Exhibit












Exhibit 10.77






MOMENTIVE UV COATINGS (SHANGHAI) CO., LTD.


FINANCIAL STATEMENTS AND 
REPORT OF THE AUDITORS 
FOR THE YEAR ENDED 31 DECEMBER 2016















































































































Audit Report
SAAF (2017) AR.NO.071 




TO THE BOARD OF DIRECTORS OF 
MOMENTIVE UV COATINGS (SHANGHAI) CO., LTD.
We have audited the accompanying financial statements of Momentive UV Coatings (Shanghai) Co., Ltd. (hereinafter referred to as “the Company”),including the balance sheet as of 31 December 2016 and the income statement, cash flow statement for the year then ended as well as notes to the financial statements.
1. Responsibility of the Company’s management on these financial statements
Management is responsible for the preparation of these financial statements. This responsibility includes: (1) these financial statements are prepared in accordance with Accounting Standards for Business Enterprises and the Accounting System for Business Enterprises, and present fairly. (2) designing, implementing and maintaining internal control relevant to the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. 
2. Responsibility of certified public accountants
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in United States of America.  Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. 
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider the internal control relevant to the preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.  
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


2











3.  Auditor’s  opinion
In our opinion, the financial statements of Momentive UV Coatings (Shanghai) Co., Ltd. have been prepared in accordance with U.S. Generally accepted accounting principles, and present fairly, in all material respects, the financial position of the Company as of 31 December 2016, and the results of its operations and cash flows for the year then ended. 






/s/ Shanghai Asahi Accounting Firm              Chinese CPA : Li Can






Chinese CPA : Zhu Jun




Shanghai    P. R. China                         February 10, 2017




3











BALANCE SHEET ( to be continued)
AS AT 31 DECEMBER 2016
(All amounts in Rmb Yuan unless otherwise stated)
	
							
	 	 
	 
	31 December
	

	31 December
	


	 	ASSETS
	Notes
	2016
	

	2015
	


	 	Current assets
	 
	 
	 
	


	 	Cash at bank and in hand 
	4.1
	11,677,321.79
	

	31,484,429.58
	


	 
	 	Notes receivable
	4.2
	26,576,197.31
	

	38,771,101.63
	


	 
	 	Accounts receivable
	2.6, 4.3
	89,902,219.94
	

	99,798,425.81
	


	 
	 	Other receivables
	2.6
	2,400.00
	

	2,400.00
	


	 
	 	Inventories
	2.7, 4.4
	18,707,271.67
	

	20,865,869.40
	


	 
	 	Prepaid expenses
	 
	4,512.95
	

	4,192.00
	


	 
	 	Total current assets 
	 
	146,869,923.66
	

	190,926,418.42
	


	 	 
	 
	 

	 	Fixed assets 
	 
	 
	

	 
	


	 	 

	 	Fixed assets - cost
	2.8, 4.5
	6,628,202.01
	

	6,709,359.28
	


	 	Less: Accumulated depreciation
	2.8, 4.5
	5,881,545.21
	

	5,811,740.84
	


	 	Fixed assets - net
	 
	746,656.80
	

	897,618.44
	


	 	Less: Provision for impairment of fixed assets
	 
	—
	

	—
	


	 
	 	Fixed assets - net book value
	 
	746,656.80
	

	897,618.44
	


	 
	 	Other assets
	 
	 
	 

	 	Long-term prepaid expenses
	2.9
	142,500.00
	

	232,500.00
	


	 
	 	Deferred tax - debit
	 
	240,760.17
	

	38,844.43
	


	 
	 	TOTAL ASSETS
	 
	147,999,840.63
	

	192,095,381.29
	





  


The accompanying notes form an integral part of these financial statements.


