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Release Date: 15 September 2014

Tianhe Chemicals
Response to Tianhes

10 September Clarification Announcement

Ticker: 1619.HK
Market Cap: HK$62 billion
Recent Price: HK$2.43
Target Price: HK$0.00
Expected Return: -100%

Conclusion: Strong Sell

1

Disclaimer

Neither Anonymous Analytics nor its principles is a registered investment advisor or otherwise licensed in any
jurisdiction, and the opinions expressed herein should not be construed as investment advice. This report
expresses our opinions, which we have based upon publicly available facts and evidence collected and analyzed
including our understanding of representations made by the managements of the companies we analyze, all of
which we set out in our research reports to support our opinions, all of which we set out herein. We conducted
basic research based on public information in a manner than any person could have done if they had been
interested in doing so. You can publicly access any piece of evidence cited in this report.

All facts, figures, and opinions are as at the last practicable date. This document has been prepared for
informational purposes only. This document is not an offer, or the solicitation of an offer, to buy or sell a security
or enter into any other agreement. We have made every effort to ensure that all information contained herein
that support our opinions is accurate and reliable, and has been obtained from public sources we believe to be
accurate and reliable, and who are not insiders or connected persons of the stock or company covered herein or
who may otherwise owe any fiduciary duty to the issuer. However, we do not represent that it is accurate or
complete and should not be relied on as such, in particular, Tianhe Chemicals (Tianhe or the Company) and
insiders, agents, and legal representatives of Tianhe and other entities mentioned herein may be in possession of
material non-public information that may be relevant to the matters discussed herein. Do not presume that any
person or company mentioned herein has reviewed our report prior to its publication.

As evident by the contents of our research and analysis, we expend considerable time and effort to ensure that our
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Dont be stupid and invest in the public markets unless you are prepared to do your own homework and due
diligence.

2

Executive Summary

Bogus Hacking Claims: Tianhes bogus claim of hacking made so that it could bypass HKex
review procedures and process.
There Are Still Two Sets of Books: By claiming forgery, Tianhe has put itself in a corner. The
original SAIC documents that we presented are authentic, have verifiable anti-counterfeit codes
attached, and contain financial information corroborated by official government
announcements and public news articles. We submitted the original SAIC filings to the SFC to be
scrutinized and verified.
Tax Evidence Still Does Not Support Prospectus: Tianhe did not provide any proof they paid
taxes that would support the numbers claimed in the prospectus. Moreover, Tianhe did not
discredit any of the evidence we originally presented, including records from the Yi County
government and the Fuxin Haizhou District Tax Bureau.
Related-Party Customers Are Still... Related-Party Customers: Simply ignoring facts does not
make them go away. Management has blatantly lied in the face of overwhelming evidence that
its biggest customers are related parties and in no way can discredit the evidence we presented.
In this response we provide new and additional evidence that Tianhe and its customers are
related to each other.
Export Data Shows CITIC International Cannot Do the Size of Business Claimed by Tianhe: CITIC
International is the only undisputed independent third party SFC customer of Tianhe, but in this
response, we present additional evidence that Tianhe has egregiously overstating its business
relationship with CITIC International.
Tianhe Marred by Evidence of True Size of Anti-Mar Market: Managements response neither
provided an estimate for the anti-mar market size that would make Tianhes claims plausible,
nor provided the names of any of its end-users of its anti-mar product.
Morgan Stanley Due Diligence Seal of Approval Worthless: Morgan Stanley due diligence is
suspect at best, particularly where they have a significant financial interest in the subject
company that they are seeking to further monetize. We point out an example of failed due
diligence by the very same private equity fund that invested in Tianhe. Morgan Stanley is the
only IPO promoter still publically supporting Tianhe.














3

Introduction

After taking more than a week, Tianhe released a half-baked response to our 67 page report dated 2
September 2014, questioning its accounts. The 10 September release of Tianhes clarification was
rather unceremonious, with Tianhe Management claiming its email system had been hacked into and
was therefore compelled to release the clarification response immediately. This is despite the fact that
the language of the clarification announcement makes clear that the HKex appears to have requested
information and explanations from Tianhe and had still not received satisfactory answers.

For the record, we have no knowledge of any attempted hack. We seriously doubt there was ever any
attempted hacking. Were not even sure we understand the rationale behind why the supposed
attempted hacking necessitated Managements release of a clarification announcement while there
were still outstanding queries from the HKex.

