深康佳B:2017年半年度报告(英文版)

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Konka Group Co., Ltd. Semi-Annual Report 2017

KONKA GROUP CO., LTD.

SEMI-ANNUAL REPORT 2017

2017-44

August 2017

1

Konka Group Co., Ltd. Semi-Annual Report 2017

Section I Important Statements, Contents and Definitions

The board of directors (the “Board”), the supervisory board (the “Supervisory Board”) as

well as the directors, supervisors and senior management of Konka Group Co., Ltd. (the

“Company”) hereby guarantee the factuality, accuracy and completeness of the contents of

this Report, and shall be jointly and severally liable for any false representation, misleading

statements or material omissions in this Report.

Liu Fengxi, head of the Company, Li Chunlei, accounting head for this Report, and Feng

Junxiu, head of the accounting department (head of accounting), hereby guarantee that the

Financial Report carried in this Report is factual, accurate and complete.

All the directors attended the board meeting for the review of this Report.

Any plans for the future and other forward-looking statements mentioned in this Report shall

NOT be considered as virtual promises of the Company to investors. Therefore, investors are

kindly reminded to pay attention to investment risk.

The Company plans not to distribute cash dividends or bonus shares or convert capital

reserve into share capital.

This Report has been prepared in both Chinese and English. Should there be any

discrepancies or misunderstandings between the two versions, the Chinese version shall

prevail.

2

Konka Group Co., Ltd. Semi-Annual Report 2017

Table of Contents

Semi-Annual Report 2017..................................................................................................................1

Section I Important Statements, Contents and Definitions............................................................2

Section II Corporate Profile and Key Operating Results...............................................................6

Section III Business Profile................................................................................................................9

Section IV Performance Discussion and Analysis......................................................................... 11

Section V Significant Events............................................................................................................30

Section VI Share Changes and Shareholders’ Profile................................................................... 42

Section VII Preference Shares.........................................................................................................47

Section VIII Directors, Supervisors and Senior Management..................................................... 48

Section IX Corporate Bonds............................................................................................................50

Section X Financial Report..............................................................................................................51

Section XI Documents Available for Reference........................................................................... 237

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Konka Group Co., Ltd. Semi-Annual Report 2017

Definitions

Term Definition

Company, the Company, the Group Konka Group Co., Ltd.

Telecommunication Technology Shenzhen Konka Telecommunications Technology Co., Ltd.

Konka Household Appliances Shenzhen Konka Household Appliances Co., Ltd.

Plastic Products Shenzhen Konka Plastic Products Co., Ltd.

Electrical Appliances Shenzhen Konka Electrical Appliances Co., Ltd.

Fittings Technology Shenzhen Konka Electronic Fittings Technology Co., Ltd.

Mudanjiang Appliances Mudanjiang Arctic Ocean Appliances Co., Ltd.

Chongqing Qingjia Chongqing Qingjia Electronics Co., Ltd.

Anhui Konka Anhui Konka Electronic Co., Ltd.

Anhui Household Appliances Anhui Konka Household Appliances Co., Ltd.

Kunshan Konka Kunshan Konka Electronic Co., Ltd.

Dongguan Konka Dongguan Konka Electronic Co., Ltd.

Dongguan Packing Dongguan Konka Packing Materials Co., Ltd.

Boluo Konka Boluo Konka PCB Co., Ltd.

Boluo Konka Precision Boluo Konka Precision Technology Co., Ltd.

Hong Kong Konka Hong Kong Konka Co., Ltd.

Konka Household Appliances Investment Konka Household Appliances Investment & Development Co., Ltd.

Konka Household Appliances International

Konka Household Appliances International Trading Co., Ltd.

Trading

Konka Europe Konka (Europe) Co., Ltd.

Konka Factoring Konka Factoring (Shenzhen) Co., Ltd.

Wankaida Shenzhen Wankaida Science and Technology Co., Ltd.

Kunshan Kangsheng Kunshan Kangsheng Investment Development Co., Ltd.

Anhui Tongchuang Anhui Konka Tongchuang Household Appliances Co., Ltd.

Indonesia Konka Indonesia Konka Electronics Co., Ltd.

Shushida Logistics Shenzhen Shushida Logistics Service Co., Ltd.

Beijing Konka Electronic Beijing Konka Electronic Co., Ltd.

Konka E-display Shenzhen Konka E-display Co., Ltd.

E-display Service Shenzhen E-display Service Co., Ltd.

Xiamen Dalong Xiamen Dalong Trading Co., Ltd.

Youshi Kangrong Youshi Kangrong Culture Communication Co., Ltd.

Kangqiao Jiacheng Shenzhen Kangqiao Jiacheng Property Investment Co., Ltd.

Konka SmartTech Konka SmartTech Limited

Kaikai Shijie Anhui Kaikai Shijie E-commerce Co., Ltd.

E2info Shenzhen E2info Network Technology Co., Ltd.

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Konka Group Co., Ltd. Semi-Annual Report 2017

Mobile Interconnection Shenzhen Konka Mobile Interconnection Technology Co., Ltd.

Commercial System Technology Shenzhen Konka Commercial System Technology Co., Ltd.

Zhongkang Supply Chain Zhongkang Supply Chain Management Co., Ltd.

Kangqiao Easy Chain Shenzhen Kangqiao Easy Chain Technology Co., Ltd.

E3info E3info (Hainan) Technology Co., Ltd.

Konka Technology & Industry Development Chuzhou Konka Technology & Industry Development Co., Ltd.

Kangzhi Trade Anhui Kangzhi Trade Co., Ltd.

CSRC The China Securities Regulatory Commission

SZSE The Shenzhen Stock Exchange

CSRC Shenzhen The Shenzhen branch of the China Securities Regulatory Commission

RMB, RMB’0,000 RMB yuan, RMB ten thousand yuan

5

Konka Group Co., Ltd. Semi-Annual Report 2017

Section II Corporate Profile and Key Operating Results

I Corporate Information

Stock name Konka A, Konka B Stock code 000016, 200016

Changed stock name (if any) N/A

Stock exchange Shenzhen Stock Exchange

Company name in Chinese 康佳集团股份有限公司

Abbr. (if any) 康佳集团

Company name in English (if any) KONKA GROUP CO.,LTD

Abbr. (if any) KONKA GROUP

Legal representative Liu Fengxi

II Contact Information

Board Secretary Securities Representative

Name Wu Yongjun Miao Leiqiang

Board Secretariat, 24/F, Konka R&D Center, 28 Keji Board Secretariat, 24/F, Konka R&D Center, 28 Keji

South Twelfth Road, Science and Technology Park, South Twelfth Road, Science and Technology Park,

Address

Yuehai Street, Nanshan District, Shenzhen, Guangdong Yuehai Street, Nanshan District, Shenzhen, Guangdong

Province, China Province, China

Tel. 0755-26608866 0755-26608866

Fax 0755-26601139 0755-26601139

E-mail szkonka@konka.com szkonka@konka.com

III Other Information

1. Ways to Contact the Company

Indicate by tick mark whether any changes occur to the registered address, office address and their

postal codes, website address and email address of the Company during the Reporting Period.

□ Applicable √ Not applicable

No changes occurred to the said information during the Reporting Period, which can be found in the

2016 Annual Report.

2. Information Disclosure Media and Place where this Report is Kept

Indicate by tick mark whether any changes occurred to the information disclosure media and the

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Konka Group Co., Ltd. Semi-Annual Report 2017

place where this Report was kept during the Reporting Period.

□ Applicable √ Not applicable

The newspapers designated by the Company for information disclosure, the website designated by

the CSRC for disclosing this Report and the location where this Report was placed did not change

during the Reporting Period. The said information can be found in the 2016 Annual Report.

IV Key Consolidated Operating Results

Indicate by tick mark whether the Company needs to retroactively restate any of its accounting data.

□ Yes √ No

Same period of last

Reporting Period +/- (%)

year

Operating revenues (RMB) 11,405,965,979.43 8,609,080,822.24 32.49%

Net profit attributable to shareholders of

30,871,267.86 12,834,736.76 140.53%

the Company (RMB)

Net profit attributable to shareholders of

the Company before exceptional gains -44,456,212.17 -28,736,147.20 -54.70%

and losses (RMB)

Net cash from operating activities

-2,264,014,704.88 -125,542,056.42 -1,703.39%

(RMB)

Basic earnings per share (RMB/share) 0.0128 0.0053 141.51%

Diluted earnings per share (RMB/share) 0.0128 0.0053 141.51%

Weighted average return on equity (%) 1.06% 0.46% 0.60%

End of Reporting

End of last year +/- (%)

Period

Total assets (RMB) 20,666,059,935.37 17,243,119,597.97 19.85%

Net assets attributable to shareholders of

2,928,936,565.96 2,901,481,607.04 0.95%

the Company (RMB)

V Differences in Accounting Data under Domestic and Foreign Accounting Standards

1. Differences in Net Profit and Net Assets Disclosed in Financial Reports Prepared under

Chinese and International Accounting Standards

□ Applicable √ Not applicable

No such differences for the Reporting Period.

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Konka Group Co., Ltd. Semi-Annual Report 2017

2. Differences in Net Profit and Net Assets Disclosed in Financial Reports Prepared under

Chinese and Foreign Accounting Standards

□ Applicable √ Not applicable

No such differences for the Reporting Period.

VI Exceptional Gains/Losses

√ Applicable □ Not applicable

Unit: RMB

Item Reporting Period Note

Gains/losses on disposal of non-current assets (including offset asset impairment

32,560,637.29

provisions)

Governmental subsidies charged to gains/losses for Reporting Period (except for

government grants closely related to business of the Company and given at a fixed quota or 79,034,666.86

amount in accordance with government’s uniform standards)

Gains/losses on investment or asset management entrustments to third parties 30,058,960.78

Gains/losses on fair value changes of financial assets and liabilities held for trading &

investment income from disposal of financial assets and liabilities held for trading as well

-61,493,877.60

as financial assets available for sale, except for effective hedges related to normal business

operations of the Company

Gains/losses on entrusted loans 280,538.52

Non-operating income and expense other than above 8,144,500.65

Less: Income tax effects 12,549,958.46

Minority interests effects (after tax) 707,988.01

Total 75,327,480.03 --

Explanation of why the Company classified an item as an exceptional gain/loss according to the

definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies

Offering Their Securities to the Public—Exceptional Gains and Losses, or reclassified any

exceptional gain/loss item given as an example in the said explanatory announcement as a recurrent

gain/loss:

√ Applicable □ Not applicable

Amount involved

Item Reason

(RMB)

Tax rebates Government grants closely related to the Company’s normal business operations and

35,115,965.51

on software constantly given at fixed quotas or amounts as per government’s uniform standards

8

Konka Group Co., Ltd. Semi-Annual Report 2017

Section III Business Profile

I Main Business Scope for Reporting Period

Is the Company subject to any disclosure requirements for special industries?

No.

Currently, the Company offers, among other things, color TVs, supply chain services, white goods

and mobile phones. Its main business models are specified as follows:

(I) Color TVs

The Company provides color TVs for both domestic and overseas markets. It also offers Internet

TV services.

The domestic sales of the Company’s color TVs are realized mainly through B2B

(Business-to-Business) and B2C (Business-to-Consumer), with its branch companies, business

departments and after-sales maintenance points operating across the country. And the Company

profits from the margins between the costs and the selling prices of its color TVs.

In the overseas sales, the Company mainly relies on B2B. Its color TVs are sold to Asia Pacific,

Middle East, Central & South America, East Europe, etc. And the main profit source is also the

differences between the costs and the selling prices of its color TVs.

The Company offers Internet TV services based on the smart TVs it has sold to end users. Firstly, it

works with other Internet companies to provide end users with, among other content, video,

educational, music, medical and game content to generate earnings. Secondly, it analyses user

behaviors and offer certain free, interactive services to increase attractiveness to users, promote its

brand and stimulate desire for its hardware products. Finally, it is trying to build an Internet TV

platform with tens of millions of users, on which it will profit through commercial and application

distribution. This Internet TV business is key to the Company’s Internet-oriented transformation and

upgrade to a development model of “hardware + software” and “smart TV + end users”.

(II) Supply Chain Services

The Company trades IC components, LCD panels, metal materials and other products in the supply

chains for the Company’s existing products. This can help the Company establish good

relationships with its upstream suppliers and downstream customers, learn about the prices of the

materials used in its production in a timely manner, and control costs of its existing products. In

addition, the Company also intends to provide supply chain services integrating commercial,

logistics and information handling services to create a new growth point for the future.

(III) White Goods

The white goods produced by the Company mainly include refrigerators, washing machines, air

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Konka Group Co., Ltd. Semi-Annual Report 2017

conditioners, freezers, etc., which are sold through B2B and B2C mainly to the domestic market.

And the Company profits from the margins between the costs and the selling prices of its white

goods.

(IV) Mobile Phones

The mobile phones of the Company are sold to both the domestic and overseas markets. The

overseas sales mainly rely on B2B and the profit comes from the margins between the costs and the

selling prices of the mobile phones. As for the domestic sales of its mobile phones, the Company

relies on B2B and B2C, and profits mainly from the costs and the selling prices of its products and

slightly from the related value added services.

II Significant Changes in Main Assets

1. Significant Changes in Main Assets

Main assets Reason for significant change in Reporting Period

New joint stock companies such as Guangdong Chutian Dragon Smart Card Co., Ltd.

Equity assets

and Shenzhen Yaode Technology Co., Ltd.

Fixed assets No significant changes

Intangible assets No significant changes

Construction in progress Increased investments in Kunshan Zhouzhuang hotel in construction, etc.

2. Main Assets Overseas

□ Applicable √ Not applicable

III Core Competitiveness Analysis

Is the Company subject to any disclosure requirements for special industries?

No.

The Company’s competitive edges include, among other things, its R&D ability, marketing network

and manufacturing capability. Through resource integration, the Company will vigorously try to

make substantial breakthroughs in intelligent products, cloud computing, application of the Internet

technology, application software, etc. It will also strengthen technical innovation to increase its

overall competitiveness.

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Konka Group Co., Ltd. Semi-Annual Report 2017

Section IV Performance Discussion and Analysis

I Summary

For the Reporting Period, the Company achieved, on a consolidated basis, operating revenues of

RMB11.406 billion, up 32.49% compared to the same period of last year; net profit attributable to

the Company’s shareholders of RMB30.8713 million, representing a year-on-year rise of 140.53%;

and earnings per share (EPS) of RMB0.0128.

In the Reporting Period, the Company proactively promoted reform in its system and kept

integrating resources to accelerate transformation. As a result, its efforts have been rewarded by

improved earnings. The work that the Company has accomplished in the Reporting Period is

detailed as follows:

1. In the Reporting Period, the Company continued to promote reform in its system. New senior

management has been hired through an open recruitment in the first quarter of this year. Meanwhile,

certain business units are carrying out a market-oriented reform in a steady manner.

2. In the Reporting Period, the Company made good use of its partners’ resource advantages. The

Company and China Mobile have jointly launched the Migu-Konka TV. In addition, the Company

has become a top sponsor of the Jiangsu Suning Football Club. These moves will help set up

win-win cooperations. In addition, the Company has signed on July 28, 2017 to be an official

partner of La Liga in China, which will bring new vitality to the Company’s brand.

3. The Reporting Period saw a significant year-on-year increase in both the operating revenues and

net profit generated by the Company’s smart TV operation business. Moreover, the Company has

developed on its own a series of new products including E-learning, E-shopping, K Video and

World of Games, increasing attractiveness to users and the soft power in brand, as well as

promoting the upgrade in its main business from a traditional model of profiting through adding

value on hardware to a new model of “hardware + software” and “smart TV + end users”.

4. In the Reporting Period, the Company integrated the development, production and supply chain

systems and optimized the product structure, trying to provide more competitive products. The

increasingly fierce market competition and the rising prices of raw materials, however, led to

decreased gross profit margins and losses in certain of the Company’s main business segments

(including color TVs and white goods).

5. Exceptional gains and losses have an effect of RMB75.3275 million on net profit in the

Reporting Period.

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Konka Group Co., Ltd. Semi-Annual Report 2017

II Analysis of Main Business

Summary:

See “I Summary” above.

Year-on-year changes of key financial data:

Unit: RMB

Same period of last

Reporting Period +/-% Main reason for change

year

Increased revenue from

Operating revenues 11,405,965,979.43 8,609,080,822.24 32.49% provision of supply chain

services

Increased costs in provision of

Operating costs 10,110,191,258.07 7,177,725,092.42 40.86%

supply chain services

Selling expense 974,003,306.54 1,109,146,923.61 -12.18%

Administrative

264,108,100.97 290,919,290.02 -9.22%

expense

Increases in borrowings secured

Finance costs 110,882,895.46 68,373,432.00 62.17% and in interest expense on

borrowings

Income taxes -3,838,772.97 705,997.10 -643.74%

R&D expense 96,753,027.87 88,336,972.44 9.53%

Net cash from

-2,264,014,704.88 -125,542,056.42 -1,703.39% Increase in cash paid for goods

operating activities

New investments in joint stock

Net cash from companies and increased

-1,580,867,932.13 -63,713,124.67 -2,381.23%

investing activities investments in wealth

management instruments

Net cash from

4,161,145,047.39 1,154,153,257.89 260.54% Increase in borrowings secured

financing activities

Net increase in cash

305,883,134.09 981,795,915.13 -68.84%

and cash equivalents

Major changes to the profit structure or sources of the Company in the Reporting Period:

□ Applicable √ Not applicable

No such cases in the Reporting Period.

Breakdown of main business:

Unit: RMB

Gross profit Operating Operating cost: Gross profit

Operating revenue Operating cost

margin revenue: YoY YoY +/-% margin: YoY +/-%

12

Konka Group Co., Ltd. Semi-Annual Report 2017

+/-%

By business segment

Electronics 6,808,860,299.10 5,693,408,104.76 16.38% -11.85% -11.01% -0.79%

Supply chain 4,307,330,068.12 4,247,646,007.45 1.39% 715.73% 720.30% -0.55%

By product

Color TVs 5,289,992,150.21 4,431,743,317.09 16.22% -1.45% -0.83% -0.53%

Supply chain 4,307,330,068.12 4,247,646,007.45 1.39% 715.73% 720.30% -0.55%

White goods 891,933,843.48 726,049,054.97 18.60% 7.49% 12.04% -3.30%

Mobile phones 420,602,444.99 365,383,403.95 13.13% -10.84% -12.05% 1.19%

Others 206,331,860.42 170,232,328.75 17.50% -60.84% -51.06% -16.49%

By geographic segment

Domestic 7,343,613,290.29 6,314,287,989.74 14.02% 41.87% 56.89% -8.23%

Overseas 3,772,577,076.93 3,626,766,122.47 3.87% 48.06% 52.83% -3.00%

III Non-Core Business Analysis

√ Applicable □ Not applicable

Unit: RMB

As a percentage

Amount Source/reason Recurring

of total profit (%)

Income from wealth management

Investment

67,005,572.06 219.28% instruments and sale of Not

income

available-for-sale financial assets

Gains and

Changes in fair value of financial

losses on fair

-103,077,757.73 -337.32% assets held for trading and forward Not

value

forex contracts

changes

Asset

2,271,042.76 7.43% Not

impairment

Tax rebates on software are

Non-operatin Governmental subsidies and gains

123,347,108.29 403.65% recurring while the others are

g income on disposal of intangible assets

uncertain

Non-operatin

3,635,538.11 11.90% Not

g expense

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Konka Group Co., Ltd. Semi-Annual Report 2017

IV Analysis of Assets and Liabilities

1. Significant Changes in Asset Composition

Unit: RMB

End of Reporting Period End of same period of last year

As a As a

percent percenta Change in

Main reason for

age of ge of percentage

Amount Amount significant change

total total (%)

assets assets

(%) (%)

Monetary funds 2,490,079,604.07 12.05% 2,598,216,832.20 17.46% -5.41%

Accounts

1,966,918,540.02 9.52% 2,041,011,200.19 13.71% -4.19%

receivable

Inventories 6,374,483,463.58 30.85% 2,925,556,540.93 19.66% 11.19%

Investment

219,271,267.11 1.06% 224,902,541.38 1.51% -0.45%

property

Long-term

equity 629,257,019.68 3.04% 276,561,119.65 1.86% 1.18%

investments

Fixed assets 1,544,239,052.29 7.47% 1,604,828,298.83 10.78% -3.31%

Construction in

404,450,172.08 1.96% 173,840,293.07 1.17% 0.79%

progress

Short-term

10,744,965,110.13 51.99% 4,588,542,749.93 30.83% 21.16%

borrowings

Long-term

70,000,000.00 0.34% 0.00 0.00% 0.34%

borrowings

2. Assets and Liabilities Measured at Fair Value

√ Applicable □ Not applicable

Unit: RMB

Gains/losses

Impairment Purchase

on fair value Cumulative fair Sold in

provided in d in

Item Opening balance changes in value changes Reportin Closing balance

Reporting Reportin

Reporting charged to equity g Period

Period g Period

Period

Financial assets

1. Financial assets at 252,084,994.12 168,120,900.00

14

Konka Group Co., Ltd. Semi-Annual Report 2017

fair value through

gains/losses (exclusive

of derivative financial

assets)

3. Available-for-sale

55,777,425.00 40,665,244.82

financial assets

Subtotal of financial

307,862,419.12 208,786,144.82

assets

Total of above 307,862,419.12 208,786,144.82

Financial liabilities 337,263.13 20,181,325.74

Significant changes in the measurement attributes of the main assets in the Reporting Period:

□ Yes √ No

3. Restricted Asset Rights as of End of the Reporting Period

As of the end of the Reporting Period, there were no such circumstances where any main assets of

the Company were sealed, distrained, frozen, impawned, pledged, conditionally cashable,

non-cashable or incapable of being used as substitution for debt.

V Investments Made

1. Total Investments Made

√ Applicable □ Not applicable

Investments made in Reporting Period Investments made in same period of last

+/-%

(RMB) year (RMB)

326,090,459.58 6,010,455.00 5325.39%

2. Significant Equity Investments Made in Reporting Period

√ Applicable □ Not applicable

Unit: RMB

The Sou

Ter Gain/

Co rce Type Pro La

m loss Disclo

Way Amount mpa of of Progress ject ws Index to

Main of for sure

Investe of of ny’s inve invest as of ed uits disclosed

busi Partners inv Repo date

e inves investme shar stm ee’s balance ear inv information

ness est rting (if

tment nt ehol ent produ sheet date nin olv (if any)

me Perio any)

din fun cts gs ed

nt d

g ds

15

Konka Group Co., Ltd. Semi-Annual Report 2017

perc

enta

ge

Investmen

t

agreement

Guang Man Zhengzhou

signed

dong ufact XiangHongW

The and

Chutia uring an Enterprise Un

Co ownership

n and Management det

Acqu mpa Undet transfer

Drago mark 588,000, 24 Co., Ltd. and er 06/30/ www.cninfo

isitio ny’s ermin with 0 0 Not

n eting 000.00 % Zhengzhou mi 2017 .com.cn

n own ed industrial

Smart of Eastern Spirit ne

fun and

Card smar Enterprise d

ds commerci

Co., t Management

al

Ltd. card Center

administra

tion

completed

588,000,

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

000.00

3. Significant Non-Equity Investments Ongoing in Reporting Period

√ Applicable □ Not applicable

Unit: RMB

Reason

Total

Total for falling

Way Investm actual Sour

Investm Proje Project earnings behind Index to

of ent in investme ce of Disclosure

Industr ent in ct ed as of end schedule disclosed

Project inve fixed nt as of inves date (if

y Reportin progr earnin of or not informatio

stme assets end of tment any)

g Period ess gs Reporting achieving n (if any)

nt or not Reporting funds

Period projected

Period

earnings

The

Renewal Dire

Com

of plants ct Comme Unde

17,620,0 1,016,690 pany’ 14.73 11/21/201

at Konka inve rcial termi 0 N/A

00 ,000 s % 4

Headquart stme estate ned

own www.cnin

ers nt

funds fo.com.cn

Dire 25% is Real The

Kunshan Unde

ct investe estate, 537,580, 1,685,930 Com 57.09 13,133,55 07/06/201

Shuiyue termi N/A

inve d in hotel 000 ,000 pany’ 5% 2 0

Zhouzhua ned

stme fixed manage s

16

Konka Group Co., Ltd. Semi-Annual Report 2017

ng nt assets ment own

funds

The

Konka Dire

Com

Technolog ct Unde

Electro 76,657,8 76,657,81 pany’ 12/30/201

ical inve 17% termi 0 N/A

nics 14.5 4.5 s 6

Innovation stme ned

own

Center nt

funds

The

Dire

Com

New ct Unde

Electro pany’ 03/11/201

plants in inve 0 0 0% termi 0 N/A

nics s 7

Dongguan stme ned

own

nt

funds

631,857, 2,779,277 13,133,55

Total -- -- -- -- -- -- -- --

814.50 ,814.50 2

Notes:

(1) Concerning the renewal project of plants at the Konka Headquarters, overall planning and

geological survey is underway.

(2) Regarding the Kunshan Shuiyue Zhouzhuang project, Phases III and IV are in construction and

the pre-sale of Phase III has been substantially completed.

(3) In regard to the Konka Technological Innovation Center project, the related land use right

transfer agreement has been signed and planning is underway.

(4) As for the project of new plants in Dongguan, preparations are underway and the Company is

waiting for the local government to put out the project target land for bids.

4. Financial Investments

(1) Securities Investments

√ Applicable □ Not applicable

Gain/lo Cumul Source

Variety Code Name Initial ss on ative

Accoun fair fair Purcha Gain/lo of

Sold in

of of of invest ting Openin value value sed in ss in Closin Account

Reporti

measur g book change change Reporti Reporti g book invest

securiti securiti securiti ment ng ing title

ement value s in s ng ng value

Period ment

model Reporti charge Period Period

es es es cost ng d to

Period equity funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 4,671.8 4,671.8 24,601. 19,929.

300605 HFXX value 0 0 0 0 e any’s

eign 0 0 50 70

method financia own

stock

l assets funds

17

Konka Group Co., Ltd. Semi-Annual Report 2017

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,371.8 3,371.8 14,788. 11,417.

300610 CHGF value 0 0 0 0 e any’s

eign 3 3 84 01

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,369.8 3,369.8 25,605. 22,235.

300609 HNKJ value 0 0 0 0 e any’s

eign 0 0 50 70

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 4,417.0 4,417.0 26,110. 21,693.

2848 GSBE value 0 0 0 0 e any’s

eign 0 0 00 00

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,575.6 3,575.6 19,092. 15,516.

2849 WXZN value 0 0 0 0 e any’s

eign 8 8 00 32

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,579.0 3,579.0 17,312. 13,733.

300611 MLKJ value 0 0 0 0 e any’s

eign 3 3 10 07

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 22,997. 22,997. 85,201. 62,204.

2850 KLD value 0 0 0 0 e any’s

eign 00 00 70 70

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 4,016.1 4,016.1 26,400. 22,383.

2851 MGMT value 0 0 0 0 e any’s

eign 0 0 00 90

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 20,109. 20,109. 68,080. 47,970.

300616 SPZP value 0 0 0 0 e any’s

eign 50 50 00 50

method financia own

stock

l assets funds

Domes 5,689.6 Fair 5,689.6 48,583. 42,894. Availabl The

300618 HRGY 0 0 0 0

tic/For 5 value 5 67 02 e-for-sal Comp

18

Konka Group Co., Ltd. Semi-Annual Report 2017

eign method e any’s

stock financia own

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 17,832. 17,832. 60,255. 42,423.

2852 DDQ value 0 0 0 0 e any’s

eign 10 10 60 50

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,766.0 2,766.0 14,648. 11,882.

300620 GKKJ value 0 0 0 0 e any’s

eign 6 6 26 20

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 1,916.8 1,916.8 9,145.5 7,228.6

300622 BSYJ value 0 0 0 0 e any’s

eign 5 5 0 5

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 5,526.0 5,526.0 19,200. 13,674.

300623 JJWD value 0 0 0 0 e any’s

eign 0 0 00 00

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 4,016.2 4,016.2 15,878. 11,861.

300621 WYGF value 0 0 0 0 e any’s

eign 0 0 00 80

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 10,885. 10,885. 32,881. 21,996.

300625 SXJG value 0 0 0 0 e any’s

eign 20 20 20 00

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,831.3 3,831.3 13,530. 9,698.7

2856 MZGF value 0 0 0 0 e any’s

eign 0 0 00 0

method financia own

stock

l assets funds

Domes Availabl The

Fair

tic/For 3,256.9 3,256.9 14,178. 10,921. e-for-sal Comp

2855 JRJS value 0 0 0 0

eign 2 2 06 14 e any’s

method

stock financia own

19

Konka Group Co., Ltd. Semi-Annual Report 2017

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,362.5 2,362.5 11,428. 9,065.7

300626 HRGF value 0 0 0 0 e any’s

eign 0 0 20 0

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,949.8 2,949.8 14,666. 11,716.

300627 HCDH value 0 0 0 0 e any’s

eign 7 7 19 32

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 4,389.1 4,389.1 16,808. 12,418.

300630 PLZY value 0 0 0 0 e any’s

eign 8 8 00 82

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 5,124.0 5,124.0 18,480. 13,356.

2774 KYDT value 0 0 0 0 e any’s

eign 0 0 00 00

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 6,798.9 6,798.9 16,005. 9,206.6

2859 JMKJ value 0 0 0 0 e any’s

eign 6 6 60 4

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,605.4 3,605.4 10,999. 7,394.3

300635 DAGF value 0 0 0 0 e any’s

eign 9 9 80 1

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,549.5 2,549.5 9,487.5 6,937.9

300632 GPGF value 0 0 0 0 e any’s

eign 5 5 0 5

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,506.3 3,506.3 9,522.6 6,016.2

2860 XSE value 0 0 0 0 e any’s

eign 7 7 0 3

method financia own

stock

l assets funds

20

Konka Group Co., Ltd. Semi-Annual Report 2017

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,850.4 2,850.4 8,339.0 5,488.5

300639 KPSW value 0 0 0 0 e any’s

eign 5 5 0 5

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,316.6 3,316.6 9,648.6 6,332.0

300637 YFXC value 0 0 0 0 e any’s

eign 2 2 5 3

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 4,485.0 4,485.0 11,960. 7,475.0

2861 YTTX value 0 0 0 0 e any’s

eign 0 0 00 0

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,101.6 3,101.6 13,402. 10,301.

2863 JFKD value 0 0 0 0 e any’s

eign 8 8 88 20

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 6,438.0 6,438.0 15,600. 9,162.0

300641 ZDGF value 0 0 0 0 e any’s

eign 0 0 00 0

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,787.4 2,787.4 8,602.4 5,815.0

2865 JDGF value 0 0 0 0 e any’s

eign 0 0 4 4

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 4,850.8 4,850.8 13,140. 8,289.8

2866 CYKJ value 0 0 0 0 e any’s

eign 0 0 60 0

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 9,940.0 9,940.0 22,355. 12,415.

2867 ZDS value 0 0 0 0 e any’s

eign 8 8 20 12

method financia own

stock

l assets funds

Domes 4,286.4 Fair 4,286.4 12,097. 7,811.4 Availabl The

2868 LKSH 0 0 0 0

tic/For 0 value 0 80 0 e-for-sal Comp

21

Konka Group Co., Ltd. Semi-Annual Report 2017

eign method e any’s

stock financia own

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 1,711.3 1,711.3 6,952.4 5,241.0

300647 CP3 value 0 0 0 0 e any’s

eign 6 6 0 4

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,119.9 2,119.9 9,860.0 7,740.1

300643 WTZK value 0 0 0 0 e any’s

eign 0 0 0 0

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 4,054.8 4,054.8 9,207.0 5,152.2

2869 JYKJ value 0 0 0 0 e any’s

eign 0 0 0 0

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 5,518.8 5,518.8 11,188. 5,670.0

2870 XSGF value 0 0 0 0 e any’s

eign 0 0 80 0

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,985.8 3,985.8 9,364.8 5,378.9

300652 LDK value 0 0 0 0 e any’s

eign 8 8 1 3

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 11,945. 11,945. 24,350. 12,404.

2872 TSZY value 0 0 0 0 e any’s

eign 58 58 40 82

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 1,557.0 1,557.0 8,214.7 6,657.7

300655 JRGF value 0 0 0 0 e any’s

eign 0 0 5 5

method financia own

stock

l assets funds

Domes Availabl The

Fair

tic/For 2,027.9 2,027.9 9,839.7 7,811.7 e-for-sal Comp

300657 HXDZ value 0 0 0 0

eign 7 7 0 3 e any’s

method

stock financia own

22

Konka Group Co., Ltd. Semi-Annual Report 2017

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,659.9 2,659.9 8,617.4 5,957.4

300659 ZFXX value 0 0 0 0 e any’s

eign 5 5 1 6

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,726.7 3,726.7 8,361.6 4,634.8

300658 YJGF value 0 0 0 0 e any’s

eign 2 2 0 8

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 13,701. 13,701. 27,395. 13,693.

300660 JSLL value 0 0 0 0 e any’s

eign 87 87 55 68

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,049.6 2,049.6 7,654.2 5,604.6

2877 ZNZK value 0 0 0 0 e any’s

eign 0 0 8 8

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,617.2 2,617.2 10,260. 7,642.8

300663 KLRJ value 0 0 0 0 e any’s

eign 0 0 00 0

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 3,353.6 3,353.6 13,194. 9,840.6

300662 KRGJ value 0 0 0 0 e any’s

eign 0 0 24 4

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 6,270.9 6,270.9 6,270.9

2879 CLKJ value 0 0 0 0.00 0.00 e any’s

eign 6 6 6

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 6,779.7 6,779.7 20,903. 14,123.

2880 WGSW value 0 0 0 0 e any’s

eign 0 0 40 70

method financia own

stock

l assets funds

23

Konka Group Co., Ltd. Semi-Annual Report 2017

Availabl The

Domes

Fair e-for-sal Comp

tic/For 1,624.0 5,057.5 1,624.0 6,681.5

300666 JFDZ value 0 0 0 0 e any’s

eign 0 0 0 0

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,804.4 4,350.7 2,804.4 7,155.1

2881 MGZN value 0 0 0 0 e any’s

eign 8 0 8 8

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 5,232.8 5,232.8 5,232.8

2882 JLY value 0 0 0 0 0 e any’s

eign 0 0 0

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 1,551.0 1,551.0 2,456.2

300669 HNGF value 0 0 905.22 0 0 e any’s

eign 0 0 2

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,306.2 2,306.2 2,306.2

300670 DYZN value 0 0 0 0 0 e any’s

eign 3 3 3

method financia own

stock

l assets funds

Availabl The

Domes

Fair e-for-sal Comp

tic/For 2,132.9 2,132.9 2,132.9

300671 FMDZ value 0 0 0 0 0 e any’s

eign 3 3 3

method financia own

stock

l assets funds

The

Domes Financi

Fair Comp

tic/For 232,71 212,19 -44,069 -44,069 168,12 al assets

300241 RFGD value 0 0 0 any’s

eign 1,950 0,150 ,250 ,250 0,900 held for

method own

stock trading

funds

Other securities investments

0 -- 0 0 0 0 0 0 0 -- --

held at period-end

168,15

233,00 212,19 -44,069 10,313. 288,90 943,40 -43,392

Total -- 3,135.8 -- --

0,852 0,150 ,250 42 2.70 0.73 ,829.57

2

Disclosure date of announcement about Board’s consent for N/A

24

Konka Group Co., Ltd. Semi-Annual Report 2017

securities investment

Disclosure date of announcement about shareholders’ meeting’s

N/a

consent for securities investment (if any)

(2) Investments in Derivative Financial Instruments

√ Applicable □ Not applicable

Unit: RMB’0,000

Capital source for derivative

U.S. dollar financings

investment

Lawsuits involved (if applicable) N/A

Disclosure date of board

announcement approving 05/24/2014

derivative investment (if any)

Disclosure date of shareholders’

meeting announcement approving 06/10/2014

derivative investment (if any)

We engage in forward forex transactions to reduce the currency risk when securing

Analysis of risks and control

foreign-currency financing. This is very needed in our routine operation and is in

measures associated with

compliance with the applicable laws and regulations. We have formulated the Management

derivative investments held in the

Rules of Konka Group Co., Ltd. for Investment In Derivative Financial Instruments,

Reporting Period (including but

making clear the relevant consideration and approval procedure, risk control, etc.. We

not limited to market risk, liquidity

always sign forward forex contracts with large banks such as the Bank of China, which

risk, credit risk, operational risk,

operate steadily and have good credit standing, which could help prevent loss on forward

legal risk, etc.)

forex contracts due to bank failure.

How we usually measure the fair value of derivative financial instruments: Based on the

Changes in market prices or fair forward forex sales and purchase contracts that are signed between the Company and

value of derivative investments banks and have not expired in a Reporting Period, we recognize the differences between

during the Reporting Period (fair the quotations for these contracts on the balance sheet dates provided by the banks and the

value analysis should include contractual prices as transactional financial assets or liabilities, and the profit/loss on fair

measurement method and related value changes is recognized accordingly. Because these contracts have locked in exchange

assumptions and parameters) rates, no changes will occur when comparing the fair value on signing dates with that on

delivery dates.

Significant changes in accounting

policies and specific accounting

principles adopted for derivative

None

investments in the Reporting

Period compared to previous

reporting period

It is considered necessary for the Company to lock in foreign-currency financing costs

Opinion of independent directors

through financial instruments, because it could effectively reduce the currency risk when

on derivative investments and risk

securing foreign-currency financing. The Company has formulated the internal control

25

Konka Group Co., Ltd. Semi-Annual Report 2017

control mechanism for investment in derivative financial instruments, and the relevant risk control

measures that the Company has taken are considered effective.

Unit: RMB’0,000

Type of derivative Opening Closing

Gain/loss in Closing investment amount as a percentage of

financial contractual contractual

Reporting Period the Company’s closing net assets

instrument amount amount

Forward forex

137,247.18 154,742.17 -7,440.04 52.83%

contract

VI Sale of Major Assets and Equity Interests

1. Sale of Major Assets

□ Applicable √ Not applicable

No such cases in the Reporting Period.

2. Sale of Major Equity Interests

√ Applicable □ Not applicable

Net

profit Ratio

contri of net Relati

buted profit onshi

Owners

to the contrib p

Rel hip of

Comp uted by betwe

Tran Transa ated all Execu

any sale of en

sacti Date ction Effect on Pricing tran involve ted as Discl Index to

Equities from equities transa

on of price the principl sact d sched osure disclosed

sold period to the ction

part sale (RMB’ Company e ion equities uled date information

-begin Compa party

y 0,000) or transferr or not

ning ny’s and

not ed or

to date total the

not

of sale net Comp

(RMB profit any

’0,000 (%)

)

A Optimizing

Un 22.935% Not lo the Not lo

Un Und

det stake in wer th Company’s Undet wer th

dete eter 05/23 www.cninfo.c

erm Enraytek an ass N/A allocation ermin an asse Not Not yet N/A

rmi mine /2017 om.cn

ine Optoelect essed of assets, ed ssed v

ned d

d ronics value generating alue

Co., Ltd. cash

26

Konka Group Co., Ltd. Semi-Annual Report 2017

inflows,

A 51% increasing

Un stake in Not lo assets’ Not lo

Un Und

det Kunshan wer th liquidity Undet wer th

dete eter 06/30 www.cninfo.c

erm Konka an ass N/A and ermin an asse Not Not yet N/A

rmi mine /2017 om.cn

ine Electronic essed improving ed ssed v

ned d

d s Co., value the alue

Ltd. Company’s

earnings

VII Main Controlled and Joint Stock Companies

√ Applicable □ Not applicable

Main subsidiaries and joint stock companies with an over 10% influence on the Company’s net

profit:

Unit: RMB

Relations

Main

Industr

Company hip with Registered Operating Operating

business

Total assets Net assets Net profit

y

name the capital revenues profit

scope

Company

Software

Shenzhen

technology

Wankaida

Subsidiar developme Electro RMB10000 465,508,703.9 54,228,020. 81,671,52 69,478,601.9

Science and 472,891,636.33

y nt and nics 000 7 00 3.46 2

Technology

maintenanc

Co., Ltd.

e

Production

Anhui

and sale of

Konka

refrigerator

Tongchuan

Subsidiar s, washing Electro RMB18000 1,040,624,838.2 -29,126,245.0 871,446,61 -14,227,20

g 7,782,918.28

y machines nics 0000 2 4 5.97 9.36

Household

and other

Appliances

household

Co., Ltd.

appliances

Anhui Production

Konka Subsidiar and sale of Electro RMB14000 1,187,112,855.7 360,481,619.4 2,399,150,9 7,650,066.

8,748,900.14

Electronic y multimedia nics 0000 7 6 81.00 73

Co., Ltd. products

Shenzhen Production

Subsidiar Electro RMB12000 -260,159,027. 373,531,83 -33,733,95 -25,459,578.6

Konka and sale of 407,954,026.32

y nics 0000 64 6.22 5.64 5

Telecommu mobile

27

Konka Group Co., Ltd. Semi-Annual Report 2017

nications communic

Technology ation

Co., Ltd. products

Production

Kunshan and sale of

Konka Subsidiar TFT-LCM Electro RMB35000 344,833,020.5 950,905,55 -6,077,554 31,562,218.3

636,259,459.25

Electronic y and nics 0000 2 6.31 .37 1

Co., Ltd. multimedia

products

Dongguan Production

Konka Subsidiar and sale of Electro RMB26667 636,941,333.4 225,543,57 -2,682,374

750,211,773.74 -254,382.34

Electronic y multimedia nics 0000 8 7.24 .63

Co., Ltd. products

Export &

Hong Kong import of

Subsidiar Electro HKD50000 1,604,475,725.5 144,055,810.6 1,236,250,4 37,968,84 33,706,379.7

Konka Co., electromec

y nics 0 1 3 47.74 3.05 2

Ltd. hanical and

electronics

Kunshan

Real

Kangsheng

Subsidiar Real estate estate RMB35000 1,574,104,261.8 363,133,551.8 3,045,238.1 -11,055,36

Investment -7,539,785.20

y and hotels and 0000 7 0 0 4.63

Developme

hotels

nt Co., Ltd.

ChainKingd

Subsidiar Internation USD150000 1,677,581,8 11,993,09 10,006,349.4

om Co., Trading 682,117,876.78 20,578,468.84

y al trading 0 38.88 7.54 6

Limited

Subsidiaries obtained or disposed in the Reporting Period:

√ Applicable □ Not applicable

How subsidiary was obtained or Effects on overall production and

Subsidiary

disposed in Reporting Period operating results

Anhui Kangzhi Trade Co., Ltd. Incorporated by investment No significant effects

Consolidated by merger, cancellation

Anhui Konka Household Appliances

formalities completed with industrial and No significant effects

Co., Ltd.

commercial administration

There is no other important information about the controlled and joint stock companies in the

Reporting Period of which disclosure is required.

VIII Structured Bodies Controlled by the Company

□ Applicable √ Not applicable

28

Konka Group Co., Ltd. Semi-Annual Report 2017

IX Performance Forecast for January-September 2017

Warning of possible loss or considerable YoY change in the accumulative net profit made during the

period-beginning to the end of the next reporting period, as well as the reasons:

□ Applicable √ Not applicable

X Risks Facing the Company and Countermeasures

The Company is mainly in face of the following risks:

The color TV market has entered a mature stage with slow growth in size. According to a research

institution, the first half of 2017 saw a year-on-year drop of 7.3% in the retail sales volume of color

TVs on the domestic market, which would do no good to the sales volume of the Company’s color

TVs. In addition, the increasingly fierce competition on the color TV market, the continuous price

competition among Internet TV brands, the flooding-in of foreign brands, and the significant price

rises of raw materials (panel, etc.) in the Reporting Period, are bringing down the gross profit

margins of the Company’s main business segments (color TVs, white goods, etc.).

To cope with these risks, the Company will adopt measures such as adjusting its hardware product

mix, increasing its products’ competitiveness, being more professional in user operation, improving

its capability of Internet TV operation and strengthening internal management.

29

Konka Group Co., Ltd. Semi-Annual Report 2017

Section V Significant Events

I Annual and Special Meetings of Shareholders Convened during the Reporting Period

1. Meetings of Shareholders Convened during the Reporting Period

Investor Index to

Meeting Type participati Convened date Disclosure date disclosed

on ratio information

Special

The First Special Meeting of

Meeting of 2.65% 03/06/2017 03/07/2017

Shareholders in 2017

Shareholders

Annual

The 2016 Annual Meeting of www.cninfo.c

Meeting of 37.09% 04/24/2017 04/25/2017

Shareholders om.cn

Shareholders

Special

The Second Special Meeting

Meeting of 37.19% 06/09/2017 06/10/2017

of Shareholders in 2017

Shareholders

2. Special Meetings of Shareholders Convened at Request of Preference Shareholders with

Resumed Voting Rights

□ Applicable √ Not applicable

II Proposal for Profit Distribution and Converting Capital Reserve into Share Capital for the

Reporting Period

□ Applicable √ Not applicable

For the Reporting Period, the Company plans not to distribute cash dividends or bonus shares or

convert capital reserve into share capital.

III Commitments of the Company’s Actual Controller, Shareholders, Related Parties and

Acquirer, as well as the Company and Other Commitment Makers, Fulfilled in the Reporting

Period or still Ongoing at Period-End

□ Applicable √ Not applicable

No such cases in the Reporting Period

IV Engagement and Disengagement of CPAs Firm

Has the semi-annual financial report been audited?

□Yes √ No

30

Konka Group Co., Ltd. Semi-Annual Report 2017

This Semi-Annual Report is unaudited.

V Explanations Given by Board of Directors and Supervisory Board Regarding “Modified

Auditor’s Report” Issued by CPAs Firm for the Reporting Period

□ Applicable √ Not applicable

VI Explanations Given by Board of Directors Regarding “Modified Auditor’s Report” Issued

for Last Year

□ Applicable √ Not applicable

VII Bankruptcy and Restructuring

□ Applicable √ Not applicable

No such cases in the Reporting Period.

VIII Legal Matters

Significant lawsuits or arbitrations:

□ Applicable √ Not applicable

No such cases in the Reporting Period.

Other legal matters:

√ Applicable □ Not applicable

Situation of

Lawsuit Process Trial results and

Basic situation Whether form execution of

amount of lawsuit influences of Disclosure Disclosure

of lawsuit into estimated judgment of

(RMB’0,00 (arbitratio lawsuit date index

(arbitration) liabilities lawsuit

0) n) (arbitration)

(arbitration)

As for the details, please refer to the Notes 2. Description of the Contingencies of the Commitments and the Contingencies of

Chapter XII of the Notes to the Financial Report. Because the involved amount was small, there was no need to fulfill the

obligation of information disclosure.

IX Punishments and Rectifications

□ Applicable √ Not applicable

No such cases in the Reporting Period.

X Credit Conditions of the Company as well as its Controlling Shareholder and Actual

Controller

□ Applicable √ Not applicable

31

Konka Group Co., Ltd. Semi-Annual Report 2017

XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for

Employees

□ Applicable √ Not applicable

No such cases in the Reporting Period.

