Stock Code: 200771 Stock ID: Hangqilun B Announcement No. 2010-34 INTERIM REPORT 2010 August 28, 2010 杭州汽轮机股份有限公司 HANGZHOU STEAM TURBINE CO., LTD. 1Table of Contents Table of Contents....................................................................................................................................................................................2 Chapter I. Important Statement...............................................................................................................................................................3 Chapter II. Company Profile..................................................................................................................................................................4 Chapter III. Changes in Share Capital & Particulars about Shareholders................................................................................................7 Chapter IV. Directors, Supervisors, and Executives...............................................................................................................................9 Chapter V. Board of Director’s Report.................................................................................................................................................11 Chapter VI. Important Events...............................................................................................................................................................15 Chapter VII. Financial Report..............................................................................................................................................................21 Chapter VIII. Documents Ready for Inquiring.....................................................................................................................................81 2Chapter I. Important Statement Chapter I. Important Statement 1. The Board of Directors and the directors of the Company guarantee that there are no significant omissions, fictitious or misleading statements carried in the Report and we will accept individual and joint responsibilities for the truthfulness, accuracy and completeness of the Report. 2. The Interim Report 2010 was examined at the 3rd meeting of the 5th term of Board and was passed unanimously by the directors at the meeting. None of the directors, supervisors, or senior managements is not able to guarantee or disagree with the accuracy, authentic and completeness. 3. Director Zhen Bin was out on business trip and entrusted Director Wanghongkang to vote on his behalf. All of the other directors attended the meeting. 4 This report is prepared both in English and Chinese. When there is any conflict in understanding, the Chinese version shall prevail. 5. The financial statements carried in this report are not audited. 6. Chairman Mr. Nie Zhonghai, General Manager Mr. Yan Jianhuan, Chief Financial Officer Mr. Bai Ronghua, and the Chief of Accounting Department Mr. Wu Guomei hereby declares: the Financial Statement in the report is guaranteed to be truthful and complete. The Board of Directors of Hangzhou Steam Turbine Co., Ltd. August 28, 2010 3Chapter II. Company Profile (I) Company Profile 1) Legal Name of the Company Name in Chinese: 杭州汽轮机股份有限公司 Name in English: HANGZHOU STEAM TURBINE CO., LTD Abbreviation in English: HTC 2) Legal Representative: Mr. Nie Zhonghai 3) Secretary of the Board: Mr. Yu Changquan Tel: (0571)85780432 E-mail: ychq@htc.net.cn Stock affair representative: Wang Gang Tel: (0571)85780198 Email: wg@htc.net.cn Board of Directors’ Office: (0571)85780198, 85784758 Fax: (0571)85780433 4) Registered Address and Office Address: 357 Shiqiao Rd., Hangzhou City, Zhejiang, China Post Code: 310022 Website: http://www.htc.cn 5) Shares Listed in: Shenzhen Stock Exchange Stock Abbreviation: Hangqilun B Stock Code: 200771 6) Presses Assigned by National Security Supervisory Committee for Information Disclosure: Website: http://www.cninfo.com.cn Press media: Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily Report prepared and ready for inquire at: Securities Office, Hangzhou Steam Turbine Co., Ltd. 7) Supplementary information: 1. Primary business registration of the company was on April 23, 1998 at Zhejiang Provincial Business Administration. The latest renewing of registration was on May 6, 2009 at Zhejiang Provincial Business Administration. 2. Business license No. 330000400001023. 3. Tax registration No. 330165704202620 4. Organization code: 704202620 5. Public accountants employed: Certified public accountant: Pan-China (Zhejiang) Certified Public Accountants Office address: 6-10/F Xihu Business Building, 128 Xixi Road, Hangzhou Post office: 310007 Email: info@orients.cn Tel: (0571)88216888 Fax: (0571)88216999 4(II) Financial highlights 1. Main accounting data and indices In RMB Yuan Ended this report term Ended previous year Increase/decrease (%) Gross Assets 5,473,877,595.45 4,910,772,244.30 11.47% Owners’ equity to shareholders of the listed company 2,443,214,287.92 2,336,109,466.46 4.58% Share capital 483,340,000.00 371,800,000.00 30.00% Net asset per share attributable to the shareholders of the listed company (Yuan/share) 5.05 6.28 -19.59% Report term (Jan-Jun) Same period last year Increase/decrease (%) Turnover 1,840,515,550.97 1,646,527,768.37 11.78% Operation profit 364,532,652.81 337,811,535.69 7.91% Total profit 361,682,077.81 338,432,212.27 6.87% Net profit attributable to the shareholders of the listed company 255,824,821.46 238,780,981.80 7.14% Net profit after deducting of non-recurring gain/loss attributable to the shareholders of the listed company 257,610,164.37 239,412,809.45 7.60% Basic earnings per share (Yuan/share) 0.5293 0.6422 -17.58% Diluted earnings per share (Yuan/share) 0.5293 0.6422 -17.58% Net return on equity (%) 10.47% 11.99% -1.52% Cash flow generated by business operation, net 209,974,963.27 -9,773,984.93 -2,248.30% Net Cash flow per share generated by business operation (yuan/share) 0.43 -0.03 -1,533.33% Note: The basic earnings per share of the report term was RMB0.5293 per share. Upon the 483.34 million capital shares after the capitalizing of common reserves, the basic earnings per share would be RMB0.6422 per share. Where the figure provided for same period of last year was on total capital share of 371.80 million. 2. Non-recurring profit/loss items In RMB Yuan Non-recurring gain and loss items Amount Note (if applicable) Gain/loss of non-current assets 48,907.71 Government subsidies accounted into current gain/loss account, other than those closely related to the Company’s common business, comply with the national policy and continues to enjoy at certain fixed rate or amount. 1,300,412.00 Other non-business income and expenditures other than the above -4,199,894.71 Influenced amount of minority shareholders’ equity 508,618.57 Influenced amount of income tax 556,613.52 Total -1,785,342.91 - 53. Difference between domestic and international accounting standard In RMB Yuan Net profit attributable to the shareholders of the listed company Owners’equity to shareholders of the listed company Current term Amount of last term End of term Beginning of term On IAS 255,824,821.46 238,780,981.80 2,443,214,287.92 2,336,109,466.46 On domestic accounting standard 255,824,821.46 238,780,981.80 2,443,214,287.92 2,336,109,466.46 Individual and total of adjustment according to IAS Total of differences between the IAS and domestic accounting standard 0.00 0.00 0.00 0.00 Statement on differences between the IAS and Chinese Accounting Standard None 6Chapter III. Changes in Share Capital & Particulars about Shareholders I. Change of capital shares According to the resolutions adopted at the Shareholders’ Annual Meeting 2009 held on June 2, 2010, the dividend plan for year 2009 was: basing on the total capital share of 371,800,000 at end of 2009, 3 bonus shares will be distributed to each 10 shares (tax included) as capitalizing of retained profit, upon completion of this plan, the total capital share will be increased to 483,340,000 shares. II. Change of shareholding position In shares Before the change Changed (+,-) After the change Amount Proportion Issuing of new shares Bonus shares Transferred from reserves Others Sub-total Amount Proportion I. None negotiable shares 23,600,000 63.64% 0 70,980,000 0 0 70,980,000 307,580,000 63.64% 1. Promoter’s shares 23,600,000 63.64% 0 70,980,000 0 0 70,980,000 307,580,000 63.64% Including: State-owned shares 23,600,000 63.64% 0 70,980,000 0 0 70,980,000 307,580,000 63.64% Domestic legal person shares Overseas legal person shares Others 2. Legal person shares placed 3. Employees’ shares 4. Preference shares or others II. Negotiable shares 135,200,000 36.36% 0 40,560,000 0 0 40,560,000 175,760,000 36.36% 1. Common shares in RMB 2. Foreign shares in domestic market 135,200,000 36.36% 0 40,560,000 0 0 40,560,000 175,760,000 36.36% 3. Foreign shares in overseas market 4. Others III. Total of capital shares 371,800,000 100.00% 0 111,540,000 0 0 111,540,000 483,340,000 100.00% III. Top 10 shareholders and current-share holders in shares Total of shareholders 15,783 7Top 10 Shareholders Name of the shareholder Properties of shareholder Share proportion % Total shares Non-negotiable shares held Pledged or frozen Hangzhou Steam Turbine Power Group Co., Ltd. State-owned legal person 63.64% 307,580,000 307,580,000 91,000,000 SCHRODER INTL SELECTION FD-GREATER CN FD GTI 25287 Overseas legal person 1.69% 8,173,716 0 0 NORGES BANK Overseas legal person 0.72% 3,470,039 0 0 TOYO SECURITIES ASIA LIMITED-A/C CLIENT. Overseas legal person 0.37% 1,787,326 0 0 Xia Zulin Domestic natural person 0.35% 1,673,000 0 0 BOCHK INVESTMENT FUNDS-BOCHK CHINA GOLDEN DRAGON FUND Overseas legal person 0.34% 1,659,836 0 0 AUSTRALIANSUPER PTY LTD Overseas legal person 0.28% 1,351,488 0 0 Natio Securities Co.,Ltd. Overseas legal person 0.24% 1,186,909 0 0 INVESTERINGSFORENINGEN DANSKE INVEST Overseas legal person 0.22% 1,067,033 0 0 Hu Xiaofeng Domestic natural person 0..21% 1,004,127 0 0 Top 10 Negotiable Share Holders Name of the shareholder Current shares held Category of shares SCHRODER INTL SELECTION FD-GREATER CN FD GTI 2528 8,173,716 Foreign shares placed in domestic exchange NORGES BANK 3,470,039 Foreign shares placed in domestic exchange TOYO SECURITIES ASIA LIMITED-A/C CLIENT. 1,787,326 Foreign shares placed in domestic exchange Xia Zulin 1,673,000 Foreign shares placed in domestic exchange BOCHK INVESTMENT FUNDS-BOCHK CHINA GOLDEN DRAGON FUND 1,659,836 Foreign shares placed in domestic exchange AUSTRALIANSUPER PTY LTD 1,351,488 Foreign shares placed in domestic exchange Natio Securities Co.,Ltd. 1,186,909 Foreign shares placed in domestic exchange INVESTERINGSFORENINGEN DANSKE INVEST 1,067,033 Foreign shares placed in domestic exchange Hu Xiaofeng 1,004,127 Foreign shares placed in domestic exchange GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED 737,504 Foreign shares placed in domestic exchange Notes to relationship or “action in concert” among the top ten shareholders. (1) Of top ten shareholders, Hangzhou Steam Turbine Group Co., Ltd. holds shares on behalf of the State and the others are to B-Share shareholders. (2) Hangzhou Steam Turbine Group Co., Ltd. is not related to any of the other 9 shareholders. It is unknown whether there is any relationship among the 9 shareholders. (3) None of the other shareholders are regarded as Act in Concert relationship according to the Administrative Regulations of Information Disclosing of Public Companies. (4) Hangzhou Steam Turbine Group Co., Ltd. (HSTG) entered the share equity collateral contract with Communication Bank Zhejiang Branch on April 30, 2010. Basing on the original “Highest Value Pledge Contract”, the collateral subject will stay unchanged at 91 million shares. In return, HSTG will have the annual credit up to RMB300 million. The collateral term will start from April 30, 2010 and ended at March 31, 2012. As of the report date, the total of capital shares of the Company was 483.34 million shares, 307.58 were held by HSTG, the 91 million shares were state-owned promoter’s shares, accounted for 29.60% of the shares held by HSTG, and 18.83% of the Company’s total capital shares. IV. Change of holding shareholder and substantial controller No change happened to the controlling shareholder and substantial controller. 8Chapter IV. Directors, Supervisors, and Executives I. Change of shareholding of directors, supervisors and senior executives Name Position Shares held at the beginning of term Amount of shares increased in the report term Amount of shares decreased in the report term Shares held at the end of term Incl. Conditional shares Share option held at end of term Cause of change Zhang Shutan Vice General Manager 44,000 13,200 0 57,200 0 0 3 bonus shares to each 10 shares II. Change of directors, supervisors and senior executives 1. Leaving of directors in the report term Name Position Date of leaving Reason Document for reference Announcement No. Zhang Mingguang Independent Director June 2, 2010 Job term of 6 years expired Resolutions of the Shareholders’ Annual Meeting 2009 2010-25 Zhou Zhaoxue Independent Director June 2, 2010 Job term of 6 years expired Resolutions of the Shareholders’ Annual Meeting 2009 2010-25 Qi Guoning Independent Director June 2, 2010 Job term of 6 years expired Resolutions of the Shareholders’ Annual Meeting 2009 2010-25 Hua Xiaoning Independent Director June 2, 2010 Job term of 6 years expired Resolutions of the Shareholders’ Annual Meeting 2009 2010-25 2. New directors engaged in the report term Name Position Date of engaging Way of engaging Document for reference Announcement No. Xu Yongbin Independent Director June 2, 2010 Elected at shareholders’ meeting Resolutions of the Shareholders’ Annual Meeting 2009 2010-25 Lv Fan Independent Director June 2, 2010 Elected at shareholders’ meeting Resolutions of the Shareholders’ Annual Meeting 2009 2010-25 Zhang Hejie Independent Director June 2, 2010 Elected at shareholders’ meeting Resolutions of the Shareholders’ Annual Meeting 2009 2010-25 3. Engaging and dismissing of directors, supervisors and executives. The Company held the Shareholders’ Annual Meeting 2009, the 1st meeting of the 5th term of Board, and the 1st 9meeting of the 5th term of Supervisory Committee on the same day on June 2, 2010. One the shareholders’ meeting, Nie Zhonghai, Wang Hongkang, Zhen Bin, Yan Jianhua, Bai Ronghua, Ye Zhong, Liu Guoqiang, Xu Yongbin, Lv Fan, and Zhang Hejie were elected the directors and independent directors of the Company respectively; Chu Shuilong, Pu Yangshuo, and Zhang Yougen were elected the supervisors of the 5th term of Supervisory Committee. Supervisor Lu Jianhua, and Zhao Ying, were elected the employee supervisor by the Employees’ Congress on April 23, 2009. Their job term was from April 23, 2009 to April 22, 2012, till reelected by the Union. Mr. Nie Zhonghai was elected by the Board as Chairman, and Mr. Wang Hongkang and Zhen Bin were elected the Vice Chairman. Yan Jianhua, Bai Ronghua, Ye Zhong, Yu Changquan, Ye Yongzhong, and Zhang Shutan were engaged as Vice General Managers. Bai Ronghua, Ye Zhong and Yu Changquan were engaged the Chief Accountant, Chief Engineer, and Secretary of the Board respectively. Chu Shuilong was elected the Chairman of the Supervisory Committee. Except for all of the independent directors, who are changed, none of the directors, supervisors and executives was changed. 10Chapter V. Board of Director’s Report I. Business discussion 1. Business overview In the first half of 210, the national economy continued to grow while the global economy was recovering slowly. The government kept promoting the strategic economic shifting and structural adjustment. Development of the whole country was facing a wilder and deeper reformation. Meanwhile, the Company was using its best effort to consolidate its market share in industrial steam turbine, to reinforce product and technical development, and extend its products to energy-saving and low-carbon area. In the report term, the Company kept growing steadily and realized operational income of RMB1,840.5156 million, gross profit of RMB361.6821 million, net profit attributable to the shareholders of the PLC of RMB255.8248 million, which have increased by 11.78%, 6.87%, and 7.14% respectively over the same period of last year. In the report term, the Company achieved great increase both in production and sales. As of end of June, the Company has engaged the ordering contracts with total value of RMB1.256 billion, increased by 9.3% over the same period of last year. In which there were 138 units of industrial steam turbine, increased by 39.4%. The headquarter of the Company has realized the total output of RMB1.466 billion, increased by 29.3% over the same period of last year, including 153 units of industrial steam turbine, increased by 19.5% over the same period of last year. In the report term, the Company kept exploring in the markets. Firstly, our sales in international market were increasing significantly. In the first half of year, the headquarter engaged the contracts valued over RMB357 million, increased by 112.75% over the same period of last year. The export contracts accounted for nearly 30% of the total contracts. This further improved the Company’s market layout both in the country and abroad. Secondly, the leading position in high-end products was consolidated. We won in a number of bidding competition for large scale projects such as large PTA, large ethylene, large water pump for power plant, large air fan, and large thermal power plant equipment. Thirdly, the Company was exploring the energy-saving equipment market. For instance, the Company won the contract with Huaneng International Haimen Power Plant to reengineering its air driver from electronic driving to steam turbine driving. This will reduce the energy consuming of the power plant, and stand a good example for energy-saving reconstruction of power plant industry. In the report term, the Company kept reinforcing technical development. Since the beginning of 2010, the Company launched R&D on 4 new products and 19 technical programs. The sample unit of auxiliary water pumps for million KW class nuclear power plant has passed the national verification. This will fill up another technical vacancy of the nuclear industry of the country and will provide opportunities for the Company to set its foot into nuclear industry. Through cooperating with researching institutions, universities, and other enterprises, the Company successfully adopted a number of key technologies in the products and production process. In the report term, the Company filed for 14 technical patents, including 5 invention patents. In the report term, the Company further reinforced its internal management. Along with the implementing of the 12th 5-Year-Plan, the Company conducted discussion and researching in future company structure, market construction, operation control, business upgrading, product planning, technical innovation, and trademark management. At entering of the global market, the Company was flowing national trade routines and kept concentrating in quality management. The quality management system, environment management system, and labor health management system were integrated in the Company. Through holding of the grand meeting with suppliers, the Company reinforced the strategic cooperation with the suppliers. Products provided to major projects were operating at the international standard and won great remark by major clients such as China Petroleum. In the report term, the performances of holding subsidiaries were increasing. Zhejiang Steam Turbine Packaged Technologies Co., Ltd. has realized sales income of RMB126.0941 million, increased by 153.5% over the same period of last year, and profit of RMB16.1041 million. Hangzhou Steam Turbine Auxiliary Machinery Co., Ltd. has realized sales income of RMB222.7150 million, increased by 12.22% over the same period of last year, and profit of RMB43.5857 million, increased by 23.94%. Hangzhou Steam Turbine Machinery Equipment Co., Ltd. has realized sales income of RMB92.1187 million, increased by 80.02%, and profit of RMB29.8015 million, increased by 88.04%. Hangzhou Steam Turbine Casting Co., Ltd. has realized sales income of RMB139.5253 million, increased by 84.64%, and profit of RMB9.8596 million, increased by 2,012.22%. Hangzhou Zhongneng Steam Turbine Power Co., Ltd. has realized the sales income of RMB344.4547 million, and profit of 11RMB46.9896 million. 