Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 FOSHAN ELECTRICAL AND LIGHTING CO., LTD. INTERIM REPORT 2019 August 2019 1 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Part I Important Notes, Table of Contents and Definitions The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior management of Foshan Electrical and Lighting Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of this Report and its summary, and shall be jointly and severally liable for any misrepresentations, misleading statements or material omissions therein. He Yong, the Company’s legal representative, Liu Xingming, the Company’s General Manager, and Tang Qionglan, the Company’s Chief Financial Officer (CFO) hereby guarantee that the Financial Statements carried in this Report are factual, accurate and complete. All the Company’s directors have attended the Board meeting for the review of this Report and its summary. Any plans for the future and other forward-looking statements mentioned in this Report and its summary shall NOT be considered as absolute promises of the Company to investors. Therefore, investors are reminded to exercise caution when making investment decisions. The Company has described in this Report the risks of fiercer market competition, rising labor costs, raw material price fluctuations, inventory valuation loss, exchange rate fluctuations and doubtful receivable accounts. Please refer to “X Risks Facing the Company and Countermeasures” under “Part IV Operating Performance Discussion and Analysis” of this Report. This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail. The Company has no interim dividend plan, either in the form of cash or stock. 2 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Table of Contents Interim Report 2019 ...................................................................................................................... 1 Part I Important Notes, Table of Contents and Definitions ......................................................... 2 Part II Corporate Information and Key Financial Information ................................................. 5 Part III Business Summary .......................................................................................................... 8 Part IV Operating Performance Discussion and Analysis ......................................................... 12 Part V Significant Events ............................................................................................................ 32 Part VI Share Changes and Shareholder Information .............................................................. 42 Part VII Preferred Shares ........................................................................................................... 48 Part VIII Directors, Supervisors and Senior Management ....................................................... 49 Part IX Corporate Bonds............................................................................................................ 51 Part X Financial Statements ....................................................................................................... 52 Part XI Documents Available for Reference ............................................................................ 184 3 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Definitions Term Definition Foshan Electrical and Lighting Co., Ltd. and its consolidated The “Company”, “FSL” or “we” subsidiaries, except where the context otherwise requires CSRC The China Securities Regulatory Commission SZSE The Shenzhen Stock Exchange General meeting General meeting of Foshan Electrical and Lighting Co., Ltd. Board of Directors The board of directors of Foshan Electrical and Lighting Co., Ltd. The supervisory committee of Foshan Electrical and Lighting Co., The Supervisory Committee Ltd. Expressed in the Chinese currency of Renminbi, expressed in ten RMB, RMB’0,000 thousand Renminbi The “Reporting Period” or “Current Period” The period from 1 January 2019 to 30 June 2019 4 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Part II Corporate Information and Key Financial Information I Corporate Information Stock name FSL, FSL-B Stock code 000541, 200541 Stock exchange for stock Shenzhen Stock Exchange listing Company name in Chinese 佛山电器照明股份有限公司 Abbr. (if any) 佛山照明 Company name in English (if FOSHAN ELECTRICAL AND LIGHTING CO.,LTD any) Abbr. (if any) FSL Legal representative He Yong II Contact Information Board Secretary Securities Representative Name He Yong Huang Yufen No. 64, Fenjiang North Road, Chancheng No. 64, Fenjiang North Road, Chancheng Address District, Foshan City, Guangdong District, Foshan City, Guangdong Province, P.R.China Province, P.R.China Tel. 0757-82810239 0757-82966028 Fax 0757-82816276 0757-82816276 Email address yh888@chinafsl.com fslhyf@163.com III Other Information 1. Contact Information of the Company Indicate by tick mark whether any change occurred to the registered address, office address and their zip codes, website address and email address of the Company in the Reporting Period. □ Applicable √ Not applicable No change occurred to the said information in the Reporting Period, which can be found in the 2018 Annual Report. 5 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 2. Media for Information Disclosure and Place where this Report is Kept Indicate by tick mark whether any change occurred to the information disclosure media and the place for keeping the Company’s periodic reports in the Reporting Period. □ Applicable √ Not applicable The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing the Company’s periodic reports and the place for keeping such reports did not change in the Reporting Period. The said information can be found in the 2018 Annual Report. IV Key Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes √ No H1 2019 H1 2018 Change (%) Operating revenue (RMB) 1,687,184,660.86 2,064,779,289.99 -18.29% Net profit attributable to the listed 167,275,725.75 229,277,455.82 -27.04% company’s shareholders (RMB) Net profit attributable to the listed company’s shareholders before exceptional 154,517,987.66 228,028,236.71 -32.24% gains and losses (RMB) Net cash generated from/used in operating 190,681,833.48 144,723,778.38 31.76% activities (RMB) Basic earnings per share (RMB/share) 0.1195 0.1638 -27.05% Diluted earnings per share (RMB/share) 0.1195 0.1638 -27.05% Weighted average return on equity (%) 3.77% 5.32% -1.55% 30 June 2019 31 December 2018 Change (%) Total assets (RMB) 5,478,348,482.66 5,588,166,699.30 -1.97% Equity attributable to the listed company’s 4,329,873,031.84 4,319,259,418.46 0.25% shareholders (RMB) V Accounting Data Differences under China’s Accounting Standards for Business Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign Accounting Standards 1. Net Profit and Equity Differences under CAS and IFRS □ Applicable √ Not applicable 6 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 No such differences for the Reporting Period. 2. Net Profit and Equity Differences under CAS and Foreign Accounting Standards □ Applicable √ Not applicable No such differences for the Reporting Period. XI Exceptional Gains and Losses √ Applicable □ Not applicable Unit: RMB Item Reporting Period Note Gain or loss on disposal of non-current assets (inclusive of -53,336.67 impairment allowance write-offs) Government subsidies charged to current profit or loss (exclusive of government subsidies given in the Company’s ordinary course 2,231,959.96 of business at fixed quotas or amounts as per the government’s uniform standards) Gain or loss on fair-value changes in trading and derivative financial assets and liabilities & income from disposal of trading Investment income received from and derivative financial assets and liabilities and other selling the equities of Chengdu 12,553,800.00 investments in debt obligations (exclusive of the effective portion Hongbo Industry Co., Ltd in the of hedges that arise in the Company’s ordinary course of Reporting Period business) Non-operating income and expense other than the above 314,237.31 Less: Income tax effects 2,287,287.39 Non-controlling interests effects (net of tax) 1,635.12 Total 12,757,738.09 -- Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/Loss Items: □ Applicable √ Not applicable No such cases for the Reporting Period. 7 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Part III Business Summary I Principal Activity of the Company in the Reporting Period Is the Company subject to any industry-specific disclosure requirements? No. 1. The Company’s Principal Activities or Products We design, manufacture and market high-quality, green and energy-efficient lighting products and electrical products, as well as provide comprehensive lighting and electrical solutions. Our products mainly include electrical products such as LED light sources and luminaries, automotive LED luminaries, traditional light sources switches and socket. Currently, we have three major operating divisions, namely, lighting, electrical products and vehicle lighting. Upon years of development, we have won quite many honors, and our “FSL” and “Fenjiang” brands have been certified as “Famous China Brands”. 2. Main business models (1) Procurement model We mainly procure raw materials such as lamp beads, lamp holders, electronic components, aluminum substrate, plastic parts, metal materials, quartz tubes and fuel by way of bids invitation. A bids invitation supervisory committee consisting of personnel from several departments will be set up in the future. For every kind of our main raw materials, we usually have a few suppliers to choose from in procurement so that the procurement prices would be fair, the supply of raw materials in time and the good quality of the raw materials ensured. (2) Production models ① Production of the conventional products Concerning the conventional products, we analyze sales of every month and predict future market demand so as to formulate a production plan for the coming month. And our workshops produce according to the plan to avoid extra stock and at the same time ensure that there is enough for sale. ② Production according to orders Different from the conventional lighting products which are of little variation in specifications, LED lighting products are at a fast pace of renewal and different customers often have different requirements regarding the products’ appearances and performance indexes. Therefore, we have to organize individualized production for 8 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 some orders for LED lighting products, export and engineering orders in particular. For this kind of orders, we formulate our production plans based on them and then make procurement plans according to the production plans, which will help effectively control the stock and the procurement prices of raw materials, reduce capital occupation and improve our operating efficiency to the maximum. ③ Combination of independent production and outsourcing With a high production capacity, we produce most of our products and parts on our own. Only a small portion of parts and low-tech products is outsourced to sub-manufacturers, who will produce in strict accordance with our requirements. We will also tag along their production processes and examine carefully the quality of the products finished. In this way, our supply of products is guaranteed. (3) Sales model Domestically, we mainly adopt a commercial agent model. In terms of channels, we have wholesale, franchised store, illumination engineering & commercial lighting, industrial and mining outdoor channels, e-commerce & retail sales and automotive lighting channels. For overseas markets, we primarily adopt OEM/ODM models and also sell under our own brands (through agents). 3. Main driving forces for growth Despite the impact of negative factors such as domestic economic downturn and US-China trade war during the Reporting Period, with the evolution of the industrial competition model, consumers are getting increasingly concerned with product quality and brand. As a result, companies with weak competitiveness will be gradually elbowed out of the market while large enterprises or enterprises with core competitiveness will have more market opportunities. By virtue of its advantages in technology, brand, channel and scale, the Company has continued to promote the technical upgrading of main products, improve product quality, beef up market expansion and optimize and upgrade the product sales structure through sustained spending on R&D and technical innovation. Meanwhile, it has gained an advantageous position in the process of enhancing market concentration by increasing the level of production automation, effectively controlling purchase costs and ramping up production efficiency. 9 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 II Significant Changes in Major Assets 1. Significant Changes in Major Assets Major assets Main reason for significant changes Equity assets No significant change during the Reporting Period Fixed assets No significant change during the Reporting Period Intangible assets No significant change during the Reporting Period Construction in progress No significant change during the Reporting Period 2. Major Assets Overseas □ Applicable √ Not applicable III Core Competitiveness Analysis Is the Company subject to any industry-specific disclosure requirements? No. The core competitiveness of the Company mainly reflects on fours aspects listed below: Channel advantage The Company has been sticking to the market strategy of deeply cultivating and refining channels. Over years of development and experience, the Company has been equipped with five major sales channels in domestic market (wholesale, franchised store, e-commerce & retail sales, illumination engineering & commercial lighting and industrial and mining outdoor channels), forming a marketing network covering the whole country; in foreign market, the Company has made active steps to develop international market business, sold products to more than 100 countries and regions in North America, Europe, Southeast Asia, Africa and Oceania, and kept improving overseas sales channel. By virtue of its powerful and comprehensive sales channels, the Company has enabled its products to enter market rapidly, substantially enhancing its market development abilities and competitiveness. Brand advantage The Company has accumulated more than 60 years’ experience in the lighting industry and enjoyed continuously increasing influence and brand value for its “FSL”. In recent years, with the enhancement of its development positioning, product design and user experience, the Company has initiated the strategy of brand upgrading and 10 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 carried out promotion by centering around the new “Professional, Healthy, Fashionable and Intelligent”. In addition, it has driven the transition of “FSL” from an industrial brand to a popular brand to maintain the brand vitality and competitiveness. Among the Company’s brands, both “FSL” and “Fenjiang” are China Famous Trademarks. The brand “FSL” has become one of the most influential and popular industrial brands in China, and the powerful brand influence has played a key role in driving the sustained growth of the Company’s sales. Technical R&D advantage The Company has been valuing the R&D of new products and the development of innovation and R&D teams. It has further increased spending on technology and independent product innovation. The Company is equipped with its own electric light source institute, National CNAS Lighting Laboratory and Guangdong Engineering Technology Development Center. It has won the title of “Provincial IP Advantaged Enterprise” and obtained 402 authorized national patents and 21 foreign patents. In terms of the development of the R&D team, the Company has formulated a comprehensive R&D personnel management policy and appraisal system, intensified the introduction of high calibre talents, and reinforced cooperation with colleges and universities in industry-university-research projects, which has created a smooth path for the development of R&D professionals and provided strong support for it to maintain a technology-leading position and to further carry out product innovation. Scale advantage As one of the enterprises to first step into the industry of producing and selling lighting products, the Company possesses the manufacture culture of refining production and the large-scale manufacturing capability by years of experience accumulation. The Company has production bases in Foshan, Nanjing and Xinxiang. The large-scale and centralized production brings obvious economic benefits to the Company, which not only shows in manufacture cost of products, but also shows in aspects such as raw material procurement and product pricing. 11 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Part IV Operating Performance Discussion and Analysis I Overview In the first half of 2019, China’s economy was under great pressure for growth. From an international perspective, global economic growth slowed down, US-China trade conflicts continued to escalate, the international trade was in confusion, and overseas market demand played a weaker role in driving China’s economic development; from a domestic perspective, real estate regulation policies remained tight, disparity among manufacturers was getting increasingly evident, and many challenges posed a threat to economic development. For lighting companies, on one hand, LED lighting has developed at a fast pace, the penetration rate of LED lighting products has continued to increase, and the growth of market demand has slowed down in recent years. On the other hand, companies have released their expanded capacity one after another, resulting in continuously sliding retail prices of lighting products and increasingly fierce competition between industries. In light of the macroeconomic pressure, slowed industrial growth and fierce market competition environment, the Company continued to deepen technical renovations and the upgrading of intelligent manufacturing for its main products by centering around the strategic goal of “Cutting-edge Technology, International Brand and Market and Large-scale Production” raised by the board of directors. Additionally, it dealt with the pressure of market competition through internal reorganization and team coordination and the integration of various advantaged resources. For the Reporting Period, the Company achieved operating revenue of RMB1687.1847 million, a year-on-year decrease of 18.29 %; and a net profit attributable to the listed company’s shareholders of RMB167.2757 million, a year-on-year decrease of 27.04 %. In the first half of 2019, the Company mainly focused on the following work: 1. Integrated internal resources and developed market potentials in each segment In the first half of 2019, the Company implemented the BU system reform. It set up four business units including R&D and sales, adjusted the BU organizational structure and talent structure, and sorted out BU process and authorization to enable fast response to changing goals of market. At the same time, it improved the remuneration and incentive system of business units, proactively mobilized staff enthusiasm, strengthened the development of 12 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 leadership, and kept exploring and innovating in incentive mechanism. It encouraged the orientation by problem solving and the joint creation of value and sharing of results by everyone who should have a sense of engagement. In terms of domestic sales, the Company explored and promoted the high-end development of its products, set up stores for the experience of a high-end, intelligent and healthy household life, and enhanced the image of Foshan Lighting in consumers’ mind through the export at the windows of the experience stores; it proactively developed engineering channel business with a focus on education, real estate, rail transit and brand franchising to increase its market shares on engineering channel; it continued to develop high quality automotive lamp projects and new LED module projects and increase LED module application vehicle models in an attempt to raise its markets shares in lamp factories and main device factories. In terms of overseas sales, to deal with the impact of US-China trade conflicts, the Company beefed up the promotion of intelligent products and made joint efforts to develop new products based on the demands of key accounts; it made active steps to explore overseas e-commerce channel and further expanded marketing channels; it made use of the development opportunities brought by “Belt and Road” to vigorously expand the markets in “Belt and Road” countries, strengthen brand promotion overseas, enhance the influence of self-owned brands, and propel the pace of brand internationalization. 2. Improved intelligent product technologies and product categories, resulting in considerable growth in the sales of intelligent products During the Reporting Period, the Company continued to enrich the categories of intelligent products and maintained the upgrading and improvement of intelligent control technologies. It connected with more influential mainstream cloud platforms both at home and abroad, including China’s Huawei, Alibaba, Tencent and Jingdong, and foreign Amazon, Google, WIZ and key accounts platforms. Meanwhile, it upgraded its own cloud platform and continued to provide users with solutions from the intelligent control of single product to scenario-based intelligent household solutions. During the Reporting Period, the Company proactively carried out interdisciplinary cooperation with other platform enterprises in the field of intelligence. It made use of Huawei’s HiLink intelligent technology to connect with Huawei’s intelligent ecological chain and carried out in-depth cooperation with Huawei in intelligent household lighting; it took the initiative to discuss deep cooperation with Baidu and Alibaba Cloud in intelligent household life. In the first half of 2019, the Company achieved sales revenue of RMB20,305,900 from its intelligent products, including a centralized purchase order of one million 13 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 lamps by Alibaba’s Tmall Genie and a new sales revenue of RMB754,000 from intelligent electrical products. 3. Strengthened efforts in intelligent manufacturing to speed up fast response The Company’s production automation has improved substantially over recent years’ continuous development in production automation. On the basis of that, the Company continued to center around the goal of “Automation, Flexibility and Large Scale”, optimized process automation for some production lines based on the actual production conditions, and tried to push the standard and modular process from front end to back end, in an effort to enhance the flexibility and compatibility of production automation. At the same time, the Company accelerated the level of information building. On the basis of the existing SAP system, OA system and HR system, it established the SRM (supply chain) system, WMS (warehouse) system and PDM (R&D) system and promoted the integration of its automated production lines and information systems, aiming to achieve inter-connectivity and integration and open up its business data chains in different segments, including R&D, purchase, manufacturing, warehousing and sales. Thus, it will help the Company’s management to quickly understand production conditions, expedite the adjustment of its production according to market demands and enhance its overall response speed and management abilities, providing customers with better delivery experience and achieving the goal of win-win results between the Company and its customers. II Analysis of Core Businesses See “I Overview” above. Year-on-year changes in key financial data: Unit: RMB H1 2019 H1 2018 Change (%) Main reason for change Operating revenue 1,687,184,660.86 2,064,779,289.99 -18.29% Cost of sales 1,297,336,713.77 1,579,291,867.89 -17.85% Selling expense 123,410,566.38 103,917,010.47 18.76% Administrative expense 67,537,179.69 85,530,538.74 -21.04% Finance costs -9,908,037.67 -13,085,476.61 24.28% A decline in operating Income tax expense 27,167,288.57 47,044,145.70 -42.25% profit caused by lower operating revenue 14 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 R&D was decreased in R&D expense 64,853,637.12 95,631,724.63 -32.18% the Current Period Net cash generated A decline in cash used in from/used in operating 190,681,833.48 144,723,778.38 31.76% operating activities activities Net cash generated A higher investment in from/used in investing 650,017.32 600,534,333.44 -99.89% banks’ wealth activities management products Net cash generated A decline in the from/used in financing -218,298,000.02 -405,163,764.00 46.12% dividends distributed in activities the Current Period A decline in net cash Net increase in cash and -28,122,906.64 341,479,690.92 -108.24% generated from investing cash equivalents activities A decline in government subsidies that arose in the Other income 5,523,870.00 1,018,385.17 442.41% ordinary course of business Investment income received from selling the Return on investment 43,839,659.74 24,509,870.36 78.87% equities of Chengdu Hongbo Industry Co., Ltd in the Current Period Recognition of trading financial assets or liabilities at fair value in Gain on changes in fair -996,200.00 the forward forex value settlement business conducted in the Current Period Recognition of allowances for doubtful receivables in credit impairment loss in the Current Period due to the Credit impairment loss -1,036,971.94 adoption of the new accounting standards governing financial instruments issued by the Ministry of Finance in 2017 15 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 A decline in operating Operating profit 193,202,450.93 277,740,724.18 -30.44% revenue A rise in non-operating Non-operating expense 478,391.97 191,749.42 149.49% expense A decline in operating Profit before tax 194,665,931.53 279,218,831.19 -30.28% revenue A decline in profits of Net profit attributable to 222,917.21 2,897,229.67 -92.31% non-wholly-owned non-controlling interests subsidiaries A rise in the fair value of Other comprehensive 61,635,887.65 -322,975,351.39 119.08% investments in other income, net of tax equity instruments Changes in the fair value of investments in other equity instruments transferred from Changes in the fair available-for-sale value of investments in 61,621,709.81 financial assets according other equity instruments to the new accounting standards governing financial instruments adopted in the Current Period The transfer of available-for-sale financial assets to Gain/Loss on changes in investments in other the fair value of equity instruments -322,972,909.70 100.00% available-for-sale according to the new financial assets accounting standards governing financial instruments adopted in the Current Period Differences arising from A decline in the the translation of foreign 14,177.84 -2,441.69 680.66% exchange rate of euro currency-denominated against the Chinese yuan financial statements A rise in the fair value of Total comprehensive 229,134,530.61 -90,800,665.90 352.35% investments in other income equity instruments Total comprehensive 228,911,613.40 -93,697,895.57 344.31% A rise in the fair value of 16 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 income attributable to investments in other owners of the Company equity instruments as the parent The transfer of available-for-sale financial assets to investments in other Available-for-sale equity instruments 897,716,590.20 -100.00% financial assets according to the new accounting standards governing financial instruments adopted in the Current Period The transfer of available-for-sale financial assets to investments in other Investments in other equity instruments 964,212,719.39 debt obligations according to the new accounting standards governing financial instruments adopted in the Current Period The transfer of financial liabilities at fair value through profit or loss to trading financial Trading financial liabilities according to 1,473,400.00 liabilities the new accounting standards governing financial instruments adopted in the Current Period The transfer of financial liabilities at fair value through profit or loss to trading financial Financial liabilities at liabilities according to fair value through profit 477,200.00 -100.00% the new accounting or loss standards governing financial instruments adopted in the Current Period 17 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 The payment in the Current Period of the Payroll payable 64,798,848.43 96,088,621.59 -32.56% year-end bonuses to employees of last year The transfer of certain deferred income to Deferred income 77,500.35 155,000.31 -50.00% non-operating income in the Current Period Material changes to the profit structure or sources of the Company in the Reporting Period: □ Applicable √ Not applicable No such changes in the Reporting Period. Breakdown of core businesses: Unit: RMB YoY change in YoY change in Operating Gross profit YoY change in Cost of sales operating revenue gross profit revenue margin cost of sales (%) (%) margin (%) By operating division Lighting products 1,670,888,644.93 1,283,982,749.97 23.16% -18.45% -18.16% -0.27% and luminaries By product category Traditional 347,779,504.28 248,868,782.96 28.44% -30.36% -32.04% 1.76% lighting products LED lighting 1,286,519,112.49 1,009,736,474.92 21.51% -13.82% -13.38% -0.40% products Electrical 36,590,028.16 25,377,492.09 30.64% -35.31% -31.36% -3.99% products By operating segment Domestic 990,577,982.47 743,362,695.37 24.96% -17.97% -13.06% -4.24% Overseas 680,310,662.46 540,620,054.60 20.53% -19.13% -24.27% 5.40% III Analysis of Non-Core Businesses √ Applicable □ Not applicable Unit: RMB As % of profit Amount Source/Reason Recurrent or not before tax Return on 43,839,659.74 22.52% Income from wealth management Not 18 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 investment investments and structured deposits at bank, dividends from financial assets during the holding period and income from the sale of equity interests in Chengdu Hongbo Industry Co., Ltd. in the Current Period Recognition of trading financial assets Gain/loss on or liabilities at fair value in the changes in fair -996,200.00 -0.51% Not forward forex settlement business value conducted in the Current Period Inventory valuation allowances Asset impairments -12,239,244.21 -6.29% Not established in the Current Period Non-operating Government subsidies and the like 1,941,872.57 1.00% Not income received Non-operating 478,391.97 0.25% A rise in non-operating expense Not expense Credit impairment Allowances for doubtful receivables -1,036,971.94 -0.53% Not loss established in the Current Period IV Analysis of Assets and Liabilities 1.Significant Changes in Asset Composition Unit: RMB 30 June 2019 30 June 2018 Change in As % of total As % of total percentag Reason for significant change Amount Amount assets assets e (%) 829,509,716.6 Monetary capital 15.14% 914,968,599.68 17.47% -2.33% 5 Accounts 765,827,365.7 13.98% 994,690,386.07 18.99% -5.01% A decline in operating revenue receivable 6 644,986,460.9 Inventories 11.77% 718,166,451.66 13.71% -1.94% 4 Long-term equity 180,122,685.9 3.29% 176,473,300.95 3.37% -0.08% investments 2 586,093,658.5 Fixed assets 10.70% 511,806,666.21 9.77% 0.93% 9 Construction in 158,184,271.5 2.89% 189,368,112.34 3.61% -0.72% progress 9 Available-for-sale 1,010,613,407. 19.29% -19.29% The transfer of available-for-sale 19 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 financial assets 54 financial assets to investments in other equity instruments according to the new accounting standards governing financial instruments adopted in the Current Period The transfer of available-for-sale financial assets to investments in other Investments in 964,212,719.3 equity instruments according to the other equity 17.60% 17.60% 9 new accounting standards governing instruments financial instruments adopted in the Current Period 2. Assets and Liabilities at Fair Value √ Applicable □ Not applicable Unit: RMB Gain/loss on Cumulative Impairment fair-value fair-value Purchased in Sold in the Beginning allowance for Item changes in the changes the Reporting Reporting Ending amount amount the Reporting Reporting charged to Period Period Period Period equity Financial assets 1. Trading financial assets (exclusive of 6,000,000.00 13,550,000.00 19,550,000.00 derivative financial assets) 4. Investments in other equity 891,716,590.20 422,699,522.53 964,212,719.39 instruments Subtotal of 897,716,590.20 13,550,000.00 422,699,522.53 19,550,000.00 964,212,719.39 financial assets Total of the 897,716,590.20 13,550,000.00 422,699,522.53 19,550,000.00 964,212,719.39 above Financial 477,200.00 -1,473,400.00 1,473,400.00 liabilities Significant changes to the measurement attributes of the major assets in the Reporting Period: □ Yes √ No 20 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 3. Restricted Asset Rights as at the Period-End Item Investment in the same period of last year Amount of variation (RMB) Monetary capital 62,346,866.91 Cash deposit for notes and future foreign exchange settlement, etc. Notes receivable 79,189,073.66 Pledge of bank notes pool Total 141,535,940.57 V Investments Made 1. Total Investment Amount □ Applicable √ Not applicable 2. Major Equity Investments Made in the Reporting Period □ Applicable √ Not applicable 3. Major Non-Equity Investments Ongoing in the Reporting Period □ Applicable √ Not applicable 4. Financial Investments (1) Securities Investments √ Applicable □ Not applicable Unit: RMB Gain/Lo Accumu ss on Source lated Account fair Purchas Gain/los Initial Beginni fair Sold in of Variety of Code of Name of ing value ed in s in Ending Account ng value Reporti investm measure changes Reporti Reporti carrying investm security security security carrying changes ng ment in ng ng value ing title ent cost method value Reporti charged Period Period Period ent to ng funds equity Period Other Guoxua investm Domestic/ Fair Self-ow n 160,000 525,465 375,686 595,921 ents in Foreign 002074 value 0.00 0.00 0.00 ned High-tec ,000.00 ,291.00 ,137.61 ,277.25 equity stock method funds h instrum ents Domestic/ 601818 China 30,828, Fair 68,622, 0.00 47,013, 0.00 0.00 2,986,0 70,663, Other Self-ow 21 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Foreign Everbrig 816.00 value 989.80 384.92 27.39 132.74 investm ned stock ht Bank method ents in funds equity instrum ents Other investm Domestic/ Self-ow Xiamen 292,574 Cost 292,574 10,971, 292,574 ents in Foreign N/A 0.00 0.00 0.00 ned Bank ,133.00 method ,133.00 417.60 ,133.00 equity stock funds instrum ents Foshan branch Other of investm Domestic/ Self-ow Guangd 500,000 Cost 500,000 500,000 ents in Foreign N/A 0.00 0.00 0.00 ned ong .00 method .00 .00 equity stock funds Develop instrum ment ents Bank 483,902 887,162 422,699 13,957, 959,658 Total -- 0.00 0.00 0.00 -- -- ,949.00 ,413.80 ,522.53 444.99 ,542.99 Disclosure date of announcement on Board’s consent for securities investment Disclosure date of announcement on shareholders’ meeting’s consent for securities investment (if any) (2) Investments in Derivative Financial Instruments √ Applicable □ Not applicable Unit: USD’0,000 Ending Actual Relation Related- Purchas Impairm investm Initial Beginni Sold in gain/los ship party Type of ed in ent Ending ent as % Operating investm Beginni Ending ng Reporti s in with the transacti derivativ Reporti allowan investm of the party ent ng date date investm ng Reporti Compan on or e ng ce (if ent Compan amount ent Period ng y not Period any) y’s Period ending 22 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 net assets Foshan Forward branch of forex 14 Not 12 July China Not settleme 1,200 January 200 200 0 0.00% -1.78 related 2018 Constructi nt 2019 on Bank portfolio Foshan Forward branch of forex 2 1 the Not Not settleme 1,200 August Februar 400 400 0 0.00% -0.12 Agricultur related nt 2018 y 2019 al Bank of portfolio China Foshan Ordinary branch of forward 22 Guangzho Not 12 June Not forex 600 March 600 600 0 0.00% -5.6 u Rural related 2019 settleme 2019 Commerci nt al Bank Foshan Ordinary branch of forward 31 Guangzho Not 24 April Not forex 600 October 600 600 0.95% -13.07 u Rural related 2019 settleme 2019 Commerci nt al Bank Foshan Ordinary branch of forward 15 Not 9 May China Not forex 500 October 500 100 400 0.63% -5.55 related 2019 Constructi settleme 2019 on Bank nt Foshan Ordinary branch of forward 14 the Not 9 May Not forex 500 October 500 100 400 0.63% -5.36 Agricultur related 2019 settleme 2019 al Bank of nt China Total 4,600 -- -- 600 2,200 1,400 1,400 2.21% -31.48 Funding source All from the Company’s own money Legal matters involved (if applicable) N/A Disclosure date of board announcement 23 May 2018 approving derivative investment (if 23 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 any) Disclosure date of general meeting announcement approving derivative investment (if any) Risk Analysis of Forward Exchange Settlement Business: 1. Risk of exchange rate fluctuations. In the case of large fluctuations in the exchange rate, the quoted price of the bank’s forward exchange rate may be lower than the Company’s quoted exchange rate to the customer, which will make the Company unable to lock the quoted exchange rate to the customer or the bank’s forward exchange rate may deviate from the exchange rate at the time of the Company’s actual receipt and payment, and causes exchange losses. 2. Risk of customer default. The customer’s accounts receivable may be overdue, and the payment for goods cannot be recovered within the predictable payback period, which will result in the loss of the Company due to the delayed forward settlement. 3. Risk of payback prediction. The marketing department shall made corresponding payback prediction based on customer orders and expected orders. However, during the actual implementation process, customers may adjust their orders and predictions, which will result in the Company’s incorrect payback prediction and cause the risk of delayed delivery of forward exchange settlement. Adopted Risk Control Measures: 1. The Company will strengthen the research and analysis of the exchange rate. When the exchange rate fluctuates greatly, it will adjust the business strategy in a timely manner to stabilize the export business and avoid exchange losses to the Analysis of risks and control measures utmost. 