XII Significant Related Transactions

1. Related Transactions Relevant to Routine Operations

√ Applicable □ Not applicable

Pric Settl

ing Wh eme

Con

Typ prin ethe nt

tent Propo Appro

e of cipl Trans r meth

of rtion ved Sim

the e of Tra action exc od

the in transac ilar Disc

relat the nsac amou eed of Discl

Relation relat same tion mar losu

Related party ed-p rela tion nt the the osure

ship ed-p kind quota ket re

arty ted- pric (RM app relat index

arty of (RMB pric date

tran part e B’0,0 rov ed-p

tran transa ’0,000 e

sact y 00) ed arty

sact ctions )

ion tran quo trans

ion

sact ta actio

ion n

Pur

Under Pur Neg

the chas chas Mar Not

otia

Anhui Huali same e of e of ket appl

ted 2,453 4,500 No Cash

Packing Co., Ltd. actual com mat pric icab

pric

controll mod erial e le

e

er ities s

Suzhou Huali Pur

Under Pur Neg

Environment the chas chas Mar Not

otia

Protection same e of e of ket appl www.

ted 728 1,500 No Cash 03/3

Packaging actual com mat pric icab cninf

pric 1/20

Technology Co., controll mod erial e le o.co

e 17

Ltd er ities s m.cn

Pur

Under Pur Neg

the chas chas Mar Not

Huali Packing otia

same e of e of ket appl

(Huizhou) Co., ted 420 1,500 No Cash

actual com mat pric icab

Ltd. pric

controll mod erial e le

e

er ities s

Under Sale

OCT Co., Ltd. and Sale Neg Mar 967 2,000 No Cash Not

the s of

32

Konka Group Co., Ltd. Semi-Annual Report 2017

its affiliated same goo s of otia ket appl

companies actual ds goo ted pric icab

controll ds pric e le

er

e

Sale

s of

LC

D

Pro

Pro

vide

vide

pro

pro

Under pert Neg

pert Mar Not

Shenzhen OCT the y otia

y

same ket appl

Property Service man man ted 614 1,000 No Cash

actual pric icab

Co., Ltd age age pric

controll e le

men men e

er

t t

serv

serv

ices

ices

Assi

st in

dev

elop

Pro reno

Under Neg

the vide vati Mar Not

Shenzhen OCT otia

same serv on ket appl

Real Estate Co., ted 1,000 2,000 No Cash

actual ices proj pric icab

Ltd pric

controll ect e le

e

er of

hea

dqu

arte

r

Total -- -- 6,182 -- 12,500 -- -- -- --

Details of large amount of sales returns Not applicable

The Company has published the Forecasting Public Notice on Routine Related

As for the prediction on the total amount of Transaction for Y2017 (public notice No. 2016-20) on Securities Times,

routine related-party transactions to be Shanghai Securities News, China Securities Journal and Hong Kong Ta Kung

occurred in the Reporting Period by relevant Pao as well as the Internet website designated by CSRC

types, the actual performance in the Reporting http://www.cninfo.com.cn on March 31, 2017. In the Reporting Period, the

Period (if any) basis for pricing, transaction price, transaction amount and settlement methods

of raw materials purchased by the Company were basically in accordance with

33

Konka Group Co., Ltd. Semi-Annual Report 2017

the forecast. The total amount was RMB61.82 million.

Reason for major difference between

transaction price and reference market price N/A

(if applicable)

2. Related Transactions Regarding Purchase or Sales of Assets or Equity Interests

□ Applicable √ Not applicable

No such cases in the Reporting Period.

3. Related Transactions Regarding Joint Investments in Third Parties

□ Applicable √ Not applicable

No such cases in the Reporting Period.

4. Credits and Liabilities with Related Parties

√ Applicable □ Not applicable

Whether there is non-operating credits and liabilities with related parties

√ Applicable □ Not applicable

Credits of parties related to account receivable

Whether Amount

Amount

there is newly Closing

Opening recovered Current

Relation Formati non-opera added in balance

Related balance in current Interest interest

with the on ting current

party (RMB’0,0 period rate (RMB’0,

Company reason capital period (RMB’0,

00) (RMB’0,0 000)

occupatio (RMB’0,0 000)

00)

n 00)

Naught Naught Naught No 0 0 0 0.00% 0 0

Impact of related credits on the company's operation result and financial

Naught

condition

Liabilities of parties related to account payable

Relat Amount

ion Opening Amount newly returned in Current

with Formation balance added in current Interest interest

Related party Closing

the reason (RMB’0,00 current period period rate (RMB’0,00

balance(R

Com 0) (RMB’0,000) (RMB’0,000 0)

MB’0,000)

pany )

OCT Enterprises 3.10%-

Co. 160,000 0 0 3,084.54 160,000

3.90%

Contr

The

OCT Enterprises ollin 3.18%-

company

Co. g 90,000 0 0 1,746.11 90,000

applies 4.35%

share

entrusted

holde

OCT Enterprises loan to it

r 90,000 0 0 3.06% 1,384.69 90,000

Co.

OCT Enterprises 3,000 0 0 4.75% 167.17 3,000

34

Konka Group Co., Ltd. Semi-Annual Report 2017

Co.

Impact of related

liabilities on the The company applies entrusted loan from OCT Enterprises Co., which meets the needs of the

company's operation result company's existing business development and reduces the financing cost.

and financial condition

5. Other Significant Related Transactions

□ Applicable √ Not applicable

No such cases in the Reporting Period.

XIII. Particulars about the Non-operating Occupation of Funds by the Controlling

Shareholder and Other Related Parties of the Company

□ Applicable √ Not applicable

The Company was not involved in the non-operating occupation of funds by the controlling

shareholder and other related parties during the Reporting Period.

XIV. Significant Contracts and Execution

1. Entrustment, Contracting and Leasing

(1) Entrustment

□ Applicable √ Not applicable

No such cases in the Reporting Period.

(2) Contracting

□ Applicable √ Not applicable

No such cases in the Reporting Period.

(3) Leasing

□ Applicable √ Not applicable

No such cases in the Reporting Period.

2. Significant Guarantees

√ Applicable □ Not applicable

(1) Guarantees

Unit: RMB'0,000

Guarantees provided by the Company and its subsidiaries for external parties (excluding those for subsidiaries)

Guarantee Disclosure date of Amou Actual occurrence date Actual Type Perio Executed Guarante

35

Konka Group Co., Ltd. Semi-Annual Report 2017

d party relevant announcement nt for (date of agreement) guarantee of d of or not e for a

guara amount guara guar related

ntee ntee antee party or

not

Naug

Naught Naught 0 Naught 0 0 Naught Naught

ht

Total external guarantee line approved during Total actual occurred amount of external

0 0

the Reporting Period (A1) guarantee during the Reporting Period (A2)

Total external guarantee line that has been

Total actual external guarantee balance at the end

approved at the end of the Reporting Period 0 0

of the Reporting Period (A4)

(A3)

Guarantees provided by the Company for its subsidiaries

Guaran

Actual Period tee for

Disclosure date of Amount Actual occurrence Execu

Guarantee guarant Type of of a

relevant for date (date of ted or

d party ee guarantee guara related

announcement guarantee agreement) not

amount ntee party

or not

Anhui

Tongchua 35,000 07/01/2016 6,000 Joint liability 1 year No No

ng

Communi

cation

50,000 09/01/2016 50,000 Joint liability 1 year No No

technolog

y

Anhui

03/31/2017 110,000 10/26/2016 10,000 Joint liability 1 year No No

Konka

Yishijie 4,800 07/01/2016 2,000 Joint liability 1 year No No

10/20/2016 3,387 Joint liability 1 year No No

11/07/2016 23,710 Joint liability 1 year No No

Hong

Kong 355,000 04/25/2017 6774 Joint liability 1 year No No

Konka 05/22/2017 13,549 Joint liability 1 year No No

06/12/2017 6774 Joint liability 1 year No No

Total actual occurred amount of guarantee

Total guarantee line approved for the subsidiaries

909,800 for the subsidiaries during the Reporting 27,097

during the Reporting Period (B1)

Period (B2)

36

Konka Group Co., Ltd. Semi-Annual Report 2017

Total actual guarantee balance for the

Total guarantee line that has been approved for the

909,800 subsidiaries at the end of the Reporting 122,194

subsidiaries at the end of the Reporting Period (B3)

Period (B4)

Guarantees provided by the subsidiaries for their subsidiaries

Amount Actual Period

Disclosure date of Actual Type of Guarantee

Guarantee for occurrence date of Executed

relevant guarantee guarante for a related

d party guarant (date of guarant or not

announcement amount e party or not

ee agreement) ee

Naught Naught 0 Naught 0 Naught 0 Naught Naught

Total guarantee line approved for the subsidiaries Total actual occurred amount of guarantee for the

0 0

during the Reporting Period (C1) subsidiaries during the Reporting Period (C2)

Total guarantee line that has been approved for the Total actual guarantee balance for the subsidiaries

0 0

subsidiaries at the end of the Reporting Period (C3) at the end of the Reporting Period (C4)

Total guarantee amount provided by the Company (total of the above-mentioned three kinds of guarantees)

Total guarantee line approved during the Total actual occurred amount of guarantee

922,800 27,097

Reporting Period (A1+B1+C1) during the Reporting Period (A2+B2+C2)

Total guarantee line that has been approved at the

Total actual guarantee balance at the end of the

end of the Reporting Period 922,800 122,194

Reporting Period (A4+B4+C4)

(A3+B3+C3)

Proportion of total guarantee amount (A4+B4+C4) to the net

41.72%

assets of the Company

Of which:

Amount of debt guarantee provided for shareholders, actual controller and the related-party

0

(D)

Amount of debt guarantee provided for the guaranteed party whose asset-liability ratio is not

122,194

less than 70% directly or indirectly (E)

Total guarantee amount exceeded 50% of the net assets (F) 0

Total amount of the above three guarantees (D+E+F) 122,194

Explanation on the occurred warranty liability or possible bearing joint responsibility of

N/A

liquidation due to immature guarantee (if any)

Explanation on provision of guarantees for external parties in violation of the prescribed

N/A

procedure (if any)

Note: the guarantee period for the "Anhui Tongchuang" and "Yishijie" is from 07/01/2016 to 07/01/2017.

Explanation on guarantee that adopts complex method

Naught

37

Konka Group Co., Ltd. Semi-Annual Report 2017

(2) Illegal Provision of Guarantees for External Parties

□ Applicable √ Not applicable

No such cases in the Reporting Period.

3. Other Significant Contracts

□ Applicable √ Not applicable

No such cases in the Reporting Period.

XV. Social Responsibilities

1. Targeted Measures Taken to Help People Lift Themselves Out of Poverty

(1) Outline of Targeted Measures in the Reporting Period

We and China Youth Development Foundation (CYDF) have held the large public benefit activity

“Heart Journey” since 2013. Five sessions of activities have been held until now. In 2013, we have

helped thousands of migrant workers to go home; in 2014, we have planted tens of thousands of

trees nationwide and improved the living conditions of 5,000 needy families by planting the

economic and ecological trees; in 2015, we have donated nearly 100 music classrooms to the

remote regions of China by carrying out “Happy Music Classroom” Project with CYDF; in 2016,

we have helped the professional training on 100 music teachers in the remote regions of China and

promote the teacher team construction in poverty-stricken areas.

In the first half of 2017, “Heart Journey” activity with the theme of caring for the affection in the

left-behind children family in the poor area carried out by our company built “Heart Journey

Affection House” in the western poor primary school to let the children have the face-to-face

communication with the relatives in other countries via the video, and help 100 left-behind children

to gather with the parents in the city during the summer vacation.

(2) List of Targeted Measures of Listed Companies in the Reporting Period

Measurement

Indicator Number/Progress

unit

I. General condition —— ——

Of which: 1. funds RMB’0,000 40

II. Itemized investment —— ——

4. Out of poverty by education —— ——

Of which: 4.1 invested amount of supporting students in poverty RMB’0,000 40

4.2 numbers of students in poverty who were supported Person 100

38

Konka Group Co., Ltd. Semi-Annual Report 2017

(3) Subsequent Targeted Measure Plans

In the second half of 2017, our company will continue to carry out the “Heart Journey” public

welfare activity with the theme of caring for the affection in the left-behind children family in the

poor area, build “Heart Journey Affection House” in the western poor primary school and help 100

left-behind children to gather with the parents in the city during the summer vacation.

2. Significant Environmental Protection

Indicate by tick mark whether the Company or any of its subsidiaries is a heavily polluting business

identified by the environmental protection authorities of China

No

XVI. Other Significant Events

√ Applicable □ Not applicable

Announc Link

ement Date Title Page on newspaper

Link on http://www.cninfo.com.cn

No.

Announcement about the Progress of

Securities Times B80, http://www.cninfo.com.cn/finalpage/2017-0

2017-01 2017-1-17 Investing and Constructing Konka

Ta Kung Pao B3 1-17/1203018565.PDF

Scientific Creation Center

Announcement on the 2016 Earnings Securities Times B68, http://www.cninfo.com.cn/finalpage/2017-0

2017-02 2017-1-21

Forecasts Ta Kung Pao B4 1-21/1203035594.PDF

Announcement on the Resolution of the 25th Securities Times B49, http://www.cninfo.com.cn/finalpage/2017-0

2017-03 2017-2-18

Session of the 8th Board of Directors Ta Kung Pao A22 2-18/1203090685.PDF

Notice on Convening the 2017 1st Securities Times B49, http://www.cninfo.com.cn/finalpage/2017-0

2017-04 2017-2-18

Extraordinary General Meeting Ta Kung Pao A22 2-18/1203090686.PDF

Announcement about Offering Entrusted Securities Times B49, http://www.cninfo.com.cn/finalpage/2017-0

2017-05 2017-2-18

Loans to joint Stock Company Ta Kung Pao A22 2-18/1203090689.PDF

Announcement on the Resolution of the Securities Times B57, http://www.cninfo.com.cn/finalpage/2017-0

2017-06 2017-3-7

2017 1st Extraordinary General Meeting Ta Kung Pao B3 3-07/1203134012.PDF

Announcement on the Resolution of the 26th Securities Times B45, http://www.cninfo.com.cn/finalpage/2017-0

2017-07 2017-3-11

Session of the 8th Board of Directors Ta Kung Pao A26 3-11/1203148741.PDF

Announcement about Put Forward “three

old” Renovation Project of Wankang Securities Times B45, http://www.cninfo.com.cn/finalpage/2017-0

2017-08 2017-3-11

Factory and investing and building New Ta Kung Pao A26 3-11/1203148742.PDF

Factory in Dongguan

http://www.cninfo.com.cn/finalpage/2017-0

2017-09 2017-3-31 Announcement on the 2016 Annual Report

3-31/1203237063.PDF

2017-10 2017-3-31 Announcement on the Abstract of the 2016 Securities Times B97, http://www.cninfo.com.cn/finalpage/2017-0

39

Konka Group Co., Ltd. Semi-Annual Report 2017

Annual Report Ta Kung Pao B14 3-31/1203237062.PDF

Announcement on the Resolution of the 28th Securities Times B97, http://www.cninfo.com.cn/finalpage/2017-0

2017-11 2017-3-31

Session of the 8th Board of Directors Ta Kung Pao B14 3-31/1203237057.PDF

Announcement on the Resolution of the 13th Securities Times B97, http://www.cninfo.com.cn/finalpage/2017-0

2017-12 2017-3-31

Session of the 8th Board of Directors Ta Kung Pao B14 3-31/1203237042.PDF

Announcement on the Expectation of the Securities Times B97, http://www.cninfo.com.cn/finalpage/2017-0

2017-13 2017-3-31

2017 Routine Related Transaction Ta Kung Pao B14 3-31/1203237058.PDF

Announcement about the External Securities Times B97, http://www.cninfo.com.cn/finalpage/2017-0

2017-14 2017-3-31

Guarantee of Konka Group Co., Ltd. Ta Kung Pao B14 3-31/1203237056.PDF

Announcement about Related Transaction Securities Times B97, http://www.cninfo.com.cn/finalpage/2017-0

2017-15 2017-3-31

of Konka Group Co., Ltd. Ta Kung Pao B15 3-31/1203237059.PDF

Announcement about Applying for the

Securities Times B97, http://www.cninfo.com.cn/finalpage/2017-0

2017-16 2017-3-31 Limit of Financial Products of Konka

Ta Kung Pao B15 3-31/1203237043.PDF

Group Co., Ltd.

Notice on Convening the 2016 Annual Securities Times B97, http://www.cninfo.com.cn/finalpage/2017-0

2017-17 2017-3-31

General Meeting Ta Kung Pao B15 3-31/1203237041.PDF

Announcement on Receiving the Tax Securities Times B40, http://www.cninfo.com.cn/finalpage/2017-0

2017-18 2017-4-8

Reimbursement Events Ta Kung Pao A6 4-08/1203260578.PDF

Announcement on the 2017 First Quarter Securities Times B61, http://www.cninfo.com.cn/finalpage/2017-0

2017-19 2017-4-15

Earnings Forecasts Ta Kung Pao A11 4-15/1203298268.PDF

Announcement about Some Vice President

Securities Times B24, http://www.cninfo.com.cn/finalpage/2017-0

2017-20 2017-4-20 of the Company officially Performing

Ta Kung Pao B7 4-20/1203331863.PDF

Duties

Announcement on the Resolution of the Securities Times B41, http://www.cninfo.com.cn/finalpage/2017-0

2017-21 2017-4-25

2015 Annual General Meeting Ta Kung Pao B13 4-25/1203376714.PDF

Legal Opinion of Konka Group 2016 http://www.cninfo.com.cn/finalpage/2017-0

2017-4-25 Securities Times B12

Annual General Meeting 4-25/1203376713.PDF

http://www.cninfo.com.cn/finalpage/2017-0

2017-22 2017-4-29 2016 First Quarter Report

4-29/1203422671.PDF

Securities Times B189, http://www.cninfo.com.cn/finalpage/2017-0

2017-23 2017-4-29 Text of the 2016 First Quarter Report

Ta Kung Pao B6 4-29/1203422669.PDF

Announcement on the Resolution of the 30th Securities Times B60, http://www.cninfo.com.cn/finalpage/2017-0

2017-24 2017-5-23

Session of the 8th Board of Directors Ta Kung Pao B10 5-23/1203553957.PDF

Securities Times B60, http://www.cninfo.com.cn/finalpage/2017-0

2017-25 2017-5-23 Announcement on the Related Transactions

Ta Kung Pao B10 5-23/1203553958.PDF

Announcement about the Listing to Transfer Securities Times B60, http://www.cninfo.com.cn/finalpage/2017-0

2017-26 2017-5-23

Equity of Yingrui Photoelectric Ta Kung Pao B10 5-23/1203553959.PDF

40

Konka Group Co., Ltd. Semi-Annual Report 2017

Notice on Convening the 2017 2nd Securities Times B60, http://www.cninfo.com.cn/finalpage/2017-0

2017-27 2017-5-23

Extraordinary General Meeting Ta Kung Pao B10 5-23/1203553955.PDF

Announcement on the Resolution of the Securities Times B48, http://www.cninfo.com.cn/finalpage/2017-0

2017-28 2017-6-10

2017 2nd Extraordinary General Meeting Ta Kung Pao B2 6-10/1203606560.PDF

Announcement about the Progress That

Securities Times B40, http://www.cninfo.com.cn/finalpage/2017-0

2017-29 2017-6-22 Listing to Transfer Equity of Yingrui

Ta Kung Pao B2 6-22/1203637987.PDF

Photoelectric

Announcement about the Resign of Securities Times B36, http://www.cninfo.com.cn/finalpage/2017-0

2017-30 2017-6-24

Non-independent Director of the Company Ta Kung Pao B3 6-24/1203642993.PDF

Announcement on Receiving the Tax Securities Times B13, http://www.cninfo.com.cn/finalpage/2017-0

2017-31 2017-6-27

Reimbursement Events Ta Kung Pao B6 6-27/1203648572.PDF

Announcement on the Resolution of the 31th Securities Times B20, http://www.cninfo.com.cn/finalpage/2017-0

2017-32 2017-6-30

Session of the 8th Board of Directors Ta Kung Pao B18 6-30/1203665192.PDF

Announcement about Planning to Set Up Securities Times B20, http://www.cninfo.com.cn/finalpage/2017-0

2017-33 2017-6-30

Industry Funds Ta Kung Pao B18 6-30/1203665190.PDF

Announcement about the Listing to Transfer

Securities Times B20, http://www.cninfo.com.cn/finalpage/2017-0

2017-34 2017-6-30 Part of Equity of Kangqiao Jiacheng

Ta Kung Pao B18 6-30/1203665200.PDF

Company

Announcement about the Listing to Transfer Securities Times B20, http://www.cninfo.com.cn/finalpage/2017-0

2017-35 2017-6-30

Part of Equity of Kunkang Company Ta Kung Pao B18 6-30/1203665201.PDF

Announcement about Investing Chutian Securities Times B20, http://www.cninfo.com.cn/finalpage/2017-0

2017-36 2017-6-30

Dragon Ta Kung Pao B18 6-30/1203665191.PDF

Notice on Convening the 2017 3rd Securities Times B20, http://www.cninfo.com.cn/finalpage/2017-0

2017-37 2017-6-30

Extraordinary General Meeting Ta Kung Pao B18 6-30/1203665193.PDF

XVII. Significant Events of Subsidiaries

□ Applicable √ Not applicable

41

Konka Group Co., Ltd. Semi-Annual Report 2017

Section VI Share Changes and Shareholders’ Profile

I. Share Changes

1. Share Changes

Unit: share

Before Increase/decrease (+/-) After

Bonu Increas

New Perce

Percent s e from

Number issue Other Subtotal Number ntage

age (%) share capital

s (%)

s reserve

1. Restricted shares 19,500 19,500 19,500 0.00%

1.1 Shares held by

other domestic 19,500 19,500 19,500 0.00%

investors

Among which: Shares

held by domestic

corporations

Shares

held by domestic 19,500 19,500 19,500 0.00%

individuals

2. Non-restricted 100.00

2,407,945,408 -19,500 -19,500 2,407,925,908 100%

shares %

2.1 RMB common 66.31

1,596,593,800 66.31% -19,500 -19,500 1,596,574,300

shares %

2.2 Domestically 33.69

811,351,608 33.69% 811,351,608

listed foreign shares %

100.00

3. Total shares 2,407,945,408 2,407,945,408 100%

%

Reasons for the share changes

√ Applicable □ Not applicable

On March 10, 2017, the company held the 26th meeting of 8th board of directors, audited and passed

the Bill on the Term-change of Senior Managers, and agreed to hire Mr. Sun Qingyan as the vice

president. Mr. Sun Qingyan holds 26,000 shares of A stock (000016), and 75% of the shares is the

limited-sales condition according to the related provisions.

Approval of share changes

42

Konka Group Co., Ltd. Semi-Annual Report 2017

□ Applicable √ Not applicable

Transfer of share ownership

□ Applicable √ Not applicable

Effects of share changes on the basic EPS, diluted EPS, net assets per share attributable to common

shareholders of the Company and other financial indexes over the prior year and the prior period

□ Applicable √ Not applicable

Other contents that the Company considers necessary or is required by the securities regulatory

authorities to disclose

□ Applicable √ Not applicable

2. Changes in Restricted Shares

√ Applicable □ Not applicable

Unit: share

Opening Unlocked in the Increased in the Closing

Name of Reason for Date of

restricted Reporting Reporting restricted

shareholder unlocking unlocking

shares Period Period shares

Locked share

Sun Qingyan 0 0 19,500 19,500 by senior Undetermined

executives

Total 0 0 19,500 19,500 -- --

II. Issuance and Listing of Securities

□ Applicable √ Not applicable

III. Total Number of Shareholders and Their Shareholdings

Unit: share

Total number of common Total number of preference shareholders with resumed voting

115,362 0

shareholders at the period-end rights at the period-end (if any) (see Note 8)

5% or greater common shareholders or the top 10 common shareholders

Pledged or

Increase/

Number frozen

Shareh decrease

Nature of Total shares of Number of shares

olding during

Name of shareholder sharehold held at the restricted non-restricte N

percent the

er period-end shares d shares held u

age (%) Reporting Status

held m

Period

b

43

Konka Group Co., Ltd. Semi-Annual Report 2017

er

State-own

ed

OCT Enterprises Co. 21.75% 523,746,932 0 0 523,746,932

corporatio

n

Foreign

CITIC Securities Brokerage

corporatio 7.56% 182,100,202 0 0 182,100,202

(Hong Kong) Co., Ltd.

n

Foreign

HOLY TIME GROUP

corporatio 2.33% 56,049,824 0 0 56,049,824

LIMITED

n

Foreign

Guoyuan Securities Broker -1,412,80

corporatio 2.27% 54,755,145 0 54,755,145

(HK) Co., Ltd. 0

n

Foreign

GAOLING FUND,L.P. corporatio 2.19% 52,801,250 0 0 52,801,250

n

State-own

ed

CMS (HK) 0.94% 22,662,120 -528,500 0 22,662,120

corporatio

n

Foreign

NAM NGAI natural 0.94% 22,535,240 -684,800 0 22,535,240

person

Nanhua Futures Co., Ltd.

- Nanhua Futures Silver -2,792,04

Other 0.86% 20,713,937 0 20,713,937

Leaf No. 25Assets 2

Management Plan

Yunnan International

20,216,86

Entrust Co., Ltd-Juli No. 48 Other 0.84% 20,216,860 0 20,216,860

0

Single Capital Entrust

Foreign

CSI Capital Management

corporatio 0.83% 20,050,928 0 0 20,050,928

Limited

n

Strategic investors or general corporations

becoming top-ten shareholders due to placing Naught

of new shares (if any) (see Note 3)

Jialong Investment Limited, a wholly-funded subsidiary of the Company’s

Related or acting-in-concert parties among the first majority shareholder OCT Enterprises Co., holds 180,001,110 and

shareholders above 18,360,000 ordinary shares in the Company respectively through CITIC

Securities Brokerage (Hong Kong) Co., Ltd. and CMS (HK). Jialong

44

Konka Group Co., Ltd. Semi-Annual Report 2017

Investment Limited and OCT Enterprises Co. are parties acting in concert.

Other than that, it is unknown whether the other shareholders are related

parties or act-in-concert parties or not.

Shareholdings of the top ten non-restricted common shareholders

Number of Type of shares

Name of shareholder non-restricted shares

Type Number

held at the period-end

RMB ordinary

OCT Enterprises Co. 523,746,932 523,746,932

share

Domestically

CITIC Securities Brokerage (Hong Kong) Co., Ltd. 182,100,202 listed foreign 182,100,202

share

Domestically

HOLY TIME GROUP LIMITED 56,049,824 listed foreign 56,049,824

share

Domestically

Guoyuan Securities Broker (HK) Co., Ltd. 54,755,145 listed foreign 54,755,145

share

Domestically

GAOLING FUND,L.P. 52,801,250 listed foreign 52,801,250

share

Domestically

CMS (HK) 22,662,120 listed foreign 22,662,120

share

Domestically

NAM NGAI 22,535,240 listed foreign 22,535,240

share

Nanhua Futures Co., Ltd. - Nanhua Futures Silver Leaf No. RMB ordinary

20,713,937 20,713,937

25Assets Management Plan share

Yunnan International Entrust Co., Ltd-Juli No. 48 Single RMB ordinary

20,216,860 20,216,860

Capital Entrust share

Domestically

CSI Capital Management Limited 20,050,928 listed foreign 20,050,928

share

Jialong Investment Limited, a wholly-funded subsidiary of the Company’s first

Related or acting-in-concert parties

majority shareholder OCT Enterprises Co., holds 180,001,110 and 18,360,000

among the top ten non-restrictedly

ordinary shares in the Company respectively through CITIC Securities Brokerage

tradable share holders and between the

(Hong Kong) Co., Ltd. and CMS (HK). Jialong Investment Limited and OCT

top ten non-restrictedly tradable share

Enterprises Co. are parties acting in concert. Other than that, it is unknown whether

holders and the top ten shareholders

the other shareholders are related parties or act-in-concert parties or not.

45

Konka Group Co., Ltd. Semi-Annual Report 2017

Top 10 ordinary shareholders

conducting securities margin trading (if Naught

any) (see Note 4)

Indicate by tick mark whether any of the top ten common shareholders or the top ten non-restricted

common shareholders of the Company conducted any promissory repo during the Reporting Period.

□ Yea √ No

No such cases in the Reporting Period.

IV. Change of the Controlling Shareholder or the Actual Controller

Change of the controlling shareholder in the Reporting Period

□ Applicable √ Not applicable

There was no any change of the controlling shareholder of the Company in the Reporting Period.

Change of the actual controller in the Reporting Period

□ Applicable √ Not applicable

There was no any change of the actual controller of the Company in the Reporting Period.

46

Konka Group Co., Ltd. Semi-Annual Report 2017

Section VII Preference Shares

□ Applicable √ Not applicable

No preference shares in the Reporting Period.

47

Konka Group Co., Ltd. Semi-Annual Report 2017

Section VIII Directors, Supervisors and Executive Officers

I Changes in Shareholdings of Directors, Supervisors and Executive Officers

√ Applicable □ Not applicable

The

The

granted

Increase Decreas granted The granted

Incu Opening Closing restricted

in the e in the restricted restricted

mbe sharehol sharehol shares at

Name Office title Reportin Reportin shares at shares at the

nt/fo ding ding the

g Period g Period the period-end

rmer (share) (share)) Reporting

(share) (share) period-begi (share)

period(shar

n (share)

e)

Liu Board Curr

0 0 0 0 0 0 0

Fengxi Chairman ent

Jin Curr

Director 0 0 0 0 0 0 0

Qingjun ent

He Curr

Director 0 0 0 0 0 0 0

Haibin ent

Zhangjin Curr

Director 0 0 0 0 0 0 0

g ent

Sun

Independent Curr

Shengdi 0 0 0 0 0 0 0

Director ent

an

Xiao Independent Curr

0 0 0 0 0 0 0

Zuhe Director ent

Zhang Independent Curr

0 0 0 0 0 0 0

Shuhua Director ent

Hao Curr

Supervisory 0 0 0 0 0 0 0

Gang ent

Wang Curr

Supervisor 0 0 0 0 0 0 0

Youlai ent

Employee Curr

Li Jun 0 0 0 0 0 0 0

Supervisor ent

Curr

Zhoubin President 0 0 0 0 0 0 0

ent

He Vice Curr

0 0 0 0 0 0 0

Jianjun President ent

48

Konka Group Co., Ltd. Semi-Annual Report 2017

Li Vice Curr

0 0 0 0 0 0 0

Hongtao President ent

Wu Board Curr

0 0 0 0 0 0 0

Yongjun Secretary ent

Li Curr

CFO 0 0 0 0 0 0 0

Chunlei ent

Vice Curr

Yang Bo 0 0 0 0 0 0 0

President ent

Cao Vice Curr

0 0 0 0 0 0 0

Shiping President ent

Sun Vice Curr

0 26,000 0 26,000 0 0 0

Qingyan President ent

Chen

Director Left 0 0 0 0 0 0 0

Yuehua

Huang Vice

Zhongtia President Left 0 0 0 0 0 0 0

n

Lin Vice

Hhongfa President Left 0 0 0 0 0 0 0

n

Total -- -- 0 26,000 0 26,000 0 0 0

II Changes in Directors, Supervisors and Executive Officers

√ Applicable □ Not applicable

Name Office title Type of change Date Reason

Election of meeting of

Zhangjing Director Elected 07/17/2017

shareholders

Chen Yuehua Director Left 06/22/2017 Resign due to personal reasons

Engaged by the decision from

Zhoubin President Engaged 03/10/2017

the Board of Directors

Engaged Engaged by the decision from

Li Chunlei CFO 03/10/2017

the Board of Directors

Vice President Engaged Engaged by the decision from

Yang Bo 03/10/2017

the Board of Directors

Vice President Engaged Engaged by the decision from

Cao Shiping 03/10/2017

the Board of Directors

Vice President Engaged Engaged by the decision from

Sun Qingyan 04/18/2017

the Board of Directors

Huang Zhongtian Vice President Left for expiration 03/10/2017 The service term of the Board

49

Konka Group Co., Ltd. Semi-Annual Report 2017

of Supervisors was expired

Vice President The service term of the Board

Lin Hongfan Left for expiration 03/10/2017

of Supervisors was expired

50

Konka Group Co., Ltd. Semi-Annual Report 2017

Section IX Corporate Bonds

Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue

before the approval date of this Report or were due but could not be redeemed in full?

No

51

Konka Group Co., Ltd. Semi-Annual Report 2017

Section X Financial Report

I. Auditor’s Report

Whether the semi-annual report has been audited?

□Yes √ No

The semi-annual report of the Company has not been audited.

II. Financial Statements

The unit of the financial statements attached: RMB

1. Consolidated Balance Sheet

Prepared by Konka Group Co., Ltd.

June 30, 2017

Unit: RMB

Item Closing balance Opening balance

Current assets:

Monetary funds 2,490,079,604.07 2,617,606,256.42

Settlement reserve

Interbank lendings

Financial assets at fair value through profit/loss 174,029,426.65 252,084,994.12

Derivative financial assets

Notes receivable 2,429,438,978.77 2,871,633,498.82

Accounts receivable 1,966,918,540.02 2,307,965,548.49

Accounts paid in advance 739,601,586.38 274,810,658.72

Premiums receivable

Reinsurance premiums receivable

Receivable reinsurance contract reserve

Interest receivable 1,185,860.75 1,342,063.84

Dividends receivable 10,171,609.48 10,171,609.48

Other accounts receivable 277,435,269.56 222,389,921.80

Financial assets purchased under agreements to resell

Inventories 6,374,483,463.58 4,287,413,944.35

Assets held for sale

52

Konka Group Co., Ltd. Semi-Annual Report 2017

Non-current assets due within one year

Other current assets 2,011,262,179.93 562,204,116.20

Total current assets 16,474,606,519.19 13,407,622,612.24

Non-current assets:

Loans and advances to customers

Available-for-sale financial assets 290,355,459.18 314,967,639.36

Held-to-maturity investments

Long-term accounts receivable

Long-term equity investments 629,257,019.68 309,648,120.37

Investment property 219,271,267.11 222,086,904.26

Fixed assets 1,544,239,052.29 1,573,978,914.03

Construction in progress 404,450,172.08 315,536,437.05

Engineering materials

Disposal of fixed assets

Productive living assets

Oil-gas assets

Intangible assets 252,432,746.73 302,045,627.44

R&D expenses

Goodwill 3,597,657.15 3,597,657.15

Long-term deferred expense 94,751,697.66 91,901,533.39

Deferred income tax assets 733,098,344.30 701,734,152.68

Other non-current assets 20,000,000.00

Total non-current assets 4,191,453,416.18 3,835,496,985.73

Total assets 20,666,059,935.37 17,243,119,597.97

Current liabilities:

Short-term borrowings 10,744,965,110.13 6,562,834,226.51

Borrowings from the Central Bank

Money deposits accepted and inter-bank deposits

Interbank borrowings

Financial liabilities at fair value through profit/loss 20,181,325.74 337,263.13

Derivative financial liabilities

Notes payable 899,911,286.22 863,709,138.39

Accounts payable 2,297,215,140.77 3,160,073,575.56

Accounts received in advance 1,678,390,010.50 1,201,426,223.70

53

Konka Group Co., Ltd. Semi-Annual Report 2017

Financial assets sold for repurchase

Fees and commissions payable

Payroll payable 172,950,937.61 273,059,516.65

Taxes payable 68,872,054.95 121,905,421.18

Interest payable 30,119,490.82 21,344,172.45

Dividends payable

Other accounts payable 1,132,518,296.11 1,444,349,986.74

Reinsurance premiums payable

Insurance contract reserve

Payables for acting trading of securities

Payables for acting underwriting of securities

Liabilities held for sale

Non-current liabilities due within one year 301,282.02 41,025.60

Other current liabilities

Total current liabilities 17,045,424,934.87 13,649,080,549.91

Non-current liabilities:

Long-term borrowings 70,000,000.00 70,000,000.00

Bonds payable

Of which: Preference shares

Perpetual bonds

Long-term accounts payable 30,144,871.84 30,102,564.14

Long-term payroll payable 15,614,846.48 18,151,659.90

Special payables

Provisions 7,551,985.10 7,551,985.10

Deferred income 126,952,107.30 130,571,125.42

Deferred income tax liabilities 21,615,840.46 19,162,818.83

Other non-current liabilities

Total non-current liabilities 271,879,651.18 275,540,153.39

Total liabilities 17,317,304,586.05 13,924,620,703.30

Owners’ equity:

Share capital 2,407,945,408.00 2,407,945,408.00

Other equity instruments

Of which: Preference shares

Perpetual bonds

54

Konka Group Co., Ltd. Semi-Annual Report 2017

Capital reserve 78,556,489.58 79,723,092.04

Less: Treasury shares

Other comprehensive income -9,181,811.13 -6,932,104.65

Special reserve

Surplus reserve 847,908,466.28 847,908,466.28

Provisions for general risks

Retained earnings -396,291,986.77 -427,163,254.63

Equity attributable to owners of the Company 2,928,936,565.96 2,901,481,607.04

Minority interests 419,818,783.36 417,017,287.63

Total owners’ equity 3,348,755,349.32 3,318,498,894.67

Total liabilities and owners’ equity 20,666,059,935.37 17,243,119,597.97

Legal representative: Liu Fengxi Accounting head for this Report: Li Chunlei

Head of the accounting department: Feng Junxiu

2. Balance Sheet of the Company

Unit: RMB

Item Closing balance Opening balance

Current assets:

Monetary funds 1,271,047,943.41 982,562,273.45

Financial assets at fair value through profit/loss 1,608,526.37 39,894,844.12

Derivative financial assets

Notes receivable 2,217,478,346.39 2,513,459,083.61

Accounts receivable 2,579,464,881.21 3,145,529,199.35

Accounts paid in advance 767,711,288.96 523,905,219.52

Interest receivable 2,215,166.39 4,502,350.43

Dividends receivable

Other accounts receivable 2,658,019,649.37 1,725,494,161.08

Inventories 2,946,917,248.75 1,926,824,243.11

Assets held for sale

Non-current assets due within one year

Other current assets 1,992,042,082.60 505,418,961.79

Total current assets 14,436,505,133.45 11,367,590,336.46

Non-current assets:

Available-for-sale financial assets 255,073,223.36 270,217,639.36

Held-to-maturity investments 170,000,000.00 170,000,000.00

55

Konka Group Co., Ltd. Semi-Annual Report 2017

Long-term accounts receivable

Long-term equity investments 2,737,657,509.19 2,383,970,009.87

Investment property 219,271,267.11 222,086,904.26

Fixed assets 493,652,144.76 499,826,176.39

Construction in progress 22,139,475.71 11,754,885.34

Engineering materials

Disposal of fixed assets

Productive living assets

Oil-gas assets

Intangible assets 88,383,149.81 90,880,022.23

R&D expenses

Goodwill

Long-term deferred expense 71,702,290.31 66,995,753.17

Deferred income tax assets 686,578,897.26 656,704,805.39

Other non-current assets 20,000,000.00

Total non-current assets 4,764,457,957.51 4,372,436,196.01

Total assets 19,200,963,090.96 15,740,026,532.47

Current liabilities:

Short-term borrowings 7,878,215,003.35 5,436,958,840.80

Financial liabilities at fair value through profit/loss 20,181,325.74 337,263.13

Derivative financial liabilities

Notes payable 2,291,729,831.35 1,454,982,347.31

Accounts payable 4,390,355,218.59 3,710,175,718.31

Accounts received in advance 427,249,879.85 322,402,357.59

Payroll payable 88,784,318.13 131,415,800.19

Taxes payable 10,440,304.17 19,823,949.08

Interest payable 39,816,809.21 23,767,528.97

Dividends payable

Other accounts payable 1,287,996,900.39 1,760,751,455.81

Liabilities held for sale

Non-current liabilities due within one year

Other current liabilities

Total current liabilities 16,434,769,590.78 12,860,615,261.19

Non-current liabilities:

56

Konka Group Co., Ltd. Semi-Annual Report 2017

Long-term borrowings 40,000,000.00 40,000,000.00

Bonds payable

Of which: Preference shares

Perpetual bonds

Long-term payables

Long-term payroll payable

Special payables

Provisions 7,551,985.10 7,551,985.10

Deferred income 82,531,411.20 82,166,818.30

Deferred income tax liabilities 12,026,251.50

Other non-current liabilities

Total non-current liabilities 130,083,396.30 141,745,054.90

Total liabilities 16,564,852,987.08 13,002,360,316.09

Owners’ equity:

Share capital 2,407,945,408.00 2,407,945,408.00

Other equity instruments

Of which: Preference shares

Perpetual bonds

Capital reserve 63,627,505.93 64,794,108.39

Less: Treasury shares

Other comprehensive income -5,093,676.42 6,714,437.62

Special reserve

Surplus reserve 847,908,466.28 847,908,466.28

Retained earnings -678,277,599.91 -589,696,203.91

Total owners’ equity 2,636,110,103.88 2,737,666,216.38

Total liabilities and owners’ equity 19,200,963,090.96 15,740,026,532.47

3. Consolidated Income Statement

Unit: RMB

Item January-June 2017 January-June 2016

1. Operating revenues 11,405,965,979.43 8,609,080,822.24

Including: Sales income 11,405,965,979.43 8,609,080,822.24

Interest income

Premium income

Fee and commission income

57

Konka Group Co., Ltd. Semi-Annual Report 2017

2. Operating costs 11,495,886,195.84 8,741,569,244.93

Including: Cost of sales 10,110,191,258.07 7,177,725,092.42

Interest expenses

Fee and commission expenses

Surrenders

Net claims paid

Net amount provided as insurance contract reserve

Expenditure on policy dividends

Reinsurance premium

Taxes and surtaxes 34,429,592.04 56,149,941.54

Selling expenses 974,003,306.54 1,109,146,923.61

Administrative expenses 264,108,100.97 290,919,290.02

Finance costs 110,882,895.46 68,373,432.00

Asset impairment loss 2,271,042.76 39,254,565.34

Add: Profit on fair value changes (“-” means loss) -103,077,757.73 -18,141,655.39

Investment income (“-” means loss) 67,005,572.06 10,586,381.62

Including: Share of profit/loss of associates and joint ventures -4,574,294.19 -7,531,575.68

Exchange gains (“-” means loss)

Other gains 36,838,391.51

3. Operating profit (“-” means loss) -89,154,010.57 -140,043,696.46

Add: Non-operating income 123,347,108.29 154,187,662.64

Including: Profit on disposal of non-current assets 33,597,795.57 3,147,161.67

Less: Non-operating expense 3,635,538.11 3,531,018.36

Including: Loss on disposal of non-current assets 1,065,392.90 617,565.57

4. Total profit (“-” means loss) 30,557,559.61 10,612,947.82

Less: Corporate income tax -3,838,772.97 705,997.10

5. Net profit (“-” means loss) 34,396,332.58 9,906,950.72

Net profit attributable to owners of the Company 30,871,267.86 12,834,736.76

Minority interests’ income 3,525,064.72 -2,927,786.04

6. Other comprehensive income net of tax -2,226,560.59 -15,440,224.77

Other comprehensive income net of tax attributable to owners of

-2,249,706.48 -15,158,638.24

the Company

6.1 Other comprehensive income that will not be reclassified

into profit/loss

6.1.1 Changes in net liabilities or assets with a defined

58

Konka Group Co., Ltd. Semi-Annual Report 2017

benefit plan upon re-measurement

6.1.2 Share of other comprehensive income of investees that

cannot be reclassified into profit/loss under the equity method

6.2 Other comprehensive income to be subsequently

-2,249,706.48 -15,158,638.24

reclassified into profit/loss

6.2.1 Share of other comprehensive income of investees that

will be reclassified into profit/loss under the equity method

6.2.2 Profit/loss on fair value changes of available-for-sale

-11,347,998.58 -1,875.00

financial assets

6.2.3 Profit/loss on reclassifying held-to-maturity

investments into available-for-sale financial assets

6.2.4 Effective profit/loss on cash flow hedges

6.2.5 Currency translation differences 9,098,292.10 -15,156,763.24

6.2.6 Other

Other comprehensive income net of tax attributable to minority

23,145.89 -281,586.53

interests

7. Total comprehensive income 32,169,771.99 -5,533,274.05

Attributable to owners of the Company 28,621,561.38 -2,323,901.48

Attributable to minority interests 3,548,210.61 -3,209,372.57

8. Earnings per share

8.1 Basic earnings per share 0.0128 0.0053

8.2 Diluted earnings per share 0.0128 0.0053

Where business mergers under the same control occurred in this Reporting Period, the net profit achieved by the merged parties

before the business mergers was RMB0.00, with the corresponding amount for the last period being RMB0.00.

