Nanjing Putian Telecommunications Co., Ltd.
Consolidated balance sheet as at June 30, 2018
(Expressed in Renminbi Yuan)
|||
|-|-|
|NoteNo.|Closing balance|
|1234567891011121314|229,753,501.3430,493,288.75882,369,626.89206,155,009.3342,136,776.14348,787,164.3822,084,720.051,761,780,086.88741,953.00187,187,732.1312,436,912.05111,442,156.953,940,454.7230,543,370.002,584,659.96348,877,238.81|
||2,110,657,325.69|

Nanjing Putian Telecommunications Co., Ltd.
Consolidated balance sheet as at June 30, 2018 (continued)
|||
|-|-|
|Note No.|Closing balance|
|151617181920212223242526272829|447,510,000.0086,064,736.10709,927,684.11305,508,384.0219,956,577.6610,581,322.26460,593.191,692,213.3855,733,308.841,637,434,819.564,867,153.004,867,153.001,642,301,972.56215,000,000.00185,374,533.85-4,251,665.75589,559.77-57,007,697.24339,704,730.64128,650,622.50468,355,353.13|
||2,110,657,325.69|

Nanjing Putian Telecommunications Co., Ltd.
Parent company balance sheet as at June 30, 2018
(Expressed in Renminbi Yuan)
||||
|-|-|-|
||NoteNo.|Closing balance|
|Current assets:|123|131,149,266.499,420,178.00438,085,618.02182,617,525.35247,983,945.47203,410,015.2814,360,717.441,227,027,266.05741,953.00356,024,381.3352,104,507.773,213,787.8812,788,775.672,415,655.96427,289,061.61|
|Cash and bank balances|||
|Financial assets at fair value through profit or|||
|loss|||
|Derivative financial assets|||
|Notes receivable|||
|Accounts receivable|||
|Advances paid|||
|Interest receivable|||
|Dividend receivable|||
|Other receivables|||
|Inventories|||
|Assets classified as held-for-sale|||
|Non-current assets due within one year|||
|Other current assets|||
|Total current assets|||
|Available-for-sale financial assets|||
|Held-to-maturity investments|||
|Long-term receivable|||
|Long-term equity investments|||
|Investment property|||
|Fixed assets|||
|Construction in progress|||
|Construction materials|||
|Fixed assets disposal|||
|Productive biological assets|||
|Oil & gas assets|||
|Intangible assets|||
|Development expenditures|||
|Goodwill|||
|Long-term prepayments|||
|Deferred tax assets|||
|Other non-current assets|||
|Total non-current assets|||
|Total assets||1,654,316,327.66|

Nanjing Putian Telecommunications Co., Ltd.
Parent company balance sheet as at June 30, 2018 (continued)
(Expressed in Renminbi Yuan)
||||
|-|-|-|
||NoteNo.|Closing balance|
|||336,000,000.0086,064,736.10335,068,651.52284,002,513.528,538,543.972,668,681.57396,333.33417,182,955.061,469,922,415.071,469,922,415.07215,000,000.00172,417,299.81589,559.76-203,612,946.98184,393,912.59|
|Share capital|||
|Other equity instruments|||
|Including: Preferred shares|||
|Perpetual bonds|||
|Capital reserve|||
|Less: Treasury shares|||
|Other comprehensive income|||
|Special reserve|||
|Surplus reserve|||
|Undistributed profit|||
|Total equity|||
|Total liabilities & equity||1,654,316,327.66|

Nanjing Putian Telecommunications Co., Ltd.
Consolidated income statement for the year ended June 30, 2018
(Expressed in Renminbi Yuan)
||||
|-|-|-|
||NoteNo.|Current periodcumulative|
||11|966,850,604.95966,850,604.951,006,737,060.12824,358,695.325,664,250.5479,696,183.6483,788,682.0710,198,465.393,030,783.16407,793.10407,793.1030,156,818.805,799,343.86-3,522,499.412,825,854.15308,586.00-1,005,231.261,646,117.70-2,651,348.96-2,651,348.96-10,421,705.607,770,356.64-135,607.00-122,046.30-122,046.30-122,046.30-13,560.70-2,786,955.96-10,543,751.907,756,795.94-0.05-0.05|
|Interest proceeds|||
|Premium earned|||
|Revenue from handling charges and commission|||
||2||
||2||
|Interest expenses|||
|Handling charges and commission expenditures|||
|Surrender value|||
|Net payment of insurance claims|||
|Net provision of insurance policy reserve|||
|Premium bonus expenditures|||
|Reinsurance expenses|||
|Taxes & surcharge for operations|345678||
|Selling expenses|||
|Administrative expenses|||
|Financial expense|||
|Assets impairment loss|||
|Add: Gains on changes in fair value (or less: losses)|||
|Investment income (or less: losses)|||
|Including: Investment income from associates and joint ventures|||
|Gains on asset disposal (or less: losses)|9||
|Gains on foreign exchange (or less: losses)|||
|Other income|10||
|Add: Non-operating revenue|1112||
|Including: Gains on disposal of non-current assets|||
|Less: Non-operating expenditures|||
|Including: Losses on disposal of fixed assets|||
||14||
|Less: Income tax|||
|1. Net profit attributable to owners of parent company (or less: net loss)|||
|2. Non-controlling interest (or less: net loss)|||
||15||

Nanjing Putian Telecommunications Co., Ltd.
Parent company income statement for the year ended June 30, 2018
(Expressed in Renminbi Yuan)
|||
|-|-|
|Note No.|Current periodcumulative|
|11|497,806,967.24461,016,015.392,188,404.3633,623,765.0632,847,514.9710,288,228.051,674,589.82407,793.10407,793.1018,909,015.41876,429.06-23,638,312.841,994,545.83210,933.46-21,854,700.47-21,854,700.47-21,854,700.47-21,854,700.47-0.10-0.10|
|2||

Nanjing Putian Telecommunications Co., Ltd.
Consolidated cash flow statement for the year ended June 30, 2018
|||
|-|-|
|NoteNo.|Current periodcumulative|
|12|823,226,257.293,751,204.5937,651,747.79864,629,209.67795,841,324.87134,614,701.2943,357,641.42116,090,771.021,089,904,438.60-225,275,228.93197,567.2030,244,870.0030,442,437.207,937,241.377,937,241.3722,505,195.832,169,200.002,169,200.00266,510,000.00268,679,200.00206,550,000.0013,087,901.032,169,200.00219,637,901.0349,041,298.97-92,357.05-153,821,091.18311,056,919.17157,235,827.99|

Nanjing Putian Telecommunications Co., Ltd.
Parent company cash flow statement for the year ended June 30, 2018
(Expressed in Renminbi Yuan)
||||
|-|-|-|
||NoteNo.|Current periodcumulative|
|I. Cash flows from operating activities:|||
|Cash receipts from sale of goods and rendering of services||348,436,329.15226,972.0768,779,821.99417,443,123.21372,154,435.2753,879,491.4611,331,804.5760,181,711.77497,547,443.07-80,104,319.86197,567.2018,187,870.0018,385,437.206,483,699.116,483,699.1111,901,738.09192,000,000.00192,000,000.00165,000,000.009,668,959.87174,668,959.8717,331,040.13-50,871,541.64109,752,099.2958,880,557.65|
|Receipts of tax refund|||
|Other cash receipts related to operating activities|||
|Subtotal of cash inflows from operating activities|||
|VI. Closing balance of cash and cash equivalents|||

Nanjing Putian Telecommunications Co., Ltd.
Consolidated statement of changes in equity for the year ended June 30, 2018
(Expressed in Renminbi Yuan)
Current period cumulative
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Equity attributable to parent company|||||||||||Non-controllinginterest|
|Share capital|Other equity instruments|||Capital reserve|Less:treasuryshares|Othercomprehensiveincome|Specialreserve|Surplusreserve|Generalriskreserve|Undistributed profit||
||Preferredshares|Perpetualbonds|Others|||||||||
|215,000,000.00||||185,374,533.85||-4,129,619.45||589,559.77||-44,605,902.63|120,893,826.56|
|||||||||||-1,980,089.01||
|215,000,000.00||||185,374,533.85||-4,129,619.45||589,559.77||-46,585,991.64|120,893,826.56|
|||||||-122,046.30||||-10,421,705.60|7,756,795.94|
|||||||-122,046.30||||-10,421,705.60|7,756,795.94|
||||||||||||2,169,200.00|
||||||||||||2,169,200.00|
||||||||||||-2,169,200.00|
||||||||||||-2,169,200.00|
|215,000,000.00||||185,374,533.85||-4,251,665.75||589,559.77||-57,007,697.24|128,650,622.50|

Nanjing Putian Telecommunications Co., Ltd.
Consolidated statement of changes in equity for the year ended June 30, 2018 (continued)
(Expressed in Renminbi Yuan)
Preceding period comparative
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Equity attributable to parent company|||||||||||Non-controllinginterest|
|Share capital|Other equity instruments|||Capital reserve|Less:treasuryshares|Othercomprehensiveincome|Specialreserve|Surplusreserve|Generalriskreserve|Undistributedprofit||
||Preferredshares|Perpetualbonds|Others|||||||||
|215,000,000.00||||185,374,533.85||-4,634,605.50||589,559.76||-56,491,072.91|112,578,132.06|
|||||||||||922,223.51|681,444.01|
|215,000,000.00||||185,374,533.85||-4,634,605.50||589,559.76||-55,568,849.40|113,259,576.07|
|||||||-148,053.34||||-13,246,723.63|4,644,496.06|
|||||||-148,053.34||||-13,246,723.63|4,644,496.06|
|215,000,000.00||||185,374,533.85||-4,782,658.84||589,559.76||-68,815,573.03|117,904,072.13|

Nanjing Putian Telecommunications Co., Ltd.
Parent company statement of changes in equity for the year ended June 30, 2018
(Expressed in Renminbi Yuan)
Current period cumulative
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Share capital|Other equity instruments|||Capital reserve|Less: treasuryshares|Othercomprehensiveincome|Specialreserve|Surplus reserve|Undistributedprofit|
||Preferredshares|Perpetualbonds|Others|||||||
|215,000,000.00||||172,417,299.81||||589,559.76|-179,778,157.50|
||||||||||-1,980,089.01|
|215,000,000.00||||172,417,299.81||||589,559.76|-181,758,246.51|
||||||||||-21,854,700.47|
||||||||||-21,854,700.47|
|215,000,000.00||||172,417,299.81||||589,559.76|-203,612,946.98|

Nanjing Putian Telecommunications Co., Ltd.
Parent company statement of changes in equity for the year ended June 30, 2018 (continued)
(Expressed in Renminbi Yuan)
Preceding period comparative
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Share capital|Other equity instruments|||Capital reserve|Less:treasuryshares|Othercomprehensiveincome|Specialreserve|Surplus reserve|Undistributed profit|
||Preferredshares|Perpetualbonds|Others|||||||
|215,000,000.00||||172,417,299.81||||589,559.76|-188,427,625.86|
||||||||||-1,122,108.50|
|215,000,000.00||||172,417,299.81||||589,559.76|-189,549,734.36|
||||||||||-22,356,207.68|
||||||||||-22,356,207.68|
|215,000,000.00||||172,417,299.81||||589,559.76|-211,905,942.04|

