Sino Great Wall Co., Ltd. 2016 Annual Report Sino Great Wall Co., Ltd. 2016 Annual Report April 2017 1 Sino Great Wall Co., Ltd. 2016 Annual Report I. Important Notice, Table of Contents and Definitions The Board of Directors and the directors, Supervisory Committee and supervisors and Senior Executives of the Company hereby warrant that at the year , there are no misstatement, misleading representation or important omissions in this report and shall assume joint and several liability for the authenticity, accuracy and completeness of the contents hereof. Mr.Chen Lue , The Company leader, Mrs. Cui Hongli, Chief financial officer and the Mrs. Xian Zhijuan, the person in charge of the accounting department (the person in charge of the accounting )hereby confirm the authenticity and completeness of the financial report enclosed in this annual report. All the directors attended the board meeting for reviewing the Annual Report. BDO China Shu Lun Pan CPAs (Special General Partnership) has issued a standard unqualified audit report for the company. In 2016,This annual report involves the forecasting description such as the future plans, and does not constitute the actual commitments of the company to the investors. The investors should pay attention to the investment risks. The company has detailedly described the possible risks existed in the company’s business operation and the countermeasures, please refer to the contents about the possible risks for the company’s future development in the fourth section-Discussion and Analysis of Business Operation in this report. The company's profit distribution plan for the year is: Based on the company's existing share capital of 1,698,245,011 shares, it’s proposed that the company will distribute cash dividend of RMB 0.60 per 10 shares (tax inclusive), with no bonus shares and no increasing shares by converting capital reserves into share capital. 2 Sino Great Wall Co., Ltd. 2016 Annual Report Table of Contents I.Important Notice, Table of contents and Definitions II. Basic Information of the Company and Financial index III. Outline of Company Business IV. Management’s 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. Administrative structure X. Corporate Bond XI. Financial Report XII. Documents available for inspection 3 Sino Great Wall Co., Ltd. 2016 Annual Report Definition Terms to be defined Refers to Definition Company Law Refers to Company Law of the People’s Republic of China Securities Law Refers to Securities Law of the People’s Republic of China “CSRC” Refers to China Securities Regulatory Commission Company,The Company, Sino Great Wall Refers to Sino Great Wall Co., Ltd. Sino International Refers to Sino Great Wall International Engineering Co., Ltd. BDO Refers to BDO China Shu Lun Pan Certified Public Accountants LLP SZSE Refers to Shenzhen Stock Exchange Reporting period Refers to January 1,2016 to December 31,2016 Yatian Decoration Refers to Shenzhen Yatian Decoration Design Engineering Co., Ltd. Union Development Refers to Union Development Group Co., Ltd. Union Holdings Refers to Union Holdings Co., Ltd. Rich Crown Investment Refers to Rich Crown Investment Co., Ltd. 4 Sino Great Wall Co., Ltd. 2016 Annual Report II. Basic Information of the Company and Financial index I.Company Information Stock abbreviation: Sino Great Wall Sino-B Stock code: 000018 200018 Change of stock Abbreviation Nil (If any) Stock exchange for listing Shenzhen Stock Exchange Name in Chinese 神州长城股份有限公司 Chinese Abbreviation 神州长城 神州 B English name (If any) Sino Great Wall Co., Ltd. English Abbreviation (If any) Sino Great Wall Sino-B Registered address 26 Kuipeng Road, Kuiyong Town, Longgang District, Shenzhen Postal code of the Registered 518119 Address Office Address Sino Great Wall Building, No.3 Jinxiu Street,Economic Technology Development Zone , Beijing Postal code of the office 100176 address Internet Web Site www.sgwde.com E-mail 000018sz@sina.com II. Contact person and contact manner Board secretary Securities affairs Representative Name Yang Chunling Liu Guofa Sino Great Wall Building, No.3 Jinxiu Sino Great Wall Building, No.3 Jinxiu Contact address Street,Economic Technology Development Street,Economic Technology Development Zone , Beijing Zone , Beijing Tel 010-89045855 010-89045855 Fax 010-89045856 010-89045856 E-mail 1208806865@qq.com 000018sz@sina.com III. Information disclosure and placed Newspapers selected by the Company for information Securities Times and Hongkong Commercial Daily. disclosure Internet website designated by CSRC for publishing http: // www.cninfo. com. cn the Annual report of the Company The place where the Annual report is prepared and Secutities Department , Sino Great Wall Building, No.3 Jinxiu placed Street,Economic Technology Development Zone , Beijing 5 Sino Great Wall Co., Ltd. 2016 Annual Report IV.Changes in Registration Organization Code 91440300618801483A On October 13, 2015, the company held the 26th board meeting of the sixth session board of directors, at which the Proposal on Alteration of the Company’s Business Scope was examined and approved. In the light of the major asset restructuring conducted by the company, the main business of the company shall be significantly changed. In order to meet the company’s development requirements, the company planned to change the company’s business scope to “Engineering design and construction, infrastructure investment, new energy construction and investment, medical investment, life technology research and development, equipment Changes in principal business activities manufacturing, defense equipment, financial investment and real estate development since listing (if any) (Finally, the business scope shall be the business scope approved by the Administration for Industry and Commerce) from the original business scope of “Production and operation of the textile industry products and its required raw materials, accessories, machinery and equipment, all kinds of fabrics and clothing and providing related services(Do not contain the products included in the existing license management, if has a license, then it will execute by the license). The Proposal on Alteration of the Company’s Business Scope was examined and approved in the 2015 second extraordinary general shareholder meeting which was convened on October 29, 2015, On October 14, 2015, the company completed the share-issuing of a total of 251,849,593 shares issued to 17 transaction objects such as Chen Lue for purchasing related assets, of which the issuing price is RMB 9.84 per share. Of which Chen Lue Holdings held 138,340,890 shares, taking for 32.86% of the company’s share capital, The Largest shareholder of the company was changed to Mr. Chen Lue form Union Holdings Co., Ltd. And the actual controller of the Compnay was changed to Mr. Chen Lue from Union Developemnt Co., Ltd. On Nov 27, 2015, the company completed the non-public share-issuing to purchase the assets and raise the matching funds. The total share quantity of the non-public Changes is the controlling shareholder in share-issuing for raising funds is 25,914,633 shares, with issuing price of RMB 9.84 the past (is any) per share, of which Chen Lue subscribed 14,735,772 shares of the newly increasing shares. After completing the non-public share-issuing, the company’s total share capital shall be changed to 446,906,582 shares, of which Mr. Chen Lue holds 153,076,662 shares, taking for 34.25% of the company’s total share capital, remained as the company’s actual controlling shareholder and the actual controller. On May 6,2016, the company held the sharelolders meeting in 2016, at which the Proposal concerning preplan for profit Distribution and Dividend Distribution for 2015 o was examined and approved.upon the base of total share capital of 446,906,582 shares on the date of December 31, 2015, 28 shares were increased for every 10 shares to all the shareholders by converting capital reserve into share capital, so the total share 6 Sino Great Wall Co., Ltd. 2016 Annual Report capital were 1,698,245,011 shares after such share increasing by converting capital reserve into share capital. of which Mr. Chen Lue holds 582,944,556 shares, taking for 34.33% of the company’s total share capital, remained as the company’s actual controlling shareholder and the actual controller. V. Other Relevant Information CPAs engaged Name of the CPAs BDO China Shu Lun Pan Certified Public Accountants LLP Office address: 10/F of the No.7 Building, No16 Yard, Mid of West 4th Ring Road, Haidian DDistrict, Beijing Names of the Certified Public Liao Jiahe, Xu Shibao Accountants as the signatories The sponsor performing persist ant supervision duties engaged by the Company in the reporting period. √Applicable □Not applicable Sponsor name Office address Representatives Period of supervision and guide 6/F,A Unit, Fengming Huatai United Securities Co., International Building, No.22, Jia Chunhao, Mao Dawei, Wu September 27, 2015 to Ltd. Fengsheng Hutong, Xicheng Wenmin December 31,2018 District, Beijing The Financial advisor performing persist ant supervision duties engaged by the Company in the reporting period √ Applicable □Not applicable Advisor Name Office address Representatives Period of supervision and guide 6/F,A Unit, Fengming Huatai United Securities Co., International Building, No.22, Jia Chunhao, Mao Dawei, Wu September 27, 2015 to Ltd. Fengsheng Hutong, Xicheng Wenmin December 31,2018 District, Beijing VI.Summary of Accounting data and Financial index May the Company make retroactive adjustment or restatement of the accounting data of the previous years due to change of the accounting policy and correction of accounting errors. □Yes √No Changed over last year 2016 2015 2014 (%) Operating Gross income(RMB) 4,664,999,117.17 4,010,358,999.58 16.32% 2,754,684,893.91 Net profit attributable to the shareholders of the listed company 473,661,862.67 346,648,651.48 36.64% 186,857,504.45 (RMB) Net profit after deducting of 470,274,602.37 347,196,614.68 35.45% 183,801,389.95 non-recurring gain/loss attributable 7 Sino Great Wall Co., Ltd. 2016 Annual Report to the shareholders of listed company(RMB) Cash flow generated by business -1,687,875,813.94 -292,051,257.08 -30.00% 163,847,389.34 operation, net(RMB) Basic earning per 0.28 0.4 -30.00% 0.74 share(RMB/Share) Diluted gains per 0.28 0.40 -30.00% 0.74 share(RMB/Share)(RMB/Share) Net asset earning ratio(%) 31.18% 34.52% -3.34% 24.54% End of Changed over last year End of 2016 End of 2014 2015 (%) Gross assets(RMB) 7,986,178,961.63 4,017,462,824.63 98.79% 2,447,572,750.57 Net assets attributable to shareholders of the listed company 1,777,948,117.49 1,282,256,738.74 38.66% 761,471,188.44 (RMB) Ⅶ.The differences between domestic and international accounting standards 1.Simultaneously pursuant to both Chinese accounting standards and international accounting standards disclosed in the financial reports of differences in net income and net assets. □ Applicable √ Not applicable 2. Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards. □ Applicable √Not applicable Ⅷ.Main Financial Index by Quarters In RMB First quarter Second quarter Third quarter Fourth quarter Operating income 924,667,155.55 1,028,907,599.96 1,280,022,467.68 1,431,401,893.98 Net profit attributable to the 76,587,282.98 125,712,133.66 100,866,553.43 170,495,892.60 shareholders of the listed company Net profit after deducting of non-recurring gain/loss attributable 76,587,282.98 99,349,882.17 100,801,973.68 193,535,463.54 to the shareholders of listed company Net Cash flow generated by -318,972,753.01 -937,643,206.19 -429,722,866.27 -1,536,988.47 business operation 8 Sino Great Wall Co., Ltd. 2016 Annual Report Whether significant variances exist between the above financial index or the index with its sum and the financial index of the quarterly report as well as semi-annual report index disclosed by the Company. □ Yes √No Ⅸ.Items and amount of non-current gains and losses √Applicable □Not applicable In RMB Items Amount (2016) Amount (2015) Amount (2014) Notes Non-current asset disposal gain/loss(including the write-off part for -564,833.40 -81,112.15 -137,889.40 which assets impairment provision is made) Govemment subsidy recognized in currentgain and loss(excluding those closely 108,121.33 342,246.00 related to the Company’s business and granted under the state’s policies) Capital occupation charges on non-financialenterprises that are charged to 5,214,416.45 the profit/loss for the reporting period Profit due to the situation where investmentcosts for the company to obtain subsidiaries, assoiates and joint ventures 1,783,284.99 are lower than the enjoyable fair Value of indetifiable net assets of investees when making investments Profit/loss on fair value changes of transactional financial assets and liabilities & investment profit on disposal of transactional financial assets and liabilities 443,065.98 60,407.78 as well as financial assets available for sale , except for effectively hedging business related to normal business operations fo the Company Non-operating incomeand expense other 5,296,814.65 -905,796.34 -1,062,500.49 than the above Less: Amount of influence of income tax 3,668,000.60 -96,699.29 1,018,319.84 11,192.65 Total 3,387,260.30 -547,963.20 3,056,114.50 For the Company’s non-recurring gain/loss items as defined in the Explanatory Announcement No.1 on information disclosure for Compaines 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 9 Sino Great Wall Co., Ltd. 2016 Annual Report 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. □ Applicable √ Not applicable 10 Sino Great Wall Co., Ltd. 2016 Annual Report 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 Sino Great Wall’s main business has two aspects: the first is construction of engineering projects, and the second is medical & health industry investment and management. The business of construction of engineering projects mainly includes international and domestic large-scale project contracting, with the international business mainly centering on the countries and regions along “One Belt, One Road”, and currently, the international business covers many countries and regions such as the Middle East, Southeast Asia and Africa. The Business scope covers building project, infrastructure project, commercial complex project etc. For the domestic business, with the company’s continuous improvement of construction qualifications, the company’s construction income in PPP projects, building construction, municipal Engineering, infrastructure and new energy field has gradually took the dominant position, while the proportion of income of pure decoration business slightly decreased. The medical & health industry investment and management mainly adopts a number of ways such as the acquisition of the existing hospital, the construction of the new hospital and operating hospital PPP project to enter the operation and management of medical & health industry, thus to achieve the development of both the construction business and the medical & health business. Currently, the company’s construction qualifications include: first-class qualification as general contractor of housing & construction project, first-class qualification as specialized contractor of architectural decoration engineering design and construction, first-class qualification as specialized contractor of building curtain wall engineering, first-class qualification as specialized contractor of ground foundation engineering, first-class qualification as specialized contractor of firefighting facilities engineering, first-class qualification as specialized contractor of waterproof anti-corrosion insulation engineering, second-class qualification as general contractor of mechanical and electrical engineering construction, second-class qualification as specialized contractor of bridge construction, second-class qualification as general contractor of petrochemical engineering construction, second-class qualification as general contractor of municipal public engineering construction, second-class qualification as specialized contractor of tunnel construction, second-class qualification as specialized contractor of fabrication and installation of hydraulic metal structure, second-class qualification as general contractor of water conservancy and hydropower project construction, third-class qualification as general contractor of railway engineering construction, second-class qualification as general contractor of metallurgical engineering construction, qualification regardless of grades as specialized contractor of special engineering, third-class qualification as specialized contractor of highway pavement engineering, third-class qualification as specialized contractor of highway subgrade engineering etc. The scope covers the engineering qualifications of building, highway, railway, municipal utilities, water conservancy and hydropower, petrochemical, electric power and other types of engineering. The medical and health business introduced pundits in the medical field and technical experts together with senior talents to set up a competitive medical team. There are a number of project teams set up all over the country, initially completed the medical& health industry layout. In 2016, it has purchased Wuhan Commercial and 11 Sino Great Wall Co., Ltd. 2016 Annual Report Vocational Hospital Co.,Ltd, won the bids of many PPP medical and health projects such as PPP project of Relocation of Luyi People's Hospital of Henan Province and the PPP project of Overall Relocation of Huichang County People's Hospital of Jiangxi, so the medical and health business has been developed smoothly. Ⅱ.Major Changes in Main Assets 1. Major Changes in Main Assets Main assets Major changes Equity assets No change of present period compared with initial period 193.03% increased in the present period compared with initial period, mainly caused by Fixed assets the acquisition of Wuhan commercial worker hospital 1045.94% increased in the present period compared with initial period, mainly caused by Intangible assets the acquisition of Wuhan commercial worker hospital 100% decreased in the present period mainly owing to the completion of tower crane construction in process installation in Kuwait project and completion construction of the factory in Suzhou city carried over to the fixed asset. 7.76 increased in the present period mainly owing to the acquisition of Wuhan Goodwill commercial worker hospital, Sichuan Dinghui Construction Co.,Ltd as well as Sichuan Haoyao Construction Engineering Co., Ltd. 2. Main Conditions of Overseas Assets √ Applicable □ Not applicable Control Foreign Whether exist measure to assets Content of Reason for Operation Income(RMB significant Asset size Location ensure the accounted for assets the formation mode ) impairment secutity of net assets of risk assets the Company Fixed assets Overseas 32,087,873.08 Kuwait, 1.76% No purchasing of Cambodia, tower crane Qatar, & vehicles Algeria Ⅲ.Analysis On core Competitiveness Whether the company needs to comply with the disclosure requirements of the particular industry No Sino Great Wall Co.,Ltd is a leading construction & engineering contractor in China with business covers various types construction & engineering contracting. The implementation of the National Strategy of “One Belt, One Road” will provide a good opportunity for the company's overseas business development. The company continues to increase efforts to open up overseas markets, thus the overseas project orders and the revenue have 12 Sino Great Wall Co., Ltd. 2016 Annual Report maintained a rapid annual growth rate. With the continuous improvement of relevant construction qualifications, the company’s domestic business also will have a lot of good opportunities as the country has been continuously promoted PPP projects. The company's comprehensive strength, overseas influence and market competitiveness have increased year by year. 1. Strategic positioning advantage The “Construction & Engineering contracting” and “Medical & Health Business” will be the company’s two strategic directions for future development. In 2013, the company set up the development goal “Making bigger and stronger overseas business, and to become the world's leading international comprehensive construction & building service provider”. In 2015, the company set up the “Medical & Health business” as another essential development direction. All of those are to comprehensively cater the needs of the national strategies of “One Belt, One Road” and “Medical & Health Industry Development”. The good prospects of “One Belt, One Road” projects and “Medical & Health Industry” will provide a broad market space for the company’s business development. In terms of engineering contracting, the early-development advantage of overseas business enables the company to have rich management experiences and high-quality customers and establish talented teams, thus laid a solid foundation for the company’s overseas business development. In terms of the Medical & Health business, the company has set up project teams in many domestic places such as Sichuan, Henan and Hubei, and the company has purchased Wuhan Commercial and Vocational Hospital Co.,Ltd and won the bids of many medical and health PPP projects. Also, the company has established cooperative relationships with many hospitals and has recruited many kinds of talents in terms of medical, hospital management, investment and financing etc, thus provided a strong support for the Medical & Health business development. 2. Standardized and high-efficient management system, fully market-oriented operation mechanism With the increasingly expanding of the company scale and business scope, the management for the company is becoming more complex. However, the company timely set up the sound management system and the authorization system to standardize the approval procedures, reduce the management hierarchy tiers and improve the work efficiency and execution, thus ensured the efficient operation of the company’s business operation. For the operation mechanism, the company bravely faces the fierce competition in the market, adheres to the market-oriented development, respects the objective laws of the market and constantly improves its management level, thus to timely response to changes in the market and continuously improve the company's market image, construction quality and profitability. 3. Integrated design and construction advantages The company has a wide range, high-ranking construction qualifications, and the company has integrated design and construction experiences and good project management capabilities, so the company is able to provide integrated design and construction services in terms of civil engineering, decoration, mechanical and electrical installation and full industry chain of curtain wall, and the company can independently complete the whole process of construction project. The company can form a comprehensive advantage in the field of building engineering, so it can reasonably schedule the procurement, labor use and construction plan, as well as the company can constantly optimize the process to reduce the project costs. The company’s excellent design ability, sound construction quality, high-efficient construction planning and the comprehensive high-quality service greatly enhanced the customers’ satisfaction. 4. Costs advantages and quality-control advantages The core management staff of the company all have more than 10 years experiences of building and engineering construction. Upon the deep understanding of the industry, the company established a relatively perfect material procurement, labor management and quality control system. Through the price ceiling mode for 13 Sino Great Wall Co., Ltd. 2016 Annual Report procurement, the company screens the suppliers in the early stage of a project, thus to ensure that the procurement costs of the project materials would be in a reasonable scope. By locking the technical requirements and time requirements of the project, the company can lock the labor costs. The company has set up strict quality-control system for the design drawing, raw material procurement and each aspect of the project construction management, thus to strictly ensue the project construction quality, so the company has won good reputation and got trust and recognition by a great number of customers. 14 Sino Great Wall Co., Ltd. 2016 Annual Report IV. Management’s Discussion and Analysis Ⅰ.General 1. Overall overview of business condition The year of 2016 is the beginning year of China's "13th Five-Year" plan, and it also is the crucial year for the supply-side structural reform. Although the world economic growth is still slow, the China’s economy has shown signs of stabilized recovery after the bottoming under the impact of positive fiscal policy, adaptive monetary policy and the real-estate policy. Under the background of the new economical normal, the company firmly adheres to the development concept of “International development” and closely follows up the national strategy of “One Belt, One Road”, seizing the opportunity and actively going abroad for development. The company continuously increases the efforts of business development in the countries and regions along “One Belt, One Road”. Meanwhile, the company actively seeks the cooperation with domestic and foreign well-known companies, tapping into each other’s advantage to continuously expand the cooperative fields. In 2016, the amount of the overseas bids won by the company and the new signing orders exceeded RMB 27 billion, so the plenteous orders will provide a solid safeguard for the company’s operating performance in the next few years. In 2016, China continued to strongly promote the PPP project. Based on the “Guidance on the Promotion of cooperation model between government and social capital in the field of public service” released in 2015, the government further released other official documents such as “Notice on promoting asset securitization related to government and social capital cooperation (PPP) project in traditional infrastructure field”. Under China’s strong promotion of PPP project construction, the domestic PPP project business continues to heat up and the investment in infrastructure has been picking up. The company precisely judged the timing and timely seized the opportunities, so the company carried out merger and acquisition of enterprises in the same industry and perfected the construction qualifications. Therefore, the company’s domestic business has been effectively extended and developed, and the company has made the successful transformation and upgrading from the previous main business of decoration, thus becoming a comprehensive construction & building service provider with general contracting ability of construction, which greatly improved the company’s s core competitiveness and the comprehensive strength. In 2016, for the investment in the medical field, the company completed the purchase of Wuhan Commercial and Vocational Hospital Co.,Ltd (hereinafter referred to as the "Wuhan Commercial and Vocational Hospital"). The hospital PPP business achieved a good start, and then the company won the bids of Relocation of Henan Luyi hospital, Guizhou Zhongshan Hongqiao City Hospital Project, the PPP project of Overall Relocation of Huichang County People's Hospital and the PPP construction project of Lingbao First People's Hospital etc. The signing and implementation of the above projects will provide a strong support for the company's future operating performance. Based on the analysis and judgment of the status quo and the future prospects of the domestic and international construction market and the medical & health industry, the company will continue to enhance the project contracting and investment along “One Belt, One Road”, increase the investment in the domestic medical & health industry and PPP business, constantly improve the company’s management level, perfect and upgrade the existing qualifications, strongly expand overseas markets, actively participate in the domestic infrastructure PPP projects and promote the sound implementation of more projects, thus to keep a stable, harmonious 15 Sino Great Wall Co., Ltd. 2016 Annual Report development for the company’s domestic and international business and continuously improve the company’s profitability. In 2016, the company realized operation income of RMB 4.665 billion, an increase of 16.32% from the last year; realized the operating profits of RMB 556million, an increase of 28.99% from the last year; and the net profit attributable to the parent company was RMB 474 million, an increase of 36.64% from the last year. In 2016, the main work carried out by the company is as follows: 1) Improved the construction qualifications for domestic building & engineering construction, extended the industry chain. In 2016, the main income of the domestic business was still from the traditional decoration business. In order to better expand the domestic business and extend the industrial chain, the company bought out Sichuan Ding Hui Construction Engineering Co., Ltd (the current name is Sino Great Wall Southwest Construction Engineering Co., Ltd), and the company obtained the share-control of Sichuan Hao Yao Construction Engineering Co., Ltd (Now is Sino Great Wall Jianye Construction Engineering Co., Ltd) by the way of capital increase and becoming a shareholder, so the company has improved the construction qualifications for domestic building & engineering construction, and has expanded the qualification field from the previous decoration for constructions to a number of new fields such as housing &building construction, municipal public facility, highway, water conservancy and hydropower, petrochemical and power engineering. Therefore, the company has greatly expanded the company’s business scope and enhanced the company’s market competitiveness and influence, thus laid a solid foundation for the further improvement on the company’s business performance and profitability. 2) Achieved good results in the overseas business development In 2016, benefiting from the strong promotion of “One Belt, One Road” policy, relying on the company’s good reputation in the overseas construction and the company’s rich construction experience and upon the company’s hard-working, the company’s overseas business achieved a rapid growth. In 2016, the company has won the bids and/or large orders in a number of countries and regions such as Indonesia, Algeria, Burma, Congo, Laos, Kampuchea, and the total amount of those orders exceeds RMB 27 billion. After several years of unremitting efforts and careful cultivation, the company's overseas business development has entered into the fast lane, and the above orders will provide a strong guarantee for the company's business performance in the next few years. (3) Made a good start in the medical & health industry In 2016, the company achieved a good start in the medical & health industry, and then the company won the bids of a number of hospital PPP projects including Relocation project of Henan Luyi hospital, Guizhou Zhongshan Hongqiao City Hospital Project, the PPP project of Overall Relocation of Huichang County People's Hospital and the PPP construction project of Lingbao First People's Hospital. The company has trained and cultivated the professional medical management and marketing team. (4) Fully respecting talents and giving opportunities to talented people, and continuously drawing in talents The enterprise competition is ultimately the talents competition, so the company always adheres to the value of “people-oriented, giving full respect and opportunities to talents”. The company highly values the human resources and talents cultivation. According to the company’s business development plan, the company continuously draws in exterior talents and cultivates the inner talents. The company has continuously improved the quality and level of the technical team and management team of the company, as well as provided a good development platform for various types of talents. By perfecting the personnel training mechanism and the performance evaluation and incentive evaluation mechanism etc, the company would attract more talents and retain the talents, thus to provide a good talent reserve for the company‘s healthy, sustainable development. (5)Standardize company instruction and enhance management 16 Sino Great Wall Co., Ltd. 2016 Annual Report In 2016, based on reality, the company revises and improves a series of instructions including Articles of Association and Rule of Procedure of Shareholders' Meeting to further improve the corporate governance and to build a management system and internal control system in a more scientific and rigorous way and to manage and standardize the company, its subsidiaries and detailed businesses in more layers for improving Enterprise operation management level. Provide a solid system guarantee for the development of all business and effectively improve the management of the company and reduce the risk of company’s operation. The company, a fast developing construction one, issues shares to Sino Great Wall (Beijing) Investment Co., Ltd. and Beijing Anben Medicare investment Co., Ltd. and Mr. Zheng Jihua and gets fund of 2.5 billion Yuan for the company’s high demand of circulating funds and assets in the development and operation and for reducing the company’s debt asset ratio, optimize capital structure and for enhancing the company’s capital strength. On February 16, 2017, the company held Board of Directors and reviewed Resolution on Adjusting Private Equity Placement Scheme of The Company and adjusted the total capital to be 900 million Yuan. Currently private equity placement A share of the company gets the approval of Issuance Examination of China Securities Regulatory Commission. The fund of private equity placement is used for supplying circulating fund and repaying bank loan, which lays a solid foundation of company’s business and improves the comprehensive competence of the company further. Ⅱ.Main business analysis 1. General Refer to relevant contents of “1.Summarization” in “Discussion and Analysis of Management”. 2. Revenue and cost (1)Component of Business Income In RMB 2016 2015 Increase /decrease Amount Proportion Amount Proportion Total business 4,664,999,117.17 100% 4,010,358,999.58 100% 16.32% income Industry EPC 3,118,359,658.51 66.85% 1,513,458,850.56 37.74% 106.04% engineering design 12,669,951.31 0.27% 19,919,636.46 0.50% -36.39% Decoration work 1,452,138,348.28 31.13% 2,455,199,964.42 61.22% -40.85% Medical service 81,593,110.43 1.75% revenue Other 238,048.64 0.01% 21,780,548.14 0.54% -98.91% Product 17 Sino Great Wall Co., Ltd. 2016 Annual Report 4,664,999,117.17 100.00% 4,010,358,999.58 100.00% 16.32% Area Domestic 1,478,928,295.44 31.70% 2,436,352,972.25 60.75% -39.30% Overseas 3,186,070,821.73 68.30% 1,574,006,027.33 39.25% 102.42% (2)Situation of Industry, Product and District Occupying the Company’s Business Income and Operating Profit with Profit over 10% √ Applicable □Not applicable Whether the company needs to comply with the disclosure requirements of the particular industry No In RMB Increase/decrease Increase/decrease Increase/decrease of revenue in the of business cost of gross profit Gross profit Turnover Operation cost same period of over the same rate over the same rate(%) the previous period of period of the year(%) previous year (%) previous year (%) Industry EPC 3,118,359,658.51 2,180,789,521.13 30.07% 106.04% 82.54% 9.01% Decoration works 1,452,138,348.28 1,215,243,366.01 16.31% -40.85% -37.99% -3.77% Product Area Domestic 3,186,070,821.73 2,234,413,513.88 29.87% 102.42% 87.03% 5.77% Overseas 1,478,928,295.44 1,224,964,230.78 17.17% -39.30% -37.83% -1.96% Under circumstances of adjustment in reporting period for statistic scope of main business data, adjusted main business based on latest on year’s scope of period-end. □ Applicable √Not applicable (3)Whether the Company’s Physical Sales Income Exceeded Service Income □ Yes √No (4)Degree of Performance of the Significant Sales Contract Signed up to this Report Period √ Applicable □Not applicable 18 Sino Great Wall Co., Ltd. 2016 Annual Report Amount of Progress of project Date of No Contracting party Name of Projet contract contract PT.Cipta karya bersama Yet to be put into 1 Indonesia Emerald Apartment RMB 314 million 2016/3/8 lestari operation Pile foundation USD80 million completed, operation of 2 Mottamma Holdings Ltd. Myanmar M-Tower project (about RMB 2016/05/31 Basement Waterproof 550 million Started USD 120 million Yet To Be Put Into Oxley Consultancy & 3 Myanmar MIN Residence project (about RMB830 Operation 2016/6/1 Management Co., Ltd. million) Comprehensive Development Pile Foundation USD 285 million Oxley Gem (Cambodia) Project (Project PP50), Floor 55, Completed 4 (about 2016/6/1 Co., Ltd Village 14, Hun Sen Road, RMB1.97 billion) Cambodia General Contracting for 5000 USD 300 million Yet To Be Put Into Banque Congolaise de 5 modern comfortable housings in The (about RMB 2 Operation 2016/6/29 l'Habitat (BCH) Republic of Congo billion) General Contracting for Project PC, Operation Started Pt. Wangxiang Nickel Production Line t, Iron-nickel Plant RMB 1.5015 6 2016/8/1 Indonesia PKEF, Morowali County, West billion Sulawesi Island, Indonesia Myr 167.7892 Process for Fundamental VERITAS ARCHITECTS Angsana Apartment Project,Penang million(about Rebars of Temporary 7 2016/8/8 SDN BHD Island,Malaysia RMB 260 Tower Crane Completed million) Xinjianye Group Co., Ltd. USD 2.7billion Yet To Be Put Into Cambodia Penh Shuangzhi Building 8 Taiwenlong Group Co., (about RMB Operation 2016/12/29 World Trade Center Ltd. 1.8781 million) About RMB 35.5 Subtotal billion (5)Component of business cost Industry Category In RMB 2016 2015 Increase Industry Items Amount Proportion Amount Proportion /decrease 19 Sino Great Wall Co., Ltd. 2016 Annual Report EPC Labor wages 627,669,828.27 18.14% 227,743,800.08 7.20% 175.60% EPC Material 1,326,646,537.37 38.35% 695,054,284.77 21.96% 90.87% EPC Other 226,473,155.49 10.77% 271,915,654.94 8.59% 37.07% Medical service 57,672,498.15 1.67% revenue Engineering 6,239,359.37 0.18% 10,603,822.07 0.34% -41.16% design Decoration works Labor wages 276,123,560.64 7.98% 547,781,369.10 17.31% -49.59% Decoration works Material 770,503,604.30 22.27% 1,359,863,294.41 42.95% -43.34% Decoration works Other 168,616,201.07 0.63% 52,064,960.29 1.65% -58.10% Notes (6)Whether Changes Occurred in Consolidation Scope in the Report Period √ Yes □No 1. Companies into merger range newly in this stage In 2016, the company founded Sino Great Wall Medicare investment Co., Ltd., Sino Great Wall Infrastructure Investment Co., Ltd. and Wuhan Vocational Hospital Co., Ltd. wholly owned by the company by cash offer, Sino Great wall Xinan Construction Co., Ltd. (Original name: Sichuan Dinghui Construction Co., Ltd.) which is wholly bought by subsidiary Sino International, Sino Great Wall Construction Co., Ltd. (Original name: Sichuan Haoyao Construction Co., Ltd.) is 60% bought by share issue by the company. Meanwhile, Sino International founded newly subsidiaries called Sino Great wall Property (Hubei) Co., Ltd. and Sino Great wall Development (Hengqin) Co., Ltd. Then the above newly founded companies and newly bought companies began to be into the merger range of the company since 2016. 2. Companies not into merger account range in this stage In 2016, Sino International cancelled holding companies called Sino Heji Recycled Material Co., Ltd., which was not in the merger range. (7)Relevant Situation of Significant Changes or Adjustment of the Business, Product or Service in the Company’s Report Period □ Applicable √ Not applicable (8)Situation of Main Customers and Main Supplier Information of the Company’s top 5 customers Total sales amount to top 5 sales customers (RMB) 2,806,001,475.3 Proportion of sales to top 5 customers in the annual 60.15% 20 Sino Great Wall Co., Ltd. 2016 Annual Report sales(%) Information of the Company’s top 5 customers No Name Amount(RMB) Proportion % 1 Customer1 902,018,306.43 19.34% 2 Customer2 768,677,450.02 16.48% 3 Customer3 577,372,398.63 12.38% 4 Customer4 395,300,992.03 8.47% 5 Customer5 162,632,328.22 3.49% Total -- 2,806,001,475.33 60.16% Principal suppliers Information of the Company’s top 5 suppliers Total Purchase amount to top 5 sales suppliers (RMB) 210,324,623.20 Proportion of purchase to top 5 suppliers in the annual 14.11% purchase(%) Information about the top 5 suppliers No Name Amount(RMB) Proportion%^ 1 Customer1 80,345,978.27 3.83% 2 Customer2 70,016,472.60 3.34% 3 Customer3 69,059,944.85 3.29% 4 Customer4 65,091,067.63 3.10% 5 Customer5 45,011,071.35 2.15% Total -- 329,524,534.70 15.71% Notes □ Applicable √ Not applicable 3.Expenses In RMB Increase/Decrea 2015 2015 Notes se(%) Sale expenses Due to the reduction of marketing 30,318,688.27 13,686,172.10 121.53% personnel Administration expenses Due to the increase of overseas branches and the increase of domestic 313,930,733.56 154,562,327.86 103.11% and overseas departments such as group, optoelectronic and medical. Financial expenses 127,437,227.95 54,866,402.02 132.27% For the increase in the Company’s 21 Sino Great Wall Co., Ltd. 2016 Annual Report short-term loan and long-term loan as well as the increase in overseas L/G amortization 4.R& D Expenses √ Applicable □Not applicable In order to enhance the core competence of the company and to meet the demand of constant development, the company focuses on researching decoration design and general contracting and so on. Currently each project shall be operate as plan. Through practical application, it can get good economic and social benefit. Situation of Research and Development Input by the Company 2016 2015 Increase /decrease Number of Research and 191 189 1.06% Development persons (persons) Proportion of Research and 7.83% 11.24% -3.41% Development persons Amount of Research and Development Investment (In 139,163,839.18 133,143,918.79 4.52% RMB) Proportion of Research and Development Investment of 2.98% 3.32% -0.34% Operation Revenue Amount of Research and Development Investment 0.00 0.00 Capitalization (In RMB) Proportion of Capitalization Research and Development 0.00% 0.00% Investment of Research and Development Investment The Reason of the Prominent Change in Total Amount of Research and Development Input Occupying the Business Income Year on Year □ Applicable √Not applicable Explanation of the Reason for Substantial Changes in the Research and Development Input’s Capitalization Rate and Its Reasonableness □ Applicable √ Not applicable 5.Cash Flow In RMB Items 2016 2015 Increase/Decrease(%) 22 Sino Great Wall Co., Ltd. 2016 Annual Report Subtotal of cash inflow received 4,618,123,624.04 4,257,440,458.70 8.47% from operation activities Subtotal of cash outflow received from operation 6,305,999,437.98 4,549,491,715.78 38.61% activities Net cash flow arising from -1,687,875,813.94 -292,051,257.08 -477.94%% operating activities Subtotal of cash inflow received 121,565,115.12 2,494.86 4,872,522.72% from investing activities Subtotal of cash outflow for 246,357,420.64 28,713,135.66 758.00% investment activities Net cash flow arising from -124,792,305.52 -28,710,640.80 investment activities Subtotal cash inflow received 3,527,919,898.49 1,805,738,341.24 95.37% from financing activities Subtotal cash outflow for 1,348,742,579.57 1,146,676,943.40 17.62% financing activities Net cash flow arising from 2,179,177,318.92 659,061,397.84 230.65% financing activities Net increase in cash and cash 360,959,565.60 338,985,801.91 6.48% equivalents Notes to the year-on-year change of the relevant data √Applicable □ Not applicable 1. Net cash flows from operating activities decreased significantly over the previous year, which was mainly due to the short period of credit accounts of overseas project suppliers. 2. The net cash flow from financing activities increased compared to the last year mainly due to the increase of bank loans in the current period. Notes to the big difference between cash flow from operating activities and net profit in the reporting year √Applicable □ Not applicable The large difference between the company’s net cash flows from operating activities and the net profits of the year in the reporting period was mainly due to the increase of operating receivables. Ⅲ.Analysis of Non-core Business □ Applicable √ Not applicable Ⅳ.Condition of Asset and Liabilities 1.Condition of Asset Causing Significant Change 23 Sino Great Wall Co., Ltd. 2016 Annual Report In RMB End of 2016 End of 2015 Proportion Proportion increase/decre Notes to the significant change Amount in the total ase assets(%) Monetary funds 1,340,815,821.83 16.79% 695,384,561.31 17.31% -0.52% Account 3,725,170,208.31 46.65% 2,352,808,087.33 58.56% -11.91% receivable Inventory 332,904,930.36 4.17% 168,133,668.91 4.19% -0.02% Fixed assets 128,483,747.74 1.61% 43,846,215.63 1.09% 0.52% Construction in 10,016,928.24 0.25% -0.25% process Short-term loans 1,966,058,357.59 24.62% 225,408,496.07 5.61% 19.01% Long-term loans 786,858,878.82 9.85% 30,140,649.14 0.75% 9.10% 2.Asset and Liabilities Measured by Fair Value □ Applicable √ Not applicable 3. Restricted asset rights as of the end of this Reporting Period Ⅴ.Investment situation 1. General √ Applicable □Not applicable Investment Amount in 2016(RMB) Investment Amount in 2015(RMB) Change rate 2.Condition of Acquiring Significant Share Right Investment during the Report Period √ Applicable □ Not applicable In RMB Name Gain or Progres Whethe of the Investm Investm expecti Less or Date of Main Investm Share s to the r to Disclos Compa ent Capital ent Product ng the Disclos Busines ent Proport Partner balance Involve ure ny Amoun Source Horizo Type earning Current ure(Not s Way ion % sheet in Index Investe t n s Investm e 5) date Lawsuit d ent Wuhan Acquisi http//.w medical Purchas 970000 Self Long-te May Comme 100% tion No ww.cni service e 00 fund rm 11,2016 rcial & complet nfo.co 24 Sino Great Wall Co., Ltd. 2016 Annual Report Vocatio ed m.cn nal Hospita l Co.,Lt d Great Wall Capital Industr increas Novem http//.w Increas y Constru 900000 Self Long-te e has ber ww.cni e 60% No Engine ction 00 funds rm been 10,201 nfo.co capital ering complet 6 m.cn Co., ed Ltd. 3.Situation of the Significant Non-equity Investment Undergoing in the Report Period □ Applicable √ Not applicable 4.Investment of Financial Asset (1)Securities investment □ Applicable √ Not applicable The Company had no securities investment in the reporting period. (2)Investment in Derivatives □ Applicable √ Not applicable The Company had no investment in derivatives in the reporting period. 5.Application of the raised capital √ Applicable □ Not applicable (1)General application of the raised funds √ Applicable □ Not applicable In RMB’0000 Amount of Accumulat Proportion Total Amount of Total Total Use and Total raised ive amount of raised Amount of the Raised Year of Way of Amount of amount of Whereabo raised capital of of raised capital of the Fund with Raising Raising the Raised Raised uts of the capital which the capital of which the Unused over 2 Fund Used Funds Unused purpose which the purpose Raised Years’ 25 Sino Great Wall Co., Ltd. 2016 Annual Report at the was purpose has been Fund at Raised Idling changed in has been changed the Fund the report changed (%) Current period Period In the special Stocks 2015 25,500 3,366.36 4,966.36 0 0 0.00% 20,533.64 account to 0 issue raise funds in storage Total -- 25,500 3,366.36 4,966.36 0 0 0.00% 20,533.64 -- 0 Notes to use of raised capital Upon the approval from the CSRC with the document of the 2015-No.1774 Zheng Jian Xu Ke -Reply of the Major Asset Restructuring and the Issue of Shares to Objects such as Chen Lue to Purchase Assets and Raise Matching Funds by Shenzhen Victor Onward Textile Industrial Co., Ltd, Sino Great Wall International Engineering Co.,Ltd( hereinafter referred to as: “company or the company”) had non-publicly issued 25,914,633 shares of RMB common share(A share), of which the par value per share was RMB 1.00, the issuing price per share was RMB 9.84, the total funds raised was RMB 254,999,988.72, and after deducting the issuance expenses of RMB 14,500,000.00 directly from the raised funds, the actual net amount of the raised funds is RMB 240,499,988.72. (2)Promised projects of raised capital √ Applicable □ Not applicable In RMB’0000 Date Accumul Investme when the Total ated nt Has any Project Total Amount project Benefit raised amount progress Has the material changed(i investme inested in has realized Committed investment capital invested ended the predicted change ncluding nt after the reached in the projects and investment invested at the end reporting result be taken partial adjustme reporting the reporting as of the period(% realized place in change) nt (1) period predicted period commited reporting )(3)=(2)( feasibility applicabl period(2) 1) e status Committed investment projects 1. Overseas marketing network construction No 10,000 10,000 3,226.51 3,226.51 No No project 2.Informatization No 2,500 2,500 27.6 27.6 No No Construction Phase II 3.Related taxes and agency fees of this No 13,000 13,000 112.25 1,712.25 No No transaction 26 Sino Great Wall Co., Ltd. 2016 Annual Report Subtotal of committeed 25,500 25,500 1,600 4,966.36 investment projects Investment orientation for und arising out of plan Total -- 25,500 25,500 3,366.36 4,966.36 -- -- 0 -- -- Situation about not coming up to schemed progress or expected Not applicable revenue and the reason ( in specific project0 Notes to significant change in feasibility of Not applicable the project Amount, application Not applicable and application progress of the unbooked proceeds About the change of Not applicable the implementation site of the projects invested with the proceeds Adjustment of the Not applicable implementation way of investment funded by raised capital About the initial Not applicable investment in the projects planned to be invested with the proceeds and the replacement Using the idle proceeds Not applicable to supplement the working capital on temporary basis Balance of the Not applicable proceeds in process of project implementation and the cause About application and status of the proceeds The company will use the raised money 150 million Yuan to supply circulating money and the unused remaining 55.6849 million Yuan will be saved in raised money account. 27 Sino Great Wall Co., Ltd. 2016 Annual Report Problems existing in application of the proceeds and the No information disclosure or other issues (3)Changes of raised funds projects □ Applicable √ Not applicable The Company had no raised funds in company 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 □ Applicable √ 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 Company Sectors Registered Operating Company type Total assets Net assets Turnover Net Profit Name engaged in capital profit General contracting, subcontractin g, Sino Great engineering Wall survey and design; 7,493,324,70 1,707,478,63 4,583,167,95 597,298,486. 