4











BALANCE SHEET (continued)
AS AT 31 DECEMBER 2016
(All amounts in Rmb Yuan unless otherwise stated)


    
	
							
	 	 
	  
	31 DECEMBER
	

	31 DECEMBER
	


	 	LIABILITIES AND OWNERS’ EQUITY
	Notes
	2016
	

	2015
	


	 	Current liabilities
	 
	 
	 

	 	Notes payable
	 
	—
	

	—
	


	 
	 	Accounts payable
	4.6
	47,965,757.51
	

	58,816,829.79
	


	 
	 	Salary payable
	 
	980,000.00
	

	400,000.00
	


	 
	 	Tax payable
	4.7
	7,834,795.03
	

	16,175,954.28
	


	 
	 	Other surcharges
	 
	10,543.40
	

	22,836.06
	


	 
	 	Dividend payable
	 
	22,461,693.80
	

	13,145,723.63
	


	 
	 	Other payable
	4.8
	1,887,909.46
	

	738,393.44
	


	 
	 	Total current liabilities


	 
	81,140,699.20
	

	89,299,737.20
	


	 
	 	Total liabilities
	 
	81,140,699.20
	

	89,299,737.20
	


	 
	 	Owners' equity
	 
	 
	 

	 
	 	Paid-in capital
	4.9
	4,138,525.00
	

	4,138,525.00
	


	 
	 	Surplus reserve
	4.10
	2,100,000.00
	

	2,100,000.00
	


	 
	 	Undistributed profits
	4.11
	60,620,616.43
	

	96,557,119.09
	


	 
	 	Total owners' equity
	 
	66,859,141.43
	

	102,795,644.09
	


	 
	 	TOTAL LIABILITIES AND OWNERS’ EQUITY
	 
	147,999,840.63
	

	192,095,381.29
	


	 



  
    
The accompanying notes form an integral part of these financial statements.
























5









INCOME STATEMENT 
FOR THE YEAR ENDED 31 DECEMBER 2016 
(All amounts in Rmb Yuan unless otherwise stated)




	
								
	 
	Notes
	Year 2016
	Year 2015
	Year 2014

	Revenues from main operations
	2.10
4.12
	334,219,891.26
	

	342,012,867.83
	

	283,502,034.63
	


	 
	 
	 
	 

	Less: Costs main operations
	4.12
	233,818,221.10
	

	261,367,286.76
	

	212,942,441.80
	


	 
	 
	 
	 
	 

	      Surcharges for main operations
	 
	979,176.41
	

	786,737.38
	

	617,583.18
	


	Profit from main operations
	 
	99,422,493.75
	

	79,858,843.69
	

	69,942,009.65
	


	 
	 
	 
	 
	 

	Less: Selling and distribution expenses
	4.13
	4,128,783.69
	

	4,820,806.92
	

	7,388,847.12
	


	 
	 
	 
	 
	 

	Other operation income
	 
	388.89
	

	47,638.49
	

	233,254.72
	


	 
	 
	 
	 
	 

	General and 
administrative expenses 
	4.14
	17,416,177.10
	

	11,657,992.28
	

	5,537,479.87
	


	 
	 
	 
	 
	 

	Finance (income) expenses - net
	4.15
	(2,695,350.25
	)
	(1,092,332.51
	)
	(13,182.60
	)

	 
	 
	 
	 
	 

	Operating profit
	 
	80,573,272.10
	

	64,520,015.49
	

	57,262,119.98
	


	 
	 
	 
	 
	 

	Non-operating income
	4.16
	191,919.03
	

	87,342.07
	

	137,199.22
	


	 
	 
	 
	 
	 

	Non-operating expense 
	4.16
	2,046.15
	

	—
	

	—
	


	 
	 
	 
	 
	 

	Total profit
	 
	80,763,144.98
	

	64,607,357.56
	

	57,399,319.20
	


	 
	 
	 
	 
	 

	Less: Income taxes
	2.11
	20,237,953.84
	

	16,196,870.02
	

	14,368,981.92
	


	 
	 
	 
	 
	 

	Net profit
	 
	60,525,191.14
	

	48,410,487.54
	

	43,030,337.28
	


	 
	 
	 
	 
	 








The accompanying notes form an integral part of these financial statements.


































