Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Stock Code: 200771 Stock ID: Hangqilun B Announcement No.2019-18
Hangzhou Steam Turbine Co., Ltd.
2018 Annual Report
（
Stock Code:
200771）
March 2019
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report I.Important Remarks, Table of Contents, and Definitions
The Board of Directors, The Supervisory Committee, the supervisors 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.
Chairman Mr. Zheng Bin, Chief Financial Officer Zhao Jiamao, and the Chief of Accounting Department Mr. Jin Can hereby declare: the Financial Statement in the report is guaranteed to be truthful and complete.
All of the directors attended the board meeting on which this report was examined.
Please refer to the prospects for the future development of the company in Section 4 for the risks in the company's operations. The company's designated information disclosure media are: Shanghai Securities News (Chinese), Securities Times (Chinese), Hong Kong Commercial Daily (English), http://www.cninfo.com.cn (In English and Chinese), all information of the company is subject to the information published in the above selected media. Investors are advised to pay attention to investment risks.
The profit distribution proposal reviewed and approved by the boarding meeting was summarized as follows: 754,010,400 for the base, the Company would distribute cash dividend to all the shareholders at the rate of CNY 2.00 for every 10 shares (with tax inclusive) , 0 bonusshares（includingtax）and no reserve would be converted into share capital.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Table of Contents
I.Important Notice, Table of contents and Definitions
II. Basic Information of the Company and Financial index
III. Outline of Company Business
IV.Management’s Discussion and Analysis
V. Important Events
VI. Change of share capital and shareholding of Principal Shareholders
VII. Situation of the Preferred Shares
VIII. Information about Directors, Supervisors and Senior Executives
IX. Administrative structure
X. Corporate Bond
XI. Financial Report
XII. Documents available for inspection
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Definition
||||
|-|-|-|
|Terms to be defined|Refers to|Definition|
|Company, the Company|Refers to|Hangzhou Steam Turbine Co., Ltd.|
|The Group, Hangqi Group|Refers to|Hangzhou Steam Turbine Power Group Co., Ltd.|
|The report period, the current period, the|||
||Refers to|January 1 – December 31 2018|
|current year|||
|Zhongneng Co.|Refers to|Hangzhou Zhongneng Steam Turbine Power Co., Ltd. – the holding subsidiary of|
|||the Company|
|Casting Co.|Refers to|Hangzhou Steam Turbine Casting Co., Ltd. – the holding subsidiary of the|
|||Company|
|||Zhejiang Steam Turbine Packaged Technology Development Co., Ltd. – the|
|Packaged Tech. Co.|Refers to||
|||holding subsidiary of the Company|
|Machinery Co.|Refers to|Hangzhou Steam Turbine Machinery Equipment Co., Ltd. - the holding|
|||subsidiary of the Company|
|||Hangzhou Steam Turbine Auxiliary Machinery Co., Ltd. - the holding subsidiary|
|Auxiliary Machine Co.|Refers to||
|||of the Company|
|Turbine Co.|Refers to|Zhejiang Turbine Import & Export Co., Ltd. – the holding subsidiary of the|
|||Company|
|Heavy Industry Co.|Refers to|Hangzhou Steam Turbine Heavy Industry Co., Ltd. - the holding subsidiary of the|
|||Company|
|The Board of Directors|Refers to|The Board of Directors of Hangzhou Steam Turbine Co., Ltd.|
|The Supervisory Committee|Refers to|The Supervisory Committee of Hangzhou Steam Turbine Co., Ltd.|
|The Shareholders’ Meeting|Refers to|The Board of Directors of Hangzhou Steam Turbine Co., Ltd.|
|RMB, RMB0’000, RMB000’000’000|Refers to|RMB Yuan, RMB10 thousand Yuan, RMB100 million Yuan|
|MW|Refers to|Unit of power: 1000KW|
|PLM|Refers to|Product life circle management information system|
|MES|Refers to|Manufacturing execution system|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report II. Basic Information of the Company and Financial index
I. Basic Information
|||||
|-|-|-|-|
|Stock ID|Hangqilun B|Stock Code|200771|
|Stock Exchange Listed in|Shenzhen Stock Exchange|||
|Company Name in Chinese|杭州汽轮机股份有限公司|||
|Short form of Company Name in||||
||杭汽轮|||
|Chinese||||
|Name in English|HANGZHOU STEAM TURBINE CO.,LTD|||
|Abbreviation in English|HTC|||
|Legal representative:|Zheng Bin|||
|Reg. Add.|No. 357 Shiqiao Rd. Hangzhou|||
|Post Code|310022|||
|Office address|No. 357 Shiqiao Rd. Hangzhou|||
|Post Code:|310022|||
|Web Address|www.htc.cn|||
|Email.|wg@htc.cn|||

II. Contacts
||||
|-|-|-|
||Secretary of the Board|Representative of Stock Affairs|
|Name|Wang Gang|Wang Caihua|
|Address|No. 357 Shiqiao Rd. Hangzhou|No. 357 Shiqiao Rd. Hangzhou|
|Tel.|0571-85780198|0571-85780438|
|Fax.|0571-85780433|0571-85780433|
|Email.|wg@htc.cn|wangch@htc.cn|

III. Place for information disclosure
|||
|-|-|
|Press media for information disclosure|Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily|
|Web address for the annual report as assigned by||
||http://www.cninfo.com.cn|
|CSRC.||
|Place for inquiry of the annual report|The Board of Directors’ Office of Hangzhou Steam Turbine Co., Ltd.|

 IV. Change of Business Registration
|||
|-|-|
|Organization code|913300007042026204|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
||The original scope of main businesses 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 providing of relevant after-sales service and import & export service.|
||In July 2008, the business scope was modified to: 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 providing|
||of relevant after-sales service; sales and import & export of power plant, industrial|
||driving, industrial turbine equipment and complete equipment. For those involve in|
||quota or licensing shall follow legal procedures.|
|Change of main business since listed|In March 2009, the business scope was modified to: 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 providing of relevant after-sales service; sales and import & export of power plant,|
||industrial driving, industrial turbine equipment and complete equipment.|
||In December 2016, the business scope was modified to: 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 providing of relevant after-sales service; sales and import & export of power plant,|
||industrial driving, industrial turbine equipment ,complete equipment and Energy|
||conservation and environmental protection projects.|
|Change of holding shareholder (if any)|No change|

V. Miscellaneous information
CPA hired by the Company
|||
|-|-|
|Name of the CPA|Pan-China Certified Public Accountants (Special general partnership)|
|Address of the CPA|B Unit, Huarun Building, No.1366, Qianjiang Road, Jianggan District Hangzhou|
|Name of CPA signed on the||
||Jiang Xiaodong,, Ye Xianbin|
|auditors’ report||

The sponsor performing persist ant supervision duties engaged by the Company in the reporting period.
Not applicable
The Financial advisor performing persist ant supervision duties engaged by the Company in the reporting period Not applicable
VI.Summary of Accounting data and Financial index
May the Company make retroactive adjustment or restatement of the accounting data of the previous years due to change of the accounting policy and correction of accounting errors.
No
|||||
|-|-|-|-|
|2018|2017|Changed over last|2016|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
||||year（％）||
|Operating revenue（Yuan）|4,642,807,589.69|3,447,142,669.49|34.69%|3,235,303,379.24|
|Net profit attributable to the shareholders of|345,824,339.47|68,753,250.90|||
||||402.99%|31,955,445.73|
|the listed company（Yuan）|||||
|Net profit after deducting of non-recurring|||||
|gain/loss attributable to the shareholders of|280,075,101.48|-1,460,504.46|19，276.60%|-8,366,688.71|
|listed company（Yuan）|||||
|Cash flow generated by business operation,|644,433,167.20|205,302,791.77|||
||||213.89%|506,159,428.42|
|net（Yuan）|||||
|Basic earning per share(Yuan/Share)|0.46|0.09|411.11%|0.04|
|Diluted gains per share(Yuan/Share)|0.46|0.09|411.11%|0.04|
|Net asset earning ratio（%）|5.82%|1.12%|4.70%|0.60%|
||||Changed over last||
||End of 2018|End of 2017||End of 2016|
||||year（％）||
|Gross assets（Yuan）|11,569,169,903.81|10,830,597,182.38|6.82%|10,550,899,708.34|
|Net assets attributable to shareholders of the|6,007,540,929.16|5,884,816,809.55|||
||||2.09%|6,385,346,243.23|
|listed company（Yuan）|||||

VII.The differences between domestic and international accounting standards
1. Differences between the net profit and net asset in the financial reports prepared under IAS and Chinese Accounting Standard
No difference in the reporting period.
2. Differences between the net profit and net asset in the financial reports prepared under IAS and Chinese Accounting Standard
No difference in the reporting period.
VIII.Main Financial Index by Quarters
In RMB
||||||
|-|-|-|-|-|
||First quarter|Second quarter|Third quarter|Fourth quarter|
|Operating revenue|962,078,793.39|1,322,052,188.74|1,108,687,686.30|1,249,988,921.26|
|Net profit attributable to the|||||
||39,042,232.50|89,468,361.51|163,313,243.33|54,000,502.13|
|shareholders of the listed company|||||
|Net profit after deducting of|||||
|non-recurring gain/loss attributable to|28,469,122.60|61,001,604.12|144,020,340.79|46,584,033.97|
|the shareholders of listed company|||||
|Net Cash flow generated by business|||||
||126,725,248.14|431,061,942.59|42,274,340.29|44,371,636.18|
|operation|||||

Any material difference between the financial indicators above or their summations and those which have been
disclosed in quarterly or semi-annual reports?
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report No
IX.Items and amount of non-current gains and losses
In RMB
||||||
|-|-|-|-|-|
|Items|Amount (2018)|Amount (2017)|Amount (2016)|Notes|
|Non-current asset disposal gain/loss(including the write-off part|-40,478.16||||
|||6,608,574.41|326,453.30||
|for which assets impairment provision is made)|||||
|Tax refund, deduction and exemption that is examined and|2,140,524.49||||
|approved by authority exceeding or has no official approval||1,250,418.38|||
|document.|||||
|Governmental Subsidy accounted as current gain/loss, except for|23,300,479.35||||
|those subsidies at with amount or quantity fixed by the national|||||
|||8,945,252.87|16,968,792.22||
|government and closely related to the Company’s business|||||
|operation.|||||
|Debt restructuring profit or loss|7,064,832.00||||
|In addition to normal business with the company effective|48,433,535.22||||
|hedging related business, holders of tradable financial assets,|||||
|transactions and financial liabilities arising from changes in fair|||||
|||62,623,000.27|28,548,677.87||
|value gains and losses, as well as the disposal of trading of|||||
|financial assets, trading financial liabilities and available-for-sale|||||
|financial assets gains return on investment|||||
|Other non-operating income and expenditure beside for the above|-1,703,546.21||||
|||6,505,882.53|7,345,994.24||
|items|||||
|Less: Influenced amount of income tax|11,452,856.21|11,777,992.62|8,701,193.64||
|Amount of influence of minority interests（After tax）|1,993,252.49|3,941,380.48|4,166,589.55||
|Total|65,749,237.99|70,213,755.36|40,322,134.44|--|

 For theCompany’s non-recurring gain/loss items as defined in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering their Securities to the Public– Non-recurring Gains and Losses and its non-recurring gain/loss items as illustrated in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering their Securities to the Public– Non-recurring Gains and Losses which have been defined as recurring gains and losses, it is necessary to explain the reason.
Not applicable
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report III. Outline of Company Business
I. Main Business the Company is Engaged in During the Report Period
Whether the company needs to comply with the disclosure requirements of the particular industry
No
As the leading provider of turbo machinery equipment and relevant service in China, our company is mainly famous for designing and producing rotating turbo machinery like industrial steam turbines and gas turbines. Our company, one of the major companies drafting the industrial standard in Chinese domestic industry of industrial steam turbine, has developed into the biggest base to research, develop and produce industrial steam turbines in China and ranks first among industrial steam turbine producers in terms of the market occupancy. Holding the principle “our products should be based onclients’ demands” as our business mode and characteristic, our company designs and produces in accordance with everyclient’s personal demands so as to meet personalized needs in engineering projects to the utmost. To realize the fast research and development of our products, our company has adopted the advanced modular design technique and, on the other hand, introduces information technique to assist the collaborative production to achieve the resource saving and flexible production. In addition, our company also provides our clients with relevant service such as engineering programs, general engineering contracting, operation and maintenance of our products as well as remote control and so on.
Industrial steam turbines use the steam featuring high temperature and high pressure as their working medium so as to convert the thermal energy into mechanical energy to drive various industrial equipments through the rotating steam turbines. As for different objects driven by industrial steam turbines, the steam turbines could be divided into industrial driving steam turbines and industrial power-generation steam turbines. Mainly driving rotating machines like compressors, air blowers, pumps and squeezers, industrial driving steam turbines, as the core power part in numerous large-scale industrial equipments, are always introduced into some industries like oil refining, chemical engineering, chemical fertilizer, building materials, metallurgy, electric power, light industry and environmental production. The industrial power-generation steam turbines, mainly utilized to drive electric generators and provide thermal energy, are mainly adopted in private stations, regional projects of combined heat and power generation, power generation by recycling waste heat in industrial production, urban waster power plants and gas-steam combined cyclepower stations in various industrial sectors. The gas turbines produced by our company are mainly used by metallurgical industry to recycle the waste heat from the blast furnace exhaust to generate power.
In the gas turbine business, the Company has cooperated with Siemens on the advanced natural gas turbine SGT-800 model-with features of high efficiency, high reliability and low emission, thus to enter the distributed natural gas field. As the general whole-set maker of SGT-800 in China, the company has launched the gas turbine business in respect of the project procurement and the integrated implementation. Hangzhou Steam Turbine has the type selection ability for the distributed energy combined cycle project, has established a complete system of supporting standard and material system, and it can complete the independent processing or matching work for the equipment besides the gas turbine body. In the industrial fields including the cogeneration /combined cycle power plant and the oil& gas project with distributed energy projects that adopt the small and medium gas turbines, the Company not only can provide gas turbine equipment for customers, but also can provide customers with
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report complete sets of equipment for gas turbine power plant and the efficient integrated solutions. Especially, it can provide customers with operational support services throughout the product life, and this service model is conductive for the establishment of long-term business cooperation relationships between the company and its customers.
As the major producer of industrial equipments in China during the report period, our company is mainly benefited from the following factors in terms of the elements driving our business performance:
1. On the basis of market demands. The relevant market demands fluctuate differently due to various business condition and investment cycles in different industrial fields. The company further made more specified positions toward the market for the products, implemented the differentiated marketing strategy, and integrated the business sectors and tapped into the potential. During the reporting period, the domestic oil refining and chemical investment projects started at multiple points and drove the demand for related equipment manufacturing. The company grasped the growth opportunities in the petrochemical sector, and formulated the flexible price strategies for the fields of low-end and mid-end drive, ensured the market share and continuously consolidated and strengthened the existing market advantages. Adhering to the "Go global" strategy, the Company continued to expand the overseas markets, establish overseas offices and increase its market influence.
2. Innovation and further reform in difficult areas of product technology.
Our company continuously improves product technical performance and tackles hard issues in the scientific researches of product structure, core parts, basic design, manufacturing technology, material technology, etc. In addition, basing onclients’ demands, our company launches the study “The Demonstration and Application Project for Packaging Technology of Steam Turbine” to push forward the intelligence of our products and the development of the integration technology. Meantime, the company cooperated with universities, scientific research institutes to build the technological exchange and cooperation platform.
3. Upgrading and transformation of industrial structure transformation.The company jointed with Siemens to enter the distributed energy market and enhance the development and utilization of natural gas distributed energy. In the industrial fields including the cogeneration /combined cycle power plant and the oil& gas project with distributed energy projects that adopt the small and medium gas turbines, the Company not only can provide gas turbine equipment for customers, but also can provide customers with complete sets of equipment for gas turbine power plant and the efficient integrated solutions.
4. Brand and market position. Thecompany’s products have a good reputation and extensive brand influence in the domestic market, The company has maintained a leading market share in the domestic industrial drive. The company's products have a high reputation and brand influence in the domestic market.
5.Cost controlling level. As domestic labor costs continue to rise and the price of industrial products continue to decline, the product profitability is facing a severe test. In recent years, the company continuously improves the level of costs controlling by improving the organizational structure, optimizing business processes, enhancing the supply chain controlling, strengthening risk management, raising the efficiency of all the staff and so on. 6.Emphasis on quality engineering and services: promote the key project management, meticulously plan key projects, implement dynamic quality supervision; attach importance toproducts’ after-sales service market, integrate existing resources to increase after-sales service initiative, extend product value chain, and promote thecompany’s transformation from manufacturing to service.
II. Major Changes in Main Assets
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 1.Major Changes in Main Assets
|||
|-|-|
|Main assets|Major changes|
||Mainly caused by the volatility in share price of Hangzhou Bank with the Company’s|
|Equity assets||
||investment and participation|
||Mainly caused by the Completion of the company’s Steam turbine Bulding transferred to|
|Fixed assets||
||fixed assets|
|Intangible assets|No major changes|
||Mainly caused by the new investment in the current period of the steam turbine Heavy|
|Construction in progress||
||industry project with the progress of the project|

2. Main Conditions of Overseas Assets
Not applicable
III. Analysis On core Competitiveness
Whether the company needs to comply with the disclosure requirements of the particular industry
No
Firstly. A complete technical innovation system was established. The Company has under its possession of national, provincial, and municipal grade technical centers, a doctorial workstation, and an academician workstation. Close co-operations were carried out with institutions and universities from throughout the country. As the main drafter of national standard on industrial steam turbine, the Company has the newest technical trend under its close observation. The Company is now providing nearly 600 different models of steam turbines to the customers and hold the newest technical system covering the product lines up to 150 MW.Cooperating with SIEMENS in the field of gas turbine, our company has been capable of selecting the model of the combined recycling project of distributed energy. In addition, our company has also been able to finish the independent processing or supporting work whichdoesn’t need to depend on the gas turbine machine.
Secondly .The advantages of solutions. The modular design of industrial steam turbine and the production pattern featuring parallelization production enable our company to give considerations to the cost, date of delivery andclients’ demands in the process of production in accordance withclients’ personalized designs, thereby making our company capable of advancing with the development trend of individual requirements. Our company has always been devoting to the localization in terms of the gas turbine business so as to achieve the localized one-stop service step by step including the sale, production, installation, debugging, operation, training and after-sale service. Our company has always been striving to provide clients with the complete equipment of gas turbine power station and the efficient total solutions.
Thirdly, the Company has established strategic co-operations with main customers in the country. Further
marketing approaches were carried on by involving itself in thecustomers’ value. A sound and steady image has
been set up in the domestic steam turbine market. In the global market, the Company has acquired multiple
important certifications and has established a primary global recognition.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Fourthly, the Company has its complete service providing system. The Company is not only capable to provide onsite 24-hour service for theCompany’s own products, but also accumulated rich experiences in technical maintenance and reengineering of othermanufacturers’ products.
Fifthly, the Company has cultivated a significant advantage in human resources. Great importance has been attached to construction of work teams with collection of high-end workforce in the areas of research& development, At the same time, our company values the cooperation with universities. “Zhejiang Technical Association for Gas Turbines in Equipment Manufacturing Industry” was officially founded jointly by our company and Zhejiang University and other scientific research institutions to build a new platform for integration of production and research in terms of gas turbine technology.The Company has cultivated a significant advantage in human resources. Great importance has been attached to construction of work teams with collection of high-end workforce in the areas of research& development, designing, technique, testing, and quality control. An excellent workforce provides a sound foundation to lift quality and services.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report IV.Management’s Discussion and Analysis
I. General
Within the report period, facing the intricate situations at home and abroad, the Company has steadily promoted the implementation of the "13th Five-Year" strategic plan, adhered to the economic policies of "innovation persisting, coordinated advance, culture leading and management strengthening" to insist on the technical innovation of products and accelerate the transformation and upgrading of the Company, orderly carried out the relocation to ensure the production schedule of products, seized the high-end market segments to enhance the Company's industrial position, started the enterprise culture construction to increase the cohesion and converge the talents, and constantly improved the enterprise management to effectively prevent the enterprise risks. After the joint efforts of all employees, the Company has realized turnover of RMB 4642.8076 million, an increase of34.69%; Total profit of RMB470.0691 million , an increase of254.35%, net profit attributable to owners of the parent company of RMB345.8243 million, an increase of402.99% the annual operation target in 2018 has been successfully completed.
I. Insist on technical innovation of products to speed up the transformation and upgrading of the Company Within the report period, the Company has developed 21 new products and completed 16 scientific research projects. Among them, the successful development of the turbine used in the HNKS63/112-type 80,000 cubic-level air separation units has enabled the Company with the complete product and technology system in the large air separation field. The smooth test run and delivery of the double-cylinder double-speed 50 MW steam turbine sets in the central solar project have indicated the technology and market breakthroughs of the Company in the photo-thermal field.
The company's "Key Technology and Application of Steam Turbine Series Damping Damping Blade Design" jointly developed by the company and Xijiao University won the second prize of National Science and Technology Progress Award in 2018.yThe Company's project of "Key Technologies and Applications of Energy Field Compound Laser Surface Modification" has been awarded with the First Prize of the China Mechanical Industry Science and Technology Award. The project of"R& D of Key Technologies and Industrial Applications for Long Twisted Vanes of Industrial Steam Turbines" has been awarded with the Second Prize of the Science and Technology Award of China Machinery Industry Federation. The project of "Domestic Industrial Steam Turbines for 100,000
m3
Air Separation Units" has been awarded with the First Prize of the Zhejiang Mechanical Industry Technology Award. In 2018, the Company has obtained 32 authorized patents, including that the project of "Design Methods for Gas Flow Bending Stress of Self-locking Damping Blade Based on Fluid-solid Coupling" has been awarded with the Zhejiang Patent Gold Award.
The successful acceptance of the Company's provincial intelligent manufacturing demonstration project "Study on Discrete Intelligent Manufacturing Modes and Digital Workshop Construction" has provided the preliminary exploration and path plan for the intelligent manufacturing construction of the Company's new plant. The new remote product monitoring service released by the Company through the service big data platform has extended the
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report intelligent manufacturing to the product service end and also an important step for the transformation of the Company to the service-oriented manufacturing enterprise.
II. Orderly carry out the relocation to ensure the production schedule of products
Within the report period, the Company's "Steam Turbine Power Building" has been delivered as a whole, and the main project of Steam turbine heavy industry and large equipment foundation construction have been started comprehensively. As the "spearhead", the painting workshop of the Company was relocated into the new plant in October 2018.
In 2018, almost 200 devices were purchased for the new plant of the Company with the fixed asset investment exceeding RMB 300 million. In order to ensure the success of the Company's comprehensive relocation, the dedicated working group has been established in the Company to formulate the relocation plan, issue the related systems and sufficiently guarantee the comprehensive relocation of the Company.
In the report period, the Company has fully explored the capacity resources, intensified the capability construction of supply chain, continued the dynamic optimization of operation plan, conquered such adverse factors as short production cycle and many changes in the contract execution and broken the historical records of steam turbine set manufacturing. The product container technology self-researched by the Company has enabled the overall assembly, overall delivery and transport and overall installation by users on site to extremely improve the product quality and user experience.
III. Seize the high-end market segments to enhance the Company's industrial position
In the report period, the domestic industry-driven market has continuously shown the exuberant market demand after being driven by the petroleum refining investment and construction.
In the dragging market, the 1,500,000t/a ethylene unit ethylene project signed between the Company and Dalian Hengli is the largest domestic single-wire ethylene unit around the world. The Company has successfully won the bidding of this project after the competition with such international famous manufacturers as GM, Siemens, Elliott and Mitsubishi and taken the international position for the Company's products, technologies and market competitiveness. The Company has obtained the orders for the 2,200,000t/a coal-to-methanol project and 105,000 Nm3/a
air separation unit turbines of Ningxia Baofeng Energy and the low-pressure driven steam turbine set for the PX Phase II project of Sinopec Hainan Refining&amp; Chemical, and broken the monopoly of foreign counterparts. The order for the 1,250,000t ethylene project of Zhejiang Satellite Energy undertaken by the Company is the first ethane-to-ethylene unit above the 1,000,000-level in China. The Company has successfully realized the cooperation between the compressors of Elliott and the turbines of the Company again to make new contributions to the expansion of the cooperation mode of the imported compressors+ HTC's turbines in the driven core fields like ethylene.
In the generator sets, the condensate pumping steam turbine sets for the2*100MW combined cycle power generation project of China Power (Changshu) supplied by the Company are the performance in the domestic 100MW combined cycle power generation projects for the first time, with greater demonstration significance for the
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report subsequent supporting steam turbine market of 100MW combined cycle units in Jiangsu Province and even the whole country.
In the gas turbines, the Company has actively expanded the cooperating projects in the fields relating to such industrial chains as small and medium-sized gas turbines and distributed energy resources and successfully signed the contract with Huafeng regarding the microfiber gas turbine combined cycle project to realize the expansion from gas turbine products to gas turbine projects and from the cooperated manufacturing to gas turbine project services. The Company has undertaken the gas turbine after-sales service contracts of RMB 80 million hitting a new high again.
IV. Start the enterprise culture construction to increase the cohesion and converge the talents
Within the report period, the Company has commenced the enterprise culture construction project with the themes of "spiritual motivation and future winning", and elected the enterprise culture ambassador, aiming at agglomerating the consensus of all employees in the Company and simulating the impetus that employees actively participate in the enterprise change to promote the transformation and upgrading.
A series of enterprise culture activities has been carried out by the Company combining the 60 anniversaries of plant establishment and 20 anniversaries of listing, and further firmly built the era responsibility of the pillars of a great power for all employees by a review of enterprise development. The HTC's spirit of originality has been presented to users and suppliers after the Company held the "20 Anniversaries of Listing and Turbine Power High-end Development Forum" to transfer the ideas of "driving the industrial civilization and sustaining China's momentum" to show the latest technical innovation and development trend of HTC. The unique industrial position of the listed company has been shown to institutional and individual investors by holding the open day activities of "Enter HTC" for investors.
The Company has actively promoted the talent construction, and improved the reserve cadres election mechanism to cultivate and store the preeminent talented managers. After the organization of skill master studio for foreign exchange and learning activities, the Company has applied for the "Millions of Talents" in Zhejiang Province, prepared the supporting scheme for highly skilled leading talents in the 10,000 talent plan of Zhejiang Province, constantly appraised and elected the "shining turbine worker", first elected the "craftsman of HTC" and cultivated the backbone elites in all fields and all departments of the Company.
V. Constantly improved the enterprise management to effectively prevent the enterprise risks
Within the report period, the Company has unceasingly improved the governance structure of subsidiaries and strengthened the management and control for subsidiaries by assigning directors and supervisors to them to ensure their standard governance with the operation and development consistent with the Company's strategic goals. With the further implementation of the Company's management system integration project and the parallel promotion of lean production project in all workshops, the annual key management tasks have been fulfilled. The Construction of Digitized, Visual and Lean Production Quality Project for Discrete Manufacturing by MES System of the Company has been awarded with the First Prize of the provincial and municipal enterprise management
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report modern innovation achievements.
Based on the big data analysis, the research on the product costs and earnings has been advanced by the Company to explore the sales pricing reform of products and constantly update and improve the Company's sale price system. The list of qualified suppliers has been complemented by the Company with the sufficient use of outsourcing resources to save the purchasing costs of the Company by such means as open tender, centralized ordering, price comparison and forcing the prices down. Through the formulation of Standard Text of Equipment Procurement Contract in Large Supporting Field and the Review Specifications for Equipment Procurement Contract in Large Supporting Field by the Company, the review for the prices, quality and delivery dates of supporting product parts has been strengthened, to ensure that the Company's products and the supporting parts purchased meet the users' requirements.
After the preparation of the risk management implementation plan, the Company has carried out the risk evaluation for key risk aspects of the Company to prevent and control the enterprise system risk. The Company has strengthened the legal means to professionally support the business and suitably solved the contract disputes with effective recovery of long aging overdue receivables.
II. Main business analysis
1. General
Refer to relevant contents of “1.Summarization” in “Discussion and Analysis of Management”.
2. Revenue and cost
(1)Component of Business Income
In RMB
|||||||
|-|-|-|-|-|-|
||2018||2017||Changed over last|
||Amount|Proportion|Amount|Proportion|year（％）|
|Total operating revenue|4,642,807,589.69|100%|3,447,142,669.49|100%|34.69%|
|On Industries||||||
|Boiler and power machine||||||
||4,170,860,461.92|89.83%|3,030,946,418.89|87.93%|37.61%|
|manufacture||||||
|Nonferrous metal alloy||||||
||133,291,110.39|2.87%|91,384,682.32|2.65%|45.86%|
|manufacture||||||
|Other|338,656,017.38|7.30%|324,811,568.28|9.42%|4.26%|
|On Products||||||
|Industrial steam turbine|3,745,445,441.72|80.67%|2,692,843,753.69|78.12%|39.09%|
|Casting products|133,291,110.39|2.87%|91,384,682.32|2.65%|45.86%|
|Auxiliary machinery|248,879,821.14|5.36%|118,292,027.16|3.43%|110.39%|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||||
|-|-|-|-|-|-|
|Part|176,535,199.06|3.80%|219,810,638.04|6.38%|-19.69%|
|Other|338,656,017.38|7.30%|324,811,568.28|9.42%|4.26%|
|District||||||
|Domestic|4,493,091,404.24|96.78%|3,240,202,391.60|94.00%|38.67%|
|Overseas|149,716,185.45|3.22%|206,940,277.89|6.00%|-27.65%|

 (2)Situation of Industry, Product and District Occupying theCompany’s Business Income and Operating Profit with Profit over10%
Whether the company needs to comply with the disclosure requirements of the particular industry
No
In RMB
||||||||
|-|-|-|-|-|-|-|
||||||Increase/decre|Increase/decr|
|||||Increase/decreas|ase of|ease of gross|
||||Gross|e of revenue in|business cost|profit rate|
||Turnover|Operation cost|profit|the same period|over the same|over the same|
||||rate(%)|of the previous|period of|period of the|
|||||year(%)|previous year|previous year|
||||||(%)|(%)|
|On Industries|||||||
|Boiler and power machine|||||||
||4,170,860,461.92|2,883,329,426.80|||||
|manufacture|||30.87%|37.61%|31.32%|3.31%|
|On Products|||||||
|Industrial steam turbine|3,745,445,441.72|2,584,502,463.97|31.00%|39.09%|29.90%|4.88%|

 Under circumstances of adjustment in reporting period for statistic scope of main business data, adjusted main business based on latest onyear’s scope of period-end.
Not applicable
(3)Whether theCompany’s Physical Sales Income Exceeded Service Income
|||||||
|-|-|-|-|-|-|
||||||Change over same|
|Business categories|Items|Unit|2018|2017||
||||||period last year|
||Sales|Set/package|442|388|13.92%|
|Steam turbine|Output|Set/package|451|361|24.93%|
||Inventory|Set/package|180|171|5.26%|
||Sales|Set/package|4|3|33.33%|
|Gas turbine,||||||
||Output|Set/package|2|4|-50.00%|
|compressor||||||
||Inventory|Set/package|7|9|-22.22%|

 Statement on change of amounts for over30% YoY.
The gas turbine and compressor products have a small output and a low proportion in the total products of
our Company. Therefore, the slight change in the absolute production and sales and stock in the period caused a
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report large fluctuation in its relative increase and decrease.
(4)Major orders in hand.
Not Applicable
(5)Component of business cost
Product category
In RMB
||||||||
|-|-|-|-|-|-|-|
|||2018||2017||Increase/De|
|Category|Items||Proportion in the||Proportion in the|crease|
|||Amount||Amount|||
||||operating costs (%)||operating costs (%)|(%)|
|Industrial steam|||||||
|||2,584,502,463.97|80.26%|1,989,579,236.24|81.19%||
|turbine||||||29.90%|
|Casting||109,373,524.81|3.40%|68,739,724.43|2.81%|59.11%|
|Auxiliary|||||||
|||220,254,043.83|6.84%|91,269,179.11|3.72%||
|machinery||||||141.32%|
|Part||78,572,919.00|2.44%|114,854,559.39|4.69%|-31.59%|
|Other||227,318,868.30|7.06%|186,144,626.62|7.59%|22.12%|
|Subtotal||3,220,021,819.91|100.00%|2,450,587,325.79|100.00%|31.40%|

 (6)Whether Changes Occurred in Consolidation Scope in the Report Period
No
(7)Relevant Situation of Significant Changes or Adjustment of the Business, Product or Service in theCompany’s Report Period
Not applicable
(8)Situation of Main Sales Customers and Main Supplier
Information of Main sales customers
|||
|-|-|
|Total sales amount to top 5 customers (Yuan)|1,624,183,928.81|
|Proportion of sales to top 5 customers in the annual sales(%)|34.98%|
|Proportion of the sales volume to the top five customers in the total sales to the||
||0.00%|
|related parties in the year||

Information of theCompany’s top 5 customers
|||||
|-|-|-|-|
|No|Name|Amount（RMB）|Proportion|
|1|Customer 1|616,115,825.66|13.27%|
|2|Customer 2|529,146,968.53|11.40%|
|3|Customer 3|239,149,941.00|5.15%|
|4|Customer 4|122,103,261.39|2.63%|
|5|Customer 5|117,667,932.23|2.53%|
|Total|--|1,624,183,928.81|34.98%|

Notes
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Not applicable
Principal suppliers
|||
|-|-|
|Total purchase of top 5 Suppliers（Yuan）|757,749,294.63|
|Percentage of total purchase of top 5 suppliers In total annual purchase(%)|23.98%|
|Proportion of purchase amount from the top 5 suppliers in the total purchase amount from the||
||5.49%|
|related parties in the year||

Information about the top 5 suppliers
|||||
|-|-|-|-|
|No|Name|Amount（RMB）|Proportion|
|1|Supplier 1|267,961,237.04|8.48%|
|2|Supplier 2|173,472,628.12|5.49%|
|3|Supplier 3|121,761,368.52|3.85%|
|4|Supplier 4|106,361,550.64|3.37%|
|5|Supplier 5|88,192,510.31|2.79%|
|Total|--|757,749,294.63|23.98%|

 Notes
Not applicable
3.Expenses
In RMB
||||||
|-|-|-|-|-|
||||Increase/Decrease||
||2018|2017||Notes|
||||(%)||
|Sale expenses|174,205,763.02|169,520,147.67|2.76%||
|Administration|453,278,171.52|433,151,164.67|||
||||4.65%||
|expenses|||||
||-17,422,889.91|24,287,127.82||Mainly due to the increase in|
|Financial|||||
||||-171.74%|interest income and exchange|
|expenses|||||
|||||gains during the period|
||264,643,888.76|211,027,767.11||Mainly due to the increase in|
|R & D cost|||25.41%|R&D investment in the current|
|||||period|

4. Research and Development
In 2018, the Company's total investment in R&D was RMB 264,643,888.76, accounting for5.7% of the operation revenue. In the industrial steam turbines, the successful project approval and development of such new
products as the largest steam turbine for 1,500,000t/a ethylene unit in the world, methyl alcohol synthesis gas
EHNKS50/50 high rotation speed steam turbine of China National Coal (Erdos) and axial exhaust NKS71/2.8 steam
turbine for PTA waste heat utilization have guaranteed the competitive advantages of the Company's leading
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report products in the international market. In the information-oriented development and application, the MES system has been on line for operation formally, and the industrial Internet application service platform has been constructed. The deep integration of informatization and industrialization has been accelerated continuously.
R& D investment situation
|||||
|-|-|-|-|
||||Increase/Decrease|
||2018|2017||
||||(%)|
|Number of Research and Development persons||||
|(persons)|912|887|2.82%|
|Proportion of Research and Development persons|26.41%|24.43%|1.98%|
|Amount of Research and Development||||
||264,643,888.76|211,027,767.11|25.41%|
|Investment (In RMB)||||
|Proportion of Research and Development||||
||5.70%|6.12%|-0.42%|
|Investment of Operation Revenue||||
|Amount of Research and Development||||
||0.00|0.00||
|Investment Capitalization (In RMB)||||
|Proportion of Capitalization Research and||||
|Development Investment of Research and|0.00%|0.00%||
|Development Investment||||

The Reason of the Prominent Change in Total Amount of Research and Development Input Occupying the Business Income Year on Year
Not applicable
Explanation of the Reason for Substantial Changes in the Research and DevelopmentInput’s Capitalization Rate and Its Reasonableness
Not applicable
5.Cash Flow
In RMB
|||||
|-|-|-|-|
||||Increase/Decrease(|
|Items|2018|2017||
||||%)|
|Subtotal of cash inflow received from operation|4,382,919,022.39|3,645,358,287.67||
||||20.23%|
|activities||||
|Subtotal of cash outflow received from|3,738,485,855.19|3,440,055,495.90||
||||8.68%|
|operation activities||||
|Net cash flow arising from operating activities|644,433,167.20|205,302,791.77|213.89%|
|Subtotal of cash inflow received from investing|4,717,583,835.95|4,340,596,720.83||
||||8.69%|
|activities||||
|Subtotal of cash outflow for investment|5,257,955,267.16|4,183,532,647.57||
||||25.68%|
|activities||||
|Net cash flow arising from investment activities|-540,371,431.21|157,064,073.26|-444.05%|
|Subtotal cash inflow received from financing|246,875,000.00|232,500,000.00||
||||6.18%|
|activities||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|Subtotal cash outflow for financing activities|233,036,102.69|281,399,925.68|-17.19%|
|Net cash flow arising from financing activities|13,838,897.31|-48,899,925.68|128.30%|
|Net increase in cash and cash equivalents|124,693,982.37|306,255,849.98|-59.28%|

 Notes to the year-on-year change of the relevant data
||||||||||
|-|-|-|-|-|-|-|-|-|
||Items||2018|2017||Proportion %||Reason|
|Net cash flow arisingfrom operating activities||644,433,167.20||205,302,791.77|213.89%||Mainly due to the increase in salesvolume and the increase in cashreceived from sales of goods duringthe period.||
|Net cash flow arisingfrom investment activities||-540,371,431.21||157,064,073.26|-444.05%||Mainly due to the increase in netexpenditure on wealth managementproducts and the increase in cash paidfor purchase and construction ofprojects.||
|Net cash flow arisingfrom financing activities||13,838,897.31||-48,899,925.68|128.30%||Mainly due to the increase in cashreceived by the casting company inthe current period by absorption ofcapital increase from minorityshareholders||

Notes to the big difference between cash flow from operating activities and net profit in the reporting year Not applicable
III.Analysis of Non-core Business
In RMB
||||||
|-|-|-|-|-|
|||Proportion in total||Sustainable|
||Amount||Explanation of cause||
|||profit||(yes or no)|
||||Mainly due to the investment income of||
|Investment income|117,535,765.44|25.00%|wealth management products and dividends||
||||of Hangzhou Bank this year||
||||Mainly due to the provision for inventory||
||||falling price and the provision for bad debts||
||||based on the aging analysis method of||
||||receivables for various types of raw||
|Impairment of assets|184,355,819.30|39.22%|||
||||materials, self-made semi-finished products,||
||||work-in-progress products, and finished||
||||goods whose estimated net realizable value||
||||is lower than the corresponding book value.||
|Non-operating income|12,138,431.92|2.58%|Mainly due to contract compensation||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
||||income and purchase debt restructuring and|
||||reduction of accounts payable|
||||Mainly due to contract compensation|
|Non-operating expenses|7,169,435.39|1.53%||
||||expenses|

