Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 FOSHAN ELECTRICAL AND LIGHTING CO., LTD. INTERIM REPORT 2020 August 2020 1 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part I Important Notes, Table of Contents and Definitions The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior management of Foshan Electrical and Lighting Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of this Report and its summary, and shall be jointly and severally liable for any misrepresentations, misleading statements or material omissions therein. Wu Shenghui, the Company’s legal representative, Lei Zihe, the Company’s General Manager, and Tang Qionglan, the Company’s Chief Financial Officer (CFO) hereby guarantee that the Financial Statements carried in this Report are factual, accurate and complete. All the Company’s directors have attended the Board meeting for the review of this Report and its summary. Any plans for the future and other forward-looking statements mentioned in this Report and its summary shall NOT be considered as absolute promises of the Company to investors. Therefore, investors are reminded to exercise caution when making investment decisions. The Company has described in this Report the risks of Macro Economic Fluctuations and Market Competition, Raw Material Price Fluctuations, inventory valuation loss, exchange rate fluctuations and doubtful receivable accounts. Please refer to “X Risks Facing the Company and Countermeasures” under “Part IV Operating Performance Discussion and Analysis” of this Report. This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail. The Company has no interim dividend plan, either in the form of cash or stock. 2 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Table of Contents Interim Report 2020........................................................................................................................... 1 Part I Important Notes, Table of Contents and Definitions ........................................................... 2 Part II Corporate Information and Key Financial Information ................................................... 5 Part III Business Summary ............................................................................................................... 8 Part IV Operating Performance Discussion and Analysis ........................................................... 12 Part V Significant Events ................................................................................................................ 30 Part VI Share Changes and Shareholder Information ................................................................. 46 Part VII Preferred Shares ............................................................................................................... 51 Part VIII Convertible Corporate Bonds ........................................................................................ 52 Part IX Directors, Supervisors and Senior Management ............................................................. 53 Part X Corporate Bonds .................................................................................................................. 54 Part XI Financial Statements .......................................................................................................... 55 Part XII Documents Available for Reference .............................................................................. 185 3 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Definitions Term Definition Foshan Electrical and Lighting Co., Ltd. and its consolidated subsidiaries, The “Company”, “FSL” or “we” except where the context otherwise requires CSRC The China Securities Regulatory Commission SZSE The Shenzhen Stock Exchange General meeting General meeting of Foshan Electrical and Lighting Co., Ltd. Board of Directors The board of directors of Foshan Electrical and Lighting Co., Ltd. The Supervisory Committee The supervisory committee of Foshan Electrical and Lighting Co., Ltd. Expressed in the Chinese currency of Renminbi, expressed in ten thousand RMB, RMB’0,000 Renminbi The “Reporting Period” or “Current Period” The period from 1 January 2020 to 30 June 2020 4 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part II Corporate Information and Key Financial Information I Corporate Information Stock name FSL, FSL-B Stock code 000541, 200541 Stock exchange for stock Shenzhen Stock Exchange listing Company name in Chinese 佛山电器照明股份有限公司 Abbr. (if any) 佛山照明 Company name in English (if FOSHAN ELECTRICAL AND LIGHTING CO.,LTD any) Abbr. (if any) FSL Legal representative Wu Shenghui II Contact Information Board Secretary Securities Representative Name Wu Shenghui Huang Yufen No. 64, Fenjiang North Road, Chancheng No. 64, Fenjiang North Road, Chancheng Address District, Foshan City, Guangdong District, Foshan City, Guangdong Province, P.R.China Province, P.R.China Tel. 0757-82810239 0757-82966028 Fax 0757-82816276 0757-82816276 Email address fsldsh@chinafsl.com fslhyf@163.com III Other Information 1. Contact Information of the Company Indicate by tick mark whether any change occurred to the registered address, office address and their zip codes, website address and email address of the Company in the Reporting Period. □ Applicable √ Not applicable No change occurred to the said information in the Reporting Period, which can be found in the 2019 Annual Report. 5 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 2. Media for Information Disclosure and Place where this Report is Kept Indicate by tick mark whether any change occurred to the information disclosure media and the place for keeping the Company’s periodic reports in the Reporting Period. □ Applicable √ Not applicable The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing the Company’s periodic reports and the place for keeping such reports did not change in the Reporting Period. The said information can be found in the 2019 Annual Report. IV Key Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes √ No H1 2020 H1 2019 Change (%) Operating revenue (RMB) 1,522,884,127.04 1,687,184,660.86 -9.74% Net profit attributable to the listed 151,061,447.83 167,275,725.75 -9.69% company’s shareholders (RMB) Net profit attributable to the listed company’s shareholders before exceptional 150,434,836.00 154,517,987.66 -2.64% gains and losses (RMB) Net cash generated from/used in operating 201,077,703.45 190,681,833.48 5.45% activities (RMB) Basic earnings per share (RMB/share) 0.1080 0.1195 -9.62% Diluted earnings per share (RMB/share) 0.1080 0.1195 -9.62% Weighted average return on equity (%) 2.94% 3.77% -0.83% 30 June 2020 31 December 2019 Change (%) Total assets (RMB) 6,517,507,782.65 6,175,200,008.24 5.54% Equity attributable to the listed company’s 5,234,668,010.70 4,880,736,800.07 7.25% shareholders (RMB) V Accounting Data Differences under China’s Accounting Standards for Business Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign Accounting Standards 1. Net Profit and Equity Differences under CAS and IFRS □ Applicable √ Not applicable 6 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 No such differences for the Reporting Period. 2. Net Profit and Equity Differences under CAS and Foreign Accounting Standards □ Applicable √ Not applicable No such differences for the Reporting Period. XI Exceptional Gains and Losses √ Applicable □ Not applicable Unit: RMB Item Reporting Period Note Gain or loss on disposal of non-current assets (inclusive of -653,096.79 impairment allowance write-offs) Government subsidies charged to current profit or loss (exclusive of government subsidies given in the Company’s ordinary course 2,920,648.00 of business at fixed quotas or amounts as per the government’s uniform standards) Gain or loss on fair-value changes in trading and derivative financial assets and liabilities & income from disposal of trading and derivative financial assets and liabilities and other -1,532,350.00 investments in debt obligations (exclusive of the effective portion of hedges that arise in the Company’s ordinary course of business) Non-operating income and expense other than the above 241,184.67 Less: Income tax effects 336,596.67 Non-controlling interests effects (net of tax) 13,177.38 Total 626,611.83 -- Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/Loss Items: □ Applicable √ Not applicable No such cases for the Reporting Period. 7 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part III Business Summary I Principal Activity of the Company in the Reporting Period 1. The Company’s Principal Activities or Products We design, manufacture and market high-quality, green and energy-efficient lighting products and electrical products, as well as provide comprehensive lighting and electrical solutions. Our products mainly include electrical products such as LED light sources and luminaries, automotive LED luminaries, traditional light sources switches and socket. Currently, we have three major operating divisions, namely, lighting, electrical products and vehicle lighting. Upon years of development, we have won quite many honors, and our “FSL” and “Fenjiang” brands have been certified as “Famous China Brands”. 2. Main business models (1) Procurement model The Procurement Department is responsible for procuring raw materials such as lamp beads, lamp holders, electronic components, aluminum substrate, plastic parts, metal materials, quartz tubes and fuel. Major materials and materials of a large quantity are sourced by way of tender invitation. A review panel comprising personnel from the Procurement Department and other relevant departments will review the tender documents and make a decision. And the Audit Department, the Discipline Inspection Department and the Legal Department will supervise the whole process. For every kind of our main raw materials, we usually have a few suppliers to choose from in procurement so that the procurement prices would be fair, the supply of raw materials in time and the good quality of the raw materials ensured. (2) Production models ① Production of the conventional products Concerning the conventional products, we analyze sales of every month and predict future market demand so as to formulate a production plan for the coming month. And our workshops produce according to the plan to avoid extra stock and at the same time ensure that there is enough for sale. ② Production according to orders Different from the conventional lighting products which are of little variation in specifications, LED lighting products are at a fast pace of renewal and different customers often have different requirements regarding the 8 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 products’ appearances and performance indexes. Therefore, we have to organize individualized production for some orders for LED lighting products, export and engineering orders in particular. For this kind of orders, we formulate our production plans based on them and then make procurement plans according to the production plans, which will help effectively control the stock and the procurement prices of raw materials, reduce capital occupation and improve our operating efficiency to the maximum. ③ Combination of independent production and outsourcing With a high production capacity, we produce most of our products and parts on our own. Only a small portion of parts and low-tech products is outsourced to sub-manufacturers, who will produce in strict accordance with our requirements. We will also tag along their production processes and examine carefully the quality of the products finished. In this way, our supply of products is guaranteed. (3) Sales model Domestically, we mainly adopt a distributor model. In terms of channels, we have wholesale, franchised store, illumination engineering & commercial lighting, industrial and mining outdoor channels, e-commerce & retail sales and automotive lighting channels. For overseas markets, we primarily adopt OEM/ODM models and also sell under our own brands (through distributor). 3. Main driving forces for growth Despite declining demand at home and abroad due to the global COVID-19 pandemic during the Reporting Period, with the evolution of the industrial competition model, consumers are getting increasingly concerned with product quality and brand. As a result, companies with weak competitiveness will be gradually elbowed out of the market in competing for the weak demand while large enterprises or enterprises with core competitiveness will have more market opportunities. Meanwhile, key investment projects launched by local governments create new opportunities for the lighting industry. By virtue of its advantages in technology, brand, channel and scale, the Company has continued to promote the technical upgrading of main products, improve product quality, beef up market expansion and optimize and upgrade the product sales structure through sustained spending on R&D and technical innovation. Meanwhile, it has gained an advantageous position in the process of enhancing market concentration by increasing the level of production automation, effectively controlling purchase costs and ramping up production efficiency. 9 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 II Significant Changes in Major Assets 1. Significant Changes in Major Assets Major assets Main reason for significant changes The ending amount increased 33.37% compared to the beginning amount, primarily Equity assets driven by the increased price of shares held in listed company in the current period. Fixed assets No significant change during the Reporting Period Intangible assets No significant change during the Reporting Period The ending amount was down 30.57% from the beginning amount, primarily driven by Construction in progress the transfer of certain plants in Gaoming District, Foshan City to fixed assets. 2. Major Assets Overseas □ Applicable √ Not applicable III Core Competitiveness Analysis The core competitiveness of the Company mainly reflects on fours aspects listed below: Channel advantage The Company has been sticking to the market strategy of deeply cultivating and refining channels. Over years of development and experience, the Company has been equipped with five major sales channels in domestic market (wholesale, franchised store, e-commerce & retail sales, illumination engineering & commercial lighting and industrial and mining outdoor channels), forming a marketing network covering the whole country; in foreign market, the Company has made active steps to develop international market business, sold products to more than 110 countries and regions in North America, Europe, Southeast Asia, Africa and Oceania, and kept improving overseas sales channel. By virtue of its powerful and comprehensive sales channels, the Company has enabled its products to enter market rapidly, substantially enhancing its market development abilities and competitiveness. Brand advantage The Company has accumulated more than 60 years’ experience in the lighting industry and enjoyed continuously increasing influence and brand value for its “FSL”. In recent years, with the enhancement of its development positioning, product design and user experience, the Company has initiated the strategy of brand upgrading and 10 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 carried out promotion by centering around the new “Professional, Intelligent, Healthy and Fashionable”. In addition, it has driven the transition of “FSL” from an industrial brand to a popular brand to maintain the brand vitality and competitiveness. Among the Company’s brands, both “FSL” and “Fenjiang” are China Famous Trademarks. The brand “FSL” has become one of the most influential and popular industrial brands in China, and the powerful brand influence has played a key role in driving the sustained growth of the Company’s sales. Technical R&D advantage The Company has been valuing the R&D of new products and the development of innovation and R&D teams. It has further increased spending on technology and independent product innovation. The Company is equipped with its own electric light source institute, National CNAS Lighting Laboratory, Guangdong Engineering Technology Development Center and Guangdong Industrial Design Center. It has won the title of “Provincial IP Advantaged Enterprise” and obtained 511 authorized national patents. In terms of the development of the R&D team, the Company keeps improving its R&D personnel management policy and appraisal system, intensifying the introduction of high calibre talents, and reinforcing cooperation with universities and research institutes in industry-university-research projects, which has created a smooth path for the development of R&D professionals and provided strong support for it to maintain a technology-leading position and to further carry out product innovation. Scale advantage As one of the enterprises to first step into the industry of producing and selling lighting products, the Company possesses the manufacture culture of refining production and the large-scale manufacturing capability by years of experience accumulation. In recent years, the Company has been promoting automation on its production equipment by introducing a great number of fully-automatic and semi-automatic equipment. This has greatly improved its product quality and production efficiency, representing further improvement of its manufacturing capability. The Company has production bases in Foshan, Nanjing and Xinxiang. The large-scale and centralized production brings obvious economic benefits to the Company, which not only shows in manufacture cost of products, but also shows in aspects such as raw material procurement and product pricing. 11 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part IV Operating Performance Discussion and Analysis I Overview The first half of 2020 saw a heavy hit by the COVID-19 pandemic to the global economy and consumer market. This, together with the fierce competition in the lighting industry, put companies under tremendous pressure. In face of the pressure and challenges, the Company forged ahead with great solidarity against headwinds. In addition to playing its part in the fight against the pandemic, the Company tapped potential internally and explored more markets externally. Through fully implementing the philosophy of “Focus on the Key Work, Improve Weak Links, Solve Bottlenecks, Increase Efficiency and Promote Growth”, as well as by paying more attention in various work, the Company has achieved a better level of production and operation. Due to the pandemic, for the Reporting Period, the Company achieved operating revenue of RMB1522.8841million, a year-on-year decrease of 9.74%; and a net profit attributable to the listed company’s shareholders of RMB151.0614million, a year-on-year decrease of 9.69%. In the first half year of 2020, the Company has carried out work mainly in the following aspects: 1. Stepping up effort in scientific and technological innovation to strengthen the momentum of development The Company has continued to increase R&D spending since the beginning of the year. In the first half year, it spent RMB64.96million on R&D, accounting for 4.27% of the operating revenue of the period. It completed the development of 335 new products, applied for 53 new patents and was granted with 42 patents. To meet new market demands in the context of COVID-19, the Company quickly mobilized forces to develop, upgrade and release series of new functional products with anti-epidemic and disinfecting functions and new healthy lighting products to the market. In addition, it further stepped up effort in the development and promotion of intelligent lighting products.,accessed the IoT platforms such as Alibaba Cloud, and developed smart home lighting products jointly with Alibaba (artificial intelligent lab o f Tmall Genie), Huiwei (Hilink) and Baidu (Duer) so as to provide more abundant products and home application scenarios for users.The Company continued to promote industry-education-research collaboration with key colleges and universities and professional research institutes across the country, and extended business into new segments to produce stronger impetus for development. 2. Focusing on marketing model innovation and market expansion to boost sales First, the Company effectively enhanced market activity through new marketing models, such as “live streaming 12 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 and crowd funding”. By hosting large-scale live streaming targeting the whole country, the Company improved the operation efficiency of its online traffic, laying a solid foundation for raising sales revenue. Second, the Company focused on developing key accounts and projects and further developed the potentials of existing key accounts. While proactively entering into the centralized purchases of real estate companies, the Company continuously expanded cooperation with home decor companies, property management companies, large chain groups and other channel customers. On top of that, the Company actively developed the overseas market, increase the development of new customers. At the same time, the Company further developed the potentials of existing big accounts and provided quality services to them, so as to obtain more orders and develop more projects of intelligent products and new lamps. 3. Tightening effort in delicacy management to enhance corporate management efficacy The Company worked hard to increase revenue and reduce expenditure to counter the impact of the epidemic on its production and operation. First, it controlled costs and cut expenses, analyzed and monitored budget execution, and made “belt-tightening” plans with strict control over non-operating expenses. It continued to advance the upgrading of production automation to cut labor costs and increase production efficiency. Second, it drove the collection of accounts receivable by establishing a warning mechanism for Accounts receivable. Through stronger effort in this aspect, the Company intended to prevent the risk of operating fund. Third, it improved its capacity for supply chain delivery. Through coordination and cooperation among different departments, the Company ensured timely receiving of materials and timely shipment of products. 4. Managing corporate culture and team building to enhance its cohesion Guided by Party building, the Company set up multiple platforms, such as Key Party Members Pioneering Post, Key Party Members Responsibility Zone, and Key Party Members Fortification Team, gave play to the leading role of Party members. It published reports on meritorious deeds in lighting and the battle against the virus, and commended 31 “Lighting Pioneers”. By doing this, the Company aimed to create a favorable atmosphere for business development, make all staff pull together towards production and operation. II Analysis of Core Businesses See “I Overview” above. Year-on-year changes in key financial data: Unit: RMB H1 2020 H1 2019 Change (%) Main reason for change 13 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Operating revenue 1,522,884,127.04 1,687,184,660.86 -9.74% Cost of sales 1,161,598,236.11 1,297,336,713.77 -10.46% Selling expense 95,277,602.70 123,410,566.38 -22.80% Administrative expense 64,215,895.53 67,537,179.69 -4.92% Increase in interest on Finance costs -19,333,964.12 -9,908,037.67 -95.13% deposits in the current period Income tax expense 23,050,722.70 27,167,288.57 -15.15% R&D expense 64,960,847.79 64,853,637.12 0.17% Net cash generated from/used in operating 201,077,703.45 190,681,833.48 5.45% activities Increase in investments Net cash generated withdrawn from wealth from/used in investing 236,432,656.11 650,017.32 36,273.29% management products of activities bank upon maturity in the current period Net cash generated from/used in financing -258,879,038.49 -218,298,000.02 -18.59% activities Increase in net cash Net increase in cash and generated from investing 178,527,737.31 -28,122,906.64 734.81% cash equivalents activities in the current period Increase in export tax Other receivables 30,629,514.19 22,307,344.76 37.31% rebates receivable in the Current Period Higher price of stock of Investments in other 1,997,994,223.39 1,454,740,241.46 37.34% listed company held in equity instruments the Current Period Transfer of certain plants in Gaoming District, Construction in progress 82,647,609.80 119,030,610.16 -30.57% Foshan City to fixed assets in the Current Period Decrease in procurement Notes payable 245,253,258.83 374,665,327.74 -34.54% in the current period Payment in the Current Employee benefits 44,377,716.78 83,156,852.86 -46.63% Period of the year-end payable bonuses to employees of 14 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 last year Taxes payable 36,797,827.09 17,211,068.21 113.80% Increase in VAT payable Higher price of stock of Deferred income tax 218,474,381.48 137,216,136.70 59.22% listed company held in liabilities the Current Period Higher price of stock of Other comprehensive 1,238,009,149.48 776,260,348.19 59.48% listed company held in income the Current Period Decrease in government subsidies that arose in the Other income 3,028,003.10 5,523,870.00 -45.18% ordinary course of business Transfer of gain on changes in the fair value of delivered forward Gain on changes in fair -1,532,350.00 -996,200.00 -53.82% forex settlement products value that matured in the Current Period to return on investment Increase in allowances Credit impairment loss -3,379,210.38 -1,036,971.94 -225.87% for doubtful accounts in the Current Period Decrease in inventory Asset impairment loss -3,200,793.69 -12,239,244.21 73.85% valuation allowances in the Current Period Decrease in government subsidies that are not Non-operating income 662,887.00 1,941,872.57 -65.86% related to operating activities in the Current Period Increase in loss on Non-operating expense 1,024,568.14 478,391.97 114.17% disposal of fixed assets in the Current Period Increase in profits of Net profit attributable to 2,769,419.42 222,917.21 1,142.35% non-wholly-owned non-controlling interests subsidiaries Higher price of stock of Other comprehensive 461,748,801.29 61,635,887.65 649.16% listed company held in income, net of tax the Current Period Other comprehensive Higher price of stock of 461,748,801.29 61,635,887.65 649.16% income, net of tax listed company held in 15 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 attributable to owners of the Current Period the Company as the parent Changes in fair value of Higher price of stock of investments in other 461,765,884.65 61,621,709.81 649.36% listed company held in equity instruments the Current Period Differences arising from Higher exchange rate of the translation of foreign -17,083.36 14,177.84 -220.49% euro against the Chinese currency-denominated yuan financial statements Higher price of stock of Total comprehensive 615,579,668.54 229,134,530.61 168.65% listed company held in income the Current Period Material changes to the profit structure or sources of the Company in the Reporting Period: □ Applicable √ Not applicable No such changes in the Reporting Period. Breakdown of operating revenue: Unit: RMB H1 2020 H1 2019 As % of total As % of total Change (%) Operating revenue operating revenue Operating revenue operating revenue (%) (%) Total 1,522,884,127.04 100% 1,687,184,660.86 100% -9.74% By operating division Lighting products 1,522,884,127.04 100.00% 1,687,184,660.86 100.00% -9.74% and luminaries By product category LED lighting 1,165,303,011.92 76.52% 1,286,519,112.49 76.25% -9.42% products Traditional lighting 300,738,547.81 19.75% 347,779,504.28 20.61% -13.53% products Electrical products 38,883,211.69 2.55% 36,590,028.16 2.17% 6.27% Other 17,959,355.62 1.18% 16,296,015.93 0.97% 10.21% By operating segment Domestic 944,602,854.41 62.03% 1,006,873,998.40 59.68% -6.18% Overseas 578,281,272.63 37.97% 680,310,662.46 40.32% -15.00% 16 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Operating Division, Product Category or Operating Segment Contributing over 10% of Operating Revenue or Operating Profit √ Applicable □ Not applicable Unit: RMB YoY change in YoY change in Operating Gross profit YoY change in Cost of sales operating revenue gross profit revenue margin cost of sales (%) (%) margin (%) By operating division Lighting products 1,522,884,127.04 1,161,598,236.11 23.72% -9.74% -10.46% 0.62% and luminaries By product category LED lighting 1,165,303,011.92 913,759,805.79 21.59% -9.42% -9.51% 0.07% products Traditional 300,738,547.81 210,078,453.30 30.15% -13.53% -15.59% 1.71% lighting products Electrical 38,883,211.69 24,297,314.99 37.51% 6.27% -4.26% 6.87% products Other 17,959,355.62 13,462,662.03 25.04% 10.21% 0.81% 6.98% By operating segment Domestic 944,602,854.41 682,630,079.86 27.73% -6.18% -9.79% 2.89% Overseas 578,281,272.63 478,968,156.25 17.17% -15.00% -11.40% -3.36% Core business data of the prior year restated according to the changed statistical caliber for the Reporting Period: □ Applicable √ Not applicable Any over 30% YoY movements in the data above and why: □ Applicable √ Not applicable III Analysis of Non-Core Businesses √ Applicable □ Not applicable Unit: RMB As % of profit before Amount Source/Reason Recurrent or not tax Income from investments in low-risk wealth management Return on 36,143,255.71 20.43% products of bank, and dividends Not investment received during the period of holding investments in other 17 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 equity instruments Gain/loss on Gain/loss on changes in fair value changes in fair -1,532,350.00 -0.87% Not of derivative financial instruments value Asset impairments -3,200,793.69 -1.81% Inventory valuation allowances Not Non-operating Government subsidies and the like 662,887.00 0.37% Not income received Non-operating 1,024,568.14 0.58% Loss on disposal of fixed assets Not expense Receipt of government subsidies Other income 3,028,003.10 1.71% that arose in the ordinary course of Not business Credit impairment -3,379,210.38 -1.91% Allowances for doubtful accounts Not loss IV Analysis of Assets and Liabilities 1. Significant Changes in Asset Composition Unit: RMB 30 June 2020 30 June 2019 Change in As % of As % of percentage Reason for significant change Amount Amount total assets total assets (%) Monetary assets 1,270,922,790.30 19.50% 829,509,716.65 14.26% 5.24% Accounts 754,565,733.58 11.58% 765,827,365.76 13.16% -1.58% receivable Inventories 524,621,286.70 8.05% 644,986,460.94 11.08% -3.03% Long-term equity 183,738,416.82 2.82% 180,122,685.92 3.10% -0.28% investments Fixed assets 654,479,073.26 10.04% 586,093,658.59 10.07% -0.03% Construction in 82,647,609.80 1.27% 158,184,271.59 2.72% -1.45% progress Investments in Higher price of stock of listed other equity 1,997,994,223.39 30.66% 1,304,626,468.20 22.42% 8.24% company held in the Current instruments Period 2. Assets and Liabilities at Fair Value √ Applicable □ Not applicable Unit: RMB 18 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Gain/loss on Cumulative Impairment fair-value fair-value Purchased in Sold in the Beginning allowance for Other Ending Item changes in the changes the Reporting Reporting amount the Reporting changes amount Reporting charged to Period Period Period Period equity Financial assets 4. Investments 1,454,740,241 543,253,981. 1,997,994,2 in other .46 93 23.39 equity instruments Subtotal of 1,454,740,241 543,253,981. 1,997,994,2 financial .46 93 23.39 assets Total of the 1,454,740,241 543,253,981. 1,997,994,2 above .46 93 23.39 Financial 0.00 0.00 liabilities Contents of other changes: Investments in wealth management products and structured deposits are not included in the item of “other changes”. For further information, see “Note 2 Held-for-Trading Financial Assets” in “VII Notes to the Consolidated Financial Statements” of Part XI of this Report. Significant changes to the measurement attributes of the major assets in the Reporting Period: □ Yes √ No 3. Restricted Asset Rights as at the Period-End Unit: RMB Item Ending carrying value Reason for restriction Monetary assets 42,561,497.97 Security deposits for notes and forward forex settlement Notes receivable 54,362,766.89 In pledge for notes pool Total 96,924,264.86 19 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 V Investments Made 1. Total Investment Amount □ Applicable √ Not applicable 2. Major Equity Investments Made in the Reporting Period □ Applicable √ Not applicable 3. Major Non-Equity Investments Ongoing in the Reporting Period □ Applicable √ Not applicable 4. Financial Assets at Fair Value √ Applicable □ Not applicable Unit: RMB Gain/loss on Accumulated Initial Accumulate fair value fair value Purchased in Sold in the Ending Funding Type of assets investment changes in the changes the Reporting Reporting d return on Reporting recorded in Period Period amount source cost investment Period equity 536,959,02 543,253,981. 1,456,481,026. 14,940,422. 1,993,440,0 Stock Self-funded 0.46 93 53 96 46.99 536,959,02 543,253,981. 1,456,481,026. 14,940,422. 1,993,440,0 Total 0.00 0.00 -- 0.46 93 53 96 46.99 5. Financial Investments (1) Securities Investments √ Applicable □ Not applicable Unit: RMB Gain/Lo Accumu ss on lated fair-valu Purchas Gain/los Initial Beginni fair-valu Sold in Security Security Security Measure e ed in s in Ending Account Funding ng e Reporti investm ment changes Reporti Reporti carrying type code name carrying changes ng method in ng ng value ing title source ent cost value charged Period Reporti Period Period to ng equity Period Domesti Guoxua Investm Fair 1,220,0 cally/Ov n 160,000 661,377 558,647 999,789 ents in Self-fun 002074 value 24,949. erseas High-tec ,000.00 ,161.25 ,787.75 ,809.36 other ded method 00 listed h equity 20 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 stock instrum ents Investm Domesti ents in cally/Ov China Fair 30,828, 81,791, -15,393, 42,747, 3,969,0 66,397, other Self-fun erseas 601818 Everbrig value 816.00 185.14 805.82 631.50 05.36 379.32 equity ded listed ht Bank method instrum stock ents Investm Domesti ents in cally/Ov Fair Xiamen 292,574 706,517 413,943 10,971, 706,517 other Self-fun erseas N/A value Bank ,133.00 ,718.67 ,585.67 417.60 ,718.67 equity ded listed method instrum stock ents Foshan branch Investm Domesti of ents in cally/Ov Fair Guangd 500,000 500,000 500,000 other Self-fun erseas N/A value ong .00 .00 .00 equity ded listed method Develop instrum stock ment ents Bank 1,450,1 1,456,4 1,993,4 483,902 543,253 14,940, Total -- 86,065. 81,026. 0.00 0.00 40,046. -- -- ,949.00 ,981.93 422.96 06 53 99 Disclosure date of announcement on Board’s consent for securities investments Disclosure date of announcement on general meeting’s consent for securities investments (if any) (2) Investments in Derivative Financial Instruments √ Applicable □ Not applicable Unit: US$’0,000 Relation Related Type Initial Beginni Purchas Sold in Impairm Ending Ending Operating Beginni Ending Actual gain/loss in ship -party of investment ng ed in Reporti ent investm investm party ng date date Reporting Period with the transact derivat amount investm Reporti ng allowan ent ent as % 21 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Compan ion or ive ent ng Period ce (if of the y not Period any) Compan y’s ending net assets Gener al Foshan forwar 4 7 branch of Not Not d 400 Novemb January 400 400 6.14 Bank of related forex er 2019 2020 China settle ment Gener Foshan al branch of forwar 4 the Not 15 April Not d 1,200 Decemb 1,200 1,200 4.43 Agricultural related 2020 forex er 2019 Bank of settle China ment Gener Foshan al branch of forwar 17 27 Guangzhou Not Not d 100 March March 100 100 0.23 Rural related forex 2020 2020 Commercial settle Bank ment Gener Foshan al branch of forwar Guangzhou Not 28 April 28 July Not d 450 450 300 150 0.20% 3.78 Rural related 2020 2020 forex Commercial settle Bank ment Total 2,150 -- -- 1,600 550 2,000 150 0.20% 14.58 Funding source All self-funded Legal matters involved (if applicable) N/A Disclosure date of board announcement approving derivative 10 April 2020 investment (if any) Disclosure date of general meeting 7 May 2020 announcement approving derivative 22 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 investment (if any) Risk Analysis of Forward Exchange Settlement Business: 1. Risk of exchange rate fluctuations. In the case of large fluctuations in the exchange rate, the quoted price of the bank’s forward exchange rate may be lower than the Company’s quoted exchange rate to the customer, which will make the Company unable to lock the quoted exchange rate to the customer or the bank’s forward exchange rate may deviate from the exchange rate at the time of the Company’s actual receipt and payment, and causes exchange losses. 2. Risk of customer default. The customer’s accounts receivable may be overdue, and the payment for goods cannot be recovered within the predictable payback period, which will result in the loss of the Company due to the delayed forward settlement. 