6









CASHFLOW STATEMENT 
FOR THE YEAR ENDED 31 DECEMBER 2016
(All amounts in Rmb Yuan unless otherwise stated)


	
							
	1. Cash flows from operating activities
	Year 2016
	Year 2015
	Year 2014

	Cash received from sales of goods or rendering of services
	406,222,940.09
	

	382,507,558.14
	

	334,543,657.23
	


	Cash received relating to other operating activities 
	191,919.03
	

	87,342.07
	

	137,199.22
	


	Sub-total of cash inflows
	406,414,859.12
	

	382,594,900.21
	

	334,680,856.45
	


	Cash paid for goods and services
	(277,618,516.29
	)
	(287,000,379.42
	)
	(241,215,872.34
	)

	Cash paid to and on behalf of employees
	(7,989,408.44
	)
	(7,633,928.62
	)
	(6,523,856.43
	)

	Payments of taxes and levies
	(47,133,802.28
	)
	(21,917,429.15
	)
	(27,568,272.06
	)

	Cash paid relating to other operating activities 
	(5,730,450.09
	)
	(6,870,003.19
	)
	(2,931,652.51
	)

	Sub-total of cash outflows 


	(338,472,177.1
	)
	(323,421,740.38
	)
	(278,239,653.34
	)

	Net cash flows from operating activities 
	67,942,682.02
	

	59,173,159.83
	

	56,441,203.11
	


	2. Cash flows from investing activities
	 
	 
	 

	intangible assets and other long-term assets
	23,398.06
	

	—
	

	—
	


	Sub-total of cash inflows 


	23,398.06
	

	—
	

	—
	


	Cash paid to acquire fixed assets, intangible assets  and other long-term assets
	(212,142.73
	)
	(356,027.35
	)
	(35,987.65
	)

	Sub-total of cash outflows
	(212,142.73
	)
	(356,027.35
	)
	(35,987.65
	)

	Net cash flows used in investing activities
	(188,744.67
	)
	(356,027.35
	)
	(35,987.65
	)

	3. Cash flows from financing activities
	 
	 
	 

	Sub-total of cash inflows
	 
	 
	 

	Cash payments for distribution of dividends or profits
	(87,145,723.63
	)
	(57,000,000
	)
	(46,479,576
	)

	Sub-total of cash outflows
	(87,145,723.63
	)
	(57,000,000.00
	)
	(46,479,576.00
	)

	Net cash flows used in financing activities
	(87,145,723.63
	)
	(57,000,000.00
	)
	(46,479,576.00
	)

	4. Effect of foreign exchange rate changes on cash  and cash equivalents
	(415,321.51
	)
	(458,617.00
	)
	(11,975.86
	)

	5. Net increase (used) in cash and cash equivalents
	(19,807,107.79
	)
	1,358,515.48
	

	9,913,663.60
	







7











NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2016


(Amounts expressed in Renminbi (“RMB”) unless otherwise stated)




1. COMPANY BACKGROUND AND PRINCIPAL ACTIVITIES
Momentive UV Coatings (Shanghai) Co., Ltd., formally known as Borden UV (Shanghai) Co., Ltd.༈ ̈”the Company”༉©is a Sino-foreign equity joint venture enterprise between Borden UV Coatings Holdings (Shanghai) Limited and Prime Union Limited. The Company was established on 18 March 2004 with the approval of the Shanghai Municipal Government in Shangwaihuhuiduzizi[2004]0768 and the business license number is 913101157595925826 with the operation period of 30 years. The Company’s registered capital is USD$500,000.00.


The approved Company’s business operation scope includes manufacture and sale of various kinds of UV coatings and provision of related technical consulting services (Comment: extracted from Articles of Associations of the Company.)


