02 14,195,935.11 27,072,731.87 1,218,888.29 4,500,000.00 102,378,831.29 2. Increment in this period 9,041,247.41 995,026.89 8,439,824.40 157,841.64 18,633,940.34 (1) Accrual 9,041,247.41 995,026.89 8,439,824.40 157,841.64 18,633,940.34 3. Decrement in this period 1,745,162.29 1,745,162.29 (1) Disposal 1,745,162.29 1,745,162.29 4. Closing balance 62,687,361.14 15,190,962.00 35,512,556.27 1,376,729.93 4,500,000.00 119,267,609.34

62 Annual Report 2017 Section VIII Financial Report KEDA

Application Trademark Non-patented Item Land use right Patent right Total software right technology III. Depreciation reserve 1. Opening balance 2. Increment in this period (1) Accrual 3. Decrement in this period (1) Disposal 4. Closing balance IV. Book value 1. Closing book value 375,100,084.60 4,612,926.17 31,083,501.00 263,070.07 411,059,581.84 2. Opening book value 390,866,768.98 3,435,157.47 39,523,325.40 420,911.71 434,246,163.56 At the end of this period, intangible assets formed through internal R&D accounted for 0% of the balance of intangible assets.

(2). Details of land use right without certificate of property rights:□ Applicable √Not applicable Remark: □Applicable √Not applicable

Goodwill (1). Original book value of goodwill √Applicable □Not applicable Unit: yuan, Currency: RMB Increment in Decrement in Invested company or goodwill matter Opening balance this period this period Closing balance Enterprise merging Disposal Foshan Henglitai Machinery Co., Ltd. 187,915,447.25 187,915,447.25 Wuhu KEDA Suremaker Co., Ltd. 189,095,543.17 189,095,543.17 Changsha Aer Compressor Co., Ltd. 18,823,759.31 18,823,759.31 Henan KEDA Dongda International Engineering Co., Ltd. 232,664,477.89 232,664,477.89 Foshan Zhuolitai Machinery Co.,Ltd. 14,811,525.16 14,811,525.16 Jiangsu Cohen Environmental Protection Technology 75,596,829.84 75,596,829.84 Co.,Ltd. KEDA (Anhui) Borui Energy Technology Co., Ltd. 4,160,100.00 4,160,100.00 Qinghai Weili New Energy Material Co., Ltd. 144,082,157.89 144,082,157.89 KEDA (Qinghai) Lithium Co., Ltd. 261,315,685.22 261,315,685.22 Ma’anshan Keda Jinxin Automobile Maintenance 168,140.89 168,140.89 Service Co., Ltd. Brightstar Investment Limited 113,522,333.97 113,522,333.97 Twyford (Ghana) Ceramics Company Limited 14,416,737.23 14,416,737.23 Twyford (Tanzania) Ceramics Company Limited 10,259,143.58 10,259,143.58 Total 723,067,682.62 543,764,198.78 1,266,831,881.40

Remark: The closing balance of goodwill increased by 81.26% compared with the opening balance, mainly due to the acquisition of Qinghai Weili and KEDA (Qinghai) Lithuim with confirmed goodwill of 4,005,397,800 yuan and the subsidiary KEDA Holding’s acquisition of 11% shares of the original joint venture Bright Star Investment, Twyford Ghana, and Twyford Tanzania with confirmed goodwill of 138,198,200 yuan,

(2). Goodwill impairment √Applicable □Not applicable Unit: yuan, Currency: RMB Increment in Decrement in Invested company or goodwill matter Opening balance this period this period Closing balance Accrual Disposal Changsha Aer Compressor Co., Ltd. 5,223,932.12 13,599,827.19 18,823,759.31 Wuhu KEDA Suremaker Co., Ltd. 65,407,924.98 65,407,924.98 Total 70,631,857.10 13,599,827.19 84,231,684.29

Annual Report 2017 63 KEDA Section VIII Financial Report

Short-term borrowings (1). Classification of Short-term borrowings √Applicable □Not applicable Unit: yuan, Currency: RMB Item Closing balance Opening balance Pledge loan 30,146,000.00 Mortgage loan 56,602,065.03 Warranted loan 478,064,001.67 477,070,441.42 Credit loan 742,700,337.89 276,386,000.00 Total 1,307,512,404.59 753,456,441.42

Classification of Short-term borrowings: Remarks 1: Details of the warranted loan set out as follows: Amount of Amount Mode of Borrower Guarantor Currency original converted guarantee currency into RMB KEDA (Anhui) Industrial Co., Ltd., KEDA (Anhui) Huadong New Energy Warranted Ma’anshan East China Tourism RMB 10,000,000.00 10,000,000.00 Automobile Travel Service Co., Ltd. guarantee Passenger Transport Co., Ltd. Warranted Zhangzhou Juming Graphite Co., Ltd. KEDA Clean Energy Co., Ltd. RMB 17,942,000.00 17,942,000.00 guarantee Warranted Foshan Zhuolitai Machinery Co.,Ltd. KEDA Clean Energy Co., Ltd. RMB 10,000,000.00 10,0e00,000.00 guarantee KEDA Clean Energy Co., Ltd., Jiangsu Cohen Environmental Energy Jiangsu Cohen Environmental Protection Warranted Development Co., Ltd., Jiangsu Cohen RMB 244,000,000.00 244,000,000.00 Technology Co.,Ltd. guarantee Environmental Protection Engineering Technology Co., Ltd. Anhui Xincheng Financing and Leasing Warranted KEDA Clean Energy Co., Ltd. RMB 32,300,000.00 32,300,000.00 Co., Ltd. guarantee Anhui Xincheng Financing and Leasing Warranted KEDA Clean Energy Co., Ltd. Euro 10,000,000.00 78,198,000.00 Co., Ltd. guarantee Xincheng International (Hong Kong) Warranted KEDA Clean Energy Co., Ltd. Euro 10,000,000.00 77,833,386.42 Co., Ltd. guarantee Keda Turkey Makine Ticaret Limited Warranted KEDA Clean Energy Co., Ltd. Euro 1,000,000.00 7,790,615.25 Sirketi guarantee Total 478,064,001.67

Notes payable √Applicable □Not applicable Unit: yuan, Currency: RMB Type Closing balance Opening balance Commercial acceptance draft 375,700.00 Bank acceptance draft 687,423,141.00 380,016,287.54 Total 687,423,141.00 380,391,987.54 Total amount of notes payable due but not paid at the end of the period is 0.

