Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Stock Code: 200771 Stock ID: Hangqilun B Announcement No. 2019-48 Hangzhou Steam Turbine Co., Ltd. SEMIANNUAL REPORT 2019 (Stock Code:200771) August 2019 1 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 I. Important Remarks, Table of Contents, and Definitions The Board of Directors, the Supervisory Committee, the directors, the supervisors, and executives of the Company guarantee that there are no significant omissions, fictitious or misleading statements carried in the Report and we will accept individual and joint responsibilities for the truthfulness, accuracy and completeness of the Report. Chairman Mr. Zheng Bin, Chief Financial Officer Zhao Jiamao, and the Chief of Accounting Department Mr. Jin Chan hereby declare: the Financial Statement in the report is guaranteed to be truthful and complete. All of the directors attended the board meeting on which this report was examined. Please refer to the prospects for the future development of the company in Section 4 for the risks in the company's operations. The company's designated information disclosure media are: Shanghai Securities News (Chinese), Securities Times (Chinese), Hong Kong Commercial Daily (English), http://www.cninfo.com.cn (In English and Chinese), all information of the company is subject to the information published in the above selected media. Investors are advised to pay attention to investment risks. The Company will not distribute cash dividend or bonus shares, neither capitalizing of common reserves for the report period. 2 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Table of Contents I. Important Notice, Table of contents and Definitions II. Corporate Profile and Key Financial Indicators III. Business Profile IV. Performance Discussion and Analysis V. Important Events VI. Change of share capital and shareholding of Principal Shareholders VII. Situation of the Preferred Shares VIII. Information about Directors, Supervisors and Senior Executives IX. Corporate Bonds X. Financial Report XI. Documents available for inspection 3 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Definition Terms to be defined Defined as Definition Company, the Company Defined as Hangzhou Steam Turbine Co., Ltd. The Group, Hangqi Group Defined as Hangzhou Steam Turbine Power Group Co., Ltd. The report period, In the report period Defined as January 1,2019-June 30,2019 Hangzhou Zhongneng Steam Turbine Power Co., Ltd. – the holding Zhongneng Co. Defined as subsidiary of the Company Hangzhou Steam Turbine Casting Co., Ltd. – the holding subsidiary of the Casting Co. Defined as Company Zhejiang Steam Turbine Packaged Technology Development Co., Ltd. – Packaged Tech. Co. Defined as the holding subsidiary of the Company Hangzhou Steam Turbine Machinery Equipment Co., Ltd. - the holding Machinery Co. Defined as subsidiary of the Company Hangzhou Steam Turbine Auxiliary Machinery Co., Ltd. - the holding Auxiliary Machine Co. Defined as subsidiary of the Company Zhejiang Turbine Import & Export Co., Ltd. – the holding subsidiary of Turbine Co. Defined as the Company Hangzhou Steam Turbine Heavy Industry Co., Ltd. - the holding Heavy Industry Co. Defined as subsidiary of the Company The Board of Directors Defined as The Board of Directors of Hangzhou Steam Turbine Co., Ltd. The Supervisory Committee Defined as The Board of Directors of Hangzhou Steam Turbine Co., Ltd. The Shareholders’ Meeting Defined as The Board of Directors of Hangzhou Steam Turbine Co., Ltd. RMB, RMB0’000, RMB000’000’000 Defined as RMB Yuan, RMB10 thousand Yuan, RMB100 million Yuan MW Defined as Unit of power: 1000KW 4 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 II. Corporate Profile and Key Financial Indicators I. Company Information Stock ID Hangqilun B Stock Code 200771 Stock Exchange Listed Shenzhen Stock Exchange Company Name in Chinese 杭州汽轮机股份有限公司 Short form of Company Name in Chinese 杭汽轮 Name in English(if any) HANGZHOU STEAM TURBINE CO.,LTD Abbreviation in English(if any) HTC Legal representative: Zheng Bin II. Contact person and contact manner Secretary of the Board Representative of Stock Affairs Name Wang Gang Wang Caihua Address No. 357 Shiqiao Rd. Hangzhou No. 357 Shiqiao Rd. Hangzhou Tel. 0571-85780198 0571-85780438 Fax. 0571-85780433 0571-85780433 Email. wg@htc.cn wangch@htc.cn III. Other info. 1. Contacts No change to the registered address, office address, postal code, official website, and email address of the Company. For details please find the Annual Report 2018. 2. Information inquiry None of the official presses, website, and place of enquiry has been changed in the semi report period. For details please find the Annual Report 2018. IV. Summary of Accounting Data and Financial Index Are there any retrospective adjustment or restatement of financial information of previous year due to change of accounting policies or correcting of accounting errors? No Increase/decrease This report term Same period last year (%) 5 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Turnover (yuan) 1,920,181,703.03 2,284,130,982.13 -15.93% Net profit attributable to shareholders of the listed company 160,325,133.00 128,510,594.01 24.76% (yuan) Net profit attributable to the shareholders of the listed 131,574,189.68 89,470,726.72 47.06% company and after deducting of non-recurring gain/loss(yuan) Net Cash flow generated by business operation (yuan) -9,340,596.37 557,787,190.73 -101.67% Basic earnings per share (Yuan/share) 0.21 0.17 23.53% Diluted earnings per share (Yuan/share) 0.21 0.17 23.53% Net income on asset, weighted 2.62% 2.18% 0.44% As at the end of the As at the end of last YoY+/-(%) reporting period year Gross assets (yuan) 12,064,555,379.75 11,569,169,903.81 4.28% Shareholders’ equity attributable to shareholders of the listed 6,231,429,574.36 6,007,540,929.16 3.73% company(yuan) V. The differences between domestic and international accounting standards 1. Differences between the net profit and net asset in the financial reports prepared under IAS and Chinese Accounting Standard Not existent 2. Differences between the net profit and net asset in the financial reports prepared under IAS and Chinese Accounting Standard Not existent VI. Non-recurring gain/loss items and amounts In RMB Items Amount Remarks Non-current asset disposal gain/loss(including the write-off part for which assets impairment -498,756.38 provision is made) Governmental Subsidy accounted as current gain/loss, except for those subsidies at with amount or 15,761,589.03 quantity fixed by the national government and closely related to the Company’s business operation. Debt restructuring profit or loss -526,315.79 In addition to normal business with the company effective hedging related business, holders of tradable financial assets, transactions and financial liabilities arising from changes in fair value gains 27,696,303.67 and losses, as well as the disposal of trading of financial assets, trading financial liabilities and available-for-sale financial assets gains return on investment Other non-operating income and expenditure beside for the above items -3,448,280.96 Less: Influenced amount of income tax 6,575,512.32 Amount of influence of minority interests(After tax) 3,658,083.93 6 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Total 28,750,943.32 -- For the Company’s non-recurring gain/loss items as defined in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering their Securities to the Public – Non-recurring Gains and Losses and its non-recurring gain/loss items as illustrated in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering their Securities to the Public – Non-recurring Gains and Losses which have been defined as recurring gains and losses, it is necessary to explain the reason. Not applicable 7 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 III. Outline of Company Business I. Main Business the Company is Engaged in During the Report Period Whether the company needs to comply with the disclosure requirements of the particular industry No As the leading provider of turbo machinery equipment and relevant service in China, our company is mainly famous for designing and producing rotating turbo machinery like industrial steam turbines and gas turbines. Our company, one of the major companies drafting the industrial standard in Chinese domestic industry of industrial steam turbine, has developed into the biggest base to research, develop and produce industrial steam turbines in China and ranks first among industrial steam turbine producers in terms of the market occupancy. Holding the principle “our products should be based on clients’ demands” as our business mode and characteristic, our company designs and produces in accordance with every client’s personal demands so as to meet personalized needs in engineering projects to the utmost. To realize the fast research and development of our products, our company has adopted the advanced modular design technique and, on the other hand, introduces information technique to assist the collaborative production to achieve the resource saving and flexible production. In addition, our company also provides our clients with relevant service such as engineering programs, general engineering contracting, operation and maintenance of our products as well as remote control and so on. Industrial steam turbines use the steam featuring high temperature and high pressure as their working medium so as to convert the thermal energy into mechanical energy to drive various industrial equipments through the rotating steam turbines. As for different objects driven by industrial steam turbines, the steam turbines could be divided into industrial driving steam turbines and industrial power-generation steam turbines. Mainly driving rotating machines like compressors, air blowers, pumps and squeezers, industrial driving steam turbines, as the core power part in numerous large-scale industrial equipments, are always introduced into some industries like oil refining, chemical engineering, chemical fertilizer, building materials, metallurgy, electric power, light industry and environmental production. The industrial power-generation steam turbines, mainly utilized to drive electric generators and provide thermal energy, are mainly adopted in private stations, regional projects of combined heat and power generation, power generation by recycling waste heat in industrial production, urban waster power plants and gas-steam combined cycle power stations in various industrial sectors. The gas turbines produced by our company are mainly used by metallurgical industry to recycle the waste heat from the blast furnace exhaust to generate power. In the gas turbine business, the Company has cooperated with Siemens on the advanced natural gas turbine SGT-800 model-with features of high efficiency, high reliability and low emission, thus to enter the distributed natural gas field. As the general whole-set maker of SGT-800 in China, the company has launched the gas turbine business in respect of the project procurement and the integrated implementation. Hangzhou Steam Turbine has the type selection ability for the distributed energy combined cycle project, has established a complete system of supporting standard and material system, and it can complete the independent processing or matching work for the equipment besides the gas turbine body. In the industrial fields including the cogeneration /combined cycle power plant and the oil & gas project with distributed energy projects that adopt the small and medium gas turbines, the Company not only can provide gas turbine equipment for customers, but also can provide customers with 8 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 complete sets of equipment for gas turbine power plant and the efficient integrated solutions. Especially, it can provide customers with operational support services throughout the product life, and this service model is conductive for the establishment of long-term business cooperation relationships between the company and its customers. As the major producer of industrial equipments in China during the report period, our company is mainly benefited from the following factors in terms of the elements driving our business performance: 1. On the basis of market demands. The relevant market demands fluctuate differently due to various business condition and investment cycles in different industrial fields. The company further made more specified positions toward the market for the products, implemented the differentiated marketing strategy, and integrated the business sectors and tapped into the potential. During the reporting period, the domestic oil refining and chemical investment projects started at multiple points and drove the demand for related equipment manufacturing. The company grasped the growth opportunities in the petrochemical sector, and formulated the flexible price strategies for the fields of low-end and mid-end drive, ensured the market share and continuously consolidated and strengthened the existing market advantages. Adhering to the "Go global" strategy, the Company continued to expand the overseas markets, establish overseas offices and increase its market influence. 2. Innovation and further reform in difficult areas of product technology. Our company continuously improves product technical performance and tackles hard issues in the scientific researches of product structure, core parts, basic design, manufacturing technology, material technology, etc. In addition, basing on clients’ demands, our company launches the study “The Demonstration and Application Project for Packaging Technology of Steam Turbine” to push forward the intelligence of our products and the development of the integration technology. Meantime, the company cooperated with universities, scientific research institutes to build the technological exchange and cooperation platform. 3. Upgrading of industrial structure transformation. The company jointed with Siemens to enter the distributed energy market and enhance the development and utilization of natural gas distributed energy. In the industrial fields including the cogeneration /combined cycle power plant and the oil & gas project with distributed energy projects that adopt the small and medium gas turbines, the Company not only can provide gas turbine equipment for customers, but also can provide customers with complete sets of equipment for gas turbine power plant and the efficient integrated solutions. 4. Brand and market position. The company’s products have a good reputation and extensive brand influence in the domestic market, The company has maintained a leading market share in the domestic industrial drive. The company's products have a high reputation and brand influence in the domestic market. 5.Cost controlling level. As domestic labor costs continue to rise and the price of industrial products continue to decline, the product profitability is facing a severe test. In recent years, the company continuously improves the level of costs controlling by improving the organizational structure, optimizing business processes, enhancing the supply chain controlling, strengthening risk management, raising the efficiency of all the staff and so on. 6.Emphasis on quality engineering and services: promote the key project management, meticulously plan key projects, implement dynamic quality supervision; attach importance to products’ after-sales service market, integrate existing resources to increase after-sales service initiative, extend product value chain, and promote the company’s transformation from manufacturing to service. II. Major Changes in Main Assets 1.Major Changes in Main Assets Main assets Major changes 9 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Mainly caused by the volatility in share price of Hangzhou Bank with the Company’s Equity assets investment and participation Fixed assets No major changes Intangible assets No major changes Mainly caused by the new investment in the current period of the steam turbine Heavy Construction in progress industry project with the progress of the project 2. Main Conditions of Overseas Assets Not applicable III. Analysis On core Competitiveness Whether the company needs to comply with the disclosure requirements of the particular industry No 1. A complete technical innovation system was established. The Company has under its possession of national, provincial, and municipal grade technical centers, a doctorial workstation, and an academician workstation. Close co-operations were carried out with institutions and universities from throughout the country. As the main drafter of national standard on industrial steam turbine, the Company has the newest technical trend under its close observation. The Company is now providing nearly 600 different models of steam turbines to the customers and hold the newest technical system covering the product lines up to 150 MW. Cooperating with SIEMENS in the field of gas turbine, our company has been capable of selecting the model of the combined recycling project of distributed energy. In addition, our company has also been able to finish the independent processing or supporting work which doesn’t need to depend on the gas turbine machine. Secondly ,The advantages of solutions. The modular design of industrial steam turbine and the production pattern featuring parallelization production enable our company to give considerations to the cost, date of delivery and clients’ demands in the process of production in accordance with clients’ personalized designs, thereby making our company capable of advancing with the development trend of individual requirements. Our company has always been devoting to the localization in terms of the gas turbine business so as to achieve the localized one-stop service step by step including the sale, production, installation, debugging, operation, training and after-sale service. Our company has always been striving to provide clients with the complete equipment of gas turbine power station and the efficient total solutions. Thirdly, the Company has established strategic co-operations with main customers in the country. Further marketing approaches were carried on by involving itself in the customers’ value. A sound and steady image has been set up in the domestic steam turbine market. In the global market, the Company has acquired multiple important certifications and has established a primary global recognition. Fourthly, the Company has its complete service providing system. The Company is not only capable to provide onsite 24-hour service for the Company’s own products, but also accumulated rich experiences in technical maintenance and reengineering of other manufacturers’ products. Fifthly, the Company has cultivated a significant advantage in human resources. Great importance has been attached to construction of work teams with collection of high-end workforce in the areas of research & development, At the same time, our company values the cooperation with universities. “Zhejiang Technical Association for Gas Turbines in Equipment Manufacturing Industry” was officially founded jointly by our company and Zhejiang University and other scientific research institutions to build a new platform for integration of production and research in terms of gas turbine technology. The Company has cultivated a significant advantage in human resources. Great importance has been attached to construction of work teams with collection of high-end workforce in the areas of research & development, designing, technique, testing, and quality control. An excellent workforce provides a sound foundation to lift quality and services. 10 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 IV. Performance Discussion and Analysis 1.General During the reporting period, the company focused on the annual work policy of "cohesion strategy, overall relocation, deepening management and rooted culture", increased technical investment, fight for market orders, orderly promoted heavy industry construction, actively planned relocation preparations, promoted key management work, and jointly created the core values of the enterprise. In the first half of 2019, the company realized operating income of 1,920,181,703.03 yuan, total profit of 221,442,313.03 yuan and net profit of 184,666,913.74 yuan, of which net profit attributable to shareholders of listed companies was 160,325,133.00 yuan. Compared with the same period of last year, the operating income decreased by 15.93% year on year, total profit increased by 15.13% year on year, net profit increased by 15.15% year on year, and net profit attributable to shareholders of listed companies increased by 24.76% year on year. 1. Cohesion strategy Under the guidance of the "13th Five-Year Plan" and the medium-term adjustment plan, the company has made every effort to push forward the strategic landing. It strengthens investment and cooperation management, studies and explores a new mode of cooperation in strategic suppliers. It pushes forward the construction of the "service big data" platform and put it into trial operation on key projects, laying a good foundation for the company to realize the transformation and upgrading of "manufacturing service". 2. Overall relocation The company pushed forward the construction of major projects as planned and made full preparations for the relocation. So far, the company's steam turbine power building has basically completed the renovation work and is expected to be put into full use before the end of the year. The steam turbine heavy industry construction project continues to advance. At present, the installation of steel structures such as the assembly plant and the rotor plant has been basically completed, the construction of the main building of the joint station has been completed, and the construction of boiler foundation, water treatment equipment foundation and circulating water tank has been basically completed, which basically meets the requirements for equipment mobilization and installation. As of the reporting period, the company has received a total of 620,559,021.76 yuan in relocation compensation. 3. Innovation driven During the reporting period, the company continued to promote the development and design of new products and scientific research and technological research work, completing 4 new product development and 25 scientific research and technological research projects. The main new products and research and development projects completed include the development of NGS63/50 double-shaft high-speed back pressure turbine, the development 11 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 of 25MW 60HZ high-efficiency waste heat utilization turbine, the development of K5.6 axial and lower exhaust cylinders, the development of GK3.6A high-efficiency water-cooled low-pressure stage group, etc. From January to June 2019, the company applied for 6 invention patents, 3 utility model patents and 1 software copyright. So far, Dalian Hengli Petrochemical, the world's largest industrial turbine with the largest power, has successfully tested the steam turbine used to drive the cracking gas compressor in an ethylene plant with an annual output of 1.5 million tons during the reporting period, which indicates that the design and manufacturing capacity of the domestic industrial drive steam turbine of Hangzhou Steam Turbine has reached the world's top level, and is also another major technological breakthrough in the localization of key equipment in the industrial plant of our country. Meanwhile, the subcritical parameter steam turbine has been steadily progressing with the trial production of the first set of new products, and the Qinghai central control solar Delingha photothermal project has been running smoothly at full capacity, which further improves the company's product market competitiveness. During the reporting period, the company continued to carry out research on the company's intelligent manufacturing and digital workshop, and continuously explored new technical solutions according to the company's design and production characteristics, including design of equipment data collection, online testing, logistics storage center, intelligent extension of after-sales service, etc. In order to meet the company's need to transform and upgrade from manufacturing industry to manufacturing service industry and realize its strategic vision of "becoming a world-class industrial driving service provider", the company has jointly established 5G Intelligent Manufacturing Industrial Application Innovation Laboratory with China Mobile and Huawei, carried out research and development on blade scanning detection and cylinder body blank shape scanning forming projects, created an application demonstration of 5G discrete industrial intelligent manufacturing, and seized the historic opportunity of a new round of industrial digital transformation. In order to integrate core technologies in related fields of gas turbine machinery industry chain and drive the transformation and upgrading of high-end equipment manufacturing industry in Zhejiang province, the company led 7 gas turbine industry chain related enterprises to jointly invest in the establishment of Zhejiang Ranchuang Turbine Machinery Co., Ltd. and to build a joint research platform for gas turbine manufacturing and upstream and downstream technologies. 4. Market consolidation During the reporting period, affected by the policy adjustment of the national energy structure, the power industry formed a market environment of excess capacity. In the face of weak international oil prices and a sharp drop in orders in the coal chemical industry due to low investment, the company continued to consolidate the advantages of the share of reactive power generation back-pressure units in Jiangsu, Zhejiang and Shandong, smoothing the impact of the drop in coal chemical market demand on us. During the reporting period, domestic oil refining investment continued to grow at a moderate rate, chemical industry, especially the one million ton ethylene project, emerged in a concentrated way, the company 12 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 implemented a precise marketing strategy, using the company's product advantages to focus on consolidating the market share in the petrochemical industry and obtaining orders for the key project of Gulei petrochemical refining integration, which is of far-reaching significance for promoting the deep integration of cross-strait petrochemical industries and promoting the peaceful development of the two straits. Meanwhile, around the national "the belt and road initiative" strategy, the company should "go out and welcome in", focus on the overall market situation, concentrate superior resources, and improve product technology and service level. In the field of gas turbine, the company has been committed to becoming a full cycle service provider in the field of gas turbine. The company continues to increase the breadth and depth of cooperation with Siemens, to enhance the core competitiveness of gas turbine products according to market demand, and to further explore the deep cooperation between the two parties in the fields of gas turbine manufacturing, research and development, and after sales service, etc. 5. Deepening management The company orderly pushes forward the landing of the annual "Top Ten Key Management Tasks". It deepens the "lean production", formulates the Lean Production Management Measures, adjustS the lean production organization structure, and carries out the production line lean team building, creative kung fu and other lean on-site core basic work. The company focuses on conducting special internal audit for the construction projects of steam turbine heavy industry and steam turbine power building. It increases efforts in bidding for the disposal of waste materials and standardize the cleaning of materials during the relocation of the company. The company strengthens assessment management on personnel construction and training. It increases the training of young cadres and reserve cadres, revises the assessment management methods for middle-level cadres, and improves the cadre assessment mechanism. Meanwhile, the company pays attention to improving the pertinence of personnel training, vigorously promotes the spirit of craftsmen, and trains outstanding national, provincial and municipal craftsmen model workers; Optimizes the talent development environment and cultivates professional skilled talents through various vocational skills competitions. It strengthens the cultivation of lean talents, stimulates the innovative potential of talents, and make new contributions to the transformation and upgrading of enterprises. 6. Rooted culture During the reporting period, the company comprehensively promoted the corporate culture construction project with the theme of "focus on power to secure the future", and established the company's mission: to drive industrial civilization and sustainable China power, and the company's vision: to become a world-class industrial drive service provider. And around the core enterprise values of "customer first, pioneering and innovative, craftsman spirit, leading by example, team cooperation", the company continued to carry out corporate culture creation activities, conduct in-depth analysis of corporate mission, vision and core values based on the company's 13 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 long-term development, and jointly explore the company's new culture in the new era. 2.Main business analysis Refer to relevant contents of “1.Summarization” in “Discussion and Analysis of Management”. Changes in the financial data In RMB This report period Same period last year YOY change(%) Cause change Turnover 1,920,181,703.03 2,284,130,982.13 -15.93% Operating cost 1,366,404,401.26 1,612,116,152.26 -15.24% Sale expenses 86,895,939.32 77,008,302.22 12.84% Administrative expenses 235,168,325.98 237,456,060.16 -0.96% Mainly due to the increase in interest Financial expenses -4,254,503.16 3,177.07 -134,012.79% income and the decrease in exchange losses during the period Income tax expenses 36,775,399.29 31,977,871.82 15.00% R & D Investment 116,760,942.52 151,349,561.03 -22.85% It is mainly due to the decrease in cash Cash flow generated by -9,340,596.37 557,787,190.73 -101.67% receipts of goods sold in the current period business operation, net compared with the same period last year. It is mainly due to the increase in Net cash flow generated redemption of financial products, the 682,424,067.27 -509,012,778.80 234.07% by investment decrease in new purchases and the decrease in total holdings. Net cash flow generated It is mainly due to the increase in foreign -248,157,520.13 -30,496,335.59 -713.73% by financing dividends and the decrease in bank loans. Net increasing of cash and 424,218,280.91 17,761,752.63 2,288.38% In combination with the above reasons cash equivalents It is mainly due to the year-on-year decrease Taxes and surcharges 13,458,140.99 29,819,229.04 -54.87% in VAT paid in the current period. It is mainly due to the receipt of dividends Investment income 99,460,322.66 37,144,607.44 167.77% from Hangzhou Bank. It is mainly due to the adjustment of the reporting items of the new financial Fair value changes income -1,474,755.34 standards that began to be implemented in the current period. It is mainly due to the return of the original Impairment loss of assets 6,423,806.70 -43,111,352.82 114.90% provision for impairment of assets resulted 14 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 from debt restructuring in the current period and recovery of long-term accounts receivable. It is mainly due to the decrease in the Non-operating income 744,839.16 4,189,726.48 -82.22% current supplier's liquidated damages and quality compensation income. It is mainly due to the increase in Non-operating expenses 5,220,762.28 2,591,154.54 101.48% compensation expenditure in the current period. It is mainly due to the decrease of financial Monetary funds 1,819,859,022.91 1,382,392,009.59 31.65% investment in the current period and the receipt of compensation for demolition. It is mainly due to the adjustment of the Transactional financial reporting items of the new financial 578,769,000.00 assets standards that began to be implemented in the current period. It is mainly due to the announcement of Dividend receivable 84,526,094.10 16,557,292.60 410.51% dividends by Hangzhou Bank. It is mainly due to the adjustment of the reporting items of the new financial Other current assets 65,115,936.29 1,188,747,955.74 -94.52% standards that began to be implemented in the current period. It is mainly due to the adjustment of the Available for sale of reporting items of the new financial 0.00 2,130,076,555.20 -100.00% financial assets standards that began to be implemented in the current period. It is mainly due to the adjustment of the Other equity Instrument reporting items of the new financial 2,264,720,465.98 0.00 investment standards that began to be implemented in the current period. It is mainly due to the adjustment of the Other non-current reporting items of the new financial 131,881,883.86 0.00 Financial assets standards that began to be implemented in the current period. It is mainly due to the continuous investment in the new factory construction Construction in process 659,588,447.28 454,767,328.93 45.04% project of heavy industry in the current period. 