In 2007, the Company’s prior shareholder Borden UV Coating Holding (Shanghai) Limited was renamed Hexion Specialty UV Coating (Shanghai) Limited and transferred 0.01% of its shares to Prime Union Limited, and the Company was renamed Hexion UV Coatings (Shanghai) Co., Ltd.. In 2013, based on the approvals of the Company’s Board of Directors and the Pudong District of Shanghai Municipal government, the Company was renamed Momentive UV Coatings (Shanghai) Co., Ltd., and one of the Company’s investors, Hexion Specialty UV Coatings (Shanghai) Ltd., was renamed Momentive Specialty UV Coatings (Shanghai) Limited (subsequently renamed again to Hexion UV Coatings (Shanghai) Limited in 2015).




2. PRINCIPAL ACCOUNTING POLICIES
2.1  Accounting standards
The Company adopts accounting principles generally accepted in the United States of America.


2.2  Accounting period
The Company’s accounting year starts on 1 January and ends on 31 December.


2.3  Basis of accounting and measurement bases
The Company follows the accrual method of accounting. Assets are initially recorded at their actual costs and are subsequently adjusted for impairment, if any, as events and circumstances warrant.


2.4  Reporting currency
The recording currency of the Company is RMB Yuan.


2.5  Foreign currency translation
Except for the accounting treatment for paid-in capital, foreign currency transactions are translated into RMB at the exchange rates stipulated by the People’s Bank of China on the first day of the month in which the transactions took place. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into RMB at the stipulated exchange rates by the People’s Bank of China at the balance sheet date. Exchange differences arising from these translations are expensed, except for those which occurred in the pre-operation period, which are recorded as long-term deferred expenses, and those attributable to foreign currency borrowings that have been taken out specifically for the construction of fixed assets, which are capitalized as part of the fixed asset costs.


2.6  Provision for Bad Debt
Full provisions are applied to receivables where events or changes in circumstances indicate that the balances cannot be collected (the debtor is deregistered, bankrupt and the Company can not take back the accounts receivable according to the bankruptcy procedure in law; the debtor is dead, has no heritage to pay or has no haeres; has solid evidence that the accounts receivable aged over three years and can not be taken back). When the bad debt occurs, it is written off through the bad debt provision with the approvals according to the authorized level.






8









2.7 Inventories
2.7.1 Inventories include materials in transit, raw materials, work in progress, finished goods, low cost consumables and packaging materials.
2.7.2 Inventories are stated at the lower of cost or market.
2.7.3 The inventory issuance cost was determined using the weighted average method.
2.7.4 Low cost consumables are fully amortized when issued for use. 


2.8  Fixed assets and depreciation
2.8.1 Fixed assets include buildings, machinery and equipment used in production or rendering of services, or held for management purposes, which have useful lives of more than one year. 
2.8.2 Fixed assets purchased or constructed by the Company are recorded at actual cost.
2.8.3 Fixed assets are depreciated using the straight-line method to write off the cost of the assets to their residual values of 0% which represents their estimated salvage value over their estimated useful lives. Their estimated useful lives are as follows:
	
				
	 	Category:
	useful lives (years) :
	Annual depreciation rate (%):

	 	Machinery 
	10
	10

	 	Electronic equipment 
	10
	10

	 	Motor vehicle
	10
	10

	 





2.9 Long-term prepaid expenses
Long-term prepaid expenses was recorded in actual cost and are amortized on the straight-line basis over the expected beneficial periods and are presented at cost net of accumulated amortization. 


2.10 Sales of goods
     Revenue from the sale of goods is recognized when significant risks and rewards of ownership of the goods are transferred to the buyer, the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and it is probable that the economic benefit associated with the transaction will flow to the Company and the relevant revenue and costs can be measured reliably.