2. Business indices and analysis 1) Business performance of the 1st half of year RMB0’000 No. Items Jan-Jun 2010 Jan-Jun 2009 Increase/decrease (%) 1 Turnover 184,051.56 164,652.78 11.78 2 Investment gains (“-“ for loss) 110.07 2,989.81 -96.32 3 Operative profit (“-“ for loss) 36,453.27 33,781.15 7.91 4 Non-operational income 220.77 348.90 -36.72 5 Non-operational expenditure 505.83 286.83 76.35 6 Gross profit (“-“ for loss) 36,168.21 33,843.22 6.87 7 Net profit (attributable to the owners’ equity of the parent company) 25,582.48 23,878.10 7.14 8 Net increasing of cash and cash equivalents -1,790.60 -2,374.32 -24.58 Notes: (1) Sales income increased by 11.78% over the same period of last year, which was caused by increase of sales of industrial steam turbine. (2) Investment gains decreased by 96.32%, it was because the dividend of Bank of Hangzhou for year 2009 was received in July 2010. (3) Operational profit increased by 7.91%, which was caused by increase of operational income. (4) Non-operational income decreased by 36.72%, which was caused by decreased government subsidy. (5) Non-operational expenditures increased by 76.35%, which was caused by increase of donation from the same period of last year by RMB1.7783 million, and the hydraulic fund has increased by RMB353.2 thousand. (6) Total profit has increased by 6.87%, which was caused by increase of operational income. (7) Net profit (attributable to the owners’ of the parent co.) has increased by 7.14%, which was caused by increase of operational income. (8) Cash and cash equivalents increased by 24.58%, which was caused by increase of money received from sales of goods and providing of services increased by RMB355.957 million. 2) Business and product segments In RMB10 thousand Segments on industries On industry or product Turnover Operation cost Gross profit ratio (%) Increase/decrease of turnover over the same period of last year (%) Increase/decrease of operation cost over the same period of last year (%) Increase/decrease of gross profit ratio over the same period of last year (%) Boiler and power machine manufacture 151,592.38 94,798.54 37.46% 11.46% 13.96% -1.38% Casting 2,799.84 2,237.01 20.10% -22.49% -1.55% -17.00% Petrochemical and other special machineries 3,651.03 3,528.72 3.35% -45.79% -25.94% -25.91% Packaged 5,799.90 4,730.90 18.43% -43.56% -26.35% -19.06% 12equipment for waste heat power plant Other special equipment 19,182.17 11,980.24 37.54% 211.31% 302.29% -14.13% Total 183,025.32 117,275.41 35.92% 12.43% 17.71% -2.88% Segments on products Industrial steam turbine 151,592.38 94,798.54 37.46% 11.46% 13.96% -1.38% Casting products 2,799.84 2,237.01 20.10% -22.49% -1.55% -17.00% Auxiliary machinery 3,651.03 3,528.72 3.35% -45.79% -25.94% -25.91% Packaged equipment for waste heat power plant 5,799.90 4,730.90 18.43% -43.56% -26.35% -19.06% Others 19,182.17 11,980.24 37.54% 211.31% 302.29% -14.13% Total 183,025.32 117,275.41 35.92% 12.43% 17.71% -2.88% 3) Main business geographic segment In RMB10 thousand Regions Turnover Change of income over last year % Domestic 158,919.54 6.46% Overseas 24,105.77 78.24% Total 183,025.32 12.43% 3. Statement on the changes occurred with the major business and its structure No major change happened to main business and its structure in the report term. 4. Statement on the major change of profitability (gross profit ratio) of major business comparing with last year. No major change happened to the profitability of the main businesses. 5. Statement on the major changes occurred with the profit structure comparing with last year No major change happened to the composition of profit structure. 6. Problems and difficulties in the report term 1) In the report term, the Company’s orders were more concentrated in large scale units and with shorter delivery terms. The weakness in productivity of larger scale products was becoming more and more severe. The Company has been doing its best effort to balance internal and external resources to achieve best efficiency of production and overcome the difficulties. 2) Along with increasing of international orders, the Company is facing different technical standards, delivery terms, production process, and difficulties in communicating with overseas customers. The Company is working on standardizing the production process and improve its capacity in organize international operation. 13II. Investment 1. Using of proceeds from share placing. No financing proceeds in the report term or carried over from previous report term. 2. Using of major non-raised capital No using of major non-raised capital occurred in the report term. III. Prospect of the 2nd half Refer to the business plan of 2010, the Company is facing a tough test in the 2nd half of the year. The Company will further reinforce investment in construction of infrastructures and key equipment, refine internal and external resources, ensure delivering of high-quality products to the clients, and accomplishing of the business target set at the beginning of year. The Company will keep promoting fine production, optimizing cost control, and following with the market trend. Close attention will be paid on national policies and the 12th 5-Year-Plan. The Company will keep following with the national strategies in energy structure upgrading and key equipment manufacturing industry, reinforcing technical innovation, and expand product application area, and reinforce the marketing effort in internal national market. 14Chapter VI. Important Events I. Administrative Position In the report period,the Company constantly improved its corporate administration structure, strengthened standardized operation and internal controlling system strictly according to the Company Law, the Securities Law, and the Administration Standards of Listed Companies, aiming to guard the interests of the shareholders. According to the laws and regulations, the Company produced the “Administration rules of shareholding by directors, supervisors, and executives”, “Responsibility tracking rules of major error in annual reports”, and “Administration rules of information insiders”. In the report term, the Company has conducted term-shifting of the directors, supervisors and executives according to the Articles of Association, and adjusted the members of professional committees in the Board. The Company was completely independent from the controlling shareholder in aspects of business, personnel, asset, organization and accounting. Decision-making and information disclosing procedures concerning major investment and related transactions have been carried out according to the laws and regulations. No non-operational capital adoption happened in relation to the controlling shareholder and its subsidiaries. II. Acquiring, disposing and reorganizing of capital No major acquiring, disposing, or reorganizing of capital occurred in the report term. III. Non-operational transaction of credits and debts with related parties In the report term, Hangzhou Steam Turbine Packaged Equipment Engineering Co., Ltd. – the holding subsidiary of Hangzhou Zhongneng Steam Turbine Co., Ltd., borrowed RMB50 million from Hangzhou Relian Import & Export Co., Ltd. – a related party of the Company. The loan term was one year, and was used as working capital of the Packaged Equipment Co. IV. Major lawsuit issues The Company has not involved in any material lawsuit or arbitration in the report period. V. Major contracts No other material contract engaged in the report term. VI. Securities investment The Company made no investment in external securities and hold no shares of other PLCs in the report term. VII. Shareholding in non-listed financial entities In RMB Yuan Name of the enterprises Initial investment Shares held Share portion Book value at the end of term Gain/loss of the report term Change of owners’equity in the report term Accounting subject Source of shares Hangzhou Bank 390,954,040.00 115,593,200 6.92% 390,954,040.00 0 0.00 Long-term share equity investment Own capital Total 390,954,040.00 115,593,200 6.92% 390,954,040.00 0 0.00 - - VIII. Related transactions 1. No major related transactions in the report term. 2. Operational credits and debts with related parties in the report term: 15In RMB 10 thousand Yuan Fund provided to the related parties Accept money from the related parties Related parties Amount occurred Balance Amount occurred Balance Hangzhou Steam Turbine Power Group Co., Ltd. 111.00 87.65 117.75 2,391.37 Hangzhou Steam Turbine Power Sales Co., Ltd. 4,954.64 10,464.69 3,618.36 2,653.48 HSTG Nanfang Sales Co. 0 2.00 0 0 Hangzhou Nanfangtongda Gears Co., Ltd. 0 0 644.97 193.40 Hangzhou Hangfa Power Generating Equipment Co., Ltd. 5,096.34 422.31 5,796.13 845.32 Hangzhou Steam Turbine Automobile Sales Service Co., Ltd. 0 0 1,197.10 589.34 Hangzhou Nanhua Wooden Packaging Co., Ltd. 0 0 628.08 17.65 Hangzhou Steam Turbine Industrial Co. 0 0 106.24 28.96 Hangzhou Steam Turbine Power Technologies Co., Ltd. 1,443.80 836.80 607.00 376.24 Total 11,605.78 11,813.45 12,715.63 7,095.76 IX. Non-operational capital adoption and settlement with the holding shareholder and its subsidiaries In the report term, no such non-operation capital adoption or settlement with the holding shareholder or its affiliates X. Special statement and independent opinion of the independent directors on capital adoption by the holding shareholder and providing of external guarantees According to Announcement 证监发[2003]56 号 issued by CSRC, 证监发[2005]120 号 issued by CSRC and CBRC, and 上市部函[2006]25 号 issued by CSRC, as the independent directors of Hangzhou Steam Turbine Co., Ltd., we have observed and verified the situations about capital adoption and providing of external guarantees in the interim term of 2010, and issued the following independent opinions 1.As of June 30, 2010, all of the capital trades between the Company and the holding shareholder were due to business operation without illegal capital adoption. We found no capital adoption by controlling shareholder or other related parties. 2. As of June 30, 2010, the Company never conducted any external guarantee and no such guarantee happened in previous terms and carried over to the current term. Independent director: Xu Yongbin, Lv Fan, Zhang Hejie August 25, 2010 XI. Guarantees provided to holding subsidiaries in the report term The Company provided Hangzhou Zhongneng Steam Turbine Power Co., Ltd. (Zhongneng Co.) guarantee for RMB60 million of loan with term of one year: July 1, 2010 to June 30, 2011. The guarantee was provided by way of: Zhongneng Co. applied the credit of RMB60 million to Bank of China Hangzhou Technologies Development Zone Branch, the Company resume the joint liabilities. For details please go to The Announcement of Providing Guarantee to Zhongneng Co. for the Bank Credit of RMB60 million (Announcement No. 2010-31). The 10th meeting of the 4th term of Board held on July 15, 2009 approved the guarantee provided to Hangzhou Steam Turbine Casting Co., Ltd. – one of the holding subsidiaries, for RMB40.80 million of bank loans for three years: July 15, 2009 to July 14, 2012. For details please go to The announcement of providing guarantee to the Casting Co. for the bank loan of RMB40.80 million (Announcement No. Lin2009-16). As of the date of this report, the loan was not raised yet. Except for the above, the Company provided no guarantees to any of the holding shareholder, its related parties, any legal persons, or non-legal-person organizations, or individuals as of the date of this report. No such guarantees provided in previous terms and carried over to the report term either. 16Independent directors’ opinion on the guarantees: The Company provided RMB60 million of guarantee to Zhongneng Co., which was to support the contract warrant deposit and working capital of the construction of the new workshops, which were rational operation of the Company. The guarantee was provided upon legal procedures and didn’t impair the interests of the mid-small shareholders. (For details please see “The independent directors’ opinions on providing of RMB60 million of guarantee to Zhongneng Co.” (Announcement No. 2010-32). XII. Fulfilling of commitments made by the Company, the shareholder, or substantial controlling party No commitment issues with any of the Company, the shareholders, or substantial controlling party of the Company in the report term. XIII. Dividend distribution or capitalizing of reserves proposed by the Board No dividend distribution or capitalizing of reserves will be carried out for the first half of 2010. XIV. Execution of dividend distribution or capitalizing of common reserves in the report term As proposed by the shareholders’ general meeting, basing on the total capital shares of 371,800,000 shares at the end of 2009, 3 bonus shares will be distributed to each 10 shares, the total capital shares will increase to 483,340,000 shares; and RMB4.00 (tax inclusive) of cash dividend will be allocated to each 10 shares. Totally RMB148,720,000.00 of profit will be distributed. Dividend for B share holders will be translated to Hong Kong Dollar at the middle rate released by People’s Bank of China at the first bank day after the profit distribution plan was approved by the Shareholders’ Annual Meeting 2009 (June 3, 2010). According to the laws and regulations, income tax of 10% will be paid by the Company on behalf of the corporation shareholders. After deducting of taxes, the corporation shareholders actually receive 3 bonus shares and RMB3.30 of cash upon each 10 shares. Income tax of non-corporation B-share holders is not paid by the Company. The above dividend plan has been accomplished in the report term. The final trading day of B shares will be June 22, 2010, where the ex-dividend date will be June 23, 2010. B share registration date will be June 25, 2010, and the bonus shares may be traded since June 28, 2010. Dividend for state-owned shareholders were distributed by the Company directly; Dividend for B-share holders were transferred to their account through the broker or bank on June 25, 2010; Dividend were recorded to the shareholders’ account on June 25, 2010. (For details of the above dividend distribution please go to Announcement Lin 2010-29 published on Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily and http://www.cninfo.com.cn dated June 12, 2010. XV. Reception of investigations, communications, or interviews Time/date Place Way Visitors Main content involved and material provided Feb 04, 2010 HTC Face to face talk Dahe Securities Capital expenditure of recent years, possibility of issuing H shares Mar 15, 2010 HTC Face to face talk Zhongjin Co. Hong Kong Hangzhou Bank Share, order trend, influence of financial crisis, productivity, competitors, share equity reformation April 17, 2010 HTC Telephone communication Huale Investment Production circle, order source, influence of material price, financing resource Apr 1, 2010 HTC Face to face talk Orient Securities Product introduction, industry profile, route of B shares, orders, future development Apr 21, 2010 HTC Face to face talk Individual shareholder Business structure, employee wages, residue heat power plant, investor relationship, preferable policies May 13, 2010 HTC Face to face talk J.P. Morgan Growth point of 2010, competitions, advantages of the Company, price comparison, energy-saving advantage, employees, market share, overseas market, productivity May 14 2010 HTC Face to face talk China Fund Raw material, orders, 3-year expectation, advantages, overseas market Jun 25, 2010 HTC Face to face talk Haitong Securities Industrial and international trend, the holding shareholder, services, residue heat recycling products 17XVI. No commitment issues made by shareholders with 5% or above share equities in the report term or carried down from previous terms, which could made major influence on the business performance or financial situation of the Company. XVII. In the report term, none of the directors, supervisors, and executives was under investigation by the authorities, under force execution of law departments, turned to legal process, investigated or punished by China Securities Regulatory Commission, prohibited or criticized by the Stock Exchange, regarded as inappropriate person, or under punishment of other authorities. XVIII. Information disclosure in the report term Announcement No. Date Content Official media Official website 2010-01 April 23, 2010 Annual Report 2009, summary Securities Time Shanghai Securities Daily Hong Kong Commercial Daily 2010-02 April 23, 2010 Annual Report 2009, full text http://www.cninfo.com.cn 2010-03 April 23, 2010 Financial Report 2009 http://www.cninfo.com.cn 2010-04 April 23, 2010 Auditors’ Report 2009 http://www.cninfo.com.cn 2010-05 April 23, 2010 Resolutions of the 13th Meeting of the 4th Term of Board Securities Time Shanghai Securities Daily, Hong Kong Commercial Daily http://www.cninfo.com.cn 2010-06 April 23, 2010 Resolutions of the 10th meeting of the 4th term of Board Securities Time Shanghai Securities Daily Hong Kong Commercial Daily http://www.cninfo.com.cn 2010-07 April 23, 2010 Specific statement and independent opinions on capital adoption by related parties, external guarantees, related transactions, and wages of executives Securities Time Shanghai Securities Daily http://www.cninfo.com.cn 2010-08 April 23, 2010 Report of self-assessment on internal control system 2009 Securities Time Shanghai Securities Daily http://www.cninfo.com.cn 2010-09 April 23, 2010 Independent directors’ comments on the ‘Report of self-assessment on internal control system 2009’ Securities Time Shanghai Securities Daily http://www.cninfo.com.cn 2010-10 April 23, 2010 Independent Directors’ Work Report 2009 Securities Time Shanghai Securities Daily http://www.cninfo.com.cn 2010-11 April 23, 2010 Statement on the special auditing on non-operational capital adoption and trade with related parties in 2009 by the CPA Securities Time Shanghai Securities Daily http://www.cninfo.com.cn 182010-12 April 23, 2010 Amount of related transactions in 2009 and expected for 2010 Securities Time Shanghai Securities Daily http://www.cninfo.com.cn 2010-13 April 23, 2010 Assessment report on the performance of CPA of year 2009, and announcement of extending the services of the CPA for year 2010 Securities Time Shanghai Securities Daily http://www.cninfo.com.cn 2010-14 April 23, 2010 Information Insider Administration Rules http://www.cninfo.com.cn 2010-15 April 23, 2010 Responsibility tracking rules for major error in annual reports http://www.cninfo.com.cn 2010-16 April 23, 2010 Rules of Shareholding of the Directors, Supervisors and Senior Executives http://www.cninfo.com.cn 2010-17 April 23, 2010 Securities Administration Rules http://www.cninfo.com.cn 2010-18 April 23, 2010 The social responsibility report 2009 of the Company http://www.cninfo.com.cn 2010-19 April 23, 2010 Announcement of Calling the Shareholders’ Annual Meeting 2009 Securities Time Shanghai Securities Daily, Hong Kong Commercial Daily http://www.cninfo.com.cn 2010-20 April 28, 2010 The 1st Quarterly Report 2010, official text Securities Time Shanghai Securities Daily Hong Kong Commercial Daily 2010-21 April 28, 2010 The 1st Quarterly Report 2010, full text http://www.cninfo.com.cn 2010-22 May 15, 2010 Resolutions of the 15th Meeting of the 4th Term of Board Securities Time Shanghai Securities Daily Hong Kong Commercial Daily http://www.cninfo.com.cn 2010-23 May 15, 2010 Notice on adding provisional proposals to the agenda of the Shareholders’ Annual Meeting 2009 Securities Time Shanghai Securities Daily, Hong Kong Commercial Daily http://www.cninfo.com.cn 2010-24 May 20, 2010 Announcement of accepting Mr. Qi Guoning’s application to give up the qualification as nominee of independent director Securities Time Shanghai Securities Daily Hong Kong Commercial Daily http://www.cninfo.com.cn 2010-25 June 3, 2010 The Resolutions of Shareholders’ Annual Meeting 2009 Securities Time Shanghai Securities Daily Hong Kong Commercial Daily http://www.cninfo.com.cn 192010-26 June 3, 2010 Resolutions of the 1st meeting of the 5th term of Board Securities Time Shanghai Securities Daily Hong Kong Commercial Daily http://www.cninfo.com.cn 2010-27 June 3, 2010 Resolutions of the 1st meeting of the 5th term of Supervisory Committee Securities Time Shanghai Securities Daily Hong Kong Commercial Daily http://www.cninfo.com.cn 2010-28 June 3, 2010 Independent directors’ comments on engagement of executives Securities Time Shanghai Securities Daily http://www.cninfo.com.cn 2010-29 June 12, 2010 Announcement of Dividend for Year 2009 Securities Time Shanghai Securities Daily Hong Kong Commercial Daily http://www.cninfo.com.cn 2010-30 June 30, 2010 Resolutions of the 2nd meeting of the 5th term of Board Securities Time Shanghai Securities Daily Hong Kong Commercial Daily http://www.cninfo.com.cn 2010-31 June 30, 2010 Announcement of providing guarantee for the loan of RMB60 million to Zhongneng Co., - the holding subsidiary of the Company. Securities Time Shanghai Securities Daily http://www.cninfo.com.cn 2010-32 June 30, 2010 Independent directors’ opinion on providing guarantee for the loan of RMB60 million to Zhongneng Co. Securities Time Shanghai Securities Daily http://www.cninfo.com.cn 