3. Risk of payback prediction. The marketing department shall made corresponding payback prediction based on customer orders and expected orders. However, during the actual implementation process, customers may adjust their orders and predictions, which will result in the Company’s incorrect payback prediction and cause the risk of delayed delivery of forward exchange settlement. Adopted Risk Control Measures: 1. The Company will strengthen the research and analysis of the Analysis of risks and control exchange rate. When the exchange rate fluctuates greatly, it will adjust the business strategy in a timely measures associated with derivative manner to stabilize the export business and avoid exchange losses to the utmost. 2. The Management investments held in Reporting Period System for Forward Settlement and Sales of Foreign Exchanges reviewed and approved by the board of (including but not limited to market directors of the Company stipulates that all forward foreign exchange settlement businesses of the risk, liquidity risk, credit risk, Company shall be based on the normal production and operation, and relied on specific business operations operational risk, legal risk, etc.) to avoid and prevent various exchange rate risks. However, speculative transaction and interest arbitrage are not allowed. At the same time, the system clearly defines the operating principles, approval authority, responsible department and responsible person, internal operation procedures, information isolation measures, internal risk reporting system, risk management procedures, and information disclosure related to the forward settlement business as well. In fact, the system is conducive to strengthen the management of the Company’s forward foreign exchange settlement business and prevent investment risks. 3. In order to prevent any delay in the forward exchange settlement, the Company will strengthen the management of accounts receivable, actively collect receivables, and avoid any overdue receivables. In the meantime, the Company plans to increase the export purchases and purchase corresponding credit insurance so as to reduce the risk of default and customer default. 4. The Company’s forward foreign exchange settlement transactions must be based on the Company’s foreign exchange earnings prediction. Besides, the Company shall strictly control the scale of its forward foreign exchange settlement business, and manage all risks that the Company may face within a controllable range. 5. The internal audit department of the Company shall check the actual signing and execution situation of all trading contracts on a regular or irregular basis. The Company carries out recognition and measurement in accordance with the Accounting Standard for Business Enterprises No. 22—Recognition and Measurement of Financial Instruments, the Accounting Changes in market prices or fair value Standard for Business Enterprises No. 24—Hedges, the Accounting Standard for Business Enterprises No. of derivative investments in Reporting 37—Presentation of Financial Instrument and other applicable regulations. Fair value is arrived at based on Period (fair value analysis should the price provided by pricing service providers such as banks or the price obtained. Fair value include measurement method and measurement and recognition are carried out on a monthly basis. Changes in the fair value of forward related assumptions and parameters) exchange settlement contracts entered into by the Company are mainly attributable to difference arising from exchange rate fluctuations. Major changes in accounting policies N/A and specific accounting principles 23 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 adopted for derivative investments in Reporting Period compared to last reporting period The independent directors of the Company are of the opinion that during the Reporting Period, the Company carried out forward forex settlement in strict compliance with the Company Law, the Opinion of independent directors on Regulations of the People’s Bank of China on Foreign Exchange Settlement, Sale and Payment and the derivative investments and risk Company’s Management Rules for Forward Foreign Exchange Settlement and Sale, among others, as well control as within the Board’s authorization. Such trading is primarily aimed to prevent exchange rate fluctuations from impacting the Company’s export business and operating earnings, with no speculative trading involved. It is a necessity, and the risk is well under control. VI Sale of Major Assets and Equity Interests 1. Sale of Major Assets □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Sale of Major Equity Interests □ Applicable √ Not applicable VII Major Subsidiaries √ Applicable □ Not applicable Major fully/majority-owned subsidiaries and those minority-owned subsidiaries with an over 10% effect on the Company’s net profit: Unit: RMB Relationship Principal Registered Operating Operating Name with the activity Total assets Net assets Net profit capital revenue profit Company Foshan Chansheng 1,000,000.0 46,114,739.8 45,680,362.1 -118,435.8 Electronic Subsidiary Manufacturing 1,930,161.98 -317,557.57 0 9 5 2 Ballast Co., Ltd. FSL Chanchang 72,782,944. 191,016,493. 135,687,339. 107,741,681. 11,147,135 Subsidiary Manufacturing 8,372,820.47 Optoelectroni 00 18 78 05 .79 cs Co., Ltd. Foshan Subsidiary Manufacturing 500,000.00 80,745,868.8 34,129,431.3 62,409,344.3 4,542,546. 3,419,713.42 24 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Taimei Times 1 5 5 26 Lamps Co., Ltd. FSL New Light Source 50,000,000. 58,652,024.6 57,353,743.9 Subsidiary Manufacturing 6,651,338.71 381,285.95 324,618.76 Technology 00 9 2 Co., Ltd. FSL (Xinxiang) 35,418,439. 59,564,169.1 51,374,904.3 18,158,362.6 1,338,038. Subsidiary Manufacturing 1,003,690.92 Lighting Co., 76 6 4 1 56 Ltd. FSL Lighting Equipment 15,000,000. 63,406,515.2 54,510,661.5 25,013,877.2 -1,822,667. Subsidiary Manufacturing -1,399,796.81 Co., Ltd. 00 7 8 3 07 Nanjing Fozhao Lighting 41,683,200. 85,011,029.2 65,081,443.3 18,468,347.0 5,964,030. Subsidiary Manufacturing 3,898,983.34 Components 00 3 8 4 79 Manufacturin g Co., Ltd. FSL Zhida Electric 50,000,000. 92,791,163.8 51,839,832.8 45,607,598.0 4,141,934. Subsidiary Manufacturing 3,558,174.26 Technology 00 2 2 7 12 Co., Ltd. FSL Lighting Subsidiary Manufacturing 195,812.50 767,240.58 -46,047.30 914,233.21 -11,090.48 -11,090.48 GmbH Subsidiaries obtained or disposed in the Reporting Period: □ Applicable √ Not applicable Information about major majority- and minority-owned subsidiaries: —Foshan Chansheng Electronic Ballast Co., Ltd. was invested and established by the Company and Mr. Ma Henglai and had set up and obtained license for business corporation on 26 August 2003. The Company holds 75% equities of the said company; therefore the said subsidiary was included into the scope of the consolidated financial statements since the date of foundation. On 24 December 2013, the Company and Mr. Ma Henglai signed the equity transfer agreement. The Company purchased 25% equity of Foshan Chansheng Electronic Ballast Co., Ltd. held by Mr. Ma Henglai. After the purchasing, the Company held 100% equity of Foshan Chansheng Electronic Ballast Co., Ltd. 25 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 —FSL Chanchang Optoelectronics Co., Ltd. (renamed on 19 June 2018 from “Foshan Chanchang Electric Appliances (Gaoming) Co., Ltd.”), which is a Sino-foreign joint venture invested and established by the Company and Prosperity Lamps and Components Ltd, had obtained license for business corporation on 23 August 2005 through approval by Foreign Trade and Economic Cooperation Bureau of Gaoming District, Foshan with document “MWJMY Zi [2005] No. 79”. The Company holds 70% equities of the said company; therefore the said subsidiary was included into the scope of the consolidated financial statements since the date of foundation. On 23 August 2016, the Company and Prosperity Lamps and Components Ltd signed the equity transfer agreement. The Company purchased 30% equity of Foshan Chanchang Electric Appliances (Gaoming) Co., Ltd. held by Prosperity Lamps and Components Ltd. After the purchasing, the Company held 100% equity of Foshan Chanchang Electric Appliances (Gaoming) Co., Ltd. —Foshan Taimei Times Lamps Co., Ltd., which is a Sino-foreign joint venture invested and established by the Company and Reback North America Investment Limited, had obtained license for Business Corporation on 5 December 2005 through approval by Foreign Trade and Economic Cooperation Bureau of Gaoming District, Foshan with document “MWJMY Zi [2005] No. 97”. The Company holds 70% equities of the said company; therefore the said subsidiary was included into the scope of the consolidated financial statements since the date of foundation. —FSL New Light Source Technology Co., Ltd. (its predecessor was “Foshan Lighting Lamps and Lanterns Co., Ltd.” and it changed its name to “FSL New Light Source Technology Co., Ltd.” on 17 December 2014), which is invested and established by the Company together with Foshan Haozhiyuan Trading Co., Ltd., Shanghai Liangqi Electric Co., Ltd, Changzhou Sanfeng Electrical & Lighting Co., Ltd., Henan Xingchen Electrical & Lighting Co., Ltd., Foshan Hongbang Electrical & Lighting Co., Ltd., Hebei Jinfen Trading Co., Ltd., obtaining its license for Business Corporation on 27 September 2009. The Company holds 60% equities of this company. Therefore the said subsidiary was included into the scope of the consolidated financial statements since the date of foundation. On 25 September 2009 and 19 November 2010, the equity transfer agreement was signed between the Company and the minority shareholders, in which the minority shareholders respectively transferred their equities of Foshan Lighting Lamps and Lanterns Co., Ltd. to the Company. After transfer, the Company holds 100% equities of Foshan Lighting Lamps and Lanterns Co., Ltd. —FSL (Xinxiang) Lighting Co., Ltd. is a limited liability company which is invested and established by the Company, obtaining its license for Business Corporation on 17 April 2009. The Company holds 100% equities of the said company, therefore the said subsidiary was included into the scope of the consolidated financial 26 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 statements since date of foundation. On 27 August 2013, the 3rd Meeting of the 7th Board of Directors reviewed and approved to invest another RMB2 million (land in an industrial park in Xinxiang, Henan Province and monetary funds) in FSL (Xinxiang) Lighting, increasing the registered capital of FSL (Xinxiang) Lighting to RMB35,418,439.76. —Foshan Lighting Lamps and Lanterns Co., Ltd. is a limited liability company invested and established by the Company with the registered capital of RMB15 million, which had obtained its license for Business Corporation on 8 May 2013. And the Company holds 100% equities of this company. Therefore the said subsidiary was included into the scope of the consolidated financial statements since the date of foundation. —In accordance with the equity transfer agreement signed between the Company and Prosperity Lamps and Components Ltd. on 27 August 2008, Prosperity Lamps and Components Ltd. transferred 100% equities of Nanjing Fozhao Lighting Components Manufacturing Co., Ltd. (formerly known as “Prosperity (Nanjing) Lighting Components Co., Ltd.”, and changed name to “Nanjing Fozhao Lighting Components Manufacturing Co., Ltd.” on 15 November 2010.) to the Company. Therefore, Nanjing Fozhao Lighting Components Manufacturing Co., Ltd. became a wholly-owned subsidiary of the Company. The said subsidiary was included into the scope of the consolidated financial statements since the merger date. —FSL Zhida Electric Technology Co., Ltd. (FSL Zhida) was incorporated by the Company, Foshan Zhibida Enterprise Management Co., Ltd. and Dongguan Baida Semiconductor Material Co., Ltd. on a joint investment basis. FSL Zhida obtained its business license on 21 October 2016. Holding a stake of 51% in it, the Company has included FSL Zhida in its consolidated financial statements since the date of FSL Zhida’s incorporation. —FSL Lighting GmbH is a Limited Liability company invested and set up in German with registered capital Euro25,000. It got the business license on 30 November 2017 whose 100% stock equity is held by the Company, and it is included into the scope of consolidated financial statement from the date of establishment. VIII Structured Bodies Controlled by the Company □ Applicable √ Not applicable IX Performance Forecast for January-September 2020 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 27 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 X Risks Facing the Company and Countermeasures 1. Risks of Macro Economic Fluctuations and Market Competition Shock to the global macro economy from COVID-19 pandemic, the rising deglobalization and local protectionism, as well as the impact of COVID-19 epidemic, the countries around the world have enforced strict entry and exit restrictions and quarantine measures, which brings about more uncertainty to export of lighting business of China. If the global economic situation further deteriorates, market demand will be impacted and competition will become fiercer, which may eventually affect the Company’s operating performance. Countermeasures: The Company will continue to increase R&D investments in a bid to develop new products and enter new segment markets. It will also accelerate the introduction of new manufacturing processes, technologies and products to the market for more market share and higher added value on its products. Meanwhile, it will continue to give play to the cost advantages in product manufacturing and improve supply ability of high-quality products. At the same time, by optimizing marketing network and strengthening the business focus and expansion on domestic and foreign major customers, the Company will improve service quality, increase core competitive capacity of the Company constantly. 2. Risk of Raw Material Price Fluctuations Raw materials of the Company’s products account for a high proportion of its cost of sales. Therefore, fluctuations in their prices will have an impact on the Company’s profitability. As some raw material prices are associated with uncontrollable factors such as global market conditions and national macroeconomic policies, there is a risk of price fluctuation of raw materials. Countermeasures: Paying attention to market dynamics, collecting information, analyzing and pre-judging supply of main raw materials and price trend, by increasing quantity of qualified suppliers, expanding bidding range, perfecting supply chain management, and establishing a long-term and mutually beneficiary cooperation model with suppliers, the Company is able to ensure the procurement quality and decrease procurement costs. 3. Risk of inventory valuation loss As of the end of the Reporting Period, the inventory mainly includes raw materials, semi-finished products and finished products. Due to the large number of product types and models, the raw materials and inventories that are stored to meet production and sales will increase simultaneously. It will lead to a higher inventory maintained in the 28 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Company. In case changes occur to product prices or demand in the future market, the Company may experience a risk of inventory depreciation. Countermeasures: Intensify the analysis of sales and change in future market demand, on the basis of assuring production and sales, the Company can control inventory scale reasonably. 4. Risk of exchange rate fluctuations The RMB exchange rate in China is based on market supply and demand, with reference to a basket of currencies for regulation and a managed floating exchange rate system. Exchange rate fluctuations will happen with the fluctuations of global economy, simmering tension of some regions and the monetary policies of various countries. Export accounts for around 40% of the Company’s business, and is mostly settled in the U.S. dollar. If the exchange rate fluctuates significantly, business performance of the Company will be affected. Countermeasures: By knowing exchange rate policies and fluctuation trend of settlement currencies in time, intensifying settlement currency management, ,and carrying out forward forex settlement when the timing is right, the Company can relatively lock in exchange rates and minimize the risks brought by exchange rate fluctuations. 5. Risk of doubtful accounts receivable Owing to the business operational characteristics, with the expansion of sales volume of Company, accounts receivable represent a great amount for the Company. If major adverse changes in the financial status of major debtors may result in the risk of uncollectible accounts receivable. Countermeasures: The Company will be highly alert and aware in respect of the safety and completeness of accounts receivable. By perfecting credit file of customers, evaluating credit status of customers regularly, adopting method of pledge of customers’ assets, and purchasing insurance on certain export sales, the Company can reduce risks from doubtful accounts receivable. The Company can organize human and other resources to reinforce the management and collection efforts of accounts receivable, implement pre-warning treatment for accounts receivable, analyze and report accounts receivable regularly, and enhance appraisal in respect of recovery of accounts receivable as means to ensure that the risk regarding accounts receivable is under effective control. 29 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part V Significant Events I Annual and Extraordinary General Meeting Convened during the Reporting Period 1. General Meeting Convened during the Reporting Period Investor Index to disclosed Meeting Type Convened date Disclosure date participation ratio information Announcement on Resolutions of the 2019 The 2019 Annual Annual General Annual General Meeting 38.22% 7 May 2020 8 May 2020 General Meeting Meeting (Announcement No.: 2020-020) disclosed on www.cninfo.com.cn 2. Extraordinary General Meetings Convened at the Request of Preference Shareholders with Resumed Voting Rights □ Applicable √ Not applicable II Interim Dividend Plan □ Applicable √ Not applicable The Company has no interim dividend plan, either in the form of cash or stock. III Commitments of the Company’s De Facto Controller, Shareholders, Related Parties and Acquirers, as well as the Company Itself and Other Entities Fulfilled in the Reporting Period or Ongoing at the Period-End √ Applicable □ Not applicable Date of Type of Term of Commitment Promisor Details of commitment commitment Fulfillment commitment commitment making Electronics Group and its acting-in-concert parties Commitments made in Controlling About Shenzhen Rising acquisition documents shareholder and avoidance of Investment and Hong 3 December Six months Completed or shareholding acting-in-concer horizontal Kong Rising Investment 2019 alteration documents t parties competition have made a commitment that they shall eliminate the horizontal competition 30 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 between Foshan NationStar Optoelectronics Co., Ltd. and the Company through business integration or other ways or arrangements before 4 June 2020. Executed on time or not Yes IV Engagement and Disengagement of Independent Auditor Are the interim financial statements audited? □Yes √ No These interim financial statements are unaudited. V Explanations Given by the Board of Directors and the Supervisory Committee Regarding the Independent Auditor's “Modified Opinion” on the Financial Statements of the Reporting Period □ Applicable √ Not applicable VI Explanations Given by the Board of Directors Regarding the Independent Auditor's “Modified Opinion” on the Financial Statements of Last Year □ Applicable √ Not applicable VII Insolvency and Reorganization □ Applicable √ Not applicable No such cases in the Reporting Period. VIII Legal Matters Significant lawsuits and arbitrations □ Applicable √ Not applicable No such cases in the Reporting Period. Other legal matters √ Applicable □ Not applicable Basic situation of Lawsuit amount Whether Process of Trial results and Situation of Disclosure Disclosure lawsuit (RMB ‘0,000) form into lawsuit influences of lawsuit execution of date index 31 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 (arbitration) estimated (arbitration) (arbitration) judgment of liabilities lawsuit (arbitration) The Company received the written order of the second instance from the court in June 2020, and the trial results are as follows: 1. Withdraw the Part II Suit and and Part IV of the counter-suit The amount civil judgment The Company between FSL and involved in the (2016) has applied for Dongguan Fozhao suit filed by FSL The Y1971MCNo.6481; property Linton against Linton is judgment of 2. Linton shall pay preservation Energy-Saving RMB10.5158 the second None RMB9,159,800 to during the Technologies Co., million, while the instance has FSL for product sales period of lawsuit Ltd. (hereinafter amount of the come into within five days from and now is referred to as counter-suite is effect the effective date of waiting for “Linton”) on a RMB13.2791 the judgment; 3. FSL execution. sales and purchase million shall pay the contract liquidated damages of RMB1,552,200 to Linton within five days from the effective date of the judgment; 4. Other claims of FSL and Linton are rejected. Suit filed by FSL against Shenzhen None (FSL Kaichuang First trial No verdict has been 112.89 is the N/A Industrial Co., Ltd. underway reached plaintiff) on a sales and purchase contract Suit filed by FSL The None (the Chanchang defendant wholly-own Optoelectronics was ordered ed Second trial Co., Ltd. against 90.21 to pay N/A subsidiary underway Shenzhen RMB902,10 of FSL is Kaichuang 0 for the plaintiff) Industrial Co., Ltd. product 32 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 on a sales and sales and purchase contract interests to FSL. The defendant has applied for an appeal. Suit filed by None Guangdong Cobra (uncertain Industry Co., Ltd. before the First trial No verdict has been 500 N/A against FSL on court underway reached infringement of decision fancies design comes out) The defendant was ordered to pay RMB14.220 8 million and the liquidated Suit filed by FSL damages to against Beijing FSL for None (FSL Zhongao Zhengshi product Second trial 1,927.64 is the N/A Lighting Co., Ltd. sales, with underway plaintiff) on a sales and Jiang purchase contract Zhenghao bearing the joint responsibilit y. The defendant has applied for an appeal. Suit filed by None Shanghai Tolight (uncertain Technology Co., before the First trial No verdict has been 608.49 N/A Ltd against FSL on court underway reached a sales and decision purchase contract comes out) Suit filed by FSL None (FSL The Second trial 840.82 N/A against Shanghai is the defendants underway 33 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Feilo Investment plaintiff) were Co., Ltd. and ordered to Shanghai Feilo pay Acoustics Co., Ltd. RMB2.4379 on a sales and million and purchase contract interests to FSL. The Company has applied for an appeal. IX Doubts from Media □ Applicable √ Not applicable The Company had no issues about which media generally raised doubts in the Reporting Period. X Punishments and Rectifications □ Applicable √ Not applicable No such cases in the Reporting Period. XI Credit Quality of the Company as well as its Controlling Shareholder and De Facto Controller √ Applicable □ Not applicable In the Reporting Period, the Company and its controlling shareholder and de facto controller were not involved in any unsatisfied court judgments, large-amount overdue liabilities or the like. XII Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for Employees □ Applicable √ Not applicable No such cases in the Reporting Period. XIII Major Related-Party Transactions 1. Continuing Related-Party Transactions √Applicable □ Not applicable Relation Transact As % of Approve Obtaina Index Type of Specific Pricing Total Over the Method Related ship ion total d ble Disclosu to transacti transacti principl value approve of party with the price(R value of transacti market re date disclos on on e (RMB’0 d line or settleme Compan MB’0,0 all on line price for ed 34 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 y 00) ,000) same-ty (RMB’0 not nt same-ty inform pe ,000) pe ation transacti transacti ons ons(RM B’0,000 ) Purchasi ng Foshan products NationS Under and Purchas tar same www.c receivin e of Market Remitta 10 April Optoele actual 1,573.13 1.85% 20,000 Not ninfo.c g labor material price 1,573.13 nce 1,573.13 2020 ctronics controll om.cn service s Co., er from Ltd. related party Guangd Purchasi ong ng Fenghua products Under Advanc and Purchas same www.c ed receivin e of Market Remitta 10 April actual 275.40 275.4 0.32% 1,100 Not 275.40 ninfo.c Technol g labor material price nce 2020 controll om.cn ogy service s er Holding from Co., related Ltd. party Purchasi Shareho ng Prosperi lder that products ty holds and Purchas Lamps www.c over 5% receivin e of Market Remitta 10 April & 107.09 107.09 0.13% 650 Not 107.09 ninfo.c shares g labor material price nce 2020 Compon om.cn of the service s ents Compan from Limited y related party Hangzh Enterpri Purchasi ou se ng Purchas Times controll products www.c e of Market Remitta 10 April Lighting ed by and 16.20 16.2 0.02% 200 Not 16.20 ninfo.c material price nce 2020 and related receivin om.cn s Electric natural g labor al Co., person service 35 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Ltd. from related party Purchasi ng Prosperi Enterpri products ty se and Purchas Electric controll www.c receivin e of Market Remitta 10 April al ed by 11.84 11.84 0.01% 100 Not 11.84 ninfo.c g labor material price nce 2020 (China) related om.cn service s Co., natural from Ltd. person related party Purchasi Guangd ng ong products Electron Under and Purchas ic same www.c receivin e of Market Remitta 10 April Technol actual 27.88 27.88 2.19% 100 Not 27.88 ninfo.c g labor equipme price nce 2020 ogy controll om.cn service nt Researc er from h related Institute party Purchasi ng Foshan products Fulong Under and Environ same receivin receivin Market Remitta mental actual g labor 4.25 4.25 12.39% Not 4.25 N/A g labor price nce Technol controll service service ogy Co., er from Ltd. related party Purchasi Jiangme ng n products Dongjia Under and ng same receivin receivin Market Remitta Environ actual g labor 3.33 3.33 9.72% Not 3.33 N/A g labor price nce mental controll service service Technol er from ogy Co, related Ltd. party 36 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Zhuhai Doumen District Yongxin Purchasi gsheng ng Environ products mental Under and Industri same receivin receivin Market Remitta al actual g labor 1.33 1.33 3.87% Not 1.33 N/A g labor price nce Wastes controll service service Recycli er from ng related Compre party hensive Treatme nt Co., Ltd. Purchasi Guangd ng ong products Electron Under and ic same receivin receivin Market Remitta Technol actual g labor 0.30 0.30 0.88% Not 0.30 N/A g labor price nce ogy controll service service Researc er from h related Institute party Selling Prosperi products ty Under and Lamps same providin www.c Selling Market Remitta 10 April & actual g labor 933.27 933.27 0.61% 3,500 Not 933.27 ninfo.c products price nce 2020 Compon controll service om.cn ents er to Limited related party Prosperi Enterpri Selling ty se products Electric controll and www.c Selling Market Remitta 10 April al ed by providin 1.13 1.13 0.00% 100 Not 1.13 ninfo.c products price nce 2020 (China) related g labor om.cn Co., natural service Ltd. person to 37 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 related party Selling Guangz products hou Under and Huajian same providin Enginee Selling Market Remitta actual g labor 12.79 12.79 0.01% Not 12.79 N/A ring products price nce controll service Constru er to ction related Co.,Ltd. party Selling Guangd products ong and Rising Actual providin Assets Selling Market Remitta controll g labor 3.43 3.43 0.00% Not 3.43 N/A Manage products price nce er service ment to Co., related Ltd. party Guangd Selling ong products Guangs Under and heng same providin Selling Market Remitta Commu actual g labor 2.36 2.36 0.00% Not 2.36 N/A products price nce nication controll service Technol er to ogy Co., related Ltd. party Guangd Selling ong products Electron Under and ics same providin Selling Market Remitta Informat actual g labor 0.80 0.8 0.00% Not 0.80 N/A products price nce ion controll service Industry er to Group related Ltd. party Total -- -- 2,974.53 -- 25,750 -- -- -- -- -- Large-amount sales return in detail N/A Give the actual situation in the In April 2020, the Company estimated the total value of its continuing transactions with Reporting Period (if any) where an related parties Foshan NationStar Optoelectronics Co., Ltd., Guangdong Fenghua Advanced 38 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 estimate had been made for the total Technology Holding Co., Ltd., Prosperity Lamps & Components Limited, Prosperity value of continuing related-party Electrical (China) Co., Ltd., Guangdong Electronic Technology Research Institute and transactions by type to occur in the Hangzhou Times Lighting and Electrical Co., Ltd. Concerning the purchases from its related Reporting Period parties, the actual amount in 2020 so far was RMB20.2074million, accounting for 9.12% of the estimate in 2020. As for the sales to its related parties, the actual amount in 2020 so far was RMB9.5379million, accounting for 26.49% of the estimate in 2020. Reason for any significant difference between the transaction price and the N/A market reference price (if applicable) 2. Related-Party Transactions Regarding Purchase or Disposal of Assets or Equity Investments □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Related-Party Transactions Regarding Joint Investments in Third Parties √ Applicable □ Not applicable Relationship Registered Total assets of Net asset of the Net profit of Name of the Principal activity of Joint investor with the capital of the the investee investee the investee investee the investee Company investee (RMB’0,000) (RMB’0,000) (RMB’0,000) Developing, manufacturing and selling: lighting products, lighting equipment, lighting fittings and raw materials, traffic lights, decorative lighting and fittings, Foshan Foshan Under same automobile fittings; NationStar HortiLite RMB17.158 actual undertaking light Optoelectroni Optoelectronics million controller projects; providing cs Co., Ltd. Co., Ltd. services regarding development and consultancy of lighting engineering technology and making investments in projects; import & export of goods and technologies 39 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 (excluding those prohibited by state or involved in administrative approval) Progress on significant construction in progress of N/A the investee (if any) 4. Amounts Due to and from Related Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 5. Other Major Related-Party Transactions √ Applicable □ Not applicable On 21 June 2019, the Company held the 31st Meeting of the 8th Board of Directors, and the Proposal on Signing the Financial Services Agreement with Guangdong Rising Finance Co., Ltd. was examined and approved at the meeting. On the same day, the Company signed the Financial Services Agreement with Guangdong Rising Finance Co., Ltd. (hereinafter referred to as “Rising Finance”), and Rising Finance would provide deposit and settlement services for the Company for a term of one year. During the term of validity of the Agreement, the daily deposit balance of the Company in Rising Finance Company shall not exceed RMB150 million. On 20 June 2020, the said Financial Services Agreement expired and all balance of the Company deposited in Rising Finance has been withdrawn. Index to the current announcement about the said related-party transaction disclosed: Title of announcement Disclosure date Disclosure website Announcement on Signing Financial Services Agreement with Guangdong Rising Finance 22 June 2019 www.cninfo.com.cn Co., Ltd. XIV Occupation of the Company’s Capital by the Controlling Shareholder or any of Its Related Parties for Non-Operating Purposes □ Applicable √ Not applicable No such cases in the Reporting Period. 40 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 XV Major Contracts and Execution thereof 1. Entrustment, Contracting and Leases (1) Entrustment □ Applicable √ Not applicable No such cases in the Reporting Period. (2) Contracting □ Applicable √ Not applicable No such cases in the Reporting Period. (3) Leases □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Major Guarantees □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Cash Entrusted for Wealth Management √ Applicable □ Not applicable Unit: RMB’0,000 Unrecovered overdue Type Funding source Amount Undue amount amount Bank financial products Self-owned funds 43,000 34,000 0 Others Self-owned funds 47,000 21,000 0 Total 90,000 55,000 0 High-risk wealth management transactions with a significant single amount, or with low security, low liquidity or no principal protection: √ Applicable □ Not applicable Unit: RMB’0,000 Type Annua Expect Actual Receip Allow Prescr Plan Index Source Deter Type of Begin Use of lized ed gain/lo t/paym ance ibed for to Truste Princi of Endin minati of wealth ning princi yield yield ss in ent of for proced more transa e pal princi g date on of trustee manag date pal rate (if Report such impair ure transa ction pal yield ement for any) ing gain/lo ment execut ction summ 41 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 product refere Period ss (if ed or or not ary nce any) not and other infor matio n (if any) China Guang fa Repay Princip The Bank, ment al-prot Comp www. Guang 19 17 of To be ected 4,000 any’s Invest cninfo zhou Bank May Augus princi 3.45% 34.03 15.88 receiv Yes Yes with own ment .com.c develo 2020 t 2020 pal ed floatin idle n pment with g yield funds area yield sub-br anch Repay Huaxi Princip The ment a al-prot Comp 2 www. of To be Bank, ected any’s 2 June Septe Invest cninfo Bank 8,000 princi 3.53% 71.18 21.66 receiv Yes Yes Fosha with own 2020 mber ment .com.c pal ed n floatin idle 2020 n with branch g yield funds yield China Guang fa Repay Princip The Bank, ment al-prot Comp www. Guang 31 of To be ected any’s 2 June Invest cninfo zhou Bank 5,000 Augus princi 3.40% 41.92 13.04 receiv Yes Yes with own 2020 ment .com.c develo t 2020 pal ed floatin idle n pment with g yield funds area yield sub-br anch China Not Repay The Minsh princip ment Comp www. eng al-prot 6 of To be any’s 4 June Invest cninfo Bank Bank ected 5,000 Augus princi 3.60% 31.07 12.82 receiv Yes Yes own 2020 ment .com.c Fosha with t 2020 pal ed idle n n floatin with funds sub-br g yield yield 42 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 anch Industr ial Not Repay The Bank princip ment Comp 14 www. Guang al-prot 15 of To be any’s Septe Invest cninfo zhou Bank ected 12,000 June princi 3.40% 101.72 16.77 receiv Yes Yes own mber ment .com.c Baiyu with 2020 pal ed idle 2020 n n floatin with funds Sub-br g yield yield anch China Repay Minsh Princip The ment eng al-prot Comp www. 20 of To be Bank ected any’s 1 July Invest cninfo Bank 16,000 March princi 3.85% 173.83 172.14 receiv Yes Yes Fosha with own 2020 ment .com.c 2020 pal ed n floatin idle n with sub-br g yield funds yield anch China Repay Everbr Princip The ment ight al-prot Comp www. 13 13 of To be Bank ected any’s Invest cninfo Bank 5,000 April July princi 3.85% 48.13 41.71 receiv Yes Yes Guang with own ment .com.c 2020 2020 pal ed zhou floatin idle n with Sub-br g yield funds yield anch Total 55,000 -- -- -- -- -- -- 501.88 294.02 -- -- -- -- Situation where the principal is expectedly irrecoverable or an impairment may be incurred: □ Applicable √ Not applicable 4. Other Significant Contracts □ Applicable √ Not applicable No such cases in the Reporting Period. XVI Corporate Social Responsibility (CSR) 1. Major Environmental Issues Indicate by tick mark whether the Company or any of its subsidiaries is identified as a major polluter by the environmental protection authorities. No In strict accordance with the government’s requirements, the Company has been conscientiously carrying out 43 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 environment-related work, including establishing and improving various related systems, and continuously increasing related expenditure. These environment improvement efforts have helped build a good image of the Company in relation to environmental protection. Meanwhile, the Company’s environmental protecting facilities have been running stably, with the discharge of waste gas and water in compliance with the relevant standards. No pollution incidents have occurred. In addition to the environmental protection authorities’ quarterly examination and supervision, the Company has also entrusted, on a yearly basis, an independent institution to exam the Company’s waste gas treatment systems, as well as waste water and noise discharges, so as to minimize environment risk. All the examinations and tests have been documented and released to the employees on the environmental protection and safety bulletin boards at every workshop. Employees at all levels, with a strong awareness of environment protection, have been cooperating closely with each other to implement the policy of “Save Energy, Reduce Consumption, Lower Pollution and Increase Efficiency”. In all, the Company’s environment risk is controllable and its environment management keeps improving. 