Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Nanjing Putian Telecommunications Co., Ltd.

2019 Annual Report

April 2020

1 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section I. Important Notice, Contents and Interpretation

Board of Directors, Supervisory Committee, all directors, supervisors and senior executives of Nanjing Putian Telecommunications Co., Ltd. (hereinafter referred to as the Company) hereby confirm that there are no any fictitious statements, misleading statements, or important omissions carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. Wang Wenkui, Principal of the Company, Wang Huilin, person in charge of accounting works and Wang Huailin, person in charge of accounting organ (accounting principal) hereby confirm that the Financial Report of 2019 Annual Report is authentic, accurate and complete.

All directors are attend the Meeting for Report deliberation.

Concerning the forward-looking statements with development strategy, operation plans and targets involved in the Report, they do not constitute a substantial commitment for investors. Investors are advised to exercise caution when investment risks exist.

Investors’ attention is requested to see the risk factors that the Company may be faced in its future development which has been analyzed in the “Section IV

Discussion and Analysis of Operation” in this report.

The Company has no plans of cash dividend distributed, no bonus shares and has no share converted from capital reserve either.

2 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Contents

Section I Important Notice, Contents and Interpretation ...... 2

Section II Company Profile and Main Financial Indexes ...... 5

Section III Summary of Company Business ...... 10

Section IV Discussion and Analysis of Operation ...... 14

Section V Important Events ...... 34

Section VI Changes in shares and particular about shareholders ...... 61

Section VII Preferred Stock ...... 68

Section VIII Convertible Bonds...... 69

Section IX Particulars about Directors, Supervisors and Senior Executives ...... 70

Section X Corporate Governance ...... 86

Section XI Corporate Bonds...... 93

Section XII Financial Report ...... 94

Section XIII Documents available for reference ...... 196

3 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Interpretation

Items Refers to Contents

CSRC Refers to China Securities Regulatory Commission

SZ Stock Exchange Refers to Shenzhen Stock Exchange

China Potevio Company Limited (controlling shareholder of the Potevio Refers to Company)

The Company, Company, Nanjing Putian Refers to Nanjing Putian Telecommunications Co., Ltd.

Nanjing Southern Telecom Co., Ltd(controlling subsidiary of the Southern Telecom, Southern Company Refers to Company)

Nanjing Putian Telege Intelligent Building Ltd.(controlling Telege Building Refers to subsidiary of the Company)

Nanjing Putian Datang Information Electronic Co., Ltd. (controlling Datang Company Refers to subsidiary of the Company)

Reporting period Refers to Year of 2019

4 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section II Company Profile and Main Financial Indexes

I. Company information

Short form of the stock NJ TEL B Stock code 200468

Stock exchange for listing Shenzhen Stock Exchange

Name of the Company (in 南京普天通信股份有限公司 Chinese)

Short form of the Company 南京普天 (in Chinese)

Foreign name of the Nanjing Putian Telecommunications Co., Ltd. Company(if applicable)

Legal representative Wang Wenkui

No. 58 Qinhuai Road, Jiangning Economics and Technology Development Zone, Nanjing, Jiangsu Registrations add. Province

Code for registrations add 211100

Putian Technology Pioneer Park, No.8 Fenghui Avenue, Yuhuatai District, Nanjing, Jiangsu Offices add. Province

Codes for office add. 210039

Company’s Internet Web Site www.postel.com.cn

E-mail [email protected]

II. Person/Way to contact

Secretary of the Board Rep. of security affairs

Name Li Jing Xiao Hong

Putian Technology Pioneer Park, No.8 Putian Technology Pioneer Park, No.8 Contact address Fenghui Avenue, Yuhuatai District, Fenghui Avenue, Yuhuatai District, Nanjing, Jiangsu Province Nanjing, Jiangsu Province

Tel. 86-25-69675809 86-25-69675865

Fax. 86-25-52416518 86-25-52416518

E-mail [email protected] [email protected]

III. Information disclosure and preparation place

Newspaper appointed for information disclosure Securities Times; Hong Kong Commercial Daily

5 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Website for annual report publish appointed by CSRC www.cninfo.com.cn

Preparation place for annual report Office of the BOD

IV. Registration changes of the Company

Organization code 91320000134878054G

Changes of main business since listing (if No change applicable)

The original controlling shareholder of the Company was China Putian Corporation. In Previous changes for controlling 2005, China Putian Corporation transferred all the holding shares free to China Potevio. shareholders (if applicable) The controlling shareholder of the Company changed to China Potevio.

V. Other relevant information

CPA engaged by the Company

Name of CPA Pan-China Certified Public Accountants (LLP)

17/F, Tower B, Beijing International Building, No. 18, Nandajie Jia, ZOL, Haidian District, Offices add. for CPA Beijing

Signing accountant Jin Jingyu, Zhang Jinghui Sponsor engaged by the Company for performing continuous supervision duties in reporting period

√Applicable □ Not applicable

Office address of sponsor Sponsor institution Sponsor representative Continuous supervision period institution

3/F, Tower B, Kaiheng Center, China Securities Co., Ltd. No.2 Chaonei St., Dongcheng Wang Min, Zhao Fengbin 2018.8.15-2019.12.31 District, Beijing Financial consultant engaged by the Company for performing continuous supervision duties in reporting period

□ Applicable √ Not applicable

VI. Main accounting data and financial indexes

Whether it has retroactive adjustment or re-statement on previous accounting data or not □ Yes √No

Changes (+,-) 2019 2018 compared with the 2017 previous year

Operating revenue (RMB) 1,338,284,194.21 1,995,627,772.60 -32.94% 2,254,399,406.04

6 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Net profit attributable to shareholders of the listed -169,088,516.69 5,859,214.84 -2,985.86% 8,982,857.76 Company(RMB)

Net profit attributable to shareholders of the listed Company -171,904,933.41 -21,461,955.87 -700.98% 6,254,448.62 after deducting non-recurring gains and losses(RMB)

Net cash flow arising from 22,686,114.91 -155,418,733.83 114.60% -47,220,769.58 operating activities(RMB)

Basic earnings per share -0.79 0.03 -2,733.33% 0.04 (RMB/Share)

Diluted earnings per share -0.79 0.03 -2,733.33% 0.04 (RMB/Share)

Weighted average ROE -66.55% 1.66% -68.21% 2.60%

Changes (+,-) compared with the Year-end of 2019 Year-end of 2018 Year-end of 2017 year-end of previous year

Total assets (RMB) 1,652,005,519.44 2,120,744,292.41 -22.10% 2,114,332,229.50

Net assets attributable to shareholder of listed Company 169,543,106.29 355,289,728.24 -52.28% 350,248,482.53 (RMB)

VII. Difference of the accounting data under accounting rules in and out of China

1. Difference of the net profit and net assets disclosed in financial report, under both IAS (International Accounting Standards) and Chinese GAAP (Generally Accepted Accounting Principles)

□ Applicable √ Not applicable The Company had no difference of the net profit or net assets disclosed in financial report, under either IAS (International Accounting Standards) or Chinese GAAP (Generally Accepted Accounting Principles) in the period.

2. Difference of the net profit and net assets disclosed in financial report, under both foreign accounting rules and Chinese GAAP (Generally Accepted Accounting Principles)

□ Applicable √ Not applicable The Company had no difference of the net profit or net assets disclosed in financial report, under either foreign accounting rules or Chinese GAAP (Generally Accepted Accounting Principles) in the period.

VIII. Quarterly main financial index

In RMB

7 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Q 1 Q 2 Q 3 Q 4

Operating revenue 489,849,942.04 267,347,429.76 277,519,139.93 303,567,682.48

Net profit attributable to -36,835,612.35 -20,692,912.53 -16,033,203.08 -95,526,788.73 shareholders of the listed Company

Net profit attributable to shareholders of the listed Company -37,608,907.37 -21,251,648.24 -17,529,611.58 -95,514,766.22 after deducting non-recurring gains and losses

Net cash flow arising from -196,430,725.42 32,333,994.68 -10,104,059.42 196,886,905.07 operating activities

Whether there are significant differences between the above-mentioned financial index or its total number and the relevant financial index disclosed in the Company’s quarterly report and semi-annual report □Yes √ No

IX. Items and amounts of extraordinary profit (gains)/loss

√Applicable □ Not applicable In RMB

Item 2019 2018 2017 Note Gains/losses from the disposal of non-current asset (including the write-off 119,033.08 33,483,456.05 -481,922.28 that accrued for impairment of assets) Governmental subsidy reckoned into current gains/losses (not including the subsidy enjoyed in quota or ration according to 4,265,247.47 8,554,841.22 5,534,839.79 national standards, which are closely relevant to enterprise’s business)

Gains/losses of debt restructuring -34,865.18

Other non-operating revenue and expenditure except for the aforementioned -185,497.35 -165,751.16 49,304.02 items

Payable unable to paid 362,546.35 1,332,427.34

Less: impact on revenue tax 154,871.99 5,400,947.05 1,150,984.62

Impact on minority shareholders’ 1,590,040.84 10,482,855.69 1,187,962.59 equity (post-tax)

Total 2,816,416.72 27,321,170.71 2,728,409.14 --

Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, explain reasons

8 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

□ Applicable √ Not applicable In reporting period, the Company has no particular about items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss

9 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section III Summary of Company Business

I. Main businesses of the Company in the reporting period

The Company is a state-controlled communications equipment manufacturing Company, of which the main business is R&D, production and sales of information communication equipment. The products of the company and its subsidiaries involved optical communication networks, wireless communication networks, data applications, and industrial electrical and other fields, the main products are optical communication network connection equipment, private network communication products, multimedia communication equipment, integrated wiring and building intelligent products etc., customers include domestic telecom operators, tower companies and industry customers in the government, finance, electric power, medical, rail transit and other fields, and the products cover all provinces and cities in the country and are exported to foreign countries.

At present, the business of the company’s headquarters includes optical wiring network and communication supporting overall solutions (ODN overall solution, optical network intelligent solution, energy-saving data center solution), private network etc. The optical wiring network and communication supporting overall solution are mainly used for domestic communication network construction, radio and television network transformation, high-speed rail communication construction, urban subway construction and e-commerce industry etc. The private network communication products mainly produce and process ad-hoc network communication equipment according to customer requirements for establishing small and medium-sized dedicated communication networks.

The business of main subsidiaries includes multimedia communication and application solutions, building intelligent integrated solutions, industrial intelligent power distribution systems, solar street light control systems, etc., among them, the main business of the subsidiary Nanjing Southern Telecom Co., Ltd. is to offer remote collaborative application solutions for large and medium-sized industry customers in governments, finance, medical, education and other fields, and the main products are video conferencing products. The subsidiary Nanjing Putian Telege Intelligent Building Ltd. mainly provides medium- and high-end integrated wiring and intelligent application solutions for customers. The subsidiary Nanjing Mennekes Electric Appliances Co., Ltd. provides industrial intelligent power distribution products for various industrial sites such as rail transit, airports, ports, etc. The subsidiary Nanjing Putian Datang Information Electronic Co., Ltd. mainly provides solar street lamp controllers and IOT street lamp monitoring systems. .

The company has market networks covering all parts of the country, and its main customers include domestic telecom operators and customers in various industries. The company mainly obtains business opportunities by participating in project bidding, designs schemes according to the project requirements, produces or purchases the equipment required by the customer, and takes responsible for the installation and debugging, and realizes the profit after deducting the cost from the contract price. The company’s operating results are mainly affected by factors such

10 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report as capital expenditures, informatization investment and bidding results, fluctuations in raw material prices and changes in other costs of telecom operators and industry customers.

During the reporting period, the situation at home and aboard was complex and severe, the downward pressure on domestic economy increased. In terms of industry environment, 4G construction has been basically completed, operator capital investment has slowed, competition in the communications equipment industry has intensified, and the company’s operating pressure has further increased. On the other hand, the promotion of industrial policies such as 5G construction, smart grid construction, and domestic informatization in the telecom industry has also brought new development opportunities to the company. As a state-owned communications equipment manufacturing company, the company will continue to strengthen its technological innovation capabilities, increase the cultivation and development of independent products, and further enhance its market competitiveness by relying on the established brand strength and influence in the industry market.

In 2019, the company became a member unit of the Jiangsu Information Technology Application Innovation Industry Alliance, and joined the Information Technology Application Innovation Working Committee of the China Electronics Standardization Association, and became a member unit of the Information Technology Application Innovation Working Committee, which helped the company to improve the technical research, product adaptation, and industrial collaboration capabilities of basic hardware products, and provided users with safer and more reliable products and solutions. At the same time, the company has obtained first-level dealer qualification of Huawei’s intelligent security systems (machine vision), and expanded the channel scale for the further development.

II. Major changes in main assets

1. Major changes in main assets

Major assets Note of major changes

Equity assets No major changes in the period

Fixed assets No major changes in the period

Intangible assets No major changes in the period

Ending balance amounted to 13.05 million yuan, an increased of 3.58 million yuan compared with that of period-beginning, main changes: construction in progress increased in the period with 10.26 million yuan for the product development center Construction in progress construction by subsidiary Putian Datang; relevant construction projects in Technology Pioneer Park of the Company was completed in the period and transferred to fixed assets, the construction in progress has 5.78 million yuan reduced.

11 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Ending balance amounted to 33.76 million yuan, a decreased of 155.09 million yuan compared with that of period-beginning, mainly due to the receipt of purchase invoices Account paid in advance from account paid in advance to suppliers during the reporting period, and the account paid in advance is charged.

2. Main overseas assets

□ Applicable √ Not applicable III. Core Competitiveness Analysis As a subsidiary of the national large-scale enterprise Putian Group, the company adheres to the “product + solution + service” strategy, and continuously accelerates the product innovation, industrial structure adjustment and transformation and upgrading. After years of efforts, it has gradually transformed from a communication manufacturer to an information communication integrated solution service provider. The company’s business belongs to the key development and support area of the country, and has a large market demand and development space. The company has a complete industrial chain structure, and good research and development capabilities, production capacity, and marketing capabilities, and has established a good brand strength and influence in the industry market and operator market. The company’s leading products have strong market competitiveness in the industry. The company has a mature market network nationwide, has good product promotion and marketing capabilities. In 2019, the company became a member unit of the Jiangsu Information Technology Application Innovation Industry Alliance, and joined the Information Technology Application Innovation Working Committee of the China Electronics Standardization Association, and became a member unit of the Information Technology Application Innovation Working Committee, which helped the company to improve the technical research, product adaptation, and industrial collaboration capabilities of basic hardware products, and provided users with safer and more reliable products and solutions. At the same time, the company has obtained first-level dealer qualification of Huawei’s intelligent security systems (machine vision), and expanded the channel scale for the further development. In 2019, the company’s distributed storage software was selected into the big data excellent product and application solution case set of the Ministry of Industry and Information Technology (2019), and was awarded the title of “Hundred Big Data Excellent Case”. The subsidiary Southern Telecom has rich professional experience in the field of video conferencing. In recent years, it has increased independent innovation, the proportion of independent product operations has gradually increased, and its sustainable development capacity has been further improved. It obtained the “2019 Chinese Government Informatization Solution Case Innovation Award” issued by the China Information Association, and the government affairs cloud video application won the Government Informatization Solution Innovation Award. The subsidiary Telege Building had stable and good channel resources in integrated cabling products, paid attention to independent innovation, won the top ten brands of integrated cabling for many years, and participated in the preparation of “Data Center 400G Network Cabling Technology White Paper” in 2019, and “China Data Center Development Blue Paper” and other standards, cabling products won the China Data Center Expert Recommendation Award, optical fiber pre-termination products were recommended by experts of the Data Center Association. The industrial intelligent power

12 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report distribution products of the subsidiary Nanjing Mennekes had a high market share in the rail transit market segment with high professionalism and strong competitiveness. The solar street lighting control system of the subsidiary Putian Datang ranked ahead in the industry market. The company is accelerating the transformation and upgrading from “manufacturing” to “intelligent manufacturing” to comprehensively enhance the industrial competitiveness.

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Section IV Discussion and Analysis of Operation

1. Introduction During the reporting period, the situation at home and abroad was complicated and severe, Sino-US trade frictions continued, the downward pressure on domestic economy increased, the industry in which the company was located was fiercely competitive, and the company faced great operating pressure and difficulties. The company focused on the four key aspects of opening up sources, reducing expenditures, innovation, and assessment, continuously improved the company’s development quality, strive to strengthen the company’s business foundation, and spared no efforts in “compensating for shortcomings, strengthening the weaknesses” through resource focus and optimized allocation, improved the basic situation of the company’s development and promoted the company’s healthy operation.

In terms of industrial operation, we make use of the existing resources to operate, concentrate on strengthening and deepening the leading industry, cultivate and enhance the core competitiveness of the Company in the future.

1. Focused on main business and gave full play to advantages The company cancelled some long-term loss-making operating entities and further focused on its main business, gave full play to its own advantages in technology, industry and customers, strengthened the foundation and stabilized the main business development. The company’s outdoor integrated cabinets and other five types of products participated in the selection of iron tower and were shortlisted in many provinces. It successfully entered the project cooperation directories of Ali, Tencent, Huawei and other well-known enterprises, took advantage of independent design and implementation, and participated in the construction of data centers such as Wuxi Mobile Baidu Project and Nanjing Telecom Tencent Project. It participated in the informatization infrastructure construction of the main stadium of the 7th World Military Games, and provided communication support.

Telege Building actively followed the development of the military, medical, education and other industries, successfully completed the supply of integrated cabling products for No. 92 project of a command center, and successfully served the venue construction of the Winter Olympics in Beijing; Southern Telecom’s Putian product business line completed the sweeping work of insurance, county-level medical treatment and other industries, and cooperated with Polycom manufacturers to successfully be selected as an equipment supplier of the State Taxation Administration, and won the bid for the single-source procurement project of the Agricultural Bank’s “new generation” video conference system transformation, the sales of independent products have increased significantly over the same period last year. Nanjing Mennekes continued to deepen its efforts in the field of rail transportation and successfully signed contracts for subway projects in Ningbo, Shenzhen, Beijing and other cities.

14 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

2.Strengthen innovation & Restore confidence Adhere to the market-oriented, customer demand as the foothold and constantly strengthen technological innovation, concentrate on independent R&D, and strive to achieve key application of technological innovation.

Cabling products launched high-performance flame-retardant 3A cables, eight types of cabling systems passed the inspection of the Ministry of Industry and Information Technology, “Fengshang” new series increased two products and low-smoke halogen-free cables, and has completed small batch production. For video conference products, the development and small-batch trial production of Ruijing hardware dual-stream box products have been completed and stabilized for commercial use; the software and hardware development of the new generation of Ruijing video conference terminals has been completed, and trial prototypes have been launched; the construction and preliminary trial of demonstration cloud platform and conference management system and test cloud platform have been completed; the low-voltage electrical products completed the production design and commissioning tasks of the environmental control cabinet, and were first applied to the main line of the subway. Smart city products based on NB-IoT smart manhole covers have been successfully selected as a bidder for the “Beijing Unicom Smart Manhole Cover” bidding and procurement project. The product research of new product “optoelectronic integrated box for base station” has been completed and achieved sales. Datang Company further stabilized and expanded the development of solar street lighting control system, actively explored the addition of Internet of Things functions in products, and further improved the IoT street lighting antenna and other products. New products such as smart power supplies, mains single-light controllers, and smart cruise ship terminal products have all been produced in small batches.

In 2019, the company became a member unit of the Jiangsu Information Technology Application Innovation Industry Alliance, and joined the Information Technology Application Innovation Working Committee of the China Electronics Standardization Association, and became a member unit of the Information Technology Application Innovation Working Committee, which helped the company to improve the technical research, product adaptation, and industrial collaboration capabilities of basic hardware products, and provided users with safer and more reliable products and solutions. At the same time, the company has obtained first-level dealer qualification of Huawei’s intelligent security systems (machine vision), and expanded the channel scale for the further development.

In terms of operation and management, the company actively promoted the establishment of rules and regulations, improved internal control and management processes, carefully sorted out operating resources, conducted business analysis, and controlled operating risks. During the reporting period, the company continued to sort out and improve the internal control system and implementation, deepened reform and innovation, completed the organization and function adjustment of the company’s management department, increased internal reorganization of similar businesses, continued to promote procurement cost reduction, and further standardized the management for the use of funds, persisted in carrying out business analysis, continued to promote the loss management, the clean-up efforts of receivables and stocks, the information construction, etc., and ensured the enterprise’s healthy

15 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report development in various aspects. In 2019, the company achieved operating income of 1.338 billion yuan, a year-on-year decrease of 32.94%, and the net profit attributable to shareholders of listed companies was -169,088,500 yuan. The main reasons for the decline in revenue and negative net profit during the reporting period were that the company further adjusted its industrial structure, contracted old industries, and cultivated new industries, at the same time, due to the impact of the macroeconomic situation and investment in the communications equipment industry, its operating performance declined; the company carried out site relocation for further resource integration during the reporting period, the current business development was affected to a certain extent, and the operation and management costs increased. The extraordinary gains/losses of the Company for 2018 was 27.32 million yuan and there was no extraordinary gains/losses with major amount occurred in the year; according to relevant regulation of the accounting standards, the assets impairment provision accrual in the period was 7,3035,900 yuan. II. Main business analysis 1. Introduction

See the “I-Introduction” in “Discussion and Analysis of Operation”

2. Revenue and cost

(1) Constitute of operation revenue

In RMB

2019 2018 Increase/decrease Ratio in operation Ratio in operation Amount Amount y-o-y revenue revenue

Total operation 1,338,284,194.21 100% 1,995,627,772.60 100% -32.94% revenue

Industries

Communication industry -Main 1,191,168,506.75 89.01% 1,767,327,767.31 88.56% -32.60% business revenue

Communication industry -Other 19,282,451.91 1.44% 64,642,486.98 3.24% -70.17% business revenue

Electrical industry -Main business 125,526,053.59 9.38% 159,936,978.03 8.01% -21.52% revenue

Electrical industry -Other business 2,307,181.96 0.17% 3,720,540.28 0.19% -37.99% revenue

Products

16 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Video conference products- main 365,004,501.66 27.27% 438,095,192.19 21.95% -16.68% business revenue

General cabling products- main 359,232,741.86 26.84% 329,431,898.41 16.51% 9.05% business revenue

Low-voltage distribution 125,526,053.59 9.38% 159,936,978.03 8.01% -21.52% products-main business revenue

Private network communication 186,594,827.60 13.94% 329,938,045.09 16.53% -43.45% products -main business revenue

Wiring and other products-main 316,048,396.10 23.62% 741,819,481.65 37.17% -57.40% business revenue

Interior offset -35,711,960.47 -2.67% -71,956,850.03 -3.61% 50.37%

Other business 21,589,633.87 1.61% 68,363,027.26 3.43% -68.42% revenue

Regions

Domestic area-main 1,316,427,546.22 98.37% 1,907,330,806.93 95.58% -30.98% business revenue

Domestic area -Other business 21,589,633.87 1.61% 68,363,027.26 3.43% -68.42% revenue

Abroad -main 267,014.12 0.02% 19,933,938.41 1.00% -98.66% business revenue

(2) About the industries, products, or regions accounting for over 10% of the Company’s operating income or operating profit

√Applicable □ Not applicable In RMB

Increase/decrease Increase/decrease Increase/decrease Operating Operating cost Gross profit ratio of operating of operating cost of gross profit revenue revenue y-o-y y-o-y ratio y-o-y

Industries

17 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Communication industry -Main 1,191,168,506.75 970,374,365.84 18.54% -32.60% -33.77% 1.44% business revenue

Communication industry -Other 19,282,451.91 15,679,501.63 18.69% -70.17% -65.61% -10.77% business revenue

Electrical industry -Main 125,526,053.59 100,123,254.01 20.24% -21.52% -22.79% 1.32% business revenue

Electrical industry -Other 2,307,181.96 1,597,245.18 30.77% -37.99% -42.57% 5.52% business revenue

Products

Main business revenue-Video 365,004,501.66 287,063,662.67 21.35% -16.68% -18.00% 1.26% conference products

Main business revenue-General 359,232,741.86 267,592,840.27 25.51% 9.05% 6.25% 1.96% cabling products

Main business revenue-Low-volt 125,526,053.59 100,123,254.01 20.24% -21.52% -22.79% 1.32% age distribution products

Main business revenue-Private network 186,594,827.60 183,479,607.25 1.67% -43.45% -43.02% -0.74% communication products

Main business revenue-Wiring 316,048,396.10 266,872,934.55 15.56% -57.40% -56.52% -1.70% and other products

Interior offset -35,711,960.47 -34,634,678.90 3.02% 50.37% 52.34% 4.01% other business 21,589,633.87 17,276,746.81 19.98% -68.42% -64.29% -9.26% revenue

Regions

Domestic area-main 1,316,427,546.22 1,070,337,411.38 18.69% -30.98% -32.31% 1.59% business revenue

18 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Domestic area-other 21,589,633.87 17,276,746.81 19.98% -68.42% -64.29% -9.26% business revenue

Abroad -main 267,014.12 160,208.47 40.00% -98.66% -98.82% 8.05% business revenue

Under circumstances of adjustment in reporting period for statistic scope of main business data, adjusted main business based on latest one year’s scope of period-end □ Applicable √ Not applicable (3) Income from physical sales larger than income from labors

√ Yes □ No

Increase/decrease Industries Item Unit 2019 2018 y-o-y

Sales volume Yuan 1,210,450,958.66 1,831,970,254.29 -33.93% Communication Production volume Yuan 1,133,076,301.85 1,603,585,767.76 -29.34% industry Inventory Yuan 165,940,178.69 243,314,835.5 -31.80%

Sales volume Yuan 127,833,235.55 163,657,518.31 -21.89%

Electrical industry Production volume Yuan 127,632,545.94 148,299,756.32 -13.94%

Inventory Yuan 43,457,107.48 43,657,797.09 -0.46%

Reasons for y-o-y relevant data with over 30% changes √Applicable □Not applicable

The main reasons why the sales volume of products in the communications industry dropped significantly on a year-on-year basis were that the company further adjusted its industrial structure, contracted old industries, and cultivated new industries during the reporting period, at the same time, due to the impact of the macroeconomic situation and investment in the communications equipment industry, the sales volume decreased; the company carried out site relocation for further resource integration during the reporting period, the current business development was affected to a certain extent.

The main reasons for the large decline in the inventory of products in the communications industry compared with the beginning of the year were that the sales volume declined, and the production and inventory correspondingly reduced; in addition, the private network communications products in the inventory at the beginning of the year were sold externally, and the inventory at the end of the year decreased.

Note: Due to the wide variety of products of the company, it is difficult to unify the unit of measurement, so the sales volume, production volume, and inventory are all expressed in amounts.

(4) Fulfillment of the Company’s signed significant sales contracts up to this reporting period

□ Applicable √ Not applicable

19 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

(5) Constitute of operation cost

Industry classification In RMB

2019 2018 Increase/decrease Industries Item Ratio in operation Ratio in operation Amount Amount y-o-y cost cost

Main business cost-Cost of raw Communication material 900,740,417.31 82.81% 1,374,600,698.15 83.66% -34.47% industry (procurement cost)

Communication Main business 69,633,948.53 6.40% 90,456,023.59 5.51% -23.02% industry cost- other

Communication Other business 15,679,501.63 1.44% 45,595,608.35 2.77% -65.61% industry cost

Main business cost-Cost of raw Electrical material 89,556,252.70 8.23% 120,718,703.99 7.35% -25.81% industry (procurement cost)

Electrical Main business 10,567,001.31 0.97% 8,963,387.08 0.55% 17.89% industry cost- other

Electrical Other business 1,597,245.18 0.15% 2,781,101.22 0.17% -42.57% industry cost

Total Operation cost 1,087,774,366.66 100.00% 1,643,115,522.38 100.00% -33.80%

Explanation

(6) Whether the changes in the scope of consolidation in Reporting Period

□ Yes √ No

(7)Major changes or adjustment in business, product or service of the Company in Reporting Period

□Applicable √Not applicable

(8) Major sales and main suppliers Major sales client of the Company

Total top five clients in sales (RMB) 322,579,266.98

Proportion in total annual sales volume for top five clients 24.10%

20 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Sales of related parties in annual sales from top five 15.10% clients

Information of top five clients of the Company

Serial Name Sales (RMB) Proportion in total annual sales

1 No. 1 202,107,711.69 15.10%

2 No. 2 61,321,611.19 4.58%

3 No. 3 21,706,765.73 1.62%

4 No. 4 18,931,161.02 1.41%

5 No. 5 18,512,017.35 1.38%

Total -- 322,579,266.98 24.10%

Other situation of main clients √Applicable □ Not applicable Among the top five clients, client No. 1 is the Company’s controlling shareholder, China Potevio,and other companies that are also controlled by China Putian Corporation.

Main suppliers of the Company

Total purchase amount from top five suppliers (RMB) 370,536,389.86

Proportion in total annual purchase amount for top five 36.66% suppliers

Purchase of related parties in annual amount from top five 0.00% suppliers

Information of top five suppliers of the Company

Serial Supplier Sales (RMB) Proportion in total annual sales

1 No. 1 132,165,318.10 13.08%

2 No. 2 82,511,396.00 8.16%

3 No. 3 74,048,009.58 7.33%

4 No. 4 47,065,872.95 4.66%

5 No. 5 34,745,793.22 3.44%

Total -- 370,536,389.86 36.66%

Other notes of main suppliers of the Company □Applicable √Not applicable

3. Expenses

In RMB

21 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Increase/decrease 2019 2018 Note of major changes y-o-y

Sales expense 146,879,432.92 153,522,328.27 -4.33%

Management expense 87,447,829.68 86,503,114.41 1.09%

Financing interest and expenses Financial expense 30,575,151.90 22,540,260.58 35.65% increased on a y-o-y basis in the Period

R&D expenses 71,178,941.51 76,275,133.26 -6.68%

4. Investment in R&D

√ Applicable □ Not applicable

During the reporting period, the company adhered to market orientation, based on customer needs, continuously strengthened technological innovation, and concentrated on independent research and development. The products and projects developed during the reporting period included Ruijing hardware dual-stream box products and the new generation of Ruijing video conference terminal hardware and software, demo cloud platform and conference management system, test cloud platform, NB-IoT smart manhole cover, etc. During the reporting period, the company added 13 patent authorizations and 7 software copyright registrations.

R&D investment of the Company

2019 2018 Change ratio(+/-)

Number of R&D (people) 381 438 -13.01%

Ratio of number of R&D 28.18% 28.72% -0.54%

R&D investment (Yuan) 71,178,941.51 76,275,133.26 -6.68%

R&D investment accounted for 5.32% 3.82% 1.50% R&D income

R&D investment capitalization 0.00 0.00 0.00% (Yuan)

Capitalization R&D investment 0.00% 0.00% 0.00% accounted for R&D investment

The reason of great changes in the proportion of total R&D investment accounted for operation income than last year □ Applicable √ Not applicable Reason for the great change in R&D investment capitalization rate and rational description □ Applicable √ Not applicable

5. Cash flow

In RMB

Item 2019 2018 Y-o-y changes

22 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Subtotal of cash in-flow from 1,349,310,377.01 1,685,497,160.30 -19.95% operation activity

Subtotal of cash out-flow from 1,326,624,262.10 1,840,915,894.13 -27.94% operation activity

Net cash flow arising from 22,686,114.91 -155,418,733.83 114.60% operating activities

Subtotal of cash in-flow from 2,081,423.80 41,013,389.72 -94.93% investment activity

Subtotal of cash out-flow from 14,544,973.78 17,752,720.09 -18.07% investment activity

Net cash flow from investment -12,463,549.98 23,260,669.63 -153.58% activity

Subtotal of cash in-flow from 547,594,317.72 455,510,000.00 20.22% financing activity

Subtotal of cash out-flow from 550,423,917.30 432,686,230.26 27.21% financing activity

Net cash flow from financing -2,829,599.58 22,823,769.74 -112.40% activity

Net increased amount of cash 7,414,549.18 -109,687,601.75 106.76% and cash equivalent

Main reasons for y-o-y major changes in aspect of relevant data √ Applicable □ Not applicable Net cash flow arising from operating activities has major growth from a year earlier: during the reporting period, the Company actively collecting the accounts receivable, and the cash paid for raw material purchases decreased on a y-o-y basis at the same time. Cash in-flow from investment activity and net cash flow arising from investment activity have major declined from a year earlier: the Company received compensation for house expropriation in the previous year, and there were no major assets disposals in the current period. Net cash flow arising from financing activities has major declined over that of last year: the loans repayments due this year increased on a y-o-y basis. Net increased amount of cash and cash equivalent has major growth over that of last year: the cash flow from operation activities are increased from a year earlier.

Reasons of major difference between the cash flow of operation activity in report period and net profit of the Company √Applicable □Not applicable In reporting period, the net cash flow from operation activities was higher than net profit due to the aggressive collection of receivables and the decrease in cash paid for raw materials.

23 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

III. Analysis of the non-main business

√ Applicable □ Not applicable In RMB

Amount Ratio in total profit Cause of formation Whether be sustainable (N/Y)

Investment income -297,833.76 0.19% N

Gain/loss of fair 0.00% N value changes

Asset impairment -19,577,005.54 12.42% Loss on inventory valuation N

Non-operation 1,900,048.84 -1.21% N revenue

Non-operation 368,099.84 -0.23% N expenditure

Credit impairment -53,458,859.20 33.91% Bad debt loss of receivable N loss

IV. Assets and liability

1. Major changes of assets composition

Implement the new financial instrument standards, new revenue standards or new lease standards for the first time since 2019, and adjusted relevant items of financial statement at beginning of the year √ Applicable □ Not applicable In RMB

Year-end of 2019 Year-begin of 2019 Ratio Ratio in total Ratio in total Notes of major changes Amount Amount changes assets assets

261,270,033.2 Monetary fund 15.82% 261,938,068.72 12.46% 3.36% 8

Account 697,656,063.9 42.23% 925,277,650.11 44.01% -1.78% receivable 6

209,397,286.1 Inventory 12.68% 286,972,632.59 13.65% -0.97% 7

Investment real 7,810,210.00 0.47% 8,397,113.98 0.40% 0.07% estate

Long-term equity 181,762,383.5 11.00% 183,244,080.23 8.72% 2.28% investment 0

24 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

110,722,102.5 Fix assets 6.70% 112,504,807.11 5.35% 1.35% 2

Construction in 13,048,701.59 0.79% 9,472,383.76 0.45% 0.34% process

451,915,948.5 Short-term loans 27.36% 445,464,333.33 21.19% 6.17% 0

Long-term loans 0.00% 0.00% 0.00%

2. Assets and liability measured by fair value

√ Applicable □ Not applicable In RMB

Accumulated Gains/losses fair value Impairment Amount Sales amount Opening of fair value Other Ending Item changes accrued in purchased in in current number changes in the changes number included in current period current period period period equity

Financial assets

1. Receivable 3,821,550.7 12,824,200.80 financing 7

2. Other equity 741,953.00 741,953.00 instrument investment

4,563,503.7 Total 13,566,153.80 7

Financial 0.00 0.00 liability

Other changes Whether there are significant changes in the measurement attributes of the major assets during the reporting period □Yes √No

3. The assets rights restricted till end of the period

Assets with ownership or usage rights restricted: Item Book value at period –end Restriction reason Monetary funds 52,477,961.78 Note margin and guarantee margin Monetary funds 8,204.90 Bank freeze involving litigation Account receivable 52,167,500.00 Secured borrowings

25 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Fixed assets 32,664,415.64 Mortgage loan Intangible assets 1,898,216.30 Mortgage loan Total 139,216,298.62 Saved as disclosed above, the Company pledged its stock rights of 4.8 million Yuan (40% equity in total) in the subsidiary Nanjing Putian Telege Intelligent Building Ltd., stock rights of 33.17 million Yuan (96.99% equity in total) in the subsidiary Nanjing Southern Telecom Co., Ltd., stock rights of 5.07 million Yuan (50.7 % equity in total)in the subsidiary Nanjing Putian Changle Telecommunication Equipment Co., Ltd., stock rights of 60.4273 million Yuan ( 67% equity in total) in Nanjing Putian Wangzhi Electronic Co., Ltd and stock rights of 7.8 million Yuan (78% equity in total) in Nanjing Putian Network Co., Ltd to the parent Company for entrusting the loan from Bank of Beijing, and handled the Company's equity registration respectively at Market Supervision Administration in Jiangning District, Hi-Tech Industry District, Yuhuatai District and Qinghuai District of Nanjing City. The stock transferring rights of the aforesaid subsidiaries are restricted before the pledge being lifted.