IV.Condition of Asset and Liabilities
1.Condition of Asset Causing Significant Change
In RMB
||||||||
|-|-|-|-|-|-|-|
||End of 2018||End of 2017||||
|||Proporti|||Proporti|Notes to|
|||on in the|||on|the|
|||||Proportion in the|||
||Amount|total|Amount||increase/|significant|
|||||total assets(%)|||
|||assets(%|||decrease|change|
|||)|||||
|Monetary fund|1,382,392,009.59|11.95%|1,222,677,495.94|11.29%|0.66%||
|Accounts|1,940,798,255.26||1,695,217,448.46||||
|||16.78%||15.65%|1.13%||
|receivable|||||||
|Inventories|2,188,121,342.87|18.91%|2,092,575,691.92|19.32%|-0.41%||
|Long-term equity|8,221,439.29||5,800,000.00||||
|||0.07%||0.05%|0.02%||
|investment|||||||
|Fixed assets|783,740,928.49|6.77%|566,710,937.10|5.23%|1.54%||
|Construction in|454,767,328.93||255,921,660.09||||
|||3.93%||2.36%|1.57%||
|process|||||||
|Short-term loans|139,600,000.00|1.21%|115,500,000.00|1.07%|0.14%||
|Long-term loans|22,700,000.00|0.20%|100,000,000.00|0.92%|-0.72%||

2.Asset and Liabilities Measured by Fair Value
In RMB
|||||||||
|-|-|-|-|-|-|-|-|
|||||Impairm|Purcha|Sold||
||||Cumulative|||||
|||||ent|sed in|inthis||
|||Profit/losson fair|fairvalue|||||
|||||provided|this|repor||
|Items|Opening balance|value changes in this|changes||||Closing balance|
|||||in this|reporti|ting||
|||reporting period|charged to|||||
|||||Reportin|ng|perio||
||||equity|||||
|||||g period|period|d||
|Financial assets||||||||
|3.Available-for –sale|||1,620,922,484|||||
||2,239,086,521.28|-227,209,996.88|||||2,011,876,524.40|
|financial assets|||.40|||||
||||1,620,922,484|||||
|Total of the above|2,239,086,521.28|-227,209,996.88|||||2,011,876,524.40|
||||.40|||||
|Financial Liabilities|0.00|0.00|0||||0.00|

Significant changes in the measurement attributes of the main assets in this Reporting Period
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report No
3. Restricted asset rights as of the end of this Reporting Period
||||
|-|-|-|
|Items|End of Book value|Reason|
|Monetary fund|120,205,192.39|Utilized for issuing bank acceptance bill, L/C , L/G and Court freezing payment|
|Notes receivable|88,112,807.60|Utilized for issuing bank acceptance bill|
|Dividend receivable|16,557,292.60|Utilized for guaranteeing the investment loan for China Development Funds|
|Available for salefinancialassets|333,592,000.00|Utilized for guaranteeing the investment loan for China Development Funds|
|Fixed assets|121,500,420.99|Utilized for pledging to obtain the bank loan and guaranteeing the investmentloan for China Development Funds|
|Construction in process|293,963,202.50|Utilized for guaranteeing the investment loan for China Development Funds|
|Invisible assets|85,918,827.81|Utilized for pledging to obtain the bank loan and guaranteeing the investmentloan for China Development Funds|
|Total|1,059,849,743.89||

V.Investment situation
1. General
||||
|-|-|-|
|Investment Amount in 2018(Yuan)|Investment Amount in 2017(Yuan)|Change rate|
|555,376,162.93|249,867,277.94|122.27%|

 2.Condition of Acquiring Significant Share Right Investment during the Report Period
Not applicable
3.Situation of the Significant Non-equity Investment Undergoing in the Report Period
In RMB
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||Accrued|Reasons for not|||
||Invest||||Accrued Actual|||Antici|Realized|Reaching the|||
|||Fixed||Investment amount|||||||||
||ment||Industry involved in||Investment Amount|Capital|Projectschedul|pated|Income up to|Planned|||
||||||||||||Disclosure|Disclosure|
|Project name||investment||in this reporting|||||||||
||meth||investment projects||up to the End of|Source|e|incom|the End of|Schedule and|date|Index|
|||s or not||period|||||||||
||od||||Reporting Period|||e|Reporting|Anticipated|||
||||||||||Period|Income|||
|Steam turbine|Self-b||General equipment||||||||||
|||Yes||109,994,014.28|231,425,262.04|Self funds|100.00%|||No|||
|building|uilt||manufacturing||||||||||
|Turbine heavy|Self-b||General equipment||||||||||
|||Yes||362,129,955.27|482,532,051.84|Self funds|27.84%|||No|||
|industry|uilt||manufacturing||||||||||
|Total|--|--|--|472,123,969.55|713,957,313.88|--|--|0.00|0.00|--|--|--|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 4.Investment of Financial Asset
（1）Securities investment
In RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||||Mode of||||Purchase|Sale||||Sauc|
|||||||||||Gain/los||||
|||Stock||accounti|Book value balance at||Cumulative fair|amount|amount||Book value balance||e of|
|Security|Security||Initial investment|||Changes in fair value||||s of the||Accounting||
|||Abbreviati||ng|the beginning of the||value changes in|in the|in the||at the end of the||the|
|category|code||cost|||of the this period||||reportin||items||
|||on:||measure|reporting period||equity|this|this||reporting period||shar|
|||||||||||g period||||
|||||ment||||period|period||||es|
|Domesti||||||||||||Financial||
||||||||||||||Self|
|c and||Hangzhou||||||||||assets||
||600926||390,954,040.00|FVM|2,239,086,521.28|-227,209,996.88|1,377,784,111.74||||2,011,876,524.40||fund|
|foreign||Bank||||||||||available for||
||||||||||||||s|
|stocks||||||||||||sale||
|Total|||390,954,040.00|--|2,239,086,521.28|-227,209,996.88|1,377,784,111.74|0.00|0.00|0.00|2,011,876,524.40|--|--|
|Disclosure Date of||||||||||||||
|Announcement on Securities||||||||||||||
|Investment Approved by the||||||||||||||
|Board of Directors||||||||||||||
|Disclosure Date of||||||||||||||
|Announcement on Securities||||||||||||||
|Investment Approved by the||||||||||||||
|Shareholders Meeting(If any)||||||||||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report（2）Investment in Derivatives
The Company had no investment in derivatives in the reporting period.
5.Application of the raised capital
Nil
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report VI.Significant Asset and Right Offering
1.Situation of Significant Asset Sale
Nil
2.Sales of major equity
Not applicable
Ⅶ.Analysis of the Main Share Holding Companies and Share Participating Companies
Situation of Main Subsidiaries and the Joint-stock Company with over10% net profit influencing to the Company
In RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||Company|Sectors|||||||
|Name|||Registered capital|Total assets|Net assets|Turnover|Operating profit|Net Profit|
||type|engaged in|||||||
|Zhejiang Steam Turbine Packaged||Trade of|51,000,000.00|272,775,507.88|89,106,117.14|220,230,100.85|12,599,099.02|11,113,668.04|
||Subsidiaries||||||||
|Technology Development Co., Ltd.||packadged|||||||
|Hangzhou Zhongneng Steam Turbine||Manufacturi|92,500,000.00|1,177,919,594.93|358,370,751.87|988,083,271.30|79,280,956.58|70,253,285.20|
||Subsidiaries||||||||
|Power Co., Ltd.||ng|||||||
|Hangzhou Steam Turbine Casting Co.,|||29,500,000.00|613,474,956.73|244,452,732.22|446,900,632.40|13,365,680.61|12,800,550.85|
||Subsidiaries|Casting|||||||
|Ltd.|||||||||
|Hangzhou Steam Turbine Machinery &||Manufacturi|30,000,000.00|253,677,936.65|154,002,383.08|242,356,767.43|65,994,727.07|50,543,093.33|
||Subsidiaries||||||||
|Equipment Co., Ltd.||ng|||||||
|Hangzhou Steam Turbine Auxiliary||Manufacturi|80,000,000.00|752,951,907.69|203,604,911.49|568,575,713.37|567,875.91|1,087,673.40|
||Subsidiaries||||||||
|Machine Co., Ltd.||ng|||||||
|Zhejiang Turbine Import & Export Co.,||Commerce|20,000,000.00|201,437,840.18|50,430,712.02|150,756,529.28|4,239,419.26|3,869,102.43|
||Subsidiaries||||||||
|Ltd.||& trade|||||||
|Hangzhou Steam Turbine Heavy Industry||Manufacturi|558,966,865.00|601,979,851.73|586,469,638.31|124,421,761.96|3,514,934.14|2,599,390.62|
||Subsidiaries||||||||
|Co., Ltd.||ng|||||||

 Subsidiaries obtained or disposed in the reporting period
Not applicable
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report VIII.Special purpose vehicle controlled by the Company
Not applicable
IX. Development prospect
(I) Development and competition of the whole industry
The company, which is a leading domestic industrial turbomachinery equipment and service provider, mainly designs, manufactures and sells rotary industrial turbines such as industrial steam turbines and gas turbines. Its business activities are closely related to the macroeconomic situation, fiscal and monetary policies, industrial investment scale and the economic prosperity of the industry.
Recently, in the context of rapid scientific and technological progress, the global industrial revolution has accelerated the expansion of new energy applications, and the global energy structure is experiencing the unprecedented profound changes. Simultaneously, the Sino-US trade friction, Brexit, interest rate increase by FED and the intensified geopolitical conflicts in the Middle East, Latin America, etc. have largely raised the uncertainties of international trade and investment market, and the risk aversion of investors has flown high, resulting in a turbulent situation in the course of economic development for lots of economic entities, which have caused the complicated external environmental influence faced by the industrial development.
At present, our national economy are still in the key phase to promote the high-quality development relying on structural adjustment, transformation and upgrading. Under the effect of a series of national policies to reduction taxes, stabilize the growth and promote the real economy development, the basic energy, chemical engineering, metallurgy, power, building materials and other industries have gradually risen from the valley bottom. With the new industrial investments poured in and the obvious investment recovery particularly in such fields as coal chemical industry, oil refining, photovoltaic power generation and ethylene, excellent market opportunities have been brought to the main business development of the Company. The Company has successively obtained the orders for the 10,000,000t oil refining projects of Dalian Hengli, Zhejiang Petrochemical, Zhongke Zhanjiang, etc. and for 1,000,000t ethylene projects of Yantai Wanhua and Satellite Petrochemical with lots of benefits. However, it remains doubtful for the "small spring" for the construction investments in the petrochemical engineering and coal chemical industry, and the excess production capacity of the steam turbine industry in China and even the world is still severe. After the comprehensive suspension of domestic large-scale thermal power construction, the large machine plants at home and abroad have entered the small machine market one after another, and the all-out price war among foreign companies and us are getting worse. The future market competition will be more cruel certainly. With the continuous promotion of such strategies as the Belt and Road Initiative, Strategic Action Plan for Energy Development (2014-2020), the enhancement in the demands for solar thermal power generation, nuclear power, biomass power generation, coal-to-liquids, coal gas, integrated utilization of waste heat and waste gas and distributed energy resources has brought giant industrial opportunities, and the new market demands are emerging constantly. The competition among domestic backbone steam turbine manufacturers and international giants is getting more and more intense. The Company will rank as one of the world-class turbine machinery and service suppliers only by speeding up the enterprise transformation and upgrading, intensifying the technological
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report innovation and independent research and development, accelerating the market development and cooperation in the gas turbine distributed energy field, promoting the intelligent manufacturing and industrialization of manufacturing services, making high-end competitive products and building the brand advantages.
(II) Development strategy
The core of thecompany’s “13th Five-Year Plan” development strategy is to speed up the transformation of the company and, in overall, to achieve the technological model innovation and business model innovation. In the technological model innovation, the company will further increase the strength of innovation-driven, combine independent innovation and technology introduction and advance in multiple lines in industrial turbines, gas turbines, distributed energy, and nuclear power fields, and the company will actively capture the market demand and strive to realize the major technology and market breakthroughs in the fields of gas turbines and nuclear power.
In terms of business model innovation, the company will realize the extension from the enterprise value management process to the customer value creation process and realize the transition from production-oriented manufacturing to service-oriented manufacturing, and upgrade the company to become a whole-set equipment manufacturer and a system operator from the single product manufacturer, thus to finally shape the ability of providing and implementing the comprehensive overall solutions.
On the basis of consolidating the position in the industrial steam turbine market, the Company will accelerate the gas turbine business, strengthen the nuclear power business, expand the service and engineering business, and form four major business sectors. At the same time, the company will rely on the five major supporting projects namely the quality project, the resource integration, process reengineering, management improvement and informatization project to shape the company's new core competitiveness.
(III) Business plan
2019 is the 70th anniversary of the founding of New China, andit’s a decisive year for the Company's relocation and construction, as well as is a key year for the Company to implement transformation and upgrading. The company will adopt the "cohesive strategy, comprehensive relocation, deepening management, and thickly cultivated culture" as its annual work policy, adhere to the strategy as the key point, stick to cultural leadership and innovation driven, continuously perfect the management and persist in transformation and upgrading to promote development.
The company will adhere to the "13th Five-Year Plan" as the development guiding principle, explore ways to change corporate systems and mechanisms, and accelerate the implementation of transformation and upgrading to promote development.
Also, it will actively explore the complete set of business, extend the industrial layout, advance to the high-end of the industrial chain, and gradually realize the transformation from production-oriented manufacturing to service-oriented manufacturing, and become a service-oriented manufacturing enterprise integrating product manufacturing, engineering complete sets and overall solutions.
2. Comprehensive Relocation
The company will follow the planning and coordination of the relocation and construction work directed by the higher-level government departments, organize the construction and relocation work in an orderly manner, and ensure that the relocation and construction will be completed smoothly and orderly. It will coordinate the relationship between relocation and production capacity to ensure the successful completion of contracted product tasks, do a good job in the selection and procurement of new equipment, further improve the installation and
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report commissioning plan for newly-added and relocated equipment, obtain all the resources needed for installation and relocation, thus to ensure that the steam turbine heavy machine company will be put into operation as soon as possible.
Plus, it will strengthen the connection between production and marketing, improve the supply chain support capability, balance the internal and external supply capacity, and strengthen the supply chain process management and quality control.
Further adjust and improve the integration of production line organization and function, gradually build a manufacturing and production organization framework compatible with the new production organization of the new plant after relocation, optimize the operation process, strengthen the integration of the manufacturing process, and improve the agility and efficiency of manufacturing and improve the rapid response ability.
3. Innovation Driven
According to the product technology development strategy, the Company will focus on the research& development and service of Dalian Hengli 1.5 million tons/year ethylene unit; promote the landing and development of the first subcritical unit; promote the one-button start-stop, digital delivery, and improve the assembly technology including the engineering materials, packaging and transportation, installation and use of software and the specifications; vigorously carry out remote operation and maintenance service system and roll out the industrial interconnection service application projects; carry out the product quality big data work, improve the inspection technical specifications; and actively explore the technical research for gas turbine parts. 4. Consolidating the Market
The Company will increase the research efforts focusing on key areas, key customers and key projects, strengthen the integration work of marketing and branding, continuously improve the project execution level and innovate the marketing model. It will continuously expand the product application areas and seek more development opportunities in energy-saving applications and new energy fields.
5. Deepening the Management
Deeply promote the three management projects of “lean production”, “management integration” and “key management tasks of the year”, and further strengthen the precision management ability on marketing, technology, technical process, manufacturing, functional management and other processes.
Continue to promote the construction of ERP, PLM, MES, industrial Internet of Things and other informatization projects, explore 5G applications, deepen MES applications and the second-phase development, actively carry out the ERP solution planning, promote the Company's hybrid cloud planning program and advance the supplying code program of purchased parts, guiding the Company's transition from traditional manufacturing to smart manufacturing.
Drive the improvement of the Company's accounts receivable management model, focus on the recovery of long-aged receivables, and pay attention to the control and professional role of financial and legal solution in overdue accounts receivable.
6. Thickly-cultivated Culture
Adhere to the innovation driven, promote the cultural construction and brand creation in the new era for Hangzhou Steam Turbine, systematically strengthen the construction and management of the talent team, further
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report improve the assessment and incentive system, and achieve business empowerment, brand enhancement, and talent advancement.
Enhance the depth and thickness of the culture, and by centering on the relocation and construction of the new plant and the strategic transformation of the “13th Five-Year Plan”, continue to promote the corporate culture construction project, deepen and refine the core cultural values of the enterprise, establish a scientific corporate culture management system with continuous reviewing and continuous improvement , promote the Company's brand building, establish a unified, standardized and unique corporate image, cultivate the employees' sense of identity, pride and belonging, create a trustworthy brand image and promote the business development.
(IV) Risks analysis
1.Market Risks
In view of distinct excess production capacity of domestic turbines, the market competition will be further intensified, and the product distribution of the Company will be further impacted.Relying on technological innovation, the company will actively highlight the core technology advantages, expand the marketing channels, improve the product quality, enhance the end service capabilities, continuously increase the added-value of products and vigorously tap into the potential demands to positively respond to the market and defuse the market risks.
2. Contract execution risk
As the market volatility becomes more intensified, there are more frequent changes in the contract during the execution of the contract for the company, and delays and suspensions of the project schedule happen from time to time, which will have a large impact on the internal realization process of production of the company, and meanwhile it also increases the cost of thecompany’s contract performance and the contract risk. The company will further strengthen the connection between production and sales, improve the speed and level of the company's response to the market, and well control the contract execution risk.
3. Accounts receivable risk
With the increasing risk in the business downturns and investment projects in some customers of the downstream industry, the company's receivables recovery has more risk, and the average age of accounts tends to increase, which will have a large impact on the company's operating results. The company will implement the customer credit management, strengthen the contract signing and perform the risk control, increase the assessment of accounts receivable, and reduce the adverse impact of overdue receivables.
4. Exchange rate risk
In 2018, the Sino-US trade friction was continuously upgraded. In 2019, the international markets remain volatile.The expansion of the company's international procurement and international sales business will cause the company's international balance of payments to be affected by exchange rate fluctuations, and there is a certain risk of exchange loss. With the increase in the two-way volatility of the RMB exchange rate, the uncertainty of foreign exchange gains and losses has been increased. The company will refer to the exchange rate volatility cycle and adopt appropriate exchange rate risk management tools to minimize exchange loss.
5. The company's profitability decline risk
With the adjustment and changes in the market structure, the product structure of the Company in 2019 has been changed compared with that in 2018. There is a risk that the Company's operating sales will decline in 2019 with fluctuation in the profitability of products at the same time. the Company will strive to improve the internal management, reduce the operating costs and increase the operational efficiency to resolve the risk of declining
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report profitability.
6. Overseas market risk
During the "Thirteenth Five-Year Plan" period, the company will vigorously implement the "go global" strategy, further expand overseas target markets, and increase the company's share and influence in the international market. However, at present, the overseas target market is affected by geopolitical conflicts, unpredictable changes of internal political and economic situation and trade barrier policies in the region, thus there is great uncertainty in the implementation of overseas market strategies. The company will increase market research efforts, actively demonstrate countermeasures, and explore the development path of business localization. 7. Operating environment change risk
The plant will be comprehensively relocated in 2019 for the Company with inevitable large impact and influence on the manufacturing. Although the company will formulate the plans of relocation safety, security and emergency countermeasures to avoid various issues arising from the equipment disassembly, cargo transportation and storage, turnover and so on, the possibility of various types of personnel injuries, loss of goods and instability incidents will still exist in the relocation process. Therefore, the company will ensure the smooth and orderly implementation of all aspects of comprehensive security, safety production and logistical support in the relocation and reconstruction process.
X. Particulars about researches, visits and interviews received in this reporting period
1.Particulars about researches, visits and interviews received in this reporting period
|||||
|-|-|-|-|
|Reception time|Way of reception|Types of visitors|Basic index|
||||Details are the relevant information disclosure|
||Onsite|||
|April 26,2018||Organization||
||investigation||（http://www.cninfo.com.cn/）|
||||Details are the relevant information disclosure|
||Onsite|||
|June 13,2018||Organization||
||investigation||（http://www.cninfo.com.cn/）|
||||Details are the relevant information disclosure|
||Onsite|||
|June 27,2018||Organization||
||investigation||（http://www.cninfo.com.cn/）|
||Onsite||Details are the relevant information disclosure|
|July 13,2018||Individual||
||investigation||（http://www.cninfo.com.cn/）|
|Reception times|||4|
|Reception agency amount|||3|
|Reception personal number|||1|
|Others|||0|
|Whether to disclose, reveal or disclose non-public material||||
||||No|
|information||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report V. Important Events
I. Specification of profit distribution of common shares and capitalizing of common reserves
Formulation, implementation and adjustment of profit distribution policy of common shares especially cash dividend policy during the reporting period
1.[Dividend sharingprinciple]: Keep profit distribution policy continuous and stable, pay enough attention to the ROI of investors, and give reasonable consideration to our long-term profits, overall profits of all shareholders and sustainable development;
2.[Prioritized cashdividend]: Dividend can be allotted either in cash, stock or in combination of cash and stock, the precondition of which is the company is in profitable state, plentiful in cash flow, and sustaining operation and long-range development are well guaranteed;
3.[Solicit suggestions and demands of independent director and medium and smallshareholders]: The board of directors will work out a specific dividend sharing plan by giving sufficient consideration to business operation, development stage, earning performance, cash flow and current capital requirements and taking medium and smallshareholders’ views into account. Later, the plan is submitted to theshareholders’ general meeting for deliberation after listening to opinions of independent directors. The general meeting is supposed to take advantage of varieties of channels to contact and exchange ideas with shareholders, especially with medium and small shareholders, give ear to their suggestions and demands and get well prepared for answering the problems they are concerned about 4.[Dividend sharingcycle]: Dividend is distributed among shareholders based on an annual cycle as a general rule. We will publish the dividend sharing plan within four months after accounting year and put the plan into practice within two months after deliberation of the shareholders meeting;
5.[Ration of dividendsharing]: The profits accumulated in cash in the last three years are not less than30% of annual average distributable profits in the same year;
6.【Decision-making procedure of dividendsharing】: In the light of Articles of Association, the dividend sharing plan is proposed by the board of directors, and submitted to the shareholders meeting for consideration after being deliberated and approved by the board of directors and commented by the independent directors; 7.【Adjustment process of dividendpolicies】: For the profit distribution policies that need to be adjusted according to the business operation, investment planning and long-term development, the adjusted profit distribution policies shall not violate the relevant provisions of CSRC (China Securities Regulatory Commission) and the stock exchange. The proposals regarding the adjustment of profit distribution policies should seek advice from the independent directors and board of supervisors, and they shall be deliberated by the board of directors and then submitted to the general meetings. The proposals need to receive more than 2/3 of the voting rights held by the shareholders attending the general meetings before implementation.
|||
|-|-|
|Special cash dividend policy description||
|Whether meets the requirements of the provisions of the articles of association or shareholders' meeting resolutions:|Yes|
|Whether dividends standard and proportion are clear|Yes|
|Whether decision making and supervision mechanism for profit distribution are completed|Yes|
|Whether independent directors perform their duties responsibly and play its due role:|Yes|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
|Whether the Minority shareholders have adequate opportunity to express their views and aspirations and Their legitimate||
||Yes|
|rights and interests have been fully protected||
|Whether the Cash dividend policy to adjust or change the conditions and procedures are compliant and transparent|Yes|

 The profit distribution preplan or proposal and the preplan or proposal of conversion of the capital reserve into share capital in the past three years(with the reporting period inclusive):
The dividend plan for year 2018 was basing on the total capital share of 754,010,400, RMB 2.00 and 0 bonus share will be distributed to each 10 shares. No capitalization of common reserves will be carried out. Totally RMB150,802,080.00(tax included) will be distributed.
The dividend plan for year 2017 was basing on the total capital share of 754,010,400, RMB 0.5 and 0 bonus share will be distributed to each 10 shares. No capitalization of common reserves will be carried out. Totally RMB37,700,520.00 will be distributed.
The dividend plan for year 2016 was basing on the total capital share of 754,010,400, RMB 0 and 0 bonus share(tax included) will be distributed to each 10 shares. No capitalization of common reserves will be carried out. Totally RMB0 will be distributed.
Dividend distribution of the latest three years
In RMB
|||||||||
|-|-|-|-|-|-|-|-|
||||||||Ratio of the|
||||||||total cash|
||||||||bonus (other|
|||||Amount||||
||||||||ways|
||||Ratio in net|of cash||||
||||||||included) in|
|||Net profit|profit|dividend||||
||||||Proportion of cash||net profit|
||Amount for|attributable to the|attributable to|s from||Amount for||
||||||dividends from||attributable|
||cash bonus|over of the parent|the parent|cash||cash bonus||
|Year|||||cash offer to||to common|
||(tax|company in the|company in the|offer to||(tax||
||||||repurchase shares||stock|
||included)|consolidated|consolidated|repurcha||included)||
||||||of the funds||shareholders|
|||financial statements|financial|se shares||||
||||||||of listed|
||||statements|of the||||
||||||||company|
|||||funds||||
||||||||contained in|
||||||||consolidation|
||||||||statement|
|2018|150,802,080.00|345,824,339.47|43.61%|0.00|0.00%|150,802,080.00|43.61%|
|2017|37,700,520.00|68,753,250.90|54.83%|0.00|0.00%|37,700,520.00|54.83%|
|2016|0.00|31,955,445.73|0.00%|0.00|0.00%|0.00|0.00%|

 In the reporting period, both theCompany’s profit and the parentcompany’s retained earnings were positive however not cash dividend distribution proposal has been put forward.
Not applicable
II. Profit distribution for the report period.
|||
|-|-|
|Bonus shares distributed at the rate of _(share)for every 10 shares|0|
|Dividend distributed at the rate of CNY___ for every 10 shares||
||2.00|
|(with tax inclusive)||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
|Number of shares converted for every 10 shares (shares)|0|
|Share capital base for the dividend distribution preplan (shares)|754,010,400|
|Total cash dividend distributed (with tax inclusive)|150,802,080.00|
|Amount of cash dividend distributed in other way(s) (such as||
||0.00|
|shares repurchased)||
|Total amount of cash dividend (including other way(s))|150,802,080.00|
|Profit available for distribution (CNY)|2,602,026,967.56|
|Proportion of the cash dividend in the total profit available for||
||100%|
|distribution (%)||
|Cash dividend distribution policy||
|Where the distribution of profits is carried out in the company's development stage that belongs to a mature stage and there is||
|significant capital expenditure arrangement, the proportion of cash dividends in this profit distribution shall be at least 40%.||
|Details of profit distribution or reserve capitalization plan||
|Not applicable||

III. Commitments to fulfill the situation
1.The fulfilled commitments in the reporting period and under-fulfillment commitments by the end of the reporting period made by the company, shareholder, actual controller, acquirer, director, supervisor, senior management personnel and other related parities.
Nil
2.The existence of the company's assets or projects earnings forecasts and earnings reporting period is still in the forecast period, the company has assets or projects meet the original profit forecast made and the reasons explained
Not applicable
IV.Particulars about the non-operating occupation of funds by the controlling shareholder
Nil
V.Explanation of the Supervisory Committee and Independent Directors (If applicable)on the QualifiedAuditor’s Report Issued by the CPAs.
Not applicable
VI.Explain change of the accounting policy, accounting estimate and measurement methods as compared with the financial reporting of last year.
1. The Company has prepared the 2018 financial statements as required in the Notice of the Ministry of Finance on Revising and Issuing the Format of 2018 General Enterprise Financial Statements (CK[2018] No. 15) and its interpretation as well as the Accounting Standards for Business Enterprises, and the retroactive adjustment approach has been applied in the changes in accounting policies. The report items and amounts in 2017 financial
statements subject to great influence are listed below:
In RMB
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|Items and amounts of the original statements||Items and amounts of the new statements||
|Notes receivable|715,410,887.68|Notes receivable % Accountreceivable|2,410,628,336.14|
|Account receivable|1,695,217,448.46|||
|Dividend receivable|6,900,000.00|Other receivable|23,805,005.57|
|Other receivable|16,905,005.57|||
|Notes payable|215,409,958.92|Notes payable & accountpayable|1,098,125,424.57|
|Account payble|882,715,465.65|||
|Interest payable|268,860.77|Other payable|28,128,478.10|
|Other payable|27,859,617.33|||
|Long-term payable|209,633,466.66|Long-term payable|447,292,297.73|
|Special payable|237,658,831.07|||
|Administration exprenses|644,178,931.78|Administration exprenses|433,151,164.67|
|||R & D cost|211,027,767.11|

 2. The Ministry of Finance issued the Interpretation of Accounting Standards for Business Enterprises No. 9 - Accounting Treatment of Net Investment Losses Under Equity Method, Interpretation of Accounting Standards for Business Enterprises No. 10 - Depreciation Method Based on Income from Use of Fixed Assets, Interpretation of Accounting Standards for Business Enterprises No. 11 - Amortization Method Based on Income from Use of Intangible Assets and Interpretation of Accounting Standards for Business Enterprises No. 12 - Whether the Provider and Receiver of Key Manager Services Are Related Parties in 2017. Since January 1, 2018, the Company has executed the above interpretations of the Accounting Standards for Business Enterprises without any influence on the initial financial data of the Company.
VII.Explain retrospective restatement due to correction of significant accounting errors in the reporting period Nil
VIII.Explain change of the consolidation scope as compared with the financial reporting of last year.
Nil
IX. Engagement/Disengagement of CPAs
CPAs currently engaged
|||
|-|-|
||Pan-China Certified Public Accountants (Specialcommon partnership)|
|Name of the domestic CPAs||
|Remuneration for domestic accounting firm（In RMB 10,000）|116|
|Successive years of the domestic CPAs offering auditing services|20|
|Names of the certified public accountants from the domestic CPAs|Jiang Xiaodong , Ye Xiaobin|
|Successive years of the domestic CPAs offering auditing||
||2|
|services||
|Name of the Overseas CPAs|No|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
|Remuneration for overseas accounting firm（Ten thousands）|0|
|Successive years of the overseas CPAs offering auditing services|No|
|Names of the certified public accountants from the overseas CPAs|No|
|Successive years of the overseas CPAs offering auditing services|No|

 Has the CPAs been changed in the current period
No
Engaging of CPA for internal auditing, financial consultants or sponsors
Pan-China Certified Public Accountants is engaged the auditor of internal control system for the current year. With payment of RMB 0.26 million for its service.
X.Situation of Facing Listing Suspension and Listing Termination after the Disclosure of the Yearly Report Not applicable
XI. Receivership and bankruptcy
No bankruptcy or capital reorganizing issues occurred in the report period.
XII. Major lawsuits and arbitrations
Till the end of the report period, the Company's sum involved in other proceedings that did not hit the standard for disclosure of major proceedings was RMB 57.5385 million .
XIII. Punishment and improvement
Nil
XIV.Credit Condition of the Company and its Controlling Shareholders and Actual Controllers
Nil
XV. Implementation Situation of Stock Incentive Plan of the Company, Employee Stock Ownership Plan or Other Employee Incentive Measures
Nil
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report XVI. Material related transactions
1. Related transactions in connection with daily operation
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||Wheth|||||
||||||||||er over|||||
|||||||||Trading||||||
|||||Principle|||||the|||||
|||||of||||limit|||Market|||
||||||||||approv||||Index of|
||||Subjects of|pricing||Amount of|Ratio in||||price of|||
|Related parties|Relationship|Type of trade|the related|the|Price of|trade|similar|approved||Way of|similar|Date of disclosure|informatio|
||||||trade||||ed|payment|||n|
||||transactions|related||RMB0’000|trades|（RMB10|||trade||disclosure|
|||||transacti|||||||available|||
||||||||||limited|||||
|||||ons||||,000)||||||
||||||||||or not|||||
||||||||||(Y/N)|||||
|Hangzhou Hangfa||||||||16,375.1|||Not|||
|Power Generating|Affiliate of the|Purchase of|Generator|Fair and|Market|17,347.26|||Yes|Bank transfer||January 29,2019|2019-08|
||Group|goods||just|price|||9|||applicable|||
|Equipment Co., Ltd.||||||||||||||
|Hangzhou Steam|||Freight, repair||||||||Not|||
|Turbine Automobile|Affiliate of the|Labor services|cost, Rental|Fair and|Market|5,589.24||5,567.18|Yes|Bank transfer||January 29,2019|2019-08|
|Sales Service Co.,|Group|||just|price||||||applicable|||
|Ltd.|||fee|||||||||||
||||SteamTurbine|||||||||||
|Hangzhou Steam||||||||||||||
||||, parts,|||||||||||
|Turbine|Affiliate of the|Labor services/|||||||||Not|||
||||compressor,|Fair and|Market|5,089.19||5,089.19|No|Bank transfer||January 29,2019|2019-08|
|Engineering Co.,|Group|selling goods||just|price||||||applicable|||
||||Installation|||||||||||
|Ltd.||||||||||||||
||||services|||||||||||
|||||||||27,031.5||||||
|Total||||--|--|28,025.69|--||--|--||--|--|
|||||||||6|||--|||
|Details of any sales return of a large amount||||No||||||||||
|Give the actual situation in the report period where a forecast had||||||||||||||
|||||No||||||||||
|been made for the total amounts of routine related-party||||||||||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
|transactions by type to occur in the current period(if any)||
|Reason for any significant difference between the transaction price||
||No|
|and the market refernce price (if applicable)||

2. Related transactions in terms of acquisition or disposal of assets:
Not applicable
3. Related transactions in term of collective external investment
Not applicable
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 4. Debts and credits with related parties
Nil
5. Other material related transactions
1.The company and Hangzhou Steam Turbine Power Group Co., Ltd. and Shanghai Relian Steel Trading Co., Ltd. jointly invested Hangzhou Juyuan Asset Management Co., Ltd., signed the "Jianyuan Xinxing No.9 Private Equity Fund" fund contract, and used its own funds to subscribe the fund-share of Jianyuan Xinxing No.9 Private Equity Fund.
The website to disclose the interim announcements on significant related-party transactions
Inquiry on the website for disclosing the provisional report concerning significant related transactions
||||
|-|-|-|
|Inquiry on the website for|||
|disclosing the provisional report|||
||Date of disclosure|Disclosure website|
|concerning significant related|||
|transactions|||
|Announcement on OverseasInvestment Subscription ContractFund and Related Transactions||(www.cninfo.com.cn)|
||April 26,2018||
|||（Announcement No.2018-35）|
|||(www.cninfo.com.cn)|
||May 23,2018||
|||（Announcement No.2018-41）|

XVII. Material contracts and execution
1. Entrustment, contracting, and leasing issues
(1) Trusteeship
No trusteeship in the report period.
(2) Contracting
No contracting in the report period.
(3) Leasing
No Leasing in the report period.
2.Guarantees
（1）Guarantees
In RMB 10,000
||||||||||
|-|-|-|-|-|-|-|-|-|
|Outward guarantees offered by the Company and its subsidiaries (Excluding guarantee to the subsidiaries）|||||||||
|||||Actual|||||
||Amount of|Amount of|Actual date of|amount||||Related|
|Guarantee|||||Type of||Complet||
||guarantee and date|the|occurring (signing|of||Term||guarant|
|provided to|||||guarantee||ed or not||
||of disclosure|guarantee|date of agreements|guarant||||ee|
|||||ee|||||
|Hangzhou Steam||||||Two years from the|||
|Turbine Power|October 22,2016|20,800|December 28,2016|20,800|Mortgage,|date of expiration of|No|Yes|
|Group Co., Ltd.||||||the principal debt|||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||Total amount of|||||||
|Total amount of outward||||||||||||
||||||outward|||||||
|guaranteeapproved in the report period||0||||||20,800||||
||||||guaranteeapproved in|||||||
|（A1）||||||||||||
||||||the report period（A1）|||||||
||||||Total of external|||||||
|Total of external guarantee|||||guarantee|||||||
|||20,800||||||20,800||||
|approved at Period-end(A3)|||||approved at|||||||
||||||Period-end(A3)|||||||
|Guarantee of the Company for the controlling subsidiaries||||||||||||
||||||||||||Guarant|
|||||||||||Compl||
||Relevant||||||||||ee|
||||Date of|Actual||||||ete||
||disclosure|Amount|||||||||for|
|Name of the|||happening|mount||||||imple||
||date/No. of|of||||Guarantee|||||associat|
|Company|||(Date o|of||||Guarantee term||mentat||
||the|guarante||||type|||||ed|
|guaranteed|||signing|guarante||||||ion||
||guaranteed|e|||||||||parties|
||||agreement)|e||||||or||
||amount||||||||||(Yes or|
|||||||||||not||
||||||||||||no)|
|Hangzhou Steam||||||||Two years from the||||
|||||||The joint||date after the||||
|Turbine Auxiliary||||||||||||
||January 27,2018|2,000|January 29,2018|1,900||liability||expiration of the loan||No|No|
|Machinery Co.,||||||||||||
|||||||guaranty||period under the||||
|Ltd||||||||||||
|||||||||main contract||||
|Hangzhou Steam||||||The joint||Two years from the||||
|Turbine Casting|June 26,2018|3,000|April 4,2018|3,000||liability||date of expiration of||No|No|
|Co., Ltd.||||||guaranty||the principal debt||||
|Hangzhou Steam||||||The joint||Two years from the||||
|Turbine Casting|June 26,2018|2,000|June 29,2018|1870||liability||date of expiration of||No|No|
|Co., Ltd.||||||guaranty||the principal debt||||
|||||Total of actual guarantee||||||||
|Total of guarantee for subsidiaries||||||||||||
|||7,000||for subsidiaries in the||||6,770||||
|approved in the Period (B1)||||||||||||
|||||Period (B2)||||||||
|||||Total of actual guarantee||||||||
|Total of guarantee for subsidiaries||||||||||||
|||7,000||for subsidiaries at||||6,770||||
|approved at Period-end (B3)||||||||||||
|||||Period-end (B4)||||||||
|Guarantee of the subsidiaries for the controlling subsidiaries||||||||||||
||||||||||||Guarant|
|||||||||||Compl||
||Relevant||||||||||ee|
||||Date of|||||||ete||
||disclosure|Amount|||||||||for|
|Name of the|||happening|Actual||||||imple||
||date/No. of|of|||||Guarantee||||associat|
|Company|||(Date o|mount of|||||Guarantee term|mentat||
||the|guarante|||||type||||ed|
|guaranteed|||signing|guarantee||||||ion||
||guaranteed|e|||||||||parties|
||||agreement)|||||||or||
||amount||||||||||(Yes or|
|||||||||||not||
||||||||||||no)|
|Hangzhou|||||||Joint liability||Two years from|||
||June 12,2018|7,000|March 28,2018|4,561.54||||||No|No|
|Guoneng Steam|||||||quaranty||the date of|||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||||||
|-|-|-|-|-|-|-|-|-|
|Turbine||||||expiration of the|||
|Engineering Co.,||||||principal debt|||
|Ltd.|||||||||
|Hangzhou||||||Two years from|||
|Guoneng Steam||||||the date after the|||
||||||Joint liability||||
|Turbine|June 12,2018|10,000|May 23,2018|6,326.06||expiration of the|No|No|
||||||quaranty||||
|Engineering Co.,||||||loan period under|||
|Ltd.||||||the main contract|||
|||||Total amount of guarantee to|||||
|Total guarantee quota to the subsidiaries||||the subsidiaries actually|||||
|||17,000||||10,887.59|||
|approved in the reporting period (C1)||||incurred in the reporting|||||
|||||period (C2)|||||
|||||Total balance of actual|||||
|Total guarantee quota to the subsidiaries|||||||||
|||||guarantee to the subsidiaries|||||
|approved at the end of the reporting||17,000||||10,887.59|||
|||||at the end of the reporting|||||
|period (C3)|||||||||
|||||period (C4)|||||
|Total of Company’s guarantee（namely total of the large three aforementioned）|||||||||
|Total of guarantee in the Period||||Total of actual guarantee in|||||
|||24,000||||17,657.59|||
|（A1+B1+C1）||||the Period（A2+B2+C2）|||||
|||||Total of actual guarantee at|||||
|Total of guarantee at Period-end|||||||||
|||44,800||Period-end||38,457.59|||
|（A3+B3+C3）|||||||||
|||||（A4+B4+C4）|||||
|The proportion of the total amount of actually guarantee in the net|||||||||
|||||6.4%|||||
|assets of the company(A4+B4+C4)|||||||||
|Including ：|||||||||
|Amount of guarantee for shareholders, actual controller and its|||||||||
|associated parties（D）||||20,800|||||
|The debts guarantee amount provided for the|||||||||
|Guaranteed parties whose assets-liability ratio exceed|||||||||
|70% directly or indirectly（E）||||10,887.59|||||
|Proportion of total amount of guarantee in net assets of the company|||||||||
|exceed 50%（F）||||0|||||
|Total guarantee Amount of the abovementioned guarantees（D+E+F）||||31,687.59|||||
|Explanations on possibly bearing joint and several liquidating|||||||||
|||||No|||||
|responsibilities for undue guarantees ( If any)|||||||||
|Explanations on external guarantee against regulated procedures(If any)||||No|||||