64 Annual Report 2017 Section VIII Financial Report KEDA

Remark 1: Amount of bank acceptance draft issued by the parent company and subsidiaries at the end of the period: Unit: yuan, Currency: RMB Amount of bank acceptance Company name draftissued at the end of the period KEDA Clean Energy Co., Ltd. 387,740,000.00 KEDA (Anhui) Industrial Co., Ltd. 88,528,000.00 Zhangzhou Juming Graphite Co., Ltd. 444,720.00 KEDA (Anhui) Clean Energy Co., Ltd. 39,075,000.00 Foshan Henglitai Machinery Co., Ltd. 35,567,900.00 Foshan Zhuolitai Machinery Co.,Ltd. 2,846,195.00 Jiangsu Cohen Environmental Protection Technology Co.,Ltd. 116,900,000.00 Henan KEDA Dongda International Engineering Co., Ltd. 16,321,326.00 Total 687,423,141.00

Payables (1). Listing of payables √Applicable □Not applicable Unit: yuan, Currency: RMB Item Closing balance Opening balance 1Within 1 year 1,112,495,351.62 1,281,416,004.55 1 to 2 years 198,115,557.31 158,910,739.62 2 to 3 years 51,165,257.14 39,268,704.66 3More than 3 years 18,789,354.08 17,529,897.38 Total 1,380,565,520.15 1,497,125,346.21

(2). Significant payables with debt age of more than 1 year √Applicable □Not applicable Unit: yuan, Currency: RMB Cause for not repaid Item Closing balance or carried forward ESupplier E 17,200,711.00 Within credit period FSupplier F 6,149,200.00 Within credit period GSupplier G 2,746,078.00 Within credit period Total 26,095,989.00 /

Remarks: □Applicable √Not applicable

Long-term borrowings (1). Classification of long-term borrowings √Applicable □Not applicable Unit: yuan, Currency: RMB Item Closing balance Opening balance Pledge loan 883,436,132.01 Mortgage loan Warranted loan 318,333,586.13 152,351,898.97 Credit loan 60,000,000.00 240,000,000.00 Total 1,261,769,718.14 392,351,898.97

Annual Report 2017 65 KEDA Section VIII Financial Report

Classification of long-term borrowings: Remark 1: Details of the pledge loan set out as follows: Amount of Amount Borrower Pledge Currency original converted currency into RMB KEDA Clean Energy Shares of Qinghai Weili, shares of RMB 278,436,132.00 278,436,132.00 Co., Ltd. KEDA (Qinghai) Lithium KEDA Clean Energy Shares of Lanke Lithium RMB 405,000,000.00 405,000,000.00 Co., Ltd. KEDA Clean Energy Shares of KEDA (Anhui) Clean RMB 200,000,000.01 200,000,000.01 Co., Ltd. Energy Total 883,436,132.01 883,436,132.01

Remarks 2: Details of warranted borrowing set out as follows: Mode of Amount of Amount converted Borrower Guarantor Currency guarantee original currency into RMB Anhui Xincheng Financing Warranted KEDA Clean Energy Co., Ltd. RMB 137,257,127.23 137,257,127.23 and Leasing Co., Ltd. guarantee Twyford Ceramics Company Warranted KEDA Clean Energy Co., Ltd. Euro 9,800,000.00 76,162,711.36 Limited guarantee Twyford (Ghana) Ceramics Warranted KEDA Clean Energy Co., Ltd. Euro 13,500,000.00 104,913,747.54 Company Limited guarantee Total 318,333,586.13

Remark 3 the closing balance of long-term borrowings increased by 221.59% compared with the opening balance, mainly due to the significant increase of the parent company’s long-term borrowings.

Others, including interest rate range: □Applicable √Not applicable

Special accounts payable □Applicable √Not applicable

Estimated liabilities √Applicable □Not applicable Unit: yuan, Currency: RMB Opening Closing Item Cause balance balance External guarantee Pending action Accrued expenses of repair, Product quality assurance 570,761.21 replacement and return Restructured obligations Nerous contract to be executed Others Total 570,761.21 /

66 Annual Report 2017 Section VIII Financial Report KEDA

Deferred income Deferred income √Applicable □Not applicable Unit: yuan, Currency: RMB Opening Increment Decrement Closing Item Cause balance in this period in this period balance Special fund granted Government subsidy 73,160,000.00 10,745,000.00 62,415,000.00 by the government Total 73,160,000.00 10,745,000.00 62,415,000.00 /

Projects involving government subsidy: √Applicable □Not applicable Unit: yuan, Currency: RMB Amount Newly Amount accounted into Related to Opening increased Other Closing Projects with liabilities accounted into non-operating assets/related to balance subsidy in changes balance other income income in this earnings this period period NewpowerSupporting fund for construction of manufacturing base of clean coal gas of Newpower appropriated by Anhui 17,500,000.00 3,500,000.00 14,000,000.00 Related to assets Energy Bureau Technological transformation project of large-scale ceramic 1,020,000.00 510,000.00 510,000.00 Related to assets sheet production equipment Technological transformation project of new energy saving and environmental protection wall material complete 2,940,000.00 735,000.00 2,205,000.00 Related to assets equipment Special fund support for circularization reconstruction pilot 37,200,000.00 4,500,000.00 32,700,000.00 Related to assets Industrial support fund of Henglitai 14,500,000.00 1,500,000.00 13,000,000.00 Related to assets Total 73,160,000.00 10,745,000.00 62,415,000.00 /

Remark: □Applicable √Not applicable

Capital reserve √Applicable □Not applicable Unit: yuan, Currency: RMB Increment in Decrement in Item Opening balance Closing balance this period this period Capital premium (share 189,075,104.59 1,020,887,274.66 163,949,019.33 1,046,013,359.92 premium) Other Capital reserve 89,029,725.92 158,739.92 88,870,986.00 Total 278,104,830.51 1,020,887,274.66 164,107,759.25 1,134,884,345.92

Remark, including increase or decrease in this period and causes: Remark 1: Capital reserve-share premium increased by 1,020,887,274.66 yuan in this period, of which 1,020,641,305.53 yuan was due to the increase in capital raised from the companys private placement in capital reserve; in addition, 242,756.95 yuan was due to the increase in minority shareholders capital increase in March 2017; the other 3,212.18 yuan was due to the increase in the sale of electricity by 22.00% of Keneng Energy Sale in October 2017. Remark 2: Capital reserve-share premium decreased by 163,949,019.33 yuan in this period, of which 155,576,691.96 yuan was due to the companys purchase of 38.00% of KEDA (Qinghai) Lithiums minority shares in July 2017; in addition,7,245,842.01 yuan was due to the subsidiary Henglitai company’s purchasing of 30.00% of minority shares of Zhuolitai; the other 1,126,485.36 yuan was due to the KEDA (Anhui) Industrial’s purchasing of 10.00% minority shares of KED Clean Energy New Material in April 2017. Remark 3: Capital reserveother capital reserve decreased by 158,739.92 yuan in this period, due to the change of other equity of Lanke Lithium, a joint venture of the subsidiaries KEDA (Qinghai) Lithium and Qinghai Weili confirmed by the equity law.