V. Investment

1. Overall situation

√ Applicable □ Not applicable

Investment in the same period of last year Investment in the reporting (RMB) Changes(%) ( RMB)

12,710,363.19 12,596,188.70 0.91%

2. The major equity investment obtained in the reporting period

□ Applicable √ Not applicable

3. The major non-equity investment doing in the reporting period

□ Applicable √ Not applicable

4. Financial assets investment

(1) Securities investment □ Applicable √ Not applicable The Company had no securities investment in the reporting period.

(2) Derivative investment

□ Applicable √ Not applicable The Company has no derivatives investment in the Period

26 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

5. Application of raised proceeds

□ Applicable √ Not applicable The Company had no application of raised proceeds in the reporting period.

VI. Sales of major assets and equity

1. Sales of major assets

□ Applicable √ Not applicable The Company had no sales of major assets in the reporting period.

2. Sales of major equity

□ Applicable √ Not applicable

VII. Analysis of main holding Company and stock-jointly companies

√ Applicable □ Not applicable Particular about main subsidiaries and stock-jointly companies net profit over 10% In RMB

Company Main Register Operating Operating Type Total assets Net Assets Net profit name business capital revenue profit

Multimedia Nanjing communicati Southern 34,205,147.8 310,221,665. 108,264,451. 365,385,454. Subsidiary on and 5,126,391.98 7,879,081.95 Telecom Co., 3 29 89 04 application Ltd solutions

General cabling, Nanjing development, Putian Telege production 20,000,000.0 307,977,820. 125,881,692. 362,262,442. 27,147,183.4 23,336,955.0 Subsidiary Intelligent and sales of 0 71 18 89 5 5 Building Ltd. the building intelligent products

27 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Manufacture and sales of Nanjing software of Putian telecommuni 10,000,000.0 38,135,813.1 22,725,435.5 -3,666,354.5 -3,667,501.1 Subsidiary 2,875,752.29 Network Co., cations, 0 0 8 9 7 Ltd. network and electronic equipment

Out-door patch, sub-line equipment, Nanjing network Putian box(cube)of Changle out-door and 10,000,000.0 68,946,280.3 31,803,061.7 38,539,284.7 Telecommuni Subsidiary -214,115.49 35,884.51 machinery 0 4 5 9 cations office, Equipment manufacture Co., Ltd. and sales of communicati on electrical products

Nanjing Bada Manufacture Telecommuni of 11,301,400.0 -4,301,547.0 -1,201,200.9 -1,201,200.9 cations Subsidiary card-terminal 616,638.98 39,751.62 0 2 0 0 Equipment communicati Co., Ltd. on equipment

Export and import of telecommuni Putian cation Telecommuni equipment, HK$ 2 -18,056,914. cations Subsidiary 4,169,839.09 0.00 -51,324.68 -51,324.68 Hi-tech R & million 05 (H.K.) Co., D and Ltd. transfer, technology trade

Nanjing Production, Putian sales and 59,490,000.0 24,314,269.4 Wangzhi Subsidiary processing of 9,533,485.99 0.00 -505,438.51 -505,438.51 0 4 Electronic electrical Co., Ltd products

28 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Nanjing Manufacture Putian and sales of Information electrical and 14,000,000.0 40,128,132.5 -2,498,671.2 -2,477,548.0 Subsidiary 2,721,928.93 635,167.16 Technology telecommuni 0 2 1 3 Company cation Ltd. products

Electronic components Nanjing assembly, Putian electronic Telecommun products, -2,047,513.2 -2,680,150.0 -2,681,059.4 ication Subsidiary 5,000,000.00 7,145,054.34 411,674.22 telecommuni 0 0 5 Technology cation Company equipment, Ltd. Hi-tech R & D and sales

Manufacture Nanjing and sales of Mennekes industrial US$ 5.2 204,517,276. 84,831,367.6 127,833,235. -6,811,839.6 -6,944,198.0 Subsidiary Electrics Co., intelligent million 03 1 55 2 4 Ltd. distribution products

R&D, manufacture and sales of Nanjing solar Putian controller, Datang 10,000,000.0 44,664,511.7 29,112,879.9 42,349,432.3 Subsidiary and 1,856,438.02 2,457,589.12 Information 0 9 0 2 production & Electronic processing Co., Ltd. business of electronic products

Particular about subsidiaries obtained or disposed in report period □ Applicable √ Not applicable

Notes of holding and shareholding companies

VIII. Structured vehicle controlled by the Company

□ Applicable √ Not applicable IX. Future Development Prospects From the perspective of the industry environment, China’s information and communication industry was affected

29 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report by the international trade situation and business development cycle in 2019, and the growth rate of revenue slowed. With the new generation of information technology such as 5G stimulating new market demand, it is expected that the information and communication industry will start a new round of growth cycle in 2020.

The company will stick to its main business, actively grasp the development opportunities of the information and communication industry, be market-oriented, optimize the company’s industrial structure, improve the core competitiveness of its own products, and continue to promote the company to transform from traditional communication equipment manufacturers to informatization solution providers and service providers.

Business plan of the next year In 2020, the company will fully enter the period of industrial adjustment and system sorting, and the problems of transformation and development will be further exacerbated. At the same time, the company’s operation will also face greater uncertainty due to the impact of the novel coronavirus pneumonia epidemic at home and abroad. The company will continue to adhere to the problem-oriented, strengthen the implementation of reform, and actively meet future challenges.

Industry development Focus on its own superior technologies, industries and customers, continue to explore technological innovations in key applications, and strive to form unique products and solutions with distinctive characteristics. In 2020, the company will focus on the development opportunities of localization of high-end cabling, and plan to launch a new generation of “Yunshang” cabling system, intelligent cabling system, fiber cabling system to gain more market shares according to user needs; combine with new automated production methods, research and develop and launch the New Yishang series cabling system; complete the research and development of a new generation of electronic distribution frame system and integrated cabling management platform; continue to deepen the data center solutions, and strengthen the independent products in the data center construction. Conduct specially-assigned persons for special projects, do a good job in marketing of key projects, and promote win-win cooperation among internal entities based on the projects. The company will closely follow the operators’ 5G access network and social information infrastructure construction, and dig deeper into the operators’ own 5G construction needs. Focus on business transformation to meet the district fragmentation needs of operators. At the same time, actively participate in the centralized procurement of the operator group, and ensure that more regular products are shortlisted and more integration projects win the bidding. In terms of video conferencing products, we will actively promote the diversified businesses development of the videoconferencing segment, focus on customer needs, focus on project-type large customers to access the Internet, drain customers on the “cloud”, increase secondary development, strive to take advantage of differentiation, and make businesses bigger.

The company will seize a new round of opportunities in scientific and technological revolution and industrial transformation, continue to strengthen independent innovation and independent research and development capabilities, and cultivate and enhance the company’s future core competitiveness. Develop new products such as

30 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report data centers, Putian video cloud platforms, etc.; actively explore the application of magnetic connectors, label connectors, and light-emitting optical fiber link technologies in cabling products; accelerate the project approval and research and development of products such as environmental monitoring cabinets, non-metallic assembled energy-saving equipment rooms, and second-generation polycarbonate socket box, industrial plugs and sockets, solar IoT street lighting control system, mains IoT smart power supply and other products.

In terms of operation and management, the company will continue to promote strategic adjustments in the new era, further make reformation and adjustments, and further improve units with many historical operating problems and poor results, strive to promote the concentration of operating resources and focus on the steady development of main business, and actively explore the future main business and the direction of incremental development, make efforts to promote the continuous optimization of the company’s industrial structure and have new breakthroughs in business development. Adhere to financial-centric management of business activities, insist on regularly holding business management analysis meetings, continue to pay close attention to the cleanup of the receivables and stocks, and do a good job of improving the asset structure. Stabilize operating cash flow, actively explore market, grab revenue, revitalize inventory, and improve quality. Continue to reduce costs and increase efficiency, and strictly control all types of controllable expenses. Strengthen risk prevention and do a good job in information construction. Continue to strengthen itself and improve quality and efficiency, and carry out work to reduce redundant staff. Efforts should be made to revitalize inefficient and ineffective stock assets and to maximize the resources needed for operations. Improve the personnel training system and strive to build a competitive cadre team.

Maintain the current business and complete the capital needs of the investment project under construction: In 2020, the company will mainly obtain the required circulating funds by dispatching its own funds and financing to financial institutions. It is estimated that the financing scale will be around 520 million Yuan in 2020.

Risks the Company may face in the future development: 1. Risks of being affected by the epidemic The world-wide outbreak of novel coronavirus pneumonia in 2020 will have a certain impact on the overall market demand and industrial ecology. In response to the sudden epidemic situation, the company strictly follows the requirements of governments at all levels to do a good job in internal epidemic prevention and control work, while actively responding to government requirements to organize resumption of work and production, collaborate with upstream and downstream customers to ensure the orderly production and operation, and at the same time, actively accelerate the product transformation and upgrading to adapt to changes in market demand, and do our best to mitigate the adverse impacts of the epidemic on the company.

2.Cycle risk of communication industry The Company is mainly engaged in the manufacture and sales of communications products, customers include

31 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report several major telecom operators in China. The establishment and adjustment of network construction period and investment plan of the operators have a significant impact on the operation of the Company and bring the industry cycle risk. The Company will continue to further integrate quality resources, accelerate industry upgrade, expand industry market and improve industry profitability. 3.Technology R&D risk The telecommunication industry is experiencing rapid change of technology development and product upgrade. Therefore, the Company’s business operation will be adversely affected if it cannot adapt to market change, lag behind in the technology reform or the developed products do not satisfy market demands. The Company will actively follow up the latest development trend of industrial technology, develop and introduce technology based on market requirements, focus on organization, planning and management of product development and expand development of new products, aiming to maintaining the leading position in terms of technology.

4.Market competition risk The industry in which the Company operates is highly competitive with substantial market players. Besides, customers, such as various operators, continue to adopt centralized procurement policy which led to very furious market competition. Benefiting from long-term operation, the Company has accumulated certain competitive advantages in terms of brand, technology, quality and marketing. If our products fail to cater for the market variation in future, we may lose the existing advantages in market competition.

The Company will continue to capitalize on the existing advantages to consolidate traditional market while expanding special network and industry markets actively, and accelerate the transformation and upgrading of industries and foster strategic emerging industries. Through continuous cost control and scientific innovation, it continues to improve production and research capability, which leads to rapid development of the new products and enables the Company to maintain and improve profitability.

5. Cash flow shortage risk

Products of the Company are used in operator network construction, subway construction and other projects. Affected by project completion cycle and long approval process, sales return cycle is longer and the cash flow pressure is greater.

The Company insists on budget management of funds, prepare capital collection plan and capital payment budget to ensure dynamic balance of cash flow. Besides, it increases management on inventory and trade receivables, reinforces performance assessment, urges prompt collection of goods payment, strengthens inventory management and reduced capital occupation. Adhering to the basic control principle of “pay-as-you-go” and management the funds strictly; obtain liquidity financing from the banks and other financial institutions

32 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

X. Reception of research, communication and interview 1. In the report period, reception of research, communication and interview

□ Applicable √ Not applicable No reception of research, communication and interview occurred in the period

33 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section V. Important Events

I. Profit distribution plan of common stock and capitalizing of common reserves plan

Formulation, Implementation and Adjustment of common stock Profit Distribution Policy Especially Cash Dividend policy during the Reporting Period □ Applicable √ Not applicable Profit distribution plan (pre-plan) of common stock and capitalizing of common reserves plan (pre-plan) in latest three years (including the reporting period) The Company did not distribute profits or capital reserve in recent three years. Cash dividend of common stock in latest three years (including the reporting period) In RMB

Ratio of the Ratio of the Ratio of the total cash Net profit cash bonus by cash bonus in bonus (other attributable to other ways in net profit ways included) common stock Proportion for net profit attributable to Total cash in net profit Amount for shareholders of cash bonus by attributable to Year for bonus common stock bonus attributable to cash bonus (tax listed company other ways(i.e. common stock shares shareholders of (including common stock included) in share shareholders of listed company other ways) shareholders of consolidation buy-backs) listed company contained in listed company statement for contained in consolidation contained in bonus year consolidation statement consolidation statement statement

-169,088,516.6 2019 0.00 0.00% 0.00 0.00% 0.00 0.00% 9

2018 0.00 5,859,214.84 0.00% 0.00 0.00% 0.00 0.00%

2017 0.00 8,982,857.76 0.00% 0.00 0.00% 0.00 0.00%

The Company gains profits in reporting period and the retained profit of common stock shareholders provided by parent Company is positive but no plan of cash dividend proposed of common stock □ Applicable √ Not applicable

II. Profit distribution plan and capitalizing of common reserves plan for the Period

□ Applicable √ Not applicable The Company has no plans of cash dividend distributed, no bonus shares and has no share converted from capital reserve either for the year.

34 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

III. Implementation of commitment

1. Commitments that the actual controller, shareholders, related party, buyer and the Company have fulfilled during the reporting period and have not yet fulfilled by the end of reporting period √Applicable □Not applicable

35 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Type of Commitm Commitment Commitme Commitments commitment Content of commitments Implementation ent party date nt term s Commitments for share merger reform Commitments in report of acquisition or equity change Commitments in assets reorganization Commitments make in initial public offering or re-financing Equity incentive commitment Commitm “As Nanjing Putian Telecommunications Co., Ltd. (hereinafter referred to as “Nanjing Putian”) ents on intended to apply for resumption of listing to the Shenzhen Stock Exchange, the Company, as a Other horizontal controlling shareholder of Nanjing Putian, made the following commitments: First, ensure the China commitments competitio personnel independence of Nanjing Putian. (1) Ensure that the production and management and Potevio for medium n, related public administration (including labour, personnel and wage management, etc.) of Nanjing Putian 8 April 2018 Long-term Implementing Company and small transactio are completely independent of the Company and other subordinate companies and enterprises of the Limited shareholders n and Company. (2) Ensure that the general manager, deputy general manager, chief financial officer, occupatio secretary of the board and other senior management staff of Nanjing Putian work full time in n of fund Nanjing Putian and get remuneration from Nanjing Putian, and don’t take part time jobs in other

36 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report positions other than directors and supervisors in the Company or other companies and enterprises of the Company, nor get remuneration from the Company or other companies and enterprises of the Company, and ensure that the financial staff of Nanjing Putian don’t take part time jobs or get remuneration from the Company or other companies and enterprises of the Company. (3) Ensure that the candidates recommended by the Company to take up the posts of directors, supervisors and senior management in Nanjing Putian are checked by legal procedures, the Company does not interfere with the personnel appointment and dismissal decision made by the board of directors and the general meeting of shareholders of Nanjing Putian. Second, ensure the assets independence and integrity of Nanjing Putian. (1) Ensure the independence and integrity of the assets of Nanjing Putian and its subsidiaries, and all of these assets are under the control of Nanjing Putian and its subsidiaries, and are independently owned and operated by Nanjing Putian and its subsidiaries. (2) Ensure that the Company and the subordinate companies and enterprises of the Company do not illegally occupy the assets, funds and other resources of Nanjing Putian. Third, ensure the business independence of Nanjing Putian. (1) Ensure that Nanjing Putian has independent procurement and sales systems, and has the assets, personnel, qualifications to carry out independent business activities and the ability to operate independently in the market. (2) Ensure that the Company and other companies and enterprises affiliated to the Company avoid horizontal competition with Nanjing Putian and its subsidiaries. (3) Ensure strict control of related transactions, and minimize the continuous related transactions between Nanjing Putian and its subsidiaries with the Company and other companies and enterprises under the Company. Eliminate the illegal occupation of funds and assets of Nanjing Putian, and don’t require Nanjing Putian and its subsidiaries to provide any form of guarantee to the Company and other companies and enterprises affiliated to the Company. For the unavoidable related transactions, insist on the principle of “fairness, justice and openness”, and keep the transaction prices same as the non-related enterprises, and carry out the information disclosure in a timely manner. (4) Ensure not to interfere with the major decision-making matters of Nanjing Putian in any way other than the exercise of shareholders’ rights in accordance with the law through a separate or concerted action, nor affect the independence of Nanjing Putian’s assets, personnel, finance, organization and business. Fourth, ensure the institution independence of Nanjing Putian. (1) Ensure that Nanjing Putian and its subsidiaries establish and improve the corporate governance structure according to law, and completely separate from the Company and

37 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report other companies and enterprises under the Company; ensure that the office facilities and production and operation sites of Nanjing Putian and its subsidiaries are completely separated from the Company and other companies and enterprises affiliated to the Company, and there is no situation in which institutions are mixed. (2) Ensure that Nanjing Putian and its subsidiaries operate independently, and the Company will not directly or indirectly interfere with the decision-making and operation of Nanjing Putian by surpassing the board of directors and shareholders’ meeting of Nanjing Putian. (3) Ensure that the shareholders’ meeting, board of directors, independent directors, board of supervisors, and senior management personnel of Nanjing Putian independently exercise their official powers in accordance with laws, regulations, and articles of association. Fifth, ensure the financial independence of Nanjing Putian. (1) Ensure that Nanjing Putian sets up an independent financial accounting department and has an independent financial accounting system, and has a standardized and independent financial accounting system and financial management system. (2) Ensure that Nanjing Putian maintains independence in financial decision-making, the Company and other companies and enterprises affiliated to the Company do not interfere with the use and dispatch of funds by Nanjing Putian. (3) Ensure that Nanjing Putian maintains its own independent bank account and does not share a bank account with the Company and other companies and enterprises under the Company. (4) Ensure that Nanjing Putian shall pay taxes independently according to law. The above commitments are valid and cannot be changed or revoked while the Company is a shareholder of Nanjing Putian. If the above commitments are violated and economic losses are caused to Nanjing Putian, the Company will compensate Nanjing Putian.” “As Nanjing Putian Telecommunications Co., Ltd. (hereinafter referred to as “Nanjing Putian”) Commitm intended to apply for resumption of listing to the Shenzhen Stock Exchange, the Company, as a ents on controlling shareholder of Nanjing Putian, made the following commitments: (1) do not influence horizontal China and require Nanjing Putian and its subsidiaries to give rights superior to the third parties in the competitio Potevio market in business cooperation, nor engage in any acts to damage the interests of Nanjing Putian and n, related 8 April 2018 Long-term Implementing Company its subsidiaries by using its controlling shareholder status at Nanjing Putian. (2) Do not influence transactio Limited and require preferential rights to make deals with Nanjing Putian and its subsidiaries by using its n and controlling shareholder status at Nanjing Putian. (3) when conducting necessary and inevitable occupatio related transactions, guarantee to conduct according to the principle of marketization and fair price, n of fund and perform the transaction procedures and information disclosure obligations in strict accordance

38 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report with the relevant laws, regulations, regulatory documents and the relevant provisions of the articles of association of listed companies, and guarantee not to damage the legitimate rights and interests of Nanjing Putian and other shareholders through related transactions. The above commitments are valid and cannot be changed or revoked while the Company is a shareholder of Nanjing Putian. If the above commitments are violated and economic losses are caused to Nanjing Putian, the Company will compensate Nanjing Putian. “As Nanjing Putian Telecommunications Co., Ltd. (hereinafter referred to as “Nanjing Putian”) intended to apply for resumption of listing to the Shenzhen Stock Exchange, the Company, as a controlling shareholder of Nanjing Putian, made the following commitments:(i) the Company and other related enterprise controlled by the Company have not engaged in any production and business operations or activities that directly or indirectly compete with Nanjing Putian; and guarantee that they will not engage in any production and business operations or activities that directly or indirectly compete with Nanjing Putian in the future. (ii) The Company does not own, manage, control, invest or engage in any business or project that is the same or similar to the business of Nanjing Putian. Commitm (iii) If the Company or any related enterprise obtains any business opportunity from any third party ents on that has substantial competition with the business of Nanjing Putian or may have substantial horizontal China competition in the future, the Company will immediately notify Nanjing Putian, and transfers the competitio Potevio business opportunity to Nanjing Putian after obtaining the promise from the third party. (iv) The n, related 8 April 2018 Long-term Implementing Company Company will supervise and restrict the production and operation activities of itself and other related transactio Limited enterprises. If the Company and other related enterprises have products or business the same or n and similar to those of Nanjing Putian, the Company promises to take the following measures to resolve: occupatio (1) When Nanjing Putian considers it necessary, the Company and other related enterprises will n of fund reduce the holdings until all the relevant assets and businesses held by the Company and related enterprises are transferred; (2) When Nanjing Putian considers it necessary, the relevant assets and businesses held by the Company and other related enterprises may be preferentially acquired through appropriate means; (3) If the Company and related enterprises have conflicts of interest with Nanjing Putian due to horizontal competition, give priority to the interests of Nanjing Putian; (4) Other measures that help avoid horizontal competition. The above commitments are valid and cannot be changed or revoked while the Company is a shareholder of Nanjing Putian. If the above commitments are violated and the economic losses are caused to Nanjing Putian, the Company will

39 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report compensate Nanjing Putian. “As Nanjing Putian Telecommunications Co., Ltd. (hereinafter referred to as “Nanjing Putian”) intended to apply for resumption of listing to the Shenzhen Stock Exchange, the Company, as an actual controller of Nanjing Putian, made the following commitments: First, ensure the personnel independence of Nanjing Putian. (1) Ensure that the production and management and public administration (including labour, personnel and wage management, etc.) of Nanjing Putian are completely independent of the Company and other subordinate companies and enterprises of the Company. (2) Ensure that the general manager, deputy general manager, chief financial officer, secretary of the board and other senior management staff of Nanjing Putian work full time in Nanjing Putian and get remuneration from Nanjing Putian, and don’t take part time jobs in other positions other than directors and supervisors in the Company or other companies and enterprises of Commitm the Company, nor get remuneration from the Company or other companies and enterprises of the ents on Company, and ensure that the financial staff of Nanjing Putian don’t take part time jobs or get horizontal remuneration from the Company or other companies and enterprises of the Company. (3) Ensure that competitio the candidates recommended by the Company to take up the posts of directors, supervisors and China Putian n, related senior management in Nanjing Putian are checked by legal procedures, the Company does not 8 April 2018 Long-term Implementing Corporation transactio interfere with the personnel appointment and dismissal decision made by the board of directors and n and the general meeting of shareholders of Nanjing Putian. Second, ensure the assets independence and occupatio integrity of Nanjing Putian. (1) Ensure the independence and integrity of the assets of Nanjing n of fund Putian and its subsidiaries, and all of these assets are under the control of Nanjing Putian and its subsidiaries, and are independently owned and operated by Nanjing Putian and its subsidiaries. (2) Ensure that the Company and the subordinate companies and enterprises of the Company do not illegally occupy the assets, funds and other resources of Nanjing Putian. Third, ensure the business independence of Nanjing Putian. (1) Ensure that Nanjing Putian has independent procurement and sales systems, and has the assets, personnel, qualifications to carry out independent business activities and the ability to operate independently in the market. (2) Ensure that the Company and other companies and enterprises affiliated to the Company avoid horizontal competition with Nanjing Putian and its subsidiaries. (3) Ensure strict control of related transactions, and minimize the continuous related transactions between Nanjing Putian and its subsidiaries with the Company and other companies and enterprises under the Company. Eliminate the illegal occupation of funds

40 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report and assets of Nanjing Putian, and don’t require Nanjing Putian and its subsidiaries to provide any form of guarantee to the Company and other companies and enterprises affiliated to the Company. For the unavoidable related transactions, insist on the principle of “fairness, justice and openness”, and keep the transaction prices same as the non-related enterprises, and carry out the information disclosure in a timely manner. (4) Ensure not to interfere with the major decision-making matters of Nanjing Putian in any way other than the exercise of shareholders’ rights in accordance with the law through a separate or concerted action, nor affect the independence of Nanjing Putian’s assets, personnel, finance, organization and business. Fourth, ensure the institution independence of Nanjing Putian. (1) Ensure that Nanjing Putian and its subsidiaries establish and improve the corporate governance structure according to law, and completely separate from the Company and other companies and enterprises under the Company; ensure that the office facilities and production and operation sites of Nanjing Putian and its subsidiaries are completely separated from the Company and other companies and enterprises affiliated to the Company, and there is no situation in which institutions are mixed. (2) Ensure that Nanjing Putian and its subsidiaries operate independently, and the Company will not directly or indirectly interfere with the decision-making and operation of Nanjing Putian by surpassing the board of directors and shareholders’ meeting of Nanjing Putian. (3) Ensure that the shareholders’ meeting, board of directors, independent directors, board of supervisors, and senior management personnel of Nanjing Putian independently exercise their offical powers in accordance with laws, regulations, and articles of association. Fifth, ensure the financial independence of Nanjing Putian. (1) Ensure that Nanjing Putian sets up an independent financial accounting department and has an independent financial accounting system, and has a standardized and independent financial accounting system and financial management system. (2) Ensure that Nanjing Putian maintains independence in financial decision-making, the Company and other companies and enterprises affiliated to the Company do not interfere with the use and dispatch of funds by Nanjing Putian. (3) Ensure that Nanjing Putian maintains its own independent bank account and does not share a bank account with the Company and other companies and enterprises under the Company. (4) Ensure that Nanjing Putian shall pay taxes independently according to law. The above commitments are valid and cannot be changed or revoked while the Company is a shareholder of Nanjing Putian. If the above commitments are violated and economic losses are caused to Nanjing Putian, the Company will compensate Nanjing Putian.”

41 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report “As Nanjing Putian Telecommunications Co., Ltd. (hereinafter referred to as “Nanjing Putian”) intended to apply for resumption of listing to the Shenzhen Stock Exchange, the Company, as a actual controller of Nanjing Putian, made the following commitments: (1)do not influence and require Nanjing Putian and its subsidiaries to give rights superior to the third parties in the market in Commitm business cooperation, nor engage in any acts to damage the interests of Nanjing Putian and its ents on subsidiaries by using its actual controller status at Nanjing Putian. (2) do not influence and require horizontal preferential rights to make deals with Nanjing Putian and its subsidiaries by using its actual competitio China Putian controller status at Nanjing Putian. (3) when conducting necessary and inevitable related n, related 8 April 2018 Long-term Implementing Corporation transactions, guarantee to conduct according to the principle of marketization and fair price, and transactio perform the transaction procedures and information disclosure obligations in strict accordance with n and the relevant laws, regulations, regulatory documents and the relevant provisions of the articles of occupatio association of listed companies, and guarantee not to damage the legitimate rights and interests of n of fund Nanjing Putian and other shareholders through related transactions. The above commitments are valid and cannot be changed or revoked while the Company is a actual controller of Nanjing Putian. If the above commitments are violated and economic losses are caused to Nanjing Putian, the Company will compensate Nanjing Putian. “As Nanjing Putian Telecommunications Co., Ltd. (hereinafter referred to as “Nanjing Putian”) intended to apply for resumption of listing to the Shenzhen Stock Exchange, the Company, as a actual controller of Nanjing Putian, made the following commitments: (i)the Company and other Commitm related enteprises controlled by the Company have not engaged in any production and business ents on operations or activities that directly or indirectly compete with Nanjing Putian; and guarantee that horizontal they will not engage in any production and business operations or activities that directly or indirectly competitio China Putian compete with Nanjing Putian in the future. (ii) The Company does not own, manage, control, invest n, related 8 April 2018 Long-term Implementing Corporation or engage in any business or project that is the same or similar to the business of Nanjing Putian. transactio (iii) if the Company or any related enterprise obtains any business opportunity from any third party n and that has substantial competition with the business of Nanjing Putian or may have substantial occupatio competition in the future, the Company will immediately notify Nanjing Putian, and transfers the n of fund business opportunity to Nanjing Putian after obtaining the promise from the third party. (iv) the Company will supervise and restrict the production and operation activities of itself and other related enterprises. If the Company and other related enterprises have products or business the same or

42 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report similar to those of Nanjing Putian, the Company promises to take the following measures to resolve: (1) When Nanjing Putian considers it necessary, the Company and other related enterprises will reduce the holdings until all the relevant assets and businesses held by the Company and related enterprises are transferred; (2) When Nanjing Putian considers it necessary, the relevant assets and businesses held by the Company and other related enterprises may be preferentially acquired through appropriate means; (3) If the Company and related enterprises have conflicts of interest with Nanjing Putian due to horizontal competition, give priority to the interests of Nanjing Putian; (4) Other measures that help avoid horizontal competition. The above commitments are valid and cannot be changed or revoked while the Company is a shareholder of Nanjing Putian. If the above commitments are violated and the economic losses are caused to Nanjing Putian, the Company will compensate Nanjing Putian. “The Group makes statements and commitments regarding the business condition and future development planning of the private network communications business of Nanjing Putian, and the operations of the Group and other enterprises controlled by the Group (other than Nanjing Putian and its controlled enterprises) as follows: in order to optimize the internal resources allocation of the group, make full use of the business capability of Nanjing Putian, starting from 2016, the Group will Putian Corporation convert the private network communication products originally purchased by China Potevio has transferred the Information Industry Co., Ltd. (hereinafter referred to as “Potevio Shares”), a wholly-owned resources related to subsidiary of the Group, into commissioning Nanjing Putian for production. The Group’s private downstream Other network communication business which was originally a trade-oriented business and was purchased customers to our China Putian commitme by Potevio Shares from external suppliers to sell has successfully transformed into an independent 19 June 2018 Long-term company, which Corporation nt processing and production business in 2016, and the current business model is that Potevio Shares independently obtains orders from customers, and then signs entrusted production contracts with Nanjing Putian operates the private and its subsidiary Nanfang Company, and Nanjing Putian is responsible for the specific production. network At present, the customer of Potevio Shares is Fushen Industrial Co., Ltd., and the annual order communication amount of the existing model products remains above 500 million Yuan, and it is predicted that there business. will be a stable demand period of 3 to 5 years. The Group promises to take Nanjing Putian as the business entity of the private network communication services, including but not limited to: 1. Nanjing Putian is the military-civilian integration industrial base of the Group, and is the only production entity of the existing product multi-mesh cloud data processing communication

43 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report equipment and related military-civilian integration project (i.e. the private network communication service signified in this commitment), which is exclusive; 2. The Group promises to gradually integrate the complete business processes and related resources of the private network communication business, including the sales link, into Nanjing Putian within three years; if relevant business resources cannot be integrated into Nanjing Putian due to external factors, for example, downstream customers have special requirements for the direct partner’s subject qualification (for example, must be non-foreign-invested enterprises), the Group will cooperate with Nanjing Putian to carry out related business in accordance with the requirements of relevant laws and regulations, that is, to undertake related business in the name of the Group or its subsidiaries, and Nanjing Putian is responsible for the actual operation. The above commitments shall take effect on the date of signing this commitment, and shall remain in force and irrevocable during the period of existence of Nanjing Putian and during the period that the Group is deemed to be a related person whom is not allowed to engage in the same or similar business with the private network communication business of Nanjing Putian in accordance with relevant regulations. If the above commitment proved to be untrue or not complied with, all the benefits obtained by the Group in violation of the commitment shall be owned by Nanjing Putian, and the Group will compensate Nanjing Putian for all direct and indirect losses and bear corresponding legal liabilities.” “In order to protect the legitimate rights and interests of all types of investors, China Potevio Company Limited (hereinafter referred to as “Potevio Company”), as the controlling shareholder of Completed. Found NJ TEL B (200468), now makes the following commitments: (i) Potevio Company, as a responsible Share more in the Progress controlling shareholder, starting from July 8, 2015, will not reduce the company’s stock within the keeping China in Fulfilling the Other next six months. (ii) at present, NJ TEL B has stable operations and its main business is running commitmen Potevio Commitments by the commitme normally. Potevio Company will continue to promote the transformation and upgrading and 8 July 2015 t: within six Company Controlling nt structural adjustment of listed companies by asset restructuring and optimizing allocation of months Limited resources so as to vigorously improve the quality of listed companies. (iii) Potevio Company will since 8 July Shareholder accelerate the long-term mechanism of improving the return of investors in listed companies, and 2015 released on 7 May improve the operation quality and profitability of listed companies so as to continuously improve 2018. investor returns.” Completed on Y time(Y/N)

44 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report As for the commitment out of the commitment - time, explain the specific reasons and further plans

45 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

2. Concerning assets or project of the Company, which has profit forecast, and reporting period still in forecasting period, explain reasons of reaching the original profit forecast

□ Applicable √ Not applicable

IV. Non-operational fund occupation from controlling shareholders and its related party

□ Applicable √ Not applicable No non-operational fund occupation from controlling shareholders and its related party in period.

V. Explanation from Board of Directors, Supervisory Committee and Independent Directors (if applicable) for “Modified Audit Report” that issued by CPA

□ Applicable √ Not applicable

VI. Particulars about the changes in aspect of accounting policy, estimates and calculation method compared with the financial report of last year

√Applicable □ Not applicable In reporting period, according to requirement of the relevant accounting standards, accounting policy has been changed by the Company. 1. In accordance with the Notice of Ministry of Finance on Revising and Issuing the Format of General Enterprise Financial Statement for 2019 (CK [2019] No.6), Notice of Ministry of Finance on Revising and Issuing the Format of Consolidated Financial Statement for 2019 (CK [2019] No.16) and interpretation for the Notice, the Company prepared the financial statement of 2019 in line with the requirement of Accounting Standards, 2. The Company implemented the Accounting Standards for Business Enterprise No.22- Recognition and Measurement of Financial Instrument, Accounting Standards for Business Enterprise No.23- Transfer of Financial Assets, Accounting Standards for Business Enterprise No.24- Hedging and Accounting Standards for Business Enterprise No.37-Presentation of Financial Instrument that revised by Ministry of Finance since 1 Jan. 2019. 3.The Company implemented the revised Accounting Standards for Business Enterprise No.7- Non-monetary Assets Exchange since 10 June 2019 and the revised Accounting Standards for Business Enterprise No.12- Debt restructuring since 17 June 2019. For details, please refer to section XII Financial Report - Significant accounting policies and estimates -27 changes of important accounting policies and accounting estimates in the full text of the annual report.

VII. Major accounting errors within reporting period that needs retrospective restatement

□ Applicable √ Not applicable No major accounting errors within reporting period that needs retrospective restatement for the Company in the period.

VIII. Compare with last year’s financial report; explain changes in consolidation statement’s scope

□ Applicable √ Not applicable No changes occurred in consolidate scope during the reporting period

46 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

IX. Appointment and non-reappointment (dismissal) of CPA

Accounting firm appointed

Name of domestic accounting firm Pan-China Certified Public Accountants (LLP)

Remuneration for domestic accounting firm (in 10 thousand 121 Yuan)

Continuous life of auditing service for domestic accounting firm 6

Name of domestic CPA Jin Jingyu, Zhang Jinghui

Continuous service years from domestic CPA 4 years, 1 year Re-appointed accounting firms in this period

□ Yes √ No Appointment of internal control auditing accounting firm, financial consultant or sponsor

√Applicable □ Not applicable Pan-China Certified Public Accountants (LLP) was engaged as audit institute of internal control for the Company of 2019, auditing fee for internal control was 0.32 million Yuan.

X. Particular about suspended and delisting after annual report disclosed

□ Applicable √Not applicable

XI. Bankruptcy reorganization

□ Applicable √ Not applicable No bankruptcy reorganization for the Company in reporting period

XII. Significant lawsuits and arbitration of the Company

□Applicable √Not applicable No significant lawsuits and arbitration occurred in the Period.

XIII. Penalty and rectification

√ Applicable □Not applicable

Types of Conclusion (if Item/name Type Cause investigation Disclosure date Disclosure index applicable) penalty

Received a Investigated on As a chairman of Decision on file or the Shanghai Xu Qian Director Administrative administrative Potevio, he is the Punishment from punishment by directly China Securities CSRC supervisor for the

47 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Regulatory illegal acts of Commission information disclosure of Shanghai Potevio. Warned and fined 50,000 Yuan

XIV. Integrity of the Company and its controlling shareholders and actual controllers

□ Applicable √ Not applicable

XV. Implementation of the Company’s stock incentive plan, employee stock ownership plan or other employee incentives

□ Applicable √ Not applicable During the reporting period, the Company has no stock incentive plan, employee stock ownership plan or other employee incentives that have not been implemented.