2. The Management System for Forward Settlement and Sales of Foreign Exchanges associated with derivative investments reviewed and approved by the board of directors of the Company stipulates that all forward held in Reporting Period (including but foreign exchange settlement businesses of the Company shall be based on the normal not limited to market risk, liquidity production and operation, and relied on specific business operations to avoid and prevent risk, credit risk, operational risk, legal various exchange rate risks. However, speculative transaction and interest arbitrage are not risk, etc.) allowed. At the same time, the system clearly defines the operating principles, approval authority, responsible department and responsible person, internal operation procedures, information isolation measures, internal risk reporting system, risk management procedures, and information disclosure related to the forward settlement business as well. In fact, the system is conducive to strengthen the management of the Company’s forward foreign exchange settlement business and prevent investment risks. 3. In order to prevent any delay in the forward exchange settlement, the Company will strengthen the management of accounts receivable, actively collect receivables, and avoid any overdue receivables. In the meantime, the Company plans to increase the export purchases and purchase corresponding credit insurance so as to reduce the risk of default and customer default. 4. The Company’s forward foreign exchange settlement transactions must be based on the Company’s foreign exchange earnings prediction. Besides, the Company shall strictly control the scale of its forward foreign exchange settlement business, and manage all risks that the Company may face within a controllable range. 5. The internal audit department of the Company shall check the actual signing and execution situation of all trading contracts on a regular or irregular basis. Changes in market prices or fair value 1. The Company has invested various derivatives including Forward Exchange Settlement of derivative investments in Reporting 3+3 Portfolio. This product portfolio is superior to other ordinary forward settlement 24 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Period (fair value analysis should products during the same period. The first three sessions of vesting conditions of this include measurement method and portfolio are: the spot exchange rate at maturity is lower than the agreed front-end exchange related assumptions and parameters) rate, and the exchange settlement shall be carried out based on the agreed front-end exchange rate; if the spot exchange rate at maturity is higher than the agreed front-end exchange rate, the Company can choose not to settle the exchange or choose to settle the exchange based on the spot exchange rate at maturity. The back-end three sessions of vesting conditions are: the spot exchange rate at maturity is lower than the agreed back-end exchange rate, and the Company can choose not to settle the exchange or choose to settle the exchange based on the spot exchange rate at maturity; if the spot exchange rate at maturity is higher than the agreed back-end exchange rate, the exchange settlement shall be carried out based on the agreed back-end exchange rate. At present, in terms of Forward Exchange Settlement 3+3 Portfolio purchased by the Company, the spot exchange rates at maturity are all higher than the agreed front-end exchange rates, and the Company chooses not to exercise the right. Therefore, the product’s fair value has not changed. 2. The Company has invested ordinary forward exchange settlement product and the exchange settlement shall be carried out in accordance with the currency, amount and exchange rate stipulated in the forward exchange settlement contract, and the fair value of the product will change. Major changes in accounting policies and specific accounting principles adopted for derivative investments in N/A Reporting Period compared to last reporting period The independent directors of the Company are of the opinion that during the Reporting Period, the Company carried out forward forex settlement in strict compliance with the Company Law, the Regulations of the People’s Bank of China on Foreign Exchange Opinion of independent directors on Settlement, Sale and Payment and the Company’s Management Rules for Forward Foreign derivative investments and risk control Exchange Settlement and Sale, among others, as well as within the Board’s authorization. Such trading is primarily aimed to prevent exchange rate fluctuations from impacting the Company’s export business and operating earnings, with no speculative trading involved. It is a necessity, and the risk is well under control. VI Sale of Major Assets and Equity Interests 1. Sale of Major Assets √ Applicable □ Not applicable Net Influen Proport Relatio The The Implem Transac Pricing Related profits ce of ion of nship owners credits ented tion basis -party Disclos Counter Asset Sales of the the sale net with hip for and on Disclos price for the transact ure party sold date Compa on the profits the the liabiliti schedul ure date (RMB’ sale of ion or index ny Compa of the counter asset es e or 0,000) asset not generat ny Compa party involve involve not, if 25 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 ed from (note 3) ny (applica d has d have not, the generat ble been been explana asset ed from related- transfer transfer tions for the the sale party red in red in and period of the transact full or full or measur from asset to ion not not es the the case) taken period- total by the begin net Compa to the profits ny shall sales of the be date Compa given (RMB’ ny 0,000) The sale of equity Annou of ncemen Chengd t on u Transfe Hongbo r of Industri Equity 6.94% al Co., of of Ltd. by Chengd equity the u Xiamen Based of Compa Hongb Tungste on the Chengd 7 ny will 8 o n 1,326.7 evaluati u March 1,955 have no 6.88% No N/A Yes Yes Yes March Industri Corpor 5 on Hongbo 2019 influen 2019 al Co., ation, result Industri ce on Ltd. Ltd. al Co., the (Annou Ltd. Compa ncemen ny’s t No.: busines 2019-0 s 05) continu disclos ity and ed on stability cninfo. of the com.cn. manage ment. 26 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 2. Sale of Major Equity Interests □ Applicable √ Not applicable VII Main Controlled and Joint Stock Companies √ Applicable □ Not applicable Main subsidiaries and joint stock companies with an over 10% influence on the Company’s net profit Unit: RMB Relationship Principal Registered Operating Operating Name with the activity Total assets Net assets Net profit capital revenue profit Company Foshan Chansheng Manufacturin 47,246,196.8 46,585,501.0 1,534,513. Electronic Subsidiary 1,000,000.00 8,793,068.21 1,286,518.29 g 3 9 72 Ballast Co., Ltd. FSL Chanchang Manufacturin 72,782,944.0 140,502,858. 128,420,402. 44,015,347.9 4,220,970. Subsidiary 3,164,768.07 Optoelectroni g 0 64 77 2 37 cs Co., Ltd. Foshan Taimei Times Manufacturin 55,506,867.6 28,536,110.7 59,575,680.8 1,995,095. Subsidiary 500,000.00 1,509,228.08 Luminaries g 7 0 6 27 Co., Ltd. FSL New Light Source Manufacturin 50,000,000.0 57,995,717.9 56,592,264.2 Subsidiary 8,588,440.67 605,130.35 533,574.72 Technology g 0 8 7 Co., Ltd. FSL (Xinxiang) Manufacturin 35,418,439.7 57,237,862.3 49,300,025.8 23,969,271.9 Subsidiary 722,748.36 548,407.50 Lighting Co., g 6 9 1 5 Ltd. Foshan Lighting Manufacturin 15,000,000.0 64,688,940.2 55,914,284.0 34,430,980.0 Lamps and Subsidiary 994,109.00 427,085.81 g 0 9 1 7 Lanterns Co., Ltd. Nanjing Manufacturin 41,683,200.0 67,672,718.9 58,557,909.7 16,774,553.1 4,778,488. Subsidiary 3,410,125.85 Fozhao g 0 5 8 2 84 27 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Lighting Components Manufacturin g Co., Ltd. FSL Zhida Electric Manufacturin 50,000,000.0 84,777,941.8 43,085,605.9 38,271,963.9 -245,568.9 Subsidiary -469,084.10 Technology g 0 2 8 2 6 Co., Ltd. FSL Manufacturin Lighting Subsidiary 195,812.50 1,018,633.97 -12,226.97 1,362,963.21 45,163.14 45,163.14 g GmbH Subsidiaries obtained or disposed in the Reporting Period: √ Applicable □ Not applicable How subsidiary was obtained or disposed Effects on overall operations and operating Subsidiary in the Reporting Period performance Guangdong Fozhao Financing Lease Co., Cancelling No influence Ltd. Information about major majority- and minority-owned subsidiaries: —Foshan Chansheng Electronic Ballast Co., Ltd. was invested and established by the Company and Mr. Ma Henglai and had set up and obtained license for business corporation on 26 August 2003. The Company holds 75% equities of the said company; therefore the said subsidiary was included into the scope of the consolidated financial statements since the date of foundation. On 24 December 2013, the Company and Mr. Ma Henglai signed the equity transfer agreement. The Company purchased 25% equity of Foshan Chansheng Electronic Ballast Co., Ltd. held by Mr. Ma Henglai. After the purchasing, the Company held 100% equity of Foshan Chansheng Electronic Ballast Co., Ltd. —FSL Chanchang Optoelectronics Co., Ltd. (renamed on 19 June 2018 from “Foshan Chanchang Electric Appliances (Gaoming) Co., Ltd.”), which is a Sino-foreign joint venture invested and established by the Company and Prosperity Lamps and Components Ltd, had obtained license for business corporation on 23 August 2005 through approval by Foreign Trade and Economic Cooperation Bureau of Gaoming District, Foshan with document “MWJMY Zi [2005] No. 79”. The Company holds 70% equities of the said company; therefore the said subsidiary was included into the scope of the consolidated financial statements since the date of foundation. On 23 August 2016, the Company and Prosperity Lamps and Components Ltd signed the equity transfer agreement. The Company purchased 30% equity of Foshan Chanchang Electric Appliances (Gaoming) Co., Ltd. held by Prosperity Lamps and Components Ltd. After the purchasing, the Company held 100% equity of Foshan Chanchang Electric Appliances (Gaoming) Co., Ltd. —Foshan Taimei Times Lamps Co., Ltd., which is a Sino-foreign joint venture invested and established by the Company and Reback North America Investment Limited, had obtained license for Business Corporation on 5 December 2005 through approval by Foreign Trade and Economic Cooperation Bureau of Gaoming District, Foshan with document “MWJMY Zi [2005] No. 97”. The Company holds 70% equities of the said company; therefore the said subsidiary was included into the scope of the consolidated financial statements since the date of 28 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 foundation. —FSL New Light Source Technology Co., Ltd. (its predecessor was “Foshan Lighting Lamps and Lanterns Co., Ltd.” and it changed its name to “FSL New Light Source Technology Co., Ltd.” on 17 December 2014), which is invested and established by the Company together with Foshan Haozhiyuan Trading Co., Ltd., Shanghai Liangqi Electric Co., Ltd, Changzhou Sanfeng Electrical & Lighting Co., Ltd., Henan Xingchen Electrical & Lighting Co., Ltd., Foshan Hongbang Electrical & Lighting Co., Ltd., Hebei Jinfen Trading Co., Ltd., obtaining its license for Business Corporation on 27 September 2009. The Company holds 60% equities of this company. Therefore the said subsidiary was included into the scope of the consolidated financial statements since the date of foundation. On 25 September 2009 and 19 November 2010, the equity transfer agreement was signed between the Company and the minority shareholders, in which the minority shareholders respectively transferred their equities of Foshan Lighting Lamps and Lanterns Co., Ltd. to the Company. After transfer, the Company holds 100% equities of Foshan Lighting Lamps and Lanterns Co., Ltd. —FSL (Xinxiang) Lighting Co., Ltd. is a limited liability company which is invested and established by the Company, obtaining its license for Business Corporation on 17 April 2009. The Company holds 100% equities of the said company, therefore the said subsidiary was included into the scope of the consolidated financial statements since date of foundation. On 27 August 2013, the 3rd Meeting of the 7th Board of Directors reviewed and approved to invest another RMB2 million (land in an industrial park in Xinxiang, Henan Province and monetary funds) in FSL (Xinxiang) Lighting, increasing the registered capital of FSL (Xinxiang) Lighting to RMB35,418,439.76. —Foshan Lighting Lamps and Lanterns Co., Ltd. is a limited liability company invested and established by the Company with the registered capital of RMB15 million, which had obtained its license for Business Corporation on 8 May 2013. And the Company holds 100% equities of this company. Therefore the said subsidiary was included into the scope of the consolidated financial statements since the date of foundation. —In accordance with the equity transfer agreement signed between the Company and Prosperity Lamps and Components Ltd. on 27 August 2008, Prosperity Lamps and Components Ltd. transferred 100% equities of Nanjing Fozhao Lighting Components Manufacturing Co., Ltd. (formerly known as “Prosperity (Nanjing) Lighting Components Co., Ltd.”, and changed name to “Nanjing Fozhao Lighting Components Manufacturing Co., Ltd.” on 15 November 2010.) to the Company. Therefore, Nanjing Fozhao Lighting Components Manufacturing Co., Ltd. became a wholly-owned subsidiary of the Company. The said subsidiary was included into the scope of the consolidated financial statements since the merger date. —FSL Zhida Electric Technology Co., Ltd. (FSL Zhida) was incorporated by the Company, Foshan Zhibida Enterprise Management Co., Ltd. and Dongguan Baida Semiconductor Material Co., Ltd. on a joint investment basis. FSL Zhida obtained its business license on 21 October 2016. Holding a stake of 51% in it, the Company has included FSL Zhida in its consolidated financial statements since the date of FSL Zhida’s incorporation. —FSL Lighting GmbH is a Limited Liability company invested and set up in German with registered capital Euro25,000. It got the business license on 30 November 2017 whose 100% stock equity is held by the Company, and it is included into the scope of consolidated financial statement from the date of establishment. VIII Structured Bodies Controlled by the Company □ Applicable √ Not applicable 29 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 IX Performance Forecast for January-September 2019 Warning of possible loss or considerable YoY change in the accumulative net profit made during the period-beginning to the end of the next reporting period, as well as the reasons: □ Applicable √ Not applicable X Risks Facing the Company and Countermeasures 1. Risk of intensified market competition From the macro perspective, with the strict implementation of real estate control policies, increasing tense Sino-US trade war and confusion international trade situation, the uncertainty of the operation for import and export enterprises has been further increased. From the industry perspective, as a fully competitive industry, lighting applications are not only subject to the competition of companies in the field of original applications, but also the competition of LED upstream and downstream chip companies as well as packaging companies that gradually extends to the lighting application field. If the market competition intensifies further in the future, the profitability of the Company may be negatively impacted. Countermeasures: The Company will focus on main business. Through increasing research & development investment constantly and developing new products the Company will improve technical innovation ability and added value of products; continue to give play to the cost advantages in product manufacturing and improve supply ability of high-quality products. At the same time, by optimizing marketing network and expanding markets in other overseas regions, the Company will improve brand image, improve service quality, intensify customer relationship management and increase core competitive capacity of the Company constantly. 2. Risk of rising labor costs and raw material price fluctuations Due to the influence of domestic labor supply and demand as well as employment policies, labor costs keep increasing, especially in the Pearl River Delta region with more developed economy. In addition, raw materials of the Company account for a high proportion of operation costs. As some raw material prices are associated with uncontrollable factors such as global market conditions and national macroeconomic policies, there is a risk of price fluctuation of raw materials. Countermeasures: By increasing quantity of qualified suppliers, expanding bidding and tendering range, perfecting supply chain management, paying attention to market dynamics, collecting information, analyzing and pre-judging 30 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 supply of main raw materials and price trend, the Company can decrease procurement costs; by improving automatic, intelligent production level and by implementing technical transformation, technology improvement and other measures, the Company can improve production efficiency and reduce product cost; by intensifying production technology and field management, the Company can control product costs. 3. Risk of inventory valuation loss As of the end of the Reporting Period, the inventory amount is high, and the inventory mainly includes raw materials, semi-finished products and finished products. Due to the large number of product types and models, the inventory amount of the Company is relatively high. Moreover, as the sales revenue of the Company increases year by year, the raw materials and inventories that are stored to meet production and sales will increase simultaneously. It will lead to a higher inventory maintained in the Company. In case changes occur to product prices or demand in the future market, the Company may experience a risk of inventory depreciation. Countermeasures: The Company can intensify the analysis of sales and change in future market demand, on the basis of assuring production and sales, the Company can control inventory scale reasonably. 4. Risk of exchange rate fluctuations The RMB exchange rate in China is based on market supply and demand, with reference to a basket of currencies for regulation and a managed floating exchange rate system. Exchange rate fluctuations will happen with the fluctuations of global economy, simmering tension of some regions and the monetary policies of various countries. Export accounts for around 40% of the Company’s business, and is mostly settled in the U.S. dollar. If the exchange rate fluctuates significantly, business performance of the Company will be affected. Countermeasures: By intensifying settlement currency management, knowing exchange rate policies and fluctuation trend of settlement currencies in time, and carrying out forward forex settlement when the timing is right, the Company can weaken the risks brought by exchange rate fluctuations as much as possible. 5. Risk of doubtful accounts receivable With the expansion of sales scale of the Company, the amount of accounts receivable has increased. The main debit customers of the Company are all long-term customers with good business reputations. Major adverse changes in the financial status of major debtors may result in the risk of uncollectible accounts receivable. Countermeasures: By perfecting credit file of customers, evaluating credit status of customers regularly, adopting 31 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 method of pledge of customers’ assets, and purchasing insurance on certain export sales, the Company can reduce risks from bad debts of accounts receivable. By strengthening the management of approval of contract, the Company can avoid legal risks incurred during implementation of contract. The Company can reinforce the management and collection efforts of accounts receivable, implement pre-warning treatment for accounts receivable with upcoming deadline during implementation, and analyze and report accounts receivable regularly. 32 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Part V Significant Events I Annual and Extraordinary General Meeting Convened during the Reporting Period 1. General Meeting Convened during the Reporting Period Investor Index to disclosed Meeting Type Convened date Disclosure date participation ratio information Announcement on Resolutions of the 2018 Annual The 2018 Annual Annual General General Meeting 37.81% 25 April 2019 26 April 2019 General Meeting Meeting (Announcement No.: 2019-021) disclosed on www.cninfo.com.cn 2. Extraordinary General Meeting Convened at Request of Preference Shareholders with Resumed Voting Rights □ Applicable √ Not applicable II Interim Dividend Plan for the Reporting Period □ Applicable √ Not applicable The Company has no interim dividend plan. III Commitments of the Company’s Actual Controller, Shareholders, Connected Parties and Acquirer, as well as the Company and Other Commitment Makers, Fulfilled in the Reporting Period or still Ongoing at Period-End □ Applicable √ Not applicable No such cases in the Reporting Period. IV Engagement and Disengagement of CPAs Firm Has the Interim financial report been audited? 33 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 □Yes √ No This Interim Report is unaudited. V Explanations Given by Board of Directors and Supervisory Committee Regarding “Modified Auditor’s Report” Issued by CPAs Firm for the Reporting Period □ Applicable √ Not applicable VI Explanations Given by Board of Directors Regarding “Modified Auditor’s Report” Issued for Last Year □ Applicable √ Not applicable VII Bankruptcy and Restructuring □ Applicable √ Not applicable No such cases in the Reporting Period. VIII Legal Matters Significant lawsuits or arbitrations: □ Applicable √ Not applicable No such cases in the Reporting Period. Other legal matters: √ Applicable □ Not applicable Situation of Trial results Basic situation of Whether form Process of execution of Lawsuit amount and influences Disclosure Disclosure lawsuit into estimated lawsuit judgment of (RMB ‘0,000) of lawsuit date index (arbitration) liabilities (arbitration) lawsuit (arbitration) (arbitration) Suit and The amount The case is counter-suit involved in the None (uncertain under the between FSL and suit filed by FSL before the court judicial No verdict has Dongguan Fozhao against Linton is N/A decision comes identificatio been reached Linton RMB10.5158 out) n procedure Energy-Saving million, while the and has not Technologies Co., amount of the 34 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Ltd. (hereinafter counter-suite is been tried referred to as RMB13.2791 “Linton”) on a million sales and purchase contract The defendant was ordered to pay RMB14.220 8 million and the Suit filed by FSL liquidated against Beijing damages to Zhongao Zhengshi FSL for Lighting Co., Ltd. RMB19.2764 None (FSL is product Second trial N/A and natural person million the plaintiff) sales, with underway Jiang Zhenghao on Jiang a sales and Zhenghao purchase contract bearing the joint responsibilit y. The defendant has applied for an appeal. Suit filed by FSL against Shanghai Feilo Investment The case has Co., Ltd. and None (FSL is No verdict has 840.82 not been N/A Shanghai Feilo the plaintiff) been reached tried Acoustics Co., Ltd. on a sales and purchase contract Suit filed by Guangdong Cobra None (uncertain The case has Industry Co., Ltd. before the court No verdict has 500 not been N/A against FSL on decision comes been reached tried infringement of out) fancies design 35 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 IX Punishments and Rectifications □ Applicable √ Not applicable No such cases in the Reporting Period. X Credit Conditions of the Company as well as its Controlling Shareholder and Actual Controller √Applicable □ Not applicable In the Reporting Period, the Company and its controlling shareholder and actual controller were not involved in any unsatisfied court judgments, large-amount overdue liabilities or the like. XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for Employees □ Applicable √ Not applicable No such cases in the Reporting Period. XII Major Related-Party Transactions 1. Continuing Related-Party Transactions √Applicable □ Not applicable Obtaina As % of ble total Approve market Index Relation Transact Total value of d Over the Method price for to ship Type of Specific Pricing ion Related value all transacti approve of same-ty Disclosu disclos with the transacti transacti principl price(R party (RMB’0 same-ty on line d line or settleme pe re date ed Compan on on e MB’0,0 ,000) pe (RMB’0 not nt transacti inform y 00) transacti ,000) ons(RM ation ons B’0,000 ) Prosperi Shareho Purchasi ty lder that ng Purchas 29 www.c Lamps holds products e of Market Remitta 135.89 135.89 0.14% 1,200 Not 135.89 March ninfo.c & over 5% and material price nce 2019 om.cn Compon shares receivin s ents of the g labor 36 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Limited Compan service y from related party Purchasi Hangzh ng Enterpri ou products se Times and Purchas controll 29 www.c Lighting receivin e of Market Remitta ed by 31.72 31.72 0.03% 100 Not 31.72 March ninfo.c and g labor material price nce related 2019 om.cn Electric service s natural al Co., from person Ltd. related party Purchasi ng Foshan products NationS Under and Purchas tar same 29 www.c receivin e of Market Remitta Optoele actual 2,416.08 2.56% 21,000 Not March ninfo.c g labor material price 2,416.08 nce 2,416.08 ctronics controll 2019 om.cn service s Co., er from Ltd. related party Purchasi Guangd ng ong products Under Fenghua and Purchas same 29 www.c Advanc receivin e of Market Remitta actual 191.90 191.9 0.20% 1,000 Not 191.90 March ninfo.c ed g labor material price nce controll 2019 om.cn Holding service s er Co., from Ltd. related party Guangd Purchasi ong ng Electron Under products Purchas ic same and 29 www.c e of Market Remitta Technol actual receivin 4.66 4.66 0.56% 300 Not 4.66 March ninfo.c equipme price nce ogy controll g labor 2019 om.cn nt Researc er service h from Institute related 37 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 party Purchasi ng MTM products Under Semicon and Purchas same 29 www.c ductor receivin e of Market Remitta actual 26.19 26.19 3.17% 100 Not 26.19 March ninfo.c Equipm g labor equipme price nce controll 2019 om.cn ent Co., service nt er Ltd. from related party Selling Shareho PROSP products lder that ERITY and holds LAMPS providin 29 www.c over 5% Selling Market Remitta & g labor 1,177.36 0.70% 4,200 Not March ninfo.c shares products price 1,177.36 nce 1,177.36 COMP service 2019 om.cn of the ONENT to Compan S LTD related y party Selling Prosperi Enterpri products ty se and Electric controll providin 29 www.c Selling Market Remitta al ed by g labor 5.70 5.7 0.00% 200 Not 5.70 March ninfo.c products price nce (China) related service 2019 om.cn Co., natural to Ltd. person related party Guangz Selling hou products Dianshe Under and ng same providin Selling Market Remitta Property actual g labor 0.08 0.08 0.00% Not 0.08 N/A products price nce Manage controll service ment er to Co., related Ltd. party Total -- -- 3,989.58 -- 28,100 -- -- -- -- -- Large-amount sales return in detail N/A Give the actual situation in the In March 2019, the Company estimated the total value of its continuing transactions with Reporting Period (if any) where an related parties Foshan NationStar Optoelectronics Co., Ltd., Guangdong Fenghua Advanced 38 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 estimate had been made for the total Technology Holding Co., Ltd., Prosperity Lamps & Components Limited, Prosperity value of continuing related-party Electrical (China) Co., Ltd., and Hangzhou Times Lighting and Electrical Co., Ltd. transactions by type to occur in the Concerning the purchases from its related parties, the actual amount in 2019 so far was Reporting Period RMB28,064,300, accounting for 11.62% of the estimate in 2019. As for the sales to its related parties, the actual amount in 2019 so far was RMB11,831,500, accounting for 26.89% of the estimate in 2019. Reason for any significant difference between the transaction price and the N/A market reference price (if applicable) 2. Related-Party Transactions Regarding Purchase or Sales of Assets or Equity Interests □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Related Transactions Regarding Joint Investments in Third Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 4. Credits and Liabilities with Related Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 5. Other Major Related-Party Transactions √ Applicable □ Not applicable 1. On 26 June 2018, the Company held the 23 rd Meeting of the 8th Board of Directors, and the Proposal on Signing the Financial Services Agreement with Guangdong Rising Finance Co., Ltd. was examined and approved at the meeting. On the same day, the Company signed the Financial Services Agreement with Guangdong Rising Finance Co., Ltd. (hereinafter referred to as “Rising Finance”), and Rising Finance would provide deposit and settlement services for the Company for a term of one year. During the term of validity of the Agreement, the daily deposit balance of the Company in Rising Finance Company shall not exceed RMB150 million. During the Reporting Period, the daily deposit balance of the Company in Rising Finance Company was RMB149 million. 39 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 2. On 21 June 2019, the Company held the 31st Meeting of the 8th Board of Directors, and the Proposal on Signing the Financial Services Agreement with Guangdong Rising Finance Co., Ltd. was examined and approved at the meeting. On the same day, the Company signed the Financial Services Agreement with Guangdong Rising Finance Co., Ltd. (hereinafter referred to as “Rising Finance”), and Rising Finance would provide deposit and settlement services for the Company for a term of one year. During the term of validity of the Agreement, the daily deposit balance of the Company in Rising Finance Company shall not exceed RMB150 million. During the Reporting Period, the daily deposit balance of the Company in Rising Finance Company was RMB149 million. Index to the current announcements about the said related-party transactions disclosed: Title of announcement Disclosure date Disclosure website Announcement on Signing Financial Service Agreement with Guangdong Rising Finance 27 June 2018 www.cninfo.com.cn Co., Ltd. Announcement on Signing Financial Service Agreement with Guangdong Rising Finance 22 June 2019 www.cninfo.com.cn Co., Ltd. XIII Occupation of the Company’s Capital by the Controlling Shareholder or Its Related Parties for Non-Operating Purposes □ Applicable √ Not applicable No such cases in the Reporting Period. XIV Major Contracts and Execution thereof 1. Entrustment, Contracting and Leases (1) Entrustment □ Applicable √ Not applicable No such cases in the Reporting Period. (2) Contracting □ Applicable √ Not applicable 40 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 No such cases in the Reporting Period. (3) Leases □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Major guarantees □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Other Major Contracts □ Applicable √ Not applicable No such cases in the Reporting Period. XV Corporate Social Responsibility (CSR) 1. Significant Environment Protection Indicate by tick mark whether the Company or any of its subsidiaries is identified as a major polluter by the environmental protection authorities. No In strict accordance with the government’s requirements, the Company has been conscientiously carrying out environment-related work, including establishing and improving various related systems, and continuously increasing related expenditure. These environment improvement efforts have helped build a good image of the Company in relation to environmental protection. Meanwhile, the Company’s environmental protecting facilities have been running stably, with the discharge of waste gas and water in compliance with the relevant standards. No pollution incidents have occurred. In addition to the environmental protection authorities’ quarterly examination and supervision, the Company has also entrusted, on a yearly basis, an independent institution to exam the Company’s waste gas treatment systems, 41 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 as well as waste water and noise discharges, so as to minimize environment risk. All the examinations and tests have been documented and released to the employees on the environmental protection and safety bulletin boards at every workshop. Employees at all levels, with a strong awareness of environment protection, have been cooperating closely with each other to implement the policy of “Save Energy, Reduce Consumption, Lower Pollution and Increase Efficiency”. In all, the Company’s environment risk is controllable and its environment management keeps improving. 2. Measures Taken for Targeted Poverty Alleviation The Company did not take any targeted measures to help people lift themselves out of poverty during the Reporting Period, also no subsequent plans. XVI Other Significant Events □ Applicable √ Not applicable No such cases in the Reporting Period. XVII Significant Events of Subsidiaries √ Applicable □ Not applicable The Company convened the 26th Meeting of the 8th Board of Directors on 7 September 2018, which reviewed and approved the Proposal on the De-Registration of Wholly-owned Subsidiary Guangdong Fozhao Finance Lease Co., Ltd. The de-registration procedure of Guangdong Fozhao Finance Lease Co., Ltd. has been completed on 26 March 2019 (refer to Announcement on Completion of Subsidiary De-Registration disclosed on www.cninfo.com.cn on 2 April 2019 for details). 42 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Part VI Share Changes and Shareholder Information I. Share Changes 1. Share Changes Unit: share Before Increase/decrease in the Reporting Period (+/-) After Shares as Shares as dividend dividend Percentag New converted Percentag Shares converted Other Subtotal Shares e (%) issues from e (%) from capital profit reserves 13,968,65 14,136,15 I. Restricted shares 1.00% 167,505 167,505 1.01% 4 9 2. Shares held by 1 1 1 0.00% state-owned legal person 3. Shares held by other 5,041,022 0.36% 167,504 167,504 5,208,526 0.37% domestic investors Among which: Shares held 4,237,081 0.30% -483,109 -483,109 3,753,972 0.27% by domestic legal person Shares held 803,941 0.06% 650,613 650,613 1,454,554 0.10% by domestic natural person 4 Shares held by foreign 8,927,632 0.64% 8,927,632 0.64% investors Among which: Shares held 8,927,632 0.64% 8,927,632 0.64% by foreign legal person 1,385,377, 1,385,209 99.00% -167,505 -167,505 98.99% II. Unrestricted shares 500 ,995 1,072,239, 1,072,071 1. RMB common shares 76.62% -167,505 -167,505 76.61% 049 ,544 2. Domestically listed 313,138,4 313,138,4 22.38% 22.38% foreign shares 51 51 1,399,346, 1,399,346 III. Total shares 100.00% 100.00% 154 ,154 Reasons for share changes: √ Applicable □ Not applicable 43 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 1. 483,109 restricted shares held by domestic legal persons became domestic natural persons’ holdings during the Reporting Period. 