Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 FOSHAN ELECTRICAL AND LIGHTING CO., LTD. SEMI-ANNUAL REPORT 2017 August 2017 1 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 senior management 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 the directors attended the board meeting for the review of this Report. This Report involves futures plans and other forward-looking statements, which shall not be considered as virtual promises to investors. Investors are kindly reminded to pay attention to possible risks. The Company has described in this Report the risks of fiercer market competition, fluctuations in raw material prices, falling prices of inventories, exchange rate fluctuations and bad debts on accounts receivable. Please refer to “X Risks Facing the Company and Countermeasures” under “Section IV Performance Discussion and Analysis” of this Report. The Company plans not to distribute cash dividends or bonus shares or convert capital reserve into share capital. 2 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Table of Contents Semi-Annual Report 2017 ................................................................................................................. 1 Section I Important Statements, Contents and Definitions ........................................................... 2 Section II Corporate Profile and Key Operating Results............................................................... 5 Section III Business Profile ............................................................................................................... 8 Section IV Performance Discussion and Analysis ......................................................................... 11 Section V Significant Events ........................................................................................................... 24 Section VI Share Changes and Shareholders’ Profile ................................................................... 32 Section VII Preference Shares ........................................................................................................ 38 Section VIII Directors, Supervisors and Senior Management ..................................................... 39 Section IX Corporate Bonds ........................................................................................................... 41 Section X Financial Report ............................................................................................................. 42 Section XI Documents Available for Reference ........................................................................... 155 3 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Definitions Term Definition The Company, Company, FSL Foshan Electrical and Lighting Co., Ltd. CSRC The China Securities Regulatory Commission SZSE The Shenzhen Stock Exchange Meeting of Shareholders of Foshan Electrical and Lighting Co., Meeting of Shareholders Ltd. Board The Board of Directors of Foshan Electrical and Lighting Co., Ltd. Supervisory Board The Supervisory Board of Foshan Electrical and Lighting Co., Ltd. RMB, RMB’0,000 RMB yuan, RMB ten thousand yuan Reporting Period January 1, 2017-June 30, 2017 4 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Section II Corporate Profile and Key Operating Results I Corporate Information Stock name FSL / FSL B Stock code 000541/200541 Stock exchange Shenzhen Stock Exchange Company name in 佛山电器照明股份有限公司 Chinese Abbr. (if any) 佛山照明 Company name in FOSHAN ELECTRICAL AND LIGHTING CO.,LTD English (if any) Abbr. (if any) FSL Legal representative He Yong II Contact Information Board Secretary Securities Representative Name Lin Yihui Huang Yufen No. 64, Fenjiang North Road, No. 64, Fenjiang North Road, Address Chancheng District, Foshan City, Chancheng District, Foshan City, Guangdong Province, P.R.China Guangdong Province, P.R.China Tel. (0757)82810239 (0757)82966028 Fax (0757)82816276 (0757)82816276 E-mail fsl-yh@126.com fslhyf@163.com III Other Information 1. Ways to Contact the Company Indicate by tick mark whether any changes occur to the registered address, office address and their postal codes, website address and email address of the Company during the Reporting Period. □ Applicable √ Not applicable No changes occurred to the said information during the Reporting Period, which can be found in the 2016 Annual Report. 5 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 2. Information Disclosure Media and Place where this Report is Kept Indicate by tick mark whether any changes occurred to the information disclosure media and the place where this Report was kept during the Reporting Period. □ Applicable √ Not applicable The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing this Report and the location where this Report was placed did not change during the Reporting Period. The said information can be found in the 2016 Annual Report. IV Key Operating Results Indicate by tick mark whether the Company needs to retroactively restate any of its accounting data. □ Yes √ No Reporting Period Same period of last year +/- (%) Operating revenues (RMB) 2,023,925,582.84 1,755,670,927.44 15.28% Net profit attributable to 228,494,660.57 206,925,812.72 10.42% shareholders of the Company (RMB) Net profit attributable to shareholders of the Company before 227,184,233.70 206,637,093.68 9.94% exceptional profit and loss (RMB) Net cash from operating activities -31,063,187.22 291,628,307.06 -110.65% (RMB) Basic earnings per share 0.1796 0.1627 10.39% (RMB/share) Diluted earnings per share 0.1796 0.1627 10.39% (RMB/share) Weighted average return on equity 4.99% 3.94% 1.05% (%) End of Reporting Period End of last year +/- (%) Total assets (RMB) 5,773,132,610.86 6,100,169,400.30 -5.36% Net assets attributable to 4,707,690,904.27 4,990,466,577.12 -5.67% shareholders of the Company (RMB) 6 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 V Differences in Accounting Data under Domestic and Foreign Accounting Standards 1. Differences in Net Profit and Net Assets Disclosed in Financial Reports Prepared under Chinese and International Accounting Standards □ Applicable √ Not applicable No such differences for the Reporting Period. 2. Differences in Net Profit and Net Assets Disclosed in Financial Reports Prepared under Chinese and Foreign Accounting Standards □ Applicable √ Not applicable No such differences for the Reporting Period. VI Exceptional Gains/Losses √ Applicable □ Not applicable Unit: RMB Item Reporting Period Note Gains/Losses on disposal of non-current assets -4,255,164.43 (including offset asset impairment provisions) Government subsidies charged to gains/losses for Reporting Period (except for government grants closely related to business of the Company and given at a fixed 3,869,949.96 quota or amount in accordance with government’s uniform standards) Non-operating income and expense other than above 1,637,836.66 Less: Income tax effects -57,390.05 Minority interests effects (after tax) -414.63 Total 1,310,426.87 -- Explanation of why the Company classified an item as exceptional gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gains and Losses, or reclassified any exceptional gain/loss item given as an example in the said explanatory announcement to recurrent gain/loss □ Applicable √ Not applicable No such cases in the Reporting Period. 7 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Section III Business Profile I Main Business Scope for the 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 LED lighting products and conventional lighting products . We have a wide variety of products with a complete range of specifications, including LED light source, LED lamps, fluorescent lamps, halogen lamps, energy saving lamps, motor vehicle lamps, conventional 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 8 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 increase our market share. 3. Main driving force for business performance (1) Rapid development of the industry As the emerging industry involved in the country’s strategies, LED 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 9 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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. II Significant Changes in Main Assets 1. Significant Changes in Main Assets Main assets Reason for significant change Equity assets No significant changes in Reporting Period Fixed assets No significant changes in Reporting Period Intangible assets No significant changes in Reporting Period Up 106.16% from the opening amount mainly due to increase in ongoing Construction in progress construction projects 2. Main Assets Overseas □ Applicable √ Not applicable III Core Competitiveness Analysis Is the Company subject to any disclosure requirements for special industries? No. No significant changes occurred to the Company’s core competitiveness in the Reporting Period. Please refer to the 2016 Annual Report for details about the Company’s core competitiveness. 10 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Section IV Performance Discussion and Analysis I Summary The first half of 2017 saw China’s economy running smoothly and the U.S. and European economies in gradual recovery. Such a stable and positive macro-economic environment provided a sound basis for growth in the lighting industry. However, the unveiling of the most stringent ever real estate control policies in China, the rise of trade protectionism across the world, heavier costs caused by rising raw material prices, wilder exchange rate fluctuations and fiercer market competition posed quite many challenges to lighting companies. In face of the complicated and changeable environment at home and abroad, the Company closely adhered to the strategic objectives of “Cutting-Edge Technologies, Internationally-Famous Brands and Large-Scale Production” the Board had put forward at the beginning of the year, focused on its main business, kept improving its ability to innovate, strengthened the execution of its overseas expansion strategy and continued to increase its lean management level. As a result, these efforts have been rewarded by strong operating results. For the Reporting Period, the Company achieved, on a consolidated basis, operating revenues of RMB 2,023.9256million, up 15.28% compared to the same period of last year; and net profit attributable to shareholders of the Company of RMB228million, representing a year-on-year growth of 10.42%. In the first half of 2017, main work arrangement of the Company was as below: 1. Strengthened the capability of innovation, and improved products and technology of the Company The Company input more on R&D, continuously strengthened the capability of innovation, which included the acceleration of innovation on new products, the principal of product design, materials, appearance, and smart lighting. At the same time, the Company reserved for basic and perspective technological work, researched and developed new products which were user-friendly and adapted to the market while introducing new technology and ideas, and sustainably improved the Company’s competitive power in the market. 2. Optimized product structure, and improved marketing capability The Company continuously optimized product structure. In the reporting period, sales revenue of the Company’s LED products and lamps achieved rapid growth,LED products accounted for 69.55% of the Company’s main products in sales revenue while LED lamps took up 45.75% of LED products in sales revenue. and new products launched rapidly won recognition by the market, rapidly and well ensuring the growth of the Company’s business 11 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 revenue. Marketing was the fountain for the Company’s business growth. The Company always valued channel construction. In domestic marketing, the Company gave play to the synergy between the traditional and emerging channels, as well as explored a new model of offline sharing and online development to realize sharing in throughput, experience, consumption, service and benefits. The Company took advantage of the platform of E-commerce resources, implemented differentiated promotion, adopted the marketing pattern focusing on stylish shops and oriented by products, so as to avoid homogeneous competitions among shops. Advantaged markets were consolidated and weak markets were broken through via integration of different resources. In respect of overseas seas sales, the Company reinforced the execution of overseas development strategy, continuously explored overseas market by relying on its own leading brands in the industry, excellent product quality, as well as professional service, and as a result, realized fast growth of sales revenue in overseas market. In the Reporting Period, business revenues of the Company in overseas market reached RMB762.3427million, representing a year-on-year increase of 30.89%. 3. Positively explored new businesses, and rapidly developed electrical technology The Company has positively enlarged new business of electrical technology ever since the subsidiary for electrical technology was founded in October of last year. By means of sustainably enriching product series, stably enlarging production scale, enlarging sales channels, and strengthening brand promotion, the brand of FSL Electrical Technology won more and more recognition from consumers. In the Reporting Period, products of electrical technology achieved business revenue of RMB 66.7346million, showing the remarkable development of electrical technology business. 4. Strengthened cost control, and improved profitability With the rise of material cost, the Company faced with serious cost pressure. Only by keeping and enlarging cost advantages can the Company keep improving competitive power. Via taking a hard look and analysis on the raw material market, the Company increased qualified suppliers, established perfect procurement database, expanded the bidding range, improved the timeliness ratio of material delivery, and cut down procurement cost; The Company cut down product cost and improved production ratio by means of improving the level of automation, intellectualization, and informatization, as well as technology transformation and technique upgrade. The Company as well found out advantages and disadvantages of every workshop and department and strengthened the crisis awareness towards cost in every workshop and department by comparing and analyzing internal and external cost competitions. 12 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 II Analysis of Main Business Year-on-year changes of key financial data: Unit: RMB Reporting Same period of last +/-% Main reason for change Period/Period-End year/Period-Beginning Operating revenues 2,023,925,582.84 1,755,670,927.44 15.28% Operating costs 1,546,931,779.85 1,322,982,560.70 16.93% Selling expense 81,651,993.69 73,251,807.41 11.47% Administrative expense 98,790,821.60 82,117,827.94 20.30% Finance costs -7,115,907.36 -6,445,753.04 -10.40% Income taxes 42,597,501.35 39,425,977.29 8.04% R&D expense 57,719,395.64 60,464,243.71 -4.54% Payment of taxes and expenses on gains from Guoxuan High-tech Net cash from operating -31,063,187.22 291,628,307.06 -110.65% shareholdings sold in fourth activities quarter of 2016, as well as payment of year-end bonuses and expenses for 2016 Smaller increment in banks’ Net cash from investing -112,026,375.71 -429,601,884.64 73.92% wealth management products activities purchased Significant increase in cash Net cash from financing -522,068,416.83 -15,935,708.57 -3,176.09% dividends distributed in this activities year than last year Decrease in net cash Net increase in cash and -664,245,623.25 -152,952,917.79 -334.28% generated by both operating cash equivalents and financing activities Distribution of cash Monetary funds 815,038,019.29 1,479,283,642.54 -44.90% dividends in this year More banker’s acceptance bills received were endorsed Notes receivable 26,434,680.74 67,925,843.74 -61.08% and used to pay to suppliers in the Reporting Period Increased operating revenues Accounts receivable 862,433,866.95 595,257,954.00 44.88% and adjustments to credit terms of domestic customers Interest receivable 3,217,917.15 4,612,406.80 -30.23% Decrease in undue interest 13 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 receivable from bank VAT and export tax rebates Other accounts 36,016,476.65 11,977,660.58 200.70% receivable in the Reporting receivable Period Increased investment in Construction in progress 147,360,531.44 71,479,325.91 106.16% expansion of plants in Gaoming The income tax payable on the gains on the sale of the Company’s shareholdings in Taxes and fares payable 24,371,207.42 138,282,644.72 -82.38% Guoxuan High-tech in 4Q2016 was paid in the Reporting Period Distribution of dividends by Dividends payable 6,287,923.09 -100.00% subsidiaries in the Reporting Period Decrease in other current Other accounts payable 32,185,577.54 50,104,338.81 -35.76% accounts payable The vehicle and vessel use tax, etc. have been included in the item of taxes and Taxes and surtaxes 20,386,602.33 12,251,578.46 66.40% surtaxes since May 1, 2016 as per the CS [2016] No. 22 Document Decrease in inventory falling Asset impairment losses 24,059,719.35 35,853,373.83 -32.89% price provisions Increase in governmental Non-operating revenue 6,022,395.88 1,575,016.58 282.37% subsidies received Minority interest income 3,390,315.67 -313,550.46 1,181.27% Earnings of new subsidiary Decreased shareholdings in Guoxuan High-tech due to Other comprehensive 23,025,471.14 140,317,778.68 -83.59% the sale of some such income, net of tax shareholdings at the end of last year Major changes to the profit structure or sources of the Company in the Reporting Period: □ Applicable √ Not applicable No such cases in the Reporting Period. Breakdown of main business: Unit: RMB Operating Operating cost Gross profit Operating Operating cost: Gross profit 14 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 revenue margin revenue: YoY YoY +/-% margin: YoY +/-% +/-% By business segment Lighting fixtures 2,010,535,149.65 1,537,416,165.51 23.53% 15.34% 16.89% -1.01% and lamps By product Traditional 545,447,386.30 407,164,404.38 25.35% -20.29% -17.88% -2.19% lighting products LED 1,398,353,192.60 1,083,319,624.12 22.53% 32.07% 32.20% -0.07% Electrical 66,734,570.75 46,932,137.01 29.67% 29.67% equipment By geographic segment Domestic 1,248,192,434.54 919,009,019.04 26.37% 7.54% 6.17% 0.95% Overseas 762,342,715.11 618,407,146.47 18.88% 30.89% 37.54% -3.92% III Non-Core Business Analysis √ Applicable □ Not applicable Unit: RMB As a percentage of Amount Source/reason Recurring (yes/no) total profit (%) Gains on purchased bank’s wealth Investment income 14,009,282.02 5.10% management products & receipt of No bonuses from investees Bad-debt and inventory falling price Asset impairment 24,059,719.35 8.77% No provisions Non-operating Government subsidies received and 6,022,395.88 2.19% No revenue others Disposal of certain old equipment Non-operating 4,769,773.69 1.74% for producing traditional lighting No expense products IV Analysis of Assets and Liabilities 1. Significant Changes in Asset Composition Unit: RMB End of Reporting Period End of same period of last year Change in percentage Main reason for significant change Amount As a Amount As a (%) 15 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 percentage percentage of of total total assets assets (%) (%) Monetary funds 815,038,019.29 14.12% 788,093,190.58 12.92% 1.20% Increased operating revenues and Accounts 862,433,866.95 14.94% 636,149,148.03 10.43% 4.51% adjustments to credit terms of receivable domestic customers Inventories 733,151,791.00 12.70% 467,975,082.84 7.67% 5.03% Stocks for expected growth in sales The Company acquired a 32.85% Long-term equity stake in Primatronix (Nanho) 209,858,507.98 3.64% 362,997.40 0.01% 3.63% investments Electronics Ltd. at RMB0.18 billion in September 2016 Fixed assets 436,897,311.33 7.57% 454,154,610.43 7.44% 0.13% Construction in Increased investment in expansion 147,360,531.44 2.55% 59,026,683.56 0.97% 1.58% progress of plants in Gaoming 2. Assets and Liabilities Measured at Fair Value √ Applicable □ Not applicable Unit: RMB Gains/Losses Impairment on fair value Cumulative fair Purchased in Sold in provided in Item Opening balance changes in value changes Reporting Reporting Closing balance Reporting Reporting charged to equity Period Period Period Period Financial assets 3. Available-for-s 1,427,901,096.63 1,335,488,158.79 1,454,989,886.20 ale financial assets Subtotal of 1,427,901,096.63 1,335,488,158.79 1,454,989,886.20 financial assets Total of above 1,427,901,096.63 1,335,488,158.79 1,454,989,886.20 Financial 0.00 0.00 liabilities Significant changes in the measurement attributes of the main assets in the Reporting Period: □ Yes √ No 16 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 3. Restricted Asset Rights as of End of the Reporting Period None. V Investments Made 1. Total Investments Made √ Applicable □ Not applicable Investments made in Reporting Period Investments made in same period of last +/-% (RMB) year (RMB) 0.00 0.00 0.00% 2. Significant Equity Investments Made in Reporting Period □ Applicable √ Not applicable 3. Significant Non-Equity Investments Ongoing in Reporting Period □ Applicable √ Not applicable 4. Financial Investments (1) Securities Investments √ Applicable □ Not applicable Gains/L osses on Cumulat Source Variety Account fair ive fair Purchas Gains/lo Code of Name of Initial Sold in of of ing Opening value value ed in sses in Closing Account Reporti securitie securitie investm measure book changes changes Reporti Reporti book investm securitie ng ment value in charged ng ng value ing title s s ent cost Period ent s model Reporti to Period Period ng equity funds Period Availabl Guoxua The Domesti Fair 1,355,3 1,284,0 1,379,8 e-for-sal n 160,000 6,560,4 Compan c/overse 002074 value 83,288. 