XVI. Major related transaction

1. Related transaction with routine operation concerned

√ Applicable □ Not applicable

Approv Proporti Whethe Market ed Trading on in the r to price of Related Related transacti Means Index Related Related Pricing amount amount exceed similar Date of transacti transacti Dealing on of of transactio relations principl (in 10 of the the transacti disclosu on on price amount paymen disclos n parties hip e thousan same approve on re type content (in 10 ts ure d Yuan) transacti d availabl thousan on amount e d Yuan)

48 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Enterpri se with share particip ated by the Compan y, Notice director Purchasi on and ng Forecas SEI-Nanji senior goods t of ng Putian Telecom Market Bank 2019-01 executiv and 0.00 0 0.00% 1,050 N 0.00 Routine Optical product price transfer -26 e of the receivin Related Network Compan g Transac y has services tion for hold a 2019 concurr ent post as director in the enterpri se

Purchasi Subsidia ng ry of PutianTon goods The controlli Telecom Market Bank 2019-01 gxin Co., and 0.00 0 0.00% 500 N 0.00 same as ng product price transfer -26 Ltd receivin above sharehol g der services

Purchasi Putian Subsidia ng Oriental ry of goods The Communi controlli Telecom Market Bank 2019-01 and 0.00 0 0.00% 1,000 N 0.00 same as cations ng product price transfer -26 receivin above Group sharehol g Co., Ltd. der services

49 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Other Other Purchasi Enterprise subsidia ng s ries of goods The Telecom Market Bank 2019-01 Controlle the and 15.70 15.70 0.02% 2,000 N 15.70 same as product price transfer -26 d by actual receivin above China controll g Potevio er services

-Includin Other Purchasi g:Nanjing subsidia ng Putian ries of goods The Telecom Market Bank 2019-01 Honyar the and 13.49 13.49 0.01% N 13.49 same as product price transfer -26 Electrics actual receivin above Tech. Co., controll g Ltd er services

-Includin Other Purchasi g:Potevio subsidia ng Informati ries of goods The Telecom Market Bank 2019-01 on the and 2.21 2.21 0.00% N 2.21 same as product price transfer -26 Technolo actual receivin above gy Co., controll g Ltd. er services

Sale of China Controll goods The Potevio ing and Telecom Market 19168.8 19,168. Bank 19168.8 2019-01 14.32% 30,480 N same as Company sharehol provisio product price 2 82 transfer 2 -26 above Limited der n of services

Putian Subsidia Sale of Informati ry of goods The on controlli and Telecom Market Bank 2019-01 547.55 547.55 0.41% 4,550 N 547.55 same as Technolo ng provisio product price transfer -26 above gy Co., sharehol n of Ltd. der services

Subsidia Sale of Putian ry of goods The Communi controlli and Telecom Market Bank 2019-01 427.87 427.87 0.32% 2,000 N 427.87 same as cations ng provisio product price transfer -26 above Co., Ltd. sharehol n of der services

50 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Other Sale of subsidia Actual goods ries of The control is and Telecom Market Bank 2019-01 the 66.52 66.52 0.05% 1,200 N 66.52 same as China provisio product price transfer -26 actual above Potevio n of controll services er

-Includin g:Beijig Other Sale of Putian subsidia goods Taili ries of The and Telecom Market Bank 2019-01 Communi the 3.13 3.13 0.00% N 3.13 same as provisio product price transfer -26 cation actual above n of Technolo controll services gy Co., er Ltd.

Other -Includin Sale of subsidia g: goods ries of The Hangzhou and Telecom Market Bank 2019-01 the 0.02 0.02 0.00% N 0.02 same as Honyar provisio product price transfer -26 actual above Electrics n of controll Co., Ltd services er

Other Sale of subsidia -Includin goods ries of The g:Eastco and Telecom Market Bank 2019-01 the 1.46 1.46 0.00% N 1.46 same as m Co., provisio product price transfer -26 actual above Ltd n of controll services er

-Includin Other Sale of g:Putian subsidia goods Eastern ries of The and Telecom Market Bank 2019-01 Communi the 1.63 1.63 0.00% N 1.63 same as provisio product price transfer -26 cations actual above n of Group controll services Co., Ltd. er

51 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Other Sale of -Includin subsidia goods g: Putian ries of The and Telecom Market Bank 2019-01 Kechuang the 60.27 60.27 0.05% N 60.27 same as provisio product price transfer -26 Industry actual above n of Co., Ltd. controll services er

Subsidia Putian ry of Rent and The Hi-Tech controlli Leased Market Bank 2019-01 Property 217.02 217.02 69.29% 500 N 217.02 same as Industry ng property price transfer -26 Fee above Co., Ltd sharehol der

20,443. Total ------43,280 ------48

Details of major sold-out order sent - back

It is estimated that routine related transactions occurred in 2019 will not exceed 432.80 million Yuan (of which, the amount purchase product and received labor services from The actual implementation of routine related party will not be more than 45.5 million Yuan, sales of product and provide labor related transactions that is about to services to related party will not be more than 382.30 million Yuan, paying rentals and occurred in the Period with total relevant service costs to related party will not be more than 5 million Yuan); the related amount estimated by category (if transaction actually occurred amounted as 204.4348 million Yuan (of which, 0.157 million applicable) Yuan from purchasing goods and receiving labor service, 202.1076 million Yuan from sales of product and provide labor services, rental and property expenses amounted as 2.1702 million Yuan) in total that not more than expected at beginning of the year.

Reason for the great difference between trade price and market - reference price (if applicable)

2. Related transactions by assets acquisition and sold

□ Applicable √ Not applicable No related transactions by assets acquisition and sold for the Company in reporting period

3. Main related transactions of mutual investment outside

□ Applicable √ Not applicable No main related transactions of mutual investment outside for the Company in reporting period

4. Contact of related credit and debt

√ Applicable □ Not applicable

52 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Whether the Company had non-operating contact of related credit and debt □ Yes √ No The Company had no non-operating contact of related credit and debt in the reporting period.

5. Other related transactions

√ Applicable □ Not applicable The Company applied for entrusted loan from controlling shareholder China Putian Information Industry Co., Ltd. in the reporting period, see the relevant interim announcement for details. At the end of 2019, the balance of entrusted loans provided by the controlling shareholders was 262 million yuan. Website for temporary disclosure of the major connected transaction

Announcement Date of disclosure Website for disclosure

Relation Transaction of Applying Entrust Loan 2019-04-23 Juchao Website from Controlling Shareholder

Relation Transaction of Applying Entrust Loan 2019-12-14 Juchao Website from Controlling Shareholder

XVII. Significant contract and implementations

1. Trusteeship, contract and leasing

(1) Trusteeship

□ Applicable √ Not applicable No trusteeship for the Company in reporting period

(2) Contract

□ Applicable √ Not applicable No contract for the Company in reporting period

(3) Leasing

√ Applicable □ Not applicable Explanation on leasing: During the reporting period, the company and its subsidiaries incurred rental fees of 3.13 million yuan, and recognized rental income of 2.15 million yuan for renting out properties. Items that bringing gain/loss to the Company more than 10% of the total profits in reporting period □ Applicable √ Not applicable No items generated over 10% gains/losses in total profit in reporting period for the Company

53 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

2. Major guarantees

√ Applicable □ Not applicable

(1) Guarantees

In 10 thousand Yuan

Particulars about the external guarantee of the Company (Barring the guarantee for subsidiaries)

Guarante Related e for Announce Actual Name of the Company Guarantee Actual date of Guarantee Guarantee Implemen ment guarantee related guaranteed limit happening type term disclosure limit ted (Y/N) party date (Y/N)

Guarantee of the Company for the subsidiaries

Guarante Related e for Announce Actual Name of the Company Guarantee Actual date of Guarantee Guarantee Implemen ment guarantee related guaranteed limit happening type term disclosure limit ted (Y/N) party date (Y/N)

Jointly Nanjing Southern 2019.6.14-20 2018-04-24 6,000 2019-06-14 2,000 liability N N Telecom Co., Ltd. 20.6.14 guaranty

Jointly Nanjing Southern 2019.6.21-20 2019-05-30 7,500 2019-06-21 1,000 liability Y N Telecom Co., Ltd. 20.3.19 guaranty

Jointly Nanjing Southern 2019.9.19-20 2019-05-30 7,500 2019-09-19 1,000 liability N N Telecom Co., Ltd. 20.9.27 guaranty

Jointly Nanjing Southern 2019.9.27-20 2019-05-30 7,500 2019-09-27 1,000 liability N N Telecom Co., Ltd. 20.6.24 guaranty Total amount of actual Total amount of approving occurred guarantee for guarantee for subsidiaries in report 11,900 5,000 subsidiaries in report period period (B1) (B2) Total balance of actual Total amount of approved guarantee for subsidiaries at guarantee for subsidiaries at the 11,900 5,000 the end of reporting period end of reporting period (B3) (B4) Guarantee of the subsidiary for subsidiaries

Related Guarante Announce Actual Name of the Company Guarantee Actual date of Guarantee Guarantee Implemen e for ment guarantee guaranteed limit happening type term disclosure limit ted (Y/N) related date party

54 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

(Y/N)

Total amount of guarantee of the Company( total of three above mentioned guarantee)

Total amount of approving Total amount of actual guarantee in report period 11,900 occurred guarantee in report 5,000 (A1+B1+C1) period (A2+B2+C2)

Total amount of approved Total balance of actual guarantee at the end of report 11,900 guarantee at the end of 5,000 period (A3+B3+C3) report period (A4+B4+C4)

The proportion of the total amount of actually guarantee in the net 29.49% assets of the Company (that is A4+ B4+C4)

Including: Amount of guarantee for shareholders, actual controller and its 0 related parties (D)

The debts guarantee amount provided for the guaranteed parties 0 whose assets-liability ratio exceed 70% directly or indirectly (E)

Proportion of total amount of guarantee in net assets of the 0 Company exceed 50% (F)

Total amount of the aforesaid three guarantees (D+E+F) 0 Explanations on possibly bearing joint and several liquidating N/A responsibilities for undue guarantees (if applicable)

Explanations on external guarantee against regulated procedures N/A (if applicable)

Explanation on guarantee with composite way

(2) Guarantee outside against the regulation

□Applicable √Not applicable No guarantee outside against the regulation in Period.

3. Entrust others to cash asset management

(1) Trust financing

□ Applicable √ Not applicable The Company had no trust financing in the reporting period.

(2) Entrusted loans

□ Applicable √ Not applicable The Company had no entrusted loans in the reporting period.

55 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

4. Other material contracts

□ Applicable √ Not applicable No other material contracts for the Company in reporting period

XVIII. Social responsibility

1. Performance of social responsibility

Based on the communications industry, the company adheres to independent innovation, continuously promotes the sustainable development of itself and society, and fulfills its responsibilities and obligations to society, shareholders, employees and other interested parties. The company continuously improves and optimizes corporate governance, earnestly fulfills its obligation of information disclosure, ensures shareholders’ right to know, right to participate and right to vote on major matters of the company, and guarantees the legitimate rights and interests of all shareholders. The company attaches great importance to quality, environment and occupational safety and health management. It has passed GB/T19001-2016 quality management system certification, GB/T24001-2016 environmental management system certification, and GB/T28001-2011 occupational health and safety management system certification, and constantly strives to promote environmental protection and sustainable development. The company strictly abides by the Labor Law, Labor Contract Law and other laws and regulations, always adheres to the people-oriented core values, attaches great importance to the value of employees, cares about the work, life, health and safety of employees, effectively protects the rights and interests of employees, enhances the cohesion of the company, devotes to the realization of the joint development vision of the company and its employees. The company has always kept in mind the mission and responsibility of the central enterprise and is enthusiastic about devoting itself to social welfare undertakings. Do a good job in targeted poverty alleviation, and have participated in the “Spring Bud Project” of China Children and Teenagers’ Fund, Nanjing City Charity “One Day Donation” and other charitable assistance and donations and public welfare activities for many years. The company’s youth commonweal organization “Blue Dandelion” volunteer service team was rated as “Top Ten Volunteer Organizations” by the Nanjing Youth League Committee. The company has always been honest and trustworthy, operating in accordance with the law, actively building partnerships with suppliers, customers, banks and other relevant stakeholders, respecting the legitimate rights and interests of stakeholders, focusing on communication and coordination with various stakeholders, and achieving a win-win situation of the company and stakeholders, and promoting the company’s sustained and steady development.

56 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

2. Precise poverty alleviation social responsibility

(1) Precise poverty alleviation plan

In 2019, Nanjing Putian insisted on its own operation and participated in targeted poverty alleviation work. There were two main aspects, the first was to continue to provide assistance to Molihua Village of Liuhe District according to the requirements of the Party Committee of Nanjing Municipal Bureau of Industry and Information Technology; the second was to participate in the assistance of Dari County of Qinghai Province according to the group company’s poverty alleviation linkage requirements. I Overall goal Guided by the spirit of the 19th National Congress of the Party and the spirit of General Secretary Xi Jinping’s series of important speeches, we adhere to the basic policy of targeted poverty alleviation, focus on “producing blood” to increase the income of poor households, focus on “transfusing blood” to improve the lives of poor households, and aim at helping poor households get rid of poverty and become better off, and adhere to the combination of “transfusing blood” and “producing blood” to effectively help poor households. II Main tasks 1. Adhere to overall planning and poverty alleviation through differences. In the process of assistance, strictly implement the annual budget in accordance with the company’s actual situation. 2. Adhere to self-reliance and address both the symptoms and the root cause. Assist the village committee of Molihua Village to improve the collective economic strength of the village; strengthen the leadership of party building and help Jianse Township, Dari County. III Safeguards 1. Funding assistance: strengthen communication and coordination with the village committee of Molihua Village, and provide financial assistance within the annual budget. 2. Emotional assistance: normalize visits and condolences, strengthen liaison with low-income farmers, go door-to-door to communicate feelings, and understand the hardships of the masses. On traditional festivals such as the Spring Festival, pay visits to the poor households who have sudden incidents in their homes and have difficulties in life, and make condolences in time. 3. Party construction assistance: adhere to the guidance of party construction and sign the “Party Construction Co-construction Agreement” with the party committee of Jianshe Township, Dari County, Qinghai.

(2) Summary of annual precise poverty alleviation

In 2019, the company continued to promote targeted poverty alleviation. For the paired assistance work with Molihua Village in Liuhe District, mainly during traditional festivals such as the Spring Festival, the company’s leadership team led the team to go to the village and pay door-to-door visits to the low-income farmers, especially poor households who had difficulties in life or had sudden incidents in their homes, sent the care of the party and enterprises to the low income families, investing 10,000 yuan in condolences throughout the year, and the condolences materials were worth about 5,000 yuan. For the joint work of poverty alleviation in Dari County,

57 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Qinghai Province, signed the “Party Construction Co-construction Agreement” with the party committee of Jianshe Township, Dari County.

(3) Results of the poverty

Target Measurement unit Numbers/ implementation i. Overall —— ——

In 10 thousand Including: 1. Capital 1.0 Yuan

In 10 thousand 2. Material discount 0.5 Yuan ii. Invested by specific project —— ——

1. Industrial development poverty —— ——

2. Transfer employment —— ——

3.Relocation the poor —— ——

4.Education poverty —— ——

5.Health poverty alleviation —— ——

6.Ecological protection and poverty —— —— alleviation

7.Fallback protection —— ——

8.Social poverty alleviation —— ——

8.2 Capital input in fixed poverty In 10 thousand 1.5 alleviation work Yuan

9. Other —— —— iii. Awards (content and grade) —— ——

(4) Follow-up of precise poverty alleviation

In 2020, Nanjing Putian’s targeted poverty alleviation work will strictly abide by the principle of living within the means, make reasonable use of assistance funds, make full use of the advantages of industrial products, do a good job in the local counterpart assistance to the Molihua Village of Liuhe District, and actively participate in the poverty alleviation linkage work of targeted poverty alleviation in Dari County, Qinghai Province.

3. Environmental protection

The listed Company and its subsidiary whether belongs to the key sewage units released from environmental protection department

No

The listed Company and its subsidiary did not belongs to the key sewage units released from environmental protection department

58 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

XIX. Explanation on other significant events

√ Applicable □ Not applicable Index of the material events that disclosed in reporting period:

Event Disclosure date Index of information on appointed website Notice on Progress of Housing Expropriation 2019.1.2 Juchao Website (www.cninfo.com.cn) Notice on obtain Government Subsidies 2019.1.3 Juchao Website (www.cninfo.com.cn) Notice on Resignation of Directors 2019.1.5 Juchao Website (www.cninfo.com.cn) Notice on Resolution of 18th Session of 7th BOD 2019.1.5 Juchao Website (www.cninfo.com.cn) Notice on Convening the 1st Extraordinary 2019.1.5 Juchao Website (www.cninfo.com.cn) Shareholders General Meeting of 2019 Notice on Resolution of 1st Extraordinary 2019.1.22 Juchao Website (www.cninfo.com.cn) Shareholders General Meeting of 2019 Notice on Resolution of 19th Session of 7th BOD 2019.1.26 Juchao Website (www.cninfo.com.cn) Notice of the Forecast for Routine Related 2019.1.26 Juchao Website (www.cninfo.com.cn) Transaction for year of 2019 Notice on Resolution of 20th Session of 7th BOD 2019.1.29 Juchao Website (www.cninfo.com.cn) Notice on Carry Out Accounts Receivable Factoring 2019.1.29 Juchao Website (www.cninfo.com.cn) Notice on Resolution of 21st Session of 7th BOD 2019.3.13 Juchao Website (www.cninfo.com.cn) Notice on Carry out Financial Leasing Business 2019.3.13 Juchao Website (www.cninfo.com.cn) Notice on Change the Continuous Supervision 2019.3.27 Juchao Website (www.cninfo.com.cn) Sponsor Representative Notice on obtain Government Subsidies 2019.4.4 Juchao Website (www.cninfo.com.cn) Preliminary Earnings Estimate for 2018 2019.4.13 Juchao Website (www.cninfo.com.cn) Performance Forecast for Q1 of 2019 2019.4.15 Juchao Website (www.cninfo.com.cn) Notice of Director Resignation 2019.4.19 Juchao Website (www.cninfo.com.cn) Notice on Resolution of 22nd Session of 7th BOD 2019.4.23 Juchao Website (www.cninfo.com.cn) Notice on Resolution of 9th Session of 7th 2019.4.23 Juchao Website (www.cninfo.com.cn) Supervisory Committee Summary of Annual Report 2018 2019.4.23 Juchao Website (www.cninfo.com.cn) Notice on Provision for Impairment of Assets for 2019.4.23 Juchao Website (www.cninfo.com.cn) 2018 Notice on Change of Accounting Policy 2019.4.23 Juchao Website (www.cninfo.com.cn) Notice on Related Transaction of Applying for 2019.4.23 Juchao Website (www.cninfo.com.cn) Entrust Loans to Controlling Shareholder Text of First Quarterly Report 2019 2019.4.30 Juchao Website (www.cninfo.com.cn) Notice on Resolution of 24th Session of 7th BOD 2019.5.30 Juchao Website (www.cninfo.com.cn) Notice on Guarantee for Controlling Subsidiary 2019.5.30 Juchao Website (www.cninfo.com.cn) Notice on Convening the AGM of 2018 2019.5.30 Juchao Website (www.cninfo.com.cn) Progress of Guarantee for Controlling Subsidiary 2019.6.18 Juchao Website (www.cninfo.com.cn)

59 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Notice on Resolution of AGM of 2018 2019.6.20 Juchao Website (www.cninfo.com.cn) Progress of Guarantee for Controlling Subsidiary 2019.6.25 Juchao Website (www.cninfo.com.cn) Performance Forecast for Semi-Annual of 2019 2019.7.13 Juchao Website (www.cninfo.com.cn) Notice on Resolution of 25th Session of 7th BOD 2019.8.10 Juchao Website (www.cninfo.com.cn) Notice on Resolution of 11th Session of 7th 2019.8.10 Juchao Website (www.cninfo.com.cn) Supervisory Committee Notice on Convening the 2nd Extraordinary 2019.8.10 Juchao Website (www.cninfo.com.cn) Shareholders General Meeting of 2019 Notice on Resolution of 2nd Extraordinary 2019.8.28 Juchao Website (www.cninfo.com.cn) Shareholders General Meeting of 2019 Notice on Resolution of 26th Session of 7th BOD 2019.8.30 Juchao Website (www.cninfo.com.cn) Summary of Semi-Annual Report of 2019 2019.8.30 Juchao Website (www.cninfo.com.cn) Notice on Change of Accounting Policy 2019.8.30 Juchao Website (www.cninfo.com.cn) Notice on Resolution of 12th Session of 7th 2019.8.30 Juchao Website (www.cninfo.com.cn) Supervisory Committee Notice on Resolution of 27th Session of 7th BOD 2019.8.31 Juchao Website (www.cninfo.com.cn) Progress of Guarantee for Controlling Subsidiary 2019.9.24 Juchao Website (www.cninfo.com.cn) Notice on change of office address and contact 2019.10.8 Juchao Website (www.cninfo.com.cn) information Progress of Guarantee for Controlling Subsidiary 2019.10.11 Juchao Website (www.cninfo.com.cn) Performance Forecast of 3Q of 2019 2019.10.15 Juchao Website (www.cninfo.com.cn) Text of 3Q report of 2019 2019.10.31 Juchao Website (www.cninfo.com.cn) Notice on Resolution of 29th Session of 7th BOD 2019.12.14 Juchao Website (www.cninfo.com.cn) Notice on the related transaction of applying for 2019.12.14 Juchao Website (www.cninfo.com.cn) entrusted loans from the controlling shareholder Notice on Convening the 3rd Extraordinary 2019.12.14 Juchao Website (www.cninfo.com.cn) Shareholders General Meeting of 2019 Suggestive notice on assets to be transferred 2019.12.14 Juchao Website (www.cninfo.com.cn) Notice on Resolution of 3rd Extraordinary 2019.12.31 Juchao Website (www.cninfo.com.cn) Shareholders General Meeting of 2019

XX. Significant event of subsidiary of the Company

□ Applicable √ Not applicable

60 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section VI. Changes in Shares and Particular about Shareholders

I. Changes in shares

1. Changes in shares

In Share Before the Change Increase/Decrease in the Change (+, -) After the Change Capitaliza New Bonus tion of Proportio Amount Proportion shares Others Subtotal Amount shares public n issued reserve 115,000,0 115,000,0 I. Unlisted shares 53.49% 53.49% 00 00

115,000,0 115,000,0 1. Sponsor’s shares 53.49% 53.49% 00 00

Including: state-owned 115,000,0 115,000,0 53.49% 53.49% shares 00 00

100,000,0 100,000,0 II. Listed shares 46.51% 46.51% 00 00

2. Domestically listed 100,000,0 100,000,0 46.51% 46.51% foreign shares 00 00

215,000,0 215,000,0 III. Total shares 100.00% 100.00% 00 00

Reasons for share changed □ Applicable √ Not applicable Approval of share changed □ Applicable √ Not applicable Ownership transfer of share changes □ Applicable √ Not applicable Progress of share repurchase □ Applicable √ Not applicable Implementation progress of reducing holdings of repurchase shares by centralized bidding □ Applicable √ Not applicable Influence on the basic EPS and diluted EPS as well as other financial indexes of net assets per share attributable to common shareholders of Company in latest year and period □ Applicable √ Not applicable Other information necessary to disclose or need to disclosed under requirement from security regulators □ Applicable √ Not applicable

61 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

2. Changes of restricted shares

□ Applicable √ Not applicable

II. Securities issuance and listing

1. Security offering (without preferred stock) in Reporting Period

□ Applicable √ Not applicable

2. Changes of total shares and shareholders structure as well as explanation on changes of assets and liability structure

□ Applicable √ Not applicable

3. Current internal staff shares

□ Applicable √ Not applicable

III. Shareholder and actual controller of the Company

1. Amount of shareholders of the Company and particulars about shares holding

In Share

Total preference Total preference shareholders Total common shareholders with voting Total common stock with voting rights recovered stock shareholders at rights recovered at end of last shareholders in 8,918 8,861 0 0 end of last month at end of month before reporting before annual reporting period annual report period-end report disclosed (if applicable) disclosed (if (see note 8) applicable) (see note 8)

Particulars about shares held above 5% by shareholders or top ten shareholders

Total Number of share pledged/frozen Amount sharehol Amount Proportio Changes of Full name of Nature of n of ders at of listed in report lock-up Shareholders shareholder shares the end shares State of share Amount held period shares of report held held period

China Potevio State-owned 115,000, 115,000, 53.49% - 0 Company Limited corporation 000 000

62 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Shenwan Foreign 5,646,50 HongYuan (H.K.) 2.63% - 0 5,646,500 corporation 0 Limited

GUOTAI JUNAN SECURITIES(H Foreign 5,480,11 -1,469,98 2.55% 0 5,480,114 ONGKONG) corporation 4 1 LIMITED

Domestic nature 2,449,73 Zheng Enyue 1.14% 5,800 0 2,449,739 person 9

Domestic nature 2,007,11 Sun Huiming 0.93% - 0 2,007,110 person 0

Guosen Securities Foreign 1,901,88 (H.K.) Broker 0.88% 40,000 0 1,901,882 corporation 2 Co., Ltd.

Domestic nature 1,871,37 Gu Jinhua 0.87% 9,000 0 1,871,371 person 1

BOCI Foreign 1,466,94 SECURITIES 0.68% -250,000 0 1,466,945 corporation 5 LIMITED

Domestic nature Xiang Yan 0.42% 910,602 - 0 910,602 person

Domestic nature Zhen Hongquan 0.39% 849,200 14,300 0 849,200 person

Strategy investors or general legal person becomes top 10 shareholders Not applicable due to rights issued (if applicable) (see note3)

Explanation on associated Among the top ten shareholders, China Potevio Company Limited is neither a related party relationship or concerted action nor a person acting in concert with the others. It’s unknown by the Company whether there among the aforesaid shareholders are related parties or persons acting in concert among the other shareholders.

Top 10 shareholders with circulation shares held

Type of shares Shareholders’ name Amount of listed shares held at end of the Period Type Amount

Domestically Shenwan HongYuan (H.K.) Limited 5,646,500 listed foreign shares

GUOTAI JUNAN Domestically SECURITIES(HONGKONG) 5,480,114 listed foreign LIMITED shares

63 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Domestically Zheng Enyue 2,449,739 listed foreign shares

Domestically Sun Huiming 2,007,110 listed foreign shares

Domestically Guosen Securities (H.K.) Broker 1,901,882 listed foreign Co., Ltd. shares

Domestically Gu Jinhua 1,871,371 listed foreign shares

Domestically BOCI SECURITIES LIMITED 1,466,945 listed foreign shares

Domestically Xiang Yan 910,602 listed foreign shares

Domestically Zhen Hongquan 849,200 listed foreign shares

Domestically Liang Wei 772,800 listed foreign shares

Expiation on associated relationship or consistent actors within the top 10 It’s unknown by the Company whether there are related parties or persons acting in concert un-restrict shareholders and between among the above mentioned shareholders. top 10 un-restrict shareholders and top 10 shareholders

Explanation on shareholders involving margin business about top ten common stock shareholders with N/A un-restrict shares held(if applicable) (see note4)

Whether top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held have a buy-back agreement dealing in reporting period □ Yes √ No The top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held of the Company have no buy-back agreement dealing in reporting period.

64 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

2. Controlling shareholder of the Company

Nature of controlling shareholders: central state-owned holding Type of controlling shareholders: legal person Legal person/person Controlling shareholder Date of foundation Organization code Main operation business in charge of the unit

Potevio is a large central enterprise under direct administration of State-owned Assets Supervision and Administration Commission of the State Council, focusing on manufacture and trading of China Potevio Company Lv Weiping 23 July 2003 91110000710931555N information Limited telecommunication products, relevant technology research and services. The operation scope covers information telecommunication, broadcasting, industrial information, financial electrics and new energy.

Equity of other Domestic and overseas listed companies directly controlled includes Shanghai Potevio Co., Ltd., domestic/oversea listed Nanjing Putian Telecommunications Co., Ltd., Chengdu Potevio Cable Co., Ltd.; Domestic and Company control by overseas listed companies indirectly controlled includes Eastern Communications Co., Ltd., controlling shareholder as Eastcompeace Smart Card Co., Ltd., the Company takes no stake in domestic and overseas listed well as stock-joint in report Company. period

Changes of controlling shareholders in reporting period □ Applicable √ Not applicable The Company had no changes of controlling shareholders in reporting period

3. Actual controller and person acting in concert of the Company

Nature of actual controller: central state-owned assets management Type of actual controller: legal person Legal Actual controlling shareholders person/person in Date of foundation Organization code Main operation business charge of the unit

65 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

A large central enterprise under direct administration of State-owned Assets Supervision and Administration Commission of the State Council, focusing on manufacture and trading of information telecommunication China Putian Corporation Lv Weiping 29 March 1980 9111000010000157XE products, relevant technology research and services. The operation scope covers information telecommunication, broadcasting, industrial information, financial electrics and new energy.

No domestic and overseas listed Company directly controlled and held by the Company. Domestic Equity of domestic/oversea and overseas listed Company indirectly controlled by China Potevio includes Shanghai Potevio listed Company control by Co., Ltd, Nanjing Putian Telecommunications Co., Ltd., Chengdu Putian Telecommunications actual controller in report period Cable Co., Ltd, Eastern Communications Co., Ltd. and Eastcompeace Smart Card Co., Ltd.

Changes of actual controller in reporting period □ Applicable √ Not applicable No changes of actual controllers for the Company in reporting period.

Property right and controlling relationship between the actual controller and the Company is as follow:

State-owned Assets Supervision and Administration Commission of the State Council

100%

China Putian Corporation

100%

China Potevio Company Limited

53.49%

Nanjing Putian Telecommunications Co., Ltd.

Actual controller controlling the Company by entrust or other assets management

□ Applicable √ Not applicable

66 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

4. Particulars about other legal person shareholders with over 10% shares held

□ Applicable √ Not applicable

5. Limitation and reducing the holdings of shares of controlling shareholders, actual controllers, restructuring side and other commitment subjects

□ Applicable √ Not applicable

67 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section VII. Preferred Stock

□ Applicable √ Not applicable The Company had no preferred stock in the reporting.

68 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section VIII. Convertible Bonds

□ Applicable √ Not applicable The Company had no convertible bonds in the Period.

69 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section IX. Particulars about Directors, Supervisors, Senior

Executives and Employees

I. Changes of shares held by directors, supervisors and senior executives

Amount Amount Shares Shares of shares of shares Start held at Other held at End date Working dated of increased decreased Title Sex(M/F) Age of office period-be changes period-en Name office status term in this in this term gin (share) d period period (Share) (Share) (Share) (Share)

Director Currently 2013-08- Xu Qian (President M 57 0 0 0 0 0 in office 23 )

Wang Currently 2019-01- Director M 45 0 0 0 0 0 Wenkui in office 21

Wang Deputy Currently 2019-04- M 45 0 0 0 0 0 Wenkui President in office 19

Currently 2019-08- Li Tong Director M 49 0 0 0 0 0 in office 27

Currently 2019-08- Liu Yun Director F 46 0 0 0 0 0 in office 27

Currently 2017-08- Qin Zhen Director M 51 0 0 0 0 0 in office 23

Wang Currently 2017-08- Director F 49 0 0 0 0 0 Jinfeng in office 23

Independ Tang Currently 2017-08- ent F 63 0 0 0 0 0 Fuxin in office 23 Director

Independ Xie Currently 2017-08- ent M 56 0 0 0 0 0 Manlin in office 23 Director

Independ Du Currently 2017-08- ent F 51 0 0 0 0 0 Xiaorong in office 23 Director

Superviso Currently 2019-08- Lv Dong M 48 0 0 0 0 0 r in office 27

70 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Chairman of the Superviso Currently 2019-08- Lv Dong M 48 0 0 0 0 0 ry in office 28 Committe e

Superviso Currently 2019-08- Wei Jie F 42 0 0 0 0 0 r in office 27

Qiu Superviso Currently 2017-08- F 46 0 0 0 0 0 Huizhen r in office 23

Wang Currently 2019-01- GM M 45 0 0 0 0 0 Wenkui in office 04

Deputy Currently 2016-08- Qin Zhen M 51 0 0 0 0 0 GM in office 26

Jia Deputy Currently 2018-06- F 39 0 0 0 0 0 Haowen GM in office 29

Deputy Currently 2019-05- Lei Xu M 51 0 0 0 0 0 GM in office 29

Chief Wang Currently 2019-08- Accounta M 52 0 0 0 0 0 Huailin in office 29 nt

Liu General Currently 2018-04- F 48 0 0 0 0 0 Xiaodong counsel in office 20

Secretary Currently 2017-08- Li Jing of the F 44 0 0 0 0 0 in office 23 Board

Office 2017-08- 2019-01- Liu Yun Director F 46 0 0 0 0 0 leaving 23 04

Li Office 2016-06- 2019-01- GM M 48 0 0 0 0 0 Linzhen leaving 15 04

Director Li (deputy Office 2017-08- 2019-04- M 48 0 0 0 0 0 Linzhen president leaving 23 18 )

Cheng Office 2017-08- 2019-08- Director F 49 0 0 0 0 0 Hui leaving 23 27

71 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Superviso r (Chairma Zhao n of the Office 2017-08- 2019-08- M 53 0 0 0 0 0 Xinping Superviso leaving 23 27 ry Committe e)

Zhang Superviso Office 2017-08- 2019-08- F 46 0 0 0 0 0 Hong r leaving 23 27

Chief Cao Office 2018-06- 2019-08- Accounta M 44 0 0 0 0 0 Xurong leaving 29 29 nt

Cao Deputy Office 2019-08- 2020-04- M 44 0 0 0 0 0 Xurong GM leaving 29 07

Total ------0 0 0 0 0

II. Changes of directors, supervisors and senior executives

√ Applicable □ Not applicable

Name Title Type Date Reasons

Wang Wenkui Director Newly-appointed 2019-01-21 Election in Shareholder General Meeting

Wang Wenkui Deputy President Newly-appointed 2019-04-19 Election of the board of directors

Li Tong Director Newly-appointed 2019-08-27 Election in Shareholder General Meeting

Liu Yun Director Newly-appointed 2019-08-27 Election in Shareholder General Meeting

Lv Dong Supervisor Newly-appointed 2019-08-27 Election in Shareholder General Meeting

Chairman of the Lv Dong Supervisory Newly-appointed 2019-08-28 Election of the board of supervisors Committee

Wei Jie Supervisor Newly-appointed 2019-08-27 Election in Shareholder General Meeting

Wang Wenkui GM Newly-appointed 2019-01-04 Appointment by the Board

Lei Xu Deputy GM Newly-appointed 2019-05-29 Appointment by the Board

Cao Xurong Deputy GM Newly-appointed 2019-08-29 Appointment by the Board

Wang Huailin Chief accountant Newly-appointed 2019-08-29 Appointment by the Board

Liu Yun Director Office leaving 2019-01-04 Resignation

Contract After deliberation and approval by the board of directors, Li Linzhen GM 2019-01-04 termination no longer serve as general manager

72 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Director (deputy Li Linzhen Office leaving 2019-04-18 Resignation president )

After deliberation and approval by the general meeting of Cheng Hui Director Office leaving 2019-08-27 shareholders, no longer serve as director

Supervisor (Chairman of the After deliberation and approval by the general meeting of Zhao Xinping Office leaving 2019-08-27 Supervisory shareholders, no longer serve as supervisor Committee)

After deliberation and approval by the general meeting of Zhang Hong Supervisor Office leaving 2019-08-27 shareholders, no longer serve as supervisor

Appoint and Appointed as deputy general manager after deliberation Cao Xurong Chief accountant 2019-08-29 dismiss by the board of directors, no longer as chief accountant

Resigned by deputy general manager after approval by Cao Xurong Deputy GM Office leaving 2020-04-07 the board of directors

III. Post-holding

Professional background, major working experience and present main responsibilities in Company of directors, supervisors and senior executive at the present

Director: Xu Qian (Male), born in 1962, a senior executive getting a MBA. He joints the work in 1984, and worked as engineer of the communication equipment dept. in China P&T Appliances from August 1984 to July 1993; a deputy GM of communication device department in China P&T Appliances from July 1993 to July 1994; deputy GM of China P&T Appliances Beijing Company from July 1994 to July 1995 and GM from July 1995 to March 1998; vice-secretary (secondment for getting experience) of CPC Lankao County Committee, Henan Province from March 1998 to March 1999; GM assistant of China P&T Appliances from March 1999 to August 2000; deputy GM of China P&T Appliances from August 2000 to February 2002 and deputy GM of China P&T Appliances Group from February 2002 to June 2003; Party members and deputy GM in China P&T Appliances Group from June 2003 to April 2009; Party members and deputy GM of the China Potevio from April 2009 to December 2017; senior vice president (concurrently) of China Potevio Company Limited and GM (concurrently) of communications industry business from June 2009 to May 2016; party secretary of the Company from May 2013 to June 2016; and he servers as president (concurrently) of China Potevio Company Limited since May 2016; he also serves as Standing committee of the Party Committee and Deputy GM of China Potevio since December 2017. Mr. Xu Qian holds a concurrent post as Director and President of the Company since August 2013.