Shortly prior to these claims of being hacked, Reuters had published an article noting that the cost of
borrowing Tianhe shares was climbing and further suggested that our report was gaining traction with
investors. See the article here: http://www.reuters.com/article/2014/09/10/tianhe-chemicals-shorts-
idUSL3N0RA2J520140910

We believe this whole farce of hacking was concocted by Tianhe so Management would have an
excuse to release their response as soon as possible in order to stem the rising criticism in the media
and among investors without having to provide satisfactory answers to the HKex in the hopes of
temporarily propping up their sinking ship.

























4

Tianhes Clarification Announcement Our Views

After a thorough review of Tianhes 10 September clarification announcement, we declare it to be an
odd document that lacks any credibility and raises more questions than it answers. We can put
Managements explanations and defenses into two categories:

Category 1: Where the evidence presented against Tianhe was related to documentation, such
as SAIC filings, Management claimed the documents we presented and proved were original,
verified documents were either forged, fabricated, or both. This is quite amusing to us
Anonymous Analytics has written research reports since 2011, and this is the first time any
company has accused us of forging documents. This is certainly a new and desperate tactic, but
then again, the stakes are high for Tianhe and its promoters. Moreover, in some cases,
Management provides chopped documents that would appear to differ from the original
authentic documents that we obtained and presented. We are not surprised by this. In China,
they build entire fake Apple stores, so it shouldnt be too hard to get fake documents.

Not that it warrants a response, but no, we did not fabricate or forge any documents we
presented the data from the original SAIC filings that we obtained, and had already provided
these documents to the Hong Kong SFC shortly after we published our report so that they could
be reviewed and scrutinized.

Category 2: Where the evidence that we presented against Tianhe was based on more easily
verifiable information such as websites, office location site visits, and photographs, or even
something tactile like a business card, Tianhe generally chose to gloss over the evidence or
ignore it all together.


In summary, for all the time it had, Tianhes rebuttal sounds more like paranoid ramblings of a
Management team that either claims everything is a forgery or refuses to acknowledge facts. Here, we
will address Managements lies and explain how to verify the truth.


















5

1. Allegations Regarding the Groups Profitability and Two Sets of Books

1. Management claim: Tianhe has only one set of books, but engaged two different accounting firms to
audit its financial results in 2011 and 2012. There are no material differences between these sets of
books.

Our response: We note that this is the first time Tianhe has finally acknowledged using two different
auditors to audit its Jinzhou DPF-TH subsidiary. As we have shown in our report (page 8), the differences
between the original SAIC filings and the prospectus are significant, with revenue and net income for
2012 being 85% and 100% less, respectively.

1.1 Management claim: The financial statements exhibited on pages 9, 10, and 11 of the AA report are
not from the financial statements of Jinzhou DPF-TH and Fuxing Hengtong as audited by Liaoning
Zhongheng. The summary financial page on page 12 of the AA report is not the signature of the
Chairman, Mr. Wei Qi.

Our response: All the original SAIC income statements we presented in our original report have anti-
counterfeit stamps that can be verified online. We received the documents as is, from an SAIC request
handled by a professional market body. Shortly after publishing our report, we sent all the SAIC
documents we used in our analysis to the SFC to be scrutinized and verified.

Furthermore, our report did not simply present the SAIC filings in isolation. The figures contained in the
original SAIC filings are corroborated by industry data (page 13), the Liaoning Daily newspaper (page 14),
an official announcement by the Fuxin government (page 15), and Tianhes own public profile (page 16).
To imply that we forged the original SAIC filings would imply that we have a time machine, and were
able to travel back to 2011 and 2012 and meticulously place corroborating government and news media
information online.

For the record, we do not have a time machine.

Managements response never addressed the corroborating sources presented in our report or even
attempted to provide a credible explanation.

1.1 Management claim: The Jinzhou AIC office accepted the Deloitte filing despite the fact that it has no
authentication or anti-counterfeit code. Deloitte has confirmed that such report is the true copy of the
audit report it prepared and issued for Jinzhou DPF-TH.

Our response: We never questioned that Deloitte signed off on a copy of the SAIC filings. Rather, we
questioned the truth of the figures presented in the SAIC filings as signed by Deloitte.