15 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 It is mainly due to the reduction of Short-term borrowing 97,500,000.00 139,600,000.00 -30.16% short-term loans in the current period. It is mainly due to the reduction of unpaid Tax payable 22,926,791.79 62,405,200.62 -63.26% VAT and enterprise income tax at the end of the current period. It is mainly due to the decrease in bank loans in the current period and the Interest payable 100,958.90 437,314.72 -76.91% corresponding decrease in interest paid on loans. It is mainly due to the demolition Long-term payable 785,666,859.28 474,876,451.26 65.45% compensation received in the current period. Significant changes in the profit structure or profit source of the Company during the reporting period Nil Main business composition In RMB Increase/decreas Increase/decrease Increase/decrease e of gross profit Gross of business cost of revenue in the rate over the Turnover Operation cost profit over the same same period of the same period of rate(%) period of previous previous year(%) the previous year (%) year (%) On Industries Boiler and power machine 1,728,016,908.35 1,233,115,640.06 28.64% -15.35% -12.58% -2.26% manufacture Nonferrous metal alloy 84,257,416.72 66,391,765.42 21.20% 26.98% 27.88% -0.55% manufacture Other 107,907,377.96 66,896,995.78 38.01% -38.86% -55.32% 22.84% Subtotal 1,920,181,703.03 1,366,404,401.26 28.84% -15.93% -15.24% -0.58% On Products Industrial steam turbine 1,465,469,922.92 1,047,420,373.19 28.53% -16.57% -13.97% -2.16% Casting products 84,257,416.72 66,391,765.42 21.20% 26.98% 27.88% -0.55% Auxiliary machinery 78,122,117.16 67,840,098.87 13.16% -3.21% -3.29% 0.08% Complete sets of waste 49,244,940.88 47,384,746.06 3.78% -8.72% 6.96% -14.10% heat power stations Part 135,179,927.39 70,470,421.94 47.87% -9.96% -10.28% 0.19% Other 107,907,377.96 66,896,995.78 38.01% -38.86% -55.32% 22.84% 16 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Subtotal 1,920,181,703.03 1,366,404,401.26 28.84% -15.93% -15.24% -0.58% District Domestic 1,711,280,921.02 1,197,414,715.29 30.03% -21.93% -22.45% 0.47% Overseas 208,900,782.01 168,989,685.97 19.11% 126.82% 148.04% -6.92% Subtotal 1,920,181,703.03 1,366,404,401.26 28.84% -15.93% -15.24% -0.58% 3.Non-core business analysis In RMB Proportion Sustainable Amount in total Explanation of cause (yes or no) profit Mainly due to the investment income of wealth management Investment income 99,460,322.66 44.91% products and dividends of Hangzhou Bank this year Fair value changes It is mainly due to the change in fair value of the shares held in -1,474,755.34 -0.67% income the current period. It is mainly due to the reversal of bad debts originally accrued for Impairment of assets -6,423,806.70 -2.90% current accounts receivable. It is mainly due to the contract compensation paid by the supplier Non-operating income 744,839.16 0.34% received in the current period. Non-operating expenses 5,220,762.28 2.36% It is mainly due to compensation and debt restructuring losses. This is mainly due to the social security refund obtained in the Other income 15,761,589.03 7.12% current period. IV. Condition of Asset and Liabilities 1.Condition of Asset Causing Significant Change In RMB End of Reporting period End of same period of last year As a As a Change in Reason for percentage percentage percentage( Amount Amount significant change of total of total %) assets(%) assets(%) Monetary fund 1,819,859,022.91 15.08% 1,230,803,798.79 10.83% 4.25% Accounts receivable 2,060,368,351.36 17.08% 1,921,794,558.44 16.91% 0.17% Inventories 2,222,781,933.26 18.42% 2,055,625,339.61 18.09% 0.33% Long-term equity 10,261,439.29 0.09% 5,800,000.00 0.05% 0.04% 17 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 investment Fixed assets 761,603,992.58 6.31% 540,574,836.70 4.76% 1.55% Construction in 659,588,447.28 5.47% 400,143,683.78 3.52% 1.95% process Short-term-Borrowin 97,500,000.00 0.81% 140,000,000.00 1.23% -0.42% g Long-term borrowing 22,600,000.00 0.19% 122,800,000.00 1.08% -0.89% 18 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 2.Asset and Liabilities Measured by Fair Value In RMB Impairment Profit/loss on fair value Cumulative fair value provided in Purchased in this Sold in this reporting Financial assets Opening balance changes in this changes charged to this Closing balance reporting period period reporting period equity Reporting period 3.Available-for –sale financial assets 1. Transactional financial 1,275,070,030.80 -1,474,755.34 0.00 0.00 1,173,060,608.40 1,736,005,000.00 710,650,883.86 assets 4.Other equity Instrument 2,011,876,524.40 252,843,941.58 1,873,766,425.98 2,264,720,465.98 investment Subtotal of financial assets 3,286,946,555.20 251,369,186.24 1,873,766,425.98 0.00 1,173,060,608.40 1,736,005,000.00 2,975,371,349.84 Total of the above 3,286,946,555.20 251,369,186.24 1,873,766,425.98 0.00 1,173,060,608.40 1,736,005,000.00 2,975,371,349.84 Financial Liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Significant changes in the measurement attributes of the main assets in this Reporting Period No 3. Restricted asset rights as of the end of this Reporting Period Items End of Book value Reason Monetary fund 133,453,924.80 Utilized for issuing bank acceptance bill, L/C and L/G. Note receivable 62,824,000.00 Utilized for issuing bank acceptance bill 19 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Fixed assets Utilized for pledging to obtain the bank loan and guaranteeing the investment 118,662,101.07 loan for China Development Funds Invisible assets Utilized for pledging to obtain the bank loan and guaranteeing the investment 84,981,463.59 loan for China Development Funds Construction in process 420,170,711.42 Utilized for guaranteeing the investment loan for China Development Funds Dividend receivable 27,827,292.60 Utilized for guaranteeing the investment loan for China Development Funds Other equity Instrument 375,516,399.00 Utilized for guaranteeing the investment loan for China Development Funds investment Total 1,223,435,892.48 V. Investment situation 1. General Investments made in same period of last Investments made in the reporting period +/- % year 229,114,374.05 167,348,162.00 36.91% 2.Condition of Acquiring Significant Share Right Investment during the Report Period Not applicable 3.Situation of the Significant Non-equity Investment Undergoing in the Report Period In RMB Accrued Reasons for not Accrued Actual Turbine Anticip Realized Reaching the Self-buil General equipment Investment Amount Capital Project Disclosure Disclosure Project name heavy Yes ated Income up to Planned date Index t manufacturing up to the End of Source schedule industry income the End of Schedule and Reporting Period Reporting Anticipated 20 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Period Income Turbine heavy General equipment Self-built Yes 201,437,083.52 683,969,135.36 Self 39.46% No industry manufacturing Total -- -- -- 201,437,083.52 683,969,135.36 -- -- 0.00 0.00 -- -- -- 4.Investment of Financial Asset (1)Securities investment Purcha Mode of Sale se Gain/loss Stock accounti Book value balance at Changes in fair amount Book value balance at Sauce Security Security Initial investment Cumulative fair value amoun of the Accounting Abbreviatio ng the beginning of the value of the this in the the end of the reporting of the category code cost changes in equity t in the reporting items n: measure reporting period period this period shares this period ment period period Domesti Other equity c and Hangzhou Self 600926 390,954,040.00 FVM 2,011,876,524.40 252,843,941.58 1,873,766,425.98 2,264,720,465.98 Instrument foreign Bank funds investment stocks Domesti Financial Debt c and LUTIANHU 3,756, assets 000912 3,756,608.40 FVM 0.00 -1,474,755.34 2,281,853.06 instru foreign A 608.40 available for ment stocks sale 3,756, Total 394,710,648.40 -- 2,011,876,524.40 251,369,186.24 1,873,766,425.98 0.00 0.00 2,267,002,319.04 -- -- 608.40 Disclosure Date of Announcement on Securities Investment Approved by the Board of Directors Disclosure Date of 21 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Announcement on Securities Investment Approved by the Shareholders Meeting(If any) The Lutianhua shares held by the Company are obtained by debt-paying by the customer. 22 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 (2)Investment in Derivatives □ Applicable √ Not applicable The Company had no investment in derivatives in the reporting period. VI. Sales of major assets and equity 1. Sales of major assets □ Applicable √ Not applicable The Company had no sales of major assets in the reporting period. 2.Sales of major equity Not applicable Ⅶ. Analysis of the Main Share Holding Companies and Share Participating Companies √ Applicable □ Not applicable Situation of Main Subsidiaries and the Joint-stock Company with over 10% net profit influencing to the Company In RMB Leading Company Company Name products and Registered capital Total assets Net assets Operating Income Operating profit Net Profit type services Trade of Zhejiang Steam Turbine Packaged Subsidiarie packaged 51,000,000.00 285,022,490.11 93,676,646.83 132,931,775.76 17,507,093.76 14,770,529.69 Technology Development Co., Ltd. s equipment Hangzhou Zhongneng Steam Turbine Power Subsidiarie Manufacturing 92,500,000.00 1,141,670,374.64 323,261,297.51 434,209,306.91 25,091,401.15 17,020,437.04 Co., Ltd. s Subsidiarie Hangzhou Steam Turbine Casting Co., Ltd. Casting 29,500,000.00 517,297,871.18 239,359,212.84 201,953,546.36 -4,818,441.91 -4,923,525.49 s 23 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Hangzhou Steam Turbine Machinery & Subsidiarie Manufacturing 30,000,000.00 279,213,048.59 140,961,770.15 134,372,561.91 44,513,298.05 31,959,387.07 Equipment Co., Ltd. s Hangzhou Steam Turbine Auxiliary Machine Subsidiarie Manufacturing 80,000,000.00 767,177,545.84 209,709,416.47 238,328,136.56 9,134,251.29 6,346,621.51 Co., Ltd. s Subsidiarie Commerce & Zhejiang Turbine Import & Export Co., Ltd. 20,000,000.00 220,674,703.32 50,481,849.46 58,411,432.33 -3,559.66 51,137.44 s trade Hangzhou Steam Turbine Heavy Industry Co., Subsidiarie Manufacturing 1,000,000,000.00 961,405,332.32 947,308,770.53 3,211,258.48 4,102,620.76 3,026,188.63 Ltd. s Subsidiaries obtained or disposed in the reporting period Not applicable VIII.Structured vehicle controlled by the Company Not applicable 24 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 IX. Prediction of business performance for January -September 2019 Estimation of accumulative net profit from the beginning of the year to the end of next report period to be loss probably or the warning of its material change compared with the corresponding period of the last year and explanation of reason. Not applicable X. Risks facing the Company and countermeasures 1. Market risks In view of distinct excess production capacity of domestic turbines, the market competition will be further intensified, and the product distribution of the Company will be further impacted. Relying on technological innovation, the company will actively highlight the core technology advantages, expand the marketing channels, improve the product quality, enhance the end service capabilities, continuously increase the added-value of products and vigorously tap into the potential demands to positively respond to the market and defuse the market risks. 2. Contract execution risk As the market volatility becomes more intensified, there are more frequent changes in the contract during the execution of the contract for the company, and delays and suspensions of the project schedule happen from time to time, which will have a large impact on the internal realization process of production of the company, and meanwhile it also increases the cost of the company’s contract performance and the contract risk. The company will further strengthen the connection between production and sales, improve the speed and level of the company's response to the market, and well control the contract execution risk. 3. Accounts receivable risk With the increasing risk in the business downturns and investment projects in some customers of the downstream industry, the company's receivables recovery has more risk, and the average age of accounts tends to increase, which will have a large impact on the company's operating results. The company will implement the customer credit management, strengthen the contract signing and perform the risk control, increase the assessment of accounts receivable, and reduce the adverse impact of overdue receivables. 4. Exchange rate risk In 2019, the Sino-US trade friction was continuously upgraded. In 2019, the international markets remain volatile.The expansion of the company's international procurement and international sales business will cause the company's international balance of payments to be affected by exchange rate fluctuations, and there is a certain risk of exchange loss. With the increase in the two-way volatility of the RMB exchange rate, the uncertainty of foreign exchange gains and losses has been increased. The company will refer to the exchange rate volatility cycle and adopt appropriate exchange rate risk management tools to minimize exchange loss. 5. The company's profitability decline risk With the adjustment and changes in the market structure, the product structure of the Company in 2019 has been changed compared with that in 2018. There is a risk that the Company's operating sales will decline in 2019 25 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 with fluctuation in the profitability of products at the same time. the Company will strive to improve the internal management, reduce the operating costs and increase the operational efficiency to resolve the risk of declining profitability. 6. Overseas market risk During the "Thirteenth Five-Year Plan" period, the company will vigorously implement the "go global" strategy, further expand overseas target markets, and increase the company's share and influence in the international market. However, at present, the overseas target market is affected by geopolitical conflicts, unpredictable changes of internal political and economic situation and trade barrier policies in the region, thus there is great uncertainty in the implementation of overseas market strategies. The company will increase market research efforts, actively demonstrate countermeasures, and explore the development path of business localization. 7. Operating environment change risk The plant will be comprehensively relocated in 2019 for the Company with inevitable large impact and influence on the manufacturing. Although the company will formulate the plans of relocation safety, security and emergency countermeasures to avoid various issues arising from the equipment disassembly, cargo transportation and storage, turnover and so on, the possibility of various types of personnel injuries, loss of goods and instability incidents will still exist in the relocation process. Therefore, the company will ensure the smooth and orderly implementation of all aspects of comprehensive security, safety production and logistical support in the relocation and reconstruction process. 26 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 V. Important Events 1. Annual General Meeting and Extraordinary Shareholders’ Meetings in the Reporting Period 1.Annual General Meeting Investor Disclosure Meeting Type participation Convened date Index to disclosed information date ratio Resolutions of the first provisional Provisional Shareholders’ general Meeting of 2019 First Provisional Shareholders’ Shareholder January January (Announcement No. 2019-08) released by 72.42% general meeting of 2019 s’ general 29,2019 30,2019 Securities Times, Shanghai Securities Daily, meeting Hong Kong Commercial Daily, and Http://www.cninfo.com.cn Resolutions of the Shareholders’ Annual Annual Meeting 2018 (Announcement No. 2019-41) Shareholder May 2018 Shareholders’ general meeting 66.98% May 10,2019 released by Securities Times, Shanghai s’ General 10,2019 Securities Daily, Hong Kong Commercial Meeting Daily, and Http://www.cninfo.com.cn 2. Preferred stockholders restored voting rights to request to convene Provisional Shareholders’ Meeting. Not applicable II. Proposal for profit distribution and converting capital Reserve into share actual for the reporting period For the reporting period, the Company plans not to distribute cash dividends or bonus shares or convert capital reserve into share capital. III. The fulfilled commitments in the reporting period and under-fulfillment commitments by the end of the reporting period made by the company, shareholder, actual controller, acquirer, director, supervisor, senior management personnel and other related parities. Not existent 27 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 IV. Particulars about engagement and disengagement of CPAs firm Whether the semi-annual financial report had been audited? The semi-annual report was not audited. V. Explanations given by board of directors and supervisory board regarding “ Modified auditor’s” Issued by CPAs firm for the reporting period Not applicable VI. Explanations given by Board of Directors regarding “ Modified auditor’s Report” Issued for last year Not applicable VII. Bankruptcy and restructuring No such cases in the reporting period. VIII. Lawsuit Significant lawsuits or arbitrations □ Applicable √ Not applicable No such cases in the reporting period. Other legal matters Amount Litigation Forming Date Index involved Litigation (arbitration) Basic conditions of litigation of the Litigation (arbitration) judgement of of (Ten (arbitration) judgement (arbitration) predicted result and influence disclos disclos thousand progress execution debt ure ure yuan ) condition On September 5, 2018, Henan According to the civil judgment of Junhua Development Co., Ltd On May 22, the Intermediate People's Court of (hereinafter referred to as Henan The Company has 2019, the Zhumadian City Henan Province Junhua Company), on the ground of [No. 215 -(2018) Yu 17 Civil appealed to the Intermediate production equipment failure Action], it’s ruled that Xi'an Higher People's People's Court leading to production stoppage, Shangu Company and the Court of Henan sued the equipment supply and of Zhumadian Company shall compensate Province, and 3,220.25 No presently the case service general contractor-China City Henan 32,202,504.572 yuan to Henan General Mechanical Engineering Junhua Company within 15 days has not yet been Province made a notified of the trial Co., Ltd, the related equipment after the judgment came into manufacturer Xi'an Shangu Power first-instance effect, with rejecting Henan time. Co., Ltd (hereinafter referred to as civil judgment. Junhua Company’s other requests, Xi'an Shangu Company) and the and for the case acceptance fee of Company, claiming the equipment 272,800 yuan, Henan Junhua 28 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 manufacturer Xi'an Shangu Company shall bear 69,987 yuan Company and the Company to and Xi'an Shangu Company and jointly compensate the production the Company shall bear 202,813 equipment stoppage loss of 44 yuan, and Xi'an Shangu Company million yuan and equipment and the Company shall bear the repairing costs of 2.2 million yuan preservation fee of 5,000 yuan. and other costs involved in the litigation. IX. Punishments and rectifications Not existent X. Credit conditions of the Company as well as its Controlling shareholder and actual Controller Not existent XI.Equity incentive plans, employee stock ownership plans or other incentive measures for employees Not existent 29 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 XII. Material related transactions 1. Related transactions in connection with daily operation Whether Principle Index of Amount of Ratio in Trading limit over the Market price Subjects of the of pricing informat Type of Price of Way of of similar Related parties Relationship related the related trade ( Ten similar approved(Ten approved Date of disclosure ion trade trade payment trade transactions transaction disclosur available s thousand) trades thousand) limited or e not (Y/N) Hangzhou Hangfa Power Generating Affiliate of the Purchase of Fair and Market Bank Not Generators 8,097.96 17,672.41 No January 30,2019 2019-08 Equipment Co., Group goods just price Ltd. transfer applicable Related Hangzhou Steam transactions Turbine Affiliate of the freight, repairing Fair and Market Bank Not Automobile Sales Group to procure fee just price 3,044.35 4,556.00 No January 30,2019 2019-08 Service Co., Ltd. transfer applicable goods / services Total -- -- 11,142.31 -- 22,228.41 -- -- -- -- Details of any sales return of a large amount No Give the actual situation in the report period where a forecast had been made for the total amounts of routine related-party No transactions by type to occur in the current period(if any) Reason for any significant difference between the transaction price No and the market refernce price (if applicable) 30 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 2. Related-party transactions arising from asset acquisition or sold No such cases in the reporting period. 3. Related-party transitions with joint investments For details, See 5, “other significant related transactions”. 31 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 4. Debts and credits with related parties Nil 5. Other material related transactions 1.The company and Hangzhou Steam Turbine Power Group Co., Ltd. and Shanghai Relian Steel Trading Co., Ltd. jointly invested Hangzhou Juyuan Asset Management Co., Ltd., signed the "Jianyuan Xinxing No.9 Private Equity Fund" fund contract, and used its own funds to subscribe the fund-share of Jianyuan Xinxing No.9 Private Equity Fund. The website to disclose the interim announcements on significant related-party transactions 1. In order to develop, drive and guide the development of core technologies in the relevant fields of the gas turbine machinery industry chain, and promote the transformation and upgrading of high-end equipment manufacturing industry in Zhejiang Province, the Company and Hangzhou Steam Turbine Power Group Co., Ltd. , Hunan Chongde Industrial Technology Co., Ltd., Hengfeng Tools Co., Ltd., Mechanical Science Research Institute Zhejiang Branch Co., Ltd., Hangzhou Bohua Laser Technology Co., Ltd and Zhejiang Hengying Power Technology Co., Ltd initiated the establishment of Zhejiang Ranchuang Turbine Machinery Co., Ltd. Date of disclosing Description of the website for Description of provisional announcement provisional announcement disclosing provisional announcements Announcement on Joint External Investment and Related www.cninfo.com.cn) ( Announcement February 26,2019 Transactions with Related Parties No.:2019-11) XIII. Particulars about the non-operating occupation of funds by the Controlling shareholder and other related parties of the Company The company was not involved in the non-operating occupation of funds by the controlling shareholder and other related parties during the reporting period. XIV. Significant contracts and execution 1.Entrustments, contracting and leasing (1)Entrustment No such cases in the reporting period. (2)Contracting No such cases in the reporting period. 32 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 (3)Leasing No such cases in the reporting period. 2.Significant guarantees (1)Guarantees Ten thousand yuan External Guarantee (Exclude controlled subsidiaries) Com Guarant Relevant plete ee Date of disclosure Amount impl for happening Actual date/No. of of eme associate Name of the Company (Date of mount of Guarantee type Guarantee term the Guarant ntati d signing guarantee guaranteed ee on parties agreement) amount or (Yes or not no) Two years from Hangzhou Steam Turbine December the date of October 22,2016 20,800 20,800 Mortgage No Yes Power Group Co., Ltd 28,2016 expiration of the principal debt Total amount of outward guarantee Total amount of outward guarantee approved 0 actually incurred in the report period 0 in the report period(A1) (A2) Total balance of actual Total of external guarantee 20,800 external guarantee at 20,800 approved at Period-end(A3) Period-end(A4) Guarantee of the Company for the controlling subsidiaries Relevant Date of Complete Guarantee disclosure Amount Name of the happening Actual implemen for date/No. of of Guarantee Company (Date o mount of Guarantee term tation associated the guarante type guaranteed signing guarantee or parties guaranteed e agreement) not (Yes or no) amount Two years Hangzhou Steam The joint from the date Turbine Casting May 18,2019 2,000 June 13,2019 1,050 liability of expiration of No No Co., Ltd. guaranty the principal debt Hangzhou Steam The joint Two years Turbine Casting May 18,2019 3,000 June 21,2019 820 liability from the date No No Co., Ltd. guaranty of expiration of 33 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 the principal debt Total of actual guarantee Total of guarantee for subsidiaries 5,000 for subsidiaries in the 1,870 approved in the Period (B1) Period (B2) Total of actual guarantee Total of guarantee for subsidiaries 5,000 for subsidiaries at 1,870 approved at Period-end (B3) Period-end (B4) Guarantee of the subsidiaries for the controlling subsidiaries Relevant Date of Complete Guarantee disclosure Name of the Amount happening Actual implemen for date/No. of Guarantee Guarantee Company of (Date o mount of tation associated the type term guaranteed guarantee signing guarantee or parties guaranteed agreement) not (Yes or no) amount Two years Hangzhou Guoneng The joint from the date June Steam Turbine 10,000 June 20,2019 1,778.61 liability of expiration No No 25,2019 Engineering Co., Ltd. guaranty of the principal debt Total amount of guarantee to Total guarantee quota to the the subsidiaries actually subsidiaries approved in the reporting 10,000 1,778.61 incurred in the reporting period (C1) period (C2) Total balance of actual Total guarantee quota to the guarantee to the subsidiaries at subsidiaries approved at the end of 10,000 1,778.61 the end of the reporting period the reporting period (C3) (C4) Total of Company’s guarantee(namely total of the large three aforementioned) Total of guarantee in the Period Total of actual guarantee in 15,000 3,648.61 (A1+B1+C1) the Period(A2+B2+C2) Total of actual guarantee at Total of guarantee at Period-end 35,800 Period-end 24,448.61 (A3+B3+C3) (A4+B4+C4) The proportion of the total amount of actually guarantee in the net 3.92% assets of the company(A4+B4+C4) Including : Amount of guarantee for shareholders, actual controller and its 20,800 associated parties(D) The debts guarantee amount provided for the 10,000 Guaranteed parties whose assets-liability ratio exceed 34 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 70% directly or indirectly(E) Proportion of total amount of guarantee in net assets of the company 0 exceed 50%(F) Total guarantee Amount of the abovementioned guarantees(D+E+F) 30,800 Explanations on possibly bearing joint and several liquidating Nil responsibilities for undue guarantees ( If any) Explanations on external guarantee against regulated procedures(If Nil any) Description of the guarantee with complex method Hangzhou Heavy Machinery Co., Ltd, which is the company's subsidiary, had made an application of special construction funds of 208 million to China Development Fund Co.,Ltd, and it has signed the four-party China Development Fund Investment Contract with China Development Fund ,the company and Hangzhou Steam Turbine Group Co.,Ltd. In order to ensure the performance of the "Investment contract" by Hangzhou steam group, the company and the Heavy Machinery Co., Ltd provide guarantee for Hangzhou Steam Group in the forms of pledge and mortgage. The contents is detailed in the Announcement on External Guarantee of Hangzhou Steam Turbine Co., Ltd. announced on October 22, 2016 at the website designated by the Shenzhen Stock Exchange (http // www.cninfo.com.cn). (Announcement No. 2016-75) (2)Illegal providing of external guarantees No illegal providing of external guarantees in the report period. 3. Other significant contracts No such cases in the reporting period. XV.Social responsibilities 1.Major environmental protection Listed company and its subsidiary belongs to the key pollution enterprise listed by Department of Environmental Protection No Neither the company nor its subsidiaries belong to the key pollutant discharge units announced by the environmental protection department. The company has formulated and perfected the environmental management systems and control procedures for various types of waste water, waste gas, waste slag, and noise in accordance with relevant environmental laws and regulations and relevant standards promulgated by the national and local governments. The company has imported ISO14001 environmental management system since 2006 and the system has been operated effectively for more than ten years. Currently, the company has adopted the clean production management and launched the clean production audits, which not only reduces consumption and increases efficiency, but also reduces the pressure and cost of end-of-pipe management. In terms of environmental greening, after years of meticulous maintenance, the company has become a garden-style enterprise. The company's environmental management system has been in operation for many years, and it has been strictly abiding by the relevant laws and regulations of the state and the principle of continuous improvement. Each year, the company formulates the annual environmental protection goals and formulates the environmental 35 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 management plans. The company also has a complete and effective management system for waste water, waste gas, waste residue and noise and other waste management. Over the years, there has been no incident of environmental pollution and emissions exceeding the standard. 2.Implementation of the social responsibility of precise poverty relief (1) Precision poverty alleviation planning The company participates in the “Lianxiangjiecun” helping and supporting activities in Hangzhou, from 2017 to 2021 for 5 years, with an annual funding of RMB 150,000 to assist Zitong Township in Chun’an County. XVI.Other material events 1. In order to meet the capital demand for the development of steam turbine heavy industry and promote the construction of steam turbine heavy industry projects, the Company increased the capital of 462,731,965 yuan to the Steam Turbine Heavy Machine. During the reporting period, the Steam Turbine Heavy Machine has increased its capital and changed its registered capital to 1 billion yuan. .The complete report is available as Announcement 2019-34 with Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily and at www.cninfo.com.cn dated April 27,2019. 2. The Company signed the “Compensation Agreement for the Relocation of Non-residential Houses on State-owned Land” with Hangzhou Xiacheng Urban Construction Investment Development Group Co., Ltd.,2. The Company will receive a compensation amount of RMB 1,299,324,850.00 for the completion of the relocation. As of the reporting period, the Company has received the accumulated compensation of 620,559,021.76 yuan for the relocation.The complete report is available as Announcement 2019-39 with Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily and at www.cninfo.com.cn dated April 27,2019. XVII. Material events of subsidiaries 1. The Company's holding subsidiary, the Casting & Forging Company, increased its capital and expanded shares to introduce strategic investors, and completed the change of registered capital of industrial and commercial registration during the reporting period.The complete report is available as Announcement 2019-07 with Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily and at www.cninfo.com.cn dated January 11,2019. 