Zhejiang Zhongde Automatic Control Technology Co., Ltd.

Announcement of Changes in Accounting Policies

The company and all members of the board of directors guarantee that the contents of the announcement are true, accurate and complete, and that there are no false records, misleading statements or major omissions, and bear individual and joint legal liabilities for the authenticity, accuracy and completeness of the contents.

1. Overview of changes

(1) Date of change: May 28, 2017

(2) Introduction of changes

1. Accounting policies adopted before the change

Before this change, the company’s accounting policies implemented the "Accounting Standards for Business Enterprises-Basic Standards" promulgated by the Ministry of Finance and various specific accounting standards, guidelines for the application of accounting standards for enterprises, interpretation announcements on accounting standards for enterprises, and other relevant regulations.

2. Accounting policies adopted after the change

(1) On April 28, 2017, the Ministry of Finance issued the "Accounting Standards for Business Enterprises No. 42

——Non-current assets held for sale, disposal groups and discontinued operations" (Cai Kuai [2017] No. 13), effective from May 28, 2017. For non-current assets held for sale, disposal groups and discontinued operations that exist on the implementation date of the standard, the future application method shall be adopted.

(2) On May 10, 2017, the Ministry of Finance issued the "Accounting Standards for Business Enterprises No. 16-Government Subsidies" (Cai Kuai [2017] No. 15), which came into effect on June 12, 2017. It is required to be implemented within the scope of all companies that implement the Accounting Standards for Business Enterprises from June 12, 2017, and the government subsidies that existed on January 1, 2017 are required to be handled by the future application method, and the standards will be implemented from January 1, 2017 to the standard. The newly added government subsidies between days are adjusted in accordance with the revised guidelines.

(3) On December 25, 2017, the Ministry of Finance issued the "Notice on Revising and Issuing the Format of General Corporate Financial Statements" (Cai Kuai [2017] No. 30), in response to the "Accounting Standards for Business Enterprises No. 42-Holding There are non-current assets for sale, disposal groups and discontinued operations" and the relevant provisions of "Accounting Standards for Business Enterprises No. 16-Government Subsidies". The format of general corporate financial statements has been revised, and "other income" and "other income" have been added. Statement items such as “asset disposal income”, “(1) net profit from continuing operations” and “(2) net profit from discontinued operations”, and adjusted the accounting scope of non-operating income and expenditure.

(3) Reason for change

In accordance with the relevant policies and notices issued by the Ministry of Finance, the company needs to make corresponding changes to the original accounting policies.

2. Voting and deliberation

(1) Deliberations of the Board of Directors

The company held the sixth meeting of the second board of directors on April 24, 2018.

Passed the "Proposal on Changes in Accounting Policies."

(2) Deliberations by the Board of Supervisors

The company held the fourth meeting of the second board of supervisors on April 24, 2018.

Passed the "Proposal on Changes in Accounting Policies."

(3) Deliberations at the general meeting of shareholders

This proposal still needs to be submitted to the 2017 Annual General Meeting of Shareholders for deliberation.

3. Explanation of the board of directors on the rationality of this accounting policy change

The board of directors believes that: this change of accounting policy complies with the relevant regulations of the Ministry of Finance, its decision-making procedure complies with relevant laws and regulations, there is no harm to the interests of the company and shareholders, and it will not have a significant impact on the company's financial statements.

4. Opinions of the Board of Supervisors on this change in accounting policies

The Board of Supervisors believes that this change in accounting policies complies with the relevant regulations of the Ministry of Finance, and its decision-making procedures comply with relevant laws and regulations. There is no harm to the interests of the company and shareholders, and it will not have a significant impact on the company's financial statements.

V. The impact of this accounting policy change on the company

Due to the implementation of the "Accounting Standards for Business Enterprises No. 16-Government Subsidies" (Cai Kuai [2017] No. 15), the company's 2017 income statement items "other income" increased by 403,524.00 yuan, and "non-operating income" increased by 403,524.00 yuan. Due to the implementation of the "Notice on Revising and Issuing the Format of General Corporate Financial Statements" (Cai Kuai [2017] No. 30), the company will report the non-current asset disposal gains and losses and non-current assets originally listed in "non-operating income" and "non-operating expenses". The exchange gains and losses of monetary assets have been changed to be listed in the “asset disposal gains”. In the company's 2017 income statement items, "asset disposal income" was increased by RMB 7,852.62, and "non-operating income" was decreased by RMB 7,852.62; there were no related matters in 2016 and no adjustments were required.

This change in accounting policies will not have a significant impact on the company's financial status, operating results and cash flow.

Seven, reference file directory

(1) The resolutions of the sixth meeting of the second board of directors of the company;

(2) The resolutions of the fourth meeting of the second board of supervisors of the company;

(3) The company's 2017 annual report and summary of the annual report.

Zhejiang Zhongde Automatic Control Technology Co., Ltd.