487,695,725. International Subsidiaries 470,136,099 professional 3.87 3.38 8.10 46 96 Engineering Co., Ltd. contracting; architectural decoration engineering; architectural curtain wall; 28 Sino Great Wall Co., Ltd. 2016 Annual Report project and technology study and experimental development; sell building material, machinery, hardware, plastic articles; technology development, technology consultation, technology service; goods import and export; technology import and export; agent import and export.(After delivering this license, you shall get administrativ e license from civil plan committee and civil residential committee. It shall be filed in civil ministry of commerce.) Acquirement and disposal of subsidiaries in the Reporting period √Applicable □Not applicable The method of obtaining and handling The influence to the whole production and Company name subsidiaries during the report period performance 29 Sino Great Wall Co., Ltd. 2016 Annual Report Wuhan Commercial & Vocational Acquisition Hospital Co.,Ltd Luyi Shuguang medical industry Investment investment and Construction Co., Ltd Notes Sino Great wall International Construction Co., Ltd. is a subsidiary of the company and is the main of income and profits of the company, which accounts for more than 90% of all the company’s operating income and net profit and the rest subsidiaries account for less than 10% of all the company’s operating income and net profit, which weight less in the whole company’s operation. Ⅷ.Special purpose vehicle controlled by the Company □ Applicable √ Not applicable Ⅸ.Prospect for future development of the Company 1.Strategy of the Company’s Development 1. Building construction: Economic development of our country has a new trend with structure adjustment, steady enhancement and upgrading of industrial transformation. It is estimated that our economic trend will adjust from high-speed adjustment to middle-high increase with the reduction of fixed asset investment increase rate of the whole society in the future. For a middle or long time, development of national construction industry will change form high-speed increase to moderate increase. Although national construction industry develops steadily, the potential of whole industry remains great. Our country pushes greatly the public service on APP and infrastructure project, which will promote the great development of related lines. Our company is engaged in construction, body of PPP project, which can share the continuity and steady profits from construction, investment and operation of PPP project. In recent years, property investment develops steadily, but it still increases in every year. With the rapid increase of urbanization, the demands of resident’s house improving and living condition needs a long time, construction market still has a bright future. The implementation of “the Belt and Road” policy will boost the development of construction in nations and areas along the sea and create an opportunity for national construction enterprises. As a renown international construction contractor, based on the reputation and market image cumulated for many years, the company will exert first-move advantages on overseas business, talent advantages, management advantages and customer advantages to ensure the rapid growth of overseas business and fully enjoy the great benefits of “the Belt and Road” policy. 2. Healthcare: “13th Five-Year Plan” plans out “Health China”. Medicare industry is of great concern. In 2013, State Council issued Suggestion on Stimulating the Development of Health Service Industry. In 2015, Ministry of Public Health and other four ministries successively issued Guidance on Pilot Projects of the Public Hospital Reform and Suggestion on Building Medical Organization by Encouraging and Guiding Social Capital and other standard files. With the issuance of a series of strategies and standard files, construction and industry 30 Sino Great Wall Co., Ltd. 2016 Annual Report development on medical and health industry step a new historical stage. The health demand of vast amount of population and constant growth of the mass provide a great market space for the development of all medical and health industry. (II) The Company’s Development Strategy The company focuses its development strategy on two aspects: one is to strengthen the project contracting and investment of the Belt and Road Initiative, and the other is to enhance the domestic medical investment. At present, the company has possessed abundant projects in Southeast Asia, South Asia, the Middle East and Africa, and aside from intensifying the exploitation of and investment to the countries in the above-mentioned regions, the company will take the efforts to explore North America, South America, Australia, Europe and other high-end markets as core for the next step. In the field of medical investment, more funds will be disposed, apart from the investment of hospital construction in PPP mode, in the acquisition of mature hospitals, the distribution of medical e-commerce, the introduction of advanced medical technology and services from abroad. Centering around the development strategies of “enlarging and strengthening overseas business to become an integrated international construction services supplier” and “developing the health-care industry”, in the future, the company will devote major efforts to developing abroad business and arranging the medical industry so as to enhance its capacity for core competitiveness and profit constantly and eventually strive to build itself into a prominent business group developed by the mutual driving forces of construction and health-care industry. (III) The Company's Business Plans In 2017, focusing on the development strategies laid down by the Board of Directors, the company will give priority to launch the following activities: (1) To promote the development of domestic business and actively participate in the construction of PPP projects The year of 2017 will witness the company intensifying the expansion of domestic business. Thus, on the basis of improving its construction qualification and capacity, the company will take positive part in the construction of PPP projects, expand its business scope in health-care, infrastructure and other fields and its development scale of architectural ../../../Program Files (x86)/Youdao/Dict/7.0.1.0227/resultui/dict/%3fkeyword=ornament business, increase its domestic business income and profits, and enhance its comprehensive strength and core competitiveness as well. (2) To enlarge the influence of overseas market and the share of overseas business In 2017, the company will make continuing efforts to explore overseas market thoroughly and strengthen the exchanges and cooperation with governments of the foregoing countries and regions. With a full grasp of the construction project opportunities from the countries and regions along the line of the Belt and Road, it will continuously extend the scale of its overseas business and enhance the foreign influence of the brand Sino Great Wall. (3) To maintain the implementation of development projects for medical business and cultivate new profit growth point For the year of 2017, taking full advantage of the good opportunities provided by the national health-care reform, the company will play a positive role in expanding the business in the area of medical health service, acting to implement the construction of hospital PPP projects that have won the bid, and continuing to exploit new hospital PPP projects as well as planning and developing in-depth cooperation in relation with medical business. 31 Sino Great Wall Co., Ltd. 2016 Annual Report (4) To promote private issuing of share and enhance the capital strength of the company On July 7, 2016, the 10th meeting of the 7th Board of Directors was convened to deliberate and approve the Proposal on the Plan of non-public Issuing of A-Share by Sino Great Wall Co., Ltd and plan to issue shares to Sino Great Wall (Beijing) Investment Co., Ltd, Beijing Anben Medical Investment Holdings Ltd and Mr. Zheng Jihua, raising funds of RMB 2.5 billion. On October 14, 2016, the 16th meeting of the 7th Board of Directors was convened to examined and adopted the Proposal on Adjustment to the Current Plan ofnon-public Issuing of A-Share by Sino Great Wall Co., Ltd, adjusting the total raised fund to RMB 900 million. On March 22, 2017, the application for non-publi issuing of A-share has been examined and approved by the Issuance Examination Commission of CSRC, but at present the official documents approved by CSRC has not yet been received. In 2017, the Company will fully seize the favorable opportunities brought by One Belt One Road strategy and Public-Private-Partnership project construction which the nation vigorously implements. To make a further perfection for overseas and domestic marketing networks, the Company will strive to exploit and develop new high-quality customers. To make a further perfection for the Company’s relevant construction qualification, the Company will enlarge the scope of its building construction for offering comprehensive solutions with more perfection and higher quality to customers. The Company will reinforce and enlarge the brand awareness which has been formed and the market share to constantly improve its core competitiveness and profitability. 3.Main Risks faced by the Company and Solutions (1)Influence of Macro Economy and Policy The construction industry and the health-care industry, in which the Company are engaging, are influenced greatly by macro economy and policies. The uncertainty in international and domestic economic situation and the changes of national policy will bring potential risks to the Company’s market development and operating management. Solutions: Pay constant attention to the international and domestic economic situation to make reasonable prejudgement. Make timely adjustment for operating strategy and marketing policy and make pre-arranged planning which copes with market changes to guarantee the smooth realization for business goals in 2016. (2)Risks Aggravated by the Market Competition With more competitions which domestic enterprises and international construction market take part in, the Company’s overseas business operating will be impacted more or less. Solutions: Strengthen team construction and take first-mover advantage of the Company’s overseas business. Draw lessons from the past, improve the capacity of management and control for the Company’s own projects to constantly heighten the Company’s core competitiveness. (3)Management Risks Brought by Constant Business Scope Enlargement In views of the period where the Company is in speedy development, the Company has transferred from the sub-contractor of professional decoration to the general contractor of building construction, and the speedy development in overseas business puts forward higher demands to the Company’s organization operating and project management. Solutions: Strengthen learning and training, constantly improve the quality of the on-the-job managers and technicists, introduce high-level personnel and improve the overall management capacity and the technical capacity of the Company to fully adapt to the pace of the Company’s speedy development Ⅹ.Particulars about researches, visits and interviews received in this reporting period 32 Sino Great Wall Co., Ltd. 2016 Annual Report 1.Particulars about researches, visits and interviews received in this reporting period √ Applicable □ Not applicable Reception time Way of reception Types of visitors Basic index The interactive relation with the investors on Shenzhen Stock Exchange platform about Sino Great Wall January 20,2016 Onsite investigation Organization International Engineering Co., Ltd: Record of the investors relations activities on January 20, 2016. The interactive relation with the investors on Shenzhen Stock Exchange platform about Sino Great Wall February 1,2016 Onsite investigation Organization International Engineering Co., Ltd: Record of the investors relations activities on February 1, 2016. The interactive relation with the investors on Shenzhen Stock Exchange platform about Sino Great Wall March 3,2016 Onsite investigation Organization International Engineering Co., Ltd: Record of the investors relations activities on Marh 3, 2016. The interactive relation with the investors on Shenzhen Stock Exchange platform about Sino Great Wall March 11,2016 Onsite investigation Organization International Engineering Co., Ltd: Record of the investors relations activities on March 11, 2016. The interactive relation with the investors on Shenzhen Stock Exchange platform about Sino Great Wall May 4,2016 Onsite investigation Organization International Engineering Co., Ltd: Record of the investors relations activities on May 4, 2016. The interactive relation with the investors on Shenzhen Stock Exchange platform about Sino Great Wall May 24,2016 Onsite investigation Organization International Engineering Co., Ltd: Record of the investors relations activities on Maty 24, 2016. The interactive relation with the September 2,2016 Onsite investigation Organization investors on Shenzhen Stock Exchange 33 Sino Great Wall Co., Ltd. 2016 Annual Report platform about Sino Great Wall International Engineering Co., Ltd: Record of the investors relations activities on September 2, 2016. The interactive relation with the investors on Shenzhen Stock Exchange platform about Sino Great Wall November 17,2016 Onsite investigation Organization International Engineering Co., Ltd: Record of the investors relations activities on November 17, 2016. The interactive relation with the investors on Shenzhen Stock Exchange platform about Sino Great Wall December 23,2016 Onsite investigation Organization International Engineering Co., Ltd: Record of the investors relations activities on December 23, 2016. Reception times 9 Reception agency amount 40 Reception personal number 0 Others 0 Whether to disclose, reveal or disclose non-public No material information 34 Sino Great Wall Co., Ltd. 2016 Annual Report V. Important Events ⅠSpecification of profit distribution of common shares and capitalizing of common reserves Formulation, implementation and adjustment of profit distribution policy of common shares especially cash dividend policy during the reporting period √ Applicable □Not applicable On August 25, 2016, the 12th meeting of the 7th Board of Directors was convened to deliberate and approve the Proposal on the Amendment of the Articles of Association, of which, the amendments include Article 162, Profit Distribution Policy of the Articles of Association. On December 16, 2016, the third Ppovisional Shareholders Meeting in 2016 was convened to deliberate and approve the Proposal on the Amendment of the Articles of Association. The details are as follows: Article 162 Profit Distribution Policy Article 162 Profit Distribution Policy The company's profit distribution shall attach The company's profit distribution shall attach importance importance to the reasonable investment return for to the reasonable investment return for investors, especially investors, especially the small and medium-sized the small and medium-sized investors, and take into account investors, and take into account its sustainable its sustainable development, establish a sustained, stable and development, establish a sustained, stable and positive dividend policy, and adopt the methods of profit positive dividend policy, and adopt the methods of disribution in cash, stock, the combination of cash and stock profit disribution in cash, stock, the combination of or other ways permitted by laws or regulations. cash and stock or other ways permitted by laws or (1) The Principle of Profit Distribution regulations. The company shall implement a sustained and stable (1) The Principle of Profit Distribution profit distribution policy, pay attention to the reasonable The company shall implement a sustained and investment return for investors and give consideration to its stable profit distribution policy, pay attention to the long-term and sustainable development; the company's profit reasonable investment return for investors and give distribution must not exceed the cumulative distributive consideration to its long-term and sustainable profit. development; the company's profit distribution must (2) The Forms of Profit Distribution not exceed the cumulative distributive profit. The company can adopt the methods of profit distribution (2) The Forms of Profit Distribution in cash, stock or the combination of cash, or other ways The company can adopt the methods of profit permitted by laws or regulations and shall give priority to the distribution in cash, stock or the combination of cash, method of cash dividends. or other ways permitted by laws or regulations and (3) The Specific Conditions and Proportion of Cash shall give priority to the method of cash dividends. Dividends 35 Sino Great Wall Co., Ltd. 2016 Annual Report (3) The Specific Conditions and Proportion of Cash 1, The implementation of cash dividends must satisfy Dividends simultaneously the following conditions: 1, The implementation of cash dividends must satisfy (1) The earnings per share of the year shall not be less than simultaneously the following conditions: 0.1 yuan; (1) The earnings per share of the year shall not be less (2) The cumulative distributive profits per share of the year than 0.1 yuan; shall not be less than 0.2 yuan; (2) The cumulative distributive profits per share of the (3) Unqualified audit reports of the company's annual or year shall not be less than 0.2 yuan; semi-annual financial statements shall be issued by the audit institution; (3) Unqualified audit reports of the company's annual or semi-annual financial statements shall be issued by the (4) No events such as major investment plans or major audit institution; cash expenditures occured (excluding the fund-raising projects). (4) No events such as major investment plans or major cash expenditures occured (excluding the Any event meeting any of the following criteria constitute fund-raising projects). a major investment plan or major cash expenditure: Major investment plan or major cash expenditure 1) The accumulated expenditures of the company’s planed refers to the accumulated expenditures of the foreign investment, assets acquisition, equipment purchase, company’s planed foreign investment, assets loan return and bond redemption that has already been acquisition or equipment purchase, house buildings implemented in the year or will be implemented in the next and land-use rights in the next 12 months reach or 12 months reach or exceed 50% of the latest total audited exceed 30% of the latest total audited assets of the assets of the company and the expenditures above-mentioned company and the expenditures above-mentioned must must exceed RMB 50 million; exceed RMB 50 million. 2) The accumulated expenditures of the company’s 2, the Provisions on Proportion of Cash Dividends planed foreign investment, assets acquisition, equipment purchase, loan return and bond redemption that has already (1) The company shall maintain the continuity and been implemented in the year or will be implemented in the stability of the profit distribution policy. Under the next 12 months reach or exceed 30% of the latest total conditions that satisfying cash dividends, the yearly audited assets of the company and the expenditures profits distributed with cash shall be no less than above-mentioned must exceed RMB 50 million. 10% of the distributive profits achieved in the year, and within any three consecutive years, the profits 2, the Provisions on Proportion of Cash Dividends distributed with cash shall be no less than 30% of the (1) The company shall maintain the continuity and average distributive profits achieved in the three stability of the profit distribution policy. Under the consecutive years; conditions that satisfying cash dividends, the yearly profits (2) The distributive profits un-allocated of the year can distributed with cash shall be no less than 10% of the be allocated in subsequent years; distributive profits achieved in the year, and within any three consecutive years, the profits distributed with cash shall be (3) The profit distribution shall not exceed the scope no less than 30% of the average distributive profits achieved of the cumulative distributive profits, and shall not in the three consecutive years; impair the company's continuous operation ability. (2) The distributive profits un-allocated of the year can be (4) Time Interval of the Dividend Distribution allocated in subsequent years; 36 Sino Great Wall Co., Ltd. 2016 Annual Report Under the conditions that satisfying cash (3) The profit distribution shall not exceed the scope of the dividends, the company will actively adopt cash cumulative distributive profits, and shall not impair the dividends as the method of dividend distribution. In company's continuous operation ability. principle, cash dividends will be implemented (4) Time Interval of the Dividend Distribution annually, and Board of Directors can propose the company to implement medium-term cash dividends Under the conditions that satisfying cash dividends, the in accordance with the company profitability and company will actively adopt cash dividends as the method of financial needs. dividend distribution. In principle, cash dividends will be implemented annually, and Board of Directors can propose (5) The Issuance Conditions of Share Dividends the company to implement medium-term cash dividends in Based on the annual earnings and cash flow and on accordance with the company profitability and financial the premise of guaranteeing the minimum cash needs. dividend ratio and the reasonable equity scale and (5) The Issuance Conditions of Share Dividends ownership structure, the company can pay attention to synchronizing equity expansion with business Based on the annual earnings and cash flow and on the growth and consider to take the method of share premise of guaranteeing the minimum cash dividend ratio dividend to distribute profits. and the reasonable equity scale and ownership structure, the company can pay attention to synchronizing equity expansion (6) Differentiated Cash Dividend Policies with business growth and consider to take the method of The Board of Directors shall take into account share dividend to distribute profits. such factors as the characteristics of the industry the (6) Differentiated Cash Dividend Policies company engage, the development stages, its own business models, profitability and whether there are The Board of Directors shall take into account such major capital expenditure arrangements, distinguish factors as the characteristics of the industry the company the following situations, and propose differentiated engage, the development stages, its own business models, cash dividend policies in accordance with the profitability and whether there are major capital expenditure procedures stipulated in the Article of Association: arrangements, distinguish the following situations, and propose differentiated cash dividend policies in accordance 1, If a profit distribution occurs when the with the procedures stipulated in the Article of Association: company is in mutual development stage and has no major capital expenditure arrangements, the cash 1, If a profit distribution occurs when the company is in dividends shall account for at least 80% of the total mutual development stage and has no major capital profits to be distributed; expenditure arrangements, the cash dividends shall account for at least 80% of the total profits to be distributed; 2, If a profit distribution occurs when the company is in mutual development stage and has 2, If a profit distribution occurs when the company is in major capital expenditure arrangements, the cash mutual development stage and has major capital expenditure dividends shall account for at least 40% of the total arrangements, the cash dividends shall account for at least profits to be distributed; 40% of the total profits to be distributed; 3, If a profit distribution occurs when the company is 3, If a profit distribution occurs when the company is in in growth stage and has major capital expenditure growth stage and has major capital expenditure arrangements, arrangements, the cash dividends shall account for at the cash dividends shall account for at least 20% of the total least 20% of the total profits to be distributed; profits to be distributed; 4, If the company's development stage is hard to 4, If the company's development stage is hard to distinguish but 37 Sino Great Wall Co., Ltd. 2016 Annual Report distinguish but there are major capital expenditure there are major capital expenditure arrangements, the distribution arrangements, the distribution of cash dividends can be of cash dividends can be dealt with in accordance with the dealt with in accordance with the preceding provisions.4 preceding provisions. (7) The Specific Conditions, Decision-making Process (7) The Specific Conditions, Decision-making Process and and Mechanism to Adjust Profit Distribution Policy Mechanism to Adjust Profit Distribution Policy Considering the production and management, Considering the production and management, investment investment planning, long-term development needs planning, long-term development needs and external business and external business environment, when the environment, when the adjustment or change to the profit adjustment or change to the profit distribution policy distribution policy determined by the Article of Association is determined by the Article of Association is absolutely absolutely necessary, the scheme for adjustment or change necessary, the scheme for adjustment or change shall shall be drawn up by and submitted to the general meeting of be drawn up by and submitted to the general meeting shareholders by the Board of Directors for diliberation. When of shareholders by the Board of Directors for the general meeting of shareholders deliberates the change diliberation. When the general meeting of for profit distribtion policy, it is a must that the deliberation is shareholders deliberates the change for profit past by 2/3 of the voting rights held by the shareholders distribtion policy, it is a must that the deliberation is present at the meeting and convenience is provided for the past by 2/3 of the voting rights held by the small and medium shareholders to attend the general meeting shareholders present at the meeting and convenience of shareholders. Independent directors shall express their is provided for the small and medium shareholders to explicit independent opinions on the adjustment or change of attend the general meeting of shareholders. profit distribution policy, and the Board of Supervisors shall Independent directors shall express their explicit publish the audit opinion. independent opinions on the adjustment or change of (8) The Decision-making Process of Profit Distribution profit distribution policy, and the Board of Policy Supervisors shall publish the audit opinion. The annual profit distribution plan of the company shall (8) The Decision-making Process of Profit be proposed and laid down by the company’s management Distribution Policy and Board of Directors with the consideration of the The annual profit distribution plan of the provisions of the Article of Association, profitability, capital company shall be proposed and laid down by the needs and shareholder return planning, and be deliberated company’s management and Board of Directors with and approved by the the general meeting of shareholders after the consideration of the provisions of the Article of being reviewed by the Board of Directors. Independent Association, profitability, capital needs and opinions to the profit distribution plan shall be made and shareholder return planning, and be deliberated and publicly disclosed by independent directors. approved by the the general meeting of shareholders (9) The Board of Directors shall carefully study and after being reviewed by the Board of Directors. demonstrate the timing, conditions, minimum proportions, Independent opinions to the profit distribution plan conditions for adjustment and other decision-making shall be made and publicly disclosed by independent rocedural requirements of the cash dividend distribution in directors. the process of deliberating and making the profit distribution (9) The Board of Directors shall carefully study plan; the independent directors shall express explicit and demonstrate the timing, conditions, minimum opinions on it. The recommendations of the management, the proportions, conditions for adjustment and other key points of the speech by shareholders attending the decision-making rocedural requirements of the cash meeting, the opinions of independent directors, the vote the dividend distribution in the process of deliberating Board of Directors and other contents shall be recorded in 38 Sino Great Wall Co., Ltd. 2016 Annual Report and making the profit distribution plan; the detail and be properly kept as the company archives in independent directors shall express explicit opinions written form. on it. The recommendations of the management, the (10) The general meeting of shareholders shall vote the key points of the speech by shareholders attending profit distribution plan proposed by the Board of Directors the meeting, the opinions of independent directors, according to the laws and rules. In the deliberation of the the vote the Board of Directors and other contents specific scheme for cash dividends, the general meeting of shall be recorded in detail and be properly kept as the shareholders shall communicate and exchange actively with company archives in written form. the shareholders, especially the small and medium (10) The general meeting of shareholders shall shareholders, through multiple channels, fully heed the vote the profit distribution plan proposed by the opinions and demands of the small and medium shareholders Board of Directors according to the laws and rules. In and respond to their concerns in a timely manner. The Board the deliberation of the specific scheme for cash of directors shall complete the distribution of dividends (or dividends, the general meeting of shareholders shall shares) within 2 months after the resolution of profit sharing communicate and exchange actively with the plan made by the general meeting of shareholders. shareholders, especially the small and medium (11) When the company get the annual profits but the shareholders, through multiple channels, fully heed management and the Board of Directors do not propose and the opinions and demands of the small and medium draw up the cash dividend plans, the management needs to shareholders and respond to their concerns in a submit to to the Board of Directors a detailed overview to this timely manner. The Board of directors shall complete issue, including the reasons for not distributing the dividends the distribution of dividends (or shares) within 2 and the purpose and using plan of the retained funds which are months after the resolution of profit sharing plan not distributed, and independent opinions to the profit made by the general meeting of shareholders. distribution plan shall be made and publicly disclosed by (11) When the company get the annual profits but independent directors; the overview will be deliberated by the the management and the Board of Directors do not the general meeting of shareholders after being reviewed and propose and draw up the cash dividend plans, the approved by the Board of Directors and it will be stated to the management needs to submit to to the Board of general meeting of shareholders by the Board of Directors. Directors a detailed overview to this issue, including (12) The company shall disclose the implementation of the reasons for not distributing the dividends and the profit distribution plans and cash dividend policies in the purpose and using plan of the retained funds which annual report and semi-annual report in strict accordance are not distributed, and independent opinions to the with the relevant provisions. When the company get the profit distribution plan shall be made and publicly annual profits but no cash dividend plans are proposed, the disclosed by independent directors; the overview will reasons for not distributing the dividends and the purpose and be deliberated by the the general meeting of using plan of the retained funds which are not distributed shareholders after being reviewed and approved by shall be expounded in the annual report. the Board of Directors and it will be stated to the general meeting of shareholders by the Board of (13) The Board of Supervisors shall supervise the Directors. implementation of the company's profit distribution policies and the shareholder return plans as well as the decision-making (12) The company shall disclose the process executed by the Board of Directors and the management. implementation of profit distribution plans and cash When the company get the annual profits but no cash dividend dividend policies in the annual report and plans are proposed, the Board of Supervisors shall make a special semi-annual report in strict accordance with the statement and comment on the implementation of relevant policies relevant provisions. When the company get the and plans. annual profits but no cash dividend plans are 39 Sino Great Wall Co., Ltd. 2016 Annual Report proposed, the reasons for not distributing the dividends and the purpose and using plan of the retained funds which are not distributed shall be expounded in the annual report. (13) The Board of Supervisors shall supervise the implementation of the company's profit distribution policies and the shareholder return plans as well as the decision-making process executed by the Board of Directors and the management. When the company get the annual profits but no cash dividend plans are proposed, the Board of Supervisors shall make a special statement and comment on the implementation of relevant policies and plans. Special explanation on cash dividend policy Satisfy regulations of General Meeting or requirement of Article Yes of Association (Yes/No) Well-defined and clearly dividend standards and proportion Yes (Yes/No) Completed relevant decision-making process and mechanism Yes (Yes/No) Independent directors perform duties completely and play a Yes proper role (Yes/No) Y Minority shareholders have ample opportunities and their Yes legitimate rights and interests are effectively protected (Yes/No) Condition and procedures are compliance and transparent while Yes the cash bonus policy adjusted or changed (Yes/No) The profit distribution preplan or proposal and the preplan or proposal of conversion of the capital reserve into share capital in the past three years(with the reporting period inclusive): Profit distribution preplan for 2014: 1 As audited by Da Hua Certified Public Accountants(Special General Partnership) , the total profit of the Company for 2014 is RMB4,740,872 , After deduction of minority gains and losses of RMB-3,709 and income tax expenses of RMB 453,676, net profit is RMB4,290,905,the total year-end undistributed profit is RMB-103,768,226. The Company is neither to distribute profit nor to capitalize capital surplus for the current year. Profit distribution plan for 2015: based on the 2015 total share capital of 446.906582 million shares, The Company will transfer the capital reserve to increase capital stock, 28 shares for every 10 shares. 40 Sino Great Wall Co., Ltd. 2016 Annual Report Dividend distribution of the latest three years In RMB Net profit Ratio in net profit attributable to the Amount of cash Proportion of cash attributable to the Cash dividend over of the parent dividends from cash dividends from cash Year parent company in (Including Tax) company in the offer to repurchase offer to repurchase the consolidated consolidated shares of the funds shares of the funds financial statements financial statements 2016 101,894,700.66 473,661,862.67 21.51% 0.00 0.00% 2015 0.00 346,648,651.48 0.00% 0.00 0.00% 2014 0.00 186,857,504.45 0.00% 0.00 0.00% In the reporting period, both the Company’s profit and the parent company’s retained earnings were positive however not cash dividend distribution proposal has been put forward. □ Applicable □ Not appliable II.Profit distribution plan and capitalizing of common reserves plan for the Period √ Applicable □ Not applicable Bonus shares for every ten shares(Shares) 0 Cash dividend for everty ten shares 0.60 (Yuan)(Tax-included) Distribute additional (shares)for 10 shares 0 A total number of shares as the distribution 1,698,245,011 basis(shares) Total cash dividend (Yuan)(Tax-included) 101,894,700.66 Proportion of cash dividend in the distributable 100.00% profit (%) Cash dividend distribution policy If the company’s development is at the growth stage with arrangements of significant capital expenditures, the minimum proportion of cash dividend in the profit distribution should reach 20%. Details of proposal of profit distribution preplan or share conversion from capital public reserve The Audit Report of LHZ(2017) No. 0263 issued by BDO China Shu Lun Pan Certified Public Accountants LLconfirms that the company's net profit of 2016 that belongs to the shareholders is RMB 465,758,169.92. According to the Article of Association, 10% of the profit, RMB 46,575,816.99, is drawn as the legal accumulation fund of the company; At the end of this year, plus the profit of RMB 755,308,636.19, which was not distributed at the beginning of last year, the profit serving as the distributive dividends for all shareholders is RMB 1,174,490,989.12. The company intends to distribute the cash dividends of RMB 0.60 yuan per 10 shares (tax incl.) to all shareholders, taking the total equity of RMB 1,698,245,011 on December 31, 2016 as the base, with a total distribution of RMB 101,894,700.66. The remaining un-allocated profit of RMB 1,072,596,288.46 will be carried over to the next year. 41 Sino Great Wall Co., Ltd. 2016 Annual Report III.Commitments to fulfill the situation 1.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. √ Applicable □ Not applicable Peiod Time of Commitment of Fulfil Commitment Type Contents making maker commi lment commitment tment Commitment on share reform No No No No Commitment in the acquisition report No No No No or the report on equity changes Shares acquired by purchases of assets through issuing shares: “I will not transfer the new shares of Victor Onward Holdings acquired through this restructuring, including but not limited to the public transfer through the stock market or by agreement, and I will not entrust anybody else to manage my shares of Victor Onward Holdings, within 36 months from the date new shares list and before the date I’ve carried out my obligations of performance compensation under this Strict restructuring(subject to whatever is 36 Chen Lue, He Stock March perf Commitments in assets reorganization early, hereinafter referred to as “lock-up month Feiyan lock 19,2015 ormi periods”). If the closing price of shares s ng of Victor Onward Holdings were lower than this issue price for 20 continuous trading days in 6 months after the restructuring transaction has been completed, or the final closing price were lower than this issue price 6 months after the transaction has been completed, the lock-up periods of my shares of Victor Onward Holdings are automatically prolonged for 6 months. (The above-mentioned issue price will be calculated according to the price after the adjustment of ex-dividend, etc. 42 Sino Great Wall Co., Ltd. 2016 Annual Report if ex-dividend behaviors of the company, including distribution of dividends, giving bonus, conversion of share capital, rationing shares, and etc., were happened during the above-mentioned periods. If the restructuring transaction were March 19,2015 36 mont hs Strict perfor ming Shenzhen Victor Onward Textile Industrial Co., Ltd. The Third Quarterly Report 2015. 14 investigated by judicial authorities or China Securities Regulatory Commission due to false record, misleading statement or major omission of the information provided or disclosed, I will not transfer my shares of the company before the conclusion of the case has been made clear. After the above-mentioned lock-up periods, I will sell or transfer the new shares of the company acquired from this restructuring following relevant regulations of China Securities Regulatory commission and Shenzhen Stock Exchange. Shares acquired by matching funds raised: “I will not transfer the new shares of Victor Onward Holdings acquired through this issuing by any Strict way, including but not limited to the 36 Stock March perf Chen Lue public transfer through the stock market month lock 19,2015 ormi or by agreement, within 36 months from s ng the date new shares list. If regulation rules or regulators have longer requirements for lock-up periods, it should be executed accordingly. Up to the issue day of the letter, I and other corporations controlled by me No haven’t possessed funds of Sino Great Strict capital Wall; After the transaction is completed, March Long-t perf Chen Lue occupa I and other companies controlled by me 19,2015 erm ormi tion (if any), except for listed companies and ng their holding subsidiaries, will not possess the funds of listed companies or 43 Sino Great Wall Co., Ltd. 2016 Annual Report Sino Great Wall by any way, including cash in advance, other expenses, direct or indirect loans, assumption, etc. and try our best to avoid fund intercourse with listed companies or Sino Great Wall, which has nothing to do with normal operations. If Sino Great Wall got penalized by government administration departments due to the money lending which was happened before the transaction, I will bear the total compensation for the company’s loss resulting from it by cash in order to guarantee Sino Great Wall won’t suffer any loss. Meanwhile, I will actively urge Sino Great Wall to establish complete inner control system and funds management system within lawful authority. In view of the fact that the houses rented by Sino Great Wall and it’s son subsidiaries, subsidiaries, haven’t rental Cash registration, I promise, if Sino Great Strict compe Wall and its son subsidiaries, March Long-t perf Chen Lue nsatio subsidiaries, were penalized by real 19,2015 erm ormi n estate management department or ng suffered other losses resulting from it, I agree to compensate the loss of the company by cash. During the reporting period, the project which Sino Great Wall is involved in is the decoration engineering construction project of Libo Grand Hotel (hereinafter referred to as “Libo project”) which the company contracted before the bidding Cash Strict process. Sino Great Wall is not involved compe March Long-t perf Chen Lue in any other projects except for Libo nsatio 19,2015 erm ormi project before bidding process. As to the n ng violating issues existed in the Libo project, I promise as follows: if Sino Great Wall got penalized by government administration departments or suffered any economic loss resulted from it, I will compensate the company by cash; 44 Sino Great Wall Co., Ltd. 2016 Annual Report Meanwhile, I, within lawful authority, will also promise to urge the company to undertake related construction projects legally so as to avoid violating issues happened before implementation of bidding process, i.e., at the time for construction again. “1. Up to October 13th,2014, the related expenses of the litigation and arbitration cases, including the actual price, compensation, penalty, ligation costs, etc. which the parent-subsidiary companies of Sino Great Wall needs to pay caused by the final results of Cash ligation and arbitration cases, exceed Strict compe the amount of liabilities which March Long-t perf Chen Lue nsatio recognized in the “Audit Report” made 19,2015 erm ormi n for Sino Great Wall by Ruihua CPA ng (Special Ordinary Partnership) on the basis of the audit base day of July 31st, 2014, I promise to bear the balance by cash unconditionally so as to guarantee the parent-subsidiaries of Sino Great Wall won’t suffer any loss. 2. This commitment letter is irrevocable. 1. On condition that ownership defect exists in the lease of house property of parent-subsidiary companies of Sino Great Wall and its subsidiary corporation, which resulted in inability for parent-subsidiary companies of Sino Great Wall and its subsidiary corporation to continue leasing this Cash Strict house property but having to relocate, compe March Long-t perf Chen Lue or parent-subsidiary companies of Sino nsatio 19,2015 erm ormi Great Wall and its subsidiary n ng corporation can’t timely find suitable workplace for lawful operation in related area, I will undertake to compensate by cash for parent-subsidiary companies of Sino Great Wall’s losses which are caused by operation and finance due to the above-mentioned matters. 2. I undertake 45 Sino Great Wall Co., Ltd. 2016 Annual Report to unconditionally bear the relevant fines by cash for parent-subsidiary companies of Sino Great Wall on condition that the rental house property of parent-subsidiary companies of Sino Great Wall and its subsidiary corporation is in absence of handling procedures for filing house leasing ,which resulted in that parent-subsidiary companies of Sino Great Wall and its subsidiary corporation are fined by property administrative department. 3.The commitment letter is irrevocable. “In condition that parent-subsidiary companies of Sino Great Wall or its son subsidiary haven’t paid social security or housing fund for staff according to law, which resulted in any losses to Sino Great Wall , including the competent Cash authorities’ requirement for Sino Great Strict compe Wall or its subsidiary to make March Long-t perf Chen Lue nsatio supplementary payment, to be punished 19,2015 erm ormi n and resourced, I will bear by ng full-amount cash for the fee of supplemental payment and the expense and fee for being punished or resourced, which is to guarantee Sino Great Wall and its subsidiary to avoid suffering from any loss ”. “At present, Suzhou Lvbang has possessed one state-own land use right, of which the land certificate is Suzhou Guo Yong(2014) No.Y2014086”, locates in Danan Village, Dadian Town, Cash Yongqiao District, Suzhou City with Strict compe 32,966 square meters of area and the March Long-t perf Chen Lue nsatio purpose for industry. Suzhou Lvbang 19,2015 erm ormi n possesses its own factory with 9,843.87 ng square meters of area above-mentioned, which is the building reserved on the former selling land. Suzhou Lvbang is carrying out refurnishing and reconstruction for this factory and has 46 Sino Great Wall Co., Ltd. 2016 Annual Report acquired “License of Construction Land Planning ”with No.2014-08-001 approved and issued by Yongqiao District, Suzhou City’s housing and rural construction bureau, of which other examination and approval procedures of construction are in the process of handling “I undertake to actively supervise and urge Suzhou Lvbang on handling procedures of the approval process involved with factor refurnishing and reconstruction, and which is suffered from administrative punishment by relevant competent authorities in reason of claiming certificate of title, or in which any dispute or controversy exist in construction and ownership, which shall be my responsibility to carry out solution, and I undertake to compensate by cash for Suzhou Lvbang’s losses which are due to this matter, guaranteeing no losses occur to Sino Great Wall and Suzhou Lvbang for this matter. “According to the “Agreement of Significant Asset Replacement and Issue of Share to Buy Asset”(hereinafter referred to as “Agreement”) signed among Victor Onward Holdings, all shareholders of Sino Great Wall and Union Development Group Co., Ltd (hereinafter referred to as“ Union Cash Strict Group”) on October 13, 2014, all the compe March Long-t perf Chen Lue creditor’s rights and liabilities related to nsatio 19,2015 erm ormi place-out asset before the delivery date n ng of Victor Onward Holdings shall be Union Group’s responsibility to carry out solution; After the asset delivery date, if any losses occur to Victor Onward Holdings in reason of the liability transfer of asset delivery, personnel placement, unsettled dispute or controversy and other compensation 47 Sino Great Wall Co., Ltd. 2016 Annual Report related to place-out asset, payment obligation and punishment, Union Group or the specified third party shall sufficiently compensate all losses for Victor Onward Holdings for the above matters. I undertake, if Union Group and the specified third party refuse to compensate the losses caused by the above mentioned matters for Victor Onward Holdings according to the“ Agreement”, I will compensate by cash for the Victor Onward Company within 5 working day in advance. Meanwhile, I will reserve the resource rights for Union Group and the specified third party “. According to“ Agreement of Shenzhen Victor Onward Textile Industrial Co., Ltd., Chen Lue and He Feiyan Concerning on Performance Compensation” and its supplemental agreement , Chen Lue’s promised Sino Great Wall that the net profit deducted by incidental losses and attributable to Perfor the parent companies’ owners after Strict Chen Lue , He mance audition of 2015, 2016 and 2017 shall May Long-t perf Feiyan commi be respectively more than RMB 345.8 11,2015 erm ormi tment million, RMB 438.5 million and RMB ng 538.2 million. If the net profit of Sino Great Wall is less than the promised net profit mentioned above , Chen Lue and He Feiyan will compensate for listed company in accordance with “Performance Compensation Agreement” and its supplemental agreement Chen Lue; He 1. This reorganization is planned to Feiyan, Wuxi place in asset. At present, complete Hengtai Indepe separation has existed between me or Strict Jiuding Assets ndent other enterprises under my possession September Long-t perf Management compe (if any) and the listed company in staff, 30,2015 erm ormi Centre tition asset, finance, institution and business ng (LP);Yantai of Sino Great Wall. Independence exists Zhaoxuan in both staff, asset, finance, institution 48 Sino Great Wall Co., Ltd. 2016 Annual Report Yuantai and business and no confusion exists. 2. Jiuding I undertake, after this reorganization, to Venture ensure the continued complete Investment separation between me or other Centre enterprises under my possession(if any) (LP);Suzho and the listed company in staff, asset, u Taiyao finance, institution and business, Zhongshan sustaining the independence in the listed Jiuding company’s staff, asset, finance, Investment institution and business, as follows: Centre (1).The Ensurance of Independence for (LP);Jiaxing Listed Company’s Personnel Ensure Jiahe Jiuding that the general manager, the Investment vice-general manger, the chief financial Centre(LP) officer, the board secretary and the senior executives of the Company only accept salary in listed company, including no holding of any post except director and supervisor in my enterprise or other enterprises under my possession. 2.Ensure the complete independence exists among the listed company’s labor, personnel, and salary management and me. 3. The director, supervisor, general manager and other senior executives recommended by me have all been through the legal procedures, and I will not intervene the company’s board and the shareholder’s decision for appointing and dismissing personnel by exercising official power. (2)The Ensurance of the Asset Independence of Listed Company 1.Ensure that the listed company possesses business system related to operation and the relevant completely-independent asset. 