36 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 VI. Change of share capital and shareholding of Principal Shareholders I.Changes in share capital 1. Changes in share capital In shares Before the change Increase/decrease(+,-) After the Change Amount Proportion Capitaliz Share ation of Bonus Subt allotm common Other Quantity Proportion shares otal ent reserve fund I. Unlisted shares 479,824,800 63.64% 0 0 0 0 0 479,824,800 63.64% 1. Founder's stock 479,824,800 63.64% 0 0 0 0 0 479,824,800 63.64% Including:State-owned shares 479,824,800 63.64% 0 0 0 0 0 479,824,800 63.64% Domestic Legal person shares 0 0.00% 0 0 0 0 0 0 0.00% Overseas legal person shares 0 0.00% 0 0 0 0 0 0 0.00% Other 0 0.00% 0 0 0 0 0 0 0.00% 2.Raising legal persons shares 0 0.00% 0 0 0 0 0 0 0.00% 3.Internal staff shares 0 0.00% 0 0 0 0 0 0 0.00% 4.Preferred shares and other 0 0.00% 0 0 0 0 0 0 0.00% II.Non-restricted shares 274,185,600 36.36% 0 0 0 0 0 274,185,600 36.36% 1.RMB common shares 0 0.00% 0 0 0 0 0 0 0.00% 2.Domestically listed foreign 274,185,600 36.36% 0 0 0 0 0 274,185,600 36.36% shares 3.Overseas listed foreign shares 0 0.00% 0 0 0 0 0 0 0.00% 4.Other 0 0.00% 0 0 0 0 0 0 0.00% III. Total of capital shares 754,010,400 100.00% 0 0 0 0 0 754,010,400 100.00% Causes of Change of shares Not applicable Approval of change of the shares 37 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Not applicable Ownership transfer of share changes Not applicable Progress on any share repurchase: □ Applicable √ Not applicable Progress on reducing the repurchased shares by means of centralized bidding: □ Applicable √ Not applicable Influence on the basic EPS and diluted EPS as well as other financial indexes of net assets per share attributable to common shareholders of Company in latest year and period □ Applicable √ Not applicable Other information necessary to disclose for the company or need to disclosed under requirement from security regulators □ Applicable √Not applicable 2. Change of shares with limited sales condition □ Applicable √ Not applicable III. Shareholders and shareholding In Shares Total number of common shareholders at Total number of preferred shareholders that had restored the 13,723 0 the end of the reporting period voting right at the end of the reporting period (if any) Particulars about shares held above 5% by shareholders or top ten shareholders Number or share Proporti Number of Changes in Amount of Amount of pledged/froze Shareholders Nature of on of shares held at reporting restricted shares un-restricted n shareholder shares period -end period held shares held State held(%) Amou of nt share Hangzhou Steam Turbine Power Group State-owned legal person 63.64% 479,824,800 0 479,824,800 0 Co., Ltd. VANGUARD TOTAL Foreign legal INTERNATIONAL STOCK INDEX 0.69% 5,203,236 1,704,190 0 5,203,236 person FUND VANGUARD EMERGING MARKETS Foreign legal 0.63% 4,722,804 0 0 4,722,804 STOCK INDEX FUND person GUOTAI JUNAN Foreign legal 0.59% 4,479,485 1,786,122 0 4,479,485 38 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 SECURITIES(HONGKONG) person LIMITED Domestic Zhou Jie 0.56% 4,200,000 0 0 4,200,000 Natural person ISHARES CORE MSCI EMERGING Foreign legal 0.48% 3,654,159 -125,395 0 3,654,159 MARKETS ETF person China Merchants Securities (HK)Co., State-owned 0.47% 3,549,104 229,663 0 3,549,104 Ltd. legal person Foreign legal NORGES BANK 0.33% 2,514,529 0 0 2,514,529 person Domestic Xia Zulin 0.31% 2,301,000 21,000 0 2,301,000 Natural person Domestic Wang Yihu 0.20% 1,488,524 47,200 0 1,488,524 Natural person Particulars about strategic investors or general corporations becoming among the top 10 shareholders Not applicable due to share placing (1) Hangzhou Steam Turbine Power Group Co., Ltd. is the holder of state-shares of the Company, all other shareholders’ are holders of domestic listed foreign shares (B shares) (2) There is no relationship between Hangzhou Steam Turbine Power Group Co., Ltd. and Explanation on associated relationship among the other shareholders; aforesaid shareholders (3) Hangzhou Steam Turbine Power Group Co., Ltd. is not an “action-in-concert” party with any of other shareholders as described by the “Administration Rules of Informational Disclosure about Change of Shareholding Statues of PLCs”. Top 10 holders of shares without trading limited conditions Amount of Category of shares Name of the shareholder unconditional shares Category of shares Amount held at end of period Foreign shares VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND 5,203,236 placed in domestic 5,203,236 exchange Foreign shares VANGUARD EMERGING MARKETS STOCK INDEX FUND 4,722,804 placed in domestic 4,722,804 exchange Foreign shares GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED 4,479,485 placed in domestic 4,479,485 exchange Foreign shares Zhou Jie 4,200,000 placed in domestic 4,200,000 exchange Foreign shares ISHARES CORE MSCI EMERGING MARKETS ETF 3,654,159 placed in domestic 3,654,159 exchange Foreign shares China Merchants Securities(HK)Co., Ltd. 3,549,104 placed in domestic 3,549,104 exchange 39 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Foreign shares NORGES BANK 2,514,529 placed in domestic 2,514,529 exchange Foreign shares Xia Zulin 2,301,000 placed in domestic 2,301,000 exchange Foreign shares Wang Yihu 1,488,524 placed in domestic 1,488,524 exchange Foreign shares Haitong International Securities Company Limited-Account Client 1,378,796 placed in domestic 1,378,796 exchange 1)It is unknown to the Company if there is any relationship among the top 10 common share holders without restriction; Explanation on associated relationship or consistent action among the top 10 (2) Hangzhou Steam Turbine Group Co., Ltd. is not an shareholders of non-restricted negotiable shares and that between the top 10 action-in-concert” party with any of other shareholders as shareholders of non-restricted negotiable shares and top 10 shareholders described by the “Administration Rules of Informational Disclosure about Change of Shareholding Statues of PLCs”. Top ten ordinary shareholders conducting securities margin trading Not applicable Whether top ten common shareholders or top ten common shareholders with un-restrict shares held have a buy-back agreement dealing in reporting period. The top ten common shareholders or top ten common shareholders with un-restrict shares held of the Company have no buy –back agreement dealing in reporting period. IV. Change of the controlling shareholder or the actual controller Change of the controlling shareholder in the reporting period There was no any change of the controlling shareholder of the Company in the reporting period. Change of the actual controller in the reporting period There was no any change of the actual controller of the Company in the reporting period. VII. Situation of the Preferred Shares The Company had no preferred shares in the reporting period 40 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 VIII. Information about Directors, Supervisors and Senior Executives I. Change of shareholding of directors, supervisors and senior executives Share held by directors, supervisors and senior executive of the Company had no changes, more details can be seen in annual report 2018. II. Change in shares held by directors, supervisors and senior executives Name Positions Types Date Reason Recommended by Hangzhou Steam Turbine Power Group Co., Ltd-the controlling shareholder, Ms. Li Guiwen was nominated as a non-independent director of Li Guiwen Director Elected January 29,2019 the Company's board of directors. After the Company held the first provisional shareholders’ general meeting in 2019, she was elected as the non-independent director of the seventh session board of directors of the Company. 41 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 IX. Corporate Bond Whether the company has corporate bonds that have been publicly issued and listed on the stock exchange, and not yet due or due but not folly cashed on the approval date of the semi-annual report No 42 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 X. Financial Report I. Auditors’ Report The Semi-annual Financial Report is not audited. II. The Financial Statements All figures in the Notes to the Financial Statements are in RMB. 1. Consolidated Balance Sheet Prepared by: Hangzhou Steam Turbine Co., Ltd June 30,2019 In RMB Items June 30,2019 December 31,2018 Current asset: Monetary fund 1,819,859,022.91 1,382,392,009.59 Settlement provision Outgoing call loan Transactional financial assets 578,769,000.00 Financial assets measured at fair value with variations accounted into current income account Derivative financial assets Notes receivable 480,606,384.84 595,089,175.22 Account receivable 2,060,368,351.36 1,940,798,255.26 Financing of receivables Prepayments 415,291,957.37 370,958,990.74 Insurance receivable Reinsurance receivable Provisions of Reinsurance contracts receivable Other account receivable 102,819,441.41 32,552,458.76 Including:Interest receivable 0.00 0.00 Dividend receivable 84,526,094.10 16,557,292.60 Repurchasing of financial assets Inventories 2,222,781,933.26 2,188,121,342.87 Contract assets Assets held for sales Non-current asset due within 1 year Other current asset 65,115,936.29 1,188,747,955.74 Total of current assets 7,745,612,027.44 7,698,660,188.18 Non-current assets: Loans and payment on other’s behalf disbursed 43 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Debt investment Available for sale of financial assets 0.00 2,130,076,555.20 Other investment on bonds Expired investment in possess Long-term receivable Long term share equity investment 10,261,439.29 8,221,439.29 Other equity instruments investment 2,264,720,465.98 0.00 Other non-current financial assets 131,881,883.86 0.00 Property investment Fixed assets 761,603,992.58 783,740,928.49 Construction in progress 659,588,447.28 454,767,328.93 Production physical assets Oil & gas assets Use right assets Intangible assets 276,098,586.15 279,740,756.49 Development expenses Goodwill Long-germ expenses to be amortized Deferred income tax asset 214,788,537.17 213,962,707.23 Other non-current asset Total of non-current assets 4,318,943,352.31 3,870,509,715.63 Total of assets 12,064,555,379.75 11,569,169,903.81 Current liabilities Short-term loans 97,500,000.00 139,600,000.00 Loan from Central Bank Borrowing funds Transactional financial liabilities Financial liabilities measured at fair value with variations accounted into current income account Derivative financial liabilities Notes payable 237,870,569.88 263,897,462.79 Account payable 1,188,329,724.43 1,086,685,918.74 Advance receipts 2,555,520,011.33 2,582,234,158.36 Selling of repurchased financial assets Deposit taking and interbank deposit Entrusted trading of securities Entrusted selling of securities Employees’ wage payable 65,138,079.59 86,390,955.29 Tax payable 22,926,791.79 62,405,200.62 Other account payable 37,609,410.52 36,904,303.01 44 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Including:Interest payable 100,958.90 437,314.72 Dividend payable 0.00 0.00 Fees and commissions payable Reinsurance fee payable Contract Liabilities Liabilities held for sales Non-current liability due within 1 year 100,100,000.00 100,100,000.00 Other current liability Total of current liability 4,304,994,587.54 4,358,217,998.81 Non-current liabilities: Reserve fund for insurance contracts Long-term loan 22,600,000.00 22,700,000.00 Bond payable Including:preferred stock Sustainable debt Lease liability Long-term payable 785,666,859.28 474,876,451.26 Long-term remuneration payable to staff Expected liabilities Deferred income 42,773,215.20 44,675,128.30 Deferred income tax liability 282,127,222.10 244,169,946.57 Other non-current liabilities Total non-current liabilities 1,133,167,296.58 786,421,526.13 Total of liability 5,438,161,884.12 5,144,639,524.94 Owners’ equity Share capital 754,010,400.00 754,010,400.00 Other equity instruments Including:preferred stock Sustainable debt Capital reserves 151,684,419.65 151,684,419.65 Less:Shares in stock Other comprehensive income 1,592,318,152.64 1,377,168,522.74 Special reserve 20,236,633.76 21,020,671.47 Surplus reserves 621,112,807.78 621,112,807.78 Common risk provision Retained profit 3,092,067,160.53 3,082,544,107.52 Total of owner’s equity belong to the parent company 6,231,429,574.36 6,007,540,929.16 Minority shareholders’ equity 394,963,921.27 416,989,449.71 Total of owners’ equity 6,626,393,495.63 6,424,530,378.87 45 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Total of liabilities and owners’ equity 12,064,555,379.75 11,569,169,903.81 Legal Representative: Zheng Bin Person in charge of accounting:Zhao Jiamao Accounting Dept Leader: Jin Chan 46 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 2.Parent Company Balance Sheet In RMB Items June 30,2019 December 31,2018 Current asset: Monetary fund 1,186,805,183.26 877,357,020.98 Transactional financial assets 270,000,000.00 Financial assets measured at fair value with variations accounted into current income account Derivative financial assets Notes receivable 183,102,369.76 302,284,986.43 Account receivable 1,518,779,763.11 1,374,628,210.45 Financing of receivables Prepayments 209,504,216.64 208,498,421.20 Other account receivable 89,097,232.56 19,984,760.06 Including:Interest receivable Dividend receivable 84,526,094.10 16,557,292.60 Inventories 1,555,631,232.70 1,584,030,951.83 Contract assets Assets held for sales Non-current asset due within 1 year Other current asset 19,651,815.47 890,000,000.00 Total of current assets 5,032,571,813.50 5,256,784,350.95 Non-current assets: Debt investment Available for sale of financial assets 2,090,631,297.62 Other investment on bonds Expired investment in possess Long-term receivable Long term share equity investment 860,732,321.62 502,919,378.03 Other equity instruments investment 2,264,720,465.98 Other non-current financial assets 92,436,626.28 Property investment Fixed assets 439,398,797.03 448,890,495.75 Construction in progress 236,257,765.82 142,310,055.48 Production physical assets Oil & gas assets Use right assets Intangible assets 163,711,361.27 165,734,347.73 Development expenses Goodwill Long-germ expenses to be amortized Deferred income tax asset 163,692,893.96 163,871,631.81 Other non-current asset 47 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Total of non-current assets 4,220,950,231.96 3,514,357,206.42 Total of assets 9,253,522,045.46 8,771,141,557.37 Current liabilities Short-term loans Transactional financial liabilities Financial liabilities measured at fair value with variations accounted into current income account Derivative financial liabilities Notes payable 14,000,000.00 24,200,000.00 Account payable 654,106,514.35 630,653,099.86 Advance receipts 1,780,682,848.49 1,877,069,335.29 Contract Liabilities Employees’ wage payable 38,755,706.92 43,332,523.01 Tax payable 480,555.24 37,809,874.53 Other account payable 22,183,637.69 24,708,959.22 Including:Interest payable 100,958.90 212,010.69 Dividend payable Liabilities held for sales Non-current liability due within 1 year 100,000,000.00 100,000,000.00 Other current liability Total of current liability 2,610,209,262.69 2,737,773,791.91 Non-current liabilities: Long-term loan Bond payable Including:preferred stock Sustainable debt Lease liability Long-term payable 575,788,940.88 264,512,388.24 Long-term remuneration payable to staff Expected liabilities Deferred income 41,269,230.20 41,944,793.30 Deferred income tax liability 282,127,222.10 244,169,946.57 Other non-current liabilities Total non-current liabilities 899,185,393.18 550,627,128.11 Total of liability 3,509,394,655.87 3,288,400,920.02 Owners’ equity Share capital 754,010,400.00 754,010,400.00 Other equity instruments Including:preferred stock Sustainable debt Capital reserves 138,953,250.09 138,953,250.09 Less:Shares in stock Other comprehensive income 1,592,701,462.08 1,377,784,111.74 Special reserve 7,391,229.80 7,609,505.31 Surplus reserves 602,356,402.65 602,356,402.65 48 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Retained profit 2,648,714,644.97 2,602,026,967.56 Total of owners’ equity 5,744,127,389.59 5,482,740,637.35 Total of liabilities and owners’ equity 9,253,522,045.46 8,771,141,557.37 Legal Representative: Zheng Bin Person in charge of accounting:Zhao Jiamao Accounting Dept Leader: Jin Chan 49 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 3.Consolidated Income Statement In RMB Items Semi-annual of 2019 Semi-annual of 2018 I. Income from the key business 1,920,181,703.03 2,284,130,982.13 Incl:Business income 1,920,181,703.03 2,284,130,982.13 Interest income Insurance fee earned Fee and commission received II. Total business cost 1,814,433,246.91 2,107,752,481.78 Incl:Business cost 1,366,404,401.26 1,612,116,152.26 Interest expense Fee and commission paid Insurance discharge payment Net claim amount paid Insurance policy dividend paid Insurance policy dividend paid Reinsurance expenses Business tax and surcharge 13,458,140.99 29,819,229.04 Sales expense 86,895,939.32 77,008,302.22 Administrative expense 235,168,325.98 237,456,060.16 R & D expense 116,760,942.52 151,349,561.03 Financial expenses -4,254,503.16 3,177.07 Including:Interest expense 7,163,329.72 5,903,346.62 Interest income 13,686,150.29 6,286,823.72 Add:Other income 15,761,589.03 20,337,694.45 Investment gain(“-”for loss) 99,460,322.66 37,144,607.44 Including: investment gains from affiliates Financial assets measured at amortized cost cease to be recognized as income Gains from currency exchange Net exposure hedging income Changing income of fair value -1,474,755.34 Credit impairment loss Impairment loss of assets 6,423,806.70 -43,111,352.82 Assets disposal income -1,183.02 III. Operational profit(“-”for loss) 225,918,236.15 190,749,449.42 Add :Non-operational income 744,839.16 4,189,726.48 50 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Less: Non-operating expense 5,220,762.28 2,591,154.54 IV. Total profit(“-”for loss) 221,442,313.03 192,348,021.36 Less:Income tax expenses 36,775,399.29 31,977,871.82 V. Net profit 184,666,913.74 160,370,149.54 (I) Classification by business continuity 1.Net continuing operating profit 2.Termination of operating net profit (II) Classification by ownership 1.Net profit attributable to the owners of parent company 160,325,133.00 128,510,594.01 2.Minority shareholders’ equity 24,341,780.74 31,859,555.53 VI. Net after-tax of other comprehensive income 215,462,868.76 -72,709,845.63 Net of profit of other comprehensive income attributable to owners of the 215,149,629.90 -72,663,722.00 parent company. (I)Other comprehensive income items that will not be reclassified into gains/losses in the subsequent accounting period 214,917,350.34 0.00 1.Re-measurement of defined benefit plans of changes in net debt or net a ssets 2.Other comprehensive income under the equity method investee can not be reclassified into profit or loss. 3. Changes in the fair value of investments in other equity instruments 214,917,350.34 4. Changes in the fair value of the company’s credit risks 5.Other (II) 232,279.56 -72,663,722.00 Other comprehensive income that will be reclassified into profit or loss. 1.Other comprehensive income under the equity method investee can be r eclassified into profit or loss. 2. Changes in the fair value of investments in other debt obligations 3.Gains and losses from changes in fair value available for sale financial -72,629,519.42 assets 4. Other comprehensive income arising from the reclassification of financial assets 5.Held-to-maturity investments reclassified to gains and losses of availabl e for sale financial assets 6. Allowance for credit impairments in investments in other debt obligations 7. Reserve for cash flow hedges 8. Translation differences in currency financial statements 232,279.56 -34,202.58 9.Other Net of profit of other comprehensive income attributable to Minority shareholders’ equity 313,238.86 -46,123.63 VII. Total comprehensive income 400,129,782.50 87,660,303.91 51 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Total comprehensive income attributable to the owner of the parent company 375,474,762.90 55,846,872.01 Total comprehensive income attributable minority shareholders 24,655,019.60 31,813,431.90 VIII. Earnings per share (I)Basic earnings per share 0.21 0.17 (II)Diluted earnings per share 0.21 0.17 Legal Representative: Zheng Bin Person in charge of accounting:Zhao Jiamao Accounting Dept Leader: Jin Chan 52 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 4. Income statement of the Parent Company In RMB Items Semi-annual of 2019 Semi-annual of 2018 I. Income from the key business 1,201,433,732.23 1,490,738,884.48 Incl:Business cost 868,692,769.43 1,092,425,706.34 Business tax and surcharge 6,969,423.29 19,980,875.77 Sales expense 48,049,960.92 42,075,448.13 Administrative expense 159,919,647.14 154,842,987.96 R & D expense 72,044,163.87 112,115,169.45 Financial expenses -7,258,639.20 -1,279,101.79 Including:Interest expenses 3,304,641.54 2,904,737.05 Interest income 12,022,468.87 4,229,484.01 Add:Other income 5,455,874.12 18,256,287.33 Investment gain(“-”for loss) 152,548,740.20 97,645,790.91 Including: investment gains from affiliates Financial assets measured at amortized cost cease to be recognized as income Net exposure hedging income Changing income of fair value -1,474,755.34 Credit impairment loss Impairment loss of assets -2,195,339.82 32,973,333.00 Assets disposal income II. Operational profit(“-”for loss) 211,741,605.58 153,506,543.86 Add :Non-operational income 631,962.46 4,125,525.27 Less:Non -operational expenses 2,904,084.35 991,089.95 III. Total profit(“-”for loss) 209,469,483.69 156,640,979.18 Less:Income tax expenses 11,979,726.29 14,024,749.88 IV. Net profit 197,489,757.40 142,616,229.30 1.Net continuing operating profit 197,489,757.40 142,616,229.30 2.Termination of operating net profit V. Net after-tax of other comprehensive income 214,917,350.34 -72,629,519.42 (I)Other comprehensive income items that will not be reclassified into 214,917,350.34 gains/losses in the subsequent accounting period 1.Re-measurement of defined benefit plans of changes in net debt or net assets 2.Other comprehensive income under the equity method investee can not be rec lassified into profit or loss. 3. Changes in the fair value of investments in other equity instruments 214,917,350.34 4. Changes in the fair value of the company’s credit risks 5.Other (II) -72,629,519.42 Other comprehensive income that will be reclassified into profit or loss. 1.Other comprehensive income under the equity method investee can be reclass ified into profit or loss. 2. Changes in the fair value of investments in other debt obligations 3. Gains and losses from changes in fair value available for sale financial assets -72,629,519.42 53 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 4. Other comprehensive income arising from the reclassification of financial -72,629,519.42 assets 5.Held-to-maturity investments reclassified to gains and losses of available for sale financial assets 6. Allowance for credit impairments in investments in other debt obligations 7. Reserve for cash flow hedges 8. Translation differences in currency financial statements 9.Other VI. Total comprehensive income 412,407,107.74 69,986,709.88 VII. Earnings per share (I)Basic earnings per share 0.26 0.19 (II)Diluted earnings per share 0.26 0.19 Legal Representative: Zheng Bin Person in charge of accounting:Zhao Jiamao Accounting Dept Leader: Jin Chan 54 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 5. Consolidated Cash flow statement In RMB Items Semi-annual of 2019 Semi-annual of 2018 I.Cash flows from operating activities Cash received from sales of goods or rending of services 1,518,810,866.20 1,990,685,784.21 Net increase of customer deposits and capital kept for brother company Net increase of loans from central bank Net increase of inter-bank loans from other financial bodies Cash received against original insurance contract Net cash received from reinsurance business Net increase of client deposit and investment Cash received from interest, commission charge and commission Net increase of inter-bank fund received Net increase of repurchasing business Net cash received by agent in securities trading Tax returned 5,744,179.17 2,343,735.23 Other cash received from business operation 26,127,131.84 21,813,193.03 Sub-total of cash inflow 1,550,682,177.21 2,014,842,712.47 Cash paid for purchasing of merchandise and services 898,280,785.94 848,782,286.99 Net increase of client trade and advance Net increase of savings in central bank and brother company Cash paid for original contract claim Net increase in financial assets held for trading purposes Net increase for Outgoing call loan Cash paid for interest, processing fee and commission Cash paid for policy dividend Cash paid to staffs or paid for staffs 379,575,581.35 354,090,861.86 Taxes paid 180,054,533.44 170,805,653.61 Other cash paid for business activities 102,111,872.85 83,376,719.28 Sub-total of cash outflow from business activities 1,560,022,773.58 1,457,055,521.74 Net cash generated from /used in operating activities -9,340,596.37 557,787,190.73 II. Cash flow generated by investing Cash received from investment retrieving 0.00 100,000,000.00 55 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Cash received as investment gains 31,491,521.16 37,144,607.44 Net cash retrieved from disposal of fixed assets, intangible assets, and other long-term assets 24,493.28 0.00 Net cash received from disposal of subsidiaries or other operational units Other investment-related cash received 2,050,778,164.28 2,054,176,329.00 Sub-total of cash inflow due to investment activities 2,082,294,178.72 2,191,320,936.44 Cash paid for construction of fixed assets, intangible assets and other long-term assets 228,526,111.45 207,219,715.24 Cash paid as investment 13,440,000.00 16,000,000.00 Net increase of loan against pledge Net cash received from subsidiaries and other operational units Other cash paid for investment activities 1,157,904,000.00 2,477,114,000.00 Sub-total of cash outflow due to investment activities 1,399,870,111.45 2,700,333,715.24 Net cash flow generated by investment 682,424,067.27 -509,012,778.80 III.Cash flow generated by financing Cash received as investment 0.00 0.00 Including: Cash received as investment from minor shareholders Cash received as loans 77,700,000.00 115,000,000.00 Cash received from bond placing Other financing –related cash received 0.00 0.00 Sub-total of cash inflow from financing activities 77,700,000.00 115,000,000.00 Cash to repay debts 119,900,000.00 72,600,000.00 Cash paid as dividend, profit, or interests 203,426,853.46 70,365,668.92 Including: Dividend and profit paid by subsidiaries to minor shareholders Other cash paid for financing activities 2,530,666.67 2,530,666.67 Sub-total of cash outflow due to financing activities 325,857,520.13 145,496,335.59 Net cash flow generated by financing -248,157,520.13 -30,496,335.59 IV. Influence of exchange rate alternation on cash and cash equivalents -707,669.86 -516,323.71 V.Net increase of cash and cash equivalents 424,218,280.91 17,761,752.63 Add: balance of cash and cash equivalents at the beginning of term 1,262,186,817.20 1,137,492,834.83 VI ..Balance of cash and cash equivalents at the end of term 1,686,405,098.11 1,155,254,587.46 Legal Representative: Zheng Bin Person in charge of accounting:Zhao Jiamao Accounting Dept Leader: Jin Chan 56 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 6. Cash flow statement of the Parent Company In RMB Items Semi-annual of 2019 Semi-annual of 2018 I.Cash flows from operating activities Cash received from sales of goods or rending of services 771,903,511.87 1,092,421,368.98 Tax returned Other cash received from business operation 13,952,892.56 5,955,302.39 Sub-total of cash inflow 785,856,404.43 1,098,376,671.37 Cash paid for purchasing of merchandise and services 469,234,191.52 437,942,428.63 Cash paid to staffs or paid for staffs 246,224,211.20 227,570,629.51 Taxes paid 109,451,334.92 90,652,184.51 Other cash paid for business activities 43,083,180.34 26,292,496.98 Sub-total of cash outflow from business activities 867,992,917.98 782,457,739.63 Net cash generated from /used in operating activities -82,136,513.55 315,918,931.74 II. Cash flow generated by investing Cash received from investment retrieving 100,000,000.00 Cash received as investment gains 84,579,938.70 97,645,790.91 Net cash retrieved from disposal of fixed assets, intangible assets, and other long-term assets Net cash received from disposal of subsidiaries or other operational units Other investment-related cash received 1,236,201,629.52 1,510,049,339.73 Sub-total of cash inflow due to investment activities 1,320,781,568.22 1,707,695,130.64 Cash paid for construction of fixed assets, intangible assets and other long-term assets 102,779,580.07 67,740,573.08 Cash paid as investment 369,212,943.59 16,000,000.00 Net cash received from subsidiaries and other operational units Other cash paid for investment activities 302,000,000.00 1,780,000,000.00 Sub-total of cash outflow due to investment activities 773,992,523.66 1,863,740,573.08 Net cash flow generated by investment 546,789,044.56 -156,045,442.44 III. Cash flow generated by financing Cash received as investment Cash received as loans Cash received from bond placing Other financing –related ash received Sub-total of cash inflow from financing activities Cash to repay debts Cash paid as dividend, profit, or interests 154,217,773.32 40,616,895.37 Other cash paid for financing activities Sub-total of cash outflow due to financing activities 154,217,773.32 40,616,895.37 Net cash flow generated by financing -154,217,773.32 -40,616,895.37 IV. Influence of exchange rate alternation on cash and cash equivalents -976,692.26 -333,572.64 V.Net increase of cash and cash equivalents 309,458,065.43 118,923,021.29 Add: balance of cash and cash equivalents at the beginning of term 842,347,117.83 650,546,455.53 57 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 VI ..Balance of cash and cash equivalents at the end of term 1,151,805,183.26 769,469,476.82 Legal Representative: Zheng Bin Person in charge of accounting:Zhao Jiamao Accounting Dept Leader: Jin Chan 58 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 7. Consolidated Statement on Change in Owners’ Equity Amount in this period In RMB Semi-annual of 2019 Owner’s equity Attributable to the Parent Company Other Equity Less instrument Com : Minor Items Other mon Total of owners’ Shar Specialized Surplus Oth shareholders’ share Capita Capital reserves Comprehens risk Retained profit Subtotal equity preferre Sustai Othe es in reserve reserves er equity ive Income provi d stock nable r stoc sion debt k 754,010,400 1,377,168,5 621,112,8 3,082,544,107.5 6,007,540,929.1 416,989,449.7 6,424,530,378.8 I.Balance at the end of last year 151,684,419.65 21,020,671.47 .00 22.74 07.78 2 6 1 7 Add: Change of accounting policy 0.00 0.00 Correcting of previous errors 0.00 0.00 Merger of entities under common 0.00 0.00 control Other 0.00 0.00 II.Balance at the beginning of 754,010,400 1,377,168,5 621,112,8 3,082,544,107.5 6,007,540,929.1 416,989,449.7 6,424,530,378.8 151,684,419.65 21,020,671.47 current year .00 22.74 07.78 2 6 1 7 215,149,629 -22,025,528.4 III.Changed in the current year 0.00 0.00 0.00 0.00 0.00 0.00 -784,037.71 0.00 0.00 9,523,053.01 0.00 223,888,645.20 201,863,116.76 .90 4 215,149,629 (1)Total comprehensive income 160,325,133.00 375,474,762.90 24,655,019.60 400,129,782.50 .90 (II)Investment or decreasing of 0.00 0.00 capital by owners 1 . Ordinary Shares invested by s 0.00 0.00 59 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 hareholders 2 . Holders of other equity instru 0.00 0.00 ments invested capital 3.Amount of shares paid and 0.00 0.00 accounted as owners’ equity 4.Other 0.00 0.00 -46,358,790.0 (III)Profit allotment -150,802,079.99 -150,802,079.99 -197,160,869.99 0 1.Providing of surplus reserves 0.00 0.00 2.Providing of common risk 0.00 0.00 provisions 3.Allotment to the owners (or -46,358,790.0 -150,802,079.99 -150,802,079.99 -197,160,869.99 shareholders) 0 4.Other 0.00 0.00 (IV) Internal transferring of 0.00 0.00 owners’ equity 1. Capitalizing of capital reserves 0.00 0.00 (or to capital shares) 2. Capitalizing of surplus reserves 0.00 0.00 (or to capital shares) 3.Making up losses by surplus 0.00 0.00 reserves. 