HCL Technologie (Shanghai) Limited. Audited Financial Statements. 31 December 2015

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1 HCL Technologie (Shanghai) Limited Audited Financial Statements 31 December 2015 Important Notice The attached financial statements have been translated from the statutory financial statements prepared in accordance with the Accounting Standards for Business Enterprises-Basic Standard. In the event of any differences in interpreting the financial statements, the Chinese version shall prevail.

2 Index Pages AUDITOR S REPORT 1 2 AUDITED FINANCIAL STATEMENTS Balance Sheet 3-4 Income Statement 5 Statement of Cash Flows 6 Statement of Changes in Equity 7 Notes to Financial Statements 8 21

3 Auditor s report Ernst & Young Hua Ming (2016) Shen Zi No _B01 To the board of directors of HCL Technologies (Shanghai) Limited We have audited the accompanying financial statements of HCL Technologies (Shanghai) Limited ( The company ), which comprise the balance sheet as at 31 December 2015, and the income statement, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements. This responsibility includes: (1) preparing and fairly presenting the financial statements in accordance with Accounting System for Business Enterprises; (2) designing, implementing and maintaining internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Chinese Standards on Auditing. Those standards require that we comply with Code of Ethics for Chinese Certified Public Accountants and plan and perform the audit to obtain a reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control relevant to the entity s preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting polices used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1 This branch has been authorized to practice by Ernst & Young Hua Ming LLP

4 Auditor s report (continued) Ernst & Young Hua Ming (2016) Shen Zi No _B01 Opinion In our opinion, the financial statements present fairly, in all material aspects, the financial position of HCL Technologies (Shanghai) Limited as at 31 December 2015 and its financial performance and cash flows for the year then ended in accordance with Accounting System for Business Enterprises. Zhang Fei Ernst & Young Hua Ming LLP Shanghai Branch Chinese Certified Public Accountant: Yuan Xiao Hui Chinese Certified Public Accountant: Shanghai, the People s Republic of China 31 May This branch has been authorized to practice by Ernst & Young Hua Ming LLP

5 BALANCE SHEET 31 December 2015 Notes ASSETS Current assets: Cash 3 49,738, ,564, Accounts receivable ,195, ,009, Other receivables 6 28,425, , Prepaid expenses 219, , Total current assets 117,579, ,476, Non-current assets: Fixed assets cost 7 4,668, ,366, Less: Accumulated depreciation 7 3,021, ,997, Fixed assets, net 7 1,647, ,368, Long-term prepayments 8-44, Total non-current assets 1,647, ,413, TOTAL ASSETS 119,226, ,889, The notes on pages 8 to 21 form an integral part of these financial statements. 3

7 INCOME STATEMENT Notes Revenue from principal operations ,361, ,996, Less: Taxes and surcharges (170,645.71) 233, Cost of sales 90,965, ,590, Operating expenses 1,444, ,448, General and administrative expenses 9,993, ,997, Financial expenses 13 (2,185,361.14) (143,281.01) Operating profit 11,313, ,869, Add: Non-operating income 23, , Less: Non-operating expenses 168, , Total profit 11,168, ,892, Less: Income tax 1,243, ,745, Net profit 9,924, ,147, The notes on pages 8 to 21 form an integral part of these financial statements. 5

8 STATEMENT OF CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES: Supplementary Notes Cash received from sale of goods 103,748, ,627, Cash received from tax refund 23, Cash received relating to other operating activities 56, , Sub-total of cash inflows 103,827, ,661, Cash paid for goods 7,807, ,971, Cash paid to and on behalf of employees 57,468, ,783, Cash paid for all types of taxes 6,482, ,088, Cash paid relating to other operating activities 10,115, ,666, Sub-total of cash outflows 81,874, ,510, Net cash flows from operating activities (1) 21,953, ,150, CASH FLOWS FROM INVESTING ACTIVITIES: Cash received from returns of investments 2,018, Net cash received from disposal of fixed assets, intangible assets and other long-term assets 665, , Sub-total of cash inflows 2,684, , Cash paid for acquisition of fixed assets, intangible assets and other long-term assets 1,872, , Cash payments for investments 27,000, Sub-total of cash outflows 28,872, , Net cash flows from investing activities (26,187,752.69) (365,565.97) EFFECT OF CHANGES IN EXCHANGE RATE ON CASH 408, (197,330.60) NET INCREASE IN CASH AND CASH EQUIVALENTS (3,825,792.08) 39,588, The notes on pages 8 to 21 form an integral part of these financial statements. 5