2.Ensure that no occupation of mine exists in capitals and assets of the listed company. 3.The Ensurance of the Financial Independence of Listed Company 1.Ensure that the independent finance department and the independent financial calculating system set up by 49 Sino Great Wall Co., Ltd. 2016 Annual Report the listed company, which possess normative and independent financial and accounting rules. 2. Ensure that the listed company independently opens a bank account, not sharing the same bank account with me. 3.Ensure that the financial staff of the listed company holds no part-time post in my enterprise and other enterprises under my possession. 4. Ensure that the listed company pays taxes according to law. 5. Ensure that the listed company makes the financial decision-making independently, I will not intervene the utilization of the listed company’s capital. (4)The Ensurance of the Institutional Independence of Listed Company 1.Ensure that the listed company sets up perfect governance structure for the share company’s legal person, which possesses independent and complete institutional framework 2.Ensure that the shareholder’s meeting, the board of director, the independent director, the supervisor and the general managers exercise official powers according to laws, regulations and articles of incorporation (5)The Ensurance of the Business Independence of Listed Company 1. Ensure that the listed company possesses the asset, staff, qualification and ability for independently holding business activities, which possesses the independent, autonomous and sustain operation ability catering to the market. 2. Ensure that I will not intervene the listed company’s business activities except exercising shareholder’s rights. 3.Ensure that I or other enterprises under my possession will avoid working on the listed company’s main business which possesses substantial competition. 4. Ensure to reduce the 50 Sino Great Wall Co., Ltd. 2016 Annual Report related transaction between me and the listed company or between other enterprises under my possession and the listed company as much as possible; When confirming necessary but unavoidable related transaction, I will ensure the fair operation according to the principle of market culture and the fair price, and fulfill the transaction procedures and the obligation of disclosing information according to relevant laws and regulations and normative document. Chen Lue; He Feiyan;Wuxi Hengtai Jiuding Assets “Once I or our unit acquire the Management newly-added share of Victor Onward Centre(LP); Company through this transaction, no Yantai transfers will occur in any way within Zhaoxuan 12 months from the listing date, Yuantai including but not limited to public Jiuding Relate transfer by securities market or transfer Venture Strict d by agreement, and no entrusting for March Lont-t Investment perfo transac others to manage my holding share of 19,2015 erm Centre rming tion Victor Onward Holdings . Once the (LP);Suzho above-mentioned lockup period expires, u Tianyao I will implement the selling or Zhongshan transferring of the newly-added share of Jiuding Victor Onward Holdings according to Investment the relevant provision of CSRC and Centre(LP); SZSE. Jiaxing Jiahe Jiuding Investment Centre(LP) During the assets reorganization, the house property and land without Union Incom property certificate in the disposed Strict Development e assets within the plant area of Kuixin March Long-t perfo Group Co., dispos Community of Kuichong Street of 19,2015 erm rming Ltd. al Longgang District and the expected compensations, as well as the expected compensations concerning to the 51 Sino Great Wall Co., Ltd. 2016 Annual Report regaining of plots planned as schools within the right of land use of Nanyou Industrial Park of Nanshan District have not been recorded in the assessment. Therefore, Union Group promises that after the reorganization, if Union or a third party appointed by Union receives compensations or incomes related toabove-mentioned disposed assets which are house property and land without property certificate as well as regaining of plots planned as schools, Union will return the benefits to Victor Onward Holdings, in 10 working days since the collection. The actual costs and fees during the possession of the house property and land and the paid as well as the unpaid but necessary costs and fees for the reception of the above-mentioned benefits for Union Group or its third party will be deducted from the income. The specific benefits and payable costs and fees should be confirmed jointly by Union Group and Victor Onward Holdings based on the actual situations. ( Notes:On June 25, 2015,All shareholders of Victor Onward Holdings, Union Group and Sino Great Wall Signed supplementary agreement, and specified that the land and houses without ownership certificate of Victor Onward Holdings located at the factory area of Kuixin community of Kuichong street office of Longgang district (the land area is about 50,000 square meters, the built-up area of houses is about 25,000 square meters, among them about 18,000 square meters of buildings at built-up area are within the plan of removal and collection of government, hereinafter referred as “undocumented property) still belongs to Victor Onward Holdings. And the benefits and risks of the real estate without certificate are 52 Sino Great Wall Co., Ltd. 2016 Annual Report enjoyed and assumed by Victor Onward Holdings.” According to the Term 5.5.3 of Agreement on Major Asset Replacement and Asset Purchase Through Issuing Shares (hereinafter referred to as Agreement) signed on October 13, 2014 by the company and all shareholders of Victor Onward Co. Ltd.. and Sino Great Wall, Victor Onward Holdings should obtain the letter of approval concerning the transferred debts of the disposed assets from the creditor (including the guarantee, similarly hereinafter) before the date of assets delivery. In the situation of debts on Victor Onward Holdings due to the absence of creditor’s consent, the company or the third party appointed by the company is in charge of paying off debts or Union Cash reaching agreement on the solution with Strict Development compe the creditor. When there are losses March Long-t perfo Group Co., nsatio caused by improper solutions of the 19,2015 erm rming Ltd n company or the third party appointed by the company, the company or the third party appointed by the company will fully compensate for the caused losses of Victor Onward Holdings in 5 working days after receiving the notice. According to the Term 5.5.4 of Agreement, after the date of assets delivery, any compensations, obligations of payment and penalties caused by disposed assets as well as unsettled disputes in Victor Onward Holdings will be undertaken and solved by the company or the third party appointed by the company, and Victor Onward Holdings assumes no responsibility. When there are losses caused by it, the company or the third party appointed by the company will fully compensate for the caused losses 53 Sino Great Wall Co., Ltd. 2016 Annual Report of Victor Onward Holdings in 5 working days after receiving the notice. According to the Term 5.6.1 of Agreement and based on the principle of “staff arrangement according to the assets”, the labor relations, social insurance relations including pension, medical treatment, unemployment, working injury and maternity, and other liable welfare and salary of all the staff in Victor Onward Holdings. (including but not limited to on-post Shenzhen Victor Onward Textile Industrial Co., Ltd. The Third Quarterly Report 2015. 25 employees, employees awaiting job assignments, retired employees, retained employees with suspend salary, transferred employees, and temporary employees, etc) will be transferred to the company or the third party appointed by the company. Compensations or related matters (if any) due to the termination of labor relationship in advance with Victor Onward Holdings, the company or the third party appointed by the company will be in charge of the payment. The company promises that for the losses caused by matters such as the above-mentioned debt transfers of disposed assets, personnel arrangement, unsettled disputes, potential debts, payment obligations and penalties, the company or the third party appointed by the company will fully compensate for the losses of Victor Onward Holdings due to the above-mentioned matters based on the Agreement in cash. 1.Guarantee that interest will be transferred to other units or individuals All directors Strict Fill which are with compensation or without Long-t of the July 7,2016 perfo returns fair conditions, neither other ways erm company rming which are harmful to the Company’s interest will be adopted;2.Guarantee 54 Sino Great Wall Co., Ltd. 2016 Annual Report restraint conduction for the duty consuming behavior of directors and senior managers;3.Guarantee that no capital of the Company will be employed for engaging in investment or consumption which are not involved with duty performance;4.Guarantee that the compensation system formulated by the board of director or Compensation and Assessment Committee is linked with the exertion situation of the Company’s return filling solution;5. Shall stock incentive mechanism subsequently be introduced by the Company, the exertion condition of the Company’s stock incentive mechanism which is intended to be published is guaranteed to be linked with the exertion situation of the Company’s return filling solution;6.When stock incentive mechanism is intended to be carried out subsequently , I promise, within the legal range, to prompt the exertion condition of the Company’s stock incentive mechanism which is intended to publish is guaranteed to be linked with the exertion situation of the Company’s return filling solution;7. I promise the commitments above will be fulfilled strictly, and guarantee actual fulfillment for the Company’s return filling solution. Shall any commitments be violated or be refused to fulfill by me, I will fulfill corresponding obligations of explanation and apology according to relevant regulations of Guidance on First Issue, Refinancing, Major Asset Reorganization and Dilution for Return at Sight by CSRC, and will approve the supervision measures or self-discipline supervision measures made by CSRC, SZSE and China Association for Public Companies. Any losses occurred upon 55 Sino Great Wall Co., Ltd. 2016 Annual Report he Company or the shareholders, I am willing to undertake the responsibility for corresponding compensation in accordance with laws. Guarantee that no operating Strict Chen Lue, He Fill management will be intervened with Long-t July 7,2016 perfo Feiyan returns exceeded authority, and no interest of erm rming the Company will be expropriated. Commitments make in initial public No No No No offering or re-financing Equity incentive commitment No No No No Other commitments for medium and No No No No small shareholders Completed on time(Y/N) Yes If the commitments is not fulfilled on time, shall explain the specify reason Nil and the next work plan 2.The existence of the company's assets or projects earnings forecasts and earnings reporting period is still in the forecast period, the company has assets or projects meet the original profit forecast made and the reasons explained □Applicable √ Not applicable IV.Particulars about the non-operating occupation of funds by the controlling shareholder □ Applicable √ Not applicable No non-operating occupation from controlling shareholders and its related party in the period. V.Explanation of the Supervisory Committee and Independent Directors (If applicable)on the Qualified Auditor’s Report Issued by the CPAs. □ Applicable √ Not applicable VI.Explain change of the accounting policy, accounting estimate and measurement methods as compared with the financial reporting of last year. √Applicable □Not applicable Nil 56 Sino Great Wall Co., Ltd. 2016 Annual Report VII.Explain retrospective restatement due to correction of significant accounting errors in the reporting period □Applicable √ Not applicable No major accounting errors within reporting period that needs retrospective restatement for the Company in the period. VIII.Explain change of the consolidation scope as compared with the financial reporting of last year. √Applicable □Not applicable 1. Companies into merger range newly in this stage In 2016, the company founded Sino Great wall Medicare investment Co., Ltd., Sino Great wall Infrastructure Investment Co., Ltd. and Wuhan Vocational Hospital Co., Ltd. wholly owned by the company by cash offer, Sino Great wall Xinan Construction Co., Ltd. (Original name: Sichuan Dinghui Construction Co., Ltd.) which is wholly bought by subsidiary Sino International, Sino Great wall Changcheng Construction Co., Ltd. (Original name: Sichuan Haoyao Construction Co., Ltd.) is 60% bought by share issue by the company. Meanwhile, Shenzhou International founded newly subsidiaries called Sino Great wall Property (Hubei) Co., Ltd. and Sino Great wall Development (Hengqin) Co., Ltd. Then the above newly founded companies and newly bought companies began to be into the merger range of the company since 2016. 2. Companies not into merger account range in this stage 2In 2016, Sino International cancelled holding companies called Sino Heji Recycled Material Co., Ltd., which was not in the merger range. IX. Engagement/Disengagement of CPAs CPAs currently engaged Name of the domestic CPAs BDO China Shu Lun Pan Certified Public Accountants LLP Remuneration for domestic accounting firm 115 (RMB’0000) Continuous life of auditing service for domestic 2 accounting firm Name of domestic CPA Liao Jiahe, Shu Shibao Has the CPAs been changed in the current period √ Yes □No Whether to change the accounting firm during the audit period □ Yes √No Description of the CPAs, financial adiver or sponsor engaged for intemal control auditing √Applicable □Not applicable In the current year, the company engaged BDO China Shu Lun Pan Certified Public Accountants LLP as the internal control audit accounting firm, during the period, the company totally pays RMB 0.35million for the 57 Sino Great Wall Co., Ltd. 2016 Annual Report internal control audit expenses. X.Situation of Facing Listing Suspension and Listing Termination after the Disclosure of the Yearly Report □Applicable √ Not applicable XI.Bankruptcy reorganization □Applicable √ Not applicable No bankruptcy reorganization for the Company in reporting period. XII.Significant lawsuits and arbitrations of the Company □Applicable √ Not applicable No significant lawsuits and arbitrations occourred in the reporting period. XIII.Situation of Punishment and Rectification □Applicable √ Not applicable No penalty and rectification for the Company in reporting period. XIV.Credit Condition of the Company and its Controlling Shareholders and Actual Controllers √Applicable □ Not applicable XV.Implementation Situation of Stock Incentive Plan of the Company, Employee Stock Ownership Plan or Other Employee Incentive Measures √Applicable □ Not applicable The second meeting of the seventh board of directors, the second meeting of the seventh board of supervisors and the 2015 third extraordinary general shareholder meeting were respectively convened by the company on Nov 5, 2015 and Nov 23, 205, at which the Proposal on the First Phase of Employee Stock Ownership Plan (draft) of Shenzhen Victor Onward Textile Industrial Co., Ltd was examined and approved. Please refer to the published on November 7, 2015, the securities times, the Hong Kong Commercial Daily and cninfo (www.cninfo.com.cn) on the relevant announcement. On December 24, 2015, the company as the asset trustor of the ESOP asset management plan, together with the asset manager- Xingzheng Securities Asset Management Co.,Ltd and the asset trustee- China Everbright Bank Co.,Ltd signed the contract of No.57 Xing Zheng Zi Guan Xin Zhong Assets Management Contract of the Collection Assets Management Plan which concretely explained and stipulated the information included the basic information of the collection plan, participating in and withdrawal of the collection plan, guarantee, classification of the collection plan, the management methods and the management rights of the customer assets in the collection plan, the establishment of the collection plan, the expenses of the collection plan, the proceeds and its distribution of the collection plan, investment philosophy and investment strategy, investment decision-making 58 Sino Great Wall Co., Ltd. 2016 Annual Report and risk control, restrictions and prohibited behaviors of investment, information disclosure of the collection plan, transfer of the share of the collection plan, non-transaction transfer ownership and freezing and so on. Please refer to the published on December 29, 2015, the securities times, the Hong Kong Commercial Daily and cninfo (www.cninfo.com.cn) on the relevant announcement. As of January 7, 2016, the company’s first phase of the employee stock ownership plan has completed the share-purchasing by means of buying in the secondary security market, of which the average position price is RMB44.7578 per share, the total purchase quantity is 833,187 shares which account for 0.1864% of the company's total share capital, and the total turnover is RMB37,291,630. The lock-up period of the shares purchased under the plan is 12 months commenced from the date of this announcement. Please refer to the published on January 8, 2016, the securities times, the Hong Kong Commercial Daily and cninfo (www.cninfo.com.cn) on the relevant announcement. XVI.Material related transactions 1. Related transactions in connection with daily operation √Applicable □ Not applicable Whethe Trading r over Principl limit the Market Index Subjects e of Amount price of of of the pricing Ratio in approve approve Way of Date of Related Relation Type of Price of of trade similar informa related the similar paymen disclosu parties ship trade trade RMB0’ trade tion transacti related trades d d t re 000 availabl disclos ons transacti e ure ons (RMB limited ’0000) or not (Y/N) The compan y where the Qinghai Procure Quarterl Compan Heyi ment of Material Market Market y y’s 1,959 6,000 No Trade goods/s Goods price price settleme director Co., Ltd. ervices nt holds the post of legal person Give the actual situation in the report According to the 2016 routine operational needs and the current market price of the period where a forecast had been procurement materials, the company is expected to complete the routinely related-party made for the total amounts of routine transactions of total RMB 60 million with the related party Qinghai Heyi Commerce Co., related-party transactions by type to Ltd, which had been deliberated and approved by the 2015 annual general meeting of occur in the current period(if any) shareholders. In 2016, the amount of the actual transactions with Qinghai Heyi Commerce 59 Sino Great Wall Co., Ltd. 2016 Annual Report Co., Ltd is RMB 19.59 million, which doesn’t surpass the approved transaction limit. 2. Related-party transactions arising from asset acquisition or sold □Applicable √ Not applicable No related transactions by assets acquisition and sold for the Company in reporting period. 3. Related-party transitions with joint investments □Applicable √ Not applicable No main related transactions of joint investment outside for the Company in reporting period. 4. Credits and liabilities with related parties √Applicable □Not applicable Was there any non-operating credit or liability with any related party? □ Yes √ Not Nil 5. Other significant related-party transactions □Applicable √ Not applicable No other material related transactions. XVII.Particulars about significant contracts and their fulfillment 1. Particulars about trusteeship, contract and lease (1) Trusteeship □Applicable √ Not applicable No trusteeship, contract or leasing for the Company in reporting period. (2) Contract □ Applicable √ Not applicable No any contract for the Company in the reporting period. (3) Lease □Applicable √ Not applicable No any lease for the Company in the reporting period.. 60 Sino Great Wall Co., Ltd. 2016 Annual Report 2.Guarantees √ Applicable □ Not applicable (1)Guarantees In RMB’0000 Guarantee of the Company for the controlling subsidiaries (Exclude controlled subsidiaries) Relevant Date of Guarantee disclosure Complete happening Actual for date/No. of Amount of implementa Name of the Company (Date of mount of Guarantee type Guarantee term associated the Guarantee tion signing guarantee parties guaranteed or not agreement) (Yes or no) amount Total of external guarantee Total of external guarantee 0 actually occurred in the 0 approved in the report term (A1) report term (A2) Total of external guarantee Total of external guarantee approved as of end of report term 0 actually occurred as of end 0 (A3) of report term (A4) Guarantee of the company for its subsidiaries Amount of Actual date of Amount of Actual guarantee occurring Type of Complete Related Guarantee provided to the amount of Term and date of (signing date of guarantee d or not guarantee guarantee guarantee disclosure agreements Sino Great Wall 15,000 Sino Great Wall 15,000 Sino Great Wall 5,000 Sino Great Wall 13,000 Sino Great Wall 8,400 Sino Great Wall 14,000 Sino Great Wall 25,000 Sino Great Wall 20,000 Sino Great Wall 18,000 Sino Great Wall 40,000 Sino Great Wall 5,000 Sino Great Wall 10,000 Sino Great Wall 20,000 Sino International 10,000 Sino International 12,000 Sino International 25,714 61 Sino Great Wall Co., Ltd. 2016 Annual Report Sino International 20,000 Sino International 20,000 Sino International 10,000 Sino International 10,000 Sino International 20,000 Sino International 50,000 Guarantee of the subsidiaries for the controlling subsidiaries Guarante Relevant e Date of Complete disclosure for Name of the Amount happening Actual implemen date/No. of Guarantee Guarantee associate Company of (Date o mount of tation the type term d guaranteed guarantee signing guarantee or guaranteed parties agreement) not amount (Yes or no) The Company’s total guarantee(i.e.total of the first three main items) Including: Description of the guarantee with complex method (2)Illegal external guarantee □ Applicable √ Not applicable Nil 3.Situation of Entrusting Others for Managing Spot Asset (1)Situation of Entrusted Finance □ Applicable √ Not applicable Nil (2)Situation of Entrusted Loans 62 Sino Great Wall Co., Ltd. 2016 Annual Report □ Applicable √ Not applicable Nil 4. Other significant contract XVIII.Explanation about other significant matters √ Applicable □ Not appliable On July 7, 2016, the 10th meeting of the 7th Board of Directors and the 7th meeting of the 7th Board of Supervisors were convened to examined and adopted the related proposals on non-publci Issuing of Shares. On July 25, 2016, the 2nd provisional general meeting of shareholders was convened to deliberate and approve the related proposals on Private Issuing of Shares. On October 14, 2016, CSRC Receipt Notice on Administrative Licensing Application released by CSRC was received. The application documents for administrative licensing submitted by the company were reviewed and considered to be complete and conform to the legal form by CSRC, and the administrative licensing application was accepted by CSRC. On December 2, 2016, CSRC Feedback Notice on the Review of Administrative Licensing Projects by CSRC was received. The company took a prompt action to check the relevant problems seriously with agencies such as the sponsor institution, Zhongde Securities Co., Ltd, analyzed and replied the problems one by one in accordance with the request of the Feedback and made a public disclosure on December 27. The company's project of private issuing of A-share remains the examination and approval by CSRC and getting the approval is still uncertain. The company will comply with its duty of information disclosure according to the progress of the project, and kindly ask the investors to pay attention to the investment risk. XIX.Major issues of subsidiary √ Applicable □ Not appliable 1, In May 2016, the company made an acquisition of 100% equity ownership of Wuhan Commercial Staff Hospital LLC, the details of which can be acquired on the Notice of the Equity Ownership Acquisition of Wuhan Commercial Staff Hospital LLC by Sino Great Wall Co., Ltd. published on www.cninfo.com.cn on May 11, 2016; 2, In November 2016, the wholly-owned subsidiary, Sino Great Wall International Engineering Co., Ltd. acquired 60% of the equity ownership from Sichuan Haoyao Construction Co., Ltd by means of increasing in capital and stock, the details of which can be acquired on the Foreign Investment Notice of the Investment by Capital Increase and Stock Expansion and the Plan to Establish A Subsidiary by the Wholly-owned Subsidiary of Sino Great Wall Co., Ltd published on www.cninfo.com.cn on November 10, 2016. 63 Sino Great Wall Co., Ltd. 2016 Annual Report 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 Proporti Bon Share Capitalization on us Othe Proportio allotm of common Subtotal Quantity shar r n ent reserve fund es -374 1.Shares with conditional 277,880,626 62.18% 778,065,752 ,910, 403,155,185 681,035,811 40.10% subscription 567 -374 3.Other domestic shares 277,880,626 62.18% 778,065,752 ,910, 403,155,185 681,035,811 40.10% 567 -337 Including :Domestic 99,888,348 22.35% 279,687,374 ,096, -57,408,676 42,479,672 2.50% Legal person shares 050 -37, Domestic natural person 177,992,278 39.83% 498,378,378 814, 460,563,861 638,556,139 37.60% shares 517 II.Shares with 374, 169,025,956 37.82% 473,272,677 910, 848,183,244 1,017,209,200 59.90% unconditional subscription 567 374, 1.Common shares in 99,604,053 22.29% 278,891,349 910, 653,801,916 753,405,969 44.36% RMB 567 2.Foreign shares in 69,421,903 15.53% 194,381,328 0 194,381,328 263,803,231 15.54% domestic market III. Total of capital shares 446,906,582 100.00% 1,251,338,429 1,251,338,429 1,698,245,011 100.00% Reasons for share changed √ Applicable □Not applicable In 2016, upon the base of total share capital of 446,906,582 shares on the date of December 31, 2015, 28 shares were increased for every 10 shares to all the shareholders by converting capital reserve into share capital, 64 Sino Great Wall Co., Ltd. 2016 Annual Report therefore the total increased shares by converting capital reserve into share capital were 1,251,338,429 shares, so the total share capital were 1,698,245,011 shares after such share increasing by converting capital reserve into share capital. Approval of Change of Shares □ Applicable √ Not applicable Ownership transfer of share changes □ 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 In shares Number of Number of Restricted Shares Date of Initial Restricted Increased Reason for Shareholder Name Unrestricted in the End of the Restriction Shares Restricted Shares Restricted Shares Shares This Term Term Removal This Term The major asset restructuring and the issue of Chen Lue 138,248,490 0 387,095,772 525,344,262 shares to October 14,2018 purchase assets and raise matching funds The major asset restructuring and the issue of November Chen Lue 14,735,772 0 41,260,162 55,995,934 shares to 27,2018 purchase assets and raise matching funds Shanghai Financial The major asset Development 20,079,080 76,300,504 56,221,424 0 October 14,2016 Investment restructuring and 65 Sino Great Wall Co., Ltd. 2016 Annual Report Fund(LP) the issue of shares to purchase assets and raise matching funds The major asset restructuring and the issue of He Feiyan 14,421,173 40,379,284 54,800,457 shares to October 14,2018 purchase assets and raise matching funds The major asset Jiutai Fund-Bank restructuring and of Communications- the issue of November Jiutai Huitong 11,178,861 42,479,672 31,300,811 0 shares to 27,2016 No.2 specific purchase assets customer asset management plan and raise matching funds The major asset restructuring and Wuxi Hengtai the issue of Jiuding Assets 10,087,004 38,330,615 28,243,611 0 shares to October 14,2016 Management Centre(LP) purchase assets and raise matching funds The major asset restructuring and Foshan Haihui the issue of Heying Venture 10,039,540 38,150,252 28,110,712 0 shares to October 14,2016 Investment Partnership(LP) purchase assets and raise matching funds Jiangxi Taihao 8,366,284 31,791,879 23,425,595 0 The major asset October 14,2016 Venture Investment 66 Sino Great Wall Co., Ltd. 2016 Annual Report Centre(LP) restructuring and the issue of shares to purchase assets and raise matching funds The major asset restructuring and Yantai ZhaoxuanYuantai the issue of Jiuding Venture 8,353,354 31,742,745 23,389,391 0 shares to October 14,2016 Investment purchase assets Centre(LP) and raise matching funds The major asset restructuring and Suzhou Tianyao the issue of Zhongshan Jiuding 7,551,634 28,696,209 21,144,575 0 shares to October 14,2016 Investment Centre(LP) purchase assets and raise matching funds The major asset restructuring and Jiaxing Jiahe the issue of Jiuding Investment 7,499,912 28,499,666 20,999,754 0 shares to October 14,2016 Centre(LP) purchase assets and raise matching funds The major asset restructuring and Beijing Xinhe the issue of Taida Investment 6,693,140 25,433,932 18,740,792 0 shares to October 14,2016 Management Centre(LP) purchase assets and raise matching funds 67 Sino Great Wall Co., Ltd. 2016 Annual Report The major asset restructuring and the issue of Wu Chenxi 5,019,770 19,075,126 14,055,356 0 shares to October 14,2016 purchase assets and raise matching funds The major asset restructuring and Beijing Longbai the issue of Huirun Investment 5,019,770 19,075,126 14,055,356 0 shares to October 14,2016 Management Centre(GP) purchase assets and raise matching funds The major asset restructuring and the issue of Zhu Lijun 3,346,514 12,716,753 9,370,239 0 shares to October 14,2016 purchase assets and raise matching funds The major asset restructuring and Shenzhen Septwolves the issue of Shenglian Equity 3,346,514 12,716,753 9,370,239 0 shares to October 14,2016 Investment Fund purchase assets Co., Ltd. and raise matching funds The major asset restructuring and the issue of Feng Renyi 1,673,255 6,358,369 4,685,114 0 October 14,2016 shares to purchase assets and raise 68 Sino Great Wall Co., Ltd. 2016 Annual Report matching funds The major asset restructuring and Shenzhen Jiayuan the issue of Qihang Venture 1,673,255 6,358,369 4,685,114 0 shares to October 14,2016 Investment Company(LP) purchase assets and raise matching funds The major asset restructuring and the issue of He Sen 430,904 0 1,206,531 1,637,435 shares to October 14,2018 purchase assets and raise matching funds Total 277,764,226 375,246,299 777,739,833 637,778,088.2 -- -- II.Issuing and listing 1.Explanation of the Situation of the Security Issue(No Preferred Shares) in the Report Period □ Applicable √ Not applicable 2.Change of asset and liability structure caused by change of total capital shares and structure √ Applicable □ Not applicable In the report period, upon the base of total share capital of 446,906,582 shares on the date of December 31, 2015, 28 shares were increased for every 10 shares to all the shareholders by converting capital reserve into share capital, therefore the total increased shares by converting capital reserve into share capital were 1,251,338,429 shares, so the total share capital were 1,698,245,011 shares after such share increasing by converting capital reserve into share capital. 3.About the existing employees’ shares □Applicable√Not applicable 69 Sino Great Wall Co., Ltd. 2016 Annual Report III.Shareholders and actual controlling shareholder 1. Number of shareholders and shareholding In Share The total number o Total Total number Total f preferred shareho preferred shareh of common shareholders at lders voting rights olders at the end shareholders at the end of the 59,940 restored at period-e 0 of the month 0 the end of the month from the nd from the date of reporting date of disclosing (if any)(See disclosing the period the annual report Notes 8) annual report Shareholding of shareholders holding more than 5% shares Proporti Number of share Number of Changes in Amount of Amount of Nuture of on of pledged/frozen Shareholders shares held at reporting restricted un-restricted shareholder shares State of period -end period shares held shares held Amount held(%) share Domestic 434,660,59 Chen Lue 34.33% 582,944,556 +429,808,094 582,109,696 834,860 Mortgage Natural person 4 STYLE-SUCCESS Foreign legal 5.47% 92,970,910 +68,504,881 0 92,970,910 LIMITED person Domestic Non- Union Holdings State-owned 5.18% 87,935,921 +44,794,889 0 87,935,921 Co., Ltd. legal person Domestic He Feiyan 3.23% 54,800,458 +40,379,285 54,800,458 0 Natural person Jiutai Fund-Bank of Communications- Jiutai Huitong Other 2.50% 42,479,672 +31,300,811 42,479,672 0 No.2 specific customer asset management plan Rich Crown Foreign legal Investment Co., 1.37% 23,235,313 +17,120,757 0 23,235,313 person Ltd. Jiangxi Taihao Domestic Non- Venture Investment State-owned 1.11% 18,791,879 +10,425,595 0 18,791,879 Centre(LP) legal person Bank of China- Other 1.07% 18,200,320 0 18,200,320 70 Sino Great Wall Co., Ltd. 2016 Annual Report Fortis Income Growth Securities Investment Fund ICBC-Huitianfu private activity of Other 1.02% 17,292,602 0 17,292,602 hybrid securities investment fund China National Petroleum Corporation Other 0.88% 14,982,390 0 14,982,390 Pension Plan- ICBC Strategy investors or general legal person becomes top 10 shareholders Nil due to rights issued (if applicable)See Notes 3) The largest shareholder of Mr. Chen Lue and the Fourth largest shareholder of Ms. He Feiyan Explanation on associated aforesaid are persons acting in concernp; The controlling shareholder of the above-mentioned relationship among the aforesaid third shareholder Shenzhen Union Holdings Co.,Ltd. and sixth shareholder Rich Crown shareholders Investment Co., Ltd.. Is Union Development Group Ltd. whether the other shareholders have associated relations are unknown. Shareholding of top 10 shareholders of unrestricted shares Share type Name of the shareholder Quantity of unrestricted shares held at the end of the reporting period Share type Quantity Foreign shares STYLE-SUCCESS LIMITED 92,970,910 placed in 92,970,910 domestic exchange RMB Union Holdings Co., Ltd. 87,935,921 Common 87,935,921 shares Foreign shares Rich Crown Investment Co., Ltd. 23,235,313 placed in 23,235,313 domestic exchange RMB Jiangxi Taihao Venture Investment 18,791,879 Common 18,791,879 Centre(LP) shares Bank of China-Fortis Income 18,200,320 RMB 18,200,320 71 Sino Great Wall Co., Ltd. 2016 Annual Report Growth Securities Investment Fund Common shares RMB ICBC-Huitianfu private activity of 17,292,602 Common 17,292,602 hybrid securities investment fund shares RMB China National Petroleum 14,982,390 Common 14,982,390 Corporation Pension Plan-ICBC shares RMB Qinghai Heyi Mining Co., Ltd. 13,356,984 Common 13,356,984 shares RMB Jiangwei 9,761,860 Common 9,761,860 shares RMB Shanghai Financial Development 9,540,962 Common 9,540,962 Investment Fund(LP) shares Explanation on associated relationship or consistent action among the top 10 shareholders of The controlling shareholder of the above-mentioned largest shareholder Shenzhen Union non-restricted negotiable shares and Holdings Ltd. and third shareholder Rich Crown Investment Co., Ltd.. Is Union Development that between the top 10 shareholders Group Ltd. of non-restricted negotiable shares and top 10 shareholders Notes to the shareholders involved in financing securities (if any)(See Nil Notes 4) Whether top ten common shareholders or top ten common shareholders with un-restrict shares held have a buy-back agreement dealing in reporting period. □ Yes √ No 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. 2.Controlling shareholder Nature of Controlling Shareholders: Natural Person Holding Type of Controlling Shareholders: Natural Person Whether to obtain the right of abode in other countries Name Nationality or regions Chen Lue China No Main occoupations and duties Chairman and General Manager of the Company 72 Sino Great Wall Co., Ltd. 2016 Annual Report Situation of domestic and abroad holding Nil listed companies in the reporting period. Change of the actual controller in the reporting period □ Appliable √ Not applicable Nil 3.Information about the controlling shareholder of the Company Actual controller nature:Domestic naturaol person Actual controller type:Natural person Whether to obtain the right of abode in other countries or Name Nationality regions Chen Lue China No Main occoupations and duties Chairman and General Manager of the Company Situation of domestic and abroad holding Nil listed companies in the part 10 years Changes of the actual controller in the reporting period □Applicable √Not applicable No Changes of the actual controller in the reporting period Block Diagram of the ownership and control relations between the company and the actual controller The actual controller controls the company by means of trust or managing the assets in other way □Applicable √Not applicable 4.Particulars about other legal person shareholders with over 10% shareheld □Applicable √Not applicable 73 Sino Great Wall Co., Ltd. 2016 Annual Report 5.Situation of Share Limitation Reduction of Controlling Shareholders, Actual Controllers, Restructuring Party and Other Commitment Subjects □Applicable √Not applicable 74 Sino Great Wall Co., Ltd. 2016 Annual Report VII. Situation of the Preferred Shares □ Applicable √ Not Applicable The Company had no preferred shares in the reporting period 75 Sino Great Wall Co., Ltd. 2016 Annual Report VIII. Information about Directors, Supervisors and Senior Executives I. Change ein shares held by directors, supervisors and senior executives Amount Amount of shares of shares Shares held increase decrease Other Shares held at Expiry Office Starting date at the d at the d at the changes the Name Positions Sex Age date of status of tenure year-begin(s reportin reportin increase/dec year-gegin(sh tenure hare) g g rease are) period(s period(s hare) hare) Board chairman, October October Chen Lue In office Male 46 153,136,462 270,000 0 429,538,094 582,944,556 General 29,2015 28,2018 Manager Hu May October Director In office Male 54 0 0 0 0 0 Yongfeng 12,2000 28,2018 Director, Deputy October October Li Erlong In office Male 41 3,000 0 0 8,400 11,400 General 29,2015 28,2018 Manager Director, Liang Deputy October 29, October In office Male 47 0 0 0 0 0 Rong General 2015 28,2018 Manager October 29, October Wang Lei Director In office Male 53 0 0 0 0 0 2015 28,2018 October 29, October Ban Bin Director In office Male 31 0 0 0 0 0 2015 28,2018 Independ Tang October 29, October ent In office Male 51 0 0 0 0 0 Jianxin 2015 28,2018 Director Independ Zhang October 29, October ent In office Male 53 0 0 0 0 0 Yufeng 2015 28,2018 Director Jiang Independ October 29, October Chonggua ent In office Male 41 0 0 0 0 0 2015 28,2018 ng Director 76 Sino Great Wall Co., Ltd. 2016 Annual Report Chairman of the October Dong superviso June In office Male 67 28,201 0 0 0 0 0 Binggen ry 26,2002 8 committe e Huang Superviso October 29, October In office Male 45 0 0 0 0 0 Shengde r 2015 28,2018 Wu Superviso October 29, October In office Male 36 0 0 0 0 0 Xiaoming r 2015 28,2018 Cui October 29, October CFO In office Female 44 0 0 0 0 0 Hongli 2015 28,2018 Secretary Yang to the October 29, October In office Female 45 0 0 0 0 0 Chunling board of 2015 28,2018 directors Deputy Septemb Song October General Retired Female 44 er 0 0 0 0 0 Chenling 29,2015 Manager 27,2016 Total -- -- -- -- -- -- 153,139,462 270,000 0 429,546,494 582,955,956 II. Change in shares held by directors, supervisors and senior executives √ Appicable □Not applicable Name Positions Types Date Reason Deputy General September Song Chenling Retired Personal reasons Manager 27,2016 III.Posts holding Work Experience in the past five years of Directors, supervisors and senior Executives in Current office (1) Director Mr. Chen Lue, male, Chinese nationality, no overseas permanent residence, born in April 1970, currently the doctoral students of accounting specialty in Wuhan University, Senior Management MBA of Guanghua School of Management of Beijing University, Senior Management MBA of School of Economics and Management of Tsinghua University, Bachelor in major of Food Science and Nutritional Engineering of China Agricultural University, senior engineer. He had served as a technician in Zhuhai Fisheries Group Canned Food Factory, project manager in Guangdong Yuexi Construction Company, vice general manager in Guizhou Construction Engineering Group Dongguan Company, vice general manager in Shenzhen Great Wall Furniture Decoration Engineering Co., Ltd. Currently, he is the Vice Chairman of Beijing Decoration Association, Director of Informatization Committee of China Building Decoration Association, director of information technology 77 Sino Great Wall Co., Ltd. 2016 Annual Report committee, executive member of China Building Decoration Association, the first chairman of Beijing-Zhanjiang Business Association. From June 2006 to September 2014, he was the chairman of the Great Wall Construction Engineering Co. Ltd; from December 2007 to September 2014, he served as the general manager of the Great Wall Construction Engineering Co. Ltd; from May 2011 to September 2014, he served as the supervisor of Sino Great Wall Construction Engineering (Liaoning) Co., Ltd. since 2001, he has been the executive director and chairman of the board of the Sino Great Wall International Engineering Co., Ltd; since November 2007, he has been the executive director of Sino Great Wall (Beijing) Decoration Design Co., Ltd; since February 2011, he has been the supervisor of Sino Great Wall Decoration Engineering (Shenyang) Co., Ltd; since April 2014, he has been the executive director and general manager of Sino Great Wall Investment (Beijing) Co., Ltd; since September 2015, he has been the chairman and the general manager of Sino Great Wall Cubic Investment Co., Ltd; since October 2015, he has been the chairman of the board and the general manager of the company. Mr. Hu Yongfeng, Chinese nationality, no overseas permanent residence ,male, born in July 1962, graduated from East China Textile Engineering College in 1983, bachelor, senior engineer. Mr. Li Erlong, Chinese nationality, no overseas permanent residence, male, was born in September 1975, graduated from the Shandong Building Materials Engineering College, MBA of Tsinghua University. He had served as the assistant to director of the National Building Materials Quality Supervision and Inspection Center, the researcher for the China-Africa R&D Center of Artificial Crystal. Since March 2005, he has been served as the general manager of the Sino Great Wall International Engineering Co., Ltd; since November 2007, he has been the general manager of Beijing Sino Great Wall Decoration Design Co., Ltd.; since June 2014, he has been the executive director of the Sino Heji Environmental-protection Material Co., Ltd; since September 2015, he has been the director of Sino Cubic Investment Co., Ltd; since October 2015, he has been the company’s director and vice general manager. Mr. Wang Lei, Chinese nationality, no overseas permanent residence, male, born in March 1963, senior management MBA of School of economics and management of Tsinghua University, currently pursuing the finance EMBA of PBC School of Finance, senior engineer. He had Served as the general manager of Anshan Yongxin Engineering General Contracting Company, vice president of Chinese Enterprises Investment Company, director and general manager of Henan Shunyuan Aluminum Industry Co.,Ltd, director and vice chief-economist of Henan Coal Chemical Industry Group Co., Ltd. Since April 2013, he has been the chairman of Shanghai Heyi Supply Chain Management Co., Ltd.; since October 2015, he has been the company’s director. Mr. Bai Bin, Chinese nationality, no overseas permanent residence, male, born in 1985, master of law, possesses vocational qualification of lawyer and law. He had successively served as the lawyer of Beijing Jingda Law Firm, investment manager, Investment Director, general manager of the asset management department and so forth posts of Kunwu Jiuding Investment Management Co.,Ltd. Currently, he is the general manager of Jiuxin Asset Management Co.,Ltd, director of Sino High-speed Rail technology Co.,Ltd, director of Beijing UTS International Travel Service Co., Ltd, director of Sino Great Wall International Engineering Co., Ltd, director of Sichuan Dawei Science and Technology Co., Ltd and so on. Since October 2015, he has been the company’s director. Mr. Tang Jianxin, male, Chinese nationality, no overseas permanent residence, born in December 1965, Doctor, Professor, doctoral supervisor, registered auditor, Certified Public Valuer. He had served as the deputy director in Hainan Spring Auditor Firm, independent director of Wuhan Zhongnan Commercial Group Co., Ltd, independent director of Wuhan Sanzhen Industry Holding Co., Ltd. Since 1995, he has been teaching at Wuhan University. Currently, he is the professor and dean of accounting department of Wuhan University. From June 2008 to June 78 Sino Great Wall Co., Ltd. 2016 Annual Report 2014, he had been served as the independent director of Wuhan Zhongnan Commercial Group Co., Ltd.; from June 2009 to July 2015, he had been served as the independent director of Wuhan Sanzhen Industry Holding Co., Ltd; since August 2010, he has been the independent director of Shenzhen Hua Pengfei Modern Logistics Co., Ltd; since November 2011, he has been the independent director of Wuhan Zhongbai Group Co., Ltd.; since May 2013, he has been the independent director of Pingdingshan Tianan Coal Industry Co., Ltd; since October 2015, he has been the independent director of the company. Mr. Zhang Yufeng, male, Chinese nationality, no overseas permanent residence, born in November 1963, Master's degree, EMBA of PBC School of Finance of Tsinghua University. He had served as the principal staff member of the discipline inspection team stationed in Ministry of health from the Commission for Discipline Inspection of the Central Committee of the CPC, Project Manager of China Hualian Real Estate Company, project manager of the Import and Export Department of China Construction Engineering Corporation, lawyer of Great Wall Law Firm of Department of Commerce. Currently, he is the director of Beijing Great Wall Law Firm; since June 2011, he has been the independent director of NetPosa Technologies Ltd; since May 2013, he has been the independent director of Bank of Langfang; since October 2015, he has been the independent director of the company.Since October 2016, he has been the independent director of Dezhan Health Co., Ltd., Since February 2017, he bas been the independent director of Nanhuihuang Technology Co., Ltd. Mr. Jiang Chongguang, male, Chinese nationality, no overseas permanent residence, born in 1975, PhD in finance of Chinese Academy of Social Sciences, PhD in economics, graduated from Peking University, Fordham University and Chinese Academy of Social Sciences. He had served as the middle, senior management staff in Haier Group, managing director of Singapore CKSP Group. Currently, he is the researcher of the Non-governmental organization and Public Administration Research Center of Chinese Academy of Social Sciences, executive director of Health China Strategy Research Center; chief economist and director of Ivy capital; vice executive chairman of the China Old-age Health International Alliance; permanent financial adviser to China- Israel Exchange Association of the High-tech Committee of Israel Parliament; independent director of Singapore CKSP; expert and committee member of Hospital Management Research Institute of Tsinghua University; expert and committee member of China Social Medical Research Association of MOHRSS; since October 2015, he has been the independent director of the company.and vice-chairman of China endowment Health International Union, Senior management of Haier Group, Director General Manager of Singapore CKSP Group. 2. Supervisors Mr. Dong Binggen, male, born in July 1949, bachelor, senior engineer, graduated from East China Textile Engineering College in 1977. He had served as the vice president of Zhejiang Silk Industry Institute, general manager of China Garment General Corporation, chairman of China National Garment Association, and so on. Currently, he is the party secretary, chairman of the board and president of Union Development Group Co., Ltd; chairman of the board of Union Holdings Co., Ltd; since June 2002, he has been the chairman of the board of supervisors of the company. Mr. Huang Shengde, male, born in January 1972; Hongkong Chinese; obtained the high Diploma of City University of Hongkong in architecture, bachelor ( honorary degree ) of University of South Australia in Architecture, MBA (financial) of the business school of The University of Manchester; he had served in the Hopewell Slip-form Engineering Co. Ltd, China Foundation Engineering Co. Ltd, Qian Tian Construction Co., Ltd, Hongkong Xing Sheng Construction Co. Ltd, Wu Teng (Hongkong) Co. Ltd, Beijing Xingrong Real Estate Development Co., Ltd, Yoma Strategic Holdings Co.,Ltd and Intecs Vantage Capitals Ltd; he had the management and professional qualifications, including the member of 2006-Hongkong Project Management Association, the member of 2006 Chinese Engineering Cost Association, the member of 2002 Hongkong Surveyors Association, 79 Sino Great Wall Co., Ltd. 2016 Annual Report the member of 2002 Royal Institution of Chartered Surveyors, the member of 2001 Australian Institute of Quantity Surveyors Association, the member of 2001-2004 British Cost Engineers Council and the member of 2001-2004 Australian Institute of architects. Currently, he is the vice general manager of Sino Great Wall International Engineering Co., Ltd mainly in charge of overseas business cooperation and business development; since October, 2015, he has been the company’s supervisor. Mr. Wu Xiaoming, male, Chinese nationality, no overseas permanent residence,born in November 1980, Bachelor in law, graduated from the law school of Guangdong Business College (now as Guangdong University of Finance & Economics) with major in law. He had served in Guangzhou Municipal Bureau of Quality and Technical Supervision Haizhu Branch ( now as Guangzhou Haizhu District Bureau of Quality and Technical Supervision); since December 2008, he has been the assistant to general manager and Legal Department Manager of Sino Great Wall International Engineering Co., Ltd; since June 2014, he has been the chairman of the board of supervisors of Sino Great Wall International Engineering Co., Ltd; since October 2015, he has been the company’s supervisor. 