KonkaGroupCo.,Ltd. AnnualReport2017 KONKA GROUP CO., LTD.
ANNUAL REPORT 2017
2018-10
March 2018
KonkaGroupCo.,Ltd. AnnualReport2017 Part I Important Notes, Table of Contents and Definitions The Board of Directors (or the “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 misrepresentations, misleading statements or material omissionsin thisReport.
Liu Fengxi, theCompany’s legal representative, Li Chunlei, theCompany’s Chief Financial Officer (CFO), and Feng Junxiu, head of theCompany’s financial department (equivalent to financial manager) hereby guarantee that the Financial Statements carried in this Report are factual, accurate andcomplete.
AlltheCompany’s Directors haveattended theBoard meetingforthe reviewofthis 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 payattention to possibleinvestment risks.
At the Board meeting, a dividend payout proposal forcommon shareholders forthe Reporting Period has been considered and approved as follows: based on the total shares of 2,407,945,408, a cash dividend of RMB1.62 (tax inclusive) per 10 shares would be distributed to all the common shareholders, with no sharedividendin any form.
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.
KonkaGroupCo.,Ltd. AnnualReport2017 Table of Contents
Part I Important Notes,Table ofContents and Definitions...........................................................2 Part II Company Profileand Key Financial Information..............................................................6 Part III Business Summary.............................................................................................................11 Part IVCompany Performance DiscussionandAnalysis............................................................13 PartVSignificantEvents.................................................................................................................41 PartVI ShareChangesand ShareholderInformation.................................................................66 PartVII Preferred Shares................................................................................................................73 PartVIII Directors, Supervisors, SeniorManagement andStaff................................................74 Part IXCorporate Governance.......................................................................................................85 Part XCorporate Bonds..................................................................................................................97 Part XI FinancialStatements..........................................................................................................98 Part XII DocumentsAvailable forReference...............................................................................310
KonkaGroupCo.,Ltd. AnnualReport2017 Definitions
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|Term|Definition|
|The “Company”,the “Group”, “KonkaGroup”or “we”|Konka Group Co., Ltd. and its consolidated subsidiaries, except where thecontextotherwiserequires|
|Parent,ParentCompany|Konka Group Co., Ltd. exclusive of subsidiaries, except where the contextotherwiserequires|
|TelecommunicationTechnology|ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd.|
|KonkaHouseholdAppliances|ShenzhenKonkaHouseholdAppliancesCo.,Ltd.|
|PlasticProducts|ShenzhenKonkaPlasticProductsCo.,Ltd.|
|ElectricalAppliances|ShenzhenKonkaElectricalAppliancesCo.,Ltd.|
|FittingsTechnology|ShenzhenKonkaElectronicFittingsTechnologyCo.,Ltd.|
|MudanjiangAppliances|MudanjiangArcticOceanAppliancesCo.,Ltd.|
|ChongqingQingjia|ChongqingQingjiaElectronicsCo.,Ltd.|
|AnhuiKonka|AnhuiKonkaElectronicCo.,Ltd.|
|AnhuiHouseholdAppliances|AnhuiKonkaHouseholdAppliancesCo.,Ltd.|
|KunshanKonka|KunshanKonkaElectronicCo.,Ltd.|
|DongguanKonka|DongguanKonkaElectronicCo.,Ltd.|
|DongguanPacking|DongguanKonkaPackingMaterialsCo.,Ltd.|
|BoluoKonka|BoluoKonkaPCBCo.,Ltd.|
|BoluoKonkaPrecision|BoluoKonkaPrecisionTechnologyCo.,Ltd.|
|HongKongKonka|HongKongKonkaCo.,Ltd.|
|KonkaHouseholdAppliancesInvestment|KonkaHouseholdAppliancesInvestment&DevelopmentCo.,Ltd.|
|Konka Household Appliances InternationalTrading|KonkaHouseholdAppliancesInternationalTradingCo.,Ltd.|
|KonkaEurope|Konka(Europe)Co.,Ltd.|
|KonkaFactoring|KonkaFactoring(Shenzhen)Co.,Ltd.|
|Wankaida|ShenzhenWankaidaScienceandTechnologyCo.,Ltd.|
|KunshanKangsheng|KunshanKangshengInvestmentDevelopmentCo.,Ltd.|
|AnhuiTongchuang|AnhuiKonkaTongchuangHouseholdAppliancesCo.,Ltd.|
|IndonesiaKonka|IndonesiaKonkaElectronicsCo.,Ltd.|
|ShushidaLogistics|ShenzhenShushidaLogisticsServiceCo.,Ltd.|
|BeijingKonkaElectronic|BeijingKonkaElectronicCo.,Ltd.|
|KonkaE-display|ShenzhenKonkaE-displayCo.,Ltd.|
|E-displayService|ShenzhenE-displayServiceCo.,Ltd.|
|XiamenDalong|XiamenDalongTradingCo.,Ltd.|