2. During the Reporting Period, some directors and supervisors, as well as the senior management increased their shareholdings in the Company, representing an increase of 167,505 restricted shares. Approval of share changes: □ Applicable √ Not applicable Transfer of share ownership: □ Applicable √ Not applicable Progress on any share repurchases: □ Applicable √ Not applicable Progress on reducing the repurchased shares by means of centralized bidding: □ Applicable √ Not applicable Effects of share changes on the basic and diluted earnings per share, equity per share attributable to the Company’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period, respectively: □ Applicable √ Not applicable Other information that the Company considers necessary or is required by the securities regulator to be disclosed: □ Applicable √ Not applicable 2. Changes in Restricted Shares √ Applicable □ Not applicable Unit: share Reason for Beginning Released in Increase in Ending restricted Shareholder restriction/release Date of release restricted shares Reporting Period Reporting Period shares from restriction Lock-up of senior Liu Xingming 444,150 0 39,705 483,855 management’s Uncertain shares Lock-up of senior Tang Qionglan 30,030 0 26,925 56,955 Uncertain management’s 44 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 shares Lock-up of senior Wei Bin 55,744 0 23,175 78,919 management’s Uncertain shares Lock-up of senior Jiao Zhigang 56,549 0 11,250 67,799 management’s Uncertain shares Lock-up of senior Chen Yu 34,699 0 14,850 49,549 management’s Uncertain shares Lock-up of senior Zhang Yong 41,547 0 16,650 58,197 management’s Uncertain shares Lock-up of senior Zhang Xuequan 38,289 0 16,500 54,789 management’s Uncertain shares Lock-up of senior Xu Xiaoping 18,727 0 9,225 27,952 management’s Uncertain shares Lock-up of senior Ye Zhenghong 48,946 0 9,225 58,171 management’s Uncertain shares Total 768,681 0 167,505 936,186 -- -- II. Issuance and Listing of Securities □ Applicable √ Not applicable III. Total Number of Shareholders and Their Shareholdings Unit: share Total number of preference Total number of ordinary shareholders with resumed 86,354 0 shareholders at the period-end voting rights at the period-end (if any) (see note 8) 5% or greater ordinary shareholders or the top 10 ordinary shareholders Total Increase/de Number Pledged or frozen shares Shareholdin Number of shares crease of Name of Nature of g non-restrict held at the during the restricted shareholder shareholder percentage ed shares Status Number period-en Reporting shares (%) held d Period held 45 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Hong Kong Wah Foreign legal 188,496,4 188,496,43 Shing Holding 13.47% In pledge 92,363,251 person 30 0 Company Limited Prosperity Lamps Foreign legal 146,934,8 146,934,85 & Components 10.50% person 57 7 Limited Shenzhen Rising Investment State-owned legal 71,696,13 5.12% 71,696,136 In pledge 35,800,000 Development Co., person 6 Ltd. Guangdong Electronics State-owned legal 66,393,50 Information 4.74% 66,393,501 In pledge 32,532,815 person 1 Industry Group Ltd. Central Huijin Asset State-owned legal 33,878,90 2.42% 33,878,900 Management Co., person 0 Ltd. Essence International Foreign legal 30,007,71 2.14% 675,525 30,007,711 Securities (Hong person 1 Kong) Co., Ltd. Rising Investment Foreign legal 25,482,25 Development 1.82% 25,482,252 person 2 Limited DBS Vickers Foreign legal 22,102,13 (Hong Kong) Ltd 1.58% 22,102,137 person 7 A/C Clients China Merchants Foreign legal 12,226,03 Securities (Hong 0.87% -107,800 12,226,036 person 6 Kong) Co., Ltd Foreign natural 11,903,50 Zhuang Jianyi 0.85% 8,927,632 2,975,877 person 9 Strategic investors or general corporations becoming top-ten Naught shareholders due to placing of new shares (if any) (see Note 3) Among the top 10 shareholders, Hong Kong Wah Shing Holding Company Limited, Shenzhen Related or acting-in-concert parties Rising Investment Development Co., Ltd., Guangdong Electronics Information Industry among the shareholders above Group Ltd. and Rising Investment Development Limited are acting-in-concert parties; and 46 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Prosperity Lamps & Components Limited and Zhuang Jianyi are acting-in-concert parties. Apart from that, it is unknown whether there is among the top 10 shareholders any other related parties or acting-in-concert parties as defined in the Administrative Measures for the Acquisition of Listed Companies. Top 10 unrestricted shareholders Shares by type Name of shareholder Unrestricted shares held at the period-end Type Shares Hong Kong Wah Shing Holding RMB-denominate 188,496,430 188,496,430 Company Limited d ordinary stock Prosperity Lamps & Components RMB-denominate 146,934,857 146,934,857 Limited d ordinary stock Shenzhen Rising Investment RMB-denominate 71,696,136 71,696,136 Development Co., Ltd. d ordinary stock Guangdong Electronics Information RMB-denominate 66,393,501 66,393,501 Industry Group Ltd. d ordinary stock Central Huijin Asset Management RMB-denominate 33,878,900 33,878,900 Co., Ltd. d ordinary stock Domestically Essence International Securities 30,007,711 listed foreign 30,007,711 (Hong Kong) Co., Ltd. stock Domestically Rising Investment Development 25,482,252 listed foreign 25,482,252 Limited stock Domestically DBS Vickers (Hong Kong) Ltd A/C 22,102,137 listed foreign 22,102,137 Clients stock Domestically China Merchants Securities (Hong 12,226,036 listed foreign 12,226,036 Kong) Co., Ltd stock Shenzhen Xingsen Asset Management RMB-denominate Co., Ltd—Phase II Private Fund of 8,616,776 8,616,776 d ordinary stock Xingsen Among the top 10 unrestricted ordinary shareholders, Hong Kong Wah Shing Holding Related or acting-in-concert parties Company Limited, Shenzhen Rising Investment Development Co., Ltd., Guangdong among top 10 unrestricted public Electronics Information Industry Group Ltd. and Rising Investment Development Limited are shareholders, as well as between top acting-in-concert parties; Apart from that, it is unknown whether there is among the top 10 10 unrestricted public shareholders shareholders any other related parties or acting-in-concert parties as defined in the and top 10 shareholders Administrative Measures for the Acquisition of Listed Companies. Top 10 ordinary shareholders Among the top 10 unrestricted shareholders, Shenzhen Xingsen Asset Management Co., involved in securities margin trading Ltd—Phase II Private Fund of Xingsen holds 0 shares in the Company through its common (if any) (see note 4) stock accounts and 8,616,776 shares in the Company through its accounts of collateral 47 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 securities for margin trading, representing a total holding of 8,616,776 shares in the Company. Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conducted any promissory repo during the Reporting Period. □ Yea √ No No such cases in the Reporting Period. IV. Change of the Controlling Shareholder or the Actual Controller Change of the controlling shareholder in the Reporting Period □ Applicable √ Not applicable No such cases in the Reporting Period. Change of the actual controller in the Reporting Period □ Applicable √ Not applicable No such cases in the Reporting Period. 48 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Part VII Preferred Shares □ Applicable √ Not applicable No preferred shares in the Reporting Period. 49 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Part VIII Directors, Supervisors and Senior Management I Change in Shareholdings of Directors, Supervisors and Senior Management √ Applicable □ Not applicable Number of Number of the restricted Decrease Number of the Increase in the restricted shares Beginning in Ending restricted shares Incumbent Reporting shares granted Name Office title shareholdi Reporting shareholdi granted at the /Former Period granted at the during the ng (share) Period ng (share) period-end (share) period-begin Reporting (share) (share) (share) Period (share) Director & Liu General Incumbent 592,200 52,940 0 645,140 0 0 0 Xingming Manager Ye Zhenghon Supervisor Incumbent 65,261 12,300 0 77,561 0 0 0 g Tang CFO Incumbent 40,040 35,900 0 75,940 0 0 0 Qionglan Vice Wei Bin General Incumbent 74,326 30,900 0 105,226 0 0 0 Manager Vice Jiao General Incumbent 75,399 15,000 0 90,399 0 0 0 Zhigang Manager Vice Chen Yu General Incumbent 46,266 19,800 0 66,066 0 0 0 Manager Vice Zhang General Incumbent 55,396 22,200 0 77,596 0 0 0 Yong Manager Vice Zhang General Incumbent 51,052 22,000 0 73,052 0 0 0 Xuequan Manager Vice Xu General Incumbent 24,970 12,300 0 37,270 0 0 0 Xiaoping Manager 50 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Total -- -- 1,024,910 223,340 0 1,248,250 0 0 0 II Changes in Directors, Supervisors and Senior Management √ Applicable □ Not applicable Name Office title Type of change Date of change Reason for change Chairman of the Elected as the chairman of the 8th Supervisory Li Huashan Supervisory Elected 25 April 2019 Committee Committee Chairman of the Li Jinkun Supervisory Left 11 April 2019 Resigned for job turnover Committee Secretary of the Lin Yihui Disengaged 29 June 2019 Resigned for personal reason Board 51 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Part IX Corporate Bonds Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the approval date of this Report or were due but could not be redeemed in full? No 52 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Part X Financial Statements I Auditor’s Report Whether the interim report has been audited? □Yes √ No The interim report of the Company has not been audited. II Financial Statements Currency unit for the financial statements and the notes thereto: RMB 1. Consolidated Balance Sheet Prepared by Foshan Electrical and Lighting Co., Ltd. Unit: RMB Item 30 June 2019 31 December 2018 Current assets: Monetary capital 829,509,716.65 896,646,719.87 Settlement reserve Interbank loans granted Trading financial assets Financial assets at fair value through profit or loss Derivative financial assets Notes receivable 135,766,529.32 107,506,613.50 Accounts receivable 765,827,365.76 834,420,596.05 Financing backed by accounts receivable Prepayments 11,891,130.86 13,811,905.18 Premiums receivable Reinsurance receivables Receivable reinsurance contract reserve Other receivables 27,065,266.07 21,745,690.53 Including: Interest receivable 5,828,623.70 5,152,364.04 53 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Dividends receivable Financial assets purchased under resale agreements Inventories 644,986,460.94 767,319,599.00 Contract assets Assets classified as held for sale Current portion of non-current assets Other current assets 913,945,157.63 864,093,663.30 Total current assets 3,328,991,627.23 3,505,544,787.43 Non-current assets: Loans and advances to customers Investments in debt obligations Available-for-sale financial assets 897,716,590.20 Investments in other debt obligations Held-to-maturity investments Long-term receivables Long-term equity investments 180,122,685.92 182,458,559.69 Investments in other equity 964,212,719.39 instruments Other non-current financial assets Investment property Fixed assets 586,093,658.59 512,106,912.39 Construction in progress 158,184,271.59 224,624,447.16 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 170,510,917.01 172,725,277.21 R&D expense Goodwill Long-term prepaid expense 8,361,600.95 6,852,985.35 Deferred income tax assets 34,504,330.96 37,831,704.45 Other non-current assets 47,366,671.02 48,305,435.42 Total non-current assets 2,149,356,855.43 2,082,621,911.87 Total assets 5,478,348,482.66 5,588,166,699.30 Current liabilities: 54 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Short-term borrowings Borrowings from central bank Interbank loans obtained Trading financial liabilities 1,473,400.00 Financial liabilities at fair value 477,200.00 through profit or loss Derivative financial liabilities Notes payable 375,906,405.75 452,683,676.97 Accounts payable 508,983,045.12 532,597,143.95 Advances from customers 35,916,666.09 43,850,788.04 Financial assets sold under repurchase agreements Customer deposits and interbank deposits Payables for acting trading of securities Payables for underwriting of securities Payroll payable 64,798,848.43 96,088,621.59 Taxes payable 28,472,607.76 25,354,466.37 Other payables 47,164,268.80 43,115,011.68 Including: Interest payable Dividends payable Handling charges and commissions payable Reinsurance payables Contract liabilities Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 1,062,715,241.95 1,194,166,908.60 Non-current liabilities: Insurance contract reserve Long-term borrowings 55 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term payroll payable Provisions Deferred income 77,500.35 155,000.31 Deferred income tax liabilities 63,404,928.38 52,530,509.00 Other non-current liabilities Total non-current liabilities 63,482,428.73 52,685,509.31 Total liabilities 1,126,197,670.68 1,246,852,417.91 Owners’ equity: Share capital 1,399,346,154.00 1,399,346,154.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 158,608,173.07 158,608,173.07 Less: Treasury stock Other comprehensive income 359,303,760.45 297,667,872.80 Specific reserve Surplus reserves 809,456,186.20 809,456,186.20 General reserve Retained earnings 1,603,158,758.12 1,654,181,032.39 Total equity attributable to owners of 4,329,873,031.84 4,319,259,418.46 the Company as the parent Non-controlling interests 22,277,780.14 22,054,862.93 Total owners’ equity 4,352,150,811.98 4,341,314,281.39 Total liabilities and owners’ equity 5,478,348,482.66 5,588,166,699.30 Legal representative: He Yong General Manager: Liu Xingming Chief Financial Officer: Tang Qionglan 2. Balance Sheet of the Company as the Parent Unit: RMB Item 30 June 2019 31 December 2018 56 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Current assets: Monetary capital 777,873,712.87 848,949,693.91 Trading financial assets Financial assets at fair value through profit or loss Derivative financial assets Notes receivable 134,345,022.32 104,945,398.61 Accounts receivable 709,370,406.65 795,897,932.65 Financings backed by accounts receivable Prepayments 26,317,689.21 25,444,445.34 Other receivables 49,579,918.55 43,538,848.72 Including: Interest receivable 5,828,623.70 5,152,364.04 Dividends receivable Inventories 575,485,441.72 692,681,479.03 Contract assets Assets classified as held for sale Current portion of non-current assets Other current assets 908,608,201.81 856,504,839.81 Total current assets 3,181,580,393.13 3,367,962,638.07 Non-current assets: Investments in debt obligations Available-for-sale financial assets 897,716,590.20 Investments in other debt obligations Held-to-maturity investments Long-term receivables Long-term equity investments 463,915,788.18 466,251,661.95 Investments in other equity 964,212,719.39 instruments Other non-current financial assets Investment property Fixed assets 528,301,991.89 427,947,613.74 Construction in progress 156,307,643.11 222,570,503.14 Productive living assets Oil and gas assets 57 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Right-of-use assets Intangible assets 127,512,566.55 129,452,067.42 R&D expense Goodwill Long-term prepaid expense 5,477,080.74 5,106,268.25 Deferred income tax assets 32,238,587.52 35,908,741.15 Other non-current assets 45,858,121.02 46,852,235.42 Total non-current assets 2,323,824,498.40 2,231,805,681.27 Total assets 5,505,404,891.53 5,599,768,319.34 Current liabilities: Short-term borrowings Trading financial liabilities 1,473,400.00 Financial liabilities at fair value 477,200.00 through profit or loss Derivative financial liabilities Notes payable 375,906,405.75 452,683,676.97 Accounts payable 668,029,057.46 681,490,174.69 Advances from customers 31,494,990.99 41,912,301.85 Contract liabilities Payroll payable 53,654,091.41 84,220,746.16 Taxes payable 26,618,163.16 17,528,644.83 Other payables 129,244,340.97 114,073,355.23 Including: Interest payable Dividends payable Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 1,286,420,449.74 1,392,386,099.73 Non-current liabilities: Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds 58 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Lease liabilities Long-term payables Long-term payroll payable Provisions Deferred income Deferred income tax liabilities 63,404,928.38 52,530,509.00 Other non-current liabilities Total non-current liabilities 63,404,928.38 52,530,509.00 Total liabilities 1,349,825,378.12 1,444,916,608.73 Owners’ equity: Share capital 1,399,346,154.00 1,399,346,154.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 166,211,779.15 166,211,779.15 Less: Treasury stock Other comprehensive income 359,294,594.15 297,672,884.34 Specific reserve Surplus reserves 809,456,186.20 809,456,186.20 Retained earnings 1,421,270,799.91 1,482,164,706.92 Total owners’ equity 4,155,579,513.41 4,154,851,710.61 Total liabilities and owners’ equity 5,505,404,891.53 5,599,768,319.34 Legal representative: He Yong General Manager: Liu Xingming Chief Financial Officer: Tang Qionglan 3. Consolidated Income Statement Unit: RMB Item H1 2019 H1 2018 1. Revenue 1,687,184,660.86 2,064,779,289.99 Including: Operating revenue 1,687,184,660.86 2,064,779,289.99 Interest income Premium income Handling charge and commission income 2. Costs and expenses 1,529,073,323.52 1,796,559,951.51 59 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Including: Cost of sales 1,297,336,713.77 1,579,291,867.89 Interest expense Handling charge and commission expense Surrenders Net claims paid Net amount provided as insurance contract reserve Expenditure on policy dividends Reinsurance premium expense Taxes and surcharges 20,836,268.74 21,962,518.24 Selling expense 123,410,566.38 103,917,010.47 Administrative expense 67,537,179.69 85,530,538.74 R&D expense 29,860,632.61 18,943,492.78 Finance costs -9,908,037.67 -13,085,476.61 Including: Interest expense Interest income Add: Other income 5,523,870.00 1,018,385.17 Return on investment (“-” for loss) 43,839,659.74 24,509,870.36 Including: Share of profit or loss 784,711.98 179,781.56 of joint ventures and associates Income from the derecognition of financial assets at amortized cost (“-” for loss) Foreign exchange gain (“-” for loss) Net gain on exposure hedges (“-” for loss) Gain on changes in fair value (“-” -996,200.00 for loss) Credit impairment loss (“-” for -1,036,971.94 loss) Asset impairment loss (“-” for loss) -12,239,244.21 -16,006,869.83 60 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Asset disposal income (“-” for loss) 3. Operating profit (“-” for loss) 193,202,450.93 277,740,724.18 Add: Non-operating income 1,941,872.57 1,669,856.43 Less: Non-operating expense 478,391.97 191,749.42 4. Profit before tax (“-” for loss) 194,665,931.53 279,218,831.19 Less: Income tax expense 27,167,288.57 47,044,145.70 5. Net profit (“-” for net loss) 167,498,642.96 232,174,685.49 5.1 By operating continuity 5.1.1 Net profit from continuing 167,498,642.96 232,174,685.49 operations (“-” for net loss) 5.1.2 Net profit from discontinued operations (“-” for net loss) 5.2 By ownership 5.2.1 Net profit attributable to 167,275,725.75 229,277,455.82 owners of the Company as the parent 5.2.1 Net profit attributable to 222,917.21 2,897,229.67 non-controlling interests 6. Other comprehensive income, net of 61,635,887.65 -322,975,351.39 tax Attributable to owners of the Company 61,635,887.65 -322,975,351.39 as the parent 6.1 Items that will not be 61,621,709.81 reclassified to profit or loss 6.1.1 Changes caused by remeasurements on defined benefit pension schemes 6.1.2 Other comprehensive income that will not be reclassified to profit or loss under the equity method 6.1.3 Changes in the fair value of 61,621,709.81 investments in other equity instruments 6.1.4 Changes in the fair value of the company’s credit risks 6.1.5 Other 6.2 Items that will be reclassified to 14,177.84 -322,975,351.39 profit or loss 6.2.1 Other comprehensive 61 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 income that will be reclassified to profit or loss under the equity method 6.2.2 Changes in the fair value of investments in other debt obligations 6.2.3 Gain/Loss on changes in the fair value of available-for-sale financial -322,972,909.70 assets 6.2.4 Other comprehensive income arising from the reclassification of financial assets 6.2.5 Gain/Loss arising from the reclassification of held-to-maturity investments to available-for-sale financial assets 6.2.6 Allowance for credit impairments in investments in other debt obligations 6.2.7 Reserve for cash flow hedges 6.2.8 Differences arising from the translation of foreign 14,177.84 -2,441.69 currency-denominated financial statements 6.2.9 Other Attributable to non-controlling interests 7. Total comprehensive income 229,134,530.61 -90,800,665.90 Attributable to owners of the Company 228,911,613.40 -93,697,895.57 as the parent Attributable to non-controlling 222,917.21 2,897,229.67 interests 8. Earnings per share 8.1 Basic earnings per share 0.1195 0.1638 8.2 Diluted earnings per share 0.1195 0.1638 Where business combinations under common control occurred in the current period, the net profit achieved by the acquirees before the combinations was RMB0.00 , with the amount for last year being RMB0.00 . Legal representative: He Yong General Manager: Liu Xingming Chief Financial Officer: Tang Qionglan 62 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 4. Income Statement of the Company as the Parent Unit: RMB Item H1 2019 H1 2018 1. Operating revenue 1,635,659,167.96 2,004,288,444.76 Less: Cost of sales 1,284,411,581.81 1,587,394,320.53 Taxes and surcharges 17,949,984.61 17,214,406.11 Selling expense 114,023,284.09 91,117,192.72 Administrative expense 58,470,337.78 77,627,911.90 R&D expense 28,129,639.08 18,613,246.57 Finance costs -9,671,203.12 -12,655,059.12 Including: Interest expense Interest income Add: Other income 5,323,870.00 561,343.06 Return on investment (“-” for 44,169,887.94 21,037,840.32 loss) Including: Share of profit or 784,711.98 179,781.56 loss of joint ventures and associates Income from the derecognition of financial assets at amortized cost (“-” for loss) Net gain on exposure hedges (“-” for loss) Gain on changes in fair value (“-” -996,200.00 for loss) Credit impairment loss (“-” for -99,161.29 loss) Asset impairment loss (“-” for -11,804,419.91 -15,224,655.05 loss) Asset disposal income (“-” for loss) 2. Operating profit (“-” for loss) 178,939,520.45 231,350,954.38 Add: Non-operating income 1,748,491.88 1,572,451.59 Less: Non-operating expense 387,894.46 164,104.09 3. Profit before tax (“-” for loss) 180,300,117.87 232,759,301.88 Less: Income tax expense 22,896,024.86 32,947,939.09 4. Net profit (“-” for net loss) 157,404,093.01 199,811,362.79 63 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 4.1 Net profit from continuing 157,404,093.01 199,811,362.79 operations (“-” for net loss) 4.2 Net profit from discontinued operations (“-” for net loss) 5. Other comprehensive income, net of 61,621,709.81 -322,972,909.70 tax 5.1 Items that will not be reclassified 61,621,709.81 to profit or loss 5.1.1 Changes caused by remeasurements on defined benefit pension schemes 5.1.2 Other comprehensive income that will not be reclassified to profit or loss under the equity method 5.1.3 Changes in the fair value of 61,621,709.81 investments in other equity instruments 5.1.4 Changes in the fair value of the company’s credit risks 5.1.5 Other 5.2 Items that will be reclassified to -322,972,909.70 profit or loss 5.2.1 Other comprehensive income that will be reclassified to profit or loss under the equity method 5.2.2 Changes in the fair value of investments in other debt obligations 5.2.3 Gain/Loss on changes in the fair value of available-for-sale financial -322,972,909.70 assets 5.2.4 Other comprehensive income arising from the reclassification of financial assets 5.2.5 Gain/Loss arising from the reclassification of held-to-maturity investments to available-for-sale financial assets 5.2.6 Allowance for credit impairments in investments in other debt obligations 64 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 5.2.7 Reserve for cash flow hedges 5.2.8 Differences arising from the translation of foreign currency-denominated financial statements 5.2.9 Other 6. Total comprehensive income 219,025,802.82 -123,161,546.91 7. Earnings per share 7.1 Basic earnings per share 7.2 Diluted earnings per share Legal representative: He Yong General Manager: Liu Xingming Chief Financial Officer: Tang Qionglan 5. Consolidated Cash Flow Statement Unit: RMB Item H1 2019 H1 2018 1. Cash flows from operating activities: Proceeds from sale of commodities 1,751,423,769.24 1,769,237,743.67 and rendering of services Net increase in customer deposits and interbank deposits Net increase in borrowings from central bank Net increase in loans from other financial institutions Premiums received on original insurance contracts Net proceeds from reinsurance Net increase in deposits and investments of policy holders Interest, handling charges and commissions received Net increase in interbank loans obtained Net increase in proceeds from repurchase transactions Net proceeds for acting trading of 65 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 securities Tax rebates 48,922,234.35 47,287,499.42 Cash generated from other operating 45,162,461.57 33,545,832.35 activities Subtotal of cash generated from 1,845,508,465.16 1,850,071,075.44 operating activities Payments for commodities and 1,126,149,726.07 1,131,421,056.92 services Net increase in loans and advances to customers Net increase in deposits in central bank and in interbank loans granted Payments for claims on original insurance contracts Net increase in financial assets held for trading Net increase in interbank loans granted Interest, handling charges and commissions paid Policy dividends paid Cash paid to and for employees 322,785,746.27 339,556,840.55 Taxes paid 94,770,787.34 137,020,623.78 Cash used in other operating 111,120,372.00 97,348,775.81 activities Subtotal of cash used in operating 1,654,826,631.68 1,705,347,297.06 activities Net cash generated from/used in 190,681,833.48 144,723,778.38 operating activities 2. Cash flows from investing activities: Proceeds from disinvestment 6,000,000.00 660,000,000.00 Return on investment 48,172,890.30 34,539,472.29 Net proceeds from the disposal of fixed assets, intangible assets and other 40,834.00 long-lived assets Net proceeds from the disposal of subsidiaries and other business units Cash generated from other investing 66 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 activities Subtotal of cash generated from 54,213,724.30 694,539,472.29 investing activities Payments for the acquisition of fixed assets, intangible assets and other 18,563,706.98 90,700,439.05 long-lived assets Payments for investments 35,000,000.00 Net increase in pledged loans granted Net payments for the acquisition of subsidiaries and other business units Cash used in other investing 3,304,699.80 activities Subtotal of cash used in investing 53,563,706.98 94,005,138.85 activities Net cash generated from/used in 650,017.32 600,534,333.44 investing activities 3. Cash flows from financing activities: Capital contributions received Including: Capital contributions by non-controlling interests to subsidiaries Borrowings obtained Net proceeds from issuance of bonds Cash generated from other financing activities Subtotal of cash generated from financing activities Repayments of borrowings Payments for interest and dividends 218,298,000.02 405,163,764.00 Including: Dividends paid by subsidiaries to non-controlling interests Cash used in other financing activities Subtotal of cash used in financing 218,298,000.02 405,163,764.00 activities Net cash generated from/used in -218,298,000.02 -405,163,764.00 financing activities 4. Effect of foreign exchange rate -1,156,757.42 1,385,343.10 changes on cash and cash equivalents 67 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 5. Net increase in cash and cash -28,122,906.64 341,479,690.92 equivalents Add: Cash and cash equivalents, 795,285,756.38 570,184,208.96 beginning of the period 6. Cash and cash equivalents, end of the 767,162,849.74 911,663,899.88 period Legal representative: He Yong General Manager: Liu Xingming Chief Financial Officer: Tang Qionglan 6. Cash Flow Statement of the Company as the Parent Unit: RMB Item H1 2019 H1 2018 1. Cash flows from operating activities: Proceeds from sale of commodities 1,691,951,258.99 1,712,676,401.03 and rendering of services Tax rebates 48,910,795.69 47,263,864.23 Cash generated from other operating 34,052,232.29 26,388,452.49 activities Subtotal of cash generated from 1,774,914,286.97 1,786,328,717.75 operating activities Payments for commodities and 1,178,508,853.41 1,263,659,844.11 services Cash paid to and for employees 244,677,337.79 209,185,383.63 Taxes paid 65,955,849.88 87,060,201.23 Cash used in other operating 100,456,711.55 85,851,338.88 activities Subtotal of cash used in operating 1,589,598,752.63 1,645,756,767.85 activities Net cash generated from/used in 185,315,534.34 140,571,949.90 operating activities 2. Cash flows from investing activities: Proceeds from disinvestment 6,000,000.00 440,000,000.00 Return on investment 48,503,118.50 30,667,499.69 Net proceeds from the disposal of fixed assets, intangible assets and other 40,330.00 long-lived assets Net proceeds from the disposal of 68 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 subsidiaries and other business units Cash generated from other investing activities Subtotal of cash generated from 54,543,448.50 470,667,499.69 investing activities Payments for the acquisition of fixed assets, intangible assets and other 17,446,155.95 85,557,155.41 long-lived assets Payments for investments 35,000,000.00 Net payments for the acquisition of subsidiaries and other business units Cash used in other investing 3,304,699.80 activities Subtotal of cash used in investing 52,446,155.95 88,861,855.21 activities Net cash generated from/used in 2,097,292.55 381,805,644.48 investing activities 3. Cash flows from financing activities: Capital contributions received Borrowings obtained Net proceeds from the issuance of bonds Cash generated from other financing activities Subtotal of cash generated from financing activities Repayments of borrowings Payments for interest and dividends 218,298,000.02 405,163,764.00 Cash used in other financing activities Subtotal of cash used in financing 218,298,000.02 405,163,764.00 activities Net cash generated from/used in -218,298,000.02 -405,163,764.00 financing activities 4. Effect of foreign exchange rate -1,176,711.33 1,384,289.90 changes on cash and cash equivalents 5. Net increase in cash and cash -32,061,884.46 118,598,120.28 equivalents 69 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Add: Cash and cash equivalents, 747,588,730.42 502,169,100.40 beginning of the period 6. Cash and cash equivalents, end of the 715,526,845.96 620,767,220.68 period Legal representative: He Yong General Manager: Liu Xingming Chief Financial Officer: Tang Qionglan 7. Consolidated Statements of Changes in Owners’ Equity H1 2019 Unit: RMB H1 2019 Equity attributable to owners of the Company as the parent Other equity Other Non-c Total instruments Less: compr Surplu Retain ontroll Item Share Capital Specifi Genera owners Treasu ehensi s ed Subtot ing capita Prefe Perpe reserve c l Other ’ ry ve reserve earnin al interes l rred tual s reserve reserve equity share bond Other stock incom s gs ts s s e 1,399 1. Balances as 158,60 297,66 809,45 1,654, 4,319, 22,054 4,341, ,346, at the end of the 8,173. 7,872. 6,186. 181,03 259,41 ,862.9 314,28 154.0 prior year 07 80 20 2.39 8.46 3 1.39 0 Add: Adjustments for changed accounting policies Adjustments for corrections of previous errors Adjustments for business combinations under common control Other adjustments 2. Balances as 1,399 158,60 297,66 809,45 1,654, 4,319, 22,054 4,341, at the beginning ,346, 8,173. 7,872. 6,186. 181,03 259,41 ,862.9 314,28 70 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 of the year 154.0 07 80 20 2.39 8.46 3 1.39 0 3. Increase/ 61,635 -51,02 10,613 10,836 decrease in the 222,91 ,887.6 2,274. ,613.3 ,530.5 period (“-” for 7.21 5 27 8 9 decrease) 3.1 Total 61,635 167,27 228,91 229,13 222,91 comprehensive ,887.6 5,725. 1,613. 4,530. 7.21 income 5 75 40 61 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other -218,2 -218,2 -218,2 3.3 Profit 98,000 98,000 98,000 distribution .02 .02 .02 3.3.1 Appropriation to surplus reserves 3.3.2 Appropriation to general reserve 3.3.3 -218,2 -218,2 -218,2 71 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Appropriation 98,000 98,000 98,000 to owners (or .02 .02 .02 shareholders) 3.3.4 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used 72 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 in the period 3.6 Other 1,399 4. Balances as 158,60 359,30 809,45 1,603, 4,329, 22,277 4,352, ,346, at the end of the 8,173. 3,760. 6,186. 158,75 873,03 ,780.1 150,81 154.0 period 07 45 20 8.12 1.84 4 1.98 0 H1 2018 Unit: RMB H1 2018 Equity attributable to owners of the Company as the parent Other equity Other Non-co instruments Less: compr Surplu Retain ntrollin Total Item Share Capital Specifi Genera Treasu ehensi s ed Subtot g owners’ capita Prefe Perp reserve c l Other ry ve reserve earnin al interest equity l rred etual s reserve reserve Other share bond stock incom s gs s s s e 1,272 1. Balances as 285,82 716,60 772,95 1,731, 4,779, 4,799,6 ,132, 20,519, at the end of 1,459. 7,333. 3,002. 600,79 115,45 35,119. 868.0 660.40 the prior year 07 78 36 6.18 9.39 79 0 Add: Adjustments for changed accounting policies Adjustments for corrections of previous errors Adjustments for business combinations under common control Other adjustments 2. Balances as 1,272 285,82 716,60 772,95 1,731, 4,779, 4,799,6 at the ,132, 20,519, 1,459. 7,333. 3,002. 600,79 115,45 35,119. beginning of 868.0 660.40 07 78 36 6.18 9.39 79 the year 0 3. Increase/ 127,2 -127,2 -322,9 -189,2 -512,2 2,897,2 -509,33 73 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 decrease in the 13,28 13,286 75,351 54,257 29,609 29.67 2,379.4 period (“-” for 6.00 .00 .39 .75 .14 7 decrease) 3.1 Total -322,9 229,27 -93,69 2,897,2 -90,800 comprehensive 75,351 7,455. 7,895. 29.67 ,665.90 income .39 82 57 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other -418,5 -418,5 -418,53 3.3 Profit 31,713 31,713 1,713.5 distribution .57 .57 7 3.3.1 Appropriation to surplus reserves 3.3.2 Appropriation to general reserve 3.3.3 -418,5 -418,5 -418,53 Appropriation 31,713 31,713 1,713.5 to owners (or .57 .57 7 74 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 shareholders) 3.3.4 Other 3.4 Transfers 127,2 -127,2 within owners’ 13,28 13,286 equity 6.00 .00 3.4.1 Increase in 127,2 -127,2 capital (or 13,28 13,286 share capital) 6.00 .00 from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve 3.5.1 75 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Increase in the period 3.5.2 Used in the period 3.6 Other 1,399 4. Balances as 158,60 393,63 772,95 1,542, 4,266, 4,290,3 ,346, 23,416, at the end of 8,173. 1,982. 3,002. 346,53 885,85 02,740. 154.0 890.07 the period 07 39 36 8.43 0.25 32 0 Legal representative: He Yong General Manager: Liu Xingming Chief Financial Officer: Tang Qionglan 8. Statements of Changes in Owners’ Equity of the Company as the Parent H1 2019 Unit: RMB H1 2019 Other equity Other Retaine instruments Less: Total Item Share Capital compreh Specific Surplus d Treasury Other owners’ capital Preferr Perpet reserves ensive reserve reserves earning ed ual Other stock equity income s shares bonds 1. Balances as at 1,399,3 1,482,1 166,211, 297,672, 809,456, 4,154,851, the end of the 46,154. 64,706. 779.15 884.34 186.20 710.61 prior year 00 92 Add: Adjustments for changed accounting policies Adjustments for corrections of previous errors Other adjustments 2. Balances as at 1,399,3 1,482,1 166,211, 297,672, 809,456, 4,154,851, the beginning of 46,154. 64,706. 779.15 884.34 186.20 710.61 the year 00 92 3. Increase/ 61,621,7 -60,893 727,802.8 decrease in the 09.81 ,907.01 0 period (“-” for 76 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 decrease) 3.1 Total 157,40 61,621,7 219,025,8 comprehensive 4,093.0 09.81 02.82 income 1 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other -218,29 3.3 Profit -218,298,0 8,000.0 distribution 00.02 2 3.3.1 Appropriation to surplus reserves 3.3.2 -218,29 Appropriation to -218,298,0 8,000.0 owners (or 00.02 2 shareholders) 3.3.3 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from 77 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balances as at 1,399,3 1,421,2 166,211, 359,294, 809,456, 4,155,579, the end of the 46,154. 70,799. 779.15 594.15 186.20 513.41 period 00 91 H1 2018 Unit: RMB H1 2018 Other equity Other instruments Less: Total Item Share Capital compre Specific Surplus Retained Treasur Other owners’ capital Preferr Perpet reserves hensive reserve reserves earnings ed ual Other y stock equity income shares bonds 78 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 1. Balances as 1,272, 293,425 716,608 772,953 1,572,167 4,627,286,7 at the end of the 132,86 ,065.15 ,088.78 ,002.36 ,765.91 90.20 prior year 8.00 Add: Adjustments for changed accounting policies Adjustments for corrections of previous errors Other adjustments 2. Balances as 1,272, 293,425 716,608 772,953 1,572,167 4,627,286,7 at the beginning 132,86 ,065.15 ,088.78 ,002.36 ,765.91 90.20 of the year 8.00 3. Increase/ 127,21 -127,21 -322,97 decrease in the -218,720, -541,693,26 3,286. 3,286.0 2,909.7 period (“-” for 350.78 0.48 00 0 0 decrease) 3.1 Total -322,97 199,811,3 -123,161,54 comprehensive 2,909.7 62.79 6.91 income 0 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments 79 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 included in owners’ equity 3.2.4 Other 3.3 Profit -418,531, -418,531,71 distribution 713.57 3.57 3.3.1 Appropriation to surplus reserves 3.3.2 Appropriation -418,531, -418,531,71 to owners (or 713.57 3.57 shareholders) 3.3.3 Other 3.4 Transfers 127,21 -127,21 within owners’ 3,286. 3,286.0 equity 00 0 3.4.1 Increase in 127,21 -127,21 capital (or share 3,286. 3,286.0 capital) from 00 0 capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to retained earnings 3.4.5 Other comprehensive income 80 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 transferred to retained earnings 3.4.6 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balances as 1,399, 166,211, 393,635 772,953 1,353,447 4,085,593,5 at the end of the 346,15 779.15 ,179.08 ,002.36 ,415.13 29.72 period 4.00 Legal representative: He Yong General Manager: Liu Xingming Chief Financial Officer: Tang Qionglan III Company profile Foshan Electrical and Lighting Co., Ltd. (hereinafter referred to as “the Company”), a joint-stock limited company jointly founded by Foshan Electrical and Lighting Company, Nanhai Wuzhuang Color Glazed Brick Field, and Foshan Poyang Printing Industrial Co. on 20 October 1992 by raising funds under the approval of YGS (1992) No. 63 Document issued by the Joint Examination Group for Experimental Enterprises in Stock System of Guangdong Province and the Economic System Reform Commission of Guangdong Province, is an enterprise with its shares held by both the corporate and the natural persons. As approved by China Securities Regulatory Commission with Document (1993) No. 33, the Company publicly issued 19.3 million shares of social public shares (A shares) to the public in October 1993, and was listed in Shenzhen Stock Exchange for trade on 23 November 1993. The Company was approved to issue 50,000,000 B shares on 23 July 1995. And, as approved to change into a foreign-invested stock limited company on 26 August 1996 by (1996) WJMZEHZ No. 466 Document issued by the Ministry of Foreign Trade and Economic Cooperation of the People’s Republic of China. On 11 December 2000, as approved by China Securities Regulatory Commission with ZJGS Zi [2000] No. 175 Document, the Company additionally issued 55,000,000 A shares. At approved by the Shareholders’ General Meeting 2006, 2007, 2008, 2014 and 2017 the Company implemented the plan of capitalization of capital reserve, after the transfer, the registered capital of the Company has increased to RMB1,399,346,154.00. Credibility code of the Company: 91440000190352575W. Legal representative: Mr. He Yong Address: No. 64, Fenjiang North Road, Foshan, Guangdong Province Main business of the company and its subsidiaries (hereinafter referred to as “the Company”): lighting products and electro technical products. The business term of the Company is long-term, which was calculated from the date of issuance of License of Business Corporation. The Financial Report was approved and authorized for issue by the Board of Directors on XXX August 2019. 