3. Senior management personnel Please see detailed work experience of Mr. Chen Lue,Mr.Li Erlong and and Mr. Liang Rong in the column of directors. Mrs. Yang Chunling, female, Chinese nationality, no overseas permanent residence, born in February 1971, Bachelor in economics, master in industrial engineering, accountant. She had served as employee in Sinotrans Henan Zhengzhou Logistic and Trading Company, Deputy Minister of the securities department of Aeolus Tyre Co., Ltd, vice general manager and secretary of the board of directors of Henan Yuhua New Material Co., Ltd. Since September 2015, she has been the director of Sino Cubic Investment Co., Ltd; since March 2014, she has been the secretary of the board of directors of Sino Great Wall International Engineering Co., Ltd; since October 2015, she has been the secretary of the board of directors of the company. Mrs. Cui Hongli, female, Chinese nationality, no overseas permanent residence, born in January 1972, graduated from Henan University of Finance and Economics, CPA. She had been served in China Luoyang Float Glass Group Co.,Ltd, Beijing Jiayou Real Estate Development Group Co.,Ltd and Yuancheng Industrial Group Co.,Ltd. Since July 2011, she has been the investment and finance department manager, CFO of Sino Great Wall International Engineering Co., Ltd; since October 2015, she has been the company’s CFO. Office taking in shareholder companies □ Applicable √Not applicable Offices taken in other organizations √Applicable □Not applicable Whether receiving Office term Name Name of other units Position Office term start from remuneration ended from other units or not Sino Great Wall International Engineering Board Chen Lue October 17,2001 Yes Co., Ltd. chairman Beijing Sino Great Wall Decoration Design Executive Chen Lue November 28,2007 No Co., Ltd. director Chen Lue Sino Great Wall Investment (Beijing) Co., Executive April 22, 2014 No 80 Sino Great Wall Co., Ltd. 2016 Annual Report Ltd. director,Gene ral Manager Board Chen Lue China Investment & Investment Co., Ltd. September 14,2015 No chairman Executive Chen Lue Shenzhen Sino Dalue Investment Co., Ltd. February 25,2015 No director Vice Hu Yongfeng Union Development Group Co., Ltd. May 18,2012 May 17,2015 No President Vice Board Hu Yongfeng Union Holdings Co., Ltd. June 21, 2013 June 20, 2016 No chairman Sino Great Wall International Engineering General Li Erlong March 1,2005 Yes Co., Ltd. Manager Sino Great Wall International Engineering Li Erlong Director June 1,2014 No Co., Ltd. Sino Great Wall International Engineering Board Li Erlong June 29,2016 No Co., Ltd. chairman Beijing Sino Great Wall Decoration Design Li Erlong Manager November 28,2007 No Co., Ltd. Executive Li Erlong Sino Heji Environmental Material Co., Ltd. September 2,2015 No director Li Erlong China Investment & Investment Co., Ltd. Director September 14,2015 No Executive Sino Great Wall International Engineering Liang Rong General April 1,2003 June 29,2016 Yes Co., Ltd. Manger Sino Great Wall International Engineering Liang Rong Director June 1,2014 No Co., Ltd. Sino Great Wall International Liang Rong Director November 17,2014 No Engineering(Macao) Co., Ltd. Board Wang Lei Qinghai Heyi Mining Co., Ltd. September 2, 2008 No chairman Board Wang Lei Qinghai Heyi Trade Co., Ltd. May 8, 2009 No chairman Shanghai Heyi Supply chain Management Board Wang Lei April 7, 2013 Yes Co., Ltd. chairman General September Bai Bin Jiuxin Assets Management Co., Ltd. September 9,2015 Yes Manger 8,2018 Bai Bin CHSR Director April 27,2016 April 28,2019 No Sino Great Wall International Engineering October Bai Bin Director October 30,2015 No Co., Ltd. 29,2018 81 Sino Great Wall Co., Ltd. 2016 Annual Report Professor ofAccountin g Department , Tang Jianxin Wuhan University December 1,2004 Yes Economics and Management School Independent Tang Jianxin Wuhan Zhongbai Group Co., Ltd. November 1,2011 Yes Director Independent Tang Jianxin Pingdingshan Tianan Coal Co., Ltd. May 17,2013 Yes Director Yicang Dongyangguang Changjiang Independent Tang Jianxin October 1,2015 Yes Medicine Co., Ltd. Director Zhang Yufeng Beijing Great Wall Law Firm Director Yes Independent Zhang Yufeng Langfang Bank May 1,2013 Yes Director Independent Zhang Yufeng Dezhan Health Co., Ltd. October 8,2016 Yes director Independent Zhang Yufeng Henan Huihuang Technology Co., Ltd. February 10,2017 Yes director Jiang Centre of Health China Strategy Research of Executive May 1,2015 Yes Chongguang Chinese Academy of Social sciences director Jiang Graduate School of Chinese Academy of September MBA Tutor September 1,2013 Yes Chongguang Social Sciences 1,2019 Chief Jiang Ivy Capital Economist, May 1,2015 Yes Chongguang Director Lifelong Jiang High tech Committee of the Israeli Financial March 1,2014 Yes Chongguang parliament to exchange association advisor Jiang Independent January Singapor CKSP December 1,2015 Yes Chongguang Director 1,2025 Jiang Deputy China Insurance Association June 15,2016 June 15,2021 Yes Chongguang Secretary Jiang Independent November Dezhan Health Co., Ltd. November 1,2016 Yes Chongguang Director 1,2019 Jiang China Health Economics Center, Beijing Special October 1,2016 No Chongguang University researcher 82 Sino Great Wall Co., Ltd. 2016 Annual Report Secretary of Party committee, Dong Binggen Union Development Group Co., Ltd. chairman of May 18,2012 Yes board of directors and President Board Dong Binggen Union Holdings Co., Ltd. June 21, 2013 No chairman Deputy Sino Great Wall International Engineering Huang Desheng Generaql Yes Co., Ltd. Manager Assistant General Sino Great Wall International Engineering Wu Xiaoming Manager, December 1,2008 Yes Co., Ltd. Manager of Law Dept. Chairman of Sino Great Wall International Engineering the Wu Xiaoming June 1,2014 Yes Co., Ltd. supervisory committee Sino Great Wall International Engineering Board Yang Chunling March 1,2014 Yes Co., Ltd. secretary Yang Chunling China Investment & Investment Co., Ltd. Diretor September 1,2015 No Manager Sino Great Wall International Engineering Cui Hongli ofInvestmen July 1,2011 Yes Co., Ltd. t Dept, CFO Except the concurrently hold posts in the above-mentioned information, the company’s directors, supervisors, Notes senior management staff do not hold other posts or concurrently hold other posts in any other companies. Punishments to the current and leaving board directors, supervisors and senior managers during the report period by securities regulators in the recent three years □ Applicable √Not applicable IV. Remuneration to directors, supervisors and senior executives Decision-making procedures, basis for determination and actual payment of the remuneration to directors , supervisors and senior executives The remuneration appraisal committee of the board of directors of the Company proposed remuneration standards according to the responsibilities, work scope and importance of directors, supervisors and senior executives, the earnings of the Company for the current year and the remuneration level of relevant post and submitted it to the board of directors for approval. After approval, the remuneration was paid on monthly basis. 83 Sino Great Wall Co., Ltd. 2016 Annual Report The remuneration of independent directors is subject to approval by the shareholders' meeting. Remuneration to directors, supervisors and senior executives in the reporting period In RMB’0000 Total Remuneration remuneration actually receivect Name Positions Sex Age Office status received from the at the end of the shareholder reporting period Board Chairman, Chen Lue Male 46 In Office 36.6 Yes General Manager Hu Yongfeng Director Male 54 In office 0 Yes Director, Deputy Li Erlong Male 41 In Office 28.2 Yes General Manger Director, Deputy Liang Rong Male 47 In office 27 Yes General Manger Wang Lei Director Male 53 In Office 0 Yes Bai Bin Director Male 31 In Office 0 Yes Independent Tang Jianxin Male 51 In office 9.5 No Director Independent Zhang Yufeng Male 53 In Office 9.5 No Director Jiang Independent Male 41 In office 9.5 No Chongguang Director Chairman of the Dong Binggen supervisory Male 67 In Office 0 Yes committee Huang Desheng Supervisor Male 45 In office 6.75 Yes Wu Xiaoming Supervisor Male 36 In Office 11.7 Yes Cui Hongli CFO Female 44 In office 22.56 Yes Secretary to the Yang Chunling Female 45 In Office 14.1 Yes board of directors Deputy General Song Chenling Female 44 In Office 22.78 Yes Manger Total -- -- -- -- 198.19 -- Incentive equity to directors, supervisors or/and senior executives in the reporting period □ Applicable √Not applicable 84 Sino Great Wall Co., Ltd. 2016 Annual Report V. Particulars about employees. 1.Number of staff, professional structure and educational background Number of in-service staff of the parent company(person) 20 Number of in-service staff of the main subsidiaries(person) 2,000 Total number of the in-service staff(person) 2,200 Total number of staff receiving remuneration in the current 2,200 period(person) Professional Classified according by Professions Number of persons(person) Production 50 Sales 1,000 Technical 50 Financial 100 Administrative 1,000 Total 2,200 Education Classified according by Professions Number of persons(person) Total 2,200 2. Remuneration policies The company, in accordance with the principle of marketization, provides competitive salary and welfare of the industry, differentiates the salary based on the positions, rewards those who perform well, and determine the employee’s salary level in accordance with the benefit, positions and sales performance. 3.Training plan The company sticks to the concept of ”people first” and values talent cultivation. To improve the employees’ professional ability and occupational skills, standardize and improve its training management, and boost employees’ enthusiasm for learning, applying, delivering and creating knowledge, the company organizes induction training and daily training for all employees and conducts induction training for fresh undergraduates recruited from university campus. It also opens up networking academy, where it has complete curriculum system for all employee to study independently and hold training lectures specially for improving professional skills or knowledge on a regular basis. The company also carries out points system for employee training. Employees’ points gained from attending training will serve as an important basis for the performance assessment, personnel transfer, promotion, salary adjustment, etc.. 85 Sino Great Wall Co., Ltd. 2016 Annual Report 4.Outsourcing situation □ Applicable √ Not Applicable 86 Sino Great Wall Co., Ltd. 2016 Annual Report IX. Administrative structure I.Basic state of corporate governance The company’s governance meets the requirements of regular documents on the governance of the listed companies issued by China Securities Regulatory Commission. During the reporting period, The company has strictly abided by the relevant laws, rules and regulations requested on “Corporate Law”, “Securities Law”, “Listing Rules of Shenzhen Stock Exchange” and “Governance Rules of Listed Companies” and by China Securities Regulatory Commission, established and perfected the internal control management system, and constantly made the deep improvement of the corporate governance activities to further standardize the company operations and improve the management level. The company’s governance meets the basic requirements of regular documents on the governance of the listed companies issued by China Securities Regulatory Commission. (1).Shareholders and shareholders' general meeting: The Company convened and held shareholders' general meeting strictly according to the requirements of Opinions on Standardization of Shareholders' General Meeting of Listed Companies, formulated Rules of Procedure of Shareholders' General Meeting, ensured all shareholders, especially medium and small shareholders, enjoy equal position and can fully exercise their own rights. (2).Relationship between the controlling shareholder and the Company: The acts of the controlling shareholder of the Company were standardized. It did not exceed the authority of the shareholders' general meeting to directly or indirectly intervene with the decision-making and operating activities of the Company. The Company is independent from its controlling shareholder in respect of personnel, assets, finance, organ and business. The board of directors, the supervisory committee and internal organ of the Company are able to operate independently. (3) The Directors and The Board of Directors: the Board of Directors includes four special committees, such as Audit Committee, Nomination Committee, Strategy Committee and Remuneration and Appraisal Committee, which has provided a favorable support to the company for the decision-making related issues. Each special committee has operated according to their work responsibilities and procedure rules, made research and examination for the relative business and major issues of the company, and expressed the professional opinions in the Board of Directors to offer support and advice for the scientific decision-making of the Board and ensure the Board’s work more scientific and efficient. Also, the organization of the Board of Directors is in line with the requirement of laws and regulations, and the independent directors play an important role in the corporate decision-making. So, the company attaches importance to the function of the independent directors. In the company’s management, the independent directors make careful review and express the independent views for the financial audit, the affiliated transactions and other issues. (4).Supervisors and the supervisory committee: The number and composition of the Supervisory Committee of the Company complied with the requirements of laws and regulations. The Supervisory Committee of the Company formulated the Rules of Procedure of the Supervisory Committee. The supervisors of the Company were able to perform their duties seriously, take the attitude of being responsible for all shareholders and supervise the legality and regulation conformity of the Company's finance and the duty performance of the directors, managers and other senior executives of the Company. (5) The Company and The Affiliated Party: the affiliated transactions between the company and the affiliated party are strictly managed and the audit of the affiliated transactions is performed in accordance with the relevant procedures. Also, the affiliated transactions are in compliance with the laws and regulations, and there not exist the issues that the major shareholders make use of the affiliated transactions to occupy the funds of the listed company. (6)Information disclosure and transparency: The Company designated the secretary to the board of directors to be responsible for information disclosure, Regulations on Management of Information Disclosure,Regulations on Management of External Information Users and reception of shareholder and consultation. In the report period, the Company was able to truly, accurately, completely and timely disclose relevant information according to the provisions of laws, regulations and the Articles of Association of the Company. The Company will continue to operate in a standardized way strictly according to the requirements of relevant laws and regulations including the Company Law, further perfect company administration structure and establish and improve various regulations in 87 Sino Great Wall Co., Ltd. 2016 Annual Report light of the gap with the requirements of Standards of Administration of Listed Companies, ensure the maximization of shareholders' interests and safeguard the lawful rights and interests of all shareholders. In the report period, The Company further increased information transparency and properly carried out publicity work for protection of investors. It timely answered the questions of investors and communicated with medium and small investors by making use of telephone, email, especially the platform for communication with investors set up by Shenzhen Stock Exchange to let them know itself better. Does there exist any difference in compliance with the corporate governance , the PRC Company Law and the relevant provisions of CSRC, □ Yes √ No There exist no difference in compliance with the corporate governance , the PRC Company Law and the relevant provisions of CSRC. II. Independence and Completeness in business, personnel , assets, organization and finance The company is completely separate with the controlling shareholder in terms of the business, personnel, assets, organizations, finance and other aspects, possessing independent and complete business and independent operating capacity. 1.Business : The Company has complete business and the ability of independent operation. It is completely independent from its controlling shareholder in respect of business. There is no unfair related transaction or horizontal competition between the company and the controlling shareholders or its affiliated enterprises. 2.Personnel : The company has a completely independent personnel management and salary system. The company’s senior manager personnel all are work in the company and receiving remunerations, and they do not hold any other posts except the post of director or receive remunerations in the controlling shareholder and its affiliated enterprises. The company's financial staffs do not concurrently hold posts in the controlling shareholder and its affiliated enterprises. 3.Assets : The company possesses independent place of business, independent land use rights, ownership of buildings and so forth assets, possesses the production system related to the production and operation, legally possesses the equipments related to production and operation and has Independent purchase, sales system and supporting facilities. 4.Organization : The company established a sound internal operation management organization, independently exercising the operation and management rights, and there is no situation of confounding organization with the controlling shareholder and its affiliated enterprises. 5.Finance:The company has a standardized financial accounting system, with an independent financial accounting department, full-time accounting personnel and independent accounting system, being able to make financial decisions independently. The company has set up the independent bank account and independently pays the tax. The situation of the free-occupying of the company’s assets and funds by the controlling shareholder and its affiliated enterprises does not exist. III. Horiontal Competitions □Applicable√Not applicable IV. Annual General Meeting and Extraordinary Shareholders’ Meetings in the Reporting Period 1.Annual General Meeting Investor Sessions Type participation ratio Meeting Date Disclosure date Disclosure index The first provisional shareholders’ General meeting in The first provisional 2016 (No.2016-025) Provisional shareholders’ published on shareholders’ 44.03% March 30,2016 March 31,2016 General meeting in Securities General Meeting 2016 Times,Hong Kong Commercial Daily and Juchao Website (http://www.cninfo 88 Sino Great Wall Co., Ltd. 2016 Annual Report .com.cn)on March 31,2016. Annual General Meeting of 2015 (No.2016-038) published on Securities Annual Genral Annual General Times,Hong Kong 42.68% May 6,2016 May 7,2016 Meeting of 2015 Meeting Commercial Daily and Juchao Website (http://www.cninfo .com.cn)on May 7,2016. The second provisional shareholders’ General meeting in The second 2016(No.2016-065) provisional Provisional published on shareholders’ shareholders’ 43.01% July 25,2017 July 26,2017 Securities General meeting in General Meeting Times,Hong Kong 2016 Commercial Daily and Juchao Website (http://www.cninfo .com.cn)on July 26,,2016. The fourth provisional shareholders’ General meeting in The Fourth 2016(No.2016-104) provisional Provisional published on shareholders’ shareholders’ 41.08% December 26,2016 December 27,2016 Securities General meeting in General Meeting Times,Hong Kong 2016 Commercial Daily and Juchao Website (http://www.cninfo .com.cn)on December 27,2016. 2. Request for extraordinary general meeting by preferred stockholders whose voting rights restore □ Applicable √Not applicable V. Responsibility performance of independent directors in report period 1. The attending of independent directors to board meetings and shareholders’ general meeting The attending of independent directors Number of Failure to Number of Board meetings Number of personally attend Independent Number of spot meetings Number of necessary to be attendances by board meetings Directors attendances attended by absence attended in the representative successively Communication reporting period twice (Yes/No) Tang Jianxin 11 2 9 0 0 No Zhang Yufeng 11 1 10 0 0 No Jiang Chongguang 11 1 10 0 0 No Number of general meetings attended 4 by independent directors as non-voting 89 Sino Great Wall Co., Ltd. 2016 Annual Report delegates Notes to failure to personally attend Board Meetings Successively Twice 2.Objection of independent directors on some relevant issues Objection of independent directors on some relevant issues □ Yes √No Nil 3. Other notes to duty performance of independent directors Has an independent director’s advice to the Company been accepted √Yes □ No Explanation on acceptance of or failure to accept an independent director’s advice to the Company. During the reporting period,The independent directors of the Company put forward a lot of professional opinions on the laws and regulations and the Articles of Association of the Company, and paid attention to the operation of the Company, performed their duties independently, formulated the system of the Company and the day-to-day business decision-making of the Company. Independent directors issued an opinion on the issue of independent and impartial opinions, in order to improve the company's supervision mechanism, safeguard the legitimate rights and interests of the company and all shareholders play a due role. VI. Duty Performance of Special Committees under the Board of Directors in the Reporting Period The board of directors of the Company has special committees including audit committee, remuneration and appraisal committee, strategy committee and nomination committee. According to the scope of authority specified in the working rules for them, the committees conducted study and put forward opinions and suggestions for reference by the board of directors for decision making. According to relevant regulations of CSRC, the audit committee of the board of directors of the Company did the following work during the preparation of the annual report of the Company for 2016: 1. On February 3, 2016, the audit committee of the board of directors reviewed the company’s financial accounting statement 2015 and published the following opinions: the financial accounting statement 2015 prepared by the company basically reflected its financial standing and operating results, and audit committee agreed to engage in the yearly financial statement auditing work on this basis, requested the financial department to provide active cooperation in assisting with this audit, strengthen communication and contact, and timely reflect the problems and audit work progress to audit committee. 2 2.On March 10, 2016, the Audit Committee of the board of directors deliberated the Proposal on Alteration and Engaging of the 2015 Annual Audit Agency, considering the Dahua Certified Public Accountants (special general partnership) had provided audit service for the company in consecutive years, in order to ensure the independence and objectivity of the audit work, after the Audit Committee of the board conscientiously examined, then proposed the alteration and engaging BDO China Shu Lun Pan Certified Public Accountants LLP as the company’s 2015 annual audit agency, of which the audit fees for financial and internal control audit is RMB 1.5 million. The Audit Committee agreed to submit the Proposal to the board of directors for deliberation. 3. On April 10, 2016, the audit committee of the board of directors reviewed the audit report 2015 issued by BDO China Shu Lun Pan Certified Public Accountants LLP . The audit committee agreed on the audit, agreed to submit the financial audit report to the board of directors for deliberation; meanwhile, to ensure the consistency of audit work, the audit committee suggested that the board of directors continue to appoint audit report 2015 issued by Shu Lun Pan Certified Public Accountants LLP as the audit institution for the year 2016. 4. On April 28, 2016, the Audit Committee of the board of directors deliberated the company’s First quarter 2016 financial accounting statements, and issued the following deliberations: the First quarter 2016 financial accounting statements compiled by the company basically reflected the situation of the company’s assets and the operation results, and the Audit Committee of the board of directors agreed to submit the financial accounting statements to the board of directors for deliberation. 5. On August 25, 2016, the Audit Committee of the board of directors deliberated the company’s Semi –annual 90 Sino Great Wall Co., Ltd. 2016 Annual Report Report 2016 financial accounting statements, and issued the following deliberations: the semi-annual report 2016 financial accounting statements compiled by the company basically reflected the situation of the company’s assets and the operation results, and the Audit Committee of the board of directors agreed to submit the financial accounting statements to the board of directors for deliberation. 6. On October 24, 2016, the Audit Committee of the board of directors deliberated the company’s third quarter 2016 financial accounting statements, and issued the following deliberations: the Third quarter 2016 financial accounting statements compiled by the company basically reflected the situation of the company’s assets and the operation results, and the Audit Committee of the board of directors agreed to submit the financial accounting statements to the board of directors for deliberation. The information about the duty performance of the remuneration and appraisal committee of the board of directors in year 2016: 1. On April 10, 2016, according to the provisions stipulated by Rules of Procedure for the Special Committee of the Board, the remuneration and appraisal committee of the board had deliberated the remunerations of the company’s directors, supervisors and senior management personnel of year 2015 and reckoned that remunerations paid to the company’s directors, supervisors and senior management personnel were fair, reasonable and conforming to the relevant company’s the remuneration policy and the appraisal standard, then agreed to submitted the item to the board of directors for deliberation. Job performance condition of strategic committee of the board of directors in the year of 2016: 1. On March 14, 2016, the Strategic Committee of the Board of Directors considered the proposal of the plan to establish a wholly-owned subsidiary by investment of the company and the wholly-owned subsidiary Sino International and released the deliberations: the proposal was in line with the long-term development strategic planning of the company and would lay a good foundation for the company’s future development. Thus, the Strategic Committee agreed to submit the proposal to the Board of Directors for consideration. 2.On July 7, 2016, the Strategic Committee of the Board of Directors deliberated the plan to raise funds by means of non-public issuing of shares in order to complement the circulating funds and repay the bank loans, considered the proposal was in line with the development strategy of the company and agreed to submit to the Board of Directors the Proposal on the Scheme of non-public Issuing of A-Share to Specific Objects, Proposal on the Plan of non-public Issuing of Shares by Sino Great Wall Co., Ltd and other relevant proposals for deliberation. VII. Work of the supervisory Committee Did the supervisory Committee find any risk existing in performing the supervision activities in the reporting period □Yes √No The supervisory Committee has no objection aginst any matters under supervision in the reporting period VIII. Assessment and incentive Mechanism for Senior executives The company established the evaluation system based on the targeted responsibility system, and adopted signing the annual responsibility appraisal agreement for the evaluation of the company’s senior management personnel which specified the KPI and evaluation method with methods related to the evaluation results. During the reporting period, the company’s had conformed to the measures of the targeted responsibility system to assess and evaluate the senior management personnel performances, which presented in the annual performance. IX. Internal control situations 1. Specific situations on major defects of internal control discovered during report period □ Yes √ No 2. Self-evaluation report on internal control Disclosure date of appraisal report on April 28,2017 internal control Disclosure index of appraisal report on Juchao Website:(http://www.cninfo.com.cn), Selfevaluation report of internal control 91 Sino Great Wall Co., Ltd. 2016 Annual Report internal control in 2016 on April 28,2017. Proportion of total unit assets covered by appraisal in the total assets of the 100.00% consolidated financial statements of the company Proportion of total unit incomes covered by appraisal in the total business incomes 100.00% of the consolidated financial statements of the company Standards of Defects Evaluation Category Financial Report Non-financial Report Material Defect: 1.Fraud of directors, supervisors and senior Material Defect: management; 1.Violation of national laws or 2.Material errors appear in the Company’s regulations, normative documents and financial report published; significant decision making lacking of scientificity and system may lead to 3. The certified public auditor finds material invalid system, no rectification for wrong reporting in the current financial material or major defect or other statement, while the Company has not found situations that materially affect such reporting during its operation;4.The audit committee and audit department of the the Company; 2.Violation of regulations Company exercise invalid supervision upon led to punishment from government internal control; department or regulatory authority. Violation of management system or 5.The result of internal control assessment internal control procedure led to major hasn’t been rectified, especially the material business disputes. Ranges of material or major defects; litigation led to great losses;3.The Standard 6.Important business is lack of system working initiatives of staffs was control or the system loses its validity. damaged at a great level, and the Major Defects:1.No recognized accounting working efficiency was substantially standards were followed when choosing and decreased, which exerted major adverse applying the accounting policies;. effects on the culture and cohesion of the 2.No anti-fraud program and control enterprise,and led to serious turnover of measures were established; 3.No core teams;4.Negative news spreads in corresponding control mechanism was the whole business scope( including the established or implemented for treating the extension to industry chain ), or is abnormal or special accounting, and it is lack concerned by national medias or public of compensating control;4.One or more ones, which will substantially damage frauds appeared during the financial report the enterprise’s reputation, and the process, and which couldn’t reasonably negative effects can’t be eliminated all guarantee that the formulated financial report the time;5.The Company involved would reach the goals of being actual and punishment from CSRC and involved accurate.General Defect: Other defects warnings from stock exchange. besides material defect and major defect. (1) Material Defect: amount with wrong reporting ≧ 10% of total profit amount; amount with wrong reporting ≧ 10% of Material Defect: Due to the internal operating income; amount with wrong control defect of non-financial report, it reporting≧ 10% of total asset; amount with may exert impacts of over RMB 10 wrong reporting≧10% of net assets;(2) million(including RMB10 million ) on Major Defect: 5% of total profit amount≦ the total profit amount.Major Defect: Due to the internal control defect of amount with wrong reporting﹤10% of total non-financial report, it may exert impacts profit amount; 5% of operating income≦ of over RMB 5 million (including 5 Standards of Quantitation amount with wrong reporting﹤10% of million but less than 10 million) on the operating income ;5% of total asset≦amount total profit amount. with wrong reporting﹤10% of total General Defect:Due to the internal asset;5% of net assets ≦amount with wrong control defect of non-financial report, it reporting﹤10% of net assets;(3) General may exert impacts of below RMB 5 Defect: amount with wrong reporting﹤5% million. of operating income. amount with wrong﹤ 5% of total asset; amount with wrong reporting﹤5% of net assets. 92 Sino Great Wall Co., Ltd. 2016 Annual Report Number of major defects in financial 0 reporting(a) Number of major defects in non financial 0 reporting (a) Number of important defects in financial 0 reporting(a) Number of important defects in non financial reporting(a) X. Internal Control audit report √ Applicable □Not applicable Review opinions in the internal control audit report We believe that, Sino Great Wall Co., Ltd. maintained efficient internal control of financial reports in all significant aspects according to “ Basic Standards of Corporate Internal Control” and relevant regulations on December 31, 2016. Disclosure date of audit report Disclosure of internal control (full-text) Index of audit report of April 28,2017 internal control (full-text) Internal audit report’s opinion Juchao Website: (http://www.cninfo.com.cn);2016 Audit report of internal control Type of audit report on internal Unqualified auditor’s report control Whether there is significant No defectin non-financial report Has the CPAs issued a qualified auditor’s report of internal control . □ Yes √No Does the internal control audit report issued by the CPAs agree with the self-assessment report of the Board of Directors √Yes □No 93 Sino Great Wall Co., Ltd. 2016 Annual Report X. 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 butnot folly cashed on the approval date of annual report No 94 Sino Great Wall Co., Ltd. 2016 Annual Report XI. Financial Report I. Audit report 95 AUDITORS' REPORT PCPAR [2017] No. ZB11076 To all shareholders of Sino Great Wall Co., Ltd.: We have audited the attached financial statements of Sino Great Wall Co., Ltd. (hereinafter referred to as “the Company”), which comprise the consolidated balance sheet and the company's balance sheet as at December 31, 2016, the consolidated income statement and the company's income statement, the consolidated statement of cash flows and the company's statement of cash flows, the consolidated statement of changes in shareholders’ equity and the company's statement of changes in shareholders' equity and notes to the financial statements for the year then ended. I. Management's Responsibility for the Financial Statements Preparation and fair presentation of financial statements is the responsibility of the company management. This responsibility includes: (1) preparing the financial statements in accordance with Accounting Standards for Business Enterprises to achieve fair presentation of the financial statements; (2) designing, implementing and maintaining internal control that is necessary to enable the financial statements that are free from material misstatement, whether due to fraud or error. II. Auditor's Responsibilities Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Auditing Standards for Certified Public Accountants in China. Those standards require that we comply with professional and ethical requirements of Chinese certified public accountants, and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgments, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider the internal control relevant to the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements. Auditors' Report Page 1 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. III. Opinion In our opinion, the financial statements of the Company are prepared in accordance with Accounting Standards for Business Enterprises and present fairly, in all material respects, the consolidated financial position and the Company's financial position as at December 31, 2016 and the consolidated operating results and the Company's operating results and cash flows for the year then ended. BDO CHINA Shu Lun Pan Certified Public Accountant of China: Certified Public Accountants LLP Certified Public Accountant of China: Shanghai, China April 26, 2017 This auditors’ report and the accompanying notes to the financial statements are English translation of the Chinese auditors’ report. In case of doubt as to the presentation of these documents, the Chinese version shall prevail. Auditors' Report Page 2 神州长城股份有限公司 Sino Great Wall Co., Ltd. 合并资产负债表 Consolidated Balance Sheet 2016 年 12 月 31 日 December 31, 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 期末余额Balance as at 年初余额 Balance as at 资 产 Assets 附注五 Note 5 December 31, 2016 January 1, 2016 流动资产: Current assets: 货币资金 Monetary funds (一) 5.1 1,340,815,821.83 695,384,561.31 结算备付金 Balances with clearing companies 拆出资金 Loans to banks and other financial institutions 以公允价值计量且其变动计入当期损益的金融资产 Financial assets measured at fair value through (二)5.2 1,102,961.04 current profit or loss 衍生金融资产 Derivative financial assets 应收票据 Notes receivable (三) 5.3 1,074,390,642.58 220,448,747.94 应收账款 Accounts receivable (四) 5.4 3,725,170,208.31 2,352,808,087.33 预付款项 Advances to suppliers (五) 5.5 319,206,798.63 77,707,568.38 应收保费 Premium receivable 应收分保账款 Reinsurance accounts receivable 应收分保合同准备金 Reinsurance contract reserves receivable 应收利息 Interest receivable 应收股利 Dividends receivable 其他应收款 Other receivables (六) 5.6 651,012,132.91 239,952,886.11 买入返售金融资产 Financial assets purchased under resale agreements 存货 Inventories (七) 5.7 332,904,930.36 168,133,668.91 划分为持有待售的资产 Assets classified as held for sale 一年内到期的非流动资产 Non-current assets maturing within one year (八) 5.8 13,462,942.89 15,717,270.60 其他流动资产 Other current assets (九) 5.9 35,450,194.47 14,138,411.87 流动资产合计 TOTAL CURRENT ASSETS 7,492,413,671.98 3,785,394,163.49 非流动资产: Non-current assets: 发放贷款及垫款 Disbursement of advances and loans 可供出售金融资产 Available-for-sale financial assets 持有至到期投资 Held-to-maturity investments 长期应收款 Long-term receivables 长期股权投资 Long-term equity investments 投资性房地产 Investment property 固定资产 Fixed assets (十) 5.10 128,483,747.74 43,846,215.63 在建工程 Construction in process (十一) 5.11 10,016,928.24 工程物资 Project materials 固定资产清理 Liquidation of fixed assets 生产性生物资产 Productive biological assets 油气资产 Oil and gas assets 无形资产 Intangible assets (十二) 5.12 106,203,443.55 9,267,746.33 开发支出 Development expenses 商誉 Goodwill (十三) 5.13 58,874,144.79 6,724,316.91 长期待摊费用 Long-term deferred expenses (十四) 5.14 7,003,035.94 18,909,785.69 递延所得税资产 Deferred income tax assets (十五) 5.15 76,298,659.34 47,950,278.07 其他非流动资产 Other non-current assets (十六) 5.16 116,902,258.30 95,353,390.28 非流动资产合计 TOTAL NON-CURRENT ASSETS 493,765,289.66 232,068,661.15 资产总计 TOTAL ASSETS 7,986,178,961.63 4,017,462,824.63 后附财务报表附注为财务报表的组成部分。 The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 1 神州长城股份有限公司 Sino Great Wall Co., Ltd. 合并资产负债表(续)Consolidated Balance Sheet (Continued) 2016 年 12 月 31 日 December 31, 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 期末余额Balance as at 年初余额 Balance as at 负债和所有者权益 Liability and Owners' Equity 附注五 Note 5 December 31, 2016 January 1, 2016 流动负债: Current liabilities: 短期借款 Short-term borrowings (十七) 5.17 1,966,058,357.59 225,408,496.07 向中央银行借款 Borrowings from central bank 吸收存款及同业存放 Absorption of deposits and interbank deposit 拆入资金 Loans from banks and other financial institutions 以公允价值计量且其变动计入当期损益的金融负债 Financial liabilities measured at fair value through current profit or loss 衍生金融负债 Derivative financial liabilities 应付票据 Notes payable (十八)5.18 706,883,375.54 143,410,167.17 应付账款 Accounts payable (十九)5.19 1,313,948,990.25 1,332,619,954.77 预收款项 Advances from customers (二十) 5.20 573,784,072.58 64,963,842.60 卖出回购金融资产款 Financial assets sold under repurchase agreements 应付手续费及佣金 Handling charges and commissions payable 应付职工薪酬 Employee compensation payable (二十一) 5.21 18,797,546.69 12,669,619.20 应交税费 Taxes and surcharges payable (二十二) 5.22 313,483,669.78 284,826,290.11 应付利息 Interest payable (二十三) 5.23 6,428,493.55 527,969.26 应付股利 Dividends payable 其他应付款 Other payables (二十四)5.24 222,414,975.01 635,200,976.60 应付分保账款 Reinsurance accounts payable 保险合同准备金 Reserves for insurance contracts 代理买卖证券款 Receivings from vicariously traded securities 代理承销证券款 Receivings from vicariously sold securities 划分为持有待售的负债 Liabilities classified as held for sale 一年内到期的非流动负债 Non-current liabilities maturing within one year (二十五)5.25 175,958,998.04 7,135,752.00 其他流动负债 Other current liabilities (二十六)5.26 30,382,980.72 流动负债合计 TOTAL CURRENT LIABILITIES 5,328,141,459.75 2,706,763,067.78 非流动负债: Non-current liabilities: 长期借款 Long-term borrowings (二十七) 5.27 786,858,878.82 30,140,649.14 应付债券 Bonds payable 其中:优先股 Including: Preferred stock 永续债 Perpetual debts 长期应付款 Long-term payables 长期应付职工薪酬 Long-term employee compensation payable 专项应付款 Special payables 预计负债 Estimated liabilities (二十八)5.28 13,225,861.70 递延收益 Deferred income 递延所得税负债 Deferred income tax liabilities (十五) 5.15 27,469,888.77 15,444.16 其他非流动负债 Other non-current liabilities 非流动负债合计 TOTAL NON-CURRENT LIABILITIES 827,554,629.29 30,156,093.30 负债合计 TOTAL LIABILITIES 6,155,696,089.04 2,736,919,161.08 所有者权益: Total owners' equity: 实收资本(或股本) Paid-in capital (or share capital) (二十九) 5.29 1,698,245,011.00 446,906,582.00 其他权益工具 Other equity instruments 其中:优先股 Including: Preferred stock 永续债 Perpetual debts 资本公积 Capital reserve (三十) 5.30 -1,299,349,701.74 -50,367,862.22 减:库存股 Less: Treasury stock 其他综合收益 Other comprehensive income 专项储备 Special reserve (三十一)5.31 65,687,868.14 46,014,941.54 盈余公积 Surplus reserve (三十二) 5.32 84,394,441.23 84,394,441.23 一般风险准备 General risk reserves 未分配利润 Undistributed profits (三十三) 5.33 1,228,970,498.86 755,308,636.19 归属于母公司所有者权益合计 Total equity attributable to owners of the parent company 1,777,948,117.49 1,282,256,738.74 少数股东权益 Minority equity 52,534,755.10 -1,713,075.19 所有者权益合计 TOTAL OWNERS' EQUITY 1,830,482,872.59 1,280,543,663.55 负债和所有者权益总计 TOTAL LIABILITIES AND OWNERS' EQUITY 7,986,178,961.63 4,017,462,824.63 后附财务报表附注为财务报表的组成部分。 The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 2 神州长城股份有限公司 Sino Great Wall Co., Ltd. 资产负债表 Balance Sheet 2016 年 12 月 31 日 December 31, 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 期末余额Balance as at 年初余额 Balance as at 资 产 Assets 附注十五 Note 15 December 31, 2016 January 1, 2016 流动资产:Current assets: 货币资金 Monetary funds 168,691,344.34 239,145,251.31 以公允价值计量且其变动计入当期 损益的金融资产 Financial assets measured at fair value through current profit or loss 衍生金融资产 Derivative financial assets 应收票据 Notes receivable 应收账款 Accounts receivable (一) 15.1 6,346.00 29,083.30 预付款项 Advances to suppliers 1,000,000.00 应收利息 Interest receivable 应收股利 Dividends receivable 其他应收款 Other receivables (二)15.2 1,672,200,041.98 存货 Inventories 划分为持有待售的资产 Assets classified as held for sale 一年内到期的非流动资产 Non-current assets maturing within one year 其他流动资产 Other current assets 1,404,744.25 流动资产合计 TOTAL CURRENT ASSETS 1,843,302,476.57 239,174,334.61 非流动资产: Non-current assets: 可供出售金融资产 Available-for-sale financial assets 持有至到期投资 Held-to-maturity investments 长期应收款 Long-term receivables 长期股权投资 Long-term equity investments (三) 15.3 3,176,451,536.66 3,079,451,536.66 投资性房地产 Investment property 固定资产 Fixed assets 4,121.50 在建工程 Construction in process 工程物资 Project materials 固定资产清理 Liquidation of fixed assets 生产性生物资产 Productive biological assets 油气资产 Oil and gas assets 无形资产 Intangible assets 开发支出 Development expenses 商誉 Goodwill 长期待摊费用 Long-term deferred expenses 336,569.60 递延所得税资产 Deferred income tax assets 382.68 其他非流动资产 Other non-current assets 48,960,000.00 非流动资产合计 TOTAL NON-CURRENT ASSETS 3,225,752,227.76 3,079,451,919.34 资产总计 TOTAL ASSETS 5,069,054,704.33 3,318,626,253.95 后附财务报表附注为财务报表的组成部分。 The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 3 神州长城股份有限公司 Sino Great Wall Co., Ltd. 资产负债表(续)Balance Sheet (Continued) 2016 年 12 月 31 日 December 31, 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 期末余额Balance as at 年初余额 Balance as at 负债和所有者权益 Liability and Owners' Equity December 31, 2016 January 1, 2016 流动负债: Current liabilities: 短期借款 Short-term borrowings 980,000,000.00 以公允价值计量且其变动计入当期损益的金融负债 Financial liabilities measured at fair value through current profit or loss 衍生金融负债 Derivative financial liabilities 应付票据 Notes payable 68,000,000.00 应付账款 Accounts payable 预收款项 Advances from customers 应付职工薪酬 Employee compensation payable 701,792.11 应交税费 Taxes and surcharges payable 97,085,106.00 98,150,372.30 应付利息 Interest payable 5,150,639.24 应付股利 Dividends payable 其他应付款 Other payables 13,252,762.06 803,339.56 划分为持有待售的负债 Liabilities classified as held for sale 一年内到期的非流动负债 Non-current liabilities maturing within one year 其他流动负债 Other current liabilities 流动负债合计 TOTAL CURRENT LIABILITIES 1,164,190,299.41 98,953,711.86 非流动负债: Non-current liabilities: 长期借款 Long-term borrowings 700,000,000.00 应付债券 Bonds payable 其中:优先股 Including: Preferred stock 永续债 Perpetual debts 长期应付款 Long-term payables 长期应付职工薪酬 Long-term employee compensation payable 专项应付款 Special payables 预计负债 Estimated liabilities 递延收益 Deferred income 递延所得税负债 Deferred income tax liabilities 其他非流动负债 Other non-current liabilities 非流动负债合计 TOTAL NON-CURRENT LIABILITIES 700,000,000.00 负债合计 TOTAL LIABILITIES 1,864,190,299.41 98,953,711.86 所有者权益: Total owners' equity: 实收资本(或股本) Paid-in capital (or share capital) 1,698,245,011.00 446,906,582.00 其他权益工具 Other equity instruments 其中:优先股 Including: Preferred stock 永续债 Perpetual debts 资本公积 Capital reserve 1,237,956,472.37 2,489,294,901.37 减:库存股 Less: Treasury stock 其他综合收益 Other comprehensive income 专项储备 Special reserve 盈余公积 Surplus reserve 26,309,287.00 26,309,287.00 未分配利润 Undistributed profits 242,353,634.55 257,161,771.72 所有者权益合计 TOTAL OWNERS' EQUITY 3,204,864,404.92 3,219,672,542.09 负债和所有者权益总计 TOTAL LIABILITIES AND OWNERS' EQUITY 5,069,054,704.33 3,318,626,253.95 后附财务报表附注为财务报表的组成部分。 The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 4 神州长城股份有限公司 Sino Great Wall Co., Ltd. 合并利润表 Consolidated Income Statement 2016年度 Year of 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 项 目 Item 附注五 Note 5 本期发生额 Year 2016 上期发生额 Year 2015 一、营业总收入 Total operating income 4,664,999,117.17 4,010,358,999.58 其中:营业收入Including: Operating income (三十四)5.34 4,664,999,117.17 4,010,358,999.58 利息收入 Interest income 已赚保费 Earned premiums 手续费及佣金收入 Income from handling charges and commissions 二、营业总成本 Total operating cost 4,110,727,814.01 3,578,964,860.85 其中:营业成本 Including: Operating cost (三十四)5.34 3,459,377,744.66 3,165,027,185.66 利息支出 Interest expenses 手续费及佣金支出 Handling charges and commissions expenses 退保金 Surrender value 赔付支出净额 Net claims paid 提取保险合同准备金净额 Net amount withdrawn for insurance contract reserves 保单红利支出 Policy dividend payment 分保费用 Reinsurance costs 税金及附加 Taxes and surcharges (三十五)5.35 9,651,529.46 79,485,669.04 销售费用 Selling expenses (三十六)5.36 30,318,688.27 13,686,172.10 管理费用 General and administrative expenses (三十七) 5.37 313,930,733.56 154,562,327.86 财务费用 Financial expenses (三十八)5.38 127,437,227.95 54,866,402.02 资产减值损失 Losses from assets impairment (三十九) 5.39 170,011,890.11 111,337,104.17 加:公允价值变动收益(损失以“-”号填列) Plus: Gains from the changes in fair value ("-" for losses) (四十) 5.40 42,553.26 投资收益(损失以“-”号填列) Investment income ("-" for losses) (四十一) 5.41 2,226,350.97 其中:对联营企业和合营企业的投资收益 Including: Income from investment in associates and joint ventures 汇兑收益(损失以“-”号填列) Gains from foreign exchange ("-" for losses) 三、营业利润(亏损以“-”号填列)Operating profits ("-" for losses) 556,497,654.12 431,436,691.98 加:营业外收入 Plus: Non-operating income (四十二) 5.42 26,427,042.86 380,733.08 其中:非流动资产处置利得 Including: Gains from disposal of non-current assets 4,455.00 减: 营业外支出 Less: Non-operating expenses (四十三) 5.43 21,586,940.28 1,025,395.57 其中:非流动资产处置损失 Including: Losses from disposal of non-current assets 564,833.40 85,567.15 四、利润总额(亏损总额以“-”号填列) Total profits ("-" for total losses) 561,337,756.70 430,792,029.49 减:所得税费用 Less: Income tax expenses (四十四) 5.44 89,244,861.75 84,688,888.81 五、净利润(净亏损以“-”号填列) Net profit ("-" for net losses) 472,092,894.95 346,103,140.68 其中:被合并方在合并前实现的净利润 Including: Net profit achieved by the combined party before the combination 归属于母公司所有者的净利润 Net profit attributable to owners of the parent company 473,661,862.67 346,648,651.48 少数股东损益 Minority interest income -1,568,967.72 -545,510.80 六、其他综合收益的税后净额 Other comprehensive income, net of tax 85.60 归属母公司所有者的其他综合收益的税后净额 Other comprehensive income, net of tax attributable to owners of the parent company 85.60 (一)以后不能重分类进损益的其他综合收益 Other comprehensive income that cannot be reclassified into profit or loss later 1. 重新计量设定受益计划净负债或净资产的变动 Changes arising from the re-measurement of net liabilities or net assets of defined benefit plan 2. 权益法下在被投资单位不能重分类进损益的其他综合收益中享有的份额 Share in other comprehensive income of the investee that cannot be reclassified into profit or loss under the equity method (二)以后将重分类进损益的其他综合收益 Other comprehensive income that will be reclassified into profit or loss later 85.60 1. 权益法下在被投资单位以后将重分类进损益的其他综合收益中享有的份额 Share in other comprehensive income of the investee that will be reclassified into profit or loss under the equity method later 2. 可供出售金融资产公允价值变动损益 Profit or loss of change in faire value of available-for-sale financial assets 3. 持有至到期投资重分类为可供出售金融资产损益 Profit or loss arising from reclassification of held-to-maturity investments as financial assets available for sale 4. 现金流量套期损益的有效部分 Effective portion of profit or loss from cash flow hedging 5. 外币财务报表折算差额 Translation differences of foreign currency financial statements 85.60 6. 其他 Others 归属于少数股东的其他综合收益的税后净额 Other comprehensive income, net of tax attributable to minority shareholders 七、综合收益总额 Total comprehensive income 472,092,894.95 346,103,226.28 归属于母公司所有者的综合收益总额 Total comprehensive income attributable to owners of the parent company 473,661,862.67 346,648,737.08 归属于少数股东的综合收益总额 Total comprehensive income attributable to minority shareholders -1,568,967.72 -545,510.80 八、每股收益: Earnings per share: (一)基本每股收益(元/股)Basic earnings per share (RMB/share) 0.28 0.40 (二)稀释每股收益(元/股)Diluted earnings per share (RMB/share) 0.28 0.40 后附财务报表附注为财务报表的组成部分。The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 5 神州长城股份有限公司 Sino Great Wall Co., Ltd. 利润表 Income Statement 2016年度 Year of 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 项 目 Item 附注十五 Note 15 本期发生额 Year 2016 上期发生额 Year 2015 一、营业收入 Operating income (五) 15.5 238,048.64 2,318,061.00 减:营业成本 Less: Operating costs (五) 15.5 237,620.18 税金及附加 Taxes and surcharges 192,135.56 153,652.28 销售费用 Selling expenses 管理费用 General and administrative expenses 34,816,749.95 8,954,347.86 财务费用(收益以“-”号填列) Financial expenses (“-” for income) 5,966,974.50 3,370,704.26 资产减值损失 Losses from assets impairment 781,524.61 -13,038.09 加:公允价值变动净收益(损失以“-”号填列) Plus: Net gains from the changes in - fair value ("-" for losses) 投资收益(损失以“-”号填列) Investment income ("-" for losses) (四) 15.4 396,197.49 383,969,705.11 其中:对联营和合营企业的投资收益 Including: Income from investment in associates - and joint ventures 二、营业利润(亏损以“-”号填列) Operating profits ("-" for losses) -41,123,138.49 373,584,479.62 加:营业外收入 Plus: Non-operating income 26,315,384.00 73,450,480.94 其中:非流动资产处置利得 Including: Gains from disposal of non-current assets 减: 营业外支出 Less: Non-operating expenses 其中:非流动资产处置损失 Including: Losses from disposal of non-current assets 三、利润总额(亏损总额以“-”号填列) Total profits ("-" for total losses) -14,807,754.49 447,034,960.56 减:所得税费用 Less: Income tax expenses 382.68 93,708,631.85 四、净利润(净亏损以“-”号填列) Net profit ("-" for net losses) -14,808,137.17 353,326,328.72 五、其他综合收益的税后净额 Other comprehensive income, net of tax 4,398,234.00 (一)以后不能重分类进损益的其他综合收益 Other comprehensive income that cannot be reclassified into profit or loss later 1. 