4.Change amount of defined benefit plans that carry forward 0.00 0.00 Retained earnings 5.Other comprehensive income 0.00 0.00 60 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 carry-over retained earnings 6.Other 0.00 0.00 (V). Special reserves -784,037.71 -784,037.71 -321,758.04 -1,105,795.75 1. Provided this year 434,456.69 434,456.69 434,456.69 2.Used this term 1,218,494.40 1,218,494.40 321,758.04 1,540,252.44 (VI)Other 0.00 0.00 754,010,400 1,592,318,1 621,112,8 3,092,067,160.5 6,231,429,574.3 394,963,921.2 6,626,393,495.6 IV. Balance at the end of this term 0.00 0.00 0.00 151,684,419.65 0.00 20,236,633.76 0.00 0.00 .00 52.64 07.78 3 6 7 3 Legal representative:Zheng Bin Person in charge of accounting:Zhao Jiamao Accounting Dept:Jin Chan Amount in last year In RMB Semi-annual of 2018 Owner’s equity Attributable to the Parent Company Other Equity instrument Other Minor Total of Items Less: Common share preferr Capital Comprehe Specialize Surplus Retained shareholders owners’ Shares risk Other Subtotal Capita Sustai reserves nsive d reserve reserves profit ’ equity equity ed Other in stock provision nable Income stock debt 754,010, 139,545,089. 1,570,358, 25,369,714 621,112,80 2,774,420, 5,884,816, 335,355,637 6,220,172,4 I.Balance at the end of last year 400.00 02 510.09 .61 7.78 288.05 809.55 .35 46.90 Add: Change of accounting policy 0.00 0.00 Correcting of previous errors 0.00 0.00 Merger of entities under common control 0.00 0.00 Other 0.00 0.00 754,010, 139,545,089. 1,570,358, 25,369,714 621,112,80 2,774,420, 5,884,816, 335,355,637 6,220,172,4 II.Balance at the beginning of current year 400.00 02 510.09 .61 7.78 288.05 809.55 .35 46.90 12,139,330.6 -193,189,9 -4,349,043 308,123,81 122,724,11 81,633,812. 204,357,931 III.Changed in the current year 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3 87.35 .14 9.47 9.61 36 .97 61 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 -193,189,9 345,824,33 152,634,3 68,232,844. 220,867,196 (1)Total comprehensive income 87.35 9.47 52.12 54 .66 (II)Investment or decreasing of capital 12,139,330.6 12,139,33 74,763,561. 86,902,891. by owners 3 0.63 25 88 1.Ordinary Shares invested by sharehold 12,139,330.6 12,139,33 74,763,561. 86,902,891. ers 3 0.63 25 88 2 . Holders of other equity instruments in 0.00 0.00 vested capital 3.Amount of shares paid and accounted 0.00 0.00 as owners’ equity 4.Other 0.00 0.00 -37,700,52 -37,700,52 -60,812,795. -98,513,315. (III)Profit allotment 0.00 0.00 00 00 1.Providing of surplus reserves 0.00 0.00 2.Providing of common risk provisions 0.00 0.00 3.Allotment to the owners (or -37,700,52 -37,700,52 -60,812,795. -98,513,315. shareholders) 0.00 0.00 00 00 4.Other 0.00 0.00 (IV) Internal transferring of owners’ 0.00 0.00 equity 1. Capitalizing of capital reserves (or to 0.00 0.00 capital shares) 2. Capitalizing of surplus reserves (or to 0.00 0.00 capital shares) 3.Making up losses by surplus reserves. 0.00 0.00 4.Change amount of defined benefit plans 0.00 0.00 that carry forward 62 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Retained earnings 5.Other comprehensive income 0.00 0.00 carry-over retained earnings 6.Other 0.00 0.00 -4,349,043 -4,349,043 -4,898,841.5 (V). Special reserves -549,798.43 .14 .14 7 -1,141,291 -1,141,291 -1,141,291.8 1. Provided this year 0.00 .88 .88 8 3,207,751. 3,207,751. 3,757,549.6 2.Used this term 549,798.43 26 26 9 (VI)Other 0.00 0.00 754,010, 151,684,419. 1,377,168, 21,020,671 621,112,80 3,082,544, 6,007,540, 416,989,449 6,424,530,3 IV. Balance at the end of this term 0.00 0.00 0.00 0.00 0.00 0.00 400.00 65 522.74 .47 7.78 107.52 929.16 .71 78.87 Legal representative:Zheng Bin Person in charge of accounting:Zhao Jiamao Accounting Dept:Jin Chan 8. Statement of change in owner’s Equity of the Parent Company Amount in this period In RMB Semi-annual of 2019 Other Equity instrument Less: Other Ot Items preferr Specialized Total of owners’ Share capital Sustai Capital reserves Shares Comprehensive Surplus reserves Retained profit he ed Other reserve equity nable in stock Income r stock debt I.Balance at the end of last year 754,010,400.00 138,953,250.09 1,377,784,111.74 7,609,505.31 602,356,402.65 2,602,026,967.56 5,482,740,637.35 Add: Change of accounting policy Correcting of previous errors 63 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Other II.Balance at the beginning of current 754,010,400.00 138,953,250.09 1,377,784,111.74 7,609,505.31 602,356,402.65 2,602,026,967.56 5,482,740,637.35 year III.Changed in the current year 214,917,350.34 -218,275.51 46,687,677.41 261,386,752.24 (I)Total comprehensive income 214,917,350.34 197,489,757.40 412,407,107.74 (II) Investment or decreasing of capital by owners 1 . Ordinary Shares invested by sharehol ders 2 . Holders of other equity instruments i nvested capital 3.Amount of shares paid and accounted as owners’ equity 4.Other (III)Profit allotment -150,802,079.99 -150,802,079.99 1.Providing of surplus reserves 2.Allotment to the owners (or -150,802,079.99 -150,802,079.99 shareholders) 3.Other (IV) Internal transferring of owners’ equity 1. Capitalizing of capital reserves (or to capital shares) 2. Capitalizing of surplus reserves (or to capital shares) 64 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 3.Making up losses by surplus reserves. 4.Change amount of defined benefit plans that carry forward Retained earnings 5.Other comprehensive income carry-over retained earnings 6.Other (V) Special reserves -218,275.51 -218,275.51 1. Provided this year 434,456.69 434,456.69 2.Used this term 652,732.20 652,732.20 (VI)Other IV. Balance at the end of this term 754,010,400.00 138,953,250.09 1,592,701,462.08 7,391,229.80 602,356,402.65 2,648,714,644.97 5,744,127,389.59 Legal representative:Zheng Bin Person in charge of accounting:Zhao Jiamao Accounting Dept:Jin Chan Amount in last year In RMB Semi-annual of 2018 Other Equity instrument Less: Items Shares Other Comprehensive Specialized Total of owners’ Share Capital prefe Capital reserves Surplus reserves Retained profit Other Sust in Income reserve equity rred Othe aina stoc r stock ble k debt I.Balance at the end of last year 754,010,400.00 138,953,250.09 1,570,912,609.09 9,629,800.19 602,356,402.65 2,298,641,960.41 5,374,504,422.43 Add: Change of accounting policy Correcting of previous errors Other 65 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 II.Balance at the beginning of current 754,010,400.00 138,953,250.09 1,570,912,609.09 9,629,800.19 602,356,402.65 2,298,641,960.41 5,374,504,422.43 year III.Changed in the current year -72,629,519.42 -207,180.79 104,915,709.30 32,079,009.09 (I)Total comprehensive income -72,629,519.42 142,616,229.30 69,986,709.88 (II) Investment or decreasing of capital by owners 1 . Ordinary Shares invested by shar eholders 2.Holders of other equity instrumen ts invested capital 3.Amount of shares paid and accounted as owners’ equity 4.Other (III)Profit allotment -37,700,520.00 -37,700,520.00 1.Providing of surplus reserves 2.Allotment to the owners (or -37,700,520.00 -37,700,520.00 shareholders) 3.Other (IV) Internal transferring of owners’ equity 1. Capitalizing of capital reserves (or to capital shares) 2. Capitalizing of surplus reserves (or to capital shares) 3.Making up losses by surplus reserves. 66 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 4.Change amount of defined benefit plans that carry forward Retained earnings 5.Other comprehensive income carry-over retained earnings 6.Other (V) Special reserves -207,180.79 -207,180.79 1. Provided this year 706,095.97 706,095.97 2.Used this term 913,276.76 913,276.76 (VI)Other IV. Balance at the end of this term 754,010,400.00 138,953,250.09 1,498,283,089.67 9,422,619.40 602,356,402.65 2,403,557,669.71 5,406,583,431.52 Legal representative:Zheng Bin Person in charge of accounting:Zhao Jiamao Accounting Dept:Jin Chan 67 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 III.Company Profile Hangzhou Steam Turbine Co., Ltd. (the Company) was incorporated as a joint stock limited company exclusively promoted by Hangzhou Steam Turbine & Power Group Company Limited (“HSTG”) approved by the Securities Regulatory Commission of the State Council with the Document SRC [1998] No. 8 by offering domestically listed foreign currency ordinary shares (B Shares), with registration date: April 23, 1998, Headquartered in Hangzhou, Zhejiang Province. The company now holds a unified social credit code for the 913300007042026204 business license, The Company’s registered capital is increased to RMB754.0104 million with total capital share of 754.0104 million shares (face value RMB1.00). Among which state-owned legal person shares were 479.8248 million shares and 274.1856 million shares of current B shares. The shares were issued and listed for trading in Shenzhen Stock Exchange on April 28, 1998. The design, manufacturing, Main Business Activities: R&D, Production and Sales of Industrial Steam Turbine. Main Products: Industrial Steam Turbine 19 subsidiaries including Zhejiang Steam Turbine Packaged Technologies Co., Ltd., Hangzhou Zhongneng Steam Turbine Power Co., Ltd., Hangzhou Steam Turbine Casting Co., Hangzhou Steam Turbine Auxiliary Co., Ltd., Hangzhou Steam Turbine Machinery & Equipment Co., Ltd., Zhejiang Turbine Import & Export Co., Ltd., and Hangzhou Steam Turbine Industry Co., Ltd., were consolidated to the Financial Statements. For details of changing consolidation range and equity position please go to the Notes to the Financial Statements. IV. Basis of compiling the finance report (I) Basis of compiling The Company adopts perpetual operation as the basis of financial statements. (II) Assessment on perpetuation No issue or situation, in 12 months since the end of report period, composes major doubt on the perpetuation assumption of the Company. V. Principal Accounting Policies and Estimations Principal Accounting Policies and Estimations Important prompt: The Company utilized detailed accounting polices and estimations on providing of bad debt provisions, fixed asset depreciation, intangible asset amortization, recognition of revenue, and so forth, according to its business practices. 1. Statement of compliance to the Enterprise Accounting Standard The finance report produced by the Company is accordance with the Enterprise Accounting Standard, and reflects the Company’s financial state, business performance and cash flow frankly and completely. 2. Fiscal year The Company uses the calendar year for its fiscal year. A fiscal year is from January 1 to December 31. 3. Operational period The Company’s relatively shorter operational period, which is 12 months, and is used as division of liquidity of assets and liabilities. 68 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 4. Standard currency for bookkeeping The Company uses Renminbi (RMB) as the standard currency for book keeping. 5. Accounting treatment of the entities under common control and different control 1. Treatment of entities under common control Assets and liabilities acquired in merger of entities are measured at book values at the date of merger. The difference between the net book value of asset and the offered price (or total of face value of shares issued) will be adjusted into capital reserves; when the capital reserves is not enough to reduce, it will be adjusted into retained profit. 2. Treatment of entities under different control The difference of takeover cost over the fair value of recognizable net asset of the acquired entity is recognized as goodwill at the day of takeover; in case the takeover cost is lower than the fair value of recognizable net asset of the acquired entity, the measuring process over the recognizable asset, liabilities, contingent liabilities, and takeover cost, shall be repeated, if comes out the same result, the difference shall be recorded into current income 6. Method for preparing the consolidated financial statements The parent company puts all of its subsidiaries under its control into the consolidated financial statements. The consolidated financial statements are prepared according to the “Enterprise Accounting Standard No. 33 – Consolidated Financial Statements”, basing on the accounts of the parent company and the subsidiaries, and after adjusting the long-term investment equity in the subsidiary on equity basis. 7. Joint venture arrangements classification and Co-operation accounting treatment Nil 8. Recognition of cash and cash equivalents Cash equivalent refers to the investment held by the Company with short term, strong liquidity and lower risk of value fluctuation that is easy to be converted into cash of known amount. 9. Foreign currency trade and translation of foreign currencies 1. Translation of foreign currency Foreign currency trades are translated into RMB at the rate of the day when the trades are made. Those balances of foreign currencies and monetary items in foreign currencies are accounted at the exchange rate of the balance sheet date. Exchange differences, other than special loans satisfying the conditions of capitalization, are accounted into current income account. Non-monetary items in foreign currencies and on historical cost are translated at the rate of the trade day. Non-monetary items in foreign currencies and on fair value are translated at the rate of the day when the fair value is recognized, where the differences are accounted as gain/loss from change of fair value. 2. Translation of foreign currency financial statements Asset and liability items in the balance sheet are translated basing on the exchange rate of the balance sheet date; Owners’ equities other than Retained Profit are translated at the exchange rate of the date when the trade 69 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 happened. Income and expense items in the income statement are translated at the similar rate of the date when the trade happened. Differences generated by the above translating of foreign currencies are demonstrated separately under the owners’ equity in the balance sheet. 10.Financial instruments (1) Classification of financial assets and financial liabilities Financial assets are divided into the following three categories upon initial recognition: 1) Financial assets measured in amortized cost; 2) Financial assets measured at fair value, whose changes are included in other comprehensive income; 3) Financial assets measured at fair value, whose changes are included in current profits and losses. Financial liabilities are divided into the following four categories upon initial recognition: 1) Financial liabilities measured at fair value, whose changes are included in current profits and losses; 2) Financial liabilities resulting from the transfer of financial assets that do not meet the conditions for derecognition or continue to be involved in the transferred financial assets; 3) Financial guarantee contracts that do not belong to the above 1) or 2), and loan commitments that do not belong to the above 1) and lend at a lower than market interest rate; 4) Financial liabilities measured in amortized cost. (2) Recognition basis, measurement methods and conditions for derecognition of financial assets and financial liabilities However, if the accounts receivable initially recognized by the company do not contain significant financing components or the company does not consider the financing components in the contract for less than one year, the initial measurement shall be made according to the transaction price. 2) Subsequent measurement methods of financial assets ①Financial assets measured at amortized cost The actual interest rate method is adopted for subsequent measurement according to amortized cost. Gains or losses arising from financial assets measured in amortized cost that are not part of any hedging relationship are included in current profits and losses when derecognition, reclassification, amortization according to the effective interest rate method, or impairment recognition. ② Debt instruments investment measured at fair value, whose changes are included in other comprehensive income Fair value is adopted for subsequent measurement. Interest, impairment losses or gains and exchange gains and losses calculated by the effective interest rate method are included in the current profits and losses, while other gains or losses are included in other comprehensive income. Upon termination of recognition, the accumulated gains or losses previously included in other comprehensive income shall be transferred out of other comprehensive income and included in current profits and losses. ③ Equity instrument investments measured at fair value, whose changes are included in other 70 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 comprehensive income Fair value is adopted for subsequent measurement. Dividends received (except those that belong to the part of investment cost recovery) are included in current profits and losses, and other gains or losses are included in other comprehensive income. Upon termination of recognition, the accumulated gains or losses previously included in other comprehensive income shall be transferred out of other comprehensive income and included in retained income. ④ Financial assets measured at fair value and changes included in current profits and losses The fair value is adopted for subsequent measurement, and the resulting gains or losses (including interest and dividend income) are included in the current profits and losses unless the financial asset is part of the hedging relationship. 3) Subsequent measurement methods of financial liabilities ① Financial liabilities measured at fair value, whose changes are included in current profits and losses Such financial liabilities include transactional financial liabilities (including derivatives of financial liabilities) and financial liabilities designated to be measured at fair value, whose changes are included in current profits and losses. Such financial liabilities are subsequently measured at fair value. Changes in the fair value of financial liabilities designated to be measured at fair value, whose changes are included in the profits and losses of the current period due to changes in the company's own credit risk are included in other comprehensive income, unless such treatment will cause or expand accounting mismatch in profits and losses. Other gains or losses arising from such financial liabilities (including interest expenses and changes in fair value except for changes in the company's own credit risk) are included in the current profits and losses unless the financial liabilities are part of the hedging relationship. Upon termination of recognition, the accumulated gains or losses previously included in other comprehensive income shall be transferred out of other comprehensive income and included in retained income. ② Financial liabilities resulting from the transfer of financial assets that do not meet the conditions for derecognition or continue to be involved in the transferred financial assets Measurement is conducted in accordance with the relevant provisions of the Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets. ③ Financial guarantee contracts that do not belong to the case of ① or ② above, and loan commitments that do not belong to ① above and lend at below market interest rates After initial recognition, subsequent measurement shall be made according to the higher of the following two amounts: A. Loss reserve amount determined according to the impairment provisions of financial instruments; B. The balance of the initial recognized amount after deducting the accumulated amortization amount determined in accordance with relevant regulations. ④ Financial liabilities measured in amortized cost 71 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 The real interest rate method is adopted to measure in amortized cost. Gains or losses arising from financial liabilities measured in amortized cost that are not part of any hedging relationship are included in current profits and losses when derecognized and amortized according to the effective interest rate method. 4) Termination of recognition of financial assets and financial liabilities ① Financial assets are derecognized when one of the following conditions is met: A. The contractual right to receive cash flow from the financial asset is terminated; B. Financial assets have been transferred, and the transfer meets the provisions of the Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets on the derecognition of financial assets. ② When the current obligation of a financial liability (or part thereof) has been discharged, the financial liability (or part thereof) shall be derecognized accordingly. (3) Recognition basis and measurement method of financial asset transfer If the company has transferred almost all risks and rewards in the ownership of financial assets, it shall terminate the recognition of the financial assets and separately recognize the rights and obligations arising from or retained in the transfer as assets or liabilities; If almost all risks and rewards on the ownership of financial assets are retained, the transferred financial assets shall continue to be recognized. If the company neither transfers nor retains almost all risks and rewards in the ownership of the financial asset, the following situations shall be handled respectively: 1) If the control over the financial asset is not retained, the recognition of the financial asset shall be terminated, and the rights and obligations generated or retained in the transfer shall be separately recognized as assets or liabilities; 2) If the control over the financial assets is retained, the relevant financial assets shall be recognized according to the extent of continuing involvement in the transferred financial assets, and the relevant liabilities shall be recognized accordingly. If the overall transfer of financial assets meets the conditions for derecognition, the difference between the following two amounts shall be included in the current profits and losses: 1) The book value of the transferred financial assets on the derecognition date; 2) The sum of the consideration received for the transfer of financial assets and the amount of the corresponding derecognized portion of the accumulated amount of changes in fair value originally directly included in other comprehensive income (the financial assets involved in the transfer are debt instrument investments measured at fair value, whose changes are included in other comprehensive income). If a part of the financial asset is transferred and the transferred part meets the conditions for derecognition as a whole, the book value of the financial asset before transfer shall be apportioned between the derecognition part and the continuing recognition part according to their respective relative fair values on the transfer date, and the difference between the following two amounts shall be included in the current profits and losses: 1) The book value of the derecognition part; 2) The sum of the consideration of the derecognized portion and the amount of the corresponding derecognized portion of the cumulative amount of changes in fair value originally directly included in other comprehensive income (financial assets involved in transfer are debt instrument investments measured at 72 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 fair value, whose changes are included in other comprehensive income). (5) Impairment of financial instruments 1) Impairment measurement and accounting treatment of financial instruments On the basis of expected credit losses, the company carries out impairment treatment on financial assets measured at amortized cost, debt instrument investments measured at fair value whose changes are included in other comprehensive income, lease receivables, loan commitments other than financial liabilities classified as financial liabilities measured at fair value, whose changes are included in current profits and losses, financial liabilities not measured at fair value, whose changes are included in current profits and losses, or financial guarantee contracts that are not financial asset transfers which do not meet the conditions for derecognition or which continue to be involved in financial liabilities formed by transferred financial assets, and recognize loss provisions. Expected credit loss refers to the weighted average of the credit losses of financial instruments weighted by the risk of default. Credit loss refers to the difference between the cash flow of all contracts discounted according to the original real interest rate and the expected cash flow of all contracts receivable according to the contract, that is, the present value of all cash shortages. Among them, the Company discounts the financial assets purchased or originated with credit impairment at the actual interest rate adjusted by credit. For financial assets purchased or originated that have suffered credit impairment, the company will only recognize the accumulated changes in expected credit losses during the entire duration since initial recognition as loss reserves on the balance sheet date. For accounts receivable that do not contain significant financing components or that the company does not consider financing components in contracts of not more than one year, the company uses simplified measurement methods to measure the loss reserve according to the expected credit loss amount equivalent to the entire duration. For lease receivables and receivables containing significant financing components, the company uses simplified measurement methods to measure the loss reserve according to the expected credit loss amount equivalent to the entire duration. For financial assets other than the above measurement methods, the company evaluates whether its credit risk has increased significantly since the initial recognition on each balance sheet date. If the credit risk has increased significantly since the initial recognition, the company shall measure the loss reserve according to the amount of expected credit loss during the whole duration. If the credit risk has not increased significantly since the initial recognition, the company shall measure the loss reserve according to the expected credit loss amount of the financial instrument within the next 12 months. The company uses the available reasonable and reliable information, including forward-looking information, to determine whether the credit risk of financial instruments has increased significantly since the initial recognition by comparing the risk of default on the balance sheet date with the risk of default on the initial 73 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 recognition date. On the balance sheet date, if the company judges that the financial instrument is with only low credit risk, it is assumed that the credit risk of the financial instrument has not increased significantly since the initial recognition. The company considers the following factors when evaluating whether the credit risk has increased significantly: ① Whether the contract payment is overdue for more than (including) 30 days. If the overdue period exceeds 30 days, the company confirms that the credit risk of financial instruments has increased significantly. Unless the company can obtain reasonable and reliable information without paying too much cost or effort, which proves that although the payment period stipulated in the contract is over 30 days, the credit risk has not increased significantly since the initial recognition. ② Whether the company's credit management methods for financial instruments have changed. ③ Whether the debtor's expected performance and repayment behavior have changed significantly. ④ Whether the actual or expected operating results of the debtor have changed significantly. ⑤ Whether there has been any significant adverse change in the regulatory, economic or technological environment for the debtor. ⑥ Whether there are adverse changes in business, financial or economic conditions that are expected to lead to significant changes in the debtor's ability to fulfill its debt-paying obligations. ⑦ Whether the internal price index has changed significantly due to changes in credit risk. ⑧ If an existing financial instrument is originated or issued as a new financial instrument on the reporting date, whether the interest rate or other terms of the financial instrument change significantly. ⑨ Whether the external market indicators of credit risks of the same financial instrument or similar financial instruments with the same expected duration have changed significantly. These indicators include: credit spreads, the price of credit default swaps for borrowers, the duration and extent that the fair value of financial assets is less than its amortized cost, and other market information related to borrowers (such as price changes of borrowers' debt instruments or equity instruments). ⑩ Whether the actual or expected external credit rating of financial instruments has changed significantly. Whether the actual or expected internal credit rating of the debtor is lowered. Whether the credit risks of other financial instruments issued by the same debtor have increased significantly. Whether there has been any significant change in the value of collateral used as debt collateral or the quality of guarantee or credit enhancement provided by a third party. Whether the expected borrower's economic motivation to repay the loan within the time limit stipulated in the contract has changed significantly. 74 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Anticipated changes to the loan contract include whether the anticipatory breach of contract may result in exemption or revision of contractual obligations, granting of interest-free period, sharp increase of interest rate, demand for additional collateral or guarantees, or other changes to the contractual framework of financial instruments. The company evaluates expected credit risks and measures expected credit losses on the basis of individual financial instruments or combinations of financial instruments. When based on the combination of financial instruments, the company divides financial instruments into different combinations based on common risk characteristics. The company remeasures the expected credit loss on each balance sheet date, and the increase or reversal amount of the loss reserve thus formed shall be included in the current profits and losses as impairment loss or profit. For financial assets measured in amortized cost, the loss reserve shall be offset against the book value of the financial assets listed in the balance sheet; For creditor's rights investments measured at fair value, whose changes are included in other comprehensive income, the company recognizes its loss reserve in other comprehensive income, which does not offset the book value of the financial asset. 2) Accounts receivable for expected credit losses measured by individual item Judgment basis for individual measurement Receivables with obvious characteristics of single credit risk with of expected credit loss evidence or can be judged based on common sense Considering the reasonable and reliable information about past events, current situation and future economic situation forecast, it shall Methods of measuring expected credit loss estimate the expected cash flow, and determine the provision for bad debt to be accrued accordingly 3) Accounts receivable for expected credit losses measured by combination ①Methods of specific combination and measurement of expected credit loss Items Basis for determining combination Methods of measuring expected credit loss Referring to historical credit loss experience and adjusting With aging as credit risk according to forward-looking estimation, a comparison Aging portfolio characteristic, the receivables are table between the aging of receivables and loss given combined default is prepared to determine the provision for bad debt to be accrued ② Bill receivable with expected credit loss measured by combination-comparison table of aging of commercial acceptance bill, accounts receivable and other receivables and expected credit loss rate for the whole duration Commercial acceptance bills Receivables Other receivables Aging receivable Expected credit loss rate (%) Expected credit loss rate (%) 75 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Expected credit loss rate (%) Within 1 year (inclusive, the same 5 5 5 below) 1-2 years 10 10 10 2-3 years 20 20 20 3-4 years 30 30 30 4-5 years 50 50 50 Over 5 years 100 100 100 (6) Setoff of Financial Assets and Liabilities The financial assets and liabilities of the company are shown separately in the balance sheet which do not offset each other. However, when the following conditions are met at the same time, the net amount after mutual offset is shown on the balance sheet. 