23,552. 75,532. e High-tec ,000.00 22.50 y’s own as stock method 49 91 50 financia h funds l asset Availabl The Domesti China Fair e-for-sal 30,828, 72,517, 51,464, 75,114,3 Compan c/overse 601818 Everbrig value e 816.00 808.14 605.88 53.70 y’s own as stock ht Bank method financia funds l asset Domesti N/A Xiamen 292,574 Cost 292,574 292,574 Availabl The 17 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 c/overse Bank ,133.00 method ,133.00 ,133.00 e-for-sal Compan as stock e y’s own financia funds l asset Foshan branch Availabl of The Domesti e-for-sal Guangd 500,000 Cost 500,000 500,000 Compan c/overse N/A e ong .00 method .00 .00 y’s own as stock financia Develop funds l asset ment Bank 1,720,9 1,335,4 1,748,0 483,902 6,560,4 Total -- 75,229. 0.00 88,158. 0.00 0.00 64,019. -- -- ,949.00 22.50 63 79 20 Disclosure date of announcement about Board’s consent for securities investment Disclosure date of announcement about shareholders’ meeting’s consent for securities investment (if any) (2) Investments in Derivative Financial Instruments □ Applicable √ Not applicable No such cases in the Reporting Period. VI Sale of Major Assets and Equity Interests 1. Sale of Major Assets □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Sale of Major Equity Interests □ Applicable √ Not applicable 18 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 VII Main Controlled and Joint Stock Companies √ Applicable □ Not applicable Main subsidiaries and joint stock companies with an over 10% influence on the Company’s net profit Unit: RMB Relationship Main Company business Industry Registered Operating Operating with the Total assets Net assets Net profit name scope capital revenues profit Company Foshan Chansheng Production Manufactur 1,000,000.0 49,096,096. 27,773,852. 94,306,931. 4,281,244 Electronic Subsidiary 3,202,584.42 and sale ing 0 50 21 11 .13 Ballast Co., Ltd. Foshan Chanchang Electric Production Manufactur 72,782,944. 117,233,75 105,493,95 33,103,172. -396,774. Subsidiary -469,196.52 Appliances and sale ing 00 3.56 6.88 26 48 (Gaoming) Co., Ltd. Foshan Taimei Production Manufactur 76,944,367. 18,767,030. 82,641,917. 2,672,291 Times Subsidiary 500,000.00 2,008,910.10 and sale ing 45 70 32 .32 Lamps Co., Ltd. FSL New Light Production Manufactur 50,000,000. 56,156,822. 54,286,950. 10,896,024. 616,824.6 Source Subsidiary 462,618.52 and sale ing 00 20 64 16 9 Technology Co., Ltd. FSL (Xinxiang) Production Manufactur 35,418,439. 53,443,977. 46,831,237. 34,493,532. 3,261,603 Subsidiary 2,460,437.77 Lighting and sale ing 76 33 13 79 .94 Co., Ltd. Guangdong Fozhao Finance 200,000,00 226,514,30 226,054,87 3,513,522 Financing Subsidiary Finance 2,635,142.21 lease 0.00 6.85 8.31 .95 Lease Co., Ltd. FSL Production Manufactur 15,000,000. 59,572,326. 48,857,908. 67,134,518. 8,073,552 Lighting Subsidiary 3,774,392.16 and sale ing 00 75 17 91 .47 Equipment 19 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Co., Ltd. Nanjing Fozhao Lighting Production Manufactur 41,683,200. 74,488,836. 48,486,156. 20,772,449. 4,050,560 Component Subsidiary 3,021,091.70 and sale ing 00 01 75 65 .72 s Manufacturi ng Co., Ltd. FSL Zhida Electric Production Manufactur 50,000,000. 101,535,54 41,149,536. 66,773,802. 7,584,601 Subsidiary 5,689,066.62 Technology and sale ing 00 1.93 53 15 .88 Co., Ltd. Subsidiaries obtained or disposed in the Reporting Period: □ Applicable √ Not applicable 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., 20 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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. 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. (FSL Zhida) was incorporated by the Company, Foshan Zhibida Enterprise Management Co., Ltd. and Dongguan Baida Semiconductor Material Co., Ltd. on a joint investment basis. FSL Zhida obtained its business license on 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 Performance Forecast for January-September 2017 Warning of possible loss or considerable YoY change in the accumulative net profit made during the period-beginning to the end of the next reporting period, as well as the reasons: □ Applicable √ Not applicable 21 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 X Risks Facing the Company and Countermeasures 1. Risks from intensified market competition From macroscopic aspects, with the descending of speed increase of domestic investment, release of property tightening policies, international trade protectionism and turmoil of political pattern, as well as the influences of other factors, the industry may face the risk of insufficient growth momentum. From industry aspects, as an industry with sufficient competitions, lighting application field is not only under the competitions from companies of original application field, but also under the competitions from LED upstream and midstream core companies and packaging enterprises gradually extending to lighting application field, in future, if market competition further gets increased, negative influences on the Company’s profitability may be generated. Solutions: The Company will focus on main business. Through increasing research & development investment constantly, the Company will improve technical innovation ability and added value of products; continue to give play to the cost advantages in product manufacturing and improve supply ability of high-quality products. At the same time, by optimizing marketing network, the Company will improve brand image, improve service quality, intensify customer relationship management and increase core competitive capacity of the company constantly. 2. Risks from price fluctuation of raw materials The raw material cost of the Company’s products accounts for about 67.98% of the operating cost, main raw materials include lamp beads, electronic parts and components, aluminum substrates, metal materials, lamp holder, packing materials, chemical materials and fuel etc., which means the price fluctuation of main raw materials will cause significant impact on the Company’s production costs. In future, if price of raw materials has fluctuation by a large margin, the Company’s profitability may have fluctuation as well. Solutions: By increasing quantity of qualified suppliers, expanding bidding and tendering range, perfecting supply chain management, paying attention to market dynamics, collecting information, analyzing and pre-judging supply of main raw materials and price trend, the Company can decrease procurement costs; by improving automatic, intelligent production level and by implementing technical transformation, technology improvement and other measures, the Company can improve production efficiency and reduce product cost; by intensifying production technology and field management, the Company can control product costs. 3. Risks of loss from falling inventory price At the end of the Reporting Period, the net value of the Company’s inventory was RMB733.1518million, accounting for 24.68% of the current assets, the inventory mainly contains raw materials, semi-finished products 22 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 and finished products etc. As there’re plenty of product categories and models in the Company, the amount of inventory value is relatively high. With the increase of the Company’s sales revenue year by year, the raw materials and inventory commodities reserved for production and sales will simultaneously increase, leading to higher level of the Company’s inventory. If there’re changes in price or demand in raw material market and product sales market, the risks of loss from falling inventory price of the Company may happen. Solutions: The Company can intensify the analysis of sales and change in future market demand, on the basis of assuring production and sales, the Company can control inventory scale reasonably. 4. Risks from fluctuation of the exchange rate The RMB exchange rate in China is based on market supply and demand, a basket of currencies for adjustment and managed floating exchange rate system as reference. With the fluctuation of the world economy, the tense upgrade of some hot spots, as well as the currency policies in different countries, the fluctuation of exchange rate will be caused. The export business of the Company accounts for 37% of the Company’s whole business and the scale is enlarging year by year. If there’s large fluctuation of the exchange rate, the Company’s business performance will be affected. Solutions: By intensifying settlement currency management, knowing the changes in economic policies of the area, exchange rate policies and fluctuation trend of settlement currencies in time, choosing to use good settlement currencies, the Company can weaken the risks brought by fluctuation of exchange rate as much as possible. 5. Risks from bad debts of accounts receivable With the enlargement of the Company’s sales volume, the amount of accounts receivable has increased. The main debit customers of the Company are long-term high-quality customers with many years of cooperation and good business reputation. If financial status of main debtors has major unfavorable changes, risks from bad debts of accounts receivable may be caused. Solutions: By perfecting credit file of customers, evaluating credit status of customers regularly, adopting method of pledge of customers’ assets, the Company can reduce risks from bad debts of accounts receivable. By strengthening the management of approval of contract, the Company can avoid legal risks incurred during implementation of contract. The Company can reinforce the management and collection efforts of accounts receivable, implement pre-warning treatment for accounts receivable with upcoming deadline during implementation, and analyze and report accounts receivable regularly. 23 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Section V Significant Events I Annual and Special Meetings of Shareholders Convened during the Reporting Period 1. Meetings of Shareholders Convened during the Reporting Period Investor Index to disclosed Meeting Type Convened date Disclosure date participation ratio information Announcement No. 2017-016 on 2016 Annual Resolutions of 2016 Meeting of Annual 38.71% 04/26/2017 04/27/2017 Annual Meeting of Shareholders Shareholders disclosed on www.cninfo.com.cn 2. Special Meetings of Shareholders Convened at Request of Preference Shareholders with Resumed Voting Rights □ Applicable √ Not applicable II Proposal for Profit Distribution and Converting Capital Reserve into Share Capital for the Reporting Period □ Applicable √ Not applicable For the Reporting Period, the Company plans not to distribute cash dividends or bonus shares or convert capital reserve into share capital. III Commitments of the Company’s Actual Controller, Shareholders, Related Parties and Acquirer, as well as the Company and Other Commitment Makers, Fulfilled in the Reporting Period or still Ongoing at Period-End □ Applicable √ Not applicable No such cases in the Reporting Period. IV Engagement and Disengagement of CPAs Firm Has the semi-annual financial report been audited? □Yes √ No This Semi-Annual Report is unaudited. 24 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 V Explanations Given by Board of Directors and Supervisory Board Regarding “Modified Auditor’s Report” Issued by CPAs Firm for the Reporting Period □ Applicable √ Not applicable VI Explanations Given by Board of Directors Regarding “Modified Auditor’s Report” Issued for Last Year □ Applicable √ Not applicable VII Bankruptcy and Restructuring □ Applicable √ Not applicable No such cases in the Reporting Period. VIII Legal Matters Significant lawsuits or arbitrations: □ Applicable √ Not applicable No such cases in the Reporting Period. Other legal matters: □ Applicable √ Not applicable IX Punishments and Rectifications □ Applicable √ Not applicable No such cases in the Reporting Period. X Credit Conditions of the Company as well as its Controlling Shareholder and Actual Controller √ Applicable □ Not applicable In the Reporting Period, the 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. XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for Employees □ Applicable √ Not applicable No such cases in the Reporting Period. 25 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 XII Significant Related Transactions 1. Related Transactions Relevant to Routine Operations √ Applicable □ Not applicable Obtaina As a ble percenta Approve market Index ge of Relation Content d Over Method price for to Related Type of Pricing Price total with the s of Transact transacti approve of same-ty Disclosu disclos transacti transacti principl (RMB’0 value of Compan transacti ion price on line d line or settleme pe re date ed on party on e ,000) same-ty y on (RMB’0 not nt transacti inform pe ,000) on ation transacti (RMB’0 ons ,000) Purchasi Shareho ng Prosperi lder that products ty holds and Purchas Lamps www.c over 5% receivin e of Market Remitta 03/30/2 & 67.05 67.05 0.06% 200 Not 67.05 ninfo.c shares g labor material price nce 017 Compon om.cn of the service s ents Compan from Limited y related party Purchasi ng Prosperi Enterpri products ty se and Purchas Electric controll www.c receivin e of Market Remitta 03/30/2 al ed by -3.21 -3.21 0.00% 600 Not -3.21 ninfo.c g labor material price nce 017 (China) related om.cn service s Co., individu from Ltd. al related party Hangzh Purchasi Enterpri ou ng se Times products Purchas controll www.c Lighting and e of Market Remitta 03/30/2 ed by 113.87 113.87 0.09% 300 Not 113.87 ninfo.c and receivin material price nce 017 related om.cn Electric g labor s individu al Co., service al Ltd. from 26 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 related party Purchasi ng Foshan products NationS Under and Purchas tar same www.c receivin e of Market Remitta 03/30/2 Optoele actual 3,897.29 3.22% 20,000 Not ninfo.c g labor material price 3,897.29 nce 3,897.29 017 ctronics controll om.cn service s Co., er from Ltd. related party Purchasi Guangd ng ong products Under Fenghua and Purchas same www.c Advanc receivin e of Market Remitta 03/30/2 actual 410.04 410.04 0.34% 900 Not 410.04 ninfo.c ed g labor material price nce 017 controll om.cn Holding service s er Co., from Ltd. related party Purchasi Guangd ng ong products Under Huayue and Purchas same bao receivin e of Market Remitta actual 93.34 93.34 0.08% Not 93.34 N/A New g labor material price nce controll Energy service s er Co., from Ltd. related party Selling Shareho Prosperi products lder that ty and holds Lamps providin www.c over 5% Selling Market Remitta 03/30/2 & g labor 1,482.06 0.73% 3,000 Not ninfo.c shares products price 1,482.06 nce 1,482.06 017 Compon service om.cn of the ents to Compan Limited related y party Prosperi Enterpri Selling Selling Market Remitta 03/30/2 www.c 3.86 3.86 0.00% 50 Not 3.86 ty se products products price nce 017 ninfo.c 27 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (Hangzh controll and om.cn ou) ed by providin Lighting related g labor and individu service Electric al to al Co., related Ltd. party Selling Prosperi Enterpri products ty se and Electric controll providin www.c Selling Market Remitta 03/30/2 al ed by g labor 17.77 17.77 0.01% 50 Not 17.77 ninfo.c products price nce 017 (China) related service om.cn Co., individu to Ltd. al related party Selling Foshan products NationS Under and tar same providin www.c Selling Market Remitta 03/30/2 Optoele actual g labor 0.34 0.34 0.00% 50 Not 0.34 ninfo.c products price nce 017 ctronics controll service om.cn Co., er to Ltd. related party Selling Hangzh Enterpri products ou se and Times controll providin Lighting Selling Market Remitta ed by g labor 2.59 2.59 0.00% Not 2.59 N/A and products price nce related service Electric individu to al Co., al related Ltd. party Total -- -- 6,085 -- 25,150 -- -- -- -- -- Details of large-amount sales return N/A Give the actual situation in the In March 2017, the Company predicted the total value of its routine transactions with related Reporting Period (if any) where a parties Foshan NationStar Optoelectronics Co., Ltd., Guangdong Fenghua Advanced Holding forecast had been made for the total Co., Ltd., Prosperity Lamps & Components Limited, Prosperity Electrical (China) Co., Ltd., value of routine related transactions Prosperity (Hangzhou) Lighting and Electrical Co., Ltd. and Hangzhou Times Lighting and by type to occur in the Reporting Electrical Co., Ltd. Concerning the purchases from its related parties, the actual amount in Period 2017 was RMB 45.7837million, accounting for 20.81% of the predicted. As for the sales to 28 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 its related parties, the actual amount in 2017 was RMB15.0661million, accounting for 47.83% of the predicted. Reason for significant difference between transaction price and market N/A reference price (if applicable) 2. Related Transactions Regarding Purchase or Sales of Assets or Equity Interests □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Related Transactions Regarding Joint Investments in Third Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 4. Credits and Liabilities with Related Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 5. Other Significant Related 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 RMB150 million. The Agreement has expired on June 22, 2017. On June 28, 2017, the Company held the 15th 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. As such, the Company renewed the Financial Services Agreement with Rising Finance, and Rising Finance would provide deposit and settlement services for the Company for a term of one year, during which the daily deposit balance of the Company in Rising Finance Company shall not exceed RMB150 million. 