81 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 The consolidation scope of the financial statement during the Reporting Period including the Company and the 9 subsidiaries such as FSL Chanchang Optoelectronics Co., Ltd. ( referred to as “Chanchang Company”), Foshan Chansheng Electronic Ballast Co., Ltd. ( referred to as “Chansheng Company”), Foshan Taimei Times Lamps and Lanterns Co., Ltd. ( referred to as “Taimei Company”), Nanjing Fozhao Lighting Components Co., Ltd. ( referred to as “Nanjing Fozhao”), FSL (Xinxiang) Lighting Co., Ltd. ( referred to as “Xinxiang Company”), Foshan Electrical and Lighting New Light Source Technology Co., Ltd. ( referred to as “New Light Source Company”), Foshan Lighting Lamps & Components Co., Ltd. ( referred to as “Lamps & Components Company”) and FSL Zhida Electric Technology Co., Ltd ( referred to as “Zhida Electric Technology”), and FSL LIGHTING GmbH (referred to as “FSL LIGHTING”). The consolidation scope of the financial statements decreases one subsidiary that is Guangdong Fozhao Financial Leasing Co., Ltd. For details, see relevant contents in Note VIII “Changes in the consolidation scope”, and Note IX “Equities in other entities”. IV Basis for Preparation of Financial Statements 1. Preparation Basis The financial statements of the Company are based on the continuing operation, and are confirmed and measured according to the actual transactions and events, the Accounting Standards for Business Enterprises - Basic Standards, other various specific accounting standards, the application guide, the interpretation of accounting standards for business enterprises (hereinafter referred to as the Accounting Standards for Business Enterprises). And based on the following important accounting policies, and accounting estimations, they are prepared according to the relevant regulations of Rules for the Information Disclosure of Companies Publicly Issuing Securities No. 15 - General Provisions on Financial Reporting of China Securities Regulatory Commission (Revised in 2014). Except the Cash Flow Statement prepared under the principle of cash basis, the rest of financial statement of the Company are prepared under the principle of accrual basis. The Company didn’t find anything like being suspicious of the ability of continuing operation within 12 months from the end of the Reporting Period with all available information. 2. Continuation The Company has no matters affecting the continuing operation of the Company and is expected to have the ability to continue to operate in the next 12 months. The financial statements of the Company are prepared on the basis of continuing operation. V Important Accounting Policies and Estimations Reminders of the specific accounting policies and accounting estimations: The Company confirmed the specific accounting policies and estimations according to production and operation features, mainly reflecting in the method of provision for accounts receivables bad debt (Note 11. Account Receivables), pricing method of inventory (Note 15. Inventory), depreciation of fixed assets and amortization of intangible assets (Note 24. Fixed Assets and Note 30. Intangible Assets), and recognized time point of income (Note 39. Income), etc. 82 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 1. Statement of Compliance with the Accounting Standards for Business Enterprises The financial statements prepared by the Company are in compliance with the Accounting Standards for Business Enterprises, which factually and completely present the Company’s and the consolidated financial positions, business results and cash flows, as well as other relevant information. 2. Fiscal Period A fiscal year starts on January 1st and ends on December 31st according to the Gregorian calendar. 3. Operating Cycle An operating cycle for the Company is 12 months, which is also the classification criterion for the liquidity of its assets and liabilities. 4. Recording Currency Renminbi is the recording currency for the statements of the Company, and the financial statements are listed and presented by Renminbi. 5. Accounting Treatment Methods for Business Combinations under the Same Control or not under the Same Control 1. Business Combinations under the Same Control For the merger of enterprises under the same control, if the consideration of the merging enterprise is that it makes payment in cash, transfers non-cash assets or bear its debts, it shall, on the date of merger, regard the share of the book value among final controller’s consolidated financial statement of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets transferred as well as the book value of the debts borne by the merging party shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. If the consideration of the merging enterprise is that it issues equity securities, it shall, on the date of merger, regard the share of the book value among final controller’s consolidated financial statement of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The total face value of the stocks issued shall be regarded as the capital stock, while the difference between the initial cost of the long-term equity investment and total face value of the shares issued shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. 2. Business Combinations not under the Same Control The Company measured the paid assets as the consideration of business combination and liabilities happened or undertaken by fair value. The difference between fair value and its book value shall be included into the current losses and gains. The Company distributed combined cost on the purchasing date. The difference of the combination cost greater than the fair value of the identifiable net assets of the acquiree acquired is recognized as goodwill; the difference of the combination cost less than the fair value of the identifiable net assets of the acquiree acquired is included into current losses and gains. 83 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 As for the assets other than intangible assets acquired from the acquiree in a business combination (not limited to the assets which have been recognized by the acquiree), if the economic benefits brought by them are likely to flow into the Company and their fair values can be measured reliably, they shall be separately recognized and measured in light of their fair values; intangible asset whose fair value can be measured reliably shall be separately recognized as an intangible asset and shall measured in light of its fair value; As for the liabilities other than contingent liabilities acquired from the acquiree, if the performance of the relevant obligations is likely to result in any out-flow of economic benefits from the Company, and their fair values can be measured reliably, they shall be separately recognized and measured in light of their fair values; As for the contingent liabilities of the acquiree, if their fair values can be measured reliably, they shall separately recognized as liabilities and shall be measured in light of their fair values. 6. Methods for Preparing Consolidated Financial Statements 1. Principle of Determining the Scope of Consolidation The scope of consolidation of the consolidated financial statements of the Company is determined on the basis of control. Control means that the investors has the right to invest in the investee and enjoy a variable return through the participation of the relevant activities of the investee, and has the ability to use the power over the investee to affect the amount of its return. The Company includes the subsidiaries with actual right of control (including separate entity controlled by the Parent Company) into consolidated financial statements. 2. Principles, Procedures and Methods for the Preparation of Consolidated Statements (1) Principles, Procedures and Methods for the Preparation of Consolidated Statements All subsidiaries included into the scope of consolidated financial statements adopted same accounting policies and fiscal year with the Company. If the accounting policies and fiscal year of the subsidiaries are different to the Company’s, necessary adjustment should be made in accordance with the Company’s accounting policies and fiscal year when consolidated financial statements are prepared. The consolidated financial statements are based on the financial statements of the Parent Company and subsidiaries included into the consolidated scope. The consolidated financial statements are prepared by the Company who makes adjustment to long-term equity investment to subsidiaries by equity method according to other relevant materials after the offset of the share held by the Parent Company in the equity capital investment of the Parent Company and owner’s equity of subsidiaries and the significant transactions and intrabranch within the Company. For the balance formed because the current loss shared by the minority shareholders of the subsidiary is more than the share enjoyed by the minority shareholders of the subsidiary in the initial shareholders’ equity, if the Articles of Corporation or Agreement didn’t stipulate that minority shareholders should be responsible for it, then the balance need to offset the shareholders’ equity of the Company; if the Articles of Corporation or Agreement stipulated that minority shareholders should be responsible for it, then the balance need to offset the minority shareholders’ equity. (2) Treatment Method of Increasing or Disposing Subsidiaries during the Reporting Period During the Reporting Period, if the subsidiaries were added due to Business combinations under the same control, then initial book balance of consolidated balance sheet need to be adjusted; the income, expenses, and profits of subsidiaries from the combination’s period-begin to the end of the reporting period need to be included into consolidated income statement; the cash flow of subsidiaries from the combination’s period-begin to the end of the reporting period need to be included into consolidated cash flow statement. if the subsidiaries were added due to Business combinations not under the same control, then initial book balance of consolidated balance sheet 84 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 doesn’t need to be adjusted; the income, expenses, and profits of subsidiaries from the purchasing date to the end of the reporting period need to be included into consolidated income statement; the cash flow of subsidiaries from purchasing date to the end of the reporting period need to be included into consolidated cash flow statement. During the Reporting Period, if the Company disposed the subsidiaries, then the income, expenses, and profits of subsidiaries from period-begin to the disposal date need to be included into consolidated income statement; the cash flow of subsidiaries from period-begin to the disposal date need to be included into consolidated cash flow statement. 7. Classification of Joint Arrangements and Accounting Treatment of Joint Operations A joint arrangement refers to an arrangement jointly controlled by two participants or above and be divided into joint operations and joint ventures. When the Company is the joint venture party of the joint operations, should recognize the following items related to the interests share of the joint operations: (1) Recognize the assets individually held and the assets jointly held by recognizing according to the holding share; (2) Recognize the liabilities undertook individually and the liabilities jointly held by recognizing according to the holding share; (3) Recognize the revenues occurred from selling the output share of the joint operations enjoy by the Company; (4) Recognize the revenues occurred from selling the assets of the joint operations according to the holding share; (5) Recognize the expenses individually occurred and the expenses occurred from the joint operations according to the holding share of the Company. When the Company is the joint operation party of the joint ventures, should recognize the investment of the joint ventures as the long-term equity investment and be measured according g to the said methods of the notes of the long-term equity investment of the financial statement. 8. Recognition Standard for Cash and Cash Equivalents In the Company’s understanding, cash and cash equivalents include cash on hand, any deposit that can be used for cover, and short-term (usually due within 3 months since the day of purchase) and high circulating investments, which are easily convertible into known amount of cash and whose risks in change of value are minimal. 9. Foreign Currency and Accounting Method for Foreign Currency 1. Foreign Currency Business Foreign currency shall be recognized by employing systematic and reasonable methods, and shall be translated into the amount in the functional currency at the exchange rate which is approximate to the spot exchange rate of the transaction date. On the balance sheet date, the foreign currency monetary items shall be translated at the spot exchange rate. The balance of exchange arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date shall be recorded into the profits and losses at the current period except that the balance of exchange arising from foreign currency borrowings for the purchase and construction or production of qualified assets shall be capitalized. The foreign currency non-monetary items measured at the historical cost shall still be translated at the spot exchange rate on the transaction date. 85 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 2. Translation of Foreign Currency Financial Statements The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date. Among the owner’s equity items, except for the items as “undistributed profits”, other items shall be translated at the spot exchange rate at the time when they are incurred. The revenues and the expenses items of the income statement should be translated according to the spot rate on the exchange date. The difference of the foreign currency financial statements occurred from the above translation should be listed under the “other comprehensive income” item of the owners’ equity of the consolidated financial statement. As for the foreign currency items which actually form into the net investment of the foreign operation, the exchange difference occurred from the exchange rate changes should be listed under the “other comprehensive income” of the owners’ equity among the consolidated financial statement when compile the consolidated financial statement. When disposing the foreign operation, as for the discounted difference of the foreign financial statement related to the foreign operation should be transferred in the current gains and losses according to the proportion. The foreign cash flow adopts the spot exchange rate on the occurring date of the cash flow. And the influenced amount of the exchange rate changes should be individually listed among the cash flow statement. 10. Financial Instruments (Applicable from January 1,2019) Financial instruments refer to the contracts that constitute a company’s financial assets and the financial liabilities or equity instruments of other units. Recognition and derecognition of financial instruments When the Company becomes a party to a financial instrument, it shall recognize a financial asset or financial liability. A financial asset (or part of a financial asset or part of a group of similar financial assets) that meets the following conditions should be derecognized, or in other words, be written off from its account and balance sheet: 1) The right to receive cash flow from the financial asset has expired; 2) The right to receive cash flow from the financial asset has been transferred, or the “transfer” agreement specifies the obligation to duly pay the full amount of cash flow received to a third party; and (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. A financial liability that has been fulfilled, canceled or expired should be derecognized. If a financial liability is replaced with another financial liability by the same creditor on almost entirely different terms materially, or the terms for an existing liability have been almost fully revised materially, such replacement or revision should be treated as derecognition of the original liability and recognition of the new liability, and the difference should be included into current profits/losses. A financial asset traded in a conventional manner should be recognized and derecognized by trade-date accounting. The trading of financial assets in a conventional manner means that financial assets are received or delivered by the deadline as specified in regulations or general practice according to contract provisions. Trade date refers to the date committed by the Company to buy or sell a financial asset. Classification and measurement of financial assets The Company classifies the financial assets when initially recognized into financial assets measured at amortized cost, financial assets measured by the fair value and the changes recorded in other comprehensive income and financial assets at fair value through profit or loss based on the business model for financial assets management and characteristics of contractual cash flow of financial assets. Financial assets initially recognized shall be 86 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 measured at their fair values. For accounts receivable and notes receivable excluding major financing or without regard to financing over one year generated from ales of commodities or provision of labor services, the initial measurement shall be conducted based on the transaction price. For financial assets at fair value through profit or loss, the transaction expenses thereof shall be directly included into the current profit or loss; for other financial assets, the transaction expenses thereof shall be included into the initially recognized amount. The subsequent measurement of financial assets depends on the classification thereof: Debt instrument investments measured at amortized cost Financial assets meeting the following conditions at the same time shall be classified as financial assets measured at amortized cost: the business mode of the Company to manage such financial assets targets at collecting the contractual cash flow. The contract of such financial assets stipulates that the cash flow generated in the specific date is the payment of the interest based on the principal and outstanding principal amount. The interest income for this kind of financial assets shall be recognized by effective interest method, and the gains or losses generated from the derecognition, modification or impairment shall all be included into the current profit or loss. This kind of financial assets mainly consist of monetary capital, accounts receivable and notes receivable, other receivables, investments in debt obligations and long-term receivables. The Company presents the investments in debt obligations due within one year since the balance sheet date and long-term receivables as current portion of non-current assets and the original investments in debt obligations with maturity date within one year as other current assets. Investments in debt instruments measured at fair value and changes thereof recorded into other comprehensive income Financial assets meeting the following conditions at the same time shall be classified as financial assets measured at fair value and changes thereof recorded into other comprehensive income: the business mode of the Company to manage such financial assets takes contract cash flow collected as target and selling as target. The contract of such financial assets stipulates that the cash flow generated in the specific date is the payment of the interest based on the principal and outstanding principal amount. The interest income for this kind of financial assets shall be recognized by effective interest method. All changes in fair value should be included into other comprehensive income except for interest income, impairment losses and exchange differences, which should be recognized as current profits/losses. When a financial asset is derecognized, the cumulative gains or losses included into other comprehensive income previously should be transferred out and included into current profits/losses. Such financial assets should be presented as other credit investments. Other credit investments that will mature within one year from the date of balance sheet should be presented as non-current assets due within one year, and other credit investments with the original maturity date coming within one year should be presented as other current assets. Equity instrument investment measured at fair value with changes included into other comprehensive income The Company irrevocably chooses to designate part of non-trading equity instrument investments as financial assets measured at fair value with changes included into other comprehensive income. Only related dividend income (excluding the dividend income confirmed to be recovered as part of investment costs) will be recognized into current profits/losses, while subsequent changes in fair value will be recognized into other comprehensive income without the withdrawal of impairment provisions required. When a financial asset is derecognized, the cumulative gains or losses included into other comprehensive income previously should be recognized into retained earnings. Such financial assets should be presented as other equity investments. A financial asset that meets one of the following conditions is classified as a trading financial asset: The financial asset has been acquired in order to be sold or repurchased in the near future; the financial asset is part of an 87 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 identifiable financial instrument portfolio under centralized management, and there is evidence proving that the company has recently adopted a short-term profit model; it is a derivative instrument, but derivative instruments that are designated as and are effective hedging instruments and those conforming with financial guarantee contracts are excluded. Financial assets at fair value through profit or loss The Company classifies financial assets except for above-mentioned financial assets measured with amortized cost and financial assets measured with fair value whose change is included into other comprehensive income into financial assets at fair value through profit or loss. The subsequent measurement of such kind of financial assets shall be conducted by fair value method and all changes in fair value shall be recorded into the current profit or loss. Such financial assets shall be presented as trading financial assets, and those will due over one year since the balance sheet date and expectedly held over one year shall be presented as other non-current financial assets. Classification and measurement of financial liabilities The Company’s financial liabilities are, on initial recognition, classified into financial liabilities at fair value through profit or loss, other financial liabilities and derivative instruments designated as effective hedging instruments. For financial liabilities at fair value through profit or loss, relevant transaction costs are immediately recognized in profit or loss for the current period, and transaction costs relating to other financial liabilities are included in the initial recognition amounts. The subsequent measurement of financial liabilities depends on the classification thereof: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include trading financial liabilities (including the derivative instruments belonging to financial liabilities) and financial liabilities designated at the initial recognition to be measured by the fair value and their changes are recorded in the current profit or loss. A financial liability that meets one of the following conditions is classified as a trading financial liability: The financial liability has been undertaken in order to be sold or repurchased in the near future; the financial liability is part of an identifiable financial instrument portfolio under centralized management, and there is evidence proving that the company has recently adopted a short-term profit model; it is a derivative instrument, but derivative instruments that are designated as and are effective hedging instruments and those conforming with financial guarantee contracts are excluded. Trading financial liabilities (including derivative instruments classified as financial liabilities) should be subsequently measured at fair value, and all changes in fair value should be recorded into current profits/losses, except for those related to hedging accounting. Other financial liabilities For such kind of financial liabilities, the subsequent measurement shall be conducted by effective interest method based on the amortized cost. Impairment of financial instruments Based on expected credit losses, the Company carries out impairment treatment on financial assets measured at amortized cost and debt instrument investments measured at fair value with changes included into other comprehensive income, rental receivables, contract assets and financial assets and recognizes provisions for losses. Credit losses refer to the difference between all contract cash flows discounted by the original actual interest rate receivable according to contracts and all cash flows expected to be received by the Company, which is the present value of all cash shortfalls. The financial assets purchased by or originating from the Company with credit impairment should be discounted by the actual interest rate of the financial assets after credit adjustment. In respect of receivable accounts and contract assets that do not contain significant financing components, the Company uses the simplified measurement method to measure provisions for losses by the amount equivalent to 88 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 the expected credit losses of the whole duration. In respect of receivable accounts and contract assets that contain significant financing components, the Company opts to use the simplified measurement method to measure provisions for losses by the amount equivalent to the expected credit losses for the whole duration. For other financial assets and financial guarantee contracts than the above using the simplified measurement method, the Company on the balance sheet date assesses whether their credit risks have increased substantially since the initial recognition. If the credit risks have not increased substantially since the initial recognition and are in the first stage, the Company will measure provisions for losses by the amount equivalent to the expected credit losses for the next 12 months and calculate interest income by the book balance and the actual interest rate; if the credit risks have increased obviously without credit impairment since the initial recognition and are in the second stage, the Company will measure provisions for losses by the amount equivalent to the expected credit losses for the whole duration and calculate interest income by the book balance and the actual interest rate; if the credit risks have increased substantially with credit impairment since the initial recognition and are in the third stage, the Company will measure provisions for losses by the amount equivalent to the expected credit losses for the whole duration and calculate interest income by the amortized cost and the actual interest rate. For financial instruments with only low credit risks on the balance sheet date, the Company assumes that their credit risks have not increased substantially since the initial recognition. The Company 1) assesses expected credit losses of financial assets with credit impairment based on individual items; 2) assesses expected credit losses of financial assets that are not derecognized but with changes in contract cash flows due to revision of or renegotiation on contracts by the Company and the counterparty, based on individual items; 3) assesses expected credit losses of other financial assets based on age combination. The Company considers related past matters, current conditions, the reasonableness of the forecast on future economic conditions and well-founded information when assessing expected credit losses. The Company’s information of the judgment standards for remarkable increase in credit risks, definition of assets with incurred credit impairment and assumption of measurement on expected credit losses is disclosed in this Note. When no longer reasonably expects to recover all or partial contractual cash flow of financial assets, the Company directly writes down the carrying amount of the financial assets. Financial instruments offset a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet when the following conditions are met at the same time: When the Company has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously. Financial guarantee contract A financial guarantee contract refers to a contract in which a specific debtor shall compensate the contract holder suffering the losses when the debtor is unable to repay the debt in due course according to the debt instrument terms. Financial guarantee contracts are measured at fair value at the initial recognition. After the initial recognition, all financial guarantee contracts should be subsequently measured by the higher amount between the amount of provisions for expected credit losses recognized on the balance sheet date and the balance of the initially recognized amount deducting the cumulative amortization recognized according to the income recognition principle, except for the financial guarantee contracts designated as financial liabilities measured at fair value with changes recorded into current profits/losses. Derivative financial instruments The Company uses derivative financial instruments, which are initially measured at the fair value on the signature 89 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 date of the derivative transaction contract and subsequently measured at their fair value. A derivative financial instrument with a positive fair value is recognized as an asset and that with a negative fair value is recognized as a liability. Gains or losses from changes in the fair value of derivative instruments are directly recognized into current profits/losses. Revision of financial assets For the financial assets that are not derecognized but with changes in contract cash flows due to revision of or renegotiation on contracts by the Company and the counterparty, the Company recalculates the book balance of the financial assets according to the renegotiated or revised contract cash flows by the discounted value of the original actual interest rate (or the actual interest rate after credit adjustment). Relevant gains or losses are recorded into current profits/losses. Costs or expenses for the revision of financial assets are adjusted to the revised book balance of financial assets and amortized in the remaining period of the revised financial assets. Transfer of financial assets As for the Company transferred nearly all of the risks and rewards related to the ownership of a financial asset to the transferee, should derecognize the financial assets; as for maintained nearly all of the risks and rewards related to the ownership of a financial asset, should continue to recognize the transferred financial assets. Where the Company does not transfer or retain nearly all of the risks and rewards related to the ownership of a financial asset, it shall deal with it according to the circumstances as follows, respectively: (1) If it gives up its control over the financial asset, it shall stop recognizing the financial asset and recognize the assets and liabilities generated; (2) If it does not give up its control over the financial asset, it shall, according to the extent of its continuous involvement in the transferred financial asset, recognize the related financial asset and recognize the relevant liability accordingly. 11. Notes Receivable Category Accounting estimate policy Bank’s acceptance bill The Company evaluates that the portfolio has relatively low credit risks, and generally no provision for impairment is made. 12. Accounts Receivable The Company withdraws the impairment loss for accounts receivable excluding significant financing component with the simplified method. 1) Accounts Receivable with Significant Single Amount for which the Bad Debt Provision is Made Individually Definition or amount criteria for an account receivable Top five accounts receivable with the largest balances or with a significant single amount accounts accounting for over 10% of the total balance of receivables. Making separate bad-debt provisions for accounts For an account receivable with a significant single 90 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 receivable with a significant single amount amount, the impairment test shall be carried out on it separately. If there is any objective evidence of impairment, the impairment loss is recognized and the bad-debt provision is made according to the difference between the present value of the account receivable’s future cash flows and its carrying amount. 2) Accounts Receivable for which the Bad Debt Provision is Withdrawn by Credit Risk Characteristics Group name Withdrawal method of bad debt provision Common transaction group Aging analysis method Internal transaction group Other methods In the groups, those adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Aging Withdrawal proportion of accounts Withdrawal proportion of other receivable receivables Within 1 year (including 1 year) 3.00% 3.00% 1 to 2 years 10.00% 10.00% 2 to 3 years 30.00% 30.00% 3 to 4 years 50.00% 50.00% 4 to 5 years 80.00% 80.00% Over 5 years 100.00% 100.00% In the groups, those adopting balance percentage method to withdraw bad debt provision □ Applicable √ Not applicable In the groups, those adopting other methods to withdraw bad debt provision: □ Applicable √ Not applicable 3) Accounts Receivable with an Insignificant Single Amount but for which the Bad Debt Provision is Made Independently Reason of individually withdrawing bad debt provision There are definite evidences indicate the obvious difference of thee return ability 91 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Withdrawal method for bad debt provision Recognizing the impairment loss and withdrawing the bad debt provision according to the difference between the present value of the account receivable’s future cash flows and its carrying amount. 13. Financing Backed by Accounts Receivable Not applicable 14. Other Receivables Recognition method and accounting treatment for expected credit losses of other receivables Refer to Note 10 for details about the recognition method and accounting treatment for expected credit losses of other receivables since 1 January 2019. 15. Inventories Is the Company subject to any disclosure requirements for special industries? No. 1. Classification of Inventory Inventory refers to finished products, goods in process, and materials consumed in the production process or the provision of labor services held by the Company for sale in daily activities, mainly including raw materials, goods in process, materials in transit, finished products, commodities, turnover materials, and commissioned processing materials. Turnover materials include low-value consumables and packaging. 2. Pricing Method of Inventory Sent Out The inventory is valued at actual cost when acquired, and inventory costs include procurement costs, processing costs and other costs. The weighted average method is used when receiving or sending out inventory. 3. Basis for Determining the Net Realizable Value of Inventory and the Method of Withdrawal for Inventory Impairment Net realizable value refers to the estimated selling price of the inventory minus the estimated cost to be incurred at the time of completion, the estimated selling expenses and the relevant taxes and fees in daily activities. In determining the net realizable value of inventory, the conclusive evidence obtained is used as the basis and the purpose of holding the inventory and the impact of the events after the balance sheet date should be taken into account. For finished products, the materials used for sale and other goods used for direct sale, the net realizable value is determined by the estimated selling price of the inventory minus the estimated selling expenses and related taxes in the process of normal production and operation. For materials inventory needs to be processed, the net realizable value is determined by the estimated selling price of the finished products minus the estimated cost to be incurred, the estimated sales costs and the relevant taxes and fees in the process of normal production and operation. 4. Inventory System The inventory system of the Company is perpetual inventory. 92 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 5. Amortization Method of Turnover Materials Low-value consumables are amortized in one-off method. The packaging is amortized in one-off method. 