[LiLinzhen] [CaoXurong] [GaoWen]
[Legalrepresentative] [Officer in charge ofaccounting] [Head of accountingdepartment]
(Signature and stamp) (Signature and stamp) (Signature and stamp)
Nanjing Putian Telecommunications Co., Ltd.
Notes to Financial Statements
Semi-annual Report 2018
Monetary unit: RMB Yuan I. Company profile
Nanjing Putian Telecommunications Co., Ltd. (the “Company”), whose predecessor is邮电部南京通信设备厂 (Nanjing Telecommunication Facility
Factory*),
was established as a limited liability company (by shares) through financing under the approval of National Economic Institutional Reform Commission with document of approval numbered TGS[1997] 28 dated March 21, 1997. The Company is headquartered in Nanjing City, Jiangsu Province. Currently it holds a business license with unified social credit code of 91320000134878054G, with registered capital of 215,000,000.00 yuan, total share of 215,000,000.00 shares, with par value of 1 yuan per share. Among them, 115,000,000 shares are state-owned legal person shares, and 100,000,000 shares are B shares. The Company was listed on the Shenzhen Stock Exchange on May 22, 1997 and its stocks has been suspended on May 11, 2017 when receiving the decision of the Shenzhen stock exchange to suspend the listing of the shares of Nanjing Putian Telecommunications Co., LTD. (Shenzhen Certificate No. 294, 2017)
The Company belongs to telecommunication equipment manufacture industry and is mainly engaged inR&D, production, and sale of data, wire and wireless telecommunication equipment, distribution and allocation of layout of telecommunication product, multimedia computer, digital television, vehicle electronics and conference video system. The main services rendered by the Company include installation and maintenance equipment, communication information network and computer information system projects design, and systems integration and related consultancy service.
The financial statements have been deliberated and approved for issue by the
13th
meeting of the 7th
session of the Board of Directors dated August 24, 2018.
The Company has brought 11 subsidiaries including南京南方电讯有限公司 (Nanjing South Telecommunications CompanyLimited*),南京普天天纪楼宇智能有限公司 (Nanjing Putian Telege Intelligent BuildingLtd.*) and南京曼奈柯斯电器有限公司 (Nanjing Mennekes Electrics Co.,Ltd.*) etc. into the consolidated scope. Please refer to notes to changes in the consolidated scope and interest in other entities for details.
II. Preparation basis of the financial statements
* The English names are for identification purpose only.
(I) Preparation basis
The financial statements have been prepared on the basis of going concern.
(II) Assessment of the ability to continue as a going concern
The Company has no events or conditions that may cast significant doubts upon theCompany’s ability to continue as a going concern within the 12 months after the balance sheet date.
III. Significant accounting policies and estimates
Important note:
The Company has set up accounting policies and estimates on transactions or events such as provision for bad debts of receivables, depreciation of fixed assets, amortization of intangible assets, and revenue recognition, etc. based on theCompany’s actual production and operation features.
(I) Statement of compliance
The financial statements have been prepared in accordance with the requirements of China Accounting Standards for Business Enterprises (CASBEs), and present truly and completely the financial position, results of operations and cash flows of the Company.
(II) Accounting period
The accounting year of the Company runs from January 1 to December 31 under the Gregorian calendar.
(III) Operating cycle
The Company has a relatively short operating cycle for its business, an asset or a liability is classified as current if it is expected to be realized or due within 12 months.
(IV) Functional currency
TheCompany’s functional currency is Renminbi (RMB) Yuan.
(V) Accounting treatments of business combination under and not under common control
1. Accounting treatment of business combination under common control
Assets and liabilities arising from business combination are measured at carrying amount of the combined party included in the consolidated financial statements of the ultimate controlling party at the combination date. Difference between carrying amount of the equity of the combined party included in the consolidated financial statements of the ultimate controlling party and that of the combination consideration or total par value of shares issued is adjusted to capital reserve, if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings.
2. Accounting treatment of business combination not under common control
When combination cost is in excess of the fair value of identifiable net assets obtained from the acquiree at the acquisition date, the excess is recognized as goodwill; otherwise, the fair value of
identifiable assets, liabilities and contingent liabilities, and the measurement of the combination cost are reviewed, then the difference is recognized in profit or loss.
(VI) Compilation method of consolidated financial statements
The parent company brings all its controlled subsidiaries into its consolidation scope. The consolidated financial statements are compiled by the parent company according to “CASBE 33 - Consolidated Financial Statements”, based on relevant information and the financial statements of the parent company and its subsidiaries.
(VII) Classification of joint arrangements and accounting treatment of joint operations
1. Joint arrangements include joint operations and joint ventures.
2. When the Company is a joint operator of a joint operation, it recognizes in relation to its interest in a joint operation:
(1) its assets, including its share of any assets held jointly;
(2) its liabilities, including its share of any liabilities incurred jointly;
(3) its revenue from the sale of its share of the output arising from the joint operation;
(4) its share of the revenue from the sales of the output by the joint operation; and
(5) its expenses, including its share of any expenses incurred jointly.
(VIII) Recognition criteria of cash and cash equivalents
Cash as presented in cash flow statement refers to cash on hand and deposit on demand for payment. Cash equivalents refer to short-term, highly liquid investments that can be readily converted to cash and that are subject to an insignificant risk of changes in value.
(IX) Foreign currency translation
1. Translation of transactions denominated in foreign currency
Transactions denominated in foreign currency are translated into RMB yuan at the spot exchange rate at the transaction date at initial recognition. At the balance sheet date, monetary items denominated in foreign currency are translated at the spot exchange rate at the balance sheet date with difference, except for those arising from the principal and interest of exclusive borrowings eligible for capitalization, included in profit or loss; non-cash items carried at historical costs are translated at the spot exchange rate at the transaction date, with its RMB amount unchanged; non-cash items carried at fair value in foreign currency are translated at the spot exchange rate at the date when the fair value was determined, with difference included in profit or loss or other comprehensive income.
2. Translation of financial statements measured in foreign currency
The assets and liabilities in the balance sheet are translated into RMB at the spot rate at the balance sheet date; the equity items, other than undistributed profit, are translated at the spot rate
at the transaction date; the revenues and expenses in the income statement are translated into RMB at the spot exchange rate at the transaction date. The difference arising from foreign currency translation is included in other comprehensive income.
(X) Financial instruments
1. Classification of financial assets and financial liabilities
Financial assets are classified into the following four categories when initially recognized: financial assets at fair value through profit or loss (including held-for-trading financial assets and financial assets designated at initial recognition as at fair value through profit or loss), held-to-maturity investments, loans and receivables, and available-for-sale financial assets.
Financial liabilities are classified into the following two categories when initially recognized: financial liabilities at fair value through profit or loss (including held-for-trading financial liabilities and financial liabilities designated at initial recognition as at fair value through profit or loss), and other financial liabilities.
2. Recognition criteria, measurement method and derecognition condition of financial assets and financial liabilities
When the Company becomes a party to a financial instrument, it is recognized as a financial asset or financial liability. The financial assets and financial liabilities initially recognized by the Company are measured at fair value; for the financial assets and liabilities at fair value through profit or loss, the transaction expenses thereof are directly included in profit or loss; for other categories of financial assets and financial liabilities, the transaction expenses thereof are included into the initially recognized amount.
The Company measures its financial assets at fair value subsequent to initial recognition, and does not deduct the transaction expenses that may occur when it disposes of the said financial asset in the future. However, those under the following circumstances are excluded: (1) the held-to-maturity investments, loans and receivables are measured at amortized costs using effective interest method; (2) the equity instrument investments for which there is no quotation in the active market and whose fair value cannot be measured reliably, and the derivative financial assets which are connected with the said equity instrument and must be settled by the delivery of the said equity instrument are measured at their costs.
The Company measures its financial liabilities at the amortized costs using effective interest method, with the exception of those under the following circumstances: (1) for the financial liabilities at fair value through profit or loss, they are measured at fair value, and none of the transaction expenses may be deducted, which may occur when the financial liabilities are settled in the future; (2) for the derivative financial liabilities, which are connected to the equity instrument for which there is no quotation in the active market and whose fair value cannot be reliably measured, and which must be settled by the delivery of the equity instrument, they are
measured at their costs; (3) for the financial guarantee contracts which are not designated as a financial liability at fair value through profit or loss, and for the commitments to grant loans which are not designated as at fair value through profit or loss and which will enjoy an interest rate lower than that of the market, they are measured subsequent to initial recognition at the higher of the following two items 1) The amount as determined according to “CASBE13 - Contingencies”; 2) the surplus after accumulative amortization as determined according to “CASBE14 - Revenues”.
The gains or losses arising from changes in fair value of financial assets or financial liabilities, if not related to hedging, are measured with the following methods: (1) Gains or losses, arising from the changes in fair value of financial asset or liability at its fair value through profit or loss, is included in gains or losses on changes in fair value; interests or cash dividends gained during the asset-holding period are recognized as investment income; when disposing of the assets, investment income is recognized at the difference between the actual amount received and the initial recorded amount, at the same time, gains or losses on changes in fair value are adjusted accordingly. (2) For available-for-sale financial asset, changes in fair value are recorded as other comprehensive income during the holding period, interests measured at effective interest method are recorded as investment income; cash dividends from available-for-sale equity instrument investment are recognized as investment income at the date of dividend declaration; when disposing of the assets, investment income is recognized at the difference between the actual amount received and the book value deducting the accumulative amount of changes in fair value originally included in other comprehensive.
Financial assets are derecognized when the contractual rights for collecting the cash flow of the said financial assets expire or substantially all risks and rewards related to the said financial assets have been transferred. Only when the underlying present obligations of a financial liability are relieved totally or partly may the financial liability be derecognized accordingly.
3. Recognition criteria and measurement method of financial assets transfer
Where the Company has transferred substantially all of the risks and rewards related to the ownership of the financial asset to the transferee, it derecognizes the financial asset. If it retained substantially all of the risks and rewards related to the ownership of the financial asset, it continues recognizing the financial asset, and the consideration received is recognized as a financial liability. Where the Company does not transfer or retain substantially all of the risks and rewards related to the ownership of a financial asset, it is dealt with according to the circumstances as follows respectively: (1) if the Company gives up its control over the financial asset, it derecognizes the financial asset; (2) if the Company does not give up its control over the financial asset, according to the extent of its continuing involvement in the transferred financial asset, it recognizes the related financial asset and recognizes the relevant liability accordingly.
If the transfer of an entire financial asset satisfies the conditions for derecognition, the difference between the amounts of the following two items are included in profit or loss: (1) the book value
of the transferred financial asset; (2) the sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally included in equity. If the transfer of financial asset partially satisfies the conditions to derecognition, the entire book value of the transferred financial asset is, between the portion which is derecognized and the portion which is not, apportioned according to their respective relative fair value, and the difference between the amounts of the following two items are included into profit or loss: (1) the book value of the portion which is derecognized; (2) the sum of consideration of the portion which is derecognized, and the portion of the accumulative amount of the changes in the fair value originally included in equity which is corresponding to the portion which is derecognized.
4. Fair value determination method of financial assets and liabilities
The Company use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value. The inputs to valuation techniques used to measure fair value are arranged in the following hierarchy and used accordingly:
(1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.
(2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability, for example, interest rates and yield curves observable at commonly quoted intervals; market-corroborated inputs;
(3) Level 3 inputs are unobservable inputs for the asset or liability. Level 3 inputs include interest rate that is not observable and cannot be corroborated by observable market data at commonly quoted intervals, historical volatility, future cash flows to be paid to fulfill the disposal obligation assumed in business combination, and financial forecast developed using theCompany’s own data, etc.
5. Impairment test and provision for impairment loss of financial assets
(1) An impairment test is carried out at the balance sheet date on the financial assets other than those at fair value through profit or loss, and provisions for impairment loss should be made if there is objective evidence indicating impairment loss.
(2) For held-to-maturity investments, borrowings, and receivables, an impairment test is made on an individual basis on financial assets of individually significant amount; with regard to the financial assets of individually insignificant amount, they may be included in a portfolio of financial assets with similar credit risk features so as to carry out an impairment-related test; where, upon the impairment test on an individual basis, the financial asset (including those financial assets of individually significant amount and of individually insignificant amount) is not
impaired, it is included in a portfolio of financial assets with similar credit risk features so as to conduct further impairment test. Where a financial asset is impaired, the carrying amount of the said financial asset is written down to the present value of the predicted future cash flow.
(3) Available-for-sale financial assets
1) Objective evidence indicating that available-for-sale debt instrument investments may be impaired includes:
a. significant financial difficulties in the debtor;
b. breach of contract by the debtor, such as principal or interest past due or default;
c. concessions made to debtors with financial difficulties considering economic and legal factors;
d. it is highly probable that the debtor is going to dissolve or going through other terms of financial restructuring;
e. owing to significant financial difficulties occurred to the debtor, the debt instrument is discontinued to trade in active market; or
f. Other circumstances indicating that available-for-sale debt instrument may be impaired.
2) Evidence indicating that available-for-sale equity instrument investment may be impaired includes the fair value of equity instrument investment is suffered from significant or non-temporary decline and the technical, market, economic, or legal environment in which the investee operates has significant adverse changes under which the Company may not be able to recover its investment cost.
The Company performs review on available-for-sale equity instrument investment on an individual basis at the balance sheet date. For equity instrument investment at fair value, if the balance sheet date fair value is50% or above lower than the cost, or the balance sheet date fair value has been lower than the cost for a consecutive of 12 months or longer, it is determined that such equity instrument investment is impaired; if the balance sheet date fair value is20% or above but not exceeding50% lower than the cost, or the balance sheet date fair value has been lower than the cost for a consecutive of 6 months or longer but not exceeding 12 months, the Company may take other factors such as price volatility into consideration in determining whether such equity instrument investment is impaired. For equity instrument investment at cost, the Company considers whether the technical, market, economic, or legal environment in which the investee operates has significant adverse changes to determine whether such equity instrument is impaired. When an available-for-sale financial asset at fair value is impaired, the cumulative loss arising from decline in fair value that has been recognized directly in other comprehensive income is reclassified to impairment loss. If, after an impairment loss has been recognized on available-for-sale debt instrument investment, there is objective evidence of a recovery in value of
the financial asset which can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss. Subsequent fair value increase in available-for-sale debt instrument investment whose impairment loss has been recognized is directly recognized in other comprehensive income.
When an available-for-sale equity instrument at cost is impaired, impairment loss on such equity instrument investment is recognized at any excess of its carrying amount over the present value of future cash flows, and such impairment loss is not reversed upon recognition.
(XI) Receivables
1. Receivables of individually significant amount and with provision made on an individual basis
Judgment basis or amount criteria of
Receivables amounting to more than 10 million yuan
individually significant amount
Provision method for receivables of Provisions are made on the difference between the
individually significant amount and lower of present value of future cash flow and their
with provision made on an individual carrying amount based on impairment testing on an
basis individual basis.
2. Receivables with provision made on a collective basis using portfolios with similar credit risk features
(1) Specific portfolios and provision method
Provision method of provision being made on collective basis using portfolios with similar
credit risk features:
Portfolio 1
Grouped with related party balances within the consolidation
scope
Portfolio 2 Grouped with age
Portfolios and provision method
Provisions are made on the difference between the lower of
Portfolio 1
present value of future cash flow and their carrying amount
based on impairment testing on an individual basis.
Portfolio 2 Age analysis method
(2) Age analysis method
||
|-|
|Proportion of provision foraccounts receivable (%)|
|0.00|
|0.00|
|10.00|
|30.00|
|40.00|
|80.00|
|100.00|