2.11 Enterprise income tax (“EIT”)
EIT is recognized under the liability method (balance sheet approach).


3. Taxations
The Company’s applicable major taxations and rate are as follows:
	
			
	Category:
	Tax base:
	Statutory Tax %:

	Value added tax
	Valuation amount
	17

	EIT
	Taxable income
	25




The actual EIT rate applicable for 2016 was 25%.


9











4. NOTES TO MAJOR ACCOUNTS IN THE FINANCIAL STATEMENTS
4.1 Cash at bank and in hand
	
													
	Item:
	31 December 2016
	31 December 2015

	Original currency
	Exchange rate
	RMB equivalent
	Original currency
	Exchange rate
	RMB equivalent

	Cash in hand
	 
	 
	42,907.15
	

	 
	 
	26,344.66
	


	RMB
	 
	 
	42,907.15
	

	 
	 
	26,344.66
	


	Cash at bank
	 
	 
	11,634,414.64
	

	 
	 
	31,458,084.92
	


	RMB
	 
	 
	7,973,653.18
	

	 
	 
	24,765,927.71
	


	USD
	527,715.36
	

	6.9370
	

	3,660,761.46
	

	1,030,577.37
	

	6.4936
	

	6,692,157.21
	


	Total
	 
	 
	11,677,321.79
	

	 
	 
	31,484,429.58
	







4.2 Notes Receivable
	
			
	Category:
	31 December 2016
	  31 December 2015

	Bank Note
	26,576,197.31
	38,771,101.63




The top major debtors are as follows:
	
					
	 	No.
	Debtor Name:
	Note Quantity:
	      31 December 2016

	 	1
	Zhong Tian Technology Optical Fiber Co., Ltd.
	3
	14,335,673.48

	 	2
	Changfei Optical Fiber Co., Ltd.
	7
	7,746,600.00

	 	3
	Nanjing Fiberhome Fujikura Optical Communication Ltd.
	3
	3,800,000.00

	 
	 	4
	Zhongzhu Optic fiber Co., Ltd
	4
	693,923.83

	 	 
	        Total
	 
	26,576,197.31






	
					
	 	No.
	Debtor Name:
	Note Quantity:
	      31 December 2015

	 	1
	Changfei Optical Fiber Co., Ltd.
	7
	30,256,585.63

	 	2
	Zhong Tian Technology Optical Fiber 
Co., Ltd.
	1
	3,000,000.00

	 	3
	Nanjing Fiberhome Fujikura Optical Communication Ltd.
	1
	2,000,000.00

	 
	 	4
	Chengdu Zhongzhu Optical Fiber Co., Ltd.
	10
	1,470,000.00

	 
	 	5
	Xi’an Xigu Optical Communication Ltd.
	3
	1,234,588.00

	 
	 	 
	        Total
	 
	37,961,173.63






10











4.3 Accounts Receivable          
	
		
	31 December 2016
	31 December 2015

	89,902,219.94
	99,798,425.81




The top 5 major debtors are as follows:
	
				
	Debtor Name:
	Nature:
	31 December 2016
	%

	Furukawa Japan 
	Goods sold
	31,223,312.13
	35%

	Zhong Tian Technology Optical Fiber Co., Ltd.
	Goods sold
	4,675,285.68
	5%

	Changfei Optical Fiber Co., Ltd.
	Goods sold
	22,233,000.03
	25%

	OFSLLC
	Goods sold
	10,062,426.5
	11%

	BIRLA FURUKAWA
	Goods sold
	5,833,739.52
	6%

	Total
	 
	74,027,763.86
	82%




There was no receivable from related parties as of 31 December 2016.