1. The company has the legal right to offset the recognized amount, and this legal right is currently enforceable. 2. The company plans to settle the financial assets or liquidate the financial liabilities at the same time for netting settlement. If the transfer of financial assets does not meet the conditions for the termination of recognition, the company shall not set off the transferred financial assets and related liabilities. 11.Notes receivable For details, please refer to Section X V-10 of this report. 12.Account receivable For details, please refer to Section X V-10 of this report. 13. Financing of receivables Nil 14.Other account receivable For details, please refer to Section X V-10 of this report. 15.Inventories Whether the company needs to comply with the disclosure requirements of the particular industry No (1) Inventory classification Inventories include saleable finished goods or merchandise, product-in-process , consumption material and goods in manufacturing procedure or working procedure. (2) Pricing of inventory to be delivered Delivered out materials are accounted by weighted average method, issued out finished products are accounted at 76 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 individual price. (3) Recognition of realizable net value of inventory and providing of inventory impairment provision At the balance sheet day, inventories are measured at the lower of costs and cashable net values, the individual difference between the cashable net value and cost are provided as inventory impairment provision. For finished product, merchandise, saleable material and other saleable merchandise inventory, their cashable net values are recognized by their estimated sale price in normal operation deducting estimated sale expenses and related taxes; for material inventory which need processing, it cashable net value are recognized by the estimated sale prices of its finished products in normal operation deducting the estimated cost, sale expenses and related taxes due to the end of processing; At the balance sheet day, for inventory item which part has contract price and part has no contract price, the cashable net value is accounted separately, and recognize the inventory impairment provision or returnable cash.. (4) Inventory system Inventory system: perpetual inventory system (5) Amortization of low-value consumables and packaging materials 1.Low price consumable Basis of amortizing: one-off 2.Packaging materials Basis of amortizing: one-off 16.Contract assets Nil 17.Constract cost Nil 18.Held-for-sale asset Nil 19.Creditor's rights investment Nil 20.Other Creditor's rights investment Nil 21.Long-term account receivable Nil 22. Long-term equity investment 1. Recognition of common control and substantial influence According to the contract, if the invested enterprise’s main finance and operation policy need to be agreed by the 77 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 other investing party, the investment is common control investment; if only have participating decision rights in invested enterprise’s main finance and operation policy but have no own control or common control with other investing part, the investment is investment with substantial influence. 2. Recognition of initial investment costs (1) For the long-term equity investment formed by corporate merger under common control, if it is the long-term equity investment obtained from the corporate merger by paying cash, transferring non-cash asset, bear liability and issuing equity securities, the share of book value of owner's equity of the merged party on the merger date shall be taken as the initial investment cost. The asset reserve is adjusted according to the difference between the initial investment cost of long-term equity investment and the book value of paid combined consideration or issued securities; if the capital is not enough for deduction, the remain earnings are adjusted. Recognition of “one-off” trade when long-term equity investment is composed by merger of entities under common control by multiple steps. Transactions under an “one-off” trade are accounted as a common trade of ownership. Transactions which are not “one-off” trades are recognized for their initial investment cost basing on the share of book value of net asset in the consolidated financial statement of the entities acquired. Balance between the initial investment cost and the book value of the long-term equity investment before merger and the premium paid for the new shares after merger, is adjusted to capital reserves; when the capital reserve is not enough to offset, retained profit shall be adjusted thereof. (2) For the long-term equity investments formed by merger of enterprises under different control, the initial investment cost is recognized by the fair value of combined consideration on purchasing day and related expenses. Long-term equity investment formed by acquisition of entities under different control by trade in multiple stages are accounted separately in the financial statements and consolidated financial statements. 1) In individual financial account, the sum of book value of original equity investment plus new investment cost is recognized as the initial investment cost on cost basis. 2) Recognition of “one-off” trade in consolidated financial statements Transactions under an “one-off” trade are accounted as a common trade of ownership. Transactions which are not “one-off” trades are re-measured for their fair value at the day of acquisition. Balance between the fair value and the book value of the long-term equity investment is adjusted to current investment gains; other gains from equity on equity basis before the acquisition day are written over to current gains of at the day of acquisition, but not the gains from re-calculating of changes in net liability or asset by the invested entity. (3) Formed by means other than entity merger: Acquired by cash payment – initial investment cost is the actual amount of payment; Acquired by issuing of equity certificates – initial investment cost is the fair value of equity certificate issued; Acquired by debtor restructuring – initial cost recognized as according to the Enterprise Accounting Standard No.12 – Debtor restructuring; Acquired by trading of non-monetary asset - initial cost recognized as according to the Enterprise Accounting Standard No.7 – Trade of non-monetary assets; 3. Subsequent measurement and recognition of gain/loss Cost basis is adopted in accounting of long-term equity investment in entities under substantial control of the Company; while equity basis is adopted in accounting of investment in affiliates and joint-ventures. 4. Treatment of disposal of subsidiaries by stages till losing of control power (1) Individual account The difference between the book value and the actual purchase price of the disposed equity is recorded into the current profit and loss. With regard to the remaining equity, which still has a significant impact on the invested 78 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 entity or exercises joint control with other parties, it shall be converted to equity accounting; if the entity under investment can no longer be controlled, jointly controlled or significantly affected, it shall be recognized as a financial asset, Accounting shall be carried out in accordance with the relevant provisions of Accounting Standards for Enterprises No. 22-recognition and Measurement of Financial Instruments. (2) Basis of Consolidated Financial Statements 1) Losing of controlling power on a subsidiary through disposal of equity by multiple trades, and not recognized as “one-off” trade: Before losing of control power, the balance of disposal consideration and the share of net asset attributable to the Company on continued basis since purchasing or merger, is adjusted to capital reserves (capital premium), whereas if the capital premium is not enough to offset the amount, retained profit will be offset at corresponding amount. At losing of control power over a former subsidiary, the retained equity shares shall be re-calculated according to the fair value at the day of losing power. Sum of the consideration obtained from disposal and fair value of the retained equity shares, less the share of net asset attributable to the Company on continued basis since purchasing or merger, is accounted into investment gains of the period when the control power is disposed, and goodwill shall be offset meanwhile. Other gains related to the equities in formal subsidiary shall be written over to current investment gains at the period when control power was disposed. 2) Losing of controlling power on a subsidiary through disposal of equity by multiple trades, and recognized as “one-off” trade: The multiple trades are treated as one trade that causes losing of control power on a subsidiary. However, the balance between the consideration received from each trade and corresponding share of net asset is recognized as other gains in the consolidated accounts, and transferred collectively to gain/loss account of the period in which the control power was lost. 23. Investment property The measurement mode of investment property Not applicable 24. Fixed assets 1. Conditions for fixed asset recognition Fixed assets is defined as the tangible assets which are held for the purpose of producing goods, providing services, lease or for operation & management, and have more than one year of service life. Fixed assets are recognized at satisfying of great possibility of benefit inflow and costs are accountable. 2. Depreciation Categories Basis of depreciation Depreciation age (year) Retain value rate Annual depreciation ratio Straight average on Houses & buildings 20-30 4 4.8-3.2 period Straight average on Equipment & machinery 8-15 4 12-6.4 period Straight average on Transportation equipment 4-8 4 24-12 period Office equipment Straight average on 5 4 19.2 79 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 period (3)Recognition basis, valuation and depreciation method for financing leased fixed assets Nil 25. Construction in process 1. Construction in process is recognized on the basis of characteristics: very possible economic benefit flow in, cost can be measured reliably. Since the date when the construction in process reaches its useful status as expected, the construction in process is measured by the happened cost Since the date when the construction in process reaches its useful status as expected. 2. When the construction in process reaches its useful status as expected, it is transferred into fixed asset at actual cost. If the construction in process has reached useful status but with completion of project settlement process, it is transferred to fixed asset at the value estimated, and adjustment will happen after completion of project settlement process but no adjustment on depreciation provided previously. 26. Loan expenses 1. Capitalizing of loan expenses Loan expenses occurred in the Company, which can be categorized to purchasing or construction of assets satisfying the conditions of capitalization, shall be capitalized and accounted into capital costs; while other loan expenses are recognized as expenses and recorded into current income account. 2. Capitalization period of loan expenses (1) Capitalization started as soon as all of these conditions are satisfied: 1) Capital expenditures have occurred; 2) Loan expenses have occurred; 3) Necessary purchasing or construction processes have been started to make the asset usable or sellable. (2) If irregular interruption occurred in the purchasing or construction process of the assets satisfying the capitalizing conditions, and suspended for over successive three months, capitalizing of loan expenses is suspended; loan expenses occurred during the suspension period are recognized as current expenses until the purchasing or construction process resumes. (3) Capitalizing of loan expenses is terminated as soon as the asset satisfying the capitalizing conditions reaches the state of usable or sellable as expected. 3. Rates and amounts of loan expense capitalization Special loans raised for purchasing or construction of assets satisfying the conditions of capitalization, interest to be capitalized will be the actual interest expenses occurred in the current period of loan (including the discount, premium, or amortizing decided on actual interest rate basis), less the interest income from the unused loans in bank account or provisional investment gains; common loans used for purchasing or construction of assets satisfying the conditions of capitalization, the interest to be capitalized will be the weighted average of balance over special loans multiply capitalization rate of common loans. 80 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 27. Biological assets Nil 28. Oil-gas assets Nil 29. Assets of the right to use Nil 30. Intangible assets (1)Pricing Method, service life and impairment test 1. Intangible assets are land using rights, patents, and non-patent technologies, which are measured at cost basis. 2. For intangible assets with limited useful life, during the use life it is amortized according to the anticipating implementation method of the economic benefit of the intangible asset systematically and reasonably. If can’t recognize the anticipating implementation method, the straight basis is deployed. Items Amortiing years Land using right 50 Patent 5-20 Software 5 (2) Accounting policy for internal research and development expenditure Expenditures of internal researching projects are accounted into current term gain and loss when happens. The development period expenditures are recognized as intangible assets when fulfill following conditions: (1) The intangible asset is completed and technically possible to be used or sold; (2) With intention to complete the intangible asset for purpose of use or sale; (3) Evidence showing that there are markets or the products produced with using of the intangible asset, or markets of the intangible asset itself, by which the intangible asset may produce financial benefits. Intangible assets used inside the Company must be approved for their usable characters. (4) Developing of the intangible assets are supported by sufficient technical, financial, and other resources, and the intangible assets can be used or sold. (5) Expenditures occurred in developing of the intangible asset may be reliably measured. 31. Impairment of partial long-term assets For those long-term assets such as equity investment, fixed assets measured on cost basis, construction-in-process, intangible assets with limited service life, their recoverable amount shall be evaluated as soon as there was evidence indicating impairment at the balance sheet day. For intangible assets such as goodwill from merger or intangible assets with uncertain service lives, impairment test is performed each year whatever there is evidence of impairment or not. Impairment test on goodwill is performed on combination of related assets. When the result of prediction shows that the recoverable amount is lower than its book value, the balance shall be provided impairment provision and accounted into current gain/loss. 32. Long-term amortizable expenses 81 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Long-term amortizable expenses which have been paid but with amortizing period over 1 year (not included). Long-term amortizable expenses are recorded at actual amount occurred, and straight amortized to stipulated periods. In case a long-term expense was not benefiting the succeeding periods, then the balance of the account shall be transferred over to current income account. 33.Constract Liabilities Nil 34. Employees’ wage 1. Employee compensation comprises short-term compensation, post-service benefit, resignation benefit and other long-term employee benefits. 2. Accounting of short-term wages In the fiscal period when an employee is providing services, short-term wages actually occurred is recognized as liability, and recorded into current gain/loss account or cost of related asset. 3.Accounting of stipulated beneficiary plan is on following steps: 1) On basis of expected accumulation of welfare, estimations on population variables and financial variables, calculating of liabilities from stipulated beneficiary plan, and recognition of the period of related liabilities, are performed on basis of non-bias and accordance actuary. Meanwhile, discount is performed on the liabilities from stipulated beneficiary plan to recognize the current value and service cost of the liabilities from the stipulated beneficiary plan. 2) When there is asset involved in the stipulated beneficiary asset, the deficit or premium from the balance of the current value of liabilities of stipulated beneficiary plan over their fair values is recognized as its net liability or net asset. When there is a premium with a stipulated beneficiary plan, the lower one between the premium and the upper limit of the asset is recognized as the net asset of such stipulated beneficiary asset; 3) At end of period, employees’ wages from stipulated beneficiary plan are recognized by three parts including service cost, net interest of net liability or net asset, and recalculated net asset or liability variation. The first two are recorded into current gain/loss or related asset cost, the third is recorded to other gains, which will not be written back to gain/loss in successive fiscal periods, but the amount can be transferred with the range of equity. 3. Accounting of dismissing welfare Welfares for employees who are dismissed, the earlier one of the following is recognized as employee wage liability, and recorded to current gain /loss: (1) When the Company cannot, on its own call only, retrieve the dismissing welfare provided by dismissing of service plan or suggestion; (2) When the costs or expenses related to restructuring involved in the dismissing welfare are recognized by the Company. 4. Accounting of other long-term employees’ welfares As of long-term welfares provided to the employees, those which satisfy conditions of the stipulated saving plan are treated according to related regulations of stipulated saving plan; those which other than the aforesaid, are treated according to the stipulated beneficiary plan. In viewing of simplifying accounting treatment, employee wage costs are recognized as service costs, the net amounts of interests of other long-term welfare net liability or asset, along with recalculated variations of the both are recorded to the related gain/loss or cost of related asset. 82 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 35. Lease liabilities Nil 36. Expected liabilities (1) When it is very much likely to cause economic interests which can be reliably calculated outflow from the company to fulfill the obligation which is due to giving security outside, contentious matter, quality guarantee of products, onerous contract and other contingency, the company will regard the obligation as anticipation liabilities. (2) The company will make an initial measurement of anticipation liabilities according to needed expense of best estimation when fulfilling related obligations and check the book value of anticipation liabilities on the balance sheet date. 37.Share-based Payment Nil 38 . Other financial instruments such as preferred shares and perpetual capital securities Nil 39.Revenues Whether the company needs to comply with the disclosure requirements of the particular industry No Whether implemented new revenue guidelines? No 1. Recognizing of revenue (1) Sales of goods Sales income is recognized when all of these conditions are satisfied: (1) Major risks and rewards attached to the goods have been transferred to the purchaser; (2) The Company holds neither successive management power which is normally attached to ownership, nor effective control, over the goods which have been sold out; (4) Amount of income may be reliably measured; (5) when the costs, occurred or will occur, may be measured reliably. (2) Providing of services At balance sheet day, those service trades (simultaneously satisfying the requirements of those: income can be measured reliably, related economic benefit will flow in very possibly, transaction procedure can be confirmed reliably, happened and happening cost can be measured reliably) which can be reliably estimated are recognized at the percentage of completion, and progress of completion of service is decided by the portion of costs occurred over the estimated total costs. At balance sheet day, those service trades which can not be reliably estimated, if the happened services cost will be compensated, the services income are recognized according to happened service cost and transited to service cost according to same amount; if the happened services cost will not be compensated, the happened services cost are accounted into current term’s gain or loss and the services income will not be recognized. 83 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 (3) Giving of asset using rights Income from giving of assets is recognized when satisfying requirements: related economic benefit flows in very possibly, income can be measured reliably. Amount of interest income is calculated according to the time and actual interest rate of the monetary capital is used by other party. Income of using fee is calculated upon the charge period and calculation provided by the related contract or agreement. 2. Practical basis for recognition of revenue Particular methods for recognition of revenue. The Company is mainly engaged in designing, manufacturing, sales, and service of steam turbines and gas turbines falling in the range of rotating and reciprocating machinery, and parts. Recognition of sales in the country shall satisfy: products had been delivered to the buyer and the amount had been fixed. Payment was received or documents received with great possibility of cash inflow. And the cost of the products is able to be measured appropriately. Recognition of sales outside the country shall satisfy: The goods had been filed by the custom with bill of lading obtained. The amount had been fixed, and payment was received or documents received with great possibility of cash inflow. And the cost of the products is able to be measured appropriately. 40. Government subsidy 1. Government subsidies are recognized while they meet the following conditions at the same time: (1) the Company can meet the conditions attached to the government subsidies; (2) the Company can receive government subsidies. Where government subsidies are monetary assets, they shall be measured by the amount received or receivable. Where government subsidies are non-monetary assets, they shall be measured by the fair value; if the fair value cannot be reliably obtained, they shall be measured by the nominal amount. 2. Recognition basis and accounting of asset-related government subsidy Government subsidies used for formation of long-term assets through purchase, construction or any other method as stipulated by government documents fall into the category of asset-related government subsidies. If government subsidies are not defined in the government documents, a judgment shall be made on the ground of essential conditions for obtaining the subsidies, among which, ones with an essential condition of formation of long-term assets through purchase, construction or any other method shall be asset-related government subsidies. For government subsidies related to assets, the book value of the relevant assets is deducted or the deferred income is recognized. Where such subsidies are recognized as deferred income, the relevant assets shall, within the useful life of the relevant assets, be reasonably recognized, The method of the system shall be recorded into profit and loss by stages. The government subsidy measured according to the nominal amount shall be directly accounted for in the profits and losses of the current period. Where the relevant assets are sold, transferred, scrapped or damaged before the end of their useful life, Transfer the undistributed balance of deferred income to the current profit or loss of asset disposal. 3. Recognition basis and accounting of income-related government subsidy A government subsidy other than an asset-related government subsidy is divided into profit-related government subsidies. It is difficult to distinguish between asset-related and revenue-related government subsidies that include both asset-related and revenue-related components. Overall classification as government subvention related to income. Than asset-related subsidies are recognized as income-related government subsidies. Those, which are used to cover costs or losses in subsequent periods, are recognized as deferred income and accounted to current gain/loss to the periods of related expenses. Those, which are used to makeup expenses or losses already occurred, are recorded to current gain/loss account. 4. Government subsidies related to routine business activities of the Company shall be included into other incomes or offset relevant costs and expenses by nature of economic business. Government subsidies irrelevant to routine 84 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 activities of the Company shall be included into the non-operating receipt and disbursement. 5. Accounting treatment method for interest subsidies for policy-based preferential loans (1) If the finance allocates interest subsidy funds to a lending banks that serves a loan to the Company at a policy-based preferential rate, the actual debit amount received shall be seen as the entry value of loan and relevant loan costs shall be worked out pursuant to the loan principal and the policy-based preferential rate. (2) If the finance directly allocates interest subsidy funds to the Company, corresponding interest subsidies shall offset relevant loan costs. 41. Deferred income tax assets/ deferred income tax liabilities 1. Deferred income tax liabilities or assets are recognized at proper rate in the term of retrieving the assets or paying the liabilities according to difference (for not recognized assets and liabilities which tax basis can be recognized, the difference is between the tax basis and the book value) between book value of the assets or liabilities and the tax basis. 2. Deferred income tax assets are recognized limitedly by the income tax which very possibly deduct deductible temporary difference. At balance sheet day, the not-yet recognized deferred income tax assets in previous fiscal term are recognized if have evidence to prove there is enough income tax very possibly to deduct deductible temporary difference. 3. At the balance sheet day, verification will be performed on the book value of differed income tax assets. If it is not possible to obtain enough taxable income to neutralize the benefit of differed income tax assets, then the book value of the differed income tax assets shall be reduced. Whenever obtaining of taxable income became possible, the reduced amount shall be restored. 4. Current income tax and differed income tax are accounted into current gain/loss account as income tax expenditures or gains, but exclude the following income taxes: (1) Merger of enterprises; (2) Transactions or events recognized directly in owners’ equity. 