AUDITOR' S REPORTYue Hua Shen / Yan Zi (2014) No. 0002 ICPA filingnumber: 020201401000420To all shareholders of ****** Co., Ltd:We have audited the accompanying financial statements of ****** Co., Ltd ( “Your Company” ), which comprise the balance sheetas of 31 December 2013, the income statement,statement of changes in owner's equity and cash flow statement for the year then ended, and notes to the financial statements.I. Management ' s responsibility for the financial statementsManagement of your Company is responsible for the preparation and fair presentation of financial statements.This responsibility includes: (1) in accordance with the Accounting Standardsfor Business Enterprises and its relevant provisions, preparing the financial statements and reflecting fair presentation; (2) designing, implementing and maintaining the necessary internal control in order to free financial statements from material misstatement, whether due to fraud or error.II. Auditors' responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Chinese Certified Public Accountants Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance 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 auditors' 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 and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit also includes evaluating the appropriatenessof accounting policies used and the reasonablenessof 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.III. OpinionIn our opinion, the financial statements of your Company have been prepared in accordance with the Accounting Standards for Business Enterprise and its relevant provisions in all material respect, and present fairly the financial position of your Company as of 31 December 2013, and the results of its operations and cash flows for the year then ended.Guangdong Huaxin Accounting Firm (general partner)Guangdong, ChinaChin ese Certified Public Acco untant:Chin ese Certified Public Acco untant:Jan uary 3, 2014BALANCE SHEETAS OF 31 DECEMBER 2013 Unit: RMB Yua nINCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2013 Un it: RMB Yua nPrepared by:Audited by: Finance Man ager: Compa ny Leader:Prepared by:ager: Leader:CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2013 Un it: RMB Yua nSTATEMENT OF CHANGES IN OWNEREQUITYFOR THE YEAR ENDED 31 DECEMBER 2013Prepared by:Audited by: Finance Man ager: Compa ny Leader:****** CO., LTDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31,2013(All amou nts in RMB Yua n)I. Company Profile******* Co., Ltd. (here in after referred to as the "Compa ny") is a limited liability company (Sino-foreign joint venture) jointly invested and established by **** Co., Ltd. and ******* Limited on 24 June 2013. On December 26, 2013, the shareholders have been changed to**** CO., LTD and ******* LIMITED.Bus in ess Lice nse of En terprise Legal Pers on Lice nse No.:Legal Represe ntative:Registered Capital: RMB (Paid-in Capital: RMB )Address:Busin ess Scope: Financing and leas ing bus in ess; leas ing bus in ess; purchase of leased property from home and abroad; residue value treatme nt and maintenance of leased property; consulting and guarantees of lease transaction (articles invoIved in the in dustry lice nse man ageme nt would be dealt in terms of n ati onal releva nt stipulati ons)II. Declaration on following Accounting Standard for Business Enterprises The financial statements made by the Company are in accordanee with the requireme nts of Acco un ti ng Sta ndard for Busin ess En terprises, which reflects the financial position, financial performance and cash flow of the Company truly and completely.III. Basic of preparation of financial statementsThe Compa ny impleme nts the Acco unting Stan dards for Bus in ess En terprises (Finance and Accounting [2006] No. 3” )issued by the Ministry of Finance on February 15, 2006 and the successive regulations. The Company prepares its financial stateme nts on a going concern basis, and recog ni zes and measuresits acco unting items in complia nce with the Acco un ti ng Sta ndards for Busin ess En terprises -Basic Stan dards and other releva nt acco unting sta ndards, applicati on guideli nes and criteria for interpretation of provisions as well as the significant accounting policies and acco un ti ng estimates on the basis of actual tran sacti ons and eve nts.IV. The main accounting policies, accounting estimates and changes Fiscal year The Company adopts the calendar year as its fiscal year from January 1 to December 31.Functional currencyRMB was the fun cti onal curre ncy of the Compa ny.Acco un ti ng measureme nt attributeThe Company adopts the accrual basis for accounting treatments and double-entry bookkeep ing of borrow ing for finan cial acco un ti ng. The historical cost is gen erally asthe measurement attribute, and when accounting elements determined are in line with the requirements of Accounting Standards for Enterprises and can be reliably measured,the replacement cost, net realizable value and fair value can be used for measureme nt.Accounting method of foreign currency transactionsThe Compa ny'foreig n curre ncy tran sact ions adopt approximate spot excha nge rate of the transaction date to convert into RMB in accordanee with systematic and rati onal method; on the bala nee sheet date, the foreig n curre ncy mon etary items use the spot exchange rate of the balanee sheet date. All balances of exchange arising from differe nces betwee n the bala nee sheet date spot excha nge rate and the in itial recognition or the former balanee sheet date spot exchange rate, except that the excha nge gains and losses aris ing by borrow ing foreig n curre ncy for the eon structi on or product ion of assetseligible for capitalizatio n are tran sactedin accorda ncewith capitalizati on prin