Wang Wenkui, male, born in 1974, bachelor of engineering, joined in work in 1996. From July 1996 to December 2002, he served as the deputy manager and WCDMA project manager of WCDMA project department of the Network Communication Research Institute of Eastcom Co., Ltd.; from December 2002 of to August 2004, he served as the manager of WCDMA Project Department of the Network Communication Research Institute of Eastcom Co., Ltd.; from August 2004 to December 2007, he was dispatched and appointed as the deputy general manager of Hangzhou Sanxing Eastcom Network Technology Co., Ltd. by the Investment Management Department of Eastcom Co., Ltd.; from December 2007 to November 2009, he served as the deputy general manager of Trunked Radio Business Division of Eastcom Co., Ltd.; from November 2009 to April 2012, he served as the general manager of Manufacturing Business Division of Eastcom Co., Ltd.; from April 2012 to June 2015, he served as the vice president and the general

73 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report manager of Manufacturing Business Division (concurrently) of Eastcom Co., Ltd.; from June 2015 to December 2018, he served as the vice president and the general manager of Financial Business Division (concurrently) of Eastcom Co., Ltd.; since January 2019, he has been serving as the general manager of Nanjing Putian Telecommunications Co., Ltd. Mr. Wang Wenkui holds a concurrent post as Director of the Company since January 2019 (serve as vice chairman of t he Company since April 2019).

Li Tong, male, born in 1970, master of business administration, joined the work in 1993. He worked in the Enterprise Management Department of China Posts and Telecommunications Industry Corporation from July 1993 to September 1999; he successively served as Director and deputy general manager of the Enterprise Management Department, deputy director of Corporate Restructuring Office, and concurrently deputy general manager of Corporate Development Division and manager of Corporate Operations Department I of China Potevio Information Industry Group Corporation from September 1999 to November 2005; from November 2005 to December 2007, he served as deputy general manager of Corporate Development Division and manager of Corporate Operations Department I, and deputy general manager of Corporate Development Division of China Potevio Information Industry Co., Ltd.; from December 2007 to December 2011, he served as general manager of Nanjing Putian Communication Technology Industrial Park Co., Ltd.; from May 2011 to December 2011, he concurrently served as deputy general manager, deputy secretary of the Party Committee, and secretary of the Discipline Inspection Committee of Nanjing Putian Communication Co., Ltd. (August 2011); he served as party secretary and deputy general manager (concurrently) of Nanjing Putian Communication Co., Ltd. from December 2011 to May 2013; and served as general manager of the Audit and Supervision Legal Department of China Potevio Information Industry Co., Ltd. from May 2013 to May 2014; from May 2014 to March 2015, he served as the deputy leader of the Discipline Inspection Group of the Leading Party Group of China Potevio Information Industry Group Corporation, and general manager (concurrently) of the Audit and Supervision Legal Department of China Potevio Information Industry Co., Ltd.; from March 2015 to December 2017, he served as the director of the General Manager Office of China Potevio Information Industry Group Corporation, the general manager of the General Affairs Department of China Potevio Information Industry Co., Ltd., and the deputy leader of the Discipline Inspection Group of the Leading Party Group of the Group; from December 2017 to October 2018, he served as secretary of the Board of Directors, and concurrently director of the General Office and director of the General Manager (President) Office (Board Office) of China Potevio Information Industry Group Corporation (China Potevio Information Industry Co., Ltd.); from October 2018 to November 2019, he served as secretary of the Board of Directors, and concurrently director of the General Office and director of the Board Office of China Potevio Information Industry Group Corporation (China Potevio Information Industry Co., Ltd.); from November 2019 to the present, he has been serving as secretary of the Board of Directors, and concurrently general manager of the General Management Department and director of the Board Office of China Potevio Information Industry Group Corporation (China Potevio Information Industry Co., Ltd.).

Mr. Li Tong holds a concurrent post as Director of the Company from May 2006 to August 2017; holds a concurrent post as Director of the Company since August 2019.

Liu Yun, female, born in 1973, master of economics, joined work in 1997. She worked in the Office and Finance Department of China National Textiles Import and Export Corporation from April 1997 to January 2002; she served as assistant general manager of Investment Department of China National Textiles Import and Export Corporation from January 2002 to June 2004; from June 2004 to October 2006, she served as assistant general manager of Chinatex International Apparel Co., Ltd.; from October 2006 to April 2007, she served as the financial director of the Preparation Office of the Infolex LLc Beijing Office; from April 2007 to October 2013, she successively served as the investment management supervisor and the investment management manager of Enterprise Development Department of China Potevio Information Industry Co., Ltd.; from October 2013 to October 2018, she successively served as the assistant general manager and deputy general manager (October 2016) of Enterprise Development Department of China Potevio Information Industry Co., Ltd.; from October 2018 to June 2019, she served as the deputy general manager of Putian

74 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Innovation and Entrepreneurship Management Co., Ltd.; from June 2019 to the present, she has been the general manager of the Enterprise Operation Department of China Potevio Information Industry Group Corporation.

Ms. Liu Yun holds a concurrent post as Director of the Company from August 2007 to January 2019; holds a concurrent post as Director of the Company since August 2019.

Qin Zhen (Male), born in 1969, bachelor of engineering, major in administrative engineering. He worked in 1990 and successively worked as the production office scheduling and department assistant in Nanjing Communication Equipment Plant from August 1990 to January 1999; he worked as the deputy GM and deputy secretary of the Party branch in wiring Company of Nanjing Putian Telecommunication Co., Ltd. from January 1999 to March 2001; and served as deputy director of the enterprise development dept. and enterprise management dept. and director of the enterprise management dept. in Nanjing Putian Telecommunication Co., Ltd. and GM of the Putian Industrial Co., Ltd. from March 2001 to January 2006; served as deputy GM in network cabinet division of the Company from January 2006 to November 2006; he served as GM in Putian manufacturing department and party branch secretary of the Company from November 2006 to March 2012; the director of party committee of the Company from March 2012 and August 2015; serves as deputy chairman of the labor union in the Company from May 2012 to March 2013 an acted as GM assistant from March 2013 to September 2016; now he serves as deputy GM of the Company since September 2016.

Mr. Qin Zhen holds a concurrent post as Director of the Company since August 2017.

Wang Jinfeng (Female), born in 1970, bachelor of economics, started her career in 1993. Ms. Wang worked as the accountant of the financial department of Beijing Posts and Telecommunications Equipment Factory from August 1993 to April 1995; she served as the accounting officer of the marketing center of Beijing Posts and Telecommunications Equipment Factory from April 1995 to February 2002; she held the position of financial accounting manager of Beijing Capitek Co. Ltd. from March 2002 to April 2005; Ms. Wang successively served as the financial manager of terminal services, agency services, agency and telecommunications services of China Potevio Company Limited from April 2005 to November 2013; she has worked as the assistant of the general manager of financial department of China Potevio Company Limited from November 2013 until now. Ms. Wang Jinfeng holds a concurrent post as Director of the Company since August 2017.

Tang Fuxin (Female), born in 1956, obtaining a master's degree, a senior accountant, started her career in 1975. Ms. Tang worked at the countryside in Shunyi Beijing from March 1975 to December 1976; she successively served as an accountant of financial division and the deputy director of inspection division of the original ministry of posts and telecommunications from September 1976 to October 1998; she served as the manager of planning financial department of the original Guoxin Paging Co.,Ltd. from October 1998 to July 2000; she worked as the vice general manager of financial department of China United Communications Limited from July 2000 to September 2001; she served as the vice general manger of financial department of China United Communications Limited from September 2001 to March 2005; Ms. Tang held the position of general manager of the financial department of China United Communications Limited from March 2005 to February 2006; she served as the general manager of auditing department of China United Communications Limited from February 2006 to April 2011; she worked as the senior manager of auditing department of China United Communications Limited from April 2011 to February 2016. Ms. Tang Fuxin holds a concurrent post as independent director of the Company since August 2017.

Xie Manlin (Male), born in 1963, Master of laws. He worked in 1986, and in the Nanjing Second Laws Firm from August 1986 to September 1989; he worked in Nanjing Jinling Laws Firm from October 1989 to October 1994; and serves as director of Jiangsu Xie Manlin Laws Firm since December 1994. Mr. Xie Manlin holds a concurrent post as independent director of the Company since August 2017.

75 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Du Xiaorong (Female), born in 1968, doctor of management, major in technical economy and management, started her career in 1989. Ms. Du worked as an assistant teacher at the management department of Hohai University from July 1989 to March 1995; she served as a lecturer of International Business School of Hohai University from April 1995 to March 2001; Ms. Du worked as an associate professor of Business School of Hohai University from April 2001 to March 2002; Ms. Du was put on field practice at Taihu Basin Administration and worked as the assistant of the director of planning department from April 2002 to April 2003; She served as an assistant professor of Business School and the deputy director of Chrematistics Department of Hohai University from May 2003 to December 2003 ;She served as an assistant professor of Business School as well as the director of Chrematistics Department of Hohai University from January 2004 to May 2008; she worked as a professor of Business School and director of Chrematistics Department of Hohai University from June 2008 to September 2010; Ms. Du also worked as a professor and the director of Finance Department of Business School of Hohai University from October 2010 to May 2013; She also serves as a professor and Head of Accounting Dept. of Hohai University since June 2013 Ms. Du Xiaorong holds a concurrent post as independent director of the Company since August 2017.

Supervisor: Lv Dong, male, born in 1971, master of management, joined the work in 1995. From August 1995 to December 1999, he served as an accounting accountant of the Finance Office of Beijing Power Equipment Group Co., Ltd.; from December 1999 to October 2000, he served as the auditor of the Audit Branch of North China Power Bureau; from October 2000 to October 2001, he was seconded to the 13th Office of the Board of Supervisors of the Central Enterprise Work Committee; he acted as the project manager of Tianhua Certified Public Accountants from October 2001 to February 2002; he acted as the auditor of the Audit Department of China Potevio Information Industry Group Corporation from February 2002 to April 2006; from April 2006 to September 2011, he served as the audit business manager and deputy manager (May 2010) of the Audit Department of China Potevio Information Industry Co., Ltd.; from September 2011 to July 2017, he served as the manager of the Audit Department and the Audit and Supervision Legal Department of China Potevio Information Industry Co., Ltd.; from July 2017 to October 2018, he served as the deputy general manager of the Audit and Supervision Legal Department and the manager of the Audit Department (concurrently) of China Potevio Information Industry Co., Ltd.; from October 2018 to the present , he has been serving as the deputy general manager of the Audit Department of China Potevio Information Industry Group Corporation. Mr. Lv Dong holds a concurrent post as supervisor, chairman of the Supervisory Committee in the Company since August 2019

Wei Jie, female, born in 1977, master of law, joined work in 2001. From July 2001 to September 2002, she served as a legal specialist of Beijing Urban Construction First Construction Engineering Co., Ltd.; from October 2005 to October 2018, he successively served as a lawyer and chief lawyer of the Legal Affairs Department of the Comprehensive Management Department, and a supervisor lawyer, senior lawyer, legal manager (June 2016) of the Audit and Supervision Legal Department of China Potevio Information Industry Co., Ltd.; from October 2018 to November 2019, she served as the director of the Discipline Inspection Case Review Office of the Legal Risk Control Department of China Potevio Information Industry Group Corporation; from November 2019 to the present, she has been serving as the legal manager of the Legal Risk Control Department of China Potevio Information Industry Group Corporation. Ms. Wei Jie holds a concurrent post as supervisor in the Company since August 2019.

Qiu Huizhen (Female), born in 1973, bachelor of economics. She commenced to work in 1997, with details as follows: successively served as the female director and secretary of the Youth League Committee in Shaokou Village Government, Wan’an County, Jiangxi Province from July 1997 to January 2000; served as the cost accountant and the CFO in the finance department of Nanjing Putian Telecommunications Co., Ltd from February 2000 to October 2004; the deputy director of the HR department of Nanjing Putian Telecommunications Co., Ltd from November 2004 to November 2005; successively served as the deputy director and

76 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report director of the finance department of Nanjing Putian Telecommunications Co., Ltd from December 2005 to September 2016, she serves as director of the department of audit, supervision and law of Nanjing Putian Telecommunications Co., Ltd since October 2016. Ms. Qiu Huizhen holds a concurrent post as the staff representative supervisor of the Company since August 2017

Senior Executives: GM Mr. Wang Wenkui found in the introduction in Director.

Deputy GM Mr. Qin Zhen found in the introduction in Director.

Jia Haowen (female) born in 1980, bachelor of management, joined in work in 2002, worked on administrative management and sales at Shanghai Xinhaoshi Real Estate Company from July 2002 to March 2004; from April 2004 to April 2007, she served as the confidential secretary and secretary of the President Office of Nanjing Putian Telecommunications Co., Ltd.; from April 2007 to February 2008, she successively served as the assistant director of the General Management Department and the assistant director of the Human Resources Department of Nanjing Putian Telecommunications Co., Ltd.; from February 2008 to October 2009, she served as the deputy director of Human Resources Department of Nanjing Putian Telecommunications Co., Ltd.; from October 2009 to March 2012, she served as the director of Human Resources Department of Nanjing Putian Telecommunications Co., Ltd.; from March 2012 to August 2012, she served as the director of the General Management Department and the director of Human Resources Department of Nanjing Putian Telecommunications Co., Ltd.; from August 2012 to June 2013, she served as the director of the General Management Department of Nanjing Putian Telecommunications Co., Ltd. (during the period, from May 2012 to May 2013), she was studying in the class for further studies as a business administration major at the Graduate School of Tsinghua University); from June 2013 to November 2014, she served as the assistant general manager and the director of General Management Department of Nanjing Putian Telecommunications Co., Ltd.; from November 2014 to August 2015, she served as the assistant general manager and the director of General Management Department and the director of Multimedia Application Industry Department of Nanjing Putian Telecommunications Co., Ltd.; from August 2015 to September 2016, she served as the assistant general manager and the director of Multimedia Application Industry Department of Nanjing Putian Telecommunications Co., Ltd.; from September 2016 to November 2017, she served as the assistant general manager of Nanjing Putian Telecommunications Co., Ltd.; since November 2017, she has been serving as a member of the party committee and the assistant general manager of Nanjing Putian Telecommunications Co., Ltd.; and since July 2018, she has been serving as the deputy general manager of Nanjing Putian Telecommunications Co., Ltd.

Lei Xu, male, born in 1968, Doctor of Engineering, joined work in 1989. He worked in Wuhan Changjiang Transformer Factory from July 1989 to July 1992, served as a product quality inspector; from July 1995 to October 2005, he worked at Harbin University of Science and Technology, engaged in teaching and scientific research; from November 2005 to July 2008, he worked at Putian Information Technology Research Institute, served as a physical layer algorithm research engineer of the Wireless Access Technology Department of the 4G Project Department; from August 2008 to December 2013, he worked at Putian Information Technology Research Institute Co., Ltd., and served as the manager of the System Planning Department / Wireless Access Technology Department; from January 2014 to June 2016, he worked at Putian Information Technology Co., Ltd. and served as the standards and national special director; from July 2016 to December 2017, he worked at Putian Information Technology Co., Ltd. as the product director of the 5th Marketing Department (information security product lines); from January 2018 to December 2018, he worked in Yingtan City, Jiangxi Province as an assistant to the mayor (taking a temporary post); from January 2019 to April 2019, he worked at Putian Information Technology Co., Ltd. as the product director of the 5th Marketing Department (information security product lines); from May 2019 to the present, he has been serving as deputy general manager of Nanjing Putian Telecommunications Co., Ltd.

77 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Wang Huailin, male, born in 1967, master of engineering, senior accountant, started working in 1991. He worked as a teacher at Funan Normal College in Anhui Province from July 1991 to September 1995; from July 1998 to December 1999, he worked as an employee of the Finance Department of Eastcom Co., Ltd.; from December 1999 to July 2001, he served as the financial manager of the Electronic Equipment Department of Eastcom Co., Ltd.; from July 2001 to July 2005, he served as the financial director of Hangzhou Lingtong Electronic Equipment Co., Ltd.; from July 2005 to March 2011, he served as the financial controller of Hefei Dongxin Real Estate Development Co., Ltd.; from March 2011 to April 2012, he successively served as deputy general manager of the Financial Department of Putian Eastcom Group Co., Ltd., and financial director of Hefei Dongxin Real Estate Development Co., Ltd.; from March 2012 to April 2012, he served as a committee member of Discipline Inspection Commission and deputy general manager of Finance Department of Putian Eastcom Group Co., Ltd., and chief financial officer of Hefei Dongxin Real Estate Development Co., Ltd.; from April 2012 to October 2018, he served as a committee member of Discipline Inspection Commission and general manager of Finance Department of Putian Eastcom Group Co., Ltd., and concurrently chief financial officer of Hefei Dongxin Real Estate Development Co., Ltd.; from October 2018 to August 2019, he served as a committee member of Discipline Inspection Commission and general manager of Finance Department of Putian Eastcom Group Co., Ltd.; from August 2019 to the present, he has been serving as chief accountant of Nanjing Putian Telecommunications Co., Ltd.

Liu Xiaodong (female) born in 1971, bachelor of economics, joined in work in 1995, served as the Company’s accountant, auditor, deputy director of the audit department, deputy director of the Audit and Supervision Department. From April 2006 to September 2016, she served as the head of the Audit and Supervision Department, and the head of the Audit Law Department, and the head of the Audit and Supervision Law Department of Nanjing Putian Telecommunications Co., Ltd. From July 2007 to July 2016, she served as the deputy secretary of the Disciplinary Inspection Committee of Nanjing Putian Telecommunications Co., Ltd. From May 2009 to August 2017, she served as the employee supervisor of Nanjing Putian Telecommunications Co., Ltd. Since June 2013, she has been serving as the general counsel of Nanjing Putian Telecommunications Co., Ltd. Since July 2016, she has been serving as the deputy secretary of the Party Committee and the secretary of the Disciplinary Inspection Committee and the chairman of the Labor Union of Nanjing Putian Telecommunications Co., Ltd.

Li Jing (Female), born in 1975, master of management. She commenced to work in 1996, with details as follows: worked as the secretary and customs declaring in Nanjing Mennekes from August 1996 to March 1998; worked as the buyer and industrial officer of Nanjing Potevio Computer Co., Ltd from March 1998 to August 2001; served as the investment management officer and deputy director of the corporate development department of Nanjing Putian Telecommunications Co., Ltd from August 2001 to August 2015; serves as the director of the strategic investment department of Nanjing Putian Telecommunications Co., Ltd since August 2015 and GM assistant and secretary of the Board of Nanjing Putian Telecommunications Co., Ltd since August 2017.

Post-holding in shareholder’s unit √ Applicable □ Not applicable

Received Position in Start dated of End date of remuneration from Name Name of shareholder’s unit shareholder’s office term office term shareholder’s unit unit n (Y/N)

Xu Qian China Potevio Company Limited President 2016-05-05 Y

78 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Director, Executive Director, Xu Qian China Potevio Company Limited 2011-05-19 Y member of the executive council

Deputy GM Wang Jinfeng China Potevio Company Limited of Finance 2017-12-13 Y dept.

Secretary of the board of directors, general manager of general Li Tong China Potevio Company Limited 2019-11-09 N management department and director of the office of the board of directors

Li Tong China Potevio Company Limited Director 2019-12-30 N

Lv Dong China Potevio Company Limited Supervisor 2019-12-30 N

Post-holding in other unit √ Applicable □ Not applicable

Received Position in Start dated of End date of office remuneration Name Name of other units other unit office term term from other unit (Y/N)

Standing committee of Xu Qian China Potevio Company Limited the Party 2017-12-27 N Committee, Deputy GM

Director, Xu Qian Potevio Guomai Networks Ltd 2012-10-23 N President

Beijig Putian Taili Communication Director, Xu Qian 2015-06-11 N Technology Co., Ltd. President

Director, Xu Qian Shanghai Potevio Co., Ltd. 2015-11-20 N President

79 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Putian Eastern Communications Group Co., Director, Xu Qian 2016-05-30 N Ltd. President

Director, Xu Qian Hangzhou Honyar Electric Co., Ltd. 2017-06-28 N President

Executive Xu Qian Putian International Trade Co., Ltd. 2019-09-30 director

Secretary of the board of directors, general manager of general Li Tong China Potevio Company Limited 2019-11-09 Y management department and director of the office of the board of directors

General Manager of Liu Yun China Potevio Company Limited Enterprise 2019-06-28 Y Operation Department

Shanghai Putian Kechuang Electronic Co., Director Liu Yun 2015-07-09 N Ltd.

Puxing Mobile Communication Equipment Director Liu Yun 2015-12-21 2019-12-23 N Co., Ltd

Liu Yun Hangzhou Honyar Electric Co., Ltd. Director 2016-07-07 N

Liu Yun Chengdu Putian Cable Co., Ltd. Director 2017-01-13 N

Liu Yun Putian Logistics Technology Co., Ltd. Director 2017-02-28 N

Liu Yun Potevio New Energy Co., Ltd Director 2018-04-13 N

Qin Zhen Putian Hi-Tech Industry Co., Ltd Director 2016-12-01 N

Beijig Putian Taili Communication Director Wang Jinfeng 2015-06-19 N Technology Co., Ltd.

Wang Jinfeng Puxing Mobile Telecom Equipment Ltd Director 2015-12-21 N

Xie Manlin Jiangsu Xie Manlin Laws Firm Executive 1994-12-01 Y

Independent Xie Manlin Jiangsu NandaSoft Company Limited 2011-06-10 Y director

80 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Professor, Head of Du Xiaorong Business School of Hohai University 2013-06-15 Y Accounting Dept.

Deputy GM Lv Dong China Potevio Company Limited 2018-10-29 Y of Audit Dept.

Lv Dong Wuhan Putian Power Co., Ltd. Supervisor 2016-05-24 N

Lv Dong Jingdezhen Putian Technology Co., Ltd. Supervisor 2015-06-16 N

Puxing Mobile Communication Equipment Lv Dong Supervisor 2015-12-21 N Co., Ltd

Putian Information Engineering Design Lv Dong Supervisor 2016-08-04 N Service Co., Ltd.

Supervisor, Chairman of Beijig Putian Taili Communication Lv Dong the 2018-07-11 N Technology Co., Ltd. Supervisory Committee

Lv Dong Putian International Trade Co., Ltd. Supervisor 2018-07-11 N

Legal Manager of Wei Jie China Potevio Company Limited Legal Risk 2019-11-14 Y Management Department

Wei Jie Putian Yintong Payment Co., Ltd. Supervisor 2016-05-17 N

Putian Guomai Network Technology Co., Wei Jie Supervisor 2016-12-02 N Ltd.

Concurrently Hangzhou Dongxin Trading Wang Huailin Supervisor 2015-04-13 N Co., Ltd.

Hangzhou Dongxin Venture Capital Co., Wang Huailin Supervisor 2015-12-11 N Ltd.

Wang Huailin Hangzhou Dongxin Industry Co., Ltd. Supervisor 2015-03-30 N

Hangzhou Dongxin Photoelectric Wang Huailin Supervisor 2015-03-30 N Technology Co., Ltd.

Liu Xiaodong Putian Hi-Tech Industry Co., Ltd Supervisor 2018-11-09 N

Note of post-holding in Among the other units mentioned above, China Potevio Company Limited is the actual controller of the Company. other unit

Punishment of securities regulatory authority in recent three years to the Company’s current and outgoing directors, supervisors and senior management during the reporting period

81 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

√ Applicable □ Not applicable In 2018, as a current director of Shanghai Putian, Mr. Li Linzhen was warned and fined 40000 yuan by Shanghai Securities Regulatory Bureau for the information disclosure of Shanghai Putian. In 2019, as a current chairman of Shanghai Putian, Mr. Xu Qian was warned and fined 50000 yuan by CSRC for the information disclosure of Shanghai Putian.

IV. Remuneration for directors, supervisors and senior executives

Decision-making procedures, recognition basis and payment for directors, supervisors and senior executives

The Company has not paid directors and supervisors, the directors and supervisors get paid as the Company's administrative duties. The independent directors receive the allowance in the Company, while subsidiary standard is determined by the general meeting of shareholders. Senior management personnel salary standard and assessment methods are decided by the board of directors.

The Company implements performance salary system on senior management, making evaluation and paying compensation according to the completion of the production and operation as well as performance of the senior management personnel.

Remuneration for directors, supervisors and senior executives in reporting period In 10 thousand Yuan

Total Whether remuneration remuneration Post-holding Name Title Sex (M/F) Age obtained from the obtained from status Company (before related party of taxes) the Company

Director Currently in Xu Qian M 57 Y (President) office

Director (deputy Currently in Wang Wenkui M 45 N president ) office

Currently in Li Tong Director M 49 Y office

Currently in Liu Yun Director F 46 Y office

Currently in Qin Zhen Director M 51 N office

Currently in Wang Jinfeng Director F 49 Y office

Independent Currently in Tang Fuxin F 63 9 N Director office

Independent Currently in Xie Manlin M 56 9 N Director office

82 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Independent Currently in Du Xiaorong F 51 9 N Director office

Supervisor (Chairman of the Currently in Lv Dong M 48 Y Supervisory office Committee)

Currently in Wei Jie Supervisor F 42 Y office

Currently in Qiu Huizhen Supervisor F 46 19.66 N office

Currently in Wang Wenkui GM M 45 36.49 N office

Currently in Qin Zhen Deputy GM M 51 23.97 N office

Currently in Jia Haowen Deputy GM F 39 22.47 N office

Currently in Lei Xu Deputy GM M 51 12.23 N office

Currently in Wang Huailin Chief Accountant M 52 8.49 N office

Currently in Liu Xiaodong General counsel F 48 22.47 N office

Secretary of the Currently in Li Jing F 44 20.98 N Board office

Director (deputy Li Linzhen M 48 Office leaving 8.56 Y president ), GM

Cheng Hui Director F 49 Office leaving Y

Supervisor (Chairman of the Zhao Xinping M 53 Office leaving Y Supervisory Committee)

Zhang Hong Supervisor F 46 Office leaving N

Deputy GM, Chief Cao Xurong M 44 Office leaving 23.97 N Accountant(Succ essively)

Total ------226.29 --

Delegated equity incentive for directors, supervisors and senior executives in reporting period □ Applicable √ Not applicable

83 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

V. Particulars of workforce

1. Number of staff, professional composition and education background

The number of On-the-job staff of the parent Company (people) 479

The number of On-the-job staff of major subsidiaries (people) 873

The total number of on-the-job staff (people) 1,352

Total number of staff receiving remuneration in the current 1,598 period (people)

The number of the retired staff of the parent Company and the 400 major subsidiaries bearing the expenses (people)

Professional composition

Category of professional composition Number of professional composition (people)

Production staff 357

Salesman 460

Technical staff 381

Financial staff 35

Administrative staff 119

Total 1,352

Education background

Category of education Number (people)

Master’s degree above 29

Bachelor 547

Junior college 484

High School and above 292

Total 1,352

2. Remuneration policy

The company strictly implements the national, provincial and municipal laws and regulations, and normatively implemented the distribution and payment of compensation and benefits. In order to further mobilize the enthusiasm, initiative and creativity of the employees, the company implements an efficiency-oriented, performance-based compensation distribution mechanism, and formulates salary and performance appraisal methods for different positions according to their different characteristics, and at the same time, pays five insurances and one housing fund and enterprise annuities according to relevant national regulations.

3. Training programs

The company always adheres to the people-oriented development concept, continuously carries out employee training, and establishes and continuously improves the matching training system according to the company’s development needs, and improves the quality of

84 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report the staff. At the same time, the company attaches great importance to the improvement of employees' comprehensive capabilities and closely follows the development trend of the industry, we will continue to innovate talent training methods, pay attention to the cultivation of compound talents, rationally arrange flexible learning methods, strengthen training in layers and grades, formulate annual training plans, and do a good job in talent reserves and cultivation of young cadres for the company to implement innovation transformation.

4. Labor outsourcing

□ Applicable √ Not applicable

85 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section X. Corporate Governance

I. Corporate governance of the Company

In reporting period, by strictly followed requirement of relevant laws, regulations and regulatory documents of Company Law, Securities Laws, Rules of Corporate Governance for Listed Company, Rules of Stock Listing in Main Board of Shenzhen Stock Exchange as well as requirement of relevant documents from CSRC and Shenzhen Stock Exchange, combined with the actual situation of the company, the Company constantly improve structure of the corporate governance, standardize company operations and improve corporate governance. The internal governance structure of the company is sound, and the operation is standardized and complies with the Company Law and the Securities Law and other laws and regulations, and the requirements of regulatory documents about corporate governance issued by the China Securities Regulatory Commission and the Shenzhen Stock Exchange.

Is there any difference between the actual condition of corporate governance and relevant regulations about corporate governance for listed Company from CSRC □Yes √ No There are no differences between the actual condition of corporate governance and relevant regulations about corporate governance for listed Company from CSRC.

II. Independence of a Company relative to its controlling shareholder in business, personnel, assets, institution and finance

The Company owes self-management ability with independence in aspect of business, personnel, assets, institute and finance relative to its controlling shareholder.

III. Horizontal competition

□ Applicable √ Not applicable

IV. In the report period, the Company held AGM and extraordinary shareholders’ general meeting

1. Shareholders’ General Meeting in the report period

Ratio of investor Session of meeting Type Meeting date Date of disclosure Index of disclosure participation

Resolution Notice of First Extraordinary First Extraordinary Extraordinary Shareholders Shareholders Shareholders 53.53% 2019-01-21 2019-01-22 General Meeting of General Meeting of General Meeting 2019 2019 on Juchao Website

86 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Resolution Notice of Annual General AGM 55.20% 2019-06-19 2019-06-20 AGM of 2018 on Meeting 2018 Juchao Website

Resolution Notice of Second Second Extraordinary Extraordinary Extraordinary Shareholders Shareholders 53.61% 2019-08-27 2019-08-28 Shareholders General Meeting of General Meeting General Meeting of 2019 2019 on Juchao Website

Resolution Notice of Third Third Extraordinary Extraordinary Extraordinary Shareholders Shareholders 55.22% 2019-12-30 2019-12-31 Shareholders General Meeting of General Meeting General Meeting of 2019 2019 on Juchao Website

2. Request for extraordinary general meeting by preferred stockholders whose voting rights restore

□ Applicable √ Not applicable

V. Responsibility performance of independent directors

1. The attending of independent directors to Board Meeting and shareholders general meeting

The attending of independent directors to Board Meeting and shareholders general meeting

Times of Absent the Times of Times of Times of Times of Board meeting Times of Board Meeting presence on Independent Presence on attending by entrusted supposed to Absence in for the second shareholders director the Board communicatio presence in attend in the Board Meeting time in a row general Meeting n Board Meeting report period (Y/N) meeting

Tang Fuxin 12 0 12 0 0 N 0

Xie Manlin 12 1 11 0 0 N 0

Du Xiaorong 12 0 12 0 0 N 2 Explanation of absent the Board Meeting for the second time in a row

2. Objection for relevant events from independent directors

Independent directors come up with objection about Company’s relevant matters □Yes √No Independent directors has no objections for relevant events in reporting period

87 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

3. Other explanation about responsibility performance of independent directors

The opinions from independent directors have been adopted √ Yes □ No

Explanation on advice that accepted/not accepted from independent directors In 2019, the independent directors of the Company earnestly exercised the relevant laws and regulations and the various functions and powered conferred by the Articles of Association, actively attended the board of directors and shareholders' meetings of the Company, carefully reviewed the proposals of the board of directors, issued independent opinions on major issues of the company, maintained communication with the management through on-site inspections, telephone inquiries, etc. to understand and master the industry development trends and production management information that the company is facing, making out plans and ideas for the development of the Company, urged the Company to regulate the operations in strict accordance with the requirements of relevant laws and regulations, it has played the role of independence and professionalism of independent directors and safeguarded the legitimate rights and interests of the company and shareholders, especially small and medium shareholders.

VI. Duty performance of the special committees under the board during the reporting period

In 2019, the Audit Committee of the Board of Directors deliberated on major events as previous periodic reports and submit the proposal to the Board; in accordance with the relevant provisions of Annual Report Working Rules of the Audit Committee, actively performed their duties in the annual report auditing process, made audit opinions on the financial statements, supervised and urged the accounting firm to complete the auditing work. The Remuneration and Appraisal Committee of the Board of Directors reviewed and made audit opinions on the remuneration of the directors, supervisors and senior executives disclosed in the annual report in accordance with relevant provisions.

VII. Works from Supervisory Committee

The Company has risks in reporting period that found in supervisory activity from supervisory committee □ Yes √ No Supervisory committee has no objection about supervision events in reporting period

VIII. Examination and incentives of senior management

The Company exercise performance year-income system for senior executives carries on appraisals and paying remuneration to senior executives based on operation target and performance of target implementation of senior executives.

IX. Internal Control

1. Details of major defects in IC appraisal report that found in reporting period

√ Yes □ No

Details of major defects in IC appraisal report that found in reporting period

No major defects in internal control were found during the reporting period.

88 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

2. Appraisal Report of Internal Control

Disclosure date of full internal control 2020-04-28 evaluation report

Disclosure index of full internal control Appraisal report of internal control for year of 2019 of Nanjing Putian evaluation report Telecommunications Co., Ltd. published on Juchao Website (www.cninfo.com.cn)

The ratio of the total assets of units included in the scope of evaluation accounting for the total assets on the 100.00% Company's consolidated financial statements

The ratio of the operating income of units included in the scope of evaluation accounting for the operating income on the 100.00% Company's consolidated financial statements

Defects Evaluation Standards

Category Financial Reports Non-financial Reports

89 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Indicators for material defect of internal Indicators for material defect of internal control in financial report: invalid control control in non-financial report: environment; fraud by our directors, decision-making procedures lead to supervisors and senior management, which material faults; lack of system control or brings significant loss and negative system void for major business, and lack influences to the Company; external auditor of effective compensation control; finds material misstatement which is not first serious loss of senior management and found by the Company; the board of senior technicians; assessment results of directors or the authorized body and internal internal control, especially material audit department conduct invalid supervision defects, are not rectified; other situations over our internal control. Indicators for that would materially and adversely major defect of internal control in financial affect the Company. Indicators for major report: not select and apply accounting defect of internal control in non-financial Qualitative criteria policies under the generally accepted report: decision-making procedures lead accounting principles; not establish to general fault; defects exist in major anti-fraud procedures and controlling business systems; serous loss of key measures; not establish corresponding staff; assessment results of internal controlling system or not implement control, especially major defects, are not corresponding compensation control in rectified; other situations that would connection with accounting for abnormal or relatively materially and adversely affect special transactions; one or more defects the Company. Indicators for general exist in control of ending financial reports defect of internal control in non-financial and there is no assurance that financial report: low efficiency of statement prepared correspondingly is decision-making procedures; defects truthful and accurate. General defect: other exist in general business systems; serious internal control defects that do not constitute loss of general staff; general defects are material or major defects. not rectified.

90 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Any of the following situations may be viewed as material defect: potential misstatement of total profit ≥ 5% of total profit; potential misstatement of total assets ≥ 1% of total assets; potential misstatement of operating income ≥ 1% of total operating income. Any of the following situation may Major deficiencies: the amount of direct be viewed as major defect: 3% of total profit property loss is or more than 10 million ≤ potential misstatement of total profit＜ Yuan; Significant deficiencies: the 5% of total profit; 0.5% of total assets ≤ amount of direct property loss is between Quantitative standard potential misstatement of total assets ＜ 1% 5 million Yuan and 10 million Yuan (5 of total assets; :0.5% of total operating million Yuan included); Common income ≤ potential misstatement of operating deficiencies: the amount of direct income ＜ 1% of total operating income. property loss is less than 5 million Yuan. Any of the following situation may be viewed as general defect: potential misstatement of total profit＜3% of total profit; potential misstatement of total assets ＜ 0.5% of total assets; potential misstatement of operating income ＜ 0.5% of total operating income.

