（ 於中華人民共和國註冊成立的股份有限公司） （股份代號 : 0038） 20172017 年度年度 (A joint stock company incorporated in 報告報告 The People’s Republic of China with limited liability) (Stock Code: 0038) 20172017 ANNUALANNUAL REPORTREPORT 年度報告 2017 ANNUAL REPORT ANNUAL 2017 FIRST TRACTOR COMPANY LIMITED 2017 ANNUAL REPORT IMPORTANT NOTICE I. The board of directors (the “Board”) and board of supervisors (the “Board of Supervisors”) of First Tractor Company Limited (the “Company”), and its directors (the “Directors”), supervisors (the “Supervisors”) and senior management confirm that there are no false information, misleading statements or material omissions contained in this Annual Report, and severally and jointly accept responsibility for the truthfulness, accuracy and completeness of the contents therein. II. Directors absent at the meeting of the Board of the Company Position of Name of absent director absent director Reason for absence Name of proxy Independent Director Yu Zengbiao Business engagement Wu Tak Lung III. Da Hua Certified Public Accountants (Special General Partnership) issued the standard unqualified audit report to the Company. IV. Mr. Zhao Yanshui (the person in charge of the Company), Mr. Yao Weidong (the person in charge of the accounting function) and Ms. Zhou Juan (the person in charge of the Accounting Department and the accounting manager) have declared and confirmed the truthfulness, accuracy and completeness of the financial statements in the Annual Report. V. Proposal of profit distribution or proposal of capitalization from capital reserves for the Reporting Period as considered by the Board. After comprehensively considering the financial position and repurchase of H Shares of the Company, the Company proposes not to distribute any cash dividend for the year. Please refer to section VI “Significant Events” of this annual report for the detailed description of proposal of profit distribution. VI. Statement for the risks involved in forward-looking statements Forward-looking statements such as the development strategy and business plan of the Company contained in this Annual Report do not constitute any substantial commitment to investors by the Company. Investors are advised to pay attention to risks. VII. Is there any misappropriation of funds not in the ordinary course of business by the controlling shareholders or its associates? No. VIII. Is there any external guarantee in violation of any established decision-making procedures? No. IX. Significant risks warning Please refer to “Management Discussion and Analysis” of this Annual Report for detailed description of unfavorable factors and risks which may occur in management and future development of the Company concluded based on the industry and operation situation of the Company under the materiality principle. 1 CONTENTS Section I Definitions ............................................................... 6 Section II Company Profile and Key Financial Indicators ..................................... 9 Section III Report of the Chairman of the Board............................................ 17 Section IV Overview of the Business of the Company ........................................ 20 Section V Management Discussion and Analysis ........................................... 23 Section VI Significant Events .......................................................... 47 Section VII Changes in Ordinary Shares and information on Shareholders ......................... 72 Section VIII Preference Shares ......................................................... 79 Section IX Directors, Supervisors, Senior Management and Employees........................... 80 Section X Corporate Governance ...................................................... 92 Section XI Relevant information on Corporate Bonds ........................................ 109 Section XII Supplemental Information on Finance Business of the Company........................ 112 Section XIII Financial Statement Prepared in accordance with the PRC Accounting Standards for Business Enterprises ........................................... 115 Section XIV Documents Available for Inspection............................................. 