9 STATEMENT OF CASH FLOWS (continued) Supplementary Notes Supplementary Notes 1. Reconciliation of net profit to cash flows from operating activities Net profit 9,924, ,147, Add: Provision for impairment of assets 163, , Depreciation of fixed assets 788, , Amortisation of long-term prepayments 44, , Increase / (Decrease) in prepaid expenses 39, (14,843.55) Increase / (Decrease) in accrued expenses (3,818,967.29) 2,300, Losses from disposal of other long-term assets 140, Financial expenses (2,427,237.58) 197, Decrease / (increase) in operating receivables (13,131,549.96) 2,073, Increase in operating payables 30,230, ,101, Net cash flows from operating Activities 21,953, ,150, Net (decrease) / increase in cash and cash equivalents Cash at end of year 49,738, ,564, Less: Cash at beginning of year 53,564, ,976, Net increase in cash and cash equivalents (3,825,792.07) 39,588, The notes on pages 8 to 21 form an integral part of these financial statements. 6

10 STATEMENT OF CHANGES IN EQUITY PAID-IN CAPITAL: At beginning and end of year 15,316, ,316, SURPLUS RESERVE: At beginning of year - - Increase in current year 1,987, At end of year 1,987, RETAINED EARNINGS: At beginning of year 9,952, ,804, Appropriation to surplus reserve (1,987,736.23) Net profit for the year 9,924, ,147, At end of year 17,889, ,952, The notes on pages 8 to 21 form an integral part of these financial statements. 7

11 NOTES TO FINANCIAL STATEMENTS 1. Corporate information HCL Technologies (Shanghai) Limited ( the Company ) is a limited company solely established by HCL TECHNOLOGIES LIMITED on 18 July 2007 upon approval by People s Government of Shanghai. The registrated capital of the Company is USD 2,200,000. The aforesaid registrated capital has been verified by Shanghai Linxin Accountants Limited with capital verification report Linkuai Fa No.(2009) 575 on 6 May It obtained business license numbered (Pudong). Its legal representative is ANIL KUMAR CHANANA and the operation period is 20 years. Its legal registration address is 23500, 14 Building, 498 Guoshoujing Road, SPSP, Pudong New Area, Shanghai. The Company is primarily engaged in the following businesses: Computer software development;design, production, sale of products, debugging and maintenance of system integration; relevant technical consulting, technical service; business consulting, enterprise management consulting (business which is involving administrative licensing, will operate with operating permits) 2. Significant accounting policies and estimates The financial statements have been prepared based on the following accounting policies and estimates, which are in accordance with the Accounting Standards for Business Enterprises, relevant implementation guidance and interpretations. Accounting system The Company adopts the Accounting System for Business Enterprises. Accounting year The accounting year of the Company is from 1 January to 31 December. Reporting currency The Company s reporting and presentation currency is the Renminbi ( Rmb ).Unless otherwise stated, the unit of the currency is RMB Yuan. 8

12 2. Significant accounting policies and estimates (continued) Basis of accounting and measurement basis Unless otherwise stated, the Company s accounts have been prepared on an accrual basis using the historical cost as the basis of measurement. Assets are recorded at cost when they are acquired. Subsequently, if the assets are impaired, impairment provisions are made in accordance with the Accounting Standards for Business Enterprises. Foreign currency transactions The foreign currency transactions are recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate released from Bank of China at the trasanction dates. At the balance sheet date, foreign currency monetary items are translated using the spot exchange rate at the balance sheet date. All the settlement differences and translated differences of monetary items are recognized in profit and loss for the reporting period, except for those generated from foreign currency bank loans specifically for purchase or construction of capitalized assets. Non-monetary foreign currency items measured at historical cost are translated at the spot exchange rate prevailing on the transaction date, and the amount denominated in the functional currency should not be changed. Cash equivalents Cash equivalents represent short-term, highly liquid investments which are readily convertible into known amounts of cash, and which are subject to an insignificant risk of changes in value. Bad debts Accounts receivable meeting the following criteria are recognised as bad debts: the debtor is deceased or has been declared bankrupt and the debts remain uncollectible after considering the assets of the bankrupt or the estate of the deceased debtor; debts that are long overdue where there is also evidence indicating that the debts are uncollectible or the possibility of collection is remote. 9