Amount of significant defects in financial 0 reports

Amount of significant defects in 0 non-financial reports

Amount of important defects in financial 0 reports

Amount of important defects in 0 non-financial reports

X. Auditing report of internal control

√ Applicable □ Not applicable

Deliberations in Internal Control Audit Report

We believe that according to relevant regulations and Basic Norms of Internal Control, the Company maintained an efficiency internal control of financial report dated 31st December 2019, in all material aspects.

Disclosure details of audit report of Disclosed internal control

Disclosure date of audit report of 2020-04-28 internal control (full-text)

91 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Index of audit report of internal Audit report of internal control for year of 2019 of Nanjing Putian Telecommunications Co., control (full-text) Ltd. published on Juchao Website (www.cninfo.com.cn)

Opinion type of auditing report of Standard unqualified IC whether the non-financial report No had major defects

Carried out modified opinion for internal control audit report from CPA □Yes √ No The internal control audit report, issued by CPA, has concerted opinion with self-evaluation report, issued from the Board √ Yes □ No

92 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section XI. Corporate Bond

Whether the Company has a corporation bonds that issuance publicly and listed on stock exchange and without due on the date when annual report approved for released or fail to cash in full on due No

93 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section XII. Financial Report

I. Audit report

Type of audit opinion Standard unqualified

Signing date of audit report 2020-04-24

Name of audit institute Pan-China Certified Public Accountants (LLP)

Document serial of audit report PCCPAAR [2020] No. 1-541

Name of CPA Jin Jingyu, Zhang Jinghui

Auditor’s Report

To the Shareholders of Nanjing Putian Telecommunications Co., Ltd.:

I. Audit Opinion We have audited the accompanying financial statements of Nanjing Putian Telecommunications Co., Ltd. (the “Company”), which comprise the consolidated and parent company balance sheets as at December 31, 2019, the consolidated and parent company income statements, the consolidated and parent company cash flow statements, and the consolidated and parent company statements of changes in equity for the year then ended, as well as notes to financial statements.

In our opinion, the attached financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2019, and of its financial performance and its cash flows for the year then ended in accordance with China Accounting Standards for Business Enterprises.

II. Basis for Audit Opinion We conducted our audit in accordance with China Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the China Code of Ethics for Certified Public Accountants, and we have fulfilled other ethical responsibilities. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

94 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

III. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not express a separate opinion on these matters.

(I) Impairment of accounts receivable 1. Key audit matters Please refer to section III(X) and V(I)3. of the notes to the financial statements for details.

As of December 31, 2019, the book balance of accounts receivable amounts to 823,969,327.57 yuan, with provision for bad debts of 126,313,263.61 yuan, and the carrying amount amounts to 697,656,063.96 yuan.

Based on credit risk features of accounts receivable, the Management measures the provision for bad debts at the amount of expected credit losses during the whole life, either on an individual basis or on a collective basis. For accounts receivable with expected credit losses measured on an individual basis, the Management estimates the expected cash flows, so as to identify the provision for bad debts to be accrued, based on a comprehensive consideration of information with reasonableness and evidence, which is related to the past events, the current situation and the forecast of future economic conditions. For accounts receivable with expected credit losses measured on a collective basis, the Management classifies portfolios on the basis of ages, adjusts them based on historical credit risk loss experience and forward-looking estimations, prepares the comparison table of ages and expected credit loss rate of accounts receivable, so as to calculate the provision for bad debts to be accrued.

As the amount of accounts receivable is significant and the impairment involves significant judgment of the Management, we have identified impairment of accounts receivable as a key audit matter.

2. Responsive audit procedures Our main audit procedures for impairment of accounts receivable are as follows: (1) We obtained understandings of key internal controls related to impairment of

95 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report accounts receivable, assessed the design of these controls, determined whether they have been executed, and tested the effectiveness of their operation;

(2) We reviewed the accounts receivable with provision for bad debts made in previous periods for their subsequent write-off or reversal, and assessed the adequacy of historical estimations made by the Management;

(3) We obtained the consideration of the Management on recoverable amount and objective evidence, and assessed whether the comparison table of ages and expected credit loss rate of accounts receivable had been appropriately identified by the

Management and whether the calculation of provision for bad debts was accurate;

(4) Implemented confirmation procedures for accounts receivable with a significant amount, check the confirmation result and implement analytical procedures combined with post-payment and long-term intercourses. And we evaluate the reasonableness of the provision of accounts receivable have been disclosed in the notes to the financial statements.

(5) We checked whether information related to impairment of accounts receivable had been presented appropriately in the financial statements.

(II) Net realizable value of inventories 1. Key audit matters Please refer to section III(XI) and V(I) of the notes to the financial statements for details.

As of December 31, 2019, the book balance of inventories amounts to 251,366,286.12 yuan, with provision for bad debts of 41,968,999.95 yuan, and the carrying amount amounts to 209,397,286.17 yuan.

At the balance sheet date, inventories are measured at the lower of cost and net realizable value; provisions for inventory write-down are made on the excess of its cost over the net realizable value. For inventories held for sale, the estimated selling price is determined based on historical selling price, actual selling price, contractual selling price, market price of identical or similar products, future market trend, etc., and the net realizable value of these inventories is determined based on the amount of the estimated selling price less the cost incurred to completion, estimated selling expenses and relevant taxes and surcharges.

96 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

As the amount of inventories is significant and determination of net realizable value involves significant judgment of the Management, we have identified net realizable value of inventories as a key audit matter.

2. Responsive audit procedures Our main audit procedures for net realizable value of inventories are as follows: (1) We obtained understandings of key internal controls related to net realizable value of inventories, assessed the design of these controls, determined whether they have been executed, and tested the effectiveness of their operation;

(2) Implement supervision procedures for inventories and checked whether there existed situations. Focusing on the adequacy of provision of obsolete inventories.

(3) Implement confirmation procedures and aging analytical procedures for goods dispatched. Focusing on the adequacy of provision of closing goods dispatched and the reasonableness of unsettled goods dispatched.

(4) We assessed the reasonableness of the net realizable value estimated by the Management according to gross profit margin in few years and existed situations during supervision process.

(5) We checked whether information related to net realizable value of inventories had been presented appropriately in the financial statements.

IV. Other Information The Company’s management (the “Management”) is responsible for the other information. The other information comprises the information included in the Company’s annual report, but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

97 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

V. Responsibilities of the Management and Those Charged with Governance for the Financial Statements The Management is responsible for preparing and presenting fairly the financial statements in accordance with China Accounting Standards for Business Enterprises, as well as designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and use the going concern basis of accounting unless the Management either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

VI. Certified Public Accountants’ Responsibility for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with China Standards on Auditing will always detect a material misstatement when it exists. Misstatement can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

We exercise professional judgment and maintain professional skepticism throughout the audit performed in accordance with China Standards on Auditing. We also:

98 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

(I) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

(II) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in circumstances.

(III) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management.

(IV) Conclude on the appropriateness of the Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

(V) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

(VI) Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain sole responsibility for our audit opinion.

We communicate with those charged with governance regarding the planned audit scope, time schedule and significant audit findings, including any deficiencies in internal control of concern that we identify during our audit.

We also provide those charged with governance with a statement that we have

99 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Pan-China Certified Public Accountants LLP Chinese Certified Public Accountant (Engagement Partner) Jing Jingyu

Hangzhou · China Chinese Certified Public Accountant Zhang Jinghui

Date of Report: April 24, 2020

The auditor’s report and the accompanying financial statements are English translations of the Chinese auditor’s report and statutory financial statements prepared under accounting principles and practices generally accepted in the People’s Republic of China. These financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in other countries and jurisdictions. In case the English version does not conform to the Chinese version, the Chinese version prevails.

100 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Nanjing Putian Telecommunications Co., Ltd. Consolidated balance sheet as at December 31, 2019 (Expressed in Renminbi Yuan) Note Assets Closing balance Opening balance No. Current assets: Cash and bank balances 1 261,270,033.28 261,938,068.72 Settlement funds Loans to other banks Held-for-trading financial assets Financial assets at fair value through profit or loss Derivative financial assets Notes receivable 2 59,653,053.58 46,475,656.01 Accounts receivable 3 697,656,063.96 941,068,459.35 Receivables financing 4 3,821,550.77 Advances paid 5 33,759,523.09 188,848,712.69 Premiums receivable Reinsurance accounts receivable Reinsurance reserve receivable Other receivables 6 28,110,390.53 33,734,948.67 Financial assets under reverse repo Inventories 7 209,397,286.17 286,972,632.59 Contract assets Assets classified as held for sale Non-current assets due within one year Other current assets 8 11,610,245.99 13,497,540.69 Total current assets 1,305,278,147.37 1,772,536,018.72 Non-current assets: Loans and advances paid Debt investments Available-for-sale financial assets 741,953.00 Other debt investments Held-to-maturity investments Long-term receivable Long-term equity investments 9 181,762,383.50 183,244,080.23 Other equity instrument investments 10 741,953.00 Other non-current financial assets Investment property 11 7,810,210.00 8,397,113.98 Fixed assets 12 110,722,102.52 112,504,807.11 Construction in progress 13 13,048,701.59 9,472,383.76 Productive biological assets Oil & gas assets Right-of-use assets Intangible assets 14 28,381,246.28 30,285,598.77

101 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Development expenditures Goodwill Long-term prepayments 15 4,260,775.18 3,562,336.84 Deferred tax assets Other non-current assets Total non-current assets 346,727,372.07 348,208,273.69 Total assets 1,652,005,519.44 2,120,744,292.41

102 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Nanjing Putian Telecommunications Co., Ltd. Consolidated balance sheet as at December 31, 2019 (continued) (Expressed in Renminbi Yuan) Note Liabilities & Equity Closing balance Opening balance No. Current liabilities: Short-term borrowings 16 451,915,948.50 445,010,000.00 Central bank loans Loans from other banks Held-for-trading financial liabilities Financial liabilities at fair value through profit or loss Derivative financial liabilities Notes payable 17 81,784,929.91 84,374,916.99 Accounts payable 18 679,428,580.08 743,028,953.62 Advances received 19 22,148,080.67 259,545,648.66 Contract liabilities Financial liabilities under repo Absorbing deposit and interbank deposit Deposit for agency security transaction Deposit for agency security underwriting Employee benefits payable 20 21,602,707.70 21,132,336.19 Taxes and rates payable 21 4,125,566.60 17,230,159.02 Other payables 22 61,246,678.81 55,128,492.65 Handling fee and commission payable Reinsurance accounts payable Liabilities classified as held for sale Non-current liabilities due within one year 23 10,820,807.35 Other current liabilities Total current liabilities 1,333,073,299.62 1,625,450,507.13 Non-current liabilities: Insurance policy reserve Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables 24 12,827,205.03 Long-term employee benefits payable Provisions Deferred income 25 6,004,873.00 7,296,315.00 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 18,832,078.03 7,296,315.00 Total liabilities 1,351,905,377.65 1,632,746,822.13 Equity: Share capital/Paid-in capital 26 215,000,000.00 215,000,000.00 Other equity instruments Including: Preferred shares Perpetual bonds

103 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Capital reserve 27 185,374,533.85 185,374,533.85 Less: Treasury shares Other comprehensive income 28 -6,776,124.85 -4,947,588.58 Special reserve Surplus reserve 29 589,559.77 589,559.77 General risk reserve Undistributed profit 30 -224,644,862.48 -40,726,776.80 Total equity attributable to the parent company 169,543,106.29 355,289,728.24 Non-controlling interest 130,557,035.50 132,707,742.04 Total equity 300,100,141.79 487,997,470.28 Total liabilities & equity 1,652,005,519.44 2,120,744,292.41

104 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Nanjing Putian Telecommunications Co., Ltd. Parent company balance sheet as at December 31, 2019 (Expressed in Renminbi Yuan) Note Assets Closing balance Opening balance No. Current assets: Cash and bank balances 75,513,546.51 80,553,208.65 Held-for-trading financial assets Financial assets at fair value through profit or loss Derivative financial assets Notes receivable 2,180,607.60 6,620,178.00 Accounts receivable 1 415,997,318.07 586,635,878.62 Receivables financing 2,307,438.00 Advances paid 13,234,147.98 155,717,638.43 Other receivables 2 26,761,817.07 31,077,389.58 Inventories 73,809,627.64 143,432,315.11 Contract assets Assets classified as held for sale Non-current assets due within one year Other current assets 2,778,241.54 6,222,172.75 Total current assets 612,582,744.41 1,010,258,781.14 Non-current assets: Debt investments Available-for-sale financial assets 741,953.00 Other debt investments Held-to-maturity investments Long-term receivable Long-term equity investments 3 333,070,134.14 333,367,967.90 Other equity instrument investments 741,953.00 Other non-current financial assets Investment property Fixed assets 52,382,989.60 50,769,872.87 Construction in progress 5,839,892.88 Productive biological assets Oil & gas assets Right-of-use assets Intangible assets 11,557,138.68 12,305,246.69 Development expenditures Goodwill Long-term prepayments 3,129,023.74 3,403,376.01 Deferred tax assets Other non-current assets Total non-current assets 400,881,239.16 406,428,309.35

105 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Total assets 1,013,463,983.57 1,416,687,090.49

106 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Nanjing Putian Telecommunications Co., Ltd. Parent company balance sheet as at December 31, 2019 (continued) (Expressed in Renminbi Yuan) Note Liabilities & Equity Closing balance Opening balance No. Current liabilities: Short-term borrowings 371,812,627.72 355,000,000.00 Held-for-trading financial liabilities Financial liabilities at fair value through profit or loss Derivative financial liabilities Notes payable 81,784,929.91 80,759,989.55 Accounts payable 274,182,241.12 340,405,588.53 Advances received 7,517,427.53 227,951,168.81 Contract liabilities Employee benefits payable 8,135,211.34 7,854,213.23 Taxes and rates payable 199,408.61 8,674,579.20 Other payables 213,090,147.71 187,172,612.82 Liabilities classified as held for sale Non-current liabilities due within one year 10,820,807.35 Other current liabilities Total current liabilities 967,542,801.29 1,207,818,152.14 Non-current liabilities: Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables 12,827,205.03 Long-term employee benefits payable Provisions Deferred income 1,000,000.00 1,000,000.00 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 13,827,205.03 1,000,000.00 Total liabilities 981,370,006.32 1,208,818,152.14 Equity: Share capital/Paid-in capital 215,000,000.00 215,000,000.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserve 172,417,299.81 172,417,299.81 Less: treasury shares Other comprehensive income -1,854,910.00 Special reserve

107 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Surplus reserve 589,559.76 589,559.76 Undistributed profit -354,057,972.32 -180,137,921.22 Total equity 32,093,977.25 207,868,938.35 Total liabilities & equity 1,013,463,983.57 1,416,687,090.49

108 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Nanjing Putian Telecommunications Co., Ltd. Consolidated income statement for the year ended December 31, 2019 (Expressed in Renminbi Yuan)

Note Current period Preceding period Items No. cumulative comparative

I. Total operating revenue 1,338,284,194.21 1,995,627,772.60 Including: Operating revenue 1 1,338,284,194.21 1,995,627,772.60 Interest income Premium earned

Revenue from handling charges and commission II. Total operating cost 1,432,157,541.99 1,992,876,998.09 Including: Operating cost 1 1,087,774,366.66 1,643,115,522.38 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 and surcharges 2 8,301,819.32 10,920,639.19 Selling expenses 3 146,879,432.92 153,522,328.27 Administrative expenses 4 87,447,829.68 86,503,114.41 R&D expenses 5 71,178,941.51 76,275,133.26 Financial expenses 6 30,575,151.90 22,540,260.58 Including: Interest expenses 30,200,892.97 23,694,841.52 Interest income 1,475,350.85 2,665,279.32

Add: Other income 7 7,894,918.90 13,702,488.41 Investment income (or less: losses) 8 -297,833.76 -3,085,858.80

Including: Investment income from associates and joint ventures -297,833.76 -3,085,858.80 Gains from derecognition of financial assets at amortized cost Gains on foreign exchange (or less: losses) Gains on net exposure to hedging risk (or less: losses) Gains on changes in fair value (or less: losses) Credit impairment loss 9 -53,458,859.20

Assets impairment loss 10 -19,577,005.54 -20,599,295.35 Gains on asset disposal (or less: losses) 11 119,033.08 33,522,820.90 III. Operating profit (or less: losses) -159,193,094.30 26,290,929.67 Add: Non-operating revenue 12 1,900,048.84 2,988,810.42 Less: Non-operating expenditures 13 368,099.84 372,499.09 IV. Profit before tax (or less: total loss) -157,661,145.30 28,907,241.00 Less: Income tax 14 1,279,314.02 4,793,925.22

V. Net profit (or less: net loss) -158,940,459.32 24,113,315.78 (I) Categorized by the continuity of operations

1. Net profit from continuing operations (or less: net loss) -158,940,459.32 24,113,315.78 2. Net profit from discontinued operations (or less: net loss) (II) Categorized by the portion of equity ownership 1. Net profit attributable to owners of parent company (or less: net loss) -169,088,516.69 5,859,214.84 2. Net profit attributable to non-controlling shareholders (or less: net loss) 10,148,057.37 18,254,100.94 VI. Other comprehensive income after tax 29,304.15 -908,854.59 Items attributable to the owners of the parent company 26,373.73 -817,969.13 (I) Not to be reclassified subsequently to profit or loss

1.Changes in remeasurement on the net defined benefit plan 2. Items under equity method that will not be reclassified to profit or loss 3. Changes in fair value of other equity instrument investments

109 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

4. Changes in fair value of own credit risk

5. Others (II) To be reclassified subsequently to profit or loss 26,373.73 -817,969.13

1. Items under equity method that may be reclassified to profit or loss 2. Changes in fair value of other debt investments 3. Profit or loss from changes in fair value of available-for-sale financial assets 4. Profit or loss from reclassification of financial assets into other comprehensive income 5. Profit or loss from reclassification of held-to-maturity investments as available-for-sale

financial assets 6. Provision for credit impairment of other debt investments

7.Cash flow hedging reserve (profit or loss on cash flow hedging) 8. Translation reserve 26,373.73 -817,969.13 9. Others Items attributable to non-controlling shareholders 2,930.42 -90,885.46 VII. Total comprehensive income -158,911,155.17 23,204,461.19

Items attributable to the owners of the parent company -169,062,142.96 5,041,245.71 Items attributable to non-controlling shareholders 10,150,987.79 18,163,215.48 VIII. Earnings per share (EPS):

(I) Basic EPS (yuan per share) -0.79 0.03 (II) Diluted EPS (yuan per share) -0.79 0.03

110 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Nanjing Putian Telecommunications Co., Ltd. Parent company income statement for the year ended December 31, 2019 (Expressed in Renminbi Yuan) Note Current period Preceding period Items No. cumulative comparative I. Operating revenue 1 433,903,979.88 1,005,618,954.77 Less: Operating cost 1 397,437,511.55 879,422,579.08 Taxes and surcharges 1,804,317.52 4,045,978.34 Selling expenses 54,675,166.60 63,547,170.31 Administrative expenses 45,037,899.50 41,683,221.44 R&D expenses 14,913,248.49 20,833,986.09 Financial expenses 27,811,135.49 21,327,399.26 Including: Interest expenses 27,271,764.56 20,350,309.17 Interest income 849,413.36 339,683.88 Add: Other income 300,000.00 2,257,355.96 Investment income (or less: losses) 2 8,855,566.24 22,697,079.67 Including: Investment income from associates and joint ventures -297,833.76 -1,679,620.33 Gains from derecognition of financial assets at amortized cost Gains on net exposure to hedging risk (or less: losses) Gains on changes in fair value (or less: losses) Gains on asset disposal (or less: losses) 21,631.63 17,375,709.64 Credit impairment loss -49,787,168.46 Assets impairment loss -17,419,090.93 -16,723,520.48 Gains on foreign exchange (or less: losses) II. Operating profit (or less: losses) -165,804,360.79 365,245.04 Add: Non-operating revenue 938,797.01 1,488,857.87 Less: Non-operating expenditures 366,483.43 233,777.62 III. Profit before tax (or less: total loss) -165,232,047.21 1,620,325.29 Less: Income tax IV. Net profit (or less: net loss) -165,232,047.21 1,620,325.29 (I) Net profit from continuing operations (or less: net loss) -165,232,047.21 1,620,325.29 (II) Net profit from discontinued operations (or less: net loss) V. Other comprehensive income after tax (I) Not to be reclassified subsequently to profit or loss 1.Changes in remeasurement on the net defined benefit plan 2. Items under equity method that will not be reclassified to profit or loss 3. Changes in fair value of other equity instrument investments 4. Changes in fair value of own credit risk 5. Others (II) To be reclassified subsequently to profit or loss 1. Items under equity method that may be reclassified to profit or loss 2. Changes in fair value of other debt investments 3. Profit or loss from changes in fair value of available-for-sale financial assets 4. Profit or loss from reclassification of financial assets into other

comprehensive income 5. Profit or loss from reclassification of held-to-maturity investments as

available-for-sale financial assets 6. Provision for credit impairment of other debt investments 7. Cash flow hedging reserve (profit or loss on cash flow hedging) 8. Translation reserve

111 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

9. Others VI. Total comprehensive income -165,232,047.21 1,620,325.29 VII. Earnings per share (EPS): (I) Basic EPS (yuan per share) (II) Diluted EPS (yuan per share)

112 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Nanjing Putian Telecommunications Co., Ltd. Consolidated cash flow statement for the year ended December 31, 2019 (Expressed in Renminbi Yuan) Note Current period Preceding period Items No. cumulative comparative I. Cash flows from operating activities: Cash receipts from sale of goods or rendering of services 1,312,359,448.24 1,645,891,322.05 Net increase of client deposit and interbank deposit Net increase of central bank loans Net increase of loans from other financial institutions Cash receipts from original insurance contract premium Net cash receipts from reinsurance Net increase of policy-holder deposit and investment Cash receipts from interest, handling charges and commission Net increase of loans from others Net increase of repurchase Net cash receipts from agency security transaction Receipts of tax refund 12,067,911.19 4,667,521.81 Other cash receipts related to operating activities 1 24,883,017.58 34,938,316.44 Subtotal of cash inflows from operating activities 1,349,310,377.01 1,685,497,160.30 Cash payments for goods purchased and services received 901,941,126.87 1,333,326,749.70 Net increase of loans and advances to clients Net increase of central bank deposit and interbank deposit Cash payments for insurance indemnities of original insurance contracts Net increase of loans to others Cash payments for interest, handling charges and commission Cash payments for policy bonus Cash paid to and on behalf of employees 241,604,857.64 253,307,248.13 Cash payments for taxes and rates 70,058,938.01 84,108,218.81 Other cash payments related to operating activities 2 113,019,339.58 170,173,677.49 Subtotal of cash outflows from operating activities 1,326,624,262.10 1,840,915,894.13 Net cash flows from operating activities 22,686,114.91 -155,418,733.83 II. Cash flows from investing activities: Cash receipts from withdrawal of investments 1,183,862.97 Cash receipts from investment income 647,567.20 Net cash receipts from the disposal of fixed assets, intangible assets and other 897,560.83 40,365,822.52 long-term assets Net cash receipts from the disposal of subsidiaries & other business units Other cash receipts related to investing activities Subtotal of cash inflows from investing activities 2,081,423.80 41,013,389.72 Cash payments for the acquisition of fixed assets, intangible assets and other 14,544,973.78 17,752,720.09 long-term assets Cash payments for investments Net increase of pledged borrowings Net cash payments for the acquisition of subsidiaries & other business units Other cash payments related to investing activities Subtotal of cash outflows from investing activities 14,544,973.78 17,752,720.09 Net cash flows from investing activities -12,463,549.98 23,260,669.63 III. Cash flows from financing activities: Cash receipts from absorbing investments

113 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Note Current period Preceding period Items No. cumulative comparative Including: Cash received by subsidiaries from non-controlling shareholders as

investments Cash receipts from borrowings 517,594,317.72 455,510,000.00 Other cash receipts related to financing activities 3 30,000,000.00 Subtotal of cash inflows from financing activities 547,594,317.72 455,510,000.00 Cash payments for the repayment of borrowings 511,267,000.00 402,050,000.00 Cash payments for distribution of dividends or profits and for interest expenses 30,076,595.52 29,795,475.55 Including: Cash paid by subsidiaries to non-controlling shareholders as dividend 6,023,300.00 or profit Other cash payments related to financing activities 4 9,080,321.78 840,754.71 Subtotal of cash outflows from financing activities 550,423,917.30 432,686,230.26 Net cash flows from financing activities -2,829,599.58 22,823,769.74 IV. Effect of foreign exchange rate changes on cash & cash equivalents 21,583.83 -353,307.29 V. Net increase in cash and cash equivalents 7,414,549.18 -109,687,601.75 Add: Opening balance of cash and cash equivalents 201,369,317.42 311,056,919.17 VI. Closing balance of cash and cash equivalents 208,783,866.60 201,369,317.42

114 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Nanjing Putian Telecommunications Co., Ltd. Parent company cash flow statement for the year ended December 31, 2019 (Expressed in Renminbi Yuan) Note Current period Preceding period Items No. cumulative comparative I. Cash flows from operating activities: Cash receipts from sale of goods and rendering of services 343,169,578.37 596,822,761.48 Receipts of tax refund 5,765,754.44 232,835.32 Other cash receipts related to operating activities 39,495,085.12 43,490,459.56 Subtotal of cash inflows from operating activities 388,430,417.93 640,546,056.36 Cash payments for goods purchased and services received 250,742,210.91 569,778,580.54 Cash paid to and on behalf of employees 92,940,344.78 100,282,989.10 Cash payments for taxes and rates 20,457,454.33 24,563,084.92 Other cash payments related to operating activities 39,907,351.71 64,030,303.24 Subtotal of cash outflows from operating activities 404,047,361.73 758,654,957.80 Net cash flows from operating activities -15,616,943.80 -118,108,901.44 II. Cash flows from investing activities: Cash receipts from withdrawal of investments Cash receipts from investment income 9,153,400.00 197,567.20 Net cash receipts from the disposal of fixed assets, intangible 398,588.81 21,918,919.67 assets and other long-term assets Net cash receipts from the disposal of subsidiaries & other

business units Other cash receipts related to investing activities Subtotal of cash inflows from investing activities 9,551,988.81 22,116,486.87 Cash payments for the acquisition of fixed assets, intangible assets 2,030,956.24 11,043,203.93 and other long-term assets Cash payments for investments Net cash payments for the acquisition of subsidiaries & other

business units Other cash payments related to investing activities Subtotal of cash outflows from investing activities 2,030,956.24 11,043,203.93 Net cash flows from investing activities 7,521,032.57 11,073,282.94 III. Cash flows from financing activities: Cash receipts from absorbing investments Cash receipts from borrowings 417,594,317.72 351,000,000.00 Other cash receipts related to financing activities 30,000,000.00 Subtotal of cash inflows from financing activities 447,594,317.72 351,000,000.00 Cash payments for the repayment of borrowings 401,257,000.00 309,000,000.00 Cash payments for distribution of dividends or profits and for 27,192,787.89 20,350,309.17 interest expenses Other cash payments related to financing activities 9,080,321.78 840,754.71 Subtotal of cash outflows from financing activities 437,530,109.67 330,191,063.88 Net cash flows from financing activities 10,064,208.05 20,808,936.12 IV. Effect of foreign exchange rate changes on cash and cash 13,777.16 287,252.28 equivalents

115 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Note Current period Preceding period Items No. cumulative comparative V. Net increase in cash and cash equivalents 1,982,073.98 -85,939,430.10 Add: Opening balance of cash and cash equivalents 23,812,669.19 109,752,099.29 VI. Closing balance of cash and cash equivalents 25,794,743.17 23,812,669.19

116 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report Nanjing Putian Telecommunications Co., Ltd. Consolidated statement of changes in equity for the year ended December 31, 2019 (Expressed in Renminbi Yuan) Current period cumulative Equity attributable to parent company Items Other equity instruments Less: Other General Non-controlling Share capital/ Special Surplus Undistributed Total equity Capital reserve comprehensive risk interest Preferred Perpetual treasury reserve profit Paid-in capital Others income reserve reserve shares bonds shares I. Balance at the end of prior year 215,000,000.00 185,374,533.85 -4,947,588.58 589,559.77 -40,726,776.80 132,707,742.04 487,997,470.28 Add: Cumulative changes of accounting -1,854,910.00 -14,829,568.99 -1,781,094.33 -18,465,573.32 policies Error correction of prior period Business combination under common

control Others II. Balance at the beginning of current year 215,000,000.00 185,374,533.85 -6,802,498.58 589,559.77 -55,556,345.79 130,926,647.71 469,531,896.96 III. Current period increase (or less: decrease) 26,373.73 -169,088,516.69 -369,612.21 -169,431,755.17 (I) Total comprehensive income 26,373.73 -169,088,516.69 10,150,987.79 -158,911,155.17 (II) Capital contributed or withdrawn by owners 1. Ordinary shares contributed by owners 2. Capital contributed by holders of other equity instruments 3. Amount of share-based payment included in equity 4. Others (III) Profit distribution -10,520,600.00 -10,520,600.00 1. Appropriation of surplus reserve 2. Appropriation of general risk reserve 3. Appropriation of profit to owners -10,520,600.00 -10,520,600.00 4. Others (IV) Internal carry-over within equity 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital

117 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Current period cumulative Equity attributable to parent company Items Other equity instruments Less: Other General Non-controlling Share capital/ Special Surplus Undistributed Total equity Capital reserve comprehensive risk interest Preferred Perpetual treasury reserve profit Paid-in capital Others income reserve reserve shares bonds shares 3. Surplus reserve to cover losses 4. Changes in defined benefit plan carried over to retained earnings 5. Other comprehensive income carried over to retained earnings 6. Others (V) Special reserve 1. Appropriation of current period 2. Application of current period (VI) Others IV. Balance at the end of current period 215,000,000.00 185,374,533.85 -6,776,124.85 589,559.77 -224,644,862.48 130,557,035.50 300,100,141.79

118 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report Nanjing Putian Telecommunications Co., Ltd. Consolidated statement of changes in equity for the year ended December 31, 2019 (continued) (Expressed in Renminbi Yuan) Preceding period comparative Equity attributable to parent company Items Other equity instruments Less: Other General Non-controlling Share capital/ Special Surplus Undistributed Total equity Capital reserve comprehensive risk interest Preferred Perpetual treasury reserve profit Paid-in capital Others income reserve reserve shares bonds shares I. Balance at the end of prior year 215,000,000.00 185,374,533.85 -4,129,619.45 589,559.77 -44,605,902.63 120,893,826.56 473,122,398.10 Add: Cumulative changes of accounting

policies Error correction of prior period -1,980,089.01 -1,980,089.01 Business combination under common

control Others II. Balance at the beginning of current year 215,000,000.00 185,374,533.85 -4,129,619.45 589,559.77 -46,585,991.64 120,893,826.56 471,142,309.09 III. Current period increase (or less: decrease) -817,969.13 5,859,214.84 11,813,915.48 16,855,161.19 (I) Total comprehensive income -817,969.13 5,859,214.84 18,163,215.48 23,204,461.19 (II) Capital contributed or withdrawn by 2,169,320.00 2,169,320.00 owners 1. Ordinary shares contributed by owners 2,169,320.00 2,169,320.00 2. Capital contributed by holders of other equity instruments 3. Amount of share-based payment included in equity 4. Others (III) Profit distribution -8,518,620.00 -8,518,620.00 1. Appropriation of surplus reserve 2. Appropriation of general risk reserve 3. Appropriation of profit to owners -8,518,620.00 -8,518,620.00 4. Others (IV) Internal carry-over within equity 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital

119 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Preceding period comparative Equity attributable to parent company Items Other equity instruments Less: Other General Non-controlling Share capital/ Special Surplus Undistributed Total equity Capital reserve comprehensive risk interest Preferred Perpetual treasury reserve profit Paid-in capital Others income reserve reserve shares bonds shares 3. Surplus reserve to cover losses 4. Changes in defined benefit plan carried over to retained earnings 5. Other comprehensive income carried over to retained earnings 6. Others (V) Special reserve 1. Appropriation of current period 2. Application of current period (VI) Others IV. Balance at the end of current period 215,000,000.00 185,374,533.85 -4,947,588.58 589,559.77 -40,726,776.80 132,707,742.04 487,997,470.28

120 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report Nanjing Putian Telecommunications Co., Ltd. Parent company statement of changes in equity for the year ended December 31, 2019 (Expressed in Renminbi Yuan) Current period cumulative

Other equity instruments Less: Other Items Share capital/ Undistributed Capital reserve treasury comprehensive Special reserve Surplus reserve Total equity Paid-in capital Preferred Perpetual Others profit shares bonds shares income I. Balance at the end of prior year 215,000,000.00 172,417,299.81 589,559.76 -180,137,921.22 207,868,938.35 Add: Cumulative changes of accounting policies -1,854,910.00 -8,688,003.89 -10,542,913.89 Error correction of prior period Others II. Balance at the beginning of current year 215,000,000.00 172,417,299.81 -1,854,910.00 589,559.76 -188,825,925.11 197,326,024.46 III. Current period increase (or less: decrease) -165,232,047.21 -165,232,047.21 (I) Total comprehensive income -165,232,047.21 -165,232,047.21 (II) Capital contributed or withdrawn by owners 1. Ordinary shares contributed by owners 2. Capital contributed by holders of other equity instruments 3. Amount of share-based payment included in equity 4. Others (III) Profit distribution 1. Appropriation of surplus reserve 2. Appropriation of profit to owners 3. Others (IV) Internal carry-over within equity 1.Transfer of capital reserve to capital 2.Transfer of surplus reserve to capital 3.Surplus reserve to cover losses 4. Changes in defined benefit plan carried over to retained earnings 5. Other comprehensive income carried over to retained earnings 6. Others

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(V) Special reserve 1. Appropriation of current period 2. Application of current period (VI) Others IV. Balance at the end of current period 215,000,000.00 172,417,299.81 -1,854,910.00 589,559.76 -354,057,972.32 32,093,977.25

122 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report Nanjing Putian Telecommunications Co., Ltd. Parent company statement of changes in equity for the year ended December 31, 2019 (continued) (Expressed in Renminbi Yuan) Preceding period comparative

Other equity instruments Less: Other Items Share capital/ Undistributed Capital reserve treasury comprehensive Special reserve Surplus reserve Total equity Paid-in capital Preferred Perpetual Others profit shares bonds shares income I. Balance at the end of prior year 215,000,000.00 172,417,299.81 589,559.76 -179,778,157.50 208,228,702.07 Add: Cumulative changes of accounting policies Error correction of prior period -1,980,089.01 -1,980,089.01 Others II. Balance at the beginning of current year 215,000,000.00 172,417,299.81 589,559.76 -181,758,246.51 206,248,613.06 III. Current period increase (or less: decrease) 1,620,325.29 1,620,325.29 (I) Total comprehensive income 1,620,325.29 1,620,325.29 (II) Capital contributed or withdrawn by owners 1. Ordinary shares contributed by owners 2. Capital contributed by holders of other equity instruments 3. Amount of share-based payment included in equity 4. Others (III) Profit distribution 1. Appropriation of surplus reserve 2. Appropriation of profit to owners 3. Others (IV) Internal carry-over within equity 1.Transfer of capital reserve to capital 2.Transfer of surplus reserve to capital 3.Surplus reserve to cover losses 4. Changes in defined benefit plan carried over to retained earnings 5. Other comprehensive income carried over to retained earnings 6. Others

123 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

(V) Special reserve 1. Appropriation of current period 2. Application of current period (VI) Others IV. Balance at the end of current period 215,000,000.00 172,417,299.81 589,559.76

[Wang Wenkui] [Wang Huailin] [Wang Huailin] [Legal representative] [Officer in charge of accounting] [Head of accounting department] (Signature and stamp) (Signature and stamp) (Signature and stamp)

124 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Nanjing Putian Telecommunications Co., Ltd. Notes to Financial Statements For the year ended December 31, 2019

Monetary unit: RMB Yuan

I. Company profile

Nanjing Putian Telecommunications Co., Ltd. (the “Company”), whose predecessor is Nanjing Telecommunication Facility Factory, was established as a limited liability company 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.