20Chapter VII. Financial Report (Not Audited) (I) Financial Statements Balance Sheet Prepared by: Hangzhou Steam Turbine Co., Ltd. Ended June 30, 2010 in RMB Yuan Balance at the end of term Balance at the beginning of year Items Consolidated Parent company Consolidated Parent company Current asset: Monetary capital 468,533,578.69 149,989,673.29 486,439,602.82 100,717,329.17 Settlement provision Outgoing call loan Transactional financial assets Notes receivable 569,736,165.06 363,217,504.37 585,510,190.21 434,620,525.22 Account receivable 1,589,408,947.69 1,322,963,582.45 1,329,433,302.65 1,115,063,042.90 Prepayment 318,739,151.06 123,948,075.50 219,791,399.56 78,676,643.13 Insurance receivable Reinsurance receivable Provisions of Reinsurance contracts receivable Interest receivable Dividend receivable Other account receivable 29,050,437.43 24,249,125.64 17,333,756.04 16,869,617.12 Repurchasing of financial assets Inventories 1,174,826,940.07 869,692,814.01 1,009,100,047.12 774,155,875.55 Non-current asset due in 1 year Other current asset 108,275.80 Total of current asset 4,150,295,220.00 2,854,060,775.26 3,647,716,574.20 2,520,103,033.09 Non-current assets Loans and payment on other’s behalf disbursed Disposable financial asset Expired investment in possess Long-term receivable Long-term share equity investment 402,586,451.62 472,280,099.47 402,586,451.62 472,280,099.47 Investment properties Fixed assets 516,774,651.56 336,300,049.36 528,315,267.49 350,458,537.59 Construction in process 181,058,362.57 39,587,413.97 133,993,100.65 14,507,898.96 Engineering goods 411,981.80 Fixed asset disposal Production physical assets Gas & petrol Intangible assets 160,138,182.23 46,724,159.17 141,444,716.26 47,902,806.89 R&D expense Goodwill 187,501.55 Long-term amortizable expenses 9,716,028.93 7,438,801.13 8,092,318.74 7,438,801.13 Differed income tax asset 52,709,215.19 39,114,576.96 48,623,815.34 39,114,576.96 Other non-current asset Total of non-current assets 1,323,582,375.45 941,445,100.06 1,263,055,670.10 931,702,721.00 Total of assets 5,473,877,595.45 3,795,505,875.32 4,910,772,244.30 3,451,805,754.09 Current liabilities Short-term loans 195,000,000.00 136,000,000.00 Loan from Central Bank Deposit received and hold for others Call loan received Trade off financial liabilities Notes payable 70,004,809.92 47,141,782.92 103,656,815.22 155,170,592.22 Account payable 536,270,437.77 387,235,375.67 320,766,161.48 202,453,257.90 21Prepayment received 1,387,427,722.19 961,417,044.87 1,233,884,154.03 872,137,702.04 Selling of repurchased financial assets Fees and commissions receivable Employees’ wage payable 35,749,491.69 23,286,688.39 23,241,197.54 14,713,270.72 Tax payable 76,686,730.39 66,942,907.15 89,484,573.70 62,319,098.96 Interest payable 195,250.00 Dividend payable Other account payable 88,031,611.00 31,969,193.39 24,231,372.13 14,582,847.36 Reinsurance fee payable Insurance contract provision Entrusted trading of securities Entrusted selling of securities Non-current liability due in 1 year Other current liability Total of current liability 2,389,170,802.96 1,517,992,992.39 1,931,459,524.10 1,321,376,769.20 Non-current liabilities Long-term borrowings 260,463,800.00 190,463,800.00 247,463,800.00 190,463,800.00 Bond payable Long-term payable 330,000.00 330,000.00 Special payable Contingent liabilities Differed income tax liability 1,225,366.39 1,225,366.39 1,225,366.39 1,225,366.39 Other non-recurring liabilities 8,004,440.00 6,362,250.00 3,322,740.00 1,942,250.00 Total of non-current liabilities 270,023,606.39 198,051,416.39 252,341,906.39 193,631,416.39 Total of liability 2,659,194,409.35 1,716,044,408.78 2,183,801,430.49 1,515,008,185.59 Owners’ equity (or shareholders’ equity) Capital paid in (or share capital) 483,340,000.00 483,340,000.00 371,800,000.00 371,800,000.00 Capital reserves 138,953,250.09 138,953,250.09 138,953,250.09 138,953,250.09 Less: Shares in stock Special reserves Surplus reserves 327,932,742.87 309,176,337.74 327,932,742.87 309,176,337.74 Common risk provision Retained profit 1,492,988,294.96 1,147,991,878.71 1,497,423,473.50 1,116,867,980.67 Different of foreign currency translation Total of owner’s equity belong to the parent company 2,443,214,287.92 2,079,461,466.54 2,336,109,466.46 1,936,797,568.50 Minor shareholders’ equity 371,468,898.18 390,861,347.35 Total of owners’ equity 2,814,683,186.10 2,079,461,466.54 2,726,970,813.81 1,936,797,568.50 Total of liabilities and owners’ equity 5,473,877,595.45 3,795,505,875.32 4,910,772,244.30 3,451,805,754.09 22Income Statement Prepared by: Hangzhou Steam Turbine Co., Ltd. Jan - Jun 2010 in RMB Yuan Amount of the Current Term Amount of the Previous Term Items Consolidated Parent company Consolidated Parent company I. Total revenue 1,840,515,550.97 1,315,034,718.53 1,646,527,768.37 1,073,162,456.36 Incl. Business income 1,840,515,550.97 1,315,034,718.53 1,646,527,768.37 1,073,162,456.36 Interest income Insurance fee earned Fee and commission received II. Total business cost 1,477,083,633.93 1,086,383,790.37 1,338,614,316.66 897,083,253.50 Incl. Business cost 1,180,414,236.98 882,879,318.32 1,012,507,507.68 647,775,737.01 Interest expense Fee and commission paid Insurance discharge payment Net claim amount paid Net insurance policy reserves provided Insurance policy dividend paid Reinsurance expenses Business tax and surcharge 5,129,818.23 1,947,356.38 5,160,353.50 1,470,364.64 Sales expense 54,567,107.05 35,616,211.64 45,458,660.63 31,560,637.45 Administrative expense 177,912,362.66 122,113,732.45 249,922,132.65 201,008,922.60 Financial expenses 9,719,615.00 4,603,057.83 -6,368,268.96 -8,223,147.20 Asset impairment loss 49,340,494.01 39,224,113.75 31,933,931.16 23,490,739.00 Plus: Gains from change of fair value (“-“ for loss) Investment gain (“-“ for loss) 1,100,735.77 98,297,793.27 29,898,083.98 74,878,300.00 Incl. Investment gains from affiliates Gains from currency exchange (“-“ for loss) III. Operational profit (“-“ for loss) 364,532,652.81 326,948,721.43 337,811,535.69 250,957,502.86 Plus: Non business income 2,207,680.04 891,907.71 3,489,025.96 274,985.76 Less: Non-business expenses 5,058,255.04 2,382,712.61 2,868,349.38 1,673,162.45 Incl. Loss from disposal of non-current assets IV. Gross profit (“-“ for loss) 361,682,077.81 325,457,916.53 338,432,212.27 249,559,326.17 Less: Income tax expenses 55,770,552.85 34,074,018.49 50,301,587.28 26,202,153.93 V. Net profit (“-“ for net loss) 305,911,524.96 291,383,898.04 288,130,624.99 223,357,172.24 Net profit attributable to the owners of parent company 255,824,821.46 291,383,898.04 238,780,981.80 223,357,172.24 Minor shareholders’ equity 50,086,703.50 49,349,643.19 VI. Earnings per share: (I) Basic earnings per share 0.5293 0.6422 (II) Diluted earnings per share 0.5293 0.6422 VII. Other misc. incomes VIII. Total of misc. incomes 305,911,524.96 291,383,898.04 288,130,624.99 223,357,172.24 Total of misc. incomes attributable to the owners of the parent company 255,824,821.46 291,383,898.04 238,780,981.80 223,357,172.24 Total misc gains attributable to the minor shareholders 50,086,703.50 49,349,643.19 23Cash Flow Statement Prepared by: Hangzhou Steam Turbine Co., Ltd. Jan - Jun 2010 in RMB Yuan Amount of the Current Term Amount of the Previous Term Items Consolidated Parent company Consolidated Parent company I. Net cash flow from business operation Cash received from sales of products and providing of services 1,762,387,472.25 1,107,857,783.61 1,406,430,485.49 938,720,443.94 Net increase of customer deposits and capital kept for brother company Net increase of loans from central bank Net increase of inter-bank loans from other financial bodies Cash received against original insurance contract Net cash received from reinsurance business Net increase of client deposit and investment Net increase of trade financial asset disposal Cash received as interest, processing fee, and commission Net increase of inter-bank fund received Net increase of repurchasing business Tax returned 1,069,300.00 15,999,725.87 14,407,182.93 Other cash received from business operation 28,631,978.56 5,500,330.14 20,064,437.32 2,191,871.00 Sub-total of cash inflow from business activities 1,792,088,750.81 1,113,358,113.75 1,442,494,648.68 955,319,497.87 Cash paid for purchasing of merchandise and services 1,074,285,012.58 665,615,592.59 1,042,124,631.51 839,332,022.58 Net increase of client trade and advance Net increase of savings in central bank and brother company Cash paid for original contract claim Cash paid for interest, processing fee and commission Cash paid for policy dividend Cash paid to staffs or paid for staffs 207,469,163.90 164,121,586.78 191,294,908.68 152,196,676.51 Taxes paid 191,337,679.45 115,386,353.49 160,723,076.96 100,812,561.79 Other cash paid for business activities 109,021,931.61 35,380,449.46 58,126,016.46 20,394,180.04 Sub-total of cash outflow from business activities 1,582,113,787.54 980,503,982.32 1,452,268,633.61 1,1 12,735,440.92 Cash flow generated by business operation, net 209,974,963.27 132,854,131.43 -9,773,984.93 -157,415,943.05 II. Cash flow generated by investing Cash received from investment retrieving Cash received as investment gains 1,100,735.77 98,197,057.50 30,114,561.65 92,090,800.00 Net cash retrieved from disposal of fixed assets, intangible assets, and other long-term assets 92,900.00 72,950.00 146,400.00 146,400.00 Net cash received from disposal of subsidiaries or other operational units Other investment-related cash received 90,868.96 100,735.77 Sub-total of cash inflow due to investment activities 1,284,504.73 98,370,743.27 30,260,961.65 92,237,200.00 Cash paid for construction of fixed assets, intangible assets and other long-term assets 123,511,525.92 28,680,728.15 24,019,009.01 7,944,707.66 Cash paid as investment 700,000.00 1,937,647.85 1,937,647.85 Net increase of loan against pledge 2425 Net cash received from subsidiaries and other operational units Other cash paid for investment activities Sub-total of cash outflow due to investment activities 124,211,525.92 28,680,728.15 25,956,656.86 9,882,355.51 Net cash flow generated by investment -122,927,021.19 69,690,015.12 4,304,304.79 82,354,844.49 III. Cash flow generated by financing Cash received as investment Incl. Cash received as investment from minor shareholders Cash received as loans 193,000,000.00 287,463,800.00 140,463,800.00 Cash received from bond placing Other financing-related cash received Subtotal of cash inflow from financing activities 193,000,000.00 287,463,800.00 140,463,800.00 Cash to repay debts 71,000,000.00 105,000,000.00 Cash paid as dividend, profit, or interests 226,621,543.69 152,939,465.11 210,780,258.38 151,503,175.10 Incl. Dividend and profit paid by subsidiaries to minor shareholders Other cash paid for financing activities 3,000,000.00 Subtotal of cash outflow due to financing activities 297,621,543.69 152,939,465.11 318,780,258.38 151,503,175.10 Net cash flow generated by financing -104,621,543.69 -152,939,465.11 -31,316,458.38 -11,039,375.10 IV. Influence of exchange rate alternation on cash and cash equivalents -332,422.52 -332,337.32 13,042,975.99 13,042,967.12 V. Net increase of cash and cash equivalents -17,906,024.13 49,272,344.12 -23,743,162.53 -73,057,506.54 Plus: Balance of cash and cash equivalents at the beginning of term 486,439,602.82 100,717,329.17 450,103,030.94 158,711,304.02 VI. Balance of cash and cash equivalents at the end of term 468,533,578.69 149,989,673.29 426,359,868.41 85,653,797.48Consolidated Statement of Change in Owners’ Equity Prepared by: Hangzhou Steam Turbine Co., Ltd. The 1st Half of 2010 in RMB Yuan Amount of the Current Term Amount of Last Year Owners’ Equity Attributable to the Parent Company Owners’ Equity Attributable to the Parent Company Items Capital paid in (or share capital) Capital reserves Less: Shares in stock Special reserves Surplus reserves Common risk provision Retained profit Minor shareholders’equity Total of owners’ equity Others Capital paid in (or share capital) Capital reserves Less: Shares in stock Special reserves Surplus reserves Common risk provision Retained profit Minor shareholders’ equity Total of owners’ equity Others I. Balance at the end of last year 371,800,000.00 138,953,250.09 327,932,742.87 1,497,423,473.50 390,861,347.35 2,726,970,813.81 371,800,000.00 138,953,250.09 279,205,827.20 1,111,352,798.36 306,483,927.77 2,207,795,803.42 Plus: Change of accounting policy Correcting of previous errors Others II. Balance at the beginning of current year 371,800,000.00 138,953,250.09 327,932,742.87 1,497,423,473.50 390,861,347.35 2,726,970,813.81 371,800,000.00 138,953,250.09 279,205,827.20 1,111,352,798.36 306,483,927.77 2,207,795,803.42 III. Changed in the current year (“-“ for decrease) 111,540,000.00 -4,435,178.54 -19,392,449.17 87,712,372.29 48,726,915.67 386,070,675.14 84,377,419.58 519,175,010.39 (I) Net profit 255,824,821.46 50,086,703.50 305,911,524.96 583,517,590.81 121,356,241.00 704,873,831.81 (II) Other misc. income Total of (I) and (II) 255,824,821.46 50,086,703.50 305,911,524.96 583,517,590.81 121,356,241.00 704,873,831.81 (III) Investment or decreasing of capital by owners 6,585,711.86 6,585,711.86 1. Capital inputted by owners 18,067,564.86 18,067,564.86 2. Amount of shares paid and accounted as owners’ equity 3. O -11,481,853.00 -11,481,853.00 (IV) Profit allotment 111,540,000.00 260,260,000.00 -69,479,152.67 -218,199,152.67 48,726,915.67 -197,446,915.67 -43,564,533.28 -192,284,533.28 1. Providing of surplus reserves 48,726,915.67 -48,726,915.67 2. Common risk provision 3. Allotment to the 111,540,000. 260,260,000.0 -69,479,152.6 -218,199,152. -148,720,000. -43,564,533.2 -192,284,533. 26owners (or shareholders) 00 0 7 67 00 8 28 4. Other (V) Internal transferring of owners’ equity 1. Capitalizing of capital reserves (or to capital shares) 2. Capitalizing of surplus reserves (or to capital shares) 3. Making up losses by surplus reserves 4. Others (VI) Special reserves 1. Provided this year 2. Used this er IV. Balance at the end of this term 483,340,000.00 138,953,250.09 327,932,742.87 1,492,988,294.96 371,468,898.18 2,814,683,186.10 371,800,000.00 138,953,250.09 327,932,742.87 1,497,423,473.50 390,861,347.35 2,726,970,813.81 Change in Owners’ Equity (Parent Co.) Prepared by: Hangzhou Steam Turbine Co., Ltd. The 1st Half of 2010 in RMB Yuan Amount of the Current Term Amount of Last Year Items Capital paid in (or share capital) Capital reserves Less: Shares in stock Special reserves Surplus reserves Common risk provision Retained profit Total of owners’ equity Capital paid in (or share capital) Capital reserves Less: Shares in stock Special reserves Surplus reserves Common risk provision Retained profit Total of owners’ equity I. Balance at the end of last year 371,800,000.00 138,953,250.09 309,176,337.74 1,116,867,980.67 1,936,797,568.50 371,800,000.00 138,953,250.09 260,449,422.07 827,045,739.68 1,598,248,411.84 Plus: Change of accounting policy Correcting of previous errors II. Balance at the beginning of current year 371,800,000.00 138,953,250.09 309,176,337.74 1,116,867,980.67 1,936,797,568.50 371,800,000.00 138,953,250.09 260,449,422.07 827,045,739.68 1,598,248,411.84 III. Changed in the current year (“-“ for decrease) 111,540,000.00 31,123,898.04 142,663,898.04 48,726,915.67 289,822,240.99 338,549,156.66 2728 (I) Net profit 291,383,898.04 291,383,898.04 487,269,156.66 487,269,156.66 (II) Other misc. income Total of (I) and (II) 291,383,898.04 291,383,898.04 487,269,156.66 487,269,156.66 (III) Investment or decreasing of capital by owners 1. Capital inputted by owners 2. Amount of shares paid and accounted as owners’ equity 3. (IV) Profit allotment 111,540,000.00 -260,260,000.00 -148,720,000.00 48,726,915.67 -197,446,915.67 -148,720,000.00 1. Providing of surplus reserves 48,726,915.67 -48,726,915.67 2. Common risk provision 3. Allotment to the owners (or shareholders) 111,540,000.00 -260,260,000.00 -148,720,000.00 -148,720,000.00 -148,720,000.00 4. Others (V) Internal transferring of owners’ equity 1. Capitalizing of capital reserves (or to capital shares) 2. Capitalizing of surplus reserves (or to capital shares) 3. Making up losses by surplus reserves 4. Others (VI) Special reserves 1. Provided this year 2. Used thi ster IV. Balance at the end of this term 483,340,000.00 138,953,250.09 309,176,337.74 1,147,991,878.71 2,079,461,466.54 371,800,000.00 138,953,250.09 309,176,337.74 1,116,867,980.67 1,936,797,568.50(II) Notes to Financial Statements (the 1st half of 2010) In RMB I. Company Profile Hangzhou Steam Turbine Co., Ltd. (the Company) was incorporated as a joint stock limited company exclusively promoted by Hangzhou Steam Turbine & Power Group Company Limited (“HSTG”) approved by the Securities Regulatory Commission of the State Council with the Document SRC [1998] No. 8 by offering domestically listed foreign currency ordinary shares (B Shares), with registration date: April 23, 1998, legal entity business license No.: QGZZ Zi No. 002150, current registered capital RMB 220,000,000. The Company has issued 80,000,000 B Shares which have been listed for trading with Shenzhen Stock Exchange commencing from April 28, 1998. On December 2, 1998, the Company became a joint stock enterprise with foreign investment through approval by the State Ministry of Foreign Trade and Economic Cooperation with the document [1998]外经贸资二函字第745号. The number of Business License was changed to 330000400001023 on May 6, 2009. On June 8th 2006, as approved at the Shareholders’ Annual Meeting 2005, the Company capitalized the common reserves upon the total capital shares of 220 million shares at December 31, 2005, namely 3 new shares to each 10 shares. After that, the total of capital shares was changed to 286 million shares, and the registered capital was changed to RMB286 million thereof. Registration alternation procedures have been accomplished on December 31, 2006. On June 15th 2006, as approved at the Shareholders’ Annual Meeting 2006, the Company capitalized the common reserves upon the total capital shares of 286 million shares at December 31, 2006, namely 3 new shares to each 10 shares (tax included). After that, the total of capital shares was changed to 371.8 million shares, and the registered capital was changed to RMB371.8 million thereof. Registration alternation procedures have been accomplished in December, 2007. On June 2, 2010, as approved at the Shareholders’ Annual Meeting 2009, the Company capitalized the common reserves upon the total capital shares of 371.8 million shares at December 31, 2009, namely 3 new shares to each 10 shares (tax included). After that, the total of capital shares was changed to 483.34 million shares, and the registered capital was changed to RMB483.34 million thereof. Among the capital shares, 307.58 million shares are non-negotiable state-owned legal person shares, and 175.76 million are current B-shares. Registration alternation procedures are in process. The scope of key business of the Company: The design and manufacturing of steam turbine, gas turbine, other rotating and to-and-fro machinery and auxiliary equipment, and spare parts and components, sales of self-manufactured products and the provision of relevant after-sales service and import & export service. II. The main accounting policies and accounting estimations adopted (I) Basis of compiling the finance report The Company adopts perpetual operation as the basis of financial statements. (II) Statement of compliance to the Enterprise Accounting Standard The finance report compiled by the Company is accordance with the enterprise accounting standard taken effect in February 2006, it reflects the Company’s finance state, achievements and cash flow fairly and entirely. (III) Accounting period The Company uses the calendar year for its fiscal year. A fiscal year is from January 1 to December 31. (IV) Standard currency for bookkeeping The Company uses Renminbi (RMB) as the standard currency for book keeping. (V) Accounting treatment of the entities under common control and different control as well 1. Treatment of entities under common control 29Assets and liabilities acquired in merger of entities are measured at book values at the date of merger. The difference between the net book value of asset and the offered price (or total of face value of shares issued) will be adjusted into capital reserves; when the capital reserves is not enough to reduce, it will be adjusted into retained profit. 