Add New Energy Investment : SUPPLEMENTAL ANNOUNCEMENT IN RELATION TO THE QUALIFIED OPINION SET OUT IN THE INDEPENDENT AUDITOR'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2018

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Add New Energy Investment Holdings Group Limited

愛 德 新 能 源 投 資 控 股 集 團 有 限 公 司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 02623)

SUPPLEMENTAL ANNOUNCEMENT IN RELATION TO

THE QUALIFIED OPINION SET OUT IN

THE INDEPENDENT AUDITOR'S REPORT

FOR THE YEAR ENDED 31 DECEMBER 2018

Reference is made to the announcement of annual results for the year ended 31 December 2018 of Add New Energy Investment Holdings Group Limited (the "Company", together with its subsidiaries, the "Group") dated 29 March 2019 and the announcement of the Company responding to the qualified opinion ("Qualified Opinion") set out in the Independent Auditor's Report for the year ended 31 December 2018 (the "Announcements").

In the course of the 2018 annual audit, the Company has disagreement with the then auditor relating to certain coal trading transactions. The independent non-executive directors of the board (the "Board") of directors (the "Directors") established an independent investigation committee and engaged external professionals to conduct an independent investigation on the above transactions. An independent investigation consultant was appointed on 18 April 2019 to conduct an independent investigation on such coal trading transactions.

A report (the "Report") on the independent investigation during the period from 1 January 2018 to 31 December 2018 was issued by the independent investigation consultant in June 2019, a summary of which is provided below.

SUMMARY OF THE REPORT

The Coal Transactions

Shandong Ishine Mining Industry Co., Ltd. (山東興盛礦業有限責任公司, "Shandong Ishine"), an

indirectly wholly-owned subsidiary of the Company, recorded coal trading transactions (the "Coal Transactions") involving 河南煤業化工集團哈密投資有限公司(referred to as "Henan Coal") as upstream supplier (the "Supplier"); and 新疆國合能源有限責任公司(referred to as "Guohe Energy") and 伊吾疆納新能源有限公司(referred to as "Yiwu New Energy") as downstream customers (respectively "Customer A" and "Customer B", collectively, the "Customers"),

between October 2018 and November 2018.

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Nature and business rationale of the Coal Transactions

In relation to the commercial rationale of the Coal Transactions, the independent investigation consultant reported as follows in the Report:

1. Shandong Ishine conducted small volumes of its coal trading business in 2010;
2. Further, the Company's prospectus dated 17 April 2012 disclosed that should opportunities arise, it is the Company's intention to continue its trading activities as long as such business activities provide it with a satisfactory gross profit margin; and
3. In 2018, the business scope of Shandong Ishine was expanded to include the procurement, selection and sales of coal.

Commercial substance of the Coal Transactions

In relation to the commercial substance of the Coal Transactions, the independent investigation consultant reported as follows in the Report:

1. Upon review of the contracts, invoices and bank receipts relating to the Coal Transactions, no irregularity was found;
2. No corresponding documents in respect of the physical delivery of coal was found in relation to the Coal Transactions as between Shandong Ishine and the Customers because the subject matter of those transactions was the transfer of right to receive delivery of coal, rather than physical delivery of coal. The Supplier and Customer A issued a letter confirming, and person in charge of Customer B confirmed in an interview, that the related goods under the Coal Transactions have been collected by end-customers of the Customers;
3. Pursuant to the relevant contracts for the Coal Transactions as between Shandong Ishine and the Customers, payments by the Customers should be made before delivery of goods by Shandong Ishine. However, contrary to the contractual arrangements and Shandong Ishine's internal policies, delivery of goods took place before payments were received from the Customers; and
4. The Company's management explained that the reason why the Supplier sold coal to Shandong Ishine at a favourable price was because the Supplier wished to sell to customers with good financial resources to meet payment obligations in order to maintain a steady trade volume which would form the basis of its financing and credit approvals.