The Company belongs to telecommunication equipment manufacture industry and is mainly engaged in R&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 Board of Directors dated April 24, 2019.

The Company has brought 11 subsidiaries including Nanjing South Telecommunications Co., Ltd., and Nanjing Putian Telege Intelligent Building Co., Ltd. etc. into the consolidated scope. Please refer to notes of VII for details.

II. Preparation basis of the financial statements (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 the Company’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 impairment of financial instruments, depreciation of fixed assets, amortization of intangible assets, and revenue recognition, etc. based on the Company’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

125 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

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 The Company’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

126 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report 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 three categories when initially recognized: (1) financial assets at amortized cost; (2) financial assets at fair value through other comprehensive income; (3) financial assets at fair value through profit or loss.

Financial liabilities are classified into the following four categories when initially recognized: (1) financial liabilities at fair value through profit or loss; (2) financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies; (3) financial guarantee contracts not fall within the above categories (1) and (2), and commitments to provide a loan at a below-market interest rate, which do not fall within the above category (1) ; (4) financial liabilities at amortized cost.

2. Recognition criteria, measurement method and derecognition condition of financial assets and financial liabilities (1) Recognition criteria and measurement method 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. However, at initial recognition, for accounts receivable that do not contain a significant financing component or contracts in which the financing components with associated period less than one year are not considered, the Company measures at their transaction price in accordance with “CASBE14 – Revenues”.

127 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

(2) Subsequent measurement of financial assets 1) Financial assets measured at amortized cost The Company measures its financial assets at the amortized costs using effective interest method. Gains or losses on financial assets that are measured at amortized cost and are not part of hedging relationships shall be included into profit or loss when the financial assets are derecognized, reclassified, through the amortization process or in order to recognize impairment gains or losses.

2) Debt instrument investments at fair value through other comprehensive income The Company measures its debt instrument investments at fair value. Interests, impairment gains or losses, and gains and losses on foreign exchange that calculated using effective interest method shall be included into profit or loss, while other gains or losses are included into other comprehensive income. Accumulated gains or losses that initially recognized as other comprehensive income should be transferred out into profit or loss when the financial assets are derecognized.

3) Equity instrument investments at fair value through other comprehensive income The Company measures its equity instrument investments at fair value. Dividends obtained (other than those as part of investment cost recovery) shall be included into profit or loss, while other gains or losses are included into other comprehensive income. Accumulated gains or losses that initially recognized as other comprehensive income should be transferred out into retained earnings when the financial assets are derecognized.

4) Financial assets at fair value through profit or loss The Company measures its financial assets at fair value. Gains or losses arising from changes in fair value (including interests and dividends) shall be included into profit or loss, except for financial assets that are part of hedging relationships.

(3) Subsequent measurement of financial liabilities 1) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include held-for-trading financial liabilities (including derivatives that are liabilities) and financial liabilities designated as at fair value through profit or loss. The Company measures such kind of liabilities at fair value. The amount of changes in the fair value of the financial liabilities that are attributable to changes in the Company’s own credit risk shall be included into other comprehensive income, unless such treatment would create or enlarge accounting mismatches in profit or loss. Other gains or losses on those financial liabilities (including interests, changes in fair value that are attributable to reasons other than changes in the Company’s own credit risk) shall be included into profit or loss, except for financial liabilities that are part of hedging relationships. Accumulated gains or losses that originally recognized as other comprehensive income should be transferred out into retained earnings when the financial liabilities are derecognized.

2) Financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies The Company measures its financial liabilities in accordance with “CASBE23 – Transfer of Financial Assets”.

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3) Financial guarantee contracts not fall within the above categories 1) and 2), and commitments to provide a loan at a below-market interest rate, which do not fall within the above category 1) The Company measures its financial liabilities at the higher of: a. the amount of loss allowances in according to impairment requirements of financial instruments; b. the amount initially recognized less the amount of accumulated amortization recognized in accordance with “CASBE14 – Revenues”.

4) Financial liabilities at amortized cost The Company measures its financial liabilities at amortized cost using effective interest method. Gains or losses on financial liabilities that are measured at amortized cost and are not part of hedging relationships shall be included into profit or loss when the financial liabilities are derecognized and through the amortization process.

(4) Derecognition of financial assets and financial liabilities 1) Financial assets are derecognized when: a. the contractual rights to the cash flows from the financial assets expire; or b. the financial assets have been transferred and the transfer qualifies for derecognition in accordance with “CASBE23 – Transfer of Financial Assets”.

2) 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, it derecognizes the financial asset, and any right or liability arising from such transfer is recognized independently as an asset or a liability. If it retained substantially all of the risks and rewards related to the ownership of the financial asset, it continues recognizing the financial asset. 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 does not retain its control over the financial asset, it derecognizes the financial asset, and any right or liability arising from such transfer is recognized independently as an asset or a liability; (2) if the Company retains 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 carrying amount of the transferred financial asset as of the date of derecognition; (2) the sum of consideration received from the transfer of the financial asset, and the accumulative amount of the changes of the fair value originally included in other comprehensive income proportionate to the transferred financial asset (financial assets transferred refer to debt instrument investments at fair value through other comprehensive income). If the transfer of financial asset partially satisfies the conditions to derecognition, the entire carry amount 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

129 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report loss: (1) the carrying amount 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 other comprehensive income which is corresponding to the portion which is derecognized (financial assets transferred refer to debt instrument investments at fair value through other comprehensive income).

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 the Company’s own data, etc.

5. Impairment of financial instruments (1) Measurement and accounting treatment The Company, on the basis of expected credit loss, recognizes loss allowances of financial assets at amortized cost, debt instrument investments, contract assets or lease receivable at fair value through other comprehensive income, loan commitments other than financial liabilities at fair value through profit or loss, financial guarantee contracts not belong to financial liabilities at fair value through profit or loss or financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies.

Expected credit losses refer to the weighted average of credit losses with the respective risks of a default occurring as the weights. Credit loss refers to the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate. Purchased or originated credit-impaired financial assets are discounted at the credit-adjusted effective interest rate.

On the balance sheet date, the Company shall only recognize the cumulative changes in the lifetime expected credit losses since initial recognition as a loss allowance for purchased or originated credit-impaired financial assets.

For accounts receivable do not contain a significant financing component or contracts in which the financing components with associated period less than one year are not considered, which result from transactions as regulated in “CASBE14 - Revenues”, the Company chooses simplified approach to measure the loss allowance at an amount equal to lifetime expected credit losses.

For lease receivables, accounts receivable and contract assets that result from transactions as regulated in “CASBE14 - Revenues” and contain a significant financing component, the Company chooses simplified approach to measure the loss allowance at an amount equal to lifetime expected credit losses.

For financial assets other than the above, on each balance sheet date, the Company shall assess whether the credit risk on the financial instrument has increased significantly since initial recognition. The Company shall measure the loss allowance for the financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has

130 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report increased significantly since initial recognition; otherwise, the Company shall measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit loss.

Considering reasonable and supportable forward-looking information, the Company compares the risk of a default occurring on the financial instrument as at the balance sheet date with the risk of a default occurring on the financial instrument as at the date of initial recognition, so as to assess whether the credit risk on the financial instrument has increased significantly since initial recognition.

The Company may assume that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk on the balance sheet date.

The Company shall estimate expected credit risk and measure expected credit losses on an individual or a collective basis. When the Company adopts the collective basis, financial instruments are grouped with similar credit risk features.

The Company shall remeasure expected credit loss on each balance sheet date, and increased or reversed amounts of loss allowance arising therefrom shall be included into profit or loss as impairment losses or gains. For a financial asset measured at amortized cost, the loss allowance reduce the carrying amount of such financial asset presented in the balance sheet; for a debt investment measured at fair value through other comprehensive income, the loss allowance shall be recognized in other comprehensive income and shall not reduce the carrying amount of such financial asset.

(2) Financial instruments with expected credit risk assessed and expected credit losses measured on a collective basis

Items Basis for determination of Method for measuring expected portfolio credit loss

Other receivables – Portfolio grouped with Based on historical credit loss consolidated related parties experience, the current situation Other receivables – Portfolio grouped with and the forecast of future deposit receivables Nature of receivables economic conditions, calculate expected credit loss through Other receivables – Portfolio grouped with exposure at default and 12-month export tax rebate or lifetime expected credit loss Other receivables – Other portfolio rate.

(3) Accounts receivable and contract assets with expected credit losses measured on a collective basis 1) Specific portfolios and method for measuring expected credit loss

Items Basis for determination of Method for measuring expected credit loss portfolio Bank acceptance receivable Based on historical credit loss experience, the current situation and the forecast of Type of notes future economic conditions, calculate Trade acceptance receivable expected credit loss through exposure at default and lifetime expected credit loss rate. Based on historical credit loss experience, Accounts receivable –Portfolio the current situation and the forecast of future economic conditions, prepare the grouped with consolidated related Consolidated related parties comparison table of overdue ages and parties lifetime expected credit loss rate of accounts receivable, so as to calculate expected credit loss. Based on historical credit loss experience, the current situation and the forecast of Accounts receivable – Portfolio Aging future economic conditions, calculate Aging expected credit loss through aging of receivables and lifetime expected credit loss rate.

2) Accounts receivable – comparison table of ages and lifetime expected credit loss rate of aging portfolio

131 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Ages Expected credit loss rate (%)

Within 1 year (inclusive, the same hereinafter) 1.00 1-2 years 5.00

2-3 years 10.00

3-4 years 30.00

4-5 years 50.00

Over 5 years 100.00

6. Offsetting financial assets and financial liabilities Financial assets and financial liabilities are presented separately in the balance sheet and are not offset. However, the Company offsets a financial asset and a financial liability and presents the net amount in the balance sheet when, and only when, the Company: (a) currently has a legally enforceable right to set off the recognized amounts; and (b) intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

In accounting for a transfer of a financial asset that does not qualify for derecognition, the Company does not offset the transferred asset and the associated liability.

(XI) 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.

(XII) Non-current assets or disposal groups classified as held for sale 1. Classification of non-current assets or disposal groups as held for sale

132 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Non-current assets or disposal groups are accounted for as held for sale when the following conditions are all met: a. the asset must be available for immediate sale in its present condition subject to terms that are usual and customary for sales of such assets or disposal groups; b. its sales must be highly probable, i.e., the Company has made a decision on the sale plan and has obtained a firm purchase commitment, and the sale is expected to be completed within one year.

When the Company acquires a non-current asset or disposal group with a view to resale, it shall classify the non-current asset or disposal group as held for sale at the acquisition date only if the requirement of “expected to be completed within one year” is met at that date and it is highly probable that other criteria for held for sale will be met within a short period (usually within three months).

An asset or a disposal group is still accounted for as held for sale when the Company remains committed to its plan to sell the asset or disposal group in the circumstance that non-related party transactions fail to be completed within one year due to one of the following reasons: a. a buyer or others unexpectedly set conditions that will extend the sale period, while the Company has taken timely actions to respond to the conditions and expects a favorable resolution of the delaying factors within one year since the setting; (2) a non-current asset or disposal group classified as held for sale fails to be sold within one year due to rare cases, and the Company has taken action necessary to respond to the circumstances during the initial one-year period and the criteria for held for sale are met.

2. Measurement of non-current assets or disposal groups as held for sale (1) Initial measurement and remeasurement For initial measurement and remeasurement as at the balance sheet date of a non-current asset or disposal group as held for sale, where the carrying amount is higher than the fair value less costs to sell, the carrying amount is written down to the fair value less costs to sell, and the write-down is recognized in profit or loss as assets impairment loss, meanwhile, provision for impairment of assets as held for sale shall be made.

For a non-current asset or disposal group classified as held for sale at the acquisition date, the asset or disposal group is measured on initial recognition at the lower of its initial measurement amount had it not been so classified and fair value less costs to sell. Apart from the non-current asset or disposal group acquired through business combination, the difference arising from the initial recognition of a non-current asset or disposal group at the fair value less costs to sell shall be included into profit or loss.

The assets impairment loss recognized for a disposal group as held for sale shall reduce the carrying amount of goodwill in the disposal group first, and then reduce its carrying amount based on the proportion of each non-current asset’s carrying amount in the disposal group.

No provision for depreciation or amortization shall be made on non-current assets as held for sale or non-current assets in disposal groups as held for sale, while interest and other expenses attributable to the liabilities of a disposal group as held for sale shall continue to be recognized.

(2) Reversal of assets impairment loss When there is a subsequent increase in fair value less costs to sell of a non-current asset as held for sale at the balance sheet date, the write-down shall be recovered, and shall be reversed not in excess of the impairment loss that has been recognized after the non-current asset was classified as held for sale. The reversal shall be included into profit or loss. Assets impairment loss that has been recognized before the classification is not reserved.

When there is a subsequent increase in fair value less costs to sell of a disposal group as held for sale at the balance sheet date, the write-down shall be recovered, and shall be reversed not in excess of the non-current assets impairment loss that has been recognized after the disposal group was classified as held for sale. The reversal shall be included into profit or loss. The reduced carrying amount of goodwill and non-current assets impairment loss that has been recognized before the classification is not reserved.

The subsequent reversal of the impairment loss that has been recognized in a disposal group as held for sale, the carrying amount is increased based on the proportion of carrying amount of each non-current assets (excluding goodwill) in the disposal group.

133 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

(3) Non-current asset or disposal group that is no longer classified as held for sale and derecognized A non-current asset or disposal group that does not met criteria for held for sale and no longer classified as held for sale, or a non-current asset that removed from a disposal group as held for sale shall be measured at the lower of: a. its carrying amount before it was classified as held for sale, adjusted for any depreciation. Amortization or impairment that would have been recognized had it not been classified as held for sale; and b. its recoverable amount.

When a non-current asset or disposal group classified as held for sale is derecognized, unrecognized gains or losses shall be included into profit or loss.

(XIII) 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 investments 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 the acquirer’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 the acquirer’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 remeasurement of defined benefit plan of the acquiree.

134 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

(3) Long-term equity investments 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 investments with control relationship, it is accounted for with cost method; for long-term equity investments with joint control or significant influence relationship, it is accounted for with equity method.

4. Disposal of a subsidiary in stages resulting in the Company’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 the Company’s loss of significant influence or joint control, the remained equity is accounted for with equity method; however, if the disposal results in the Company’s loss of control, joint control, or significant influence, the remained equity is 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 the Company’s loss of control Before the Company’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 the Company’s loss of control.

2) Disposal of a subsidiary in stages qualified as “bundled transaction” resulting in the Company’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.

(XIV) 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.

(XV) 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.

135 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

2. Depreciation method of different categories of fixed assets

Estimated residual Annual Useful life Categories Depreciation method value proportion depreciation (years) (%) rate (%) Buildings and structures Straight-line method 15-35 3.00 2.77-6.47

Machinery Straight-line method 10-15 3.00 6.47-9.70

Transport facilities Straight-line method 6-8 3.00 12.13-16.17

Electronic equipment Straight-line method 4-11 3.00 8.82-24.25

Other equipment Straight-line method 4-11 3.00 8.82-24.25

(XVI) 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.

(XVII) 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

136 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report 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.

(XVIII) Intangible assets 1. Intangible asset includes land use right, software, 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 5-10 technology

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.

(XIX) 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.

(XX) 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.

137 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

(XXI) 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 remeasurement 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 remeasurement 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.

(XXII) Provisions

138 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

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.

(XVIII) 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.

(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 the Company’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 The Company’s main product is the Video conference products, integrated wiring products, low voltage distribution products, private network communication products, wiring products and other products. 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.

(XIX) Government grants 1. Government grants shall be recognized if, and only if, the following conditions are all met: (1) the Company will comply with the conditions attaching to the grants; (2) the grants will be received. Monetary government grants are measured at the amount received or receivable. Non-monetary government grants are measured at fair value, and can be measured at nominal amount in the circumstance that fair value can’t be assessed.

2. Government grants related to assets

Government grants related to assets are government grants with which the Company construct or otherwise acquire long-term assets under requirements of government. In the circumstances that there is no specific government requirement, the Company shall determine based on the primary condition to acquire the grants and government grants related to assets are government grants whose primary condition is to construct or otherwise acquire long-term assets. They offset carrying amount of relevant assets or recognized

139 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report as deferred income. If recognized as deferred income, they are included in profit or loss on a systematic basis over the useful lives of the relevant assets. Those measured at notional amount is directly included into profit or loss. For assets sold, transferred, disposed or damaged within the useful lives, balance of unamortized deferred income is transferred into profit or loss of the year in which the disposal occurred.

3. Government grants related to income

Government grants related to income are government grants other than those related to assets. For government grants that contain both parts related to assets and parts related to income, in which those two parts are blurred and thus collectively classified as government grants related to income. For government grants related to income used for compensating the related future cost, expenses or losses of the Company are recognized as deferred income and are included in profit or loss or offset relevant cost during the period in which the relevant cost, expenses or losses are recognized; for government grants related to income used for compensating the related cost, expenses or losses incurred to the Company, they are directly included in profit or loss or directly offset relevant cost.

4. Government grants related to the ordinary course of business shall be included into other income or offset relevant cost based on business nature, while those not related to the ordinary course of business shall be included into non-operating revenue or expenditures.

(XXV) Leases 1. Operating leases When the Company is the lessee, lease payments are recognized as cost or profit or loss with straight-line method/unit-of-production 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/unit-of-production 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 as profit or loss in the periods in which they are incurred.

2. Finance leases When the Company is the lessee, at the commencement of the lease term, lessees recognize finance leases as assets and liabilities in their balance sheets at amounts equal to the lower of fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease, and recognize the minimum lease payments as the entering value of long-term payable, and treat the difference of the two as unrecognized finance expense. Any initial direct costs of the lessee are added to the amount recognized as an asset. The effective interest method is used to recognize finance expense of the period during the lease term.

When the Company is the lessor, at the commencement of the lease, lessor recognizes the aggregate of minimum lease receipts and initial direct costs, each determined at the inception of the lease, as the entering value of finance lease receivables, and recognize the unguaranteed residual value at the same time. The difference between the aggregate of the minimum lease receipts, the initial direct costs and the unguaranteed residual value, and the sum of their present values is recognized as unrealized finance income. The effective interest method is used to recognize finance income of the period during the lease term.

140 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

(XXVI) Segment reporting Reportable segments are identified based on operating segments which are determined based on the structure of the Company’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.

(XXVII) Significant changes in accounting policies and estimates 1. Significant changes in accounting policies (1) Changes in accounting policies arising from changes in CASBEs 1) The Company prepared the financial statements for the year ended December 31, 2019 in accordance with “Notice of the Ministry of Finance on Revising and Issuing Financial Statement Templates for General Enterprises” (numbered Cai Kuai [2019] 6), “Notice on Revising and Issuing the Format of Consolidated Financial Statements (2019 Edition)” (Cai Kuai [2019] 16), and CASBEs, and changes in accounting policies are applicable to retrospective application method. Items of financial statement for the year ended December 31, 2018 significantly affected and their amounts are as follows:

Original financial statement items and amounts Revised financial statement items and amounts

Notes receivable 46,475,656.01

Notes receivable and accounts 987,544,115.36 Accounts receivable 941,068,459.35 receivable Receivables financing

Notes payable 84,374,916.99 Notes payable and accounts 827,403,870.61 payable Accounts payable 743,028,953.62

2) The Company has adopted “CASBE 23 – Transfer of Financial Assets”, “CASBE 24 - Hedging” and “CASBE 37 - Presentation of Financial Instruments” (collectively, the “revised financial instrument standard”) revised by Ministry of Finance of PRC since January 1, 2019. Pursuant to regulations on convergence between old and new standards, no adjustment shall be made on comparable information, and the difference arising from adoption on the adopting date shall be retrospectively adjusted into retained earnings or other comprehensive income at the beginning of the reporting period.

The revised financial instrument standard changes classification and measurement method of financial assets, and determines three major categories of measurement: amortized cost; fair value through other comprehensive income; fair value through profit or loss. The Company makes the above classification based on its own business model and the contractual cash flow characteristics of the financial assets. The Company measures equity investments at fair value through profit or loss, but may make an irrevocable election at initial recognition to measure them at fair value through other comprehensive income (gains or losses on disposal can’t be reversed into profit or loss, but dividend income can be included into profit or loss).

The revised financial instrument standard requires for a “expected credit loss model” instead of “incurred loss model”, which is applicable to financial assets at amortized cost, financial assets, lease receivable at fair value through other comprehensive income.

① Main effects on the financial statements as at January 1, 2019 due to adoption of revised financial instrument standard are as follows:

Items Balance sheet

141 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Effect due to revised Dec. 31, 2018 financial instrument Jan. 1, 2019 standard Notes receivable 46,475,656.01 -12,824,200.80 33,651,455.21

Receivables financing 12,824,200.80 12,824,200.80

Accounts receivable 941,068,459.35

Other receivables 33,734,948.67

Assets as held for sale 741,953.00 -741,953.00

Other equity instrument 741,953.00 741,953.00 investments

Short-term borrowings 445,010,000.00 454,333.33 445,464,333.33

Other payables 55,128,492.65 -454,333.33 54,674,159.32

Other comprehensive -4,947,588.58 -1,854,910.00 -6,802,498.58 income (OCI)

Undistributed profit -40,726,776.80 -14,829,568.99 -55,556,345.79

Minority equity 132,707,742.04 -1,781,094.33 130,926,647.71

② On January 1, 2019, the comparison table of categories and measuring result of the Company’s financial assets under revised and old financial instrument standards is as follows:

Old standard Revised standard Items Category Carrying amount Category Carrying amount

Cash and bank Financial 261,938,068.72 Amortized cost 261,938,068.72 balances assets

Amortized cost 33,651,455.21

Notes Financial fair value through 46,475,656.01 receivable assets other comprehensiv 12,824,200.80 e income

Accounts Financial 941,068,459.35 Amortized cost 925,277,650.11 receivable assets

Other Financial 33,734,948.67 Amortized cost 31,060,184.59 receivables assets

Other equity fair value through Financial instrument 741,953.00 other comprehensiv 741,953.00 assets investments e income

Short-term Financial 445,010,000.00 Amortized cost 445,464,333.33 borrowings liabilities

Financial Notes payable 84,374,916.99 Amortized cost 84,374,916.99 liabilities

Accounts Financial 743,028,953.62 Amortized cost 743,028,953.62

142 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

payable liabilities

Financial Other payables 55,128,492.65 Amortized cost 54,674,159.32 liabilities

③ On January 1, 2019, the reconciliation statement on the carrying amount of the financial assets and financial liabilities under revised financial instrument standard is as follows:

Carrying amount Carrying amount under revised Items under old standard Reclassification Remeasurement standard (Jan. 1, (Dec. 31, 2018) 2019) A. Financial assets

a. Measured at amortized cost

Cash and bank 261,938,068.72 261,938,068.72 balances

Notes receivable

Presented as original 46,475,656.01 CAS22

Less: transfer to fair value through other -12,824,200.80 comprehensive income(new CAS22)

Presented as new 33,651,455.21 CAS22

Accounts receivable

Presented as original 941,068,459.35 CAS22

Remeasurement: -15,790,809.24 expected credit loss

Presented as new 925,277,650.11 CAS22

Other receivable

Presented as original 33,734,948.67 CAS22

Remeasurement: -2,674,764.08 expected credit loss

Presented as new 31,060,184.59 CAS22

143 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Carrying amount Carrying amount under revised Items under old standard Reclassification Remeasurement standard (Jan. 1, (Dec. 31, 2018) 2019)

Total financial assets 1,283,217,132.75 -12,824,200.80 -18,465,573.32 1,251,927,358.63 at amortized cost b. Measured at fair value through other comprehensive income

Receivables financing

Presented as original

CAS22

Less: transfer from amortized cost 12,824,200.80 (original CAS22)

Presented as new 12,824,200.80 CAS22

Available-for-sale financial assets

Presented as original 741,953.00 CAS22

Less: transfer to fair value through other comprehensive income-other equity -741,953.00 instrument investments (new CAS22)

Presented as new

CAS22

Other equity instrument investments

Presented as original

CAS22

Add: transfer from Available-for-sale 741,953.00 financial assets (new CAS22)

Presented as new 741,953.00

144 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Carrying amount Carrying amount under revised Items under old standard Reclassification Remeasurement standard (Jan. 1, (Dec. 31, 2018) 2019) CAS22

Total financial assets at fair value through 741,953.00 12,824,200.80 13,566,153.80 other comprehensive income B. Financial liabilities

a. Measured at amortized cost

Short-term

borrowings

Presented as original 445,010,000.00 CAS22

Add: transfer from other payables 454,333.33 (interest payable)

Presented as new 445,464,333.33 CAS22

Notes payable 84,374,916.99 84,374,916.99

Accounts payable 743,028,953.62 743,028,953.62

Other payables

Presented as original 55,128,492.65 CAS22

Less: transfer to short-term borrowings -454,333.33 (interest payable)

Presented as new 54,674,159.32 CAS22

Total financial liabilities at amortized 1,327,542,363.26 1,327,542,363.26 cost

④ On January 1, 2019, the reconciliation statement on the provision for impairment of the financial assets under revised financial instrument standard is as follows:

145 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Provision for impairment made under old Provision for Items financial instrument standard/provisions Remeasurement impairment under recognized under the contingencies standard revised standard (Jan. 1, (Dec. 31, 2018) 2019) Accounts receivable 56,220,092.44 15,790,809.24 72,010,901.68

Other receivable 33,739,468.01 2,674,764.08 36,414,232.09

3) The Company has adopted “CASBE 7 – Non-cash Assets Exchange” since June 10, 2019, and “CASBE 12 – Debt Restructuring” since June 17, 2019, and changes in accounting policies are applicable to prospective application method.

2. Significant changes in accounting estimates

None

IV. Taxes

(I) Main taxes and tax rates

Taxes Tax bases Tax rates

17%、16%、13%、6%、 Value-added tax (VAT) The taxable revenue from sales of goods or rendering of services 3%

For housing property levied on the basis of price, housing property tax is levied at the rate of 1.2% of Housing property tax the balance after deducting 30% of the cost; for 1.2%、12% housing property levied on the basis of rent, housing property tax is levied at the rate of 12% of rent revenue. Urban maintenance and Turnover tax payable 7% construction tax Education surcharge Turnover tax payable 3%

Local education surcharge Turnover tax payable 2%

Enterprise income tax Taxable income 15%、16.5%、25%

Different enterprise income tax rates applicable to different taxpayers:

Taxpayers Income tax rate

The Company 15%

Nanjing Putian Telege Intelligent Building Co., Ltd. 15% Nanjing Putian Changle Telecommunications 15% Equipment Co., Ltd. Nanjing Putian Datang Information Electronic Co., 15% Ltd.

Nanjing Putian Network Co., Ltd. 15%

Putian Telecommunications (H.K.) Co., Ltd. 16.5%

Taxpayers other than the above-mentioned 25%

(II) Tax preferential policies

146 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

The Company obtained high-tech enterprise certificate in December, 2018, valid for 3 years. It is subject to the enterprise income tax at a rate of 15%

The subsidiary, Nanjing Putian Telege Intelligent Building Ltd., obtained high-tech enterprise certificate in December, 2017, valid for 3 years. It is subject to the enterprise income tax at a rate of 15%.

The subsidiary, Nanjing Putian Changle Telecommunications Equipment Co., Ltd., obtained high-tech enterprise certificate in October, 2018, valid for 3 years. It is subject to the enterprise income tax at a rate of 15%.

The subsidiary, Nanjing Putian Network Co., Ltd., obtained high-tech enterprise certificate in December, 2017, valid for 3 years. It is subject to the enterprise income tax at a rate of 15%.

The subsidiary, Nanjing Putian Datang Information Electronic Co., Ltd., obtained high-tech enterprise certificate in November, 2018, valid for 3 years. It is subject to the enterprise income tax at a rate of 15%.

The subsidiary, Nanjing Telecommunication Equipment Factory - the Seventh Branch, 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 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 of VAT refund upon collection in accordance with the provisions of Cai Shui [2011] No.100.

V. Notes to items of consolidated financial statements Remarks: “Opening balance” in this report refers to balances as at January 1, 2019, while “closing balance” refers to balances as at December 31, 2019; and “current period” refers to the year of 2019, while “preceding period” refers to the year of 2018. This is also applicable to that of the parent company.

(I) Notes to items of the consolidated balance sheet 1. Cash and bank balances (1) Details

Items Closing balance Opening balance

Cash on hand 2,273.88 1,886.33

Cash in bank 208,781,592.72 201,367,431.09

Other cash and bank balances 52,486,166.68 60,568,751.30

Total 261,270,033.28 261,938,068.72

(2) Details of other cash and bank balances

Items Closing balance Opening balance

Bank acceptance deposit 36,000,000.00 38,442,848.22

147 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

deposit for L/G 16,477,961.78 22,125,903.08

Others 8,204.90

Total 52,486,166.68 60,568,751.30 Other cash and bank balances are restricted funds.

2. Notes receivable (1) Details 1) Details of different categories Closing balance

Book balance Provision for bad debts Categories % to Provision Carrying Amount Amount proportion amount total (%) Receivables with provision for bad debts made on an individual basis Including: Bank acceptance Trade acceptance Receivables with provision for bad 59,976,824.10 100.00 323,770.52 0.54 59,653,053.58 debts made on a collective basis Including: Bank acceptance 53,501,413.64 89.20 53,501,413.64

Trade acceptance 6,475,410.46 10.80 323,770.52 5.00 6,151,639.94

Total 59,976,824.10 100.00 323,770.52 0.54 59,653,053.58 (Continued)

Opening balance

Book balance Provision for bad debts Categories Provision Carrying amount Amount % to total Amount proportion (%) Receivables with provision for bad debts made on an individual basis Including: Bank acceptance

Trade acceptance

Receivables with provision for bad 33,651,455.21 100.00 33,651,455.21 debts made on a collective basis Including: Bank acceptance 25,013,468.01 74.33 25,013,468.01

Trade acceptance 8,637,987.20 25.67 8,637,987.20

Total 33,651,455.21 100.00 33,651,455.21

Note: Differences between the opening amount and the end amount of the previous year (December 31, 2018) are presented as III(XXVII) for details. (2) Changes in provision for bad debts Increase Decrease Items Opening Closing balance Accrual Recovery Others Reversal Written-of Others balance

148 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

f

individual basis collective 323,770.52 323,770.52 basis Subtotal 323,770.52 323,770.52

(3) Endorsed or discounted but undue notes at the balance sheet date

Items Closing balance derecognized Closing balance not yet derecognized

Bank acceptance 59,625,961.74

Trade acceptance 8,346,281.81

Subtotal 67,972,243.55

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.

3. Accounts receivable (1) Details 1) Details on categories Closing balance Book balance Provision for bad debts Categories % to Provision Carrying amount Amount Amount proportion total (%) Receivables with provision 31,829,378.66 3.86 31,411,610.66 98.69 417,768.00 made on an individual basis Receivables with provision 792,139,948.91 96.14 94,901,652.95 11.98 697,238,295.96 made on a collective basis Total 823,969,327.57 100.00 126,313,263.61 15.33 697,656,063.96 (Continued)

Opening balance

Book balance Provision for bad debts Categories Provision Carrying amount Amount % to total Amount proportion (%) Receivables with provision made on an individual basis Receivables with provision 997,288,551.79 100.00 72,010,901.68 7.22 925,277,650.11 made on a collective basis Total 997,288,551.79 100.00 72,010,901.68 7.22 925,277,650.11

Note: Differences between the opening amount and the end amount of the previous year (December 31, 2018) are presented as III(XXVII) for details.

2) Accounts receivable with provision made on an individual basis

Debtors Book balance Provision for bad Provision Reasons debts proportion (%)

149 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Debtors Book balance Provision for bad Provision Reasons debts proportion (%) Mr. Xu 17,591,683.74 17,591,683.74 100.00 Unable to recover China Tower 14,237,694.92 13,819,926.92 97.07 Unable to recover Corporation Ltd.

Subtotal 31,829,378.66 31,411,610.66 98.69 Unable to recover

3) Accounts receivable with provision for bad debts made on age analysis

Closing balance Items Book balance Provision for bad debts Provision proportion (%) Within 1 year 337,560,793.39 3,375,607.92 1.00

1-2 years 303,529,497.26 15,176,474.87 5.00

2-3 years 57,050,674.38 5,705,067.44 10.00

3-4 years 26,698,408.08 8,009,522.43 30.00

4-5 years 9,331,191.04 4,665,595.53 50.00

Over 5 years 57,969,384.76 57,969,384.76 100.00

Subtotal 792,139,948.91 94,901,652.95 11.98% (2) Changes in provision for bad debts

Increase Decrease Opening Items Recov Reve Other Closing balance balance Accrual Others Written ery rsal off s Receivables with provision made on an 31,411,610.66 31,411,610.66 individual basis Receivables with provision made on a 72,010,901.68 22,772,948.64 117,802.63 94,901,652.95 collective basis Subtotal 72,010,901.68 54,184,559.30 117,802.63 126,313,263.61 (3) Details of the top 5 debtors with largest balances

Proportion to the total Provision for Debtors Book balance balance of accounts bad debts receivable (%) Beijing UniStrong Science & Technology 52,167,500.00 6.33 2,608,375.00 Co., Ltd.

Beijing Zhongrui Haotian Information 25,499,700.00 3.09 1,274,985.00 Technology Co., Ltd.

Beidou navigation technology Co., Ltd. 21,589,232.00 2.62 1,079,461.60 Shenzhen Zhongchuang Electric 21,513,968.79 2.61 1,075,698.44 Measurement Technology Co., Ltd.

Dongpo Xi Laos Co., Ltd. 19,708,086.54 2.39 985,404.33

Subtotal 140,478,487.33 17.04 7,023,924.37

4. Receivables financing (1) Details

150 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

1) Details on categories

Closing balance Items Interest Interest Changes in Carrying Provision for Initial cost adjustment accrued fair value amount impairment Bank acceptance 3,821,550.77 3,821,550.77

Total 3,821,550.77 3,821,550.77

(Continued)

Opening balance Items Interest Interest Changes in fair Provision for Initial cost Carrying amount adjustment accrued value impairment Bank acceptance 12,824,200.80 12,824,200.80

Total 12,824,200.80 12,824,200.80

Note: Differences between the opening amount and the end amount of the previous year (December 31, 2018) are presented as III(XXVII) for details.

2) Receivables financing with provision for impairment made on a collective basis

Closing balance Items Provision Book balance Provision for impairment proportion (%) Bank acceptance 3,821,550.77 portfolio Subtotal 3,821,550.77

(2) Endorsed or discounted but undue notes at the balance sheet date

Items Closing balance derecognized Closing balance not yet derecognized Bank acceptance 15,206,972.07

Subtotal 15,206,972.07

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.