3. Receivables of individually insignificant amount but with provision made on an individual basis
Reasons for provision made on an Impairment test on an individual basis with objective
individual basis evidence indicating that the receivable is impaired
Provision method Provision method made on an individual basis
For other receivables such as notes receivable, interest receivable and long-term receivable, etc., provision for bad debts is made at the difference between the present value of future cash flow and the carrying amount.
(XII) Inventories
1. Classification of inventories
Inventories include finished goods or goods held for sale in the ordinary course of business, work in process in the process of production, and materials or suppliers etc. to be consumed in the production process or in the rendering of services.
2. Accounting method for dispatching inventories:
Inventories dispatched from storage are accounted for with weighted average method.
3. Basis for determining net realizable value
At the balance sheet date, inventories are measured at the lower of cost or net realizable value; provisions for inventory write-down are made on the excess of its cost over the net realizable value. The net realizable value of inventories held for sale is determined based on the amount of the estimated selling price less the estimated selling expenses and relevant taxes and surcharges in the ordinary course of business; the net realizable value of materials to be processed is determined based on the amount of the estimated selling price less the estimated costs of completion, selling expenses and relevant taxes and surcharges in the ordinary course of business; at the balance sheet date, when only part of the same item of inventories have agreed price, their net realizable value is determined separately and is compared with their costs to set the provision for inventory write-down to be made or reversed.
4. Inventory system
Perpetual inventory method is adopted.
5. Amortization method of low-value consumables and packages
(1) Low-value consumables
Low-value consumables are amortized with one-off method.
(2) Packages
Packages are amortized with one-off method.
(XIII) Assets classified as held-for-sale
Non-current assets (excluding financial assets) are accounted for as held-for-sale when the following conditions are all met: a. the component must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such component; b. the Company has made a decision on the disposal of the component; c. the Company has signed
an irrevocable transfer agreement with the transferee; and d. the transfer is expected to be completed within one year.
(XIV) Long-term equity investments
1. Judgment of joint control and significant influence
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of these policies.
2. Determination of investment cost
(1) For business combination under common control, if the consideration of the combining party is that it makes payment in cash, transfers non-cash assets, assumes its liabilities or issues equity securities, on the date of combination, it regards the share of the carrying amount of the equity of the combined party included the consolidated financial statements of the ultimate controlling party as the initial cost of the investment. The difference between the initial cost of the long-term equity investment and the carrying value of the combination consideration paid or the par value of shares issued offsets capital reserve; if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings.
When long-term equity investments are obtained through business combination under common control achieved in stages, the Company determines whether it is a “bundled transaction”.If it is a “bundled transaction”, stages as a whole are considered as one transaction in accounting treatment. If it is not a “bundled transaction”, investment cost is initially recognized at the share of the carrying amount of net assets of the combined party included the consolidated financial statements of the ultimate controlling party. The difference between the acquisition-date investment cost of long-term equity investments and the carrying amount of the previously held long-term equity investments plus the carrying amount of the consideration paid for the newly acquired equity is adjusted to capital reserve; if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings.
(2) For business combination not under common control, investment cost is initially recognized at the acquisition-date fair value of considerations paid.
When long-term equity investments are obtained through business combination not under common control achieved in stages, the Company determined whether they are stand-alone financial statements or consolidated financial statements in accounting treatment:
1) In the case of stand-alone financial statements, investment cost is initially recognized at the carrying amount of the previously held long-term equity investments plus the carrying amount of the consideration paid for the newly acquired equity.
2) In the case of consolidated financial statements, the Company determines whether it is a
“bundled transaction”. If it is a “bundled transaction”, stages as a whole are considered as one transaction in accounting treatment. If it is not a “bundled transaction”, the carrying value of theacquirer’s previously held equity interest in the acquire is re-measured at the acquisition-date fair value, and the difference between the fair value and the carrying amount is recognized in investment income; when theacquirer’s previously held equity interest in the acquire involves other comprehensive income under equity method, the related other comprehensive income is reclassified as income for the acquisition period, excluding other comprehensive income arising from changes in net liabilities or assets from re-measurement of defined benefit plan of the acquiree.
(3) Long-term equity investment obtained through ways other than business combination: the initial cost of a long-term equity investment obtained by making payment in cash is the purchase cost which is actually paid; that obtained on the basis of issuing equity securities is the fair value of the equity securities issued; that obtained through debt restructuring is determined according to “CASBE12 - Debt Restructuring”; and that obtained through non-cash assets exchange is determined according to “CASBE7 - Non-cash Assets Exchange”.
3. Subsequent measurement and recognition method of gain or loss
For long-term equity investment with control relationship, it is accounted for with cost method; for long-term equity investment with joint control or significant influence relationship, it is accounted for with equity method.
4. Disposal of a subsidiary in stages resulting in theCompany’s loss of control
(1) Stand-alone financial statements
The difference between the carrying amount of the disposed equity and the consideration obtained thereof is recognized in profit or loss. If the disposal does not result in theCompany’s loss of significant influence or joint control, the remained equity is accounted for with equity method; however, if the disposal results in theCompany’s loss of control, joint control, or significant influence, the remained equity is reclassified as available-for-sale financial assets, and accounted for according to CASBE 22–Financial Instruments: Recognition and Measurement.
(2) Consolidated financial statements
1) Disposal of a subsidiary in stages not qualified as “bundled transaction” resulting in theCompany’s loss of control
Before theCompany’s loss of control, the difference between the disposal consideration and the proportionate share of net assets in the disposed subsidiary from acquisition date or combination date to the disposal date is adjusted to capital reserve (capital premium), if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings.
When the Company loses control, the remained equity is re-measured at the loss-of-control-date fair value. The aggregated value of disposal consideration and the fair value of the remained
equity, less the share of net assets in the disposed subsidiary held before the disposal from the acquisition date or combination date to the disposal date is recognized in investment income in the period when the Company loses control over such subsidiary, and meanwhile goodwill is offset correspondingly. Other comprehensive income related to equity investments in former subsidiary is reclassified as investment income upon theCompany’s loss of control.
2) Disposal of a subsidiary in stages qualified as “bundled transaction” resulting in theCompany’s loss of control
In case of “bundled transaction”, stages as a whole are considered as one transaction resulting in loss of control in accounting treatment. Before the Company loses control, the difference between the disposal consideration at each stage and the proportionate share of net assets in the disposed subsidiary is recognized as other comprehensive income at the consolidated financial statements and reclassified as profit or loss in the period when the Company loses control over such subsidiary.
(XV) Investment property
1. Investment property includes land use right of rent-out property and of property held for capital appreciation and buildings that have been leased out.
2. The initial measurement of investment property is based on its cost, and subsequent measurement is made using the cost model, the depreciation or amortization method is the same as that of fixed assets and intangible assets.
(XVI) Fixed assets
1. Recognition principles of fixed assets
Fixed assets are tangible assets held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and expected to be used during more than one accounting year. Fixed assets are recognized if, and only if, it is probable that future economic benefits associated with the assets will flow to the Company and the cost of the assets can be measured reliably.
2. Depreciation method of different categories of fixed assets
||||
|-|-|-|
|Depreciation method|Useful life(years)|Estimatedresidual valueproportion (%)|
|Straight-line method|15-35|3.00|
|Straight-line method|10-15|3.00|
|Straight-line method|6-8|3.00|
|Straight-line method|4-11|3.00|
|Straight-line method|4-11|3.00|

(XVII) Construction in progress
1. Construction in progress is recognized if, and only if, it is probable that future economic
benefits associated with the item will flow to the Company, and the cost of the item can be measured reliably. Construction in progress is measured at the actual cost incurred to reach its designed usable conditions.
2. Construction in progress is transferred into fixed assets at its actual cost when it reaches its designed usable conditions. When the construction completion cost reaches final estimating and auditing of the construction in progress was not finished while it reaching the designed usable conditions, it is transferred to fixed assets using estimated value first, and then adjusted accordingly when the actual cost is settled, but the accumulated depreciation is not to be adjusted retrospectively.
(XVIII) Borrowing costs
1. Recognition principle of borrowing costs capitalization
Where the borrowing costs incurred to the Company can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, it is capitalized and included in the costs of relevant assets; other borrowing costs are recognized as expenses on the basis of the actual amount incurred, and are included in profit or loss.
2. Borrowing costs capitalization period
(1) The borrowing costs are not capitalized unless they following requirements are all met: 1) the asset disbursements have already incurred; 2) the borrowing costs have already incurred; and 3) the acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started.
(2) Suspension of capitalization: where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs is suspended; the borrowing costs incurred during such period are recognized as expenses, and are included in profit or loss, till the acquisition and construction or production of the asset restarts.
(3) Ceasing of capitalization: when the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs is ceased. 3. Capitalization rate and capitalized amount of borrowing costs
For borrowings exclusively for the acquisition and construction or production of assets eligible for capitalization, the to-be-capitalized amount of interests is determined in light of the actual interest expenses incurred (including amortization of premium or discount based on effective interest method) of the special borrowings at the present period minus the income of interests earned on the unused borrowings as a deposit in the bank or as a temporary investment; where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the Company calculates and determines the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the
accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used.
(XIX) Intangible assets
1. Intangible asset includes land use right, patent right and non-patented technology etc. The initial measurement of intangible asset is based its cost.
2. For intangible assets with finite useful lives, its amortization amount is amortized within its useful lives systematically and reasonably, if it is unable to determine the expected realization pattern reliably, intangible assets are amortized by the straight-line method with details as follows: Items Amortization period (years)
Software 3-10
Patent right and non-patented technology 5-10
Land use right 40-50
3. Expenditures on the research phase of an internal project are recognized as profit or loss when it is incurred. An intangible asset arising from the development phase of an internal project is recognized if the Company can demonstrate all of the following: (1) the technical feasibility of completing the intangible asset so that it will be available for use or sale; (2) its intention to complete the intangible asset and use or sell it; (3) how the intangible asset will generate probable future economic benefits. Among other things, the Company can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; (4) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and (5) its ability to measure reliably the expenditure attributable to the intangible asset during its development.
(XX) Impairment of part of non-current assets
For non-current assets such as long-term equity investments, investment property at cost model, fixed assets, construction in progress, intangible assets with finite useful life, etc., if at the balance sheet date there is indication of impairment, the recoverable amount is estimated. For goodwill recognized in business combination and intangible assets with indefinite useful life, no matter whether there is indication of impairment, impairment test is performed annually. Impairment test on goodwill is performed on related group of assets or a portfolio of groups of assets.
When the recoverable amount of such non-current assets is lower than their carrying amount, the difference is recognized as assets impairment loss through profit or loss.
(XXI) Long-term prepayments
Long-term prepayments are expenses that have been recognized but with amortization period over one year (excluding one year). They are recorded with actual cost, and evenly amortized within its beneficiary period or stipulated period. If items of long-term prepayments fail to be beneficial to
the following accounting periods, residual values of such items are included in profit or loss.
(XXII) Employee benefits
1. Employee benefits include short-term employee benefits, post-employment benefits, termination benefits and other long-term employee benefits.
2. Short-term employee benefits
The Company recognizes, in the accounting period in which an employee provides service, short-term employee benefits actually incurred as liabilities, with a corresponding charge to profit or loss or the cost of a relevant asset.
3. Post-employment benefits
The Company classifies post-employment benefit plans as either defined contribution plans or defined benefit plans.
(1) The Company recognizes in the accounting period in which an employee provides service the contribution payable to a defined contribution plan as a liability, with a corresponding charge to profit or loss or the cost of a relevant asset.
(2) Accounting treatment by the Company for defined benefit plan usually involves the following steps:
1) In accordance with the projected unit credit method, using unbiased and mutually compatible actuarial assumptions to estimate related demographic variables and financial variables, measure the obligations under the defined benefit plan, and determine the periods to which the obligations are attributed. The Company discounts obligations under the defined benefit plan using the discount rate to determine the present value of the defined benefit plan obligations and the current service cost;
2) When a defined benefit plan has assets, the Company recognizes the deficit or surplus by deducting the present value of the defined benefit plan obligation from the fair value of defined benefit plan assets as a net defined benefit plan liability or net defined benefit plan asset. When a defined benefit plan has a surplus, the Company measures the net defined benefit plan asset at the lower of the surplus in the defined benefit plan and the asset ceiling;
3) At the end of reporting period, the Company recognizes the following components of employee benefits cost arising from defined benefit plan: a. service cost; b. net interest on the net defined benefit plan liability (asset); and c. Changes as a result of re-measurement of the net defined benefit liability (asset). Item a and item b are recognized in profit or loss or the cost of a relevant asset. Item c is recognized in other comprehensive income and is not to be reclassified subsequently to profit or loss. However, the Company may transfer those amounts recognized in other comprehensive income within equity.
4. Termination benefits
Termination benefits provided to employees are recognized as an employee benefit liability for termination benefits, with a corresponding charge to profit or loss at the earlier of the following dates: a. when the Company cannot unilaterally withdraw the offer of termination benefits because of an employment termination plan or a curtailment proposal; or b. when the Company recognizes cost or expenses related to a restructuring that involves the payment of termination benefits.
5. Other long-term employee benefits
When other long-term employee benefits provided by the Company to the employees satisfied the conditions for classifying as a defined contribution plan, those benefits are accounted for in accordance with the requirements relating to defined contribution plan. The Company recognizes and measures the net liability or net asset of other long-term employee benefits in accordance with the requirements relation to defined benefit plan. At the end of the reporting period, the Company recognizes the components of cost of employee benefits arising from other long-term employee benefits as the followings: a. service cost; b. net interest on the net liability or net assets of other long-term employee benefits; and c. changes as a result of re-measurement of the net liability or net assets of other long-term employee benefits. As a practical expedient, the net total of the aforesaid amounts are recognized in profit or loss or included in the cost of a relevant asset.
(XXIII) Provisions
1. Provisions are recognized when fulfilling the present obligations arising from contingencies such as providing guarantee for other parties, litigation, products quality guarantee, onerous contract, etc., may cause the outflow of the economic benefit and such obligations can be reliably measured.
2. The initial measurement of provisions is based on the best estimated expenditures required in fulfilling the present obligations, and its carrying amount is reviewed at the balance sheet date.
(XXIV) Revenue
1. Revenue recognition principles
(1) Sale of goods
Revenue from sale of goods is recognized if, and only if, the following conditions are all satisfied: a) significant risks and rewards of ownership of the goods is transferred to the buyer; b) the Company retains neither continuing managerial involvement of ownership nor effective control over the goods sold; c) the amount of revenue can be measured reliably; d) it is probable that the economic benefits of the transaction will flow to the Company; and e) the costs of the transaction incurred and to be incurred can be measured reliably.
(2) Rendering of services
When the outcome of the transaction can be estimated reliably (the amount of revenue can be measured reliably, it is probable that the economic benefits will flow to the Company, the percentage of completion of the transaction can be determined reliably, and the costs of the
transaction incurred and to be incurred can be measured reliably), revenue from rendering of services is recognized using the percentage of completion method, and the stage of completion is determined at the proportion of costs incurred to the estimated total costs. When the outcome of the transaction cannot be estimated reliably at the balance sheet date, revenue is recognized based on the amount of the costs incurred and the costs incurred are charged off at the same amount when the costs incurred are expected to be recoverable; and no revenue is recognized and the costs incurred are charged off as an expense of the period when the costs incurred are not expected to be recovered.
(3) Revenue arising from use by others of assets
Revenue arising from use by others of assets is recognized if, and only if, it is probable that economic benefits associated with the transaction will flow to the Company and the amount of the revenue can be measured reliably. Interest income is recognized based on the length of time for which theCompany’s cash is used by others and the effective interest rate; and royalties are recognized according to the period and method of charging as specified in relevant contract or agreement.
2. Revenue recognition method adopted by the Company
TheCompany’s main product is the telecommunication product. Revenue is recognized if, and only if, the following conditions are all met: the Company has delivered goods to the purchaser based on contractual agreements; customers have accepted goods and settled the payment; goods payment has been collected or the Company has obtained receipts invoices and it is probable that economic benefits associated with the transaction will flow to the Company; and the costs of the transaction incurred and to be incurred can be measured reliably.
(XXV) Government grants
1. Government grants related to assets
Government grants related to assets are government grants, with which the Company purchase, construct or otherwise acquire non-current assets. They are recognized as deferred income, and amortized on a straight-line method over the useful lives of the relevant assets, and included in profit or loss. However, those measured at notional amount is directly included into profit or loss.
2. Government grants related to income
Government grants related to income are government grants other than those related to assets. Government grants related to income if used for compensating the related future expenses or losses of the Company are recognized as deferred income and are included in profit or loss during the period when the relevant expenses are recognized; if used for compensating the related expenses or losses incurred to the Company are directly included in profit or loss.
(XXVI) Deferred tax assets/Deferred tax liabilities
1. Deferred tax assets or deferred tax liabilities are calculated and recognized based on the
difference between the carrying amount and tax base of assets and liabilities (and the difference of the carrying amount and tax base of items not recognized as assets and liabilities but with their tax base being able to be determined according to tax laws) and in accordance with the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled.
2. A deferred tax asset is recognized to the extent of the amount of the taxable income, which it is most likely to obtain and which can be deducted from the deductible temporary difference. At the balance sheet date, if there is any exact evidence that it is probable that future taxable profits will be available against which deductible temporary differences can be utilized, the deferred tax assets unrecognized in prior periods are recognized.
3. At the balance sheet date, the carrying amount of deferred tax assets is reviewed. The carrying amount of a deferred tax asset is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefit of the deferred tax asset to be utilized. Such reduction is subsequently reversed to the extent that it becomes probable that sufficient taxable income will be available.
4. The income tax and deferred tax for the period are treated as income tax expenses or income through profit or loss, excluding those arising from the following circumstances: (a) business combination; and (b) the transactions or items directly recognized in equity.
(XXVII) Operating leases
When the Company is the lessee, lease payments are recognized as cost or profit or loss with straight-line method over the lease term. Initial expenses are recognized directly into profit or loss. Contingent rents are charged as profit or loss in the periods in which they are incurred.
When the Company is the lessor, lease income is recognized as profit or loss with straight-line method over the lease term. Initial expenses, other than those with material amount and eligible for capitalization which are recognized as profit or loss by installments, are recognized directly as profit or loss. Contingent rents are charged into profit or loss in the periods in which they are incurred.
(XXVIII) Segment reporting
Reportable segments are identified based on operating segments which are determined based on the structure of theCompany’s internal organization, management requirements and internal reporting system. An operating segment is a component of the Company that:
(1) engages in business activities from which it may earn revenues and incur expenses;
(2) whose financial performance are regularly reviewed by Management to make decisions about resource to be allocated to the segment and assess its performance; and
(3) for which financial information regarding financial position, financial performance and cash
flows is available.
(XXIX)Changes in accounting policies
(1) The Company has adopted “CASBE 42 - Non-current Assets and Disposal Groups Held for Sale and Discontinued Operations” promulgated by Ministry of Finance of PRC since May 28, 2017, and has adopted “CASBE 16 - Government Grants” revised by Ministry of Finance of PRC since June 12, 2017. The change is applicable to prospective application method.
(2) The Company prepared the financial statements for the year ended December 31, 2017 in accordance with “Notice of the Ministry of Finance on Revising and Issuing Financial Statement Templates for General Enterprises” (numbered Cai Kuai[2017] 30), and gains and losses on disposal of non-current assets and gains and losses on trading of non-cash assets which originally presented under the items “Non-operating revenue” and “Non-operating expenditures” were presented under the item “Gains on asset disposal”. As this change is applicable to retrospective application method, non-operating revenue and non-operating expenditures of semi-annual of 2017 are respectively decreased by 29,788.25 yuan and 693,153.07 yuan, while gains on asset disposal is increased by -663,364.82 yuan.
IV. Taxes
(I) Main taxes and tax rates
||
|-|
|Tax bases|
|The taxable revenue from sales of goods orrendering of services|
|For housing property levied on the basis ofprice, housing property tax is levied at therate of 1.2% of the balance after deducting30% of the cost; for housing propertylevied on the basis of rent, housingproperty tax is levied at the rate of 12% ofrent revenue.|
|Turnover tax payable|
|Turnover tax payable|
|Turnover tax payable|
|Taxable income|