13 2. Significant accounting policies and estimates (continued) Bad debts (continued) Specific provisions are made to account for bad debt losses on accounts receivable and other receivables. A specific provision refers to an amount that is provided based on management s assessment of the recoverability of an individual receivable. Fixed assets Fixed assets are tangible assets with high unit costs held by the Company for use in production of goods, supply of services, rental or for administrative purposes, and are expected to be used for more than one year. Fixed assets are recorded at cost when acquired. Fixed assets depreciation is calculated using the straight-line method. The respective estimated useful lives and estimated residual values of fixed assets are as follows: Estimated Estimated residual Annual Category useful life value depreciation rate Office equipment 5years 10% 18% Electronic equipment 3-5years 0-10% 18%-33% At the end of the accounting period, fixed assets are carried at the lower of book value and recoverable amount. A provision for impairment of fixed assets is made for any difference between the book value and the lower recoverable amount. The recoverable amount of the fixed assets is the greater of the net selling price and the value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Gains or losses arising from the disposal, damage, obsolescence or physical counting of fixed assets are accounted for as non-operating expenses or income in the current year. Long-term prepayments Long-term prepayments are amortised over the periods from which the Company derives benefits, on a straight-line basis, as follows: Item Decorating expenses Beneficial period 3 years 10

14 2. Significant accounting policies and estimates (continued) Revenue recognition Revenue from the sale of goods is recognised when: the significant risks and rewards in relation to ownership of the goods have been transferred to the buyer; the Company maintains neither continuing managerial involvement nor effective control over the goods sold; it is probable that the economic benefits associated with the transaction will flow to the Company; and the relevant amounts of revenue and costs can be measured reliably. Rendering of services are recognised when the results of service providing transactions can be estimated reliably and the transactions initiate and terminate within one fiscal year. For inter-temporal services, rendering of services are recognised by percentage of completion. Operating leases Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Rentals applicable to such operating leases are charged to the income statement on a straight-line basis over the lease terms. Income tax Income tax is accounted for using the tax payable method, whereby the income tax provision is calculated based on the applicable income tax rate and the accounting results for the year after adjusting for items which are non-assessable or disallowed in accordance with the relevant tax laws. Related party In financial and operating decisions, if a party has the power to control, jointly control or exercise significant influence over another party, they are regarded as related parties. Two or more parties are also regarde as related parties if they are subject to control, joint control or siginificant influence from the same party. 3. Cash Cash in bank 49,738, ,564,

15 4. Accounts receivable Accounts receivable 39,918, ,569, Less: Bad debt provision 722, , ,195, ,009, The ageing analysis is as below: Balance % Bad debt Balance % Bad debt Provision provisoin Within 1 year 39,918, , ,569, , yeras ,918, , ,569, , Bad debt provision Opening Closing balance Additions Reversals balance Accounts receivable 559, , , , Other receivables Other receivables 28,425, ,

16 7. Fixed assets Electronic Equipments Office Equipments Total Cost Opening Balance 4,306, , ,366, Additions 1,829, , ,872, Disposals 1,560, , ,569, Closing balance 4,575, , ,668, Accumulated depreciation Opening balance 2,938, , ,997, Charge for the year 782, , , Written back On disposal 755, , , Closing blance 2,964, , ,021, Net book value As of 31 Dec ,610, , ,647, As of 31 Dec ,367, ,368, As at 31 December, Management of the Company was in view of that no fixed assets impairment should be provided. 8. Long-term prepayments Decorating expenses Opening balance 44, , Additions - - Amortisation (44,518.74) (38,159.04) Closing balance - 44, Taxes payable Value added tax 850, , Income tax 958, ,392, ,808, ,981,

17 9. Taxes payable (continued) The major categories of taxes applicable to the Company and the respective tax rates are as follows: (1) Value added tax ( VAT ) - In accordance with the relevant tax laws in the PRC, the VAT rate for sales is 6%. VAT is levied at 6% on the invoiced value of sales and is payable by the purchaser. The Company is required to remit the VAT it collects to the tax authority, but may deduct the VAT it has paid on eligible purchases. (2) Income tax The company is applicable for statutory tax rate of 25%. (3) Withholding of individual - In accordance with the relevant tax laws in income tax the PRC, the Company is required to withhold individual income tax on salaries paid to its employees. (4) Withholding of - In accordance with the relevant tax laws in corporate taxes the PRC, the Company is required to withhold and pay corporate income tax and business tax in respect of the interest and technology transfer fees payable to foreign investors and overseas related companies. 10. Paid-in capital Registered: RMB % RMB % HCL Technologies Ltd. 15,316, ,316, Paid in: RMB % RMB % HCL Technologies Ltd. 15,316, ,316, Shanghai Lin Xin Accountant Firm issued Linkuai Fa No.(2009) 575 capital verification report.on 6 May