 Description of the guarantee with complex method
Hangzhou Heavy Machinery Co., Ltd, which is the company's subsidiary, had made an application of special construction funds of 208 million to China Development Fund Co.,Ltd, and it has signed the four-party China Development Fund Investment Contract with China Development Fund ,the company and Hangzhou Steam Turbine Group Co.,Ltd. In order to ensure the performance of the "Investment contract" by Hangzhou steam group, the company and the Heavy Machinery Co., Ltd provide guarantee for Hangzhou Steam Group in the
forms of pledge and mortgage. The contents is detailed in the Announcement on External Guarantee of Hangzhou
Steam Turbine Co., Ltd. announced on October 22, 2016 at the website designated by the Shenzhen Stock
Exchange (http // www.cninfo.com.cn). (Announcement No. 2016-75)
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report（2）Illegal providing of external guarantees
No illegal providing of external guarantees in the report period.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 3.Situation of Entrusting Others for Managing Spot Asset
(1)Situation of Entrusted Finance
In RMB 10,000
||||||
|-|-|-|-|-|
|Type|Source|Amount|Unexpired balance|Overdue amount|
|Bank financing||||0|
||Idle own funds|110,756.8|91,567||
|product|||||
|Trust financing||||0|
||Idle own funds|28,620|24,120||
|product|||||
|Total||139,376.8|115,687|0|

Specific Circumstance of Trust Investment which is large in single amount, low in security, poor in liquidity or unguaranteed in high risk
In RMB 10,000
||||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||||Actualprofit orloss forthereportingperiod|||Whe|||
|||||||||||||Actual|||||
|||||||||||||||ther|||
|||||||||||||recovery||||Summar|
|||||||||||||||or|||
|||||||||Way|Referent|||of|||Is there|y of|
|Name of|Type of||||||||||||Provisio|not|||
|||Type||||||of|ial|||profits|||a|matters|
|Trustees|Trustees|||||||||Prospectiv|||n for|due|||
|||of|||Date of|Date of||Confir|Annuali|||and|||commiss|and|
|(or|(or||Amount|Source|||Capital Investment Orientation|||e Yield|||impairm|proc|||
|||Produc|||Beginning|Expiry||ming|zed|||losses|||ion plan|related|
|Entrustees|Entruste|||||||||(if any)|||ent (if|ess|||
|||tion||||||Rewar|Yield|||during|||in the|query|
|)|es)||||||||||||any)|has|||
|||||||||ds|Rate|||the|||future|Index (if|
|||||||||||||||been|||
|||||||||||||reportin||||any)|
|||||||||||||||follo|||
|||||||||||||g period|||||
|||||||||||||||wed|||
||||||||Trust Funds with dispersed investment||||||||||
||Investm||||||will be invested for real estate||||||||||
|Hangzhou|ent||||||claims,other claims;publicly-raising||||||||||
|||||Disposal||||Floatin|||||||||
|Industrial|manage||||July|March|bond, privately-raising bond;debt funds;||||||||||
|||Trust|5,000|of own||||g|6.50%|228.84|229.95|229.95||Yes|No||
|&Commer|ment||||6,2017|20,2018|publicly-raising equity instrument,||||||||||
|||||capital||||profit|||||||||
|cial Trust|compan||||||privately-raising equity instrument;||||||||||
||y||||||short-term debt instrument ,||||||||||
||||||||high-liquidity debt instrument||||||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||The trust capital will be invested for the||||||||
||Investm||||||||||||||
||||||||contribution for Shanghai Jin Mu Yuan||||||||
||ent||||||||||||||
|||||Disposal|||Investment Partnership(Limited|Floatin|||||||
|Zhongron|manage||||June|June|||||||||
|||Trust|5,000|of own|||Partnership), contributing the|g|7.20%|360|360|360.00|Yes|No|
|g Trust|ment||||22,2017|22,2018|||||||||
|||||capital|||partnership shares of priority to become|profit|||||||
||compan||||||||||||||
||||||||the partnership of priority of Shanghai||||||||
||y||||||||||||||
||||||||Jin Mu Yuan Investment||||||||
||||||||Trust Funds with dispersed investment||||||||
||Investm||||||will be invested for real estate||||||||
|Hangzhou|ent||||||claims,other claims;publicly-raising||||||||
|||||Disposal||||Floatin|||||||
|Industrial|manage||||March|March|bond, privately-raising bond;debt funds;||||||||
|||Trust|10,000|of own||||g|7.50%|729.45|0|0|No|No|
|&Commer|ment||||30,2018|20,2019|publicly-raising equity instrument,||||||||
|||||capital||||profit|||||||
|cial Trust|compan||||||privately-raising equity instrument;||||||||
||y||||||short-term debt instrument ,||||||||
||||||||high-liquidity debt instrument||||||||
||||||||Mainly through equity investment and||||||||
||||||||right of return on equity among other||||||||
||||||||methods, trust funds are invested in good||||||||
||Investm||||||||||||||
||||||||enterprises and projects in minerals,||||||||
||ent||||||||||||||
|Zhongron|manage|||Disposal|February2|April|energy, and policies and|Floatin|||||||
|||Trust|5,000|of own||||g|7.60%|380|0|0|Yes|No|
|g Trust|ment||||4,2018|24,2019|countermeasures for people's livelihood||||||||
|||||capital||||profit|||||||
||compan||||||and as funds are idled, trust funds can be||||||||
||y||||||||||||||
||||||||used through claims, convertible bonds,||||||||
||||||||and investment in the beneficiary right||||||||
||||||||of trust.||||||||
|||||Disposal|||Money market, fixed income,|Floatin|||||||
|CITIC||Financ|||August|February2|||||||||
||Bank||7,000|of own|||non-standardized creditor's assets and|g|4.90%|171.03|171.03|171.03|Yes|No|
|Bank||ing|||25,2017|3,2018|||||||||
|||||capital|||other categories|profit|||||||
|||||Disposal||||Floatin|||||||
|Hangzhou||Financ|||December|March|Highly liquid assets , bond assetsand||||||||
||Bank||8,000|of own||||g|4.90%|96.66|96.66|96.66|Yes|No|
|Bank||ing|||18,2017|8,2018|Equity assets||||||||
|||||capital||||profit|||||||
||||||||Financial instruments with a sound||||||||
|||||Disposal||||Floatin|||||||
|Everbright||Financ|||January|April|||||||||
||Bank||10,000|of own|||return and liquidity include bank|g|5.10%|131.34|131.34|131.34|Yes|No|
|Bank||ing|||5,2018|9,2018|||||||||
|||||capital|||deposits, monetary market instruments,|profit|||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||bond products, other income assets and||||||||
||||||||initial public offerings among others||||||||
||||||||Financial instruments with a sound||||||||
||||||||return and liquidity include bank||||||||
|||||Disposal||||Floatin|||||||
|Everbright||Financ|||March|June|||||||||
||Bank||10,000|of own|||deposits, monetary market instruments,|g|5.10%|131.34|131.34|131.34|Yes|No|
|Bank||ing|||2,2018|4,2018|||||||||
|||||capital|||bond products, other income assets and|profit|||||||
||||||||initial public offerings among others||||||||
|||||Disposal||||Floatin|||||||
|Hangzhou||Financ|||March|June|Highly liquid assets , bond assetsand||||||||
||Bank||10,000|of own||||g|5.25%|130.89|130.89|130.89|Yes|No|
|Bak||ing|||7,2018|6,2018|Equity assets||||||||
|||||capital||||profit|||||||
||||||||Financial instruments with a sound||||||||
||||||||return and liquidity include bank||||||||
|||||Disposal||||Floatin|||||||
|Everbright||Financ|||March|June|||||||||
||Bank||10,000|of own|||deposits, monetary market instruments,|g|5.10%|128.55|128.55|128.55|Yes|No|
|Bank||ing|||13,2018|13,2018|||||||||
|||||capital|||bond products, other income assets and|profit|||||||
||||||||initial public offerings among others||||||||
|||||Disposal||||Floatin|||||||
|Hangzhou||Financ|||March|June|Highly liquid assets , bond assetsand||||||||
||Bank||9,000|of own||||g|5.20%|116.68|116.68|116.68|Yes|No|
|Bank||ing|||14,2018|13,2018|Equity assets||||||||
|||||capital||||profit|||||||
||||||||Financial instruments with a sound||||||||
||||||||return and liquidity include bank||||||||
|||||Disposal||||Floatin|||||||
|Everbright||Financ|||April|July|||||||||
||Bank||10,000|of own|||deposits, monetary market instruments,|g|5.10%|127.15|127.15|127.15|Yes|No|
|Bank||ing|||10,2018|10,2018|||||||||
|||||capital|||bond products, other income assets and|profit|||||||
||||||||initial public offerings among others||||||||
|||||Disposal||||Floatin|||||||
|Hangzhou||Financ|||December|March|Highly liquid assets , bond assetsand||||||||
||Bank||7,000|of own||||g|4.35%|75.92|0|0|Yes|No|
|Bank||ing|||28,2018|29,2019|Equity assets||||||||
|||||capital||||profit|||||||
||||||||Bonds, monetary market instruments,||||||||
||||||||interbank deposits, trust plans in||||||||
|||||Disposal||||Floatin|||||||
|||Financ|||November|November|||||||||
|CZB|Bank||7,000|of own|||compliance with requirements of|g|4.85%|337.64|0|0|No|No|
|||ing|||20,2018|18,2019|||||||||
|||||capital|||regulators, rights of return on assets,|profit|||||||
||||||||monetary market funds, bond funds and||||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||other fixed income instruments, asset||||||||||
||||||securitization products, asset||||||||||
||||||management plans matching the above||||||||||
||||||orientations of investment and other||||||||||
||||||financial instruments for investment||||||||||
||||||allowed by policies and regulations||||||||||
|Total|113,000|--|--|--|--|--|--|3,145.49|1,623.59|--|0|--|--|--|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Situation with the appearance of principals which can not be recovered expectedly or other existing situations which may lead to impairment
Not applicable
(2)Situation of Entrusted Loans
Nil
4. Other significant contract
Nil
XVIII. Social responsibility
1. Execution of social responsibility
The Company has disclosed the full text of the social responsibility report, as detailed in (www.cninfo.com.cn) (Announcement No.:2019-).
2.Implementation of the social responsibility of precise poverty relief
||
|-|
|(1) Precision poverty alleviation planning|
|The company participates in the “Lianxiangjiecun” helping and supporting activities in Hangzhou, from|
|2017 to 2021 for 5 years, with an annual funding of RMB 150,000 to assist Zitong Township in Chun’an County.|

 (2) Annual Precision Poverty Alleviation Summary
In 2018, the Company funded RMB 150,000/year in the support and relief activity for Zitong Town, Chun'an County again to implement targeted poverty alleviation in the method of cash relief.
（3）Precision poverty alleviation effect
||||
|-|-|-|
|Index|Measurement unit|Quantity / Status|
|I. General situation|——|——|
|Thereinto： 1.Capital|In RMB 10,000|15|
|II. Itemized input|——|——|
|8. Social poverty alleviation|——|——|
|8.2 Amount invested in targeted poverty|||
||Ten thousands|15|
|alleviation work|||

（4）Subsequent targeted poverty alleviation program
The follow-up plan of the company will follow up the “Lianxiangjie Village” assistance activities as planned. The next year will continue to implement accurate poverty alleviation in the form of 150,000 cash grants at Wutong Town,Pan’an County.
3.Environmental protection
Listed company and its subsidiary belongs to the key pollution enterprise listed by Department of Environmental Protection
No
Neither the company nor its subsidiaries belong to the key pollutant discharge units announced by the environmental protection department. The company has formulated and perfected the environmental management
systems and control procedures for various types of waste water, waste gas, waste slag, and noise in accordance
with relevant environmental laws and regulations and relevant standards promulgated by the national and local
governments. The company has imported ISO14001 environmental management system since 2006 and the
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report system has been operated effectively for more than ten years. Currently, the company has adopted the clean production management and launched the clean production audits, which not only reduces consumption and increases efficiency, but also reduces the pressure and cost of end-of-pipe management. In terms of environmental greening, after years of meticulous maintenance, the company has become a garden-style enterprise.
The company's environmental management system has been in operation for many years, and it has been strictly abiding by the relevant laws and regulations of the state and the principle of continuous improvement. Each year, the company formulates the annual environmental protection goals and formulates the environmental management plans. The company also has a complete and effective management system for waste water, waste gas, waste residue and noise and other waste management. Over the years, there has been no incident of environmental pollution and emissions exceeding the standard.
XIX. Explanation on other significant events
1.Follow-up progress of the relocation of land in Hangzhou Steam Turbine Plant Area
The company signed the “Compensation Agreement for the Relocation of Non-residential Houses on State-owned Land” with Hangzhou Xiacheng City Construction Investment Development Group Co., Ltd. The company received a total of RMB 1,299,324,850 for relocation compensation; thecompany’s holding subsidiary Hangzhou Steam Turbine Machinery Equipment Co., Ltd. received a total of compensation of RMB 6,625,450. The complete report is available as Announcement No.2018-1,Announcement No.2018-10 and Announcement 2018-57 with Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily and at www.cninfo.com.cn dated January 4,2018 ,March 21, 2018 and August 7, 2018.
2. The company waived the preemptive right of the capital contribution in the capital increase of the casting company.
The casting company, a holding subsidiary to the company, planed to increase the registered capital from 22 million yuan to 29.50 million yuan. The company waived the preemptive right of the capital contribution in the capital increase.The complete report is available as Announcement 2018-05 with Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily and at www.cninfo.com.cn dated May 26,2018.
3. Matters of theCompany’s signing of important project contracts
（1）The company recently signed an annual contract for producing 1.5 million tons of ethylene steam turbine units with Hengli Petrochemical (Dalian) Refining& Chemical Co., Ltd., and is currently the largest single-line ethylene plant inChina；（2）Hangzhou Steam Turbine Co., Ltd recently signed a contract of 3.2 million tons/year light hydrocarbon comprehensive processing and utilization project with Lianyungang Petrochemical Co., Ltd,The signing of the two major project contracts has enhanced the competitiveness of the company in the ethylene market .The complete report is available as Announcement No.2018-42 and Announcement 2018-72 with Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily and at www.cninfo.com.cn dated May 26,2018 and November 1, 2018.
4.Matters concerning changes in the company's directors, supervisors and senior management personnel
Mr. Zhang Shutan resigned as the deputy general manager of the company due to the legal retirement age. The complete report is available as Announcement 2018-53 with Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily and at www.cninfo.com.cn dated July 21,2018.
Mr. Yan Jianhua applied for resignation from the company's vice chairman and the related duties in the special committee of the board of directors due to reaching his legal retirement age. The complete report is available as Announcement 2018-73 with Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily and at www.cninfo.com.cn dated November 20,2018.
XX. Material issues of the subsidiaries
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 1.The matter of intending to increase capital and expand shares by the holding subsidiary
The casting& forging company, a company's holding subsidiary, is affected by the overall sluggish market situation of the equipment manufacturing industry and the intensified market competition, therefore it will not have sufficient profitability in the future. The casting& forging company plans to increase its capital and expand its shares and introduce new strategic investors to upgrade its production capacity and enhance its comprehensive competitiveness.The complete report is available as Announcement 2018-05 with Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily and at www.cninfo.com.cn dated May 26,2018.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report VI. Change of share capital and shareholding of Principal Shareholders
1.Changes in share capital
1.Changes in share capital
In shares
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Before the change||Increase/decrease（+，-）|||||After the Change||
||Amount|Proportion|||Capitaliz|||||
||||Share||ation of|||||
|||||Bonus|||Subt|||
||||allotm||common|Other||Quantity|Proportion|
|||||shares|||otal|||
||||ent||reserve|||||
||||||fund|||||
|I. Unlisted shares|479,824,800|63.64%|0|0|0|0|0|479,824,800|63.64%|
|1. Founder's stock|479,824,800|63.64%|0|0|0|0|0|479,824,800|63.64%|
|Including：State-owned shares|479,824,800|63.64%|0|0|0|0|0|479,824,800|63.64%|
|Domestic Legal person shares|0|0.00%|0|0|0|0|0|0|0.00%|
|Overseas legal person shares|0|0.00%|0|0|0|0|0|0|0.00%|
|Other|0|0.00%|0|0|0|0|0|0|0.00%|
|2.Raising legal periosn shares|0|0.00%|0|0|0|0|0|0|0.00%|
|3.Internal staff shares|0|0.00%|0|0|0|0|0|0|0.00%|
|4.Preferred shares and other|0|0.00%|0|0|0|0|0|0|0.00%|
|II.Non-restricted shares|274,185,600|36.36%|0|0|0|0|0|274,185,600|36.36%|
|1.RMB common shares|0|0.00%|0|0|0|0|0|0|0.00%|
|2.Domestically listed foreign||||||||||
||274,185,600|36.36%|0|0|0|0|0|274,185,600|36.36%|
|shares||||||||||
|3.Overseas listed foreign shares|0|0.00%|0|0|0|0|0|0|0.00%|
|4.Other|0|0.00%|0|0|0|0|0|0|0.00%|
|III. Total of capital shares|754,010,400|100.00%|0|0|0|0|0|754,010,400|100.00%|

 Causes of Change of shares
Not applicable
Approval of change of the shares
Not applicable
Transfer in change of shares
Not applicable
Influence of the change of the shares upon such financial indicators as the basic EPS and diluted EPS, net asset
value per share attributable to the common stockholders in the past year and the latest period
Not applicable
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Other information the Company considers it necessary or required by the securities regulatory authority to be disclosed
Not applicable
2. Change of Restricted Shares
Not applicable
II. Securities issue and listing
1.Explanation of the Situation of the Security Issue(No Preferred Shares) in the Report Period
Not applicable
2.Change of asset and liability structure caused by change of total capital shares and structure
Not applicable
3.About the existingemployees’ shares
Not applicable
III. Particulars about the shareholders and substantial controller
1. Amount of shareholders and their shareholding position
In shares
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Total number of|||||||||||||||
|||Total shareholders||||||||Total|||||
|||||||The total number of pref|||||||||
|common||at the end of the||||||||preferred shareholders at|||||
|||||||erred shareholders votin|||||||||
|shareholders at the end|14,270|month from the||14,157|||||0|the end of the month from||||0|
|||||||g rights restored at perio|||||||||
|of the||date of disclosing||||||||the date of disclosing the|||||
|||||||d-end|||||||||
|||the annual report||||||||annual report|||||
|reporting period|||||||||||||||
|Particulars about shares held above 5% by shareholders or top ten shareholders|||||||||||||||
|||||||||||||Number or|||
|||||||||||||share|||
||||Proporti|||||||||pledged/froz|||
||||||Number of||Changes in|Amount of|||Amount of||||
|Shareholders||Nature of|on of|||||||||en|||
||||||shares held at||reporting|restricted|||un-restricted||||
|||shareholder|shares|||||||||State|||
||||||period -end||period|shares held|||shares held||||
||||held（%）|||||||||of|Amou||
|||||||||||||shar|nt||
|||||||||||||e|||
|Hangzhou Steam Turbine PowerGroup Co., Ltd.||State-ownedlegal person|63.64%||479,824,800||0|479,824,800|||0||||
|VANGUARD EMERGINGMARKETS STOCK INDEX FUND||Foreign legalperson|0.63%||4,722,804||0|0|||4,722,804||||
|Zhou Jie||DomesticNatural person|0.56%||4,200,000||1,524,000|0|||4,200,000||||
|ISHARES CORE MSCIEMERGING MARKETS ETF||Foreign legalperson|0.50%||3,779,554||1,033,653|0|||3,779,554||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|VANGUARD TOTALINTERNATIONAL STOCKINDEX FUND|Foreign legalperson|0.46%|3,499,046||45,000|0||3,499,046||
|China MerchantsSecutities(HK)Co., Ltd.|State-ownedlegal person|0.44%|3,319,441||919,292|0||3,319,441||
|GUOTAIJUNANSECURITIES(HONGKONG) LIMITED|Foreign legalperson|0.36%|2,693,363||231,483|0||2,693,363||
|NORGES BANK|Foreign legalperson|0.33%|2,514,529||-1,789,146|0||2,514,529||
|Xia Zulin|DomesticNatural person|0.30%|2,280,000||90,000|0||2,280,000||
|Wang Yihu|DomesticNatural person|0.19%|1,441,324||109,000|0||1,441,324||
|Particulars about strategic investors or general||||||||||
|corporations becoming among the top 10||Not applicable||||||||
|shareholders due to share placing||||||||||
|||(1) Hangzhou Steam Turbine Power Group Co., Ltd. is the holder of state-shares of||||||||
|||the Company, all other shareholders’ are holders of domestic listed foreign shares||||||||
|||(B shares)||||||||
|Explanation on associated relationship among the||(2) There is no relationship between Hangzhou Steam Turbine Power Group Co.,||||||||
|||Ltd. and other shareholders;||||||||
|aforesaid shareholders||||||||||
|||(3) Hangzhou Steam Turbine Power Group Co., Ltd. is not an “action-in-concert”||||||||
|||party with any of other shareholders as described by the “Administration Rules of||||||||
|||Informational Disclosure about Change of Shareholding Statues of PLCs”.||||||||
|Top 10 holders of shares without trading limited conditions||||||||||
|||||Amount of|||Category of shares|||
|Name of the shareholder||||unconditional shares||||||
||||||||Category||Amount|
|||||held at end of period||||||
|VANGUARD EMERGING MARKETS STOCK INDEX FUND||||4,722,804|||Foreign shares|||
||||||||placed in domestic||4,722,804|
||||||||exchange|||
|Zhou Jie||||4,200,000|||Foreign shares|||
||||||||placed in domestic||4,200,000|
||||||||exchange|||
|ISHARES CORE MSCI EMERGING MARKETS ETF||||3,779,554|||Foreign shares|||
||||||||placed in domestic||3,779,554|
||||||||exchange|||
|VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND||||3,499,046|||Foreign shares|||
||||||||placed in domestic||3,499,046|
||||||||exchange|||
|China Merchants Secutities(HK)Co., Ltd.||||3,319,441|||Foreign shares|||
||||||||placed in domestic||3,319,441|
||||||||exchange|||
|GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED||||2,693,363|||Foreign shares|||
||||||||placed in domestic||2,693,363|
||||||||exchange|||
|NORGES BANK||||2,514,529|||Foreign shares|||
||||||||placed in domestic||2,514,529|
||||||||exchange|||
|Xia Zulin||||2,280,000|||Foreign shares|||
||||||||placed in domestic||2,280,000|
||||||||exchange|||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|Wang Yihu|1,441,324|Foreign shares||
|||placed in domestic|1,441,324|
|||exchange||
|Haitong International Securities Company Limited-Account Client|1,320,496|Foreign shares||
|||placed in domestic|1,320,496|
|||exchange||
||1）It is unknown to the Company if there is any relationship|||
|Explanation on associated relationship or consistent action among the top|among the top 10 common share holders without restriction;|||
|10 shareholders of non-restricted negotiable shares and that between the|(2) Hangzhou Steam Turbine Group Co., Ltd. is not an|||
|top 10 shareholders of non-restricted negotiable shares and top 10|action-in-concert” party with any of other shareholders as|||
|shareholders|described by the “Administration Rules of Informational|||
||Disclosure about Change of Shareholding Statues of PLCs”.|||
|Notes to the shareholders involved in financing securities (if any)(See||||
||Not applicable|||
|Notes 4)||||

Whether top ten common shareholders or top ten common shareholders with un-restrict shares held have a buy-back agreement dealing in reporting period.
The top ten common shareholders or top ten common shareholders with un-restrict shares held of the Company have no buy–back agreement dealing in reporting period.
2.Controlling shareholder
Nature of Controlling Shareholders: Local state holding
Type of Controlling Shareholders: Legal person
||||||
|-|-|-|-|-|
|Name of the|||||
||Legal||||
|holding||Incorporated in|Organization code|Registered capital|
||representative||||
|shareholder|||||
|||||Business scope: Manufacturing and|
|||||processing: textile machinery, Manufacturing|
|||||machines,paper-making machinery, pump,|
|||||casting products, electrical tools, gear box,|
|||||thermal transmitter, digital controlling device,|
|||||and spare parts of the above (limited to the|
|||||subsidiaries); Contracting of domestic and|
|Hangzhou Steam|||||
||||91330100143071842L||
|Turbine Power|Zheng Bin|Dec 14, 1992|||
|||||overseas machinery engineering projects,|
|Group Co., Ltd.|||||
|||||export of above equipments and materials,|
|||||provide labor services for above overseas|
|||||projects. Thermal power plant project and|
|||||equipment engineering; wholesale and retail:|
|||||products and spare parts manufactured by|
|||||members of the group, and technical research,|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|||consulting, and service of above products;|
|||Provide materials, equipments, and|
|||spare parts to members of the Group, water|
|||and power supply (other than installation and|
|||maintaining of power supply equipment);|
|||Including the business scope of|
|||subsidiaries.|
|Shareholding|||
|status of the|||
|holding|||
|shareholder in|||
||Nil||
|other PLCs in the|||
|country and|||
|abroad during the|||
|report period|||

Change of holding shareholder
No change of holding shareholder in the report period.
3．Information about the controlling shareholder of the Company
Actual controllernature：Local state owned Assets Management
Actual controllertype：Legal person
||||||
|-|-|-|-|-|
||Legal|Date of|||
|Name of the substantial|||Organization||
||representati|incorpo||Principal business activitie|
|controller|||code||
||ve|ration|||
|||||In the light of the municipal government authorization, perform the|
|||||investor’s responsibilities, supervise the municipal|
|||||operational state-owned assets and strengthen the|
|||||management of state-owned assets in accordance with|
|||||the laws and regulations of Corporate Law of the|
|||||People's Republic of China , Enterprise State-Owned|
|||||Assets Law of the People's Republic of China .|
|State-owned Assets|||||
|Supervision and||||(II) Execute the laws, regulations and policies of the|
|||||management of state-owned assets; be entrusted with|
|Administration Commission|Wang Xi||776637527||
|||||drafting local regulations regarding the management of|
|of Hangzhou Municipal|||||
|||||state-owned assets, and enact relevant rules and|
|Government||||regulations, supervise and examine the implementation;|
|||||guide and supervise the management of the state-owned|
|||||assets at the district, county (city) level pursuant to the|
|||||laws.|
|||||(III) Make proposals regarding the municipal state-owned|
|||||economic layout and strategic adjustment to promote|
|||||the strategic adjustment of the municipal state-owned|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|economic structure and layout; guide and propel the|
|reform and restructuring of state-owned enterprises;|
|instruct and promote the construction of modern|
|enterprise system in state-owned enterprises,|
|consummate the corporate governance structure, and|
|form a governance mechanism characterized by clear|
|duty, well-coordination and effective balances.|
|(IV) Pursuant to the provisions of the relevant documents of|
|the municipal Party committee, investigate, appoint and|
|remove the supervised principles of enterprises|
|according to the legal procedures; establish a|
|employment mechanism that is in line with the socialist|
|market economic system and the requirements of|
|modern enterprise system, consummate the incentive|
|and restraint system for the operators; assess the|
|business performance of the principles of the enterprises|
|that are supervised and implement the rewards and|
|penalties system. Take charge of the management and|
|building work of the Party organization of the|
|supervised enterprises.|
|(V) Dispatch directors, supervisors or CFO to the|
|supervised enterprises on behalf of the municipal|
|government; and take charge of the daily management|
|of directors, supervisors or CFO.|
|(VI) Take charge of organizing the supervised enterprises to|
|turn over the state-owned capital gains; participate in|
|enacting management system and solutions for the|
|state-owned capital operating budget; take charge of the|
|preparation and implementation of the state-owned|
|operating budget of the supervised enterprises. Take|
|charge of the comprehensive budget management of the|
|supervised enterprises.|
|(VII) Establish and consummate the preservation and|
|appreciation index system of the state-owned assets, and|
|develop the assessment criteria; take charge of the|
|supervision and assessment of the preservation and|
|appreciation of the state-owned assets; enact and|
|organize the implementation of the income distribution|
|policy of the supervised enterprises and state-owned|
|enterprises. Take charge of the fundamental|
|management work, namely, the authentication of|
|property rights, registration of property rights, asset|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|||evaluation monitoring, property liquidation and|
|||verification, asset statistics, comprehensive evaluation;|
|||safeguard rights and interests of the investors of|
|||state-owned assets|
|||(VIII) Take charge of directing and supervising the|
|||implementation of national and provincial and|
|||municipal safety laws, regulations, rules and standards,|
|||etc.|
|||(IX) Undertake other matters assigned by the municipal Party|
|||committee and government.|
|The equity of the controlling|||
|shareholder in other|||
||Hangyang Co., Ltd.(SZ.002430) held 54.4% shares, Hangzhou Jiebai (SH.600814) held 68.26% shares||
|domestic and foreign listed|||
|companies held or partly|and Digital Source Technology Co., Ltd.（SZ.000909）held 45.33% .||
|held by it in the report|||
|period|||

Change of the actual controller in the reporting period
Nil
公司与实际控制人之间的产权及控制关系的方框图
The actual controller controls the company by means of trust or managing the assets in other way
Not applicable
4.Other corporate shareholder holding over10% of theCompany’s shares
Not applicable
5.Situation of Share Limitation Reduction of Controlling Shareholders, Actual Controllers, Restructuring Party
and Other Commitment Subjects
Not applicable
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report VII. Situation of the Preferred Shares
No preference shares in the Company.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report VIII. Information about Directors, Supervisors and Senior Executives
I. Change in shares held by directors, supervisors and senior executives
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||||Amoun|Amoun|||
|||||||||t of|t of|||
|||||||||shares|shares|||
||||||||Shares||||Shares|
|||||||||increas|decreas|Other||
|||Offic|||||held at||||held at|
||||||Starting date of|||ed at|ed at|changes||
|Name|Positions|e|Sex|Age||Expiry date of tenure|the||||the|
||||||tenure|||the|the|increase/||
|||status|||||year-begi||||year-gegi|
|||||||||reportin|reportin|decrease||
||||||||n(share)||||n(share)|
|||||||||g|g|||
|||||||||period(|period(|||
|||||||||share)|share)|||
|Zheng||||||||||||
||Chairman|In|Male|54|December 5,2014|May 18,2019|0|0|0|0|0|
|Bin||office||||||||||
|Yang||||||||||||
|Yongmi|Vice|In|Male|54|June 24,2013|May 18,2019|0|0|0|0|0|
||Chairman|office||||||||||
|ng||||||||||||
|Ye||||||||||||
||Director, GM|In|Male|50|June 25,2001|May 18,2019|0|0|0|0|0|
|Zhong||office||||||||||
||Director,|||||||||||
|Wang||||||||||||
||secretary of|In|Male|46|June 30,2017|May 18,2019|0|0|0|0|0|
|Gang||office||||||||||
||the board|||||||||||
||Director,|||||||||||
|Kong|Deputy|||||||||||
|Jianqia|General|In|Male|47|June 24,2013|May 18,2019|0|0|0|0|0|
|||office||||||||||
|ng|Director,Chi|||||||||||
||ef engineer|||||||||||
|Gu|Independent|In||||||||||
|||||62|May 18,2016|May 18,2019|0|0|0|0|0|
||||Male|||||||||
|Xinjian|Director|office||||||||||
|Ma|Independent|||||||||||
|||In|Male|65|May 18,2016|May 18,2019|0|0|0|0|0|
|Lihong|Director|office||||||||||
|Zhang||||||||||||
||Independent||Fema|||||||||
|Xiaoy||In||46|December 4,2015|May 18,2019|0|0|0|0|0|
||Director|office|le|||||||||
|an||||||||||||
|Chen||||||||||||
||Independent||Fema|||||||||
|Danhon||In||54|May 18,2016|May 18,2019|0|0|0|0|0|
||Director|office|le|||||||||
|g||||||||||||
||Chairman of|||||||||||
|Li|the|||||||||||
|||In|Male|49|June 24,2013|May 18,2019|0|0|0|0|0|
|Shijie|Supervisory|office||||||||||
||Committee|||||||||||
|Wang||||||||||||
||Supervisor|In|Male|51|June 24,2013|May 18,2019|97,576|3,100|0|0|100,676|
|Xiaohui||office||||||||||
|Liu||||||||||||
|Zhiyon|Supervisor|In|Male|59|June 30,2017|May 18,2019|16,600|0|0|0|16,600|
|||office||||||||||
|g||||||||||||
|Lu|Employee|In|Male|57|August 15,2004|May 18,2019|0|0|0|0|0|
||Supervisor|office||||||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Jianhua||||||||||||
|Fang||||||||||||
||Employee|In|Male|56|February 16,2012|May 18,2019|0|0|0|0|0|
|Yin|Supervisor|office||||||||||
||Deputy|||||||||||
|Zhao|General|||||||||||
|||In|Male|43|January 1,2018|May 18,2019|0|0|0|0|0|
|Jiamao|Manger, Chief|office||||||||||
||accounantant|||||||||||
|Li|Deputy|||||||||||
|Jianshe|General|In|Male|55|December 5,2014|May 18,2019|0|0|0|0|0|
|||office||||||||||
|ng|Manger|||||||||||
|Wang|Deputy|||||||||||
|Zhengr|General|In|Male|48|June 9,2017|May 18,2019|0|0|0|0|0|
|||office||||||||||
|ong|Manger|||||||||||
|Li||In|Fema|||||||||
||Director|||48|January 9,2019|May 18,2019|0|0|0|0|0|
|Guiwen||office|le|||||||||
|Yan|Vice|||||||||||
|||Dimi|Male|60|June 24,2013|November 20,2018|0|0|0|0|0|
|Jianhua|Chairman|ssion||||||||||
|Zhang|Deputy|||||||||||
|Shuta|General|Dimi|Male|60|February 16,2009|July 20,2018|66,924|0|0|0|66,924|
|||ssion||||||||||
|n|Manager|||||||||||
|Total|--|--|--|--|--|--|181,100|3,100|0|0|184,200|

 II. Change in shares held by directors, supervisors and senior executives
||||||
|-|-|-|-|-|
|Name|Positions|Types|Date|Reason|
|Zhang|Deputy General||||
||||July 20,2018|Due to reaching legal age, applied for resignation from the|
|||Dimission|||
|Shutan|Manager|||company’s Deputy General Manager.|
|||||Due to reaching legal age, applied for resignation from the|
|Yan Jianhua|Vice Chairman||November 20,2018||
|||Dimission||company’s vice chairman and the related duties in the|
|||||special committee of the board of directors.|