ciples, are in eluded in profit or loss in this period; the foreig n curre ncy non-mon etary items measured at historical cost will still be conv erted with the spot excha nge rate of the tran sact ion date.The standard for recognizing cash equivalentWhe n making the cash flow stateme nt, cash on hand and deposits readily to be paid will be recog ni zed as cash, and short-term (usually no more tha n three mon ths), highly liquid and readily con vertible to known amounts of cash with in sig nifica nt risk of cha nges in value are recog ni zed as cash equivale nt.Financial InstrumentsClassification, recognition and measurement of financial assets-The company at the time of initial recognition of financial assets divides it into the following four categories: financial assets measured at fair value with changes in eluded in the profit or loss of this period, loa ns and receivables, finan cial assets available for sale and held-to-maturity investments. Financial assets are measured at fair value whe n in itially recog ni zed. Releva nt tran sact ion costs of finan cial assets measured at fair value with cha nges in eluded in the profit or loss of this period are recog ni zed in profit or loss of this period, and releva nt tran sact ion costs of other categories of financial assets are recognized in the amount initially recognized.--Finan cial assets measured at fair value with cha nges in eluded in the profit or loss of this period refer to the short-term sales finan cial assets, in clud ing finan cial assets held for trad ing or finan cial assets measured at fair value with cha nges in eluded in the profit or loss of this period designated upon initial recognition by the management. Finan cial assets measured at fair value with cha nges in eluded in the profit or loss of this period are subseque ntly measured at fair value, and the in terest or cash divide nds obta ined duri ng the holdi ng period will be recog ni zed as inv estme nt in come, and the gains or losses of the cha nge in fair value at the end of this period are recog ni zed in the profit or loss in this period. When it is disposed, the differenee between the fair value and the in itial recorded amount is recog ni zed as inv estme nt in come, while adjusting gains from changes in the fair value.--Loans and receivables: the non-derivative financial assetswithout the price in an active market and with fixed and determinable recovery cost are classified as loans and receivables. Loans and receivables adopt the effective interest method and takeamortized cost for subsequent measurement, and gains or losses arising from derecognition, impairment or amortization are included in the profit or loss of this period. -- Financial assets available for sale: including non-derivative financial assets available for sale recognized initially and other non-derivative financial assets except for loans and receivables, held-to-maturity investments and trading financial assets. Financial assets available for sale are subsequently measured at fair value, and interest or cash dividends obtained during the holding period will be recognized as investment income, and gains or losses arising from the changes in fair value at the end of this period are recognized directly in owners' equity until the financial asset is derecognized or impaired and then is recognized as the profit or loss in this period.-- Held-to-maturity investments: the non-derivative financial assets with clear intention and ability to hold to maturity by the management of the company, a fixed maturity date and fixed or determinable payments are classified as held-to-maturity investments. Held-to-maturity investments adopt the effective interest method and take amortized cost for subsequentmeasurement,and gains or losses arising from derecognition, impairment or amortization are included in the profit or loss of this period.Classification, recognition and measurement of financial liabilities- The company at the time of initial recognition of financial liabilities divides it into the following two categories: financial liabilities measured at fair value with changes included in the profit or loss of this period and other financial liabilities. Financial liabilities are measured at fair value when initially recognized. Relevant transaction costs of financial liabilities measured at fair value with changes included in the profit or loss of this period are recognized in profit or loss of this period, and relevant transaction costs of other financial liabilities are recognized in the amount initially recognized.-- Financial liabilities measuredat fair value with changesincluded in the profit or loss of this period include the trading financial liabilities and financial liabilities measured at fair value with changes included in the profit or loss of this period designated upon initial recognition. Financial liabilities are subsequently measured at fair value, and the gains or losses of the change in fair value are recognized in the profit or loss in this period.