16. Contract Assets Not applicable 17. Contract Costs Not applicable 18. Assets Held for Sale 1. Assets Held for Sale When a company relies mainly on selling (including the exchanges of non-monetary assets with commercial substance) instead of continuing to use a non-current asset or disposal group to recover its book value, the non-current asset or disposal group is classified as asset held for sale. The non-current assets mentioned above do not include investment properties that are subsequently measured by the fair value model, biological assets measured by fair value less net selling costs, assets formed from employee remuneration, financial assets, deferred income tax assets and rights generated from insurance contracts. Disposal group refers to a group of assets that are disposed of together as a whole through sale or other means in a transaction, and the liabilities directly related to these assets transferred in the transaction. In certain circumstances, the disposal group includes goodwill obtained in business combination. The Company recognizes non-current assets or disposal groups that meet both of the following conditions as held for sale: ① Assets or disposal groups can be sold immediately under current conditions based on the practice of selling such assets or disposal groups in similar transactions; ② Sales are highly likely to occur, that is, the Company has already made a resolution on a sale plan and obtained a certain purchase commitment, and the sale is expected to will be completed within one year, and the sale has been approved if relevant regulations require relevant authority or regulatory authority of the Company to approve it. Non-current assets or disposal groups specifically obtained by the Company for resale will be classified by the Company as a held-for-sale category on the acquisition date when they meet the stipulated conditions of “expected to be sold within one year” on the acquisition date, and may well satisfy the category of held-for-sale within a short time (which is usually 3 months). If one of the following circumstances cannot be controlled by the Company and the transaction between non-related parties fails to be completed within one year, and there is sufficient evidence that the Company still promises to sell the non-current assets or disposal groups, the Company should continue to classify the non-current assets or disposal groups as held-for-sale: ①The purchaser or other party unexpectedly sets conditions that lead to extension of the sale. The Company has already acted on these conditions in a timely manner and it is expected to be able to successfully deal with the conditions that led to the extension of the sale within one year after the conditions were set. ②Due to unusual circumstances, the non-current assets or disposal groups held for sale failed to be sold within one year. In the first year, the Company has taken necessary measures for these new conditions and the assets or disposal groups meet the conditions of held-for-sale again. If the Company loses control of a subsidiary due to the sale of investments to its subsidiaries, whether or not the Company retains part of the equity investment after the sale, when the proposed sale of the investment to the 93 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 subsidiary meets the conditions of held- for-sale, the investment to the subsidiary will be classified as held-for-sale in the individual financial statement of the parent company, and all the assets and liabilities of the subsidiary will be classified as held-for-sale in the consolidated financial statement. When the company initially measures or re-measures non-current assets or disposal groups held for sale on the balance sheet date, if the book value is higher than the fair value minus the net amount of the sale costs, the book value will be written down to the net amount of fair value minus the sale costs, and the amount written down will be recognized as impairment loss of assets and included in the current profit and loss, and provision for impairment of held-for-sale assets will be made. For the confirmed amount of impairment loss of assets of the disposal groups held for sale, the book value of goodwill of the disposal groups will be offset first, and then the book value of various non-current assets in the disposal groups will be offset according to the proportions. If the net amount that the fair value of the non-current assets or disposal groups held for sale on the follow-up balance sheet date minus the sale costs increases, the previous written-down amount will be restored, and reversed to the asset impairment loss confirmed after the assets being classified as held-for-sale. The reversed amount will be included in the current profit or loss. The book value of goodwill that has been deducted cannot be reversed. Non-current assets held for sale or non-current assets in the disposal group are not subject to depreciation or amortization. Interest and other expenses of liabilities in the disposal group held for sale will be confirmed as before. When a non-current asset or disposal group ceases be classified as held-for-sale or a non-current asset is removed out from the held-for-sale disposal group due to failure in meeting the classification conditions for the category of held-for-sale, it will be measured by one of the followings whichever is lower: ① The book value before being classified as held for sale will be adjusted according to the depreciation, amortization or impairment that would have been recognized under the assumption that it was not classified as held for sale; ② The recoverable amount. 2. Termination of Operation Termination of operation refers to a separately identifiable constituent part that satisfies one of the following conditions that has been disposed of by the Company or is classified as held-for-sale: (1) This constituent part represents an independent main business or a separate main business area. (2) This constituent part is part of an associated plan that is intended to be disposed of in an independent main business or a separate major business area. (3) This constituent part is a subsidiary that is specifically acquired for resale. 3. Presentation In the balance sheet, the Company distinguishes the non-current assets held for sale or the assets in the disposal group held for sale separately from other assets, and distinguish the liabilities in the disposal group held for sale separately from other liabilities. The non-current assets held for sale or the assets in the disposal group held for sale are not be offset against the liabilities in the disposal group held for sale. They are presented as current assets and current liabilities respectively. The Company lists profit and loss from continuing operations and profit and loss from operating profits in the income statement. For the termination of operations for the current period, the Company restates the information originally presented as profit or loss of continuing operation in the current financial statements to profit or loss of termination of the comparable accounting period. If the termination of operation no longer meets the conditions of held-for-sale, the Company restates the information originally presented as a profit and loss of termination in the current financial statements to profit or loss of continuing operation of the comparable accounting period. 94 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 19. Investments in Debt Obligations Not applicable 20. Other Investments in Debt Obligations Not applicable 21. Long-term Receivables Not applicable 22. Long-term Equity Investments Long-term equity investment refers to the Company’s long-term equity investment with control, joint control or significant influence on the investee. The long-term equity investment of the Company which has no control, joint control or significant influence on the investee is accounted for as financial assets available-for-sale or financial assets at fair value and changes recognized in profit or loss for the current period. For details of accounting policies, please refer to 10. Financial instruments in Notes V. Joint control refers to the control that is common to an arrangement in accordance with the relevant agreement, and the relevant activities of the arrangement must be agreed upon by the participant who has shared the control. Significant influence refers to the Company has the power to participate in decision-making on the financial and operating policies of the investee, but can’t control or jointly control the formulation of these policies with other parties. 1. Investment Cost Recognition for Long-term Equity Investments (1) For the merger of enterprises under the same control, it shall, on the date of merger, regard the share of the book value of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment, and the direct relevant expenses occurred for the merger of enterprises shall be included into the profits and losses of the current period. (2) For the merger of enterprises not under the same control, The combination costs shall be the fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equity securities issued by the Company in exchange for the control on the acquiree, and all relevant direct costs incurred to the acquirer for the business combination. Where any future event that is likely to affect the combination costs is stipulated in the combination contract or agreement, if it is likely to occur and its effects on the combination costs can be measured reliably, the Company shall record the said amount into the combination costs. (3) The cost of a long-term equity investment obtained by making payment in cash shall be the purchase cost which is actually paid. The cost consists of the expenses directly relevant to the obtainment of the long-term equity investment, taxes and other necessary expenses. (4) The cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. (5) The cost of a long-term investment obtained by the exchange of non-monetary assets (having commercial nature) shall be recognized base on taking the fair value and relevant payable taxes as the cost of the assets received. (6) The cost of a long-term equity investment obtained by recombination of liabilities shall be recognized at the fair value. 95 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 2. Subsequent Measurement of Long-term Equity Investment and Recognized Method of Profit/Loss The long-term equity investment with joint control (except for the common operator) or significant influence on the investee is accounted by equity method. In addition, the Company's financial statements use cost method to calculate long-term equity investments that can control the investee. (1) Long-term Equity Investment Accounted by Cost Method When the cost method is used for accounting, the long-term equity investment is priced at the initial investment cost, and the cost of the long-term equity investment is adjusted according to additional investment or recovered investment. Except the price actually paid when acquired investment or cash dividends or profits that have been declared but not yet paid included in the consideration, current investment income is recognized by the cash dividends or profits declared by the investee. (2) Long-term Equity Investment Accounted by Equity Method When the equity method is used for accounting, if the initial investment cost of the long-term equity investment is greater than the fair value of the investee’s identifiable net assets, the initial investment cost of the long-term equity investment shall not be adjusted; if the initial investment cost is less than the fair value of the investee’s identifiable net assets, the difference shall be recorded into the current profits and losses, and the cost of the long-term equity investment shall be adjusted at the same time. When the equity method is used for accounting, the investment income and other comprehensive income shall be recognized separately according to the net profit or loss and other comprehensive income realized by the investee, and the book value of the long-term equity investment shall be adjusted at the same time. The part entitled shall be calculated according to the profits or cash dividends declared by the investee, and the book value of the long-term equity investment shall be reduced accordingly. For other changes in the owner’s equity other than the net profit or loss, other comprehensive income and profit distribution of the investee, the book value of the long-term equity investment shall be adjusted and included in the capital reserve. When the share of the net profit or loss of the investee is recognized, the net profit of the investee shall be adjusted and recognized according to the fair value of the identifiable assets of the investee when the investment is made. If the accounting policies and accounting periods adopted by the investee are inconsistent with the Company, the financial statements of the investee shall be adjusted according to the accounting policies and accounting periods of the Company and the investment income and other comprehensive income shall be recognized accordingly. For the transactions between the Company and associates and joint ventures, if the assets made or sold don’t constitute business, the unrealized gains and losses of the internal transactions are offset by the proportion attributable to the Company, and the investment gains and losses are recognized accordingly. However, the loss of unrealized internal transactions incurred by the Company and the investee attributable to the impairment loss of the transferred assets shall not be offset. If the assets made to associates or joint ventures constitute business, and the investor makes long-term equity investment but does not obtain the control, the fair value of the investment shall be taken as the initial investment cost of the new long-term equity investment, and the difference between initial investment and the book value of the investment is fully recognized in profit or loss for the current period. If the assets sold by the Company to joint ventures or associates constitute business, the difference between the consideration and the book value of the business shall be fully credited to the current profits and losses. If the assets purchased by Company from joint ventures or associates constitute business, conduct accounting treatment in accordance with the provisions of Accounting Standard for Business Enterprises No. 20 - Business combination, and the profits or losses related to the transaction shall be recognized in full. When the net loss incurred by the investee is recognized, the book value of the long-term equity investment and other long-term equity that substantially constitute the net investment in the investee shall be written down to zero. 96 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 In addition, if the Company has an obligation to bear additional losses to the investee, the estimated liabilities are recognized in accordance with the obligations assumed and included in the current investment losses. If the investee has realized net profit in later period, the Company will resume the recognition of the income share after the income share has made up the unrecognized loss share. (3) Acquisition of Minority Interests In the preparation of the consolidated financial statements, capital reserve shall be adjusted according to the difference between the long-term equity investment increased due to the purchase of minority interests and the share of the net assets held by the subsidiary from the date of purchase (or the date of combination) calculated according to the proportion of the new shareholding ratio, and retained earnings shall be adjusted if the capital reserve is insufficient to offset. (4) Disposal of Long-term Equity Investment In the consolidated financial statements, the parent company partially disposes of the long-term equity investment in the subsidiary without the loss of control, and the difference between the disposal price and the net assets of the subsidiary corresponding to the disposal of the long-term equity investment is included in the shareholders’ equity. If the disposal of long-term equity investment in subsidiaries results in the loss of control over the subsidiaries, handle in accordance with the relevant accounting policies described in 6(2). “Principles, Procedures and Methods for the Preparation of Consolidated Statements” in Notes V . In other cases, the difference between the book value and the actual acquisition price shall be recorded into the current profits and losses for the disposal of the long-term equity investment. For long-term equity investment accounted by the equity method and residual equity after disposal still accounted by the equity method, other comprehensive income originally included in the shareholders’ equity shall be treated in the same basis of the investee directly disposing related assets or liabilities by corresponding proportion. The owner’s equity recognized by the change of the owner’s equity of the investee other than the net profit or loss, other comprehensive income and profit distribution is carried forward proportionally into the current profits and losses. For long-term equity investment accounted by the cost method and residual equity after disposal still accounted by the cost method, other comprehensive income accounted by equity method or recognized by financial instrument and accounted and recognized by measurement criteria before the acquisition of the control over the investee is treated in the same basis of the investee directly disposing related assets or liabilities, and carried forward proportionately into the current profits and losses. Other changes of owner’s equity in net assets of the investee accounted and recognized by the equity method other than the net profit or loss, other comprehensive income and profit distribution are carried forward proportionally into the current profits and losses. 3. Impairment Provisions for Long-term Equity Investments For the relevant testing method and provision making method, see 31. Impairment of Long-term Assets in Notes V herein. 23. Investment Property Measurement mode of investment property Not applicable 97 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 24. Fixed Assets (1) Recognition Conditions Fixed assets of the Company refers to the tangible assets that simultaneously possess the features as follows: they are held for the sake of producing commodities, rendering labor service, renting or business management; and their useful life is in excess of one accounting year and unit price is higher. No fixed assets may be recognized unless it simultaneously meets the conditions as follows: ① The economic benefits pertinent to the fixed asset are likely to flow into the Company; and ② The cost of the fixed asset can be measured reliably. (2) Depreciation Method Expected net salvage Category of fixed assets Method Depreciable life Annual deprecation value Housing and building Straight-line method 3—30 years 5% 31.67%-3.17% Machinery equipments Straight-line method 2—10 years 5% 47.50%-9.50% Transportation Straight-line method 5—10 years 5% 19.00%-9.50% equipments Electronic equipment Straight-line method 2—8 years 5% 47.50%-11.88% (3) Recognition Basis, Pricing and Depreciation Method of Fixed Assets by Finance Lease Not applicable 25. Construction in Progress 1. Pricing of Construction in Progress The constructions are accounted according to the actual costs incurred. The constructions shall be carried forward into fixed assets at the actual cost when reach intended usable condition. The borrowing expenses eligible for capitalization incurred before the delivery of the construction are included in the construction cost; after the delivery, the relevant interest expense shall be recorded into the current profits and losses. 2. Standard and Time of Construction in Progress Carrying Forward into Fixed Assets The Company’s construction in progress is carried forward into fixed assets when the construction completes and reaches intended usable condition. The criteria for determining the intended usable condition shall meet one of the following: (1) The physical construction (including installation) of fixed assets has been completed or substantially completed; (2) Has been produced or run for trial, and the results indicate that the assets can run normally or can produce stable products stably, or the results of the trial operation show that it can operate normally; (3) The amount of the expenditure on the fixed assets constructed is little or almost no longer occurring; (4) The fixed assets purchased have reached the design or contract requirements, or basically in line with the design or contract requirements. 3. Provision for Impairment of Construction in Progress Please refer to Note 31: Long-term Asset Impairment under Note V for the impairment test method and provision 98 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 for impairment of construction in progress. 26. Borrowing Costs The borrowing costs refer to interest and other related costs incurred by the Company as a result of borrowings, including interest on borrowings, amortization of discounts or premiums, ancillary expenses and exchange differences arising from foreign currency borrowings. The borrowing costs incurred by the Company directly attributable to the acquisition, construction or production of assets eligible for capitalization are capitalized and included in the cost of the relevant assets. Other borrowing costs are recognized as expenses according to the amount at the time of occurrence, and are included in the current profits and losses. 1. Principle of capitalization of borrowing costs Borrowing costs can be capitalized when all the following conditions are met: Asset expenditure has already occurred; borrowing costs have already occurred; construction or production activities necessary to bring the assets to the intended useable or sellable status have already begun. 2. Capitalization period of borrowing costs Capitalization period refers to the period from the capitalization of borrowing costs starting to the end of capitalization, excluding the period when capitalization is suspended. If assets that meet the conditions of capitalization are interrupted abnormally in the course of construction or production, and the interruption time exceeds 3 consecutive months, the capitalization of borrowing costs shall be suspended. The borrowing costs incurred during the interruption are recognized as expenses and included in current profits and losses until the acquisition or construction of the assets is resumed. The capitalization of the borrowing costs continues if the interruption is a procedure necessary for the purchase or production of assets eligible for capitalization to meet the intended useable or sellable status. The borrowing costs shall cease to be capitalized when the purchased or produced assets that meet the conditions of capitalization meet the intended useable or sellable status. The borrowing costs incurred after the assets eligible for capitalization meet the intended useable or sellable status can be included in the current profits and losses when incurred. 3. Calculation method of capitalized amount of borrowing costs During the period of capitalization, the capitalization amount of interests (including amortization of discounts or premiums) for each accounting period is determined in accordance with the following provisions: (1) For special borrowings for the acquisition or construction of assets eligible for capitalization, the interest expenses actually incurred in the current period of borrowings shall be recognized after deducting the interest income obtained by depositing the unused borrowing funds into the bank or investment income obtained from temporary investment. (2) Where the general borrowing is occupied for the acquisition or construction of assets eligible for capitalization, the Company multiplies the weighted average of the asset expenditure of the accumulated asset expenditure exceeding the special borrowing by the capitalization rate of the general borrowing to calculate the amount of interest that should be capitalized for general borrowings. The capitalization rate is determined based on the weighted average interest rate of general borrowings. 27. Living Assets Not applicable 99 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 28. Oil and Gas Assets Not applicable 29. Right-of-use Assets Not applicable 30. Intangible Assets (1) Pricing Method, Useful Life and Impairment Test 1. Recognition Criteria of Intangible Assets Intangible assets are identifiable non-monetary assets that are owned or controlled by the Company without physical form. The intangible assets are recognized when all the following conditions are met: (1) Conform to the definition of intangible assets; (2) Expected future economic benefits related to the assets are likely to flow into the Company; (3) The costs of the assets can be measured reliably. 2. Initial Measurement of Intangible Assets Intangible assets are initially measured at cost. Actual costs are determined by the following principles: (1) The cost of the acquisition of intangible assets, including the purchase price, relevant taxes and other expenses directly attributable to the intended use of the asset. The payment of purchase price of intangible assets exceeding normal credit terms is deferred, and the cost of intangible assets having financing nature in essence shall be recognized based on the present value of the purchase price. The difference between the actual payment price and the present value of the purchase price shall be recorded into the current profits and losses in the credit period except that can be capitalized in accordance with the Accounting Standard for Business Enterprises No. 17 - Borrowing Cost. (2) The cost of investing in intangible assets shall be recognized according to the value agreed upon in the investment contract or agreement, except that the value of the contract or agreement is unfair. 3. Subsequent Measurement of Intangible Assets The Company shall determine the useful life when it obtains intangible assets. The useful life of intangible assets is limited, and the years of the useful life or output that constitutes the useful life or similar measurement units shall be estimated. The intangible assets are regarded as intangible assets with uncertain useful life if the term that brings economic benefits to the Company is unforeseeable Intangible assets with limited useful life shall be amortized by straight line method from the time when the intangible assets are available until can’t be recognized as intangible assets; intangible assets with uncertain useful life shall not be amortized. The Company reviews the estimated useful life and amortization method of intangible assets with limited useful life at the end of each year, and reviews the estimated useful life of intangible assets with uncertain useful life in each accounting period. For intangible assets that evidence shows the useful life is limited, the useful life shall be estimated and the intangible assets shall be amortized in the estimated useful life. 4. Recognition Criteria and Withdrawal Method of Intangible Asset Impairment Provision The impairment test method and withdrawal method for impairment provision of intangible assets are detailed in Note 31: Long-term asset impairment under Note V. 100 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (2) Accounting Policy for Internal Research and Development Expenditures The expenditures in internal research and development projects of the Company are classified into expenditures in research stage and expenditures in development stage. The expenditures in research stage are included in the current profits and losses when incurred. The expenditures in development stage are recognized as intangible assets when meeting the following conditions: (1) The completion of the intangible assets makes it technically feasible for using or selling; (2) Having the intention to complete and use or sell the intangible assets; (3) The way in which an intangible asset generates economic benefits, including the proof that the products produced with the intangible asset have market or the proof of its usefulness if the intangible asset has market and will be used internally; (4) Having sufficient technical, financial resources and other resources to support the development of the intangible assets and the ability to use or sell the intangible assets; (5) Expenditure attributable to the development stage of intangible assets can be measured reliably. The cost of self-developed intangible assets includes the total expenditure incurred since meeting intangible assets recognition criterion until reaching intended use. Expenditures that have been expensed in previous periods are no longer adjusted. Non-monetary assets exchange, debt restructuring, government subsidies and the cost of intangible assets acquired by business combination are recognized according to relevant provisions of Accounting Standard for Business Enterprises No. 7 - Non-monetary assets exchange, Accounting Standard for Business Enterprises No. 12 - Debt restructuring, Accounting Standards for Business Enterprises No. 16 - Government subsidies, Accounting Standard for Business Enterprises No. 20 - Business combination respectively. 31. Impairment of Long-term Assets For non-current non-financial assets such as fixed assets, construction in progress, intangible assets with limited useful life, investment real estate measured in cost mode and long-term equity investments in subsidiaries, joint ventures and associates, the Company determines whether there is indication of impairment at balance sheet date. If there is indication of impairment, then estimate the amount of its recoverable value and test the impairment. Goodwill, intangible assets with uncertain useful life and intangible assets that have not yet reached useable state shall be tested for impairment every year, whether or not there is any indication of impairment. If the impairment test results indicate that the recoverable amount of the asset is lower than its book value, the impairment provision shall be made at the difference and included in the impairment loss. The recoverable amount is the higher of the fair value of the asset minus the disposal cost and the present value of the expected future cash flow of the asset. The fair value of the asset is recognized according to the price of the sales agreement in the fair trade; if there is no sales agreement but there is an active market, the fair value is recognized according to the buyer’s bid of the asset; if there is no sales agreement or active market, the fair value of asset shall be estimated based on the best information that can be obtained. Disposal costs include legal costs related to disposal of assets, related taxes, handling charges, and direct costs incurred to enable the asset reaching sellable status. The present value of the expected future cash flows of the assets is recognized by the amount discounted at appropriate discount rate according to the expected future cash flows arising from the continuing use of the asset and the final disposal. The provision for impairment of assets is calculated and recognized on the basis of individual assets. If it is difficult to estimate the recoverable amount of individual assets, the recoverable amount of the asset group shall be recognized by the asset group to which the asset belongs. The asset group is the smallest portfolio of assets that 101 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 can generate cash inflows independently. The book value of the goodwill presented separately in the financial statements shall be apportioned to the asset group or portfolio of asset groups that is expected to benefit from the synergies of the business combination when the impairment test is conducted. The corresponding impairment loss is recognized if the test results indicate that the recoverable amount of the asset group or portfolio of asset groups containing the apportioned goodwill is lower than its book value. The amount of the impairment loss shall offset the book value of the goodwill apportioned to the asset group or portfolio of asset groups, and offset the book value of other assets in proportion according to the proportion of the book value of other assets except the goodwill in the asset group or portfolio of asset groups. Once the impairment loss of the above asset is recognized, the portion that the value is restored will not be written back in subsequent periods. 32. Long-term Prepaid Expense Long-term prepaid expense refers to general expenses with the apportioned period over one year (one year excluded) that have occurred but attributable to the current and future periods. Long-term deferred expense shall be amortized averagely within benefit period. In case of no benefit in the future accounting period, the amortized value of such project that fails to be amortized shall be transferred into the profits and losses of the current period. 33. Contract Liabilities Not applicable 34. Payroll (1) Accounting Treatment of Short-term Compensation Short-term compensation mainly including salary, bonus, allowances and subsidies, employee services and benefits, medical insurance premiums, birth insurance premium, industrial injury insurance premium, housing fund, labor union expenditure and personnel education fund, non-monetary benefits etc. The short-term compensation actually happened during the accounting period when the active staff offering the service for the Group should be recognized as liabilities and is included in the current gains and losses or relevant assets cost. Of which the non-monetary benefits should be measured according to the fair value. (2) Accounting Treatment of the Welfare after Demission Welfare after demission mainly includes defined contribution plans and defined benefit plans. Of which defined contribution plans mainly include basic endowment insurance, unemployment insurance, annuity funds, etc., and the corresponding payable and deposit amount should be included into the relevant assets cost or the current gains and losses when happen. (3) Accounting Treatment of the Demission Welfare If an enterprise cancels the labor relationship with any employee prior to the expiration of the relevant labor contract or brings forward any compensation proposal for the purpose of encouraging the employee to accept a 102 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 layoff, and should recognize the payroll liabilities occurred from the demission welfare base on the earlier date between the time when the Group could not one-sided withdraw the demission welfare which offered by the plan or layoff proposal owning to relieve the labor relationship and the date the Group recognizes the cost related to the reorganization of the payment of the demission welfare and at the same time includes which into the current gains and losses. But if the demission welfare is estimated that could not totally pay after the end of the annual report within 12 months, should be disposed according to other long-term payroll payment. (4) Accounting Treatment of Other Long-term Welfare for Staff The inside employee retirement plan is treated by adopting the same principle with the above dismiss ion welfare. The Group would recorded the salary and the social security insurance fees paid and so on from the employee’s service terminative date to normal retirement date into current profits and losses (dismiss ion welfare) under the condition that they meet the recognition conditions of estimated liabilities. The other long-term welfare that the Group offers to the staffs, if met with the setting drawing plan, should be accounting disposed according to the setting drawing plan, while the rest should be disposed according to the setting revenue plan. 35. Lease Liabilities Not applicable 36. Provisions 1. Recognition of Provisions The obligation such as external guaranty, pending litigation or arbitration, product quality assurance, layoff plan, loss contract, restructuring and disposal of fixed assets, pertinent to a contingencies shall be recognized as an provisions when the following conditions are satisfied simultaneously: ① That obligation is a current obligation of the enterprise; ② It is likely to cause any economic benefit to flow out of the enterprise as a result of performance of the obligation; and ③ The amount of the obligation can be measured in a reliable way 2. Measurement of Provisions The provisions shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation. If there is a sequent range for the necessary expenses and if all the outcomes within this range are equally likely to occur, the best estimate shall be determined in accordance with the middle estimate within the range. In other cases, the best estimate shall be conducted in accordance with the following situations, respectively: ① If the Contingencies concern a single item, it shall be determined in the light of the most likely outcome. ② If the Contingencies concern two or more items, the best estimate should be calculated and determined in accordance with all possible outcomes and the relevant probabilities. ③ When all or some of the expenses necessary for the liquidation of an provisions of an enterprise is expected to be compensated by a third party, the compensation should be separately recognized as an asset only when it is virtually certain that the reimbursement will be obtained. The Company shall check the book value of the provisions on the balance sheet date. The amount of compensation is not exceeding the book value of the recognized provisions. 103 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 37. Share-based Payment Not applicable 38. Other Financial Instruments such as Preferred Shares and Perpetual Bonds Not applicable 39. Revenue Is the Company subject to any disclosure requirements for special industries? No Has implemented the new standards governing revenue? □ Yes √ No 1. Sale of Goods No revenue from selling goods may be recognized unless the following conditions are met simultaneously: ① The significant risks and rewards of ownership of the goods have been transferred to the buyer by the Company; ② The Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; ③ The revenue amount could be reliably measured; and ④ The relevant economic benefits may flow into the Company, and the relevant cost which had occurred or will occur could be reliably measured. Specific principles for recognition of the “domestic sale and export” incomes of the Company: (1) Method for recognition of the domestic sale income: According to the buyer’s requirements, the Company delivers to the buyer the products that have been considered qualified upon examination. The amount of the income has been determined and the sales invoice has been issued. The payment for the delivered products has been received in full or is expectedly recoverable. (2) Method for recognition of the export income: The Company produces the products according to the contract signed with the buyer. After the products have been examined as qualified, the Company completes the customs clearing procedure for export. The shipping company loads the products for shipping. The amount of the income has been determined and the export sales invoice has been issued. The payment for the delivered products has been received in full or is expectedly recoverable. 2. Provision of Labor Services In the case that the results of the labor service transaction can be reliably estimated, the income from the provision of labor services shall be recognized at the balance sheet date by the percentage of completion method according to the progress of the labor transaction. The result of the provision of labor services can be reliably estimated refers that all the following conditions are met: ① The amount of income can be measured reliably; ②The relevant economic benefits are likely to inflow to the enterprise; ③ The progress of the transaction can be reliably determined; ④ The cost incurred and to be incurred in the transaction can be measured reliably. If the result of the provision of labor services can’t be reliably estimated, the income from the provision of labor services shall be recognized according to the cost of labor services that have incurred and are expected to be compensated, and the cost of labor services that have incurred is recognized as the current expenses. If the cost of labor services already incurred isn’t expected to be compensated, the income will not be recognized. If the contract or agreement between the Company and other enterprises includes the sale of goods and the provision 104 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 of labor services, and the sale of goods and the provision of labor services can be distinguished and measured separately, the sale of goods and the provision of labor services shall be dealt with separately; if the sale of goods and the provision of labor services can’t be distinguished or can’t be measured separately, the contract will be treated as sale of goods. 