42. Lease (1)Accounting of operational lease When the Company is the leasee, the amount is recorded to asset cost or recognized as gain/loss of current period on straight basis to the periods of lease. Initial direct expenses are accounted into current gain/loss. Contingent rentals are recorded to current gain/loss at actual occurrence. When the Company is the leaser, the amount is recorded to current gain/loss at straight basis to the periods of lease. Initial direct expenses are recorded to current gain/loss other than those with greater amount which are capitalized and recorded to gain/loss of different periods. Contingent rentals are recorded to current gain/loss at actual occurrence. (2) Accounting Method for Financing Leases Nil 43. Other significant accounting policies and estimates Nil 44.Change of main accounting policies and estimations (1)Change of main accounting policies 85 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 √Applicable □ Not applicable The content and reason for change of accounting policy Approval process Remark On March 27, 2019, the Company held the 31st meeting of the seventh In 2017, the Ministry of Finance of the People's Republic of Board of Directors and the China issued the revised " No. 22 Accounting Standards for 14th meeting of the Business Enterprises-Recognition and Measurement of seventh Board of Financial Instruments", " No. 23 Accounting Standards for Supervisors, in which the Business Enterprises-Transfer of Financial Assets", " No. 24 “Proposal on Change in Accounting Standards for Business Enterprises-Hedge Accounting Policy” was Announcement No.2019-24 Accounting, and " No. 37 Accounting Standards for Business reviewed and approved, Enterprises-Financial Instruments Presentation", and it and this change of required the domestic listed companies to implement the accounting policy did not afore-said accounting standards from January 1, 2019. need to be submitted to the shareholders’ general meeting for deliberation. (2) Change of main accounting estimations Not applicable (3)Adjustments to the Financial Statements at the Beginning of the First Execution Year of any New Standards Governing Financial Instruments, Revenue or Leases √ Applicable □Not applicable Consolidated balance sheet In RMB Items December 21,2018 January 1,2019 Adjustment amount Current asset: Monetary fund 1,382,392,009.59 1,382,392,009.59 Settlement provision Outgoing call loan Transactional financial assets 1,156,870,000.00 1,156,870,000.00 Financial assets measured at fair value with variations accounted into current income account 86 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Derivative financial assets Notes receivable 595,089,175.22 595,089,175.22 Account receivable 1,940,798,255.26 1,940,798,255.26 Financing of receivables Prepayments 370,958,990.74 370,958,990.74 Insurance receivable Reinsurance receivable Provisions of Reinsurance contracts receivable Other account receivable 32,552,458.76 32,552,458.76 Including:Interest receivable 0.00 Dividend receivable 16,557,292.60 16,557,292.60 Repurchasing of financial assets Inventories 2,188,121,342.87 2,188,121,342.87 Contract assets Assets held for sales Non-current asset due within 1 year Other current asset 1,188,747,955.74 31,877,955.74 -1,156,870,000.00 Total of current assets 7,698,660,188.18 7,698,660,188.18 Non-current assets: Loans and payment on other’s behalf disbursed Debt investment Available for sale of financial assets 2,130,076,555.20 -2,130,076,555.20 Other investment on bonds Expired investment in possess Long-term receivable Long term share equity investment 8,221,439.29 8,221,439.29 Other equity instruments investment 0.00 2,011,876,524.40 2,011,876,524.40 Other non-current financial assets 0.00 118,200,030.80 118,200,030.80 Property investment Fixed assets 783,740,928.49 783,740,928.49 Construction in progress 454,767,328.93 454,767,328.93 Production physical assets Oil & gas assets 87 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Use right assets Intangible assets 279,740,756.49 279,740,756.49 Development expenses Goodwill Long-germ expenses to be amortized Deferred income tax asset 213,962,707.23 213,962,707.23 Other non-current asset Total of non-current assets 3,870,509,715.63 3,870,509,715.63 Total of assets 11,569,169,903.81 11,569,169,903.81 Current liabilities Short-term loans 139,600,000.00 139,600,000.00 Loan from Central Bank Borrowing funds Transactional financial liabilities Financial liabilities measured at fair value with variations accounted into current income account Derivative financial liabilities Notes payable 263,897,462.79 263,897,462.79 Account payable 1,086,685,918.74 1,086,685,918.74 Advance receipts 2,582,234,158.36 2,582,234,158.36 Selling of repurchased financial assets Deposit taking and interbank deposit Entrusted trading of securities Entrusted selling of securities Employees’ wage payable 86,390,955.29 86,390,955.29 Tax payable 62,405,200.62 62,405,200.62 Other account payable 36,904,303.01 36,904,303.01 Including:Interest payable 437,314.72 437,314.72 Dividend payable 0.00 0 Fees and commissions payable Reinsurance fee payable Contract Liabilities Liabilities held for sales Non-current liability due within 1 year 100,100,000.00 100,100,000.00 88 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Other current liability Total of current liability 4,358,217,998.81 4,358,217,998.81 Non-current liabilities: Reserve fund for insurance contracts Long-term loan 22,700,000.00 22,700,000.00 Bond payable Including:preferred stock Sustainable debt Lease liability Long-term payable 474,876,451.26 474,876,451.26 Long-term remuneration payable to staff Expected liabilities Deferred income 44,675,128.30 44,675,128.30 Deferred income tax liability 244,169,946.57 244,169,946.57 Other non-current liabilities Total non-current liabilities 786,421,526.13 786,421,526.13 Total of liability 5,144,639,524.94 5,144,639,524.94 Owners’ equity Share capital 754,010,400.00 754,010,400.00 Other equity instruments Including:preferred stock Sustainable debt Capital reserves 151,684,419.65 151,684,419.65 Less:Shares in stock Other comprehensive income 1,377,168,522.74 1,377,168,522.74 Special reserve 21,020,671.47 21,020,671.47 Surplus reserves 621,112,807.78 621,112,807.78 Common risk provision Retained profit 3,082,544,107.52 3,082,544,107.52 Total of owner’s equity belong to the parent 6,007,540,929.16 6,007,540,929.16 company Minority shareholders’ equity 416,989,449.71 416,989,449.71 Total of owners’ equity 6,424,530,378.87 6,424,530,378.87 Total of liabilities and owners’ equity 11,569,169,903.81 11,569,169,903.81 89 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Notes Balance sheet of Parent Company In RMB Items December 31,2018 January 1,2019 Adjustment amount Current asset: Monetary fund 877,357,020.98 877,357,020.98 Transactional financial assets 890,000,000.00 890,000,000.00 Financial assets measured at fair value with variations accounted into current income account Derivative financial assets Notes receivable 302,284,986.43 302284986.4 Account receivable 1,374,628,210.45 1,374,628,210.45 Financing of receivables Prepayments 208,498,421.20 208,498,421.20 Other account receivable 19,984,760.06 19,984,760.06 Including:Interest receivable Dividend receivable 16,557,292.60 16,557,292.60 Inventories 1,584,030,951.83 1,584,030,951.83 Contract assets Assets held for sales Non-current asset due within 1 year Other current asset 890,000,000.00 -890,000,000.00 Total of current assets 5,256,784,350.95 5,256,784,350.95 Non-current assets: Debt investment Available for sale of financial assets 2,090,631,297.62 -2,090,631,298.00 Other investment on bonds Expired investment in possess Long-term receivable Long term share equity investment 502,919,378.03 502,919,378.03 Other equity instruments investment 2,011,876,524.40 2,011,876,524.40 Other non-current financial assets 78,754,773.22 78,754,773.22 Property investment 90 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Fixed assets 448,890,495.75 448,890,495.75 Construction in progress 142,310,055.48 142,310,055.48 Production physical assets Oil & gas assets Use right assets Intangible assets 165,734,347.73 165,734,347.73 Development expenses Goodwill Long-germ expenses to be amortized Deferred income tax asset 163,871,631.81 163,871,631.81 Other non-current asset Total of non-current assets 3,514,357,206.42 3,514,357,206.42 Total of assets 8,771,141,557.37 8,771,141,557.37 Current liabilities Short-term loans Transactional financial liabilities Financial liabilities measured at fair value with variations accounted into current income account Derivative financial liabilities Notes payable 24,200,000.00 24,200,000.00 Account payable 630,653,099.86 630,653,099.86 Advance receipts 1,877,069,335.29 1,877,069,335.29 Contract Liabilities Employees’ wage payable 43,332,523.01 43,332,523.01 Tax payable 37,809,874.53 37,809,874.53 Other account payable 24,708,959.22 24,708,959.22 Including:Interest payable 212,010.69 212,010.69 Dividend payable Liabilities held for sales Non-current liability due within 1 year 100,000,000.00 100,000,000.00 Other current liability Total of current liability 2,737,773,791.91 2,737,773,791.91 Non-current liabilities: Long-term loan 91 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Bond payable Including:preferred stock Sustainable debt Lease liability Long-term payable 264,512,388.24 264,512,388.24 Long-term remuneration payable to staff Expected liabilities Deferred income 41,944,793.30 41,944,793.30 Deferred income tax liability 244,169,946.57 244,169,946.57 Other non-current liabilities Total non-current liabilities 550,627,128.11 550,627,128.11 Total of liability 3,288,400,920.02 3,288,400,920.02 Owners’ equity Share capital 754,010,400.00 754,010,400.00 Other equity instruments Including:preferred stock Sustainable debt Capital reserves 138,953,250.09 138,953,250.09 Less:Shares in stock Other comprehensive income 1,377,784,111.74 1,377,784,111.74 Special reserve 7,609,505.31 7,609,505.31 Surplus reserves 602,356,402.65 602,356,402.65 Retained profit 2,602,026,967.56 2,602,026,967.56 Total of owners’ equity 5,482,740,637.35 5,482,740,637.35 Total of liabilities and owners’ equity 8,771,141,557.37 8,771,141,557.37 Notes (4)Retrospective Restatement of Previous Comparative Data due to the First Execution of any New Standards Governing Financial Instruments or Leases Not applicable 45.Other VI. Taxation 1. Main categories and rates of taxes 92 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Category of taxes Tax base Tax rate VAT Sales of goods or providing of taxable labor service 16%,13%,6% City maintenance and Turnover tax payable 5%,7% construction tax Enterprise income tax Amount of income taxable 15%,25% Educational surcharge Turnover tax payable 3% Local education additional Turnover tax payable 2% For those on price basis, taxes are paid at 1.2% of the balance of original value of the property after House tax 1.2%,12% deducting of 30%; for those on rental basis, taxes are paid at 12% of the rental. Notes of the disclosure situation of the taxpaying bodies with different enterprises income tax rate Name Income tax rate The Company , Zhongneng Company, Packaged Tech. Company,Casting Company, Zhejiang Huayuan Steam Turbine Machinery Co.,Ltd. and 15% Hangzhou Guoneng Steam Turbine Engineering Co.,Ltd. Hangzhou Zhongneng Steam Turbine Power (Indonesia) Hangzhou Zhongneng Steam Turbine Power (Indonesia) Co., Ltd. Co., Ltd. registered in Indonesia overseas subsidiaries, the applicable local relevant tax laws and regulations. Other Subsidiary(Domestic) 25% 2. Preferential tax 1. According to the document “Notice for Qualification of High-tech Enterprises” (GKHZD〔2017〕No.201) issued by Department of Science and Technology High-tech Development Center, the Company along with Hangzhou Zhongneng Steam Turbine Power Co., Ltd. ,Zhejiang Packaged Technologies Development Co., Ltd., Zhejiang Huayuan Steam Turbine Machinery Co.,Ltd. and Hangzhou Guoneng Steam Turbine Engineering Co.,Ltd. – subsidies of the Company, were qualified as high-tech enterprises for term of three years. Therefore they enjoy 15% of tax for 2018. 2. According to the document “Notice for Qualification of High-tech Enterprises” (GKHZD〔2016〕No.149) issued by Department of Science and Technology High-tech Development Center, Hangzhou Steam Turbine Casting Co., Ltd– subsidies of the Company, were qualified as high-tech enterprises for term of three years. Therefore they enjoy 15% of tax for 2016-2018. 3.Other VII. Notes to the Consolidated Financial Statements 93 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 1.Monetary Capital In RMB Items End of term Beginning of term Cash in stock 132,336.73 128,198.82 Bank deposit 1,721,272,261.33 1,297,059,605.97 Other monetary fund 98,454,424.85 85,204,204.80 Total 1,819,859,022.91 1,382,392,009.59 Incl: Total of accounts saved overseas 5,188,570.66 4,535,870.05 Other notes: The ending bank deposits include a court-blocked deposit with a restricted usage of RMB 35,000,000.00;Other monetary fund composes , Security for bank acceptance notes RMB 98,363,924.80 of security for Letter of credit, RMB90,000.00 of security for bank guarantee letter and refundable deposit without a restricted usage of RMB 500.56. 2. Transactional financial assets In RMB Items End of term Beginning of term Financial assets measured at fair value through profit or loss 578,769,000.00 1,156,870,000.00 Of which : Of which: Total 578,769,000.00 1,156,870,000.00 3. Derivative financial assets Nil 4. Notes receivable (1) Notes receivable listed by category In RMB Items End of term Beginning of term Bank acceptance bill 471,996,506.16 574,782,175.22 Trade acceptance bill 8,609,878.68 20,307,000.00 Total 480,606,384.84 595,089,175.22 94 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 (2) Accounts receivable withdraw, reversed or collected during the reporting period Nil (3)Notes receivable pledged by the Company at the end of the period In RMB Items Pledged amount Bank acceptance bill 62,824,000.00 Total 62,824,000.00 (4)Notes receivable which had endorsed by the Company or had discounted and had not due on the balance sheet date at the period-end In RMB Amount of recognition termination at the Amount of not terminated recognition at Items period-end the period-end Bank acceptance bill 715,062,076.86 Trade acceptance bill 2,542,730.25 Total 717,604,807.11 (5)Notes transferred to accounts receivable because drawer of the notes fails to executed the contract or agreement (6) The actual write-off accounts receivable Nil 95 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 5. Accounts receivable (1) Accounts receivable disclosed by category In RMB End of term Beginning of term Book balance Bad debt provision Book balance Bad debt provision Category Proportion Proportion Book value Proportion Proportion Book value Amount Amount Amount Amount % % % % Accrual of bad debt provision by single 29,819,607.69 0.95% 29,819,607.69 100.00% 0.00 29,819,607.69 0.99% 29,819,607.69 100.00% item Including: Accrual of bad debt 3,096,045,722.22 99.05% 1,035,677,370.86 33.45% 2,060,368,351.36 2,982,887,216.78 99.01% 1,042,088,961.52 34.94% 1,940,798,255.26 provision by portfolio Including: Total 3,125,865,329.91 100.00% 1,065,496,978.55 34.09% 2,060,368,351.36 3,012,706,824.47 100.00% 1,071,908,569.21 35.58% 1,940,798,255.26 Accrual of bad debt provision by single item:29,819,607.69 yuan In RMB End of term Name Other receivable Bad debt provision Proportion% Reason account 96 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 There are evidences or receivables based on Accrual of bad debt provision by single 29,819,607.69 29,819,607.69 100.00% common sense that the credit risk is tem: significantly higher or lower. Total 29,819,607.69 29,819,607.69 -- -- 97 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Accrual of bad debt provision by portfolio:1,035,677,370.86 yuan In RMB Closing balance Name Book balance Bad debt provision Proportion Within 1 year ( Including 1 1,207,787,957.34 60,389,397.94 5.00% year) 1-2 years 624,005,759.19 62,400,575.84 10.00% 2-3 years 328,553,152.78 98,565,945.84 30.00% 3-4 years 208,046,764.12 124,828,058.47 60.00% 4-5 years 190,793,480.12 152,634,784.10 80.00% Over 5 years 536,858,608.67 536,858,608.67 100.00% Total 3,096,045,722.22 1,035,677,370.86 -- Relevant information of the provision for bad debts will be disclosed with reference to the disclosure method of other receivables if the provision for bad debts of bills receivable is accrued according to the general model of expected credit loss: Disclosure by aging In RMB Aging Closing balance Within 1 year(Including 1 year) 1,207,787,957.34 1-2 years 624,005,759.19 2-3 years 328,553,152.78 Over 5 years 935,698,852.91 3-4 years 208,046,764.12 4-5 years 190,793,480.12 Over 5 years 536,858,608.67 Total 3,096,045,722.22 (2) Accounts receivable withdraw, reversed or collected during the reporting period The withdrawal amount of the bad debt provision: In RMB Amount of change in the current period Category Opening balance Reversed or Closing balance Accrual Write-off collected amount Accrual of bad debt 29,819,607.69 29,819,607.69 provision by single item 98 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Accrual of bad debt -6,411,590.66 1,042,088,961.52 1,035,677,370.86 provision by portfolio Total 1,071,908,569.21 -6,411,590.66 1,065,496,978.55 (3) The actual write-off accounts receivable In RMB Items Amount Uncollectible amount 0.00 The significant actual write-off accounts receivable: (4)The ending balance of account receivables owed by the imputation of the top five parties Name Amount Proportion(%) Bad debt provision Client 1 670,859,810.45 21.46% 300,449,816.90 Client 2 240,631,511.27 7.70% 163,538,638.03 Client 3 161,326,729.06 5.16% 9,871,314.19 Client 4 63,427,500.00 2.03% 6,342,750.00 Client 5 53,953,673.36 1.73% 2,697,683.67 Subtotal 1,190,199,224.14 38.08% 482,900,202.79 (5)Account receivable which terminate the recognition owning to the transfer of the financial assets Nil (6)The amount of the assets and liabilities formed by the transfer and the continues involvement of accounts receivable Nil 6. Financing of receivables Nil 7. Prepayments (1)Age analysis In RMB Age End of term Beginning of term 99 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Book balance Proportion(%) Book balance Proportion(%) Within 1 year 387,035,194.27 93.20% 339,805,990.35 91.60% 1-2 years 15,114,713.00 3.64% 22,067,247.82 5.95% 2-3 years 4,009,227.00 0.97% 1,208,614.00 0.33% Over 3 years 9,132,823.10 2.20% 7,877,138.57 2.12% Total 415,291,957.37 -- 370,958,990.74 -- Notes: (2) Top 5 of the closing balance of the prepayment collected according to the prepayment target Name Amount Proportion(%) Hangzhou Hangfa generation Equipment Co., ltd. 41,416,785.00 9.97 Jinling International Co., Ltd. 35,654,354.43 8.59 Siemens Industrial Turbomachinery AB 31,279,682.87 7.53 Wuhan Baiya Electric power Technology Co., Ltd. 21,154,000.00 5.09% FORMOSA ELECTRIC POWER SYSTEM CO.,LTD. 20,954,980.57 5.05% Subtotal 150,459,802.87 36.23 Other notes: 8. Other account receivable In RMB Nature Closing balance Opening balance Interest receivable 0.00 Dividend receivable 84,526,094.10 16,557,292.60 Other 18,293,347.31 15,995,166.16 Total 102,819,441.41 32,552,458.76 (1)Interest receivable :Nil (2)Dividend receivable (1)Dividend receivable In RMB Items End of term Beginning of term Hangzhou Bank 84,526,094.10 16,557,292.60 Total 84,526,094.10 16,557,292.60 100 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 2) Significant dividend receivable aged over 1 year In RMB Whether occurred Items Closing balance Aging Reason impairment and its judgment basis Hangzhou Bank 9,657,292.60 1-2 years Equity pledge No Hangzhou Bank 6,900,000.00 2-3 years Equity pledge No Total 16,557,292.60 -- -- -- 3)Bad-debt provision Not applicable (3) Other accounts receivable 1) Other accounts receivable classified by the nature of accounts In RMB Nature Closing book balance Opening book balance Export tax rebate receivable 2,153,878.45 Deposit 13,265,110.29 16,937,448.95 Provisional payment receivable 10,572,543.47 5,251,040.00 Petty cash 4,133,206.64 1,327,534.34 Other 3,713,119.52 3,730,374.47 Total 31,683,979.92 29,400,276.21 2)Bad-debt provision In RMB Stage 1 Stage 2 Stage 3 Expected credit losses for the Bad Debt Reserves Expected credit losses Expected credit loss over life Total entire duration (credit over the next 12 months (no credit impairment) impairment occurred) Balance as at January 1, 2019 13,405,110.05 Balance as at January 1, 2019 in —— —— —— —— current Current period accrual 0.00 Turn back in the current period 14,477.44 101 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Balance as at June 20,2019 13,390,632.61 Loss provision changes in current period, change in book balance with significant amount □ Applicable √Not applicable Disclosure by aging In RMB Aging Closing balance Within 1 year(Including 1 year) 13,733,488.50 Subtotal 13,733,488.50 1-2 years 3,113,848.28 2-3 years 1,817,130.30 Over 3 years 13,019,512.84 3-4 years 2,061,752.00 4-5 years 1,736,888.90 Over 5 years 9,220,871.94 Total 31,683,979.92 3) Accounts receivable withdraw, reversed or collected during the reporting period The withdrawal amount of the bad debt provision: In RMB Amount of change in the current period Category Opening balance Reversed or Closing balance Accrual collected amount Other receivables with provision for bad debts 13,405,110.05 14,477.44 13,390,632.61 based on credit risk characteristics Total 13,405,110.05 14,477.44 13,390,632.61 4) The actual write-off accounts receivable Nil 5) Top 5 of the closing balance of the other accounts receivable collated according to the arrears party In RMB Proportion of the total Closing balance Name Nature Closing balance Aging year end balance of the of bad debt 102 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 accounts receivable provision Shanghai Customs Waigaoqiao Office Deposit 3,710,320.94 Over 5 years 11.71% 3,710,320.94 Hangzhou Zhongneng Steam Turbine 10.83% 3,431,600.00 Investment 3,431,600.00 5-6 years Power (Indonesia) Co., Ltd. Temporary 3.49% 55,269.75 Hangzhou Intermediate People's Court, payment 1,105,395.00 1 year Zhejiang Province receivable Guoxin Tendering Group Co., Ltd Deposit 800,000.00 4 years 2.52% 480,000.00 National Central and Western Regional 2.52% 40,000.00 Cooperation Demonstration Zone Deposit 800,000.00 1 year Bidding Management Office Total -- 9,847,315.94 -- 31.07% 7,717,190.69 6) Accounts receivable involved with government subsidies Nil 7) Other account receivable which terminate the recognition owning to the transfer of the financial assets Nil 8) The amount of the assets and liabilities formed by the transfer and the continues involvement of other accounts receivable Nil 9. Inventories Whether implemented new revenue guidelines? No (1)Category of Inventory In RMB Closing book balance Opening book balance Provision for Provision for Items inventory inventory Book balance Book value Book balance Book value impairment impairment Raw materials 537,036,361.35 53,003,915.45 484,032,445.90 585,528,478.85 53,187,189.03 532,341,289.82 Goods in 25,188,298.67 progress 794,557,915.19 28,954,137.55 765,603,777.64 731,748,385.18 706,560,086.51 103 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Stock goods 1,107,771,113.80 134,625,404.08 973,145,709.72 1,093,823,673.99 144,603,707.45 949,219,966.54 Total 2,439,365,390.34 216,583,457.08 2,222,781,933.26 2,411,100,538.02 222,979,195.15 2,188,121,342.87 Whether the company is required to comply with the "Shenzhen Stock Exchange Industry Information Disclosure Guidelines No. 4 - listed companies engaged in seed industry, planting business" disclosure requirements No (2) Falling price reserves of inventory In RMB Increased amount Decreased amount Items Opening balance Reverse or Reverse or Closing balance Withdrawal Other write-off write-off Raw materials 53,187,189.03 0.00 0.00 183,273.58 0.00 53,003,915.45 Goods in progress 28,968,721.85 0.00 0.00 14,584.30 0.00 28,954,137.55 Stock goods 140,823,284.27 0.00 0.00 6,197,880.19 0.00 134,625,404.08 Total 222,979,195.15 0.00 0.00 6,395,738.07 0.00 216,583,457.08 2) The specific basis for determining the net realizable value, and the reasons for the reversal of the inventory depreciation reserve for the current period Current write-off Items Specific basis for recognition of net realizable value Reason for provision for inventory The net realizable value shall be recognized by the amount of the Used for current production Raw materials estimated selling prices minus the estimated selling costs and relevant and use taxes and dues The net realizable value shall be recognized by the amount of the estimated selling prices minus the estimated selling costs and relevant Goods in process and taxes and dues, wherein regarding suspended projects expected not be to Current realized sales commodity stocks be recovered or projects whose sales agreements are released, the net realizable value shall be recognized by the expected recoverable compensation (3) Notes of the closing balance of the inventory which includes capitalized borrowing expenses (4) Completed unsettled assets formed from the construction contact at the period-end 10. Assets divided as held-to-sold Nil 104 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 11. Non-current assets due within 1 year Nil 12. Other current assets Whether implemented new revenue guidelines? No In RMB Items End of term Beginning of term Input tax deductible 59,238,064.27 28,260,278.71 To verify the input tax 47,553.14 Prepaid income tax 4,992,881.54 2,804,366.47 Rent charge 837,437.34 813,310.56 Total 65,115,936.29 31,877,955.74 13.Creditor's right investment:Nil 14.Other Creditor's right investment: Nil 15. Long-term accounts receivable Nil 16. Long-term equity investment In RMB Increase /decrease Profits and Withdr losses on Cash awal Closing Decr Other invest balance of ease compr Change bonus or of Investees Opening balance ments Closing balance Additional in ehensi s in impairment Recog profits impair Other investment inve ve other nized provision stme under incom equity announce ment nt e d to issue provisi the equity on metho d I. Joint venture 2. Affiliated Company 105 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Zhejiang Zhongrun Gas 8,221,439.29 2,040,000.00 10,261,439.29 turbine technology Co., Ltd. Subtotal 8,221,439.29 2,040,000.00 10,261,439.29 Total 8,221,439.29 2,040,000.00 10,261,439.29 Other notes 17. Other equity instruments investment In RMB Items End of term Beginning of term Hangzhou Bank 2,264,720,465.98 2,011,876,524.40 Total 2,264,720,465.98 2,011,876,524.40 Itemized disclosure of the current non - trading equity instrument investment In RMB Reasons for being Amount of other measured at fair Reasons for other comprehensive value and whose comprehensive Recognized Accumulating Accumulating Name income changes are income dividend income profit profit transferred to included in other transferred to retained earnings comprehensive retained earnings income The Company takes a position of holding the equity instrument for a long-term to obtain stable dividends, and it Hangzhou Bank 67,968,801.50 1,873,766,425.98 does not care about the impact of price fluctuations on profit and loss. The Cash flow is not entirely the principal and 106 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 interest. Other notes: 18.Other non-current assets In RMB Items End of term Beginning of term Hangzhou Jushi Investment Partnership(LP) 50,000,000.00 50,000,000.00 Hangzhou Steam Turbine Engineering Co., Ltd. 4,820,000.00 4,820,000.00 Wuxi Xinchang Steel Bube Co., ltd. 13,845,257.58 13,845,257.58 Zhejiang Zhongkong Solar Energy Technology 15,000,000.00 15,000,000.00 Co., Ltd. Zhejiang Tianhang Steam Turbine Auxiliary 10,000,000.00 10,000,000.00 Machinery Co., Ltd. Greenesol power systems PVT Ltd. 5,534,773.22 5,534,773.22 Zhejiang Hangzhou Steam Turbine Gas turbine 2,400,000.00 2,400,000.00 machinery innovation center Zhejiang Sanxin Automation Engineering Co., 600,000.00 600,000.00 Ltd. Juyuan Xinxing No.9 private equity fund raising 16,000,000.00 16,000,000.00 special account Sichuan Lutianhua Co., Ltd. 2,281,853.06 Turbine Company 11,400,000.00 Total 131,881,883.86 118,200,030.80 Other notes: 19. Investment property Nil 20. Fixed assets In RMB Items End of term Beginning of term 107 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Fixed assets 761,603,992.58 783,740,928.49 Total 761,603,992.58 783,740,928.49 (1) Details In RMB Transportation Items Houses & buildings Machinery equipment Office equipment Total equipment I. Original price 1. Balance at 732,378,844.81 1,022,902,093.21 27,934,764.05 100,670,157.77 1,883,885,859.84 period-beginning 2.Increase in the current 0.00 14,065,140.36 420,882.90 964,332.12 15,450,355.38 period (1) Purchase 0.00 7,383,988.74 420,882.90 548,836.44 8,353,708.08 ( 2 ) 0.00 6,681,151.62 0.00 415,495.68 7,096,647.30 Transferred from construct ion in progress (3)Increased of 0.00 Enterprise Combination 0.00 3.Decreased amount of the 0.00 5,825,250.24 140,000.00 1,693,493.76 7,658,744.00 period (1)Dispose 0.00 5,825,250.24 140,000.00 1,693,493.76 7,658,744.00 0.00 4. Balance at period-end 732,378,844.81 1,031,141,983.33 28,215,646.95 99,940,996.13 1,891,677,471.22 II.Accumulated 0.00 amortization 1.Opening balance 205,744,672.74 782,001,809.78 21,626,415.94 84,120,061.22 1,093,492,959.68 2.Increased amount of the 12,846,518.83 22,455,549.23 415,621.91 1,271,956.33 36,989,646.30 period (1) Withdrawal 12,846,518.83 22,455,549.23 415,621.91 1,271,956.33 36,989,646.30 0.00 3.Decrease in the reporting 0.00 4,825,001.33 133,000.00 1,632,096.51 6,590,097.84 period (1)Disposal 0.00 4,825,001.33 133,000.00 1,632,096.51 6,590,097.84 108 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 0.00 4.Closing balance 218,591,191.57 799,632,357.68 21,909,037.85 83,759,921.04 1,123,892,508.14 III. Impairment provision 0.00 1.Opening balance 1,504,928.24 4,033,520.42 0.00 1,113,523.01 6,651,971.67 2.Increase in the reporting 0.00 0.00 0.00 0.00 0.00 period (1)Withdrawal 0.00 0.00 3.Decrease the reporting 0.00 433,399.30 0.00 37,601.87 471,001.17 period (1)Disposal 0.00 433,399.30 0.00 37,601.87 471,001.17 0.00 4. Closing balance 1,504,928.24 3,600,121.12 0.00 1,075,921.14 6,180,970.50 IV. Book value 0.00 1.Book value of the 525,553,099.54 214,639,129.99 6,306,609.10 15,105,153.95 761,603,992.58 period-end 2.Book value of the 525,129,243.83 236,866,763.01 6,308,348.11 15,436,573.54 783,740,928.49 period-begin (2) List of temporarily idle fixed assets Nil (3) Fixed assets leased in from financing lease Nil (4) Fixed assets leased out from operation lease Nil (5) Details of fixed assets failed to accomplish certification of property In RMB Items Book value Reason Steam turbine power Building 217,937,640.97 In process Complete sets of factory 40,753,085.36 In process 109 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 (6)Liquidation of fixed assets Nil 21. Construction in progress In RMB Items End of term Beginning of term Construction in progress 659,588,447.28 454,767,328.93 Total 659,588,447.28 454,767,328.93 (1) List of construction in progress In RMB End of term Beginning of term Provision Provision Items for Book balance Book value Book balance for Book value impairmen impairment t New Plant project 631,046,137.11 631,046,137.11 429,609,053.59 429,609,053.59 Steam turbine power 1,726,143.04 1,726,143.04 Building Software project 7,779,939.24 7,779,939.24 7,779,939.24 7,779,939.24 Other project 15,116,301.15 15,116,301.15 8,457,875.95 8,457,875.95 Prepayment for 3,919,926.74 3,919,926.74 8,920,460.15 8,920,460.15 equipment or projects Total 659,588,447.28 659,588,447.28 454,767,328.93 454,767,328.93 110 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 111 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 (2)Changes of significant construction in progress In RMB Including g: Capitaliz Capitaliz capitaliz Source Transferred to Other Proportion Project ation of Name of project Budget Opening balance Increase End balance ation of ation of of fixed assets decrease % process interest interest interest funding rate (%) this period New Plant project 1,733,287,600.0 Under 0 429,609,053.59 201,437,083.52 631,046,137.11 39.46% Construc 5,427,195.39 1,255,268.85 1.20% Other tion Steam turbine power 231,425,300.00 Complet 1,726,143.04 1,726,143.04 100.00% Other Building ed 7,970,000.00 Under Software project 7,779,939.24 7,779,939.24 97.62% Construc Other tion Under Other project 8,457,875.95 8,750,212.35 2,091,787.15 15,116,301.15 Construc Other tion Prepayment for Under equipment or 8,920,460.15 4,326.74 5,004,860.15 3,919,926.74 Other projects Construc 112 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 tion 1,972,682,900.0 Total 454,767,328.93 211,917,765.65 7,096,647.30 0.00 659,588,447.28 -- -- 5,427,195.39 1,255,268.85 -- 0 (3) List of the withdrawal of the impairment provision of the construction in progress Nil (4)Engineering material Nil 22. Productive biological assets Nil 23. Oil and gas assets Nil 24. Right to use assets Nil 113 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 25. Intangible assets (1) Information In RMB Non patent Items Land using right Patent Software Total technology I. Original price 1. Balance at 332,298,312.33 309,433.96 0.00 3,240,025.87 335,847,772.16 period-beginning 2.Increase in the current period (1) Purchase (2)Internal Development (3)Increased of Enterprise Combination 3.Decreased amount of the period (1)Disposal 4.Closing balance 332,298,312.33 309,433.96 0.00 3,240,025.87 335,847,772.16 II.Accumulated amortization 1.Opening balance 55,106,840.56 258,450.38 0.00 741,724.73 56,107,015.67 2.Increased amount of 3,331,432.68 2,735.10 0.00 308,002.56 3,642,170.34 the period (1) Withdrawal 3,331,432.68 2,735.10 0.00 308,002.56 3,642,170.34 3.Decreased amount of the period (1)Disposal 4.Closing balance 58,438,273.24 261,185.48 0.00 1,049,727.29 59,749,186.01 III. Impairment provision 1.Opening balance 2.Increased amount of the 114 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 period (1) Withdrawal 3.Decreased amount of the period (1)Disposal 4.Closing balance IV. Book value 1.Closing book value 273,860,039.09 48,248.48 0.00 2,190,298.58 276,098,586.15 2.Opening book value 277,191,471.77 50,983.58 0.00 2,498,301.14 279,740,756.49 The proportion the intangible assets formed from the internal R&D through the Company amount the balance of the intangible assets at the period-end. (2) Details of fixed assets failed to accomplish certification of land use right Nil 26. R&D expenses Nil 27. Goodwill Nil 28. Long-term unamortized expenses Nil 29. Deferred income tax assets/deferred income tax liabilities (1) Deferred income tax assets had not been off-set In RMB End of term Beginning of term Items Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference assets difference assets Provision for Asset Impairment 1,300,939,413.26 200,993,717.84 1,339,474,275.36 207,199,125.83 Internal trade profit not 61,806,771.99 9,463,856.66 41,572,138.74 6,430,832.03 realized Deductible loss 0.00 0.00 115 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Temporary difference such as 2,218,329.11 332,749.37 2,218,329.11 332,749.37 amortizing of software expense Changes in fair value of other 26,654,755.34 3,998,213.30 non-current assets Total 1,391,619,269.70 214,788,537.17 1,383,264,743.21 213,962,707.23 (2) Deferred income tax liabilities had not been off-set In RMB End of term Beginning of term Items Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference liabilities difference liabilities Changes in fair value of investments in other 1,873,766,425.98 281,064,963.90 1,620,922,484.40 243,138,372.66 equity instruments Accumulated 6,180,970.50 927,145.58 6,651,971.67 997,795.75 depreciation Deferred income 900,750.80 135,112.62 225,187.70 33,778.16 Total 1,880,848,147.28 282,127,222.10 1,627,799,643.77 244,169,946.57 (3)Deferred income tax assets and liabilities are presented as net amount after neutralization In RMB Deferred Income Tax Temporarily Deductable Deferred Income Tax Temporarily Deductable Assets or Liabilities at or Taxable Difference at Items Assets or Liabilities at or Taxable Difference at the Beginning of Report the Beginning of Report the End of Report Period the End of Report Period Period Period Deferred income tax 214,788,537.17 213,962,707.23 assets Deferred income tax 282,127,222.10 244,169,946.57 liabilities (4)Details of income tax assets not recognized In RMB Items End of term Beginning of