Furthermore, we are at a loss as to why Tianhe would present SAIC filings without the necessary anti-
counterfeit codes that are required by the relevant government ordinance? There is no question that
the local ordinance requires the codes to be present why does Tianhe think that a different set of rules
applies to it?



6

1.2 Management claim: The financial statements were audited by different auditors based on only one
set of books to fulfill different requirements and obligations.

Our response: We note that the SAIC filings we presented with all the necessary counterfeit codes
clearly show major discrepancies between the Liaoning Zhongheng audit and the IPO prospectus. Again,
we did not present the SAIC filings in isolation we presented numerous government and third-party
sources that corroborated the SAIC filings in our report (pages 13-16). Tianhes response never
addressed these other sources or even attempted to provide a credible explanation.

Furthermore, we are confused as to why Tianhe would need two different auditors to audit its SAIC
filings in each of 2011 and 2012. We do not accept Managements vague excuse that they had different
requirements and obligations. Tianhes admitted use of two auditors for each year is a glaring red flag.


*****


Suggestion to the Authorities: An easy way to further verify the authenticity of the original SAIC filings
we presented in our report is to check the provincial or national SAIC computer database for 2011 and
2012 for the Jinzhou DPF-TH and Fuxin Hengtong subsidiaries (http://gsxt.lngs.gov.cn/saicpub/) and not
simply rely on hardcopies presented by the Company. We doubt the figures Tianhe is presenting in its
rebuttal are in the computer database because we believe them to be fake and clearly contradictory to
numerous government reports and articles, including government tax reports.


























7

2. Allegations Regarding Tax Discrepancies

2.1: Management claim: Tianhe paid all its taxes and has obtained tax confirmations from the relevant
authorities.

Our response: If Tianhe in fact paid all its taxes (income taxes + VAT) based on the information in the
prospectus, this would be in direct contradiction to all the government reports and information on taxes
that we presented in our report, including the Jinzhou government, Yi County government, and the
Fuxin Haizhou District Tax Bureau (pages 17-22).

Therefore, we are left with the conclusion that either the purported tax confirmations obtained by
Management were faked and/or the result of bribes made by Tianhe, or that all the relevant and
competent government bodies we cited in our report published false and misleading tax collection
numbers that are understated by an order of magnitude.

Notably, Management does not actually present its purported confirmations in its response, nor does
Management provide any rationale or reason why the tax sources we cited are not accurate. Readers
are only left to take Management at their word.


*****


Suggestion to the Authorities: We would like to note that fraudulent companies often falsify tax
receipts to fool auditors, regulators, and investors. Chinese tax authorities normally do not entertain
request from auditors or unauthorized third parties for verification. However, given the Shanghai-HK
stock connect, HK regulators should demand that they get the authorization to check taxes directly from
provincial tax bureaus. That is the best way to protect investors, and a vital tool for the HKexs standing
as Asias financial center. If tax data can be obtained directly from provincial governments in China, it
would be easy for the regulators to pick off the rotten apples even before they IPO.


















8

2.1: Management claim: The tax calculations in the AA report are based on incorrect assumptions. For
example, the AA report states that equipment and machinery (which offer tax returns) was minimal and
was ignored for calculation purposes. This is incorrect because Tianhes businesses experienced
substantial expansion over 2011 to 2013, including material additions of plant and equipment during
those years.

Our response: We did not make any incorrect assumptions and we know tax accounting in China better
than Management thinks. Only machineries and equipment get VAT tax returns. As stated in our report,
property purchases and buildings (regardless of their use) and construction-in-progress do not get any
VAT tax returns (page 17). Management does not dispute this point.

What Management seems to argue is that they experienced material additions of plant and equipment
in the 2011-2013 period. Here is the relevant page from Tianhes prospectus:


Source: IPO prospectus, page I-33


We can see from the prospectus that Plant and Machinery added between 2011-2013 was only RMB480
million. At 17% VAT, this translates to VAT taxes of a mere RMB81 million over three years.

In those three years, Tianhe should have paid more than RMB1.3 billion in VAT and 2.3 billion in total
taxes (page 17). In that context, how is RMB81 million material?

Furthermore, the Plant portion of Plant and Machinery does not get VAT returns. Considering that
most of the additions to Plant and Machinery were transferred through construction-in-progress, the
implication is that most of these additions were Plant and not Machinery. Therefore, even our RMB81
million is too generous.