29 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Index to the current announcements about the said related transactions disclosed: Title of announcement Disclosure date Disclosure website Announcement on Signing Financial Service Agreement with Guangdong Rising Finance 12/24/2016 www.cninfo.com.cn Co., Ltd. Announcement on Renewing Financial Service Agreement with Guangdong Rising Finance 06/29/2017 www.cninfo.com.cn Co., Ltd. XIII Occupation of the Company’s Funds by Controlling Shareholder or Its Related Parties for Non-Operating Purposes □ Applicable √ Not applicable No such cases in the Reporting Period. XIV Significant Contracts and Their Execution 1. Entrustment, Contracting and Leasing (1) Entrustment □ Applicable √ Not applicable No such cases in the Reporting Period. (2) Contracting □ Applicable √ Not applicable No such cases in the Reporting Period. (3) Leasing □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Significant Guarantees □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Other Significant Contracts □ Applicable √ Not applicable 30 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 No such cases in the Reporting Period. XV Social Responsibilities 1. Targeted Measures Taken to Help People Lift Themselves out of Poverty The Company did not take such measures in the first half of the year and has no such plans for now. 2. Material Environmental Issues Is the Company or any of its subsidiaries a heavily polluting business declared by environmental protection authorities? No. XVI Other Significant Events √ Applicable □ Not applicable On June 27, 2017, the Company signed an Equity Transfer Agreement with KEDA Clean Energy Co., Ltd., transferring the Company’s 38% stake in Qinghai Fozhao Lithium Energy Exploitation Co., Ltd. to the latter for RMB189.8176 million. After the transfer, the Company would no longer hold equity interest in Qinghai Fozhao Lithium Energy Exploitation Co., Ltd. As of the end of the first half of 2017, the Company had neither received the transfer payment nor started the transfer formalities with the competent authority, which is in compliance with the Equity Transfer Agreement. XVII Significant Events of Subsidiaries □ Applicable √ Not applicable 31 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 12,522,47 12,582,00 1. Restricted shares 0.98% 59,524 59,524 0.99% 9 3 1.3 Shares held by other 4,406,450 0.34% 59,524 59,524 4,465,974 0.35% domestic investors Among which: Shares held 3,860,675 0.30% 3,860,675 0.30% by domestic corporations Shares held 545,775 0.04% 59,524 59,524 605,299 0.05% by domestic individuals 1.4 Shares held by foreign 8,116,029 0.64% 8,116,029 0.64% investors Shares held 8,116,029 0.64% 8,116,029 0.64% by foreign individuals 1,259,610, 1,259,550 99.02% -59,524 -59,524 99.01% 2. Non-restricted shares 389 ,865 974,940,0 974,879,5 2.1 RMB common shares 76.64% -60,499 -60,499 76.63% 45 46 2.2 Domestically listed 284,670,3 284,671,3 22.38% 975 975 22.38% foreign shares 44 19 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 the Reporting Period, some supervisors and executive officers increased their shareholdings in the Company, representing an increase of 91049 restricted shares. 32 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 2. During the Reporting Period, the Company’s shares held by some former executive officers who had stayed unemployed by the Company for six months were unlocked, resulting in an increment of 31525 non-restricted shares. 3. Due to Item 1 and 2 above, the Company’s restricted shares increased by 59524 shares in the Reporting Period. Approval of share changes: □ Applicable √ Not applicable 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 of 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 2. Changes in Restricted Shares √ Applicable □ Not applicable Unit: share Reason for Name of Opening Unlocked in Increased in Closing restricted lock-up/unlockin Date of unlocking shareholder restricted shares Reporting Period Reporting Period shares g Lock-up of Liu Xingming 359,073 0 21,450 380,523 executive Uncertain officer’s shares Lock-up of Tang Qionglan 0 0 12,150 12,150 executive Uncertain officer’s shares Lock-up of Wei Bin 25,627 0 9,975 35,602 Uncertain executive 33 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 officer’s shares Lock-up of Chen Yu 12,870 0 7,500 20,370 executive Uncertain officer’s shares Lock-up of Jiao Zhigang 31,083 0 9,375 40,458 executive Uncertain officer’s shares Lock-up of Xu Xiaoping 0 0 7,575 7,575 executive Uncertain officer’s shares Lock-up of Zhang Yong 18,720 0 7,275 25,995 executive Uncertain officer’s shares Lock-up of Zhang Xuequan 9,908 0 10,125 20,033 executive Uncertain officer’s shares Lock-up of Ye Zhenghong 33,696 0 5,625 39,321 supervisor’s Uncertain shares Expiration of lock-up of Xie Qing 31,525 31,525 0 0 outgoing 05/24/2017 executive officer’s shares Total 522,502 31,525 91,050 582,027 -- -- II Issuance and Listing of Securities □ Applicable √ Not applicable III Shareholders and Their Holdings at Period-End Unit: share Total number of preference Total number of common shareholders with resumed 93,117 0 shareholders at period-end voting rights at period-end (if any) (see note 8) 5% or greater common shareholders or top 10 common shareholders Name of Nature of Shareholdin Total Increase/de Restricted Non-restricted Pledged or frozen shares shareholder shareholder g percentage common crease in common common Status Number 34 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 shares held at Reporting shares shares held at period-end Period held at period-end period-en d Hong Kong Wah Shing Foreign Holding 13.47% 171,360,391 171,360,391 Pledged 83,966,592 corporation Company Limited Prosperity Lamps & Foreign 10.50% 133,577,143 133,577,143 Components corporation Limited Shenzhen Rising State-owned Investment 5.12% 65,178,305 65,178,305 corporation Development Co., Ltd. Guangdong Electronics State-owned Information 4.74% 60,357,728 60,357,728 Pledged 29,575,287 corporation Industry Group Ltd. Central Huijin Asset State-owned 2.42% 30,799,000 30,799,000 Management corporation Co., Ltd. Essence International Foreign Securities 1.91% 24,277,429 24,277,429 corporation (Hong Kong) Co., Ltd. DBS Vickers Foreign (Hong Kong) 1.86% 23,645,755 23,645,755 corporation Ltd A/C Clients Hong Kong Rising Foreign Investment 1.82% 23,165,684 23,165,684 corporation Development Co., Ltd. Zhuang Jianyi Foreign 0.85% 10,821,372 8,116,029 2,705,343 35 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 individual China Merchants Foreign 0.84% 10,686,856 10,686,856 Securities (HK) corporation Co., Limited Strategic investors or general corporations becoming top-10 common shareholders due to N/A placing of new shares (if any) (see Note 3) Among the top 10 shareholders, Hong Kong Wah Shing Holding Company Limited, Shenzhen Rising Investment Development Co., Ltd., Guangdong Electronics Information Industry Group Related or acting-in-concert Ltd. and Hong Kong Rising Investment Development Co., Ltd. are acting-in-concert parties; and parties among shareholders Prosperity Lamps & Components Limited and Zhuang Jianyi are acting-in-concert parties. Apart above from that, it is unknown whether there is among the top 10 shareholders any other related parties or acting-in-concert parties as defined in the Administrative Measures for the Acquisition of Listed Companies. Top 10 non-restricted common shareholders Type of shares Name of shareholder Non-restricted common shares held at 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 RMB common 30,799,000 30,799,000 Co., Ltd. share Domestically Essence International Securities 24,277,429 listed foreign 24,277,429 (Hong Kong) Co., Ltd. share Domestically DBS Vickers (Hong Kong) Ltd A/C 23,645,755 listed foreign 23,645,755 Clients share Domestically Hong Kong Rising Investment 23,165,684 listed foreign 23,165,684 Development Co., Ltd. share China Merchants Securities (HK) 10,686,856 Domestically 10,686,856 36 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Co., Limited listed foreign share Guangdong Rising Finance Holding RMB common 6,876,386 6,876,386 Co., Ltd. share Among the top 10 non-restricted common shareholders, Hong Kong Wah Shing Holding Related or acting-in-concert parties Company Limited, Shenzhen Rising Investment Development Co., Ltd., Guangdong among top 10 non-restricted Electronics Information Industry Group Ltd., Hong Kong Rising Investment Development common shareholders, as well as Co., Ltd. and Guangdong Rising Finance Holding Co., Ltd. are acting-in-concert parties. between top 10 non-restricted Apart from that, it is unknown whether there is among the top 10 shareholders any other common shareholders and top 10 related parties or acting-in-concert parties as defined in the Administrative Measures for the common shareholders Acquisition of Listed Companies. Top 10 common shareholders conducting securities margin trading N/A (if any) (see note 4) Indicate by tick mark whether any of the top 10 common shareholders or the top 10 non-restricted common shareholders of the Company conducted any promissory repo during the Reporting Period. □ Yea √ No No such cases in the Reporting Period. IV Change of Controlling Shareholder or Actual Controller in Reporting Period Change of the controlling shareholder in the Reporting Period: □ Applicable √ Not applicable The controlling shareholder remained the same in the Reporting Period. Change of the actual controller in the Reporting Period: □ Applicable √ Not applicable The actual controller remained the same in the Reporting Period. 37 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Section VII Preference Shares □ Applicable √ Not applicable No preference shares in the Reporting Period. 38 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Section VIII Directors, Supervisors and Senior Management I Changes in Shareholdings of Directors, Supervisors and Senior Management √ Applicable □ Not applicable Restricted Decrease Granted Increase in shares Granted Opening in Closing restricted Incumbent Reporting granted in restricted shares Name Office title shareholdi Reporting shareholdi shares at /Former Period Reporting at period-end ng (share) Period ng (share) period-begin (share) Period (share) (share) ning (share) (share) Director & Liu General Incumbent 478,764 28,600 507,364 Xingming Manager Board Lin Yihui Incumbent 13,000 16,600 29,600 Secretary Tang CFO Incumbent 0 16,200 16,200 Qionglan Vice Wei Bin General Incumbent 34,169 13,300 47,469 Manager Vice Jiao General Incumbent 41,444 12,500 53,944 Zhigang Manager Vice Chen Yu General Incumbent 17,160 10,000 27,160 Manager Vice Xu General Incumbent 0 10,100 10,100 Xiaoping Manager Vice Zhang General Incumbent 24,960 9,700 34,660 Yong Manager Vice Zhang General Incumbent 13,211 13,500 26,711 Xuequan Manager Ye Zhenghon Supervisor Incumbent 44,928 7,500 52,428 g 39 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Total -- -- 667,636 138,000 0 805,636 0 0 0 II Changes in Directors, Supervisors and Senior Management □ Applicable √ Not applicable The Company’s directors, supervisors and senior management remained unchanged in the Reporting Period. Please refer to the 2016 Annual Report for details about them. 40 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Section IX Corporate Bonds Does the Company have 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. 41 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Section X Financial Report I Auditor’s Report Has this semi-annual financial report been audited? □ Yes √ No This semi-annual financial report is unaudited. II Financial Statements Currency unit for the statements in the notes to these financial statements: RMB 1. Consolidated Balance Sheet Prepared by Foshan Electrical and Lighting Co., Ltd. June 30, 2017 Unit: RMB Item Closing balance Opening balance Current assets: Monetary funds 815,038,019.29 1,479,283,642.54 Settlement reserve Interbank lendings Financial assets at fair value through gains/losses Derivative financial assets Notes receivable 26,434,680.74 67,925,843.74 Accounts receivable 862,433,866.95 595,257,954.00 Accounts paid in advance 27,685,018.96 30,292,007.11 Premiums receivable Reinsurance premiums receivable Receivable reinsurance contract reserve Interest receivable 3,217,917.15 4,612,406.80 Dividends receivable Other accounts receivable 36,016,476.65 11,977,660.58 Financial assets purchased under agreements to resell Inventories 733,151,791.00 753,681,605.19 42 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Assets held for sale Non-current assets due within one year Other current assets 466,262,718.17 441,205,461.72 Total current assets 2,970,240,488.91 3,384,236,581.68 Non-current assets: Loans and advances to customers Available-for-sale financial assets 1,758,739,646.36 1,732,150,857.01 Held-to-maturity investments Long-term accounts receivable Long-term equity investments 209,858,507.98 210,394,932.69 Investment property Fixed assets 436,897,311.33 446,006,929.66 Construction in progress 147,360,531.44 71,479,325.91 Engineering materials Disposal of fixed assets Productive living assets Oil-gas assets Intangible assets 158,172,586.28 160,330,395.13 R&D expense Goodwill Long-term deferred expense 6,932,911.30 6,897,119.78 Deferred income tax assets 40,730,492.66 43,547,918.44 Other non-current assets 44,200,134.60 45,125,340.00 Total non-current assets 2,802,892,121.95 2,715,932,818.62 Total assets 5,773,132,610.86 6,100,169,400.30 Current liabilities: Short-term borrowings Borrowings from Central Bank Money deposits accepted and inter-bank deposits Interbank borrowings Financial liabilities at fair value through gains/losses Derivative financial liabilities 43 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Notes payable Accounts payable 673,397,021.27 552,255,512.33 Accounts received in advance 32,657,976.85 41,180,818.13 Financial assets sold for repurchase Fees and commissions payable Payroll payable 68,383,359.33 96,021,156.06 Taxes payable 24,371,207.42 138,282,644.72 Interest payable Dividends payable 6,287,923.09 Other accounts payable 32,185,577.54 50,104,338.81 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 830,995,142.41 884,132,393.14 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 11,872,268.53 10,449,768.49 Deferred income tax liabilities 204,175,913.54 200,112,595.11 Other non-current liabilities Total non-current liabilities 216,048,182.07 210,562,363.60 Total liabilities 1,047,043,324.48 1,094,694,756.74 44 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 285,821,459.07 285,821,459.07 Less: Treasury shares Other comprehensive income 1,156,996,843.39 1,133,971,372.25 Special reserve Surplus reserve 733,924,951.81 733,924,951.81 Provisions for general risks Retained earnings 1,258,814,782.00 1,564,615,925.99 Equity attributable to owners of the 4,707,690,904.27 4,990,466,577.12 Company (as parent company) Minority interests 18,398,382.11 15,008,066.44 Total owners’ equity 4,726,089,286.38 5,005,474,643.56 Total liabilities and owners’ equity 5,773,132,610.86 6,100,169,400.30 Legal representative: He Yong Accounting head for this Report: Liu Xingming Head of the accounting department: Tang Qionglan 2. Balance Sheet of the Company (as Parent Company) Unit: RMB Item Closing balance Opening balance Current assets: Monetary funds 621,028,793.79 1,235,417,964.88 Financial assets at fair value through gains/losses Derivative financial assets Notes receivable 25,648,653.72 66,222,840.44 Accounts receivable 865,936,526.24 611,855,496.90 Accounts paid in advance 78,575,487.30 117,217,953.23 Interest receivable 2,187,889.37 3,590,629.01 Dividends receivable 14,671,820.57 Other accounts receivable 63,730,648.45 56,714,849.84 Inventories 665,648,682.97 717,097,516.25 Assets held for sale 45 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Non-current assets due within one year Other current assets 349,066,845.84 379,932,325.87 Total current assets 2,671,823,527.68 3,202,721,396.99 Non-current assets: Available-for-sale financial assets 1,758,739,646.36 1,732,150,857.01 Held-to-maturity investments Long-term accounts receivable Long-term equity investments 693,455,797.74 693,992,222.45 Investment property Fixed assets 361,704,762.30 375,075,102.44 Construction in progress 145,061,164.42 69,589,510.14 Engineering materials Disposal of fixed assets Productive living assets Oil-gas assets Intangible assets 114,634,684.40 117,017,633.92 R&D expenses Goodwill Long-term deferred expense 6,932,911.30 6,897,119.78 Deferred income tax assets 35,219,760.73 37,790,043.38 Other non-current assets 43,580,346.60 44,519,790.00 Total non-current assets 3,159,329,073.85 3,077,032,279.12 Total assets 5,831,152,601.53 6,279,753,676.11 Current liabilities: Short-term borrowings Financial liabilities at fair value through gains/losses Derivative financial liabilities Notes payable Accounts payable 844,733,659.24 701,814,818.26 Accounts received in advance 31,405,141.81 38,406,798.91 Payroll payable 36,517,295.06 66,764,581.34 Taxes payable 11,957,006.39 121,939,572.62 Interest payable 46 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Dividends payable Other accounts payable 112,053,963.76 258,368,416.59 Liabilities held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 1,036,667,066.26 1,187,294,187.72 Non-current liabilities: Long-term borrowings Bonds payable Of which: Preference shares Perpetual bonds Long-term payables Long-term payroll payable Special payables Provisions Deferred income 11,484,768.34 9,984,768.34 Deferred income tax liabilities 204,175,913.54 200,112,595.11 Other non-current liabilities Total non-current liabilities 215,660,681.88 210,097,363.45 Total liabilities 1,252,327,748.14 1,397,391,551.17 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 293,425,065.15 293,425,065.15 Less: Treasury shares Other comprehensive income 1,156,996,843.39 1,133,971,372.25 Special reserve Surplus reserve 733,924,951.81 733,924,951.81 Retained earnings 1,122,345,125.04 1,448,907,867.73 Total owners’ equity 4,578,824,853.39 4,882,362,124.94 Total liabilities and owners’ equity 5,831,152,601.53 6,279,753,676.11 Legal representative: He Yong Accounting head for this Report: Liu Xingming 47 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Head of the accounting department: Tang Qionglan 3. Consolidated Income Statement Unit: RMB Item Reporting Period Same period of last year 1. Operating revenues 2,023,925,582.84 1,755,670,927.44 Including: Sales revenue 2,023,925,582.84 1,755,670,927.44 Interest revenue Premium revenue Fee and commission revenue 2. Operating costs 1,764,705,009.46 1,520,011,395.30 Including: Cost of sales 1,546,931,779.85 1,322,982,560.70 Interest expense Fee and commission expense Surrenders Net claims paid Net amount provided as insurance contract reserve Expenditure on policy dividends Reinsurance premium expense Taxes and surtaxes 20,386,602.33 12,251,578.46 Selling expense 81,651,993.69 73,251,807.41 Administrative expense 98,790,821.60 82,117,827.94 Finance costs -7,115,907.36 -6,445,753.04 Asset impairment losses 24,059,719.35 35,853,373.83 Add: Gains on fair value changes (“-” means losses) Investment income (“-” means 14,009,282.02 13,720,747.77 losses) Including: Share of gains/losses of 1,543,965.79 -19,640.12 associates and joint ventures Exchange gains (“-” means losses) Other gains 3. Operating profit (“-” means loss) 273,229,855.40 249,380,279.91 Add: Non-operating income 6,022,395.88 1,575,016.58 Including: Gains on disposal of 20,253.97 non-current assets 48 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Less: Non-operating expense 4,769,773.69 4,917,056.94 Including: Losses on disposal of 4,255,164.43 223,092.25 non-current assets 4. Total profit (“-” means loss) 274,482,477.59 246,038,239.55 Less: Income taxes 42,597,501.35 39,425,977.29 5. Net profit (“-” means net loss) 231,884,976.24 206,612,262.26 Net profit attributable to owners of 228,494,660.57 206,925,812.72 the Company (as parent company) Minority interests income 3,390,315.67 -313,550.46 6. Other comprehensive income, net of 23,025,471.14 140,317,778.68 tax Other comprehensive income, net of tax, attributable to owners of