Annual Report 2017 67 KEDA Section VIII Financial Report

Retained earnings √Applicable □Not applicable Unit: yuan, Currency: RMB Item This period Last period Retained earnings before adjustment at the end of the last period 2,074,268,447.78 1,934,975,969.16 Total retained earnings under adjustment at the beginning of the period (“+” for increment, “–” for decrement) Retained earnings after adjustment at the beginning of the period 2,074,268,447.78 1,934,975,969.16 Add: net profit attributed to shareholders of the parent company in 478,891,307.30 303,289,490.02 this period Less: withdrawal legal surplus reserve 28,643,266.08 22,850,579.20 Withdrawal discretionary Surplusreserve Withdrawal generic risk reserve Common stock dividends payable 112,917,145.76 141,146,432.20 Dividend of ordinary shares converted into capital share Retained earnings at the end of the period 2,411,599,343.24 2,074,268,447.78 Details of retained earnings under adjustment at the end of the period: 1. Due to the retrospective adjustment of the Accounting Standards for Enterprises and related new regulations, no retained earningss at the beginning of the period is affected. 2. Due to the changes in accounting policies, no retained earningss at the beginning of the period is affected. 3. Due to the corrections of significant accounting errors, no retained earningss at the beginning of the period is affected. 4. Due to the changes of consolidation range under the same control, no retained earningss at the beginning of the period is affected. 5. Due to other adjustments, no retained earningss at the beginning of the period in total is affected.

Sales revenue and costs √Applicable □Not applicable Unit: yuan, Currency: RMB Current period Last period Item revenue cost revenue cost Major operations 5,725,602,461.96 4,540,913,991.23 4,374,091,317.72 3,368,518,287.88 Other operations 2,911,155.31 1,644,425.58 6,390,388.69 5,467,499.08 total 5,728,513,617.27 4,542,558,416.81 4,380,481,706.41 3,373,985,786.96

Major operations (based on branch product) Unit: yuan, Currency: RMB Current period Last period Name of product Operating revenue Operating cost Operating revenue Operating cost Building material 4,060,972,115.66 3,190,905,432.08 3,291,631,170.99 2,550,172,461.81 machinery Equipment of clean 985,187,305.07 774,592,092.57 801,868,451.16 569,657,720.10 energy Service of clean energy 110,692,072.75 196,385,665.02 75,788,806.56 166,108,273.21 Financing & leasing 121,027,632.11 20,710,679.04 131,794,579.48 21,849,876.96 Material of lithium battery 228,185,044.12 210,334,498.25 42,990,216.85 39,377,922.38 Ceramics for 83,285,582.05 56,635,122.20 construction Other items 136,252,710.20 91,350,502.07 30,018,092.68 21,352,033.42 Total 5,725,602,461.96 4,540,913,991.23 4,374,091,317.72 3,368,518,287.88

68 Annual Report 2017 Section VIII Financial Report KEDA

Major businesss branch industry Unit: yuan, Currency: RMB Current period Last period Regions Operating revenue Operating cost Operating revenue Operating cost Domestic market 3,683,454,123.86 2,988,248,673.00 3,091,394,854.68 2,425,910,029.43 Overseas market 2,042,148,338.10 1,552,665,318.23 1,282,696,463.04 942,608,258.45 Total 5,725,602,461.96 4,540,913,991.23 4,374,091,317.72 3,368,518,287.88

Note 1: The sales amounts of the top five customers total 787, 854, 500 yuan (tax excluded), 13.76% of the sales income. Note 2: The operating revenue during the current period increased by 30.77% compared to that of the last period, mainly because the construction equipment, material of lithium battery and other businesses had been expanded. Operating cost during the current period increased by 34.63% compared to that of the last period, mostly because of the expansion of operations and the rising cost of raw material such as steel.

Taxes and surcharges √Applicable □Not applicable Unit: yuan, Currency: RMB Item Current period Last period Consumption tax Business tax 811,153.56 Urban construction and maintenance tax 9,622,008.58 13,474,024.66 Educational surcharges 7,512,917.81 10,057,728.52 Embankment maintenance levy 1,258,530.86 1,511,234.71 Resource tax Real estate tax 9,345,270.71 6,902,824.96 Tax on using urban land 13,159,708.37 9,164,603.39 Vehicle and vessel tax 45,352.50 41,555.00 Stamp tax 3,885,545.32 1,173,892.16 Total 44,829,334.15 43,137,016.96

Marketing costs √Applicable □Not applicable Unit: yuan, Currency: RMB Item Current period Last period Payroll payable 110,941,739.76 81,027,281.99 Travel expenses 35,976,793.94 30,920,054.99 Transportation expenses 42,410,043.62 31,994,540.41 Entertainment expenses 13,683,770.51 10,129,875.70 Promotion expense 16,009,897.85 3,182,302.84 After-sales service costs 20,163,063.00 19,100,677.26 Other items 49,422,521.55 31,295,302.05 Total 288,607,830.23 207,650,035.24 Other details: Marketing costs of the current period rose by 38.99% compared with that of the last period. The main reason lies in the Company had expanded its scale of sales considerably during the current period.

Annual Report 2017 69 KEDA Section VIII Financial Report

Managing costs √Applicable □Not applicable Unit: yuan, Currency: RMB Item Current period Last period Payroll payable 111,682,874.72 109,420,630.61 Office expenses 19,720,379.96 13,056,604.09 Utility bill 9,244,774.38 8,959,416.19 Travel expenses 14,050,424.22 11,594,476.74 Audit and consultancy fees 23,947,107.46 11,371,983.61 Taxes 7,543,040.97 Depreciation and lease expenses 52,693,702.60 50,512,105.74 Amortization of intangibles 18,633,940.34 18,479,608.43 Research and development expense 139,932,091.63 101,522,416.59 Other items 57,148,202.53 36,222,211.03 Total 447,053,497.84 368,682,494.00

Financing costs √Applicable □Not applicable Unit: yuan, Currency: RMB Item Current period Last period Interest expenses 55,874,642.17 27,680,767.78 Decrease: interest revenue -5,267,662.55 -15,177,740.78 Exchange gain or loss 52,120,888.69 -9,833,203.56 Commission expenses 15,064,764.73 8,804,590.56 Total 117,792,633.04 11,474,414.00 Other details: Financing costs of the current period increased by 926.57% compared to that of the last period. The main reasons are that the loss on exchange rose owning to the fluctuating exchange rate and interest expenses surged, compared to those of the last period.

Income on investment √Applicable □Not applicable Unit: yuan, Currency: RMB Item Current period Last period Income on long-term equity investment accounted by equity method 148,264,617.76 -8,859,118.21 Income on disposal of long-term equity -882,279.42 -3,599,559.06 Income on financial assets in holding period accounted by fair value whose changes included in the current profits or losses Income on disposal of financial assets accounted by fair value whose changes included in the current profits or losses Income on held-to-maturity investment in holding period Income on financial assets and other investment available for sale Income on disposal of financial assets investment available for sale Income occurred after remaining equity recalculated at fair value when parent company lose its right of control Income recognized from the fair value of the purchase date of the equity held by the acquired company in the enterprise merging not 108,390,756.70 under the same control. Total 255,773,095.04 -12,458,677.27

70 Annual Report 2017 Section VIII Financial Report KEDA

Note 1: Income from long-term equity investment accounted by equity method √Applicable □Not applicable Unit: yuan, Currency: RMB Enterprise invested Current period Last period Qinghai Salt Lake Fozhao Lanke Lithium Co., Ltd. 147,579,967.83 Bright star Investment Limited 14,877,340.15 -7,469,663.94 Twyford (Ghana) Ceramics -7,115,166.66 -1,390,221.97 Twyford (Tanzania) Ceramics -6,815,974.82 Sichuan Guangxing Lithium Science & Technology Co., Ltd. 895,202.79 Anhui Hudu KEDA Fluid Machinery Co., Ltd. -1,156,651.53 Guangdong Taiwei Digital Ceramics Printing Co., Ltd. -100.00 767.70 Total 148,264,617.76 -8,859,118.21