We are not sure what point Management is trying to make, or if they even understand simple tax
accounting. These are the ramblings of a desperate Management team looking to complain for the sake
of complaining.

9

3. Allegations Regarding Purported Customers

3.1 Management claim: The AA report alleges that Tianhe failed to disclose the name of CITIC
International because its transactions with CITIC International are fictitious. This is simply not true.

Our response: This statement is patently false and Management should perhaps improve on their
reading comprehension. We discuss CITIC International not being disclosed as a customer on page 34 of
our report:

The one time that Tianhe disclosed in writing the name of an SFC customer was in its
draft prospectus, where it named CITIC International Co. Ltd. (CITIC International) as a
customer. For whatever reason, CITIC Internationals name was dropped from the final
prospectus.

Following these two sentences, we make no mention of CITIC International until page 54 of our report,
where we discuss CITIC International in detail. Management has merged two different discussions made
20 pages apart, and set up their response for an argument we never made. This willful ignorance is
telling.

The real reason we believe Tianhe is lying about the extent of its business relationship with CITIC
International is because of CITIC Internationals business size. As per our report, an announcement made
on the website of CITIC Bank notes that CITIC International only generated revenue of RMB1.31 billion
and net profit of RMB29 million in 2009 (page 54).

However, Tianhe claims to have sold to CITIC International RMB829 million in 2011, RMB953 million in
2012, and RMB1.5 billion in 2013.

Given CITIC Internationals 2009 revenue, it would take a feat of mental gymnastics to assume that while
CITIC International only generated revenue of RMB1.31 billion in 2009, it purchased RMB829 million
worth of chemicals from Tianhe in 2011, and even more in subsequent years. This assumption becomes
even more unrealistic when we consider that CITIC Internationals business consists of domestic trading,
exporting, and importing.

Management completes ignores this section of our report and instead responded to an argument we
never made.

Furthermore, in its response, Management provides a letter from CITIC Group in which CITIC Group
agrees that Tianhe can: disclose (i) the name and business of our group; and (ii) our genuine business
transactions with your group in your listing documents.

However, this document never actually acknowledges how much business Tianhe conducts with CITIC
International it just gives Tianhe permission to list genuine business transactions (which is something
we are confident Tianhe did not do anyway).




10

On this topic, we would like to provide new and additional evidence that Tianhe is lying about its
relationship with CITIC International:

Tianhe claims that CITIC International purchased RMB1.5 billion from Tianhe in 2013. Of this amount,
RMB1.2 billion was SFC products.
1
Tianhe also claims in its draft prospectus that CITIC International
further re-sells a large portion of our products to their clients overseas.
2


However, we reviewed publically available PRC government export data which shows that this
statement cannot possibly be true. Export data can be accessed at the following website:

http://www.ciedata.com/Contact/lx.aspx

This official government data shows that CITIC Internationals total export figures in 2013 stood at
RMB230 million. Based on the export data, CITIC Internationals largest exports in terms of value were
magnesia (customs code 2519) valued at US$8 million and talc (customs code 2526) valued at US$4
million.

In the export data, the only products that could plausibly be SFC products were labeled as other
polybasic alcohol (customs code 2905) and other aromatic oxide derivated chemicals (customs code
2909). The export value of these two products was only US$0.7 million.

Based on CITIC Internationals 2009 business size, as well as 2013 official government customs data, we
are absolutely confident that Tianhe is egregiously overstating its relationship with CITIC International.


*****


Suggestion to the Authorities: The easiest way to verify our arguments and confirm that Tianhe is lying
would be to pull the SAIC filings of CITIC International Co., Ltd. for 2013 and see if it was possible for
Tianhe to sell RMB1.5 billion worth of goods to CITIC International.















1
http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0609/LTN20140609007.pdf pg I-27
2
Draft prospectus, pg 133

11

3.2: Management claim: Shanghai Xidatong, Shanghai Top and Heilongjiang Taina are all bona fide
independent third parties.

Our response: The evidence clearly and overwhelmingly shows that Xidatong, Shanghai Top, and Taina
are all in fact related parties and should have been disclosed as such in the IPO prospectus. We provided
extensive evidence that these customers have overlapping management, ownership, and offices with
each other and with Tianhe (pages 36 to 53). We show substantial evidence that these customers are all
actually undisclosed related parties that do not have the resources to conduct business with Tianhe of
the size claimed. In fact, we believe the true value of these customers comes from acting as
counterparty and transacting with Tianhe on paper in order to satisfy Deloitte. Managements claim that
these three customers are independent third parties is a blatant lie in the face of overwhelming facts.