2. Measures Taken for Targeted Poverty Alleviation Measurement Indicator Number/Progress unit I. General condition —— —— Of which: 1. Funds Ten thousand 3 2. Discount on supplies Ten thousand 0.5 3. Number of people out of poverty being helped to establish Person archival cards II. Itemized investment —— —— 8. Social poverty alleviation —— —— Of which: 8.1 Input amount of cooperation of the eastern and western Ten thousand 3.5 poverty alleviation 8.2 Input amount of fixed-point poverty alleviation Ten thousand 8.3 Input amount of public welfare fund for poverty Ten thousand alleviation Since 2018, the Company has responded actively to the call of Foshan Poverty Relief Office, and signed the contract of social forces and pairing system with Luohong Jiagu Village in Kuyi County, Zhaojue Town, Liangshan Prefecture, Sichuan Province. According to the contract, the Company has donated industrial support funds every year for three consecutive years, and launched the activities including “purchase instead of donation”, students assistance and love assistance, etc.., actively fulfilled the social responsibility of targeted poverty alleviation. XVII Other Significant Events √ Applicable □ Not applicable On 1 June 2020, the Company held the 40th Meeting of the 8th Board of Directors, on which the Proposal on 44 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Reducing Some Stocks of Guoxuan High-tech was reviewed and approved and the Board agreed to reduce some stocks of Guoxuan High-tech adopting centralized bidding trading method or block trading method in accordance with laws and regulations and at an appropriate time within 90 days since the date that the proposal was approved. The amount of stocks reduced shall not exceed 33,880,580 shares, accounting for 3% of current total shares of Guoxuan High-tech. and the price for reduction shall be determined by the market price when the reduction is carried out. As of the disclosure date of this report, the Company has not reduced any shares of Guoxuan High-tech. XVIII Significant Events of Subsidiaries □ Applicable √ Not applicable 45 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part VI Share Changes and Shareholder Information I Share Changes 1. Share Changes Unit: share Before Increase/decrease in the Reporting Period (+/-) After Shares as Shares as dividend dividend Percentag New converted Percentag Shares converted Other Subtotal Shares e (%) issues from e (%) from capital profit reserves 13,653,05 13,814,33 1. Restricted shares 0.98% 161,285 161,285 0.99% 1 6 1.2 Shares held by 1 0.00% 1 0.00% state-owned legal persons 1.3 Shares held by other 4,725,418 0.34% 161,285 161,285 4,886,703 0.35% domestic investors Among which: Shares held 3,753,972 0.27% 3,753,972 0.27% by domestic legal persons Shares held by domestic natural 971,446 0.07% 161,285 161,285 1,132,731 0.08% persons 1.4 Shares held by foreign 8,927,632 0.64% 8,927,632 0.64% investors Shares held 8,927,632 0.64% 8,927,632 0.64% by foreign natural persons 1,385,693, 1,385,531 2. Unrestricted shares 99.02% -161,285 -161,285 99.01% 103 ,818 2.1 RMB-denominated 1,072,554, 1,072,393 76.65% -161,285 -161,285 76.63% ordinary shares 652 ,367 2.2 Domestically listed 313,138,4 313,138,4 22.38% 22.38% foreign shares 51 51 1,399,346, 1,399,346 3. Total shares 100.00% 100.00% 154 ,154 Reasons for share changes: 46 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 √ Applicable □ Not applicable During the Reporting Period, the restricted shares increased 161,285 shares due to the lock-in of shares in the Company held by those outgoing directors and senior management. Approval of share changes: □ Applicable √ Not applicable Transfer of share ownership: □ Applicable √ Not applicable Progress on any share repurchases: □ Applicable √ Not applicable Progress on reducing the repurchased shares by means of centralized bidding: □ Applicable √ Not applicable Effects of share changes on the basic and diluted earnings per share, equity per share attributable to the Company’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period, respectively: □ Applicable √ Not applicable Other information that the Company considers necessary or is required by the securities regulator to be disclosed: □ Applicable √ Not applicable 2. Changes in Restricted Shares √ Applicable □ Not applicable Unit: share Reason for Beginning Released in Increase in Ending restricted Shareholder restriction/release Date of release restricted shares Reporting Period Reporting Period shares from restriction Lock-up of senior Liu Xingming 483,855 0 161,285 645,140 management’s 25 October 2020 shares Total 483,855 0 161,285 645,140 -- -- II Issuance and Listing of Securities □ Applicable √ Not applicable III Shareholders and Their Holdings as at the Period-End Unit: share Number of preference shareholders Number of ordinary 87,618 with resumed voting rights (if any) 0 shareholders (see note 8) 5% or greater ordinary shareholders or the top 10 ordinary shareholders 47 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Increase/de Shares in pledge or frozen Restricted crease in Unrestricted Name of Nature of Shareholdin Ordinary ordinary the ordinary shares shareholder shareholder g percentage shares held shares Status Shares Reporting held held Period Hong Kong Wah Shing Foreign legal Holding 13.47% 188,496,430 0 0 188,496,430 In pledge 92,363,251 person Company Limited Prosperity Lamps & Foreign legal 10.50% 146,934,857 0 0 146,934,857 Components person Limited Shenzhen Rising State-owned Investment 5.12% 71,696,136 0 0 71,696,136 In pledge 35,800,000 legal person Development Co., Ltd. Guangdong Electronics State-owned Information 4.85% 67,876,801 1,483,300 0 67,876,801 In pledge 32,532,815 legal person Industry Group Ltd. Central Huijin Asset State-owned 2.42% 33,878,900 0 0 33,878,900 Management legal person Co., Ltd. Essence International Foreign legal Securities 2.22% 31,059,913 51,000 0 31,059,913 person (Hong Kong) Co., Ltd. Hong Kong Rising Foreign legal Investment 1.82% 25,482,252 0 0 25,482,252 person Development Co., Ltd. DBS Vickers(Hong Foreign legal 1.50% 20,929,637 -1,072,500 0 20,929,637 Kong) Ltd A/C person Clients 48 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 China Merchants Foreign legal Securities 0.89% 12,494,704 334468 0 12,494,704 person (Hong Kong) Co., Ltd Foreign natural Zhuang Jianyi 0.85% 11,903,509 0 8,927,632 2,975,877 person Strategic investors or general corporations becoming top-ten ordinary shareholders due to Naught 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 the 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 unrestricted ordinary shareholders Type of shares Name of shareholder Unrestricted ordinary shares held Type Shares Hong Kong Wah Shing Holding RMB-denominate 188,496,430 188,496,430 Company Limited d ordinary stock Prosperity Lamps & RMB-denominate 146,934,857 146,934,857 Components Limited d ordinary stock Shenzhen Rising Investment RMB-denominate 71,696,136 71,696,136 Development Co., Ltd. d ordinary stock Guangdong Electronics RMB-denominate 67,876,801 67,876,801 Information Industry Group Ltd. d ordinary stock Central Huijin Asset RMB-denominate 33,878,900 33,878,900 Management Co., Ltd. d ordinary stock Domestically Essence International Securities 31,059,913 listed foreign 31,059,913 (Hong Kong) Co., Ltd. stock Domestically Hong Kong Rising Investment 25,482,252 listed foreign 25,482,252 Development Co., Ltd. stock Domestically DBS Vickers(Hong Kong) Ltd 20,929,637 listed foreign 20,929,637 A/C Clients stock 49 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Domestically China Merchants Securities 12,494,704 listed foreign 12,494,704 (Hong Kong) Co., Ltd stock Guangdong Rising Finance RMB-denominate 11,434,762 11,434,762 Holding Co., Ltd. d ordinary stock Related or acting-in-concert Among the top 10 unrestricted ordinary shareholders, Hong Kong Wah Shing Holding Company parties among the top 10 Limited, Shenzhen Rising Investment Development Co., Ltd., Guangdong Electronics unrestricted ordinary Information Industry Group Ltd., Guangdong Rising Finance Holding Co., Ltd. and Hong Kong shareholders, as well as between Rising Investment Development Co., Ltd. are acting-in-concert parties; Apart from that, it is the top 10 unrestricted ordinary unknown whether there is among the top 10 shareholders any other related parties or shareholders and the top 10 acting-in-concert parties as defined in the Administrative Measures for the Acquisition of Listed ordinary shareholders Companies. Top 10 ordinary shareholders involved in securities margin None trading (if any) (see note 4) Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conducted any promissory repo during the Reporting Period. □ Yes √ No No such cases in the Reporting Period. IV Change of the Controlling Shareholder or the De Facto Controller Change of the controlling shareholder in the Reporting Period □ Applicable √ Not applicable No such cases in the Reporting Period. Change of the de facto controller in the Reporting Period □ Applicable √ Not applicable No such cases in the Reporting Period. 50 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part VII Preference Shares □ Applicable √ Not applicable No preference shares in the Reporting Period. 51 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part VIII Convertible Corporate Bonds □ Applicable √ Not applicable No convertible corporate bonds in the Reporting Period. 52 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part IX Directors, Supervisors and Senior Management I Change in Shareholdings of Directors, Supervisors and Senior Management □ Applicable √ Not applicable No changes occurred to the shareholdings of the directors, supervisors and senior management in the Reporting Period. See the 2019 Annual Report for more details. II Change of Directors, Supervisors and Senior Management √ Applicable □ Not applicable Name Office title Type of change Date of change Reason for change Chairman of the Wu Shenghui Elected 7 May 2020 Elected as the Chairman of the Board Board Director & Elected as the director of the 8th Board of Directors and Lei Zihe Elected 7 July 2020 General Manager hired as the general manager of the Company Chairman of the He Yong Left 24 April 2020 Resign the post for job turnover Board Director & Liu Xingming Left 24 April 2020 Resign the posts for age General Manager 53 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part X Corporate Bonds Does the Company have any corporate bonds publicly offered on the stock exchange, which were outstanding before the date of this Report’s approval or were due but could not be redeemed in full? No. 54 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part XI Financial Statements I Auditor’s Report Whether the interim report has been audited? □Yes √ No The interim report of the Company has not been audited. II Financial Statements Currency unit for the financial statements and the notes thereto: RMB 1. Consolidated Balance Sheet Prepared by Foshan Electrical and Lighting Co., Ltd. 30 June 2020 Unit: RMB Item 30 June 2020 31 December 2019 Current assets: Monetary assets 1,270,922,790.30 1,125,456,662.64 Settlement reserve Interbank loans granted Held-for-trading financial assets 657,796,459.38 901,166,682.64 Derivative financial assets Notes receivable 96,328,610.62 109,444,480.94 Accounts receivable 754,565,733.58 712,175,266.51 Accounts receivable financing Prepayments 6,588,282.64 7,851,390.78 Premiums receivable Reinsurance receivables Receivable reinsurance contract reserve Other receivables 30,629,514.19 22,307,344.76 Including: Interest receivable Dividends receivable Financial assets purchased under resale agreements 55 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Inventories 524,621,286.70 637,336,584.06 Contract assets Assets held for sale Current portion of non-current assets Other current assets 46,195,101.66 52,502,863.59 Total current assets 3,387,647,779.07 3,568,241,275.92 Non-current assets: Loans and advances to customers Investments in debt obligations Investments in other debt obligations Long-term receivables Long-term equity investments 183,738,416.82 181,093,725.43 Investments in other equity 1,997,994,223.39 1,454,740,241.46 instruments Other non-current financial assets Investment property Fixed assets 654,479,073.26 629,832,098.35 Construction in progress 82,647,609.80 119,030,610.16 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 165,612,140.26 167,826,499.74 Development costs Goodwill Long-term prepaid expense 6,241,458.24 7,727,394.74 Deferred income tax assets 31,706,831.27 36,847,064.36 Other non-current assets 7,440,250.54 9,861,098.08 Total non-current assets 3,129,860,003.58 2,606,958,732.32 Total assets 6,517,507,782.65 6,175,200,008.24 Current liabilities: Short-term borrowings Borrowings from the central bank Interbank loans obtained Held-for-trading financial liabilities 56 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Derivative financial liabilities Notes payable 245,253,258.83 374,665,327.74 Accounts payable 610,696,483.53 559,016,692.70 Advances from customers 50,449,357.17 Contract liabilities 41,949,069.17 Financial assets sold under repurchase agreements Customer deposits and interbank deposits Payables for acting trading of securities Payables for underwriting of securities Employee benefits payable 44,377,716.78 83,156,852.86 Taxes payable 36,797,827.09 17,211,068.21 Other payables 55,847,187.57 46,073,344.71 Including: Interest payable Dividends payable Handling charges and commissions payable Reinsurance payables Liabilities directly associated with assets held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 1,034,921,542.97 1,130,572,643.39 Non-current liabilities: Insurance contract reserve Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term employee benefits payable Provisions 57 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Deferred income Deferred income tax liabilities 218,474,381.48 137,216,136.70 Other non-current liabilities Total non-current liabilities 218,474,381.48 137,216,136.70 Total liabilities 1,253,395,924.45 1,267,788,780.09 Owners’ equity: Share capital 1,399,346,154.00 1,399,346,154.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 158,608,173.07 158,608,173.07 Less: Treasury stock Other comprehensive income 1,238,009,149.48 776,260,348.19 Specific reserve Surplus reserves 836,559,645.36 836,559,645.36 General reserve Retained earnings 1,602,144,888.79 1,709,962,479.45 Total equity attributable to owners of 5,234,668,010.70 4,880,736,800.07 the Company as the parent Non-controlling interests 29,443,847.50 26,674,428.08 Total owners’ equity 5,264,111,858.20 4,907,411,228.15 Total liabilities and owners’ equity 6,517,507,782.65 6,175,200,008.24 Legal representative: Wu Shenghui General Manager: Lei Zihe Chief Financial Officer: Tang Qionglan 2. Balance Sheet of the Company as the Parent Unit: RMB Item 30 June 2020 31 December 2019 Current assets: Monetary assets 1,203,728,130.09 1,059,001,233.28 Held-for-trading financial assets 657,796,459.38 901,166,682.64 Derivative financial assets Notes receivable 86,684,688.94 107,567,164.99 Accounts receivable 695,350,047.31 666,106,832.53 Accounts receivable financing 58 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Prepayments 4,437,435.40 6,614,791.10 Other receivables 46,389,136.26 37,934,614.96 Including: Interest receivable Dividends receivable Inventories 451,996,367.75 553,557,529.00 Contract assets Assets held for sale Current portion of non-current assets Other current assets 38,810,467.31 43,118,385.01 Total current assets 3,185,192,732.44 3,375,067,233.51 Non-current assets: Investments in debt obligations Investments in other debt obligations Long-term receivables Long-term equity investments 467,531,519.08 464,886,827.69 Investments in other equity 1,997,994,223.39 1,454,740,241.46 instruments Other non-current financial assets Investment property Fixed assets 600,171,929.04 573,844,707.66 Construction in progress 82,477,792.67 116,240,559.37 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 123,833,564.79 125,673,065.66 Development costs Goodwill Long-term prepaid expense 4,118,018.95 4,891,398.93 Deferred income tax assets 28,591,147.92 34,205,213.27 Other non-current assets 6,121,450.54 8,440,448.08 Total non-current assets 3,310,839,646.38 2,782,922,462.12 Total assets 6,496,032,378.82 6,157,989,695.63 Current liabilities: Short-term borrowings 59 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Held-for-trading financial liabilities Derivative financial liabilities Notes payable 245,253,258.83 376,265,327.74 Accounts payable 742,443,210.84 689,846,497.35 Advances from customers 46,758,714.00 Contract liabilities 38,638,644.92 Employee benefits payable 31,813,426.00 68,658,329.30 Taxes payable 27,472,927.96 12,374,430.19 Other payables 152,464,042.95 125,001,875.83 Including: Interest payable Dividends payable Liabilities directly associated with assets held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 1,238,085,511.50 1,318,905,174.41 Non-current liabilities: Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term employee benefits payable Provisions Deferred income Deferred income tax liabilities 218,474,381.48 137,216,136.70 Other non-current liabilities Total non-current liabilities 218,474,381.48 137,216,136.70 Total liabilities 1,456,559,892.98 1,456,121,311.11 Owners’ equity: Share capital 1,399,346,154.00 1,399,346,154.00 Other equity instruments 60 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Including: Preferred shares Perpetual bonds Capital reserves 166,211,779.15 166,211,779.15 Less: Treasury stock Other comprehensive income 1,238,008,872.55 776,242,987.90 Specific reserve Surplus reserves 836,559,645.36 836,559,645.36 Retained earnings 1,399,346,034.78 1,523,507,818.11 Total owners’ equity 5,039,472,485.84 4,701,868,384.52 Total liabilities and owners’ equity 6,496,032,378.82 6,157,989,695.63 Legal representative: Wu Shenghui General Manager: Lei Zihe Chief Financial Officer: Tang Qionglan 3. Consolidated Income Statement Unit: RMB Item H1 2020 H1 2019 1. Revenue 1,522,884,127.04 1,687,184,660.86 Including: Operating revenue 1,522,884,127.04 1,687,184,660.86 Interest income Insurance premium income Handling charge and commission income 2. Costs and expenses 1,376,707,249.71 1,529,073,323.52 Including: Cost of sales 1,161,598,236.11 1,297,336,713.77 Interest expense Handling charge and commission expense Surrenders Net insurance claims paid Net amount provided as insurance contract reserve Expenditure on policy dividends Reinsurance premium expense Taxes and surcharges 15,851,397.76 20,836,268.74 61 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Selling expense 95,277,602.70 123,410,566.38 Administrative expense 64,215,895.53 67,537,179.69 R&D expense 59,098,081.73 29,860,632.61 Finance costs -19,333,964.12 -9,908,037.67 Including: Interest expense Interest 17,488,125.06 10,378,329.29 income Add: Other income 3,028,003.10 5,523,870.00 Return on investment (“-” for loss) 36,143,255.71 43,839,659.74 Including: Share of profit or loss 4,725,081.89 784,711.98 of joint ventures and associates Income from the derecognition of financial assets at amortized cost (“-” for loss) Exchange gain (“-” for loss) Net gain on exposure hedges (“-” for loss) Gain on changes in fair value (“-” -1,532,350.00 -996,200.00 for loss) Credit impairment loss (“-” for -3,379,210.38 -1,036,971.94 loss) Asset impairment loss (“-” for loss) -3,200,793.69 -12,239,244.21 Asset disposal income (“-” for 7,489.02 loss) 3. Operating profit (“-” for loss) 177,243,271.09 193,202,450.93 Add: Non-operating income 662,887.00 1,941,872.57 Less: Non-operating expense 1,024,568.14 478,391.97 4. Profit before tax (“-” for loss) 176,881,589.95 194,665,931.53 Less: Income tax expense 23,050,722.70 27,167,288.57 5. Net profit (“-” for net loss) 153,830,867.25 167,498,642.96 5.1 By operating continuity 5.1.1 Net profit from continuing 153,830,867.25 167,498,642.96 operations (“-” for net loss) 5.1.2 Net profit from discontinued operations (“-” for net loss) 5.2 By ownership 5.2.1 Net profit attributable to 151,061,447.83 167,275,725.75 62 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 owners of the Company as the parent 5.2.1 Net profit attributable to 2,769,419.42 222,917.21 non-controlling interests 6. Other comprehensive income, net of 461,748,801.29 61,635,887.65 tax Attributable to owners of the Company 461,748,801.29 61,635,887.65 as the parent 6.1 Items that will not be 461,765,884.65 61,621,709.81 reclassified to profit or loss 6.1.1 Changes caused by remeasurements on defined benefit schemes 6.1.2 Other comprehensive income that will not be reclassified to profit or loss under the equity method 6.1.3 Changes in the fair value of 461,765,884.65 61,621,709.81 investments in other equity instruments 6.1.4 Changes in the fair value arising from changes in own credit risk 6.1.5 Other 6.2 Items that will be reclassified to -17,083.36 14,177.84 profit or loss 6.2.1 Other comprehensive income that will be reclassified to profit or loss under the equity method 6.2.2 Changes in the fair value of investments in other debt obligations 6.2.3 Other comprehensive income arising from the reclassification of financial assets 6.2.4 Credit impairment allowance for investments in other debt obligations 6.2.5 Reserve for cash flow hedges 6.2.6 Differences arising from the translation of foreign -17,083.36 14,177.84 currency-denominated financial statements 6.2.7 Other Attributable to non-controlling interests 7. Total comprehensive income 615,579,668.54 229,134,530.61 63 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Attributable to owners of the Company 612,810,249.12 228,911,613.40 as the parent Attributable to non-controlling 2,769,419.42 222,917.21 interests 8. Earnings per share 8.1 Basic earnings per share 0.1080 0.1195 8.2 Diluted earnings per share 0.1080 0.1195 Where business combinations under common control occurred in the current period, the net profit achieved by the acquirees before the combinations was RMB0.00 , with the amount for last year being RMB0.00 . Legal representative: Wu Shenghui General Manager: Lei Zihe Chief Financial Officer: Tang Qionglan 4. Income Statement of the Company as the Parent Unit: RMB Item H1 2020 H1 2019 1. Operating revenue 1,422,984,075.84 1,635,659,167.96 Less: Cost of sales 1,114,257,858.54 1,284,411,581.81 Taxes and surcharges 12,796,090.44 17,949,984.61 Selling expense 87,141,728.10 114,023,284.09 Administrative expense 56,438,900.74 58,470,337.78 R&D expense 53,411,931.20 28,129,639.08 Finance costs -19,059,613.45 -9,671,203.12 Including: Interest expense Interest income 17,198,883.00 10,124,433.97 Add: Other income 2,807,028.00 5,323,870.00 Return on investment (“-” for 36,143,255.71 44,169,887.94 loss) Including: Share of profit or 4,725,081.89 784,711.98 loss of joint ventures and associates Income from the derecognition of financial assets at amortized cost (“-” for loss) Net gain on exposure hedges (“-” for loss) Gain on changes in fair value (“-” -1,532,350.00 -996,200.00 for loss) Credit impairment loss (“-” for -1,548,956.28 -99,161.29 64 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 loss) Asset impairment loss (“-” for -2,500,432.51 -11,804,419.91 loss) Asset disposal income (“-” for 7,489.02 loss) 2. Operating profit (“-” for loss) 151,373,214.21 178,939,520.45 Add: Non-operating income 527,849.42 1,748,491.88 Less: Non-operating expense 268,377.64 387,894.46 3. Profit before tax (“-” for loss) 151,632,685.99 180,300,117.87 Less: Income tax expense 16,915,430.83 22,896,024.86 4. Net profit (“-” for net loss) 134,717,255.16 157,404,093.01 4.1 Net profit from continuing 134,717,255.16 157,404,093.01 operations (“-” for net loss) 4.2 Net profit from discontinued operations (“-” for net loss) 5. Other comprehensive income, net of 461,765,884.65 61,621,709.81 tax 5.1 Items that will not be reclassified 461,765,884.65 61,621,709.81 to profit or loss 5.1.1 Changes caused by remeasurements on defined benefit schemes 5.1.2 Other comprehensive income that will not be reclassified to profit or loss under the equity method 5.1.3 Changes in the fair value of 461,765,884.65 61,621,709.81 investments in other equity instruments 5.1.4 Changes in the fair value arising from changes in own credit risk 5.1.5 Other 5.2 Items that will be reclassified to profit or loss 5.2.1 Other comprehensive income that will be reclassified to profit or loss under the equity method 5.2.2 Changes in the fair value of investments in other debt obligations 5.2.3 Other comprehensive income arising from the reclassification of financial assets 5.2.4 Credit impairment allowance 65 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 for investments in other debt obligations 5.2.5 Reserve for cash flow hedges 5.2.6 Differences arising from the translation of foreign currency-denominated financial statements 5.2.7 Other 6. Total comprehensive income 596,483,139.81 219,025,802.82 7. Earnings per share 7.1 Basic earnings per share 7.2 Diluted earnings per share Legal representative: Wu Shenghui General Manager: Lei Zihe Chief Financial Officer: Tang Qionglan 5. Consolidated Cash Flow Statement Unit: RMB Item H1 2020 H1 2019 1. Cash flows from operating activities: Proceeds from sale of commodities 1,515,624,335.16 1,751,423,769.24 and rendering of services Net increase in customer deposits and interbank deposits Net increase in borrowings from the central bank Net increase in loans from other financial institutions Premiums received on original insurance contracts Net proceeds from reinsurance Net increase in deposits and investments of policy holders Interest, handling charges and commissions received Net increase in interbank loans obtained Net increase in proceeds from repurchase transactions Net proceeds from acting trading of securities 66 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Tax rebates 41,505,723.58 48,922,234.35 Cash generated from other operating 43,607,475.27 45,162,461.57 activities Subtotal of cash generated from 1,600,737,534.01 1,845,508,465.16 operating activities Payments for commodities and 939,689,423.66 1,126,149,726.07 services Net increase in loans and advances to customers Net increase in deposits in the central bank and in interbank loans granted Payments for claims on original insurance contracts Net increase in interbank loans granted Interest, handling charges and commissions paid Policy dividends paid Cash paid to and for employees 310,458,004.56 322,785,746.27 Taxes paid 58,197,306.93 94,770,787.34 Cash used in other operating 91,315,095.41 111,120,372.00 activities Subtotal of cash used in operating 1,399,659,830.56 1,654,826,631.68 activities Net cash generated from/used in 201,077,703.45 190,681,833.48 operating activities 2. Cash flows from investing activities: Proceeds from disinvestment 245,000,000.00 6,000,000.00 Return on investment 35,020,943.18 48,172,890.30 Net proceeds from the disposal of fixed assets, intangible assets and other 131,978.12 40,834.00 long-lived assets Net proceeds from the disposal of subsidiaries and other business units Cash generated from other investing activities Subtotal of cash generated from 280,152,921.30 54,213,724.30 investing activities Payments for the acquisition of fixed assets, intangible assets and other 43,720,265.19 18,563,706.98 long-lived assets 67 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Payments for investments 35,000,000.00 Net increase in pledged loans granted Net payments for the acquisition of subsidiaries and other business units Cash used in other investing activities Subtotal of cash used in investing 43,720,265.19 53,563,706.98 activities Net cash generated from/used in 236,432,656.11 650,017.32 investing activities 3. Cash flows from financing activities: Capital contributions received Including: Capital contributions by non-controlling interests to subsidiaries Borrowings raised Cash generated from other financing activities Subtotal of cash generated from financing activities Repayment of borrowings Interest and dividends paid 258,879,038.49 218,298,000.02 Including: Dividends paid by subsidiaries to non-controlling interests Cash used in other financing activities Subtotal of cash used in financing 258,879,038.49 218,298,000.02 activities Net cash generated from/used in -258,879,038.49 -218,298,000.02 financing activities 4. Effect of foreign exchange rates -103,583.76 -1,156,757.42 changes on cash and cash equivalents 5. Net increase in cash and cash 178,527,737.31 -28,122,906.64 equivalents Add: Cash and cash equivalents, 1,049,833,555.02 795,285,756.38 beginning of the period 6. Cash and cash equivalents, end of the 1,228,361,292.33 767,162,849.74 period Legal representative: Wu Shenghui General Manager: Lei Zihe Chief Financial Officer: Tang Qionglan 68 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 6. Cash Flow Statement of the Company as the Parent Unit: RMB Item H1 2020 H1 2019 1. Cash flows from operating activities: Proceeds from sale of commodities 1,439,542,964.28 1,691,951,258.99 and rendering of services Tax rebates 41,500,167.87 48,910,795.69 Cash generated from other operating 36,847,098.74 34,052,232.29 activities Subtotal of cash generated from 1,517,890,230.89 1,774,914,286.97 operating activities Payments for commodities and 958,739,460.46 1,178,508,853.41 services Cash paid to and for employees 237,328,269.38 244,677,337.79 Taxes paid 37,998,771.62 65,955,849.88 Cash used in other operating 84,878,540.95 100,456,711.55 activities Subtotal of cash used in operating 1,318,945,042.41 1,589,598,752.63 activities Net cash generated from/used in 198,945,188.48 185,315,534.34 operating activities 2. Cash flows from investing activities: Proceeds from disinvestment 245,000,000.00 6,000,000.00 Return on investment 35,020,943.18 48,503,118.50 Net proceeds from the disposal of fixed assets, intangible assets and other 125,361.02 40,330.00 long-lived assets Net proceeds from the disposal of subsidiaries and other business units Cash generated from other investing activities Subtotal of cash generated from 280,146,304.20 54,543,448.50 investing activities Payments for the acquisition of fixed assets, intangible assets and other 42,331,728.97 17,446,155.95 long-lived assets Payments for investments 35,000,000.00 Net payments for the acquisition of subsidiaries and other business units 69 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Cash used in other investing activities Subtotal of cash used in investing 42,331,728.97 52,446,155.95 activities Net cash generated from/used in 237,814,575.23 2,097,292.55 investing activities 3. Cash flows from financing activities: Capital contributions received Borrowings raised Cash generated from other financing activities Subtotal of cash generated from financing activities Repayment of borrowings Interest and dividends paid 258,879,038.49 218,298,000.02 Cash used in other financing activities Subtotal of cash used in financing 258,879,038.49 218,298,000.02 activities Net cash generated from/used in -258,879,038.49 -218,298,000.02 financing activities 4. Effect of foreign exchange rates -92,218.76 -1,176,711.33 changes on cash and cash equivalents 5. Net increase in cash and cash 177,788,506.46 -32,061,884.46 equivalents Add: Cash and cash equivalents, 983,378,125.66 747,588,730.42 beginning of the period 6. Cash and cash equivalents, end of the 1,161,166,632.12 715,526,845.96 period Legal representative: Wu Shenghui General Manager: Lei Zihe Chief Financial Officer: Tang Qionglan 7. Consolidated Statements of Changes in Owners’ Equity H1 2020 Unit: RMB H1 2020 Equity attributable to owners of the Company as the parent Non-c Total Item Other equity ontroll owners Share Capital Less: Other Specifi Surplu Genera Retain Subtot capita instruments reserve Treasu compr c s l ed Other ing ’ al l Prefe Perpe Other s ry ehensi reserve reserve reserve earnin interes equity 70 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 rred tual stock ve s gs ts share bond incom s s e 1,399 1. Balance as at 158,60 776,26 836,55 1,709, 4,880, 26,674 4,907, ,346, the end of the 8,173. 0,348. 9,645. 962,47 736,80 ,428.0 411,22 154.0 prior year 07 19 36 9.45 0.07 8 8.15 0 Add: Adjustment for change in accounting policy Adjustment for correction of previous error Adjustment for business combination under common control Other adjustments 1,399 2. Balance as at 158,60 776,26 836,55 1,709, 4,880, 26,674 4,907, ,346, the beginning of 8,173. 0,348. 9,645. 962,47 736,80 ,428.0 411,22 154.0 the year 07 19 36 9.45 0.07 8 8.15 0 3. Increase/ 461,74 -107,8 353,93 356,70 decrease in the 2,769, 8,801. 17,590 1,210. 0,630. period (“-” for 419.42 29 .66 63 05 decrease) 3.1 Total 461,74 151,06 612,81 615,57 2,769, comprehensive 8,801. 1,447. 0,249. 9,668. 419.42 income 29 83 12 54 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by owners 3.2.2 Capital 71 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other -258,8 -258,8 -258,8 3.3 Profit 79,038 79,038 79,038 distribution .49 .49 .49 3.3.1 Appropriation to surplus reserves 3.3.2 Appropriation to general reserve 3.3.3 -258,8 -258,8 -258,8 Appropriation 79,038 79,038 79,038 to owners (or .49 .49 .49 shareholders) 3.3.4 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 72 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Changes in defined benefit schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 1,399 4. Balance as at 158,60 1,238, 836,55 1,602, 5,234, 29,443 5,264, ,346, the end of the 8,173. 009,14 9,645. 144,88 668,01 ,847.5 111,85 154.0 period 07 9.48 36 8.79 0.70 0 8.20 0 H1 2019 Unit: RMB H1 2019 Equity attributable to owners of the Company as the parent Other equity Other Non-co instruments Less: compr Surplu Retain ntrollin Total Item Capital Specifi Genera Share Prefe Perp Treasu ehensi s ed Subtot g owners’ capita reserve c l Other rred etual ry ve reserve earnin al interest equity l Other s reserve reserve share bond stock incom s gs s s s e 1,399 1. Balance as at 158,60 297,66 809,45 1,654, 4,319, 4,341,3 ,346, 22,054, the end of the 8,173. 7,872. 6,186. 181,03 259,41 14,281. 154.0 862.93 prior year 07 80 20 2.39 8.46 39 0 Add: 289,35 289,35 289,351 Adjustment for 1,686. 1,686. ,686.49 change in 73 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 accounting 49 49 policy Adjustment for correction of previous error Adjustment for business combination under common control Other adjustments 1,399 2. Balance as at 158,60 587,01 809,45 1,654, 4,608, 4,630,6 ,346, 22,054, the beginning 8,173. 9,559. 6,186. 181,03 611,10 65,967. 154.0 862.93 of the year 07 29 20 2.39 4.95 88 0 3. Increase/ 61,635 -51,02 10,613 decrease in the 222,917 10,836, ,887.6 2,274. ,613.3 period (“-” for .21 530.59 5 27 8 decrease) 3.1 Total 61,635 167,27 228,91 222,917 229,134 comprehensive ,887.6 5,725. 1,613. .21 ,530.61 income 5 75 40 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by owners 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 74 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 3.2.4 Other -218,2 -218,2 -218,29 3.3 Profit 98,000 98,000 8,000.0 distribution .02 .02 2 3.3.1 Appropriation to surplus reserves 3.3.2 Appropriation to general reserve 3.3.3 -218,2 -218,2 -218,29 Appropriation 98,000 98,000 8,000.0 to owners (or .02 .02 2 shareholders) 3.3.4 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit schemes transferred to retained earnings 75 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 1,399 4. Balance as at 158,60 648,65 809,45 1,603, 4,619, 4,641,5 ,346, 22,277, the end of the 8,173. 5,446. 6,186. 158,75 224,71 02,498. 154.0 780.14 period 07 94 20 8.12 8.33 47 0 Legal representative: Wu Shenghui General Manager: Lei Zihe Chief Financial Officer: Tang Qionglan 8. Statements of Changes in Owners’ Equity of the Company as the Parent H1 2020 Unit: RMB H1 2020 Other equity Other Retaine instruments Less: Total Item Share Capital compreh Specific Surplus d Preferr Perpet Treasury Other owners’ capital reserves ensive reserve reserves earning ed ual Other stock equity income s shares bonds 1. Balance as at 1,399,3 1,523,5 166,211, 776,242, 836,559, 4,701,868, the end of the 46,154. 