Note 2: Income on disposal of long-term equity investment Unit: yuan, Currency: RMB Item Current period Last period Anhui Hudu KEDA Fluid Machinery Co., Ltd. -882,279.42 Foshan KEDA Stone Material Machinery Co., Ltd. -3,599,599.06 Total -882,279.42 -3,599,599.06

Note 3: Income recognized from the fair value of the purchase date of the equity held by the acquired company in the enterprise merging not under the same control. Unit: yuan, Currency: RMB Item Current period Last period Brightstar Investment Limited 89,037,124.69 Twyford (Ghana) Ceramics Company Limited 11,307,244.89 Twyford (Tanzania) Ceramics Company Limited 8,046,387.12 Total 108,390,756.70

Revenues from other operations Unit: yuan, Currency: RMB Government Last grants Subsidiary item Current period period recognized in profits Special fund for the 2017 Pearl River Bank Advanced Equipment Manufacturing by the 15,980,000.00 15,980,000.00 Economy and Technology Promotion Bureau of Shunde district, Foshan Industrialization and application of Internet of Things in whole line machinery of building materials the 2011 Special Fund Project of Guangdong Provincial Strategic Emerging 6,800,000.00 6,800,000.00 Industry Development Tax return of relocation of Sanshui Industrial Parks management committee by the 6,009,169.29 6,009,169.29 Finance Bureau of Leping town, Sanshui district, Foshan Subsidy of the first technological heavy equipment set and its application in Anhui province - Comprehensive grants from the 2017 Commission of Economic and 3,500,000.00 3,500,000.00 Information (KDJN Swirl Percussive Dry Powder Gasification System) Tax return of relocation of the headquarter in 2014 support fund from Sanshui Industrial 3,330,128.81 3,330,128.81 Parks management committee The first 10000-ton compressor subsidy for R&D from the Economy Promotion Bureau 3,040,000.00 3,040,000.00 Financial incentives of the year 2016 by the Construction Investment Co., Ltd. in the 2,920,000.00 2,920,000.00 Maanshan Economic and Technological Development Zone Special fund for the intellectual property right by the Finance Bureau of the Tinghu district 2,400,000.00 2,400,000.00 Tax return of the management commission of Yancheng Environmental Protection 2,019,472.31 2,019,472.31 Technology City Provincial-level special fund for advanced equipment manufacturing in the Zhuxi Transportation Hub in 2017 by the Economic and Technological Promotion Bureau of 1,850,000.00 1,850,000.00 Shunde district, Foshan

Annual Report 2017 71 KEDA Section VIII Financial Report

Government Last grants Subsidiary item Current period period recognized in profits Special fund of the Opening-up policy of the 2107 domestic and foreign economic and trade development and port construction by the Economic and Technological Promotion 1,832,408.00 1,832,408.00 Bureau of Shunde Special fund for the Key Laboratory of Energy Saving and Environmental Protection for 1,828,303.18 1,828,303.18 Ceramic Machinery in Guangdong province R&D and Industrialization Project of CNC processing machinery and equipment 1,500,000.00 1,500,000.00 The second batch of provincial-level special fund for the development of modern service 1,000,000.00 1,000,000.00 industry in 2016 from the Finance Bureau of Tinghu district, Yancheng KEDA technical transformation project of complete equipment for wall material of new 735,000.00 735,000.00 energy saving and environmental protection R&D subsidy for KEDAs transformation project of the production equipment of large-scale 510,000.00 510,000.00 ceramic sheets R&D subsidy for the Newpower clean coal gasification system of KEDA (Anhui) Industrial 3,500,000.00 3,500,000.00 Co., Ltd. Special fund for the pilot project of recyclable reform in Shenyang province 4,500,000.00 4,500,000.00 Support fund for Foshan Henglitai Machinery Co., Ltd. by the Economy Promotion Bureau 1,500,000.00 1,500,000.00 in Leping town, Sanshui district Subsidy for corporate mergers and reorganizations of the Treasury Centralized Payment 1,140,000.00 1,140,000.00 Center of Dangtu county Special fund for the Establishment of Investment Corporation Limited in the Ma’anshan 7,839,307.27 7,839,307.27 Economic and Technological Development Zone Other financial subsidies 12,575,862.35 12,575,862.35 Total 86,309,651.21 86,309,651.21

Income tax expense (1) diagram of income tax √Applicable □Not applicable Unit: yuan, Currency: RMB

Item Current period Last period Income tax of the current period 73,638,456.06 74,375,762.65 Deferred income tax -9,077,684.71 1,429,057.79 Total 64,560,771.35 75,804,820.44

(2) The current net cash flow by disposal of subsidiary companies √Applicable □Not applicable Unit: yuan, Currency: RMB Amount Current cash and equivalents by disposal of subsidiaries during the current period 15,000,000.00 Anhui Hudu KEDA Fluid Machinery Co., Ltd. 15,000,000.00 Decrease: cash and equivalents held by subsidiaries at the date of losing right of control 10,582,833.07 Anhui Hudu KEDA Fluid Machinery Co., Ltd. 10,582,833.07 Increase: current cash and equivalents by disposal of subsidiaries over the past periods Current net cash flow by disposal of subsidiary companies 4,417,166.93

