Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 FOSHAN ELECTRICAL AND LIGHTING CO., LTD. ANNUAL REPORT 2016 March 2017 1 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section I Important Statements, Contents and Definitions The board of directors (the “Board”), the supervisory board (the “Supervisory Board”), as well as the directors, supervisors and executive officers of Foshan Electrical and Lighting Co., Ltd. (the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of this Report, and shall be jointly and severally liable for any false representation, misleading statements or material omissions in this Report. He Yong, head of the Company, Liu Xingming, accounting head for this Report, and Tang Qionglan, head of the accounting department (head of accounting), hereby guarantee that the Financial Report carried in this Report is factual, accurate and complete. All directors attended the board meeting for the review of this Report. Beijing Zhongzhengtiantong Certified Public Accountants LLP has issued a standard auditor’s report with unqualified opinion for the Company. The accounting data and financial report in this Report are subject to those audited by Beijing Zhongzhengtiantong Certified Public Accountants LLP. This Report is prepared in both Chinese and English. Should there be any understanding discrepancy between the two versions, the Chinese version shall prevail. The future plans and some other forward-looking statements, as well as the relevant cautionary statements, involved in this Report shall not be considered as virtual promises of the Company to investors. And investors are kindly reminded to be well aware of possible risks. The Company has described in detail in this Report the risk of market competition, the risk of rising operating costs, the risk of falling prices of inventories and the risk of exchange rate fluctuations. Please refer to “Possible risks” in “Outlook of the Company’s future development” in “Section IV Performance Discussion and Analysis” of this Report. The Board has considered and approved the following proposal for profit distribution: Based on the total shares of 1,272,132,868, a cash dividend of RMB4.20 (tax inclusive) per 10 shares will be distributed to all shareholders of the Company. No bonus shares will be granted, nor will any capital reserve be converted into share capital. 2 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Table of Contents Section I Important Statements, Contents and Definitions ............................................................ 2 Section II Corporate Profile and Financial Results ........................................................................ 5 Section III Business Profile ............................................................................................................. 10 Section IV Performance Discussion and Analysis ......................................................................... 14 Section V Significant Events ........................................................................................................... 39 Section VI Share Changes and Shareholders’ Profile ................................................................... 74 Section VII Preference Shares ........................................................................................................ 85 Section VIII Directors, Supervisors, Executive Officers and Staff .............................................. 86 Section IX Corporate Governance ................................................................................................. 99 Section X Corporate Bonds ........................................................................................................... 113 Section XI Financial Report .......................................................................................................... 114 Section XII Documents Available for Reference ......................................................................... 239 3 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Definitions Term Definition The Company, Company, FSL Foshan Electrical and Lighting Co., Ltd. GRAM Guangdong Rising Assets Management Co., Ltd. Electronics Group Guangdong Electronics Information Industry Group Ltd. GD Rising Finance Guangdong Rising Finance Holding Co., Ltd. Shenzhen Rising Investment Shenzhen Rising Investment Development Co., Ltd. Hong Kong Rising Investment Hong Kong Rising Investment Development Limited CSRC China Securities Regulatory Commission SZSE Shenzhen Stock Exchange Shareholders’ General Meeting of Foshan Electrical and Lighting Co., Shareholders’ General Meeting Ltd. Board of Directors Board of Directors of Foshan Electrical and Lighting Co., Ltd. Supervisory Board Supervisory Board of Foshan Electrical and Lighting Co., Ltd. Annual report auditor Beijing Zhongzhengtiantong Certified Public Accountants LLP Yuan, ten thousand, million, billion RMB Yuan, RMB Ten Thousand, RMB million, RMB billion 4 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section II Corporate Profile and Financial Results I Corporate information Stock name FSL / FSL B Stock code 000541/200541 Stock exchange Shenzhen Stock Exchange Company name in Chinese 佛山电器照明股份有限公司 Abbr. 佛山照明 Company name in English (if FOSHAN ELECTRICAL AND LIGHTING CO.,LTD any) Abbr. (if any) FSL Legal representative He Yong Registered address No. 64, Fenjiang North Road, Chancheng District, Foshan City, Guangdong Province, P.R.China Zip code 528000 Office address No. 64, Fenjiang North Road, Chancheng District, Foshan City, Guangdong Province, P.R.China Zip code 528000 Company website www.chinafsl.com Email gzfsligh@pub.foshan.gd.cn II Contact information Board Secretary Securities Representative Name Lin Yihui 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 E-mail fsl-yh@126.com fslhyf@163.com III Information disclosure and place where this Report is kept Newspapers designated by the Company for China Securities Journal, Securities Times, Securities Daily, Ta Kung Pao information disclosure (HK) Website designated by the China Securities http://www.cninfo.com.cn Regulatory Commission (CSRC) for the publication 5 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 of this Report Board Secretary’s Office, FSL Office Building, No. 64, Fenjiang North Place where this Report is kept Road, Chancheng District, Foshan City, Guangdong Province, P.R.China IV Company registration and alteration Credibility code 91440000190352575W Changes in main business activities of the No changes Company after going public (if any) Changes of controlling shareholder (if any) No changes V Other information The CPAs firm hired by the Company Name Beijing Zhongzhengtiantong Certified Public Accountants LLP Office address 13/F, Tower B, Jinyun Building, A43 Xizhimen Avenue North, Haidian District, Beijing Accountants writing signatures Tong Quanyong, Luo Dongri Sponsor engaged by the Company to continuously perform its supervisory function during this Reporting Period □ Applicable √ Not applicable Financial advisor engaged by the Company to continuously perform its supervisory function during this Reporting Period □ Applicable √ Not applicable VI Accounting and financial results Indicate by tick mark whether the Company performed any retroactive adjustments to or restatement of its accounting data due to changes of accounting policies or correction of accounting errors □ Yes √ No 2016 2015 +/-% 2014 Operating revenues (RMB Yuan) 3,366,454,968.60 2,876,659,100.63 17.03% 3,068,641,200.17 Net profit attributable to shareholders of the Company 1,072,342,050.13 53,405,593.12 1,907.92% 266,125,048.97 (RMB Yuan) Net profit attributable to shareholders of the Company 351,237,317.17 150,093,497.33 134.01% 306,310,907.76 before exceptional profit and loss (RMB Yuan) Net cash flows from operating 289,978,768.48 188,325,189.43 53.98% 305,638,745.34 activities (RMB Yuan) 6 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Basic earnings per share (RMB 0.8429 0.0420 1,906.90% 0.2092 Yuan /share) Diluted earnings per share (RMB 0.8429 0.0420 1,906.90% 0.2092 Yuan /share) Weighted average return on equity 21.40% 1.27% 20.13% 9.08% (%) December 31, 2016 December 31, 2015 +/-% December 31, 2014 Total assets (RMB Yuan) 6,100,169,400.30 6,048,296,432.78 0.86% 3,736,704,336.40 Net assets attributable to shareholders of the Company 4,990,466,577.12 5,023,546,888.12 -0.66% 3,044,585,720.58 (RMB Yuan) VII Differences in accounting data under domestic and foreign accounting standards 1. Differences in the net profit and the net assets disclosed in the financial reports prepared under Chinese and international accounting standards □ Applicable √ Not applicable No such differences for this Reporting Period. 2. Differences in the net profit and the net assets disclosed in the financial reports prepared under Chinese and foreign accounting standards □ Applicable √ Not applicable No such differences for this Reporting Period. VIII Financial results by quarter Unit: RMB Yuan 1Q 2Q 3Q 4Q Operating revenues 904,310,757.83 851,360,169.61 819,510,785.90 791,273,255.26 Net profit attributable to 107,776,865.30 99,148,947.42 73,179,107.88 792,237,129.53 shareholders of the Company Net profit attributable to shareholders of the Company 107,348,727.74 99,288,365.94 73,405,588.72 71,194,634.77 before exceptional profit and loss Net cash flows from operating 186,104,091.50 105,524,215.56 32,420,605.94 -34,070,144.52 activities Indicate by tick mark whether there are any material differences between the financial indicators above or their summations and those which have been disclosed in quarterly or semi-annual reports □ Yes √ No 7 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 IX Exceptional profit/loss √ Applicable □ Not applicable Unit: RMB Yuan Item 2016 2015 2014 Note Profit/loss on disposal of non-current assets (including offset asset impairment -5,776,457.37 -8,172,702.85 -1,287,703.94 provisions) Government grants charged to the profit/loss for this Reporting Period (except for the government grants closely related to the 1,669,377.53 4,780,007.27 2,174,021.86 business of the Company and given at a fixed quota or amount in accordance with the State’s uniform standards) Profit due to the situation where investment costs for the Company to obtain subsidiaries, associates and joint ventures -17,112.47 are lower than the enjoyable fair value of identifiable net assets of investees when making investments Profit/loss on fair value changes of transactional financial assets and liabilities Mainly due to sale & investment income from disposal of through block trading transactional financial assets and liabilities 853,216,065.17 19,472,654.77 2,962,781.37 of the Guoxuan as well as financial assets available for sale, High-tech stock held except for effective hedges related to routine by the Company operations of the Company Impairment provision reversal of accounts receinable on which the impairment test is 3,535,749.69 carried out separately Non-operating income and expense other -4,774,788.19 -130,293,226.71 -51,945,691.06 than the above Other gain and loss items that meet 944,428.72 1,499,406.22 definition of extraordinary gain/loss Less: Corporate income tax 127,331,306.57 -16,925,475.37 -6,958,646.77 Minority interests (after tax) -566,092.70 344,540.78 530,207.54 Total 721,104,732.96 -96,687,904.21 -40,185,858.79 -- Explanation of why the Company classified an item as exceptional profit/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Profit and Loss, or reclassified any exceptional profit/loss item given as an example in the said explanatory announcement to recurrent profit/loss 8 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 □ Applicable √ Not applicable No such cases in this Reporting Period. 9 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section III Business Profile I Main business scope for this Reporting Period Is the Company subject to any disclosure requirements for special industries? No. 1. Main business and products We have been engaged in production, R&D and sale of lighting products since our listing. Our products mainly include conventional lighting products and LED lighting products. We have a wide variety of products with a complete range of specifications, including fluorescent lamps, halogen lamps, energy saving lamps, motor vehicle lamps, conventional lamps, LED light source, LED lamps, etc. With the most specifications in the lighting industry, our products are widely used for indoor and outdoor lighting, landscape lighting, motor vehicle lighting and so on. Upon years of development, we have won quite many honors such as the title of “The King of Lamps in China”, and our “FSL” and “Fenjiang” brands have been certified as “Famous China Brands”. While pushing diversified strategies, the Company set the electrical engineering business as the new engine for its rapid development in 2016. Based on the existing electrical engineering equipment, the Company strived to develop electrical engineering equipment covering lots of series of electrical engineering equipment and sockets. In future, the Company would make efforts to create a strategic layout where the development of lighting products keeping pace with electrical engineering equipment. 2. Main business model (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 10 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 some orders for LED lighting products, export 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 We mainly adopt a commercial agent model, selling our products to commercial agents through various channels and setting up business divisions under the sales department to follow up the use of our products by customers and provide relevant support. In terms of channels, besides consolidating wholesale, we will also focus on the development of franchised stores, illumination engineering & commercial lighting, e-commerce & retail sales and automotive lighting to minimize our weaknesses in this respect and expand the space for our survival. 3. Main driving force for business performance (1) Rapid development of the industry As the emerging industry involved in the country’s strategies, LEC industry rapidly developed in the world in recent years due to its features of high efficiency and energy-saving, green environmental protection, as well as long service life. Thanks to the rapid development of the LED industry, the Company achieved good business performance. (2) The Company’s own advantages By right of the Company’s advantages in technology, brand, channel, and scale, the Company firmly grasped the opportunities brought by the industry’s rapid development, consistently pushed forward the technology upgrade of main products, reinforced market development, and optimized the sales structure of products through sustainable 11 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 R&D input and technology innovation. And at the same time, by means of effective control on procurement and manufacturing cost, the Company raised the efficiency of management and products, improved its comprehensive competitiveness, overcame the difficulties and challenges resulted from the serious market situation, and kept the sustainable growth of its operating revenue and profit. 4. Development stage and periodicity of the lighting industry as well as our position in the market The recent years have witnessed the rapid rise of the LED lighting technology. Due to the sharp drop in their cost and their remarkable performance in energy saving & emission reduction, LED lighting products have been generally accepted by consumers, resulting in a higher and higher penetration rate as well as a fast-shrinking market for conventional lighting products. However, after years of fast development and renewal, growth in LED lighting has slowed down. Particularly the LED downstream with a low requirement for market access is suffering from an obvious problem of structural overcapacity, leading to the disordered, cutthroat competition on the market. Under the double hits by a macro economic downturn and fierce competition, large enterprises will expand through mergers and acquisitions for stronger competitiveness, while some small and medium ones can only face the fate of being washed out of the market due to lack of competitiveness, which is bringing the entire industry into an integration phase. As a necessity for daily life, lighting products are mainly under the influence of the macro economy and the real estate sector but are little affected by seasons and regions. Generally speaking, China’s lighting industry is insufficiently centralized with no overwhelmingly superior enterprises despite an enlarging market share of competitive brands. Upon years of development, we have become a leading and quite competitive lighting enterprise with strong competitiveness in brand, production scale, channel, R&D, etc. II Significant changes in main assets 1. Significant changes in main assets Main assets Reason for any significant change Fixed assets No significant changes Intangible assets No significant changes Increased 120.01% from the opening amount mainly due to increase in ongoing Construction in progress construction projects Available-for-sale financial assets Mainly due to sale through block trading of some of the Guoxuan High-tech stock held 12 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 by the Company 2. Main assets overseas □ Applicable √ Not applicable III Core competitiveness analysis Is the Company subject to any disclosure requirements for special industries? No. The core competitiveness of the Company mainly reflects on fours aspects listed below: Channel advantage The Company has been sticking to the marketing strategy of deeply focusing and refining channels. Through years of development and experience accumulation, the Company currently has four major sales channels, which contains the circulation and wholesales channel, the exclusive shop channel, the E-business retail channel, and the engineering commercial lighting channel, forming a marketing network covering the whole country. Replying on strong and perfect sales channels, products of the Company can rapidly enter the market, which has significantly improved the Company’s market development capability and competitiveness. Brand advantage The Company keeps focusing on the positioning, core value, and features of FSL brand, and continually improved the brand recognition and reputation of FSL brand by product design, end sales, advertisement, special lighting exhibition, and so on. At present, FSL and Fen Jiang among the three brands of the Company are both famous trademarks in China. The FSL brand has become one of the most influential and popular brands in China, and the powerful brand influence has become the main driver for continuous sales growth of the Company. Technology advantage The Company has always been attaching importance to R&D of new products and technologies, increasing the input on independent innovation on technologies and products, and perfecting the improvement process for R&D and technique of all products. The Company absorbs and trains technical talents, set up innovative incentive mechanism and performance mechanism, and fully provides with supports in fund, talents, and mechanisms. 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. 13 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section IV Performance Discussion and Analysis I Overview (I) Summary In 2016, with great downward pressure and limited driving forces, the international and domestic economies both slowed down in growth. In the lighting industry, despite a fast-growing LED market, LED enterprises were excessive in number, causing increasingly fierce competition. In face of the unfavorable macro-environment and the intense competition in the industry, the Company continued to follow the guideline of “Adjust the Structure, Stabilize Growth, Attach Importance to Management and Improve Business Results”. Keeping in mind the targets it set at the beginning of the year, as well as its development strategy, the Company beefed up product development for a better product mix, strengthened marketing and improved management. As a result, the business targets for the year have been excellently achieved. For the Reporting Period, the Company achieved operating revenues of RMB 3366.4550million, up 17.03 % from the year earlier. To be specific, LED products generated sales revenue of RMB 2045.6815million, representing a YoY increase of 44.43 %, while traditional lighting products created sales revenue of RMB 1293.5391million, down 9.51 % from last year; the domestic sales revenue stood at RMB 2147.7421million, a 11.66% increase from last year, while the overseas sales revenue stood at RMB 1218.7129million, up 27.84% from the year earlier. The total profits stood at RMB 1273million (including an investment income of RMB 853million from the sale of the Guoxuan High-tech stock in the Reporting Period), up 2668.32 % year on year; and the net profits attributable to the shareholders of the listed Company stood at RMB 1072million, representing a YoY rise of 1907.92 %. (II) What we have done in 2016: 1. Reinforced R&D, and constantly launched new products Based on LEC product’s features of short service life and rapid renewing, we focused on customers, insisted on more input on R&D and product innovation, constantly built the competitive technology and R&D platform. We put an emphasis on user survey and basic research, subdivided the product market via independent R&D and external cooperation, continuously researched and developed new products, as well as launched them to the market, so that our hard efforts would result to the transfer of our image as the wholesaler of big products in circulation. In the Reporting Period, we spent R&D expense of RMB 110.07million, representing a year-on-year increase of 18.49 %. We applied for 61patents, of which there’re 10 patents for invention, 33 patents of utility models, 18 design patents. We accomplished 195 big series, of which there’re 1009 items in new product 14 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 development with specifications, and 269 items in technology and technique improvement with specifications. The launch of new products enriched our product line, improved our market competitiveness, and brought growth point for our sales revenue and profit. 2. Optimized channel construction, and expanded development space In the Reporting Period, we continued to deeply dig in channel enlargement, and optimized channel construction. In terms of domestic sales, we simultaneously promoted the core and emerging channels, and constantly emphasized on developing new channels while keeping the advantaged channels, and as a result we achieved a large growth of sales revenue in channels including exclusive shops, e-commerce, industrial mining, and motor vehicles. In the Reporting Period, as for the exclusive chop channel, we newly increased 242exclusive shops, contributing to 928 exclusive shops in total. As for the e-commerce channel, we conducted sales promotion while keeping pace with Tmall and JD. In aspect of engineering commercial lighting, we organized special teams to positively participate in engineering projects in various hidden channels. In terms of overseas sales, we made breakthroughs in factors covering brand, client, product, and area. We strived to promote our FSL self-owned brand, constantly improved the sales volume for our overseas self-owned brand, and successfully sold out our FSL self-owned-brand products in 30 countries and regions in 2016, reaching a 66% year-on-year growth of sales volume for FSL self-owned brand. We initiatively and deeply dug out customer demands, continuously intensify our cooperation with the existing major customers, and sustainably conducted development of major customers. We deeply developed LED business with the existing traditional customers, urged the constant optimization of product structure in overseas sales, and reached 60% LED product sales in the whole overseas sales. 3. Implemented the precise production, and improved the operating efficiency In the Reporting Period, we put forward the working subject for production management as “creating benefits via precise production”. We saved human resources cost and improved production efficiency through improving the production automation level. We cut down procurement cost through mechanisms such as sunshine procurement, competitive bidding, and competitive negotiation. We also lowered cost and raised efficiency through optimizing design, as well as introducing new materials and techniques. We strictly controlled waste and improved production efficiency via enhancing the scheduling management, as well as the management and control on production process. We decreased the risk of product’s market quality via executing the quality objective appraisal system, as well as supervision and review on internal control of quality. We strictly implemented the budget management system, utilized the idle fund to purchase the principal-protected financing products, so as to improve the service efficiency of capital. In the Reporting Period, our gross margin increased by 1.17% as compared with last year, and expense decreased by 6.76% as compared with last year. 15 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 4. Established the subsidiary for electrical engineering, and increased our profit growth point In Oct 2016, we established the subsidiary for electrical engineering. While based on our brand advantage, channel advantage, as well as the abundant experience in production, operation, and management, we made great efforts on electrical engineering equipment, and as a result, set the basis for our strategy of simultaneous development of lighting products and electrical engineering equipment in future. In respect of product, we organized the excellent R&D team in the industry, so that to lay the root for the extension of electrical engineering equipment in later stage. In respect of channel, we depended on our current channel advantages, integrated channel resources, applied incentive sales policy, and therefore aroused the enthusiasm of agencies. In the Reporting Period, we gained sales revenue in electrical engineering equipment of RMB 70.16million, showing a year-on-year increase of 90%. II Analysis of main business 1. Overview See “I Overview” in “Performance Discussion and Analysis”. 2. Revenues and costs (1) Breakdown of operating revenues Unit: RMB Yuan 2016 2015 As a percentage of As a percentage of +/-% Amount operating revenues Amount operating revenues (%) (%) Operating revenues 3,366,454,968.60 100% 2,876,659,100.63 100% 17.03% By business segment Lighting fixtures and 3,366,454,968.60 100.00% 2,876,659,100.63 100.00% 17.03% lamps By product LED products 2,045,681,465.82 60.77% 1,416,365,037.13 49.24% 44.43% Traditional lighting 1,293,539,060.72 38.42% 1,429,560,217.10 49.70% -9.51% products Others 27,234,442.06 0.81% 30,733,846.40 1.07% -11.39% By geographical segment 16 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 China 2,147,742,100.25 63.80% 1,923,383,563.07 66.86% 11.66% Overseas 1,218,712,868.35 36.20% 953,275,537.56 33.14% 27.84% (2) Business segments, products or geographical segments contributing over 10% of the operating revenues or profit √ Applicable □ Not applicable Is the Company subject to any disclosure requirements for special industries? No. Unit: RMB Yuan Increase/decrease Increase/decrease Increase/decrease Operating Gross profit rate of operating of gross profit Operating cost of operating cost revenue (%) revenue over last rate over last year over last year (%) year (%) (%) Classified by industry: Lighting fixtures 3,366,454,968.60 2,518,164,099.97 25.20% 17.03% 15.22% 1.17% and lamps Classified by product: LED lighting 2,045,681,465.82 1,583,097,371.71 22.61% 44.43% 41.27% 1.73% products Traditional 1,293,539,060.72 916,616,441.30 29.14% -9.51% -12.12% 2.10% lighting products Others 27,234,442.06 18,450,286.96 32.25% -11.39% -15.56% 3.34% Classified by region: China 2,147,742,100.25 1,594,275,715.11 25.77% 11.66% 10.37% 0.87% Overseas 1,218,712,868.35 923,888,384.86 24.19% 27.84% 24.66% 1.93% Where the Company’s accounting standard of the main business data above changed during the reporting period, give the main business data of the latest year adjusted according to the accounting standard at the end of the reporting period: □ Applicable √ Inapplicable (3) Whether revenue from physical sales is higher than service revenue √ Yes □ No Business segment Item Unit 2016 2015 +/-% Sales volume Piece 871,948,420 837,767,920 4.08% Lighting fixtures and Output volume Piece 881,564,257 827,174,901 6.58% lamps Inventory Piece 133,785,918 124,170,082 7.74% Reason for any over 30% YoY movements in the data above 17 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 □ Applicable √ Not applicable (4) Execution progress of major signed sales contracts in this Reporting Period □ Applicable √ Not applicable (5) Breakdown of operating costs By business segment and product Unit: RMB Yuan 2016 2015 As a percentage As a percentage Business segment Item +/-% Amount of operating costs Amount of operating costs (%) (%) Lighting fixtures 2,518,164,099.97 100.00% 2,185,558,581.31 100.00% 15.20% and lamps Lighting fixtures Raw materials 1,696,469,566.51 67.37% 1,416,799,337.80 64.83% 19.70% and lamps Lighting fixtures Labor cost 504,117,326.14 20.02% 427,667,401.28 19.57% 17.90% and lamps Lighting fixtures Depreciation and 299,126,920.36 11.88% 319,242,900.55 14.61% -6.30% and lamps other Lighting fixtures Others 18,450,286.96 0.73% 21,848,941.68 1.00% -15.60% and lamps Unit: RMB Yuan 2016 2015 As a percentage As a percentage Product Item +/-% Amount of operating costs Amount of operating costs (%) (%) LED products Raw materials 1,139,950,591.51 45.27% 713,381,463.13 32.64% 59.80% LED products Labor cost 264,639,920.23 10.51% 246,143,230.85 11.26% 7.50% Depreciation and LED products 178,506,859.97 7.09% 161,101,174.91 7.37% 10.80% other LED products Subtotal 1,583,097,371.71 62.87% 1,120,625,868.89 51.27% 41.30% Traditional Raw materials 556,518,975.00 22.10% 703,417,874.67 32.18% -20.90% lighting products Traditional Labor cost 239,477,405.91 9.51% 181,524,170.43 8.31% 31.90% lighting products Traditional Depreciation and 120,620,060.39 4.79% 158,141,725.64 7.24% -23.70% 18 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 lighting products other Traditional Subtotal 916,616,441.30 36.40% 1,043,083,770.74 47.73% -12.10% lighting products Others Others 18,450,286.96 0.73% 21,848,941.68 1.00% -15.60% - Total 2,518,164,099.97 100.00% 2,185,558,581.31 100.00% 15.20% (6) Changes in the scope of the consolidated financial statements for this Reporting Period √ Yes □ No One new entity is included in the consolidation scope for this Reporting Period, namely, FSL Zhida Electric Technology Co., Ltd., newly incorporated with a registered capital of RMB50 million and in which the Company holds a stake of 51%. Meanwhile, one entity is excluded from the consolidation scope as compared with 2015. A creditor of subsidiary Suzhou Mont Lighting Co., Ltd. (Suzhou Mont) applied to the court for Suzhou Mont’s bankruptcy. On June 2, 2016, the Suzhou Industrial Park court appointed Jiangsu Yingyuan Law Firm to be Suzhou Mont’s custodian through the Decision (2016) Suzhou 0591 Civil Bankruptcy No. 03. And the control of the Company over Suzhou Mont has ceased since that day. Pursuant to the accounting standards for business enterprises, the Company has excluded Suzhou Mont from its consolidation scope since June 2016. (7) Major changes in the business, products or services in this Reporting Period □ Applicable √ Not applicable (8) Main customers and suppliers Main customers Total sales to top five customers (RMB Yuan) 453,921,650.54 Total sales to top five customers as a percentage of the 13.48% total sales for this Reporting Period (%) Total sales to related parties among top five customers as a percentage of the total sales for this Reporting Period 0.00% (%) Information about top five customers As a percentage of the total sales for this No. Customer Sales amount (RMB Yuan) Reporting Period (%) 1 Customer A 178,894,550.33 5.31% 2 Customer B 99,856,231.03 2.97% 19 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 3 Customer C 68,775,707.72 2.04% 4 Customer D 60,385,200.44 1.79% 5 Customer E 46,009,961.02 1.37% Total -- 453,921,650.54 13.48% Other information about the main customers √ Applicable □ Not applicable None of the top 5 customers are related parties of the Company. Main suppliers Total purchases from top five suppliers (RMB Yuan) 330,396,017.96 Total purchases from top five suppliers as a percentage of 15.42% the total purchases for this Reporting Period (%) Total purchases from related parties among top five suppliers as a percentage of the total purchases for this 4.39% Reporting Period (%) Information about top five suppliers As a percentage of the total purchases for No. Supplier Purchase amount (RMB Yuan) this Reporting Period (%) 1 Supplier A 94,159,851.42 4.39% 2 Supplier B 70,306,793.68 3.28% 3 Supplier C 65,489,158.75 3.06% 4 Supplier D 55,099,273.74 2.57% 5 Supplier E 45,340,940.37 2.12% Total -- 330,396,017.96 15.42% Other information about the main suppliers √ Applicable □ Not applicable Among the top 5 suppliers, the 1st supplier is a related party of the Company while the other 4 are not. 3. Expense Unit: RMB Yuan 2016 2015 +/-% Reason for any significant change Selling expenses 204,777,965.73 203,112,498.50 0.82% Administrative expenses 211,412,262.47 241,585,514.09 -12.49% 20 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Finance costs -28,457,453.89 -28,871,124.02 1.43% 4. R&D input √ Applicable □ Not applicable The Company always took science and technology as the first priority, paid attention to technology R&D, constantly researched and developed new products and technologies meeting market demands, promoted the optimization and upgrade of product structure, improved the technology content of products, and improved the core competitiveness of the Company. Meanwhile, the Company strengthened the research on technique and technology of products, so as to cut down product cost and improve quality. In the Reporting Period, the Company totally spent R&D input of RMB 110.07million, occupying by3.27% of operating revenue of the Reporting Period. Information about R&D input: 2016 2015 +/-% Number of R&D personnel 259 231 12.12% R&D personnel as a percentage 2.78% 2.88% -0.10% in the total employees R&D input (RMB Yuan) 110,070,467.56 92,891,920.00 18.49% R&D input as a percentage in 3.27% 3.23% 0.04% operating revenues Capitalized R&D input (RMB 0.00 0.00 0.00% Yuan) Capitalized R&D input as a percentage in the total R&D 0.00% 0.00% 0.00% input Reasons for any significant YoY change in the percentage of the R&D input in the operating revenues □ Applicable √ Not applicable Reason for any sharp variation in the percentage of the capitalized R&D input and rationale □ Applicable √ Not applicable 5. Cash flows Unit: RMB Yuan Item 2016 2015 +/-% Subtotal of cash inflows from 3,266,614,809.01 2,904,539,258.69 12.47% operating activities Subtotal of cash outflows from 2,976,636,040.53 2,716,214,069.26 9.59% 21 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 operating activities Net cash flows from operating 289,978,768.48 188,325,189.43 53.98% activities Subtotal of cash inflows from 982,592,873.51 30,861,512.16 3,083.88% investing activities Subtotal of cash outflows from 720,093,967.08 68,596,503.73 949.75% investing activities Net cash flows from investing 262,498,906.43 -37,734,991.57 795.64% activities Subtotal of cash inflows from 10,000,000.00 financing activities Subtotal of cash outflows from 15,901,660.85 215,284,023.90 -92.61% financing activities Net cash flows from financing -5,901,660.85 -215,284,023.90 97.26% activities Net increase in cash and cash 545,737,534.17 -56,155,127.23 1,071.84% equivalents Explanation of why the data above varied significantly √ Applicable □ Not applicable 1. The net cash flows from operating activities increased 53.98% from last year mainly because last year, the compensations for false stock statements were paid as required by the judgment of the court. 2. The cash inflows from investing activities increased 3083.88% from last year mainly because of the sale through block trading of some of the Guoxuan High-tech stock held by the Company. 3. The cash outflows from investing activities increased 949.75% from last year mainly because of the bank wealth management products purchased and the investments made in external parties. 4. The net cash flows from investing activities increased 795.64% from last year mainly because of the sale through block trading of some of the Guoxuan High-tech stock held by the Company. 5. The cash inflows from financing activities were the cash received from minority shareholder investments by subsidiaries. 6. The cash outflows from financing activities decreased 92.61% from last year mainly because a smaller amount of cash dividends were distributed. 7. The net cash flows from financing activities increased 97.26% from last year mainly because a smaller amount of cash dividends were distributed. 8. The net increase in cash and cash equivalents increased 1071.84% from last year mainly because of the sale 22 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 through block trading of some of the Guoxuan High-tech stock held by the Company. Reason for any big difference between the net operating cash flow and the net profit for this Reporting Period √ Applicable □ Not applicable For the Reporting Period, the net operating cash flows stood at RMB 289,978,768.48 yuan while the net profits stood at RMB 1,073,256,393.74 yuan, representing a difference of RMB-783,277,625.26 yuan, mainly because of the sale through block trading of some of the Guoxuan High-tech stock held by the Company. III Analysis of non-core business √ Applicable □ Not applicable Unit: RMB Yuan As a percentage of Amount Source/reason Recurring or not total profit (%) Sale of tradable shares in Investment income 882,079,521.77 69.28% some investees & receipt of No bonuses from investees Bad-debt and inventory Asset impairment 25,640,511.08 2.01% No falling price provisions Non-operating Government subsidies 3,740,686.27 0.29% No revenue received and others Non-operating Disposal of non-current 12,622,554.30 0.99% No expense assets IV Analysis of assets and liabilities 1. Significant changes in the asset composition Unit: RMB Yuan December 31, 2016 December 31, 2015 As a As a Change in percentage of percentage of percentag Reason for any significant change Amount Amount total assets total assets e (%) (%) (%) 1,479,283,642. Sale of some of the Guoxuan High-tech Monetary funds 24.25% 935,241,205.20 15.46% 8.79% 54 stock Accounts 595,257,954.0 Stop of the use of trade acceptance bills 9.76% 366,401,130.72 6.06% 3.70% receivable 0 in settlement with customers 23 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 753,681,605.1 Inventories 12.36% 559,651,928.21 9.25% 3.11% Stock-up for growing sales 9 Mainly due to the acquisition of a Long-term equity 210,394,932.6 32.85% stake in Primatronix (Nanho) 3.45% 382,637.52 0.01% 3.44% investments 9 Electronics Ltd. at RMB0.18 billion in the Current Period 446,006,929.6 Fixed assets 7.31% 484,436,218.17 8.01% -0.70% 6 Construction in More input to ongoing construction 71,479,325.91 1.17% 32,488,518.68 0.54% 0.63% progress projects 2. Assets and liabilities measured at fair value √ Applicable □ Not applicable Unit: RMB Yuan Profit/loss on Cumulative fair Impairment fair value Purchased in Sold in this Opening value changes provided in this Closing Item changes in this this Reporting Reporting balance charged to Reporting balance Reporting Period Period equity Period Period Financial assets 1. Financial assets at fair value through profit/loss 51,600.00 51,600.00 (excluding derivative financial assets) 2. Available-for-sa 2,787,166,401. 1,308,399,369. 1,427,901,09 965,244,565.11 le financial 96 22 6.63 assets Subtotal of 2,787,218,001. 1,308,399,369. 1,427,901,09 965,244,565.11 financial assets 96 22 6.63 Total of the 2,787,218,001. 1,308,399,369. 1,427,901,09 965,296,165.11 above 96 22 6.63 Financial 0.00 0.00 liabilities Significant changes in the measurement attributes of the main assets in this Reporting Period □ Yes √ No 24 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 3. Restricted asset rights as of the end of this Reporting Period Not applicable. V Investments made 1. Total investments made √ Applicable □ Not applicable Investments made in this Reporting Period Investments made in the prior year (RMB +/-% (RMB Yuan) Yuan) 220,507,350.00 0.00 - 2. Significant equity investments made in this Reporting Period √ Applicable □ Not applicable Unit: RMB Yuan The Index Compa Source Progres Profit/l to Amoun Project Lawsuit Main Way of ny’s of Term of Type of s as of oss for Disclos disclose Investe t of Partner ed s busines investm shareho investm investm investm balance Reporti ure date d e investm s earning involve s ent lding ent ent ent sheet ng (if any) informa ent s d percent funds date Period tion (if age any) Product ion and The operati 32.85% on of stake in electric Primatr al onix Primatr product (Nanho onix , The ) (Nanho commu 180,00 Compa Equity www.c Acquisi Electro 558,68 09/03/2 ) nication 0,000.0 32.85% ny’s None N/A acquisit 0.00 None ninfo.c tion nics 6.07 016 Electro product 0 own ion om.cn Ltd. has nics , plastic funds been Ltd. product transfer , mould red to product the , radio Compa transmi ny ssion equipm 25 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 ent, handset (mobile phone), LED lighting product ; Import and export, as well as the support ing busines s for the aforesai d commo dities ( not related to commo dities manage d by the State-tr ading busines s, and should be applied accordi ng to related state rules if the commo dity is 26 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 related to quota, license manage ment, and other special rules); Leasing busines s of self-ow ned plants and the support ing dormito ries in NO.100 Busha Road, Nanwa n Street, Longga ng District Product The ion and 30% Foshan operati stake in Chanch on of Foshan ang lamps, Chanch The Electric electric ang Compa Equity www.c Applia lighting Acquisi 40,507, Electric 5,984,9 10/19/2 30.00% ny’s None N/A acquisit 0.00 None ninfo.c nces product tion 350.00 Applian 09.62 016 own ion om.cn (Gaomi s and ces funds ng) accesso (Gaomi Co., ries, as ng) Ltd. well as Co., the Ltd. has related been 27 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 installat transfer ion and red to consulti the ng Compa service ny 220,50 6,543,5 Total -- -- 7,350.0 -- -- -- -- -- -- 0 -- -- -- 95.69 0 3. Significant non-equity investments ongoing in this Reporting Period □ Applicable √ Not applicable 4. Financial investments (1) Securities investments √ Applicable □ Not applicable Unit: RMB Yuan Profit/lo ss on Cumulat Source Variety Purchas Profit/lo Account fair ive fair Sold in Code of Name of Initial ed in ss in of of ing Opening value value this Closing Account this this securitie securitie investm measure book changes changes Reporti book investm securitie Reporti Reporti ment value in this charged ng value ing title s s ent cost ng ng ent s model Reporti to Period Period Period ng equity funds Period Availabl Guoxua Domesti Fair 2,708,5 1,259,5 1,355,3 e-for-sal n 160,000 965,244 869,297 Own c/overse 002074 value 28,165. 