07,818. 779.15 987.90 645.36 384.52 prior year 00 11 Add: Adjustment for change in accounting policy Adjustment 76 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 for correction of previous error Other adjustments 2. Balance as at 1,399,3 1,523,5 166,211, 776,242, 836,559, 4,701,868, the beginning of 46,154. 07,818. 779.15 987.90 645.36 384.52 the year 00 11 3. Increase/ -124,16 decrease in the 461,765, 337,604,1 1,783.3 period (“-” for 884.65 01.32 3 decrease) 3.1 Total 134,71 461,765, 596,483,1 comprehensive 7,255.1 884.65 39.81 income 6 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by owners 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other -258,87 3.3 Profit -258,879,0 9,038.4 distribution 38.49 9 3.3.1 Appropriation to surplus reserves 3.3.2 -258,87 Appropriation to -258,879,0 9,038.4 owners (or 38.49 9 shareholders) 77 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 3.3.3 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balance as at 1,399,3 1,399,3 166,211, 1,238,00 836,559, 5,039,472, the end of the 46,154. 46,034. 779.15 8,872.55 645.36 485.84 period 00 78 H1 2019 Unit: RMB 78 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 H1 2019 Other equity Other instruments Less: Total Item Share Capital compre Specific Surplus Retained Preferr Perpet Treasur Other owners’ capital reserves hensive reserve reserves earnings ed ual Other y stock equity income shares bonds 1. Balance as at 1,399, 166,211, 297,672 809,456 1,482,164 4,154,851,7 the end of the 346,15 779.15 ,884.34 ,186.20 ,706.92 10.61 prior year 4.00 Add: Adjustment for 289,351 289,351,68 change in ,686.49 6.49 accounting policy Adjustment for correction of previous error Other adjustments 2. Balance as at 1,399, 166,211, 587,024 809,456 1,482,164 4,444,203,3 the beginning 346,15 779.15 ,570.83 ,186.20 ,706.92 97.10 of the year 4.00 3. Increase/ decrease in the 61,621, -60,893,9 727,802.80 period (“-” for 709.81 07.01 decrease) 3.1 Total 61,621, 157,404,0 219,025,80 comprehensive 709.81 93.01 2.82 income 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by owners 3.2.2 Capital increased by holders of other equity 79 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other 3.3 Profit -218,298, -218,298,00 distribution 000.02 0.02 3.3.1 Appropriation to surplus reserves 3.3.2 Appropriation -218,298, -218,298,00 to owners (or 000.02 0.02 shareholders) 3.3.3 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit schemes transferred to retained earnings 3.4.5 Other comprehensive 80 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balance as at 1,399, 166,211, 648,646 809,456 1,421,270 4,444,931,1 the end of the 346,15 779.15 ,280.64 ,186.20 ,799.91 99.90 period 4.00 Legal representative: Wu Shenghui General Manager: Lei Zihe Chief Financial Officer: Tang Qionglan III Company profile Foshan Electrical and Lighting Co., Ltd. (hereinafter referred to as “the Company”), a joint-stock limited company jointly founded by Foshan Electrical and Lighting Company, Nanhai Wuzhuang Color Glazed Brick Field, and Foshan Poyang Printing Industrial Co. on 20 October 1992 by raising funds under the approval of YGS (1992) No. 63 Document issued by the Joint Examination Group for Experimental Enterprises in Stock System of Guangdong Province and the Economic System Reform Commission of Guangdong Province, is an enterprise with its shares held by both the corporate and the natural persons. As approved by China Securities Regulatory Commission with Document (1993) No. 33, the Company publicly issued 19.3 million shares of social public shares (A shares) to the public in October 1993, and was listed in Shenzhen Stock Exchange for trade on 23 November 1993. The Company was approved to issue 50,000,000 B shares on 23 July 1995. And, as approved to change into a foreign-invested stock limited company on 26 August 1996 by (1996) WJMZEHZ No. 466 Document issued by the Ministry of Foreign Trade and Economic Cooperation of the People’s Republic of China. On 11 December 2000, as approved by China Securities Regulatory Commission with ZJGS Zi [2000] No. 175 Document, the Company additionally issued 55,000,000 A shares. At approved by the Shareholders’ General Meeting 2006, 2007, 2008, 2014 and 2017 the Company implemented the plan of capitalization of capital reserve, after the transfer, the registered capital of the Company has increased to RMB1,399,346,154.00. Credibility code of the Company: 91440000190352575W. Legal representative: Mr. Wu Shenghui Address: No. 64, Fenjiang North Road, Foshan, Guangdong Province Main business of the company and its subsidiaries (hereinafter referred to as “the Company”): lighting products and electro technical products. The business term of the Company is long-term, which was calculated from the date of issuance of License of Business Corporation. 81 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 The Financial Report was approved and authorized for issue by the Board of Directors on 27 August 2020. The consolidation scope of the financial statement during the Reporting Period including the Company and the 9 subsidiaries such as FSL Chanchang Optoelectronics Co., Ltd. ( referred to as “Chanchang Company”), Foshan Chansheng Electronic Ballast Co., Ltd. ( referred to as “Chansheng Company”), Foshan Taimei Times Lamps and Lanterns Co., Ltd. ( referred to as “Taimei Company”), Nanjing Fozhao Lighting Components Co., Ltd. ( referred to as “Nanjing Fozhao”), FSL (Xinxiang) Lighting Co., Ltd. ( referred to as “Xinxiang Company”), Foshan Electrical and Lighting New Light Source Technology Co., Ltd. ( referred to as “New Light Source Company”), Foshan Lighting Lamps & Components Co., Ltd. ( referred to as “Lamps & Components Company”) and FSL Zhida Electric Technology Co., Ltd ( referred to as “Zhida Electric Technology”), and FSL LIGHTING GmbH (referred to as “FSL LIGHTING”). For details, see relevant contents in Note VIII “Changes in the consolidation scope”, and Note IX “Equities in other entities”. IV Basis for Preparation of Financial Statements 1. Preparation Basis The financial statements of the Company are based on the continuing operation, and are confirmed and measured according to the actual transactions and events, the Accounting Standards for Business Enterprises - Basic Standards, other various specific accounting standards, the application guide, the interpretation of accounting standards for business enterprises (hereinafter referred to as the Accounting Standards for Business Enterprises). And based on the following important accounting policies, and accounting estimations, they are prepared according to the relevant regulations of Rules for the Information Disclosure of Companies Publicly Issuing Securities No. 15 - General Provisions on Financial Reporting of China Securities Regulatory Commission (Revised in 2014). Except the Cash Flow Statement prepared under the principle of cash basis, the rest of financial statement of the Company are prepared under the principle of accrual basis. The Company didn’t find anything like being suspicious of the ability of continuing operation within 12 months from the end of the Reporting Period with all available information. 2. Continuation The Company has no matters affecting the continuing operation of the Company and is expected to have the ability to continue to operate in the next 12 months. The financial statements of the Company are prepared on the basis of continuing operation. V Important Accounting Policies and Estimations Reminders of the specific accounting policies and accounting estimations: The Company confirmed the specific accounting policies and estimations according to production and operation features, mainly reflecting in the method of provision for accounts receivables bad debt (Note 12. Accounts Receivable), depreciation of fixed assets and amortization of intangible assets (Note 24. Fixed Assets and Note 30. Intangible Assets), and recognized time point of income (Note 39. Revenue), etc. 82 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 1. Statement of Compliance with the Accounting Standards for Business Enterprises The financial statements prepared by the Company are in compliance with the Accounting Standards for Business Enterprises, which factually and completely present the Company’s and the consolidated financial positions, business results and cash flows, as well as other relevant information. 2. Fiscal Year A fiscal year starts on January 1st and ends on December 31st according to the Gregorian calendar. 3. Operating Cycle An operating cycle for the Company is 12 months, which is also the classification criterion for the liquidity of its assets and liabilities. 4. Recording Currency Renminbi is the recording currency for the statements of the Company, and the financial statements are listed and presented by Renminbi. 5. Accounting Treatment Methods for Business Combinations under the Same Control or not under the Same Control 1. Business Combinations under the Same Control For the merger of enterprises under the same control, if the consideration of the merging enterprise is that it makes payment in cash, transfers non-cash assets or bear its debts, it shall, on the date of merger, regard the share of the book value among final controller’s consolidated financial statement of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets transferred as well as the book value of the debts borne by the merging party shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. If the consideration of the merging enterprise is that it issues equity securities, it shall, on the date of merger, regard the share of the book value among final controller’s consolidated financial statement of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The total face value of the stocks issued shall be regarded as the capital stock, while the difference between the initial cost of the long-term equity investment and total face value of the shares issued shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. 2. Business Combinations not under the Same Control The Company measured the paid assets as the consideration of business combination and liabilities happened or undertaken by fair value. The difference between fair value and its book value shall be included into the current losses and gains. The Company distributed combined cost on the purchasing date. The difference of the combination cost greater than the fair value of the identifiable net assets of the acquiree acquired is recognized as goodwill; the difference of the combination cost less than the fair value of the identifiable net assets of the acquiree acquired is included into current losses and gains. As for the assets other than intangible assets acquired from the acquiree in a business combination (not limited to the assets which have been recognized by the acquiree), if the economic benefits brought by them are likely to flow into the Company and their fair values can be measured reliably, they shall be separately recognized and measured in light of their fair values; intangible asset whose fair value can be measured reliably shall be 83 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 separately recognized as an intangible asset and shall measured in light of its fair value; As for the liabilities other than contingent liabilities acquired from the acquiree, if the performance of the relevant obligations is likely to result in any out-flow of economic benefits from the Company, and their fair values can be measured reliably, they shall be separately recognized and measured in light of their fair values; As for the contingent liabilities of the acquiree, if their fair values can be measured reliably, they shall separately recognized as liabilities and shall be measured in light of their fair values. 6. Methods for Preparing Consolidated Financial Statements 1. Principle of Determining the Scope of Consolidation The scope of consolidation of the consolidated financial statements of the Company is determined on the basis of control. Control means that the investors has the right to invest in the investee and enjoy a variable return through the participation of the relevant activities of the investee, and has the ability to use the power over the investee to affect the amount of its return. The Company includes the subsidiaries with actual right of control (including separate entity controlled by the Parent Company) into consolidated financial statements. 2. Principles, Procedures and Methods for the Preparation of Consolidated Statements (1) Principles, Procedures and Methods for the Preparation of Consolidated Statements All subsidiaries included into the scope of consolidated financial statements adopted same accounting policies and fiscal year with the Company. If the accounting policies and fiscal year of the subsidiaries are different to the Company’s, necessary adjustment should be made in accordance with the Company’s accounting policies and fiscal year when consolidated financial statements are prepared. The consolidated financial statements are based on the financial statements of the Parent Company and subsidiaries included into the consolidated scope. The consolidated financial statements are prepared by the Company who makes adjustment to long-term equity investment to subsidiaries by equity method according to other relevant materials after the offset of the share held by the Parent Company in the equity capital investment of the Parent Company and owner’s equity of subsidiaries and the significant transactions and intrabranch within the Company. For the balance formed because the current loss shared by the minority shareholders of the subsidiary is more than the share enjoyed by the minority shareholders of the subsidiary in the initial shareholders’ equity, if the Articles of Corporation or Agreement didn’t stipulate that minority shareholders should be responsible for it, then the balance need to offset the shareholders’ equity of the Company; if the Articles of Corporation or Agreement stipulated that minority shareholders should be responsible for it, then the balance need to offset the minority shareholders’ equity. (2) Treatment Method of Increasing or Disposing Subsidiaries during the Reporting Period During the Reporting Period, if the subsidiaries were added due to Business combinations under the same control, then initial book balance of consolidated balance sheet need to be adjusted; the income, expenses, and profits of subsidiaries from the combination’s period-begin to the end of the reporting period need to be included into consolidated income statement; the cash flow of subsidiaries from the combination’s period-begin to the end of the reporting period need to be included into consolidated cash flow statement. if the subsidiaries were added due to Business combinations not under the same control, then initial book balance of consolidated balance sheet doesn’t need to be adjusted; the income, expenses, and profits of subsidiaries from the purchasing date to the end of the reporting period need to be included into consolidated income statement; the cash flow of subsidiaries from purchasing date to the end of the reporting period need to be included into consolidated cash flow statement. During the Reporting Period, if the Company disposed the subsidiaries, then the income, expenses, and profits of 84 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 subsidiaries from period-begin to the disposal date need to be included into consolidated income statement; the cash flow of subsidiaries from period-begin to the disposal date need to be included into consolidated cash flow statement. 7. Classification of Joint Arrangements and Accounting Treatment of Joint Operations A joint arrangement refers to an arrangement jointly controlled by two participants or above and be divided into joint operations and joint ventures. When the Company is the joint venture party of the joint operations, should recognize the following items related to the interests share of the joint operations: (1) Recognize the assets individually held and the assets jointly held by recognizing according to the holding share; (2) Recognize the liabilities undertook individually and the liabilities jointly held by recognizing according to the holding share; (3) Recognize the revenues occurred from selling the output share of the joint operations enjoy by the Company; (4) Recognize the revenues occurred from selling the assets of the joint operations according to the holding share; (5) Recognize the expenses individually occurred and the expenses occurred from the joint operations according to the holding share of the Company. When the Company is the joint operation party of the joint ventures, should recognize the investment of the joint ventures as the long-term equity investment and be measured according g to the said methods of the notes of the long-term equity investment of the financial statement. 8. Recognition Standard for Cash and Cash Equivalents In the Company’s understanding, cash and cash equivalents include cash on hand, any deposit that can be used for cover, and short-term (usually due within 3 months since the day of purchase) and high circulating investments, which are easily convertible into known amount of cash and whose risks in change of value are minimal. 9. Foreign Currency and Accounting Method for Foreign Currency 1. Foreign Currency Business Foreign currency shall be recognized by employing systematic and reasonable methods, and shall be translated into the amount in the functional currency at the exchange rate which is approximate to the spot exchange rate of the transaction date. On the balance sheet date, the foreign currency monetary items shall be translated at the spot exchange rate. The balance of exchange arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date shall be recorded into the profits and losses at the current period except that the balance of exchange arising from foreign currency borrowings for the purchase and construction or production of qualified assets shall be capitalized. The foreign currency non-monetary items measured at the historical cost shall still be translated at the spot exchange rate on the transaction date. 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 85 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 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 Financial instruments refer to the contracts that constitute a company’s financial assets and the financial liabilities or equity instruments of other units. 1. Recognition and derecognition of financial instruments When the Company becomes a party to a financial instrument, it shall recognize a financial asset or financial liability. A financial asset (or part of a financial asset or part of a group of similar financial assets) that meets the following conditions should be derecognized, or in other words, be written off from its account and balance sheet: 1) The right to receive cash flow from the financial asset has expired; 2) The right to receive cash flow from the financial asset has been transferred, or the “transfer” agreement specifies the obligation to duly pay the full amount of cash flow received to a third party; and (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. A financial liability that has been fulfilled, canceled or expired should be derecognized. If a financial liability is replaced with another financial liability by the same creditor on almost entirely different terms materially, or the terms for an existing liability have been almost fully revised materially, such replacement or revision should be treated as derecognition of the original liability and recognition of the new liability, and the difference should be included into current profits/losses. A financial asset traded in a conventional manner should be recognized and derecognized by trade-date accounting. The trading of financial assets in a conventional manner means that financial assets are received or delivered by the deadline as specified in regulations or general practice according to contract provisions. Trade date refers to the date committed by the Company to buy or sell a financial asset. 2. Classification and measurement of financial assets The Company classifies the financial assets when initially recognized into financial assets measured at amortized cost, financial assets measured by the fair value and the changes recorded in other comprehensive income and financial assets at fair value through profit or loss based on the business model for financial assets management and characteristics of contractual cash flow of financial assets. Financial assets initially recognized shall be measured at their fair values. For accounts receivable and notes receivable excluding major financing or without regard to financing over one year generated from ales of commodities or provision of labor services, the initial measurement shall be conducted based on the transaction price. 86 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 For financial assets at fair value through profit or loss, the transaction expenses thereof shall be directly included into the current profit or loss; for other financial assets, the transaction expenses thereof shall be included into the initially recognized amount. The subsequent measurement of financial assets depends on the classification thereof: (1) Debt instrument investments measured at amortized cost Financial assets meeting the following conditions at the same time shall be classified as financial assets measured at amortized cost: the business mode of the Company to manage such financial assets targets at collecting the contractual cash flow. The contract of such financial assets stipulates that the cash flow generated in the specific date is the payment of the interest based on the principal and outstanding principal amount. The interest income for this kind of financial assets shall be recognized by effective interest method, and the gains or losses generated from the derecognition, modification or impairment shall all be included into the current profit or loss. This kind of financial assets mainly consist of monetary capital, accounts receivable and notes receivable, other receivables, investments in debt obligations and long-term receivables. The Company presents the investments in debt obligations due within one year since the balance sheet date and long-term receivables as current portion of non-current assets and the original investments in debt obligations with maturity date within one year as other current assets. (2) Investments in debt instruments measured at fair value and changes thereof recorded into other comprehensive income Financial assets meeting the following conditions at the same time shall be classified as financial assets measured at fair value and changes thereof recorded into other comprehensive income: the business mode of the Company to manage such financial assets takes contract cash flow collected as target and selling as target. The contract of such financial assets stipulates that the cash flow generated in the specific date is the payment of the interest based on the principal and outstanding principal amount. The interest income for this kind of financial assets shall be recognized by effective interest method. All changes in fair value should be included into other comprehensive income except for interest income, impairment losses and exchange differences, which should be recognized as current profits/losses. When a financial asset is derecognized, the cumulative gains or losses included into other comprehensive income previously should be transferred out and included into current profits/losses. Such financial assets should be presented as other credit investments. Other credit investments that will mature within one year from the date of balance sheet should be presented as non-current assets due within one year, and other credit investments with the original maturity date coming within one year should be presented as other current assets. (3) Equity instrument investment measured at fair value with changes included into other comprehensive income The Company irrevocably chooses to designate part of non-trading equity instrument investments as financial assets measured at fair value with changes included into other comprehensive income. Only related dividend income (excluding the dividend income confirmed to be recovered as part of investment costs) will be recognized into current profits/losses, while subsequent changes in fair value will be recognized into other comprehensive income without the withdrawal of impairment provisions required. When a financial asset is derecognized, the cumulative gains or losses included into other comprehensive income previously should be recognized into retained earnings. Such financial assets should be presented as other equity investments. A financial asset that meets one of the following conditions is classified as a trading financial asset: The financial asset has been acquired in order to be sold or repurchased in the near future; the financial asset is part of an identifiable financial instrument portfolio under centralized management, and there is evidence proving that the company has recently adopted a short-term profit model; it is a derivative instrument, but derivative instruments that are designated as and are effective hedging instruments and those conforming with financial guarantee 87 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 contracts are excluded. (4) Financial assets at fair value through profit or loss The Company classifies financial assets except for above-mentioned financial assets measured with amortized cost and financial assets measured with fair value whose change is included into other comprehensive income into financial assets at fair value through profit or loss. The subsequent measurement of such kind of financial assets shall be conducted by fair value method and all changes in fair value shall be recorded into the current profit or loss. Such financial assets shall be presented as trading financial assets, and those will due over one year since the balance sheet date and expectedly held over one year shall be presented as other non-current financial assets. 3. Classification and measurement of financial liabilities The Company’s financial liabilities are, on initial recognition, classified into financial liabilities at fair value through profit or loss, other financial liabilities and derivative instruments designated as effective hedging instruments. For financial liabilities at fair value through profit or loss, relevant transaction costs are immediately recognized in profit or loss for the current period, and transaction costs relating to other financial liabilities are included in the initial recognition amounts. The subsequent measurement of financial liabilities depends on the classification thereof: (1) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include trading financial liabilities (including the derivative instruments belonging to financial liabilities) and financial liabilities designated at the initial recognition to be measured by the fair value and their changes are recorded in the current profit or loss. A financial liability that meets one of the following conditions is classified as a trading financial liability: The financial liability has been undertaken in order to be sold or repurchased in the near future; the financial liability is part of an identifiable financial instrument portfolio under centralized management, and there is evidence proving that the company has recently adopted a short-term profit model; it is a derivative instrument, but derivative instruments that are designated as and are effective hedging instruments and those conforming with financial guarantee contracts are excluded. Trading financial liabilities (including derivative instruments classified as financial liabilities) should be subsequently measured at fair value, and all changes in fair value should be recorded into current profits/losses, except for those related to hedging accounting. (2) Other financial liabilities For such kind of financial liabilities, the subsequent measurement shall be conducted by effective interest method based on the amortized cost. 4. Impairment of financial instruments Based on expected credit losses, the Company carries out impairment treatment on financial assets measured at amortized cost and debt instrument investments measured at fair value with changes included into other comprehensive income, rental receivables, contract assets and financial assets and recognizes bad debt provision. Credit losses refer to the difference between all contract cash flows discounted by the original actual interest rate receivable according to contracts and all cash flows expected to be received by the Company, which is the present value of all cash shortfalls. The financial assets purchased by or originating from the Company with credit impairment should be discounted by the actual interest rate of the financial assets after credit adjustment. In respect of receivable accounts and contract assets that do not contain significant financing components, the Company uses the simplified measurement method to measure bad debt provision by the amount equivalent to the expected credit losses of the whole duration. In respect of receivable accounts and contract assets that contain significant financing components, the Company opts to use the simplified measurement method to measure bad debt provision by the amount equivalent to the expected credit losses for the whole duration. 88 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 For other financial assets and financial guarantee contracts than the above using the simplified measurement method, the Company on the balance sheet date assesses whether their credit risks have increased substantially since the initial recognition. If the credit risks have not increased substantially since the initial recognition and are in the first stage, the Company will measure bad debt provision by the amount equivalent to the expected credit losses for the next 12 months and calculate interest income by the book balance and the actual interest rate; if the credit risks have increased obviously without credit impairment since the initial recognition and are in the second stage, the Company will measure bad debt provision by the amount equivalent to the expected credit losses for the whole duration and calculate interest income by the book balance and the actual interest rate; if the credit risks have increased substantially with credit impairment since the initial recognition and are in the third stage, the Company will measure bad debt provision by the amount equivalent to the expected credit losses for the whole duration and calculate interest income by the amortized cost and the actual interest rate. For financial instruments with only low credit risks on the balance sheet date, the Company assumes that their credit risks have not increased substantially since the initial recognition. The Company 1) assesses expected credit losses of financial assets with credit impairment based on individual items; 2) assesses expected credit losses of financial assets that are not derecognized but with changes in contract cash flows due to revision of or renegotiation on contracts by the Company and the counterparty, based on individual items; 3) assesses expected credit losses of other financial assets based on age combination. The Company considers related past matters, current conditions, the reasonableness of the forecast on future economic conditions and well-founded information when assessing expected credit losses. The Company’s information of the judgment standards for remarkable increase in credit risks, definition of assets with incurred credit impairment and assumption of measurement on expected credit losses is disclosed in this Note 12 Accounts Receivable. When no longer reasonably expects to recover all or partial contractual cash flow of financial assets, the Company directly writes down the carrying amount of the financial assets. 5. Financial instruments offset a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet when the following conditions are met at the same time: When the Company has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously. 6. Financial guarantee contract A financial guarantee contract refers to a contract in which a specific debtor shall compensate the contract holder suffering the losses when the debtor is unable to repay the debt in due course according to the debt instrument terms. Financial guarantee contracts are measured at fair value at the initial recognition. After the initial recognition, all financial guarantee contracts should be subsequently measured by the higher amount between the amount of bad debt provision for expected credit losses recognized on the balance sheet date and the balance of the initially recognized amount deducting the cumulative amortization recognized according to the income recognition principle, except for the financial guarantee contracts designated as financial liabilities measured at fair value with changes recorded into current profits/losses. 7. Derivative financial instruments The Company uses derivative financial instruments, which are initially measured at the fair value on the signature date of the derivative transaction contract and subsequently measured at their fair value. A derivative financial instrument with a positive fair value is recognized as an asset and that with a negative fair value is recognized as a liability.Gains or losses from changes in the fair value of derivative instruments are directly recognized into current profits/losses. 89 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 For the financial assets that are not derecognized but with changes in contract cash flows due to revision of or renegotiation on contracts by the Company and the counterparty, the Company recalculates the book balance of the financial assets according to the renegotiated or revised contract cash flows by the discounted value of the original actual interest rate (or the actual interest rate after credit adjustment). Relevant gains or losses are recorded into current profits/losses. Costs or expenses for the revision of financial assets are adjusted to the revised book balance of financial assets and amortized in the remaining period of the revised financial assets. 8. Transfer of financial assets As for the Company transferred nearly all of the risks and rewards related to the ownership of a financial asset to the transferee, should derecognize the financial assets; as for maintained nearly all of the risks and rewards related to the ownership of a financial asset, should continue to recognize the transferred financial assets. Where the Company does not transfer or retain nearly all of the risks and rewards related to the ownership of a financial asset, it shall deal with it according to the circumstances as follows, respectively: (1) If it gives up its control over the financial asset, it shall stop recognizing the financial asset and recognize the assets and liabilities generated; (2) If it does not give up its control over the financial asset, it shall, according to the extent of its continuous involvement in the transferred financial asset, recognize the related financial asset and recognize the relevant liability accordingly. 11. Notes Receivable Category Accounting estimate policy Bank’s acceptance bill The Company evaluates that the portfolio has relatively low credit risks, and generally no provision for impairment is made. 12. Accounts Receivable The Company withdraws the impairment loss for accounts receivable excluding significant financing component with the simplified method. 1. Accounts Receivable with Significant Single Amount for which the Bad Debt Provision is Made Individually Definition or amount criteria for an account Making separate bad-debt provisions for accounts receivable with a significant single receivable with a significant single amount amount Making separate bad-debt provisions for For an account receivable with a significant single amount, the impairment test shall be accounts receivable with a significant single carried out on it separately. If there is any objective evidence of impairment, the amount impairment loss is recognized and the bad-debt provision is made according to the difference between the present value of the account receivable’s future cash flows and its carrying amount. 