Different enterprise income tax rates applicable to different taxpayers:
Taxpayers Income tax rate
Nanjing Mennekes Electric Appliances Co., Ltd 15%
Nanjing Putian Telege Intelligent Building Ltd. 15%
Taxpayers Income tax rate
南京普天长乐通信设备有限公司
15%
(Nanjing Putian Changle Telecommunications Equipment Co.,
Ltd.*)
南京普天大唐信息电子有限公司
15%
(Nanjing Putian Datang Information Electronic Co.,Ltd.*)
南京普天网络有限公司
15%
(Nanjing Putian Network Co.,Ltd.*)
普天通信(香港)股份有限公司
16.5%
(Putian Telecommunications (H.K.) Co.,Ltd.*)
Taxpayers other than the above-mentioned 25%
The subsidiary, Putian Telecommunications (H.K.) Co., Ltd., was established in Hong Kong on December 1, 2000, and is subject to the enterprise income tax at a rate of16.5%, according to relevant rules in Hong Kong.
(II) Tax preferential policies
The subsidiary, Nanjing Putian Telege Intelligent Building Ltd., obtained high-tech enterprise certificate in December 7, 2017, valid for 3 years. The certificate number is GR201732002774. As a result, it is subject to the enterprise income tax at a rate of15% for 2017 to 2019.
The subsidiary, Nanjing Mennekes Electric Appliances Co., Ltd obtained high-tech enterprise certificate in October 20, 2016, valid for 3 years. The certificate number is GR201632000065. As a result, it is subject to the enterprise income tax at a rate of15% for 2017 to 2019.
The subsidiary, Nanjing Putian Changle Telecommunications Equipment Co., Ltd., obtained high-tech enterprise certificate in October 10, 2015, valid for 3 years. The certificate number is GR201532001302. As a result, it is subject to the enterprise income tax at a rate of15% for 2015 to 2017.
The subsidiary, Nanjing Putian Network Co., Ltd., obtained high-tech enterprise certificate in December 7, 2017, valid for 3 years. The certificate number is GF201732003495. As a result, it is subject to the enterprise income tax at a rate of15% for 2017 to 2019.
The subsidiary, Nanjing Putian Datang Information Electronic Co., Ltd., obtained high-tech enterprise certificate in August 24, 2015, valid for 3 years. The certificate number is GF201532000188. As a result, it is subject to the enterprise income tax at a rate of15% for 2015 to 2017.
The subsidiary, Nanjing Telecommunication Equipment Factory - the SeventhBranch*), is a social welfare enterprise. Accordance to the provisions of Guo Shui Fa[2007] No.067, it enjoys the preferential tax policy of VAT refund upon collection and plus deduction of wages paid to the disabled employees.
The subsidiaries, Nanjing Putian Datang Information Electronic Co., Ltd. and Nanjing Putian
* The English names are for identification purpose only.
Telecommunication Technology Co.,Ltd.*), were certified as software enterprises, and some of the software products produced by Nanjing South Telecommunications Company Limited and Nanjing Putian Network Co., Ltd. are entitled to enjoy the preferential tax policy of3% VAT refund upon collection in accordance with the provisions of Cai Shui[2011] No.100.
V. Notes to items of consolidated financial statements
(I) Notes to items of the consolidated balance sheet
1. Cash and bank balances
(1) Details
||
|-|
|Closing balance|
|4,218.51|
|157,231,609.48|
|72,517,673.35|
|229,753,501.34|

 (2) Other remarks
Other cash and bank balances include deposit for acceptance and deposit for L/G, which are with use restrictions.
2. Notes receivable
(1) Details
||||||
|-|-|-|-|-|
|Closing balance|||||
|Book balance|Provision forbad debts|Carryingamount|Book balance|Provision forbad debts|
|29,943,288.75||29,943,288.75|20,715,749.22||
|550,000.00||550,000.00|11,761,714.37||
|30,493,288.75||30,493,288.75|32,477,463.59||

 (2) Endorsed or discounted but undue notes at the balance sheet date
||
|-|
|Closing balance derecognized|
|1,640,625.03|
|546,875.01|
|2,187,500.04|

 Due to the fact that the acceptor of bank acceptance is commercial bank, which is of high credit level, there is very little possibility of failure in recoverability when it is due. Based on this fact, the Company derecognized the endorsed or discounted bank acceptance. However, if any bank
acceptance is not recoverable when it is due, the Company still holds joint liability on such
acceptance, according to the China Commercial Instrument Law.
In the current period, trade acceptance is endorsed for goods payment. As it relates to many endorsements and the drawer is always in good commercial credit level, it is with low default risk and thus derecognized.
3. Accounts receivable
(1) Details
1) Details on categories
Closing balance
|||||
|-|-|-|-|
|Book balance||Provision for bad debts||
|Amount|% to total|Amount|Provisionproportion (%)|
|921,138,806.63|98.72|38,769,179.74|4.21|
|921,138,806.63|98.72|38,769,179.74|4.21|
|11,921,451.05|1.28|11,921,451.05|100.00|
|933,060,257.68|100.00|50,690,630.79|5.43|

 (Continued)
Opening balance
|||||
|-|-|-|-|
|Book balance||Provision for bad debts||
|Amount|% to total|Amount|Provisionproportion (%)|
|815,282,308.11|98.56|35,192,700.70|4.32|
|815,282,308.11|98.56|35,192,700.70|4.32|
|11,901,554.08|1.44|11,901,554.08|100.00|
|827,183,862.19|100.00|47,094,254.78|5.69|

 2) In portfolios, accounts receivable with provision made on a collective basis with age analysis method
Closing balance
Ages
|||
|-|-|
|Book balance|Provision for bad debts|

Closing balance
Ages
|||
|-|-|
|Book balance|Provision for bad debts|
|638,568,099.60||
|187,811,924.60||
|36,740,459.85|3,679,648.39|
|20,510,586.37|6,153,175.93|
|9,466,123.63|3,786,449.46|
|14,458,535.09|11,566,828.47|
|13,583,077.49|13,583,077.49|
|921,138,806.63|38,769,179.74|

 (2) Provisions made, collected or reversed in current period
1) Provision for bad debts made in current period totaled 3,534,469.53 yuan, and provision increased due to fluctuations in exchange totaled 61,906.48 yuan.
(2) Details of the top 5 debtors with largest balances
|||
|-|-|
|Book balance|Proportion to thetotal balance ofaccountsreceivable (%)|
|48,118,986.00|5.16|
|32,406,347.08|3.47|
|16,964,697.28|1.82|
|15,714,957.42|1.68|
|13,819,926.92|1.48|
|127,024,914.70|13.61|

4. Advances paid
(1) Age analysis
1) Details
Closing balance
Ages
||||
|-|-|-|
|Book balance|% to total|Provision forbad debts|
|184,879,585.79|89.68%||
|9,038,065.59|4.38%||
|4,346,007.03|2.11%||
|7,891,350.92|3.83%||
|206,155,009.33|100.00%||

(Continued)
Opening balance
Ages
||||
|-|-|-|
|Book balance|% to total|Provision forbad debts|
|36,704,841.98|68.20||
|11,206,192.14|20.82||
|1,456,310.44|2.70||
|4,454,593.23|8.28||
|53,821,937.79|100.00||

 2) Reasons for unsettlement on advances paid with age over one year and significant amount
||
|-|
|Closing balance|
|940,000.00|
|729,330.00|
|481,771.60|
|439,507.50|
|436,294.00|
|3,026,903.10|

(2) Details of the top 5 debtors with largest balances
||
|-|
|Book balance|
|108,765,000.00|
|39,676,000.00|
|4,215,050.00|
|2,282,800.00|
|1,519,459.31|
|156,458,309.31|

 5. Other receivables
(1) Details
1) Details on categories
Closing balance
Categories
|||
|-|-|
|Book balance|Provision for bad debts|

|||||
|-|-|-|-|
|Amount|% to total|Amount|Provisionproportion (%)|
|28,912,122.71|38.44|28,912,122.71|100.00|
|46,295,617.70|61.56|4,158,841.56|8.98|
|46,295,617.70|61.56|4,158,841.56|8.98|
|75,207,740.41|100.00|33,070,964.27|43.97|