3. Income from Transferring the Right to Use Assets The operating income is calculated and recognized according to the time and method stipulated by relevant contracts and agreements. 4. Interest Income Recognized when all the following conditions are met: ① The amount of income can be measured reliably; ② Economic benefits related to the transaction can inflow. 40. Government Subsidies 1. Category of Government Subsidies Government subsidies refer to the monetary assets and non-monetary assets obtained by the Company from the government, which mainly include government subsidies related to assets and government subsidies related to income. 2. Distinction Standard of Government Subsidies Related to Assets with Government Subsidies Related to Income The government subsidies related to assets refer to the government subsidies obtained for acquisition, construction or otherwise formation of long-term assets. The government subsidies related to income refer to the government subsidies except the government subsidies related to assets. The specific standard of classifying the government subsidies as subsidies related to assets: government subsidies for acquisition, construction or otherwise formation of long-term assets. The specific criteria that the Company classifies government subsidies as income related is: other government subsidies other than asset-related government subsidies. If the government documents do not specify the subsidy object, the bases that the Company classified the government subsidies as assets-related subsidies or income-related subsidies were as follows: (1) If the specific items for which the subsidy is targeted are stipulated in government documents, divide according to the relative proportion of the amount of expenditure that forms assets and the amount of expenditure included in the cost in the budget for that particular project, and the proportion shall be reviewed at each balance sheet date and changed as necessary; (2) if the government documents only have a general statement of the purpose and do not specify a specific project, the subsidy is recognized as government subsidy related to income. 3. Measurement of Government Subsidies If a government subsidy is a monetary asset, it shall be measured according to the amount received or receivable. If a government subsidy is a non-monetary asset, it shall be measured at its fair value, and shall be measured at a nominal amount (RMB1) when the fair value cannot be obtained reliably. For confirmed government subsidies that need to be returned, if there is relevant deferred income, the book balance of related deferred income shall be written off and the excess shall be charged to profit or loss for the Current Period; for other circumstances, it shall be directly charged to profit or loss for the Current. 4. Accounting Treatment for Government Subsidies The Company adopts the gross method to confirm government subsidies. The government subsidies related to assets are recognized as deferred income, and are charged to the current profit or loss in a reasonable and systematic manner within the useful lives of the relevant assets (subsidies related to the daily activities of the Company are included in other income; while subsidies unrelated to the daily activities of the Company are 105 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 included in non-operating income). Government subsidies measured at nominal amounts are directly charged to profit or loss for the Current Period. Where the relevant assets are sold, transferred, scrapped or damaged before the end of their useful lives, the balance of related undistributed deferred income shall be transferred to the profit or loss of the asset disposal in the Current Period. Government subsidies related to income shall be treated as follows: (1) government subsidies used to compensate the relevant costs, expenses or losses of the Company in the subsequent period shall be recognized as deferred income, and shall be included in the current profit and loss during the period of confirming the relevant costs, expenses or losses (subsidies related to the daily activities of the Company are included in other income; while subsidies unrelated to the daily activities of the Company are included in non-operating income); (2) government subsidies used to compensate the relevant costs, expenses or losses incurred by the Company shall be directly included in the current profits and losses (subsidies related to the daily activities of the Company are included in other income; while subsidies unrelated to the daily activities of the Company are included in non-operating income). For government subsidies that include both assets-related and income-related parts, they should be distinguished separately for accounting treatment; for government subsidies that are difficult to be distinguished, they should be classified as income-related. 41. Deferred Income Tax Assets/Deferred Income Tax Liabilities The income tax of the Company includes the current income tax and deferred income tax. Both are recorded into the current gains and losses as income tax expenses or revenue, except in the following circumstances: (1) The income tax generated from the business combination shall be adjusted into goodwill; (2) The income tax related to the transaction or event directly included in shareholders’ equity shall be recorded into shareholders’ equity. At the balance sheet date, the Company recognizes the deferred income tax assets or deferred income tax liabilities in accordance with the balance sheet liability method for the temporary difference between the book value of assets or liabilities and its tax base. The Company recognizes all taxable temporary differences as deferred income tax liabilities unless taxable temporary differences arise in the following transactions: (1) The initial recognition of goodwill or the initial recognition of the assets or liabilities arising from a transaction with the following characteristics: the transaction is not a business combination and neither the accounting profit nor the taxable income is incurred at the time of the transaction; (2) The time of write-back of taxable temporary differences related to the investments in subsidiaries, associates and joint ventures can be controlled and the temporary differences are likely to not be written back in the foreseeable future. The Company recognizes the deferred income tax assets arising from deductible temporary differences, subject to the amount of taxable income obtained to offset the deductible temporary differences, unless the deductible temporary differences arise in the following transactions: (1) The transaction is not a business combination, and the transaction does not affect the accounting profit or the amount of taxable income; (2) The deductible temporary differences related to the investments in subsidiaries, associates and joint ventures are not met simultaneously: Temporary differences are likely to be written back in the foreseeable future and are likely to be used to offset the taxable income of deductible temporary differences in the future. 106 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 At the balance sheet date, the Company measures the deferred income tax assets and deferred income tax liabilities at the applicable tax rate of the period expected to recover the asset or pay off the liabilities according to tax law, and reflects the income tax effect of expected assets recovery or liabilities payoff method at the balance sheet date. At the balance sheet date, the Company reviews the book value of the deferred income tax assets. If it is likely that sufficient taxable income will not be available to offset the benefit of the deferred income tax assets in the future period, the book value of the deferred income tax assets will be written down. If it is probable that sufficient taxable income will be available, the amount of write-down will be written back. 42. Lease (1) Accounting Treatment of Operating Lease (1) The lease fee paid by the Company for rented assets shall be apportioned using the straight-line method over the entire lease term without deducting the rent-free period and shall be included in the current period expenses. The initial direct costs related to the lease transaction paid by the Company are included in current expenses. When the lessor of the asset assumes the lease-related expenses that should be borne by the Company, the Company should deduct the part of the expenses from the total rental amount, and the deducted rental expenses are apportioned during the lease term and included in the current expenses. (2) The rental fees received by the company for leasing assets are apportioned on a straight-line basis over the entire lease term without deducting the rent-free period and are recognized as lease income. The initial direct expenses related to lease transactions paid by the company are included in the current expenses; if the amount is larger, they are capitalized and are recorded in the current period in stages on the same basis as the recognition of lease income during the entire lease period. When the company assumes the lease-related expenses that should be borne by the lessee, the company deducts the expenses from the total amount of rental income and allocates the deducted rental expenses during the lease period. (2) Accounting Treatments of Financial Lease (1) Financing leased assets: on the lease starting date, the Company recorded the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognized the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treated the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. The company adopted the effective interest method to amortize the unrecognized financing expenses during the asset lease period and included it into financial expenses. (2) Assets leased by finance: On the lease beginning date, the Company recognized the financial lease receivables, and the difference between the sum of unguaranteed residual values and its present value as unrealized financing income. It is recognized as lease income during any lease period in the future. The initial direct costs incurred by the Company in relation to the lease transaction, were included in the initial measurement of the financial lease receivable and the amount of revenue recognized during the lease period shall be reduced. 107 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 43. Other Significant Accounting Policies and Estimates Not applicable 44. Changes in Main Accounting Policies and Estimates (1) Change of Accounting Policies √ Applicable □ Not applicable Changes in accounting policy Approval procedure Remark In 2017, the Ministry of Finance revised and issued the Accounting Standards for Business Enterprises No.22-Recognition and Measurement of Financial Instruments, Accounting Standards for Business Enterprises No.24-Hedge Accounting, Accounting Standards for Business Enterprises No.37-Presentation of Financial Instruments and required enterprises listed both domestically and overseas as well as companies listed overseas with For details, refer to the financial report prepared in accordance with Announcement on Changes in Reviewed and approved by the 30th International Financial Reporting Standards or Accounting Policies Meeting of the 8th Board of Directors Accounting Standards for Business Enterprises to (Announcement No.: 2019-020) carry out the revised accounting standards since 1 disclosed on cninfo.com.cn. January 2018, required other domestically listed companies to carry out the revised standards since 1 January 2019, and required unlisted enterprises implementing Accounting Standards for Business Enterprises to carry out the revised standards since 1 January 2021. Thus the Company starts to implement the changed new standards governing financial instruments since 1 January 2019. (2) Significant Changes in Accounting Estimates □ Applicable √ Not applicable (3) Adjustments to the Financial Statements at the Beginning of the First Execution Year of any New Standards Governing Financial Instruments, Revenue or Leases √ Applicable □ Not applicable Consolidated Balance Sheet Unit: RMB Item 31 December 2018 1 January 2019 Adjusted 108 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Current assets: Monetary capital 896,646,719.87 896,646,719.87 Settlement reserve Interbank loans granted Trading financial assets 6,000,000.00 6,000,000.00 Financial assets at fair value through profit or loss Derivative financial assets Notes receivable 107,506,613.50 107,506,613.50 Accounts receivable 834,420,596.05 834,420,596.05 Financing backed by accounts receivable Prepayments 13,811,905.18 13,811,905.18 Premiums receivable Reinsurance receivables Receivable reinsurance contract reserve Other receivables 21,745,690.53 21,745,690.53 Including: Interest 5,152,364.04 5,152,364.04 receivable Dividends receivable Financial assets purchased under resale agreements Inventories 767,319,599.00 767,319,599.00 Contract assets Assets classified as held for sale Current portion of non-current assets Other current assets 864,093,663.30 864,093,663.30 Total current assets 3,505,544,787.43 3,511,544,787.43 6,000,000.00 Non-current assets: Loans and advances to customers Investments in debt obligations 109 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Available-for-sale financial 897,716,590.20 -897,716,590.20 assets Investments in other debt obligations Held-to-maturity investments Long-term receivables Long-term equity 182,458,559.69 182,458,559.69 investments Investments in other equity 891,716,590.20 891,716,590.20 instruments Other non-current financial assets Investment property Fixed assets 512,106,912.39 512,106,912.39 Construction in progress 224,624,447.16 224,624,447.16 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 172,725,277.21 172,725,277.21 R&D expense Goodwill Long-term prepaid 6,852,985.35 6,852,985.35 expense Deferred income tax assets 37,831,704.45 37,831,704.45 Other non-current assets 48,305,435.42 48,305,435.42 Total non-current assets 2,082,621,911.87 2,076,621,911.87 -6,000,000.00 Total assets 5,588,166,699.30 5,588,166,699.30 Current liabilities: Short-term borrowings Borrowings from central bank Interbank loans obtained Trading financial liabilities 477,200.00 477,200.00 Financial liabilities at fair 477,200.00 -477,200.00 value through profit or loss Derivative financial liabilities 110 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Notes payable 452,683,676.97 452,683,676.97 Accounts payable 532,597,143.95 532,597,143.95 Advances from customers 43,850,788.04 43,850,788.04 Financial assets sold under repurchase agreements Customer deposits and interbank deposits Payables for acting trading of securities Payables for underwriting of securities Payroll payable 96,088,621.59 96,088,621.59 Taxes payable 25,354,466.37 25,354,466.37 Other payables 43,115,011.68 43,115,011.68 Including: Interest payable Dividends payable Handling charges and commissions payable Reinsurance payables Contract liabilities Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 1,194,166,908.60 1,194,166,908.60 Non-current liabilities: Insurance contract reserve Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities 111 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Long-term payables Long-term payroll payable Provisions Deferred income 155,000.31 155,000.31 Deferred income tax 52,530,509.00 52,530,509.00 liabilities Other non-current liabilities Total non-current liabilities 52,685,509.31 52,685,509.31 Total liabilities 1,246,852,417.91 1,246,852,417.91 Owners’ equity: Share capital 1,399,346,154.00 1,399,346,154.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 158,608,173.07 158,608,173.07 Less: Treasury stock Other comprehensive 297,667,872.80 297,667,872.80 income Specific reserve Surplus reserves 809,456,186.20 809,456,186.20 General reserve Retained earnings 1,654,181,032.39 1,654,181,032.39 Total equity attributable to owners of the Company as 4,319,259,418.46 4,319,259,418.46 the parent Non-controlling interests 22,054,862.93 22,054,862.93 Total owners’ equity 4,341,314,281.39 4,341,314,281.39 Total liabilities and owners’ 5,588,166,699.30 5,588,166,699.30 equity Note for adjustment: In 2017, Ministry of Finance respectively revised and issued the Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments (CK[2017]No.7), the Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets (CK[2017]No.8), the Accounting Standards for Business Enterprises No. 24 – Hedging Accounting (CK[2017]No.9), and the Accounting Standards for Business Enterprises No. 37 – Presentation of Financial Instruments (CK[2017]No.14). The Company starts to implement above new standards since 1 January 2019. In accordance with the link up provision, no adjustment was made to information of comparative period, and the Company retroactively adjusted the retained earnings of period-begin or 112 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 other comprehensive income based on the difference between the original standards and the new standards on the first execution date. Those originally recorded into “available-for-sale financial assets” are now recorded into “trading financial assets” and “other investments in equity instruments”; those originally recorded into “financial liabilities at fair value through profit or loss” are now recorded into “trading financial liabilities”. Balance Sheet of the Company as the Parent Unit: RMB Item 31 December 2018 1 January 2019 Adjusted Current assets: Monetary capital 848,949,693.91 848,949,693.91 Trading financial assets 6,000,000.00 6,000,000.00 Financial assets at fair value through profit or loss Derivative financial assets Notes receivable 104,945,398.61 104,945,398.61 Accounts receivable 795,897,932.65 795,897,932.65 Financings backed by accounts receivable Prepayments 25,444,445.34 25,444,445.34 Other receivables 43,538,848.72 43,538,848.72 Including: Interest 5,152,364.04 5,152,364.04 receivable Dividends receivable Inventories 692,681,479.03 692,681,479.03 Contract assets Assets classified as held for sale Current portion of non-current assets Other current assets 856,504,839.81 856,504,839.81 Total current assets 3,367,962,638.07 3,373,962,638.07 6,000,000.00 Non-current assets: Investments in debt obligations Available-for-sale financial 897,716,590.20 -897,716,590.20 assets Investments in other debt 113 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 obligations Held-to-maturity investments Long-term receivables Long-term equity 466,251,661.95 466,251,661.95 investments Investments in other equity 891,716,590.20 891,716,590.20 instruments Other non-current financial assets Investment property Fixed assets 427,947,613.74 427,947,613.74 Construction in progress 222,570,503.14 222,570,503.14 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 129,452,067.42 129,452,067.42 R&D expense Goodwill Long-term prepaid 5,106,268.25 5,106,268.25 expense Deferred income tax assets 35,908,741.15 35,908,741.15 Other non-current assets 46,852,235.42 46,852,235.42 Total non-current assets 2,231,805,681.27 2,225,805,681.27 -6,000,000.00 Total assets 5,599,768,319.34 5,599,768,319.34 Current liabilities: Short-term borrowings Trading financial liabilities 477,200.00 477,200.00 Financial liabilities at fair 477,200.00 -477,200.00 value through profit or loss Derivative financial liabilities Notes payable 452,683,676.97 452,683,676.97 Accounts payable 681,490,174.69 681,490,174.69 Advances from customers 41,912,301.85 41,912,301.85 Contract liabilities Payroll payable 84,220,746.16 84,220,746.16 114 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Taxes payable 17,528,644.83 17,528,644.83 Other payables 114,073,355.23 114,073,355.23 Including: Interest payable Dividends payable Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 1,392,386,099.73 1,392,386,099.73 Non-current liabilities: Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term payroll payable Provisions Deferred income Deferred income tax 52,530,509.00 52,530,509.00 liabilities Other non-current liabilities Total non-current liabilities 52,530,509.00 52,530,509.00 Total liabilities 1,444,916,608.73 1,444,916,608.73 Owners’ equity: Share capital 1,399,346,154.00 1,399,346,154.00 Other equity instruments Including: Preferred shares Perpetual bonds 115 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Capital reserves 166,211,779.15 166,211,779.15 Less: Treasury stock Other comprehensive 297,672,884.34 297,672,884.34 income Specific reserve Surplus reserves 809,456,186.20 809,456,186.20 Retained earnings 1,482,164,706.92 1,482,164,706.92 Total owners’ equity 4,154,851,710.61 4,154,851,710.61 Total liabilities and owners’ 5,599,768,319.34 5,599,768,319.34 equity Note for adjustment: In 2017, Ministry of Finance respectively revised and issued the Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments (CK[2017]No.7), the Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets (CK[2017]No.8), the Accounting Standards for Business Enterprises No. 24 – Hedging Accounting (CK[2017]No.9), and the Accounting Standards for Business Enterprises No. 37 – Presentation of Financial Instruments (CK[2017]No.14). The Company starts to implement above new standards since 1 January 2019. In accordance with the link up provision, no adjustment was made to information of comparative period, and the Company retroactively adjusted the retained earnings of period-begin or other comprehensive income based on the difference between the original standards and the new standards on the first execution date. Those originally recorded into “available-for-sale financial assets” are now recorded into “trading financial assets” and “other investments in equity instruments”; those originally recorded into “financial liabilities at fair value through profit or loss” are now recorded into “trading financial liabilities”. (4) Retroactive Adjustments to Comparative Data of Prior Years when First Execution of any New Standards Governing Financial Instruments or Leases □ Applicable √ Not applicable 45. Other Naught VI Taxes 1. Main Taxes and Tax Rates Category of taxes Tax basis Tax rate Sales volume from goods selling or taxable VAT 3%, 6%, 9%, 10%, 11%, 13%, 16% service Urban maintenance and construction tax Turnover tax payable 7%, 5% Enterprise income tax Taxable income 15%, 20%, 25% Educational surtax Turnover tax payable 3% 116 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Local educational surtax Turnover tax payable 2% Notes of the disclosure situation of the taxpaying bodies with different enterprises income tax rate Name Income tax rate Foshan Electrical and Lighting Co., Ltd. 15% FSL Chanchang Optoelectronics Co., Ltd. 25% Foshan Chansheng Electronic Ballast Co., Ltd. 20% Foshan Taimei Times Lamps and Lanterns Co., Ltd. 25% Nanjing Fozhao Lighting Components Manufacturing Co., Ltd. 25% Foshan Electrical & Lighting (Xinxiang) Co., Ltd. 25% FSL New Light Source Technology Co., Ltd. 25% Guangdong Fozhao Financial Leasing Co., Ltd. 25% Foshan Lighting Lamps and Lanterns Co., Ltd. 25% FSL Zhida Electric Technology Co., Ltd. 25% FSL Europe GmbH 15% 2. Tax Preference The Company passed the re-examination for High-tech Enterprises in 2017, as well as won the “Certificate of High-tech Enterprise” after approval by Department of Science and Technology of Guangdong Province, Department of Finance of Guangdong Province, Guangdong Provincial Bureau of State Taxation and Guangdong Provincial Bureau of Local Taxation. In accordance with relevant provisions in Corporate Income Tax Law of the People’s Republic of China and the Administration Measures for Identification of High-tech Enterprises promulgated in 2007, the Company paid the corporate income tax based on a tax rate of 15% within three years since 1 January 2017. 3. Other Paid according to the relevant regulation of the tax law. VII. Notes to Main Items of Consolidated Financial Statements 1. Monetary Capital Unit: RMB Item Ending balance Beginning balance Cash on hand 41,073.13 34,937.47 Bank deposits 766,646,136.79 784,166,295.87 Other monetary capital 62,822,506.73 112,445,486.53 Total 829,509,716.65 896,646,719.87 117 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Of which: Total amount deposited 1,018,633.97 739,617.83 oversees Other notes Note: Other monetary capital includes cash deposit for notes, cash deposit for future foreign exchange settlement, investment fund deposited in securities companies and e-commerce balance, of which, the cash deposit for notes and cash deposit for future foreign exchange settlement are restricted assets. For details, please refer to Note VII-Notes to Items of Consolidated Financial Statements (81. Assets with Restricted Ownership and Right to Use). 2. Trading Financial Assets Unit: RMB Item Ending balance Beginning balance Of which: Financial assets assigned measured by fair value and the changes be included in the 6,000,000.00 current gains and losses Of which: Total 6,000,000.00 Other notes: The reason for the decrease of trading financial assets at the period-end is the Company transferred 69% of shares in Chengdu Hongbo Enterprise Co., Ltd. to Xiamen Tungsten Co., Ltd. in the Reporting Period. 3. Derivative Financial Assets Naught 4. Notes Receivable (1) Notes Receivable Listed by Category Unit: RMB Item Ending balance Beginning balance Bank acceptance bill 135,766,529.32 107,506,613.50 Total 135,766,529.32 107,506,613.50 Unit: RMB Ending balance Beginning balance Carrying amount Bad debt provision Carrying amount Bad debt provision Item Carrying Carrying Proportio Withdra Proportio Withdraw Amount Amount value Amount Amount value n wal n al 118 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 proportio proportio n n Of which: Notes receivable 135,766, 135,766,5 107,506,6 107,506,6 withdrawn bad debt 100.00% 100.00% 529.32 29.32 13.50 13.50 provision by group Of which: 135,766, 135,766,5 107,506,6 107,506,6 Total 100.00% 100.00% 529.32 29.32 13.50 13.50 Individual withdrawal of bad debt provision: Naught Withdrawal of bad debt provision by group: Naught Notes of confirming the basis of the groups: Please refer to the relevant information of disclosure of bad debt provision of other accounts receivable if adopting the general mode of expected credit loss to withdraw bad debt provision of notes receivable. □ Applicable √ Not applicable (2) Notes Receivable Withdrawn, Reversed or Collected during the Reporting Period Information of bad debt provision in the Reporting Period: Naught Of which bad debt provision recovered or reversed with significant amount during the Reporting Period: □ Applicable √ Not applicable (3) Notes Receivable Pledged at the Period-end Unit: RMB Item Amount pledged at the period-end Bank acceptance bill 79,189,073.66 Total 79,189,073.66 (4) Notes Receivable which Had Endorsed by the Company or Had Discounted and Had not Due on the Balance Sheet Date at the Period-end Unit: RMB Amount of recognition termination at the Amount of not terminated recognition at Item period-end the period-end Bank acceptance bill 47,238,011.00 Total 47,238,011.00 119 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (5) Notes Transferred to Accounts Receivable because Drawer of the Notes Fails to Executed the Contract or Agreement Naught (6) The Actual Write-off Accounts Receivable Naught 5. Accounts Receivable (1) Accounts Receivable Disclosed by Category Unit: RMB Ending balance Beginning balance Carrying amount Bad debt provision Carrying amount Bad debt provision Category Withdra Withdraw Carrying Carrying Proportio wal Proportio al Amount Amount value Amount Amount value n proportio n proportio n n Accounts receivable 23,377,2 16,266,8 7,110,413 23,377,22 16,266,81 7,110,413.5 withdrawn bad debt 2.87% 69.58% 2.65% 69.58% 23.66 10.09 .57 3.66 0.09 7 provision separately Of which: Accounts receivable 792,053, 33,336,0 758,716,9 860,060,6 32,750,48 827,310,18 withdrawn bad debt 97.13% 4.21% 97.35% 3.81% 023.50 71.31 52.19 68.85 6.37 2.48 provision by group Of which: 815,430, 49,602,8 765,827,3 883,437,8 49,017,29 834,420,59 Total 100.00% 6.08% 100.00% 5.55% 247.16 81.40 65.76 92.51 6.46 6.05 Individual withdrawal of bad debt provision: Unit: RMB Ending balance Name Carrying amount Bad debt provision Withdrawal proportion Withdrawal reason Involved in the lawsuit, the Company won the Customer A 14,220,827.14 7,110,413.57 50.00% lawsuit in the first instance, and the other side has appealed. 120 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Involved in the lawsuit, Customer B 9,156,396.52 9,156,396.52 100.00% the case hasn’t been finalized Total 23,377,223.66 16,266,810.09 -- -- Withdrawal of bad debt provision by group: Unit: RMB Ending balance Name Carrying amount Bad debt provision Withdrawal proportion Credit risk group 792,053,023.50 33,336,071.31 4.21% Total 792,053,023.50 33,336,071.31 -- Please refer to the relevant information of disclosure of bad debt provision of other accounts receivable if adopting the general mode of expected credit loss to withdraw bad debt provision of accounts receivable. □ Applicable √ Not applicable Disclosure by aging Unit: RMB Aging Ending balance Within 1 year (including 1 year) 724,279,399.86 1 to 2 years 30,884,789.03 2 to 3 years 7,653,591.61 3 to 4 years 2,782,638.29 4 to 5 years 226,946.97 Over 5 years 0.00 Total 765,827,365.76 (2) Accounts Receivable Withdrawn, Reversed or Collected during the Reporting Period Information of withdrawal of bad debt provision: Unit: RMB Changes in the Reporting Period Category Beginning amount Ending balance Withdrawal Reversal or recovery Write-off Accounts receivable 49,017,296.46 696,350.03 0.00 110,765.09 49,602,881.40 Total 49,017,296.46 696,350.03 110,765.09 49,602,881.40 121 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Of which bad debt provision recovered or reversed with significant amount during Reporting Period: Naught (3) Particulars of the Actual Verification of Accounts Receivable during the Reporting Period Unit: RMB Item Amount No. 1 110,652.83 Other retails accounts 112.26 Of which verification of significant accounts receivable: Naught (4) Top 5 of the Ending Balance of the Accounts Receivable Collected according to the Arrears Party Unit: RMB Relationship with the Carrying amount Amount of bad debt Proportion to total Name of units Company provision withdrawn accounts receivable (%) No. 1 Non-related party 116,548,474.42 3,496,454.23 14.29% No. 2 Non-related party 21,132,097.12 691,796.76 2.59% No. 3 Non-related party 19,446,088.18 876,795.88 2.38% No. 4 Non-related party 17,103,092.54 513,092.78 2.10% No. 5 Non-related party 16,775,164.92 503,254.95 2.06% Total 191,004,917.18 6,081,394.60 23.42% (5) Derecognition of Accounts Receivable due to the Transfer of Financial Assets Naught (6) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Accounts Receivable Naught 6. Accounts Receivable Financing Naught 122 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 7. Prepayment (1) Listed by Aging Unit: RMB Ending balance Beginning balance Aging Amount Proportion Amount Proportion Within 1 year 7,024,075.66 59.07% 8,074,848.21 58.46% 1 to 2 years 2,549,809.80 21.44% 3,525,963.03 25.53% 2 to 3 years 706,193.75 5.94% 721,403.24 5.22% Over 3 years 1,611,051.65 13.55% 1,489,690.70 10.79% Total 11,891,130.86 -- 13,811,905.18 -- Notes of the reasons of the prepayment aging over 1 year with significant amount but failed settled in time: Naught (2) Top 5 of the Ending Balance of the Prepayments Collected according to the Prepayment Target Unit: RMB Name of units Relationship with the Ending balance Proportion to total Aging Company prepayments (%) No. 1 Non-related supplier 1,190,838.91 10.01% Within 1 year No. 2 Non-related supplier 1,043,968.84 8.78% Within 1 year No. 3 Non-related supplier 600,525.92 5.05% Within 2 years No. 4 Non-related supplier 591,568.29 4.97% Within 2 years No. 5 Non-related supplier 418,205.26 3.52% Within 1 year Total 3,845,107.22 32.33% 8. Other Receivables Unit: RMB Item Ending balance Beginning balance Interest receivable 5,828,623.70 5,152,364.04 Dividend receivable 0.00 0.00 Other receivables 21,236,642.37 16,593,326.49 Total 27,065,266.07 21,745,690.53 123 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (1) Interest Receivable 1) Category of Interest Receivable Unit: RMB Item Ending balance Beginning balance Deposits on a regular basis 1,575,001.54 56,317.78 Entrusted loan 0.00 Bond investment 0.00 Structural deposit 2,400,361.88 3,151,895.54 Bank financial products 1,853,260.28 1,944,150.72 Total 5,828,623.70 5,152,364.04 2) Significant Overdue Interest Naught 3) Information of Withdrawal of Bad Debt Provision □Applicable √Not applicable (2) Dividends Receivable Naught (3) Other Receivables 1) Other Receivables Classified by Accounts Nature Unit: RMB Nature Ending carrying amount Beginning carrying amount Staff borrow and deposit 6,418,419.33 3,451,053.16 VAT export tax refunds 6,006,579.00 6,252,642.96 Performance bond 3,949,456.48 2,905,450.00 Rent, water & electricity fees 1,516,762.13 765,582.10 Other 5,017,418.94 4,549,969.87 Total 22,908,635.88 17,924,698.09 2) Information of Withdrawal of Bad Debt Provision Unit: RMB First stage Second stage Third stage Bad debt provision Expected credit loss Expected loss in the Expected loss in the Total of the next 12 months duration (credit impairment duration (credit impairment 124 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 not occurred) occurred) Balance of 1 January 427,381.20 903,990.40 1,331,371.60 2019 Balance of 1 January 2019 in the current —— —— —— —— period Withdrawal of the 149,282.77 191,339.14 340,621.91 current period Balance of 30 June 2019 576,663.97 1,095,329.54 1,671,993.51 Changes of carrying amount with significant amount changed of loss provision in the current period □Applicable √Not applicable Disclosure by aging Unit: RMB Aging Ending balance Within 1 year (including 1 year) 18,645,468.79 1 to 2 years 1,584,151.10 2 to 3 years 938,235.43 3 to 4 years 11,181.16 4 to 5 years 57,605.89 Over 5 years 0.00 Total 21,236,642.37 3) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Information of withdrawal of bad debt provision: Unit: RMB Changes in the Reporting Period Category Beginning balance Ending balance Withdrawal Reversal or recovery Other receivables 1,331,371.60 340,621.91 1,671,993.51 Total 1,331,371.60 340,621.91 1,671,993.51 Of which bad debt provision reversed or recovered with significant amount during Reporting Period: Naught 4) Particulars of the Actual Verification of Other Receivables during the Reporting Period Naught 5) Top 5 of the Ending Balance of the Other Receivables Collected according to the Arrears Party Unit: RMB Name of the entity Nature Ending balance Aging Proportion to ending Ending balance of 125 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 balance of other bad debt provision receivables (%) No. 1 Export rebates 6,006,579.00 Within 1 year 26.22% 180,197.37 No. 2 Social insurance 1,532,340.79 Within 1 year 6.69% 45,970.22 No. 3 Other 1,296,947.31 1 to 3 years 5.66% 314,327.63 No. 4 Other 1,157,064.20 Within 1 year 5.05% 34,711.93 No. 5 Petty cash 1,151,893.62 1 to 3 years 5.03% 70,085.15 Total -- 11,144,824.92 -- 48.65% 645,292.30 6) Accounts Receivable Involving Government Subsidies Naught 7) Derecognition of Other Receivables due to the Transfer of Financial Assets Naught 8) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Other Receivables Naught 9. Inventory Whether the Company has executed the new income standards □ Yes √ No (1) Category of Inventory Unit: RMB Ending balance Beginning balance Item Falling price Falling price Carrying amount Carrying value Carrying amount Carrying value reserves reserves Raw materials 101,814,729.03 2,221,937.15 99,592,791.88 126,493,040.39 1,912,404.69 124,580,635.70 Goods in process 67,462,606.70 67,462,606.70 34,923,287.33 34,923,287.33 Inventory goods 393,861,262.51 30,812,489.13 363,048,773.38 495,768,205.24 25,743,927.08 470,024,278.16 Semi-finished 112,541,908.64 906,893.85 111,635,014.79 135,536,163.37 787,982.05 134,748,181.32 goods Low priced and easily worn 3,247,274.19 3,247,274.19 3,043,216.49 3,043,216.49 articles Total 678,927,781.07 33,941,320.13 644,986,460.94 795,763,912.82 28,444,313.82 767,319,599.00 Whether the Company need satisfy relevant disclosure requirements stated in SZSE Industrial Information Disclosure Guidance No.4---Listed Company Specialized in Seed Industry and Planting Businesses or not? No 126 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (2) Falling Price Reserves of Inventory Unit: RMB Increase Decrease Beginning Item Reversal or Ending balance balance Withdrawal Other Other write-off Raw materials 1,912,404.69 1,217,399.07 907,866.61 2,221,937.15 Inventory goods 25,743,927.08 10,637,928.27 5,569,366.22 30,812,489.13 Semi-finished 787,982.05 383,916.87 265,005.07 906,893.85 goods Total 28,444,313.82 12,239,244.21 6,742,237.90 33,941,320.13 Reason for withdrawal and reversal of falling price reserves of inventories Item Reasons for the reverse or write-off of Basis for provision for falling price of falling price reserves of inventory of Remark inventory Reporting Period According to the lower of inventory cost Raw materials Raw materials sales or scrapping and net realizable value According to the lower of inventory cost Inventory goods Products sales or scrapping and net realizable value (3) Notes to the Ending Balance of Inventory Including Capitalized Borrowing Expense Not applicable (4) Completed Unsettled Assets Formed from the Construction Contact at the Period-end Naught 10. Contract Assets Naught 11. Held-for-Sale Assets Naught 12. Current Portion of Non-current Assets Naught 127 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 13. Other Current Assets Whether the Company has executed the new income standards □ Yes √ No Unit: RMB Item Ending balance Beginning balance Deductible input tax of VAT 38,945,157.63 21,691,700.53 Advance payment of enterprise income tax 2,401,962.77 Bank financial products (Note) 295,000,000.00 240,000,000.00 Structural deposits (Note) 580,000,000.00 600,000,000.00 Total 913,945,157.63 864,093,663.30 Other notes: Note: The bank principal-guaranteed financial products with maturity date more than three months but investment cycle shorter than a year and structural deposit products which cannot be terminated in advance. 