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大 冷B:2017年年度报告(英文版)(更新后)2018-06-20  

						                 Dalian Refrigeration Co., Ltd. 2017 Annual Report




Dalian Refrigeration Co., Ltd.
     2017 Annual Report




         April, 2018




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                                         Dalian Refrigeration Co., Ltd. 2017 Annual Report



Section 1    Important Notice, Table of Contents, and Definitions

The directors and the Board of Directors, the supervisors and the
Supervisory Board, and Senior staff members of Dalian Refrigeration Co.,
Ltd. (hereinafter referred to as the Company) hereby confirm that there are
not any important omissions, fictitious statements or serious misleading
carried in this report, and shall take all responsibilities, individual and/or
joint, for the reality, accuracy and completeness of the whole contents.

Chairman of the Board of Directors of the Company Mr. Ji Zhijian,
Financial Majordomo Mr. Ma Yun and the head of Accounting Department
Mrs. Mao Chunhua hereby confirm that the financial report of the annual
report is true and complete.

All the directors have attended this Board meeting of the Company.

There is no significant risk having adverse influence on attainment of the
Company's future development strategy and business targets.The paragraph
"Discussion and Analysis of the Business situation" in Section 4 of this
Annual Report describes major risks the Company may be confronted with,
including the risk of Increasing market competition risk,the market
promotion for new product and new technology slow and the Accounts
receivable is on the high side. See the related sections for the
countermeasures to be taken by the Company.

The profit distribution proposal reviewed and adopted at this Board meeting
of the Company is: Based on the total capital stock of 855,908,981 shares, the
dividend of RMB 0.5 in cash (including tax) will be distributed for every 10
shares; The Company will not transfer the capital reserve to increase capital
stock.

This report is written respectively in Chinese and in English. In the event of
any discrepancy between the two above-mentioned versions, the Chinese
version shall prevail.




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                                                                                           Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                                                 CONTENTS


Section 1 Important Notice, Table of Contents, and Definitions ................................................................................2
Section 2 About the Company ....................................................................................................................................5
Section 3 Summary of Main Accounting Data and Financial Indicators....................................................................8
Section 4 Board of Directors' Report..........................................................................................................................9
Section 5 Important Issues........................................................................................................................................20
Section 6 Change in Share Capital and Shareholders' Information ..........................................................................26
Section 7 Information on Preferred Stock ................................................................................................................30
Section 8 Information on the Company’s Directors, Supervisors, Senior Management and Staff ...........................31
Section 9 Corporate Governance ..............................................................................................................................36
Section 10 Information on Corporate Bonds ............................................................................................................39
Section 11 Financial Report......................................................................................................................................40
Section 12 Contents of Reference Documents .......................................................................................................158




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                                                                     Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                                   Definitions

           Defined item           Stands for                                        Meaning

Reporting period                 Stands for    From Jan. 1, 2017 to Dec. 31, 2017

The Company, this Company        Stands for    Dalian Refrigeration Co., Ltd.
                                               Wuhan New World Refrigeration Industries Co., Ltd., one of the subsidiaries of
Wuxin Refrigeration              Stands for
                                               the Company where the Company holds 100% of its shares.
                                               Dalian Bingshan Group Engineering Co., Ltd,one of the subsidiaries of the
Bingshan Engineering Company     Stands for
                                               Company where the Company holds 100% of its shares.
                                               Bingshan Technology Service (Dalian) Co., Ltd. one of the subsidiaries of the
Bingshan Service Company         Stands for
                                               Company where the Company holds 100% of its shares.
                                               Dalian Bingshan Ryosetsu Quick Freezing Equipment Co., Ltd., one of the
Bingshan Ryosetsu                Stands for
                                               subsidiaries of the Company where the Company holds 100% of its shares.
                                               Dalian Bingshan Engineering & Trading Co., Ltd. one of the subsidiary of this
Bingshan Engineering & Trading   Stands for    Company, where the controlling shareholder of the Company holds 76% of its
                                               shares before, and the Company holds 100% of its shares since April 2017.
                                               Panasonic Compressor (Dalian) Co., Ltd. one of the mutual shareholding
Panasonic Compressor             Stands for
                                               companies of the Company, where the Company holds 40% of its shares.
                                               Panasonic Cold-Chain (Dalian) Co., Ltd. one of the mutual shareholding
Panasonic Cold-Chain             Stands for
                                               companies of the Company, where the Company holds 40% of its shares.
                                               Dalian Fuji-Bingshan Vending Machine Co., Ltd., one of the mutual
Dalian Fuji-Bingshan             Stands for    shareholding companies of this Company, where the Company holds 49% of its
                                               shares.
                                               Dalian Bingshan Metal Technology Co., Ltd., one of the mutual shareholding
                                               companies of the Company, where the controlling shareholder of the Company
Bingshan Metal Technology        Stands for
                                               holds 49% of its shares before, and the Company holds 49% of its shares since
                                               April 2017.
                                               Keihin Grand-Ocean Cooling & Heating Industry (Dalian) Co., Ltd., one of the
Keihin Grand-Ocean               Stands for    mutual shareholding companies with this Company, where the Company holds
                                               20% of its shares.




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                                                              Dalian Refrigeration Co., Ltd. 2017 Annual Report



                                  Section 2 About the Company
I.   Company information

Short form of the stock                DALENG GUFEN; DALENG-B
Stock code                             000530; 200530
Listed stock exchange                  Shenzhen Stock Exchange
Legal name in Chinese                  大连冷冻机股份有限公司
Legal English name and abbreviation    Dalian Refrigeration Co., Ltd. DRC
Legal representative                   Ji Zhijian
                                       No.106, Liaohe East Road, Dalian Economic and Technological
Registered address
                                       Development Zone
Post code of Registered address        116630
                                       No.106, Liaohe East Road, Dalian Economic and Technological
Office address
                                       Development Zone
Post code of Office address            116630
Internet web site of the Company       www.daleng.cn
E-mail of the Company                  000530@bingshan.com

II. Contact persons and information

                   Secretary of the Board of Directors          Authorized representative for securities affairs
Name         Song Wenbao                                       Du Yu
             DALENG GUFEN Securities﹠Legal Affairs            DALENG GUFEN Securities﹠Legal
Address      No.106, Liaohe East Road, Dalian Economic and     AffairsNo.106, Liaohe East Road, Dalian
             Technological Development Zone                    Economic and Technological Development Zone
Tel.         0411-87968130                                     0411-87968822
Fax          0411-87968125                                     0411-87968125
E-mail       000530@bingshan.com                               000530@bingshan.com

III. Information disclosure and place of preparation for inquiry

Name of the newspaper designated by the Company for     China Securities Daily and Hong Kong Commercial
information disclosure                                  Daily
Address of the website designated by China Securities
                                                        http://www.cninfo.com.cn
Regulatory Commission for publishing this Annual Report
Place where this Annual Report was prepared for inquiry     Securities﹠Legal Affairs Department of the Company


IV. Alteration to the registration
Organization code                                         912102002423613009
Change in main business since the Company was listed No change
Changes in the holding shareholder                        No change




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                                                                                            Dalian Refrigeration Co., Ltd. 2017 Annual Report

          Due to the relocation and transformation,the registered address of the Company has been changed from 888
          Xinan Road, Shahekou District, Dalian to No.106, Liaohe East Road, Dalian Economic and Technological
          Development Zone.

          V. Other related information
           Accounting firm engaged by the Company
        Name of accounting firm            ShineWing CPAs (Special General Partnership)
                                           9/F,A Building No.,8 north street of Chao Yang Men, Dong Cheng District Beijing,
        Office location of accounting firm
                                           China
        Name of signing certified public
                                           Sui Guojun, Wang Dong
        accountant
           Sponsor the Company appointed for performance of the consistent supervision duty in the reporting period
           √Applicable □Not applicable
        Name of Sponsor Institution        Guotai Junan Securities Co., Ltd.
                                           9/F,2nd Building Ying Tai center of Financial Street, Xi Cheng District Beijing,
        Office location of accounting firm
                                           China
        Name of Sponsor Representative Zeng Dacheng, Han Yupeng
        Period of consistent supervision June 18, 2016-December 31,2017
           Financial consultant the Company appointed for performance of the consistent supervision duty in the reporting
           period
           □ Applicable √ Not applicable
          VI. Main accounting data and financial indicators
                                                                                                        Increase/decrease
                                                                                2016                     compared with                         2015
                                                    2017                                                 previous year
                                                                     Before              After                                                              After
                                                                                                        After adjustment       Before adjustment
                                                                   adjustment          adjustment                                                        adjustment
Operating revenue                              2,079,715,105.37   1,779,499,226.64 1,893,200,939.64                   9.85%         1,607,518,439.61 1,721,064,308.11

Net profit attributable to shareholders of
                                                200,759,820.17     178,632,660.24      182,234,151.73               10.17%            129,947,307.39     134,174,674.88
listed companies
Net profit belonging to the shareholders
of listed companies after the deduction of      165,044,724.44     145,227,418.21      148,598,436.25                11.07%           126,122,809.25     129,659,412.87

non-recurring profit and loss
Net cash flow from operating activities        -207,225,851.22       -7,706,320.22      -6,607,069.97            -3,036.00%           -50,568,474.38     -39,799,347.27

Basic earning per share                                    0.23               0.31               0.22                 4.55%                     0.36                0.17

Diluted earnings per share                                 0.23               0.31               0.22                 4.55%                     0.36                0.17

Weighted average return on net asset                                                                           Decrease 0.01
                                                         5.97%             5.87%               5.98%                                           6.38%             6.58%
yield                                                                                                    percentage points

                                                                                                        Increase/decrease
                                                                           2016.12.31                    compared with                      2015.12.31
                                                2017.12.31                                               previous year
                                                                     Before              After                                  Before
                                                                                                        After adjustment                        After adjustment
                                                                   adjustment          adjustment                              adjustment
Total assets                                   5,619,621,500.67   4,983,511,574.26 5,095,986,440.32                 10.28% 4,082,499,864.42            4,146,479,416.99

Owner's        equity     attributable    to
                                               3,416,531,064.91   3,247,797,768.92 3,301,087,748.86                   3.50% 2,647,609,091.41           2,697,297,579.86
shareholders of listed companies



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                                                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report

      VII.1.Difference of accounting data between as per Chinese accounting standards and as per
      International Accounting Standards
      □ Applicable √ Not applicable
      2. Difference of accounting data between as per Chinese accounting standards and as per
      Foreign Accounting Standards
      The difference of accounting data between as per Chinese Accounting Standards and as per International
      Accounting Standards was 0.

      VIII. The quarter main financial indicators
                                                               the first quarter the second quarter    the third quarter   the fourth quarter
Operating revenue                                              504,654,807.75       497,723,909.75       461,323,140.51      616,013,247.36
Net profit attributable to shareholders of listed companies     34,979,790.84        63,280,372.25        47,073,348.70        55,426,308.38
Net profit belonging to the shareholders of listed companies
                                                                34,254,953.33        35,705,910.16        47,499,687.40        47,584,173.55
after the deduction of non-recurring profit and loss
Net cash flow from operating activities                        -157,927,050.15        9,349,508.25       -55,016,219.36        -3,632,089.96


      IX. Non-recurring profits and losses and their amounts
                                   item                                           2017                 2016                   2015
  Disposal gains and losses of non-current asset                                  552,588.02     -23,302,552.40                      -64,700.24

  Tax returned/reduced by chance                                                                                                   499,945.82

  Government subsidies included in current profit or loss                     11,830,406.39           4,072,664.60               2,830,070.56
  Earnings from the Company get subsidiaries, associated
  companies and joint venture investment cost less than get
                                                                                                  30,334,841.93
  investment should enjoy the invested entity produced by
  the fair value of the identifiable net assets yield
  Debt restructuring gains and losses                                                                  229,833.00                 -586,377.00

  The net profit and loss of the subsidiary period from the
  beginning to the consolidation date of the company under                       1,418,670.20

  the same control.
  Disposal gains from investments on financial assets
                                                                              27,467,019.93       27,629,395.44
  available for sale
  Other non-operating revenue or expense                                          661,345.45           976,314.82                2,896,432.61
  Influence on income tax                                                        6,520,362.10         6,190,610.26                 901,514.60
  Influence on minority shareholders                                             -297,876.84           114,171.65                  158,595.14
  Total                                                                       35,715,095.73       33,635,715.48                  4,515,262.01

      During the reporting period, the Company sold 1.5 million shares of Guotai Jun’an, and received investment
      returns of 27,467,019.93 yuan.




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                                                                     Dalian Refrigeration Co., Ltd. 2017 Annual Report


                             Section 3 The Company's Business profile
   I. The Company’s Main business during the reporting period
   The Company, as the largest industrial refrigeration equipment production enterprise in China, is committed to
   developing Industrial refrigeration and heating business field, commercial refrigeration and refrigeration business
   field, air-conditioning and environment business field, core parts business field, engineering and service business
   field have covered the key areas of the refrigeration industrial chain and forged the most complete cold and hot
   industrial chain in China.
   II. Major changes in main assets
   1. Major changes in main assets

   Main assets                                                Explain for major changes

                     Significantly decreased on a year-on-year basis, mainly because the increase in raised funds investment
  Monetary funds
                     after non-public offering of shares.
                     Significantly increased on a year-on-year basis, mainly because the Company used the temporarily idle
Other current assets
                     raised funds to purchase bank financial products.
                     Significantly increased on a year-on-year basis, mainly because the buildings in the new factory area
   Fixed assets
                     transferred to fixed assets.
  Construction in     Significantly decreased on a year-on-year basis, mainly because the buildings in the new factory area
     progress         transferred to fixed assets.
                      Significantly increased on a year-on-year basis, mainly because the Company rented out the entire land
Investment property
                      and buildings of the old factory area to Dalian Bingshan Wisdom Park Co., Ltd.
 Short-term loans     Significantly increased on a year-on-year basis, mainly because the credit loans increased.
   2. The main overseas assets
   □ Applicable √ Not applicable
   III. Analysis of core competence
   The Company closely focuses on main business of cold and heat; independent R&D and joint venture partnerships
   are cooperate with each other effectively; capital resources integration and business model innovation are in a
   positive interaction; the community of business and interest are being created in two ways; the develop mode with
   Bingshan characteristic are formed.
   The Company has the most integrated cold-heat industrial chain for offering kinds of comprehensive solution
   services, including design, manufacture, installation and maintenance etc., and can satisfy individual requirements
   preferably.
   The Company possesses a mature and solid marketing networks and after-sale service network on/off-line, and
   can offer high quality and high value-added services more initiative and faster for clients from around the city.
   After overall relocation reform, the new factory of intelligence, environment protection, high efficiency and safety
   are put into used, which produces a strong comparative advantage for creating higher value to the customers.
   While move forward with transformation and upgrading for former business, the Company will implement the
   cultivation for new business, thus the sustainable healthy development will come more and more feasible.
   Core-competency of the Company further promoted in the reporting period.




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                                                               Dalian Refrigeration Co., Ltd. 2017 Annual Report


                   Section 4 Management discussion and analysis

I. Summary
In 2017, by adherence to the theme of "activation, integration and upgrading", the Company managed to
accomplish the major operating indicators through maintaining strategic commitment, activating endogenous
driving force, integrating system resources, gathering competitive forces and improving operating quality. In 2017,
the Company recorded operating income of RMB 2,079,720 million yuan with a year-on-year increase of 9.85%,
and recorded total profit of RMB 21,847 million yuan with a year-on-year increase of 12.90%.

During the reporting period, the overall relocation and transformation of the Company was successfully
completed, and the intelligent, environmental, efficient and safe new factory was put into use. It has been
identified by the Ministry of Industry and Information Technology as one of the first batch of service-based
manufacturing model enterprises, the national technological innovation demonstration enterprise, and it has been
awarded with the gold medal of quality by the governor of Liaoning Province in 2017.

During the reporting period, Wuxin Refrigeration, one of our subsidiaries, achieved significant progress in the
strategic transformation from traditional refrigeration and air conditioner to energy saving, emission reduction,
comprehensive energy utilization as well as process gas compressor. The company has almost completed layout of
the new products demonstration outlets across the whole nation and recorded a year-on-year increase of over 50%
in sales revenue from the new products. Through technical marketing and government marketing, our symbolic
new products, such as natural gas pipe network pressure power generation and cold energy recovery system, have
become available for commercial use for multiple projects in various regions.

During the reporting period, the Company's subsidiary Bingshan Engineering Company continued to deepen the
market segmentation, and achieved satisfying growth in ordering in various fields in which the company enjoyed
advantages, such as cold chain logistics and fishing. In particular, the company succeeded to execute over 20
contracts with subject transaction under any of them amounting to RMB 10 million or above. New achievements
have been made by the company in the segment of marine engineering since it has successfully entered into the
market of high-end ultra-low temperature ocean carriage ships when it realized successful shipping of
refrigeration station. The amount of orders placed was nearly RMB 100 million, up by 50% over the same period.
Great progress has been made in the development of new energy industry, and distributed energy projects have
come to the ground successively. The segment of ice and snow experienced a new breakthrough as it won the bid
in the high-end indoor snow field project developed by Guangzhou Wanda Mall, for which, the total contract
value amounted to approximately RMB 40 million.

During the reporting period, the Company's subsidiary Bingshan Service Company has flexibly applied Bingshan
Internet of things Cloud Platform, the all-in-one button repair mobile APP as firstly developed in the industry and
large refrigeration system hosting service model, enabling the company to record a year-on-year increase of over
50% in repair and maintenance income.

During the reporting period, the Company's subsidiary Bingshan Ryosetsu experienced rapid growth in its quick
freezing business, recording revenue of over RMB 50 million from quick freezing equipment with an increase of
more than 50% as compared to the corresponding period of last year. It has successfully entered the crayfish

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                                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report

processing industry which is prospering, enabling it to further strengthen the future development potential.

During the reporting period, the horizontal scroll compressors applicable for rail transit air conditioning systems
newly developed by Panasonic Compressor, an associated company of the Company has made obvious progress in
market expansion in metro, light rail and other fields. The "coal to electricity" heat pump compressor for
commercial use in north areas has been successfully developed and put into use in batches, which has occupied
the market opportunities. Overseas market expansion has achieved new results. In particular, the European market
contributed income of RMB 100 million, and the South Korean market also achieved significant increase in
income contribution. Impacted by the state's rectification in electric bus market and the reduction of subsidy, the
sales volume of the horizontal scroll compressor applicable for electric bus has shrunk in stages, and the net profit
has dropped considerably as compared to the corresponding period of previous year.

During the reporting period, Panasonic Cold Chain, an associated company of the Company, conformed to the
new trend of consumption and actively expanded the subdivision of the blue sea market. With respect to
convenience store business, based on the Internet of things technology and by applying the energy management
and store intelligent system to boost the intelligent upgrading of the cold chain equipment applicable for
convenience store, the revenue increased by about 30% over the same period. With respect to commercial kitchen
business, revenue from Hong Kong market increased by about 40% year on year. With respect to biomedical
business, application of medical cryogenic refrigerators, blood refrigerators, thermostat incubators and other new
products have achieved breakthroughs in hospitals, blood stations, scientific research and other fields, with
revenue increased by over 50% over the corresponding period of previous year.

During the reporting period, Fuji Bingshan, an associated company of the Company, vigorously promoted product
development oriented for intelligence, modular and diversification, and formed six major product series, including
beverage machine, food machine, liquor machine, dairy machine, coffee machine and box lunch machine, so as to
make rapid response to customers’ demands. The world's leading intelligent manufacturing plant newly
established for manufacturing automatic vending machines has been put into operation and realized double
increase of production capacity, which enables the company to better capture business opportunities in new retail
market.

During the reporting period, based on the overall positioning of the cold and heat industry investment platform,
the Company further intensified capital operation. The acquisition of the first batch of high-quality assets from the
controlling shareholder has been completed by the end of April 2017. The Company currently holds the entire
equity interest of Bingshan International Trade, and 49% equity interest of Bingshan Metal Technology. The
non-public issuance of exchangeable corporate bonds has been launched to seek low-cost bond financing and
reduction of holding in high price stock.

During the reporting period, the Company actively promoted incubation of new undertakings while focusing on
transformation and upgrading of the original causes. Through the investment platform company, the Company and
Tokyo Century Corporation jointly invested in establishment of Dalian Bingshan Group Hua Huida Financial
Leasing Co. Ltd to carry out cold and heat industry-chain-based financing. It is surprising that the company
recorded profit for the first year in which it was established. Besides, the Company and a subsidiary of Zhejiang
Southern Architecture Design Co., Ltd made joint investment in establishing Dalian Bingshan Wisdom Park Co.,
Ltd to take charge of the comprehensive utilization of the land parcel of the original plant after relocation and


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                                                                                        Dalian Refrigeration Co., Ltd. 2017 Annual Report

manage to build an industry ecosystem within Bingshan Group. At the current stage, the investment attraction is
going well with significant progress and the alteration is processed in an orderly manner. Besides, the Company
and a subsidiary of K2DATA Technology (Beijing) Co., Ltd made joint investment in establishing Dalian Kelvins
Technology Co., Ltd to actively promote innovation of big data application by Bingshan in its cold and heat
industries, construction of the Internet of things and further development of intelligent manufacturing, so as to
assist Bingshan to realize smart growth in its core business segments.

II. Analysis of main business

1. Summary
See the related content “Section 4 Business situation discussion and analysis” the “Summary”

2. Sales income and costs
(1) Sales income structure
                                                 2017                                                 2016
                                                                                                                                         Year-on-year
                                                        Proportion to the                                    Proportion to the
                                 Amount                                                Amount                                         increase/decrease
                                                           Sales costs                                          Sales costs
Total sales income            2,079,715,105.37                       100%            1,893,200,939.64                        100%                    9.85%
By industry
Refrigeration and
air-conditioning              2,043,986,956.70                      98.28%           1,872,949,269.50                     98.93%                     9.13%
equipment
Others                            35,728,148.67                      1.72%              20,251,670.14                      1.07%                    76.42%
By product
Refrigeration and
air-conditioning              2,043,986,956.70                      98.28%           1,872,949,269.50                     98.93%                     9.13%
equipment
Others                            35,728,148.67                      1.72%              20,251,670.14                      1.07%                    76.42%
By region
Northeast China               1,639,118,557.71                      78.81%           1,629,449,445.22                     86.07%                     0.59%
Central China                   358,707,022.50                      17.25%            167,673,235.16                       8.86%                  113.93%
East China                        81,889,525.16                      3.94%              96,078,259.26                      5.07%                   -14.77%


(2) Main business structure
                                                                                     Increase/decrease of Increase/decrease
                                                                                      operating revenues of operating costs Increase/decrease of gross profit
                             Operating revenue    Operating costs    Gross profit
                                                                                       on a year-on-year on a year-on-year       on a year-on-year basis
                                                                                             basis              basis
By industry

Refrigeration and
                              2,043,986,956.70    1,625,595,014.87          20.47%                9.13%              6.52%    Increase 1.60 percentage points
air-conditioning

By product
Refrigeration and
                              2,043,986,956.70    1,625,595,014.87          20.47%                9.13%              6.52%    Increase 1.60 percentage points
air-conditioning equipment
By region

Northeast China               1,603,390,409.04    1,256,129,764.47          21.66%               -0.36%             -3.08%    Increase 2.20 percentage points

Central China                   358,707,022.50      296,519,736.37          17.34%              113.93%           113.29%     Increase 0.25 percentage points

East China                       81,889,525.16       72,945,514.03          10.92%              -14.77%            -19.88%    Increase 5.69 percentage points




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                                                                                   Dalian Refrigeration Co., Ltd. 2017 Annual Report

   (3)Was the Company's sales income on material objects more than that on labor service?
   √ Yes □ No
                                                                                                                             Year-on-year
            Industry category                     Item                          2017                    2016
                                                                                                                           increase/decrease
                                        Sales volume                                    2,058                   2,216                   -7.13%
   Main refrigeration unit for
                                        Production output                               2,044                   2,197                   -6.96%
   industrial or commercial use
                                        Inventory level                                   385                     399                   -3.51%
   Reason for change in the related data by 30% or higher on a year-on-year basis
   □ Applicable √ Not applicable

   (4)Major orders in the hand of the Company
   □ Applicable √ Not applicable

   (5) Sales cost structure
                                                         2017                                    2016
                                                                Proportion to                          Proportion to the     Year-on-year
 Industry category          Item
                                             Amount             the operating          Amount                              increase/decrease
                                                                    costs                              operating costs
                     Direct materials    1,370,277,944.02             83.37% 1,320,953,940.65                   85.97%                   3.73%
                     Labor wages           179,276,307.57             10.91%       142,256,417.94                9.26%                  26.02%

Refrigeration and    Depreciation           27,966,168.83              1.70%           24,721,220.65             1.61%                  13.13%

air-conditioning     Utilities              14,846,776.23              0.90%           16,679,142.39             1.09%                 -10.99%
                     Others                 51,286,246.29              3.12%           31,920,720.45             2.08%                  60.67%
                     Total operating
                                         1,643,653,442.93            100.00% 1,536,531,442.08                  100.00%                   6.97%
                     costs
   (6) Was the Company's consolidated range change during the reporting period?
   √Applicable □Not applicable
   During the reporting period, there are 2 more entities were included in the scope of consolidation, which are
   Dalian Bingshan Engineering &Trading Co., Ltd, and Chengdu Bingshan Refrigeration Engineering Co., Ltd.
   (7) Major change or adjustment in the Company's products or service in the reporting period
   □ Applicable √ Not applicable
   (8) Information on the Company's major customers and major suppliers
   Information on the Company's major customers
   Total sales volume from top five customers (yuan)                                                    418,847,562.09
   Proportion of the total sales volume from top five customers to the annual sales volume                    20.14%
   Proportion of the related party total sales volume from top five customers to the annual
                                                                                                              15.14%
   sales volume
   Information on the Company's top five customers
                                                                   Sales volume      Proportion to the annual sales
     No.                     Name of customer
                                                                       (yuan)                   volume
      1 Panasonic Cold-chain (Dalian) Co., Ltd                      173,038,902.46                              8.32%
      2     Panasonic Refrigeration (Dalian) Co., Ltd.                             107,638,666.72                                        5.18%
      3     Guangzhou R&F Properties Co., Ltd.                                         62,393,162.39                                     3.00%
      4     Hongtai International Financial Leasing (Tianjin) Co., Ltd.                41,559,455.73                                     2.00%
      5     Dalian Fuji-Bingshan Vending Machine Co., Ltd                              34,136,856.37                                     1.64%
    Total                                 ——                                     418,767,043.67                                       20.14%

   Information on the Company's major suppliers
   Total purchase volume from top five suppliers (yuan)                                                                         238,695,565.48
   Proportion of the total purchase volume from top five suppliers to the annual purchases volume                                       13.62%
   Proportion of the related party total purchase volume from top five suppliers to the annual purchases volume                         11.33%



                                                                                                                                               12
                                                                           Dalian Refrigeration Co., Ltd. 2017 Annual Report



 Information on the Company's top five suppliers
                                                                                      Purchase             Proportion to the annual
    No.                              Name of supplier
                                                                                    volume (yuan)             purchase volume

     1     Panasonic Appliances Refrigeration System (Dalian) Co., Ltd.                   67,655,354.93                           3.86%
     2     Panasonic Refrigeration (Dalian) Co., Ltd.                                     47,090,734.64                           2.69%
     3     BAC Dalian Co., Ltd.                                                           41,865,711.10                           2.39%
     4     Panasonic Cold-chain (Dalian) Co., Ltd.                                        41,897,553.16                           2.39%
     5     Chongqing Wanzhou Jinlong Copper Tube Sales Co., Ltd.                          40,186,211.65                           2.29%
   Total                                   ——                                        238,695,565.48                             13.62%


 3. Expenses
                                                             Increase/decrease of
                              2017             2016            gross profit on a                      Explain for major changes
                                                              year-on-year basis
Selling expenses         113,422,315.47     91,678,326.90                     23.72%
Administrative expenses 230,822,141.57 219,270,065.31                          5.27%
                                                                                     Short-term borrowings increased during the
Financial expenses         10,855,836.96     2,378,038.61                    356.50% reporting period, and interest expenses increased
                                                                                     accordingly

 4. R&D expenditure
 In the reporting period, the Company had the total R&D expenditure of 93.80 million yuan, accounting for 2.75%
 of the Company's net assets as of the end of 2017 or 4.51% of the Company's annual operating revenues of 2017.
 There was no remarkable year-on-year change in related data.
 Information on R&D expenditure
                                                               2017                2016          Increase/decrease on a year-on-year basis
 The quantity of the person engaged in R&D                            268                 277                                       -3.25%
 The quantity proportion of the person engaged in R&D             15.52%            14.77%                  Increase 0.75 percentage points
 The spending amount on R&D(yuan)                         93,795,151.25 85,949,812.65                                              9.13%
 R&D spending accounts for the proportion of revenue               4.51%             4.54%                 Decrease 0.03 percentage points
 The amount of R&D investment capitalization(yuan)                  0.00                0.00                                          0%


 5. Cash flows

                                                                                                                     Year-on-year
                                Item                                         2017                   2016
                                                                                                                   increase/decrease
 Sub-total of cash inflows from operating activities                  1,602,754,173.31 1,724,295,026.34                           -7.05%
 Sub-total of cash outflows from operating activities                 1,809,980,024.53 1,730,902,096.31                           4.57%
 Net amount of cash flow generated in operating activities             -207,225,851.22             -6,607,069.97             -3,036.00%
 Sub-total of cash inflows from investing activities                      126,820,377.97         111,761,688.96                   13.47%
 Sub-total of cash outflows from investing activities                     475,753,422.49         377,303,814.52                   26.09%
 Net amount of cash flow generated in investing activities             -348,933,044.52           -265,542,125.56                -31.40%
 Sub-total of cash inflows from financing activities                      495,706,515.56         977,192,378.02                 -49.27%
 Sub-total of cash outflows from financing activities                     263,709,646.02         270,911,050.69                   -2.66%
 Net amount of cash flow generated in financing activities                231,996,869.54         706,281,327.33                 -67.15%
 Net increase in cash and cash equivalents                             -326,545,416.67           435,856,981.51               -174.92%


                                                                                                                                       13
                                                                       Dalian Refrigeration Co., Ltd. 2017 Annual Report


Reason for change in the related data by 30% or higher on a year-on-year basis
√ Applicable □ Not applicable
1.Net cash flow arising from operation activities have a significant decrease on a y-o-y basis, mainly because the
cash received from sale goods decreased, and cash paid for purchasing commodities increased during the
reporting period.
2. Net cash flow arising from investing activities have a significant decrease on a y-o-y basis, mainly because the
Company purchased 49% shares of Dalian Bingshan Metal Technology Co., Ltd. held by Dalian Bingshan Group
Co., Ltd. during the reporting period.
3. Net cash flow arising from financing activities have a significant decrease on a y-o-y basis, mainly because the
raised funds from non-public offering of shares last year.

Reason for remarkable difference between the cash flows from the Company's operating activities in the reporting
period and the net annual profit
√ Applicable □ Not applicable
There was a remarkable difference between the net amount of cash flow generated in operating activities of the
Company and the net annual profit in the reporting period, mainly due to that the proportion of returns on
investment to the total profit of the Company was higher.

III. Analysis of the non-main business
□ Applicable √ Not applicable
IV. Analysis of assets & liabilities
1. Remarkable change in assets
                                                                                                Monetary unit: RMB yuan
                              2017.12.31                         2016.12.31
                                      Proportion to                      Proportion to     Proportion increase/decrease
                          Amount                            Amount
                                     the total assets                   the total assets
Monetary funds          394,809,694.11         7.03%      715,215,638.54         14.03%      Decrease 7.00 percentage points
Accounts receivable    1,036,255,895.79       18.44%      807,109,959.54         15.84%      Increase 2.60 percentage points
Inventories             352,279,664.64         6.27%      349,538,424.06           6.86%     Decrease 0.59 percentage points
Investment property     103,861,275.27         1.85%        28,605,652.94          0.56%     Increase 1.29 percentage points
Long-term equity
                       1,568,255,738.12       27.91% 1,292,912,901.49            25.37%      Increase 2.54 percentage points
investment
Fixed assets            890,874,647.40        15.85%      511,008,545.87         10.03%      Increase 5.82 percentage points
Construction in
                          82,999,382.90        1.48%      321,646,676.78           6.31%     Decrease 4.83 percentage points
progress
Short-term loans        394,809,694.11         7.03%      715,215,638.54         14.03%      Increase 5.34 percentage points
Long-term loans        1,036,255,895.79       18.44%      807,109,959.54         15.84%      Decrease 0.29 percentage points
2. Assets & liabilities which are measured by fair value
√ Applicable □ Not applicable
Finance asset held available for sales measured in fair value is 531,653,458.05 yuan at the year beginning,and
501,871,535.40 yuan at the year end, with a selling amount of 28,888,171.61 yuan.
V. Analysis of investments
1.The overall situation
√ Applicable □ Not applicable
      Investment in 2017(yuan)                  Investment in 2016(yuan)                   Amount of variation
              1,568,255,738.12                          1,292,912,901.49                          21.30%

2.The significant equity investment during the reporting period
√ Applicable □ Not applicable
The Company purchased 49% shares of Dalian Bingshan Metal Technology Co., Ltd. held by Dalian Bingshan
Group Co., Ltd. during the reporting period. The purchasing price was 172.95 million yuan.



                                                                                                                          14
                                                                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report

     3 The significant non-equity investment during the reporting period
     □Applicable √Not applicable

     4.The financial asset investment
     (1) The securities investment
     √ Applicable □ Not applicable
                                                                      Changes

                                        Account                         in the
                                                                                     Accumulative
                           Initial         ing                        profit and
 Stock       Stock                                Book value at the                  change of fair     Current sale   Report period Book value in the    Accounting       Source
                        investment      measure                       loss of the
 code    abbreviation                                beginning                      value credited to     amount       profit and loss      ending          subjects       of funds
                            cost           ment                       fair value
                                                                                         equity
                                         model                          in this

                                                                        period

                                        fair
                                                                                                                                                           Financial
                                        value                                                                                                                               Own
601211 Guotai Jun’an   28,598,895.00               531,653,458.05          0.00     476,197,108.65 28,888,171.61 11,153,569.05          501,871,535.40 assets available
                                        measure                                                                                                                             funds
                                                                                                                                                            for sale
                                        ment

         total          28,598,895.00 --            531,653,458.05          0.00     476,197,108.65 28,888,171.61 11,153,569.05          501,871,535.40        --             --


     (2) Derivative investment
     □Applicable √ Not applicable
     During the reporting period, the Company does not exist derivative investment.

     5. The use of funds raised
     √ Applicable □ Not applicable
     Total commitment investment for raised-fund project in the Period amounting to 580 million Yuan, after
     adjustment, total investment turns to 561.2814 million Yuan. In reporting period, amount of 407.4699 million
     Yuan invested, and pre-phase investment 87.6 million Yuan was replaced with the raised-fund. The temporary idle
     raised-fund 80 million Yuan save as CD in the Period. The temporary idle raised-fund 76 million Yuan was used to
     purchase the bank financial product in the Period. Till end of the reporting period, raised-fund 156.1732 million
     Yuan are not used, and balance of the specific raised-fund account amounting to 156.1732 million Yuan.
     Actual time for raised-fund in the private placement in place appeared later, in previous phase, the Company has
     limit in contribution of the raised-fund project with self-raised fund, and process layout and plan in the new plant
     are continues to improved during the implementation in follow up process, the time for new-type equipment input
     and debugging progress are later than expected. In consideration of the progress payment and guarantee money
     for the equipment, being decided by the Company after research in purpose of guarantee a smooth transition of the
     new-aged plants, and reducing the impact on routine operation of the Company from relocation, the serviceable
     condition state of the relocation deferred to end of May in 2017 from year-end of 2016. The Report of Deferring
     Serviceable Condition State of the Raised-Fund Project was deliberated and approved by the 13th session of 7th
     BOD on 21 April 2017. The production and operation of the Company’s new plant is normal till the end of 2017.
     By the end of 30 June 2016, the pre-invested money for raised-fund project with self-raised capital amounting to
     87,597,055.10 Yuan, the Dahua CPA carried out assurance service on the above mentioned money and issued an
     Assurance Report of Dalian Refrigerator Co., Ltd. Pre-invested the Raised-fund Project with Self-raised Fund (Da
     Hua He Zi[2016] No. 0034330). And on 5 July 2016, the 6th session of 7th BOD and 5th session of 7th
     Supervisory Committee have deliberated and approved the “Report of Replace the Pre-Invested Fund with
     Raised-Fund ” , independent directors propose a clear agreement.


                                                                                                                                                                    15
                                                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report

     Till end of the reporting period, raised-fund 156.1732 million Yuan are not used, mainly for equipment guarantee
     funds, engineering guarantee funds and the remaining engineering funds, which shall be paid after completion
     acceptance and settlement audit.

     VI. The material assets and equity sale
     1. The material assets sale
     □Applicable √Not applicable

     2. The material equity sale
     □Applicable √Not applicable

     VII. Analysis of major subsidiary companies and mutual shareholding companies
     √ Applicable □ Not applicable
                                                                                                             Operating
                                                          registered      total assets         net                            Net profit
  Company name          Type        The main business                                                          income
                                                             capital        ( yuan)        assets( yuan)                       ( yuan)
                                                                                                               ( yuan)
                    mutual
                                    Full function       JPY 4,000
 Fuji Bingshan      shareholding                                          638,522,978.22    366,560,274.18   442,326,067.27    54,885,773.13
                                    vending machine     million
                    company
                    mutual
 Panasonic                          Refrigeration and JPY 6,200
                    shareholding                                        1,891,401,156.52 1,234,576,003.06 1,623,387,718.61    119,567,490.02
 Compressor                         air-conditioning    million
                    company


     Subsidiary companies obtained or disposed in the reporting period
     √Applicable □ Not applicable

                                   the way of obtained or disposed
             Name                   Subsidiary companies in the                    The impact on overall production and performance
                                          reporting period
                                                                       The company will have an independent export channel,further strengthen
Dalian Bingshan Engineering Enterprise merger under the same           the sales and service system in overseas markets with combining business
 & Trading Co., Ltd.           control                                 and specialization,and realize the sustainable development of the
                                                                       international market.
Chendu Bingshan
                               Investment establishment of
Refrigeration Engineering                                              Strengthening the construction of the marketing network of the Company
                               subsidiary company
Co., Ltd.


     VIII. The structured corporate bodies which the Company controlled
     □Applicable √Not applicable

     IX. Development prospect of the Company

     1. Industry development trend
     In recent years, the influence of refrigeration and air conditioning industry in China's national economy is growing,
     conferring increasing influence upon consumption upgrade, food safety and livelihood improvement. Besides,
     development model under an entire set of service, modularization, information and intelligence is experiencing
     rapid growth, with constant entrance of new market players and constant emerging of new hot spots. The field of
     competition, competitors, products, connotation is constantly changing.

                                                                                                                                               16
                                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report

In 2018, industry development division will continue to increase, and competition will continue to intensify. The
transformation and upgrading of major players in the industry will further accelerate. New technologies and
solutions are being launched to cater for the emerging market demands on energy saving, environmental
protection, distributed energy utilization, coal to electricity and data center. Intelligent manufacturing and
service-oriented manufacturing are becoming increasingly prominent. With the gradual implementation of the
concept of green development, the traditional market pays more attention to energy saving and emission reduction.
The advantage of single technology is gradually replaced by the advantages of integrated technology and
comprehensive solution.
2. Challenges and opportunities faced by the Company
(1)Opportunities faced by the Company
China government has accelerated the people-oriented new urbanization, accelerated the agricultural supply side
structural reform and increased investment in food, sanitary, health, pension and other livelihood areas. In
addition, all levels of governments have introduced policies to support the cold chain logistics, which will secure a
relatively market growth of refrigeration industry, which in turn increases market demands of our major
operations. The energy saving and safety renovation projects for the complete set of engineering and refrigeration
stations bring new market demand, which provides a real business opportunity for the Company to vigorously
expand the production-oriented services market. With the innovative business model, strong technology bases,
backwardness advantages of the intelligent factory and system advantages, the Company is capable of capturing
the above opportunities in a good position.
(2)Challenges faced by the Company
Due to the complicated process of transformation and upgrading, there may be significant risk factors that have
not yet been identified. The speed of commercialization of new technology and new products needs to be
accelerated. We should make full use of financial innovation products and promote the development of the
physical industry with finance.
3. Development planning of the Company
The Company will focus on the refrigeration and heating industries under the operation policy of innovation and
value creation, promote business integration with the parent company and subsidiaries as the core business,
integrate internal and external resources, upgrade the industrial chain, innovate business model, strengthen
technological innovation, improve and expand the business scale and development space, improve employees’
benefits and realize sustained, healthy and harmonious development, thus to become an enterprise trusted and
respected by customers, partners and the society.
4. Capital requirement and fund sourcing plan
In 2018, the capital expected to be required for the Company's production operation and capital operation will be
financed by its own funds and appropriate financing.
5. Main risks the company faces and response measures
(1)Increasing market competition risk
Countermeasures: focus on refrigeration and heating industries, deeply plough market segmentation and seek for
business blue sea; improve intelligent manufacturing and service-based manufacturing in an orderly manner;
accelerate transformation and upgrading of the existing business; accelerate cultivation of new businesses; create
the iceberg cause and common interest.
(2)Risk of slow marketing of new products and technologies
Countermeasures: create differentiated competitiveness of new products and technologies; strengthen technology
marketing and service marketing, better satisfy individual needs of customers; make effective use of finance
leasing, contract energy management, project companies and other innovative modes.