	
							
	Aging:
	31 December 2016
	%
	31 December 2015
	%

	Within 1 year
	89,901,173.79
	

	99.999
	99,797,379.66
	

	99.999

	1 to 2 years
	1,046.15
	

	0.001
	1,046.15
	

	0.001

	Total
	89,902,219.94
	

	100
	99,798,425.81
	

	100






4.4 Inventory
	
							
	Item:
	31 December 2016
	31 December 2015

	Amount
	Reserve
	Amount
	Reserve

	Raw materials
	9,093,245.46
	

	—
	11,236,148.21
	

	—

	Packing material
	121,466.70
	

	—
	98,697.32
	

	—

	Low valued consumables
	513,825.99
	

	—
	55,113.98
	

	—

	Finished goods
	8,978,733.52
	

	—
	9,475,909.89
	

	—

	Total
	18,707,271.67
	

	—
	20,865,869.4
	

	—






4.5 Fixed Assets and Accumulated Depreciation
Original Cost 
	
									
	Category:
	31 December 2016
	Additions
	Deductions
	31 December 2015

	Machinery
	3,014,713.91
	

	—
	

	—
	

	3,014,713.91
	


	Electronic
	939,132.83
	

	—
	

	—
	

	939,132.83
	


	equipment
	 
	 
	 
	 

	Motor Vehicle
	413,071.79
	

	168,552.99
	

	293,300.00
	

	537,818.80
	


	Other equipment
	2,261,283.48
	

	43,589.74
	

	—
	

	2,217,693.74
	


	Total
	6,628,202.01
	

	212,142.73
	

	293,300.00
	

	6,709,359.28
	







11











Accumulated depreciation
	
									
	Category:
	31 December 2016
	Addition 
	Deductions
	31 December 2015

	Machinery
	2,712,898.96
	

	117,990.93
	

	—
	

	2,594,908.03
	


	Electronic equipment
	833,221.69
	

	48,697.89
	

	—
	

	784,523.80
	


	Motor Vehicle
	225,792.25
	

	52,997.34
	

	293,300.00
	

	466,094.91
	


	Other equipment
	2,109,632.31
	

	143,418.21
	

	—
	

	1,966,214.10
	


	Total
	5,881,545.21
	

	363,104.37
	

	293,300.00
	

	5,811,740.84
	







4.6 Accounts Payable
	
		
	31 December 2016
	31 December 2015

	47,965,757.51
	58,816,829.79




The top 5 major Creditors are as follows:
	
				
	Creditor Name:
	Nature:
	31 December 2016

	MIWON
	Goods Purchased
	15,236,204.82
	


	Sartomer Logistics (Shanghai) Co., Ltd.
	Goods Purchased
	14,174,942.96
	


	Shuangjian
	Goods Purchased
	6,354,397.84
	


	Linjia Machine
	Goods Purchased
	2,040,680.00
	


	湛新  (氰特) 
	Goods Purchased
	1,634,068.80
	


	Total
	 
	39,440,294.42
	







	
				
	Creditor Name: 
	Nature:
	31 December 2015

	MIWON
	Goods Purchased
	28,094,430.53
	


	Sartomer Logistics (Shanghai) Co., Ltd.
	Goods Purchased
	13,979,690.94
	


	Shuangjian
	Goods Purchased
	3,001,376.84
	


	Linjia Machine
	Goods Purchased
	2,468,520
	


	Dai Quan
	Goods Purchased
	1,717,868.64
	


	Total
	 
	49,261,886.95
	







4.7 Taxes Payable
	
					
	Item:
	31 December 2016
	31 December 2015

	VAT payable
	637,109.93
	

	2,283,606.21
	


	EIT payable
	6,858,152.38
	

	13,490,360.42
	


	Individual income tax payable
	276,272.32
	

	264,971.28
	


	City construction tax
	10,543.4
	

	22,836.06
	


	Extra charges of education funds 
	52,717.00
	

	114,180.31
	


	Total
	7,834,795.03
	

	16,175,954.28
	







12











4.8 Other Payables
	
		
	31 December 2016
	31 December 2015

	1,887,909.46
	738,393.44






The top 3 major Creditors are as follows:
	