31,308. 83,288. e High-tec ,000.00 ,565.11 ,039.05 funds as stock method 00 90 49 financia h l asset Availabl Domesti China Fair e-for-sal 30,828, 78,638, 48,868, 3,523,8 72,517, Own c/overse 601818 Everbrig value e 816.00 236.96 060.32 83.26 808.14 funds as stock ht Bank method financia l asset Availabl Domesti e-for-sal Xiamen 292,574 Cost 292,574 292,574 Own c/overse N/A e Bank ,133.00 method ,133.00 ,133.00 funds as stock financia l asset Foshan Availabl Domesti 500,000 Cost 500,000 500,000 Own N/A branch e-for-sal c/overse .00 method .00 .00 funds of e 28 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 as stock Guangd financia ong l asset Develop ment Bank Held-for Fair 60,039, 60,039, 27,635. -trading Own Other 205007 7 Days value 000.00 000.00 14 financia funds method l asset Held-for Fair 140,001 140,001 131,177 -trading Own Other 205008 14 Days value ,000.00 ,000.00 .73 financia funds method l asset Held-for Fair 205010 19,841, 19,841, 45,661. -trading Own Other 28 days value 000.00 000.00 48 financia funds method l asset Held-for Fair 19,800, 19,800, 1,342.2 -trading Own Bond 204001 GC001 value 198.00 198.00 3 financia funds method l asset Held-for Fair 79,803, 79,803, 26,965. -trading Own Bond 204004 GC004 value 192.00 192.00 79 financia funds method l asset Held-for Fair 238,911, 238,911, 112,566. -trading Own Bond 204007 GC007 value 945.00 945.00 52 financia funds method l asset Held-for Fair 19,901, 19,901, 23,161. -trading Own Bond 204014 GC014 value 990.00 990.00 39 financia funds method l asset Held-for Domesti Fair 7,005.0 7,005.0 5,018.1 -trading Own c/overse 300456 Navior value 0 0 0 financia funds as stock method l asset 1,062,2 3,658,5 1,308,3 1,720,9 965,244 873,194 Total 08,279. -- 45,864. 0.00 99,369. 0.00 75,229. -- -- ,565.11 ,450.69 00 96 22 63 Disclosure date of the 01/23/2014 29 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 announcement about the board’s consent for the securities investment Disclosure date of the announcement about the general meeting’s consent for the securities investment (if any) Note: The funds for the “pledged repo” and “reverse repo of government bonds” (“other” and “bond” in the table above) were strictly controlled within the line approved by the board, without use out of line. In order to better use the funds, we carried out repeated investment in the mature investment products above in multiple transactions. As such, the single investment costs for the “other” and “bond” were their accumulative amounts which were repeatedly invested within the first quarter of 2016. On March 24, 2016, the Eighth Board convened a third meeting, which resolved on the termination of the said securities investment since April 2016. And the Company no longer conducts such business from April 2016. (2) Investment in derivative financial instruments □ Applicable √ Not applicable No such cases in this Reporting Period 5. Use of funds raised □ Applicable √ Not applicable No such cases in this Reporting Period. VI Sale of major assets and equity interests 1. Sale of major assets √ Applicable □ Not applicable Net Ratio Relatio Credito Execute Owners profit of the nship r’s d as hip of contrib net betwee rights schedul Index Transac Effect Related the uted to profit n the and ed or to Transac tion on the Pricing -party asset Asset Date of the contrib transact liabiliti not; if Disclos disclose tion price Compa principl transact involve sold sale Compa uted by ion es not, ure date d party (RMB0 ny (see e ion or d has ny from the sale party involve give informa ’000) note 3) not been all the of the and the d have reasons tion transfer period- asset to Compa been all and red or begin the ny transfer measur 30 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 to the Compa (applica not red or es date of ny’s ble for not taken sale total related- (RMB0 profit party ’000) (%) transact ions) Indicati ve Announ No cement impact No. on the 2016-0 Some busines 63 on Market of the s Sale of 11/15/2 price Guoxua continu Some Block 016 96,524. 72,523. when 12/09/2 n ity and 67.57% No N/A Yes Yes Yes of trading to7/12/ 46 37 reducin 016 High-te manage Guoxua 2016 g the ch ment n stock stock stability High-te of the ch Compa Stock ny on www.c ninfo.c om.cn 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 Yuan Relationship Main Company business Registered Operating Operating with the Total assets Net assets Net profit name scope capital revenues profit Company Foshan Chansheng 41,308,724.4 24,571,267.7 175,664,083. Subsidiary Manufacture 1,000,000.00 7,851,031.25 5,718,636.29 Electronic 3 9 30 Ballast Co., 31 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Ltd. Foshan Chanchang Electric 72,782,944.0 114,266,729. 105,963,153. 66,246,503.3 Subsidiary Manufacture 7,912,810.13 5,992,538.34 Appliances 0 01 40 4 (Gaoming) Co., Ltd. Foshan Taimei Times 74,038,971.4 16,758,120.6 131,088,201. Subsidiary Manufacture 500,000.00 8,021,892.93 5,746,438.79 Lamps Co., 2 0 96 Ltd. FSL New Light Source 50,000,000.0 55,563,518.2 53,824,332.1 21,731,567.3 Subsidiary Manufacture 332,396.04 193,996.43 Technology 0 5 2 5 Co., Ltd. FSL (Xinxiang) 35,418,439.7 53,791,708.3 44,370,799.3 45,581,638.6 Subsidiary Manufacture 5,296,288.75 3,819,950.09 Lighting Co., 6 9 6 3 Ltd. Guangdong Fozhao 200,000,000. 223,762,603. 223,419,736. Financing Subsidiary Finance 4,817,241.98 3,612,931.48 00 36 10 Lease Co., Ltd. FSL Lighting Equipment 15,000,000.0 84,110,568.3 45,083,516.0 149,397,618. 11,733,875.5 Subsidiary manufacture 7,941,495.19 Co., Ltd. 0 8 1 25 6 Nanjing Fozhao Lighting 41,683,200.0 62,553,979.8 45,465,065.0 42,824,302.6 Subsidiary Manufacture 114,351.94 249,386.72 Components 0 7 5 6 Manufacturin g Co., Ltd. FSL Zhida Electric 50,000,000.0 38,940,925.0 35,460,469.9 Subsidiary Manufacture 433,033.67 -52,707.59 -39,530.09 Technology 0 4 1 Co., Ltd. Subsidiaries obtained or disposed in this Reporting Period √ Applicable □ Not applicable 32 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 How to obtain or dispose the subsidiary in Effect on overall production and operation Subsidiary this Reporting Period results Created new business and new profit growth points to improve the Company’s business structure, bettered the Company’s FSL Zhida Electric Technology Co., Ltd. Newly incorporated sustained development capability and overall earnings, and laid a foundation for the next step of the Company’s development strategy Suzhou Mont Lighting Co., Ltd. Bankruptcy liquidation No great effects Information about the main controlled and joint stock companies —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 Aug. 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 Dec. 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. —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 Aug. 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 Aug. 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 Dec. 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 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 Dec. 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 Sept. 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. 33 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 On 25 Sep. 2009 and 19 Nov. 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 Apr. 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 Aug. 2013, the 3rd Session of the 7th Board of Directors reviewed and approved to invest another RMB 2 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 RMB 35,418,439.76. —FSL Lighting Equipment Co., Ltd. is a limited liability company invested and established by the Company with the registered capital of RMB 15 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 Aug. 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 Nov. 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. 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 October 21, 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. VIII Structured bodies controlled by the Company □ Applicable √ Not applicable IX Outlook for the future development of the Company (I) Development trends in the industry As the emerging industry, the LED lighting is now in the stage of rapid development. The LED light source is honored as the third revolution in human being’s lighting history, and has aroused the development and research upsurge in the globe due to its advantages of high efficiency and energy-saving, green environmental protection, as well as long service life. After several years of rapid and disordered development in the LED industry, despite the sustainable growth of utilized LEC led by newly increased demands and replacement needs, the LED industry, especially in the downstream application fields, is facing with obvious structural over-capacity problem. The 34 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 supply of low-end products and repeatable products exceeds demand, together with the intense price competitions, resulting in companies’ growth of revenue instead of profit. The supply of high-end products and specially used products falls short of demand, giving rise to high prices and rich profit. In the years to come, with the industry transformation and the intensified market competitions, the LED industry will step into a period with faster integration speed. On one hand, as for middle and small enterprises, which don’t have the advantage in core technology of product and sales channel, the pressure from competitions and surviving will be higher and higher. On the other hand, the advantaged enterprises will continuously make efforts on technology breakthrough, brand building, channel extension, as well as cost cut and efficiency improvement, so as to advance the cost performance of products and the market competitiveness. With the dual promotion of surviving pressure and demands for brand and scale effect, the LEC industry in future will step into the peak season of integration, when the industry competitions will gradually tend to be rational, and transfer from price competitions in the past to competitions in technology, product, brand, and service. (II) Development strategy in future The Company will adhere to the path of professional development, center around the main business of lighting products, be oriented by market demand, take the motive as technology innovation, take the core as brand operation, build the domestic and international market net with effective covering fraction by making qualified products and improving efficiency, comprehensively improve the Company’s operation quality and the capability of sustainable development, as well as devote itself to becoming the top 1 brand among lighting enterprises in the country. And at the same time, the Company will preserve in multiple development strategies, strive to develop the electrical engineering industry, and attempt to carry forward the strategic layout where the lighting business and the electrical engineering industry keeping the same pace. (III) Operation plan in 2017 1. To improve R&D innovation and strengthen company competitiveness The Company will reinforce R&D input, as well as the innovation on science and technology, introduce high-quality R&D talents, enhance the technology communication and cooperation with external institutions, continuously improve the technology level to “high-grade, precision, and advanced” standard, and strengthen the growth power generated from the internal part of the Company. The Company will positively and firmly propel the work of science and technology innovation, as well as product R&D, put forth effort to improve the technology content and quality level of products, so as to offer guarantee for the sustainable and rapid 35 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 development of the Company. 2. To sustainably improve the marketing capability, and improve market share In respect of domestic sales, the Company will further deepen channel management, emphasize on strengthening the construction of weak channels; adjust measures to local conditions and enlarge the force of market expansion, develop multiple end-sales activities; reinforce the promotion of new products, and continuously improve market share. In respect of overseas sales, the Company will continue to do a good job in management and service for major clients, develop the potential value of major clients, and improve business performance for a single client; continue to strengthen the development of major clients, enlarge client groups and market share; to seize opportunities arising from the deep change of industries around the world and the re-division of labor to promote the international recognition of the Company’s own brands ;intensify the sales of self-owned brand, enhance the promotion of self-owned brand, improve the popularity and reputation of FSL in overseas market; innovate on the overseas sales mode, sustainably optimize product sales structure, and prioritize the development of LED lighting products. 3. To make great efforts on electrical engineering equipment, so as to increase profit growth point for the Company In 2017, the Company will make great efforts on electrical engineering equipment, fully take the advantage of resource sharing and synergistic interaction, and make the business of electrical engineering equipment bigger and stronger. By means of further enriching the product line, perfecting sales policy, enlarging sales channels, and strengthen the promotion of brands,the Company will make electrical engineering equipment rapidly become the key sales revenue source besides lighting products, increase profit growth point, and improve the comprehensive competitiveness of the Company. 4. To strengthen expense control and cut down production cost In the face of pressure from the uprising cost of raw materials, transportation, and human labor, the Company will continue to strengthen procurement management, enlarge the bidding coverage, reinforce the management of quotation review and approval, enhance market analysis, improve the ability of judgment on market conditions, cut down procurement; continuously strengthen the thorough budget management, manage and control all kinds of expenditure from the source, control expense and cut down cost via the reversed forcing mechanism; strengthen the management and control on production process, further improve the production automation level, and gradually develop to the trend of intellectualization, so as to decrease human labors and improve production efficiency. 5. To value talent training, and perfect the human resources management system The Company will positively train and introduce talents in R&D, production, marketing, and management, put forth efforts to organizing a staff team featuring with “unity, innovation, high-efficiency, and professionalism”; 36 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 continue to perfect the human resources management system, establish a remuneration appraisal system oriented by performance; continuously improve the employee structure, improve the skill and profession level of employees, urge the employees to develop to a direction of technicalization and professionalism, so as to meet the long-term demand for the Company’s development. (IV) Possible risks 1. Risks from the more and more intensified marketing competitions The descending growth of domestic economy, the regulatory and control policy of real estate market, the weak recovery of overseas economy, as well as the complexity and variety of political environment bring about the uncertainty of market demand. At the same time, in an industry with sufficient competitions, the lighting products are exposed to a market with low concentration and fierce competitions. In future, if the macro economy is further in a downturn, and the market competitions keep fierce, the demands for the Company’s products may shrink, and the product price may fall down, further causing effects on the Company’s business performance. 2. Risks from the price fluctuation of raw materials The raw material cost of the Company’s lighting products accounts for about 65% of the operating cost, which means the price fluctuation of raw materials will cause significant impact on the Company’s operating cost. Based on the price fluctuation of raw materials, the Company will accordingly make product price adjustment, which has hysteresis and is restricted by the supply and demand status in the market, as well as the Company’s bargain ability. If there’s big price fluctuation of raw materials in future, and the product sales price of the Company can’t be simultaneously adjusted in time, the profitability of the Company may therefore fluctuate. 3. Risk of loss from falling inventory price As at the end of the Reporting Period, the net value of the Company’s inventory was RMB 753.6816million, accounting for 22.27 % of the current assets. Inventory mainly contains raw materials, semi-finished products, and finished products. As there’re plenty of product categories, standards, and models in the Company, the inventory value is high. With the gradual increase of the Company’s sales revenue year after year, the raw materials and inventory commodities reserved for production and sales will simultaneously increase, leading to high level of the Company’s inventory. If there’re changes in price or demand in raw material market and product sales market, the risk of loss from falling inventory price of the Company may happen. 37 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 4. Risks from fluctuation of the exchange rate The RMB exchange rate in China is based on market supply and demand, reference to a basket of currencies, managed floating exchange rate system. The fluctuation of the world economy, the tension upgrade in some hot spot areas, as well we the currency policies in different countries, will bring about the fluctuation of exchange rate. The export business of the Company accounts for one-third of the Company’s whole business, and is obtaining scale enlargement year after year. If there’s large fluctuation of the exchange rate, the Company’s business performance will be affected. X Visits paid to the Company for purposes of research, communication, interview, etc. 1. In this Reporting Period √ Applicable □ Not applicable Date of visit Way of visit Type of visitor Index to main inquiry information Investor Relations-EasyIR- 01/28/2016 One-on-one meeting Institution www.cninfo.com.cn Investor Relations-EasyIR- 03/29/2016 One-on-one meeting Institution www.cninfo.com.cn Investor Relations-EasyIR- 05/06/2016 One-on-one meeting Institution www.cninfo.com.cn Times of visit 3 Number of visiting institutions 7 Number of visiting individuals 30 Number of other visitors 3 Significant undisclosed information disclosed, None revealed or leaked 38 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section V Significant Events I Profit distribution and converting capital reserve into share capital for common shareholders Formulation, execution or adjustments of profit distribution policy, especially cash dividend policy, for common shareholders in this Reporting Period √ Applicable □ Not applicable According to the CSRC Notice on Further Implementing Matters Related to Cash Dividend Distribution of Listed Companies (Zheng-Jian-Fa [2012] No. 37) and the Guangdong CSRC Notice on Further Implementing Regulations Related to Dividend Distribution of Listed Companies (Guang-Dong-Zheng-Jian [2012] No. 91), in order to further standardize the dividend mechanism, promote a scientific, sustained and stable dividend mechanism and protect legal rights and interests of investors, in 2012, the Company convened a general meeting to revise the dividend-related contents in its Articles of Association and specify the dividend conditions, the lowest dividend ratio, the decision-making procedure, etc.. Meanwhile, it formulated the Management Rules for Profit Distribution and the Return for Shareholder Plan for the Coming Three Years (2015-2017), specifying the arrangements and forms of dividends, the cash dividend planning and the distribution intervals, which further improved the decision-making and supervision procedures for dividend distribution. According to the Company’s Articles of Association, the profit distributed in cash shall not be less than 30% of the distributable profit achieved in the year. The Company’s proposal for profit distribution and converting capital reserve into share capital for the Reporting Period was in compliance with relevant rules such as the Company’s Articles of Association. Special statement about cash dividend policy In compliance with the Company’s Articles of Association and Yes resolution of general meeting Specific and clear dividend standard and ratio Yes Complete decision-making procedure and mechanism Yes Independent directors fulfilled their responsibilities and played Yes their due role. 39 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Minority interests have the chance to fully express their opinion and desire and their legal rights and interests were fully Yes protected. In adjustment or alteration of the cash dividend policy, the conditions and procedure were in compliance with applicable N/A regulations and transparent. Plans/proposals for profit distribution and converting capital reserve into share capital for common shareholders for the past three years (including this Reporting Period): For 2014, based on the total 978,563,745 shares of the Company as at December 31, 2014, a cash dividend of RMB2.20 (tax included and dividends for B-share holders paid in the Hong Kong dollars) was distributed to the A-share and B-share holders for every 10 shares they held, with the total distributed cash dividends reaching RMB 215,284,023.90; and 3 shares were increased, with capital reserve, to all the shareholders for every 10 shares they held, with the increased shares totaling 293,569,123 shares. For 2015, based on the total 1,272,132,868 shares of the Company as at December 31, 2015, a cash dividend of RMB 0.125 yuan (tax included and dividends for B-share holders paid in the Hong Kong dollars) was distributed to the A-share and B-share holders for every 10 shares they held, with the total distributed cash dividends reaching RMB 15,901,660.85 yuan. For 2016, based on the total 1,272,132,868shares of the Company as at December 31, 2016, a cash dividend of RMB4.20(tax included and dividends for B-share holders to be paid in the Hong Kong dollars) will be distributed to the A-share and B-share holders for every 10 shares they hold, with the total distributed cash dividends reaching RMB534,295,804.56yuan. Cash dividend distribution of the Company to common shareholders over the past three years (including this Reporting Period) Unit: RMBYuan Net profit Proportion in net attributable to profit attributable to common common Cash dividends shareholders of the shareholders of the Ratio of cash Cash dividends in Year dividends in other (tax included) Company in the Company in the other forms forms consolidated consolidated statements for the statements for the year year (%) 2016 534,295,804.56 1,072,342,050.13 49.83% 0.00 0.00% 40 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 2015 15,901,660.85 53,405,593.12 29.78% 0.00 0.00% 2014 215,284,023.90 266,125,048.97 80.90% 0.00 0.00% Indicate by tick mark whether the Company made profit in this Reporting Period and the profit distributable to common shareholders of the Company was positive, but it did not put forward a proposal for cash dividend distribution to its common shareholders □ Applicable √ Not applicable II Proposal for profit distribution and converting capital reserve into share capital for this Reporting Period √ Applicable □ Not applicable Bonus shares for every 10 shares (share) 0 Dividend for every 10 shares (RMB yuan) (tax 4.20 inclusive) Additional shares to be converted from capital 0 reserve for every 10 shares (share) Total shares as the basis for the profit distribution 1,272,132,868 proposal (share) Total cash dividends (RMB yuan) (tax included) 534,295,804.56 Distributable profit (RMB yuan) 1,448,907,867.73 Percentage of cash dividends in the total profit to 100.00% be distributed (%) Cash dividend policy Where the Company is at a mature stage of development and has plans for considerable spending, in profit distribution, cash dividends shall reach at least 40% in the total profit to be distributed. Details about the proposal for profit distribution and converting capital reserve into share capital As audited by Beijing Zhongzhengtiantong Certified Public Accountants LLP, the after-tax net profits of RMB 1,054,858,446.87yuan of the Company without subsidiaries for 2016, plus the opening retained profits of RMB515,436,926.40 yuan, minus the distributed profits of RMB15,901,660.85yuan for 2015 (a cash dividend of RMB0.125yuan for every 10 shares) and the statutory surplus reserve of RMB 105,485,844.69yuan for 2016, equals the closing profits distributable to shareholders of RMB 1,448,907,867.73yuan. The Board of Directors has proposed to allocate profits for 2016 as follows: Based on the total 1,272,132,868 shares of the Company as at December 31, 2016, a cash dividend of RMB4.20yuan(tax included and dividends for B-share holders to be paid in the Hong Kong dollars) will be distributed to the A-share and B-share holders for every 10 shares they hold, with the total cash dividends to be distributed reaching RMB 534,295,804.56yuan. The retained profits of RMB 914,612,063.17yuan will be carried forward into the next year. The profit allocation preplan can be effective upon review and 41 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 approval of the Shareholders’ General Meeting of the Company. III Fulfillment of commitments 1. Commitments of the Company’s actual controller, shareholders, related parties and acquirer, as well as the Company and other commitment makers, fulfilled in this Reporting Period or ongoing at the period-end √ Applicable □ Not applicable Date of Commitment Type of Period of Commitment Contents commitment Fulfillment maker commitment commitment making Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made a commitment that within 12 months from the completion of their acquisitions, they shall not transfer or entrust Commitments made in others to manage the acquisition documents Controlling About share lock-up shares directly or 2015-12-04 12 months Fulfilled or shareholding shareholder indirectly held by alteration documents them in the Company, nor shall they allow the Company to repurchase those shares, except for the case where those shares may be transferred for no compensation due to any business or asset integration with their actual controller or their 42 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 actual controller’s controlled subsidiaries. Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made a commitment that the business of Foshan NationStar Optoelectronics Co., Ltd. that is in About avoidance of competition with the Controlling horizontal business of the 2015-12-04 24 months Ongoing shareholder competition Company takes up only a small part in NationStar’s total business, they shall gradually reduce or eliminate the horizontal competition as planned through business integration or other ways or arrangements within the coming 24 months. Electronics Group and its acting-in-concert parties Shenzhen Rising Investment About avoidance of Controlling and Hong Kong horizontal 2015-12-04 Long-standing Ongoing shareholder Rising Investment competition have made more commitments as follows to avoid horizontal competition with the 43 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 44 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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. Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong About reduction and Rising Investment Controlling regulation of have made a 2015-12-04 Long-standing Ongoing shareholder related-party commitment that transactions during their direct or indirect holding of the Company’s shares, they shall 1. strictly abide by the regulatory documents of the 45 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 46 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 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. In order to ensure the independence of the Company in business, personnel, asset, organization and finance, Controlling Electronics Group About independence 2015-12-04 Long-standing Ongoing shareholder and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made the 47 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 48 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 49 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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, a 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 50 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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. And (2) They promise that the operational and management organs within the Company will independently execute their functions according 51 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 to laws, regulations and the Company’s Articles of Association. And 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 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. 52 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 The profits distributed by the Company in cash Other commitments About cash every year shall not made to minority The Company 2009-05-27 Long-standing Ongoing dividends be less than 30% of interests the distributable profits it has achieved in the year. Executed on time or not Yes Specific reasons for failing to fulfill N/A commitments on time and plans for next step 2. Where there had been an earnings forecast for an asset or project and this Reporting Period was still within the forecast period, explain why the forecast has been reached for this Reporting Period. □Applicable √ Not applicable IV Occupation of the Company’s funds by the controlling shareholder or its related parties for non-operating purposes □ Applicable √ Not applicable No such cases in this Reporting Period. V Explanations given by the Board of Directors, the Supervisory Board and the independent directors (if any) regarding the “modified auditor’s report” issued by the CPAs firm for this Reporting Period □ Applicable √ Not applicable VI YoY changes in accounting policies, estimations and methods √ Applicable □ Not applicable On September 22, 2016, the 9th meeting of the 8th Board was convened, at which the Proposal on Accounting Estimation Change was considered and approved. In order to present the recoverableness and risk changes of accounts receivable in a more objective and fairer way and prevent financial risks, taken into account the actual occurrence of bad debts on accounts receivable in the past, pursuant to the accounting standards for business enterprises, the Company has changed the accounting estimations of the bad-debt provision percentages on accounts receivable as follows: 53 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Account age Former bad-debt provision percentage Changed bad-debt provision percentage Accounts Other accounts Accounts Other accounts receivable receivable receivable receivable Within 1 year 6% 6% 3% 3% 1-2 years 6% 6% 10% 10% 2-3 years 6% 6% 30% 30% 3-4 years 6% 6% 50% 50% 4-5 years 6% 6% 80% 80% Over 5 years 6% 6% 100% 100% The said change in accounting estimations increased the Company’s total profit for 2016 by RMB 7,956,755.73yuan. VII Retroactive restatement due to correction of material accounting errors in this Reporting Period □ Applicable √ Not applicable No such cases in this Reporting Period. VIII YoY changes in the scope of the consolidated financial statements √ Applicable □ Not applicable 1. As considered and approved at the sixth meeting of the eighth Board on July 19, 2016, the Company incorporated FSL Zhida Electric Technology Co., Ltd. (FSL Zhida) through investment and thus holds a 51% stake in it. FSL Zhida has been included in the Company’s consolidated financial statements since October 21, 2016, the date of its incorporation. 2. Suzhou Mont Lighting Co., Ltd. (Suzhou Mont), one of the Company’s controlled subsidiaries, was sued by its creditor Suzhou LiftAll Electronics Co., Ltd. in the People’s Court of Suzhou Industrial Park, requesting the Court to carry out bankruptcy liquidation on Suzhou Mont. The Court has ruled in favor of the plaintiff on May 9, 2016 and appointed Jiangsu Yingyuan Law Firm as the custodian of Suzhou Mont on June 3, 2016 (for details, see the Progress Announcement on Controlled Subsidiary’s Bankruptcy and Liquidation disclosed on www.cninfo.com.cn dated June 6, 2016). And the control of the Company over Suzhou Mont has ceased since that day. Pursuant to the accounting standards for business enterprises, the Company has excluded Suzhou Mont from its consolidation scope since June 2016. IX Engagement and disengagement of CPAs firm Current CPAs firm 54 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Name of the domestic CPAs firm Beijing Zhongzhengtiantong Certified Public Accountants LLP The Company’s payment for the domestic CPAs firm 124 (RMB’0,000) Consecutive years of the audit service provided by 1 the domestic CPAs firm Names of the certified public accountants from the Tong Quanyong, Luo Dongri domestic CPAs firm Name of the foreign CPAs firm (if any) N/A The Company’s payment for the foreign CPAs firm 0 (RMB’0,000) (if any) Consecutive years of the audit service provided by 0 the foreign CPAs firm (if any) Names of the certified public accountants from the N/A foreign CPAs firm (if any) Indicate by tick mark whether the CPAs firm was changed in this Reporting Period. √ Yes □ No Indicate by tick mark whether the CPAs firm was changed during the audit. □ Yes √ No Indicate by tick mark whether the approval procedure was executed to change the CPAs firm. √ Yes □ No Details about the change of the CPAs firm Pursuant to the applicable regulations and requirements of authorities, as considered and approved by the company's 2015 annual general meeting of shareholders, the Company changed during this Reporting Period its financial auditor and internal control auditor to Beijing Zhongzhengtiantong Certified Public Accountants LLP for 2016. CPAs firm, financial advisor or sponsor engaged for internal control audit √ Applicable □ Not applicable In the Reporting Period, the Company engaged Beijing Zhongzhengtiantong Certified Public Accountants LLP as its internal control auditor with the total audit fees of RMB 480000 yuan. 55 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 X Possibility of listing suspension or termination after disclosure of this Report □ Applicable √ Not applicable XI Bankruptcy and restructuring □ Applicable √ Not applicable No such cases in this Reporting Period. XII Significant litigations and arbitrations √ Applicable □ Not applicable In Mar. 2013, CSRC Guangdong administered an administrative punishment on the illegal information disclosure of the Company. During the period from Sept. 2013 to May 2016, a total of 2,769 plaintiffs separately sued the Company to Guangzhou Intermediate People’s Court for false securities statements, demanding civil compensations of RMB386.845 million and HKD1.328 million in total from the Company for its illegal information disclosure. As of January 13, 2017, all the 2,769 cases had been tried and the verdicts had taken effect. According to the verdicts, the Company shall compensate the plaintiffs with a total of RMB182.7365 million and HKD7.3582million and bear the legal fare of RMB 3.2332million. As of March 27, 2017, the Company had made compensations to the 2,719 plaintiffs (excluding 49 plaintiffs who were overruled) for RMB190.1732million(including legal fees). Thus, these cases of false securities statements have all been closed. They had an influence of RMB61.4383 million on the total profits of the Company in 2014 and RMB131.8899 million on that in 2015, and little influence on the financial results of 2016. XIII Punishments and rectifications □ Applicable √ Not applicable No such cases in this Reporting Period. XIV Credit conditions of the Company as well as its controlling shareholder and actual controller √ Applicable □ Not applicable In the Reporting Period, the controlling shareholder and actual controller of the Company were in a good credit position, without unsatisfied court judgments, large-amount overdue liabilities or the like. 56 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 XV Implementation of any equity incentive plan, employee stock ownership plan or other incentive measures for employees □ Applicable √ Not applicable No such cases in this Reporting Period. XVI Significant related-party transactions 1. Related-party transactions relevant to routine operation √ Applicable □ Not applicable Obtaina Proporti ble on in Approv market Index Relation Transact Transact total ed price for Contents Over to Related ship Type of Pricing ion ion amounts transacti Mode of transacti of approve Disclos disclose transactio with the transacti principl price(R amount of on line settleme on of transacti d line or ure date d n party Compan on e MB’0,0 (RMB’0 transacti (’ nt the on not informa y 00) ,000) ons of RMB’0, same tion same 000) kind(R kind MB’ 0,000) Purchasi Corpora ng tion that products Prosperity holds and Purchas Lamps & www.c over 5% receivin e of Market Remitta 03/28/2 Compone 193.05 193.05 0.09% 650 No 193.05 ninfo.c shares g labor material price nce 016 nts om.cn of the service s Limited Compan from y related party Acting-i Purchasi n-conce ng rt party products of a Prosperity and Purchas corporat www.c Electrical receivin e of Market Remitta 03/28/2 ion that 636.80 636.8 0.30% 1,500 No 636.80 ninfo.c (China) g labor material price nce 016 holds om.cn Co., Ltd. service s over 5% from shares related of the party Compan 57 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 y Acting-i n-conce Purchasi rt party ng Hangzhou of a products Times corporat and Purchas www.c Lighting ion that receivin e of Market Remitta 03/28/2 174.93 174.93 0.08% 350 No 174.93 ninfo.c and holds g labor material price nce 016 om.cn Electrical over 5% service s Co., Ltd. shares from of the related Compan party y Purchasi ng Foshan products Under NationSta and Purchas same www.c r receivin e of Market 9,415.9 9,415.9 Remitta 9,415.9 03/28/2 actual 4.39% 30,000 No ninfo.c Optoelect g labor material price 9 9 nce 9 016 controll om.cn ronics service s er Co., Ltd. from related party Purchasi ng Guangdo products Under ng and Purchas same www.c Fenghua receivin e of Market Remitta 03/28/2 actual 854.51 854.51 0.40% 2,000 No 854.51 ninfo.c Advanced g labor material price nce 016 controll om.cn Holding service s er Co., Ltd. from related party Purchasi ng Guangdo products Under ng and Purchas same Huayueba receivin e of Market Remitta actual 139.17 139.17 0.06% No 139.17 N/A o New g labor material price nce controll Energy service s er Co., Ltd. from related party 58 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Selling Corpora products tion that Prosperity and holds Lamps & providin www.c over 5% Selling Market 2,634.3 2,634.3 Remitta 2,634.3 03/28/2 Compone g labor 0.79% 4200 No ninfo.c shares products price 9 9 nce 9 016 nts service om.cn of the Limited to Compan related y party Acting-i n-conce Selling rt party Prosperity products of a (Hangzho and corporat u) providin www.c ion that Selling Market Remitta 03/28/2 Lighting g labor 13.25 13.25 0.00% 350 No 13.25 ninfo.c holds products price nce 016 and service om.cn over 5% Electrical to shares Co., Ltd. related of the party Compan y Acting-i n-conce Selling rt party products of a and Prosperity corporat providin www.c Electrical ion that Selling Market Remitta 03/28/2 g labor 29.59 29.59 0.01% 120 No 29.59 ninfo.c (China) holds products price nce 016 service om.cn Co., Ltd. over 5% to shares related of the party Compan y An Selling acting-i products n-conce and OSRAM rt party providin www.c (China) of Selling Market Remitta 03/28/2 g labor 504.93 504.93 0.15% 1,300 No 504.93 ninfo.c Lighting corporat products price nce 016 service om.cn Co., Ltd. ion that to held related over 5% party shares 59 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 of the Compan y within the past 12 months An acting-i n-conce rt party Selling of products corporat and Osram ion that providin www.c Asia held Selling Market Remitta 03/28/2 g labor 548.02 548.02 0.16% 2,500 No 548.02 ninfo.c Pacific over 5% products price nce 016 service om.cn Ltd. shares to of the related Compan party y within the past 12 months A Selling compan Shanghai products y with a Linxian and related Mechanic providin www.c individu Selling Market Remitta 03/28/2 al and g labor 15.63 15.63 0.00% 70 No 15.63 ninfo.c al in it products price nce 016 Electrical service om.cn as a Equipmen to senior t Co., Ltd. related executiv party e Selling products Foshan Under and NationSta same providin www.c r Selling Market Remitta 03/28/2 actual g labor 14.00 14.00 0.00% 100 No 14.00 ninfo.c Optoelect products price nce 016 controll service om.cn ronics er to Co., Ltd. related party 15,174. Total -- -- -- 43,140 -- -- -- -- -- 26 60 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Details of any sales return of a large N/A amount In March 2016, the Company predicted the total amounts of its routine transactions with related parties Foshan NationStar Optoelectronics Co., Ltd., Guangdong Fenghua Advanced Give the actual situation in this Holding Co., Ltd., OSRAM (China) Lighting Co., Ltd., OSRAM (China) Lighting Co., Reporting Period (if any) where a Ltd., Osram Asia Pacific Ltd., Prosperity Lamps & Components Limited, Prosperity forecast had been made for the total Electrical (China) Co., Ltd., Prosperity (Hangzhou) Lighting and Electrical Co., Ltd., amounts of routine related-party Hangzhou Times Lighting and Electrical Co., Ltd. and Shanghai Linxian Mechanical and transactions by type to occur in this Electrical Equipment Co., Ltd. Concerning the purchases from its related parties, the actual Reporting Period amount in 2016 was RMB114.1445million, accounting for 33.09% of the predicted. As for the sales to its related parties, the actual amount in 2016 was RMB37.5980million, accounting for 43.52% of the predicted. 