TO THE MEMBERS OF

XINCHEN CHINA POWER HOLDINGS LIMITED

(incorporated in the Cayman Islands with limited liability)

# OPINION

We have audited the accompanying consolidated financial statements of Xinchen China Power Holdings Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 62 to 124, which comprise the consolidated statement of financial position as at 31 December 2017 and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2017, and of its consolidated financial performance and consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance (“CO”).

# BASIS FOR OPINION

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

# KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter	How our audit addressed the key audit matter
Impairment of intanibltge asses
At 31 December 2017, the Group had significant intaniblge assets
amounted to Renminbi (“RMB”) 590,478,000 which arose from
caitalisation of development costs of technical kpnow-how of new
automotive enines and are amortised based on unit ofg production
by reference to the expected saleable units of respective automotive
enignes.
Recoverabilitly of these intanibbge assets is ased on the forecasting
saleable units, which are inherentlhy hilgy judgmental.
The key estimate made by the management included the expected
saleable units of respective automotive enignes.
Management’s disclosures with regard to the estimation are
contained in Note 4 to the consolidated financial statements, whilst
the disclosures in respect of the carriyng value of intaniblge assets
are set out in Note 17 to the consolidated financial statements.	Our procedures in relation to assessment of the carriyng value of
intaniblge assets with imiparment indicator included:
• Discussing with the management and understanding the
management’s basis of estimation of saleable units;
• Understanding the management process over the regular
assessment of saleable units;
• Assessing the accuracy of the management’s estimate of the
likelihood of saleable units based on historical sales records
and, where alipcable indipcative units confirmed by customers;
and
• Testing the subsequent sales units after the year-end, on a
samlpe basis, to source documents, including goods delivery
notes and invoices.