                                                                                                                  17
                                                                       Dalian Refrigeration Co., Ltd. 2017 Annual Report

  (3)Risk of high level of trade receivables
  Countermeasures: effective inventory management and intensified management on trade receivables; enhance
  quality of contract through intensified customer credit assessment and contract appraisal; effective control of
  increase in trade receivables by reduction of guarantee deposits, taking bank credit instruments as guarantee
  deposits and finance leasing; improve contract execution through stricter review on goods delivery, intensified
  control on project construction and post-sale service; prepare special composition solutions through professional
  creditor’s right management institutions and accelerate settlement of trade receivables with relatively long aging.
  6. Business plan in 2018
  Sales revenue: 2,300 million yuan, an approximate increase of 10% compared with the sales revenue of 2,079.72
  million yuan in 2017.
  Total profit: 245 million yuan, an approximate increase of 12% compared with the total profit of 218.47 million
  yuan in 2017.
  In 2018, theme as the “committed to innovation  focus on transformation  share the same load”, the Company
  will insist on new products and technologies development with the need of industry and market unswervingly.
  Create a new market with new ideas and sub-dividing the market; makes the energy (secondary energy in
  particular) exploitation and utilization to be a continuous force point in way of transformation and upgrading
  strategy; under the help of double platform, we work in full cooperation, and to keep improving, sincere
  cooperation and share the same load, achieved the overall target of operating income and profit for year of 2018.
  Key works for 2018:
  (1) Deepening of the traditional market. Deeply plough segment market with the industrial refrigeration such as
  machine engine, extend application of CO2 high pressure compressor, and the NH3 extremely low filling system
  solutions, enhance competiveness in advantage domain and range of low temperature market; activate the
  development of commercial freezing market with packaged design, installation and construction for NH3 and CO2
  refrigeration system, also with the intelligent control, operation study and excellent technical service; solid and
  promote the implementation of energy-field projects, such as energy-saving, environment protection and high
  efficiency, and obtain exemplary item project; seize the opportunity of Winter Olympic Games, and provide
  solutions for the trend industry as ice and snow sports.
  (2) New energy industrialization. Based on energy saving products and technology, build a energy saving
  platform, and integrate resource of social products, markets and capital; provide comprehensive solutions for
  energy conservation and energy management services in field of chemical industry, natural gas, mine, oil,
  thermoelectricity and metallurgy etc.; to be an ESCO instead of manufacture of energy-saving products, earn in
  way of value creation for clients, and achieve a rapid growth in new business.
  (3) Service specialization. Create a refrigeration & air conditioning service network under the name of Bingshan
  group, and exploit offline service network layout; integration resources and mutual share by gathering
  refrigeration technician of the Group under the Bingshan service network; attract high quality customers by
  machine room trusteeship and relevant services, expand value-added service and achieve a win-win with clients;
  further to improve the online service platform building for under line service, remote monitor & control and
  authoritative release.
  X. Record of investigation, communication, and other activities in the reporting period
Receiving time                 Way of receiving                 Received object type            Basic situation index

 Jan.3, 2017                  Field investigation                    Institution       http://irm.cninfo.com.cn/ssessgs/S000530
 Jan.4, 2017     Investors communication meetings in Shanghai        Institution       http://irm.cninfo.com.cn/ssessgs/S000530

 Jan.12, 2017                 Field investigation                    Institution       http://irm.cninfo.com.cn/ssessgs/S000530

 Jan.18, 2017                 Field investigation                    Institution       http://irm.cninfo.com.cn/ssessgs/S000530


                                                                                                                              18
                                                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report


  Jan.19 2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Mar.8, 2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Mar.9, 2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Apr.24,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  May 26, 2017                        Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

   Jun.8,2017         Investors communication meetings in Beijing             Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Jun.13,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Jun.14,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Jun.16,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Jun.21,2017       Investors communication meetings in Hangzhou              Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Jun.27,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

   Jul.6,2017         Investors communication meetings in Suzhou              Institution    http://irm.cninfo.com.cn/ssessgs/S000530

   Jul.13,2017                        Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

   Jul.19,2017                        Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Aug.28,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

   Sep.8,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Sep.13,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Sep.25,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Oct.25,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

   Nov.1,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

   Nov.3,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530

  Nov.28,2017                         Field investigation                     Institution    http://irm.cninfo.com.cn/ssessgs/S000530
Number of reception                                                                                            26
amount of reception for Institution                                                                            171
amount of reception for Individual                                                                              0
Whether to disclose, reveal or disclose unpublished significant information                                    no




                                                                                                                                    19
                                                                            Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                          Section 5 Important Issues
I Profit distribution and dividend payment
By giving consideration to both the return to shareholders and the Company's long-term development, and in
combination of the Company's profit made in the this year, the Company formulated the 2016 annual dividend
distribution plan of paying the cash of 1 yuan for every 10 shares, with capital reserve every 10 turn add 4 shares.
Reviewed and adopted at the Company's general meeting, the Company's Board of Directors has implemented the
plan in June 2017.
Formulation and implementation of the Company's cash dividend distribution policy in the reporting period
complied with the Company's Articles of Association and the general meeting's resolution, and the dividend
distribution standard and proportion were defined and clear and the applicable decision-making procedure and
system were complete. The independent directors agreed on it and the legal rights and interests of minority
shareholders were well protected.
                                   Special notes to cash dividend payout policy
If the regulations of the Articles of Association or the requirements of the shareholders of
                                                                                                                   Yes
the company meeting are met:
If the dividend payout standard and proportion is definite and clear-cut:                                          Yes
If relevant decision-making procedure and mechanism is complete:                                                   Yes
If the independent directors have performed their duties and played their due role:                                Yes
If small and medium shareholders have the opportunity to sufficiently express their
                                                                                                                   Yes
opinions and appeals and if their legal rights and interests are sufficiently protected:
If the condition and procedure for adjusting or changing the cash dividend payout policy
                                                                                                                   Yes
is compliant and transparent:

Table of profit distribution plan, plan of share-granting with capital accumulation fund of the Company in recent
three years
Dividend                                                                          Plan of share-granting with capital accumulation
                                 Profit distribution plan
  year                                                                                                  fund
  2017      RMB 0.5 yuan (cash) for every 10 shares (including tax)                                     none
  2016      RMB 1 yuan (cash) for every 10 shares (including tax)                  with capital reserve every 10 transfer 4 shares.
  2015      RMB 1 yuan (cash) for every 10 shares (including tax)                  with capital reserve every 10 transfer 5 shares.

                                           Dividends in the annual consolidated net income Accounted for in the consolidated net
                 Cash dividend amount
     year                                       attributable to common shareholders of the     income attributable to common
                     (tax included)
                                                                Company                         shareholders of the Company
     2017                 42,795,449.05                                       200,759,820.17                              21.32%
     2016                 61,177,655.80                                       182,234,151.73                              33.57%
     2015                 36,016,497.50                                       134,174,674.88                              26.84%
The Company made profit in the reporting period and the undistributed profit of the parent company was positive
but no cash dividend distribution plan was proposed.
□ Applicable √ Not applicable
II Profit distribution preplan, and preplan of share-granting with capital accumulation fund
of the Company
Bonus shares to be presented for every 10 shares (shares)                                                                           0
Dividend to be distributed for every 10 shares (RMB yuan) (including tax)                                                          0.5
Transferred shares to be presented for every 10 shares (shares)                                                                     0
Equity base for distribution preplan (shares)                                                                            855,908,981



                                                                                                                                   20
                                                                             Dalian Refrigeration Co., Ltd. 2017 Annual Report

Total amount of cash dividend distribution (RMB yuan) (including tax)                                                       42,795,449.05
Profit distributable to the shareholders in the current year                                                               165,269,682.79
Proportion of cash dividend distribution accounting for total profit distribution                                                  100%
                                                      Cash dividend distribution policy:
When the development stage of the company belongs to a growth period with important fund disbursement arrangement(s), the
proportion of cash dividend distribution accounting for this profit distribution should reach 20% at minimum when conducting profit
distribution.
                   Notes to details about preplan for profit distribution or capital stock increase with capital reserve

According to the audit by ShineWing CPAs (Special General Partnership), the net profit made by the parent company of the Company
in 2017 was RMB 183.633 million and 10% of the net profit (RMB 18.363 million) was drawn as the legal surplus reserve.
Therefore, the profit distributable to the shareholders in the current year was RMB 165.27 million. Plus the initial undistributed profit
of RMB 498.963 million and minus the dividend of RMB 61.178 million of common shares paid in 2016 and the drawn free surplus
reserve of RMB 29.208 million (20%), the accumulated profit distributable to the shareholders was RMB 573.847 million.
The Company’s profit distribution preplan for 2017:
Based on the net profit made by the parent company of the Company in 2017 (183.633 million), 20% of the net profit (RMB 36.727
million) will be drawn as the free surplus reserve;
Based on the total capital stock of 855,908,981 shares, the dividend of RMB 0.5 in cash (including tax) will be distributed for every
10 shares, the total cash dividend is RMB 42.795 million, and the cash dividend for B share is converted and paid in Hong Kong
dollars.


III Implementation of commitments

1. Commitments of the Company or its shareholders holding 5% or higher of the shares in the reporting
period or carried to the reporting period
The implementation for management equity incentive plan is being performed currently.
The new stock increased from private placement under the name of Daleng were listed on 20 June 2016, the
follow seven investors including Zhejiang Caitong Capital Investment Co., Ltd., Xingzheng Security Asset
Management Co., Ltd., Penghua Fund Management Co., Ltd., First State Cinda Fund Co., Ltd., Shenzhen B&D
Capital Co., Ltd., Bosera Funds Management Co., Ltd. and Caitong Fund Management Co., Ltd. committed that:
the stock of Daleng subscribes in private placement process will lock-up for trading with 12 months since the first
trading date of the new shares increased in the placement.

IV. Non-operation capital occupation by holding shareholders and their related parties in the
listed company
The company had no capital occupation by the holding shareholders and their related parties in the listed company
within this reporting period.
V. Explain to the “non standard audit report” from the board of directors, board of
supervisors of the Company
□Applicable √Not applicable
VI. Change in accounting policies, accounting estimates and accounting methods compared
with the financial statements of the previous year
√Applicable □Not applicable
In 2017, the Ministry of Finance announced or amended and implemented “Accounting Standards for Business
Enterprises No.42-Held for Sale non-current assets, disposal group and discontinued operation". Since May 28th,
2017, any held for sale non-current assets, disposal group and discontinued operation existing on the
implementation date shall be applied to prospective application. When preparing the financial statements for
2017FY, the policy has been adopted and the accounting has been done in accordance with this standard.
Updated standard shall be applied since June 12th,2017. Any government existing on January 1at,2017 shall be

                                                                                                                                      21
                                                                          Dalian Refrigeration Co., Ltd. 2017 Annual Report

 applied to prospective application. Any new government grant obtained between January 1at,2017 and
 implementation date shall be adjusted in line with this standard too. When preparing the financial statements for
 2017FY, the policy has been adopted and the accounting has been done in accordance with this standard.
 In 2017, the Ministry of Finance announced or amended and implemented “Financial Statements
 Format ”(Caikuai[2017]No.30)
 Gain/loss on non-current assets disposal and on non-monetary assets exchange presented under “non-operating
 income/expense”is changed to “Gain on asset disposal”. This accounting policy change shall be retrospectively
 adjusted. Non-operating income in 2016shall be decreased by 1,186,397.77Yuan, and expense shall be decreased
 by 22,751,748.20Yuan respectively. Gain on asset disposal shall be adjusted by -21,565,350.43Yuan. No effect on
 sum of asset and net profit.
 VII. Correction of major accounting mistakes in the reporting period, which should be
 retroactively restated
 □Applicable √Not applicable
 XIII. Change in the range of consolidated statements compared with the financial statements
 of the previous year
 √Applicable □ Not applicable
 The range of consolidated statements of the Company changed in the reporting period, and two companies were
 added, including Dalian Bingshan Engineering &Trading Co., Ltd., and Chengdu Bingshan Refrigeration
 Engineering Co., Ltd.

 IX. Engagement and dismissal of the accounting firm
 Currently engaged accounting firm
Name of domestic accounting firm                                                ShineWing CPAs (Special General Partnership)
Remuneration paid to the domestic accounting firm (in 10 thousand yuan)                            107
Continuous audit service years of the domestic accounting firm                                      2
Name of certified public accountants with the domestic accounting firm                    Sui Guojun, Wang Dong
 If the CPA firm retaining was changed in this period
 □Applicable √Not applicable
 X. Facing suspend and terminate listing after the annual report disclosure
 □ Applicable √ Not applicable
 XI. Bankruptcy restructuring related matters
 □ Applicable √ Not applicable
 XII. Major lawsuit and arbitration issues
 □ Applicable √ Not applicable
 XIII. Punishment and rectification
 □ Applicable √ Not applicable
 XIV The credibility of companies and its controlling shareholder, actual controller
 √ Applicable □ Not applicable
 The controlling shareholder of the Company and the Company don’t exist situation such as unfulfilled the court’s
 effective judgments or failed to pay duly a large amount of debt during the reporting period.
 XV. The implementation and effect of equity incentive
 √Applicable □ Not applicable
 The 2015 restricted stock incentive plan has been implemented and completed granting the restricted stock on
 March 2015, following first batch of unlock on April 22, 2016, and second batch of unlock on May 23, 2017. The
 2016 restricted stock incentive plan has been implemented and completed granting the restricted stock on
 December 2016, following first batch of unlock on December 19, 2017. The details see the series announcement
 on China Securities, HK Commercial Daily and Cninfo website.
 XVI. Important associated transactions
 1. Important associated transactions
 In the reporting period, the total amount of normal associated transactions between the Company and associated
 parties was 694,890 thousand yuan, accounting for 78.96% of the budgeted amount for the year 2017. This
 included 295,300 thousand yuan, accounting for 73.83% of the budgeted amount for the year 2017, for purchasing
 supporting products for package projects from associated parties, and 399,590 thousand yuan, accounting for
 83.25% of the budgeted amount for the year 2017, from selling supporting parts and components to associated


                                                                                                                               22
                                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report

parties.
2. Associated transactions related to purchases or sales of assets
3. Important associated transactions with joint external investments
4.Current associated rights of credit and liabilities
□ Applicable √ Not applicable
5. Other associated transactions
√ Applicable □ Not applicable
Approved by the 12th Meeting of the 7th Board of Directors and the 1st Extraordinary Shareholders’ General
Meeting of 2017, the Company purchased 76% shares of Dalian Bingshan Engineering &Trading Co., Ltd. held
by Dalian Bingshan Group Co., Ltd.
Approved by the 12th Meeting of the 7th Board of Directors and the 1st Extraordinary Shareholders’ General
Meeting of 2017, the Company purchased 49% shares of Dalian Bingshan Metal Technology Co., Ltd. held by
Dalian Bingshan Group Co., Ltd.
Approved by the 13th Meeting of the 7th Board of Directors, the Company rent the land and buildings of old plant
to Dalian Bingshan Wisdom Park Co., Ltd., which was located on 888, Southwest Road, Shahekou District,
Dalian.
For details, please see the related series announcement on China Securities, HK Commercial Daily and Cninfo
website.
XVII. Major contract and its performance
1. Hosting, contracting and leasing status
(1) the hosting status
□ Applicable √ Not applicable
(2)the contracting status
□ Applicable √ Not applicable
(3) the leasing status
√ Applicable □ Not applicable
The company signed rental contract with MHI Bingshan Refrigeration (Dalian) Co.,Ltd., and rent # 6 workshop
building located on No. 106 Liaohe East Rd, Dalian Economic and Technology Development Zone to MHI
Bingshan Refrigeration (Dalian) Co., Ltd. The rental area is 15,259.04 square meters, and the rental term till 16th
July, 2029. The annual rent fee is RMB 4.2 million after considering the time value of money.
On April 21, 2017, the Company convened the 13th meeting of 7th Board of Directors, and approved to rent out the
whole land and house of the Company’s old plant locating at No. 888, Southwest Road, Shahekou District, Dalian
to Dalian Bingshan Wisdom Park Co., Ltd., with rental land area of 167,165.61 square meters and housing area of
105,652.43 square meters. The lease term is from April 1, 2017 to December 31, 2036. The total rent for the
previous three years is RMB 20.34 million, of which the rent in 2017 is RMB 4.62 million, the rent in 2018 is
RMB 7.86 million, and the rent in 2019 is RMB 7.86 million. From January 2020, the two parties will negotiate
and determine the rent of the next three years according to the local market changes.

2. Guaranteeing status
√ Applicable □ Not applicable
Resolution of 2nd meeting of 7th session of the Board of directors agreed to provide guarantee to Dalian Bingshan
Group Co., Ltd. for obtaining Development Fund of National Development Bank. Total amount of the loan was
RMB120 million with interest rate 1.2%, and the loan period was 10 years. The fund can only be used for cold
chain green intelligent equipment and the development of service industry. When Dalian Bingshan Group Co., Ltd.
receives the fund, it will transfer all the fund to the Company with the same conditions. The above guarantee to
Dalian Bingshan Group Co., Ltd. is to the Company itself actually.
3. Entrust others to cash assets management
(1)Trust management
√Applicable □ Not applicable                                                              (ten thousand yuan)
       Specific type              Source of fund           Amount of occurrence    Undue balance     Overdue amount
Bank financial products   Temporarily unused raised fund                   7,600             7,600                    0
                          Total                                            7,600             7,600                    0

(2)Entrusted loans


                                                                                                                      23
                                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report

□Applicable √Not applicable
(3)Other important contracts
□ Applicable √ Not applicable
XVIII. Social responsibilities
√Applicable □ Not applicable
1. Performance of precise poverty alleviation social responsibility
(1) Overview of the annual targeted poverty alleviation
In 2017, the Company and its controlling shareholder carried out targeted measures in poverty alleviation in the
Songlin Village, Guangmingshan Town, Zhuanghe City, the fixed-point poverty alleviation continually. Main
helping measures are:
Firstly, pay highly attention to the poverty alleviation, actively do well in reception. Determine the responsibility
department for the docking work of poverty alleviation and actively to contact with the Songlin Village.
Formulate an anti poverty funds budget in full-amount, and ensuring the capital fully funded in time.
Secondly, implement poverty alleviation with facilities to solve traffic problems. According to the traffic
inconvenience in Songlin Village and actual needs of peasant bridge building, the Company donated money for
preparing to construct the party building cultural square.
Thirdly, follow up and focus on. Do real work for the local people, and a real solution to life’s difficulties.
(2) Follow-up targeted poverty alleviation plan
In 2018, the Company will promote the poverty alleviation with innovative measures, ensuring an actual effect
achieved from the works.
Firstly, implemented the idea of target poverty alleviation and implement poverty alleviation with facilities, center
on actual needs of the village and fundamental facility of the agriculture development as well as agricultural
machinery equipment and deep processing of agricultural, to use the poverty alleviation funs on the blade.
Secondly, according to the actual condition of agricultural development in the village, and combined the needs of
enterprise with funds contributed as Bingshan, solve the labor surplus problems through proving jobs and creating
opportunities for farmers to increase their incomes.
Thirdly, offering a guarantee for poverty alleviation funds, funding the poverty-stricken households with specific
necessaries, and providing priority employment opportunities while funding the poverty students.
2. Performance of other social responsibility
For the specific performance of social responsibilities by the Company, refer to the social responsibility report for
2017.

The listed company and its subsidiaries whether belong to heavy pollution industry formulated by the state
environmental protection department
√Yes □ No




                                                                                                                  24
                                                                                   Dalian Refrigeration Co., Ltd. 2017 Annual Report



                                                                         Distribution                     Pollutant
                                    Main                     Number of                                                               Total      Excessiv
                                                  Way of                    of the        Emission        discharge     Total
   Enterprise or subsidiary      pollutant and               discharge                                                             approved        e
                                                 discharge                discharge     concentration     standard    discharge
                                   features                    outlet                                                              emissions emission
                                                                            outlet                      implemented

                                                                         Unified             57         DB21                                    Not over
Dalian Refrigeration Co., Ltd. COD               sequence        1                                                      2.7 tons      6 tons
                                                                         discharged         ㎎/L                                                standard
                                                                                                        1627-2008

                                 Ammonia                                 Unified            10.2        DB21                                    Not over
Dalian Refrigeration Co., Ltd.                   sequence        1                                                     0.54 tons     0.9 tons
                                 nitrogen                                discharged         ㎎/L                                                standard
                                                                                                        1627-2008
                                                                         Unified            10.6                                                Not over
Dalian Refrigeration Co., Ltd. Dust              sequence        1                                 3    GB9078-1996    2.59 tons     6.8 tons
                                                                         discharged        mg/m                                                 standard


    XIX. Other important matters
    □ Applicable √ Not applicable

    XX. Other important matters of subsidiary company
    □ Applicable √ Not applicable




                                                                                                                                             25
                                                                           Dalian Refrigeration Co., Ltd. 2017 Annual Report


      Section 6 Change in Share Capital and Shareholders' Information
 I. Change in share capital
 1. Change in share capital
                                                             Shares                                          Shares
                                                       (before change)                                (after change)
                       items                                                        Changes
                                                    number       proportion                         number            proportion
I. Non-circulating share capital with restricted
                                                    82,340,713        13.46%        -60,225,758       22,114,955           2.58%
trade conditions
Executive lock stock                                  154,117         0.02%          +2,766,558        2,920,675           0.34%
Restricted stock after starting                     58,645,096        9.59%         -58,645,096               0                   0
Equity incentive restricted stock                   23,541,500        3.85%           -4,347,220      19,194,280           2.24%
II. Circulating share capital                      529,435,845        86.54%       +304,936,381      834,372,226           97.42%
1. Domestically listed ordinary shares             356,935,845        58.34%       +235,936,381      592,872,226           69.22%
2. Domestically listed foreign shares              172,500,000        28.20%        +69,000,000      241,500,000           28.20%
III. Total shares                                  611,776,558         100%        +244,710,623      856,487,181            100%


 The reason for the Change in share capital
 On March 16, 2017, Mr. Yu Fuchun, the original Chairman of Board of Supervisors, resigned. On May 24,
 2017, the second patch of unlock of 2015 restricted stock incentive plan was implemented. On June 14, 2017, the
 Company finished the work of interest distribution of last year, transfer the capital reserve to increase capital stock,
 4 shares for every 10 shares. On June 20, 2017, the restricted private placement of A share began to be traded on
 market. On June 29, 2017, Mr. Wang Zhiqiang, the original deputy general manager, resigned. On December 19,
 2017, the first patch of unlock of 2016 restricted stock incentive plan was implemented.
 The things mentioned above in the report have caused the change of the total amount of shares and the structure of
 stock.
 Approval of changes in shares
 √Applicable □ Not applicable
 The second patch of unlock of 2015 restricted stock incentive plan was approved by the 14th meeting of 7th Board
 of Directors of the Company. The Company’s 2016 annual profit distribution plan was approved by 2016
 Shareholders’ General Meeting. The first patch of unlock of 2016 restricted stock incentive plan was approved by
 the 17th meeting of 7th Board of Directors of the Company.
 The influence of change in share capital on the a recent year and recent issue for basic earnings per share ,diluted
 earnings per share and net assets per share.
 (1)The basic per share of 2016 is 0.31 yuan; According to the latest equity is adjusted for 0.22 yuan;
 (2)The diluted per share of 2016 is 0.31 yuan; According to the latest equity is adjusted for 0.22 yuan;
 (3)The net assets per share of 2016 is 5.31 yuan; According to the latest equity is adjusted for3.79 yuan.
 2. The restricted shares changes
 √Applicable □ Not applicable
 For details, please see the Chinese version of 2017 Annual Report.
 II. Securities issuance and listing
 1. Securities issuance in the report period
 □ Applicable √ Not applicable
 2. Change in total shares of the Company and structure of shareholders

                                                                                                                             26
                                                                            Dalian Refrigeration Co., Ltd. 2017 Annual Report

For details, please see the” I Change in share capital”
3. Internal staff shares
□ Applicable √ Not applicable

III. Shareholders and actual controller
1. Number of shareholders and their shareholding
Total number of shareholders in the                      Total number of shareholders as of the last month before
                                                44,696                                                                                51,354
reporting period                                         disclosure of the annual report
                                                   Shareholding of top ten shareholders
                                                                                                              Number of          Number of
                                                                                 Proporti                     shares with         pledged
                      Name                                    Nature                        Total number
                                                                                    on                           sale             shares or
                                                                                                              restriction       shares frozen
                                                   Domestic non-state-owned
Dalian Bingshan Group Co., Ltd.                                                   19.96% 170,916,934                        0                 0
                                                   legal person
Sanyo Electric Co., Ltd.                           Overseas legal person           8.58%       73,503,150                   0                 0
                                                   Domestic non-state-owned
Huatai securities Co. LTD.                                                         1.32%       11,346,659                   0                 0
                                                   legal person
National Social Security Funds 104 Portfolio       Others                          1.17%       10,000,000                   0                 0
National Social Security Funds 503 Portfolio       Others                          0.96%        8,210,314                   0                 0
Tian an property insurance co., LTD. - win No 1. Others                            0.85%        7,247,571                   0                 0
Lin Zhenming                                       Foreign natural person          0.73%        6,280,000                   0                 0
JOHCM INTERNATIONAL
                                                   Overseas legal person           0.63%        5,396,942                   0                 0
SMALL CAP EQUITY FUND
Industrial Securities Golden Kylin No. 2 Colle
                                                   Others                          0.60%        5,101,286                   0                 0
ctive Asset Management Plan
Wu An                                              Domestic natural person         0.56%        4,760,000                   0                 0

                                      Shareholding of top ten shareholders without sale restriction
                                                                            Number of shares
                               Name                                                                            Type of shares
                                                                        without sale restriction
Dalian Bingshan Group Co., Ltd.                                                     170,916,934 RMB denominated ordinary shares
Sanyo Electric Co., Ltd.                                                             73,503,150       Domestically listed foreign shares
Huatai securities Co. LTD.                                                           11,346,659 RMB denominated ordinary shares
National Social Security Funds 104 Portfolio                                         10,000,000 RMB denominated ordinary shares
National Social Security Funds 503 Portfolio                                          8,210,314 RMB denominated ordinary shares
Tian an property insurance co., LTD. - win 1.                                         7,247,571 RMB denominated ordinary shares
Lin Zhenming                                                                          6,280,000       Domestically listed foreign shares
JOHCM INTERNATIONAL
                                                                                      5,396,942       Domestically listed foreign shares
SMALL CAP EQUITY FUND
Industrial Securities Golden Kylin No. 2 Collective Asset Mana
                                                                                      5,101,286 RMB denominated ordinary shares
gement Plan
Wu An                                                                                 4,760,000       Domestically listed foreign shares




                                                                                                                                          27
                                                                         Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                                                      Dalian Bingshan Group Co., Ltd. had the association

Notes to the associated relationship and uniform actions of the above relationship with Sanyo Electric Co., Ltd. among the above
                             shareholders                             shareholders. Sanyo Electric Co., Ltd. holds 26.6% of Dalian
                                                                      Bingshan Group Co., Ltd.'s equity.



2. Controlling shareholder of the Company

                                          Legal         Founding    Unified social
    Name of holding shareholder                                                                      Main business
                                      representative      date       credit code
                                                                                Research, development, manufacture, sales,
                                                                                service and installation of industrial refrigeration
                                                                                products, freezing and cold storage products,
                                                                    91210200241 large-, medium- and small-size air-conditioning
Dalian Bingshan Group Co., Ltd.       Ji Zhijian       Jul. 3, 1985
                                                                    2917931     products, petrochemical equipment products,
                                                                                electronic and electric control products, home
                                                                                appliance products and environment protection
                                                                                products.
Shares held by the holding
shareholder in other overseas and
domestic listed companies as the      None
holding shareholder or ordinary
shareholder in the reporting period

Change in the holding shareholder in the reporting period
□ Applicable √ Not applicable

3. Actual controller of the Company
The company has no actual controller.
According to the actual situation of Dalian Refrigeration Co., Ltd. and its controlling shareholders, and compared
with the related laws and regulations including Company Law of People’s Republic of China, Management
Regulation on Listing Company Acquisition and Stock Listing Rules of Shenzhen Stock Exchange, with the
confirmation of Liaoning Huaxia law firm, the Company released the Public Notice on Not Having Actual
Controller.(No: 2015-025),) which was published on B04 of China Securities, A19 of HK Commercial Daily and
Cninfo website on April 24 2015.




                                                                                                                                 28
Commission ofDalian Municipality Government
                                                                                                                                                                                                                                                         Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                               State-owned Assets Supervision and Administration




                                                                                                                                                                       Dalian State-owned Assets Management Co., Ltd.
                                                                                                                      Dalian Equipment Manufacture Investment




                                                                                                                                                                                                                                                                                                         Dalan Zhonghuida Refrigeration




                                                                                                                                                                                                                                                                                                                                                  Sanyo Electric Co., Ltd.
                                                                                                                                                                                                                                 Yida Group Co., Ltd.




                                                                                                                                                                                                                                                             Dayang Co., Ltd.




                                                                                                                                                                                                                                                                                  Technology Co., Ltd.
                                                                                                          Co., Ltd.




                                                                                                   100%                                                         100%




                                                                                                      22.2%                                                        4.4%                                                     13.3%                       13.3%                   20.2%                                                     26.6%




                                                                                                                                                                         Dalian Bingshan Group Co., Ltd.


                                                                                                                                                                                                                            19.96%

                                                                                                                                                                                                                        Dalian Refrigeration Co., Ltd.

                                              The actual controller controlled the Company through a trust or other asset management
                                              □ Applicable √ Not applicable

                                              4. Other legal-person shareholders holding of 10% or more shares
                                              □ Applicable √ Not applicable
                                              5.、controlling shareholders, actual controllers, restructuring the constraint to the stake and other
                                              commitments underweight
                                              □ Applicable √ Not applicable




                                                                                                                                                                                                                                                                                                                                                                             29
                                                               Dalian Refrigeration Co., Ltd. 2017 Annual Report



                       Section 7 Information on Preferred Stock
□ Applicable √ Not applicable
In the reporting period, the Company didn’t own preferred stock.




                                                                                                             30
                                                                      Dalian Refrigeration Co., Ltd. 2017 Annual Report


       Section 8 Information on the Company’s Directors, Supervisors,
                       Senior Management and Staff
I. Changes in shareholding by directors, supervisors and senior managers

                                                                                                  Increase       Decrease
                                                                                   Shares                                        Shares
                                                                                                 on holding in holding
                                                           Starting    Ending      held at                                       held at
                               Office-holdi                                                      of shares       of shares
  Name           Position                     Sex   Age    date of     date of   beginning                                      the end of
                                 ng state                                                          in this        in this
                                                          office term office term of period                                      period
                                                                                                   period         period
                                                                                  (shares)                                       (shares)
                                                                                                  (shares)        (share)
                                                           Mar. 27,    Jan.20,
Ji Zhijian   Chairman          Incumbent      M     51                            1,413,450        565,380         450,000 1,528,830
                                                            2014        2019
                                                           Mar. 27,    Jan.20,
Xu Junrao Director             Incumbent      F     55                              925,249        370,100         265,000 1,030,349
                                                            2014        2019
                                                           Feb. 5,     Apr.2,
Liu Kai      Vice Chairman     Incumbent      M     43                              989,400        395,760                  0 1,385,160
                                                            2013        2018
                                                           Jan. 21,    Jan.20,
Ding Jie     Director, GM      Incumbent      M     55                              725,000        290,000                  0 1,015,000
                                                            2016        2019
Takagi                                                       Mar.      Jan.20,
             Director          Incumbent      M     61                                       0               0              0               0
Toshiyuki                                                  7,2017       2019
                                                           Jan. 21,    Jan.20,
Shin Kudo Director             Incumbent      M     55                                       0               0              0               0
                                                            2016        2019
Dai          Independent                                   Feb.12,     Jan.20,
                               Incumbent      F     67                                       0               0              0               0
Dashuang director                                           2015        2019
             Independent                                   Feb.12,     Jan.20,
Liu Jiwei                      Incumbent      M     57                                       0               0              0               0
             director                                       2015        2019
             Independent                                   May.20      Jan.20,
Wang Yan                       Incumbent      F     54                                       0               0              0               0
             director                                       2015        2019
             Chairman of
Mao                                                        Mar. 20,    Jan.20,
             Board of          Incumbent      F     52                                       0               0              0               0
Chunhua                                                     2017        2019
             Supervisors
                                                           Jan. 21,    Jan.20,
Dai Yuling Supervisor          Incumbent      F     40                                       0               0              0               0
                                                            2016        2019
                                                             Mar.      Jan.20,
Cao Lili     Supervisor        Incumbent      F     39
                                                           13,2017      2019
Fan                                                        Otc.20,     Jan.20,
             DGM               Incumbent      M     54                              500,000        200,000                  0     700,000
Yuekun                                                      2015        2019
             Chief Financial                               Jan. 21,    Jan.20,
Ma Yun                         Incumbent      M     46                              500,000        200,000                  0     700,000
             Officer                                        2016        2019
Song                                                       Feb. 5,     Jan.20,
             Board Secretary Incumbent        M     44                              424,200        169,680                  0     593,880
Wenbao                                                      2013        2019
Kijima       Director            Leaving      M     60     Mar. 27,    Feb.6,                0               0              0               0



                                                                                                                                             31
                                                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report

     Tadatoshi                          office                           2014      2017
                   Chairman of
                                       Leaving                          Feb. 5,   Mar.11,
     Yu Fuchun Board of                                M       58                                 15,211         6,084            0    21,295
                                        office                           2013      2017
                   Supervisors
     Wang                              Leaving                         Jan. 21,   Jun.29,
                   DGM                                 M       56                                515,349     206,140              0   721,489
     Zhiqiang                           office                           2016      2017
           Total          --               --           --      --         --       --          6,007,859 2,403,144        715,000 7,696,003
     During the reporting period, the Company carried out profit distribution plan for year of 2016, transferring 4
     shares from capital reserve for every 10 shares.
     On April 2, 2017, Mr. Liu Kai, the original vice chairman of Board of Directors, resigned due to work change. The
     Company will elect the new vice chairman on the 20th meeting of 7th Board of Directors.

     II. Changes of directors, supervisors, senior managers of the Company

     Name                        Position held                       Type                Date                            Reason
Kijima Tadatoshi Director                                    Leaving office       Feb.6,2017        Resign from the Company due to retirement
                                                                                                    Resign from the Company due to work
Yu Fuchun           Chairman of Board of Supervisors         Leaving the office   Mar.11,2017
                                                                                                    change
                                                                                                    Resign from the Company due to personal
Wang Zhiqiang       DGM                                      Leaving the office   Jun.29,2017
                                                                                                    reason
Takagi Toshiyuki Director                                    Be employed          Mar.7,2017        Be elected
Cao Lili            Worker Supervisor                        Be employed          Mar.13,2017       Be elected
Mao Chunhua         Chairman of Board of Supervisors         Be employed          Mar.20,2017       Be elected


     III Office holding

     Professional background, main work experiences and the main duties and responsibilities of incumbent directors,
     supervisors, senior managers of the Company
                                                                                                                                        main duties and
           Name    Position held Professional background                            Main work experience
                                                                                                                                        responsibilities
                                 doctorate degree in          Successively acting as director, GM, Chairman of Panasonic                    Related
      Ji Zhijian    Chairman management of the Dalian Cold-Chain.; Chairman and President of Dalian Bingshan Group Co., responsibilities of
                                 University of Technology Ltd.; Chairman of the Company.                                                 the Chairman
                                                              Successively acting as the Financial Majordomo, director of the               Related
                                 The MBA and senior
     Xu Junrao       Director                                 Company; Vice President and chief accountant of Dalian Bingshan responsibilities of
                                 account
                                                              Group Co., Ltd.                                                             the Director
                                 graduate from Xi’an
                                 Jiaotong University major Successively acting as Head of Production Management Dept.,
                                                                                                                                            Related
                       Vice      in mechanical designing      Assistant GM, GM and director of the Company; Chairman of Dalian
       Liu Kai                                                                                                                         responsibilities of
                    Chairman and manufacturing and the Bingshan Group Engineering Co., Ltd.; Chairman of Dalian Bingshan
                                                                                                                                          the Director
                                 MBA of Dalian University Group Sales Co., Ltd.
                                 of Technology
     Ding Jie       Director,    graduate from Xi’an         Served as the GM and director of Wuhan new world Refrigeration                Related


                                                                                                                                             32
                                                                            Dalian Refrigeration Co., Ltd. 2017 Annual Report


                 GM        Jiaotong University major Co., Ltd. since 2002                                                         responsibilities of
                           in compressor and                                                                                         the Director
                           refrigeration technology,                                                                                   Related
                           owed a master of business                                                                              responsibilities of
                           administration of                                                                                           the GM
                           Huazhong University of
                           Science and Technology
                                                       He had been work in the technology division, the information
                                                       machine division, PC department, IT product department, AVC
                                                       network department of Panasonic Electric Industrial Co., Ltd and
Takagi                     graduated from Osaka
              Director                                 Panasonic system network Co., Ltd.He serves as director in Panasonic
Toshiyuki                  Prefecture University;
                                                       Electric Industrial Co., Ltd, the deputy director of the electrochemical
                                                       residential equipment machine Co., Ltd, the director of air-condition
                                                       Co., Ltd.
                                                       Successively acting as manager of counselor and manager of
                                                                                                                                       Related
                           graduated from Japan Soka ministry of Supervision of Panasonic Electric Industrial Co., Ltd. The
Shin Kudo     Director                                                                                                            responsibilities of
                           University                  chief accountant of Panasonic Electric (China), Panasonic Electric
                                                                                                                                     the Director
                                                       AP(China)
                           professor, international
                                                       She serves as professor and doctoral tutor of the school of business            Related
                           project management
   Dai       Independent                               administration of Dalian university of Technology, the director of responsibilities of
                           appraiser, Chinese
Dashuang       director                                project management research center of Dalian university of                  the Independent
                           registered consulting
                                                       technology.                                                                     director
                           engineer.
                                                                                                                                       Related
                           doctor of management,       He has served successively as the director of finance department,
             Independent                                                                                                          responsibilities of
 Liu Jiwei                 professor of accounting,    professor of the accountancy of Dongbei University of Finance and
               director                                                                                                            the Independent
                           CPA.                        Economics,
                                                                                                                                       director
                                                       She has served successively as vice dean of law school of Dongbei
                           graduate from China                                                                                         Related
                                                       University of Finance and Economics, the director of Chinese society
             Independent University of Political                                                                                  responsibilities of
Wang Yan                                               of Economic Law ,the president of the Economics law seminar of
               director    Science and Law,                                                                                       the Independent
                                                       Liaoning Province law society, and the arbitrator of Dalian Arbitration
                           professor of law                                                                                            director
                                                       Commission
             Chairman of                                                                                                               Related
   Mao                                                 Successively acting as Vice Head, and Head of the Financial Dept. of
              Board of     Senior Accountant                                                                                      responsibilities of
 Chunhua                                               the Company.
             Supervisors                                                                                                           the Supervisor
                                                                                                                                       Related
                                                       acting as the deputy chief of the Financial Dept. of Dalian Bingshan
Dai Yuling Supervisor Accountant                                                                                                  responsibilities of
                                                       Group Company Ltd.
                                                                                                                                    the Supervisor
                                                                                                                                       Related
               Worker      graduated from Harbin
Cao Lili                                               served as organizer of organization department of the Company              responsibilities of
             Supervisor University of Commerce
                                                                                                                                    the Supervisor
   Fan                     graduated from Tsinghua     He successively served as the general manager of operation &
                DGM                                                                                                                Assist the GM
 Yuekun                    University with a bachelor management division and GM assistant of Panasonic Cold-Chain


                                                                                                                                        33
                                                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                degree, major in           from 2003 to 2013; served as GM of Dalian HURLLY Group Co.,
                                engineering physics, and   Ltd. from June 2013 to July 2015; served as the general manager of
                                MBA of Dalian University operation & management division of the Company since September
                                of Technology;             2015. serves as the Deputy General Manager of the Company since
                                                           October 22, 2015.
                                                           He has served successively as the Deputy chief of the Financial
                     Chief                                                                                                                       Related
                                                           Management Dept. of the Company, the supervisor of the Company,
   Ma Yun           Financial The Accountant                                                                                              responsibilities of
                                                           and the Chief Financial Officer of Dalian Bingshan Group Sales Co.,
                    Officer                                                                                                                       CFO
                                                           Ltd.
                                                                                                                                                 Related
       Song          Board      graduate from Zhejiang     Successively acting as representative for securities affairs, board
                                                                                                                                         responsibilities of
     Wenbao         Secretary University,CFA              secretary of the Company.
                                                                                                                                          Board Secretary


   Office holding in shareholder unit
   √ Applicable □ Not applicable
                                                                                                        If receiving remuneration or allowance from
Name of office holder           Shareholder unit name             Position held in shareholder unit
                                                                                                                        shareholder unit
Ji Zhijian               Dalian Bingshan Group Co., Ltd. Chairman of the Board, President                                      Yes
Xu Junrao                Dalian Bingshan Group Co., Ltd. Vice President and chief accountant                                   Yes
   Office holding in other units
   √ Applicable □ Not applicable
                                                                                                                                       If receiving
                                                                                                                                     remuneration or
         name                                       unit name                                    Position held in other unit
                                                                                                                               allowance from other
                                                                                                                                          unit
                                    Panasonic Refrigeration (Dalian) Co., Ltd.;                          Chairman                          no
                             Dalian Bingshan Group Management Consulting Co., Ltd.                       Chairman                          no
       Ji Zhijian                Bingshan Technology Service (Dalian) Co., Ltd.                          Chairman                          no
                              Dalian Zhong Huida Refrigeration Technology Co., Ltd.                      Chairman                          no
                                       Dalian Kelvins Technology Co., Ltd.                               Chairman                          no
                                Wuhan New World Refrigeration Industry Co., Ltd.                         Chairman                          no
       Ding Jie                   Dalian Bingshan Group Engineering Co., Ltd.                            Chairman                          no
                                      Dalian Bingshan Group Sales Co., Ltd.                              Chairman                          no
                                  Dalian Huarui Heavy Industry Group Co., Ltd                         The independent                      yes
    Dai Dashuang
                                         Yingkou Port Liability Co., Ltd                              The independent                      yes
       Liu Jiwei                         Lingyuan Iron and Steel Co., Ltd                             The independent                      yes


   IV. Remuneration paid to directors, supervisors, and senior management
   Decision-making procedure, decision-making basis and actual payment of remuneration for directors, supervisors
   and senior management
   Decision-making procedure: the Company's remuneration plan for directors and supervisors was proposed by the
   Company's Remuneration and Evaluation Committee of the Board of Directors, and after approval by the Board
   of Directors, submitted to the general meeting for adoption and put into effect. The Company’s remuneration plan
   for senior management was put into effect after approval by the Company’s Board of Directors.
   Decision-making basis: it was decided on the basis of main responsibilities and importance of the concerned

                                                                                                                                                  34
                                                               Dalian Refrigeration Co., Ltd. 2017 Annual Report

position and the remuneration level of similar positions in other similar enterprises and evaluated and rewarded
through the Company’s examination procedure for assets operation performance.
The total amount of remunerations actually ( pre-tax ) paid by the Company to directors, supervisors, and senior
management was 3.5078 million yuan.