72 Annual Report 2017 Section VIII Financial Report KEDA

Governmental subsidy 1.Basic information √Applicable □Not applicable Unit: yuan, Currency: RMB Amount recognized Type Amount Other items in the current profits and losses Fund of supporting construction of the production base for the Newpower clean coal Revenues from 3,500,000.00 3,500,000.00 gasification system by the Bureau of Energy in Anhui province. other operations Revenues from Transformation project of the production equipment of large-scale ceramic sheets 510,000.00 510,000.00 other operations Technological transformation project of new energy saving and environmental protection Revenues from 735,000.00 735,000.00 wall material complete equipment other operations Revenues from Special fund for the pilot project of recyclable reform 4,500,000.00 4,500,000.00 other operations Revenues from Support fund for Foshan Henglitai Machinery Co., Ltd. 1,500,000.00 1,500,000.00 other operations Subsidy for corporate mergers and reorganizations of the Treasury Centralized Payment Revenues from 1,140,000.00 1,140,000.00 Center of Dangtu county other operations Special fund for the Establishment of Investment Corporation Limited in the Ma’anshan Revenues from 7,839,307.27 7,839,307.27 Economic and Technological Development Zone other operations Revenues from Other financial subsidies 6,808,923.60 6,808,923.60 other operations Provincial-level special fund for advanced equipment manufacturing in the Zhuxi Revenues from Transportation Hub in 2017 by the Economic and Technological Promotion Bureau of 1,850,000.00 1,850,000.00 other operations Shunde district, Foshan Special fund of the Opening-up policy of the 2107 domestic and foreign economic and Revenues from trade development and port construction by the Economic and Technological Promotion 1,832,408.00 1,832,408.00 other operations Bureau of Shunde district, Foshan Special fund for the Key Laboratory of Energy Saving and Environmental Protection for Revenues from 1,828,303.18 1,828,303.18 Ceramic Machinery in Guangdong province other operations Special fund for advanced equipment manufacturing in the Pearl River Delta area in 2017 Revenues from 15,980,000.00 15,980,000.00 by the Economic and Technological Promotion Bureau of Shunde district, Foshan other operations Inspection of the project of R&D and industrialization for CNC processing machinery and Revenues from 1,500,000.00 1,500,000.00 equipment other operations Special fund of 6.8 million yuan after inspection of the project of Industrialization and Revenues from application of Internet of Things in whole line machinery of building materials the 2011 6,800,000.00 6,800,000.00 other operations Special Fund Project of Guangdong Provincial Strategic Emerging Industry Development Subsidy of the first technological heavy equipment set and its application in Anhui Revenues from province - Comprehensive grants from the 2017 Commission of Economic and 3,500,000.00 3,500,000.00 other operations Information (KDJN Swirl Percussive Dry Powder Gasification System) Financial incentives of the year 2016 by the Construction Investment Co., Ltd. in the Revenues from 2,920,000.00 2,920,000.00 Ma’anshan Economic and Technological Development Zone other operations Revenues from The first 10000-ton compressor subsidy for R&D from the Economy Promotion Bureau 3,040,000.00 3,040,000.00 other operations Tax return of relocation of the headquarter in 2014 support fund from Sanshui Industrial Revenues from 3,330,128.81 3,330,128.81 Parks management committee other operations Tax return of relocation of Sanshui Industrial Parks management committee by the Revenues from 6,009,169.29 6,009,169.29 Finance Bureau of Leping town, Sanshui district, Foshan other operations The second batch of provincial-level special fund for the development of modern service Revenues from 1,000,000.00 1,000,000.00 industry in 2016 from the Finance Bureau of Tinghu district, Yancheng other operations Revenues from Special fund for the intellectual property right by the Finance Bureau of the Tinghu district 2,400,000.00 2,400,000.00 other operations Tax return of the management commission of Yancheng Environmental Protection Revenues from 2,019,472.31 2,019,472.31 Technology City other operations Revenues from Other financial subsidies 5,766,938.75 5,766,938.75 other operations Total 86,309,651.21 86,309,651.21

Annual Report 2017 73 KEDA Section VIII Financial Report

Change of consolidation scope Merging not under the same control √Applicable □Not applicable (1). Merging not under the same control in the current period √Applicable □Not applicable Unit: ten thousand yuan Currency: RMB Income of the Net income acquiree Capital from the Date of Cost of Equity from the acquisition Date of Evidence of the date of Name of the acquiree acquiring acquiring acquisition date of ratio acquisition date of acquisition acquisition equity equity method acquisition (%) to the end of to the the period end of the period Qinghai Weili New Energy Business registration 2017-06-01 16,431.61 53.62 Cash 2017-06-01 4,285.82 Material Co., Ltd. of change Business registration Qinghai KEDA Lithium Co., Ltd. 2017-06-01 30,970.24 62.00 Cash 2017-06-01 10,404.67 of change Ma’anshan KEDA Jinxin Business registration Automobile Maintenance Service 2017-10-01 51.00 51.00 Cash 2017-10-01 28.29 -11.39 of change Co., Ltd. Acquisition of the right of control of the Brightstar Investment Limited 2017-10-01 20,654.53 51.00 Cash 2017-10-01 acquired company 6,315.99 620.64 and payment of consideration Acquisition of the right of control of the Twyford (Ghana) Ceramics 2017-12-01 338.13 51.00 Cash 2017-12-01 acquired company 1,745.69 -52.45 Company Limited and payment of consideration Acquisition of the right of control of the Twyford (Tanzania) Ceramics 2017-12-01 336.94 51.00 Cash 2017-12-01 acquired company 266.88 -427.37 Company Limited and payment of consideration

(1).Major financial information of important joint ventures √Applicable □Not applicable Unit: ten thousand yuan Currency: RMB Closing balance Opening balance Qinghai Salt Lake Qinghai Salt Lake Qinghai Salt Lake Qinghai Salt Lake Fozhao Lanke Fozhao Lanke Fozhao Lanke Fozhao Lanke Lithium Co., Ltd. Lithium Co., Ltd. Lithium Co., Ltd. Lithium Co., Ltd. Current assets 74,881.06 35,972.14 Non-current assets 86,292.83 66,409.40 Total assets 161,173.89 102,381.54 Current liabilities 52,279.83 50,274.64 Non-current liabilities 18,114.44 3,434.44 Total liabilities 70,394.27 53,709.08 Non-controlling interest Total equity attributed to stockholders of parent company Pro-rata share of net assets 39,561.76

74 Annual Report 2017 Section VIII Financial Report KEDA

Closing balance Opening balance Qinghai Salt Lake Qinghai Salt Lake Qinghai Salt Lake Qinghai Salt Lake Fozhao Lanke Fozhao Lanke Fozhao Lanke Fozhao Lanke Lithium Co., Ltd. Lithium Co., Ltd. Lithium Co., Ltd. Lithium Co., Ltd. Adjustment items 56,905.90 — Goodwill 40,539.78 — Unrealised profits on internal transactions — Others 16,366.12 Carrying amount of investment on equity of 96,467.66 associates Fair value of associates equity investments with public offer Operating revenue 74,846.25 31,080.03 Net income 42,033.22 13,472.21 Net income of discontinued operations Other comprehensive income Total comprehensive income 42,033.22 13,472.21 Dividends from the associate of the current year