term Deductible provisional differences 734,654.14 650,570.73 Deductible losses 30,691,075.97 25,565,760.83 116 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Total 31,425,730.11 26,216,331.56 (5) The un-recognized deductible losses of deferred income tax assets will due in the following years In RMB Year End of term Beginning of term Remark 2020 352,606.82 439,625.66 2021 712,938.27 712,938.27 2022 5,902,717.30 5,953,854.74 2023 18,459,342.16 18,459,342.16 2024 5,263,471.42 Total 30,691,075.97 25,565,760.83 -- 30. Other non-current assets Nil 31. Short-term borrowings (1) Category of short-term borrowings In RMB Items End of term Beginning of term Pledge Borrowing 0.00 0.00 Mortgage Borrowings 59,800,000.00 47,900,000.00 Guarantee Borrowing 37,700,000.00 37,700,000.00 Credit borrowing 0.00 0.00 Mortgage and Guarantee 0.00 54,000,000.00 Total 97,500,000.00 139,600,000.00 (2) List of the short-term borrowings overdue but not return 32. Transactional financial liabilities Nil 33. Derivative financial liability Nil 117 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 34.Notes payable In RMB Items End of term Beginning of term Bank acceptance bill 237,870,569.88 263,897,462.79 Total 237,870,569.88 263,897,462.79 35. Accounts payable (1) List of accounts payable In RMB Items End of term Beginning of term Goods 1,088,197,720.56 1,026,275,855.39 Equipment and Engineering 100,132,003.87 60,410,063.35 Total 1,188,329,724.43 1,086,685,918.74 (2) Notes of the accounts payable aging over one year Nil 36. Advances received Whether implemented new revenue guidelines? Nil (1) List of Advances received In RMB Items End of term Beginning of term Goods 2,555,520,011.33 2,582,234,158.36 Total 2,555,520,011.33 2,582,234,158.36 (2) Notes of the accounts payable aging over one year Nil 37. Employees’ wage payable (1) List of Payroll payable In RMB Items Beginning of term Increased this period Decreased this period End of term I. Short-term wages 63,423,331.59 324,039,923.67 337,179,017.91 50,284,237.35 118 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 II. Welfare after leaving of position-fixed 22,967,623.70 43,995,715.30 52,109,496.76 14,853,842.24 provision scheme Total 86,390,955.29 368,035,638.97 389,288,514.67 65,138,079.59 (2) Details of short term wages In RMB Items Beginning of term Increased this period Decreased this period End of term 1.Wage, bonus, allowance and subsidies 48,159,059.49 243,286,098.34 263,117,557.72 28,327,600.11 2. Employee welfare 0.00 18,336,994.82 13,091,480.29 5,245,514.53 3. Social insurance 6,861,555.29 26,760,752.54 26,728,272.16 6,894,035.67 Incl. Medical insurance 6,406,895.63 23,347,637.26 23,313,021.09 6,441,511.80 Labor injury insurance 96,387.91 742,611.04 740,032.75 98,966.20 Maternity insurance 358,271.75 2,670,504.24 2,675,218.32 353,557.67 4. Housing fund 111,421.96 25,731,882.00 25,726,039.00 117,264.96 5. Labour union fee and employee 8,291,294.85 8,251,195.97 6,842,668.74 9,699,822.08 education fee 6. Short-term paid absence 0.00 0.00 0.00 0.00 7.Short-term profit sharing scheme 0.00 1,673,000.00 1,673,000.00 0.00 Total 63,423,331.59 324,039,923.67 337,179,017.91 50,284,237.35 (3) Details of fixed provision scheme In RMB Items Beginning of term Increased this period Decreased this period End of term 1.Basic pension 4,080,388.66 31,241,284.39 31,189,936.66 4,131,736.39 insurance 2. Unemployment 145,938.27 1,114,649.31 1,113,025.82 147,561.76 insurance 3. Enterprise annual fee 18,741,296.77 11,639,781.60 19,806,534.28 10,574,544.09 Total 22,967,623.70 43,995,715.30 52,109,496.76 14,853,842.24 38. Taxes Payable In RMB Items End of term Beginning of term VAT 3,815,501.92 29,776,940.88 Enterprise Income tax 15,707,673.47 23,909,724.68 Individual Income tax 684,083.90 1,043,483.57 City Construction tax 260,719.16 2,366,801.27 119 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Property tax 348,901.25 1,520,839.72 Land use tax 1,655,168.00 1,654,687.31 Education subjoin 125,288.80 1,014,509.41 Locality Education subjoin 83,525.82 676,339.74 Other 245,929.47 441,874.04 Total 22,926,791.79 62,405,200.62 39.Other account payable In RMB Items End of term Beginning of term Interest payable 100,958.90 437,314.72 Dividend payable 0.00 0.00 Other account payable 37,508,451.62 36,466,988.29 Total 37,609,410.52 36,904,303.01 (1) Interest payable In RMB Items End of term Beginning of term Long term interest on borrowings due in installments 100,958.90 245,102.36 Interest on short-term borrowings 192,212.36 Total 100,958.90 437,314.72 (2) Dividends payable In RMB Items End of term Beginning of term Total 0.00 0.00 Note: Including significant unpaid dividends payable over one year, the unpaid reason shall be disclosed: (3) Other accounts payable (1) Other accounts payable listed by nature of the account In RMB 120 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Items End of term Beginning of term Deposit 11,818,556.60 12,075,403.25 Provisional account payable 24,008,353.70 22,537,821.34 Other 1,681,541.32 1,853,763.70 Total 37,508,451.62 36,466,988.29 ② Significant other payables for over 1 year Nil 40. Liabilities classified as holding for sale Nil 41. Non-current liabilities due within 1 year In RMB Items End of term Beginning of term Long-term Borrowing loans due within 1 100,100,000.00 100,100,000.00 year Total 100,100,000.00 100,100,000.00 42. Other current-liabilities Nil 43. Long-term borrowing (1) Category of long-term loan In RMB Items End of term Beginning of term Mortgage loan 12,600,000.00 12,700,000.00 Guarantee loan 10,000,000.00 10,000,000.00 Total 22,600,000.00 22,700,000.00 44. Bonds payable Nil 121 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 45. Lease liability Nil 46. Long-term payable In RMB Items End of term Beginning of term Long term account payable 208,330,000.00 209,598,799.99 Special Payable 577,336,859.28 265,277,651.27 Total 785,666,859.28 474,876,451.26 (1) Long-term payable listed by nature of the account In RMB Items End of term Beginning of term CDB investment fund 208,000,000.00 208,000,000.00 Income payable of CDB 1,268,799.99 Drawing in administrative restructuring 330,000.00 330,000.00 Total 208,330,000.00 209,598,799.99 Other notes: According to the relevant agreement of the National Development Fund Investment Contract (hereinafter referred to as the Investment Contract) jointly signed by the Company, National Development Fund Co., Ltd. (hereinafter referred to as the NDF), Hangzhou Steam Turbine Industry Co., Ltd. and Hangzhou Steam Turbine Group, the NDF invested RMB 208,000,000.00 in Hangzhou Steam Turbine Industry Co., Ltd., the subsidiary, The NDF obtains 1.2% of the proceeds through dividends or repurchasing premium each year for the above investment; under the investment contract, Hangzhou Steam Turbine Group will transfer its shares of Steam Turbine Industry Co., Ltd from 2019 to the NDF by installment. Hangzhou Steam Turbine Industry Co., Ltd has received the above investment on December 27, 2016, according to the agreement of the investment contract on the relevant investment returns, The Company reports it as a long-term payables, the current accrued income is RMB1,248,000. Cumulative recognized income payable is RMB6,281,600.01. (3) Special Payable In RMB Decreased this Items Beginning of term Increased this period End of term Reason period Compensation for 265,277,651.27 314,548,452.89 2,489,244.88 577,336,859.28 relocation Total 265,277,651.27 314,548,452.89 2,489,244.88 577,336,859.28 -- 122 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 47. Long term payroll payable Nil 48. Accrued liabilities Nil 49. Deferred income In RMB Decreased this Items Beginning of term Increased this period End of term Reason period Receive government Government Subsidy 44,675,128.30 2,489,244.88 4,391,157.98 42,773,215.20 subsidies Total 44,675,128.30 2,489,244.88 4,391,157.98 42,773,215.20 -- Details of government subsidies In RMB Amount Amount of cost transferr Asset-related Other income New subsidy in ed to deducted Other or Items Beginning of term recorded in the End of term current period non-oper in the changes income-relate ational current period d current income period Financial support Related to for industrial 230,240.00 0.00 28,780.00 201,460.00 assets projects Government subsidy Related to 1,911,645.00 0.00 997,380.00 914,265.00 for casting project assets Circular economy Related to 91,280.00 0.00 11,410.00 79,870.00 financial subsidy assets Subsidy for industrial upgrading Related to 160,000.00 0.00 160,000.00 0.00 by provincial assets government 123 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Finance for casting Related to 230,240.00 0.00 28,780.00 201,460.00 project assets Government subsidy for industrial entities from Yuhang Related to 106,930.00 0.00 0.00 106,930.00 District Government assets in the 2nd half of 2009 Compensation for requisition and Related to 41,944,793.30 2,489,244.88 3,164,807.98 41,269,230.20 relocation-newly assets built complete plant Total 44,675,128.30 2,489,244.88 0.00 4,391,157.98 0.00 0.00 42,773,215.20 50. Other non-current liabilities Nil 51. Stock capital In RMB Increase/decrease this time (+ , - ) Transferre Balance Year-beginning Issuing of new Bonus Balance year-end d from Other Subtotal share shares reserves Total of capital 754,010,400.00 754,010,400.00 shares 52. Other equity instruments Nil 53. Capital reserves In RMB Year-beginning balance Increase in Decrease in the current Year-end balance Items the current period period 124 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Capital premium 93,909,294.56 93,909,294.56 Other capital reserves 57,775,125.09 57,775,125.09 Total 151,684,419.65 151,684,419.65 54. Treasury stock Nil 125 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 55. Other comprehensive income In RMB Occurred current term Less:Amount Less:Prior transferred period into profit and included in loss in the other After-tax attribute Items Opening balance Amount incurred before current period composite Less:Income tax After-tax attribute to the Closing balance to minority income tax that recognied income expenses parent company shareholder into other transfer to comprehensiv retained e income in income in the prior period current period 1. Other comprehensive income that cannot be 1,377,784,111.74 252,843,941.58 0.00 0.00 37,926,591.24 214,917,350.34 0.00 1,592,701,462.08 reclassified in the loss and gain in the future Changes in fair value of investments in other equity 1,377,784,111.74 252,843,941.58 37,926,591.24 214,917,350.34 0.00 1,592,701,462.08 instruments II. Other Comprehensive income that will be -615,589.00 545,518.42 0.00 0.00 0.00 232,279.56 313,238.86 -383,309.44 reclassified subsequently to profit or loss 126 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Difference of translating of -615,589.00 545,518.42 232,279.56 313,238.86 -383,309.44 foreign currency accounts Total of other 1,377,168,522.74 253,389,460.00 0.00 0.00 37,926,591.24 215,149,629.90 313,238.86 1,592,318,152.64 comprehensive income 56.Special reserves In RMB Items Beginning of term Increased this period Decreased this period End of term Labor safety expenses 21,020,671.47 434,456.69 1,218,494.40 20,236,633.76 Total 21,020,671.47 434,456.69 1,218,494.40 20,236,633.76 127 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 57. Surplus reserves In RMB Items Beginning of term Increased this period Decreased this period End of term Statutory surplus reserves 621,112,807.78 621,112,807.78 Total 621,112,807.78 621,112,807.78 58. Retained profit In RMB Items Amount of this period Amount of last period After adjustments: Retained profits at the period 3,082,544,107.52 2,774,420,288.05 beginning Add:Net profit belonging to the owner of the 160,325,133.00 345,824,339.47 parent company Common stock dividend payable 150,802,079.99 37,700,520.00 Retained profit at the end of this term 3,092,067,160.53 3,082,544,107.52 As regards the details of adjusted the beginning undistributed profits (1)As the retroactive adjustment on Enterprise Accounting Standards and its related new regulations, the affected beginning undistributed profits are RMB 0.00. (2) As the change of the accounting policy, the affected beginning undistributed profits are RMB 0.00. (3) As the correction of significant accounting error, the affected beginning undistributed profits are RMB 0.00 . (4) As the change of consolidation scope caused by the same control, the affected beginning undistributed profits are RMB 0.00. 59. Business income and Business cost In RMB Amount of this period Amount of last period Items Income Cost Income Cost Main Business 1,911,865,806.20 1,364,677,904.22 2,276,427,071.38 1,608,263,667.71 Other 8,315,896.83 1,726,497.04 7,703,910.75 3,852,484.55 Total 1,920,181,703.03 1,366,404,401.26 2,284,130,982.13 1,612,116,152.26 Whether implemented new revenue guidelines? □ Yes √ No 128 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 60.Taxes and surcharges In RMB Items Amount of this period Amount of last period City maintenance and construction tax 6,258,277.92 11,822,700.18 Education surtax 2,722,783.20 5,249,866.83 House tax 332,977.63 3,216,786.22 Land use tax 1,655,168.00 5,178,759.26 vehicle and vessel tax 26,793.80 24,888.00 Stamp tax 646,951.82 1,027,019.01 Locality Education surcharge 1,815,188.62 3,299,209.54 Total 13,458,140.99 29,819,229.04 61. Sales expense In RMB Items Amount of this period Amount of last period Employees’ remunerations 35,345,136.48 32,773,059.29 Transportation 17,358,879.72 14,693,552.44 Business trips 11,000,584.22 9,452,510.07 Business reception expenses 3,518,464.60 3,399,943.75 Conferences 8,877,804.98 8,058,157.00 Consulting service fee 857,979.45 900,990.48 Three charge 2,965,403.66 1,829,961.31 Advertising fee 645,456.86 904,782.48 Office expenses 294,547.52 610,525.86 Unit premium 443,566.81 175,631.84 Other 5,588,115.02 4,209,187.70 Total 86,895,939.32 77,008,302.22 62. Administrative expense In RMB Items Amount of this period Amount of last period Employees’ remunerations 163,845,277.06 180,210,554.84 Asset depreciation and amortizing 12,905,965.64 6,891,121.59 Business reception expenses 1,341,508.33 5,547,320.26 129 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Rental fee, House rental, property management, water and power 11,812,826.37 5,015,031.88 Traveling fees 4,586,971.31 4,275,372.97 Material, low-value-consumable 1,755,846.28 1,720,636.69 Office expenses 1,171,344.18 904,559.60 Maintaining 1,822,902.87 1,375,919.85 Other 35,925,683.94 31,515,542.48 Total 235,168,325.98 237,456,060.16 63. R&D Expense In RMB Items Amount of this period Amount of last period Labor cost 50,307,098.47 52,135,762.31 Direct materials 51,643,451.05 85,259,892.10 Depreciation expenses 6,273,507.75 6,939,770.84 Test and inspection fee 5,852,855.49 3,476,581.20 Commissioned research & development 906,393.74 1,738,575.99 Other 1,777,636.02 1,798,978.59 Total 116,760,942.52 151,349,561.03 64. Financial expenses In RMB Items Amount of this period Amount of last period Interest expense 7,347,036.95 6,422,483.44 Less: Incoming interests 13,761,463.96 6,343,865.32 Exchange gains/losses 1,120,184.65 -1,251,354.77 Commission 1,072,945.23 1,032,189.81 Other -33,206.03 143,723.91 Total -4,254,503.16 3,177.07 65. Other income In RMB Items Amount of this period Amount of last period 130 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Government subsidies 14,470,802.89 20,337,694.45 Individual tax commission refunds 1,290,786.14 Total 15,761,589.03 20,337,694.45 66. Investment income In RMB Items Amount of this period Amount of last period Long-term equity investment income by equity method 0.00 Investment income from disposal of Long-term equity investment 0.00 2,320,462.15 Investment gains from holding of sellable financial assets 29,171,059.01 Investment income from disposal of available for sale financial assets Dividend income from other equity instrument investments 67,968,801.50 during the holding period Investment income received from holding of held-to-maturity 0.00 investments during holding period Available for sale financial assets in the holding period of 0.00 11,428,418.13 investment income Investment income from disposal of available for sale financial 0.00 assets Disposal of investment proceeds from hold-to-maturity investments 0.00 Investment income from the remaining equity recalculated by fair 0.00 value after losing control Interest income earned by the debt investment during the holding 0.00 period Interest income earned by other debt investments during the 0.00 holding period Investment income from disposal of other debt investments 0.00 Investment income of financial products 0.00 25,716,189.31 Total 99,460,322.66 37,144,607.44 67.Net exposure hedging income Nil 131 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 68. Gains on the changes in the fair value In RMB Source Amount of this period Amount of last period Transactional financial assets -1,474,755.34 Total -1,474,755.34 69. Credit impairment loss Nil 70. Losses from asset impairment Whether implemented new revenue guidelines? □Yes √No In RMB Items Amount of this period Amount of last period Losses on bad debt 6,034,889.10 -43,111,352.82 Inventory price loss 388,917.60 Total 6,423,806.70 -43,111,352.82 71. Asset disposal income In RMB Source Amount of this period Amount of last period Profits of disposal of fixed assets -1,183.02 Total -1,183.02 72. Non-operating income In RMB Recorded in the amount of the non-recurring Items Amount of this period Amount of last period gains and losses Compensation income 576,158.72 3,727,204.67 576,158.72 132 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 167,716.46 Others 168,680.44 462,521.81 Total 744,839.16 4,189,726.48 743,875.18 73. Non-operational expenditure In RMB Recorded in the amount of the Items Amount of this period Amount of last period non-recurring gains and losses Debt restructuring loss 526,315.79 526,315.79 Donations 70,000.00 10,000.00 70,000.00 Penalty paid out 3,681,180.41 2,488,554.74 3,681,180.41 Local water source foundation 66.99 770.69 Fine, late payment 87,175.73 4,673.35 87,175.73 Non-current assets scrapping 497,573.36 3,031.08 497,573.36 loss Other 358,450.00 84,124.68 353,800.00 Total 5,220,762.28 2,591,154.54 5,216,045.29 74. Income tax expenses (1) Details In RMB Items Amount of this period Amount of last period Income tax of current term 37,570,544.94 27,761,803.39 Deferred income tax -795,145.65 4,216,068.43 Total 36,775,399.29 31,977,871.82 (2) Adjustment process of accounting profit and income tax expenses In RMB Items Amount of this period Total profit 221,442,313.03 Income tax expense at statutory / applicable tax rates 33,216,346.96 133 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Effect of different tax rates applicable to subsidiaries 3,268,612.11 Adjustment for income tax in prior year 6,658,104.43 Income not subject to tax -7,388,913.37 Expenses not deductible for tax purposes 230,138.89 Affect the use of deferred tax assets early unconfirmed -34,539.07 deductible losses The current period does not affect the deferred tax assets 825,649.34 recognized deductible temporary differences or deductible loss Income tax expenses 36,775,399.29 75. Other Comprehensive income Please find the statement in the notes of consolidated balance sheet. 76. Notes Cash flow statement (1) Other cash received from business operation In RMB Items Amount of this period Amount of last period Deposit interest(Notes) 12,657,033.86 6,343,865.32 Government subsidies received 8,849,942.78 2,161,611.71 Recovery of operating bank deposits 3,376,150.00 Compensation income 63,697.10 11,483,287.56 Receipt of operating current account 900,072.19 1,000.00 Other 280,235.91 1,823,428.44 Total 26,127,131.84 21,813,193.03 Notes: 2. Other cash paid for Operating activities In RMB Items Amount of this period Amount of last period Transportation 1,852,243.48 2,761,048.87 16,200,400.44 13,727,883.04 Travel expenses Business trips 4,675,551.83 8,947,264.01 134 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Maintaining 932,917.88 991,158.80 Property management and civil services 14,459,646.16 6,043,553.85 Deposit for bidding and others 7,002,407.01 4,967,366.64 Office expenses 1,125,869.55 2,365,249.57 Conferences 1,012,286.97 1,286,844.32 Consulting service fee 4,134,383.92 9,460,726.55 Transportation and vehicles 1,800,422.55 2,693,178.46 Other 48,915,743.06 30,132,445.17 Total 102,111,872.85 83,376,719.28 3.Other investment-related cash received In RMB Items Amount of this period Amount of last period Repurchasing of trusteeship 1,736,229,711.39 2,054,176,329.00 Receipt of levy and relocation 314,548,452.89 compensation Total 2,050,778,164.28 2,054,176,329.00 4. Other cash paid for investment activities In RMB Items Amount of this period Amount of last period Purchasing of financial products 1,157,904,000.00 2,477,114,000.00 Total 1,157,904,000.00 2,477,114,000.00 5. Other financing-related cash received In RMB Items Amount of this period Amount of last period Total 0.00 0.00 (6) Other cash paid relevant to financing activities In RMB Items Amount of this period Amount of last period Payment of CDB investment interest 2,530,666.67 2,530,666.67 135 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Total 2,530,666.67 2,530,666.67 77. Supplement Information for cash flow statement (1)Supplement Information for cash flow statement In RMB Supplementary Info. Amount of this period Amount of last period I. Adjusting net profit to cash flow from operating activities -- -- Net profit 184,666,913.74 160,370,149.54 Add: Impairment loss provision of assets -6,423,806.70 43,111,352.82 Depreciation of fixed assets, oil and gas assets and consumable 30,399,548.46 34,665,195.13 biological assets Amortization of intangible assets 3,642,170.34 3,549,845.84 Amortization of Long-term deferred expenses 126,943.44 Loss on disposal of fixed assets, intangible assets and other 1,183.02 long-term deferred assets Loss on scrap of fixed assets 497,573.36 3,031.08 Loss to changes in fair value 1,474,755.34 Financial cost 8,467,221.60 5,171,128.67 Loss on investment -99,460,322.66 -37,144,607.44 Decrease of deferred income tax assets -825,829.94 4,216,068.43 Increased of deferred income tax liabilities 37,957,275.53 Decrease of inventories -28,264,852.32 36,950,352.31 Decease of operating receivables -127,219,533.71 -206,949,145.32 Increased of operating Payable -12,688,968.55 514,803,440.92 Other -1,563,923.88 -1,086,564.69 Net cash flows arising from operating activities -9,340,596.37 557,787,190.73 II. Significant investment and financing activities that without cash -- -- flows: III. Net changes in cash and cash equivalents: -- -- Cash at end of year 1,686,405,098.11 1,155,254,587.46 136 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Less: cash equivalents at beginning of year 1,262,186,817.20 1,137,492,834.83 Net increase of cash and cash equivalents 424,218,280.91 17,761,752.63 (2) Net Cash paid of obtaining the subsidiary Nil (3) Net Cash receive of disposal of the subsidiary Nil (4) Component of cash and cash equivalents In RMB Items End of term Beginning of term I. Cash 1,686,405,098.11 1,262,186,817.20 Of which: Cash in stock 132,336.73 128,198.82 Bank savings could be used at any time 1,686,272,261.33 1,262,057,605.97 Other unrestricted monetary funds 500.05 1,012.41 III. Closing balance of cash and cash equivalents 1,686,405,098.11 1,262,186,817.20 78. Note of statement of changes in the owner's equity Explain "other" project name and adjustment amount of the adjustment of closing balance in previous year, etc. 79. Assets with limitation on ownership or using rights In RMB Items Closing book value Causation o limitation Used as security for issuing of acceptance drafts Monetary capital 133,453,924.80 and bill of guarantees Note receivable 62,824,000.00 Used as security for issuing of acceptance drafts Collateral for obtaining bank loans and Fixed assets 118,662,101.07 investment funds from CDB Collateral for obtaining bank loans and Intangible assets 84,981,463.59 investment funds from CDB Construction in process 420,170,711.42 Used for mortgage to obtain bank loan and 137 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 guarantee investment fund for CDB Used for mortgage to obtain bank loan and Dividend receivable 27,827,292.60 guarantee investment fund for CDB Used for mortgage to obtain bank loan and Other Equipment instrument Investment 375,516,399.00 guarantee investment fund for CDB Total 1,223,435,892.48 -- Other notes: 80. Monetary items in foreign currencies (1) Foreign currency monetary items In RMB Translated to RMB at end of Items Balance at end of period Exchange rate period Monetary capital -- -- 164,396,901.76 Incl:USD 23,148,814.88 6.8742 159,129,583.25 Euro 9,828.56 7.8170 76,829.86 HKD 0.00 0.00 Yen 30,055.00 0.063816 1,917.99 Rupiah 10,992,734,449.92 0.000472 5,188,570.66 Account receivable -- -- 224,759,835.13 Incl:USD 31,461,943.71 6.8742 216,275,693.45 Euro 551,673.43 7.8170 4,312,431.20 HKD Rupiah 8,324,656,609.57 0.000472 3,929,237.92 SGD 47,726.12 5.0805 242,472.56 Long-term borrowing -- -- Incl:USD Euro HKD Account payable 10,413,054.69 Incl:USD 951,442.96 6.8742 6,540,409.20 Euro 381,143.86 7.8170 2,979,401.55 Rupiah 1,892,465,980.00 0.000472 893,243.94 138 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Other receivable 3,437,100.00 Incl:USD 500,000.00 6.8742 3,437,100.00 Other notes: (2) Note to overseas operating entities, including important overseas operating entities, which should be disclosed about its principal business place, function currency for bookkeeping and basis for the choice. In case of any change in function currency, the cause should be disclosed. Not applicable 81. Hedging Hedging According to Hedging category to disclose arbitrage item, relevant Hedging tools and the Hedging risk qualitative and quantitative information: 82. Government subsidy 1) Government subsidies related to assets In RMB Amount included in current Items Amount Project profit and loss Social security fee refund 8,859,468.01 Other income 8,859,468.01 Relocation compensation - 3,164,807.98 Other income 3,164,807.98 relocation costs Incentive for scientific and 1,000,000.00 Other income 1,000,000.00 technological innovation Forging project financial 997,380.00 Other income 997,380.00 resources Provincial industrial transformation and upgrading 160,000.00 Other income 160,000.00 financial support Economic work reward 126,500.00 Other income 126,500.00 Refund for land use tax 49,703.56 Other income 49,703.56 Social insurance subsidy for post stabilization and 9,513.34 Other income 9,513.34 employment Other incidental government 103,430.00 Other income 103,430.00 subsidies Total 14,470,802.89 14,470,802.89 139 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 (2)Government subsidy return □ Applicable √ Not applicable 83.Other :Nil VIII. Changes of merge scope 1. Business merger not under same control (1) Business merger not under same control in reporting period Nil (2) Merger of enterprises under the same control Nil 3. Counter purchase Nil 4. The disposal of subsidiary Whether there is a single disposal of the investment to subsidiary and lost control □ Yes √No Whether there are multiple transactions step by step dispose the investment to subsidiary and lost control in reporting period □ Yes √ No 5. Other reasons for the changes in combination scope Nil 140 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 6. Other :Nil IX. Equities in Other Entities (I) Equity in major subsidiaries (1) The structure of the enterprise group Name of the Main business Share proportion % Reg. Add. Business property subsidiaries location Way of obtain Direct Indirect Zhejiang Steam Trubine Packaged Hangzhou Hangzhou Zhejiang Zhejiang Commerce 70.86% Incorporation Technologies Development Co., Ltd. Hangzhou Zhongneng Steam Turbine Power Hangzhou Hangzhou Manufacturing Co., Ltd. Zhongneng 60.83% Incorporation Zhejiang Zhejiang Co.) Hangzhou Steam Hangzhou Hangzhou Turbine Casting Co., Zhejiang Zhejiang Manufacturing 38.03% Incorporation Ltd. Hangzhou Steam Hangzhou Hangzhou Turbine Machinery Manufacturing Zhejiang Zhejiang 52.00% Incorporation Equipment Co., Ltd. Hangzhou Steam Turbine Auxiliary Hangzhou Hangzhou Machinery Co., Ltd. Zhejiang Zhejiang Manufacturing 87.53% Incorporation (Auxiliary Machinery Co.) 141 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Zhejiang Turbine Hangzhou Hangzhou Import & Export Co., Commerce 100.00% Incorporation Zhejiang Zhejiang Ltd. (Turbine Co.) Hangzhou Steam Hangzhou Hangzhou Turbine Heavy Industry Zhejiang Zhejiang Manufacturing 100.00% Incorporation Co., Ltd. (2) Basis for holding 50% or less than 50% of the voting power but still controlling the invested organizations In December 2018, the subsidiary Casting Company introduced external strategic investors, leading to a decrease in the shareholding ratio of the Company from 51% to 38.03%. Since the Company still held more than 1/3 of shares and took four seats in the board of seven directors, it still had power of control over the Casting & Forging Company. 2.Major non-fully-Owned subsidiaries In RMB Gains/loss of the period Balance of equity of Name of the Share portion of minor Dividend announced in the attributable to minor minor shareholders at subsidiaries shareholders period to minor shareholders shareholders end of period Zhejiang Steam Trubine Packaged Technologies 29.14% 4,304,870.88 2,972,790.00 27,302,058.72 Development Co., Ltd. Hangzhou Zhongneng Steam 39.17% 7,733,747.67 21,786,000.00 136,358,773.38 turbine Power Co., Ltd. Hangzhou Steam 61.97% -3,050,916.73 148,321,569.19 Turbine Casting Co., 142 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Ltd. Hangzhou Steam Turbine Machinery 48.00% 15,340,505.79 21,600,000.00 67,661,649.67 Equipment Co., Ltd. Hangzhou Steam Turbine Auxiliary 12.47% 791,423.70 26,150,764.23 Machinery Co., Ltd. 143 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 3. Material financial information of major non-fully-owned subsidiaries In RMB End of term Beginning of term Subsidiaries Non-current Current Non-current Total of Non-current Current Non-current Total of Name Current assets Total of assets Current assets Total of assets assets liabilities liabilities liability assets liabilities liabilities liability Zhejiang Steam Trubine Packaged 285,022,490.1 191,345,843.2 248,134,781.8 272,775,507.8 183,669,390 183,669,390.7 Technologies 260,418,141.15 24,604,348.96 191,345,843.28 0.00 24,640,726.05 0.00 1 8 3 8 .74 4 Development Co., Ltd. Hangzhou Zhongneng Steam 1,141,670,374 818,409,077.1 1,105,955,992 1,177,919,594 819,218,843 819,548,843.0 1,071,372,607.22 70,297,767.42 818,079,077.13 330,000.00 71,963,602.76 330,000.00 turbine PowerCo., .64 3 .17 .93 .06 6 Ltd. Hangzhou Steam 165,407,628.4 517,297,871.1 277,938,658.3 441,396,913.8 172,078,042.9 613,474,956.7 343,698,819 369,022,224.5 Turbine Casting 351,890,242.72 253,941,603.34 23,997,055.00 25,323,405.00 6 8 4 2 1 3 .51 1 Co., Ltd. Hangzhou Steam Turbine 279,213,048.5 138,251,278.4 232,419,338.5 253,677,936.6 98,910,290. Machinery 257,731,414.27 21,481,634.32 136,703,360.04 1,547,918.40 21,258,598.11 765,263.03 99,675,553.57 9 4 4 5 54 Equipment Co., Ltd. Hangzhou Steam 107,914,924.1 767,177,545.8 557,468,129.3 642,467,713.4 110,484,194.2 752,951,907.6 549,240,066 549,346,996.2 659,262,621.68 557,361,199.37 106,930.00 106,930.00 Turbine Auxiliary 6 4 7 1 8 9 .20 0 144 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Machinery Co., Ltd. In RMB Subsidiaries Amount of current period Amount of previous period Cash flow for business Cash flow for business Name Turnover Net profit Total Misc Gains Turnover Net profit Total Misc Gains activities activities Zhejiang Steam Trubine Packaged 132,931,775.76 14,770,529.69 14,770,529.69 16,677,677.17 103,740,083.15 8,964,799.55 8,964,799.55 -3,782,165.04 Technologies Development Co., Ltd. Hangzhou Zhongneng 434,209,306.91 17,020,437.04 17,565,955.46 25,182,061.76 404,080,803.34 13,107,189.41 13,026,863.20 81,799,842.65 Steam turbine Power Co., Ltd. Hangzhou Steam Turbine 201,953,546.36 -4,923,525.49 -4,923,525.49 -4,923,310.09 217,307,955.01 11,884,986.18 11,884,986.18 -36,112,238.38 Casting Co., Ltd. Hangzhou Steam Turbine 134,372,561.91 31,959,387.07 31,959,387.07 34,542,152.34 120,928,873.57 25,913,896.24 25,913,896.24 13,513,334.06 Machinery 145 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Equipment Co., Ltd. Hangzhou Steam Turbine Auxiliary 238,328,136.56 6,346,621.51 6,346,621.51 1,340,271.89 225,615,296.83 5,792.82 5,792.82 33,715,715.56 Machinery Co., Ltd. 146 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 (4) Significant restrictions of using enterprise group assets and pay off enterprise group debt Nil (5) Provide financial support or other support for structure entities incorporate into the scope of consolidated financial statements Nil 2. The transaction of the Company with its owner’s equity share changed but still controlling the subsidiary Nil 3. Equity in joint venture arrangement or associated enterprise Nil 4. Significant common operation Nil 5. Equity of structure entity not including in the scope of consolidated financial statements Nil 6.Other:Nil X. Risks related to financial instruments The objective of the Company’s risk management is to achieve a balance between the risk and gains. Constrain the negative influence on business operation to the lowest limit, and maximum the interests of shareholders and other equity holders. With regard to this target, the basic policies of the Company are; locate and analyse the risks, set appropriate bottom line for risks, and manage and monitor on each risk and constrain them in a certain extent. Risks attached to financial instruments are mainly credit risks, liquidity risks, and market risks. The following risk managing policies have been examined and approved by the management: (I) Credit risks Credit risks are introduced when one party of the financial instrument failed to exercise its liabilities and then caused financial loss to another. The credit risks of the Company are mainly composed by bank savings and receivable accounts. Following measurements are adopted to control these risks: 1. Bank deposit The Company puts its bank savings in financial institutions with higher credit ranks, therefore with lower risks. 