III.Posts holding
The professional background, working experience and main responsibilities of the current board members, supervisors and senior managers in the company
（1）Director
Mr. Zheng Bin, born in November 1964, CCP member, university graduate, senior economics professional certification. He served as vice chairman and Vice General Manager of Hangzhou Steam Turbine Power Group Co., Ltd. He used to be chairman and General Manager of Hangzhou Dongfeng Shipyard Co., Ltd. He was engaged the vice Chairman at the 4th term of Board on March 2009 ,Vice Chairman at the 5th term of Board on June 2010, He was engaged the Director and General Manager of the Company on June 2013, He was engaged the Chairman at the 6th term of Board on December 2014. He was elected as Chairman of the 7th term of board of
directors on May 18, 2016.
Mr. Yang Yongming, born in November 1964, CCP member, university graduate, certified senior economist.
Currentlyhe’s the vice general manager of Hangzhou Steam Turbine Power Group Co., Ltd. He used to be the
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report vice director and director of Sales Administration Departments of the Company; Since 2013, he served as vice general manager, general manager, and vice chairman of Hangzhou Dongfeng Shipyard Ltd. Currentlyhe’s the vice general manager of Hangzhou Steam Turbine Power Group Co., Ltd . and the Vice Chairman of the 6th term of Board of the Company. He was elected as Vice Chairman of the 7th term of board of directors on May 18, 2016.
Ms. Li Guiwen, born in September 1970, member of the Communist Party of China, postgraduate degree, senior engineer. In 1992 the company entered the company, She served as Deputy director General office and Deputy Minister of Economic Management of Hangzhou Steam turbine Power Group, Since August 2007, She Served as Minister of Strategic Development of Hangzhou Steam turbine Power Group, Since November 2017,She served as Secretary of the Board of Directors and Minister of Strategic Development of Hangzhou Steam turbine Power Group. Since January 2019, She served as Director of the Company.
Mr. Ye Zhong: born in April 1968, CCP member; bachelor degree; professor and senior engineer. Started working in July 1990. he was the director of the 2nd term of Board, Chief Engineer; director of the 3rd term of Board, Vice General Manager; Director of the 4th and 5th terms of Board, Vice General Manager, and Chief Engineer.He’s the Standing Vice General Manager, director and Chief Engineer of the 6th term of Board of the Company, and General Manager of the 4 Company since December 2014. He was elected as director and General Manager of the 7th term of board of directors on May 18, 2016.
Mr. Wang Gang, born in February 1972, member of the Communist Party of China, postgraduate degree, Zhejiang University MBA, senior engineer. In 1993 the company entered the company, served as the company organization personnel, a steam shop, security, securities laws and regulations, operation and management department and other department heads. The current party secretary of the party committee, discipline appoint secretary, trade union chairman. He passed the qualification certificate of the board of directors of Shenzhen Stock Exchange in June 2009 and obtained the certificate of secretary of the board of directors. From July 2009 to April 2016, He served as the representative of securities affairs of the Company. He was engaged the secretary of the board of the Company on June 10,2017. He was elected as director of the 7th term of board of directors on June 30, 2017.
Mr. Kong Jianqiang, born in May 1970, CCP member, Master of Engineering, certified senior engineer. Started working in July 1992. He used to be technician, head of workshop, vice director, and director of Steam Turbine Institute of the company.He’s the director of the 6th term of Board since June 2013, and Engineer General of the Company since December 2014. He was elected as director of the 7th term of board of directors on May 18, 2016. Appointed as deputy general manager and Chief engineer of the company.
Ms Zhang Xiaoyan, was born in March 1973. Since 1994, she successively worked in Zhejiang Securities Co., Ltd, Zhejiang Senhe Seed Co., Ltd, Shanghai AllBright Law Offices (Hangzhou), Beijing Gaopeng& Partners Hangzhou Office, Beijing Kangda Law Firm (Hangzhou). She currently holds the post of the partner of Beijing Kangda (Hangzhou) Law FirmNot only being skilled at reformation, listing, floatation,m&a and refinancing for listed company, but also at venture capital, industrial fund, shares incentive, shares option including itscontract’s negotiation,signing and litigation,etc. Currentlyhe’s the independent director of the 6th term of Board. He was elected as Independent director of the 7th term of board of directors on May 18, 2016.
Ms Chen Danhong, born in October 1964, was graduated from Hangzhou Business College, majoring statistics. She was former assistant in Shanghai Economic Management College, section chief in accounting section of financial department from Zhejiang Gongshang University, General Manager in Planning and Finance Department and HR Manager of New China Life Insurance Co., Ltd.Zhejiang Branch, Executive Vice President of Zhejiang Zhongye Holdings Group Co., Ltd., CEO of Daodao Group Co., Ltd., and Deputy General Manager and Chief Financial Officer of Zhejiang Arch of Triumph Macao Doulao Holding Group Co., Ltd. She was special professional ethos supervisor in Zhejiang Provincial Office,SAT, CPPCC member in West Lake District, and Special Auditor of Audit Bureau in West Lake District. In April 1997, she obtained qualification of National Registered Accountant, and she was chosen as senior accountant by domestic Ministry of Trade in December, 1997. On May 18, 2016, she was elected as the seventh Board of Directors Independent Director of the company. Mr Ma Lihong, born in October 1953, as professor, got management PhD from Fudan University. He worked in Hohhot No.3 Middle School in Inner Mongolia, county party committee propaganda department of huangyan in Zhejiang Province, and Zhejiang Administration College. He worked as the chief of teaching and research section in Zhejiang Administration College, Deputy Inspector in Party School of Zhejiang Provincial Committee of CPC, and Vice Dean of Zhejiang Administration College. He was Vice President of Zhejiang Social Science League, subject review group expert in National Social Science Fund, and he was approved to share special allowance of the State Council in 2010. He repeatedly was responsible to hold national social science fund project and important social sciences issues in Zhejiang Province. On May 18, 2016, she was elected as the
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report seventh Board of Directors Independent Director of the company.
Mr Gu Xinjian, born in July 1956, was doctor of engineering, as a professor in Modern Manufacturing Technology Research Institute of Zhejiang University, and a doctoral supervisor. He was the Deputy Director in Center for Innovation Management and Sustainable Competitiveness of Zhejiang University, and Director of Patents And Standards Strategic Institute. He was as assistant engineer in Ministry of Electronics Industry 1051 Institute from January, 1982 to September, 1984. From August, 1987 until now, he devoted himself to research and education work in Mechanical Engineering Department of Zhejiang University, primarily engaged in researching manufacturing informatization, enterprise modeling, networked manufacturing, advanced manufacturing systems mode, and mechanical manufacturing systems engineering. On May 18, 2016, he was elected as the seventh Board of Directors Independent Director of the company.
(II) The Supervisors
Mr. Li Shijie, born in July 1969, CCP member, university graduate, certified senior engineer. head of supplying department of the Company, general manager and chief secretary of CCP committee of Hangzhou Steam Turbine Auxiliary Machinery Co., Ltd. Currentlyhe’s the vice chief secretary of CCP committee and chief secretary of discipline committee of Hangzhou Steam Turbine Power Group Co., Ltd. Currentlyhe’s the Chairman of the 6th term of Supervisory Committee. He was elected as Chairman of the 7th term of Supervisory Committee on May 18, 2016.
Mr. Wang Xiaohui, born in December 1967, CCP member, university degree, certified senior accountant, certified taxation accountant, certified internal auditor. External Chief Finance Officer of Hangzhou State-owned Property; Chief Accountant and Director of Accounting Dept. of Hangzhou Dongfeng Shipyard Co., Ltd. Currentlyhe’s the vice director of Accounting Dept. of Hangzhou Steam Turbine Power Group Co., Ltd. Currentlyhe’s the supervisor of the 6th term of Supervisory Committee. She was elected as supervisor of the 7th term of Supervisory Committee on May 18, 2016.
Mr. Liu Zhiyong, born in January 1960, member of the Communist Party of China, university degree, senior engineer, deputy secretary of the company Commission for Discipline Inspection. He served as Director of the Office of the Chief Engineer of the Company, Deputy Director of the Second Automobile Workshop, Director of the Integrated Management Department and Secretary of the Comprehensive Party Branch. June 2014 as the company blade factory director, leaf party branch secretary. He was elected as supervisor of the 7th term of Supervisory Committee on June 30, 2017.
Mr. Lu Jianhua, born in March 1962, CCP member, university graduate. Once he was the clerk and office manager of the Trade Union, elected vice chairman of the Trade Union and supervisor; He assumedemployees’ supervisor for the 3rd, 4th, and 5th term of the Supervisory Committee. He was elected as supervisor of the 7th term of Supervisory Committee on May 12, 2016.
Mr. Fang Yin, born in December 1962, CCP member, senior engineer, master degree. Graduated from Zhejiang University of Industry in February 1982, and started working in technical area in Hangzhou Steam Turbine Co., Ltd. (former Hangzhou Steam Turbine Factory); Since September 1988, he has been working onR&D in the Industrial Turbine Research Institute of the Company; Mr. Fang was elected supervisor of the 6th term of Supervisory Committee by theEmployees’ Congress on February 28, 2013. He was elected as supervisor of the 7th term of Supervisory Committee on May 12, 2016.
(III) Senior Executives
Profiles of General Manager Ye Zhong, secretary of the board Wang Gang and Deputy General Manager ,Chief Engineer are available among the directors above.
Mr. Li Jiansheng,born January 1963, CCP member, master of engineering, certified senior engineer of professor level.Mr. Li started working for the Company in February 1982. He has been in the positions of chief of No.4 section, vice head of the Institution, and vice head of the Industrial Turbine Institute. He has been the assistant of Deputy general manager and head of production unit of Hangzhou Steam Turbine Co., Ltd. Mr. Li was engaged the Deputy general manager of the Company since December 2014.
Mr. Wang Zhengrong, born in October 1970, member of the Communist Party of China, university degree, Bachelor of Engineering, Zhejiang University, senior engineer. In 1992 to enter the company work, served as deputy director of the company sales, director, marketing party branch secretary. Since March 2010, he has been a member of the Party Committee of the Company. He has been Assistant General Manager of the Company and
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Director of Steam Turbine Marketing since June 2015. Mr. Wang was engaged the Deputy general manager of the Company since June 2017.
Mr. Zhao Jiamao, born in March 1975, member of the Communist Party of China, university degree, certified public accountant and senior accountant. He joined Hangzhou Steam Turbine Power Group Co., Ltd. Finance Office in 1995 and was once the Vice Minister of Finance of Hangzhou Steam Turbine Power Group Co., Ltd., Chief Accountant, Deputy General Manager and General Manager of Hangzhou Steam Turbine Power Technology Co., Ltd. In December 2014, he was the Deputy Chief Accountant and Chief Financial Officer of the Company. Since March 2016, he has been the General Manager Assistant, the Director of Asset Management Department and the Finance Department and the Contract Department. Mr. Zhao was engaged the Deputy general manager and Chief accountang of the Company since January 2018.
Jobs taken in shareholding parties
|||||||
|-|-|-|-|-|-|
||||||Take|
||||||remunerations|
|||||Job||
|Names|Name of the shareholder|Job taken|Job started||from the|
|||||ended||
||||||shareholding|
||||||party|
|||Chief secretary of CCP,||||
||Hangzhou Steam Turbine Power|Chairman, Legal|September 28,2017||Yes|
|Zheng Bin||||||
||Group Co., Ltd.|||||
|||Representative||||
|||Commissioner of CCP, Vice||||
|Yang|Hangzhou Steam Turbine Power||May 1,2013||Yes|
|Yongming|Group Co., Ltd.|GM||||
|||Secretary of the Boardof||||
|||directors, Director of staff,||||
|Li Guiwen|Hangzhou Steam Turbine Power||August 1,2007||Yes|
||Group Co., Ltd.|Director of strategic||||
|||Development Dept.||||
|Ye Zhong|Hangzhou Steam Turbine Power|CCP Commissioner, director|May 1,2001||No|
||Group Co., Ltd.|||||
|||Vice Secretary of CCP||||
|||Commission, Secretary of||||
||Hangzhou Steam Turbine Power|Discipline Committee, Vice|May 1,2013||Yes|
|Li Shijie||||||
||Group Co., Ltd.|Chairman of Supervisory||||
|||Committee, Chairman of Trade||||
|||Union||||
|Wang||||||
||Hangzhou Steam Turbine Power|Director of financial|September 22,2014||Yes|
|Xiaohui|Group Co., Ltd.|department||||

Jobs taken in other parties
|||||||
|-|-|-|-|-|-|
||||||Take|
|Names|Name of the parties|Positions|Job started|Job ended|remunerations|
||||||from the party|
|Zheng Bin|Hangzhou Relian Group Co., Ltd.|Chairman, Legal|September 28,2017|February 18,2019|No|
|||representative||||
|Zheng Bin|Bank of Hangzhou Co., Ltd.|Director|February 10,2017||No|
|Yang||||||
||Hangzhou Relian Group Co., Ltd.|Director|May 1,2013|February 18,2019|No|
|Yongming||||||
|Yang|Hangzhou Steam Turbine Auto Sales|Chairman, Legal||||
||||June 29,2017||No|
|Yongming|service Co., Ltd.|representative||||
|Yang||||||
||Guangdong Huaxing Bank Co., Ltd.|Director|September 28,2017||No|
|Yongming||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||||
|-|-|-|-|-|-|
||Hangzhou Wandong Electronics Co.,|Chairman, Legal||||
|Li Guiwen|||December 1,2014||No|
||Ltd.|representative||||
||Hangzhou Steam Turbine Engineering|||||
|Li Guiwen||Director|September 1,2009||No|
||Co., Ltd.|||||
||Hangzhou Steam Turbine Investment|||||
|Li Guiwen||Chairman|December 1,2014|February 18,2019|No|
||Co., Ltd.|||||
|Li Guiwen|Hangzhou Relian Group Co., Ltd.|Director|May 1,2015|February 18,2019|No|
||Hangzhou Zhongneng Steam Turbine|Chairman, Legal||||
|Ye Zhong|||February 1,2010||No|
||Power Co., Ltd.|representative||||
||Hangzhou Steam Turbine Engineering|Chairman, Legal||||
|Ye Zhong|||December 23,2014||No|
||Co., Ltd.|representative||||
|Wang|Hangzhou Zhongneng Steam Turbine|||||
|||Supervisor|June 21,2017||No|
|Gang|Power Co., Ltd.|||||
|Wang|Hangzhou Steam Turbine Casting|||||
|||Director|June 21,2017||No|
|Gang|Co.,ltd.|||||
|Kong|Zhejiang Steam Turbine Packaged|Chairman, Legal||||
||||June 21,2017||No|
|Jianqiang|Technology Development Co., Ltd.|representative||||
|Kong|Hangzhou Steam Turbine Auxiliary|||||
|||Chairman, Legal||||
||||June 21,2017||No|
|Jianqiang|Machine Co., Ltd.|representative||||
|Kong|Hangzhou Guoneng Steam Turbine|||||
|||Chairman, Legal||||
||||June 21,2017||No|
|Jianqiang|Engineering Co., Ltd.|representative||||
|Chen||Independent||||
||Zheshang Development Co., Ltd.||April 29,2016||Yes|
|Danhong||director||||
|Chen||||||
|||Independent||||
||Huijishan Shaoxing Wine Co., Ltd.||September 27,2016||Yes|
|Danhong||director||||
|Chen||||||
|||Independent||||
||Hangzhou Electric Cable Co., ltd.||April 19,2017||Yes|
|Danhong||director||||
|||Professor,||||
||Zhejiang University. Institute of modern|||||
|Gu Xinjian||Supervisor of a|December 1,1999||Yes|
||manufacturing engineering|||||
|||ph.D Student||||
|Zhang||||||
||Beijing Kangda（Hangzhou）Law Firm|Partner|May 1,2012||Yes|
|Xiaoyan||||||
|||Chairman of the||||
|Li Shijie|Hangzhou Relian Group Co., Ltd.|Supervisory|May 1,2013|February 18,2019|No|
|||Committee||||
|Wang|Hangzhou Nanfangtongda Gears Co.,|||||
|||Supervisor|April 1,2009|April 17,2018|No|
|Xiaohui|Ltd.|||||
|Wang|Hangzhou Xiangjiang Technology|||||
|||Supervisor|June 29,2017||No|
|Xiaohui|Co.,Ltd.|||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
|Wang|Zhejiang Steam Turbine Packaged||||
|||Supervisor|January 1,2015|No|
|Xiaohui|Technology Development Co., Ltd.||||
|Liu|Zhejiang Steam Turbine Packaged||||
|||Supervisor|June 21,2017|No|
|Zhiyong|Technology Development Co., Ltd.||||
|Liu|Hangzhou Steam Turbine Heavy||||
|||Supervisor|June 21,2017|No|
|Zhiyong|Industry Co., Ltd.||||
|Li|Hangzhou Steam Turbine Auxiliary||||
|||Director|April 3,2014|No|
|Jianshang|Machine Co., Ltd.||||
|Li|Hangzhou Steam Turbine Casting Co.,||||
|||Director|July 15,2014|No|
|Jiansheng|Ltd.||||
|||Legal|||
|Li|Hangzhou Steam Turbine Heavy|representative,|||
||||June 21,2017|No|
|Jiansheng|Industry Co., Ltd.|executive|||
|||director|||
|Wang|Hangzhou Steam Turbine Machinery &|Chairman, Legal|||
||||June 21,2017|No|
|Zhengrong|Equipment Co., Ltd.|representative|||
|Wang|Hangzhou Zhongneng Steam Turbine||||
|||Director|July 1,2013|No|
|Zhengrong|Power Co., Ltd.||||
|||Legal|||
|Wang|Zhejiang Turbine Import & Export Co.,|representative,|||
||||April 3,2014|No|
|Zhengrong|Ltd.|executive|||
|||director|||
|Zhao|Zhejiang Steam Turbine Packaged||||
|||Director|March 12,2018|No|
|Jiamao|Technology Development Co., Ltd.||||
|Zhao|Hangzhou Steam Turbine Casting Co.,||||
|||Director|June 21,2017|No|
|Jiamao|Ltd.||||
|Zhao|Hangzhou Zhongneng Steam Turbine||||
|||Director|March 12,2018|No|
|Jiamao|Power Co., Ltd.||||
|Zhao|||||
||（India）Gelin Shaoer Power Installation||||
|||Director|March 12,2018|No|
|Jiamao|Privately Co., Ltd.||||

Punishments to the current and leaving board directors, supervisors and senior managers during the report period by securities regulators in the recent three years
Not applicable
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report IV. Remuneration to directors, supervisors and senior executives in the reporting period
Decision-making procedures, basis for determination and actual payment of the remuneration to directors , supervisors and senior executives
1. Decision-making and basis of remunerations to directors, supervisors, and executives
The 4th meeting of the 7th Remuneration Committee was held on March 18, 2019. The remuneration plan for directors and executives was examined at the meeting. The Remuneration and Assessment Committee of the Board conducted assessment on the performances of the directors and executives, and the remuneration plan was produced according to the Administration Rules of Remuneration and Assessment of Directors of the 7th Term of Board andExecutives（2016-2018）. The plan is subject to examination of the 31th meeting of the 7th term of Board.
Allowances for independent directors and supervisors are subject to approval by the Board and theShareholders’ Meeting thereafter. The proposal of allowances for the 7th term of independent directors and supervisors was adopted at the 1st ProvisionalShareholders’ Meeting held on December 28, 2016, and the allowance for independent directors is RMB150 thousand (tax included) per year, while it is RMB36,000 for supervisors for the period of three years (tax included). Non employee supervisors do not enjoy the allowance
2. Actual payment
Basic wages are prepaid on monthly basis and the overall remunerations are paid upon completion of the annual assessment. Allowances for independent directors and supervisors are paid according to the scheme approved by theShareholders’ Meeting.
Remuneration of directors, supervisors, and executives in the report period
In RMB 10,000
||||||||
|-|-|-|-|-|-|-|
||||||Total of reward||
|||||||Actual reward in|
||||||from the||
|Name|Position|Sex|Age|Statue of duty||total at end of|
||||||Company(Pre-tax||
|||||||report term|
||||||)||
|Zheng Bin|Chairman|Male|54|In Office|0|Yes|
|Yang|||||||
||Vice Chairman|Male|54|In Office|0|Yes|
|Yongming|||||||
|Ye Zhong|Director, GM|Male|50|In Office|118.09|No|
|Wang Gang|Director, secretary of the board|Male|46|In Office|78.17|No|
|Kong|Director, Deputy GM, Chief||||||
|||Male|48|In Office|82.02|No|
|Jianqiang|engineer||||||
|Ma Lihong|Independent Director|Male|65|In Office|0|No|
|Gu Xinjian|Independent Director|Male|62|In Office|15|No|
|Chen|||||||
||Independent Director|Male|54|In Office|15|No|
|Danhong|||||||
|Zhang|||||||
||Independent Director|Female|46|In Office|15|No|
|Xiaoyan|||||||
||Chairman of the Supervisory||||||
|Li Shijie||Male|48|In Office|0|Yes|
||Committee||||||
|Wang|||||||
||Supervisor|Male|51|In Office|0|Yes|
|Xiaohui|||||||
|Liu Zhiyong|Supervisor|Male|58|In Office|59.55|No|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||||
|-|-|-|-|-|-|-|
|Lu Jianhua|Employee Supervisor|Male|57|In Office|36.34|No|
|Fang Yin|Employee Supervisor|Male|56|In Office|31.34|No|
|Li Jiansheng|Deputy GM|Male|55|In Office|81.43|No|
|Wang|||||||
||Deputy GM,|Male|48|In Office|77.01|No|
|Zhengrong|||||||
||Deputy General Manger, Chief||||||
|Zhao Jiamao||Male|44|In Office|70.21|No|
||accounantant||||||
|Yan Jinhua|Vice Chairman|Male|60|Dimission||Yes|
|Zhang Shutan|Deputy General Manager|Male|60|Dimission|60.18|No|
|Total|--|--|--|--|739.34|--|

Incentive equity to directors, supervisors or/and senior executives in the reporting period
Not applicable
V. Particulars about employees.
1.Number of staff, professional structure and educational background
||||
|-|-|-|
|Number of in-service staff of the parent company(person)||2,270|
|Number of in-service staff of the main subsidiaries(person)||1,393|
|The total number of the in-service staff(person)||3,663|
|The total number of staff receiving remuneration in the current period(person)||3,663|
|Retired staff with charges paid by the parent company and main subsidiaries|||
|||0|
|(person)|||
|Professional|||
|Category||Number of persons（person）|
|Production||2,070|
|Sales||434|
|Tech||650|
|Finance||64|
|Administration||445|
|Total||3,663|
|Education|||
|Category|Number of persons（person）||
|Master’s Degree|204||
|Bachelor|1,224||
|College diploma|688||
|High school and below|1,547||
|Total|3,663||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 2.Particulars about the employees:
Under the premise of considering the annual benefit, with the level of competition, the ability to pay of enterprises, price levels and other factors, in 2018 the company adequate remuneration be adjusted according to the value of the unpaid position, according to the performance of the performance fee, adhere to labor distribution, taking into account efficiency and equity, the maximum level of protection of the interests of employees, to achieve a win-win business and employees. Company on a monthly basis, full and timely payment of wages, overtime pay in accordance with national regulations, on a monthly basis.
3. Educational training for employees:
In 2018, the staff education and training work strived for realize the goal of “Talents invigorate enterprises”, and set the work objectives of training and optimizing the “the three teams namely the management team, the professional and technical personnel team and the high-skilled personnel team”, and upon combining with thecompany’s strategic goals and the departmental performance targets and theemployees’ development goals, it well did the annual training work, formulated the “2018 Company Education and training Plan”, implemented various training programs in an orderly manner as required, continuously improved the staff's business level and comprehensive capabilities and made contributions to thecompany’s stable operation. In terms of the funding, the company drew2.5% of the total salary as the staff education fund, which effectively guaranteed the expenditure of the training program. According to statistics, 169 training classes were held in 2018, the person-time of staff received trainings reached 5,170. For 2019, the company plans to carry out 151 training programs in aspects of management, engineering technology, operation skills, quality, environment and safety education.
4. Outsourcing situation
Not applicable
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report IX. Administrative structure
I. General situation
1 .Standardized operation of corporate governance structure
In accordance with the "company law" provisions, The Company has its executive, decision making and supervisory bodies operated strictly according to the Articles of Association,Shareholders’ Meeting Criteria, Board Meeting Criteria, and Supervisory Committee Criteria. Meetings were held by legal procedures, Corporate governance in accordance with the relevant provisions of the laws and regulations of China Securities Regulatory Commission and the Shenzhen Stock Exchange.
2. Effectiveness of organization
The Board of Directors is the executive body of the decisions made by theShareholders’ Meeting. The Board is also responsible to establish and improve the internal control system of the Company, and make it works effectively. Chairman of the Board is the caller of the Board. Strategy, Investment, Remuneration, and Auditing Committees were established within the Board, and were supporting the decision-making of the Board. The Supervisory Committee is responsible to report to theShareholders’ Meeting and supervise the legal performance of duties of directors, managers, and executives. The management is responsible to the Board, and take charge of daily operation of the Company. Functional departments were deployed according to the needs of business with clear responsibilities.
3. Basis for material decisions
The Company has setup practical rules for all material aspects of management, including but not limited to, external investment, trusteeship, related transactions, information disclosure,investors’ relationship, information insider, executive shares, and management of controlled subsidiaries. These documents of rules were constantly revised and improved to maintain effectiveness upon changing situation.
In the report period, the Company adjusted the limit of authorization for financial management delegated by the Board of Directors and General Meeting of Shareholders and revised relevant terms in Financial Management Agent Management System (revised in 2016) to further meet the need for efficiency of use of funds while giving a consideration to the need for risk control in asset management to ensure that incomes and risks are under control. In the corresponding period, Measures for Management of Share Holding of Directors, Supervisors and Senior Executives and Variation (revised in 2018) was revised subject to Company Law, Securities Law, Rules for Management of Directors, Supervisors and Senior Executives of Listed Companies Holding Shares of Their Own Companies and Variation of China Securities Regulatory Commission (hereinafter referred to as CSRC), Some Regulations on Directors, Supervisors and Senior Executives of Listed Companies Reducing Shares of CSRC, Rules for Implementation of Shareholders, Directors, Supervisors and Senior Executives of Listed Companies Reducing Shares of Shenzhen Stock Exchange, Business Guide to Management of Share Holding of Directors, Supervisors and Senior Executives of Listed Companies and Variation of Shenzhen Stock Exchange and other laws,
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report regulations departmental regulations and regulatory documents and in conjunction with Company's Articles of Association and relevant provisions of the Company to tighten management of directors, supervisors and senior executives of the Company holding shares of the Company and variation, standardize directors and supervisors buying and selling shares of the Company and derivative products at a high price and further give a clarity to operating procedures and liabilities for violation.
4. Establishing of internal control system
The Company kept close observation on the whole business process identifying risk points according to Enterprise Internal Control Standards, Internal Control Guidelines, Internal Assessment Guidelines, and Internal Control Guidelines for PLCs issued by Shenzhen Stock Exchange. Effective mechanisms on risk control and internal auditing were conducted. The Auditing Committee of the Board was responsible to supervise the internal control practices.
5.Corporate Information Disclosure and Transparency
The company attaches great importance to the information disclosure and the investor relations management, and it has designated Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn as its statutory information disclosure media and website. With fair treatment to all investors, the company in a timely manner discloses the information with truthfulness, accuracy and completeness, which well ensures the transparency of the company and the legitimate rights and interests of all shareholders. Does there exist any difference in compliance with the corporate governance , the PRC Company Law and the relevant provisions of CSRC,
There exist no difference in compliance with the corporate governance , the PRC Company Law and the relevant provisions of CSRC.
II. Independence and Completeness in business, personnel , assets, organization and finance
The Company kept independence and separated with holding shareholders on the aspects of business, human resource, capital, organization, and accounting. And the Company established independent and complete business operating systems.
1. On business operations
TheCompany’s majors of design, manufacture, sale business of industrial steam turbine was independent from the holding company (Hangzhou Steam Turbine Power Group). The controlling shareholder in the subsidiary engineering company to undertake the projectin，Some of the holding subsidiaries of the Group are selling theCompany’s steam turbine products and spare parts, which are at market prices; The Company and the Group are not sharing any office site.
2. On personnel management
The Company kept independence with the holding shareholders on the aspects of human resource and remuneration management. Although theCompany’s chairman of the Board and the vice chairman of the Board were part-time by the parentcompany’s (Hang Steam Turbine Group) chairman of the Board and the vice chairman of the Board; theCompany’s management was employed and gotten salary exclusively in the Company instead of any management duty in the holding-share share holders except the duty of chairman of the Board. TheCompany’s accountant shad no part-time job in their parent company or related companies.
3. On capital operation
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report The property relationship between the Company and the holding-share shareholders was clear and explicit. The capital and business injected by the holding-share shareholders was independent and complete. And at the same time, the Company owned system of manufacturing and operation, sale, accessorial manufacturing and relevant equipments which independent from holding shareholder.
4. On organization structure
The Company kept total independence from the controlling shareholder on the organization configuration. The Company owned separate and independent manufacturing, supplying, and sales system, there was no horizontal competition with the controlling shareholder, and the Company owned independent management and operation systems. The Company signed related trading agreements with the subsidiaries of the share-holding company. TheCompany’s intermediate managers are employed by theCompany’s executives, and was evaluated under the economic responsibility system.
5. On accounting management
The Company had independent accounting department, and established independent account re-calculation system and accounting system; the Company also had the regulated and independent finance management on the share-holding and subsidiaries; the Company had independent finance policies and bank account and its tax, there was no joint account with controlling shareholder.
6. In legal aspect
Department of Securities and Law– the special legal department was founded in the report term, and performs duties according to Administration Rules for Legal Consultancy to State-owned Enterprises. Along with Zhejiang Tianche Law Firm– the public legal consultancy employed by the Company, the Department aims to regulate the legal affairs and day-to-day administrations .
III. Competition situations of the industry
Not applicable
IV. Annual General Meeting and ExtraordinaryShareholders’ Meetings in the Reporting Period
1.Annual General Meeting
|||||||
|-|-|-|-|-|-|
|||Investor||||
|Sessions|Type|participation|Meeting Date|Disclosure date|Disclosure index|
|||ratio||||
||||||Resolutions of the Shareholders’|
||||||Annual Meeting 2017|
|2017||||||
||||||(Announcement No. 2018-36)|
|Shareholders’|Shareholders’|||||
|||69.46%|April 26,2018|April 27,2018|released by Securities Times,|
|general|Meetin|||||
||||||Shanghai Securities Daily, Hong|
|meeting||||||
||||||Kong Commercial Daily, and|
||||||Http://www.cninfo.com.cn|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||||
|-|-|-|-|-|-|
||||||Resolutions of the 1st Provisioanal|
||||||Shareholders’ Annual Meeting 2018|
|1st||||||
|Provisional|Provisional||||(Announcement No. 2018-54)|
|Shareholders’|Shareholders’|72.34%|July 20,2018|July 21,2018|released by Securities Times,|
|Meeting 2018|Meetin||||Shanghai Securities Daily, Hong|
||||||Kong Commercial Daily, and|
||||||Http://www.cninfo.com.cn|

2. Request for extraordinary general meeting by preferred stockholders whose voting rights restore
Not applicable
V. Responsibility performance of independent directors in report period
1. The attending of independent directors to board meetings andshareholders’ general meeting
|||||||||
|-|-|-|-|-|-|-|-|
|The attending of independent directors||||||||
||Number of|||||Failure to|Number of|
||||Number of|||||
||Board meetings|Number of||Number of|Number|personally attend||
||||||||attendance at|
|Independent|||meetings attended|||||
||necessary to be|spot||attendances by|of|board meetings||
|Directors|||by||||general meetings|
||attended in the|attendances||representative|absence|successively twice||
||||Communication|||||
||||||||of shareholders|
||reporting period|||||(Yes/No)||
|Zhang||||||||
||10|4|6|0|0|No|2|
|Xiaoyan||||||||
|Ma Lihong|10|4|6|0|0|No|2|
|Gu Xinjian|10|4|6|0|0|No|2|
|Chen Danhong|10|4|6|0|0|No|2|

2.Objection of independent directors on some relevant issues
Independent directors proposed no objection against the relevant matters in the reporting period.
3. Other statement for performance of independent directors
Adoption of suggestion proposed by independent directors
Yes
Statement for suggestion adopted or not by the Company
(1) The independent directors debriefed the managers about the business condition in 2017, and suggested the Company to enhance communication with government sectors and to obtain government subsidy support from the research and development of products. the independent directors suggested the Company to coordinate the
product structure and constantly improve the gas turbine business, to seize the market strategic position and
actively expand the international market, to control the risk in contracts and intensify the collection for receivables,
to strengthen the salary management and performance assessment as well as enhancing staffs andadministrators’
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report initiative.
(2) At the 1st communication meeting between the independent directors and the accounting firm, the independent directors debriefed the accounting firm, and suggested the Company to attach importance to the recovery of receivables and the inventory of units to grasp risks.
(3)At the 2nd communication meeting between the independent directors and the accounting firm,the independent directors suggested the Company to confirm revenue recognition principle and keep the precautionary principle as always, to respond risks for partial suspended projects, to keep the the construction progress of important issues up with the market condition changes, and to actively disclose relevant information to minority shareholders and maintain their interests
(4) It was recognized at the third meeting of the seventh Compensation Committee that the Company's directors and senior executives performed their duties diligently and made significant contribution to the Company's business development during their tenure, hence greater compensation assessment incentive should be given and compensation should be increased to create an effective incentive. Since the State-owned Assets Supervision and Administration Commission has restrictions on compensation assessment on directors and senior executives of state-owned enterprises, an adjustment shall be done to the compensation proposal for directors and senior executives of the Company subject to corresponding reference standards.
(5) At the meeting of the Board of Directors on deliberation of routine related transactions of the Company, independent directors advised the Company to sort out related transactions and enhance communication with minority shareholders for holding that the Company has legitimate deliberation procedures for deliberation of routine related transactions.
The management accepted the above suggestions.
VI. Fulfilling of duties by the Special Committees under the Board of Directors
(I) The Auditing Committee
The Auditing Committee was performing its duties strictly according to the Working Criteria of Auditing Committee and was mainly in charge of supervising, verification and communication of internal and external auditing works. It was also performing the duties to satisfy the requirement of China Securities Regulatory Commission as well as Shenzhen Stock Exchange. In the report period, the Company adjusted the composition of the Auditing Committee and its members in the report period, and the main works performed by the Auditing Committee were:
1. To call the 3rd meeting of the 7th term of Auditing Committee at which the annual auditing work was discussed and suggestions were provided on problems in the auditing process.
2. The 4th meeting of the 7th term of Auditing Committee was held to examine the Annual Report 2017, the GeneralManager’s Report, Financial Report, Dividend Plan, Proposal of Routine Related Transactions, Providing of Inventory Provision and Bad Debt Provision, Internal Control Manual, Internal Control Introspective Report, Internal Control Annual Report and Plan. Statements and were provided on the auditing works of the CPA, and opinions were issued about extending of theCPA’s service. Improvement suggestions were provided on internal control. Opinions were provided on the Annual Report and Financial Report which were about to be submitted to the Board.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report (II) The Remuneration and Assessment Committee
The Remuneration and Assessment Committee was established to set up standard for assessing the performance and deciding the remuneration of the directors and executives. Detailed plans were produced and submitted to the Board. In the report period, the Board refined the composition of the Remuneration Committee according to the composition of the new term of Board. The Committee conducted the following works in the report period: 1.The 3rd meeting of the 7th term of Remuneration and Assessment Committee was held to examine the assessment outcome of the directors and executives for year 2017, and produced the remuneration plan for the examination of the Board.
VII. Fulfilling of duties of the Supervisory Committee
Is there any risk in the supervisory activities of the board of supervisors during the reporting period
Nol
No disagreement with supervisory issues by the Supervisory Committee during the report period.
VIII. Assessment and incentive Mechanism for Senior executives
The Company adopts the annual remuneration scheme for directors (excluding independent directors) and senior executives (including Chairman of the Supervisory Committee) which is a combination of basic wages and performance wages. According to the “Remuneration and Assessment Scheme for the 5th term of the 7th term of Board and the 1stshareholders’ provisional meeting 2016(2016-2018), the Remuneration& Assessment Committee is responsible to assess the performances of the directors and senior executives according to stipulated procedures. Directors and senior executives are scored and assessed one after another and comes out with a plan subject to approval of the Board and theShareholders’ Meeting. Basic wages are distributed on monthly basis and the overall remunerations are paid upon completion of the annual assessment.
In the report term, the Directors (exclude independent directors) and senior executives (including the Chairman of Supervisory Committee) are scored and assessed one after another and comes out with a plan decided by the 2nd meeting of the 7th term of Remuneration Committee, which was subject to approval of the Board.
The Assessment and Remuneration Scheme was produced through legal procedures and has been monitoring and motivating the directors and senior executives.
The Companyhadn’t conducted any share incentive program to any directors or senior executives as of the end of report period.
IX. Internal control situations
1. Major problems in internal control discovered in the report period
No
2. Self-evaluation report on internal control
|||
|-|-|
|Disclosure date of appraisal report on internal control|March 29,2019|
||Disclosed by http://www.cninfo.com.cn dated March 29, 2019 (Announcement|
|Disclosure index of appraisal report on internal control||
||2019- )|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|Proportion of total unit assets covered by appraisal in||||
|the total assets of the consolidated financial statements||100.00%||
|of the company||||
|Proportion of total unit incomes covered by appraisal in||||
|the total business incomes of the consolidated financial||100.00%||
|statements of the company||||
|Standards of Defects Evaluation||||
|Type|Financial Report||Non-financial Report|
||Deficiency characterized as below will be treated||(1) Punishment received by governments|
||as fatal defects: To correct the fatal errors already||below provincial level ( including provincial|
||published in the financial report （except for the||level) but no negative effects for our|
||retrospection and adjustments of previous years||company’s periodic report disclosure will|
||because of policies changing and other objective||be considered as a general deficiency; (2) or|
||factors changing);fatal errors already discovered||punishments from national governments|
||by auditor, unidentified in the current financial||above provincial level but no negative|
|Standard||||
||report; any fraud among top management; invalid||effects for our company’s periodic report|
||monitoring to the financial report from audit||disclosure will be considered as a significant|
||committee and internal audit department.||deficiency; (3) external official disclosure|
||||has been already carried out and brought|
||||certain negative effects to our company’s|
||||periodic report disclosure will be considered|
||||as a fatal deficiency.|
||In accordance with the degree of importance of||1) Losses < consolidating 3% of pre-tax|
||deficiency that may cause financial report||profit, will be asserted as general|
||errors, our company defined quantitative||deficiencies; (2) 3% of combined pre-tax|
||identification standard of financial report internal||profit ≤ losses < 5% of combined pre-tax|
||deficiency control as per the average of the last||profit, will be asserted as significant|
||three-year total profit. (1) errors reported||deficiencies; (3) losses ≥5% of combined|
|Standards of Quantization||||
||indicator < 3% of total profit, will be asserted as||pre-tax profit, will be asserted as fatal|
||general deficiencies; (2) 3% of total profit ≤||deficiencies.|
||errors reported indicator < 5% of total profit, will|||
||be asserted as significant deficiencies; (3) errors|||
||reported indicator ≥ 5% of total profit, will be|||
||asserted as fatal deficiencies.|||
|Number of major defects in financial||||
||0|||
|reporting（a）||||
|Number of major defects in non||||
||0|||
|financial reporting (a)||||
|Number of important defects in||||
||0|||
|financial reporting（a）||||
|Number of important defects in non||||
||0|||
|financial reporting（a）||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report X. Internal Control audit report
|||
|-|-|
|Review opinions in the internal control audit report||
|As far as our best understanding, Hangzhou Steam Turbine Co., Ltd. has been conducting effective internal control over its financial||
|reporting system in all material aspects we observed as of December 31, 2018, and has been following with the Enterprise Internal||
|Control Criteria.||
|Disclosure of internal audit report|Disclosure|
|Disclosure date of audit report||
||March 29,2019|
|of internal control (full-text)||
||Disclosed by http://www.cninfo.com.cn dated March 29, 2019 (Announcement No.|
|Index of audit report of||
|internal control (full-text)|2019-22 )|
|Internal audit report’s opinion|Unqualified audit opinion|
|Non-financial reporting the existence of significant||
||No|
|deficiencies||

Has the CPAs issued a qualifiedauditor’s report of internal control .
No
Does the internal control audit report issued by the CPAs agree with the self-assessment report of the Board of Directors
Yes
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report X. Corporation bonds
Whether or not the Company public offering corporation bonds in stock exchange, which undue or without payment in full at maturity on the approval date for annual report disclosed
No
XI. Financial Report
I. Audit report
|||
|-|-|
|Type of audit opinion|Standard Unqualified opinion|
|Date of signing this report|March 27,2019|
||Pan-China Certified Public Accountants (Special common|
|Name of audit firm||
||partnership)|
||Tian Jian Shen No.〔2019〕1468|
|Reference number of auditor's report||
|Name of the certified public accounts|Jiang Xiaodong ,Ye Xianbin|