 (Continued)
Opening balance
|||||
|-|-|-|-|
|Book balance||Provision for bad debts||
|Amount|% to total|Amount|Provisionproportion (%)|
|28,912,122.71|45.97|28,912,122.71|100.00|
|33,987,705.89|54.03|4,662,282.16|13.72|
|33,987,705.89|54.03|4,662,282.16|13.72|
|62,899,828.60|100.00|33,574,404.87|53.38|

 2) Other receivables of individually significant amount and with provision made on an individual basis
||||
|-|-|-|
|Book balance|Provision forbad debts|Provisionproportion (%)|
|28,912,122.71|28,912,122.71|100.00|
|28,912,122.71|28,912,122.71|100.00|

3) In portfolios, other receivables with provision made on a collective basis with age analysis method
Ages Closing balance
* The English name is for identification purpose only.
|||
|-|-|
|Book balance|Provision for bad debts|
|29,810,982.32||
|8,530,117.55||
|2,400,123.20|240,012.32|
|1,361,898.00|407,669.40|
|1,018,458.70|406,583.48|
|347,307.85|277,846.28|
|2,826,730.08|2,826,730.08|
|46,295,617.70|4,158,841.56|

 (2) Provisions made, collected or reversed in current period
Provision for bad debts made in current period totaled -503,686.37 yuan, and provision increased due to fluctuations in exchange totaled 245.77 yuan.
(3) Other receivables categorized by nature
||
|-|
|Closing balance|
|3,024,173.05|
|17,573,250.56|
|42,906,197.19|
|11,704,119.61|
|75,207,740.41|

 (4) Details of the top 5 debtors with largest balances
|||||
|-|-|-|-|
|Nature ofreceivables|Book balance|Ages|Proportion to thetotal balance ofother receivables(%)|
|Temporaryadvance paymentreceivable|28,912,122.71|Over 6 years|38.44|
|Temporaryadvance paymentreceivable|1,000,000.00||1.33|
|Temporaryadvancepaymentreceivable|835,252.00|1-3 years|1.11|
|Deposits|800,000.00|Within 1 year|1.06|
|Temporaryadvancepaymentreceivable|738,706.63|1-6 years|0.98|
||32,286,081.34||46.56|

6. Inventories
(1) Details
||||||
|-|-|-|-|-|
|Closing balance|||||
|Book balance|Provision forwrite-down|Carrying amount|Book balance|Provision forwrite-down|
|51,622,472.32|2,938,752.56|48,683,719.76|32,589,471.27|2,938,752.56|
|90,757,012.61||90,757,012.61|9,304,009.61||
|111,240,428.46|3,087,176.10|108,153,252.36|310,378,245.32|3,087,176.10|
|103,952,498.53|7,751,357.94|96,201,140.59|147,425,970.58|7,758,200.35|
|5,796,731.05|804,691.99|4,992,039.06|4,789,181.58|804,691.99|
|363,369,142.97|14,581,978.59|348,787,164.38|504,486,878.36|14,588,821.00|

 (2) Provision for inventory write-down
1) Details
||||||
|-|-|-|-|-|
|Opening balance|Increase||Decrease||
||Provision|Others|Reversal orwritten-off|Others|
|2,938,752.56|||||
|3,087,176.10|||||
|7,758,200.35|||6,842.41||
|804,691.99|||||
|14,588,821.00|||6,842.41||

 2) Determination basis of net realizable value and reasons for the reversal or written-off of provision for inventory write-down
Please refer to XII for determination basis of net realizable value. Reversal of provision for inventory write-down due to the sale of raw materials in the current period, which is with provision for inventory write-down made in prior period, totaled 6,842.41 yuan.
7. Other current assets
||
|-|
|Closing balance|
|21,971,751.01|
|112,969.04|
|22,084,720.05|

 8. Available-for-sale financial assets
(1) Details
||||||
|-|-|-|-|-|
|Closing balance|||||
|Book balance|Provision forimpairment|Carryingamount|Book balance|Provision forimpairment|
|2,596,863.00|1,854,910.00|741,953.00|2,596,863.00|1,854,910.00|
|2,596,863.00|1,854,910.00|741,953.00|2,596,863.00|1,854,910.00|

(2) Available-for-sale financial assets at cost
Book balance
Investees
||||
|-|-|-|
|Openingbalance|Increase|Decrease|
|420,915.00|||
|321,038.00|||
|1,854,910.00|||
|2,596,863.00|||

 (Continue)
||||||
|-|-|-|-|-|
|Provision for impairment||||Holdingproportion ininvestees (%)|
|Openingbalance|Increase|Decrease|Closingbalance||
|||||10.00|
|||||2.26|
|1,854,910.00|||1,854,910.00|51.00|
|1,854,910.00|||1,854,910.00||

Note: Up to the end of 2007, Beijing Likangpu Communications Equipment Co., Ltd. was significantly insolvent and was shut down with no operations since 2008. In October 2007, Beijing Administration for Industry and Commerce issued the decision on treatment of cancellation of license and required it to carry out liquidation under laws and regulations. Pursuant to “CASBE 33 - Consolidated Financial Statements”, Beijing Likangpu Communications Equipment Co., Ltd. shall no longer be brought into consolidation scope since 2008 and such event has been reported to China Potevio Information Industry Inc. and State-owned Assets Supervision and Administration Commission of the State Council.
9. Long-term equity investments
(1) Categories
||||||
|-|-|-|-|-|
|Closing balance|||||
|Book balance|Provision forimpairment|Carryingamount|Book balance|Provision forimpairment|
|173,806,943.51||173,806,943.51|173,681,413.39||
|13,380,788.62||13,380,788.62|13,296,092.84||
|187,187,732.13||187,187,732.13|186,977,506.23||

 (2) Details
|||||
|-|-|-|-|
|Opening balance||||
||Investmentsincreased|Investmentsdecreased|Investment incomerecognized underequity method|

* The English names are for identification purpose only.
|||||
|-|-|-|-|
|Opening balance||||
||Investmentsincreased|Investmentsdecreased|Investment incomerecognized underequity method|
|13,296,092.84|||84,695.78|
|13,296,092.84|||84,695.78|
|3,040,101.44||||
|170,641,311.95|||323,097.32|
|173,681,413.39|||323,097.32|
|186,977,506.23|||407,793.10|

(Continued)
||||||
|-|-|-|-|-|
|Increase/decrease||||Closing balance|
|Changes inother equity|Cashdividend/profitdeclared fordistribution|Provision forimpairment|Others||
|||||13,380,788.62|
|||||13,380,788.62|
|||||3,040,101.44|
||197,567.20|||170,766,842.07|
||197,567.20|||173,806,943.51|
||197,567.20|||187,187,732.13|

10. Investment property
|||
|-|-|
|Buildings andstructures|Land use right|
|23,851,020.30|3,642,147.87|
|23,851,020.30|3,642,147.87|
|11,083,691.02|1,764,573.87|
|322,337.59|43,235.64|

* The English names are for identification purpose only.
|||
|-|-|
|Buildings andstructures|Land use right|
|322,337.59|43,235.64|
|11,406,028.61|1,807,809.51|
|1,842,418.00||
|1,842,418.00||
|10,602,573.69|1,834,338.36|
|10,924,911.28|1,877,574.00|

 11. Fixed assets
(1) Details
||||||
|-|-|-|-|-|
|Buildings andstructures|Machineryequipment|Transportfacilities|Electronicequipment|Officeequipmentand others|
|154,660,368.48|58,096,595.23|13,247,627.08|6,659,225.73|50,842,510.16|
|138,474.74|185,022.83|618,809.35|115,157.85|404,413.92|
|138,474.74|185,022.83|618,809.35|115,157.85|404,413.92|
|13,881,674.82|702,332.25|375,030.95|92,396.60|12,994,545.98|
|13,881,674.82|702,332.25|375,030.95|92,396.60|12,994,545.98|
|140,917,168.40|57,579,285.81|13,491,405.48|6,681,986.98|38,252,378.10|
|53,189,862.57|47,038,059.99|12,073,510.18|5,875,572.02|44,637,453.40|
|1,932,394.12|741,070.76|270,726.77|687,602.63|1,441,730.46|
|1,932,394.12|741,070.76|270,726.77|687,602.63|1,441,730.46|
|9,632,361.23|687,733.20|363,780.02|89,587.67|12,584,399.70|
|9,632,361.23|687,733.20|363,780.02|89,587.67|12,584,399.70|
|45,489,895.46|47,091,397.55|11,980,456.93|6,473,586.98|33,494,784.16|
|539,124.00|10,863.02||103,112.78|296,846.94|
|539,124.00|10,863.02||103,112.78|296,846.94|
|94,888,148.94|10,477,025.24|1,510,948.55|105,287.22|4,460,747.00|
|100,931,381.91|11,047,672.22|1,174,116.90|680,540.93|5,908,209.82|

(2) Fixed assets temporarily idle
|||||
|-|-|-|-|
|Cost|Accumulateddepreciation|Provision forimpairment|Carryingamount|
|218,700.00|202,437.65||16,262.35|
|225,000.00|218,250.00||6,750.00|
|19,100.00|18,527.00||573.00|
|630,241.55|314,868.89|296,846.94|18,525.72|
|1,093,041.55|754,083.54|296,846.94|42,111.07|

(3) Fixed assets with certificate of titles being unsettled
||
|-|
|Carrying amount|
|4,917,169.73|
|32,472,530.91|
|37,389,700.64|

12. Construction in progress
(1) Details
||||||
|-|-|-|-|-|
|Closing balance|||||
|Bookbalance|Provisionforimpairment|Carryingamount|Bookbalance|Provisionforimpairment|
|3,213,787.88||3,213,787.88|1,830,131.25||
|726,666.84||726,666.84|333,136.64||
|3,940,454.72||3,940,454.72|2,163,267.89||

 (2) Changes in significant projects
||||||
|-|-|-|-|-|
|Budgets|Opening balance|Increase|Transferred tofixed assets|Otherdecrease|
|6,100,437.50|1,830,131.25|1,383,656.63|||
|600,000.00|333,136.64|393,530.20|||
|6,700,437.50|2,163,267.89|1,777,186.83|||

 (Continued)
||||||
|-|-|-|-|-|
|Accumulatedinvestment tobudget|Completionpercentage(%)|Accumulatedamount ofborrowing costcapitalization|Amount ofborrowing costcapitalization incurrent period|Annualcapitalizationrate (%)|
|50.00|50.00||||
|121.11|90.00||||

13. Intangible assets
|||||
|-|-|-|-|
|Software|Land use right|Patent right|Non-patenttechnology|
|10,889,840.33|34,760,072.04|607,500.00|4,560,000.00|
|499,306.89||||
|499,306.89||||
|11,389,147.22|34,760,072.04|607,500.00|4,560,000.00|
|8,858,384.46|6,054,711.03|607,500.00|4,560,000.00|
|428,272.54|264,481.23|||
|428,272.54|264,481.23|||
|9,286,657.00|6,319,192.26|607,500.00|4,560,000.00|
|2,102,490.22|28,440,879.78|||
|2,031,455.87|28,705,361.01|||

 14. Long-term prepayments
|||||
|-|-|-|-|
|Opening balance|Increase|Amortization|Other decreases|
|503,316.01||82,920.00||
|1,181,112.19||129,109.88||
||1,070,715.95|89,226.33||
|1,110,766.56|106,499.20|1,086,493.74||
|2,795,194.76|1,177,215.15|1,387,749.95||

 15. Short-term borrowings
||
|-|
|Closing balance|
|205,500,000.00|
|77,010,000.00|
|165,000,000.00|
|447,510,000.00|

 In the current period, the Company entrusted the parent company to apply for loans from Bank of Beijing, which is the pledged borrowings amounting to 201,000,000.00 yuan. The Company pledged its holding equities to the parent company, which include equity of Nanjing putian tianji
building intelligence co. LTD amounting to 4.80 million yuan, Nanjing South Telecommunications
Co amounting to 33.17 million yuan, equity of Nanjing Putian Changle Telecommunications
Equipment Co., Ltd. amounting to 5.07 million yuan, equity of Nanjing Putian Wangzhi
Electronic Co.,
Ltd.*
amounting to 60.43 million yuan, equity of Nanjing Putian Network Co., Ltd. amounting to 7.80 million yuan. The Company has registered the equity pledge at Nanjing Jiangning Market Supervision Administration.
16. Notes payable
||
|-|
|Closing balance|
|14,064,736.10|
|72,000,000.00|
|86,064,736.10|

 17. Accounts payable
(1) Details
||
|-|
|Closing balance|
|696,758,127.47|
|11,045,846.61|
|2,123,710.03|
|709,927,684.11|

 (2) Significant accounts payable with age over one year
||
|-|
|Closing balance|
|24,274,339.32|
|24,210,574.66|
|19,328,017.84|
|16,484,933.94|
|16,314,294.20|
|100,612,159.96|

18. Advances received
(1) Details
||
|-|
|Closing balance|
|305,508,384.02|
|305,508,384.02|

 (2) Significant advances received with age over one year
Items Closing balance Reasons for unsettlement
* The English names are for identification purpose only.
||
|-|
|Closing balance|
|3,740,144.73|
|376,719.00|
|213,000.00|
|195,000.00|
|131,190.00|
|4,656,053.73|

19. Employee benefits payable
(1) Details
||||
|-|-|-|
|Opening balance|Increase|Decrease|
|21,033,311.73|118,861,399.72|119,938,133.79|
||13,618,000.60|13,618,000.60|
||3,003,720.00|3,003,720.00|
|21,033,311.73|135,483,120.32|136,559,854.39|