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 Book Assessed value of value of Relations Type of Contents Price of Index to Related the the Profit/loss hip with the of the Pricing transfer Mode of Disclosur disclosed transactio transferre transferre (RMB’0, the transactio transactio principle (RMB’0, settlement e date informati n party d asset d asset 000) Company n n 000) on (RMB’0, (RMB’0, 000) 000) The Announc Company ement acquired No. the 30% 2016-042 stake held on Sharehold by Acquisiti Prosperity er that Prosperity on of Accordin Lamps & holds Equity Lamps & Stake in g to the 08/25/201 Compone over 5% acquisitio Compone 2,976.52 4,050.74 4,050.74 In cash 0 Controlle assessed 6 nts shares of n nts d value Limited the Limited Subsidiar Company in Foshan y& Chanchan Related-p g Electric arty Appliance Transacti s on on (Gaoming www.cnin 61 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 ) Co., Ltd. fo.com.cn Reason for any large difference between the transfer price and the book value or N/A assessed value (if any) After the acquisition, Foshan Chanchang Electric Appliances (Gaoming) Co., Ltd. Effect on the Company’s business results became a wholly-owned subsidiary of the Company. For the Reporting Period, Foshan and financial position Chanchang Electric Appliances (Gaoming) Co., Ltd. achieved operating revenues of RMB 66.2465million and net profit of RMB 5.9925million. Performance of the asset in this Reporting Period when a performance-related N/A undertaking is involved in the transaction 3. Related-party transitions regarding joint investments √ Applicable □ Not applicable Relationship Registered Total assets of Net assets of Net profit of Main business Joint investor with the Investee capital of investee investee investee of investee Company investee (RMB’0,000) (RMB’0,000) (RMB’0,000) Production and operation of electrical product, communication product, plastic product, mould product, radio transmission equipment, Guangdong Shareholder handset (mobile Primatronix Electronics that holds phone), LED (Nanho) RMB63.33 Information over 5% lighting 17,094.32 1,356.06 -171.47 Electronics million Industry shares of the product; Import Ltd. Group Ltd. Company and export, as well as the supporting business for the aforesaid commodities ( not related to commodities managed by the State-trading business, and 62 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 should be applied according to related state rules if the commodity is related to quota, license management, and other special rules); Leasing business of self-owned plants and the supporting dormitories in NO.100 Busha Road, Nanwan Street, Longgang District Progress on significant ongoing construction N/A projects of investee (if any) 4. Credits and liabilities with related parties □ Applicable √ Not applicable No such cases in this Reporting Period. 5. Other significant related-party transactions √ Applicable □ Not applicable On December 23, 2016, the Company held the 11th 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. During the term of validity of the Agreement, the daily deposit balance of the Company in Rising Finance Company shall not exceed RMB 150 million. During the Reporting Period, the 63 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 daily deposit balance held of the Company in Rising Finance Company was RMB 100 million, and the interest income incurred and recognized in the Reporting Period was RMB 42000 yuan. Index to the current announcements about the said related-party transactions disclosed Title of current announcement Disclosure date Disclosure website Announcement on Signing Financial Service Agreement with Guangdong Rising Finance 12/24/2016 www.cninfo.com.cn Co., Ltd. XVII Significant contracts and execution 1. Entrustment, contracting and leasing (1) Entrustment □ Applicable √ Not applicable No such cases in this Reporting Period. (2) Contracting □ Applicable √ Not applicable No such cases in this Reporting Period. (3) Leasing √ Applicable □ Not applicable Particulars about leasing: The Company and Shanghai Jiabao Industry & Commerce (Group) Co., Ltd. (hereinafter referred to as “Shanghai Jiabao) signed, where Shanghai Jiabao agreed to license the Company to exclusively use its trademarks “Hu Zi” (registration No.: 100940), “Lian He” (registration No.: 100950) and “Lian He” (registration No.: 3603597) from 1 Jan. 2014 to 31 Dec. 2016; and the Company shall pay to Shanghai Jiabao 1% of the net sales of products produced by the Company and carrying the licensed trademarks as the license fee, but it shall not be less than RMB1 million per year (for details, see the “Announcement No. 2014-002 on Signing ” disclosed on http://www.cninfo.com.cn dated 9 Jan. 2014). Any leasing event incurring profit/loss over 10% of the total profits of the Company for this Reporting Period 64 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 □ Applicable √ Not applicable No such cases in this Reporting Period. 2. Significant guarantees □ Applicable √ Not applicable No such cases in this Reporting Period. 3. Entrusted cash management (1) Entrusted cash management √ Applicable □ Not applicable Unit: RMB'0,000 Actuall y Actual receive principal Amount Actual Related-p Method d/paid Commenc amount provided profit/loss arty Product Entrusted Terminati of Projected profit/l Trustee ement recovered for in this transactio type amount on date remunerat earnings oss in date in this impairme Reporting n (yes/no) ion this Reporting nt (if any) Period Reporti Period ng Period Xindache Principal ng Guarantee repaymen sub-branc d principal 04/05/201 07/07/201 t with Receiv h of Bank No and 3,000 3,000 23.82 6 6 interest ed of floating upon Guangzho interest maturity u Foshan Principal Dunhou Guarantee repaymen sub-branc d principal 04/05/201 05/10/201 t with Receiv h of No and 4,000 4,000 9.59 6 6 interest ed China floating upon Construct interest maturity ion Bank Sales Guarantee Principal Departme d principal 04/05/201 05/10/201 repaymen Receiv No 5,000 5,000 13.42 nt of and 6 6 t with ed Foshan floating interest 65 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 branch of interest upon Industrial maturity and Commerc ial Bank of China Principal Foshan Guarantee repaymen branch of d principal 04/15/201 05/20/201 t with Receiv China No and 8,000 8,000 25.32 6 6 interest ed Minsheng floating upon Bank interest maturity Guangzho Principal u Guarantee repaymen Huanshid d principal 04/08/201 07/08/201 t with Receiv ong No and 8,000 8,000 63 6 6 interest ed sub-branc floating upon h of SPD interest maturity Bank Principal Guarantee Foshan repaymen d principal branch of 04/15/201 07/04/201 t with Receiv No and 10,000 10,000 72.33 Huaxia 6 6 interest ed floating Bank upon interest maturity Principal Foshan Guarantee repaymen Jiangwan d principal 05/12/201 08/11/201 t with Receiv sub-branc No and 3,000 3,000 20.57 6 6 interest ed h of Ping floating upon An Bank interest maturity Foshan Principal Dunhou Guarantee repaymen sub-branc d principal 05/16/201 11/14/201 t with Receiv h of No and 8,000 8,000 123.66 6 6 interest ed China floating upon Construct interest maturity ion Bank Sales Guarantee Principal Departme d principal 05/16/201 11/14/201 repaymen Receiv No 5,000 5,000 73.55 nt of and 6 6 t with ed Foshan floating interest 66 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 branch of interest upon Industrial maturity and Commerc ial Bank of China Sales Departme nt of Principal Guarantee Foshan repaymen d principal branch of 06/06/201 12/05/201 t with Receiv No and 3,000 3,000 42.63 Industrial 6 6 interest ed floating and upon interest Commerc maturity ial Bank of China Xindache Principal ng Guarantee repaymen sub-branc d principal 07/15/201 10/13/201 t with Receiv h of Bank No and 3,000 3,000 22.22 6 6 interest ed of floating upon Guangzho interest maturity u Principal Foshan Guarantee repaymen Jiangwan d principal 07/14/201 10/13/201 t with Receiv sub-branc No and 3,000 3,000 22.44 6 6 interest ed h of Ping floating upon An Bank interest maturity Guangzho Principal u Guarantee repaymen Huanshid d principal 07/21/201 10/21/201 t with Receiv ong No and 5,000 5,000 37.5 6 6 interest ed sub-branc floating upon h of SPD interest maturity Bank Principal Foshan Guarantee repaymen Jiangwan d principal 08/16/201 10/11/201 t with Receiv sub-branc No and 3,000 3,000 12.43 6 6 interest ed h of Ping floating upon An Bank interest maturity 67 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Foshan Principal Dunhou Guarantee repaymen sub-branc d principal 11/16/201 12/28/201 t with Receiv h of No and 500 500 1.27 6 6 interest ed China floating upon Construct interest maturity ion Bank Principal Foshan Guarantee repaymen branch of d principal To be 08/16/201 02/16/201 t with China No and 3,000 3,000 49.07 36.08 receive 6 7 interest Minsheng floating d upon Bank interest maturity Shenzhen Chegong Principal Guarantee miao repaymen d principal To be sub-branc 09/06/201 03/06/201 t with No and 5,000 5,000 61.99 40.06 receive h of 6 7 interest floating d China upon interest Bohai maturity Bank Principal Foshan Guarantee repaymen Jiangwan d principal To be 10/19/201 t with sub-branc No and 6,000 04/19/217 6,000 85.27 34.20 receive 6 interest h of Ping floating d upon An Bank interest maturity Xindache Principal ng Guarantee repaymen sub-branc d principal To be 10/28/201 06/02/201 t with h of Bank No and 3,000 3,000 53.51 16.02 receive 6 7 interest of floating d upon Guangzho interest maturity u Foshan Principal Dunhou Guarantee repaymen sub-branc d principal To be 11/16/201 02/22/201 t with h of No and 2,500 2,500 16.11 5.35 receive 6 7 interest China floating d upon Construct interest maturity ion Bank Sales No Guarantee 5,000 11/17/201 02/16/201 Principal 5,000 36.15 17.88 To be 68 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Departme d principal 6 2 repaymen receive nt of and t with d Guangzho floating interest u branch interest upon of China maturity CITIC Bank Sales Departme nt of Principal Guarantee Foshan repaymen d principal To be branch of 11/16/201 05/18/201 t with No and 5,000 5,000 66.07 16.34 receive Industrial 6 7 interest floating d and upon interest Commerc maturity ial Bank of China Principal Foshan Guarantee repaymen branch of d principal To be 11/18/201 02/21/201 t with China No and 5,000 5,000 40.90 18.68 receive 6 7 interest Minsheng floating d upon Bank interest maturity Principal Foshan Guarantee repaymen branch of d principal To be 11/18/201 02/21/201 t with China No and 5,500 5,500 44.99 20.37 receive 6 7 interest Minsheng floating d upon Bank interest maturity Total 111,500 -- -- -- 111,500 454.06 769.45 -- Source of entrusted cash The Company’s own idle funds Cumulative principals and 0 interest overdue Lawsuits (if applicable) N/A Disclosure date of the announcement about the board’s 03/28/2016 consent for the cash management entrustment (if any) Disclosure date of the announcement about the consent of the shareholders’ meeting for the cash management 69 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 entrustment (if any) Any plans for cash management Yes entrustment in the future (2) Entrusted loans □ Applicable √ Not applicable No such cases in this Reporting Period. 4. Other significant contracts □ Applicable √ Not applicable No such cases in this Reporting Period. XVIII Social responsibilities 1. Targeted measures taken to help people lift themselves out of poverty □ Applicable √ Not applicable 2. Other social responsibilities taken We have always attached importance to the accomplishment of our social value. With “provide returns for shareholders, provide a platform for employees, create value for customers and create prosperity for the society” as our mission, we take on the social responsibilities to protect the interests of our creditors, employees, customers, suppliers and community. We have been utilizing resources in a scientific, rational way, effectively protecting the natural environment and safeguarding social safety so as to promote common, harmonious and sustainable development of the Company and the society. A. Protection of the rights and interests of our shareholders and creditors We continuously improve our corporate governance structure, regulate our operation and enhance our management on information disclosure and investor relations. We treat all our investors fairly and justly, ensure their rights to know about, participate in and vote on the significant events of the Company, and safeguard the legal rights and interests of all our shareholders, especially our minority shareholders. B. Protection of the rights and interests of our employees Considering employees the most valuable resource for our survival and development, we constantly improve our employment system, improve the compensation packages for our employees and attach importance to talent cultivation so as to provide opportunities and space for the sustainable development of our employees as well as 70 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 realize the common development of the employees and the Company. We also pay attention to the health of our employees, attach importance to production safety and labor protection, and improve the working and living conditions for our employees so as to formulate harmonious and stable labor relations. C. Protection of the rights and interests of our customers and consumers We have been upholding the “Customer First” principle in our provision of quality products and services to customers. We operate honestly and disallow any unfair trade practice against commercial ethics, market rules and the fair competition principle. We also improve our product quality and after-sales services and try to build a win-win relationship with our customers. D. Protection of the rights and interests of our suppliers We respect and protect the legal rights and interests of our suppliers, carefully protect their secret and proprietary information, encourage and push them to continuously improve the quality of their products and services through creating an environment for open and fair competition among them so as to realize mutual benefits and mutual development of the suppliers and the Company. E. Environmental protection and sustainable development As an active response to the government’s call for building an environment-friendly and resource-saving society, we take on our responsibility of environmental protection and strictly abide by the government’s laws and regulations in environmental protection. In the Reporting Period, we enhanced the R&D, promotion and sale of environment-friendly and high-efficient products. We have passed the ISO14001 environmental management system certification, passed the province’s voluntary clean production examination and won the title of “Clean Production Enterprise in Guangdong Province”. F. Public relations and welfare We attach importance to the realization of our social value and see creating a prosperous society as a commitment that we should take on, trying to boost the local economy through our own development. We have been granted by the local government the title of “Foshan Over-100-Million Tax Payer” for many years due to our contributions in boosting the harmonious development of the Company and the community. Is the Company or any of its subsidiaries a heavily polluting business identified by the environmental protection authorities of China? No. Indicate by tick mark whether a social responsibility report is released 71 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 □ Yes √ No XIX Other significant events √ Applicable □ Not applicable On August 23, 2016, the Company held the 1st Extraordinary Shareholders’ General Meeting in 2016, examined and approved the Proposal on Authorizing the Reduction in Holding of Part of the Stocks of Guoxuan High-tech in Due Time, and authorized the management of the Company to choose the time to reduce holding part of the stocks of Guoxuan High-tech through block trading or aggregate auction in accordance with the laws and regulations from the date of approval by the shareholders’ General Meeting to December 31, 2016. The reduction shall not exceed 3650 shares, and the price shall be determined according to the market price when the reduction was implemented. From November 15, 2016 to December 7, 2016, the Company reduced holding 29,270,000 shares of Guoxuan High-tech through the block trading, accounting for 3.34% of the total share capital of Guoxuan High-tech. The total turnover was RMB 965.2446 million. After deducting costs and related taxes and fees, The company achieved an investment income of RMB853.2161 million, contributing RMB725.2337 million to the net profit of the Company for 2016. As of the end of the Reporting Period, the Company still holds 43,736,150 shares of Guoxuan High-tech, accounting for 4.98% of the total share capital of Guoxuan High-tech. XX Significant events of subsidiaries √ Applicable □ Not applicable During the Reporting Period, Suzhou Mont Lighting Co., Ltd. (hereinafter referred to as “Suzhou Mont”), a subsidiary of the Company, was filed for bankruptcy liquidation by the creditor Suzhou Liftall Electronics Co., Ltd. with the Suzhou Industrial Park People’s Court. Suzhou Industrial Park People’s Court had accepted the bankruptcy liquidation application and designated Jiangsu Yingyuan Law Firm as the administrator of Suzhou Mont. The Company’s investment in Suzhou Mont was RMB 24.36 million, and the claims that hadn’t been recognized by the judiciary were RMB 14,187,300, totaling RMB 38,547,300. In the year of 2015, the Company has made provision for impairment of the aforesaid assets in full. (For details, please refer to Announcement on Holding Subsidiary Suzhou Mont Lighting Co., Ltd. Being Filed for Bankruptcy Liquidation, Announcement on the Court’s Acceptance of the Bankruptcy Liquidation Matters of the Holding Subsidiary and Announcement on the Progress of Bankruptcy Liquidation of the Holding Subsidiary published on http://www.cninfo.com.cn on 72 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 April 19, 2016, May 10, 2016 and June 4, 2016). The bankruptcy liquidation of Suzhou Mont did not have any significant impact on the Company’s operating and performance in 2016. 73 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section VI Share Changes and Shareholders’ Profile I Share changes 1. Share changes Unit: share Before Increase/decrease (+/-) After Increase Percentag New Bonus from Percentag Number Other Subtotal Number e (%) issues shares capital e (%) reserve 12,655,86 12,522,47 0.99% -133,382 -133,382 0.98% 1. Restricted shares 1 9 1.3 Shares held by other 4,539,832 0.36% -133,382 -133,382 4,406,450 0.34% domestic investors Among which: Shares held 3,959,926 0.31% -99,251 -99,251 3,860,675 0.30% by domestic corporations Shares held by 579,906 0.05% -34,131 -34,131 545,775 0.04% domestic individuals 1.4 Shares held by foreign 8,116,029 0.64% 8,116,029 0.64% investors Shares held by 8,116,029 0.64% 8,116,029 0.64% foreign individuals 1,259,477, 1,259,610 99.01% 133,382 133,382 99.02% 2. Non-restricted shares 007 ,389 974,861,5 974,940,0 2.1 RMB common shares 76.63% 78,457 78,457 76.64% 88 45 2.2 Domestically listed 284,615,4 284,670,3 22.37% 54,925 54,925 22.38% foreign shares 19 44 1,272,132, 1,272,132 3. Total shares 100.00% 100.00% 868 ,868 Reasons for any share changes √ Applicable □ Not applicable 1. During this Reporting Period, the ownership of 17,564 restricted shares was transferred from domestic corporations to domestic individuals, and these shares have been unlocked as non-restricted shares on October 27, 74 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 2016. 2. 114,618 restricted shares (81,687 shares held by domestic corporations and 32,931 shares by domestic individuals) have been unlocked as non-restricted shares on October 27, 2016. 3. During this Reporting Period, the Company’s shares held by some new supervisors and outgoing directors and executive officers were locked up or unlocked as stipulated, resulting in an increment of 31,889 non-restricted shares. 4. During this Reporting Period, some supervisors and executive officers increased their shareholdings in the Company, representing an increase of 13,125restricted shares. 5. Due to Item 2, 3 and 4 above, the Company’s restricted shares decreased by 133,382 shares in the Reporting Period. Approval of share changes √ Applicable □ Not applicable Upon the review and approval of the Shenzhen Stock Exchange and the Shenzhen branch of China Securities Depository and Clearing Co., Ltd., 114,618 restricted shares became tradable on October 27, 2016 (for details, see the Indicative Announcement No. 2016-057 on Unlocking Shares disclosed on www.cninfo.com.cn dated October 26, 2016). Transfer of share ownership □ Applicable √ Not applicable Effects of share changes on the basic EPS, diluted EPS, net assets per share attributable to common shareholders of the Company and other financial indexes over the prior year and the prior period □ Applicable √ Not applicable Other contents that the Company considers necessary or is required by the securities regulatory authorities to disclose □ Applicable √ Not applicable 75 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 2. Changes in restricted shares √ Applicable □ Not applicable Unit: share Reason for Name of Opening Unlocked in this Increased in this Closing restricted Date of lock-up/unlockin shareholder restricted shares Reporting Period Reporting Period shares unlocking g Lock-up of Zhang Xuequan 8,483 0 1,425 9,908 executive Uncertain officer’s shares Lock-up of Ye Zhenghong 21,996 0 11,700 33,969 supervisor’s Uncertain shares Lock-up of outgoing Xie Qing 22,912 0 8,613 31,525 05/27/2017 executive officer’s shares Expiration of lock-up of Pan Jie 55,900 55,900 0 0 06/26/2016 outgoing director’s shares Foshan Restricted shares Enterpreneur 81,687 81,687 0 0 before going 10/27/2016 Directors public Association Restricted shares Zhou Zuliang 13,174 13,174 0 0 before going 10/27/2016 public Restricted shares Han Yuqin 10,977 10,977 0 0 before going 10/27/2016 public Restricted shares Chen Xianming 4,390 4,390 0 0 before going 10/27/2016 public Restricted shares Zhang Sirui 4,390 4,390 0 0 before going 10/27/2016 public Lock-up of Lin Qing 0 0 15,398 15,398 supervisor’s Uncertain shares 76 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Total 223,909 170,518 37,136 90,800 -- -- II Issuance and listing of securities 1. Securities (excluding preference shares) issued in this Reporting Period □ Applicable √ Not applicable 2. Changes in total shares of the Company and the shareholder structure, as well as the asset and liability structures □ Applicable √ Not applicable 3. Existing employee-held shares □ Applicable √ Not applicable III Shareholders and actual controller 1. Total number of shareholders and their shareholdings Unit: share Total number of preference Total number of Total number of shareholders common preference with resumed Total number shareholders at shareholders with voting rights at of common the prior 85,213 85,567 resumed voting 0 the prior 0 shareholders at month-end rights at the month-end the period-end before the period-end (if any) before the disclosure of this (see note 8) disclosure of this Report Report (if any) (see note 8) 5% or greater shareholders or the top 10 shareholders Total Increase/ Pledged or frozen shares Number Number Sharehold shares decrease of of Name of Nature of ing held at during restricted non-restric shareholder shareholder percentag the this Status Number shares ted shares e (%) period-en Reporting held held d Period 77 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Hong Kong Wah Foreign 171,360,3 171,360,3 Shing Holding 13.47% 0 0 Pledged 83,966,592 corporation 91 91 Company Limited Prosperity Lamps Foreign 133,577,1 133,577,1 & Components 10.50% 0 0 corporation 43 43 Limited Shenzhen Rising Investment State-owned 65,178,30 65,178,30 5.12% 25641558 0 Development Co., corporation 5 5 Ltd. Guangdong Electronics State-owned 60,357,72 60,357,72 Information 4.74% 0 0 Pledged 29,575,287 corporation 8 8 Industry Group Ltd. Central Huijin State-owned 30,799,00 30,799,00 Asset Management 2.42% 0 0 corporation 0 0 Co., Ltd. Essence International Foreign 23,794,84 23,794,84 1.87% 219287 0 Securities (Hong corporation 8 8 Kong) Co., Ltd. DBS Vickers Foreign 23,555,75 23,555,75 (Hong Kong) Ltd 1.85% 1620492 0 corporation 5 5 A/C Clients Hong Kong Rising Investment Foreign 23,165,68 23,165,68 1.82% 0 0 Development Co., corporation 4 4 Ltd. National Social 14,368,80 14,368,80 Security Fund Other 1.13% 0 2 2 Portfolio 113 10,821,37 10,821,37 Zhuang Jianyi Foreign individual 0.85% 0 0 2 2 Strategic investors or general corporations becoming top-ten N/A shareholders due to placing of new shares (if any) (see Note 3) Among the top 10 shareholders, Hong Kong Wah Shing Holding Company Limited, Related or acting-in-concert parties Shenzhen Rising Investment Development Co., Ltd., Guangdong Electronics Information among the shareholders above Industry Group Ltd. and Hong Kong Rising Investment Development Co., Ltd. are 78 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 acting-in-concert parties; and 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. Shareholdings of the top ten non-restricted shareholders Number of non-restricted shares held at the Type of shares Name of shareholder period-end Type Number Hong Kong Wah Shing Holding RMB common 171,360,391 171,360,391 Company Limited share Prosperity Lamps & Components RMB common 133,577,143 133,577,143 Limited share Shenzhen Rising Investment RMB common 65,178,305 65,178,305 Development Co., Ltd. share Guangdong Electronics Information RMB common 60,357,728 60,357,728 Industry Group Ltd. share Central Huijin Asset Management Co., RMB common 30,799,000 30,799,000 Ltd. share Domestically Essence International Securities (Hong 23,794,848 listed foreign 23,794,848 Kong) Co., Ltd. share Domestically DBS Vickers (Hong Kong) Ltd A/C 23,555,755 listed foreign 23,555,755 Clients share Domestically Hong Kong Rising Investment 23,165,684 listed foreign 23,165,684 Development Co., Ltd. share National Social Security Fund RMB common 14,368,802 14,368,802 Portfolio 113 share Domestically Zhuang Jianyi 10,821,372 listed foreign 10,821,372 share Among the top 10 shareholders, Hong Kong Wah Shing Holding Company Limited, Related or acting-in-concert parties Shenzhen Rising Investment Development Co., Ltd., Guangdong Electronics Information among the top ten non-restrictedly Industry Group Ltd. and Hong Kong Rising Investment Development Co., Ltd. are tradable share holders and between the acting-in-concert parties; and Prosperity Lamps & Components Limited and Zhuang Jianyi top ten non-restrictedly tradable share are acting-in-concert parties. Apart from that, it is unknown whether there is among the top holders and the top ten shareholders 10 shareholders any other related parties or acting-in-concert parties as defined in the Administrative Measures for the Acquisition of Listed Companies. Top ten common shareholders N/A conducting securities margin trading 79 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (if any) (see Note 4) Indicate by tick mark whether any of the top ten common shareholders or the top ten non-restricted common shareholders of the Company conducted any promissory repo during this Reporting Period. □ Yea √ No No such cases in this Reporting Period. 2. Information about the controlling shareholder Nature of the controlling shareholder: Controlled by the local government Type of the controlling shareholder: Corporation Legal Name of controlling Date of representative/perso Credibility code Main business scope shareholder establishment n in charge Development, production and sale of electronics, IT products and electrical appliances, operation of electronic information networks and computers, electronic computer technology service, and equipment and venue rental service; sale of electronic computers and fittings, electronic components, electron devices, and Guangdong Electronics electrical machinery and Information Industry He Yong 10/19/2000 91440000725458764N equipment; wholesale of coal; Group Ltd. energy performance contracting service, development and consulting service of energy-saving technology, and manufacture and installation of energy-saving equipment; parking lot operation (188 Yueken Road, Tianhe District, Guangzhou, Guangdong Province, P.R.China); import and export of goods; and training of professional and technical personnel. Shenzhen Rising Equity and venture capital Investment Wu Xiaohui 08/27/2003 91440300754255560K investment (approval shall be Development Co., Ltd. obtained for each specific 80 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 investment project); industrial investment (approval shall be obtained for each specific investment project); trustee service for asset management (not including securities, insurance, funds, financial service, human resources consulting service and other restricted business); and investment information consulting service, economic information consulting service, investment management planning, corporate identity design (excluding restricted business). Guangdong Rising Finance Holding Co., Wang Li Xin 14/11/2014 91440400315213166P Investment and asset management Ltd. Hong Kong Rising Investment Liu Wei 07/11/2001 764105 Investment and asset management Development Limited In the reporting period, Guangdong Electronics Information Industry Group Ltd. held 61,348,500 shares Shareholdings of in Foshan NationStar Optoelectronics Co., Ltd., representing a stake of 12.90% in NationStar. Shenzhen controlling shareholder Rising Investment Development Co., Ltd. held 34,984,561 shares in Guangdong Fenghua Advanced in other listed Holding Co., Ltd., accounting for 3.91% of Fenghua’s total shares; and held 106,178,408 shares in companies at home or Shenzhen Zhongjin Lingnan Nonfemet Co., Ltd., representing a stake of 4.804% in Nonfemet. Shenzhen abroad in reporting Rising Investment Development Co., Ltd. held 1,302,027 shares in Dongjiang Environmental Co. Ltd, period accounting for 0.15% of Dongjiang Environment’s total shares; and held 882,501 shares in Foshan NationStar Optoelectronics Co., Ltd, accounting for 0.19% of NationStar’s total shares. Change of the controlling shareholder during this Reporting Period □ Applicable √ Not applicable No such cases in this Reporting Period. 3. Information about the actual controller Nature of the actual controller: Local administrator for state-owned assets Type of the actual controller: Corporation Legal Name of actual Date of representative/person Credibility code Main business scope controller establishment in charge 81 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Asset management and operation, equity management and operation, investment operation, and management and re-investment of investment earnings; other business authorized by the state-owned assets administration of the Guangdong Province; contractor service for overseas projects and domestic projects calling for international bids, Guangdong Rising contractor service for survey, Assets Management Li Zezhong 12/23/1999 91440000719283849E consulting, design and supervision of Co., Ltd. the aforesaid overseas projects, export of equipment and materials for the aforesaid overseas projects, and dispatch of contract workers for the aforesaid overseas projects; property rental service; and exploitation, sale and deep processing of rare earth (operated by the branches with the relevant licenses). At the end of the Reporting Period, Guangdong Rising Assets Management Co., Ltd. directly or indirectly Shareholdings of the held the following stakes in other listed companies at home or abroad: 1. a 42.87% stake of 129,372,517 actual controller in other shares in Rising Nonferrous (stock code: 600259); 2. a 35.31% stake of 781,207,756shares in Nonfemet listed companies at (stock code: 000060); 3. a 23.94% stake of 214,286,912shares in Fenghua Advanced (stock code: home or abroad in this 000636); 4. a20.56% stake of97,815,633shares in NationStar Optoelectronics (stock code: 002449); 5. a Reporting Period 7.31% stake of 64,880,898 shares in Dongjiang Environment (stock code: 002672); 6. a 6.94% stake of 5,614,082,653 shares in China Telecom (stock code: 00728). Change of the actual controller during this Reporting Period □ Applicable √ Not applicable No such cases in this Reporting Period. Ownership and control relations between the actual controller and the Company 82 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 State-owned Assets Supervision and Administration Commission of the People’s Government of Guangdong Province 100% Guangdong Rising Assets Management Co., Ltd. 100% 100% 100% Guangdong Rising Financial Holding Hong Kong Rising Investment Guangdong Electronics Co., Ltd. Development Limited Information Industry Group Ltd. 0.537% 100% 4.745% 100% % Shenzhen Rising Investment Hong Kong Wah Shing Holding Development Co., Ltd. 1.821% Company Limited 5.124% 13.470% Foshan Electrical and Lighting Co., Ltd. Indicate by tick mark whether the actual controller controls the Company via trust or other ways of asset management. □ Applicable √ Not applicable 4. 10% or greater corporate shareholders √ Applicable □ Not applicable Legal representative / Date of Name of corporate shareholder Registered capital Business scope company principal establishment Import and export of electronics, electric lighting products, lamps, electric Prosperity Lamps & Components Zhuang Jianyi 04/28/1978 HKD2 million lighting equipment, etc., and Limited design, installation and after-sales service of lighting solutions 83 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 5. Limitations on shareholding decrease by the Company’s controlling shareholder, actual controller, reorganizer and other commitment makers √ Applicable □ Not applicable The controlling shareholders have made a commitment that within 12 months from the date of the control right change (December 4, 2015), they shall not transfer or entrust others to manage the shares directly or indirectly held by them in the Company, nor shall they allow the Company to repurchase those shares, except for the case where those shares may be transferred for no compensation due to any business or asset integration with their actual controller or their actual controller’s controlled subsidiaries. In this Reporting Period, the controlling shareholders strictly kept to its commitment on share trading limitation. And the commitment has expired on December 4, 2016. 84 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section VII Preference Shares □ Applicable √ Not applicable No preference shares in this Reporting Period. 85 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section VIII Directors, Supervisors, Executive Officers and Staff I Changes in shareholdings of directors, supervisors and executive officers Increase Decrease Opening Other Closing in this in this Office Incumben Starting Ending sharehold increase/d sharehold Name Gender Age date of date of Reporting Reporting title t/former tenure tenure ing ecrease ing Period Period (share) (share) (share) (share) (share) Board Incumben 12/25/201 12/25/201 He Yong Male 56 0 0 0 0 0 Chairman t 5 8 Vice Zhuang Incumben 12/25/201 12/25/201 10,821,37 10,821,37 Board Male 65 0 0 0 Jianyi t 5 8 2 2 Chairman Incumben 12/25/201 12/25/201 Cheng Ke Director Male 42 10,500 0 0 0 10,500 t 5 8 Incumben 10/18/201 12/25/201 Qi Siyin Director Male 36 0 0 0 0 0 t 6 8 Huang Incumben 12/25/201 12/25/201 Director Male 47 0 0 0 0 0 Zhiyong t 5 8 Liu Director Incumben 04/22/201 12/25/201 Male 54 478,764 0 0 0 478,764 Xingming & GM t 6 8 Independ Zhang Incumben 12/25/201 12/25/201 ent Female 67 0 0 0 0 0 Nan t 5 8 Director Independ Incumben 12/25/201 12/25/201 Lu Rui ent Male 41 0 0 0 0 0 t 5 8 Director Independ Incumben 12/25/201 12/25/201 Lu Wei ent Male 52 0 0 0 0 0 t 5 8 Director Chairman Liang of the Incumben 12/25/201 12/25/201 Female 41 0 0 0 0 0 Yuefei Superviso t 5 8 ry Board Zhuang Superviso Incumben 12/25/201 12/25/201 Male 31 0 0 0 0 0 Junjie r t 5 8 Ye Superviso Incumben 12/10/201 12/25/201 Zhenghon Male 43 29,328 15,600 0 0 44,928 r t 5 8 g 86 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Superviso Incumben 09/20/201 12/25/201 Lin Qing Male 47 20,530 0 0 0 20,530 r t 6 8 Liang Superviso Incumben 09/20/201 12/25/201 Female 42 0 0 0 0 0 Yueyi r t 6 8 Board Incumben 01/26/201 12/25/201 Lin Yihui Male 62 13,000 0 0 0 13,000 Secretary t 6 8 Tang Incumben 01/26/201 12/25/201 CFO Female 46 0 0 0 0 0 Qionglan t 6 8 Incumben 01/26/201 12/25/201 Wei Bin Vice GM Male 47 34,169 0 0 0 34,169 t 6 8 Jiao Incumben 01/26/201 12/25/201 Vice GM Male 44 41,444 0 0 0 41,444 Zhigang t 6 8 Incumben 01/26/201 12/25/201 Chen Yu Vice GM Male 44 17,160 0 0 0 17,160 t 6 8 Xu Incumben 01/26/201 12/25/201 Vice GM Male 46 0 0 0 0 0 Xiaoping t 6 8 Zhang Incumben 08/23/201 12/25/201 Vice GM Male 42 24,960 0 0 0 24,960 Yong t 6 8 Zhang Incumben 08/23/201 12/25/201 Vice GM Male 39 11,311 1,900 0 0 13,211 Xuequan t 6 8 Chen 12/25/201 04/07/201 Director Former Male 52 0 0 0 0 0 Binghui 5 6 12/25/201 09/08/201 Liu Ren Director Former Male 49 0 0 0 0 0 5 6 Zhang Superviso 12/10/201 08/10/201 Former Male 42 24,960 0 0 0 24,960 Yong r 5 6 Zhang Superviso 12/10/201 08/10/201 Former Male 39 11,311 1,900 0 0 13,211 Xuequan r 5 6 01/26/201 11/25/201 Xie Qing Vice GM Former Male 42 31,525 0 0 0 31,525 6 6 11,570,33 11,576,73 Total -- -- -- -- -- -- 19,400 0 0 4 4 II Changes in directors, supervisors and executive officers Name Office title Type of change Date Reason Chen Binghui Director Outgoing 04/07/2016 Resigned for personal reason Liu Ren Director Outgoing 09/08/2016 Resigned for job change 87 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Zhang Yong Supervisor Appointed 08/10/2016 Post change Zhang Xuequan Supervisor Appointed 08/10/2016 Post change Xie Qing Vice GM Dismissed 11/25/2016 Resigned for personal reason Liu Xingming Director Appointed 04/22/2016 Elected as a director of the 8th Board Qi Siyin Director Appointed 10/18/2016 Elected as a director of the 8th Board III Brief biographies Professional backgrounds, main working experience and current responsibilities in the Company of the incumbent directors, supervisors and executive officers 1. Working experience of the directors Mr. He Yong: Han nationality, born in Sep. 1960, a member of the Communist Party of China. He graduated from Open University of Hong Kong with a MBA and master’s degree. He once acted as the Vice-minister of the Operating and Management Department of Guangdong Rising Assets Management Co., Ltd., the Chairman of the Reform and Stableness Office, the Minister of the Operating and Management Department, the Supervisor of Shenzhen Zhongjin Lingnan Nonfemet Co., Ltd., the GM of Guangdong Electronics Information Industry Group Ltd. and Deputy Secretary. Now he serves as the Chairman of the Board of Directors of Guangdong Electronics Information Industry Group Ltd., the Party Secretary and the Chairman of Foshan NationStar Optoelectronics Co., Ltd., the Chairman of Foshan Sigma Venture Capital Co., Ltd. and the Chairman of Shenzhen Primatronix (Nanho) Electronics Ltd. And he has been the Board Chairman of the Company since December 2015. Mr. Zhuang Jianyi: born in 1951, with a bachelor’s degree and MBA. He now acts as the Chairman of Hong Kong Youchang Lighting Equipment, and has been engaged in the electric light source equipment production as well as the trading business for about 40 years. From 1995 to 2010, he acted as the Directors, the Vice Chairman and the Chairman of the Company. And he was elected as a director of the 8th Board of the Company in December 2015. Mr. Cheng Ke: Han nationality, born in Feb. 1974, a member of the Communist Party of China and an auditor with the bachelor’s degree. He once acted as the Attendant of the Audit Division of Guangzhou Dongshan Corporate Authority of Guangzhou Military Logistics Department, the Assistant Supervisor, the Supervisor, the Senior Executive and the Vice-Minister of the Financing Plan Department of Guangdong Rising Assets Management Co., Ltd., Vice GM of Hubei Ashennan Expressway Development Co., Ltd., Hubei Gdrising Han-E Expressway Co., Ltd. and Hubei Han-Cai Expressway Co., Ltd. and now acts as the Minister of the Financing Plan Department of Guangdong Rising Assets Management Co., Ltd. and the Director of Guangdong Rising 88 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Assets Management Co., Ltd. And he was elected as a director of the 8th Board of the Company in December 2015. Mr. Qi Siyin: Chinese nationality, with no right of permanent residence abroad. Born in May 1980, a member of the Communist Party of China, postgraduate degree, dual master’s degrees. Ever worked in Guangdong Provincial Expressway Development Co., Ltd., former investor relations management clerk, investor relations management director, information disclosure director and securities affairs representative of the Securities Department. Has been working in Guangdong Rising Assets Management Co., Ltd. as Senior Director of Capital Operation Department, Deputy Secretary of the Communist Youth League and Deputy Director; as Director and Deputy General Manager of Hong Kong Rising Investment Co., Ltd.; as Deputy Director of Capital Operations Department of Guangdong Rising Assets Management Co., Ltd. since 2007. Currently as the Director of Capital Operations Department of Guangdong Rising Assets Management Co., Ltd. In October 2016, elected as the director of the 8th Board of Directors of the Company. Mr. Huang Zhiyong: Han nationality, born in Aug. 1969, a member of the Communist Party of China and an engineer. He graduated from Xidian University with a bachelor’s degree of Electronic Devices Structures. He once acted as the Vice GM of Shenzhen Primatronix (Nanho) Electronics Ltd., the Minister of Enterprise Development Department and the GM Assistant of Guangdong Electronics Information Industry Group Ltd.. He now acts as the Vice GM and a member of Communist Party of China of Guangdong Electronics Information Industry Group Ltd. and the Chairman of Vollsun Ltd., the Director and GM of Foshan Sigma Venture Capital Co., Ltd.. And he was elected as a director of the 8th Board of the Company in December 2015. Mr. Liu Xingming: Born in Jun. 1962, a member of the Communist Party of China and an engineer with a bachelor’s degree. He joined the Company in 1983, and acted as Vice GM from 1997 to 2005; acted as GM of the Company from Dec. 2005 to Nov. 2008; acted as Vice GM of the Company in Dec. 2008; elected as the Director of the Company from 1995 to Dec. 2015; acted as Vice Director of the Board from Apr. 2011 to Dec. 2015; from Apr. 2012 up to now, he acted as the GM and Vice Director of the Board; after 1995, he was elected as the Director of the Company; and he was elected as a director of the Company in April 2016. In Jul. 2015, he was elected as the Party Secretary of the Company. Ms. Zhang Nan (Independent Director): Han nationality, born in Feb. 1949, a member of the Communist Party of China and a senior economist. She graduated from Chinese Academy of Social Sciences with a master degree of economic law. She once acted as the Vice-Minister of Beijing Electronic Instruments Industry System Office, Deputy Director of Audit and Regulations Bureau, the Director, the Deputy Director and the Chief of the research 89 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 laboratory of SETC, the Regulations Bureau and the Economic cadre training center as well as the bureau-level Supervisor of the large enterprises of the Board of Supervisors of the State-owned Assets Supervision and Administration Commission and retired in Mar. 2009. She used to be an Independent Director of CSCL and Guandgong Rising Nonferrous Metals Co., Ltd. And she was elected as an independent director of the 8th Board of the Company in December 2015. Mr. Lu Rui (Independent Director): Chinese Nationality, no permanent residency abroad, born in Jan. 1975. He graduated in 2006 from the Sun Yat-Sen University of Management Accounting with a doctor’s degree of management. He is now a professor, doctorial tutor, the Head of the Accounting and Capital Operation Research Center and the Head of the EDP Education Center of the Lingnan (University) College of Sun Yat-Sen University. He acted as the Teaching Assistant and the Lecturer of the Financial Accounting Department of Guangzhou Finance & Trade Management Institute during the period from July 1996 to August 2003, the Lecturer of the Lingnan (University) College of Sun Yat-Sen University during the period from July 2006 to December 2008, and the Associate Professor of the Lingnan (University) College of Sun Yat-Sen University during the period from January 2009 to June 2016. And he has been a profession at the Lingnan (University) College of Sun Yat-Sen University since July 2016. He was a visiting scholar to the MIT Sloan School of Management for January-June 2007 and September-October 2009. His other academic and social posts mainly include: the member of Independent Director Committee of China Association for Public Companies, a national leading accounting professional recognized by the Ministry of Finance, the member of All-China Financial Youth Federation, the member of the senior member of Accounting Society of China, the member of AAA and America Finance Management Academy, the evaluation experts of NSFC and the researcher of the Internal Control Research Center of Sun Yat-Sen University; the Independent Director of Guangzhou GCI Science & Technology Co., Ltd. since Apr. 2010, the Independent Director of Xilong Chemical Co., Ltd. since Jan. 2015 and the Independent Director of Youmi Technology Co., Ltd. since May 2016. And he was elected as an independent director of the 8th Board of the Company in December 2015. Mr. Lu Wei (Independent Director): Chinese Nationality, born in Dec. 1964. He is a doctoral candidate in economic administration at Fudan University and a doctor’s degree holder in economics. He was a teaching assistant, a lecturer, a departmental chief, an associate profession and then a professor at Fudan University during the period from August 1989 to March 2003. And he has been working in Shanghai Jiao Tong University since April 2003. He was a professor and doctoral tutor of the Department of Business Administration of the Antai Management School of Shanghai Jiao Tong University during the period from April 2003 to March 2006, and has 90 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 been a professor and doctoral tutor of the Department of Business Administration of the Antai Economics and Management School of Shanghai Jiao Tong University since April 2006. He has been the head of the SJTU-USC Cultural Creativity Industries School since October 2014; an independent director of Shanghai Shibei Hi-tech Co., Ltd. since Sep. 2012; and an independent director of Shanghai Lujiazui Finance & Trade Zone Development Co., Ltd. since May 2015. And he was elected as an independent director of the 8th Board of the Company in December 2015. 