2. Treatment of entities under different control The difference of takeover cost over the fair value of recognizable net asset of the acquired entity is recognized as goodwill at the day of takeover; in case the takeover cost is lower than the fair value of recognizable net asset of the acquired entity, the measuring process over the recognizable asset, liabilities,contingent liabilities, and takeover cost, shall be repeated, if comes out the same result, the difference shall be recorded into current income account. (VI) Method for preparing the consolidated financial statements The parent company puts all of its subsidiaries under its control into the consolidated financial statements. The consolidated financial statements are prepared according to the 揈nterprise Accounting Standard No. 33 – Consolidated Financial Statements”, basing on the accounts of the parent company and the subisidiaries, and after adjusting the long-term investment equity in the subsidiary on equity basis. (VII) Recognition of cash and cash equivalents Cash equivalent refers to the investment held by the Company with short term, strong liquidity and lower risk of value fluctuation that is easy to be converted into cash of known amount. (VIII) Foreign currency trade and translation of foreign currencies 1. Translation of foreign currency Foreign currency trades are translated into RMB at the rate of the day when the trades are made. Those balances of foreign currencies and monetary items in foreign currencies are accounted at the exchange rate of the balance sheet date. Exchange differences, other than special loans satisfying the conditions of capitalization, are accounted into current income account. Non-monetary items in foreign currencies and on historical cost are translated at the rate of the trade day. Non-monetary items in foreign currencies and on fair value are translated at the rate of the day when the fair value is recognized, where the differences are accounted as gain/loss from change of fair value. 2. Translation of foreign currency financial statements Asset and liability items in the balance sheet are translated at the rate of the balance sheet day; Owners’ equity, other than “retained profit”, are translated at the rate when occurred; income and expense items in the income statement are translated at the rate of the trade date. Differences raised from aforesaid translations are presented individually under the owners’ equity in the balance sheet. Items in the cash flow statement are translated at the rate when the particular item was occurred. Influence of the changing of exchange rate are presented in the cash flow statement individually. (IX) Financial instruments 1. Type of finance asset and finance debt Finance assets are divided initially into four types of financial asset appointed to be measured at fair value with their changes are accounted into current gain/loss accounts(including transactional finance asset and financial asset appointed to be measured at fair value with their changes are accounted into current gain/loss accounts), transactional financial assets, debt and account receivable, finance asset saleable. Finance debts are divided initially into two types of financial debt appointed to be measured at fair value with their changes are accounted into current gain/loss accounts(including transactional finance debt and financial debt appointed to be measured at fair value with their changes are accounted into current gain/loss accounts), other finance debt. 2. Basis of recognition and accounting of finance asset and finance debt When the Company is one part of the finance instrument contract, one finance asset or debt is recognized. When on recognizing initially finance asset or debt, it is measured by fair value, for the 30finance asset or debt which appointed to be measured at fair value with their changes are accounted into current gain/loss accounts, the related transaction expenses are directly accounted into current gain and loss; for other finance asset and debt, the related transaction expenses accounted into the initial recognition account. The Company future measures finance asset by fair value without deducting future possible transaction fee but with exception: (1) Due investment, debt and account receivable are measured by actual interest rate according to the amortized costs. (2) Equity instrument investment which have no quote in active market and which fair value can’t be measured reliably, and its derived finance assets which are connected with the equity instrument and which are summarized through the equity instrument, are measured by cost. The Company conduct successive measure of finance debt according to amortized cost by actual interest rate with exception as following: (1) finance debt which appointed to be measured at fair value with their changes are accounted into current gain/loss accounts, is measured at fir value without deducting possible future transactional fee at settlement; (2) Equity instrument investment which have no quote in active market and which fair value can’t be measured reliably, and its derived finance assets which are connected with the equity instrument and which are closed off through the equity instrument, are measured by cost. (3) finance debt sponship contracts which are not appointed to be measured at fair value with their changes are accounted into current gain/loss accounts, or debt agreements at rate lower than market rate and which are not appointed to be measured at fair value with their changes are accounted into current gain/loss accounts, are measured at the higher value between the optimal estimated value payable according to current obligations and the surplus value from which the initial recognition value deduct the accumulated amortized amount according to the actual interest rate. Gain or loss from fluctuation of financial assets or liabilities are handled at the following ways, except for relating to hedge instrument. (1) Gain or loss from fluctuation of fair value of financial assets or liabilities and accounted into current gain/loss account, are accounted into gain/loss of fluctuation of fair value. Interests or cash dividend received in the period of holding these assets are recognized as investment gains. When they are disposed, the difference between the amount actually received and initially booked value is recognized as investment gains, and adjust the gain/loss from fair value fluctuation. (2) Fluctuation of fair value of sellable financial assets accounted into capital reserves; interests gained at actual interest rate are accounting into investment gains; the cash dividend received from sellable instrument investment, are accounted into investment gains when distributed; At disposal of these investment, the difference between actual amount received and book value are recognized as investment gains after deducting of accumulated change of fair value which are originally accounted into capital reserves. As soon as the contract rights of acquiring the cash flow of particular financial asset have been terminated or almost all of the risks and rewards attached to the financial asset have been transferred, recognition of the financial asset is terminated; as soon as the current liabilities attached to the financial liability have been completely or partially relieved, recognition of the financial liability or part of is terminated. 3. Basis of recognition and accounting of financial asset transferring The Company stop recognizing the finance asset which risks and remuneration of ownership are transferred to the receiver; and continue to recognize the transferred finance asset which risks and remuneration of ownership are kept, and recognize the value as one finance debt. For the finance assets which risks and remuneration of ownership are not transferred or kept, the Company recognize them as following: (1) stop recognizing the finance asset which are given up the control; (2) continue to recognize the finance asset and related finance debt according to the extend which involved into the transferred finance asset for the finance asset which are not given up control. The Company measured the surplus between the following two values for the transferred finance assets which fulfill the stop recognition requirements into current gain or loss: (1) Account value of the transferred finance asset; (2) Consideration plus the accumulated fair value changes which were accounted directed into ownership rights. For the transferred finance assets which partly fulfill the stop recognition requirements the Company amortized the stopped recognition part and the not-stopped recognition part of the account value of the whole transferred finance asset, and account the surplus between the following two values into current gain or loss: (1) Account value of the stopped recognition 31part; (2) consideration plus the corresponding stopped recognition part of the accumulated fair value changes which were accounted directed into ownership rights. 4. Basis of recognition and accounting of fair value for the main finance asset and finance debt For the finance asset or debt which active market exists, the Company recognize the fair value according to the quote on the active market; for the finance asset or debt which active market not exists, the Company recognized the fair value using estimation technology (including reference of the latest market prices from freewill transactions by persons familiar with conditions, reference of the current fair value of other similar finance instrument in characteristics, discounted cash flow models and Option Pricing Model); for the initially acquired or initial finance asset or finance debt, the Company recognize the fair value basis on the market trading price. 5. Impairment test and impairment reserves plan The Company conduct impairment test to the finance asset other than which appointed to be measured at fair value with their changes are accounted into current gain/loss accounts on balance sheet day. The Company conduct independently impairment test for single finance asset with large value for single finance asset with little value the Company conduct the impairment test with those of the finance asset composition which have similar credit risk characteristics; for the non impairment assets which are tested independently, the Company conduct the impairment test with those of the finance asset composition which have similar credit risk characteristics. For the finance asset accounted by amortized cost which have subject impairment evidence at the end term, the impairment loss was recognized according to the difference between the account value and the anticipating future cash flow, for the finance asset which have little difference between its short term account receivable anticipating future cash flow and its current value, the Company don’t discount the future cash flow when recognizing related impairment loss. When there is impairment loss for the Equity instrument investment which have no quote in active market and which fair value can’t be measured reliably and its derived finance assets which are connected with the equity instrument and which are calculated through the equity instrument, are measured by cost, the difference is recognized as impairment loss between the account value of the equity instrument investment and its derived finance asset and the current value discounted by the future cash flow according to the market profit rate of the similar finance asset. The Company recognize the impairment loss for the saleable finance asset which fair value have sharp decreasing and the anticipating decreasing trend is not temporary, and account it into impairment loss together with the accumulated fair vale loss which was accounted into owner’s equity directly. (X) Receivable accounts 1. Recognition and providing of bad debt provision on individual receivable account with large amount Condition of recognition Accounts count for over 10% of the book balance of receivable accounts or other receivable accounts Basis of bad debt provision Impairment test performed individually, bad debt provision will be provided at the difference of expected cash flow lower than the book value; If no impairment found in individual testing, bade debt provision will be provided along with the group of similar risks. For details please see the recognition and providing methods of receivable account with minor amount and not under individual impairment test. 2. Recognition and providing methods of receivable account with minor amount and under individual impairment test Condition of recognition Account with minor individual amount and aged over three years Basis of bad debt provision Impairment test performed individually, bad debt provision will be provided at the difference of expected cash flow lower than the book value; If no impairment found in individual testing, bade debt provision will be provided along with the group of similar risks. For details please see the recognition and providing methods of receivable account with minor amount and not under individual impairment 32test. 3. Recognition and providing basis of bad debt reserves for group of receivable accounts with similar characteristics of credit risks (1) Age analysis Age Provision rate for receivables (%) Rate for other receivables (%) Within 1 yr, (included, same for the followings) 5 5 1-2 years 20 20 2-3 years 40 40 Over 3 years 60 60 Remarks for bad debt provisions Grouped by age characteristics, and bad debt provision rate of the group decided with consideration of practical rate of loss (2) Other methods of provision and statement For those receivables and other receivables with obvious differences in recovering possibility, bad debt provisions are recognized individually. As for other receivable accounts such as notes, prepayments, interests, and long-term receivables, bad debt provisions will be provided upon the differences of expectable cash flow lower than the booked value. No bad debt provision is provided for receivables and other receivables occurred between the companies within the consolidated financial statements. (XI) Inventories 1. Categorizing of inventories Inventories include saleable finished goods or merchandise, product-in-process , consumption material and goods in manufacturing procedure or working procedure. 2. Pricing of delivering inventory Delivered out materials are accounted by weighted average method, issued out finished products are accounted at individual price. 3. Recognition of inventory realizable value and providing of impairment provision At the balance sheet day, inventories are measured at the lower of costs and cashable net values, the individual difference between the cashable net value and cost are provided as inventory impairment provision. For finished product, merchandise, saleable material and other saleable merchandise inventory, their cashable net values are recognized by their estimated sale price in normal operation deducting estimated sale expenses and related taxes; for material inventory which need processing, it cashable net value are recognized by the estimated sale prices of its finished products in normal operation deducting the estimated cost, sale expenses and related taxes due to the end of processing; At the balance sheet day, for inventory item which part has contract price and part has no contract price, the cashable net value is accounted separately, and recognize the inventory impairment provision or returnable cash.. 4. Inventory system Inventory is inventoried by perpetual inventory system 5. Amortizing of low-value consumables and packaging materials Consumables are amortized on one-off basis. Packing materials for manufacturing are accounted directly into manufacturing cost. (XII) Long-term equity investment 1. Recognition of initial investment costs 33(1) For the long-term equity investment formed by corporate merger under common control, if it is the long-term equity investment obtained from the corporate merger by paying cash, transferring non-cash asset, bear liability and issuing equity securities, the share of book value of owner's equity of the merged party on the merger date shall be taken as the initial investment cost. The asset reserve is adjusted according to the difference between the initial investment cost of long-term equity investment and the book value of paid combined consideration or issued securities; if the capital is not enough for deduction, the remain earnings are adjusted. (2) For the long-term equity investments formed by merger of enterprises under different control, the initial investment cost is recognized by the paid fair value of combined consideration on purchasing day and related expenses. (3) For the long-term equity investments formed by other than merger of enterprises: if it is gotten by paying cash, the initial investment cost is recognized by purchasing price when buy; if it is gotten by issuing equity securities, the initial investment cost is recognized by the fair value of the securities; if it is gotten by investor’s investment, the initial investment cost is recognized by investment contract or agreed value in contract (except the not fair contract value). 2. Subsequent measurement and recognition of gain/loss Cost basis is adopted in accounting of those long-term equity investments by which the Company has substantial control, and is adjusted in composing combined finance report according to equity basis; and those has no common control or major influence without quotation in an active market and the fair value cannot be reliably measured is also recalculated by cost basis. And equity basis is adopted in accounting of those long-term equity investments by which the Company has joint control or major influence on the invested enterprise. 3. Basis of recognizing common control and significant influence According to the contract, if the invested enterprise’s main finance and operation policy need to be agreed by the other investing party, the investment is common control investment; if only have participating decision rights in invested enterprise’s main finance and operation policy but have no own control or common control with other investing part, the investment is investment with major influence. 4. Impairment examination and providing of impairment provision At balance sheet day, for the long term equity investment which recalculated on cost basis and has no quotation in an active market and the fair value cannot be reliably measured, if has subject evidence of impairment, long-term investment impairment provision will be provided according to the difference between discounted cash flow of similar market investment and its fair value; for other investment has value deducting phenomenon, provide the long term investment impairment provision according to the Note II. in this finance report. (XIII) Fixed assets 1. Recognition conditions Fixed assets also have following conditions: (1) Economic benefit flow into enterprise very possibly; (2) cost can be measured reliably. The successive expensed related fixed assets are accounted into fixed assets cost if it is in accordance with above conditions; if not, accounted into current term gain or loss when happens. Initial accounting is on cost basis. 2. Depreciation of fixed assets Depreciation of fixed assets is on age average basis. Depreciation age, estimated net residue rate and annual rates are as the followings Category of fixed assets Useful age (yrs) Expected retain value Annual depreciation ratio (%) Houses & buildings 20-30 4% of original value 3.2-4.8 Equipment & machinery 8-15 4% of original value 6.4-12 Office equipment 5 4% of original value 19.2 3. Impairment examination and providing of impairment provision At balance sheet day, when evidence showing that impairment has occurred to fixed asset, impairment 34provision shall be provided as described in Note II. of this report. (XIV) Construction in process 1. Construction in process is recognized on the basis of characteristics: very possible economic benefit flow in, cost can be measured reliably. Since the date when the construction in process reaches its useful status as expected, the construction in process is measured by the happened cost Since the date when the construction in process reaches its useful status as expected. 2. When the construction in process reaches its useful status as expected, it is transferred into fixed asset at actual cost. If the construction in process has reached useful status but with completion of project settlement process, it is transferred to fixed asset at the value estimated, and adjustment will happen after completion of project settlement process but no adjustment on depreciation provided previously. 3. At the balance sheet day, if there is evidence of impairment occurred to the construction in process, impairment provision shall be provided as described in Note II. of this report. (XV) Loan expenses 1. Capitalizing of loan expenses Loan expenses occurred in the Company, which can be categorized to purchasing or construction of assets satisfying the conditions of capitalization, shall be capitalized and accounted into capital costs; while other loan expenses are recognized as expenses and recorded into current income account. 