 (2) Details of short-term employee benefits
||||
|-|-|-|
|Opening balance|Increase|Decrease|
|11,712,169.62|98,522,105.50|99,584,083.50|
||5,109,601.88|5,102,584.11|
||7,687,877.99|7,687,877.99|
||6,902,431.27|6,902,431.27|
||385,578.42|385,578.42|
||399,868.30|399,868.30|
|119,044.35|5,254,849.48|5,221,752.60|
|9,202,097.76|1,890,282.38|1,945,153.10|
||396,682.49|396,682.49|
|21,033,311.73|118,861,399.72|119,938,133.79|

 (3) Details of defined benefit plan
||||
|-|-|-|
|Opening balance|Increase|Decrease|
||12,244,477.13|12,244,477.13|
||520,354.18|520,354.18|
||853,169.29|853,169.29|

||||
|-|-|-|
|Opening balance|Increase|Decrease|
||13,618,000.60|13,618,000.60|

20. Taxes and rates payable
||
|-|
|Closing balance|
|3,687,351.15|
|4,616,390.06|
|200,837.20|
|706,126.57|
|316,941.07|
|48,004.38|
|998,475.94|
|7,195.89|
|10,581,322.26|

 21. Interest payable
||
|-|
|Closing balance|
|460,593.19|
|460,593.19|

 22. Dividend payable
(1) Details
||
|-|
|Closing balance|
|1,692,213.38|
|1,692,213.38|

 (2) Significant dividend payable with age over one year
||
|-|
|Closing balance|
|253,832.01|
|423,053.34|
|253,832.01|
|84,610.67|

* The English names are for identification purpose only.
||
|-|
|Closing balance|
|423,053.34|
|253,832.01|
|1,692,213.38|

23. Other payables
||
|-|
|Closing balance|
|5,115,134.63|
|29,544,979.74|
|11,981,308.02|
|943,123.21|
|8,148,763.24|
|55,733,308.84|

 24. Deferred income
(1) Details
|||||
|-|-|-|-|
|Openingbalance|Increase|Decrease|Closingbalance|
|8,664,102.90||3,796,949.90|4,867,153.00|
|8,664,102.90||3,796,949.90|4,867,153.00|

(2) Details of government grants
|||||
|-|-|-|-|
|Openingbalance|Increase|Included innon-operating revenuein current period|Closing balance|
|770,926.90||770,926.90||
|1,000,000.00||1,000,000.00||
|6,893,176.00||2,026,023.00||
|8,664,102.90||3,796,949.90||

Note: The condition of government subsidies carried in profit and loss of current period are showed in the explanations of notes to items of consolidated financial statements as detailed.
25. Share capital
|||
|-|-|
|Opening balance|Movements|

|||||||
|-|-|-|-|-|-|
||Issue ofnew shares|Bonusshares|Reservetransferred toshares|Others|Subtotal|
|215,000,000.00||||||

 26. Capital reserve
||||
|-|-|-|
|Opening balance|Increase|Decrease|
|139,592,332.04|||
|45,782,201.81|||
|185,374,533.85|||

 27. Other comprehensive income (OCI)
|||||||
|-|-|-|-|-|-|
|Opening balance|Current period cumulative|||||
||Current periodcumulativebefore incometax|Less: OCIcarried forwardtransferred toprofit or loss|Less:incometax|Attributable toparentcompany|Attributable tonon-controllinginterest|
|-4,129,619.45|-135,607.00|||-122,046.30|-135,607.70|
|-4,129,619.45|-135,607.00|||-122,046.30|-135,607.70|
|-4,129,619.45|-135,607.00|||-122,046.30|-135,607.70|

 28. Surplus reserve
||||
|-|-|-|
|Opening balance|Increase|Decrease|
|589,559.77|||
|589,559.77|||

 29. Undistributed profit
(1) Details
||
|-|
|Current periodcumulative|
|-44,605,902.63|
|-1,980,089.01|
|-46,585,991.64|
|-10,421,705.60|
|-57,007,697.24|

 (II) Notes to items of the consolidated income statement
1. Operating revenue/Operating cost
Items Current period cumulative Preceding period comparative
||||
|-|-|-|
|Income|Cost|Income|
|934,501,599.83|796,224,938.08|988,549,333.34|
|32,349,005.12|28,133,757.24|23,847,074.05|
|966,850,604.95|824,358,695.32|1,012,396,407.39|

 2. Taxes and surcharge for operations
||
|-|
|Current period cumulative|
|2,182,407.41|
|2,054,225.98|
|254,742.19|
|749,055.08|
|320,919.70|
|102,900.18|
|5,664,250.54|

 Note: Pursuant to Provisions on Accounting Treatment of Value-Added Tax (numbered Cai Kuai[2016] 22) and Interpretation about Provisions on Accounting Treatment of Value-Added Tax that issued by Ministry of Finance, amounts of housing property tax, vehicle and vessel use tax, land use tax and stamp duty for the period from May to December are listed in “taxes and surcharge for operations”, while those for the period prior to May 2016 are listed in “administrative expenses”.
3. Selling expenses
||
|-|
|Current period cumulative|
|40,217,290.65|
|12,549,783.07|
|7,876,538.22|
|7,900,716.87|
|2,593,640.68|
|720,798.25|
|1,658,518.68|
|1,002,873.79|
|345,262.15|
|4,830,761.28|
|79,696,183.64|

4. Administrative expenses
||
|-|
|Current period cumulative|
|29,511,436.71|
|36,398,106.80|
|1,477,494.62|
|2,348,170.20|
|1,987,484.94|
|1,732,042.57|
|1,351,907.52|
|3,131,873.17|
|5,850,165.54|
|83,788,682.07|

 Note: Showed in the explanation of notes to items for taxes and surcharge for operations.
5. Financial expenses
||
|-|
|Current period cumulative|
|11,625,553.62|
|1,692,017.07|
|18,771.62|
|409.83|
|246,567.05|
|10,198,465.39|

 6. Assets impairment loss
||
|-|
|Current period cumulative|
|3,030,783.16|
|3,030,783.16|

 7. Investment income
||
|-|
|Current period cumulative|
|407,793.10|
|407,793.10|

8. Gains on disposal of assets
|||
|-|-|
|Current periodcumulative|Preceding periodcomparative|
|30,156,818.80|-663,364.82|
|30,156,818.80|-663,364.82|

 9. Other income
|||
|-|-|
|Current periodcumulative|Preceding periodcomparative|
|2,945,620.86|2,784,809.60|
|2,026,023.00||
|647,200.00||
|158,700.00||
|21,800.00||
|5,799,343.86|2,784,809.60|

Note: The amounts carried in current period are showed in the explanations of notes to items of consolidated financial statements as detailed.
10. Non-operating revenue
|||
|-|-|
|Current periodcumulative|Preceding periodcomparative|
|225,371.60|301,606.55|
|2,375,370.56|2,368,873.77|
|225,111.99|69,330.61|
|2,825,854.15|2,739,810.93|

 (2) Government grants
|||
|-|-|
|Current periodcumulative|Preceding periodcomparative|
|1,000,000.00||
|770,926.90|443,149.84|
|100,000.00||

|||
|-|-|
|Current periodcumulative|Preceding periodcomparative|
|330,300.00||
|174,143.66|213,064.93|
||1,662,659.00|
||50,000.00|
|2,375,370.56|2,368,873.77|

11. Non-operating expenditures
|||
|-|-|
|Current periodcumulative|Preceding periodcomparative|
|97,000.00|2,000.00|
|135,029.97|1,725.22|
||187,832.09|
|76,556.03|44,965.91|
|308,586.00|236,523.22|

 12. Income tax expenses
(1) Details
||
|-|
|Current period cumulative|
|1,646,117.70|
|1,646,117.70|

 (2) Reconciliation of accounting profit to income tax expenses
||
|-|
|Current period cumulative|
|-1,005,231.26|
|-251,307.82|
|-874,737.23|
|67,935.55|
|-101,948.28|
|1,826,473.01|
|-2,407,065.64|

||
|-|
|Current period cumulative|
|7,620,079.35|
|92,031.50|
|-4,233,311.26|
|1,646,117.70|

 13. Other comprehensive income, net of income tax
Please refer to notes to items of the consolidated balance sheet - other comprehensive income for details.
(III) Notes to items of the consolidated cash flow statement
1. Other cash receipts related to operating activities
||
|-|
|Current period cumulative|
|4,377,764.52|
|1,692,017.07|
|29,756,412.58|
|1,825,553.62|
|37,651,747.79|

 2. Other cash payments related to operating activities
||
|-|
|Current period cumulative|
|62,678,023.35|
|52,338,653.48|
|1,074,094.19|
|116,090,771.02|

 3. Supplement information to the cash flow statement
(1) Supplement information to the cash flow statement
||
|-|
|Current periodcumulative|
|-2,651,348.96|
|3,030,783.16|
|5,073,524.74|
|692,753.77|

||
|-|
|Current periodcumulative|
|1,387,749.95|
|-30,156,818.80|
|11,625,553.62|
|-407,793.10|
|141,110,892.98|
|-263,703,522.06|
|-91,277,004.23|
|-225,275,228.93|
|157,235,827.99|
|311,056,919.17|
|-153,821,091.18|

 (2) Cash and cash equivalents
||
|-|
|Closing balance|
|157,235,827.99|
|4,218.51|
|157,231,609.48|
|157,235,827.99|

company or subsidiaries with use restrictions
(3) Remarks on supplement information to the cash flow statement
Cash and cash equivalents with use restrictions are deposit for acceptance and deposit for L/G, of which closing balance amounts totaled 72,517,673.35 yuan and opening balance amounts totaled 16,420,782.19 yuan.
(IV) Others
1. Assets with title or use right restrictions
||
|-|
|Closing carrying amount|
|72,517,673.35|
|70,069,098.63|
|5,968,997.52|
|6,110,879.51|
|154,666,649.01|

Note: We remind users of financial statements that, apart from the above assets with title or use right restrictions, The Company pledged its holding equities to the parent company, which include equity of Nanjing putian tianji building intelligence co. LTD amounting to 4.80 million yuan, Nanjing South Telecommunications Co amounting to 33.17 million yuan, equity of Nanjing Putian Changle Telecommunications Equipment Co., Ltd. amounting to 5.07 million yuan, equity of Nanjing Putian Wangzhi Electronic Co., Ltd. amounting to 60.43 million yuan, equity of Nanjing Putian Network Co., Ltd. amounting to 7.80 million yuan. The Company has registered the equity pledge at Nanjing Jiangning Market Supervision Administration. Those equities are with use restrictions before released.
2. Monetary items in foreign currencies
|||
|-|-|
|Closing balance inforeign currencies|Exchange rate|
|782,842.85|6.6166|
|522.27|7.6515|
|641,509.93|0.8431|
|208.79|8.6551|

 3. Government grants
1. Details
(1) Government grants related to income and used to compensate future relevant costs, expenses or losses
||||||
|-|-|-|-|-|
|Openingbalance ofdeferredincome|Increase|Amountscarriedforward|Closingbalance ofdeferredincome|Amounts carriedforwardpresented under|
|770,926.90||770,926.90||Non-operating|

|||||
|-|-|-|-|
||||revenue|
|1,000,000.00|1,000,000.00||Non-operatingrevenue|
|6,893,176.00|2,026,023.00|4,867,153.00|Other income|
|8,664,102.90|3,796,949.90|4,867,153.00||

(2) Government grants related to income and used to compensate incurred relevant costs, expenses or losses
|||
|-|-|
|Amounts|Presented under|
|2,945,620.86|Other income|
|647,200.00|Other income|
|158,700.00|Other income|
|21,800.00|Other income|
|100,000.00|Non-operating revenue|
|174,143.66|Non-operating revenue|
|330,300.00|Non-operating revenue|
|4,377,764.52||

2. The amount of government subsidy included in the current profit and loss is included in the current period is 8,174,714.42 yuan.
VI. Interest in other entities
(I) Interest in significant subsidiaries
1. Significant subsidiaries
(1) Basis information
||||||
|-|-|-|-|-|
|Mainoperatingplace|Place ofregistration|Businessnature|Holdingproportion (%)||
||||Direct|Indirect|
|NanjingCity|NanjingCity|Manufacture|96.99|1.38|
|NanjingCity|NanjingCity|Manufacture|75.00||
|NanjingCity|NanjingCity|Manufacture|45.767||
|NanjingCity|NanjingCity|Manufacture|50.70||
|Nanjing|Nanjing|Manufacture|40.00||

||||||
|-|-|-|-|-|
|Mainoperatingplace|Place ofregistration|Businessnature|Holdingproportion (%)||
||||Direct|Indirect|
|City|City||||

(2) Other remarks
1) Remarks on inconsistency between holding proportion owned and voting rights proportion owned in subsidiaries
The Company holds40% equity of Nanjing Putian Datang Information Electronic Co., Ltd. The Company signed the agreement with严耀明 (Yan Yaoming), a shareholder of Nanjing Putian Datang Information Electronic Co., Ltd., to exercise his21% right to vote. The agreement is valid during the period of the existence of Nanjing Putian Datang Information Electronic Co., Ltd. The Company has61% of the voting right during the existence period of Nanjing Putian Datang Information Electronic Co., Ltd.
2) Basis for the control of an investee while holding its half or less than half voting rights, and the non-control of an investee while holding its more than half voting rights
The Company holds45.767% of voting rights in Nanjing Putian Telege Intelligent Building Ltd., the other voting rights are decentralized. The Company has over half member of the Board of Directors, and it not only controls this company but also has a privileged variable return by taking part in Nanjing Putian Telege Intelligent BuildingLtd’s related activity. The Company has the ability to impact the amount of return and control over Nanjing Putian Telege Intelligent Building Ltd.
2. Significant not wholly-owned subsidiaries
(1) Details
||||
|-|-|-|
|Holdingproportion ofnon-controllingshareholders|Profit or lossattributable tonon-controllingshareholders|Dividenddeclared tonon-controllingshareholders|
|1.63%|85,452.96||
|25.00%|-313,203.34||
|54.233%|4,264,516.05|2,169,200.00|
|49.30%|-1,474,270.38||
|60.00%|1,813,970.12||