Subsidiaries of the Company Details of the subsidiaries as shown in the appendix √Applicable □Not applicable Unit: ten thousand yuan Currency: RMB Voting Legal Nature of Registered Shareholding Unified social Full name of subsidiaries Type Registration site shares representative business capital ratio (%) credit code (%) Ma’anshan Economic and KEDA (Anhui) Industrial LLC Technological Development Zone, Chen Xinjiang Manufacturing 80,000.00 100.00 100.00 9134050067589409XX Co., Ltd. Anhui province Joint Ma’anshan Economic and KEDA (Anhui) Clean stock Technological Development Zone, Liu Huaiping Manufacturing 4,460.00 97.37 97.37 91340500661503967A Energy Co., Ltd. company Anhui province KEDA (Shenyang) Clean Faku Economic Development Zone, LLC Fei Jichuan Manufacturing 40,000.00 82.50 82.50 91210124550792268N Energy Gas Co., Ltd. Liaoning province Industrial Park of the Dadu Villagers Foshan KEDA Hydraulic LLC Committee in Shunde district, Yang Jun Manufacturing 3,850.00 58.85 58.85 91440606568290581X Machinery Co., Ltd. Foshan Foshan Henglitai Sanshui Central Science and LLC Yang Xuexian Manufacturing 12,560.00 100.00 100.00 91440600712393666R Machinery Co., Ltd. Technology Industrial Park, Foshan Ma’anshan Economic and Anhui Xincheng Investment Commercial LLC Technological Development Zone, Zhou Peng 25,000.00 100.00 100.00 913405006986740300 Co., Ltd. service industry Anhui province Wuhu KEDA Suremaker Wuhu Machinery Industrial Park, LLC Chen Xinjiang Manufacturing 5,000.00 100.00 100.00 9134022166624276X0 Co., Ltd. Anhui province Changsha Economic and Changsha Aer LLC Technological Development Zone, Zeng Fei Manufacturing 2,608.00 100.00 100.00 91430100755827962Y Compressor Co., Ltd. Hunan province Henan KEDA Dongda International Engineering LLC Jian She Xi Lu, Zhengzhou Zhao Pengxi Manufacturing 5,000.00 100.00 100.00 914101007067856557 Co., Ltd. Foshan Zhuolitai LLC Sanshui district, Foshan Hu Jianguo Manufacturing 396.00 80.76 80.76 91440607664966596M Machinery Co., Ltd. Jiangsu Cohen Yancheng Environmental Protection Environmental Protection LLC Science and Technology City, Liu Huaiping Manufacturing 13,636.36 72.00 72.00 913209026086112210 Technology Co.,Ltd. Jiangsu Province Cohen Environmental Protection Technology LLC Pingluo county, Ningxia Liu Huaiping Manufacturing 5,000.00 100.00 100.00 91640221574868431X Co.,Ltd. Ma’anshan Economic and Anhui KEDA Clean Energy LLC Technological Development Zone, Zhu Yafeng Manufacturing 7,000.00 100.00 100.00 91340521355187820D New Material Co., Ltd. Anhui province

Annual Report 2017 75 KEDA Section VIII Financial Report

Voting Legal Nature of Registered Shareholding Unified social Full name of subsidiaries Type Registration site shares representative business capital ratio (%) credit code (%) Zhangzhou Juming Chuanchang county, Nanjing town, LLC Wu Jianyun Manufacturing 5,000.00 100.00 100.00 91350627717396444C Graphite Co., Ltd. Fujian province Ma’anshan Economic and Anhui KEDA Borui Energy Technological Development Zone, 800.00 51.00 51.00 91340521MA2N1EB218 Technology Co., Ltd. Anhui province Ma’anshan Economic and KEDA (Anhui) New Energy Commercial LLC Technological Development Zone, Zhangfeng 1,000.00 100.00 100.00 91340500MA2MTEPE07 Automobile Sales Co., Ltd. service industry Anhui province KEDA (Anhui) Huadong Ma’anshan Economic and Commercial New Energy Automobile LLC Technological Development Zone, Zhu Hongjun 1,000.00 51.00 51.00 91340500MA2MUTTP26 service industry Travel Service Co., Ltd. Anhui province Ma’anshan Economic and Anhui Keda Power Commercial LLC Technological Development Zone, Zhangfeng 20,001.00 53.00 53.00 91340500MA2MT7G34X Business Co., Ltd. service industry Anhui province Ma’anshan Economic and KEDA (Anhui) Keneng Commercial Technological Development Zone, Gao Yongbo 2,100.00 76.00 76.00 91340100MA2MXP9E0B Energy Sale Co., Ltd. service industry Anhui province Foshan Delitai Science & Sanshui Central Science and LLC Chen Tian Manufacturing 2,550.00 100.00 100.00 91440607MA4UNRGA45 Technology Co., Ltd. Technology Industrial Park, Foshan Foshan KEDA Ceramics Chencun town, Shunde district, LLC Wang Deliang Manufacturing 2,000.00 51.00 51.00 91440606MA4UUWAC43 Co., Ltd. Foshan Qinghai Weili New Energy Dongchuan Industrial Park, Xining, LLC Zhu Yafeng Manufacturing 2,000.00 53.62 53.62 91632900679184650E Material Co., Ltd. Qinghai Province Qinghai KEDA Lithium Co., Xining Economic and Technological LLC Zhu Yafeng Manufacturing 10,000.00 100.00 100.00 916300006791880023 Ltd. Development Zone Zijin Technology Innovation Special Jiangsu KEDA Electric Commercial LLC Community, Nanjing, Jiangsu Zhang Feng 20,100.00 73.00 73.00 91320115MA1P1QC122 Power Co., Ltd. service industry province Anqing Suoxiang Commercial LLC Yingjiang district, Anqing Gao Yongbo 2100.00 58.00 58.00 91340800MA2N13K96Y Electricity Sale Co., Ltd. service industry Fujian KEDA Electric Commercial LLC Siming district, Xiamen Zhang Feng 20,100.00 51.00 51.00 91350200MA2YK1T08A Power Co., Ltd. service industry Ma’anshan KEDA Jinxin Ma’anshan Economic and Commercial Automobile Maintenance LLC Technological Development Zone, Zhu Hongjun 200.00 51.00 51.00 91340500343923587M service industry Service Co., Ltd. Anhui province

Registration Legal Nature of Registered Shareholding Voting Full name of subsidiaries Type site representative business capital ratio (%) share (%) Zhong Import-export KEDA Industrial (Hong Kong) Limited LLC Hong Kong 1,300.00 100.00 100.00 Yingzhou trade Guangdong Xincheng Financing and Shunde district, Commercial LLC Wang Gang 2,700.00 100.00 100.00 Leasing Co., Ltd. Foshan service industry Ma’anshan Economic and Anhui Xincheng Financing and Technological Commercial LLC Wang Gang 3,500.00 100.00 100.00 Leasing Co., Ltd. Development service industry Zone, Anhui province Zhong Commercial Keda Holding (Mauritius) Limited LLC Mauritius 3,334.00 100.00 100.00 Yingzhou service industry Commercial Brightstar Investment Limited LLC Mauritius / 2,,550.00 51.00 51.00 service industry Twyford Ceramics Company Limited LLC Kenya Manufacturing 100.00 51.00 51.00 Twyford (Ghana) Ceramic Company LLC Ghana / Manufacturing 100.00 51.00 51.00 Limited Twyford (Tanzania) Ceramics LLC Tanzania / Manufacturing 100.00 51.00 51.00 Company Limited

76 Annual Report 2017 Section VIII Financial Report KEDA

Unit: ten thousand yuan Currency: rupee Registration Legal Nature of Registered Shareholding Voting Name Type site representative business capital ratio (%) share (%) Keda Industrial (India) Limited LLC India Zou Weiyi Manufacturing 6,500.00 90.00 90.00

Registration Legal Nature of Registered Shareholding Voting Name Type site representative business capital ratio (%) share (%) Keda Turkey Makine Ticaret Import-export LLC Turkey Zeng Fei 30.00 100.00 100.00 Limited Sirketi trade