重新计量设定受益计划净负债或净资产的变动 Changes arising from the re- measurement of net liabilities or net assets of defined benefit plan 2. 权益法下在被投资单位不能重分类进损益的其他综合收益中享有的份额 Share in other comprehensive income of the investee that cannot be reclassified into profit or loss under the equity method (二)以后将重分类进损益的其他综合收益 Other comprehensive income that will be 4,398,234.00 reclassified into profit or loss later 1. 权益法下在被投资单位以后将重分类进损益的其他综合收益中享有的份额 Share in other comprehensive income of the investee that will be reclassified into profit or loss under the equity method later 2. 可供出售金融资产公允价值变动损益 Profit or loss of change in faire value of available-for-sale financial assets 3. 持有至到期投资重分类为可供出售金融资产损益 Profit or loss arising from reclassification of held-to-maturity investments as financial assets available for sale 4. 现金流量套期损益的有效部分 Effective portion of profit or loss from cash flow hedging 5. 外币财务报表折算差额 Translation differences of foreign currency financial 4,398,234.00 statements 6. 其他 Others 六、综合收益总额 Total comprehensive income -14,808,137.17 357,724,562.72 七、每股收益: Earnings per share: (一)基本每股收益(元/股)Basic earnings per share (RMB/share) -0.01 0.17 (二)稀释每股收益(元/股)Diluted earnings per share (RMB/share) -0.01 0.17 后附财务报表附注为财务报表的组成部分。The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 6 神州长城股份有限公司 Sino Great Wall Co., Ltd. 合并现金流量表 Consolidated Statement of Cash Flows 2016年度 Year of 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 项 目 Item 附注五 Note 5 本期发生额 Year 2016 上期发生额 Year 2015 一、经营活动产生的现金流量 CASH FLOWS FROM OPERATING ACTIVITIES 销售商品、提供劳务收到的现金 Cash received from sales of goods and rendering of services 2,793,118,697.02 2,882,512,458.95 客户存款和同业存放款项净增加额 Net increase in deposits from customers and due from banks and other financial institutions 向中央银行借款净增加额 Net increase in borrowings from the central bank 向其他金融机构拆入资金净增加额 Net increase in loans from other financial institutions 收到原保险合同保费取得的现金 Cash received from receiving insurance premium of original insurance contract 收到再保险业务现金净额 Net cash received from reinsurance business 保户储金及投资款净增加额 Net increase in deposits and investments from policyholders 处置以公允价值计量且其变动计入当期损益的金融资产净增加额 Net increase received from disposal of financial assets measured at fair value through current profit and loss 收取利息、手续费及佣金的现金 Cash received from interests, handling charges and commissions 拆入资金净增加额 Net increase in loans from banks and other financial institutions 回购业务资金净增加额 Net capital increase in repurchase business 收到的税费返还 Refunds of taxes and surcharges 6,342,293.39 250,556.49 收到其他与经营活动有关的现金 Cash received from other operating activities (四十五)5.45 1,818,662,633.63 1,374,677,443.26 经营活动现金流入小计 Sub-total of cash inflows from operating activities 4,618,123,624.04 4,257,440,458.70 购买商品、接受劳务支付的现金 Cash paid for goods purchased and services received 2,879,469,436.78 2,566,176,221.01 客户贷款及垫款净增加额 Net increase in customers' loans and advances 存放中央银行和同业款项净增加额 Net increase in deposits with central bank and with banks and other financial institutions 支付原保险合同赔付款项的现金 Cash paid for original insurance contract claims 支付利息、手续费及佣金的现金 Cash paid for interests, handling charges and commissions 支付保单红利的现金 Cash paid for policy dividends 支付给职工以及为职工支付的现金 Cash payments to and on behalf of employees 345,233,924.96 194,602,987.57 支付的各项税费 Cash paid for taxes and surcharges 92,009,656.66 150,781,903.84 支付其他与经营活动有关的现金 Cash paid for other operating activities (四十五)5.45 2,989,286,419.58 1,637,930,603.36 经营活动现金流出小计 Sub-total of cash outflows from operating activities 6,305,999,437.98 4,549,491,715.78 经营活动产生的现金流量净额 NET CASH FLOWS FROM OPERATING ACTIVITIES -1,687,875,813.94 -292,051,257.08 二、投资活动产生的现金流量 CASH FLOWS FROM INVESTING ACTIVITIES 收回投资收到的现金 Cash received from disposal of investments 119,902,961.04 68.86 取得投资收益所收到的现金 Cash received from returns on investments 1,566,217.08 2,426.00 处置固定资产、无形资产和其他长期资产收回的现金净额 Net cash received from disposal of fixed assets, intangible 95,937.00 assets and other long-term assets 处置子公司及其他营业单位收到的现金净额 Net cash received from disposal of subsidiaries and other business units 收到其他与投资活动有关的现金 Cash received from other investing activities 投资活动现金流入小计 Sub-total of cash inflows from investment activities 121,565,115.12 2,494.86 购建固定资产、无形资产和其他长期资产支付的现金净额 Net cash paid for purchase and construction of fixed assets, 15,582,049.03 25,179,343.19 intangible assets and other long-term assets 投资支付的现金 Cash paid for investments 188,307,635.00 质押贷款净增加额 Net increase in pledge loans 取得子公司及其他营业单位支付的现金净额 Net cash paid to acquire subsidiaries and other business units 42,467,736.61 3,533,792.47 支付其他与投资活动有关的现金 Cash paid for other investing activities 投资活动现金流出小计 Sub-total of cash outflows from investing activities 246,357,420.64 28,713,135.66 投资活动产生的现金流量净额 NET CASH FLOWS FROM INVESTING ACTIVITIES -124,792,305.52 -28,710,640.80 三、筹资活动产生的现金流量 CASH FLOWS FROM FINANCING ACTIVITIES 吸收投资收到的现金 Cash received from absorption of investment 242,223,784.52 其中:子公司吸收少数股东投资收到的现金 Including: Cash received by subsidiaries from investments by minority shareholders 取得借款收到的现金 Cash received from borrowings 3,352,564,898.49 783,614,556.72 发行债券收到的现金 Cash received from bonds issue 收到其他与筹资活动有关的现金 Cash received from other financing activities (四十五)5.45 175,355,000.00 779,900,000.00 筹资活动现金流入小计 Sub-total of cash inflows from financing activities 3,527,919,898.49 1,805,738,341.24 偿还债务支付的现金 Cash paid for debts repayments 676,386,220.35 737,683,498.86 分配股利、利润或偿付利息支付的现金 Cash paid for distribution of dividends and profits or payment of interests 116,576,063.38 33,711,743.66 其中:子公司支付给少数股东的股利、利润 Including: Dividends and profits paid to minority shareholders by subsidiaries 支付其他与筹资活动有关的现金 Cash paid for other financing activities (四十五)5.45 555,780,295.84 375,281,700.88 筹资活动现金流出小计 Sub-total of cash outflows from financing activities 1,348,742,579.57 1,146,676,943.40 筹资活动产生的现金流量净额 NET CASH FLOWS FROM FINANCING ACTIVITIES 2,179,177,318.92 659,061,397.84 四、汇率变动对现金及现金等价物的影响 EFFECT OF FLUCTUATION IN EXCHANGE RATE ON CASH AND -5,549,633.86 686,301.95 CASH EQUIVALENTS 五、现金及现金等价物净增加额 NET INCREASE IN CASH AND CASH EQUIVALENTS 360,959,565.60 338,985,801.91 加:期初现金及现金等价物余额 Plus: Beginning balance of cash and cash equivalents 582,745,756.81 243,759,954.90 六、期末现金及现金等价物余额 ENDING BALANCE OF CASH AND CASH EQUIVALENTS 943,705,322.41 582,745,756.81 后附财务报表附注为财务报表的组成部分。The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 7 神州长城股份有限公司 Sino Great Wall Co., Ltd. 现金流量表 Statement of Cash Flows 2016年度 Year of 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 项 目 Item 本期发生额 Year 2016 上期发生额 Year 2015 一、经营活动产生的现金流量: CASH FLOWS FROM OPERATING ACTIVITIES: 销售商品、提供劳务收到的现金 Cash received from sales of goods and rendering of services 266,133.00 2,246,511.00 收到的税费返还 Refunds of taxes and surcharges 收到其他与经营活动有关的现金 Cash received from other operating activities 822,670,967.58 99,238,423.81 经营活动现金流入小计 Sub-total of cash inflows from operating activities 822,937,100.58 101,484,934.81 购买商品、接受劳务支付的现金 Cash paid for goods purchased and services received 支付给职工以及为职工支付的现金 Cash payments to and on behalf of employees 7,388,478.01 1,026,970.10 支付的各项税费 Cash paid for taxes and surcharges 1,558,123.56 14,621,408.55 支付其他与经营活动有关的现金 Cash paid for other operating activities 2,332,567,169.66 95,712,355.22 经营活动现金流出小计 Sub-total of cash outflows from operating activities 2,341,513,771.23 111,360,733.87 经营活动产生的现金流量净额 NET CASH FLOWS FROM OPERATING ACTIVITIES -1,518,576,670.65 -9,875,799.06 二、投资活动产生的现金流量:CASH FLOWS FROM INVESTING ACTIVITIES: 收回投资收到的现金 Cash received from disposal of investments 107,000,000.00 取得投资收益收到的现金 Cash received from returns on investments 396,197.49 处置固定资产、无形资产和其他长期资产收回的现金净额 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 处置子公司及其他营业单位收到的现金净额 Net cash received from disposal of subsidiaries and other business units 收到其他与投资活动有关的现金 Cash received from other investing activities 40,084.65 投资活动现金流入小计 Sub-total of cash inflows from investment activities 107,396,197.49 40,084.65 购建固定资产、无形资产和其他长期资产支付的现金 Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets 投资支付的现金 Cash paid for investments 155,960,000.00 取得子公司及其他营业单位支付的现金净额 Net cash paid to acquire subsidiaries and other business 97,000,000.00 units 支付其他与投资活动有关的现金 Cash paid for other investing activities 投资活动现金流出小计 Sub-total of cash outflows from investing activities 252,960,000.00 投资活动产生的现金流量净额 NET CASH FLOWS FROM INVESTING ACTIVITIES -145,563,802.51 40,084.65 三、筹资活动产生的现金流量: CASH FLOWS FROM FINANCING ACTIVITIES: 吸收投资收到的现金 Cash received from absorption of investment 240,499,988.72 取得借款收到的现金 Cash received from borrowings 发行债券收到的现金 Cash received from bonds issue 1,810,000,000.00 收到其他与筹资活动有关的现金 Cash received from other financing activities 12,500,000.00 筹资活动现金流入小计 Sub-total of cash inflows from financing activities 1,822,500,000.00 240,499,988.72 偿还债务支付的现金 Cash paid for debts repayments 130,000,000.00 分配股利、利润或偿付利息支付的现金 Cash paid for distribution of dividends and profits or payment 74,013,433.81 of interests 支付其他与筹资活动有关的现金 Cash paid for other financing activities 24,800,000.00 筹资活动现金流出小计 Sub-total of cash outflows from financing activities 228,813,433.81 筹资活动产生的现金流量净额 NET CASH FLOWS FROM FINANCING ACTIVITIES 1,593,686,566.19 240,499,988.72 四、汇率变动对现金及现金等价物的影响 EFFECT OF FLUCTUATION IN EXCHANGE RATE ON CASH AND CASH EQUIVALENTS 五、现金及现金等价物净增加额 NET INCREASE IN CASH AND CASH EQUIVALENTS -70,453,906.97 230,664,274.31 加:期初现金及现金等价物余额 Plus: Beginning balance of cash and cash equivalents 239,145,251.31 8,480,977.00 六、期末现金及现金等价物余额 ENDING BALANCE OF CASH AND CASH EQUIVALENTS 168,691,344.34 239,145,251.31 后附财务报表附注为财务报表的组成部分。The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 8 神州长城股份有限公司 Sino Great Wall Co., Ltd. 合并所有者权益变动表 Consolidated Statement of Changes in Owners' Equity 2016年度 Year of 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 本期发生额 Year 2016 归属于母公司所有者权益 Equity attributable to owners of the parent company 项 目 Item 其他权益工具 Other equity instruments 少数股东权益 所有者权益合计 Total 实收资本(或股本) 一般风险准备 资本公积 Capital 减:库存股 Less: 其他综合收益 Other 专项储备 Special 盈余公积 未分配利润 Undistributed Minority equity owners' equity Paid-in capital (or share General risk 优先股 Preferred 永续债 Perpetual reserves Treasury stock comprehensive income reserves Surplus reserves profits capital) 其他 Others reserves stock debts 一、上年年末余额 Balance at the end of the last year 446,906,582.00 -50,367,862.22 46,014,941.54 84,394,441.23 755,308,636.19 -1,713,075.19 1,280,543,663.55 加:会计政策变更 Plus: Adjustments for changes in accounting policies 前期差错更正 Correction of accounting errors in prior periods 同一控制下企业合并 Business combination under common control 其他 Others 二、本年年初余额 Balance at the beginning of the year 446,906,582.00 -50,367,862.22 46,014,941.54 84,394,441.23 755,308,636.19 -1,713,075.19 1,280,543,663.55 三、本期增减变动金额(减少以“-”号填列) 1,251,338,429.00 -1,248,981,839.52 19,672,926.60 473,661,862.67 54,247,830.29 549,939,209.05 Increases/decreases in the current period (“-” for decreases) (一)综合收益总额 Total comprehensive income 473,661,862.67 -1,327,357.60 472,334,505.07 (二)所有者投入和减少资本 Capital contributed or reduced 1,251,338,429.00 2,356,589.48 55,575,187.89 1,309,270,206.37 by owners 1.股东投入的普通股 Common shares contributed by 1,251,338,429.00 1,251,338,429.00 shareholders 2.其他权益工具持有者投入资本 Capital contributed by the holders of other equity instruments 2.股份支付计入所有者权益的金额 Amounts of share-based payments recognized in owners' equity 3.其他 Others 2,356,589.48 55,575,187.89 57,931,777.37 (三)利润分配 Profit distribution 1.提取盈余公积 Withdrawal of surplus reserves 2.提取一般风险准备 Withdrawal of general risk reserves 3.对所有者(或股东)的分配 Profits distributed to owners (or shareholders) 4.其他 Others (四)所有者权益内部结转 Internal carry-forward of owners' -1,251,338,429.00 -1,251,338,429.00 equity 1.资本公积转增资本(或股本) Conversion of capital -1,251,338,429.00 -1,251,338,429.00 reserves into paid-in capital (or share capital) 2.盈余公积转增资本(或股本) Conversion of surplus reserves into paid-in capital (or share capital) 3.盈余公积弥补亏损 Surplus reserves offsetting losses 4.其他 Others (五)专项储备 Special reserves 19,672,926.60 19,672,926.60 1.本期提取 Amount withdrawn in the current period 56,095,547.05 56,095,547.05 2.本期使用 Amount used in the current period 36,422,620.45 36,422,620.45 (六)其他 Others 四、本期期末余额 Balance at the end of the current period 1,698,245,011.00 -1,299,349,701.74 65,687,868.14 84,394,441.23 1,228,970,498.86 52,534,755.10 1,830,482,872.60 后附财务报表附注为财务报表的组成部分。The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 9 神州长城股份有限公司 Sino Great Wall Co., Ltd. 合并所有者权益变动表(续) Consolidated Statement of Changes in Owners' Equity (Continued) 2016年度 Year of 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 上期发生额 Year 2015 归属于母公司所有者权益 Equity attributable to owners of the parent company 项 目 Item 其他权益工具 Other equity instruments 其他综合收益 少数股东权益 所有者权益合计 Total 实收资本(或股本) 减:库存股 一般风险准 资本公积 Capital Other 专项储备 Special 盈余公积 Surplus 未分配利润 Minority equity owners' equity Paid-in capital (or 优先股 永续债 Perpetual Less: Treasury 备 General 其他 Others reserves comprehensive reserves reserves Undistributed profits share capital) Preferred stock debts stock risk reserves income 一、上年年末余额 Balance at the end of the last year 70,136,099.00 176,467,549.00 -85.60 21,813,200.10 49,347,406.23 443,707,019.71 761,471,188.44 加:会计政策变更 Plus: Adjustments for changes in accounting policies 前期差错更正 Correction of accounting errors in prior periods 同一控制下企业合并 Business combination under common control 其他 Others 二、本年年初余额 Balance at the beginning of the year 70,136,099.00 176,467,549.00 -85.60 21,813,200.10 49,347,406.23 443,707,019.71 761,471,188.44 三、本期增减变动金额(减少以“-”号填列) Increases/decreases in the current 376,770,483.00 -226,835,411.22 85.60 24,201,741.44 35,047,035.00 311,601,616.48 -1,713,075.19 519,072,475.11 period (“-” for decreases) (一)综合收益总额 Total comprehensive income 85.60 346,648,651.48 -545,510.80 346,103,226.28 (二)所有者投入和减少资本 Capital contributed or reduced by owners 25,914,633.00 226,661,441.01 252,576,074.01 1.股东投入的普通股 Common shares contributed by shareholders 25,914,633.00 217,585,355.72 243,499,988.72 2.其他权益工具持有者投入资本 Capital contributed by the holders of other equity instruments 2.股份支付计入所有者权益的金额 Amounts of share-based payments recognized in owners' equity 3.其他 Others 9,076,085.29 9,076,085.29 (三)利润分配 Profit distribution 35,047,035.00 -35,047,035.00 -1,167,564.39 -1,167,564.39 1.提取盈余公积 Withdrawal of surplus reserves 35,047,035.00 -35,047,035.00 2.提取一般风险准备 Withdrawal of general risk reserves 3.对所有者(或股东)的分配 Profits distributed to owners (or shareholders) 4.其他 Others -1,167,564.39 -1,167,564.39 (四)所有者权益内部结转 Internal carry-forward of owners' equity 1.资本公积转增资本(或股本) Conversion of capital reserves into paid-in capital (or share capital) 2.盈余公积转增资本(或股本) Conversion of surplus reserves into paid-in capital (or share capital) 3.盈余公积弥补亏损 Surplus reserves offsetting losses 4.其他 Others (五)专项储备 Special reserves 24,201,741.44 24,201,741.44 1.本期提取 Amount withdrawn in the current period 34,558,557.84 34,558,557.84 2.本期使用 Amount used in the current period -10,356,816.40 -10,356,816.40 (六)其他 Others 350,855,850.00 -453,496,852.23 -102,641,002.23 四、本期期末余额 Balance at the end of the current period 446,906,582.00 -50,367,862.22 46,014,941.54 84,394,441.23 755,308,636.19 -1,713,075.19 1,280,543,663.55 后附财务报表附注为财务报表的组成部分。The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 10 神州长城股份有限公司 Sino Great Wall Co., Ltd. 所有者权益变动表 Statement of Changes in Owners' Equity 2016年度 Year of 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 本期发生额 Year 2016 其他权益工具 Other equity instruments 项 目 Item 减:库存股 实收资本(或股本)Paid- 资本公积 Capital 其他综合收益 Other 专项储备 盈余公积 Surplus 未分配利润 所有者权益合计 Total Less: Treasury in capital (or share capital) 优先股 Preferred 永续债 Perpetual 其他 reserves comprehensive income Special reserves reserves Undistributed profits owners' equity stock debts Others stock 一、上年年末余额 Balance at the end of the last year 446,906,582.00 2,489,294,901.37 26,309,287.00 257,161,771.72 3,219,672,542.09 加:会计政策变更 Plus: Adjustments for changes in accounting policies 前期差错更正 Correction of accounting errors in prior periods 其他 Others 二、本年年初余额 Balance at the beginning of the year 446,906,582.00 2,489,294,901.37 26,309,287.00 257,161,771.72 3,219,672,542.09 三、本期增减变动金额(减少以“-”号填列) Increases/decreases in the 1,251,338,429.00 -1,251,338,429.00 -14,808,137.17 -14,808,137.17 current period (“-” for decreases) (一)综合收益总额 Total comprehensive income -14,808,137.17 -14,808,137.17 (二)所有者投入和减少资本 Capital contributed or reduced by 1,251,338,429.00 1,251,338,429.00 owners 1.股东投入的普通股 Common shares contributed by shareholders 1,251,338,429.00 1,251,338,429.00 2.其他权益工具持有者投入资本 Capital contributed by the holders of other equity instruments 3.股份支付计入所有者权益的金额 Amounts of share-based payments recognized in owners' equity 4.其他 Others (三)利润分配 Profit distribution 1.提取盈余公积 Withdrawal of surplus reserves 2.对所有者(或股东)的分配 Profits distributed to owners (or shareholders) 3.其他 Others (四)所有者权益内部结转 Internal carry-forward of owners' equity -1,251,338,429.00 -1,251,338,429.00 1.资本公积转增资本(或股本) Conversion of capital reserves into -1,251,338,429.00 -1,251,338,429.00 paid-in capital (or share capital) 2.盈余公积转增资本(或股本) Conversion of surplus reserves into paid-in capital (or share capital) 3.盈余公积弥补亏损 Surplus reserves offsetting losses 4.其他 Others (五)专项储备 Special reserves 1.本期提取 Amount withdrawn in the current period 2.本期使用 Amount used in the current period (六)其他 Others 四、本期期末余额 Balance at the end of the current period 1,698,245,011.00 1,237,956,472.37 26,309,287.00 242,353,634.55 3,204,864,404.92 后附财务报表附注为财务报表的组成部分。The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 11 神州长城股份有限公司 Sino Great Wall Co., Ltd. 所有者权益变动表(续) Statement of Changes in Owners' Equity (Continued) 2016年度 Year of 2016 (除特别注明外,金额单位均为人民币元) (Monetary units are expressed in RMB unless otherwise stated) 上期发生额 Year 2015 其他权益工具 Other equity instruments 项 目 Item 实收资本(或股本) 减:库存股 资本公积 Capital 其他综合收益 Other 专项储备 盈余公积 Surplus 未分配利润 所有者权益合计 Total Paid-in capital (or share 优先股 Preferred 永续债 Perpetual Less: Treasury 其他 Others reserves comprehensive income Special reserves reserves Undistributed profits owners' equity capital) stock debts stock 一、上年年末余额 Balance at the end of the last year 169,142,356.00 31,606,598.00 -4,398,234.00 26,309,287.00 -96,164,557.00 126,495,450.00 加:会计政策变更 Plus: Adjustments for changes in accounting policies 前期差错更正 Correction of accounting errors in prior periods 其他 Others 二、本年年初余额 Balance at the beginning of the year 169,142,356.00 31,606,598.00 -4,398,234.00 26,309,287.00 -96,164,557.00 126,495,450.00 三、本期增减变动金额(减少以“-”号填列) Increases/decreases in the current 277,764,226.00 2,457,688,303.37 4,398,234.00 353,326,328.72 3,093,177,092.09 period (“-” for decreases) (一)综合收益总额 Total comprehensive income 4,398,234.00 353,326,328.72 357,724,562.72 (二)所有者投入和减少资本 Capital contributed or reduced by owners 277,764,226.00 2,457,688,303.37 2,735,452,529.37 1.股东投入的普通股 Common shares contributed by shareholders 277,764,226.00 2,443,935,757.84 2,721,699,983.84 2.其他权益工具持有者投入资本 Capital contributed by the holders of other equity instruments 3.股份支付计入所有者权益的金额 Amounts of share-based payments recognized in owners' equity 4.其他 Others 13,752,545.53 13,752,545.53 (三)利润分配 Profit distribution 1.提取盈余公积 Withdrawal of surplus reserves 2.对所有者(或股东)的分配 Profits distributed to owners (or shareholders) 3.其他 Others (四)所有者权益内部结转 Internal carry-forward of owners' equity 1.资本公积转增资本(或股本) Conversion of capital reserves into paid-in capital (or share capital) 2.盈余公积转增资本(或股本) Conversion of surplus reserves into paid-in capital (or share capital) 3.盈余公积弥补亏损 Surplus reserves offsetting losses 4.其他 Others (五)专项储备 Special reserves 1.本期提取 Amount withdrawn in the current period 2.本期使用 Amount used in the current period (六)其他 Others 四、本期期末余额 Balance at the end of the current period 446,906,582.00 2,489,294,901.37 26,309,287.00 257,161,771.72 3,219,672,542.09 后附财务报表附注为财务报表的组成部分。The accompanying notes to the financial statements are integral parts of the financial statements. 企业法定代表人: Legal Representative of Enterprise: 主管会计工作负责人: Accounting Principal: 会计机构负责人: Head of the Accounting Department: Financial statements Page 12 SINO GREAT WALL CO., LTD. AUDITORS' REPORT AND FINANCIAL STATEMENTS (FOR THE YEAR ENDED DECEMBER 31, 2016) Contents Page 1. Auditors' Report 1-2 2. Financial Statements Consolidated Balance Sheet and the Company's Balance Sheet 1-4 Consolidated Income Statement and the Company's Income 5-6 Statement Consolidated Statement of Cash Flows and the Company's Statement 7-8 of Cash Flows Consolidated Statement of Changes in Owners' Equity and the 9-12 Company's Statement of Changes in Owners' Equity Notes to the Financial Statements 1-70 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 (Amounts are expressed in RMB unless otherwise stated) 1. Company profile 1.1 Company overview Sino Great Wall Co., Ltd. (hereinafter referred to as the "Company" or "Sino Great Wall") is formerly known as Shenzhen Victor Onward Textile Industrial Company Limited which is formerly known as Xinnan Printing and Dyeing Factory Co., Ltd. Established in 1980, Xinnan Printing and Dyeing Factory Co., Ltd. is the first wholly foreign-owned enterprise in Shenzhen. In April 1984, the Xinnan Printing and Dyeing Factory Co., Ltd. was changed into a foreign joint venture and was renamed Shenzhen Victor Onward Printing and Dyeing Co., Ltd. On November 19, 1991, approved by the Government of Shenzhen City, Shenzhen Victor Onward Printing and Dyeing Co., Ltd. was restructured into a joint stock limited company and was renamed Shenzhen Victor Onward Textile Industrial Company Limited. Domestic listed RMB ordinary shares ("A" shares; stock code: 000018) and overseas-listed foreign investment shares ("B" shares; stock code: 200018) issued by the Company were listed for trading on the Shenzhen Stock Exchange in 1992. On July 23, 2015, approved by the China Securities Regulatory Commission under the Official Reply to Approving Shenzhen Victor Onward Textile Industrial Company Limited to Make Major Assets Restructuring and Issue Shares to Chen Lve and Other Shareholders to Purchase Assets and Raise Supporting Funds (Z.J.X.K. [2015] No.1774), the Company issued 251,849,593 shares to Chen Lve and other 16 shareholders to purchase 100% of equities of Sino Great Wall International Engineering Co., Ltd. held by them and issued to them 25,914,633 non-public offering shares, which raised funds of RMB 254,999,988.72. As at September 24, 2015, equities of the listed company were changed to be registered in the name of the Company. Both parties fully completed the transfer of equities and the relevant formalities of industrial and commercial registration of changes, so the Company already owned 100% of equities in the listed company. Meanwhile, according to the Confirmation on Delivery of Exchange-Out Assets and as at the date of delivery (namely July 31, 2015), all assets and liabilities of the Company had been exchanged out. On September 24, 2015, Shenzhen Branch of the China Securities Depository and Clearing Corporation Limited had completed the relevant securities registration formalities for the above new shares. On July 29, 2015, the listed company received the new registered capital of RMB 251,849,593 paid by all the shareholders of Sino Great Wall. Ruihua Certified Public Accountants issued the Verification Report (R.H.Y.Z. [2015] No.48250011) on July 30, 2015. Registered capital after the change was RMB 420,991,949 and share capital RMB 420,991,949. On December 4, 2015, Shenzhen Victor Onward Textile Industrial Company Limited was renamed Sino Great Wall Co., Ltd. At the Company's general meeting of shareholders held on May 6, 2016, the 2015 Plan of Conversion of Capital Reserves into Share Capital was adopted. The detailed plan was: to increase capital reserves to all the shareholders with 28 shares for 10 shares based on 446,906,582 shares in total as at December 31, 2015 and to increase 1,251,338,429 shares in total. After the increase, total share capital of the Company was increased to 1,698,245,011 shares. As at December 31, 2016, total share capital of the Company was 1,698,245,011 shares, in which there were 1,434,441,780 circulating A shares and 263,803,231 circulating B shares. Chen Lve who holds 582,944,556 A shares, accounting for 34.33% of the total share capital, is the Company's controlling shareholder and actual controller. Notes to the Financial Statements Page 1 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Registered address of the Company: No.26 Kuipeng Road, Baishi Gang, Kuichong Street, Dapeng New District, Shenzhen. Legal representative: Chen Lve. The Company falls under textile printing and dyeing industry. The Company mainly engages in dyeing and printing production, processing and sales of all kinds of pure cotton, pure linen, polyester cotton, ramie cotton, high-grade blended fabrics and finished garments. The financial statements have been approved by the Board of Directors on April 26, 2017. 1.2 Scope of the consolidated financial statements As at December 31, 2016, subsidiaries within the scope of the consolidated financial statements of the Company are as follows: Name of subsidiaries Sino Great Wall International Engineering Co., Ltd. Beijing Sino Great Wall Decoration Design Co., Ltd. Suzhou Lvbang Wood Technology Co., Ltd. Herabenna Interior Design Guangzhou Co., Ltd. Sino Great Wall Group Co., Limited Shanghai Ling Rui International Trade Company Limited Shenzhen Hongtulve Industrial Co., Ltd. Inrich Me Engineering Co., Limited Sino Great Wall New Energy (Beijing) Co., Ltd. SINO GREAT WALL (PHILIPPINES) INTERNATIONAL CORPORITION SGW HP Engineering Construction SDN.BHD SINO GREAT WALL (USA). INC Shenzhen Yatian Decoration Design Engineering Co., Ltd. Sino Great Wall International Engineering (MACAU) Co., Limited SINO GREAT WALL INTERNETIONAL ENGINEERING (CNMI) CO., LLC Sino Great Wall (Beijing) Investment Fund Management Co., Ltd. Sino Great Wall Real estate (Hubei) Co., Ltd. Sino Great Wall Development (Hengqin) Co., Ltd. PT.SINO GREAT WALL INVESTMENT INDONESIA PT.SINO GREAT WALL CONSTRUCTION INDONESIA SINO GREAT WALL INTERNETIONAL ENGINEERING(MM)CO.,LTD Sino Great Wall Southwest Construction Engineering Co., Ltd. Sino Great Wall Jianyee Engineering Co., Ltd. Wuhan Commercial Workers Hospital Co., Ltd. See “Note 6. Changes in scope of consolidation” and “Note 7. Rights and interests in other entities” for details of the scope of consolidated financial statements in the current year and the changes thereof. 2. Preparation basis for financial statements 2.1 Preparation basis The Company prepares the financial statements based on going concern, according to the transactions and events actually occurred and in accordance with the Accounting Standards for Business Enterprises - Basic Standards and various specific accounting standards, application guidance to and interpretations for the Accounting Standards for Business Enterprises and other relevant provisions (hereinafter collectively referred to as the "Accounting Standards for Business Enterprises") promulgated by the Ministry of Finance and disclosure provisions of the Rules for the Information Disclosure and Compilation of Companies Publicly Issuing Securities No. 15 - General Rules on Financial Reports promulgated by the China Securities Regulatory Commission. Notes to the Financial Statements Page 2 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 2.2 Going concern The Company will have going-concern abilities within 12 months as of the end of the reporting period and have no significant events that will affect the going-concern abilities. 3. Significant accounting policies and accounting estimates 3.1 Statement on compliance with Accounting Standards for Business Enterprises The financial statements prepared by the Company meet the requirements of the Accounting Standards for Business Enterprises and truly and completely reflect the Company’s financial position, operating results, cash flows and other related information in the reporting period. 3.2 Accounting period The accounting year is from January 1 to December 31 in calendar year. 3.3 Operating cycle The Company's operating cycle is 12 months. 3.4 Functional currency RMB is the functional currency of the Company and its domestic subsidiaries due to that it is the currency in the main economic environment in which the Company and its domestic subsidiaries located. Currency of the Company in preparing its financial statements is RMB. 3.5 Accounting treatment methods of business combinations under common control and not under common control Business combination under common control: The assets and liabilities acquired by the Company in business combinations are measured at the book value of assets and liabilities of the combinee (including the goodwill arising from the acquisition of the combinee by the ultimate controller) in the consolidated financial statements of the ultimate controller on the combination date. The stock premium in the capital reserves should be adjusted at the difference between the book value of the net assets acquired in combinations and that of consideration paid for the combination (or total par value of shares issued). If the stock premium in the capital reserves is insufficient to cover the differences, the retained earnings should be adjusted. Business combination not under common control: The Company shall, on the acquisition date, measure the assets surrendered and liabilities incurred or assumed by the Company for a business combination at their fair values. The Company shall recognize the difference of the combination costs in excess of the fair value of the identifiable net assets acquired from the acquiree as goodwill. The Company shall recognize the difference of the combination costs in short of the fair value of the identifiable net assets acquired from the acquiree in the current profit or loss after review. The auditing, legal services, consulting and other intermediary fees and other related administrative expenses for business combination will be included into current profit and loss upon occurrence; the transaction costs for the issuance of equity securities shall set off equities. 3.6 Preparation method of consolidated financial statements 3.6.1 Scope of consolidation The scope of consolidation of the consolidated financial statements of the Company is recognized based on the control and all subsidiaries (including the divisible part of the investee controlled by the Company) shall be included in the consolidated financial statements. Notes to the Financial Statements Page 3 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 3.6.2 Procedures of consolidation The Company prepares the consolidated financial statements based on its own financial statements and those of its subsidiaries, and other relevant information. When preparing the consolidated financial statements, the Company treats the enterprise group as a whole accounting entity, to reflect the overall financial position, operating results and cash flows in accordance with relevant recognition, measurement and presentation requirements of Accounting Standards for Business Enterprises and the uniform accounting policies. The accounting policies and accounting period adopted by subsidiaries included in the consolidation scope of the consolidated financial statements shall be the same as those of the Company; if inconsistent, necessary adjustments shall be made according to the Company's accounting policies and accounting period in the preparation of the consolidated financial statements. For the subsidiaries acquired through business combinations not under common control, adjustments to their financial statements shall be made based on the fair values of net identifiable assets on the acquisition date. For subsidiaries acquired through business combination under common control, adjustments will be made to their financial statements based on the book value of their assets and liabilities (including the goodwill formed from the ultimate controller's acquisition of the subsidiaries) in the financial statements of the ultimate controller. The share of owner's equity, net profits and losses in the current year and comprehensive income in the current year of subsidiaries attributable to minority shareholders should be separately presented under the item "owner's equity" in the consolidated balance sheet, the item "net profit" and the item "total comprehensive income" in the consolidated income statement. The difference of the loss in the current year shared by minority shareholders of the subsidiaries in excess of the share of minority shareholders in the owner's equity at the beginning of the year of the subsidiaries should be used to offset the minority equity. (1) Increase in subsidiaries or business During the reporting period, if the Company increases subsidiaries or business due to business combination under common control, it shall adjust the beginning amount of the consolidated balance sheet; include revenues, expenses and profits of the subsidiaries or business from the beginning of the current combination period to the end of the reporting period in the consolidated income statement; include cash flows of the subsidiaries or from the business from the beginning of the current combination period to the end of the reporting period in the consolidated cash flow statement; at the same time adjust the relevant items of the comparative statements to the extent that the reporting entity after combination has been always existed since the start of control by the ultimate controller. Where control can be exercised on the investee under the common control for additional investment or other reasons, it deems that all parties involved in combination make adjustment based on the current status when the ultimate controller starts its control. Equity investments held before the control over the combinee is obtained, the related gains and losses, other comprehensive income as well as other changes in net assets recognized from the later of the date when the original equity is obtained or the date when the combining party and the combined party are under the same control, to the combination date will respectively write down the retained earnings or current profit and loss in the comparative statements. Notes to the Financial Statements Page 4 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 During the reporting period, if the Group acquired subsidiaries or business from the business combination not under common control, the beginning balance in the consolidated balance sheet will not be adjusted. The incomes, expenses and profits of the newly acquired subsidiaries or business from the acquisition date to the end of the reporting period shall be included in the consolidated income statement. The cash flows of the newly acquired subsidiaries or business from the acquisition date to the end of the reporting period shall be included in the consolidated statement of cash flows. Where the Company can implement control over an investee not under common control due to additional investment or other reasons, the equity held by the combinee before the purchase date is re-measured at the fair value on the purchase date of the equity, and the difference between the fair value and the book value shall be included in the current investment income. In the event that the equity of the acquiree held prior to the acquisition date involves other comprehensive income under the equity method and other changes in owners' equity than net profit and loss, other comprehensive income and profit distribution, other comprehensive income and other changes in the owner's equity associated therewith are transferred to investment income of the period to which the acquisition date belongs, except for other comprehensive income arising from changes in net liabilities or net assets due to the investee's re-measurement of defined benefits plan. (2) Disposal of subsidiaries or business A. General method of disposal During the reporting period, if the Company disposes subsidiaries or business, the incomes, expenses and profits from the subsidiaries or business from the beginning of the year to the disposal date shall be included in the consolidated income statement; cash flows of the subsidiaries and business from the beginning of the year to the disposal date shall be included in the consolidated statement of cash flows. When the Company loses the control over the investee due to disposal of partial equity investment or other reasons, the remaining equity investment after the disposal will be re-measured by the Company at its fair value on the date of loss of the control. The difference of total amount of the consideration from disposal of equities plus the fair value of the remaining equities less the shares calculated at the original shareholding ratio in net assets and goodwill of the original subsidiary which are continuously calculated as of the acquisition date or combination date is included in the investment income of the period at the loss of control. Other comprehensive incomes associated with the equity investments of the original subsidiary, or the changes in owners' equity other than net profit or loss, other comprehensive income and profit distribution, are transferred into investment income of the period when control is lost, except for other comprehensive income from the change in net liability or net asset due to the investor's re-measurement of designated benefit plan. B Disposal of subsidiaries by stages Where the Company disposes the equity investments in subsidiary through multiple transactions and by stages until it loses the control, if the effect of the disposal on the terms and conditions as well as economic effect of all transactions of equity investments in subsidiaries meet one or more of the following circumstance, it usually indicates that the multiple transactions should be accounted for as a package deal: Notes to the Financial Statements Page 5 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 i. the transactions are concluded at the same time or under the consideration of mutual effect; ii. the transactions as a whole can reach a complete business result; iii. the occurrence of a transaction depends on that of at least one other transactions; and/or iv. a single transaction is uneconomical but it is economical when considered together with other transactions. Where various transactions of disposal of equity investments in subsidiaries until loss of the control belong to a package deal, accounting treatment shall be made by the Company on the transactions as a transaction to dispose subsidiaries and lose the control; however, the difference between each disposal cost and net asset share in the subsidiaries corresponding to each disposal of investments before loss of the control should be recognized as other comprehensive income in the consolidated financial statements and should be transferred into the current profit or loss at the loss of the control. Where various transactions of disposal of equity investments in subsidiaries until loss of the control do not belong to a package deal, before the loss of the control, accounting treatment shall be made according to the relevant policies for partial disposal of equity investments in the subsidiary without losing control; at the loss of the control, accounting treatment shall be made according to general treatment methods for disposal of subsidiaries. (3) Purchase of minority equity of subsidiaries The difference between long-term equity investments acquired by the Company through purchase of minority interest and the subsidiary’s identifiable net assets attributable to the Company calculated continuously from the acquisition date (or the combination date) in accordance with the increased shareholding ratio shall be charged against stock premium within capital reserves in the consolidated balance sheet; when stock premium within capital reserves is insufficient to offset, the retained earnings shall be adjusted. (4) Partial disposal of equity investments in subsidiaries without loss of control The difference between the proceeds from partial disposal of equity investments in the subsidiary and the share of identifiable net assets of the subsidiary attributable to the Company which are calculated continuously from the acquisition date (or the combination date) and which are corresponding to the disposal of long-term equity investments without losing control shall be charged against stock premium within capital reserves in the consolidated balance sheet; when stock premium within capital reserves is insufficient to offset, the retained earnings shall be adjusted. 3.7 Recognition criteria of cash and cash equivalents For the purpose of preparing the statement of cash flows, the term “cash” refers to the cash on hand and the unrestricted deposit of the Company. The term “cash equivalents” refers to short-term (maturing within three months from acquisition) and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Notes to the Financial Statements Page 6 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 3.8 Foreign currency transactions and translation of foreign currency statements 3.8.1 Foreign currency transactions Foreign currency transactions are translated into functional currency at the approximate rate of spot exchange rate on the day when the transactions occur. The balance of foreign currency monetary items as at the balance sheet date are translated at the spot exchange rate on the balance sheet date and the exchange differences arising therefrom shall be included in the current profit or loss, except those exchange differences arising from the special borrowings of foreign currency related to the acquired and constructed assets qualified for capitalization that will be capitalized at the borrowing expenses. 3.8.2 Translation of foreign currency financial statements Assets and liabilities in the balance sheet shall be translated at the spot exchange rates on the balance sheet date; for owners' equity items, except for the item of "retained earnings", other items are translated at the spot exchange rates prevailing on the date when the transactions occur. The income and expenses items in income statements are translated at the approximate rate of spot exchange rate prevailing on the date when transactions occur. Where the Company disposes of an overseas business, it shall transfer the exchange difference relating to the overseas business to the current profit and loss. 3.9 Financial instruments Financial instruments include financial assets, financial liabilities and equity instruments. 3.9.1 Classification of financial instruments Upon initial recognition, financial assets and financial liabilities are classified into: financial assets or financial liabilities measured at fair value through current profit or loss, including financial assets or financial liabilities held for trading (and financial assets or financial liabilities directly designated to be measured at fair value through current profit and loss); held-to-maturity investments; receivables; available-for-sale financial assets; and other financial liabilities, etc. 3.9.2 Recognition basis and measurement method of financial instruments (1) Financial assets or financial liabilities measured at fair value through current profit and loss are initially recorded at fair values when acquired (deducting cash dividends that have been declared but not distributed and bond interest that has matured but not been drawn). Relevant transaction expenses are included in the current profit and loss. The interests or cash dividends to be received during the holding period are recognized as investment income. Change in fair values is included in the current profit and loss at the end of the period. Upon disposal, the difference between the fair value and initial book-entry value is recognized as investment income, while the gains or losses from changes in fair value will be adjusted. (2) Held-to-maturity investments Held-to-maturity investments are initially recognized at the sum of the fair value (bond interest due but not yet received) and related transaction costs upon acquisition. The interest income will be calculated and determined according to the amortized cost and effective interest rate during the holding period and included in investment income. The effective interest rate is determined upon acquisition and will remain unchanged during the expected renewal period, or a shorter period if applicable. Notes to the Financial Statements Page 7 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Upon disposal, the difference between the purchase price obtained and the book value of the investment is recognized in investment income. (3) Receivables For creditor’s rights receivable arising from external sales of goods or rendering of service by the Company and other creditor's rights of other enterprises (excluding liability instruments quoted in an active market) held by the Company, including accounts receivable and other receivables, the initial recognition amount shall be the contract price or agreement price receivable from purchasing party; for those with financing nature, they are initially recognized at their present values. Upon recovery or disposal, the difference between the purchase price obtained and the book value of the receivables is recognized in current profit and loss. (4) Available-for-sale financial assets Available-for-sale financial assets are initially recorded at the sum of fair values (deducting cash dividends that have been declared but not distributed and bond interests that have matured but not been drawn) and transaction costs upon acquisition. The interests or cash dividends to be obtained during the holding period are recognized as investment income. The interest or cash dividends is measured at fair value and changes in fair value is included in other comprehensive income. However, for an equity instrument investment that has no quoted price in an active market and whose fair value cannot be reliably measured, and for derivative financial asset linked to the said equity instrument and settled by delivery of the same equity instrument, they are measured at cost. Difference between the proceeds and the book value of the financial assets is recognized as investment profit or loss upon disposal; meanwhile, amount of disposal corresponding to the accumulated change in fair value which is originally and directly included in other comprehensive income shall be transferred out and recognized as investment income. (5) Other financial liabilities They are initially recognized at the sum of the fair value and the associated transaction costs. The subsequent measurement is based on amortized costs. 3.9.3 Recognition and measurement of financial assets transfer When a financial assets transfer occurs, the financial assets will be derecognized when substantially all the risks and rewards on the ownership of the financial assets have been transferred to the transferee; and they will not be derecognized if substantially all the risks and rewards on the ownership of the financial assets have been retained. The principle of substance over form is adopted to determine whether a financial asset meets the above de-recognition conditions for the financial asset. The Company divides the transfer of financial assets into overall transfer and partial transfer. Where the entire transfer of the financial asset meets the de-recognition conditions, the difference of the following two amounts will be included in current profit and loss: (1) the book value of the transferred financial asset; (2) the sum of the consideration received from the transfer and the accumulated amount of the changes in fair value originally and directly included in owners’ equity (the situation where the financial asset transferred is an available-for-sale financial asset is involved). Notes to the Financial Statements Page 8 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 If the partial transfer of the financial assets meets the de-recognition condition, the entire book value of the transferred financial asset shall be split into the derecognized and recognized part according to their respective fair value and the difference between the amounts of the following two items shall be included in the current profit or loss: (1) the book value of the derecognized part; (2) the sum of the consideration for the derecognized part and the portion of de-recognition corresponding to the accumulated amount of the changes in fair value originally and directly included in owners’ equity (the situation where the financial asset transferred is an available-for-sale financial asset is involved). If the transfer of financial assets does not meet the de-recognition condition, the financial assets shall continue to be recognized, and the consideration received will be recognized as a financial liability. 