				
	Creditor Name:
	Nature:
	31 December 2016

	  Fishand Richardson PC
	Lawyer fee
	1,478,573.62
	


	  Caribou Specialty Materials
	Technology service charge
	288,416.74
	


	  Momentive Chemical
	Overseas market promotion
	152,614.00
	







	
				
	Creditor Name: 
	Nature:
	31 December 2015

	Momentive Chemical
	Overseas market promotion
	389,616.00
	


	Caribou Specialty Materials
	Technology service charge
	200,645.81
	


	Fishand Richardson PC
	Lawyer fee
	141,065.28
	









4.9 Paid-in Capital
	
							
	Investor Name:
	31 December 2016、 2015、2014
	 

	 
	In USD$
	RMB equivalent
	(%)

	Momentive Specialty UV coatings ( Shanghai) Limited(Renamed to Hexion UV Coating (Shanghai ) Limited in 2015)
	249,950.00
	

	2,068,848.65
	

	49.99%
	


	Prime Union Limited
	250,050.00
	

	2,069,676.35
	

	50.01%
	


	Total
	500,000.00
	

	4,138,525.00
	

	100.00
	%






4.10 Surplus Reserve
	
		
	Item:
	31 December 2016、2015、2014

	Reserve fund
	2,100,000.00

	Total
	2,100,000.00






4.11 Retained Earnings
	
							
	Item:
	2016
	2015
	2014

	Retained earning, beginning
	96,557,119.09
	

	118,292,355.18
	

	92,862,017.90
	


	Add: current year profit
	60,525,191.14
	

	48,410,487.54
	

	43,030,337.28
	


	Less: Profit distribution to equity owners
	96,461,693.80
	

	70,145,723.63
	

	17,600,000.00
	


	Retained earning, ending
	60,620,616.43
	

	96,557,119.09
	

	118,292,355.18
	







13











4.12 Operation Income / Operation Cost
	
						
	Operation Income for Year 2016
	Operation Income for year 2015
	Operation Income for year 2014

	Sales
	Other Operation Income
	Sales
	Other Operation Income
	Sales
	Other Operation Income

	334,219,891.26
	388.89
	342,012,867.83
	47,638.49
	283,502,034.63
	233,254.72






	
						
	Operation Cost for year 2016
	Operation Cost for year 2015
	Operation Cost for year 2014

	Cost of sales
	Other Operation Cost
	Cost of sales
	Other Operation Cost
	Cost of sales
	Other Operation Cost

	233,818,221.10
	—
	261,367,286.76
	—
	212,942,441.80
	—






4.13 Selling and distribution expenses
	
			
	Year 2016
	Year 2015
	Year 2014

	4,128,783.69
	4,820,806.92
	7,338,847.12




The major 2016 items include:
	
							
	Item:
	Year 2016
	Year 2015
	Year 2014

	Transportation
	2,709,713.24
	

	2,918,723.12
	

	1,568,240.22
	


	Market promotion
	1,042,392.38
	

	369,000.00
	

	2,369,079.74
	


	Gas and parking
	111,927.71
	

	126,631.67
	

	194,696.27
	


	Custom inspection
	50,334.64
	

	74,999.99
	

	108,773.62
	


	Office expense
	33,284.66
	

	45,743.30
	

	155,417.18
	







4.14 G&A Expenses
	
			
	Year 2016
	Year 2015
	Year 2014

	17,416,177.10
	11,657,992.28
	5,537,479.87




The major 2016 items include:
	