2. Capitalization period of loan expenses (1) Capitalization started as soon as all of these conditions are satisfied: 1) Capital expenditures have occurred; 2) Loan expenses have occurred; 3) Necessary purchasing or construction processes have been started to make the asset usable or sellable. (2) If irregular interruption occurred in the purchasing or construction process of the assets satisfying the capitalizing conditions, and suspended for over successive three months, capitalizing of loan expenses is suspended; loan expenses occurred during the suspension period are recognized as current expenses until the purchasing or construction process resumes. (3) Capitalizing of loan expenses is terminated as soon as the asset satisfying the capitalizing conditions reaches the state of usable or sellable as expected. 3. Amount of loan expense capitalization Special loans raised for purchasing or construction of assets satisfying the conditions of capitalization, interest to be capitalized will be the actual interest expenses occurred in the current period of loan (including the discount, premium, or amortizing decided on actual interest rate basis), less the interest income from the unused loans in bank account or provisional investment gains; common loans used for purchasing or construction of assets satisfying the conditions of capitalization, the interest to be capitalized will be the weighted average of balance over special loans multiply capitalization rate of common loans. (XVI) Intangible assets 1. Intangible assets are including franchiseeship, land using rights, patents, and non-patent technologies, which are measured initially on cost basis. 2. For intangible assets with limited useful life, during the use life it is amortized according to the anticipating implementation method of the economic benefit of the intangible asset systematically and reasonably. If can’t recognize the anticipating implementation method, the straight basis is deployed. Items Amortizing years Land using right 50 Operation rights of waste heat power plant on actual operation term 353. At the balance sheet day, to check the future economic benefit capacity to the Company of the intangible assets, asset impairment provision is provided according to Note II 4. 4. Expenditures of internal researching projects are accounted into current term gain and loss when happens. The development period expenditures are recognized as intangible assets when fulfill following conditions: (1) The intangible asset is completed and technically possible to be used or sold; (2) With intention to complete the intangible asset for purpose of use or sale; (3) Evidence showing that there are markets or the products produced with using of the intangible asset, or markets of the intangible asset itself, by which the intangible asset may produce financial benefits. Intangible assets used inside the Company must be approved for their usable characters. (4) Developing of the intangible assets are supported by sufficient technical, financial, and other resources, and the intangible assets can be used or sold. (5) Expenditures occurred in developing of the intangible asset may be reliably measured. (XVII) Long-term amortizable expenses Long-term amortizable expenses are recorded at actual amount occurred, and straight amortized to stipulated periods. In case a long-term expense was not benefiting the succeeding periods, then the balance of the account shall be transferred over to current income account. (XVIII) Expected liabilities 1. Liabilities caused by contingent issues such as providing of guarantee, lawsuit, quality warranty, and loss contract are regarded as current liabilities of the Company. Executing of these liabilities may cause benefit outflow. These are recognized as expectable liabilities when they can be measured reliably. 2. The best prediction is used in initial measurement when the relative liability is excercised, and revised at balance sheet day. (XIX) Turnover 1. Sales of goods Sales income is recognized when all of these conditions are satisfied: Major risks and rewards attached to the goods have been transferred to the purchaser; The Company holds neither successive management power which is normally attached to ownership, nor effective control, over the goods which have been sold out; Amount of income may be reliably measured; when the costs, occurred or will occur, may be measured reliably. 2. Providing of labor service At balance sheet day, those service trades (simultaneously satisfying the requirements of those: income can be measured reliably, related economic benefit will flow in very possibly, transaction procedure can be confirmed reliably, happened and happening cost can be measured reliably) which can be reliably estimated are recognized at the percentage of completion, and progress of completion of service is decided by the portion of costs occurred over the estimated total costs. At balance sheet day, those service trades which can not be reliably estimated, if the happened services cost will be compensated, the services income are recognized according to happened service cost and transited to service cost according to same amount; if the happened services cost will not be compensated, the happened services cost are accounted into current term’s gain or loss and the services income will not be recognized. 3. Demising of asset using rights Income from giving of assets is recognized when satisfying requirements: related economic benefit flows in very possibly, income can be measured reliably. Amount of interest income is calculated according to the time and actual interest rate of the monetary capital is used by other party. Income of using fee is calculated upon the charge period and calculation provided by the related contract or agreement. (XX) Government subsidy 1. Government subsidies are divided into asset-related subsidies and income-related subsidies. 2. Monetary government subsidies are measured on actual amount or receivable amount; non-monetary 36subsidies are measured at fair value; when no fair value is available, measured at named amount. 3. Asset-related government subsidies are recognized as differed income, amortized straight to its useful life and recorded into current income account. Those income-related government subsidies used to makeup expenses or losses in succeeding periods are recognized as differed income and recorded in current income account at the related expenses is recognized; those used to makeup expenses or losses already occurred are recorded into current income account instantly. (XXI) Differed income tax assets/ differed income tax liabilities 1. Differed income tax liabilities or assets are recognized at proper rate in the term of retrieving the assets or paying the liabilities according to difference (for not recognized assets and liabilities which tax basis can be recognized, the difference is between the tax basis and the book value) between book value of the assets or liabilities and the tax basis. 2. Differed income tax assets are recognized limitedly by the income tax which very possibly deduct deductible temporary difference. At balance sheet day, the not-yet recognized differed income tax assets in previous fiscal term are recognized if have evidence to prove there is enough income tax very possibly to deduct deductible temporary difference. 3. At the balance sheet day, verification will be performed on the book value of differed income tax assets. If it is not possible to obtain enough taxable income to neutralize the benefit of differed income tax assets, then the book value of the differed income tax assets shall be reduced. Whenever obtaining of taxable income became possible, the reduced amount shall be restored. 4. Current income tax and differed income tax are accounted into current gain/loss account as income tax expenditures or gains, but exclude the following income taxes: (1) Merger of enterprises; (2) Transactions or events recognized directly in owners’ equity. (XXII) Asset impairment 1. 1. At the balance sheet day, assets (except inventory, equity investment without quote at active market and which fair value can’t be reliably measured, investing property deployed fair value measurement, consuming biology asset, ) are evaluated to show if there is depreciation clue .If there is clue to show asset depreciation, estimate its returnable amount by individual asset; if it’s hard to estimate the individual asset, estimate it on the basis of its asset composition or composition group. For goodwill and intangible asset without certain useful life, impairment test is performed each year whether or not there is clue of impairment. 2. The returnable amount is the higher value of net value of individual asset, asset composition, asset composition group’s fair value deduct dealing expenditures and anticipating future cash flow net value of the individual asset, asset composition, asset composition group. 3. If the individual asset’s recoverable amount is lower than its book value, asset impairment provision is conducted according to the deference between the individual asset book value and recoverable amount. If the recoverable value of the asset composition or the asset composition group is lower than its book value, when recognizing the depreciation loss, the depreciation loss amount firstly compensate the amortized book value of goodwill of the asset composition or asset composition group, secondly proportionally compensate the other assets’ book value according to the proportion of other asset other than goodwill; the above book value compensations are recognized as separate individual asset’s impairment loss and separate asset impairment provisions are provided. 4. Once impairment losses are confirmed upon the above assets, they won’t be restored in successive accounting periods. III. Taxations (I) VAT Paid at 17%. City maintenance and construction tax The Company, Zhejiang Huayuan Steam Turbine Mechanism Co., Ltd, Hangzhou Guonenng Steam 37Turbine Co’,Ltd are foreign investment enterprises which are free of city maintenance tax. The other subsidiaries are subject to pay city maintenance tax with amount of 7% turnover tax. (III) Education surtax The Company, Zhejiang Huayuan Steam Turbine Mechanism Co., Ltd, Hangzhou Guonenng Steam Turbine Co’,Ltd are foreign investment enterprises which are free of education surtax. The other subsidiaries are subject to education surtax at 3% of turnover tax. (IV) Local education surcharges Paid at 2% of turnover tax payable. (V) Corporation income tax 1. According to the document 浙科发高[2008]314 titled “Notification of Awarding the Second Lot of High-Tech Enterprises of Year 2008” issued jointly by Zhejiang Bureau of Science and Technology, Zhejiang Bureau of Finance, Zhejiang National Tax Bureau, and Zhenjiang Local Tax Bureau, the Company was certified the High-Tech Enterprise of 2008, therefore enjoys 15% of income tax rate from 2008 to 2010. 2. According to the document 浙科发高[2008]250 titled “Notification of Awarding the First Lot of High-Tech Enterprises of Year 2008” issued jointly by Zhejiang Bureau of Science and Technology, Zhejiang Bureau of Finance, Zhejiang National Tax Bureau, and Zhenjiang Local Tax Bureau, the Company was certified the High-Tech Enterprise of 2008, therefore enjoys 15% of income tax rate from 2008 to 2010. 3. According to “Approval to Hangzhou Guoneng Steam Turbine Engineering Co., Ltd. for remitting of taxes at fixed period” (余国税外〔2008〕290号) issued by Zhejiang Hangzhou National Tax Bureau, Hangzhou Guoneng Steam Turbine Engineering Co., Ltd. is enjoying preferable taxation policies at fixed period, namely, 2007 was the year the company started to make profit, it was free of tax for 2007-2008, and 12.5% of tax rate for 2009-2011. 4. According to “Notification of certifying Zhejiang Huayuan Steam Turbine Machinery Co., Ltd. and other three foreign invested manufacturers to enjoy tax remitting policies at fixed period” (德国税法[2007]19号) issued by Zhejiang Deqing County National Tax Bureau, Zhejiang Huayuan Steam Turbine Machinery Co., Ltd. was qualified to enjoy income tax remitting policies at fixed periods, namely, 2007 was the year the company started to make profit, it was free of tax for 2007-2008, and 12.5% of tax rate for 2009-2011. 5. Other subsidiaries are subject to 25% of corporation income tax. IV. Enterprise consolidation and consolidated financial statements (I) Profiles of subsidiaries 1. Subsidiaries acquired through incorporation or investment Subsidiary (Full name) Ownership of the subsidiary Reg. Add. Business Property Registered capital Business Scope Zhejiang Steam Trubine Packaged Technologies Development Co., Ltd. (the Packaged Tech Co.) Controlled subsidiaries Hangzhou Zhejiang Manufacturing 30 mil Development of electrical & mechanical equipment cotrol unit and technical consulting service Hangzhou Zhongneng Steam Turbine Power Co., Ltd. (Zhongneng Co.) Controlled subsidiaries Hangzhou Zhejiang Manufacturing 92.5 mil Designing and manufacturing of steam turbines and supplementary equipment and parts; sales of the Company’s products; contracting and consulting of mid-small size power plants Hangzhou Steam Turbine Casting Co., Controlled subsidiaries Hangzhou Zhejiang Manufacturing 22 mil Manufacturing of cast iron and steel products; installation and maintenance 38Ltd. (Casting Co.) of casting equipments; sales of the Company’s products Hangzhou Steam Turbine Auxiliary Machinery Co., Ltd. (Auxiliary Machinery Co.) Controlled subsidiaries Hangzhou Zhejiang Manufacturing 40 mil Manufacturing of auxiliary equipment of steam turbine Hangzhou Steam Turbine Machinery Equipment Co., Ltd. (Machinery Equipment Co.) Controlled subsidiaries Hangzhou Zhejiang Manufacturing 30 mil Manufacturing and processing of steam turbine auxiliary parts and other machinery auxiliary parts Zhejiang Huayuan Steam Turbine Machinery Co., Ltd. (Huayuan Co.) Holding subsidiary of the Machinery Co. Huzhou Zhejiang Manufacturing 21 mil Manufacturing and processing of steam turbine parts Hangzhou Guoneng Steam Turbine Engineering Co., Ltd. (Guoneng Co.) Holding subsidiary of the Auxiliary Machine Co. Hangzhou Zhejiang Manufacturing 80 mil Steam turbine periphery; service: design, installation, consultation, technology service of steam turbine system and related equipments. Hangzhou Steam Turbine Group Equipment System Engineering Co., Ltd. (Group System Co.) Holding subsidiary of Zhongneng Co. Hangzhou Zhejiang Manufacturing 20 mil Steam turbine and auxiliary equipment designing and installation, equipment system engineering Hangzhou Pangtong Electronic Equipment Co., Ltd. (Pangtong Co.) Holding subsidiary of Zhongneng Co. Hangzhou Zhejiang Manufacturing 1 mil Designing of cooling and depressurizing equipment and accessories; manufacturing (assembling only): cooling and depressurizing equipment; wholesale and retailing: cooling and depressurizing equipment and related equipment Hangzhou Kaineng Forge Co., Ltd. (Kaineng Co.) Holding subsidiary of Casting Co. Hangzhou Zhejiang Manufacturing 2 mil Forging and casting materials Hangzhou Tongneng Turbine Machinery Co., Ltd. (Tongneng Co.) Full-holding subsidiary of Zhongneng Co. Hangzhou Zhejiang Manufacturing 3 mil Manufacturing of single pole steam turbine; technical service, development, and consulting, designing of turbine equipment Guizhou Zhongcheng Concrete Co., Ltd. (Zhongcheng Co.) Holding subsidiary of Zhongneng Co. Dushan Guizhou Manufacturing 50 mil chamotte and concrete manufacturing Zhejiang Turbine Import & Export Co., Ltd. (Turbine Co.) Fully-owned subsidiary Hangzhou Zhejiang Commerce 20 mil Steam turbine, gass turbine, generator, gear box, boiler, air cooler, condensator, power plant auxiliary equipment, water turbine, air compressor, fan, controlling equipment, spare parts, and materials. Sales and assembling of the above, import and export. Hangzhou Energy-saving Technologies and Design Institute Ltd. Controlled subsidiary of the Packaged Tech Ltd. of HSTG Hangzhou Zhejiang 1 mil R&D of energy-saving and environment protection technologies, promotion and sales of products, technical consultancy. (Continue) Subsidiary (Full name) Actual investment at end of term (RMB0’000) Balance of other items actually formed net investment in the subsidiaries Share proportion % Voting power % Consolidated? Zhejiang Steam Turbine Packaged Technology Development Co., 1,626.02 51.84 51.84 Yes 39Ltd. Hangzhou Zhongneng Steam Turbine Power Co., Ltd. 560.09 51.60 51.60 Yes Hangzhou Steam Turbine Casting Co., Ltd. 1,122 51 51 Yes Hangzhou Steam Turbine Auxiliary Machine Co., Ltd. 1,924.46 76.50 76.50 Yes Hangzhou Steam Turbine Machinery & Equipment Co., Ltd. 796.80 52 52 Yes Zhejiang Huayuan Steam Turbine Machinery Co., Ltd. 1,575 75 75 Yes Hangzhou Guoneng Steam Turbine Engineering Co., Ltd. 3,000 75 75 Yes Hangzhou Steam Turbine Power Group Packaged Project Engineering Co., Ltd. 800 40 40 Yes Hangzhou Pangtong Electronic Equipment Co., Ltd. 70 70 70 Yes Hangzhou Kaineng Forge Co., Ltd. 200 100 100 Yes Hangzhou Tongneng Turbine Machinery Co., Ltd. 300 100 100 Yes Guizhou Zhongcheng Concrete Co., Ltd. 3,000 60 60 Yes Zhejiang Turbine Import & Export Co., Ltd. 2,000 100 100 Yes Hangzhou Energy-saving Technologies and Design Institute Ltd. 70 70 70 Yes (Continue) Subsidiary (Full name) Minor shareholders’ equity Amount for deducting minor shareholder’s equity in the minor shareholder’s equity Balance of owners’ equity of parent co. less minor shareholders’ share of current loss over the share of minor shareholder’s equity at beginning of term Zhejiang Steam Turbine Packaged Technology Development Co., Ltd. 27,352,341.44 Hangzhou Zhongneng Steam Turbine Power Co., Ltd. 86,655,247.19 Hangzhou Steam Turbine Casting Co., Ltd. 70,831,822.52 Hangzhou Steam Turbine Auxiliary Machine Co., Ltd. 59,488,991.91 Hangzhou Steam Turbine Machinery & Equipment Co., Ltd. 56,900,586.10 Zhejiang Huayuan Steam Turbine Machinery Co., Ltd. 3,221,819.72 Hangzhou Guoneng Steam Turbine Engineering Co., Ltd. 1,986,918.64 Hangzhou Steam Turbine Power Group Packaged Project Engineering Co., Ltd. 45,140,951.61 Hangzhou Pangtong Electronic Equipment Co., Ltd. 255,231.35 Hangzhou Kaineng Forge Co., Ltd. 0 Hangzhou Tongneng Turbine 0 40Machinery Co., Ltd. Guizhou Zhongcheng Concrete Co., Ltd. 19,580,423.16 Zhejiang Turbine Import & Export Co., Ltd. 0 Hangzhou Energy-saving Technologies and Design Institute Ltd. 54,564.54 371,468,898.18 2. Subsidiaries in which the parent company is holding half or over of shares, and reasons to be included in the consolidated financial statements HSTG Equipment & Engineering Co. was incorporated in October 2007 and Zhongneng Co. was holding 40% of its share equity. It’s business practice started in the report term, and Zhongneng Co. is practically controlling the business operation. Therefore it was included in the consolidated financial statements since January 2008. (II) Change on scope of consolidated financial statements. 