2. Accounts Receivable for which the Bad Debt Provision is Withdrawn by Credit Risk Characteristics Group name Withdrawal method of bad debt provision Common transaction group Aging analysis method Internal transaction group Other methods In the groups, those adopting aging analysis method to withdraw bad debt provision: Aging Withdrawal proportion of accounts receivable 90 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Within 1 year (including 1 year) 3% 1 to 2 years 10% 2 to 3 years 30% 3 to 4 years 50% 4 to 5 years 80% Over 5 years 100% 3. Accounts Receivable with an Insignificant Single Amount but for which the Bad Debt Provision is Made Independently Reason of individually withdrawing bad debt There are definite evidences indicate the obvious difference of thee return provision ability Withdrawal method for bad debt provision Recognizing the impairment loss and withdrawing the bad debt provision according to the difference between the present value of the account receivable’s future cash flows and its carrying amount. 13. Accounts Receivable Financing Not applicable 14. Other Receivables Recognition method and accounting treatment for expected credit losses of other receivables Refer to Note 12 Accounts Receivable for details about the recognition method and accounting treatment for expected credit losses of other receivables which is the same as that of accounts receivable since 1 January 2019. 15. Inventories 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 91 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 the time of completion, the estimated selling expenses and the relevant taxes and fees in daily activities. In determining the net realizable value of inventory, the conclusive evidence obtained is used as the basis and the purpose of holding the inventory and the impact of the events after the balance sheet date should be taken into account. For finished products, the materials used for sale and other goods used for direct sale, the net realizable value is determined by the estimated selling price of the inventory minus the estimated selling expenses and related taxes in the process of normal production and operation. For materials inventory needs to be processed, the net realizable value is determined by the estimated selling price of the finished products minus the estimated cost to be incurred, the estimated sales costs and the relevant taxes and fees in the process of normal production and operation. 4. Inventory System The inventory system of the Company is perpetual inventory. 5. Amortization Method of Turnover Materials Low-value consumables are amortized in one-off method. The packaging is amortized in one-off method. 16. Contract Assets The Company presents the right possessed to collect consideration from customers unconditionally (only depending on the passing of time) as accounts receivable, and the right to charge the consideration through transferring any commodity to clients which depends on other factors except the passing of time as contract assets. As for the recognition method and accounting treatment for expected losses of contract assets, please refer to Note V-12. Accounts Receivable. 17. Contract Cost Not applicable 18. Assets Held for Sale 1. Assets Held for Sale When a company relies mainly on selling (including the exchanges of non-monetary assets with commercial substance) instead of continuing to use a non-current asset or disposal group to recover its book value, the non-current asset or disposal group is classified as asset held for sale. The non-current assets mentioned above do not include investment properties that are subsequently measured by the fair value model, biological assets measured by fair value less net selling costs, assets formed from employee remuneration, financial assets, deferred income tax assets and rights generated from insurance contracts. Disposal group refers to a group of assets that are disposed of together as a whole through sale or other means in a transaction, and the liabilities directly related to these assets transferred in the transaction. In certain circumstances, the disposal group includes goodwill obtained in business combination. The Company recognizes non-current assets or disposal groups that meet both of the following conditions as held for sale: ① Assets or disposal groups can be sold immediately under current conditions based on the practice of selling such assets or disposal groups in similar transactions; ② Sales are highly likely to occur, that is, the Company has already made a resolution on a sale plan and obtained a certain purchase commitment, and the sale 92 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 is expected to will be completed within one year, and the sale has been approved if relevant regulations require relevant authority or regulatory authority of the Company to approve it. Non-current assets or disposal groups specifically obtained by the Company for resale will be classified by the Company as a held-for-sale category on the acquisition date when they meet the stipulated conditions of “expected to be sold within one year” on the acquisition date, and may well satisfy the category of held-for-sale within a short time (which is usually 3 months). If one of the following circumstances cannot be controlled by the Company and the transaction between non-related parties fails to be completed within one year, and there is sufficient evidence that the Company still promises to sell the non-current assets or disposal groups, the Company should continue to classify the non-current assets or disposal groups as held-for-sale: ①The purchaser or other party unexpectedly sets conditions that lead to extension of the sale. The Company has already acted on these conditions in a timely manner and it is expected to be able to successfully deal with the conditions that led to the extension of the sale within one year after the conditions were set. ②Due to unusual circumstances, the non-current assets or disposal groups held for sale failed to be sold within one year. In the first year, the Company has taken necessary measures for these new conditions and the assets or disposal groups meet the conditions of held-for-sale again. If the Company loses control of a subsidiary due to the sale of investments to its subsidiaries, whether or not the Company retains part of the equity investment after the sale, when the proposed sale of the investment to the subsidiary meets the conditions of held- for-sale, the investment to the subsidiary will be classified as held-for-sale in the individual financial statement of the parent company, and all the assets and liabilities of the subsidiary will be classified as held-for-sale in the consolidated financial statement. When the company initially measures or re-measures non-current assets or disposal groups held for sale on the balance sheet date, if the book value is higher than the fair value minus the net amount of the sale costs, the book value will be written down to the net amount of fair value minus the sale costs, and the amount written down will be recognized as impairment loss of assets and included in the current profit and loss, and provision for impairment of held-for-sale assets will be made. For the confirmed amount of impairment loss of assets of the disposal groups held for sale, the book value of goodwill of the disposal groups will be offset first, and then the book value of various non-current assets in the disposal groups will be offset according to the proportions. If the net amount that the fair value of the non-current assets or disposal groups held for sale on the follow-up balance sheet date minus the sale costs increases, the previous written-down amount will be restored, and reversed to the asset impairment loss confirmed after the assets being classified as held-for-sale. The reversed amount will be included in the current profit or loss. The book value of goodwill that has been deducted cannot be reversed. Non-current assets held for sale or non-current assets in the disposal group are not subject to depreciation or amortization. Interest and other expenses of liabilities in the disposal group held for sale will be confirmed as before. When a non-current asset or disposal group ceases be classified as held-for-sale or a non-current asset is removed out from the held-for-sale disposal group due to failure in meeting the classification conditions for the category of held-for-sale, it will be measured by one of the followings whichever is lower: ① The book value before being classified as held for sale will be adjusted according to the depreciation, amortization or impairment that would have been recognized under the assumption that it was not classified as held for sale; ② The recoverable amount. 2. Termination of Operation Termination of operation refers to a separately identifiable constituent part that satisfies one of the following conditions that has been disposed of by the Company or is classified as held-for-sale: 93 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 (1) This constituent part represents an independent main business or a separate main business area. (2) This constituent part is part of an associated plan that is intended to be disposed of in an independent main business or a separate major business area. (3) This constituent part is a subsidiary that is specifically acquired for resale. 3. Presentation In the balance sheet, the Company distinguishes the non-current assets held for sale or the assets in the disposal group held for sale separately from other assets, and distinguish the liabilities in the disposal group held for sale separately from other liabilities. The non-current assets held for sale or the assets in the disposal group held for sale are not be offset against the liabilities in the disposal group held for sale. They are presented as current assets and current liabilities respectively. The Company lists profit and loss from continuing operations and profit and loss from operating profits in the income statement. For the termination of operations for the current period, the Company restates the information originally presented as profit or loss of continuing operation in the current financial statements to profit or loss of termination of the comparable accounting period. If the termination of operation no longer meets the conditions of held-for-sale, the Company restates the information originally presented as a profit and loss of termination in the current financial statements to profit or loss of continuing operation of the comparable accounting period. 19. Investments in Debt Obligations Not applicable 20. Other Investments in Debt Obligations Not applicable 21. Long-term Receivables Not applicable 22. Long-term Equity Investments Long-term equity investment refers to the Company’s long-term equity investment with control, joint control or significant influence on the investee. The long-term equity investment of the Company which has no control, joint control or significant influence on the investee is accounted for as financial assets available-for-sale or financial assets at fair value and changes recognized in profit or loss for the current period. For details of accounting policies, please refer to 10. Financial instruments 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, 94 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 and the direct relevant expenses occurred for the merger of enterprises shall be included into the profits and losses of the current period. (2) For the merger of enterprises not under the same control, The combination costs shall be the fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equity securities issued by the Company in exchange for the control on the acquiree, and all relevant direct costs incurred to the acquirer for the business combination. Where any future event that is likely to affect the combination costs is stipulated in the combination contract or agreement, if it is likely to occur and its effects on the combination costs can be measured reliably, the Company shall record the said amount into the combination costs. (3) The cost of a long-term equity investment obtained by making payment in cash shall be the purchase cost which is actually paid. The cost consists of the expenses directly relevant to the obtainment of the long-term equity investment, taxes and other necessary expenses. (4) The cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. (5) The cost of a long-term investment obtained by the exchange of non-monetary assets (having commercial nature) shall be recognized base on taking the fair value and relevant payable taxes as the cost of the assets received. (6) The cost of a long-term equity investment obtained by recombination of liabilities shall be recognized at the fair value. 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 95 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 be adjusted according to the accounting policies and accounting periods of the Company and the investment income and other comprehensive income shall be recognized accordingly. For the transactions between the Company and associates and joint ventures, if the assets made or sold don’t constitute business, the unrealized gains and losses of the internal transactions are offset by the proportion attributable to the Company, and the investment gains and losses are recognized accordingly. However, the loss of unrealized internal transactions incurred by the Company and the investee attributable to the impairment loss of the transferred assets shall not be offset. If the assets made to associates or joint ventures constitute business, and the investor makes long-term equity investment but does not obtain the control, the fair value of the investment shall be taken as the initial investment cost of the new long-term equity investment, and the difference between initial investment and the book value of the investment is fully recognized in profit or loss for the current period. If the assets sold by the Company to joint ventures or associates constitute business, the difference between the consideration and the book value of the business shall be fully credited to the current profits and losses. If the assets purchased by Company from joint ventures or associates constitute business, conduct accounting treatment in accordance with the provisions of Accounting Standard for Business Enterprises No. 20 - Business combination, and the profits or losses related to the transaction shall be recognized in full. When the net loss incurred by the investee is recognized, the book value of the long-term equity investment and other long-term equity that substantially constitute the net investment in the investee shall be written down to zero. 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 NotesⅥ. “Principles, Procedures and Methods for the Preparation of Consolidated 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 96 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 the cost method, other comprehensive income accounted by equity method or recognized by financial instrument and accounted and recognized by measurement criteria before the acquisition of the control over the investee is treated in the same basis of the investee directly disposing related assets or liabilities, and carried forward proportionately into the current profits and losses. Other changes of owner’s equity in net assets of the investee accounted and recognized by the equity method other than the net profit or loss, other comprehensive income and profit distribution are carried forward proportionally into the current profits and losses. 3. Impairment Provisions for Long-term Equity Investments For the relevant testing method and provision making method, see Notes 31. Impairment of Long-term Assets. 23. Investment Property Measurement model for investment property Not applicable 24. Fixed Assets (1) Recognition Conditions Fixed assets of the Company refers to the tangible assets that simultaneously possess the features as follows: they are held for the sake of producing commodities, rendering labor service, renting or business management; and their useful life is in excess of one accounting year and unit price is higher. No fixed assets may be recognized unless it simultaneously meets the conditions as follows: ① The economic benefits pertinent to the fixed asset are likely to flow into the Company; and ② The cost of the fixed asset can be measured reliably. (2) Depreciation Method Expected net salvage Category of fixed assets Method 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 25. Construction in Progress 1. Pricing of Construction in Progress 97 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 The constructions are accounted according to the actual costs incurred. The constructions shall be carried forward into fixed assets at the actual cost when reach intended usable condition. The borrowing expenses eligible for capitalization incurred before the delivery of the construction are included in the construction cost; after the delivery, the relevant interest expense shall be recorded into the current profits and losses. 2. Standard and Time of Construction in Progress Carrying Forward into Fixed Assets The Company’s construction in progress is carried forward into fixed assets when the construction completes and reaches intended usable condition. The criteria for determining the intended usable condition shall meet one of the following: (1) The physical construction (including installation) of fixed assets has been completed or substantially completed; (2) Has been produced or run for trial, and the results indicate that the assets can run normally or can produce stable products stably, or the results of the trial operation show that it can operate normally; (3) The amount of the expenditure on the fixed assets constructed is little or almost no longer occurring; (4) The fixed assets purchased have reached the design or contract requirements, or basically in line with the design or contract requirements. 3. Provision for Impairment of Construction in Progress Please refer to Note 31: Long-term Asset Impairment under Note V for the impairment test method and provision for impairment of construction in progress. 26. Borrowing Costs The borrowing costs refer to interest and other related costs incurred by the Company as a result of borrowings, including interest on borrowings, amortization of discounts or premiums, ancillary expenses and exchange differences arising from foreign currency borrowings. The borrowing costs incurred by the Company directly attributable to the acquisition, construction or production of assets eligible for capitalization are capitalized and included in the cost of the relevant assets. Other borrowing costs are recognized as expenses according to the amount at the time of occurrence, and are included in the current profits and losses. 1. Principle of capitalization of borrowing costs Borrowing costs can be capitalized when all the following conditions are met: Asset expenditure has already occurred; borrowing costs have already occurred; construction or production activities necessary to bring the assets to the intended useable or sellable status have already begun. 2. Capitalization period of borrowing costs Capitalization period refers to the period from the capitalization of borrowing costs starting to the end of capitalization, excluding the period when capitalization is suspended. If assets that meet the conditions of capitalization are interrupted abnormally in the course of construction or production, and the interruption time exceeds 3 consecutive months, the capitalization of borrowing costs shall be suspended. The borrowing costs incurred during the interruption are recognized as expenses and included in current profits and losses until the acquisition or construction of the assets is resumed. The capitalization of the borrowing costs continues if the interruption is a procedure necessary for the purchase or production of assets eligible for capitalization to meet the intended useable or sellable status. The borrowing costs shall cease to be capitalized when the purchased or produced assets that meet the conditions of capitalization meet the intended useable or sellable status. The borrowing costs incurred after the assets eligible for capitalization meet the intended useable or sellable status can be included in the current profits and losses when incurred. 3. Calculation method of capitalized amount of borrowing costs 98 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 During the period of capitalization, the capitalization amount of interests (including amortization of discounts or premiums) for each accounting period is determined in accordance with the following provisions: (1) For special borrowings for the acquisition or construction of assets eligible for capitalization, the interest expenses actually incurred in the current period of borrowings shall be recognized after deducting the interest income obtained by depositing the unused borrowing funds into the bank or investment income obtained from temporary investment. (2) Where the general borrowing is occupied for the acquisition or construction of assets eligible for capitalization, the Company multiplies the weighted average of the asset expenditure of the accumulated asset expenditure exceeding the special borrowing by the capitalization rate of the general borrowing to calculate the amount of interest that should be capitalized for general borrowings. The capitalization rate is determined based on the weighted average interest rate of general borrowings. 27. Living Assets Not applicable 28. Oil and Gas Assets Not applicable 29. Right-of-use Assets Not applicable 30. Intangible Assets (1) Pricing Method, Useful Life and Impairment Test 1. Recognition Criteria of Intangible Assets Intangible assets are identifiable non-monetary assets that are owned or controlled by the Company without physical form. The intangible assets are recognized when all the following conditions are met: (1) Conform to the definition of intangible assets; (2) Expected future economic benefits related to the assets are likely to flow into the Company; (3) The costs of the assets can be measured reliably. 2. Initial Measurement of Intangible Assets Intangible assets are initially measured at cost. Actual costs are determined by the following principles: (1) The cost of the acquisition of intangible assets, including the purchase price, relevant taxes and other expenses directly attributable to the intended use of the asset. The payment of purchase price of intangible assets exceeding normal credit terms is deferred, and the cost of intangible assets having financing nature in essence shall be recognized based on the present value of the purchase price. The difference between the actual payment price and the present value of the purchase price shall be recorded into the current profits and losses in the credit period except that can be capitalized in accordance with the Accounting Standard for Business Enterprises No. 17 - Borrowing Cost. (2) The cost of investing in intangible assets shall be recognized according to the value agreed upon in the investment contract or agreement, except that the value of the contract or agreement is unfair. 3. Subsequent Measurement of Intangible Assets 99 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 The Company shall determine the useful life when it obtains intangible assets. The useful life of intangible assets is limited, and the years of the useful life or output that constitutes the useful life or similar measurement units shall be estimated. The intangible assets are regarded as intangible assets with uncertain useful life if the term that brings economic benefits to the Company is unforeseeable Intangible assets with limited useful life shall be amortized by straight line method from the time when the intangible assets are available until can’t be recognized as intangible assets; intangible assets with uncertain useful life shall not be amortized. The Company reviews the estimated useful life and amortization method of intangible assets with limited useful life at the end of each year, and reviews the estimated useful life of intangible assets with uncertain useful life in each accounting period. For intangible assets that evidence shows the useful life is limited, the useful life shall be estimated and the intangible assets shall be amortized in the estimated useful life. 4. Recognition Criteria and Withdrawal Method of Intangible Asset Impairment Provision The impairment test method and withdrawal method for impairment provision of intangible assets are detailed in Note 31: Long-term asset impairment under Note V. (2) Accounting Policy for Internal Research and Development Expenditures The expenditures in internal research and development projects of the Company are classified into expenditures in research stage and expenditures in development stage. The expenditures in research stage are included in the current profits and losses when incurred. The expenditures in development stage are recognized as intangible assets when meeting the following conditions: (1) The completion of the intangible assets makes it technically feasible for using or selling; (2) Having the intention to complete and use or sell the intangible assets; (3) The way in which an intangible asset generates economic benefits, including the proof that the products produced with the intangible asset have market or the proof of its usefulness if the intangible asset has market and will be used internally; (4) Having sufficient technical, financial resources and other resources to support the development of the intangible assets and the ability to use or sell the intangible assets; (5) Expenditure attributable to the development stage of intangible assets can be measured reliably. The cost of self-developed intangible assets includes the total expenditure incurred since meeting intangible assets recognition criterion until reaching intended use. Expenditures that have been expensed in previous periods are no longer adjusted. Non-monetary assets exchange, debt restructuring, government subsidies and the cost of intangible assets acquired by business combination are recognized according to relevant provisions of Accounting Standard for Business Enterprises No. 7 - Non-monetary assets exchange, Accounting Standard for Business Enterprises No. 12 - Debt restructuring, Accounting Standards for Business Enterprises No. 16 - Government subsidies, Accounting Standard for Business Enterprises No. 20 - Business combination respectively. 31. Impairment of Long-term Assets For non-current non-financial assets such as fixed assets, construction in progress, intangible assets with limited useful life, investment real estate measured in cost mode and long-term equity investments in subsidiaries, joint ventures and associates, the Company determines whether there is indication of impairment at balance sheet date. If there is indication of impairment, then estimate the amount of its recoverable value and test the impairment. Goodwill, intangible assets with uncertain useful life and intangible assets that have not yet reached useable state 100 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 shall be tested for impairment every year, whether or not there is any indication of impairment. If the impairment test results indicate that the recoverable amount of the asset is lower than its book value, the impairment provision shall be made at the difference and included in the impairment loss. The recoverable amount is the higher of the fair value of the asset minus the disposal cost and the present value of the expected future cash flow of the asset. The fair value of the asset is recognized according to the price of the sales agreement in the fair trade; if there is no sales agreement but there is an active market, the fair value is recognized according to the buyer’s bid of the asset; if there is no sales agreement or active market, the fair value of asset shall be estimated based on the best information that can be obtained. Disposal costs include legal costs related to disposal of assets, related taxes, handling charges, and direct costs incurred to enable the asset reaching sellable status. The present value of the expected future cash flows of the assets is recognized by the amount discounted at appropriate discount rate according to the expected future cash flows arising from the continuing use of the asset and the final disposal. The provision for impairment of assets is calculated and recognized on the basis of individual assets. If it is difficult to estimate the recoverable amount of individual assets, the recoverable amount of the asset group shall be recognized by the asset group to which the asset belongs. The asset group is the smallest portfolio of assets that can generate cash inflows independently. The book value of the goodwill presented separately in the financial statements shall be apportioned to the asset group or portfolio of asset groups that is expected to benefit from the synergies of the business combination when the impairment test is conducted. The corresponding impairment loss is recognized if the test results indicate that the recoverable amount of the asset group or portfolio of asset groups containing the apportioned goodwill is lower than its book value. The amount of the impairment loss shall offset the book value of the goodwill apportioned to the asset group or portfolio of asset groups, and offset the book value of other assets in proportion according to the proportion of the book value of other assets except the goodwill in the asset group or portfolio of asset groups. Once the impairment loss of the above asset is recognized, the portion that the value is restored will not be written back in subsequent periods. 32. Long-term Prepaid Expense Long-term prepaid expense refers to general expenses with the apportioned period over one year (one year excluded) that have occurred but attributable to the current and future periods. Long-term deferred expense shall be amortized averagely within benefit period. In case of no benefit in the future accounting period, the amortized value of such project that fails to be amortized shall be transferred into the profits and losses of the current period. 33. Contract Liabilities The Company’s obligation of transferring commodities to customers due to consideration received or receivable from clients. If the client has paid the contract consideration or the Company has obtained the unconditional right of collection before the Company transfers commodities to the customer, the Company shall present the accounts received or receivable as contract liabilities at the earlier time between the time when the client actually conducts payment and the deadline of payment. Contract assets and contract liabilities under the same contract shall be presented based on the net amount, while those not under the same contract shall not be offset. 101 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 34. Payroll (1) Accounting Treatment of Short-term Compensation Short-term compensation mainly including salary, bonus, allowances and subsidies, employee services and benefits, medical insurance premiums, birth insurance premium, industrial injury insurance premium, housing fund, labor union expenditure and personnel education fund, non-monetary benefits etc. The short-term compensation actually happened during the accounting period when the active staff offering the service for the Group should be recognized as liabilities and is included in the current gains and losses or relevant assets cost. Of which the non-monetary benefits should be measured according to the fair value. (2) Accounting Treatment of the Welfare after Demission Welfare after demission mainly includes defined contribution plans and defined benefit plans. Of which defined contribution plans mainly include basic endowment insurance, unemployment insurance, annuity funds, etc., and the corresponding payable and deposit amount should be included into the relevant assets cost or the current gains and losses when happen. (3) Accounting Treatment of the Demission Welfare If an enterprise cancels the labor relationship with any employee prior to the expiration of the relevant labor contract or brings forward any compensation proposal for the purpose of encouraging the employee to accept a layoff, and should recognize the payroll liabilities occurred from the demission welfare base on the earlier date between the time when the Group could not one-sided withdraw the demission welfare which offered by the plan or layoff proposal owning to relieve the labor relationship and the date the Group recognizes the cost related to the reorganization of the payment of the demission welfare and at the same time includes which into the current gains and losses. But if the demission welfare is estimated that could not totally pay after the end of the annual report within 12 months, should be disposed according to other long-term payroll payment. (4) Accounting Treatment of the Welfare of Other Long-term Staffs The inside employee retirement plan is treated by adopting the same principle with the above dismiss ion welfare. The group would recorded the salary and the social security insurance fees paid and so on from the employee’s service terminative date to normal retirement date into current profits and losses (dismiss ion welfare) under the condition that they meet the recognition conditions of estimated liabilities. The other long-term welfare that the Group offers to the staffs, if met with the setting drawing plan, should be accounting disposed according to the setting drawing plan, while the rest should be disposed according to the setting revenue plan. 35. Lease Liabilities Not applicable 36. Provisions 1. Recognition of Provisions 102 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 The obligation such as external guaranty, pending litigation or arbitration, product quality assurance, layoff plan, loss contract, restructuring and disposal of fixed assets, pertinent to a contingencies shall be recognized as an provisions when the following conditions are satisfied simultaneously: ① That obligation is a current obligation of the enterprise; ② It is likely to cause any economic benefit to flow out of the enterprise as a result of performance of the obligation; and ③ The amount of the obligation can be measured in a reliable way 2. Measurement of Provisions The provisions shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation. If there is a sequent range for the necessary expenses and if all the outcomes within this range are equally likely to occur, the best estimate shall be determined in accordance with the middle estimate within the range. In other cases, the best estimate shall be conducted in accordance with the following situations, respectively: ① If the Contingencies concern a single item, it shall be determined in the light of the most likely outcome. ② If the Contingencies concern two or more items, the best estimate should be calculated and determined in accordance with all possible outcomes and the relevant probabilities. ③ When all or some of the expenses necessary for the liquidation of an provisions of an enterprise is expected to be compensated by a third party, the compensation should be separately recognized as an asset only when it is virtually certain that the reimbursement will be obtained. The Company shall check the book value of the provisions on the balance sheet date. The amount of compensation is not exceeding the book value of the recognized provisions. 37. Share-based Payment Not applicable 38. Other Financial Instruments such as Preferred Shares and Perpetual Bonds Not applicable 39. Revenue The Accounting Policy Adopted for Recognition and Measurement of Revenue Revenue is the total inflow of economic interests formed by the Company in its routine activities that increase owners’ equity and are irrelevant to the capital contributed by the owners. The Company recognizes revenue when it has fulfilled the obligation of contract performance, namely, when it has acquired the control of the related commodity. The acquisition of control over a commodity refers to the capacity to control the use of the commodity and to gain almost all economic interests thereof. The Company recognizes revenue based on the net of consideration payable to customers upon the delivery of products to customers as agreed in the contract. The Company recognizes the amount of contract consideration collected from customers as contract liabilities when signing contracts with customers and receiving orders but without delivery of products to customers. Differences in accounting policies for the recognition of revenue caused by different business models for the same type of business Not applicable. 103 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 40. Government Subsidies 1. Category of Government Subsidies Government subsidies refer to the monetary assets and non-monetary assets obtained by the Company from the government, which mainly include government subsidies related to assets and government subsidies related to income. 