14. Creditors' Investment Naught 15. Other Creditors' Investment Naught 16. Long-term Accounts Receivable Naught 17. Long-term Equity Investment Unit: RMB Increase/decrease Ending Gains and Adjustme Cash Withdraw balance Additiona losses nt of Beginnin Reduced Changes bonus or al of Ending of Investees l recognize other g balance investmen of other profits depreciati Other balance depreciati investmen d under comprehe t equity announce on on t the equity nsive d to issue reserves reserves method income I. Joint ventures II. Associated enterprises Shenzhen 182,458,5 784,711.9 3,120,585 180,122,6 Primatron 59.69 8 .75 85.92 128 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 ix (Nanho) Electronic s Ltd. 182,458,5 784,711.9 3,120,585 180,122,6 Subtotal 59.69 8 .75 85.92 182,458,5 784,711.9 3,120,585 180,122,6 Total 59.69 8 .75 85.92 18. Other Equity Instrument Investment Unit: RMB Item Ending balance Beginning balance Non-listed equity investment 297,628,309.40 297,628,309.40 Listed equity investment 666,584,409.99 594,088,280.80 Total 964,212,719.39 891,716,590.20 Disclosure of Non-trading Equity Instrument Investment Unit: RMB Reason for Amount of other assigning to Reason for other comprehensive measure in fair comprehensive Dividend income Accumulative Accumulative Item income value and the income recognized gains losses transferred to changes included transferred to retained earnings in the current retained earnings gains and losses Shares of Guoxuan 375,686,137.61 High-tech Shares of 2,986,027.39 47,013,384.92 Everbright Bank Total 2,986,027.39 422,699,522.53 19. Other Non-current Financial Assets Naught 20. Investment Property Naught 129 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 21. Fixed Assets Unit: RMB Item Ending balance Beginning balance Fixed assets 586,093,658.59 512,106,912.39 Disposal of fixed assets 0.00 0.00 Total 586,093,658.59 512,106,912.39 (1) List of Fixed Assets Unit: RMB Houses and Machinery Transportation Electronic Item Total buildings equipment equipment equipment I. Original carrying value 1. Beginning 710,892,641.29 721,559,752.40 22,584,005.26 27,863,135.01 1,482,899,533.96 balance 2. Increased 96,636,567.00 8,632,421.52 92,758.58 639,458.50 106,001,205.60 amount of the period (1) Purchase 4,044,140.03 92,758.58 639,458.50 4,776,357.11 (2) Transfer from construction in 96,636,567.00 4,588,281.49 101,224,848.49 progress (3) Enterprise combination increase 3. Decreased 1,209,668.15 431,957.26 49,799.75 1,691,425.16 amount of the period (1) Disposal or 1,159,375.15 431,957.26 49,799.75 1,641,132.16 scrap (2) Equipment 50,293.00 50,293.00 transformation 4. Ending balance 807,529,208.29 728,982,505.77 22,244,806.58 28,452,793.76 1,587,209,314.40 II. Accumulative depreciation 1. Beginning 432,350,311.91 497,669,898.94 16,516,228.63 21,965,331.34 968,501,770.82 balance 2. Increased 9,828,642.78 20,205,006.36 561,299.96 1,290,449.88 31,885,398.98 amount of the period 130 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (1) Withdrawal 9,828,642.78 20,205,006.36 561,299.96 1,290,449.88 31,885,398.98 3. Decreased 1,104,695.59 410,359.40 47,309.75 1,562,364.74 amount of the period (1) Disposal or 1,093,945.45 410,359.40 47,309.75 1,551,614.60 scrap (2) Equipment 10,750.14 10,750.14 transformation 4. Ending balance 442,178,954.69 516,770,209.71 16,667,169.19 23,208,471.47 998,824,805.06 III. Depreciation reserves 1. Beginning 0.00 2,290,422.72 0.00 428.03 2,290,850.75 balance 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the period (1) Disposal or scrap 4. Ending balance 2,290,422.72 428.03 2,290,850.75 IV. Carrying value 1. Ending carrying 365,350,253.60 209,921,873.34 5,577,637.39 5,243,894.26 586,093,658.59 value 2. Beginning 278,542,329.38 221,599,430.74 6,067,776.63 5,897,375.64 512,106,912.39 carrying value (2) List of Temporarily Idle Fixed Assets Unit: RMB Original carrying Accumulated Depreciation Item Carrying value Note value depreciation reserves Name of the T5, T8, announcement: energy-saving lamp 7,940,325.52 5,945,024.07 1,943,741.93 51,559.52 Announcement on production line Withdrawing the 131 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Preparation for the Assets Impairment on the Idle Equipments and Construction in Progress; the Announcement No.: 2015-030; disclosure website: www.cninfo.com.cn (3) Fixed Assets Leased in by Financing Lease Naught (4) Fixed Assets Leased out by Operation Lease Naught (5) Fixed Assets Failed to Accomplish Certification of Property Naught (6) Disposal of Fixed Assets Unit: RMB Item Ending balance Beginning balance Total 0.00 0.00 22. Construction in Progress Unit: RMB Item Ending balance Beginning balance Construction in progress 158,184,271.59 224,624,447.16 Engineering materials 0.00 0.00 Total 158,184,271.59 224,624,447.16 (1) List of Construction in Progress Unit: RMB Item Ending balance Beginning balance 132 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Depreciation Depreciation Carrying amount Carrying value Carrying amount Carrying value reserves reserves Construction in 158,184,271.59 158,184,271.59 224,624,447.16 224,624,447.16 progress Total 158,184,271.59 158,184,271.59 224,624,447.16 224,624,447.16 (2) Changes in Significant Construction in Progress during the Reporting Period Unit: RMB Of Proporti which: on of Accumul Capitaliz amount accumul ated ation rate Transferr of Beginnin Other ated amount of Increase ed in Ending Job capitaliz Capital Item Budget g decrease investme of interests d amount fixed balance schedule ed resources balance d amount nt in interest for the assets interests construct capitaliz Reportin for the ions to ation g Period Reportin budget g Period Fuwan intellige 52,040,0 41,583,1 5,042,50 33,168.6 46,592,4 nt 89.53% 99.00% Other 00.00 09.95 5.78 2 47.11 worksho pH Gaoming R&D worksho 40,000,0 12,615,0 11,372,8 1,212,57 22,775,3 56.94% 65.00% Other p 11, 12, 00.00 97.54 59.14 6.14 80.54 13, 14 and 18 Fuwan standard 23,775,0 19,241,4 439,002. 210,108. 19,470,3 81.89% 99.00% Other worksho 00.00 52.36 14 52 45.98 p K1 Fuwan standard 23,775,0 19,015,0 305,357. 210,108. 19,110,3 80.38% 99.00% Other worksho 00.00 75.82 32 51 24.63 p J3 Family housing 10,100,0 7,693,42 920,308. 8,610,06 3,663.06 85.25% 99.00% Other of Gao 00.00 3.10 42 8.46 Ming, 133 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Building 8# Employe e 6,500,00 5,643,72 599,922. 99,829.2 6,143,82 Housing 94.52% 99.00% Other 0.00 9.10 96 3 2.83 Seven of Fuwan Automat ic system of intellige nt 21,920,0 11,604,4 486,620. 11,117,8 producti 0.00 50.72% 85.00% Other 00.00 61.41 65 40.76 on worksho p (worksh op H) Fuwan standard 22,310,0 18,583,8 1,267,02 19,850,8 100.00% 100.00% Other worksho 00.00 45.29 2.40 67.69 p J1 Fuwan standard 22,310,0 18,367,6 1,122,12 19,489,7 100.00% 100.00% Other worksho 00.00 69.88 5.31 95.19 p J2 Fuwan standard 26,200,0 21,702,4 3,259,15 24,961,5 100.00% 100.00% Other worksho 00.00 30.93 3.06 83.99 p K2 Fuwan standard 26,200,0 21,942,2 3,841,30 25,783,5 100.00% 100.00% Other worksho 00.00 87.85 6.92 94.77 p K3 275,130, 197,992, 28,169,5 90,085,8 2,256,07 133,820, Total -- -- -- 000.00 583.23 63.45 41.64 4.73 230.31 (3) List of the Withdrawal of the Depreciation Reserves for Construction in Progress Naught 134 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (4) Engineering Materials Unit: RMB Ending balance Beginning balance Item Depreciation Carrying Depreciation Carrying amount Carrying value Carrying value reserves amount reserves Total 0.00 0.00 23. Productive Living Assets (1) Productive Biological Assets Adopting Cost Measurement Mode □ Applicable √ Not applicable (2) Productive Biological Assets Adopting Fair Value Measurement Mode □ Applicable √ Not applicable 24. Oil and Gas Assets □ Applicable √ Not applicable 25. Right-to-use Assets Naught 26. Intangible Assets (1) List of Intangible Assets Unit: RMB Non-patent Using right of Item Land use right Patent Total technology software I. Original carrying value 1. Beginning 233,741,723.60 200,000.00 2,773,651.87 236,715,375.47 balance 2. Increased amount of the period (1) Purchase (2) Internal R&D 135 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (3) Business combination increase 3. Decreased amount of the period (1) Disposal 4. Ending balance 233,741,723.60 200,000.00 2,773,651.87 236,715,375.47 II. Accumulated amortization 1. Beginning 61,904,106.59 200,000.00 1,885,991.67 63,990,098.26 balance 2. Increased 2,157,510.86 56,849.34 2,214,360.20 amount of the period (1) Withdrawal 2,157,510.86 56,849.34 2,214,360.20 3. Decreased amount of the period (1) Disposal 4. Ending balance 64,061,617.45 200,000.00 1,942,841.01 66,204,458.46 III. Depreciation reserves 1. Beginning balance 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the period (1) Disposal 4. Ending balance IV. Carrying value 1. Ending carrying 169,680,106.15 830,810.86 170,510,917.01 value 136 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 2. Beginning 171,837,617.01 887,660.20 172,725,277.21 carrying value (2) Land Use Right with Certificate of Title Uncompleted Naught 27. R&D Expense Naught 28. Goodwill Naught 29. Long-term Prepaid Expense Unit: RMB Amortization Other decreased Item Beginning balance Increased amount Ending balance amount of the period amount Engineering 6,004,040.42 2,914,673.24 2,832,554.17 6,086,159.49 decoration expenses Other 848,944.93 1,792,321.52 365,824.99 2,275,441.46 Total 6,852,985.35 4,706,994.76 3,198,379.16 8,361,600.95 30. Deferred Income Tax Assets/Deferred Income Tax Liabilities (1) Deferred Income Tax Assets that Had not Been Off-set Unit: RMB Ending balance Beginning balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference assets difference assets Provision for impairment 93,357,045.81 14,481,934.60 86,933,832.63 13,391,933.49 of assets Unrealized profit of 1,363,677.73 204,551.66 1,187,129.74 178,069.46 internal transactions Depreciation of fixed 74,907,420.57 11,577,365.09 75,022,616.39 11,594,644.46 assets Payroll payable 53,463,130.75 8,019,469.61 83,969,846.94 12,595,477.04 137 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Changes in fair value of trading financial 1,473,400.00 221,010.00 477,200.00 71,580.00 liabilities Total 224,564,674.86 34,504,330.96 247,590,625.70 37,831,704.45 (2) Deferred Income Tax Liabilities Had not Been Off-set Unit: RMB Ending balance Beginning balance Item Taxable temporary Deferred income tax Taxable temporary Deferred income tax difference liabilities difference liabilities Changes in fair value of other equity instrument 422,699,522.53 63,404,928.38 350,203,393.34 52,530,509.00 investment Total 422,699,522.53 63,404,928.38 350,203,393.34 52,530,509.00 (3) Deferred Income Tax Assets or Liabilities Listed by Net Amount after Off-set Unit: RMB Mutual set-off amount of Amount of deferred Mutual set-off amount of Amount of deferred deferred income tax income tax assets or deferred income tax income tax assets or Item assets and liabilities at liabilities after off-set at assets and liabilities at liabilities after off-set at the period-end the period-end the period-begin the period-begin Deferred income tax 34,504,330.96 37,831,704.45 assets Deferred income tax 63,404,928.38 52,530,509.00 liabilities (4) List of Unrecognized Deferred Income Tax Assets Naught (5) Deductible Losses of Unrecognized Deferred Income Tax Assets will Due in the Following Years Naught 31. Other Non-current Assets Whether the Company has executed the new income standards □ Yes √ No Unit: RMB 138 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Item Ending balance Beginning balance Land purchase and the ownership implicit 41,755,700.00 41,755,700.00 of relevant items Prepayments for business facilities 5,610,971.02 6,549,735.42 Total 47,366,671.02 48,305,435.42 32. Short-term Borrowings Naught 33. Trading Financial Liabilities Unit: RMB Item Ending balance Beginning balance Of which: Specified as financial liabilities at fair 1,473,400.00 477,200.00 value through profit or loss Of which: Total 1,473,400.00 477,200.00 34. Derivative Financial Liabilities Naught 35. Notes Payable Unit: RMB Item Ending balance Beginning balance Trade acceptance 0.00 Bank’s acceptance bill 375,906,405.75 452,683,676.97 Total 375,906,405.75 452,683,676.97 The total amount of the due but not paid notes payable at the end of the period was of RMB0.00. 36. Accounts Payable (1) List of Accounts Payable Unit: RMB Item Ending balance Beginning balance 139 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Accounts payable 508,983,045.12 532,597,143.95 Total 508,983,045.12 532,597,143.95 (2) Significant Accounts Payable Aging over One Year Naught 37. Advances from Customers Whether the Company has executed the new income standards □ Yes √ No (1) List of Advances from Customers Unit: RMB Item Ending balance Beginning balance Advances from customers 35,916,666.09 43,850,788.04 Total 35,916,666.09 43,850,788.04 (2) Significant Advances from Customers Aging over One Year Naught (3) Settled but Uncompleted Projects Formed by Construction Contracts at the Period-end Naught 38. Contract Liabilities Naught 39. Payroll Payable (1) List of Payroll Payable Unit: RMB Item Beginning balance Increase Decrease Ending balance I. Short-term salary 96,088,621.59 271,353,842.77 302,643,615.93 64,798,848.43 II. Post-employment benefit-defined 20,142,130.34 20,142,130.34 contribution plans Total 96,088,621.59 291,495,973.11 322,785,746.27 64,798,848.43 140 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (2) List of Short-term Salary Unit: RMB Item Beginning balance Increase Decrease Ending balance 1. Salary, bonus, 95,725,486.52 245,059,024.54 276,318,324.20 64,466,186.86 allowance, subsidy 2. Employee welfare 6,362,973.01 6,362,973.01 3. Social insurance 12,654,519.65 12,654,519.65 Of which: Medical 10,015,605.90 10,015,605.90 insurance premiums Work-re 514,975.61 514,975.61 lated injury insurance Materni 2,123,938.14 2,123,938.14 ty insurance 4. Housing fund 5,257,270.50 5,257,270.50 5.Labor union budget and employee education 363,135.07 2,020,055.07 2,050,528.57 332,661.57 budget Total 96,088,621.59 271,353,842.77 302,643,615.93 64,798,848.43 (3) List of Defined Contribution Plans Unit: RMB Item Beginning balance Increase Decrease Ending balance 1. Basic pension benefits 19,470,095.01 19,470,095.01 2. Unemployment 672,035.33 672,035.33 insurance Total 20,142,130.34 20,142,130.34 40. Taxes Payable Unit: RMB Item Ending balance Beginning balance VAT 12,661,807.02 3,147,064.81 Corporate income tax 6,230,743.24 14,907,122.79 Personal income tax 1,273,129.98 704,101.03 Urban maintenance and construction tax 1,627,040.15 761,673.03 Education surcharge 1,162,171.53 544,052.17 141 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Property tax 3,035,301.90 2,374,748.34 Land use tax 2,311,597.02 2,750,413.52 Other 170,816.92 165,290.68 Total 28,472,607.76 25,354,466.37 41. Other Payables Unit: RMB Item Ending balance Beginning balance Other payables 47,164,268.80 43,115,011.68 Total 47,164,268.80 43,115,011.68 (1) Interest Payable Naught (2) Dividends Payable Naught (3) Other Payables 1) Other Payables Listed by Nature Unit: RMB Item Ending balance Beginning balance Compensation for lawsuit 1,126,231.95 1,762,533.43 Performance bond 31,524,138.52 27,413,254.10 Other 14,513,898.33 13,939,224.15 Total 47,164,268.80 43,115,011.68 2) Significant Other Payables Aging over One Year Naught 42. Held-for-sale Liabilities Naught 43. Current Portion of Non-current Liabilities Naught 142 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 44. Other Current Liabilities Whether the Company has executed the new income standards □ Yes √ No Naught 45. Long-term Borrowings Naught 46. Bonds Payable Naught 47. Lease Liabilities Naught 48. Long-term Payables Naught 49. Long-term Payroll Payable Naught 50. Provisions Whether the Company has executed the new income standards □ Yes √ No Naught 51. Deferred Income Unit: RMB Reason for Item Beginning balance Increase Decrease Ending balance formation Government Government 155,000.31 77,499.96 77,500.35 subsidies related to subsidies assets/income Total 155,000.31 77,499.96 77,500.35 -- Item involving government subsidies: Unit: RMB 143 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Amount Amount recorded into recorded into Amount Amount of Related to Beginning non-operatin other income offset cost in Other Ending Item newly assets/related balance g income in in the the Reporting changes balance subsidy to income the Reporting Reporting Period Period Period Production line of 50 million Related to 155,000.31 77,499.96 77,500.35 energy-savin assets g fluorescent lamp Total 155,000.31 77,499.96 77,500.35 52. Other Non-current Liabilities Whether the Company has executed the new income standards □ Yes √ No Naught 53. Share Capital Unit: RMB Increase/decrease (+/-) Beginning New shares Bonus issue Ending balance balance Bonus shares Other Subtotal issued from profit The sum of 1,399,346,154. 1,399,346,154. shares 00 00 54. Other Equity Instruments Naught 55. Capital Reserves Unit: RMB Item Beginning balance Increase Decrease Ending balance Capital premium 151,362,201.53 151,362,201.53 (premium on stock) Other capital reserves 7,245,971.54 7,245,971.54 144 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Total 158,608,173.07 158,608,173.07 56. Treasury Shares Naught 57. Other Comprehensive Income Unit: RMB Reporting Period Less: Less: Recorded Recorded in in other other comprehe Attributabl Income comprehensi nsive e to Attributabl before ve income in income in Less: owners of e to Beginning Ending Item taxation in prior period prior Income the non-contro balance balance the and period and tax Company lling Current transferred in transferred expense as the interests Period profit or loss in retained parent after tax in the earnings in after tax Current the Period Current Period I. Other comprehensive income 297,672,884 72,496,12 10,874,41 61,621,70 359,294, that may not subsequently be .34 9.19 9.38 9.81 594.15 reclassified to profit or loss Changes in fair value of 297,672,884 72,496,12 10,874,41 61,621,70 359,294, other equity instrument .34 9.19 9.38 9.81 594.15 investment II. Other comprehensive income that may subsequently be -5,011.54 14,177.84 14,177.84 9,166.30 reclassified to profit or loss Differences arising from translation of foreign -5,011.54 14,177.84 14,177.84 9,166.30 currency-denominated financial statements Total of other comprehensive 297,667,872 72,510,30 10,874,41 61,635,88 359,303, income .80 7.03 9.38 7.65 760.45 145 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 58. Specific Reserve Naught 59. Surplus Reserves Unit: RMB Item Beginning balance Increase Decrease Ending balance Statutory surplus 672,569,617.84 672,569,617.84 reserves Discretionary surplus 136,886,568.36 136,886,568.36 reserves Total 809,456,186.20 809,456,186.20 60. Retained Earnings Unit: RMB Item Reporting Period Same period of last year Beginning balance of retained earnings before 1,654,181,032.39 1,731,600,796.18 adjustments Beginning balance of retained earnings after 1,654,181,032.39 1,731,600,796.18 adjustments Add: Net profit attributable to owners of the 167,275,725.75 229,277,455.82 Company as the parent Dividend of ordinary shares payable 218,298,000.02 418,531,713.57 Ending retained earnings 1,603,158,758.12 1,542,346,538.43 List of adjustment of beginning retained earnings: (1) RMB0.00 beginning retained earnings was affected by retrospective adjustment conducted according to the Accounting Standards for Business Enterprises and relevant new regulations. (2) RMB0.00 beginning retained earnings was affected by changes in accounting policies. (3) RMB0.00 beginning retained earnings was affected by correction of significant accounting errors. (4) RMB0.00 beginning retained earnings was affected by changes in combination scope arising from same control. (5) RMB0.00 beginning retained earnings was affected totally by other adjustments. 61. Operating Revenue and Cost of Sales Unit: RMB Item Reporting Period Same Period of last year 146 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Operating revenue Cost of sales Operating revenue Cost of sales Main operations 1,670,888,644.93 1,283,982,749.97 2,048,839,316.62 1,568,876,663.19 Other operations 16,296,015.93 13,353,963.80 15,939,973.37 10,415,204.70 Total 1,687,184,660.86 1,297,336,713.77 2,064,779,289.99 1,579,291,867.89 Whether the Company has executed the new income standards □ Yes √ No 62. Taxes and Surtaxes Unit: RMB Item Reporting Period Same period of last year Urban maintenance and construction tax 8,002,766.99 8,264,474.00 Education surcharge 5,716,249.15 5,949,176.10 Property tax 3,616,025.09 4,231,277.07 Land use tax 2,499,767.83 2,590,984.95 Vehicle and vessel use tax 4,952.48 6,668.80 Stamp duty 934,962.64 906,543.92 Environmental protection tax 61,544.56 13,393.40 Total 20,836,268.74 21,962,518.24 63. Selling Expense Unit: RMB Item Reporting Period Same period of last year Employee’s remuneration 29,625,732.79 30,104,690.49 Freight 36,186,424.88 36,843,018.64 Business travel charges 5,908,417.09 4,436,361.10 Business propagandize fees and 23,221,696.87 9,922,450.58 advertizing fees Dealer meeting expense 2,629,705.03 2,444,484.12 Sales promotion fees 10,918,490.31 7,768,266.90 Other 14,920,099.41 12,397,738.64 Total 123,410,566.38 103,917,010.47 64. Administrative Expense Unit: RMB 147 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Item Reporting Period Same period of last year Employee’s remuneration 41,310,326.31 56,356,593.01 Office expenses 5,056,903.17 5,211,417.98 Rent of land and management charge 2,757,197.21 3,135,605.89 Amortization of intangible assets 2,214,360.20 2,157,008.85 Depreciation charge 7,701,119.24 7,681,086.49 Other 8,497,273.56 10,988,826.52 Total 67,537,179.69 85,530,538.74 65. R&D Expense Unit: RMB Item Reporting Period Same period of last year Employee’s remuneration 23,210,591.76 13,466,962.82 Expense on equipment debugging 1,357,085.75 2,277,877.56 Fees for certification testing 2,197,635.38 1,851,079.26 Material consumption 1,955,730.02 598,544.26 Charges related to patents 187,908.12 494,973.06 Depreciation and long-term prepayments 303,946.75 169,890.88 Other 647,734.83 84,164.94 Total 29,860,632.61 18,943,492.78 Other notes: 1. The R&D expense of the Reporting Period was RMB10,917,139.83 with increase of 57.63% compared with that of last year which was due to the huge increase in labor costs compared with that of last year. 2. In the Company’s R&D activities, the expense on bench-scale and pilot-scale production is recorded in R&D expense, the revenue generated from the sale of products through bench-scale and pilot-scale production is recorded in main operation revenue, and the costs incurred are recorded in the cost of sales of main operation. 66. Finance Costs Unit: RMB Item Reporting Period Same period of last year Interest expense Less: Interest income 10,378,329.29 4,879,439.87 Foreign exchange gains or losses -303,552.28 -9,341,097.44 Other 773,843.90 1,135,060.70 Total -9,908,037.67 -13,085,476.61 148 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 67. Other Income Unit: RMB Sources Reporting Period Same period of last year Subsidy for stabilizing posts 792,403.17 Supporting fund for import and export 4,494,490.00 Competition among Hundreds of 700,000.00 Enterprises Other 329,380.00 225,982.00 Total 5,523,870.00 1,018,385.17 68. Investment Income Unit: RMB Item Reporting Period Same period of last year Long-term equity investment income 784,711.98 179,781.56 accounted by equity method Investment income from holding of trading 1,750,000.00 financial assets Investment income from disposal of trading 13,550,000.00 financial assets Investment income from holding of other 13,957,444.99 equity instrument investment Investment income from holding of 10,971,417.60 available–for-sale financial assets Income received from financial products and 14,528,002.77 13,358,671.20 structural deposits Other -730,500.00 Total 43,839,659.74 24,509,870.36 69. Net Gain on Exposure Hedges Naught 70. Gain on Changes in Fair Value Unit: RMB Sources Reporting Period Same period of last year Trading financial liabilities -996,200.00 149 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Total -996,200.00 71. Credit Impairment Loss Unit: RMB Item Reporting Period Same period of last year Bad debt loss of other receivables -340,621.91 Bad debt loss of accounts receivable -696,350.03 Total -1,036,971.94 72. Assets Impairment Loss Whether the Company has executed the new income standards □ Yes √ No Unit: RMB Item Reporting Period Same period of last year I. Bad debt loss -8,366,488.61 II. Loss on inventory valuation -12,239,244.21 -7,640,381.22 Total -12,239,244.21 -16,006,869.83 73. Assets Disposal Income Naught 74. Non-operating Income Unit: RMB Amount recorded in the current Item Reporting Period Same period of last year non-recurring profit or loss Government subsidy 1,202,579.96 914,699.96 1,202,579.96 Other 739,292.61 755,156.47 739,292.61 Total 1,941,872.57 1,669,856.43 1,941,872.57 Government subsidies recorded in current profit or loss: Unit: RMB Whether influence the Special Related to Distribution Distribution Reporting Same period Item Nature profits or subsidy or assets/related entity reason Period of last year losses of the not to income year or not 150 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Due to engaged in special industry that the state Production encouraged line of 50 and million supported, Related to Subsidy No No 77,499.96 77,499.96 energy-savin gained assets g fluorescent subsidy lamp (obtaining in line with the law and the regulations of national policy) Subsidy from Other R&D miscellaneou Technical Related to Rewards No No 1,125,080.00 837,200.00 s government updating and income subsidies transformatio n, etc. Total 1,202,579.96 914,699.96 75. Non-operating Expense Unit: RMB Amount recorded in the current Item Reporting Period Same period of last year non-recurring profit or loss Total losses from disposal of 53,336.67 70,182.97 53,336.67 non-current assets Of which: Losses from disposal 53,336.67 70,182.97 53,336.67 of fixed assets Losses on inventories 170,523.69 170,523.69 Penalty 4,995.00 4,995.00 Delaying payment 239,571.80 239,571.80 Lawsuit compensation 65,000.00 Other 9,964.81 56,566.45 9,964.81 Total 478,391.97 191,749.42 478,391.97 151 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 76. Income Tax Expense (1) List of Income Tax Expense Unit: RMB Item Reporting Period Same period of last year Current income tax expense 23,839,915.08 44,301,342.36 Deferred income tax expense 3,327,373.49 2,742,803.34 Total 27,167,288.57 47,044,145.70 (2) Adjustment Process of Accounting Profit and Income Tax Expense Unit: RMB Item Reporting Period Profit before taxation 194,665,931.53 Current income tax expense accounted at statutory/applicable tax 28,967,898.33 rate Influence of applying different tax rates by subsidiaries 1,166,469.64 Influence of income tax before adjustment -443,721.62 Influence of non-taxable income -2,523,357.78 Income tax expense 27,167,288.57 77. Other Comprehensive Income Refer to Note 57 for details. 78. Cash Flow Statement (1) Cash Generated from Other Operating Activities Unit: RMB Item Reporting Period Same period of last year Deposit interest 8,960,610.92 10,461,602.02 Income from insurance compensation 245,123.30 50,333.58 Cash deposit income 14,070,620.26 1,729,639.24 Property and rental income 3,133,802.35 2,110,828.30 Income from subsidy 6,634,379.76 1,911,331.54 Income from waste 6,413,317.83 8,814,180.41 Other 5,704,607.15 8,467,917.26 152 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Total 45,162,461.57 33,545,832.35 (2) Cash Used in Other Operating Activities Unit: RMB Item Reporting Period Same period of last year Administrative expense paid in cash 15,681,410.19 20,080,875.34 Selling expense paid in cash 80,443,469.23 70,572,897.55 Finance costs paid in cash 237,571.61 343,210.94 Returned cash deposit 7,855,566.14 Other 6,902,354.83 6,351,791.98 Total 111,120,372.00 97,348,775.81 (3) Cash Generated from Other Investing Activities Naught (4) Cash Used in Other Investing Activities Unit: RMB Item Reporting Period Same period of last year The future foreign exchange settlement 2,447,280.00 security deposit Security deposit on quota 857,419.80 Total 3,304,699.80 (5) Cash Generated from Other Financing Activities Naught (6) Cash Used in Other Financing Activities Naught 79. Supplemental Information for Cash Flow Statement (1) Supplemental Information for Cash Flow Statement Unit: RMB 153 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Supplemental information Reporting Period Same period of last year 1. Reconciliation of net profit to net cash -- -- flows generated from operating activities: Net profit 167,498,642.96 232,174,685.49 Add: Provision for impairment of assets 13,276,216.15 16,006,869.83 Depreciation of fixed assets, oil-gas assets, 31,885,398.98 34,998,383.79 and productive living assets Amortization of intangible assets 2,214,360.20 2,157,008.85 Amortization of long-term prepaid expenses 3,198,379.16 2,859,910.25 Losses from disposal of fixed assets (gains: 53,336.67 70,182.97 negative) Losses from changes in fair value (gains: 996,200.00 negative) Investment loss (gains: negative) -43,839,659.74 -24,509,870.36 Decrease in deferred income tax assets 3,327,373.49 2,742,803.34 (increase: negative) Decrease in inventory (gains: negative) 116,836,131.75 23,967,773.95 Decrease in accounts receivable generated 12,637,048.69 -280,200,774.50 from operating activities (gains: negative) Increase in accounts payable used in -117,401,594.83 134,456,804.77 operating activities (decrease: negative) Net cash generated from/used in operating 190,681,833.48 144,723,778.38 activities 2.Significant investing and financing activities without involvement of cash -- -- receipts and payments 3.Net increase/decrease of cash and cash -- -- equivalents: Ending balance of cash 767,162,849.74 911,663,899.88 Less: Beginning balance of cash 795,285,756.38 570,184,208.96 Net increase in cash and cash equivalents -28,122,906.64 341,479,690.92 (2) Net Cash Paid For Acquisition of Subsidiaries Naught (3) Net Cash Received from Disposal of the Subsidiaries Naught 154 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (4) Cash and Cash Equivalents Unit: RMB Item Ending balance Beginning balance I. Cash 767,162,849.74 795,285,756.38 Including: Cash on hand 41,073.13 34,937.47 Bank deposit on demand 765,976,136.79 783,346,295.87 Other monetary capital on demand 1,145,639.82 11,904,523.04 III. Ending balance of cash and cash 767,162,849.74 795,285,756.38 equivalents 80. Notes to Items of the Statements of Changes in Owners’ Equity Notes to the name of “Other” of ending balance of the Same period of last year adjusted and the amount adjusted: Not applicable 81. Assets with Restricted Ownership or Right to Use Unit: RMB Item Ending carrying value Reason for restriction Security deposit of notes and security Monetary capital 62,346,866.91 deposit of future foreign exchange settlement Notes receivable 79,189,073.66 Pledged for notes pool Total 141,535,940.57 -- 82. Foreign Currency Monetary Items (1) Foreign Currency Monetary Items Unit: RMB Ending foreign currency Ending balance converted to Item Exchange rate balance RMB Monetary capital -- -- 2,363,055.17 Of which: USD 194,325.01 6.8747 1,335,926.15 EUR 131,396.83 7.8170 1,027,129.02 HKD Accounts receivable -- -- 278,313,858.59 155 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Of which: USD 40,483,782.36 6.8747 278,313,858.59 EUR HKD Long-term borrowings -- -- Of which: USD EUR HKD Advances from customers 15,878,401.30 Of which: USD 2,250,062.46 6.8747 15,468,504.40 EUR 52,436.60 7.8170 409,896.90 Prepayments 1,462,174.10 Of which: USD 212,689.15 6.8747 1,462,174.10 Other payables 481,710.23 Of which: USD 70,070.00 6.8747 481,710.23 (2) Notes to Overseas Entities Including: for Significant Oversea Entities, Main Operating Place, Recording Currency and Selection Basis Shall Be Disclosed; if there Are Changes in Recording Currency, Relevant Reasons Shall Be Disclosed. □ Applicable √ Not applicable 83. Arbitrage Naught 84. Government Subsidy (1) Basic Information on Government Subsidy Unit: RMB Type Amount Presented in Charged to current profit or loss Rewards for Competition 700,000.00 Other income 700,000.00 among Hundreds of Enterprises Supporting fund for import and 4,494,490.00 Other income 4,494,490.00 export Other 329,380.00 Other income 329,380.00 Production line of 50 million 77,499.96 Non-operating income 77,499.96 energy-saving fluorescent lamp 156 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Other miscellaneous 1,125,080.00 Non-operating income 1,125,080.00 government subsidies Total 6,726,449.96 6,726,449.96 (2) Return of Government Subsidy □ Applicable √ Not applicable 85. Other Naught VIII. Changes of Consolidation Scope 1. Business Combination Not under the Same Control Naught 2. Business Combination under the Same Control Naught 3. Counter Purchase Naught 4. Disposal of Subsidiary Whether there is a single disposal of the investment to the subsidiary and lost control? □ Yes √ No Whether there are several disposals of the investment to the subsidiary and lost controls? □ Yes √ No 5. Changes in Combination Scope for Other Reasons Note to changes in combination scope for other reasons (such as newly establishment or liquidation of subsidiaries, etc.) and relevant information: The original subsidiary not included in combination scope in the current year On September 7, 2018, the Company held the 26th meeting of the 8th Board of Directors, in which examined and approved the Proposal on Cancelling the Wholly-owned Subsidiary Guangdong FSL Finance Leasing Co., Ltd.(hereinafter referred as “FSL Leasing Company). The Company received the Notice of Approval of Cancellation and Registration issued by Market Supervision and Administration of Foshan on March 26, 2019 and has completed the registration cancellation of FSL Leasing Company. FSL 157 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Leasing Company will not be included in the consolidated financial statements of the Company after cancelling thereof. 