Auditors’ Report
To the entire shareholders of Hangzhou Steam Turbine Co., Ltd.
I. Opinion
We have audited the financial statements of Hangzhou Steam Turbine Co., Ltd..(hereinafter referred to as "the Company"), which comprise the balance sheet as at December 31, 2018, and the income statement, the statement of cash flows and the statement of changes in owners' equity for the year then ended and notes to the financial statements.
In our opinion, the attached financial statements are prepared, in all material respects, in accordance with Accounting Standards for Business Enterprises and present fairly the financial position of the Company as at December 31, 2018 and its operating results and cash flows for the year then ended.
II. Basis for Our Opinion
We conducted our audit in accordance with the Auditing Standards for Certified Public Accountants in China. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. According to the Code of Ethics for Chinese CPA, we are independent of the Company in accordance with the Code of Ethics for Chinese CPA and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
III. Key Audit Matters
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
(1) Recognition of income
Description of the matter
For details of the relevant information disclosure, please refer to Note III (21), Note V (2) 1 and Note XII (1) in the financial statements.
The operating income of Hangzhou Steam Turbine Co., Ltd. mainly comes from the production and sales of industrial steam turbines and other products. In 2018, the amount of operating income items shown in the consolidated financial statements of Hangzhou Steam Turbine Co., Ltd. was RMB 4,642,807,589.69, of which the operating income of the industrial steam turbine business was RMB 3,745,445,441.72, accounting for80.67% of the operating income.
According to the sales contract of Hangzhou Steam Turbine Co., Ltd. and its customers, where the domestic-sales products have been delivered and the receipts confirmed by the purchaser have been obtained, and where the related products for export have been declared for export and the export goods declaration and freight bill of lading have been obtained treated as the major risk and reward transfer timing point of the ownership of the goods, and where the economic benefits related to the transaction are likely to flow into the Company with the relevant costs can be reliably measured, then the realization of income is recognized.
As the operating income is one of the key performance indicators of Hangzhou Steam Turbine Co., there may be inherent risks that management may achieve a specific goal or expectation through inappropriate revenue recognition. Therefore, we identify the revenue recognition as a key audit matter.
2. Audit Countermeasures
For revenue recognition, the audit procedures we have implemented mainly include:
(1) Understand key internal controls related to revenue recognition, evaluate the design of these controls, determine whether they are implemented, and test the operational effectiveness of relevant internal controls; (2) Examine the main sales contracts, identify the terms related to the main risks and rewards of transfer of ownership of the goods, and evaluate whether the revenue recognition policies are in compliance with the Accounting Standards for Business Enterprises;
(3) Implementing substantive analysis procedures for operating income and gross profit margin according to products and customers to identify whether there are material or abnormal fluctuations, and to identify the causes of such fluctuations;
(4) For domestic sales income, by sampling method check the supporting documents related to revenue recognition, including sales contracts, sales invoices, shipment bills and receipts; for export income, by sampling method check the supporting documents including sales contracts, export declarations, freight bills of lading and sales invoices;
(5) In conjunction with the letter confirmation of accounts receivable, the sales amount of the current period for major customers are letter confirmed by sampling method;
(6) By sampling method check the support documents including the invoices, receipts, and bills of lading corresponding to the operating income confirmed before and after the balance sheet date, and evaluate whether the operating income is recognized during the appropriate period;
(7) Check that the information related to the operating income whether has been properly presented and disclosed in the financial statements.
(II) Impairment of accounts receivable
1. Description of the matter
For related information disclosure, please refer to Note III (10) and Note V (1) 2 (3) of the financial statements.
As of December 31, 2018, the book balance of accounts receivable items shown in the consolidated financial statements of Hangzhou Steam Turbine Co., Ltd. was RMB 3,012,706,824.47, the bad debt provision was RMB 1,071,908,569.21, and the book value was RMB 1,940,798,255.26.
For accounts receivable that are individually tested for impairment, when there is objective evidence that it is impaired, the management considers thedebtor’s industry status, operating conditions, financial status, lawsuits involvements, repayment records and so on to estimate the present value of future cash flows and determine the provision for bad debts that should be accrued; for accounts receivable that are tested for impairment using a combination method, the management divides the combination according to the age of the accounts and adjusts
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report based on a historical loss rate of a similar combination with the similar credit risk characteristics and the actual situation to estimate the present value of future cash flow and determine the provision for bad debts that should be accrued.
Due to the significant amount of accounts receivable and the impairment test of accounts receivable involving significant management judgment, we determine the impairment of accounts receivable as a key audit matter.
2. Audit Countermeasures
For the impairment of accounts receivable, the audit procedures we have implemented mainly include: (1) Understand the key internal controls related to the impairment of accounts receivable, evaluate the design of these controls, determine whether they have been implemented, and test the operational effectiveness of the relevant internal controls;
(2) Review the subsequent actual write-off or reversal of accounts receivable with provision for bad debts in previous years, and evaluate the accuracy of the management's past forecasts;
(3) Review the management's relevant considerations and the objective evidence for the impairment test of the accounts receivable, and evaluate whether the management fully recognizes the accounts receivable that have been impaired;
(4) For accounts receivable that are individually tested for impairment, obtain and examine the management's forecast on the present value of future cash flows, evaluate the rationality of the key assumptions and the accuracy of the data used in the forecast, and verify with the external evidence obtained;
(5) For the accounts receivable that are tested for impairment using the combination method, evaluate the rationality of the management's combination dividing according to the credit risk characteristics; based on the historical loss rate of a combination with similar credit risk characteristics and the relevant observable data reflecting the current situation and so on to evaluate the rationality of the management's impairment test method (including the proportion of the provision for bad debts of each combination); test the accuracy and completeness of the data used by the management (including the accounts receivable combination with aging as the risk characteristics, checking the accuracy of the ageing of accounts receivable by sampling method) and test whether the calculation of the corresponding provision for bad debts is accurate;
(6) Checking the post-payments of accounts receivable and evaluating the reasonableness of the management's provision for bad debts of accounts receivable;
(7) Check whether the information related to the impairment of accounts receivable has been properly presented and disclosed in the financial statements.
(III) Net realizable value of inventories
1. Description of the matter
For details of relevant information disclosure, please refer to Note III (11) and Note V (1) 5 of the financial statements.
As of December 31, 2018, the book balance of the inventory items shown in the consolidated financial statements of Hangzhou Steam Turbine Co., Ltd. was RMB 2,411,100,538.02, the provision for price falling was RMB 222,979,195.15, and the book value was RMB 2,188,121,342.87.
On the balance sheet date, the inventories are measured at the lower of the cost and net realizable value, and the provision for inventory falling price is made based on the difference that the cost of a single inventory exceeding the net realizable value. On the basis of considering the purpose of holding the inventory, the management determines the estimated selling price according to the contract price, the market price of the same or similar products, the advance receipt, the estimated disposal income, etc., and determines the net realizable value of the inventory by the estimated sales price subtracting the estimated occurrence cost will be happened at the time of completion and subtracting the estimated sales expenses and related taxes and fees
Due to the significant amount of inventories and the determination of the net realizable value of inventories involving significant management judgment, we determine the net realizable value of inventories as a key audit item.
2. Audit Countermeasures
For the net realizable value of inventories, the audit procedures we have implemented mainly include: (1) Understand the key internal controls related to the net realizable value of inventory, evaluate the design of these controls, determine whether they have been implemented, and test the operational effectiveness of the relevant internal controls;
(2) Review management's forecast of the net realizable value of inventory and the actual operating results in previous years, and evaluate the accuracy of management's past forecasts;
(3) by sampling method review the management's forecast of the estimated selling price of the inventory, and compare the estimated selling price with the post-event situation, the contracted selling price, the advance receipt,
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report and the valuation value;
(4) evaluate the management's reasonableness for the estimation on the costs, sales expenses and related taxes and fees that will occur from the inventory to its completion sales;
(5) test the accuracy of the management's calculation on the net realizable value of inventory;
(6) In combination with the inventory monitoring, check whether the ending inventory has long storage age, obsolete models, project suspension or termination situation, and evaluate whether the management has reasonably estimated the net realizable value;
(7) Check whether the information related to the net realizable value of the inventory has been properly presented and disclosed in the financial statements.
IV. Other information
The management of the Company is responsible for the other information. The other information comprises information of the Company's annual report, but excludes the financial statements and our auditor's report. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard
V. Responsibilities of Management and Those Charged with Governance for the Financial Statements The Company's management is responsible for preparing the financial statements in accordance with the requirements of Accounting Standards for Business Enterprises to achieve a fair presentation, and for designing, implementing and maintaining internal control that is necessary to ensure that the financial statements are free from material misstatements, whether due to frauds or errors.
In preparing the financial statements, management of the Company is responsible for assessing the Company's ability to continue as a going concern, disclosing matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process. VI. Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the audit standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, omissions, misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management of the Company.
(4) Conclude on the appropriateness of using the going concern assumption by the management of the Company, and conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements and bear all liability for the opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit matters, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
II. The Financial Statements
All figures in the Notes to the Financial Statements are in RMB.
1. Consolidated Balance Sheet
Prepared by: Hangzhou Steam Turbine Co., Ltd
December 31,2018
In RMB
||||
|-|-|-|
|Items|At the end of term|Beginning of term|
|Current asset：|||
|Monetary fund|1,382,392,009.59|1,222,677,495.94|
|Settlement provision|||
|Outgoing call loan|||
|Financial assets measured at fair value with variations accounted into|||
|current income account|||
|Derivative financial assets|||
|Notes receivable & Account receivable|2,535,887,430.48|2,410,628,336.14|
|Including:Notes receivable|595,089,175.22|715,410,887.68|
|Account receivable|1,940,798,255.26|1,695,217,448.46|
|Prepayments|370,958,990.74|446,166,710.77|
|Insurance receivable|||
|Reinsurance receivable|||
|Provisions of Reinsurance contracts receivable|||
|Other account receivable|32,552,458.76|23,805,005.57|
|Including：Interest receivable|||
|Dividend receivable|16,557,292.60|6,900,000.00|
|Repurchasing of financial assets|||
|Inventories|2,188,121,342.87|2,092,575,691.92|
|Assets held for sales|||
|Non-current asset due within 1 year|||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|Other current asset|1,188,747,955.74|904,426,265.79|
|Total of current assets|7,698,660,188.18|7,100,279,506.13|
|Non-current assets：|||
|Loans and payment on other’s behalf disbursed|||
|Available-for-sale financial assets|2,130,076,555.20|2,417,780,984.08|
|Held-to-maturity investments|||
|Long-term receivable|||
|Long term share equity investment|8,221,439.29|5,800,000.00|
|Property investment|||
|Fixed assets|783,740,928.49|566,710,937.10|
|Construction in progress|454,767,328.93|255,921,660.09|
|Productive biological assets|||
|Oil and natural gas assets|||
|Intangible assets|279,740,756.49|285,670,638.55|
|R & D costs|||
|Goodwill|||
|Long-germ expenses to be amortized||253,886.90|
|Deferred tax assets|213,962,707.23|198,179,569.53|
|Other non-current asset|||
|Total of non-current assets|3,870,509,715.63|3,730,317,676.25|
|Total of assets|11,569,169,903.81|10,830,597,182.38|
|Current liabilities|||
|Short-term loans|139,600,000.00|115,500,000.00|
|Loan from Central Bank|||
|Deposit received and hold for others|||
|Borrowingf funds|||
|Financial liabilities measured at fair value with variations accounted into|||
|current income account|||
|Derivative financial liabilities|||
|Notes payable & account payable|1,350,583,381.53|1,098,125,424.57|
|Advance payment|2,582,234,158.36|2,419,751,405.08|
|Selling of repurchased financial assets|||
|Fees and commissions receivable|||
|Employees’ wage payable|86,390,955.29|79,525,773.69|
|Tax payable|62,405,200.62|34,920,073.37|
|Other account payable|36,904,303.01|28,128,478.10|
|Including：Interest payable|437,314.72|268,860.77|
|Dividend payable|||
|Reinsurance fee payable|||
|Insurance contract provision|||
|Entrusted trading of securities|||
|Entrusted selling of securities|||
|Liabilities held for sales|||
|Non-current liability due within 1 year|100,100,000.00|4,900,000.00|
|Other current liability|||
|Total of current liability|4,358,217,998.81|3,780,851,154.81|
|Non-current liabilities：|||
|Long-term loan|22,700,000.00|100,000,000.00|
|Bond payable|||
|Including：preferred stock|||
|Sustainable debt|||
|Long-term payable|474,876,451.26|447,292,297.73|
|Long-term payable employees’s remuneration|||
|Expected liabilities|||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|Deferred income|44,675,128.30|4,063,615.00|
|Deferred income tax liability|244,169,946.57|278,217,667.94|
|Other non-current liabilities|||
|Total non-current liabilities|786,421,526.13|829,573,580.67|
|Total of liability|5,144,639,524.94|4,610,424,735.48|
|Owners’ equity|||
|Share capital|754,010,400.00|754,010,400.00|
|Other equity instruments|||
|Including：preferred stock|||
|Sustainable debt|||
|Capital reserves|151,684,419.65|139,545,089.02|
|Less：Shares in stock|||
|Other comprehensive income|1,377,168,522.74|1,570,358,510.09|
|Special reserves|21,020,671.47|25,369,714.61|
|Surplus reserves|621,112,807.78|621,112,807.78|
|Common risk provision|||
|Retained profit|3,082,544,107.52|2,774,420,288.05|
|Total of owner’s equity belong to the parent company|6,007,540,929.16|5,884,816,809.55|
|Minority shareholders’ equity|416,989,449.71|335,355,637.35|
|Total of owners’ equity|6,424,530,378.87|6,220,172,446.90|
|Total of liabilities and owners’ equity|11,569,169,903.81|10,830,597,182.38|

 Legal Representative: Zheng Bin
Person in charge ofaccounting：Zhao Jiamao
Accounting Dept Leader: Jin Can
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 2.Parent Company Balance Sheet
In RMB
||||
|-|-|-|
|Items|At the end of term|Beginning of term|
|Current asset：|||
||877,357,020.98|654,407,180.33|
|Monetary fund|||
|Financial assets measured at fair value with variations accounted into|||
|current income account|||
|Derivative financial assets|||
|Notes receivable & Account receivable|1,676,913,196.88|1,553,594,608.07|
|Including: Notes receivable|302,284,986.43|357,644,500.75|
|Account receivable|1,374,628,210.45|1,195,950,107.32|
||208,498,421.20|163,701,036.86|
|Prepayments|||
||19,984,760.06|11,211,538.86|
|Other account receivable|||
|Including：Interest receivable|||
||16,557,292.60|6,900,000.00|
|Dividend receivable|||
||1,584,030,951.83|1,598,522,597.27|
|Inventories|||
|Assets held for sales|||
|Non-current asset due within 1 year|||
||890,000,000.00|737,474,571.12|
|Other current asset|||
||5,256,784,350.95|4,718,911,532.51|
|Total of current assets|||
|Non-current assets：|||
||2,090,631,297.62|2,377,021,294.50|
|Available-for-sale financial assets|||
|Held-to-maturity investments|||
|Long-term receivable|||
||502,919,378.03|502,919,378.03|
|Long term share equity investment|||
|Property investment|||
||448,890,495.75|265,423,321.11|
|Fixed assets|||
||142,310,055.48|151,569,540.89|
|Construction in progress|||
|Productive biological assets|||
|Oil and natural gas assets|||
||165,734,347.73|169,780,320.65|
|Intangible assets|||
|R & D costs|||
|Goodwill|||
|||253,886.90|
|Long-germ expenses to be amortized|||
||163,871,631.81|146,802,178.11|
|Deferred tax assets|||
|Other non-current asset|||
||3,514,357,206.42|3,613,769,920.19|
|Total of non-current assets|||
||8,771,141,557.37|8,332,681,452.70|
|Total of assets|||
|Current liabilities|||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|Short-term loans|||
|Financial liabilities measured at fair value with variations accounted into|||
|current income account|||
|Derivative financial liabilities|||
||654,853,099.86|462,704,271.86|
|Notes payable and account payable|||
||1,877,069,335.29|1,817,869,660.07|
|Advance payment|||
||43,332,523.01|42,770,536.86|
|Employees’ wage payable|||
||37,809,874.53|3,918,864.69|
|Tax payable|||
||24,708,959.22|15,628,537.39|
|Other account payable|||
|Including：Interest payable|212,010.69|112,597.22|
|Dividend payable|||
|Liabilities held for sales|||
||100,000,000.00||
|Non-current liability due within 1 year|||
|Other current liability|||
||2,737,773,791.91|2,342,891,870.87|
|Total of current liability|||
|Non-current liabilities：|||
|||100,000,000.00|
|Long-term loan|||
|Bond payable|||
|Including：preferred stock|||
|Sustainable debt|||
||264,512,388.24|237,067,491.46|
|Long-term payable|||
|Employees’ wage payable|||
|Expected liabilities|||
||41,944,793.30||
|Deferred income|||
||244,169,946.57|278,217,667.94|
|Deferred income tax liability|||
|Other non-current liabilities|||
||550,627,128.11|615,285,159.40|
|Total of Non-current liabilities|||
||3,288,400,920.02|2,958,177,030.27|
|Total of liability|||
|Owners’ equity|||
||754,010,400.00|754,010,400.00|
|Share capital|||
|Other equity instrument|||
|Including：preferred stock|||
|Sustainable debt|||
||138,953,250.09|138,953,250.09|
|Capital reserves|||
|Less：Shares in stock|||
||1,377,784,111.74|1,570,912,609.09|
|Other comprehensive income|||
||7,609,505.31|9,629,800.19|
|Special reserves|||
||602,356,402.65|602,356,402.65|
|Surplus reserves|||
||2,602,026,967.56|2,298,641,960.41|
|Retained profit|||
||5,482,740,637.35|5,374,504,422.43|
|Total of owners’ equity|||
||8,771,141,557.37|8,332,681,452.70|
|Total of liabilities and owners’ equity|||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Legal Representative: Zheng Bin
Person in charge ofaccounting：Zhao Jiamao
Accounting Dept Leader: Jin Can
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 3.Consolidated Income statement
In RMB
||||
|-|-|-|
|||Same period of the|
|Items|Report period||
|||previous year|
|I. Income from the key business|4,642,807,589.69|3,447,142,669.49|
|Incl：Business income|4,642,807,589.69|3,447,142,669.49|
|Interest income|||
|Insurance fee earned|||
|Fee and commission received|||
|II. Total business cost|4,321,036,104.54|3,454,428,905.88|
|Incl：Business cost|3,220,021,819.91|2,450,587,325.79|
|Interest expense|||
|Fee and commission paid|||
|Insurance discharge payment|||
|Net claim amount paid|||
|Net amount of withdrawal of insurance contract reserve|||
|Insurance policy dividend paid|||
|Reinsurance expenses|||
|Business tax and surcharge|41,953,531.94|31,221,773.02|
|Sales expense|174,205,763.02|169,520,147.67|
|Administrative expense|453,278,171.52|433,151,164.67|
|R & D costs|264,643,888.76|211,027,767.11|
|Financial expenses|-17,422,889.91|24,287,127.82|
|Including：Interest expense|13,540,383.97|9,972,261.98|
|Interest income|16,327,538.73|8,249,739.28|
|Asset impairment loss|184,355,819.30|134,633,599.80|
|Add：Other incme|25,802,658.17|10,195,671.25|
|Investment gain（“-”for loss）|117,535,765.44|120,565,851.26|
|Incl: investment gains from affiliates|-585,160.71||
|Changing income of fair value|||
|Gains from currency exchange|||
|Income on disposal of assets|-9,843.23|2,740,865.13|
|III. Operational profit（“-”for loss）|465,100,065.53|126,216,151.25|
|Add ：Non-operational income|12,138,431.92|8,075,659.19|
|Less: Non-operating expense|7,169,435.39|1,635,679.94|
|IV.Total profit(“-”for loss)|470,069,062.06|132,656,130.50|
|Less：Income tax expenses|55,928,956.18|10,835,754.48|
|V. Net profit|414,140,105.88|121,820,376.02|
|1.Net continuing operating profit|414,140,105.88|121,820,376.02|
|2.Termination of operating net profit|||
|Net profit attributable to the owners of parent company|345,824,339.47|68,753,250.90|
|Minority shareholders’ equity|68,315,766.41|53,067,125.12|
|VI. Net after-tax of other comprehensive income|-193,272,909.22|-567,294,413.99|
|Net of profit of other comprehensive income attributable to owners of the par|||
||-193,189,987.35|-567,060,789.75|
|ent company.|||
|（I）Other comprehensive income items that will not be reclassified into|||
|gains/losses in the subsequent accounting period|||
|1.Re-measurement of defined benefit plans of changes in net debt or net asset|||
|s|||
|2.Other comprehensive income under the equity method investee can not be r|||
|eclassified into profit or loss.|||
|（II）|||
||-193,189,987.35|-567,060,789.75|
|Other comprehensive income that will be reclassified into profit or loss.|||
|1.Other comprehensive income under the equity method investee can be recla|||
|ssified into profit or loss.|||
|2.Gains and losses from changes in fair value available for sale financial asset|||
||-193,128,497.35|-566,887,547.71|
|s|||
|3.Held-to-maturity investments reclassified to gains and losses of available fo|||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|r sale financial assets|||
|4.The effective portion of cash flow hedges and losses|||
|5.Translation differences in currency financial statements|-61,490.00|-173,242.04|
|6.Other|||
|Net of profit of other comprehensive income attributable to Minority|||
||-82,921.87|-233,624.24|
|shareholders’ equity|||
|VII. Total comprehensive income|220,867,196.66|-445,474,037.97|
|Total comprehensive income attributable to the owner of the parent company|152,634,352.12|-498,307,538.85|
|Total comprehensive income attributable minority shareholders|68,232,844.54|52,833,500.88|
|VIII. Earnings per share|||
|（I）Basic earnings per share|0.46|0.09|
|(II)Diluted earnings per share|0.46|0.09|

 Legal Representative: Zheng Bin
Person in charge ofaccounting：Zhao Jiamao
Accounting Dept Leader: Jin Can
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 4. Income statement of the Parent Company
In RMB
||||
|-|-|-|
|||Same period of the|
|Items|Report period||
|||previous year|
|I. Income from the key business|2,929,805,668.71|2,196,716,474.74|
|Incl：Business cost|2,071,053,547.88|1,694,306,219.84|
|Business tax and surcharge|24,329,202.98|10,973,986.81|
|Sales expense|103,094,916.72|105,694,953.84|
|Administrative expense|282,726,613.74|275,760,628.45|
|R & D costs|166,413,462.10|133,401,508.33|
|Financial expenses|-16,013,179.60|13,375,506.45|
|Including：Interest expenses|4,888,997.17|3,519,361.10|
|Interest income|11,240,684.14|5,138,097.48|
|Asset impairment loss|163,896,062.98|97,887,620.88|
|Add：Other income|21,212,334.73|3,890,400.53|
|Investment gain（“-”for loss）|205,883,243.16|167,830,820.86|
|Incl: investment gains from affiliates|||
|Gains from change of fir value （“-”for loss）|||
|Assets disposal income||2,555,740.94|
|II. Operational profit（“-”for loss）|361,400,619.80|39,593,012.47|
|Add ：Non-operational income|11,384,845.48|4,030,380.36|
|Less：Non business expenses|5,376,965.13|1,307,587.69|
|III.Total profit(“-”for loss)|367,408,500.15|42,315,805.14|
|Less：Income tax expenses|26,322,973.00|-13,027,027.19|
|IV. Net profit|341,085,527.15|55,342,832.33|
|1.Net continuing operating profit|341,085,527.15|55,342,832.33|
|2.Termination of operating net profit|||
|V. Net after-tax of other comprehensive income|-193,128,497.35|-566,887,547.71|
|（I）Other comprehensive income items that will not be reclassified into|||
|gains/losses in the subsequent accounting period|||
|1.Re-measurement of defined benefit plans of changes in net debt or net asset|||
|s|||
|2.Other comprehensive income under the equity method investee can not be r|||
|eclassified into profit or loss.|||
|（II）|-193,128,497.35|-566,887,547.71|
|Other comprehensive income that will be reclassified into profit or loss.|||
|1.Other comprehensive income under the equity method investee can be recla|||
|ssified into profit or loss.|||
|2.Gains and losses from changes in fair value available for sale financial asset|-193,128,497.35|-566,887,547.71|
|s|||
|3.Held-to-maturity investments reclassified to gains and losses of available fo|||
|r sale financial assets|||
|4.The effective portion of cash flow hedges and losses|||
|5.Translation differences in currency financial statements|||
|6.Other|||
|VI. Total comprehensive income|147,957,029.80|-511,544,715.38|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|VII. Earnings per share|||
|（I）Basic earnings per share|0.45|0.07|
|(II)Diluted earnings per share|0.45|0.07|

 Legal Representative: Zheng Bin
Person in charge ofaccounting：Zhao Jiamao
Accounting Dept Leader: Jin Can
5. Consolidated Cash flow statement
In RMB
||||
|-|-|-|
|||Same period of the previous|
|Items|Report period||
|||year|
|I.Cash flows from operating activities|||
||4,150,843,538.52|3,494,692,256.02|
|Cash received from sales of goods or rending of services|||
|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 amount from disposal financial assets that|||
|measured by fair value and with variation reckoned into current|||
|gains/losses|||
|Cash received from interest, commission charge and|||
|commission|||
|Net increase of inter-bank fund received|||
|Net increase of repurchasing business|||
||8,126,697.11|13,672,821.64|
|Tax returned|||
||223,948,786.76|136,993,210.01|
|Other cash received from business operation|||
||4,382,919,022.39|3,645,358,287.67|
|Sub-total of cash inflow|||
||2,317,958,643.70|2,188,106,830.33|
|Cash paid for purchasing of merchandise and services|||
|Net increase of client trade and advance|||
|Net increase of savings n central bank and brother company|||
|Cash paid for original contract claim|||
|Cash paid for interest, processing fee and commission|||
|Cash paid for policy dividend|||
||709,795,993.52|675,225,336.13|
|Cash paid to staffs or paid for staffs|||
||330,799,484.51|237,999,779.64|
|Taxes paid|||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
||379,931,733.46|338,723,549.80|
|Other cash paid for business activities|||
||3,738,485,855.19|3,440,055,495.90|
|Sub-total of cash outflow from business activities|||
||644,433,167.20|205,302,791.77|
|Cash flow generated by business operation, net|||
|II.Cash flow generated by investing|||
||101,314,432.00|103,680,000.00|
|Cash received from investment retrieving|||
||108,463,633.55|84,616,250.54|
|Cash received as investment gains|||
|Net cash retrieved from disposal of fixed assets, intangible|136,785.20|16,494,301.22|
|assets, and other long-term assets|||
|Net cash received from disposal of subsidiaries or other|||
|operational units|||
||4,507,668,985.20|4,135,806,169.07|
|Other investment-related cash received|||
||4,717,583,835.95|4,340,596,720.83|
|Sub-total of cash inflow due to investment activities|||
|Cash paid for construction of|||
||482,008,267.16|149,836,385.82|
|fixed assets, intangible assets|||
|and other long-term assets|||
||68,040,000.00|102,400,000.00|
|Cash paid as investment|||
|Net increase of loan against pledge|||
|Net cash received from subsidiaries and other operational units|||
||4,707,907,000.00|3,931,296,261.75|
|Other cash paid for investment activities|||
||5,257,955,267.16|4,183,532,647.57|
|Sub-total of cash outflow due to investment activities|||
||-540,371,431.21|157,064,073.26|
|Net cash flow generated by investment|||
|III.Cash flow generated by financing|||
||84,075,000.00||
|Cash received as investment|||
||84,075,000.00||
|Incl: Cash received as investment from minor shareholders|||
||162,800,000.00|232,500,000.00|
|Cash received as loans|||
|Cash received from bond placing|||
|Other financing –related cash received|||
||246,875,000.00|232,500,000.00|
|Sub-total of cash inflow from financing activities|||
||120,800,000.00|208,500,000.00|
|Cash to repay debts|||
||109,705,436.02|49,845,493.76|
|Cash paid as dividend, profit, or interests|||
|Incl: Dividend and profit paid by subsidiaries to minor|60,092,795.00|41,161,592.50|
|shareholders|||
||2,530,666.67|23,054,431.92|
|Other cash paid for financing activities|||
||233,036,102.69|281,399,925.68|
|Sub-total of cash outflow due to financing activities|||
||13,838,897.31|-48,899,925.68|
|Net cash flow generated by financing|||
|IV. Influence of exchange rate alternation on cash and cash|6,793,349.07|-7,211,089.37|
|equivalents|||
||124,693,982.37|306,255,849.98|
|V.Net increase of cash and cash equivalents|||
|Add: balance of cash and cash equivalents at the beginning of|1,137,492,834.83|831,236,984.85|
|term|||
||1,262,186,817.20|1,137,492,834.83|
|VI ..Balance of cash and cash equivalents at the end of term|||

Legal Representative: Zheng Bin
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Person in charge ofaccounting：Zhao Jiamao
Accounting Dept Leader: Jin Can
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 6. Cash Flow Statement of the Parent Company
In RMB
||||
|-|-|-|
|Items|Amount in this period|Amount in last period|
|I.Cash flows from operating activities|||
|Cash received from sales of goods or rending of services|2,201,529,921.02|2,123,033,690.29|
|Tax returned|1,879,838.88|1,250,418.38|
|Other cash received from business operation|39,876,451.63|20,481,813.79|
|Sub-total of cash inflow|2,243,286,211.53|2,144,765,922.46|
|Cash paid for purchasing of merchandise and services|1,148,104,039.15|1,199,591,051.02|
|Cash paid to staffs or paid for staffs|464,351,072.55|457,506,060.50|
|Taxes paid|187,542,833.21|106,962,139.60|
|Other cash paid for business activities|161,062,408.27|123,920,412.74|
|Sub-total of cash outflow from business activities|1,961,060,353.18|1,887,979,663.86|
|Cash flow generated by business operation, net|282,225,858.35|256,786,258.60|
|II.Cash flow generated by investing|||
|Cash received from investment retrieving|100,000,000.00|103,680,000.00|
|Cash received as investment gains|196,225,950.56|135,809,172.66|
|Net cash retrieved from disposal of fixed assets, intangible assets,|||
|||16,038,777.07|
|and other long-term assets|||
|Net cash received from disposal of subsidiaries or other|||
|operational units|||
|Other investment-related cash received|2,979,772,279.69|2,713,003,714.00|
|Sub-total of cash inflow due to investment activities|3,275,998,230.25|2,968,531,663.73|
|Cash paid for construction of|||
|fixed assets, intangible assets|192,468,557.01|70,439,655.26|
|and other long-term assets|||
|Cash paid as investment|66,000,000.00|102,400,000.00|
|Net cash received from subsidiaries and other operational units|||
|Other cash paid for investment activities|3,070,000,000.00|2,676,530,440.00|
|Sub-total of cash outflow due to investment activities|3,328,468,557.01|2,849,370,095.26|
|Net cash flow generated by investment|-52,470,326.76|119,161,568.47|
|III.Cash flow generated by financing|||
|Cash received as investment|||
|Cash received as loans||100,000,000.00|
|Cash received from bond placing|||
|Other financing –related ash received|||
|Sub-total of cash inflow from financing activities||100,000,000.00|
|Cash to repay debts||100,000,000.00|
|Cash paid as dividend, profit, or interests|42,490,103.70|3,406,763.88|
|Other cash paid for financing activities|||
|Sub-total of cash outflow due to financing activities|42,490,103.70|103,406,763.88|
|Net cash flow generated by financing|-42,490,103.70|-3,406,763.88|
|IV. Influence of exchange rate alternation on cash and cash|||
||4,535,234.41|-5,925,130.42|
|equivalents|||
|V.Net increase of cash and cash equivalents|191,800,662.30|366,615,932.77|
|Add: balance of cash and cash equivalents at the beginning of|||
||650,546,455.53|283,930,522.76|
|term|||
|VI ..Balance of cash and cash equivalents at the end of term|842,347,117.83|650,546,455.53|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Legal Representative: Zheng Bin
Person in charge ofaccounting：Zhao Jiamao
Accounting Dept Leader: Jin Can
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 7. Consolidated Statement on Change inOwners’ Equity
Amount in this period
In RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||Amount in this period|||||||||||||
||Owner’s equity Attributable to the Parent Company|||||||||||||
|||Other Equity instrument||||||||||Minor||
||||||||Other|||Common|||Total of|
|Items||preferr|||Capital|Less: Shares||Specialized|Surplus||Retained|shareholders||
||Share||||||Comprehens|||risk|||owners’ equity|
||Capital|ed|Sustaina|Other|reserves|in stock||reserve|reserves||profit|’ equity||
||||||||ive Income|||provision||||
|||stock|ble debt|||||||||||
|I.Balance at the end of last||||||||||||||
||754,010,4||||139,545,0||1,570,358,5|25,369,714.|621,112,807.7||2,774,420,288|335,355,637.|6,220,172,446|
|year|00.00||||89.02||10.09|61|8||.05|35|.90|
|Add: Change of accounting||||||||||||||
|policy||||||||||||||
|Correcting of previous errors||||||||||||||
|Merger of entities under||||||||||||||
|common control||||||||||||||
|Other||||||||||||||
|II.Balance at the beginning of||||||||||||||
||754,010,4||||139,545,0||1,570,358,5|25,369,714.|621,112,807.7||2,774,420,288|335,355,637.|6,220,172,446|
|current year|00.00||||89.02||10.09|61|8||.05|35|.90|
|III.Changed in the current||||||||||||||
||||||12,139,33||-193,189,98|-4,349,043.1|||308,123,819.4|81,633,812.3|204,357,931.9|
|year|||||0.63||7.35|4|||7|6|7|
|（1）Total comprehensive||||||||||||||
||||||||-193,189,98||||345,824,339.4|68,232,844.5|220,867,196.6|
|income|||||||7.35||||7|4|6|
|（II）Investment or decreasing||||||||||||||
|||||||||||||84,795,000.0||
||||||||||||||84,795,000.00|
|of capital by owners||||||||||||0||
|1．Ordinary Shares invested||||||||||||84,795,000.0|84,795,000.00|
|||||||||||||0||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|by shareholders||||
|2．Holders of other equity ins||||
|truments invested capital||||
|3．Amount of shares paid and||||
|accounted as owners’ equity||||
|4．Other||||
|（III）Profit allotment|-37,700,520.0|-60,812,795.|-98,513,315.0|
||0|00|0|
|1.Providing of surplus||||
|reserves||||
|2.Providing of common risk||||
|provisions||||
|3．Allotment to the owners (or||||
||-37,700,520.0|-60,812,795.|-98,513,315.0|
|shareholders)|0|00|0|
|4．Other||||
|(IV) Internal transferring of||||
|owners’ equity||||
|1. Capitalizing of capital||||
|reserves (or to capital shares)||||
|2. Capitalizing of surplus||||
|reserves (or to capital shares)||||
|3．Making up losses by||||
|surplus reserves.||||
|4.Change amount of defined||||
|benefit plans that carry||||
|forward||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||||||
|-|-|-|-|-|-|-|-|-|
|Retained earnings|||||||||
|5．Other|||||||||
|(V). Special reserves||||-3,207,751.2|||-549,798.43|-3,757,549.69|
|||||6|||||
|1. Provided this year|||||||||
|2．Used this term||||-3,207,751.2|||-549,798.43|-3,757,549.69|
|||||6|||||
|（VI）Other||12,139,33||-1,141,291.8|||-10,031,438.|966,600.00|
|||0.63||8|||75||
|IV. Balance at the end of this||||||||6,424,530,378.87|
||754,010,4|151,684,4|1,377,168,5|21,020,671.|621,112,807.7|3,082,544,107|416,989,449.||
|term|00.00|19.65|22.74|47|8|.52|71||

 Legal Representative: Zheng Bin Person in charge ofaccounting：Zhao Jiamao Accounting Dept Leader: Jin Can
Amount in last year
In RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||Amount in last year|||||||||||||
||Owner’s equity Attributable to the Parent Company|||||||||||||
|||Other Equity||||||||||||
|||instrument||||||||||||
|||||||||||||Minor||
|||||||Less:|Other||||||Total of|
|Items|||||Capital|||Specialized|Surplus|Common risk|Retained|shareholders’||
||Share|preferr|Sust|||Shares in|Comprehens||||||owners’ equity|
||Capital||||reserves|||reserve|reserves|provision|profit|equity||
|||ed|aina|Other||stock|ive Income|||||||
|||stock|ble|||||||||||
||||debt|||||||||||
|I.Balance at the end of last||||||||||||||
||754,010,4||||139,590,||2,137,419,2||621,112,807||2,705,667,037||6,745,622,670|
|||||||||27,546,353.37||||360,276,427.29||
|year|00.00||||345.09||99.84||.78||.15||.52|
|Add: Change of accounting||||||||||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||||||
|-|-|-|-|-|-|-|-|-|
|policy|||||||||
|Correcting of previous errors|||||||||
|Merger of entities under|||||||||
|common control|||||||||
|Other|||||||||
|II.Balance at the beginning of|||||||||
||754,010,4|139,590,|2,137,419,2||621,112,807|2,705,667,037||6,745,622,670|
|||||27,546,353.37|||360,276,427.29||
|current year|00.00|345.09|99.84||.78|.15||.52|
|III.Changed in the current|||||||||
|||-45,256.|-567,060,78|||||-525,450,223.|
|||||-2,176,638.76||68,753,250.90|-24,920,789.94||
|year||07|9.75|||||62|
|（1）Total comprehensive|||||||||
||||-567,060,78|||||-445,474,037.|
|||||||68,753,250.90|52,833,500.88||
|income|||9.75|||||97|
|（II）Investment or decreasing|||||||||
|of capital by owners|||||||||
|1．Ordinary Shares invested|||||||||
|by shareholders|||||||||
|2．Holders of other equity ins|||||||||
|truments invested capital|||||||||
|3．Amount of shares paid and|||||||||
|accounted as owners’ equity|||||||||
|4．Other|||||||||
|（III）Profit allotment|||||||-41,161,592.50|-41,161,592.5|
|||||||||0|
|1.Providing of surplus|||||||||
|reserves|||||||||
|2.Providing of common risk|||||||||
|provisions|||||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||||||
|-|-|-|-|-|-|-|-|-|
|3．Allotment to the owners (or|||||||||
|||||||||-41,161,592.5|
||||||||-41,161,592.50||
|shareholders)||||||||0|
|4．Other|||||||||
|(IV) Internal transferring of|||||||||
|owners’ equity|||||||||
|1. Capitalizing of capital|||||||||
|reserves (or to capital shares)|||||||||
|2. Capitalizing of surplus|||||||||
|reserves (or to capital shares)|||||||||
|3．Making up losses by|||||||||
|surplus reserves.|||||||||
|4.Change amount of defined|||||||||
|benefit plans that carry|||||||||
|forward|||||||||
|Retained earnings|||||||||
|5．Other|||||||||
|(V). Special reserves||||-2,176,638.76|||-378,458.25|-2,555,097.01|
|1. Provided this year|||||||||
|2．Used this term||||-2,176,638.76|||-378,458.25|-2,555,097.01|
|（VI）Other||-45,256.|||||-36,214,240.07|-36,259,496.1|
|||07||||||4|
|IV. Balance at the end of this|||||||||
||754,010,4|139,545,|1,570,358,5||621,112,807|2,774,420,288||6,220,172,446|
|||||25,369,714.61|||335,355,637.35||
|term|00.00|089.02|10.09||.78|.05||.90|