3. Main financial information of significant not wholly-owned subsidiaries
(1) Assets and liabilities
Closing balance
Subsidiaries
||||||
|-|-|-|-|-|
|Current assets|Non-currentassets|Total assets|Current liabilities|Non-currentliabilities|
|289,176,667.91|13,867,668.85|303,044,336.76|186,080,216.89||
|184,495,806.34|25,450,252.47|209,946,058.81|117,469,511.61||
|241,441,984.86|39,438,367.83|280,880,352.69|157,121,564.64||
|76,559,512.24|601,883.99|77,161,396.23|49,088,870.87||
|35,337,300.26|10,040,345.08|45,377,645.34|20,180,838.56||

(Continued)
Opening balance
Subsidiaries
||||||
|-|-|-|-|-|
|Current assets|Non-currentassets|Total assets|Current liabilities|Non-currentliabilities|
|309,537,813.81|13,592,176.13|323,129,989.94|211,408,383.03||
|176,169,023.07|25,854,512.91|202,023,535.98|108,294,175.42||
|256,432,695.75|39,896,214.78|296,328,910.53|180,433,445.64||
|74,309,078.75|636,133.14|74,945,211.89|43,882,280.07||
|30,926,444.05|10,451,600.76|41,378,044.81|19,204,521.56||

(2) Profit or loss and cash flows
Current period cumulative
||||
|-|-|-|
|Operatingrevenue|Net profit|Totalcomprehensiveincome|
|189,137,568.77|5,242,512.96|5,242,512.96|
|76,791,799.01|-1,252,813.36|-1,252,813.36|
|175,165,797.66|7,863,323.16|7,863,323.16|
|10,520,409.96|-2,990,406.46|-2,990,406.46|
|25,909,924.77|3,023,283.53|3,023,283.53|

(Continued)
Subsidiaries Preceding period comparative
||||
|-|-|-|
|Operatingrevenue|Net profit|Totalcomprehensiveincome|
|243,730,139.55|7,650,094.68|7,650,094.68|
|71,301,568.30|2,326,478.84|2,326,478.84|
|163,937,091.78|6,401,329.59|6,401,329.59|
|28,820,122.05|-182.92|-182.92|
|20,982,232.12|1,964,874.04|1,964,874.04|

(II) Interest in joint venture or associates
1. Significant joint ventures or associates
||||||
|-|-|-|-|-|
|Mainoperatingplace|Place ofregistration|Business nature|Holdingproportion (%)||
||||Direct|Indirect|
|NanjingCity|NanjingCity|Opticalcommunicationproducts productionand sale|50.00||
|NanjingCity|NanjingCity|Industrial parkvenue rentalmanagement etc.|49.64||

2. Main financial information of significant joint ventures
Closing balance/ Opening balance/
Items current period cumulative preceding period comparative SEI-Nanjing Potevio Optical Network Co., Ltd.
||
|-|
|33,268,327.90|
|2,836,164.95|
|924,878.95|
|34,193,206.85|
|7,436,554.79|
|7,436,554.79|
|26,756,652.06|
|13,378,326.03|

Closing balance/ Opening balance/
Items current period cumulative preceding period comparative SEI-Nanjing Potevio Optical Network Co., Ltd.
||
|-|
|13,378,326.03|
|12,270,863.27|
|-16,611.71|
|164,466.39|
|164,466.39|

3. Main financial information of significant associates
Closing balance/ Opening balance/
Items current period cumulative preceding period comparative Potevio Hi-tech Industry Co., Ltd.
||
|-|
|155,481,529.29|
|192,677,112.23|
|348,158,641.52|
|4,147,967.56|
|4,147,967.56|
|344,010,673.96|
|170,766,842.03|
|170,766,842.03|

Closing balance/ Opening balance/
Items current period cumulative preceding period comparative Potevio Hi-tech Industry Co., Ltd.
||
|-|
|12,964,410.68|
|650,880.98|
|650,880.98|
|197,567.20|

4. Aggregated financial information of insignificant joint ventures and associates
||
|-|
|Closing balance/currentperiod cumulative|
|3,040,101.44|
|75,194.64|
|75,194.64|

 VII. Risks related to financial instruments
The Company aims to seek the appropriate balance between the risks and benefits from its use of financial instruments and to mitigate the adverse effects that the risks of financial instruments have on theCompany’s financial performance. Based on such objectives, theCompany’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.
The Company has exposure to the following risks from its use of financial instruments, which mainly include: credit risk, liquidity risk, and market risk. Management have deliberated and approved policies concerning such risks, and details are:
(I) Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
TheCompany’s credit risk is primarily attributable to bank balances and receivables. In order to control such risks, the Company has taken the following measures:
1. Bank balances
The Company deposits its bank balances in financial institutions with relatively high credit levels,
hence, its credit risk is relatively low.
2. Receivables
The Company performs credit assessment on customers who uses credit settlement on a regular basis. The Company selects credible and well-reputed customers based on credit assessment result, and conducts ongoing monitoring on receivables, to avoid significant risks in bad debts.
As theCompany’s credit risks fall into several business partners and customers, as of June 30, 2018,13.16% (December 31, 2017:11.25%) of the total accounts receivable was due from the five largest customers of the Company. The Company has no significant central credit risk.
(II) Liquidity risk
Liquidity risk is the risk that the Company may encounter deficiency of funds in meeting obligations associated with cash or other financial assets settlement, which is possibly attributable to failure in selling financial assets at fair value on a timely basis, or failure in collecting liabilities from counterparts of contracts, or early redemption of debts, or failure in achieving estimated cash flows.
In order to control such risk, the Company utilized financing tools such as notes settlement and bank borrowings, etc. to optimizing financing structures, and finally maintains a balance between financing sustainability and flexibility. The Company has obtained credit limit from several commercial banks to meet working capital requirements and expenditures.
(III) Market risk
Market risk is the risk that the Company may encounter fluctuation in fair value of financial instruments or future cash flows due to changes in market price.
1. Interest risk
Interest risk is the risk that an enterprise may encounter fluctuation in fair value of financial instruments or future cash flows due to changes in market interest. TheCompany’s interest risk relates mainly to borrowings with floating interest rate.
2. Foreign currency risk
Foreign currency risk is the risk arising from changes in exchange rate. The Company is mainly operated in mainland China, with a small amount of imports and exports, and its main activities are denominated in RMB, hence, the Company bears insignificant market risk arising from foreign exchange changes.
Please refer to notes to foreign currency monetary items for details in foreign currency financial assets and liabilities at the end of the period.
VIII. Related party relationships and transactions
(I) Related party relationships
1. Details of parent company
(1) Parent company
|||||
|-|-|-|-|
|Place of registration|Businessnature|Registeredcapital(in million)|Holdingproportion overthe Company|
|No.2 Shangdi 2 Road,Zhongguan VillageEconomy Zone, HaidianDistrict, Beijing|Informationindustry|1,903,05|53.49%|

TheCompany’s ultimate controlling party is中国普天信息产业集团公司 (China POTEVIO Corporation Limited
*).
2. The details of the company's important subsidiaries are illustrated in the notes to the financial statements in other subjects.
3. Joint ventures and associates of the Company
Please refer to notes to interest in other entities for details on theCompany’s significant joint ventures and associates. Details of other joint ventures or associates carrying out related party transactions with the Company in current period or in preceding period but with balance in current period are as follows:
Joint ventures or associates Relationships with the Company
Potevio Hi-tech Industry Co., Ltd. Associates
Nanjing Potevio Telege Cable Co., Ltd. Associates
SEI-Nanjing Potevio Optical Network Co., Ltd. Joint ventures
4. Other related parties of the Company
Related parties Relationships with the Company
南京普天鸿雁电器科技有限公司 An affiliated company of the ultimate (Nanjing Honyar Electrical Technology Co.,Ltd.*) controlling party
南京普天鸿雁电器有限公司 An affiliated company of the ultimate (Nanjing Honyar Electrical Co.,Ltd.*) controlling party
上海普天邮通科技股份有限公司
An affiliated company of the ultimate (Shanghai Potevio Post and Telecommunications
controlling party
Technology Co.,Ltd.*)
北京普天太力通信科技有限公司
An affiliated company of the ultimate (Beijing Potevio Taili Communications Technology Co.,
controlling party
Ltd.*)
杭州鸿雁东贝光电科技有限公司
An affiliated company of the ultimate (Hangzhou Honyar Dongbei Photoelectric Technology
controlling party
Co.,Ltd.*)
上海普天网络技术有限公司 An affiliated company of the ultimate (Shanghai Potevio Network Technology Co.,Ltd.*) controlling party
普天通信有限责任公司 An affiliated company of the ultimate (POTEVIO Telecommunications Co.,Ltd.*) controlling party
普天信息技术有限公司 An affiliated company of the ultimate (Potevio Information Technology Co.,Ltd.*) controlling party
北京立康普通信设备有限公司
An affiliated company of the
Beijing Picom Telecommunications Equipment Co.,
Company
Ltd.
* The English names are for identification purpose only.
Related parties Relationships with the Company
曼奈柯斯工业电气（中国）有限公司 Non-controlling shareholder of the Mennekes Electric Industrial Co., Ltd. (China) Company’s subsidiary
普天和平科技有限公司 An affiliated company of the ultimate (Potevio Heping Technology Co.,Ltd.*) controlling party
杭州鸿雁电器有限公司 An affiliated company of the ultimate Hangzhou Honyar Electrical Co., Ltd. controlling party
普天国际贸易有限公司 An affiliated company of the
(Potevio International Trading Co.,Ltd.*) ultimate controlling party
(II) Related party transactions
1. Purchase and sale of goods, rendering and receiving services
(1) Purchase of goods and receiving of services
|||
|-|-|
|Content of transaction|Current periodcumulative|
|Telecommunicationproducts||
|Telecommunicationproducts||
|Telecommunicationproducts|85,492.00|
|Telecommunicationproducts|597,863.25|
|Telecommunicationproducts||

(2) Sale of goods and rendering of services
|||
|-|-|
|Content of transaction|Current periodcumulative|
|Telecommunicationproducts|12,975,234.34|
|Telecommunicationproducts|238,683,644.38|
|Telecommunicationproducts|6,423.67|
|Telecommunicationproducts||
|Telecommunicationproducts||
|Telecommunicationproducts||
|Telecommunicationproducts||
|Telecommunicationproducts||

2. Related party leases
(1) The Company as the lessor
|||
|-|-|
|Types of assetleased|Lease income forcurrent period|
|Buildings and|318,215.64|

|||
|-|-|
|Types of assetleased|Lease income forcurrent period|
|structures||

(2) The Company as the lessee
|||||
|-|-|-|-|
|Types of assetleased|Lease expensesfor currentperiod|Lease expensesfor theprecedingperiod|Propertyservices forcurrent period|
|Buildings andstructures|372,669.04|781,500.33|797,626.96|

3. Related party guarantees
The Company and its subsidiaries as guaranteed parties
||||
|-|-|-|
|Amountguaranteed|Commence-ment date|Maturitydate|
|30,000,000.00|2017/11/30|2018/11/30|
|10,000,000.00|2018/1/27|2018/9/28|
|30,000,000.00|2018/2/1|2018/9/28|
|30,000,000.00|2018/3/9|2019/3/9|

 4. Keymanagement’s emoluments
||
|-|
|Current period cumulative|
|514,805.62|

 5. Interest expenditures
In the current period, the Company paid to China Potevio Information Industry Inc a total of 4,253,778.75 yuan as interest expenditures.
(III) Balance due to or from related parties
1. Balance due from related parties
|||||
|-|-|-|-|
|Related parties|Closing balance|||
||Book balance|Provision forbad debts|Book balance|
|China Putian InformationIndustry Co., Ltd.|||3,402,240.00|
|Putian International TradeCo., Ltd.|||3,987,403.60|
||||7,389,643.60|
|China PotevioInformation Industry Inc|629,899.32|||
|China Putian InformationIndustry Co., Ltd.|9,910,887.04|629,319.50|13,315,921.88|
|Potevio InformationTechnology Co., Ltd.|14,963,664.18||20,991,047.20|
|Shanghai PotevioNetwork Technology Co.,Ltd.|536,319.70|319,337.76|536,319.70|
|Shanghai Potevio Postand TelecommunicationsTechnology Co., Ltd.|8,755,534.00|7,004,427.20|8,755,534.00|

|||||
|-|-|-|-|
|Related parties|Closing balance|||
||Book balance|Provision forbad debts|Book balance|
|Potevio Hi-tech IndustryCo., Ltd.|||14,455.30|
|Potevio HepingTechnology Co., Ltd.|333,706.00||333,706.00|
||35,130,010.24|7,953,084.46|43,946,984.08|
|Potevio HepingTechnology Co., Ltd.|||436,294.00|
||||436,294.00|
|China Putian InformationIndustry Co., Ltd.|1,000,000.00|40,000.00|1,020,000.00|
|Beijing PicomTelecommunicationsEquipment Co., Ltd.|28,912,122.71|28,912,122.71|28,912,122.71|
|Potevio Hi-tech IndustryCo., Ltd.|255,238.96||255,238.96|
||30,167,361.67|28,952,122.71|30,187,361.67|