3.9.4 De-recognition conditions of financial liabilities The whole or partial financial liabilities, which present obligations have been wholly or partially discharged, shall be de-recognized; if the Company signs an agreement with the creditor to replace the existing financial liabilities by way of assuming the new financial liabilities which contract terms are different with those of the existing financial liabilities, then the existing financial liabilities shall be derecognized and the new financial liabilities shall be recognized. Where substantive changes are made to the contract terms of existing financial liability in whole or in part, the existing financial liabilities or part thereof will be derecognized, and the financial liability the terms of which have been modified will be recognized as a new financial liability. When financial liabilities are derecognized in whole or in part, the difference between the book value of the financial liabilities derecognized and the consideration paid (including non-cash assets transferred out or new financial liabilities borne) will be included into current profit or loss. When the Company buys back part of financial liabilities, it will allocate the entire book value of the said financial liabilities on the repurchase date in accordance with the relative fair value of the recognized part and the terminated part. The difference between the book value of the derecognized part and the consideration paid (including non-cash assets surrendered or new financial liabilities assumed) shall be included in the current profit or loss. 3.9.5 Determination method for the fair value of financial assets and financial liabilities The fair value of a financial instrument having an active market is determined on the basis of quoted price in the active market. The fair value of a financial instrument, for which there is no active market, is determined by using valuation techniques. For valuating, the Company chooses input values which characteristics are consistent with those of assets or liabilities considered by market participants in the course of transactions of relevant assets or liabilities by using the valuation technique that is applicable in the present situation and has sufficient available data and other information supporting, and applies relevant observable input values in priority. Unobservable input values are used only when relevant observable input values cannot be available or such values obtained are infeasible. Notes to the Financial Statements Page 9 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 3.9.6 Test method and accounting treatment of depreciation of financial assets (excluding receivables) Except for the financial assets measured at fair values through current profit or loss, the Company will check the book value of financial assets on the balance sheet date. If there is objective evidence indicating that a financial asset is impaired, provision for impairment will be made. (1) Provision for impairment of available-for-sale financial assets: If the fair value of available-for-sale financial assets has significantly declined at the end of the period, or it is expected that the trend of decrease in value is non-temporary after considering of various relevant factors, the impairment shall be recognized, and accumulated losses from decreases in fair value originally and directly included in owners' equity shall be all transferred out and recognized as impairment loss. For available-for-sale debt instruments whose impairment losses have been recognized, if their fair values rise in the subsequent accounting period and such rise is objectively related to the events occurring after the recognition of impairment loss, the previously recognized impairment loss shall be reversed and recorded into the current profit or loss. Impairment losses on available-for-sale equity instruments should not be reversed through profit and loss. (2) Provision for impairment of held-to-maturity investments: Measurement of provision for impairment loss on held-to-maturity investments is treated with reference to the measurement method of impairment loss on receivables. 3.10 Provision for bad debts of accounts receivable 3.10.1 Receivables that are individually significant but with provision for bad debts made on an individual basis: Judgment basis or amount standards for individually significant amount: The Company recognizes account receivables that are individually significant (more than or equal to RMB 10 million) and other receivables of a single current entities (more than or equal to RMB 2 million) as individually significant receivables. Provision method for receivables with individually significant amount and subject to individual provision for bad debts: On the balance sheet date, the Company separately conducts an impairment test on accounts receivable that are individually significant. Where they are impaired after such test, the impairment loss is recognized at the difference between the present value of its future cash flows lower than the book value and the provision for bad debts shall be made; accounts receivable that are not impaired after the separate test, together with accounts receivable that are individually insignificant, are divided into several portfolios according to similar credit risk features. The impairment loss is calculated and recognized at a certain percentage of these portfolios of accounts receivable in the balance on the balance sheet date and the provision for bad debts shall be made. 3.10.2 Provision for bad debts of accounts receivable made on credit risk characteristics portfolio basis: (1) Basis of determination for credit risk characteristics portfolio: The Company divides receivables that are individually insignificant and receivables that are individually significant but that fail to be impaired after a separate test into groups according to the similarity and correlation of credit risk Notes to the Financial Statements Page 10 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 characteristics. The provision for bad debts is made based on a certain percentage of the balance of the portfolio of such receivables. The provision for bad debts for the current period is calculated based on the actual loss ratio of the receivables identical or similar thereto in the previous year, in combination with the proportion of the provision for bad debts in relation to each portfolio in the current year determined on the basis of practical situation. (2) Method of bad-debt provision made in terms of the credit risk features portfolio Methods of provision for bad debts made on credit risk characteristics portfolio basis Aging portfolio Aging analysis method Portfolio of related parties within the scope of consolidation No provision for bad debts For those subject to provision for bad debts under aging analysis method: Proportion of provision Proportion of provision Aging for receivables for other receivables (%) (%) Within 1 year 5 5 1-2 years 10 10 2-3 years 30 30 3-4 years 50 50 4-5 years 80 80 Over 5 years 100 100 3.10.3 Receivables that are individually insignificant but with provision for bad debts made on an individual basis: Reasons for individual provision of bad debts On the balance sheet date, the Company recognizes impairment losses and makes provision for bad debts of other individually significant receivables with signs of impairment at the differences of the present values of their future cash flows in short of their book values. Method of provision for bad debts On the balance sheet date, the Company separately conducts an impairment test on accounts receivable that are individually insignificant but are provided for bad debts on individual basis. Where they are impaired after such test, the impairment losses are recognized at the difference between the present value of future cash flows lower than the book value and the provision for bad debts shall be accordingly made. 3.11 Inventories 3.11.1 Classification of inventories Inventories are classified into: raw materials, project construction, inventory goods, in products, low-value consumption goods, etc. 3.11.2 Valuation method of inventories dispatched The inventories are measured at weighted average method when dispatched. 3.11.3 Recognition basis for net realizable values of inventories of different categories In normal operation process, for merchandise inventories held directly for sale, including finished goods, stock commodities and materials for sale, their net realizable values are determined at the estimated selling prices minus the estimated selling expenses and relevant taxes and surcharges; in normal operation process, for material Notes to the Financial Statements Page 11 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 inventories that need further processing, their net realizable values are determined at the estimated selling prices of finished goods minus estimated costs to completion, estimated selling expenses and relevant taxes and surcharges; for inventories held to execute sales contract or service contract, their net realizable values are calculated on the basis of contract price. If the quantities of inventories specified in sales contracts are less than the quantities held by the Company, the net realizable value of the excess portion of inventories shall be based on general selling prices. The provisions for inventory depreciation reserve are made on an individual basis at the end of the period, for inventories with large quantities and relatively low unit prices, the provisions for inventory depreciation reserve are made on a category basis. For inventories related to the product portfolios manufactured and sold in the same area, and of which the final usage or purpose is identical or similar thereto, and which is difficult to separate from other items for measurement purposes, the provisions for inventory depreciation reserve are made on a portfolio basis. The net realizable values of inventory items are determined based on the market price on the balance sheet date, except for there is obvious evidence showing the market price on the balance sheet date is abnormal. Net realizable value of inventory items at the end of the year is recognized at the market price on the balance sheet date. 3.11.4 Inventory system Perpetual inventory system is adopted. 3.11.5 Amortization methods for low-cost consumables and packaging materials (1) One-off amortization method is adopted for low-cost consumables; (2) One-off amortization method is adopted for packaging materials. 3.12 Assets classified as held for sale The Company recognizes the part (or non-current assets) that meet all the following conditions as assets held for sale: (1) the part must be immediately available to be sold under the current conditions and according to the usual terms on the sale of such part; (2) the Company has made resolutions on disposing of the part (or non-current assets) and has been approved by the general meeting or relevant organs of power if the approval of shareholders is required; (3) the Company has signed an irrevocable transfer agreement with the assignee; (4) the transfer will be completed within one year. 3.13 Long-term equity investments 3.13.1 Determination basis of joint control or significant influence over the investee The term ‘common control’ refers to the joint control, according to the relevant provisions, over an arrangement, of which the relevant activities should be agreed and decided by the participants that share the control. Where the Company exercises joint control over the investee together with other parties to the joint venture and enjoys the right on the investee's net assets, the investee is a joint venture of the Company. Notes to the Financial Statements Page 12 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Significant influence refers to the power to participate in making decisions on the financial and operating policies of an enterprise, but not the power to control, or jointly control, the formulation of such policies with other parties. Where the Company is able to have significant influences on an investee, the investee is its associate. 3.13.2 Determination of initial investment cost (1) A long-term equity investment as a result of business combination Business combination under the common control: if the Company makes payment in cash, transfers non-cash assets or bears debts and issues equity securities as the consideration for the business combination, the book value of the owner's equity of the acquiree in the consolidated financial statements of the ultimate controller is recognized as the initial cost of the long-term equity investment on the combination date. In case the Company can exercise control over the investee under common control for additional investment or other reasons, the initial investment cost of long-term equity investments is recognized at the share of book value of net asset of the acquiree after the combination in the consolidated financial statements of the ultimate controller on the combination date. The stock premium should be adjusted at the difference between the initial investment cost of long-term equity investments on the combination date and the book value of long-term equity investments before the combination plus the book value of consideration paid for additional shares; if there is no sufficient stock premium for write-downs, the retained earnings are adjusted. Business combination not under the common control: The Company recognizes the combination cost determined on the combination date as the initial cost of long-term equity investments. Where the Company can control the investee not under common control from additional investments, the initial investment cost should be changed to be accounted for under the cost method and recognized at the sum of the book value of equity investments originally held and newly increased investment cost. (2) Long-term equity investments obtained by other means For long-term equity investments acquired from making payments in cash, the initial cost is the actually paid purchase cost. For long-term equity investments acquired from issuance of equity securities, the initial investment cost is the fair value of the issued equity securities. If the exchange of non-monetary assets has commercial substance and the fair values of assets traded out and traded in can be measured reliably, the initial cost of long-term equity investment traded in with non-monetary assets are determined based on the fair values of the assets traded out and the relevant taxes and surcharges payable unless there is any conclusive evidence that the fair values of the assets traded in are more reliable; if the exchange of non-monetary assets does not meet the above criteria, the book value of the assets traded out and the relevant taxes and surcharges payable are recognized as the initial cost of long-term equity investment traded in. For long-term equity investment acquired from debt restructuring, the initial cost is determined based on the fair value. Notes to the Financial Statements Page 13 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 3.13.3 Subsequent measurements and the recognition method of profits and losses (1) Long-term equity investments calculated under the cost method Long-term equity investments of the Company in its subsidiaries are calculated under the cost method. Except for the actual price paid for acquisition of investment or the cash dividends or profits contained in the consideration which have been declared but not yet distributed, the Company recognizes the investment income in the current year at the cash dividends or profits declared by the investee. (2) Long-term equity investments calculated under the equity method The Company's long-term equity investments in associates and joint ventures are calculated under the equity method. If the initial cost is more than the share of the fair value of the investee' identifiable net asset to which the Company shall be entitled when investing, the initial cost of the long-term equity investment will not be adjusted. If the initial cost of a long-term equity investment is less than the share of the fair value of the investee's identifiable net asset to which the Company shall be entitled when investing, the difference shall be included in the current profit or loss. The Company shall recognize the investment income and other comprehensive income at the shares of net profit and loss and other comprehensive income realized by the investee which the Company shall enjoy or bear and adjust the book value of long-term equity investments at the same time; the Company shall calculate the shares according to profits or cash dividends declared by the investee and correspondingly reduce the book value of long-term equity investments; the book value of long-term equity investments shall be adjusted according to the investee's other changes in owner's equity other than net profit and loss, other comprehensive income and profit distribution, which should be included in owner's equity. The share of the investee's net profit or loss should be recognized after adjustments are made to net profit of the investee based on the fair value of identifiable net assets of the investee upon acquisition of investments and according to accounting policies and accounting period of the Company. When holding the investment, the investee should prepare the consolidated financial statements, it shall account for the investment income based on the net profit, other comprehensive income and the changes in other owner's equity attributable to the investee. The Company shall write off the part of incomes from internal unrealized transactions between the Company and associates and joint ventures which are attributable to the Company according to the corresponding ratio and recognize the profit and loss on investments on such basis. Where the losses from internal transactions between the Company and the investee fall into the scope of assets impairment loss, the full amount of such losses should be recognized. For transactions on investments or sales of assets between the Company and associates and joint ventures, where such assets constitute business, they should be accounted for according to the relevant policies disclosed in this note "Accounting treatment of business combinations under common control and not under common control" and "Preparation of consolidated financial statements". When the Company recognizes its share of loss incurred to the investee, treatment shall be done in following sequence: firstly, the book value of the long-term equity investment shall be reduced; secondly, where the book value is insufficient to cover the share of losses, investment losses are recognized to the extent of book value of other long-term equity which forms the net investment in Notes to the Financial Statements Page 14 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 the investee in substance and the book value of long term receivables shall be reduced; finally, after all the above treatments, if the Company is still responsible for any additional liability in accordance with the provisions stipulated in the investment contracts or agreements, estimated liabilities are recognized and included into current investment loss according to the obligations estimated to undertake. (3) Disposal of long-term equity investments For disposal of long-term equity investments, the difference between the book value and the actual price shall be included into the current profit or loss. For long-term equity investments calculated under the equity method, when the Company disposes such investments, accounting treatment should be made to the part that is originally included in other comprehensive income according to the corresponding proportion by using the same basis for the investee to directly dispose the relevant assets or liabilities. Owner's equity recognized at the changes in the investee's other owner's equity other than net profit or loss, other comprehensive income and profit distribution shall be transferred to the current profit and loss according to the proportion, except for other comprehensive income from changes arising from re-measurement of net liabilities or net assets of defined benefit plan. In case the joint control or significant influence over the investee is lost for disposing part of equity investments or other reasons, the remaining equity will be changed to be accounted for according to the recognition and measurement principles of financial instruments. The difference between the fair value and the book value on the date of the loss of joint control or significant influence should be included in the current profit and loss. For other comprehensive income recognized from accounting of the original equity investments under the equity method, accounting treatment should be made by using the same basis for the investee to directly dispose the relevant assets or liabilities when the equity method is no longer adopted. Owner's equity recognized from the investee's changes in other owner's equity other than net profit or loss, other comprehensive income and profit distribution should all transferred to the current profit and loss when the equity method confirmed is no longer adopted. In case the control over the investee is lost due to disposal of part of equity investments or other reasons, in the preparation of individual financial statements, the remaining equity after the disposal that can exercise joint control or exert significant influence over the investee shall be accounted for in the equity method, and such remaining equity shall be adjusted as if it had been accounted for in the equity method since the time of acquisition; the remaining equity after disposal that cannot exercise joint control or exert significant influence over the investee shall be subject to account treatment according to the relevant provisions of the recognition and measurement criteria for financial instruments, and the difference between the fair value on the date when the control is lost and the book value shall be included into the current profit and loss. Where equity after the disposal is acquired from business combinations due to additional investments or other reasons, when the Company prepares individual financial statements, if the remaining equity after the disposal is accounted for under the cost method or equity method, other comprehensive income and other owners' equity recognized from equity investments that are held before the acquisition date and are accounted for under the equity method should be carried forward in proportion; if the remaining equity after the disposal is changed to be accounted for according to recognition and measurement standards of financial instruments, other comprehensive income and other owners' equity should be carried forward at full amount. Notes to the Financial Statements Page 15 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 3.14 Investment properties The investment property refers to the real estate held for earning rentals or/and capital appreciation or both, including leased land use right, land use right held for transfer upon appreciation, and leased building (including self-built buildings or buildings developed for renting or buildings under construction or development for future renting). The Company measures its existing investment property at cost. For investment properties measured with the cost model - in terms of buildings for renting, the same depreciation policy as that for fixed assets of the Company is adopted and land use rights for renting are implemented with the same amortization policy as that for intangible assets. 3.15 Fixed assets 3.15.1 Recognition criteria of fixed assets Fixed assets refer to the tangible assets held for the purpose of producing commodities, rendering services, renting or business management with useful lives exceeding one accounting year. Fixed assets are recognized when they simultaneously meet the following conditions: (1) It is probable that the economic benefits relating to the fixed assets will flow into the Company; and (2) The costs of the fixed asset can be measured reliably. 3.15.2 Depreciation method Depreciation of the fixed assets is made on a category basis using the straight-line method and the depreciation rates are determined according to the categories, estimated useful lives and estimated net residual rates of fixed assets. Where various components of fixed assets are different in useful lives or bring economic benefits for the enterprise in different ways, then the Company should choose different depreciation rates or methods to separately provide for depreciation. For fixed assets acquired under financing leases, if there is reasonable assurance that the Company will obtain the ownership of the leased assets when the lease term expires, the leased assets should be depreciated over its useful life; if there is no reasonable assurance that the Company will obtain the ownership of the leased assets when the lease term expires, the leased assets should be depreciated over the shorter of the lease term or the useful life of the leased assets. The depreciation method, depreciation life, residual value rate and annual depreciation rate of fixed assets are as follows: Depreciation Residual value Annual depreciation Category Depreciation method life (year) rate (%) rate (%) Buildings and constructions Straight-line method 20 5.00 4.75 Machinery equipment Straight-line method 10 5.00 9.50 Transportation equipment Straight-line method 7 5.00 13.57 Electronic equipment and other equipment Straight-line method 3-5 5.00 19.00-31.67 3.15.3 Determination basis and measurement method of fixed assets acquired under financing leases The fixed assets acquired under financing lease are recognized if one of the following conditions is specified by the Company and the leaser in their lease agreement: (1) upon the expiration of the lease term, the ownership of the leased asset has been transferred to the Company; (2) the Company has the option to purchase the asset and the purchase price is far lower than the fair value of such asset at the time of the option being exercised; Notes to the Financial Statements Page 16 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 (3) the lease term covers the most of the useful life of the leased asset; (4) there is no large difference between the present value of the minimum lease payments on the lease commencement date and fair value of the assets. On the lease commencement date, the leased assets are stated at the lower of the fair value and the present value of the minimum lease payments. Minimum lease payments are stated at long-term payables and the difference is recognized as unrecognized financing costs. 3.16 Construction in progress Projects under construction are recorded as fixed assets at necessary expenditures incurred before preparing the asset to reach the condition for its intended use. For construction in progress that has reached working conditions for its intended use but for which the completion of settlement has not been handled, it shall be transferred into fixed assets at the estimated value according to the project budget, construction price or actual cost, etc. from the date when it reaches the working conditions for its intended use. The fixed assets shall be depreciated in accordance with the Company’s policy on fixed asset depreciation. Adjustment shall be made to the originally and provisionally estimated value based on the actual cost after the completion of settlement is handled, but depreciation already provided will not be adjusted. 3.17 Borrowing costs 3.17.1 Recognition principles of capitalization of borrowing costs Borrowing costs include the interest of borrowings, the amortization of discount or premium, auxiliary expenses, exchange differences incurred by foreign currency borrowings, etc. The borrowing costs incurred to the Company and directly attributable to the acquisition and construction or production of assets eligible for capitalization should be capitalized and recorded into relevant asset costs; other borrowing costs should be recognized as costs according to the amount incurred and be included into the current profit and loss. Assets eligible for capitalization refer to fixed assets, investment property, inventories and other assets which may reach their intended use or sale status only after long-time acquisition and construction or production activities. Borrowing costs may be capitalized only when all the following conditions are met at the same time: (1) Asset disbursements, which include those incurred by cash payment, the transfer of non-cash assets or the undertaking of interest-bearing debts for acquiring and constructing or producing assets eligible for capitalization, have already been incurred; (2) Borrowing costs have already been incurred; (3) The acquisition and construction or production activities which are necessary to prepare the assets for their intended use or sale have been in progress. 3.17.2 Capitalization period of borrowing costs Capitalization period refers to the period from the commencement of capitalization of borrowing costs to its cessation, excluding the period of capitalization suspension of borrowing costs. Notes to the Financial Statements Page 17 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Capitalization of borrowing costs should cease when the acquired and constructed or produced assets eligible for capitalization have reached the working condition for their intended use or sale. Where part of the purchase, construction or manufacturing projects of assets are completed and can be used separately, capitalization of the related borrowing costs should be ceased. When some projects among the acquired and constructed or produced assets eligible for capitalization are completed and can be used separately, the capitalization of borrowing costs of such projects should be ceased. 3.17.3 Period of capitalization suspension If the acquisition and construction or production activities of assets eligible for capitalization are abnormally interrupted and such condition lasts for more than three months, the capitalization of borrowing costs should be suspended; if the interruption is necessary procedures for the acquired, constructed or produced assets eligible for capitalization to reach the working conditions for its intended use or sale, the borrowing costs continue to be capitalized. Borrowing costs incurred during the interruption are recognized as the current profit and loss and continue to be capitalized until the acquisition, construction or production of the asset restarts. 3.17.4 Measurement of capitalization rate and capitalized amounts of borrowing costs As for special borrowings borrowed for acquiring and constructing or producing assets eligible for capitalization, borrowing costs of special borrowing actually incurred in the current period less the interest income of the borrowings unused and deposited in bank or return on temporary investment should be recognized as the capitalization amount of borrowing costs. As for general borrowings used for acquiring and constructing or producing assets eligible for capitalization, the interest of general borrowings to be capitalized should be calculated by multiplying the weighted average of asset disbursements of the part of accumulated asset disbursements exceeding special borrowings by the capitalization rate of used general borrowings. The capitalization rate is calculated by weighted average interest rate of general borrowings. 3.18 Intangible assets 3.18.1 Measurement method of intangible assets (1) The Company initially measures intangible assets at cost on acquisition; The costs of externally acquired intangible assets include their purchase prices, related taxes and surcharges and any other directly attributable expenditure incurred to prepare the asset for its intended use. If the payment for an intangible asset is delayed beyond the normal credit conditions, which is substantially of the financing nature, the cost of the intangible asset shall be determined on the basis of the present value of the purchase price. The intangible assets acquired and used by the debtor to repay debt in debt restructuring should be recorded at the fair value of the intangible assets. The difference between the book value of restructured debts and the fair value of intangible assets used to repay debt should be included in the current profit and loss. On the premise that non-monetary assets trade is of commercial nature and the fair value of the assets traded in or out can be measured reliably, the intangible assets traded in with non-monetary assets should be recognized at the fair value of the assets traded out, unless any unambiguous evidence indicates that the fair value of the assets traded in is more reliable; as to the non-monetary assets trade Notes to the Financial Statements Page 18 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 not meeting the aforesaid premise, the book value of the assets traded out and related taxes and surcharges payable should be recognized as the cost of the intangible assets, with gains or losses not recognized. (2) Subsequent measurement The useful lives of the intangible assets are analyzed and determined on their acquisition. For intangible assets with definite useful lives, the Company shall adopt the straight-line method for amortization within the period during which they can bring economic benefits to the Company; where the period during which they can bring economic benefits to the Company cannot be forecast, those intangible assets shall be deemed as assets with indefinite lives and no amortization will be made. 3.18.2 Estimate of useful life of intangible assets with limited useful life: Item Estimated useful lives Basis Land use right 50 years Land use certificate Software 5 years By reference to the same industry The useful life and amortization method of intangible assets with limited useful lives should be reviewed at the end of each year. After review, the useful life of intangible assets and amortization method at the end of the year are not different from previous estimates. 3.18.3 Specific criteria for classification of research phase and development phase Research phase: the phase for the creative and planned investigation and research to acquire and understand new scientific or technological knowledge. Development phase: the phase for the application of research achievements and other knowledge to a certain plan or design, prior to the commercial production or use, so as to produce any new material, device or product, or substantially improved material, device and product. Expenditures incurred during the research phase of internal research and development projects shall be written off to current profit and loss. 3.18.4 Specific criteria for capitalization of expenditures at the development phase Expenditures arising from development phase on internal research and development projects must be capitalized if the Company can satisfy all of the following criteria simultaneously: (1) it is technically feasible to finish intangible assets for use or sale; (2) it is intended to finish and use or sell the intangible asset; (3) the ways whereby the intangible asset is to generate economic benefits, including those whereby it is able prove that there is a potential market for the products manufactured by applying this intangible asset or that there is a potential market for the intangible asset itself; if the intangible asset will be used internally, its usefulness shall be proved; (4) it is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources; and Notes to the Financial Statements Page 19 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 (5) the expenditure attributable to the intangible assets during its development phase can be reliably measured. 3.19 Impairment of long-term assets For the long-term equity investments, investment property, fixed assets, construction in progress, intangible assets, and other long-term assets measured at cost model, if there are signs of impairment, an impairment test will be conducted on the balance sheet date. If the recoverable amount of the asset is less than its book value after test, assets impairment provision will be made at the difference and included into impairment loss. The recoverable amount is determined at the higher of the net of the fair value less disposal costs and the present value of the expected future cash flows. The assets impairment provision is calculated and made on an individual basis. If it is difficult for the Company to estimate the recoverable amount of the individual asset, the recoverable amount of an asset group, to which the said asset belongs, will be determined. Asset group is the smallest asset group that can independently generate cash inflows. For goodwill, impairment test shall be conducted at least in the end of each year. The Company conducts an impairment test for the goodwill. The book value of goodwill arising from business combinations is amortized to relevant asset groups with a reasonable method from the date of acquisition; or amortized to relevant combination of asset groups if it is difficult to be amortized to relevant asset groups. When the book value of goodwill is amortized to the relevant assets group or combination of assets groups, it shall be evenly amortized according to the proportion of the fair value of each assets group or combination of assets groups in the total fair value of the relevant assets groups or combinations of assets groups. Where the fair value cannot be reliably measured, it should be amortized according to the proportion of the book value of each asset group or combination of assets groups in the total book value of assets groups or combinations of assets groups. When making an impairment test on the relevant assets groups or combination of assets groups containing goodwill, if any indication shows that the assets groups or combinations of assets groups may be impaired, the Company shall first conduct an impairment test on the assets groups or combinations of assets groups not containing goodwill, calculate the recoverable amount and compare it with the relevant book value to recognize the corresponding impairment loss. Then the Company shall conduct an impairment test on the assets groups or combinations of assets groups containing goodwill, and compare the book value of these assets groups or combinations of assets groups (including the book value of the goodwill apportioned thereto) with the recoverable amount. Where the recoverable amount of the relevant assets groups or combinations of assets groups is lower than the book value thereof, the Company shall recognize the impairment loss of the goodwill. The above losses from asset impairment shall not be reversed in subsequent accounting periods once recognized. 3.20 Long-term deferred expenses Long-term deferred expenses refer to various expenses which have been already incurred but will be born in this period and in the future with an amortization period of over one year. 3.20.1 Amortization method The amortization period is determined in accordance with the contract or expected beneficial period. 3.20.2 Amortization years The amortization period is determined in accordance with the contract or expected beneficial period. Notes to the Financial Statements Page 20 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 3.21 Employee compensation 3.21.1 Accounting treatment of short-term compensation During the accounting period when employees serve the Company, the actual short-term compensation is recognized as liabilities and included in current profit or loss or costs associated with assets. During the accounting period when employees provide services for the Company, the corresponding amount of employee compensation is calculated and determined according to the provision basis and provision proportion as stipulated in the provisions on the social insurance premiums and housing funds paid for employees by the Company, as well as trade union funds and employee education funds. The non-monetary benefits of employees that can be measured reliably are measured at fair value. 3.21.2 Accounting treatment of post-employment benefits Defined contribution plans The Company pays basic endowment insurance and unemployment insurance for employees according to the relevant provisions of the local government, calculate payables according to payment base and proportion specified by the local government and recognizes them as liabilities, and includes them into the current profit and loss or the relevant asset costs. 3.21.3 Accounting treatment of dismissal benefits The Company recognizes the employee compensation arising from dismissal benefits as liabilities and include it in the current profit and loss when the Company cannot unilaterally withdraw dismissal benefits which are provided for termination of labor relation plan or layoff proposal, or when the Company recognizes costs or expenses (whichever is earlier) associated with restructuring of payment of dismissal benefits. 3.22 Estimated liabilities 3.22.1 Recognition criteria for estimated liabilities Where all the following conditions are met simultaneously for any obligation pertinent to any contingency including litigation, debt guarantee, onerous contract and reorganization, the Company will recognize such contingency as estimated liabilities: (1) the obligation is a present obligation of the Company; (2) the performance of such obligation is likely to result in outflow of economic benefits from the Company; and (3) the amount of the obligation can be measured reliably. 3.22.2 Measurement of estimated liabilities Estimated liabilities of the Company are initially measured as the best estimate of expenses required for the performance of relevant present obligations. When the Company determines the best estimate, it should have a comprehensive consideration of risks with respect to contingencies, uncertainties and the time value of money. If the time value of money is significant, the best estimate shall be determined after discounting the relevant future outflow of cash. The best estimate shall be accounted as follows in different circumstances: Notes to the Financial Statements Page 21 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 If there is continuous range (or interval) for the necessary expenses, and probabilities of occurrence of all the outcomes within this range are equal, the best estimates will be determined at the average amount of upper and lower limits within the range. If there is no continuous range (or interval) for the necessary expenses, or probabilities of occurrence of all the outcomes within this range are unequal although such a range exists, in case that the contingency involves a single item, the best estimate shall be determined at the most likely outcome; if the contingency involves two or more items, the best estimate should be determined according to all the possible outcomes with their relevant probabilities. When all or some of the expenses necessary for the liquidation of estimated liabilities of the Company are expected to be compensated by a third party, the compensation should be separately recognized as an asset only when it is virtually certain that the reimbursement will be obtained. The amount recognized for the reimbursement should not exceed the book value of estimated liabilities. 3.23 Share-based payments The Company's share-based payments are transactions in which the Company grants equity instruments or undertakes equity-instrument-based liabilities in return for services from employees [or other parties]. The share-based payments of the Company consist of equity-settled share-based payments and cash-settled share-based payments. The equity-settled share-based payment in return for services from employees shall be measured at the fair value of the equity instruments granted to the employees. Where the Company makes share-based payments in restricted stocks and the employee makes capital contributions to subscribe such shares, such shares should not be circulated or transferred before they reach unlocked conditions and before they are unlocked; if the unlocked conditions specified in the final equity incentive plan fail to be reached, then the Company should repurchase the shares at the price agreed in advance. When the Company received the payment of the employee for the subscription of restricted stocks, it should recognize share capital and capital reserves (share premiums) in accordance with the payment for subscription received. The Company should fully recognize a liability at the repurchase obligations and recognize treasury stock at the same time. On each balance sheet date within the vesting period, the Company will, based on the newly-acquired subsequent information such as the changes in the number of the vested employees and whether the specified performance is reached, make the best estimate on the number of the vesting equity instruments. On such basis, the services received in the current period should be included in the relevant cost or expenses according to fair value on the date of grant and capital reserves should be accordingly increased. No adjustments should be made to the recognized relevant costs or expenses and total owners' equity after the vesting date. However, when the right can be exercised immediately after the grant, it should be included in the relevant costs or expenses at the fair value on the date of grant. The capital reserves should be increased accordingly. For share-based payments finally failing to be exercised, costs or expenses should not be recognized, unless the conditions for vesting are market conditions or non-vesting conditions. At this time, whether market conditions or non-vesting conditions are met or not, it is deemed to have vesting rights if non-market conditions in all the vesting conditions are met. If the terms of the equity-settled share-based payments were modified, the services received should be recognized at least in accordance with the unmodified terms. Moreover, the modification of fair value of equity instruments granted from any increase, or beneficial changes to the employee on the modification date should be recognized as increases in services obtained. If the equity-settled share-based payments were cancelled, they should be handled as accelerated exercise of rights on the date of cancellation and the amount that is not yet recognized should be immediately recognized. Where employees or other parties could choose to meet non-vesting Notes to the Financial Statements Page 22 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 conditions but failed to meet the conditions in the vesting period, they should be handed as cancelling the equity-settled share-based payments. However, if new equity instruments are granted, which are recognized as the replacement of the cancelled equity instrument on the grant data, the granted equity instrument for replacement shall be handled in the same way with the disposal of revision of provisions on the original equity instrument and conditions. 3.24 Revenue 3.24.1 General recognition principles for revenue from sales of goods: (1) the Company has transferred the substantial risks and rewards of ownership of the goods to the buyer; (2) the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (3) the amount of revenue can be measured reliably; and (4) the related economic benefits are likely to flow into the Company; and (5) the relevant costs that have occurred or will occur can be measured reliably. 3.24.2 Specific principles (1) Revenue from rendering of service Revenue from rendering of services of the Company mainly refers to revenue from engineering design. If the outcome of transactions can be estimated reliably, revenue shall be recognized at the important timing specified in the design contract. That is to say, revenue shall be recognized at the percentage of workload of completed design at the important timing in total design workload and expected recoverable contract amount. Where the outcome of transactions on rendering of services cannot be reliably estimated, the revenue from rendering of services shall be recognized at labor costs that have been incurred and that are expected to be compensated. The labor costs that have been incurred are recognized as the expenses in the current period. Labor costs that have been incurred but that are not expected to be compensated shall not be recognized as revenue. When contracts or agreements of the Company concluded with other enterprises include sales of goods and rendering of services, if the part of sales of goods and that of rendering of services can be distinguished and be separately measured, they shall be treated separately; if the part of sales of goods and that of rendering of services cannot be distinguished or can be distinguished but cannot be separately measured, the whole contract shall be treated as sales of goods. (2) Revenue from construction contracts If the outcome of a construction contract can be reliably estimated, the revenue and costs from the construction contract will be recognized by the completion percentage method on the balance sheet date. The progress of the contract completion is recognized based on the proportion of the actually incurred contract costs accumulated in the estimated total costs. Where the outcome of a construction contract cannot be estimated reliably, if contract costs are not expected to be recoverable, contract revenue is recognized to the extent of actual contract costs that are expected to be recoverable and the contract costs are recognized as contract expenses immediately when incurred. If contract costs are not expected to be recoverable, they are recognized as expenses immediately when incurred and contract revenue is not recognized. When uncertainties that make the outcome of a construction contract unable to be estimated reliably do not exist, revenue and costs associated with construction contracts should be recognized with the completion percentage method. Notes to the Financial Statements Page 23 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 If the estimated total contract costs exceed the estimated total contract revenue, the expected loss is recognized as current expenses. Accumulated costs incurred and accumulative gross profits (losses) recognized as well as payments settled as to the construction contract should be presented at the net amount after the offset in the balance sheet. The part of accumulated costs incurred plus accumulative gross profits (losses) recognized exceeding payments settled as to the construction contract should be presented as inventories; the part of accumulated costs incurred plus accumulative gross profits (losses) recognized less than the payments settled as to the construction contract should be presented as advances from customers. (3) Recognition of revenue from hospital service The revenue from hospital service mainly comes from out-patient department and in-patient department, and the revenue is recognized when the patients make the settlements. For revenue from out-patient department, as the patients that go to out-patient department generally require no hospitalization, and receive short term treatment, they settle with the hospital on the date of visit and pay for the treatment and medicine. Therefore, the revenue is recognized financially on the date the payment is received. For revenue from in-patient department, patients need to stay in for a period of treatment; they will pay certain advance when being hospitalized, which will not be recognized at that time. When the patients leave the hospital, they settle the medical expenses during the hospitalization, the hospital will issue an invoice to the patients, and then revenue is recognized financially. 3.25 Government subsidies 3.25.1 Type Government subsidies are monetary assets and non-monetary assets freely obtained by the Company from the government. They are divided into government subsidies related to assets and government subsidies related to income. Government subsidies related to assets refer to government subsidies which are acquired by the Company for construction or form long-term assets in other ways, including the financial allocation for purchasing fixed assets or intangible assets, the financial discount for special loan of fixed assets and others. Government subsidies related to income refer to those other than the government subsidies related to assets. 3.25.2 Timing of recognition If government subsidies are monetary assets, it shall be measured in the light of the amount received or receivable. Where government subsidies are non-monetary assets, they are measured at fair value; where the fair value cannot be reliably measured, they are measured at nominal amount. Government subsidies measured at nominal amount are directly included in the current profit and loss. 3.25.3 Accounting treatment Government subsidies related to assets are recognized as deferred income, and included in non-operating income by stages based on the useful life of the assets acquired and constructed; if government subsidies related to income are used to compensate the Company’s relevant expenses or losses in future periods, such government subsidies should be Notes to the Financial Statements Page 24 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 recognized as deferred income on acquisition and be included in current non-operating income during the period of recognition of the relevant expenses; if government subsidies related to income are used to compensate the Company’s relevant expenses or losses incurred, such government subsidies are directly included into current non-operating income on acquisition. 