Particulars about the annual remuneration of directors, supervisors and senior staff members
                                   Annual remuneration and allowance( pre-tax )paid by the Company
                  Name
                                                          (ten thousand yuan)
     Ji Zhijian                                                    0
     Xu Junrao                                                     0
     Liu Kai                                                       0
     Ding Jie                                                    85.9
     Takagi Toshiyuki                                              0
     Shin Kudo                                                     0
     Dai Dashuang                                                  8
     Liu Jiwei                                                     8
     Wang Yan                                                      8
     Mao Chunhua                                                 19.72
     Dai Yuling                                                    0
     Cao Lili                                                      0
     Fan Yuekun                                                   76
     Ma Yun                                                       72
     Song Wenbao                                                  45
     Kijima Tadatoshi                                              0
     Yu Fuchun                                                   2.26
     Wang Zhiqiang                                               25.9
     Total                                                      350.78

Equity incentive plans granted to directors, supervisors and senior management of the Company in the reporting
period
□ Applicable √ Not applicable

V. Status of the Company's staff

1. As of Dec. 31, 2017 the Company and its major subsidiary had 1,726 enrolled employees, including 933
persons engaged in production; 268 persons engaged in engineering and technology; 263 persons engaged in
marketing; 37 persons engaged in financing; and 225 persons engaged in management.
2. As of Dec. 31, 2017, among enrolled employees of the Company and its major subsidiary, 61 persons have the
educational background of Master or higher; 502 persons have the educational background of university; 526
persons have the educational background of junior college; and 637 persons have the educational background of
secondary technical school or lower.
3. The Company applied the employee job performance wage system with distribution according to positions and
performance of an employee.
4. The Company formulated the annual training plan and gave purposeful training to an employee in consideration
of his/her post requirement.
5. The pension and medical expense for retired employees of the Company were paid by the social insurance
body.




                                                                                                                   35
                                                                               Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                        Section 9 Corporate Governance
     I. Basic situation of corporate governance

     Within the reporting period, the company centered around the operation subject as “Leading innovation, Creating
     value” with the theme “activation, integration and upgrading”, relying on the opportunity of overall relocation and
     transformation of the Company, to further deepen and perfect the normative internal control system and upgrade
     the governing level of the company continuously.

     There were no problems with the Company concerning horizontal competition caused by restructures and other
     reasons. The main normal associated transactions between the Company and the associated companies included
     purchasing the supporting products for package projects from the associated companies, and selling the supporting
     parts and components to the associated companies and providing them with the labor service. Associated
     transactions between the Company and the associated companies are necessary for normal production and
     operation and helpful for the Company’s healthy development, and therefore will continue. The Company will
     strictly follow the related decision-making procedures and fulfill the obligation in information disclosure in order
     to further regulate associated transactions.

     Was there any deviation of the Company's corporate governance from the requirements in the Company Law and
     China Securities Regulatory Commission's regulations?
     □ Yes √ No
     There was no deviation of the Company's corporate governance from the requirements in the Company Law and
     China Securities Regulatory Commission's regulations.

     II. Status of the Company's business, staff, asset, organization and finance separations from
     the holding shareholder

     The Company was separated from the holding shareholder in business, staff, asset, organization and finance, and
     has the independent and complete business and operation capability.
     III. Horizontal competitions
     □ Applicable √ Not applicable

     IV Shareholders’ general meeting convened in the reporting period

     1. Annual Shareholders’ general meeting within this reporting period
                                                                            The proportion of
Session number of meeting                    The type of the meeting                                date      Disclosing date Disclosing index
                                                                            participate investors
The 1st Extraordinary Shareholders’ General extraordinary Shareholders’                           March                     http://www.cnin
                                                                                         30.31%               March 8,2017
Meeting of 2017                              general meeting                                        7,2017                    fo.com.cn
2016                                         Annual        Shareholders’                           May                       http://www.cnin
                                                                                         30.75%               May 20.2017
Annual Shareholders’ General Meeting        general meeting                                        19.2017                   fo.com.cn
      nd
The 2 Extraordinary Shareholders’ General extraordinary Shareholders’                             November November         http://www.cnin
                                                                                         30.55%
Meeting of 2017                              general meeting                                        10.2017   11.2017         fo.com.cn

The 3rd Extraordinary Shareholders’ General extraordinary Shareholders’                           December December         http://www.cnin
                                                                                         30.52%
Meeting of 2017                              general meeting                                        28,2017   29,2017         fo.com.cn


     V. Independent directors’ execution of duties in the reporting period




                                                                                                                                      36
                                                                        Dalian Refrigeration Co., Ltd. 2017 Annual Report


1. Attendance of independent directors to the meetings of the Board of Directors and general meetings
                         Attendance of independent directors to the meetings of the Board of Directors

     Name of                                                                                                Failure to attend
                      Number of due board      Number of     Number of     Number of
                                                                                                Number of     in person for
   independent       meetings in the reporting attendances attendance by attendance by
                                                                                                 absences    successive two
     director                 period           on the spot communication     proxy
                                                                                                               times or not
Dai Dashuang                     7                  1               6               0                0            No
Liu Jiwei                        7                  1               6               0                0            No
Wang Yan                         7                  1               6               0                0            No
Number of attendances as a non-voting delegate                                          4


2. Objections to the related matters of the Company raised by independent directors

The independent directors have raised no objections to the related matters of the Company in the reporting period.

3. Other description of independent directors’ execution of duties

For details of the Company's independent directors' execution of duties, see the 2017 annual work report of the
independent directors of the Company.

VI.. Execution of duties of the special committees under the Board of Directors in the
reporting period

1. Execution of duties of the audit committee under the Board of Directors

With performance of its duty according to the Implementation Rules for the Audit Commission under the Board of
Directors and the Annual Reporting Work Rules for the Audit Commission, the Audit Commission under the
Board of Directors supervised the Company’s internal audit system and its implementation, audited the
Company’s accounting information and its disclosure and assessed the work of the external audit institution.
In the work of evaluation of a normative internal control system of the company, the Auditing Commission
brought into play actively the duty of organization, leadership and supervision. According to the company internal
control defect recognization standard, it examined and recognized the internal control defect recognization
summary table developed by the internal control evaluation work group of the company, and had an examination
reading of the internal control evaluation report of the company for 2017, believing that the status quo of the
internal control system of the company complies with related requirements and with the actual situation of the
company and it is being carried out satisfactorily. The internal control evaluation report of the company for 2017
reflects the above facts accurately.
In the Company’s 2017 annual audit work, the Audit Commission conducted positive communication and
effective coordination with the audit institution ShineWing CPAs .The Audit Commission conducted
communication with the person in charge of the project of the audit institution on the audit work plan, schedule,
matters that should be noticed in audit and other matters and reached an agreement with them. In the process of
audit, they kept close information on the progress of audit work and urged the audit institution many times to
ensure the quality and schedule in the audit work. Through serious review of the Company’s annual finance report
and annual report after completion of the audit work, the Audit Commission believed that the Company’s finance
report was comprehensive and authentic, and the finance report and other information disclosed by the Company
were objective and true, having reflected the true annual financial status of the Company.
The Audit Commission believed that in the 2017 annual audit service for the Company, ShineWing CPAs
implemented the audit for the Company on the practicing basis of independency, objectivity and fairness and
strictly abided by the new accounting standards. They worked out a well-considered plan, allocated all necessary
personnel, positively contacted our Audit Commission and independent directors, and completed the 2017 annual
audit service for the Company through its industrious and conscientious working. It is suggested that ShineWing
CPAs should be reengaged as the auditing agency for the Company in 2018.

2. Execution of duties of the remuneration and evaluation committee under the Board of Directors

                                                                                                                            37
                                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report


With performance of its duty according to the Implementation Rules for the Remuneration and Evaluation
Commission under the Board of Directors, the Remuneration and Evaluation Commission under the Board of
Directors examined the annual salary and remuneration level of the Company’s directors, supervisors and senior
executives, and believed that the decision-making procedure for salary and remuneration of the above persons and
the paying standard complied with the laws and regulations and the Company’s regulations, and the salary and
remuneration information disclosed in the Company’s Annual Report for 2017 was authentic and exact.

VII. Work of the Board of Supervisors
Was there any risk with the Company found by the Board of Supervisors in their supervision activities in the
reporting period?
□ Applicable √ Not applicable
The Board of Supervisors had no objections to the matters under supervision in the reporting period.
VIII. Performance evaluation and incentive system for senior management
Combined with the 2015 restricted stock incentive plan and 2016 restricted stock incentive plan, the Company
evaluated and rewarded senior management through the Company's examination procedure for assets operation
performance in the reporting period.
IX. The internal control system
1. Details of material weakness in the internal control found in the reporting period described in the report
on self-evaluation of internal control.
□ Applicable √ Not applicable
There was no material weakness in the internal control found in the reporting period.

2. Report on self-evaluation of internal control
    Details of material weakness in the internal control found in the reporting period described in the report on
                                          self-evaluation of internal control
There was no material weakness in the internal control found in the reporting period.
Date of disclosing the full text of the report on
                                                  Apr. 21, 2018
self-evaluation of internal control
Disclosure reference to the full text of the      For the 2017 annual report on self-evaluation of internal control
report on self-evaluation of internal control     of the Company, visit the website www.cninfo.com.cn.

3. Internal control audit report
                     Description of the deliberation opinions in the internal control audit report
We think that as of Dec. 31, 2017, Dalian Refrigeration Co., Ltd. had maintained an effective internal control
over the financial reports in all material aspects according to Basic Enterprise Internal Control Specification and
relevant regulations.
Date of disclosing the full text of
                                      Apr. 21, 2018
the internal control audit report
Disclosure reference to the full text For the 2017 annual internal control audit report of the Company, visit the
of the internal control audit report website www.cninfo.com.cn.
Did the accounting firm issue the internal control audit report with nonstandard opinions?
□ Applicable √ Not applicable
Was the internal control audit report issued by the accounting firm consistent with the opinion in the
self-evaluation report of the Board of Directors?
√Yes □ No




                                                                                                                      38
                                              Dalian Refrigeration Co., Ltd. 2017 Annual Report


                      Section 10 Information on Corporate Bonds
□ Applicable √ Not applicable




                                                                                            39
                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report

                              Section 11 Financial Report

I. Auditor’s Report

                                                                               XYZH/2018DLA10187
  To the shareholders of Dalian Refrigeration Company Limited

        1. Opinion
  We have audited the financial statements of Dalian Refrigeration Company Limited (“Dalian
  Refrigeration Company”), which comprise the Company’s balance sheet as at 31 December
  2017, the Company’s income statement, the Company’s cash flow statement and the Company’s
  statement of changes in shareholders’ equity for the year then ended, and the related notes to the
  financial statements.
  In our opinion, the accompanying financial statements of Dalian Refrigeration Company present
  fairly, in all material respects, the Company’s financial position as at 31 December 2017, the
  Company’s results of operations and cash flows for the year then ended in accordance with
  Accounting Standards for Business Enterprises.

        2. Basis for Opinion
  We conducted our audit in accordance with China Standards on Auditing for Chinese Certified
  Public Accountants. Our responsibilities under those standards are further described in the
  “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our report. We
  are independent of Dalian Refrigeration Company in accordance with the Code of Ethics for
  Chinese Certified Public Accountants, and we have fulfilled our other ethical responsibilities of
  the code. We believe that the audit evidence we have obtained is sufficient and appropriate to
  provide a basis for our audit.

        3. Key Audit Matters
  Key audit matters are those matters that we consider, in our professional judgment, were of most
  significance in our audit of the financial statements of the current period. These matters were
  addressed in the context of our audit of the financial statements as a whole and, in forming our
  audit opinion thereon, and we do not express a separate opinion on these matters.
    Revenue recognition
    Key Audit Matter                             How the matter was addressed in the audit
    Revenue of Dalian Refrigeration              The main audit procedures carried out for addressing
    Company and its subsidiaries mainly          the key audit matters are as follows:
    come from sales of products and              Understand and evaluate effectiveness of design and
    installation. The key concern about the      operation of the management ‘s internal control over
    sales revenue is due to the large sales      revenue
    quantities and any potential                 Carried out analytical review and evaluate the
    misstatements existing in the revenue        reasonableness of sales income and gross profit
    recognition within the appropriate           margin by segmenting the business and sales in
    accounting period. Key concern about conjunction with industry development and actual
    installation income is because the           situation of Dalian Refrigeration Company.
    accounting involved by significant           Sampling test the sales contracts, identify the clause
    accounting estimate and judgment.            and terms in respect to the risk and reward transfer of
    Having considered these matters, we          the ownership. Evaluate the recognition timing of
    recognized revenue recognition as key        revenue whether is in line with the accounting
    audit matters.                               standards.
                                                 Sampling select product sales revenue record,
                                                 reconcile to sales invoice, contracts, dispatch note,
                                                 acceptance note; Sampling select installation sales
                                                 revenue record, reconcile to invoice, installation
                                                 contracts and completion report and Evaluate the
                                                 recognition of revenue whether is in line with the
                                                 accounting standards
                                                                                                           40
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                             Obtain the system data and reconcile to the data from
                                             accounting system so to ensure the consistence.
                                             Sampling select the transactions before and after the
                                             balance sheet date, test the dispatch note and other
                                             supporting documents so to ensure whether the
                                             transaction is recorded into the appropriate accounting
                                             period.

      4. Other Information
The management of Dalian Refrigeration Company (hereinafter referred to as the
“Management”) is responsible for the other information. The other information comprises the
information included in the Dalian Refrigeration Company 2017 annual report, but does not
include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
the other information, we are required to report that fact. We have nothing to report in this
regard.

     5.   Responsibilities of the Management and Those Charged with Governance for the
Financial Statements
The Management is responsible for the preparation of the financial statements in accordance with
Accounting Standards for Business Enterprises to achieve fair presentation; and designing,
implementing and maintaining internal control which is necessary to enable that the financial
statements are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Management is responsible for assessing Dalian
Refrigeration Company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
Management either intends to liquidate Dalian Refrigeration Company or to cease operations, or
have no realistic alternative but to do so.
Those charged with governance are responsible to overseeing Dalian Refrigeration Company’s
financial reporting process.

      6. Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with auditing standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
generally considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial
statements.
During the course of audit in accordance with auditing standards, we exercise professional
judgment and maintain professional skepticism. We also carry out the following works:
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our audit. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of its internal control (this sentence would be deleted in
circumstance when we are also responsible to issue an opinion on the effectiveness of internal
control in conjunction with the audit of the financial statements).
                                                                                                      41
                                                   Dalian Refrigeration Co., Ltd. 2017 Annual Report
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Management.
Conclude on the appropriateness of the Management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on Dalian Refrigeration
Company’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements in accordance with the auditing standards or, if such disclosures are
inadequate, we shall modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause
Dalian Refrigeration Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and also whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence of financial information from Dalian
Refrigeration Company and express our opinion. We are responsible for directing, monitoring
and implementing the group audit and take full responsibility for audit opinion.
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings etc., including any
significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
those relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence and
related safeguards, where applicable.
From the matters communicated with those charged with governance, we determine those
matters that were of most significance in the audit of the financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation prohibited public disclosure about the matter or when, in rare
circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.

 ShineWing Certified Public Accountants            CICPA:Sui Guojun          (Audit Partner)
 LLP


                                                   CICAP:Wang Dong


 China, Beijing                                    April 20, 2018




                                                                                                 42
                                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report

      II. Accounting statement
                                                     BALANCE SHEET
        Prepared by Dalian Refrigeration Co., Ltd.                     December 31, 2017                 Unit: RMB Yuan
                                                                     31-Dec-2017                           31-Dec-2016
                          Assets
                                                            Consolidation      Parent Company     Consolidation     Parent Company
Current assets:
Monetary funds                                                394,809,694.11     234,655,092.14    715,215,638.54     496,417,106.54
Financial assets which are measured by fair value and
which changes are recorded in current profit and loss
Derivative financial assets
Notes receivable                                             172,818,176.20       57,455,446.82    126,408,249.59      90,509,540.07
Accounts receivable                                         1,036,255,895.79     356,557,956.93    807,109,959.54     117,575,405.74
Accounts in advance                                          140,808,375.21       33,125,666.30    108,033,313.10      96,269,883.15
Interest receivables                                            1,871,783.33       1,871,783.33        723,955.56        723,955.56
Dividend receivable                                                33,450.00                            39,025.00
Other receivables                                              52,049,009.83       2,822,798.03     57,257,456.57       4,368,505.07
Inventories                                                  352,279,664.64      149,549,915.80    349,538,424.06     151,230,744.47
Assets held for sale
Non-current asset due within one year
Other current assets                                          114,907,269.33     102,402,409.84     43,254,044.92      30,563,139.06
                    Total current assets                    2,265,833,318.44     938,441,069.19 2,207,580,066.88      987,658,279.66
Non-current assets:
Finance asset held available for sales                       515,783,193.99      514,468,051.49    545,565,116.64     544,249,974.14
Held-to-maturity investment
Long-term account receivable
Long-term equity investment                                 1,568,255,738.12 2,044,438,551.88 1,292,912,901.49 1,713,412,501.09
Investment property                                          103,861,275.27      114,812,363.92     28,605,652.94      28,605,652.94
Fixed assets                                                 890,874,647.40      658,637,271.68    511,008,545.87     274,262,264.28
Construction in progress                                       82,999,382.90      80,314,961.09    321,646,676.78     320,329,247.78
Engineering material
Disposal of fixed asset
Productive biological asset
Oil and gas asset
Intangible assets                                            143,918,516.87       71,715,598.15    154,714,212.52      88,113,279.88
Expense on Research and Development
Goodwill                                                        1,750,799.49                         1,750,799.49
Long-term expenses to be apportioned                           14,431,131.01      12,737,555.16      4,448,719.77       3,658,276.80
Deferred income tax asset                                      31,913,497.18       5,815,160.93     27,753,747.94       6,751,619.50
Other non-current asset
                  Total non-current asset                   3,353,788,182.23 3,502,939,514.30 2,888,406,373.44 2,979,382,816.41
                    Total assets                             5,619,621,500.67 4,441,380,583.49 5,095,986,440.32 3,967,041,096.07
      Legal Representative: Ji Zhijian      Chief Financial Official: Ma Yun Person in Charge of Accounting Organization: Mao
      Chunhua




                                                                                                                            43
                                                             Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                          BALANCE SHEET (CONTINUED)
      Prepared by Dalian Refrigeration Co., Ltd.                December 31, 2017                 Unit: RMB Yuan
                                                                 31-Dec-2017                         31-Dec-2016
          Liabilities and shareholders’ equity
                                                        Consolidation    Parent Company     Consolidation   Parent Company
Current liabilities:
Short-term loans                                         349,801,300.00    260,000,000.00     45,000,000.00
Derivative financial liabilities
Notes payable                                            260,443,167.67    119,034,784.44   194,562,734.79     85,834,371.87
Accounts payable                                         889,964,317.63    385,076,569.09   863,552,643.26    340,987,669.38
Accounts received in advance                             147,172,195.05     61,450,463.91   150,098,892.29     74,949,113.25
Wage payable                                              46,751,562.36     11,445,665.15     50,256,392.86     9,796,460.53
Taxes payable                                             29,992,558.62      1,274,710.89     18,405,089.48     1,234,137.19
Interest payable                                             379,085.53       379,085.53
Dividend payable                                             863,516.60       533,156.00        863,516.60       533,156.00
Other accounts payable                                    67,674,829.07     30,346,173.96   109,493,520.02     74,954,775.74
Liabilities held for sale
Non-current liabilities due within one year
Other current liabilities
                   Total current liabilities            1,793,042,532.53   869,540,608.97 1,432,232,789.30    588,289,683.96
Non-current liabilities:
Long-term loans                                          160,000,000.00    160,000,000.00   160,000,000.00    160,000,000.00
Bonds payable
Long-term account payable
Long-term wage payable
Special accounts payable
Projected liabilities
Deferred income                                          100,336,504.07     56,890,504.07     57,396,619.00    12,836,619.00
Deferred income tax liabilities                           71,429,566.31     71,429,566.31     75,683,681.95    75,683,681.95
Other non-current liabilities
                Total non-current liabilities             331,766,070.38   288,320,070.38   293,080,300.95    248,520,300.95
                      Total liabilities                 2,124,808,602.91 1,157,860,679.35 1,725,313,090.25    836,809,984.91
Shareholders’ equity
Share capital                                            856,487,181.00    856,487,181.00    611,776,558.00   611,776,558.00
Other equity instruments
Capital public reserve                                   757,532,081.34    802,034,176.17 1,046,321,716.85 1,036,115,161.54
Less:Treasury stock                                       23,305,370.40     23,305,370.40     67,615,856.00    67,615,856.00
Other comprehensive income                               407,269,002.11    406,306,901.44   431,639,323.52    430,413,556.77
Special preparation
Surplus public reserve                                   668,150,375.30    668,150,375.30   620,578,847.52    620,578,847.52
Retained profit                                          750,397,795.56    573,846,640.63   658,387,158.97    498,962,843.33
Translation of foreign currency capital
 Total owner’s equity attributable to parent company   3,416,531,064.91 3,283,519,904.14 3,301,087,748.86 3,130,231,111.16
Minority interests                                        78,281,832.85                       69,585,601.21
                    Total owner’s equity               3,494,812,897.76 3,283,519,904.14 3,370,673,350.07 3,130,231,111.16
       Total liabilities and shareholder’s equity      5,619,621,500.67 4,441,380,583.49 5,095,986,440.32 3,967,041,096.07
      Legal Representative: Ji Zhijian Chief Financial Official: Ma Yun Person in Charge of Accounting Organization: Mao
      Chunhua




                                                                                                                    44
                                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                                INCOME STATEMENT
       Prepared by Dalian Refrigeration Co., Ltd.                January-December, 2017   Unit: RMB Yuan
                                                         January-December, 2017         January-December, 2016
                        Items
                                                      Consolidation Parent Company Consolidation Parent Company
I. Total sales                                        2,079,715,105.37   616,759,880.66    1,893,200,939.64   558,404,871.04
Including: Operating income                           2,079,715,105.37   616,759,880.66    1,893,200,939.64   558,404,871.04
II. Total operating cost                              2,045,840,192.64   633,137,078.08    1,888,674,681.05   579,660,051.71
Including: Operating cost                             1,643,653,442.93   507,660,774.60    1,536,531,442.08   468,526,965.90
Taxes and associate charges                             19,553,933.04      7,988,392.84      17,932,226.42       5,674,459.53
Selling and distribution expenses                      113,422,315.47        891,189.19      91,678,326.90       1,292,587.98
Administrative expenses                                231,345,591.57    112,247,954.40     219,270,065.31    109,136,561.08
Financial expense                                       10,855,836.96      4,027,140.72       2,378,038.61        350,400.16
Impairment loss                                         27,009,072.67        321,626.33      20,884,581.73      -5,320,922.94
Add: Gain/(loss) from change in fair value
Gain/(loss) from investment                            180,132,262.51    198,438,477.12     172,600,178.47    187,574,249.05
Including: income form investment on affiliated
                                                       140,904,557.45    141,879,121.47     128,967,171.76    131,022,957.13
enterprise and jointly enterprise
Gain/(loss) from asset disposal                            552,588.02      1,851,943.49      -21,565,350.43    -21,377,966.78
Other income                                             1,771,176.72        128,650.51
III. Operating profit                                  216,330,939.98    184,041,873.70     155,561,086.63    144,941,101.60
Add: non-business income                                 2,330,234.97        527,565.75      38,222,022.99       3,084,214.94
Less: non-business expense                                 187,380.52                 0         285,318.73         60,000.00
IV. Total profit                                       218,473,794.43    184,569,439.45     193,497,790.89    147,965,316.54
Less: Income tax                                        13,917,742.62        936,458.57       7,966,473.68       1,924,168.07
V. Net profit                                          204,556,051.81    183,632,980.88     185,531,317.21    146,041,148.47
(I) Classification by continuous operation
1. Net profit from continuous operation                204,556,051.81    183,632,980.88     185,531,317.21    146,041,148.47
2. Net profit from discontinuing operation
(II)Classification by ownership
1.Net profit attributable to parent company            200,759,820.17    183,632,980.88     182,234,151.73    146,041,148.47
2.Minority shareholders’ gains and losses               3,796,231.64                         3,297,165.48
VI. After-tax net amount of other comprehensive
                                                        -24,370,321.41    -24,106,655.33   -158,348,794.53    -158,345,633.66
incomes
After-tax net amount of other comprehensive
                                                        -24,370,321.41    -24,106,655.33   -158,348,794.53    -158,345,633.66
incomes attributable to owners of the Company
(I) Other comprehensive incomes that will not be
reclassified into gains and losses
1. Changes in net liabilities or assets with a
defined benefit plan upon re-measurement
2. Enjoyable shares in other comprehensive
incomes in investees that cannot be reclassified
into gains and losses under the equity method
(II) Other comprehensive incomes that will be
                                                        -24,370,321.41    -24,106,655.33   -158,348,794.53    -158,345,633.66
reclassified into gains and losses
1. Enjoyable shares in other comprehensive
incomes in investees that will be reclassified into       -263,666.08                             -3,160.87
gains and losses under the equity method
2. Gains and losses on fair value changes of
                                                        -24,106,655.33    -24,106,655.33   -158,345,633.66    -158,345,633.66
available-for-sale financial assets
3. Gains and losses on reclassifying
held-to-maturity investments into
available-for-sale financial assets
4. Effective hedging gains and losses on cash
flows
5. Foreign-currency financial statement
translation difference
                                                                                                                    45
                                                                      Dalian Refrigeration Co., Ltd. 2017 Annual Report
6. Other
After-tax net amount of other comprehensive
incomes attributable to minority shareholders
VII Total comprehensive income                            180,185,730.40      159,526,325.55          27,182,522.68          -12,304,485.19
Total comprehensive income attributable to
                                                          176,389,498.76      159,526,325.55          23,885,357.20          -12,304,485.19
parent company
Total comprehensive income attributable to
                                                             3,796,231.64                               3,297,165.48
minority shareholders
VIII. Earnings per share
(I) basic earnings per share                                           0.23                                      0.22
(II) diluted earnings per share                                        0.23                                      0.22
      Legal Representative: Ji Zhijian   Chief Financial Official: Ma Yun      Person in Charge of Accounting Organization: Mao Chunhua




                                                                                                                                    46
                                                               Dalian Refrigeration Co., Ltd. 2017 Annual Report

                                           CASH FLOW STATEMENT

        Prepared by Dalian Refrigeration Co., Ltd.        January -December, 2017       Unit: RMB Yuan
                                               January -December, 2017            January -December, 2016
                 Items
                                          Consolidation     Parent Company     Consolidation   Parent Company
I. Cash flows arising from operating
activities:
Cash received from selling commodities and
                                                 1,490,364,517.50     466,954,711.78   1,635,367,200.41   573,989,576.16
providing labor services
Write-back of tax received                         13,249,610.37                         15,004,822.89
Other cash received concerning operating
                                                   99,140,045.44       67,958,978.50     73,923,003.04     43,293,827.34
activities
     Subtotal of cash inflow arising from
                                                 1,602,754,173.31     534,913,690.28   1,724,295,026.34   617,283,403.50
             operating activities
Cash paid for purchasing commodities and
                                                 1,208,906,954.40     503,456,875.87   1,130,198,716.81   417,926,957.89
receiving labor service
Cash paid to/for staff and workers                328,550,494.59      125,201,385.18    320,358,728.02    126,059,533.97
Taxes paid                                         97,569,294.79        9,617,239.24    119,059,997.71     18,159,382.86
Other cash paid concerning operating
                                                  174,953,280.75       25,669,693.09    161,284,653.77     38,988,406.65
activities
     Subtotal of cash outflow arising from
                                                 1,809,980,024.53     663,945,193.38   1,730,902,096.31   601,134,281.37
   operating activities
      Net cash flows arising from operating
                                                 -207,225,851.22     -129,031,503.10      -6,607,069.97    16,149,122.13
                    activities
II. Cash flows arising from investing
activities:
Cash received from recovering investment            1,500,000.00        1,500,000.00      1,500,000.00       4,170,375.54
Cash received from investment income              124,960,986.95      134,921,961.95    109,727,833.19    119,993,684.77
Net cash received from disposal of fixed,
                                                      359,391.02           46,000.00        533,855.77       1,328,170.00
intangible and other long-term assets
Net cash received from disposal of
subsidiaries and other units
Other cash received concerning investing
activities
     Subtotal of cash inflow from investing
                                                  126,820,377.97      136,467,961.95    111,761,688.96    125,492,230.31
                  activities
Cash paid for purchasing fixed, intangible
                                                  121,653,422.49      107,072,028.97    339,787,389.83    328,899,717.16
and other long-term assets
Cash paid for investment                          221,950,000.00      221,950,000.00     57,404,907.59    168,990,635.74
Net cash paid for achievement of subsidiaries
                                                   56,150,000.00       56,150,000.00     -19,888,482.90    21,535,918.03
and other business units
Other cash paid concerning investing
                                                   76,000,000.00       76,000,000.00
activities
     Subtotal of cash outflow from investing
                                                  475,753,422.49      461,172,028.97    377,303,814.52    519,426,270.93
             activities
     Net cash flows arising from investing
                                                 -348,933,044.52     -324,704,067.02   -265,542,125.56    -393,934,040.62
                    activities
III. Cash flows arising from financing
activities
Cash received from absorbing investment             4,900,000.00                        639,016,550.34    633,626,550.34
Including: Cash received from absorbing
minority shareholders' equity investment by         4,900,000.00                          5,390,000.00
subsidiaries
Cash received from loans                          467,829,700.00      320,000,000.00    312,380,000.00    240,000,000.00
Other cash received concerning financing
                                                   22,976,815.56        1,200,000.00     25,795,827.68        720,332.73
activities
     Subtotal of cash inflow from financing
                                                  495,706,515.56      321,200,000.00    977,192,378.02    874,346,883.07
             activities
Cash paid for settling debts                      162,890,000.00       60,000,000.00    201,480,000.00    107,600,000.00
Cash paid for dividend and profit distributing
                                                   71,104,725.59       68,187,672.87     42,474,168.02     37,733,665.57
or interest paying
Including: dividends or profit paid by                                                    1,078,000.00

                                                                                                                47
                                                                      Dalian Refrigeration Co., Ltd. 2017 Annual Report
subsidiaries to minority shareholders
Other cash paid concerning financing
                                                       29,714,920.43                                26,956,882.67               3,430,000.00
activities
     Subtotal of cash outflow from financing
                                                      263,709,646.02         128,187,672.87        270,911,050.69            148,763,665.57
           activities
    Net cash flows arising from financing
                                                      231,996,869.54         193,012,327.13        706,281,327.33            725,583,217.50
                     activities
IV. Influence on cash due to fluctuation in
                                                        -2,383,390.47           161,228.59            1,724,849.71                -20,326.62
exchange rate
V. Net increase of cash and cash equivalents         -326,545,416.67        -260,562,014.40        435,856,981.51            347,777,972.39
Add: Balance of cash and cash equivalents at
                                                      691,238,822.98         495,217,106.54        255,381,841.47            147,439,134.15
the period -begin
VI. Balance of cash and cash equivalents at
                                                      364,693,406.31         234,655,092.14        691,238,822.98            495,217,106.54
the period–end
      Legal Representative: Ji Zhijian   Chief Financial Official: Ma Yun     Person in Charge of Accounting Organization: Mao Chunhua




                                                                                                                                    48
                                                                                         Dalian Refrigeration Co., Ltd. 2017 Annual Report
                         CONSOLIDATED STATEMENT OF CHANGES IN OWNERS’
                                           EQUITY
               Prepared by Dalian Refrigeration Company Limited                                                   2017.01-12                       Unit: RMB Yuan
                                                                                                       2017.01-12
                                                                 Owners’ equity attributable to parent company
             Items                                                                      Other                                                 Retained         Minority       Total of owners’
                                                                      Lessen:                           Special               Surplus                           equity             equity
                                     share capital Capital suplus                  comprehensive                                               profits
                                                                  treasury stock                        reserve               reserve
                                                                                       income
I. balance at the end of last
                                     611,776,558.00 1,046,321,716.85    67,615,856.00      431,639,323.52                   620,578,847.52   658,387,158.97 69,585,601.21       3,370,673,350.07
year
1. Change of accounting
policy
2. Correction of errors in
previous period
3. Merger of enterprises under
the same control.
II. Balance at the beginning of
                                     611,776,558.00 1,046,321,716.85    67,615,856.00      431,639,323.52                   620,578,847.52   658,387,158.97 69,585,601.21       3,370,673,350.07
this year
III. Increase/ decrease of
amount in this year (“-”           244,710,623.00   -288,789,635.51   -44,310,485.60     -24,370,321.41                    47,571,527.78    92,010,636.59    8,696,231.64        124,139,547.69
means decrease)
(I)     Total     comprehensive
                                                                                           -24,370,321.41                                    200,759,820.17    3,796,231.64        180,185,730.40
incomes
(II) Capital increased and
                                                       -44,079,012.51   -44,310,485.60                                                                         4,900,000.00          5,131,473.09
reduced by owners
  1. Common shares increased
                                                       -56,150,000.00   -44,310,485.60                                                                         4,900,000.00         -6,939,514.40
by shareholders
  2. Capital increased by
holders of other equity                                                                                                                                                                         -
instruments
3. Amounts of share-based
payments        recognized      in                     12,070,987.49                                                                                                                12,070,987.49
owners’ equity
  4. Other                                                                                                                                                                                      -
  (III) Profit distribution                                                                                                  47,571,527.78   -108,749,183.58                       -61,177,655.80
  1. Withdrawing surplus
                                                                                                                             47,571,527.78    -47,571,527.78
public reserve
  2. Withdrawing general risk
preparation.
  3. Distribution to all owners
                                                                                                                                              -61,177,655.80                       -61,177,655.80
(shareholders)
  4. Others
  (IV)      Internal      carrying
                                     244,710,623.00   -244,710,623.00
forward of owners’ equity
  1. New increase of share
                                     244,710,623.00   -244,710,623.00
capital from capital reserves
  2. Convert surplus reserves
to share capital
  3. Surplus reserves make up
losses
 4. Others
(V) Specific reserve
1. Withdrawn for the period                                                                                 2,016,809.74                                                             2,016,809.74
2. Used in the period                                                                                       -2,016,809.74                                                           -2,016,809.74
(VI) Other
 IV. Balance at the end of this
                                856,487,181.00        757,532,081.34    23,305,370.40      407,269,002.11                   668,150,375.30   750,397,795.56 78,281,832.85       3,494,812,897.76
period
               Legal Representative: Ji Zhijian         Chief Financial Official: Ma Yun              Person in Charge of Accounting Organization: Mao Chunhua




                                                                                                                                                                              49
                                                                                        Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                                                                                     2016.01-12
                                                                 Owners’ equity attributable to parent company
             Items                                                                      Other                                              Retained         Minority       Total of owners’
                                                                      Lessen:                           Special             Surplus                          equity             equity
                                     share capital Capital suplus                  comprehensive                                            profits
                                                                  treasury stock                        reserve             reserve
                                                                                       income
I. balance at the end of last
                                     360,164,975.00   630,264,991.95    39,503,800.00    589,988,118.05                   580,769,740.16   525,925,066.25 66,257,548.71         2,713,866,640.12
year
1. Change of accounting
policy
2. Correction of errors in
previous period
3. Merger of enterprises under
                                                       23,634,942.60                                                                        26,053,545.85                         49,688,488.45
the same control.
II. Balance at the beginning of
                                     360,164,975.00   653,899,934.55    39,503,800.00    589,988,118.05                   580,769,740.16   551,978,612.10 66,257,548.71         2,763,555,128.57
this year
III. Increase/ decrease of
amount in this year (“-”           251,611,583.00   392,421,782.30    28,112,056.00   -158,348,794.53                    39,809,107.36   106,408,546.87   3,328,052.50         607,118,221.50
means decrease)
(I)     Total     comprehensive
                                                                                        -158,348,794.53                                    182,234,151.73   3,297,165.48          27,182,522.68
incomes
(II) Capital increased and
                                      71,529,096.00   572,504,269.30    28,112,056.00                                                                       1,108,887.02         617,030,196.32
reduced by owners
  1. Common shares increased
                                      71,529,096.00   560,231,963.55    28,112,056.00                                                                       1,108,887.02         604,757,890.57
by shareholders
  2. Capital increased by
holders of other equity
instruments
3. Amounts of share-based
payments        recognized      in                     12,227,168.00                                                                                                              12,227,168.00
owners’ equity
  4. Other                                                 45,137.75                                                                                                                  45,137.75
  (III) Profit distribution                                                                                                39,809,107.36   -75,825,604.86 -1,078,000.00           -37,094,497.50
  1. Withdrawing surplus
                                                                                                                           39,809,107.36   -39,809,107.36
public reserve
  2. Distribution to all owners
                                                                                                                                           -36,016,497.50 -1,078,000.00           -37,094,497.50
(shareholders)
  3. Others
  (IV)      Internal      carrying
                                     180,082,487.00   -180,082,487.00
forward of owners’ equity
  1. New increase of share
                                     180,082,487.00   -180,082,487.00
capital from capital reserves
  2. Convert surplus reserves
to share capital
  3. Surplus reserves make up
losses
 4. Others
(V) Specific reserve
1. Withdrawn for the period                                                                               1,982,950.50                                                              1,982,950.50
2. Used in the period                                                                                     -1,982,950.50                                                            -1,982,950.50
(VI) Other
 IV. Balance at the end of this
                                611,776,558.00 1,046,321,716.85         67,615,856.00    431,639,323.52                   620,578,847.52   658,387,158.97 69,585,601.21         3,370,673,350.07
period
               Legal Representative: Ji Zhijian             Chief Financial Official: Ma Yun          Person in Charge of Accounting Organization: Mao Chunhua




                                                                                                                                                                           50
                                                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                  STATEMENT OF CHANGES IN OWNERS’ EQUITY
                Prepared by Dalian Refrigeration Company Limited                                       2017.01-12                   Unit: RMB Yuan
                                                                                               2017.01-12
                                                                   Owners’ equity attributable to parent company
             Items                                                           Lessen:           Other                                                             Total of owners’
                                               Other equity                                                   Special           Surplus           Retained            equity
                                 share capital              Capital suplus treasury       comprehensive
                                                instrument                                                  preparation         reserve            profits
                                                                              stock           income
I. balance at the end of last
                                611,776,558.00              1,036,115,161.54 67,615,856.00    430,413,556.77                   620,578,847.52 498,962,843.33          3,130,231,111.16
year
1. Change of accounting
policy
2. Correction of errors in
previous period
II. Balance at the beginning of
                                611,776,558.00              1,036,115,161.54 67,615,856.00    430,413,556.77                   620,578,847.52 498,962,843.33          3,130,231,111.16
this year
III. Increase/ decrease of
amount in this year (“-” 244,710,623.00                    -234,080,985.37 -44,310,485.60   -24,106,655.33                    47,571,527.78 74,883,797.30            153,288,792.98
means decrease)
(I)    Total    comprehensive
                                                                                              -24,106,655.33                                    183,632,980.88         159,526,325.55
incomes
(II) Capital increased and
                                                               10,629,637.63 -44,310,485.60                                                                             54,940,123.23
reduced by owners
  1. Common shares increased
                                                               -1,441,349.86 -44,310,485.60                                                                             42,869,135.74
by shareholders
  2. Capital increased by
holders of other equity
instruments
3. Amounts of share-based
payments      recognized     in                                12,070,987.49                                                                                            12,070,987.49
owners’ equity
  4. Other
                                                                                                                                                -108,749,183.5
 (III) Profit distribution                                                                                                      47,571,527.78
                                                                                                                                                             8
                                                                                                                                                                        -61,177,655.80

 1. Withdrawing surplus
                                                                                                                                47,571,527.78 -47,571,527.78
public reserve
 2. Distribution to all owners
                                                                                                                                                -61,177,655.80          -61,177,655.80
(shareholders)
 3. Others
 (IV)      Internal    carrying
                                 244,710,623.00              -244,710,623.00
forward of owners’ equity
 1. New increase of share
                                 244,710,623.00              -244,710,623.00
capital from capital reserves
 2. Convert surplus reserves
to share capital
 3. Surplus reserves make up
losses
 4. Others
(V) Specific reserve
1. Withdrawn for the period                                                                                    2,016,809.74                                               2,016,809.74
2. Used in the period                                                                                          -2,016,809.74                                             -2,016,809.74
(VI) Other
  IV. Balance at the end of this
                                 856,487,181.00               802,034,176.17 23,305,370.40    406,306,901.44                   668,150,375.30 573,846,640.63          3,283,519,904.14
period
                Legal Representative: Ji Zhijian        Chief Financial Official: Ma Yun         Person in Charge of Accounting Organization: Mao Chunhua




                                                                                                                                                                 51
                                                                                      Dalian Refrigeration Co., Ltd. 2017 Annual Report

                                                                                                  2016.01-12
                                                                       Owners’ equity attributable to parent company
             Items                                                               Lessen:           Other                                                           Total of owners’
                                                   Other equity                                                   Special           Surplus        Retained             equity
                                     share capital              Capital suplus treasury       comprehensive
                                                    instrument                                                  preparation         reserve         profits
                                                                                  stock           income
I. balance at the end of last
                                      360,164,975.00              640,764,783.03 39,503,800.00    588,759,190.43                   580,769,740.16 428,747,299.72        2,559,702,188.34
year
1. Change of accounting
policy
2. Correction of errors in
previous period
II. Balance at the beginning of
                                      360,164,975.00              640,764,783.03 39,503,800.00    588,759,190.43                   580,769,740.16 428,747,299.72        2,559,702,188.34
this year
III. Increase/ decrease of
amount in this year (“-”            251,611,583.00              395,350,378.51 28,112,056.00   -158,345,633.66                    39,809,107.36 70,215,543.61          570,528,922.82
means decrease)
(I)     Total     comprehensive
                                                                                                 -158,345,633.66                                 146,041,148.47           -12,304,485.19
incomes
(II) Capital increased and
                                       71,529,096.00              575,432,865.51 28,112,056.00                                                                           618,849,905.51
reduced by owners
  1. Common shares increased
                                       71,529,096.00              563,160,559.76 28,112,056.00                                                                           606,577,599.76
by shareholders
  2. Capital increased by
holders of other equity
instruments
3. Amounts of share-based
payments        recognized      in                                 12,227,168.00                                                                                          12,227,168.00
owners’ equity
  4. Other                                                            45,137.75                                                                                               45,137.75
  (III) Profit distribution                                                                                                         39,809,107.36 -75,825,604.86          -36,016,497.50
  1. Withdrawing surplus
                                                                                                                                    39,809,107.36 -39,809,107.36
public reserve
  2. Distribution to all owners
                                                                                                                                                  -36,016,497.50          -36,016,497.50
(shareholders)
  3. Others
  (IV)      Internal      carrying
                                      180,082,487.00             -180,082,487.00
forward of owners’ equity
  1. New increase of share
                                      180,082,487.00             -180,082,487.00
capital from capital reserves
  2. Convert surplus reserves
to share capital
  3. Surplus reserves make up
losses
  4. Others
(V) Specific reserve
1. Withdrawn for the period                                                                                        1,982,950.50                                             1,982,950.50
2. Used in the period                                                                                              -1,982,950.50                                           -1,982,950.50
(VI) Other
  IV. Balance at the end of this
                                      611,776,558.00            1,036,115,161.54 67,615,856.00    430,413,556.77                   620,578,847.52 498,962,843.33        3,130,231,111.16
period

               Legal Representative: Ji Zhijian           Chief Financial Official: Ma Yun       Person in Charge of Accounting Organization: Mao Chunhua




                                                                                                                                                                   52
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
III. Notes to the accounting statement
 (All amounts in RMB Yuan unless otherwise stated)

I. General Information

  Dalian Refrigeration Company Limited (the “Company”) was reorganized and reformed from
  main part of former Dalian Refrigeration Factory. On December 8, 1993, the company went to the
  public as a listed company at Shenzhen Stock Exchange Market. On March 20, 1998, the
  company successfully went to the public at B share market and listed at Shenzhen Stock
  Exchange Market with total share capital of RMB350,014,975Yuan.