 Legal Representative: Zheng Bin Person in charge ofaccounting：Zhao Jiamao Accounting Dept Leader: Jin Can
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 8.Statement of change inowner’s Equity of the Parent Company
Amount in this period In RMB
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||Amount in this period|||||||||||
|||Other Equity||||||||||
|||instrument||||||||||
|||||||Less:||||||
||||||||Other|||||
||||||Capital|Shares||Specialized|||Total of owners’|
|Items||||||||||||
||Share Capital|preferr|Sust||||Comprehensive||Surplus reserves|Retained profit||
||||||reserves|in||reserve|||equity|
|||ed|aina|Other|||Income|||||
|||||||stock||||||
|||stock|ble|||||||||
||||debt|||||||||
||||||138,953,250.0||||||5,374,504,422.4|
|I.Balance at the end of last year|754,010,400.00||||||1,570,912,609.09|9,629,800.19|602,356,402.65|2,298,641,960.41||
||||||9||||||3|
|Add: Change of accounting policy||||||||||||
|Correcting of previous errors||||||||||||
|Other||||||||||||
|II.Balance at the beginning of||||||||||||
||||||138,953,250.0||||||5,374,504,422.4|
||754,010,400.00||||||1,570,912,609.09|9,629,800.19|602,356,402.65|2,298,641,960.41||
|current year|||||9||||||3|
|III.Changed in the current year|||||||-193,128,497.35|-2,020,294.88||303,385,007.15|108,236,214.92|
|（I）Total comprehensive income|||||||-193,128,497.35|||341,085,527.15|147,957,029.80|
|(II) Investment or decreasing of||||||||||||
|capital by owners||||||||||||
|1．Ordinary Shares invested by s||||||||||||
|hareholders||||||||||||
|2．Holders of other equity instru||||||||||||
|ments invested capital||||||||||||
|3.Amount of shares paid and||||||||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||||||
|-|-|-|-|-|-|-|-|
|accounted as owners’ equity||||||||
|4．Other||||||||
|（III）Profit allotment||||||-37,700,520.00|-37,700,520.00|
|1.Providing of surplus reserves||||||||
|2．Allotment to the owners (or||||||||
|||||||-37,700,520.00|-37,700,520.00|
|shareholders)||||||||
|3．Other||||||||
|(IV) Internal transferring of||||||||
|owners’ equity||||||||
|1. Capitalizing of capital reserves||||||||
|(or to capital shares)||||||||
|2. Capitalizing of surplus reserves||||||||
|(or to capital shares)||||||||
|3．Making up losses by surplus||||||||
|reserves.||||||||
|4.Change amount of defined||||||||
|benefit plans that carry forward||||||||
|Retained earnings||||||||
|5．Other||||||||
|(V) Special reserves||||-2,020,294.88|||-2,020,294.88|
|1. Provided this year||||||||
|2．Used this term||||-2,020,294.88|||-2,020,294.88|
|（VI）Other||||||||
|||138,953,250.0|||||5,482,740,637.35|
|IV. Balance at the end of this term|754,010,400.00||1,377,784,111.74|7,609,505.31|602,356,402.65|2,602,026,967.56||
|||9||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Legal Representative: Zheng Bin Person in charge ofaccounting：Zhao Jiamao Accounting Dept Leader: Jin Can
Amount in last year
In RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||Amount in last year|||||||||||
|||Other Equity||||||||||
|||instrument||||Less:|Other|||||
||||||Capital|||Specialized|||Total of owners’|
|Items||||||||||||
||Share Capital|||||Shares in|Comprehensiv||Surplus reserves|Retained profit||
|||preferr|||reserves|||reserve|||equity|
||||Sustai|Oth||||||||
|||ed||||stock|e Income|||||
||||nable|er||||||||
|||stock||||||||||
||||debt|||||||||
||||||138,953,2||2,137,800,156||||5,887,293,371.4|
|I.Balance at the end of last year|754,010,400.00|||||||10,874,033.85|602,356,402.65|2,243,299,128.08||
||||||50.09||.80||||7|
|Add: Change of accounting policy||||||||||||
|Correcting of previous errors||||||||||||
|Other||||||||||||
|II.Balance at the beginning of current||||||||||||
||||||138,953,2||2,137,800,156||||5,887,293,371.4|
||754,010,400.00|||||||10,874,033.85|602,356,402.65|2,243,299,128.08||
|year|||||50.09||.80||||7|
||||||||-566,887,547.|||||
|III.Changed in the current year||||||||-1,244,233.66||55,342,832.33|-512,788,949.04|
||||||||71|||||
||||||||-566,887,547.|||||
|（I）Total comprehensive income||||||||||55,342,832.33|-511,544,715.38|
||||||||71|||||
|(II) Investment or decreasing of||||||||||||
|capital by owners||||||||||||
|1．Ordinary Shares invested by share||||||||||||
|holders||||||||||||
|2．Holders of other equity instrument||||||||||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||||||
|-|-|-|-|-|-|-|-|
|s invested capital||||||||
|3.Amount of shares paid and||||||||
|accounted as owners’ equity||||||||
|4．Other||||||||
|（III）Profit allotment||||||||
|1.Providing of surplus reserves||||||||
|2．Allotment to the owners (or||||||||
|shareholders)||||||||
|3．Other||||||||
|(IV) Internal transferring of owners’||||||||
|equity||||||||
|1. Capitalizing of capital reserves (or||||||||
|to capital shares)||||||||
|2. Capitalizing of surplus reserves (or||||||||
|to capital shares)||||||||
|3．Making up losses by surplus||||||||
|reserves.||||||||
|4.Change amount of defined benefit||||||||
|plans that carry forward||||||||
|Retained earnings||||||||
|5．Other||||||||
|(V) Special reserves||||-1,244,233.66|||-1,244,233.66|
|1. Provided this year||||||||
|2．Used this term||||-1,244,233.66|||-1,244,233.66|
|（VI）Other||||||||
|IV. Balance at the end of this term|754,010,400.00|138,953,2|1,570,912,609|9,629,800.19|602,356,402.65|2,298,641,960.41|5,374,504,422.4|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|50.09|.09|3|

 Legal Representative: Zheng Bin Person in charge ofaccounting：Zhao Jiamao Accounting Dept Leader: Jin Can
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Hangzhou Steam Turbine Co.,Ltd.
Notes to Financial Statement
Year 2018
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, Headquartered in Hangzhou, Zhejiang Province. The company now holds a unified social credit code for the 913300007042026204 business license, TheCompany’s registered capital is increased to RMB754.0104 million with total capital share of 754.0104 million shares (face value RMB1.00). Among which state-owned legal person shares were 479.8248 million shares and 274.1856 million shares of current B shares. The shares were issued and listed for trading in Shenzhen Stock Exchange on April 28, 1998.
The design, manufacturing, Main Business Activities:R&D, Production and Sales of Industrial Steam Turbine. Main Products: Industrial Steam Turbine
These Financial Statements are released upon approval at the 31st meeting of the 7th term of Board held on March 27, 2019.
19 subsidiaries including Zhejiang Steam Turbine Packaged Technologies Co., Ltd., Hangzhou Zhongneng Steam Turbine Power Co., Ltd., Hangzhou Steam Turbine Casting Co.,Ltd. Hangzhou Steam Turbine Auxiliary Co., Ltd., Hangzhou Steam Turbine Machinery& Equipment Co., Ltd., Zhejiang Turbine Import& Export Co., Ltd., and Hangzhou Steam Turbine Heavy Industry Co., Ltd., were consolidated to the Financial Statements. For details Notes of equity in other subjects of this annual report
II. Basis of compiling the financial statement
(1) Basis of compiling
The Company adopts perpetual operation as the basis of financial statements.
(II) Assessment on perpetuation
No issue or situation, in 12 months since the end of report period, composes major doubt on the
perpetuation assumption of the Company.
III. Principal Accounting Policies and Estimations
Important prompt: The Company utilized detailed accounting polices and estimations on providing of bad debt provisions, fixed asset depreciation, intangible asset amortization, recognition of revenue, and so forth, according to its business practices.
1. Statement of compliance to the Enterprise Accounting Standard
The finance report produced by the Company is accordance with the Enterprise Accounting Standard, and reflects theCompany’s financial state, business performance and cash flow frankly and completely.
2. Fiscal year
The Company uses the calendar year for its fiscal year. A fiscal year is from January 1 to
December 31.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 3. Operational period
TheCompany’s relatively shorter operational period, which is 12 months, and is used as division
of liquidity of assets and liabilities.
4. Standard currency for bookkeeping
The Company uses Renminbi (RMB) as the standard currency for book keeping.
5. Accounting treatment of the entities under common control and different control
1. Treatment of entities under common control
Assets and liabilities acquired in merger of entities are measured at book values at the date of merger. The difference between the net book value of asset and the offered price (or total of face value of shares issued) will be adjusted into capital reserves; when the capital reserves is not enough to reduce, it will be adjusted into retained profit.
2. Treatment of entities under different control
The difference of takeover cost over the fair value of recognizable net asset of the acquired entity is recognized as goodwill at the day of takeover; in case the takeover cost is lower than the fair value of recognizable net asset of the acquired entity, the measuring process over the recognizable asset, liabilities, contingent liabilities, and takeover cost, shall be repeated, if comes out the same result, the difference shall be recorded into current income account.
6. Method for preparing the consolidated financial statements
The parent company puts all of its subsidiaries under its control into the consolidated financial statements. The consolidated financial statements are prepared according to the “Enterprise Accounting Standard No. 33– Consolidated Financial Statements”, basing on the accounts of the parent company and the subsidiaries, and after adjusting the long-term investment equity in the subsidiary on equity basis.
7. 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.
8. Foreign currency trade and translation of foreign currencies
1. Translation of foreign currency
Foreign currency trades are translated into RMB at the rate of the day when the trades are made. Those balances of foreign currencies and monetary items in foreign currencies are accounted at the exchange rate of the balance sheet date. Exchange differences, other than special loans satisfying the conditions of capitalization, are accounted into current income account. Non-monetary items in foreign currencies and on historical cost are translated at the rate of the trade day. Non-monetary items in foreign currencies and on fair value are translated at the rate of the day when the fair value is recognized, where the differences are accounted as gain/loss from change of fair value.
2. Translation of foreign currency financial statements
Asset and liability items in the balance sheet are translated basing on the exchange rate of the balance sheet date;Owners’ equities other than Retained Profit are translated at the exchange rate of the date when the trade happened. Income and expense items in the income statement are translated at the similar rate of the date when the trade happened. Differences generated by the above translating of foreign currencies are demonstrated separately under theowners’ equity in
the balance sheet.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 9. Financial instruments
1. Type of finance asset and finance debt Finance assets fall into four categories at initial recognition: 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 fall into two types at initial recognition: 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 finance 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 valuecan’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.
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 finance 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 valuecan’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 valuecan’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 sponsorship 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
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 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 part; (2) consideration plus the corresponding stopped recognition part of the accumulated fair value changes which were accounted directed into ownership rights.
4. Recognition of fair value of financial assets and liabilities
The Company utilizes evaluation technologies supported by sufficient data and information to recognize the fair values of financial assets and liabilities. Values inputted to the evaluation technology are divided into following levels and used in sequence:
(1) Level 1 input: unadjusted quotations obtained from an active market of the similar asset or liability at the date of measurement;
(2) Level 2 input: values of the asset or liability observable, directly or indirectly, other than level 1 input, including: quotation of similar asset or liability in an active market; quotation of similar asset or liability in an non-active market; other observable value other than quotations, i.e. observable interest or gain curves in normal intervals of quotations.
(3) Level 3 input: non-observable input value of the asset or liability, including interest rates which are not observable or not testified by observable market data, fluctuation of stock prices, future cash flow of disposal liabilities undertaken from merger of entities, or financial predictions upon data itself.
5. Impairment test and impairment reserves plan
(1) The Company conduct impairment test to the finance asset other than which appointed to be
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report measured at fair value with their changes are accounted into current gain/loss accounts on balance sheet day. Impairment provision is provided as long as evidence showing that impairment has happened to the financial asset.
(2) In dealing with major financial assets such as investment hold-to-mature, loans, and receivables, the Company conduct independently impairment test for single finance asset. Impairment tests are conducted 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. The balance of book value over current value of expected future cash flow is recognized as impairment loss.
(3) Objective evidences of impairment on sellable financial assets 1) Objective evidences supporting the impairment of investment on sellable liability instruments are: a. Material financial dilemma with the debtor; b. Violating of the contract by the debtor, e.g. overdue of payment for interests or principal; c. Compromise made to the debtor who is in financial crisis with consideration of financial or legal factors; d. Possible bankruptcy or financial restructuring of the debtor; e. The liability instrument is not able to be traded in an active market for the debtor is in material financial dilemma; f. Other circumstances that are showing that impairment has already occurred.
2) Objective evidence showing that impairment has already occurred on sellable equity instruments are: significant or non-temporary fall of fair value, the invested entities suffers from material negative situations in aspects of technical, market, economy, or legislation environment. The Company performs tests on investments on sellable equity instruments individually on the balance sheet day. For investment on equity instruments measured on fair value, if the fair value on the balance sheet day is lower than the cost by50% (included), or lower than the costs for successively 12 months (included), impairment is recognized; If the fair value is lower than the cost by more than20% (included), but higher than50%, or lower than the cost for successively 6 months (included) but not more than 12 months, the Company will determine if impairment occurred with consideration of other factors, e.g. fluctuation of prices. For those equity instruments on cost basis, the Company will decided about impairment with consideration of the investedentities’ situations in aspects of technical, market, economy, or legislation environment.
When impairment occurred with a sellable financial asset, the accumulated losses caused by decreasing of fair value which have originally been written intoowners’ equity shall be carried over to current gain/loss account. If practical evidence showing that the value of a particular financial asset has recovered in value after a impairment loss has been recognized and practically related to the issues occurred after recognition of the loss, the impairment loss recognized shall be restored and accounted into current gain/loss. Impairment loss of sellable equity investment instrument will be restored toowners’ equity when the fair value has increased afterward. When impairment occurs on sellable equity instrument on cost basis, the balance between its book value and the current value of the predictable future cash flow upon current market gain rate, is recognized as impairment loss and recorded to current gain/loss account. It will not be written back in subsequent years.
When impairment occurred with a sellable financial asset, the accumulated losses caused by decreasing of fair value which have originally been written intoowners’ equity shall be carried over to current gain/loss account. If practical evidence showing that the value of a particular financial asset has recovered in value after a impairment loss has been recognized and practically related to the issues occurred after recognition of the loss, the impairment loss recognized shall be restored and accounted into current gain/loss. Impairment loss of sellable equity investment instrument will be restored toowners’ equity when the fair value has increased afterward.
10. Receivable accounts
(1) Recognition and providing of bad debt provision on individual receivable account with large amount
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Basis of recognition or standard amount of
Accounts take over10% of the book balance of receivable accounts individual account with large amount
Provision method for account receivable Impairment test performed individually, bad debt provision will be with major individual amount and bad debt provided at the difference of expected cash flow lower than the book provision provided individually value.
(2)Recognition and providing basis of bad debt reserves for group of receivable accounts with similar characteristics of credit risks
(1) The specific combination and providing basis of bad debt reserves
Recognition and providing of bad debt provisions on groups
Group by age analysis Age analysis method
Impairment test performed individually, bad debt provision will be Combination of associated transactions
provided at the difference of expected cash flow lower than the book within the scope of consolidation
value.
(2) Age analysis method
||
|-|
|Rate of provision onreceivable account|
|5|
|10|
|30|
|60|
|80|
|100|

3.Receivables with not major individual amount and bad debt provision provided individually
|||
|-|-|
||When there is significant difference between the current value of future cash|
|Basis of providing bad debt individually|flow of the receivable account and the current value of future cash flow of the|
||group|
||Impairment test performed individually, bad debt provision will be provided at|
|Basis of bad debt provision||
||the difference of expected cash flow lower than the book value.|

Provision for bad debt shall be withdrawn for notes receivable, interests receivable, long-term receivables and other receivables subject to the balance between the present value and book value of their future cash flow.
11.Inventories
(1) Inventory classification
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Inventories include saleable finished goods or merchandise, product-in-process , consumption material and goods in manufacturing procedure or working procedure.
(2) Pricing of inventory to be delivered
Pricing basis:
Delivered out materials are accounted by weighted average method, issued out finished products are accounted at individual price.
(3) Recognition of realizable net value of inventory and providing of inventory impairment provision
At the balance sheet day, inventories are measured at the lower of costs and cashable net values, the individual difference between the cashable net value and cost are provided as inventory impairment provision. For finished product, merchandise, saleable material and other saleable merchandise inventory, their cashable net values are recognized by their estimated sale price in normal operation deducting estimated sale expenses and related taxes; for material inventory which need processing, it cashable net value are recognized by the estimated sale prices of its finished products in normal operation deducting the estimated cost, sale expenses and related taxes due to the end of processing; At the balance sheet day, for inventory item which part has contract price and part has no contract price, the cashable net value is accounted separately, and recognize the inventory impairment provision or returnable cash..
(4) Inventory system
Inventory system: perpetual inventory system
(5) Amortization of low-value consumables and packaging materials
1.Low price consumable
Basis of amortizing: one-off
2.Packaging materials
Basis of amortizing: one-off
12. Long-term equity investment
1. Recognition of common control and substantial influence
According to the contract, if the investedenterprise’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 investedenterprise’s main finance and operation policy but have no own control or common control with other investing part, the investment is investment with substantial influence.
2. Recognition of initial investment costs
(1) For the long-term equity investment formed by corporate merger under common control, if it is the long-term equity investment obtained from the corporate merger by paying cash, transferring non-cash asset, bear liability and issuing equity securities, the share of book value of owner's equity of the merged party on the merger date shall be taken as the initial investment cost. The
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report asset reserve is adjusted according to the difference between the initial investment cost of long-term equity investment and the book value of paid combined consideration or issued securities; if the capital is not enough for deduction, the remain earnings are adjusted.
Recognition of “one-off” trade when long-term equity investment is composed by merger of entities under common control by multiple steps.
Transactions under an “one-off” trade are accounted as a common trade of ownership.
Transactions which are not “one-off” trades are recognized for their initial investment cost basing on the share of book value of net asset in the consolidated financial statement of the entities acquired. Balance between the initial investment cost and the book value of the long-term equity investment before merger and the premium paid for the new shares after merger, is adjusted to capital reserves; when the capital reserve is not enough to offset, retained profit shall be adjusted thereof.
(2) For the long-term equity investments formed by merger of enterprises under different control, the initial investment cost is recognized by the fair value of combined consideration on purchasing day and related expenses.
Long-term equity investment formed by acquisition of entities under different control by trade in multiple stages are accounted separately in the financial statements and consolidated financial statements.
1) In individual financial account, the sum of book value of original equity investment plus new
investment cost is recognized as the initial investment cost on cost basis.
2) Recognition of “one-off” trade in consolidated financial statements
Transactions under an “one-off” trade are accounted as a common trade of ownership. Transactions which are not “one-off” trades are re-measured for their fair value at the day of acquisition. Balance between the fair value and the book value of the long-term equity investment is adjusted to current investment gains; other gains from equity on equity basis before the acquisition day are written over to current gains of at the day of acquisition, but not the gains from re-calculating of changes in net liability or asset by the invested entity.
(3) Formed by means other than entity merger:
Acquired by cash payment– initial investment cost is the actual amount of payment;
Acquired by issuing of equity certificates– initial investment cost is the fair value of equity certificate issued;
Acquired by debtor restructuring– initial cost recognized as according to the Enterprise Accounting Standard No.12– Debtor restructuring;
Acquired by trading of non-monetary asset - initial cost recognized as according to the Enterprise Accounting Standard No.7– Trade of non-monetary assets;
3. Subsequent measurement and recognition of gain/loss
Cost basis is adopted in accounting of long-term equity investment in entities under substantial control of the Company; while equity basis is adopted in accounting of investment in affiliates and joint-ventures.
4. Treatment of disposal of subsidiaries by stages till losing of control power
(1) Individual account
At disposal of equity shares, the balance between book value and actual consideration received is recorded to current gain/loss account.
When the retained share equity is composing major influence or joint control with other parties on
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report the invested entity, accounting will be on equity basis;
When none of substantial control, joint control, or major influence on the entity, it will be
recognized as sellable financial asset and accounted on fair value.
(2) Basis of Consolidated Financial Statements
1) Losing of controlling power on a subsidiary through disposal of equity by multiple trades, and not recognized as “one-off” trade:
Before losing of control power, the balance of disposal consideration and the share of net asset attributable to the Company on continued basis since purchasing or merger, is adjusted to capital reserves (capital premium), whereas if the capital premium is not enough to offset the amount, retained profit will be offset at corresponding amount.
At losing of control power over a former subsidiary, the retained equity shares shall be re-calculated according to the fair value at the day of losing power. Sum of the consideration obtained from disposal and fair value of the retained equity shares, less the share of net asset attributable to the Company on continued basis since purchasing or merger, is accounted into investment gains of the period when the control power is disposed, and goodwill shall be offset meanwhile. Other gains related to the equities in formal subsidiary shall be written over to current investment gains at the period when control power was disposed.
2) Losing of controlling power on a subsidiary through disposal of equity by multiple trades, and recognized as “one-off” trade:
The multiple trades are treated as one trade that causes losing of control power on a subsidiary. However, the balance between the consideration received from each trade and corresponding share of net asset is recognized as other gains in the consolidated accounts, and transferred collectively to gain/loss account of the period in which the control power was lost.
13. Fixed assets
1. Conditions for fixed asset recognition
Fixed assets is defined as the tangible assets which are held for the purpose of producing goods, providing services, lease or for operation& management, and have more than one year of service life. Fixed assets are recognized at satisfying of great possibility of benefit inflow and costs are accountable.
2. Depreciation methods
||||
|-|-|-|
|Basis ofdepreciation|Depreciation age(year)|Retain value rate|
|Straight averageon period|20-30|4|
|Straight averageon period|8-15|4|
|Straight averageon period|4-8|4|
|Straight averageon period|5|4|

14. Construction in process
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Whether the company needs to comply with the disclosure requirements of the particular industry No
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.
15. Loan expenses
1. Capitalizing of loan expenses
Loan expenses occurred in the Company, which can be categorized to purchasing or construction of assets satisfying the conditions of capitalization, shall be capitalized and accounted into capital costs; while other loan expenses are recognized as expenses and recorded into current income account.
2. Capitalization period of loan expenses
(1) Capitalization started as soon as all of these conditions are satisfied: 1) Capital expenditures have occurred; 2) Loan expenses have occurred; 3) Necessary purchasing or construction processes have been started to make the asset usable or sellable.
(2) If irregular interruption occurred in the purchasing or construction process of the assets satisfying the capitalizing conditions, and suspended for over successive three months, capitalizing of loan expenses is suspended; loan expenses occurred during the suspension period are recognized as current expenses until the purchasing or construction process resumes.
(3) Capitalizing of loan expenses is terminated as soon as the asset satisfying the capitalizing conditions reaches the state of usable or sellable as expected.
3. Rates and amounts of loan expense capitalization
Special loans raised for purchasing or construction of assets satisfying the conditions of capitalization, interest to be capitalized will be the actual interest expenses occurred in the current period of loan (including the discount, premium, or amortizing decided on actual interest rate basis), less the interest income from the unused loans in bank account or provisional investment gains; common loans used for purchasing or construction of assets satisfying the conditions of capitalization, the interest to be capitalized will be the weighted average of balance over special loans multiply capitalization rate of common loans.
16. Intangible assets
（1）Pricing Method, service life and impairment test
1. Intangible assets are land using rights, patents, and non-patent technologies, which are measured at cost basis.
2. For intangible assets with limited useful life, during the use life it is amortized according to the anticipating implementation method of the economic benefit of the intangible asset systematically and reasonably. Ifcan’t recognize the anticipating implementation method, the straight basis is deployed.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Items Amortiing years(Year)
Land use right 50
Patent and Special technology 5-20
Softward 5
(2) Accounting policy for internal research and development expenditure
Expenditures of internal researching projects are accounted into current term gain and loss when happens. The development period expenditures are recognized as intangible assets when fulfill following conditions: (1) The intangible asset is completed and technically possible to be used or sold; (2) With intention to complete the intangible asset for purpose of use or sale; (3) Evidence showing that there are markets or the products produced with using of the intangible asset, or markets of the intangible asset itself, by which the intangible asset may produce financial benefits. Intangible assets used inside the Company must be approved for their usable characters. (4) Developing of the intangible assets are supported by sufficient technical, financial, and other resources, and the intangible assets can be used or sold. (5) Expenditures occurred in developing of the intangible asset may be reliably measured.
17. Impairment of partial long-term assets
For those long-term assets such as equity investment, fixed assets measured on cost basis, construction-in-process, intangible assets with limited service life, their recoverable amount shall be evaluated as soon as there was evidence indicating impairment at the balance sheet day. For intangible assets such as goodwill from merger or intangible assets with uncertain service lives, impairment test is performed each year whatever there is evidence of impairment or not. Impairment test on goodwill is performed on combination of related assets.
When the result of prediction shows that the recoverable amount is lower than its book value, the balance shall be provided impairment provision and accounted into current gain/loss.
18. Long-term amortizable expenses
Long-term amortizable expenses which have been paid but with amortizing period over 1 year (not included). Long-term amortizable expenses are recorded at actual amount occurred, and straight amortized to stipulated periods. In case a long-term expense was not benefiting the succeeding periods, then the balance of the account shall be transferred over to current income account.
19.Employees’ wage
1. Employee compensation comprises short-term compensation, post-service benefit, resignation benefit and other long-term employee benefits.
2. Accounting of short-term wages
In the fiscal period when an employee is providing services, short-term wages actually occurred is recognized as liability, and recorded into current gain/loss account or cost of related asset.
3.Accounting of stipulated beneficiary plan is on following steps:
1) On basis of expected accumulation of welfare, estimations on population variables and financial variables, calculating of liabilities from stipulated beneficiary plan, and recognition of the period
of related liabilities, are performed on basis of non-bias and accordance actuary. Meanwhile,
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report discount is performed on the liabilities from stipulated beneficiary plan to recognize the current value and service cost of the liabilities from the stipulated beneficiary plan.
2) When there is asset involved in the stipulated beneficiary asset, the deficit or premium from the balance of the current value of liabilities of stipulated beneficiary plan over their fair values is recognized as its net liability or net asset. When there is a premium with a stipulated beneficiary plan, the lower one between the premium and the upper limit of the asset is recognized as the net asset of such stipulated beneficiary asset;
3) At end of period,employees’ wages from stipulated beneficiary plan are recognized by three parts including service cost, net interest of net liability or net asset, and recalculated net asset or liability variation. The first two are recorded into current gain/loss or related asset cost, the third is recorded to other gains, which will not be written back to gain/loss in successive fiscal periods, but the amount can be transferred with the range of equity.
4. Accounting of dismissing welfare
Welfares for employees who are dismissed, the earlier one of the following is recognized as employee wage liability, and recorded to current gain /loss:
(1) When the Company cannot, on its own call only, retrieve the dismissing welfare provided by dismissing of service plan or suggestion;
(2) When the costs or expenses related to restructuring involved in the dismissing welfare are recognized by the Company.
5. Accounting of other long-termemployees’ welfares
As of long-term welfares provided to the employees, those which satisfy conditions of the stipulated saving plan are treated according to related regulations of stipulated saving plan; those which other than the aforesaid, are treated according to the stipulated beneficiary plan. In viewing of simplifying accounting treatment, employee wage costs are recognized as service costs, the net amounts of interests of other long-term welfare net liability or asset, along with recalculated variations of the both are recorded to the related gain/loss or cost of related asset.
20. Expected liabilities
(1) When it is very much likely to cause economic interests which can be reliably calculated outflow from the company to fulfill the obligation which is due to giving security outside, contentious matter, quality guarantee of products, onerous contract and other contingency, the company will regard the obligation as anticipation liabilities.
(2) The company will make an initial measurement of anticipation liabilities according to needed expense of best estimation when fulfilling related obligations and check the book value of anticipation liabilities on the balance sheet date.
21.Revenue
1. Recognizing of revenue
(1) Sales of goods
Sales income is recognized when all of these conditions are satisfied: (1) Major risks and rewards attached to the goods have been transferred to the purchaser; (2) The Company holds neither successive management power which is normally attached to ownership, nor effective control, over the goods which have been sold out; (4) Amount of income may be reliably measured; (5) when the costs, occurred or will occur, may be measured reliably.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report (2) Providing of services
At balance sheet day, those service trades (simultaneously satisfying the requirements of those: income can be measured reliably, related economic benefit will flow in very possibly, transaction procedure can be confirmed reliably, happened and happening cost can be measured reliably) which can be reliably estimated are recognized at the percentage of completion, and progress of completion of service is decided by the portion of costs occurred over the estimated total costs. At balance sheet day, those service trades which can not be reliably estimated, if the happened services cost will be compensated, the services income are recognized according to happened service cost and transited to service cost according to same amount; if the happened services cost will not be compensated, the happened services cost are accounted into currentterm’s gain or loss and the services income will not be recognized.
(3) Giving of asset using rights
Income from giving of assets is recognized when satisfying requirements: related economic benefit flows in very possibly, income can be measured reliably. Amount of interest income is calculated according to the time and actual interest rate of the monetary capital is used by other party. Income of using fee is calculated upon the charge period and calculation provided by the related contract or agreement.
2. Practical basis for recognition of revenue
Particular methods for recognition of revenue. The Company is mainly engaged in designing, manufacturing, sales, and service of steam turbines and gas turbines falling in the range of rotating and reciprocating machinery, and parts. Recognition of sales in the country shall satisfy: products had been delivered to the buyer and the amount had been fixed. Payment was received or documents received with great possibility of cash inflow. And the cost of the products is able to be measured appropriately. Recognition of sales outside the country shall satisfy: The goods had been filed by the custom with bill of lading obtained. The amount had been fixed, and payment was received or documents received with great possibility of cash inflow. And the cost of the products is able to be measured appropriately.
22. Government subsidy
1. Government subsidies are recognized while they meet the following conditions at the same time: (1) the Company can meet the conditions attached to the government subsidies; (2) the Company can receive government subsidies. Where government subsidies are monetary assets, they shall be measured by the amount received or receivable. Where government subsidies are non-monetary assets, they shall be measured by the fair value; if the fair value cannot be reliably obtained, they shall be measured by the nominal amount.
2. Recognition basis and accounting of asset-related government subsidy
Government subsidies used for formation of long-term assets through purchase, construction or any other method as stipulated by government documents fall into the category of asset-related government subsidies. If government subsidies are not defined in the government documents, a judgment shall be made on the ground of essential conditions for obtaining the subsidies, among which, ones with an essential condition of formation of long-term assets through purchase, construction or any other method shall be asset-related government subsidies. For government subsidies related to assets, the book value of the relevant assets is deducted or the deferred income
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report is recognized. Where such subsidies are recognized as deferred income, the relevant assets shall, within the useful life of the relevant assets, be reasonably recognized, The method of the system shall be recorded into profit and loss by stages. The government subsidy measured according to the nominal amount shall be directly accounted for in the profits and losses of the current period. Where the relevant assets are sold, transferred, scrapped or damaged before the end of their useful life, Transfer the undistributed balance of deferred income to the current profit or loss of asset disposal.
3. Recognition basis and accounting of income-related government subsidy
A government subsidy other than an asset-related government subsidy is divided into profit-related government subsidies. It is difficult to distinguish between asset-related and revenue-related government subsidies that include both asset-related and revenue-related components. Overall classification as government subvention related to income.Than asset-related subsidies are recognized as income-related government subsidies. Those, which are used to cover costs or losses in subsequent periods, are recognized as deferred income and accounted to current gain/loss to the periods of related expenses. Those, which are used to makeup expenses or losses already occurred, are recorded to current gain/loss account.
4. Government subsidies related to routine business activities of the Company shall be included into other incomes or offset relevant costs and expenses by nature of economic business. Government subsidies irrelevant to routine activities of the Company shall be included into the non-operating receipt and disbursement.
5. Accounting treatment method for interest subsidies for policy-based preferential loans
(1) If the finance allocates interest subsidy funds to a lending banks that serves a loan to the Company at a policy-based preferential rate, the actual debit amount received shall be seen as the entry value of loan and relevant loan costs shall be worked out pursuant to the loan principal and the policy-based preferential rate.
(2) If the finance directly allocates interest subsidy funds to the Company, corresponding interest subsidies shall offset relevant loan costs.
23. Deferred income tax assets/ deferred income tax liabilities
1. Deferred income tax liabilities or assets are recognized at proper rate in the term of retrieving the assets or paying the liabilities according to difference (for not recognized assets and liabilities which tax basis can be recognized, the difference is between the tax basis and the book value) between book value of the assets or liabilities and the tax basis.
2. Deferred income tax assets are recognized limitedly by the income tax which very possibly deduct deductible temporary difference. At balance sheet day, the not-yet recognized deferred income tax assets in previous fiscal term are recognized if have evidence to prove there is enough income tax very possibly to deduct deductible temporary difference.
3. At the balance sheet day, verification will be performed on the book value of differed income tax assets. If it is not possible to obtain enough taxable income to neutralize the benefit of differed income tax assets, then the book value of the differed income tax assets shall be reduced. Whenever obtaining of taxable income became possible, the reduced amount shall be restored.
4. Current income tax and differed income tax are accounted into current gain/loss account as income tax expenditures or gains, but exclude the following income taxes: (1) Merger of enterprises; (2) Transactions or events recognized directly inowners’ equity.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 24. Lease
When the Company is the leasee, the amount is recorded to asset cost or recognized as gain/loss of current period on straight basis to the periods of lease. Initial direct expenses are accounted into current gain/loss. Contingent rentals are recorded to current gain/loss at actual occurrence.
When the Company is the leaser, the amount is recorded to current gain/loss at straight basis to the periods of lease. Initial direct expenses are recorded to current gain/loss other than those with greater amount which are capitalized and recorded to gain/loss of different periods. Contingent rentals are recorded to current gain/loss at actual occurrence.
25. Work safety costs
The Company withdraws and includes work safety costs into relevant product costs or current profits and loss and the subject of "special reserve" as per Measures for Management of Enterprise Withdrawal and Use of Work Safety Costs (Cai Qi[2012] No.16) jointly promulgated by Ministry of Finance and State Administration of Work Safety. As work safety costs withdrawn are used, ones attributable to the cost disbursement shall directly offset special reserve. To form fixed assets, the disbursement incurred for inclusion into the subject of "construction in progress" shall be recognized as fixed assets when safety projects are completed and available for use as expected; meanwhile, costs for forming fixed assets shall offset special reserve, cumulative depreciation in the corresponding amount shall be recognized and depreciation shall no longer be withdrawn for the fixed assets in the following period.
26. Significant accounting policy changes
1. The Company has prepared the 2018 financial statements as required in the Notice of the Ministry of Finance on Revising and Issuing the Format of 2018 General Enterprise Financial Statements (CK[2018] No. 15) and its interpretation as well as the Accounting Standards for Business Enterprises, and the retroactive adjustment approach has been applied in the changes in accounting policies. The report items and amounts in 2017 financial statements subject to great influence are listed below:
Items and amounts of the original statements Items and amounts of the new statements
|||
|-|-|
|715,410,887.68|Notes receivable &Account receivable|
|1,695,217,448.46||
|6,900,000.00|Other receivable|
|16,905,005.57||
|215,409,958.92|Notes payable & Accountpayable|
|882,715,465.65||
|268,860.77|Other payable|
|27,859,617.33||
|209,633,466.66|Long-term payable|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
|237,658,831.07||
|644,178,931.78|Management expenses|
||R & D expenses|

 2. The Ministry of Finance issued the Interpretation of Accounting Standards for Business Enterprises No. 9 - Accounting Treatment of Net Investment Losses Under Equity Method, Interpretation of Accounting Standards for Business Enterprises No. 10 - Depreciation Method Based on Income from Use of Fixed Assets, Interpretation of Accounting Standards for Business Enterprises No. 11 - Amortization Method Based on Income from Use of Intangible Assets and Interpretation of Accounting Standards for Business Enterprises No. 12 - Whether the Provider and Receiver of Key Manager Services Are Related Parties in 2017. Since January 1, 2018, the Company has executed the above interpretations of the Accounting Standards for Business Enterprises without any influence on the initial financial data of the Company.
IV. Taxation
1. Main categories and rates of taxes
||
|-|
|Tax base|
|Sales of goods or providing of taxable laborservice|
|For those on price basis, taxesare paid at 1.2% of the balanceof original value of the propertyafter deducting of 30%; for thoseon rental basis, taxes are paidat 12% of the rental.|
|Turnover tax payable|
|Turnover tax payable|
|Turnover tax payable|
|Amount of income taxable|

Notes of the disclosure situation of the taxpaying bodies with different enterprises income tax rate
Name Income tax rate
The Company , Zhongneng Company, Packaged Tech. Company,Casting
Company, Zhejiang Huayuan Steam Turbine Machinery Co.,Ltd. and 15%
Hangzhou Guoneng Steam Turbine Engineering Co.,Ltd.
angzhou Zhongneng Steam Turbine Power (Indonesia) Co., Ltd. [Note]
OtherSubsidiary（Domestic） 25%
Note :Hangzhou Zhongneng Steam Turbine Power (Indonesia) Co., Ltd. registered in
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Indonesia overseas subsidiaries, the applicable local relevant tax laws and regulations.
2. Preferential tax
1. According to the document “Notice for Qualification of High-tech Enterprises” (GKHZD〔2017〕No.201) issued by Department of Science and Technology High-tech Development Center, the Company along with Hangzhou Zhongneng Steam Turbine Power Co., Ltd. ,Zhejiang Packaged Technologies Development Co., Ltd., Zhejiang Huayuan Steam Turbine Machinery Co.,Ltd. and Hangzhou Guoneng Steam Turbine Engineering Co.,Ltd.– subsidies of the Company, were qualified as high-tech enterprises for term of three years. Therefore they enjoy15% of tax for 2017.
2. According to the document “Notice for Qualification of High-tech Enterprises” (GKHZD〔2016〕No.149) issued by Department of Science and Technology High-tech Development Center, Hangzhou Steam Turbine Casting Co.,Ltd– subsidies of the Company, were qualified as high-tech enterprises for term of three years. Therefore they enjoy15% of tax for 2018.
V. Notes to the Consolidated Financial Statements
(I) Notes to the Consolidated Financial Statements
1.Monetary Capital
(1)The detail situation
||
|-|
|End of term|
|128,198.82|
|1,297,059,605.97|
|85,204,204.80|
|1,382,392,009.59|
|4,535,870.05|

 Othernotes：
The ending bank deposits include a court-blocked deposit with a restricted usage of RMB 35,000,000.00, ETC margin of RMB 2,000.00； Other monetary fund composes of RMB74,201,389.54 of security for bank acceptance notes RMB10,683,802.85 of security for Letter of credit, RMB318,000.00 of security for bank guarantee letter and refundable deposit without a restricted usage of RMB 1,012.41.
2.Notes receivable& Account receivable
(1)The detail situation
||
|-|
|End of term|
|595,089,175.22|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|1,940,798,255.26|
|2,535,887,430.48|

 (2) Notes receivable
1)The detail situation
||||||
|-|-|-|-|-|
|End of term|||||
|Book balance|Bad debtprovision|Book value|Book balance|Bad debtprovision|
|574,532,175.22||574,532,175.22|691,199,387.68||
|20,557,000.00||20,557,000.00|24,211,500.00||
|595,089,175.22||595,089,175.22|715,410,887.68||