the 23,025,471.14 140,317,778.68 Company (as parent company) 6.1 Other comprehensive income that will not be reclassified into gains/losses 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 gains/losses under equity method 6.2 Other comprehensive income to be subsequently reclassified into 23,025,471.14 140,317,778.68 gains/losses 6.2.1 Share of other comprehensive income of investees that will be reclassified into gains/losses under equity method 6.2.2 Gains/Losses on fair value changes of available-for-sale 23,025,471.14 139,503,813.54 financial assets 6.2.3 Gains/Losses on reclassifying held-to-maturity investments into available-for-sale financial assets 6.2.4 Effective gains/losses on cash flow hedges 6.2.5 Currency translation differences 49 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 6.2.6 Other 813,965.14 Other comprehensive income, net of tax, attributable to minority interests 7. Total comprehensive income 254,910,447.38 346,930,040.94 Attributable to owners of the 251,520,131.71 347,243,591.40 Company (as parent company) Attributable to minority interests 3,390,315.67 -313,550.46 8. Earnings per share 8.1 Basic earnings per share 0.1796 0.1627 8.2 Diluted earnings per share 0.1796 0.1627 Where business mergers under the same control occurred in the Reporting Period, the net profit achieved by the merged parties before the business mergers was RMB0.00, with the amount for the same period of last year 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 (as Parent Company) Unit: RMB Item Reporting Period Same period of last year 1. Operating revenues 1,980,196,404.29 1,782,457,216.14 Less: Operating costs 1,549,957,656.10 1,355,707,509.94 Taxes and surtaxes 14,028,299.06 7,825,502.47 Selling expense 74,062,826.39 72,636,241.42 Administrative expense 98,398,538.37 82,409,260.52 Finance costs -4,474,253.64 -3,798,619.84 Asset impairment losses 23,053,208.55 35,788,227.78 Add: Gains on fair value changes (“-” means losses) Investment income (“-” means 12,903,476.48 13,720,747.77 loss) Including: Share of gains/losses of 1,543,965.79 -19,640.12 associates and joint ventures Other gains 2. Operating profit (“-” means loss) 238,073,605.94 245,609,841.62 Add: Non-operating income 5,746,833.41 1,389,423.13 Including: Gains on disposal of 9,401.71 non-current assets Less: Non-operating expense 2,041,377.50 3,736,581.73 50 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Including: Losses on disposal of 1,528,785.79 193,011.74 non-current assets 3. Total profit (“-” means loss) 241,779,061.85 243,262,683.02 Less: Income taxes 34,045,999.98 37,862,188.03 4. Net profit (“-” means net loss) 207,733,061.87 205,400,494.99 5. Other comprehensive income, net of 23,025,471.14 139,503,813.54 tax 5.1 Other comprehensive income that will not be reclassified into gains and losses 5.1.1 Changes in net liabilities or assets with a defined benefit plan upon re-measurement 5.1.2 Share of other comprehensive income of investees that cannot be reclassified into gains/losses under equity method 5.2 Other comprehensive income to be subsequently reclassified into 23,025,471.14 139,503,813.54 gains/losses 5.2.1 Share of other comprehensive income of investees that will be reclassified into gains/losses under equity method 5.2.2 Gains/Losses on fair value changes of available-for-sale financial 23,025,471.14 139,503,813.54 assets 5.2.3 Gains/Losses on reclassifying held-to-maturity investments into available-for-sale financial assets 5.2.4 Effective gains/losses on cash flow hedges 5.2.5 Currency translation differences 5.2.6 Other 6. Total comprehensive income 230,758,533.01 344,904,308.53 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 51 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Head of the accounting department: Tang Qionglan 5. Consolidated Cash Flow Statement Unit: RMB Item Reporting Period Same period of last year 1. Cash generated by or used in operating activities: Cash generated by sale of 1,754,303,637.97 1,547,557,182.88 commodities and rendering of service Net increase in money deposits from customers and interbank placements Net increase in loans from Central Bank Net increase in funds borrowed from other financial institutions Cash received as premiums of original insurance contracts Net cash generated by reinsurance business Net increase in deposits of policy holders and investment fund Net increase in disposal of financial assets at fair value through gains/losses Interest, fees and commissions received Net increase in interbank borrowings Net increase in funds in repurchase business Tax rebates received 42,499,505.18 44,239,351.38 Cash generated by other operating 28,893,716.10 15,057,708.67 activities Subtotal of cash generated by operating 1,825,696,859.25 1,606,854,242.93 activities Cash paid for goods and services 1,114,835,724.72 850,216,733.93 Net increase in loans and advances to customers Net increase in funds deposited in Central Bank and interbank placements Cash paid for claims of original insurance contracts Interest, fees and commissions paid Cash paid as policy dividends 52 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Cash paid to and for employees 371,942,160.26 290,038,390.79 Taxes paid 262,092,182.25 92,793,562.26 Cash used in other operating 107,889,979.24 82,177,248.89 activities Subtotal of cash used in operating 1,856,760,046.47 1,315,225,935.87 activities Net cash from operating activities -31,063,187.22 291,628,307.06 2. Cash generated by or used in investing activities: Cash generated by disinvestments 7,005.00 Cash received as investment income 15,011,705.23 11,852,333.55 Net cash generated by disposal of fixed assets, intangible assets and other 1,626,000.00 73,000.00 long-term assets Net cash generated by disposal of subsidiaries or other business units Cash generated by other investing activities Subtotal of cash generated by investing 16,637,705.23 11,932,338.55 activities Cash paid to acquire fixed assets, intangible assets and other long-term 108,664,080.94 33,994,345.07 assets Cash paid for investments 20,000,000.00 400,000,000.00 Net increase in pledged loans Net cash paid to acquire subsidiaries and other business units Cash used in other investing 7,539,878.12 activities Subtotal of cash used in investing 128,664,080.94 441,534,223.19 activities Net cash from investing activities -112,026,375.71 -429,601,884.64 3. Cash generated by or used in financing activities: Cash received as capital contributions Including: Cash received from minority shareholder investments by subsidiaries Cash received as borrowings Cash generated by issuance of 53 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 bonds Cash generated by other financing activities Subtotal of cash generated by financing activities Repayment of borrowings Cash paid for interest expenses and 522,068,416.83 15,935,708.57 distribution of dividends or profit Including: dividends or profit paid 5,660,290.78 by subsidiaries to minority interests Cash used in other financing activities Sub-total of cash used in financing 522,068,416.83 15,935,708.57 activities Net cash from financing activities -522,068,416.83 -15,935,708.57 4. Effect of foreign exchange rate 912,356.51 956,368.36 changes on cash and cash equivalents 5. Net increase in cash and cash -664,245,623.25 -152,952,917.79 equivalents Add: Opening balance of cash and 1,479,283,642.54 933,546,108.37 cash equivalents 6. Closing balance of cash and cash 815,038,019.29 780,593,190.58 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 (as Parent Company) Unit: RMB Item Reporting Period Same period of last year 1. Cash generated by or used in operating activities: Cash generated by sale of 1,700,716,001.72 1,583,633,686.90 commodities and rendering of service Tax rebates received 42,499,505.18 44,239,351.38 Cash generated by other operating 24,406,290.15 11,425,998.07 activities Subtotal of cash generated by operating 1,767,621,797.05 1,639,299,036.35 activities Cash paid for goods and services 1,363,028,963.41 1,070,690,628.68 Cash paid to and for employees 167,453,782.97 118,971,583.13 Taxes paid 200,061,046.37 42,416,995.71 54 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Cash used in other operating 101,737,482.16 80,203,151.06 activities Subtotal of cash used in operating 1,832,281,274.91 1,312,282,358.58 activities Net cash from operating activities -64,659,477.86 327,016,677.77 2. Cash generated by or used in investing activities: Cash generated by disinvestments 35,000,000.00 7,005.00 Cash received as investment income 28,724,845.24 11,852,333.55 Net cash generated by disposal of fixed assets, intangible assets and other 1,580,000.00 14,000.00 long-term assets Net cash generated by disposal of subsidiaries or other business units Cash generated by other investing activities Subtotal of cash generated by investing 65,304,845.24 11,873,338.55 activities Cash paid to acquire fixed assets, intangible assets and other long-term 99,538,768.93 31,293,478.92 assets Cash paid for investments 400,000,000.00 Net cash paid to acquire subsidiaries and other business units Cash used in other investing 7,500,000.00 activities Subtotal of cash used in investing 99,538,768.93 438,793,478.92 activities Net cash from investing activities -34,233,923.69 -426,920,140.37 3. Cash generated by or used in financing activities: Cash received as capital contributions Cash received as borrowings Cash generated by issuance of bonds Cash generated by other financing activities Subtotal of cash generated by financing activities Repayment of borrowings 55 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Cash paid for interest expenses and 516,408,126.05 15,935,708.57 distribution of dividends or profit Cash used in other financing activities Sub-total of cash used in financing 516,408,126.05 15,935,708.57 activities Net cash from financing activities -516,408,126.05 -15,935,708.57 4. Effect of foreign exchange rate 912,356.51 956,368.17 changes on cash and cash equivalents 5. Net increase in cash and cash -614,389,171.09 -114,882,803.00 equivalents Add: Opening balance of cash and 1,235,417,964.88 633,291,177.30 cash equivalents 6. Closing balance of cash and cash 621,028,793.79 518,408,374.30 equivalents Legal representative: He Yong Accounting head for this Report: Liu Xingming Head of the accounting department: Tang Qionglan 7. Consolidated Statement of Changes in Owners’ Equity Reporting Period Unit: RMB Reporting period Equity attributable to owners of the Company (as parent company) Other equity Item Other Provisio Retaine Minorit Total instruments Less: Share Capital compre Special Surplus ns for d y owners’ Prefer Perpet Treasur capital reserve hensive reserve reserve general earning interests equity ence ual Other y shares income risks s shares bonds 1,272, 1,133,9 1,564,6 5,005,4 1. Balance at prior 285,821 733,924 15,008, 132,86 71,372. 15,925. 74,643. year-end ,459.07 ,951.81 066.44 8.00 25 99 56 Add: Changes in accounting policies Corrections of previous errors Business mergers under same control Other 2. Balance at 1,272, 285,821 1,133,9 733,924 1,564,6 15,008, 5,005,4 56 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 beginning of the 132,86 ,459.07 71,372. ,951.81 15,925. 066.44 74,643. year 8.00 25 99 56 3. Increase/ -305,80 -279,38 decrease in the 23,025, 3,390,3 1,143.9 5,357.1 period (“-” means 471.14 15.67 9 8 decrease) 3.1 Total 23,025, 228,494 3,390,3 254,910 comprehensive 471.14 ,660.57 15.67 ,447.38 income 3.2 Capital increased and reduced by owners 3.2.1 Common shares increased by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments charged to owners’ equity 3.2.4 Other -534,29 -534,29 3.3 Profit 5,804.5 5,804.5 distribution 6 6 3.3.1 Appropriation to surplus reserve 3.3.2 Appropriation to provisions for general risks 3.3.3 -534,29 -534,29 Appropriation to 5,804.5 5,804.5 owners (or 6 6 shareholders) 3.3.4 Other 3.4 Internal carry-forward of owners’ equity 57 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 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, 1,156,9 1,258,8 4,726,0 285,821 733,924 18,398, 4. Closing balance 132,86 96,843. 14,782. 89,286. ,459.07 ,951.81 382.11 8.00 39 00 38 Amount last year: Unit: RMB Same period of last year Equity attributable to owners of the Company (as parent company) Other equity Minorit Other Provisio Total Item instruments y Less: Retaine Share Capital compre Specific Surplus ns for owners’ Treasur d interest Prefer Perpet equity capital reserve hensive reserve reserve general y shares earnings s ence ual Other income risks shares bonds 1,272, 2,212,9 5,057,7 1. Balance at prior 296,324 628,439 613,661 34,193, 132,86 89,156. 40,219. year-end ,375.58 ,107.12 ,381.40 330.93 8.00 02 05 Add: Changes in accounting policies Corrections of previous errors 58 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Business mergers under same control Other 2. Balance at 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 Common shares 10,000, 10,000, increased by 000.00 000.00 shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 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, -22,183, 7,505.5 distribution 5 ,844.69 923.09 963.69 4 3.3.1 -105,48 105,485 Appropriation to 5,844.6 ,844.69 surplus reserve 9 3.3.2 Appropriation to provisions for general risks 3.3.3 -15,901, -6,287, -22,189, 59 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Appropriation to 660.85 923.09 583.94 owners (or 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 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 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 (as Parent Company) Reporting Period: Unit: RMB Reporting Period Item Share Other equity instruments Capital Less: Other Special Surplus Retaine Total capital Prefere Perpetu Other reserve Treasury comprehe reserve reserve d owners’ 60 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 nce al bonds shares nsive earnings equity shares income 1,448,9 1. Balance at prior 1,272,13 293,425,0 1,133,971 733,924,9 4,882,362 07,867. year-end 2,868.00 65.15 ,372.25 51.81 ,124.94 73 Add: Changes in accounting policies Corrections of previous errors Other 2. Balance at 1,448,9 1,272,13 293,425,0 1,133,971 733,924,9 4,882,362 beginning of the 07,867. 2,868.00 65.15 ,372.25 51.81 ,124.94 year 73 3. Increase/ -326,56 decrease in the 23,025,47 -303,537, 2,742.6 period (“-” means 1.14 271.55 9 decrease) 3.1 Total 23,025,47 207,733 230,758,5 comprehensive 1.14 ,061.87 33.01 income 3.2 Capital increased and reduced by owners 3.2.1 Common shares increased by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments charged to owners’ equity 3.2.4 Other -534,29 3.3 Profit -534,295, 5,804.5 distribution 804.56 6 3.3.1 Appropriation to 61 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 surplus reserve 3.3.2 -534,29 Appropriation to -534,295, 5,804.5 owners (or 804.56 6 shareholders) 3.3.3 Other 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 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 1,122,3 1,272,13 293,425,0 1,156,996 733,924,9 4,578,824 4. Closing balance 45,125. 2,868.00 65.15 ,843.39 51.81 ,853.39 04 Amount last year: Unit: RMB Same period of last year 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 prior 1,272,13 293,419,4 2,212,989 628,439,1 515,436 4,922,417 62 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 year-end 2,868.00 44.90 ,156.02 07.12 ,926.40 ,502.44 Add: Changes in accounting policies Corrections of previous errors Other 2. Balance at 1,272,13 293,419,4 2,212,989 628,439,1 515,436 4,922,417 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 Common shares increased by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 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 -15,901, -15,901,6 Appropriation to 660.85 60.85 owners (or 63 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 (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 Legal representative: He Yong Accounting head for this Report: Liu Xingming Head of the accounting department: Tang Qionglan 64 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 III Company profile (I). 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 October 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 October 1993, and was listed in Shenzhen Stock Exchange for trade on November 23, 1993. The Company was approved to issue 50,000,000 B shares on July 23, 1995. And, as approved to change into a foreign-invested stock limited company on August 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 December 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 (II). 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.) (III). Approval and Issue of the Financial Report The Financial Report was approved and authorized for issue by the Board of Directors on August 23, 2017. 65 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (IV). 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. 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 February 15, 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 ability to continue to operate in the next 12 months. The financial statements of the Company are prepared on the basis of continuing operation. V Important accounting policies and estimations Reminders of the specific accounting policies and accounting estimations: 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 January 1 and ends on December 31 according to the Gregorian calendar. 66 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 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 67 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 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. 68 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 beginning still off set the minority shareholders' equity. 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 to the balance sheet date shall be 69 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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. 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. ③Available-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 70 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 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 71 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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. 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 72 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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. 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 receivable 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% 73 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 2 to 3 years 30.00% 30.00% 3 to 4 years 50.00% 50.00% 4 to 5 years 80.00% 80.00% Over 5 years 100.00% 100.00% In the groups, those adopting balance percentage method to withdraw bad debt provision □ Applicable √ Not applicable In the groups, those adopting other methods to withdraw bad debt provision: □ Applicable √ Not applicable (3) Accounts receivable with an insignificant single amount but for which the bad debt provision is made independently Reason of individually withdrawing bad debt provision There are definite evidences indicate the obvious difference of thee 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 74 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 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 75 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 combination contract or agreement, if it is likely to occur and its effects on the combination costs can be measured reliably, the Company shall record the said amount into the combination costs. (3) The cost of a long-term equity investment obtained by making payment in cash shall be the purchase cost which is actually paid. The cost consists of the expenses directly relevant to the obtainment of the long-term equity investment, taxes and other necessary expenses. (4) The cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. (5) The cost of a long-term investment obtained by the exchange of non-monetary assets (having commercial nature) shall be recognized base on taking the fair value and relevant payable taxes as the cost of the assets received. (6) The cost of a long-term equity investment obtained by recombination of liabilities shall be recognized at the fair value. 