  According to the 13th meeting of the 6th generation of board, extraordinary general meeting for
  2015 fiscal year and ' Restricted share incentive plan (draft)' , the Company planned to introduce
  A ordinary shares to incentive objectives, which was 10,150,000 number of shares would be
  granted to 41 share incentive objectives at granted price of RMB5.56Yuan per share. Up to March
  12th ,2015, the Company received new added share capital of RMB10,150,000Yuan and the share
  capital had been verified by DaHua Certified Public Accountants, and had been issued the capital
  verification report Dahuayanzi [2015]000086 on March12th , 2015.

  The general meeting for 2015 fiscal year held on 21st April 2016 approved the profit distribution
  policy for the year of 2015, which agrees the profit distribution based on the total 360,164,975
  number of shares as share capital, paid share dividend of 5 common shares for every 10 shares
  through capital reserve. The policy stated above was fully implemented on 5th May 2016, and the
  registered capital was altered to 540,247,462.00Yuan.

  The 17thmeeting of the 6th generation of board was held on 4th June 2015 and the 2nd interim
  shareholders’ meeting was held on 24th June 2015, meeting deliberated and passed the proposal
  of non-public offering of ‘A shares’. China’s Securities Regulatory Commission issued SFC
  license [2015]3137 on 30th December, 2015, approving that new non-public offering cannot
  exceeded 38,821,954 number of shares. The company implemented the post meeting procedures
  for China’s Securities Regulatory Commission, which is regarding adjustment of bottom price and
  the number of the shares issued after the implementation of profit distribution policy of 2015 in
  May, 2016, and accordingly revised the upper limit of non-public offering of share to58,645,096
  number of new ‘A shares’. The company issued the non-public offering of 58,645,096 number of
  ‘A shares’ to 7 investors, and as a result, the total number of shares of the company is changed to
  598,892,558 shares, and the par value is 1yuan per share and the total share capital is
  598,892,558.00Yuan. The share capital stated above has been verified by DaHua Certified Public
  Accountants, and has been issued the capital verification report Dahuayanzi [2016]000457 on 31st
  May 2016.

  According to the ‘Restricted Share Incentive Plan(draft) of Dalian Refrigeration Company
  Limited for the year of 2016’ and the ‘Proposal regarding the shareholders’ meeting authorized the
  board of directors to implement the Restricted Share Incentive Plan’ approved on the
  3rdprovisional general meeting held on 13th September 2016, the 9th meeting of the 7th generation
  of board deliberated and passed the ‘Proposal about granting the restricted shares to incentive

                                                                                                     53
                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report
                             th                th
  targets’ on September 20 , 2016 and set 20 September 2016 as share granted date, and granted
  12,884,000 number of restricted shares to 188 incentive targets at granted price of 5.62Yuan per
  share. By 22ndNovember, 2016, the company has actually received the newly subscribed
  registered share capital of 12,884,000Yuan subscribed by incentive targets. The share capital
  stated above has been verified by DaHua Certified Public Accountants, and has been issued the
  capital verification report Dahuayanzi [2016]001138 on 23rdNovember, 2016.

  On May 20th, 2017,      the general meeting for 2016 fiscal year was held and profit appropriation
  scheme for 2016 FY was approved, which was every 10 shares will be increased by 4 shares
  through capital reserve based on the total 611,776,558 number of shares. After the profit
  appropriation scheme, the registered capital was changed to RMB856,478,181.00Yuan.

  The old address of the Company’s registered office as same as head office is No.888 Xinan Road,
  Shahekou District, Dalian, China. In 2017, the Company relocated to new factory and changed its
  address to No.16 East of Liao River RD, DDA, Dalian China as same as HQ’s address. The parent
  company of the Company is Dalian Bingshan Group Co., Ltd., and there is no ultimate controller
  regulated by the relevant law, regulations and rules.

  The company falls into industrial manufacturing sector, mainly engaged in industrial refrigeration,
  refrigerated and frozen food storage, and manufacture and installation of central air-conditioning
  and refrigeration equipment. The scope of business includes refrigeration equipment, valve,
  fixings refrigeration equipment, supported products processing and system design of
  air-conditioning. The company also offers technical consultation, technical services, commercial
  trade and material supply and marketing.

II. The scope of consolidation

  There are 15 entities included in the current consolidated financial statements, including:

                                                                  Proportion of
                                                                                   Proportion of
         Names of subsidiaries               Types        Level    shareholding
                                                                                    votes(%)
                                                                     (%)

Dalian Bingshan Group Engineering
                                          Subsidiary        2          100              100
Co., Ltd.
Dalian Bingshan Group Sales        Co.,
                                          Subsidiary        2          100              100
Ltd.
Dalian      Bingshan   Air-conditioning
                                          Subsidiary        2          70                70
Equipment Co., Ltd.
Dalian Bingshan JiaDe Automation
                                          Subsidiary        2          100              100
Co., Ltd.
Dalian      Bingshan   Lingshe    Quick
                                          Subsidiary        2          100              100
Freezing Equipment Co., Ltd.
Wuhan New World Refrigeration
                                          Subsidiary        2          100              100
Industrial Co., Ltd.
                                                                                                   54
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                                                  Proportion of
                                                                                    Proportion of
         Names of subsidiaries              Types       Level     shareholding
                                                                                     votes(%)
                                                                     (%)

Bingshan Technical Service(Dalian)
                                          Subsidiary       2           100               100
Co.,Ltd.
Dalian       Niweisi        LengNuan
                                          Subsidiary       2            55                55
Techonology Co., Ltd.
Dalian      Xinminghua       Electrical
                                          Subsidiary       2           100               100
Technology Co., Ltd
Dalian      Bingshan      International
                                          Subsidiary       2           100               100
Trading Co.,Ltd
Wuhan New World Air-conditioning             Sub-
                                                           3           100               100
Refrigeration Engineering Co., Ltd        subsidiary
Dalian Bingshan Security Leisure             Sub-
                                                           3           100               100
Industrial Engineering Co., Ltd           subsidiary
Ningbo Bingshan Air-conditioning             Sub-
                                                           3            51                51
Refrigeration Engineering Co., Ltd        subsidiary
Shanghai Bingshan Technical Service          Sub-
                                                           3            51                51
Co., Ltd                                  subsidiary
Chengdu     Bingshan     Refrigeration       Sub-
                                                           3            51                51
Engineering Co., Ltd.                     subsidiary

 This year, entities within the consolidation scope are changed comparing to last year. Because two
 more entities are added into the group, Chengdu Bingshan Refrigeration Engineering Co., Ltd was
 newly invested and Dalian Bingshan International Trading Co.,Ltd was newly acquired.

 For the specific information of entity change in the consolidation scope, see the notes of VII. The
 Change of Scope of Consolidation and VIII. The Equity in Other Entities.

III. Financial Statements Preparation Basis

  (1) Preparing basis

  The Company’s financial statements are prepared on the basis of going concern assumption,
  according to the actual occurred transactions and events and in accordance with ‘Accounting
  Standards for Business Enterprises’ and relevant regulations, and also based on the note IV
  “Significant Accounting Policies, Accounting Estimates”.

  (2) Going concern

   The company has the capacity to continually operate within 12 months at least since the end of
   report period, and hasn‘t the major issues impacting on the sustainable operation ability.

IV. Significant Accounting Policies and Accounting Estimates

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                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
1. Declaration for compliance with accounting standards for business enterprises

The financial statements are prepared by the Group according to the requirements of Accounting
Standard for Business Enterprise, and reflect the relative information for the financial position,
operating performance, cash flow of the Group truly and fully.

2. Accounting period

The Group adopts the Gregorian calendar year as accounting period from Jan 1 to Dec 31.

3. Operating cycle

Normal operating cycle refers to the duration starting from purchasing the assets for
manufacturing up to cash or cash equivalent realization. The group sets twelve months for one
operating cycle and as the liquidity criterion for assets and liability.

4. Functional currency

The Group adopts RMB as functional currency.

5. Accounting for business combination under same control and not under same control

As an acquirer, the assets and liabilities that The Group obtained in a business combination under
the same control should be measured on the basis of their carrying amount in the consolidated
financial statements on the combining date. As for the balance between the carrying amount of the
net assets obtained by the combining party and the carrying amount of the consideration paid by it,
the capital surplus shall be adjusted. If the capital surplus is not sufficient to be offset, the retained
earnings shall be adjusted.

For a business combination not under same control, the asset, liability and contingent liability
obtained from the acquirer shall be measured at the fair value on the acquisition date. The
combination cost shall be the fair value, on the acquisition date, of the assets paid, the liabilities
incurred or assumed and equity securities issued by the acquirer in exchange for the control of the
acquire, and sum of all direct expenses(if the combination is achieved in stages, the combination
cost shall be the sum of individual transaction). The difference when combination cost exceeds
proportionate share of the fair value of identifiable net assets of acquire should be recognized as
goodwill. If the combination cost is less than proportionate share of the fair value of identifiable
net assets of acquiree, firstly, fair value of identifiable asset, liability or contingent liability shall
be reviewed, and so the fair value of non-monetary assets or equity instruments issued in the
combination consideration , after review, still the combination cost is less than proportionate
share of the fair value of identifiable net assets of acquire, the difference should be recognized as
non-operating income.

6. Method of preparation of consolidated financial statements

All subsidiaries controlled by the Group and structured entities are within the consolidation scope.

If subsidiaries adopt different accounting policy or have different accounting period from the
parent company, appropriated adjustments shall be made in accordance with the Group policy in
preparation of the consolidated financial statements.
                                                                                                       56
                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report
All significant intergroup transactions, outstanding balances and unrealized profit shall be
eliminated in full when preparing the consolidated financial statements. Portion of the subsidiary’s
equity not belonging to the parent, profit, loss for the current period, portion of other
comprehensive income and total comprehensive belonging to minority interest,                       shall be
presented separately in the consolidated financial statements under “minority interest of
equity”, ”minority interest of profit and loss”, “other comprehensive income attributed to minority
interest” and “total comprehensive income attributed to minority interest” title.

If a subsidiary is acquired under common control, its operation results and cash flow shall be
consolidated since the beginning of the consolidation period. When preparing the comparative
consolidated financial statements, adjustments shall be made to relevant items of comparative
figures as regarded that reporting entity established through consolidation has been always there
since the point when the ultimate controlling party starts to have the control.

If a business consolidation under common control is finally achieved in stages, consolidation
accounting method shall be disclosed additionally for the period in which the control is obtained.
For example, if a business consolidation under common control is finally achieved in stages, when
preparing the consolidated financial statements, adjustments shall be made for the current
consolidation status as if consolidation has always been there since the point when the ultimate
controlling party starts to control. In preparation of comparative figures, asset and liability of the
acquiree shall be consolidated into the Group’s comparative financial statements, but to the extent
no earlier than the point when the Group and acquiree are both under ultimate control and relevant
items under equity in comparative financial statements shall be adjusted for net asset increased in
combination. To avoid the duplicated computation of net asset of acquiree, for long-term equity
investment held by the Group before the consolidation, relevant profit and loss, other
comprehensive income and movement in other net asset, recognized for the period between the
combination date and later date when original shareholding is obtained and when the Group and
the acquiree are under common control of same ultimate controlling party, shall be respectively
used for writing down the opening balance of retained earnings of comparative financial
statements and profit and loss for the current period.

If a subsidiary is acquired not under common control, its operation results and cash flow shall be
consolidated since the beginning of the consolidation period. In preparation of the consolidated
financial statements, adjustments shall be made to subsidiary’s financial statements based on the
fair value of its all identifiable assets, liability or contingent liability on the acquisition date.

If a business consolidation under non-common control is finally achieved in stages, consolidation
accounting method shall be disclosed additionally for the period in which the control is obtained.
For example, if a business consolidation not under common control is finally achieved in stages,
when preparing the consolidated financial statements, the acquirer shall remeasure its previously
held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting
gain or loss as investment income for the current period. Other comprehensive income, under
equity method accounting rising from the interest held in acquiree in relation to the period before
the acquisition, and changes in the value of its other equity other than net profit or loss, other
                                                                                                         57
                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report
comprehensive income and profit appropriation shall be transferred to investment gain or loss
for the    period in which the acquisition incurs, excluding the other comprehensive income from
the movement on the remeasurement of ne asset or liability of defined benefit plan.

When the Group partially disposes of the long –term equity investment in subsidiary without
losing the control over it, in the consolidated financial statements, the difference, between
disposals price and respective disposed value of share of net assets in the subsidiary since the
acquisition date or combination date, shall be adjusted for capital surplus or share premium, no
enough capital surplus, then adjusted for retained earnings.

When the Group partially disposes of the long –term equity investment in subsidiary and lose the
control over it, in preparation of consolidated financial statements, remaining share of interest in
the subsidiary shall be remeasured on the date of losing control. Sum of the share disposal
consideration and fair value of remaining portion of shareholding minus the share of the net assets
in the subsidiary held based on the previous shareholding percentage since the acquisition date or
combination date,      the balance of above is recognized as investment gain/loss for the period and
goodwill shall be written off accordingly. Other comprehensive income relevant to share
investment in subsidiary shall be transferred to investment gain /loss for the period on the date of
losing control.

When the Group partially disposes of the long –term equity investment in subsidiary and lose the
control over it by stages, if all disposing transactions are bundled, each individual transaction shall
be seen as a transaction of disposal of a subsidiary by losing control. The difference between the
disposal price and      the share of the net assets in the subsidiary held before the date of losing
control, shall be recognize as other comprehensive income until the date of losing control where it
is transferred into investment gain/ loss for the current period.

7. Joint arrangement classification and joint operation accounting

The Group’s joint arrangement includes joint operation and joint venture. For joint operation, the
Group as a joint operator shall recognize its own assets and its share of any assets held jointly, its
liabilities and its share of any liabilities incurred jointly, its revenue from the sale of its share of
the output arising from the joint operation, its share of the revenue from the sale of the output by
the joint operation; and its expenses, including its share of any expenses incurred jointly. When an
entity enters into a transaction with a joint operation in which it is a joint operator, such as a sale
or contribution of assets, it is conducting the transaction with the other parties to the joint
operation and, as such, the joint operator shall recognize gains and losses resulting from such a
transaction only to the extent of the other parties’ interests in the joint operation.

8. Cash and cash equivalent

The cash listed on the cash flow statements of the Group refers to cash on hand and bank deposit.
The cash equivalents refer to short-term (normally with original maturities of three months or less)
and liquid investments which are readily convertible to known amounts of cash and subject to an
insignificant risk of changes in value.

                                                                                                     58
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
9. Translation of foreign currency

(1) Foreign currency transaction

Foreign currency transactions are translated at the spot exchange rate issued by People’s Bank of
China (“PBOC”) on the 1st day of the month when the transactions incurred. Monetary assets and
liabilities in foreign currencies are translated into RMB at the exchange rate prevailing at the
balance sheet day. Exchange differences arising from the settlement of monetary items are charged
as in profit or loss for the period. Exchange differences of specific borrowings related to the
acquisition or construction of a fixed asset should be capitalized as occurred, before the relevant
fixed asset being acquired or constructed is ready for its intended uses.

(2) Translation of foreign currency financial statements

The asset and liability items in the foreign currency balance sheet should be translated at a spot
exchange rate at the balance sheet date. Among the owner’s equity items except “undistributed
profit”, others should be translated at the spot exchange rate when they are incurred. The income
and expense should be translated at spot exchange rate when the transaction incurs. Translation
difference of foreign currency financial statements should be presented separately under the other
comprehensive income title. Foreign currency cash flows are translated at the spot exchange rate
on the day when the cash flows incur. The amounts resulted from change of exchange rate are
presented separately in the cash flow statement.

10. Financial assets and financial liabilities

A financial asset or liability shall be recognized when the entity becomes a party to the
contractual provisions of a financial instrument.

(1) Financial assets

1) Classification, recognition and measurement

The Group classifies its financial assets in the following categories: at fair value through profit or
loss, loans and receivables, held-to-maturity financial assets and available-for-sale. The
classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of its financial assets at initial recognition.

Financial assets at fair value through profit and loss include trading financial assets and those
financial assets initially designated as fair value through profit and loss. When meeting one of the
following conditions, the company shall classify the assets into trading financial asset: it is
acquired principally for the purpose of selling in the near term and is part of a portfolio of
identified financial instruments that are managed together and for which there is evidence of a
recent actual pattern of short-term profit-taking; it is a derivative(except for a derivative that is a
designated and effective hedging instrument or a financial guarantee contract, or linked to the
investments in equity instruments that do not have a quoted price in an active market, no fair value
can be reliably measured and must be settled by delivery of such an equity instrument. When
meeting one of the following conditions, the financial assets can be classified as the assets initially
designated as fair value through profit and loss: it eliminates or significantly reduces a
                                                                                                    59
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
measurement or recognition inconsistency that would otherwise arise from measuring assets or
liabilities or recognising the gains and losses on them on different bases; or the financial
instrument portfolio is managed and its performance is evaluated and provided internally on that
basis to the entity’s key management personnel on a fair value basis, in accordance with a
documented risk management or investment strategy;          or it is a hybrid instrument embedded by
one or more instruments except for a embedded derivate that does not significantly modify the
cash flows or it is clear that separation of the embedded derivative(s) is prohibited; it is a hybrid
instrument that is required to be separated but unable to be measured separately either at
acquisition or at the end of a subsequent financial reporting period. They are measured at fair
value subsequently. Change on fair value shall be recognized in the profit and loss. Interest or
cash dividends received during the period in which such financial assets are held, are recognized
as ‘Investment income’. On disposal, the difference between fair value of disposal and initial
recorded amount are recognized as ‘Gain or loss on Investment’ and adjust the gain or loss from
changes in fair value accordingly.

Receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Receivables are subsequently measured at amortized cost using the
effective interest method. The amortization, impairment and any gain or loss from derecognition
shall be recognized in the profit and loss for the current year.

Available-for-sale financial assets are non-derivative financial assets that are either designated in
this category or not classified as financial assets of any other class at initial recognition. This
category includes the derivative financial assets that linked to the investments in equity
instruments without a quoted price in an active market, no fair value can be reliably measured and
must be settled by delivery of such an equity instrument, and shall be measured at cost
subsequently. Others have a quoted price in an active market or fair value can be measured
reliably although no quoted price available, they shall be measured at fair value. Any change on
fair value shall be recognized in other comprehensive income and subsequently be measured at
fair value. Except impairment loss and exchange gain or loss arising from foreign currency
monetary financial assets, changes in fair value of available-for-sale financial assets are directly
recorded in shareholders’ equity until such financial assets is derecognized and the accumulated
fair value adjustments previously recorded in equity are charged to profit or loss for the period.
Interests for the period in which the assets are held as investment in debt instrument is calculated
using the effective interest method and is charged to profit or loss for the period as ‘Investment
income’. Cash dividends declared by the investee company relating to available-for-sale equity
instruments are charged to profit or loss for the period as ‘Investment income’. Equity instruments
that a quoted price is not applicable in an active market and no fair value can be reliably measured,
shall be measured at cost.

2)Recognition and measurement of transfer of financial assets

A financial asset is derecognised when any one of the following conditions is satisfied: i) the rights
to receive cash flows from the asset expire, ii) the financial asset has been transferred and the
entity transfers substantially all risks and rewards relating to the financial assets to the transferee,
                                                                                                     60
                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report
iii) the financial asset has been transferred to the transferee, the entity has given up its control of
the financial asset although the entity neither transfers nor retains all risks and rewards of the
financial asset.

Where an entity neither transfers nor retains substantially all risks and rewards of financial asset
and does not give up the control over such financial asset, then the entity recognizes such
financial asset to the extent of its continuous involvement and recognizes the corresponding
liabilities.

In the case where the financial asset as a whole qualifies for the derecognition conditions, the
difference between the carrying value of transferred financial asset and the sum of the
consideration received for transfer and the accumulated amount of changes in fair value that was
previously recorded under other comprehensive income is charged into profit or loss for the
period.

In the case where only part of the financial asset qualifies for derecognition, the carrying amount
of financial asset being transferred is allocated between the portions that to be derecognized and
the portion that continued to be recognized according to their relative fair value. The difference
between the amount of consideration received for the transfer and the accumulated amount of
changes in fair value that was previously recorded in other comprehensive income of the part
qualifies for derecognition and the above-mentioned allocated carrying amount is charged to
profit or loss for the period.

3) Impairment of financial assets

The Group assesses the carrying amount of financial assets other than financial assets at fair value
through profit or loss at each balance sheet date. If there is objective evidence that the financial
asset is impaired, the Group shall determine the amount of any impairment loss accounts.

The specific impairment provision methods of financial assets were as follows:

1) Provision for impairment of available-for-sale financial assets:

On balance sheet date, the Company executes individually inspection on each available-for-sale
financial statement, if the fair value of the equity instruments which is invested on the balance
sheet date is lower than its initial investment cost for more than 50% (including 50%) or lower
than its initial investment cost for the duration time for more than 1 year (including 1 year), which
indicates that it had occurred impairment; if the fair value of the equity instruments which invests
on the balance sheet date is lower than its initial investment cost for more than 20% (including
20%) but not reaches at 50%, the Company will comprehensively considerate the other relevant
factors such as the price volatility etc. and will judge the equity investment whether had occurred
impairment.

The aforesaid "cost" recognized in line with the initial investment cost of available for sale
financial instrument deducting principal recovered, amount amortized and the impairment losses
recorded into profits or losses. “fair value" recognized through the closing price of Securities
Exchange at period end unless the investment of available for sale equity instrument was in the
                                                                                                    61
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
restricted stock trade period. For investment of available for sale equity instrument was in the
restricted stock trade period, recognized in line with the closing price of Securities Exchange at
period end deducting the risk of market player cannot sell the equity instrument, thus, require
compensation.

If objective evidence shows that impairment for available-for-sale financial assets will occur, the
cumulative loss arising from the decline in fair value that had been recognized directly in equity is
removed from equity and recognized as impairment loss, although the financial assets are not
derecognized. The accumulative losses that are transferred out shall be the balance obtained from
the initially obtained costs of the financial asset after deducting the principals taken back and
amortized amount, the current fair value and the impairment losses originally recorded into the
profits and losses account.

For an available for sale debt instrument, if there is objective evidence that the value of the
financial asset recovered and the recovery can be related objectively to an event occurring after
the impairment was recognized, the previously recognized impairment loss is reversed and the
amount of reversal is recognized in income statement. For an available for sale equity instrument,
if there is objective evidence that the value recovered and the recovery can be objectively related
to an event occurring after the impairment loss recognized, the previously recognized impairment
loss is reversed and directly recognized in equity. However, the impairment losses incurred to an
equity instrument investment for which there is no quoted price in the active market and whose
fair value cannot be reliably measured, or incurred to a derivative financial asset which is linked
to the equity instrument and which shall be settled through the equity instrument, can not be
reversed.

2) Provision for impairment of held-to-maturity financial assets

If there is objective evidence that the value of a financial asset carried at amortized cost has
impaired, the amount of loss is measured at the difference between the asset’s carrying amount
and the present value of estimated future cash flows. If there is objective evidence that the value
of the financial asset recovered and the recovery can be related objectively to an event occurring
after the impairment was recognized, the previously recognized impairment loss is reversed and
the amount of reversal is recognized in income statement, but to the extent where the reversed
amount can not exceed the amortized cost on the reversing day if no impairment provided before.

 (2) Financial liabilities

 1) Classification, basis for recognition and measurement
     Financial liabilities of an entity are classified at initial recognition as “financial liabilities at
     fair value through profit or loss” and “other financial liabilities” on initial recognition
     Financial liabilities at fair value through profit or loss include financial liabilities held for
     trading and those designated as fair value through profit or loss on initial recognition
     (relevant basis for classification shall be disclosed by reference to financial assets). They
     are subsequently measured at fair value. The net gain or loss arising from changes in fair

                                                                                                        62
                                               Dalian Refrigeration Co., Ltd. 2017 Annual Report
     value, dividends and interest paid related to such financial liabilities are recorded in profit or
     loss for the period in which they are incurred.
     Other financial liability is measured at amortized cost by adopting the effective rate method.
 2) Financial liability derecognition
     A financial liability is derecognized when the underlying present obligations or part of it are
     discharged. Existing financial liability shall be derecognized and new financial liability shall
     be recognized when the entity sign the agreement with creditor to undertake the new
     financial liability in replacement of existing financial liability, and the terms of agreement
     are different in substance. Any significant amendment to the agreement as a whole or part o
     it is made, then the existing liabilities or part of it shall be derecognized and financial
     liability after terms amendment shall be recognized as a new financial liability. The
     difference between the carrying amount of the financial liability derecognized and the
     consideration paid is recognized in profit or loss for the period.
 3) Fair value measurement of financial asset and financial liability
     If there is an active market for the financial assets and liability measured at fair value, the
     fair value is measured at the quoted price in the active market; originally obtained or derived
     financial assets or liability is measured at market trade price. If no active market exists for
     the financial asset or liability, applicable valuation techniques is used for fair value
     measurement. When valuating, the price in the most advantageous market shall be used for
     fair value measurement and applicable valuation techniques which enough data is available
     for and supported by other information shall be adopted, and the group chooses the input
     with same characters of asset or liability as considered by market participant and try to give
     priority in use of observable input. Unobservable input shall be used when observable
     inputcan not be obtained or it is infeasible to be obtained.

11. Provision for bad debts of receivables

The Group shall review the carrying amount of receivables fully at the balance sheet date. The
Group shall calculate the full provision for bad debts for the following receivables: debtor has
been log-out, bankruptcy, minus net asset, significant poor cash flow and significant nature
disaster leads to discontinue production and the debtors could not pay for the debts within the
foreseeable time. Other solid evidences indicates that the receivables could not be paid or be of a
slim chance.

The allowance method is applied to the potential loss of bad debt. The Group should make the
impairment test individually or group and accrue the bad debt provisions which shall be recorded
into current profit or loss at the end of the period. If there is defined evidence for the receivables
not to or not likely to be received, which shall be recognized as the loss of bad debt and write off
the accrued bad debts provisions after going through the approval procedure of the Group.

(1) Individually significant amounts of accounts receivable accrued bad debt provision as per
                                                                                                    63
                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report
  portfolio
 Judgment basis or amount standards of Top 5 of account receivables at year end
 individually significant amounts
 The accruing method of the receivables The bad debt provisions shall be accrued based on
 with individually significant amounts  the difference between current value of future cash
                                        flow and the carrying amounts.


  (2) Accounts receivable accrued bad debt provision by credit risk portfolio

 The basis of portfolio
                                              Accounts receivable due from subsidiaries
 Inter-company
                                              included in consolidated scope
                                              Other than accounts receivable due from
                                              subsidiaries included in consolidated scope and
 Accounting aging                             individual receivable with significant amount
                                              without impairment, use the accounting aging of
                                              the receivables
 The basis of bad debt provision
 Inter-company                                Individual identified method
 Accounting aging                             Age analysis method


The percentage of provision for bad debts based on the age of receivables as followings:

  Accounting aging                    Accrual percentage of the             Accrual percentage of
                                            receivables (%)                 other receivables (%)
  Within 1 year                                     5                                    5
  1-2 years                                        10                                   10
  2-3 years                                        30                                   30
  3-4 years                                        50                                   50
  4-5 years                                        80                                   80
  Over 5 years                                     100                                  100


   (3) Individually insignificant amount accounts receivable but accrued bad debt provision as per
  portfolio

                    The individual amount is not significant, but the accrued bad debt provision
Accrual reason
                    on the basis of portfolio can not reflect its risk characteristic
                    The bad debt provisions should be accrued based on the difference between
Accrual method
                    current value of future cash flow and the carrying amount.

  12. Inventories

  Inventories are materials purchasing, raw material, variance of cost materials, low-valuable
  consumable, materials processed on commission, working-in-progress, semi-finished goods,
  variance of semi-finished goods, and finished goods, engineering construction etc.


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                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report
The inventories are processed on perpetual inventory system, and are measured at their          actual
cost on acquisition. Weighted average cost method is taken for measuring the inventory
dispatched or used. Low value consumables and packaging materials is recognized in the income
statement by one-off method.

After yearend thorough inventory check, at the balance sheet date inventory impairment should be
provided or adjusted according to inventory category. For the finished goods, raw material held
for sale etc which shall be sold directly, the net realizable value should be confirmed at the
estimated selling price less estimated selling expenses and related tax and expenses. The raw
material held for production, its realizable value should be confirmed at the estimated selling price
of finished goods less estimated cost of completion, estimated selling expenses and related tax.
The net realizable value of inventories held for execution of sale contracts or labor contracts shall
be calculated based on the contract price. If the quantities of inventories in the Group are more
than quantities if inventories subscribed in the sales contracts, the net realizable value of the
excessive part of the inventories should be calculated based on the general selling price. When the
impairment indicators disappear, impairment provision shall be reversed and

13. Long-term equity investment

Long term equity investments are the investment in subsidiary, in associated company and in joint
venture.

Joint control is the contractual agreement sharing of control over an economic activity by all
participants or participants’ combination and decisions or policies relating to the operating activity
of the entity require the unanimous consent of the parties sharing the control.

Significant influence exists when the entity directly or indirectly owned 20% or more but less than
50% shares with voting rights in the investee company. If holding less than 20% voting rights, the
entity shall also take other facts or circumstances into accounts when judging any significant
influences. Factors and circumstances include: representation on the board of directors or
equivalent governing body of the investee, participation in financial or operating activities
policy-making processes, material transactions between the investor and the investee, interchange
of managerial personnel or provision of essential technical information.

When control exists over an investee, the investee is a subsidiary of an entity. The initial
investment cost for long-term equity investment acquired through business combination under
common control, is the carrying amount presented in the consolidated financial statements of the
share of net assets at the combination date in the acquired company. If the carrying amount of net
assets at the combination date in the acquired company is negative, investment shall be recognized
at zero.

If the equity of investee under common control is acquired by stages and business combination
incurs in the end, an entity shall disclose the accounting method for long-term equity investment
in the parent financial statement as a supplemental. For example, if the equity of investee under
common control is acquired by stages and business combination incurs in the end, and it’s a
bundled transaction, the entity shall regard all transactions as a one for accounting. If it’s not a
                                                                                                    65
                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report
bundled transaction, the carrying amount presented in the consolidated financial statements of the
share of net assets at the combination date in the acquired company since acquisition is
determined as for the initial cost of long-term equity investment. The difference between the cost
initially recognized and carrying amount of long-term equity investment prior to the business
combination plus the newly paid consideration for further share acquired, and capital reserve shall
be adjusted accordingly. If no enough capital reserve is available for adjustment, retain earnings
shall be adjusted.

If long-term equity investment is acquired through business combination not under common
control, initial investment cost shall be the combination cost.

If the equity of investee not under common control is acquired by stages and business
combination incursion the end, an entity shall disclose the accounting method for long-term equity
investment in the parent financial statement as a supplemental. If the equity investment of investee
not under common control is acquired by stages and business combination incursion the end, and
it’s a bundled transaction, the entity shall regard all transactions as a one for accounting. If it’s not
a bundled transaction, the carrying amount of the equity investment held previously plus newly
increased investment cost are taken as the initial investment cost under cost model. If equity
investment is held under equity method before the acquisition date, other comprehensive income
under equity method previously shall not be adjusted accordingly. When disposing of the
investment, the entity shall adopt the same basis as the investee directly disposing of related assets
or liability for accounting treatment. Equity held prior to acquisition date as available for sale
financial assets under fair value model, accumulated change on fair value previously recorded in
other comprehensive shall be transferred into investment gain/loss for the period.

Apart from the long-term equity investments acquired through business combination mentioned
above, the cost of investment for the long-term equity investments acquired by cash payment is
the amount of cash paid. For long-term equity investment acquired by issuing equity instruments,
the cost of investment is the fair value of the equity instrument issued. For long-term equity
investment injected to the entity by the investor, the investment cost is the consideration as
specified in the relevant contract or agreement.

The Group adopts cost method to account for investment in subsidiary and equity method for
investment in joint venture and affiliate.

Long-term equity investment subsequently measured under cost model shall increase the carrying
amount of investment by adjusting the fair value of additional investment and relevant transaction
expenses. Cash dividend or profit declared by investee shall be recognized as investment gain/loss
for the period based on the proportion share in the investee.

Long-term equity investment subsequently measured under equity method shall be adjusted for its
carrying amount according to the share of equity increase or decrease in the investee. The entity
shall recognize its share of the investee’s net profits or losses based on the fair value of the
investee’s individual identifiable assets at the acquisition date, after making appropriate
adjustments thereto in conformity with the accounting policies and accounting period, and
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                                                   Dalian Refrigeration Co., Ltd. 2017 Annual Report
  offsetting the unrealized profit or loss from internal transactions entered into between the entity
  and its associates and joint ventures according to the shareholding attributable to the entity and
  accounted for as investment income and loss based on such basis.
  On disposal of a long-term equity investment, the difference between the carrying value and the
  consideration actually received is recognized as investment income for the period. For long-term
  investments accounted for under equity method, the movements of shareholder’s equity, other than
  the net profit or loss, of the investee company, previously recorded in the shareholder’s equity of
  the Company are recycled to investment income for the period on disposal.
  Where the entity has no longer joint control or significant influence in the investee company as a
  result of partially disposal of the investment, the remaining investment will be changed to be
  accounted for as available for sale financial assets, and the difference between the fair value of
  remaining investment at the date of losing joint control or significant influence and its carrying
  amount shall be recognized in the profit or loss for the year. Other comprehensive income
  recognized from previous equity investment under equity model shall be accounted for on the
  same basis as the investee directly disposing of related assets or liability when stopping using
  under equity model.
  Where the entity has no longer control over the investee company as a result of partially disposal
  of the investment, the remaining investment will be changed to be accounted for using equity
  method providing remaining joint control or significant influence over the investee company. The
  difference between carrying amount of disposed investment and consideration received actually
  shall be recognized in the profit and loss for the period as investment gain or loss, and investment
  shall be adjusted accordingly as if it was accounted for under equity model since acquisition.
  Where the entity has on longer joint control or significant influence in the investee as a result of
  disposal, the investment shall be changed to be accounted for as available for sale financial assets,
  and difference between the carrying amount and disposal consideration shall be recognized in
  profit and loss for the period, and the difference between the fair value of remaining investment at
  the date of losing control and its carrying amount shall be recognized in the profit or loss for the
  year as investment gain or loss.

  If the entity loses its control through partially disposal of investment by stages and it’s not a
  bundled transaction, the entity shall account for all transactions separately. If it’s a bundled
  transaction, the entity shall regard all transactions as one disposal of subsidiary by losing control,
  but the difference between disposal consideration and carrying amount of the equity investment
  disposed prior to losing control, which arises from each individual transaction shall be recognized
  as other comprehensive income until being transferred into profit and loss for the period by the
  time of losing control.

  14. Investment property

The investment property includes property and building and measured at cost model

Category                             Useful life      Estimated net    Annual depreciation rate
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                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                       (years)          residual value
                                                          rate (%)
Housing and Buildings                    40                    3%                         2.43%

    15. Fixed assets

    Recognition criteria of fixed assets: defined as the tangible assets which are held for the purpose
    of producing goods, rendering services, leasing or for operation & management, and have more
    than one year of useful life.

    Fixed assets shall be recognized when the economic benefit probably flows into the Group and its
    cost can be measured reliably. Fixed assets include: building, machinery, transportation equipment,
    electronic equipment and others.

    All fixed assets shall be depreciated unless the fixed assets had been fully depreciated and are still
    being used and land is separately measured. Straight-line depreciation method is adopted by the
    Group. Estimated net residual value rate, useful life, depreciation rate as follows:

                                                                      Estimated net
                                                 Useful life                                      Annual
    No    Category                                                  residual value rate
                                                   (years)                                 depreciation rate
                                                                           (%)
1         Housing and Buildings                         20-40         3%,5%,10%                    2.25-4.85%
2         Machinery equipment                           10-22         3%,5%,10%                     4.09-9.7%
3         Transportation equipment                       4-15         3%,5%,10%                     6-24.25%
4         Electronic equipment                                 5      3%,5%,10%                     18-19.4%
5         Others equipment                              10-15         3%,5%,10%                       6-9.7%

    The Group should review the estimated useful life, estimated net residual value and depreciation
    method at the end of each year. If any change has occurred, it shall be regarded as a change in the
    accounting estimates.

    16. Construction in progress

    The criteria and time spot of constructions in progress’s being transferred to fixed assets:
    Constructions in progress are carried down to fixed assets on their actual costs when completing
    and achieving estimated usable status. The fixed assets that have been completed and reached
    estimated usable status but have not yet been through completion and settlement procedures are
    charged to an account according to their estimate values; adjustment will be conducted upon
    confirmation of their actual values. The Group should withdraw depreciation in the next month
    after completion.

    17. Borrowing costs

    The borrowing cost includes the interest expenses of the borrowing, amortization of underflow or
    overflow from borrowings, additional expenses and the foreign exchange profit and loss because
    of foreign currency borrowings. The borrowing costs incurred which can be directly attribute to
    the fixed assets, investments properties, inventories requesting over 1 year purchasing or

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                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
manufacturing so to come into the expected condition of use or available for sale shall start to be
capitalized when expenditure for the assets is being occurred, borrowing cost has occurred,
necessary construction for bringing the assets into expected condition for use is in progress. The
borrowing costs shall stop to be capitalized when the assets come into the expected condition of
use or available for sale. The borrowing costs subsequently incurred should be recorded into profit
and loss when occurred. The borrowing costs should temporarily stop being capitalized when
there is an unusual stoppage of over consecutive 3 months during the purchase or produce of the
capitalized assets, until the purchase or produce of the asset restart.

The borrowing costs of special borrowings, deducting the interest revenue of unused borrowings
kept in the bank or the investment income from transient investment should be capitalized. The
capitalized amount of common borrowings should be calculated as follows: average assets
expenditure of the accumulated assets expenditure excess the special borrowing, multiplied by the
capital rate. The capital rate is the weighted average rate of the common borrowings.

18. Intangible assets

The intangible assets of the Group refer to land use right and software. For acquired intangible
assets, the actual cost are measured at actual price paid and relevant other expenses. The cost
invested into intangible assets by investors shall be determined according to the stated value in the
investment contract or agreement, except for those of unfair value in the contract or agreement.

Land use right shall be amortized evenly within the amortization period since the remised
date.ERP system software and other intangible assets are amortized over the shortest of their
estimated useful life, contractual beneficial period and useful life specified in the law.
Amortization charge is included in the cost of assets or expenses, as appropriate, for the period
according to the usage of the assets. At the end of the year, for definite life of intangible assets,
their estimated useful life and amortization method shall be assessed. Any change shall be treated
as change on accounting estimate.

19. Impairment of long-term assets

The Group assesses at each balance sheet date whether there is any indication that long-term
equity investments, investment property, fixed assets, construction in progress and intangible
assets with definite useful life may be impaired. If there is any indication that an asset may be
impaired, the asset will be tested for impairment. Goodwill arising in a business combination
and intangible asset with infinite useful life are tested for impairment annually no matter there is
any indication of impairment or not.

Estimate of recoverable amount is the higher of its fair value less costs to sell and the present
value of the future cash flows expected to be derived from the asset.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount shall be
impaired and the difference is recognised as an impairment loss and charged to profit or loss for
the period. Once an impairment loss on the assets is recognised, it is not reversed in a subsequent
period.

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                                               Dalian Refrigeration Co., Ltd. 2017 Annual Report
After assets impairment loss is recognized, depreciation and amortisation of the impaired asset
shall be adjusted in the following period so that the adjusted carrying amount(less expected
residual value) can be depreciated and amortised systematically within the remaining life.

When assessing goodwill for impairment, the carrying amount of goodwill shall be allocated
evenly to the assets group or assets portfolio. When testing the assets group or assets portfolio
including goodwill, if there is any indication of impairment , ignoring the goodwill and testing
the assets group or assets portfolio alone so to work out the recoverable amount and comparing to
its carrying amount and recognize the impairment loss. After that, testing the assets group or assets
portfolio with goodwill together, comparing the carrying amount of the assets group or assets
portfolio(including goodwill allocation) with recoverable amount , goodwill impairment shall be
recognized when the recoverable amount is lower than its carrying amount.

20. Long-term deferred expenses

Long-term deferred expenses of the Group refer to leasing expenses, redecoration expense and
others. The expenses should be amortized evenly over the beneficial period. If the deferred
expense cannot take benefit for the future accounting period, the unamortized balance of the
deferred expenses should be transferred into the current profit or loss. Leasing expenses will be
amortized within 10 years and 30years; redecoration expense and others will be amortized
within 3 years.

21. Employee benefits

Employee’s benefit comprises short-term benefit, post-employment benefit, termination benefit
and other long-term employee’s benefit.

Short-term benefit includes salary, bonus, allowance, welfare, social insurance, housing funds,
labour union expense, staff training expense, during the period in which the service rendered by
the employees, the actually incurred short term employee benefits shall be recognized as liability
and shall be recognized in P&L or related cost of assets based on benefit objective allocated from
the service rendered by employees.

