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On behalf of the board (the “Board”) of directors (the “Directors”) of the Company, I am pleased to present to shareholders the annual results of the Group for the year ended 31 December 2017 (the “Year”).

In 2017, the Group delivered satisfactory results, in particular:

  • Revenue of the Group maintained steady growth and reached approximately RMB24,654 million.
  • The Group sustained leadership in the industry as evidenced in it ranking first in the battery industry for the fifth consecutive year on the lists of “Top 500 Enterprises of China (中國企業500 強)”, “Top 500 Enterprises of China’s Manufacturing Industry (中 國製造業企業500強)” and “Top 100 Enterprises of China Light Industry ( 中國輕工業百強企業)”. In addition, it was among the 2017 “Fortune Top 500 Chinese Companies 《( 財富》中國500強)” and “Top 500 Chinese Private-Owned Enterprises ( 中國民營企 業500 強)” in the Year. Also, having been selected as eligible stock to Shenzhen Stock Connect, a testament to its investment value, the Group has attracted much attention in the capital market.
  • The Group maintained its industry-leading technological strengths and was accredited as a “National Model Enterprise of Technology Innovation ( 國家技術創新示範企業)” and “National Model Enterprise of Intellectual Property ( 國家知識產權示範企業)”.

The results of the Group for the Year above were mainly attributable to the following factors:

  • Strong economic growth and consumption upgrade in the PRC boosted demand upgrade

    The PRC’s gross domestic product (GDP) rose by 6.9% in 2017, a reverse of the downward trend for the first time since 2011 and indicating of accelerating growth. As society develops, urbanization going at full steam, transportation networks keep improving and consumption expenditure per capita increases in the PRC, market demand for all kinds of electric vehicles will continue to grow steadily.

  • Overall profitability stayed stable along with positive industrial development

    With the PRC government continuing to raise environmental protection standards and tighten regulations on the lead-acid battery market over the past few years, the entry barrier to the industry has heightened, offering new opportunities for development in the industry. The benefit of favorable policies over the past few years and the policies in relation to new energy vehicles announced are going to set the new energy vehicle industry in good order, and that plus adjustments made by the industry itself will see the new energy vehicle market consolidate and ultimately improve the profitability of the industry in the future.

  • Diversified product mix to respond to the needs for market development

    During the Year, the Group promptly seized market opportunities by adopting the diversification strategy, as well as enriching its product series and optimizing its product mix. For instance, the Group launched the “CHILWEE” Black Gold Series High-energy Value-regulated Lead-acid (VRLA) Battery (the “BG Battery”) in 2016, which was the first successful attempt by an industry player to apply graphene technology in a commercially-viable, mass-produced lead-acid battery. Since the launch of the BG Battery, it has received positive response from customers and market recognition for its performance and energy efficiency, reflected in the sales volume of the battery.

    As for the development of lithium-ion battery, the Group has focused on production quality and endeavored to enhance the technical level of the battery. With the persistence of innovation in technology, the Group obtained for its lithium-ion battery products more than 180 patents, and thus enhanced the excellent safety when in use and specific energy of the products. As a result, the product has been granted a number of professional certificates, such as the “National Torch Program — Certificate for Exemplary Projectfor Commercialization( 國家火炬計劃產業化示範項目證書)”.

  • Focused on production quality and enhancement of technological capability

    The Group believes putting out quality products is the best strategy for consolidating market share. Thus, it has been committed to technological innovation and research supported by its well-established research and development (“R&D”) system as well as outstanding technologies, to help it improve the quality of its existing products, while achieving results in R&D of patent-worthy state-of-the-art technologies. The Group has been moving forward with innovation as its engine and technological research powering its ability to innovate. The Group has set up various technological innovation platforms, including a nationally-recognized technology center, a nationally-accredited laboratory, and a national environmental protection engineering technology center as well as a provincial key research institute. Moreover, the Group has established an overseas research institute in Germany. As at 31 December 2017, the Group owned a total of 1,484 patents and had 423 patent applications pending approval, and the patent application for the core technology of the BG Battery was making good progress.

    Moreover, as one of the largest suppliers of professional green energy solutions in the PRC, the Group adheres to the environmentally-friendly development guidelines under the 13th Five-Year Plan for the National Economic and Social Development (the “13th Five-Year-Plan”) and the reform plan for promoting eco-civilization system set out in the report of the 19th National Congress of the Communist Party of China (the “19th CPC National Congress Report”), and also upholds the environmental protection principle of “minimizing energy consumption, pollution and emissions”, as it is determined to become a role model in “resource conservation and environmental protection” and promote the Group as the top green energy brand in the PRC.

    The Group took the lead to develop the cadmium-free enclosed battery formation process (the “Cadmium-free Enclosed Battery Formation Process”) and has become one of only a few domestic enterprises to have successfully adopted the Cadmium-free Enclosed Battery Formation Process in production.

  • Expanded distribution network to bolster brand value

    During the Year, the Group strategically established a nationwide sales and distribution network to help it expand primary and secondary markets. In the primary market, the Group maintained cooperation with a number of top electric vehicle manufacturers, including Evermaster, Yadea, Lima, Bidewen and Luyuan. And, for the secondary market, the Group increased the number of independent distributors to 2,341.

    The Group has adopted a flat and refined approach in managing its distributors. It launched a more market-driven agency mechanism, removing intervening intermediaries in sales channels and that had won for its greater loyalty from end-distributors, and in turn the competitiveness of the “CHILWEE” brand was boosted.

    Looking forward, having the leverage of favorable policies implemented by the PRC government and with urbanization progressing in good pace, plus the industry consolidating and new energy electric vehicle market developing, the battery industry can expect to see solid and healthy growth in the future. The Group will closely monitor market dynamics and seize arising opportunities by adjusting flexibly its production and sales strategies, as well as refining development plan and its sales network so as to achieve business expansion. In addition, the Group will seek to enhance its brand value by focusing on technological innovation, undertaking indepth research in technology, nurturing industry talent and helping to improve the new energy industrial chain.

    In the Year, at the call to action for green development by the PRC government, the Group, as the role model in the battery industry, responded by enhancing production quality and technological capability and pursuing excellence in innovation, and as a result, it turned market opportunities into impressive performance.

    On behalf of the Group, I would like to express my gratitude to our shareholders, customers and business partners for their long-time support and faith in the Group. I would also like to thank the Board, the management team and our staff for their remarkable contribution to the Group. With the community giving us attention and encouragement and the diligence and wisdom of our staff, the Group will push forward with resolve to capture opportunities to achieve greater success in 2018.

Zhou Mingming
Chairman and Chief Executive Officer
25 March 2018

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