3.26 Deferred income tax assets and deferred income tax liabilities Deferred income tax assets are recognized at deductible temporary differences to the extent that it shall not exceed the taxable income probably obtained in future period to be against the deductible temporary difference. For deductible losses and tax credits that can be carried forward to subsequent periods, deferred tax assets arising therefrom are recognized to the extent that future taxable income will be probable to be available against deductible losses and tax credits. Taxable temporary differences are recognized as deferred income tax liabilities except in special circumstances. Such special circumstances in which deferred tax assets or deferred tax liabilities shall not be recognized include: the initial recognition of goodwill; other transactions or matters excluding business combinations, which affect neither accounting profits nor the taxable income (or deductible losses) when incurred. If the Company has the legal right to settle in net amounts and intends to settle in net amount or to obtain assets and discharge liabilities simultaneously, the current tax assets and current tax liabilities of the Company shall be presented based on the net amount upon offset. When the Company has the legal right for netting of current income tax assets and current income tax liabilities and the income tax assets and income tax liabilities are related to the income tax levied on the same taxpayer by the same tax administrative department or are related to different taxpayers but, within each future period of reversal of important income tax assets and income tax liabilities, the taxpayers involved intend to settle current income tax assets and current income tax liabilities or acquire assets and liquidate liabilities at the same time, the Company's income tax assets and income tax liabilities shall be presented at the net amount after the offset. 3.27 Leases 3.27.1 Accounting treatment of operating leases (1) The Company's rental expenses paid for leased assets shall, within the whole lease term excluding the rent-free period, be amortized with the straight-line method and included in current expenses. Initial direct costs related to lease transactions paid by the Company shall be included in the current expenses. When assets lessor bears costs related to the lease borne by the Company, the Company shall deduct the part of expenses from the total rents and amortize the rents after deduction over the lease term and include them in current expenses. (2) The Company's rental expenses collected for leased assets shall, within the whole lease term excluding the rent-free period, be amortized with the straight-line method and recognized as the relevant rental income. Initial direct expenses relating to lease transactions incurred by the Company shall be recognized as the current expenses; if the amounts are significant, they shall be capitalized and included in the current income on the same basis as the recognition of lease income. When the Company bears the lease related expenses which should be undertook by the lessee, the Company shall deduct this part of expense from the total rental expenses, and amortize the net amount over the lease term. Notes to the Financial Statements Page 25 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 3.27.2 Accounting treatment of financing lease (1) Assets leased in under financing leases: On the lease commencement date, the book entry value of a fixed asset acquired under financing lease is measured at the asset’s fair value or the present value of the minimum lease payment, whichever is the lower. The minimum lease payment is recorded as the book entry value of the long-term payables, and the difference between them is deemed as the unrecognized financing expenses. The Company adopts the effective interest rate method for unrecognized financing charges, which shall be amortized over the lease terms and included in financial expenses. The Company records the initial direct expenses in the values of leased assets. (2) Assets leased under finance leases: On the lease beginning date, the Company recognizes the difference between the sum of financing lease receivable and the unguaranteed residual value, and the present value thereof as unrealized financing income, and recognizes the same as rental income over the periods when rent is received in the future. The Company's initial direct costs related to the rental transactions will be included in the initial measurement of the financing lease receivables and the amount of revenue recognized in the lease term will be reduced. 3.28 Discontinued operation Discontinued operations refer to the component meeting any of the following conditions that has been disposed by the Company or classified as held for sale by the Company, and that can be separately identified upon operation and preparation for the financial statements: (1) the component represents a separate major business or a major business areas; (2) the component is a part of the plan on intended disposal of an independent major business or a major business area; or (3) the part is a subsidiary acquired only for resale. 3.29 Changes in significant accounting policies and accounting estimates 3.29.1 Changes in significant accounting policies (1) Implementation of the Provisions on the Accounting Treatment for Value-added Tax On December 3, 2016, the Ministry of Finance promulgated the Provisions on the Accounting Treatment for Value-added Tax (Cai Kuai [2016] No.22), which apply to relevant transactions of the Company occurred since May 1, 2016. Main impacts of the provisions implementation of the Company are as follows: Contents of and reasons for changes in Name and amount of the affected accounting policies items in the financial statements (1) Adjust the item "business taxes and surcharges" in the income statement to the item "taxes and surcharges" therein. Taxes and surcharges (2) Reclassify the real estate tax, land-use tax-, vehicle and vessel use tax and stamp duty incurred by business operation activities of the enterprise since May 1, 2016 from "General and administrative expenses" to "Taxes and Increased taxes and surcharges in surcharges" and the taxes incurred this year amount to RMB before May 1, 2016 will not be adjusted. 433,364.39, and decreased general The comparative data shall not be and administrative expenses in 2016 adjusted. amount to RMB 433,364.39. (3) Reclassify the item "taxes and Increased ending balance of other Notes to the Financial Statements Page 26 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 surcharges payable" to transfer the VAT current liabilities amounted to RMB amount where income (or profit) has 30,382,980.72, and decreased ending been recognized but the VAT has not balance of taxes and surcharges been paid and which shall be recognized payable amounted to RMB as the output tax amount into the item 30,382,980.72. "other current liabilities" (or "other non-current liabilities"). Compared data shall not be adjusted. The comparative data shall not be adjusted. 3.29.2 Changes in significant accounting estimates The Company had no changes in principal accounting estimates during the reporting period. 4. Taxation 4.1 Major tax types and tax rates Tax type Tax basis Tax rate (%) The output tax is calculated based on taxable income in accordance with tax laws, and value added tax payable should be the balance of the output tax after deducting 0, 3, 6, 11 Value added tax (VAT) the deductible input tax for the current period and 17 Business tax Levied based on the taxable operating income 3 and 5 Urban maintenance and Paid based on the actual business tax, VAT and construction tax consumption tax paid 1, 5 and 7 Education surtax Calculated and paid at turnover tax actually paid. 3 Local education surtax Calculated and paid at turnover tax actually paid. 2 Enterprise income tax Levied based on the amount of taxable income 15, 25 Notes to the Financial Statements Page 27 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Note 1 According to the Circular on Launching the Pilot Collection of Value Added Tax in lieu of Business Tax in Transportation and Certain Areas of Modern Services Industries in Eight Provinces and Municipalities Including Beijing (Cai Shui [2012] No.71) promulgated by the Ministry of Finance and the State Administration of Taxation on July 31, 2012, design business of the Company’s subsidiary Beijing Sino Great Wall Decoration Design Co., Ltd. (hereinafter referred to as the "Sino Great Wall Design") was changed from taxable items under business tax to those under value added tax as of September 1, 2012, so the Company and Sino Great Wall Design became a small-scale VAT taxpayer and were subject to the rate of 3%. Rates of income tax in regard to the Company and its subsidiaries: Income tax rate Name of subsidiary Remarks (%) Sino Great Wall Co., Ltd. 25 Sino Great Wall Medical Investment Management Co., Ltd. 25 Sino Great Wall Infrastructure Investment Co., Ltd. 25 Wuhan Commercial Workers Hospital Co., Ltd. 25 Sino Great Wall International Engineering Co., Ltd. 15 Sino Great Wall Jianyee Engineering Co., Ltd. (formerly known as Sichuan Haoyao Constructional Engineering Co., Ltd.) 25 Sino Great Wall (Beijing) Investment Fund Management Co., Ltd. 25 Sino Great Wall Real estate (Hubei) Co., Ltd. 25 Sino Great Wall New Energy (Beijing) Co., Ltd. 25 Qian'an Sino Solar Power Generation Co., Ltd. 25 Wu'an Juhe Photovoltaic Power Generation Co., Ltd. 25 Bozhou Guangcheng New Energy Co., Ltd. 25 Bozhou Zhaosheng Agricultural Technology Co., Ltd. 25 Bozhou Xieying Solar Power Generation Co., Ltd. 25 Shanghai Ling Rui International Trade Company Limited 25 Shenzhen Hongtulve Industrial Co., Ltd. 25 Sino Great Wall Development (Hengqin) Co., Ltd. 25 SINO GREAT WALL (USA). INC 30 Herabenna Interior Design Guangzhou Co., Ltd. 25 Inrich Me Engineering Co., Limited 17 Sino Great Wall Southwest Construction Engineering Co., Ltd. (formerly known as Sichuan Dinghui Construction Co., Ltd.) 25 PT.SINO GREAT WALL INVESTMENT INDONESIA 25 PT.SINO GREAT WALL CONSTRUCTION INDONESIA 25 Seven levels of tax rates from 0% to 5%, SINO GREAT WALL INTERNETIONAL non-deductible ENGINEERING(CNMI)CO., LLC progressive Shenzhen Yatian Decoration Design Engineering Co., Ltd. 25 Sino Great Wall International Engineering (MACAU) Co., Limited 12 Sino Great Wall Group Co., Limited 17 SGW HP Engineering Construction SDN. BHD 24 SINO GREAT WALL (PHILIPPINES) INTERNATIONAL CORPORITION 30 Beijing Sino Great Wall Decoration Design Co., Ltd. 25 Suzhou Lvbang Wood Technology Co., Ltd. 25 Sino Heji Environmental Protection Materials Co., Ltd. 25 SINO GREAT WALL INTERNETIONAL ENGINEERING(MM) CO., LTD 25 Sino Great Wall International Engineering (Thailand) Co., Ltd. 20 4.2 Tax preference (1) Approved by the Beijing Municipal Office, SAT under the Circular on Approval of Tax Types in 2013, the taxable income of Sino Great Wall Design was calculated at 10% of total income. Notes to the Financial Statements Page 28 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 (2) According to the provisions of the Circular of the State Administration of Taxation on Issuing the Tentative Measures for the Collection and Administration of Income Tax on Enterprises That Have Operations in Different Regions and That Pay Taxes in a Consolidated Manner (G.S.F. [2008] No. 28) issued on March 10, 2008, for business institutions and establishments without the status of a legal person that are established in different regions within the territory of China, namely those engaging in production and operating activities in different regions, their head offices (parent companies) are enterprises that pay taxes in a consolidated manner. The parent company pays taxes in a consolidated manner. Head office and branches prepay enterprise income tax in installment, 50% of which is shared by all branches and 50% of which is prepaid by the head office. Branches share the prepayments in the proportion of 35%, 35% and 30% of operating income, employee compensation and total assets; final settlement of annual enterprise income tax shall be made by the parent company at the tax authority and will no longer be allocated to branches. (3) The Company's subsidiaries Sino Great Wall Group Co., Limited (hereinafter referred to as "Sino Hong Kong") and Inrich Me Engineering Co., Limited (hereinafter referred to as "Inrich Me Engineering") are enterprises established in the Hong Kong Special Administrative Region and are subject to enterprise profit tax at the rate of 16.5%; Sino Great Wall International Engineering (MACAU) Co., Limited (hereinafter referred to as "Sino Macau") is an enterprise established in the Macao Special Administrative Region and is subject to complementary income tax at the progressive rate. (4) The Company's wholly-owned subsidiary Sino Great Wall International Engineering Co., Ltd. (hereinafter referred to as "Sino International") obtained the high-tech enterprise certificate (No.: GR201511003125) jointly approved and issued by Beijing Municipal Science and Technology Commission, Beijing Municipal Finance Bureau, Beijing Municipal Office, SAT and Beijing Local Taxation Bureau on November 24, 2015. The certificate was issued on November 24, 2015 and valid for 3 years, so Sino International would pay enterprise income tax at the rate of 15% in 2015, 2016 and 2017. (5) The Company's wholly-owned subsidiary Wuhan Commercial Workers Hospital Co., Ltd. was entitled to the exemption of value-added taxes since May 1, 2016 in accordance with the Notice of the Ministry of Finance and the State Administration of Taxation on Implementing the Pilot Program of Replacing Business Tax with Value-Added Tax in an All-round Manner (Cai Shui [2016] No.36). 5. Notes to the items of consolidated financial statements 5.1 Cash and cash equivalents Balance as at Balance as at Item December 31, 2016 January 1, 2016 Cash on hand 2,974,883.16 1,349,587.20 Bank deposits 940,730,439.25 343,390,159.56 Other monetary funds 397,110,499.42 350,644,814.55 Total 1,340,815,821.83 695,384,561.31 Including: Total amount deposited abroad 197,496,287.50 60,170,773.67 Cash or cash equivalents being restricted for use due to mortgage, pledge or freezing, or being placed overseas with restrictions on fund repatriation as follows: Balance as at Balance as at Item December 31, 2016 January 1, 2016 Bank acceptance bills margin 140,689,860.21 46,497,936.83 Performance bond 255,913,019.19 64,202,294.79 Deposits for peasant laborers 507,620.02 1,532,920.07 Term deposits or call deposits for guarantee Notes to the Financial Statements Page 29 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Balance as at Balance as at Item December 31, 2016 January 1, 2016 Funds placed overseas with restrictions on fund repatriation 405,652.81 Total 397,110,499.42 112,638,804.50 5.2 Financial assets measured at fair value through current profit and loss 5.2.1 Financial assets measured at fair value through current profit and loss Balance as at Balance as at Item December 31, 2016 January 1, 2016 Money market fund 1,102,961.04 Total 1,102,961.04 5.3 Notes receivable 5.3.1 Notes receivable by category Balance as at Balance as at Item December 31, 2016 January 1, 2016 Bank acceptance bills 21,300,446.44 4,040,251.87 Commercial acceptance bills 1,053,090,196.14 216,408,496.07 Total 1,074,390,642.58 220,448,747.94 5.3.2 Pledged notes receivable of the Company as at December 31, 2016 Pledged amount as at Item December 31, 2016 Bank acceptance draft - Commercial acceptance draft 98,645,997.87 Total 98,645,997.87 5.3.3 Notes receivable endorsed or discounted by the Company as at December 31, 2016 but not expired on the balance sheet date Amount of Amount derecognition as underecognized Item at December 31, as at December 2016 31, 2016 Bank acceptance draft 207,110,526.41 Commercial acceptance draft 345,762,089.05 Total 207,110,526.41 345,762,089.05 5.4 Accounts receivable 5.4.1 Disclosure of accounts receivable by category Balance as at December 31, 2016 Book balance Provision for bad debts Category Proportion Proportion of Book value Amount (%) Amount provision (%) Receivables that are individually significant but with provision for bad debts made on an individual basis Receivables subject to provisions for bad debts on credit risk characteristics basis 4,148,182,356.26 99.91 423,012,147.95 10.20 3,725,170,208.31 Receivables that are individually insignificant but with provision for bad debts made on an individual basis 3,844,309.34 0.09 3,844,309.34 100.00 - Total 4,152,026,665.60 100.00 426,856,457.29 10.28 3,725,170,208.31 Notes to the Financial Statements Page 30 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 (Continued) Balance as at January 1, 2016 Book balance Provision for bad debts Category Proportion Proportion of Book value Amount (%) Amount provision (%) Receivables that are individually significant but with provision for bad debts made on an individual basis Receivables subject to provisions for bad debts on credit risk characteristics basis 2,638,742,183.89 100.00 285,934,096.56 10.84 2,352,808,087.33 Receivables that are individually insignificant but with provision for bad debts made on an individual basis Total 2,638,742,183.89 100.00 285,934,096.56 10.84 2,352,808,087.33 In the portfolio, accounts receivable with the provision for bad debts made under the aging analysis method: Balance as at December 31, 2016 Aging Account Provision for Proportion of receivable bad debts provision (%) Within1 year 2,981,476,004.74 149,073,800.25 5.00 1-2 years 665,268,747.44 66,526,874.75 10.00 2-3 years 281,948,783.56 84,584,635.07 30.00 3-4 years 177,703,424.82 88,851,712.41 50.00 4-5 years 39,051,351.16 31,241,080.93 80.00 Over 5 years 2,734,044.54 2,734,044.54 100.00 Total 4,148,182,356.26 423,012,147.95 5.4.2 Provision, reversal or recovery of bad debts in 2016 The amount of the provision for bad debts in 2016 was RMB 127,789,717.16; the amount of increase in bad debts on a consolidated basis in 2016 was RMB 13,132,643.57; and no bad debts were recovered or reversed in 2016. 5.4.3 Accounts receivable actually written off in 2016 No accounts receivable were actually written off during the reporting period. 5.4.4 Top five of accounts receivable by the debtor Balance as at December 31, 2016 Proportion in the Name of company Provision for Account receivable total accounts bad debts receivable (%) China Harbour Engineering Company Ltd. 672,067,475.39 16.19 33,644,960.56 CHINA CENTRAL ASIA GROUP Co. Ltd 436,859,602.82 10.52 21,842,980.14 PowerChina Construction Group Ltd. 302,978,738.20 7.30 15,148,936.91 Oxley Diamond (Cambodia) Co., Ltd 282,328,914.30 6.80 14,116,445.72 Henan No.1 Thermal Power Construction Co., Ltd. 203,103,421.33 4.89 13,042,616.76 Total 1,897,338,152.04 45.70 97,795,940.09 Notes to the Financial Statements Page 31 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 5.4.5 Accounts receivable derecognized due to the transfer of financial assets Gains or losses Amount Method of financial assets Name of company Project on derecognized transfer derecognition Xiamen Jiayu Real Estate Xiamen Semi-hill Transfer of creditors’ Development Co., Ltd. Grand View B03 14,160,461.27 right (without recourse) 1,621,895.35 Apartments of Jinan Jinan Haier Green Town Property National Games Transfer of creditors’ Co., Ltd. Village 10,296,979.40 right (without recourse) 1,179,384.11 Building No. 1, Zhongda Square, Guangzhou Poly Pearl Transfer of creditors’ Poly Real Estate Group Co., Ltd River New Town 5,566,496.88 right (without recourse) 637,569.30 Qingdao Green Town Jiaozhou Bay Jiaozhou Bay Sheraton Transfer of creditors’ Real Estate Development Co., Ltd. Hotel 5,151,220.21 right (without recourse) 590,004.80 Dalian Aonan House Development Dalian Mingxiu Manor Transfer of creditors’ Co., Ltd. Type B House 4,695,452.00 right (without recourse) 537,802.52 Chaobai River Daweicheng Phase 2 Dachang Jingyu Real Estate Stone Curtain Wall Transfer of creditors’ Development Co., Ltd. Project 4,664,024.76 right (without recourse) 534,202.94 Dalian Red Star Dalian Zhengqian Property Co., Coastal Community Transfer of creditors’ Ltd. Project 4,237,549.39 right (without recourse) 485,355.77 Hohhot Daya Inner Mongolia Yitai Property Co., Comprehensive Transfer of creditors’ Ltd. Building 4,212,745.43 right (without recourse) 482,514.81 Panyu Poly Transfer of creditors’ Poly Real Estate Group Co., Ltd Champagne Mansion 4,191,403.58 right (without recourse) 480,070.38 Dalian Zhengqian Property Co., Transfer of creditors’ Ltd. Dalian Red Star Sea 2,474,061.00 right (without recourse) 283,371.28 Tangshan Hengrong Real Estate Transfer of creditors’ Development Co., Ltd. Tang City 101 2,105,541.40 right (without recourse) 241,162.19 Zhuhai Poly Golden Bay Project, No. 9 Poly (Zhuhai) Real Estate model building and Transfer of creditors’ Development Co., Ltd. model room in the hall 2,078,996.00 right (without recourse) 238,121.76 Inner Mongolia Transfer of creditors’ Chifeng Wanda Plaza Co., Ltd. Chifeng Wanda Hotel 1,437,783.42 right (without recourse) 164,679.26 Hangzhou Zhongtian Project Plot No. 25 Hangzhou Gemdale Zhongtian Real Block A High-rise Transfer of creditors’ Estate Development Co., Ltd. indoor decoration 1,199,168.80 right (without recourse) 137,349.07 Total 66,471,883.54 7,613,483.54 Note: On June 25, 2016, the Company and Dagang Financing Lease (Shanghai) Co., Ltd. signed an agreement on transfer of creditors’ right (No.: BLW-SZDG-2016002), according to which the Company transferred 14 items of accounts receivable of RMB66,471,883.54 to Dagang Financing Lease (Shanghai) Co., Ltd. at a transfer price of RMB 58,858,400.00 without recourse as agreed therein. The Company derecognized accounts receivable in 2016, and included the loss of RMB 7,613,483.54 on transfer in non-operating expenses. Notes to the Financial Statements Page 32 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 5.5 Advances to suppliers 5.5.1 Advances to suppliers by aging Balance as at December 31, 2016 Balance as at January 1, 2016 Aging Proportion Proportion Book balance Book balance (%) (%) Within 1 year 311,193,306.31 97.49 70,146,608.20 90.27 1-2 years 5,789,414.72 1.81 5,258,018.08 6.77 2-3 years 1,269,897.25 0.40 1,090,606.22 1.40 Over 3 years 954,180.35 0.30 1,212,335.88 1.56 Total 319,206,798.63 100.00 77,707,568.38 100.00 5.5.2 Top five advances by suppliers Proportion in the total Balance as at balance of advances to Supplier December 31, suppliers as at December 2016 31, 2016 (%) Qingyuan Hefeng New Energy Technology Co., Ltd. 165,000,000.00 51.69 Nanjing Zhongjian Chemical Equipment Manufacturing Co., Ltd. 40,676,756.76 12.74 Shenyang Zhaohuan Modern Architectural Industrial Park Co., Ltd. 4,639,008.00 1.45 GULFLIGHTSELECTRICALENGI NEERINGWLL 4,314,087.18 1.35 CSSC (Cambodia) Co., Ltd. 3,651,831.04 1.15 Total 218,281,682.98 68.38 5.6 Other receivables 5.6.1 Disclosure of other receivables by category: Balance as at December 31, 2016 Book balance Provision for bad debts Category Proportion Proportion of Book value Amount Amount (%) provision (%) Other receivables with individually significant amount and subject to separate provision for bad debts Other receivables with provision for bad debts accrued by credit risk features portfolio 709,527,391.05 99.93 58,515,258.14 8.25 651,012,132.91 Other receivables with individually insignificant amount but subject to individual provision for bad debts 500,000.00 0.07 500,000.00 100.00 Total 710,027,391.05 100.00 59,015,258.14 8.31 651,012,132.91 (Continued) Balance as at January 1, 2016 Book balance Provision for bad debts Category Proportion Proportion of Book value Amount (%) Amount provision (%) Other receivables with significant single amount and individual provision for bad debts Notes to the Financial Statements Page 33 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Balance as at January 1, 2016 Book balance Provision for bad debts Category Proportion Proportion of Book value Amount (%) Amount provision (%) Other receivables with provision for bad debts accrued by portfolio with credit risk features 261,942,379.50 99.82 21,989,493.39 8.39 239,952,886.11 Other receivables with insignificant single amount and individual provision for bad debts 478,000.00 0.18 478,000.00 100 Total 262,420,379.50 100 22,467,493.39 8.56 239,952,886.11 Other receivables subject to provision for bad debts under aging analysis method: Balance as at December 31, 2016 Aging Provision for bad Proportion of Other receivables debts provision (%) Within 1 year 574,225,645.55 28,714,087.87 5.00 1-2 years 72,506,847.29 7,250,684.74 10.00 2-3 years 50,949,805.67 15,284,941.71 30.00 3-4 years 8,772,720.70 4,386,360.35 50.00 4-5 years 965,941.84 772,753.47 80.00 Over 5 years 2,106,430.00 2,106,430.00 100.00 Total 709,527,391.05 58,515,258.14 5.6.2 Provision, reversal or recovery of bad debts in 2016 The amount of the provision for bad debts in 2016 was RMB 35,012,661.40; the amount of increase in bad debts on a consolidated basis in 2016 was RMB 1,535,103.35; and no bad debts were recovered or reversed in 2016. 5.6.3 Other receivables actually written off in 2016 Item Written-off amount Actual write-off of other receivables 1,485,463.34 5.6.4 Classification of other receivables by the nature of payment Book balance as at Book balance as at Nature of Payment December 31, 2016 January 1, 2016 Bidding margins, performance bonds and deposits 366,310,322.14 168,213,515.22 Petty cash and current accounts between individuals 59,867,918.12 40,331,852.58 Current accounts among entities 282,984,039.72 53,815,203.95 Others 865,111.07 59,807.75 Total 710,027,391.05 262,420,379.50 5.6.5 Top five of other receivables by the debtor Proportion in total Provision for Balance as at balance of other bad debts Name of company Nature December 31, Aging receivables as at Balance as at 2016 December 31, December 31, 2016 (%) 2016 PowerChina Construction Current accounts Within 1 Group Ltd. among entities 259,423,663.63 year 36.54 12,971,183.18 Bidding margins, PT.WANXIANGNICKELIN performance bonds Within 1 DONESIA and deposits 68,000,000.00 year 9.58 3,400,000.00 Notes to the Financial Statements Page 34 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Proportion in total Provision for Balance as at balance of other bad debts Name of company Nature December 31, Aging receivables as at Balance as at 2016 December 31, December 31, 2016 (%) 2016 Chengdu Qingyuan Real Bidding margins, Estate Development Co., performance bonds Within 1 Ltd. and deposits 30,000,000.00 year 4.23 1,500,000.00 Leading Group Office for Reconstruction and Extension Project of Jingfeng Hotel of the Bidding margins, General Logistics performance bonds Department of PLA and deposits 30,000,000.00 2-3 years 4.23 9,000,000.00 Bidding margins, Shenzhen Jinshawan Hotel performance bonds Within 1 Co., Ltd. and deposits 27,655,391.29 year 3.88 1,382,769.57 Total / 415,079,054.92 58.46 28,253,952.75 5.7 Inventories 5.7.1 Classification of inventories Balance as at December 31, 2016 Balance as at January 1, 2016 Item Provision for Provision for Book balance Book value Book balance Book value depreciation depreciation Raw materials 12,078,945.75 - 12,078,945.75 13,086,673.87 13,086,673.87 Stock commodities 43,492,877.62 1,404,765.68 42,088,111.94 7,538,609.26 1,352,585.08 6,186,024.18 Engineering construction 282,911,079.94 5,051,867.60 277,859,212.34 148,457,514.11 148,457,514.11 Goods in transit - - - 403,456.75 403,456.75 Goods in progress 668,934.23 - 668,934.23 Low-cost consumables 209,726.10 - 209,726.10 Total 339,361,563.64 6,456,633.28 332,904,930.36 169,486,253.99 1,352,585.08 168,133,668.91 Notes to the Financial Statements Page 35 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 5.7.2 Inventory provision Balance as at Increase in 2016 Decrease in 2016 Balance as at Item January 1, Reversal or December 31, Provision Others Others 2016 write-off 2016 Stock commodities 1,352,585.08 52,180.60 1,404,765.68 Engineering construction 5,051,867.60 5,051,867.60 Total 1,352,585.08 5,104,048.20 6,456,633.28 5.8 Non-current assets maturing within one year Item Balance as at December 31, 2016 Balance as at January 1, 2016 Long-term borrowings maturing within one year 13,462,942.89 15,717,270.60 Total 13,462,942.89 15,717,270.60 5.9 Other current assets Item Balance as at December 31, 2016 Balance as at January 1, 2016 Input tax 35,248,102.26 14,138,411.87 Income tax expenses prepaid 202,092.21 Total 35,450,194.47 14,138,411.87 5.10 Fixed assets 5.10.1 Fixed assets Electronic Buildings and Machinery Transportation Item equipment and Total constructions equipment equipment other equipment 1. Original book value (1) Balance as at January 1, 2016 10,193,831.80 15,124,117.90 27,339,595.16 5,372,383.58 58,029,928.44 (2) Increase in 2016 57,775,649.24 73,898,441.45 8,823,721.31 10,286,188.75 150,784,000.75 - Purchase 17,027,997.40 19,620,984.99 6,436,507.07 1,848,909.82 44,934,399.28 - Transfer of construction in progress 5,898,702.19 4,664,068.70 10,562,770.89 - Increase due to business combinations 34,848,949.65 45,459,977.76 2,387,214.24 8,424,278.93 91,120,420.58 - Others 4,153,410.00 13,000.00 4,166,410.00 (3) Decrease in 2016 7,768,106.00 - 952,895.00 8,721,001.00 - Disposal or write-off 3,614,696.00 939,895.00 4,554,591.00 - Others 4,153,410.00 13,000.00 4,166,410.00 Notes to the Financial Statements Page 36 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Electronic Buildings and Machinery Transportation Item equipment and Total constructions equipment equipment other equipment (4) Balance as at December 31, 2016 67,969,481.04 81,254,453.35 36,163,316.47 14,705,677.33 200,092,928.19 2. Accumulated depreciation - - - - (1) Balance as at January 1, 2016 74,769.21 624,167.49 11,569,621.16 1,915,154.95 14,183,712.81 (2) Increase in 2016 15,053,031.73 33,414,280.49 4,895,747.20 8,483,410.78 61,846,470.20 - Provision 655,224.14 3,366,867.97 3,215,361.21 1,631,494.27 8,868,947.59 - Others 14,397,807.59 30,047,412.52 1,680,385.99 6,851,916.51 52,977,522.61 (3) Decrease in 2016 - 3,525,400.06 - 895,602.49 4,421,002.55 - Disposal or write-off 3,097,944.85 891,142.76 3,989,087.61 - Others 427,455.21 4,459.73 431,914.94 (4) Balance as at December 31, 2016 15,127,800.94 30,513,047.92 16,465,368.36 9,502,963.24 71,609,180.46 3. Provision for impairment - - - - (1) Balance as at January 1, 2016 - - - - - (2) Increase in 2016 - - - - - - Provision - - - - - - Others - - - - - (3) Decrease in 2016 - - - - - - Disposal or write-off - - - - - - Others - - - - - (4) Balance as at December 31, 2016 - - - - - 4. Book value - - - - (1) Book value as at December 31, 2016 52,841,680.10 50,741,405.43 19,697,948.11 5,202,714.09 128,483,747.74 (2) Book value as at January 1, 2016 10,119,062.59 14,499,950.41 15,769,974.00 3,457,228.63 43,846,215.63 5.10.2 Temporarily idle fixed assets There were no temporarily idle fixed assets in 2016. 5.10.3 Fixed assets with pending certificate of title Item Book value Reason for absence of certificate of title Suzhou factory 5,751,234.64 The relevant formalities are going through Notes to the Financial Statements Page 37 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 5.11 Construction in process 5.11.1 Construction in progress Balance as at December 31, 2016 Balance as at January 1, 2016 Item Provision for Provision for Book balance Book value Book balance Book value impairment impairment Suzhou Lvbang Plant 4,978,670.79 4,978,670.79 Kuwait tower cranes 5,038,257.45 5,038,257.45 Total 10,016,928.24 10,016,928.24 5.11.2 Changes in important construction in progress in 2016 Balance as Accumulated Including: Interest Balance as Transfer into Other Percentage Increase at capitalization Interest capitalization Sources of Project Budget at January fixed assets in decreases of in 2016 December amount of capitalized rate in 2016 funds 1, 2016 2016 in 2016 completion 31, 2016 interest in 2016 (%) Suzhou Lvbang Plant 6,478,670.79 4,978,670.79 920,031.40 5,898,702.19 100% Self-raised Kuwait tower cranes 5,298,257.45 5,038,257.45 202,074.12 4,664,068.70 576,262.87 100% Self-raised Total 11,776,928.24 10,016,928.24 1,122,105.52 10,562,770.89 576,262.87 5.12 Intangible assets 5.12.1 Intangible assets Item Land use right Software Total 1. Original book value (1) Balance as at January 1, 2016 7,714,044.00 2,395,059.29 10,109,103.29 (2) Increase in 2016 100,906,958.59 2,021,556.78 102,928,515.37 - Purchase 1,073,583.44 1,073,583.44 -Internal research and development - - - - Increase due to business combinations 100,906,958.59 947,973.34 101,854,931.93 (3) Decrease in 2016 - - - - Disposal - - - (4) Balance as at December 31, 2016 108,621,002.59 4,416,616.07 113,037,618.66 2. Accumulated amortization - - - (1) Balance as at January 1, 2016 181,202.41 660,154.55 841,356.96 (2) Increase in 2016 4,873,410.93 1,119,407.22 5,992,818.15 - Provision 354,160.54 755,571.31 1,109,731.85 - Increase due to business combinations 4,519,250.39 363,835.91 4,883,086.30 (3) Decrease in 2016 - Disposal (4) Balance as at December 31, 2016 5,054,613.34 1,779,561.77 6,834,175.11 3. Provision for impairment - - - Notes to the Financial Statements Page 38 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Item Land use right Software Total (1) Balance as at January 1, 2016 - - - (2) Increase in 2016 - Provision (3) Decrease in 2016 - - - - Disposal - - - (4) Balance as at December 31, 2016 - - - 4. Book value - - - (1) Book value as at December 31, 2016 103,566,389.25 2,637,054.30 106,203,443.55 (2) Book value as at January 1, 2016 7,532,841.59 1,734,904.74 9,267,746.33 5.12.2 Land use right with pending certificate of title There was no land use right with pending certificate of title in 2016. 5.13 Goodwill 5.13.1 Original book value of goodwill Decrease in Balance as at Increase in 2016 2016 Balance as at Name of the investee or matters forming goodwill January 1, Formed from business December 31, 2016 2016 Disposal combinations Shenzhen Yatian Decoration Design Engineering Co., Ltd. 6,724,316.91 6,724,316.91 Wuhan Commercial Workers Hospital Co., Ltd. 27,257,314.49 27,257,314.49 Sino Great Wall Southwest Construction Engineering Co., Ltd. 17,948,978.53 17,948,978.53 Sino Great Wall Jianyee Engineering Co., Ltd. 6,943,534.86 6,943,534.86 Total 6,724,316.91 52,149,827.88 - 58,874,144.79 Remarks: 1. Natural person Pan Huan and the Company's wholly-owned subsidiary Sino Great Wall International Engineering Co., Ltd. signed an Equity Transfer Agreement on November 25, 2015. Pan Huan transferred 70% of his equities held in Shenzhen Yatian Decoration Design Engineering Co., Ltd. to Sino Great Wall International Engineering Co., Ltd.. After the transfer, the Company's wholly-owned subsidiary Sino Great Wall International Engineering Co., Ltd. held 70% of equities in Shenzhen Yatian Decoration Design Engineering Co., Ltd.. The price for the transfer of 70% of equities in Shenzhen Yatian Decoration Design Engineering Co., Ltd. by the Company's wholly-owned subsidiary Sino Great Wall International Engineering Co., Ltd. was RMB 4 million. The Company's wholly-owned subsidiary Sino Great Wall International Engineering Co., Ltd. takes November 25, 2015 as the acquisition date and total combination costs on the acquisition date are RMB 4 million. The difference between RMB-2,724,316.91, namely the fair value of identifiable net assets of 70% of the equities in Shenzhen Yatian Decoration Design Engineering Co., Ltd. acquired by the Company's wholly-owned subsidiary Sino Great Wall International Engineering Co., Ltd. on the acquisition date, and the combination costs was RMB 6,724,316.91, which should be included in goodwill. Notes to the Financial Statements Page 39 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 2. On May 1, 2016, Wuhan Shangzhi Hospital Co., Ltd. and its management shareholders signed a Contract on Equity Transfer and Asset Acquisition with the Company, specifying that Wuhan Shangzhi Hospital Co., Ltd. and its management shareholders transfer 100% of equities in Wuhan Shangzhi Hospital Co., Ltd. to the Company. After the equity transfer, the Company owned 100% of equities in Wuhan Commercial Workers Hospital Co., Ltd.. The consideration of the Company for 100% of equities transferred by Wuhan Commercial Workers Hospital Co., Ltd. was RMB 97 million. The Company took June 21, 2016 as the acquisition date. Total combination costs on the acquisition date were RMB 97 million. The difference between RMB 69,742,685.51, namely the fair value of identifiable net assets of 100% of the equities in Wuhan Shangzhi Hospital Co., Ltd. acquired by the Company on the acquisition date, and the combination costs was RMB 27,257,314.49, which should be included in goodwill. 3. Natural persons Ye Jiajun and Zhang Shizhong signed an Equity Transfer Agreement with the Company on July 27, 2016. Ye Jiajun and Zhang Shizhong transferred 100% of his equities held in Sichuan Dinghui Construction Co., Ltd. to Sino Great Wall International Engineering Co., Ltd.. After the transfer, the Company's wholly-owned subsidiary Sino Great Wall International Engineering Co., Ltd. held 100% of equities in Sichuan Dinghui Construction Co., Ltd.. The price made by the Company's wholly-owned subsidiary Sino Great Wall International Engineering Co., Ltd. for receiving 100% of equities in Sichuan Dinghui Construction Co., Ltd. was RMB 18 million. The Company took August 9, 2016 as the acquisition date. Total combination costs on the acquisition date were RMB 18 million. The difference between RMB 51,021.47, namely the fair value of identifiable net assets of 100% of the equities in Sichuan Dinghui Construction Co., Ltd. acquired by the Company, and the combination costs was RMB 17,948,978.53, which should be included in goodwill. After the acquisition, Sichuan Dinghui Construction Co., Ltd. was renamed Sino Great Wall Southwest Construction Engineering Co., Ltd.. 4. Sichuan Haoyao Constructional Engineering Co., Ltd. and its parent company Chengdu Ruihe Hongsheng Technology Co., Ltd. signed an Agreement on Increase in Capital and Share with the Company's wholly-owned subsidiary Sino Great Wall International Engineering Co., Ltd. on November 9, 2016. They transferred 60% of their equities held in Sichuan Haoyao Constructional Engineering Co., Ltd. to Sino Great Wall International Engineering Co., Ltd.. After the transfer, the Company's wholly-owned subsidiary Sino Great Wall International Engineering Co., Ltd. held 60% of equities in Sichuan Haoyao Constructional Engineering Co., Ltd.. The price made by the Company's wholly-owned subsidiary Sino Great Wall International Engineering Co., Ltd. for receiving 60% of equities in Sichuan Haoyao Constructional Engineering Co., Ltd. was RMB 90 million. The Company took November 11, 2016 as the acquisition date. Total combination costs on the acquisition date were RMB 90 million. The difference between RMB 83,056,465.14, namely the fair value of identifiable net assets of 60% of the equities in Sichuan Haoyao Constructional Engineering Co., Ltd. acquired by the Company on the acquisition date, and the combination costs was RMB 6,943,534.86, which should be included in goodwill. Notes to the Financial Statements Page 40 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS 5.14 Long-term deferred expenses Balance as at Increase in Amortization in Balance as at Item Other decreases January 1, 2016 2016 2016 December 31, 2016 Renovation costs 14,879,816.11 2,567,004.36 5,418,620.60 - 12,028,199.87 Overseas guarantee fees 19,747,240.18 1,856,356.88 13,165,818.10 - 8,437,778.96 Subtotal 34,627,056.29 4,423,361.24 18,584,438.70 - 20,465,978.83 Less: long-term borrowings maturing within one year 15,717,270.60 13,462,942.89 Total 18,909,785.69 7,003,035.94 5.15 Deferred income tax assets and deferred income tax liabilities 5.15.1 Deferred income tax assets without offset Balance as at December 31, 2016 Balance as at January 1, 2016 Deductible Deductible Item Deferred tax Deferred tax temporary temporary assets assets differences differences Provision for asset impairment 484,110,666.81 74,623,400.23 308,401,589.95 46,440,178.39 Deductible losses 2,265,150.21 566,287.55 4,729,047.45 1,171,953.41 Inventory provision 6,456,633.28 1,108,971.56 1,352,585.08 338,146.27 Total 492,832,450.30 76,298,659.34 314,483,222.48 47,950,278.07 5.15.2 Deferred income tax liabilities without offset Balance as at December 31, 2016 Balance as at January 1, 2016 Taxable Deferred Taxable Deferred Item temporary income tax temporary income tax differences liabilities differences liabilities Gains from changes in fair value of financial assets measured at fair value through profit and loss 102,961.04 15,444.16 Value increment of assets due to combinations not under common control by evaluation 109,879,555.06 27,469,888.77 Total 109,879,555.06 27,469,888.77 102,961.04 15,444.16 5.15.3 Details of unrecognized deferred income tax assets Balance as at Balance as at Item December 31, 2016 January 1, 2016 Deductible temporary differences 1,761,048.62 Deductible losses 29,368,743.01 Total 31,129,791.63 5.16 Other non-current assets Balance as at Balance as at Item December 31, 2016 January 1, 2016 PPP project investment 48,960,000.00 Advances for purchase of long-term assets 67,942,258.30 95,353,390.28 Total 116,902,258.30 95,353,390.28 Notes to the Financial Statements Page 41 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS 1. Details of equity investments of PPP project companies Registered Subscribed Increase Balance as at Shareho Balance as at capital contributions in 2016 Decrease December 31, Item lding January 1, (RMB (RMB (RMB in 2016 2016 (RMB ratio 2016 '0,000) '0,000) '0,000) '0,000) Luyi Shuguang Medical Industrial Investment and Construction Co., Ltd. 9,600.00 4,896.00 51.00% 4,896.00 4,896.00 Total 9,600.00 4,896.00 4,896.00 4,896.00 5.17 Short-term borrowings 5.17.1 Short-term borrowings Balance as at Balance as at Item December 31, 2016 January 1, 2016 Guaranteed borrowings 1,621,515,110.00 210,000,000.00 Commercial acceptance bills endorsed or discounted but not expired on the balance sheet date 344,543,247.59 15,408,496.07 Total 1,966,058,357.59 225,408,496.07 1. Notes to short-term borrowings: See Note 10.4 "Related-party transactions" for the related-party guarantee for short-term borrowings. 2. There were no outstanding short-term borrowings due as at December 31, 2016. 5.18 Notes payable Balance as at Balance as at Type December 31, 2016 January 1, 2016 Bank acceptance bill 397,450,000.00 143,410,167.17 Commercial acceptance bill 309,433,375.54 Total 706,883,375.54 143,410,167.17 Total notes payable due but unpaid as at December 31, 2016 were RMB 0.00. The amount of notes that will expire in next accounting period was RMB 706,883,375.54. 5.19 Accounts payable 5.19.1 Presentation of accounts payable: Balance as at Balance as at Item December 31, 2016 January 1, 2016 Payments for projects 1,295,611,654.20 1,331,950,114.27 Payments for purchase of long-term assets 7,923,625.18 669,840.50 Payment for purchase of medicines 10,413,710.87 Total 1,313,948,990.25 1,332,619,954.77 5.19.2 Significant accounts payable with aging over one year: Balance as at Reasons for failure of repayment or Item December 31, carry-forward 2016 Before the CUMMINSQATAR RMB 914,723.58 for those within 1 year settlement LLC 11,660,032.30 and RMB 10,745,308.72 within 1-2 years period Notes to the Financial Statements Page 42 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Balance as at Reasons for failure of repayment or Item December 31, carry-forward 2016 GULF REINFORCEMEN Before the T STEEL CO. RMB 658955.18 for those within 1 year settlement W.L.L 10,424,868.23 and RMB 9,765,913.05 within 1-2 years period Before the Rezayat Trading Co. settlement Limited 10,782,975.37 RMB 10,782,975.37 within 1-2 years period RMB 11,975,790.38 for those within 1 Before the CHHE GROUP year and RMB 12,588,011.67 within 1-2 settlement CO.,LTD 24,563,802.05 years period Total 57,431,677.95 / 5.20 Advances from customers 5.20.1 Presentation of advances from customers Balance as at Balance as at Item December 31, 2016 January 1, 2016 Payments for projects 572,743,695.28 64,963,842.60 Advances for medical services 1,040,377.30 Total 573,784,072.58 64,963,842.60 5.21 Employee compensation payable 5.21.1 Presentation of employee compensation payable Balance as at Balance as at Increase in Decrease in Item January 1, December 31, 2016 2016 2016 2016 Short-term compensation 11,696,032.04 337,653,647.65 331,711,930.27 17,637,749.42 Post-employment benefits - defined contribution plans 973,587.16 13,708,204.80 13,521,994.69 1,159,797.27 Total 12,669,619.20 351,361,852.45 345,233,924.96 18,797,546.69 5.21.2 Presentation of short-term compensation Balance as at Balance as at Increase in Decrease in Item January 1, December 31, 2016 2016 2016 2016 (1) Salaries, bonuses, allowances and subsidies 10,957,918.68 303,347,680.62 297,388,634.57 16,916,964.73 (2) Employee welfare - 14,636,878.07 14,636,878.07 - (3) Social insurance premiums 678,746.36 9,768,469.65 9,826,271.31 620,944.70 Including: medical insurance premiums 567,258.19 8,753,518.62 8,804,708.07 516,068.74 Work-related injury insurance premium 48,777.45 300,584.33 322,991.86 26,369.92 Maternity insurance premiums 62,710.72 714,366.70 698,571.38 78,506.04 (4) Housing provident funds 59,367.00 8,386,377.05 8,345,904.06 99,839.99 (5) Labor union funds and employee education funds - 1,514,242.26 1,514,242.26 - Total 11,696,032.04 337,653,647.65 331,711,930.27 17,637,749.42 5.21.3 Presentation of defined contribution plans Notes to the Financial Statements Page 43 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Balance as at Balance as at Increase in Decrease in Item January 1, December 31, 2016 2016 2016 2016 Basic endowment insurance premiums 928,655.00 13,138,845.28 12,936,675.43 1,130,824.85 Unemployment insurance premium 44,932.16 569,359.52 585,319.26 28,972.42 Total 973,587.16 13,708,204.80 13,521,994.69 1,159,797.27 5.22 Taxes and surcharges payable Balance as at Balance as at Taxes and surcharges December 31, 2016 January 1, 2016 Value-added tax 12,062,605.90 367,314.45 Business tax 83,297,969.10 99,853,626.46 Enterprise income tax 207,849,865.19 172,280,720.23 Individual income tax 1,515,889.41 545,880.47 Urban maintenance and construction tax 4,725,964.11 6,413,578.69 Education surtax 3,694,729.45 5,106,621.62 Stamp tax and other taxes 336,646.62 258,548.19 Total 313,483,669.78 284,826,290.11 5.23 Interest payable Balance as at Balance as at Item December 31, 2016 January 1, 2016 Interest payable on short-term borrowings 4,710,255.00 330,945.21 Interest payable on long-term borrowings 1,718,238.55 197,024.05 Total 6,428,493.55 527,969.26 5.24 Other payables 5.24.1 Other payables by nature Balance as at Balance as at Item December 31, 2016 January 1, 2016 Bidding margins, performance bonds and deposits 26,582,761.45 19,625,824.93 Current accounts between individuals and withholding payables 45,650,286.49 42,269,479.45 Lendings to shareholders - 523,963,781.16 Current accounts between entities 136,613,997.74 49,313,976.16 Others 1,067,929.33 27,914.90 Payments for subscribing shares issued privately 12,500,000.00 Total 222,414,975.01 635,200,976.60 5.24.2 Other significant payables with aging over one year Reasons for failure Balance as at Item of repayment or December 31, 2016 carry-forward Shenzhen Qunguangshun Construction Labor Co., Ltd. 31,500,000.00 Unexpired yet Total 31,500,000.00 Notes to the Financial Statements Page 44 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS 5.25 Non-current liabilities maturing within one year Balance as at Balance as at Item December 31, 2016 January 1, 2016 Long-term borrowings maturing within one year 175,958,998.04 7,135,752.00 Total 175,958,998.04 7,135,752.00 5.26 Other current liabilities Balance as at Balance as at Item December 31, 2016 January 1, 2016 Output tax to be carried forward 30,382,980.72 Total 30,382,980.72 5.27 Long-term borrowings 5.27.1 Classification of long-term borrowings Balance as at Balance as at Item December 31, 2016 January 1, 2016 Pledged borrowings 500,000,000.00 19,480,800.00 Mortgage borrowings 3,175,860.22 10,659,849.14 Guaranteed borrowings 283,683,018.60 Total 786,858,878.82 30,140,649.14 5.28 Estimated liabilities Balance as at Balance as at Item Reasons for the formation December 31, 2016 January 1, 2016 Provision for pending Pending litigation 13,225,861.70 litigation of the Company Total 13,225,861.70 / 5.29 Share capital Increase/Decrease in 2016 Balance as at Balance as at Issuance Reserves Item January 1, Bonus December 31, of new transferred to Others Subtotal 2016 shares 2016 shares share capital Total amount of shares 446,906,582.00 1,251,338,429.00 1,251,338,429.00 1,698,245,011.00 5.30 Capital reserve Balance as at Balance as at Item Increase in 2016 Decrease in 2016 January 1, 2016 December 31, 2016 Capital premium (share premium) 394,052,904.72 1,251,338,429.00 -857,285,524.28 Other capital reserves -444,420,766.94 2,356,589.48 -442,064,177.46 Total -50,367,862.22 2,356,589.48 1,251,338,429.00 -1,299,349,701.74 Remark: Increase in other capital reserves of RMB 2,356,589.48 in 2016 was capital reserves increased due to accounting of interest of borrowings of the controlling shareholders and associated natural persons to the Company according to the equity transactions; The capital reserves conversed into share capital of RMB 1,251,338,429.00 in 2016 were the decrease of capital reserves in 2016. 