Relationships between Shandong Ishine, the Supplier and the Customers

In relation to the relationships between Shandong Ishine, the Supplier and the Customers, the independent investigation consultant reported as follows in the Report:

1. Based on publicly available information, there is no shareholding relationship between Customer B and (i) the Company; and (ii) 新疆疆納礦業有限公司(Jiangna Mining), the upstream supplier of the Supplier; and
2. The Supplier and Customer A confirmed to the independent investigation consultant by way of confirmation letters that there is no connected party relationship vis-à-vis them and (i) the Group; and (ii) Mr. Li Yunde, controlling shareholder of the Company.

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AUDIT COMMITTEE'S VIEW ON THE REPORT

On 14 June 2019, the audit committee of the Company (the "Audit Committee") reviewed (i) the Report and (ii) a letter in respect of the Report issued by Mr. Lin Chu Chang (formerly the chairman of the audit committee prior to his retirement from such position with effect from 18 June 2019, "Mr. Lin's Letter"), in which Mr. Lin did not raise any objection in relation to the Report and recommended that the Company's management should produce verifiable evidence in order to alleviate any concerns that no connected party relationship exists between the Company and Customer B; or the Company should implement remedial measures in order to protect the interests of the Company's shareholders if such connected party relationship indeed exists. On the same day, the Audit Committee agreed with Mr. Lin's recommendation.

MANAGEMENT'S VIEW ON THE REPORT

On 18 June 2019, a board meeting was held where the Report and Mr. Lin's Letter were discussed at length. The management of the Company reached the following views:

1. The independent investigation consultant did not reach any definitive conclusions either in support of or against the Qualified Opinion in the Report.
2. However, the independent investigation consultant has basically confirmed the following matters (and provided clarification in relation to the Qualified Opinion):
3. 1. The genuineness of the Coal Transactions, following on-site inspection and investigation;
   2. Insofar as connected party relationships are concerned, both the upstream and downstream companies in half of the Coal Transactions are state-owned enterprises; and the customer in the other half of the Coal Transactions is Customer B, an enterprise controlled by a natural person. Based on the information available up to then, there is no evidence to demonstrate either way whether Customer B is or is not a connected party to the Company. The Report is an objective analysis and should be understood as having dispelled any suspicion in this regard;
   3. Insofar as the Company's internal policies are concerned, the independent investigation consultant noted in its Report that the Company did not provide an approval document in respect of the Coal Transactions as would be required by the Company's internal control policy. It was emphasized by Mr. Geng Guohua (the Chief Executive Officer of the Company) that the reason why the independent investigation consultant had not seen the relevant approval document was simply because the document was not requested by the independent investigation consultant from the Company during the course of the investigation. In fact, the transactions in question were compliant with the Company's internal control policy, and the relevant approval document was available for inspection; and
   4. The Company's internal controls are effective. However, with a view to further enhance the Company's internal controls, it was agreed that an independent professional internal control advisor should be engaged to review the Company's internal control policies.

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PROPOSED TIMETABLE AND COURSE OF ACTION TO ADDRESS THE QUALIFIED OPINION BEFORE THE PUBLICATION OF THE ANNUAL RESULTS FOR THE YEAR ENDING 31 DECEMBER 2019

The Company's proposed timetable and course of action (in details) to address the Qualified Opinion before the publication of the annual results for the year ending 31 December 2019, are as follows:

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Saved as disclosed above, there are no any other relevant matters in relation to the Qualified Opinion that need to be brought to the attention of the Company's shareholders.

By order of the Board

Add New Energy Investment Holdings Group Limited

Li Yunde

Chairman

Hong Kong, 28 October 2019

As at the date of this announcement, the Board comprises three executive Directors, namely Mr. Li Yunde (Chairman), Mr. Geng Guohua (Chief Executive Officer) and Mr. Lang Weiguo; and three independent non-executive Directors, namely Mr. Leung Nga Tat, Mr. Zhang Jingsheng and Mr. Li Xiaoyang.

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