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 76 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 offset. If the assets made to associates or joint ventures constitute business, and the investor makes long-term equity investment but does not obtain the control, the fair value of the investment shall be taken as the initial investment cost of the new long-term equity investment, and the difference between initial investment and the book value of the investment is fully recognized in profit or loss for the current period. If the assets sold by the Company to joint ventures or associates constitute business, the difference between the consideration and the book value of the business shall be fully credited to the current profits and losses. If the assets purchased by Company from joint ventures or associates constitute business, conduct accounting treatment in accordance with the provisions of Accounting Standard for Business Enterprises No. 20 - Business combination, and the profits or losses related to the transaction shall be recognized in full. When the net loss incurred by the investee is recognized, the book value of the long-term equity investment and other long-term equity that substantially constitute the net investment in the investee shall be written down to zero. 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. 77 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 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 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 78 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 completed; (2) Has been produced or run for trial, and the results indicate that the assets can run normally or can produce stable products stably, or the results of the trial operation show that it can operate normally; (3) The amount of the expenditure on the fixed assets constructed is little or almost no longer occurring; (4) The fixed assets purchased have reached the design or contract requirements, or basically in line with the design or contract requirements. 3. Provision for impairment of construction in progress Please refer to Note 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 79 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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. 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 80 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 The expenditures in internal research and development projects of the Company are classified into expenditures in research stage and expenditures in development stage. The expenditures in research stage are included in the current profits and losses when incurred. The expenditures in development stage are recognized as intangible assets when meeting the following conditions: (1) The completion of the intangible assets makes it technically feasible for using or selling; (2) Having the intention to complete and use or sell the intangible assets; (3) The way in which an intangible asset generates economic benefits, including the proof that the products produced with the intangible asset have market or the proof of its usefulness if the intangible asset has market and will be used internally; (4) 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 81 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 group or portfolio of asset groups that is expected to benefit from the synergies of the business combination when the impairment test is conducted. The corresponding impairment loss is recognized if the test results indicate that the recoverable amount of the asset group or portfolio of asset groups containing the apportioned goodwill is lower than its book value. The amount of the impairment loss shall offset the book value of the goodwill apportioned to the asset group or portfolio of asset groups, and offset the book value of other assets in proportion according to the proportion of the book value of other assets except the goodwill in the asset group or portfolio of asset groups. Once the impairment loss of the above asset is recognized, the portion that the value is restored will not be written back in subsequent periods. 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. 82 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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. 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 83 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 income has been determined and the sales invoice has been issued. The payment for the delivered products has been received in full or is expectedly recoverable. ② Method for recognition of the export income: The Company produces the products according to the contract signed with the buyer. After the products have been examined as qualified, the Company completes the customs clearing procedure for export. The shipping company loads the products for shipping. The amount of the income has been determined and the export sales invoice has been issued. The payment for the delivered products has been received in full or is expectedly recoverable. 2. Provision of labor services In the case that the results of the labor service transaction can be reliably estimated, the income from the provision of labor services shall be recognized at the balance sheet date by the percentage of completion method according to the progress of the labor transaction. The result of the provision of labor services can be reliably estimated refers that all the following conditions are met: ① The amount of income can be measured reliably; ②The relevant economic benefits are likely to inflow to the enterprise; ③ The progress of the transaction can be reliably determined; ④ The cost incurred and to be incurred in the transaction can be measured reliably. If the result of the provision of labor services can’t be reliably estimated, the income from the provision of labor services shall be recognized according to the cost of labor services that have incurred and are expected to be compensated, and the cost of labor services that have incurred is recognized as the current expenses. If the cost of labor services already incurred isn’t expected to be compensated, the income will not be recognized. If the contract or agreement between the Company and other enterprises includes the sale of goods and the provision 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 84 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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. 31. Lease (1) Accounting treatment of operating lease For the leasee of the 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 85 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 33. Changes in main accounting policies and estimates (1) Change of accounting policies □ Applicable √ Not applicable 86 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (2) Significant changes in accounting estimates □ Applicable √ Not applicable 34. Other Naught 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% 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 March 17, 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 January 1, 2014. 87 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 3. Other Paid according to the relevant regulation of the tax law. VII. Notes to Main Items of Consolidated Financial Statements 1. Monetary funds Unit: RMB Item Closing balance Opening balance Cash on hand 53,479.90 13,058.91 Bank deposits 806,670,784.99 1,477,005,924.93 Other currency funds 8,313,754.40 2,264,658.70 Total 815,038,019.29 1,479,283,642.54 Other notes 2. Financial assets measured by fair value and the changes be included in the current gains and losses Naught 3. Derivative financial assets □ Applicable √ Not applicable 4. Notes receivable (1) Notes receivable listed by category Unit: RMB Item Closing balance Opening balance Bank acceptance bill 26,434,680.74 67,925,843.74 Total 26,434,680.74 67,925,843.74 (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 Item Amount of recognition termination at the Amount of not terminated recognition at 88 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 period-end the period-end Bank acceptance bill 120,858,754.05 Total 120,858,754.05 (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 41,491,163.00yuan by 61.08 % over the period-begin, which was mainly due to the increase of payment for goods by endorsing the received bank acceptance bill. 5. Accounts receivable (1) Accounts receivable disclosed by category Unit: RMB 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 10,062,3 10,062,3 10,064, 10,064,66 1.11% 100.00% 1.59% 100.00% which bad debt 78.10 78.10 664.92 4.92 provision separately accrued Accounts receivable withdrawn bad debt 899,878, 37,444,5 862,433,8 624,003 28,745,59 595,257,95 provision according 98.89% 4.16% 98.41% 4.61% 370.83 03.88 66.95 ,551.87 7.87 4.00 to credit risks characteristics 909,940, 47,506,8 862,433,8 634,068 38,810,26 595,257,95 Total 100.00% 5.22% 100.00% 6.12% 748.93 81.98 66.95 ,216.79 2.79 4.00 Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end √ Applicable □ Not applicable Unit: RMB 89 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Accounts receivable(by Closing balance units) Accounts receivable Bad debt provision Withdrawal proportion Withdrawal reasons The debtor was at a continuous loss due to Suzhou Mont Lighting the scale and market and 10,062,378.10 10,062,378.10 100.00% Co., Ltd. other reasons, so now it is not suitable to produce continuously. Total 10,062,378.10 10,062,378.10 -- -- In the groups, accounts receivable adopting aging analysis method to accrue bad debt provision: √ Applicable □ Not applicable Unit: RMB Closing balance Aging Accounts receivable Bad debt provision Withdrawal proportion Subitem within 1 year Within 1 year 865,599,141.43 25,967,974.24 3.00% Subtotal within 1 year 865,599,141.43 25,967,974.24 3.00% 1 to 2 years 16,117,550.89 1,611,755.08 10.00% 2 to 3 years 2,434,424.81 730,327.45 30.00% Over 3 years 15,727,253.70 9,134,447.11 58.08% 3 to 4 years 11,627,150.17 5,813,575.09 50.00% 4 to 5 years 3,896,157.57 3,116,926.06 80.00% Over 5 years 203,945.96 203,945.96 100.00% Total 899,878,370.83 37,444,503.88 4.16% Notes of confirming the basis of the groups: 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: Naught (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 9,788,103.48yuan; the amount of the reversed or collected part during the Reporting Period was of RMB 0.00. (3) The actual write-off accounts receivable Unit: RMB 90 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Item Amount Beijing Senjiyuan Electronic Components Sales Center 339,032.24 Nanjing Weiyiming Photoelectric Technology Co., Ltd 303,567.17 TEERA-MONGKOL INDUSTRY PUBLIC 213,202.93 Chenzhou Wangshengda Materials Co., Ltd 99,999.82 Panjin Panfeng Hardware Sales Co., Ltd 17,018.73 Bureau in Finance in 2013 14,703.90 Other retails accounts 103,959.50 Total 1,091,484.29 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 Name of units Nature Amount Aging First Payment for goods 86,950,173.28 Within1 year Second Payment for goods 31,389,810.51 Within 1 year Third Payment for goods 25,.078,424.52 Within 1 year Fourth Payment for goods 18,267,713.00 Within 1 year Fifth Payment for goods 14,737,760.00 Within 1 year Total 176,423,881.31 (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 91 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Closing balance Opening balance Aging Amount Proportion Amount Proportion Within 1 year 22,472,029.30 81.17% 25,191,421.39 83.16% 1 to 2 years 742,018.33 2.68% 3,788,046.20 12.51% 2 to 3 years 3,545,685.81 12.81% 616,046.47 2.03% Over 3 years 925,285.52 3.34% 696,493.05 2.30% Total 27,685,018.96 -- 30,292,007.11 -- (2) Top 5 of the closing balance of the prepayment collected according to the prepayment target Unit: RMB Name of units Closing balance Aging Percentage of total Relationship amount(%) First Non-related relationship 2,900,000.00 2 to 3 years 10.47% Second Non-related relationship 2,094,715.75 Within 1 year 7.57% Third Non-related relationship 1,996,800.00 Within 1 year 7.21% Fourth Non-related relationship 1,199,640.00 Within 1 year 4.33% Fifth Non-related relationship 935,476.71 Within 1 year 3.38% Total 9,126,632.46 32.97% 7. Interest receivable (1) Category of interest receivable Unit: RMB Item Closing balance Opening balance Deposits on a regular basis 2,209,500.00 2,555,260.82 Finance products 1,008,417.15 2,057,145.98 Total 3,217,917.15 4,612,406.80 (2) Significant overdue interest Naught 8. Dividend receivable Naught 92 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 9. Other accounts receivable (1) Other accounts receivable disclosed by category Unit: RMB Closing balance Opening balance Book balance Bad debt provision Book balance Bad debt provision Category Withdra Book Book Proportio wal Proportio Withdrawal Amount Amount value Amount Amount value n proportio n proportion n Other accounts receivable withdrawn 38,455,6 2,439,18 36,016,47 13,527, 1,549,488 11,977,660 bad debt provision 99.24% 6.34% 97.86% 11.45% 62.27 5.62 6.65 149.04 .46 .58 according to credit risks characteristics Other accounts receivable with insignificant single 295,120. 295,120. 295,120 295,120.0 0.76% 100.00% 2.14% 100.00% amount for which 00 00 .00 0 bad debt provision separately accrued 38,750,7 2,734,30 36,016,47 13,822, 1,844,608 11,977,660 Total 100.00% 7.06% 100.00% 13.35% 82.27 5.62 6.65 269.04 .46 .58 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 Closing balance Aging Other accounts receivable Bad debt provision Withdrawal proportion Subitem within 1 year Within 1 year 33,054,794.93 991,643.84 3.00% Subtotal within 1 year 33,054,794.93 991,643.84 3.00% 1 to 2 years 1,972,699.38 197,269.94 10.00% 2 to 3 years 3,107,684.06 932,305.22 30.00% Over 3 years 320,483.90 317,966.62 99.21% 3 to 4 years 2,233.32 1,116.66 50.00% 4 to 5 years 7,003.10 5,602.48 80.00% 93 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Over 5 years 311,247.48 311,247.48 100.00% Total 38,455,662.27 2,439,185.62 6.34% 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 889,703.51yuan, the amount of reversed or recovered bad debt provision in the Reporting Period RMB 000. (3) Particulars of the actual verification of other accounts receivable during the Reporting Period Unit: RMB Item Amount Other retails accounts 6.35 Total 6.35 Of which: other significant write-off accounts receivable: Naught (4) Other account receivable classified by account nature Unit: RMB Nature Closing book balance Opening book balance VAT export tax refunds 15,120,172.36 Performance bond 3,095,428.94 1,959,752.60 Staff borrow and deposit 11,854,983.51 5,767,808.81 Water & electricity fees 874,384.16 955,738.35 Advance money for street light 3,777,672.16 2,523,547.23 construction Internal business group 295,120.00 295,120.00 Other 3,733,021.14 2,320,302.05 Total 38,750,782.27 13,822,269.04 (5) The top five other account receivable classified by debtor at period-end Unit: RMB 94 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Closing balance of Name of units Nature Closing balance Aging Proportion% bad debt provision VAT export tax First 15,120,172.36 Within 1 year 39.02% 453,605.17 refunds Advance money for Second street light 3,777,672.16 2 to 3 years 9.75% 794,687.92 construction Third Other 1,801,136.00 Within 1 year 4.65% 54,034.08 Application fees for Fourth 1,382,012.61 Within 1 year 3.57% 41,460.38 certification Fifth Performance bond 1,332,058.60 Within 1 year 3.44% 39,961.76 Total -- 23,413,051.73 -- 60.42% 1,383,749.31 (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 (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 Closing balance Opening balance Item Falling price Falling price Book balance Book value Book balance Book value reserves reserves Raw materials 91,904,445.39 5,289,467.13 86,614,978.26 116,197,403.06 1,635,294.87 114,562,108.19 Goods in process 52,788,483.44 52,788,483.44 28,522,590.52 28,522,590.52 Inventory goods 472,426,724.68 13,423,926.27 459,002,798.41 443,843,318.14 14,938,179.05 428,905,139.09 Self-manufacture 133,746,869.72 1,189,614.35 132,557,255.37 179,867,083.78 579,873.99 179,287,209.79 95 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 d semi-finished product Low-value 2,188,275.52 2,188,275.52 2,404,557.60 2,404,557.60 fugitive items Total 753,054,798.75 19,903,007.75 733,151,791.00 770,834,953.10 17,153,347.91 753,681,605.19 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 Increased amount Decreased amount Item Opening balance Reverse or Closing balance Withdrawal Other Other write-off Raw materials 1,635,294.87 5,299,351.65 1,645,179.39 5,289,467.13 Inventory goods 14,938,179.05 7,306,926.80 8,821,179.58 13,423,926.27 Self-manufacture d semi-finished 579,873.99 775,633.91 165,893.55 1,189,614.35 product Total 17,153,347.91 13,381,912.36 10,632,252.52 19,903,007.75 (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 96 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Item Closing balance Opening balance Deductible input tax of VAT 46,262,718.17 41,181,826.53 Advance payment of enterprise income tax 23,635.19 Bank financial products 420,000,000.00 400,000,000.00 Total 466,262,718.17 441,205,461.72 14. Available-for-sale financial assets (1) List of available-for-sale financial assets Unit: RMB Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserves reserves Available-for-sale equity 1,764,589,646. 1,758,739,646. 1,738,000,857.0 5,850,000.00 5,850,000.00 1,732,150,857.01 instruments 36 36 1 Measured by fair 1,454,989,886. 1,454,989,886. 1,427,901,096.6 1,427,901,096.63 value 20 20 3 Measured by cost 309,599,760.16 5,850,000.00 303,749,760.16 310,099,760.38 5,850,000.00 304,249,760.38 1,764,589,646. 1,758,739,646. 1,738,000,857.0 Total 5,850,000.00 5,850,000.00 1,732,150,857.01 36 36 1 (2) Available-for-sale financial assets measured by fair value at the period-end Unit: RMB 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 1,454,989,886.20 1,454,989,886.20 Changed amount of the fair value that be accumulatively recorded 1,335,488,158.79 1,335,488,158.79 in other comprehensive income 97 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (3) Available-for-sale financial assets measured by cost at the period-end Unit: RMB Book balance Depreciation reserves Shareholdi Cash ng bonus of Investee Period-beg Period-beg proportion the Increase Decrease Period-end Increase Decrease Period-end in in 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 5.00% Ltd. Chengdu Hongbo 6,000,000. 6,000,000. 6.94% Industrial 00 00 Co., Ltd. Xiamen 292,574,13 292,574,13 5.85% Bank 3.00 3.00 Guangdon g Less than Developm 500,000.00 500,000.00 5.00% ent Bank Co., Ltd. Foshan Fochen Road 5,175,627. 4,675,627. Developm 500,000.22 7.66% 38 16 ent Company Limited 310,099,76 309,599,76 5,850,000. 