Management claim: No one is allowed to access financial statements of third party companies filed with
the local AIC without authorization.

Our response: This statement is patently false and brings into question Tianhes choice of legal counsel.
SAIC filings are public information. In some local AIC offices, in response to complaints by listed
companies who have been dogged by accusations of fraud, the local AIC office has restricted some
access to AIC files, but this is not the case with any of the AIC offices where Tianhes PRC operating
subsidiaries and Tianhes purported customers file their AIC paperwork. Tianhes excuse is one generally
made by companies that are grasping at straws and arguing against the evidence. We obtained the SAIC
filings of Xidatong, Shanghai Top, and Taina through public channels and the filings all show that these
customers are either small or nearly non-existent in terms of revenue, profits, and assets.

At least this time, Tianhe didnt claim that the SAIC filings we presented were fake...

Management claim: It is a generally accepted practice in Hong Kong, the US and China for a company to
have a registered office address that is different from its principal business address.

Our response: IT IS NOT generally accepted business practice in ANY jurisdiction that a legitimate
company register its address at abandoned housing communities or offices were no one has heard of
the company, as is the case with Xidatong (page 38,39).

Management claim: Customers sharing office premises is not a relevant factor.

Our response: Is this Tianhes actual response!? This is ridiculous. Not only does Management see
nothing wrong with the fact that Xidatong and Shanghai Top shared an office together (page 47) nor
that Xidatong and Taifu currently share an office together (page 52), but it also seems that Management
is actively defending this as normal behavior. The evidence clearly shows that these customers are
related and acting in concert under the direction and influence of a single set of control persons.









12

Shanghai Xidatong

Management claim: Tianhe has never entered into any employment relationship with Mr. Zhang Silang,
the CEO of Xidatong.

Our response: There is no basis for Tianhes denial. In our report, we presented evidence that Mr. Zhang
attended a 2008 conference in Guangzhou as the VP of Fuxin Hengtong (Tianhe) (page 41). Management
provides no explanation for this.

We hereby present new and additional evidence that Mr. Zhang was a top-level executive at Tianhe. In
2007, Mr. Zhang went to a SOCMA conference as the VP of Fuxin Hengtong:


Source: http://www.socma.com/events/index.cfm?attendees=true&id=1001&articleID=1&start=41&sort=state


Greg Chang is the English name of Mr. Zhang Silang. How do we know this? Because that is the name
Mr. Zhang provides on his Shanghai Top business card:


13


Source: AA report, page 43


Additionally, here is the contact information of Mr. Zhang for Hope Land International (Hope Land
International is Xidatong):


Source: http://www.techmonitor.net/tm/index.php?title=VATIS_Update_Ozone_Layer_Protection_._Jan-Feb_2007



It is overwhelmingly obvious that Mr. Zhang Silang (Greg Chang) is a connected executive at Tianhe and
Xidatong and Shanghai Top.




14

Shanghai Top

Management claim: Mr. Zhang Silang has neither been an employee nor the CEO of Shanghai Top.

Our response: We already presented a business card from Shanghai Top with Mr. Zhangs name on it,
but here is further proof: In 2009, Fuxin Hengtong attended the 4
th
China International Fluoro & Silicon
Material Exhibition in Shanghai on 24-27 November. In attending the Exhibition, Fuxin Hengtong used
Shanghai Tops phone number, fax number, and email contact:


Source: http://www.china-expo.net.cn/swffile/A4E8652C.swf


The phone and fax numbers of Shanghai Top can be found on its website:
http://www.topfluoro.com/en/Contact%20us.html

What other proof does one need to show that Tianhe is lying?

It is time for Management to stop denying that its biggest customers are all related parties. It is time for
Management to admit that it lied to the regulators and investors. And it is time for Management to face
justice.




15

4. Allegations Regarding Anticipated Market Demand for SFC

4.1: Management claim: The AA report understates the size of the anti-mar market size by at least five
times.

Our response: Lets play along for a moment. Tianhe claims to have sold 8 tons of pure anti-mar in 2013,
and our calculations show that global demand was only 4 tons of pure anti-mar (page 59). Lets assume
that the true figure is 5X, or 20 tons of pure anti-mar. Based on this new figure, Tianhe would still
represent 40% of the anti-mar market, which is a completely preposterous idea.