Post-employment benefits include the basic pension scheme and unemployment insurance etc.
Based on the risk and obligation borne by the Group, post-employment benefits are classified into
defined contribution plan and defined benefit plan. For defined contribution plan, liability shall be
recognized based on the contributed amount made by the Group to separate entity at the balance
sheet date in exchange of employee service for the period and it shall be recorded into current
profit and loss account or relevant cost of assets in accordance with beneficial objective.

Termination benefits are employee’s benefit payable as a result of either an entity’s decision to
terminate an employee’s employment before the contract due date or an employee’s decision to
accept voluntary redundancy in exchange for those benefits. An entity shall recognize the
termination benefits as a liability and an expense at the earlier date when the entity cannot
unilateral withdraw the termination benefits due to employment termination plan or due to
redundancy suggestion, or when the entity can recognize the restructuring cost or expense arising

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                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
from paying termination benefits.

Other long-term employee’s benefit refers to all other employee benefits other than short-term
benefit, post-employment benefit and termination benefit.

If other long-term employee’s benefit is qualified as defined contribution plan, contribution made
shall be recognized as liabilities accordingly for the period in which the service are rendered by
the employee and recognized in the profit or loss for the current period or relevant cost of assets.
Except other long-term employee’s benefit mentioned above, obligation arising from defined
benefit plan shall be recognized in the profit or loss for the current period or relevant cost of assets
in accordance with the       period when the service are rendered by the employee.

22. Contingent liabilities

When the company has transactions such as commitment to externals, discounting the trade
acceptance, unsettled litigation or arbitration which meets the following criterion, provision
should be recognized: It is the Company's present obligation; carrying out the obligation will
probably cause the Company's economic benefit outflow; the obligation can be reliably measured.

Provision is originally measured on the best estimate of outflow for paying off the present
obligations, and to consider the risk, uncertainty, time value of monetary relevant to contingent
items. If the time value of monetary is significant, the best estimate will be determined by
discounted cash outflow in the future. At each balance sheet date, the book value of provision is
reviewed and adjustment will be made on the book value if there is any change, in order to reflect
the current best estimate.

When compensation from the 3rd party is expected for full or partial contingent liability
settlement, the compensation shall be recognized as an asset separately and measured at no more
than the book value of contingent liability.

23. Share based payment

An equity-settled share-based payment in exchange for the employee’s services is measured at the
fair value at the date when the equity instruments are granted to the employee. Such fair value
during the vesting period of service or before the prescribed exercisable conditions are achieved is
recognised as relevant cost or expense on a straight-line during the vesting period based on the
best estimated quantity of exercisable equity instruments, accordingly increase capital reserve.

A cash-settled share-based payment is measured at the fair value at the date at which the Group
incurred liabilities that are determined based on the price of the shares or other equity instruments.
If it is immediately vested, the fair value of the liabilities at the date of grant is recognised as
relevant cost or expense, and corresponding liabilities. If it is exercisable only when the vesting
period of service is expired or the prescribed conditions are achieve, the fair value of liabilities
undertaken by the Group are re-measured at each balance sheet date based on the best estimate of
exercisable situation.

The fair value of the liabilities is re-measured at each balance sheet date. Any changes are
recognised in the profit or loss for the year.
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                                              Dalian Refrigeration Co., Ltd. 2017 Annual Report
If the granted equity instruments are cancelled within the vesting period, the equity instrument
shall be treated as accelerated vesting and the balance linked to the remaining vesting period shall
be recognized in the profit or loss account, accordingly be recognized in the capital reserve. If
employees or other parties can choose but fail to satisfy non-vesting conditions during the vesting
period, the Company sees this as cancellation of granted equity instruments.

24. Principle of recognition of revenue

The revenue of the Group is mainly from selling goods, providing labor services and abalienating
the right of use assets and construction contracts. Recognition standards for revenue are as below:

(1) The revenue from selling goods: Company has transferred all the significant risks and
rewards of the ownership of the goods to the buyers, and retains neither continuing managerial
involvement to the degree usually associated with ownership nor effective control over the goods
sold. The relative sale proceeds have been reliably measured, respective economic benefit
probably inflow to the company, and the incurred or incurring cost can be reliably measured, and
then the revenue can be recognized.

In the reporting period, revenue recognition point and principle: goods is dispatched from
warehouse, client has no dispute on the quantity and quality of the goods, client collected or
authorized the agent to collect the good and sales amount is confirmed, have collected or
expected to collect the payment, cost of goods can be reliably measured, risk and reward is
transferred so the revenue is recognized.

Complete sets of engineering projects, if selling products and building installation part can be
separated and can be measured separately, selling products will be treated as sales of products.
Selling products and building installation will not be able to be distinguished, or can be
distinguished but can't be separately measured, selling products and building installation will be
all treated as building installation.

(2) Income from a alienating the right of use assets is recognized when satisfying
requirements related economic benefit flows in very possibly, income can be measured reliably.

1)    Amount of interest income is calculated according to the time and actual interest rate of the
     monetary capital used by other party.

2)   Income of using fee is calculated upon the charge period and calculation provided by the
     related contract or agreement.

(3) The service revenue should be recognized when the outcome of the services can be
estimated reliably.

The outcome of the services can be estimated reliably means the following conditions must be
satisfied at the same time:

1)   Amount can be measured reliably

2)   Relevant economic benefit probably flow into the company

3)   The stage of completion of the service can be estimated reliably
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                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
4)   Cost incurred or expect to incur in the transaction can be measured reliably

Total service income shall be recognized according to the price agreed in the contract or
agreement which has been settled or to be settled unless the price is not fair. Service revenue for
the current period shall be recognized based on the figure worked out on the total income
multiply by the percentage of completion of the service after deducting the service revenue
recognized in the prior period at the balance sheet and accordingly recognized the cost based on
the figure worked out on the total cost multiply by the percentage of completion of the service
after deducting the service cost recognized in the prior period.

At the balance sheet date, if outcome of the service can not be estimated reliably, the treatment
shall apply respectively

1)   Costs incurred may be probably recovered, revenue is recognized only to the extent of costs
     incurred that are expected to be recoverable, and costs shall be recognized as an expense in
     the period in which they are incurred

2)   Costs incurred are not probable of being recovered, then these cost incurred are recognized
     as an expense immediately, no revenue shall be recognized.

     In the case that selling goods and rendering service are both included in the agreements or
     contracts, when selling products and rendering service part can be separated and can be
     measured separately, selling products will be treated as sales of products. Selling products
     and rendering service will not be able to be distinguished, or can be distinguished but can't
     be separately measured; selling products and rendering service will be all treated as
     rendering service.

(4) Revenue from construction contract

1)   When the result of the construction contract is able to be evaluated reliably at the balance
     sheet date, the income and cost of the contract are recognized on completion percentage
     basis.

The result of the fixed price of construction contract can be estimated reliably means the
following conditions must be satisfied at the same time:

① Amount can be measured reliably

② Relevant economic benefit probably flow into the company

③ Cost actually incurred can be well distinguished and measured reliably

④ The stage of completion and the cost expected to incur for the completion of the contract can
     be estimated reliably

The result of the cost plus of construction contract can be estimated reliably means the following
conditions must be satisfied at the same time:

① Relevant economic benefit probably flow into the company

② Cost actually incurred can be well distinguished and measured reliably
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                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
Total construction contract income shall be recognized according to the price agreed in the
contract or agreement which has been settled or to be settled unless the price is not fair.
Construction contract income for the current period shall be recognized based on the figure
worked out on the total contracted income multiply by the percentage of completion of the
construction after deducting the revenue recognized in the prior period at the balance sheet and
accordingly recognized the cost based on the figure worked out on the total expected cost
multiply by the percentage of completion of the construction after deducting the construction e
cost recognized in the prior period. Construction contract income is recognized to the extend
where the change of the contract, claim for compensation and bonus can bring the income and
can be measured reliably.

2)   If the result of the construction contract is not able to be evaluated reliably, the treatment
     shall apply respectively

① If contract cost maybe recovered, the income is recognized at the cost actually recovered,
     and the cost of the contract is recognized as contract expenses of the current period when it
     is occurred.

② If contract cost may not be recovered, the cost of the contract shall be recognized as contract
     expenses when incurred, and no contract revenue shall be recognized.

3)     In case the expected total cost is greater than the total income, the expected loss will be
     recognized as expense of the current period immediately.

.25. Government grants

 A government grant shall be recognized when the company complies with the conditions
 attaching to the grant and when the company is able to receive the grant.

 Assets-related government grant is the government fund obtained by the company for the
 purpose of long-term assets purchase and construction or establishment in the other forms.
 Income-related grants are the grant given by the government apart from the assets-related grants.
 If no grant objective indicated clearly in the government documents, the company shall judge it
 according to the principle mentioned above.

 Where a government grant is in the form of a transfer of monetary asset, it is measured at the
 amount received. Where a government grant is made on the basis of fixed amount or conclusive
 evidence indicates relevant conditions for financial support are met and expect to probably
 receive the fund, it is measured at the amount receivable. Where a government grant is in the
 form of a transfer of non-monetary asset, it is measured at fair value. If fair value cannot be
 determined reliably, it is measured at a nominal amount of RMB1 Yuan.

 Assets-related government grants are recognized as deferred income ore directly offsetting the
 book value of the asset, and Assets-related government grants recognized as deferred income
 shall be evenly amortized to profit or loss over the useful life of the related asset.

 Any assets are sold, transferred, disposed off or impaired earlier than their useful life expired
 date, the remaining balance of deferred income which hasn’t been allocated shall be carried
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                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
 forward to the income statement when the assets are disposed off.

 Income-related government grants that is a compensation for related expenses or losses to be
 incurred in subsequent periods are recognized as deferred income and credited to the relevant
 period when the related expense are incurred. Government grants relating to compensation for
 related expenses or losses already incurred are charged directly to the profit or loss for the period.
 Government grants related to daily business, shall be recognized as other income in accordance
 with business nature, otherwise, shall be recognized as non-operating expenses.

 If any government grant already recognized needs to be returned to the government, the
 accounting shall be differed according to the following circumstances:

 1)   originally recognized as offsetting of related assets' book value, assets book value shall be
      adjusted

 2)   if any deferred income, book value of deferred income shall be offset, excessive portion
      shall be accounted into income statement

 3)   Other situation, it shall be accounted into income statement directly.

26. Deferred tax assets and deferred tax liabilities

The deferred income tax assets or the deferred income tax liabilities should be recognized
according to the differences (temporary difference) between the carrying amount of the assets or
liabilities and its tax base. Deferred tax assets shall be respectively recognized for deductible tax
losses that can be carried forward in accordance with tax law requirements for deduction of
taxable income in subsequent years. No deferred tax liabilities shall be recognized for any
temporary difference arising from goodwill initially recognition. No deferred tax assets or
liabilities shall be recognized for any difference arising from assets or liabilities initial recognition
on non-business combination with no effect on either accounting profit or taxable profit (or
deductible tax loss). At the balance sheet date, deferred tax assets and deferred tax liabilities are
measured at the tax rates that are expected to apply to the period when the asset is realized or
liability is settled.

Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be
available to offset the deductible temporary difference, deductible loss and tax reduction.

27.Lease

The Company’s leasing business is operating lease.

As a leasee, the lease premium shall be recognized in the cost of asset based on straight line
method within the the period or directly to income statement.

28.Held for sale

(1) Any non-current assets or disposal group shall be classified as held for sale if the following
criteria are met: ⑴ according to the similar transactions for selling such assets or disposal group
in practice, the assets must be available for immediate sale under current condition. ⑵The sale is
highly probable with decision made on a probable selling proposal and the firm purchase
                                                                                                      75
                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report
commitment has been obtained, the sale is expected to be completed within one year. Certain
regulations request that approvals must be given by relevant authority or supervision regulator
before the assets can be sold. Prior to the assets initially classified as held for sale or disposal
group, the carrying amounts of the asset(or all the assets and liabilities in the disposal group) shall
be measured in accordance with applicable accounting standards. The Company shall recognize an
impairment loss and account it in to income statement for the current period, for any initial or
subsequent write- down of the asset(or disposal group) to its fair value less costs to sell if the
carrying amount is higher than its fair value less costs to sell. In the meantime, provision for assets
impairment shall be made.

(2) The company acquires a non-current asset(or disposal group) exclusively with a view to its
subsequent resale, it shall be classified as held for sale at the acquisition date only if the condition
of “expected sale can be completed within one year” can be met and also other conditions of
classified as held for sale can highly probably be met within a short period following the
acquisition(usually with three months). When measuring a newly acquired asset(or disposal group)
meeting the criteria to be classified as held for sale, it shall be measured at the lower of its
carrying amount had it not been so classified and fair value less costs to sell. Except the
non-current assets or disposal group acquired as part of a business combination, the difference
between its fair value less costs to sale and initial carrying amount is recognized in the income
statement.

(3) The Company that loss of control of a subsidiary due to a sale plan of its investment shall
classify its subsidiary planned for sale as a whole as held for sale in the single financial statement
of the parent only if the investment in subsidiary meets the criteria of held for sale, regardless of
whether the Company will retain a proportion of equity interest in its former subsidiary after sale,
and classify all assets and liabilities of the subsidiary as held for sale in the consolidated financial
statements

(4) The Company shall recognize a gain for any subsequent increase in fair value less costs to
sell of an asset and shall reverse the impairment to the extent that previously recognized when
being classified as held for sale, the revisable amount is recognized in the income statement for
the period. Any impairment from the period when the assets are not classified as held for sale can
not be reversed.

(5) The impairment loss recognised for a disposal group shall reduce the carrying amount of
goodwill of disposal group first, and then reduce the carrying amount of the non-current assets
based on its proportion on the book.

The Company shall recognize a gain for any subsequent increase in fair value less costs to sell of a
disposal group and shall reverse the impairment to the extent that previously recognized when
being classified as held for sale, in accordance with applicable measuring standards, the revisable
amount is recognized in the income statement for the period. Any impairment from the period
when the assets are not classified as held for sale and reduced goodwill can not be reversed.

For any subsequently reversed amount, after the impairment loss is recognized for held for sale
                                                                                                     76
                                               Dalian Refrigeration Co., Ltd. 2017 Annual Report
disposal group, the Company shall increase the carrying amount of disposal group based on the
proportion of carrying amount of non-current assets excluding goodwill.

(6) Non-current assets classified as held for sale or disposal group shall not be depreciated or
amortized, interest and other expenses attributable to the liabilities of a disposal group classified
as held for sale shall continue to be recognized.

(7) When held for sale assets or disposal group can not meet the criteria for held for sale
classification so that they are not recognized as held for sale or non-current asset will be removed
from disposal group, they shall be measured at the lower of the following amounts: ⑴carrying
amount of assets prior to it classified as held for sale, which is the amount after depreciation,
amortization or impairment adjustment as it had not been classified as held for sale ; ⑵
recoverable amount.

When the Company derecognizes the held for sale assets or disposal group, the remaining
unrecognized gain or loss shall be accounted in the income statement.

29. Discontinued operation

When meeting any one of the following criteria and the component can be identified separately
and the component has already been disposed off or classified as held for sale: ⑴the component
represents one independent main business or one single main business area; ⑵the component
plans to be part of the related plan which represents one independent main business or one single
main business area; ⑶the component was specially acquired for resale

30. Other significant accounting policies, accounting Estimates

When preparing the financial statements, the management needs to use accounting estimate and
assumption, which will have effect on the application of accounting policy and amount of asset,
liability, income and expense. The actual circumstance maybe differs from the estimates. The
management needs to continuously assess the key assumption involved by estimate and the
judgment on uncertainty. Effect on the accounting estimate shall be recognized during the period
when estimate is changed and in future.

The following accounting estimate and key assumption will trigger the significant risk of
significant adjustment on the book value of asset and liability during the period of future.

(1) Impairment of receivable

Receivable is measured at amortized cost at the balance sheet date and assessed for any
impairment indicator and the acutely amount of impairment. Objective evidence for impairment
includes judgmental data of indicating significant decline of future cash flow of individual or
group of receivable, indicating significant negative financial performance of debtors. Had
receivable is recovered with certain proof, and in fact, it is relevant to the the matters subsequent
to the the loss recognition, the impairment recognized before shall be reversed.

(2) Provision of inventory impairment

Inventory is periodically evaluated at the net realizable value and any cost higher than NRV shall
                                                                                                  77
                                               Dalian Refrigeration Co., Ltd. 2017 Annual Report
be recognized as inventory impairment loss. When evaluating the NRV, net realizable value is
determined by deducting the expected selling expense and relative tax from the estimated selling
price. When actual selling price or cost differs from the previous estimates, management will
make adjustment on NRV. Therefore, the results based on the present experience may differ from
the actual results, which caused the adjustment on the carrying amount of inventory in the book.
Provision for inventory impairment may vary with the above reasons. Any adjustment on
provision for inventory impairment will affect the income statement.

(3) Provision of goodwill impairment

Each year, goodwill shall be assessed for any impairment. Recoverable amount of assets group
or asset portfolio including goodwill shall be the present value of future cash flow, which needs
estimates for calculation.

If management adjust the gross profit margin adopted by the present value of future cash flow
calculation of assets group or asset portfolio, adjusted gross profit margin is lower than the margin
applied, the impairment is required.

If management adjust the discounting rate before tax applied by the present value of future cash
flow calculation of assets group or asset portfolio, adjusted discounting rate before tax is higher
than the rate applied, the impairment is required.

If actual profit margin or discounting rate before tax is higher or lower than management’s
estimate, any impairment recognized before can not be reversed.

(4) Provision of fixed asset impairment

At the balance sheet date, the management shall implement impairment test on buildings, plant
and machinery etc which has any impairment indicator. The recoverable amount of FA is the
higher of PV of future cash flow and net value of fair value after disposal cost, the calculation
needs accounting estimate.

If management adjust the gross profit margin adopted by the present value of future cash flow
calculation of assets group or asset portfolio, adjusted gross profit margin is lower than the margin
applied, the impairment is required.

If management adjust the discounting rate before tax applied by the present value of future cash
flow calculation of assets group or asset portfolio, adjusted discounting rate before tax is higher
than the rate applied, the impairment is required.

If actual profit margin or discounting rate before tax is higher or lower than management’s
estimate, any impairment recognized before can not be reversed.



(5) Recognition of deferred tax assets

Estimate on deferred tax assets needs making estimation of taxable income and applied tax rate in
the following years in future. Whether deferred tax asset can be realized depends on the enough
probable taxable profit obtained in future. Tax rate change in future and the timing of temporary
                                                                                                  78
                                              Dalian Refrigeration Co., Ltd. 2017 Annual Report
difference reverse may also affect the income tax expense(income)and the balance of deferred tax.
Any change of estimate described here will cause the deferred tax adjustment.

(6) Useful life span of fixed assets and intangible assets

At least every year end, the management shall review the useful life of FA and intangible assets.
Expected useful life is based on the management’s experience on the same class of assets, with
reference to the estimate applied in the industry in conjunction with expected technology
development. When previous estimate significantly changed, depreciation and amortization in the
future shall be adjusted accordingly.

31. Changes in Accounting Policies, Accounting Estimates

(1)       Change in significant accounting policies

 Changes on accounting policy and reasons                       Approval progress      Memo
  In 2017, the Ministry of Finance announced or
 amended and implemented “Accounting Standards for
 Business Enterprises No.42-Held for Sale non-current
 assets, disposal group and discontinued operation".           The       accounting
 Since May 28th, 2017, any held for sale non-current           policy   change   has
 assets, disposal group and discontinued operation             been approved by the
 existing on the implementation date shall be applied to       20th meeting of the
 prospective application. When preparing the financial         seventh generation of
 statements for 2017FY, the policy has been adopted            board.
 and the accounting has been done in accordance with
 this standard.

 . Updated standard shall be applied since June
 12th,2017. Any government existing on January
 1at,2017 shall be applied to prospective application.         The       accounting
 Any new government grant obtained between January             policy   change   has
 1at,2017 and implementation date shall be adjusted in         been approved by the
 line with this standard too. When preparing the               20th meeting of the
 financial statements for 2017FY, the policy has been          seventh generation of
 adopted and the accounting has been done in                   board.
 accordance with this standard.




                                                                                               79
                                                   Dalian Refrigeration Co., Ltd. 2017 Annual Report
   Changes on accounting policy and reasons                         Approval progress          Memo
   In 2017, the Ministry of Finance announced or
   amended and implemented “Financial Statements
   Format ”(Caikuai[2017]No.30)
   Gain/loss on non-current assets disposal and on
                                                                    The         accounting
   non-monetary assets exchange presented under
                                                                    policy     change    has
   “non-operating income/expense”is changed to “Gain
                                                                    been approved by the
   on asset disposal”. This accounting policy change shall
                                                                    20th meeting of the
   be retrospectively adjusted. Non-operating income in
                                                                    seventh generation of
   2016shall be decreased by 1,186,397.77Yuan, and
                                                                    board.
   expense     shall    be   decreased   by     22,751,748.20Yuan
   respectively. Gain on asset disposal shall be adjusted by
   -21,565,350.43Yuan. No effect on sum of asset and net
   profit.

  (2)         Changes in accounting estimate

   None

V. Taxation

 1. The main applicable tax and rate to the Group as follows:

Tax                                             Tax base                           Tax rate
Value-added tax (VAT)           Sales revenue or Purchase                    17%,13%,11%,6%,5%
City construction tax           Value-added tax payables, business tax                  7%
Education surcharge             Value-added tax payables, business tax                  3%
Local education surcharge       Value-added tax payables, business tax                  2%
Enterprise income               Current period taxable profit                      15%,25%
tax(EIT)
                                70% of cost of own property or revenue
Real estate tax                                                                  1.2% or 12%
                                from leasing property
Land use tax                    Land using right area                          Fixed amount per
                                                                                  square meter
Other tax                                                                       According to the
                                                                             relevant provisions of
                                                                               the state and local

Notes for tax entities with different EIT rate

  Tax entities                                                                      EIT rate
  Dalian Refrigeration Company                                                          15%
  Dalian Bingshan Group Engineering Co., Ltd.                                           25%
  Dalian Bingshan Group Sales       Co., Ltd.                                           25%
  Dalian Bingshan Air-conditioning Equipment Co., Ltd.                                  15%
                                                                                                      80
                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report
 Tax entities                                                                  EIT rate
 Dalian Refrigeration Company                                                    15%
 Dalian Bingshan JiaDe Automation Co., Ltd.                                      15%

 Dalian Bingshan Lingshe Quick Freezing Equipment Co., Ltd.                      25%

 Wuhan New World Refrigeration Industrial Co., Ltd.                              15%

 Bingshan Technical Service (Dalian) Co.,Ltd.                                  15%

 Dalian Niweisi LengNuan Techonoligy Co., Ltd.                                   15%

 Dalian Xinminghua Electrical Technology Co., Ltd                                15%

2. Tax preference

The company obtained the qualification of high and new technology enterprises on 29th November,
2017 approved by Dalian Science Technology Bureau, Dalian Finance Bureau, Dalian State Tax
Bureau and Local tax Bureau.The Certificate No is GR201721200306, and the validity duration is
three years. According to the tax law, the company can be granted for the preferential tax policy of
enterprise income tax rate of 15% in three years.

The company’s subsidiary, Dalian Bingshan JiaDe Automation Co., Ltd. obtained the qualification
of high and new technology enterprises on 21st September, 2015 approved by Dalian Science
Technology Bureau, Dalian Finance Bureau, Dalian State Tax Bureau and Local tax Bureau.The
Certificate No is GR201521200115, and the validity duration is three years. According to the tax
law, the company can be granted for the preferential tax policy of enterprise income tax rate of 15%
in three years.

The company’s subsidiary, Wuhan New World Refrigeration Industrial Co., Ltd obtained the
qualification of high and new technology enterprises on 28th October, 2015 approved by Hubei
Science Technology Bureau, Hubei Finance Bureau, Hubei State Tax Bureau and Hubei Local tax
Bureau.The Certificate No is GR201542000772, and the validity duration is three years. According
to the tax law, the company can be granted for the preferential tax policy of enterprise income tax
rate of 15% in three years

The company’s subsidiary, Dalian Xinminghua Electrical Technology Co., Ltd obtained the
qualification of high and new technology enterprises on 29th November, 2017 approved by Dalian
Science Technology Bureau, Dalian Finance Bureau, Dalian State Tax Bureau and Local tax
Bureau. The Certificate No is GR2201721200301, and the validity duration is three years.
According to the tax law, the company can be granted for the preferential tax policy of enterprise
income tax rate of 15% in three years.

The company’s subsidiary, Dalian Niweisi LengNuan Techonoligy Co., Ltd. obtained the
qualification of high and new technology enterprises on 29th November, 2017 approved by Dalian
Science Technology Bureau, Dalian Finance Bureau, Dalian State Tax Bureau and Local tax
Bureau. The Certificate No is GR2201721200108, and the validity duration is three years.
According to the tax law, the company can be granted for the preferential tax policy of enterprise
income tax rate of 15% in three years.


                                                                                                  81
                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report
 The company’s subsidiary, Bingshan Technical Service (Dalian ) Co., Ltd. obtained the
 qualification of high and new technology enterprises on 29th November, 2017 approved by Dalian
 Science Technology Bureau, Dalian Finance Bureau, Dalian State Tax Bureau and Local tax
 Bureau. The Certificate No is GR2201721200155, and the validity duration is three years.
 According to the tax law, the company can be granted for the preferential tax policy of enterprise
 income tax rate of 15% in three years.

The company’s subsidiary, Dalian Bingshan Air-conditioning Equipment Co., Ltd. obtained the
qualification of high and new technology enterprises on 29th November, 2017 approved by Dalian
Science Technology Bureau, Dalian Finance Bureau, Dalian State Tax Bureau and Local tax Bureau.
The Certificate No is GR2201721200279, and the validity duration is three years. According to the
tax law, the company can be granted for the preferential tax policy of enterprise income tax rate of
15% in three years.

VI. Notes to Consolidated Financial Statements

 The following disclosure date on this financial statement without special indication, “opening”
 refers to January 1, 2017; “closing” refers to December 31, 2017; “current period” refers to the
 period from January 1, 2017to December 31, 2017; and “last period” refers to the period from
 January 1, 2016 to December 31, 2016; with the currency unit RMB.

  1. Cash and cash in bank

  Item                                               Closing Balance          Opening Balance
  Cash on hand                                                 62,880.11                83,511.72
  Cash in bank                                           364,630,526.20            686,615,661.42
  Other cash and cash equivalents                          30,116,287.80            28,516,465.40
  Total                                                   394,809,694.11           715,215,638.54
    Including: sum of deposits overseas

Note: other monetary funds is restricted, including deposit for bank acceptance notes of
25,559,515.54Yuan, guarantee deposit of 3,556,772.26Yuan, migrant deposit of 1,000,000.00Yuan,
total of 30,116,287.80 Yuan.

  2. Notes receivable

  (1) Category of notes receivable

  Items                                           Closing Balance            Opening Balance
  Bank acceptance       notes                           59,496,684.07               41,906,247.02
  Commercial acceptance        notes                   113,321,492.13               84,502,002.57
  Total                                                172,818,176.20              126,408,249.59
  (2) Pledged notes receivable up to December 31, 2016.

  Items                                                         Closing pledged amount
  Bank acceptance       notes                                                       16,110,843.93

                                                                                                    82
                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report
  Commercial acceptance       notes
  Total                                                                              16,110,843.93

  (3) Notes receivable endorsed or discounted but not mature at the end of year

  Item                                Closing amount no more              Closing amount still
                                              recognized                       recognized
  Bank acceptance        notes                       251,658,051.71
  Commercial            acceptance                    18,102,321.88
  notes
  Total                                              269,760,373.59

  (4) The closing balance of the notes receivable increased 36.71% compared with the opening
        balance because of the increasing notes received due to more note payment at the year end

  3. Accounts receivable

  (1) Category of accounts receivable

                                                      Closing Balance
        Items               Booking balance                   Provision               Booking
                           Amount             %           Amount           %          balance
Accounts
receivable       with
significant
individual amount
and separate bad
debt provision
Accounts
receivable with bad
debt       provision
                        1,208,205,492.85   100.00        171,949,597.06    14.23   1,036,255,895.79
based      on     the
characters of credit
risk portfolio
Accounts
receivable       with
insignificant
individual amount
and separate bad
debt provision
        Total           1,208,205,492.85   100.00        171,949,597.06    14.23   1,036,255,895.79

(Continued)

        Items                                        Opening balance

                                                                                                      83
                                                     Dalian Refrigeration Co., Ltd. 2017 Annual Report
                              Booking balance                   Provision
                                                                                    Booking balance
                              Amount             %           Amount          %
Accounts
receivable        with
significant
individual amount
and separate bad
debt provision
Accounts
receivable with bad
debt         provision
                             958,174,419.26    100.00      151,064,459.72   15.77      807,109,959.54
based       on     the
characters of credit
risk portfolio
Accounts
receivable        with
insignificant
individual amount
and separate bad
debt provision
          Total              958,174,419.26    100.00      151,064,459.72   15.77      807,109,959.54

  1) Accounts receivable with the bad debt provisions under accounting aging analysis method

                                                                 Closing Balance
                  Aging                       Accounts             Provision for    Drawing proportion
                                              receivable            bad debts              (%)
              Within1 year               816,596,983.71           40,829,849.18                    5.00

              1 to 2 years               181,236,517.36           18,123,651.75                   10.00
              2 to 3 years               102,726,564.39           30,817,969.30                   30.00
              3 to 4 years                41,876,278.00           20,938,139.02                   50.00
              4 to 5years                 22,645,807.94           18,116,646.36                   80.00
              Over 5 years                43,123,341.45           43,123,341.45                  100.00
                  Total                 1,208,205,492.85          171,949,597.06            —

    2) Bad debt provision accrued and written-off (withdraw)

  The bad debt provision has been accrued at the amount of 27,221,131.52Yuan during the report
  period. Bad debt reversal or withdrawn incurred at the amount of 661,616.00 Yuan during the
  year.

   Including:Significant bad debt reversal or withdrawn in current period


                                                                                                          84
                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                          Received      Regained
  Companies                                                                     Reasons
                                          amount           form
  Shandong       Laiyang   Huasheng                                         judicial decision to
                                          293,092.00          lawsuit
  Food Co., Ltd                                                             receive the debt
  Beijing Taizinai Milk Biology                                             judicial decision to
                                          368,524.00          lawsuit
  Development Co.,LTD                                                       receive the debt
  Total                                   661,616.00

   3) Accounts receivable written off in current period

  Item                                                              Written off amount
  Receivable actually written off                                                        6,997,610.18



  (2) The top five significant accounts receivable categorized by debtors

                                                                                          Closing
                                                                         % of the
 Company                       Closing Balance         Aging                             Balance of
                                                                         total AR
                                                                                         Provision
 Guangzhou Fuli Estate
 Co.,Ltd                         44,290,000.00 Within 1 year                     3.67     2,214,500.00
 Panasonic     Cold-Chain                      Within 1 year,
 (Dalian) Co., Ltd.              31,120,658.05 1-2 years                         2.58     1,591,317.35
 Xinyi              Yuanda
 construction          and                     Within 1 year,
 Installation Engineering        27,709,087.18 1-2 years                         2.29     2,145,439.31
 Co., Ltd.
 Jilin           Changjitu
 Development                     27,000,000.00 Within 1 year                     2.23     1,350,000.00
 &Construction Co.,Ltd
 CRECCL                          25,221,586.00 Within 1 year                     2.09     1,261,079.30

 Total                          155,341,331.23                                12.86       8,562,335.96

4. Advances to suppliers

  (1) Aging of advances to suppliers

                                    Closing Balance                        Opening Balance
  Items                       Amount             Percentage             Amount          Percentage
                                                    (%)                                     (%)
  Within 1 year               96,449,107.72               68.50     91,708,963.35                  84.89
  1 to 2 years                43,020,607.78               30.55     15,856,969.05                  14.68
  2 to 3 years                  871,279.01                 0.62          467,380.70                 0.43
  Over 3 years                  467,380.70                 0.33
  Total                      140,808,375.21            100.00      108,033,313.10              100.00

  Significant prepayment over 1 year


                                                                                                           85
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                              Closing                         Unsettled Reasons
Company                                                        Aging
                                              Balance
Shenyang Debao Hongtai Agricultural                                           Contract is not fully
                                            15,252,880.00     1-2 years
Development Co., Ltd.                                                            implemented
Shenyang DebaoJiahong Agricultural                                            Contract is not fully
                                             6,395,198.00     1-2 years
Technology Co.,Ltd                                                               implemented
Shanghai      POMA          Automation                                        Contract is not fully
                                             6,125,000.00     1-2 years
Equipment Co.,ltd                                                                implemented
Total                                       27,773,078.00        —                    —



  (2) The top five significant advances to suppliers categorized by debtors

                                                                                     % of the total
  Company                             Closing Balance             Aging               advances to
                                                                                        suppliers
  Shenyang Debao Hongtai
  Agricultural Development                 15,252,880.00 1-2 years                               10.83
  Co., Ltd.
  Dalian HOLLEY Coating                                  Within 1 year,
  Equipment Co., Ltd.                      12,000,000.00 1-2 years                                8.52
  Mitsubishi Heavy Industries
  Air-conditioners(Shanghai)                9,236,000.00 Within 1 year                            6.56
  Co.,Ltd
  Dalian Ganghe Trading ltd                 8,444,300.00 Within 1 year                            6.00
  Shenyang DebaoJiahong
  Agricultural Technology                   6,395,198.00 W1-2 years                               4.54
  Co.,Ltd
  Total                                    51,328,378.00                                         36.45

(3) Note: The closing balance of the advances to supplier increased 30.34% comparing with the
opening balance because of the increasing advanced e payments at the year end.

  5. Interest receivable

  (1) Interest receivable

  Items                                       Closing Balance                 Opening Balance
  Interest on Term deposits                              921,783.33                         723,955.56
  Bank financial product                                 950,000.00
  Total                                                 1,871,783.33                        723,955.56

The closing balance of the interest receivable increased 158.55% comparing with opening balance
because of bank financial product interest increase.

  6. Dividends receivable

  (1) Dividends receivable
                                                                                                         86
                                                          Dalian Refrigeration Co., Ltd. 2017 Annual Report
  Company                                              Closing Balance                    Opening Balance
  Wuhan Steel and Electricity Co., Ltd.                             33,450.00                             39,025.00
  Total                                                             33,450.00                             39,025.00

  7. Other receivables

  (1) The categories of other receivable

                                                               Closing Balance

Items
                                 Booking balance                      Provision                       Booking
                                Amount               %             Amount               %             balance
Other        receivables
with          significant
individual         amount                    -             -                      -           -                  -
and separate bad debt
provision
Other        receivables
identified bad debt
provision based on             59,207,829.92      100.00          7,158,820.09        12.09          52,049,009.83
the     characters      of
credit risk portfolio
Other        receivables
with          significant
individual         amount
and separate bad debt
provision
Total                          59,207,829.92      100.00          7,158,820.09        12.09          52,049,009.83

(Continued)

                                                            Opening Balance
Items                          Booking balance                      Provision
                                                                                                  Booking balance
                               Amount              %            Amount                %
Other       receivables
with         significant
individual      amount                   -             -                      -           -                     -
and     separate     bad
debt provision
Other       receivables
identified bad debt
provision based on           64,905,774.51       100.00        7,648,317.94           11.78          57,257,456.57
the     characters    of
credit risk portfolio
                                                                                                                      87
                                                      Dalian Refrigeration Co., Ltd. 2017 Annual Report
Other       receivables
with         significant
individual      amount
and     separate    bad
debt provision
Total                        64,905,774.51   100.00         7,648,317.94     11.78           57,257,456.57

1) Other receivables accrued the bad debt provisions under accounting aging analysis method

                                                                Closing Balance
                   Aging                                          Provision for      Drawing proportion
                                       Other receivables
                                                                    bad debts                   (%)
              Within 1 year                  27,188,467.00           1,359,423.37               5.00
               1-2 years                     27,220,604.77           2,722,060.50              10.00
               2-3 years                      1,708,062.82             512,418.85              30.00
               3-4 years                        785,711.21             392,855.61              50.00
               4-5 years                        664,611.80             531,689.44              80.00
              Over 5 years                    1,640,372.32           1,640,372.32              100.00
                   Total                     59,207,829.92           7,158,820.09                —

      (2) Other receivables written off in current period

  Item                                                                 Written-off Amount
  Other receivables written off                                                                   84,544.00

      (3) Other receivables categorized by nature

  Nature                                      Closing Balance                     Opening Balance
  Guarantee deposits                                  43,339,402.91                       34,372,184.48
  Petty cash                                                7,879,896.91                       9,061,619.39
  Accounts payable                                          5,520,797.71                      16,038,288.24
  Others                                                    2,467,732.39                       5,433,682.40
  Total                                                  59,207,829.92                        64,905,774.51

      (5)Other receivables from the top 5 debtors

                                                                                     % of
                                                                                                  Closing
                                                    Closing                          the
             Name                Category                            Aging                      Balance of
                                                    Balance                          total
                                                                                                 Provision
                                                                                     OR
  Shenyang       Debao
  Hongtai Agricultural
                                  Deposit      12,000,000.00 1–2years               20.27     1,200,000.00
  Development      Co.,
  Ltd.
  Shenyang Debao
  Jiahong Agricultural
                                  Deposit      10,000,000.00 1–2years               16.89     1,000,000.00
  Technology Co.,
  Ltd.
                                                                                                              88
                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                                                                % of
                                                                                            Closing
                                                   Closing                      the
          Name               Category                              Aging                   Balance of
                                                 Balance                        total
                                                                                           Provision
                                                                                OR
  Chengdu Silver low
  Cold Chain Logistics        Deposit           3,800,000.00 1–2years           6.42      190,000.00
   Co., Ltd.
  Dalian Delta HK&                                              Within 1year,
                              Deposit           2,830,000.00                     4.78      398,000.00
  China Gas Co., Ltd.                                           3–4 years
  National Tax office       Exporting tax
  of Dalian                    refund           2,272,241.76 Within 1 year       3.84       113,612.09
  Total                                        30,902,241.76                    52.20     2,901,612.09

  8. Inventories

  (1) Categories of inventories

                                                         Closing Balance
             Item
                                  Book value         Provision for decline        Net book value
  Raw materials                    93,097,749.58               1,120,202.77              91,977,546.81
  Working in progress              57,136,761.54                                         57,136,761.54
  Finished goods                  138,840,644.36                358,460.00              138,482,184.36
  Low-value                          141,351.31                                            141,351.31
  consumable
  Self-manufactured                32,879,154.10                                         32,879,154.10
  semi-finished products
  Constructing projects            27,778,087.73                                         27,778,087.73
  Materials on                      3,884,578.79                                          3,884,578.79
  consignment for
  further processing
           Total                  353,758,327.41               1,478,662.77             352,279,664.64

(Continue)

                                                         Opening Balance
             Item
                                  Book value         Provision for decline        Net book value
      Raw materials                68,988,506.23               1,070,944.56              67,917,561.67
    Working in progress            88,255,287.69                                         88,255,287.69
      Finished goods              118,393,387.27                320,000.00              118,073,387.27
  Low-value consumable               209,949.86                                            209,949.86
    Self-manufactured              31,999,705.01                                         31,999,705.01
  semi-finished products
   Constructing projects           40,729,017.13                                         40,729,017.13
       Materials on                 2,353,515.43                                          2,353,515.43
  consignment for further
        processing
           Total                  350,929,368.62               1,390,944.56             349,538,424.06

   (2) Provision for decline in the value of inventories


                                                                                                         89
                                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                                     Increase                        Decrease
                               Opening                                                                        Closing
                Item                                                       Reverse/         Others
                               Balance          Accrual         Other                                         Balance
                                                                          Written- off    transferred
           Raw materials       1,070,944.56     154,435.00                   105,176.79    1,120,202.77       154,435.00

            Finished goods      320,000.00      38,460.00                                       358,460.00    38,460.00

                Total           1,390,944.56    192,895.00                   105,176.79    1,478,662.77       192,895.00

              (3) Accrual for provision for decline in the value of inventories

                                               Basis for net realizable value
            Item                                                                     Reasons for reverse/write-off
                                                        recognition
            Raw materials                         Lower of cost and NRV                   Sold within the year
            Finished goods                        Lower of cost and NRV                   Sold within the year

            9. Other current assets

            Item                                        Closing Balance                    Opening Balance
            Prepaid income tax presented
                                                                      1,247,766.25                           734,482.13
            at net amount after offsetting
            VAT to be deducted                                     37,613,420.40                         42,164,041.41
            Bank financial product                                 76,000,000.00
            Prepaid expenses                                            46,082.68                            355,521.38
            Total                                                 114,907,269.33                         43,254,044.92

          The closing balance of the other current assets increased 165.66% comparing with the opening
          balance because of bank financial product bought from ICBC bank.

            10. Available-for-sale financial assets

            (1) Available-for-sale financial assets

     Item                          Closing Balance                                         Opening Balance
                    Booking                                  Carrying         Booking                                Carrying
                                       Provision                                                  Provision
                     balance                                 amount            balance                               amount
Available-f
or-sale
debt
instruments
Available-f
or-sale
                 520,850,268.15 5,067,074.16 515,783,193.99                550,711,039.12 5,145,922.48            545,565,116.64
equity
instruments
Measured
as         fair 503,296,003.65 1,424,468.25 501,871,535.40 533,156,774.62 1,503,316.57 531,653,458.05
value

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                                                              Dalian Refrigeration Co., Ltd. 2017 Annual Report
     Item                           Closing Balance                                    Opening Balance
                     Booking                           Carrying            Booking                         Carrying
                                       Provision                                          Provision
                      balance                           amount             balance                          amount
method
Measured
as       cost      17,554,264.50 3,642,605.91         13,911,658.59     17,554,264.50 3,642,605.91        13,911,658.59
method
Others
     Total       520,850,268.15 5,067,074.16 515,783,193.99            550,711,039.12 5,145,922.48       545,565,116.64

              (2) Available-for-sale financial assets measured at fair value method

                            Items                       Equity instruments available for sale          Total
      Cost                                                                      27,098,895.00         27,098,895.00
      Fair value                                                               501,871,535.40       501,871,535.40
      FV accumulated change recognized in other
      comprehensive income                                                     476,197,108.65       476,197,108.65

      Provision for impairment                                                   1,424,468.25          1,424,468.25

             (3) Available-for-sale financial assets measured at cost method


                                          Proportion of                              Book Value
                 Investee                shareholding in
                                                                 Opening                                 Closing
                                         the investee(%)                        Increase Decrease
                                                                 Balance                                 Balance

     Zibo traction motor co., ltd.                     0.76       849,000.00                              849,000.00

     Liaoning Mike group Limited
                                                       5.57     1,020,000.00                            1,020,000.00
     by Share Ltd

     Guotai Junan investment
                                                       0.22     3,057,316.00                            3,057,316.00
     management company

     Cold      King       container
                                                      17.80    11,207,806.00                           11,207,806.00
     temperature control Co., Ltd.