2. Account receivable The Company performs credit assessment on the clients on periodic and constant basis. Results suggested by the assessment are used by the Company to determine clients with higher ranks and to overlook the rest. This was conducted to avoid risks brought by material bad debts. 147 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 As the Company only does business with recognized and reputable third parties, so no collateral is needed. Credit risks are centralized managed in accordance with customers. As of June 30, 2019, the Company has a characteristic of specific credit risk concentration. 38.08% (June 30, 2018: 36.50%) of the Company's accounts receivable comes from the top five customers. The Company does not hold any collateral or other credit enhancement for the balance of accounts receivable. (1) Analyzing of receivable accounts neither due nor impaired, and those have due but not impaired: Items End of term Not overdue and not Overdue but not impaired Total impaired Within 1 year 1-2 years Over 2 years Note receivable 480,606,384.84 480,606,384.84 Subtotal 480,606,384.84 480,606,384.84 Items Beginning of term Not overdue and not Overdue but not impaired Total impaired Within 1 year 1-2 years Over 2 years Note receivable 595,089,175.22 595,089,175.22 Subtotal 595,089,175.22 595,089,175.22 (2) Refer to Notes of the Financial Statements in conjunction with notes of the consolidated financial statements-accounts receivable for individual accounts receivable with provision for impairment. (II) Liquidation risks Liquidation risks are the possibilities of short in cash at fulfilling liabilities of payment or settlement for financial assets. They may be caused by failing to cash financial assets at fair value instantly; debtors’ failing of paying debts due; debts due before schedule; or failing of generating expected cash flow. To handle these risks, the Company adopted multiple measures such as note clearance and bank loans. Long-term and short-term financing approaches were used to maintain balance between constancy and flexibility. The Company has obtained credit from multiple banks to satisfy the needs of business operation and capital output. (III) Market risks Market risks are those brought by change of fair value or expectable cash flow of financial instruments due to change of market prices, mainly interest risks and exchange rate risks. 1. Interest risks 148 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Interest risks are those brought by change of fair value or expectable cash flow of financial instruments due to change of interest rates, mainly regards the loans at floating interest rates. 2. Foreign currency risks Foreign currency risks (exchange rate risks) are those caused by change of fair value or expectable cash flow of financial instruments due to fluctuation of exchange rates. These risks are mainly related to foreign currency assets and liabilities. The Company operates in mainland China and mostly uses RMB as standard currency, therefore no major risks regarding exchange rates. For details of foreign currency assets and liabilities, please go to the descriptions in the notes to the consolidated financial statements. XI Fair value disclosure (I)Closing balance of assets and liabilities measured at fair value In RMB Closing fair value Items Level 1 Level 2 Level 3 Total I. Consistent fair value measurement -- -- -- -- (I) Trading financial assets 2,281,853.06 16,000,000.00 692,369,030.80 710,650,883.86 1. Financial assets at fair value through 2,281,853.06 16,000,000.00 692,369,030.80 710,650,883.86 profit or loss (1)Debt instrument investment 16,000,000.00 578,769,000.00 594,769,000.00 (2)Equity instrument investment 2,281,853.06 113,600,030.80 115,881,883.86 (3)Derivative financial assets 0.00 1. Designated Financial assets at fair 0.00 0.00 0.00 0.00 value through profit or loss (1)Debt instrument investment 0.00 (2)Equity instrument investment 0.00 2.Other creditor's right investment 0.00 3.Other equipment instrument investment 2,264,720,465.98 2,264,720,465.98 4.Investment Real estate 0.00 1. The right to use the leased land 0.00 2. Leased buildings 0.00 3. Land use rights held and prepared for 0.00 transfer after appreciation 5. Biological assets 0.00 1. Consumable biological assets 0.00 2. Productive biological assets 0.00 149 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Total assets of inconsistent fair value 2,267,002,319.04 16,000,000.00 692,369,030.80 2,975,371,349.84 measurement II.Total liabilities of inconsistent fair -- -- -- -- value measurement 2. Market price recognition basis for consistent and inconsistent fair value measurement items at level 1 The shares held by the Company, Hangzhou Bank Co., Ltd and Sichuan Lutianhua Co., Ltd have active market quotations, thus those are measured at the first level fair value. 3. Valuation technique adopted and nature and amount determination of important parameters for consistent and inconsistent fair value measurement items at level 2 The fair value of the Juyuan Xinxing 9 Private Equity Fund held by the Company, as the quotation of same or similar assets or liabilities can be obtained in the active or inactive market, is determined on the basis of the quoted price and in accordance with the valuation method agreed in the subscription contract. 4. Valuation technique adopted and nature and amount determination of important parameters for consistent and inconsistent fair value measurement items at level 3 As the quotations cannot be obtained in the similar active market, the equity and debt-type financial assets held by the Company other than the above, including wealth management products, are measured at the third-level fair value. 5. Sensitiveness analysis on unobservable parameters and adjustment information between opening and closing book value of consistent fair value measurement items at level 3 6. Explain the reason for conversion and the policy governing when the conversion happens if conversion happens among consistent fair value measurement items at different levels 7. Changes in the valuation technique in the current period and the reason for change 8. Fair value of financial assets and liabilities not measured at fair value 9. Other XII. Related party and related Transaction 1. Information related to parent company of the Company Name of the parent Registered place Business nature Registered capital Shareholding ratio in Voting ratio in the Company 150 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 company the Company (%) (%) Hangzhou Steam Hangzhou China Manufacturing 800 million yuan 63.64% 63.64% Turbine Group Hangzhou Municipal Government State-owned Asset Supervisory Committee is the ultimate controller of the Company. 2.Subsidiaries of the enterprise For details of subsidiaries please go to the statement of equities in other entities. 3. Situation of joint ventures and associated enterprises Nil 4. Other related parties Name of the related parties Relationship with the Company Hangzhou Steam turbine Automobile sales service Co., Ltd. Affiliate of the Group Hangzhou Steam turbine Industry Trade Co., Ltd. Affiliate of the Group Hangzhou Hangfa Power Generating Equipment Co., Ltd. Affiliate of the Group Hangzhou Nanhua Wooden Packaging Co., Ltd. Affiliate of the Group Hangzhou Steam Turbine Engineering Co., Ltd. Affiliate of the Group Hangzhou Steam Turbine Power Group Equipment Co., Ltd. Affiliate of the Group Hangzhou Steam Turbine Compressor Co., Ltd. Affiliate of the Group China Electrical and Mechanical Institute-Hangzhou Turbine Group Affiliate of the Group (Hangzhou) United Research Institute Co., Ltd. Shanghai Relian Group Co., Ltd. Shareholding enterprise Greenesol power systems PVT Ltd. Shareholding enterprise Hangzhou Bank Shareholding enterprise 5.Related transaction (1) Sale of goods/rendering of labor services/labor service offering Purchase of goods and service In RMB Over the Content of related Amount of current Amount of previous Amount of last Related parties trading limit transaction period or not? period period Hangzhou Nanhua Wooden Packaging Packaging 7,475,985.95 18,060,000.00 No 6,153,165.35 Co., Ltd. China Electrical and Mechanical Raw material 171,982.76 2,000,000.00 No 998,507.96 151 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Institute-Hangzhou Turbine Group (Hangzhou) United Research Institute Co., Ltd. Hangzhou Hangfa Generating Generators 80,979,594.17 176,724,137.93 No 66,654,877.76 Equipment Co., Ltd. Hangzhou Steam Turbine Engineering Raw material and 861,320.75 3,900,000.00 No 427,350.43 Co., Ltd. technical service Hangzhou Steam turbine Automobile Transportation , 30,443,515.87 45,560,000.00 No 20,047,920.03 sales service Co., Ltd. repair , etc. 119,932,399.50 246,244,137.93 94,281,821.53 Related transactions regarding sales of goods or providing of services In RMB Subjects of the related Related parties Current term Same period of last term transactions Steam Turbine, Hangzhou Steam Turbine Engineering Co., Ltd. Compressor, Installation 3,209,482.76 45,627,247.27 service Hangzhou Hangfa Generating Equipment Co., Cast parts 3,902,039.33 7,495,811.84 Ltd. Greenesol power systems PVT Ltd. Part 315,180.53 521,141.46 Hangzhou Steam Turbine Automobile Sales Small amount materials 117.49 302.06 Service Co., Ltd. Hangzhou Steam Turbine Power Group Co., Ltd. Small amount materials 1,019.70 0.00 Subtotal 7,427,839.81 53,644,502.63 (2) Related trusteeship/contract Nil (3) Information of related lease - The company was lessee: In RMB Category of leased The lease income Lessor Category of leased assets assets confirmed in this year HSTG House and Building 1,693,306.96 737,888.21 Hangzhou Steam Turbine Automobile Sales Site leasing 1,032,514.68 1,197,365.43 Service Co., Ltd. 152 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Subtotal 2,725,821.64 1,935,253.64 (4)Related-party guarantee The Company was guarantor In RMB Guarantor Guarantee amount Start date End date Execution accomplished or not HSTG 208,000,000.00 December 28,2016 December 22,2026 No The Company was secured party In RMB Guarantor Guarantee amount Start date End date Execution accomplished or not HSTG 100,000,000.00 November 30,2017 November 30,2019 No Notes: In accordance with the National Development Fund Investment Contract, jointly signed by the Company, NDF, Turbine Industry Company and Hangzhou Steam Turbine Group, the investment of the NDF on Turbine Industry Company, RMB 208,000,000.00, is repurchased by the Hangzhou Steam Turbine Group, and the NDF asks the Company and Hangzhou Steam Turbine Group to provide guarantee for the fulfillment of Hangzhou Steam Turbine Group of the transferee equity obligations. The Company and Steam Turbine Company pledge to the NDF with a total of 45.08 million shares of Hangzhou Bank Co., Ltd. with book value of RMB 375,516,399.00,Dividend Receivable of RMB27,827,292.60, Steam Turbine heavy Industry Co., Ltd. mortgaged the book value of65,987,061.22 yuan of land use rights and book value of 40,753,085.36 yuan of fixed assets and book value of 420,170,711.42 yuan of construction in progress to the National Development Fund. (5) Inter-bank lending of capital of related parties Nil (6)Related party asset transfer and debt restructuring In RMB Related party Content Current term Same period of last term Hangzhou Steam Turbine Automobile Sales Service Purchase fixed assets 131,110.93 0.00 Co., Ltd. (7) Remunerations of key managements In RMB Items Current term Same period of last term Remunerations of key managements 4,302,268.00 3,834,075.47 (8) Other related transactions (1) Service and power supply 153 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 HSTG supplies water and power to the Company and some of the subsidiaries amounted to RMB 6762513.50 this period. HSTG. provides property management services for its subsidiary which is Complete Technology Corporation, of which the fee of this period incurred in the property management is RMB 26050.60. Hangzhou Steam Turbine Automobile Sales & Service Co., Ltd. provided transportation to the Company’s employees and RMB 1050286.00 was paid this period. (3) Expenses paid on behalf the Company 1) During the current period, Hangzhou Steam Turbine Group advanced the payment of RMB 467520.08 salaries for the company. Advanced for paying the fees of 671,627.72 yuan for newspapers and periodicals. (3) Bank credit and entrusted wealth-management 1) The Company applied for a line of credit of RMB 300 million to Shiqiao Sub-branch, Bank of Hangzhou Co., Ltd. and till June 30,2019, the balance of loan under the line of credit was still RMB 0. 2) The Company entered into a financial management agent contract with Bank of Hangzhou Co., Ltd. in the cumulative amount of financial management of RMB 318,000,000.00 and till June 30.ber 31, 2019, the balance of the financial management was RMB268,000,000.00. 6. Receivables and payables of related parties (1)Receivables In RMB End of term Beginning of term Name Related party Book balance Bad debt provision Book balance Bad debt provision Note Hangzhou Steam Turbine Engineering 6,100,000.00 1,033,180.00 receivable Co., Ltd. Hangzhou Hangfa Generating 13,760,000.00 4,000,000.00 Equipment Co., Ltd. Subtotal 19,860,000.00 5,033,180.00 Account Hangzhou Steam Turbine Engineering 51,242,293.87 23,846,464.78 56,048,293.87 23,796,436.58 receivable Co., Ltd. Hangzhou Hangfa Generating 19,014,343.57 1,475,673.32 18,739,908.99 1,269,459.57 Equipment Co., Ltd. Greenesol power systems PVT Ltd. 14,522,075.90 14,522,075.90 Hangzhou Steam Turbine Power 158,500.00 158,500.00 158,500.00 158,500.00 Group Co., Ltd. Hangzhou Steam Turbine Compressor 59,000.00 35,400.00 59,000.00 35,400.00 154 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Co., Ltd’ Hangzhou Steam Turbine Power Group Complete Equipment Engineering Co., Ltd. Hangzhou Steam Turbine Automobile 134.42 6.72 Sales Service Co., Ltd Subtotal 70,474,271.86 25,516,044.82 89,527,778.76 39,781,872.05 Hangzhou Hangfa Generating Prepayment 41,416,785.00 51,691,853.97 Equipment Co., Ltd. Hangzhou Steam Turbine Engineering 7,715,000.00 5,820,000.00 Co., Ltd. Zhejiang Zhongrun Gas turbine 792,022.20 technology Co., Ltd. Subtotal 90,513,135.00 58,312,390.17 Other account Hangzhou Steam Turbine Compressor 300,000.00 30,000.00 300,000.00 30,000.00 receivable Co., Ltd. Hangzhou Steam Turbine Group 39,105.34 3,910.53 Subtotal 339,105.34 33,910.53 (2)Payables In RMB Name Related party Amount at year Amount at year beginning Hangzhou Hangfa Generating Equipment Note payable 11,500,000.00 Co., Ltd. Hangzhou Steam Turbine Automobile Sales 1,680,000.00 1,650,000.00 Service Co., Ltd Hangzhou Nanhua Wooden Packaging Co., 450,000.00 1,660,000.00 Ltd. Hangzhou Steam Turbine Engineering Co., Ltd. Subtotal 14,810,000.00 14,810,000.00 Hangzhou Hangfa Generating Equipment Account payable 170,999,628.32 116,462,941.48 Co., Ltd. Hangzhou Steam Turbine Automobile Sales 13,943,743.22 11,934,956.54 Service Co., Ltd 155 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Greenesol power systems PVT Ltd. 1,978,927.49 3,381,200.50 Hangzhou Steam Turbine Engineering Co., 3,562,056.60 2,040,000.00 Ltd. Hangzhou Nanhua Wooden Packaging Co., 1,313,835.14 1,851,121.07 Ltd. HSTG 7,237,557.51 1,652,987.82 China Electrical and Mechanical Institute-Hangzhou Turbine Group 427,500.00 (Hangzhou) United Research Institute Co., Ltd. Hangzhou Steam Turbine Industries & Trade 814,507.79 476,525.45 Co., Ltd. Zhejiang Zongrun Gas turbine technology 158,607.00 Co., Ltd. Subtotal 200,008,863.07 138,765,214.56 Advances Hangzhou Steam Turbine Compressor Co., 14,190,000.00 14,190,000.00 received Ltd. Hangzhou Steam Turbine Engineering Co., 15,877,300.00 10,543,300.00 Ltd. Greenesol power systems PVT Ltd. 432,983.80 103,764.63 Subtotal 30,500,283.80 24,837,064.63 Other account Hangzhou Steam Turbine Automobile Sales 100,000.00 100,000.00 payable Service Co., Ltd HSTG 958,640.46 87,736.60 Subtotal 1,058,640.46 187,736.60 7. Related party commitment 8.Other 156 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 XIII. Stock payment 1. The Stock payment overall situation Not applicable 2. The Stock payment settled by equity Not applicable 3. The Stock payment settled by cash Not applicable 4. Modification and termination of the stock payment Not applicable 5.Other XIV. Commitments 1.Significant commitments Nil 2. Contingency The Company have no significant contingency to disclose, also should be stated 3.Other: Nil XV. Events after balance sheet date Nil XVI. Other significant events 1. The accounting errors correction in previous period Nil 157 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 2. Debt restructuring Nil 3. Replacement of assets Nil 4. Pension plan Nil 5. Discontinuing operation Nil 6. Segment information (1) Recognition basis and accounting policies of reportable segment Nil (2) The financial information of reportable segment Nil (3) There was no reportable segment, or the total amount of assets and liabilities of each part of reportable segment, shall disclose the reason. The Company is single in its business, which is mainly for production and sales of steam turbines, gas turbines and auxiliary turbines. The company’s management regard these businesses as a whole to implement management so as to evaluate the business performance, thus there will be no report divisions. According to the product classifications of main business income and main business cost, the Company will make details for them as follows: Items Main Business Income Main Business Cost Industrial Steam Turbine 1,465,469,922.92 1,047,420,373.19 Castings and Forging 84,257,416.72 66,391,765.42 Auxiliary Engines 78,122,117.16 67,840,098.87 Complete set of waste heat power 49,244,940.88 47,384,746.06 station Part 135,179,927.39 70,470,421.94 158 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Other 107,907,377.96 66,896,995.78 Subtotal 1,920,181,703.03 1,366,404,401.26 (4) Other notes 7. Other important transactions and events have an impact on investors’ decision-making 8. Other 159 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 XVII. Notes of main items in the financial statements of the Parent Company 1. Accounts receivable (1) Accounts receivable classified by category In RMB End of term Beginning of term Book balance Bad debt provision Book balance Bad debt provision Category Proportion Proportion Book value Proportion Proportion Book value Amount Amount Amount Amount % % % % Accrual of bad debt provision by single 29,819,607.69 1.26% 29,819,607.69 100.00% 29,819,607.69 1.34% 29,819,607.69 100.00% item Including Accrual of bad debt provision by 2,331,855,629.80 98.74% 813,075,866.69 34.87% 1,518,779,763.11 2,189,901,288.35 98.66% 815,273,077.90 37.23% 1,374,628,210.45 portfolio Including: Total 2,361,675,237.49 100.00% 842,895,474.38 35.69% 1,518,779,763.11 2,219,720,896.04 100.00% 845,092,685.59 38.07% 1,374,628,210.45 Accrual of bad debt provision by single item: 29,819,607.69 In RMB End of term Name Book balance Bad debt provision Proportion Reason Accounts receivable of individually 29,819,607.69 29,819,607.69 100.00% 160 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 withdrawing bad debt provision with non-significant individual amount Total 29,819,607.69 29,819,607.69 -- -- 161 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Accrual of bad debt provision by portfolio: In RMB End of term Name Book balance Bad debt provision Proportion Account receivables provided bad 2,331,855,629.80 813,075,866.69 34.87% debt provision in credit risk groups Relevant information of the provision for bad debts will be disclosed with reference to the disclosure method of other receivables if the provision for bad debts of bills receivable is accrued according to the general model of expected credit loss: □ Applicable √Not applicable Disclosure by aging In RMB Aging End of term Within 1 year(Including 1 year) 816,913,221.69 1-2 years 473,332,227.01 2-3 years 252,434,638.36 Over 3 years 789,175,542.74 3-4 years 168,201,441.58 4-5 years 160,109,032.10 Over 5 years 460,865,069.06 Total 2,331,855,629.80 The withdrawal amount of the bad debt provision: In RMB Amount of change in the current period Category Opening balance Reversed or Closing balance Accrual Write-off collected amount Accrual of bad debt 29,819,607.69 29,819,607.69 provision by single item Total 815,273,077.90 -2,197,211.21 813,075,866.69 The significant actual write-off accounts receivable: Of which the significant amount of the reversed or collected part during the reporting period Nil (3) The actual write-off accounts receivable In RMB 162 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Items Amount Uncollectible amount 0.00 Total -- 2,392,634.79 -- -- -- (4)The ending balance of account receivables owed by the imputation of the top five parties In RMB Name Amount Proportion(%) Bad debt provision Client 1 635,020,421.93 26.89 282,449,030.97 Client 2 240,631,511,27 10.19 163,538,638.03 Client 3 112,363,538.46 4.76 7,423,154.66 Client 4 66,736,640.63 2.83 Client 5 63,427,500.00 2.68 6,342,750.00 Subtotal 1,118,179,612.29 47.35 459,753,573.66 (5)Account receivable which terminate the recognition owning to the transfer of the financial assets (6)The amount of the assets and liabilities formed by the transfer and the continues involvement of accounts receivable 2. Other account receivable In RMB Nature End of term Beginning of term Dividend receivable 84,526,094.10 16,557,292.60 Other 4,571,138.46 3,427,467.46 Total 89,097,232.56 19,984,760.06 (1)Interest receivable :Nil (2)Dividend receivable (1)Dividend receivable In RMB Items End of term Beginning of term Hangzhou Bank 84,526,094.10 16,557,292.60 Total 84,526,094.10 16,557,292.60 163 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 2) Significant dividend receivable aged over 1 year In RMB Whether occurred Items Closing balance Aging Reason impairment and its judgment basis Hangzhou Bank 9,657,292.60 1-2 years Equity pledge Hangzhou Bank 6,900,000.00 2-3 years Equity pledge Total 16,557,292.60 -- -- -- 3)Provision for bad debts Not applicable (3) Other accounts receivable (1) Other accounts receivable classified by the nature of accounts In RMB Nature Closing book balance Opening book balance Deposit 2,767,375.00 6,547,501.35 Provisional payment receivable 6,933,682.74 1,953,877.08 Petty cash 360,000.00 0.00 Other 108,827.71 325,106.75 Total 10,169,885.45 8,826,485.18 2)Bad-debt provision In RMB Stage 1 Stage 2 Stage 3 Expected credit Expected credit losses for Bad Debt Reserves Expected credit loss over Total losses over the next the entire duration (credit life (no credit impairment) 12 months impairment occurred) Balance as at January 1, 2019 5,399,017.72 5,399,017.72 Balance as at January 1, 2019 —— —— —— —— in current Current period accrual 199,729.27 199,729.27 Balance as at June 30,2019 5,598,746.99 5,598,746.99 Loss provision changes in current period, change in book balance with significant amount Not applicable Disclosure by aging 164 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 In RMB Aging Closing balance Within 1 year(Including 1 year) 4,052,404.63 1-2 years 175,283.58 2-3 years 6,004.00 Over 3 years 5,936,193.24 3-4 years 979,251.00 4-5 years 745,026.90 Over 5 years 4,211,915.34 Total 10,169,885.45 3) Accounts receivable withdraw, reversed or collected during the reporting period The withdrawal amount of the bad debt provision: In RMB Amount of change in the current period Category Opening balance Reversed or collected Closing balance Accrual amount Other receivables with provision for bad debts 5,399,017.72 199,729.27 5,598,746.99 based on credit risk characteristics Total 5,399,017.72 199,729.27 5,598,746.99 4) The actual write-off accounts receivable (5) Top 5 of the closing balance of Other accounts receivable In RMB Account Percentage in total other Name of the company Book balance Age Bad debt provision property receivable % Deposit in 3,710,320.94 36.48% 3,710,320.94 Shanghai Customs Waigaoqiao Office Over 5 years custom China Electric Power Complete Deposit in 1,105,395.00 10.87% 55,269.75 1 year Equipment Co., Ltd. custom Deposit in 800,000.00 7.87% 480,000.00 Guoxin Bidding Group Co., Ltd. 3 years 165 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 custom Deposit in 800,000.00 7.87% 40,000.00 China Petroleum & Chemical 1 year Corporation. Nanjing Bidding Center custom Deposit in 500,000.00 4.92% 400,000.00 Jian Group Co., Ltd. 4years custom Total -- 6,915,715.94 -- 68.01% 4,685,590.69 (6)Account receivable involving government subsidies Nil (7)Other account receivable derecognized due to the transfer of financial assets (8)Amount of transfer other account receivable and assets and liabilities formed by its continuous involvement. Other notes: 3. Long-term share equity investment In RMB End of term Beginning of term Items Impairment Impairment Book balance Book value Book balance Book value provision provision Investment on 860,732,321.62 860,732,321.62 502,919,378.03 502,919,378.03 subsidiaries Total 860,732,321.62 860,732,321.62 502,919,378.03 502,919,378.03 (1) Investments in subsidiaries In RMB Provided Current Impairment Company invested current term Beginning of term Increased this period term End of term provision in Impairment decrease End of term provision Turbine Company 20,000,000.00 20,000,000.00 Hangzhou Heavy 360,000,000.00 357,812,943.59 717,812,943.59 Industry Hangzhou Auxiliary Machine 46,286,513.41 46,286,513.41 Co. 166 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Zhejiang Turbine 29,800,389.56 29,800,389.56 Packaged Co. Zhongneng Co. 27,644,475.06 27,644,475.06 Machinery Co. 7,968,000.00 7,968,000.00 Casting Co. 11,220,000.00 11,220,000.00 Total 502,919,378.03 357,812,943.59 860,732,321.62 (2)Investments in associates and joint ventures Nil (3)Other notes 4. Business income and Business cost In RMB Items Amount of current period Amount of previous period Income Cost Income Cost Main business 1,195,173,183.58 864,005,383.66 1,483,873,460.09 1,087,042,320.25 Other 6,260,548.65 4,687,385.77 6,865,424.39 5,383,386.09 Total 1,201,433,732.23 868,692,769.43 1,490,738,884.48 1,092,425,706.34 Whether implemented new revenue guidelines? □ Yes √No 5.Investment income In RMB Items Amount of current period Amount of previous period Long-term equity investment income by Cost method 61,041,210.00 64,587,205.00 Investment income from disposal of Long-term equity investment Investment gains from holding of sellable financial assets 1,320,462.15 Investment income from disposal of available for sale financial 22,218,266.55 assets Dividend income from other equity instrument investments 67,968,801.50 during the holding period Investment income received from holding of held-to-maturity investments during holding period Investment income received from holding of available-for –sale 10,428,418.13 167 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 financial assets Investment income arising from disposal of available-for-sale financial assets Investment income from the disposal of hold-to-maturity investments Investment income from the remaining equity recalculated by fair value after losing control Interest income earned by the debt investment during the holding period Interest income earned by other debt investments during the holding period Investment income from disposal of other debt investments Investment income of financial products 22,630,167.78 Total 152,548,740.20 97,645,790.91 6.Other XVIII. Supplement information 1. Particulars about current non-recurring gains and loss In RMB Items Amount Notes Gains/losses from the disposal of non-current asset -498,756.38 Governmental subsidy calculated into current gains and loess(while closely related with the normal business of the Company, excluding the fixed-amount 15,761,589.03 or fixed-proportion governmental subsidy according to the unified national standard) Gain/loss from debt reorganization -526,315.79 In addition to normal business with the company effective hedging related business, holders of tradable financial assets, transactions and financial liabilities arising from changes in fair value gains and losses, as well as the 27,696,303.67 disposal of trading of financial assets, trading financial liabilities and available-for-sale financial assets gains return on investment Other non-business income and expenditures other than the above -3,448,280.96 Less: Influenced amount of income tax 6,575,512.32 168 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 Amount of influence of minority interests 3,658,083.93 Total 28,750,943.32 -- For the Company’s non-recurring gain/loss items as defined in the Explanatory Announcement No.1 on information disclosure for Companies Offering their Securities to the Public-Non-recurring Gains and Losses and its non-recurring gain/loss items as illustrated in the Explanatory Announcement No.1 on information Disclosure for Companies offering their securities to the public-non-recurring Gains and losses which have been defined as recurring gains and losses, it is necessary to explain the reason. Not applicable 2. Return on equity (ROE) and earnings per share (EPS) Weighted average ROE EPS(Yuan/share) Profit as of reporting period (%) EPS-basic EPS-diluted Net profit attributable to common 2.62% 0.21 0.21 shareholders of the Company Net profit attributable to common shareholders of the Company after 2.15% 0.17 0.17 deduction of non-recurring profit and loss 3. Differences between accounting data under domestic and overseas accounting standards (1) Differences of net profit and net assets disclosed in financial reports prepared under international and Chinese accounting standards √ Not applicable (2) Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards √ Not applicable (3) Explain reasons for the differences between accounting data under domestic and overseas accounting standards, for audit data adjusting differences had been foreign audited, should indicate the name of the foreign institutions 4.Other Nil XI. Documents available for inspection 169 Hangzhou Steam Turbine Co., Ltd. Semi-Annual Report 2019 (I) Financial Statements signed and sealed by the Chairman of the Board , chief accountant and director of the financial division; (II) All the originals of the Company’s documents and public notices disclosed in the newspapers designated by China Securities Regulatory Commission in the report period; (III) Original copy of Resolutions of the 35th Meeting of the 7th Term of Board. Hangzhou Steam Turbine Co., Ltd. Chairman of the Board: Zheng Bin August 23, 2019 170