2. Working experience of the supervisors Ms. Liang Yuefei: Han nationality, born in Nov. 1975, a member of the Communist Party of China and a CCPA member. She graduated from Guangdong Polytechnik Normal College with a bachelor’s degree. She once acted as the Vice-Minister of the Total Fiscal Audit Department of Guangdong Electronics Information Industry Group Ltd.. And now acts as the general manager assistant, Minister of the Total Fiscal Department and Employee Supervisor of Guangdong Electronics Information Industry Group Ltd., the Supervisor of Foshan Sigma Venture Capital Co., Ltd. and the chairman of the Supervisory Board of Foshan NationStar Optoelectronics Co., Ltd, the Director of Primatronix (Nanho) Electronics Ltd and Guangdong HuaSheng data solid-state storage co., LTD... And she was elected as the chairman of the 8th Supervisory Board of the Company in December 2015. Mr. Zhuang Junjie: Born in Sep. 1985, a Hong Kong permanent resident. He graduated with a bachelor’s degree and once acted as the Consultant Manager of Accenture Software and now acts as the Director of Hong Kong Youchang Lighting Equipment Co., Ltd. And he was elected as a supervisor of the 8th Supervisory Board of the Company in December 2015. Mr. Ye Zhenghong: Born in Jul. 1973, a member of the Communist Party of China with a college degree. He joined the Company from Jul. 1995; worked in the Machine Repair Shop from Jul. 1997 to Jan. 2001; acted as Equipment Management Director in T8 Fluorescent Lamp Factory from Feb. 2001 to Jan. 2005; acted as Director of Machine Repair Workshop from May 2005 to Jan. 2007; acted as Chief Officer of Machinery Dynamic Department from May 2006 to Dec. 2007; and acted as factory director of T8 Fluorescent Lamp Factory from Jan. 2008 to Nov. 2013; and acted as factory director of LED of T8 from Dec. 2013 up to now; the Chairman of the 5th Board of Supervisors and the Employee Supervisor of the 6th, 7th and 8th Board of Supervisors. Mr. Lin Qing: born in September 1969, member of the Communist Party of China, undergraduate degree, electric light source engineer; has been working in the company since August 1991; worked as mercury lamp workshop technician and workshop director from June 1996 to February 2002; as the workshop director and factory director 91 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 of the fluorescent lamp factory from March 2002 to September 2009; as the director of Technology Department since October 2009; in July 2015, elected as a discipline committee member of the company’s CPC committee. And he was elected as a Employee Supervisor of the Company in September 2016. Ms. Liang Yueyi: born in June 1974, member of the Communist Party of China, college degree; has been working in the company since August 1995; worked as the Secretary to the President from August 1995 to September 2002; as clerk of the Import & Export Trade Department from October 2002 to December 2006; as the Deputy Manager of the Import & Export Trade Department since January 2007; a member of the company’s CPC committee since July 2015; as a female member of the company’s labor union since April 2016. And she was elected as a Employee Supervisor of the Company in September 2016.. 3. Working experience of the senior management staff Mr. Liu Xingming: Born in Jun. 1962, a member of the Communist Party of China and an engineer with a bachelor’s degree. He joined the Company in 1983, and acted as Vice GM from 1997 to 2005; acted as GM of the Company from Dec. 2005 to Nov. 2008; acted as Vice GM of the Company in Dec. 2008; elected as the Director of the Company from 1995 to Dec. 2015; acted as Vice Chairman of the Board from Apr. 2011 to Dec. 2015; from Apr. 2012 up to now, he acted as the GM of the Company; and he was elected as a director of the Company in April 2016. In Jul. 2015, he was elected as the Party Secretary of the Company. Mr. Lin Yihui: Born in Nov. 1954, a member of the Communist Party of China with a master’s degree in Economics. He was in active service in force from Dec. 1970 to 1986 and acted as posts of command, battalion and group; works in Foshan International Trust and Investment Company from 1986 to Sep. 2000 and acted as Section Chief and Vice GM and was in charge of the securities business of the Company as well as host the works such as the underwritten offering and listing recommendation of the shares of various companies over years; acted as Party Secretary of the Company from May. 2010 to Jul. 2015. He has acted as the Secretary of the Company since May 2013. Ms. Tang Qionglan: born in March 1970, member of the Communist Party of China, bachelor degree, China Certified Public Accountant, worked as an accountant in Foshan Certified Public Accountants, served as audit manager of BDO China Shu Lun Pan Certified Public Accountants LLP Foshan Branch; as Deputy Manager of the Finance Department, Manager, Chief Financial Officer, Deputy General Manager and Chief Financial Officer of Foshan NationStar Optoelectronics Co., Ltd. from October 2008 to January 2016. In January 2016, elected as the Chief Financial Officer of the Company. 92 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Mr. Wei Bin: Born in May 1969, a member of the Communist Party of China and an engineer with a bachelor’s degree. He joined in the Company in 1991, and responsible for the product development of the graduate school of the Company from Mar. 1992 to Dec. 1996, acted as Workshop Manager of Energy Saving Lamp Workshop from Jan. 1997 to Dec. 2005, acted as Workshop Manager of HID Workshop from Jan. to Dec. 2005, acted as Workshop Manager of T5 Workshop from 2006 to Nov. 2008, acted as the Department Director of the Technology Department from Nov. 2008 to 2009 and acted as Vice GM of the Company from Sep. 2009. Mr. Jiao Zhigang: Born in May 1972, a member of the Communist Party of China with a bachelor’s degree. He graduated from South China University of Technology in Jul. 1994, and at the same year he entered Foshan Electrical and Lighting Co., Ltd. He acted as Warehouse Director of the Company from Aug. 1995 to Sep. 2013, acted as Department Director of Human Resources Department from May 2010 to Sep. 2013; selected as Employee Supervisor from Mar. 2007 to Sep. 2013, and as Chairman of the Supervisory of the Company from May 2010 to Sep. 2013. He acted as Vice GM of the Company in Sep. 2013. Mr. Chen Yu: Born in Dec. 1972, a member of the Communist Party of China, college graduate and engineer. He entered Foshan Electrical and Lighting Co., Ltd. in Jul. 1994. And acted as workshop manager of parabolic reflector, coating film, energy saving lamp, factory director of the branch factory of Gaoming and workshop manager of general bulbs from Jan. 1997 to Dec. 2012, acted as Director of Production Department, OEM Department and Mechanical Dynamics Department from Jan. to Aug. 2013, acted as Director of Production Department and OEM Department from Sep. 2013 to May 2014 as well as acted as Vice GM of the Company from May 2014. Mr. Xu Xiaoping: born in July 1970, member of the Communist Party of China, postgraduate degree, engineer. Worked as Deputy General Manager and General Manager of Guangdong Fenghua Advanced Technology Holding Co., Ltd. Xin’gu Branch from September 2000 to December 2013, also as the General Manager of Guangdong Fenghua Semiconductor Technology Co., Ltd. from January 2011 to December 2013, and Deputy Director of Headquarters Operations Center from January 2013 to February 2015; as the General Manager of Guangdong Fenghua Advanced Technology Holding Co., Ltd. Lihua Branch from March 2015 to January 2016; won the first prize of scientific and technological progress of Zhaoqing in 2008; won the title of the “Ninth Batch of Top Talents of Zhaoqing” in 2010; served as Deputy General Manager of the company in January 2016. Mr. Zhang Yong: Born in Jun. 1974, a member of the Communist Party of China and a mechanical engineer with a college degree. From Jul. 1997, he joined in the Foshan Electrical and Lighting Co., Ltd. and successively acted as Deputy Director and Director of Lamp Filament Appliance Workshop from Oct. 1999 to Jun. 2008; acted as 93 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Factory Director of Gaoming Fluorescent Lamp Factory and Factory Director of Gaoming Branch Factory from Jul. 2008 to Dec. 2008; respectively acted as Department Director of Product Department, OEM Department, Mechanical Dynamics Department and Infrastructure Department from Jan. 2009 to Dec. 2012; acted as General Manager Assistant from Mar. 2013 to August 2016. He was a supervisor and the Chairman of the Board of Supervisors of the Company from Sep. 2013 to August 2016; has been the chairman of the Labor Union of the Company since September 2013; was elected as the Deputy Party Secretary in July 2015; and has been a vice GM of the Company since August 2016. Mr. Zhang Xuequan: Born in Dec. 1977, a member of the Communist Party of China with a bachelor’s degree. He joined the Company in Oct. 1996. He worked in the former Iodine-tungsten Lamp Workshop from Oct. to Dec. 1996; worked in the Technology Department and then the Quality Control Department from Jan. 1997 to Aug. 2005; acted as the Workshop Manager of Lamp Workshop from Sept. 2002 to May 2008; acted as the Department Director of the Business Management Department of the Company from Jun. 2008 to August 2016. He has concurrently acted as the Office Director since Feb. 2016. He has been the Party Branch Secretary for the Administrative Office of the Company since July 2010, and a member of the party committee of the Company since July 2015. He was a supervisor of the Company from May 2013 to August 2016 and has been a vice GM of the Company since August 2016. Posts concurrently held in shareholding entities √Applicable □Not applicable Allowance from Starting date of Ending date of Name Shareholding entity Post the shareholding tenure tenure entity (yes/no) Chairman, Guangdong Electronics Information He Yong Party Yes Industry Group Ltd. Secretary Zhuang Jianyi Youchang Light Equipment Co., Ltd. Chairman Yes Guangdong Electronics Information Huang Zhiyong Vice GM Yes Industry Group Ltd. Planning and Guangdong Electronics Information Finance Liang Yuefei Yes Industry Group Ltd. Manager & GM Assistant Zhuang Junjie Youchang Light Equipment Co., Ltd. Director Yes Remark None Posts held concurrently in other entities 94 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 √Applicable □Not applicable Starting date of Ending date of Allowance from Name Other entity Post tenure tenure the entity (yes/no) Planning and Guangdong Rising Assets Management Co., Cheng Ke Finance Yes Ltd. Manager Capital Guangdong Rising Assets Management Co., Qi Siyin Operation Yes Ltd. Manager Lingnan (University) College of Sun Lu Rui Professor Yes Yat-Sen University Lu Wei Antai School of Management of SJTU Professor Yes Remark None Punishments imposed in the recent three years by the securities regulators on the incumbent directors, supervisors and executive officers as well as those who left in this Reporting Period √ Applicable □ Not applicable In Mar. 2013, Mr. Liu Xingming was warned by the Guangdong CSRC and fined RMB30,000. In Mar. 2013, Mr. Xie Qing and Mr. Wei Bin were warned by the Guangdong CSRC. IV Remuneration of directors, supervisors and executive officers Decision-making procedure, determination basis and actual remuneration payment of directors, supervisors and executive officers The Remuneration & Appraisal Committee under the Board of Directors decides the remuneration of directors, supervisors and senior management in accordance with the Plan for Decision-making procedure for the Implementing the Equity Incentive Mechanism for Middle-and Top-Rank Management remuneration of directors, Personnel reviewed and approved on the 2001 Annual Shareholders’ General Meeting, and supervisors and senior management the particulars on completing current main financial indexes & operating goals, as well as the fulfillment of job responsibilities by them. The remuneration of directors (excluding independent directors), supervisors and senior management who withdraw remuneration in the Company are all decided in accordance with Basis for determining the the Company’s Plan for Implementing the Equity Incentive Mechanism for Middle-and remuneration of directors, Top-Rank Management Personnel and the Salary System and the relevant appraisal indexes. supervisors and senior management The allowance of independent directors should be granted according to the standard reviewed and approved by 2010 Annual Shareholders’ General Meeting. Actual payment of the remuneration The total remuneration (before tax) actually paid to the directors, supervisors and senior of directors, supervisors and senior management staff for 2016 were RMB11.2040 million. management 95 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Remuneration of directors, supervisors and executive officers in this Reporting Period Unit: RMB'0,000 Remuneration Total before-tax from related remuneration Name Office title Gender Age Incumbent/former parties of the from the Company Company (yes/no) He Yong Board Chairman Male 56 Incumbent Yes Vice Board Zhuang Jianyi Male 65 Incumbent Yes Chairman Cheng Ke Director Male 42 Incumbent Yes Qi Siyin Director Male 36 Incumbent Yes Huang Zhiyong Director Male 47 Incumbent Yes Liu Xingming Director & GM Male 54 Incumbent 170.7 No Independent Zhang Nan Female 67 Incumbent No Director Independent Lu Rui Male 41 Incumbent 14.4 No Director Independent Lu Wei Male 52 Incumbent 14.4 No Director Supervisory Liang Yuefei Female 41 Incumbent Yes Board Chairman Zhuang Junjie Supervisor Male 31 Incumbent Yes Ye Zhenghong Supervisor Male 43 Incumbent 49.9 No Lin Qing Supervisor Male 47 Incumbent 39.95 No Liang Yueyi Supervisor Female 42 Incumbent 55.17 No Lin Yihui Board Secretary Male 62 Incumbent 104.56 No Tang Qionglan CFO Female 46 Incumbent 98.59 No Wei Bin Vice GM Male 47 Incumbent 101.56 No Jiao Zhigang Vice GM Male 44 Incumbent 98.49 No Chen Yu Vice GM Male 44 Incumbent 91.49 No Xu Xiaoping Vice GM Male 46 Incumbent 60.61 No Zhang Yong Vice GM Male 42 Incumbent 91.49 No Zhang Xuequan Vice GM Male 39 Incumbent 65.07 No Chen Binghui Director Male 52 Former Yes Liu Ren Director Male 49 Former Yes Xie Qing Vice GM Male 42 Former 64.02 No 96 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Total -- -- -- -- 1,120.40 -- Equity incentives for directors, supervisors and executive officers in this Reporting Period □ Applicable √ Not applicable V Employees 1. Number, functions and educational backgrounds of employees Number of in-service employees of the Company 1,789 Number of in-service employees of main subsidiaries 7,591 Total number of in-service employees 9,380 Total number of employees with remuneration in this Reporting 9,380 Period Number of retirees to whom the Company or its main 0 subsidiaries need to pay retirement pension Functions Function Number of employees Production 7,852 Sales 783 Technical 545 Financial 58 Administrative 142 Total 9,380 Educational backgrounds Educational background Number of employees College and above 1,460 Technical secondary school and high school 1,781 Below high school 6,139 Total 9,380 2. Employee remuneration policy The general principal of the employee’s remuneration policy is: as for the external part, the Company should maintain the market competitiveness of the talents by possessing of the attraction and as for the internal part, should possess of the impartiality and consistency. The salary level of the external labor market and the social average salary level as well as the wage guiding issued by the governmental department are the important reference basis for the confirm of the salary standard of the Company; to confirm different pay grade according to 97 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 different positions and the position characteristics and to furthest incentive the enthusiasm of the employees; to abide with the principal of giving priority to efficiency and give consideration of the fairness and to object to the equalitarianism when distributing the remunerations, to pay with generous compensation for those excellent employees who creates great value, to appropriately incline to the key talents and the market supply shortage talents; the lowest salary of the Company should not be lower than the local lowest salary standard. 3. Employee training plans The Company has been setting great store on the training and development work of the employees, and combined with the actual situation, annual plan, the position nature and the responsibilities as well as the development demands, the Company built up a serious of training plan through the methods of having classes by internal lecturers and external engaged professors, which with multiple levels, channels, fields and ways to strengthen the employee training work, including the new employee orientation training, the on-the-job personnel professional training, the frontline staff skills training, skills training for managerial personnel, etc., to constantly improve the overall quality of the current employees for realizing the win-win situation and mutual progress. 4. Labor outsourcing □ Applicable √ Not applicable 98 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section IX Corporate Governance I Basic situation of corporate governance During the Reporting Period, in strict accordance with relevant requirements of Company Law, Securities Law, Code of Corporate Governance of Listed Companies and Rules of Stock Listing of Shenzhen Stock Exchange as well as other relevant laws, rules and regulations, the Company continuously perfected the corporate governance structure and set up an effective corporate governance system. At present, the Company has set up governance structure of responsible Shareholders’ General Meeting, the Board of Directors, the Supervisory Committee and managers, who performed right of decision-making, execution and supervision respectively according to their duties; besides, the Company set up special committees of the Board of Directors and system for independent directors. The Company strengthened information disclosure of principal shareholders and persons acting-in-concert, forbidden shareholders of the Company to misapply their rights. The Company separated from the principal shareholder in personnel, assets, business, financial affairs and organizational, and was absolutely impendent. The Company timely revised and perfected various systems in accordance with the latest issued laws & rules and relevant regulations of CSRC and Shenzhen Stock Exchange. And the corporate governance is basically in line with the requirements of relevant laws, regulations and regulatory documents. Any significant incompliance with the regulatory documents issued by the CSRC governing the governance of listed companies □ Yes √ No No such cases in this Reporting Period. II Independence of businesses, personnel, asset, organizations and finance which are separate from the controlling shareholder The Company is completely separated from its controlling shareholder in aspects such as business, personnel, assets, institutions and finance and possesses independent and complete business and self-dependent operating ability. 1. As for the business, the Company is independent of the controlling shareholders and the subordinate enterprises and owns the independent business departments and management system as well as possesses of impendent and entire business and self-dependent operating ability. 2. As for the personnel, the Company formulates the independent management system such as the labor, personnel 99 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 and the salary, possesses the independent personnel department and the operating management team. The Senior Executives of the Company are serving at the Company in full time and receiving the salary from the Company. 3. As for the assets, the assets of the Company are independent and entire with clear ownership, and possesses the independent production system, BOP system and the supporting facilities, as well as possesses the legal ownership of the land, factories, equipments related to the production and operating and the assets such as the trademark, patent and the non-patent technology, and possesses the entire control and govern power of all the assets of the Company without any behavior such as any controlling shareholder occupies the assets of the Company. 4. As for the institutions, the Company set up the independent and entire organizations and institutions, and the construction as well as the operating of the corporate governance institutions is executed strictly executed according to the Articles of Association, and the production and operating as well as the offices are entirely independent from the controlling shareholders with any situation of working under one roof with the controlling shareholders.。 5. As for the finance, the Company set up the independent finance department and builds up the independent and normative accounting and financial control system according to the requirements of the ASBE, set up the independent bank account and pays the taxes legally and independently and the Company could make the financial decisions independently without any situation of the shareholding intervenes the capital usage. III Horizontal competition √ Applicable □ Not applicable Nature of Solution’s Name of controlling Type of issue controlling Cause for issue Solution progress and shareholder shareholder follow-up plan The controlling shareholders Guangdong committed: 1. in view of the Electronics percentage of the horizontal Information Some enterprises competition between the Industry Group Ltd., Local State-owned controlled by the Foshan NationStar Shenzhen Rising Assets controlling shareholders Optoelectronics Co., Ltd. Horizontal Investment Supervision and engage in the same or and Foshan Electrical and Ongoing competition Development Co., Administration similar business with the Lighting Co., Ltd. was less, Ltd., Hong Kong Commission Company, which incurs the Electronics Group, Rising Investment horizontal competition. Shenzhen Guangdong Development Rising Investment and Hong Limited Kong Guangdong Rising Investment committed to 100 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 designedly gradually reduce or eliminate the horizontal competition through business integration or other methods and arrangement within 24 months in the future. 2. In view of Shenzhen Primatronix (Nanho) Electronics Ltd. (hereinafter referred to as “Nanho Primatronix”), Guangdong Rising Optoelectronic Co., Ltd. (hereinafter referred to as “Guangdong Rising Optoelectronic”) and Henan Guangdong Rising High-tech Investment Co., Ltd. (hereinafter referred to as “Guangdong Rising Hi-tech”) were all ceased the business which were of horizontal competition with Foshan Electrical and Lighting, and the Electronics Group and its persons acting in concert was planed to respectively adopt the corresponding solving measures on Nanho Primatronix, Guangdong Rising Optoelectronic and Guangdong Rising Hi-tech: (1) Nanho Primatronix: had ceased the relevant business of horizontal competition with the Foshan Electrical and Lighting; (2) Guangdong Rising Optoelectronic: had ceased the relevant business of horizontal competition with the Foshan Electrical and Lighting and the Electronics 101 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Group will plan to transfer the relevant equities or shutdown the company according to the relevant situation after the completion of the acceptance check of the government project originally undertook by Guangdong Rising Optoelectronic and the completion of the relevant processing work; (3) Guangdong Rising Hi-tech: owning to the small operating scope, the Electronics Group had executed the shutdown of the whole company that only left 4 employees to take the responsibility of the recovery of the amount of the goods selling and the written-off procedures of the company. As for avoiding the horizontal competition with Foshan Electrical and Lighting, the further commitments on the relevant arrangements made by the Electronics Group, Shenzhen Guangdong Rising Investment and Hong Kong Guangdong Rising Investment as follows: 1. the company will execute the supervision and restriction on the production and the operating activities of the company and the relevant enterprises except for the above enterprises currently involved with the horizontal competition with 102 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Foshan Electrical and Lighting and if there is same or similar situation occurs horizontal competition with Foshan Electrical and Lighting from the future promises and the relevant enterprises on the products or business, the Company following measures to solve the problem: (1) when commits to adopt the Foshan Electrical and Lighting considers it is necessary, the Company and the relevant enterprises would decrease the shareholding until entirely completes the transfer of the held relevant assets and business; (2) when Foshan Electrical and Lighting considers it is necessary, should take preference to purchase the relevant assets and business held by the company and the relevant enterprises through appropriate methods; 2.each commitment made by the company on eliminating or avoiding the horizontal competition is also adapted to the subordinate enterprises directly or indirectly controlled by the company and the Company owns the obligation to urge and ensure the other subordinate enterprises to carry out each events and arrangement stated on the document and to strictly abide to the whole 103 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 commitments. 3. If the company or the subordinate enterprises directly or indirectly controlled by the company violated the above commitments that led to the losses of Foshan Electrical and Lighting, the company should pay for the reasonable compensation.” The controlling shareholders committed: 1. guaranteed to strictly abide by the each regulation from the CSRC, the normative laws documents of SZSE and the Articles of Association of Foshan Electrical and Lighting. Among the production and operating activities since then, the promisee would not take Guangdong advantage of the position of Electronics the controlling shareholders Information Some enterprises and the actual controller to Industry Group Ltd., controlled by the carry out any behavior that Shenzhen Rising controlling shareholders Related-party harm the benefits of Foshan Investment Local SASAC engage in business with Ongoing transactions Electrical and Lighting and Development Co., the Company, which other shareholders; 2. the Ltd., Hong Kong incurs related-party promisee and the other Rising Investment transactions. subsidiaries, the branch Development companies, the joint Limited ventures or associated companies (hereinafter referred to as the “relevant enterprises”) will try their best to avoid and reduce the related transactions with Foshan Electrical and Lighting and its subsidiaries; 3. as for the related transactions which are indeed necessary and could not be avoided 104 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 between the promisee, the relevant enterprises and Foshan Electrical and Lighting, will strictly abide by the market principles of fairness, justice with valuable consideration. When the Annual General Meeting or the Board of Directors is executing the voting on the related transactions which involved with the promisee and the relevant enterprises, should execute the obligation of avoiding the voting and at the same time execute the transactions vetting process as well as the information disclosure obligations according to the relevant laws and regulations and the normative documents. If violated the above commitments and caused the losses to Foshan Electrical and Lighting as well as the subsidiaries and other shareholders, the promisee should assume compensation liability. IV Annual and special meetings of shareholders convened during this Reporting Period 1. Meetings of shareholders convened during this Reporting Period Index to the Investor Meeting Type Convened date Disclosure date disclosed participation ratio information Announcement No. 2015 Annual 2016-020 on Meeting of Annual 38.19% 04/22/2016 04/23/2016 Resolutions of Shareholders 2015 Annual Meeting of 105 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Shareholders disclosed on www.cninfo.com.cn Announcement No. 2016-039 on st The 1 Special Resolutions of 1st Meeting of Special 37.56% 08/23/2016 08/24/2016 Special Meeting of Shareholders in 2016 Shareholders in 2016 disclosed on www.cninfo.com.cn Announcement No. 2016-054 on The 2nd Special Resolutions of 2nd Meeting of Special 37.43% 10/18/2016 10/19/2016 Special Meeting of Shareholders in 2016 Shareholders in 2016 disclosed on www.cninfo.com.cn 2. Special meetings of shareholders convened at the request of preference shareholders with resumed voting rights □ Applicable √ Not applicable V Performance of independent directors in this Reporting Period 1. Attendance of independent directors in board meetings and meetings of shareholders Attendance of independent directors in board meetings Due presence in Presence by Absent for two Presence on site Presence through Independent director this Reporting telecommunicati Absence (times) consecutive (times) a proxy (times) Period (times) on (times) times Zhang Nan 10 5 5 0 0 No Lu Rui 10 5 5 0 0 No Lu Wei 10 4 5 1 0 No Attendance of independent directors in meetings of shareholders as non-voting 2 delegates (times) 2. Objections raised by independent directors on issues of the Company Indicate by tick mark whether any independent directors raised any objections on issues of the Company. □ Yes √ No No such cases in this Reporting Period. 106 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 3. Other details about the performance of duties by independent directors Indicate by tick mark whether any suggestions from independent directors were adopted by the Company. √ Yes □ No Suggestions from independent directors adopted or not adopted by the Company: During the Reporting Period, in accordance with the requirements of Company Law, Code of Governance of Listed Companies, Guidance on the Establishment of the Independent Directors System of the Listed Companies, Articles of Association and relevant systems, the independent directors of the Company attended the board sessions held during the Reporting Period, carefully reviewed the proposals proposed on the sessions, paid attention to the operation of the Company, performed the duties sincerely and diligently, and issued independent opinion on acquisition and sale of assets, asset impairment provision making, related-party transactions, profit distribution, etc., as well as proposed many precious advices on perfection of systems and decision of routine operation of the Company, so as to play an active role in protecting the legal right of the Company and its shareholders. VI Performance of duties by specialized committees under the Board during this Reporting Period (I) Work accomplished by the Audit Committee According to the related provisions of China Securities Regulatory Commission and Shenzhen Stock Exchange, as well as the Rules of Implementation for the Audit Committee of the Board, the Audit Committee diligently performed the following work duties: 1. On January 29, 2016, the Audit Committee convened a session and reviewed as well as approved the following two topics: (1) Reviewed and approved the auditor’s schedule for the 2015 annual audit of the Company; and (2) Reviewed and approved the Financial Department’s briefing on the 2015 main financial data. Had not discovered any significant problem of the 2015 main financial data of the Company after carefully reviewed and the 2015 main financial data and pretax profits analysis submitted by Ministry of Finance and listened to the report from the financial staffs. Since there is a period of time between this preliminary review of the financial statements and the formal issuance of the auditor’s report and the financial statements, we hereby remind the Company’s Financial Department to pay attention to dealing with the follow-up affairs after the date of Balance Sheet in strict compliance with the New Accounting Standards for Business Enterprises, so as to ensure 107 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 the factuality, fairness and completeness of the financial statements. 2. On March 17, 2016, the Audit Committee convened a session and reviewed as well as approved the following two topics: (1) 2015 annual financial report of the Company; (2) Proposal on hiring new CPAs firm; and In view of the fact that GP Certified Public Accountants LLP (Special General Partnership) has been providing financial audit services for the Company for 23 years, and the service period of present year is about to expire, it is proposed to appoint Beijing Zhongzheng Tiantong Certified Public Accountants (Special General Partnership) as the auditing institution for finance and internal control of the Company for the year 2016 after careful investigation and survey in order to ensure the independence and objectivity of the audit work. (3) 2015 work plan of Audit Department. 3. On April 18, 2016, the Audit Committee convened a meeting, at which the Proposal on Appointment of Pang Haitao as Internal Audit Manager was considered and approved. (II) Work of the Remuneration and Appraisal Committee 1. On January 29, 2016, the Remuneration and Appraisal Committee held a meeting to consider the Notes on the Remuneration of the Senior Management of the Company for 2015; In the case of macroeconomic downturn and increased competition in the industry, the Company’s performance in 2015 didn’t meet the requirements, which was mainly due to the following reasons: (1) Compensated the investors for losses of RMB 130.42 million; (2) accrued provision for impairment of assets RMB 89.47 million; (3) LED product price dropped, resulting in profits reduction. Although the Company’s performance in 2015 didn’t meet the requirements, the achievement of main business didn’t decline too much. The operating income of the Company in 2015 was RMB 2,876,659,100, which declined by 6.26% on a year-on-year basis. According to the fulfillment of the performance indicators of senior management, comparing with the performance requirements and combined with the Company’s actual situation, it is decided to pay only the basic annual salary to the senior management in 2015, while the performance salary and long-term incentive fund will be garnished. 2. On December 20, 2016, the Remuneration and Appraisal Committee held a meeting to consider the Proposal of Remuneration Plan for Senior Management of Foshan Electrical and Lighting Co., Ltd. (Draft). 108 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 The Proposal was developed according to the industry and regional remuneration level of the Company, combined with the actual operation of the company and the assessment system. The remuneration scheme complies with laws and regulations and the Articles of Association and other relevant provisions and is conducive to mobilize the enthusiasm and creativity of the company’s senior management, create good business performance and promote the company’s long-term development. (III) Work of the Nomination Committee During the Reporting Period, the Nomination Committee carried out its work actively and seriously, carefully audited the qualification, work experience and other related matters of the directors and senior management serving in the Reporting Period, and believed that the directors and senior management were fully qualified for their work. During the Reporting Period, the Nomination Committee nominated Qi Siyin as director of the Board of Directors; nominated Zhang Yong and Zhang Xuequan as the senior management of the Company. VII Performance of duties by the Supervisory Board Did the Supervisory Board find any risks to the Company during its supervision in this Reporting Period? □ Yes √ No The Supervisory Board raised no objections in this Reporting Period. VIII Appraisal and incentive for executive officers The senior management of the Company is appointed by the Board of Directors, evaluated by the Remuneration and Appraisal Committee of the Board of Directors according to their work abilities, duty performance and fulfillment of the operating performance management, and paid according to Establishing Equity Incentive System for Middle and Senior Management and Remuneration System of the company considered and passed at the Annual Shareholders’ General Meeting of the Company in 2001, the Remuneration Plan for Executive Officers considered and approved by the Board and salary system of the Company. IX Internal control 1. Serious internal control defects found in this Reporting Period □ Yes √ No 109 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 2. Internal control self-evaluation report Disclosure date of the internal control 03/30/2017 self-evaluation report Index to the disclosed internal control See www.cninfo.com.cn for the Internal Control Self-Evaluation Report 2016 self-evaluation report Total assets of the evaluated entities as a 99.36% percentage in the consolidated total assets Operating revenues of the evaluated entities as a percentage in the consolidated 99.99% operating revenues Defect identification standards Type Financial-report related Non-financial-report related Defect with one of the following characteristics should be recognized as a serious defect: 1. being punished for Defect with one of the following seriously violating the national laws, the characteristics should be recognized as a administrative laws and regulations and serious defect: 1. the defect involved with the normative documents; 2. the the malpractices of the Directors, the Company suffers a serious economic loss Supervisors and the Senior Executives; 2. the due to any serious errors made in controlled environment is invalid; 3. the CPA decision-making caused by serious lack discovered any significant misstatement of decision-making procedures on from the current financial report while the significant events or unfair internal control could not discover the decision-making; 3. the Company’s mistake during the operating process; 4. the reputation has been unrepairably supervision from the Corporate Audit damaged by any conduct in violation of Committee and the internal audit institution laws and regulations which produces a Nature standard on the internal control. If there met with one far-reaching negative impact and draws of the situation of the following, should be the public’s attention widely; 4. the recognized as an important defect: 1. the major business involved with the recognized important defect is not solved production and operating of the during the reasonable period; 2. corrects the Company lack of the system control or published financial report; 3. the function of the system control is invalid; 5. the the internal audit of the Company is invalid; results of the internal control assessment 4. the control of whether execute the turn out to include any serious defects selection and the application of the and such defects fail to be rectified accounting policies according to the effectively within 12 months. Defects Generally Accepted Accounting Principles is with the following characteristics should invalid. be recognized as important defects: 1. owing to partly lack of the decision-making process on significant events and the undemocratic 110 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 decision-making process which caused the decision-making mistake that led the Company face with certain economic losses; 2. the negative influences owning to the unlawful acts and the irregularities h involve with wide range and cause public concern among the partial regions which bring certain harms to the reputation of the Company; 3. the system of the major business involved with the production and operating of the Company is incomplete or partially invalid; 4. the results of the internal control assessment turn out to include any serious defects and such defects fail to be rectified effectively within 6 months. Based on the data of the 2016 consolidated According to the quantitative criterion of statements, the quantitative criterion of the internal control defects of the confirming the important degree of the financial report, the quantitative criterion misstatement (including the false negatives) of the internal control defects assessment from of the consolidated statements of the of the non-financial report confirmed by listed companies is as follows: serious the Company is as follows: serious Quantitative standard defect: misstatement≥1.0% of the total assets defect: losses amount≥1.0% of the total amount; important defects: 0.5% of the total assets amount; important defects: 0.5% assets amount≤misstatement<1.0% of the of the total assets amount≤losses amount total assets amount; common defects: < 1.0% of the total assets amount; misstatement < 0.5% of the total assets common defects: losses amount<0.5% amount. of the total assets amount. Number of serious financial-report-related 0 defects Number of serious 0 non-financial-report-related defects Number of important 0 financial-report-related defects Number of important 0 non-financial-report-related defects X Auditor’s report on internal control √ Applicable □ Not applicable Opinion paragraph in the auditor’s report on internal control Beijing Zhongzhengtiantong Certified Public Accountants LLP considered that: Foshan Electrical and Lighting Co., Ltd. maintained effective internal control of the financial report in all significant aspects according to the Basic Standards for Internal 111 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Control and relevant regulations. Auditor’s report on internal control Disclosed disclosed or not Disclosure date 03/30/2017 Index to the disclosed auditor’s See www.cninfo.com.cn for the Auditor’s Report on Internal Control report on internal control Type of the auditor’s opinion Standard unqualified opinion Serious non-financial-report-related None defects Indicate by tick mark whether any modified opinions are expressed by the CPAs firm in its auditor’s report on the Company’s internal control. □ Yes √ No Indicate by tick mark whether the auditor’s report on the Company’s internal control issued by the CPAs firm is consistent with the self-evaluation report of the Board. √ Yes □ No 112 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section X 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. 