5. Advances paid (1) Age analysis

Closing balance Opening balance

Ages Provision Provision % to for % to for Book balance Carrying amount Book balance Carrying amount total impairmen total impairmen t t Within 22,726,145.30 67.32 22,726,145.30 179,718,854.19 95.17 179,718,854.19 1 year

1-2 7,774,347.45 23.03 7,774,347.45 3,256,231.30 1.72 3,256,231.30

151 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Closing balance Opening balance

Ages Provision Provision % to for % to for Book balance Carrying amount Book balance Carrying amount total impairmen total impairmen t t years

2-3 1,297,653.28 3.84 1,297,653.28 1,176,772.69 0.62 1,176,772.69 years

Over 3 1,961,377.06 5.81 1,961,377.06 4,696,854.51 2.49 4,696,854.51 years

Total 33,759,523.09 100.00 33,759,523.09 188,848,712.69 100.00 188,848,712.69

(2) Details of the top 5 debtors with largest balances

Proportion to the total Debtors Book balance balance of advances paid (%) Jiangsu Sainty Machinery IMP.&Co.,Ltd. 3,640,549.11 10.78

Jiangsu Xinxin Jiayuan Network Technology Co.,Ltd. 2,380,440.00 7.05

Guizhou Tianguang Shian Technology Co., Ltd. 2,239,090.77 6.63

Fuzhou Yunfeng Communication Technology Co., Ltd. 1,547,169.75 4.58

Brillview technology Inc. 1,422,420.00 4.21

Subtotal 11,229,669.63 33.26

6. Other receivables (1) Details 1) Details on categories

Closing balance

Book balance Provision for bad debts Categories Carrying Provision % to amount Amount Amount proportion total (%) Receivables with provision made 28,912,122.71 45.55 28,912,122.71 100.00 on an individual basis Including: Interest receivable

Dividend receivable

Other receivables 28,912,122.71 45.55 28,912,122.71 100.00 Receivables with provision made 34,563,137.22 54.45 6,452,746.69 18.67 28,110,390.53 on a collective basis Including: Interest receivable

Dividend receivable

Other receivables 34,563,137.22 54.45 6,452,746.69 18.67 28,110,390.53

Total 63,475,259.93 100.00 35,364,869.40 55.71 28,110,390.53 (Continued)

152 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Opening balance

Book balance Provision for bad debts Categories Carrying Provision % to amount Amount Amount proportion total (%) Receivables with provision made 28,912,122.71 42.85 28,912,122.71 100.00 on an individual basis Including: Interest receivable

Dividend receivable

Other receivables 28,912,122.71 42.85 28,912,122.71 100.00 Receivables with provision made 38,562,293.97 57.15 7,502,109.38 19.45 31,060,184.59 on a collective basis Including: Interest receivable

Dividend receivable

Other receivables 38,562,293.97 57.15 7,502,109.38 19.45 31,060,184.59

Total 67,474,416.68 100.00 36,414,232.09 53.97 31,060,184.59

Note: Differences between the opening amount and the end amount of the previous year (December 31, 2018) are presented as III(XXVII) for details.

2) Other receivables with provision made on an individual basis

Debtors Book balance Provision for bad Provision Reasons for debts proportion (%) provision made Beijing Likong Communication 28,912,122.71 28,912,122.71 100.00 Unable to recover Equipment Co., Ltd.

Subtotal 28,912,122.71 28,912,122.71 100.00

3) Other receivables with provision made on a collective basis Closing balance Portfolios Book balance Provision for bad debts Provision proportion (%)

Portfolio-Financing margin 5,578,947.37

Portfolio-Others 28,984,189.85 6,452,746.69 22.26

Subtotal 34,563,137.22 6,452,746.69 18.67

(2) Age analysis

Items Closing book balance

Within 1 year 17,480,990.19

1-2 years 9,297,587.45

2-3 years 2,517,678.34

3-4 years 1,673,457.97

153 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

4-5 years 733,113.00

Over 5 years 31,772,432.98

Subtotal 63,475,259.93

(3) Changes in provision for bad debts 1) Details Phase I Phase II Phase III Lifetime Items 12‑ month Lifetime expected Total expected credit expected credit losses losses (credit credit losses (credit impaired) not impaired) Opening balance 1,634,746.56 34,779,485.53 36,414,232.09 Opening balance in the

current period --Transferred to phase II

--Transferred to phase III -83,672.90 83,672.90

--Reversed to phase II

--Reversed to phase I Provision made in the -365,208.21 -684,262.41 -1,049,470.62 current period Provision recovered in

current period Provision reversed in

current period Provision written-off in

current period Other changes 107.93 107.93

Closing balance 1,185,865.45 34,179,003.95 35,364,869.40 (4) Other receivables categorized by nature

Nature of receivables Closing balance Opening balance

Temporary payment receivable 36,848,648.68 33,879,523.33

Security deposit 23,681,938.64 24,126,517.87

Imprest 1,499,462.35 2,652,720.79

Others 1,445,210.26 6,815,654.69

Total 63,475,259.93 67,474,416.68

(5) Details of the top 5 debtors with largest balances

Proportion to the Nature of total balance of Provision for Debtors Book balance Ages receivables other receivables bad debts (%) Beijing Likong Communication Temporary Over 5 28,912,122.71 45.55 28,912,122.71 Equipment Co., Ltd. payment years

154 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Proportion to the Nature of total balance of Provision for Debtors Book balance Ages receivables other receivables bad debts (%) receivable

Ping An International Financial Security 1-2 yea 4,000,000.00 6.30 Leasing Co., Ltd. deposit rs

China Potevio Information Security 1-5 yea 1,958,000.00 3.08 496,900.00 Industry Inc. deposit rs

Far East International Leasing Security Within 1,578,947.37 2.49 Co.,Ltd. deposit 1 year

Shenzhen Metro Group Co., Security Within 1,490,768.10 2.35 74,538.41 Ltd. Construction Headquarters deposit 1 year

Subtotal 37,939,838.18 59.77 29,483,561.12

7. Inventories (1) Details

Closing balance Opening balance Items Provision for Provision for Book balance Carrying amount Book balance Carrying amount write-down write-down Raw materials 33,932,185.24 3,232,000.61 30,742,039.05 84,431,224.04 3,401,987.55 81,029,236.49 Work in 11,050,997.83 11,050,997.83 33,004,830.02 33,004,830.02 process

Goods on hand 74,186,943.04 17,585,934.82 56,559,153.80 80,895,523.20 7,337,485.59 73,558,037.61 Goods 129,012,025.69 20,346,372.53 108,665,653.16 108,005,683.58 13,804,319.56 94,201,364.02 dispatched Materials on consignment 3,184,134.32 804,691.99 2,379,442.33 5,983,856.44 804,691.99 5,179,164.45 for further processing Total 251,366,286.12 41,968,999.95 209,397,286.17 312,321,117.28 25,348,484.69 286,972,632.59

(2) Provision for inventory write-down 1) Details Increase Decrease Items Opening Closing balance Provision Others Reversal or Others balance written-off Raw materials 3,401,987.55 2,151,256.43 2,321,243.37 3,232,000.61

Goods on hand 7,337,485.59 10,883,696.14 635,246.91 17,585,934.82

Goods dispatched 13,804,319.56 6,542,052.97 20,346,372.53 Materials on consignment for 804,691.99 804,691.99 further processing Subtotal 25,348,484.69 19,577,005.54 2,956,490.28 41,968,999.95

8. Other current assets

155 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Closing balance Opening balance

Input VAT to be credited 10,632,374.23 13,497,540.69

Prepaid income tax 977,871.76

Total 11,610,245.99 13,497,540.69

9. Long-term equity investments (1) Categories

Closing balance Opening balance

Items Provision Provision for for Book balance Carrying amount Book balance Carrying amount impairmen impairmen t t Investmen ts in 10,422,067.61 10,422,067.61 11,128,318.34 11,128,318.34 associates Investmen ts in joint 171,340,315.89 171,340,315.89 172,115,761.89 172,115,761.89 ventures Total 181,762,383.50 181,762,383.50 183,244,080.23 183,244,080.23

(2) Details

Increase/Decrease

Opening Adjustment in Investees Investment income balance Investments Investments other recognized under increased decreased comprehensive equity method income Joint ventures SEI-Nanjing Potevio

Optical Network Co., 11,128,318.34 -706,250.73 Ltd.

Subtotal 11,128,318.34 -706,250.73

Associates Nanjing Putian Telege 1,183,862.97 1,183,862.97 Cable Co., Ltd.

Potevio Hi-tech 170,931,898.92 408,416.97 Industry Co., Ltd.

Subtotal 172,115,761.89 1,183,862.97 408,416.97

Total 183,244,080.23 1,183,862.97 -297,833.76 (Continued)

Increase/Decrease Closing balance of Investees Closing balance Changes in Cash dividend/profit Provision for Others provision for other equity declared for distribution impairment impairment Joint ventures

156 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Increase/Decrease Closing balance of Investees Closing balance Changes in Cash dividend/profit Provision for Others provision for other equity declared for distribution impairment impairment SEI-Nanjing

Potevio Optical 10,422,067.61 Network Co., Ltd.

Subtotal 10,422,067.61

Associates Nanjing Putian

Telege Cable Co., Ltd.

Potevio Hi-tech 171,340,315.89 Industry Co., Ltd.

Subtotal 171,340,315.89

Total 181,762,383.50

10. Other equity instrument investments

Accumulated amount of gains or losses transferred from other Items Closing Opening Dividend comprehensive income to balance balance income retained earnings Amount Reasons

Nanjing Yuhua 420,915.00 420,915.00 Electroplating Factory

Hangzhou Honyar 321,038.00 321,038.00 Electrical Co.,Ltd.

Beijing Likong

Communication Equipment Co., Ltd.

Subtotal 741,953.00 741,953.00 Note: Note: Differences between the opening amount and the end amount of the previous year (December 31, 2018) are presented as III(XXVII) for details. The investment in Nanjing Yuhua Electroplating Factory, Hangzhou Honyar Electrical Co.,Ltd. and Beijing Likong Communication Equipment Co., Ltd. are classified as other equity instrument investments, the Company measured it at fair value through other comprehensive income.

11. Investment property

Items Buildings and structures Land use right Total Cost

Opening balance 18,646,397.35 3,642,147.87 22,288,545.22

157 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Buildings and structures Land use right Total Increase

1) Acquisition

Decrease

1) Disposal

Closing balance 18,646,397.35 3,642,147.87 22,288,545.22

Accumulated depreciation and amortization

Opening balance 10,164,478.73 1,884,534.51 12,049,013.24

Increase 466,943.34 119,960.64 586,903.98

1) Accrual 466,943.34 119,960.64 586,903.98 Decrease

1) Disposal

Closing balance 10,631,422.07 2,004,495.15 12,635,917.22 Provision for impairment

Opening balance 1,842,418.00 1,842,418.00 Increase

1) Provision made

Decrease

1) Disposal

Closing balance 1,842,418.00 1,842,418.00 Carrying amount

Closing balance 6,172,557.28 1,637,652.72 7,810,210.00

Opening balance 6,639,500.62 1,757,613.36 8,397,113.98

12. Fixed assets (1) Details

Buildings and Machinery Transport Electronic Subtotal/ Items Others structures equipment facilities equipment Total

Cost

Opening balance 146,734,468.68 47,510,328.82 12,956,558.48 7,377,179.98 46,466,540.34 261,045,076.30

Increase 5,839,892.88 1,831,334.40 18,498.61 134,723.49 537,267.92 8,361,717.30

1) Acquisition 1,831,334.40 18,498.61 134,472.61 460,203.70 2,444,509.32

2) Transferred in from 5,839,892.88 77,064.22 5,916,957.10 construction in progress

3) Retranslation 250.88 250.88

Decrease 11,402,316.05 2,490,947.33 1,314,061.76 1,170,280.46 16,377,605.60

158 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Buildings and Machinery Transport Electronic Subtotal/ Items Others structures equipment facilities equipment Total

1) Disposal/scrap 11,402,316.05 2,490,947.33 1,314,061.76 1,170,280.46 16,377,605.60

Closing balance 152,574,361.56 37,939,347.17 10,484,109.76 6,197,841.71 45,833,527.80 253,029,188.00

Accumulated depreciation

Opening balance 50,615,949.47 37,030,086.33 11,631,222.35 5,825,140.46 42,701,045.00 147,803,443.61

Increase 5,049,237.14 2,137,363.36 293,256.32 1,458,792.71 427,244.61 9,365,894.14

1) Accrual 5,049,237.14 2,137,363.36 293,256.32 1,458,541.83 427,244.61 9,365,643.26

2) Retranslation 250.88 250.88

Decrease 10,828,547.47 2,415,391.10 1,294,096.56 1,061,042.72 15,599,077.85

1) Disposal/scrap 10,828,547.47 2,415,391.10 1,294,096.56 1,061,042.72 15,599,077.85

Closing balance 55,665,186.61 28,338,902.22 9,509,087.57 5,989,836.61 42,067,246.89 141,570,259.90

Provision for impairment

Opening balance 539,124.00 10,863.02 11,048.35 175,790.21 736,825.58

Increase

Decrease

Closing balance 539,124.00 10,863.02 11,048.35 175,790.21 736,825.58

Carrying amount

Closing balance 96,370,050.95 9,589,581.93 975,022.19 196,956.75 3,590,490.70 110,722,102.52

Opening balance 95,579,395.21 10,469,379.47 1,325,336.13 1,540,991.17 3,589,705.13 112,504,807.11

2) Fixed assets temporarily idle

Accumulated Provision for Items Cost Carrying amount Note depreciation impairment Machinery equipment 208,085.00 192,141.10 11,048.35 4,895.55

Transport facilities 225,000.00 218,250.00 6,750.00

Electronic equipment 36,000.00 34,920.00 1,080.00

Others 370,885.18 184,349.93 175,408.71 11,126.54

Subtotal 839,970.18 629,661.03 186,457.06 23,852.09

3) Fixed assets with certificate of titles being unsettled

Items Carrying amount Reasons for unsettlement

Buildings and structures 32,787,161.70 Unable to handle

Subtotal 32,787,161.70

22. Construction in progress (1) Details

159 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Closing balance Opening balance

Projects Provision Provision Book balance for Carrying amount Book balance for Carrying amount impairment impairment Nanjing Putian Datang Information Electronics 12,738,203.48 12,738,203.48 2,472,349.61 2,472,349.61 Co., Ltd. Product Development Center Nanjing putian science and technology pioneer park intelligent park 5,781,757.54 5,781,757.54 construction related building intelligent equipment.

Others 310,498.11 310,498.11 1,218,276.61 1,218,276.61

Total 13,048,701.59 13,048,701.59 9,472,383.76 9,472,383.76

2) Changes in significant projects

Transferred to Projects Budgets Opening balance Increase Closing balance fixed assets

Nanjing Putian Datang Information Electronics Co., Ltd. 30,000,000.00 2,472,349.61 10,265,853.87 12,738,203.48 Product Development Center

Nanjing putian science and technology pioneer park intelligent park construction related building intelligent 5,920,000.00 5,781,757.54 5,781,757.54 equipment.

Subtotal 35,920,000.00 8,254,107.15 10,265,853.87 5,781,757.54 12,738,203.48

(Continued)

Completio Accumulated Accumulated amount Amount of borrowing Annual Projects n investment to percentage of borrowing cost cost capitalization in capitalizati Fund source budget capitalization current period on rate (%) (%)

Nanjing Putian Datang

Information Electronics Co., Self-owned 42.46 42.46 Ltd. Product Development fund

Center

Nanjing putian science and

technology pioneer park Self-owned intelligent park construction 97.66 100.00 fund related building intelligent

equipment.

Subtotal

14. Intangible assets

Items Land use right Software Patent right Non-patent Total technology Cost

Opening balance 34,638,346.69 11,978,112.74 607,500.00 4,560,000.00 51,783,959.43

160 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Land use right Software Patent right Non-patent Total technology Increase

1) Acquisition

2) Internal research and development

Decrease 607,500.00 4,560,000.00 5,167,500.00

1) Disposal 607,500.00 4,560,000.00 5,167,500.00

Closing balance 34,638,346.69 11,978,112.74 46,616,459.43

Accumulated amortization

Opening balance 6,865,500.72 9,465,359.94 607,500.00 4,560,000.00 21,498,360.66

Increase 862,457.85 1,041,894.64 1,904,352.49

1) Accrual 862,457.85 1,041,894.64 1,904,352.49

Decrease 607,500.00 4,560,000.00 5,167,500.00

1) Disposal 607,500.00 4,560,000.00 5,167,500.00

Closing balance 7,727,958.57 10,507,254.58 18,235,213.15

Carrying amount

Closing balance 26,910,388.12 1,470,858.16 28,381,246.28

Opening balance 27,772,845.97 2,512,752.80 30,285,598.77

15. Long-term prepayments

Items Opening balance Increase Amortization Closing balance

Reconstruction of canteen 789,761.03 229,357.80 224,517.83 794,601.00

Reconstruction of office building 1,262,446.69 2,143,855.16 1,219,977.37 2,186,324.48

Others 1,510,129.12 59,433.96 289,713.38 1,279,849.70

Total 3,562,336.84 2,432,646.92 1,734,208.58 4,260,775.18

16. Short-term borrowings

Items Closing balance Opening balance

Pledge borrowings 276,812,627.72 250,396,333.33

Mortgage borrowings 65,042,904.11 65,010,000.00

Secured borrowings 110,060,416.67 130,058,000.00

Total 451,915,948.50 445,464,333.33 Note: Differences between the opening amount and the end amount of the previous year (December 31, 2018) are presented as III(XXVII) for details.

17. Notes payable Items Closing balance Opening balance

161 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Closing balance Opening balance

Bank acceptance 72,000,000.00 68,442,848.22

Trade acceptance 9,784,929.91 15,932,068.77

Total 81,784,929.91 84,374,916.99

18. Accounts payable (1) Details

Items Closing balance Opening balance

Procurement of materials 679,428,580.08 742,212,386.80

Project payment 816,566.82

Total 679,428,580.08 743,028,953.62

(2) Significant accounts payable with age over one year

Items Closing balance Reasons for unsettlement

Nanjing Featchina Electric Co., Ltd. 21,963,551.71 Not yet settled

SEI-Nanjing Potevio Optical Network Co., Ltd. 20,530,725.66 Not yet settled

China Potevio Information Industry Inc. 19,641,228.50 Not yet settled

Jiangsu Sainty Machinery IMP.&Co.,Ltd. 18,799,670.60 Not yet settled POLYCOM communications technology 17,737,438.13 Not yet settled (Beijing) Co.,Ltd.

Subtotal 98,672,614.60

19. Advances received

Items Closing balance Opening balance

Payment for goods 22,148,080.67 259,545,648.66

Total 22,148,080.67 259,545,648.66

20. Employee benefits payable (1) Details

Items Opening balance Increase Decrease Closing balance

Short-term employee benefits 21,132,336.19 211,945,155.91 211,474,784.40 21,602,707.70 Post-employment benefits - 29,987,049.94 29,987,049.94 defined contribution plan Total 21,132,336.19 241,932,205.85 241,461,834.34 21,602,707.70

(2) Details of short-term employee benefits

Items Opening balance Increase Decrease Closing balance

162 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Opening balance Increase Decrease Closing balance Wage, bonus, allowance and 11,254,526.62 150,842,449.91 150,887,038.91 11,209,937.62 subsidy Employee welfare fund 10,842,623.28 10,842,623.28

Social insurance premium 15,537,946.52 15,537,946.52

Including: Medicare premium 14,220,642.06 14,220,642.06 Occupational injuries 301,393.45 301,393.45 premium Maternity premium 1,015,911.01 1,015,911.01

Housing provident fund 156,533.23 12,964,736.67 12,964,736.67 156,533.23 Trade union fund and employee 9,721,276.34 3,274,713.28 2,780,429.53 10,215,560.09 education fund Compensation for termination 6,590,904.35 6,590,904.35 of labor relations

Others 11,891,781.90 11,871,105.14 20,676.76

Subtotal 21,132,336.19 211,945,155.91 211,474,784.40 21,602,707.70

(3) Details of defined contribution plan

Items Opening balance Increase Decrease Closing balance Basic endowment insurance 25,736,048.20 25,736,048.20 premium Unemployment insurance 1,168,522.03 1,168,522.03 premium Company annuity payment 3,082,479.71 3,082,479.71

Subtotal 29,987,049.94 29,987,049.94

21. Taxes and rates payable

Items Closing balance Opening balance

VAT 1,385,203.91 11,419,693.22

Enterprise income tax 1,605,203.32 3,685,037.85

Individual income tax 90,009.67 233,032.97

Urban maintenance and construction tax 446,279.63 900,385.94

Housing property tax 222,050.55 248,142.34

Land use tax 83,316.67 83,316.67

Education surcharge 287,880.75 655,635.04

Other tax 5,622.10 4,914.99

Total 4,125,566.60 17,230,159.02

22. Other payables (1) Details

163 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Closing balance Opening balance

Dividend payable 12,538,813.38 2,018,213.38

Other payables 48,707,865.43 52,655,945.94

Total 61,246,678.81 54,674,159.32 Note: Differences between the opening amount and the end amount of the previous year (December 31, 2018) are presented as III(XXVII) for details. (2) Dividend payable Items Closing balance Opening balance

Dividend of ordinary shares 12,538,813.38 2,018,213.38

Subtotal 12,538,813.38 2,018,213.38 (3) Other payables

Items Closing balance Opening balance

Temporary receipts payable 28,413,293.97 23,338,514.42

Unsettled installation cost 6,405,205.17 18,165,474.04

Deposits 6,942,844.36 5,611,697.12

Unpaid employee reimbursement 2,184,841.28 2,899,584.68

Others 4,761,680.65 2,640,675.68

Total 48,707,865.43 52,655,945.94

23. Non-current liabilities due within one year

Items Closing balance Opening balance

Long-term payables due within one year 10,820,807.35

Total 10,820,807.35

24. Long-term borrowings

Items Closing balance Opening balance

Finance lease 12,827,205.03

Total 12,827,205.03

25. Deferred income

Items Opening balance Increase Decrease Closing balance

Government grants 7,296,315.00 7,958,376.90 9,249,818.90 6,004,873.00

Total 7,296,315.00 7,958,376.90 9,249,818.90 6,004,873.00

Note: Please refer to section V (IV) 3 of notes to financial statements for details on grants included into profit or loss.

164 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

26. Share capital

Movements Opening Items Issue of Reserve Closing balance balance Bonus new transferred Others Subtotal shares shares to shares Total shares 215,000,000.00 215,000,000.00

27. Capital reserve

Items Opening balance Increase Decrease Closing balance

Share premium 139,592,332.04 139,592,332.04

Other capital reserve 45,782,201.81 45,782,201.81

Total 185,374,533.85 185,374,533.85

28. Other comprehensive income (OCI)

Current period cumulative

Less: OCI Current Opening carried Closing Items period Less: Attributable Attributable to balance forward balance cumulative income to parent non-controllin transferred before tax company g shareholders to profit or income tax loss Items to be reclassified -6,802,498.58 29,304.15 26,373.73 2,930.42 -6,776,124.85 subsequently to profit or loss Including: Translation -4,947,588.58 29,304.15 26,373.73 2,930.42 -4,921,214.85 reserves Reclassified

financial assets to -1,854,910.00 -1,854,910.00 OCI

Total -6,802,498.58 29,304.15 26,373.73 2,930.42 -6,776,124.85 Note: Differences between the opening amount and the end amount of the previous year (December 31, 2018) are presented as III(XXVII) for details.

29. Surplus reserve

Items Opening balance Increase Decrease Closing balance

Statutory surplus reserve 589,559.77 589,559.77

Total 589,559.77 589,559.77

30. Undistributed profit (1) Details

Items Current period Preceding period cumulative comparative

165 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Current period Preceding period cumulative comparative Balance before adjustment at the end of preceding period -40,726,776.80 -44,605,902.63

Add: Increase due to adjustment (or less: decrease) -14,829,568.99 -1,980,089.01

Opening balance after adjustment -55,556,345.79 -46,585,991.64 Add: Net profit attributable to owners of the parent -169,088,516.69 5,859,214.84 company Less: Appropriation of statutory surplus reserve

Dividend payable on ordinary shares

Closing balance -224,644,862.48 -40,726,776.80

(2) Details of increase or decrease due to adjustment Adjustments of -14,829,568.99 yuan are made on opening balance of undistributed profit due to changes in accounting policies.

(II) Notes to items of the consolidated income statement 1. Operating revenue/Operating cost

Current period cumulative Preceding period comparative Items Revenue Cost Revenue Cost

Main operations 1,316,694,560.34 1,070,497,619.85 1,927,264,745.34 1,594,738,812.81 Other 21,589,633.87 17,276,746.81 68,363,027.26 48,376,709.57 operations

Total 1,338,284,194.21 1,087,774,366.66 1,995,627,772.60 1,643,115,522.38

2. Taxes and surcharges

Items Current period cumulative Preceding period comparative

Urban maintenance and 3,276,155.79 4,620,799.94 construction tax Education surcharge 2,311,072.67 3,292,038.83

Housing property tax 1,462,422.80 1,453,355.85

Land use tax 547,177.81 589,112.16

Other tax 704,990.25 965,332.41

Total 8,301,819.32 10,920,639.19

3. Selling expenses

Items Current period cumulative Preceding period comparative

Employee benefits 77,048,927.73 70,194,402.37

Transport fees and transport 19,665,748.31 20,909,275.08 damages

166 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Current period cumulative Preceding period comparative

Business entertainment 17,114,142.33 20,664,396.74

Travelling expenses 13,819,057.87 15,966,752.60

Office expenses 5,560,856.53 4,199,890.00

Conference expenses 1,525,458.07 1,446,273.00

Promotion expenses 1,155,792.65 1,910,941.70

Sales service charges 1,038,155.51 2,451,675.69

Equipment maintain fees 53,959.44 616,140.73

Others 9,897,334.48 15,162,580.36

Total 146,879,432.92 153,522,328.27

4. Administrative expenses

Items Current period cumulative Preceding period comparative

Employee benefits 55,926,241.69 51,771,703.92

Depreciation and amortization 6,887,635.80 5,022,564.80

Consulting, intermediary and legal 5,448,016.21 6,818,156.63 fees

Office expenses 4,275,357.00 3,751,126.94

Lease expenses 3,131,821.43 3,406,740.99

Business entertainment 2,253,298.18 2,797,113.99

Travelling expense 1,461,187.42 3,185,065.89

Funding for Party Building 1,213,551.34 1,060,733.94

Others 6,850,720.61 8,689,907.31

Total 87,447,829.68 86,503,114.41

5. R&D expenses

Items Current period cumulative Preceding period comparative

Employee benefits 55,575,661.68 55,938,206.12

Intermediate test fee 600,097.91 3,785,739.52

Travelling expenses 3,433,025.78 3,667,575.96

Material use 3,270,507.03 3,081,505.47

Depreciation and amortization 1,555,336.33 1,739,684.27

Commissioned development 841,669.70 1,221,605.55

Others 5,902,643.08 6,840,816.37

Total 71,178,941.51 76,275,133.26

167 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

6. Financial expenses

Items Current period cumulative Preceding period comparative

Interest expenditures 30,200,892.97 23,694,841.52

Less: Interest income 1,475,350.85 2,665,279.32

Losses on foreign exchange 7,720.32 -293,209.60

Financial institution fees 692,502.67 897,134.41

Financing fee 1,149,386.79 840,754.71

Others 66,018.86

Total 30,575,151.90 22,540,260.58

7. Other income

Items Current period Preceding period Amount included in cumulative comparative non-recurring profit or loss Government grants 7,894,918.90 13,702,488.41 2,910,347.47 related to income [Note] Total 7,894,918.90 13,702,488.41 2,910,347.47

Note: Please refer to notes V(IV)3. to government grants for details on grants included into other income.

8. Investment income

Items Current period cumulative Preceding period comparative

Investment income from long-term equity investments under equity -297,833.76 -3,085,858.80 method Total -297,833.76 -3,085,858.80

9. Credit impairment loss

Items Current period cumulative Preceding period comparative

Bad debts -53,458,859.20

Total -53,458,859.20

10. Assets impairment loss

Items Current period cumulative Preceding period comparative

Bad debts -9,071,391.90

Inventory write-down loss -19,577,005.54 -11,527,903.45

Total -19,577,005.54 -20,599,295.35

11. Gains on asset disposal

168 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Amount included in Current period Preceding period Items non-recurring profit or cumulative comparative loss Gains on disposal of fixed assets 119,033.08 33,522,820.90 119,033.08

Total 119,033.08 33,522,820.90 119,033.08

12. Non-operating revenue

Current period Preceding period Amount included in Items non-recurring profit or cumulative comparative loss Government grants 1,354,900.00 1,489,000.00 1,354,900.00

Unpaid payables 362,546.35 1,332,427.34 362,546.35

Penalty income 63,385.71 65,602.74 63,385.71

Others 119,216.78 101,780.34 119,216.78

Total 1,900,048.84 2,988,810.42 1,900,048.84

13. Non-operating expenditures

Current period Preceding period Amount included in Items non-recurring profit or cumulative comparative loss Penalty expenditures 343,083.03 195,554.97 343,083.03

Donation expenditures 105,000.00 Losses on damage or retirement of non-current 39,364.85 assets Others 25,016.81 32,579.27 25,016.81

Total 368,099.84 372,499.09 368,099.84

14. Income tax expenses (1) Details

Items Current period cumulative Preceding period comparative Current period income tax 1,279,314.02 4,793,925.22 expenses Total 1,279,314.02 4,793,925.22

(2) Reconciliation of accounting profit to income tax expenses

Items Current period Preceding period cumulative comparative Profit before tax -157,661,145.30 28,907,241.00 Income tax expenses based on tax rate applicable -23,649,171.79 4,336,086.15 to the parent company Effect of different tax rate applicable to -626,836.21 2,329,261.16 subsidiaries

169 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Current period Preceding period cumulative comparative Effect of prior income tax reconciliation 498,379.34 -1,024,603.99

Effect of non-taxable income 462,878.82 Effect of non-deductible costs, expenses and 3,456,216.58 2,909,790.78 losses Effect of deducible temporary differences or -5,499,920.41 deductible losses not recognized Effect of reverse of taxable temporary differences that deferred income tax liabilities not recognized in previous 110,437.79 184,062.99 period

Effect of deducible temporary differences or deductible 31,109,797.60 6,085,709.68 losses not recognized

Deduction of R&D expenditures -9,619,509.29 -4,989,339.96

Income tax expenses 1,279,314.02 4,793,925.22

(III) Notes to items of the consolidated cash flow statement 1. Other cash receipts related to operating activities

Items Current period cumulative Preceding period comparative

Government grants 2,973,805.47 4,887,053.32

Interest income 1,475,350.85 2,665,279.32

Intercourse 14,077,394.69 14,580,000.00

VAT refund 1,674,556.65

Others 6,356,466.57 11,131,427.15

Total 24,883,017.58 34,938,316.44

2. Other cash payments related to operating activities

Items Current period cumulative Preceding period comparative

Selling and Administrative 110,042,009.33 136,557,091.67 expenses paid in cash

Intercourse 2,969,125.35 22,923,883.09

Guaranteed payment 5,705,120.89

Others 8,204.90 4,987,581.84

Total 113,019,339.58 170,173,677.49

3. Other cash receipts related to financing activities

Items Current period cumulative Preceding period comparative

Financial lease payments 30,000,000.00

170 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Current period cumulative Preceding period comparative received

Total 30,000,000.00

4. Other cash payments related to financing activities

Items Current period cumulative Preceding period comparative Installment financing lease 7,930,934.99 payments Payment of financing handling 1,149,386.79 840,754.71 fees

Total 9,080,321.78 840,754.71

5. Supplement information to the cash flow statement (1) Supplement information to the cash flow statement

Supplement information Current period Preceding period cumulative comparative (1) Reconciliation of net profit to cash flow from operating activities: Net profit -158,940,459.32 24,113,315.78 Add: Provision for assets impairment loss 70,079,374.46 19,831,055.59

Depreciation of fixed assets, oil and gas assets, 9,832,586.60 11,030,411.19 productive biological assets Amortization of intangible assets 2,024,313.13 1,469,027.61

Amortization of long-term prepayments 1,734,208.58 1,337,826.15 Loss on disposal of fixed assets, intangible assets -119,033.08 -33,522,820.90 and other non-current assets (Less: gains) Fixed assets retirement loss (Less: gains) 39,364.85 Losses on changes in fair value (Less: gains)

Financial expenses (Less: gains) 31,358,000.08 24,535,596.23

Investments losses (Less: gains) 297,833.76 3,085,858.80 Decrease of deferred tax assets (Less: increase)

Increase of deferred tax liabilities (Less: decrease)

Decrease in inventories (Less: increase) 60,954,831.16 192,165,761.08

Decrease in operating receivables (Less: increase) 326,109,564.75 -318,167,229.87

Increase of operating payables (Less: decrease) -320,645,105.21 -81,336,900.34 Others

Net cash flow from operating activities 22,686,114.91 -155,418,733.83

(2) Significant investing and financing activities not related to cash receipts and payments:

171 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Supplement information Current period Preceding period cumulative comparative Conversion of debt into share capital

Convertible bonds due within one year

Fixed assets rented in under finance leases

(3) Net changes in cash and cash equivalents:

Cash at the end of the period 208,783,866.60 201,369,317.42

Less: Cash at the beginning of the period 201,369,317.42 311,056,919.17

Add: Cash equivalents at the end of the period Less: Cash equivalents at the beginning of the

period Net increase of cash and cash equivalents 7,414,549.18 -109,687,601.75

(2) Cash and cash equivalents

Items Closing balance Opening balance

1) Cash 208,783,866.60 201,369,317.42

Including: Cash on hand 2,273.88 1,886.33

Cash in bank on demand for payment 208,781,592.72 201,367,431.09

2) Cash equivalents

3) Cash and cash equivalents at the end of the period 208,783,866.60 201,369,317.42

(3) Amount of endorsed commercial acceptance not involving cash receipts and payments

Items Current period cumulative Preceding period comparative

Amount of endorsed commercial 153,041,789.44 469,756,030.30 acceptance Including: Payment for goods 152,290,789.44 469,756,030.30 Payment for acquisition of long-term assets, such as 751,000.00 fixed-assets

(IV) Others 1. Assets with title or use right restrictions (1) Details

Items Closing carrying amount Reasons for restrictions

Deposit for acceptance and Cash and bank balances 52,477,961.78 deposit for L/G

Cash and bank balances 8,204.90 Bank freeze due to litigation

Accounts receivable 52,167,500.00 Pledged borrowings

Fixed assets 32,664,415.64 mortgaged borrowings

172 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Closing carrying amount Reasons for restrictions

Intangible assets 1,898,216.30 mortgaged borrowings

Total 139,216,298.62

(2) Other remarks We remind users of financial statements that, apart from the above assets with title or use right restrictions, in order to entrust the parent company to apply for loans from Bank of Beijing, Jiangning Sub-branch, the Company pledged its holding equities to the parent company, which include equity of Nanjing Putian Telege Intelligent Building Co., Ltd. 33.17 million yuan, equity of Nanjing South Telecommunications Co Ltd. 4.80 million yuan, equity of Nanjing Putian Changle Telecommunications Equipment Co., Ltd. 5.07 million yuan, equity of Nanjing Putian Wangzhi Electronic Co., Ltd. 60.43 million yuan, equity of Nanjing Putian Network Co., Ltd. 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

Items Closing balance in Exchange rate RMB equivalent foreign currencies Cash and bank balances 4,978,695.23

Including: USD 635,339.59 6.9762 4,432,256.05

EUR 522.27 7.8155 4,081.80

HKD 603,312.05 0.8958 540,446.93

GBP 208.79 9.1501 1,910.45

3. Government grants

(1) Government grants related to income and used to compensate future relevant costs, expenses or losses

Opening Closing Recognized in balance of Recognized in balance of related to Items Increase non-operating deferred other income deferred asset/income income income income Science and technology development plan and related to 1,000,000.00 1,000,000.00 science and technology income funding target subsidies

Compensation for related to 6,296,315.00 1,291,442.00 5,004,873.00 zombie enterprise income

Subtotal 7,296,315.00 1,291,442.00 6,004,873.00

(2) Government grants related to income and used to compensate incurred relevant costs, expenses or losses

Items Amounts Presented under Remarks

VAT refund 4,984,571.43 Other income Cai Shui [2011] No.100

173 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Amounts Presented under Remarks

Nanjing Yuhua Development Management Committee Finance Institute New Energy Vehicle Key Special fund 600,000.00 Other income Technology Breakthrough and Industrialization Project Award Fund

Rewards of R&D 368,000.00 Other income Nanjing Qinhuai District Science Rewards of technology 300,000.00 Other income and Technology Bureau development Technology Development Award

Stable subsidy 149,855.47 Other income

Supporting fund 100,000.00 Other income

Special fund for software 100,000.00 Other income

Vocational training subsidy 1,050.00 Other income A notice on Nanjing's science and Reward for High-tech Non-operating technology development plan and 1,354,900.00 Enterprises income science and technology funding targets, etc.

Subtotal 7,958,376.90 The amount of government subsidies included in the current profits and losses is 9,249,818.90 yuan.