-- Other financial liabilities: adopting the effective interest method and taking amortized cost for subsequent measurement. The gains or losses arising from derecognition or amortization is included in the profit or loss of this period. Requirements for derecognition of financial liabilitiesFinancial liabilities shall be entirely or partially derecognized if the present obligations derived from them are entirely or partially discharged. Where the Company enters into an agreement with a creditor so as to substitute the current financial liabilities with new ones, and the contract clauses of which are substantially different from those of the current ones, it shall recognize the new financial liabilities in place of the current ones. Where substantial revisions are made to some or all of the contract clauses of the current financial liabilities, the Company shall recognize the new financial liabilities after revision of the contract clauses in place of the current ones entirely or partially.Upon entire or partial derecognition of financial liabilities, differences between the carrying amounts of the derecognized financial liabilities and the consideration paid (including non-monetary assets surrendered or new financial liabilities assumed) are charged to profit or loss for the current period.Where the Company redeems part of its financial liabilities, it shall allocate the carrying amounts of the entire financial liabilities between the relative fair values of the parts that continue to be recognized and the derecognized parts on the redemption date. Differences between the carrying amounts allocated to the derecognized parts and the consideration paid (including non-monetary assets surrendered and the new financial liabilities assumed) are charged to profit or loss for the current period. Recognition and measurement for transfer of financial assetsIf the Company has transferred nearly all of the risks and rewards relating to the ownership of the financial assetsto the transferee, they shall be derecognized.If it retains nearly all of the risks and rewards relating to the ownership of the financial assets, they shall not be derecognized and will be recognized as a financial liability. If the Company has not transferred nor retained nearly all of the risks and rewards relating to the ownership of the financial assets:(1) to give up the control of the financial assets to be derecognized; (2) not giving up control of the financial asset to be recognized based on the extent of its continuing involvement in the transferred financial assets and liabilities are recognized accordingly.If the transfer of entire financial assets satisfy the criteria for derecognition, differences between the amounts of the following two items shall be recognized in profit or loss for the current period: (1) the carrying amount of the transferred financial asset; (2) the aggregate consideration received from the transfer plus the cumulative amounts of the changes in the fair values originally recognized in the owners 'equity. If the partial transfer of financial assets satisfy the criteria for derecognition, the carrying amounts of the entire financial assets transferred shall be split into the derecognized and recognized parts according to their respective fair values and differences between the amounts of the following two items are charged to profit or loss for the current period: (1) the carrying amounts of the derecognized parts; (2) The aggregate consideration for the derecognized parts plus the portion of the accumulative amounts of the changes in the fair values of the derecognized parts which are originally recognized in the owners ' equity.Determination of the fair value of financial instruments- If financial instruments trade in an active market, the quoted price in an active market determines its fair value; if financial instrument trade not in an active market, the valuation techniques determine the fair value. Valuation techniques include recent market transaction price reference to the familiar situation and volunteer transaction, current fair value reference to other substantially similar financial instruments, disco un ted cash flow method and opti on pric ing model and so on.Test and Provisions for impairment loss on financial assets--Except tradi ng finan cial assets, the Compa ny makes assessme nton the carry ing values of financial assets at the balance sheet date. If there is evidence that the fair value of specific financial asset has been impaired, provisions for impairment loss is made accord in gly.--Measureme nt of impairme nt of finan cial assets measured at amortized cost If there is objective evide nce that the finan cial asset measured at amortized cost has been impaired, the carrying amount of the financial asset is written down to the prese nt valueof estimated future cash flows (excludi ng future credit losses that have not yet occurred), and the amount of reduct ion is recog ni zed as impairme nt loss and is recognized in the profit or loss of this period. The Company carries out the impairment test of significant single financial asset separately, carries out the impairme nt test on in sig nifica nt sin gle finan cial asset from a si ngle or comb in atio n of an gles, and carries out the impairme nt test on sin gle asset without objective evide nce of impairment along with the financial assets with similar credit risk characteristics to con stitute a comb in ati on, but does not carry out the impairme nt test on the provisi on for impairment of financial assets based on the single in the portfolio. In the subsequent period, if there is objective evidence that the value of financial asset has bee n restored and recog ni zed releva nt to the objective matters occurri ng after the impairme nt, previously recog ni zed impairme nt loss shall be reversed and charged into the profit or loss of this period. But the book value after the reversal should not exceed the amortized cost at the reversal date of the financial assets supposed no provision for impairment. When the financial assets measured at amortized cost actually occur loss, offset aga inst the related provisi on for impairme nt.