Legal representative: Liu Fengxi Accounting head for this Report: Li Chunlei

Head of the accounting department: Feng Junxiu

4. Income Statement of the Company

Unit: RMB

Item January-June 2017 January-June 2016

1. Operating revenues 6,272,712,644.73 6,445,980,538.16

Less: Operating costs 5,443,839,907.56 5,638,759,127.68

Taxes and surtaxes 10,868,803.46 21,209,160.52

Selling expenses 711,874,597.16 808,506,711.94

Administrative expenses 188,310,629.91 152,850,562.16

Finance costs 127,560,085.67 72,822,853.13

Asset impairment loss 2,244,928.43 24,699,388.50

Add: profit on fair value changes (“-” means loss) -63,255,380.36 7,670,643.10

59

Konka Group Co., Ltd. Semi-Annual Report 2017

Investment income (“-” means loss) 77,763,929.57 20,628,022.12

Including: Share of profit/loss of associates and joint ventures -6,495,694.18 4,112,715.97

Other gains 26,416,590.40

2. Operating profit (“-” means loss) -171,061,167.85 -244,568,600.55

Add: Non-operating income 46,954,770.89 98,624,509.69

Including: Profit on disposal of non-current assets 71,766.85 264,303.85

Less: Non-operating expense 2,589,238.41 1,189,594.88

Including: Loss on disposal of non-current assets 141,009.66 145,122.77

3. Total profit (“-” means loss) -126,695,635.37 -147,133,685.74

Less: Corporate income tax -38,114,239.37 -35,628,495.40

4. Net profit (“-” means loss) -88,581,396.00 -111,505,190.34

5. Other comprehensive income net of tax -11,808,114.04 641,019.96

5.1 Other comprehensive income that will not be reclassified into

profit and loss

5.1.1 Changes in net liabilities or assets with a defined benefit

plan upon re-measurement

5.1.2 Share of other comprehensive income of investees that

cannot be reclassified into profit/loss under the equity method

5.2 Other comprehensive income to be subsequently reclassified

-11,808,114.04 641,019.96

into profit/loss

5.2.1 Share of other comprehensive income of investees that will

be reclassified into profit/loss under the equity method

5.2.2 Profit/loss on fair value changes of available-for-sale

-11,358,312.00 -1,875.00

financial assets

5.2.3 Profit/loss on reclassifying held-to-maturity investments

into available-for-sale financial assets

5.2.4 Effective profit/loss on cash flow hedges

5.2.5 Currency translation differences -449,802.04 642,894.96

5.2.6 Other

6. Total comprehensive income -100,389,510.04 -110,864,170.38

7. Earnings per share

7.1 Basic earnings per share

7.2 Diluted earnings per share

5. Consolidated Cash flow statement

Unit: RMB

Item January-June 2017 January-June 2016

1. Cash flows associated with operating activities:

60

Konka Group Co., Ltd. Semi-Annual Report 2017

Cash received from sale of commodities and rendering of service 10,702,542,891.56 9,435,398,454.00

Net increase in money deposits from customers and interbank

placements

Net increase in loans from the Central Bank

Net increase in funds borrowed from other financial institutions

Cash received from premium of original insurance contracts

Net cash received from reinsurance business

Net increase in deposits of policy holders and investment fund

Net increase in disposal of financial assets at fair value through

profit/loss

Interest, fees and commissions received

Net increase in interbank borrowings

Net increase in funds in repurchase business

Tax refunds received 153,594,635.95 178,405,043.66

Cash generated by other operating activities 242,504,590.42 265,852,475.51

Subtotal of cash generated by operating activities 11,098,642,117.93 9,879,655,973.17

Cash paid for goods and services 11,531,432,202.90 8,174,460,211.13

Net increase in loans and advances to customers

Net increase in funds deposited in the Central Bank and interbank

placements

Cash paid for claims of original insurance contracts

Interest, fees and commissions paid

Cash paid as policy dividends

Cash paid to and for employees 810,851,488.87 844,148,334.80

Taxes paid 264,698,689.66 393,891,670.20

Cash used in other operating activities 755,674,441.38 592,697,813.46

Subtotal of cash used in operating activities 13,362,656,822.81 10,005,198,029.59

Net cash generated by operating activities -2,264,014,704.88 -125,542,056.42

2. Cash flows associated with investing activities:

Cash received from retraction of investments 9,766,980.30 10,039,975.96

Cash received as investment income 78,957,443.99 18,138,724.61

Net cash received from disposal of fixed assets, intangible assets

78,716,573.22 177,070.99

and other long-term assets

Net cash received from disposal of subsidiaries or other business

units

Cash generated by other investing activities 857,901,449.68 4,293,428,300.00

61

Konka Group Co., Ltd. Semi-Annual Report 2017

Subtotal of cash generated by investing activities 1,025,342,447.19 4,321,784,071.56

Cash paid to acquire fixed assets, intangible assets and other

124,051,006.64 57,679,455.60

long-term assets

Cash paid for investment 326,090,459.58 6,010,455.00

Net increase in pledged loans

Net cash paid to acquire subsidiaries and other business units

Cash used in other investing activities 2,156,068,913.10 4,321,807,285.63

Subtotal of cash used in investing activities 2,606,210,379.32 4,385,497,196.23

Net cash generated by investing activities -1,580,867,932.13 -63,713,124.67

3. Cash flows associated with financing activities:

Cash received from capital contributions 265,000.00 4,900,000.00

Including: Cash received from minority shareholder investments

265,000.00 4,900,000.00

by subsidiaries

Cash received as borrowings 5,023,816,944.90 2,902,000,000.00

Cash received from issuance of bonds

Cash generated by other financing activities 444,475,802.89 1,091,505,232.65

Subtotal of cash generated by financing activities 5,468,557,747.79 3,998,405,232.65

Repayment of borrowings 1,143,869,292.69 2,762,733,295.48

Cash paid for interest expenses and distribution of dividends or

162,968,902.94 50,260,605.68

profit

Including: dividends or profit paid by subsidiaries to minority

746714.88

interests

Cash used in other financing activities 574,504.77 31,258,073.60

Sub-total of cash used in financing activities 1,307,412,700.40 2,844,251,974.76

Net cash generated by financing activities 4,161,145,047.39 1,154,153,257.89

4. Effect of foreign exchange rate changes on cash and cash

-10,379,276.29 16,897,838.33

equivalents

5. Net increase in cash and cash equivalents 305,883,134.09 981,795,915.13

Add: Opening balance of cash and cash equivalents 2,020,902,945.13 1,488,154,851.35

6. Closing balance of cash and cash equivalents 2,326,786,079.22 2,469,950,766.48

6. Cash Flow Statement of the Company

Unit: RMB

Item January-June 2017 January-June 2016

1. Cash flows associated with operating activities:

Cash received from sale of commodities and rendering of service 7,169,804,450.63 6,066,072,499.56

Tax refunds received 45,615,145.13 106,864,410.47

62

Konka Group Co., Ltd. Semi-Annual Report 2017

Cash generated by other operating activities 1,557,443,931.45 595,949,901.28

Subtotal of cash generated by operating activities 8,772,863,527.21 6,768,886,811.31

Cash paid for goods and services 6,398,479,799.13 7,097,799,617.56

Cash paid to and for employees 490,539,972.72 469,174,013.13

Taxes paid 74,454,460.84 199,964,096.41

Cash used in other operating activities 2,206,102,049.40 950,560,098.46

Subtotal of cash used in operating activities 9,169,576,282.09 8,717,497,825.56

Net cash generated by operating activities -396,712,754.88 -1,948,611,014.25

2. Cash flows associated with investing activities:

Cash received from retraction of investments 5,685.00

Cash received as investment income 90,904,415.99 22,133,330.57

Net cash received from disposal of fixed assets, intangible assets

157,331.75 174,720.56

and other long-term assets

Net cash received from disposal of subsidiaries or other business

units

Cash generated by other investing activities 857,000,000.00 4,395,417,300.00

Subtotal of cash generated by investing activities 948,061,747.74 4,417,731,036.13

Cash paid to acquire fixed assets, intangible assets and other

25,893,599.53 8,706,651.29

long-term assets

Cash paid for investment 361,799,598.00 14,016,000.00

Net cash paid to acquire subsidiaries and other business units

Cash used in other investing activities 2,229,985,587.07 4,542,483,083.21

Subtotal of cash used in investing activities 2,617,678,784.60 4,565,205,734.50

Net cash generated by investing activities -1,669,617,036.86 -147,474,698.37

3. Cash flows associated with financing activities:

Cash received from capital contributions

Cash received as borrowings 2,676,935,367.72 3,501,874,941.51

Cash received from issuance of bonds

Cash generated by other financing activities 141,159,174.39

Subtotal of cash generated by financing activities 2,818,094,542.11 3,501,874,941.51

Repayment of borrowings 303,221,456.06 210,241,682.55

Cash paid for interest expenses and distribution of dividends or

155,399,679.20 15,544,969.44

profit

Cash used in other financing activities 574,504.77 322,169,966.60

Sub-total of cash used in financing activities 459,195,640.03 547,956,618.59

Net cash generated by financing activities 2,358,898,902.08 2,953,918,322.92

63

Konka Group Co., Ltd. Semi-Annual Report 2017

4. Effect of foreign exchange rate changes on cash and cash

2,847,903.92 7,375,907.16

equivalents

5. Net increase in cash and cash equivalents 295,417,014.26 865,208,517.46

Add: Opening balance of cash and cash equivalents 973,613,753.40 478,267,624.53

6. Closing balance of cash and cash equivalents 1,269,030,767.66 1,343,476,141.99

64

Konka Group Co., Ltd. Semi-Annual Report 2017

7. Consolidated Statement of Changes in Owners’ Equity

January-June 2017 Unit: RMB

January-June 2017

Equity attributable to owners of the Company

Other equity

Item Minority Total owners’

instruments Less: Other General

Special Surplus Retained

Share capital Prefere Perpet Capital reserve Treasury comprehensi risk interests equity

Othe reserve reserve earnings

nce ual shares ve income reserve

r

shares bonds

1. Balance at the end of the prior year 2,407,945,408.00 79,723,092.04 -6,932,104.65 847,908,466.28 -427,163,254.63 417,017,287.63 3,318,498,894.67

Add: Changes in accounting

policies

Correction of errors in prior

periods

Business mergers under the

same control

Other

2. Balance at the beginning of the

2,407,945,408.00 79,723,092.04 -6,932,104.65 847,908,466.28 -427,163,254.63 417,017,287.63 3,318,498,894.67

year

3. Increase/ decrease in the period

-1,166,602.46 -2,249,706.48 30,871,267.86 2,801,495.73 30,256,454.65

(“-” means decrease)

3.1 Total comprehensive income -2,249,706.48 30,871,267.86 3,548,210.61 32,169,771.99

3.2 Capital increased and reduced

by owners

3.2.1 Ordinary shares increased

by shareholders

65

Konka Group Co., Ltd. Semi-Annual Report 2017

3.2.2 Capital increased by

holders of other equity instruments

3.2.3 Amounts of share-based

payments charged to owners’ equity

3.2.4 Other

3.3 Profit distribution -746,714.88 -746,714.88

3.3.1 Appropriation to surplus

reserve

3.3.2 Appropriation to general

risk provisions

3.3.3 Appropriation to owners

-746,714.88 -746,714.88

(or shareholders)

3.3.4 Other

3.4 Internal carry-forward of

owners’ equity

3.4.1 New increase of capital (or

share capital) from capital reserve

3.4.2 New increase of capital (or

share capital) from surplus reserve

3.4.3 Surplus reserve for making

up loss

3.4.4 Other

3.5 Special reserve

3.5.1 Withdrawn for the period

3.5.2 Used in the period

3.6 Other -1,166,602.46 -1,166,602.46

4. Closing balance 2,407,945,408.00 78,556,489.58 -9,181,811.13 847,908,466.28 -396,291,986.77 419,818,783.36 3,348,755,349.32

66

Konka Group Co., Ltd. Semi-Annual Report 2017

January-June 2016 Unit: RMB

January-June 2016

Equity attributable to owners of the Company

Other equity

Less:

Item instruments Other General Minority Total owners’

Capital Treasu Special Surplus Retained

Share capital Prefer Perpet comprehensi risk interests equity

Othe reserve ry reserve reserve earnings

ence ual ve income reserve

r shares

shares bonds

1. Balance at the end of the prior year 2,407,945,408.00 78,209,535.19 3,155,744.00 847,908,466.28 -522,836,282.66 261,067,546.32 3,075,450,417.13

Add: Changes in accounting policies

Correction of errors in prior

periods

Business mergers under the same

control

Other

2. Balance at the beginning of the year 2,407,945,408.00 78,209,535.19 3,155,744.00 847,908,466.28 -522,836,282.66 261,067,546.32 3,075,450,417.13

3. Increase/ decrease in the period (“-”

1,513,556.85 -10,087,848.65 95,673,028.03 155,949,741.31 243,048,477.54

means decrease)

3.1 Total comprehensive income -10,087,848.65 95,673,028.03 -3,703,180.21 81,881,999.17

3.2 Capital increased and reduced by

159,564,888.59 159,564,888.59

owners

3.2.1 Ordinary shares increased by

261,842,331.23 261,842,331.23

shareholders

3.2.2 Capital increased by holders

of other equity instruments

3.2.3 Amounts of share-based

payments charged to owners’ equity

3.2.4 Other -102,277,442.64 -102,277,442.64

67

Konka Group Co., Ltd. Semi-Annual Report 2017

3.3 Profit distribution

3.3.1 Appropriation to surplus

reserve

3.3.2 Appropriation to general risk

provisions

3.3.3 Appropriation to owners (or

shareholders)

3.3.4 Other

3.4 Internal carry-forward of owners’

-35,543,805.21 -35,543,805.21

equity

3.4.1 New increase of capital (or

share capital) from capital reserve

3.4.2 New increase of capital (or

share capital) from surplus reserve

3.4.3 Surplus reserve for making

up loss

3.4.4 Other -35,543,805.21 - -35,543,805.21

3.5 Special reserve

3.5.1 Withdrawn for the period

3.5.2 Used in the period

3.6 Other 37,057,362.06 88,032.93 37,145,394.99

4. Closing balance 2,407,945,408.00 79,723,092.04 -6,932,104.65 847,908,466.28 -427,163,254.63 417,017,287.63 3,318,498,894.67

8. Statement of Changes in Owners’ Equity of the Company

January-June 2017 Unit: RMB

January-June 2017

Item Other equity Less: Other Special Retained Total owners’

Share capital Capital reserve Surplus reserve

instruments Treasury comprehe reserve earnings equity

shares nsive

68

Konka Group Co., Ltd. Semi-Annual Report 2017

Preferen Perpet

Othe

ce ual

r

shares bonds

1. Balance at the end of the prior year 2,407,945,408.00 64,794,108.39 6,714,437.62 847,908,466.28 -589,696,203.91 2,737,666,216.38

Add: Changes in accounting policies

Correction of errors in prior periods

Other

2. Balance at the beginning of the year 2,407,945,408.00 64,794,108.39 6,714,437.62 847,908,466.28 -589,696,203.91 2,737,666,216.38

3. Increase/ decrease in the period (“-” means -11,808,114.

-1,166,602.46 -88,581,396.00 -101,556,112.50

decrease) 04

3.1 Total comprehensive income -11,808,114. -88,581,396.00 -100,389,510.04

3.2 Capital increased and reduced by owners

3.2.1 Ordinary shares increased by

shareholders

3.2.2 Capital increased by holders of other

equity instruments

3.2.3 Amounts of share-based payments

charged to owners’ equity

3.2.4 Other

3.3 Profit distribution

3.3.1 Appropriation to surplus reserve

3.3.2 Appropriation to owners (or

shareholders)

3.3.3 Other

3.4 Internal carry-forward of owners’ equity

3.4.1 New increase of capital (or share capital)

from capital reserve

69

Konka Group Co., Ltd. Semi-Annual Report 2017

3.4.2 New increase of capital (or share capital)

from surplus reserve

3.4.3 Surplus reserve for making up loss

3.4.4 Other

3.5 Special reserve

3.5.1 Withdrawn for the period

3.5.2 Used in the period

3.6 Other -1,166,602.46 -1,166,602.46

4. Closing balance 2,407,945,408.00 63,627,505.93 -5,093,676.4 847,908,466.28 -678,277,599.91 2,636,110,103.88

January-June 2016 Unit: RMB

January-June 2016

Other equity

instruments Less: Other

Item Special Retained

Share capital Preferen Perpet Capital reserve Treasury comprehensi Surplus reserve Total owners’ equity

reserve earnings

ce ual Other shares ve income

shares bonds

1. Balance at the end of the prior year 2,407,945,408.00 46,505,607.34 1,803,252.77 847,908,466.28 -209,882,853.00 3,094,279,881.39

Add: Changes in accounting policies

Correction of errors in prior periods

Other

2. Balance at the beginning of the year 2,407,945,408.00 46,505,607.34 1,803,252.77 847,908,466.28 -209,882,853.00 3,094,279,881.39

3. Increase/ decrease in the period (“-” means

18,288,501.05 4,911,184.85 -379,813,350.91 -356,613,665.01

decrease)

3.1 Total comprehensive income 4,911,184.85 -379,813,350.91 -374,902,166.06

3.2 Capital increased and reduced by owners

3.2.1 Ordinary shares increased by

shareholders

70

Konka Group Co., Ltd. Semi-Annual Report 2017

3.2.2 Capital increased by holders of other

equity instruments

3.2.3 Amounts of share-based payments

charged to owners’ equity

3.2.4 Other

3.3 Profit distribution

3.3.1 Appropriation to surplus reserve

3.3.2 Appropriation to owners (or

shareholders)

3.3.3 Other

3.4 Internal carry-forward of owners’ equity

3.4.1 New increase of capital (or share

capital) from capital reserve

3.4.2 New increase of capital (or share

capital) from surplus reserve

3.4.3 Surplus reserve for making up loss

3.4.4 Other

3.5 Special reserve

3.5.1 Withdrawn for the period

3.5.2 Used in the period

3.6 Other 18,288,501.05 18,288,501.05

4. Closing balance 2,407,945,408.00 64,794,108.39 6,714,437.62 847,908,466.28 -589,696,203.91 2,737,666,216.38

71

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

` Konka Group Co., Ltd.

Notes to Financial Statements for January-June 2017

(All amounts are expressed, unless otherwise stated, in Renminbi (RMB).)

I. Company Profile

1. Establishment

Konka Group Co., Ltd. (hereinafter referred to as “Company” or “the Company”), is a

joint-stock limited company reorganized from the former Shenzhen Konka Electronic Co.,

Ltd. in August 1991 upon approval of the People’s Government of Shenzhen Municipality,

and has its ordinary shares (A-share and B-share) listed on Shenzhen Stock Exchange with

prior consent from the People’s Bank of China Shenzhen Special Economic Zone Branch. On

August 29, 1995, the Company was renamed to “Konka Group Co., Ltd.” (Credibility code:

914403006188155783) with its main business falling into electronic industry. And now the

headquarters locates in No. 28 of No. 12 of Keji South Rd., Science & Technology Park,

Yuehai Street, Nanshan District, Shenzhen, Guangdong Province.

2. Share Capital Changes upon Establishment

On November 27, 1991, with approval from the SRYFZ No. 102 [1991] document as issued

by the People’s Bank of China Shenzhen Special Economic Zone Branch, Shenzhen Konka

Electronic Co., Ltd., during December 8—December 31, 1991, has issued 128,869,000 RMB

ordinary shares (A-share) at a par value of RMB1.00 per share, of which the original net

assets were converted into 98,719,000 state-owned institutional shares, 30,150,000 new

shares were issued, including 26,500,000 circulating shares issued to the public and

3,650,000 staff shares issued to the staff of the Company.

On January 29, 1992, with approval from the SRYFZ No. 106 [1991] document as issued by

the People’s Bank of China Shenzhen Special Economic Zone Branch, Shenzhen Konka

Electronic Co., Ltd., during December 20, 1991— January 31, 1992, has issued to investors

abroad 58,372,300 RMB special shares (B-share) at a par value of RMB1.00 per share, of

which 48,372,300 shares held by the former foreign investor and founder—Hong Kong

Ganghua Electronic Group Co., Ltd. are converted into foreign legal person’s shares, and

10,000,000 B-shares are issued additionally.

On April 10, 1993, the Proposal on Profit Distribution and Dividend Payout 1992 was

adopted at the second general meeting of shareholders of the Company. With approval from

72

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

the SZBF No. 2 [1993] document as issued by Shenzhen Securities Regulatory Office, the

Company began to perform dividend policy for FY 1992 as of April 30, 1993: distributing

RMB 0.90 in cash plus 3.5 bonus shares for every 10 shares to all shareholders. The total

capital stock reached 187,473,150 shares after this distribution.

On April 18, 1994, the Proposal on Profit Distribution and Dividend Payout 1993 was

adopted at the third general meeting of shareholders of the Company. With approval from the

SZBF No. 115 [1994] document as issued by Shenzhen Securities Regulatory Office, the

Company began to perform dividend policy for FY1993 as of June 10, 1994: distributing

RMB 1.10 in cash plus 5 bonus shares (including 4.4 profit bonus shares and 0.6 bonus share

capitalized from capital public reserve) for every 10 shares to all shareholders. The total

capital stock reached 281,209,724 shares after this distribution and capitalization from capital

public reserve.

On June 2, 1994, in accordance with the provisions that “staff shares could go public and be

transferred six months after listing”, as jointly promulgated by the State Commission for

Restructuring the Economic System and the State Council’s Securities Commission, the staff

shares of the Company was planned to be listed on the flow on June 6, 1994, with the prior

consent of Shenzhen Securities Regulatory Office and Shenzhen Stock Exchange.

On October 8, 1994, the Proposal on Negotiable Bonus Shares of B-Share Corporate

Shareholders 1992 was adopted at the interim general meeting of shareholders of the

Company. With approval from the SZBF No. 224 [1994] document as issued by Shenzhen

Securities Regulatory Office, the 16,930,305.00 bonus shares for FY 1992 granted to foreign

legal persons were listed and negotiated at B-share market on October 26, 1994.

On February 6, 1996, the Proposal on Share Allotment Modes 1996 was adopted at the

interim general metering of shareholders of the Company. With approval from the SZBF No.

5 [1996] document as issued by Shenzhen Securities Regulatory Office, and reexamination

from the ZJPSZ No. 16 [1996] document and ZJGZ No. 2 [1996] document as issued by

China Securities Regulatory Commission, on July 16, 1996 and October 29, 1996, all

shareholders were respectively allotted three shares for every ten existing shares held at

RMB 6.28/A-share and HKD 5.85/B-share. Corporate shareholders took their respective

existing shares as bases for full subscription of the allocable shares. The total capital stock

reached 365,572,641.00 shares after this allotment.

On January 25, 1998, the Plan on Share Allotment 1998 was adopted at the interim general

73

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

meeting of shareholders of the Company. With approval from the ZZBZ No. 29 [1998]

document as issued by Shenzhen Securities Regulatory Office, and ZJSZ No.64 [1998]

document as issued by China Securities Regulatory Commission, on July 15, 1998,

negotiable A-shares were allotted in proportion of 3:10 at RMB 10.50/A-share. For such

reasons as continued weakness in B-share secondary market (lower than share allotment

price), B-share negotiation and allotment plan was canceled, and the corporate shareholders

of the Company waived the preemptive right. The total capital stock reached 389,383,603

shares after this allotment.

On June 30, 1999, the Proposal on Profit Distribution and Capitalization from Capital Public

Reserve 1998 was adopted at the eighth general meeting of shareholders of the Company. On

August 20, 1999, the profit distribution for FY 1998 was carried out: all shareholders were

presented RMB3.00 in cash for every 10 shares, plus 2 shares capitalized from capital public

reserve. The total capital stock reached 467,260,323.00 shares after this capitalization.

On June 30, 1999, the Plan on A-Share Issue for Capital Increase was adopted at the eighth

general meeting of shareholders of the Company. With approval from the ZJFXZ No.140

[1999] document as issued by China Securities Regulatory Commission, on November 1,

1999, 80,000,000.00 A-shares were additionally issued to the public at RMB15.50/share. The

total capital stock reached 547,260,323.00 shares after this additional issue.

On May 30, 2000, the Plan on Profit Distribution and Dividend Payout 1999 was adopted at

the ninth general meeting of shareholders of the Company. On July 25, 2000, the profit

distribution for FY 1999 was carried out: all shareholders were distributed RMB4.00 in cash

plus 1 bonus shares for every 10 shares. The total capital stock reached 601,986,352.00

shares after this distribution.

On May 26, 2008, the 2017 general meeting of shareholders s was convened, during which

the following resolutions were discussed and adopted: based on the total capital stock of

601,986,352.00 shares for the year ended December 31, 2007, capitalization from capital

public reserve was made to all shareholders at a proportion of 1:1, namely 10 new shares for

every 10 existing shares. On December 16, 2008, with approval from the SMGZF No. 2662

[2008] document as issued by Shenzhen Bureau of Trade and Industry, the Company was

agreed to increase its share capital, and went through the formalities for registration of

changes with the administration for industry and commerce on April 10, 2009. The total

capital stock reached 1,203,972,704.00 shares after change.

74

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

According to the regulations of the 2015 1st Extraordinary General Meeting and the revised

articles of the Company, the Company applied to increase the registered capital of

RMB1,203,972,704.00, which totally turned into capital reserve with the altered registered

capital of RMB2,407,945,408.00 and managed the industrial and commercial alternation

registration on January 28, 2016 with the altered share capital of 2,407,945,408.00 shares.

3. Approved business scope: research and development, production and operation of such

household appliances as televisions, refrigerators, washing machines, and personal electronic

appliances; manufacturing and application of home AV, IPTV set-top boxes, digital TV

receivers (including ground receiving equipment of satellite television broadcasting), digital

products, mobile communication equipments and terminal products, daily-use electronic

products, automotive electronic products, satellite navigation systems, intelligent

transportation systems, fire-fighting and security systems, office equipments, computers,

displays, large screen display systems; LED (OLED) back light, illumination, light-emitting

devices, and packaging thereof; Touch TV AIO, wireless broadcasting television transiting

equipment; electronic parts and components, moulds, plastic and rubber products, and

packing materials, design and in-door installation security products, monitoring products,

wireless and cable digital television system and system integration, and technical consultancy

and after-sale paid services of related products (except mobile phone, the other products in

the above business scope are manufactured in other places outside Shenzhen); Wholesale,

retail, import & export and relevant support services of the aforesaid products (including

spare parts) (Commodities subject to state trading management are not involved. Products

involved in quota, license management and other specified management shall be subject to

the relevant state provisions.); sale of self-developed technological achievements; provision

of maintenance services, technical consultant service for electronic products; ordinary cargo

transportation, domestic freight forwarding, warehousing services; consultancy on enterprise

management; and self-owned property leasing and management services, recovery of waste

electrical appliances and electronic products (excluding dissembling) (operated by branch

offices); and outsourcing services of information technology and business procedures by

means of undertaking services in the way of outsourcing, including management and

maintenance of system application, management of information technology, bank

background service, financial settlement, human resource service, software development, call

center, and data processing.

4. The Company and its subsidiaries are mainly engaged in the production and sales of color

TVs, white goods, mobile phones, etc.; trading; real estate development and marketing;

75

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

advertising agency; factoring, and etc.

5. The financial statements contained herein have been approved for issue by the Board of

the Company on August 23, 2017.

6. There were 39 subsidiaries included in the consolidation scope of June 30, 2017 of the

Company, and please refer to the Notes VIII. “Equities among other entities” for details.

There were 1 subsidiaries increased and 1 decreased in the consolidation scope of the

Reporting Period over the last period of the Company, and the reason for 1 decreased is that

Anhui Household Appliance is absorbed and consolidated by Anhui Tongchuang. For details,

please refer to the Notes VII. “Changes of the consolidation scope” for details.

7. A check list of corporate names and their abbreviations mentioned in this Report

Corporate name Abbreviation

Shenzhen Konka Telecommunications Technology Co., Ltd. Telecommunication Technology

Shenzhen Konka Household Appliances Co., Ltd. Konka Household Appliances

Shenzhen Konka Plastic Products Co., Ltd. Plastic Products

Shenzhen Konka Electrical Appliances Co., Ltd. Electrical Appliances

Shenzhen Konka Electronic Fittings Technology Co., Ltd. Fittings Technology

Mudanjiang Arctic Ocean Appliances Co., Ltd. Mudanjiang Appliances

Chongqing Qingjia Electronics Co., Ltd. Chongqing Qingjia

Anhui Konka Electronic Co., Ltd. Anhui Konka

Anhui Konka Household Appliances Co., Ltd. Anhui Household Appliances

Kunshan Konka Electronic Co., Ltd. Kunshan Konka

Dongguan Konka Electronic Co., Ltd. Dongguan Konka

Dongguan Konka Packing Materials Co., Ltd. Dongguan Packing

Boluo Konka PCB Co., Ltd. Boluo Konka

Boluo Konka Precision Technology Co., Ltd. Boluo Konka Precision

Hong Kong Konka Co., Ltd. Hong Kong Konka

Konka Household Appliances

Konka Household Appliances Investment & Development Co., Ltd.

Investment

76

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Corporate name Abbreviation

Konka Household Appliances

Konka Household Appliances International Trading Co., Ltd.

International Trading

Konka (Europe) Co., Ltd. Konka Europe

Konka Factoring (Shenzhen) Co., Ltd. Konka Factoring

Shenzhen Wankaida Science and Technology Co., Ltd. Wankaida

Kunshan Kangsheng Investment Development Co., Ltd. Kunshan Kangsheng

Anhui Konka Tongchuang Household Appliances Co., Ltd. Anhui Tongchuang

Indonesia Konka Electronics Co., Ltd. Indonesia Konka

Shenzhen Shushida Logistics Service Co., Ltd. Shushida Logistics

Beijing Konka Electronic Co., Ltd. Beijing Konka Electronic

Shenzhen Konka E-display Co., Ltd. Konka E-display

Shenzhen E-display Service Co., Ltd. E-display Service

Xiamen Dalong Trading Co., Ltd. Xiamen Dalong

Youshi Kangrong Culture Communication Co., Ltd. Youshi Kangrong

Shenzhen Kangqiao Jiacheng Property Investment Co., Ltd. Kangqiao Jiacheng

Konka SmartTech Limited Konka SmartTech

Anhui Kaikai Shijie E-commerce Co., Ltd. Kaikai Shijie

Shenzhen E2info Network Technology Co., Ltd. E2info

Shenzhen Konka Mobile Interconnection Technology Co., Ltd. Mobile Interconnection

Shenzhen Konka Commercial System Technology Co., Ltd. Commercial System Technology

Zhongkang Supply Chain Management Co., Ltd. Zhongkang Supply Chain

Shenzhen Kangqiao Easy Chain Technology Co., Ltd. Kangqiao Easy Chain

E3info (Hainan) Technology Co., Ltd. E3info

Konka Technology & Industry

Chuzhou Konka Technology & Industry Development Co., Ltd.

Development

77

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Corporate name Abbreviation

Anhui Kangzhi Trade Co., Ltd. Kangzhi Trade

II. Basis for the preparation of financial statements

1. Basis for the preparation

With the going-concern assumption as the basis and based on transactions and other events

that actually occurred, the Group prepared financial statements in accordance with

Accounting Standards for Business Enterprises—Basic Standard> issued by the Ministry of

Finance with Decree No. 33 and revised with Decree No. 76, the 41 specific accounting

standards, the Application Guidance of Accounting Standards for Business Enterprises, the

Interpretation of Accounting Standards for Business Enterprises and other regulations issued

and revised from 15 Feb. 2006 onwards (hereinafter jointly referred to as “the Accounting

Standards for Business Enterprises”, “China Accounting Standards” or “CAS”), as well as

the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15 –

General Regulations for Financial Reporting (revised in 2014) by China Securities

Regulatory Commission.

In accordance with relevant provisions of the Accounting Standards for Business Enterprises,

the Group adopted the accrual basis in accounting. Except for some financial instruments,

where impairment occurred on an asset, an impairment reserve was withdrawn accordingly

pursuant to relevant requirements.

III. Statement of Compliance with the Accounting Standards for Business Enterprises

The financial statements prepared by the Group are in compliance with in compliance with

the Accounting Standards for Business Enterprises, which factually and completely present

the Company’s financial positions as at June 30, 2017, business results and cash flows for the

first half year of 2017, and other relevant information. In addition, the Company’s and the

Group’s financial statements meet the requirements of disclosing financial statements and

notes thereto stated in the Rules for Preparation Convention of Disclosure of Public Offering

Companies No.15 – General Regulations for Financial Reporting (revised in 2014) by China

Securities Regulatory Commission.

78

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

IV. Important accounting policies and estimations

The Company and each subsidiary formulated certain specific accounting policies and

accounting estimates according to the actual production and operation characteristics and the

regulations of the relevant ASBE on the transactions and events of the revenues recognition.

For the details, please refer to each description of Notes IV. 22 “Revenues”. For the notes of

the significant accounting judgment and estimations made by the management layer, please

refer to Notes IV. 27 “Significant accounting judgment and estimations”.

1. Fiscal period

The Group’s fiscal periods include fiscal years and fiscal periods shorter than a complete

fiscal year. The Group’s fiscal year starts on 1 Jan. and ends on 31 Dec. of every year

according to the Gregorian calendar.

2. Operating cycle

A normal operating cycle refers to a period from the Group purchasing assets for processing

to realizing cash or cash equivalents. An operating cycle for the Group is 12 months, which

is also the classification criterion for the liquidity of its assets and liabilities.

3. Recording currency

Renminbi is the dominant currency used in the economic circumstances where the Group and

its domestic subsidiaries are involved. Therefore, the Group and its domestic subsidiaries use

Renminbi as their bookkeeping base currency. As for the overseas subsidiaries of the

Company-America Konka, European Konka and Indonesia Konka, should be respectively

confirmed the US Dollar, Euro and Indonesia Rupiah as their recording currency according

its major economic environment of their operating address; subsidiaries such as Hong Kong

Konka, Konka Household Appliances International Trading, Konka Zhisheng and

Zhongkang Supply Chain use HK Dollar as their recording currency. And the Group adopted

Renminbi as the bookkeeping base currency when preparing the financial statements for the

reporting year.

4. Accounting treatment methods for business combinations under the same control or

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

not under the same control

Business combinations, it is refer to two or more separate enterprises merge to form a

reporting entity transactions or events. Business combination is divided into under the same

control and those non under the same control.

(1) Business combinations under the same control

A business combination under the same control is a business combination in which all of the

combining enterprises are ultimately controlled by the same party or the same parties both

before and after the business combination and on which the control is not temporary. In a

business combination under the same control, the party which obtains control of other

combining enterprise(s) on the combining date is the combining party, the other combining

enterprise(s) is (are) the combined party. The “combining date” refers to the date on which

the combining party actually obtains control on the combined party.

The assets and liabilities that the combining party obtains in a business combination shall be

measured on the basis of their carrying amount in the combined party on the combining date.

As for the balance between the carrying amount of the net assets obtained by the combining

party and the carrying amount of the consideration paid by it (or the total par value of the

shares issued), the additional paid-in capital (share premium) shall be adjusted. If the

additional paid-in capital (share premium) is not sufficient to be offset, the retained earnings

shall be adjusted.

The direct cost for the business combination of the combining party shall be recorded into the

profits and losses at the current period.

(2) Business combinations not under the same control

A business combination not under the same control is a business combination in which the

combining enterprises are not ultimately controlled by the same party or the same parties

both before and after the business combination. In a business combination not under the same

control, the party which obtains the control on other combining enterprise(s) on the purchase

date is the acquirer, and other combining enterprise(s) is (are) the acquiree.

For a business combination not under the same control, the combination costs shall include

the fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

and the equity securities issued by the acquirer in exchange for the control on the acquiree,

the expenses for audit, legal services and assessment, and other administrative expenses,

which are recorded into the profits and losses in the current period. The trading expenses for

the equity securities or debt securities issued by the acquirer as the combination

consideration shall be recorded into the amount of initial measurement of the equity

securities or debt securities. The involved contingent consideration shall be recorded into the

combination costs at its fair value on the acquiring date. Where new or further evidences

emerge, within 12 months since the acquiring date, against the existing circumstances on the

acquiring date and the contingent consideration thus needs to be adjusted, the combined

goodwill shall be adjusted accordingly. The combination costs of the acquirer and the

identifiable net assets obtained by it in the combination shall be measured according to their

fair values at the acquiring date. The acquirer shall recognize the positive balance between

the combination costs and the fair value of the identifiable net assets it obtains from the

acquiree as business reputation. Where the combination costs are less than the fair value of

the identifiable net assets it obtains from the acquiree, the acquirer shall re-examine the

measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it

obtains from the acquiree as well as the combination costs. If, after the reexamination, the

combination costs are still less than the fair value of the identifiable net assets it obtains from

the acquiree, the acquirer shall record the balance into the profits and losses of the current

period.

As for the deductible temporary differences the acquirer obtains from the acquiree which are

not recognized into deferred income tax liabilities due to their not meeting the recognition

standards, if new or further information shows that the relevant situation has existed on the

acquiring date and the economic benefits brought by the deductible temporary differences the

acquirer obtains from the acquiree on the acquiring date can be realized, they shall be

recognized into deferred income tax assets and the relevant goodwill shall be reduced. Where

the goodwill is not sufficient to be offset, the difference shall be recognized into the profits

and losses in the current period. In other circumstances than the above, where the deductible

temporary differences are recognized into deferred income tax assets on the acquiring date,

they shall be recorded into the profits and losses in the current period.

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

In a business combination not under same control realized by two or more transactions of

exchange, according to about the 5th Notice about the Treasury Issuing the Accounting

Standards for Enterprises (Finance accounting) [2012] No. 19 Criterion about the “package

deal” (see Notes IV. 5 (2)), Whether the deals are “package deal” or not, belong to the

“package deal”, see the previous paragraphs described in this section and Notes IV. 12 “long

term equity investment transaction” and conduct accounting treatment, those not belong to

the “package deal” distinguish between the individual financial statements and the

consolidated financial statements and conduct relevant accounting treatment.

In the individual financial statements, the sum of the book value and new investment cost of

the Group holds in the acquiree before the acquiring date shall be considered as initial cost of

the investment. Other related comprehensive gains in relation to the equity interests that the

Group holds in the acquiree before the acquiring date shall be treated on the same basis as the

acquiree directly disposes the related assets or liabilities when disposing the investment (that

is, except for the corresponding share in the changes in the net liabilities or assets with a

defined benefit plan measured at the equity method arising from the acquiree’s

re-measurement, the others shall be transferred into current investment gains).

In the Group’s consolidated financial statements, as for the equity interests that the Group

holds in the acquiree before the acquiring date, they shall be re-measured according to their

fair values at the acquiring date; the positive difference between their fair values and carrying

amounts shall be recorded into the investment gains for the period including the acquiring

date. Other related comprehensive gains in relation to the equity interests that the Group

holds in the acquiree before the acquiring date shall be treated on the same basis as the

acquiree directly disposes the related assets or liabilities when disposing the investment (that

is, except for the corresponding share in the changes in the net liabilities or assets with a

defined benefit plan measured at the equity method arising from the acquiree’s

re-measurement, the others shall be transferred into current investment gains on the acquiring

date).

5. Methods for preparing consolidated financial statements

(1) Principle for determining the consolidation scope

The consolidation scope for financial statements is determined on the basis of control. The

term “control” is the power of the Group upon an investee, with which it can take part in

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

relevant activities of the investee to obtain variable returns and is able to influence the

amount of returns. A subsidiary is an enterprise or entity controlled by the Group.

Once any changes in the relevant facts or situations result in any changes in the elements

involved in the aforesaid definition of “control”, the Company shall carry out a reassessment.

(2) Methods for preparing the consolidated financial statements

Subsidiaries are fully consolidated from the date on which the Group obtains control on their

net assets and operation decision-making and are de-consolidated from the date when such

control ceases. As for a disposed subsidiary, its operating results and cash flows before the

disposal date has been appropriately included in the consolidated income statement and cash

flow statement; and as for subsidiaries disposed in the current period, the opening items in

the consolidated balance sheet are not adjusted. For a subsidiary acquired in a business

combination not under the same control, its operating results and cash flows after the

acquiring date have been appropriately included in the consolidated income statement and

cash flow statement, and the opening items and comparative items in the consolidated

financial statements are not adjusted. For a subsidiary acquired in a business combination

under the same control or a combined party obtained in a takeover, its operating results and

cash flows from the beginning of the Reporting Period of the combination to the combination

date have been appropriately included in the consolidated income statement and cash flow

statement, and the comparative items in the consolidated financial statements are adjusted at

the same time.

The financial statements of subsidiaries are adjusted in accordance with the accounting

policies and accounting period of the Group during the preparation of the consolidated

financial statements, where the accounting policies and the accounting periods are

inconsistent between the Group and subsidiaries. For a subsidiary acquired from a business

combination not under the same control, the individual financial statements of the subsidiary

are adjusted based on the fair value of the identifiable net assets at the acquisition date.

All significant inter-group balances, transactions and unrealized profits are offset in the

consolidated financial statements.

The portion of a subsidiary’s shareholders’ equity and the portion of a subsidiary’s net profits

and losses for the period not held by the Group are recognized as minority interests and

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

minority shareholder profits and losses respectively and presented separately under

shareholders’ equity and net profits in the consolidation financial statements. The portion of

a subsidiary’s net profits and losses for the period that belong to minority interests is

presented as the item of “minority shareholder profits and losses” under the bigger item of

net profits in the consolidated financial statements. Where the loss of a subsidiary shared by

minority shareholders exceeds the portion enjoyed by minority shareholders in the

subsidiary’s opening owners’ equity, minority interests are offset.

Where the Group losses control on its original subsidiaries due to disposal of some equity

investments or other reasons, the residual equity interests are re-measured according to the

fair value on the date when such control ceases. The summation of the consideration obtained

from the disposal of equity interests and the fair value of the residual equity interests, minus

the portion in the original subsidiary’s net assets measured on a continuous basis from the

acquisition date that is enjoyable by the Group according to the original shareholding

percentage in the subsidiary, is recorded in investment gains for the period when the Group’s

control on the subsidiary ceases. Other comprehensive incomes in relation to the equity

investment in the original subsidiary are treated on the same accounting basis as the acquiree

directly disposes the relevant assets or liabilities (that is, except for the changes in the net

liabilities or assets with a defined benefit plan resulted from re-measurement of the original

subsidiary, the rest shall all be transferred into current investment gains) when such control

ceases. And subsequent measurement is conducted on the residual equity interests according

to the No. 2 Accounting Standard for Business Enterprises —Long-term Equity Investments

or the No. 22 Accounting Standard for Business Enterprises—Recognition and Measurement

of Financial Instruments. For details, see Note IV, 12 “long term equity investment” or Note

IV. 9 “financial instruments”.

Where the Group losses control on its original subsidiaries due to step by step disposal of

equity investments through multiple transactions, it need to distinguish the Group losses

control on its subsidiaries due to disposal of equity investments whether belongs to a package

deal. All the transaction terms, conditions and economic impact of the disposal of

subsidiaries’ equity investment are in accordance with one or more of the following

conditions, which usually indicate the multiple transactions, should be considered as a

package deal for accounting treatment. ① These deals are at the same time or under the

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

condition of considering the influence of each other to concluded; ② These transactions only

be as a whole can achieve a complete business result; ③ The occurrence of a deal depends

on at least one other transactions;④ A deal alone is not economical, it is economical with

other trading together. Those not belong to a package deal, each of them a deal depends on

circumstances respectively conduct accounting treatment in accordance with the applicable

principles of “part disposal of subsidiaries of a long-term equity investment under the

condition of not losing control on its subsidiaries” (see Note IV 12, (2) ④) and “Where the

Group losses control on its original subsidiaries due to disposal of some equity investments

or other reasons” (See the front paragraph) relevant transactions of the Group losses control

on its subsidiaries due to disposal of equity investments belonging to a package deal,

considered as a transaction and conduct accounting treatment. However, Before losing

control, every disposal cost and corresponding net assets balance of subsidiary of disposal

investment are confirmed as other comprehensive income in consolidated financial

statements, which together transferred into the current profits and losses in the loss of control,

when the Group losing control on its subsidiary.

6. Classification of joint arrangements and accounting treatment of joint operations

A joint arrangement refers to an arrangement jointly controlled by two participants or above.

The Group classifies joint arrangements into joint operations and joint ventures according to

its rights and duties in the joint arrangements. A joint operation refers to a joint arrangement

where the Group enjoys assets and has to bear liabilities related to the arrangement. A joint

venture refers to a joint arrangement where the Group is only entitled to the net assets of the

arrangement.

The Group’s investments in joint ventures are measured at the equity method according to

the accounting policies mentioned in Note IV. 12 (2) ② “Long-term equity investments

measured at the equity method”.

For a joint operation, the Group, as a joint operator, recognizes the assets and liabilities that it

holds and bears in the joint operation, and recognizes the jointly-held assets and jointly-borne

liabilities according to the Group’s stake in the joint operation; recognizes the income from

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

sale of the Group’s share in the output of the joint operation; recognizes the income from sale

of the joint operation’s outputs according to the Group’s stake in it; and recognizes the

expense solely incurred to the Group and the expense incurred to the joint operation

according to the Group’s stake in it.

When the Group, as a joint operator, transfers or sells assets (the assets not constituting

business, the same below) to the joint operation, or purchases assets from the joint operation,

before the assets are sold to a third party, the Group only recognizes the share of the other

joint operators in the gains and losses arising from the sale. Where impairment occurs to the

assets as prescribed in

Impairment>, the Group shall fully recognizes the loss for a transfer or sale of assets to a

joint operation; and shall recognize the loss according to its stake in the joint operation for a

purchase of assets from the joint operation.

7. Recognition standard for cash and cash equivalents

In the Group’s understanding, cash and cash equivalents include cash on hand, any deposit

that can be used for cover, and short-term (usually due within 3 months since the day of

purchase) and high circulating investments, which are easily convertible into known amount

of cash and whose risks in change of value are minimal.

8. Foreign currency businesses and translation of foreign currency financial statements

(1) Accounting treatments for translation of foreign currency transactions

As for a foreign currency transaction, the Company shall convert the amount in a foreign

currency into amount in its bookkeeping base at the spot exchange rate (usually referring to

the central parity rate announced by the People’s Bank of China, the same below) of the

transaction date, while as for such transactions as foreign exchange or involving in foreign

exchange, the Company shall converted into amount in the bookkeeping base currency at

actual exchange rate the transaction is occurred.

(2) Accounting treatments for translation of foreign currency monetary items and

non-monetary items

On the balance sheet date, the foreign currency monetary items shall be translated at the spot

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

exchange rate on the balance sheet date. The exchange difference arising from the difference

between the spot exchange rate on the balance sheet date and the spot exchange rate at the

time of initial recognition or prior to the balance sheet date shall be recorded in the profits

and losses in the current period, excluding the following situations: ① the exchange

difference arising from foreign currency loans related to acquisition of fixed assets shall be

treated at the principle of capitalization of borrowing costs; ② the exchange difference

arising from the hedging instruments used for effective hedging of net overseas operation

investments shall be recorded into other comprehensive incomes, and shall be recognized

into current gains and losses when the net investments are disposed; and ③ the exchange

difference arising from change in the book balance of foreign currency monetary items

available for sale except the amortized costs shall be recorded into other comprehensive

gains and losses.

When it involves overseas business in preparing the consolidated financial statement, for the

translation difference of foreign currency monetary items of net investment in overseas

business arising from the change in exchange rate, it shall be recorded into the other

comprehensive income; and be recorded into disposal gains and losses at current period when

disposing overseas business.

A foreign currency non-monetary item measured at the historical costs shall still be translated

at the spot exchange rate on the transaction date. Where the foreign non-monetary items

measured at the fair value shall be converted into amount in its bookkeeping base currency at

spot exchange rate, the exchange gains and losses arising thereof shall be treated as change in

fair value, and recorded into the current period gains and losses or as other comprehensive

incomes.

(3) Translation of foreign currency financial statements

When it involves overseas business in preparing the consolidated financial statement, for the

translation difference of foreign currency monetary items of net investment in overseas

business arising from the change in exchange rate, it shall be recorded into the item of

“difference of foreign currency financial statement translation” under the owners’ equity; and

be recorded into disposal gains and losses at current period when disposing overseas

business.

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

The foreign currency financial statement of overseas business should be translated in to RMB

financial statement by the following methods: The asset and liability items in the balance

sheets shall be translated at a spot exchange rate on the balance sheet date. Among the

owner’s equity items, except for the items as “undistributed profits”, other items shall be

translated at the spot exchange rate at the time when they are incurred. The income and

expense items in the profit statements shall be translated at the spot exchange rate of the

transaction date. The undistributed profits at year-begin is the undistributed profits at the end

of last year after the translation; undistributed profits at year-end shall be listed as various

distribution items after the translation; after the translation, the balance between assets and

the sum of liabilities and owners’ equities shall be recorded into other comprehensive gains

and losses as difference of foreign currency translation. Where an enterprise disposes of an

overseas business without the control right, it shall shift the differences, which is presented

under the items of the owner’s equities in the balance sheet and which arises from the

translation of foreign currency financial statements relating to this overseas business, into the

disposal profits and losses of the current period by all or proportion of the disposed overseas

business.