Associates & Joint ventures Important associates and joint ventures of the Company as detailed in the appendix √Applicable □Not applicable Important associates and joint ventures of the Company are shown as below. Unit: ten thousand yuan Currency: RMB Shareholding Voting Legal Nature of Registration Unified social credit Name of companies invested Type Registration site ratio of the share of the representative business capital code associates Company (%) Company (%) Foshan, Guangdong Taiwei Digital LLC Guangdong Xu Lei Manufacturing 2,000.00 40.00 40.00 91440606594058786U Ceramics Printing Co., Ltd. province Anhui Hudu KEDA Fluid Maanshan, Anhui LLC Liu Dongliang Manufacturing 3,000.00 49.00 49.00 913405000948292819 Machinery Co., Ltd. province Jiangsu Zhongchuang Qingyuan Yancheng, LLC Li Bing Manufacturing 2,600.00 30.00 30.00 91320902MA1T55U237 Technology Co., Ltd. Jiangsu province Sichuan Guangxing Lithium Aba, Sichuan LLC Feng Yu Manufacturing 5,000.00 20.00 20.00 915132003145597129 Science & Technology Co., Ltd. province Qinghai Salt Lake Fozhao Lanke Golmud, Qinghai LLC He Yongping Manufacturing 34,332.26 43.58 48.58 91630000781439859F Lithium Co., Ltd. province

(1). Guarantor and its debtors KEDA as the guarantor √Applicable □Not applicable Unit: ten thousand yuan Currency: RMB Whether the Guarantee Starting date Maturity date Debtor guarantee is amount of guarantee of guarantee completed Anhui Xincheng Financing and Leasing Co., Ltd. 66,527.20 2017/01/20 2020/10/10 No Foshan Zhuolitai Machinery Co., Ltd. 1,000.00 2017/12/25 2018/12/25 No Foshan Zhuolitai Machinery Co., Ltd. 284.62 2017/08/30 2018/05/05 No Zhangzhou Juming Graphite Co., Ltd. 1,794.20 2017/03/27 2018/02/28 No Zhangzhou Juming Graphite Co., Ltd. 44.47 2017/09/14 2018/03/13 No Jiangsu Cohen Environmental Protection Technology Co., Ltd. 24,400.00 2017/01/11 2018/12/28 No Jiangsu Cohen Environmental Protection Technology Co., Ltd. 11,690.00 2017/07/13 2018/6/26 No Anhui KEDA Electromechanical Co., Ltd. 8,852.80 2017/07/27 2018/6/25 No Anhui KEDA Clean Energy Co., Ltd. 3,907.50 2017/01/17 2018/07/06 No Foshan Henglitai Machinery Co., Ltd. 3,556.79 2017/08/17 2018/06/26 No Henan KEDA Dongda International Engineering Co., Ltd. 1,632.13 2017/09/19 2018/06/25 No Qinghai Salt Lake Fozhao Lanke Lithium Co., Ltd. 7,821.38 2017/12/22 2022/06/20 No Twyford Ceramics Company Limited 1,050.00 Euro 2016/12/21 2020/06/21 No Twyford (Ghana)Ceramics Company Limited 1,350.00 Euro 2017/01/25 2021/01/24 No Keda Turkey Makine Ticaret Limited irketi 100.00 Euro 2017/08/10 2018/09/03 No Xincheng International (Hong Kong) Co., Ltd. 1,000.00 Euro 2017/05/09 2018/09/25 No

Annual Report 2017 77 KEDA Section VIII Financial Report

(2). other related transactions √Applicable □Not applicable Unit: ten thousand yuan Currency: RMB Creditor Debtor Amount Starting date Maturity date Details Keda Holding (Mauritius) Twyford (Tanzania) Ceramics 6,024.47 2017-05-31 Limited Company Limited Keda Holding (Mauritius) Twyford (Ghana) Ceramics 3,060.23 2017-1-31 Limited Company Limited

Note: The loan was an interest-free loan offered to the associate by Keda Holding as a shareholder under the joint venture agreement.

VI. Notes to the significant items of the financial statement of parent company

Accounts receivable (1). Classification of accounts receivable √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Opening balance Book balance Bad debt provision Book balance Bad debt provision Category Proportion Proportion Proportion Book value Proportion Book value Amount Amount of provision Amount amount of provision (%) (%) (%) (%) Receivables with significant single amount and provision accrued separately Loans of subsidiaries 533,419,035.50 58.08 533,419,035.50 431,604,497.47 75.55 431,604,497.47 Receivables with provision accrued according to credit 378,255,120.55 41.18 20,330,128.61 357,924,991.94 132,573,799.15 23.20 9,536,763.30 7.19 123,037,035.85 risk feature portfolio Receivables with insignificant single amount 6,789,563.45 0.74 6,789,563.45 100.00 7,158,547.79 1.25 7,158,547.79 100.00 and provision accrued separately Total 918,463,719.50 27,119,692.06 891,344,027.44 571,336,844.41 100.00 16,695,311.09 554,641,533.32

In the combination, receivables with provision for bad debts based on aging analysis method: √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Aging Bad debt Proportion of Receivable provision provision (%) Within 1 year 362,880,810.24 18,144,040.53 5.00 1 to 2 years 11,135,359.78 1,113,535.98 10.00 2 to 3 years 3,957,998.04 791,599.61 20.00 3 to 5 years 50.00 Above 5 years 280,952.49 280,952.49 100.00 Total 378,255,120.55 20,330,128.61

In the combination, receivables with provision for bad debts based on other analysis methods: √Applicable □Not applicable Unit: yuan, Currency: RMB Name Carrying amount Bad debt provision Loans of subsidiaries 533,419,035.50 Total 533,419,035.50

78 Annual Report 2017 Section VIII Financial Report KEDA

(2). Provision for bad debts, recovery or reversal of the provision for bad debts for the current period: Provision for bad debts for the current period is 13,055,590.924 yuan; the recovery or reversal of the provision for bad debts is 304,869.45 yuan.

(3). The top five largest accounts receivables by the closing balance collected regarding the borrowers √Applicable □Not applicable Unit: yuan, Currency: RMB Proportion of Relation with the total Name Amount Aging the Company accounts receivable (%) Xincheng International (Hong Wholly owned subsidiary 343,014,913.70 Within one year 37.35 Kong) Co., Ltd. Anhui Xincheng Financing and Wholly owned subsidiary 183,792,520.00 Within one year 20.01 Leasing Co., Ltd. Customer H Non-related party 127,277,769.86 Within one year 13.86 Customer I Non-related party 104,187,070.00 Within one year 11.34 Customer G Non-related party 13,199,287.18 Within one year 1.44 Total 771,471,560.74 84.00

Other accounts receivable (1). Classification of other accounts receivable √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Opening balance Book balance Bad debt provision Book balance Bad debt provision Category Proportion Proportion Proportion Book value Proportion Book value Amount Amount of Amount Amount of (%) (%) provision provision Other receivables with significant single amount and provision accrued separately Transaction with affiliated parties 1,885,467,548.45 97.80 1,885,467,548.45 1,044,160,739.72 97.27 1,044,160,739.72 Export tax rebate 12,265,349.94 0.64 12,265,349.94 19,874,987.72 1.85 19,874,987.72 Tender bond 370,000.00 0.02 370,000.00 Receivables with provision accrued according to credit risk 29,776,820.72 1.54 1,760,826.04 5.91 28,015,994.68 9,476,719.38 0.88 1,287,613.43 13.59 8,189,105.95 feature portfolio Other receivables with insignificant single amount and provision accrued separately Total 1,927,879,719.11 1,760,826.04 1,926,118,893.07 1,073,512,446.82 1,287,613.43 1,072,224,833.39