5.31 Special reserve Balance as at Balance as at Item Increase in 2016 Decrease in 2016 January 1, 2016 December 31, 2016 Work safety costs 46,014,941.54 56,095,547.05 36,422,620.45 65,687,868.14 Total 46,014,941.54 56,095,547.05 36,422,620.45 65,687,868.14 Notes to the Financial Statements Page 45 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS 5.32 Surplus reserve Balance as at Balance as at Item Increase in 2016 Decrease in 2016 January 1, 2016 December 31, 2016 Statutory surplus reserves 84,394,441.23 84,394,441.23 Total 84,394,441.23 84,394,441.23 5.33 Undistributed profits Item Year 2016 Year 2015 Undistributed profits as at the end of last period before adjustment 755,308,636.19 443,707,019.71 Adjustment to total undistributed profits at the beginning of the year ("+" for increase and "-" for decrease) Undistributed profits at the beginning of the year after adjustment 755,308,636.19 443,707,019.71 Plus: net profit attributable to owners of the parent company in the year 473,661,862.67 346,648,651.48 Less: withdrawal of statutory surplus reserves 35,047,035.00 Others Undistributed profits at the end of the year 1,228,970,498.86 755,308,636.19 5.34 Operating income and operating cost Amount in 2016 Amount in 2015 Item Income Cost Income Cost Primary business 4,662,402,374.17 3,459,377,744.66 4,010,300,741.19 3,165,027,185.66 Other business 2,596,743.00 - 58,258.39 Total 4,664,999,117.17 3,459,377,744.66 4,010,358,999.58 3,165,027,185.66 5.35 Business taxes and surcharges Item Amount in 2016 Amount in 2015 Business tax 8,128,747.41 71,137,330.61 Urban maintenance and construction tax 597,022.91 4,552,568.01 Education surtax 478,975.13 3,795,770.42 Other taxes 446,784.01 Total 9,651,529.46 79,485,669.04 5.36 Selling expenses Item Amount in 2016 Amount in 2015 Employee compensation 6,623,108.93 7,480,826.85 Travel expenses 934,104.49 1,055,919.35 Entertainment expenses 469,366.01 898,779.78 Advertising and promotion expenses 2,675.00 155,680.00 Engineering maintenance fees 17,911,593.82 1,431,742.98 Others 4,377,840.02 2,663,223.14 Total 30,318,688.27 13,686,172.10 Notes to the Financial Statements Page 46 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS 5.37 General and administrative expenses Item Amount in 2016 Amount in 2015 Employee compensation 127,039,183.19 87,117,818.35 Office costs 9,544,489.51 6,241,300.07 Rental fees 19,084,430.19 12,393,307.35 Travel expenses 12,096,343.79 5,350,149.45 Entertainment expenses 9,828,496.48 6,462,222.69 Depreciation of fixed assets 6,848,917.76 2,339,244.07 Vehicle costs 2,871,639.42 2,586,923.27 Amortization of long-term deferred expenses 4,308,529.48 4,844,357.87 Consulting fees 79,559,745.78 10,069,218.74 Conference expenses 156,486.46 136,778.15 Others 42,592,471.50 17,021,007.85 Total 313,930,733.56 154,562,327.86 5.38 Financial expenses Category Amount in 2016 Amount in 2015 Interest expenses 130,325,289.46 45,919,707.78 Less: Interest income 3,936,374.12 1,654,394.40 Gains or losses on exchange -75,709,807.87 -7,285,087.59 Discount interest 19,445,217.45 4,863,792.26 Handling charges and others 57,312,903.03 13,022,383.97 Total 127,437,227.95 54,866,402.02 5.39 Losses from asset impairment Item Amount in 2016 Amount in 2015 Losses on bad debts 164,907,841.91 109,984,519.09 Losses on inventory depreciation 5,104,048.20 1,352,585.08 Total 170,011,890.11 111,337,104.17 5.40 Gains from changes in fair value Source of the gains from changes in fair value Amount in 2016 Amount in 2015 Financial assets measured at fair value through current profit and loss 42,553.26 Total 42,553.26 5.41 Investment income Item Amount in 2016 Amount in 2015 Income from long-term equity investments accounted for under equity method - Investment income from disposal of long-term equity investments - Investment income received from financial assets measured at fair value through current profit and loss during the holding period - Investment income received from disposal of financial assets measured at fair value through current profit and loss 13,448.02 Investment income from held-to-maturity investments during the holding period - Investment income of available-for-sale financial assets during the holding period - Notes to the Financial Statements Page 47 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Item Amount in 2016 Amount in 2015 Investment income from disposal of available-for-sale financial assets - Gains and losses arising from re-measurement of the remaining equities at the fair value after the loss of the control - Others 2,212,902.95 Total 2,226,350.97 5.42 Non-operating income Amount included in Item Amount in 2016 Amount in 2015 non-recurring gains and losses in 2016 Total gains from disposal of non-current assets 4,455.00 Including: gains from disposal of fixed assets 4,455.00 Government grants 108,121.33 342,246.00 108,121.33 Others 26,318,921.53 34,032.08 26,318,921.53 Total 26,427,042.86 380,733.08 26,427,042.86 Government subsidies included in current profit and loss Item Amount in 2016 Amount in 2015 Related to assets/income Rewards for headquarter-mode enterprises that have made investments in Tongzhou 72,365.00 342,246.00 Related to income Post subsidy 35,756.33 Related to income Total 108,121.33 342,246.00 / 5.43 Non-operating expenses Amount included in Item Amount in 2016 Amount in 2015 non-recurring gains and losses in 2016 Total losses from disposal of non-current assets 564,833.40 85,567.15 564,833.40 Including: losses on disposal of fixed assets 564,833.40 85,567.15 564,833.40 Foreign donations Others 21,022,106.88 939,828.42 21,022,106.88 Total 21,586,940.28 1,025,395.57 21,586,940.28 5.44 Income tax expenses 5.44.1 Statement of income tax expenses Item Amount in 2016 Amount in 2015 Current income tax expenses 115,052,974.76 82,948,121.72 Deferred income tax expenses -25,808,113.01 1,740,767.09 Total 89,244,861.75 84,688,888.81 5.44.2 Adjustment process of accounting profits and income tax expenses Item Amount in 2016 Total profit 561,337,756.70 Income tax expenses calculated at the statutory [or applicable] tax rate 140,334,439.18 Effect of different tax rate applicable to subsidiaries 1,009,583.31 Effect of adjustment on income tax in previous periods Effect of tax-exempt income Effect of non-deductible costs, expenses and losses 42,837,964.72 Notes to the Financial Statements Page 48 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Item Amount in 2016 Effect of deductible losses from using deferred income tax assets unrecognized in previous periods Effect of deductible temporary differences or deductible losses from deferred income tax assets unrecognized in the current period 7,242,029.39 Income tax expenses 89,244,861.75 5.45 Items in the statement of cash flows 5.45.1 Cash received from other operating activities Item Amount in 2016 Amount in 2015 Interest income 3,936,374.12 1,654,394.40 Margin, deposit and other current accounts 1,814,618,138.18 1,372,680,802.86 Government grants 108,121.33 342,246.00 Total 1,818,662,633.63 1,374,677,443.26 5.45.2 Cash paid for other operating activities Item Amount in 2016 Amount in 2015 Handling charges 15,515,853.49 17,871,746.12 Margin and deposit expenses 117,417,474.74 65,681,623.08 Selling expenses 23,695,579.34 5,708,228.19 General and administrative expenses 175,125,500.48 58,197,102.84 Current accounts 2,657,532,011.53 1,490,471,903.13 Total 2,989,286,419.58 1,637,930,603.36 5.45.3 Cash received from other investing activities Item Amount in 2016 Amount in 2015 Individual financing funds received 162,855,000.00 779,900,000.00 Non-public deposits 12,500,000.00 Total 175,355,000.00 779,900,000.00 5.45.4 Cash paid for other financing activities Item Amount in 2016 Amount in 2015 Note margin - 46,903,589.64 Individual financing funds 530,980,295.84 328,378,111.24 Trust deposits 2,000,000.00 Financing fees 22,800,000.00 Total 555,780,295.84 375,281,700.88 5.46 Supplementary information to the statement of cash flows 5.46.1 Supplementary information to the statement of cash flows Supplementary information Year 2016 Year 2015 1. Net profit adjusted to cash flows from operating activities Net profit 472,092,894.95 346,103,140.68 Plus: provision for asset impairment 170,011,890.11 111,337,104.17 Depreciation of fixed assets and others 8,868,947.59 3,522,849.96 Amortization of intangible assets 1,109,731.85 627,434.01 Amortization of long-term deferred expenses 18,584,438.70 12,313,310.96 Losses on disposal of fixed assets, intangible assets and other long-term assets ("-" for gains) 564,833.40 81,112.15 Notes to the Financial Statements Page 49 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Supplementary information Year 2016 Year 2015 Losses on write-off of fixed assets (“-” for gains) Losses from changes in fair value ("-" for gains) -42,553.26 Financial expenses ("-" for gains) 136,256,259.56 38,634,620.19 Investment loss ("-" for gains) 2,226,350.97 - Decreases in deferred income tax assets ("-" for increases) 1,646,331.60 1,741,109.30 Increases in deferred income tax liabilities ("-" for decreases) -27,454,444.61 -342.21 Decreases in inventories ("-" for increases) -148,243,275.45 -134,526,054.06 Decreases in operating receivables (“-” for increases) -2,878,862,492.67 -867,621,315.78 Decreases in operating payables ("-" for decreases) 555,322,720.06 195,778,326.80 Others Net cash flows from operating activities -1,687,875,813.94 -292,051,257.08 2. Significant investing and financing activities not involving cash inflows and outflows Conversion of debt into capital Convertible corporate bonds due within one year Fixed assets acquired under financial lease 3. Net change in cash and cash equivalents Ending balance of cash 943,705,322.41 582,745,756.81 Less: Beginning balance of cash 582,745,756.81 243,759,954.90 Plus: Ending balance of cash equivalents Less: Beginning balance of cash equivalents Net increase in cash and cash equivalents 360,959,565.60 338,985,801.91 5.46.2 Net cash paid for acquisition of subsidiaries in 2016 Amount Cash or cash equivalents paid in 2016 for business combinations incurred in 2016 110,000,000.00 Less: cash and cash equivalents held by subsidiaries on the acquisition date 67,532,263.39 Plus: Cash or cash equivalents paid in 2016 for business combinations in previous periods Net cash paid for acquisition of subsidiaries 42,467,736.61 5.46.3 Breakdowns of cash and cash equivalents Balance as at Balance as at Item December 31, 2016 January 1, 2016 I. Cash 943,705,322.41 582,745,756.81 Including: cash on hand 2,974,883.16 1,349,587.20 Unrestricted bank deposit 940,730,439.25 343,390,159.56 Other unrestricted monetary funds 238,006,010.05 II. Cash equivalents III. Balance of cash and cash equivalents as at December 31, 2016 943,705,322.41 582,745,756.81 Including: cash and cash restricted for Notes to the Financial Statements Page 50 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Balance as at Balance as at Item December 31, 2016 January 1, 2016 use by the parent company or subsidiaries within the group 5.47 Restricted assets Book value as at Item -Reason for restriction December 31, 2016 Cash and cash equivalents 397,110,499.42 Deposits Notes receivable 98,645,997.87 Pledge Balance of accounts receivables 1,509,610,147.37 Pledge Total 2,005,366,644.66 5.48 Monetary items in foreign currency 5.48.1 Monetary items in foreign currency Balance in foreign RMB balance Exchange Item currency as at translated as at rate December 31, 2016 December 31, 2016 Cash and cash equivalents 1,088,130,877.82 Including: USD 154,220,972.45 6.9370 1,069,830,885.89 GBP 1,000.00 8.5094 8,509.40 HKD 1,525,578.86 0.8945 1,364,645.55 QAR 82,452.21 1.9051 157,078.79 THB 50,000.00 0.1937 9,684.67 INR 292,646,802.97 0.0463 13,552,008.49 PHP 122,867.99 0.1402 17,224.11 MYR 284,472.84 1.5527 441,686.76 KWD 116,796.90 22.6588 2,646,480.79 BUK 1,590,000.00 0.0051 8,109.00 MOP 108,932.37 0.8681 94,564.37 Accounts receivable 2,062,888,319.06 Including: USD 109,812,714.10 6.9370 761,770,797.71 QAR 159,572,978.97 1.9051 304,000,701.70 INR 1,149,337,736.29 0.0463 53,224,004.52 PHP - 0.1402 - MYR 42,494,611.37 1.5527 65,979,258.34 MOP 1,362,817.67 0.8681 1,183,064.22 DZD 24,867,193.21 0.0626 1,557,808.06 KWD 38,623,917.74 22.6588 875,172,684.51 Advances to suppliers 96,686,246.86 Including: USD 2,587,704.72 6.9370 17,950,907.64 QAR 21,321,042.22 1.9051 40,618,479.63 INR 8,026,046.66 0.0463 371,673.47 KWD 1,665,804.92 22.6588 37,745,186.12 Other receivables 148,838,337.87 Including: USD 13,048,500.31 6.9370 90,517,446.65 HKD 15,150.00 0.8945 13,551.83 MOP - 0.8681 - INR 25,540,450.43 0.0463 1,182,737.68 MYR 462,804.74 1.5527 718,573.78 PHP 116,997.00 0.1402 16,401.10 Notes to the Financial Statements Page 51 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Balance in foreign RMB balance Exchange Item currency as at translated as at rate December 31, 2016 December 31, 2016 QAR 15,675,667.09 1.9051 29,863,538.46 THB 1,022,031.04 0.1937 197,960.61 KWD 1,149,993.31 22.6588 26,057,499.89 DZD 3,361,846.96 0.0626 210,603.27 BUK 11,841,381.00 0.0051 60,024.60 Accounts payable 615,773,811.43 Including: USD 42,867,884.62 6.9370 297,374,515.61 QAR 51,783,417.59 1.9051 98,652,011.05 INR 364,688,798.76 0.0463 16,888,158.86 PHP 44,130.43 0.1402 6,186.38 MYR 16,300,996.89 1.5527 25,309,742.82 KWD 7,536,594.55 22.6588 170,770,394.88 BUK 1,336,107,728.00 0.0051 6,772,801.83 Advances from customers 31,893,381.65 Including: USD 1,524,015.00 6.9370 10,572,092.06 EUR 1,998,722.68 7.3068 14,604,266.88 HKD - 0.8945 - DZD 107,223,416.22 0.0626 6,717,022.71 Other payables 80,390,994.02 Including: USD 10,134,042.51 6.9370 70,299,852.89 HKD - 0.8945 - QAR 500,339.30 1.9051 953,190.82 INR 42,167,275.30 0.0463 1,952,699.52 PHP 8,447.15 0.1402 1,184.15 DZD 126,262.63 0.0626 7,909.74 KWD 316,704.69 22.6588 7,176,156.90 Notes to the Financial Statements Page 52 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS 6. Changes in the scope of consolidation 6.1 Business combinations not under common control 6.1.1 Business combinations not under common control in 2016 Revenue of the Net profit of the Costs for Proportion of Method of Recognition acquiree from the acquiree from the Timing of acquisition Acquiree acquisition of equities acquired acquisition of Acquisition date basis of the acquisition date to acquisition date of equities equities (%) equities acquisition date December 31, to December 31, 2016 2016 Wuhan Commercial Workers Hospital Acquisition of Co., Ltd. June 21, 2016 97,000,000.00 100 Acquisition June 21, 2016 control 82,027,233.44 3,120,181.28 Sino Great Wall Southwest Acquisition of Construction Engineering Co., Ltd. August 9, 2016 18,000,000.00 100 Acquisition August 9, 2016 control 14,967,733.16 426,158.33 Sino Great Wall Jianyee Engineering Increase in capital Acquisition of Co., Ltd. November 11, 2016 90,000,000.00 60 and share November 11, 2016 control 102,593,058.61 541,256.23 6.1.2 Combination cost and goodwill Wuhan Sino Great Wall Sino Great Wall Commercial Southwest Construction Jianyee Engineering Workers Hospital Engineering Co., Ltd. Co., Ltd. Co., Ltd. Combination cost - Cash 97,000,000.00 18,000,000.00 90,000,000.00 - Fair value of non-cash assets - - - -Fair value of liabilities issued or assumed - - - -Fair value of equity securities issued - - - -Fair value of contingent consideration - - - - Fair value of equities held before the acquisition date on the acquisition date - - - - Others - - - Total combination costs 97,000,000.00 18,000,000.00 90,000,000.00 Less: share of fair value of identifiable net assets acquired 69,742,685.51 51,021.47 83,056,465.14 Amount of goodwill/combination cost less than the share of fair value of identifiable net assets acquired 27,257,314.49 17,948,978.53 6,943,534.86 Notes to the Financial Statements Page 53 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS 6.1.3 Identifiable assets and liabilities of the acquiree on the acquisition date (Unit: RMB '0,000) Sino Great Wall Southwest Wuhan Commercial Sino Great Wall Jianyee Construction Engineering Workers Hospital Co., Ltd. Engineering Co., Ltd. Co., Ltd. Fair value Book value Fair value on Book value Fair value on Book value on the on the the on the the on the acquisition acquisition acquisition acquisition acquisition acquisition date date date date date date Current assets 17,101.91 17,101.91 404.21 387.62 29,475.62 27,984.18 Non-current assets 14,056.60 2,552.97 4.15 307.19 679.46 Total assets: 31,158.51 19,654.88 404.21 391.77 29,782.81 28,663.64 Current liabilities 21,308.34 21,308.34 377.34 377.34 24,150.98 24,150.98 non-current liabilities - - Total liabilities: 21,308.34 21,308.34 377.34 377.34 24,150.98 24,150.98 Net asset 9,850.17 -1,653.46 26.87 14.43 5,631.83 4,512.66 Less: minority equity - - 2,252.73 1,805.06 Net asset acquired 9,850.17 -1,653.46 26.87 14.43 3,379.10 2,707.60 Notes to the Financial Statements Page 54 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS 6.2 Changes in the scope of consolidation for other reasons 1. The Company established a wholly-owned subsidiary in 2016 - SINO GREAT WALL INTERNETIONAL ENGINEERING (CNMI) CO., LLC with registered capital of USD 1 million. 2. The Company established a wholly-owned subsidiary in 2016 - Sino Great Wall (Beijing) Investment Management Co., Ltd. with registered capital of RMB 100 million. 3. The Company established a holding subsidiary in 2016 - Sino Great Wall Real Estate (Hubei) Co., Ltd. with the shareholding ratio of 80% and the registered capital of RMB 100 million. 4. The Company established a holding subsidiary in 2016 - Sino Great Wall Development (Hengqin) Co., Ltd. with the shareholding ratio of 85% and the registered capital of RMB 50 million. 5. The Company established a holding subsidiary in 2016 - PT.SINO GREAT WALL INVESTMENT INDONESIA with the shareholding ratio of 99.9% and the registered capital of IDR 520 billion. 6. The Company established a holding subsidiary in 2016 - PT.SINO GREAT WALL CONSTRUCTION INDONESIA with the shareholding ratio of 67% and the registered capital of IDR 150 billion. 7. The Company established a holding subsidiary in 2016 - SINO GREAT WALL INTERNETIONAL ENGINEERING (MM) CO., LTD with the shareholding ratio of 80% and the registered capital of USD 10 million. 8. The Company established a wholly-owned subsidiary in 2016 - Sino Great Wall New Energy (Beijing) Co., Ltd. with registered capital of RMB 30 million. 9. The Company canceled a holding subsidiary in 2016 - Sino Heji Environmental Protection Materials Co., Ltd. 7. Equity in other entities 7.1 Equity in subsidiaries 7.1.1 Structure of the enterprise group Principal place Registered Nature of Shareholding ratio (%) Way of Name of subsidiaries of business place business Directly Indirectly acquisition Sino Great Wall Medical Investment Management Co., Medical Establishmen Ltd. Beijing Beijing investment 100 t Investment management, Sino Great Wall Infrastructure import and Establishmen Investment Co., Ltd. Beijing Beijing export 100 t Wuhan Commercial Workers Hospital Co., Ltd. Wuhan Wuhan Health care 100 Acquisition Sino Great Wall International Engineering Co., Ltd. Beijing Beijing Decoration 100 Acquisition Sino Great Wall Jianyee Engineering Co., Ltd. (formerly known as Sichuan Haoyao Constructional Engineering Co., Ltd.) Chengdu Chengdu Construction 60 Acquisition Notes to the Financial Statements Page 55 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Principal place Registered Nature of Shareholding ratio (%) Way of Name of subsidiaries of business place business Directly Indirectly acquisition Investment and property management; Sino Great Wall (Beijing) economy and Investment Fund Management trade Establishmen Co., Ltd. Beijing Beijing consulting 100 t Sino Great Wall Real Estate Real estate Establishmen (Hubei) Co., Ltd. Wuhan Wuhan development 80 t Sino Great Wall New Energy New energy Establishmen (Beijing) Co., Ltd. Beijing Beijing technology 100 t Solar Qian'an Sino Solar Power photovoltaic Establishmen Generation Co., Ltd. Qian'an Qian'an power station 100 t Solar photovoltaic Wu'an Juhe Photovoltaic Power power Establishmen Generation Co., Ltd. Wu'an Wu'an generation 100 t Bozhou Guangcheng New Solar power Establishmen Energy Co., Ltd. Bozhou Bozhou generation 100 t Bozhou Zhaosheng Agricultural Establishmen Technology Co., Ltd. Bozhou Bozhou Agriculture 100 t Bozhou Xieying Solar Power Solar power Establishmen Generation Co., Ltd. Bozhou Bozhou generation 100 t Shanghai Ling Rui International Establishmen Trade Company Limited Shanghai Shanghai Trade 100 t Investment, research and development and sales, trade as well Shenzhen Hongtulve Industrial as import and Establishmen Co., Ltd. Shenzhen Shenzhen export 100 t Sino Great Wall Development Design and Establishmen (Hengqin) Co., Ltd. Zhuhai Hengqin construction 85 t Commercial activities SINO GREAT WALL (USA). The United The United allowed by Establishmen INC States States law 100 t Herabenna Interior Design Establishmen Guangzhou Co., Ltd. Guangzhou Guangzhou Design 100 t Mechanical and electrical engineering, scientific research, trade and Inrich Me Engineering Co., investment Establishmen Limited Hong Kong Hong Kong consulting 100 t Sino Great Wall Southwest Construction Engineering Co., Ltd. (formerly known as Sichuan Dinghui Construction Co., Ltd.) Chengdu Chengdu Construction 100 Acquisition PT.SINO GREAT WALL Real estate or Establishmen INVESTMENT INDONESIA Indonesia Indonesia lease 99.9 t PT.SINO GREAT WALL Establishmen CONSTRUCTION INDONESIA Indonesia Indonesia Construction 67 t Notes to the Financial Statements Page 56 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Principal place Registered Nature of Shareholding ratio (%) Way of Name of subsidiaries of business place business Directly Indirectly acquisition SINO GREAT WALL INTERNETIONAL ENGINEERING(CNMI)CO.,LL Design and Establishmen C Saipan Saipan construction 100 t Shenzhen Yatian Decoration Design and Design Engineering Co., Ltd. Shenzhen Shenzhen construction 70 Acquisition Sino Great Wall International Engineering (MACAU) Co., Design and Establishmen Limited Macao Macao construction 96 4 t Construction, design, trade and Sino Great Wall Group Co., investment Establishmen Limited Hong Kong Hong Kong consulting 100 t SGW HP EngineeringConstructionSDN.B Design and Establishmen HD Malaysia Malaysia construction 100 t Building SINO GREAT WALL construction (PHILIPPINES) and import INTERNATIONAL and export Establishmen CORPORITION Philippines Philippines trade 100 t Beijing Sino Great Wall Design and Establishmen Decoration Design Co., Ltd. Beijing Beijing consulting 100 t Suzhou Lvbang Wood Production Establishmen Technology Co., Ltd. Suzhou Suzhou and sales 100 t Sino Heji Environmental Production Establishmen Protection Materials Co., Ltd. Heji Heji and sales 80 t SINO GREAT WALL INTERNETIONAL Design and Establishmen ENGINEERING(MM)CO.,LTD Myanmar Myanmar construction 80 t Sino Great Wall International Establishmen Engineering (Thailand) Co., Ltd. Thailand Thailand 48.998 t 8. Risks associated with financial instruments The Company faces various financial risks in the process of operation: credit risks, market risks and liquidity risks. The Board of Directors of the Company shall be fully responsible for determining risk management objectives and policies and bearing the ultimate liabilities for that. However, the Board of Directors has authorized the management to design and implement the process that can ensure the effective implementation of the risk management objectives and policies. The Board of Directors reviews the effectiveness of the enforced procedures and the rationality of risk management objectives and policies through monthly reports submitted by the management. Internal auditors of the Company will also audit risk management policies and procedures and report the relevant findings to the audit committee. Overall objective of risk management of the Company is to formulate risk management policies to minimize risks without undue prejudice to the Company's competitiveness and resilience. 8.1 Credit risk Credit risk refers to a risk of financial losses suffered by one party of financial instruments due to the failure of the other party to fulfill obligations. The Company mainly faces customer credit risks caused by sales on account. Prior to the conclusion of a new contract, the Company will evaluate the credit risk of the new customer, including external credit rating and bank reference letter under some circumstances if the relevant information is available. The Company sets a credit limit for each customer. The limit is the maximum amount unnecessary for additional approval. Notes to the Financial Statements Page 57 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS The Company quarterly monitors credit ratings of existing customers and monthly reviews aging analysis of accounts receivable to ensure that the Company's overall credit risk is within the controllable range. When the Company monitors credit risks of customers, the customers shall be divided into groups according to their credit features. Customers rated as "high risk" will be placed in a restricted customer list. The Company may sell goods to such customers on credit in future periods subject to additional approval; otherwise the Company must require advance payments. 8.2 Market risk Market risk associated with financial instruments refers to the risk arising from changes in fair value or future cash flows of financial instruments due to market price fluctuation, including interest rate risk and foreign exchange risk. (1) Interest rate risk Interest rate risk refers to the risk arising from changes in fair value or future cash flows of financial instruments due to fluctuation in market interest rate. The Company's interest rate risk mainly derives from bank borrowings. The Company establishes good relations with banks and reasonably designs credit lines, credit varieties and credit period to guarantee sufficient bank credit lines and to meet short-term financing needs. By shortening the time limit of a single loan, the Company may specifically agree terms of the prepayment to reasonably reduce the risk of interest rate. On December 31, 2016, in case other variables remain unchanged, if the loan interest rate calculated at a floating interest rate rises or falls 100 basis points, the Company's net profit will reduce or increase by RMB 21,200 (December 31, 2015: RMB 2,178,000). (2) Exchange rate risk Exchange rate risk refers to the risk arising from changes in fair value or future cash flows of financial instruments due to fluctuation in foreign exchange rate. The Company shall match foreign currency income and foreign currency expenses as much as possible to minimize exchange rate risk. In addition, the Company may also sign forward foreign exchange contracts or currency swap contracts to avoid exchange rate risks. The exchange rate risk faced by the Company mainly derives from dollar-denominated financial assets and financial liabilities. Foreign currency financial assets and financial liabilities are converted into amount in RMB as follows: Balance as at December 31, 2016 (RMB) Balance as at January 1, 2016 (RMB) Item Other foreign Total Other foreign Total USD USD currencies currencies Cash and cash equivalents 1,069,830,885.89 18,299,991.93 1,088,130,877.82 12,367,626.74 47,803,146.93 60,170,773.67 Accounts receivable 761,770,797.71 1,301,117,521.35 2,062,888,319.06 261,680,003.01 64,685,392.32 326,365,395.33 Advances to suppliers 17,950,907.64 78,735,339.22 96,686,246.86 3,219,710.57 21,727,760.68 24,947,471.25 Other receivables 90,517,446.65 58,320,891.22 148,838,337.87 19,653,509.31 61,363,486.93 81,016,996.24 Sub-total of assets 1,940,070,037.89 1,456,473,743.72 3,396,543,781.61 296,920,849.63 195,579,786.86 492,500,636.49 Accounts payable 297,374,515.61 318,399,295.82 615,773,811.43 121,182,379.88 321,046,692.24 442,229,072.12 Advances from customers 10,572,092.06 21,321,289.59 31,893,381.65 16,637,252.49 16,637,252.49 Other payables 70,299,852.89 10,091,141.13 80,390,994.02 2,005,010.46 3,042,262.65 5,047,273.11 Sub-total of liabilities 378,246,460.56 349,811,726.54 728,058,187.10 123,187,390.34 340,726,207.38 463,913,597.72 Net amount 1,561,823,577.33 1,106,662,017.18 2,668,485,594.51 173,733,459.29 -145,146,420.52 28,587,038.77 On December 31, 2016, in case all other variables remain unchanged, if RMB to USD appreciates or depreciates by 1%, the net profits of the Company would reduce or increase by RMB 15,618,200 (December 31, 2015: RMB 285,900). Notes to the Financial Statements Page 58 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS 8.3 Liquidity risk Liquidity risk refers to a risk arising from shortage of funds when the Company performs the obligations settled in cash or other financial assets. Policies of the Company are to ensure sufficient cash to pay matured debts. Liquidity risk is under centralized control of the financial department of the Company. The financial department monitors cash balance and readily realizable and marketable securities and makes rolling forecast on cash flows of the next 12 months to ensure that the Company has sufficient funds to repay debts in all cases of reasonable prediction. See disclosure of the relevant items of Note 5 for details of financial liabilities of the Company presented at undiscounted contractual cash flows on the maturity date. 9. Related parties and related-party transactions 9.1 Actual controller of the Company Shareholding ratio Voting ratio in Amount of Name in the Company the Company Remarks shares held (%) (%) Chen Lve 582,944,556 34.33 34.33 9.2 Subsidiaries of the Company See Note 7 Equity in other entities for subsidiaries of the Company. 9.3 Other related parties Other related parties Relationship with the Company Brother-in-law of the shareholder and actual controller of He Sen the Company Wife of the shareholder and actual controller of the He Feiyan Company Li Erlong etc. Directors, supervisors and senior officers of the Company Qinghai Heyi Commercial Co., Enterprise controlled by Wang Lei, the director of the Ltd. Company Enterprise controlled by Wang Lei, the director of the Qinghai Heyi Mining Co., Ltd. Company Kunwu Jiuding Investment Holdings Co., Ltd. and its Shareholders with 5% or above of shares of the Company related parties and under common control Beijing Baolilai Technology A wholly-owned subsidiary in which the Company's Co., Ltd. director acts as a director 9.4 Related party transactions 9.4.1 Purchase or sale of goods, and rendering or receipt of labor services Table of purchase of goods and receipt of labor services (Unit: RMB '0,000) Amount in Amount in Related parties Related party transactions 2016 2015 Qinghai Heyi Commercial Co., Ltd. Payment for materials 1,959.00 4,636.50 Qinghai Heyi Mining Co., Ltd. Consulting fees 1,187.00 Notes to the Financial Statements Page 59 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Table of sales of goods and rendering of services (Unit: RMB '0,000) Amount in Amount in Related parties Related party transactions 2016 2015 Kunwu Jiuding Investment Holdings Co., Funds for decoration Ltd. and its related parties projects 795.13 5,800.00 Beijing Baolilai Funds for decoration Technology Co., Ltd. projects 38.20 821.60 9.4.2 Related-party guarantee The Company as the warrantee: Have the Starting date Maturity Amount of the guarantee Warrantor of the date of the guarantee been guarantee guarantee performed? Chen Lve and Sino Great Wall March 21, March 21, Co., Ltd. 150,000,000.00 2016 2017 No Chen Lve, Sino Great Wall Co., July 19, Ltd. and He Feiyan 150,000,000.00 July 19, 2016 2017 No August 8, August 8, Sino Great Wall Co., Ltd. 50,000,000.00 2016 2017 No Chen Lve and Zhongcheng June 3, Jianyee Engineering Co., Ltd. 80,000,000.00 June 19, 2015 2016 Yes Chen Lve and Sino Great Wall October 28, September Co., Ltd. 130,000,000.00 2016 28, 2017 No Chen Lve, He Feiyan and Sino November 19, November Great Wall Co., Ltd. 50,000,000.00 2015 19, 2016 Yes March 10, March 9, Qinghai Heyi Mining Co., Ltd. 2016 2017 No March 10, March 9, Chen Lve 500,000,000.00 2016 2017 No Chen Lve and Sino Great Wall December 19, December Co., Ltd. 84,000,000.00 2016 19, 2017 No January 13, January 13, Chen Lve 12,000,000.00 2016 2018 No March 29, March 29, Chen Lve 12,000,000.00 2016 2018 No March 27, March 27, Chen Lve 12,000,000.00 2016 2018 No United Venture Guarantee January 8, January 7, Group Co., Ltd. 28,000,000.00 2016 2017 No Great Wall Jianyee Engineering Co., Ltd., Chen Lve and Qinghai Heyi Commercial Co., January 20, January 19, Ltd. 114,280,000.00 2015 2016 Yes May 18, Chen Lve and He Feiyan 140,000,000.00 June 11, 2015 2016 Yes Chen Lve, Sino Great Wall Co., July 12, Ltd. and He Feiyan 140,000,000.00 July 12, 2016 2017 No Beijing Zhongguancun Sci-tech February 22, March 22, Financing Guaranty Co., Ltd. 230,000,000.00 2016 2018 No Chen Lve and Qinghai Heyi January 20, January 19, Commercial Co., Ltd. 114,280,000.00 2015 2016 Yes June 3, Chen Lve 80,000,000.00 June 19, 2015 2016 Yes June 3, Chen Lve 80,000,000.00 June 19, 2015 2016 Yes Notes to the Financial Statements Page 60 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Have the Starting date Maturity Amount of the guarantee Warrantor of the date of the guarantee been guarantee guarantee performed? May 18, Chen Lve and He Feiyan 140,000,000.00 June 11, 2015 2016 Yes September 3, September Chen Lve 70,000,000.00 2014 2, 2016 Yes February 11, February Chen Lve 11,000,000.00 2015 11, 2018 No July 30, Chen Lve 11,000,000.00 July 30, 2015 2018 No Sino Great Wall International Engineering Co., Ltd. and Chen January 13, January 12, Lve 100,000,000.00 2016 2017 No Sino Great Wall International Engineering Co., Ltd., Chen January 13, January 12, Lve and He Feiyan 120,000,000.00 2016 2017 No Sino Great Wall International Engineering Co., Ltd., Chen August 25, August 25, Lve and He Feiyan 257,140,000.00 2016 2017 No Sino Great Wall International Engineering Co., Ltd. and Chen January 21, January 20, Lve 200,000,000.00 2016 2017 No January 29, July 28, Chen Lve 50,000,000.00 2016 2016 Yes September Chen Lve 30,000,000.00 March 4, 2016 3, 2016 Yes January 28, Chen Lve 50,000,000.00 July 29, 2016 2017 No Sino Great Wall International Engineering Co., Ltd. and Chen June 20, Lve 200,000,000.00 June 21, 2016 2017 No Sino Great Wall International Engineering Co., Ltd., Zhongcheng Jianyee Engineering Co., Ltd. and Chen April 28, Lve 100,000,000.00 April 29, 2016 2017 No April 26, Chen Lve 100,000,000.00 April 26, 2016 2017 No November Chen Lve 5,000,000.00 June 22, 2016 22, 2016 Yes December Chen Lve 45,000,000.00 July 5, 2016 5, 2016 Yes Sino Great Wall International Engineering Co., Ltd., Chen August 22, August 22, Lve and He Feiyan 100,000,000.00 2016 2017 No September 29, September Chen Lve and He Feiyan 100,000,000.00 2016 28, 2018 No June 28, Chen Lve 400,000,000.00 June 28, 2016 2018 No Sino Great Wall International Engineering Co., Ltd., Chen April 18, Lve and He Feiyan 200,000,000.00 April 19, 2016 2018 No December 15, June 14, Chen Lve 10,000,000.00 2016 2017 No Notes to the Financial Statements Page 61 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Have the Starting date Maturity Amount of the guarantee Warrantor of the date of the guarantee been guarantee guarantee performed? Sichuan Jinyu Financing Guaranty Co., Ltd., Ye Meifu February 17, February and Yang Qiuhua 8,000,000.00 2016 16, 2017 No June 27, Sino Great Wall Co., Ltd. 400,000,000.00 June 28, 2016 2017 No March 23, March 23, Sino Great Wall Co., Ltd. 200,000,000.00 2016 2017 No January 3, January 2, Sino Great Wall Co., Ltd. 180,000,000.00 2017 2018 No February Sino Great Wall Co., Ltd. 100,000,000.00 April 29, 2016 13, 2017 No Sino Great Wall International Engineering Co., Ltd. and Chen November 22, November Lve 500,000,000.00 2016 22, 2017 No Sino Great Wall International Engineering Co., Ltd., Chen December 21, December Lve and He Feiyan 300,000,000.00 2016 20, 2017 No December 20, December Sino Great Wall Co., Ltd. 250,000,000.00 2016 19, 2017 No March 25, March 25, Sino Great Wall Co., Ltd. 50,000,000.00 2016 2017 No 9.4.3 Borrowings from and to related parties Lending/borrowing Maturity Related parties Starting date Remark amount date Lending January 1, June 30, Chen Lve 93,855,000.00 2016 2016 December Chen Lve 4,000,000.00 July 1, 2016 31, 2016 Remark: Provision for interest on the lendings to shareholders has been made. The amount included in the profit and loss in 2016 was RMB 2,356,589.48. 9.4.4 Remuneration of key management Item Amount in 2016 Amount in 2015 Remuneration of key management 1,696,900.00 1,495,100.00 9.5 Receivables from and payables to related parties 9.5.1 Receivables Balance as at December 31, 2016 Balance as at January 1, 2016 Project Related parties Provision for Provision for Book balance Book balance bad debts bad debts Accounts receivable Kunwu Jiuding Investment Holdings Co., Ltd. and its related parties 1,609,996.92 80,499.85 2,500,737.20 125,036.86 Beijing Baolilai Technology Co., Ltd. 160,000.00 8,000.00 2,816,000.00 140,800.00 Advances to suppliers Notes to the Financial Statements Page 62 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS Balance as at December 31, 2016 Balance as at January 1, 2016 Project Related parties Provision for Provision for Book balance Book balance bad debts bad debts Qinghai Heyi Commercial Co., Ltd. 18,902,151.50 9.5.2 Payables Book Balance as at Book Balance as at Project Related parties December 31, 2016 January 1, 2016 Accounts payable Qinghai Heyi Commercial Co., Ltd. 1,750,581.64 Other payables Qinghai Heyi Commercial Co., Ltd. 2,999,209.78 He Sen 4,405,644.43 10. Commitments and contingencies 10.1 Significant commitments There were no major commitments required to be disclosed in 2016. 10.2 Contingencies There were no contingencies required to be disclosed in 2016. 11. Post balance sheet events 11.1 Notes to significant non-adjusting events On July 7, 2016, the Company held the tenth session of the seventh Board of Directors and approved the Proposal on Non-public Issuance of A Shares by Sino Great Wall Co., Ltd.. The Company intended to issue shares to Sino Great Wall (Beijing) Investment Co., Ltd., Beijing Anben Medical Investment Holding Co., Ltd. and Mr. Zheng Jihua to raise funds of RMB 2.5 billion. On October 14, 2016, the China Securities Regulatory Commission accepted the Company's application for non-public offering of shares. At the sixteenth meeting of the seventh Board of Directors convened by the Company on February 16, 2017, the Company deliberated and passed the Proposal on Adjusting the Scheme for the Non-public Issuance of Shares and adjusted the amount of funds to be raised to RMB 900 million.On March 22, 2017, the Company's application for non-public issuance of A shares was approved by the Issuance Examination Commission of China Securities Regulatory Commission, but official documents approved by the China Securities Regulatory Commission have not received yet. Notes to the Financial Statements Page 63 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS 11.2 Profit distribution Approved at the seventeenth session of the seventh Board of Directors, the Company distributed cash dividends of RMB 0.60 (including tax) for every 10 shares based on the existing 16,982,450,110,000 shares. No bonus shares were given and no capital reserves were conversed to increase share capital. 12. Other important matters 12.1 Outstanding L/G In order to ensure the smooth completion of the project, at the request of the owner, the Company applied to a commercial bank for issuing a performance guarantee. As at December 31, 2016, the amount of the outstanding L/G was RMB 1,262,632,100. 12.2 Segment information 12.2.1 Basis for recognition of reportable segment and accounting policies Accounting policies of reportable segment There were no related-party transactions among domestic architectural decoration, overseas architectural decoration and medical treatment, so no inters-segment price was transferred; Medical treatment was implemented by the Company and its independent subsidiary; overseas architectural decoration was accounted for according to the account sets set up in the regions where the projects in progress are located, mainly including account sets for Qatar, Kuwait, Cambodia, Sri Lanka, Malaysia, Burma, Maldives and Saipan, so there were no fees which were indirectly attributable to each segment and needed to be amortized; the business data of overseas architectural decoration was formed by the financial data of the above 8 account sets for major projects. Notes to the Financial Statements Page 64 SINO GREAT WALL CO., LTD. FOR THE YEAR ENDED DECEMBER 31, 2016 NOTES TO THE FINANCIAL STATEMENTS 12.2.2 Financial information of reportable segments Domestic architectural decoration Overseas architectural decoration Medical treatment Offset Total Item Year 2016 Year 2015 Year 2016 Year 2015 Year 2016 Year 2015 Year 2016 Year 2015 Year 2016 Year 2015 I. Operating income 1,418,192,694.17 2,428,344,815.19 3,165,213,312.57 1,560,310,586.25 81,593,110.43 -21,703,598.14 4,664,999,117.17 4,010,358,999.58 Including: income from external transactions 1,418,192,694.17 2,428,344,815.19 3,165,213,312.57 1,560,310,586.25 81,593,110.43 -21,703,598.14 4,664,999,117.17 4,010,358,999.58 Income from inter-segment transactions - - II. Operating cost 1,184,945,928.21 1,988,442,188.52 2,216,759,318.30 1,154,881,399.00 57,672,498.15 -21,703,598.14 3,459,377,744.66 3,165,027,185.66 Including: costs of external transactions 1,184,945,928.21 1,988,442,188.52 2,216,759,318.30 1,154,881,399.00 -21,703,598.14 3,401,705,246.51 3,165,027,185.66 Costs of inter-segment transactions - - III. Losses from asset impairment 74,286,638.56 80,433,729.48 95,207,208.36 30,903,374.69 518,043.19 170,011,890.11 111,337,104.17 IV. Depreciation and amortization 3,004,474.27 6,985,552.79 30,488.71 21,288.88 19,316.10 -3,794,638.67 6,848,917.76 7,006,841.67 V. Total profit -304,963,110.16 69,862,580.73 864,476,659.76 360,904,330.95 3,583,802.03 - 1,759,594.94 -25,117.82 561,337,756.68 430,792,029.50 VI. Income tax expenses -10,207,854.94 76,207,293.00 99,038,519.27 8,766,407.91 1,703,401.20 1,289,203.78 89,244,861.75 84,973,700.90 VII. Net profit -294,755,255.22 -6,344,712.27 765,438,140.48 352,137,923.04 1,880,400.83 - 470,391.16 -25,117.82 472,092,894.93 345,818,328.60 VIII. Total assets 10,947,559,949.24 6,044,181,578.99 3,044,412,477.45 1,097,651,243.20 121,748,481.08 6,127,541,946.13 3,124,369,997.56 7,986,178,961.63 4,017,462,824.63 IX. Total liabilities 7,089,471,639.73 2,406,019,801.98 1,752,059,212.34 690,133,065.43 136,402,672.37 2,822,237,435.41 358,948,894.24 6,155,696,089.04 2,737,203,973.17 Notes to the Financial Statements Page 65 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 13. Notes to main items of the financial statements of the parent company 13.1 Accounts receivable 13.1.1 Disclosure of accounts receivable by category Balance as at December 31, 2016 Book balance Provision for bad debts Category Proportion Proportion Book value Amount Amount (%) (%) Receivables that are individually significant but with provision for bad debts made on an individual basis Receivables subject to provision for bad debts on credit risk characteristics basis 6,680.00 100.00 334.00 5.00 6,346.00 Receivables that are individually insignificant but with provision for bad debts made on an individual basis Total 6,680.00 100 334 5 6,346.00 (Continued) Balance as at January 1, 2016 Book balance Provision for bad debts Category Proportion Proportion Book value Amount Amount (%) (%) Receivables that are individually significant but with provision for bad debts made on an individual basis Receivables subject to provision for bad debts on credit risk characteristics basis 30,614.00 100.00 1,530.70 5.00 29,083.30 Receivables that are individually insignificant but with provision for bad debts made on an individual basis Total 30,614.00 100 1,530.70 5 29,083.30 In the portfolio, accounts receivable with the provision for bad debts made under the aging analysis method: Balance as at December 31, 2016 Aging Accounts Provision for Proportion of receivable bad debts provision Within 1 year 6,680.00 334.00 5.00 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years Total 6,680.00 334.00 13.1.2 Provision, recovery or reversal of accounts receivable in 2016 The provision for bad debts made in 2016 was RMB 0.00; the provision for bad debts recovered or reversed in 2016 was RMB 1,196.70. 13.1.3 Top five receivables by debtor Balance as at December 31, 2016 Company name Accounts Proportion in the total Provision for receivable accounts receivables (%) bad debts Sporadic individual rent in Kuichong, Shenzhen 6,680.00 100.00 334.00 Total 6,680.00 100.00 334.00 Notes to the Financial Statements Page 66 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 13.2 Other receivables 13.2.1 Disclosure of other receivables by category: Balance as at December 31, 2016 Book balance Provision for bad debts Category Proportion Book value Amount Amount Proportion (%) (%) Other receivables that are individually significant but with provision for bad debts made on an individual basis Other receivables provided for bad debts on portfolio of credit risks 1,672,982,763.29 100.00 782,721.31 0.05 1,672,200,041.98 Other receivables that are individually insignificant but with provision for bad debts made on an individual basis Total 1,672,982,763.29 100 782,721.31 0.05 1,672,200,041.98 (Continued) Balance as at January 1, 2016 Book balance Provision for bad debts Category Proportion Book value Amount Amount Proportion (%) (%) Other receivables that are individually significant but with provision for bad debts made on an individual basis Other receivables provided for bad debts on portfolio of credit risks Other receivables that are individually insignificant but with provision for bad debts made on an individual basis Total Remark: There were no other receivables as at January 1, 2016. 13.2.2 Provision for bad debts and reversal or recovery thereof in 2016 The provision for bad debts made in 2016 was RMB 782,721.31; the provision for bad debts recovered or reversed in 2016 was RMB 0.00. 13.2.3 Category of other receivables by nature Book Balance as at Book Balance as at Nature December 31, 2016 January 1, 2016 Current accounts between entities 1,657,328,337.13 Petty cash 1,272,085.13 Margin and deposit 14,382,341.03 Others Total 1,672,982,763.29 13.2.4 Top five other receivables by debtor Proportion in Balance of Balance as at total other provision for bad Company name Nature December 31, Aging receivables debts as at 2016 (%) December 31, 2016 Wuhan Commercial Workers Hospital Co., Current accounts with Ltd. related parties 107,800,000.00 Within 1 year 6.44 Notes to the Financial Statements Page 67 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Proportion in Balance of Balance as at total other provision for bad Company name Nature December 31, Aging receivables debts as at 2016 (%) December 31, 2016 Upper First-class Hospital, Hongqiao, Liangdu, Liupanshui (Finance Bureau of Fushun Economic Development Zone) Deposits 10,000,000.00 Within 1 year 0.60 500,000.00 Hunan Trust Co., Ltd. Deposits 2,000,000.00 Within 1 year 0.12 100,000.00 Borrowings of Xu Ce employees 1,109,002.22 Within 1 year 0.07 55,450.11 The First People's Hospital of Lingbao City (COCITC) Deposits 1,000,000.00 Within 1 year 0.06 50,000.00 Total / 121,909,002.22 / 7.29 705,450.11 13.3 Long-term equity investments Balance as at December 31, 2016 Balance as at January 1, 2016 Provision Provision Item Book balance for Book value Book balance for Book value impairment impairment Investment in subsidiaries 3,176,451,536.66 3,176,451,536.66 3,079,451,536.66 3,079,451,536.66 Total 3,176,451,536.66 3,176,451,536.66 3,079,451,536.66 3,079,451,536.66 13.3.1 Investment in subsidiaries Balance of Balance as at Balance as at Provision for provision for Increase Decrease Investee January 1, December 31, impairment in impairment as at in 2016 in 2016 2016 2016 2016 December 31, 2016 Sino Great Wall International Engineering Co., Ltd. 3,079,451,536.66 3,079,451,536.66 Wuhan Commercial Workers Hospital Co., Ltd. 97,000,000.00 97,000,000.00 Total 3,079,451,536.66 97,000,000.00 3,176,451,536.66 13.4 Investment income Item Amount in 2016 Amount in 2015 Income from long-term equity investments accounted for under cost method Income from long-term equity investments accounted for under equity method Investment income from disposal of long-term equity investments Investment income received from financial assets measured at fair value through current profit and loss during the holding period Notes to the Financial Statements Page 68 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Item Amount in 2016 Amount in 2015 Investment income received from disposal of financial assets measured at fair value through current profit and loss Investment income from held-to-maturity investments during the holding period Investment income of available-for-sale financial assets during the holding period Investment income from disposal of available-for-sale financial assets Gains and losses arising from re-measurement of the remaining equities at the fair value after the loss of the control Others 396,197.49 Total 396,197.49 13.5 Operating income and operating cost Amount in 2016 Amount in 2015 Item Income Cost Income Cost Primary business Other business 238,048.64 2,318,061.00 237,620.18 Total 238,048.64 2,318,061.00 237,620.18 14. Supplementary information 14.1 Breakdown of current non-recurring profits and losses Item Amount Remark Profits or losses from disposal of non-current assets -564,833.40 Tax returns, deduction and exemption approved beyond the authority or without official approval documents Government grants included in current profits and losses (except for government grants closely related to the enterprise business, obtained by quota or quantity at unified state standards) 108,121.33 Expenses for using funds charged from non-financial enterprises and included in the current profit and loss Gains from the difference between the investment costs of acquisition of subsidiaries, associates and joint ventures and share in the net fair value of the identifiable assets of the investee when investing 1,783,284.99 Profit or loss on exchange of non-monetary assets - Gains or losses from entrusting the investments or management of asset Provision of asset impairment made due to force majeure, such as natural disasters Gains or losses from debt restructuring Enterprise reorganizing expenses, such as employee accommodation costs and integration expenses Gains or losses from transactions with obvious unfair transaction price Current net gains and losses of the subsidiaries from business combinations under common control from the beginning of the period to the combination date Notes to the Financial Statements Page 69 SINO GREAT WALL CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Item Amount Remark Profit or loss on contingencies irrelevant to normal operation of the Company Except for effective hedging business related to the normal business of the company, profits or losses from fair value changes in held-for-trading financial assets and held-for-trading financial liabilities, and investment income from disposal of held-for-trading financial assets, held-for-trading financial liabilities and available-for-sale financial assets 443,065.98 Reversal of the impairment provision for receivables subject to separate impairment test - Profits or losses from entrusted loans - Profit or loss on changes in fair value of investment properties subsequently measured under the fair value model - Effects of one-off adjustments to the current profit and loss in accordance with the requirements of tax and accounting laws and regulations on the current profit and loss - Custodian income from entrusted management - Other non-operating income and expenditure except for the above items 5,296,814.65 Other items of gains and losses subject to the definition of non-recurring gains and losses - Effect of income tax -3,668,000.60 Effect of minority interests -11,192.65 Total 3,387,260.30 14.2 Return on equity and earnings per share: Earnings per share (RMB) Weighted average return Profit for the reporting period Basic earnings per Diluted earnings on equity (%) share per share Net profit attributable to ordinary shareholders of the Company 31.18 0.28 0.28 Net profit attributable to ordinary shareholders of the Company after deducting non-recurring gains and losses 30.96 0.28 0.28 Sino Great Wall Co., Ltd. (Official Seal) April 26, 2017 Notes to the Financial Statements Page 70