113 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section XI Financial Report I Auditor’s report Type of auditor’s opinion Standard unqualified opinion Date of signing the auditor’s report 03/28/2017 Name of the auditor Beijing Zhongzhengtiantong Certified Public Accountants LLP No. of the auditor’s report ZZTT(2017)Auditor’s Report No. 071062 Name of CPA Tong Quanyong, Luo Dongri Text of the Auditor’s Report Auditor’s Report ZZTT(2017)Auditor’s Report No. 071062 All shareholders of Foshan Electrical and Lighting Co., Ltd., We have audited the accompanying financial statements of Foshan Electrical and Lighting Co., Ltd. (the “Company”), which comprise the Company’s and consolidated balance sheets as at December 31, 2016, the Company’s and consolidated income statements, the Company’s and consolidated cash flow statements, the Company’s and consolidated statements of changes in shareholders’ equity for the year then ended, as well as the notes to the financial statements. 1. The management’s responsibility for the financial statements The management of the Company is responsible for the preparation and fair presentation of these financial statements. Such a responsibility includes: (1) preparing financial statements according to the Accounting Standards for Business Enterprises and make them a fair presentation; and (2) designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 2. Auditor’s responsibility 114 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Our responsibility is to express an opinion on these financial statements based on our audit. We have conducted our audit in accordance with the Audit Standards for Chinese Registered Accountants, which require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risks assessments, the auditor considers the internal control related to the preparation of the financial statements so as to design proper audit procedures. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate, which provides a basis for us to express auditing opinion. 3. Auditor’s opinion In our opinion, the financial statements of the Company have been prepared according to the Accounting Standards for Business Enterprises in all material aspects, which give a fair view of the Company’s and consolidated financial positions as at December 31, 2016 and the Company’s and consolidated operating results and cash flows for the year then ended. Beijing Zhongzhengtiantong Certified CPA: Public Accountants LLP Tong Quanyong CPA: Beijing China Luo Dongri March 28, 2017 115 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 II Financial statements Currency unit for the financial statements: RMB 1. Consolidated balance sheet Prepared by Foshan Electrical and Lighting Co., Ltd. December 31, 2016 Unit: RMB Yuan Item December 31, 2016 December 31, 2015 Current assets: Monetary funds 1,479,283,642.54 935,241,205.20 Settlement reserve Interbank lendings Financial assets at fair value through 51,600.00 profit/loss Derivative financial assets Notes receivable 67,925,843.74 202,669,316.48 Accounts receivable 595,257,954.00 366,401,130.72 Accounts paid in advance 30,292,007.11 6,858,950.41 Premiums receivable Reinsurance premiums receivable Receivable reinsurance contract reserve Interest receivable 4,612,406.80 3,022,646.23 Dividends receivable Other accounts receivable 11,977,660.58 17,313,604.14 Financial assets purchased under agreements to resell Inventories 753,681,605.19 559,651,928.21 Assets held for sale Non-current assets due within one year Other current assets 441,205,461.72 91,060,842.89 Total current assets 3,384,236,581.68 2,182,271,224.28 Non-current assets: Loans and advances to customers Available-for-sale financial assets 1,732,150,857.01 3,092,416,162.34 116 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Held-to-maturity investments Long-term accounts receivable Long-term equity investments 210,394,932.69 382,637.52 Investment property Fixed assets 446,006,929.66 484,436,218.17 Construction in progress 71,479,325.91 32,488,518.68 Engineering materials Disposal of fixed assets Productive living assets Oil-gas assets Intangible assets 160,330,395.13 163,887,313.63 R&D expenses Goodwill Long-term deferred expenses 6,897,119.78 406,425.35 Deferred tax assets 43,547,918.44 42,744,728.66 Other non-current assets 45,125,340.00 49,263,204.15 Total non-current assets 2,715,932,818.62 3,866,025,208.50 Total assets 6,100,169,400.30 6,048,296,432.78 Current liabilities: Short-term borrowings Borrowings from the Central Bank Money deposits accepted and inter-bank deposits Interbank borrowings Financial liabilities at fair value through profit/loss Derivative financial liabilities Notes payable Accounts payable 552,255,512.33 396,263,382.12 Accounts received in advance 41,180,818.13 71,531,790.37 Financial assets sold for repurchase Fees and commissions payable Payroll payable 96,021,156.06 72,004,987.32 Taxes payable 138,282,644.72 12,969,090.31 Interest payable 117 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Dividends payable 6,287,923.09 Other accounts payable 50,104,338.81 36,530,501.22 Reinsurance premiums payable Insurance contract reserve Payables for acting trading of securities Payables for acting underwriting of securities Liabilities held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 884,132,393.14 589,299,751.34 Non-current liabilities: Long-term borrowings Bonds payable Of which: Preference shares Perpetual bonds Long-term accounts payable Long-term payroll payable Special payables Provisions Deferred income 10,449,768.49 10,722,275.02 Deferred tax liabilities 200,112,595.11 390,534,187.37 Other non-current liabilities Total non-current liabilities 210,562,363.60 401,256,462.39 Total liabilities 1,094,694,756.74 990,556,213.73 Owners’ equity: Share capital 1,272,132,868.00 1,272,132,868.00 Other equity instruments Of which: Preference shares Perpetual bonds Capital reserve 285,821,459.07 296,324,375.58 Less: Treasury shares Other comprehensive income 1,133,971,372.25 2,212,989,156.02 118 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Special reserve Surplus reserve 733,924,951.81 628,439,107.12 Provisions for general risks Retained earnings 1,564,615,925.99 613,661,381.40 Equity attributable to owners of the 4,990,466,577.12 5,023,546,888.12 Company Minority interests 15,008,066.44 34,193,330.93 Total owners’ equity 5,005,474,643.56 5,057,740,219.05 Total liabilities and owners’ equity 6,100,169,400.30 6,048,296,432.78 Legal representative: He Yong Accounting head for this Report: Liu Xingming Head of the accounting department: Tang Qionglan 2. Balance sheet of the Company Unit: RMB Yuan Item December 31, 2016 December 31, 2015 Current assets: Monetary funds 1,235,417,964.88 633,291,177.30 Financial assets at fair value through 51,600.00 profit/loss Derivative financial assets Notes receivable 66,222,840.44 200,483,728.48 Accounts receivable 611,855,496.90 387,870,578.18 Accounts paid in advance 117,217,953.23 6,258,960.70 Interest receivable 3,590,629.01 1,979,245.24 Dividends receivable 14,671,820.57 Other accounts receivable 56,714,849.84 47,175,016.15 Inventories 717,097,516.25 540,058,085.51 Assets held for sale Non-current assets due within one year Other current assets 379,932,325.87 87,132,242.99 Total current assets 3,202,721,396.99 1,904,300,634.55 Non-current assets: Available-for-sale financial assets 1,732,150,857.01 3,092,416,162.34 Held-to-maturity investments Long-term accounts receivable 119 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Long-term equity investments 693,992,222.45 417,972,577.28 Investment property Fixed assets 375,075,102.44 403,470,166.52 Construction in progress 69,589,510.14 32,098,207.18 Engineering materials Disposal of fixed assets Productive living assets Oil-gas assets Intangible assets 117,017,633.92 120,554,776.71 R&D expenses Goodwill Long-term deferred expenses 6,897,119.78 Deferred tax assets 37,790,043.38 36,469,936.66 Other non-current assets 44,519,790.00 49,025,459.75 Total non-current assets 3,077,032,279.12 4,152,007,286.44 Total assets 6,279,753,676.11 6,056,307,920.99 Current liabilities: Short-term borrowings Financial liabilities at fair value through profit/loss Derivative financial liabilities Notes payable Accounts payable 701,814,818.26 518,615,548.53 Accounts received in advance 38,406,798.91 70,168,946.84 Payroll payable 66,764,581.34 48,921,086.93 Taxes payable 121,939,572.62 2,172,775.43 Interest payable Dividends payable Other accounts payable 258,368,416.59 93,375,598.50 Liabilities held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 1,187,294,187.72 733,253,956.23 Non-current liabilities: 120 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Long-term borrowings Bonds payable Of which: Preference shares Perpetual bonds Long-term payables Long-term payroll payable Special payables Provisions Deferred income 9,984,768.34 10,102,274.95 Deferred tax liabilities 200,112,595.11 390,534,187.37 Other non-current liabilities Total non-current liabilities 210,097,363.45 400,636,462.32 Total liabilities 1,397,391,551.17 1,133,890,418.55 Owners’ equity: Share capital 1,272,132,868.00 1,272,132,868.00 Other equity instruments Of which: Preference shares Perpetual bonds Capital reserve 293,425,065.15 293,419,444.90 Less: Treasury shares Other comprehensive income 1,133,971,372.25 2,212,989,156.02 Special reserve Surplus reserve 733,924,951.81 628,439,107.12 Retained earnings 1,448,907,867.73 515,436,926.40 Total owners’ equity 4,882,362,124.94 4,922,417,502.44 Total liabilities and owners’ equity 6,279,753,676.11 6,056,307,920.99 Legal representative: He Yong Accounting head for this Report: Liu Xingming Head of the accounting department: Tang Qionglan 3. Consolidated income statement Unit: RMB Yuan Item 2016 2015 1. Operating revenues 3,366,454,968.60 2,876,659,100.63 Including: Sales income 3,366,454,968.60 2,876,659,100.63 Interest income 121 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Premium income Fee and commission income 2. Operating costs 2,966,419,594.56 2,716,539,877.28 Including: Cost of sales 2,518,164,099.97 2,185,558,581.31 Interest expenses Fee and commission expenses Surrenders Net claims paid Net amount provided as insurance contract reserve Expenditure on policy dividends Reinsurance premium Taxes and surtaxes 34,882,209.20 25,680,514.21 Selling expenses 204,777,965.73 203,112,498.50 Administrative expenses 211,412,262.47 241,585,514.09 Finance costs -28,457,453.89 -28,871,124.02 Asset impairment loss 25,640,511.08 89,473,893.19 Add: Profit on fair value changes (“-” 35,935.00 means loss) Investment income (“-” means loss) 882,079,521.77 19,523,757.86 Including: Share of profit/loss of 4,327,697.03 -3,307,086.87 associates and joint ventures Exchange gains (“-” means loss) 3. Operating profit (“-” means loss) 1,282,114,895.81 179,678,916.21 Add: Non-operating income 3,740,686.27 7,627,967.24 Including: Profit on disposal of 20,253.97 182,286.57 non-current assets Less: Non-operating expense 12,622,554.30 141,313,889.53 Including: Loss on disposal of 5,796,711.34 8,354,989.42 non-current assets 4. Total profit (“-” means loss) 1,273,233,027.78 45,992,993.92 Less: Corporate income tax 199,976,634.04 8,308,268.53 5. Net profit (“-” means loss) 1,073,256,393.74 37,684,725.39 Net profit attributable to owners of 1,072,342,050.13 53,405,593.12 the Company Minority interests’ income 914,343.61 -15,720,867.73 6. Other comprehensive income net of tax -1,079,017,783.77 2,140,838,817.33 122 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Other comprehensive income net of tax attributable to owners of the -1,079,017,783.77 2,140,838,817.33 Company 6.1 Other comprehensive income that will not be reclassified into profit/loss 6.1.1 Changes in net liabilities or assets with a defined benefit plan upon re-measurement 6.1.2 Share of other comprehensive income of investees that cannot be reclassified into profit/loss under the equity method 6.2 Other comprehensive income to be subsequently reclassified into -1,079,017,783.77 2,140,838,817.33 profit/loss 6.2.1 Share of other comprehensive income of investees that 21,831,908.42 will be reclassified into profit/loss under the equity method 6.2.2 Profit/loss on fair value changes of available-for-sale financial -1,100,849,692.19 2,140,838,817.33 assets 6.2.3 Profit/loss on reclassifying held-to-maturity investments into available-for-sale financial assets 6.2.4 Effective profit/loss on cash flow hedges 6.2.5 Currency translation differences 6.2.6 Other Other comprehensive income net of tax attributable to minority interests 7. Total comprehensive income -5,761,390.03 2,178,523,542.72 Attributable to owners of the -6,675,733.64 2,194,244,410.45 Company Attributable to minority interests 914,343.61 -15,720,867.73 8. Earnings per share 8.1 Basic earnings per share 0.8429 0.0420 8.2 Diluted earnings per share 0.8429 0.0420 Where business mergers under the same control occurred in this Reporting Period, the net profit achieved by the merged parties 123 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 before the business mergers was RMB0.00, with the corresponding amount for the last period being RMB0.00. Legal representative: He Yong Accounting head for this Report: Liu Xingming Head of the accounting department: Tang Qionglan 4. Income statement of the Company Unit: RMB Yuan Item 2016 2015 1. Operating revenues 3,419,178,022.89 2,931,734,966.72 Less: Operating costs 2,643,247,405.29 2,324,989,903.05 Taxes and surtaxes 23,282,652.36 17,146,422.63 Selling expenses 202,456,041.37 198,554,906.43 Administrative expenses 193,826,370.43 187,165,627.10 Finance costs -23,363,408.54 -21,570,398.18 Asset impairment loss 25,569,327.12 90,519,931.40 Add: profit on fair value changes (“-” 35,935.00 means loss) Investment income (“-” means 895,733,724.43 19,523,757.86 loss) Including: Share of profit/loss of 4,327,697.03 -3,307,086.87 associates and joint ventures 2. Operating profit (“-” means loss) 1,249,893,359.29 154,488,267.15 Add: Non-operating income 3,197,757.63 5,222,584.35 Including: Profit on disposal of 9,401.71 9,375.59 non-current assets Less: Non-operating expense 10,946,958.61 139,994,837.37 Including: Loss on disposal of 5,485,996.38 7,411,664.29 non-current assets 3. Total profit (“-” means loss) 1,242,144,158.31 19,716,014.13 Less: Corporate income tax 187,285,711.44 -2,990,648.49 4. Net profit (“-” means loss) 1,054,858,446.87 22,706,662.62 5. Other comprehensive income net of -1,079,017,783.77 2,140,838,817.33 tax 5.1 Other comprehensive income that will not be reclassified into profit and loss 5.1.1 Changes in net liabilities or assets with a defined benefit plan upon re-measurement 124 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 5.1.2 Share of other comprehensive income of investees that cannot be reclassified into profit/loss under the equity method 5.2 Other comprehensive income to be subsequently reclassified into -1,079,017,783.77 2,140,838,817.33 profit/loss 5.2.1 Share of other comprehensive income of investees that 21,831,908.42 will be reclassified into profit/loss under the equity method 5.2.2 Profit/loss on fair value changes of available-for-sale financial -1,100,849,692.19 2,140,838,817.33 assets 5.2.3 Profit/loss on reclassifying held-to-maturity investments into available-for-sale financial assets 5.2.4 Effective profit/loss on cash flow hedges 5.2.5 Currency translation differences 5.2.6 Other 6. Total comprehensive income -24,159,336.90 2,163,545,479.95 7. Earnings per share 7.1 Basic earnings per share 7.2 Diluted earnings per share Legal representative: He Yong Accounting head for this Report: Liu Xingming Head of the accounting department: Tang Qionglan 5. Consolidated cash flow statement Unit: RMB Yuan Item 2016 2015 1. Cash flows from operating activities: Cash received from sale of 3,142,236,107.62 2,835,034,614.10 commodities and rendering of service Net increase in money deposits from customers and interbank placements Net increase in loans from the Central Bank Net increase in funds borrowed from other financial institutions 125 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Cash received from premium of original insurance contracts Net cash received from reinsurance business Net increase in deposits of policy holders and investment fund Net increase in disposal of financial assets at fair value through profit/loss Interest, fees and commissions received Net increase in interbank borrowings Net increase in funds in repurchase business Tax refunds received 71,456,301.70 42,423,907.66 Cash received from other operating 52,922,399.69 27,080,736.93 activities Subtotal of cash inflows from operating 3,266,614,809.01 2,904,539,258.69 activities Cash paid for goods and services 1,962,007,251.93 1,618,725,610.28 Net increase in loans and advances to customers Net increase in funds deposited in the Central Bank and interbank placements Cash paid for claims of original insurance contracts Interest, fees and commissions paid Cash paid as policy dividends Cash paid to and for employees 610,995,842.31 508,218,930.15 Taxes paid 242,817,744.82 214,353,895.03 Cash paid for other operating 160,815,201.47 374,915,633.80 activities Subtotal of cash outflows from 2,976,636,040.53 2,716,214,069.26 operating activities Net cash flows from operating activities 289,978,768.48 188,325,189.43 2. Cash flows from investing activities: Cash received from retraction of 64,155,025.41 25,409,754.20 investments Cash received as investment income 918,324,848.10 4,413,629.96 Net cash received from disposal of fixed assets, intangible assets and other 113,000.00 1,038,128.00 long-term assets 126 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Net cash received from disposal of subsidiaries or other business units Cash received from other investing activities Subtotal of cash inflows from investing 982,592,873.51 30,861,512.16 activities Cash paid to acquire fixed assets, intangible assets and other long-term 99,546,739.15 68,596,503.73 assets Cash paid for investment 620,507,350.00 Net increase in pledged loans Net cash paid to acquire subsidiaries and other business units Cash paid for other investing 39,877.93 activities Subtotal of cash outflows from 720,093,967.08 68,596,503.73 investing activities Net cash flows from investing activities 262,498,906.43 -37,734,991.57 3. Cash flows from financing activities: Cash received from capital 10,000,000.00 contributions Including: Cash received from minority shareholder investments by 10,000,000.00 subsidiaries Cash received as borrowings Cash received from issuance of bonds Cash received from other financing activities Subtotal of cash inflows from financing 10,000,000.00 activities Repayment of borrowings Cash paid for interest expenses and 15,901,660.85 215,284,023.90 distribution of dividends or profit Including: dividends or profit paid by subsidiaries to minority interests Cash paid for other financing activities Sub-total of cash outflows from 15,901,660.85 215,284,023.90 financing activities Net cash flows from financing activities -5,901,660.85 -215,284,023.90 127 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 4. Effect of foreign exchange rate -838,479.89 8,538,698.81 changes on cash and cash equivalents 5. Net increase in cash and cash 545,737,534.17 -56,155,127.23 equivalents Add: Opening balance of cash and 933,546,108.37 989,701,235.60 cash equivalents 6. Closing balance of cash and cash 1,479,283,642.54 933,546,108.37 equivalents Legal representative: He Yong Accounting head for this Report: Liu Xingming Head of the accounting department: Tang Qionglan 6. Cash flow statement of the Company Unit: RMB Yuan Item 2016 2015 1. Cash flows from operating activities: Cash received from sale of 3,164,460,619.08 2,801,046,950.23 commodities and rendering of service Tax refunds received 71,456,301.70 42,234,888.61 Cash received from other operating 43,134,054.60 14,330,850.10 activities Subtotal of cash inflows from operating 3,279,050,975.38 2,857,612,688.94 activities Cash paid for goods and services 2,428,381,785.03 1,958,657,434.17 Cash paid to and for employees 235,862,626.78 185,511,119.94 Taxes paid 141,319,406.75 120,381,921.25 Cash paid for other operating 155,496,800.41 391,075,314.15 activities Subtotal of cash outflows from 2,961,060,618.97 2,655,625,789.51 operating activities Net cash flows from operating activities 317,990,356.41 201,986,899.43 2. Cash flows from investing activities: Cash received from retraction of 64,155,025.41 25,409,754.20 investments Cash received as investment income 918,324,848.10 4,413,629.96 Net cash received from disposal of fixed assets, intangible assets and other 14,000.00 18,626.61 long-term assets Net cash received from disposal of subsidiaries or other business units Cash received from other investing 128 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 activities Subtotal of cash inflows from investing 982,493,873.51 29,842,010.77 activities Cash paid to acquire fixed assets, intangible assets and other long-term 90,609,951.60 77,403,585.76 assets Cash paid for investment 591,007,350.00 Net cash paid to acquire subsidiaries and other business units Cash paid for other investing activities Subtotal of cash outflows from 681,617,301.60 77,403,585.76 investing activities Net cash flows from investing activities 300,876,571.91 -47,561,574.99 3. Cash flows from financing activities: Cash received from capital contributions Cash received as borrowings Cash received from issuance of bonds Cash received from other financing activities Subtotal of cash inflows from financing activities Repayment of borrowings Cash paid for interest expenses and 15,901,660.85 215,284,023.90 distribution of dividends or profit Cash paid for other financing activities Sub-total of cash outflows from 15,901,660.85 215,284,023.90 financing activities Net cash flows from financing activities -15,901,660.85 -215,284,023.90 4. Effect of foreign exchange rate -838,479.89 8,514,259.57 changes on cash and cash equivalents 5. Net increase in cash and cash 602,126,787.58 -52,344,439.89 equivalents Add: Opening balance of cash and 633,291,177.30 685,635,617.19 cash equivalents 6. Closing balance of cash and cash 1,235,417,964.88 633,291,177.30 equivalents Legal representative: He Yong Accounting head for this Report: Liu Xingming 129 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Head of the accounting department: Tang Qionglan 7. Consolidated statement of changes in owners’ equity 2016 Unit: RMB Yuan 2016 Equity attributable to owners of the Company Other equity Other Retaine Minorit Total Item instruments Less: General Share Capital compre Special Surplus d y owners’ Prefer Perpet Treasur risk capital reserve hensive reserve reserve earning interests equity ence ual Other y shares reserve income s shares bonds 1. Balance at the 1,272, 2,212,9 5,057,7 296,324 628,439 613,661 34,193, end of the prior 132,86 89,156. 40,219. ,375.58 ,107.12 ,381.40 330.93 year 8.00 02 05 Add: Changes in accounting policies Correction of errors in prior periods Business mergers under the same control Other 2. Balance at the 1,272, 2,212,9 5,057,7 296,324 628,439 613,661 34,193, beginning of the 132,86 89,156. 40,219. ,375.58 ,107.12 ,381.40 330.93 year 8.00 02 05 3. Increase/ -1,079,0 decrease in the -10,502, 105,485 950,954 -19,185, -52,265, 17,783. period (“-” means 916.51 ,844.69 ,544.59 264.49 575.49 77 decrease) 3.1 Total -1,079,0 1,072,3 914,343 -5,761,3 comprehensive 17,783. 42,050. .61 90.03 income 77 13 3.2 Capital -10,508, -13,811, -24,320, increased and 536.76 685.01 221.77 reduced by owners 3.2.1 Ordinary shares 10,000, 10,000, increased by 000.00 000.00 shareholders 130 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Amounts of share-based payments charged to owners’ equity -10,508, -23,811, -34,320, 3.2.4 Other 536.76 685.01 221.77 -121,38 3.3 Profit 5,620.2 105,485 -6,287,9 -22,183, 7,505.5 distribution 5 ,844.69 23.09 963.69 4 3.3.1 -105,48 105,485 Appropriation to 5,844.6 ,844.69 surplus reserve 9 3.3.2 Appropriation to general risk provisions 3.3.3 Appropriation to -15,901, -6,287,9 -22,189, owners (or 660.85 23.09 583.94 shareholders) 5,620.2 5,620.2 3.3.4 Other 5 5 3.4 Internal carry-forward of owners’ equity 3.4.1 New increase of capital (or share capital) from capital reserve 3.4.2 New increase of capital (or share capital) from surplus reserve 3.4.3 Surplus reserve for making up loss 131 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 3.4.4 Other 3.5 Special reserve 3.5.1 Withdrawn for the period 3.5.2 Used in the period 3.6 Other 1,272, 1,133,9 1,564,6 5,005,4 285,821 733,924 15,008, 4. Closing balance 132,86 71,372. 15,925. 74,643. ,459.07 ,951.81 066.44 8.00 25 99 56 2015 Unit: RMB Yuan 2015 Equity attributable to owners of the Company Other equity Minorit Other Total Item instruments Less: General Retaine y Share Capital compre Specific Surplus owners’ Prefer Perpet Treasur risk d interest capital reserve hensive reserve reserve equity ence ual Other y shares reserve earnings s income shares bonds 1. Balance at the 978,56 3,094,4 589,892 72,150, 626,168 777,810 49,914, end of the prior 3,745. 99,919. ,717.59 338.69 ,440.86 ,478.44 198.66 year 00 24 Add: Changes in accounting policies Correction of errors in prior periods Business mergers under the same control Other 2. Balance at the 978,56 3,094,4 589,892 72,150, 626,168 777,810 49,914, beginning of the 3,745. 99,919. ,717.59 338.69 ,440.86 ,478.44 198.66 year 00 24 3. Increase/ 293,56 -293,56 2,140,8 -164,14 1,963,2 decrease in the 2,270,6 -15,720 9,123. 8,342.0 38,817. 9,097.0 40,299. period (“-” means 66.26 ,867.73 00 1 33 4 81 decrease) 3.1 Total 2,140,8 53,405, -15,720 2,178,5 132 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 comprehensive 38,817. 593.12 ,867.73 23,542. income 33 72 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 Amounts of share-based payments charged to owners’ equity 3.2.4 Other -217,55 -215,28 3.3 Profit 2,270,6 4,690.1 4,023.9 distribution 66.26 6 0 3.3.1 2,270,6 -2,270,6 Appropriation to 66.26 66.26 surplus reserve 3.3.2 Appropriation to general risk provisions 3.3.3 -215,28 -215,28 Appropriation to 4,023.9 4,023.9 owners (or 0 0 shareholders) 3.3.4 Other 3.4 Internal 293,56 -293,56 carry-forward of 9,123. 9,123.0 owners’ equity 00 0 3.4.1 New increase of capital 293,56 -293,56 (or share capital) 9,123. 9,123.0 from capital 00 0 reserve 133 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 3.4.2 New increase of capital (or share capital) from surplus reserve 3.4.3 Surplus reserve for making up loss 3.4.4 Other 3.5 Special reserve 3.5.1 Withdrawn for the period 3.5.2 Used in the period 3.6 Other 780.99 780.99 1,272, 2,212,9 5,057,7 296,324 628,439 613,661 34,193, 4. Closing balance 132,86 89,156. 40,219. ,375.58 ,107.12 ,381.40 330.93 8.00 02 05 Legal representative: He Yong Accounting head for this Report: Liu Xingming Head of the accounting department: Tang Qionglan 8. Statement of changes in owners’ equity of the Company 2016 Unit: RMB Yuan 2016 Other equity instruments Other Less: Retaine Total Item Share Prefere Capital comprehe Special Surplus Perpetu Treasury d owners’ capital nce Other reserve nsive reserve reserve al bonds shares earnings equity shares income 1. Balance at the 1,272,13 293,419,4 2,212,989 628,439,1 515,436 4,922,417 end of the prior 2,868.00 44.90 ,156.02 07.12 ,926.40 ,502.44 year Add: Changes in accounting policies Correction of errors in prior periods Other 2. Balance at the 1,272,13 293,419,4 2,212,989 628,439,1 515,436 4,922,417 134 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 beginning of the 2,868.00 44.90 ,156.02 07.12 ,926.40 ,502.44 year 3. Increase/ decrease in the -1,079,01 105,485,8 933,470 -40,055,3 5,620.25 period (“-” means 7,783.77 44.69 ,941.33 77.50 decrease) 3.1 Total 1,054,8 -1,079,01 -24,159,3 comprehensive 58,446. 7,783.77 36.90 income 87 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 Amounts of share-based payments charged to owners’ equity 3.2.4 Other -121,38 3.3 Profit 105,485,8 -15,896,0 5,620.25 7,505.5 distribution 44.69 40.60 4 3.3.1 -105,48 105,485,8 Appropriation to 5,844.6 44.69 surplus reserve 9 3.3.2 Appropriation to -15,901, -15,901,6 owners (or 660.85 60.85 shareholders) 3.3.3 Other 5,620.25 5,620.25 3.4 Internal carry-forward of owners’ equity 3.4.1 New increase of capital 135 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (or share capital) from capital reserve 3.4.2 New increase of capital (or share capital) from surplus reserve 3.4.3 Surplus reserve for making up loss 3.4.4 Other 3.5 Special reserve 3.5.1 Withdrawn for the period 3.5.2 Used in the period 3.6 Other 1,448,9 1,272,13 293,425,0 1,133,971 733,924,9 4,882,362 4. Closing balance 07,867. 2,868.00 65.15 ,372.25 51.81 ,124.94 73 2015 Unit: RMB Yuan 2015 Other equity instruments Other Less: Retaine Total Item Share Prefere Capital comprehe Special Surplus Perpetu Treasury d owners’ capital nce Other reserve nsive reserve reserve al bonds shares earnings equity shares income 1. Balance at the 978,563, 586,987,7 72,150,33 626,168,4 710,284 2,974,155 end of the prior 745.00 86.91 8.69 40.86 ,953.94 ,265.40 year Add: Changes in accounting policies Correction of errors in prior periods Other 2. Balance at the 978,563, 586,987,7 72,150,33 626,168,4 710,284 2,974,155 beginning of the 745.00 86.91 8.69 40.86 ,953.94 ,265.40 136 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 year 3. Increase/ -194,84 decrease in the 293,569, -293,568, 2,140,838 2,270,666 1,948,262 8,027.5 period (“-” means 123.00 342.01 ,817.33 .26 ,237.04 4 decrease) 3.1 Total 2,140,838 22,706, 2,163,545 comprehensive ,817.33 662.62 ,479.95 income 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 Amounts of share-based payments charged to owners’ equity 3.2.4 Other -217,55 3.3 Profit 2,270,666 -215,284, 4,690.1 distribution .26 023.90 6 3.3.1 2,270,666 -2,270,6 Appropriation to .26 66.26 surplus reserve 3.3.2 -215,28 Appropriation to -215,284, 4,023.9 owners (or 023.90 0 shareholders) 3.3.3 Other 3.4 Internal 293,569, -293,569, carry-forward of 123.00 123.00 owners’ equity 3.4.1 New increase of capital 293,569, -293,569, (or share capital) 123.00 123.00 from capital 137 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 reserve 3.4.2 New increase of capital (or share capital) from surplus reserve 3.4.3 Surplus reserve for making up loss 3.4.4 Other 3.5 Special reserve 3.5.1 Withdrawn for the period 3.5.2 Used in the period 3.6 Other 780.99 780.99 1,272,13 293,419,4 2,212,989 628,439,1 515,436 4,922,417 4. Closing balance 2,868.00 44.90 ,156.02 07.12 ,926.40 ,502.44 Legal representative: He Yong Accounting head for this Report: Liu Xingming Head of the accounting department: Tang Qionglan III Company profile 1. Overview of the Company 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 Oct. 20, 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 Oct., 1993, and was listed in Shenzhen Stock Exchange for trade on Nov. 23, 1993. The Company was approved to issue 50,000,000 B shares on Jul. 23, 1995. And, as approved to change into a foreign-invested stock limited company on Aug. 26, 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 Dec. 11, 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 and 2014 the Company implemented the plan of capitalization of capital reserve, after the transfer, the registered capital of the Company has increased to RMB1,272,132,868.00. Credibility code of the Company: 91440000190352575W Legal representative: Mr. He Yong Address: No. 64, Fenjiang North Road, Foshan, Guangdong Province 138 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 2. Business nature and main operating activities R&D and production of electro-optical source products, electro-optical source equipment and electro-optical accessories, raw materials of electric light sources, lamps & fittings, electrical materials, motorcycle components, household appliances, electric switches, electrical outlets, fire control products, ventilation devices, LED products, lithium ion batteries and relevant materials; domestic and overseas sale of the aforesaid products; relevant engineering consulting services. (Where a license is required, it must be obtained according to the government’s rules before operation.) 3. Approval and Issue of the Financial Report The Financial Report was approved and authorized for issue by the Board of Directors on March 28, 2017. 4. Scope of the consolidated financial statements and changes The consolidation scope of the financial statement including the Company and the 9 subordinate subsidiaries such as Foshan Chanchang Electric Appliance (Gaoming) Co., Ltd., Foshan Chansheng Electronic Ballast Co., Ltd., Foshan Taimei Times Lamps and Lanterns Co., Ltd., Nanjing Fozhao Lighting Components Co., Ltd., FSL (Xinxiang) Lighting Co., Ltd., Foshan Electrical and Lighting New Light Source Technology Co., Ltd., Guangdong Fozhao Leasing Co., Ltd., Foshan Lighting Lamps & Components Co., Ltd. and FSL Zhida Electric Technology Co., Ltd. When compared with last year, FSL Zhida Electric Technology Co., Ltd. is newly added to and Suzhou Mont Lighting Co., Ltd. is excluded from the consolidation scope. For details, see “Note VIII Changes in the consolidation scope”. IV Basis for preparation of financial statements 1. Preparation basis The financial statements of the Company are based on the assumption of continuing operation, and are prepared according to the actual transactions and events, the Accounting Standards for Business Enterprises - Basic Standards issued by the Ministry of Finance (Decree No. 33 of the Ministry of Finance, revised by Decree No. 76 of the Ministry of Finance) , 41 specific accounting standards, the guidelines on the application of accounting standards for business enterprises, the interpretation of accounting standards for business enterprises and other relevant provisions (hereinafter referred to as the Accounting Standards for Business Enterprises) promulgated and revised on and after 15 February 2006, as well as the disclosure requirements of Rules for the Information Disclosure of Companies Publicly Issuing Securities No. 15 - General Provisions on Financial Reporting of China Securities Regulatory Commission (Revised 2014). According to the relevant provisions of the Accounting Standards for Business Enterprises, the Company’s accounting is based on accrual basis. Except certain financial instruments, these financial statements are based on historical costs. The amount of non-current assets held for sale is valuated at fair value less the estimated amount and the original book value at the time when the conditions for sale are satisfied, whichever is lower. If the asset is impaired, the corresponding provision for impairment shall be made in accordance with the relevant provisions. 2. Continuation The Company has no matters affecting the continuing operation of the Company and is expected to have the 139 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 Is the Company subject to any disclosure requirements for special industries? No. Reminders of the specific accounting policies and accounting estimations: Naught 1. Statement of Compliance with the Accounting Standards for Business Enterprises The financial statements prepared by the Group are in compliance with 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 Year A fiscal year starts on 1 January and ends on 31 Dec. according to the Gregorian calendar. 3. Operating cycle A normal operating cycle refers to a period from the Group purchasing assets for processing to realizing cash or cash equivalents. An operating cycle for the Group 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 its subsidiaries, as well as for the consolidated financial statements. 5. Accounting treatment methods for business combinations under the same control or not under the same control A business combination refers to a transaction or event that combines two or more separate businesses to form a reporting entity. Business combinations are divided into the combination under the same control and the combination under different controls. (1) Business combinations under the same control A business combination under the same control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or the same parties both before and after the business combination and on which the control is not temporary. For the combination under the same control, the party obtaining control over other companies involved in the combination on the combination day is the combining party, and other companies are combined parties. Combination day is the date on which the obtaining party actually obtains control over the combined parties. The assets and liabilities acquired by the combining party are measured at the book value of the combined parties 140 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 at the date of combination. The capital reserve (share premium) is adjusted by the difference between the book value of the net assets obtained by the combining party and the book value of the paid combination consideration (or total nominal value of the issued shares); if the capital reserve (share premium) is insufficient to offset, adjust the retained earnings. The direct costs incurred by the combining party in the conduct of the business combination shall be recorded into the current profits and losses when incurred. (2) Business combinations not under the same control It is business combination under different controls if the companies involved in the combination are not subject to the final control of the same party or same multiple parties before and after the combination. For the combination under different controls, the party obtaining control over other companies involved in the combination on the combination day is the combining party, and other companies are combined parties. Combination day is the date on which the obtaining party actually obtains control over the combined parties. For the combination under different controls, the costs of combination include the assets paid, liabilities incurred or assumed by the purchaser and the fair value of the equity securities issued by the purchaser for the acquisition of the acquiree, and the audit fees, legal services, assessment consulting and other intermediary service fees and other management fees incurred for the business combination are included in the current profits and losses. The transaction costs of the equity securities or debt securities issued by the purchaser as combination consideration shall be included in the initial recognized amount of the equity securities or the debt securities. The involved contingent consideration shall be included in the combination cost at the fair value at the purchase date, and if contingent consideration should be adjusted due to new or further evidence within 12 months after the purchase date, the consolidated goodwill should be adjusted accordingly. The combination costs incurred by the acquirer and the identifiable net assets acquired in the combination are measured at the fair value at the acquisition date. The difference of the combination cost greater than the fair value of the identifiable net assets of the acquiree acquired at the acquisition date is recognized as goodwill. If the combination cost is less than the fair value of the identifiable net assets of the acquiree acquired in the combination, the fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree and the measurement of the combination costs shall be reviewed first. If the combination cost is still less than the fair value of the identifiable net assets of the acquiree acquired in the combination, the difference shall be recorded into the current profits and losses. If the deductible temporary difference obtained by the purchaser from the acquiree has not been confirmed on the date of purchase due to the non-compliance with the recognition criteria of deferred income tax assets, the relevant deferred income tax assets shall be recognized and the goodwill shall be reduced if new or further information is obtained within 12 months after the date of purchase showing that the relevant circumstances are already present and it is expected that the economic benefits brought by the deductible temporary difference of the acquiree on the date of purchase may be realized. If the goodwill is insufficient to offset, the difference shall be recognized as profit or loss for the current period. Except for the above, the deferred income tax assets related to the business combination shall be recognized and included in the current profits and losses. 