1. Subsidiaries newly included in the consolidated financial statements (1) In January 2010, the Packaged Technologies Co., Ltd. acquired Hangzhou Energy Saving Technologies Institute Ltd. This company was registered with capital of RMB1 million. The Packaged Tech Co. invested RMB700 thousand to take 70% of its equity and hold substantial control power. Thus this company is included in the consolidated financial statements. (III) Entities newly included and excluded in the consolidated accounts 1. Subsidiaries newly included in the consolidated accounts Names Net asset at end of current term Net profit of current term (From the date of merger till end of current term) Hangzhou Energy-saving Technologies and Design Institute Ltd. 181,881.80 -550,258.84 41V. Notes to the Consolidated Financial Statements (I) Notes to Consolidated Balance Sheet 1. Monetary capital (1) Details End of term Beginning of term Items Original currency Exchange rate Translated to RMB Original currency Exchange rate Translated to RMB Cash in stock RMB 309,771.34 197,212.66 Sub-total 309,771.34 197,212.66 Bank account: RMB 458,632,077.50 451,704,022.58 USD 797,999.83 6.79091 5,419,141.61 4,037,995.96 6.8282 27,572,244.00 JPY 6,493.00 0.76686 497.92 9,767.00 0.073782 720.63 EURO 10.92 8.27106 90.32 0.31 9.7971 3.04 HKD 8,874.10 0.88048 7,813.47 Sub-total 464,051,807.35 479,284,803.72 Other monetary fund RMB 4,172,000.00 6,246,525.00 USD 104,136.00 6.8282 711,061.44 Sub-total 4,172,000.00 6,957,586.44 Total 468,533,578.69 486,439,602.82 2. Notes receivable (1) Details End of term Beginning of term Category Book balance Bad debt rovision Book value Book balance Bad debt rovision Book Bank acceptance 569,736,165.06 569,736,165.06 585,510,190.21 585,510,190.21 Total 569,736,165.06 569,736,165.06 585,510,190.21 585,510,190.21 423. Account receivable (1) Details 1) Detailed categories End of term Beginning of term Book balance Bad debt provision Book balance Bad debt provision Category Amount Proportion % Amount Proportion % Amount Proportion % Amount Proportion % Major single amount 867,361,730.25 45.41 130,455,331.27 15.04 570,247,250.59 35.62 95,609,541.87 16.77 Minor single amount but greater risk after combined in a character group 101,702,372.01 5.32 61,931,700.80 60.90 75,484,953.53 4.71 46,201,249.72 61.21 Other minors 941,064,050.75 49.27 128,332,173.25 13.64 955,435,641.42 59.67 129,923,751.30 13.60 Total 1,910,128,153.01 100.00 320,719,205.32 16.79 1,601,167,845.54 100.00 271,734,542.89 16.97 2) Detailed on ages End of term Beginning of term Book balance Book balance Age Amount Proportion % Bad debt provision Amount Proportion % Bad debt provision within 1 yr 1,124,361,483.24 58.86 56,218,074.16 901,443,591.76 56.30 45,072,179.60 1-2 yrs 400,049,819.58 20.94 80,009,963.92 371,511,261.38 23.20 74,302,252.28 2-3 yrs 239,246,102.34 12.53 95,698,440.93 227,389,810.13 14.20 90,955,924.05 over 3 yrs 146,470,747.85 7.67 88,792,726.31 100,823,182.27 6.30 61,404,186.96 Total 1,910,128,153.01 100.00 320,719,205.32 1,601,167,845.54 100.00 271,734,542.89 (2) Further remarks on bad debt provisions at end of term 1) Bad debt provision provided according to the result of individual impairment testing on major single account or minor single account but tested individually Description of the receivable accounts Book balance Bad debt provision Rate Reason Ningxia Meili Paper Co., Ltd. 1,011,694.00 1,011,694.00 100% Hard to recover Jinxi Chemical Machinery Factory 1,264,000.00 1,264,000.00 100% Hard to recover 43Sub-total 2,275,694.00 2,275,694.00 2) Bad debt provisions provided on individual tested items without impairment and not tested individually Individual tested items without impairment and not tested individually are included in the group of similar risks, and bad debt provisions are provided along with the group. For details please refer to Note II. (3) Receivable accounts due from shareholders with 5% of shares or over End of term Beginning of term Name of the companies Book balance Bad debt provision Book balance Bad debt provision Hangzhou Steam Turbine Group 876,500.00 148,525.00 944,000.00 182,500.00 Sub-total 876,500.00 148,525.00 944,000.00 182,500.00 (4) Receivable accounts top 5 on amounts Name of the companies Relation with the Company Book balance Age Portion in balance of receivable accounts (%) Shenyang Turbine Machinery Co., Ltd. Non-related 397,922,667.90 [Note 1] 20.83 Xi’an Shanggu Power Co., Ltd. Non-related 256,337,062.35 [Note 2] 13.42 Chongqing Zhongjieneng Sanfeng Energy Co., Ltd. Non-related 213,102,000.00 within 1 year 11.16 Hangzhou Steam Turbine Power Sales Co., Ltd. Related parties 104,646,943.69 [Note 3] 5.48 Lianyuan Steel Group Co., Ltd. Non-related 72,509,871.00 within 1 year 3.80 Sub-total 1,044,518,544.94 54.69 [Note 1] Shenyang Turbine Machinery Co., Ltd. has a balance of receivable within 1 year of RMB219,712,413.50, 1-2 years of RMB102,173,102.40, 2-3 years of RMB43,511,270.00, over 3 years of RMB32,525,882.00. [Note 2] Xi’an Shangu Power Co., Ltd. has a balance of receivable within 1 year of RMB103,729,441.91, 1-2 years of RMB86,090,330.60, 2-3 years of RMB54,274,796.00, and over 3 years of RMB12,242,493.84. [Note 3] Hangzhou Steam Turbine Power Sales Co., Ltd. has a balance of receivable within 1 year of RMB56,771,974.31, 1-2 years of RMB20,767,910.00, 2-3 years of RMB 24,242,559.38, and over 3 years of RMB2,864,500.00. (5) Other receivable accounts of related parties Name of the companies Relation with the Company Book balance Portion in balance of receivable accounts (%) Hangzhou Steam Turbine Power Group Co., Ltd. Controlling shareholder 876,500.00 0.05 HSTG Nanfang Sales Co. Affiliate of the Group 20,000.00 Hangzhou Steam Turbine Power Affiliate of the Group 104,646,943.69 5.48 44Sales Co., Ltd. Hangzhou Steam Turbine Power Technologies Co., Ltd. Affiliate of the Group 8,368,000.00 0.44 Sub-total 113,911,443.69 5.97 4. Prepayment (1) Age analysis End of term Beginning of term Age Book balance Proportion % Bad debt provision Book value Book balance Proportion % Bad debt provision Book value within 1 yr 310,084,546.30 97.28 310,084,546.30 190,709,889.50 86.76 190,709,889.50 1-2 yrs 8,233,838.76 2.58 8,233,838.76 28,590,064.06 13.01 28,590,064.06 2-3 yrs 309,881.00 0.10 309,881.00 258,681.00 0.12 258,681.00 over 3 yrs 110,885.00 0.04 110,885.00 232,765.00 0.11 232,765.00 Total 318,739,151.06 100.00 318,739,151.06 219,791,399.56 100 219,791,399.56 (2) Top 5 prepayment account in amount Name of the companies Relation with the Company End of term Age Reason of unsettled Mitsubishi Non-related 51,893,590.17 within 1 year In schedule as the contract Ha’erbin Steam Turbine Factory Ltd. Non-related 14,520,000.00 within 1 year In schedule as the contract Zhejiang Southern Boiler Co., Ltd. Non-related 14,380,000.00 within 1 year In schedule as the contract Zhejiang Chuangsheng Construction Engineering Co., Ltd. Non-related 11,560,000.00 within 1 year In schedule as the contract DST Ltd. Germany Non-related 10,830,822.80 1-2 years In schedule as the contract Sub-total 103,184,412.97 (3) Prepayment with large amount and aged over 1 year, and reason for overdue Name of the companies End of term Reason of unsettled DST Ltd. Germany 10,830,822.80 Goods not arrived yet Sub-total 10,830,822.80 5. Other account receivable (1) Details 1) Detailed categories End of term Beginning of term Book balance Bad debt provision Book balance Bad debt provision Category Amount Proportion % Amount Proportion % Amount Proportion % Amount Proportion % Major single amount 4,010,320.94 11.62 2,406,192.56 60.00 7,010,320.94 31.25 3,006,192.56 42.88 Minor single amount but 1,344,571.28 3.90 806,742.77 60.00 1,217,574.78 5.43 730,544.87 60.00 45greater risk after combined in a character group Other minors 29,151,106.24 84.48 2,242,625.70 7.69 14,205,589.77 63.32 1,362,992.02 9.59 Total 34,505,998.46 100.00 5,455,561.03 15.81 22,433,485.49 100.00 5,099,729.45 22.73 2) Detailed on ages End of term Beginning of term Book balance Book balance Age Amount Proportion % Bad debt provision Amount Proportion % Bad debt provision within 1 yr 25,661,703.74 74.37 1,283,085.20 10,596,706.24 47.24 529,835.31 1-2 yrs 2,181,102.50 6.32 436,220.50 6,051,983.53 26.98 1,210,396.71 2-3 yrs 1,308,300.00 3.79 523,320.00 556,900.00 2.48 222,760.00 over 3 yrs 5,354,892.22 15.52 3,212,935.33 5,227,895.72 23.30 3,136,737.43 Total 34,505,998.46 100.00 5,455,561.03 22,433,485.49 100.00 5,099,729.45 (2) Further remarks on bad debt provisions at end of term Bad debt provisions provided on individual tested items without impairment and not tested individually Individual tested other receivable items without impairment and not tested individually are included in the group of similar risks, and bad debt provisions are provided along with the group. For details please refer to Note II. (3) No receivable account due from shareholding parties holding over 5% of the Company’s shares. (4) Top 5 other receivables Name of the companies Relation with the Company Book balance Age Percentage in total other receivable % Property of the account Customs deposit receivable Non-related 4,010,320.94 Over 3 years 11.62 Deposit Guodian Trust Bidding Co., Ltd. Non-related 2,436,000.00 within 1 year 7.06 Bidding deposit Beijing Guodian Trust Bidding Agency Co., Ltd. Non-related 535,000.00 within 1 year 1.55 Bidding deposit Yunnan Yunchuang Bidding Co., Ltd. Non-related 660,000.00 within 1 year 1.91 Bidding deposit Hangzhou National Tax Bureau, Export Tax Refunding Office Non-related 9,153,846.18 within 1 year 26.53 Tax refunding Sub-total 16,795,167.12 48.67 (5) No other receivable due from related parties 6. Inventories (1) Details Items End of term Beginning of term 46Book balance Impairment Book value Book balance Impairment Book value Stock materials 307,346,615.89 307,346,615.89 297,160,684.51 297,160,684.51 Product in process 455,339,194.65 455,339,194.65 434,608,594.31 434,608,594.31 Products in stock 413,623,495.11 1,482,365.58 412,141,129.53 278,813,133.88 1,482,365.58 277,330,768.30 Total 1,176,309,305.65 1,482,365.58 1,174,826,940.07 1,010,582,412.7 1,482,365.58 1,009,100,047.12 (2) Inventory depreciation provision 1) Details Decreased this term Items Beginning of term Increased this term Written back Transferred End of term Products in stock 1,482,365.58 1,482,365.58 Sub-total 1,482,365.58 1,482,365.58 7. Long-term share equity investment (1) Details Company invested in Calculating basis Initial costs Beginning of term Changed by End of term Zhejiang Tianhang Steam Turbine Auxiliary Machinery Co., Ltd. Cost basis 10,000,000.00 10,000,000.00 10,000,000.00 Zhejiang Sanxin Automatic Engineering Co., Ltd. Cost basis 600,000.00 600,000.00 600,000.00 Greenesol Co. (India) Cost basis 1,032,411.62 1,032,411.62 1,032,411.62 Hangzhou Bank Cost basis 390,954,040.00 390,954,040.00 390,954,040.00 Total 402,586,451.62 402,586,451.62 402,586,451.62 (Continue) Company invested in Share proportion % Voting power % Statement on differences between the shareholding and voting rights Impairment provision Impairment provision provided this term Cash dividend of the current term Zhejiang Tianhang Steam Turbine Auxiliary Machinery Co., Ltd. 33.33 33.33 1,000,000.00 Zhejiang Sanxin Automatic Engineering 6.00 6.00 0 47Co., Ltd. Greenesol Co. (India) 37.00 37.00 0 Hangzhou Bank 6.92 6.92 0 Hangzhou Steam Turbine Environmental Engineering Co., Ltd. Note (2) 100,735.77 Total 1,100,735.77 (2) Other statements Note 1) The Auxiliary Machine Co. – the controlled subsidiary of the Company has invested RMB10,000,000 in Zhejiang Tianhang Steam Turbine Auxiliary Machinery Co., Ltd. and take 33.33% of the share equities. According to the agreement, the Company adopts fixed return in accounting of this long-term equity investment. In case of the revenue of the company is lower than RMB80 million, the return rate after tax will be 10%, ie. RMB1,000,000; in case of the revenue is over RMB80 million, the return rate after tax will be 12%, ie. RMB1,200,000. For the above long-term equity investment adopts agreement rewarding scheme, the Auxiliary Machinery Co. accounts the long-term equity investment on cost basis. Note 2) Hangzhou Steam Turbine Environment Engineering Co., Ltd. filed for deregistration to Hangzhou Bureau of Commerce Binjiang Office, and was approved on December 12, 2009. The account was the interest settlement received in the report term. 8. Fixed assets (1) Details Items Beginning of term Increased this term Decreased this term End of term 1) Subtotal of original book value 991,664,635.89 23,662,559.66 1,971,839.26 1,013,355,356.29 Houses & buildings 295,678,088.90 5,348,876.42 670,593.55 300,356,371.77 Equipment & machinery 595,983,929.23 14,317,914.80 274,984.56 610,026,859.47 Office equipment 100,002,617.76 3,995,768.44 1,026,261.15 102,972,125.05 2) Subtotal of accumulated depreciation 455,180,259.16 33,959,030.37 727,694.04 488,411,595.49 Houses & buildings 95,842,898.54 4,721,370.89 100,564,269.43 Equipment & machinery 302,997,871.16 23,299,623.75 259,757.19 326,037,737.72 Office equipment 56,339,489.46 5,938,035.73 467,936.85 61,809,588.34 3) Subtotal of net book value 536,484,376.73 23,662,559.66 35,203,175.59 524,943,760.8 Houses & buildings 199,835,190.36 5,348,876.42 5,391,964.44 199,792,102.34 Equipment & machinery 292,986,058.07 14,317,914.80 23,314,851.12 283,989,121.75 Office equipment 43,663,128.30 3,995,768.44 6,496,360.03 41,162,536.71 4) Subtotal of impairment provision 8,169,109.24 8,169,109.24 Houses & buildings 1,504,928.24 1,504,928.24 Equipment & machinery 4,472,304.10 4,472,304.10 Office equipment 2,191,876.90 2,191,876.90 485) Total of book value 528,315,267.49 23,662,559.66 35,203,175.59 516,774,651.56 Houses & buildings 198,330,262.12 5,348,876.42 5,391,964.44 198,287,174.10 Equipment & machinery 288,513,753.97 14,317,914.80 23,314,851.12 279,516,817.65 Office equipment 41,471,251.40 3,995,768.44 6,496,360.03 38,970,659.81 Depreciation of the report term was RMB33,959,030.37; the original value of construction in process transferred to fixed asset was RMB12,147,637.67. (2) Fixed assets not granted property license Items Reason for not granted Expected date of grant Houses and buildings of Guoneng Co. Completion settlement not finished yet In process (3) At end of the term, there was RMB35,259,414.38 of fixed assets provided as guarantee. 9. Construction in process (1) Details End of term Beginning of term Project Book balance Impairment provision Book value Book balance Impairment provision Book value TK6916 Digital Flat Boring 0 0 7,063,388.53 7,063,388.53 6.3 m vertical lathe 1,424,673.00 1,424,673.00 70,000.00 70,000.00 Toyota business car 653,452.00 653,452.00 0 0 D260 digital boring 27,815,984.22 27,815,984.22 261,000.00 261,000.00 Renewing of D1000/L3000 digital lathe 0 0 606,583.86 606,583.86 Gas turbine cylinder equipment of general assembling 1,098,324.28 1,098,324.28 716,828.77 716,828.77 27m assembling platform of general assembling 366,598.00 366,598.00 365,336.00 365,336.00 Upgrading of painting lift 1,591,864.88 1,591,864.88 796,977.01 796,977.01 Environment project of temporary yard 868,642.60 868,642.60 464,928.34 464,928.34 Casting workshop and equipment 108,984,107.05 108,984,107.05 116,367,550.30 116,367,550.30 Guoneng Co. New Factory Construction 0 0 0 0 Construction of Zhongcheng Co. 32,192,509.55 32,192,509.55 3,117,651.39 3,117,651.39 Zhongneng Headquarter 294,332.00 294,332.00 0 0 Other small projects 5,767,874.99 5,767,874.99 4,162,856.45 4,162,856.45 Total 181,058,362.57 181,058,362.57 133,993,100.65 133,993,100.65 (2) Changes and alternations 1) Details Project Budget amount RMB0’000 Beginning of term Increased this term Transferred into fixed assets Other decreases Investment on budget (%) TK6916 Digital Flat Boring 700 7,063,388.53 7,063,388.53 0 101 496.3 m vertical lathe 70,000.00 1,354,673.00 0 0 Toyota business car 66 0 653,452.00 0 0 99 D260 digital boring 3,500 261,000.00 27,554,984.22 0 0 79.47 Renewing of D1000/L3000 digital lathe 65 606,583.86 0 606,583.86 0 93 Gas turbine cylinder equipment of general assembling 120 716,828.77 381,495.51 0 0 91.53 27m assembling platform of general assembling 66 365,336.00 1,262.00 0 0 55.55 Upgrading of painting lift 120 796,977.01 794,887.87 0 0 132.66 Environment project of temporary yard 464,928.34 403,714.26 0 0 Casting workshop and equipment 13,120 116,367,550.30 0 0 7,383,443.25 83.07 Guoneng Co. New Factory Construction 0 1,554,848.49 0 1,554,848.49 Construction of Zhongcheng Co. 7,500 3,117,651.39 29,074,858.16 0 0 42.92 Zhongneng Headquarter 0 294,332.00 0 0 Other small projects 4,162,856.45 6,082,683.82 4,477,665.28 0 Total 133,993,100.65 68,151,191.33 12,147,637.67 8,938,291.74 (Continue) Project Progress Accumulate of interest capitalized Interest capitalized this term Interest capitalized rate of this term % Fund recourse End of term TK6916 Digital Flat Boring Completed Independent 0 6.3 m vertical lathe under construction Independent 1,424,673.00 Toyota business car under construction Independent 653,452.00 D260 digital boring under construction Independent 27,815,984.22 Renewing of D1000/L3000 digital lathe Completed Independent 0 Gas turbine cylinder equipment of general assembling under construction Independent 1,098,324.28 27m assembling platform of general assembling under construction Independent 366,598.00 Upgrading of painting lift under construction Independent 1,591,864.88 Environment project of temporary yard under construction Independent 868,642.60 Casting workshop and equipment under construction 2,794,617.50 0 0 Independent 108,984,107.05 Guoneng Co. New Factory Construction Completed Independent 0 Construction of Zhongcheng Co. under construction Independent 32,192,509.55 Zhongneng Headquarter under construction Independent 294,332.00 Other small projects under construction Independent 5,767,874.99 Total 181,058,362.57 5010. Intangible assets (1) Details Items Beginning of term Increased this term Decreased this term End of term 1) Subtotal of original book value 155,609,548.25 22,661,314.62 0 178,270,862.87 Land using right 85,609,548.25 22,581,314.62 0 108,190,862.87 Operation rights of waste heat power plant 70,000,000.00 0 0 70,000,000.00 Product patent 80,000.00 0 80,000.00 2) Subtotal of accumulated amortizing 14,164,831.99 3,967,848.65 0 18,132,680.64 Land using right 12,736,261.99 1,586,898.65 0 14,323,160.64 Operation rights of waste heat power plant 1,428,570.00 2,380,950.00 0 3,809,520.00 3) Subtotal of net book value 141,444,716.26 22,661,314.62 3,967,848.65 160,138,182.23 Land using right 72,873,286.26 22,581,314.62 1,586,898.65 93,867,702.23 Operation rights of waste heat power plant 68,571,430.00 0 2,380,950.00 66,190,480.00 Product patent 0 80,000.00 0 80,000.00 4) Subtotal of impairment provision Land using right Operation rights of waste heat power plant 5) Total of book value 141,444,716.26 22,661,314.62 3,967,848.65 160,138,182.23 Land using right 72,873,286.26 22,581,314.62 1,586,898.65 93,867,702.23 Operation rights of waste heat power plant 68,571,430.00 0 2,380,950.00 66,190,480.00 Product patent 80,000.00 80,000.00 RMB3,967,848.65 amortized this term. (2) Particulars about the property not granted license Items Reason for not granted Expected date of grant Land using rights of Huayuan Co. Under normal procedures In process 11. Long-term amortizable expenses Items Beginning of term Increased this term Amortized this term Other decreases End of term Decoration fee 8,092,318.74 1,853,703.27 229,993.08 9,716,028.93 Total 8,092,318.74 1,853,703.27 229,993.08 9,716,028.93 12. Differed income tax assets/ differed income tax liabilities (1) Details Items End of term Beginning of term Differed income tax asset Bad debt provision 42,653,028.70 42,653,028.70 Inventory impairment provision 222,354.84 222,354.84 Fixed asset impairment provision 1,225,366.39 1,225,366.39 Unrealised profit in consolidated accounts 8,346,759.66 4,261,359.81 Tax remitting for home-made equipment 0 Other deductible provisional difference 261,705.60 261,705.60 Total 52,709,215.19 48,623,815.34 Differed income tax liability Temporary differences of other tax payables 1,225,366.39 1,225,366.39 Total 1,225,366.39 1,225,366.39 51(2) Provisional differences correspondent to the asset or liability items Items Amount of temporary differences Deductible provisional differences Bad debt provision 276,834,272.34 Inventory impairment provision 1,482,365.58 Fixed asset impairment provision 8,169,109.24 Unrealised profit in consolidated accounts 46,225,017.48 Other deductible provisional difference 1,512,592.01 Sub-total 334,223,356.65 Taxable provisional difference Temporary differences of other tax payables 8,169,109.24 Sub-total 8,169,109.24 13. Short-term loans Details Items End of term Beginning of term Guarantee loan 180,000,000.00 100,000,000.00 Pledged loan 15,000,000.00 31,000,000.00 Loan by pledge 5,000,000.00 Total 195,000,000.00 136,000,000.00 14. Notes payable Category End of term Beginning of term Bank acceptance 70,004,809.92 103,656,815.22 Total 70,004,809.92 103,656,815.22 15. Account payable (1) Details Items End of term Beginning of term Trade 522,638,029.77 288,160,209.73 Payment for equipment and projects 13,632,408.00 32,605,951.75 Total 536,270,437.77 320,766,161.48 (2) Account payable to shareholders with 5% or over of the Company’s voting shares and other related parties Name of the companies End of term Beginning of term Hangzhou Steam Turbine Group 448,149.55 333,711.37 Hangzhou Steam Turbine Automobile Sales Service Co., Ltd. 2,571,696.17 590,390.33 Hangzhou Steam Turbine Industrial Co. 289,554.51 122,763.43 Hangzhou Hangfa Power Generating Equipment Co., Ltd. 8,453,150.20 2,339,600.00 Hangzhou Steam Turbine Wooden Packaging Co., Ltd. 176,457.00 71,040.00 Hangzhou Nanfangtongda Gears Co., Ltd. 1,934,025.00 66,000.00 Sub-total 13,873,032.43 3,523,505.13 (3) No large amount payable account aged over one year 16. Prepayment received (1) Details Items End of term Beginning of term Trade 1,387,427,722.19 1,233,884,154.03 Total 1,387,427,722.19 1,233,884,154.03 52(2) Account received in advance from shareholders with 5% or over of the Company’s voting shares and other related parties Name of the companies End of term Beginning of term Hangzhou Steam Turbine Power Sales Co., Ltd. 26,534,823.54 36,763,556.54 Hangzhou Steam Turbine Power Technologies Co., Ltd. 3,762,400.00 Sub-total 30,297,223.54 36,763,556.54 (3) No large amount account received in advance aged over one year. 17. Employees’ wage payable (1) Details Items Beginning of term Increased this term Decreased this term End of term Wage, bonus, allowance and subsidies 3,502,519.27 160,996,319.02 157,475,446.99 7,023,391.30 Employee welfare 0.00 20,465,931.98 15,211,125.65 5,254,806.33 Social insurance 16,478,500.78 36,166,990.41 35,828,705.28 16,816,785.91 Housing fund 89,638.76 16,771,042.42 16,778,282.30 82,398.88 Trade Union finance 1,025,704.18 3,080,180.85 3,195,328.11 910,556.92 Training expenses 2,144,834.55 3,828,666.77 311,448.97 5,662,052.35 Dismissing policy 0.00 28,002.10 28,502.10 -500.00 Total 23,241,197.54 241,337,133.55 228,828,839.40 35,749,491.69 No invalid delay of payment in the wage payable. 