--Available for sale finan cial assetsIf there is objective evidence that an impairment of available for sale financial assets occurs, even though the financial asset has not been derecognised, the cumulative loss of decreaseof the faire value originally recorded in the owner's equity should be tran sferred out and charged in to the curre nt profit and loss. The cumulative loss is the initial acquisition cost of available for sale financial assets, deducting the fair value of the withdrawing principal and amortization amount and impairment loss as well as net impairme nt amount origi nally charged into the profit or loss.Recog niti on and provisi on for bad debts of acco unts receivableIf there is objective evide nce that receivables are impaired at the end of this period, the carrying value will be written down to its present value of estimated future cash flows, and the amount of reducti on is recog ni zed as impairme nt loss and is recog ni zed in the current profit or loss. Present value of estimated future cash flows is determined through future cash flows (excluding credit losses that have not been incurred) disco un ted at the origi nal effective in terest rate, tak ing in to acco unt the value of related collateral (less estimated disposal costs, etc.). Origi nal effective in terest rate is the actual interest rate when the receivables are recognized initially. The estimated future cash flows of short-term receivables have small difference from the present value, and the estimated future cash flows are not discounted in determining the related impairme nt loss.The sig nifica nt sin gle receivables are separately carried out impairme nt test at the end of this period, and if there is objective evidence that the impairment has occurred, based on the differe nce of the prese nt value of future cash flows less tha n the book value, the impairme nt loss is recog ni zed and the provisi on of bad debts is done. The significant single amount refers to top five receivable balances or the sum of payme nts acco un ti ng for more tha n 10% of receivable bala nces.If there is objective evide nce that the in dividual non-sig nifica nt receivables impairment has occurred, separate impairment test is done, the impairment loss is recog ni zed and the provisi on for bad debts is done; other in dividual non-sig nifica ntreceivables and receivables not impaired after separate test are together divided into several comb in atio ns for impairme nt testi ng with aging as the similar credit risk characteristics, to determ ine the impairme nt loss and do provisi on for bad debts.In addition to separate provision for impairment of receivables, the company is based on the actual loss rate of receivable portfolio with the same or similar to the previous year and aging as the similar credit risk characteristics, and combines the current situation to determine the ratio of provision for bad debts as follows:Fixed assets and depreciation accounting methodRecognition criteria of fixed assets: fixed assets refer to tangible assets held for the purpose of produc ing commodities, provid ing services, ren ti ng or bus in ess man ageme nt with useful lives exceed ing one acco un ti ng year and high unit value. Classification of fixed assets: buildings and constructions, machinery equipment, tran sport equipme nt and office equipme nt.Fixed assets pricing and depreciation method: the fixed assetsis priced based on actual cost and depreciated in a straight-line method. The estimated useful lives, estimated residual rate and annual depreciation rate of various categories of fixed assets are listed as follows:end of the report ing period, and if the market con ti nuing to fall or tech no logical obsolescence, damage, long-term idle and other reasons result in fixed assets recoverable amount lower than its book value, in accordancewith the difference provision for impairment of fixed assets, the impairment loss is recognized in fixed assetsa nd can not be reversed i n a subseque nt acco un ti ng period. The recoverable amount is recog ni zed based on the fair value of the assets deduct ing the net amount after disposal expensesand the present value of cash flows of the estimated future assets. The present value of the future cash flows of the asset is determined in accorda nee with the result ing estimated future cash flows in the process of con ti nu ous use and final disposal to select its appropriate discount rate and the amount of the disco unt. Accounting method of construction in progressThe construction in progress is priced on the actual cost, to temporarily transfer to fixed assets whe n reach ing the in ten ded use state in accorda nce with the project budgetand the actual cost of the project, and to adjust the book value of fixed assets according to the actual cost after handling final settlement of accounts. Acquisition, con struct ion or producti on of assets eligible for capitalizatio n borrowed specifically or the in terest on gen eral borrowi ng costs and auxiliary expe nses of specific borrow ings occurred can be in cluded in the cost of capital assets and subseque ntly recog ni zed in the curre nt profit or loss before the acquisiti on, con structi on or product ion of the qualify ing asset reaches the inten ded use state or the sale state.Impairme nt of con struct ion in progress: the Compa ny con ducts a comprehe nsive inspection of construction in progress at the end of the reporting period; if the con struct ion in process is stopped for long time and will not be con structed in the n ext three years and the con struct ion in progress brings great un certa inty to the econo mic ben efits of en terprises due to backward performa nce or tech niq ues and the con struct ion in progress occurs impairme nt, the bala nce of recoverable amount of sin gle con struct ion in progress lower tha n the book value of con struct ion in progress is for impairme nt provisi ons of con struct ion in progress. Impairme nt loss on the con struct ion in progress shall not be reversed in subseque nt acco unting periods once recog ni zed. The pricing and amortizing of intangible assetsPricing of the intan gible assets---The cost of outsourcing intangible assets shall be priced based on the actual expe nditure directly attributable to in ta ngible assets for the expected purpose.