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 Company has the right to invest in the investee and enjoy a variable return through 141 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 scope of consolidation includes the Company and all subsidiaries. Subsidiary means the subject controlled by the Company. The Company will conduct a reassessment once the changes in the relevant facts and circumstances result in the changes to the relevant elements of aforesaid control definition. (2) Principles, procedures and methods for the preparation of consolidated statements The Company starts to incorporate it into the scope of consolidation from the date of obtaining the actual control over the net assets and decision-making of production and operation of the subsidiaries, and ceases to incorporate it in the scope of consolidation from the date of losing the actual control. For the disposed subsidiaries, the operating results and cash flow before the date of disposal have been properly included in the consolidated income statement and consolidated cash flow statement; for the subsidiaries disposed in current period, the beginning amount of the consolidated balance sheet isn’t adjusted. For the subsidiaries added due to the business combination under different controls, the operating results and cash flow after the date of purchase have been properly included in the consolidated income statement and the consolidated cash flow statement, and the beginning amount and the contrast amount of the consolidated financial statements are not adjusted. For the subsidiaries added due to the business combination under same control, the operating results and cash flow from the period begin of the combination to the date of combination have been properly included in the consolidated income statement and the consolidated cash flow statement, and the contrast amount of the consolidated financial statements is adjusted at the same time. In the preparation of the consolidated financial statements, if the subsidiaries are inconsistent with the accounting policies or accounting periods adopted by the Company, the necessary adjustments shall be made to the financial statements of the subsidiaries in accordance with the Company’s accounting policies and accounting periods. For subsidiaries acquired by business combination under different controls, the financial statements shall be adjusted on the basis of the fair value of the identifiable net assets at the acquisition date. As for the subsidiaries acquired from the enterprise combine not under the same control, the individual financial statement should be adjusted based on the fair value of the identifiable net assets on the purchase date when compiling the consolidated financial statements; as for the subsidiaries acquired from the enterprise combine under the same control, should be regarded as exist as the current state when each involved combine party starting to execute the control in the ultimate control party, and should include the assets, liabilities, operating results and the cash flow in the consolidated financial statements since the year-begin of the combine period and to adjust the previous compared financial statement according to the above principles. All significant balances, transactions and unrealized profits in the Company are set off at the time of preparation of the consolidated financial statements. The part of shareholders’ equity and the net profit or loss for the current period of the subsidiaries that are not of the Company are listed in shareholders’ equity and net profits in the consolidated financial statements as the minority interests and minority gains and losses separately. The share of minority interests in the current net profit or loss of the subsidiaries is presented under the item “Minority gains and losses” under the net profit item of the consolidated income statement. The losses shared by the minority shareholders of the subsidiary exceeding its share in the shareholders’ equity at the period begin still off set the minority shareholders' equity. 142 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 Group’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 tot 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. (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. 143 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 (1) Classification, recognition and measurement of financial assets Financial assets shall be classified into the following four categories when they are initially recognized: financial assets measured at fair value and of which variations are recorded in the profits and losses for the current period, loans and the account receivables, financial assets available for sale and the investments which will be held to their maturity. ① Financial assets measured at fair value and of which variations are recorded in the profits and losses for the current period refer to financial assets held by the Company for the purpose of selling in the near future, including transactional financial assets, or financial assets designated by the management in the initial recognition to be measured at fair value with variations recorded in the gains and losses for the current period. Financial assets measured at fair value and of which variations are recorded in the profits and losses for the current period are subsequently measured at their fair values. Interest or cash dividends arising from such assets during the holing period are recognized as investment gains. Gains or losses arising from fair value changes are recorded in the gains and losses for the current period at the end of the Reporting Period. When such assets are disposed, the difference between their fair values and initially recognized amounts is recognized as investment gains and the gains and losses arising from fair value changes are adjusted accordingly. ② Loan and accounts receivable: the non-derivative financial assets for which there is no quoted price in the active market and of which the recoverable amount is fixed or determinable shall be classified as loan and accounts receivable. The Company shall make subsequent measurement on its loan and accounts receivable on the basis of the post-amortization costs by adopting the actual interest rate, from which gains and losses, when loan and accounts receivable are terminated from recognizing, or are impaired or amortized, shall be recorded into the profits and losses of the current period. ③ Available-for-sale Financial Assets: the non-derivative financial assets which are designated as available-for-sale financial assets when they are initially recognized as well as the non-derivative financial assets other than loans and accounts receivables, investments held until their maturity; and transaction financial assets. The Company shall make subsequent measurement on available-for-sale financial assets at fair value and recognize the interests or the cash bonus acquired the holding period as the investment income, as well as directly include the profits or losses formed by the changes of the fair value into the owners’ equity at the period-end, until the said financial assets shall be transferred out when they are terminated from recognizing or are impaired, which shall be recorded into the profits and losses of current period. ④ Held-to-maturity Investments: non-derivative financial asset with a fixed date of maturity, a fixed or determinable recoverable amount and which the Company’s management holds for a definite purpose or the Company’s management is able to hold until its maturity. The Company shall make subsequent measurement on its Held-to-maturity Investments on the basis of the post-amortization costs by adopting the actual interest rate, from which gains and losses, when loan and accounts receivable are terminated from recognizing, or are impaired or amortized, shall be recorded into the profits and losses of the current period. (2) Classification, Recognition and Measurement of Financial Liabilities Financial liabilities shall be classified into the following two categories when they are initially recognized: (1) the transactional financial liabilities; and (2) other financial liabilities. The financial liabilities initially recognized by 144 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 the Company shall be measured at their fair values. For the transactional financial liabilities, the transaction expenses thereof shall be directly recorded into the profits and losses of the current period; for other categories of financial liabilities, the transaction expenses thereof shall be included into the initially recognized amount. ① As for the financial liabilities measured by fair value and its changes be included in the current gains and losses, which including trading financial liabilities and the financial liabilities be appointed to be measured by fair value with the changes be included in the current gains and losses when being initially recognized, should be executed subsequent measurement according to the fair value with the profits or losses formed by the changes of the fair value be included in the current gains and losses. ② Other financial liabilities: The Company shall make subsequent measurement on its other financial liabilities on the basis of the post-amortization costs by adopting the actual interest rate, from which gains and losses, when other financial liabilities are terminated from recognizing or amortized, shall be recorded into the profits and losses of the current period. (3) Recognition and measurement of financial asset transfers 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 and recognize the received counter price as a financial liability. Where the Company does not transfer or retain nearly all of the risks and rewards related to the ownership of a financial asset (that is to say, it is not under a circumstance as mentioned in Article 7 of these Standards), 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; (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. If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the difference between the amounts of the following 2 items shall be recorded in the profits and losses of the current period: (1) The book value of the transferred financial asset; (2) the sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the owner's equities. If the transfer of partial financial asset satisfies the conditions to stop the recognition, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped, be apportioned according to their respective relative fair value, and the difference between the amounts of the following 2 items shall be included into the profits and losses of the current period: (1)The book value of the portion whose recognition has been stopped; (2)The sum of consideration of the portion whose recognition has been stopped, and the portion of the accumulative amount of the changes in the fair value originally recorded in the owner's equities which is corresponding to the portion whose recognition has been stopped. (4) De-recognition conditions of financial liabilities Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly. Where the Group (debtor) enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is substantially different from that regarding the existing financial liability, it terminates the recognition of the existing financial liability, and at the same time recognizes the new financial liability. If executed practical modification on the whole or part of the contract regulations of the existing financial liabilities, should terminate to recognize the existing financial liabilities or certain part of it and at the same time recognize the revised financial liabilities as a new financial liabilities. 145 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Where the recognition of a financial liability is totally or partially terminated, the enterprise concerned shall include into the profits and losses of the current period for the gap between the book value which has been terminated from recognition and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed). If the Company re-purchase part of the financial liabilities, should distribute the whole book value of the financial liabilities according to the comparatively fair value between the continued reorganization part and the terminated reorganization part on the re-purchase date. And the difference between the book value distributed to the terminated recognition part and the counter price of the paid part (including the rolled out non-cash assets or the new financial liabilities undertook) should be included in the current gains and losses. (5) Recognition method of the fair value of the financial assets and the financial liabilities As for the financial instruments for which there is an active market, the quoted prices in the active market shall be used to determine the fair values thereof. Where there is no active market for a financial instrument, the Company concerned shall adopt value appraisal techniques to determine its fair value. The value appraisal techniques mainly include the prices adopted by the parties, who are familiar with the condition, in the latest market transaction upon their own free will, the current fair value obtained by referring to other financial instruments of the same essential nature, the cash flow capitalization method and the option pricing model, etc. (6) Impairment test of financial assets (excluding the accounts receivable) and withdrawal method of impairment provision The Company inspects the book value of the financial assets on the balance sheet date to judge whether there are evidences indicate that the financial assets had occurred impairment owning to the occurrence of one or multiple events. As for the measurement for impairment of financial assets measured on the basis of the post-amortization costs, where there is any objective evidence proving that a financial asset measured on the basis of post-amortization costs is impaired, should be recognized by the carrying amount of the difference between the said financial asset which shall be written down to the current value of the predicted future cash flow (excluding the loss of future credits not yet occurred) and the amount of the as written down which shall be recognized as loss of the impairment of the asset. When calculating the current value of the estimated future cash flow, should adopt the original effective interests’ rate of the financial assets as the discount rate. The book value of the assets should be written down to the estimated recoverable amount through impairment provision items with the written down amount be included in the current gains and losses. As for the financial assets with individual significant amount, should adopt the individual assessment for ensure whether there are objective evidences indicate the impairment provision and as for the other assets with insignificant amount, should be inspected by individual or group assessment for ensure whether there are objective evidences indicate the impairment provision. As for the financial assets measured by cost, if there are evidences indicate the impairment of the financial instruments without market price which had not measured by fair value because the fair value could not be reliable measured, the amount of the impairment losses should be measured by the difference between the book value of the financial assets and the current value of the estimated future cash flow acquired from the discounting measurement of the current market return rate of the similar financial assets. Where an available-for-sale financial asset is impaired, the accumulative losses arising from the decrease of the fair value of the owner’s equity which was directly included shall be transferred out and recorded into the profits and losses of the current period. 146 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 11. Receivables (1) Accounts receivable with significant single amount for which the bad debt provision is made individually Definition or amount criteria for an account receivable with a Top five accounts receivable with the largest balances or significant single amount accounts accounting for over 10% of the total balance of receivables. Making separate bad-debt provisions for accounts receivable For an account receivable with a significant single amount, the with a significant single amount 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. As for non-significant accounts receivable for which separate impairment provisions are not necessary as proved by the impairment test, as well as other significant accounts reivable that have not been impaired as proved by a separate impairment test, they shall be grouped according to their credit risks and account ages, and then the impairment test is carried out on a group basis. (2) Accounts receivable which the bad debt provision is withdrawn by credit risk characteristics Group name Withdrawal method of bad debt provision Common transaction group Aging analysis Internal transaction group Age analysis method In the groups, those adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Withdrawal proportion of account Withdrawal proportion of other account Aging receivables 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 147 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (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 returnability Withdraw the bad debt provision according to the difference of Withdrawal method for bad debt provision which the future cash flow lower than the book value. 12. Inventory 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. (5) Amortization method of turnover materials Low-value consumables are amortized in one-off method. The packaging is amortized in one-off method. 13. Divided as assets held for sale The Company divides the non-current financial assets which simultaneously meet with the following conditions (excluding financial assets) as the assets held for sale: ① the composition part should and could be immediately sold only according to the usual and idiomatic clauses of selling such composition part under the current 148 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 circumstance; ② had made a solution on the disposing of the composition part;③ had signed a irrevocable transfer agreement with the transferee; ④ the transfer probably be completed within 1 year. The assets classified as separate non-current assets and disposal groups held for sale are presented separately in the current assets of the balance sheet; liabilities classified as associated with the transferred assets in the disposal group held for sale are presented separately in the current liabilities of the balance sheet. For an asset or disposal group classified as held for sale but no longer meets the conditions for recognition of non-current assets held for sale, the Company ceases to classify it as held for sale and measure according to the amount of the following two items, whichever is lower: 1. The book value of the asset or disposal group before being classified as held for sale is measured by the amount adjusted according to the depreciation, amortization or impairment that should be recognized as it isn’t classified as held for sale. 2. The recoverable amount at the date decided not to sell. 14. 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 Note 5: Important accounting policies and accounting estimates, and Note 10: Financial instruments. 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. 149 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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. (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 150 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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. 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 Note 5: Important accounting policies and accounting estimates, and Note 6: Preparation method of consolidated financial statements. 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 “22. Impairment of long-term assets” herein. 15. Investment real estates Measurement mode of investment real estates Not applicable 151 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 16. 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 Useful life Annual deprecation value Housing and building Average method of 3—30 years 5% 31.67%-3.17% useful life Machinery equipments Average method of 2—10 years 5% 47.50%-9.50% useful life Transportation vehicle Average method of 5—10 years 5% 19.00%-9.50% useful life Average method of Electronic equipment 2—8 years 5% 47.50%-11.88% useful life (3) Recognition basis, pricing and depreciation method of fixed assets by finance lease Not applicable 17. Construction in Progress Is the Company subject to any disclosure requirements for special industries? No. 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 152 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 design or contract requirements. 3. Provision for impairment of construction in progress Please refer to Note 5: Important accounting policies and accounting estimates and Note 22: Long-term deferred expenses for the impairment test method and provision for impairment of construction in progress. 18. 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. 153 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 19. Biological assets Not applicable 20. Oil-gas assets Not applicable 21. 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 5: Significant accounting policies and accounting estimates, and Note 22: Long-term asset impairment. (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: 154 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (1) The completion of the intangible assets makes it technically feasible for using or selling; (2) Have 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) Have 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. 22. 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 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 155 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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. 23. Amortization method of long-term deferred expenses Long-term deferred expenses refer 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. 24. 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 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 the welfare of other long-term staffs 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. 156 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 25. Estimated liabilities (1) Recognition of estimated debts 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 estimated debts 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 estimated debts The estimated debts 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 estimated debts 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 estimated debts on the balance sheet date. The amount of compensation is not exceeding the book value of the recognized estimated liabilities. 26. Share-based payment Not applicable 27. Other financial instruments such as preferred shares and perpetual capital securities Not applicable 28. Revenue Is the Company subject to any disclosure requirements for special industries? 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 157 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 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. 29. Government Subsidies (1) Judgment basis and accounting treatment of government subsidies related to assets The Company defines government subsidies obtained for acquisition, construction or otherwise formation of long-term assets as government subsidies related to assets. If the government documents do not specify the subsidy object, the subsidies are divided into income-related subsidies and assets-related subsidies in the following method: (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) it is income-related government subsidies if the government documents only have a general statement of the purpose and do not specify a specific project. The government subsidies pertinent to assets shall be recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses. But the government subsidies 158 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 measured at their nominal amounts shall be directly included in the current profits and losses. (2) Judgment basis and accounting treatment of government subsidies pertinent to incomes Other government subsidies than those recognized as government subsidies pertinent to assets in (1) above are government subsidies pertinent to incomes. The government subsidies pertinent to incomes shall be treated respectively in accordance with the circumstances as follows: those subsidies used for compensating the related future expenses or losses of the enterprise shall be recognized as deferred income and shall included in the current profits and losses during the period when the relevant expenses are recognized; or those subsidies used for compensating the related expenses or losses incurred to the enterprise shall be directly included in the current profits and losses. 30. Deferred income tax assets/deferred income tax liabilities 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. 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. 159 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 31. Lease (1) Accounting treatment of operating lease For the leasee of he operating lease, the rent expenses from operating leases shall be recorded by the lessee in the relevant asset costs or the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs shall be recognized as the profits and losses of the current period; the contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. A lessor shall include the assets subject to operating leases in relevant items of its balance sheets in light of the nature of the asset;The rents from operating leases shall be recorded in the profits and losses of the current period by using the straight-line method over each period of the lease term;the initial direct costs incurred to a lessor shall be recorded into the profits and losses of the current period. As for the fixed assets subject to operating leases, the lessor shall calculate the depreciation of it by adopting depreciation policy for similar assets; as for other leased assets, systematic and reasonable methods shall be adopted for its amortization; the contingent rents shall be recorded in the profits and losses of the period in which they actually arise. (2) Accounting treatments of financial lease On the lease beginning date, a lessee shall record 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, recognize the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges; the initial direct costs such as commissions, attorney's fees and traveling expenses, stamp duties directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in the asset value of the current period; when amortizing the unrecognized financial charges during each period within the lease term, should recognize the current financial expenses by the actual interests rate; and the contingent rental should be included the current gains and losses when actually arise When a lessee calculates the present value of the minimum lease payments, if it can obtain the lessor's interest rate implicit in the lease, it shall adopt the interest rate implicit in the lease as the discount rate. Otherwise, it shall adopt the interest rate provided in the lease agreement as the discount rate. In case the lessee cannot obtain the lessor's interest rate implicit in the lease and no interest rate is provided in the lease agreement, the lessee shall adopt the borrowing interest rate of the bank for the same period as the discount rate. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life. On the beginning date of the lease term, a lessor shall recognize the sum of the minimum lease receipts on the lease beginning date and the initial direct costs as the entering value in an account of the financing lease values receivable, and record the unguaranteed residual value at the same time; the balance between the sums of the minimum lease receipts, the initial direct costs and the unguaranteed residual value, and the sum of their present values shall be recognized as unrealized financing income; the unrealized financing income shall be allocated to each period during the lease term; the lessor shall calculate the financing income at the current period by adopting the effective interest rate method; contingent rents shall be recognized as an expense in the period in which they are actually incurred. 32. Other significant accounting policies and estimates Not applicable 160 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 33. Changes in main accounting policies and estimates (1) Change of accounting policies □ Applicable √ Not applicable (2) Significant changes in accounting estimates √ Applicable □ Not applicable Content and reason of the Approval procedure Time point starting to apply Remark changes in accounting estimates The Company’s provision for bad debts was calculated using aging analysis method based on the combination of credit risk characteristics, and the estimated proportion of bad debt provision for each aging The affected reporting items group was 6%. The Company and amounts are as follows: has changed the accruing 1. Balance sheet items proportion of provision for bad Provision for bad debts: debts of accounts receivable in RMB-7,956,755.73 yuan the current period according to Deferred tax assets: RMB the Accounting Standards for -1,193,513.36yuan Business Enterprises in 2. Income statement items combination with the actual The change was approved by Asset impairment losses: RMB situation of the bad debts of the the 9th board meeting of the September 22, 2016 -7,956,755.73yuan Company’s receivables in order Company. Income tax: RMB to reflect the recoverable -1,193,513.36 situation and the risk situation yuan of the Company’s receivables more objectively and fairly, and 3. Statement of changes in prevent financial risks. The equity items proportion of provision for bad Undistributed profit: RMB debts of accounts receivable 6,763,242.37yuan after the change is: 3% within 1 Surplus reserve: year; 10% for 1-2 years; 30% RMB676,324.24yuan for 2-3 years; 50% for 3-4 years; 80% for 4-5 years; 100% for more than 5 years. This change in accounting estimate uses prospective application method. 34. Other Not applicable 161 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 VI Taxes 1. Main taxes and tax rates Category of tax Taxable amount Tax rate Balance after the offset of output and input VAT 11%、17% VAT Urban maintenance and construction tax Turnover tax payable 7%、5% Enterprise income tax Taxable income 15%、25% Educational surtax Turnover tax payable 3% Local educational surtax Turnover tax payable 2% Business tax Taxable turnover 5% Notes of the disclosure situation of the taxpaying bodies with different enterprises income tax rate Taxpayer Income tax rate Foshan Electrical and Lighting Co., Ltd. 15% Foshan Chanchang Electric Appliance (Gaoming) Co., Ltd. 25% Foshan Chansheng Electronic Ballast Co., Ltd. 25% 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 Leasing Co., Ltd. 25% Foshan Lighting Lamps and Lanterns Co., Ltd. 25% FSL Zhida Electric Technology Co., Ltd. 25% 2. Tax preference The Company passed the re-examination for the First Batch High-tech Enterprise in 2014 on 17 Mar. 2015, as well as won the “Certificate of High-tech Enterprise” with serial number GR201444001411 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 Jan. 2014. 3. Other Paid according to the relevant regulation of the tax law. 162 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 VII. Notes to Main Items of Consolidated Financial Statements 1. Monetary funds Unit: RMB Yuan Item Closing balance Opening balance Cash on hand 13,058.91 36,008.01 Bank deposits 1,477,005,924.93 855,342,849.29 Other currency funds 2,264,658.70 79,862,347.90 Total 1,479,283,642.54 935,241,205.20 Other notes Note: The increase in the balance of bank deposits at the end of the Reporting Period was due to the sale of the stock of Guoxuan High-tech in the Reporting Period. The closing balances of the other monetary funds were the refundable deposits and the balance of the Alipay. 2. Financial assets measured by fair value and the changes be included in the current gains and losses Unit: RMB Yuan Item Closing balance Opening balance Financial assets appointed to be measured by fair value with the changes be included 51,600.00 in the current gains and losses Investment on equity instruments 51,600.00 Total 51,600.00 3. Derivative financial assets □ Applicable √ Not applicable 4. Notes receivable (1) Notes receivable listed by category Unit: RMB Yuan Item Closing balance Opening balance Bank acceptance bill 67,925,843.74 58,819,605.04 Commercial acceptance bill 143,849,711.44 Total 67,925,843.74 202,669,316.48 163 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (2) Notes receivable pledged by the Company at the period-end Naught (3) 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 Yuan Amount of recognition termination at the Amount of not terminated recognition at Item period-end the period-end Bank acceptance bill 116,606,122.95 Total 116,606,122.95 (4) Notes transferred to accounts receivable because drawer of the notes fails to executed the contract or agreement Naught Other notes The closing balance of the notes receivable decreased of RMB 134,743,472.74yuan by 66.48 % over the period-begin, which was mainly due to the Company no longer adopted the commercial acceptance bill for settling accounts. 5. Accounts receivable (1) Accounts receivable disclosed by category Unit: RMB Yuan Closing balance Opening balance Book balance Bad debt provision Book balance Bad debt provision Category Withdra Book Proportio wal Proportio Withdrawal Book value Amount Amount value Amount Amount n proportio n proportion n Accounts receivable with significant single amount for 10,064,6 10,064,6 1.59% 100.00% which bad debt 64.92 64.92 provision separately accrued Accounts receivable 624,003, 28,745,5 595,257,9 389,788 23,387,30 366,401,13 withdrawn bad debt 98.41% 4.61% 99.02% 6.00% 551.87 97.87 54.00 ,436.93 6.21 0.72 provision according 164 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 to credit risks characteristics Accounts receivable with insignificant single amount for 3,874,6 3,874,675 0.98% 100.00% which bad debt 75.02 .02 provision separately accrued 634,068, 38,810,2 595,257,9 393,663 27,261,98 366,401,13 Total 100.00% 6.12% 100.00% 6.93% 216.79 62.79 54.00 ,111.95 1.23 0.72 Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end √ Applicable □ Not applicable Unit: RMB Yuan Accounts receivable(by Closing balance unit) Accounts receivable Bad debt provision Withdrawal proportion Withdrawal reason The debtor has suffered continual losses due to Suzhou Mont Lighting the size of its business 10,064,664.92 10,064,664.92 100.00% Co., Ltd. and the market reason, and it is now no longer able to produce again. Total 10,064,664.92 10,064,664.92 -- -- In the groups, accounts receivable adopting aging analysis method to accrue bad debt provision: √ Applicable □ Not applicable Unit: RMB Yuan Closing balance Aging Accounts receivable Bad debt provision Withdrawal proportion Subitem within 1 year Within 1 year 574,738,196.78 17,242,145.90 3.00% Subtotal within 1 year 574,738,196.78 17,242,145.90 3.00% 1 to 2 years 32,170,657.97 3,217,065.80 10.00% 2 to 3 years 2,522,921.32 756,876.40 30.00% Over 3 years 14,571,775.80 7,529,509.77 51.67% 3 to 4 years 13,896,049.20 6,948,024.60 50.00% 4 to 5 years 471,207.14 376,965.71 80.00% Over 5 years 204,519.46 204,519.46 100.00% Total 624,003,551.87 28,745,597.87 4.61% 165 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 In the groups, accounts receivable adopting balance percentage method to withdraw bad debt provision □ Applicable √ Not applicable (2) Accounts receivable withdraw, reversed or collected during the Reporting Period The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 2,326,376.29yuan; the amount of the reversed or collected part during the Reporting Period was of RMB 3,535,749.69yuan. Of which, the significant amount of the reverses or collected part of the bad debt provisions during the Reporting Period: Unit: RMB Yuan Name of units Amount Method Foshan Sanshui Center of Science and Technology Industrial Park Development 2,069,866.90 Cash recover Co., Ltd. Suzhou Mont Lighting Co., Ltd. 1,187,363.14 Equipment recover Kunming Hong guangming Commerce and 278,519.65 Cash recover Trade Co., Ltd. Total 3,535,749.69 -- (3) The actual write-off accounts receivable Unit: RMB Yuan Item Amount Suzhou Mont Lighting Co., Ltd. 2,012,636.86 Tianjin Jishi Shengda Lighting Co., Ltd. 160,306.56 Zhenjiang New Century Lighting Appliance Co., Ltd. 144,326.30 Foshan Sanshui Center of Science and Technology Industrial 4,603.10 Park Development Co., Ltd. Other retails accounts 189.74 Total 2,322,062.56 Notes of accounts receivable write-off: The write-off process had been performed for the accounts receivable write-off of the Reporting Period in accordance with the provisions of the Company’s bad debt management system. (4) Top 5 of the closing balance of the accounts receivable collected according to the arrears party Unit: RMB Yuan Name of units Relationship Book balance Proportion of the Withdrawal bad debt total accounts provision receivable 166 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 First Non-related 90,616,666.15 14.29% 3,581,411.24 relationship Second Non-related 19,547,480.15 3.08% 586,424.40 relationship Third Non-related 15,980,885.31 2.52% 479,426.56 relationship Fourth Non-related 14,566,977.79 2.30% 437,009.33 relationship Fifth Non-related 12,487,543.99 1.97% 374,626.32 relationship Total 153,199,553.39 24.16% 5,458,897.85 (5) Account receivable which terminate the recognition owning to the transfer of the financial assets Naught (6) The amount of the assets and liabilities formed by the transfer and the continues involvement of accounts receivable Naught 6. Prepayment (1) List by aging analysis Unit: RMB Yuan Closing balance Opening balance Aging Amount Proportion Amount Proportion Within 1 year 25,191,421.39 83.16% 5,151,048.23 75.10% 1 to 2 years 3,788,046.20 12.51% 942,100.92 13.74% 2 to 3 years 616,046.47 2.03% 610,778.10 8.90% Over 3 years 696,493.05 2.30% 155,023.16 2.26% Total 30,292,007.11 -- 6,858,950.41 -- (2) Top 5 of the closing balance of the prepayment collected according to the prepayment target Unit: RMB Yuan Name of units Relationship Closing balance Proportion Time First Non-related 2,900,000.00 9.57% 2015 relationship 167 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Second Non-related 2,601,400.00 8.59% 2016 relationship Third Non-related 1,996,800.00 6.59% 2016 relationship Fourth Non-related 1,387,092.80 4.58% 2016 relationship Fifth Non-related 1,122,394.34 3.71% 2016 relationship Total 10,007,687.14 33.04% 7. Interest receivable (1) Category of interest receivable Unit: RMB Yuan Item Closing balance Opening balance Deposits on a regular basis 2,555,260.82 3,022,646.23 Interests of the funds deposited in the bank 2,057,145.98 Total 4,612,406.80 3,022,646.23 8. Dividend receivable Naught 9. Other accounts receivable (1) Other accounts receivable disclosed by category Unit: RMB Yuan Closing balance Opening balance Book balance Bad debt provision Book balance Bad debt provision Category Withdra Book Proportio wal Proportio Withdrawal Book value Amount Amount value Amount Amount n proportio n proportion n Other accounts receivable withdrawn 13,527,1 1,549,48 11,977,66 18,418, 1,105,123 17,313,604. bad debt provision 97.86% 11.45% 100.00% 6.00% 49.04 8.46 0.58 727.80 .66 14 according to credit risks characteristics Other accounts 295,120. 2.14% 295,120. 100.00% 168 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 receivable with 00 00 insignificant single amount for which bad debt provision separately accrued 13,822,2 1,844,60 11,977,66 18,418, 1,105,123 17,313,604. Total 100.00% 13.35% 100.00% 6.00% 69.04 8.46 0.58 727.80 .66 14 Other receivable with single significant amount and withdrawal bad debt provision separately at end of period □ Applicable √ Not applicable In the groups, other accounts receivable adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Unit: RMB Yuan Closing balance Aging Other accounts receivable Bad debt provision Withdrawal proportion Subitem within 1 year Within 1 year 8,709,017.41 261,270.53 3.00% Subtotal within 1 year 8,709,017.41 261,270.53 3.00% 1 to 2 years 1,827,470.90 182,747.09 10.00% 2 to 3 years 2,657,553.61 797,266.08 30.00% Over 3 years 333,107.12 308,204.76 92.52% 3 to 4 years 3,003.72 1,501.86 50.00% 4 to 5 years 117,002.48 93,601.98 80.00% Over 5 years 213,100.92 213,100.92 100.00% Total 13,527,149.04 1,549,488.46 11.45% Notes: In the groups, other accounts receivable adopting balance percentage method to withdraw bad debt provision: □ Applicable √ Not applicable In the groups, other accounts receivable adopting other methods to withdraw bad debt provision: □ Applicable √ Not applicable (2) Bad debt provision withdrawal, reversed or recovered in the report period The amount of bad debt provision was RMB 453,029.45yuan, the amount of reversed or recovered bad debt provision in the Reporting Period RMB 0.00yuan (3) Particulars of the actual verification of other accounts receivable during the Reporting Period Naught 169 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (4) Other account receivable classified by account nature Unit: RMB Yuan Nature Closing book balance Opening book balance VAT export tax refunds 10,002,722.46 Performance bond 1,959,752.60 3,712,081.83 Staff borrow and deposit 5,767,808.81 843,146.81 Water & electricity fees 955,738.35 490,494.61 Advance money for street light 2,523,547.23 2,523,547.23 construction Internal business group 295,120.00 Other 2,320,302.05 846,734.86 Total 13,822,269.04 18,418,727.80 (5) The top five other account receivable classified by debtor at period-end Unit: RMB Yuan Closing balance of Name of units Nature Closing balance Aging Proportion% bad debt provision Advance money for First street light 2,523,547.23 2-3 years 18.26% 757,064.17 construction Second Margin 1,000,000.00 1-2 years 7.23% 100,000.00 Social security Third 839,347.46 Within 1 year 6.07% 25,180.42 charges Fourth Housing fund 754,015.98 Within 1 year 5.46% 22,620.48 Certification Fifth 565,834.50 Within 1 year 4.09% 16,975.04 application fee Total -- 5,682,745.17 -- 41.11% 921,840.11 (6) Accounts receivable involved with government subsidies Naught (7) Other account receivable which terminate the recognition owning to the transfer of the financial assets Naught 170 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (8) The amount of the assets and liabilities formed by the transfer and the continues involvement of other accounts receivable Naught 10. Inventory Whether the Company needs to comply with the disclosure requirements of the real estate industry No (1) Category of inventory Unit: RMB Yuan Closing balance Opening balance Item Falling price Falling price Book balance Book value Book balance Book value reserves reserves Raw materials 116,197,403.06 1,635,294.87 114,562,108.19 77,384,147.93 8,137,865.12 69,246,282.81 Goods in process 28,522,590.52 28,522,590.52 25,812,370.33 25,812,370.33 Inventory goods 443,843,318.14 14,938,179.05 428,905,139.09 366,582,258.72 17,263,510.85 349,318,747.87 Self-manufacture d semi-finished 179,867,083.78 579,873.99 179,287,209.79 116,119,714.01 3,963,130.61 112,156,583.40 product Low-value 2,404,557.60 2,404,557.60 3,117,943.80 3,117,943.80 fugitive items Total 770,834,953.10 17,153,347.91 753,681,605.19 589,016,434.79 29,364,506.58 559,651,928.21 Whether the Company needs to comply with the disclosure requirements of Shenzhen Stock Exchange Industry Information Disclosure Guidelines No. 4 - Listed companies engaged in seed industry and planting business No (2) Falling price reserves of inventory Unit: RMB Yuan Increased amount Decreased amount Item Opening balance Reverse or Closing balance Withdrawal Other Other write-off Raw materials 8,137,865.12 2,278,453.12 3,973,362.69 4,807,660.68 1,635,294.87 Inventory goods 17,263,510.85 19,553,813.25 20,170,040.53 1,709,104.52 14,938,179.05 Self-manufacture 3,963,130.61 1,028,838.97 2,845,764.32 1,566,331.27 579,873.99 d semi-finished 171 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 product Total 29,364,506.58 22,861,105.34 26,989,167.54 8,083,096.47 17,153,347.91 Note: Other decreases were due to Suzhou Mont Lighting Co., Ltd. (hereinafter referred to as Suzhou Mont) wasn’t consolidated. Item Basis for provision for falling price of Reasons for the reverse or write-off Remark inventory of falling price reserves of inventory of Reporting Period Raw materials According to the lower of inventory Raw materials sales or scrapping cost and net realizable value Inventory goods According to the lower of inventory Products sales or scrapping cost and net realizable value (3) Notes of the closing balance of the inventory which includes capitalized borrowing expenses Naught (4) Completed unsettled assets formed from the construction contact at the period-end Naught 11. Assets divided as held-to-sold Naught 12. Non-current assets due within 1 year Naught 13. Other current assets Unit: RMB Yuan Item Closing balance Opening balance Deductible input tax of VAT 41,181,826.53 56,770,134.59 Advance payment of enterprise income tax 23,635.19 25,347,724.55 Unsettled assets profit and loss 8,942,983.75 Bank financial products (Note) 400,000,000.00 Total 441,205,461.72 91,060,842.89 Other notes: Note: For the bank financial products with maturity date more than three months but investment cycle shorter than a year are principal-guaranteed financial products. 