2. Distinction Standard of Government Subsidies Related to Assets with Government Subsidies Related to Income The government subsidies related to assets refer to the government subsidies obtained for acquisition, construction or otherwise formation of long-term assets. The government subsidies related to income refer to the government subsidies except the government subsidies related to assets. The specific standard of classifying the government subsidies as subsidies related to assets: government subsidies for acquisition, construction or otherwise formation of long-term assets. The specific criteria that the Company classifies government subsidies as income related is: other government subsidies other than asset-related government subsidies. If the government documents do not specify the subsidy object, the bases that the Company classified the government subsidies as assets-related subsidies or income-related subsidies were as follows: (1) If the specific items for which the subsidy is targeted are stipulated in government documents, divide according to the relative proportion of the amount of expenditure that forms assets and the amount of expenditure included in the cost in the budget for that particular project, and the proportion shall be reviewed at each balance sheet date and changed as necessary; (2) if the government documents only have a general statement of the purpose and do not specify a specific project, the subsidy is recognized as government subsidy related to income. 3. Measurement of Government Subsidies If a government subsidy is a monetary asset, it shall be measured according to the amount received or receivable. If a government subsidy is a non-monetary asset, it shall be measured at its fair value, and shall be measured at a nominal amount (RMB1) when the fair value cannot be obtained reliably. For confirmed government subsidies that need to be returned, if there is relevant deferred income, the book balance of related deferred income shall be written off and the excess shall be charged to profit or loss for the Current Period; for other circumstances, it shall be directly charged to profit or loss for the Current. 4. Accounting Treatment for Government Subsidies The Company adopts the gross method to confirm government subsidies. The government subsidies related to assets are recognized as deferred income, and are charged to the current profit or loss in a reasonable and systematic manner within the useful lives of the relevant assets (subsidies related to the daily activities of the Company are included in other income; while subsidies unrelated to the daily activities of the Company are included in non-operating income). Government subsidies measured at nominal amounts are directly charged to profit or loss for the Current Period. Where the relevant assets are sold, transferred, scrapped or damaged before the end of their useful lives, the balance of related undistributed deferred income shall be transferred to the profit or loss of the asset disposal in the Current Period. Government subsidies related to income shall be treated as follows: (1) government subsidies used to compensate the relevant costs, expenses or losses of the Company in the subsequent period shall be recognized as deferred income, and shall be included in the current profit and loss during the period of confirming the relevant costs, expenses or losses (subsidies related to the daily activities of the Company are included in other income; while subsidies unrelated to the daily activities of the Company are included in non-operating income); (2) government subsidies used to compensate the relevant costs, expenses or losses incurred by the Company 104 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 shall be directly included in the current profits and losses (subsidies related to the daily activities of the Company are included in other income; while subsidies unrelated to the daily activities of the Company are included in non-operating income). For government subsidies that include both assets-related and income-related parts, they should be distinguished separately for accounting treatment; for government subsidies that are difficult to be distinguished, they should be classified as income-related. 41. Deferred Income Tax Assets/Deferred Income Tax Liabilities The income tax of the Company includes the current income tax and deferred income tax. Both are recorded into the current gains and losses as income tax expenses or revenue, except in the following circumstances: (1) The income tax generated from the business combination shall be adjusted into goodwill; (2) The income tax related to the transaction or event directly included in shareholders’ equity shall be recorded into shareholders’ equity. At the balance sheet date, the Company recognizes the deferred income tax assets or deferred income tax liabilities in accordance with the balance sheet liability method for the temporary difference between the book value of assets or liabilities and its tax base. The Company recognizes all taxable temporary differences as deferred income tax liabilities unless taxable temporary differences arise in the following transactions: (1) The initial recognition of goodwill or the initial recognition of the assets or liabilities arising from a transaction with the following characteristics: the transaction is not a business combination and neither the accounting profit nor the taxable income is incurred at the time of the transaction; (2) The time of write-back of taxable temporary differences related to the investments in subsidiaries, associates and joint ventures can be controlled and the temporary differences are likely to not be written back in the foreseeable future. The Company recognizes the deferred income tax assets arising from deductible temporary differences, subject to the amount of taxable income obtained to offset the deductible temporary differences, unless the deductible temporary differences arise in the following transactions: (1) The transaction is not a business combination, and the transaction does not affect the accounting profit or the amount of taxable income; (2) The deductible temporary differences related to the investments in subsidiaries, associates and joint ventures are not met simultaneously: Temporary differences are likely to be written back in the foreseeable future and are likely to be used to offset the taxable income of deductible temporary differences in the future. 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. 105 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 42. Lease (1) Accounting Treatment of Operating Lease (1) The lease fee paid by the Company for rented assets shall be apportioned using the straight-line method over the entire lease term without deducting the rent-free period and shall be included in the current period expenses. The initial direct costs related to the lease transaction paid by the Company are included in current expenses. When the lessor of the asset assumes the lease-related expenses that should be borne by the Company, the Company should deduct the part of the expenses from the total rental amount, and the deducted rental expenses are apportioned during the lease term and included in the current expenses. (2) The rental fees received by the company for leasing assets are apportioned on a straight-line basis over the entire lease term without deducting the rent-free period and are recognized as lease income. The initial direct expenses related to lease transactions paid by the company are included in the current expenses; if the amount is larger, they are capitalized and are recorded in the current period in stages on the same basis as the recognition of lease income during the entire lease period. When the company assumes the lease-related expenses that should be borne by the lessee, the company deducts the expenses from the total amount of rental income and allocates the deducted rental expenses during the lease period. (2) Accounting Treatments of Financial Lease (1) Financing leased assets: on the lease starting date, the Company recorded the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognized the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treated the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. The company adopted the effective interest method to amortize the unrecognized financing expenses during the asset lease period and included it into financial expenses. (2) Assets leased by finance: On the lease beginning date, the Company recognized the financial lease receivables, and the difference between the sum of unguaranteed residual values and its present value as unrealized financing income. It is recognized as lease income during any lease period in the future. The initial direct costs incurred by the Company in relation to the lease transaction, were included in the initial measurement of the financial lease receivable and the amount of revenue recognized during the lease period shall be reduced. 43. Other Significant Accounting Policies and Estimates Not applicable 44. Changes in Main Accounting Policies and Estimates (1) Change of Accounting Policies √ Applicable □ Not applicable Changes in accounting policy Approval procedure Remark 106 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 On 5 July 2017, the Ministry of Finance issued the Notice on Revising and Issuing the Accounting Standards for Business Enterprises No.14-Revenue (CK(2017)No.22 and required those enterprises both listed in domestic and aboard and those enterprises overseas listed with International Financial Reporting Standards or For details, refer to the Accounting Standards for Business Enterprises for Announcement on Changes in preparation of financial statements to implement it since 1 Approved by the 35th Meeting of the Accounting Policies January 2018, required other domestically listed 8th Board of Directors (Announcement No.: 2020-011) enterprises to implement it since 1 January 2020 and disclosed on cninfo.com.cn. required non-listed enterprises carrying out the Accounting Standards for Business Enterprises to implement it since 1 January 2021. Thus, the Company starts to implement the new standards governing revenue since 1 January 2020 and has made the treatment in accordance with governing connection regulation. (2) Changes in Accounting Estimates □ Applicable √ Not applicable (3) Adjustments to the Financial Statements at the Beginning of the First Execution Year of any New Standards Governing Revenue or Leases since 2020 Applicable Whether items of balance sheets at the beginning of the year need adjustment √ Yes □ No Consolidated Balance Sheet Unit: RMB Item 31 December 2019 1 January 2020 Adjusted Current assets: Monetary assets 1,125,456,662.64 1,125,456,662.64 Settlement reserve Interbank loans granted Held-for-trading financial 901,166,682.64 901,166,682.64 assets Derivative financial assets Notes receivable 109,444,480.94 109,444,480.94 Accounts receivable 712,175,266.51 712,175,266.51 Accounts receivable financing 107 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Prepayments 7,851,390.78 7,851,390.78 Premiums receivable Reinsurance receivables Receivable reinsurance contract reserve Other receivables 22,307,344.76 22,307,344.76 Including: Interest receivable Dividends receivable Financial assets purchased under resale agreements Inventories 637,336,584.06 637,336,584.06 Contract assets Assets held for sale Current portion of non-current assets Other current assets 52,502,863.59 52,502,863.59 Total current assets 3,568,241,275.92 3,568,241,275.92 Non-current assets: Loans and advances to customers Investments in debt obligations Investments in other debt obligations Long-term receivables Long-term equity 181,093,725.43 181,093,725.43 investments Investments in other equity 1,454,740,241.46 1,454,740,241.46 instruments Other non-current financial assets Investment property Fixed assets 629,832,098.35 629,832,098.35 Construction in progress 119,030,610.16 119,030,610.16 Productive living assets Oil and gas assets 108 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Right-of-use assets Intangible assets 167,826,499.74 167,826,499.74 Development costs Goodwill Long-term prepaid 7,727,394.74 7,727,394.74 expense Deferred income tax assets 36,847,064.36 36,847,064.36 Other non-current assets 9,861,098.08 9,861,098.08 Total non-current assets 2,606,958,732.32 2,606,958,732.32 Total assets 6,175,200,008.24 6,175,200,008.24 Current liabilities: Short-term borrowings Borrowings from the central bank Interbank loans obtained Held-for-trading financial liabilities Derivative financial liabilities Notes payable 374,665,327.74 374,665,327.74 Accounts payable 559,016,692.70 559,016,692.70 Advances from customers 50,449,357.17 -50,449,357.17 Contract liabilities 50,449,357.17 50,449,357.17 Financial assets sold under repurchase agreements Customer deposits and interbank deposits Payables for acting trading of securities Payables for underwriting of securities Employee benefits payable 83,156,852.86 83,156,852.86 Taxes payable 17,211,068.21 17,211,068.21 Other payables 46,073,344.71 46,073,344.71 Including: Interest payable Dividends payable 109 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Handling charges and commissions payable Reinsurance payables Liabilities directly associated with assets held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 1,130,572,643.39 1,130,572,643.39 Non-current liabilities: Insurance contract reserve Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term employee benefits payable Provisions Deferred income Deferred income tax 137,216,136.70 137,216,136.70 liabilities Other non-current liabilities Total non-current liabilities 137,216,136.70 137,216,136.70 Total liabilities 1,267,788,780.09 1,267,788,780.09 Owners’ equity: Share capital 1,399,346,154.00 1,399,346,154.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 158,608,173.07 158,608,173.07 Less: Treasury stock 110 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Other comprehensive 776,260,348.19 776,260,348.19 income Specific reserve Surplus reserves 836,559,645.36 836,559,645.36 General reserve Retained earnings 1,709,962,479.45 1,709,962,479.45 Total equity attributable to owners of the Company as 4,880,736,800.07 4,880,736,800.07 the parent Non-controlling interests 26,674,428.08 26,674,428.08 Total owners’ equity 4,907,411,228.15 4,907,411,228.15 Total liabilities and owners’ 6,175,200,008.24 6,175,200,008.24 equity Notes to adjustment In accordance with the new standards governing revenue, “contract liabilities” refer to the Company’s obligations in transferring commodities or services to the client for the received or predicted consideration. The “advances from customers” of the Company received in advance due to performance of contract obligations by customers shall be adjusted into “contract liabilities”. Balance Sheet of the Company as the Parent Unit: RMB Item 31 December 2019 1 January 2020 Adjusted Current assets: Monetary assets 1,059,001,233.28 1,059,001,233.28 Held-for-trading financial 901,166,682.64 901,166,682.64 assets Derivative financial assets Notes receivable 107,567,164.99 107,567,164.99 Accounts receivable 666,106,832.53 666,106,832.53 Accounts receivable financing Prepayments 6,614,791.10 6,614,791.10 Other receivables 37,934,614.96 37,934,614.96 Including: Interest receivable Dividends receivable Inventories 553,557,529.00 553,557,529.00 Contract assets 111 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Assets held for sale Current portion of non-current assets Other current assets 43,118,385.01 43,118,385.01 Total current assets 3,375,067,233.51 3,375,067,233.51 Non-current assets: Investments in debt obligations Investments in other debt obligations Long-term receivables Long-term equity 464,886,827.69 464,886,827.69 investments Investments in other equity 1,454,740,241.46 1,454,740,241.46 instruments Other non-current financial assets Investment property Fixed assets 573,844,707.66 573,844,707.66 Construction in progress 116,240,559.37 116,240,559.37 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 125,673,065.66 125,673,065.66 Development costs Goodwill Long-term prepaid 4,891,398.93 4,891,398.93 expense Deferred income tax assets 34,205,213.27 34,205,213.27 Other non-current assets 8,440,448.08 8,440,448.08 Total non-current assets 2,782,922,462.12 2,782,922,462.12 Total assets 6,157,989,695.63 6,157,989,695.63 Current liabilities: Short-term borrowings Held-for-trading financial liabilities Derivative financial 112 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 liabilities Notes payable 376,265,327.74 376,265,327.74 Accounts payable 689,846,497.35 689,846,497.35 Advances from customers 46,758,714.00 -46,758,714.00 Contract liabilities 46,758,714.00 46,758,714.00 Employee benefits payable 68,658,329.30 68,658,329.30 Taxes payable 12,374,430.19 12,374,430.19 Other payables 125,001,875.83 125,001,875.83 Including: Interest payable Dividends payable Liabilities directly associated with assets held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 1,318,905,174.41 1,318,905,174.41 Non-current liabilities: Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term employee benefits payable Provisions Deferred income Deferred income tax 137,216,136.70 137,216,136.70 liabilities Other non-current liabilities Total non-current liabilities 137,216,136.70 137,216,136.70 Total liabilities 1,456,121,311.11 1,456,121,311.11 113 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Owners’ equity: Share capital 1,399,346,154.00 1,399,346,154.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 166,211,779.15 166,211,779.15 Less: Treasury stock Other comprehensive 776,242,987.90 776,242,987.90 income Specific reserve Surplus reserves 836,559,645.36 836,559,645.36 Retained earnings 1,523,507,818.11 1,523,507,818.11 Total owners’ equity 4,701,868,384.52 4,701,868,384.52 Total liabilities and owners’ 6,157,989,695.63 6,157,989,695.63 equity Notes to adjustment In accordance with the new standards governing revenue, “contract liabilities” refer to the Company’s obligations in transferring commodities or services to the client for the received or predicted consideration. The “advances from customers” of the Company received in advance due to performance of contract obligations by customers shall be adjusted into “contract liabilities”. (4) Retroactive Adjustments to Comparative Data of Prior Years when First Execution of any New Standards Governing Revenue or Leases since 2020 □ Applicable √ Not applicable 45. Other Naught VI. Taxes 1. Main Taxes and Tax Rates Category of taxes Tax basis Tax rate Sales volume from goods selling or taxable VAT 6%, 9%, 13% service Urban maintenance and construction tax Turnover tax payable 7%, 5% 114 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Enterprise income tax Taxable income 15%, 20%, 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 Name Income tax rate Foshan Electrical and Lighting Co., Ltd. 15% FSL Chanchang Optoelectronics Co., Ltd. 25% Foshan Chansheng Electronic Ballast Co., Ltd. 20% Foshan Taimei Times Lamps and Lanterns Co., Ltd. 25% Nanjing Fozhao Lighting Components Manufacturing Co., Ltd. 25% Foshan Electrical & Lighting (Xinxiang) Co., Ltd. 25% FSL New Light Source Technology Co., Ltd. 25% Foshan Lighting Lamps and Lanterns Co., Ltd. 25% FSL Zhida Electric Technology Co., Ltd. 15% FSL Lighting GmbH 15% 2. Tax Preference The Company passed the re-examination for High-tech Enterprises in 2017, as well as won the “Certificate of High-tech Enterprise” after approval by Department of Science and Technology of Guangdong Province, Department of Finance of Guangdong Province, Guangdong Provincial Bureau of State Taxation and Guangdong Provincial Bureau of Local Taxation. In accordance with relevant provisions in Corporate Income Tax Law of the People’s Republic of China and the Administration Measures for Identification of High-tech Enterprises promulgated in 2007, the Company paid the corporate income tax based on a tax rate of 15% within three years since 1 January 2017. FSL Zhida Electric Technology Co., Ltd. passed the examination for High-tech Enterprises in December 2019, and thus FSL Zhida Electric Technology Co., Ltd. paid the corporate income tax based on a tax rate of 15% within three years since 1 January 2019 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. According to Notice of Implementation of Inclusive Tax Reduction Policy to Small and Micro Enterprises by Ministry of Finance and State Administration of Taxation (CS [2019] No. 13), Foshan Chansheng Electronic Ballast Co., Ltd. is applicable to the preferential tax policy for small low-profit enterprises in 2019: the portion of annual taxable income less than RMB1 million shall be included in the taxable income based on a tax rate of 25% and 20% of preferential tax rate paid for the corporate income tax; the portion of annual taxable income more than RMB1 million but less than RMB3 million shall be included in the taxable income based on a tax rate of 50% and 20% of preferential tax rate paid for the corporate income tax. 115 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 3. Other Paid according to the relevant regulation of the tax law. VII. Notes to Main Items of Consolidated Financial Statements 1. Monetary Assets Unit: RMB Item Ending balance Beginning balance Cash on hand 10,454.25 18,281.85 Bank deposits 1,222,758,444.44 1,048,694,037.32 Other monetary assets (note 1) 48,153,891.61 70,079,965.12 Unexpired interest (note 2) 6,664,378.35 Total 1,270,922,790.30 1,125,456,662.64 Of which: Total amount deposited 736,020.72 1,232,977.34 overseas Other notes Note 1: Other monetary assets were security deposits for notes, forward exchange settlement contracts and performance bonds, as well as investments placed with security firm and the balance with e-commerce platforms, of which the security deposits for notes, forward exchange settlement contracts and performance bonds were restricted assets (see “81. Assets with Restricted Ownership or Right of Use” in Note “VII Notes to Consolidated Financial Statements”). Note 2: Unexpired interest did not belong to cash and cash equivalents. 2. Trading Financial Assets Unit: RMB Item Ending balance Beginning balance Financial assets at fair value through profit 657,781,609.38 899,619,482.64 or loss Including: Wealth management products (note) 340,801,731.51 467,869,852.09 Structural deposits (note) 316,979,877.87 431,749,630.55 Financial assets designated to be measured 14,850.00 1,547,200.00 at fair value through profit or loss Including: Total 657,796,459.38 901,166,682.64 Other notes: 116 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 They are the low-risk wealth management products of banks with maturity date over three months and investment cycle less than one year and the structural deposits cannot be terminated in advance. 3. Derivative Financial Assets Not applicable 4. Notes Receivable (1) Notes Receivable Listed by Category Unit: RMB Item Ending balance Beginning balance Bank acceptance bill 96,328,610.62 109,444,480.94 Total 96,328,610.62 109,444,480.94 Please refer to the relevant information of disclosure of bad debt provision of other receivables if adopting the general mode of expected credit loss to withdraw bad debt provision of notes receivable. □ Applicable √ Not applicable (2) Bad Debt Provision Withdrawn, Reversed or Collected during the Reporting Period Naught Of which, the bad debt provision reversed or collected with significant amount during the Reporting Period: □ Applicable √ Not applicable (3) Notes Receivable Pledged at the Period-end Unit: RMB Item Amount pledged at the period-end Bank acceptance bill 54,362,766.89 Total 54,362,766.89 (4) Notes Receivable which Had Endorsed by the Company or Had Discounted and Had not Due on the Balance Sheet Date at the Period-end Unit: RMB Amount of recognition termination at the Amount of not recognition termination at Item period-end the period-end Bank acceptance bill 56,625,210.50 Total 56,625,210.50 117 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 (5) Notes Transferred to Accounts Receivable because Drawer of the Notes Fails to Executed the Contract or Agreement Naught (6) The Actual Write-off Notes Receivable Naught 5. Accounts Receivable (1) Accounts Receivable Disclosed by Category Unit: RMB Ending balance Beginning balance Carrying amount Bad debt provision Carrying amount Bad debt provision Category Withdra Withdraw Carrying Carrying Proportio wal Proportio al Amount Amount value Amount Amount value n proportio n proportio n n Accounts receivable 23,377,2 16,266,8 7,110,413 23,377,22 16,266,81 7,110,413.5 withdrawn bad debt 2.89% 69.58% 3.06% 69.58% 23.66 10.09 .57 3.66 0.09 7 provision separately Of which: Accounts receivable 786,091, 38,635,9 747,455,3 740,781,1 35,716,29 705,064,85 withdrawn bad debt 97.11% 4.91% 96.94% 4.82% 306.24 86.23 20.01 45.60 2.66 2.94 provision by group Of which: 809,468, 54,902,7 754,565,7 764,158,3 51,983,10 712,175,26 Total 100.00% 6.78% 100.00% 6.80% 529.90 96.32 33.58 69.26 2.75 6.51 Individual withdrawal of bad debt provision: Unit: RMB Ending balance Name Carrying amount Bad debt provision Withdrawal proportion Withdrawal reason Involved in the lawsuit, the Company won the Customer A 14,220,827.14 7,110,413.57 50.00% lawsuit in the first instance, and the other 118 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 side has appealed. Involving lawsuit and Customer B 9,156,396.52 9,156,396.52 100.00% having a long account age Total 23,377,223.66 16,266,810.09 -- -- Withdrawal of bad debt provision by group: Unit: RMB Ending balance Name Carrying amount Bad debt provision Withdrawal proportion Credit risk group 786,091,306.24 38,635,986.23 4.91% Total 786,091,306.24 38,635,986.23 -- Please refer to the relevant information of disclosure of bad debt provision of other receivables if adopting the general mode of expected credit loss to withdraw bad debt provision of accounts receivable. □ Applicable √ Not applicable Disclosure by aging Unit: RMB Aging Ending balance Within 1 year (including 1 year) 700,846,872.84 1 to 2 years 62,859,913.68 2 to 3 years 15,654,090.71 Over 3 years 30,107,652.67 3 to 4 years 15,515,563.07 4 to 5 years 1,781,966.16 Over 5 years 12,810,123.44 Total 809,468,529.90 (2) Bad Debt Provision Withdrawn, Reversed or Collected during the Reporting Period Information of withdrawal of bad debt provision: Unit: RMB Changes in the Reporting Period Beginning Category Reversal or Ending balance amount Withdrawal Write-off Other recovery Accounts 51,983,102.75 2,919,831.52 137.95 54,902,796.32 receivable Total 51,983,102.75 2,919,831.52 137.95 54,902,796.32 Of which bad debt provision recovered or reversed with significant amount during Reporting Period: naught 119 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 (3) Particulars of the Actual Verification of Accounts Receivable during the Reporting Period Unit: RMB Item Amount Other retails accounts 137.95 Total 137.95 Of which the verification of accounts receivable with significant amount: naught (4) Top 5 of the Ending Balance of the Accounts Receivable Collected according to the Arrears Party Unit: RMB Ending balance of accounts Proportion to total ending balance Ending balance of bad debt Name of units receivable of accounts receivable (%) provision No. 1 71,743,804.40 8.86% 2,152,314.13 No. 2 38,317,669.82 4.73% 1,149,530.09 No. 3 32,005,878.73 3.95% 960,176.36 No. 4 17,114,271.39 2.11% 2,187,526.58 No. 5 15,400,628.68 1.90% 462,018.86 Total 174,582,253.02 21.55% (5) Derecognition of Accounts Receivable due to the Transfer of Financial Assets Naught (6) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Accounts Receivable Naught 6. Accounts Receivable Financing Naught 7. Prepayment (1) Listed by Aging Unit: RMB Ending balance Beginning balance Aging Amount Proportion Amount Proportion 120 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Within 1 year 2,958,264.98 44.90% 4,151,087.73 52.87% 1 to 2 years 323,788.69 4.91% 1,687,169.78 21.49% 2 to 3 years 1,402,335.30 21.29% 710,290.79 9.05% Over 3 years 1,903,893.67 28.90% 1,302,842.48 16.59% Total 6,588,282.64 -- 7,851,390.78 -- (2) Top 5 of the Ending Balance of the Prepayments Collected according to the Prepayment Target Unit: RMB Name of units Relationship with the Ending balance Proportion to total prepayments (%) Aging Company No. 1 Non-related supplier 601,013.10 9.12% Within 3 years No. 2 Non-related supplier 461,054.68 7.00% Within 1 year No. 3 Non-related supplier 381,392.84 5.79% Within 1 year No. 4 Non-related supplier 307,514.01 4.67% Within 3 years No. 5 Non-related supplier 300,000.00 4.55% Over 3 years Total 2,050,974.63 31.13% 8. Other Receivables Unit: RMB Item Ending balance Beginning balance Other receivables 30,629,514.19 22,307,344.76 Total 30,629,514.19 22,307,344.76 (1) Interest Receivable Naught (2) Dividends Receivable Naught (3) Other Receivables 1) Other Receivables Classified by Account Nature Unit: RMB Nature Ending carrying amount Beginning carrying amount VAT export tax refunds 12,598,007.93 8,154,485.23 121 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Performance bond 3,984,660.80 3,236,931.10 Staff borrow and deposit 7,253,044.50 5,991,107.91 Rent, water & electricity fees 2,573,758.87 1,686,102.59 Other 6,627,837.16 5,187,134.14 Total 33,037,309.26 24,255,760.97 2) Information of Withdrawal of Bad Debt Provision Unit: RMB First stage Second stage Third stage Expected loss in the Expected loss in the Bad debt provision Expected credit loss Total duration (credit impairment duration (credit impairment of the next 12 months not occurred) occurred) Balance of 1 January 593,749.50 1,354,666.71 1,948,416.21 2020 Balance of 1 January 2020 in the Current —— —— —— —— Period Withdrawal of the 196,706.57 262,672.29 459,378.86 Current Period Balance of 30 June 2020 790,456.07 1,617,339.00 2,407,795.07 Changes of carrying amount with significant amount changed of loss provision in the current period □Applicable √Not applicable Disclosure by aging Unit: RMB Aging Ending balance Within 1 year (including 1 year) 26,348,537.05 1 to 2 years 3,629,105.42 2 to 3 years 2,220,271.55 Over 3 years 839,395.24 3 to 4 years 482,096.55 4 to 5 years 50,000.00 Over 5 years 307,298.69 Total 33,037,309.26 3) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Information of withdrawal of bad debt provision: 122 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Unit: RMB Changes in the Reporting Period Beginning Category Reversal or Ending balance balance Withdrawal Write-off Other recovery Other receivables 1,948,416.21 459,378.86 2,407,795.07 Total 1,948,416.21 459,378.86 2,407,795.07 Of which bad debt provision reversed or recovered with significant amount during Reporting Period: Naught 4) Particulars of the Actual Verification of Other Receivables during the Reporting Period Naught 5) Top 5 of the Ending Balance of the Other Receivables Collected according to the Arrears Party Unit: RMB Proportion to total ending balance of Ending balance of Name of the entity Nature Ending balance Aging other receivables bad debt provision (%) No. 1 Export rebates 12,598,007.93 Within 1 year 38.13% 377,940.24 No. 2 Other 1,888,515.60 Within 4 years 5.72% 534,299.21 No. 3 Social insurance 1,597,440.13 Within 1 year 4.84% 47,923.20 No. 4 Petty cash 938,266.21 Within 4 years 2.84% 83,256.53 No. 5 Petty cash 917,554.10 Within 5 years 2.78% 227,270.83 Total -- 17,939,783.97 -- 54.31% 1,270,690.01 6) Accounts Receivable Involving Government Grants Naught 7) Derecognition of Other Receivables due to the Transfer of Financial Assets Naught 8) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Other Receivables Naught 123 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 9. Inventory Whether the Company needs to comply with disclosure requirements for real estate industry No (1) Category of Inventory Unit: RMB Ending balance Beginning balance Falling price Falling price reserves of reserves of inventory or inventory or Item Carrying amount depreciation Carrying value Carrying amount depreciation Carrying value reserves of reserves of contract contract performance cost performance cost Raw materials 103,889,353.01 2,093,585.84 101,795,767.17 124,826,657.81 2,426,340.03 122,400,317.78 Goods in process 36,350,773.87 36,350,773.87 32,861,535.80 32,861,535.80 Inventory goods 310,383,717.01 25,231,188.47 285,152,528.54 380,880,872.40 25,335,631.67 355,545,240.73 Semi-finished 100,259,311.07 1,388,360.36 98,870,950.71 125,058,072.72 1,658,579.31 123,399,493.41 goods Low priced and easily worn 2,451,266.41 2,451,266.41 3,129,996.34 3,129,996.34 articles Total 553,334,421.37 28,713,134.67 524,621,286.70 666,757,135.07 29,420,551.01 637,336,584.06 (2)Falling Price Reserves of Inventory and Depreciation Reserves of Contract Performance Cost Unit: RMB Increase Decrease Beginning Item Reversal or Ending balance balance Withdrawal Other Other write-off Raw materials 2,426,340.03 121,610.26 454,364.45 2,093,585.84 Inventory goods 25,335,631.67 3,009,515.62 3,113,958.82 25,231,188.47 Semi-finished 1,658,579.31 69,667.81 339,886.76 1,388,360.36 goods Total 29,420,551.01 3,200,793.69 3,908,210.03 28,713,134.67 124 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 (3) Notes to the Ending Balance of Inventories Including Capitalized Borrowing Expense Naught (4) Amortization Amount of Contract Performance Cost during the Reporting Period Naught 10. Contract Assets Naught 11. Held-for-Sale Assets Naught 12. Current Portion of Non-current Assets Naught 13. Other Current Assets Unit: RMB Item Ending balance Beginning balance Deductible input tax of VAT 46,195,101.66 49,860,530.03 Advance payment of enterprise income tax 2,642,333.56 Total 46,195,101.66 52,502,863.59 14. Creditor’s Rights Investment Naught 15. Other Creditor’s Rights Investment Naught 16. Long-term Accounts Receivable Naught 17. Long-term Equity Investment Unit: RMB 125 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Increase/decrease Ending Gains and Adjustme Beginnin Cash Withdraw Ending balance Additiona losses nt of g balance Reduced Changes bonus or al of balance of Investees l recognize other (carrying investmen of other profits impairme Other (carrying depreciati investmen d under comprehe value) t equity announce nt value) on t the equity nsive d to issue provision reserves method income I. Joint ventures II. Associated enterprises Shenzhen Primatron ix 181,093,7 4,725,081 2,080,390 183,738,4 (Nanho) 25.43 .89 .50 16.82 Electronic s Ltd. 181,093,7 4,725,081 2,080,390 183,738,4 Subtotal 25.43 .89 .50 16.82 181,093,7 4,725,081 2,080,390 183,738,4 Total 25.43 .89 .50 16.82 18. Other Equity Instrument Investment Unit: RMB Item Ending balance Beginning balance Non-listed equity investment 711,571,895.07 711,571,895.07 Listed equity investment 1,286,422,328.32 743,168,346.39 Total 1,997,994,223.39 1,454,740,241.46 Disclosure of non-trading equity instrument investment by items Unit: RMB Reason for Amount of other assigning to Reason for other comprehensive measure in fair comprehensive Dividend income Accumulative Accumulative Item income value and the income recognized gains losses transferred to changes included transferred to retained earnings in the current retained earnings gains and losses Not satisfied with Stock of Guoxuan 999,789,809.36 the condition of High-tech trading equity 126 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 instrument Not satisfied with Stock of the condition of 3,969,005.36 42,747,631.50 Everbright Bank trading equity instrument Not satisfied with the condition of Xiamen Bank 10,971,417.60 413,943,585.67 trading equity instrument Not satisfied with Guangdong the condition of Development trading equity Bank Co.,Ltd instrument Foshan Fochen Not satisfied with Road the condition of Development trading equity Company instrument Limited Not satisfied with Shenzhen the condition of Zhonghao trading equity (Group) Ltd instrument Total 14,940,422.96 1,456,481,026.53 19. Other Non-current Financial Assets Naught 20. Investment Property Naught 21. Fixed Assets Unit: RMB Item Ending balance Beginning balance Fixed assets 654,479,073.26 629,832,098.35 Total 654,479,073.26 629,832,098.35 (1) List of Fixed Assets Unit: RMB 127 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Houses and Machinery Transportation Electronic Item Total buildings equipment equipment equipment I. Original carrying value 1. Beginning 871,680,760.24 735,281,251.39 21,672,517.21 29,297,960.13 1,657,932,488.97 balance 2. Increased 48,006,011.64 10,823,316.21 395,090.98 717,172.87 59,941,591.70 amount of the period (1) Purchase 4,292,101.66 395,090.98 585,926.58 5,273,119.22 (2) Transfer from construction in 48,006,011.64 6,531,214.55 131,246.29 54,668,472.48 progress (3) Enterprise combination increase 3. Decreased 552,766.18 4,740,760.44 351,701.26 9,958.12 5,655,186.00 amount of the period (1) Disposal or 552,766.18 3,025,837.36 351,701.26 9,958.12 3,940,262.92 scrap (2) Equipment 1,714,923.08 1,714,923.08 transformation 4. Ending balance 919,134,005.70 741,363,807.16 21,715,906.93 30,005,174.88 1,712,218,894.67 II. Accumulative depreciation 1. Beginning 453,670,579.13 529,997,835.69 16,159,650.82 24,199,951.63 1,024,028,017.27 balance 2. Increased 13,266,227.01 19,052,788.24 589,829.32 1,012,656.09 33,921,500.66 amount of the period (1) Withdrawal 13,266,227.01 19,052,788.24 589,829.32 1,012,656.09 33,921,500.66 3. Decreased 406,070.64 3,517,542.11 338,602.41 8,972.16 4,271,187.32 amount of the period (1) Disposal or 406,070.64 2,416,208.72 338,602.41 8,972.16 3,169,853.93 scrap (2) Equipment 1,101,333.39 1,101,333.39 transformation 4. Ending balance 466,530,735.50 545,533,081.82 16,410,877.73 25,203,635.56 1,053,678,330.61 III. Depreciation 128 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 reserves 1. Beginning 4,071,945.32 428.03 4,072,373.35 balance 2. Increased amount of the period (1) Withdrawal 3. Decreased 10,882.55 10,882.55 amount of the period (1) Disposal or scrap (2) Equipment 10,882.55 10,882.55 transformation 4. Ending balance 4,061,062.77 428.03 4,061,490.80 IV. Carrying value 1. Ending carrying 452,603,270.20 191,769,662.57 5,305,029.20 4,801,111.29 654,479,073.26 value 2. Beginning 418,010,181.11 201,211,470.38 5,512,866.39 5,097,580.47 629,832,098.35 carrying value (2) List of Temporarily Idle Fixed Assets Unit: RMB Original carrying Accumulated Depreciation Item Carrying value Note value depreciation reserves T5, T8, energy-saving lamp 7,940,325.52 5,945,024.07 1,943,741.93 51,559.52 production line Total 7,940,325.52 5,945,024.07 1,943,741.93 51,559.52 (3) Fixed Assets Leased in by Financing Lease Naught (4) Fixed Assets Leased out by Operation Lease Naught 129 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 (5) Fixed Assets Failed to Accomplish Certification of Property Naught (6) Disposal of Fixed Assets Naught 22. Construction in Progress Unit: RMB Item Ending balance Beginning balance Construction in progress 82,647,609.80 119,030,610.16 Total 82,647,609.80 119,030,610.16 (1) List of Construction in Progress Unit: RMB Ending balance Beginning balance Item Depreciation Depreciation Carrying amount Carrying value Carrying amount Carrying value reserves reserves Construction in 82,647,609.80 82,647,609.80 119,030,610.16 119,030,610.16 progress Total 82,647,609.80 82,647,609.80 119,030,610.16 119,030,610.16 (2) Changes in Significant Construction in Progress during the Reporting Period Unit: RMB Of Proporti which: on of Accumul Capitaliz amount accumul ative ation rate Transferr of Beginnin Other ative amount of Increase ed in Ending Job capitaliz Capital Item Budget g decrease investme of interests d amount fixed balance schedule ed resources balance d amount nt in interest for the assets interests construct capitaliz Reportin for the ions to ation g Period Reportin budget g Period Gaoming 115,530, 2,188,11 2,188,11 Office 1.89% Other 000.00 5.98 5.98 Building 130 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Reconstr uction project of the main road 3,880,00 2,943,81 2,943,81 from the 75.87% 80.00% Other 0.00 6.51 6.51 west gate to the south gate of Gaoming Plant Section II of the upgradin g and reconstru ction project of the external faade of the factory next to the main 3,394,20 2,491,15 2,491,15 road 77.65% 95.00% Other 0.00 5.98 5.98 from the west gate to the south gate of Gaoming Plant (motor vehicle lamps, bidding B and bidding G) Upgradi 9,280,16 3,475,61 3,475,61 39.10% 30.00% Other 131 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 ng and 9.12 4.70 4.70 reconstru ction project of the road in Gaoming Plant Project of building the greening park for 2,820,75 1,982,05 287,716. 