 (2) Notes receivable pledged by the Company at the period-end
Amount on pledge
Items
Bank acceptance 88,112,807.60
Total 88,112,807.60
（3）Notes receivable which had endorsed by the Company or had discounted and had not due on the balance sheet date at the period-end
||
|-|
|Amount of recognitiontermination at theperiod-end|
|607,704,623.69|
|607,704,623.69|

The acceptor of the bank acceptance bill is a commercial bank, because the commercial bank has high credit, the possibility of the bank acceptance bill not being paid at maturity is low, so the company has endorsed or discounted the bank acceptance bill to terminate the confirmation. However, if the bill is not paid at maturity, the company shall remain jointly and severally liable to the holder under the provisions of the bill act.
3. Account receivable
(1)The detail situation
①Detailed categories
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report End of term
|||||
|-|-|-|-|
|Book balance||Bad debt provision||
|Amount|Proportion|Amount|Proportion|
|2,982,887,216.78|99.01|1,042,088,961.52|34.94|
|29,819,607.69|0.99|29,819,607.69|100.00|
|3,012,706,824.47|100.00|1,071,908,569.21|35.58|

 (Continued)
Beginning of term
|||||
|-|-|-|-|
|Book balance||Bad debt provision||
|Amount|Proportion|Amount|Proportion|
|2,695,568,129.24|98.91|1,000,350,680.78|37.11|
|29,819,607.69|1.09|29,819,607.69|100.00|
|2,725,387,736.93|100.00|1,030,170,288.47|37.80|

② Receivable accounts in the group on which bad debt provisions are provided on age basis
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report End of term
Aging
|||
|-|-|
|Book balance|Bad debt provision|
|1,277,800,662.60|63,890,033.12|
|418,616,365.94|41,861,636.59|
|306,732,722.96|92,019,816.90|
|223,862,853.79|134,317,712.27|
|229,374,244.26|183,499,395.41|
|526,500,367.23|526,500,367.23|
|2,982,887,216.78|1,042,088,961.52|

 2) The current amount of provision for bad debts is RMB42,755,890.74 ; recovery or payback
for bad debts Amount is RMB0.00.
(3)The current accounts receivable write-offs situation
①Actual write-off of accounts receivable for the current period is RMB 1,017,610.00.
② The significant actual write-off accounts receivable for the current period
|||||
|-|-|-|-|
|Nature ofaccountreceivable|Amount written off|Reason forwritten off|Verification procedures|
|Goods|399,206.80|Uncollectibleamount|The examined and adopted toGeneral Manager Office|
|Goods|225,000.00|Uncollectibleamount|The examined and adopted toGeneral Manager Office|
|Goods|362,000.00|Uncollectibleamount|The examined and adopted toGeneral Manager Office|
|Goods|31,403.20|Uncollectibleamount|The examined and adopted toGeneral Manager Office|
||1,017,610.00|||

（4）Receivables account of the top five parties
|||
|-|-|
|Amount|Proportion(%)|
|664,163,157.69|22.05|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
|244,356,995.05|8.11|
|179,184,689.73|5.95|
|63,427,500.00|2.11|
|56,048,293.87|1.86|
|1,207,180,636.34|40.08|

 4. Prepayments
（1）Age analysis
1)The detail situation
||||||||
|-|-|-|-|-|-|-|
|Balance in year-end|||||||
|Book balance|Proportion(%)|Provisionfor baddebt|Book value|Book balance|Proportion(%)|Provisionfor baddebt|
|339,805,990.35|91.60||339,805,990.35|414,480,174.64|92.90||
|22,067,247.82|5.95||22,067,247.82|10,312,288.25|2.31||
|1,208,614.00|0.33||1,208,614.00|4,033,538.38|0.90||
|7,877,138.57|2.12||7,877,138.57|17,340,709.50|3.89||
|370,958,990.74|100.00||370,958,990.74|446,166,710.77|100.00||

 (2) Top 5 of the prepayment amount
||
|-|
|Amount|
|51,691,853.97|
|40,361,122.85|
|17,050,557.25|
|16,711,942.43|
|16,609,627.00|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Subtotal 142,425,103.50 38.40 4. Other account receivable
1)The detail situation
||
|-|
|End ofterm|
|16,557,292.60|
|15,995,166.16|
|32,552,458.76|

 (2) Dividend receivable
1)The detail situation
||
|-|
|End ofterm|
|16,557,292.60|
|16,557,292.60|

 2) Important dividend receivable over 1 year of age
||||
|-|-|-|
|End ofterm|Age|Reasons for notrepossessing|
|6,900,000.00|1-2 years|Stock right pledge|
|6,900,000.00|||

(3) Other receivable
1)The detail situation
① Detailed categories
End of term
|||||
|-|-|-|-|
|Book balance||Bad debt provision||
|Amount|Proportion %|Amount|Proportion %|
|29,400,276.21|100.00|13,405,110.05|45.60|
|29,400,276.21|100.00|13,405,110.05|45.60|

(Continued)
Category Beginning of term
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|Book balance||Bad debt provision||
|Amount|Proportion %|Amount|Proportion %|
|28,165,573.86|100.00|11,260,568.29|39.98|
|28,165,573.86|100.00|11,260,568.29|39.98|

② Other receivable accounts in the group on which bad debt provisions are provided on age
basis
End of term
Aging
|||
|-|-|
|Other receivable|Bad debt provision|
|11,640,599.16|582,029.96|
|2,978,522.14|297,852.21|
|1,127,566.07|338,269.82|
|2,525,398.00|1,515,238.80|
|2,282,357.90|1,825,886.32|
|8,845,832.94|8,845,832.94|
|29,400,276.21|13,405,110.05|

 2) The withdrawal amount of the bad debt provision during the reporting period was ofRMB2,144,541.76；the amount of the reversed or collected part during the reporting period was of RMB 0.00.
3) No write-off of other receivables for the current period
4) Other accounts receivable classified by the nature of accounts
||
|-|
|Closing book balance|
|2,153,878.45|
|16,937,448.95|
|5,251,040.00|
|1,327,534.34|
|3,730,374.47|
|29,400,276.21|

5) Top 5 of Other accounts receivable
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
|Accountproperty|Book balance|Age|Proportion(%)|Bad debtprovision|
|Deposit|3,710,320.94|Over 5 years|12.62|3,710,320.94|
|Investment|3,431,600.00|Over 5 years|11.67|3,431,600.00|
|The export taxrebate|2,153,878.45|Within 1year|7.33|107,693.92|
|Deposit|1,200,000.00|Within 1year|4.08|60,000.00|
|Deposit|979,061.42|Within 1year|3.33|48,953.07|
||11,474,860.81||39.03|7,358,567.93|

 5. Inventories
(1) Details
||||||
|-|-|-|-|-|
|End of term|||||
|Book balance|Impairment|Book value|Book balance|Impairment|
|585,528,478.85|53,187,189.03|532,341,289.82|522,590,238.59|309,803.19|
|731,748,385.18|25,188,298.67|706,560,086.51|584,647,307.67|15,617,324.99|
|1,093,823,673.99|144,603,707.45|949,219,966.54|1,098,811,798.77|97,546,524.93|
|2,411,100,538.02|222,979,195.15|2,188,121,342.87|2,206,049,345.03|113,473,653.11|

 (2) Inventory depreciation provision
1) Details
||||||
|-|-|-|-|-|
|Beginning of term|Increased thisperiod||Decreased thisperiod||
||Provided|Others|Written|Others|
|309,803.19|53,187,189.03||309,803.19||
|15,617,324.99|9,570,973.68||||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|97,546,524.93|51,517,224.09|4,460,041.57|
|113,473,653.11|114,275,386.80|4,769,844.76|

 2) The specific basis for determining the net realizable value, and the reasons for the reversal of the inventory depreciation reserve for the current period
||
|-|
|Specific basis for recognition of net realizable value|
|The net realizable value shall be recognized by the amount ofthe estimated selling prices minus the estimated selling costsand relevant taxes and dues|
|The net realizable value shall be recognized by the amount ofthe estimated selling prices minus the estimated selling costsand relevant taxes and dues, wherein regarding suspendedprojects expected not be to be recovered or projects whose salesagreements are released, the net realizable value shall berecognized by the expected recoverable compensation|

6. Other current asset
||
|-|
|End ofterm|
|1,156,870,000.00|
|28,260,278.71|
|2,804,366.47|
|813,310.56|
|1,188,747,955.74|

[Note]: Financial products are financial products and trust financial products, are in
non-guaranteed floating-income short-term financial products, and no active market price.
7. Available for sale of financial assets
(1) Detail
||||||
|-|-|-|-|-|
|End of term|||||
|Book balance m|pairment provision|Book value|mBook balanceo|pairmen|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|2,011,876,524.40||2,011,876,524.40|2,239,086,521.28|
|143,380,030.80|25,180,000.00|118,200,030.80|178,694,462.80|
|2,155,256,555.20|25,180,000.00|2,130,076,555.20|2,417,780,984.08|

 (2) Available-for-sale financial assets measured by fair value at the period-end
Available-for-sale
Type
equity instruments
Equity instruments cost 390,954,040.00
Fair value 2,011,876,524.40
The amount of change in the fair value that is accumulated
1,620,922,484.40
into other comprehensive income
Note: Shares of Bank of Hangzhou Co., Ltd. held by the Company.
(3)Available-for-sale financial assets measured by cost at the period-end
Book balance
Investee
||||
|-|-|-|
|Period-begin|Increase|Decrease|
|100,000,000.00|50,000,000.00|100,000,000.00|
|30,000,000.00|||
|15,159,689.58||1,314,432.00|
|15,000,000.00|||
|10,000,000.00|||
|5,534,773.22|||
|2,400,000.00|||
|600,000.00|||
||16,000,000.00||
|178,694,462.80|66,000,000.00|101,314,432.00|

(Continued)
|||
|-|-|
|Impairment provision|Proportion %|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
|Period-begin|Increase|Decrease|Period-end||
|||||82.64|
||25,180,000.00||25,180,000.00|15.00|
|||||18.00|
|||||3.84|
|||||33.33|
|||||35.62|
|||||48.00|
|||||6.00|
|||||-|
||25,180,000.00||25,180,000.00||

 (4) Other note
1) The company, as an investor, does not have the power to participate in the decision-making of financial and operational policies of the invested units including Hangzhou Jushi Investment Partnership (Limited Partnership), Zhejiang Tianhang Steam Turbine Auxiliary Machinery Co., Ltd, Zhejiang Gas Turbine& Turbomachinery Innovation Center, Greenesol power systems PVT Ltd. Therefore, the cost method is used to make the accounting treatment on this kind of equity investment, with in accordance with the criteria for the recognition and measurement of financial instruments.
2) According to the agreement made by and between the subsidiary Auxiliary Machinery Company and Wuxi Xinchang Steel Pipe Co., Ltd. (hereinafter referred to as Wuxi Xinchang Company), if Wuxi Xinchang Company fails to realize the expected profit, it shall give a cash compensation to Auxiliary Machinery Company. Since Wuxi Xinchang Company failed to realize the expected profit in 2016, it should give a cash compensation of RMB 3,930,471.59 to Auxiliary Machinery Company. Auxiliary Machinery Company received the first sum of cash compensation of RMB 1,314,432.00 in the current period and is expected to receive the remaining compensation
in the following two years.
8. Long-term equity investments
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report (1)Classification
||||||
|-|-|-|-|-|
|End of term|||||
|Bookbalance|Impairmentprovision|Book value|Bookbalance|Impairmentprovision|
|8,221,439.29||8,221,439.29|5,800,000.00||
|8,221,439.29||8,221,439.29|5,800,000.00||

 (2) Detail
|||||
|-|-|-|-|
|Opening balance||||
||Additionalinvestment|Decreaseinvestment|Investmentgains andlossesrecognizedunder theequity method|
|5,800,000.00|2,040,000.00||-585,160.71|
|5,800,000.00|2,040,000.00||-585,160.71|

(Continued)
||||||
|-|-|-|-|-|
|Increase /decrease||||Closing balance|
|Changes ofother equity|Cash bonusor profitsannounced toissue|Withdrawalofimpairmentprovision|Other||
|966,600.00||||8,221,439.29|
|966,600.00||||8,221,439.29|

9. Fixed assets
(1) Details
|||||
|-|-|-|-|
|Houses &buildings|Machineryequipment|Transportationequipment|Office equipment|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|463,997,001.86|1,002,701,532.72|28,655,573.48|98,322,465.88|
|268,381,842.95|20,361,089.24|425,491.38|2,794,017.10|
||1,374,467.79|425,491.38|815,748.09|
|268,381,842.95|18,986,621.45||1,978,269.01|
||160,528.75|1,146,300.81|446,325.21|
||160,528.75|1,146,300.81|446,325.21|
|732,378,844.81|1,022,902,093.21|27,934,764.05|100,670,157.77|
|190,878,065.10|725,830,773.54|20,917,542.82|82,687,283.71|
|14,866,607.64|56,231,871.20|1,795,896.84|1,860,964.61|
|14,866,607.64|56,231,871.20|1,795,896.84|1,860,964.61|
||60,834.96|1,087,023.72|428,187.10|
||60,834.96|1,087,023.72|428,187.10|
|205,744,672.74|782,001,809.78|21,626,415.94|84,120,061.22|
|1,504,928.24|4,033,520.42||1,113,523.01|
|1,504,928.24|4,033,520.42||1,113,523.01|
|525,129,243.83|236,866,763.01|6,308,348.11|15,436,573.54|
|271,614,008.52|272,837,238.76|7,738,030.66|14,521,659.16|

 (2)Details of fixed assets failed to accomplish certification of property
||
|-|
|Book value|
|222,083,722.00|
|41,944,793.30|
|264,028,515.30|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 10. Construction in process
（1）Details
||||||
|-|-|-|-|-|
|End of term|||||
|Boook balance|Impairmentsion|Book value|Boook balance|Impairmentsion|
|429,609,053.59||429,609,053.59|120,402,096.57||
||||121,431,247.76||
|7,779,939.24||7,779,939.24|4,788,559.92||
||||1,213,675.18||
|8,457,875.95||8,457,875.95|4,609,323.41||
|8,920,460.15||8,920,460.15|3,476,757.25||
|454,767,328.93||454,767,328.93|255,921,660.09||

 (1) Changes of significant construction in progress
||||||
|-|-|-|-|-|
|Budget(In RMB10,000)|Opening balance|Increase|Transferred tofixedassets(Note )|Other decrease|
|173,328.76|120,402,096.57|362,129,955.27|52,922,998.25||
|23,142.53|121,431,247.76|109,994,014.28|231,425,262.04||
|797.00|4,788,559.92|2,991,379.32|||
|170.35|1,213,675.18|489,783.64|519,698.14|1,183,760.68|
||4,609,323.41|7,626,368.59|3,777,816.05||
||3,476,757.25|6,144,661.83|700,958.93||
|197,438.64|255,921,660.09|489,376,162.93|289,346,733.41|1,183,760.68|

 (Continued)
||||||
|-|-|-|-|-|
|Proportion %|Projectprocess|Capitalization ofinterest|Including:capitaliz|Capitalization ofinterest|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
||||ation ofinterestthisperiod|rate (%)|
|27.84|UnderConstruction|4,171,926.54|2,267,236.13|1.20|
|100.00|Completed||||
|97.62|UnderConstruction||||
|100.00|Completed||||
||UnderConstruction||||
||UnderConstruction||||
|||4,171,926.54|2,267,236.13||

Note：Other reduction refers to the original value of intangible assets transferred from the completion of the current period to 1,183,760.68 yuan
11. Intangible assets
（1）Details
||||
|-|-|-|
|Landusing right|Patent|Software|
|332,298,312.33|309,433.96|1,979,342.11|
|||1,260,683.76|
|||76,923.08|
|||1,183,760.68|
|332,298,312.33|309,433.96|3,240,025.87|
|48,444,955.34|242,000.00|229,494.51|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|6,661,885.22|16,450.38|512,230.22|
|6,661,885.22|16,450.38|512,230.22|
|55,106,840.56|258,450.38|741,724.73|
|277,191,471.77|50,983.58|2,498,301.14|
|283,853,356.99|67,433.96|1,749,847.60|

 12. Long-term amortize expenses
|||||
|-|-|-|-|
|Balance inyear-begin|Increase in thisperiod|Amortizedexpenses|Other loss|
|253,886.90||253,886.90||
|253,886.90||253,886.90||

13. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets had not been off-set
||||
|-|-|-|
|Balance in year-end|||
|Deductible temporarydifference|Deferred income taxassets|Deductible temporarydifference|
|1,339,474,275.36|207,199,125.83|1,160,614,665.91|
|41,572,138.74|6,430,832.03|68,494,522.27|
|||46,151,636.66|
|2,218,329.11|332,749.37|2,981,985.19|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|1,383,264,743.21|213,962,707.23|1,278,242,810.03|

 (2) Deferred income tax liabilities had not been off-set
||||
|-|-|-|
|Balance in year-end|||
|Deductible temporarydifference|Deferred income taxliabilities|Deductible temporarydifference|
|1,620,922,484.40|243,138,372.66|1,848,132,481.28|
|6,651,971.67|997,795.75|6,651,971.67|
|225,187.70|33,778.16||
|1,627,799,643.77|244,169,946.57|1,854,784,452.95|

 (3)Details of income tax assets not recognized
||
|-|
|End of term|
|650,570.73|
|25,565,760.83|
|26,216,331.56|

 (4) The un-recognized deductible losses of deferred income tax assets will due in the following
years:
||
|-|
|End of term|
|439,625.66|
|712,938.27|
|5,953,854.74|
|18,459,342.16|
|25,565,760.83|

 14.Short-term loans
||
|-|
|Balance in year-end|
|47,900,000.00|
|37,700,000.00|
|54,000,000.00|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Total 139,600,000.00 115,500,000.00 15. Notes payable& Account payable
(1) Detail
||
|-|
|Balance in year-end|
|263,897,462.79|
|1,086,685,918.74|
|1,350,583,381.53|

 (2) Notes payable
||
|-|
|Balance in year-end|
|263,897,462.79|
|263,897,462.79|

 (3) Account payable
||
|-|
|Balance in year-end|
|1,009,733,728.93|
|60,410,063.35|
|16,542,126.46|
|1,086,685,918.74|

 16. Advances received
||
|-|
|Balance in year-end|
|2,582,234,158.36|
|2,582,234,158.36|

 17.Employees’ wage payable
(1) Details
||||
|-|-|-|
|Beginning of term|Increased thisperiod|Decreased thisperiod|
|56,866,150.55|639,945,732.82|633,388,551.78|
|22,659,623.14|75,563,470.81|75,255,470.25|
||44,974.70|44,974.70|
|79,525,773.69|715,554,178.33|708,688,996.73|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report (2) Details of short term wages
||||
|-|-|-|
|Beginning of term|Increased thisperiod|Decreased thisperiod|
|43,714,190.74|499,302,495.69|494,857,626.94|
||32,400,702.76|32,400,702.76|
|5,917,986.12|47,730,355.04|46,786,785.87|
|5,505,850.79|41,755,844.73|40,854,799.89|
|122,710.40|1,435,735.69|1,462,058.18|
|289,424.93|4,538,774.62|4,469,927.80|
|113,749.96|47,542,992.00|47,545,320.00|
|7,120,223.73|12,969,187.33|11,798,116.21|
|56,866,150.55|639,945,732.82|633,388,551.78|

 (3) Details of fixed provision scheme
||||
|-|-|-|
|Beginning of term|Increased thisperiod|Decreased thisperiod|
|3,985,531.77|54,744,525.50|54,649,668.61|
|140,443.92|1,962,993.27|1,957,498.92|
|18,533,647.45|18,855,952.04|18,648,302.72|
|22,659,623.14|75,563,470.81|75,255,470.25|

 18. Tax Payable
||
|-|
|Balance in year-end|
|29,776,940.88|
|23,909,724.68|
|1,043,483.57|
|2,366,801.27|
|1,520,839.72|
|1,654,687.31|
|1,014,509.41|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|676,339.74|
|441,874.04|
|62,405,200.62|

 19.Other account payable
(1) Details
||
|-|
|End of term|
|437,314.72|
|36,466,988.29|
|36,904,303.01|

 (2) Interest payable
||
|-|
|End of term|
|245,102.36|
|192,212.36|
|437,314.72|

 (3) Other payable
||
|-|
|End of term|
|12,075,403.25|
|22,537,821.34|
|1,853,763.70|
|36,466,988.29|

 20. Non-current liabilities due within 1 year
||
|-|
|End of term|
|100,100,000.00|
|100,100,000.00|

 21. Long-term loan
Items End of term Beginning of term
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|12,700,000.00|
|10,000,000.00|
|22,700,000.00|

 22.Long term account payable
(1) Details
||
|-|
|End of term|
|209,598,799.99|
|265,277,651.27|
|474,876,451.26|

 (2) Long term account payable
(1) Details
||
|-|
|End of term|
|208,000,000.00|
|1,268,799.99|
|330,000.00|
|209,598,799.99|

 2) Other note
According to the relevant agreement of the National Development Fund Investment Contract (hereinafter referred to as the Investment Contract) jointly signed by the Company, National Development Fund Co., Ltd. (hereinafter referred to as the NDF), Hangzhou Steam Turbine Industry Co., Ltd. and Hangzhou Steam Turbine Group, the NDF invested RMB 208,000,000.00 in Hangzhou Steam Turbine Industry Co., Ltd., the subsidiary, The NDF obtains1.2% of the proceeds through dividends or repurchasing premium each year for the above investment; under the investment contract, Hangzhou Steam Turbine Group will transfer its shares of Steam Turbine Industry Co., Ltd from 2019 to the NDF by installment. Hangzhou Steam Turbine Industry Co., Ltd has received the above investment on December 27, 2016, according to the agreement of the investment contract on the relevant investment returns, The Company reports it as a long-term payables,the current accrued income is RMB2,496,000.00. Cumulative recognized income payable is RMB 5,019,733.33.
(3) Special Payable
1) Detail
||||
|-|-|-|
|Beginning of term|Increased this period|Decreased this|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|||period|
|237,658,831.07|69,899,656.20|42,280,836.00|
|237,658,831.07|69,899,656.20|42,280,836.00|

 2) Other note
The current increase is attributable to the second sum of land requisition and demolishing compensation received by the Company subject to the overall removal plan of Hangzhou Municipal Government; the current decrease includes the Company's current removal cost of RMB 110,855.00 transferred to other incomes and complete plant cost of RMB 42,169,981.00 paid to Steam Turbine Heavy Industry Company upon the current construction and conversion to fixed assets and transferred to the deferred income.For details, please refer to note XII 2 of this financial statement. 23. Deferred income
|||||
|-|-|-|-|
|Beginning ofterm|Increased thisperiod|Decreased thisperiod|End of term|
|4,063,615.00|42,169,981.00|1,558,467.70|44,675,128.30|
|4,063,615.00|42,169,981.00|1,558,467.70|44,675,128.30|

Note: For the government subsidy of this period counted into the current profit and loss, see details at government subsidy statements at additional notes of project notes annotated under of this combined financial statement
24. Stock capital
|||||||
|-|-|-|-|-|-|
|BalanceYear-beginning|Increase/decrease this time (+ , - )|||||
||Issuingof newshare|Bonusshares|Transferredfromreserves|Other|Subtotal|
|754,010,400.00||||||

25. Capital reserves
(1) Detail
||||
|-|-|-|
|Year-beginning|Increase in the|Decrease in the|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|balance|current period|current period|
|81,769,963.93|12,139,330.63||
|57,775,125.09|||
|139,545,089.02|12,139,330.63||

 (2) Other note
1) In September 2018, the subsidiary Touping Company increased capital of its affiliated joint venture Zhejiang Zhongrun Turbine Technology Co., Ltd., leading to a balance of RMB 966,600.00 between the due fair value share of recognizable net assets of invested organizations calculated by the former shareholding ratio and the former book value of investment, which is recognized by the subsidiary as capital reserve-capital stock premium.
2) In December 2018, minority shareholders of the subsidiary Casting&amp; Forging Company unilaterally increased capital in the premium, leading to an increase of RMB 11,172,730.63 in the due equity of the Company, which is recognized as capital reserve-capital stock premium at the level of consolidated financial statements.
26. Other comprehensive income
|||
|-|-|
|Beginning of term||
||Amount occurredbefore incometax of theperiod|
|1,570,358,510.09|-227,354,408.75|
|1,570,912,609.09|-227,209,996.88|
|-554,099.00|-144,411.87|
|1,570,358,510.09|-227,354,408.75|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report（Continued）
||||
|-|-|-|
|Occurred current term|||
|Less:Income taxexpenses|Attributableto the parentco. after tax|Attributableto minorityshareholdersafter tax|
|-34,081,499.53|-193,189,987.35|-82,921.87|
|-34,081,499.53|-193,128,497.35||
||-61,490.00|-82,921.87|
|-34,081,499.53|-193,189,987.35|-82,921.87|

27.Special reserves
(1)Detail
||||
|-|-|-|
|Beginning of term|Increased thisperiod|Decreased thisperiod(Note)|
|25,369,714.61||4,349,043.14|
|25,369,714.61||4,349,043.14|

Note: The current decrease covers the work safety costs paid by the Company for buying safety protection articles and equipment and the work safety costs of RMB 1,141,291.88 offsetting the decrease of special reserve of the subsidiary entitled to the Company caused by unilateral capital increase of minority shareholders of the subsidiary Casting Company.
(2) Other note
On December 5, 2016, Upon the application of the Company and the approval of Hangzhou Safety Production Supervision and Administration Bureau (HSPSAB), the minimum reserved amount for the collection and use of the safety production cost of the Company and its subsidiaries is RMB 20 million. If the safety production costs that have been withdrawn in previous years have exceeded the minimum reserved amount, it will no longer be reduced; if the safety production costs for the subsequent years are less than the above-mentioned minimum reserved amount, withdraw in the current year to compensate up to the minimum reserved amount.
28. Surplus reserves
||||
|-|-|-|
|Beginning of term|Increased thisperiod|Decreased thisperiod|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|621,112,807.78|
|621,112,807.78|

 29. Retained profit
||
|-|
|Current term|
|2,774,420,288.05|
|345,824,339.47|
|37,700,520.00|
|3,082,544,107.52|

 (II) Notes to items in the consolidated income statement
1. Business income and Business cost
||||
|-|-|-|
|Occurred current term|||
|Income|Cost|Income|
|4,506,238,820.34|3,090,243,038.00|3,309,136,671.06|
|136,568,769.35|129,778,781.91|138,005,998.43|
|4,642,807,589.69|3,220,021,819.91|3,447,142,669.49|

 2. Business tax and surcharge
||
|-|
|Occurred current term|
|18,079,695.53|
|7,861,289.45|
|5,239,921.16|
|1,952,496.87|
|4,944,097.41|
|3,811,689.17|
|64,342.35|
|41,953,531.94|

3. Sales expense
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|Amount of this period|
|67,589,535.09|
|40,177,043.84|
|25,828,561.22|
|8,954,165.29|
|17,644,059.53|
|2,677,505.58|
|3,572,369.51|
|2,119,639.04|
|1,006,512.46|
|599,743.29|
|4,036,628.17|
|174,205,763.02|

 4. Administrative expense
||
|-|
|Amount of this period|
|337,675,591.39|
|18,248,724.80|
|8,088,099.28|
|26,203,998.25|
|9,677,236.03|
|3,945,766.48|
|8,815,990.20|
|2,792,473.27|
|37,830,291.82|
|453,278,171.52|

 5. R& D cost
||
|-|
|Amount of this period|
|106,515,148.37|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|134,162,422.65|
|13,280,416.04|
|5,920,537.16|
|2,084,603.76|
|2,680,760.78|
|264,643,888.76|

 6. Financial expenses
||
|-|
|Amount of this period|
|13,540,383.97|
|16,327,538.73|
|-16,756,166.26|
|2,120,431.11|
|-17,422,889.91|

 7. Asset impairment loss
||
|-|
|Amount of this period|
|44,900,432.50|
|114,275,386.80|
|25,180,000.00|
|184,355,819.30|

 8. Other income
|||
|-|-|
|Amount of thisperiod|Amount of lastperiod|
|1,558,467.70|1,359,280.00|
|23,882,536.14|8,836,391.25|
|361,654.33||
|25,802,658.17|10,195,671.25|

Refer to Notes of the Financial Statements in conjunction with notes of the consolidated
financial statements-others-government subsidies for current government subsidies included into
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report other incomes.
9. Investment income
||
|-|
|Amount of this period|
|-585,160.71|
|69,687,390.93|
|48,433,535.22|
|117,535,765.44|

 10.Assets disposal income
|||
|-|-|
|Amount of thisperiod|Amount of lastperiod|
|-9,843.23|2,740,865.13|
|-9,843.23|2,740,865.13|

 11. Non-Operation income
|||
|-|-|
|Amount of thisperiod|Amount of lastperiod|
|2,798.00||
|4,697,324.21|7,101,662.20|
||254,099.61|
|7,064,832.00||
|373,477.71|719,897.38|
|12,138,431.92|8,075,659.19|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 12. Non-operational expenditure
|||
|-|-|
|Amount of thisperiod|Amount of lastperiod|
|33,432.93|60,243.24|
|170,000.00|160,000.00|
|6,179,774.33|1,017,449.18|
||5,660.04|
|217,852.65|386,417.98|
|568,375.48|5,909.50|
|7,169,435.39|1,635,679.94|

 13. Income tax expenses
(1) Details
||
|-|
|Amount of this period|
|71,678,315.72|
|-15,749,359.54|
|55,928,956.18|

(2) Adjustment process of accounting profit and income tax expenses
||
|-|
|Amount of this period|
|470,069,062.06|
|68,651,882.72|
|6,032,485.73|
|2,838,746.17|
|-9,270,055.74|
|1,213,881.52|
|-15,405,319.57|
|-188,829.45|
|52,453.21|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|-732,453.30|
|2,736,164.89|
|55,928,956.18|

 14. Other Comprehensive income
Please find the statement in the notes of consolidated balance sheet.
(III) Notes to consolidated cash flow statement items
(1) Other cash received from operating activities
||
|-|
|Amount of this period|
|16,437,522.61|
|4,920,547.56|
|195,099,239.74|
|17,968.60|
|6,617,872.95|
|855,635.30|
|223,948,786.76|

Notes：Interest of deposit received from the sum invested of China Development Fund in the year of 2018 is included.
2. Other cash paid for Operating activities
||
|-|
|Amount of this period|
|102,943,029.61|
|90,399,413.49|
|10,685,901.70|
|2,120,431.11|
|136,776,129.79|
|35,000,000.00|
|970,622.48|
|1,036,205.28|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Total 379,931,733.46 338,723,549.80 3.Other investment-related cash received
||
|-|
|Amount of this period|
|4,437,769,329.00|
|69,899,656.20|
|4,507,668,985.20|

 4. Other cash paid for investment activities
||
|-|
|Amount of this period|
|4,707,907,000.00|
|4,707,907,000.00|

 5. Other financing-related cash received
||
|-|
|Amount of this period|
|2,530,666.67|
|2,530,666.67|

 6. Supplement Information for cash flow statement
（1）Supplement Information for cash flow statement
||
|-|
|Amount of this period|
|414,140,105.88|
|184,355,819.30|
|74,755,340.29|
|7,190,565.82|
|253,886.90|
|9,843.23|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|30,634.93|
|-4,446,827.42|
|-117,535,765.44|
|-15,783,137.70|
|33,778.16|
|-209,828,327.48|
|-137,083,068.76|
|452,097,869.18|
|-3,757,549.69|
|644,433,167.20|
|1,262,186,817.20|
|1,137,492,834.83|
|124,693,982.37|

Note：It is special reserve current period net add amount
（2）Composition of cash and cash equivalents
||
|-|
|Balance inyear-end|
|1,262,186,817.20|
|128,198.82|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|1,262,057,605.97|
|1,012.41|
|1,262,186,817.20|

(3) Monetary funds other than cash and cash equivalents
||
|-|
|Balance in year-end|
|74,201,389.54|
|10,683,802.85|
|35,000,000.00|
|318,000.00|
|2,000.00|
|120,205,192.39|

 (4) Amount of transfer by endorsement of commercial bills not related to cash receipt and disbursement
||
|-|
|Balance in year-end|
|1,334,082,169.12|
|1,331,582,169.12|
|1,700,000.00|
|800,000.00|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report (IV)Other
1. Assets with limitation on ownership or using rights
||
|-|
|Closing book value|
|120,205,192.39|
|88,112,807.60|
|16,557,292.60|
|333,592,000.00|
|121,500,420.99|
|293,963,202.50|
|85,918,827.81|
|1,059,849,743.89|

2. Monetary items in foreign currencies
|||
|-|-|
|Balance at end of period|Exchange rate|
|21,453,930.49|6.8632|
|134,543.67|7.8473|
|5.51|0.8762|
|30,055.00|0.061887|
|7,247,761,625.85|0.000473|
|29,160,574.90|6.8632|
|550,828.43|7.8473|
|14,489,565,804.00|0.000473|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
|47,726.12|5.0062|
|500,000.00|6.8632|
|1,500.00|7.8473|
|570,979.96|6.8632|
|22,100.86|7.8473|
|6,449,526,536.00|0.000473|

 3. Government subsidy
(1) Detail
1) Government subsidies related to assets
|||||
|-|-|-|-|
|Beginningof term|Newsubsidyincurrentperiod|Amortizationfor the currentperiod|End ofterm|
|259,020.00||28,780.00|230,240.00|
|259,020.00||28,780.00|230,240.00|
|102,690.00||11,410.00|91,280.00|
|320,000.00||160,000.00|160,000.00|
|2,909,025.00||997,380.00|1,911,645.00|
|213,860.00||106,930.00|106,930.00|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
||42,169,981.00|225,187.70|41,944,793.30|
|4,063,615.00|42,169,981.00|1,558,467.70|44,675,128.30|

2) Income-related government subsidies used for compensation of relevant costs and expenses or losses incurred in the Company
||
|-|
|Amount|
|16,710,609.09|
|2,207,200.00|
|1,694,108.44|
|1,512,446.88|
|628,077.61|
|344,300.00|
|298,610.24|
|272,500.00|
|110,855.00|
|103,828.88|
|23,882,536.14|

(2)The current amount of government subsidies included into the current profits and loss is RMB 25,441,003.84.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report VI. Equities in Other Entities
(I) Equity in major subsidiaries
1. Composition of major subsidiaries
(1) Basic situation
||||||
|-|-|-|-|-|
|Mainbusinesslocation|Reg.Add.|Businessproperty|Shareproportion %||
||||Direct|Indirect|
|HangzhouZhejiang|HangzhouZhejiang|Manufacturing|70.86||
|HangzhouZhejiang|HangzhouZhejiang|Manufacturing|60.83||
|HangzhouZhejiang|HangzhouZhejiang|Manufacturing|38.03||
|HangzhouZhejiang|HangzhouZhejiang|Manufacturing|52.00||
|HangzhouZhejia|HangzhouZhejia|Manufacturing|87.53||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|ng|ng|||
|HangzhouZhejiang|HangzhouZhejiang|Commerce|100.00|
|HangzhouZhejiang|HangzhouZhejiang|Manufacturing|100.00|

(2) Basis for holding50% or less than50% of the voting power but still controlling the invested organizations
In December 2018, the subsidiary Casting Company introduced external strategic investors, leading to a decrease in the shareholding ratio of the Company from51% to38.03%. Since the Company still held more than 1/3 of shares and took four seats in the board of seven directors, it still had power of control over the Casting&amp; Forging Company.
2.Major non-fully-Owned subsidiaries
(1) Detail
||||
|-|-|-|
|Share protion ofminor shareholders|Gains/loss of theperiod attributableto minorshareholders|Dividendannounced in theperiod to minorshareholders|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|39.17%|29,643,193.06|21,486,000.00|
|61.97%|6,272,269.92|12,250,000.00|
|48.00%|24,260,684.80|21,600,000.00|
|12.47%|135,632.87|3,990,400.00|

(2) Description of difference between the shareholding ratio and voting power of minority shareholders of subsidiaries
Refer to the current notes to financial statements-VI (I) 1(2) description.
3. Material financial information of major non-fully-owned subsidiaries
(1) Assets and liabilities
End of term
Subsidiaries
||||||
|-|-|-|-|-|
|Current assets|Non-current assets|Total of assets|Current liabilities|Non-currentliabilities|
|248,134,781.83|24,640,726.05|272,775,507.88|183,669,390.74||
|1,105,955,992.17|71,963,602.76|1,177,919,594.93|819,218,843.06|330,000.00|
|441,396,913.82|172,078,042.91|613,474,956.73|343,698,819.51|25,323,405.00|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
|232,419,338.54|21,258,598.11|253,677,936.65|98,910,290.54|765,263.03|
|642,467,713.41|110,484,194.28|752,951,907.69|549,240,066.20|106,930.00|

(Continued)
Beginning of term
Subsidiaries
||||||
|-|-|-|-|-|
|Current assets|Non-currentassets|Total of assets|Current liabilities|Non-currentliabilities|
|219,292,216.34|24,375,146.44|243,667,362.78|160,574,913.68||
|1,037,373,643.65|75,190,430.57|1,112,564,074.22|772,310,062.79|330,000.00|
|304,833,240.88|184,619,003.14|489,452,244.02|312,465,702.87|3,849,755.00|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
|205,163,731.11|21,782,104.60|226,945,835.71|77,895,206.35|591,339.61|
|548,200,286.67|115,360,847.76|663,561,134.43|428,134,519.20|213,860.00|

(2) Profit and loss and cash flow
Amount of current period
||||
|-|-|-|
|Turnover|Net profit|Total Misc Gains|
|220,230,100.85|11,113,668.04|11,113,668.04|
|988,083,271.30|70,253,285.20|70,108,873.33|
|446,900,632.40|12,800,550.85|12,800,550.85|
|242,356,767.43|50,543,093.33|50,543,093.33|
|568,575,713.37|1,087,673.40|1,087,673.40|

(Continued)
Amount of previous period
||||
|-|-|-|
|Turnover|Net profit|Total Misc Gains|
|241,699,214.69|10,676,500.39|10,676,500.39|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|833,201,191.68|25,173,217.92|24,766,351.64|
|357,558,102.11|27,727,923.66|27,727,923.66|
|220,887,783.34|46,032,691.93|46,032,691.93|
|394,136,946.17|36,761,943.86|36,761,943.86|

(II) Transactions where the Company sustains a variation of share of owners' equity in subsidiaries but still controls the subsidiaries
1. Description of variation in the share of owners' equity of subsidiaries
|||
|-|-|
|Variation|Shareholding ratio beforevariation|
|2018.12.29|51.00%|

2. Effects of transactions on minority shareholders' equity attributable to owners' equity of the parent company
Items Casting Company
Disposal of consideration[Note]
Less: share of net assets of the subsidiary
11,172,730.63
calculated by the disposed shareholding ratio
Balance -11,172,730.63
Including: adjustment of capital reserve -11,172,730.63
Note: increase of the share of equity entitled to the Company caused by the unilateral capital increase of minority shareholders of the subsidiary Casting Company.
(III) Equity in the joint venture
Insignificant financial information of Associated Enterprises
Items Ending amount/current Beginning amount/amount in
amount the corresponding period of
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|8,221,439.29|
|-585,160.71|
|-585,160.71|
|-585,160.71|