If we assume that we understated the anti-mar market by 10X, then Tianhes 8 tons of pure anti-
mar would represent 20% of the anti-mar market.
If we assume that we understated the anti-mar market by 20X, then Tianhes 8 tons of pure anti-
mar would represent 10% of the anti-mar market.

In any of the above scenarios, Tianhe would still be a very notable player in the anti-mar market.
However, as we mentioned in our report, Daikin is acknowledged as the clear leader in the anti-mar
market with ~60% market share, followed by Shinetsu, Dow Corning, and DuPont for a combined ~40%
(page 60). Throughout our research, Tianhe was never mentioned as a visible player in the anti-mar
market. In fact, the only time Tianhes name was mentioned by experts was to state that it is NOT a
supplier of anti-mar.

We note that we only engaged in the above-exercise to show how delusional Managements claim of
having sold 8 tons of pure anti-mar is. We stand by our analysis concerning global demand of 4 tons or
less of pure anti-mar and we suspect Managements claim of having sold 8 tons of pure anti-mar derives
from their lack of understanding of the market. This is to be expected, since we have been consistently
told by industry experts that Tianhe does not even sell anti-mar.

4.1 Management claim: The AA report misquoted Management, claiming that 1 gram of 20%
concentrate anti-mar solution can coat approximately 200 smartphones. Management had stated that 1
gram of 100% concentrate anti-mar solution can coat approximately 200 smartphones.

Our response: Again, this is poor reading comprehension on the part of Management. We did not
specify the concentration when we quoted Management (page 57). We only specified the 20%
concentrate when we quoted experts, such as touch panel vendors to Fujitsu and Samsung (page 57).
We do not consider Tianhes Management experts as we do not believe Tianhe sells anti-mar.

Furthermore, Managements defense still doesnt make any sense mathematically. Management admits
that they claim to sell 8 tons of pure anti-mar and also claim that 1 gram of pure anti-mar can be used to
coat 200 smartphones. At 1 million grams per ton, this implies that Tianhe sells enough anti-mar to coat
1.6 billion smartphones. According to IDC (page 58) the 2013 global shipment of all smartphones was
only 1 billion and the global shipment of tablets was only 217 million. This effectively means that Tianhe
supplies enough anti-mar to the market to coat of all the smartphones sold in 2013 and half of all tablets
sold in 2013. As agreed by all experts we interviewed, smartphones and tablets accounted for most of
global anti-mar consumption. Daikin and Shinetsu will be shocked to learn that such a massive
competitor has been operating unnoticed under their nose this entire time. It appears that Management
did not even engage in basic math when it decided to concoct claims of selling 8 tons of pure anti-mar.

16

4.1 Management claim: A major flaw in the AA report is that it focuses mainly on smartphones, tablets,
and eyeglasses in its analysis of the end-markets for anti-mar products. However, there are many other
end-markets in which anti-mar products are utilized.

Our response: This is false. Our report clearly states that according to IHS, only 63.5% of the touch panel
market is used in smartphones and tablets (page 59.) We go on to note that the other 36.5% of the
touch panel market is used in other applications. We source all our information and we take into
consideration the entire universe of touch panel applications, as per IHS data. Either Management did
not bother to read our report in its entirety, or they are being willfully ignorant. From our report
(footnote 36):


Source: https://www.academia.edu/4410199/Touch_Panel_Market_Forecast_2013


Furthermore, Management claims that total solar panel area installed in 2013 could reach 4 billion
square feet and that the possible application of anti-mar represent a much larger potential market for
the use of anti-mar products than the smartphones and tablets market combined. But this potential
market Management points to comes off more as grandstanding than as real analysis. Management
provides no facts or data to back up how many solar panels actually use anti-mar (if any), and no expert
we spoke with ever mentioned anti-mar use in solar panels.

Moreover, our sources talked to several analysts from the banks that worked on Tianhes IPO, and none
of them ever mentioned solar panels in their discussions of anti-mar.

We will not entertain this notion any further.

However, we will note this: for all of Managements excuses, they never once provide their own
estimates of the anti-mar market size. We suspect that any estimates Management does provide to
validate its 8 tons claim will look foolish and be easily refutable, so instead Management has decided to
avoid directly addressing this issue.