---Expenditure on internal research and development projects is charged into the current profit or loss, and expense in the development stage can be recognized as in tan gible costs if meeti ng the criteria for capitalizati on.---Intangible assets of investment is in accordance with the agreed value of the in vestme nt con tract or agreeme nt as costs, exclud ing not fair agreed value of the con tract or agreeme nt.---Intan gible assets of the debtor obta ined in the non-cash asset cover debt method can be accepted; if the receivable creditor' right is changed into intangible assets, then record accord ing to the fair value of intan gible assets.---For non-monetary transaction intangible assets,the fair value and related taxes payable of non-mon etary assets should be the acco un ti ng cost.Amortizati on of in tan gible assets: as for the in tan gible assets with limited service life, it is amortized by straight-line method when it is available for use within the service period. As for unforeseeable period of intangible assets bringing future economic ben efits to the compa ny, it is regarded as in tan gible assets with un certa in service life, and in tan gible assets with un certa in service life can not be amortized. The Compa' in tan gible assets in clude land use rights, forest land use rights and the producti on and marketing information management software. The land use rights are amortized averagely in accordanee with 50 years of service life, forest land use rights are amortized averagely in accordanee with 30 years of service life, and the production and marketing information management software are amortized averagely in accorda nee with 5 years of service life.Expe nditures aris ing from developme nt phase on internal research and developme nt projects can be recog ni zed as intan gible assetswhe n satisfy ing all of the follow ingconditions: (1) there is technical feasibility of completing the intangible assets so that they will be available for use or sale; (2) there is in ten ti on to complete and use or sell the in ta ngible assets; (3) the method that the in ta ngible assetsge nerate econo mic ben efits, in clud ing existe nee of a market for products produced by the intan gible assets or for the intangible assets themselves, shall be proved. Or, if to be used intern ally, the usef uln ess of the intan gible assets shall be proved; (4) adequate tech ni cal, finan cial, and other resources are available to complete the developme nt of intan gible assets, and the Compa ny has the ability to use or sell the intan gible assets; (5) the expenditures arising from development phase of the intangible assets can be measured reliably.Impairme nt of in ta ngible assets: the Compa ny con ducts a comprehe nsive in spect ion on intangible assetsat the end of the reporting period. If the intangible assetshave bee n replaced by other new tech no logies so as to seriously affect its capacity to create econo mic ben efits for the en terprise, the market value of certa in in ta ngible assets sharply fall and is not expected to recover in the remaining amortization period, certa in in tan gible asset has exceeded the legal time limit but still has some value in use as well as the intangible asset impairment has occurred, the provision for impairme nt is done accord ing to the differe nce betwee n the in dividual estimated recoverable amount and the book value. Impairme nt loss on the intan gible asset shall not be reversed in subseque nt acco unting periods once recog ni zed.Acco un ti ng method of capitalizatio n of borrowi ng costsBorrow ing costs that are directly attributable to the acquisiti on, con struct ion or product ion of qualify ing assets for capitalizati on should be charged into the releva nt costs of assets and therefore should be capitalized. Borrowing costs incurred after qualify ing assets for capitalizatio n reaches the estimated use state are charged to profit or loss in the curre nt period. Other borrow ing costs are recog ni zed as expe nses based on the accrual and are charged to profit or loss in the curre nt period.Capitalizati on of borrow ing costs should meet the follow ing con diti ons: expe nditures are being in curred, which comprise disburseme nts in curred in the form of payme nts of cash, tran sfer of non-mon etary assetsor assumpti on of in terest-beari ng debts for the acquisiti on, con struct ion or product ion of qualify ing assets for capitalizati on; borrow ing costs are being in curred; purchase, con structi on or manu facturi ng activities that are n ecessary to prepare the assets for their inten ded use or sale are in progress. Capitalizati on amount of borrowi ng in terest: the borrowi ng in terest in curred from the acquisiti on, con struct ion or producti on of assets eligible for capitalizatio n borrowed specifically or gen erally should be determ ined the capitalizati on amount accordi ng to the followi ng method before the acquisiti on, con struct ion or product ion of a qualify ing asset reach ing its inten ded use or sale state:---Where funds are borrowed specifically for purchase, con structi on or manu facturi ng of assets eligible for capitalization, costs eligible for capitalization are the actual in terest costs in curred in curre nt period less the in terest in come of unu sed borrowi ng funds deposited in the bank or any in come earned on the temporary inv estme nt of such borrow in gs.---Where funds allocated for purchase, con struct ion or manu facturi ng of assets eligible for capitalization are part of a general pool, the eligible capitalization interest。