172 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 14. Available-for-sale financial assets (1) List of available-for-sale financial assets Unit: RMB Yuan Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserves reserves Available-for-sale equity 1,738,000,857. 1,732,150,857. 3,098,266,162.3 5,850,000.00 5,850,000.00 3,092,416,162.34 instruments 01 01 4 Measured by fair 1,427,901,096. 1,427,901,096. 2,787,166,401.9 2,787,166,401.96 value 63 63 6 Measured by cost 310,099,760.38 5,850,000.00 304,249,760.38 311,099,760.38 5,850,000.00 305,249,760.38 1,738,000,857. 1,732,150,857. 3,098,266,162.3 Total 5,850,000.00 5,850,000.00 3,092,416,162.34 01 01 4 (2) Available-for-sale financial assets measured by fair value at the period-end Unit: RMB Yuan Category of the Available-for-sale equity Available-for-sale available-for-sale Total instruments liabilities instruments financial assets Cost of the equity instruments/amortized 119,501,727.41 119,501,727.41 cost of the debt instruments Fair value 1,427,901,096.63 1,427,901,096.63 Changed amount of the fair value that be accumulatively recorded 1,308,399,369.22 1,308,399,369.22 in other comprehensive income (3) Available-for-sale financial assets measured by cost at the period-end Unit: RMB Yuan Book balance Depreciation reserves Shareholdi Cash Investee Period-beg Period-beg ng bonus of Increase Decrease Period-end Increase Decrease Period-end in in proportion the 173 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 among the Reporting investees Period Shenzhen Zhonghao 5,850,000. 5,850,000. 5,850,000. 5,850,000. Less than (Group) 00 00 00 00 5% Ltd. Chengdu Hongbo 6,000,000. 6,000,000. 6.94% Industrial 00 00 Co., Ltd. Xiamen 292,574,13 292,574,13 6.91% Bank 3.00 3.00 Guangdon g Less than Developm 500,000.00 500,000.00 5% ent Bank Co., Ltd. Foshan Fochen Road 6,175,627. 1,000,000. 5,175,627. Developm 7.66% 38 00 38 ent Company Limited 311,099,76 1,000,000. 310,099,76 5,850,000. 5,850,000. Total -- 0.38 00 0.38 00 00 (4) Changes of the impairment of the available-for-sale financial assets during the Reporting Period Unit: RMB Yuan Category of the Available-for-sale equity Available-for-sale available-for-sale Total instruments liabilities instruments financial assets Withdrawn impairment balance at the 5,850,000.00 5,850,000.00 period-begin Withdrawn impairment 5,850,000.00 5,850,000.00 balance at the period-end 174 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (5) Relevant notes of the fair value of the available-for-sale equity instruments which seriously fell or temporarily fell but not withdrawn the impairment provision Other notes —The available-for-sale financial assets balance at the period-end decreased RMB 1,360,265,305.33yuan by 44 % on year-on-year basis due to the sale of the stock of Guoxuan High-tech. —The revenue of the investee company, Foshan Fochen Road Development Company Limited had be included in the unified collection distribution system of Foshan road and bridge tolls, and the Company had executed amortization within the remained planting duration by regarding the investment balance as the usufruct and the amortized investment cost of the Reporting Period was of RMB 1,000,000.00yuan. 15. Investment held-to-maturity Naught 16. Long-term accounts receivable Naught 17. Long-term equity investment Unit: RMB Yuan Increase/decrease Closing Gains and Adjustme Cash Withdraw balance Additiona losses nt of Opening Reduced Changes bonus or al of Closing of Investee l recognize other balance investmen of other profits impairme Other balance impairme investmen d under comprehe t equity announce nt nt t the equity nsive d to issue provision provision method income I. Joint ventures II. Associated enterprises Qinghai FSL Lithium 382,637.5 3,769,010 25,684,59 29,836,24 Energy 2 .96 8.14 6.62 Exploitati on Co., Ltd. Shenzhen 180,000,0 558,686.0 180,558,6 Primatron 00.00 7 86.07 175 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 ix (Nanho) Electronic s Ltd. 382,637.5 180,000,0 4,327,697 25,684,59 210,394,9 Subtotal 2 00.00 .03 8.14 32.69 382,637.5 180,000,0 4,327,697 25,684,59 210,394,9 Total 2 00.00 .03 8.14 32.69 Other notes The Company entered into the Equity Transfer Agreement with (Hong Kong) Baiya Company Limited on July 25th, 2016, and accepted 32.85 % shares of Shenzhen Primatronix (Nanho) Electronics Ltd. held by (Hong Kong) Baiya Company Limited at the price of RMB180,000,000.00. 18. Investment property (1) Investment property adopting cost measurement mode □ Applicable √ Not applicable (2) Investment property adopting fair value measurement mode □ Applicable √ Not applicable (3) List of the investment property failed to completed the property certificate Naught 19. Fixed assets (1) List of fixed assets Unit: RMB Yuan Houses and Machinery Transportation Electronic Item Total buildings equipment equipment equipment I. Original book value: 1. Opening 638,249,602.24 906,292,098.16 21,230,148.30 24,043,747.30 1,589,815,596.00 balance 2. Increased 5,324,695.55 37,327,327.07 1,340,628.63 1,677,049.10 45,669,700.35 amount of the period (1) Purchase 778,133.60 15,754,712.37 1,340,628.63 1,627,450.28 19,500,924.88 176 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (2) Transfer of project under 4,546,561.95 21,572,614.70 49,598.82 26,168,775.47 construction (3) Enterprises combination increase 3. Decreased 133,026,442.68 450,616.48 1,744,635.56 135,221,694.72 amount of the period (1) Disposal or 126,341,986.48 450,616.48 1,407,928.86 128,200,531.82 scrap (2) Equipment 5,098,690.39 5,098,690.39 transformation (3) Enterprises combination 1,585,765.81 336,706.70 1,922,472.51 decrease 4. Closing balance 643,574,297.79 810,592,982.55 22,120,160.45 23,976,160.84 1,500,263,601.63 II. Accumulated desperation 1. Opening 358,763,342.24 673,160,992.83 14,213,165.13 14,482,647.84 1,060,620,148.04 balance 2. Increased 26,370,120.20 44,325,340.30 1,344,648.60 3,416,369.69 75,456,478.79 amount of the period (1) Withdrawal 26,370,120.20 44,325,340.30 1,344,648.60 3,416,369.69 75,456,478.79 (2) Enterprises combination increase 3. Decreased 119,870,239.50 462,887.95 1,556,046.90 121,889,174.35 amount of the period (1) Disposal or 116,111,229.93 462,887.95 1,324,360.04 117,898,477.92 scrap (2) Equipment 3,436,070.42 3,436,070.42 transformation (3) Enterprises combination 322,939.15 231,686.86 554,626.01 decrease 4. Closing balance 385,133,462.44 597,616,093.63 15,094,925.78 16,342,970.63 1,014,187,452.48 III. Depreciation reserves 1. Opening 44,757,883.48 1,346.31 44,759,229.79 177 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 balance 2. Increased amount of the period (1) Withdrawal 3. Decreased 4,689,092.02 918.28 4,690,010.30 amount of the period (1) Disposal or 4,600,537.59 918.28 4,601,455.87 scrap (2) Equipment 88,554.43 88,554.43 transformation 4. Closing balance 40,068,791.46 428.03 40,069,219.49 IV. Book value 1. Closing book 258,440,835.35 172,908,097.46 7,025,234.67 7,632,762.18 446,006,929.66 value 2. Opening book 279,486,260.00 188,373,221.85 7,016,983.17 9,559,753.15 484,436,218.17 value (2) List of temporarily idle fixed assets Unit: RMB Yuan Accumulated Depreciation Item Original book value Book value Remark depreciation reserves T5, T8, energy-saving lamp 119,489,755.23 82,549,826.64 36,623,780.03 316,148.56 production line (3) Fixed assets leased in from financing lease Naught (4) Fixed assets leased out from operation lease Naught (5) Details of fixed assets failed to accomplish certification of property Naught 178 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 20. Construction in progress (1) List of construction in progress Unit: RMB Yuan Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserves reserves Construction in 71,479,325.91 71,479,325.91 32,488,518.68 32,488,518.68 progress Total 71,479,325.91 71,479,325.91 32,488,518.68 32,488,518.68 (2) Changes of significant construction in progress Unit: RMB Yuan Of Amount Proporti which: Accumul that on the Capitaliz Other ative transferr estimate amount ation rate Estimate decrease amount Name of Opening Increase ed to Closing d of the Project of the of the Capital d d amount of item balance d amount fixed balance project progress capitaliz interests resources number of the capitaliz assets of accumul ed of the period ed the ative interests period interests period input of the period D project of Gaoming 30,000,0 19,074,1 124,543. 18,949,6 63.58% 80.00% Other standard 00.00 63.23 67 19.56 worksho p Fuwan standard 30,000,0 16,629,4 62,126.2 16,567,3 55.43% 70.00% Other worksho 00.00 40.69 1 14.48 pE 9 assembly 8,500,00 7,981,04 7,981,04 lines of 93.89% 90.00% Other 0.00 4.20 4.20 LED (16005) Gaoming 4,350,00 2,206,74 2,079,87 99,041.5 4,187,57 98.54% 85.00% Other Jiangbin 179 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Shangri- 0.00 0.10 2.00 0 0.60 La Garden commerc ial residenti al building LEDT8 automati c line 2,950,00 2,907,39 2,907,39 98.56% 98.00% Other transfor 0.00 8.19 8.19 mation (16033) Self-man ufacture d LED lamp 1,990,00 1,979,51 1,983,12 automati 3,610.24 99.65% 98.00% Other 0.00 2.13 2.37 c producti on line (15012) Transfor mation of three aging machine in Gaoming 1,650,00 1,642,96 1,642,96 99.57% 98.00% Other T8 0.00 3.50 3.50 second worksho p, work order number: 16011 Steel platform construct 1,620,00 1,611,49 1,611,49 99.47% 99.00% Other ion for 0.00 3.05 3.05 Gaoming tank 180 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 furnace glass ninth cutting worksho p Self-man ufacture d three dispensi ng pipe 1,700,00 1,488,23 1,488,23 87.54% 75.00% Other mills, 0.00 5.48 5.48 work order number: 16029 Gaoming staff dormitor y buildings 1,200,00 1,139,06 1,139,06 94.92% 98.00% Other 8#9# 0.00 8.24 8.24 (Increme ntal engineeri ng) 83,960,0 4,186,25 54,557,2 285,711. 58,457,8 Total -- -- -- 00.00 2.23 88.82 38 29.67 (3) List of the withdrawal of the impairment provision of the construction in progress Naught 21. Engineering material Naught 22. Liquidation of fixed assets Naught 181 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 23. Productive biological 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. Intangible assets (1) Information Unit: RMB Yuan Item Land use right Patent Non-patents Software use right Total I. Original book value 1. Opening 211,719,938.60 20,700,700.00 1,636,664.95 234,057,303.55 balance 2. Increased 1,136,986.92 1,136,986.92 amount of the period (1) Purchase 1,136,986.92 1,136,986.92 (2) Internal R &D (3) Increase from enterprise combination 3. Decrease in the 20,500,700.00 20,500,700.00 Reporting Period (1) Disposal (2) Enterprises combination 20,500,700.00 20,500,700.00 decrease 4. Closing 211,719,938.60 200,000.00 2,773,651.87 214,693,590.47 balance II. Total accrued 182 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 amortization 1. Opening 48,760,068.42 4,091,720.00 709,221.50 53,561,009.92 balance 2. Increased 4,344,643.08 349,262.34 4,693,905.42 amount of the period (1) Withdrawal 4,344,643.08 349,262.34 4,693,905.42 3. Decrease in 3,891,720.00 3,891,720.00 the Reporting Period (1) Disposal (2) Enterprises combination 3,891,720.00 3,891,720.00 decrease 4. Closing 53,104,711.50 200,000.00 1,058,483.84 54,363,195.34 balance III. Depreciation reserves 1. Opening 16,608,980.00 16,608,980.00 balance 2. Increased amount of the period (1) Withdrawal 3. Decrease in the 16,608,980.00 16,608,980.00 Reporting Period (1) Disposal (2) Enterprises combination 16,608,980.00 16,608,980.00 decrease 4. Closing balance IV. Book value 1. Book value of the 158,615,227.10 1,715,168.03 160,330,395.13 period-end 2. Book value of the 162,959,870.18 927,443.45 163,887,313.63 period-begin The proportion the intangible assets formed from the internal R&D through the Company amount the balance of the intangible assets at the period-end was 0.00%. 183 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (2) Details of fixed assets failed to accomplish certification of land use right Other notes: The decrease in the Reporting Period was mainly due to the bankruptcy liquidation of Suzhou Mont Lighting, which was no longer included in the scope of consolidation. 26. R&D expenses Naught 27. Goodwill (1) Original book value of goodwill Unit: RMB Yuan Name of the investees or the Opening balance Increase Decrease Closing balance events formed goodwill Suzhou Mont 7,360,330.45 7,360,330.45 Lighting Co., Ltd. (2) Impairment provision of goodwill Unit: RMB Yuan Name of the investees or the Opening balance Increase Decrease Closing balance events formed goodwill Suzhou Mont 7,360,330.45 7,360,330.45 Lighting Co., Ltd. Notes to the recognition methods of the goodwill impairment test process, parameters and goodwill impairment losses: The subsidiary Suzhou Mont Lighting Co., Ltd. is in the bankruptcy liquidation procedure and has been taken over by the manager. This year is no longer included in the consolidation, and the confirmation of the goodwill of Suzhou Mont terminates at end of the period. 28. Long-term unamortized expenses Unit: RMB Yuan Item Opening balance Increased amount Amortization Decrease Closing balance 184 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 amount Maintenance and 406,425.35 9,912,547.95 3,100,100.12 321,753.40 6,897,119.78 decoration expenses Total 406,425.35 9,912,547.95 3,100,100.12 321,753.40 6,897,119.78 Other notes Other decreases were due to the subsidiary Suzhou Mont was no longer included in the consolidation. 29. Deferred income tax assets/deferred income tax liabilities (1) Deferred income tax assets had not been off-set Unit: RMB Yuan Closing balance Opening balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference assets difference assets Assets impairment 128,070,435.31 19,448,040.38 136,195,788.86 20,975,403.88 provision Unrealized profits of 1,356,293.17 203,443.98 1,195,795.66 179,369.35 internal transactions Deductible losses 16,435,405.51 4,108,851.38 16,661,633.81 4,165,408.45 Depreciation of fixed 65,682,019.37 10,183,492.79 66,856,506.21 10,254,446.06 assets Payroll payable 63,987,177.61 9,604,089.91 47,800,672.81 7,170,100.92 Total 275,531,330.97 43,547,918.44 268,710,397.35 42,744,728.66 (2) Deferred income tax liabilities had not been off-set Unit: RMB Yuan Closing balance Opening balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference liabilities difference liabilities Changes of the fair value of the available-for-sale 1,308,399,369.22 196,259,905.39 2,603,516,654.14 390,527,498.12 financial assets Changes of the fair value of the tradable financial 44,595.00 6,689.25 assets Share of other 25,684,598.14 3,852,689.72 185 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 comprehensive income of investees that cannot be reclassified into profit/loss under the equity method Total 1,334,083,967.36 200,112,595.11 2,603,561,249.14 390,534,187.37 (3) Deferred income tax assets or liabilities listed by net amount after off-set Unit: RMB Yuan 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 43,547,918.44 42,744,728.66 assets Deferred income tax 200,112,595.11 390,534,187.37 liabilities (4) List of unrecognized deferred income tax assets Naught (5) Deductible losses of unrecognized deferred income tax assets will due the following years Other notes: —Deferred income tax liabilities at the period-end decreased RMB 190,423,430.16yuan by 48.76 % over the period-begin, which was mainly due to the sale of the stock of Guoxuan High-tech in the Reporting Period. 30. Other non-current assets Unit: RMB Yuan Item Closing balance Opening balance Land purchase and the ownership implicit 41,755,700.00 41,755,700.00 of relevant items Prepayments for business facilities 3,369,640.00 7,507,504.15 Total 45,125,340.00 49,263,204.15 31. Short-term loans Naught 186 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 32. Financial liabilities measured by fair value and the changes included in the current gains and losses Naught 33. Derivative financial liabilities □ Applicable √ Not applicable 34. Notes payable The total unpaid notes payable due at the period end was RMB 0.00. 35. Accounts payable (1) List of accounts payable Unit: RMB Yuan Item Closing balance Opening balance Accounts payable 552,255,512.33 396,263,382.12 Total 552,255,512.33 396,263,382.12 (2) Notes of the accounts payable aging over one year Naught Other notes: The accounts payable at the period-end increased RMB 155,992,130.21yuan by 39.37% over the period-begin, which was mainly due to the increase of the inventory reserve for the Company. 36. Advance from customers (1) List of advance from customers Unit: RMBYuan Item Closing balance Opening balance Prepayments 41,180,818.13 71,531,790.37 Total 41,180,818.13 71,531,790.37 (2) Significant advance from customers aging over one year Naught 187 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (3) Particulars of settled but unfinished projects formed by construction contract at period-end Naught 37. Payroll payable (1) List of Payroll payable Unit: RMBYuan Item Opening balance Increase Decrease Closing balance I. Short-term salary 70,996,987.32 591,874,111.57 566,849,942.83 96,021,156.06 II. Welfare after demission - defined 43,137,899.48 43,137,899.48 contribution plans III. Dismission welfare 1,008,000.00 1,008,000.00 Total 72,004,987.32 635,012,011.05 610,995,842.31 96,021,156.06 (2) List of Short-term salary Unit: RMBYuan Item Opening balance Increase Decrease Closing balance 1. Salary, bonus, 70,635,830.10 520,927,326.54 495,967,763.15 95,595,393.49 allowance, subsidy 2. Employee welfare 28,040,548.62 28,040,548.62 3. Social insurance 26,171,693.81 26,171,693.81 Including: Medical 21,535,834.98 21,535,834.98 insurance premiums Work-related injury 2,607,671.43 2,607,671.43 insurance Maternity insurance 2,028,187.40 2,028,187.40 4. Housing fund 12,015,653.71 12,015,653.71 5. Labor union budget and employee education 361,157.22 4,718,888.89 4,654,283.54 425,762.57 budget Total 70,996,987.32 591,874,111.57 566,849,942.83 96,021,156.06 (3) List of drawing scheme Unit: RMBYuan 188 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Item Opening balance Increase Decrease Closing balance 1. Basic pension benefits 41,550,661.32 41,550,661.32 2. Unemployment 1,587,238.16 1,587,238.16 insurance Total 43,137,899.48 43,137,899.48 38. Taxes payable Unit: RMBYuan Item Closing balance Opening balance VAT 9,504,368.23 6,471,716.18 Corporate income tax 121,469,524.92 3,666,766.26 Personal income tax 452,181.32 869,010.09 Urban maintenance and construction tax 947,172.36 471,260.34 Business tax 300,148.90 Education surcharge 680,460.70 337,379.51 Property tax 4,259,219.31 308,905.60 Land use tax 804,737.31 204,737.31 Other taxes 164,980.57 339,166.12 Total 138,282,644.72 12,969,090.31 Other notes: The tax payable at the period-end increased RMB 125,313,554.41 by 966.24 % over the period-begin, which was mainly due to the large amount of taxable income arisen from the sale of the stock of Guoxuan High-tech. 39. Interest payable Naught 40. Dividends payable Unit: RMBYuan Item Closing balance Opening balance Common stock dividends 6,287,923.09 Total 6,287,923.09 Other notes, including significant dividends payable unpaid for more than one year, should disclose the reason for non-payment: Note: Subsidiary Foshan Taimei Times Lamps and Lanterns Co., Ltd. distributes the profits of the year 2013 and year 2014 in the 189 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Reporting Period. 41. Other accounts payable (1) Other accounts payable listed by nature of the account Unit: RMBYuan Item Closing balance Opening balance Compensation for lawsuit 1,762,533.43 13,872,398.53 Performance bond 20,564,161.28 9,053,678.50 Relevant fees of sale 15,634,331.32 1,924,886.76 Hosting housing fund, medical insurance, unemployment insurance, pension 8,076,410.52 8,076,410.52 insurance Other 4,066,902.26 3,603,126.91 Total 50,104,338.81 36,530,501.22 (2) Other significant accounts payable with aging over one year Unit: RMBYuan Item Closing balance Unpaid/ Un-carry-over reason Hosting housing fund, medical insurance, unemployment insurance, pension 8,076,410.52 insurance Total 8,076,410.52 -- Other notes The balance of other payables at period-end increased RMB 13,573,837.59 by 37.16 % over the period-begin, which was mainly due to the increase in performance bond arisen from the increase in bid invitations, and the increase in business promotion expenses and other sales related expenses. 42. Liabilities classified as holding for sale Naught 43. Non-current liabilities due within 1 year Naught 190 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 44. Other current-liabilities Naught 45. Long-term loan Naught 46. Bonds payable Naught 47. Long-term payable Naught 48. Long-term payroll payable Naught 49. Special payable Naught 50. Accrued liabilities Naught 51. Deferred income Unit: RMBYuan Item Opening balance Increase Decrease Closing balance Formation reasons Government Government 10,722,275.02 480,000.00 752,506.53 10,449,768.49 subsidies related to subsidies assets income Total 10,722,275.02 480,000.00 752,506.53 10,449,768.49 -- Items involved in government subsidies: Unit: RMBYuan Amount accrued Amount of newly Related to the Item Opening balance in non-business Other changes Closing balance subsidy assets/ income income LED production 9,852,274.95 9,852,274.95 Related to the 191 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 technical assets transformation project Production line of 50 million Related to the 620,000.07 154,999.92 465,000.15 energy-saving assets fluorescent lamp New type of low cost silicon substrate LED Related to the 250,000.00 220,331.68 29,668.32 light source income module technology Standard optical components Related to the testing laboratory 480,000.00 377,174.93 102,825.07 income capacity construction Total 10,722,275.02 480,000.00 752,506.53 10,449,768.49 -- 52. Other non-current liabilities Naught 53. Share capital Unit: RMBYuan Increase/decrease (+/-) Opening Capitalization Closing Newly issue balance Bonus shares of public Other Subtotal balance share reserves The sum of 1,272,132,868. 1,272,132,868. shares 00 00 54. Other equity instruments Naught 55. Capital reserves Unit: RMBYuan 192 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Item Opening balance Increase Decrease Closing balance Capital premium 289,084,024.29 10,508,536.76 278,575,487.53 Other capital reserves 7,240,351.29 5,620.25 7,245,971.54 Total 296,324,375.58 5,620.25 10,508,536.76 285,821,459.07 Other notes, including changes and reason of change: The decrease of capital premium of the Reporting Period was difference between the adjusted cost paid to purchase the minority equity subsidiary Foshan Chanchang Electric Appliance (Gaoming) Co., Ltd. and the net asset share that has been calculated since the beginning of the purchase of Foshan Chanchang Electric Appliance (Gaoming) Co., Ltd. calculated in accordance with the new shareholding ratio. Other capital reserves increased of RMB 5,620.25 during the Reporting Period, which mainly due to the income of the historical odd lots dividends of the listed companies returned by the Shenzhen Branch of CSDCC. The securities companies had cleared the historical odd lots dividends that kept by the securities companies according to the Notice of the Related Events of the Return of the Historical Odd Lots Dividends issued by Shenzhen Branch of CSDCC and had returned the historical odd lots dividends to the listed companies; at the same time, the listed companies included the historical odd lots dividends into the relevant reserved funds subjects of the shareholders’ equities. 56. Treasury stock Naught 57. Other comprehensive income Unit: RMB Yuan Reporting Period Less: Amount transferred into profit and loss in the Amount After-tax After-tax Opening current period Less: Closing Item incurred attribute to attribute to balance that income tax balance before the parent minority recognized expense income tax company shareholder into other comprehensive income in prior period II. Other comprehensive income 2,212,989,15 -368,336,14 901,096,544.7 -190,414,90 -1,079,017, 1,133,971 reclassify into profits and losses 6.02 2.09 0 3.02 783.77 ,372.25 Of which: share of other 25,684,598. 3,852,689.7 21,831,908. 21,831,90 comprehensive income of investees 14 2 42 8.42 that will be reclassified into 193 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 profit/loss under the equity method Profits or losses from the change 2,212,989,15 -394,020,74 901,096,544.7 -194,267,59 -1,100,849, 1,112,139 of fair value of available for sale 6.02 0.23 0 2.74 692.19 ,463.83 financial assets 2,212,989,15 -368,336,14 901,096,544.7 -190,414,90 -1,079,017, 1,133,971 Total of other comprehensive income 6.02 2.09 0 3.02 783.77 ,372.25 58. Special reserves Naught 59. Surplus reserves Unit: RMBYuan Item Opening balance Increase Decrease Closing balance Statutory surplus 491,552,538.76 105,485,844.69 597,038,383.45 reserves Discretional surplus 136,886,568.36 136,886,568.36 reserves Total 628,439,107.12 105,485,844.69 733,924,951.81 Notes to the surplus reserves including the notes to the increase/decrease during the Reporting Period as well as the reasons: The increase in the Reporting Period was accrued statutory surplus reserves based on 10% of the net profit of the parent company. 60. Retained profits Unit: RMBYuan Item Amount Withdrawal or distributed proportion Opening balance of retained profits before 613,661,381.40 777,810,478.44 adjustments Opening balance of retained profits after 613,661,381.40 777,810,478.44 adjustments Add: Net profit attributable to owners of the 1,072,342,050.13 53,405,593.12 Company Less: Accrued statutory surplus reserve 105,485,844.69 2,270,666.26 Dividend of common stock payable 15,901,660.85 215,284,023.90 Closing retained profits 1,564,615,925.99 613,661,381.40 List of adjustment of opening retained profits: 1) RMB0.00 opening retained profits was affected by retrospective adjustment conducted according to the Accounting Standards for Business Enterprises and relevant new regulations. 194 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 2) RMB0.00 opening retained profits was affected by changes on accounting policies. 3) RMB0.00 opening retained profits was affected by correction of significant accounting errors. 4) RMB0.00 opening retained profits was affected by changes in combination scope arising from same control. 5) RMB0.00 opening retained profits was affected totally by other adjustments. 61. Revenue and cost of sales Unit: RMBYuan Reporting Period Same period of last year Item Sales revenue Cost of sales Sales revenue Cost of sales Main operations 3,339,220,526.54 2,499,713,813.01 2,845,925,254.23 2,163,709,639.63 Other operations 27,234,442.06 18,450,286.96 30,733,846.40 21,848,941.68 Total 3,366,454,968.60 2,518,164,099.97 2,876,659,100.63 2,185,558,581.31 62. Business tax and surcharges Unit: RMBYuan Item Reporting Period Same period of last year Urban maintenance and construction tax 15,047,836.70 14,040,573.35 Education surcharge 6,466,338.90 6,041,930.37 Property tax 4,539,974.31 Land use tax 3,386,603.03 Vehicle usage tax 3,185.40 Stamp duty 893,633.80 Business tax 233,406.51 1,570,072.79 Local education surcharge 4,310,892.68 4,027,937.70 Embankment protection fee 337.87 Total 34,882,209.20 25,680,514.21 Other notes: The five new taxes in the Current Period came from administrative expenses reclassification as per the Financial Accounting Document [2016] No. 22. 63. Sales expenses Unit: RMBYuan Item Reporting Period Same period of last year Salary 47,004,941.08 42,665,935.90 Service charges on promotion of 13,569,643.61 25,217,244.68 195 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 energy-saving products Sales promotion fee 14,998,126.80 13,381,454.04 Transport fees 68,158,701.23 62,901,799.56 Business travel charges 10,427,361.98 9,128,534.60 Dealer meeting expense 4,753,331.93 5,651,161.95 Other 19,627,871.29 11,778,675.52 Business propagandize fee 26,237,987.81 32,387,692.25 Total 204,777,965.73 203,112,498.50 64. Administration expenses Unit: RMBYuan Item Reporting Period Same period of last year Employee’s remuneration 83,847,203.01 121,577,653.26 Depreciation charge 18,880,789.26 21,057,357.43 Tax expenses 5,216,708.43 16,341,074.77 Office expenses 9,577,225.25 5,702,172.93 Welfare fee 20,209,213.56 20,195,256.28 Amortization of intangible assets 4,693,905.42 6,617,836.08 Land rent and management fee 5,109,835.09 6,793,028.62 Other 63,877,382.45 43,301,134.72 Total 211,412,262.47 241,585,514.09 65. Financial expenses Unit: RMBYuan Item Reporting Period Same period of last year Interest expenses Less: Interest income 13,318,183.24 15,747,878.09 Exchange loss -16,356,683.41 -15,110,552.47 Other 1,217,412.76 1,987,306.54 Total -28,457,453.89 -28,871,124.02 66. Asset impairment loss Unit: RMBYuan Item Reporting Period Same period of last year 196 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 I. Bad debt loss 2,779,405.74 6,204,880.86 II. Inventory falling price loss 22,861,105.34 19,419,051.26 VII. Impairment losses of fixed asset 37,880,650.62 impairment loss IX. Impairment losses of construction in 2,000,000.00 process XII. Impairment losses of intangible assets 16,608,980.00 XIII. Goodwill impairment loss 7,360,330.45 Total 25,640,511.08 89,473,893.19 Other notes: The impairment loss of the assets of the Reporting Period decreased RMB 63,833,382.11 by 71.34 % over the previous year. The main reasons were as follows: 1. The Company accrued impairment provision RMB 37,880,650.62 for of idle equipment T5, T8 and energy saving lamp production line, and accrued impairment provision RMB 2,000,000.00 for construction in process - hard glass furnace; 2. Subsidiary Suzhou Mont had accrued total provision for impairment RMB 16,608,980.00 for the book value of intangible assets - patents in last period; 3. Suzhou Mont sustained losses due to the scale, market and other reasons, there was no conditions for production any longer, and accrued total impairment provision for the goodwill formed by purchasing Suzhou Mont in last period. 67. Gains and losses from changes in fair value Unit: RMBYuan Sources Reporting Period Same period of last year Financial assets measured by fair value and the changes be included in the current 35,935.00 profits and losses Total 35,935.00 68. Investment income Unit: RMBYuan Item Reporting Period Same period of last year Long-term equity investment income 4,327,697.03 -3,307,086.87 accounted by equity method Investment income received from financial assets measured by fair value and the changes 19,505.00 be included in the current profits and losses during holding period Investment income received from disposal of financial assets measured by fair value and the 373,528.38 2,353,948.21 changes be included in the current profits and 197 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 losses during holding period Investment income received from holding of 14,474,805.76 3,449,696.24 available-for-sale financial assets Investment income received from disposal of 858,346,116.55 17,063,266.56 available-for-sale financial assets Investment and financial products income 7,694,508.91 Other -3,137,134.86 -55,571.28 Total 882,079,521.77 19,523,757.86 Other notes: Note: Other items of the Reporting Period were mainly forward foreign exchange settlement earnings. 69. Non-operating gains Unit: RMBYuan Recorded in the amount of the Item Reporting Period Same period of last year non-recurring gains and losses Total gains from disposal of 20,253.97 182,286.57 20,253.97 non-current assets Including: Gains from disposal 20,253.97 182,286.57 20,253.97 of fixed assets Government subsidies 1,669,377.53 5,141,174.13 1,669,377.53 Other 2,051,054.77 2,304,506.54 2,051,054.77 Total 3,740,686.27 7,627,967.24 3,740,686.27 Government subsidies recorded into current profits and losses Unit: RMBYuan Whether subsidies Special Related to Distribution Distribution influence the Reporting Same period Item Nature subsidy or assets/related entity reason current Period of last year not income profits and losses or not Due to Project of engaged in FGD fly ash special Related to the removal of Subsidy No No 28,166.86 industry that assets furnace the state system encouraged 198 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 and supported, gained subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state Production encouraged line of 50 and million supported, Related to the Subsidy No No 154,999.92 154,999.89 energy-savin gained assets g fluorescent subsidy lamp (obtaining in line with the law and the regulations of national policy) Standard optical components Subsidy from testing R&D laboratory Technical Related to the capacity Subsidy No No 377,174.93 updating and assets construction transformatio and products n, etc. quality guarantee engineering New type of Subsidy from low cost R&D silicon Technical Related to the Subsidy No No 220,331.68 substrate updating and assets LED light transformatio source n, etc. 199 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 module technology Subsidy from Subsidiary R&D from Technical Related to the Subsidy No No 2,019,056.20 wangjiayizha updating and income n transformatio n, etc. Subsidy from Leadership R&D growth Technical Related to the Award No No 1,196,830.00 project sales updating and income award transformatio n, etc. Subsidy from R&D Clean energy Technical Related to the Award No No 330,000.00 reward updating and income transformatio n, etc. Suzhou Subsidy from Industrial R&D Park science Technical Related to the and Award No No 93,600.00 104,812.00 updating and income technology transformatio development n, etc. fund Subsidy from Electroless R&D capacitor Technical Related to the Award No No 690,391.50 drive power updating and income technology transformatio n, etc. Subsidy from R&D Other odd Technical Related to the government Award No No 823,271.00 616,917.68 updating and income subsidies transformatio n, etc. Total -- -- -- -- -- 1,669,377.53 5,141,174.13 -- 200 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 70. Non-operating expenses Unit: RMBYuan Recorded in the amount of the Item Reporting Period Same period of last year non-recurring gains and losses Loss on disposal of non-current 5,796,711.34 8,354,989.42 5,796,711.34 assets Including: Loss on disposal of 5,796,711.34 8,354,989.42 5,796,711.34 fixed assets Donations 50,549.74 90,231.94 50,549.74 Lawsuit compensation 130,497,453.69 Inventory loss 4,872,903.24 1,288,079.32 4,872,903.24 Fine expenses 1,196,550.68 1,196,550.68 Overdue fine 6,572.30 6,572.30 Other 699,267.00 1,083,135.16 699,267.00 Total 12,622,554.30 141,313,889.53 12,622,554.30 71. Income tax expense (1) Lists of income tax expense Unit: RMBYuan Item Reporting Period Same period of last year Current income tax expense 200,786,513.07 12,134,618.15 Deferred income tax expense -809,879.03 -3,826,349.62 Total 199,976,634.04 8,308,268.53 (2) Adjustment process of accounting profit and income tax expense: Unit: RMBYuan Item Reporting Period Total profits 1,273,233,027.78 Current income tax expense accounted by tax and relevant 190,984,954.17 regulations Influence of different tax rate suitable to subsidiary 4,294,276.08 Influence of income tax before adjustment 8,241,244.39 Effect of non-deductible costs, expenses and losses 2,242,218.70 Effect of allowing to make up for the amount of tax losses in -155,884.24 201 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 previous years Effect of deferred tax assets -809,879.03 Investment income and dividends -4,871,148.50 As sales 37,675.77 Other 13,176.70 Income tax expense 199,976,634.04 72. Other comprehensive income For details, please refer to Notes on major items in consolidated financial statements of the Company, 57. 73. Supplementary information to cash flow statement (1) Other cash received relevant to operating activities: Unit: RMB Yuan Item Reporting Period Same period of last year Deposit interest 13,785,568.65 14,826,507.40 Income from insurance compensation 13,376,161.79 (Note) Guaranteed income 11,861,861.00 Property and rental income 2,331,426.63 2,895,455.72 Income from subsidy 1,732,404.67 4,907,615.88 Other 9,834,976.95 4,451,157.93 Total 52,922,399.69 27,080,736.93 Notes for other cash received relating to operating activities: Note: The significant increase in income from insurance compensation of the Reporting Period was mainly due to for the insurance indemnity for warehouse water stains (2) Other cash paid relevant to operating activities: Unit: RMBYuan Item Reporting Period Same period of last year Management fees paid with cash 34,441,711.07 46,287,176.76 Selling expenses paid with cash 111,440,656.67 147,647,779.81 Financial expenses paid with cash 1,198,307.44 1,987,306.54 Lawsuit compensation 13,700,478.57 178,063,330.32 202 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Other 34,047.72 930,040.37 Total 160,815,201.47 374,915,633.80 (3) Other cash received relevant to investment activities Naught (4) Other cash paid relevant to investment activity Unit: RMBYuan Item Reporting Period Same period of last year Subsidiary liquidation expenses 39,877.93 Total 39,877.93 (5) Other cash received relevant to financing activities Naught (6) Other cash paid relevant to financing activities Naught 74. Supplemental information for Cash Flow Statement (1) Supplemental information for Cash Flow Statement Unit: RMBYuan Supplemental information Reporting Period Same period of last year 1. Reconciliation of net profit to net cash -- -- flows generated from operating activities Net profit 1,073,256,393.74 37,684,725.39 Add: Provision for impairment of assets 25,640,511.08 89,473,893.19 Depreciation of fixed assets, of oil-gas 75,456,478.79 66,958,262.29 assets, of productive biological assets Amortization of intangible assets 4,693,905.42 6,617,836.08 Long-term unamortized expenses 3,100,100.12 1,122,171.38 Losses on disposal of fixed assets, intangible assets and other long-term assets (gains: 5,776,457.37 2,462,027.70 negative) Loss on retirement of fixed assets (gains: 1,765,606.37 5,710,675.15 203 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 negative) Losses from variation of fair value (gains: -35,935.00 negative) Financial cost (gains: negative) -8,150,854.62 Investment loss (gains: negative) -882,079,521.77 -19,523,757.86 Decrease in deferred income tax assets -692,850.33 -1,048,513.87 (gains: negative) Increase in deferred income tax liabilities -6,689.25 -2,777,835.75 (“-” means decrease) Decrease in inventory (gains: negative) -215,842,269.53 46,723,993.01 Decrease in accounts receivable from -123,344,623.02 65,879,278.93 operating activities (gains: negative) Increase in payables from operating 322,255,269.49 -102,770,776.59 activities (decrease: negative) Net cash flows generated from operating 289,978,768.48 188,325,189.43 activities 2. Significant investing and financing activities without involvement of cash -- -- receipts and payments 3. Change of cash and cash equivalent: -- -- Closing balance of cash 1,479,283,642.54 933,546,108.37 Less: Opening balance of cash 933,546,108.37 989,701,235.60 Net increase in cash and cash equivalents 545,737,534.17 -56,155,127.23 (2) Net Cash paid of obtaining the subsidiary Naught (3) Net Cash receive from disposal of the subsidiary Naught (4) Cash and cash equivalents Unit: RMBYuan Item Closing balance Opening balance I. Cash 1,479,283,642.54 933,546,108.37 Including: Cash on hand 13,058.91 36,008.01 Bank deposit on demand 1,477,005,924.93 853,647,752.46 204 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Other monetary funds on demand 2,264,658.70 79,862,347.90 III. Closing balance of cash and cash 1,479,283,642.54 933,546,108.37 equivalents Of which: the parent company or subsidiaries within the group use restricted 0.00 1,695,096.83 cash and cash equivalents 75. Notes to items of changes in owner's equity Note to name of "other" item adjusted closing balance and the adjustment amount: Not applicable 76. The assets with the ownership or use right restricted Unit: RMBYuan Item Closing book value Restricted reason Monetary capital 0.00 Notes receivable 0.00 Inventory 0.00 Fixed assets 0.00 Intangible assets 0.00 Total 0.00 -- 77. Foreign currency monetary items (1) Foreign currency monetary items Unit: RMBYuan Closing foreign currency Closing convert to RMB Item Exchange rate balance balance Monetary capital -- -- 2,638,044.00 Including: USD 369,531.81 6.9370 2,563,442.16 EUR 10,209.92 7.3068 74,601.84 Accounts receivable -- -- 257,668,120.36 Including: USD 37,144,027.73 6.9370 257,668,120.36 Accounts payable 1,755,558.66 Including: USD 253,071.74 6.9370 1,755,558.66 Advance from customers 13,550,084.65 205 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Including: USD 1,942,773.05 6.9370 13,477,016.65 EUR 10,000.00 7.3068 73,068.00 (2) Note to oversea entities including: for significant oversea entities, shall disclose main operating place, recording currency and selection basis, if there are changes into recording currency, shall also disclose the reason. □ Applicable √ Not applicable 78. Arbitrage Qualitative and quantitative information of relevant arbitrage instruments, hedged risk in line with the type of arbitrage to disclose: Not applicable 79. Other Not applicable VIII. Changes of merge scope 1. Business combination not under the same control (1) Business combination under the same control during the Reporting Period Naught (2) Combination cost and goodwill Naught (3) Identifiable assets and liabilities of acquiree on purchase date Naught (4) Profits or losses of residual equity held before purchase dare recalculated in line with fair value Whether there is a transaction that through multiple transaction step by step to realize enterprises merger and gaining the control during the Reporting Period □ Yes √ No (5) Note to merger could not be determined reasonable consideration or Identifiable assets, Fair value of liabilities of the acquiree at acquisition date or closing period of the merge Naught 206 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (6) Other notes Naught 2. Business combination under the same control (1) Business combination under the same control during the Reporting Period Naught (2) Combination cost Naught (3) The book value of the assets and liabilities of the combined party at combining date Naught 3. Counter purchase Naught 4. The disposal of subsidiary Whether there is a single disposal of the investment to subsidiary and lost control □ Yes √ No Whether there are multiple transactions step by step dispose the investment to subsidiary and lost control in Reporting Period □ Yes √ No 5. Other reasons for the changes in combination scope Original subsidiaries no longer incorporated in the consolidation of present year The subsidiary Suzhou Mont was filed for bankruptcy by creditors. On June 2, 2016, (2016) SU0591 MP No. 03 Decision of the trial court Suzhou Industrial Park People’s Court designated Jiangsu Yingyuan Law Firm as the administrator of Suzhou Mont. The company lost the control to Suzhou Mont from that date. According to the Accounting Standards for Business Enterprises, Suzhou Mont was not included in the consolidated financial statements of the Company at the end of the Reporting Period (the Company only included the Profit Statement and Cash Flow Statement of Suzhou Mont in the consolidation from January to May 2016). Main body incorporated in the consolidation of present year Name Net assets at period-end Net profit of Reporting Period Foshan Lighting Zhida Electric Technology Co., Ltd 35,460,469.91 -39,530.09 207 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 6. Other Naught IX. Equity in other entities 1. Equity in subsidiary (1) The structure of the enterprise group 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. Foshan Chanchang Electric Production and Newly Foshan Foshan 100.00% Appliance sales established (Gaoming) 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. Guangdong Newly Foshan Foshan Finance lease 100.00% Fozhao Leasing established 208 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Co., Ltd. Nanjing Fozhao Lighting Production and Components Nanjing Nanjing 100.00% Purchase sales Manufacturing Co., Ltd. Foshan Lighting Zhida Electric Production and Newly Foshan Foshan 51.00% Technology Co., sales established Ltd (2) Significant not wholly owned subsidiary Unit: RMBYuan The profits and losses Declaring dividends Balance of minority Shareholding proportion Name arbitrate to the minority distribute to minority shareholder at closing of minority shareholder shareholders shareholder period Foshan Taimei Times Lamps and Lanterns Co., 30.00% 1,723,931.64 6,287,923.10 5,027,436.18 Ltd. Foshan Lighting Zhida Electric Technology Co., 49.00% -19,369.74 9,980,630.26 Ltd (3) The main financial information of significant not wholly owned subsidiary Unit: RMBYuan Closing balance Opening 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 Foshan Taimei Times 66,911,9 7,126,97 74,038,9 57,280,8 57,280,8 51,164,1 8,097,17 59,261,2 27,289,8 27,289,8 Lamps 91.61 9.81 71.42 50.82 50.82 04.98 0.56 75.54 50.07 50.07 and Lanterns Co., Ltd. Foshan 38,927,7 13,176.7 38,940,9 3,480,45 3,480,45 Lighting 48.34 0 25.04 5.13 5.13 Zhida 209 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Electric Technolo gy Co., Ltd Suzhou Mont 7,308,64 1,847,17 9,155,81 27,826,9 27,826,9 Lighting 1.50 1.96 3.46 67.12 67.12 Co., Ltd. 105,839, 7,140,15 112,979, 60,761,3 60,761,3 58,472,7 9,944,34 68,417,0 55,116,8 55,116,8 Total 739.95 6.51 896.46 05.95 05.95 46.48 2.52 89.00 17.19 17.19 Unit: RMBYuan Reporting Period Same period of last year Total Total Name Operation Operating Operation Operating Net profit comprehensi Net profit comprehensi revenue cash flow revenue cash flow ve income ve income Foshan Taimei Times 131,088,201. 