Foreign cash flow shall be translated at the spot exchange rate/the weighted average of the

exchange rate of the current period of the date of cash flow incurred. The influence of

exchange rate on the cash flow shall be adjustment item and individually listed in the cash

flow statement.

And the opening balance and the actual balance of last year shall be listed at the amounts

after translation of foreign currency financial statement in last year.

Where the control of the Group over an overseas operation ceases due to disposal of all or

some of the Group’s owner’s equity in the overseas operation or other reasons, the

foreign-currency statement translation difference belonging to the parent company’s owner’s

equity in relation to the overseas operation which is stated under the shareholders’ equity in

the balance sheet shall be all restated as gains and losses of the disposal period.

Where the Group’s equity in an overseas operation decreases due to disposal of some equity

investment or other reasons but the Group still has control over the overseas operation, the

foreign-currency statement translation difference in relation to the disposed part of the

overseas operation shall be recorded into minority interests instead of current gains and

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

losses. If what’s disposed is some equity in an overseas associated enterprise or joint venture,

the foreign-currency statement translation difference related to the overseas operation shall

be recorded into the gains and losses of the current period of the disposal according to the

disposal ratio.

9. Financial instruments

The Group recognizes a financial asset or liability when it becomes a party of the relevant

financial instrument contract. Financial assets and liabilities are measured at fair value in

initial recognition. As for the financial assets and liabilities measured at fair value of which

changes are recorded into current gains and losses, the relevant dealing expenses are directly

recorded into gains and losses; and the dealing expenses on other kinds of financial assets

and liabilities are included in the amounts initially recognized.

(1) Determination of the fair value of main financial assets and financial liabilities

Fair value refers to the price that a market participant shall receive for selling an asset or

shall pay for transferring a liability in an orderly transaction on the measurement date. As for

the financial assets or financial liabilities for which there is an active market, the quoted

prices in the active market shall be used to determine the fair values thereof. The quoted

prices in the active market refers to the prices available from stock exchange, broker’s

agencies, guilds, pricing organization and etc., which represent the actual trading price under

equal transaction. Where there is no active market for a financial instrument, the enterprise

concerned shall adopt value appraisal techniques, including the prices adopted by the parties,

who are familiar with the condition, in the latest market transaction upon their own free will,

the current fair value obtained by referring to other financial instruments of the same

essential nature, the cash flow capitalization method and the option pricing model, etc., to

determine its fair value.

(2) Classification, recognition and measurement of financial assets

The purchase and sale of financial assets under the normal ways shall be recognized and

stopped to be recognized respectively at the price of transaction date. Financial assets shall

be classified into the following four categories when they are initially recognized: (a) the

financial assets which are measured at their fair values and the variation of which is recorded

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

into the profits and losses of the current period, (b) the investments which will be held to

their maturity; (c) loans and the account receivables; and (d) financial assets available for

sale.

① The financial assets which are measured at their fair values and the variation of which is

recorded into the profits and losses of the current period

Including transactional financial assets and the financial assets which are designated to be

measured at their fair value when they are initially recognized and of which the variation is

recorded into the profits and losses of the current period;

The financial assets meeting any of the following requirements shall be classified as

transactional financial assets:A. The purpose to acquire the said financial assets is mainly for

selling them in the near future; B. Forming a part of the identifiable combination of financial

instruments which are managed in a centralized way and for which there are objective

evidences proving that the enterprise may manage the combination by way of short-term

profit making in the near future; C. Being a derivative instrument, excluding the designated

derivative instruments which are effective hedging instruments, or derivative instruments to

financial guarantee contracts, and the derivative instruments which are connected with the

equity instrument investments for which there is no quoted price in the active market, whose

fair value cannot be reliably measured, and which shall be settled by delivering the said

equity instruments.

The financial assets meeting any of the following requirements shall be designated as

financial assets which are measured at their fair values and the variation of which is recorded

into the profits and losses of the current period for initial recognition: A. the designation can

eliminate or significantly reduce the difference of relevant gains and losses between

recognition and measurement causing from different bases for measurement of financial

assets; B. The official written documents for risk management and investment strategies of

the enterprise have clearly stated that it shall ,manage, evaluate and report to important

management personnel based on the fair value, about the financial assets group or the group

of financial assets & liabilities which the financial assets are belong to.

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

For the financial assets which are measured at their fair values and the variation of which is

recorded into the profits and losses of the current period shall continue to be measured by fair

value, gains and losses of change in fair value, dividends and interest related with these

financial assets should be recorded into gains and losses of current period.

② Held-to-maturity investment

The term “held-to-maturity investment” refers to a non-derivative financial asset with a fixed

date of maturity, a fixed or determinable amount of repo price and which the enterprise holds

for a definite purpose or the enterprise is able to hold until its maturity.

For the held-to-maturity investment adopting actual interest rate method, which is measured

at the post-amortization costs, the profits and losses that arise when such financial assets or

financial liabilities are terminated from recognition, or are impaired or amortized, shall be

recorded into the profits and losses of the current period.

The actual interest rate method refers to the method by which the post-amortization costs and

the interest incomes of different installments or interest expenses are calculated in light of the

actual interest rates of the financial assets or financial liabilities (including a set of financial

assets or financial liabilities). The actual interest rate refers to the interest rate adopted to

cash the future cash flow of a financial asset or financial liability within the predicted term of

existence or within a shorter applicable term into the current carrying amount of the financial

asset or financial liability.

When the actual interest rate is determined, the future cash flow shall be predicted on the

basis of taking into account all the contractual provisions concerning the financial asset or

financial liability (the future credit losses shall not be taken into account).and also the various

fee charges, trading expenses, premiums or reduced values, etc., which are paid or collected

by the parties to a financial asset or financial liability contract and which form a part of the

actual interest rate.

③ Loans and the accounts receivables

Loans and the accounts receivables refer to non-derivative financial assets, which there is no

quotation in the active market, with fixed recovery cost or recognizable. Financial assets that

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

are defined as loans and the accounts receivables by the Group including notes receivables,

accounts receivables, interest receivable, dividends receivable and other receivables etc..

Loans and the accounts receivables are made follow-up measurement on the basis of

post-amortization costs employing the effective interest method. Gains or loss arising from

the termination recognition, impairment occurs or amortization shall be recorded into the

profits and losses of the current period.

④ Assets available for sales

Assets available for sales including non-derivative financial asset that has been assigned as

assets available for sales on the initial recognition and financial assets excluded those

measured at fair value and of which the variation into profits and losses of the current period,

they are some financial assets, loans and accounts receivables, held-to-maturity investment.

The cost at the period-end of the available-for-sale liabilities instruments should be

confirmed according to its amortized cost method, that is the initially recognized amount

which deduct the principal that had been repaid, to plus or minus the accumulative

amortization amount formed by the amortization between the difference of the initially

recognized amount and the amount on the due date that adopted the actual interest rate

method, and at the same time deduct the amount after the impairment loss happened. The

cost at the period-end of the available-for-sale liabilities instruments is its initial cost.

Financial assets available-for-trade are subsequently measured at fair value, and gains or

losses arising from changes in the fair value are recognized as other comprehensive income,

and be carried forward when the said financial assets stopped recognition, then it shall be

recorded into the profits and losses of the current period. But, the equity instrument

investment which neither have quotation in the active market nor its fair value could not be

reliable measured, as well as the derivative financial assets that concern with the equity

instruments and should be settled through handing over to its equity instruments, should take

the follow-up measurement according to the cost.

Interest receive during the holding of assets available for sales and cash dividends with

distribution announcement by invested companies, it shall be recorded into the profits and

losses of the current period.

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

(3) Impairment of financial assets

The Group assesses at the balance sheet date the carrying amount of every financial asset

except for the financial assets that measured by the fair value. If there is objective evidence

indicating a financial asset may be impaired, a provision is provided for the impairment.

The Group carries out a separate impairment test for every financial asset which is

individually significant. As for a financial asset which is individually insignificant, an

impairment test is carried out separately or in the financial asset group with similar credit risk.

Where the financial asset (individually significant or insignificant) is found not impaired

after the separate impairment test, it is included in the financial asset group with similar

credit risk and tested again on the group basis. Where the impairment loss is recognized for

an individual financial asset, it is not included in the financial asset group with similar credit

risk for an impairment test.

① Impairment on held-to maturity investment, loans and receivables

The financial assets measured by cost or amortized cost write down their carrying value by

the estimated present value of future cash flow. The difference is recorded as impairment loss.

If there is objective evidence to indicate the recovery of value of financial assets after

impairment, and it is related with subsequent event after recognition of loss, the impairment

loss recorded originally can be reversed. The carrying value of financial assets after

impairment loss reversed shall not exceed the amortized cost of the financial assets without

provisions of impairment loss on the reserving date.

② Impairment of available-for-sale financial assets

When it judged that the decrease of fair value of the available-for-sale equity instrument

investment is serious and not temporarily after comprehensive considering relevant factors, it

reflected that the available-for-sale equity instrument investment occurred impairment. Of

which, the “serious decline” refers to the accumulative decline range of the fair value over

20%; while the “non-temporary decline” refers to the consecutive decline time of the fair

value over 12 months.

Where an available-for-sale financial asset is impaired, the accumulative losses arising from

the decrease of the fair value of the capital reserve which is directly included are transferred

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

out and recorded in the profits and losses for the current period. The accumulative losses

transferred out are the balance obtained from the initially obtained cost of the said financial

asset after deducting the principals as taken back, the amortized amount, the current fair

value and the impairment loss originally recorded in the profits and losses.

Where the impairment loss has been recognized for an available-for-sale financial asset, if,

within the accounting periods thereafter, there is any objective evidence proving that the

value of the said financial asset has been restored and the restoration is objectively related to

the events that occur after the impairment loss was recognized, the originally recognized

impairment loss is reversed. The impairment losses on the available-for-sale equity

instrument investments are reversed and recognized as other comprehensive incomes, and the

impairment losses on the available-for-sale liability instruments are reversed and recorded in

the profits and losses for the current period.

The impairment loss incurred to an equity instrument investment for which there is no quoted

price in the active market and whose fair value cannot be reliably measured, or incurred to a

derivative financial asset which is connected with the said equity instrument investment and

which must be settled by delivering the said equity investment, is not reversed.

(4) Recognition and measurement of financial asset transfers

Where a financial asset satisfies any of the following requirements, the recognition of it is

terminated: ① The contractual rights for collecting the cash flow of the said financial asset

are terminated; ② The said financial asset has been transferred and nearly all of the risks and

rewards related to the ownership of the financial asset to the transferee; or ③ The said

financial asset has been transferred. And the Group has ceased its control on the said

financial asset though it neither transfers nor retains nearly all of the risks and rewards

related to the ownership of the financial asset.

Where the Group neither transfers nor retains nearly all of the risks and rewards related to the

ownership of a financial asset, and it does not cease its control on the said financial asset, it

recognizes the relevant financial asset and liability accordingly according to the extent of its

continuous involvement in the transferred financial asset. The term "continuous involvement

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

in the transferred financial asset" refers to the risk level that the enterprise faces resulting

from the change of the value of the financial asset.

If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the

difference between the amounts of the following 2 items is recorded in the profits and losses

of the current period: (1) The book value of the transferred financial asset; and (2) The sum

of consideration received from the transfer, and the accumulative amount of the changes of

the fair value originally recorded in other comprehensive incomes.

If the transfer of partial financial asset satisfies the conditions to stop the recognition, the

book value of the transferred financial asset is apportioned between the portion whose

recognition has been stopped and the portion whose recognition has not been stopped

according to their respective relative fair value, and the difference between the amounts of

the following 2 items is included into the profits and losses of the current period: (1) The

summation of the consideration received from the transfer and the portion of the

accumulative amount of changes in the fair value originally recorded in other comprehensive

incomes which corresponds to the portion whose recognition has been stopped; and (2) The

amortized carrying amounts of the aforesaid amounts.

In respect of the assets using recourse to sell or using endorsement to transfer, the Group

needs to determine whether almost all of the risks and rewards of the financial asset

ownership are transferred. If almost all of the risks and rewards of the financial asset

ownership had been transferred to the transferee, derecognize the financial assets. For almost

all of the risks and rewards of the financial asset ownership retained, do not end to recognize

the financial assets. For which neither transfer or retain almost all of the risks and rewards of

the financial asset ownership, continuously judge whether the Company retain the control of

the assets, and conduct accounting treatment according to the principle of mentioned in the

previous paragraphs.

(5) Classification and measurement of financial liabilities

In the initial recognition, financial liabilities are divided into the financial liabilities measured

at fair values and whose changes are recorded in current gains and losses and other financial

liabilities. Financial liabilities are initially recognized at their fair values. As for a financial

liability measured at fair value and whose changes are recorded in current gains and losses,

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

the relevant trading expense is directly recorded in the profits and losses for the current

period. As for other financial liabilities, the relevant trading expenses are recorded in the

initially recognized amounts.

① Financial liabilities measured at fair values and whose changes are recorded in current

gains and losses

Such financial liabilities are divided into transactional financial liabilities and financial

liabilities designated to be measured at fair values and whose changes are recorded in current

gains and losses in the initial recognition under the same conditions where such financial

assets are divided into transactional financial assets and financial assets designated to be

measured at fair values and whose changes are recorded in current gains and losses in the

initial recognition.

Financial liabilities measured at fair values and whose changes are recorded in current gains

and losses are subsequently measured at their fair values. Gains or losses arising from the fair

value changes, as well as the dividend and interest expenses in relation to the said financial

liabilities, are recorded in the profits and losses for the current period.

② Other financial liabilities

As for a derivative financial liability connected to an equity instrument for which there is not

quoted price in an active market and whose fair value cannot be reliably measured and which

must be settled by delivering the equity instrument, it is subsequently measured on the basis

of costs. Other financial liabilities are subsequently measured according to the amortized cost

using the actual interest rate method. Gains or losses arising from de-recognition or

amortization of the said financial liabilities is recorded in the profits and losses for the

current period.

③ Financial guarantee contract and loan commitment

For the financial guarantee contracts which are not designated as a financial liability

measured at its fair value and the variation thereof is recorded into the profits and losses of

the current period, or the loan commitment which is not designated as a financial liability

measured at its fair value and the variation thereof is recorded into the gains and losses that

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

will be loaned lower than the market interest rate, which shall be initially recognized by fair

value, and the subsequent measurement shall be made after they are initially recognized

according to the higher one of the following: a. the amount as determined according to the

Accounting Standards for Enterprises No. 13 – Contingencies; b. the surplus after

accumulative amortization as determined according to the principles of the Accounting

Standards for Enterprises No. 14 - Revenues is subtracted from the initially recognized

amount.

(6) De-recognition of financial liabilities

Only when the prevailing obligations of a financial liability are relieved in all or in part may

the recognition of the financial liability be terminated in all or partly. Where the Group

(debtor) enters into an agreement with a creditor so as to substitute the existing financial

liabilities by way of any new financial liability, and if the contractual stipulations regarding

the new financial liability is substantially different from that regarding the existing financial

liability, it terminates the recognition of the existing financial liability, and at the same time

recognizes the new financial liability.

Where the recognition of a financial liability is totally or partially terminated, the enterprise

concerned shall include into the profits and losses of the current period for the gap between

the book value which has been terminated from recognition and the considerations it has paid

(including the non-cash assets it has transferred out and the new financial liabilities it has

assumed)

(7) Derivatives and embedded derivatives

Derivative financial instruments include derivatives are initially measured at fair value at the

date when the derivative contracts are entered into and are substantially re-measured at fair

value. The resulting gain and loss is recognized in profit or loss.

An embedded derivative is separated from the hybrid instrument, where the hybrid

instrument is not designated as a financial asset or financial liability at fair value though

profit or loss, and the treated as a standalone derivative if (a) the economic characteristics

and risks of the embedded derivative are not closely related to the economic characteristics

and risks of the host contract; and (b) a separate instrument with the same terms as the

embedded derivative would meet the definition of a derivative. If the Company is unable to

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

measure the embedded derivative separately either at acquisition or at a subsequent balance

sheet date, it designates the entire hybrid instrument as a financial asset or financial liability

at fair value through profit or loss.

(8) Offsetting financial assets and financial liabilities

When the Group has a legal right that is currently enforceable to set off the recognized

financial assets and financial liabilities, and intends either to settle on a net basis, or to realize

the financial asset and settle the financial liability simultaneously, a financial asset and a

financial liability shall be offset and the net amount is presented in the balance sheet. Except

for the above circumstances, financial assets and financial liabilities shall be presented

separately in the balance sheet and shall not be offset.

(9) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the

Company after deducting all of its liabilities. The Group issues (including refinancing),

re-purchases, sells or written-offs the equity instrument as the disposing of the changes of the

equity. The Group not recognized the changes of the fair value of the equity instrument. The

transaction expenses related to the equity transaction would be deducted from the equity.

All types of distribution (excluding stock dividends) made by the Group to holders of equity

instruments are deducted from shareholders’ equity. The Group does not recognize any

changes in the fair value of equity instruments.

10. Receivables

Receivables include account receivables and other accounts receivables.

(1) Recognition of provision for bad debts:

The Group shall test the carrying amount of receivables on the balance sheet date. Where

there is any objective evidence proving that such receivables have been impaired, an

impairment provision shall be made.

① Debtor has serious financial difficult;

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

② Debtor goes against the contract clause (for instance, breach of faith or overdue paying

interests or principal);

③ Debtors have a great probability of bankruptcy or other financial reorganization;

④ Other evidence proving such accounts receivable has been impaired;

(2) Withdraw method of provision for bad debts

① The recognition criteria and method of individual provision for bad debts of receivables

that are individually significant

The Group recognized the receivables with amount above RMB20 million and other

receivables above 10 million as receivables with significant single amounts and withdrawn

the provision for bad debts.

The Group made an independent impairment test on receivables with significant single

amounts; the financial assets without impairment by independent impairment test should be

included in financial assets portfolio with similar credit risk to take the impairment test.

Receivables was recognized with impairment should no longer be included in receivables

portfolio with similar credit risk to take the impairment test.

② The recognition and method of provision for bad debts of receivables by credit risk

portfolio

A. Recognition of credit risk group

Receivables that not individually significant and individually significant but without

impairment by independent impairment test, are grouped on the basis of similarity and

relevance of credit risk. This credit risk usually reflects the debtor’s ability to repay all the

due accounts in accordance with contract for such assets, which also are related with the

measurement on future cash flow of the examined assets.

Recognition basic of different groups:

Item Basic

Group 1: Aging group Divide the groups according to the credit risks characteristics of the accounts

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

receivable

Group 2: Internal related party groups in

Divide the groups according to the credit risks characteristics of whether the

the scope of consolidation of the

creditor is the internal related party in the scope of consolidation of the Company

Company

B. Withdrawal method of provision for bad debts recognized by credit risk group

For the impairment test implemented by groups, the amount of provision for bad debts was

appraised and recognized in accordance with the structure of accounts receivable group and

similar characteristics of credit risk (the debtor’s ability to pay off the loans in accordance

with the provisions of contract), experience of losses, current economic status and the

predicted losses in the accounts receivable group.

Item Withdrawal method

Group 1: Aging group Aging analysis method

Group 2: Internal related party groups in the To make an independent impairment test and if there was no

scope of consolidation of the Company impairment, should not withdraw the bad debts provision.

In the groups, adopting aging analysis method to withdraw bad debt provision:

Withdrawal proportion for accounts Withdrawal proportion for other

Age

receivable (%) accounts receivable (%)

Within 1 year (including 1 year, similarly

2 2

hereinafter)

1-2 years 5 5

2-3 years 20 20

3-4 years 50 50

4-5 years 50 50

Over 5 years 100 100

③ Receivables with insignificant amount but being individually withdrawn the provision for

bad debts

The Group made independent impairment test on receivables with insignificant amount but

with the following characteristics, if any objective evidence shows that the accounts

receivable has been impaired, impairment loss shall be recognized on the basis of the gap

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

between the current values of the future cash flow lower than its book value so as to

withdraw provision for bad debts:

A. Receivables have dispute with the other parties or involving lawsuit and arbitration;

B. Receivables have obvious indication showing that the debtors are likely to fail to perform

the duty of repayment, etc.

C. There is other evidence of impairment and the impairment amount can estimated reliably.

(3) Reversal of provision for bad debts

If there is any objective evidence proving that the value of the said receivables has been

restored, and it is objectively related to the events occurred after such loss is recognized, the

impairment-related losses as originally recognized shall be reversed and be recorded into the

profits and losses of the current period. However, the reversed carrying amount shall not be

any more than the post-amortization costs of the said accounts receivable on the day of

reverse under the assumption that no provision is made for the impairment.

11. Inventory

(1) Classification

The Group’s inventories are classified as non-property inventories and property inventories.

And the non-property inventories include raw materials, goods in process; merchandise on

hand, goods delivered and circulating materials, etc; while the property inventories include

property in process and finished property, etc.

① The finished property refers to the finished and held-for-sale property.

② The property in process (development costs) refers to the unfinished property with the

development purpose for sale.

(2) Pricing method for outgoing inventories

The inventories shall be measured in light of their cost when obtained. The cost of inventory

consists of purchase costs, processing costs and other costs. Inventory is accounted by weight

average method upon receiving and giving. For merchandise on hand shall be accounted by

planned cost, if the difference between planned cost of and actual cost of raw materials is

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

accounted through the cost variance item, and the planned cost is adjusted to the actual cost

according to the cost difference which the carryover and given-out inventory should shoulder

in the period.

The property inventories are initially measured at the costs, and the costs of the developed

property include the land premium, expenditures for supporting infrastructures, expenditures

for construction and installation projects, the borrowing costs before the completion of the

developed project and other expenses occurred during the development process.

① The public supporting facilities recorded the development costs at the actual costs, the

amortization upon completion was transferred to the costs of houses and other

available-for-sale property, while as for the supporting facilities with operating value and

beneficiary rights owned by the Group as well as available for individual sale and

measurement, which shall be recorded into the “investment property”

② For the accounting policies on borrowing costs occurred for developing property, please

refer to Note IV. 16 Pricing of “Borrowing Costs”.

(3) Recognition basis of net realizable value and withdrawal method of depreciation reserves

for inventories

The net realizable value refers, in the ordinary course of business, to the account after

deducting the estimated cost of completion, estimated sale expense and relevant taxes from

the estimated sale price of inventories. The net realizable value of inventories shall be fixed

on the basis of valid evidence as well as under consideration of purpose of inventories and

the effect of events after balance-sheet-date.

On the balance sheet date, the inventories shall be measured according to the cost or the net

realizable value, whichever is lower. If the net realizable value is lower than the cost, it shall

withdraw the depreciation reserves for inventories, which was withdrawn in accordance with

the balance that the cost of individual inventory item exceeding the net realizable value.

After withdrawing the depreciation reserves for inventories, if the factors, which cause any

write-down of the inventories, have disappeared, causing the net realizable value of

inventories is higher than its carrying amount; the amount of write-down shall be reversed

from the original amount of depreciation reserve for inventories. The reversed amount shall

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

be included in the profits and losses of the current period.

(4) The perpetual inventory system is maintained for stock system.

(5) Amortization method of the low-value consumption goods and packing articles

The low-value consumption goods should be amortized by one time amortization when

acquiring and the packing articles are amortized by one time/gradation amortization when

acquiring.

12. Long-term equity investments

The long-term equity investments of this part refer to the long-term equity investments that

the Group has control, joint control or significant influence over the investees. The long-term

equity investment that the Group does not have control, joint control or significant influence

over the investees, should be recognized as available-for-sale financial assets or be measured

by fair value with the changes should be included in the financial assets accounting of the

current gains and losses, and please refer the details of the accounting policies to Notes IV 9

“financial instrument”.

Joint control, refers to the control jointly owned according to the relevant agreement on an

arrangement by the Group and the relevant activities of the arrangement should be decided

only after the participants which share the control right make consensus. Significant

influence refers to the power of the Group which could anticipate in the finance and the

operation polices of the investees, but could not control or jointly control the formulation of

the policies with the other parties.

(1) Recognition of investment costs

As for long-term equity investments acquired by enterprise merger, if the merger is under the

same control, the share of the book value of the owner’s equity of the merged enterprise, on

the date of merger, is regarded as the initial cost of the long-term equity investment. The

difference between the initial cost of the long-term equity investment and the payment in

cash, non-cash assets transferred as well as the book value of the debts borne by the merging

party shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the

retained earnings shall be adjusted. If the consideration of the merging enterprise is that it

issues equity securities, it shall, on the date of merger, regard the share of the book value of

the shareholder's equity of the merged enterprise on the consolidated financial statement of

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

the ultimate control party as the initial cost of the long-term equity investment. The total face

value of the stocks issued shall be regarded as the capital stock, while the difference between

the initial cost of the long-term equity investment and total face value of the shares issued

shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the

retained earnings shall be adjusted. The equities of the combined party which respectively

acquired through multiple transaction under the same control that ultimately form into the

combination of the enterprises under the same control, should be disposed according whether

belongs to package deal; if belongs to package deal, each transaction would be executed

accounting treatment by the Company as a transaction of acquiring the control right. If not

belongs to package deal, it shall, on the date of merger, regard the enjoyed share of the book

value of the shareholder's equity of the merged enterprise on the consolidated financial

statement of the ultimate control party as the initial cost of the long-term equity investment,

and as for the difference between the initial investment cost of the long-term equity

investment and sum of the book value of the long-term equity investment before the

combination and the book value of the consideration of the new payment that further

required on the combination date, should adjust the capital reserve; if the capital reserve is

insufficient to dilute, the retained earnings shall be adjusted. The equity investment held

before the combination date which adopted the equity method for accounting, or the other

comprehensive income confirmed for the available-for-sale financial assets, should not have

any accounting disposal for the moment.

For the long-term investment required from the business combination under different control,

the initial investment cost regarded as long-term equity investment on the purchasing date

according to the combination cost, the combination costs shall be the sum of the fair values

of the assets paid, the liabilities incurred or assumed and the equity securities issued by the

Company. The equities of the acquirees which respectively acquired through multiple

transaction that ultimately form into the combination of the enterprises under the different

control, should be disposed according whether belongs to package deal; if belongs to

package deal, each transaction would be executed accounting treatment by the Company as a

transaction of acquiring the control right. If not belongs to package deal, the sum of the book

value of the original held equity investment of the acquirees and the newly added investment

cost should be regarded as the initial investment cost of the long-term equity investment that

changed to be accounted by cost method. If the original held equity is calculated by cost

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

method, the other relevant comprehensive income would not have any accounting disposal

for the moment. If the original held equity investment is the financial assets available for sale,

its difference between the fair value and the book value as well as the accumulative changes

of the fair value that include in the other comprehensive income, should transfer into the

current gains and losses.

The commission fees for audit, law services, assessment and consultancy services and other

relevant expenses occurred in the business combination by the combining party or the

purchase party, shall be recorded into current profits and losses upon their occurrence; the

transaction expense from the issuance of equity securities or bonds securities which are as

consideration for combination by the combining party, should be recorded as the initial

amount of equity securities and bonds securities.

Besides the long-term equity investments formed by business combination, the other

long-term equity investments shall be initially measured by cost, the cost is fixed in

accordance with the ways of gaining, such as actual cash payment paid by the Group, the fair

value of equity securities issued by the Group, the agreed value of the investment contract or

agreement, the fair value or original carrying amount of exchanged assets from non-monetary

assets exchange transaction, the fair value of the long-term equity investments, etc. The

expenses, taxes and other necessary expenditures directly related with gaining the long-term

equity investments shall also be recorded into investment cost. The long-term equity

investment cost for those could execute significant influences on the investees because of

appending the investment or could execute joint control but not form as control, should be as

the sum of the fair value of the original held equity investment and the newly added

investment cost recognized according to the No.22 of Accounting Standards for Business

Enterprises—Recognition and Measurement of Financial Instrument.

(2) Subsequent measurement and recognition of gains or losses

A long-term equity investment where the investing enterprise has joint control (except for

which forms into common operators) or significant influence over the investors should be

measured by equity method. Moreover, long-term equity investment adopting the cost

method in the financial statements, and which the Company has control on invested entity.

① Long-term equity investment measured by adopting cost method

The price of a long-term equity investment measured by adopting the cost method shall be

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

included at its initial investment cost and append as well as withdraw the cost of investing

and adjusting the long-term equity investment. The return on investment at current period

shall be recognized in accordance with the cash dividend or profit announced to distribute by

the invested entity, except the announced but not distributed cash dividend or profit included

in the actual payment or consideration upon gaining the investment.

② Long-term equity investment measured by adopting equity method

If the initial cost of a long-term equity investment is more than the Company's attributable

share of the fair value of the invested entity's identifiable net assets for investment, the initial

cost of the long-term equity investment may not be adjusted. If the initial cost of a long-term

equity investment is less than the Company's attributable share of the fair value of the

invested entity's identifiable net assets for investment, the difference shall be included in the

current profits and losses and the cost of the long-term equity investment shall be adjusted

simultaneously.

When measured by adopting equity method, respectively recognize investment income and

other comprehensive income according to the net gains and losses as well as the portion of

other comprehensive income which should be enjoyed or be shared, and at the same time

adjust the book value of the long-term equity investment; corresponding reduce the book

value of the long-term equity investment according to profits which be declared to distribute

by the investees or the portion of the calculation of cash dividends which should be enjoyed;

for the other changes except for the net gains and losses, other comprehensive income and

the owners’ equity except for the profits distribution of the investees, should adjust the book

value of the long-term equity investment as well as include in the capital reserve. The

investing enterprise shall, on the ground of the fair value of all identifiable assets of the

invested entity when it obtains the investment, recognize the attributable share of the net

profits and losses of the invested entity after it adjusts the net profits of the invested entity. If

the accounting policies adopted by the investees is not accord with that of the Group, should

be adjusted according to the accounting policies of the Group and the financial statement of

the investees during the accounting period and according which to recognize the investment

income as well as other comprehensive income. For the transaction happened between the

Group and associated enterprises as well as joint ventures, if the assets launched or sold not

form into business, the portion of the unrealized gains and losses of the internal transaction,

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

which belongs to the Group according to the calculation of the enjoyed proportion, should

recognize the investment gains and losses on the basis. But the losses of the unrealized

internal transaction happened between the Group and the investees which belongs to the

impairment losses of the transferred assets, should not be neutralized.

The Group shall recognize the net losses of the invested enterprise until the book value of the

long-term equity investment and other long-term rights and interests which substantially

form the net investment made to the invested entity are reduced to zero. However, if the

Group has the obligation to undertake extra losses, it shall be recognized as the estimated

liabilities in accordance with the estimated duties and then recorded into investment losses at

current period. If the invested entity realizes any net profits later, the Group shall, after the

amount of its attributable share of profits offsets against its attributable share of the

un-recognized losses, resume recognizing its attributable share of profits.

For the long-term equity investment held by the Group before the first execution of the new

accounting criterion of the associated enterprises and joint ventures, if there is debit

difference of the equity investment related to the investment, should be included in the

current gains and losses according to the amount of the straight-line amortization during the

original remained period.

③ Acquiring shares of minority interest

In the preparation for the financial statements, the balance existed between the long-term

equity investment increased by acquiring shares of minority interest and the attributable net

assets on the subsidiary calculated by the increased shares held since the purchase date (or

combination date), the capital reserves shall be adjusted, if the capital reserves are not

sufficient to offset, the retained profits shall be adjusted.

④ Disposal of long-term equity investment

In the preparation of financial statements, the Company disposed part of the long-term equity

investment on subsidiaries without losing its controlling right on them, the balance between

the disposed price and attributable net assets of subsidiaries by disposing the long-term

equity investment shall be recorded into owners’ equity; where the Company losses the

controlling right by disposing part of long-term equity investment on such subsidiaries, it

shall treated in accordance with the relevant accounting policies in Note IV. 5 (2) — Method

on preparation of combined financial statements.

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

For other ways on disposal of long-term equity investment, the balance between the book

value of the disposed equity and its actual payment gained shall be recorded into current

profits and losses.

For the long-term equity investment measured by adopting equity method, if the remained

equity after disposal still adopts the equity method for measurement, the other

comprehensive income originally recorded into owners’ equity should adopt the same basis

of the accounting disposal of the relevant assets or liabilities directly disposed by the

investees according to the corresponding proportion. The owners’ equity recognized owning

to the changes of the other owners’ equity except for the net gains and losses, other

comprehensive income and the profits distribution of the investees, should be transferred into

the current gains and losses according to the proportion.

For the long-term equity investment which adopts the cost method of measurement, if the

remained equity still adopt the cost method, the other comprehensive income recognized

owning to adopting the equity method for measurement or the recognition and measurement

standards of financial instrument before acquiring the control of the investees, should adopt

the same basis of the accounting disposal of the relevant assets or liabilities directly disposed

by the investees and should be carried forward into the current gains and losses according to

the proportion; the changes of the other owners’ equity except for the net gains and losses,

other comprehensive income and the profits distribution among the net assets of the investees

which recognized by adopting the equity method for measurement, should be carried forward

into the current gains and losses according to the proportion.

For those the Group lost the control of the investees by disposing part of the equity

investment as well as the remained equity after disposal could execute joint control or

significant influences on the investees, should change to measure by equity method when

compiling the individual financial statement and should adjust the measurement of the

remained equity to equity method as adopted since the time acquired; if the remained equity

after disposal could not execute joint control or significant influences on the investees,

should change the accounting disposal according to the relevant regulations of the

recognition and measurement standards of financial instrument, and its difference between

the fair value and book value on the date lose the control right should be included in the

current gains and losses. For the other comprehensive income recognized by adopting equity

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

method for measurement or the recognition and measurement standards of financial

instrument before the Group acquired the control of the investees, should execute the

accounting disposal by adopting the same basis of the accounting disposal of the relevant

assets or liabilities directly disposed by the investees when lose the control of them, while the

changes of the other owners’ equity except for the net gains and losses, other comprehensive

income and the profits distribution among the net assets of the investees which recognized by

adopting the equity method for measurement, should be carried forward into the current

gains and losses according to the proportion. Of which, for the disposed remained equity

which adopted the equity method for measurement, the other comprehensive income and the

other owners’ equity should be carried forward according to the proportion; for the disposed

remained equity which changed to execute the accounting disposal according to the

recognition and measurement standards of financial instrument, the other comprehensive

income and the other owners’ equity should be carried forward in full amount.

For those the Group lost the control of the investees by disposing part of the equity

investment, the disposed remained equity should change to calculate according to the

recognition and measurement standards of financial instrument, and difference between the

fair value and book value on the date lose the control right should be included in the current

gains and losses. For the other comprehensive income recognized from the original equity

investment by adopting the equity method, should execute the accounting disposal by

adopting the same basis of the accounting disposal of the relevant assets or liabilities directly

disposed by the investees when terminate the equity method for measurement, while for the

owners’ equity recognized owning to the changes of the other owner’s equity except for the

net gains and losses, other comprehensive income and the profits distribution of the investees,

should be transferred into the current investment income with full amount when terminate

adopting the equity method.

The Group respectively disposes the equity investment of the subsidiaries through multiple

transactions until lose the control right, if the above transactions belongs to the package deal,

should execute the accounting disposal by regarding each transaction as a deal of disposing

the equity investment of the subsidiaries until lose the control right, while the difference

between each expenses of the disposal and the book value of the long-term equity investment

in accord with the disposed equity before losing the control right, should firstly be

recognized as other comprehensive income then be transferred into the current gains and

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

losses of losing the control right along until the time when lose it.

13. Investment real estates

The term “investment real estate” refers to the real estate held for generating rent and/or

capital appreciation. Investment real estates of the Group include the right to use any land

which has already been rented; the right to use any land which is held and prepared for

transfer after appreciation; and the right to use any building which has already been rented.

The initial measurement of the investment real estate shall be made at its cost. Subsequent

expenditures incurred for an investment real estate is included in the cost of the investment

real estate when it is probable that economic benefits associated with the investment real

estate will flow to the Group and the cost can be reliably measured, otherwise the

expenditure is recognized in profit or loss in the period in which they are incurred.

The Group shall make a follow-up measurement to the investment real estate by employing

the cost pattern on the date of the balance sheet. An accrual depreciation or amortization shall

be made for the investment real estates in the light of the accounting policies of the use right

of buildings or lands.

For details of impairment test method and withdrawal method of impairment provision of

investment real estates, please refer to Note IV. 19. “Long-term assets impairment”.

When owner-occupied real estate or inventories are changed into investment real estate or

investment real estate is changed into owner-occupied real estate, of which book value prior

to the change shall be the entry value after the change.

When an investment real estate is changed to an owner-occupied real estate, it would be

transferred to fixed assets or intangible assets at the date of such change. When an

owner-occupied real estate is changed to be held to earn rental or for capital appreciation, the

fixed asset or intangible asset is transferred to investment real estate at the date of such

change. If the fixed asset or intangible asset is changed into investment real estate measured

by adopting the cost pattern, whose book value prior to the change shall be the entry value

after the change; if the fixed asset or intangible asset is changed into investment real estate

measured by adopting the fair value pattern, whose fair value on the date of such change

shall be the entry value after the change

An investment real estate is derecognized on disposal or when the investment real estate is

permanently withdrawn from use and no future economic benefits are expected from its

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

disposal. The amount of proceeds on sale, transfer, retirement or damage of an investment

real estate less its carrying amount and related taxes and expenses is recognized in profit or

loss in the period in which it is incurred.

14. Fixed assets

(1) Conditions for recognition of fixed assets

The term "fixed assets" refers to the tangible assets that simultaneously possess the features

as follows: (a) they are held for the sake of producing commodities, rendering labor service,

renting or business management; and (b) their useful life is in excess of one fiscal year. The

fixed assets are only recognized when the relevant economic benefits probably flow in the

Group and its cost could be reliable measured. The fixed assets should take the initial

measurement according to the cost and at the same time consider the influences of the factors

of the estimated discard expenses.

(2) Depreciation methods of each fixed asset

The fixed assets should be withdrawn and depreciation by straight-line depreciation within

the useful life since the next month when the fixed assets reach the estimated available state.

The useful life, estimated net salvage and the yearly discounted rate of each fixed asset are as

follows:

Expected net

Annual

Category of fixed assets Method Useful life (Year) salvage value

deprecation (%)

(%)

Housing and building Straight-line

20-40 10.00 2.25-4.50

depreciation

Machinery equipment Straight-line 10.00

10 9.00

depreciation

Electronic equipment Straight-line 10.00

5 18.00

depreciation

Transportation vehicle Straight-line 10.00

5 18.00

depreciation

Other equipment Straight-line 5 10.00

18.00

depreciation

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

The “expected net salvage value” refers to the expected amount that the Group may obtain

from the current disposal of a fixed asset after deducting the expected disposal expenses at

the expiration of its expected useful life.

(3) Testing method of impairment and withdrawal method of provision for impairment on

fixed assets

For details of the testing method of impairment and withdraw method of impairment

provision for impairment on fixed assets, please refer to Note IV. 19 “Long-term assets

impairment”.

(4) Recognition basis, pricing and depreciation method of fixed assets by finance lease

The “finance lease” shall refer to a lease that has transferred in substance all the risks and

rewards related to the ownership of an asset. Its ownership may or may not eventually be

transferred. The fixed assets by finance lease shall adopt the same depreciation policy for

self-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the

ownership of the leased asset when the lease term expires, the leased asset shall be fully

depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain

the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully

depreciated over the shorter one of the lease term or its useful life.

(5) Other explanations

The follow-up expenses related to a fixed asset, if the economic benefits pertinent to this

fixed asset are likely to flow into the enterprise and its cost can be reliably measured, shall be

recorded into cost of fixed assets and ultimately recognized as the book value of the replaced

part; otherwise, they shall be included in the current profits and losses.

Terminate to recognize the fixed assets when the fixed assets under the disposing state or be

estimated that could not occur any economy benefits through using or disposing. When the

Group sells, transfers or discards any fixed assets, or when any fixed assets of the Group is

damaged or destroyed, the Group shall deduct the book value of the fixed assets as well as

the relevant taxes from the disposal income, and include the amount in the current profits and

losses.

The Group shall check the useful life, expected net salvage value and depreciation method of

the fixed assets at the end of the year at least, if there is any change, it shall be regarded as a

change of the accounting estimates.

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

15. Construction in progress

Construction in process is measured at actual cost. Actual cost comprises construction costs,

borrowing costs that are eligible for capitalization before the fixed assets being ready for

their intended us and other relevant costs. Construction in process is transferred to fixed

assets when the assets are ready for their intended use.

For details of the testing method of impairment and withdraw method of impairment

provision on construction in progress, please refer to Note IV. 19 “Long-term assets

impairment”.

16. Borrowing costs

The borrowing costs shall include interest on borrowings, amortization of discounts or

premiums on borrowings, ancillary expenses, and exchange balance on foreign currency

borrowings. When the borrowing costs can be directly attributable to the construction or

production of assets eligible for capitalization, and the asset disbursements or the borrowing

costs have already incurred, and the construction or production activities which are necessary

to prepare the asset for its intended use or sale have already started, the capitalization of

borrowing costs begins. When the asset eligible for capitalization under acquisition and

construction or production is ready for the intended use or sale, the capitalization of the

borrowing costs shall be ceased. Other borrowing costs shall be recognized as expenses when

incurred.

The to-be-capitalized amount of interests shall be determined in light of the actual interests

incurred of the specially borrowed loan at the present period minus the income of interests

earned on the unused borrowing loans as a deposit in the bank or as a temporary investment;

the enterprise shall calculate and determine the to-be-capitalized amount 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. The capitalization rate shall be calculated and determined in

light of the weighted average interest rate of the general borrowing.

During the period of capitalization, the exchange balance on foreign currency special

borrowings shall be capitalized; the exchange balance on foreign currency general

borrowings shall be recorded into current profits and losses.

The term “assets eligible for capitalization” refers to the fixed assets, investment real estate,

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

inventories and other assets, of which the acquisition and construction or production may

take quite a long time to get ready for its intended use or for sale.

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 shall be suspended.

17. Intangible assets

(1) Pricing method, useful life and impairment test

The term “intangible asset” refers to the identifiable non-monetary assets possessed or

controlled by enterprises which have no physical shape.

The intangible assets shall be initially measured according to its cost. The costs related with

the intangible assets, if the economic benefits related to intangible assets are likely to flow

into the enterprise and the cost of intangible assets can be measured reliably, shall be

recorded into the costs of intangible assets; otherwise, it shall be recorded into current profits

and losses upon the occurrence.

The use right of land gained is usually measured as intangible assets. For the self-developed

and constructed factories and other constructions, the related expenditures on use right of

land and construction costs shall be respectively measured as intangible assets and fixed

assets. For the purchased houses and buildings, the related payment shall be distributed into

the payment for use right of land and the payment for buildings, if it is difficult to be

distributed, the whole payment shall be treated as fixed assets.

For intangible assets with a finite service life, from the time when it is available for use, the

cost after deducting the sum of the expected salvage value and the accumulated impairment

provision shall be amortized by straight line method during the service life. While the

intangible assets without certain service life shall not be amortized.

At the end of period, the Group shall check the service life and amortization method of

intangible assets with finite service life, if there is any change, it shall be regarded as a

change of the accounting estimates. Besides, the Group shall check the service life of

intangible assets without certain service life, if there is any evidence showing that the period

of intangible assets to bring the economic benefits to the enterprise can be prospected, it shall

be estimated the service life and amortized in accordance with the amortization policies for

intangible assets with finite service life.

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

(2) R & D expenses

The expenditures for internal research and development projects of an enterprise shall be

classified into research expenditures and development expenditures.

The research expenditures shall be recorded into the profit or loss for the current period.

The development expenditures shall be confirmed as intangible assets when they satisfy the

following conditions simultaneously, and shall be recorded into profit or loss for the current

period when they don’t satisfy the following conditions.

① It is feasible technically to finish intangible assets for use or sale;

② It is intended to finish and use or sell the intangible assets;

③ The usefulness of methods for intangible assets to generate economic benefits shall be

proved, including being able to prove that there is a potential market for the products

manufactured by applying the intangible assets or there is a potential market for the

intangible assets itself or the intangible assets will be used internally;

④ It is able to finish the development of the intangible assets, and able to use or sell the

intangible assets, with the support of sufficient technologies, financial resources and other

resources;

⑤ The development expenditures of the intangible assets can be reliably measured.

As for expenses that can’t be identified as research expenditures or development

expenditures, the occurred R & D expenses shall be all included in current profits and losses.

(3) Testing method of impairment and withdraw method of impairment provision of

intangible assets

For details of the testing method of impairment and withdraw method of impairment

provision on intangible assets, see Notes IV. 19 “Long-term assets impairment”.

18. Amortization method of long-term deferred expenses

Long-term deferred expenses refer to general expenses with the apportioned period over one

year (one year excluded) that have occurred but attributable to the current and future periods.

Long-term deferred expense shall be amortized averagely within benefit period.

19. Impairment of long-term assets

For non-current financial Assets of fixed Assets, projects under construction, intangible

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Assets with limited service life, investing real estate with cost model, long-term equity

investment of subsidiaries, cooperative enterprises and joint ventures, the Group should

judge whether decrease in value exists on the date of balance sheet. Recoverable amounts

should be tested for decrease in value if it exists. Other intangible Assets of reputation and

uncertain service life and other non-accessible intangible assets should be tested for decrease

in value no matter whether it exists.

If the recoverable amount is less than book value in impairment test results, the provision for

impairment of differences should include in impairment loss. Recoverable amounts would be

the higher of net value of asset fair value deducting disposal charges or present value of

predicted cash flow. Asset fair value should be determined according to negotiated sales price

of fair trade. If no sales agreement exists but with asset active market, fair value should be

determined according to the Buyer’s price of the asset. If no sales agreement or asset active

market exists, asset fair value could be acquired on the basis of best information available.

Disposal expenses include legal fees, taxes, cartage or other direct expenses of merchantable

Assets related to asset disposal. Present value of predicted asset cash flow should be

determined by the proper discount rate according to Assets in service and predicted cash flow

of final disposal. Asset depreciation reserves should be calculated on the basis of single

Assets. If it is difficult to predict the recoverable amounts for single Assets, recoverable

amounts should be determined according to the belonging asset group. Asset group is the

minimum asset combination producing cash flow independently.

In impairment test, book value of the business reputation in financial report should be shared

to beneficial asset group and asset group combination in collaboration of business merger. It

is shown in the test that if recoverable amounts of shared business reputation asset group or

asset group combination are lower than book value, it should determine the impairment loss.

Impairment loss amount should firstly be deducted and shared to the book value of business

reputation of asset group or asset group combination, then deduct book value of all assets

according to proportions of other book value of above assets in asset group or asset group

combination except business reputation.

After the asset impairment loss is determined, recoverable value amounts would not be

returned in future.