 2. Balance due to related parties
|||
|-|-|
|Related parties|Closing balance|
|SEI-Nanjing Potevio OpticalNetwork Co., Ltd.||
|China Potevio InformationIndustry Inc|19,466,652.30|
|Nanjing Honyar ElectricalTechnology Co., Ltd.|242,595.99|
|Shanghai Potevio NetworkTechnology Co., Ltd.|11,685.00|
|Nanjing Putian HongyanElectrical Technology Co., Ltd.|58,932.10|
|Mennekes Electric Industrial Co.,Ltd. (China)||
|Potevio Information TechnologyCo., Ltd.||
||19,779,865.39|
|China Potevio InformationIndustry Inc|262,227,894.73|
|Nanjing Honyar ElectricalTechnology Co., Ltd.||
||262,227,894.73|
|SEI-Nanjing Potevio OpticalNetwork Co., Ltd.||
|China Potevio InformationIndustry Inc|11,040,000.00|
||11,040,000.00|

 IX. Commitments and contingencies
None
X. Events after balance sheet day
None
XI. Other important matters
1. Correction of prior accounting errors
Retrospect method
|||
|-|-|
|Procedure|Affected item（2014）|
|This error was approved by the10th Board of Directors of the 7thsession of the company. In thisissue, the retrospective restatementmethod was used to correct theerror.|Cash and bank balance|
||Inventories|
||Undistributed profit|
||Operating cost|
||Selling expenses|
||Financial expenses|
||Net profit attributable to owners ofthe parent company|
||Net assets attributable to owners ofthe parent company|

|||
|-|-|
|Procedure|Affected item（2015）|
|This error was approved by the10th Board of Directors of the7th session of the company. Inthis issue, the retrospectiverestatement method was used tocorrect the error.|Cash and bank balance|
||Inventories|
||Tax and rates payable|
||Undistributed profit|
||Operating cost|
||Selling expenses|
||Financial expenses|
||Income tax expenses|
||Net profit attributable to owners ofthe parent company|
||Net assets attributable to owners ofthe parent company|

|||
|-|-|
|Procedure|Affected item（2016）|
|This error was approved by the10th Board of Directors of the7th session of the company. Inthis issue, the retrospectiverestatement method was used tocorrect the error.|Cash and bank balance|
||Inventories|
||Tax and rates payable|
||Undistributed profit|
||Operating cost|
||Selling expenses|
||Financial expenses|
||Income tax expenses|
||Net profit attributable to owners ofthe parent company|
||Net assets attributable to owners ofthe parent company|

|||
|-|-|
|Procedure|Affected item（2017）|
|This error was approved by the10th Board of Directors of the7th session of the company. Inthis issue, the retrospectiverestatement method was used tocorrect the error.|Cash and bank balance|
||Inventories|
||Undistributed profit|
||Operating cost|
||Selling expenses|
||Financial expenses|
||Income tax expenses|
||Net profit attributable to owners ofthe parent company|
||Net assets attributable to owners ofthe parent company|

XII. Segment information
1. Identification basis for reportable segments
Reportable segments are identified based on operating segments which are determined based on the structure of theCompany’s internal organization, management requirements and internal reporting system. The Company identified reportable segments based on products, which include video conferencing products, generic cable products, electrical products, Special network communication products, wiring products and other products. Assets and liabilities shared by different segments are allocated pro rata among segments.
The Company identified reportable segments based on geographic information, revenue from main operations and costs of main operations are allocated between segments based on locations where sales realized, and assets and liabilities are allocated based on locations of operating entities.
The Company identified reportable segments based on products, assets and liabilities of each segment are the actual amount of its proportion in assets and liabilities, and revenue from main operations and cost of main operations are those generated or incurred by each product segment.
2. Financial information of reportable segments
Products segment
|||||||
|-|-|-|-|-|-|
|Videoconferencingproducts|Generic cableproducts|Electricalproducts|Special networkcommunicationproducts|Wiring products|Inter-segmentoffsetting|
|188,928,044.96|173,351,077.26|73,588,442.32|237,230,769.20|278,378,982.33|-17,434,919.71|
|148,545,094.33|134,961,572.73|59,708,975.76|233,505,231.77|236,479,779.73|-17,334,805.39|
|303,044,336.76|278,053,400.07|209,946,058.81|284,889,590.93|1,640,437,949.12|-614,676,991.58|
|187,873,205.71|157,121,564.64|117,469,511.61|260,093,247.01|1,386,829,694.18|-462,885,196.13|

 XIII. Notes to items of parent company financial statements
(I) Notes to items of parent company balance sheet
1. Accounts receivable
(1) Details
1) Details on categories
Closing balance
|||||
|-|-|-|-|
|Book balance||Provision for bad debts||
|Amount|% to total|Amount|Provisionproportion (%)|
|462,425,588.11|99.59|24,339,970.09|5.26|
|462,425,588.11|99.59|24,339,970.09|5.26|
|1,881,238.51|0.41|1,881,238.51|100.00|

Closing balance
|||||
|-|-|-|-|
|Book balance||Provision for bad debts||
|Amount|% to total|Amount|Provisionproportion (%)|
|464,306,826.62|100.00|26,221,208.60|5.65|

 (Continued)
Opening balance
|||||
|-|-|-|-|
|Book balance||Provision for bad debts||
|Amount|% to total|Amount|Provisionproportion (%)|
|447,892,760.42|99.58|22,328,923.45|4.99|
|447,892,760.42|99.58|22,328,923.45|4.99|
|1,881,238.51|0.42|1,881,238.51|100.00|
|449,773,998.93|100.00|24,210,161.96|5.38|

 2) In portfolios, accounts receivable with provision made on a collective basis with age analysis method
Closing balance
Ages
|||
|-|-|
|Book balance|Provision for bad debts|
|280,121,011.10||
|130,147,379.41||
|21,235,722.92|2,123,572.28|
|6,250,314.19|1,875,094.27|
|3,160,842.69|1,264,337.08|
|12,166,756.71|9,733,405.37|
|9,343,561.09|9,343,561.09|
|462,425,588.11|24,339,970.09|

 (2) Provisions made, collected or reversed in current period
Provision for bad debts made in current period totaled 2,011,046.64 yuan.
(3) Details of the top 5 debtors with largest balances
|||
|-|-|
|Book balance|Proportion to thetotal balance ofaccountsreceivable (%)|

|||
|-|-|
|Book balance|Proportion to thetotal balance ofaccountsreceivable (%)|
|32,406,347.08|6.98|
|16,964,697.28|3.65|
|13,819,926.92|2.98|
|11,804,926.45|2.54|
|10,205,143.45|2.20|
|85,201,041.18|18.35|

2. Other receivables
(1) Details
1) Details on categories
Closing balance
|||||
|-|-|-|-|
|Book balance||Provision for bad debts||
|Amount|% to total|Amount|Provisionproportion (%)|
|28,912,122.71|10.17|28,912,122.71|100.00|
|251,143,720.57|88.39|3,159,775.10|1.26|
|224,403,521.34|78.97|||
|26,740,199.23|9.42|3,159,775.10|11.82|
|4,097,886.33|1.44|4,097,886.33|100.00|
|284,153,729.61|100.00|36,169,784.14|12.73|

 (Continued)
Opening balance
|||||
|-|-|-|-|
|Book balance||Provision for bad debts||
|Amount|% to total|Amount|Provisionproportion (%)|
|28,912,122.71|37.21|28,912,122.71|100.00|
|44,691,252.14|57.52|3,496,231.92|7.82|

* The English names are for identification purpose only.
Opening balance
|||||
|-|-|-|-|
|Book balance||Provision for bad debts||
|Amount|% to total|Amount|Provisionproportion (%)|
|23,644,138.80|30.43|||
|21,047,113.34|27.09|3,496,231.92|16.61|
|4,097,886.33|5.27|4,097,886.33|100|
|77,701,261.18|100.00|36,506,240.96|46.98|

 2) Other receivables of individually significant amount and with provision made on an individual basis
||||
|-|-|-|
|Book balance|Provision forbad debts|Provisionproportion (%)|
|28,912,122.71|28,912,122.71|100.00|
|28,912,122.71|28,912,122.71||

3) In portfolios, other receivables with provision made on other method.
Closing balance
Portfolio
|||
|-|-|
|Book balance|Provision for bad debts|
|224,403,521.34||
|224,403,521.34||

4) In portfolios, other receivables with provision made on a collective basis with age analysis method
Closing balance
Ages
|||
|-|-|
|Book balance|Provision for bad debts|
|14,076,549.27||
|6,729,123.67||
|1,870,743.20|187,074.32|
|1,042,298.00|312,689.40|
|511,458.70|204,583.48|
|272,992.43|218,393.94|
|2,237,033.96|2,237,033.96|
|26,740,199.23|3,159,775.10|

 5) Other receivables of individually not significant amount and with provision made on an
individual basis
||||
|-|-|-|
|Book balance|Provision forbad debts|Provisionproportion (%)|

||||
|-|-|-|
|Book balance|Provision forbad debts|Provisionproportion (%)|
|4,097,886.33|4,097,886.33|100.00|
|4,097,886.33|4,097,886.33||

(2) Provisions made, collected or reversed in current period
Provisions for bad debts made in current period totaled -336,456.82 yuan.
(3) Other receivables categorized by nature
||
|-|
|Closing balance|
|867,221.19|
|11,990,480.82|
|263,566,303.89|
|7,729,723.71|
|284,153,729.61|

 (4) Details of the top 5 debtors with largest balances
|||||
|-|-|-|-|
|Nature ofreceivables|Book balance|Ages|Proportion to thetotal balance ofother receivables(%)|
|Temporaryadvance paymentreceivable|28,912,122.71|Over 6 years|10.17|
|Temporaryadvance paymentreceivable|1,000,000.00|1-3 years|0.35|
|Temporaryadvance paymentreceivable|835,252.00|Within 1 year|0.29|
|Temporaryadvance paymentreceivable|738,706.63|1-6 years|0.26|
|Deposits|400,000.00|1-2 years|0.14|
||31,886,081.34||11.21|

 3. Long-term equity investments
(1) Categories
||||||
|-|-|-|-|-|
|Closing balance|||||
|Book balance|Provision forimpairment|Carrying amount|Book balance|Provision forimpairment|
|173,787,270.64|1,910,520.00|171,876,750.64|173,787,270.64|1,910,520.00|
|184,147,630.69||184,147,630.69|183,937,404.79||

||||||
|-|-|-|-|-|
|357,934,901.33|1,910,520.00|356,024,381.33|357,724,675.43|1,910,520.00|

 (2) Investments in subsidiaries
||||||
|-|-|-|-|-|
|Opening balance|Increase|Decrease|Closing balance|Provision forimpairment made incurrent period|
|57,831,011.71|||57,831,011.71||
|5,610,000.00|||5,610,000.00||
|2,610,457.00|||2,610,457.00||
|1,294,510.00|||1,294,510.00||
|13,860,000.00|||13,860,000.00||
|3,320,003.45|||3,320,003.45||
|1,910,520.00|||1,910,520.00||
|7,741,140.41|||7,741,140.41||
|40,997,683.00|||40,997,683.00||
|33,175,148.00|||33,175,148.00||
|5,436,797.07|||5,436,797.07||
|173,787,270.64|||173,787,270.64||

 (3) Investments in associates and joint ventures
|||||
|-|-|-|-|
|Opening balance||||
||Investmentsincreased|Investmentsdecreased|Investment incomerecognized underequity method|
|13,296,092.84|||84,695.78|
|13,296,092.84|||84,695.78|
|170,641,311.95|||323,097.32|
|170,641,311.95|||323,097.32|
|183,937,404.79|||407,793.10|

(Continued)
||||||
|-|-|-|-|-|
|Increase/decrease||||Closing balance|
|Changes inother equity|Cashdividend/profitdeclared fordistribution|Provision forimpairment|Others||
|||||13,380,788.62|
|||||13,380,788.62|
||197,567.20|||170,766,842.07|

||||||
|-|-|-|-|-|
|Increase/decrease||||Closing balance|
|Changes inother equity|Cashdividend/profitdeclared fordistribution|Provision forimpairment|Others||
||197,567.20|||170,766,842.07|
||197,567.20|||184,147,630.69|

(II) Notes to items of the parent company income statement
1. Operating revenue/ Operating cost
||||
|-|-|-|
|Current period cumulative|||
|Revenue|Cost|Revenue|
|473,077,482.03|437,252,856.53|477,333,066.05|
|24,729,485.21|23,763,158.86|14,937,079.42|
|497,806,967.24|461,016,015.39|492,270,145.47|

 2. Investment income
||
|-|
|Current period cumulative|
|407,793.10|
|407,793.10|

 XIV. Other supplementary information
(I) Non-recurring profit or loss
1. Schedule of non-recurring profit or loss of current period
||
|-|
|Amount|
|30,156,818.80|
|3,022,570.56|
|225,371.60|
|-83,474.01|
|33,321,286.95|
|114,123.01|
|36,254.07|
|33,170,909.87|

(II) RONA and EPS
1. Details
|||
|-|-|
|Weighted averageRONA (%)||
||Basic EPS|
|-3.02|-0.05|
|-12.64|-0.20|

2. Calculation process of weighted average RONA
|||
|-|-|
||Symbols|
||A|
||B|
||C=A-B|
||D|
||E|
||F|
||G|
||H|
|Translation reserveincreased in currentperiod|-122,046.30|
|Number of monthscounting from the nextmonth when the netassets were increased ordecreased to the end ofthe reporting period|3.00|
||K|
||L= D+A×1/2+E×F/K-G×H/K±I×J/K|
||M=A/L|
||N=C/L|

3. Calculation process of basic EPS and diluted EPS
(1) Calculation process of basic EPS
Items Symbols
Current period
cumulative
||
|-|
|Symbols|
|A|
|B|
|C=A-B|
|D|
|E|
|F|
|G|
|H|
|I|
|J|
|K|
|L=D+E+F×G/K-H×I/K-J|
|M=A/L|
|N=C/L|

(2) The calculation process of diluted EPS is the same with that of basic EPS.
Nanjing Putian Telecommunications Co., Ltd. August 24, 2018