VI. Changes in the consolidation scope None.

VII. Interest in other entities (1) Interest in significant subsidiaries 1. Composition of subsidiaries 1) Basis information

Main Holding Place of Business Acquisition Subsidiaries operating proportion (%) registration nature method place Direct Indirect Nanjing Putian Changle Nanjing Nanjing Telecommunications Manufacture 50.70 Set up City City Equipment Co., Ltd. Nanjing Putian Telege Nanjing Nanjing Manufacture 45.77 Set up Intelligent Building Ltd. City City Nanjing South Nanjing Nanjing Telecommunications Manufacture 96.99 1.38 Set up City City Company Limited not under Nanjing Mennekes Nanjing Nanjing Manufacture 75.00 Electrics Co., Ltd. City City the same

174 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Main Holding Place of Business Acquisition Subsidiaries operating proportion (%) registration nature method place Direct Indirect control

Nanjing Putian Nanjing Nanjing Manufacture 78.00 Set up Network Co., Ltd. City City not under Nanjing Putian Datang Nanjing Nanjing Information Electronic Manufacture 40.00 the same City City Co., Ltd. control Nanjing Putian Nanjing Nanjing Communication Manufacture 70.00 Set up City City Technology Co., Ltd. Nanjing Putian Nanjing Nanjing Wangzhi Electronic Manufacture 67.00 32.46 Set up City City Co., Ltd. Nanjing Bada Nanjing Nanjing Communication Manufacture 60.00 Set up City City Equipment Co., Ltd. Nanjing Putian Nanjing Nanjing Information Manufacture 99.00 0.98 Set up City City Technology Co., Ltd. Putian Communications Hong Hong Trading 90.00 Set up (Hong Kong) Co., Ltd. Kong Kong

2) Other remarks Remarks on inconsistency between holding proportion owned and voting rights proportion owned in subsidiaries a. The Company holds 45.767% 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 Building Ltd’s related activity. The Company has the ability to impact the amount of return and control over Nanjing Putian Telege Intelligent Building Ltd. b. The Company holds 40% equity of Nanjing Putian Datang Information Electronic Co., Ltd. The Company signed the agreement with Yan yaoming, a shareholder of Nanjing Putian Datang Information Electronic Co., Ltd., to exercise his 21% right to vote. The agreement is valid during the period of the existence of Nanjing Putian Datang Information Electronic Co., Ltd. The Company has 61% of the voting right during the existence period of Nanjing Putian Datang Information Electronic Co., Ltd.

2. Significant not wholly-owned subsidiaries 1) Details Dividend Closing balance Holding proportion Non-controlling declared to of non-controlling Subsidiaries of non-controlling shareholders’ non-controlling shareholders’ shareholders profit or loss shareholders profit or loss Nanjing Putian Telege 54.233% 12,656,330.83 10,846,600.00 68,269,418.12 Intelligent Building Ltd.

175 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

3. Main financial information of significant not wholly-owned subsidiaries 1) Assets and liabilities

Closing balance Subsidiaries Current Non-current Non-current Total assets Current liabilities Total liabilities assets assets liabilities Nanjing Putian

Telege Intelligent 272,941,946.26 35,035,874.45 307,977,820.71 182,096,128.53 182,096,128.53

Building Ltd. (Continued)

Opening balance Subsidiaries Current Non-current Non-current assets Total assets Current liabilities Total liabilities assets liabilities Nanjing Putian

Telege Intelligent 263,041,060.54 37,450,502.90 300,491,563.44 176,803,061.42 176,803,061.42

Building Ltd.

2) Profit or loss and cash flows

Current period cumulative Preceding period comparative Cash flows Cash flows Subsidiaries Total Total Operating from Operating from Net profit comprehensi Net profit comprehensi revenue operating revenue operating ve income ve income activities activities Nanjing Putian Telege 362,262,4 23,336,95 23,336,95 57,350,65 332,950,6 17,793,03 17,793,03 13,930,

Intelligent Building Ltd. 42.89 5.05 5.05 1.98 45.89 7.13 7.13 731.99

(II) Interest in joint venture or associates 1. Significant joint ventures or associates (1) Basic information

Main Holding proportion Accountin Joint ventures or Place of operating Business nature (%) associates registration g treatment place Direct Indirect

Potevio Hi-tech Nanjing Nanjing Industrial park Equity Industry Co., Ltd. City City venue rental 49.64 method management etc.

2. Main financial information of significant joint ventures Closing balance/current period Opening balance/preceding Items cumulative period comparative Potevio Hi-tech Industry Co., Ltd.

Current assets 157,263,692.10 161,743,478.51

Non-current assets 195,395,449.73 190,882,106.08

Total assets 352,659,141.83 352,625,584.59

Current liabilities 7,493,085.87 8,282,339.46

Non-current liabilities

176 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Closing balance/current period Opening balance/preceding Items cumulative period comparative Potevio Hi-tech Industry Co., Ltd.

Total liabilities 7,493,085.87 8,282,339.46

Non-controlling interest Equity attributable to owners of 345,166,055.96 344,343,245.13 parent company Proportionate share in net assets 171,340,315.89 170,931,898.92

Adjustments

Goodwill Unrealized profit in

internal trading Others Carrying amount of investments 171,340,315.89 170,931,898.92 in joint ventures Fair value of equity investments in joint ventures in association with quoted price Operating revenue 25,256,483.09 21,089,902.43

Net profit 822,810.83 983,452.15 Net profit of discontinued

operations Other comprehensive income

Total comprehensive income 822,810.83 983,452.15 Dividend from joint ventures 197,567.20 received in current period

3. Aggregated financial information of insignificant joint ventures and associates

Items Closing balance/current Opening balance/preceding period cumulative period comparative Joint ventures

Total carrying amount of investments 10,422,067.61 11,128,318.34 Proportionate shares in the following items Net profit -706,250.73 -2,167,774.50

Total comprehensive income -706,250.73 -2,167,774.50 Associates Total carrying amount of investments 1,183,862.97

Proportionate shares in the following items Net profit -1,406,238.47

Total comprehensive income -1,406,238.47

Dividend paid 450,000.00

177 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

VIII. 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 the Company’s financial performance. Based on such objectives, the Company’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.

1. Credit risk management practice (1) Evaluation method of credit risk At each reporting date, the Company assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When assessing whether the credit risk has increased significantly since initial recognition, the Company takes into account reasonable and supportable information, which is available without undue cost or effort, including qualitative and quantitative analysis based on historical data, external credit risk rating, and forward-looking information. The Company determines the changes in default risk of financial instruments during the estimated lifetime through comparison of the default risk at the balance sheet date and the initial recognition date, on an individual basis or a collective basis.

The Company considers the credit risk on a financial instrument has increased significantly when one or more of the following qualitative and quantitative standards are met: 1) Quantitative standard mainly relates to the scenario in which, on the balance sheet date, the probability of default in the remaining lifetime has risen by more than a certain percentage compared with the initial recognition;

2) Qualitative standard mainly relates to significant adverse changes in the debtor’s operation or financial position, present or expected changes in technology, market, economy or legal environment that will have significant adverse impact on the debtor’s repayment ability;

(2) Definition of default and credit-impaired asset A financial asset is credit-impaired when one or more following events have occurred: 1) significant financial difficulty of the debtor;

2) a breach of binding clause of contract;

3) it is very likely that the debtor will enter bankruptcy or other financial reorganization;

4) the creditor of the debtor, for economic or contractual reasons relating to the debtor’s financial difficulty, having granted to the debtor a concession(s) that the creditor would not otherwise consider.

2. Measurement of expected credit losses The key factors in the measurement of expected credit loss include the probability of default, loss rate of default, and exposure to default risk.

178 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

3. Please refer to notes details on the reconciliation table of opening balance and closing balance of provision for losses of financial instrument.

4. Exposure to credit risk and concentration of credit risk The Company’s credit risk is primarily attributable to cash and bank balances and receivables. In order to control such risks, the Company has taken the following measures: (1) Cash and bank balances The Company deposits its bank balances and other cash and 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/continuous 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 the Company only conducts business with credible and well-reputed third parties, normally, does not obtain collateral from customers. Normally, the Group does not obtain collateral from customers. The Company manages credit risk aggregated by customers. As of December 31, 2019, the Company has certain concentration of credit risk, and 17.05% (December 31, 2018: 16.85%) of the total accounts receivable was due from the five largest customers of the Company. The Company held no collateral or other credit enhancement on balance of receivables.

The maximum amount of exposure to credit risk of the Company is the carrying amount of each financial asset on the balance sheet.

(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, bank borrowings, etc. and adopts long and short financing methods 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.

Financial instruments classified based on remaining time period till maturity

Closing balance Items Contract amount Over 3 Carrying amount Within 1 year 1-3 years not yet discounted years Bank borrowings 451,915,948.50 465,473,426.95 465,473,426.95

Notes payable 81,784,929.91 81,784,929.91 81,784,929.91

Accounts payable 679,428,580.08 679,428,580.08 679,428,580.08

Other payable 48,707,865.43 48,707,865.43 48,707,865.43 Long-term 23,648,012.38 24,357,452.75 11,145,431.57 13,212,021.18 payable

Subtotal 1,285,485,336.30 1,299,752,255.12 1,286,540,233.94 13,212,021.18 (Continued)

179 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Opening balance Items Contract amount Over 3 Carrying amount Within 1 year 1-3 years not yet discounted years Bank borrowings 445,464,333.33 458,828,263.33 458,828,263.33

Notes payable 84,374,916.99 84,374,916.99 84,374,916.99

Accounts payable 743,028,953.62 743,028,953.62 743,028,953.62

Other payable 52,655,945.94 52,655,945.94 52,655,945.94

Subtotal 1,325,524,149.88 1,338,888,079.88 1,338,888,079.88

(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. The Company’s fair value interest risks arise from fixed-rate financial instruments, while the cash flow interest risks arise from floating interest financial instruments. The Company determines the proportion of fixed-rate financial instruments and floating interest rate financial instruments based on the market environment, and maintains a proper financial instruments portfolio through regular review and monitoring. The Company’s interest risk relates mainly to bank borrowings with floating interest rate.

2. Foreign currency risk Foreign currency risk is the risk arising from changes in fair value or future cash flows of financial instrument resulted from changes in exchange rate. The Company’s foreign currency risk relates mainly to foreign currency monetary assets and liabilities.

Please refer to notes to financial statements for details in foreign currency financial assets and liabilities at the end of the period.

IX. Fair value disclosure (I) Details of fair value of assets and liabilities at fair value at the balance sheet date Fair value as of the balance sheet date Items Level 1 Level 2 Level 3 Total Recurring fair value measurement

1.Receivable financing 3,821,550.77 3,821,550.77 2 Other equity instrument 741,953.00 741,953.00 investments Total assets at recurring fair value 4,563,503.77 4,563,503.77 measurement

(II) Valuation technique(s) and key input(s) for level 3 fair value at recurring and non-recurring fair measurement 1. For notes receivable, measured at par value. 2. For other equity instrument investments including Nanjing Yuhua Electroplating Factory and Hangzhou Honyar Electrical Co.,Ltd., due to no changes of operating environment and conditions and financial conditions of the invested enterprises, the Company measured at investment cost.

180 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

3. For other equity instrument investments including Beijing Likangpu Communication Equipment Co., Ltd., due to deterioration of operating environment and conditions and financial conditions of the invested enterprises, the Company measured at zero value.

X. Related party relationships and transactions (I) Related party relationships 1. Parent company

Registered Holding Voting right Business Parent company Place of registration capital proportion over proportion over nature (in million) the Company the Company No.2 Tudi 2 Road, China Potevio Zhongguan Village Information Information 1,903,05 53.49% 53.49% Economy Zone, Haidian Industry Inc industry District, Beijing The Company’s ultimate controlling party is China POTEVIO Corporation Limited..

2. Please refer to section VII of notes to financial statements for details on the Company’s subsidiaries.

3. Joint ventures and associates of the Company (1) Joint ventures and associates of the Company

Please refer to section VII of notes to financial statements for details on the Company’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

An affiliated company of the ultimate controlling Nanjing Honyar Electrical Technology Co., Ltd. party An affiliated company of the ultimate controlling Nanjing Honyar Electrical Co., Ltd. party Shanghai Potevio Post and Telecommunications An affiliated company of the ultimate controlling Technology Co., Ltd. party Beijing Potevio Taili Communications Technology Co., An affiliated company of the ultimate controlling Ltd. party Hangzhou Honyar Dongbei Photoelectric Technology Co., An affiliated company of the ultimate controlling Ltd. party An affiliated company of the ultimate controlling Shanghai Potevio Network Technology Co., Ltd. party An affiliated company of the ultimate controlling POTEVIO Telecommunications Co., Ltd. party

181 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Related parties Relationships with the Company

An affiliated company of the ultimate controlling Potevio Information Technology Co., Ltd. party Beijing Picom Telecommunications Equipment Co., Ltd. An affiliated company of the Company Minority shareholders of subsidiaries of the Mennekes Electric Industrial(China) Co., Ltd. company An affiliated company of the ultimate controlling Potevio Heping Technology Co., Ltd. party An affiliated company of the ultimate controlling Hangzhou Honyar Electrical Co.,Ltd. party An affiliated company of the ultimate controlling Potevio International Trading Co., Ltd. party An affiliated company of the ultimate controlling Chengdu Putian Telecommunications Cable Co.,Ltd. party An affiliated company of the ultimate controlling Eastern Communications Inc. party An affiliated company of the ultimate controlling Potevio Eastern Communications Co.,Ltd. party An affiliated company of the ultimate controlling Potevio Science & Technology Industrial Co., Ltd. party An affiliated company of the ultimate controlling Guangxi Potevio Post Communication Equipment Co., Ltd. party

(II) Related party transactions 1. Purchase and sale of goods, rendering and receiving services (1) Details 1) Purchase of goods and receiving of services

Related parties Content of transaction Current period Preceding period cumulative comparative Telecommunication SEI-Nanjing Potevio Optical Network Co., Ltd. 1,957,326.89 products

Telecommunication Nanjing Putian Telege Cable Co., Ltd. 488,838.48 products

Nanjing Potevio Honyar Electrical Technology Telecommunication 134,874.07 194,401.64 Co., Ltd. products

Telecommunication Potevio Information Technology Co., Ltd. 22,123.89 1,297,363.25 products

2) Sale of goods and rendering of services

Related parties Content of transaction Current period Preceding period cumulative comparative Potevio Information Technology Telecommunication 5,475,549.68 19,354,250.44 Co., Ltd. products China Potevio Information Industry Telecommunication 191,688,219.39 336,575,675.56 Inc products Beijing Potevio Taili Telecommunication Communications Technology Co., 31,310.35 11,992.64 products Ltd.

182 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Related parties Content of transaction Current period Preceding period cumulative comparative Hangzhou Honyar Electrical Telecommunication 241.36 Co.,Ltd. products Potevio International Trading Co., Telecommunication 27,349.06 Ltd. products Telecommunication Nanjing Honyar Electrical Co., Ltd. 10,017.24 products Telecommunication Chengdu Putian Cable Co., Ltd. 61,500.00 products Telecommunication Eastern Communications Co., Ltd. 14,641.59 178,100.00 products Putian Eastern Communication Telecommunication 16,300.00 1,238,450.81 Group Co., Ltd. products Putian Science & Technology Telecommunication 602,734.41 1,371,335.80 Industrial Co., Ltd. products Telecommunication Putian Communication Co., Ltd. 4,278,714.91 1,524,198.32 products Tianjin Putian Innovation and Telecommunication 130,639.66 Entrepreneur Technology Co., Ltd. products

2. Related party leases (1) Details 1) The Company as the lessor

Lease income for Lease income for the Lessees Types of asset leased current period preceding period SEI-Nanjing Potevio Optical Land and buildings 655,524.56 Network Co., Ltd.

2) The Company as the lessee

Lease expenses for Lease expenses for the Lessors Types of asset leased current period preceding period Potevio Hi-tech Industry Co., Buildings and structures 2,170,165.03 3,776,107.93 Ltd.

(2) Other remarks

3. Related party guarantees (1) Details

1) The Company and its subsidiaries as guaranteed parties

Whether the Amount Commence-m Guarantors Maturity date guarantee is guaranteed ent date mature China Potevio Information Industry Inc 40,000,000.00 2018/10/10 2019/7/9 YES

China Potevio Information Industry Inc 30,000,000.00 2018/3/9 2019/3/8 YES

China Potevio Information Industry Inc 30,000,000.00 2019/6/11 2020/6/11 No

China Potevio Information Industry Inc 30,000,000.00 2019/8/14 2020/5/15 No

183 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

4. Related party entrusted loan and interest expenditure

Entrusted loans and interest expenses Current period cumulative Preceding period comparative with parent company

Entrusted loans 262,000,000.00 207,000,000.00

Entrusted interest expenses 13,560,288.33 9,459,773.88

5. Key management’s emoluments

Items Current period cumulative Preceding period comparative

Key management’s emoluments 1,796,209.00 2,310,164.00

(III) Balance due to or from related parties 1. Balance due from related parties

Closing balance Opening balance Items Related parties Book balance Provision for Book balance Provision for bad debts bad debts China Potevio Notes Information Industry 6,120,178.00 receivable Inc.

Subtotal 6,120,178.00

China Potevio Accounts Information Industry 12,500,971.72 2,537,197.33 14,861,482.73 709,020.78 receivable Inc.

Potevio Information 14,018,807.64 525,759.59 12,941,118.68 Technology Co., Ltd.

Shanghai Potevio

Network Technology 536,319.70 110,415.99 536,319.70 84,960.00 Co., Ltd.

Shanghai Potevio Post

and Technology Co., 8,755,534.00 8,755,534.00 8,755,534.00 8,755,534.00 Ltd.

Potevio Heping 333,706.00 Technology Co., Ltd.

Eastern 20,659.60 371.18 206,596.00 Communications Inc.

SEI-Nanjing Potevio

Optical Network Co., 199,000.00 Ltd.

Potevio Eastern 127,974.15 3,182.80 941,969.60

184 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Closing balance Opening balance Items Related parties Book balance Provision for Book balance Provision for bad debts bad debts Communications Co.,Ltd.

Potevio

Telecommunications 5,193,281.30 84,350.07 1,768,070.00 Co., Ltd.

Tianjin Potevio Innovation and 4,546.26 227.31 4,546.26 Entrepreneur Technology Co., Ltd.

Potevio Company 629,899.32 311,049.45 629,899.32 186,044.64 Limited.

Mennekes Electric

Industrial(China) Co., 12,709.44 Ltd.

Subtotal 41,787,993.69 12,328,087.72 41,190,951.73 9,735,559.42 Advances Potevio Heping 436,294.00 436,294.00 paid Technology Co., Ltd.

Subtotal 436,294.00 436,294.00 China Potevio Other Information Industry 1,958,000.00 496,900.00 3,839,000.00 400,000.00 receivables Inc.

Potevio Hi-tech 1,209,297.25 Industry Co., Ltd.

Potevio Eastern

Communications 30,000.00 1,500.00 30,000.00 Co.,Ltd.

Potevio Information

Engineering Design 1,300.00 Service Co., Ltd.

Potevio Information 1,203,052.00 60,152.60 1,203,052.00 Technology Co., Ltd.

Putian New Energy 1,150.06 57.50 (Shenzhen) Co., Ltd.

Subtotal 3,192,202.06 558,610.10 6,282,649.25 400,000.00

2. Balance due to related parties

185 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Closing Opening Items Related parties balance balance

Accounts SEI-Nanjing Potevio Optical Network Co., Ltd. 20,530,725.66 20,819,725.66 payable

China Potevio Information Industry Inc. 19,641,228.50 19,641,228.50

Nanjing Potevio Honyar Electrical Technology Co., Ltd. 242,595.99 242,595.99

Shanghai Potevio Network Technology Co., Ltd. 11,685.00 11,685.00

Mennekes Electric Industrial(China) Co., Ltd. 5,508,839.24 5,433,476.69

Potevio Information Technology Co., Ltd. 69,950.00

Potevio Hi-tech Industry Co., Ltd. 25,000.00

Nanjing Potevio Honyar Electrical Technology Co., Ltd. 136,848.85 86,243.30

Subtotal 46,096,923.24 46,304,905.14 Advances China Potevio Information Industry Inc. 2,708,112.86 223,246,886.73 received

Subtotal 2,708,112.86 223,246,886.73 Other SEI-Nanjing Potevio Optical Network Co., Ltd. 83,000.00 payables

Potevio Hi-tech Industry Co., Ltd. 3,535,518.07

Potevio Information Technology Co., Ltd. 400,000.00

Potevio Telecommunications Co., Ltd. 200,000.00 200,000.00

China Potevio Information Industry Inc. 475,310.00

Potevio Company Limited. 14,580,000.00 14,580,000.00

Subtotal 19,273,828.07 14,780,000.00

XI. Commitments and contingencies (I) Significant commitments None. (II) Contingencies None.

XII. Events after the balance sheet date In 2018, the Company signed a sales contract with Beijing UniStrong Science & Technology Co., Ltd. with a total amount of 52,167,500.00 yuan. The Company took a civil lawsuit at January 14, 2020 against Beijing UniStrong Science & Technology Co., Ltd. due to it had financial difficulties and did not pay in due. Then reached a settlement agreement with it on January 16, 2020. As of April 1, 2020, the Company has received the total amount of 52,167,500.00 yuan and release of creditor's rights.

XIII. Other significant events (I) Segment information

186 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

1. Identification basis for reportable segments Reportable segments are identified based on operating segments which are determined based on the structure of the Company’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, 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 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

Video Special network Generic cable Electrical Inter-segment Items conferencing communication Wiring products Total products products offsetting products products Revenue from 365,004,501.66 359,232,741.86 125,526,053.59 186,594,827.60 316,048,396.10 -35,711,960.47 1,316,694,560.34 main operations Cost of main 287,063,662.67 267,592,840.27 100,123,254.01 183,479,607.25 266,872,934.55 -34,634,678.90 1,070,497,619.85 operations

Total assets 310,221,665.29 307,977,820.71 204,517,276.03 39,387,052.48 1,202,197,470.69 -412,295,765.76 1,652,005,519.44

Total liabilities 201,957,213.40 182,096,128.53 119,685,908.42 1,051,969.45 1,136,947,758.59 -289,833,600.74 1,351,905,377.65

XIV. 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

Categories Book balance Provision for bad debts Carrying amount Amount % to total Amount Provision proportion (%) Receivables with provision 31,829,378.66 3.86 31,411,610.66 98.69 417,768.00 made on an individual basis Receivables with provision 475,258,345.40 96.14 59,678,795.33 12.56 415,579,550.07 made on a collective basis Total 507,087,724.06 100.00 91,090,405.99 17.96 415,997,318.07 (Continued)

Opening balance

Categories Book balance Provision for bad debts Carrying amount Amount % to total Amount Provision proportion (%) Receivables with provision made on an individual basis Receivables with provision 618,514,189.40 100.00 40,551,040.25 6.56 577,963,149.15 made on a collective basis Total 618,514,189.40 100.00 40,551,040.25 6.56 577,963,149.15

187 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

2) Accounts receivable with provision made on an individual basis

Debtors Book balance Provision for bad Provision Reasons for provision debts proportion (%) made Mr. Xu 17,591,683.74 17,591,683.74 100.00 Unable to collect China Tower 14,237,694.92 13,819,926.92 97.07 Unable to collect Corporation Ltd.

Subtotal 31,829,378.66 31,411,610.66 98.69

3) Accounts receivable with provision for bad debts made on an age basis

Closing balance Items Book balance Provision for bad debts Provision proportion (%)

Within 1 year 143,330,702.41 1,433,307.02 1.00

1-2 years 232,857,468.08 11,642,873.40 5.00

2-3 years 27,576,499.95 2,757,650.00 10.00

3-4 years 15,371,713.22 4,611,513.97 30.00

4-5 years 5,266,896.96 2,633,448.48 50.00

Over 5 years 36,600,002.46 36,600,002.46 100.00

Subtotal 461,003,283.08 59,678,795.33 12.95% (2) Changes in provision for bad debts Increase Decrease Items Opening Recov Othe Rev Othe Closing balance Accrual Written balance ery rs ersal off rs Receivables with provision 31,411,610.66 31,411,610.66 made on an individual basis Receivables with provision 40,551,040.25 19,127,755.08 59,678,795.33 made on a collective basis Subtotal 40,551,040.25 50,539,365.74 91,090,405.99 (3) Details of the top 5 debtors with largest balances

Proportion to the total Provision for bad Debtors Book balance balance of accounts debts receivable (%) Beijing UniStrong Science & Technology 52,167,500.00 10.29 2,608,375.00 Co., Ltd.

Beijing Zhongrui Haotian Information 25,499,700.00 5.03 1,274,985.00 Technology Co., Ltd.

Shenzhen Zhongchuang Electric 21,513,968.79 4.24 1,075,698.44 Measurement Technology Co., Ltd.

Dongpo Xi Laos Co., Ltd. 19,708,086.54 3.89 985,404.33

Mr. Xu 17,591,683.74 3.47 17,591,683.74

188 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Proportion to the total Provision for bad Debtors Book balance balance of accounts debts receivable (%) Subtotal 136,480,939.07 26.92 23,536,146.51

2. Other receivables (1) Details 1) Details on categories

Closing balance

Categories Book balance Provision for bad debts Carrying Amount % to total Amount Provision amount proportion (%) Receivables with provision made 33,010,009.04 51.27 33,010,009.04 100.00 on an individual basis Including: Interest receivable

Dividend receivable

Other receivables 33,010,009.04 51.27 33,010,009.04 100.00 Receivables with provision 31,371,561.56 48.73 4,609,744.49 14.69 26,761,817.07 made on a collective basis Including: Interest receivable

Dividend receivable

Other receivables 31,371,561.56 48.73 4,609,744.49 14.69 26,761,817.07

Total 64,381,570.60 100.00 37,619,753.53 58.43 26,761,817.07 (Continued)

Opening balance

Categories Book balance Provision for bad debts Carrying Amount % to total Amount Provision amount proportion (%) Receivables with provision made 33,010,009.04 48.76 33,010,009.04 on an individual basis Including: Interest receivable

Dividend receivable

Other receivables 33,010,009.04 48.76 33,010,009.04 Receivables with provision 34,683,915.75 51.24 5,476,710.59 15.79 29,207,205.16 made on a collective basis Including: Interest receivable

Dividend receivable 400,000.00 0.59 400,000.00

Other receivables 34,283,915.75 50.65 5,476,710.59 15.97 28,807,205.16

Total 67,693,924.79 100.00 38,486,719.63 56.85 29,207,205.16

2) Other receivables with provision made on an individual basis

189 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Provision Reasons for Provision for bad Debtors Book balance proportion provision debts (%) made Beijing Likangpu Communication Unable to 28,912,122.71 28,912,122.71 100.00 Equipment Co., Ltd. collect

Putian Communications (Hong Unable to 4,097,886.33 4,097,886.33 100.00 Kong) Co., Ltd. collect

Subtotal 33,010,009.04 33,010,009.04 100.00

3) Other receivables with provision made on a collective basis

Closing balance Portfolios Provision Book balance Provision for bad debts proportion (%) Portfolio-Financing margin 5,578,947.37

Portfolio-Other 25,792,614.19 4,609,744.49 17.87

Subtotal 31,371,561.56 4,609,744.49 14.69 (2) Ages

Items Closing carrying amount

Within 1 year 16,695,643.58

1-2 years 9,027,575.59

2-3 years 1,742,931.56

3-4 years 1,528,457.97

4-5 years 563,113.00

Over 5 years 34,823,848.90

Subtotal 64,381,570.60 (3) Changes in provision for bad debts Phase I Phase II Phase III Items 12‑ month Lifetime expected Lifetime expected Total expected credit losses (credit credit losses credit losses not impaired) (credit impaired) Opening balance 1,152,310.25 37,334,409.38 38,486,719.63 Opening balance in

current period --Transferred to phase

II --Transferred to phase -76,422.90 76,422.90 III

--Reversed to phase II

--Reversed to phase I Provision made in -371,553.70 -495,412.40 -866,966.10 current period

190 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Phase I Phase II Phase III Items 12‑ month Lifetime expected Lifetime expected Total expected credit losses (credit credit losses credit losses not impaired) (credit impaired) Provision recovered in

current period Provision reversed in

current period Provision written-off

in current period Other changes

Closing balance 704,333.65 36,915,419.88 37,619,753.53 (4) Other receivables categorized by nature

Nature of receivables Closing balance Opening balance Temporary advance payment 47,366,428.11 46,230,393.22 receivable

Deposit as security 15,794,589.88 18,558,706.28

Travel reserve fund 630,902.93 1,348,181.93

Others 589,649.68 1,156,643.36

Total 64,381,570.60 67,293,924.79

(5) Details of the top 5 debtors with largest balances

Proportion to the Nature of Provision for bad Debtors Book balance Ages total balance of other receivables debts receivables (%) Beijing Likangpu Over 5 Communication Intercourse 28,912,122.71 years 44.91 28,912,122.71 Equipment Co., Ltd.

Nanjing Putian 0-3 Communication Intercourse 6,664,010.05 years 10.35 Technology Co., Ltd.

Putian Over 5 Telecommunications Intercourse 4,097,886.33 years 6.36 4,097,886.33 (H.K.) Co., Ltd.

Ping An International 1-2 Deposit as Financial Leasing Co., 4,000,000.00 years 6.21 security Ltd.

China Potevio Deposit as 1-5 1,958,000.00 3.04 496,900.00 Information Industry Inc. security years

Subtotal 45,632,019.09 70.87 33,506,909.04

3. Long-term equity investments (1) Categories

191 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Closing balance Opening balance Items Provision for Provision for Book balance Carrying amount Book balance Carrying amount impairment impairment Investments in subsidiaries 153,218,270.64 1,910,520.00 151,307,750.64 153,218,270.64 1,910,520.00 151,307,750.64 Investments in associates and 181,762,383.50 181,762,383.50 182,060,217.26 182,060,217.26 joint ventures Total 334,980,654.14 1,910,520.00 333,070,134.14 335,278,487.90 1,910,520.00 333,367,967.90

(2) Investments in subsidiaries

Provision for Closing balance impairment Investees Opening balance Increase Decrease Closing balance of provision for made in current impairment period Nanjing Mennekes Electrics Co., 57,831,011.71 57,831,011.71 Ltd. Nanjing Bada Communication 5,610,000.00 5,610,000.00 Equipment Co., Ltd. Nanjing Putian Changle Telecommunications Equipment Co., 2,610,457.00 2,610,457.00 Ltd. Nanjing Putian Telecommunication 1,294,510.00 1,294,510.00 Technology Co., Ltd. Nanjing Putian Information 13,860,000.00 13,860,000.00 Technology Co., Ltd.* Nanjing Putian Telege Intelligent 3,320,003.45 3,320,003.45 Building Ltd. Putian Telecommunications (H.K.) 1,910,520.00 1,910,520.00 1,910,520.00 Co., Ltd. Nanjing Putian Network Co., Ltd. 7,741,140.41 7,741,140.41

Nanjing Putian Wangzhi Electronic 20,428,683.00 20,428,683.00 Co., Ltd. Nanjing South Telecommunications 33,175,148.00 33,175,148.00 Company Limited Nanjing Putian Datang Information 5,436,797.07 5,436,797.07 Electronic Co., Ltd. Subtotal 173,787,270.64 153,218,270.64 1,910,520.00

(3) Investments in associates and joint ventures

Increase/Decrease

Adjustment in Investees Opening balance Investment income Investments Investments other recognized under increased decreased comprehensive equity method income Joint ventures

SEI-Nanjing Potevio

Optical Network Co., 11,128,318.34 -706,250.73 Ltd.

Subtotal 11,128,318.34 -706,250.73

Associates

192 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Increase/Decrease

Adjustment in Investees Opening balance Investment income Investments Investments other recognized under increased decreased comprehensive equity method income Potevio Hi-tech 170,931,898.92 408,416.97 Industry Co., Ltd.

Subtotal 170,931,898.92 408,416.97

Total 182,060,217.26 -297,833.76 (Continued)

Increase/Decrease Closing balance of Investees Cash Closing balance provision for Changes in dividend/profit Provision for Others other equity declared for impairment impairment distribution Joint ventures

SEI-Nanjing Potevio

Optical Network Co., 10,422,067.61 Ltd.

Subtotal 10,422,067.61

Associates Potevio Hi-tech 171,340,315.89 Industry Co., Ltd.

Subtotal 171,340,315.89

Total 181,762,383.50

(II) Notes to items of the parent company income statement 1. Operating revenue/cost

Current period cumulative Preceding period comparative Items Revenue Cost Revenue Cost

Main operations 421,674,918.84 386,876,567.34 948,501,070.96 838,026,882.71

Other operations 12,229,061.04 10,560,944.21 57,117,883.81 41,395,696.37

Total 433,903,979.88 397,437,511.55 1,005,618,954.77 879,422,579.08

2. Investment income

Items Current period cumulative Preceding period comparative Investment income from long-term equity investments under cost 9,153,400.00 24,376,700.00 method Investment income from long-term -297,833.76 -1,679,620.33 equity investments under equity

193 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Current period cumulative Preceding period comparative method Total 8,855,566.24 22,697,079.67

XV. Other supplementary information (I) Non-recurring profit or loss 1. Schedule of non-recurring profit or loss of current period Items Amount Remarks Gains on disposal of non-current assets, including 119,033.08 written-off of provision for impairment Government grant included in profit or loss (excluding those closely related to operating activities, or regular 4,265,247.47 government grants) Other non-operating revenue or expenditures 362,546.35 Other profit or loss satisfying the definition of -185,497.35 non-recurring profit or loss Subtotal 4,561,329.55

Less: enterprise income tax affected -154,871.99

Non-controlling interest affected (after tax) -1,590,040.84 Net non-recurring profit or loss attributable to shareholders 2,816,416.72 of the parent company

(II) RONA and EPS 1. Details EPS (yuan/share) Profit of the reporting period Weighted average RONA (%) Basic EPS Diluted EPS Net profit attributable to -66.55 -0.7865 -0.7865 shareholders of ordinary shares Net profit attributable to shareholders of ordinary shares -67.66 -0.7996 -0.7996 after deducting non-recurring profit or loss

2. Calculation process of weighted average RONA

Items Symbols Current period cumulative Net profit attributable to shareholders of ordinary shares A -169,088,516.69

Non-recurring profit or loss B 2,816,416.72 Net profit attributable to shareholders of ordinary shares after C=A-B -171,904,933.41 deducting non-recurring profit or loss Opening balance of net assets attributable to shareholders of D 338,605,249.25 ordinary shares Net assets attributable to shareholders of ordinary shares increased due to offering of new shares or conversion of E debts into shares

194 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Items Symbols Current period cumulative Number of months counting from the next month when the F net assets were increased to the end of the reporting period Net assets attributable to shareholders of ordinary shares decreased due to share repurchase or cash dividends G appropriation Number of months counting from the next month when the H net assets were decreased to the end of the reporting period Retranslation I 26,373.73

Others Number of months counting from the next month when other net assets were increased J 6.00 or decreased to the end of the reporting period Number of months in the reporting period K 12.00

Weighted average net assets L= D+A×1/2+ 254,074,177.77 E×F/K-G×H/K±I ×J/K Weighted average RONA M=A/L -66.55

Weighted average RONA after deducting non-recurring profit N=C/L -67.66 or loss

3. Calculation process of basic EPS and diluted EPS (1) Calculation process of basic EPS

Items Symbols Current period cumulative Net profit attributable to shareholders of ordinary shares A -169,088,516.69

Non-recurring profit or loss B 2,816,416.72 Net profit attributable to shareholders of ordinary shares after C=A-B -171,904,933.41 deducting non-recurring profit or loss Opening balance of total shares D 215,000,000.00

Number of shares increased due to conversion of reserve to E share capital or share dividend appropriation Number of shares increased due to offering of new shares or F conversion of debts into shares Number of months counting from the next month when the G share was increased to the end of the reporting period Number of shares decreased due to share repurchase H

Number of months counting from the next month when the I share was decreased to the end of the reporting period Number of shares decreased in the reporting period J

Number of months in the reporting period K 12.00 L=D+E+F×G/K-H×I/ Weighted average of outstanding ordinary shares 215,000,000.00 K-J Basic EPS M=A/L -0.7865

Basic EPS after deducting non-recurring profit or loss N=C/L -0.7996 Calculation process of diluted EPS is the same as calculation process of basic EPS.

195 Nanjing Putian Telecommunications Co., Ltd. 2019 Annual Report

Section XIII. Documents Available for Reference

(i) Accounting statement bearing signature and seal of the legal representative, person in charge of accounting works and person in charge of accounting institution of the Company (ii) Original auditing report bearing seal of CPAs and signature and seal of CPA.

(iii) Text of notice and original draft that public on website appointed by CSRC within report period.

Board of Directors of Nanjing Putian Telecommunications Co., Ltd. 28 April 2020

196