20. Employee compensation

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Employee compensation of the Company mainly includes short-term employee

compensation, departure benefits, demission benefits and other long-term employee

compensation. Of which:

Short-term compensation mainly including salary, bonus, allowances and subsidies,

employee services and benefits, medical insurance premiums, birth insurance premium,

industrial injury insurance premium, housing fund, labor union expenditure and personnel

education fund, non-monetary benefits etc. The short-term compensation actually happened

during the accounting period when the active staff offering the service for the Group should

be recognized as liabilities and is included in the current gains and losses or relevant assets

cost. Of which the non-monetary benefits should be measured according to the fair value.

Welfare after demission mainly includes setting drawing plan. Defined contribution plans

include basic endowment insurance, unemployment insurance and annuity. Deposited

amounts are charged to relevant asset costs or current profits and losses during the

period in which they are incurred. Defined benefit plan of the Company is internal early

retirement plan. According to anticipated accumulative welfare unit, the Company makes

estimates by unbiased and consistent actuarial assumption for the demographic variables and

financial variables, measures the obligations produced in defined benefit plans, and

determines the vesting period. On balance sheet date, the Company will list all obligations in

defined benefit plans as present value and include current service costs into current profits

and losses.

When terminating labor relations before expiration of contract, or layoffs with compensations,

and the Company cannot terminate the labor relations unilaterally or reduce the demission

welfare, remuneration and liabilities produced from the demission welfare should be

determined and included in current profits and losses when determining the costs of

demission welfare and recombination. However, demission welfare not fully paid within 12

months after annual Reporting Period should be handled the same as other long-term

employees’ payrolls.

The inside employee retirement plan is treated by adopting the same principle with the above

dismiss ion welfare. The group would recorded the salary and the social security insurance

fees paid and so on from the employee’s service terminative date to normal retirement date

into current profits and losses (dismiss ion welfare) under the condition that they meet the

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

recognition conditions of estimated liabilities.

The other long-term welfare that the Group offers to the staffs, if met with the setting

drawing plan, should be accounting disposed according to the setting drawing plan, while the

rest should be disposed according to the setting revenue plan.

21. Estimated liabilities

The company should recognize the related obligation as a provision for liability when the

obligation meets the following conditions: (1) That obligation is a present obligation of the

enterprise; (2) It is probable that an outflow of economic benefits from the enterprise will be

required to settle the obligation; (3) A reliable estimate can be made of the amount of the

obligation.

On the balance sheet date, an enterprise shall take into full consideration of the risks,

uncertainty, time value of money, and other factors pertinent to the Contingencies to measure

the estimated liabilities in accordance with the best estimate of the necessary expenses for the

performance of the current obligation.

When all or some of the expenses necessary for the liquidation of an estimated liabilities of

an enterprise is expected to be compensated by a third party, the compensation should be

separately recognized as an asset only when it is virtually certain that the reimbursement will

be obtained. Besides, the amount recognized for the reimbursement should not exceed the

book value of the estimated liabilities.

22. Revenue

(1) Revenue from selling goods

No revenue from selling goods may be recognized unless the following conditions are met

simultaneously: the significant risks and rewards of ownership of the goods have been

transferred to the buyer by the enterprise; the enterprise retains neither continuous

management right that usually keeps relation with the ownership nor effective control over

the sold goods; the relevant amount of revenue can be measured in a reliable way; the

relevant economic benefits may flow into the enterprise; and the relevant costs incurred or to

be incurred can be measured in a reliable way.

The recognition of revenue from commodities for the home market when shipping the goods:

for goods exported, the revenue shall be recognized once the goods are cleared through

customs and delivered to the carrier designated by the purchaser.

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

(2) Providing labor services

If the Group can reliably estimate the outcome of a transaction concerning the labor services

it provides, it shall recognize the revenue from providing services employing the

percentage-of-completion method on the date of the balance sheet. The completed proportion

of a transaction concerning the providing of labor services shall be decided by the proportion

of the labor service already provided to the total labor service to provide.

The outcome of a transaction concerning the providing of labor services can be measured in a

reliable way, means that the following conditions shall be met simultaneously: ① The

amount of revenue can be measured in a reliable way; ② The relevant economic benefits are

likely to flow into the enterprise; ③ The schedule of completion under the transaction can be

confirmed in a reliable way; and ④ The costs incurred or to be incurred in the transaction

can be measured in a reliable way.

If the outcome of a transaction concerning the providing of labor services cannot be

measured in a reliable way, the revenue from the providing of labor services shall be

recognized in accordance with the amount of the cost of labor services incurred and expected

to be compensated, and make the cost of labor services incurred as the current expenses. If it

is predicted that the cost of labor services incurred couldn’t be compensated, thus no revenue

shall be recognized.

Where a contract or agreement signed between Group and other enterprises concerns selling

goods and providing of labor services, if the part of sale of goods and the part of providing

labor services can be distinguished from each other and can be measured respectively, the

part of sale of goods and the part of providing labor services shall be treated respectively. If

the part of selling goods and the part of providing labor services cannot be distinguished

from each other, or if the part of sale of goods and the part of providing labor services can be

distinguished from each other but cannot be measured respectively, both parts shall be

conducted as selling goods.

(3) Recognition method of the sales revenues of real estate

The Group had signed the sales contract with the real estate had completed and be examined

qualified, and reached the referable using conditions agreed by the sales contract as well as at

the same time the housing accounts had been recognized the realize of the sales revenues

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

when received with full amount according to the sales contract.

(4) Royalty revenue

In accordance with relevant contract or agreement, the amount of royalty revenue should be

recognized as revenue on accrual basis.

(5) Interest revenue

The amount of interest revenue should be measured and confirmed in accordance with the

length of time for which the Group’s monetary fund is used by others and the agreed interest

rate.

(6)Property leasing revenue

For the recognition method of the property leasing revenue, please refer to Notes IV. 25.

23. Government subsidies

A government subsidy means the monetary or non-monetary assets obtained free by the

Group from the government, but excluding the capital invested by the government as the

owner of the enterprise. Government subsidies consist of the government subsidies pertinent

to assets and government subsidies pertinent to income.

If a government subsidy is a monetary asset, it shall be measured in the light of the received

or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured

at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at

its nominal amount. The government subsidies measured at their nominal amounts shall be

directly included in the current profits and losses.

The government subsidies pertinent to assets shall be recognized as deferred income, equally

distributed within the useful lives of the relevant assets, and included in the current profits

and losses. The government subsidies pertinent to incomes shall be treated respectively in

accordance with the circumstances as follows: those subsidies used for compensating the

related future expenses or losses of the enterprise shall be recognized as deferred income and

shall included in the current profits and losses during the period when the relevant expenses

are recognized; or those subsidies used for compensating the related expenses or losses

incurred to the enterprise shall be directly included in the current profits and losses.

Where it is necessary to refund any government subsidy which has been recognized, it shall

be treated respectively in accordance with the circumstances as follows: if there is the

deferred income concerned, the book balance of the deferred income shall be offset against,

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

but the excessive part shall be included in the current profits and losses; or if there is no

deferred income concerned to the government subsidy, it shall be directly included in the

current profits and losses.

24. Deferred income tax assets/deferred income tax liabilities

(1) Income tax of the current period

On the balance sheet date, for the current income tax liabilities (or assets) of the current

period as well as the part formed during the previous period, should be measured by the

income tax of the estimated payable (returnable) amount which be calculated according to

the regulations of the tax law. The amount of the income tax payable which is based by the

calculation of the current income tax expenses, are according to the result measured from the

corresponding adjustment of the pre-tax accounting profit of 2014 which in accord to the

relevant regulations of the tax law.

(2) Deferred income tax assets and deferred income tax liabilities

The difference between the book value of certain assets and liabilities and their tax

assessment basis, as well as the temporary difference occurs from the difference between the

book value of the items which not be recognized as assets and liabilities but could confirm

their tax assessment basis according to the regulations of the tax law, the deferred income tax

assets and the deferred income tax liabilities should be recognized by adopting liabilities law

of the balance sheet.

No deferred tax liability is recognized for a temporary difference arising from the initial

recognition of goodwill, the initial recognition of assets or liabilities due to a transaction

other than a business combination, which affects neither accounting profit nor taxable profit

(or deductible loss). Besides, no deferred tax assets is recognized for the taxable temporary

differences related to the investments of subsidiary companies, associated enterprises and

joint enterprises, and the investing enterprise can control the time of the reverse of temporary

differences as well as the temporary differences are unlikely to be reversed in the excepted

future. Otherwise, the Group should recognize the deferred income tax liabilities arising from

other taxable temporary difference.

No deferred taxable assets should be recognized for the deductible temporary difference of

initial recognition of assets and liabilities arising from the transaction which is not business

combination, the accounting profits will not be affected, nor will the taxable amount or

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

deductible loss be affected at the time of transaction. Besides, no deferred taxable assets

should be recognized for the deductible temporary difference related to the investments of

the subsidiary companies, associated enterprises and joint enterprises, which are not likely to

be reversed in the expected future or is not likely to acquire any amount of taxable income

tax that may be used for making up such deductible temporary differences. Otherwise, the

Company shall recognize the deferred income tax assets arising from a deductible temporary

difference basing on the extent of the amount of the taxable income that is likely to be

acquired to make up such deductible temporary differences

For any deductible loss or tax deduction that can be carried forward to the next year, the

corresponding deferred income tax asset shall be determined to the extent that the amount of

future taxable income to be offset by the deductible loss or tax deduction to be likely

obtained.

On the balance sheet date, the deferred income tax assets and the deferred income tax

liabilities shall be measured at the tax rate applicable to the period during which the assets

are expected to be recovered or the liabilities are expected to be settled.

The book value of deferred income tax assets shall be reviewed at each balance sheet date. If

it is unlikely to obtain sufficient taxable income to offset against the benefit of the deferred

income tax asset, the book value of the deferred income tax assets shall be written down. Any

such write-down should be subsequently reversed where it becomes probable that sufficient

taxable income will be available.

(3) Income tax expenses

Income tax expenses include current income tax and deferred income tax.

The rest current income tax and the deferred income tax expenses or revenue should be

included into current gains and losses except for the current income tax and the deferred

income tax related to the transaction and events that be confirmed as other comprehensive

income or be directly included in the shareholders’ equity which should be included in other

comprehensive income or shareholders’ equity as well as the book value for adjusting the

goodwill of the deferred income tax occurs from the business combination.

(4) Offset of income tax

The current income tax assets and liabilities of the Group should be listed by the written-off

net amount which intend to executes the net amount settlement as well as the assets acquiring

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

and liabilities liquidation at the same time while owns the legal rights of settling the net

amount.

The deferred income tax assets and liabilities of the Group should be listed as written-off net

amount when having the legal rights of settling the current income tax assets and liabilities

by net amount and the deferred income tax and liabilities is relevant to the income tax which

be collected from the same taxpaying bodies by the same tax collection and administration

department or is relevant to the different taxpaying bodies but during each period which there

is significant reverse of the deferred income assets and liabilities in the future and among

which the involved taxpaying bodies intend to settle the current income tax and liabilities by

net amount or are at the same time acquire the asset as well as liquidate the liabilities.

25. Leasing

Financing leasing virtually transferred the whole risks and leasing of the compensation

related to the assets ownership and their ownership may eventually be transferred or maybe

not. Other leasing except for the financing leasing is operating leasing.

(1) Business of operating leases recorded by the Group as the lessee

The rent expenses from operating leases shall be recorded by the lessee in the relevant asset

costs or the profits and losses of the current period by using the straight-line method over

each period of the lease term. The initial direct costs shall be recognized as the profits and

losses of the current period. The contingent rents shall be recorded into the profits and losses

of the current period in which they actually arise.

(2) Business of operating leases recorded by the Group as the lessor

The rent incomes from operating leases shall be recognized as the profits and losses of the

current period by using the straight-line method over each period of the lease term. The

initial direct costs of great amount shall be capitalized when incurred, and be recorded into

current profits and losses in accordance with the same basis for recognition of rent incomes

over the whole lease term. The initial direct costs of small amount shall be recorded into

current profits and losses when incurred. The contingent rents shall be recorded into the

profits and losses of the current period in which they actually arise.

(3) Business of finance leases recorded by the Group as the lessee

On the lease beginning date, the Group shall record the lower one of the fair value of the

leased asset and the present value of the minimum lease payments on the lease beginning

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

date as the entering value in an account, recognize the amount of the minimum lease

payments as the entering value in an account of long-term account payable, and treat the

balance between the recorded amount of the leased asset and the long-term account payable

as unrecognized financing charges. Besides, the initial direct costs directly attributable to the

leased item incurred during the process of lease negotiating and signing the leasing

agreement shall be recorded in the asset value of the current period. The balance through

deducting unrecognized financing charges from the minimum lease payments shall be

respectively stated in long-term liabilities and long-term liabilities due within 1 year.

Unrecognized financing charges shall be adopted by the effective interest rate method in the

lease term, so as to calculate and recognize current financing charges. The contingent rents

shall be recorded into the profits and losses of the current period in which they actually arise.

(4) Business of finance leases recorded by the Group as the lessor

On the beginning date of the lease term, the Group shall recognize the sum of the minimum

lease receipts on the lease beginning date and the initial direct costs as the entering value in

an account of the financing lease values receivable, and record the unguaranteed residual

value at the same time. The balance between the sum of the minimum lease receipts, the

initial direct costs and the unguaranteed residual value and the sum of their present values

shall be recognized as unrealized financing income. The balance through deducting

unrealized financing incomes from the finance lease accounts receivable shall be respectively

stated in long-term claims and long-term claims due within 1 year.

Unrecognized financing incomes shall be adopted by the effective interest rate method in the

lease term, so as to calculate and recognize current financing revenues. The contingent rents

shall be recorded into the profits and losses of the current period in which they actually arise.

26. Changes in main accounting policies and estimates

(1) Change of accounting policies

There was no any change of accounting policies of the Company in the Reporting Period.

(2) Change of accounting estimates

There was no any change of accounting estimate of the Company in the Reporting Period.

27. Critical accounting judgments and estimates

Due to the inside uncertainty of operating activity, the Group needed to make judgments,

estimates and assumption on the book value of the accounts without accurate measurement

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Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

during the employment of accounting policies. And these judgments, estimates and

assumption were made basing on the prior experience of the senior executives of the Group,

as well as in consideration of other factors. These judgments, estimates and assumption

would also affect the report amount of income, costs, assets and liabilities, as well as the

disclosure of contingent liabilities on balance sheet date. However, the uncertainty of these

estimates was likely to cause significant adjustment on the book value of the affected assets

and liabilities.

The Group would check periodically the above judgments, estimates and assumption on the

basis of continuing operation. For the changes in accounting estimates only affected on the

current period, the influence should be recognized at the period of change occurred; for the

changes in accounting estimates affected the current period and also the future period, the

influence should be recognized at the period of change occurred and future period.

On the balance sheet date, the Group needed to make judgments, estimates and assumption

on the accounts in the following important items:

(1) Categorization of leasing

In accordance with Accounting Standards for Enterprises No. 21 – Leasing, the Group

categorized the leasing into operating lease and finance lease. During the categorization, the

management level needed to make analysis and judgment on whether all the risk and

compensation related with the leased assets had been transferred to the leasee, or whether the

Group had already undertaken all the risk and compensation related with the leased assets.

(2) Provision for bad debts

In accordance with the accounting policies of accounts receivable, the Group measured the

losses for bad debts by adopting allowance method. The impairment of accounts receivable

was based on the appraisal of the recoverability of accounts receivable. The impairment of

accounts receivable was dependent on the judgment and estimates. The actual amount and

the difference of previous estimates would affect the book value of accounts receivable and

the withdrawal and reversal on provision for bad debts of accounts receivable during the

period of estimates being changed.

(3) Provision for falling price of inventories

In accordance with the accounting policies of inventories, for the inventories that the costs

were more than the net realizable value as well as out-of-date and dull-sale inventories, the

125

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Group withdrawn the provision for falling price of inventories on the lower one between

costs and net realizable value. Evaluating the falling price of inventories needed the

management level gain the valid evidence and take full consideration of the purpose of

inventories, influence of events after balance sheet date and other factors, and then made

relevant judgments and estimates. The actual amount and the difference of previous estimates

would affect the book value of inventories and the withdrawal and reversal on provision for

bad debts of inventories during the period of estimates being changed.

(4) The fair value of financial instrument

For the financial instruments without active market, the Group recognized the fair value by

various methods. These evaluation methods included discounted cash flow mode analysis,

etc. The Group needed to estimate the future cash flow, credit risk, fluctuation rate of market

and relativity and other factors, as well as choose the property discount rate. Due to the

uncertainty of relevant assumptions, so their changes would affect the fair value of financial

instrument.

(5) Held-to-maturity investments

The Company classifies the non-derivative financial asset with a fixed or determinable

amount of repo price, and a fixed date of maturity, which the enterprise holds for a definite

purpose or the enterprise is able to hold until its maturity, to held-to-maturity investment.

Such classification concerns lots of judgments. During the judgment process, the Company

will assess the purpose and capability for holding such kind of investment to maturity. Except

for special cases (for example, selling investment with no-large amount when the maturity

date is closely to come), if the Company can’t hold the investment to maturity date, the

Company should re-classify all that investment to available-for-sale financial assets, and

shouldn’t classify those financial assets into hold-to-maturity investment in the current fiscal

year and the next two complete fiscal years. Such cases may have significant impact on

related financial assets value stated in financial statements, and may influence the risk

management strategy for financial tools of the Company.

(6) Impairment of held-to-maturity investment

The decision about confirming the impairment of the investment held-to-maturity by the

Company depends on the judgment of the management layer to a great extent. The objective

evidences of the occurrence of the impairment include there is serious financial difficulties of

126

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

the issuer which lead the financial assets could not be continued to deal in the active market

and could not execute the clauses of the contracts (for example, to pay for the interests or the

principal occurs default) and so on. When executing the judgment, the Company should

assess the influences of the objective evidences of the occurrence of the impairment on the

estimated future cash flow of the investment.

(7) The impairment of financial assets available for sale

The Group judged whether the financial assets available for sale were impaired relying

heavily on the judgment and assumption of the management team, so as to decide whether

recognized the impairment losses in the income statement. During the process of making the

judgment and assumption, the Group needed to appraise the balance of the cost of the

investment exceeding its fair value and the continuous period, the financial status and

business forecast in a short period, including the industrial situation, technical reform, credit

level, default rate and risk of counterparty.

(8) Provision for impairment of non-financial non-current assets

The Group made a judgment on the non-current assets other than financial assets whether

they had any indication of impairment on the balance sheet date. For the intangible assets

without finite service life, other than the annual impairment test, they should be subject to the

impairment test when there was any indication of impairment. For other non-current

non-financial assets, which should be subjected to impairment test when there was indication

of impairment indicated that the book value can’t be recoverable.

When the book value of the assets or assets portfolio was more than the recoverable amount,

which was the higher one between the net amount of fair value after deducting the disposal

expenses and the discounted amount of the estimated future cash flow, it means impairment

incurred.

The net amount of fair value after deducting the disposal expenses should be fixed the price

in the sale agreement for similar assets in the fair transaction minus the increased costs

directly attributable to the assets disposal.

When estimated the discounted value of future cash flow, the Group needed to make

important judgment on the output, selling price, relevant costs and the discount rate for

calculating the discounted amount, etc. When estimated the recoverable amount, the Group

would adopt all the available documents, including the prediction for relevant output, selling

127

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

price and relevant operating costs arising from reasonable and supportive assumptions.

The Group made the impairment test on goodwill at least one time per year, which required

to predict the discounted amount of the future cash flow of the assets or assets portfolio with

the distributed good will, for which, the Group needed to predict the future cash flow of the

assets or assets portfolio, and adopt the property discounted rate to decide the discounted

amount of future cash flow.

(9) Depreciation and amortization

For the investment real estate, fixed assets and intangible assets, the Group withdrew the

depreciation and amortization by adopting the straight-line method during the service life

after full consideration of the salvage value. The Group checked the service life periodically

so as to decide the amount of depreciation and amortization at each Reporting Period. The

service life was fixed by the Group in accordance with the previous experience of the similar

assets and the expected technical update. If there was any significant change on the previous

estimates, the depreciation and amortization expenses should be adjusted.

(10) Expenditures for development

When fixing the amount of capitalization, the management level of the Group needed to

make assumption on the predicted future cash flow, property discounted rate and estimated

beneficiary period for relevant assets.

(11) Deferred income tax assets

Within the limit that it was likely to have sufficient taxable profits to offset the losses, the

Group recognized the deferred income tax assets by all the unused tax losses, which needed

the management level of the Group to estimate time and amount of the future taxable profits

incurred with many judgments, as well as integrate strategy of tax payment, to decide the

amount of deferred income tax assets which should be recognized.

(12) Income tax

During the routine operating activities, there were some uncertainty in the ultimate tax

treatment and calculation for parts of transactions. Some accounts of such transaction could

be listed as pre-tax expenditures only after the approval of taxation authorities. If there were

any differences between the ultimate result of recognition for these taxation maters and their

initial estimates, the differences would affect the current income tax and deferred income tax

at the period of ultimate recognition.

128

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

(13) Internal early retirement welfare and supplementary retirement welfare

Amounts of expenditures and liabilities of internal early retirement welfare and

supplementary retirement welfare should be determined according to assumption terms.

Assumption terms include discount rate, average growth rate of medical costs, growth rate of

subsidies for early retirement employees and retirees and other factors. The differences of

actual results and assumption should be confirmed immediately and included into costs of

current year. Although the management have adopted reasonable assumption terms, changes

of actual experience value and assumption terms may affect the internal early retirement

welfare, supplementary retirement benefits and balance of liabilities.

(14) Estimated liabilities

The Group made the estimation on product quality guarantee, predicted loss of contract and

the fine for delayed delivery etc. and withdrew the relevant provision for estimated liabilities

in accordance the provisions of contract, current knowledge and experience. Under the

condition that the contingent event has formed a current duty and fulfilling the duty is likely

to cause the economical interest outflow the Group, the Group measures the estimated

liabilities in accordance with the best estimate of the necessary expenses for the performance

of the current duty. The recognition and measurement of estimated liabilities were heavily

relied on the judgment of the management team. During the process of making judgment, the

Group needed to appraise the relevant risks, uncertainty and the time value of money and etc.

Of which, the Group estimated the liabilities basing on the after-sale services commitments

to the customers upon the sale, repair and reform of goods. When estimating the liabilities,

the Group has fully taken the consideration of the latest repair experience, but which may not

reflect the repair situation in the future. Any increase / decrease of the provision for estimated

liabilities may affect the profits and losses in the future periods.

V. Taxation

1. Main taxes and tax rate

Category of taxes Specific situation of the taxes rate

Calculated the output tax at 3%, 5%, 6%, 11%, 13%, 17% and paid the VAT by

the amount after deducting the deductible withholding VAT at current period,

VAT

of which the VAT applicable to easy collection won’t belong to the deductible

withholding VAT.

Business tax

Paid by 5% of taxable business income.; and VAT replaced the business tax

129

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Category of taxes Specific situation of the taxes rate

from May 1, 2016.

Paid at 7% of the circulating tax actually paid, of which Dongguan Packing,

Urban maintenance and construction

tax Dongguan Konka, Boluo Konka, Boluo Konka Precision, and Kunshan

Kangsheng of 5%.

Paid at 25% of the taxable income, of which Hong Kong Konka, Konka

Household Appliances Investment, Konka Household Appliances International

Trading, Konka Zhisheng, and Zhongkang Supply Chain of 16.5%;

Enterprise income tax

Telecommunication Technology, Kunshan Konka, Dongguan Konka, Anhui

Konka, Konka E-display, and Wankaida and Chongqing Qingjia of 15%; and

Europe Konka of 31%.

Education surtax Paid at 3% of the circulating tax actually paid.

Local education surtax Paid at 2% of the circulating tax actually paid.

Note: (1) On March 23, 2016, the Ministry of Finance and the State Administration of

Taxation issued the Notice on Overall Promotion of Pilot Change from Business Tax to VAT

(CS [2016)] NO.36). Since May 1, 2016, the pilot change from business tax to VAT has been

overall promoted in nationwide. The industries of construction, real estate, financing, life

service, and so on were all included into the pilot range and related business taxpayers will

pay VAT instead of business tax. The Company has followed the aforesaid policy for its

businesses belonging to the industries of real estate, information service, immovable property

leasing, and so on.

(2) In accordance with the Notice on Printing the Administration Method on Charging and

Use of the Treatment Funds of Discarded Electronic Appliance and Electric Products issued

by the Ministry of Finance, Ministry of Environmental Protection, National Development

and Reform Commission, Ministry of Industry and Information, General Administration of

Customs and National Taxation Bureau (CZ [2012] No. 34), and the Administration Method

on Charging and Use of the Treatment Funds of Discarded Electronic Appliance and Electric

Products issued by National Taxation Bureau (GJSWZJGG [2012] No. 41), the domestic

manufacturer of the electrical appliances and electronic products of PRC started to pay the

treatment funds for discarded electrical appliance and electronic products according the sales

volume (trusted processing amount) and relevant charging standards from July 1, 2012.

According to the regulations, the Group’s charging standards were RMB13 per set of TV,

130

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

RMB12 per set of refrigerator and RMB7 per set of washing machine.

(3) According to regulations of Temporary Provisions of Income Tax of Trans-boundary Tax

Payment Enterprises by State Administration of Taxation, resident enterprises without

business establishment or places of legal persons should be tax payment enterprises with the

administrative measures of income tax of “unified computing, level-to-level administration,

local prepayment, liquidation summary, and finance transfer”. It came into force from

January 1, 2008. According to the above methods, the Company’s sales branch companies in

each area will hand in the corporate income taxes in advance from January 1, 2008 and will

be final settled uniformly by the Company at the year-end.

2. Tax preference and approved document

(1) On August 5, 2014, the subsidiary of the Company, Kunshan Konka Electronics Co., Ltd.

acquired the certificate of high-technology enterprises joint issued by Jiangsu Province

Science and Technology Department, Department of Finance of Jiangsu Province, Jiangsu

Provincial Office, SAT, and Jiangsu Local Taxation Bureau with the certification number of

GF201432000413 and the validity of three years. According to the relevant taxation

regulations, the Kunshan Konka could enjoy the relevant preferential tax policy on the

high-tech enterprise for continuous 3 years from 2014 to 2016, and pay for the corporate

income tax according to 15% of the preferential tax rate.

(2) On September 30, 2014, the subsidiary of the Company Shenzhen Konka

Telecommunication Technology Co., Ltd. acquired the certificate of high-technology

enterprises jointly issued by Shenzhen Science and technology Innovation Committee,

Shenzhen Finance Committee, Shenzhen Provincial Office, SAT, and Shenzhen Local

Taxation Bureau, with the certification number of GR201444201101 and the validity of three

years. According to the relevant taxation regulations, the Telecommunication Technology

could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3

years from 2014 to 2016, and pay for the corporate income tax according to 15% of the

preferential tax rate.

(3) On September 30, 2014, the Company’s subsidiary- Wankaida acquired the certificate of

high-technology enterprises joint issued by Shenzhen Science and technology Innovation

Committee, Shenzhen Finance Committee, Shenzhen Provincial Office, SAT, and Shenzhen

Local Taxation Bureau with the certification number of GR201444201523 and the validity of

three years. According to the relevant taxation regulations, the Anhui Tongchuang could

131

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years

from 2012 to 2014, and pay for the corporate income tax according to 15% of the preferential

tax rate.

(4) On October 10, 2014, the subsidiary of the Company, Dongguan Konka acquired the

certificate of high-technology enterprises joint issued by Guangdong Province Science and

Technology Department, Department of Finance of Guangdong Province, Guangdong

Province Municipal Office, SAT, and Guangdong Local Taxation Bureau with the

certification number of GF201444001341 and the validity of three years. According to the

relevant taxation regulations, the Dongguan Konka could enjoy the relevant preferential tax

policy on the high-tech enterprise for continuous 3 years since 2014 (2014~2016), and pay

for the corporate income tax according to 15% of the preferential tax rate.

(5) On October 21, 2016, the subsidiary of the Company, Anhui Konka acquired the

certificate of high-technology enterprises joint issued by Anhui Province Science and

Technology Department, Department of Finance of Anhui Province, Anhui Provincial Office,

SAT, and Anhui Local Taxation Bureau with the certification number of GR201634000520

and the validity of three years. According to the relevant taxation regulations, the Anhui

Konka could enjoy the relevant preferential tax policy on the high-tech enterprise for

continuous 3 years from 2016 to 2018, and pay for the corporate income tax according to

15% of the preferential tax rate.

(6) On November 21, 2016, the subsidiary of the Company, Konka E-display acquired the

certificate of high-technology enterprises joint issued by Shenzhen Science and Technology

Innovation Committee, Finance Commission of Shenzhen Municipality, Shenzhen Municipal

Office, SAT, and Shenzhen Local Taxation Bureau with the certification number of

GR201644201332 and the validity of three years. According to the relevant taxation

regulations, the Konka E-display could enjoy the relevant preferential tax policy on the

high-tech enterprise for continuous 3 years from 2016 to 2018, and pay for the corporate

income tax according to 15% of the preferential tax rate.

(7) According to CS[2011]No.58 Notice to Implement the Tax Policy Problem Related with

Western Development Strategy, Chongqing Qingjia Electronics Co., Ltd., a subsidiary of our

company shall pay the enterprise income tax according to the preferential rate of 15% from

January 1, 2011 to December 31, 2020.

(8) According to the CS No. [2011] 100 Article issued by Ministry of Finance and State

Administration of Taxation, if the ordinary VAT payer sells software products developed by

132

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

itself, the VAT is levied at the rate of 17% and after that, the part of actual tax burden of VAT

which exceeds 3% can enjoy the policy of refunding taxes immediately after levying taxes.

The subsidiaries of the Company, Shenzhen Konka Telecommunication Technology Co.,

Ltd., Shenzhen Konka Information Network Co., Ltd., Shenzhen Wankaida Science and

Technology Co., Ltd. and Shenzhen Konka Yishijie Commercial Display Co., Ltd. enjoy

such favorable policy.

VI. Notes on major items in consolidated financial statements of the Company

Unless otherwise noted, the following annotation project (including the main projects

annotation of the financial statement of the Company), the period-begin refers to January 1,

2017, the period-end refers to June 30, 2017 and this period refers to January – June 2017

with the last period of January – June 2016.

1. Monetary funds

Item Closing balance Opening balance

Cash on hand 2,243.88 2,354.63

Bank deposits 2,326,783,835.34 2,020,900,590.51

Other monetary funds 163,293,524.85 596,703,311.28

Total 2,490,079,604.07 2,617,606,256.42

Of which: total amount deposited in

443,043,503.51 643,590,382.98

overseas

Notes: The closing balance of other monetary fund was the deposits of each margin deposit

not withdrawn at any time.

2. Financial assets measured by fair value and the changes be included in the current

gains and losses

Item Closing balance Opening balance

Income from agreement of forward

855,984.37 39,894,844.12

foreign exchange purchase

Transactional financial assets 168,120,900.00 212,190,150.00

Foreign exchange option 5,052,542.28

Total 174,029,426.65 252,084,994.12

3. Notes receivable

(1) Notes receivable listed by Item

133

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Closing balance Opening balance

Bank acceptance bill 2,381,704,149.01 2,866,434,355.03

Trade acceptance 47,734,829.76 5,199,143.79

Total 2,429,438,978.77 2,871,633,498.82

(2) Notes receivable pledged at the period-end

Item Amount

Bank acceptance bill 1,367,853,053.41

Total 1,367,853,053.41

Notes: Up to June 30, 2017, the Company pledged the banker’s acceptance bill of the book

value of RMB 1,367,853,053.41 for the comprehensive financing business such as handling

the billing, letter of credit and the trading financing.

(3) Notes receivable which had endorsed by the Company or had discounted and had not due

on the balance sheet date at the year-end

Amount of recognition termination at the Amount of recognition

Item

period-end termination at the period-end

Bank acceptance bill 596,282,708.80 —

Total 596,282,708.80 —

4. Accounts receivable

(1) Accounts receivable disclosed by category

Closing balance

Book balance Bad debt provision

Category Withdra

Proportion wal Book value

Amount Amount

(%) proporti

on (%)

Accounts receivable with

significant individual amount

24,105,446.05 1.05 24,105,446.05 100.00 0.00

and make independent

provision for bad debt

Accounts receivable withdrawn

bad debt provision according to

credit risks characteristics

134

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance

Book balance Bad debt provision

Category Withdra

Proportion wal Book value

Amount Amount

(%) proporti

on (%)

Group 1: aging group 2,172,166,790.55 94.18 234,656,920.97 10.80 1,937,509,869.58

Subtotal of groups 2,172,166,790.55 94.18 234,656,920.97 10.80 1,937,509,869.58

Accounts receivable with

insignificant single amount for

109,892,524.23 4.77 80,483,853.79 73.24 29,408,670.44

which bad debt provision

separately accrued

Total 2,306,164,760.83 100.00 339,246,220.81 14.71 1,966,918,540.02

(Continued)

Opening balance

Book balance Bad debt provision

Category Withdra

Proportion wal Book value

Amount Amount

(%) proporti

on (%)

Accounts receivable with

significant individual amount

24,684,155.33 0.93 24,684,155.33 100.00 -

and make independent

provision for bad debt

Accounts receivable withdrawn

bad debt provision according to

credit risks characteristics

Group 1: aging group 2,516,341,840.82 94.77 242,313,342.19 9.63 2,274,028,498.63

Subtotal of groups 2,516,341,840.82 94.77 242,313,342.19 9.63 2,274,028,498.63

Accounts receivable with

insignificant single amount for

which bad debt provision 114,253,229.55 4.30 80,316,179.69 70.30 33,937,049.86

separately accrued

Total 2,655,279,225.70 100.00 347,313,677.21 13.08 2,307,965,548.49

① Accounts receivable with significant individual amount and make independent provision

for bad debt at the year-end

135

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance

Accounts receivable (classified by

Withdrawal

units) Accounts receivable Bad debt provision Withdrawal reason

proportion (%)

The counterparty’s company

DSC HOLDINGS LIMITED 24,105,446.05 24,105,446.05 100.00 went bankrupt and expected

hard to recover

② In the groups, accounts receivable adopting aging analysis method to accrue bad debt

provision

Closing balance

Aging

Withdrawal proportion

Accounts receivable Bad debt provision

(%)

Within 1 year 1,934,601,471.67 38,692,029.42 2.00

1 to 2 years 33,435,887.73 1,671,794.39 5.00

2 to 3 years 8,034,493.35 1,606,898.67 20.00

3 to 4 years 5,547,644.29 2,773,822.15 50.00

4 to 5 years 1,269,834.34 634,917.17 50.00

Over 5 years 189,277,459.17 189,277,459.17 100.00

Total 2,172,166,790.55 234,656,920.97

③ Top 5 of the accounts receivable with insignificant single amount but individually

withdrawn the bad debt provision

Closing balance

Name Accounts Bad debt Withdrawal Withdrawal

receivable provision proportion (%) reason

H-BUSTER DO BRASIL Had difficulty in

18,509,467.26 18,509,467.26 100.00 operation

INDUSTRIA

HENAN BROADCAST & evidence shows

TELEVISION NETWORK CO., 18,320,000.00 5,496,000.00 30.00 that the amount

decreases by 30%

LTD.

DAEWOO DISPLAY Involved with

12,692,138.85 12,692,138.85 100.00 lawsuit dispute

CORPORATION

136

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance

Name Accounts Bad debt Withdrawal Withdrawal

receivable provision proportion (%) reason

SHENZHEN TENGDA ELECTRIC Involved with

8,223,935.99 4,111,968.00 50.00 lawsuit dispute

APPLIANCE CO., LTD.

MOTOM ELECTRONICS GROUP Involved with

5,794,676.58 5,794,676.58 100.00 lawsuit dispute

SPA

Total 63,540,218.68 46,604,250.69 73.35

(2) Bad debt provision withdrawal, reversed or recovered in the Reporting Period

The withdrawal amount of the bad debt provision during the Reporting Period was of RMB

6,382,342.47; the amount of the reversed or collected part during the Reporting Period was

of RMB 13,333,986.11, no write-off amounts.

(3) Top five of account receivable of closing balance collected by arrears party

The total amount of top five of account receivable of closing balance collected by arrears

party was RMB 949,856,183.56, 41.62% of total closing balance of account receivable, the

relevant closing balance of bad debt provision withdrawn was RMB 18,997,123.67.

5. Prepayment

(1) List by aging analysis:

Closing balance Opening balance

Aging Book balance Book balance

Proportion Bad debt provision Proportion Bad debt provision

Amount Amount

(%) (%)

Within 1

year 730,562,127.56 98.25 1,119,839.73 269,405,925.30 96.52 1,461,427.25

1 to 2 years 5,925,151.86 0.80 232.67 3,335,844.57 1.20 36,710.13

2 to 3 years 9,405.00 0.00 470.25 2,265,192.49 0.81 415,058.47

Over 3

7,097,388.89 0.95 2,871,944.28 4,099,193.21 1.47 2,382,301.00

years

Total 743,594,073.31 100.00 3,992,486.93 279,106,155.57 100.00 4,295,496.85

Notes: (1) prepayments of significant amount and aged more than 1 year, of which the

amount of RMB 8,146,945.00 was the relevant materials which had quality problems and

had not handle the accounts settlement as well as the material warehousing formalities, and

137

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

the materials purchase account prepaid should be presented as the prepayments.

(2) Top 5 of the closing balance of the prepayment collected according to the prepayment

target

The total amount of top five of account receivable of closing balance collected by arrears

party was RMB245,502,929.55, 33.02% of total closing balance of account receivable.

(3) The accrual bad debt reserve is RMB 35,186.42 this year; the withdrawing or reversing

bad debt reserve is RMB 322,952.31.

6. Interests receivable

Item Closing balance Opening balance

Fixed term deposit interest 1,158,069.08 1,342,063.84

Entrusted loan interest 27,791.67 —

Total 1,185,860.75 1,342,063.84

7. Dividends receivable

Item Closing balance Opening balance

Shenzhen Konka Precision Mould

10,171,609.48 10,171,609.48

Manufacturing Co., Ltd.

Total 10,171,609.48 10,171,609.48

8. Other accounts receivable

(1) Other account receivable classified by Item

Closing balance

Book balance Bad debt provision

Item Withdrawa

Proportion Book value

Amount Amount l

(%)

proportion

Other accounts receivable with

significant single amount for

183,915,489.33 38.53 174,186,734.34 94.71 9,728,754.99

which bad debt provision

separately accrued

Other accounts receivable

withdrawn bad debt provision

138

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance

Book balance Bad debt provision

Item Withdrawa

Proportion Book value

Amount Amount l

(%)

proportion

according to credit risks

characteristics

Group 1: aging group 288,041,256.20 60.34 24,293,649.44 8.43 263,747,606.75

Subtotal of groups 288,041,256.20 60.34 24,293,649.44 8.43 263,747,606.75

Other accounts receivable

with insignificant single amount

5,400,601.91 1.13 1,441,694.10 26.70 3,958,907.82

for which bad debt provision

separately accrued

Total 477,357,347.44 100.00 199,922,077.88 41.88 277,435,269.56

(Continued)

Opening balance

Book balance Bad debt provision

Item

Withdrawa

Proportion Book value

Amount Amount l

(%)

proportion

Other accounts receivable with

significant single amount for

183,915,489.33 43.21 174,186,734.34 94.71 9,728,754.99

which bad debt provision

separately accrued

Other accounts receivable

withdrawn bad debt provision

according to credit risks

characteristics

Group 1: aging group 234,570,113.10 55.12 26,878,827.62 11.46 207,691,285.48

Subtotal of groups 234,570,113.10 55.12 26,878,827.62 11.46 207,691,285.48

139

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Opening balance

Book balance Bad debt provision

Item Withdrawa

Proportion Book value

Amount Amount l

(%)

proportion

Other accounts receivable with

insignificant single amount for

7,101,401.90 1.67 2,131,520.57 30.02 4,969,881.33

which bad debt provision

separately accrued

Total 425,587,004.33 100.00 203,197,082.53 47.75 222,389,921.80

Other account receivable with insignificant single amount for which bad debt provision

separately accrued

Closing balance

Other accounts receivable

Other accounts Withdrawal

(unit) Bad debt provision Withdrawal reason

receivable proportion

Energy saving subsidy 152,402,680.00 152,402,680.00 100.00% Irrecoverable

Shenzhen Konka Video &

Assessment irrecoverable for

Communication Systems 18,115,952.51 8,387,197.52 46.30% full amount

Engineering Co., Ltd.

Chongqing Konka Auto Irrecoverable, under

Electronic Company 13,396,856.82 13,396,856.82 100.00% bankruptcy liquidation

Total 183,915,489.33 174,186,734.34 94.71% —

② In the groups, other accounts receivable adopting aging analysis method to withdraw bad

debt provision:

Closing balance

Aging

Other accounts receivable Bad debt provision Withdrawal proportion (%)

Within 1 year 232,049,383.58 4,640,987.66 2.00

1 to 2 years 25,458,687.47 1,272,934.37 5.00

2 to 3 years 12,969,329.40 2,593,865.88 20.00

3 to 4 years 3,054,459.23 1,527,229.62 50.00

4 to 5 years 501,529.22 250,764.61 50.00

140

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance

Aging

Other accounts receivable Bad debt provision Withdrawal proportion (%)

Over 5 years 14,007,867.30 14,007,867.30 100.00

Total 288,041,256.20 24,293,649.44

(2) Bad debt provision withdrawal, reversed or recovered in the Reporting Period

The withdrawal amount of the bad debt provision during the Reporting Period was of

RMB 1,160,417.80; the amount of the reversed or collected part during the Reporting

Period was of RMB 4,159,432.06, no write-off amounts.

(3) Top 5 of the closing balance of the other accounts receivable collected according to the

arrears party

Proportion of the

total amount of the Closing balance of

Name of units Nature Closing balance Aging closing balance of the bad debt

other accounts provision

receivable (%)

Energy-saving 2-3 years, 4-5

Energy-saving subsidies 152,402,680.00 31.93 152,402,680.00

subsidies years

Chuzhou Bureau of

Land fund 73,500,000.00 Within 1 year 15.40 1,470,000.00

Finance

Customs of the People’s

Export refund 20,511,658.91 Within 1 year 4.30 410,233.18

Republic of China

Shenzhen Konka Video

& Communication

Transfer fund 18,115,952.51 3-4 years 3.80 8,387,197.52

Systems Engineering

Co., Ltd.

Chongqing Konka 2-3 years, 3-4

Automotive Electronics Current account 13,396,856.82 years , 4-5 years , 2.81 13,396,856.82

Co., Ltd. over 5 years

Total — 277,927,148.24 48.15 176,066,967.52

9. Inventory

(1) Category

Closing balance

Of which: the

Item Impairment of

Book balance capitalized amount Book value

inventories

of the borrowings

141

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance

Of which: the

Item Impairment of

Book balance capitalized amount Book value

inventories

of the borrowings

Development projects

of the property:

Development cost 1,516,368,571.23 1,516,368,571.23

Development products 6,036,068.26 128,525.78 6,036,068.26

Subtotal 1,522,404,639.49 128,525.78 0.00 1,522,404,639.49

Non-development

projects of the

property:

Raw materials 1,874,563,922.70 33,289,359.79 1,841,274,562.91

Semi-finished product 64,192,721.23 8,364,754.34 55,827,966.89

Inventory goods 3,199,778,821.51 244,943,725.65 2,954,835,095.86

Turnover material 141,198.43 141,198.43

Subtotal 5,138,676,663.87 0.00 286,597,839.78 4,852,078,824.09

Total 6,661,081,303.36 128,525.78 286,597,839.78 6,374,483,463.58

(Continued)

Opening balance

Of which: the

Item capitalized Impairment of

Book balance Book value

amount of the inventories

borrowings

Development projects

of the property:

Development cost 1,394,176,034.85 — — 1,394,176,034.85

Development products 7,596,482.12 141,378.83 — 7,596,482.12

Subtotal 1,401,772,516.97 141,378.83 — 1,401,772,516.97

Non-development

projects of the

property:

Raw materials 781,934,686.08 — 31,054,247.46 750,880,438.62

Semi-finished product 83,957,767.23 — 8,872,936.27 75,084,830.96

142

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Opening balance

Of which: the

Item capitalized Impairment of

Book balance Book value

amount of the inventories

borrowings

Inventory goods 2,306,460,682.29 — 247,224,025.03 2,059,236,657.26

Turnover material 439,500.54 — — 439,500.54

Subtotal 3,172,792,636.14 — 287,151,208.76 2,885,641,427.38

Total 4,574,565,153.11 141,378.83 287,151,208.76 4,287,413,944.35

(2) List of the development cost

Expected completion

Name of the projects Starting time Opening balance Closing balance

time of the next batch

Shuiyue Zhouzhuang (Phase

449,653,196.40 553,935,807.91

III, Phase IV) December 2015 Year 2018

Kangqiao Jiacheng Project October 2015 Year 2020 944,522,838.45 961,521,041.58

Chuzhou Technology

December 2017 Year 2019 911,721.74

Project

Total 1,394,176,034.85 1,516,368,571.23

(3) List of the developed products

Completion

Name of item Opening amount Increased Decreased Closing amount

time

Shuiyue

Zhouzhuang Year 2014 3,953,247.18 3,953,247.18

Project(Phase I)

Shuiyue

Zhouzhuang Year 2015 3,643,234.94 1,560,413.86 2,082,821.08

Project(Phase II)

Total 7,596,482.12 1,560,413.86 6,036,068.26

(4) Impairment of inventories

Increased amount Decreased amount

Item Opening balance Closing balance

Withdrawal Other Reverse Write-off Other decrease

Raw materials 31,054,247.46 2,933,598.43 224,952.37 622,541.84 33,140,351.68

143

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Increased amount Decreased amount

Item Opening balance Closing balance

Withdrawal Other Reverse Write-off Other decrease

Semi-finished

8,872,936.27 131,142.03 0.00 268,529.82 8,735,548.48

product

Inventory

goods 247,224,025.03 12,628,069.47 3,070,068.22 12,060,086.66 244,721,939.62

Total 287,151,208.76 15,692,809.93 0.00 3,295,020.59 12,951,158.32 0.00 286,597,839.78

Notes: other decrease was due to the loss of control right to subsidiaries.