5,850,000. Total 500,000.22 -- 0.38 0.16 00 00 (4) Changes of the impairment of the available-for-sale financial assets during the Reporting Period Unit: RMB Category of the Available-for-sale equity Available-for-sale available-for-sale Total instruments liabilities instruments financial assets Withdrawn impairment 5,850,000.00 5,850,000.00 balance at the 98 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 period-begin Withdrawn impairment 5,850,000.00 5,850,000.00 balance at the period-end (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 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 500,000.22yuan. 15. Investment held-to-maturity Naught 16. Long-term accounts receivable Naught 17. Long-term equity investment Unit: RMB 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 29,836,24 1,286,376 31,122,62 Energy 6.62 .00 2.62 Exploitati on Co., Ltd. Shenzhen 180,558,6 257,589.7 2,080,390 178,735,8 Primatron 86.07 9 .50 85.36 99 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 ix (Nanho) Electronic s Ltd. 210,394,9 1,543,965 2,080,390 209,858,5 Subtotal 32.69 .79 .50 07.98 210,394,9 1,543,965 2,080,390 209,858,5 Total 32.69 .79 .50 07.98 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 Houses and Machinery Transportation Electronic Item Total buildings equipment equipment equipment I. Original book value: 1. Opening 643,574,297.79 810,592,982.55 22,120,160.45 23,976,160.84 1,500,263,601.63 balance 2. Increased 4,589,391.32 28,207,291.04 992,312.85 994,921.51 34,783,916.72 amount of the period (1) Purchase 1,296,522.30 20,846,321.47 992,312.85 994,921.51 24,130,078.13 (2) Transfer of project under 3,292,869.02 7,360,969.57 10,653,838.59 construction (3) Enterprises combination increase 100 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 3. Decreased 1,970,199.57 67,346,113.02 406,278.29 68,214.56 69,790,805.44 amount of the period (1) Disposal or 1,970,199.57 61,308,043.53 406,278.29 68,214.56 63,752,735.95 scrap (2) Equipment 6,038,069.49 6,038,069.49 transformation 4. Closing balance 646,193,489.54 771,454,160.57 22,706,195.01 24,902,867.79 1,465,256,712.91 II. Accumulated desperation 1. Opening 385,133,462.44 597,616,093.63 15,094,925.78 16,342,970.63 1,014,187,452.48 balance 2. Increased 12,231,418.42 21,710,315.76 702,193.40 1,755,214.89 36,399,142.47 amount of the period (1) Withdrawal 12,231,418.42 21,710,315.76 702,193.40 1,755,214.89 36,399,142.47 3. Decreased 412,154.52 57,224,217.64 385,964.37 60,042.55 58,082,379.08 amount of the period (1) Disposal or 412,154.52 53,078,764.67 385,964.37 60,042.55 53,936,926.11 scrap (2) Equipment 4,145,452.97 4,145,452.97 transformation 4. Closing balance 396,952,726.34 562,102,191.75 15,411,154.81 18,038,142.97 992,504,215.87 III. Depreciation reserves 1. Opening 40,068,791.46 428.03 40,069,219.49 balance 2. Increased amount of the period (1) Withdrawal 3. Decreased 4,214,033.78 4,214,033.78 amount of the period (1) Disposal or 4,165,026.73 4,165,026.73 scrap (2) Equipment 49,007.05 49,007.05 transformation 4. Closing balance 35,854,757.68 428.03 35,855,185.71 101 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 IV. Book value 1. Closing book 249,240,763.20 173,497,211.14 7,295,040.20 6,864,296.79 436,897,311.33 value 2. Opening book 258,440,835.35 172,908,097.46 7,025,234.67 7,632,762.18 446,006,929.66 value (2) List of temporarily idle fixed assets Unit: RMB Accumulated Depreciation Item Original book value Book value Remark depreciation reserves Name of the announcement: Announcement on Withdrawing the Preparation for the Assets Impairment T5, T8, on the Idle energy-saving lamp 95,099,861.20 60,999,110.87 33,801,743.65 299,006.68 Equipments and production line Construction in Progress; the Announcement No.: 2015-030; disclosure website: www.cninfo.com.cn (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 20. Construction in progress (1) List of construction in progress Unit: RMB 102 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserves reserves Construction in 147,360,531.44 147,360,531.44 71,479,325.91 71,479,325.91 progress Total 147,360,531.44 147,360,531.44 71,479,325.91 71,479,325.91 (2) Changes of significant construction in progress Unit: RMB 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 Fuwan intellige 49,000,0 12,977,7 12,977,7 nt 26.49% 30.00% Other 00.00 41.38 41.38 worksho pH D project of Gaoming 30,000,0 18,949,6 2,753,74 21,703,3 72.34% 95.00% Other standard 00.00 19.56 5.95 65.51 worksho p Fuwan standard 30,000,0 16,567,3 6,656,84 23,224,1 77.41% 95.00% Other worksho 00.00 14.48 3.69 58.17 pE Fuwan standard 26,400,0 7,786,23 7,786,23 29.49% 35.00% Other worksho 00.00 0.10 0.10 p K2 Fuwan 26,400,0 7,949,14 7,949,14 30.11% 35.00% Other standard 00.00 7.56 7.56 103 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 worksho p K3 Fuwan standard 22,400,0 6,941,59 6,941,59 30.99% 32.00% Other worksho 00.00 3.11 3.11 p J1 Fuwan standard 22,400,0 6,803,03 6,803,03 30.37% 32.00% Other worksho 00.00 2.32 2.32 p J2 Automat ion equipme nt system of 22,000,0 5,533,33 5,533,33 25.15% 30.00% Other intellige 00.00 3.21 3.21 nt worksho p (worksh op H) 9 assembly 11,000,0 7,981,04 2,019,64 10,000,6 lines of 90.92% 95.00% Other 00.00 4.20 8.42 92.62 LED (16005) LEDT8 automati c line 6,500,00 2,907,39 3,110,43 6,017,83 92.58% 99.00% Other transfor 0.00 8.19 7.44 5.63 mation (16033) 246,100, 46,405,3 62,531,7 108,937, Total -- -- -- 000.00 76.43 53.18 129.61 (3) List of the withdrawal of the impairment provision of the construction in progress Naught 21. Engineering material Naught 104 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 22. Liquidation of fixed assets Naught 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 Item Land use right Patent Non-patents Software use right Total I. Original book value 1. Opening 211,719,938.60 200,000.00 2,773,651.87 214,693,590.47 balance 2. Increased amount of the period (1) Purchase (2) Internal R &D (3) Increase from enterprise combination 3. Decrease in the Reporting Period (1) Disposal 4. Closing 211,719,938.60 200,000.00 2,773,651.87 214,693,590.47 105 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 balance II. Total accrued amortization 1. Opening 53,104,711.50 200,000.00 1,058,483.84 54,363,195.34 balance 2. Increased 1,937,293.01 220,515.84 2,157,808.85 amount of the period (1) Withdrawal 1,937,293.01 220,515.84 2,157,808.85 3. Decrease in the Reporting Period (1) Disposal 4. Closing 55,042,004.51 200,000.00 1,278,999.68 56,521,004.19 balance III. Depreciation reserves 1. Opening balance 2. Increased amount of the period (1) Withdrawal 3. Decrease in the Reporting Period (1) Disposal 4. Closing balance IV. Book value 1. Book value of the 156,677,934.09 1,494,652.19 158,172,586.28 period-end 2. Book value of the 158,615,227.10 1,715,168.03 160,330,395.13 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%. 106 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (2) Details of fixed assets failed to accomplish certification of land use right Naught 26. R&D expenses Naught 27. Goodwill (1) Original book value of goodwill Naught (2) Impairment provision of goodwill Naught 28. Long-term unamortized expenses Unit: RMB Amortization Item Opening balance Increased amount Decrease Closing balance amount Maintenance and 6,897,119.78 1,683,365.04 1,647,573.52 6,932,911.30 decoration expenses Total 6,897,119.78 1,683,365.04 1,647,573.52 6,932,911.30 29. Deferred income tax assets/deferred income tax liabilities (1) Deferred income tax assets had not been off-set Unit: RMB Closing balance Opening balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference assets difference assets Assets impairment 136,128,598.22 20,625,526.93 128,070,435.31 19,448,040.38 provision Unrealized profits of 476,596.87 71,489.53 1,356,293.17 203,443.98 internal transactions Deductible losses 16,382,698.72 4,095,674.68 16,435,405.51 4,108,851.38 Depreciation of fixed 67,654,979.71 10,479,436.86 65,682,019.37 10,183,492.79 assets 107 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Payroll payable 36,389,097.70 5,458,364.66 63,987,177.61 9,604,089.91 Total 257,031,971.22 40,730,492.66 275,531,330.97 43,547,918.44 (2) Deferred income tax liabilities had not been off-set Unit: RMB 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 1,335,488,158.79 200,323,223.82 1,308,399,369.22 196,259,905.39 financial assets Share of other comprehensive income of investees that cannot 25,684,598.14 3,852,689.72 25,684,598.14 3,852,689.72 be reclassified into profit/loss under the equity method Total 1,361,172,756.93 204,175,913.54 1,334,083,967.36 200,112,595.11 (3) Deferred income tax assets or liabilities listed by net amount after off-set Unit: RMB Mutual set-off amount of Amount of deferred Mutual set-off amount of Amount of deferred deferred income tax income tax assets or deferred income tax income tax assets or Item assets and liabilities at liabilities after off-set at assets and liabilities at liabilities after off-set at the period-end the period-end the period-begin the period-begin Deferred income tax 40,730,492.66 43,547,918.44 assets Deferred income tax 204,175,913.54 200,112,595.11 liabilities (4) List of unrecognized deferred income tax assets Naught (5) Deductible losses of unrecognized deferred income tax assets will due the following years Naught 108 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 30. Other non-current assets Unit: RMB 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 2,444,434.60 3,369,640.00 Total 44,200,134.60 45,125,340.00 31. Short-term loans Naught 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 Item Closing balance Opening balance Accounts payable 673,397,021.27 552,255,512.33 Total 673,397,021.27 552,255,512.33 (2) Notes of the accounts payable aging over one year Naught 36. Advance from customers (1) List of advance from customers Unit: RMB 109 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Item Closing balance Opening balance Prepayments 32,657,976.85 41,180,818.13 Total 32,657,976.85 41,180,818.13 (2) Significant advance from customers aging over one year Naught (3) Particulars of settled but unfinished projects formed by construction contract at period-end Naught 37. Payroll Payable (1) List of Payroll Payable Unit: RMB Item Opening balance Increase Decrease Closing balance I. Short-term salary 96,021,156.06 319,106,399.00 346,744,195.73 68,383,359.33 II. Welfare after demission - defined 25,197,964.53 25,197,964.53 contribution plans Total 96,021,156.06 344,304,363.53 371,942,160.26 68,383,359.33 (2) List of Short-term Salary Unit: RMB Item Opening balance Increase Decrease Closing balance 1. Salary, bonus, allowance, 95,595,393.49 282,014,781.96 309,691,654.41 67,918,521.04 subsidy 2. Employee welfare 12,695,704.13 12,695,704.13 3. Social insurance 15,681,813.55 15,681,813.55 Including: Medical insurance 12,905,594.63 12,905,594.63 premiums Work-related 1,561,453.07 1,561,453.07 injury insurance Maternity insurance 1,214,765.85 1,214,765.85 4. Housing fund 5,987,908.00 5,987,908.00 5. Labor union budget and 425,762.57 2,726,191.36 2,687,115.64 464,838.29 employee education budget 110 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Total 96,021,156.06 319,106,399.00 346,744,195.73 68,383,359.33 (3) List of Drawing Scheme Unit: RMB Item Opening balance Increase Decrease Closing balance 1. Basic pension benefits 24,306,411.37 24,306,411.37 2. Unemployment 891,553.16 891,553.16 insurance Total 25,197,964.53 25,197,964.53 38. Taxes Payable Unit: RMB Item Closing balance Opening balance VAT 18,160,385.85 9,504,368.23 Corporate income tax -171,758.70 121,469,524.92 Personal income tax 610,225.20 452,181.32 Urban maintenance and construction tax 1,262,089.71 947,172.36 Education Surcharge 904,746.30 680,460.70 Property tax 1,104,316.04 4,259,219.31 Land use tax 2,334,756.55 804,737.31 Other taxes 166,446.47 164,980.57 Total 24,371,207.42 138,282,644.72 Other notes: The closing balance of taxes payable drops 82.38%, RMB113,911,437.30yuan. compared to that of the beginning of the period, which is from the payment of increase of corporate income tax caused by revenues generated from sales of shares of Guoxuan High-tech Co., Ltd. in the fourth quarter of the same period of last year. 39. Interest Payable Naught 40. Dividends Payable Unit: RMB Item Closing balance Opening balance Common stock dividends 6,287,923.09 111 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Total 6,287,923.09 Other notes: including the significant dividends payable unpaid for more than one year, the reason for unpayment shall be disclosed: The subsidiary Foshan Taimei Times Lamps and Lanterns Co., Ltd. has distributed and paid in the reporting period the profits of 2013 and 2014 allocated at the beginning of the year. 41. Other Accounts Payable (1) Other Accounts Payable Listed by Nature of the Account Unit: RMB Item Closing balance Opening balance Compensation for lawsuit 1,762,533.43 1,762,533.43 performance bond 18,404,130.82 20,564,161.28 Relevant fees of sale 1,327,650.91 15,634,331.32 Escrow of housing provident fund, damages, default money and down 8,076,410.52 8,076,410.52 payment Others 2,614,851.86 4,066,902.26 Total 32,185,577.54 50,104,338.81 (2) Other Significant Accounts Payable with Aging over One Year Unit: RMB Item Closing balance Unpaid/ Un-carry-over reason Escrow of housing provident fund, damages, default money and down 8,076,410.52 payment Total 8,076,410.52 -- 42. Liabilities Classified as Holding for Sale Naught 43. Non-current Liabilities Due within 1 Year Naught 44. Other Current Liabilities Naught 112 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 Revenue Unit: RMB Item Opening balance Increase Decrease Closing balance Reason Government Government 10,449,768.49 1,500,000.00 77,499.96 11,872,268.53 subsidies related to subsidies assets/revenues Total 10,449,768.49 1,500,000.00 77,499.96 11,872,268.53 -- Item involving government subsidies: Unit: RMB Amount recorded into Related to Amount of newly Item Opening balance non-operating Other changes Closing balance assets/related subsidy income in report income period LED production technical Related to the 9,852,274.95 9,852,274.95 transformation assets project 113 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Production line of 50 million Related to the 465,000.15 77,499.96 387,500.19 energy-saving assets fluorescent lamp New type of low cost silicon substrate LED Related to the 29,668.32 29,668.32 light source income module technology Standard optical components testing laboratory capacity Related to the 102,825.07 102,825.07 construction and income products quality guarantee engineering Suggestion from the Electro-optical Institute of Related to the 1,000,000.00 1,000,000.00 Foshan income Electrical and Lighting Co., Ltd. Overseas protection plan of Related to the 500,000.00 500,000.00 intellectual income property of FSL Total 10,449,768.49 1,500,000.00 77,499.96 11,872,268.53 -- 52. Other Non-current Liabilities Naught 53. Share Capital Unit: RMB Increase/decrease (+/-) Opening Closing New shares Capitalized balance Bonus shares Others Subtotal balance issued Capital 114 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 reserves The sum of 1,272,132,868. 1,272,132,868. shares 00 00 Other notes: 54. Other Equity Instruments Naught 55. Capital Surplus Unit: RMB Item Opening balance Increase Decrease Closing balance Capital premium 278,575,487.53 278,575,487.53 Other capital reserves 7,245,971.54 7,245,971.54 Total 285,821,459.07 285,821,459.07 56. Treasury Stock Naught 57. Other Comprehensive Income Unit: RMB Reporting period Less: recorded in other Amount comprehensive Attributable Opening before income in Less: to owners Attributable Closing Item balance income tax prior period Income tax of the to minority balance in current and transferred expense Company shareholder period to profit or after tax s after tax loss in current period II. Other comprehensive income 1,133,971,37 27,088,789. 4,063,318.4 23,025,471. 1,156,996 reclassify into profits and losses 2.25 57 3 14 ,843.39 Including: shares enjoyed in the other comprehensive income reclassified 21,831,908.4 21,831,90 into profits and losses under the 2 8.42 equity method 115 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Profits or losses from the 1,112,139,46 27,088,789. 4,063,318.4 23,025,471. 1,135,164 change of fair value of available for 3.83 57 3 14 ,934.97 sale financial assets 1,133,971,37 27,088,789. 4,063,318.4 23,025,471. 1,156,996 Total of other comprehensive income 2.25 57 3 14 ,843.39 58. Special Reserves Naught 59. Surplus Reserves Unit: RMB Item Opening balance Increase Decrease Closing balance Statutory surplus 597,038,383.45 597,038,383.45 reserves Discretionary surplus 136,886,568.36 136,886,568.36 reserves Total 733,924,951.81 733,924,951.81 60. Retained Earnings Unit: RMB Item Reporting Period Last period Opening balance of retained profits before 1,564,615,925.99 613,661,381.40 adjustments Opening balance of retained profits after 1,564,615,925.99 613,661,381.40 adjustments Add: Net profit attributable to owners of the 228,494,660.57 206,925,812.72 Company Dividend of common stock payable 534,295,804.56 15,901,660.85 Closing retained profits 1,258,814,782.00 804,685,533.27 List of adjustment of opening retained profits: 1) RMB0.00yuan opening retained profits was affected by retrospective adjustment conducted according to the Accounting Standards for Business Enterprises and relevant new regulations. 2) RMB0.00yuan opening retained profits was affected by changes on accounting policies. 3) RMB0.00 yuanopening retained profits was affected by correction of significant accounting errors. 4) RMB0.00yuan opening retained profits was affected by changes in combination scope arising from same control. 5) RMB0.00yuan opening retained profits was affected totally by other adjustments. 116 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 61. Revenues and Operating Costs Unit: RMB Reporting Period Same period of last year Item Sales revenue Cost of sales Sales revenue Cost of sales Main operations 2,010,535,149.65 1,537,416,165.51 1,743,092,467.69 1,315,261,790.95 Other operations 13,390,433.19 9,515,614.34 12,578,459.75 7,720,769.75 Total 2,023,925,582.84 1,546,931,779.85 1,755,670,927.44 1,322,982,560.70 62. Business Tax and Surcharges Unit: RMB Item Reporting Period Same period of last year Urban maintenance and construction tax 7,980,261.34 7,002,504.08 Education Surcharge 5,707,899.61 5,015,667.87 Property tax 3,045,704.60 Land use tax 2,621,884.53 Vehicles and vessels use tax 13,909.92 Stamp duty 1,016,936.24 Business tax 233,406.51 Embankment-protection fees 6.09 Total 20,386,602.33 12,251,578.46 Other notes: the five increased tax items are reclassified from administration expenses in accordance with the No. 22 stipulation of Finance & Accounting [2016]. 