18. Tax payable Items End of term Beginning of term VAT 29,301,950.81 24,620,872.92 City maintenance and construction tax 477,379.79 255,642.82 Business tax 487,090.11 212,846.48 Enterprise income tax 40,223,690.56 57,851,854.03 Personal income tax 1,851,723.19 3,930,411.71 Property tax 46,607.04 184,227.72 Education surtax 272,169.22 109,561.18 Local education surcharges 1,034,904.88 816,356.62 Stamp tax 28,555.68 93,602.03 water conservancy special fund 2,086,054.11 1,409,198.19 Land using tax 876,605.00 Total 76,686,730.39 89,484,573.70 19. Interest payable Items End of term Beginning of term Loan interests 0 195,250.00 Total 0 195,250.00 20. Other account payable 53(1) Details Items End of term Beginning of term Deposit 1,360,000.00 6,147,115.90 Payable to other company 76,906,708.23 17,883,468.09 Others 9,764,902.77 200,788.14 Total 88,031,611.00 24,231,372.13 (2) Account payable to shareholders with 5% or over of the Company’s voting shares and other related parties Name of the companies End of term Beginning of term Hangzhou Steam Turbine Group 23,465,523.29 10,340,876.00 Hangzhou Steam Turbine Automobile Sales Service Co., Ltd. 3,321,702.81 1,928,039.57 Hangzhou Relian International Trading Co. 50,000,000.00 0 Sub-total 76,787,226.10 12,268,915.57 (3) No large amount other payable aged over 1 year. (4) Remarks on other payable accounts with large amount Name of the companies End of term Property of the account Hangzhou Relian International Trading Co. 50,000,000.00 Packaged Tech of the Group borrowed from the Company Hangzhou Steam Turbine Group 23,465,523.29 Power and land rental Hangzhou Steam Turbine Automobile Sales Service Co., Ltd. 3,321,702.81 Freight and repairing Sub-total 76,787,226.10 21. Long-term borrowings (1) Particulars of long-term borrowings 1) Details Items End of term Beginning of term Pledged loan 40,000,000.00 40,000,000.00 Guarantee loan 130,000,000.00 117,000,000.00 Credit loan 90,463,800.00 90,463,800.00 Total 260,463,800.00 247,463,800.00 (2) Details of long-term borrowings Loan provided by Loans Start date Loans Expired on Currency Annual interest rate (%) End of term Beginning of term China Construction Bank, Zhejiang Branch 2009-3-24 2015-3-23 RMB Float rates 90,463,800.00 90,463,800.00 China Import & Export Bank, Zhejiang Branch 2009-8-17 2011-2-16 RMB Float rates 100,000,000.00 100,000,000.00 China Construction Bank, Tangxi Office 2009-6-24 2011-6-23 RMB Float rates 40,000,000.00 40,000,000.00 54Pudong Development Bank, Yuhang Branch 2009-6-12 2011-6-11 RMB 5.40 17,000,000.00 17,000,000.00 Pudong Development Bank, Yuhang Branch 2010-5-24 2012-5-23 RMB 5.40 13,000,000.00 Sub-total 260,463,800.00 247,463,800.00 22. Long-term payable Items End of term Beginning of term Drawing in administrative restructuring 330,000.00 330,000.00 Total 330,000.00 330,000.00 23. Other non-recurring liabilities (1) Details Items End of term Beginning of term Differed income 8,004,440.00 3,322,740.00 Total 8,004,440.00 3,322,740.00 (2) Balance at end of term increased by 140.90% over the beginning of term, which was caused by receiving of a) Technical reforming subsidy of 2009 from Hangzhou Xiacheng Government of RMB2,580,000.00; b) Award for key equipment of 2009 from Hangzhou Xiacheng Government of RMB1,080,000.00. 5524. Share capital Changed this term (+,-) Items Beginning of term End of term Amount Proportion % Issuing of new shares Bonus shares Transferred from reserves Others Sub-total Amount Proportion % 1. State-owned shares 2. State legal person shares 236,600,000 63.64 70,980,000 307,580,000 63.64 3. Other domestic shares In which: Domestic legal person shares Domestic natural person shares 4. Foreign shares In which: Foreign legal person shares (I) Shares with condition of restricted to sell Foreign natural person shares Total of conditional shares 236,600,000 63.64 70,980,000 307,580,000 63.64 1. RMB common shares 2. Foreign currency shares listed domestic 135,200,000 36.36 40,560,000 175,760,000 36.36 3. Foreign shares listed overseas 4. Others (II) Unconditional shares Total of negotiable shares 135,200,000 36.36 40,560,000 175,760,000 36.36 (III) Total of shares 371,800,000 100.00 111,540,000 483,340,000 100.00 5625. Capital reserves Items Beginning of term Increased this term Decreased this term End of term Share capital premium 81,815,220.00 81,815,220.00 Other capital reserves 57,138,030.09 57,138,030.09 Total 138,953,250.09 138,953,250.09 26. Surplus reserves (1) Details Items Beginning of term Increased this term Decreased this term End of term Statutory surplus reserves 327,932,742.87 327,932,742.87 Total 327,932,742.87 327,932,742.87 (2) Reason and basis of change on surplus reserves. 27. Retained profit (1) Details Items Amount Percentage of drawing or allocation Adjustment on retained profit at end of previous term 1,497,423,473.50 —— Adjustment on the total of retained profit at beginning of term (+ for increase, - for decrease) —— Retained profit at beginning of term after adjustment 1,497,423,473.50 —— Plus: Net profit attributable to owners of the parent company 255,824,821.46 —— Less: Statutory surplus reserves 0 10% Dividend payable to common shares (to shareholders) 260,260,000.00 RMB4 (tax included) of cash dividend to each 10 shares, 3 bonus shares (tax included) to each 10 shares Retained profit at the end of term 1,492,988,294.96 —— (2) Other statements 1) According to the profit distribution plan 2009, upon the total capital shares of 371,800,000 at end of 2009, RMB4 (tax included) was distributed to each 10 shares. Totally RMB148,720,000.00 was distributed. 3 bonus shares (tax included) were distributed to each 10 shares, totally RMB111,540,000.00 was distributed. This plan has been implemented in June 2010. 57(II) Notes to consolidated income statement 1. Turnover / cost (1) Details Items Current term Same period of last term Major business turnover 1,830,253,159.97 1,627,937,615.84 Other business income 10,262,391.00 18,590,152.53 Operation cost 1,180,414,236.98 1,012,507,507.68 (2) Main business turnover / cost (categorized on products) Current term Same period of last term Name of industry Revenue Cost Revenue Cost Industrial steam turbine 1,515,923,802.17 947,985,439.00 1,360,087,455.05 831,880,755.22 Casting products 27,998,388.10 22,370,089.03 36,121,030.64 22,721,216.13 Auxiliary machinery 36,510,320.49 35,287,211.12 67,354,751.49 47,648,281.33 Packaged equipment for 57,998,974.36 47,309,044.89 102,756,024.88 64,236,701.30 Others 191,821,674.85 119,802,394.05 61,618,353.78 29,780,294.42 Sub-total 1,830,253,159.97 1,172,754,178.09 1,627,937,615.84 996,267,248.40 (3) Main business turnover / cost (on territories) Current term Same period of last term Name of districts Revenue Cost Revenue Cost Domestic 1,589,195,419.48 994,025,770.27 1,492,697,124.71 886,163,390.60 Overseas 241,057,740.49 178,728,407.82 135,240,491.13 110,103,857.80 Sub-total 1,830,253,159.97 1,172,754,178.09 1,627,937,615.84 996,267,248.40 (4) Business turnover from top 5 clients Name of clients Turnover Percentage in total turnover of the Company Chongqing Zhongjieneng Sanfeng Energy Co., Ltd. 368,752,136.92 20.04 Shenyang Turbine Machinery Co., Ltd. 236,265,034.13 12.83 Xi’an Shanggu Power Co., Ltd. 87,379,487.21 4.75 Hangzhou Steam Turbine Power Sales Co., Ltd. 56,675,678.62 3.08 BMM Power plant in India 33,995,970.00 1.85 Sub-total 783,068,306.88 42.55 582. Business tax and surcharge Items Current term Same period of last term Rate Business tax 541,665.95 801,986.00 City maintenance and construction tax 1,274,082.70 2,990,090.84 Education surtax 556,850.14 681,006.98 Local education surcharges 2,757,219.44 687,270.58 For details please see Notes to the Financial Statements. Total 5,129,818.23 5,160,353.50 3. Asset impairment loss Items Current term Same period of last term Bad debt losses 49,340,494.01 31,933,931.16 Total 49,340,494.01 31,933,931.16 4. Investment income (1) Details Items Current term Same period of last term Long-term equity investment gains on cost basis 1,000,000.00 29,898,083.98 Long-term equity investment gains on equity basis 100,735.77 Investment gains from disposal of long-term equity investment Others Total 1,100,735.77 29,898,083.98 (2) Long-term investment income on cost basis Company invested in Current term Same period of last term Causation of change Hangzhou Commercial Bank 28,898,300.00 Zhejiang Tianhang Steam Turbine Auxiliary Machinery Co., Ltd. 1,000,000.00 1,200,000.00 Sub-total 1,000,000.00 30,098,300.00 (3) Long-term investment income on equity basis Company invested in Current term Same period of last term Causation of change Hangzhou Steam Turbine Environmental Engineering Co., Ltd. 100,735.77 Canceled in previous term Sub-total 100,735.77 (4) There was no major limitation on retrieving of investment gains. 595. Non-operational income (1) Details Items Current term Same period of last term Total of gains from disposal of non-current assets 48,907.71 174,985.76 Incl. Gains from disposal of fixed assets 48,907.71 174,985.76 Government subsidy 1,300,412.00 3,214,040.20 Compensation income 841,925.00 0 Others 16,435.33 100,000.00 Total 2,207,680.04 3,489,025.96 (1) Statement on changes for over 30% (included) or 10% (included) of the total profit. Non-operational income decreased by 36.73%, which was caused by decrease of government subsidy. 6. Non-operational expenditure Items Current term Same period of last term Total of loss from disposal of non-current assets 1.37 Incl. Loss from disposal of fixed assets 1.37 Donations 2,683,337.00 905,000.00 Penalty paid 58,128.74 13,890.00 water conservancy special fund 2,300,045.06 1,946,789.92 Others 16,744.24 2,668.09 Total 5,058,255.04 2,868,349.38 7. Income tax expenses Items Current term Same period of last term Income tax calculated according to the law and regulations of current term 57,396,622.68 48,512,516.75 Adjustment of differed income tax -1,626,069.83 1,789,070.53 Total 55,770,552.85 50,301,587.28 60(III) Notes to consolidated cash flow statement 1. Other operational cash received Items Current term Gains from bank interests 3,055,870.71 Government subsidies received 6,256,112.00 Bidding deposit 7,165,370.00 Others 12,154,625.85 Total 28,631,978.56 2. Other operational cash paid Items Current term Business trips 12,034,496.75 Transportation 19,603,711.77 Business reception expenses 9,639,494.68 International travelling 2,090,208.08 Property management and civil services 3,750,358.95 Rental 4,528,582.29 Bidding deposit 16,121,850.00 Others 41,253,229.09 Total 109,021,931.61 3. Cash received as borrowing Items Current term Loans from bank 143,000,000.00 Borrowings received from other units 50,000,000.00 Total 193,000,000.00 615. Appendix of Cash Flow Statement (1) Supplementary cash flow statement Supplementary Info. Current term Same period of last term 1) Net profit adjusted to cash flow of operation: Net profit 305,911,524.96 288,130,624.99 Plus: Asset impairment provision 49,340,494.01 31,933,931.16 Fixed asset depreciation, gas and petrol depreciation, production goods depreciation 33,959,030.37 32,511,820.30 Amortizing of intangible assets 3,967,848.65 29,539,093.29 Amortizing of long-term expenses 229,993.08 229,993.08 Loss from fixed assets, intangible assets and other long-term assets disposal (“-“ for gains) -48,907.71 -174,985.76 Loss from fixed assets discarding (“-“ for gains) 0 1.37 Loss from fluctuate of fair value (“-“ for gains) 0 0 Financial expenese (“-“ for gains) 9,719,615.00 -6,368,268.96 Investment loss (“-“ for gains) -1,100,735.77 -29,898,083.98 Decrease of deferred income tax asset (“-“ for increase) -4,085,399.85 1,909,346.88 Increase of deferred income tax liabilities (“-“ for decrease) 0 0 Decrease of inventory (“-“ for increase) -165,726,892.95 -85,502,793.87 Decrease of operational receivables (“-“ for increase) -371,086,225.38 -65,251,259.59 Increase of operational payables (“-“ for decrease) 348,894,618.86 -206,999,403.59 Others 165,999.75 Cash flow generated by business operation, net 209,974,963.27 -9,773,984.93 2) Major investment and financing activities not involved in cash Liabilities converted to capital Convertible bond expire in 1 year Fixed assets leased through financing 3) Net change of cash and cash equivalents: Balance of cash at period end 468,533,578.69 426,359,868.41 Less: Initial balance of cash 484,391,142.82 450,103,030.94 Plus: Balance of cash equivalents at the period end Less: Initial balance of cash equivalents Net increasing of cash and cash equivalents -15,857,564.13 -23,743,162.53 (2) Composition of cash and cash equivalents 62Items End of term Beginning of term 1) Cash 468,533,578.69 484,391,142.82 Incl: Cash in stock 309,771.34 197,212.66 Bank savings could be used at any time 464,051,807.35 477,236,343.72 Other monetary capital could be used at any time 4,172,000.00 6,957,586.44 2) Cash equivalents Incl. Bond investment due in 3 months 3) Balance of cash and cash equivalents at end of term 468,533,578.69 484,391,142.82 (3) Remarks on supplementary cash flow statement There is a sum of USD300 thousand (RMB2,048,460.00) frozen by the bank at beginning of term, which was not included in the cash and cash equivalent. (IV) Details of asset impairment provision Details Decreased this term Items Beginning of term Provided current term Written Transferred End of term Bad debt provision 276,834,272.34 49,340,494.01 326,174,766.35 Inventory impairment provision 1,482,365.58 0 1,482,365.58 Fixed asset impairment provision 8,169,109.24 0 8,169,109.24 Total 286,485,747.16 49,340,494.01 335,826,241.17 VI. Related parties and transactions (I) Related parties 1. The parent company of the Company Name of the parent co. Relationship Ownership type Reg. Add. Legal representative Business property Hangzhou Steam Turbine Group Controlling shareholder Solely national owned Hangzhou China Nie Zhonghai Limited liability (Continue) Name of the parent co. Registered capital Shareholding of the parent co. Voting rights of the parent co. % Substantial holder of the Company Organization code Hangzhou Steam Turbine Group RMB500 million 63.64 63.64 Hangzhou State Asset Committee 143071842 2. Details of the subsidiaries are available with the Notes to the Consolidated Financial Statements 3. Other related parties (1) Other related parties 63Name of the related parties Relationship with the Company Organization code Hangzhou Steam Turbine Automobile Sales Service Co., Ltd. Affiliate of the Group 710976614 Hangzhou Steam Turbine Power Sales Co., Ltd. Affiliate of the Group 757214932 HSTG Nanfang Sales Co. Affiliate of the Group YA3715443 Hangzhou Hangfa Power Generating Equipment Co., Ltd. Affiliate of the Group 70427611X Hangzhou Nanfangtongda Gears Co., Ltd. Affiliate of the Group 770809041 Hangzhou Steam Turbine Wooden Packaging Co., Ltd. Affiliate of the Group 143326331 Hangzhou Dongfeng Shipyard Co., Ltd. Affiliate of the Group 721062009 HSTG Energy Tech Co., Ltd. Affiliate of the Group 790940629 Hangzhou Steam Turbine Industrial Co. Affiliate of the Group 757237210 Tangshan Thermal Union Trade Co., Ltd. Affiliate of the Group 727606636 Hangzhou Relian International Trading Co. Affiliate of the Group 710976614 Hangzhou Steam Turbine Power Technologies Co., Ltd. Affiliate of the Group 143039674 HSTG Technology Association Affiliate of the Group 501900023 HSTG Technology Association Affiliate of the Group (II) Related transactions 1. Trade of goods and services (1) Details 1) Purchase of goods and services Current term Same period of last term Related parties Type of trade Subjects of the related transactions Amount Pricing and decision making process Amount Pricing and decision making process Hangzhou Steam Turbine Automobile Sales Service Co., Ltd. Accept labor freight, repairing fee 11,970,961.58 Price on agreement 6,206,310.22 Price on agreement Hangzhou Steam Turbine Industrial Co. Purchase of goods Raw materials 1,062,351.52 Price on agreement 940,893.80 Price on agreement Hangzhou Hangfa Power Generating Equipment Co., Ltd. Purchase of goods Generators 86,616,180.00 Price on agreement 70,939,000.00 Price on agreement 64Hangzhou Relian International Trading Co. Purchase of goods Raw materials 0 Price on agreement 98,932.00 Price on agreement Hangzhou Steam Turbine Wooden Packaging Co., Ltd. Purchase of goods Packaging materials 6,280,827.70 Price on agreement 5,312,865.75 Price on agreement Hangzhou Nanfangtongda Gears Co., Ltd. Purchase of goods Gear boxes 6,449,700.00 Price on agreement 7,419,000.00 Price on agreement Hangzhou Dongfeng Shipyard Co., Ltd. Accept labor Process fee 0 828,800.00 Price on agreement HSTG Technology Association Accept labor Process fee 0 51,315.00 Price on agreement Hangzhou Steam Turbine Power Sales Co., Ltd. Purchase of goods Raw materials 0 6,200.75 Price on agreement Sub-total 112,380,020.80 91,803,317.52 2) Sales of goods and providing of services Current term Same period of last term Related parties Type of trade Subjects of the related transactions Amount Pricing and decision making process Amount Pricing and decision making process Hangzhou Steam Turbine Group Sales of goods Steam turbine 5,435,897.42 Price on agreement 8,863,247.84 Price on agreement Hangzhou Steam Turbine Power Sales Co., Ltd. Sales of goods Steam turbine 56,453,456.40 Price on agreement 73,316,752.16 Price on agreement Hangzhou Hangfa Power Generating Equipment Co., Ltd. Providing of labor service Industrial cooperation 362,393.16 Price on agreement HSTG Energy Tech Co., Ltd. Sales of goods Spare parts 36,072.65 Price on agreement Hangzhou Steam Turbine Automobile Sales Service Co., Ltd. Sales of goods Spare parts 376.09 协议价 26,821.48 Price on agreement Hangzhou Steam Turbine Power Technologies Co., Sales of goods Steam turbine 12,981,196.58 Price on agreement 0 65Ltd. HSTG Technology Association Providing of labor service Industrial co-operation 0 161,324.79 Price on agreement Sub-total 74,870,926.49 82,766,612.08 662. Rental payment in the report term Name of the owner Name of the tenant Description of the property Annual rental as contract Starting date Stop date Hangzhou Steam Turbine Group The Company Houses & buildings 390,696.00 2010.1.1 2010.12.31 Hangzhou Steam Turbine Group The Company Land using right 1,340,860.00 2010.1.1 2010.12.31 Sub-total 1,731,556.00 3. Guarantees among the related parties The guarantor The beneficiary party Amount guaranteed Start date Due date Completed or not Hangzhou Steam Turbine Group Packaged Equipment Co. of the Group 20,000,000.00 2009-9-21 2010-7-14 No Hangzhou Steam Turbine Group Packaged Equipment Co. of the Group 30,000,000.00 2009-8-28 2010-7-14 No Hangzhou Steam Turbine Group Packaged Equipment Co. of the Group 30,000,000.00 2010-1-20 2011-1-19 No Hangzhou Steam Turbine Group Packaged Equipment Co. of the Group 30,000,000.00 2010-3-26 2011-3-21 No Hangzhou Steam Turbine Group Packaged Equipment Co. of the Group 20,000,000.00 2010-4-20 2011-4-18 No Sub-total 130,000,000.00 4. Other related transactions (1) Supplying agreement on services, raw materials, energy, and telecommunication HSTG provide civil services, property management, and employee training to the Company. The fees payable to HSTG was RMB2,233,770.00 in the current term. HSTG supplies water and power to the Company and some of the subsidiaries amounted to RMB6,708,708.27 this term. HSTG provide cleaning services to the Company and the fee was RMB334,299.48 for this term. (2) Using of trademark The Company pays RMB1,500,000.00 to HSTG for using of the registered trademark. (3) Expenses paid on behalf the Company The basic and supplementary medical insurance was paid by HSTG on behalf of the Company. For the current term, the Company had paid RMB751,511.53 under this item. (4) Capital interchange with related parties HSTG Packaged Tech Co., Ltd. borrowed working capital of RMB50 million from Hangzhou Relian Import & Export Co. on March 4, 2010. The term was March 4, 2010 to March 3, 2011. The interest was 90% discount on the bank loans of 5.31% per annum (namely 4.779%). The borrowing was used by the Packaged Tech Co., Ltd. as working capital. (III) Payable and receivable accounts with the related parties 67Projects Related parties End of term Beginning of term Account receivable Hangzhou Steam Turbine Group 876,500.00 944,000.00 HSTG Nanfang Sales Co. 20,000.00 20,000.00 Hangzhou Steam Turbine Power Sales Co., Ltd. 104,646,943.69 91,284,168.38 Hangzhou Steam Turbine Power Technologies Co., Ltd. 8,368,000.00 Sub-total 113,911,443.69 92,248,168.38 Prepayment Hangzhou Hangfa Power Generating Equipment Co., Ltd. 4,223,025.00 11,220,825.00 Sub-total 4,223,025.00 11,220,825.00 Account payable Hangzhou Steam Turbine Group 448,149.55 333,711.37 Hangzhou Steam Turbine Automobile Sales Service Co., Ltd. 2,571,696.17 590,390.33 Hangzhou Steam Turbine Industrial Co. 289,554.51 122,763.43 Hangzhou Hangfa Power Generating Equipment Co., Ltd. 8,453,150.20 2,339,600.00 Hangzhou Steam Turbine Wooden Packaging Co., Ltd. 176,457.00 71,040.00 Hangzhou Nanfangtongda Gears Co., Ltd. 1,934,025.00 66,000.00 Sub-total 13,873,032.43 3,523,505.13 Prepayment received Hangzhou Steam Turbine Power Sales Co., Ltd. 26,534,823.54 36,763,556.54 Hangzhou Steam Turbine Power Technologies Co., Ltd. 3,762,400.00 Sub-total 30,297,223.54 36,763,556.54 Other account payable Hangzhou Steam Turbine Group 23,465,523.29 10,340,876.00 Hangzhou Steam Turbine Automobile Sales Service Co., Ltd. 3,321,702.81 1,928,039.57 Hangzhou Relian International Trading Co. 50,000,000.00 Sub-total 76,787,226.10 12,268,915.57 VII. Contingent Events No major contingent event to be disclosed. VIII. Commitment Events The Company, the Casting Co., Guoneng Co., Zhongcheng Co., and subsidiary of Zhongneng Co. have made capital commitment amounted to RMB161.6159 million for construction of new workshops and purchasing of equipment. 