(5) Withdrawal provision basis of the falling price of the inventory and the reasons of the

reserve or write-off

Specific basis of withdrawal of falling price

Item Reasons for write-off

reserves of inventory

Difference that the realizable net value was

Raw materials Disposed in the current period

lower than the book value

Difference that the realizable net value was

Semi-finished product Disposed in the current period

lower than the book value

Difference that the realizable net value was

Inventory goods Disposed in the current period

lower than the book value

(6) Closing balance of the inventory which includes capitalized borrowing expenses was

RMB 128,525.78

10. Other current assets

Item Closing balance Opening balance

Financial products

1,570,016,568.58 299,745,437.03

Prepayments and deductible taxes

441,245,611.35 262,458,679.17

Total 2,011,262,179.93 562,204,116.20

144

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

11. Available-for-sale financial assets

(1) List of available-for-sale financial assets

Closing balance Opening balance

Item Depreciation Depreciation

Book balance Book value Book balance Book value

reserves reserves

Available-for-sale equity instruments 295,353,244.82 4,997,785.64 290,355,459.18 319,965,425.00 4,997,785.64 314,967,639.36

Of which: measured at fair value 40,665,244.82 40,665,244.82 55,777,425.00 — 55,777,425.00

Measured by cost 254,688,000.00 4,997,785.64 249,690,214.36 264,188,000.00 4,997,785.64 259,190,214.36

Total 295,353,244.82 4,997,785.64 290,355,459.18 319,965,425.00 4,997,785.64 314,967,639.36

(2) Available-for-sale financial assets measured by fair value at the period-end

Item Available-for-sale equity instruments

Cost of the equity instruments 47,251,922.40

Fair value 40,665,244.82

Changed amount of the fair value accumulatively included in other comprehensive income -6,586,677.58

Withdrawn impairment amount —

(3) Available-for-sale financial assets measured by cost at the period-end

Book balance

Investee

Period -begin Increase Decrease Period-end

145

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Book balance

Investee

Period -begin Increase Decrease Period-end

Shenzhen Qianhai Qingsong Venture Capital Fund Enterprise 20,000,000.00 20,000,000.00

Shenzhen Tianyilian Science & Technology Co., Ltd. 4,800,000.00 4,800,000.00

Shenzhen Yifan Interactive Science & Technology Co., Ltd. 9,500,000.00 9,500,000.00 0.00

Shenzhen A Dot TV Co., Ltd. 5,750,000.00 5,750,000.00

Feihong Electronics Co., Ltd. 1,300,000.00 1,300,000.00

ZAEFI 100,000.00 100,000.00

Shenzhen Chuangce Investment Development Co., Ltd. 485,000.00 485,000.00

Shanlian Information Technology Engineering Center 5,000,000.00 5,000,000.00

Shenzhen CIU Science & Technology Co., Ltd. 1,153,000.00 1,153,000.00

Shenzhen Digital TV National Engineering Laboratory Co., Ltd. 6,000,000.00 6,000,000.00

Shanghai National Engineering Research Center of Digital TV

2,400,000.00 2,400,000.00

Co., Ltd.

ChinaAMC - Jiayi Overseas Orientation Programs 203,000,000.00 203,000,000.00

Beijing Konka Technology Co., Ltd 4,700,000.00 4,700,000.00

Chongqing Konka Automotive Electronic Co., Ltd. — 0.00

Total 264,188,000.00 0.00 9,500,000.00 254,688,000.00

(Continued)

146

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Depreciation reserves Cash

Shareholding bonus of

Investee proportion among the

Period-begin Increase Decrease Period-end

the investees (%) Reporting

Period

Shenzhen Qianhai Qingsong Venture Capital Fund Enterprise — — — — 6.00 —

Shenzhen Tianyilian Science & Technology Co., Ltd. — — — — 6.10 —

Shenzhen Yifan Interactive Science & Technology Co., Ltd. — — — — 13.57 —

Shenzhen A Dot TV Co., Ltd. — — — — 12.67 —

Feihong Electronics Co., Ltd. 1,300,000.00 — — 1,300,000.00 9.60 —

ZAEFI 100,000.00 — — 100,000.00 — —

Shenzhen Chuangce Investment Development Co., Ltd. 485,000.00 — — 485,000.00 1.00 —

Shanlian Information Technology Engineering Center 1,639,190.80 — — 1,639,190.80 9.62 —

Shenzhen CIU Science & Technology Co., Ltd. 200,000.00 — — 200,000.00 11.50 —

Shenzhen Digital TV National Engineering Laboratory Co., Ltd. 1,273,594.84 — — 1,273,594.84 2.40 —

Shanghai National Engineering Research Center of Digital TV Co.,

Ltd. — — — 4.26 —

ChinaAMC - Jiayi Overseas Orientation Programs — — — — —

Hunan Vary Science & Technology Co., Ltd. — — — 9.56 —

Nobel Education Investment Development Co., Ltd. — — — — —

147

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Depreciation reserves Cash

Shareholding bonus of

Investee proportion among the

Period-begin Increase Decrease Period-end

the investees (%) Reporting

Period

Beijing Kanga Technology Co., Ltd — — — 3.62 —

Chongqing Konka Eurotomotive Electronic Co., Ltd. ( Note ) — — — — —

Total 4,997,785.64 — — 4,997,785.64 — —

Note: ① On March 27, 2015, Chongqing Jiangbei District People’s Court accepted the application of bankruptcy liquidation from Chongqing

Konka Automotive Electronic Co.,Ltd., a subsidiary of our company and appointed to establish the liquidation group, the company would not

have the leading right on the related activity of Chongqing Konka Automotive Electronic Co.,Ltd. After entering into the bankruptcy procedure,

it would not be included in the consolidation scope, and it would be classified again with the net value of zero to the available-for-sale financial

asset.

(4) Changes of the impairment of the available-for-sale financial assets of the Reporting Period

Category of available-for-sale financial assets Available-for-sale equity instruments

Withdrawn impairment balance at the period-begin 4,997,785.64

Withdrawal of the Reporting Period —

Of which: transferred from other comprehensive income —

Decrease of the Reporting Period —

Of which: recovered or reversed from the fair value after the Period —

148

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Category of available-for-sale financial assets Available-for-sale equity instruments

Withdrawn impairment balance at the period-end 4,997,785.64

12. Long-term equity investment

Increase/decrease in Reporting Period

Investment profit Adjustment of

Opening balance of Cost method

Investee Opening balance Additional Negative and loss recognized other Other equity

impairment reserves converted into

investment investment under the equity comprehensive changes

equity method

method income

I. Associated enterprises:

Enraytek Optoelectronics (Shanghai)

88,298,590.32 30,257,135.84

Co., Ltd.

Shenzhen Konka Energy Technology

3,649,728.08 3,649,728.08 3,649,728.08

Co., Ltd.

Shanghai Konka Green Science &

85,791,460.71 -3,733,992.50 -449,802.04 -1,166,602.46

Technology Co., Ltd.

Zhuhai Jinsu Plastic Co., Ltd. 7,438,647.50 1,923,787.63

Shenzhen Konka Precision Mold

Manufacturing Co., Ltd 85,405,031.28 -2,387.64

Dongguan Konka Mold Plastic Co.,

27,166,487.52

149

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Increase/decrease in Reporting Period

Investment profit Adjustment of

Opening balance of Cost method

Investee Opening balance Additional Negative and loss recognized other Other equity

impairment reserves converted into

investment investment under the equity comprehensive changes

equity method

method income

Ltd

Shenzhen Zhongbin Konka technology

co., Ltd. 19,164,691.78 -3,060,432.97

Shenzhen Konka Intelligent Electric

Co., Ltd 6,213,908.63 -495,301.18

Shenzhen Konka Information Network

Co., Ltd 20,426,438.47 794,032.47

Guoguang Ruilian (Shenzhen) Internet

4,000,000.00

Technology Co., Ltd

Guangdong Chutian Dragon Smart

150,000,000.00

Card Co., Ltd.

Shenzhen Yaode Technology Co., Ltd 171,799,598.00

Total 343,554,984.29 33,906,863.92 325,799,598.00 0.00 3,649,728.08 -4,574,294.19 -449,802.04 -1,166,602.46

(Continued)

Investee Increase/decrease in Reporting Period Closing balance Closing balance of

impairment provision

150

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Declaration of cash dividends or Withdrawn impairment Equity converted into

profits provision tradable financial assets

I. Associated enterprises:

Enraytek Optoelectronics (Shanghai) Co.,

Ltd. 88,298,590.32 30,257,135.84

Shenzhen Konka Energy Technology Co.,

Ltd. 0.00 0.00

Shanghai Konka Green Science &

Technology Co., Ltd. 80,441,063.71

Zhuhai Jinsu Plastic Co., Ltd. 9,362,435.13

Shenzhen Konka Precision Mold

Manufacturing Co., Ltd 85,402,643.64

Dongguan Konka Mold Plastic Co., Ltd

27,166,487.52

Shenzhen Zhongbin Konka technology co.,

Ltd. 16,104,258.81

Shenzhen Konka Intelligent Electric Co.,

Ltd 5,718,607.45

Shenzhen Konka Information Network Co.,

Ltd 21,220,470.94

Guoguang Ruilian (Shenzhen) Internet

4,000,000.00

Technology Co., Ltd

Guangdong Chutian Dragon Smart Card

150,000,000.00

Co., Ltd.

151

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Investee Increase/decrease in Reporting Period

Closing balance of

Declaration of cash dividends or Withdrawn impairment Equity converted into Closing balance

impairment provision

profits provision tradable financial assets

Shenzhen Yaode Technology Co., Ltd 171,799,598.00

Total 659,514,155.52 30,257,135.84

152

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

13. Investment property

Investment property adopted the cost measurement mode

Item Houses and buildings Total

I. Original book value

1. Opening balance 249,923,047.75 249,923,047.75

2. Increased amount of the period — —

3. Decreased amount of the period — —

4. Closing balance 249,923,047.75 249,923,047.75

II. The accumulative depreciation

— —

and accumulative amortization

1. Opening balance 27,836,143.49 27,836,143.49

2. Increased amount of the period 2,815,637.15 2,815,637.15

(1) withdraw or amortization 2,815,637.15 2,815,637.15

3. Decreased amount of the period — —

4. Closing balance 30,651,780.64 30,651,780.64

III. Impairment provision — —

1. Opening balance — —

2. Increased amount of the period — —

3. Decreased amount of the period — —

4. Closing balance — —

IV. book value — —

1. Closing book value 219,271,267.11 219,271,267.11

2. Opening book value 222,086,904.26 222,086,904.26

153

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

14. Fixed assets

(1) List of fixed assets

Houses and buildings Machinery equipment Electronic equipment Transportation Other

Item Total

equipment

I. Original book value

1.Opening balance 1,585,782,685.49 758,663,226.60 212,512,639.28 53,668,633.02 169,982,040.39 2,780,609,224.78

2. Increased amount of the

426,220.22 17,504,505.72 8,032,993.43 1,690,710.33 2,702,592.78 30,357,022.48

period

(1) Purchase 426,220.22 2,777,220.18 8,032,993.43 1,690,710.33 2,702,592.78 15,629,736.94

(2) Transfer of project under

14,727,285.54 14,727,285.54

construction

3.Decreased amount of the

721,422.82 4,934,460.03 19,964,185.75 2,094,235.69 3,234,950.46 30,949,254.75

period

(1) Disposal or Scrap 721,422.82 4,934,460.03 19,964,185.75 2,094,235.69 3,234,950.46 30,949,254.75

(2) Other 0.00

4.Closing balance 1,585,487,482.89 771,233,272.29 200,581,446.96 53,265,107.66 169,449,682.71 2,780,016,992.51

II. Accumulative depreciation

1.Opening balance 392,850,477.50 462,360,402.61 163,374,809.37 39,315,097.11 123,516,834.06 1,181,417,620.65

154

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Houses and buildings Machinery equipment Electronic equipment Transportation Other

Item Total

equipment

2. Increased amount of the

18,613,936.20 24,358,346.66 5,717,058.03 1,714,940.31 6,969,489.05 57,373,770.25

period

(1) Withdrawal 18,613,936.20 24,358,346.66 5,717,058.03 1,714,940.31 6,969,489.05 57,373,770.25

3.Decreased amount of the

182,014.07 3,720,311.79 17,907,864.12 1,559,641.60 2,854,875.57 26,224,707.15

period

(1) Disposal or Scrap 182,014.07 3,720,311.79 17,907,864.12 1,559,641.60 2,854,875.57 26,224,707.15

(2) Other 0.00

4.Closing balance 411,282,399.63 482,998,437.48 151,184,003.28 39,470,395.82 127,631,447.54 1,212,566,683.75

III. Depreciation reserves

1.Opening balance 2,006,749.30 16,777,278.59 3,760,562.66 950,517.86 1,717,581.69 25,212,690.10

2. Increased amount of the

0.00 2,579.50 48,191.00 0.00 60,906.71 111,677.21

period

(1) Withdrawal 0.00 2,579.50 48,191.00 0.00 60,906.71 111,677.21

3.Decreased amount of the

0.00 135,594.31 1,777,624.43 0.00 199,892.10 2,113,110.84

period

(1) Disposal or Scrap 0.00 135,594.31 1,777,624.43 0.00 199,892.10 2,113,110.84

(2) Other 0.00

155

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Houses and buildings Machinery equipment Electronic equipment Transportation Other

Item Total

equipment

4.Closing balance 2,006,749.30 16,644,263.78 2,031,129.23 950,517.86 1,578,596.30 23,211,256.47

IV. Book value

1. Closing book value 1,172,198,333.96 271,590,571.03 47,366,314.45 12,844,193.98 40,239,638.87 1,544,239,052.29

2. Opening book value 1,190,925,458.69 279,525,545.40 45,377,267.25 13,403,018.05 44,747,624.64 1,573,978,914.03

Notes: other decrease was due to the loss of control right to subsidiaries.

156

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

(2) List of Temporarily Idle Fixed Assets

Original Accumulative Impairment

Item Book value Notes

book value depreciation provision

Houses and buildings 39,474,322.57 20,230,130.99 542,558.97 18,701,632.61

Mechanical

25,533,099.58 11,996,854.48 8,321,804.55 5,214,440.55

equipment

Transportation

1,732,582.00 1,595,054.30 100,422.20 37,105.50

equipment

Electronic equipment 21,893,797.12 20,551,591.46 1,021,928.09 320,277.57

Other equipment 1,752,076.39 1,345,351.28 263,805.28 142,919.83

Total 90,385,877.66 55,718,982.51 10,250,519.09 24,416,376.06

(3) Fixed Assets Leased in from Financing Lease

Accumulative

Item Original book value Impairment provision Book value

depreciation

Mechanical equipment 5,988,219.52 1,953,324.23 4,034,895.29

Electronic equipment 205,128.20 95,726.49 109,401.71

Total 6,193,347.72 2,049,050.72 4,144,297.00

(4) Fixed Assets Leased out from Operation Lease

Item Closing book value

Houses and buildings 23,232,191.19

Total 23,232,191.19

(5) Details of Fixed Assets Failed to Accomplish Certification of Property

Item Book value Reason

Yikang building 45,739,032.33 Under processing

Kangsheng Aquatic Club 19,359,810.34 Under processing

Mudangjiang electric Has not obtained the state-owned land uses card, can not

12,187,010.26

appliances main workshop to deal with house property card

Jingyuan office building 12,197,713.76 Under processing

Kunming office building 5,248,901.73 Under processing

Guyang Huaguoyuan Property 3,540,181.14 Under processing

157

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

15. Construction in Progress

(1) List of Construction in Progress

158

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance Opening balance

Item Impairment Impairment

Book balance Book value Book balance Book value

provision provision

Kunshan hotel

361,913,329.77 361,913,329.77 286,093,111.12 — 286,093,111.12

Kunshan gallery

1,643,881.07 1,643,881.07 1,643,881.07 — 1,643,881.07

Green Park project

21,743,404.48 21,743,404.48 — — —

Other small projects 19,149,556.76 19,149,556.76 27,799,444.86 — 27,799,444.86

Total 404,450,172.08 0.00 404,450,172.08 315,536,437.05 — 315,536,437.05

(2) Changes of Significant Construction in Progress

Increase Amount that transferred to Other decreased

Name o f item Estimated number Opening balance Closing balance

Amount fixed assets of the period amount of the period

Kunshan hotel 444,600,000.00 286,093,111.12 75,820,218.65 361,913,329.77

Kunshan gallery 26,320,000.00 1,643,881.07 1,643,881.07

Green Park project 35,000,000.00 8,061,797.71 13,681,606.77 21,743,404.48

Other small projects 19,737,647.15 14,139,195.15 14,727,285.54 19,149,556.76

Total 505,920,000.00 315,536,437.05 103,641,020.57 14,727,285.54 0.00 404,450,172.08

Notes: Other decrease was mainly generated from the loss of control over subsidiaries.

159

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

(Continued)

Proportion Of which: the

Accumulative Capitalization

estimated of the amount of the

Project amount of rate of the

Project name project capitalized Capital resources

capitalized interests of the

accumulative progress interests of the

interests period

input period

Self-owned fund

Kunshan gallery 6.25 6.25 — — —

Loans to financial

Kunshan hotel 90 99 832,313.28 — — institutions and

self-owned fund

16. Intangible Assets

(1) List of Intangible Assets

Item Land use right Patent right Trademark Total

Others

registration expense

I. Original book value

1.Opening balance 316,997,134.11 40,234,111.64 3,519,159.61 56,205,873.76 416,956,279.12

2. Increased amount of

1,519,158.67 1,519,158.67

the period

(1) Purchase 1,519,158.67 1,519,158.67

(2) Transfer of project

0.00

under construction

3.Decreased amount of

45,617,181.03 45,617,181.03

the period

(1) Disposal 45,617,181.03 45,617,181.03

(2) Other decrease 0.00

4.Closing balance 271,379,953.08 40,234,111.64 3,519,159.61 57,725,032.43 372,858,256.76

II. Accumulated

0.00

amortization

1.Opening balance 53,371,371.76 33,745,464.74 3,412,215.10 21,480,517.47 112,009,569.07

2. Increased amount of

2,577,266.19 346,235.48 2,591,356.68 5,514,858.35

the period

160

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Land use right Patent right Trademark Total

Others

registration expense

(1) Withdrawal 2,577,266.19 346,235.48 2,591,356.68 5,514,858.35

3.Decreased amount of

the period

(1) Disposal

(2) Other decrease

4.Closing balance 55,948,637.95 34,091,700.22 3,412,215.10 24,071,874.15 117,524,427.42

III. Depreciation

-

reserves

1.Opening balance 2,901,082.61 2,901,082.61

2. Increased amount of

the period

(1) Withdrawal

3.Decreased amount of

the period

(1) Disposal

(2) Other decrease

4.Closing balance 2,901,082.61 2,901,082.61

IV. Book value -

1. Closing book value 215,431,315.13 3,241,328.81 106,944.51 33,653,158.28 252,432,746.73

2. Opening book value 263,625,762.35 3,587,564.29 106,944.51 34,725,356.29 302,045,627.44

Notes: Other decrease was mainly generated from the loss of control over subsidiaries.

(2) Details of Fixed Assets Failed to Accomplish Certification of Land Use Right

Item Book value Reason

Mudangjiang electric appliances etc. 3,153,608.13 Left over by history

17. Goodwill

(1) Original Book Value of Goodwill

Name of the investees or Opening balance Increase Decrease

Closing balance

161

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

the events formed Formed from the

Others Dispose Others

goodwill business combination

Anhui Konka 3,597,657.15 — — — — 3,597,657.15

Total 3,597,657.15 — — — — 3,597,657.15

For more information on the method of impairment test and impairment provision, please

refer to NoteIV.19.

As of June 30, 2017, there was no book value of goodwill higher than recoverable amount.

18. Long-term Unamortized Expenses

Item Opening balance Increased amount Amortization amount Decrease of others Closing balance

Renovati

16,313,225.16 5,011,364.82 3,734,066.14 0.00 17,590,523.84

on costs

Shop fees 51,212,313.70 25,845,674.19 22,994,414.21 0.00 54,063,573.68

Others 24,375,994.53 4,103,436.15 5,381,830.54 0.00 23,097,600.14

Total 91,901,533.39 34,960,475.16 32,110,310.89 0.00 94,751,697.66

Notes: Other decrease was mainly generated from the loss of control over subsidiaries.

19. Deferred Income Tax Assets/Deferred Income Tax Liabilities

(1) List of Deferred Income Tax Assets

Closing balance Opening balance

Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax

difference assets difference assets

Assets impairment

740,047,560.61 183,885,720.72 746,292,412.93 184,974,531.80

provision

Unrealized internal sales

101,199,694.08 25,299,923.52 100,026,922.96 25,006,730.74

gain and loss

Accrued expenses 102,944,305.25 25,080,837.16 113,547,244.37 28,241,712.82

Deferred income 91,842,840.87 22,029,567.24 90,555,138.14 21,799,952.55

Deductible losses 1,737,704,820.92 434,109,795.78 1,622,776,529.02 405,694,132.25

Others 170,769,999.52 42,692,499.88 144,068,370.06 36,017,092.52

Total 2,944,509,221.25 733,098,344.30 2,817,266,617.48 701,734,152.68

Notes: Others were refundable subsidy for energy-saving without actual refund, accrued

162

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

liabilities, advance house payment, advance earnest money and payroll payable.

(2) List of Deferred Income Liabilities

Closing balance Opening balance

Item Deductible temporary Deferred income Deductible temporary Deferred income

difference tax liabilities difference tax liabilities

Accelerated depreciation of fixed assets 7,075,362.87 1,061,304.43 6,867,714.25 1,030,157.14

Change of fair value of trading financial

assets 0.00 0.00 39,557,580.99 9,889,395.25

Change in fair value of available-for-sale

financial assets 0.00 0.00 8,547,425.00 2,136,856.25

Unrealized profits from internal

71,782,644.68 17,945,661.17 14,848,590.56 3,712,147.64

transactions

Accrued taxes 10,435,499.44 2,608,874.86 9,577,050.20 2,394,262.55

Total 89,293,506.99 21,615,840.46 79,398,361.00 19,162,818.83

(3) List of Unrecognized Deferred Income Tax Assets

Item Closing balance Opening balance

Deductible temporary

difference 212,724,693.73 215,783,474.69

Deductible losses 1,219,362,942.89 1,198,447,416.45

Total 1,432,087,636.62 1,414,230,891.14

20. Other Non-current Assets

Item Closing balance Opening balance

Entrust loans 20,000,000.00 0.00

Total 20,000,000.00 0.00

21. Assets Impairment Provision

Withdrawn Decreased

impairment Reverse

Item Opening balance Closing balance

balance at the Write-off

period-begin

I. Bad debt provision 554,806,256.59 7,577,946.69 17,816,370.48 1,407,047.18 543,160,785.62

II. Impairment of

287,151,208.76 15,692,809.93 3,295,020.59 12,951,158.32 286,597,839.78

inventories

III. Impairment provision

4,997,785.64 0.00 0.00 4,997,785.64

of the available-for-sale

163

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Opening balance Withdrawn Decreased Closing balance

financial assets impairment

IV. Impairment provision of balance at the

25,212,690.10 111,677.21 2,113,110.84 23,211,256.47

the fixed assets

period-begin

V. Impairment provision of

2,901,082.61 0.00 0.00 2,901,082.61

the intangible assets

VI. Long-term equity

33,906,863.92 0.00 3,649,728.08 30,257,135.84

investment

Total 908,975,887.62 23,382,433.83 21,111,391.07 20,121,044.42 891,125,885.96

22. Short-term Loans

Category of Short-term Loans

Item Closing balance Opening balance

Guaranteed loan (Note) 591,952,161.09 720,088,506.52

Credit loan 10,153,012,949.04 5,842,745,719.99

Total 10,744,965,110.13 6,562,834,226.51

Note: The closing balance of guaranteed loan of related party in guaranteed loan was

RMB591,952,161.09. For more details, please refer to Note XI. 5(4).

23. Financial Liabilities Measured by Fair Value and the Changes Included in the

Current Gains and Losses

Category Closing balance Opening balance

Loss from forward foreign

20,181,325.74 337,263.13

exchange purchase agreement

Total 20,181,325.74 337,263.13

24. Notes Payable

Category Closing balance Opening balance

Trade acceptance 56,604,230.04 259,499,645.15

Bank acceptance bill 843,307,056.18 604,209,493.24

Total 899,911,286.22 863,709,138.39

Notes: The amount of notes payable due during the next accounting period was

RMB899,911,286.22.

25. Accounts Payable

164

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

(1) List of Accounts Payable

Item Closing balance Opening balance

Within 1 year 2,204,229,902.21 3,051,643,650.52

1 to 2 years 24,227,354.00 53,050,351.35

2 to 3 years 20,777,516.86 10,532,651.04

Over 3 years 47,980,367.70 44,846,922.65

Total 2,297,215,140.77 3,160,073,575.56

(2) Notes of the Accounts Payable Aging over One Year

Item Closing balance Unpaid/ Un-carry-over reason

Estimated construction costs 28,486,306.70 Unsettled

Accounts from the transfer of equity 9,543,100.00 Unsettled

Total 38,029,406.70

26. Advance from Customers

(1) List of Advance from Customers

Item Closing balance Opening balance

Within 1 year 1,645,102,587.82 1,160,427,420.29

1 to 2 years 23,635,582.74 19,169,243.24

2 to 3 years 365,269.67 6,518,376.19

Over 3 years 9,286,570.27 15,311,183.98

Total 1,678,390,010.50 1,201,426,223.70

(2) The Significant Advance from Customers Aging over 1 year was Mainly Generated from

the Advance from Customers from Companies without Continuous Cooperation.

(3) Advance Receipts of Houses

Item Closing balance Opening balance

Shuiyue Zhouzhuang Project

1,635,098.00 1,345,098.00

(Phase I Residence)

Shuiyue Zhouzhuang Project

1,608,868.00 2,560,000.00

(Phase II Residence)

165

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Closing balance Opening balance

Shuiyue Zhouzhuang Project

928,845,428.00 890,759,963.00

(Phase II Residence)

Total 932,089,394.00 894,665,061.00

27. Payroll Payable

(1) List of Payroll Payable

Other decrease

Item Opening balance Increase Decrease Closing balance

of the year

I. Short-term

269,328,946.11 651,894,639.51 750,826,484.09 0 170,397,101.53

salary

II.

Post-employment

2,067,376.48 55,267,430.99 54,878,592.67 2,456,214.80

benefit-defined

contribution plans

III. Termination

1,663,194.06 623,418.40 2,188,991.18 97,621.28

benefits

IV. Other benefits

due within one 0

year

Total 273,059,516.65 707,785,488.90 807,894,067.94 0 172,950,937.61

Notes: The other decrease of the year was generated from the loss of control over

subsidiaries.

(2) List of Short-term Salary

Other decrease of

Item Opening balance Increase Decrease Closing balance

the year

1. Salary, bonus,

259,948,249.68 567,441,027.96 672,099,201.27 155,290,076.37

allowance, subsidy

2. Employee welfare 1,210,626.63 32,381,092.08 27,957,944.98 5,633,773.73

3. Social insurance 1,799,379.97 28,512,836.10 27,603,281.93 2,708,934.14

Of which: 1. Medical

894,422.89 24,454,580.19 24,002,166.26 1,346,836.82

insurance premiums

166

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Other decrease of

Item Opening balance Increase Decrease Closing balance

the year

Work-related

180,237.94 2,228,378.09 2,237,061.20 171,554.83

injury insurance

Maternity

724,719.14 1,829,877.82 1,364,054.47 1,190,542.49

insurance

4. Housing fund 1,313,004.12 10,816,260.71 11,665,431.72 463,833.11

5. Labor union budget and

employee education 4,314,422.20 5,524,803.61 3,829,764.64 6,009,461.17

budget

6.Short-term absence with

— 0

payment

7. Short-term profit

— 0

sharing plan

8. Other 743,263.51 7,218,619.05 7,670,859.55 291,023.01

Total 269,328,946.11 651,894,639.51 750,826,484.09 0 170,397,101.53

Notes: The other decrease of the year was generated from the loss of control over

subsidiaries.

(3) List of Drawing Scheme

Other decrease

Item Opening balance Increase Decrease Closing balance

of the year

1. Basic pension benefits 1,929,475.33 53,419,061.57 53,021,070.86 2,327,466.04

2. Unemployment insurance 137,901.15 1,848,369.42 1,857,521.81 128,748.76

3. Annuity — 0.00

Total 2,067,376.48 55,267,430.99 54,878,592.67 2,456,214.80

Notes: The other decrease of the year was generated from the loss of control over

subsidiaries.

The Company, in line with the requirement, participate the endowment insurance,

unemployment insurance scheme and so on, according to the scheme, the Company monthly

pay to the scheme in line with requirements of local government, except the monthly

payment, the Company no longer shoulder the further payment obligation, the relevant

167

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

expense occurred was recorded into current profits and losses or related assets costs.

28. Taxes Payable

Item Closing balance Opening balance

VAT 6,235,397.21 22,004,630.74

Corporate income tax 29,341,831.95 47,284,465.50

Fund for disposing abandoned appliances and electronic

products 11,854,045.00 22,247,050.00

Land use tax 7,887,162.23 7,665,004.34

Real estate tax 4,023,557.21 5,981,502.18

Business tax 1,005,946.96 5,657,810.54

Tariff 4,413,293.36 4,840,472.49

Personal income tax 2,819,699.91 3,057,758.99

Urban maintenance and construction tax 451,931.85 1,045,876.46

Stamp duty 351,288.38 1,038,401.33

Education fees and local education Surcharge 255,167.09 762,586.83

Flood control fund, fund for embankment, fund for water

conservancy and fund for river management 29,807.37 2,661.16

Others 202,926.43 317,200.62

Total 68,872,054.95 121,905,421.18

29. Interest Payable

Item Closing balance Opening balance

Loan interests 30,119,490.82 21,344,172.45

Total 30,119,490.82 21,344,172.45

30. Other Accounts Payable

(1) Other Accounts Payable Listed by Nature of the Account

Item Closing balance Opening balance

Accrued expenses 678,797,416.33 1,024,955,359.82

Margin 223,657,959.46 200,962,374.64

Intercourse funds 143,376,312.99 140,710,255.05

168

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Closing balance Opening balance

Payment on behalf 3,438,817.44 9,468,406.97

Others 83,247,789.89 68,253,590.26

Total 1,132,518,296.11 1,444,349,986.74

(2) Other Significant Accounts Payable with Aging over One Year

Item Closing balance Unpaid/ Un-carry-over reason

Cash deposit 70,959,377.96 Unsettled

Total 70,959,377.96 —

31. Non-current Liabilities Due within 1 Year

Item Closing balance Opening balance

Long-term loans due within 1 year(Note: 31) — —

Long-term loans due within 1 year(Note: 32) 301,282.02 41,025.60

Total 301,282.02 41,025.60

32. Long-term Loan

Item Closing balance Opening balance

Mortgage loan — —

Guaranteed loan — —

Credit loan 70,000,000.00 70,000,000.00

Less: long-term loans due within 1 year(Note: 30) — —

Total 70,000,000.00 70,000,000.00

33. Long-term Payable

Item Closing balance Opening balance

Chuzhou Tongchuang Jianshe Investment Co.,

30,000,000.00 30,000,000.00

Ltd.

Accrued financial lease outlay 446,153.86 143,589.74

Less: Expired part due within 1 year (Notes: 30) 301,282.02 41,025.60

Total 30,144,871.84 30,102,564.14

34. Long-term Payroll Payable

169

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

(1) List of Long-term Payroll Payable

Item Closing balance Opening balance

I. Termination benefits-net liabilities of defined

15,614,846.48 18,151,659.90

contribution plans

II. Termination benefits — —

III. Other long term welfare — —

Total 15,614,846.48 18,151,659.90

(2) Changes of Defined Benefit Plans

① Present Worth of Defined Benefit Plans Obligation

Item Reporting Period Same period of last year

I. Opening balance 18,151,659.90 23,435,856.86

II. Defined benefit cost recorded into current

profits and losses

1. Current service cost —

2. Previous service cost —

3. Settlement gains (loss “-”) —

III.Other changes 2,536,813.42 5,284,196.96

1. Consideration of settlement of payment —

2.Welfare had paid 2,536,813.42 5,284,196.96

IV. Closing balance 15,614,846.48 18,151,659.90

② Notes to the influence of the content and related risk of defined benefit plans to the future

cash flows, time and uncertainty of the Company:

Due to upgrading and reconstruction of current work sites of the subsidiary, communication

technology, it is to adjust the labor relations according to Implementation Measures for

Accompanying Employees in manufacturing system of Shenzhen Konka Communication

Technology Co., Ltd on the premise to balance the Company’s and employees’ benefits and

voluntary selection, Communication Technology provides early retirement plans for senior

employees (employed before December 31, 1990 and signed non-fixed term labor contract

with the Company or Communication Technology).

The accumulative compensation paid to the internal early retirement pensions in future year

170

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

is RMB34,931,714.55, the Company in line with Agreement of Internal Early Retirement

Pension, in line with the standard of salary remaining the same, turnover rate of 0, the

mortality rate of, fix standard of social security base payment remaining the same to test the

present worth of defined benefit plans. The actual payment for the employee is influence by

the actual turnover rate, death rate and the changes of minimum cardinality of social security.

③ Notes to analysis results of actuarial assumptions and sensibility of defined benefit plans

Major assumptions estimated Period-end of Reporting Period Period-end of last period

Discount rate Treasury bond rate in same period —

Death rate 0% —

Expected life expectancy Over legal emeritus age —

Expected compensation growth rate 0% —

35. Estimated Liabilities

Item Opening balance Closing balance Formed reason

Pending litigation 4,711,597.59 4,711,597.59 Litigation

Contract

Employee compensation 2,840,387.51 2,840,387.51

consideration

Total 7,551,985.10 7,551,985.10

36. Deferred Revenue

Other decrease of Formed

Item Opening balance Increase Decrease Closing balance

the year reason

Governme

Amortizati

nt 130,571,125.42 7,942,660.60 11,561,486.48 192.24 126,952,107.30 on

subsidies

Total 130,571,125.42 7,942,660.60 11,561,486.48 192.24 126,952,107.30 —

171

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Of which, items involved in government subsidies:

Amount accrued

Amount of newly Related to the assets/

Item Opening balance in non-business Other changes Closing balance

subsidy income

income

Subsidies for equipment engineering and technology 10,530,000.00 1,755,000.00 8,775,000.00 Related to the assets

Smart TV industry chain of Konka Group Co., Ltd. 12,800,000.00 213,333.33 12,586,666.67 Related to the assets

Shenzhen Finance Committee Konka Group Smart TV

8,170,000.00 136,166.67 8,033,833.33 Related to the assets

Industry Project

Supporting the next generation Internet intelligent terminal

7,776,925.55 2,000,000.00 1,024,207.11 8,752,718.44 Related to the assets

system R & D and industrialization

R&D of mating core chip based on the terminal of AVS/DRA 5,620,000.00 0.00 5,620,000.00 Related to the assets

R&D and industrialization of new-type smart television with

5,256,893.21 0.00 5,256,893.21 Related to the assets

man-machine interaction

Konka next generation multimedia terminal technology

5,000,000.00 0.00 5,000,000.00 Related to the assets

engineering laboratory project

Fund for flat panel display industry in year 2008 2,499,999.90 1,000,000.02 1,499,999.88 Related to the assets

Mobile intelligent terminal new application service system 4,000,000.00 0.00 4,000,000.00 Related to the assets

Key technology and industrialization of LED Backlight of flat TV

2,750,000.05 499,999.98 2,250,000.07 Related to the assets

set

Special Fund of Strategic Emerging Industry of Dongguan

3,000,000.00 300,000.00 2,700,000.00 Related to the assets

Financial Bureau

Economic, trade and information commission, 2015 Shenzhen 6,620,000.00 0.00 6,620,000.00 Related to the assets

172

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Amount accrued

Amount of newly Related to the assets/

Item Opening balance in non-business Other changes Closing balance

subsidy income

income

Industrial Design Center subsidy

Supporting the research and development and industrialization of

2,600,000.00 0.00 2,600,000.00 Related to the assets

synergy internet-connected digital products

Special fund for 2010-2012 provincial finance industrial

2,136,666.58 210,000.00 1,926,666.58 Related to the assets

technology

Funds for provincial scientific and technological innovation and

1,956,521.76 260,869.56 1,695,652.20 Related to the assets

special guidance of achievements transfer of 2010

Machine module integration subsidy 2,175,000.00 150,000.00 2,025,000.00 Related to the assets

TV application oriented and embedded operating system

2,470,000.00 174,200.00 2,295,800.00 Related to the assets

development

mobile intelligent terminal information security system key 2,400,000.00 0.00 2,400,000.00 Related to the assets

Research and development and industrialization of Dual channel

1,996,166.67 202,999.98 1,793,166.69 Related to the assets

new 3 D smart TV

Lean manufacturing execution system comprehensive integrated

2,000,000.00 0.00 2,000,000.00 Related to the assets

innovation projects

R&D and industrialization of large size liquid crystal display

0.00 Related to the assets

module (LCM)

Supporting triple play smart TV and system support platform 1,466,666.68 199,999.98 1,266,666.70 Related to the assets

Research instruments subsidies 1,227,333.25 210,400.02 1,016,933.23 Related to the assets

Mobile intelligent terminal new application service system 850,000.00 300,000.00 550,000.00 Related to the assets

173

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Amount accrued

Amount of newly Related to the assets/

Item Opening balance in non-business Other changes Closing balance

subsidy income

income

Mobile internet and the 4G mobile communication industry 4,000,000.00 0.00 4,000,000.00 Related to the assets

Others 27,637,230.66 5,942,200.00 3,803,915.79 29,775,514.87 Related to the assets

Subtotal 126,939,404.31 7,942,200.00 10,441,092.44 0.00 124,440,511.87

Others 3,631,721.11 460.60 1,120,394.04 192.24 2,511,595.43 Related to the income

Subtotal 3,631,721.11 460.60 1,120,394.04 192.24 2,511,595.43

Total 130,571,125.42 7,942,660.60 11,561,486.48 192.24 126,952,107.30

37. Share Capital

Increase/decrease in Reporting Period (+,-)

Item Opening balance Issuing Bonus Capitalization Closing balance

Others Subtotal

new shares shares of public reserves

The sum of shares 2,407,945,408.00 — — — — — 2,407,945,408.00

38. Capital Surplus

Item Opening balance Increase Decrease Closing balance

Capital premium 7,393,378.55 7,393,378.55

Other capital reserves 72,329,713.49 1,166,602.46 71,163,111.03

Total 79,723,092.04 0.00 1,166,602.46 78,556,489.58

174

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Notes: The decrease of other capital surplus was generated from the changes in owner’s equity excluding the net gain/loss of Shanghai Konka

Green Technology Co., Ltd. with the amount of RMB1,166,602.46.

39. Other Comprehensive Income

Reporting Period

Less: recorded in

other

comprehensive Attributable

Amount before Attributable to

Item Opening balance income in prior Less: Income tax to minority Closing balance

income tax in owners of the

period and expense shareholders

current period Company after tax

transferred to after tax

profit or loss in

current period

I. Other comprehensive income cannot be

reclassified into profits and losses in future

II. Other comprehensive reclassified into

-6,932,104.65 -6,012,664.59 0.00 -3,786,104.00 -2,249,706.48 23,145.89 -9,181,811.13

profits or losses

Of which: other comprehensive income as per

equity method recognized into profit and loss in 0.00 0.00

future

Profits or losses of change in fair value of

6,410,568.76 -15,134,102.58 -3,786,104.00 -11,347,998.58 -4,937,429.82

available-for-sale financial assets

Converted difference of the foreign currency

-13,342,673.41 9,121,437.99 9,098,292.10 23,145.89 -4,244,381.31

financial statement

Total -6,932,104.65 -6,012,664.59 0.00 -3,786,104.00 -2,249,706.48 23,145.89 -9,181,811.13

175

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

40. Surplus Reserves

Item Opening balance Increase Decrease Closing balance

Statutory surplus reserves 593,846,200.71 — — 593,846,200.71

Discretionary surplus reserves 254,062,265.57 — — 254,062,265.57

Total 847,908,466.28 — — 847,908,466.28

Notes: Based on the regulations of the Corporation Law and Constitution, the Company

should withdraw 10% of the statutory surplus reserves according to the net profits. If the

accumulated amount of the statutory surplus reserves exceeded the 50% of the registered

capital, the Company could no more withdraw.

41. Retained Profits

Item Reporting Period Same period of last year

Opening balance of retained profits before

-427,163,254.63 -522,836,282.66

adjustments

Total opening balance of retained profits before

— —

adjustments (Increase+, decrease-)

Opening balance of retained profits after adjustments -427,163,254.63 -522,836,282.66

Add: Net profit attributable to owners of the

30,871,267.86 95,673,028.03

Company

Less: Withdrawal of statutory surplus reserves — —

Withdrawal of discretional surplus reserves — —

Dividend of common stock payable — —

Dividend of common stock transfer into share capital — —

Closing retained profits -396,291,986.77 -427,163,254.63

42. Revenue and Cost of Sales

(1) Revenue and Cost of Sales

Reporting Period Same period of last year

Item

Sales revenue Cost of sales Sales revenue Cost of sales

Main

11,116,190,367.22 9,941,054,112.21 7,724,414,205.37 6,397,747,058.44

operations

176

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Reporting Period Same period of last year

Item

Sales revenue Cost of sales Sales revenue Cost of sales

Other

289,775,612.21 169,137,145.86 884,666,616.87 779,978,033.98

operations

Total 11,405,965,979.43 10,110,191,258.07 8,609,080,822.24 7,177,725,092.42

(2) Main Operations (Classified by product)

Reporting Period Same period of last year

Product

Operation revenue Operation cost Operation revenue Operation cost

Color TV business 5,289,992,150.21 4,431,743,317.09 5,367,972,378.49 4,468,618,453.12

Consumer

891,933,843.48 726,049,054.97 829,752,654.59 648,051,838.45

appliances business

Mobile phone

420,602,444.99 365,383,403.95 471,731,609.94 415,431,430.93

business

Supply chain

4,307,330,068.12 4,247,646,007.45

business

Others 206,331,860.42 170,232,328.75 1,054,957,562.35 865,645,335.94

Total 11,116,190,367.22 9,941,054,112.21 7,724,414,205.37 6,397,747,058.44

(3) Main Operations (Classified by Area)

Reporting Period Same period of last year

Area

Operation revenue Operation cost Operation revenue Operation cost

Domestic sales 7,343,613,290.29 6,314,287,989.74 5,176,447,693.40 4,024,605,977.81

Overseas sales 3,772,577,076.93 3,626,766,122.47 2,547,966,511.97 2,373,141,080.63

Total 11,116,190,367.22 9,941,054,112.21 7,724,414,205.37 6,397,747,058.44

(4) Other Business

Reporting Period Same period of last year

Product

Operation revenue Operation cost Operation revenue Operation cost

Income gained from

598,960,641.11 591,804,734.74

supply chain

Others 289,775,612.21 169,137,145.86 534,917,991.67 444,108,975.70

Total 289,775,612.21 169,137,145.86 1,133,878,632.78 1,035,913,710.44

177

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

(5) The Revenue of Sales from the Top Five Customers

Period Main operation revenue Proportion of total business revenue (%)

January-June 2017 2,662,113,944.10 23.34

1,776,976,457.55 20.64

January-June 2016

43. Business Tax and Surcharges

Item Reporting Period Same period of last year

Urban maintenance and

9,045,781.48 20,776,311.03

construction tax

VAT of land 102,929.05

Business tax 47,500.00 13,191,515.48

Education Surcharge 4,011,787.05 9,430,266.44

Local education surtax 2,617,655.26 6,021,776.47

Stamp duty 4,633,250.57 —

Real estate tax 6,808,790.65 —

Land use tax 5,698,979.66 —

Vehicles and vessels fees 13,620.00 —

Water conservancy fund 457,748.63 —

Others 991,549.69 6,730,072.12

Total 34,429,592.04 56,149,941.54

Note: (1) After replacing business tax with value added tax is fully tried according to CK

[2016] No. 22 Provision on VAT Accounting Treatment issued by the Ministry of Finance,

the course title of “business tax and surcharge” is adjusted to be the course of “tax and

surcharge”, the course checks the consumption tax, urban maintenance and construction tax,

resource tax, educational expense and surcharge and property tax, land use tax, vehicle and

vessel use tax, stamp tax and other related taxes occurred in the enterprise’s operating

activity; the project of “business tax and surcharge” in the profit statement is adjusted as the

project of “tax and surcharge”.

(2) For more details about the measurement standards of business tax and surcharges, please

refer to Note V. Tax.