2,269,77 80.47% 95.00% Other leisure 2.94 3.85 82 0.67 and sport in Gaoming Branch Plant Section I of the upgradin g and reconstru ction project of the external faade of the 2,377,80 1,745,17 1,745,17 factory 73.39% 95.00% Other 0.00 4.30 4.30 next to the main road from the west gate to the south gate of Gaoming Plant (luminari 132 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 es, T8) Fuwan intellige 49,070,0 46,708,0 1,947,48 48,655,5 nt 99.16% 100.00% Other 00.00 62.10 9.96 52.06 worksho pH Gaoming R&D worksho 45,000,0 30,853,9 426,341. 31,280,2 69.51% 85.00% Other p 11, 12, 00.00 31.43 57 73.00 13, 14 and 18 Automat ic system of intellige nt 21,920,0 11,117,8 11,117,8 producti 50.72% 90.00% Other 00.00 40.76 40.76 on worksho p (worksh op H) Upgradi ng project in Local 6,500,00 5,408,81 606,635. 6,015,45 roads 92.55% 95.00% Other 0.00 5.09 34 0.43 and greening of Gaoming Upgradi ng project of Standard 4,200,00 3,502,56 3,502,56 83.39% 95.00% Other C 0.00 8.80 8.80 worksho p external facade 133 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 48 tons electric melting furnace 7,766,00 4,295,52 165,703. 4,461,22 57.45% 80.00% Other (18025) 0.00 0.36 06 3.42 Gaoming tank furnace 271,738, 103,868, 16,277,7 48,655,5 71,491,0 Total -- -- -- 922.06 792.39 64.22 52.06 04.55 (3) List of the Withdrawal of the Depreciation Reserves for Construction in Progress Naught (4) Engineering Materials Naught 23. Productive Living Assets Naught 24. Oil and Gas Assets □ Applicable √ Not applicable 25. Right-of-use Assets Naught 26. Intangible Assets (1) List of Intangible Assets Unit: RMB Non-patent Using right of Item Land use right Patent Total technology software I. Original carrying value 1. Beginning 233,741,723.60 200,000.00 2,773,651.87 236,715,375.47 balance 2. Increased 134 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 amount of the period (1) Purchase (2) Internal R&D (3) Business combination increase 3. Decreased amount of the period (1) Disposal 4. Ending balance 233,741,723.60 200,000.00 2,773,651.87 236,715,375.47 II. Accumulated amortization 1. Beginning 66,689,185.37 200,000.00 1,999,690.36 68,888,875.73 balance 2. Increased 2,157,510.14 56,849.34 2,214,359.48 amount of the period (1) Withdrawal 2,157,510.14 56,849.34 2,214,359.48 3. Decreased amount of the period (1) Disposal 4. Ending balance 68,846,695.51 200,000.00 2,056,539.70 71,103,235.21 III. Depreciation reserves 1. Beginning balance 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the period (1) Disposal 135 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 4. Ending balance IV. Carrying value 1. Ending carrying 164,895,028.09 717,112.17 165,612,140.26 value 2. Beginning 167,052,538.23 773,961.51 167,826,499.74 carrying value The proportion of intangible assets formed from the internal R&D of the Company at the period-end to the ending balance of intangible assets was 0 %. (2) Land Use Right with Certificate of Title Uncompleted Naught 27. Development Costs Naught 28. Goodwill Naught 29. Long-term Prepaid Expense Unit: RMB Amortization Other decreased Item Beginning balance Increased amount Ending balance amount of the period amount Engineering 5,917,401.48 1,123,699.90 2,144,188.20 4,896,913.18 decoration expense Other 1,809,993.26 465,448.20 1,344,545.06 Total 7,727,394.74 1,123,699.90 2,609,636.40 6,241,458.24 30. Deferred Income Tax Assets/Deferred Income Tax Liabilities (1) Deferred Income Tax Assets that Had not Been Off-set Unit: RMB Ending balance Beginning balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference assets difference assets Provision for impairment 95,935,216.86 14,925,270.31 93,274,443.32 14,388,688.12 of assets 136 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Unrealized profit of 1,597,638.67 239,645.80 1,885,791.90 282,868.80 internal transactions Depreciation of fixed 75,345,045.92 11,801,874.19 76,057,614.11 11,908,759.43 assets Payroll payable 31,600,273.10 4,740,040.97 68,444,986.72 10,266,748.01 Total 204,478,174.55 31,706,831.27 239,662,836.05 36,847,064.36 (2) Deferred Income Tax Liabilities Had not Been Off-set Unit: RMB Ending balance Beginning balance Item Taxable temporary Deferred income tax Taxable temporary Deferred income tax difference liabilities difference liabilities Changes in fair value of other equity instrument 1,456,481,026.53 218,472,153.98 913,227,044.60 136,984,056.70 investment Changes in fair value of 14,850.00 2,227.50 1,547,200.00 232,080.00 trading financial assets Total 1,456,495,876.53 218,474,381.48 914,774,244.60 137,216,136.70 (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 31,706,831.27 36,847,064.36 assets Deferred income tax 218,474,381.48 137,216,136.70 liabilities (4) List of Unrecognized Deferred Income Tax Assets Naught (5) Deductible Losses of Unrecognized Deferred Income Tax Assets will Due in the Following Years None 137 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 31. Other Non-current Assets Unit: RMB Ending balance Beginning balance Item Carrying Depreciation Carrying Carrying Depreciation Carrying amount reserve value amount reserve value Prepayments for business facilities 7,440,250.54 7,440,250.54 9,861,098.08 9,861,098.08 Total 7,440,250.54 7,440,250.54 9,861,098.08 9,861,098.08 32. Short-term Borrowings Naught 33. Trading Financial Liabilities Naught 34. Derivative Financial Liabilities Naught 35. Notes Payable Unit: RMB Item Ending balance Beginning balance Bank acceptance bill 245,253,258.83 374,665,327.74 Total 245,253,258.83 374,665,327.74 The total amount of the due but not paid notes payable at the end of the period was of RMB0.00. 36. Accounts Payable (1) List of Accounts Payable Unit: RMB Item Ending balance Beginning balance Accounts payable 610,696,483.53 559,016,692.70 Total 610,696,483.53 559,016,692.70 138 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 (2) Significant Accounts Payable Aging over One Year Naught 37. Advances from Customer Naught 38. Contract Liabilities Unit: RMB Item Ending balance Beginning balance Contract liabilities 41,949,069.17 50,449,357.17 Total 41,949,069.17 50,449,357.17 39. Payroll Payable (1) List of Payroll Payable Unit: RMB Item Beginning balance Increase Decrease Ending balance I. Short-term salary 83,156,852.86 264,360,371.72 303,139,507.80 44,377,716.78 II. Post-employment benefit-defined 7,318,496.76 7,318,496.76 contribution plans Total 83,156,852.86 271,678,868.48 310,458,004.56 44,377,716.78 (2) List of Short-term Salary Unit: RMB Item Beginning balance Increase Decrease Ending balance 1. Salary, bonus, 82,843,966.12 240,873,217.05 279,647,267.73 44,069,915.44 allowance, subsidy 2. Employee welfare 7,831,519.90 7,831,519.90 3. Social insurance 7,393,860.99 7,393,860.99 Of which: Medical 4,912,736.13 4,912,736.13 insurance premiums Work-re 158,444.30 158,444.30 lated injury insurance Materni 2,322,680.56 2,322,680.56 139 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 ty insurance 4. Housing fund 6,443,415.90 6,443,415.90 5.Labor union budget and employee education 312,886.74 1,818,357.88 1,823,443.28 307,801.34 budget Total 83,156,852.86 264,360,371.72 303,139,507.80 44,377,716.78 (3) List of Defined Contribution Plans Unit: RMB Item Beginning balance Increase Decrease Ending balance 1. Basic pension benefits 7,162,965.35 7,162,965.35 2. Unemployment 155,531.41 155,531.41 insurance Total 7,318,496.76 7,318,496.76 Other notes: The Company participates in the scheme of pension insurance and unemployment insurance established by government agencies as required. According to the scheme, fees are paid to it on a monthly basis and at the rate of stipulated by government agencies. In addition to the above monthly deposit fees, the Company no longer assumes further payment obligations. Corresponding expenses are recorded into the current profits or losses or the cost of related assets when incurred. 40. Taxes Payable Unit: RMB Item Ending balance Beginning balance VAT 17,663,202.53 2,848,860.13 Corporate income tax 11,806,372.90 12,419,827.14 Personal income tax 314,431.98 595,012.66 Urban maintenance and construction tax 1,201,573.35 385,734.01 Education surcharge 878,623.80 281,417.17 Property tax 2,911,388.90 264,468.41 Land use tax 1,814,012.67 187,752.00 Other 208,220.96 227,996.69 Total 36,797,827.09 17,211,068.21 41. Other Payables Unit: RMB 140 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Item Ending balance Beginning balance Other payables 55,847,187.57 46,073,344.71 Total 55,847,187.57 46,073,344.71 (1) Interest Payable Naught (2) Dividends Payable Naught (3) Other Payables 1) Other Payables Listed by Nature Unit: RMB Item Ending balance Beginning balance Compensation for lawsuit 1,126,231.95 1,126,231.95 Performance bond 36,709,870.57 29,641,485.45 Relevant expense of sales 3,143,931.43 3,323,583.65 Other 14,867,153.62 11,982,043.66 Total 55,847,187.57 46,073,344.71 2) Significant Other Payables Aging over One Year Naught 42. Liabilities Held for sale Naught 43. Current Portion of Non-current Liabilities Naught 44. Other Current Liabilities Naught 141 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 45. Long-term Borrowings Naught 46. Bonds Payable Naught 47. Lease Liabilities Naught 48. Long-term Payables Naught 49. Long-term Payroll Payable Naught 50. Provisions Naught 51. Deferred Income Naught 52. Other Non-current Liabilities Naught 53. Share Capital Unit: RMB Increase/decrease (+/-) Beginning New shares Bonus issue Ending balance balance Bonus shares Other Subtotal issued from profit The sum of 1,399,346,154. 1,399,346,154. shares 00 00 54. Other Equity Instruments Naught 142 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 55. Capital Reserves Unit: RMB Item Beginning balance Increase Decrease Ending balance Capital premium 151,362,201.53 151,362,201.53 (premium on stock) Other capital reserves 7,245,971.54 7,245,971.54 Total 158,608,173.07 158,608,173.07 56. Treasury Shares Naught 57. Other Comprehensive Income Unit: RMB Reporting Period Less: Less: Recorded Recorded in in other other comprehe Attributabl Income comprehensi nsive e to Attributabl before ve income in income in Less: owners of e to Beginning Ending Item taxation in prior period prior Income the non-contro balance balance the and period and tax Company lling Current transferred to transferred expense as the interests Period profit or loss to retained parent after tax in the earnings in after tax Current the Period Current Period I. Other comprehensive income 776,242,987 543,253,9 81,488,09 461,765,8 1,238,00 that may not subsequently be .90 81.93 7.28 84.65 8,872.55 reclassified to profit or loss Changes in fair value of 776,242,987 543,253,9 81,488,09 461,765,8 1,238,00 other equity instrument .90 81.93 7.28 84.65 8,872.55 investment II. Other comprehensive income that may subsequently be 17,360.29 -17,083.36 -17,083.36 276.93 reclassified to profit or loss Differences arising from 17,360.29 -17,083.36 -17,083.36 276.93 143 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 translation of foreign currency-denominated financial statements Total of other comprehensive 776,260,348 543,236,8 81,488,09 461,748,8 1,238,00 income .19 98.57 7.28 01.29 9,149.48 58. Specific Reserve Naught 59. Surplus Reserves Unit: RMB Item Beginning balance Increase Decrease Ending balance Statutory surplus 699,673,077.00 699,673,077.00 reserves Discretionary surplus 136,886,568.36 136,886,568.36 reserves Total 836,559,645.36 836,559,645.36 60. Retained Earnings Unit: RMB Item Reporting Period Same period of last year Beginning balance of retained earnings before 1,709,962,479.45 1,654,181,032.39 adjustments Beginning balance of retained earnings after 1,709,962,479.45 1,654,181,032.39 adjustments Add: Net profit attributable to owners of the 151,061,447.83 167,275,725.75 Company as the parent Dividend of ordinary shares payable 258,879,038.49 218,298,000.02 Ending retained earnings 1,602,144,888.79 1,603,158,758.12 List of adjustment of beginning retained earnings: (1) RMB0.00 beginning retained earnings was affected by retrospective adjustment conducted according to the Accounting Standards for Business Enterprises and relevant new regulations. (2) RMB0.00 beginning retained earnings was affected by changes in accounting policies. (3) RMB0.00 beginning retained earnings was affected by correction of significant accounting errors. (4) RMB0.00 beginning retained earnings was affected by changes in combination scope arising from same control. (5) RMB0.00 beginning retained earnings was affected totally by other adjustments. 144 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 61. Operating Revenue and Cost of Sales Unit: RMB Reporting Period Same period of last year Item Operating revenue Cost of sales Operating revenue Cost of sales Main operations 1,504,924,771.42 1,148,135,574.08 1,670,888,644.93 1,283,982,749.97 Other operations 17,959,355.62 13,462,662.03 16,296,015.93 13,353,963.80 Total 1,522,884,127.04 1,161,598,236.11 1,687,184,660.86 1,297,336,713.77 Relevant information of revenue: Unit: RMB Category of contracts Segment 1 Segment 2 Total Type of products 1,522,884,127.04 1,522,884,127.04 Of which: LED lighting products 1,165,303,011.92 1,165,303,011.92 Traditional lighting 300,738,547.81 300,738,547.81 products Electrical products 38,883,211.69 38,883,211.69 Other 17,959,355.62 17,959,355.62 By operating places 1,522,884,127.04 1,522,884,127.04 Of which: Domestic sales 944,602,854.41 944,602,854.41 Export sales 578,281,272.63 578,281,272.63 Total 1,522,884,127.04 1,522,884,127.04 Information related to transaction value assigned to residual performance obligations: The amount of revenue corresponding to performance obligations of contracts signed but not performed or not fully performed yet was RMB0.00 at the period-end. 62. Taxes and Surtaxes Unit: RMB Item Reporting Period Same period of last year Urban maintenance and construction tax 4,998,635.00 8,002,766.99 Education surcharge 3,577,428.55 5,716,249.15 Property tax 3,633,352.66 3,616,025.09 Land use tax 2,684,232.16 2,499,767.83 Vehicle and vessel use tax 8,527.08 4,952.48 145 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Stamp duty 913,111.28 934,962.64 Environmental protection tax 36,111.03 61,544.56 Total 15,851,397.76 20,836,268.74 63. Selling Expense Unit: RMB Item Reporting Period Same period of last year Employee benefits 28,172,676.97 29,625,732.79 Freight 33,427,988.23 36,186,424.88 Business propagandize fees and 7,286,534.16 23,221,696.87 advertizing fees Sales promotion fees 4,462,291.48 10,918,490.31 Business travel charges 2,464,021.64 5,908,417.09 Dealer meeting expense 513,244.52 2,629,705.03 Other 18,950,845.70 14,920,099.41 Total 95,277,602.70 123,410,566.38 64. Administrative Expense Unit: RMB Item Reporting Period Same period of last year Employee benefits 35,721,650.78 41,310,326.31 Depreciation charge 8,106,951.60 7,701,119.24 Office expenses 5,964,403.64 5,056,903.17 Rent of land and management charge 2,862,186.81 2,757,197.21 Amortization of intangible assets 2,214,359.48 2,214,360.20 Other 9,346,343.22 8,497,273.56 Total 64,215,895.53 67,537,179.69 65. Development Costs Unit: RMB Item Reporting Period Same period of last year Employee benefits 35,672,528.60 23,210,591.76 Expense on equipment debugging 2,837,455.51 1,357,085.75 Certification and testing fee 4,847,341.24 2,197,635.38 146 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Material consumption 3,242,624.38 1,955,730.02 Charges related to patents 2,724,900.93 187,908.12 Depreciation and long-term prepaid 5,814,964.29 303,946.75 expense Other 3,958,266.78 647,734.83 Total 59,098,081.73 29,860,632.61 Other information: 1. R&D expense stood at RMB29,237,449.12 in the current period, up 97.91% year-on-year, primarily driven by a considerable increase in labor cost, etc. 2. In respect of R&D expense incurred by the Company, expense other than that on bench-scale and pilot-scale production is included in R&D expense; and sales revenue of products from bench-scale and pilot-scale production is included in core business revenue and the relevant costs are included in cost of sales of core business. 66. Finance Costs Unit: RMB Item Reporting Period Same period of last year Interest expense Less: Interest income 17,488,125.06 10,378,329.29 Foreign exchange gains or losses -2,544,700.07 -303,552.28 Other 698,861.01 773,843.90 Total -19,333,964.12 -9,908,037.67 67. Other Income Unit: RMB Sources Reporting Period Same period of last year Subsidy for stabilizing posts 39,075.10 Supporting fund for import and export 126,000.00 4,494,490.00 Rewards of “Competition among Hundreds 700,000.00 of Enterprises” Other 2,862,928.00 329,380.00 Total 3,028,003.10 5,523,870.00 68. Investment Income Unit: RMB 147 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Item Reporting Period Same period of last year Long-term equity investment income 4,725,081.89 784,711.98 accounted by equity method Investment income from holding of trading 1,750,000.00 financial assets Investment income from disposal of trading 13,550,000.00 financial assets Investment income from holding of other 14,940,422.96 13,957,444.99 equity instrument investment Income received from financial products and 15,454,650.86 14,528,002.77 structural deposits Other 1,023,100.00 -730,500.00 Total 36,143,255.71 43,839,659.74 69. Net Gain on Exposure Hedges Naught 70. Gain on Changes in Fair Value Unit: RMB Sources Reporting Period Same period of last year Trading financial assets -1,532,350.00 Trading financial liabilities -996,200.00 Total -1,532,350.00 -996,200.00 71. Credit Impairment Loss Unit: RMB Item Reporting Period Same period of last year Bad debt loss of other receivables -459,378.86 -340,621.91 Bad debt loss of accounts receivable -2,919,831.52 -696,350.03 Total -3,379,210.38 -1,036,971.94 72. Asset Impairment Loss Unit: RMB Item Reporting Period Same period of last year II. Loss on inventory valuation and -3,200,793.69 -12,239,244.21 148 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 contract performance cost Total -3,200,793.69 -12,239,244.21 73. Assets Disposal Income Unit: RMB Sources Reporting Period Same period of last year Disposal income of fixed assets 7,489.02 Total 7,489.02 74. Non-operating Income Unit: RMB Amount recorded in the current Item Reporting Period Same period of last year non-recurring profit or loss Government grants 57,720.00 1,202,579.96 57,720.00 Total income from disposal of 43,653.10 43,653.10 non-current assets Of which: Income from 43,653.10 43,653.10 disposal of fixed assets Other 561,513.90 739,292.61 561,513.90 Total 662,887.00 1,941,872.57 662,887.00 Government grants recorded in current profit or loss: Unit: RMB Whether influence the Special Related to Distribution Distribution Reporting Same period Item Nature profits or subsidy or assets/related entity reason Period of last year losses of the not to income year or not Due to engaged in special Production industry that line of 50 the state million Related to Subsidy encouraged No No 77,499.96 energy-savin assets and g fluorescent supported, lamp gained subsidy (obtaining in 149 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 line with the law and the regulations of national policy) Subsidy from Other R&D miscellaneou technical Related to Reward No No 57,720.00 1,125,080.00 s government updating and income grants transformatio n, etc. Total 57,720.00 1,202,579.96 75. Non-operating Expense Unit: RMB Amount recorded in the current Item Reporting Period Same period of last year non-recurring profit or loss Total losses from disposal of 704,238.91 53,336.67 704,238.91 non-current assets Of which: Losses from disposal 704,238.91 53,336.67 704,238.91 of fixed assets Losses on inventories 274,833.59 170,523.69 274,833.59 Penalty 45,447.00 4,995.00 45,447.00 Delaying payment 47.09 239,571.80 47.09 Other 1.55 9,964.81 1.55 Total 1,024,568.14 478,391.97 1,024,568.14 76. Income Tax Expense (1) List of Income Tax Expense Unit: RMB Item Reporting Period Same period of last year Current income tax expense 18,140,342.11 23,839,915.08 Deferred income tax expense 4,910,380.59 3,327,373.49 Total 23,050,722.70 27,167,288.57 150 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 (2) Adjustment Process of Accounting Profit and Income Tax Expense Unit: RMB Item Reporting Period Profit before taxation 176,881,589.95 Current income tax expense accounted at statutory/applicable tax 26,532,238.49 rate Influence of applying different tax rates by subsidiaries 2,102,297.10 Influence of income tax before adjustment -2,633,987.16 Investment income and final dividend -2,949,825.73 Income tax expense 23,050,722.70 77. Other Comprehensive Income Refer to Note 57 for details. 78. Cash Flow Statement (1) Cash Generated from Other Operating Activities Unit: RMB Item Reporting Period Same period of last year Margin income 5,143,890.04 14,070,620.26 Deposit interest 20,811,434.74 8,960,610.92 Subsidy income 3,001,473.10 6,634,379.76 Income from waste 6,810,795.49 6,413,317.83 Property and rental income 3,790,160.94 3,133,802.35 Income from insurance compensation 11,293.51 245,123.30 Other 4,038,427.45 5,704,607.15 Total 43,607,475.27 45,162,461.57 (2) Cash Used in Other Operating Activities Unit: RMB Item Reporting Period Same period of last year Administrative expense paid in cash 22,211,979.63 15,681,410.19 Selling expense paid in cash 60,915,397.06 80,443,469.23 Finance costs paid in cash 516,972.81 237,571.61 151 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Returned cash deposit 4,145,401.79 7,855,566.14 Other 3,525,344.12 6,902,354.83 Total 91,315,095.41 111,120,372.00 (3) Cash Generated from Other Investing Activities Naught (4) Cash Used in Other Investing Activities Naught (5) Cash Generated from Other Financing Activities Naught (6) Cash Used in Other Financing Activities Naught 79. Supplemental Information for Cash Flow Statement (1) Supplemental Information for Cash Flow Statement Unit: RMB Supplemental information Reporting Period Same period of last year 1. Reconciliation of net profit to net cash -- -- flows generated from operating activities: Net profit 153,830,867.25 167,498,642.96 Add: Provision for impairment of assets 6,580,004.07 13,276,216.15 Depreciation of fixed assets, oil-gas assets, 33,921,500.66 31,885,398.98 and productive living assets Amortization of intangible assets 2,214,359.48 2,214,360.20 Amortization of long-term prepaid expenses 2,609,636.40 3,198,379.16 Loss from disposal of fixed assets, intangible assets and other long-term assets (gains: -7,489.02 negative) Losses from scrapping of fixed assets (gains: 660,585.81 53,336.67 negative) Losses from changes in fair value (gains: 1,532,350.00 996,200.00 negative) 152 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Investment loss (gains: negative) -36,143,255.71 -43,839,659.74 Decrease in deferred income tax assets 5,140,233.09 3,327,373.49 (increase: negative) Increase in deferred income tax liabilities -229,852.50 (“-” for decrease) Decrease in inventory (“-” for increase) 113,422,713.70 116,836,131.75 Decrease in operating receivables (“-” for -50,808,368.68 12,637,048.69 increase) Increase in operating payables (“-” for -31,645,581.10 -117,401,594.83 decrease) Net cash generated from/used in operating 201,077,703.45 190,681,833.48 activities 2.Significant investing and financing activities without involvement of cash -- -- receipts and payments 3.Net increase/decrease of cash and cash -- -- equivalents: Ending balance of cash 1,228,361,292.33 767,162,849.74 Less: Beginning balance of cash 1,049,833,555.02 795,285,756.38 Net increase in cash and cash equivalents 178,527,737.31 -28,122,906.64 (2) Net Cash Paid For Acquisition of Subsidiaries Naught (3) Net Cash Received from Disposal of the Subsidiaries Naught (4) Cash and Cash Equivalents Unit: RMB Item Ending balance Beginning balance I. Cash 1,228,361,292.33 1,049,833,555.02 Including: Cash on hand 10,454.25 18,281.85 Bank deposit on demand 1,221,672,815.19 1,047,408,408.07 Other monetary assets on demand 6,678,022.89 2,406,865.10 III. Ending balance of cash and cash 1,228,361,292.33 1,049,833,555.02 equivalents 153 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 80. Notes to Items of the Statements of Changes in Owners’ Equity Notes to the name of “Other” of ending balance of the same period of last year adjusted and the amount adjusted: Not applicable 81. Assets with Restricted Ownership or Right of Use Unit: RMB Item Ending carrying value Reason for restriction Security deposit of notes and security Monetary assets 42,561,497.97 deposit of future foreign exchange settlement Notes receivable 54,362,766.89 Pledged for notes pool Total 96,924,264.86 -- 82. Foreign Currency Monetary Items (1) Foreign Currency Monetary Items Unit: RMB Ending foreign currency Ending balance converted to Item Exchange rate balance RMB Monetary assets -- -- 1,376,612.78 Of which: USD 153,604.91 7.0795 1,087,445.93 EUR 36,322.93 7.9610 289,166.85 HKD Accounts receivable -- -- 266,741,301.46 Of which: USD 37,677,985.94 7.0795 266,741,301.46 EUR HKD Long-term borrowings -- -- Of which: USD EUR HKD 154 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Contract liabilities 15,818,117.57 Of which: USD 2,234,355.19 7.0795 15,818,117.57 Prepayments 1,061,246.78 Of which: USD 149,904.20 7.0795 1,061,246.78 Other payables 496,060.57 Of which: USD 70,070.00 7.0795 496,060.57 (2) Notes to Overseas Entities Including: for Significant Oversea Entities, Main Operating Place, Recording Currency and Selection Basis Shall Be Disclosed; if there Are Changes in Recording Currency, Relevant Reasons Shall Be Disclosed. □ Applicable √ Not applicable 83. Arbitrage Naught 84. Government Grants (1) Basic Information on Government Grants Unit: RMB Type Amount Presented in Charged to current profit or loss Subsidy for stabilizing posts 39,075.10 Other income 39,075.10 Supporting fund for import and 126,000.00 Other income 126,000.00 export Other 2,862,928.00 Other income 2,862,928.00 Other miscellaneous 57,720.00 Non-operating income 57,720.00 government subsidies Total 3,085,723.10 3,085,723.10 (2) Return of Government Grants Naught 85. Other Naught 155 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 VIII. Changes of Consolidation Scope 1. Business Combination Not under the Same Control (1) Business Combination Not under the Same Control in the Reporting Period Naught (2) Combination Cost and Goodwill Naught (3) The Identifiable Assets and Liabilities of Acquiree on Purchase Date Naught (4) Gains or losses from Re-measurement of Equity Held before the Purchase Date at Fair Value Whether there is a transaction that through multiple transaction step by step to realize business combination and gaining the control during the Reporting Period □ Yes √ No (5) Notes to Reasonable Consideration or Fair Value of Identifiable Assets and Liabilities of the Acquiree that Cannot Be Determined on the Acquisition Date or during the Period-end of the Merger Naught (6) Other Notes Naught 2. Business Combination under the Same Control Naught 3. Counter Purchase Naught 4. Disposal of Subsidiary Whether there is a single disposal of the investment to the subsidiary and lost control? □ Yes √ No Whether there are several disposals of the investment to the subsidiary and lost controls? □ Yes √ No 156 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 5. Changes in Combination Scope for Other Reasons Note to changes in combination scope for other reasons (such as new establishment or liquidation of subsidiaries, etc.) and relevant information: Naught 6. Other Naught IX. Equity in Other Entities 1. Equity in Subsidiary (1) Subsidiaries Main operating Nature of Holding percentage (%) Name Registration place Way of gaining place business Directly Indirectly Foshan Chansheng Production and Newly Foshan Foshan 100.00% Electronic Ballast sales established Co., Ltd. Foshan Lighting Lamps & Production and Newly Foshan Foshan 100.00% Components Co., sales established Ltd. Guangdong Fozhao New Production and Newly Light Sources Foshan Foshan 100.00% sales established Technology Co., Ltd. FSL Chanchang Production and Newly Optoelectronics Foshan Foshan 100.00% sales established Co., Ltd. Foshan Taimei Production and Newly Times Lamps and Foshan Foshan 70.00% sales established Lanterns Co., Ltd. Foshan Electrical & Lighting Production and Newly Xinxiang Xinxiang 100.00% (Xinxiang) Co., sales established Ltd. Nanjing Fozhao Production and Nanjing Nanjing 100.00% Acquired Lighting sales 157 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Components Manufacturing Co., Ltd. FSL Zhida Electric Production and Newly Foshan Foshan 51.00% Technology Co., sales established Ltd. FSL LIGHTING Production and Newly Germany Germany 100.00% GmbH sales established Notes: Holding proportion in subsidiary different from voting proportion: Naught Basis of holding half or less voting rights but still been controlled investee and holding more than half of the voting rights not been controlled investee: Naught Significant structured entities and controlling basis in the scope of combination: Naught Basis of determining whether the Company is the agent or the principal: Naught (2) Significant Non-wholly-owned Subsidiary Unit: RMB Shareholding Declaring dividends The profit or loss Balance of proportion of distributed to Name attributable to the non-controlling interests non-controlling non-controlling non-controlling interests at the period-end interests interests Foshan Taimei Times Lamps 30.00% 1,025,914.03 10,238,829.41 and Lanterns Co., Ltd. FSL Zhida Electric 49.00% 1,743,505.39 19,205,018.09 Technology Co., Ltd. (3) The Main Financial Information of Significant Not Wholly-owned Subsidiary Unit: RMB Ending balance Beginning balance Non-curr Non-curr Non-curr Non-curr Name Current Total Current Total Current Total Current Total ent ent ent ent assets assets liabilities liabilities assets assets liabilities liabilities assets liability assets liability Foshan 63,630,0 17,115,8 80,745,8 46,616,4 46,616,4 40,797,2 17,975,7 58,772,9 28,063,2 28,063,2 Taimei 44.83 23.98 68.81 37.46 37.46 59.87 35.27 95.14 77.21 77.21 Times 158 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Lamps and Lanterns Co., Ltd. FSL Zhida Electric 84,408,3 8,382,86 92,791,1 40,951,3 40,951,3 79,707,2 9,067,38 88,774,5 40,492,9 40,492,9 Technolo 01.99 1.83 63.82 31.00 31.00 13.61 0.69 94.30 35.74 35.74 gy Co., Ltd. Unit: RMB Reporting Period Same period of last year Cash flows Cash flows Total Total Name Operating from Operating from Net profit comprehensi Net profit comprehensi revenue operating revenue operating ve income ve income activities activities Foshan Taimei Times 62,409,344.3 59,575,680.8 Lamps and 3,419,713.42 3,419,713.42 -2,169,954.22 1,509,228.08 1,509,228.08 778,035.37 5 6 Lanterns Co., Ltd. FSL Zhida Electric 45,607,598.0 38,271,963.9 3,558,174.26 3,558,174.26 -2,023,109.53 -469,084.10 -469,084.10 6,129,306.92 Technology 7 2 Co., Ltd. (4) Significant Restrictions on Using the Assets and Liquidating the Liabilities of the Company Naught (5) Financial Support or Other Supports Provided to Structural Entities Incorporated into the Scope of Consolidated Financial Statements Naught 2. The Transaction of the Company with Its Owner’s Equity Share Changed but Still Controlling the Subsidiary Naught 159 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 3. Equity in Joint Ventures or Associated Enterprises (1) Significant Joint Ventures or Associated Enterprises Naught (2) Main Financial Information of Significant Joint Ventures Naught (3) Main Financial Information of Significant Associated Enterprises Naught (4) Summary Financial Information of Insignificant Joint Ventures or Associated Enterprises Unit: RMB Beginning balance/Same period of last Ending balance/Reporting Period year Joint ventures: -- -- The total of following items according to the -- -- shareholding proportions Associated enterprises: -- -- Total carrying value of investment 183,738,416.82 181,093,725.43 The total of following items according to the -- -- shareholding proportions --Net profit 4,725,081.89 784,711.98 --Total comprehensive income 4,725,081.89 784,711.98 (5) Note to the Significant Restrictions on the Ability of Joint Ventures or Associated Enterprises to Transfer Funds to the Company Naught (6) The Excess Loss of Joint Ventures or Associated Enterprises Naught (7) The Unrecognized Commitment Related to Investment to Joint Ventures Naught 160 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 (8) Contingent Liabilities Related to Investment to Joint Ventures or Associated Enterprises Naught 4. Significant Common Operation Naught 5. Equity in the Structured Entity Excluded in the Scope of Consolidated Financial Statements Naught 6. Other Naught X. The Risk Related to Financial Instruments The financial instruments of the Company included: monetary funds, notes receivable, accounts receivable, notes receivable, accounts payable, etc. The details of each financial instrument see relevant items of Note VII. The main risks of the Company due to financial instruments were credit risk, liquidity risk and market risk. The operating management of the Company was responsible for the risk management target and the recognition of the policies. (I) Credit risk Credit risk was one party of the contract failed to fulfill the obligations and causes loss of financial assets of the other party. The credit risk the Company faced was selling on credit which leads to customer credit risk. The Company will evaluate credit risk of new customer, and set credit limit, once the balance of account receivable over credit limit, require the customer to pay or producing and delivering goods shall be approved by the management of the Company. The Company through monthly aging analysis of account receivable and monitoring the collection situation of the customer ensured the overall credit risk of the Company was in control scope. Once appear abnormal situation, the Company should conduct necessary measures to requesting the payment timely. (II) Liquidity Risk Liquidity risk is referred to their risk of incurring capital shortage when performing settlement obligation in the way of cash payment or other financial assets. The policies of the Company are to ensure that there was sufficient cash to pay the due liabilities. The liquidity risk is centralized controlled by the Financial Department of the Company. The financial department through supervising the balance of the cash and securities can be convert to cash at any time and the rolling prediction of cash flow in future 12 months to ensure the Company have sufficient cash to pay the liabilities under the case of all reasonable prediction, Each financial liability of the Company was estimated due within 1 year. (III) Market risk Market risk was referred to risk of the fair value or future cash flow of financial instrument changed due to the change of market price, including: exchange rate risk, interest rate risk and other price risk. 1. Exchange rate risk Exchange rate risk was referred to risk of possible losses due to changes of exchange rate. The exchange rate risk 161 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 undertaken by the Company was mainly generated from USD and EUR. On 30 June 2020, all assets and liabilities of the Company were balances in RMB except that the balances of assets and liabilities presented in the Note VII (82) Foreign Currency Monetary Items were in USD and EUR. The exchange rate risk generated from those balance of assets and liabilities in foreign currency might influence the running performance of the Company to some extent. The Company made efforts to avoid exchange rate risk through forward exchange settlement, improving operation management and promoting the international competitiveness of the Company, etc. 2. Interest rate risk Interest rate risk is refers to fluctuation risk of the fair value or future cash flow of financial instrument change due to the change of market price. There was no bank loan in the Company, thus no RMB benchmark interest rate changes 3. Other price risk Naught XI. The Disclosure of Fair Value 1. Ending Fair Value of Assets and Liabilities at Fair Value Unit: RMB Ending fair value Item Fair value measurement Fair value measurement Fair value measurement Total items at level 1 items at level 2 items at level 3 I. Consistent fair value -- -- -- -- measurement (I) Trading financial assets 14,850.00 657,781,609.38 657,796,459.38 1.Financial assets at fair value through profit or 657,781,609.38 657,781,609.38 loss 2. Specified as financial assets at fair value through 14,850.00 14,850.00 profit or loss (III) Other equity 1,286,422,328.32 711,571,895.07 1,997,994,223.39 instrument investment II. Inconsistent fair value -- -- -- -- measurement 2. Market Price Recognition Basis for Consistent and Inconsistent Fair Value Measurement Items at Level 1 In line with the market price of shares on the balance sheet date and forward foreign exchange rate. 162 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 3. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters for Consistent and Inconsistent Fair Value Measurement Items at Level 2 Items measured at fair value level 2 include bank's wealth management products and structured deposits, which are measured at the contractual expected yield rate as a reasonable estimate of the fair value. 4. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters for Consistent and Inconsistent Fair Value Measurement Items at Level 3 (1) Because the invested company, Xiamen Bank planned IPO and to list, significant changes have been occurred to the business environment, operation conditions and financial conditions compared to the initial investment. Refer to prospectus declaration and relative proportion between the recent issue price of similar listed banks and net assets, as well as regard the period-end portion of net assets in Xiamen Bank enjoyed by the Company as the reasonable estimation of fair value to measure. (2) Because the business environment, operation conditions and financial conditions of the invested companies, China Guangfa Bank and Foshan Fochen Expressway Development Co., Ltd. haven’t changed significantly, the Company takes investment costs as the reasonable estimation of fair value to measure. (3) Because the business environment, operation conditions and financial conditions of the invested company, Shenzhen Zhonghao (Group) Co., Ltd. were deteriorated, the Company takes zero element as the reasonable estimation of fair value to measure. 5. Sensitiveness Analysis on Unobservable Parameters and Adjustment Information between Beginning and Ending Carrying Value of Consistent Fair Value Measurement Items at Level 3 Naught 6. Explain the Reason for Conversion and the Governing Policy when the Conversion Happens if Conversion Happens among Consistent Fair Value Measurement Items at Different Levels Naught 7. Changes in the Valuation Technique in the Current Period and the Reason for Such Changes Naught 8. Fair Value of Financial Assets and Liabilities Not Measured at Fair Value Financial assets and liabilities not measured at fair value include: monetary assets, accounts receivable and accounts payable, etc. There is small difference between the carrying value of above financial assets and liabilities and fair value. 9. Other Naught 163 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 XII. Related Party and Related-party Transactions 1. Information Related to the Company as the Parent of the Company Proportion of share Proportion of voting held by the rights owned by the Name Registration place Nature of business Registered capital Company as the Company as the parent against the parent against the Company Company Hong Kong Wah Shing Holding Hong Kong Investment HKD110,000 13.47% 13.47% Company Limited Shenzhen Rising Investment RMB135.409614 Shenzhen Investment 5.12% 5.12% Development Co., million Ltd. Guangdong Electronics Guangzhou Sales & Production RMB462 million 4.85% 4.85% Information Industry Group Ltd. Rising Investment RMB200 million Development Co., Hong Kong Investment 1.82% 1.82% and HKD1 million Ltd. Guangdong Rising Finance Holding Zhuhai Investment RMB1,393 million 0.82% 0.82% Co., Ltd. Total 26.08% 26.08% Notes: Information on the Company as the parent The largest shareholder of the Company, Hong Kong Wah Shing Holding Co., Ltd., was the wholly-owned subsidiary of Electronics Group, and Electronics Group, Shenzhen Rising Investment Development Co., Ltd. (hereinafter referred to as “Shenzhen Rising”), Guangdong Rising Finance Holding Co., Ltd. (hereinafter referred to as “GD Rising Finance”) and Rising Investment Development Co., Ltd. (hereinafter referred to as “Rising Investment”) were the wholly-owned subsidiaries of Guangdong Rising Assets Management Co., Ltd. (hereinafter referred to as “Rising Company”). In line with the relevant stipulation of Corporation Law and Rules on Listed Companies Acquisition, Electronics Group, Shenzhen Rising and Rising Investment were persons acting in concert, and the Rising Company was the actual controller of the Company. As of 30 June 2020, the aforesaid persons acting in concert holding total A, B share of the Company 364,986,381 shares, 26.083 % of total share equity of the Company. The final controller of the Company was Guangdong Rising Assets Management Co., Ltd. 164 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 2. Subsidiaries of the Company Refer to Note IX Equity in Other Entities-1. Equity in Subsidiaries for details. 3. Information on the Joint Ventures and Associated Enterprises of the Company Refer to Note IX Equity in Other Entities-3. Equity in Joint Ventures or Associated Enterprises for details of significant joint ventures or associated enterprises of the Company. 4. Information on Other Related Parties Name Relationship with the Company PROSPERITY LAMPS & COMPONENTS LTD Shareholder owning over 5% shares Foshan NationStar Optoelectronics Co. Ltd. Under same actual controller Guangdong Fenghua Advanced Technology Holding Co., Ltd. Under same actual controller Guangdong Vollsun Data Solid-state Storage Co., Ltd Under same actual controller Guangdong Rising Finance Limited Under same actual controller MTM Semiconductor Equipment Co., Ltd. Under same actual controller Guangdong Electronic Technology Research Institute Under same actual controller Guangzhou Diansheng Property Management Co., Ltd. Under same actual controller Zhuhai Doumen District Yongxingsheng Environmental Under same actual controller Industrial Wastes Recycling Comprehensive Treatment Co., Ltd. Jiangmen Dongjiang Environmental Protection Technology Co., Under same actual controller Ltd. Foshan Fulong Environmental Protection Technology Co., Ltd. Under same actual controller Guangdong Guangsheng Communications Technology Co., Ltd. Under same actual controller Guangzhou Huajian Engineering Construction Co., Ltd. Under same actual controller Hangzhou Times Lighting and Electrical Co., Ltd. Company controlled by related natural person Prosperity (Hangzhou) Lighting and Electrical Co., Ltd. Company controlled by related natural person Prosperity Electrical (China) Co., Ltd. Company controlled by related natural person Company controlled by related natural person with significant OSRAM (China) Lighting Co., Ltd. influence 5. List of Related-party Transactions (1) Information on Acquisition of Goods and Reception of Labor Service Information on acquisition of goods and reception of labor service Unit: RMB 165 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 The approval trade Whether exceed trade Same period of last Related party Content Reporting Period credit credit or not year Foshan NationStar Purchase of Optoelectronics Co., 15,731,289.16 200,000,000.00 No 24,160,788.99 materials Ltd. PROSPERITY LAMPS & Purchase of 1,070,878.91 11,000,000.00 No 1,358,912.39 COMPONENTS materials LTD Guangdong Fenghua Advanced Purchase of 2,753,999.58 6,500,000.00 No 1,919,036.93 Technology Holding materials Co., Ltd. Prosperity Electrical Purchase of 118,407.08 1,000,000.00 No (China) Co., Ltd. materials Hangzhou Times Purchase of Lighting and 161,975.60 2,000,000.00 No 317,153.35 materials Electrical Co., Ltd. MTM Purchase of Semiconductor 261,855.01 equipment Equipment Co., Ltd. Guangdong Electronic Purchase of 278,761.06 1,000,000.00 No 46,551.72 Technology equipment Research Institute Zhuhai Doumen District Yongxingsheng Environmental Receiving labor 13,274.34 54,676.52 Industrial Wastes service Recycling Comprehensive Treatment Co., Ltd. Jiangmen Dongjiang Environmental Receiving labor Protection 33,309.73 service Technology Co., Ltd. Foshan Fulong Receiving labor Environmental 42,477.88 service Protection 166 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Technology Co., Ltd. Guangdong Electronic Receiving labor 3,033.63 Technology service Research Institute Total 20,207,406.97 221,500,000.00 28,118,974.91 Information of sales of goods and provision of labor service Unit: RMB Related party Content Reporting Period Same period of last year PROSPERITY LAMPS & Sale of products 9,332,663.68 11,773,638.34 COMPONENTS LTD Prosperity Electrical (China) Sale of products 11,282.10 56,974.66 Co., Ltd. Guangzhou Diansheng Property Sale of products 846.90 Management Co., Ltd. Guangdong Rising Assets Sale of products 34,336.28 Management Co., Ltd. Guangdong Electronics Information Industry Group Sale of products 8,004.42 Ltd. Guangdong Rising Communications Technology Sale of products 23,628.32 Co., Ltd. Guangzhou Huajian Engineering Construction Co., Sale of products 127,948.85 Ltd. Total 9,537,863.65 11,831,459.90 Information of sales/purchase of goods and provision/reception of labor service The pricing for related-party transactions observes the principle of market subject to the market price when the transaction happens and relevant accounts shall be paid on time based on actual transaction. (2) Information on Related-party Trusteeship/Contract Naught (3) Information on Related-party Lease The Company was lessor: Naught 167 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 The Company was lessee: Unit: RMB The lease fee confirmed in The lease fee confirmed in the Name of lessor Category of leased assets the Reporting Period same period of last year Guangdong Electronics Information Vehicles 5,699.21 Industry Group Ltd. (4) Information on Related-party Guarantee Naught (5) Information on Inter-bank Lending of Capital of Related Parties Naught (6) Information on Assets Transfer and Debt Restructuring by Related Party Naught (7) Information on Remuneration for Key Management Personnel Unit: RMB Item Reporting period Same period of last year Chairman of the Board 197,370.00 General Manager 548,526.00 707,777.02 Chairman of the Supervisory Committee 401,155.00 199,621.80 Secretary of the Board 66,667.00 Chief Financial Officer 401,155.00 407,777.02 Other 2,116,926.00 2,773,195.18 Total 3,665,132.00 4,155,038.02 (8) Other Related-party Transactions Naught 6. Accounts Receivable and Payable of Related Party (1) Accounts Receivable Unit: RMB Item Related party Ending balance Beginning balance 168 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Carrying amount Bad debt provision Carrying amount Bad debt provision Monetary Guangdong Rising capital-Interest 3,126,022.22 Finance Co., Ltd. receivable PROSPERITY LAMPS & Accounts receivable 2,082,583.52 62,477.51 3,158,126.65 94,743.80 COMPONENTS LTD Guangdong Vollsun Accounts receivable Data Solid-state 2,653,280.00 265,328.00 2,653,280.00 265,328.00 Storage Co., Ltd. OSRAM (China) Accounts receivable 117,554.16 58,777.08 117,554.16 58,777.08 Lighting Co., Ltd. Prosperity (Hangzhou) Lighting Accounts receivable 86,367.27 86,367.27 86,367.27 86,293.82 and Electrical Co., Ltd. Guangzhou Huajian Engineering Accounts receivable 144,582.20 4,337.47 Construction Co., Ltd. Foshan NationStar Prepayments Optoelectronics Co., 17,742.86 4,866.76 Ltd. Prosperity Electrical Prepayments 39,428.00 7,521.37 (China) Co., Ltd. Total 5,141,538.01 477,287.33 9,153,738.43 505,142.70 (2) Accounts Payable Unit: RMB Item Related party Ending carrying amount Beginning carrying amount Foshan NationStar Accounts payable 15,055,064.50 13,443,520.14 Optoelectronics Co., Ltd. PROSPERITY LAMPS & Accounts payable 728,943.97 COMPONENTS LTD Guangdong Fenghua Advanced Accounts payable 2,621,004.33 384,036.84 Technology Holding Co., Ltd. Hangzhou Times Lighting and Accounts payable 169,522.41 219,439.95 Electrical Co., Ltd. 169 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Prosperity Electrical (China) Accounts payable 160,759.70 Co., Ltd. PROSPERITY LAMPS & Other payables 488,822.33 COMPONENTS LTD Guangdong Electronic Other payables 210,500.00 181,700.00 Technology Research Institute Prosperity Electrical (China) Other payables 100,000.00 100,000.00 Co., Ltd. Prosperity Electrical (China) Contractual liabilities 56,438.08 52,619.26 Co., Ltd. Total 18,941,473.29 15,030,898.22 7. Commitments of Related Party (1) Commitment: commitments made in acquisition documents or shareholding alteration documents Commitment maker: Controlling shareholder Type of commitment: About avoidance of horizontal competition Contents: Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made a commitment that the elimination of the horizontal competition between Foshan Nation Star Optoelectronics Co., Ltd. and the Company through business integration or other ways or arrangements shall be completed before 4 June 2020. Date of commitment making: 3 December 2019 Term of commitment: 6 months Fulfillment: Fulfilled (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. 170 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Date of commitment making: 4 December 2015 Term of commitment: Long-standing Fulfillment: In execution (3) Commitment: commitments made in acquisition documents or shareholding alteration documents Commitment maker: Controlling shareholder Type of commitment: About reduction and regulation of related-party transactions Content: Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made a commitment that during their direct or indirect holding of the Company’s shares, they shall 1. Strictly abide by the regulatory documents of the CSRC and the SZSE, the Company’s Articles of Association, etc. and not harm the interests of the Company or other shareholders of the Company in their production and operation activities by taking advantage of their position as the controlling shareholder and actual controller; 2. make sure that they or their other controlled subsidiaries, branch offices, jointly-run or associated companies (the “Relevant Enterprises” for short) will try their best to avoid or reduce related-party transactions with the Company or the Company’s subsidiaries; 3. strictly follow the market principle of justness, fairness and equal value exchange for necessary and unavoidable related-party transactions between them and their Relevant Enterprises and the Company, and withdraw from voting when a related-party transaction with them or their Relevant Enterprises is being voted on at a general meeting or a board meeting, and execute the relevant approval procedure and information disclosure duties pursuant to the applicable laws, regulations and regulatory documents. Where the aforesaid commitments are broken and a loss is thus caused for the Company, its subsidiaries or the Company’s other shareholders, they shall be obliged to compensate. Date of commitment making: 4 December 2015 Term of commitment: Long-standing Fulfillment: In execution (4) Commitment: commitments made in acquisition documents or shareholding alteration documents Commitment maker: Controlling shareholder Type of commitment: About independence In order to ensure the independence of the Company in business, personnel, asset, organization and finance, Electronics Group and its acting-in-concert parties Shenzhen Rising Investment and Hong Kong Rising Investment have made the following commitments: 1. They will ensure the independence of the Company in business: (1) They promise that the Company will have the assets, personnel, qualifications and capabilities for it to operate independently as well as the ability of independent, sustainable operation in the market. (2) They promise not to intervene in the Company’s business activities other than the execution of their rights as the Company’s shareholders. (3) They promise that they and their related parties will not be engaged in business that is substantially in competition with the Company’s business. And (4) They promise that they and their related parties will try their best to reduce related-party transactions between them and the Company; for necessary and unavoidable related-party transactions, they promise to operate fairly following the market-oriented principle and at fair prices, and execute the transaction procedure and the duty of information disclosure pursuant to the applicable laws, regulations and regulatory documents. 2.They will ensure the independence of the Company in personnel: (1) They promise that the Company’s GM, deputy GMs, CFO, Company Secretary and other senior management personnel will work only for and receive remuneration from the Company, not holding any positions in them or their other controlled subsidiaries other than director and supervisor. (2) They promise the Company’s absolute independence from their related parties in labor, human resource and salary management. And (3) They 171 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 promise to follow the legal procedure in their recommendation of directors, supervisors and senior management personnel to the Company and not to hire or dismiss employees beyond the Company’s Board of Directors and General Meeting. 3. They will ensure the independence and completeness of the Company in asset: (1) They promise that the Company will have a production system, an auxiliary production system and supporting facilities for its operation; legally have the ownership or use rights of the land, plants, machines, trademarks, patents and non-patented technology in relation to its production and operation; and have independent systems for the procurement of raw materials and the sale of its products. (2) They promise that the Company will have independent and complete assets all under the Company’s control and independently owned and operated by the Company. And (3) They promise that they and their other controlled subsidiaries will not illegally occupy the Company’s funds and assets in any way, or use the Company’s assets to provide guarantees for the debts of themselves or their other controlled subsidiaries with. 4. They will ensure the independence of the Company in organization: (1) They promise that the Company has a sound corporate governance structure as a joint-stock company with an independent and complete organization structure. (2) They promise that the operational and management organs within the Company will independently execute their functions according to laws, regulations and the Company’s Articles of Association. 5. They will ensure the independence of the Company in finance: (1) They promise that the Company will have an independent financial department and financial accounting system with normative, independent financial accounting rules. (2) They promise that the Company will have independent bank accounts and not share bank accounts with its related parties. (3) They promise that the Company’s financial personnel do not hold concurrent positions in its related parties. (4) They promise that the Company will independently pay its tax according to law. And (5) They promise that the Company can make financial decisions independently and that they will not illegally intervene in the Company’s use of its funds. Date of commitment making: 4 December 2015 Term of commitment: Long-standing Fulfillment: In execution 8. Other Naught XIII. Stock Payment 1. The Overall Situation of Stock Payment □Applicable √ Not applicable 2. The Stock Payment Settled in Equity □Applicable √ Not applicable 3. The Stock Payment Settled in Cash □Applicable √ Not applicable 172 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 4. Modification and Termination of the Stock Payment Naught 5. Other Naught XIV. Commitments and Contingency 1. Significant Commitments Significant commitments on the balance sheet date Naught 2. Contingency (1) Significant Contingency on Balance Sheet Date Naught (2) In Despite of no Significant Contingency to Disclose, the Company Shall Also Make Relevant Statements There was no significant contingency in the Company. 3. Other Naught XV. Events after Balance Sheet Date 1. Significant Non-adjusted Events Naught 2. Profit Distribution Naught 3. Sales Return Naught 173 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 4. Note to Other Events after Balance Sheet Date Naught XVI. Other Significant Events 1. The Accounting Errors Correction in Previous Period Naught 2. Debt Restructuring Naught 3. Assets Replacement Naught 4. Pension Plan Naught 5. Discontinued Operations Naught 6. Segment Information Naught 7. Other Significant Transactions and Events with Influence on Investors’ Decision-making Naught 8. Other Naught XVII. Notes of Main Items in the Financial Statements of the Company as the Parent 1. Notes Receivable (1) Category of Notes Receivable Unit: RMB 174 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Ending balance Beginning balance Carrying amount Bad debt provision Carrying amount Bad debt provision Item Withdra Withdraw Carrying Carrying Proportio wal Proportio al Amount Amount value Amount Amount value n proportio n proportio n n Accounts receivable for which bad debt 23,377,2 16,266,8 7,110,413 23,377,22 16,266,81 7,110,413.5 3.14% 69.58% 3.27% 69.58% provision separately 23.66 10.09 .57 3.66 0.09 7 accrued Of which: Accounts receivable for which bad debt 721,482, 33,242,4 688,239,6 691,130,6 32,134,19 658,996,41 96.86% 4.61% 96.73% 4.65% provision accrued 087.55 53.81 33.74 12.31 3.35 8.96 by group Of which: 744,859, 49,509,2 695,350,0 714,507,8 48,401,00 666,106,83 Total 100.00% 6.65% 100.00% 6.77% 311.21 63.90 47.31 35.97 3.44 2.53 Individual withdrawal of bad debt provision by single item: Unit: RMB Ending balance Name Carrying amount Bad debt provision Withdrawal proportion Reason for withdrawal Involved in the lawsuit; the Company won in the Customer A 14,220,827.14 7,110,413.57 50.00% first instance judgment and the other side had appealed Involving lawsuit and Customer B 9,156,396.52 9,156,396.52 100.00% having a long account age Total 23,377,223.66 16,266,810.09 -- -- Withdrawal of bad debt provision by group: Unit: RMB Ending balance Name Carrying amount Bad debt provision Withdrawal proportion Credit risk 721,482,087.55 33,242,453.81 4.61% Total 721,482,087.55 33,242,453.81 -- Please refer to the relevant information of disclosure of bad debt provision of other accounts receivable if 175 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 adopting the general mode of expected credit loss to withdraw bad debt provision of accounts receivable. □ Applicable √ Not applicable Disclosure by aging Unit: RMB Aging Ending balance Within 1 year (including 1 year) 654,876,679.26 1 to 2 years 48,408,562.02 2 to 3 years 12,364,264.57 Over 3 years 29,209,805.36 3 to 4 years 15,515,563.07 4 to 5 years 1,781,966.16 Over 5 years 11,912,276.13 Total 744,859,311.21 (2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Information of withdrawal of bad debt provision: Unit: RMB Changes in the Reporting Period Beginning Category Reversal or Ending balance balance Withdrawal Write-off Other recovery Accounts 48,401,003.44 1,108,377.31 116.85 49,509,263.90 receivable Total 48,401,003.44 1,108,377.31 116.85 49,509,263.90 Of which bad debt provision recovered or reversed with significant amount during the Reporting Period: Naught (3) Particulars of the Actual Verification of Accounts Receivable during the Reporting Period Unit: RMB Item Amount Other driblet small amount 116.85 Total 116.85 (4) Top 5 of the Ending Balance of the Accounts Receivable Collected according to Arrears Party Unit: RMB Name Ending balance of accounts Proportion to total ending Ending balance of bad debt 176 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 receivable balance of accounts receivable provision No. 1 71,743,804.40 9.63% 2,152,314.13 No. 2 38,317,669.82 5.14% 1,149,530.09 No. 3 32,005,878.73 4.30% 960,176.36 No. 4 15,809,222.09 2.12% 2,071,199.65 No. 5 15,400,628.68 2.07% 462,018.86 Total 173,277,203.72 23.26% (5) Derecognition of Accounts Receivable due to the Transfer of Financial Assets Naught (6) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Accounts Receivable Naught 2. Other Receivables Unit: RMB Item Ending balance Beginning balance Other receivables 46,389,136.26 37,934,614.96 Total 46,389,136.26 37,934,614.96 (1) Interest Receivable Naught (2) Dividends Receivable Naught (3) Other Receivables 1) Other Receivables Classified by Accounts Nature Unit: RMB Nature Ending carrying amount Beginning carrying amount Internal business group 17,767,942.21 17,624,135.10 VAT export tax refunds 12,598,007.93 8,154,485.23 177 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Performance bond 3,939,060.80 3,231,331.10 Borrowings and petty cash for employees 6,501,149.15 5,436,926.32 Rental fees and water & electricity fees 2,351,406.74 1,476,056.29 Other 5,556,622.77 3,896,155.29 Total 48,714,189.60 39,819,089.33 2) Withdrawal of Bad Debt Provision Unit: RMB First stage Second stage Third stage Expected loss in the Expected loss in the Bad debt provision Expected credit loss Total duration (credit impairment duration (credit impairment of the next 12 months not occurred) occurred) Balance of 1 January 532,610.02 1,351,864.35 1,884,474.37 2020 Balance of 1 January 2020 in the Current —— —— —— —— Period Withdrawal of the 199,335.37 241,243.60 440,578.97 Current Period Balance of 30 June 2020 731,945.39 1,593,107.95 2,325,053.34 Changes of carrying amount with significant amount changed of loss provision in the current period □ Applicable √ not applicable Disclosure by aging Unit: RMB Aging Ending balance Within 1 year (including 1 year) 39,613,560.27 1 to 2 years 5,405,928.44 2 to 3 years 2,879,206.93 Over 3 years 815,493.96 3 to 4 years 458,195.27 4 to 5 years 50,000.00 Over 5 years 307,298.69 Total 48,714,189.60 178 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 3) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Information of withdrawal of bad debt provision Unit: RMB Changes in the Reporting Period Beginning Category Reversal or Ending balance balance Withdrawal Write-off Other recovery Other accounts 1,884,474.37 440,578.97 2,325,053.34 receivable Total 1,884,474.37 440,578.97 2,325,053.34 Of which bad debt provision recovered or reversed with significant amount during the Reporting Period: Naught 4) Particulars of the Actual Verification of Other Receivables during the Reporting Period Naught 5) Top 5 of the Ending Balance of Other Receivables Collected according to the Arrears Party Unit: RMB Proportion to total Ending balance of Name of the entity Nature Ending balance Aging ending balance of bad debt provision other receivables% No. 1 Export rebates 12,598,007.93 Within 1 years 25.86% 377,940.24 Internal business Within 3 year No. 2 12,423,925.40 25.50% group Internal business Within 1 year No. 3 4,959,398.59 10.18% group No. 4 Other 1,888,515.60 Within 4 years 3.88% 534,299.21 No. 5 Social insurance 1,098,556.32 Within 1 years 2.26% 32,956.69 Total -- 32,968,403.84 -- 67.68% 945,196.14 6) Accounts Receivable Involving Government Grants Naught 7) Derecognition of Other Receivables due to the Transfer of Financial Assets Naught 179 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 8) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Other Receivables Naught 3. Long-term Equity Investment Unit: RMB Ending balance Beginning balance Item Depreciation Depreciation Carrying amount Carrying value Carrying amount Carrying value reserve reserve Investment to 283,793,102.26 283,793,102.26 283,793,102.26 283,793,102.26 subsidiaries Investment to joint ventures and 183,738,416.82 183,738,416.82 181,093,725.43 181,093,725.43 associated enterprises Total 467,531,519.08 467,531,519.08 464,886,827.69 464,886,827.69 (1) Investment to Subsidiaries Unit: RMB Beginning Increase/decrease Ending balance balance Depreciation Ending balance Investee Additional Reduced of depreciation (carrying reserves Other (carrying value) investment investment reserve value) withdrawn Foshan Chansheng 2,744,500.00 2,744,500.00 Electronic Ballast Co., Ltd. FSL Chanchang Optoelectronics 82,507,350.00 82,507,350.00 Co., Ltd. Foshan Taimei Times Lamps 350,000.00 350,000.00 and Lanterns Co., Ltd. Nanjing Fozhao Lighting 72,000,000.00 72,000,000.00 Components Manufacturing 180 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Co., Ltd. Foshan Electrical & Lighting 35,418,439.76 35,418,439.76 (Xinxiang) Co., Ltd. Guangdong Fozhao New Light Sources 50,077,000.00 50,077,000.00 Technology Co., Ltd. Foshan Lighting Lamps & 15,000,000.00 15,000,000.00 Components Co., Ltd. FSL Zhida Electric 25,500,000.00 25,500,000.00 Technology Co., Ltd. FSL Lighting 195,812.50 195,812.50 GMBH 283,793,102.2 Total 283,793,102.26 6 (2) Investment to Joint Ventures and Associated Enterprises Unit: RMB Increase/decrease Ending Gains and Adjustme Beginnin Cash Withdraw Ending balance Additiona losses nt of g balance Reduced Changes bonus or al of balance of Investee l recognize other (carrying investmen of other profits impairme Other (carrying depreciati investmen d under comprehe value) t equity announce nt value) on t the equity nsive d to issue provision reserve method income I. Joint ventures II. Associated enterprises Shenzhen Primatron 181,093,7 4,725,081 2,080,390 183,738,4 ix 25.43 .89 .50 16.82 (Nanho) Electronic 181 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 s Ltd. 181,093,7 4,725,081 2,080,390 183,738,4 Subtotal 25.43 .89 .50 16.82 181,093,7 4,725,081 2,080,390 183,738,4 Total 25.43 .89 .50 16.82 (3) Other Notes Naught 4. Operating Revenue and Cost of Sales Unit: RMB Reporting Period Same period of last year Item Operating revenue Cost of sales Operating revenue Cost of sales Main business 1,364,657,069.47 1,068,734,161.29 1,587,821,567.72 1,245,016,649.64 Other business 58,327,006.37 45,523,697.25 47,837,600.24 39,394,932.17 Total 1,422,984,075.84 1,114,257,858.54 1,635,659,167.96 1,284,411,581.81 Information related to transaction value assigned to residual performance obligations: The amount of revenue corresponding to performance obligations of contracts signed but not performed or not fully performed yet was RMB0.00 at the period-end. 5. Investment Income Unit: RMB Item Reporting Period Same period of last year Long-term equity investment income 4,725,081.89 784,711.98 accounted by equity method Investment income from disposal of 330,228.20 long-term equity investment Investment income from holding of trading 1,750,000.00 financial assets Investment income from disposal of trading 13,550,000.00 financial assets Dividend income from holding of other 14,940,422.96 13,957,444.99 equity instrument investment Investment income from financial products 15,454,650.86 14,528,002.77 and structural deposits Other 1,023,100.00 -730,500.00 182 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Total 36,143,255.71 44,169,887.94 6. Other Naught XVIII. Supplementary Materials 1. Items and Amounts of Non-recurring Profit or Loss √ Applicable □ Not applicable Unit: RMB Item Amount Note Gains/losses on the disposal of non-current -653,096.79 assets Government grants recognized in the current period, except for those acquired in the ordinary course of business or granted at 2,920,648.00 certain quotas or amounts according to the government’s unified standards Gain/loss from change of fair value of trading financial assets and liabilities, derivative financial assets and liabilities, and investment gains from disposal of trading financial assets and liabilities, derivative -1,532,350.00 financial assets and liabilities, and investment in other debt obligations, other than valid hedging related to the Company’s common businesses Other non-operating income and expenses 241,184.67 other than the above Less: Income tax effects 336,596.67 Non-controlling interests effects 13,177.38 Total 626,611.83 -- Explain the reasons if the Company classifies an item as an non-recurring gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurring Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item □ Applicable √ Not applicable 183 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 2. Return on Equity and Earnings Per Share EPS (Yuan/share) Profit as of Reporting Period Weighted average ROE (%) EPS-basic EPS-diluted Net profit attributable to ordinary 2.94% 0.1080 0.1080 shareholders of the Company Net profit attributable to ordinary shareholders of the Company after 2.92% 0.1075 0.1075 deduction of non-recurring profit or loss 3. Differences between Accounting Data under Domestic and Overseas Accounting Standards (1) Differences of Net Profit and Net Assets Disclosed in Financial Reports Prepared under International and Chinese Accounting Standards □ Applicable √ Not applicable (2) Differences of Net profit and Net assets Disclosed in Financial Reports Prepared under Overseas and Chinese Accounting Standards □ Applicable √ Not applicable (3) Explain Reasons for the Differences between Accounting Data under Domestic and Overseas Accounting Standards; for any Adjustment Made to the Difference Existing in the Data Audited by the Foreign Auditing Agent, Such Foreign Auditing Agent’s Name Shall Be Clearly Stated Naught 4. Other Naught 184 Foshan Electrical and Lighting Co., Ltd. Interim Report 2020 Part XII Documents Available for Reference 1. The financial statements signed and stamped by the Company’s legal representative, General Manager and Chief Financial Officer. 2. The originals of all the Company’s announcements and documents disclosed to the public during the Reporting Period on the media designated by the CSRC for information disclosure. The Board of Directors Foshan Electrical and Lighting Co., Ltd. 27 August 2020 185