128,813,369. Lamps and 5,746,438.79 5,746,438.79 4,828,194.91 5,903,925.36 5,903,925.36 -5,018,556.05 96 96 Lanterns Co., Ltd. Foshan Lighting Zhida 433,043.67 -39,530.09 -39,530.09 1,859,128.47 Electric Technology Co., Ltd Suzhou Mont 26,198,849.9 -28,830,585.1 -28,830,585.1 Lighting Co., 248,781.50 -1,611,812.15 -1,611,812.15 6,893.12 -3,858,454.50 8 7 7 Ltd. (4) Significant restrictions of using enterprise group assets and pay off enterprise group debt Naught (5) Provide financial support or other support for structure entities incorporate into the scope of consolidated financial statements Naught 210 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 2. The transaction of the Company with its owner’s equity share changed but still controlling the subsidiary (1) Note to owner’s equity share changed in subsidiary Naught (2) The transaction’s influence to equity of minority shareholders and attributable to the owner's equity of the parent company Unit: RMBYuan Purchase cost / disposal price 40,507,350.00 --Cash 40,507,350.00 Total purchase cost / disposal price 40,507,350.00 Less: share of net assets of subsidiaries calculated according to 29,998,813.24 the percentage of equity acquired / disposed of Difference 10,508,536.76 Of which: adjusted additional paid-in capital 10,508,536.76 3. Equity in joint venture arrangement or associated enterprise (1) Significant joint venture arrangement or associated enterprise Naught (2) Main financial information of significant joint venture Naught (3) Main financial information of significant associated enterprise Naught (4) Summary financial information of insignificant joint venture or associated enterprise Unit: RMBYuan Closing balance/ Reporting Period Opening balance /last period Joint venture: -- -- Total investment book value 210,394,932.69 382,637.52 The total of following items according to the -- -- shareholding proportions 211 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 -- Net profits 4,327,697.03 -3,307,086.87 -- Other comprehensive income 21,831,908.42 -- Total comprehensive income 26,159,605.45 -3,307,086.87 Associated enterprise: -- -- The total of following items according to the -- -- shareholding proportions (5) Note to the significant restrictions of the ability of joint venture or associated enterprise transfer funds to the Company Naught (6) The excess loss of joint venture or associated enterprise Naught (7) The unrecognized commitment related to joint venture investment Naught (8) Contingent liabilities related to joint venture or associated enterprise investment Naught 4. Significant common operation Naught 5. Equity of structure entity not including in the scope of consolidated financial statements Naught 6. Other Naught X. The risk related 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 V. 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. 212 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (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 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 the possible loss due to changes of exchange rate in the financial activities that economic agents held or used the foreign exchange. The Company’s export business was settled by USD which avoided exchange risk the Company faced in transaction. 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 the fair value 1. Closing fair value of assets and liabilities calculated by fair value Unit: RMBYuan Closing 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 -- -- -- -- 213 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 measurement (II) Available-for-sale 1,427,901,096.63 1,427,901,096.63 financial assets (2) Equity tool investment 1,427,901,096.63 1,427,901,096.63 Total assets of consistent 1,427,901,096.63 1,427,901,096.63 fair value measurement II. Inconsistent fair value -- -- -- -- measurement 2. Market price recognition basis for consistent and inconsistent fair value measurement items at level 1 The recognition judgment of the fair value measurement items at level 1 was the stock price on assets balance sheet date 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 opening and closing book value of consistent fair value measurement items at level 3 Naught 6. Explain the reason for conversion and the policy governing 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 change Naught 8. Fair value of financial assets and liabilities not measured at fair value Naught 214 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 9. Other Naught XII. Related party and related Transaction 1. Information related to parent company of the Company Proportion of voting Proportion of share rights owned by Name of parent held by parent Registration place Nature of business Registered capital parent company company company against the against the Company Company (%) (%) Hong Kong Wah Shing Holding Hong Kong / / 13.47% 13.47% Company Limited Shenzhen Guangsheng Investment Shenzhen Investment RMB120 million 5.12% 5.12% Development Co., Ltd. Guangdong Electronics Guangzhou Production, sale RMB462 million 4.74% 4.74% Information Industry Group Ltd. Guangsheng Investment Hong Kong / / 1.82% 1.82% Development Co., Ltd. Guangdong Rising Finance Holdings Zhuhai Investment RMB1,393 million 0.54% 0.54% Limited Total 25.70% 25.70% Notes: Information on the parent company: On 9 September 2015, the Company’s original first majority shareholder OSRAM Holding Company Limited signed Equity Transfer Agreement with Guangdong Electronics Information Industry Group Co., Ltd. (Hereinafter referred to as "Electronics Group”) Germany OSRAM Company Limited transfer its 100% share equity to Electronics Group. The relevant transaction was completed on 4 December 2015. Electronics Group became only controlling shareholder of OSRAM Holding (Renamed as Hong Kong Wah Shing Holding Company Limited (hereinafter referred to as “Hong Kong Wah Shing Holding”) and indirectly became the first majority shareholder of the Company. The first majority shareholder of the Company, Hong Kong Huasheng Holding Co., Ltd. was the wholly owned 215 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 subsidiary of Electronics Group, and Electronics Group, Shenzhen Guangsheng Investment Development Co., Ltd. (hereinafter referred to as “Shenzhen Guangsheng”), Guangdong Rising Finance Holdings Limited Holdings Limited (hereinafter referred to as “Rising Finance”) and Guangsheng Investment Development Co., Ltd. (hereinafter referred to as “Guangsheng Investment”) were the wholly owned subsidiaries of Guangdong Rising Assets Management Co., Ltd. In line with the relevant stipulation of Corporation Law and Rules on Listed Companies Acquisition, Electronics Group, Shenzhen Guangsheng and Guangsheng Investment were persons acting in concert. As of 31 December 2016, the aforesaid persons acting in concert holding total A, B share of the Company 326,899,130 shares, 25.70% of total share equity of the Company. Guangsheng becomes the actual controller of the Company. The final controller of the Company is Guangdong Rising Assets Management Co., Ltd. (GRAM). 2. Subsidiaries of the Company See details to Notes IX. Equity in other entities, 1. Equity in subsidiary. 3. Information on the joint ventures and associated enterprises of the Company The details of significant joint venture and associated enterprise of the Company, please refer to Notes IX. Equity in other entities, 3. Equity in the joint venture arrangement or associated enterprise 4. Information on other related parties of the Company Name Relationship PROSPERITY LAMPS & COMPONENTS LTD Shareholder owning over 5% shares Prosperity (Hangzhou) Lighting and Electrical Co., Ltd. Company controlled by related natural person Hangzhou Times Lighting and Electrical Co., Ltd. Company controlled by related natural person Prosperity Electrical (China) Co., Ltd. Company controlled by related natural person Prosperity (Xinxiang) Electro-optical Machinery Co., Ltd. Company controlled by related natural person Prosperity (Xinxiang) Lighting Machinery Co., Ltd. Company controlled by related natural person Siteco Prosperity Lighting (Langfang) Co., Ltd. Company affected by related natural person Shanghai Linxian Mechanical and Electrical Equipment Co., Ltd. Related natural person as a senior manager in the company Foshan NationStar Optoelectronics Co. Ltd. Under same actual controller Guangdong Fenghua Advanced Technology Holding Co., Ltd. Under same actual controller Henan Guangsheng Technology Investment Co., Ltd. Under same actual controller Guangdong Rising Finance Limited Under same actual controller Guangdong Zhongke Hongwei Semiconductor Equipment Co., Under same actual controller Ltd. Guangdong Huayuebao New Energy Co., Ltd. Under same actual controller OSRAM (China) Lighting Co., Ltd. An acting-in-concert party of corporation that held over 5% 216 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 shares of the Company within the past 12 months An acting-in-concert party of corporation that held over 5% OSRAM Asia Pacific Ltd. shares of the Company within the past 12 months 5. List of related-party transactions (1) Information on acquisition of goods and reception of labor service (unit: ten thousand Yuan) Information on acquisition of goods and reception of labor service Unit: RMBYuan Whether exceed trade The approval trade credit or not Whether Same period of last Related party Content Reporting Period credit exceed trade credit or year not Foshan NationStar Purchase of raw Optoelectronics 94,159,851.42 300,000,000.00 No 76,444,384.33 material Co., Ltd. Guangdong Fenghua Advanced Purchase of raw 8,545,092.81 20,000,000.00 No 1,889,435.70 Technology Holding material Co., Ltd. Prosperity Electrical Purchase of raw 6,368,027.48 15,000,000.00 No 22,850,547.95 (China) Co., Ltd. material Prosperity Lamps Purchase of raw and Components 1,930,525.20 6,500,000.00 No 7,847,567.70 material Ltd. Hangzhou Times Purchase of raw Lighting and 1,749,294.75 3,500,000.00 No 3,110,065.22 material Electrical Co., Ltd. Guangdong Purchase of raw Huayuebao New 1,391,666.63 material Energy Co., Ltd. OSRAM (China) Purchase of raw No 66,000.00 Lighting Co., Ltd. material Prosperity (Xinxiang) Purchase of raw No 169,129.06 Electro-Optical material Machinery Co., Ltd Prosperity Lamps and Components Sales commission No 1,143,599.60 Ltd. 217 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Prosperity (Xinxiang) Purchase of No 305,266.00 Electro-Optical equipment Machinery Co., Ltd Shanghai Linxian Mechanical and Purchase of raw No 129,270.08 Electrical material Equipment Co., Ltd. Guangdong Zhongke Hongwei Purchase of 366,464.78 Semiconductor equipment Equipment Co., Ltd. Total 114,510,923.07 113,955,265.64 Information of sales of goods and provision of labor service Unit: RMBYuan Related party Content Reporting Period Same period of last year Prosperity Lamps and Sale of products 26,343,909.02 37,595,265.96 Components Ltd. OSRAM Asia Pacific Ltd. Sale of products 5,480,151.82 20,274,496.35 OSRAM (China) Lighting Co., Sale of products 5,049,289.31 11,694,540.97 Ltd. Prosperity Electrical (China) Sale of products 295,866.44 1,066,171.84 Co., Ltd. Shanghai Linxian Mechanical and Electrical Equipment Co., Sale of products 156,300.94 233,882.48 Ltd. Foshan NationStar Sale of products 139,981.43 460,630.77 Optoelectronics Co., Ltd. Prosperity (Hangzhou) Lighting Sale of products 132,536.76 2,519,651.15 and Electrical Co., Ltd. Total 37,598,035.72 73,844,639.52 (2) Related trusteeship/contract Naught (3) Information of related lease The Company was lessor: Unit: RMBYuan 218 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 The lease income confirmed in The lease income confirmed in Name of lessee Category of leased assets this year last year Shanghai Linxian Mechanical and Electrical Equipment Co., House property 84,054.08 90,000.00 Ltd. The Company was lessee: Unit: RMB The lease fee confirmed in this The lease fee confirmed in last Name of lessor Category of leased assets year year Guangdong Electronics Information Industry Group Vehicles 16,666.67 Ltd. (4) Related-party guarantee Naught (5) Inter-bank lending of capital of related parties Unit: RMBYuan Related party Amount Starting date Due date Note Borrow Offer The Company deposited RMB 100,000,000.00 to Guangdong Rising Finance Co., Ltd. in 2016 according to the Financial Services Guangdong Rising Agreement signed by 100,000,000.00 Finance Limited both parties and the annualized interest rate was 3.80%. The interest income incurred and recognized in the Reporting Period was RMB42,222.22. (6) Related party asset transfer and debt restructuring Naught 219 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (7) Rewards for the key management personnel Unit: RMBYuan Item Reporting Period Same period of last year Chairman of the Board 2,598,750.00 Director & GM 1,707,000.00 1,417,500.00 Chairman of the Supervisor 520,000.00 Chairman Secretary 1,045,600.00 716,600.00 CFO 985,900.00 1,559,250.00 Other 7,465,500.00 3,577,700.00 Total 11,204,000.00 10,389,800.00 (8) Other related-party transactions Naught 6. Receivables and payables of related parties (1) Receivables Unit: RMBYuan Closing balance Opening balance Name of item Related party Book balance Bad debt provision Book balance Bad debt provision Guangdong Rising Interest receivable 42,222.22 Finance Limited Prosperity Lamps Accounts receivable and Components 4,121,642.27 123,649.27 8,110,971.49 486,658.29 Ltd. OSRAM (China) Accounts receivable 117,554.16 3,526.62 2,305,508.76 138,330.53 Lighting Co., Ltd. Prosperity (Hangzhou) Lighting Accounts receivable 86,367.27 25,910.18 1,183,367.27 71,002.04 and Electrical Co., Ltd. Prosperity Electrical Accounts receivable 26,156.80 784.70 (China) Co., Ltd. Shanghai Linxian Mechanical and Accounts receivable 21,723.08 651.69 115,788.02 6,947.28 Electrical Equipment Co., Ltd. 220 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Foshan NationStar Accounts receivable Optoelectronics Co., 538,938.00 32,336.28 Ltd. OSRAM Asia Accounts receivable 5,551,463.20 333,087.79 Pacific Ltd. Henan Guangsheng Other accounts Technology 117,000.00 93,600.00 117,000.00 receivable Investment Co., Ltd. Guangdong Other accounts Electronics 5,000.00 150.00 receivable Information Industry Group Ltd. Prosperity Electrical Prepayment 92,424.45 (China) Co., Ltd. 4,630,090.25 248,272.47 17,923,036.74 1,068,362.21 (2) Payables Unit: RMBYuan Name of item Related party Closing book balance Opening book balance Foshan NationStar Accounts payable 19,840,379.88 28,114,401.12 Optoelectronics Co., Ltd. Guangdong Fenghua Advanced Accounts payable 2,492,269.85 440,962.32 Technology Holding Co., Ltd. Prosperity Electrical (China) Accounts payable 1,286,052.41 6,457,303.92 Co., Ltd. Guangdong Huayuebao New Accounts payable 1,391,666.63 Energy Co., Ltd. Prosperity Lamps and Accounts payable 331,774.70 1,733,345.47 Components Ltd. Hangzhou Times Lighting and Accounts payable 243,897.33 275,413.63 Electrical Co., Ltd. Prosperity Electrical (China) Other account payable 100,000.00 Co., Ltd. Guangdong Zhongke Hongwei Other account payable Semiconductor Equipment Co., 47,860.00 Ltd. Advance from customers OSRAM Asia Pacific Ltd. 2,947.78 Advance from customers Prosperity Electrical (China) 18,133.90 221 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Co., Ltd. Total 25,736,848.58 37,039,560.36 7. Related party commitment (1) Commitment: commitments made in acquisition documents or shareholding alteration documents Commitment maker: Controlling shareholder Type of commitment: About share lock-up Contents: Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made a commitment that within 12 months from the completion of their acquisitions, they shall not transfer or entrust others to manage the shares directly or indirectly held by them in the Company, nor shall they allow the Company to repurchase those shares, except for the case where those shares may be transferred for no compensation due to any business or asset integration with their actual controller or their actual controller’s controlled subsidiaries. Date of commitment making: 2015-12-04 Term of commitment: 12 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 Content: Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made a commitment that the business of Foshan NationStar Optoelectronics Co., Ltd. that is in competition with the business of the Company takes up only a small part in NationStar’s total business, they shall gradually reduce or eliminate the horizontal competition as planned through business integration or other ways or arrangements within the coming 24 months. Date of commitment making: 2015-12-04 Term of commitment: 24 months Fulfillment: In execution (3) 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 222 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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: 2015-12-04 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 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 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: 2015-12-04 Term of commitment: Long-standing Fulfillment: In execution (5) 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 223 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 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 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: 2015-12-04 Term of commitment: Long-standing Fulfillment: In execution 8. Other Naught XIII. Stock payment 1. The Stock payment overall situation □ Applicable √ Not applicable 224 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 2. The Stock payment settled by equity □ Applicable √ Not applicable 3. The Stock payment settled by cash □ Applicable √ Not applicable 4. Modification and termination of the stock payment Naught 5. Other Naught XIV. Commitments 1. Significant commitments Significant commitments at balance sheet date 1. Significant commitments Significant commitments on the balance sheet date As of December 31, 2016, the Company had the following commitments: Commitment: Commitment made to small and medium shareholders of the company Type of commitment: Commitment about cash dividends Contents: The annual profits distributed in cash by the Company shall be not less than 30% of the distributable profits of the year. Date of commitment making: 2009-5-27 Term of commitment: Long-standing Fulfillment: In execution 2. Contingency (1) Significant contingency at balance sheet date 1. According to the judgment made by Guangzhou Intermediate People’s Court in (2016) GD01 MC No. 5-16 Civil Judgment, the litigation request of disputes over the misrepresentation of securities of the 12 plaintiff was rejected. The plaintiff arrested the judgment, appealed to the Guangdong Provincial Higher People’s Court, and requested to revoke the (2016) GD01 MC No. 5-16 Civil Judgment made by Guangzhou Intermediate People’s Court. On December 26, 2016, the Guangdong Provincial Higher People’s Court made (2016) GDMZ No. 1841-1852 Civil Judgment, rejected the appeal and upheld the original judgment. 2. As Dongguan FSL Lindun Energy-saving Technology Co., Ltd. (hereinafter referred to as “Dongguan Lindun”) defaulted on the payment of the Company, the Company filed a lawsuit with Dongguan First People’s Court on 225 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 March 22, 2016 (case No.: (2016) GD1971 MCZ No. 6481), and demanded a verdict that Dongguan Lindun should pay overdue payment RMB 9,559,837.55 and liquidated damages RMB 955,983.76 (total: RMB 10,515,821.31). Dongguan Lindun filed Civil Counterclaim with Dongguan First People’s Court on April 28, 2016 against the Company on the grounds of quality problems in the goods provided by the Company, and requested the Court to order the Company to indemnify a loss of RMB 11,727,003.10 and pay liquidated damages RMB 1,552,159.76 (total: RMB 13,279,162.86). As of the date of the audit report, the above-mentioned case was at the reception stage and hadn’t yet been brought to trial. 3. The company undertook the northern mountain area streetlight project tender 7 for township streetlight construction in Guangzhou jointly with Guangdong Hengyu Construction Engineering Co., Ltd. (hereinafter referred to as “Guangdong Hengyu”). As Guangdong Hengyu was in arrears with project payments, the Company filed a lawsuit with Foshan Chancheng District People’s Court on August 5, 2016, and demanded a verdict that Guangdong Hengyu shall pay the project payments and interest (calculated from January 1, 2016 to the actual payment date by the loan interest rate of the People’s Bank of China of the same period). On January 12, 2017, five streetlight construction contractors of the above-mentioned project filed Civil Litigation with Foshan Chancheng District People’s Court, and requested the court to order the Company to pay the construction payment of RMB 1,241,844.93 in total. As of the date of the audit report, the above-mentioned case was at the reception stage and hadn’t yet been brought to trial. 4. In November 2016, the administrator of Suzhou Mont filed a lawsuit with Suzhou Industrial Park People’s Court, and requested the court to order the Company to pay the commissions of RMB 1,070,294.11. As of the date of the audit report, the above-mentioned case was at the reception stage and hadn’t yet been brought to trial. (2) The Company have no significant contingency to disclose, also should be stated There was no significant contingency in the Company. 3. Other Naught XV. Events after balance sheet date 1. Significant events had not adjusted Naught 2. Profit distribution Unit: RMBYuan Profits or dividends to be distributed 534,295,804.56 Profits or dividends to be declared and distributed after approval 534,295,804.56 3. Sales return Naught 226 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 4. Notes of other significant events On January 19, 2017, the twelfth meeting of the 8th Board of Directors of the Company passed the Proposal on Transferring the Equity of Qinghai FSL Lithium Energy Exploitation Co., Ltd., and the Company intended to transfer 38% equity of the joint venture Qinghai FSL Lithium Energy Exploitation Co., Ltd. held by the Company at RMB 189,817,600 to potential counterparties. As of December 31, 2016, the book value of Company’s investment in Qinghai FSL Lithium Energy Exploitation Co., Ltd. was RMB 29.8362million. Except the above, the Company has no other matters that need to be disclosed after the balance sheet date. XVI. Other significant events 1. The accounting errors correction in previous period Naught 2. Debt restructuring Naught 3. Replacement of assets Naught 4. Pension plan Naught 5. Discontinuing operation Naught 6. Segment information Naught 7. Other important transactions and events have an impact on investors’ decision-making Naught 8. Other (I) About equity incentive fund On May 16, 2002, the resolution of the Shareholders’ General Meeting of the year 2001 of the Company passed the proposal of establishing equity incentive system for middle and senior executives, which stipulated that the 227 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 assessment target shall be annual return on net assets of 6%. When the annual return on net assets reached 6%, withdraw equity incentive funds by 5% of the net profit, the accruing proportion of incentive funds and the increase ratio of return on net assets should increase simultaneously. The scheme was implemented from the fiscal year 2001. The accrued equity incentive fund of the Company was RMB 17.50million for the present year. (II) About bankruptcy liquidation of Suzhou Mont Lighting Co., Ltd. Subsidiary Suzhou Mont failed to pay off the debts due, and was filed for bankruptcy on April 13, 2016 by the creditor Suzhou Liftall Electronics Co., Ltd. with Suzhou Industrial Park People’s Court. On April 27, 2016, Suzhou Industrial Park People’s Court accepted the bankruptcy liquidation application filed by Suzhou Liftall Electronics Co., Ltd. against Suzhou Mont in (2016) SU0591 MP No. 3 Civil Order. On June 2, 2016, (2016) SU0591 MP No. 03 Decision issued by Suzhou Industrial Park People’s Court designated Jiangsu Yingyuan Law Firm as the administrator of Suzhou Mont. At present, the bankruptcy liquidation of Suzhou Mont is ongoing. (III) The lawsuit with Foshan Yixin The Company entrusted Foshan Yixin Equity Trusteeship Services Limited (the actual year was from 1995 to 2009) (hereinafter referred to as “Foshan Yixin”) to handle the dividend payout from 1994 to 2008. As Foshan Yixin didn’t provide the distribution details of dividend payment and the proof of actual receipt by the shareholders, the Company filed a lawsuit with Foshan Chancheng District People’s Court (Case No.: (2015) FCFECZ No. 911) and demanded a verdict that Foshan Yixin should provide the distribution details of dividend payment and the proof of actual receipt by the shareholders and return the dividend payment that hadn’t been actually distributed to the shareholders to the Company. As of the date of the audit report, the above-mentioned case was at the reception stage and hadn’t yet been brought to trial. XVII. Notes of main items in the financial statements of the Company 1. Accounts receivable (1) Accounts receivable classified by category Unit: RMBYuan Closing balance Opening balance Book balance Bad debt provision Book balance Bad debt provision Category Withdra Book Proportio wal Proportio Withdrawal Book value Amount Amount value Amount Amount n proportio n proportion n Accounts receivable with significant single amount for 10,064,6 10,064,6 12,986, 12,986,75 1.55% 100.00% 3.05% 100.00% which bad debt 64.92 64.92 752.44 2.44 provision separately accrued Accounts receivable 640,256, 98.45% 28,400,6 4.44% 611,855,4 410,900 96.40% 23,029,47 5.60% 387,870,57 228 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 withdrawn bad debt 170.33 73.43 96.90 ,049.63 1.45 8.18 provision according to credit risks characteristics Accounts receivable with insignificant single amount for 2,352,9 2,352,989 0.55% 100.00% which bad debt 89.65 .65 provision separately accrued 650,320, 38,465,3 611,855,4 426,239 38,369,21 387,870,57 Total 100.00% 5.91% 100.00% 9.00% 835.25 38.35 96.90 ,791.72 3.54 8.18 Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end √ Applicable □ Not applicable Unit: RMBYuan Accounts receivable(by Closing balance unit) Accounts receivable Bad debt provision Withdrawal proportion Withdrawal reason The debtor has suffered continual losses due to Suzhou Mont Lighting the size of its business 10,064,664.92 10,064,664.92 100.00% Co., Ltd. and the market reason, and it is now no longer able to produce again. Total 10,064,664.92 10,064,664.92 -- -- In the groups, accounts receivable adopting aging analysis method to accrue bad debt provision: √ Applicable □ Not applicable Unit: RMBYuan Closing balance Aging Accounts receivable Bad debt provision Withdrawal proportion Subitem within 1 year Within 1 year 573,508,845.24 17,205,265.36 3.00% Subtotal within 1 year 573,508,845.24 17,205,265.36 3.00% 1 to 2 years 31,285,996.22 3,128,599.62 10.00% 2 to 3 years 2,436,831.19 731,049.36 30.00% Over 3 years 14,249,154.92 7,335,759.09 51.48% 3 to 4 years 13,638,308.80 6,819,154.40 50.00% 4 to 5 years 471,207.14 376,965.71 80.00% 229 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Over 5 years 139,638.98 139,638.98 100.00% Total 621,480,827.57 28,400,673.43 4.57% Notes: In the groups, accounts receivable adopting balance percentage method to withdraw bad debt provision □ Applicable √ Not applicable In the groups, accounts receivable adopting other methods to withdraw bad debt provision: (2) Bad debt provision withdrawal, reversed or recovered in the report period The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 2,273,861.07; the amount of the reversed or collected part during the Reporting Period was of RMB 3,535,749.69. Significant amount of reversed or recovered bad debt provision: Unit: RMBYuan Name of units Amount Method Foshan Sanshui Center of Science and Technology Industrial Park Development 2,069,866.90 Cash recover Co., Ltd. Suzhou Mont Lighting Co., Ltd. 1,187,363.14 Equipment recover Kunming Hong guangming Commerce and 278,519.65 Cash recover Trade Co., Ltd. Total 3,535,749.69 -- (3) Particulars of the actual verification of accounts receivable during the Reporting Period Unit: RMB Yuan Item Amount Suzhou Mont Lighting Co., Ltd. 2,012,636.86 Foshan Sanshui Center of Science and Technology Industrial Park 4,603.10 Development Co., Ltd. Tianjin Jishi Shengda Lighting Co., Ltd. 160,306.56 Other retails accounts 189.74 Subtotal 2,177,736.26 (4) Top 5 of the closing balance of the accounts receivable collected according to the arrears party Unit: RMBYuan Name of units Relationship Book balance Proportion of the Withdrawal bad debt total accounts provision receivable 230 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 First Non-related 90,616,666.15 13.93% 3,581,411.24 relationship Second Non-related 19,547,480.15 3.01% 586,424.40 relationship Third Non-related 15,980,885.31 2.46% 479,426.56 relationship Fourth Non-related 14,566,977.79 2.24% 437,009.33 relationship Fifth Non-related 12,487,543.99 1.92% 374,626.32 relationship Total 153,199,553.39 23.56% 5,458,897.85 (5) Derecogniziton of account receivable due to the transfer of financial assets Naught (6) The amount of the assets and liabilities formed by the transfer and the continues involvement of accounts receivable Naught 2. Other accounts receivable (1) Other account receivable classified by category Unit: RMBYuan Closing balance Opening balance Book balance Bad debt provision Book balance Bad debt provision Category Withdra Book Proportio wal Proportio Withdrawal Book value Amount Amount value Amount Amount n proportio n proportion n Other accounts receivable withdrawn 58,237,7 1,522,85 56,714,84 48,263, 1,088,491 47,175,016. bad debt provision 99.50% 2.61% 99.39% 2.26% 02.22 2.38 9.84 507.82 .67 15 according to credit risks characteristics Other accounts receivable with 295,120. 295,120. 295,120 295,120.0 insignificant single 0.50% 100.00% 0.61% 100.00% 00 00 .00 0 amount for which bad debt provision 231 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 separately accrued 58,532,8 1,817,97 56,714,84 48,558, 1,383,611 47,175,016. Total 100.00% 3.11% 100.00% 2.85% 22.22 2.38 9.84 627.82 .67 15 Other receivable with single significant amount and withdrawal bad debt provision separately at end of period □ Applicable √ Not applicable In the groups, other accounts receivable adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Unit: RMBYuan Closing balance Aging Other accounts receivable Bad debt provision Withdrawal proportion Subitem within 1 year Within 1 year 8,174,274.74 245,228.25 3.00% Subtotal within 1 year 8,174,274.74 245,228.25 3.00% 1 to 2 years 1,793,982.90 179,398.29 10.00% 2 to 3 years 2,657,553.61 797,266.08 30.00% Over 3 years 325,862.12 300,959.76 92.36% 3 to 4 years 3,003.72 1,501.86 50.00% 4 to 5 years 117,002.48 93,601.98 80.00% Over 5 years 205,855.92 205,855.92 100.00% Total 12,951,673.37 1,522,852.38 11.76% In the groups, other accounts receivable adopting balance percentage method to withdraw bad debt provision: □ Applicable √ Not applicable In the groups, other accounts receivable adopting other methods to withdraw bad debt provision: □ Applicable √ Not applicable (2) Bad debt provision withdrawal, reversed or recovered in the report period The amount of bad debt provision was RMB 434,360.71, the amount of reversed or recovered bad debt provision in the Reporting Period RMB0.00 (3) Particulars of the actual verification of other accounts receivable during the Reporting Period Naught (4) Other account receivable classified by account nature Unit: RMBYuan Nature Closing book balance Opening book balance 232 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Internal business group 45,581,148.85 30,417,099.89 VAT export tax refunds 10,002,722.46 Performance bond 1,959,752.60 3,554,295.96 Staff borrow and deposit 5,587,226.25 730,813.84 Water & electricity fees 936,834.08 490,494.61 Advance money for street light construction 2,523,547.23 2,523,547.23 Other 1,944,313.21 839,653.83 Total 58,532,822.22 48,558,627.82 (5) The top five other account receivable classified by debtor at period-end Unit: RMBYuan Closing balance of Name of units Nature Closing balance Aging Proportion% bad debt provision Interdepartmental Within 2 year First 28,959,393.89 49.47% 0.00 account Interdepartmental Within 2 year Second 8,568,323.24 14.64% 0.00 account Interdepartmental Third 4,024,850.39 Within 2 year 6.88% 0.00 account Interdepartmental Fourth 3,291,024.13 Within 2 year 5.62% 0.00 account Advance money for Fifth street light 2,523,547.23 2-3 years 4.31% 757,064.17 construction Total -- 47,367,138.88 -- 80.92% 757,064.17 (6) Account receivable involving government subsidies Naught (7) Other account receivable derecognized due to the transfer of financial assets Naught (8) Amount of transfer other account receivable and assets and liabilities formed by its continuous involvement Naught 233 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 3. Long-term equity investment Unit: RMBYuan Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserves reserves Investment to the 507,957,289.76 24,360,000.00 483,597,289.76 441,949,939.76 24,360,000.00 417,589,939.76 subsidiary Investment to joint ventures and 210,394,932.69 0.00 210,394,932.69 382,637.52 0.00 382,637.52 associated enterprises Total 718,352,222.45 24,360,000.00 693,992,222.45 442,332,577.28 24,360,000.00 417,972,577.28 (1) Investment to the subsidiary Unit: RMBYuan Withdrawn Closing balance impairment Investee Opening balance Increase Decrease Closing balance of impairment provision in the provision Reporting Period Foshan Chansheng Electronic Ballast 2,744,500.00 2,744,500.00 Co., Ltd. Foshan Chanchang Electric Appliance 42,000,000.00 40,507,350.00 82,507,350.00 (Gaoming) 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. Guangdong Fozhao New Light Sources 50,077,000.00 50,077,000.00 Technology Co., Ltd. 234 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Foshan Electrical & Lighting 35,418,439.76 35,418,439.76 (Xinxiang) Co., Ltd. Guangdong Fozhao Leasing 200,000,000.00 200,000,000.00 Co., Ltd. Foshan Lighting Lamps & 15,000,000.00 15,000,000.00 Components Co., Ltd. Foshan Lighting Zhida Electric 25,500,000.00 25,500,000.00 Technology Co., Ltd Suzhou Mont 24,360,000.00 24,360,000.00 24,360,000.00 Lighting Co., Ltd. Total 441,949,939.76 66,007,350.00 507,957,289.76 24,360,000.00 (2) Investment to joint ventures and associated enterprises Unit: RMBYuan Increase/decrease Closing Gains and Adjustme Cash Withdraw balance Additiona losses nt of Opening Reduced Changes bonus or al of Closing of Investee l recognize other balance investmen of other profits impairme Other balance impairme investmen d under comprehe t equity announce nt nt t the equity nsive d to issue provision provision method income I. Joint ventures II. Associated enterprises Qinghai FSL Lithium 382,637.5 3,769,010 25,684,59 29,836,24 Energy 2 .96 8.14 6.62 Exploitati on Co., Ltd. Shenzhen 180,000,0 558,686.0 180,558,6 Primatron 00.00 7 86.07 ix 235 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 (Nanho) Electronic s Ltd. 382,637.5 180,000,0 4,327,697 25,684,59 210,394,9 Subtotal 2 00.00 .03 8.14 32.69 382,637.5 180,000,0 4,327,697 25,684,59 210,394,9 Total 0.00 2 00.00 .03 8.14 32.69 (3) Other notes Naught 4. Revenue and Cost of Sales Unit: RMBYuan Reporting Period Same period of last year Item Sales revenue Cost of sales Sales revenue Cost of sales Main operations 3,316,069,235.74 2,561,443,178.44 2,905,137,467.71 2,309,203,166.69 Other operations 103,108,787.15 81,804,226.85 26,597,499.01 15,786,736.36 Total 3,419,178,022.89 2,643,247,405.29 2,931,734,966.72 2,324,989,903.05 Other notes: 5. Investment income Unit: RMBYuan Item Reporting Period Same period of last year Long-term equity investment income 14,671,820.57 accounted by cost method Long-term equity investment income 4,327,697.03 -3,307,086.87 accounted by equity method Investment income received from financial assets measured by fair value and the 19,505.00 changes be included in the current profits and losses during holding period Investment income received from disposal of financial assets measured by fair value and 373,528.38 2,353,948.21 the changes be included in the current profits and losses during holding period Investment income received from holding of 14,474,805.76 3,449,696.24 available-for-sale financial assets 236 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Investment income received from disposal of 858,346,116.55 17,063,266.56 available-for-sale financial assets Investment and financial products income 7,490,856.14 Other -3,951,100.00 -55,571.28 Total 895,733,724.43 19,523,757.86 6. Other Naught XVIII. Supplementary materials 1. Items and amounts of extraordinary gains and losses √ Applicable □ Not applicable Unit: RMBYuan Item Amount Note Gains/losses on the disposal of non-current -5,776,457.37 assets Tax rebates, reductions or exemptions due to approval beyond authority or the lack of 1,669,377.53 official approval documents Gain/loss from change of fair value of transactional assets and liabilities, and Mainly due to the sale of the stocks of investment gains from disposal of Guoxuan High-tech held by the Company transactional financial assets and liabilities 853,216,065.17 through block trading in the Reporting and available-for-sale financial assets, other Period than valid hedging related to the Company’s common businesses Impairment provision reversal of accounts receinable on which the impairment test is 3,535,749.69 carried out separately Other non-operating income and expenses -4,774,788.19 other than the above Less: Income tax effects 127,331,306.57 Minority interests effects -566,092.70 Total 721,104,732.96 -- Explain the reasons if the Company classifies an item as an extraordinary gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Extraordinary Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item 237 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 □ 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 common 21.40% 0.8429 0.8429 shareholders of the Company Net profit attributable to common shareholders of the Company after 7.01% 0.2761 0.2761 deduction of non-recurring profit and 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 audit data adjusting differences had been foreign audited, should indicate the name of the foreign institutions Naught 4. Other Naught 238 Foshan Electrical and Lighting Co., Ltd. Annual Report 2016 Section XII Documents Available for Reference Investors and relevant departments may refer to the following materials placed in the Board Secretariat in the office building of the Company: 1. Financial statements signed and sealed by the legal representative, the accounting head for the Report and the manager of the finance department; 2. Original of the audit report signed and sealed certified public accountants and stamped by accounting firm. 3. All originals of the Company’s documents and announcements disclosed on China Securities Journal, Securities Times, and Ta Kung Pao in the Reporting Period. The Board of Directors Foshan Electrical and Lighting Co., Ltd. March 28, 2017 239