     Liaoning             enterprises
                                                       4.20       105,000.00                              105,000.00
     Industrial Co., Ltd.

     Wuhan steel electric Limited                      5.60     1,315,142.50                            1,315,142.50


     Total                                                     17,554,264.50                           17,554,264.50


         (Continue)

                                                                                                           Cash
                 Investee                                 Provision for impairment
                                                                                                         dividend

                                                                                                               91
                                                       Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                        Opening                                 Closing
                                                       Increase Decrease
                                        Balance                                 Balance

Zibo traction motor co., ltd.            849,000.00                               849,000.00

Liaoning Mike group Limited
                                                                                                   310,000.00
by Share Ltd

Guotai Junan investment
                                       2,688,605.91                            2,688,605.91
management company

Cold      King       container
temperature control Co., Ltd.

Liaoning enterprises Industrial
                                         105,000.00                              105,000.00
Co., Ltd.

Wuhan steel electric Limited                                                                        33,450.00


Total                                  3,642,605.91                            3,642,605.91        343,450.00


   (4)Provision for available-for-sale financial assets impairment
                                                                 Debt
                                      Equity instruments     instruments
                Category                                                     Others        Total
                                       available for sale    available for
                                                                 sale
        Beginning balance                   5,145,922.48                                  5,145,922.48
        Increased during current
        year
          Including: transfer from
        other comprehensive
        income
        Decreased during current                78,848.32                                     78,848.32
        year
           Including: transfer from
        fair value rising
        Ending balance                      5,067,074.16                                  5,067,074.16

            (5) Other explanatory on available-for-sale financial assets

   Guotai Junan Securities Co., Ltd. was listed on Shanghai Stock Security Exchange on 26th June 2015,
   and until 31st December, 2017, the company held 27,098,895 numbers of shares of Guotai Junan
   Securities Co., Ltd which was measured at fair value at the year end. The company received cash
   dividend RMB 11,153,569.05Yuan.




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                                                                                                                                         Dalian Refrigeration Co., Ltd. 2017 Annual Report



11.Long-term equity investments

                                                                                         Increase/Decrease
                                                                      Gains and
                             Beginning                                   losses       Adjustment of Change   Cash bonus       Provision for                                   Provision for
          Investee                                                    recognized          other       of      or profits     impairment of                Ending balance
                              balance         Increased   Decreased                                                                            Others                         impairment
                                                                       under the      comprehensive other    announced         the current
                                                                        equity           income     equity     to issue          period
                                                                        method
    Associates
    Panasonic Appliances
    Air-Conditioning and
    Refrigeration            157,425,641.15                            5,991,975.67                           1,600,000.00                                  161,817,616.82     157,425,641.15
    (Dalian) Co.Ltd
    Dalian          Honjo
    Chemical Co., Ltd.         9,642,351.34                             912,160.07                            1,441,499.53                                     9,113,011.88      9,642,351.34
    Panasonic
    Cold-Chain (Dalian)      217,687,237.26                           14,163,570.31                           4,800,000.00                                  227,050,807.57     217,687,237.26
    Co., Ltd.
    Keinin-Grand Ocean
    Thermal Technology        52,952,413.79                           12,652,398.53                           8,000,000.00                                   57,604,812.32      52,952,413.79
    (Dalian) Co., Ltd.
    Panasonic
    Compressor (Dalian)      484,003,393.99                           44,000,847.56                          38,000,000.00                                  490,004,241.55     484,003,393.99
    Co., Ltd.
    MHI         Bingshan
    Refrigeration             13,018,792.05                             340,712.76                                                                           13,359,504.81      13,018,792.05
    (Dalian) Co.,Ltd.
    Beijing     Huashang
    Bingshan
    Refrigeration      and      769,463.27                              661,677.89                                                                            1,431,141.16        769,463.27
    Air-conditioning
    Machinery Co., Ltd.
    Dalian Fuji Bingshan
    Vending      Machine     160,787,194.81                           26,894,028.83                           7,840,000.00                                  179,841,223.64     160,787,194.81
    Co., Ltd.
    Changzhou Jingxue
    Refrigeration            151,527,707.42                           14,564,351.32                                                                          166,092,058.74    151,527,707.42
    Equipment Co., Ltd.




                                                                                                                                                                                                93
                                                                                                                                                                                       Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                                                                                                       Increase/Decrease
                                                                                               Gains and
                                      Beginning                                                   losses          Adjustment of Change               Cash bonus         Provision for                                                    Provision for
               Investee                                                                        recognized             other       of                  or profits       impairment of                             Ending balance
                                       balance           Increased          Decreased                                                                                                           Others                                   impairment
                                                                                                under the         comprehensive other                announced           the current
                                                                                                 equity              income     equity                 to issue            period
                                                                                                 method
       Dalian Fuji Iceberg
       Vending      Machine              9,410,006.56                                            4,102,434.74                                          1,470,000.00                                                   12,042,441.30          9,410,006.56
       Sales Co., Ltd
       Wuhan         Lanning
       Energy Science Co.,               6,132,033.33                                              -45,247.34                                                                                                          6,086,785.99          6,132,033.33
       Ltd.
       Wuhan Sikafu Power
       Control Equipment                 6,156,369.01                                             -929,316.68                                                                                                          5,227,052.33          6,156,369.01
       Co., Ltd
       Panasonic         cold
       Machine        System           23,400,297.51                                             4,424,366.91                                                                                                         27,824,664.42         23,400,297.51
       (Dalian) Co., Ltd
       Dalian      Bingshan
       Metal     Technology                             172,950,000.00                          14,526,852.76                                         24,360,221.29                                                  163,116,631.47
       Co.,Ltd
       Dalian      Bingshan
       Group Management
       and        Consulting                             49,000,000.00                          -1,356,255.88                                                                                                         47,643,744.12
       Co.,ltd
       Total                        1,292,912,901.49    221,950,000.00                         140,904,557.45                                         87,511,720.82                                                1,568,255,738.12      1,292,912,901.49



 1、At the 1st general meeting in 2017, and 12th meeting of the 7th generation of board of directors approved Dalian Refrigeration Company to acquire 49% of shareholding of Dalian Bingshan Metal Technology Co., Ltd through Dalian Bingshan Group, and Beijing

 Zhongqihua Assets Valuation Co.,LTD was engaged to the thorough valuation of Dalian Bingshan Metal Technology Co., Ltd, valuation date is December 31st,2017. Based on the valuation results, the share transferring price is 17,295Yuan for 49% shareholding of

 Dalian Bingshan Metal Technology Co., Ltd held by Dalian Refrigeration Company.


 、The 11thmeeting of the 7th generation of board of directors was held on November 25th, 2016, and approved to jointly set up Dalian Bingshan Group Management and Consulting Co.,ltd with Dalian Bingshan Group. Dalian Refrigeration Company will hold 49%
shareholding of Dalian Bingshan Group Management and Consulting Co.,ltd and Dalian Bingshan Group will hold 51%. JV, Dalian Bingshan Group Management and Consulting Co.,ltd will be invested in the form of cash and subscribed capital is 0.49million Yuan
and is fully subscribed by December 31st,2017.




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                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report

12. Investment property
(1) Investment property measured as cost method




                           Property&                            Construction in
           Item                             Land-use-rights                          Total
                                                                   progress
                           Building
I. Initial Cost

1. Opening Balance          30,031,254.35                          30,031,254.35    30,031,254.35

2. Increase                162,707,850.49       24,391,511.82     187,099,362.31   162,707,850.49

(1) Outsourcing

(2) Transferred from

Construction in            162,707,850.49       24,391,511.82     187,099,362.31   162,707,850.49

progress

3. Decrease

(1) Disposal

(2)Transferred to other

4.   Closing Balance       192,739,104.84       24,391,511.82     217,130,616.66   192,739,104.84

II. Accumulated

Depreciation

1. Opening Balance           1,425,601.41                           1,425,601.41     1,425,601.41

2.   Increase              101,965,177.68        9,878,562.30     111,843,739.98   101,965,177.68

(1)Provision or
                             3,497,837.37         487,830.24        3,985,667.61     3,497,837.37
amortization

(2) Acquired from
                            98,467,340.31        9,390,732.06     107,858,072.37    98,467,340.31
business combination

3.   Decrease

(1) Disposal

(2) Transferred to other

4.   Closing Balance       103,390,779.09        9,878,562.30     113,269,341.39   103,390,779.09

III. Impairment

Reserve

1. Opening Balance

2.   Increase

(1)Provision or

amortization

3. Decrease

(1) Disposal

(2) Transferred to other

4.   Closing Balance

IV. Book Value                                                                                      95
1. Closing book value       89,348,325.75      14,512,949.52      103,861,275.27    89,348,325.75
                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report
Note: On 31st July,2014, the company signed supplemental rental contract with MHI Bingshan
Refrigeration (Dalian) Co.,Ltd., and rent out # 6 building of workshop located on No. 106 Liaohe
East Rd, Dalian Economic and Technology Development Zone to MHI Bingshan Refrigeration
(Dalian) Co.,Ltd. The rental area is 15,259.04 square metres, and annual rent is RMB 4.2 million
with the expiry date on 16th July, 2029.

The 13th meeting of the 7th generation board was held on April 22, 2017, and approved to rent out the
old plant and land located in No888, South West RD, Shahekou Districit, Dalian to Bingshan Huigu
Company. The lease premium is 4.62million Yuan per annum and contract is from April 1st, 2017 to
December 31, 2036. The company has signed the “estate leasing contract” with Dalian Bingshan
Huigu Development Company based on the requirement of utilization of old land and plant and new
business foster plan.

On June 1st, 2017, the company’s subsidiary, Bingshan Lingshe, signed the leasing contract with
Dalian Jingxue Energy Saving Technology Co. LTD and rented out # 7 building of workshop located
on No.92, Tieshan West Rd, DDA, Dalian. The rental area is 3653.76 square metres, and annual rent
is RMB 840K with the contracted date between June 1st,2017 and May 31st,2022. Bingshan Lingshe
also rented out Room 201,        # 4 building located on No.92, Tieshan West Rd, DDA, Dalian to
Dalian Jingxue Energy Saving Technology Co. LTD . The rental area is 25square metres, and annual
lease premium is RMB 15K with the contracted date between June 1st, 2017 and May 31st,2022

 (2) Investment property without owner’s certificates

                         Items                       Book value          Reasons
# 6 building of workshop on No. 106 Liaohe East Rd,
                                                    27,873,369.74 Deed is in the progress
Dalian Economic and Technology Development Zone
#7 plant of Dalian Bingshan Lingshe                  4,690,315.52 Deed is in the progress
                                                             32,563,685.26

  13. Fixed assets

  (1) Fixed assets detail

                                                          Transportati
                        Property&        Machinery                            Other
  Item                                                        on            Equipment           Total
                        buildings        Equipment
                                                          Equipment
  I. Initial Cost
  1.     Opening
                        451,766,766.84   515,351,153.65     23,073,454.57   48,512,512.27   1,038,703,887.33
  Balance
  2. Increase           312,268,203.78   158,905,376.90       518,421.39    19,837,583.07    491,529,585.14

  (1) Purchase           16,772,328.28    12,781,975.54       518,421.39     2,711,867.43     32,784,592.64

  (2) Transferred
  from
                        295,495,875.50   146,123,401.36                     17,125,715.64    458,744,992.50
  construction-in
  -progress
  (3)    Acquired
                                                                                                              96
                                              Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                                    Transportati
                  Property&        Machinery                            Other
Item                                                     on           Equipment          Total
                  buildings        Equipment
                                                    Equipment
from business
combination
3. Decrease        170,885,099.5    18,918,423.62      3,913,338.53    2,003,230.21   195,720,091.86

(1) Disposal       14,553,174.07    17,280,051.40      3,913,338.53    2,003,230.21    37,749,794.21

(2) Transferred
                  156,331,925.43     1,638,372.22                                     157,970,297.65
to other
4.      Closing                                                                       1,334,513,380.6
                  593,149,871.12   655,338,106.93     19,678,537.43   66,346,865.13
Balance                                                                                            1

II.
Accumulated
Depreciation
1.      Opening
                  155,865,048.40   320,193,873.95     14,385,210.02   36,696,181.34    527,140,313.71
Balance
2. Increase        12,781,020.11    24,929,359.24      1,775,250.71    3,436,982.94     42,922,613.00

(1)Accrued         12,781,020.11    24,929,359.24      1,775,250.71    3,436,982.94     42,922,613.00

3. Decrease       104,572,515.02    16,789,146.76      3,286,181.24    2,293,669.98   126,941,513.00

(1) Disposal        7,694,395.77    15,199,925.70      3,286,181.24    2,293,669.98    28,474,172.69

(2) Transferred
                   96,878,119.25     1,589,221.06                                      98,467,340.31
to other
4.      Closing
                   64,073,553.49   328,334,086.43     12,874,279.49   37,839,494.30   443,121,413.71
Balance
III.
Impairment
Reserve
1.      Opening
                                      555,027.75                                          555,027.75
Balance
2. Increase
(1)Accrued
3. Decrease                             37,708.25                                          37,708.25

(1) Disposal                            37,708.25                                          37,708.25

4.      Closing
                                      517,319.50                                          517,319.50
Balance
IV.        Book
Value
1.      Closing
                  529,076,317.63   326,486,701.00      6,804,257.94   28,507,370.83   890,874,647.40
book value



                                                                                                        97
                                                             Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                                                     Transportati
                                Property&         Machinery                               Other
         Item                                                             on            Equipment           Total
                                buildings         Equipment
                                                                      Equipment
         2.      Opening
                                295,901,718.44    194,602,251.95        8,688,244.55    11,816,330.93    511,008,545.87
         book value

            (2) Fixed assets as pending certificate of ownership

                         Item                             Book value                       Reason for Pending

         Office,Lianhe          #1      plant,
         #2plant,Jiacu       plant        and                  264,114,617.95             Deed is in the progress
         dormitory

         Newly built plant                                         47,464,299.36          Deed is in the progress

         Functional Lab plant                                      17,091,610.37          Deed is in the progress

                                                                                       Land is pledged and deed can
         Lianhe #3 plant                                        42,023,144.41              not be granted

         Total                                                370,693,672.09

           14. Construction-in-progress

           (1) Construction in progress details

                                     Closing Balance                                         Opening Balance
    Item
                    Book Balance        Provision       Book Value           Book Balance        Provision        Book Value
Buildings
                     16,348,332.17                      16,348,332.17       250,913,095.82                       250,913,095.82
reconstruction
Improvement
                      1,633,725.79                       1,633,725.79          70,072,395.96                        70,072,395.96
of machinery
Official
                                                                                   661,185.00                         661,185.00
furniture
Self-heating
circulation
equipment            65,017,324.94                      65,017,324.94
from mine air
return
Total                82,999,382.90                      82,999,382.90       321,646,676.78                       321,646,676.78

           (2) Change in the significant construction in progress

                                                                               Decrease
                         Opening                                                                               Closing
       Name                                  Increase              Transfer to              Other
                         Balance                                                                               Balance
                                                                   fixed assets            decrease
   Buildings
   reconstruction     250,913,095.82        65,986,306.15          295,813,516.96         4,737,552.84        16,348,332.17
   Improvement
   of machinery        70,072,395.96        92,130,914.62          160,569,584.79                              1,633,725.79
   Official               661,185.00         1,700,705.75             2,361,890.75
                                                                                                                          98
                                                                         Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                                                                         Decrease
                                   Opening                                                                               Closing
               Name                                       Increase            Transfer to             Other
                                   Balance                                                                               Balance
                                                                              fixed assets          decrease
        furniture
        Software                                          1,226,947.93                              1,226,947.93
        Green land of
        new factory                                       5,405,405.40                              5,405,405.40
        Self-heating
        circulation
        equipment                                     65,017,324.94                                                    65,017,324.94
        from mine air
        return
              Total             321,646,676.78 231,467,604.79                  458,744,992.50     11,369,906.17        82,999,382.90

                     (Continued)

                                                              Progress                            Including:
                                       Percent of                                                                    Interest
                                                                 of            Accumulated      Accumulated
                                      investment                                                                   capitalizatio        Source of
   Name                Budget                               construction        capitalized       capitalized
                                        against                                                                         n                 funds
                                                                                  interest      interest of the
                                      budget(%)                                                                      rate(%)
                                                                                                     year
Buildings
                                                                                                                                           Self
reconstructi     337,527,099.00                   95.16              95.16
on                                                                                                                                      financing
Improveme
                                                                                                                                        Loan/Self
nt of            167,000,000.00                   97.13              97.13
machinery                                                                                                                               financing
Official                                                                                                                                   Self
furniture             2,361,890.75            100.00                100.00
                                                                                                                                        financing
                                                                                                                                           Self
Software              1,226,947.93            100.00                100.00
                                                                                                                                        financing
Green land
of new                8,921,154.88            100.00                100.00
factory
Self-heating
circulation
equipment        110,000,000.00                   59.11              59.11
from mine
air return
Total                    —                  —                 —                                                                         —

                 15. Intangible assets

                 (1) Intangible assets list

                                                          Land use
               Item                                                           Knowhow            Others               Total
                                                            right
               I. Initial Cost
               1. Opening Balance                   183,963,902.62                            15,695,674.72        199,659,577.34
               2. Increase                                                   11,800,000.00      1,711,943.66        13,511,943.66
               (1) Purchase                                                  11,800,000.00       484,995.73         12,284,995.73
               (2)      Transferred      from                                                   1,226,947.93         1,226,947.93

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                                       Land use
Item                                                    Knowhow           Others             Total
                                         right
construction-in-progress
3. Decrease                           31,073,705.82                       633,000.00       31,706,705.82
(1) Disposal                           6,682,194.00                       633,000.00        7,315,194.00
(2) Transferred to other              24,391,511.82                                        24,391,511.82
4.     Closing Balance            152,890,196.80      11,800,000.00    16,774,618.38    181,464,815.18
II.               Accumulated
amortisation
1. Opening Balance                    37,791,708.77                     7,153,656.05       44,945,364.82
2.     Increase                        3,128,513.95      294,999.99     1,477,572.91        4,901,086.85
(1)Accrued                             3,128,513.95      294,999.99     1,477,572.91        4,901,086.85
3.     Decrease                       12,041,338.36                       258,815.00       12,300,153.36
(1) Disposal                           2,650,606.30                       258,815.00        2,909,421.30
(2) Transferred to other               9,390,732.06                                         9,390,732.06
4.     Closing Balance                28,878,884.36      294,999.99     8,372,413.96       37,546,298.31

III. Impairment Reserve

1. Opening Balance
2.     Increase
(1)Accrued

(2) Others

3.     Decrease
(1) Disposal
(2) Transferred to other
4.     Closing Balance
IV. Book Value
1. Closing book value             124,011,312.44      11,505,000.01     8,402,204.42    143,918,516.87
2. Opening book value             146,172,193.85                        8,542,018.67    154,714,212.52

       16. Goodwill

      (1) Original cost of goodwill

                                               Increased during        Decreased during
                                                 current year            current year
                             Opening                                                            Closing
          Name                                Enterprises
                             Balance                                                            Balance
                                                merger      Other     Disposal     Other
                                               increase
Dalian      Niweisi
LengNuan
                            1,440,347.92                                                        1,440,347.92
Techonoligy    Co.,
Ltd.
Dalian    Bingshan            310,451.57                                                         310,451.57
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                                               Increased during        Decreased during
                                                 current year            current year
                              Opening                                                         Closing
          Name                                Enterprises
                              Balance                                                         Balance
                                                merger      Other Disposal Other
                                               increase
   Security      Leisure
   Industrial
   Engineering      Co.,
   Ltd
           Total             1,750,799.49                                                      1,750,799.49

     (2) Goodwill impairment provision
   Goodwill calculation method:

   In the year 2015, the book value of equity investment of Dalian Niweisi LengNuan Technology Co.,
   Ltd exceeds the fair value of the proportion of the acquired company’s identifiable net asset. The
   difference between the book value of equity investment of 48, 287,589.78 Yuan and the identifiable
   net asset’s fair value of Dalian Sanyo High-efficient Refrigeration System Co., Ltd of 46,847,241.86
   Yuan on the acquisition date of July 31st    2015 is recognized as goodwill of 1,440,347.92 Yuan on
   the group consolidated financial report at the end of the year.

   In the year 2016, the company purchases shares of Dalian BingshanBaoan Leisure Industry Co., Ltd
   and gains control. The transferred price is based on the net asset of Dalian BingshanBaoan Leisure
   Industry Co., Ltd on June 30th 2016. Negotiated with Dalian BingshanBaoan Leisure Industry Co.,
   Ltd’s shareholder Baoan Water Project (China) Limited Company, the transfer price is the
   combination cost on the purchasing date which is 5,359,548.42 Yuan, the fair value of proportion of
   Dalian BingshanBaoan Leisure Industry Company’s identifiable net asset is 5,049,096.85 Yuan on
   the purchasing day, therefore, goodwill is 310,451.57Yuan on the purchasing date.

   The book value of goodwill from business combination of Dalian Niweisi LengNuan Technology
   Co., Ltd and Dalian BingshanBaoan Leisure Industry Co., Ltd which are not under same control
   shall be allocated into the relevant asset group using the reasonable method since acquisition date
   and taken impairment test on relevant asset group where the goodwill is included. The obvious
   impairment indication of the goodwill hasn’t been found. Thus no goodwill impairment provision
   has been made.

      17. Long-term repayments

                           Opening                                                Other        Closing
  Item                                      Increase         Amortization
                            Balance                                              Decrease      Balance
Employee’s
                           2,427,605.34                         138,478.32                    2,289,127.02
dormitory use right
Renovation       and
rebuilding                  681,294.43         900,900.90       700,063.19                      882,132.14
Lease                       850,320.00                          106,290.00                      744,030.00
Membership fee for
Golf                        489,500.00                               16,500.00                  473,000.00
Technology
entrance fee of cold                         1,867,125.00       280,068.75                    1,587,056.25
and heat machinery
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                            Opening                                                   Other             Closing
  Item                                       Increase           Amortization
                             Balance                                              Decrease              Balance
Greenland of new
factory                                        8,921,154.88        520,400.70                           8,400,754.18

Warranty extension                                94,339.62           39,308.20                           55,031.42
Total                       4,448,719.77     11,783,520.40        1,801,109.16                       14,431,131.01

         18. Deferred tax assets and deferred tax liabilities

         (1) Deferred tax assets without offsetting

   Item                             Closing Balance                         Opening Balance
                               Deductible       Deferred tax            Deductible       Deferred tax
                           temporary difference    assets           temporary difference    assets
   Provision for
   impairment of              139,387,243.38      27,485,104.23         124,545,784.82        25,188,239.74
   assets
   Share option
   Incentiveexpense             13,881,215.49      2,082,182.32          17,103,388.00         2,565,508.20
   Unrealized profit
   from internal                15,641,404.17      2,346,210.63
   transaction
   Total                      168,909,863.04      31,913,497.18         141,649,172.82        27,753,747.94

          (2) Deferred tax liabilities without offsetting

   Item                                     Closing Balance                        Opening Balance
                                       Taxable        Deferred tax            Taxable       Deferred tax
                                     temporary          liabilities         temporary         liabilities
                                      difference                             difference
   Fair value change of the
   available-for-sale             476,197,108.65      71,429,566.31      504,557,879.67          75,683,681.95
   financial assets
   Total                          476,197,108.65      71,429,566.31      504,557,879.67          75,683,681.95

          (3) Unrecognized deferred tax assets details

   Item                                           Closing Balance                 Opening Balance
   Deductible temporary difference                          45,359,761.94                     44,617,762.47
   Deductible loss                                           6,173,430.97                     48,658,772.82
   Total                                                    51,533,192.91                     93,276,535.29

         (4) Unrecognized deductible loss of deferred tax assets expired years

        Year                           Closing Balance          Opening Balance                 Notes
        2017                                                            409,595.19
        2018                                 1,196,797.80              2,044,154.14
        2019                                                           1,843,026.73
        2020                                 3,240,819.97             11,863,347.41
        2021                                 1,735,813.20             32,498,649.35
        2022
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  Year                           Closing Balance        Opening Balance              Notes
  Total                                  6,173,430.97         48,658,772.82

   19. Short-term loan

   (1) Category of short term loan

  Loan category                          Closing Balance                  Opening Balance
  Mortgage loan                                                                     45,000,000.00
  Credit loan                                    349,801,300.00
  Total                                          349,801,300.00                     45,000,000.00

   Note: Dalian Refrigeration Company borrowed 260million Yuan from bank and Bingshan
International Trading, a subsidiary of Dalian Refrigeration Company borrowed 980.13million
Yuan from bank , the other subsidiary, Wuhan New World Refrigeration Industrial Co., Ltd.
borrowed RMB80million from Dalian Refrigeration Company.

   20. Notes payable

  Notes category                              Closing Balance              Opening Balance
  Bank acceptance notes                            221,572,037.67                  189,305,658.64
  Commercial acceptance     notes                   38,871,130.00                    5,257,076.15
  Total                                            260,443,167.67                  194,562,734.79

At the year end, there is no unpaid notes payable which is due. Closing balance increased by 33.86%
because the note has not been due yet.

   21. Accounts payable

   (1) Accounts payable

   Item                                     Closing Balance               Opening Balance
   Material payments                              593,418,202.00                  660,416,857.54
   Project payments                               244,492,384.60                  199,503,352.11
   Equipment payments                              48,813,078.50                     3,565,090.35
   Others                                           3,240,652.53                       67,343.26
   Total                                          889,964,317.63                  863,552,643.26
    (2) Accounts payable with age over 1 year
                                                                  Reason of unpaid or not carried
             Name of company                Closing Balance
                                                                          forward
                                                             Project is uncompleted contract is
  Dalian Yida Construction Company             24,639,904.38 not finished
                                                             Project is uncompleted contract is
  Panasonic Cold Chain (Dalian)                13,045,170.70 not finished
  Heilongjiang Longleng Technology                            Project is uncompleted contract is
                                                 9,413,290.00 not finished
  Co., Ltd
                                                              Project is uncompleted contract is
  Binzhou Shanfu Refrigeration                   9,069,804.92 not finished

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                                                               Reason of unpaid or not carried
           Name of company                Closing Balance
                                                                            forward
Engineering Co., Ltd
Total                                        56,168,170.00

 22. Received in advance

 (1)      Received in advance

Item                                      Closing Balance               Opening Balance
Advanced on sales                              147,172,195.05                    150,098,892.29
Total                                          147,172,195.05                    150,098,892.29

 (2)      Accounts received in advance aged over 1 year

Company                                    Closing Balance                  Reason
Hongtai International       Financing                            Unsettled contract payments on
lease(Tianjin) Co.,Ltd                         42,075,051.51              sets projects
                                                                 Unsettled contract payments on
Dandong Port                                    5,000,000.00              sets projects
Total                                          47,075,051.51

 23. Employee’s payable

 (1) Category of employee’s payable

Item                        Opening           Increase           Decrease              Closing
                            Balance                                                   Balance
Short-term
                          50,256,392.86     303,853,777.75     307,369,873.66     46,740,296.95
employee’s payable
Post-employment
benefit       –defined                      36,701,139.02       36,689,873.61          11,265.41
contribution plan
Termination benefits                           129,745.88          129,745.88
Other welfare due
within 1 year
Total                     50,256,392.86     340,684,662.65     344,189,493.15     46,751,562.36

 (2) Short-term employee’s payables

 Item                       Opening           Increase           Decrease             Closing
                             Balance                                                  Balance
 Salaries,       bonus,
 allowance,         and   33,496,485.39     239,928,455.13     237,741,088.17    35,683,852.35
 subsidy
 Welfare                  14,173,682.87      11,423,684.36      17,140,532.05     8,456,835.18
 Social insurance                            19,260,015.40      19,254,330.99            5,684.41
 Include:      Medical                       15,040,301.79      15,035,324.58            4,977.21

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                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report
   Item                      Opening            Increase            Decrease          Closing
                              Balance                                                 Balance
              insurance
   Supplemental
                                                 106,676.16          106,676.16
              insurance
                 On-duty
                   injury                      2,335,004.77         2,334,709.70           295.07
                insurance
                Maternity
                                               1,778,032.68         1,777,620.55           412.13
                insurance
   Housing funds             1,575,760.60     28,370,586.47        28,407,118.00     1,539,229.07
   Labor union and
                             1,010,464.00      4,527,777.08         4,483,545.14     1,054,695.94
   training expenses
   Short-term       leave
   with pay
   Short term profit
   share plan
   Others                                        343,259.31          343,259.31
   Total                    50,256,392.86    303,853,777.75      307,369,873.66     46,740,296.95



   (3) Defined contribution plan

  Item                         Opening          Increase             Decrease          Closing
                               Balance                                                 Balance
  Pension                                      35,356,670.57       35,345,745.93         10,924.64
  Unemployment
                                                1,134,468.45        1,134,127.68            340.77
  insurance
  Company         Annuity
                                                  210,000.00          210,000.00
  Plan
  Total                                        36,701,139.02       36,689,873.61         11,265.41

The company joins the pension and unemployment plan in accordance with the state regulation, and
therefore, the company makes monthly contribution and bears no any other obligation other than the
monthly contribution. Accordingly the contribution will be recorded in the profit and loss or the cost
of assets when incurs.

   (4) Other explanatory of the employee’s payable
There was no amount delay paid at the end of the current period.

   24. Tax payable

   Item                                           Closing Balance              Opening Balance
   Value-added tax                                         12,550,353.23             7,442,531.84
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                                            Dalian Refrigeration Co., Ltd. 2017 Annual Report
Enterprise income tax                                  13,418,675.14              7,007,154.72
Individual income tax                                     628,015.54                494,374.71
City maintenance and construction tax                     907,478.69                520,432.62
Real estate tax                                           882,771.72                542,956.99
Land use tax                                              553,224.98                553,224.98
Education surcharge                                       613,577.67                371,260.24
River toll fee                                                                      965,963.53
Safeguard fund for disables                                   480.00                202,031.38
Stamp duty                                                437,981.65                305,158.47
Total                                                  29,992,558.62             18,405,089.48

25. Interest payable

 Item                                           Closing Balance            Opening Balance

 Interest on short term loan                              379,085.53
 Total                                                    379,085.53



26. Dividend payable

  Item                                          Closing Balance           Opening Balance

  Ordinary share dividend                                863,516.60               863,516.60
  Total                                                  863,516.60               863,516.60


26. Other accounts payable

(1) Other payables categorized by payments nature

Payments nature                            Closing Balance                Opening Balance
Restricted share buy back                         21,026,106.00                  67,615,856.00
Loan from non-financial institutes                    6,320,000.00                6,700,000.00
Cash pledge and security deposit                  10,842,115.56                   8,601,269.21
Apply for reimbursement and
unpaid                                            13,699,458.65                  11,486,092.78
Cash from related parties                              934,995.17                   566,240.01
Receipts under custody                            12,572,889.29                  12,237,893.26
Others                                                2,279,264.40                2,286,168.76
Total                                             67,674,829.07                 109,493,520.02

(2) Significant other payables with age over 1 year

                                                                     Reason of unpaid or not
Name of company                         Closing Balance
                                                                  carried forward
                                                           Not reach the return condition
Restricted share buy back                    21,026,106.00 of contract

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                                                   Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                                                      Reason of unpaid or not
   Name of company                            Closing Balance
                                                                             carried forward
   Total                                            21,026,106.00

    27. Long-term loan

    (1) Category of long-term loan

   Category                                         Closing Balance            Opening Balance
   Guarantee loan                                        160,000,000.00               160,000,000.00
   Total                                                 160,000,000.00               160,000,000.00

     CDBDevelopment fund give support to the company’s intelligent and green equipment of cold
chain and service industry base project and provide special fund to the company’s holding
shareholder, Bingshan Group. The fund is 0.16billion Yuan with 10year’s expiration at 1.2% rate.
Once the fund arrived, Bingshan Group gave it to the company at the same rate of 1.2% in lump sum.
The above fund needed to be warranted by the company. The guarantee seems to be given for the
holding shareholder, but it is for the company itself in fact.

    28. Deferred income

    (1) Category of deferred income

 Item               Opening           Increase          Decrease            Closing        Formation
                    Balance                                                 Balance            Basis
 Asset
                 57,396,619.00     45,654,706.85       2,714,821.78       100,336,504.07
 related
 Revenue
                                   10,639,876.15      10,639,876.15
 related
 Total           57,396,619.00 56,294,583.00          13,354,697.93       100,336,504.07        —

  (2) Government subsidy project




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                                                               Dalian Refrigeration Co., Ltd. 2017 Annual Report
                                                               Recorded into                                       Related
                                Opening                            non            Other           Closing              with
   Government
                                                Increase
   subsidy item                 Balance                         -operation       Change           Balance              asset/
                                                                  income                                           equity
Subsidy fund for
                                                                                                                       Asset
highly effective heat
pump and related                3,152,624.00                                      551,672.00      2,600,952.00     related
system
Contribution    to                                                                                                     Asset
subsidiary company             44,560,000.00                                     1,114,000.00    43,446,000.00     related
relocation

Application             of
NH3       and        CO2
instead       of      R22                                                                                              Asset
                                9,683,995.00   16,601,133.00                    10,352,900.06    15,932,227.94     related
screw refrigerating
machine combined
condensing unit
Compressor IC                                                                                                          Asset
                                                4,170,000.00                         3,548.33     4,166,451.67     related
system
Ultrasonic                                                                                                             Asset
intelligent        defrost                      4,000,000.00                                      4,000,000.00     related
technology
Eco       Compressor                                                                                                   Asset
                                               31,000,000.00                      809,127.54     30,190,872.46     related
project
Research            centre                                                                                         Income
and       key          lab                       500,000.00        500,000.00                                      related
subsidy
                                                                                                                   Income
Patent bonus                                      20,000.00         20,000.00                                      related
                                                                                                                   Income
Patent subsidy                                      3,450.00         3,450.00                                      related
                                                                                                                   Income
Total                          57,396,619.00   56,294,583.00       523,450.00   12,831,247.93   100,336,504.07     related

                   Asset related grant shall be offset the cost or expense within the asset’s useful life; income
          related grant shall be booked into other income or offset cost or expense if it is relevant to daily
          activity, otherwise it shall be booked into non-operating expense.

                   29. Share capital

  Item              Opening                            Increase/decrease(+、-)                             Closing




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                                                            Dalian Refrigeration Co., Ltd. 2017 Annual Report
                  balance       New share                 Transfer from                                      balance
                                                Share                                     Subtotal
                                   issued                     capital        others
                                               dividend
                                                              reserve
Total
share         611,776,558.00                                244,710,623.00             244,710,623.00     856,487,181.00
capital

          On May 20th, 2017, the general meeting for 2016 fiscal year was held and profit appropriation
          scheme for 2016 FY was approved, which was every 10 shares will be increased by 4 shares through
          capital reserve based on the total 611,776,558 number of shares. The plan has been implemented
          completely by May 31st, 2017. After the profit appropriation scheme, the registered capital was changed
          to RMB856, 478,181.00Yuan.

              30. Capital reserves

          Items                         Opening             Increase           Decrease        Closing Balance
                                        Balance
          Share premium               962,071,905.05      15,115,549.49       300,860,623.00     676,326,831.54
          Other capital reserves       84,249,811.80      12,070,987.49        15,115,549.49         81,205,249.80
          Total                      1,046,321,716.85     27,186,536.98       315,976,172.49     757,532,081.34

            (1) Statement of share premium decrease

            1) This year mainly due to the reserve transfer to share capital of 244,710,623.00Yuan, refer to note
                  VI.30 share capital for details.

            2) Dalian Refrigeration Company acquired Bingshan International Trading company’s
                  controlling shareholding through business combination under same control. As the share
                  acquisition, Dalian Refrigeration Company has restated the prior year’s financial
                  statements and adjusted the opening balance of capital reserve of 23,634,942.60Yuan
                  and capital reserve decreased by 56,150,000.00Yuan during the year for the same
                  reason.

            (2) Other capital reserve is the expense for share incentive plan amortization and decrease is the
                  other capital reserve to be recognized during elimination period when restricted share comes to
                  unlock condition.

              32. Treasury Share

                                        Opening Balance         Increase          Decrease           Closing
                     Items
                                                                                                     Balance
          Share incentive buy-back          67,615,856.00      2,279,264.40    46,589,750.00 23,305,370.40
          Total                             67,615,856.00      2,279,264.40    46,589,750.00 23,305,370.40

          The company implements restricted share incentive plan in 2016 and recognizes buy-back obligation as
          liability. At the year end, treasure stock is recognized based on the numbers of restricted share in the
          vesting period and buy back price agreed in the share incentive plan.
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33. Other comprehensive income

                                                                                                         2016

                                              Opening                             Less:Previously                                                               Closing
                   Items                                                                                                                      After-tax
                                              Balance         Amount for the     recognized in profit                   After-tax attribute                      Balance
                                                                                                        Less:income                          attribute   to
                                                               period before       or loss in other                     to     the  parent
                                                                income tax                                  tax                               minority
                                                                                   comprehensive                        company
                                                                                                                                              shareholder
                                                                                       income
   I.Later can’t reclassified into
   profit and loss of other
   comprehensive income
   II. Later reclassified into profit and
   loss of other comprehensive income        431,639,323.52        -758,134.26       27,730,686.01      -4,118,498.86       -24,370,321.41                     407,269,002.11
   Proportional other comprehensive
   income of investee which is
   reclassified into income statement          2,765,125.85                              263,666.08                            -263,666.08                       2,501,459.77
   under equity method
   Changes in fair value recognized in
   gains     and     losses     of     the   428,874,197.67        -758,134.26       27,467,019.93      -4,118,498.86       -24,106,655.33                     404,767,542.34
   available-for-sale financial assets
   Other comprehensive income
   total                                     431,639,323.52        -758,134.26       27,730,686.01      -4,118,498.86       -24,370,321.41                     407,269,002.11




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                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report


     34. Special Reserve

                                     Opening                                             Closing
             Items                                    Increase         Decrease
                                      Balance                                            Balance
Safety production cost                               2,016,809.74     2,016,809.74
              Total                                  2,016,809.74     2,016,809.74

    34. Surplus reserves

Item                                  Opening                                            Closing
                                                        Increase           Decrease
                                       Balance                                           Balance
Statutory surplus reserve           299,882,056.06    18,363,298.09                   318,245,354.15
Discretionary surplus reserve       320,696,791.46    29,208,229.69                   349,905,021.15
Total                               620,578,847.52    47,571,527.78                   668,150,375.30

The company made profit distribution within the reporting period. According to the 2016 annual
meeting, 20% of net profit in the 2016 fiscal annual report is provided for discretionary surplus
reserve of 29,208,229.69 Yuan. In the meanwhile, 10% of net profit of parent company is
provided for statutory surplus reserve of 18,363,298.09 Yuan.

    35. Undistributed profits

Item                                                                2017                 2016
Closing balance of 2016                                          658,387,158.97       525,925,066.25
Add: Adjustments to the opening balance of
       undistributed profits
    Including: additional retrospective adjustments
    according to the new accounting standards
     Change on accounting policy
     Correction of prior period significant errors
       Change on combination scope under same
                                                                                       26,053,545.85
       control
     Other factors
Opening balance of 2017                                          658,387,158.97       551,978,612.10
Add: net profit attributable to shareholders of
                                                                 200,759,820.17       182,234,151.73
parent company in the year
Less: Provision for statutory surplus reserves                    18,363,298.09        14,604,114.85
        Provision for any surplus reserves                        29,208,229.69        25,204,992.51
        Provision of general risk
        Dividends payable for common shares                       61,177,655.80        36,016,497.50
        Share dividends

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                                                      Dalian Refrigeration Co., Ltd. 2017 Annual Report


 Closing balance of 2017                                             750,397,795.56      658,387,158.97

        Note: opening balance of last year has been adjusted due to the business combination under
           same control which triggered consolidation scope change. Opening balance of last year
           has been affected by 26,053,545.85Yuan.