Other accounts receivable with significant single amount and individual provision for bad debts at the end of the period: □Applicable √Not applicable

Annual Report 2017 79 KEDA Section VIII Financial Report

In the combination, other receivables with provision for bad debts based on aging analysis method √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Aging Other accounts Bad debts Proportion of receivable provision provision (%) sub-total within 1 year 28,215,120.72 1,410,756.04 5.00 1 to 2 years 844,000.00 84,400.00 10.00 2 to 3 years 310,600.00 62,120.00 20.00 Above 5 years 100.00 3 to 5 years 407,100.00 203,550.00 50.00 Total 29,776,820.72 1,760,826.04

In the combination, other receivables with provision for bad debts based on other analysis methods: √Applicable □Not applicable Unit: yuan, Currency: RMB Name of the combination Carrying amount Bad debt provision Transactions of related parties 1,885,467,548.45 Export tax rebate 12,265,349.94 Tender bond 370,000.00 Total 1,898,102,898.39

(2). The top five largest other accounts receivables by the closing balance collected regarding the borrowers √Applicable □Not applicable Unit: yuan, Currency: RMB Proportion of Closing Nature of the total amount balance of Name Closing balance Aging the amount of other accounts bad debt receivable provision Qinghai KEDA Lithium Co., Ltd. Current accounts 676,783,600.00 Within 1 year 35.11 KEDA (Shenyang) Clean Energy Gas Co., Ltd. Current accounts 665,880,000.00 Within 4 years 34.54 KEDA (Anhui) Industrial Co., Ltd. Current accounts 331,000,000.00 Within 1 year 17.17 Anhui KEDA Clean Energy and New Material Current accounts 177,000,000.00 Within 1 year 9.18 Co., Ltd. Jiangsu Kexing Environmental Protection Co., Ltd. Current accounts 15,710,000.00 Within 1 year 0.81 Total 1,866,373,600.00 96.81

Long term equity investment √Applicable □Not applicable Unit: yuan, Currency: RMB Closing balance Opening balance Provision Provision Item Book balance for Book value Book balance for Book value devaluation devaluation Investment in 4,096,131,578.91 4,096,131,578.91 2,901,724,395.82 2,901,724,395.82 subsidiaries Investment in associates and joint 29,943,703.91 29,943,703.91 505,252.65 505,252.65 ventures Total 4,126,075,282.82 4,126,075,282.82 2,902,229,648.47 2,902,229,648.47

80 Annual Report 2017 Section VIII Financial Report KEDA

(1) Investment in subsidiaries √Applicable □Not applicable Unit: yuan, Currency: RMB Provision for Closing Decrease for Opening Increase for the Closing devaluation balance of the Name the current balance current period balance for the current provision for period period devaluation KEDA Electromechanical (Hong Kong) 86,712,700.00 86,712,700.00 Co., Ltd. KEDA (Anhui) Industrial Co., Ltd. 680,000,000.00 120,000,000.00 800,000,000.00 KEDA (Anhui) Clean Energy Co., Ltd. 624,323,378.00 624,323,378.00 Foshan KEDA Hydraulic Machinery 28,868,750.00 28,868,750.00 Co., Ltd. Foshan Henglitai Machinery Co., Ltd. 682,954,365.00 100,000,000.00 782,954,365.00 Anhui Xincheng Investment Co., Ltd. 129,954,830.85 136,000,000.00 265,954,830.85 Changsha Aer Compressor Co., Ltd. 69,164,518.97 69,164,518.97 Henan KEDA Dongda International 360,940,993.00 360,940,993.00 Engineering Co., Ltd. Jiangsu Cohen Environmental 180,000,000.00 180,000,000.00 Protection Technology Co., Ltd. KEDA Holding(Mauritius) Limited 48,604,860.00 174,571,052.37 223,175,912.37 Foshan KEDA Ceramics Co., Ltd. 10,200,000.00 10,200,000.00 Qinghai Weili New Energy Material 164,316,130.72 164,316,130.72 Co., Ltd. Qinghai KEDA Lithium Co., Ltd. 499,520,000.00 499,520,000.00 Total 2,901,724,395.82 1,194,407,183.09 4,096,131,578.91

(2) Investment on joint ventures and associates √Applicable □Not applicable Unit: yuan, Currency: RMB Changes of the current period Profits or Cash Closing losses of Adjustment Opening Changes dividend Provision Closing balance Name Additional Reduced investment of other balance of other or profit for Others balance of the investment investment accounted comprehensive equity declared or devaluation provision by equity income issued method Joint ventures Guangdong Taiwei Digital Ceramics Printing Co., 505,252.65 -100.00 505,152.65 Ltd. Anhui Hudu KEDA Fluid 14,700,000.00 -1,156,651.53 13,543,348.47 Machinery Co., Ltd. Sichuan Guangxing Lithium Science & 15,000,000.00 895,202.79 15,895,202.79 Technology Co., Ltd. Sub-total 505,252.65 29,700,000.00 -261,548.74 29,943,703.91 Total 505,252.65 29,700,000.00 -261,548.74 29,943,703.91

Annual Report 2017 81 KEDA Section VIII Financial Report

Sales revenue & cost √Applicable □Not applicable Unit: yuan, Currency: RMB Current period Last period Item Revenue Cost Revenue Cost Major operations 2,547,897,806.96 2,069,785,563.53 2,265,300,816.96 1,813,328,552.18 Other operations 5,055,747.49 3,297,891.51 2,585,851.39 3,166,958.61 Total 2,552,953,554.45 2,073,083,455.04 2,267,886,668.35 1,816,495,510.79

Investment income √Applicable □Not applicable Unit: yuan, Currency: RMB Item Current period Last period Income from long-term equity investment based on the cost method 153,369,417.00 7,200,000.00 Income from long-term equity investment based on the equity method -261,548.74 767.70 Investment income from disposal of long-term equity investment 3,725,545.44 Total 153,107,868.26 10,926,313.14

(1) Income from long-term equity investment based on the cost method Item Current period Last period Foshan Henglitai Machinery Co., Ltd. 150,000,000.00 KEDA Holding (Mauritius) Limited 3,369,417.00 Jiangsu Cohen Environmental Protection Technology Co., Ltd. 7,200,000.00 Total 153,369,417.00 7,200,000.00

(2) Income from long-term equity investment based on the equity method Item Current period Last period Sichuan Guangxing Lithium Science & Technology Co., Ltd. 895,202.79 Anhui Hudu KEDA Fluid Machinery Co., Ltd. -1,156,651.53 Guangdong Taiwei Digital Ceramics Printing Co., Ltd. -100.00 767.70 Total -261,548.74 767.70

(3) Investment income from disposal of long-term equity investment Item Current period Last period Foshan KEDA Stone Material Machinery Co., Ltd. 3,725,545.44 Total 3,725,545.44

Legal Representative: Wu Muhai

March 31, 2018

82 Annual Report 2017