And finally, despite their rebuttal, Management never once mentioned a single-end user of its supposed
anti-mar product. This should be a glaring red flag for any investor.







17

4.1 Management claim: According to public sources, Daikins 20% concentration OPTOOL product sells
for US$6,906 per kg, or RMB42 million per ton (instead of RMB100 million per ton as the AA report
claims).

Our response: This is incorrect. We have recorded conversations with two Daikin experts as well as an
IHS consultant, both of whom confirm 20% concentrate OPTOOL sells for at least RMB100 million per
ton.

The source Management references for pricing is a customs data website. This website only states the
customs value of OPTOOL. However, the customs value of OPTOOL is different than the final ASP that
Daikin charges its customers.

While we are on the subject of customs data, we pulled the customs data for Daikins OPTOOL China
import for 2013:

Exchange rate=6.2
39059000 Volume(kg) Value(USD) Value(RMB) ASP(RMB/kg)
420 4,376,766 27,135,949 64,609
145 1,213,093 7,521,177 51,870
565 5,589,859 34,657,126 61,340
Source: customs data

As we can see, in all of 2013 Daikin only imported 565kg of 20% concentrate anti-mar into China.
Considering that Daikin has the largest market share in the anti-mar industry, and also that China is the
largest consumer of anti-mar, the 565kg import volume even makes our 4 tons of pure anti-mar global
demand assumption look aggressive.

We simply cannot believe that in the face of all this evidence, Tianhe still wants the world to believe it
sold 8 tons of pure anti-mar.















18

Morgan Stanleys Support of Tianhe

Predictably, Morgan Stanley has come out to publically support Tianhe. According to a Reuters article:
3


Morgan Stanley Private Equity Asia, one of its top investors, stands by the Chinese
firm's management after Anonymous Analytics published a report last week accusing
Tianhe of falsifying statements.

In a emailed statement, Tianhe quoted Homer Sun, Chief Investment Officer and Head of
China for Morgan Stanley Private Equity Asia, as saying the company resolutely behind
Tianhe's world class management team.


There is a sense of irony in this statement.

Back in 2008, the MSPEAIII fund the very same fund that invested in Tianhe invested US$38.5 million
for a 30% stake in India-based Biotor Industries. Biotor manufactured caster oil which is used in a broad
range of industries, including lubricants and biofuels. In making its investment, MSPEA publically
announced that:

This investment in Biotor represents Morgan Stanley Private Equity Asia's strategy to
invest in companies with exceptional management teams and unique competitive
advantages.
4



Within three years of MSPEA making this statement, Biotors management team was charged by Indias
Central Bureau of Investigation with orchestrating an elaborate fraud, and the company was dissolved
and Morgan Stanley lost its entire investment.
56


This is just something investors and market commentators might want to consider when they point to
MSPEAs investment in Tianhe as gospel.












3
http://www.reuters.com/article/2014/09/11/tianhe-chemicals-anonymousanalytics-morg-
idUSB9N0PP00W20140911
4
https://www.linkedin.com/company/biotor-industries-ltd
5
http://archive.indianexpress.com/news/biotor-industries-in-rs-1-500-cr-fraud/742090/
6
http://www.dealcurry.com/20111117-Curtain-Falls-On-Morgan-Stanley-s-Biotor.htm

19

Last Words

We stand by all of our original report, which is only further bolstered by the additional related-party
evidence and customs data we presented herein. The totality of the evidence shows that Tianhe has
vastly misrepresented the size and scope of its business, and has produced false and misleading
statements to the market. Nothing that Tianhe has presented in its 10 September clarification credibly
responds to any of the evidence we have presented. The explanations Tianhe gave in its rebuttal are
incoherent, contradict independently verifiable facts, and often make no logical sense. We also reject
Managements ramblings that the SAIC evidence we provided are fake.

Tianhe ends its clarification announcement by questioning why we would want to publish our report if
we are not financially motivated. This confusion speaks to Managements character. We published our
report because we have a right to express or opinions and concerns, and because the issues involved are
of utmost public interest.

However, we note that Tianhe and those associated with its IPO have a substantial financial interest in
avoiding scrutiny and hoping to silence dissent.

Tianhes weak and colorless rebuttal only invites additional regulatory scrutiny and we hope that the
authorities move quickly to protect investors from being further defrauded.