VII. Risks related to financial instruments
The objective of theCompany’s risk management is to achieve a balance between the risk and gains. Constrain the negative influence on business operation to the lowest limit, and maximum the interests of shareholders and other equity holders. With regard to this target, the basic policies of the Company are; locate and analyse the risks, set appropriate bottom line for risks, and manage and monitor on each risk and constrain them in a certain extent.
Risks attached to financial instruments are mainly credit risks, liquidity risks, and market risks.
The following risk managing policies have been examined and approved by the management:
(I) Credit risks
Credit risks are introduced when one party of the financial instrument failed to exercise its
liabilities and then caused financial loss to another.
The credit risks of the Company are mainly composed by bank savings and receivable accounts.
Following measurements are adopted to control these risks:
1. Bank deposit
The Company puts its bank savings in financial institutions with higher credit ranks, therefore
with lower risks.
2. Account receivable
The Company performs credit assessment on the clients on periodic and constant basis. Results suggested by the assessment are used by the Company to determine clients with higher ranks and to overlook the rest. This was conducted to avoid risks brought by material bad debts.
As the Company only does business with recognized and reputable third parties, so no collateral is needed. Credit risks are centralized managed in accordance with customers. As of December 31, 2018, the Company has a characteristic of specific credit risk concentration.40.08% (December 31, 2017:39.44%) of the Company's accounts receivable comes from the top five customers. The Company does not hold any collateral or other credit enhancement for the balance of accounts receivable.
(1) Analyzing of receivable accounts neither due nor impaired, and those have due but not impaired:
End of term
|||||
|-|-|-|-|
|Not overdue and notimpaired|Overdue but not impaired|||
||Within 1 year|1-2 years|Over 2|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
||years|
|595,089,175.22||
|595,089,175.22||

 (Continued)
Beginning of term
|||||
|-|-|-|-|
|Not overdue and notimpaired|Overdue but not impaired|||
||Within 1 year|1-2 years|Over 2years|
|715,410,887.68||||
|715,410,887.68||||

 (2) Refer to Notes of the Financial Statements in conjunction with notes of the consolidated financial statements-accounts receivable for individual accounts receivable with provision for impairment.
(II) Liquidation risks
Liquidation risks are the possibilities of short in cash at fulfilling liabilities of payment or settlement for financial assets. They may be caused by failing to cash financial assets at fair value instantly;debtors’ failing of paying debts due; debts due before schedule; or failing of generating expected cash flow.
To handle these risks, the Company adopted multiple measures such as note clearance and bank loans. Long-term and short-term financing approaches were used to maintain balance between constancy and flexibility. The Company has obtained credit from multiple banks to satisfy the needs of business operation and capital output.
Categorizing of financial liabilities on remained period to due
End of term
|||||
|-|-|-|-|
|Book value|Contractamount notdiscounted|within 1 year|1-3 years|
|139,600,000.00|141,968,522.53|141,968,522.53||
|1,350,583,381.53|1,350,583,381.53|1,350,583,381.53||
|100,100,000.00|103,512,427.64|103,512,427.64||
|22,700,000.00|25,297,942.57||25,297,942.57|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|209,598,799.99|220,248,799.99|29,764,799.99|58,044,000.00|
|36,904,303.01|36,904,303.01|36,904,303.01||
|1,859,486,484.53|1,878,515,377.27|1,662,733,434.70|83,341,942.57|

 (Continued)
Beginning of term
|||||
|-|-|-|-|
|Book value|Contractamount notdiscounted|within 1 year|1-3 years|
|115,500,000.00|117,664,804.32|117,664,804.32||
|1,098,125,424.57|1,098,125,424.57|1,098,125,424.57||
|4,900,000.00|4,903,383.01|4,903,383.01||
|100,000,000.00|107,057,027.40|3,685,000.00|103,372,027.40|
|209,633,466.66|222,751,733.33||53,000,000.00|
|28,128,478.10|28,128,478.10|28,128,478.10||
|1,556,287,369.33|1,578,630,850.73|1,252,507,090.00|156,372,027.40|

 Note: Exclusive of special accounts receivable-land requisition and demolishing compensation cost. (III) Market risks
Market risks are those brought by change of fair value or expectable cash flow of financial instruments due to change of market prices, mainly interest risks and exchange rate risks.
1. Interest risks
Interest risks are those brought by change of fair value or expectable
cash flow of financial instruments due to change of interest rates,
mainly regards the loans at floating interest rates.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report As of December 31, 2018, the Company had raised RMB19,000,000.00 (Dec 31 2017: RMB0.00) on floating interest rates. In case of other variables remain unchanged, if the interest rates change, reasonably and possibly, for50% of the benchmark, the total profit andshareholders’ equity will be free of major impact.
2. Foreign currency risks
Foreign currency risks (exchange rate risks) are those caused by change of fair value or expectable cash flow of financial instruments due to fluctuation of exchange rates. These risks are mainly related to foreign currency assets and liabilities. The Company operates in mainland China and mostly uses RMB as standard currency, therefore no major risks regarding exchange rates. For details of foreign currency assets and liabilities, please go to the descriptions in the notes to the consolidated financial statements.
VIII.Fair value disclosure
(I)Closing balance of assets and liabilities measured at fair value
Closing fair value
||||
|-|-|-|
|（II）Available-for-saleFinancial Assets|Level 2|Level 3|
|（2）Equityinstrumentinvestment|||
|2,011,876,524.40|||
|2,011,876,524.40|||
|2,011,876,524.40|||

(II) Market price basis at fair value by level 1 on a continued and non-continued basis
The shares of Hangzhou Bank Co., Ltd. held by the Company have active market quotations, so it is measured in accordance with the first level of fair value.
XII. Related parties and related-party transactions
(I)Related parties
1. Parent company information of the enterprise
1. Parent company of the Company
|||||||
|-|-|-|-|-|-|
|||||Shareholding|Voting rights of|
|Name of the||Business|Registered|||
||Reg. Add.|||of the parent|the parent co. %|
|parent co.||property|capital|||
|||||co.||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||||
|-|-|-|-|-|-|
|Hangzhou Steam|Hangzhou|Manufacturin||||
||||RMB 800 milllion|63.64%|63.64%|
|Turbine Group|China|g||||

(2) Hangzhou Municipal Government State-owned Asset Supervisory Committee is the ultimate controller of the Company.
2.Subsidiaries of the enterprise
For details of subsidiaries please go to the statement of equities in other entities.
3. Situation of joint ventures and associated enterprises
For details of the important joint venture or joint venture of the enterprise, see the description of
the rights and interests in other parties in the notes
4. Other related parties
Name of the related parties Relationship with the Company
Hangzhou Steam turbine Automobile sales service Co., Ltd. Affiliate of the Group
Hangzhou Hangfa Power Generating Equipment Co., Ltd. Affiliate of the Group
Hangzhou Nanfangtongda Gears Co., Ltd.(Note) Affiliate of the Group
Hangzhou Nanhua Wooden Packaging Co., Ltd. Affiliate of the Group
Hangzhou Steam Turbine Industrical Co., Ltd. Affiliate of the Group
Hangzhou Steam Turbine Engineering Co., Ltd. Affiliate of the Group
Hangzhou Steam Turbine Power Group Equipment Co., Ltd. Affiliate of the Group
Hangzhou Steam Turbine Compressor Co., Ltd. Affiliate of the Group
China Electrical and Mechanical Institute-Hangzhou Turbine
Affiliate of the Group
Group (Hangzhou) United Research Institute Co., Ltd.
Hangzhou Steam Turbine Industry& Trade Co., Ltd. Affiliate of the Group
Shanghai Relian steel Trade Co., Ltd. Affiliate of the Group
Greenesol power systems PVT Ltd. Shareholding enterprise
Hangzhou Bank Shareholding enterprise
Note: It has been no longer a related party to the Company as of the equity transfer in June 2018.
(II)Related transaction
1. Sale of goods/rendering of labor services/labor service offering
(1)Purchase of goods and service
|||
|-|-|
|Content of relatedtransaction|Amount of currentperiod|
|Generators|173,472,628.12|
|Transportation , repair ,etc.|49,397,713.70|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
|Packaging|17,204,942.74|
|Gear boxes|1,863,034.17|
|Development ,design|1,468,929.24|
|Grind fee|1,096,475.08|
|Raw materials,processing fees|983,861.03|
|Part|940,170.90|
|Raw material,Technicalservice|833,010.81|
|Service|339,622.64|
|Coupler||
||247,600,388.43|

 (2) Related transactions regarding sales of goods or providing of services
|||
|-|-|
|Subjects of therelatedtransactions|Currentterm|
|Steamturbine,compressor,Installation service|50,891,902.45|
|Cast parts|12,803,285.29|
|Part|806,596.80|
|Infornation service|28,674.03|
|Small amount materials|803.44|
|Part, Industrial cooperation||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|64,531,262.01|

 2.Information of related lease
(1)The Company was lessor
|||
|-|-|
|Category of leaseassets|The lease incomeconfirmed in thisyear|
|House and Building||

(2) The company waslessee：
|||
|-|-|
|Category of leasedassets|The lease incomeconfirmed in thisyear|
|House and Building|3,926,912.32|
|EngineeringEquipment|1,775,862.07|
|Land use right|4,835,169.55|
|Site leasing|4,148,921.29|
|Car rental|245,172.41|
|House &Building|476,525.45|
||15,408,563.09|

 3. Related-party guarantee
(1) The company and its subsidiaries as guarantors
As stated in Note 5 (I) 22 of the financial statement, In accordance with the National Development Fund Investment Contract, jointly signed by the Company, NDF, Turbine Industry Company and Hangzhou Steam Turbine Group, the investment of the NDF on Turbine Industry Company, RMB 208,000,000.00, is repurchased by the Hangzhou Steam Turbine Group, and the NDF asks the Company and Hangzhou Steam Turbine Group to provide guarantee for the fulfillment of Hangzhou Steam Turbine Group of the transferee equity obligations. The Company and Steam Turbine Company pledge to the NDF with a total of 45.08 million shares of Hangzhou Bank Co., Ltd. with book value of RMB 333,592,000.00,Dividend Receiviable of RMB16,557,292.60,
Steam Turbine heavy Industry Co., Ltd. mortgaged the book value of66,668,212.97 yuan of land
use rights and book value of 41,944,793.30 yuan of fixed assets and book value of 293,963,202.50
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report yuan of construction in progress to the National Development Fund.
(2) The company and its subsidiaries are the guaranteed parties
||||
|-|-|-|
|Guarantee amount|Start date|End date|
|100,000,000.00|November 30,2017|December 30,2019|

4.Related party asset transfer
|||
|-|-|
|Content|Current term|
|Purchase fixed assets|77,413.79|

5. Remunerations of key managements
||
|-|
|Current term|
|8,133,290.02|

 6. Other related transactions
(1) Service and power supply
(1)HSTG supplies water and power to the Company and some of the subsidiaries amounted to RMB14,664,638.25 this period.
2）HSTG. provides property management services for its subsidiary which is Complete Technology Corporation, of which the fee of this period incurred in the property management is RMB42,083.06.
3) Hangzhou Steam Turbine Automobile Sales& Service Co., Ltd. provided transportation to theCompany’s employees and RMB2,100,564.00 was paid this period.
4) Hangzhou Steam Turbine Industry Co., Ltd. provided cleaning services to the Company and RMB1,265,723.28 was paid this period.
(2) Using of trademark
The Company pays RMB1,698,113.21 to HSTG for using of the registered trademark.
(3) Expenses paid on behalf the Company
1) During the current period, Hangzhou Steam Turbine Group advanced the payment of RMB
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report 574,972.41 salaries for the company.
(4) Bank credit and entrusted wealth-management
1) The Company applied for a line of credit of RMB 300 million to Shiqiao Sub-branch, Bank of Hangzhou Co., Ltd. in 2017 and till December 31, 2018, the balance of loan under the line of credit was still RMB 0.
2) The Company entered into a financial management agent contract with Bank of Hangzhou Co., Ltd. in the cumulative amount of financial management of RMB 1,490,000,000.00 and till December 31, 2018, the balance of the financial management was RMB 470,000,000.00.
（5）Subscription of the Fund
In the period, the Company, together with Hangzhou Steam Turbine Group and Shanghai Relian Steel Trading Co., Ltd. contributed funds to subscribe the shares of Juyuan Xinxing No. 9 Private Equity Fund, and they signed the contract with Hangzhou Juyuan Asset Management Co., Ltd. respectively. The Company made the share subscription of 16 million yuan.
(III) Receivables and payables of related parties
（1）Receivables
|||||
|-|-|-|-|
|Related party|End of term|||
||Book balance|Bad debtprovision|Book balance|
|Hangzhou Steam Turbine Engineering Co.,Ltd.|1,033,180.00||9,022,000.00|
|Hangzhou Hangfa Power GeneratingEquipment Co., Ltd.|4,000,000.00|||
||5,033,180.00||9,022,000.00|
|Hangzhou Steam Turbine Engineering Co.,Ltd.|56,048,293.87|23,796,436.58|60,048,003.87|
|Hangzhou Hangfa Power GeneratingEquipment Co., Ltd.|18,739,908.99|1,269,459.57|23,168,548.05|
|Greenesol power systems PVT Ltd.|14,522,075.90|14,522,075.90|13,825,933.72|
|Hangzhou Steam Turbine Group|158,500.00|158,500.00|158,500.00|
|Hangzhou Steam Turbine Compressor Co.,Ltd.|59,000.00|35,400.00|59,000.00|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|Hangzhou Steam Turbine Power GroupComplete Equipment Engineering Co., Ltd.|||305,000.00|
||89,527,778.76|39,781,872.05|97,564,985.64|
|Hangzhou Hangfa Power GeneratingEquipment Co., Ltd.|51,691,853.97||43,741,785.00|
|Hangzhou Steam Turbine Engineering Co.,Ltd.|5,820,000.00||2,022,000.00|
|Zhejiang Zongrun Gas turbine technologyCo., Ltd.|792,022.20||715,000.00|
|Hangzhou Steam Turbine Industrial Co., Ltd.|8,514.00||50,000.00|
||58,312,390.17||46,528,785.00|
|Hangzhou Steam Turbine Compressor Co.,Ltd’|300,000.00|30,000.00|346,200.00|
|Hangzhou Steam Turbine Group|39,105.34|3,910.53|39,105.34|
||339,105.34|33,910.53|385,305.34|

 2. Payables
|||
|-|-|
|Related party|Amount at year|
|Hangzhou Hangfa Power Generating EquipmentCo., Ltd.|11,500,000.00|
|Hangzhou Steam Turbine Automobile Sales ServiceCo., Ltd|1,650,000.00|
|Hangzhou Nanhua Wooden Packaging Co., Ltd.|1,660,000.00|
|Hangzhou Steam Turbine Engineering Co., Ltd.||
||14,810,000.00|
|Hangzhou Hangfa Power Generating EquipmentCo., Ltd.|116,462,941.48|
|Hangzhou Steam Turbine Automobile Sales ServiceCo., Ltd|11,934,956.54|
|Greenesol power systems PVT Ltd.|3,381,200.50|
|Hangzhou Steam Turbine Engineering Co., Ltd.|2,040,000.00|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
|Hangzhou Nanhua Wooden Packaging Co., Ltd.|1,851,121.07|
|Hangzhou Nanfang Tongda Gears Co., Ltd.||
|Hangzhou Steam Turbine Group|1,652,987.82|
|Hangzhou Steam Turbine Industrial Co., Ltd.|537,981.70|
|China Electrical and Mechanical Institute-HangzhouTurbine Group (Hangzhou) United ResearchInstitute Co., Ltd.|427,500.00|
|Hangzhou Steam Turbine Industries & Trade Co.,Ltd.|476,525.45|
||138,765,214.56|
|Hangzhou Steam Turbine Compressor Co., Ltd’|14,190,000.00|
|Hangzhou Steam Turbine Engineering Co., Ltd.|10,543,300.00|
|Greenesol power systems PVT Ltd.|103,764.63|
||24,837,064.63|
|Hangzhou Steam Turbine Automobile Sales ServiceCo., Ltd|100,000.00|
|Hangzhou Steam Turbine Group|87,736.60|
||187,736.60|

 X. Commitment and Contingency Issues
(I) Material commitment issues
1. External investment contracts engaged but not exercised or not fully exercised and related
financial outflow
As stated in Note 5 (I) 22 of the financial statement, Hangzhou Turbine Group will transfer its holding equity of Hangzhou Turbine Heavy Industry Co., Ltd. by stages to China Development Funds since 2019. After transfer, Hangzhou Turbine Group will transfer the transferred equity of Hangzhou Turbine Heavy Industry Co., Ltd to our Company at the same price.
2. Outsourcing contracts engaged with large amounts and are under processing or preparation
As of December 31, 2018, Construction contracts and contracts which are performed or ready for being performed by the Company and its subsidiaries for the sake of plant construction are valued about RMB 361,730,600.
3.With regard to bank letters of credit opened by the Company and its subsidiaries, the outstanding balance till December 31, 2018 is as follows:
||||
|-|-|-|
|Bank|Currency|Amount|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|ICBC Hangzhou Branch|Euro|9,098,660.00|
|ICBC Hangzhou Branch|USD|579,338.00|
|Bank of China Zhejiang Branch|Euro|254,378.00|
|Bank of China Zhejiang Branch|USD|510,000.00|
|China CITIC Bank HangzhouBranch|Euro|7,784,600.00|
|China CITIC Bank HangzhouBranch|Swing franc|1,368,448.68|

4. With regard to bank letters of Guarantee opened by the Company and its subsidiaries, the outstanding balance till December 31, 2018 is as follows:
||||
|-|-|-|
|Bank|Currency|Amount|
|Bank of China Zhejiang Branch|USD|8,504,725.00|
|Bank of China Zhejiang Branch|RMB|65,196,937.00|
|ICBC Hangzhou Branch|RMB|254,865,231.05|
|Everbright Bank HangzhouQianjiang Branch|RMB|24,528,000.00|
|China CITIC Bank HangzhouBranch|RMB|26,345,021.00|
|ICBC Banshan Branch|RMB|4,963,506.60|
|ICBC Banshan Branch|RMB|37,815,900.00|
|ICBC Branch business department|RMB|55,812.80|
|China CITIC Bank HangzhouBranch|RMB|800,000.00|
|Bank of China EcomomicDevelopment Zone Branch|RMB|45,485,531.25|
|ICBC Wulin Branch|RMB|1,140,000.00|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report (II). Contingency
(1) For details of guarantees provided for related parties, please refer to the notes for related parties and related transactions in the notes to this financial statement.
(2) Litigation matters
(1) On September 5, 2018, Henan Junhua Development Co., Ltd. sued the Company, Xi'an Shaangu Power Co., Ltd. and the third party, China General Mechanical Engineering Co., Ltd. to request the Company and Xi'an Shaangu Power Co., Ltd. to compensate the loss of RMB 44 million, the equipment repair expense of RMB 2.2 million, all legal fares including the court acceptance fee and property preservation fee of this case and other expenses for the plaintiff to realize the creditor's rights to Henan Junhua Development Co., Ltd. The case is still pending up to the approval date of the financial statements.
(2) On September 13, 2018, the subsidiary, Zhongneng Company sued China Machinery Industry Construction Group Inc. failing to pay the commissioning amount and quality guarantee deposit as agreed in the contract as scheduled and pay the expenses for the additional equipment parts after purchasing the turbines and supporting equipment of spontaneous power plant from Zhongneng Company. Zhongneng Company requested China Machinery Industry Construction Group Inc. to pay the price of goods worth RMB 8.6813 million,Payment overdue is about 643,900 yuan . The case is still pending up to the approval date of the financial statements.
XI. Enents after balance sheet date
(I) Important non-adjusting events
1. The Company subsequently subscribed capital of RMB 11.40 million to found Zhejiang Ranchuang Touping Machinery Co., Ltd. (hereinafter referred to as Ranchuang Company) and on February 28, 2019, Ranchuang Company completed industrial and commercial registration procedures and obtained the Business License issued by Hangzhou Municipal Administration for Market Regulation. The equity structure of Ranchuang Company is as follows:
||
|-|
|Amount of subscribedcapital（RMB 10,000）|
|1,140.00|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
||1,000.00|
||100.00|
||85.00|
||75.00|
|Hangzhou bohua laser technology Co., Ltd.|50.00|
||50.00|
||2,500.00|

 2. According to the resolution of the shareholders meeting of Hangzhou Guoneng Steam Turbine Engineering Co., Ltd-a subsidiary to the Auxiliary Machinery Co., Ltd-on Dec 21, 2018, Hong Kong Ruiyun Enterprise Co., Ltd., a shareholder of Guoneng Steam Turbine Co., Ltd., transferred a25% equity held by the company to the Auxiliary Machinery Co., Ltd in a total of 10 million yuan. The business registration change procedure for the above-mentioned equity transfer had been completed on January 10, 2019.
3. On November 20, 2018, the Company signed the“Debtitor’s Right and Debt Transfer Agreement” with Shenyang Turbo Machinery Co., Ltd., Ningxia Baofeng Energy Group Co., Ltd. and Ningxia Baofeng Real Estate Development Co., Ltd., and meanwhile signed the Agreement of Compensation Using Building for Repaying Debt with Baofeng Real Estate. henyang Turbo Company agreed to transfer some of itscreditor’s rights on Baofeng Group of RMB 13,581,513.00 to the Company, and Baofeng Group transferred the afore-said debts to Baofeng Real Estate synchronously. Baofeng Real Estate uses the 13 houses, underground parking spaces and storage rooms located in Lanxigu Community, Lijing North Street, Yinchuan City-the disposal rights of which was owned by Baofeng-as the compensation for transferring the debt to the Company. Where the Company fails to obtain the “Certificate of immovable property right” for all or part of the aforesaid real estate within 6 months from the date of signing the agreement due to the reasons of the Company, Shenyang Turbo Company shall assume the repayment responsibility for the part of the above repayable amount that the Company fails to obtain the real estate compensation. The Company has obtained the “Certificate of immovable property righ” related to the above-mentioned debt-compensation assets on March 21, 2019. So far, the creditor-debt relationship of the amount of RMB 13,581,513.00 among the Company, Shenyang Turbo Machinery and Baofeng Group has been settled as agreed upon.
(II) Profit distribution
Based on the 2018 profit distribution plan reviewed and passed at the 31st meeting of the 7th Board of Directors on March 27, 2018, and
Profit or dividend proposed to be
without drawing up statutory surplus reserves, the company used a
distributed total of 754,010,400 shares at the end of 2018 as the base to distribute
cash to all shareholders for every 10 shares. The bonus is RMB 2.00
(including tax), and 0 bonus shares will be sent to the company. Don't
convert the public reserve fund into share capital. The total profit
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report distributed was RMB 150,802,080.00 this time.The afore-said profit
distribution plan still needs to be reviewed and approved by the
shareholders' general meeting.
XII.Other significant events
1.Information of Division
(1) The companies,which have no report divisions or can not disclose the total assets and total liabilities of all report divisions, shall give explanations.
The Company is single in its business, which is mainly for production and sales of steam turbines, gas turbines and auxiliary turbines. Thecompany’s management regard these businesses as a whole to implement management so as to evaluate the business performance, thus there will be no report divisions. According to the product classifications of main business income and main business cost, the Company will make details for them as follows:
||
|-|
|Main Business Income|
|3,745,445,441.72|
|133,291,110.39|
|248,879,821.14|
|176,535,199.06|
|202,087,248.03|
|4,506,238,820.34|

 (II)Other
According to the planning of the Hangzhou Municipal Government, the property right bodies of 6 companies including Hangzhou Steam Turbine Group and Hangzhou Steam Turbine Company within the plant area of Hangzhou Steam Shiqiao Road factory area were included in the scope of the Expropriation and Relocation Planning. According to the Hangzhou Municipal People's Government's Minutes (Hangfu Minutes[2016] No. 87) on the relevant issues concerning the compensation for the relocation of the Steam Turbine Shiqiao road plant area and the spirit of the minutes (Hangfu Minutes[2016] No. 47)of the special meeting of Hangzhou Municipal people's Government on the relevant issues concerning speeding up the relocation of the Shiqiao Road Factory area of Hangzhou Steam Turbine and the Construction of the Hangzhou Steam Turbine Heavy Industry Project, Hangzhou Municipal Government, in accordance with the principle of "one factory, one policy", determines that the compensation for the overall relocation of the plant area of Hangzhou Steam Turbine Shiqiao road plant is RMB 1.815 billion, with the
compensation contents include the compensation for physical assets such as buildings, structures,
housing renovations, equipment, and land within the area of relocation, as well as personnel
resettlement fees, compensation fees for shutdown loss and production stoppage loss and incentive
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report fees, and the compensation agreement shall be signed by the Xiacheng Urban Construction Investment Group-the land-making main-body affiliated to Hangzhou Xiacheng District Municipal Government with each relocation unit. The property rights bodies within the scope of the relocation shall complete the relocation by December 31, 2019, and evacuate the houses and hand them over to the land-making main-body of the government, the houses shall not be demolished or damaged without authorization, and the residual value of the houses after the handing over shall be possessed by the Urban Construction Investment Group.
On March 21, 2018, based on the evaluation opinion of Kunyuan Assets Appraisal Co., Ltd (No. 606-2017 Kunnyuan Appraisal Report, No. 609-2017 Kunnyuan Appraisal Report, No. 18-2018 Kunnyuan Appraisal Report,), the company signed the “Relocation Compensation Agreement for Non-residential Buildings on State-owned Land” with Xiacheng Urban Construction Investment Group, and determined that Xiacheng Urban Construction Investment Group shall make full monetary relocation compensation for the Company and its subsidiary the Machinery Company, with the total amount of compensation for various physical assets and expenses is RMB 1,305,950,300.00 (Including the incentive fee of RMB 34,892,770.00), and this aforementioned compensation shall be firstly collected by Hangzhou Steam Turbine Group.
As of December 31, 2018, the Company had received the second relocation compensation of 69,899,656.20 yuan. Together with the first compensation, the Company and its subsidiaries have received the compensation for relocation compensation of 307,558,487.27 yuan, all of which are accounted for by special payables. The relocation expenses incurred by the Company in the current period amounted to RMB 110,855.00. The subsidiary company Steam Turbine Heavy Industries Co., Ltd. incurred a total of RMB 42,169,981.00 for the purchase and construction of complete sets of plants in the current period, which correspondingly wrote off the special payables- the relocation compensation amount of RMB 42,280,836.00, respectively transferred to other income of RMB 110,855.00 and transferred into the deferred income of RMB 42,169,981.00. At the end of the period, there was still a balance of unused relocation compensation of RMB 265,277,651.27.
XIII. Notes to the Financial Statements of the Parent Co.
(I) Notes to items of parent company financial statements
1. Notes receivable& Account receivable
（1）Detail
||
|-|
|End of term|
|302,284,986.43|
|1,374,628,210.45|
|1,676,913,196.88|

 (2)Notes receivable
1) Detail
||||||
|-|-|-|-|-|
|End of term|||||
|Book balance|Bad debt|Book value|Book balance|Bad debt|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
||sion|||sion|
|284,664,986.43||284,664,986.43|338,420,500.75||
|17,620,000.00||17,620,000.00|19,224,000.00||
|302,284,986.43||302,284,986.43|357,644,500.75||

 2) Notes receivable pledged by the Company at the period-end
Amount on pledge
Items
Bank acceptance 24,530,000.00
Total 24,530,000.00
3) Notes receivable which had endorsed by the Company or had discounted and had not due on
the balance sheet date at the period-end
||
|-|
|Amount of recognitiontermination at theperiod-end|
|443,200,690.70|
|443,200,690.70|

The acceptor of the bank acceptance bill is a commercial bank, because the commercial bank has high credit, the possibility of the bank acceptance bill not being paid at maturity is low, so the company has endorsed or discounted the bank acceptance bill to terminate the confirmation. However, if the bill is not paid at maturity, the company shall remain jointly and severally liable to the holder under the provisions of the bill act.
3. Account receivable
(1)The detail situation
①Detailed categories
End of term
|||||
|-|-|-|-|
|Book balance||Bad debt provision||
|Amount|Proportion|Amount|Proportion|
|2,189,901,288.35|98.66|815,273,077.90|37.23|
|29,819,607.69|1.34|29,819,607.69|100.00|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|2,219,720,896.04|100.00|845,092,685.59|38.07|

 (Continued)
Beginning of term
|||||
|-|-|-|-|
|Book balance||Bad debt provision||
|Amount|Proportion|Amount|Proportion|
|1,975,235,478.30|98.51|779,285,370.98|39.45|
|29,819,607.69|1.49|29,819,607.69|100.00|
|2,005,055,085.99|100.00|809,104,978.67|40.35|

②
Receivable accounts in the group on which bad debt provisions are provided on age basis
End of term
Aging
|||
|-|-|
|Book balance|Bad debt provision|
|833,000,869.78|41,650,043.49|
|277,900,524.80|27,790,052.48|
|228,058,731.55|68,417,619.47|
|173,910,129.12|104,346,077.47|
|167,207,350.44|133,765,880.35|
|439,303,404.64|439,303,404.64|
|2,119,381,010.33|815,273,077.90|

③
Notes receivable which had endorsed by the Company or had discounted and had not due on
the balance sheet date at the period-end
End of term
Name
||||
|-|-|-|
||Book balance|Bad debt provision|
|Association current|70,520,278.02||
|combination within|||
|the scope of|||
|consolidation [Note]|||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|70,520,278.02|

Note: At the end of period, the Company did a separate impairment test on the portfolio and found no impairment incurred, hence no withdrawal of provision for bad debt was needed.
2) The current amount of provision for bad debts is RMB35,987,706.92 ; recovery or payback
for bad debts Amount is RMB0.00.
3) There is no write-off of accounts receivable in the current period
4) Receivables account of the top five parties
|||
|-|-|
|Amount|Proportion(%)|
|592,784,981.17|26.71|
|242,067,374.85|10.91|
|112,363,538.46|5.06|
|63,427,500.00|2.86|
|52,129,523.04|2.35|
|1,062,772,917.52|47.89|

 2. Other account receivable
1)Detail
||
|-|
|End ofterm|
|16,557,292.60|
|3,427,467.46|
|19,984,760.06|

 (2) Dividend receivable
1) Detail
||
|-|
|End ofterm|
|16,557,292.60|
|16,557,292.60|

 2) Important dividend receivable over 1 year of age
||||
|-|-|-|
|End ofterm|Age|Reasons for notrepossessing|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|6,900,000.00|1-2 years|Stock right pledge|
|6,900,000.00|||

(3) Other receivable
1)The detail situation
① Detailed categories
End of term
|||||
|-|-|-|-|
|Book balance||Bad debt provision||
|Amount|Proportion %|Amount|Proportion %|
|8,826,485.18|100.00|5,399,017.72|61.17|
|8,826,485.18|100.00|5,399,017.72|61.17|

 (Continued)
Beginning of term
|||||
|-|-|-|-|
|Book balance||Bad debtprovision||
|Amount|Proportion %|Amount|Amount|
|9,976,732.52|100.00|5,665,193.66|56.78|
|9,976,732.52|100.00|5,665,193.66|56.78|

②
Other receivable accounts in the group on which bad debt provisions are provided on age
basis
End of term
Aging
|||
|-|-|
|Other receivable|Bad debt provision|
|1,767,885.91|88,394.30|
|167,447.59|16,744.76|
|158,158.00|47,447.40|
|827,097.00|496,258.20|
|943,495.90|754,796.72|
|3,995,376.34|3,995,376.34|
|7,859,460.74|5,399,017.72|

③
Notes receivable which had endorsed by the Company or had discounted and had not due on
the balance sheet date at the period-end
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report End of term
Name
||||
|-|-|-|
||Book balance|Bad debt provision|
|Association current|967,024.44||
|combination within|||
|the scope of|||
|consolidation [Note]|||
||967,024.44||

Note: At the end of period, the Company did a separate impairment test on the portfolio and found no impairment incurred, hence no withdrawal of provision for bad debt was needed.
2) The withdrawal amount of the bad debt provision during the reporting period isRMB-266,175.94；the amount of the reversed or collected part during the reporting period was of RMB 0.00.
3) No write-off of other receivables for the current period
4) Other accounts receivable classified by the nature of accounts
||
|-|
|Closing book balance|
|6,547,501.35|
|967,024.44|
|1,311,959.39|
|8,826,485.18|

 5) Top 5 of Other accounts receivable
||||||
|-|-|-|-|-|
|Accountproperty|Book balance|Age|Proportion(%)|Bad debt provision|
|Deposit|3,710,320.94|Over 5 years|42.04|3,710,320.94|
|Deposit|800,000.00|3-4 years|9.06|480,000.00|
|Deposit|632,983.48|Within 1 year|7.17|31,649.17|
|Provisionalpayment|630,148.55|Within 1 year|7.14||

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
|receivable|||||
|Deposit|500,000.00|4-5 years|5.66|400,000.00|
||6,273,452.97||71.07|4,621,970.11|

 3. Long-term share equity investment
(1) Detail
||||||
|-|-|-|-|-|
|End of term|||||
|IBook balances|mpairmention|Book value|Book balance|Impairmentision|
|502,919,378.03||502,919,378.03|502,919,378.03||
|502,919,378.03||502,919,378.03|502,919,378.03||

 (2) Investment on subsidiaries
||||||
|-|-|-|-|-|
|Beginning of term|Increase|decrease|End of term|Provided currentterm impairmentprovision|
|20,000,000.00|||20,000,000.00||
|360,000,000.00|||360,000,000.00||
|46,286,513.41|||46,286,513.41||
|29,800,389.56|||29,800,389.56||
|27,644,475.06|||27,644,475.06||
|7,968,000.00|||7,968,000.00||
|11,220,000.00|||11,220,000.00||
|502,919,378.03|||502,919,378.03||

(II) Notes to items in the parent company income statement
1. Business income and Business cost
||||
|-|-|-|
|Occurred current term|||
|Income|Cost|Income|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||||
|-|-|-|
|2,915,241,196.80|2,059,290,820.18|2,056,532,812.35|
|14,564,471.91|11,762,727.70|140,183,662.39|
|2,929,805,668.71|2,071,053,547.88|2,196,716,474.74|

 2. R& D cost
||
|-|
|Amount of this period|
|72,790,629.36|
|79,835,016.55|
|10,463,642.38|
|1,944,603.76|
|1,379,570.05|
|166,413,462.10|

 3. Investment income
||
|-|
|Amount of this period|
|98,187,205.00|
|68,687,390.93|
|39,008,647.23|
|205,883,243.16|

 XIV. Other Supplementary Information
1. Non-recurring gains and loss
Items Amount
Gains/losses from the disposal of non-current asset
-40,478.16
Tax refund, deduction and exemption that is examined and approved by
2,140,524.49
authority exceeding or has no official approval document.
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Governmental subsidy calculated into current gains andloess（while
closely related with the normal business of the Company, excluding the
23,300,479.35
fixed-amount or fixed-proportion governmental subsidy according to the
unified nationalstandard）
Capital occupation fee collected from non-financial organizations and
accounted as current gain/loss.
Income from the exceeding part between investment cost of the Company
paid for obtaining subsidiaries, associates and joint-ventures and
recognizable net assets fair value attributable to the Company when
acquiring the investment
Gains and losses from exchange of non-monetary assets
Gains and losses from assets under trusted investment or Management
Asset impairment provisions for force major such as natural disasters
Gain/loss from debt reorganization
7,064,832.00
Enterprise reorganization expenses, such as payment to stuff placement
and consolidation expenses
Gain/loss from trades obviously departed from fair value
Net gain/loss of current term from consolidation of subsidiaries under
common control from beginning of term to the consolidation date
Gain/loss from debt for casting without connection to the main business
operation
In addition to normal business with the company effective hedging related
business, holders of tradable financial assets, transactions and financial
liabilities arising from changes in fair value gains and losses, as well as the 48,433,535.22
disposal of trading of financial assets, trading financial liabilities and
available-for-sale financial assets gains return on investment;
Single impairment test for impairment of receivables transferred back to
preparation
Gains and losses obtained from external trusted loans
The use of fair value measurement model of follow-up to the fair value of
real estate investment gains and losses arising from changes
According to tax, accounting and other laws, regulations, the requirements
of the current Gain/loss for a one-time adjustment of the impact of the
current Gain/loss;
Entrusted with the operating of the trust to obtain fee income
Net amount of non-operating income and expense except the aforesaid
-1,703,546.21
items
Other non-recurring Gains/loss items
Subtotal 79,195,346.69
Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report Less: .Amount of influence of income tax
11,452,856.21
Less: Amount of influence of minority interests
1,993,252.49
Attributable to shareholders of the parent company total non-current gains
65,749,237.99
and losses
(II) Return on equity (ROE) and earnings per share (EPS)
1. Detail
|||
|-|-|
|Weighted average ROE (%)||
||EPS-basic|
|5.82|0.46|
|4.72|0.37|

2. Calculation of rate of return on weighted average net assets
|||
|-|-|
||No|
||A|
||B|
||C=A-B|
||D|
||E|
||F|
||G|
||H|
|Variation of other comprehensive incomes|I1|
|Cumulative months from the month following theincrease/decrease of net assets to the end of the report period|J1|
|Variation of special reserve|I2|
|Cumulative months from the month following theincrease/decrease of net assets to the end of the report period|J2|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
|||
|-|-|
|Variation of consolidated capital reserve caused byunilateral capital increase done by minority shareholders ofthe subsidiary Casting Company|I3|
|Cumulative months from the month following theincrease/decrease of net assets to the end of the report period|J3|
|Variation of consolidated special reserve caused byunilateral capital increase done by minority shareholders ofthe subsidiary Casting Company|I4|
|Cumulative months from the month following theincrease/decrease of net assets to the end of the report period|J4|
|Variation of capital reserve caused by capital increase of thejoint venture Zhejiang Zhongrun Turbine Technology Co.,Ltd.|I5|
|Cumulative months from the month following theincrease/decrease of net assets to the end of the report period|J5|
||K|
||L= D+A/2+E×F/K-G×H/K±I×J/K|
||M=A/L|
||N=C/L|

3. Calculation of basic earnings per share and diluted earnings per share
(1) Calculation of basic earnings per share
||
|-|
|No|
|A|
|B|
|C=A-B|
|D|
|E|
|F|
|G|
|H|

Hangzhou Steam Turbine Co.,Ltd. 2018 Annual Report
||
|-|
|I|
|J|
|K|
|L=D+E+F×G/K-H×I/K-J|
|M=A/L|
|N=C/L|

 (2) Calculation of diluted earnings per share
Diluted earnings per share are calculated in the same method as that of basic earnings per share.
XII.Documents for Reference
I. Annual Report 2018 with signature of the Chairman;
II. Original copy of theAuditors’ Report with the seals and signatures of the legal representative, CFO, Accounting Manager of the Company, and the Pan-China CPA and signed by certified accountants.
III. All of the originals of theCompany’s documents and public notices publicized by the presses designated by China Securities Regulatory Commission in the report period;
IV.Original copy of Resolutions of the 31st Meeting of the 7th Term of Board with signatures of directors.
Hangzhou Steam Turbine Co., Ltd.
Chairman of the Board: Zheng Bin
March 29, 2019