68IX. Post-balance sheet issues No such post-balance sheet issues to be disclosed. X. Other significant issues None XI. Notes to Financial Statements of the Parent Company (I) Notes to items of parent company financial statements 1. Account receivable (1) Details 1) Detailed categories End of term Beginning of term Book balance Bad debt provision Book balance Bad debt provision Category Amount Proportion % Amount Proportion % Amount Proportion % Amount Proportion % Major single amount 833,348,258.64 51.82 125,576,145.19 15.07 547,961,555.58 40.25 92,749,134.62 16.93 Minor single amount but greater risk after combined in a character group 96,992,511.31 6.03 58,817,184.39 60.64 72,838,779.83 5.35 44,324,945.50 60.85 Other minors 677,786,533.41 42.15 100,770,391.33 14.87 740,685,655.24 54.40 109,348,867.63 14.76 Total 1,608,127,303.36 100.00 285,163,720.91 17.73 1,361,485,990.65 100 246,422,947.75 18.10 2) Detailed on ages End of term Beginning of term Book balance Book balance Age Amount Proportion % Bad debt provision Amount Proportion % Bad debt provision within 1 yr 908,537,157.53 56.50 45,359,005.37 716,741,793.50 52.64 35,827,739.68 1-2 yrs 341,351,189.07 21.23 68,270,237.81 336,252,250.50 24.70 66,963,890.10 2-3 yrs 218,113,269.61 13.56 86,837,387.84 210,427,638.08 15.46 84,171,055.23 over 3 yrs 140,125,687.15 8.71 84,697,089.89 98,064,308.57 7.20 59,460,262.74 Total 1,608,127,303.36 100 285,163,720.91 1,361,485,990.65 100 246,422,947.75 (2) Further remarks on bad debt provisions at end of term 1) Bad debt provision provided according to the result of individual impairment testing on major single account or minor single account but tested individually 69Description of the receivable accounts Book balance Bad debt provision Rate Reason Ningxia Meili Paper Co., Ltd. 1,011,694.00 1,011,694.00 100% Hard to recover Jinxi Chemical Machinery Factory 1,264,000.00 1,264,000.00 100% Hard to recover Sub-total 2,275,694.00 2,275,694.00 2) Bad debt provisions provided on individual tested items without impairment and not tested individually Individual tested items without impairment and not tested individually are included in the group of similar risks, and bad debt provisions are provided along with the group. For details please refer to Note II. (4) Receivable accounts due from shareholders with 5% of shares or over End of term Beginning of term Name of the companies Book balance Bad debt provision Book balance Bad debt provision Hangzhou Steam Turbine Group 178,500.00 8,925.00 178,500.00 8,925.00 Sub-total 178,500.00 8,925.00 178,500.00 8,925.00 (5) Receivable accounts top 5 on amounts Name of the companies Relation with the Company Book balance Age Portion in balance of receivable accounts (%) Shenyang Turbine Machinery Co., Ltd. Non-related 365,669,527.90 [Note 1] 22.74 Xi’an Shanggu Power Co., Ltd. Non-related 254,576,730.74 [Note 2] 15.83 Chongqing Zhongjieneng Sanfeng Energy Co., Ltd. Non-related 213,102,000.00 within 1 year 13.25 Hangzhou Steam Turbine Power Sales Co., Ltd. Related parties 97,510,934.69 [Note 3] 6.06 Lianyuan Steel Group Co., Ltd. Non-related 72,509,871.00 within 1 year 4.51 Sub-total 1,003,369,064.33 62.39 [Note 1]: Balance of receivable from Shenyang Turbine Machinery Co., Ltd. due within 1 year was RMB198,686,723.50, between 1 and 2 years was RMB94,921,802.40, between 2-3 years was RMB40,477,820.00, and over 3 years was RMB198,686,723.50. [Note 2] Xi’an Shanggu Power Co., Ltd., has a balance of receivable within 1 year of RMB103,526,610.30, 1-2 years of RMB85,225,330.60, 2-3 years of RMB54,274,796.00, and over 3 years of RMB11,549,993.8. [Note 3] HSTG Sales Co., has a balance of receivable within 1 year of RMB54,928,965.31, 1-2 years of RMB19,157,910.00, 2-3 years of RMB 20,949,559.38, and over 3 years of RMB 2,474,500.00. 70(6) Other receivable accounts of related parties Name of the companies Relation with the Company Book balance Portion in balance of receivable accounts (%) Hangzhou Steam Turbine Packaged Technologies Co., Ltd. Parent co. 2,376,850.00 0.15 Hangzhou Steam Turbine Power Technologies Co., Ltd. Parent co. 8,368,000.00 0.52 Hangzhou Zhongneng Steam Turbine Power Co., Ltd. Parent co. 481,000.00 0.03 Hangzhou Steam Turbine Power Sales Co., Ltd. Affiliate of the Group 97,510,934.69 6.06 Sub-total 108,736,784.69 6.76 2. Other account receivable (1) Details 1) Detailed categories End of term Beginning of term Book balance Bad debt provision Book balance Bad debt provision Category Amount Proportion % Amount Proportion % Amount Proportion % Amount Proportion % Major single amount 11,902,332.97 42.12 2,406,192.56 20.22 9,669,162.67 47.41 2,406,192.56 24.89 Minor single amount but greater risk after combined in a character group 1,778,381.28 6.29 1,067,028.77 60.00 859,981.28 4.22 515,988.77 60.00 Other minors 14,576,751.72 51.59 535,119.00 3.67 9,865,472.91 48.37 602,818.41 6.11 Total 28,257,465.97 100 4,008,340.33 14.19 20,394,616.86 100 3,524,999.74 17.28 2) Detailed on ages End of term Beginning of term Book balance Book balance Age Amount Proportion % Bad debt provision Amount Proportion % Bad debt provision within 1 yr 21,670,061.25 76.69 418,138.50 14,100,524.64 69.14 226,780.41 1-2 yrs 298,702.50 1.05 59,740.50 967,390.00 4.74 193,478.00 712-3 yrs 1,213,800.00 4.30 485,520.00 456,400.00 2.24 182,560.00 over 3 yrs 5,074,902.22 17.96 3,044,941.33 4,870,302.22 23.88 2,922,181.33 Total 28,257,465.97 100.00 4,008,340.33 20,394,616.86 100.00 3,524,999.74 (2) Further remarks on bad debt provisions at end of term Bad debt provisions provided on individual tested items without impairment and not tested individually Individual tested other receivable items without impairment and not tested individually are included in the group of similar risks, and bad debt provisions are provided along with the group. For details please refer to Note II. (3) No receivable account due from shareholding parties holding over 5% of the Company’s shares. (4) Other receivable accounts top 5 on amounts Name of the companies Relation with the Company Book balance Age Percentage in total other receivable % Property of the account Hangzhou Steam Turbine Casting Co., Ltd. Parent co. 7,892,012.03 Within 1 year 27.93 Paid in behalf Customs deposit receivable Non-related 4,010,320.94 Over five years 14.19 Deposit Hangzhou Steam Turbine Auxiliary Machine Co., Ltd. Parent co. 1,931,004.79 Within 1 year 6.83 Paid in behalf Hangzhou Guoneng Steam Turbine Engineering Co., Ltd. Parent co. 1,921,738.46 Within 1 year 6.80 Paid in behalf Hangzhou Steam Turbine Packaged Technologies Co., Ltd. Parent co. 1,198,526.91 Within 1 year 4.24 Paid in behalf Sub-total 16,953,603.13 59.99 (5) Other related party receivable account Name of the companies Relation with the Company Book balance Portion in balance of receivable accounts (%) Hangzhou Steam Turbine Packaged Technologies Co., Ltd. Parent co. 1,198,526.91 4.24 Hangzhou Steam Turbine Casting Co., Ltd. Parent co. 7,892,012.03 27.93 Hangzhou Steam Turbine Machinery & Equipment Co., Ltd. Parent co. 364,009.14 1.29 Hangzhou Steam Turbine Auxiliary Machine Co., Ltd. Parent co. 1,931,004.79 6.83 Hangzhou Guoneng Steam Turbine Engineering Co., Ltd. Parent co. 1,921,738.46 6.80 Sub-total 13,307,291.33 47.09 723. Long-term share equity investment (1) Details Company invested in Calculating basis Initial costs Beginning of term Changed by End of term Zhejiang Steam Turbine Packaged Technology Development Co., Ltd. Cost basis 16,260,174.60 16,260,174.60 16,260,174.60 Hangzhou Zhongneng Steam Turbine Power Co., Ltd. Cost basis 5,600,853.25 5,600,853.25 5,600,853.25 Hangzhou Steam Turbine Casting Co., Ltd. Cost basis 11,220,000.00 11,220,000.00 11,220,000.00 Hangzhou Steam Turbine Auxiliary Machine Co., Ltd. Cost basis 19,244,620.00 19,244,620.00 19,244,620.00 Hangzhou Steam Turbine Machinery & Equipment Co., Ltd. Cost basis 7,968,000.00 7,968,000.00 7,968,000.00 Greenesol Co. (India) Cost basis 1,032,411.62 1,032,411.62 1,032,411.62 Hangzhou Bank Cost basis 390,954,040.00 390,954,040.00 390,954,040.00 Zhejiang Turbine Import & Export Co., Ltd. Cost basis 20,000,000.00 20,000,000.00 20,000,000.00 Total 472,280,099.47 472,280,099.47 472,280,099.47 (Continue) Company invested in Share proportion % Voting power % Statement on differences between the shareholding and voting rights Impairment provision Impairment provision provided this term Cash dividend of the current term Zhejiang Steam Turbine Packaged Technology Development Co., Ltd. 51.84 51.84 6,998,332.50 Hangzhou Zhongneng Steam Turbine Power Co., Ltd. 51.60 51.60 25,801,500.00 Hangzhou Steam Turbine Casting Co., Ltd. 51.00 51.00 0 Hangzhou Steam Turbine Auxiliary Machine Co., Ltd. 76.50 76.50 45,897,225.00 Hangzhou Steam Turbine Machinery & Equipment Co., Ltd. 52.00 52.00 19,500,000.00 73Greenesol Co. (India) 37.00 37.00 0 Hangzhou Bank 6.92 6.92 0 Zhejiang Turbine Import & Export Co., Ltd. 100.00 100.00 0 Hangzhou Steam Turbine Environmental Engineering Co., Ltd. 100,735.77 Total 98,297,793.27 (II) Notes to items of parent company income statements 1. Turnover / cost (1) Details Items Current term Same period of last term Major business turnover 1,305,234,415.66 1,064,823,034.65 Other business income 9,800302.87 8,339,421.71 Operation cost 882,879,318.32 647,775,737.01 (2) Main business turnover/ cost (categorized by products) Current term Same period of last term Products or services Revenue Cost Revenue Cost Industrial 1,297,625,430.53 871,201,321.15 1,055,102,412.28 633,925,811.86 Others 7,608,985.13 2,357,667.98 9,720,622.37 5,792,447.20 Sub-total 1,305,234,415.66 873,558,989.13 1,064,823,034.65 639,718,259.06 (4) Main business turnover / cost (on territories) Current term Same period of last term Name of districts Revenue Cost Revenue Cost Domestic 1,135,731,795.37 756,327,162.81 929,582,843.52 529,614,401.26 Overseas 169,502,620.29 117,231,826.32 135,240,191.13 110,103,857.80 Sub-total 1,305,234,415.66 873,558,989.13 1,064,823,034.65 639,718,259.06 (3) Business turnover from top 5 clients Name of clients Turnover Percentage in total turnover of the Company Chongqing Zhongjieneng Sanfeng Energy Co., Ltd. 368,752,136.90 28.04 Shenyang Turbine Machinery Co., Ltd. 208,362,213.70 15.84 Xi’an Shanggu Power Co., Ltd. 87,379,487.21 6.64 74Hangzhou Steam Turbine Power Sales Co., Ltd. 55,958,485.47 4.26 BMM Power Plant in India 33,995,970.00 2.59 Sub-total 754,448,293.28 57.37 752. Investment income (1) Details Items Current term Same period of last term Long-term equity investment gains on cost basis 98,197,057.50 74,878,300.00 Long-term equity investment gains on equity basis 100,735.77 Total 98,297,793.27 74,878,300.00 (2) Long-term investment income on cost basis Company invested in Current term Same period of last term Causation of change Hangzhou Zhongneng Steam Turbine Power Co., Ltd. 25,801,500.00 Hangzhou Steam Turbine Auxiliary Machine Co., Ltd. 45,897,225.00 24,320,000.00 Zhejiang Steam Turbine Packaged Technology Development Co., Ltd. 6,998,332.50 9,180,000.00 Hangzhou Steam Turbine Machinery & Equipment Co., Ltd. 19,500,000.00 12,480,000.00 Hangzhou Bank 28,898,300.00 Dividend of year 2009 received in July 2010 Greenesol Co. (India) 0 Sub-total 98,197,057.50 74,878,300.00 (3) Long-term investment income on equity basis Company invested in Current term Same period of last term Causation of change Hangzhou Steam Turbine Environmental Engineering Co., Ltd. 100,735.77 Canceled in last term, clearing of deposit interests Sub-total 100,735.77 (4) No major limitation on retrieving of investment gains. 76XII. Supplementary information (I) Non-recurring gain/loss 1. Details of non-recurring gain/loss of current term Items Amount Remarks Gain/loss from disposal of non-working capital, including the neutralized part of the impairment provision provided already 48,907.71 Refunding and exemption of taxes in excess of authority or without official approval documents 0 Government subsidies accounted into current income account (except for those government subsidies closely related to the Company’s business, and received at national statutory standard and amount) 1,300,412.00 Capital adoption fee collected from non-financial organizations and accounted into current gain/loss 0 Gain/loss from differences between the cost of enterprise merger and the fair value of recognizable net asset of the invested entities 0 Gain/loss from non-monetary assets 0 Gain/loss from commissioned investment or assets 0 Asset impairment provisions provided for force-majeur 0 Gain/loss from debt reorganization 0 Enterprise reorganizing expenses, such as employee placement fee and integration fee 0 Gain/loss from trade departing from fair value 0 Current net gain/loss of subsidiaries under same control from beginning of term till date of consolidation 0 Gain/loss generated by contingent liabilities without connection with main businesses 0 Gain/loss from change of fair value of transactional asset and liabilities, and investment gains from disposal of transactional financial assets and liabilities and sellable financial assets, other than valid period value instruments related to the Company’s common businesses 0 Restoring of receivable account impairment provision tested individually 0 Gain/loss from commissioned loans 0 Gain/loss from change of fair value of investment property measured at fair value in follow-up measurement 0 Influence of one-time adjustment made on current gain/loss account according to the laws and regulations regarding tax and accounting 0 Consigning fee received for cosigned operation 0 Other non-business income and expenditures other than the above -4,199,894.71 Other gain/loss items satisfying the definition of non-recurring gain/loss account Sub-total -2,850,575.00 Less: Influence of enterprise income tax (??for decrease of income tax) 556,613.52 Influence on minority shareholders’ equity (after tax) 508,618.57 Net non-recurring gain/loss attributable to the owners of the parent company -1,785,342.91 (III) Net income on asset and earnings per share 1. Details Earnings per share (yuan/share) Profit of the report period Weighted average net income on asset % Basic earnings per share Diluted earnings per share Net profit attributable to common shareholders of the Company 10.38% 0.5293 0.5293 Net profit attributable to the common owners of the PLC after deducting of non-recurring gains/losses 10.45% 0.5330 0.5330 772. Calculation process of weighted average net income on asset Items No. Current term Net profit attributable to common shareholders of the Company A 255,824,821.46 Non-recurring gain/loss B -1,785,342.91 Net profit attributable to common shareholders of the Company after deducting of non-recurring gain/loss C=A-B 257,610,164.37 Net asset attributable to the common shareholders of the Company at beginning of term D 2,336,109,466.46 Net asset increased by issuing of new shares or converting of debt to shares, and attributable to the common shareholders of the Company E Total number of months from the next month of when the asset was newly added to the end of report term F Net asset decreased by repurchasing or cash dividend and attributable to common shareholders of the Company G 148,720,000.00 Total number of months from the next month of when the asset is decreased to the end of report term H 0 Change of net asset caused by other trade or event and attributable to the common shareholders of the Company I Total number of months from the next month when the change of net asset caused by other trade to the end of report term J Number of months in the report term K 6 Weighted average net asset L= D+A/2 + E×F/K-G×H/K±I 2,464,021,877.19 Net income on asset, weighted M=A/L 10.38% Weighted average net income on asset after deducting of non-recurring gain/loss N=C/L 10.45% 3. Calculation of basic earnings per share Items No. Year 2009 Net profit attributable to common shareholders of the Company A 255,824,821.46 Non-recurring gain/loss B -1,785,342.91 Net profit attributable to common shareholders of the Company after deducting of non-recurring gain/loss C=A-B 257,610,164.37 Total of shares at beginning of shares D 371,800,000 Shares increased due to capitalizing of reserves or share dividend E 111,540,000 Increasing of shares by issuing of new shares or converting of debt to shares F Total number of months from the next month of when the shares are increased to the end of report term G Decrease of shares caused by repurchasing H 78Total number of months from the next month of when the shares are decreased to the end of report term I Amount of shares reduced J Number of months in the report term K 6 Weighted average of common shares issued to the outside L=D+E+F×G/K-H 483,340,000 Basic earnings per share M=A/L 0.5293 Basic earning per share after deducting of non-recurring gain/loss N=C/L 0.5330 4. Calculation process of diluted earning per share Same as the calculating method of basic earning per share. (IV) Irregular situation in the financial statements and remarks Balance Sheet Items End of term Beginning of term Scale of change Remarks on the change Prepayments 318,739,151.06 219,791,399.56 45.02% Mainly caused by increasing of prepayment made by the Packaged Tech Co. for purchasing of equipment parts and materials. Other account receivable 29,050,437.43 17,333,756.04 67.59% Mainly caused by tax refunding of India project. Other current asset 108,275.80 -100.00% Construction in process 181,058,362.57 133,993,100.65 35.13% Mainly caused by increasing of project and equipment payment for the 2nd phase of workshop of Casting Co.. Short-term loans 195,000,000.00 136,000,000.00 43.38% Packaged Tech Co. increased the loan by RMB80 million, and the Casting Co. decreased by RMB21 million. Notes payable 70,004,809.92 103,656,815.22 -32.46% Caused by significant decreasing of bank accepted draft issued by the Company Account payable 536,270,437.77 320,766,161.48 67.18% Mainly caused by increasing of inventory to meet the demand of increasing orders Employees’ wage payable 35,749,491.69 23,241,197.54 53.82% For details please see Note V(I)17 Interest payable 195,250.00 -100.00% Bank interests Other account payable 88,031,611.00 24,231,372.13 263.30% For details please see Note V. (I), 20-(2) Other non-current asset 8,004,440.00 3,322,740.00 140.90% Please see Note V(I)23 – (2) Practical capital input 483,340,000.00 371,800,000.00 30.00% According to the resolution of the Shareholders’ Annual Meeting 2009, 3 bonus shares for each 10 shares. 79Income Statement Items Current term Same period of last term Scale of change Remarks on the change Financial expenses 9,719,615.00 -6,368,268.96 -252.63% Mainly caused by decrease of exchange gains and increase of interests Asset impairment loss 49,340,494.01 31,933,931.16 54.51% Mainly caused by increasing of receivable, extending of account ages, and therefore increase of bad debt provisions Investment income 1,100,735.77 29,898,083.98 -96.32% Dividend of 2009 from Bank of Hangzhou, received in July 2010 Non-operational income 2,207,680.04 3,489,025.96 -36.72% Mainly caused by decrease of government subsidy accounted into non-operation income Non-operational expenditure 5,058,255.04 2,868,349.38 76.35% Mainly caused by increase of external donations 8081 Chapter VIII. Documents Ready for Inquiring (I) Original copy of Interim Report 2010 in full text and summary with signature of the Chairman. (II) Financial Report bearing the signatures of the legal representative, financial superior and head of accounting department. (III) All documents that have been disclosed on statutory presses assigned by CSRC. (IV) Other related documents. Hangzhou Steam Turbine Co., Ltd. (Stamp) Chairman of Board: Nie Zhonghai August 28, 2010