63. Sale Expenses Unit: RMB Item Reporting Period Same period of last year Transport fees 31,103,632.14 26,988,943.15 Salary 30,517,319.21 23,124,058.32 Business propagandize fee 3,408,430.38 5,771,832.24 Business travel charges 5,183,499.37 3,730,926.88 Sales promotion fee& dealer meeting 7,656,851.44 8,919,049.44 expense Street light project maintenance fee 40,600.00 Others 3,782,261.15 4,676,397.38 117 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Total 81,651,993.69 73,251,807.41 64. Administration Expenses Unit: RMB Item Reporting Period Same period of last year Employee’s remuneration 41,767,426.90 25,133,604.07 Depreciation charge 9,552,900.65 9,506,297.68 Tax expenses 7,387,142.35 Office expenses 5,129,871.30 4,466,075.16 Amortization of intangible assets 2,157,808.85 2,100,959.51 R&D expenses 5,467,714.83 3,198,358.61 Testing expense 1,046,717.25 680,292.67 Others 33,668,381.82 29,645,097.89 Total 98,790,821.60 82,117,827.94 65. Financial Expenses Unit: RMB Item Reporting Period Same period of last year Interest expenses Less: interest income 15,609,163.27 6,489,563.72 Exchange gains and losses 6,502,463.05 -556,267.25 Others 1,990,792.86 600,077.93 Total -7,115,907.36 -6,445,753.04 Other notes: 66. Asset Impairment Loss Unit: RMB Item Reporting Period Same period of last year I. Bad debt loss 10,677,806.99 14,692,768.91 II. Inventory falling price loss 13,381,912.36 21,160,604.92 Total 24,059,719.35 35,853,373.83 67. Gains and Losses from Changes in Fair Value Naught 118 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 68. Investment Income Unit: RMB Item Reporting Period Same period of last year Long-term equity investment income 1,543,965.79 -19,640.12 accounted by equity method Investment income received from disposal of financial assets measured by fair value and the 261,818.10 changes be included in the current profits and losses during holding period Investment income received from holding of 6,560,422.50 10,950,922.50 available-for-sale financial assets Investment income received from financial 6,404,893.95 2,659,136.99 products Others -500,000.22 -131,489.70 Total 14,009,282.02 13,720,747.77 69. Other Income Naught 70. Non-operating Gains Unit: RMB 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 non-current assets Including: Gains from disposal 20,253.97 of fixed assets Government subsidies 3,869,949.96 505,099.96 3,869,949.96 Others 2,152,445.92 1,049,662.65 2,152,445.92 Total 6,022,395.88 1,575,016.58 6,022,395.88 Government subsidies recorded into current profits and losses Unit: RMB Whether subsidies Special Related to Distribution Distribution Reporting Same period Item Nature influence the subsidy or assets/related entity reason Period of last year current not income profits and 119 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 losses or not Due to engaged in special industry that the state Production encouraged line of 50 and million supported, Related to Subsidy No No 77,499.96 77,499.96 energy-savin gained assets g fluorescent subsidy lamp (obtaining in line with the law and the regulations of national policy) Special funds Subsidy from for export R&D enterprises Technical Related to Award No No 26,000.00 69,000.00 exploiting the updating and income international transformatio market n, etc. Subsidy from Award for R&D adopting Technical Related to international Award No No 150,000.00 updating and income standard transformatio products n, etc. Chancheng Subsidy from District R&D Economy and Technical Related to Science Award No No 300,000.00 66,000.00 updating and income Promotion transformatio Bureau Talent n, etc. Subsidy Subsidy from R&D Support fund Technical Related to for import Award No No 3,249,240.00 updating and income and export transformatio n, etc. 120 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Subsidy from Project grants R&D from Technical Related to National Award No No 10,000.00 updating and income Spark transformatio Program n, etc. Subsidy from R&D Governmenta Technical Related to Award No No 20,000.00 l reward fund updating and income transformatio n, etc. The Subsidy from development R&D of science Technical Related to and Award No No 93,600.00 updating and income technology transformatio plan project n, etc. funds Subsidy from R&D Other odd Technical Related to government Award No No 187,210.00 49,000.00 updating and income subsidies transformatio n, etc. Total -- -- -- -- -- 3,869,949.96 505,099.96 -- 71. Non-operating Expenses Unit: RMB 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 4,255,164.43 223,092.25 4,255,164.43 assets Including: Loss on disposal of 4,255,164.43 223,092.25 4,255,164.43 fixed assets Outward donation 2,000.00 2,000.00 The inventory scrap loss 3,403,353.00 Lawsuit compensation 100,000.00 Others 512,609.26 1,190,611.69 512,609.26 121 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Total 4,769,773.69 4,917,056.94 4,769,773.69 72. Income Tax Expense (1) Lists of Income Tax Expense Unit: RMB Item Reporting Period Same period of last year Current income tax expense 39,780,075.57 44,968,418.65 Deferred income tax expense 2,817,425.78 -5,542,441.36 Total 42,597,501.35 39,425,977.29 (2) Adjustment Process of Accounting Profit and Income Tax Expense Unit: RMB Item Reporting Period Total profits 274,482,477.59 Current income tax expense accounted by tax and relevant 41,055,651.79 regulations Influence of different tax rate suitable to subsidiary 3,120,459.39 Influence of income tax before adjustment -362,951.59 Influence of non taxable income -1,215,658.24 Income tax expense 42,597,501.35 73. Other Comprehensive Income For details, please refer to Notes on major items in consolidated financial statements of the Company, 57. 74. Information of Cash Flow Statement (1) Other Cash Received Relevant to Operating Activities Unit: RMB Item Reporting Period Same period of last year Deposit interest 17,037,947.97 5,465,229.02 Income from insurance compensation 132,451.15 2,217,602.70 Guaranteed income -3,637,333.34 2,428,184.00 Property and rental income 1,737,139.33 1,058,343.21 Income from subsidy 5,010,204.36 939,625.32 122 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Income from waste 5,756,171.75 1,910,274.50 Others 2,857,134.88 1,038,449.92 Total 28,893,716.10 15,057,708.67 (2) Other Cash Paid Relevant to Operating Activities Unit: RMB Item Reporting Period Same period of last year Transport fees 50,931,038.88 32,535,287.92 Donations, punishment, lawsuit 63,859.62 12,680,691.76 compensation Advertising expense 10,719,132.28 9,850,522.41 Audit fees, attorney fees, appraisal cost 7,686,184.18 6,382,707.08 and detect cost Business office expenses 7,272,319.87 4,324,091.36 The spare parts, maintenance, and service 6,530,959.82 1,076,002.69 charge Margin 2,955,498.60 864,301.00 Business travel charges 7,085,185.69 4,541,469.24 Energy-saving promotion fee 368,987.65 Street light project construction and 1,378,623.48 1,677,736.31 maintenance Land rent and management fee 3,301,887.73 3,311,454.39 Trademark fee& patent fee 1,396,336.23 442,693.00 Others 8,568,952.86 4,121,304.08 Total 107,889,979.24 82,177,248.89 (3) Other Cash Received Relevant to Investment Activities Naught (4) Other Cash Paid Relevant to Investment Activity Unit: RMB Item Reporting Period Same period of last year Others 39,878.12 The future foreign exchange settlement 7,500,000.00 guarantee deposit 123 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Total 7,539,878.12 (5) Other Cash Received Relevant to Financing Activities Naught (6) Other Cash Paid Relevant to Financing Activities Naught 75. Supplemental Information for Cash Flow Statement (1) Supplemental Information for Cash Flow Statement Unit: RMB Supplemental information Reporting Period Same period of last year 1. Reconciliation of net profit to net cash -- -- flows generated from operating activities Net profit 231,884,976.24 206,612,262.26 Add: Provision for impairment of assets 24,059,719.35 35,853,373.83 Depreciation of fixed assets, of oil-gas 36,399,142.47 37,519,048.12 assets, of productive biological assets Amortization of intangible assets 2,157,808.85 2,100,959.51 Long-term unamortized expenses 1,647,573.52 84,671.95 Losses on disposal of fixed assets, intangible assets and other long-term assets (gains: 166,326.42 -20,253.97 negative) Loss on retirement of fixed assets (gains: 4,088,838.01 223,092.25 negative) Financial cost (gains: negative) -956,368.36 Investment loss (gains: negative) -14,009,282.02 -13,720,747.77 Decrease in deferred income tax assets 2,817,425.78 -5,535,752.11 (gains: negative) Increase in deferred income tax liabilities -6,689.25 (“-” means decrease) Decrease in inventory (gains: negative) 17,780,154.35 84,829,939.85 Decrease in accounts receivable from -214,104,001.05 -161,829,594.02 operating activities (gains: negative) Increase in payables from operating -123,951,869.14 106,474,364.77 124 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 activities (decrease: negative) Net cash flows generated from operating -31,063,187.22 291,628,307.06 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 815,038,019.29 780,593,190.58 Less: Opening balance of cash 1,479,283,642.54 933,546,108.37 Net increase in cash and cash equivalents -664,245,623.25 -152,952,917.79 (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: RMB Item Closing balance Opening balance I. Cash 815,038,019.29 1,479,283,642.54 Including: Cash on hand 53,479.90 13,058.91 Bank deposit on demand 806,670,784.99 1,477,005,924.93 Other monetary funds on demand 8,313,754.40 2,264,658.70 III. Closing balance of cash and cash 815,038,019.29 1,479,283,642.54 equivalents 76. Note to Items in the Statement of Change in Equity Note to name of "other" item adjusted closing balance and the adjustment amount: Not applicable 77. Assets with Restricted Ownership and Right to Use Naught 125 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 78. Foreign Currency Monetary Items (1) Foreign Currency Monetary Items Unit: RMB Closing foreign currency Closing convert to RMB Item Exchange rate balance balance Monetary capital -- -- 18,611,366.01 Including: USD 2,735,685.92 6.7744 18,532,630.69 EUR 10,159.92 7.7496 78,735.32 Account receivable -- -- 279,015,390.10 Including: USD 41,186,730.94 6.7744 279,015,390.10 Prepayments 1,416,270.15 Including: USD 209,062.08 6.7744 1,416,270.15 Deposit received 12,497,338.74 Including: USD 1,844,789.01 6.7744 12,497,338.74 Other notes: (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 79. Arbitrage Qualitative and quantitative information of relevant arbitrage instruments, hedged risk in line with the type of arbitrage to disclose: Not applicable 80. Other Not applicable VIII. Change of Consolidation Scope 1. Business Combination Not under the Same Control (1) Business Combination Not under the Same Control during the Reporting Period Naught 126 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (2) Combination Cost and Goodwill Naught (3) The Identifiable Assets and Liabilities of Acquiree at Purchase Date Naught (4) The Profit or Loss from Equity Held by the Date before Acquisition in Accordance with the Fair Value Measured Again 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) The Explanations on the Situation in which the Merger Price Cannot Be determined Rationally at the Date of Acquisition or the End of the Period of Merger and Explanations on the Fair Value of the Acquiree’s Recognizable Assets and Liabilities Naught (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 127 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 Note to reasons for the changes in combination scope (Newly established subsidiary and subsidiary of liquidation) and relevant information: Naught 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 Production and Newly Foshan Foshan 100.00% Electric sales established Appliance 128 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (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 Fozhao Leasing Foshan Foshan Finance lease 100.00% established Co., Ltd. Nanjing Fozhao Lighting Production and Components Nanjing Nanjing 100.00% Purchase sales Manufacturing Co., Ltd. FSL Zhida Electric Production and Newly Foshan Foshan 51.00% Technology Co., sales established Ltd. (2) Significant Not Wholly Owned Subsidiary Unit: RMB 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% 602,673.03 5,630,109.21 Ltd. FSL Zhida Electric 49.00% 2,787,642.64 12,768,272.90 Technology Co., Ltd. (3) The Main Financial Information of Significant Not Wholly Owned Subsidiary Unit: RMB 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 liabilities assets liabilities 129 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Foshan Taimei Times 67,603, 9,341,04 76,944,3 58,177,3 58,177,3 66,911,9 7,126,97 74,038,9 57,280,8 57,280,8 Lamps and 322.46 4.99 67.45 36.75 36.75 91.61 9.81 71.42 50.82 50.82 Lanterns Co., Ltd. FSL Zhida Electric 93,769, 7,765,83 101,535, 60,386,0 60,386,0 38,927,7 13,176.7 38,940,9 3,480,45 3,480,45 Technolog 706.82 5.11 541.93 05.40 05.40 48.34 0 25.04 5.13 5.13 y Co., Ltd. Unit: RMB Reporting period The same period of last year Cash flow Cash flow Total Total Name Operation from Operation from Net profit consolidated Net profit consolidated revenue operating revenue operating income income activities activities Foshan Taimei Times 82,641,917.3 23,327,544.4 51,763,010.9 Lamps and 2,008,910.10 2,008,910.10 1,570,356.09 1,570,356.09 301,174.27 2 9 4 Lanterns Co., Ltd. FSL Zhida Electric 66,773,802.1 5,689,066.62 5,689,066.62 -3,415,460.17 Technology 5 Co., Ltd. (4) Significant Restrictions of Using Enterprise Group Assets and Paying Off Enterprise Group Debt Naught (5) Provide Financial Support or Other Support for Structure Entities Incorporate into the Scope of Consolidated Financial Statements Naught 2. The Transaction of the Company with Its Owner’s Equity Share Changed but Still Controlling the Subsidiary (1) Explanations on Changes of Owner’s Equity in the Subsidiary Naught 130 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (2) The Effects of Transactions on Minority Equity and Owner’s Equity Attributable to the Parent Company Naught 3. Equity in Joint Venture Arrangement or Associated Enterprise (1) List of Significant Joint Ventures or Associated Enterprises Naught (2) The Main Financial Information of Significant Joint Ventures Naught (3) The Main Financial Information of Significant Associated Enterprises Naught (4) The Summarized Financial Information of Unimportant Joint Ventures and Associated Enterprises Unit: RMB Closing balance/amount incurred in the Opening balance/amount incurred in last current period period Joint venture: -- -- The total of following items according to the -- -- shareholding proportions Associated enterprise: -- -- The total of following items according to the -- -- shareholding proportions Total investment book value 209,858,507.98 210,394,932.69 The total of following items according to the -- -- shareholding proportions --Net profits 1,543,965.79 432,767.03 --Other comprehensive income 21,831,908.42 --Total comprehensive income 1,543,965.79 26,159,605.45 (5) Explanations on Great Limitation of the Ability to Transfer Funds to the Company by Joint Ventures or Associated Enterprises Naught 131 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (6) Excess Loss Incurred in Joint Ventures or Associated Enterprises Naught (7) The Unrecognized Commitment Related to the Investment of Joint Ventures Naught (8) The Contingent Liabilities Related to the Investment of Joint Ventures or Associated Enterprises Naught 4. Significant Joint 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: equity investment, accounts 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. 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 132 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 N/A XI. The Disclosure of the Fair Value 1. Closing Fair Value of Assets and Liabilities Calculated by Fair Value Unit: RMB Fair value at the end of the reporting period Item First level Second level Third level Total Fair value measurement Fair value measurement Fair value measurement I. Consistent fair value -- -- -- -- measurement (II) Available-for-sale 1,454,989,886.20 1,454,989,886.20 financial assets (1) Equity tool investment 1,454,989,886.20 1,454,989,886.20 Total assets of consistent 1,454,989,886.20 1,454,989,886.20 fair value measurement II. Inconsistent fair value -- -- -- -- measurement 133 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 the balance sheet date 3. Consistent and Inconsistent Fair value Measurement Items at Level 2, Valuation Techniques Adopted, the Qualitative and Quantitative Information of Important Parameters Naught 4. Consistent and Inconsistent Fair Value Measurement Items at Level 3, Valuation Techniques Adopted, the Qualitative and Quantitative Information of Important Parameters Naught 5. Consistent Fair Value Measurement Items at Level 3, the Adjustment Information of the Opening and Closing Book Value, and the Sensitivity Analysis of Unobservable Parameters Naught 6. Consistent Fair Value Measurement Items, Conversion between All Levels during the Reporting Period, the Reasons for Conversion and Policies at the Time of Determination of Conversion Naught 7. Change and Change Reason of Valuation Techniques in the Reporting Period Naught 8. Particulars about the Fair Value of the Financial Assets and Financial Liabilities Not Measured at Fair Value Naught 9. Other Naught XII. Related Party and Related Transaction 1. Information Related to Parent Company of the Company Proportion of share Proportion of voting Registration Nature of Name of parent company Registered capital held by parent rights owned by place business company against the parent company 134 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Company (%) against the Company (%) Hong Kong Wah Shing Hong Kong / / 13.47% 13.47% Holding Company Limited Shenzhen Rising Investment Shenzhen Investment RMB120,000,000 5.12% 5.12% Development Co., Ltd. Guangdong Electronics Sales & Information Industry Group Guangzhou RMB462,000,000 4.74% 4.74% Production Ltd. Rising Investment Hong Kong / / 1.82% 1.82% Development Co., Ltd. Guangdong Rising Finance Zhuhai Investment RMB1,393,000,000 0.54% 0.54% Holding Co., Ltd. 25.70% 25.70% Notes: Information on the parent company: September 9, 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 December 4, 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 Wah Shing Holding Co., Ltd. was the wholly owned subsidiary of Electronics Group, and Electronics Group, Shenzhen Rising Investment Development Co., Ltd. ( Hereinafter referred to as " Shenzhen Rising " ), Guangdong Rising Finance Holding Co., Ltd. ( Hereinafter referred to as GD Rising Finance) and Rising Investment Development Co., Ltd. ( Hereinafter referred to as " Rising Investment" ) were the wholly owned subsidiaries of Guangdong Rising Assets Management Co., Ltd. In line with the relevant stipulation of Corporation Law and Rules on Listed Companies Acquisition, Electronics Group, Shenzhen Rising and Rising Investment were persons acting in concert. As of June 30, 2017, the aforesaid persons acting in concert holding total A, B share of the Company 000 shares, 000 % of total share equity of the Company. Guangdong Rising Assets Management Co., Ltd. became 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 For more details, please refer 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 135 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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-optic Machinery Co., Ltd. Company controlled by related natural person Prosperity (Xinxiang) Lighting Machinery Co., Ltd. Company controlled by related natural person Foshan Nation Star Optoelectronics Co. Ltd. Under same actual controller Guangdong Fenghua Advanced Technology Holding Co., Ltd. Under same actual controller Henan Rising High-Tech Investment Co., Ltd. Under same actual controller Guangdong Rising Finance Co., Ltd. Under same actual controller MTM Semiconductor Equipment Co., Ltd. Under same actual controller Guangdong HYB New Energy Co., Ltd. Under same actual controller 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: RMB The approval trade Whether exceed trade Same period of last Related-party Content Reporting Period credit credit or not year Prosperity Lamps Purchase of and Components 670,457.93 2,000,000.00 No 1,205,832.30 materials Ltd. Prosperity Electrical Purchase of -32,104.28 6,000,000.00 No 4,670,025.04 (China) Co., Ltd. materials Hangzhou Times Purchase of Lighting and 1,138,676.40 3,000,000.00 No 978,074.43 materials Electrical Co., Ltd. Foshan Nation Star Purchase of Optoelectronics 38,972,909.25 200,000,000.00 No 50,935,351.13 materials Co., Ltd. Guangdong Fenghua Advanced Purchase of 4,100,354.77 9,000,000.00 No 2,950,368.03 Technology Holding materials Co., Ltd. 136 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Guangdong HYB Purchase of New Energy Co., 933,432.24 No materials Ltd. MTM Purchase of Semiconductor 164,400.00 2,000,000.00 No equipment Equipment Co., Ltd. Information of sales of goods and provision of labor service Unit: RMB Related-party Content Reporting Period Same period of last year Prosperity Lamps and Sale of products 14,820,551.42 13,828,671.26 Components Ltd. Prosperity (Hangzhou) Lighting Sale of products 38,649.58 63,364.11 and Electrical Co., Ltd. Prosperity Electrical (China) Sale of products 177,652.13 127,799.81 Co., Ltd. Foshan Nation Star Sale of products 3,353.85 139,981.43 Optoelectronics Co., Ltd. Hangzhou Times Lighting and Sale of products 25,852.99 Electrical Co., Ltd. (2) Relating Commissioned Management/Contract and Entrusted Management/Outsourcing Naught (3) Information of Related Lease The Company serves as the lessor: Unit: RMB Rental income confirmed in the Rental income confirmed in the Name of leasee Type of leased assets Report