340 2 FIRST TRACTOR COMPANY LIMITED 2017 ANNUAL REPORT MAJOR EVENTS OF FIRST TRACTOR IN 2017 February The YTO tractor of the Company was shown at the 77th International Agricultural Machinery and Agricultural Technology Exhibition in France March The Company convened the first extraordinary general meeting in 2017 The Company announced the 2016 annual results April “Dongfanghong” and “YTO” brands of the Company were honoured by Farmer’s Daily Newspaper the Jinkoubei Award for enterprise and product brands May The Company’s high-power tractor that is equipped with a heavy-duty diesel engine independently developed and produced by the Company was exported to the central region of Russia for the first time June The Company convened the annual general meeting July The Company won many awards such as Technology Innovation Award and Market Leading Gold Award in the 2017 Agricultural Machinery Industry TOP50 hosted by the China Association of Agricultural Machinery Manufacturers, the Chinese Society for Agricultural Machinery and the journal Farm Machinery The Company strengthened the internal resource integration, reorganized the hi-power wheeled tractor business and crawler tractor business, and established a high-power tractor assembly factory The Company transferred its 100% stake in YTO (Luoyang) Forklift Truck Company Limited 3 MAJOR EVENTS OF FIRST TRACTOR IN 2017 (CONTINUED) The Company deregistered 10.05 million H shares repurchased during the period authorized at the general meeting, and reduced the registered capital to RMB985.85 million accordingly August The Company announced the 2017 interim results September The Company’s Dongfanghong 400-hoursepower continuously variable transmission heavy-duty tractor was launched on a large-scale achievement exhibition named “The Five Years of Development” The Company amalgamated its wholly-owned subsidiary – YTO (Luoyang) Drive Axle Company Limited October The “Dongfanghong” tractors of the Company that is equipped with a high-pressure common-rail diesel engine was launched on the market Dongfanghong LF954-C driverless tractor, Dongfanghong-LR-6M3Z diesel engine and LR-series National III diesel engine won the 2017 Gold Product Award and 2017 Market Performance Award for China agricultural machinery industry at the 2017 China International Agricultural Machinery Exhibition hosted by the China Association of Agricultural Machinery Manufacturers, the China Agricultural Mechanization Association and the China Agricultural Machinery Distribution Association. The Company won the 2017 Excellence Award for Chinese Agricultural Machinery Manufacturers 4 FIRST TRACTOR COMPANY LIMITED 2017 ANNUAL REPORT MAJOR EVENTS OF FIRST TRACTOR IN 2017 (CONTINUED) The project “Digital Factory with Intelligent Cockpit of Modern Agricultural Equipment” of the Company was selected as a pilot project of the Ministry of Industry and Information Technology and the Ministry of Finance for the comprehensive standardization and new model application for intelligent manufacturing in 2017 The Company announced it was the first enterprise to join the precision agriculture platform covering the whole agricultural industry chain in China November The Dongfanghong LF-2204 power shift tractor of the Company was exhibited in Agritechnica The Dongfanghong LF-2204 power shift tractor of the Company won the “Innovation Award” for agricultural machinery industry in the 8th Intensive Cultivation Cup, and the Company won such awards as “Top 10 Tractor Brands Most Desired by Users” and “An Influential Brand in Chinese Market” The Company convened the 2nd extraordinary general meeting in 2017, appointing Da Hua Certified Public Accountants as the auditor for financial report and internal control 5 MAJOR EVENTS OF FIRST TRACTOR IN 2017 (CONTINUED) December The project “Key Technology and Equipment for Mouldless Composite Forming Manufacturing of Complex Casting” completed jointly by the Company and entities such as China Academy of Machinery Science and Technology was awarded the Second Prize of National Technology Invention The Company won the Most Socially Responsible Listed Company Award in the 2017 Golden Hong Kong Stock hosted by Zhitongcaijing, a financial information and service provider The Company acquired 100% stake in YTO Belarus Technology Co., Ltd. 6 FIRST TRACTOR COMPANY LIMITED 2017 ANNUAL REPORT DEFINITIONS I. DEFINITIONS Unless the context otherwise requires, the following terms should have the following meanings in the Annual Report: The Company/Company means First Tractor Company Limited (第一拖拉機股份有限公司) Group means the Company and its controlled subsidiaries controlled subsidiary means a company held as to more than 50% shares or equity interest by the Company, or a company actually controlled by the Company through agreement and arrangement subsidiary means a subsidiary as defined under the Listing Rules of the Stock Exchange YTO means YTO Group Corporation (中國一拖集團有限公司), the controlling shareholder of the Company Sinomach means China National Machinery Industry Corporation (中國機械工業集團有 限公司), the ultimate controlling shareholder of the Company YTO International Trade means YTO International Economy and Trade Company Limited (一拖國際經 濟貿易有限公司), a wholly-owned subsidiary of the Company Xinjiang Equipment means YTO (Xinjiang) Dongfanghong Equipment Machinery Company Company Limited (一拖（新疆）東方紅裝備機械有限公司),