     36. Operating revenue and cost

Items                                     2017                                      2016
                          Sales revenue          Cost of sales        Sales revenue        Cost of sales
Revenue from
                         2,043,986,956.70    1,625,595,014.87        1,872,949,269.50    1,526,065,621.80
principle operation
Revenue from
                            35,728,148.67         18,058,428.06          20,251,670.14      10,465,820.28
other operation
Total                    2,079,715,105.37    1,643,653,442.93        1,893,200,939.64    1,536,531,442.08

     37. Operating taxes and surcharges

 Items                                                            2017                     2016
 City construction tax                                             3,872,117.40             5,529,542.02
 Education surcharge                                               2,670,598.37             3,887,028.44
 Property tax                                                      6,132,613.95             2,845,708.77
 Land use tax                                                      4,900,926.20             3,267,248.67
 Vehicle and vessel tax                                              32,024.47                    4,177.44
 Stamp duty                                                        1,718,435.64             1,599,703.98
 Others                                                             227,217.01               798,817.10
 Total                                                            19,553,933.04            17,932,226.42

     38. Selling expenses

 Items                                                            2017                     2016
 Official business expense                                        16,172,326.40            13,793,965.40
 Employee benefit                                                 37,798,487.92            31,495,022.77
 Depreciation expense                                               334,486.58               405,097.18
 Transportation expense                                           18,548,242.98            15,026,756.52
 Business entertaining expense                                    12,056,961.89             7,767,799.36
 Travel expense                                                   13,229,495.33             9,582,123.03
 Maintenance and repair expense                                   12,791,435.69            11,027,691.87
 Advertisement and bids expense                                    2,184,356.83             1,173,168.59
 Other expense                                                      306,521.85              1,406,702.18
 Total                                                           113,422,315.47            91,678,326.90

     39. Administrative expenses

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                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report


Items                                                  2017                     2016
Official expense                                     22,474,616.19                15,680,641.20
Employee benefit                                   138,811,457.97                131,643,380.51
Depreciation expense                                  8,182,795.40                 9,169,896.40
Transportation expense                                  171,491.59                   175,434.61
Business entertaining expense                         3,512,217.30                 4,206,418.37
Travel expense                                        7,530,675.32                 7,822,881.36
Maintenance and repair expense                        6,536,885.81                 6,046,582.07
Advertisement expense                                   287,869.52                   258,533.47
Other taxes and fee                                   1,524,590.51                 5,882,445.29
Insurance expense                                       910,211.97                 1,460,517.16
Technology development expense                       20,480,936.70                16,843,552.24
Long-term assets amortization                         5,546,087.90                 4,874,233.44
Design consultant and test service expense           10,015,427.50                 6,866,858.60
Safety production cost                                3,979,165.98                 5,683,421.94
Other expense                                         1,381,161.91                 2,655,268.65
Total                                              231,345,591.57                219,270,065.31

    40. Financial expenses

Items                                                         2017                  2016
Interest expenses                                           10,526,056.47          5,379,674.13
Less: Interest income                                         4,865,429.43         3,026,398.66
Add: Exchange loss                                            2,458,197.49        -1,992,684.34
Add: Others expenditure                                       2,737,012.43         2,017,447.48
Total                                                       10,855,836.96          2,378,038.61

    41. Assets impairment losses

Items                                                         2017                  2016
Loss of bad debts                                           26,816,177.67         20,884,581.73
Provision for inventory impairment                              192,895.00
Total                                                       27,009,072.67         20,884,581.73

    42. Investment income

Items                                                    2017                      2016
Long-term equity investment gain under
equity method                                            140,904,557.45          128,967,171.76
Gain from disposing long-term equity
investment                                                    263,666.08                3,160.87
Gain from holding of financial assets
available for sale                                        11,497,019.05           16,000,450.40
Gain from disposal financial assets available             27,467,019.93           27,629,395.44
                                                                                             113
                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report

for sale
Total                                                        180,132,262.51          172,600,178.47

    43. Gain on assets disposal

                                                                               Amounts recognized
                                                                                   into current
               Item                         2017               2016
                                                                               non-recurring profit
                                                                                      or loss
Gains on disposal of non-current
                                           552,588.02     -21,565,350.43                  552,588.02
assets
        Gain on non-current
assets disposal income not                 552,588.02     -21,565,350.43                  552,588.02
classified as held for sale
Incl: gain on fixed assets
                                           552,588.02     -21,565,350.43                  552,588.02
disposal
Total                                      552,588.02     -21,565,350.43                  552,588.02

    44. Other income

Items                                                        2017                       2016
VAT refund                                                       657,176.72
Grant given       by   the    government    for
relocation                                                      1,114,000.00
Total                                                          1,771,176.72

    45. Non-operating income

(1)      Non-operating income list

                                                                               Amounts recognized
                                                                               into non-recurring
                Item                         2017                2016
                                                                               profit or loss for the
                                                                                       year
Gain on debts restructuring                                    229,833.00
Government grant                           1,473,958.00       6,395,714.51              1,473,958.00
Others                                      856,276.97      31,596,475.48                 856,276.97
Total                                      2,330,234.97     38,222,022.99               2,330,234.97

Non-operating expense this year increased 1,982.77% due to increased disposal of fixed assets
in the old factory.

(2)      Government grant details

              Item                         2017                 2016            With asset/income
Taxes refund                                                   1,330,480.25
New wall materials specific                305,038.00
                                                                                                  114
                                                     Dalian Refrigeration Co., Ltd. 2017 Annual Report


             Item                        2017                    2016           With asset/income
fund
Contribution to subsidiary
                                                                1,114,000.00       Income related
company relocation
Fostering fund in 2015                    300,000.00
 International         market
 development fund in 2016                 247,200.00
 Finance support                            52,000.00            337,200.00
 Service policy implemented
 fund in 2016                               13,200.00
                                                                                   Income related
Exporting incentive fund                    22,000.00

Liaoning self-owned brand                                                          Income related
development project                                              270,000.00
Innovation in technology                                         283,000.00        Income related
Small        and       medium                                                      Income related
enterprises     in    Liaoning
province         "specialization                                   30,000.00
special" product project
Stabilization subsidy                                          2,474,362.26        Income related
Patent subsidy                              14,520.00               5,000.00       Income related
Subsidy fund for highly                                                             Asset related
effective heat pump and                                          551,672.00
related system
City research centre and key                                                       Income related
lab fund                                  500,000.00
Patent bonus                                20,000.00                              Income related

Total                                   1,473,958.00            6,395,714.51

(3)    Non-operating income statement

Non-operating income decreased by 92.30% in comparison with last year, mainly because of the
acquisition of Dalian Xinminghua shareholding last year and 30,334,841.93 Yuan was
recognized as non-operating income which was the combination cost lower than proportion of
shareholding of fair value of identifiable assets.

    46. Non-operating expenses

                                                                               Amounts recognized
                                                                               into non-recurring
                Item                           2017               2016
                                                                               profit or loss for the
                                                                                        year
Outward donation                                10,000.00         60,000.00                 10,000.00
Others                                       177,380.52         225,318.73                177,380.52
Total                                        187,380.52         285,318.73                187,380.52
                                                                                                    115
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    47. Income tax expenses

    (1) Income tax expenses

Items                                                  2017                         2016
Current income tax expenses                             19,032,298.13                  12,405,225.52
Deferred income tax expenses                            -5,114,555.51                  -4,438,751.84
Total                                                   13,917,742.62                   7,966,473.68
    (2)   Adjustment process of accounting profit and income tax expense

Items                                                                              2017
Consolidated total profit this year                                                   218,473,794.43
Income tax expenses at applicable tax rate                                             32,771,069.16
Effect on subsidiary applied to different tax rate                                        2,437,403.18
Effect on prior period income tax                                                           -26,163.10
Effect on non-taxable income                                                          -21,135,683.62
Effect on non-deductible cost ,expense and loss                                           3,123,890.95
Effect on use of deductible loss from unrecognized deferred
tax assets in the prior period                                                            -185,487.87
Effect on temporary difference or deductible loss from
unrecognized deferred tax assets this year                                             -4,534,341.78
Tax rate adjustment caused the opening balance of deferred
tax assets /liability change                                                              1,467,055.70

Income tax expense                                                                     13,917,742.62

    48. Other comprehensive income

Refer to the note VI.33 other comprehensive income for details.

    49. Notes to cash flow statement

    (1) Cash receipt/payment of other operating/investing/financing activities

   1) Other cash received relating to operating activities

 Items                                                          2017                    2016
 Government grants                                             58,192,890.84           13,740,935.17
 Received travel expense refund                                 2,648,675.53              3,070,900.72
 Deposit given back                                            30,740,218.26           49,845,835.40
 Receivable from relate party                                      28,355.16              2,184,788.63
 Interest income                                                4,865,429.43              2,461,618.10
                    rd
 Receivable from 3 party                                        1,886,442.36                70,987.00
 Others                                                           778,033.86              2,547,938.02
 Total                                                         99,140,045.44           73,923,003.04

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   2) Other cash paid relating to operating activities

 Items                                                        2017                    2016
 Business travel borrowing                                    6,831,117.22           6,075,257.80
 Deposit paid                                                49,379,114.48          56,275,941.60
 Expenditure                                                115,004,087.20          95,678,510.22
 Bank handling charges                                        1,718,011.38           1,722,380.37
 Others                                                       2,020,950.47           1,532,563.78
 Total                                                      174,953,280.75         161,284,653.77

3) Others cash received relating to financing activities

Items                                                          2017                   2016
Bank financial product                                       76,000,000.00
Total                                                        76,000,000.00

4) Others cash received relating to financing activities

Items                                                         2017                    2016
Collection of guarantee money at the year end                22,976,815.56          20,665,689.93
Refund fractional dividend                                                              45,137.75
Interests on discount of bill acceptance                                             5,085,000.00
Total                                                        22,976,815.56          25,795,827.68

5) Others cash played relating to financing activities

Items                                                         2017                    2016
Interests on discount of bill acceptance                                               295,067.11
Payment of guarantee money                                   29,116,287.80          21,576,815.56
Note financing is due and is paid                               598,632.63           5,085,000.00
Total                                                        29,714,920.43          26,956,882.67

    (2) Supplementary information of consolidated cash flow statement

Items                                                                 2017               2016
1. Adjusting net profit into cash flows of operating                  ——                ——
activities:
Net profit                                                       204,556,051.81      185,531,317.21
Add: Provision for impairment of assets                           27,009,072.67       20,884,581.73
      Depreciation of fixed assets, Amortization of
                                                                  46,420,450.37       40,804,660.75
mineral resources, and biological assets
             Amortization of intangible assets                     5,388,917.09        4,997,057.34
             Amortization of long-term deferred expenses           1,801,109.16        1,408,785.18


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                                                        Dalian Refrigeration Co., Ltd. 2017 Annual Report


        Losses on disposal of fixed assets, intangible assets, and
                                                                          -681,321.46       -1,179,307.59
        long-term assets (income listed with”-”)
        Losses on write-off of fixed assets (income listed
                                                                           128,733.44       22,748,252.08
        with”-”)
        Change of fair value profit or loss
  Financial expense (income listed with”-”)                           13,508,079.57        3,161,368.74
  Investment loss (income listed with”-”)                           -180,132,262.51     -172,600,178.47
  Decrease of deferred tax assets(increase listed
                                                                        -4,159,749.24       -4,512,357.37
         with”-”)
  Increase of deferred tax liabilities(decrease
         listed with”-”)
  Decrease of inventories (increase listed with”-”)                   -2,828,958.79      -47,231,344.86
  Decrease of operating receivables (increase listed
                                                                      -296,492,807.92          302,021.78
         with”-”)
   Increase of operating payables (decrease listed
                                                                       -34,228,577.41      -73,149,094.49
         with”-”)
             Others                                                     12,485,412.00       12,227,168.00
        Net cash flows arising from operating activities              -207,225,851.22       -6,607,069.97
  2. Significant investment and financing activities
  unrelated to cash income and expenses
      Liabilities transferred to capital
      Convertible bonds within 1 year
      Financing leased fixed assets
  3. Net increase (decrease) of cash and cash equivalent
  Closing balance of cash                                              364,693,406.31      691,238,822.98
  Less: Opening balance of cash                                        691,238,822.98      255,381,841.47
  Add: Closing balance of cash equivalent
  Less: Opening balance of cash equivalent
  Net increase of cash and cash equivalent                            -326,545,416.67      435,856,981.51

     (3) Net cash paid for acquiring subsidiaries

Items                                                                                      2017
Payment of Net cash and cash equivalent under the business merger                          56,150,000.00
during the year
Including:Dalian        Bingshan International Trade Co., Ltd.                            56,150,000.00
Net cash paid for acquiring subsidiaries                                                   56,150,000.00

     (4) Cash and cash equivalents

 Items                                                                  2017                 2016
                                                                                                     118
                                                   Dalian Refrigeration Co., Ltd. 2017 Annual Report


Cash                                                           364,693,406.31         691,238,822.98
Including: Cash on hand                                                62,880.11            83,511.72
Bank deposit used for paying at any moment                     364,630,526.20          691,155,311.26
Other monetary fund for paying at any moment
Deposit fund in central bank available for payment
Cash equivalent
Including: bonds investment with maturity in 3 months
Closing balance of cash and cash equivalents                   364,693,406.31         691,238,822.98

Cash and cash equivalents restricted in the parent
company or subsidiary


    47.        The assets with the ownership or use right restricted

                Items                          2017                          Reasons
Monetary fund                                30,116,287.80               Guarantee money
Notes Receivable                             16,110,843.93                    Pledge
Fixed assets                                 94,612,451.78                Mortgage Loan
Intangible assets                            51,222,206.00                Mortgage Loan
                Total                       192,061,789.51

Dalian Niweisi LengNuan Techonoligy Co., Ltd. pledged the bank acceptance note to Bank o f
China Dalian Gangxi Branch as guarantee for issuing the commercial acceptance note.

Wuhan New World Refrigeration Industrial Co., Ltd signed the “maximum pledge contract”
with GuangdaBank of China Wuhan branch on December 24, 2015. Property and land were
pledged and Wuhan New World Refrigeration Industrial Co., Ltd was granted for credit of
100million Yuan.

    48.        Monetary category of foreign currency

    (1)        Monetary category of foreign currency

Item                                Closing Balance          Exchange              Closing Balance
                                   (foreign currency)           Rate                   (RMB)
Cash                                                   —               —              38,703,907.22
Including:USD                              5,913,472.10          6.5342                38,639,808.80
               Euro                             3,725.04          7.8023                    29,063.88
           GBP                                    218.76          8.7792                     1,920.54
               JPY                            572,113.00        0.057883                    33,114.00
Accounts receivable                                    —               —              19,151,148.50
Including: USD                              2,814,574.35          6.5342                18,390,991.72
          GBP                                  86,586.11          8.7792                   760,156.78
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                                                     Dalian Refrigeration Co., Ltd. 2017 Annual Report


   Item                              Closing Balance              Exchange           Closing Balance
                                    (foreign currency)               Rate                (RMB)
   Short term borrowing                                   —                —             9,801,300.00
                 USD                          1,500,000.00             6.5342              9,801,300.00
   Accounts payable                                       —                —             4,738,246.24
   Including: USD                              564,054.40              6.5342              3,685,644.26
                 JPY                         12,664,261.00           0.057883                733,045.42
               GBP                                36,399.28            8.7792                319,556.56

   VII. Change of Consolidation Scope

          1.   Consolidation not under the same control

          None

          2.   Consolidation under same control

          (1)Consolidation under the same control during the year

                                                                                             Basis for
                               Percentage
                                                     Basis for                           combination date
                                (%)of                                Combination
Name of the acquiree                           combination under                            recognition
                              shareholding                                    date
                                                   same control
                                acquired

                                                Ultimately under                         Actually obtain
                                                   same control                          the control
Dalian Bingshan                                   before and after
International Trading              76                                        2017.3.31
Co., Ltd                                       acquisition and the
                                                  control is not
                                                    temporary



                          Acquiree’s        Acquiree’s net
                                                                       Acquiree’s        Acquiree’s net
                        income from the      profit from the
   Name of the                                                          income for           profit for
                        beginning of year    beginning of year
     acquiree                                                          comparison            comparison
                        of combination to    of combination to
                                                                            period             period
                        acquisition date      acquisition date
Dalian Bingshan            63,072,226.20           1,866,671.32        272,122,356.93          4,738,804.59
International
Trading Co., Ltd
   Note:the 12th meeting of 7th generation of board held on February 15th, 2017 and 1st
   extraordinary shareholders meeting held on March 8th, 2017 approved to acquire 76%
   shareholding of Bingshan International Trading Company controlled by Bingshan Group in
                                                                                                       120
                                                       Dalian Refrigeration Co., Ltd. 2017 Annual Report


     exchange of 56.15million Yuan cash. After share transfer, Dalian Refrigeration Company
     held 100% shareholding of Bingshan International Trading Company. Acquisition is
     ultimately under same control of Dalian Bingshan Group before and after acquistion and the
     control is not temporary, therefore, the combination is carried out under same control and the
     acquisition date is recognized as March 31st, 2017.

             (2) Cost of combination

     Item                                                                     Bingshan International
                                                                                   Trading Company
     cash                                                                                56,150,000.00
     Total of combination cost                                                           56,150,000.00




             (3) Book value of assets and liability of acquire on acquisition date

Items                                                          Bingshan International Trading Company
                                                              Acquisition date           Last year end

Assets:                                                           171,176,925.72             160,177,923.59
Monetary fund                                                      24,517,467.97              35,490,832.78
Receivables                                                       111,266,853.98              92,080,339.05
Inventory                                                          28,525,631.04              25,675,356.58
Other current assets                                                2,812,632.99                2,783,834.27
Deferred tax assets                                                 1,493,126.82                1,586,347.99
Liability                                                           2,561,212.92                2,561,212.92
Payables                                                           99,191,859.74              90,059,528.93
Net assets                                                         10,319,700.00
Less: minority interest                                            88,872,159.74              90,059,528.93

Acquired net assets                                                71,985,065.98              70,118,394.66

             3.   Other reason of change on consolidation scope

     In accordance with the board meeting of Bingshan Construction Company, a subsidiary of Dalian
     Refrigeration Company, Bingshan Construction Company and Chengdu New World Company
     jointly set up Chengdu Bingshan Refrigeration Engineering Co., Ltd. Bingshan Construction Company
     invested 5.1million Yuan cash holding 51% of shares. Up to December 31st, 2017, Chengdu Bingshan
     Refrigeration Engineering Co., Ltd’s business has been already formally running.

     VIII. Interest in other entity

            1.      Equity of subsidiaries

            (1)     Organization structure of group company
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                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report


                             Main                                     Shareholding
                                       Registered      Business            (%)              Obtaining
  Name of subsidiaries      business
                                        address         nature                               method
                            address                                  Direct Indirect
Dalian Bingshan Group
                            Dalian      Dalian        Installation     100                  Establish
Engineering Co., Ltd.
Dalian Bingshan Group
                            Dalian      Dalian         Trading         100                  Establish
Sales Co., Ltd.
Dalian Bingshan
Air-conditioning            Dalian      Dalian      Manufacturing      70                   Establish
Equipment Co., Ltd.
Dalian Bingshan JiaDe
                            Dalian      Dalian      Manufacturing      100                  Establish
Automation Co., Ltd.
Dalian Bingshan Lingshe
Quick Freezing              Dalian      Dalian      Manufacturing      100                  Establish
Equipment Co., Ltd.
Wuhan New World
Refrigeration Industrial    Wuhan       Wuhan       Manufacturing      100                 Acquisition
Co., Ltd.
Bingshan Technical
Service (Dalian)          Dalian      Dalian         Services        100                  Establish
Co.,Ltd.
Dalian Xinminghua
Electrical Technology       Dalian      Dalian        Electronic       100                 Acquisition
Co., Ltd
Dalian Niweisi LengNuan
                            Dalian      Dalian      Manufacturing      55                  Acquisition
Technology Co., Ltd.
Dalian Bingshan
International Trading       Dalian      Dalian         Service         100                 Acquisition
Company
Wuhan New World
Air-conditioning                                      Installation
                            Wuhan       Wuhan                                   100         Establish
Refrigeration Engineering
Co., Ltd
Ningbo Bingshan
Air-conditioning
                            Ningbo      Ningbo        Installation               51         Establish
Refrigeration Engineering
Co., Ltd
Dalian Bingshan Baoan
                            Dalian      Dalian        Installation              100        Acquisition
Leisure Industrial

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                                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report

                                    Main          Registered        Business        Shareholding          Obtaining
  Name of subsidiaries
                                   business        address           nature             (%)                method
Engineering Co., Ltd
Shanghai Bingshan
Technical Service Co.,            Shanghai        Shanghai          Services                   51         Establish
Ltd
Chengdu Bingshan
Refrigeration Engineering         Chengdu         Chengdu           Services                   51         Establish
Co., Ltd.

                1)      All the proportion of shareholding in subsidiaries were the same with voting right

                2)      The company held over 50% voting right in subsidiaries and could control these
                subsidiaries with over 50% voting right

                3)      Change on the shareholding of the subsidiaries is explained in the Note II.change on the
                combination scope

                (2)        There is no significant non-wholly-owned Subsidiary

                2.         Equity in joint venture arrangement or associated enterprise

                     (1) The important of joint ventures or affiliated companies


                                                                                        Shareholding (%)
                                        Main
  Name of joint ventures or                           Registered        Business                               Accounting
                                       business
    affiliated companies                               address           nature                                 methods
                                       address
                                                                                        Direct      Indirect



Panasonic              Compressor                                                                                Equity
                                        Dalian          Dalian       Manufacturing        40
(Dalian) Co., Ltd                                                                                                method

Dalian        Fuji       Bingshan                                                                                Equity
                                        Dalian          Dalian       Manufacturing        49
Vending Machine Co., Ltd.                                                                                        method

            The company assumes the affiliated as significant party either when the investment income from
            investee presents 10% of the parent’s net profit or the proportion of shareholding of the investee’s net
            asset represents 10% of the parent’s shareholder equity.

            1) The company has the same percentage of shareholding and voting right in joint-venture or
                affiliated company.

            2) The company doesn’t have affiliated company which has significant influence although being held
                less than 20% voting rights.
                                                                                                               123
                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report

   3) The company doesn’t have joint venture or affiliated companies which have no significant
        influence although being held 20% or more voting rights.


   (2)       The key financial information of affiliated companies

                                                                       2017

Items                                        Panasonic Compressor             Dalian Fuji Bingshan
                                               (Dalian) Co., Ltd          Vending Machine Co., Ltd.

Current assets                                       1,561,263,338.96                   373,991,952.58
Including: Cash and cash equivalents                   222,958,963.14                    86,597,714.30
Non-current assets                                     330,137,817.56                   264,531,025.64
Total assets                                         1,891,401,156.52                   638,522,978.22
Current liabilities                                    656,825,153.46                   185,438,746.74
Non-current liabilities                                                                  86,523,957.30
Total liabilities                                      656,825,153.46                   271,962,704.04
Minority interests
Equity to the parent company                         1,234,576,003.06                   366,560,274.18
Proportions of net assets according to
                                                       493,830,401.22                   179,614,534.35
the shareholding percentage
Adjusting events
—Goodwill
—Unrealized        profits   of   insider
trading
--Others                                                 -3,826,159.67                       226,689.29
Book value of equity investment of
                                                       490,004,241.55                   179,841,223.64
affiliated companies
Fair value of equity investment with
public offer
Operating income                                     1,623,387,718.61                   442,326,067.27
Financial expense                                          -362,406.98                      -484,458.47
Income tax expense                                       26,264,317.90                   10,432,796.66
Net profit                                             119,567,490.02                    54,885,773.13
Net profit of discontinuing operation
Other comprehensive income
Total comprehensive income                             119,567,490.02                    54,885,773.13
The current dividends received from
                                                         38,000,000.00                     7,840,000.00
joint ventures
   Continued:



Items                                                           2016


                                                                                                 124
                                                             Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                   Jiangsu            Dalian         Fuji Keinin-Grand
                                                                                                    Panasonic
                                   Jingxue            Bingshan               Ocean Thermal
                                                                                                    Compressor
                                   Freezing           Vending                Technology
                                                                                                    (Dalian)       Co.,
                                   Equipment          Machine        Co., (Dalian)          Co.,
                                                                                                    Ltd
                                   Co., Ltd.          Ltd.                   Ltd
Current assets                       544,766,000.08      280,972,490.97            324,274,111.23         1,368,463,901.88

Including: Cash and cash
                                      78,043,080.32      102,873,995.95             48,954,435.83          343,053,793.36
equivalents
Non-current assets                   190,982,542.93      151,754,975.82             86,150,062.42          350,108,180.41
Total assets                         735,748,543.01      432,727,466.79            410,424,173.65         1,718,572,082.29
Current liabilities                  349,389,866.24      101,199,564.85            145,662,104.80          495,843,809.25
Non-current liabilities                3,963,050.80           3,853,400.89
Total liabilities                    353,352,917.04      105,052,965.74            145,662,104.80          495,843,809.25
Minority interests                      432,553.72
Equity to the parent
                                     382,395,625.97      327,674,501.05            264,762,068.85         1,222,728,273.04
company
Net    assets    calculated
according       to      the          111,579,052.67      160,560,505.51             52,952,413.77          489,091,309.22
shareholding proportions
Adjusting events
—Goodwill                            39,948,654.75
—Unrealized profits          of
insider trading
--Others                                                                                                     -5,087,915.23

Book value of equity
investment of affiliated             151,527,707.42      160,787,194.81             52,952,413.79          484,003,393.99
companies
Fair value of equity
investment with public
offer
Operating income                     502,464,526.22      453,146,399.31            812,583,118.92         1,752,750,321.32

Financial expense                      1,508,553.77             221,715.36           4,115,158.49           -12,526,005.42

Income tax expense                     9,163,232.01           9,207,934.91          31,182,502.23           34,756,343.51

Net profit                            56,713,066.91          52,088,861.48          92,726,892.48          158,997,350.73
Net profit of discontinuing
operation
Other       comprehensive
income
Total       comprehensive
                                      56,713,066.91          52,088,861.48          92,726,892.48          158,997,350.73
income
The current dividends
received     from      joint           5,842,400.00                                 14,200,000.00           32,400,000.00
ventures

    (3)           Summary financial information of insignificant affiliated companies

                      Items                                   2017                                  2016
                                                                                                                  125
                                                   Dalian Refrigeration Co., Ltd. 2017 Annual Report


                Items                               2017                            2016
Total book value of investment of                    897,265,918.24                    443,642,191.48
affiliated companies
The total of following items
according to the shareholding
proportions
      Net profit                                      69,639,419.82                      10,779,436.18
     Other comprehensive income
     Total comprehensive income                       69,639,419.82                      10,779,436.18

(4)     Significant restrictions of the ability of affiliated companies transferring funds to the
        company.

        None

(5)     Excessive loss of affiliated companies.

        None

(6)     Contingency related to joint venture or affiliated company need to be disclosed.

        None

IX. Risk Related to Financial Instruments

The main financial instruments held by the group company are cash and cash in bank, accounts
receivable, accounts payable, available-for-sale financial asset and short term loan. The detailed
explanation is referred to this notes No.VI. The related risks of these financial instruments and
the risk management policy conducted to reduce these risks by the group company are
introduced as below. The Group management conducts to manage and monitor these risks
exposure and control these risks under certain risk level.

   Objectives and policies of each risk management

The objectives of risk management conducted by the group company are to reach the balance
between risk and profit return    by reducing the negative influence to operating performance to
the minimum level as well as maximizing the shareholders’ and other investors’ profits. Based
on these objectives, the basic risk management policy is to recognize and analyze all sorts of
risk that the group company faced with, to set up the proper risk tolerance bottom line
conducting risk management, as well as to monitor these risks in a timely and effective manner,
and to ensure these risks under the limit level.

     (1) Market risk
        1) Exchange rate risk

Most of the company’s business is located in China, and settled with RMB. But the company
defined exchange rate risk of assets, liabilities dominated in foreign currency and future
                                                                                                126
                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report


   transaction dominated in foreign currency (mainly including USD,JPY,HKD and GBP). The
   financial department of the company monitors the company’s foreign currency transaction and
   the scale of foreign assets and liabilities, and decreases exchange rate risk. During the current
   year the company didn’t agree any forward foreign exchange contract or currency swap
   contract .As at 31st December 2017, the company’s assets and liabilities dominated in foreign
   currency are listed in RMB as following:

                                                        Closing Balance
       Items
                              USD            JPY             GBP             EUR              Total
Cash and cash in
                              1,954.72     410,894.00        98,556.32     511,405.04
bank
Accounts receivable                                          79,255.11      79,255.11
     Subtotal                 1,954.72     410,894.00      177,811.43      590,660.15
Accounts Payable                                             36,399.28      36,399.28
     Subtotal                                                36,399.28      36,399.28



   Items                                           Closing Balance             Opening balance
   Monetary fund-USD                                      38,639,808.80                 26,363,244.38
   Monetary fund-JPY                                          33,114.00                    24,490.05
   Monetary fund-EURO                                         29,063.88                   838,655.15
   Monetary fund-STERLING                                       1,920.54                         0.29
   Receivable- STERLING                                      760,156.78                   674,413.43
   Receivable -USD                                        18,390,991.72                 40,126,815.27
   Short term borrowing-USD                                9,801,300.00
   Payables -USD                                           3,685,644.26                  2,146,568.57
   Payables -JPY                                             733,045.42                  2,602,681.45
   Payables - STERLING                                       319,556.56                   309,736.03
   Payables - EURO                                                                        134,415.89
   Payables -SF                                                                          3,331,222.94
   Dalian Refrigeration Company paid close attention to the effect on FX risk.

           2) Interest rate risk

   The interest risk of the Group incurred from bank loan, risk of a floating interest rate of financial
   liabilities that lead to the company facing cash flow interest rate risk, financial liabilities with a fixed
   interest rate lead to the company facing cash flow interest rate risk. The company determined the
   proportion of fixed interest rate and floating interest rate according the current market circumstance. The
   company and Dalian Bingshan Group Co.,Ltd borrowed long term loan RMB 160,000,000.00 with fixed
   interest rate. The subsidiary of the company Wuhan New World Refrigeration Industrial Co., Ltd.
   borrowed short term loan RMB 80,000,000.00 and Dalian Bingshan International Trading borrowed
                                                                                                   127
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report

short term loan RMB9.8013 million Yuan with fixed interest rate.

The financial department of the company continuously monitors the interest rates level, and the
management would make some adjustment to lower the interest rate risk according to the latest market
situation. Climbing interest rate will increase the cost of newly increased interest-bearing liability and
interest expense for unsettled interest-bearing liability at floating rate and have adverse effect on the
business performance.

The sensitive analysis:

As at 31st December 2017, base on the assumption of interest rate change of 50 BP, the company’s net
profit of year 2017 will increase or decrease RMB1.2646 million Yuan.

        3) Price risk

Dalian Refrigeration Company sells steel products according to the market price, so there will be effect
on the price variance.

     (2)Credit risk

The credit risk of the company comes from monetary fund, notes receivable, accounts receivable, and
other accounts receivable etc.The management made credit policies and monitored changes of this credit
exposure.

The company's working capital was in bank with higher credit rating, so there was no significant credit
risk, nor significant losses due to the default of other entity. Upper limit policy is adopted to avoid any
credit risk from financial institution.

The company made relevant policy to control credit risk exposure from receivable, other receivable and
notes receivable. The company assesses the client’s credit background according to the client’s financial
performance, possibility of obtaining guarantee from the 3rd party, credit record and other factors such
as current market. The company will periodically monitor the credit situation of the client and will
take measures such as prompt letter, shorten credit period or cancel the credit to ensure the overall credit
risk within the controllable scope.

As at 31st December 2017, the top five customers of receivable accounts balance is
155,341,331.23Yuan.

      (3) Liquidity risk

Liquidity risk was referred to the risk of shortage of funds incurred when the enterprise fulfill       the
obligation of settlement by cash or other financial assets. The way to manage the liquidity risk is to
ensure enough fund available to fulfill the liability by due date in prevention from unacceptable loss of
or reputation damage to the Company. The Company periodically analyze the liability structure and

                                                                                                128
                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report

expiry date and the financial department of the company continued to monitors the short term or long
term capital needs to ensure maintain plenty of cash flow. And the same time they also monitor the
condition of bank loan agreements and obtain commitments from banks to provide plenty of funds.

The main fund comes from bank loan. By December 31st,2017, the credit limit still available is
340million Yuan and short term credit limit available is 340million Yuan.

As at 31st December 2017, the company’s financial assets and financial liabilities in line with non
discount cash flow of the contracts as following: Currency unity:10kYuan

                                                       Closing balance
                                                          2-5       Over 5
Items                      Within 1 year   1-2 years                                    Total
                                                         years       years

Financial Assets
Cash and cash in
                               39,480.97                                                  39,480.97
bank
Notes receivable               17,281.82                                                  17,281.82
Accounts receivable           103,625.59                                                 103,625.59
Other Receivable                5,204.90                                                   5,204.90
Available     for   sale
                                                                    51,578.32             51,578.32
financial asset
Financial Liabilities
Short-term loan                34,980.13                                                  34,980.13
Notes Payable                  26,044.32                                                  26,044.32
Accounts payable               88,996.43                                                  88,996.43
Other payable                   6,767.48                                                   6,767.48
Employee’s payable             4,675.16                                                   4,675.16
Tax payable                     2,999.26                                                   2,999.26
Dividend payable                   86.35                                                        86.35
Long-term loan                             16,000.00                                      16,000.00

X. Disclosure of Fair Value
 1. Amount and measurement level of the assets and liabilities measured at fair value at the year
   end




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                                                          Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                                                 Fair value at the year end


Items                                     First         level   Second     level   Third       level
                                          measurement of fair   measurement of     measurement             Total
                                          value                 fair value         of fair value

Financial    assets    Continuously            531,653,458.05                                          531,653,458.05
measured at FV available for sale

Available for sale asset                       501,871,535.40                                          501,871,535.40
(1)    Investment by debt instruments
(2)    Investment by equity instruments        501,871,535.40                                          501,871,535.40
(3)    Others

       2. Basis for Market price of first level measurement of fair value

       Equity instrument portion of the available for sale financial assets is measured at the
        unadjusted closing quoted price on stock market on December 29, 2017.

       3. For continuous and discontinuous 2nd level of FV, valuation technique adopted and key
        parameter quantitive and qualitive information.

       None.

       4. For continuous and discontinuous 3rd level of FV, valuation technique adopted and key
        parameter quantitive and qualitive information.

       None..

       5. For continuous 3rd level of FV, adjusted information of opening and closing balance and
        sensitivity analysis of unobservable parameter.

       None

       6. Assets continuously measured at fair value have switched among different level during the
          year.

       None

       7. Changes of valuation technique and reasons for changes

       None

       8. Assets and liability are disclosed at FV rather than measured at FV

       None

      XI. Related Parties Relationship and Transactions

      (I) Related parties relationship

      1. Parent company and ultimate controller

                                                                                                             130
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report


  1) Parent company and ultimate controller

Parent          Registered         Business        Registered      Shareholding        Voting
company            address          nature           capital        percentage          power
                                                                        (%)          percentage
                                                                                         (%)

Dalian
Bingshan
                   Dalian        Manufacture     158,580,000.00       19.96%           19.96%
Group Co.,
Ltd.


Dalian Bingshan Group Co., Ltd. is a sino –foreign joint venture located No.888 Xinan Road,
Shahekou District, Dalian, China.The legal representative of Dalian Bingshan Group Co., Ltd. is
Mr.Ji Zhijian, and the registered capital is RMB158.58 million. The registered business
operation period is from 3rd July 1985 to 2nd July 2035. The business scope include research,
development, manufacture, sales, service and installment of refrigeration equipment, cooling
and freezing equipment, different size of air-conditioners, petrochemical equipment, electronic
and   electronic- control products, home electronic appliance, environment protect equipment
and etc. (unless the licenses needed)

  2) Change of registered capital of controlling shareholder

 Controlling shareholder      Opening balance       Increase      Decrease      Closing balance
 Dalian Bingshan Group           158,580,000.00                                   158,580,000.00
 Co., Ltd.

  3) Change of proportion of controlling shareholder’s shareholding and equity

                             Shareholding amount                Ratio of shareholding(%)

 Controlling         Closing balance      Opening balance           Ratio            Ratio at
 shareholder                                                      at year end      beginning of
                                                                                       year

 Dalian Bingshan
 Group Co., Ltd.       170,916,934.00         122,083,524.00           19.96%            19.96%




2. Subsidiaries

Referring to the content in the Note VIII. 1. (1) Organization structure of group company.

3. Affiliated company and joint venture

The information of the affiliated company and joint venture please refers to the noteVIII. 3 ‘The

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                                                   Dalian Refrigeration Co., Ltd. 2017 Annual Report


 significant affiliated company and joint venture’. The company had transactions with related
 parties during the current period or last period, including:
    Names of the joint ventures or affiliated
                                                                Relationships with the Company
                   company
Panasonic Refrigeration (Dalian) Co., Ltd                       Affiliated company of the Company
                                                                            Affiliated
Panasonic Cold-chain (Dalian) Co., Ltd
                                                                            Affiliated
Panasonic Compressor (Dalian) Co., Ltd
                                                                            Affiliated
Dalian Honjo Chemical Co., Ltd
Keinin-Grand      Ocean   Thermal   Technology                              Affiliated
(Dalian) Co., Ltd
Beijing Huashang Bingshan Refrigeration and                                 Affiliated
Air-conditioning Machinery Co., Ltd
                                                                            Affiliated
Dalian Fuji Bingshan Vending Machine Co., Ltd
                                                                            Affiliated
MHI Bingshan Refrigeration (Dalian) Co.,Ltd.
Dalian Fuji Iceberg Vending Machine Sales Co.,                              Affiliated
Ltd
                                                                            Affiliated
Jiangsu Jingxue Freezing Equipment Co., Ltd.
Panasonic Cooling Machine system (Dalian) co.,                              Affiliated
Ltd
                                                                            Affiliated
Dalian Bingshan Metal Technology Co.,Ltd
Dalian Bingshan Group Mangement and Consulting                              Affiliated
Co.,Ltd
                                                          Affiliated wholly owned subsidiary of the
Wuhan LanNing energy technology co., Ltd
                                                                          Company
                                                          Affiliated wholly owned subsidiary of the
Wuhan Sikafu Power Control Equipment Co., Ltd
                                                                          Company

 4. Other related parties

             Name of related party                            Related party relationship
 Dalian    Bingshan     Group    Refrigeration          Affiliated company of Dalian Bingshan
 Equipment Co., Ltd                                                     Group
 Dalian Pate Technology Co.,LTd                          Subsidiary of Dalian Bingshan Group
                                                        Affiliated company of Dalian Bingshan
 Dalian Spindle Cooling Towers Co., Ltd
                                                                        Group
                                                        Affiliated company of Dalian Bingshan
 BAC (Dalian) Co., Ltd
                                                                        Group

     Note: Dalian Third Refrigeration Equipment Factory has been renamed as Dalian Pate
     Technology Co.,LTd on October 16th , 2017.

 (II) Related Party transactions

 1. Purchase of goods, offer and receive labour services etc inter-group transactions

                                                                                                 132
                                                Dalian Refrigeration Co., Ltd. 2017 Annual Report


  1)        Purchase of goods/receive labour services

Related party                             Content               2017                2016
Panasonic cold machine system Purchases of                                       116,159,861.59
(Dalian) co., Ltd                     goods                   67,655,354.93
Panasonic Refrigeration (Dalian) Co., Purchases of                                36,625,052.09
Ltd.                                  goods                   47,090,734.64
                                      Purchases of                                36,505,585.84
BAC (Dalian) Co., Ltd                                         41,865,711.10
                                      goods
Panasonic Cold-chain (Dalian) Co., Purchases of                                  135,018,000.08
Ltd                                   goods                   41,897,553.16
Jiangsu Jingxue Freezing Equipment Purchases of                                   26,148,762.59
Co., Ltd.                             goods                   28,938,719.21
Wuhan LanNing energy technology Purchases of                                      21,429,117.11
co., Ltd                              goods                   22,360,810.41
Dalian Bingshan Group Refrigeration Purchases of                                  25,348,686.18
Equipment Co., Ltd                    goods                   21,764,023.60
Beijing       Huashang     Bingshan
                                      Purchases of
Refrigeration and Air-conditioning                            11,965,812.07        3,803,218.03
                                      goods
Machinery Co., Ltd.
                                      Purchases of                                 5,625,902.59
Dalian Pate Technology Co.,LTd                                 4,927,599.77
                                      goods
Dalian Spindle Cooling Towers Co., Purchases of                                    4,621,938.47
Ltd                                   goods                    3,680,841.01
Panasonic compressor (Dalian) Co., Purchases of                                    3,415,394.87
Ltd                                   goods                    2,576,209.40
Dalian Bingshan Metal Technology Purchases of                                        577,427.88
Co., Ltd                              goods                      500,078.87
                                      Purchases of
Dalian Honjo Chemical Co., Ltd.                                    74,102.56
                                      goods
Dalian Fuji Bingshan Vending Purchases of                                            359,807.67
Machine Co., Ltd                      goods
MHI Bingshan Refrigeration (Dalian) Purchases of                                      30,199.15
Co.,Ltd.                              goods
Total                                                    295,297,550.73          415,668,954.14

  2)        Sales of goods/ labour services provision

Related party                                  Content             2016              2015
Panasonic Cold-chain (Dalian) Co., Ltd      Sales of goods     173,038,902.46 133,176,472.97
Panasonic Refrigeration (Dalian) Co.,
                                            Sales of goods     107,638,666.72     76,396,710.08
Ltd.
Dalian Fuji Bingshan Vending Machine
                                            Sales of goods      34,136,856.37     25,951,727.99
Co., Ltd
Panasonic     Cold    Machine      system
                                            Sales of goods      21,666,442.54      2,321,854.48
(Dalian) co., Ltd
MHI Bingshan Refrigeration (Dalian)
                                            Sales of goods      21,470,860.07     17,508,233.63
Co.,Ltd.



                                                                                             133
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report


Beijing          Huashang          Bingshan
Refrigeration      and    Air-conditioning    Sales of goods     14,337,123.07     27,791,350.44
Machinery Co., Ltd.
Wuhan LanNing energy technology co.,                             12,555,063.86     31,564,672.87
                                              Sales of goods
Ltd
                                                                  7,496,076.45      4,289,463.10
Panasonic compressor (Dalian) Co., Ltd        Sales of goods

Dalian Pate Technology Co.,LTd                Sales of goods      2,180,488.20      2,777,710.00
Keinin-Grand           Ocean        Thermal
                                              Sales of goods        834,672.00        766,630.42
Technology (Dalian) Co., Ltd.
Dalian Fuji Iceberg Vending Machine
                                              Sales of goods        806,414.75        125,921.72
Sales Co., Ltd
Jiangsu Jingxue Freezing Equipment
                                              Sales of goods        676,308.07        377,379.23
Co., Ltd.
BAC (Dalian) Co., Ltd                         Sales of goods        649,816.64         48,042.74
Dalian Bingshan Group Refrigeration
                                              Sales of goods        649,621.22        543,771.08
Equipment Co., Ltd
Dalian Bingshan Huigu Development
                                              Sales of goods        622,131.50
Company
Dalian      Bingshan     Group     Huahuida
                                              Sales of goods        358,332.87
Financial Leasing Co.,LTd
Dalian Spindle Cooling Towers Co., Ltd        Sales of goods        284,680.37      2,914,181.55
Wuhan Sikafu Power Control Equipment
                                              Sales of goods        184,040.96        560,308.54
Co., Ltd
Dalian Honjo Chemical Co., Ltd                Sales of goods                            6,401.89
Dalian Bingshan Metal Technology Co.,
                                              Sales of goods                           48,779.66
Ltd
Total                                                           399,586,498.12 327,169,612.39

2. Assets Lease

  1)         Assets rent out


                                          Category of assets     2017Lease         2016 Lease
      Lessor              Lessee
                                              rent out             Income            Income

 Dalian
 Refrigeration     Dalian Bingshan
 Company                                        Office              97,297.30         98,742.86
                   Group Co., Ltd.
 Limited
 Dalian            MHI Bingshan
 Refrigeration
 Company           Refrigeration                 Plant           4,000,000.00      4,100,000.00
 Limited           (Dalian) Co.,Ltd.
                                                                                              134
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report



                                         Category of assets         2017Lease      2016 Lease
    Lessor              Lessee
                                             rent out                Income          Income

 Dalian          Dalian Bingshan
 Refrigeration   Huigu
 Company                                  Land and property         4,400,000.00
                 Development
 Limited         Company
 Dalian          Panasonic
 Refrigeration                                Employee
                 Cold-chain (Dalian)                                  19,617.73
 Company                                      dormitory
 Limited         Co., Ltd
 Dalian
                 Panasonic
 Refrigeration                                Employee
                 compressor                                           38,159.80
 Company                                      dormitory
 Limited         (Dalian) Co., Ltd
 Dalian          Panasonic
 Refrigeration                                Employee
 Company         Refrigeration                                        60,900.69
                                              dormitory
 Limited         (Dalian) Co., Ltd.
 Dalian
 Refrigeration   Dalian Honjo                 Employee
 Company                                                               3,625.28
                 Chemical Co., Ltd            dormitory
 Limited

Note: Dalian Refrigeration Company signed leasing contract with Dalian Bingshan
Group and rented out 576squre meter office to Dalian Bingshan group from April 1st,
2017 to March 31st, 2019 with annual lease premium of 144,000Yuan.