period same period of last year The Company serves as the leasee: Unit: RMB Rental expense confirmed in the Rental expense confirmed in the Name of lessor Type of leased assets report period same period of last year Guangdong Electronics Information Industry Group Vehicles 24,500.00 Ltd. 137 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (4) Related-party Guarantee Naught (5) Borrowing and Lending of Related Parties Naught (6) Related Party Asset Transfer and Debt Restructuring Naught (7) Rewards for the Key Management Personnel Unit: RMB Item Reporting period Same period of last year Chairman of the Board 0.00 0.00 Director & GM 700,000.00 496,125.00 Chairman of the Supervisor 0.00 0.00 Secretary of the Board 400,000.00 358,314.00 CFO 400,000.00 298,595.00 Others 2,671,500.00 2,099,970.00 Total 4,171,500.00 3,253,004.00 (8) Other Related-party Transactions Naught 6. Receivables and Payables of Related Parties (1) Receivables Unit: RMB Closing balance Opening balance Name o f item Related-party Book balance Bad debt provision Book balance Bad debt provision Prosperity (Hangzhou) Lighting Accounts receivable 86,367.27 43,110.18 86,367.27 25,910.18 and Electrical Co., Ltd. Prosperity Electrical Accounts receivable 104,626.70 3,138.80 26,156.80 784.70 (China) Co., Ltd. 138 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Prosperity Lamps Accounts receivable and Components 5,987,859.76 179,635.79 4,121,642.27 123,649.27 Ltd. Henan Rising Other accounts High-tech 117,000.00 117,000.00 117,000.00 93,600.00 receivable Investment Co., Ltd. Guangdong Other accounts Electronics 5,000.00 500.00 5,000.00 150.00 receivable Information Industry Group Ltd. MTM Prepayment Semiconductor 164,400.00 Equipment Co., Ltd. Prosperity Electrical Prepayment 7,521.37 92,424.45 (China) Co., Ltd. Guangdong Rising Interest receivable 42,222.22 Finance Co., Ltd. (2) Payables Unit: RMB Name o f item Related-party Closing book balance Opening book balance Prosperity Lamps and Accounts payable 608,772.61 331,774.70 Components Ltd. Prosperity Electrical (China) Accounts payable 366,125.94 1,286,052.41 Co., Ltd. Foshan Nation Star Accounts payable 18,377,867.72 19,840,379.88 Optoelectronics Co., Ltd. Hangzhou Times Lighting and Accounts payable 879,884.85 243,897.33 Electrical Co., Ltd. Guangdong Fenghua Advanced Accounts payable 2,038,015.43 2,492,269.85 Technology Holding Co., Ltd. Guangdong HYB New Energy Accounts payable 1,391,666.63 Co., Ltd. Prosperity Lamps and Other accounts payable 448,258.77 Components Ltd. Prosperity Electrical (China) Other accounts payable 100,000.00 100,000.00 Co., Ltd. MTM Semiconductor Other accounts payable 47,860.00 47,860.00 Equipment Co., Ltd. 139 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 7. Related Party Commitment (1) 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 Nation Star Optoelectronics Co., Ltd. that is in competition with the business of the Company takes up only a small part in Nation Star’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 (2) Commitment: commitments made in acquisition documents or shareholding alteration documents Commitment maker: Controlling shareholder Type of commitment: About avoidance of horizontal competition Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made more commitments as follows to avoid horizontal competition with the Company: 1. They shall conduct supervision and restraint on the production and operation activities of themselves and their relevant enterprises so that besides the enterprise above that is in horizontal competition with the Company for now, if the products or business of them or their relevant enterprises become the same with or similar to those of the Company or its subsidiaries in the future, they shall take the following measures: (1) If the Company thinks necessary, they and their relevant enterprises shall reduce and wholly transfer their relevant assets and business; and (2) If the Company thinks necessary, it is given the priority to acquire first, by proper means, the relevant assets and business of them and their relevant enterprises. 2. All the commitments made by them to eliminate or avoid horizontal competition with the Company are also applicable to their directly or indirectly controlled subsidiaries. They are obliged to urge and make sure that other subsidiaries execute what’s prescribed in the relevant document and faithfully honor all the relevant commitments. 3. If they or their directly or indirectly controlled subsidiaries break the aforesaid commitments and thus cause a loss for the Company, they shall compensate the Company on a rational basis. Date of commitment making: 2015-12-04 Term of commitment: Long-standing Fulfillment: In execution (3) Commitment: commitments made in acquisition documents or shareholding alteration documents Commitment maker: Controlling shareholder Type of commitment: About reduction and regulation of related-party transactions Content: Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made a commitment that during their direct or indirect holding of the Company’s shares, they shall 1. Strictly abide by the regulatory documents of the CSRC and the SZSE, the Company’s Articles of 140 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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 (4) Commitment: commitments made in acquisition documents or shareholding alteration documents Commitment maker: Controlling shareholder Type of commitment: About independence In order to ensure the independence of the Company in business, personnel, asset, organization and finance, Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made the following commitments: 1. They will ensure the independence of the Company in business: (1) They promise that the Company will have the assets, personnel, qualifications and capabilities for it to operate independently as well as the ability of independent, sustainable operation in the market. (2) They promise not to intervene in the Company’s business activities other than the execution of their rights as the Company’s shareholders. (3) They promise that they and their related parties will not be engaged in business that is substantially in competition with the Company’s business. And (4) They promise that they and their related parties will try their best to reduce related-party transactions between them and the Company; for necessary and unavoidable related-party transactions, they promise to operate fairly following the market-oriented principle and at fair prices, and execute the transaction procedure and the duty of information disclosure pursuant to the applicable laws, regulations and regulatory documents. 2.They will ensure the independence of the Company in personnel: (1) They promise that the Company’s GM, deputy GMs, CFO, Company Secretary and other senior management personnel will work only for and receive remuneration from the Company, not holding any positions in them or their other controlled subsidiaries other than director and supervisor. (2) They promise the Company’s absolute independence from their related parties in labor, human resource and salary management. And (3) They promise to follow the legal procedure in their recommendation of directors, supervisors and senior management personnel to the Company and not to hire or dismiss employees beyond the Company’s Board of Directors and General Meeting. 3. They will ensure the independence and completeness of the Company in asset: (1) They promise that the Company will have a production system, 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 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 141 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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. Share-based Payment 1. General Share-based Payment □ Applicable √ Not applicable 2. Shared-based Payment Settled by Equity □ Applicable √ Not applicable 3. Shared-based Payment Settled by Cash □ Applicable √ Not applicable 4. Modification and Termination on Share-based Payment Naught 5. Other Naught 142 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 XIV. Commitments and Contingencies 1. Significant Commitments Significant commitments at balance sheet date Naught 2. Contingencies (1) Significant Contingencies at Balance Sheet Date Naught (2) If the Company Has No Significant Contingency to Disclose, Relevant Explanations Should Also Be Given The company has no significant contingency to disclose. 3. Other Naught XV. Events after Balance Sheet Date 1. Significant Non-adjusting Events Naught 2. Profit Distribution Naught 3. Sales Return Naught 4. Notes of Other Events after Balance Sheet Date Naught XVI. Other Significant Events 1. The Accounting Errors Correction in Previous Period Naught 143 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 2. Debt Restructuring Naught 3. Assets Replacement Naught 4. Annuity Plan Naught 5. Discontinued Operation Naught 6. Segment Information Naught 7. Other Important Transactions and Events that Have an Impact on Investors’ Decision-making Naught 8. Other Naught XVII. Notes of Main Items in the Financial Statements of the Company 1. Accounts Receivable (1) Accounts Receivable Classified by Category Unit: RMB 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 10,062,3 10,062,3 10,064, 10,064,66 with significant 1.10% 100.00% 1.55% 100.00% 78.10 78.10 664.92 4.92 single amount for 144 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 which bad debt provision separately accrued Accounts receivable withdrawal of bad 902,068, 36,131,9 865,936,5 640,256 28,400,67 611,855,49 debt provision of by 98.90% 4.01% 98.45% 4.44% 469.45 43.21 26.24 ,170.33 3.43 6.90 credit risks characteristics: 912,130, 46,194,3 865,936,5 650,320 38,465,33 611,855,49 Total 100.00% 5.06% 100.00% 5.91% 847.55 21.31 26.24 ,835.25 8.35 6.90 Accounts receivable with single significant amount and withdrawal bad debt provision separately at end of period √ Applicable □ Not applicable Unit: RMB Accounts receivable Closing balance (Unit) Accounts receivable Bad-debt provision Withdrawal proportion Reason for withdrawal The debtor is not qualified to continuously Suzhou Mont Lighting produce for the time 10,062,378.10 10,062,378.10 100.00% Co., Ltd. being for continuing losses caused by the scale and market. Total 10,062,378.10 10,062,378.10 -- -- In the groups, accounts receivable adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Unit: RMB Closing balance Aging Accounts receivable Bad-debt provision Withdrawal proportion Subentry within 1 year Within 1 year 838,284,736.17 25,148,542.09 3.00% Subtotal of within 1 year 838,284,736.17 25,148,542.09 3.00% 1 to 2 years 16,064,941.39 1,606,494.14 10.00% 2 to 3 years 1,845,107.85 553,532.36 30.00% Over 3 years 15,318,633.22 8,823,374.62 57.60% 3 to 4 years 11,531,150.17 5,765,575.08 50.00% 4 to 5 years 3,648,417.57 2,918,734.06 80.00% Over 5 years 139,065.48 139,065.48 100.00% Total 871,513,418.63 36,131,943.21 4.15% Notes: 145 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 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: Naught (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 RMB8,820,467.25yuan; the amount of the reversed or collected part during the Reporting Period was of RMB0.00. (3) Particulars about Other Accounts Receivable Actually Verified during the Reporting Period Unit: RMB Item Amount of verification Beijing Senjiyuan Electronic Components Sales Center 339,032.24 Nanjing Weiyiming Photoelectric Technology Co., Ltd. 303,567.17 TEERA-MONGKOL INDUSTRY PUBLIC 213,202.93 Chenzhou Wangshengda Materials Co., Ltd. 99,999.82 Panjin Panfeng Hardware & Electric Materials Sales Co., Ltd. 17,018.73 2013 Finance Bureau 14,703.90 Other driblet small amount 103,959.50 Total 1,091,484.29 (4) Accounts Receivable of the Top 5 of the Closing Balance Collected According to the Arrears Party Unit: RMB Name of the entity Nature Closing balance Aging No. 1 Loan 86,950,173.28 Within 1 year No. 2 Loan 27,597,102.14 Within 1 year No. 3 Loan 25,.078,424.52 Within 1 year No. 4 Loan 17,190,715.74 Within 1 year No. 5 Loan 14,046,026.43 1 to 2 years Total 172,862,442.11 (5) Accounts Receivable Derecognized for the Transfer of Financial Assets Naught 146 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (6) Amount of Assets and Liabilities Generated from the Transfer of Accounts Receivable and Continued Involvement Naught 2. Other Accounts Receivable (1) Other Accounts Receivable Classified by Category Unit: RMB 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 66,104,3 2,373,67 63,730,64 58,237, 1,522,852 56,714,849. bad debt provision 99.56% 3.59% 99.50% 2.61% 23.42 4.97 8.45 702.22 .38 84 according to credit risks characteristics Other accounts receivable with insignificant single 295,120. 295,120. 295,120 295,120.0 0.44% 100.00% 0.50% 100.00% amount for which 00 00 .00 0 bad debt provision separately accrued 66,399,4 2,668,79 63,730,64 58,532, 1,817,972 56,714,849. Total 100.00% 4.02% 100.00% 3.11% 43.42 4.97 8.45 822.22 .38 84 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 Closing balance Aging Other accounts receivable Bad debt provision Withdrawal proportion Subentry within 1 year Within 1 year 31,298,666.50 938,959.99 3.00% Subtotal of within 1 year 31,298,666.50 938,959.99 3.00% 1 to 2 years 1,916,881.38 191,688.14 10.00% 147 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 2 to 3 years 3,107,684.06 932,305.22 30.00% Over 3 years 313,238.90 310,721.62 99.20% 3 to 4 years 2,233.32 1,116.66 50.00% 4 to 5 years 7,003.10 5,602.48 80.00% Over 5 years 304,002.48 304,002.48 100.00% Total 36,636,470.84 2,373,674.97 6.48% 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) The Bad-debt Provision Withdrew, Reversed or Collected during the Reporting Period The withdrawal amount of the bad debt provision during the Reporting Period was of RMB850,828.94yuan; the amount of the reversed or collected part during the Reporting Period was of RMB0.00. (3) Other Accounts Receivable Actually Verified during the Reporting Period Unit: RMB Item Amount of verification Other driblet small amount 6.35 (4) Other Accounts Receivable Classified by Account Nature Unit: RMB Nature of accounts Closing book balance Opening book balance Internal business group 29,762,972.58 45,581,148.85 VAT export tax refunds 15,120,172.36 Performance bond 2,805,428.94 1,959,752.60 Staff borrow and deposit 10,792,685.93 5,587,226.25 Water & electricity fees 870,716.06 936,834.08 Advance money for street light construction 3,777,672.16 2,523,547.23 Other 3,269,795.39 1,944,313.21 Total 66,399,443.42 58,532,822.22 (5) The Top Five Other Account Receivable Classified by Debtor at Period-end Unit: RMB 148 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Proportion to the Account-age at the total of closing Closing balance of Name of unit Nature of accounts Closing balance end of the period balance of other bad-debt provision accounts receivable VAT export tax No. 1 15,120,172.36 Within 1 year 22.77% 453,605.17 refunds Internal business No. 2 10,852,345.81 Within 1 year 16.34% group Internal business No. 3 6,125,510.62 1 to 2 years 9.23% group Internal business No. 4 4,395,981.86 2 to 3 years 6.62% group Internal business No. 5 4,026,908.74 Within 1 year 6.06% group Total -- 40,520,919.39 -- 61.03% 453,605.17 (6) Account Receivable Involving Government Subsidies Naught (7) Other Account Receivable Derecognized Due To the Transfer of Financial Assets Naught (8) Amount of Assets and Liabilities Generated from the Transfer of Other Accounts Receivable and Continued Involvement Naught 3. Long-term Equity Investment Unit: RMB Closing balance Opening balance Item Impairment Impairment Book balance Book value Book balance Book value provision provision Investment to the 507,957,289.76 24,360,000.00 483,597,289.76 507,957,289.76 24,360,000.00 483,597,289.76 subsidiary Investment to joint ventures and 209,858,507.98 209,858,507.98 210,394,932.69 210,394,932.69 associated enterprises 149 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Total 717,815,797.74 24,360,000.00 693,455,797.74 718,352,222.45 24,360,000.00 693,992,222.45 (1) Investment to the Subsidiary Unit: RMB 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 82,507,350.00 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. Foshan Electrical & Lighting 35,418,439.76 35,418,439.76 (Xinxiang) Co., Ltd. Guangdong Fozhao New Light Sources 50,077,000.00 50,077,000.00 Technology Co., Ltd. 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. FSL Zhida Electric 25,500,000.00 25,500,000.00 150 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Technology Co., Ltd. Suzhou Mont 24,360,000.00 24,360,000.00 24,360,000.00 Lighting Co., Ltd. Total 507,957,289.76 507,957,289.76 24,360,000.00 (2) Investment to Joint Ventures and Associated Enterprises Unit: RMB Increase/decrease Profit and Closing loss on Adjustme Cash, balance Additiona investmen nt of dividends Impairme for The Opening Reduced Changes Closing l ts other and nt impairme investor balance investmen in other Others balance investmen confirmed comprehe profits provision nt ts equity ts according nsive declared s provision to equity income to issue s law I. Joint ventures II. Associated enterprises Qinghai FSL Lithium 29,836,24 1,286,376 31,122,62 Develop 6.62 .00 2.62 ment Co., Ltd. Primatro nix 180,558,6 257,589.7 2,080,390 178,735,8 (Nanho) 86.07 9 .50 85.36 Electron ics Ltd. 210,394,9 1,543,965 2,080,390 209,858,5 Subtotal 32.69 .79 .50 07.98 210,394,9 1,543,965 2,080,390 209,858,5 Total 32.69 .79 .50 07.98 (3) Other Notes Naught 151 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 4. Revenues and Operating Costs Unit: RMB Reporting Period Same period of last year Item Sales revenue Cost of sales Sales revenue Cost of sales Main operations 1,932,419,061.23 1,513,940,853.47 1,734,702,749.77 1,312,995,991.44 Other operations 47,777,343.06 36,016,802.63 47,754,466.37 42,711,518.50 Total 1,980,196,404.29 1,549,957,656.10 1,782,457,216.14 1,355,707,509.94 5. Investment Income Unit: RMB Item Reporting Period Same period of last year Long-term equity investment income 1,543,965.79 -19,640.12 accounted by equity method Investment income received from disposal of financial assets measured by fair value and 261,818.10 the changes be included in the current profits and losses during holding period Investment income received from holding of 6,560,422.50 10,950,922.50 available-for-sale financial assets Investment income received from bank 5,299,088.41 2,659,136.99 financial products Others -500,000.22 -131,489.70 Total 12,903,476.48 13,720,747.77 6. Other Nought XVIII. Supplementary Materials 1. Items and Amounts of Extraordinary Gains and Losses √ Applicable □ Not applicable Unit: RMB Item Amount Explanation Gains/losses on the disposal of non-current -4,255,164.43 assets Government subsidies recorded into the 3,869,949.96 152 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 current gains and losses (excluding the government subsidies that are closely relative to business and enjoyed in normed way or quantitatively in accordance with the national standards) Other non-operating income and expenses 1,637,836.66 other than the above Less: amount affected of income tax -57,390.05 Amount affected of minority equity -414.63 Total 1,310,426.87 -- 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. □ Applicable √ Not applicable 2. Return on Net 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 4.99% 0.1796 0.1796 shareholders of the Company Net profit attributable to common shareholders of the Company after 4.96% 0.1786 0.1786 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 153 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 (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 154 Foshan Electrical and Lighting Co., Ltd. Semi-Annual Report 2017 Section XI 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; and 2. 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 August 23, 2017 155