							
	Item
	Year 2016
	Year 2015
	Year 2014

	Consultant fees
	7,425,998.20
	

	—
	

	—
	


	Payroll
	4,010,501.34
	

	3,829,369.58
	

	3,724,309.67
	


	Overseas R & D fee
	3,466,126.79
	

	3,384,203.73
	

	—
	


	Statutory social insurance
	458,919.92
	

	453,578.50
	

	379,421.50
	


	Entertainment expenses
	453,334.71
	

	416,872.58
	

	366,407.02
	


	Office expense
	399,906.96
	

	407,177.19
	

	241,014.06
	


	Taxes
	310,493.10
	

	190,366.33
	

	232,799.40
	


	Lawyer fees
	—
	

	1,928,804.70
	

	—
	







4.15 Financial Expenses
	
							
	Item:
	Year 2016
	Year 2015
	Year 2014

	Interest expense
	455,052.04
	

	45,584.94
	

	—
	


	Interest income
	(162,426.65
	)
	(82,315.96
	)
	(68,511.36
	)

	Foreign exchange loss (gain) 
	(3,049,485.53
	)
	(1,133,604.97
	)
	(18,666.07
	)

	Bank charges
	61,509.89
	

	78,003.48
	

	73,994.83
	


	Total
	(2,695,350.25)
	

	(1,092,332.51)
	

	(13,182.60)
	







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4.16 Non-operation Income / Non-operation (Expense)
	
								
	 	Item
	Year 2016
	Year 2015
	Year 2014

	 	Net non-operation result
	189,872.88
	

	87,342.07
	

	137,199.22
	


	 	Total non-operation income
	191,919.03
	

	87,342.07
	

	137,199.22
	


	 	 
	 
	 
	 

	 	1. tax return
	122,322.16
	

	18,000.00
	

	0
	


	 	2. service charge return for tax payment
	16,423.10
	

	45,966.07
	

	115,511.22
	


	 	3. sponsor
	9,000.00
	

	22,376.00
	

	  21,688.00
	


	 	4. other
	44,173.77
	

	1,000.00
	

	—
	


	 	Total non-operation expense
	2,046.15
	

	—
	

	—
	


	 





4.17 Cash Flow Information
	
							
	Supplemental Information
	Year 2016
	

	Year 2015
	

	Year 2014
	


	Reconciliation of net profit to cash flows from operating activities
	 
	 
	 

	   Net profit
	60,525,191.14
	

	48,410,487.54
	

	43,030,337.28
	


	   Adjust for:Provision for asset impairment
	—
	

	—
	

	—
	


	Depreciation of tangible assets
	363,104.37
	

	570,797
	

	604,108.77
	


	Amortization of long-term prepaid expenses
	90,000.00
	

	37,500.00
	

	2,436.40
	


	Amortization of prepaid expense
	(320.95
	)
	(4,192.00
	)
	—
	


	Losses on disposal of fixed assets, intangible assets and  other long-term assets
	(23,398.06
	)
	—
	

	—
	


	Finance expenses
	415,321.51
	

	458,617.00
	

	11,975.86
	


	Decrease in deferred tax debit
	(201,915.74
	)
	479,683.42
	

	163,844.03
	


	Decrease in inventories
	2,158,597.73
	

	1,589,183.75
	

	1,687,661.03
	


	(Increase) Decrease in operating receivables
	22,091,110.19
	

	(16,040,544.12
	)
	3,872,228.53
	


	Increase in operating payables
	(17,475,008.17
	)
	23,671,627.24
	

	7,068,611.21
	


	Others
	—
	

	—
	

	—
	


	Net cash flows from operating activities
	67,942,682.02
	

	59,173,159.83
	

	56,441,203.11
	







5. Related party relationships and transactions
5.1 Related party relationships
	
		
	Name:
	Related party relationships

	Momentive Specialty UV coatings ( Shanghai) Limited (Renamed to Hexion UV Coating (Shanghai ) Limited in 2015)                                                                                                 
	Investor

	Prime Union Limited
	Investor






5.2 Transactions
There were no material related party transactions in 2016.






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6. Subsequent event
January 8, 2015 - Momentive UV Coatings (Shanghai) Co., Ltd. sued by DSM Desotech, Inc. for patent infringement in Southern District of Ohio.
The case is currently pending, and the Company is unable to assess the potential outcome and any resulting financial impact at this time.






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