On 31st July,2014, the company signed supplemental rental contract with MHI Bingshan
Refrigeration (Dalian) Co.,Ltd., and rent out # 6 building of workshop located on No. 106
Liaohe East Rd, Dalian Economic and Technology Development Zone to MHI Bingshan
Refrigeration (Dalian) Co.,Ltd. The rental area is 15,259.04 square metres, and annual rent is
RMB 4.2 million with the expiry date on 16th July, 2029.

The 13th meeting of the 7th generation board was held on April 22, 2017, and approved to rent
out the old plant and land located in No888, South West RD, Shahekou District, Dalian to
Bingshan Huigu Company. The lease premium is 4.62million Yuan per annum and contract is
from April 1st, 2017 to December 31, 2036. The company has signed the “estate leasing
contract” with Dalian Bingshan Huigu Development Company based on the requirement of
utilization of old land and plant and new business forester plan.

  2)       Assets under lease


                                                Category of         2017 Lease     2016 Lease
       Lessor                Lessee
                                               assets rent in          fees            fees

 Dalian Bingshan Dalian Refrigeration
                                                 Office, etc                         135,782.86
 Group Co.       Company Limited
                                                                                              135
                                                          Dalian Refrigeration Co., Ltd. 2017 Annual Report



                                                        Category of          2017 Lease           2016 Lease
               Lessor                Lessee
                                                        assets rent in              fees                fees

         Dalian Bingshan Dalian Refrigeration
                                                              Land                                  219,267.25
         Group Co.       Company Limited

        3. Warranty provided by Related Parties
        The national development fund planned to support the company’s intelligent and green
        equipment of cold chain and service industry base project, and provide the special fund to the
        controlling shareholder of the company, Bingshan Group. Please refer to the “ Note VI.28 long
        term borrowings”

        4. Funds borrow from /lent to related party

        1)Funds borrowed from Related Party

    Name of the related party                  Amount           Starting date          Ending date             Explanation
                                                                                                               Project fund
Dalian Bingshan Group Co., Ltd.            160,000,000.00            2016.03.14            2026.03.13          investment
                                                                                                                Working
Dalian Bingshan Group Co., Ltd.               60,000,000.00          2017.08.31            2018.08.30            capital
                                                                                                                Working
Dalian Bingshan Group Co., Ltd.                5,820,000.00          2017.09.27            2018.09.25            capital
                                                                                                                Working
Dalian Bingshan Group Co., Ltd.               14,180,000.00          2017.12.04            2018.11.30            capital
Total                                      240,000,000.00

        Notes of borrowing funds

        The company borrowed 0.16billionYuan from Bingshan Group, the controlling shareholder of
        the Company for the plan to support the company’s intelligent and green equipment of cold
        chain and service industry base project, loan interest is fixed interest rate @1.2% annual rate
        and paid interest 1,946,666.67Yuan.

        Wuhan New World Refrigeration Industrial Co., Ltd., the subsidiary of the company, borrowed
        80 million Yuan from Dalian Bingshan Group. At the year end, the loan has not been repaid and
        interst is calcualted at the same interest rate of the bank. The interest paid is 904,331.71 Yuan.

        5. Management Remuneration

        Item                                                   2017                             2016
        Total rewards for the key management                         3,507,800.00                  3,896,600.00
        personnel( tax included)

        (III) Balances with Related party

                                                                                                                 136
                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report


    (1) Accounts receivable due from related parties

                                         Closing Balance                    Opening Balance
   Item        Related party           Book             Bad debt          Book           Bad debt
                                     Balance           Provision         Balance         Provision
Accounts     BAC      (Dalian)
             Co., Ltd                 682,000.00          34,100.00
receivable
Accounts     Beijing Huashang
             Bingshan
receivable   Refrigeration and
                                     8,913,856.35        524,792.82    38,284,385.35    3,543,453.34
             Air-conditioning
             Machinery Co.,
             Ltd
Accounts     Dalian        Fuji
             Bingshan Vending        5,296,495.78        264,824.79     1,520,221.58       76,011.08
receivable   Machine Co., Ltd.
Accounts     Dalian     Spindle
             Cooling Towers             19,500.00            975.00        46,659.20        2,332.96
receivable   Co., Ltd
Accounts     Thermo        King
             Suzhou                  1,072,398.37         53,619.92
receivable
Accounts     MHI      Bingshan
             Refrigeration           3,943,798.07        197,189.90       215,889.22       10,794.46
receivable   (Dalian) Co.,Ltd.
Accounts     Panasonic Cold
             Machine system          1,011,420.13         50,571.01       988,213.08       49,410.65
receivable   (dalian) Co., Ltd
Accounts     Panasonic Cold
             Chain     (Dalian)     31,120,658.05      1,579,384.35    49,852,547.51    2,492,627.38
receivable   Co., Ltd
Accounts     Panasonic
             Compressor               93,510.28            4,675.51       285,612.28       17,405.61
receivable   (Dalian) Co., Ltd
Accounts     Panasonic
             Refrigeration           2,329,505.72        116,475.29    10,132,966.54      506,648.32
receivable   (Dalian) Co., Ltd
Accounts     Wuhan LanNing
             Energy
receivable                           7,376,782.55        368,839.13    14,466,855.00      723,342.75
             Technology Co.,
             Ltd
Accounts     Wuhan       Sikafu
             Power      Control
receivable                              77,975.80          3,898.79       655,561.00       32,778.05
             Equipment Co.,
             Ltd
Accounts     Dalian Bingshan
             Group
receivable   Refigeration                                                   3,461.40          173.07
             Equipment
             Co.,Ltd




                                                                                                 137
                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report


Accounts     Keinin-Grand
             Ocean Thermal
receivable                                                                6,117.31          305.87
             Technology
             (Dalian) Co., Ltd.
Accounts     Dalian Bingshan
             Pate Technology                                              5,642.60          564.26
receivable   Co.,Ltd
Accounts     Dalian        Fuji
receivable   Iceberg   Vending
                                                                          4,452.90          222.65
             Machine      Sales
             Co., Ltd
             Beijing Huashang
             Bingshan
Other        Refrigeration and
                                    108,307.06           7,163.99        34,972.74        1,748.64
receivable   Air-conditioning
             Machinery Co.,
             Ltd
             Panasonic Cold
Other
             Chain     (Dalian)      89,016.00           4,450.80
receivable
             Co., Ltd
             Wuhan LanNing
Other        Energy
                                     43,680.84           2,184.04         3,814.37          190.72
receivable   Technology Co.,
             Ltd
             Wuhan       Sikafu
Other        Power      Control
                                     10,817.95             540.90       320,000.00       16,000.00
receivable   Equipment Co.,
             Ltd
             Dalian     Spindle
Prepayment   Cooling Towers          37,956.00
             Co., Ltd
             Jiangsu Jingxue
             Freezing
Prepayment                          782,768.00                            5,469.00
             Equipment Co.,
             Ltd.
             Panasonic Cold
Prepayment   Machine system           2,373.00                          837,819.00
             (dalian) Co., Ltd
             Panasonic
Prepayment   Refrigeration          460,620.00                          318,120.00
             (Dalian) Co., Ltd
             BAC       (Dalian)
Prepayment                                                              318,220.00
             Co., Ltd
             Panasonic Cold
Prepayment   Chain     (Dalian)                                          90,000.00
             Co., Ltd
Notes        Dalian         Fuji
             Bingshan Vending      1,182,028.15
receivable   Machine Co., Ltd.
Notes        Dalian     Spindle
             Cooling Towers          39,064.75
receivable   Co., Ltd


                                                                                               138
                                                         Dalian Refrigeration Co., Ltd. 2017 Annual Report


Notes             MHI      Bingshan
                  Refrigeration         1,711,379.41                        19,805,806.72
receivable        (Dalian) Co.,Ltd.
Notes             Panasonic Cold
                  Machine system             53,989.08                           1,778.45
receivable        (Dalian) Co., Ltd
Notes             Panasonic Cold
                  Chain     (Dalian)   54,495,058.38                        15,532,736.64
receivable        Co., Ltd
Notes             Panasonic
                  Compressor            1,182,680.29                           200,000.00
receivable        (Dalian) Co., Ltd
Notes             Panasonic
                  Refrigeration        14,031,393.19
receivable        (Dalian) Co., Ltd
Notes             Jiangsu Jingxue
                  Freezing
receivable                                                                   4,277,035.00
                  Equipment Co.,
                  Ltd.

        (1)      Accounts Payable due from Related Party


          Item                     Related party                    Closing Balance         Opening Balance

 Accounts Payable        BAC Dalian Co., Ltd                               6,078,640.00        29,773,959.00
                         Dalian Bingshan Pate Technology
 Accounts Payable                                                              5,550.00         2,022,156.94
                         Co.,Ltd
                         Dalian       Bingshan     Group
 Accounts Payable                                                         11,799,186.85         9,520,335.93
                         Refrigeration Equipment Co., Ltd.
                         Dalian       Bingshan      Metal
 Accounts Payable                                                            140,316.68
                         Technology Co., Ltd
                         Dalian Bingshan Pate Technology
 Accounts Payable                                                          5,119,096.22
                         Co.,Ltd
                         Dalian Fuji Bingshan Vending
 Accounts Payable                                                                983.82
                         Machine Co., Ltd.
                         Dalian Spindle Cooling Towers
 Accounts Payable                                                          7,544,866.00         5,339,188.00
                         Co., Ltd
                         Jiangsu      Jingxue    Efficient
 Accounts Payable                                                         14,043,679.12         8,505,375.05
                         Technology Co., Ltd.
                         Panasonic Cold machine system
 Accounts Payable                                                         20,582,489.66         3,680,482.86
                         (Dalian) Co., Ltd
                         Panasonic Cold Chain (Dalian)
 Accounts Payable                                                         13,180,390.70        28,245,301.70
                         Co., Ltd
                         Panasonic Compressor (Dalian)
 Accounts Payable                                                          1,696,000.00         1,766,420.00
                         Co., Ltd
                         Panasonic Refrigeration (Dalian)
 Accounts Payable                                                            644,319.10            50,667.31
                         Co., Ltd.
                         Wuhan        LanNing     Energy
 Accounts Payable                                                          7,725,855.00        15,300,000.00
                         technology Co., Ltd
 Other accounts          MHI Bingshan           Refrigeration
 payable                 (Dalian) Co.,Ltd.                                                        270,000.00




                                                                                                      139
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report


 Other accounts        Dalian Bingshan Pate Technology
 payable               Co.,Ltd                                                              1,000.00

 Other accounts        Panasonic Compressor (Dalian)
 payable               Co., Ltd                                                             9,425.59

 Other accounts        Panasonic Cold Chain (Dalian)
 payable               Co., Ltd                                                           216,570.00

                       Beijing    Huashang   Bingshan
 Accounts
                       Refrigeration              and
 Received in                                                         399,609.61           459,609.61
                       Air-conditioning Machinery Co.,
 Advance
                       Ltd
 Accounts
                       Dalian    Bingshan         Huigu
 Received in                                                       1,100,000.00
                       Development Co.,Ltd
 Advance
 Accounts
                       Dalian       Bingshan     Group
 Received in                                                          50,000.00
                       Refrigeration Equipment Co., Ltd.
 Advance
 Accounts
                       Panasonic Cold machine system
 Received in                                                          90,360.00           171,000.00
                       (Dalian) Co., Ltd
 Advance
 Accounts
                       MHI Bingshan        Refrigeration
 Received in                                                                              450,000.00
                       (Dalian) Co.,Ltd.
 Advance
 Notes Payable         BAC (Dalian) Co., Ltd                      47,469,964.10        30,121,670.00
                       Dalian Bingshan Group
 Notes Payable                                                     7,812,262.79         1,312,540.00
                       Refrigeration Equipment Co., Ltd.
                       Dalian       Bingshan      Metal
 Notes Payable                                                       474,736.39           450,000.00
                       Technology Co., Ltd
                       Dalian Bingshan Pate Technology
 Notes Payable                                                     1,503,294.01
                       Co.,Ltd
                       Jiangsu      Jingxue    Efficient
 Notes Payable                                                     4,860,000.00         4,903,405.00
                       Technology Co., Ltd.
                       Panasonic Cold Chain (Dalian)
 Notes Payable                                                     1,657,321.00         3,939,286.50
                       Co., Ltd
                       Wuhan        LanNing     Energy
 Notes Payable                                                     1,355,550.00
                       technology Co., Ltd
                       Wuhan Sikafu Power Control
 Notes Payable                                                                            620,000.00
                       Equipment Co., Ltd

  (IV) Related Party Commitment
        None

  XII. Share-Based Payment

        1. General situation of share payment

Items                                                                    Situation
Total equity instruments granted by the company during                                         none
the period
Total equity instruments exercised by the company                                              none

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                                                     Dalian Refrigeration Co., Ltd. 2017 Annual Report


 Items                                                                       Situation
 during the period
 Total equity instruments invalid by the company during                                      413,000.00
 the period
 The scope of the exercise price of the share options        2015:5.56 Yuan per share,divide into 3
 issued by the company at the year end             and the period, remaining contract period are24
 remaining term of the contract                              and 36 months
                                                             2016:5.62 Yuan per share,divide into 3
                                                             period, remaining contract period are12,
                                                             24 and 36 months.
 The scope of the exercise price of other equity and the
 remaining term of the contract at the year end

   In accordance with “Restricted Share Incentive Plan (draft)’ in 2016 and the 3rd extraordinary
   shareholder’s meeting in 2017, incentive objective, Liu Jie, Meng Yunchan, Fang Zheng, Di Jun,
   Zhang guanghui 5 persons resigned, therefore, the they are not entitled for share incentive.
   These 5persons were granted for 413,000 numbers of shares in total. In accordance with
   “dividend distribution plan of 2016”, based on the total number of 611,776,558shares, every
   10shares will be granted for 4new shares from capital reserve transfer. After transfer, sum of the
   unlocked restricted shares granted to these 5 persons is 578,200. On December 8, 2017, the 17th
   meeting of 7th generation of directors board and the 14th meeting of 7th generation of supervisors
   board approved “Amendment of share buyback plan of Restricted Share Incentive Plan in
   2016”and “Approval of writing off bought back shares within the Restricted Share Incentive
   Plan in 2016”, the Company bought them back and has written off the account. Share buyback
   is planned to be settled by self financing and the sum of buy back price is 2,279,264.40 Yuan.

         2. Share payment settled by equity

Items                                                                          Situation
                                                               According to the fair value of restricted
Method for determining the fair value of the equity
                                                               stock on granted date (the fair value
instruments granted
                                                               changes after the grant date is uncertain)
The basis for determining the quantities         of exercised Determined by the actual numbers of
equity instruments                                            share exercised

The reasons for the significant difference between this
                                                                                                    None
year’s estimation and last year’s estimation
The cumulative amount of capital reserve which includes
                                                                                           36,488,675.49
share payment settled    by equity
Total cost of share payment recognized by equity
                                                                                           12,070,987.49
settlement this year
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                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report


     1) The Situation of Granted Restricted Share in 2015

According to the 13th meeting of the 6th generation of board, the 1st interim shareholders’
meeting and the rules of ‘Restricted Share Incentive Plan (draft)’, the Company granted
10,150,000 numbers of restricted shares to 41 incentive targets by offering incentive targets ‘A’
original shares. The granted price is 5.56yuan per share, and the total capital raised is
56,434,000.00Yuan. The Company’s incentive targets include the directors, middle and senior
management personnel and other key personnel supposed to incent who held office when the
‘Share Incentive Plan’ was announced, but excluding the supervisors, the independent directors,
foreign directors and foreign management personnel. The 15th meeting of board of 6th generation
held on 4th March 2015 approved the ‘The Report Regarding Granting Incentive Targets
Restricted Shares’, which agrees to grant 10,150,000 numbers of restricted shares to 41
incentive targets, and set 4th March 2015 as share granted date.

     2) The Situation of Granted Restricted Share in 2016

According to the 9th meeting of 7th generation of directors, the 3rd interim shareholders’ meeting
and the rules of ‘Restricted Share Incentive Plan (draft)’, the Company granted 12,884,000
numbers of restricted shares to 118 incentive targets by offering incentive targets ‘A’ original
shares. The granted price is 5.62yuan per share, and the total capital raised is
72,480,080.00Yuan. The Company’s incentive targets include the directors, middle and senior
management personnel and other key personnel supposed to incent who held office when the
‘Share Incentive Plan’ was announced, but excluding the supervisors, the independent directors,
foreign directors and foreign management personnel. The 9th meeting of board of 7th
generation held on 20th September 2016 approved the ‘The Report Regarding Granting
Incentive Targets Restricted Shares’, which agrees to grant 12,884,000 numbers of restricted
shares to 118 incentive targets, and set 20th September 2016 as share granted date.

     3) The Situation of Unlocking Restricted Shares in 2016

The 4th meeting of the 7th generation of board held on 13th April 2016 approved the ‘Proposal for
unlocking in restricted share options incentive plan for the first unlocking-in period’. There
were 41 incentive targets who satisfied the requirements of unlocking- in, and the number of the
restricted shares can apply unlocking in to have listed and circulated is 3,045,000 that account
representing 0.50% of the Company’s total shares at the year end.

The 4th meeting of the 7th generation of director board approved “proposal for the 2nd
unlocking period of restricted share incentive plan”. Objectives qualifying for the unlocking
conditions are 41 persons, based on the “Profit distribution scheme of 2015”, every 10 share
capital will granted for 5 new shares by transferring from capital reserve. After transferring to
share capital, 6,090,000 numbers of restricted shares will be applied to unlocking condition and

                                                                                               142
                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report


can be listed in the market, representing 0.71% if total of share capital.

The 17th meeting of the 7th generation of director board approved “proposal of 1st unlocking
period of restricted share incentive plan in 2016”. Objectives qualifying for the unlocking
conditions are 113 persons, based on the “Profit distribution scheme of 2016”, every 10 share
capital will granted for 4 new shares by transferring from capital reserve. After transferring to
share capital, 5,237,820 numbers of restricted shares will be applied to unlocking condition and
can be listed in the market, representing 0.61% if total of share capital.


XIII. Contingency

As at 31 December 2017, the Group does not have any other contingencies for disclosure.

XIV. Commitment

As at 31 December 2017, the Group does not have any other significant commitments.

XV. Events after the Balance Sheet Date

     1. Significant events had not adjusted

                                                               Impact on the
                                                                                      Reason
                                                             financial position
 Items                                  Content                                    unable to be
                                                               and operating
                                                                                    estimated
                                                                   results
                            Convertible company bond                               Bonds are not
 Issuing bond
                            privately                                                 issued
 Significant    External Acquired        Wuhan    Lanning
                                                                      4,500,000
 Investment                 shares

2017 annual shareholder’s meeting of Wuhan New World Refrigeration approved to acquire
27.27% shareholding held by Cheng Xiangrong, a shareholder of Wuhan Lanning Energy
Technology Co.,Ltd. After acquisition, Wuhan New World Refrigeration increased investment
in Wuhan Lanning to 12million Yuan, representing 54.55% of shareholding. Wuhan New
World Refrigeration has signed the transfer agreement with Cheng Xiangrong and paid
4.5million Yuan on January 12th, 2018. Updates of shareholders in Commercial and Industry of
Administration has been done in February, 2018, after acquisition, Wuhan New World
Refrigeration can control over Wuhan Lanning and acquisition date was recognized as February
28, 2018.

According to the 16th meeting of the 7th generation of board and the 2nd extraordinary
shareholders meeting, the Company approved to issue convertible bond privately. The bond can
be converted to A share, ‘GuoTaiJunAn’(#601211) held by Dalian Refrigeration Company

                                                                                                143
                                                         Dalian Refrigeration Co., Ltd. 2017 Annual Report


     and total face value of the bond is less than 400million Yuan. On February 1st, 2018, the
     Company has received the “Approval letter of privately listed convertible loan of Dalian
     Refrigeration Company “( Shangzhenghan[2018]No125) from Shanghai Security and
     Exchange Market. Up to today, the bond has not been issued yet.

           2. Information about profit distribution

Items                                                                        Content

                                               Extract     20%    of   the     free   surplus   reserves;   based
                                               on611,776,558 numbers of share in total, paid out cash
                                               dividend of 1Yuan for every 10 shares(before tax),and cash
Dividend proposed to be distributed
                                               dividend of B shares are paid in Hong Kong dollars; the total,
                                               and share dividend of      4 common shares for every 10 shares
                                               through capital reserve.


Dividend approved to be distributed by the
General Meeting


     The 12th meeting of the 7th generation of board held on 20th April 2018 approved the profit
     distribution policy for the year of 2017, extracting 20% of the free surplus reserves and based on
     855,908,981 numbers of share in total, paying out cash dividend of 0.5Yuan for every 10
     shares(before tax) and cash dividend of B shares are paid in Hong Kong dollars.

           3. Sales Return

          There is no significant sales return after the balance sheet date.

          4. Except the subsequent event disclosed above, the Company has no other significant
          subsequent event.

     XVI. Other Significant Events

        1. Error correction and effect in previous period.

     The Company has no adjustment of prior period accounting error this year.

        2. Debt Restructuring
        The Company has no events of debt restructuring this year.

        3. Asset exchange
         (1) The exchange of non-monetary assets

         None

         (2) The exchange of other assets

                                                                                                        144
                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report

   None

  4. Annuity Plan

     None

  5. Operation Termination

     None

  6. Segment Information

The management of the Company divided the Company into 3 segments based on the
geographic area: Northeast China, Central China, and East China. The Northeast is the
Company’s general headquarters and the registered address. The Central is the subsidiary of the
Company, Wuhan New World Refrigeration Industrial Co., Ltd, Chengdu Bingshan. The East is
the subsidiaries of the Company, and they are Ningbo Bingshan Air-conditioning Refrigeration
Engineering Co., Ltd and Shanghai Bingshan Technical Service Co., Ltd.

  (1) The basis and accounting policies of reporting segments

  The internal organization structure, management requirements and internal report scheme are
         the determination basis for the Company to set the operating segments. The segments
         are those satisfied the following requirements.

     1).The segment can generates revenue and incur expenses.

     2).The management personnel can regularly evaluate the operation results of segments and
         allocate resource ,assess its performance .

     3).The financial situation, operation results, cash flow and other accounting information of
         segments can be acquired.

The Company confirms the report segments based on the operating segments. The transfer price
among segments is set base on the market price. The assets and related expenses in common use
are allocated to different segments based on their proportion of revenue.

     (2)The financial information of reporting segments
                                                              Amount unit :Ten thousands Yuan
                                                                    2017
            Items                Northeast             Central
                                                                    East China       Offset            Total
                                   China               China
1 Operating income                260,871.59            35,870.70      8,188.96     -96,959.74    207,971.51
2 Cost                             258,083.18           35,343.89      8,116.69     -96,959.74    204,584.02
   Impairment on assets              2,348.35              295.27           57.29                      2,700.91
   Depreciation and
                                     4,192.26            1,152.06           16.73                      5,361.05
amortization

                                                                                                 145
                                                   Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                                                      2017
            Items                 Northeast          Central
                                                                     East China         Offset            Total
                                   China             China
3 Investment income from
                                     14,187.91            -97.45                                      14,090.46
associates and joint venture
4 Operating profits(loss)            24,500.09            569.37             78.56      -3,300.64     21,847.38
5 Income tax                          1,532.64             75.67             18.09       -234.63          1,391.77
6 Net profit(loss)                   22,967.44            493.71             60.47      -3,066.01     20,455.61
7 Total assets                     588,305.71         58,765.89          3,541.54      -88,650.99    561,962.15
8 Total liabilities                203,027.52         44,429.53          1,979.68      -36,955.87    212,480.86

7. Other important transactions and matters affect the investor's decision

The company hasn’t had other important transactions and matters affect the investor's decision
in this period.

XVII. Notes to the Main Items of the Financial Statements of Parent Company

   1. Accounts receivable

   (1) Accounts receivable category

                                                     Closing Balance
       Item                    Booking balance                     Provision               Booking
                            Amount               %           Amount            %           balance
        Accounts
   receivable with
       significant
 individual amount
  and separate bad
    debt provision
        Accounts
receivable with bad
    debt provision
                       414,554,206.31            100.00   57,996,249.38        13.99    356,557,956.93
     based on the
characters of credit
     risk portfolio
 Accounting age as
                       230,841,994.64             55.68   57,996,249.38        25.12    172,845,745.26
       characters
    Related party
         within
                       183,712,211.67             44.32                                 183,712,211.67
    consolidation
          scope
        Accounts
   receivable with
     insignificant
 individual amount

                                                                                                    146
                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                                   Closing Balance
       Item                 Booking balance                    Provision              Booking
                          Amount             %             Amount           %         balance
 and separate bad
  debt provision
      Total             414,554,206.31       100.00     57,996,249.38      13.99   356,557,956.93

(Continued)

                                                     Opening Balance
       Item                 Booking balance                  Provision               Booking
                           Amount            %           Amount            %          balance
Accounts receivable
  with significant
 individual amount
 and separate bad
   debt provision
Accounts receivable
   with bad debt
provision based on      178,100,272.41      100.00     60,524,866.67       33.98   117,575,405.74
 the characters of
credit risk portfolio
 Accounting age as
                        178,100,272.41      100.00     60,524,866.67       33.98   117,575,405.74
     characters
Related party within
consolidation scope
Accounts receivable
 with insignificant
 individual amount
 and separate bad
   debt provision
       Total            178,100,272.41      100.00     60,524,866.67       33.98   117,575,405.74

    1) The bad debt provisions of accounts receivable in the portfolio is accrued under
        accounting aging analysis method:

                                                      Closing Balance
          Aging                                         Provision for bad Drawing Proportion
                            Accounts receivable
                                                              debts                  (%)
      Within 1 year                 125,157,912.50            6,257,895.63            5
        1-2 years                    28,442,788.14            2,844,278.81            10
        2-3 years                    21,662,625.64            6,498,787.69            30

                                                                                                147
                                                    Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                                        Closing Balance
           Aging                                           Provision for bad Drawing Proportion
                            Accounts receivable
                                                                    debts                (%)
         3-4 years                      20,667,685.67           10,333,842.84             50
         4-5 years                      14,247,691.41           11,398,153.13             80
        Over 5 years                    20,663,291.28           20,663,291.28            100
           Total                       230,841,994.64           57,996,249.38

  (2) Bad debt provision accrued and reversed (withdraw)

  The bad debt provision has been accrued in the amount of 766,311.58 Yuan, during the report
  period, bad debt provision is recollected of 661,616.00Yuan.

  Key amount of reverse or recollected:

                                     Reverse(recollected)       Regained
Companies                                                                             Reasons
                                     amount                       form

Shandong Laiyang Huasheng                                                      judicial decision to
                                                  293,092.00        lawsuit
Food Co., Ltd                                                                  receive the debt
Beijing Taizinai Milk Biology                                                  judicial decision to
                                                  368,524.00        lawsuit
Development Co.,LTD                                                            receive the debt
Total                                             661,616.00          —                 —



  (3) No accounts receivable written off in current period.

Item                                                                 Written off amount
Receivable actually written off                                                         3,956,544.87

  (4) The top five significant accounts receivable categorized by debtors

                                                                                         Closing
                                                                        % of the
Company                   Closing Balance             Aging                            Balance of
                                                                        total AR
                                                                                        Provision
Guangzhou Fuli Estate
                                  44,290,000.00    Within 1 year              10.68       2,214,500.00
Co.,Ltd
Xinyi Yuanda
Construction and                                   Within 1 year,
Installation                      27,709,087.18     1-2 years                  6.68       2,145,439.31
Engineering Co., Ltd.
Jilin Changjitu
Development                       27,000,000.00    Within 1 year               6.51       1,350,000.00
&Construction Co.,Ltd
Yangmei Fengxi
                                  16,700,000.00    Within 1 year               4.03           835,000.00
Fertilizer
Dalian          Mingdi
                                  15,130,000.00    Within 1 year               3.65           756,500.00
TradingCo.,Ltd
                                                                                                      148
                                                         Dalian Refrigeration Co., Ltd. 2017 Annual Report


                                                                                                      Closing
                                                                              % of the
Company                       Closing Balance               Aging                                    Balance of
                                                                              total AR
                                                                                                     Provision
Total                               130,829,087.18                                       31.55         7,301,439.31

      2. Other Receivables

      (1) The category of other receivables

                                                         Closing Balance
Items                                   Booking balance                    Provision                  Booking
                                        Amount                %         Amount              %          balance
Other       receivables      with
significant            individual
                                                     -            -                  -           -                 -
amount and separate bad
debt provision
Other receivables with bad
debt provision based on the
                                      3,605,280.13 100.00               782,482.10 21.70             2,822,798.03
characters of credit risk
portfolio
Other       receivables      with
insignificant          individual
amount and separate bad
debt provision
               Total                  3,605,280.13 100.00               782,482.10 21.70             2,822,798.03

(Continued)

                                                   Opening Balance
Items                               Booking balance                       Provision                   Booking
                                    Amount                %            Amount              %           balance
Other receivables with
significant     individual
amount and separate
bad debt provision
Other receivables with
bad     debt     provision
                                    5,595,672.42     100.00           1,227,167.35        21.93      4,368,505.07
based on the characters
of credit risk portfolio
Other receivables with
significant     individual
amount and separate
                                                                                                                 149
                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report


bad debt provision
          Total              5,595,672.42    100.00        1,227,167.35      21.93      4,368,505.07

    1) The bad debt provisions of other receivables in the portfolio is accrued under accounting
          aging analysis method

                                                      Closing Balance
          Aging                                          Provision for bad Drawing Proportion
                              Other receivables
                                                               debts                     (%)
      Within 1 year                     224,619.70                  11,230.99            5.00
         1-2 years                    2,430,000.00               243,000.00             10.00
         2-3 years                      339,109.75               101,732.93             30.00
         3-4 years                      330,065.00               165,032.50             50.00
         4-5 years                      100,000.00                  80,000.00           80.00
      Over 5 years                      181,485.68               181,485.68             100.00
           Total                      3,605,280.13               782,482.10              —

  (2) Bad debt provision accrued and reversed (withdraw) in 2017.

  The bad debt provision has been reversed by 444,685.25Yuan.

  (3) Other receivables categorized by nature

Nature                                  Closing Balance                     Opening Balance
Petty cash                                              74,915.50                          80,892.85
Guarantee deposits                                   3,501,260.43                       5,502,139.57
Others                                                  29,104.20                          12,640.00
              Total                                  3,605,280.13                       5,595,672.42

   (5) Other receivables from the top 5 debtors

                                                                                          Closing
                                        Closing                           % of the
      Name             Category                            Aging                         Balance of
                                        Balance                           total OR
                                                                                         Provision
Dalian Delta HK
                        Security                         1-2 years,
China gas Co.,                        2,730,000.00                              75.72     393,000.00
                        deposit                          3-4 years
Ltd
Dalian    Jinzhou
New        district
                        Security
Funding agencies                        339,109.75       2-3 years,              9.41     101,732.93
                        deposit
and institutions
accounting center
Dalian economic
and technological
                        Security                           Over 5
development zone                        112,985.68                               3.13     112,985.68
                        deposit                            years
funding agencies
and institutions

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                                                                             Closing
                                 Closing                     % of the
        Name        Category                    Aging                      Balance of
                                 Balance                     total OR
                                                                            Provision
accounting center
Henan Shuanghui
                    Security
Investment                      100,000.00     4-5years            2.77      80,000.00
                    deposit
Company
Xinjiang
Petroleum           Security                   Within 1
management          deposit       60,000.00     year               1.66        3,000.00
Company
Total                          3,342,095.43                       92.69     690,718.61




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 3. Long-term equity investments

(1) Category of long-term equity investments

                                                      Closing Balance                                              Opening Balance
             Item
                                  Closing Balance         Provision           Book Value        Opening Balance       Provision           Book Value
  Investment of subsidiaries         487,496,652.08                           487,496,652.08      432,788,001.94                         246,597,906.16
   Investment of affiliates
                                                                                                1,280,624,499.15                       1,214,360,893.12
            and JV                 1,556,941,899.80                          1,556,941,899.80
            Total                  2,044,438,551.88                          2,044,438,551.88   1,713,412,501.09                       1,460,958,799.28

(2) Investments of subsidiaries

                  Subsidiaries names                    Opening Balance             Increase            Decrease             Closing Balance
      Dalian Bingshan Group Construction Co., Ltd            93,749,675.77                                                            93,749,675.77
      Dalian Bingshan Group Sales Co., Ltd                   20,722,428.15                                                            20,722,428.15
      Dalian Bingshan Air-Conditioning Equipment
      Co., Ltd                                               36,506,570.00                                                            36,506,570.00
      Dalian Bingshan Jiade Automation Co., Ltd               6,872,117.80                                                             6,872,117.80
      Dalian Bingshan Lingshe Quick Freezing
      Equipment Co., Ltd                                     59,356,051.19                                                            59,356,051.19
      Dalian Niweisi LengNuan Technology Co.,
      Ltd                                                    48,287,589.78                                                            48,287,589.78
      Wuhan New World Refrigeration Industrial
      Co., Ltd                                               84,674,910.81                                                            84,674,910.81
      Bingshan Technical Service ( Dalian )
      Co.,Ltd.                                               22,024,000.00                                                            22,024,000.00
      Dalian Xinminghua Electronics Co., Ltd.                43,766,243.72                                                            43,766,243.72




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                    Subsidiaries names                         Opening Balance                   Increase              Decrease                   Closing Balance
          Dalian Bingshan International             Trading
          Co.,Ltd                                                      16,828,414.72              54,708,650.14                                              71,537,064.86
          Total                                                       432,788,001.94              54,708,650.14                                             487,496,652.08

   (3) Joint ventures& affiliated companies
                                                                                           Increase/Decrease
                                                                        Gains and                                              Provision
                                                                                                                                                                                Provision
                                                                           losses       Adjustment of Changes                     for
                             Beginning                                                                          Cash bonus or                                                      for
        Investee                                                        recognized          other        of                   impairment                       Ending balance
                              balance         Increased   Decreased                                                profits                         Others                     impairment
                                                                         under the      comprehensive other                      of the
                                                                                                                 announced                                                     at year end
                                                                          equity           income     equity                    current
                                                                          method                                                period
1. Affiliated companys
Panasonic Refrigeration
(Dalian) Co., Ltd.           157,425,641.15                              5,991,975.67                              1,600,000.00                                  161,817,616.82
Panasonic      Cold-chain
(Dalian) Co., Ltd            217,687,237.26                             14,163,570.31                              4,800,000.00                                  227,050,807.57
Panasonic     Compressor
(Dalian) Co., Ltd            484,003,393.99                             44,000,847.56                             38,000,000.00                                  490,004,241.55
Dalian Honjo Chemical
Co., Ltd                       9,642,351.34                                912,160.07                              1,441,499.53                                    9,113,011.88
Keinin-Grand        Ocean
Thermal       Technology      52,952,413.79                             12,652,398.53                              8,000,000.00                                   57,604,812.32
(Dalian) Co., Ltd
Beijing         Huashang
Bingshan Refrigeration
and      Air-conditioning       769,463.27                                 661,677.89                                                                              1,431,141.16
Machinery Co., Ltd
Dalian Fuji Bingshan
Vending Machine Co.,         160,787,194.81                             26,894,028.83                              7,840,000.00                                  179,841,223.64
Ltd
MHI              Bingshan
Refrigeration     (Dalian)    13,018,792.05                                340,712.76                                                                             13,359,504.81
Co.,Ltd.




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                                                                                                Increase/Decrease
                                                                             Gains and                                              Provision
                                                                                                                                                                                    Provision
                                                                                losses       Adjustment of Changes                     for
                              Beginning                                                                              Cash bonus or                                                     for
        Investee                                                             recognized          other        of                   impairment                      Ending balance
                               balance          Increased       Decreased                                               profits                         Others                    impairment
                                                                              under the      comprehensive other                      of the
                                                                                                                      announced                                                    at year end
                                                                               equity           income     equity                    current
                                                                               method                                                period
Dalian    Fuji    Iceberg
Vending Machine Sales          9,410,006.56                                   4,102,434.74                             1,470,000.00                                   12,042,441.30
Co., Ltd
Jiangsu Jingxue Freezing
Equipment Co., Ltd.          151,527,707.42                                  14,564,351.32                                                                           166,092,058.74
Panasonic cold machine
system (Dalian) Co., Ltd      23,400,297.51                                   4,424,366.91                                                                            27,824,664.42
Bingshan Metal
Technical Service                              172,950,000.00                14,526,852.76                            24,360,221.29                                  163,116,631.47
(Dalian) Co.,Ltd.
Dalian Bingshan Group
Mangement and                                   49,000,000.00                -1,356,255.88                                                                            47,643,744.12
Consulting Company
Total                       1,280,624,499.15   221,950,000.00               141,879,121.47                             87,511,720.82                                1,556,941,899.80

At the 1st general meeting in 2017, and 12th meeting of the 7th generation of board of directors held on February 15th,2017,                  approved Dalian Refrigeration Company
to acquire 76% of shareholding of Dalian Bingshan International Trading Co., Ltd, and Beijing Zhongkehua Assets Valuation Co.,LTD was engaged to the thorough
valuation of Dalian Bingshan International Trading Co., Ltd, valuation date is December 31st,2017. Based on the valuation results, the share transferring price is
56.15million Yuan for 76% shareholding of Dalian Bingshan International Trading Co., Ltd held by Dalian Bingshan Group. After share transfer, the Company holds
100% of shareholding of Dalian Bingshan International Trading Co., Ltd.




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   4. Operating revenue and cost

Item                                    2017                                 2016
                             Revenue              Cost            Revenue             Cost
Revenue     from   main
                           595,981,322.69 495,403,921.28 546,594,784.30 461,413,033.94
operation
Revenue     from   other
                            20,778,557.97      12,256,853.32    11,810,086.74       7,113,931.96
operation
Total                      616,759,880.66 507,660,774.60 558,404,871.04 468,526,965.90

   5. Investment income

 Items                                                      2017           2016
 Income from long-term equity investments under equity
 method                                                141,879,121.47 131,022,957.13
 Income from disposing long-term share equity investments          263,666.08         56,278.70
 Income from holding of financial assets available for sale     11,463,569.05     15,961,425.40
 Income from disposing available for sale financial
 investments                                                    27,467,019.93     27,629,395.44
 Income from long-term equity investments under cost
 method                                                         17,365,100.59     12,904,192.38
 Total                                                         198,438,477.12 187,574,249.05

XVIII. Approval of Financial Statements

 The parent and consolidated financial statements of the Company were approved by the Board
 of Directors of the Group on April 20, 2018




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                                                 Dalian Refrigeration Co., Ltd. 2017 Annual Report


Supplementary Information to the Financial Statements

1. Non-operating profit or loss
 Items                                                                         2017        Notes
 Gain or loss from disposal of non-current assets                             552,588.02
 Override, no formal approval or accidental tax refund ,deduction or
 exemption
 Government grants recorded into profit or loss during current period      11,830,406.39
 Expenses for using funds from non financial institution recognized
 in current profit/loss
 Gains from acquisition of subsidiary or associates when initial cost
 is less than the fair value of identifiable net asset of invested
 company
 Profits/loss from non monetary assets exchange
 Profits/loss from investments or management of assets entrusted by
 others
 Assets impairment provision accrued due to force majeure, e.g.:
 suffering natural disasters
 Profit or loss from debts restructuring
 Expenses of enterprise restructuring
 Gain/loss on excessive part from the transaction where the trading
 price is obviously unfair.
 Net gain/loss of subsidiary from combination under same control
                                                                            1,418,670.20
 between the beginning of year and consolidation date.
 Gains/ loss from contingencies arising from the normal business of
 the Company
 Gain/loss from change of fair value by holding or disposing the
 tradable financial asset and liabilities, and available for sale
                                                                           27,467,019.93
 financial assets, other than effective hedging in relation to the
 company’s normal business
 Reversal of impairment provision of accounts receivable separately
 tested for impairment
 The profits/loss from external entrusted fund
 Investment property subsequently measured at fair value
 The profits/gains from changes of fair value
 Effects of gain/loss from one-off adjustments of gain/loss based on
 laws and regulations of taxation and accounting.
 non-operating revenue and expense besides the above items                    668,896.45

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                                                  Dalian Refrigeration Co., Ltd. 2017 Annual Report


 Other profit or loss
 Subtotal                                                                   41,937,580.99
 Effect on income tax                                                        6,520,362.10
 Attributable to minority shareholders’ equity (after tax)                   -297,876.84
 Total                                                                      35,715,095.73

2. Return on equity and earnings per share
                                                               Weighted       Earnings per share
                                                               average                  (EPS)
Profit of report period                                        return on        Basic       Diluted
                                                               net assets       EPS             EPS
                                                                  (%)
Net profit attributable to shareholders of parent company        5.97            0.23           0.23
Net profit after deducting non-recurring gains and losses
                                                                 4.91            0.19           0.19
attributable to shareholders of parent company




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                                                   Dalian Refrigeration Co., Ltd. 2017 Annual Report


                        Section 12 Reference Documents

1.   The accounting statements bearing the signatures and seals of the legal representative, the
     financial majordomo and the accountants in charge.
2.   The original copy of the auditor's report bearing the seal of the certified public accountants and
     the signatures and seals of the certified accountants.
3.   The original copies of all the Company's documents and the original copies of the bulletins
     published on the newspapers designated by the China Securities Regulatory Commission in the
     report period.
4.   Time for reference: from Monday to Friday 8:00 - 11:30 (am)       1:00 - 4:30 (pm)
     Liaison persons: Mr. Song Wenbao,Ms Du Yu
     Tel: 0086-411-87968130
     Fax: 0086-411-87968125




                                                              Dalian Refrigeration Company Limited

                                                                                       20, April, 2018




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