18 11. Surplus reserve 2014 Openning Balance Additions Decrease Closing Balance Surplus reserve - 1,987, ,987, According to the provisions of Company Law and the Company s articles of association, the Company appropriates statutory surplus reserve at 10% of the net profit. Where the accumulated amount of surplus reserve reaches 50% or more of the company s registered capital, additional appropriation is not needed. 12. Revenue from principal operations Rendering of services 111,361, ,996, Financial expenses Interest expense / (gain) (2,018,958.25) 136, Exchange loss / (gain) (223,788.51) (315,216.16) Others 57, , Related party relationships and transactions (2,185,361.14) (143,281.01) Details of the Company s investor, which has a controlling interest in the Company, are as follows: Equity interest held and its Name of Investor Registered Address changes during the year HCL Technologies Ltd. Malaysia 100% Name of related party HCL SWEDEN AB HCL Singapore Pte Limited HCL POLAND SP.Z O.O HCL Japan Limited HCL Hong Kong SAR Limited HCL GMBH HCL Technologies France HCL Tech Belgium Relationship 15

19 14. Related party relationships and transactions (continued) Name HCL Australia Ser Pty Ltd HCL America Inc. HCL Axon Solutions (Shanghai) Co., Ltd. HCLT Finland Branch HCL GREAT BRITAIN LIMITED HCL (Brazil) Technologies HCLT Middle East HCL Technologies Limited Switzerland HCL South Africa Share Ow HCL Tech Norway AS FILIAL ESPAÑOLA DE HCL TECH HCL TECHNOLOGIES LTD. Portugal HCL ARGENTINA S.A. HCL AXON MALAYSIA PT. HCL Technologies Indonesia HCL Technologies Philippines, Inc HCL (Netherlands) B.V. HCL Tech Limited, Moscow HCLT Limited, Israel HCL Tech Italy HCL Technologies México SdeRLde CV HCL Austria HCL AXON (Pty) Ltd HCL Holland HCL UK HCL Chile HCL Denmark HCL Ireland HCL Russia HCL Britain HCL Germany Frankfurter AB UK HCL Canada HCL Singapore HCL Arba HCL Finland HCL New Zealand Mexico SdeRLdeCV HCL Netherlands HCL South Africa HCL Malaysia Relationship 16

20 14. Related party relationships and transactions (continued) Significant transactions between the Company and its related parties during the year are as follows: (1) Sales and purchases 2015 年 2014 年 Sales of goods and services HCL America Inc. 18,103, ,626, HCL Axon Solutions (Shanghai) Co., Ltd. 2,836, , HCL Technologies Limited Switzerland 2,493, ,125, HCL Technologies Ltd. 2,199, ,088, HCL GMBH 1,768, , HCL Singapore Pte Limited 1,107, ,199, HCL South Africa Share Ow 909, , HCLT Finland Branch 772, ,569, HCL Tech Belgium 602, ,928, HCL GREAT BRITAIN LIMITED 528, , HCL (Brazil) Technologia 478, , HCL Holland 378, HCL UK 298, HCL Canada 284, , Mexico SdeRLdeCV 276, , HCL Australia Ser Pty Ltd. 208, , HCL Tech Italy 189, , HCL Chile 122, HCL Hong Kong SAR Limited 120, FILIAL ESPAÑOLA DE HCL TECH 112, , HCL New Zealand 47, HCL Japan Limited 45, , HCL Tech Norway AS 44, , HCL Denmark 34, HCL Ireland 18, HCL Russia 18, HCL Technologies France - 299, HCL (Netherlands) B.V , HCL AXON MALAYSIA - 77, HCL TECHNOLOGIES LTD. Portugal - 76, HCL ARGENTINA S.A. - 73, PT. HCL Technologies Indonesia - 48, HCL POLAND SP.Z O.O. - 47, HCL Technologies Philippines, Inc. - 18, ,999, ,331,