44. Sales Expenses

178

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Reporting Period Same period of last year

Salary 146,655,505.33 157,536,220.65

Promotional activities 320,216,302.42 372,587,893.03

Logistic Fee 148,814,891.66 154,776,709.59

Warranty fee 114,430,603.12 167,856,546.55

Advertising expense 93,547,508.94 91,273,551.74

Social security charges 21,205,649.26 21,910,951.20

Business travel charges 16,044,394.98 17,770,918.55

Rental charges 14,424,674.47 15,085,828.42

Business entertainment expense 10,651,455.99 11,450,052.22

Exhibition fee 6,530,558.33 6,719,144.35

Others 81,481,762.04 92,179,107.31

Total 974,003,306.54 1,109,146,923.61

45. Administrative Expenses

Item Reporting Period Same period of last year

R&D expenses 96,753,027.87 88,336,972.44

Salary 68,075,439.56 73,525,422.30

Depreciation charge 16,955,414.43 16,536,843.42

Social security charges 9,395,168.52 11,042,691.24

Business entertainment expense 8,204,092.21 7,228,540.05

Consulting fees 6,907,424.07 3,993,681.74

Tax and fund 0.00 17,286,987.83

Business travel charges 4,518,651.08 4,382,095.57

Employee welfare 6,552,271.96 6,728,436.24

Labor-union expenditure 3,456,348.07 3,969,760.83

Others 43,290,263.20 57,887,858.36

Total 264,108,100.97 290,919,290.02

46. Financial Expenses

Item Reporting Period Same period of last year

Interest expenses 165,919,248.32 115,905,577.29

179

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Reporting Period Same period of last year

Less: Interest income 61,587,922.88 47,941,503.94

Exchange gains and losses -94,091.34 -223,594.54

Others 6,645,661.36 632,953.19

Total 110,882,895.46 68,373,432.00

47. Asset Impairment Loss

Item Reporting Period Same period of last year

Bad debt loss -10,238,423.79 8,154,439.14

Inventory falling price loss 12,397,789.34 28,006,901.30

Fixed assets impairment losses 111,677.21 3,093,224.90

Total 2,271,042.76 39,254,565.34

48. Gains and Losses from Changes in Fair Value

Sources Reporting Period Last period

Financial assets measured by fair value and the changes be

-103,077,757.73

included in the current profits and losses -18,141,655.39

Of which, gains on the changes in the fair value of derivative

-103,077,757.73

financial instruments -18,141,655.39

Total -103,077,757.73 -18,141,655.39

49. Investment Income

Item Reporting Period Same period of last year

Long-term equity investment income accounted by equity method -4,574,294.19 -7,531,575.68

Investment income arising from disposal of long-term equity investments 28,234.62 3,030,280.93

Investment income received from holding of available-for-sale financial assets 0.00 1,310,000.00

Investment income received from disposal of available-for-sale financial assets 25,048,785.15 44,703.62

Investment income received from holding of available-for-sale trading financial

263,100.00

assets

Income received from re-measurement of the rest of stock at fair value after

4,510,212.49

losing control rights

180

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Reporting Period Same period of last year

Financial assets accounted by equity method transferred from equity investment

Income received from purchase of financial products and entrust loans 30,338,020.11 9,222,760.26

Investment income received from the disposal of financial assets/liabilities

measured by fair value and the changes be included in the current profits and 15,901,726.37 —

losses

Total 67,005,572.06 10,586,381.62

50. Other Income

Item Reporting Period Same period of last year

Tax refund of software 35,115,965.51 0.00

Subsidy for export credit insurance 1,722,426.00 0.00

Total 36,838,391.51 0.00

51. Non-operating Gains

Recorded in the amount of

Item Reporting Period Same period of last year the non-recurring gains

and losses

Total gains from disposal of non-current assets 33,597,795.57 3,147,161.67 33,597,795.57

Including: Gains from disposal of fixed assets 228,629.18 3,147,161.67 228,629.18

Government grants ( Details, see the statement

79,034,666.86 136,544,386.15 79,034,666.86

below, lists of government subsidies )

Income from compensation 7,639,245.00

Penalty income 3,366,979.21 2,148,787.76 3,366,979.21

Others 7,347,666.65 4,708,082.06 7,347,666.65

Total 123,347,108.29 154,187,662.64 123,347,108.29

Of which, government subsidies recorded into current profits and losses

Item Reporting Period Same period of last year Related to the assets/ income

Software tax returns 0.00 84,594,956.03 Related to the income

Support fund 40,225,800.00 29,076,900.00 Related to the income

Deferred income 11,561,486.48 12,057,366.44 See Note VI. 35

181

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Reporting Period Same period of last year Related to the assets/ income

Awards and subsidies 21,005,000.00 Related to the income

Refund of land tax 1,948,800.00 Related to the income

Others 4,293,580.38 10,815,163.68 Related to the income

Total 79,034,666.86 136,544,386.15

52. Non-operating Expenses

Recorded in the amount of

Item Reporting Period Same period of last year the non-recurring gains and

losses

Loss on disposal of non-current

1,065,392.90 617,565.57 1,065,392.90

assets

Including: Loss on disposal of

1,065,392.90 617,565.57 1,065,392.90

fixed assets

Compensation expenses 1,531.07 1,531.07

Penalty expenses 52,501.63 1,344,333.27 52,501.63

External donation expenses 13,600.00 28,000.00 13,600.00

Refundable national subsidy for

energy-saving

Others 2,502,512.51 1,541,119.52 2,502,512.51

Total 3,635,538.11 3,531,018.36 3,635,538.11

53. Income Tax Expense

(1) Lists of Income Tax Expense

Item Reporting Period Same period of last year

Current income tax expense 21,286,293.02 41,114,706.11

Deferred income tax expense -25,125,065.99 -40,408,709.01

Total -3,838,772.97 705,997.10

(2) Adjustment Process of Accounting Profit and Income Tax Expense

Item Reporting Period

Total profits 30,557,559.61

182

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Current income tax expense accounted by tax and relevant

7,639,389.90

regulations

Influence of different tax rate suitable to subsidiary -3,376,311.10

Influence of income tax before adjustment -726,692.04

Influence of non taxable income -2,265,211.18

Influence of not deductable costs, expenses and losses 561,232.11

Influence of deductable losses of deferred income tax assets

-4,832,078.47

derecognized used in previous period

Influence of deductible temporary difference or deductible losses of

-839,102.19

deferred income tax assets derecognized in Reporting Period.

Changes of the balance of deferred income tax assets/ liabilities in

previous period due to adjustment of tax rate

Influence of plus deducting costs

Income tax expense -3,838,772.97

54. Other Comprehensive Income

For more details, please refer to Note VI. 39.

55. Information of Cash Flow Statement

(1) Other Cash Received Relevant to Operating Activities

Item Reporting Period Same period of last year

Income from government subsidy 73,794,757.98 43,649,169.82

Bargain money and deposit 35,452,861.96 33,299,181.92

Interest income from bank deposits 7,386,176.08 23,481,811.90

Income from waste 5,528,381.42 6,679,741.15

Repayment of individual borrowing 2,369,554.91 2,937,490.67

Insurance indemnity 6,000.00

Temporary received repair fund 2,820,613.27 681,957.93

Income from fine and penalty 170,823.92 318,724.35

Current accounts and other 114,981,420.88 154,798,397.77

Total 242,504,590.42 265,852,475.51

183

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

(2) Other Cash Paid Relevant to Operating Activities

Item Reporting Period Same period of last year

Expense for cash payment 619,722,220.51 470,234,898.51

Payment made on behalf 16,655,746.00 23,090,996.59

Payment for pledges, guarantee and repair 55,078,829.30 42,278,211.56

Employee reserve fund 10,359,585.52 11,796,262.92

Expense for bank handling charges 9,929,886.88 4,984,527.17

Donation expense 0.00 28,000.00

Other expense 43,928,173.17 40,284,916.71

Total 755,674,441.38 592,697,813.46

(3) Other Cash Received Relevant to Investment Activities

Item Reporting Period Same period of last year

Received financial product 857,900,000.00 4,243,417,300.00

Interest of entrust loan 50,000,000.00

Others 1,449.68 11,000.00

Total 857,901,449.68 4,293,428,300.00

(4) Other Cash Paid Relevant to Investment Activity

Item Reporting Period Same period of last year

Purchase of financial products 2,130,900,000.00 4,293,417,300.00

Payment of entrust loan 20,000,000.00 —

Payment of option price 5,125,000.00

Others 43,913.10 28,389,985.63

Total 2,156,068,913.10 3,658,501,268.22

(5) Other Cash Received Relevant to Financing Activities

Item Reporting Period Same period of last year

Self opening and self discounting 1,087,905,232.65

Payment of due RMB certificate of deposit

444,475,802.89

as pledge

184

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Reporting Period Same period of last year

Others 3,600,000.00

Total 444,475,802.89 1,091,505,232.65

(6) Other Cash Paid Relevant to Financing Activities

Item Reporting Period Same period of last year

Margin deposit as pledge 574,504.77

Others 0.00 31,258,073.60

Total 574,504.77 31,258,073.60

56. Supplemental Information for Cash Flow Statement

(1) Supplemental Information for Cash Flow Statement

Supplemental information Reporting Period Same period of last year

1. Reconciliation of net profit to net cash flows

generated from operating activities

Net profit 34,396,332.58 9,906,950.72

Add: Provision for impairment of assets 2,271,042.76 39,254,565.34

Depreciation of fixed assets, of oil-gas assets, of productive

57,373,770.25 63,256,033.89

biological assets

Amortization of intangible assets 5,514,858.35 6,225,055.67

Long-term unamortized expenses 32,110,310.89 27,591,224.40

Losses on disposal of fixed assets, intangible assets and

-32,532,402.67 -2,529,596.10

other long-term assets (gains: negative)

Loss on retirement of fixed assets (gains: negative) — —

Losses from variation of fair value (gains: negative) 103,077,757.73 —

Financial cost (gains: negative) 205,629,196.69 129,789,423.55

Investment loss (gains: negative) -67,005,572.06 -10,586,381.62

Decrease in deferred income tax assets (gains: negative) -35,150,295.62 -36,491,902.56

Increase in deferred income tax liabilities

2,453,021.63 1,218,228.05

(crease in deferred

Decrease in inventory (gains: negative) -2,097,599,214.55 29,575,516.85

Decrease in accounts receivable from operating activities

274,747,714.15 203,319,939.04

(gains: negative)

Increase in payables from operating activities (decrease:

-737,739,738.53 -586,071,113.65

negative)

Others -11,561,486.48 —

Net cash flows generated from operating activities -2,264,014,704.88 -125,542,056.42

185

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Supplemental information Reporting Period Same period of last year

2. Investing and financing activities that do not

involving cash receipts and payment:

Conversion of debt into capital — —

Company bonus convertible due within one year — —

Fix assets under financing lease — —

3. Net increase in cash and cash equivalents

Closing balance of cash 2,326,786,079.22 2,469,950,766.48

Less: Opening balance of cash 2,020,902,945.13 1,488,154,851.35

Add: Closing balance of cash equivalents — —

Less: Opening balance of cash equivalents — —

Net increase in cash and cash equivalents 305,883,134.09 981,795,915.13

(2) Cash and Cash Equivalents

Item Closing balance Opening balance

I. Cash 2,326,786,079.22 2,469,950,766.48

Including: Cash on hand 2,243.88 3,160.55

Bank deposit on demand 2,326,783,835.34 2,469,947,605.93

II. Cash and cash equivalents — —

Of which: Bond investment due within three months — —

III. Closing balance of cash and cash equivalents 2,326,786,079.22 2,469,950,766.48

Notes: The cash and cash equivalents excluded the restricted cash and cash equivalents of the

Company and its subsidiaries.

57. The Assets with the Ownership or Use Right Restricted

Item Closing book value Restricted reason

Each margin deposit for security cannot be

Monetary funds 163,293,524.85

withdrawn at any time.

Used for comprehensive financing business

Notes receivable 1,367,853,053.41 such as the opening of bank’s acceptance bill,

L/C, letter of indemnity and trade financing

Fixed assets 5,807,674.32 Property preservation

Total 1,536,954,252.58

58. Foreign Currency Monetary Items

186

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

(1) Foreign Currency Monetary Items

Closing convert to RMB

Item Closing foreign currency balance Exchange rate

balance

Monetary capital 723,760,332.08

Including: USD 105,182,149.96 6.7744 712,545,956.69

EUR 103,868.04 7.7496 804,935.76

IDR 4,225,752,514.66 0.000509 2,150,908.03

GBP 1.32 8.8144 11.64

HKD 9,268,333.66 0.86792 8,044,172.15

CAD 6.96 5.2144 36.29

PLN 117,296.00 1.8271 214,311.52

Accounts receivable 391,992,421.81

Including: USD 57,647,203.61 6.7744 390,525,216.14

IDR 1,131,442,304.69 0.000509 575,904.13

HKD 1,026,939.74 0.86792 891,301.54

Other accounts receivable 4,024,272.48

Including: USD 361,691.10 6.7744 2,450,240.19

EUR 1,400.00 7.7496 10,849.44

HKD 305,018.72 0.86792 264,731.85

IDR 8,000,000.00 0.000509 4,072.00

JPY 21,400,000.00 0.060485 1,294,379.00

Accounts payable 101,202,241.41

Including: USD 14,843,770.66 6.7744 100,557,639.98

HKD 742,696.83 0.86792 644,601.43

VII. Changes of Merge Scope

1. The Disposal of Subsidiary

There was no subsidiary to dispose.

2. Other Reasons for the Changes in Combination Scope

(1) Anhui Konka Electronic Co., Ltd., a subsidiary of our company registered to set up the

187

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

wholly-owned subsidiary of Anhui Kangzhi Commerce and Trade Co., Ltd., in Anhui on

March 8, 2017 with the registered capital of RMB5.00 million. Until the date of asset balance

sheet, Anhui Konka Electronic Co., Ltd. has not invested actually. The company has the

control power, and it has been included in the merger scope since March 8, 2017.

(2) Anhui Konka Tongchuang Household Appliances Co., Ltd., a subsidiary of our company

absorbed and merged the wholly-owned subsidiary of Anhui Konka Household Appliances

Co., Ltd. on May 17, 2017, Anhui Konka Household Appliances Co., Ltd. completed the

industrial and commercial registration cancellation on May 17, 2017.

VIII. Equity in Other Entities

1. Equity in Subsidiary

(1) The Structure of the Enterprise Group

Holding

Main

percentage (%) Way

Registrati Nature of

Name operating

on place business of gaining

Direct Indirectl

place

ly y

Shenzhen Konka Shenzhen,

Shenzhen, Manufacturing Set up or

Telecommunications Technology Guangdon 75.00 25.00

Guangdong industry investment

Co., Ltd. g

Shenzhen, Manufacturing

Shenzhen Konka Electronic Co., Shenzhen, 100.0 Set up or

Guangdon industry and —

0

Ltd. Guangdong investment

g trade

Shenzhen,

Shenzhen Konka Plastic Products Shenzhen, Manufacturing Set up or

Guangdon 49.00 51.00

Co., Ltd. Guangdong industry investment

g

Shenzhen,

Shenzhen Konka Life Electronic Shenzhen, Manufacturing Set up or

Guangdon 75.00 25.00

Co., Ltd. Guangdong industry investment

g

Shenzhen,

Shenzhen Konka Electronic Shenzhen, Investment Set up or

Guangdon 75.00 25.00

Fittings Technology Co., Ltd. Guangdong holding investment

g

188

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Holding

Main

percentage (%) Way

Registrati Nature of

Name operating

on place business of gaining

Direct Indirectl

place

ly y

Mudanjia

Mudanjiang,

Mudanjiang Arctic Ocean ng, Manufacturing Set up or

Heilongjian 60.00 —

Appliances Co., Ltd. Heilongjia industry investment

g

ng

Chongqing Konka Electronic Co., Chongqin Manufacturing Set up or

Chongqing — 40.00

Ltd.① g industry investment

Chuzhou, Chuzhou, Manufacturing Set up or

Anhui Konka Electronic Co., Ltd. 78.00 —

Anhui Anhui industry investment

Chuzhou, Chuzhou, Manufacturing 100.0 Set up or

Anhui Konka Appliance Co., Ltd. —

0

Anhui Anhui industry investment

Kunshan Konka Electronic Co., Kunshan, Kunshan, Manufacturing Set up or

75.00 25.00

Ltd. Jiangsu Jiangsu industry investment

Dongguan

Dongguan Konka Electronic Co., Dongguan, , Manufacturing Set up or

— 100.00

Ltd. Guangdong Guangdon industry investment

g

Dongguan

Dongguan Konka Packing Dongguan, , Manufacturing Set up or

— 100.00

Materials Co., Ltd. Guangdong Guangdon industry investment

g

Boluo,

Boluo, Manufacturing Set up or

Boluo Konka PCB Co., Ltd. Guangdon — 100.00

Guangdong industry investment

g

Boluo,

Boluo Konka Precision Boluo, Manufacturing 100.0 Set up or

Guangdon —

0

Technology Co., Ltd. Guangdong industry investment

g

189

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Holding

Main

percentage (%) Way

Registrati Nature of

Name operating

on place business of gaining

Direct Indirectl

place

ly y

Hong

Hong Kong, International Set up or

Hong Kong Konka Co., Ltd. Kong, — 100.00

China Trading investment

China

Konka Household Appliances Hong

Hong Kong, Investment Set up or

Investment & Development Co., Kong, — 100.00

China holding investment

Ltd. China

Frankfurt, Frankfurt,

International 100.0 Set up or

Konka (Europe) Co., Ltd. Germany, Germany, —

0

Trading investment

Europe Europe

Shenzhen, Factoring

Konka Commercial Shenzhen, 100.0 Set up or

Guangdon (Non-bank —

0

Factor(Shenzhen) Co., Ltd.② Guangdong investment

g finance)

Shenzhen,

Shenzhen Wankaida Science and Shenzhen, Software 100.0 Set up or

Guangdon —

0

Technology Co., Ltd. Guangdong development investment

g

Kunshan Kangsheng Investment Kunshan, Kunshan, 100.0 Set up or

Real estate —

0

Development Co., Ltd. Jiangsu Jiangsu investment

Anhui Konka Tongchuang Chuzhou, Chuzhou, Manufacturing 100.0 Set up or

0

Household Appliances Co., Ltd.③ Anhui Anhui industry investment

Indonesia Konka Electronics Co., International Set up or

Indonesia Indonesia — 51.00

Ltd. Trading investment

Shenzhen,

Shenzhen Shushida Logistics Shenzhen, 100.0 Set up or

Guangdon Logistics —

0

Service Co., Ltd. Guangdong investment

g

Sale of home 100.0 Set up or

Beijing Konka Electronic Co., Ltd. Beijing Beijing —

0

appliance investment

190

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Holding

Main

percentage (%) Way

Registrati Nature of

Name operating

on place business of gaining

Direct Indirectl

place

ly y

Shenzhen,

Shenzhen Konka E-display Co., Shenzhen, Manufacturing Set up or

Guangdon 60.00 —

Ltd. Guangdong industry investment

g

Shenzhen,

Shenzhen E-display Service Co., Shenzhen, Manufacturing Set up or

Guangdon 60.00

Ltd. Guangdong industry investment

g

Xiamen, Xiamen, Set up or

Xiamen Dalong Trade Co., Ltd. Trade — 69.23

Fujian Fujian investment

Youshi Kangrong Cultural Set up or

Tianjin Tianjin Advertisement — 70.00

Communication Co., Ltd. investment

Shenzhen,

Shenzhen Kangqiaojiacheng Shenzhen, Set up or

Guangdon Real estate 70.00 —

Property Investment Co., Ltd Guangdong investment

g

Hong

Hong Kong, International Set up or

Konka Smarttech Limited Kong, — 61.00

China trading investment

China

Anhui Kakai Shijie E-Commerce Set up or

Anhui Anhui E-commerce 80.00 —

Co., Ltd investment

Shenzhen,

Shenzhen Yipingfang Network Shenzhen, Information 100.0 Set up or

Guangdon —

0

Technology Co., Ltd Guangdong service investment

g

Shenzhen,

Shenzhen Konka Commercial Shenzhen, Set up or

Guangdon Commerce 81.00 —

Systems Technology Co., Ltd Guangdong investment

g

Shenzhen,

Shenzhen Konka Mobile Internet Shenzhen, Set up or

Guangdon Commerce 51.00 —

Technology Co., Ltd. Guangdong investment

g

191

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Holding

Main

percentage (%) Way

Registrati Nature of

Name operating

on place business of gaining

Direct Indirectl

place

ly y

Hong

Hong Kong, International Set up or

Chain Kingdom Co.,Limited Kong, — 51.00

China trading investment

China

Shenzhen,

Shenzhen Kangqiao Easy Chain Shenzhen, Set up or

Guangdon Commerce 60.00 —

Technology Co., Ltd. Guangdong investment

g

Development of

E3info (Hainan) Technology Co., Haikou, Haikou, 100.0 Set up or

internet —

Ltd. Hainan Hainan 0 investment

platform

Chuzhou Konka Technology & Chuzhou, Chuzhou, Technology 100.0 Set up or

Industry Development Co., Ltd. Anhui Anhui industry 0

investment

Chuzhou, Chuzhou, Set up or

Anhui Kangzhi Trade Co., Ltd. Trade — 78.00

Anhui Anhui

investment

Notes: ① The Company holds 40.00% shares of Chongqing Qingjia Electronic Co., Ltd. that

all senior managers of Chongqing Qingjia Electronic Co., Ltd. are appointed and dismissed

by the Company. Among the directors, half of them or over half are dispatched directly or

indirectly by the Company. Moreover, in Chongqing Qingjia, 70% to 80% of its products

are sold to the Company and thus the Company has absolute influence and control over the

production and operation of Chongqing Qingjia Electronic Co., Ltd., which is combined into

the consolidated financial statement.

② Anhui Tongchuang is a limited company jointly invested and established by the Company

and Chuzhou Tongchuang Construction Investment Co., Ltd. (hereinafter refer to as

“Tongchuang Construction”) with registration capital of RMB 180 million, of which each

party invested in RMB 90 million respectively on contract. As to Dec. 31, 2013, Anhui

Tongchuang with a paid-up capital of RMB 120 million (including paid-up capital of RMB

90 million of the Company, 75.00% of total paid-up capital; and paid-up capital of RMB 30

million of Tongchuang Construction, 25.00% of total paid-up capital ). According to contract

192

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

sign by two parties, Tongchuang Construction has the rights of transferring stock ownership

three years after the establishment of Anhui Tongchuang Company. Meanwhile, the

Company can repurchase the said stock ownership and contracted with Tongchuang

Investment Company that the Company shall receive fixed investment gains at 2% of actual

capital invested by the Group annually. As of Dec. 31, 2016, “Tongchuang Construction” had

not transferred its equity and the Company had not repurchased it. So the Company can

conduct actual control to Anhui Tongchuang Company, and combines it into the consolidated

financial statement.

(2) Significant Not Wholly Owned Subsidiary

Shareholding The profits and losses Balance of minority

Dividends distribute to

Name proportion of minority arbitrate to the minority shareholder at closing

minority shareholder

shareholder shareholders period

Anhui Konka 22.00 1,924,758.03 — 79,305,956.28

Kangqiao Jiacheng 30.00 -1,379,203.28 — 295,555,154.69

Kaikai Shijie 20.00 589,684.00 — 5,835,182.48

Commercial

19.00 125,654.91 — 2,399,143.36

System Technology

Mobile

49.00 -1,862,724.74 — 3,402,493.98

Interconnection

(3) The Main Financial Information of Significant Not Wholly Owned Subsidiary

Closing balance

Name Non-current Current Non-current

Current assets Total assets Total liabilities

assets liabilities liability

Anhui Konka 956,041,713.09 231,071,142.68 1,187,112,855.77 818,317,044.11 8,314,192.20 826,631,236.31

Kangqiao

1,091,379,684.22 669,800.89 1,092,049,485.11 6,865,636.14 100,000,000.00 106,865,636.14

Jiacheng

Kaikai Shijie 450,332,965.18 1,603,761.86 451,936,727.04 422,760,814.65 0.00 422,760,814.65

Commercial

System 57,327,701.61 124,443.28 57,452,144.89 44,825,074.59 0.00 44,825,074.59

Technology

Mobile 43,693,816.15 23,095.72 43,716,911.87 36,773,046.61 0.00 36,773,046.61

193

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance

Name Non-current Current Non-current

Current assets Total assets Total liabilities

assets liabilities liability

Interconnectio

n

(Continued)

Opening balance

Name Non-current Current Non-current

Current assets Total assets Total liabilities

assets liabilities liability

Anhui Konka 882,686,223.79 237,235,477.46 1,119,921,701.25 758,810,489.87 9,378,492.06 768,188,981.93

Kangqiao

1,095,944,360.32 823,353.13 1,096,767,713.45 6,986,520.22 100,000,000.00 106,986,520.22

Jiacheng

Kaikai Shijie 415,460,985.44 1,976,121.55 417,437,106.99 391,209,614.58 — 391,209,614.58

Commercial

System 60,748,150.41 210,589.31 60,958,739.72 49,258,011.04 — 49,258,011.04

Technology

Mobile

Interconnectio 51,339,640.20 25,744.89 51,365,385.09 40,620,040.76 — 40,620,040.76

n

Reporting Period

Name Total comprehensive

Operation revenue Net profit Operating cash flow

income

Anhui Konka 2,399,150,981.00 8,748,900.14 8,748,900.14 -25,296,816.63

Kangqiao

0.00 -4,597,344.26 -4,597,344.26 -20,180,271.82

Jiacheng

Kaikai Shijie 470,025,219.90 2,948,419.98 2,948,419.98 82,976,543.24

Commercial

System 68,795,665.26 661,341.62 661,341.62 -10,618,619.61

Technology

194

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Reporting Period

Name Total comprehensive

Operation revenue Net profit Operating cash flow

income

Mobile

112,984,978.64 -3,801,479.07 -3,801,479.07 -6,303,289.22

Interconnection

(Continued)

Same period of last year

Name Total comprehensive

Operation revenue Net profit Operating cash flow

income

Anhui Konka 1,782,076,379.17 41,054,374.04 41,054,374.04 -18,411,271.87

Kangqiao

0.00 -1,974,407.17 -1,974,407.17 -344,371.26

Jiacheng

Kaikai Shijie 249,006,644.45 5,918,017.84 5,918,017.84 -27,434,290.16

Commercial

System 49,859,194.22 1,159,219.36 1,159,219.36 19,339,200.90

Technology

Mobile

145,032,685.28 2,756,416.09 2,756,416.09 23,235,560.41

Interconnection

2. Equity in Associated Enterprise

(1) Significant Associated Enterprises

Main Holding percentage (%) Accounting treatment of the

Registratio

Name operating Nature of business investment of joint venture or

n place Directly Indirectly

place associated enterprise

Shanghai Konka Production and sale

Green Science & Shanghai Shanghai of light emitting 39.00 — Equity method

Technology Co., Ltd. diode

(2) Main Financial Information of Significant Associated Enterprise

Closing balance/ Reporting

Opening balance /last period

Period

Item

Shanghai Konka Green

Shanghai Konka Green Science &

Science & Technology Co.,

Technology Co., Ltd.

Ltd.

195

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Current assets 312,266,543.64 361,468,348.74

Non-current assets 348,472,666.95 356,832,999.34

Total assets 660,739,210.59 718,301,348.08

Current liabilities 202,158,890.03 254,144,707.10

Non-current liability 60,315,740.08 71,618,268.97

Total liabilities 262,474,630.11 325,762,976.07

Minority interests 192,005,442.76 172,560,267.62

Equity attributable to owners of the

206,259,137.72 219,978,104.39

Company

85,791,460.71

Portion of net assets calculated according

80,441,063.71 85,791,460.71

to proportion of shareholdings

Adjusting events

-Goodwill — —

-Unrealized internal sales gain and loss — —

-Other — —

Book value of equity investment to

80,441,063.71 85,791,460.71

associated venture

Fair value of equity investment of

— —

associate enterprises with public offer

Operation revenue 260,884,229.06 474,548,859.80

Net profit 9,284,617.15 27,916,818.85

Net profits of termination operation — —

Other comprehensive income — —

Total comprehensive income 9,284,617.15 27,916,818.85

196

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Dividends received from associated

— —

enterprises in Reporting Period

IX. The Risk Related Financial Instruments

(I) Risk Management Objectives and Policies

Risk management objective of the Company is to balance the risks and profits, minimize the

negative effects to business performance and maximize the profits for stockholders and other

equity investors. On the basis of risk management objectives, basic strategies of risk

management are to determine and analyze all possible risks, establish appropriate risk

baseline, control and manage risks and monitor all risks timely and reliably within defined

scope.

1. Market Risk

(1) Foreign Exchange Risk

Foreign exchange risk refers to the risks that may lead to losses due to fluctuation in

exchange rate. Foreign exchange risk refers to the risks that may lead to losses due to

fluctuation in exchange rate. The foreign exchange risk borne by the Company is related to

USD, EURO, IDR and HKD, except the procurement and sales by US dollars for several

subsidiaries such as the Company, Kongkong Konka, Zhongkang Supply Chain, Konka

Trading, Europe Konka and Indonesia Konka which settled by USD, HKD, IDR and EURO

for purchase and sale. Until June 30, 2017 (refer to Notes VI 58, foreign monetary items),

foreign exchange risks may affect the business performance produced by the assets and

liabilities of the balance.

The Company timely pay attention to the influence of change of the exchange rate to the

Company's foreign exchange risk, which require the Group and others which conducted

purchase and sale with settlement by foreign currency to purchase foreign currency long-term

forward contract to lock the cost of purchase on forward date to reduce the risk exposure of

foreign exchange.

(2) Interest Rate Risk- cash Flow Change Risk

Cash flow change risk caused by financial instruments due to interest rate change is related to

floating interest rate of bank loan. By establishing good relations with banks and reasonable

planning of credit line, credit varieties and credit period, it is to guarantee sufficient band line

of credit and satisfy all financial demands. Moreover, it is to reduce risks of interest rate

uncertainty by shortening single loan term and establishing repayment terms.

197

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

3. Other Price Risk

The investment classified as available-for-sale financial assets and trading financial assets,

and the financial assets/liabilities measured at fair value and its changes be recorded into the

current gains/losses held by the Company were accounted at fair value on the balance sheet

date., For the equity investment of other listed companies holding by the Company, the

management considers that the market price risks are acceptable. Refer to Notes VI, 11

Available-for-sale financial assets for equity investment of other listed companies holding by

the Company.

2 Credit Risk

On June 30, 2017, the biggest credit risk exposure may lead to the financial assets losses of

the Company was mainly from the one party fail to perform its obligation, which included:

book amount recognized in consolidated balance sheet: for financial instruments measured at

fair value, the book value reflect its risk exposure, but not the biggest one, the biggest risk

exposure will change along with the change of future fair value.

In order the reduce the credit risk, the Company establish a group response for recognizing

line of credit, conducting credit approval and other monitor procedures to ensure that the

necessary measures were used to recycle expired claims. In addition, the Company at each

balance sheet date, review every single receivables recycling situation, to ensure that the

money unable to recycle withdrawn provision for bad debt fully. Thus, the Company

management believed that have assume the credit risk the Company shouldered had been

greatly reduced.

The company’s working capital was in bank with higher credit rating, so credit risk of

working capital was low.

3. Liquidity Risk

When managing liquidity risk, the Company maintained the management, so credit rat

supervising the sufficient cash and cash equivalents to meet the operating demand of the

Company and reduce the influence of the fluctuation of cash flow.

X. The Disclosure of the Fair Value

1. Closing Fair Value of Assets and Liabilities Calculated by Fair Value

Item Closing fair value

198

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Fair value Fair value

Fair value

measurement measurement

measurement items Total

items at level items at level

at level 1

2 3

I. Consistent fair value measurement

(I) Financial assets calculated by fair value

and changes record into current profits or

losses

1. Trading financial assets 168,120,900.00 — — 168,120,900.00

2. Income generated from the forward

855,984.37 — — 855,984.37

purchase agreement

3. Foreign exchange option 5,052,542.28 5,052,542.28

(II) Available-for-sale financial assets

1. Debt instruments investment — — — —

2. Equity instrument investment 40,665,244.82 — — 40,665,244.82

3. Other — — — —

Total assets of consistent fair value

214,694,671.47 — — 214,694,671.47

measurement

(I)Transaction financial liabilities

1. Losses generated from the forward

purchase agreement 20,181,325.74 — — 20,181,325.74

Total liabilities of consistent fair value

measurement 20,181,325.74 — — 20,181,325.74

Total assets inconsistently measured at fair

value — — — —

Total liabilities inconsistent measured at

fair value — — — —

2. Market Price Recognition Basis for Consistent and Inconsistent Fair Value

Measurement Items at Level 1

As of the end of Reporting Period, the Company in line with the difference of DF forward

foreign exchange purchase cost (DF base price on balance sheet date) on assets balance sheet

and agreement DF forward foreign exchange purchase cost (DF exchange rate agreed)

recognized as losses or profits

By the end of Reporting Period, for the 13,155,000 shares of Refond stock held by the

199

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

company, their final fair value was calculated and determined to be RMB168,120,900.00,

according to closing price of RMB12.78 for each share on June 30, 2017; for the 6,760,900

shares of Hunan VARY stock held by the company, their final fair value was calculated and

determined to be RMB40,633,009.00, according to closing price of RMB6.01 for each share

on June 30, 2017; for the 348 shares of Changlan Cable Accessories stock held by the

company, their final fair value was calculated and determined to be RMB6,270.96, according

to buying price of RMB18.02 for each share on June 7, 2017, and unlisted transaction had no

fair value on June 30; for the 350 shares of Konfoong Materials stock held by the company,

their final fair value was calculated and determined to be RMB6,681.5, according to closing

price of RMB19.09 for each share on June 30, 2017; for the 313 shares of MeiG Smart stock

held by the company, their final fair value was calculated and determined to be

RMB7,155.18, according to closing price of RMB 22.86 for each share on June 30, 2017; for

the 844 shares of Jinlongyu stock held by the company, their final fair value was calculated

and determined to be RMB5,232.80, according to closing price of RMB6.2 for each share on

June 19, 2017, and unlisted transaction had no fair value on June 30; for the 141 shares of

Huning Elevator Parts stock held by the company, their final fair value was calculated and

determined to be RMB2,456.22, according to closing price of RMB17.42 for each share on

June 30, 2017; for the 211 shares of Daye Intelligent stock held by the company, their final

fair value was calculated and determined to be RMB2,306.23, according to closing price of

RMB10.93 for each share on June 28, 2017, and unlisted transaction had no fair value on

June 30; for the 263 shares of Fuman Electronics stock held by the company, their final fair

value was calculated and determined to be RMB2,132.93, according to closing price of RMB

8.11 for each share on June 29, 2017, and unlisted transaction had no fair value on June 30.

XI. Related Party and Related Transaction

1. Information of Parent Company

Proportion of share Proportion of voting

Registration Registered held by parent rights owned by parent

Name of parent company Nature of business

place capital company against the company against the

Company (%) Company (%)

Shenzhen OCT East Co., Tourism, real estate, RMB11.30

Shenzhen 29.99 29.99

Ltd. electronics industry billion

Notes: the final control party of the Company is State-owned Assets Supervision and

Administration Commission

200

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

2. Information of Subsidiary of the Company

For more details, please refer to Note VIII. 1. Equity in Subsidiary.

3. Information on the Associated Enterprises of the Company

For more details, please refer to Note VIII. 2. Equity in Associated Enterprises. The

information on other joint ventures or associated enterprises with balance in related

transactions made with the Company in this year or before the reporting period was as

follows:

Name of joint ventures or associated enterprises Relationship

Shenzhen Konka Information Network Co., Ltd. Associated enterprise

Shenzhen Dekang Electronic Co., Ltd. Associated enterprise

Zhuhai Jinsu Plastics Co., Ltd. Associated enterprise

Shanghai Konka Green Technology Co., Ltd. Associated enterprise

Shenzhen Konka Intelligent Appliance Technology Co.,

Associated enterprise

Ltd.

Anhui Konka Green Lighting Technology Co., Ltd. Associated enterprise

Shenzhen Zhongbing Konka Technology Co., Ltd. Associated enterprise

Shenzhen Konka Precision Mould Manufacturing Co.,

Associated enterprise

Ltd.

Kunshan Branch of Shenzhen Konka Precision Mould

Subsidiary of associated enterprise

Manufacturing Co., Ltd.

Chuzhou Branch of Shenzhen Konka Precision Mould

Subsidiary of associated enterprise

Manufacturing Co., Ltd.

Dongguan Konka Mould & plastics Co., Ltd. Associated enterprise

Dongguan Xutongda Mould & Plastics Co., Ltd. Associated enterprise

Kunshan Jielunte Mould & Plastics Co., Ltd. Associated enterprise

Chuzhou Jielunte Mould & Plastics Co., Ltd. Associated enterprise

Dongguan Jielunte Mould & Plastics Co., Ltd. Associated enterprise

Anhui Jiasen Precision Technology Co., Ltd. Associated enterprise

4. Information on Other Related Parties of the Company

Name Relationship

201

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Shenzhen OCT East Co., Ltd. Under the same actual controller

Shanghai Tianxiang OCT Investment Co., Ltd. Under the same actual controller

Anhui Huali Packaging Co., Ltd. Under the same actual controller

Shenzhen OCT Water and Power Co., Ltd Under the same actual controller

Shanghai Huali Packaging Co., Ltd Under the same actual controller

Shenzhen Huali Packing & Trading Co., Ltd Under the same actual controller

Huali Packaging (Huizhou) Co., Ltd. Under the same actual controller

Suzhou Huali Environmental Packing Technology Co.,

Under the same actual controller

Ltd.

Shenzhen Konka Video & Communication Systems

Under the same actual controller

Engineering Co., Ltd.

Taizhou OCT Co., Ltd. Under the same actual controller

Shenzhen OCT Real Estate Co., Ltd. Under the same actual controller

Shenzhen OCT Hotel Co., Ltd. Under the same actual controller

Shenzhen OCT Property Management Co., Ltd. Under the same actual controller

Assets Management Branch of Shenzhen OCT Under the same actual controller

Shenzhen OCT Huck Culture Co., Ltd. Under the same actual controller

Shenzhen OCT Fire Engineering Co., Ltd. Under the same actual controller

Shenzhen OCT Gas Service Station Co., Ltd. Under the same actual controller

Chongqing OCT Industrial Development Co., Ltd. Under the same actual controller

Guangdong Shunde OCT Industrial Development Co.,

Under the same actual controller

Ltd.

Shenzhen OCT Properties Company Under the same actual controller

Shenzhen OCT Gas Service Station Company Under the same actual controller

Shenzhen OCT East Theme Hotels Under the same actual controller

Shenzhen OCT East Property Management Co., Ltd. Under the same actual controller

Chengdu OCT Industrial Development Co., Ltd. Under the same actual controller

Shenzhen OCT Culture-oriented Travel & Technology

Under the same actual controller

Co., Ltd.

Shenzhen OCT Sea View Hotel Co., Ltd. Under the same actual controller

Kunshan Branch of Shenzhen OCT Property Management

Under the same actual controller

Co., Ltd.

Shenzhen OCT Economic Development Corporation Under the same actual controller

Shenzhen OCT East Property Management Company Under the same actual controller

202

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Jiangxi Youshi Xinrong Culture & Communication Co., The company controlled by the final controller of Subsidiary’s

Ltd. minority shareholders

Charm Media Co. , Ltd. The final controller of minority shareholders of subsidiary

Guoguang Oriental Network (Beijing) Co., Ltd. Shareholder of associated enterprise

Shenzhen Refund Optoelectronics Co., Ltd. Ex-associated enterprise

5. List of Related-party Transactions

(1) Information on Acquisition of Goods and Reception of Labor Service (unit: ten thousand

Yuan)

① Information on acquisition of goods and reception of labor service

Same period of last

Related party Content Reporting Period

year

Shenzhen Refund Optoelectronics Co., Ltd. Purchase of materials 77,564,260.96 54,995,087.43

Chuzhou Jielunte Mould & Plastics Co., Ltd. Purchase of materials 53,840,442.74 68,600,936.93

Guoguang Oriental Network (Beijing) Co., Ltd. Purchase of products 81,484,429.91 —

Dongguan Konka Mould & Plastics Co., Ltd. Purchase of materials 5,254,342.08 23,984,888.98

Anhui Huali Packing Co., Ltd. Packing 24,527,123.44 13,316,909.09

Shenzhen Konka Precision Mould

Purchase of materials 0.00 14,541,172.21

Manufacturing Co., Ltd.

Shenzhen Konka Information Network Co., Ltd. Purchase of materials/others 2,585,675.21 —

Huali Packing (Huizhou) Co., Ltd. Purchase of materials 4,195,331.54 4,650,789.23

Anhui Jiasen Precision Technology Co., Ltd. Purchase of materials 11,286,323.82 —

Suzhou Huali Environmental Packing

Purchase of materials 7,278,815.34 —

Technology Co., Ltd.

Shanghai Huali Packing Co., Ltd. Purchase of materials 41,734.51 6,150,994.50

Shenzhen Konka Intelligent Appliance

Purchase of products 799,033.15 —

Technology Co., Ltd.

Shenzhen OCT Water and Power Co., Ltd Utilities 2,244,889.77 1,175,261.15

Kunshan Jielunte Mould & Plastics Co., Ltd. Purchase of materials 34,843.00 —

Chain Kingdom Co.,Limited Service charge 0.00 1,447,315.77

Kunshan Branch of Shenzhen OCT Property Service charge for property

1,262,436.01 —

Management Co., Ltd. management

Charm Media Co. , Ltd. Advertising expense 6,415,094.34

Dongguan Jielunte Mould & Plastics

Purchase of materials 2,014,700.50 —

Technology Co., Ltd.

Shenzhen OCT East Property Management

Service charge 28,043.88 —

Company

Shenzhen OCT Real Estate Co., Ltd. Service charge of 10,000,000.00 —

203

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Same period of last

Related party Content Reporting Period

year

engineering

②Information of sales of goods and provision of labor service

Same period of

Related party Content Reporting Period

last year

Guoguang Oriental Network (Beijing) Co., Ltd. Sales of products 80,608,719.74 —

Shenzhen Refund Optoelectronics Co., Ltd. Sales of products 11,997,198.94 14,403,685.82

Lease service charge and

Dongguan Konka Mould & Plastics Co., Ltd. 3,906,945.24 5,867,443.85

sales of materials

Charm Media Co. , Ltd. Advertising expense 0.00 11,320,754.76

Service charge and sales of

Shenzhen Zhongbing Konka Technology Co., Ltd. 1,233,572.79 —

products

Shenzhen Konka Information Network Co., Ltd. Sales of products 2,648,776.15 —

Dongguan Xutongda Mould & Plastics Co., Ltd. Lease service charge 3,359,016.16 4,306,505.64

Shenzhen Konka Intelligent Appliance Technology Service charge and sales of

147,369.23 —

Co., Ltd. products

Technical service fees and

Anhui Konka Green Lighting Technology Co., Ltd. 216,246.39 2,798,336.32

sales of materials

Chongqing OCT Industrial Development Co., Ltd. Sales of display screens 5,681,875.20 —

Shenzhen OCT East Co., Ltd. Maintenance service 1,417,777.78 35,400.00

Shenzhen OCT Real Estate Co., Ltd. Sales of display screens 2,564.10 —

Shenzhen Konka Video & Communication Systems

Maintenance service 1,051,681.35 —

Engineering Co., Ltd.

Happy Valley Branch of Tianjin OCT Industrial Co.,

Maintenance service 1,203,179.49 —

Ltd.

Shanghai Tianxiang OCT Investment Co., Ltd. Maintenance service 108,262.11 63,333.33

Shenzhen OCT Hotel Co., Ltd. Maintenance service 51,282.05 —

Shenzhen OCT Culture-oriented Travel Technology

Maintenance service 87,170.94 —

Co., Ltd.

Shenzhen Splendid China Development Co., Ltd. Sales of display screens 21,367.52 —

Shenzhen Crowne Plaza Hotel Sales of display screens 2,564.10 —

Shenzhen OCT Sea View Hotel Co., Ltd. Maintenance service 35,724.79 —

Shenzhen Konka Precision Mould Manufacturing Co.,

Maintenance service 4,302,721.71 179,645.20

Ltd.

Taizhou OCT Co., Ltd. Sales of display screens 7,948.72 —

(2) Borrowing and Lending of Related Parties

204

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Related party Amount Start date Maturity date notes

Borrowing:

The interest rate was

OCT 1,600,000,000.00 01/11/2017 09/28/2017

3.9%

The interest rate was

OCT 900,000,000.00 03/19/2017 11/26/2017

4.35%

The interest rate was

OCT 900,000,000.00 10/17/2016 07/14/2017

3.06%

The interest rate was

OCT 30,000,000.00 12/14/2016 12/13/2019

4.75%

Notes: The current interest expenses confirmed with OCT were RMB63,825,197.54.

(4) Related-party Guarantee

The Company severed as the guarantee

Actual using Execution

Guarantee amount

Secured party Currency amount Start date End date accomplished

(RMB’0,000)

(RMB’0,000) or not

Anhui

RMB 6,000.00 4,440.00 07/01/2016 07/01/2017 No

Tongchuang

Anhui Konka

RMB 10,000.00 7,200.00 10/26/2016 07/13/2017 No

(Note ①)

Konka E-display

RMB 2,000.00 646.92 07/01/2016 07/01/2017 No

(Note ②)

Telecommunicati

RMB 50,000.00 13,119.49 09/21/2016 09/21/2017 No

on Technology

Hong Kong

USD 500 500 10/20/2016 10/20/2017 No

Konka

Hong Kong

USD 3,500.00 3,500.00 11/07/2016 11/07/2017 No

Konka

Hong Kong

USD 1,000.00 1,000.00 04/24/2017 04/23/2018 No

Konka

Hong Kong

USD 2,000.00 2,000.00 05/22/2017 05/18/2018 No

Konka

Hong Kong

USD 1,000.00 1,000.00 06/12/2017 06/11/2018 No

Konka

Notes: ①The minority shareholders of Anhui Konka, Chuzhou State-owned Assets

205

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Operation Co., Ltd. provided 22% counter-guarantee to the limit amount of guarantee of the

Company.

②Shenzhen Konka Yi Capital Investment Partnership (Limited partnership) provided 40%

counter-guarantee to the limit amount of guarantee of the Company.

The Company served as the secured party

Guarantee amount

Guarantee Currency Start date End date Execution accomplished or not

(RMB’0,000)

Wu Guoren, Xiao

USD 4,000.00 10/17/2016 10/16/2017 No

Yongsong

Note: the subsidiary, Zhongkang Supply Chain Management Co., Ltd. obtained the

borrowing of USD 40 million from Hong Kong Konka Co., Ltd. The corresponding natural

persons of Zhongkang Supply Chain, minority shareholders, Wu Guoren (25%) and Xiao

Yongsong (24%) provided equity pledge guarantee for this loan. The third-party natural

person provided the house property mortgage guarantee as the third party guarantor.

(5) Rewards for the Key Management Personnel

Item Reporting Period Same period of last year

Rewards for the key management

RMB4,109,400 RMB4,086,800

personnel

6. Receivables and Payables of Related parties

(1) Receivables

Closing balance Opening balance

Name o f item

Book balance Bad debt provision Book balance Bad debt provision

Accounts receivable

Guoguang Oriental Network (Beijing)

66,382,152.00 1,327,643.04 61,566,084.52 1,231,321.69

Co., Ltd.

Shenzhen Konka Information Network

20,755,610.90 415,112.22 22,708,250.40 456,890.30

Co., Ltd.

Dongguan Xutongda Mould & Plastics

12,205,388.44 244,107.77 16,770,384.94 665,277.05

Co., Ltd.

Shenzhen Refund Optoelectronics Co.,

2,560,469.44 51,209.39 16,006,373.88 320,127.48

Ltd.

Shanghai Konka Green Lighting

6,263,614.12 1,252,722.82 7,463,614.12 1,627,495.78

Technology Co., Ltd.

206

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance Opening balance

Name o f item

Book balance Bad debt provision Book balance Bad debt provision

Shenzhen Zhongbing Konka Technology

189,668.62 3,793.37 6,236,403.32 124,728.07

Co., Ltd.

Dongguan Konka Mould & Plastics Co.,

2,165,092.05 43,301.84 4,376,574.40 179,174.65

Ltd.

Chongqing OCT Industrial Development

3,522,682.24 70,453.64 546,416.80 10,928.34

Co., Ltd.

Shenzhen Konka Precision Mould

1,132,419.90 22,648.40 287,956.74 5,759.13

Manufacturing Co., Ltd.

Beijing Century OCT Industry Co., Ltd. 270,000.00 5,400.00 270,000.00 5,400.00

Shanghai Tianxiang OCT Investment Co.,

95,000.00 1,900.00 89,733.33 2,586.67

Ltd.

Guangdong Shunde OCT Industrial

0.00 74,880.00 1,497.60

Development Co., Ltd.

Shenzhen OCT Huck Culture Co., Ltd. 3,297.39 65.95 55,281.17 2,665.14

Shenzhen Konka Intelligent Appliance

0.00 35,980.00 719.60

Technology Co., Ltd.

Shenzhen OCT East Co., Ltd. 530,947.11 10,618.94 6,000.00 120.00

Total 116,076,342.21 3,448,977.39 136,493,933.62 4,634,691.50

Notes receivable:

Dongguan Konka Mould & Plastics Co.,

0.00 2,473,998.29 —

Ltd.

Dongguan Xutongda Mould & Plastics

0.00 800,000.00 —

Co., Ltd.

Total 0.00 0.00 3,273,998.29 —

Payment in advance:

Dongguan Konka Mould & Plastics Co.,

25,353,644.56 507,072.89 16,230,337.81 324,606.76

Ltd.