6. Other Naught IX. Equity in Other Entities 1. Equity in Subsidiary (1) Subsidiaries Main operating Nature of Holding percentage (%) Name Registration place Way of gaining place business Directly Indirectly Foshan Chansheng Production and Newly Foshan Foshan 100.00% Electronic Ballast sales established Co., Ltd. Foshan Lighting Lamps & Production and Newly Foshan Foshan 100.00% Components Co., sales established Ltd. Guangdong Fozhao New Production and Newly Light Sources Foshan Foshan 100.00% sales established Technology Co., Ltd. FSL Chanchang Production and Newly Optoelectronics Foshan Foshan 100.00% sales established Co., Ltd. Foshan Taimei Production and Newly Times Lamps and Foshan Foshan 70.00% sales established Lanterns Co., Ltd. Foshan Electrical & Lighting Production and Newly Xinxiang Xinxiang 100.00% (Xinxiang) Co., sales established Ltd. Nanjing Fozhao Lighting Production and Nanjing Nanjing 100.00% Acquired Components sales Manufacturing 158 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Co., Ltd. FSL Zhida Electric Production and Newly Foshan Foshan 51.00% Technology Co., sales established Ltd. FSL LIGHTING Production and Newly Germany Germany 100.00% GmbH sales established Notes: Holding proportion in subsidiary different from voting proportion: Naught Basis of holding half or less voting rights but still been controlled investee and holding more than half of the voting rights not been controlled investee: Naught Significant structured entities and controlling basis in the scope of combination: Basis of determining whether the Company is the agent or the principal: Naught Other notes: Naught (2) Significant Non-wholly-owned Subsidiary Unit: RMB Shareholding proportion The profit or loss Declaring dividends Balance of Name of non-controlling attributable to the distributed to non-controlling interests interests non-controlling interests non-controlling interests at the period-end Foshan Taimei Times Lamps and Lanterns Co., 30.00% 452,768.42 8,560,833.21 Ltd. FSL Zhida Electric 49.00% -229,851.21 13,716,946.93 Technology Co., Ltd. Holding proportion of minority shareholder in subsidiary different from voting proportion: Naught Other notes: Naught (3) The Main Financial Information of Significant Not Wholly-owned Subsidiary Unit: RMB Ending balance Beginning balance Non-curr Non-curr Non-curr Non-curr Name Current Total Current Total Current Total Current Total ent ent ent ent assets assets liabilities liabilities assets assets liabilities liabilities assets liability assets liability 159 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Foshan Taimei Times 36,400,4 19,106,4 55,506,8 26,970,7 26,970,7 35,881,0 19,031,5 54,912,5 27,885,7 27,885,7 Lamps 05.91 61.76 67.67 56.97 56.97 53.56 31.64 85.20 02.58 02.58 and Lanterns Co., Ltd. FSL Zhida Electric 74,496,8 10,281,0 84,777,9 41,692,3 41,692,3 74,044,5 10,388,8 84,433,3 40,878,6 40,878,6 Technolo 65.78 76.04 41.82 35.84 35.84 33.25 13.87 47.12 57.04 57.04 gy Co., Ltd. 110,897, 29,387,5 140,284, 68,663,0 68,663,0 109,925, 29,420,3 139,345, 68,764,3 68,764,3 Total 271.69 37.80 809.49 92.81 92.81 586.81 45.51 932.32 59.62 59.62 Unit: RMB Reporting Period Same period of last year Cash flows Cash flows Total Total Name Operating from Operating from Net profit comprehensi Net profit comprehensi revenue operating revenue operating ve income ve income activities activities Foshan Taimei Times 59,575,680.8 73,606,152.8 11,967,649.4 Lamps and 1,509,228.08 1,509,228.08 778,035.37 3,544,952.10 3,544,952.10 6 7 2 Lanterns Co., Ltd. FSL Zhida Electric 38,271,963.9 56,884,635.5 -469,084.10 -469,084.10 6,129,306.92 3,742,334.78 3,742,334.78 -6,170,821.36 Technology 2 4 Co., Ltd. 97,847,644.7 130,490,788. Total 1,040,143.98 1,040,143.98 6,907,342.29 7,287,286.88 7,287,286.88 5,796,828.06 8 41 (4) Significant Restrictions on Using the Assets and Liquidating the Liabilities of the Company Naught (5) Financial Support or Other Supports Provided to Structural Entities Incorporated into the Scope of Consolidated Financial Statements Naught 160 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 2. The Transaction of the Company with Its Owner’s Equity Share Changed but Still Controlling the Subsidiary Naught 3. Equity in Joint Ventures or Associated Enterprises (1) Significant Joint Ventures or Associated Enterprises Naught (2) Main Financial Information of Significant Joint Ventures Naught (3) Main Financial Information of Significant Associated Enterprises Naught (4) Summary Financial Information of Insignificant Joint Ventures or Associated Enterprises Unit: RMB Beginning balance/The same period of last Ending balance/Reporting Period year Joint ventures: -- -- The total of following items according to the -- -- shareholding proportions Associated enterprises: -- -- Total carrying value of investment 180,122,685.92 182,458,559.69 The total of following items according to the -- -- shareholding proportions --Net profit 784,711.98 179,781.56 --Total comprehensive income 784,711.98 179,781.56 (5) Note to the Significant Restrictions on the Ability of Joint Ventures or Associated Enterprises to Transfer Funds to the Company Naught (6) The Excess Loss of Joint Ventures or Associated Enterprises Naught 161 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (7) The Unrecognized Commitment Related to Investment to Joint Ventures Naught (8) Contingent Liabilities Related to Investment to Joint Ventures or Associated Enterprises Naught 4. Significant Common Operation Naught 5. Equity in the Structured Entity Excluded in the Scope of Consolidated Financial Statements Naught 6. Other Naught X. The Risk Related to Financial Instruments The financial instruments of the Company included: monetary funds, accounts receivable, notes receivable, accounts payable, etc. The details of each financial instrument see relevant items of Note VII. The main risks of the Company due to financial instruments were credit risk, liquidity risk and market risk. The operating management of the Company was responsible for the risk management target and the recognition of the policies. (I) Credit risk Credit risk was one party of the contract failed to fulfill the obligations and causes loss of financial assets of the other party. The credit risk the Company faced was selling on credit which leads to customer credit risk. The Company will evaluate credit risk of new customer, and set credit limit, once the balance of account receivable over credit limit, require the customer to pay or producing and delivering goods shall be approved by the management of the Company. The Company through monthly aging analysis of account receivable and monitoring the collection situation of the customer ensured the overall credit risk of the Company was in control scope. Once appear abnormal situation, the Company should conduct necessary measures to requesting the payment timely. (II) Liquidity Risk Liquidity risk is referred to their risk of incurring capital shortage when performing settlement obligation in the way of cash payment or other financial assets. The policies of the Company are to ensure that there was sufficient cash to pay the due liabilities. The liquidity risk is centralized controlled by the Financial Department of the Company. The financial department through supervising the balance of the cash and securities can be convert to cash at any time and the rolling prediction of cash flow in future 12 months to ensure the Company have sufficient cash to pay the liabilities under the case of all reasonable prediction, Each financial liability of the Company was 162 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 estimated due within 1 year. (III) Market risk Market risk was referred to risk of the fair value or future cash flow of financial instrument changed due to the change of market price, including: exchange rate risk, interest rate risk and other price risk. 1. Exchange rate risk Exchange rate risk was referred to risk of possible losses due to changes of exchange rate. The exchange rate risk undertaken by the Company was mainly generated from USD and EUR. On June 30, 2019, all assets and liabilities of the Company were balances in RMB except that the balances of assets and liabilities presented in the Note VII (82) Foreign Currency Monetary Items were in USD and EUR. The exchange rate risk generated from those balance of assets and liabilities in foreign currency might influence the running performance of the Company to some extent. The Company made efforts to avoid exchange rate risk through forward exchange settlement, improving operation management and promoting the international competitiveness of the Company, etc. 2. Interest rate risk Interest rate risk is refers to fluctuation risk of the fair value or future cash flow of financial instrument change due to the change of market price. There was no bank loan in the Company, thus no RMB benchmark interest rate changes 3. Other price risk Naught XI. The Disclosure of Fair Value 1. Ending Fair Value of Assets and Liabilities at Fair Value Unit: RMB Ending fair value Item Fair value measurement Fair value measurement Fair value measurement Total items at level 1 items at level 2 items at level 3 I. Consistent fair value -- -- -- -- measurement (III) Other equity 666,584,409.99 666,584,409.99 instrument investment The total amount of assets consistently measured at 666,584,409.99 666,584,409.99 fair value (VII) Specified as financial liabilities at fair 1,473,400.00 1,473,400.00 value through profit or loss The total amount of 1,473,400.00 1,473,400.00 liabilities consistently 163 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 measured at fair value II. Inconsistent fair value -- -- -- -- measurement 2. Market Price Recognition Basis for Consistent and Inconsistent Fair Value Measurement Items at Level 1 In line with the market price of shares on the balance sheet date and forward foreign exchange option exchange rate. 3. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters for Consistent and Inconsistent Fair Value Measurement Items at Level 2 Naught 4. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters for Consistent and Inconsistent Fair Value Measurement Items at Level 3 Naught 5. Sensitiveness Analysis on Unobservable Parameters and Adjustment Information between Beginning and Ending Carrying Value of Consistent Fair Value Measurement Items at Level 3 Naught 6. Explain the Reason for Conversion and the Governing Policy when the Conversion Happens if Conversion Happens among Consistent Fair Value Measurement Items at Different Levels Naught 7. Changes in the Valuation Technique in the Current Period and the Reason for Such Changes Naught 8. Fair Value of Financial Assets and Liabilities Not Measured at Fair Value Naught 9. Other Naught 164 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 XII. Related Party and Related-party Transactions 1. Information Related to the Company as the Parent of the Company Proportion of share Proportion of voting held by the rights owned by the Name Registration place Nature of business Registered capital Company as the Company as the parent against the parent against the Company Company Hong Kong Wah Shing Holding Hong Kong Investment HKD110,000 13.47% 13.47% Company Limited Shenzhen Rising Investment RMB135.409614 Shenzhen Investment 5.12% 5.12% Development Co., million Ltd. Guangdong Electronics Guangzhou Sales & Production RMB462 million 4.74% 4.74% Information Industry Group Ltd. Rising Investment RMB 200 million Development Co., Hong Kong Investment 1.82% 1.82% and HKD1 million Ltd. Guangdong Rising Finance Holding Zhuhai Investment RMB1393 million 0.54% 0.54% Co., Ltd. Total 25.70% 25.70% Notes: Information on the Company as the parent The largest shareholder of the Company, Hong Kong Wah Shing Holding Co., Ltd., was the wholly-owned subsidiary of Electronics Group, and Electronics Group, Shenzhen Rising Investment Development Co., Ltd. (hereinafter referred to as “Shenzhen Rising”), Guangdong Rising Finance Holding Co., Ltd. (hereinafter referred to as “GD Rising Finance”) and Rising Investment Development Co., Ltd. (hereinafter referred to as “Rising Investment”) were the wholly-owned subsidiaries of Guangdong Rising Assets Management Co., Ltd. (hereinafter referred to as “Rising Company”). In line with the relevant stipulation of Corporation Law and Rules on Listed Companies Acquisition, Electronics Group, Shenzhen Rising and Rising Investment were persons acting in concert, and the Rising Company was the actual controller of the Company. As of 30 June 2019, the aforesaid persons acting in concert holding total A, B share of the Company 359,632,344.00 shares, 25.70 % of total share equity of the Company. The final controller of the Company was Guangdong Rising Assets Management Co., Ltd. 2. Subsidiaries of the Company Refer to Note IX Equity in Other Entities-1. Equity in Subsidiaries for details. 165 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 3. Information on the Joint Ventures and Associated Enterprises of the Company Refer to Note IX Equity in Other Entities-3. Equity in Joint Ventures or Associated Enterprises for details of significant joint ventures or associated enterprises of the Company. 4. Information on Other Related Parties Name Relationship with the Company PROSPERITY LAMPS & COMPONENTS LTD Shareholder owning over 5% shares Foshan NationStar Optoelectronics Co. Ltd. Under same actual controller Guangdong Fenghua Advanced Technology Holding Co., Ltd. Under same actual controller Guangdong Rising Optoelectronics Co., Ltd. Under same actual controller Guangdong Vollsun Data Solid-state Storage Co., Ltd Under same actual controller Guangdong Rising Finance Limited Under same actual controller MTM Semiconductor Equipment Co., Ltd. Under same actual controller Henan Rising Technology Investment Co., Ltd. Under same actual controller Guangdong Electronic Technology Research Institute Under same actual controller Guangzhou Diansheng Property Management Co., Ltd. Under same actual controller Hangzhou Times Lighting and Electrical Co., Ltd. Company controlled by related natural person Prosperity (Hangzhou) Lighting and Electrical Co., Ltd. Company controlled by related natural person Prosperity Electrical (China) Co., Ltd. Company controlled by related natural person Siteco Prosperity Lighting (Langfang) Co., Ltd. Company controlled by related natural person Company controlled by related natural person with significant OSRAM (China) Lighting Co., Ltd. influence 5. List of Related-party Transactions (1) Information on Acquisition of Goods and Reception of Labor Service Information on acquisition of goods and reception of labor service Unit: RMB The approval trade Whether exceed trade Same period of last Related party Content Reporting Period credit credit or not year Prosperity Lamps Purchase of and Components 1,358,912.39 12,000,000.00 No 3,844,498.14 materials Ltd. Prosperity Electrical Purchase of 4,500,000.00 No 729,882.89 (China) Co., Ltd. materials 166 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Hangzhou Times Purchase of Lighting and 317,153.35 1,000,000.00 No 368,916.04 materials Electrical Co., Ltd. Foshan NationStar Purchase of Optoelectronics 24,160,788.99 210,000,000.00 No 43,595,754.55 materials Co., Ltd. Guangdong Fenghua Advanced Purchase of 1,919,036.93 10,000,000.00 No 5,172,863.77 Technology Holding materials Co., Ltd. Guangdong Electronic Purchase of 46,551.72 3,000,000.00 No 760,683.76 Technology equipment Research Institute MTM Purchase of Semiconductor 261,855.01 1,000,000.00 No 323,282.05 equipment Equipment Co., Ltd. Guangdong Vollsun Purchase of Data Solid-state 1,600,000.00 equipment Storage Co., Ltd. Total 28,064,298.39 241,500,000.00 56,395,881.20 Information of sales of goods and provision of labor service Unit: RMB Related party Content Reporting Period Same period of last year PROSPERITY LAMPS & Sale of products 11,773,638.34 18,871,809.73 COMPONENTS LTD Prosperity Electrical (China) Co., Sale of products 56,974.66 175,397.67 Ltd. Prosperity (Hangzhou) Lighting and Sale of products 46,299.15 Electrical Co., Ltd. Guangdong Rising Optoelectronics Sale of products 568.97 Co., Ltd. Guangzhou Diansheng Property Sale of products 846.90 Management Co., Ltd. Total 11,831,459.90 19,094,075.52 Information of sales/purchase of goods and provision/reception of labor service The pricing for related-party transactions observes the principle of market subject to the market price when the transaction happens and relevant accounts shall be paid on time based on actual transaction. 167 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (2) Information on Related-party Trusteeship/Contract Naught (3) Information on Related-party Lease The Company was lessor: Naught The Company was lessee: Unit: RMB The lease fee confirmed in the The lease fee confirmed in the Name of lessor Category of leased assets Reporting Period same period of last year Guangdong Electronics Information Industry Group Vehicles 5,699.21 8,333.31 Ltd. (4) Information on Related-party Guarantee Naught (5) Information on Inter-bank Lending of Capital of Related Parties Naught (6) Information on Assets Transfer and Debt Restructuring by Related Party Naught (7) Information on Remuneration for Key Management Personnel Unit: RMB Item Reporting period Same period of last year Chairman of the Board 0.00 0.00 General Manager 707,777.02 700,000.00 Chairman of the Supervisory Committee 199,621.80 0.00 Secretary of the Board 66,667.00 400,000.00 Chief Financial Officer 407,777.02 400,000.00 Other 2,773,195.18 2,695,000.00 Total 4,155,038.02 4,195,000.00 168 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (8) Other Related-party Transactions Naught 6. Accounts Receivable and Payable of Related Party (1) Accounts Receivable Unit: RMB Ending balance Beginning balance Item Related party Carrying amount Bad debt provision Carrying amount Bad debt provision Guangdong Rising Interest receivable 16,711.11 49,800.02 Finance Co., Ltd. Guangdong Vollsun Accounts receivable Data Solid-state 2,753,280.00 82,598.40 2,753,280.00 82,598.40 Storage Co., Ltd. Guangzhou Diansheng Property Accounts receivable 957.00 28.71 Management Co., Ltd. PROSPERITY LAMPS & Accounts receivable 3,642,370.89 109,271.13 3,676,377.29 110,291.32 COMPONENTS LTD Prosperity (Hangzhou) Lighting Accounts receivable 86,367.27 86,293.82 86,367.27 69,093.82 and Electrical Co., Ltd. OSRAM (China) Accounts receivable 117,554.16 41,566.93 117,554.16 35,266.25 Lighting Co., Ltd. Prosperity Electrical Prepayments 7,521.37 7,521.37 (China) Co., Ltd. MTM Prepayments Semiconductor 28,368.00 Equipment Co., Ltd Guangdong Electronics Other receivables 19,500.00 585.00 Information Industry Group Ltd. Total 6,624,761.80 319,758.99 6,738,768.11 297,834.79 169 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (2) Accounts Payable Unit: RMB Item Related party Ending carrying amount Beginning carrying amount Foshan NationStar Accounts payable 15,740,680.29 17,964,138.25 Optoelectronics Co., Ltd. Guangdong Fenghua Advanced Accounts payable 1,757,507.91 1,489,703.61 Technology Holding Co., Ltd. Siteco Prosperity Lighting Accounts payable 251,021.56 251,021.56 (Langfang) Co., Ltd. Prosperity Electrical (China) Accounts payable 160,759.70 160,759.70 Co., Ltd. Hangzhou Times Lighting and Accounts payable 197,700.70 229,109.60 Electrical Co., Ltd. Prosperity Lamps and Accounts payable 554,680.06 Components Ltd. Guangdong Electronic Other payables 181,700.00 179,000.00 Technology Research Institute Prosperity Electrical (China) Other payables 100,000.00 100,000.00 Co., Ltd. MTM Semiconductor Other payables 21,000.00 38,600.00 Equipment Co., Ltd. Prosperity Lamps and Other payables 481,710.23 480,904.43 Components Ltd. Foshan NationStar Other payables 200,000.00 Optoelectronics Co., Ltd. Guangdong Electronics Other payables Information Industry Group 11,111.12 Ltd. Prosperity Electrical (China) Advances from customers 57,295.04 38,646.66 Co., Ltd. Total 19,149,375.43 21,497,674.99 7. Commitments of Related Party (1) Commitment: commitments made in acquisition documents or shareholding alteration documents Commitment maker: Controlling shareholder Type of commitment: About avoidance of horizontal competition Contents: Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising 170 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Investment have made a commitment that the elimination of the horizontal competition between Foshan Nation Star Optoelectronics Co., Ltd. and the Company through business integration or other ways or arrangements shall be completed before December 4, 2019. Date of commitment making: 4 December 2017 Term of commitment: 24 months Fulfillment: In execution (2) Commitment: commitments made in acquisition documents or shareholding alteration documents Commitment maker: Controlling shareholder Type of commitment: About avoidance of horizontal competition Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made more commitments as follows to avoid horizontal competition with the Company: 1. They shall conduct supervision and restraint on the production and operation activities of themselves and their relevant enterprises so that besides the enterprise above that is in horizontal competition with the Company for now, if the products or business of them or their relevant enterprises become the same with or similar to those of the Company or its subsidiaries in the future, they shall take the following measures: (1) If the Company thinks necessary, they and their relevant enterprises shall reduce and wholly transfer their relevant assets and business; and (2) If the Company thinks necessary, it is given the priority to acquire first, by proper means, the relevant assets and business of them and their relevant enterprises. 2. All the commitments made by them to eliminate or avoid horizontal competition with the Company are also applicable to their directly or indirectly controlled subsidiaries. They are obliged to urge and make sure that other subsidiaries execute what’s prescribed in the relevant document and faithfully honor all the relevant commitments. 3. If they or their directly or indirectly controlled subsidiaries break the aforesaid commitments and thus cause a loss for the Company, they shall compensate the Company on a rational basis. Date of commitment making: 4 December 2015 Term of commitment: Long-standing Fulfillment: In execution (3) Commitment: commitments made in acquisition documents or shareholding alteration documents Commitment maker: Controlling shareholder Type of commitment: About reduction and regulation of related-party transactions Content: Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made a commitment that during their direct or indirect holding of the Company’s shares, they shall 1. Strictly abide by the regulatory documents of the CSRC and the SZSE, the Company’s Articles of Association, etc. and not harm the interests of the Company or other shareholders of the Company in their production and operation activities by taking advantage of their position as the controlling shareholder and actual controller; 2. make sure that they or their other controlled subsidiaries, branch offices, jointly-run or associated companies (the “Relevant Enterprises” for short) will try their best to avoid or reduce related-party transactions with the Company or the Company’s subsidiaries; 3. strictly follow the market principle of justness, fairness and equal value exchange for necessary and unavoidable related-party transactions between them and their Relevant Enterprises and the Company, and withdraw from voting when a related-party transaction with them or their Relevant Enterprises is being voted on at a general meeting or a board meeting, and execute the relevant approval 171 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 procedure and information disclosure duties pursuant to the applicable laws, regulations and regulatory documents. Where the aforesaid commitments are broken and a loss is thus caused for the Company, its subsidiaries or the Company’s other shareholders, they shall be obliged to compensate. Date of commitment making: 4 December 2015 Term of commitment: Long-standing Fulfillment: In execution (4) Commitment: commitments made in acquisition documents or shareholding alteration documents Commitment maker: Controlling shareholder Type of commitment: About independence In order to ensure the independence of the Company in business, personnel, asset, organization and finance, Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made the following commitments: 1. They will ensure the independence of the Company in business: (1) They promise that the Company will have the assets, personnel, qualifications and capabilities for it to operate independently as well as the ability of independent, sustainable operation in the market. (2) They promise not to intervene in the Company’s business activities other than the execution of their rights as the Company’s shareholders. (3) They promise that they and their related parties will not be engaged in business that is substantially in competition with the Company’s business. And (4) They promise that they and their related parties will try their best to reduce related-party transactions between them and the Company; for necessary and unavoidable related-party transactions, they promise to operate fairly following the market-oriented principle and at fair prices, and execute the transaction procedure and the duty of information disclosure pursuant to the applicable laws, regulations and regulatory documents. 2.They will ensure the independence of the Company in personnel: (1) They promise that the Company’s GM, deputy GMs, CFO, Company Secretary and other senior management personnel will work only for and receive remuneration from the Company, not holding any positions in them or their other controlled subsidiaries other than director and supervisor. (2) They promise the Company’s absolute independence from their related parties in labor, human resource and salary management. And (3) They promise to follow the legal procedure in their recommendation of directors, supervisors and senior management personnel to the Company and not to hire or dismiss employees beyond the Company’s Board of Directors and General Meeting. 3. They will ensure the independence and completeness of the Company in asset: (1) They promise that the Company will have a production system, an auxiliary production system and supporting facilities for its operation; legally have the ownership or use rights of the land, plants, machines, trademarks, patents and non-patented technology in relation to its production and operation; and have independent systems for the procurement of raw materials and the sale of its products. (2) They promise that the Company will have independent and complete assets all under the Company’s control and independently owned and operated by the Company. And (3) They promise that they and their other controlled subsidiaries will not illegally occupy the Company’s funds and assets in any way, or use the Company’s assets to provide guarantees for the debts of themselves or their other controlled subsidiaries with. 4. They will ensure the independence of the Company in organization: (1) They promise that the Company has a sound corporate governance structure as a joint-stock company with an independent and complete organization structure. (2) They promise that the operational and management organs within the Company will independently execute their functions according to laws, regulations and the Company’s Articles of Association. 5. They will ensure the independence of the Company in finance: (1) They promise that the Company will have an independent financial department and financial accounting system with normative, independent financial accounting rules. (2) They promise that the Company will have 172 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 independent bank accounts and not share bank accounts with its related parties. (3) They promise that the Company’s financial personnel do not hold concurrent positions in its related parties. (4) They promise that the Company will independently pay its tax according to law. And (5) They promise that the Company can make financial decisions independently and that they will not illegally intervene in the Company’s use of its funds. Date of commitment making: 4 December 2015 Term of commitment: Long-standing Fulfillment: In execution 8. Other Naught XIII. Stock Payment 1. The Overall Situation of Stock Payment □Applicable √ Not applicable 2. The Stock Payment Settled in Equity □Applicable √ Not applicable 3. The Stock Payment Settled in Cash □Applicable √ Not applicable 4. Modification and Termination of the Stock Payment Naught 5. Other Naught XIV. Commitments and Contingency 1. Significant Commitments Significant commitments on the balance sheet date Naught 173 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 2. Contingency (1) Significant Contingency on Balance Sheet Date Naught (2) In Despite of no Significant Contingency to Disclose, the Company Shall Also Make Relevant Statements There was no significant contingency in the Company. 3. Other Naught XV. Events after Balance Sheet Date 1. Significant Non-adjusted Events Naught 2. Profit Distribution Naught 3. Sales Return Naught 4. Notes to Other Events after Balance Sheet Date Naught XVI. Other Significant Events 1. The Accounting Errors Correction in Previous Period Naught 2. Debt Restructuring Naught 174 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 3. Assets Replacement Naught 4. Pension Plan Naught 5. Discontinued Operations Naught 6. Segment Information Naught 7. Other Significant Transactions and Events with Influence on Investors’ Decision-making Naught 8. Other Naught XVII. Notes of Main Items in the Financial Statements of the Company as the Parent 1. Accounts Receivable (1) Accounts Receivable Disclosed by Category Unit: RMB Ending balance Beginning balance Carrying amount Bad debt provision Carrying amount Bad debt provision Category Withdra Withdraw Carrying Carrying Proportio wal Proportio al Amount Amount value Amount Amount value n proportio n proportio n n Accounts receivable for which bad debt 23,377,2 16,266,8 7,110,413 23,377,22 16,266,81 7,110,413.5 3.09% 69.58% 2.78% 69.58% provision separately 23.66 10.09 .57 3.66 0.09 7 accrued Of which: Accounts receivable 732,299, 96.91% 30,039,3 4.10% 702,259,9 819,146,6 97.22% 30,359,11 3.71% 788,787,51 175 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 for which bad debt 386.93 93.85 93.08 35.09 6.01 9.08 provision accrued by group Of which: 755,676, 46,306,2 709,370,4 842,523,8 46,625,92 795,897,93 Total 100.00% 6.13% 100.00% 5.53% 610.59 03.94 06.65 58.75 6.10 2.65 Individual withdrawal of bad debt provision by single item: Unit: RMB Ending balance Name Carrying amount Bad debt provision Withdrawal proportion Reason for withdrawal Involved in the lawsuit; the Company won in the Customer A 14,220,827.14 7,110,413.57 50.00% first instance judgment and the other side had appealed Involved in the lawsuit, Customer B 9,156,396.52 9,156,396.52 100.00% the case hasn’t been finalized Total 23,377,223.66 16,266,810.09 -- -- Withdrawal of bad debt provision by group: Unit: RMB Ending balance Name Carrying amount Bad debt provision Withdrawal reason Credit risk 732,299,386.93 30,039,393.85 4.10% Total 732,299,386.93 30,039,393.85 -- Notes to the determination basis for the group: Please refer to the relevant information of disclosure of bad debt provision of other accounts receivable if adopting the general mode of expected credit loss to withdraw bad debt provision of accounts receivable. □ Applicable √ Not applicable Disclosure by aging Unit: RMB Aging Ending balance Within 1 year (including 1 year) 676,467,035.42 1 to 2 years 22,338,039.73 2 to 3 years 7,653,591.61 3 to 4 years 2,782,638.29 4 to 5 years 129,101.60 176 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Total 709,370,406.65 (2) Bad Debt Provision Withdrawal, Reversed or Recovered in the Reporting Period Information of withdrawal of bad debt provision: Unit: RMB Changes in the Reporting Period Category Beginning balance Ending balance Withdrawal Reversal or recovery Write-off Accounts receivable 46,625,926.10 -210,202.38 109,519.78 46,306,203.94 Total 46,625,926.10 -210,202.38 109,519.78 46,306,203.94 Of which bad debt provision recovered or reversed with significant amount during the Reporting Period: Naught (3) Particulars of the Actual Verification of Accounts Receivable during the Reporting Period Unit: RMB Item Amount No. 1 109,420.64 Other driblet small amount 99.14 Of which verification of significant accounts receivable: Naught (4) Top 5 of the Ending Balance of the Accounts Receivable Collected according to Arrears Party Unit: RMB Relationship with the Carrying amount Amount of bad debt Proportion to total Name Company provision withdrawn accounts receivable No. 1 Non-related party 116,548,474.42 3,496,454.23 15.42% No. 2 Non-related party 21,132,097.12 691,796.76 2.80% No. 3 Non-related party 18,052,065.50 834,975.20 2.39% No. 4 Non-related party 17,103,092.54 1,710,309.25 2.26% No. 5 Non-related party 16,775,164.92 1,677,516.49 2.22% Total 189,610,894.50 8,411,051.93 25.09% (5) Derecognition of Accounts Receivable due to the Transfer of Financial Assets Naught 177 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (6) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Accounts Receivable Naught 2. Other Receivables Unit: RMB Item Ending balance Beginning balance Interest receivable 5,828,623.70 5,152,364.04 Other receivables 43,751,294.85 38,386,484.68 Total 49,579,918.55 43,538,848.72 (1) Interest Receivable 1) Category of Interest Receivable Unit: RMB Item Ending balance Beginning balance Fixed time deposit 1,575,001.54 56,317.78 Structural deposit 2,400,361.88 3,151,895.54 Bank financial products 1,853,260.28 1,944,150.72 Total 5,828,623.70 5,152,364.04 2) Significant Overdue Interest Naught 3) Information of Withdrawal of Bad Debt Provision □ Applicable √ Not applicable (2) Dividends Receivable Naught (3) Other Receivables 1) Other Receivables Classified by Accounts Nature Unit: RMB Nature Ending carrying amount Beginning carrying amount Internal business group 23,824,279.81 22,478,786.69 Borrowings and petty cash for employees 6,070,982.35 3,294,170.26 VAT export tax refunds 6,006,579.00 6,252,642.96 178 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Performance bond 3,904,842.00 2,905,450.00 Rental fees and water & electricity fees 1,253,446.62 765,582.10 Other 4,302,146.66 3,991,470.59 Total 45,362,276.44 39,688,102.60 2) Information of Withdrawal of Bad Debt Provision Unit: RMB First stage Second stage Third stage Expected loss in the Expected loss in the Bad debt provision Expected credit loss Total duration (credit impairment duration (credit impairment of the next 12 months not occurred) occurred) Balance of 1 January 406,679.05 894,938.87 1,301,617.92 2019 Balance of 1 January 2019 in the current —— —— —— —— period Withdrawal of the 132,933.30 176,430.37 309,363.67 current period Balance of 30 June 2019 539,612.35 1,071,369.24 1,610,981.59 Changes of carrying amount with significant amount changed of loss provision in the current period □ Applicable √ not applicable Disclosure by aging Unit: RMB Aging Ending balance Within 1 year (including 1 year) 41,271,745.79 1 to 2 years 1,483,985.07 2 to 3 years 927,958.10 3 to 4 years 10,000.00 4 to 5 years 57,605.89 Total 43,751,294.85 3) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Information of withdrawal of bad debt provision Unit: RMB Changes in the Reporting Period Category Beginning balance Ending balance Withdrawal Reversal or recovery Other accounts 1,301,617.92 309,363.67 1,610,981.59 receivable Total 1,301,617.92 309,363.67 1,610,981.59 179 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Of which bad debt provision recovered or reversed with significant amount during the Reporting Period: Naught 4) Particulars of the Actual Verification of Other Receivables during the Reporting Period Naught 5) Top 5 of the Ending Balance of Other Receivables Collected according to the Arrears Party Unit: RMB Proportion to ending Ending balance of Name of the entity Nature Ending balance Aging balance of total other bad debt provision receivables% Internal business No. 1 18,835,715.58 Within 3 years 41.52% group No. 2 Export rebates 6,006,579.00 Within 1 year 13.24% 180,197.37 Internal business No. 3 4,584,479.53 Within 1 year 10.11% group No. 4 Other 1,296,947.31 Within 3 years 2.86% 314,327.63 No. 5 Other 1,157,064.20 Within 1 year 2.55% 34,711.93 Total -- 31,880,785.62 -- 70.28% 529,236.93 6) Accounts Receivable Involving Government Subsidies Naught 7) Derecognition of Other Receivables due to the Transfer of Financial Assets Naught 8) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Other Receivables Naught 3. Long-term Equity Investment Unit: RMB Ending balance Beginning balance Item Depreciation Depreciation Carrying amount Carrying value Carrying amount Carrying value reserve reserve Investment to 283,793,102.26 283,793,102.26 283,793,102.26 283,793,102.26 subsidiaries Investment to joint ventures and 180,122,685.92 180,122,685.92 182,458,559.69 182,458,559.69 associated enterprises Total 463,915,788.18 463,915,788.18 466,251,661.95 466,251,661.95 180 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (1) Investment to Subsidiaries Unit: RMB Depreciation Ending balance of Beginning Investee Increase Decrease Ending balance reserve depreciation balance withdrawn reserve Foshan Chansheng Electronic Ballast 2,744,500.00 2,744,500.00 Co., Ltd. FSL Chanchang Optoelectronics 82,507,350.00 82,507,350.00 Co., Ltd. Foshan Taimei Times Lamps and 350,000.00 350,000.00 Lanterns Co., Ltd. Nanjing Fozhao Lighting Components 72,000,000.00 72,000,000.00 Manufacturing Co., Ltd. Foshan Electrical & Lighting 35,418,439.76 35,418,439.76 (Xinxiang) Co., Ltd. Guangdong Fozhao New Light Sources 50,077,000.00 50,077,000.00 Technology Co., Ltd. Foshan Lighting Lamps & 15,000,000.00 15,000,000.00 Components Co., Ltd. FSL Zhida Electric Technology Co., 25,500,000.00 25,500,000.00 Ltd. FSL Lighting 195,812.50 195,812.50 GMBH Total 283,793,102.26 283,793,102.26 181 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 (2) Investment to Joint Ventures and Associated Enterprises Unit: RMB Increase/decrease Ending Gains and Adjustme Cash Withdraw balance Additiona losses nt of Beginnin Reduced Changes bonus or al of Ending of Investee l recognize other g balance investmen of other profits impairme Other balance depreciati investmen d under comprehe t equity announce nt on t the equity nsive d to issue provision reserve method income I. Joint ventures II. Associated enterprises Shenzhen Primatron ix 182,458,5 784,711.9 3,120,585 180,122,6 (Nanho) 59.69 8 .75 85.92 Electronic s Ltd. 182,458,5 784,711.9 3,120,585 180,122,6 Subtotal 59.69 8 .75 85.92 182,458,5 784,711.9 3,120,585 180,122,6 Total 59.69 8 .75 85.92 4. Operating Revenue and Cost of Sales Unit: RMB Reporting Period Same period of last year Item Operating revenue Cost of sales Operating revenue Cost of sales Main business 1,587,821,567.72 1,245,016,649.64 1,951,987,821.57 1,545,234,231.64 Other business 47,837,600.24 39,394,932.17 52,300,623.19 42,160,088.89 Total 1,635,659,167.96 1,284,411,581.81 2,004,288,444.76 1,587,394,320.53 Whether the Company has executed the new income standards □ Yes √ No 5. Investment Income Unit: RMB Item Reporting Period Same period of last year Long-term equity investment income 784,711.98 179,781.56 accounted by equity method 182 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Investment income from disposal of 330,228.20 long-term equity investment Investment income from holding of trading 1,750,000.00 financial assets Investment income from disposal of trading 13,550,000.00 financial assets Dividend income from holding of other 13,957,444.99 equity instrument investment Investment income from holding of 10,971,417.60 available-for-sale financial assets Investment income from financial products 14,528,002.77 9,886,641.16 and structural deposits Other -730,500.00 Total 44,169,887.94 21,037,840.32 6. Other Naught XVIII. Supplementary Materials 1. Items and Amounts of Non-recurring Profit or Loss √ Applicable □ Not applicable Unit: RMB Item Amount Note Gains/losses on the disposal of non-current -53,336.67 assets Government grants recognized in the current period, except for those acquired in the ordinary course of business or granted at 2,231,959.96 certain quotas or amounts according to the government’s unified standards Gain/loss from change of fair value of trading assets and liabilities, derivative in financial assets and liabilities, and Mainly because investment income investment gains from disposal of trading 12,553,800.00 obtained from selling equity of Chengdu financial assets and liabilities, derivative Hongbo Enterprise Co., Ltd. financial assets and liabilities, and other creditors’ investment, other than valid hedging related to the Company’s common 183 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 businesses Other non-operating income and expenses 314,237.31 other than the above Less: Income tax effects 2,287,287.39 Non-controlling interests effects 1,635.12 Total 12,757,738.09 -- Explain the reasons if the Company classifies an item as an non-recurring gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurring Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item □ Applicable √ Not applicable 2. Return on Equity and Earnings Per Share EPS (Yuan/share) Profit as of Reporting Period Weighted average ROE (%) EPS-basic EPS-diluted Net profit attributable to ordinary 3.77% 0.1195 0.1195 shareholders of the Company Net profit attributable to ordinary shareholders of the Company after 3.49% 0.1104 0.1104 deduction of non-recurring profit or loss 3. Differences between Accounting Data under Domestic and Overseas Accounting Standards (1) Differences of Net Profit and Net Assets Disclosed in Financial Reports Prepared under International and Chinese Accounting Standards □ Applicable √ Not applicable (2) Differences of Net profit and Net assets Disclosed in Financial Reports Prepared under Overseas and Chinese Accounting Standards □ Applicable √ Not applicable (3) Explain Reasons for the Differences between Accounting Data under Domestic and Overseas Accounting Standards; for any Adjustment Made to the Difference Existing in the Data Audited by the Foreign Auditing Agent, Such Foreign Auditing Agent’s Name Shall Be Clearly Stated Naught 184 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 4. Other Naught 185 Foshan Electrical and Lighting Co., Ltd. Interim Report 2019 Part XI Documents Available for Reference 1. The financial statements signed and stamped by the Company’s legal representative, General Manager and Chief Financial Officer. 2. The originals of all the Company’s announcements and documents disclosed to the public during the Reporting Period on the media designated by the CSRC for information disclosure. The Board of Directors Foshan Electrical and Lighting Co., Ltd. 28 August 2019 186