21 14. Related party relationships and transactions (continued) (1) Sales and purchases (continued) 2015 年 2014 年 Purchases of goods and services HCL Britain 14,923, HCL Technologies Ltd. 11,675, ,896, HCL Germany Frankfurter AB UK 2,304, HCL (Brazil) Technologies 2,217, , HCL GMBH 1,294, ,717, HCL POLAND SP.Z O.O. 1,166, , HCL Singapore Pte Limited 638, ,194, HCLT Finland Branch 579, HCL Axon Solutions (Shanghai) Co., Ltd. 3,020, HCL America Inc. 423, ,297, HCL UK 376, HCL Australia Ser Pty Ltd. 244, , HCL AXON (Pty) Ltd. 202, , HCL Austria 190, , México SdeRLde CV 166, , HCL Tech Limited, Moscow 145, , HCL Canada 135, HCL Tech Italy 82, , HCL Singapore 79, HCL SWEDEN AB 50, , HCL Axon Malaysia 45, HCL Technologies France 45, , HCL Arab 23, HCL Spain 13, HCL Japan Limited 12, , HCL South Africa 203, HCL Tech Belgium 6, , HCLT Limited, Israel , HCLT Middle East (250.91) - HCL (Netherlands) B.V. - 24, HCL GREAT BRITAIN LIMITED - 4,016, ,270, ,348,

22 14. Related party relationships and transactions (continued) (2) Amounts due from/to related parties Account Name Account HCL America Inc. 4,478, , receivables HCL Axon Solutions (Shanghai) Co., Ltd. 2,856, , HCL Technologies Ltd. 1,351, ,698, HCL GMBH 693, , HCL Finland 579, , HCL (Brazil) Technologia 517, HCL Switzerland 369, , HCL Singapore Pte Limited 372, , HCL UK 298, HCL Holland 228, , HCL Australia Ser Pty Ltd. 208, , HCL Tech Italy 189, , HCL Canada 141, HCL Japan Limited 120, , HCL Chile 119, FILIAL ESPAÑOLA DE HCL TECH 112, HCL ARGENTINA S.A. 70, , HCL Hong Kong SAR Limited 56, HCL New Zealand 47, HCL Denmark 34, HCL Great Britain Limited 26, , HCL Russia 18, México SdeRLde CV 18, , PT. HCL Technologies Indonesia - 48, HCL (Netherlands) B.V. - - HCL South Africa Share Ow - 342, HCL Tech Belgium - 156, HCL Technologies Philippines, Inc. - 18, Advances HCL India 607, , from HCL Netherlands 137, customers HCL POLAND SP.Z O.O. 112, , Account HCL Technologies Ltd. 30,227, ,259, Payables HCL Britain 21,376, ,453, HCL America Inc. 3,263, ,839, HCL GMBH 3,012, ,717, HCL Singapore Pte Limited 2,819, ,180, HCL Brazil 2,441, , HCL Germany Frankfurter AB UK 2,304,

23 14. Related party relationships and transactions (continued) (2) Amounts due from/to related parties (continued) Account Name Account HCL POLAND SP.Z O.O. 1,895, , Payables HCL Axon Solutions (Shanghai) Co., Ltd. 3,700, , HCLT Finland Branch 707, , HCL Singapore 643, , Mexico SdeRLdeCV 626, , HCL UK 376, HCL Australia Ser Pty Ltd 344, , HCL Austria 335, , HCL South Africa 255, , HCL Tech Limited, Moscow 234, , HCL Japan Limited 212, , HCL Tech Italy 172, , HCL Canada 135, HCL Technologies France 112, , HCL SWEDEN AB 103, , HCL Tech Belgium 37, , HCL Holland 24, , HCL Arab 23, HCL Spain 13, HCLT Limited, Israel 12, , HCLT Middle East 1, , HCL Malaysia 45, , Other HCL Axon Solutions Payables (Shanghai) Co., Ltd. 53, HCL India Amounts due from/to related parties are interest free, unsecured and repayable within 2 years. 15. Commitments The non-cancellable minimum lease payments for each of the next three years subsequent to the balance sheet date and aggregate minimum lease payments thereafter are as follows: 20

24 15. Commitments (continued) Operating lease commitments The 1st year 1,218, ,326, The 2nd year 507, , The 3rd year - - 1,726, ,879, Contingencies AS of the balance sheet date, there were no contingencies that the Company was required to disclose. 17. Events occurring after the balance sheet date The company has no events occurring after the balance sheet date need to disclosure. 18. Approval of the financial statements The financial statements have been authorised for issuance by the board of directors on 31 May

HCL Technologies (Shanghai) Limited. Audited Financial Statements. 31 December 2016

HCL Technologies (Shanghai) Limited. Audited Financial Statements. 31 December 2016 Audited Financial Statements 31 December 2016 Important Notice The attached financial statements have been translated from the statutory financial statements prepared in accordance with the Accounting