Total 25,353,644.56 507,072.89 16,230,337.81 324,606.76

Other accounts receivable:

Jiangxi Youshi Xinrong Culture &

0.00 0.00 22,260,000.00 445,200.00

Communication Co., Ltd. (Note)

Shenzhen Konka Video & Communication

18,115,952.51 8,387,197.52 18,115,952.51 8,387,197.52

Systems Engineering Co., Ltd.

Shenzhen OCT Properties Company 1,053,706.86 1,033,907.60 1,053,706.86 1,033,907.60

207

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance Opening balance

Name o f item

Book balance Bad debt provision Book balance Bad debt provision

Shenzhen OCT Water & Power Co., Ltd. 753,553.73 15,071.07 801,006.26 16,020.13

Assets Management Branch of Shenzhen

0.00 0.00 145,638.00 7,281.90

OCT

Chongqing OCT Industrial Development

220,000.00 4,400.00 130,540.69 2,610.81

Co., Ltd.

Shenzhen OCT Gas Service Station

80,000.00 80,000.00 80,000.00 80,000.00

Company

Shenzhen OCT Property Management

778,305.14 88,947.15 77,402.65 74,929.10

Co., Ltd.

Beijing Century OCT Industry Co., Ltd. 0.00 0.00 50,000.00 1,000.00

Shenzhen OCT East Theme Hotels 0.00 0.00 49,640.00 992.80

OCT 0.00 0.00 49,626.92 992.54

Shenzhen Konka Information Network

0.00 0.00 17,940.73 358.81

Co., Ltd.

Shenzhen OCT East Co., Ltd. 5,000.00 100.00 5,000.00 100.00

Dongguan Konka Mould & Plastics Co.,

4,448.00 889.60 4,448.00 889.60

Ltd.

Shenzhen OCT East Property

3,000.00 60.00 3,000.00 60.00

Management Co., Ltd.

Shanghai Tianxiang OCT Investment Co.,

0.00 0.00 922.33 18.45

Ltd.

Total 21,013,966.24 9,610,572.94 42,844,824.95 10,051,559.26

(2) Payables

Name of item Closing balance Opening balance

Accounts payable:

Shenzhen Refond Optoelectronics Co., Ltd. 30,043,130.69 27,963,779.92

Chuzhou Jielunte Mould & Plastics Co., Ltd. 29,499,985.38 25,461,077.95

Shenzhen Konka Video & Communication Systems

17,134,148.23

Engineering Co., Ltd.

Anhui Huali Packing Co., Ltd. 18,174,005.86 15,811,189.21

Guoguang Oriental Network (Beijing) Co., Ltd. 67,312,882.13 13,907,425.83

Shenzhen Shangyongtong Investment Development Co.,

9,543,100.00 9,543,100.00

Ltd.

Shenzhen Konka Information Network Co., Ltd. 310,000.00 9,131,218.97

Suzhou Huali Environmental Packing Technology Co., 4,672,418.54 4,784,497.70

208

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Name of item Closing balance Opening balance

Ltd.

Anhui Jiasen Precision Technology Co., Ltd. 8,368,055.84 4,647,480.06

Huali Packing (Huizhou) Co., Ltd. 2,614,248.15 3,538,318.14

Shenzhen Huali Packing & trading Co., Ltd. 1,078,005.09 1,294,334.74

Dongguan Konka Mould & Plastics Co., Ltd. 1,540.19 1,017,067.85

Shenzhen Konka Intelligent Appliance Technology Co.,

721,103.02 682,275.95

Ltd.

Shenzhen Precision Mould Manufacturing Co., Ltd. 1,132,419.90 449,367.83

Shenzhen Dekang Electronics Co., Ltd. 358,929.03 358,929.03

Shanghai Huali Packing Co., Ltd. 1,259.03 321,039.97

Dongguan Jielunte Mould & Plastics Co., Ltd. 899,659.44 155,760.53

Kunshan Jielunte Mould & Plastics Co., Ltd. 10,915.86 61,472.60

Shenzhen OCT Culture-oriented Travel Technology Co.,

6,900.00 59,320.00

Ltd.

Total 174,748,558.15 136,321,804.51

Notes payable:

Chuzhou Jielunte Mould & Plastics Co., Ltd. 65,345,962.63

Shenzhen Refund Optoelectronics Co., Ltd. 12,623,941.41 45,043,301.91

Anhui Huali Packing Co., Ltd. 8,458,014.55 12,369,348.43

Anhui Jiasen Precision Technology Co., Ltd. 5,626,406.69

Shenzhen Konka Precision Mould Manufacturing Co.,

3,452,680.80

Ltd.

Suzhou Huali Environmental Packing Technology Co.,

2,448,292.14 3,152,101.04

Ltd.

Huali Packing (Huizhou) Co., Ltd. 1,815,156.91 3,104,985.16

Dongguan Konka Mould & Plastics Co., Ltd. 1,462,156.55 2,855,530.14

Shanghai Huali Packing Co., Ltd. 2,801,506.81

Kunshan Jielunte Mould & Plastics Co., Ltd. 2,594,086.07

Kunshan Branch of Shenzhen Konka Precision Mould

2,503,959.47

Manufacturing Co., Ltd.

Zhuhai Jinsu Plastics Co., Ltd. 1,000,000.00

Charm Media Co. , Ltd. 275,291.47

Dongguan Jielunte Mould & Plastics Co., Ltd. 702,203.57

Total 27,509,765.13 150,125,160.62

Accounts received in advance:

209

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Name of item Closing balance Opening balance

Dongguan Konka Mould & Plastics Co., Ltd. 22,537,909.18 23,468,903.76

Shenzhen Konka Video & Communication Systems

15,357,854.41 15,926,323.73

Engineering Co., Ltd.

Zhonglian Datong Co., Ltd. 955,155.90 232,667.70

Shenzhen OCT East Theme Hotels 0.00 187,888.00

Shenzhen OCT Sea View Hotel Co., Ltd. 0.00 35,299.00

Anhui Konka Green Lighting Technology Co., Ltd. 0.00 4,063.72

Total 38,850,919.49 39,855,145.91

Other accounts payable:

Shenzhen Konka Information Network Co., Ltd. 750,000.00 9,021,630.77

Anhui Huali Packing Co., Ltd. 1,187,000.00 1,267,000.00

Kunshan Branch of Shenzhen OCT Property

0.00 1,217,879.59

Management Co., Ltd.

Shenzhen OCT Property Management Co., Ltd. 0.00 1,073,975.09

Shenzhen Zhonglian Datong Supply Chain Management

0.00 992,890.82

Consulting Co., Ltd.

Shenzhen Refund Optoelectronics Co., Ltd. 301,135.00 807,135.00

Shenzhen Konka Intelligent Appliance Technology Co.,

0.00 686,375.00

Ltd.

Shanghai Huali Packing Co., Ltd. 222,000.00 222,000.00

Shenzhen OCT Water & Power Co., Ltd. 0.00 145,500.00

Shenzhen OCT Economic Development Corporation 105,000.00 105,000.00

Anhui Konka Green Lighting Technology Co., Ltd. 0.00 48,670.70

Shenzhen Konka Precision Mould Manufacturing Co.,

0.00 19,440.00

Ltd.

Shenzhen Tianyilian Technology Co., Ltd. 10,139.00 10,000.00

Total 2,575,274.00 15,617,496.97

Interest payable:

5,270,833.33 43,541.67

OCT

5,270,833.33 43,541.67

Total

XII. Commitments and Contingency

1. Significant Commitments

(1) Capital Commitment

210

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Closing balance Opening balance

Commitments signed but hasn’t been

recognized in financial statements

-- Commitment for constructing and —

purchasing long-term assets

457,003,294.00 91,710,250.89

- Contract with large amount

— —

- Foreign investment commitments

457,003,294.00 91,710,250.89

Total

(2) Operating Lease Commitments

As of the end of balance sheet date, the irrevocable operating lease commitments that the

Company signed were as followed:

Item Closing balance Opening balance

Minimum lease payments of irrevocable operating

lease

1 year after balance date 15,669,396.70 20,712,196.63

2 year after balance date 11,680,611.91 10,195,499.08

3 year after balance date 8,148,431.95 5,192,714.87

Future years 1,391,040.43 1,434,105.28

Total 36,889,480.99 37,534,515.86

2. Contingencies

(1) Contingent liabilities and financial effects caused by pending litigation or arbitration

①In May, 2013, the company’s subsidiary, Kunshan Konka entrusted Ningbo United to ship

goods from Shanghai to Genoa, Italy, and Econolines Limited was the carrier. After the

goods arrived at the destination port in Italy, due to releasing goods without B/L, and because

that the customer of Kunshan Konka, MOTOM ELECTRONICS GROUP SPA (hereinafter

referred to as the "MEG") didn't pay the full payment to Kunshan Konka after receiving the

goods, the amount in arrear reached USD 1,100,000.00. Kunshan Konka filed a suit to

Shanghai Maritime Court on August 15, 2013, requesting Econolines Limited and Ningbo

United to jointly compensate USD 1,099,423.52 and its interest to Kunshan Konka and bear

the case's acceptance fee and property preservation application fee.

On May 26, 2014, Shanghai Maritime Court made the first-instance judgment, which ordered

211

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Econolines Limited to compensate USD 1,099,423.52 and its interest to Kunshan Konka.

Ningbo United undertook the joint compensation liability. The case's acceptance fee and

property preservation application fee were jointly bore by Econolines Limited and Ningbo

United. In June, 2014, Ningbo United and Econolines Limited refused to accept and appealed

to Shanghai Higher People's Court, requiring to rescind the first-instance judgment. In the

second trial, because Kunshan Konka had received EUR 100 thousand from the overseas

consignee, it deducted the corresponding amount from the goods payment claimed by

Ningbo United and Econolines Limited. On July 16, 2015, Shanghai Higher People's Court

made the judgment that Econolines Limited compensated the goods loss of USD 990, 253.50

(discounted by the middle of the euro against the dollar exchange rate of People's Bank of

China on July 16, 2015) to Kunshan Konka and bore the litigation expense, and Ningbo

United bore the joint liability. In the execution stage, Kunshan Konka received the execution

funds of RMB 592,200 (USD 17,475) of "Ningbo United" enforced by Ningbo Marine Court.

By December 31, 2016, the credit receivable of Kunshan Konka should be USD 855,378.57.

This case is in the compulsory execution stage at present.

②Konka (Nanchang) Co., Ltd. litigated and applied for property preservation to Tengda

Electric Appliance Co., Ltd. due to the contract disputes in 2015. Nanchang Intermediate

People's Court ruled to freeze the bank deposit of RMB 9,918,725.43 of Tengda Electric

Appliance Co., Ltd. and closed down its 5 house properties. In the follow-up stage, we

changed the add-on interest of the original sue amount to RMB 595,123.50 based on the

actual conditions, which is accepted by the court. During the period, Tengda Electric

Appliance Co., Ltd. filed an objection to the jurisdiction of the case. Nanchang Intermediate

People's Court overruled the jurisdiction objection application of Tengda Electric Appliance

Co., Ltd. Tengda Electric Appliance Co., Ltd. was unsatisfied with the judgment result and

appealed to Jiangxi Superior People's Court. In January, 2016, Jiangxi Superior People's

Court overruled its jurisdiction objection appeal and upheld the original ruling.

In March, 2016, in the trial process of the case in Nanchang Intermediate People's Court,

Konka (Nanchang) Co., Ltd. received the notice of Xinyu Intermediate People's Court on

ruling to accept the bankruptcy and liquidation case of Tengda Electric Appliance Co., Ltd.

and designate an administrant to conduct the bankruptcy and liquidation for Tengda Electric

Appliance Co., Ltd. On March 16, Konka (Nanchang) Co., Ltd. received the notice of

Nanchang Intermediate People's Court on suspending the case trial. In May, 2017, Konka

(Nanchang) Co., Ltd. received the civil ruling paper of Nanchang Intermediate People's

Court, ruling to relieve the seal of the property of Tengda Electric Appliance Co., Ltd. and

212

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

the freeze of Gome acquisition payment and relieve the seal of the property provided by our

company for guarantee. At present, the creditor's right declaring data of Konka (Nanchang)

Co., Ltd. have been submitted to the bankruptcy administrator, and the declared claim

amount is RMB 12,051,251.40. The Tengda Electric Appliance Co., Ltd. is in bankruptcy

liquidation.

(2) Possible liabilities formed for providing debt guarantee for other institutions and their

financial impacts

①The company signed the guarantee contract (No. 16czA0030-a-XCYZBZD2016) with

China CITIC Bank Chuzhou Branch on July 1, 2016, providing credit guarantee of RMB

60,000,000.00 to Anhui Tongchuang International Trade Co., Ltd. from July 1, 2016 to July 1,

2017. The credit line was mainly used to open and accept the L/C of Anhui Tongchuang

International Trade Co., Ltd. and obtain the financing credit and other daily businesses from

the bank. The guarantee credit had been used RMB 44,400,000.00 by June 30, 2017. The

minority shareholder of Anhui Tongchuang International Trade Co., Ltd. -- Chuzhou

Tongchuang Investment Construction Co., Ltd. provided 50% of counter guarantee for our

company's guarantee amount.

② On October 26, 2016, the Company signed the guarantee contract with Bank of China

Chuzhou Branch and provided RMB 100,000,000.00 of credit line to Anhui Konka, a

sub-branch of the Company. The credit period was Oct. 26, 2016 ~ July 13, 2017. The credit

line can be used for Anhui Konka to issue the letter of credit, make acceptance bill and obtain

financing credit from the bank etc. By June 30, 2017, the credit line had been used RMB

72,000,000.00. A few shareholders in Anhui Konka, state-owned assets operation limited

companies in Chuzhou, provide 22% of counter guarantee for the Company’s credit line.

③The Company applied for RMB 6,000,000,000.00 of comprehensive credit line in Bank of

China Fukuda Branch on September 21, 2016. The Company made RMB 1,300,000,000.00

of bank acceptance for pledge guarantee. On September 21, 2016, the Company provided

RMB 500,000,000.00 from total RMB 6,000,000,000.00 comprehensive credit line to the

sub-branch for communication technology. Communication technology shall be jointly and

severally liable for the comprehensive credit. The credit period was Sept. 21, 2016 ~ Sept. 21,

2017. The credit line is mainly used for communication technology to obtain the financing

credit from the bank etc. By June 30, 2017, the credit line had been used RMB

131,194,900.00.

④ On October 20, 2016, the Company applied for opening 5,000,000.00 dollars of letter of

guarantee in China Minsheng Banking Shenzhen Branch. The letter of guarantee could be

213

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

used for Hong Kong Konka Sub-branch to obtain the financing credit. The credit period was

Oct. 20, 2016 ~ Oct. 20, 2017. By June 30, 2017, Hong Kong Konka Sub-branch had

obtained 5,000,000.00 dollars of loan from Bank of China (Hong Kong) Co., Ltd.

⑤On July 1, 2016, the Company signed the guarantee contract numbered

“07308BY20168072” with Bank of Ningbo Shenzhen Branch and provided RMB

20,000,000.00 of credit line to Konka Yishijie. The credit period was July 1, 2016 ~ July 1,

2017. The credit line could be used for Konka Yishijie to open a letter of credit, accept and

obtain the financing credit from the bank etc. By June 30, 2017, the credit line had been used

RMB 6,469,200.00. A few shareholders of Konka Yishijie, Shenzhen Konka Yi Capital

Investment Partnerships Enterprises (limited partnership), provided 40% of counter

guarantee for the Company’s credit line.

⑥On November 7, 20016, the Company applied for opening 35,000,000.00 dollars of letter

of guarantee in China Minsheng Banking Shenzhen Branch. The letter of guarantee could be

used for Hong Kong Konka Sub-branch to obtain the financing credit. The credit period was

November 7, 2016 ~ November 7, 2017. By June 30, 2017, Hong Kong Konka had obtained

35,000,000.00 dollars from Bank of China (Hong Kong) Co., Ltd.

⑦ On April 24, 2017, the Company applied for opening 10,000,000.00 dollars of letter of

guarantee in Agricultural Bank of China Shenzhen OTC Sub-branch. The letter of guarantee

could be used for Hong Kong Konka to obtain the financing loan from the bank. The credit

period was April 24, 2017 ~ April 23, 2018. By June 30, 2017, Hong Kong Konka had

obtained 10,000,000.00 dollars from Bank of China (Hong Kong) Co., Ltd.

⑧On May 22, 2017, the Company applied for opening 20,000,000.00 dollars of letter of

guarantee in Agricultural Bank of China Shenzhen OTC Sub-branch. The letter of guarantee

could be used Hong Kong Konka to obtain the financing credit from the bank. The credit

period was May 22, 2017 ~ May 18, 2018. By June 30, 2017, Hong Kong Konka had

obtained 20,000,000.00 dollars from Bank of China Hong Kong) Co., Ltd.

⑨On June 12, 2017, the Company applied for opening 10,000,000.00 dollars of letter of

guarantee in Agricultural Bank of China Shenzhen OTC Sub-branch. The letter of guarantee

could be used Hong Kong Konka to obtain the financing credit from the bank. The credit

period was June 12, 2017 ~ June 11, 2018. By June 30, 2017, Hong Kong Konka had

obtained 10,000,000.00 dollars from Bank of China Hong Kong) Co., Ltd.

⑩Kunshan Kangsheng, a sub-branch of the Company, signed the bank and enterprise

cooperation agreement on new house loan business with Agricultural Bank of China Corp.

Ltd in 2016. The Company provided the liability guarantee for the personal housing loan

214

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

issued by the bank for the house purchaser. The credit period was from the house loan issuing

day to the house ownership certificate day. It shall continue to the completion of mortgage

registration formalities, and the house purchaser shall be the mortgagee at the same time. The

Company shall pay 3% of house loan issued by the bank for the house purchaser as the cash

deposit. By June 30, 2017, Kunshan Konka provided RMB 233,632,522.00 of credit line for

the house purchaser’s loan. The deposit fund balance was RMB 9,142,975.66.

Kunshan Kangsheng, a sub-branch of the Company, signed the bank and enterprise

cooperation agreement on new house loan business with China Construction Bank Kunshan

Branch in 2016. The Company provided the liability guarantee for the personal housing loan

issued by the bank for the house purchaser. The credit period was from the house loan issuing

day to the house ownership certificate day. It shall continue to the completion of mortgage

registration formalities, and the house purchaser shall be the mortgagee at the same time. The

Company shall pay 3% of house loan issued by the bank for the house purchaser as the cash

deposit. By June 30, 2017, Kunshan Konka provided RMB 147,688,505.00 of credit line for

the house purchaser’s loan. The deposit fund balance was RMB 4,430,655.15.

Kunshan Kangsheng, a sub-branch of the Company, signed the bank and enterprise

cooperation agreement on new house loan business with Kunshan Rural Commercial Bank

Zhouzhuang Branch in 2016. The Company provided the liability guarantee for the personal

housing loan issued by the bank for the house purchaser. The credit period was from the

house loan issuing day to the house ownership certificate day. It shall continue to the

completion of mortgage registration formalities, and the house purchaser shall be the

mortgagee at the same time. The Company shall pay 3% of house loan issued by the bank for

the house purchaser as the cash deposit. By June 30, 2017, Kunshan Konka provided RMB

93,879,000.00 of credit line for the house purchaser’s loan. The deposit fund balance was

RMB 2,816,370.00.

XIII. Events after Balance Sheet Date

None

XIV. Other Significant Events

1. Lease

(1) The closing original price, accumulated depreciation and accumulated impairment

provision of all kinds of the rented fixed assets.

Particulars of the financing lease of the rented fixed assets, please refer to Notes VI, 14, (3)

(2) Minimum lease payment will be paid in future

215

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

The remaining lease term The minimum lease payment

301,282.02

Within 1 year (including 1 year)

144,871.84

Over 1 year and within 2 years (including 2 year)

446,153.86

Total

(3) Category of fixed assets leased by operating lease, please refer to Note VI, 14 (4)

2. The Company's subsidiary Mudanjiang Konka. Changshu Konka had finished liquidation.

3. The Company’s subsidiary Chongqing Qingjia conducted liquidation after the complement

of land purchasing and storage.

4. On February 16, 2017, the Company held the 25th meeting of the 8th Chairman of the

Board and passed Bill on Providing Entrusted Loan to Wanrong Science Technology. The

Company planned to provide Hunan Wanrong Science Technology Co., Ltd (“Wanrong

Science Technology”) with the entrusted loan not more than RMB 50,000,000.00. Entrusted

loan interest rate was the 150% of current financing institutions’ one-year loan interest rate

issued by People's Bank of China. The entrusted loan was mainly used for daily operation of

Wanrong Science Technology.

5. On March 10, 2017, the Company held the 26th meeting of the 8th Chairman of the Board

and passed Bill on Building New Factories in Dongguan. The Company planned to push the

“three-old” renovation project of Dongguan Konka factory area. The Company also planned

to raise RMB 800 million to build new factories (including color TV R&D building, main

production plant, logistics distribution warehouse, supporting staff dorms etc.) in Wulian

Village, Fenggang Town, Dongguan. At the same time, the Company carried out the

development, production and marketing of color TV and other electrical products.

6. On June 29, 2017, the Company held the 31st meeting of the 8th Chairman of the Board and

passed Resolution on listing transfer part of Kunshan Konka’s holdings. The Company

decided to transfer 51% of holdings of Kunshan Konka Electronic Household Co., Ltd in

assets and equity exchange. The listing price shall not be lower than the assessed value of

asset appraisal firm.

7. On May 28, 2015, the company signed the Comprehensive Credit Contract (No.

0005-SYQHZZD2015) with China CITIC Bank Shenzhen Citizen Center Sub-branch,

applying for credit line of RMB 400,000,000.00, which was used for loans, acceptance of

bills, discounting of bills, opening L/C, packing loans, import bill advance, outward bill

credit, opening letter of guarantee and other businesses. The credit period was May, 2017 ~

May, 2018. The credit line had been used RMB 250,000,000.00 by June 30, 2017.

216

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

8. On June 14, 2016, the company signed the Credit Line Contract (No. J2016Z15608HQC)

with China Construction Bank Shenzhen Branch, applying for credit line not more than RMB

3,570,000,000.00 at maximum. The credit period was June 14, 2016 ~ June 13, 2019. By

June 30, 2017, the credit line had been used RMB 661,127,500.00, and RMB

4,908,872,500.00 had not been used. Hereinto, the company and had agreed with China

Construction Bank Shenzhen Branch that it could apply for low risk credit not more than

RMB 2,000,000,000.00 at maximum. The credit line had not been used yet by June 30, 2017.

9. On August 11, 2016, the company signed the Comprehensive Credit Contract (No.

018-SJTZEZD2016) with China Minsheng Banking Corp. Ltd, applying for credit line not

more than RMB 500,000,000.00 at maximum, which was used for RMB business, trade

financing, import bill advance and outward bill credit, import refinance, delivery against

bank guarantee, packing loans, bill discounting and other businesses. The credit period was

August 11, 2016 ~ August 11, 2017. By June 30, 2017, the credit line had been used RMB

275,860,000.00, and RMB 224,140,000.00 had not been used.

10. On September 12, 2016, the company signed the Comprehensive Credit Agreement (No.

CN11002068781-160823) with HSBC Bank (China) Shenzhen Branch, applying for

uncommitted portfolio revolving credit not more than USD 15,000,000.00 at maximum. The

credit period was September 12, 2016 ~ September 12, 2017. By June 30, 2017, the credit

line had not been used yet.

11. On September 21, 2016, the company signed the Credit Line Agreement (No.

0000719-ZZYFEXZD2016) with Bank of China Shenzhen Futian Sub-branch, agreeing that

the company and Konka Communication which was its subsidiary provided bank acceptance

not less than RMB 1,300,000,000.00 as pledge guarantee to get the comprehensive credit line

not more than RMB 6,000,000,000.00. Hereinto, the company was the credited party, and the

Communication Technology Company was the authorized party that could draw the money.

The credit period was September 21, 2016 ~ September 21, 2017. By June 30, 2017, the

credit line had been used RMB 3,939,983,280.33, and RMB 2,060,016,719.67 had not been

used.

12. On September 30, 2016, the company agreed with Industrial and Commercial Bank of

China Shenzhen OTC Sub-branch to apply for credit line not more than RMB

2,200,000,000.00 at maximum. The credit period was September 30, 2016 ~ September 30,

2017. By June 30, 2017, the credit line had been used RMB 1,598,700,300.00, and RMB

601,299,700.00 had not been used.

13. On October 12, 2016, the company signed the Credit Line Agreement (No.

217

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

A596201609260001-PY(SZ)ZZD) with Ping An Banking Corp. Ltd Head Office Sales

Department, applying for credit line not more than RMB 400,000,000.00 at maximum, which

was used for liquidity loans, opening bank acceptances, opening import L/C, opening

domestic L/C, import bill advance and outward bill credit, import and export refinance,

opening financing guarantee and other businesses. The credit period was October 12, 2016 ~

October 12, 2017. By June 30, 2017, the comprehensive credit line had been used RMB

400,000,000.00.

14. On February 28, 2017, the company applied for credit line of RMB 1,200,000,000.00

from Agricultural Bank of China Shenzhen OCTOBER Sub-branch, for loans, acceptance of

bills, discounting of bills, opening L/C, packing loans, import bill advance, outward bill

credit, opening letter of guarantee and other businesses. The credit period was February 28,

2017 ~ February 28, 2018. By June 30, 2017, the comprehensive credit line had been used

RMB 604,610,000.00, and RMB 595,390,000.00 had not been used.

15. On April 11, 2017, the company applied for credit line of RMB 500,000,000.00 from

Bank of Communications Shenzhen OCTOBER Sub-branch, for loans, acceptance of bills,

discounting of bills, opening L/C, packing loans, import bill advance, outward bill credit,

opening letter of guarantee and other businesses. The credit period was April 11, 2017 ~

April 11, 2019. By June 30, 2017, the credit line had not been used yet.

16. On April 11, 2017, the company applied for credit line of RMB 500,000,000.00 from

Bank of Ningbo Shenzhen Branch, for loans, acceptance of bills, discounting of bills,

opening L/C, packing loans, import bill advance, outward bill credit, opening letter of

guarantee and other businesses. The credit period was April 11, 2017 ~ April 11, 2018. By

June 30, 2017, the credit line had been used RMB 9,070,000.00, and RMB 490,930,000.00

had not been used.

XV. Notes of Main Items in the Financial Statements of the Company

1. Accounts Receivable

(1) Accounts Receivable Disclosed by Category

Closing balance

Book balance Bad debt provision

Category

Proportio Proportion Book value

Amount n (%) Amount (%)

Accounts receivable with

— — — — —

significant single amount for

218

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance

Book balance Bad debt provision

Category

Proportio Proportion Book value

Amount n (%) Amount (%)

which bad debt provision

separately accrued

Accounts receivable

withdrawal of bad debt

provision of by credit risks

characteristics:

Group 1: aging group 1,137,172,860.75 40.41 201,098,271.61 17.68 936,074,589.14

Group 2: related party group

within the consolidation 1,613,987,991.63 57.35 — — 1,613,987,991.63

scope

Subtotal of groups 2,751,160,852.38 97.76 201,098,271.61 7.31 2,550,062,580.77

Accounts receivable with

insignificant single amount

63,021,334.66 2.24 33,619,034.22 53.35 29,402,300.44

for which bad debt provision

separately accrued

Total 2,814,182,187.04 100.00 234,717,305.83 8.34 2,579,464,881.21

(Continued)

Opening balance

Book balance Bad debt provision

Category

Proportion Proportion Book value

Amount (%) Amount (%)

Accounts receivable with

significant single amount for

— — — — —

which bad debt provision

separately accrued

219

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Opening balance

Book balance Bad debt provision

Category

Proportion Proportion Book value

Amount (%) Amount (%)

Accounts receivable

withdrawal of bad debt

provision of by credit risks

characteristics:

Group 1: aging group 1,457,500,829.10 43.04 204,973,829.53 14.06 1,252,526,999.57

Group 2: related party group

within the consolidation 1,859,065,149.92 54.89 — — 1,859,065,149.92

scope

Subtotal of groups 3,316,565,979.02 97.93 204,973,829.53 6.18 3,111,592,149.49

Accounts receivable with

insignificant single amount

70,065,431.01 2.07 36,128,381.15 51.56 33,937,049.86

for which bad debt provision

separately accrued

Total 3,386,631,410.03 100.00 241,102,210.68 7.12 3,145,529,199.35

①In the groups, accounts receivable adopting aging analysis method to withdraw bad debt

provision

Closing balance

Aging

Account receivable Bad debt provision Withdrawal proportion (%)

Within 1 year 929,687,065.77 18,593,741.32 2.00

1 to 2 years 22,891,350.59 1,144,567.53 5.00

2 to 3 years 291,468.26 58,293.65 20.00

3 to 4 years 5,346,073.44 2,673,036.72 50.00

4 to 5 years 656,540.60 328,270.30 50.00

Over 5 years 178,300,362.09 178,300,362.09 100.00

Total 1,137,172,860.75 201,098,271.61

②In the groups, accounts receivable adopting other methods to withdraw bad debt provision

220

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Closing balance

Name of the group Bad debt Withdrawal

Account receivable

provision proportion (%)

Related party group within the consolidation scope 1,613,987,991.63 — —

Total 1,613,987,991.63 — —

③The top 5 of accounts receivable with significant single amount for which bad debt

provision separately accrued

Closing balance

Name of customer Bad debt Withdrawal

Account receivable Reason

provision proportion (%)

30% impairment

Henan Broadcasting &

18,320,000.00 5,496,000.00 30 showed by

Television Network Co., Ltd.

evidence

Involving in

Tengda Electrical Appliance

8,223,935.99 4,111,968.00 50 litigation and

Co., Ltd.

disputes

Yunnan Broadcasting & 35% impairment

Television Network Group 3,674,078.28 1,285,927.40 35 showed by

Co., Ltd. evidence

Involving in

Yunmeng Zhengye Electrical

3,408,394.19 2,045,036.51 60 litigation and

Appliance Co., Ltd.

disputes

Administration of Radio, Film 31% impairment

and Television of 2,316,229.68 718,031.20 31 showed by

Heilongjiang Province evidence

Total 35,942,638.14 13,656,963.11 — —

(2) Bad Debt Provision Withdrawal, Reversed or Recovered in the Report Period

The withdrawal amount of the bad debt provision during the Reporting Period was of RMB

000; the amount of the reversed or collected part during the Reporting Period was of

RMB6,384,904.85.

(3) Top 5 of the Closing Balance of the Other Accounts Receivable Collected according to

the Arrears Party

The total amount of top five of account receivable of closing balance collected by arrears

party was RMB1,986,202,264.91, 70.58% of total closing balance of account receivable,

the relevant closing balance of bad debt provision withdrawn was RMB10,827,635.27.

221

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

2. Other Accounts Receivable

(1) Other Accounts Receivable Disclosed by Category

Closing balance

Book balance Bad debt provision

Category

Proportion( Proportion( Book value

Amount %) Amount %)

Other accounts receivable with

significant single amount for

173,061,959.33 6.09 163,333,204.34 0.94 9,728,754.99

which bad debt provision

separately accrued

Other accounts receivable

withdrawn bad debt provision

0

according to credit risks

characteristics

Group 1: aging group 121,519,248.71 4.27 20,120,580.97 0.17 101,398,667.74

Group 2: related party group 2,543,589,780.50 89.47 0 2,543,589,780.50

Subtotal of groups 2,665,109,029.21 93.74 20,120,580.97 0.01 2,644,988,448.24

Other accounts receivable with

insignificant single amount for

4,727,923.05 0.17 1,425,476.91 0.3 3,302,446.14

which bad debt provision

separately accrued

Total 2,842,898,911.59 100.00 184,879,262.22 0.07 2,658,019,649.37

(Continued)

Opening balance

Book balance Bad debt provision

Category

Proportion( Proportion( Book value

Amount %) Amount %)

Other accounts receivable with

significant single amount for which

173,061,959.33 9.04 163,333,204.34 94.38 9,728,754.99

bad debt provision separately

accrued

222

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Opening balance

Book balance Bad debt provision

Category

Proportion( Proportion( Book value

Amount %) Amount %)

Other accounts receivable

withdrawn bad debt provision

according to credit risks

characteristics

Group 1: aging group 126,005,125.10 6.58 22,703,322.23 18.02 103,301,802.87

Group 2: related party group 1,607,493,721.89 84.00 — — 1,607,493,721.89

Subtotal of groups 1,733,498,846.99 90.59 22,703,322.23 1.31 1,710,795,524.76

Other accounts receivable with

insignificant single amount for

7,101,401.90 0.37 2,131,520.57 30.02 4,969,881.33

which bad debt provision separately

accrued

Total 1,913,662,208.22 100.00 188,168,047.14 9.83 1,725,494,161.08

①Other receivable with single significant amount and withdrawal bad debt provision

separately at end of period

Closing balance

Other accounts receivable (unit) Other accounts Withdrawal

Bad debt provision Withdrawal reason

receivable proportion (%)

Irrecoverable due to policy

Energy saving subsidy 141,549,150.00 141,549,150.00 100.00

changes

Chongqing Konka Auto Electronic

13,396,856.82 13,396,856.82 100.00 Bankruptcy and liquidation

Company

Shenzhen Konka Video &

Communication Systems 18,115,952.51 8,387,197.52 46.30 Assessment impairment

Engineering Co., Ltd.

Total 173,061,959.33 163,333,204.34 — —

② In the groups, other accounts receivable adopting aging analysis method to withdraw bad

debt provision

Aging Closing balance

223

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Other accounts receivable Bad debt provision Withdrawal proportion (%)

Within 1 year 70,548,176.76 1,410,963.54 2.00

1 to 2 years 23,131,613.27 1,156,580.66 5.00

2 to 3 years 11,037,720.70 2,207,544.14 20.00

3 to 4 years 2,634,461.48 1,317,230.74 50.00

4 to 5 years 278,029.22 139,014.61 50.00

Over 5 years 13,889,247.28 13,889,247.28 100.00

Total 121,519,248.71 20,120,580.97 —

③ In the groups, accounts receivable adopting other methods to withdraw bad debt provision

Closing balance

Name of the group Bad debt Withdrawal

Account receivable

provision proportion (%)

Related party group within the consolidation scope 2,543,589,780.50 — —

Total 2,543,589,780.50 — —

(2) Bad Debt Provision Withdrawal, Reversed or Recovered in the Report Period

The withdrawal amount of the bad debt provision during the Reporting Period was of RMB

000; the amount of the reversed or collected part during the Reporting Period was of

RMB3,288,784.92.

(3) Top 5 of the Closing Balance of the Other Accounts Receivable Collected according to

the Arrears Party

Name of the Proportion (%) Bad debt provision

Nature Closing balance Aging

entity Closing balance

Within 1

Kaikai Shijie Intercourse funds 445,251,804.52 year, 1 to 2 15.66 —

years

Within 1

Anhui

Intercourse funds 438,095,069.40 year, 1 to 2 15.41 —

Tongchuang

years

Konka Household

Intercourse funds 359,413,591.91 Within 1 year 12.64 —

Appliances

224

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Name of the Proportion (%) Bad debt provision

Nature Closing balance Aging

entity Closing balance

Telecommunicati

Intercourse funds 347,253,097.02 Within 1 year 12.21 —

on Technology

Intercourse

Konka Factoring 344,417,113.46 Within 1 year 12.11 —

funds

Total 1,934,430,676.31 68.04 0.00

225

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

3. Long-term Equity Investment

(1) List of Long-term Equity Investment

Closing balance Opening balance

Item Depreciation Depreciation

Book balance Book value Book balance Book value

reserves reserves

Investment to the subsidiary 2,257,782,345.01 46,732,484.69 2,211,049,860.32 2,217,782,345.01 46,732,484.69 2,171,049,860.32

Investment to joint ventures and associated

531,766,557.93 5,158,909.06 526,607,648.87 218,079,058.61 5,158,909.06 212,920,149.55

enterprises

Total 2,789,548,902.94 51,891,393.75 2,737,657,509.19 2,435,861,403.62 51,891,393.75 2,383,970,009.87

(2) Investment to the Subsidiary

Withdrawn

impairment Decrease of

Opening balance Closing balance

provision in impairment

Investee Opening balance Increase Decrease Closing balance of impairment of impairment

the provision in the

provision provision

Reporting reporting period

Period

Mudangjian

g electric 36,000,000.00 36,000,000.00 36,000,000.00

appliances

Anhui

122,780,937.98 — —

Konka

Dongguan 274,783,988.91 — —

226

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Withdrawn

impairment Decrease of

Opening balance Closing balance

provision in impairment

Investee Opening balance Increase Decrease Closing balance of impairment of impairment

the provision in the

provision provision

Reporting reporting period

Period

Konka

Hong Kong

781,828.61 — —

Konka

Konka

261,482.50 — —

Europe

Kunshan

350,000,000.00 — —

Konka

Plasthetics 4,655,000.00 — —

Konka

Household 10,732,485.69 10,732,484.69 10,732,484.69

Appliances

Telecommun

ication 90,000,000.00 — —

Technology

Shushida 31,500,000.00 — —

Fittings

48,750,000.00 — —

Technology

Kunshan

350,000,000.00 — —

Kangsheng

227

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Withdrawn

impairment Decrease of

Opening balance Closing balance

provision in impairment

Investee Opening balance Increase Decrease Closing balance of impairment of impairment

the provision in the

provision provision

Reporting reporting period

Period

Anhui

69,702,612.22 — —

Tongchuang

Konka

Optoelectron 10,000,000.00 — —

ic

Wankaida 10,000,000.00 — —

Beijing

30,000,000.00 — —

Konka

Shushida

10,000,000.00 — —

Logistics

Konka

7,200,000.00 — —

E-display

Kaikai Shijie 16,000,000.00 — —

Kangqiao

700,000,000.00 — —

Jiacheng

Commercial

5,832,000.00 — —

Technology

Mobile

10,200,000.00 — —

Internet

228

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Withdrawn

impairment Decrease of

Opening balance Closing balance

provision in impairment

Investee Opening balance Increase Decrease Closing balance of impairment of impairment

the provision in the

provision provision

Reporting reporting period

Period

E3info 20,000,000.00 — —

Dongguan

8,602,009.10 — —

Packing

Chuzhou

40,000,000.00 40,000,000.00

Konka

Total 2,217,782,345.01 40,000,000.00 0.00 2,257,782,345.01 46,732,484.69 46,732,484.69

1 Investment to associated enterprises

Increase/decrease in Reporting Period

Investment profit Adjustment of

Increase after Decre

Investee Opening book value the transfer to Increased ased and loss other Other equity

equity method investment invest

recognized under comprehensive changes

from cost ment

the equity method income

Shanghai Konka Green Science & Technology

85,791,460.70 -3,733,992.50 -449,802.04 -1,166,602.46

Co., Ltd.

Zhuhai Jinsu Plastic Co., Ltd. 7,438,647.50

Konka Intelligent Electric Appliance 6,213,908.63 -495,301.18

229

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Increase/decrease in Reporting Period

Investment profit Adjustment of

Increase after Decre

Investee Opening book value the transfer to Increased ased and loss other Other equity

equity method investment invest

recognized under comprehensive changes

from cost ment

the equity method income

Yingrui Optoelectronic (Shanghai) Co., Ltd. 86,545,225.20

Shenzhen Zhongbing Konka Technology

19,164,691.78 -3,060,432.97

Company

Shenzhen Konka Information Network Co.,

12,925,124.80 794,032.47

Ltd.

Guangdong Chutian Dragon Smart Card Co.,

150,000,000.00

Ltd.

Shenzhen Yaode Technology Co., Ltd. 171,799,598.00

Total 218,079,058.61 0.00 321,799,598.00 0.00 -6,495,694.18 -449,802.04 -1,166,602.46

(Continued)

Increase/decrease in Reporting Period

Closing balance of

Investee Declaration of cash Withdrawn Closing book value

Others impairment provision

dividends or profits impairment provision

Shanghai Konka Green Science & Technology Co., Ltd. 80,441,063.70 —

Zhuhai Jinsu Plastic Co., Ltd. 7,438,647.50 —

Konka Intelligent Electric Appliance 5,718,607.45 —

230

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Increase/decrease in Reporting Period

Closing balance of

Investee Declaration of cash Withdrawn Closing book value

Others impairment provision

dividends or profits impairment provision

Yingrui Optoelectronic (Shanghai) Co., Ltd. 86,545,225.20 —

Shenzhen Zhongbing Konka Technology Company 16,104,258.81 —

Shenzhen Konka Information Network Co., Ltd. 13,719,157.27 5,158,909.06

Guangdong Chutian Dragon Smart Card Co., Ltd. 150,000,000.00

Shenzhen Yaode Technology Co., Ltd. 171,799,598.00

Total 531,766,557.93 5,158,909.06

231

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

4. Revenue and Cost of Sales

(1) Revenue and Cost of Sales

Reporting Period Same period of last year

Item

Sales revenue Cost of sales Sales revenue Cost of sales

Main

4,206,989,260.45 3,482,365,918.48 4,302,017,760.17 3,585,433,823.43

operations

Other

2,065,723,384.28 1,961,473,989.08 2,143,962,777.99 2,053,325,304.25

operations

Total 6,272,712,644.73 5,443,839,907.56 6,445,980,538.16 5,638,759,127.68

(2) Main Operations (Classified by Industry)

Reporting Period Same period of last year

Industry

Sales revenue Cost of sales Sales revenue Cost of sales

Electronic

4,206,989,260.45 3,482,365,918.48 4,302,017,760.17 3,585,433,823.43

industry

Total 4,206,989,260.45 3,482,365,918.48 4,302,017,760.17 3,585,433,823.43

(3) Main Operations (Classified by Product)

Reporting Period Same period of last year

Product

Sales revenue Cost of sales Sales revenue Cost of sales

Color TV

4,058,572,854.30 3,352,318,191.14 4,081,763,878.87 3,396,084,238.81

business

Consumer

appliances 148,212,399.29 129,780,963.65 175,160,620.74 148,984,332.14

business

Others 204,006.86 266,763.69 45,093,260.56 40,365,252.48

Total 4,206,989,260.45 3,482,365,918.48 4,302,017,760.17 3,585,433,823.43

(4) Main Operations (Classified by Area)

Reporting Period Same period of last year

Area

Sales revenue Cost of sales Sales revenue Cost of sales

Domestic sales 3,822,475,481.58 3,102,447,555.27 3,760,982,130.37 3,052,781,690.91

232

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Reporting Period Same period of last year

Area

Sales revenue Cost of sales Sales revenue Cost of sales

Overseas sales 384,513,778.87 379,918,363.21 541,035,629.80 532,652,132.52

Total 4,206,989,260.45 3,482,365,918.48 4,302,017,760.17 3,585,433,823.43

(5) The Revenue of Sales from the Top Five Customers

Period Main operation revenue Proportion of total business revenue (%)

January-June 2017 1,153,169,124.71 18.38

January-June 2016 1,401,966,640.64 21.75

5. Investment Income

Item Reporting Period Same period of last year

Long-term equity investment income accounted by cost method 33,233,152.36

Long-term equity investment income accounted by equity method -6,495,694.18 4,112,715.97

Investment income arising from disposal of long-term equity

investments

Investment income received from holding of financial assets measured

at fair value and changes be recorded into the current gains/losses

Investment income received from disposal of financial assets measured

16,271,994.98

at fair value and changes be recorded into the current gains/losses

Investment income received from holding of held-to-maturity

investment

Investment income received from holding of available-for-sale financial

1,310,000.00

assets

Investment income received from disposal of available-for-sale

15,380.40

financial assets

Gains received from the rest of equity re-measured at fair value after

losing control rights

Income from trust management 34,754,476.41 15,189,925.75

Total 77,763,929.57 20,628,022.12

XVI. Supplementary Materials

233

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

1. Items and Amounts of Extraordinary Gains and Losses

Item Amount Notes

Gains/losses on the disposal of non-current assets 32,560,637.29

Tax rebates, reductions or exemptions due to approval beyond authority or the lack

of official approval documents

Government grants recognized in the current period, except for those acquired in the

ordinary course of business or granted at certain quotas or amounts according to the 79,034,666.86

government RMB000.ees for acc

Capital occupation charges on non-financial enterprises that are recorded into

current gains and losses

Gains due to that the investment costs for the Company to obtain subsidiaries,

associates and joint ventures are lower than the enjoyable fair value of the

identifiable net assets of the investees when making the investments

Gain/loss on non-monetary asset swap

Gain/loss on entrusting others with investments or asset management 30,058,960.78

Asset impairment provisions due to acts of God such as natural disasters

Gains and losses from debt restructuring

Expenses on business reorganization, such as expenses on staff arrangements,

integration, etc.

Gain/loss on the part over the fair value due to transactions with distinctly unfair

prices

Current net gains and losses of subsidiaries acquired in business combination under the

same control from period-begin to combination date

Profit and loss from contingencies irrelative to the normal business operations of

company

234

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Item Amount Notes

Gain/loss from change of fair value of transactional assets and liabilities, and

investment gains from disposal of transactional financial assets and liabilities and

-61,493,877.60

available-for-sale financial assets, other than valid hedging related to the Company

and normal businesses

Depreciation reserves returns of receivables with separate depreciation test

Gain/loss on entrustment loans 280,538.52

Gain/loss on change of the fair value of investing real estate of which the

subsequent measurement is carried out adopting the fair value method

Effect on current gains/losses when a one-off adjustment is made to current

gains/losses according to requirements of taxation, accounting and other relevant

laws and regulations

Custody fee income when entrusted with operation

Other non-operating income and expenses other than the above 8,144,500.65

Project confirmed with the definition of non-recurring gains and losses and losses

Subtotal 88,585,426.50

Income tax effects 12,549,958.46

Minority interests effects (after tax) 707,988.01

Total 75,327,480.03

Notes: the number “+” among the non-current gains and losses items refers to profits and revenues, while “-”referred to losses or

expenditure.

The recognition of the non-current gains and losses items was executed according to the regulations

of No.1 of the Information Disclosure Explanatory Notice of the Companies Public Offering

Securities-Non-current Gains and losses (Z-J-H-Announcement [2008] No. 43) .

235

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

The amount of

Item leased assets Reason

involved

Closely related to the normal operating business of the

Company which met with the regulations of the state policies

Software tax returns 35,115,965.51

as well as constantly enjoyed the governmental subsidies

according to certain standard quotas or quantities

2. Return on Equity and Earnings Per Share

Weighted average ROE EPS(RMB/share)

Profit as of Reporting Period

(%) Basic EPS Diluted EPS

Net profit attributable to common shareholders

1.06 0.0128 0.0128

of the Company

Net profits attributed to the common

shareholders after deducting the non-current -1.52 -0.0185 -0.0185

gains and losses

236

Konka Group Co., Ltd. Notes to Financial Statements for January-June 2017

Section XI Documents Available for Reference

I Financial statements signed and sealed by the head of the Company, the accounting head for the

Report, and the head of the accounting organ (the head of accounting);

II Originals of all the announcements and documents that the Company disclosed on the newspaper

designated by the CSRC in the Reporting Period; and

III Other relevant materials.

The Board of Directors

Konka Group Co., Ltd.

August 24, 2017

237

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