KonkaGroupCo.,Ltd. AnnualReport2017
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|YoushiKangrong|YoushiKangrongCultureCommunicationCo.,Ltd.|
|KangqiaoJiacheng|ShenzhenKangqiaoJiachengPropertyInvestmentCo.,Ltd.|
|KonkaSmartTech|KonkaSmartTechLimited|
|KaikaiShijie|AnhuiKaikaiShijieE-commerceCo.,Ltd.|
|E2info|ShenzhenE2infoNetworkTechnologyCo.,Ltd.|
|MobileInterconnection|ShenzhenKonkaMobileInterconnectionTechnologyCo.,Ltd.|
|CommercialSystemTechnology|ShenzhenKonkaCommercialSystemTechnologyCo.,Ltd.|
|ChainKingdom|ChainKingdomCo.,Limited|
|KangqiaoEasyChain|ShenzhenKangqiaoEasyChainTechnologyCo.,Ltd.|
|E3info|E3info(Hainan)TechnologyCo.,Ltd.|
|ChuzhouKonkaTID|ChuzhouKonkaTechnology&IndustryDevelopmentCo.,Ltd.|
|KonkaVentures|KonkaVenturesDevelopment(Shenzhen)Co.,Ltd.|
|KonkaPengrun|ShenzhenKonkaPengrunTechnology&IndustryCo.,Ltd.|
|KonkaUnifortune|ShenzhenKonkaUnifortuneSupplyChainManagementCo.,Ltd.|
|KonkaInvestment|ShenzhenKonkaInvestmentHoldingCo.,Ltd.|
|KangzhiTrade|AnhuiKangzhiTradeCo.,Ltd.|
|KonkaMaterial|HainanKonkaMaterialTechnologyCo.,Ltd.|
|KonkaLeasing|TianjinKonkaLeasingCo.,Ltd.|
|YantaiKonka|YantaiKonkaHealthcareEnterpriseServiceCo.,Ltd.|
|KonkaCapital|ShenzhenKonkaCapitalEquityInvestmentManagementCo.,Ltd.|
|ChainKingdomShenzhen|ChainKingdom(Shenzhen)Co.,Ltd.|
|CSRC|TheChinaSecuritiesRegulatoryCommission|
|SZSE|TheShenzhenStockExchange|
|CSRCShenzhen|TheShenzhenbranchoftheChinaSecuritiesRegulatoryCommission|
|RMB,RMB’0,000|InRMByuan,inRMBtenthousandyuan|
|The “ReportingPeriod” or “CurrentPeriod”|TheperiodfromJanuary1,2017toDecember31,2017|

KonkaGroupCo.,Ltd. AnnualReport2017 Part II Company Profile and Key Financial Information
I Corporate Information
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|Stockname|KonkaA,KonkaB|Stocksymbol|000016,200016|
|Changedstockname(ifany)|N/A|||
|Stockexchange|ShenzhenStockExchange|||
|CompanynameinChinese|康佳集团股份有限公司|||
|Abbr.|康佳集团|||
|CompanynameinEnglish(ifany)|KONKAGROUPCO.,LTD.|||
|Abbr.(ifany)|KONKAGROUP|||
|Legalrepresentative|LiuFengxi|||
|Registeredaddress|15-24/F, Konka R&D Center, 28 Keji South Twelfth Road, Science and TechnologyPark,YuehaiStreet,NanshanDistrict,Shenzhen,GuangdongProvince,China|||
|Zipcode|518057|||
|Officeaddress|15-24/F, Konka R&D Center, 28 Keji South Twelfth Road, Science and TechnologyPark,YuehaiStreet,NanshanDistrict,Shenzhen,GuangdongProvince,China|||
|Zipcode|518057|||
|Companywebsite|www.konka.com|||
|Emailaddress|szkonka@konka.com|||

II Contact Information
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||BoardSecretary|SecuritiesRepresentative|
|Name|WuYongjun|MiaoLeiqiang|
|Address|Board Secretariat, 24/F, Konka R&D Center, 28 KejiSouth Twelfth Road, Science and Technology Park,YuehaiStreet,NanshanDistrict,Shenzhen,GuangdongProvince,China|Board Secretariat, 24/F, Konka R&D Center, 28 KejiSouth Twelfth Road, Science and Technology Park,YuehaiStreet,NanshanDistrict,Shenzhen,GuangdongProvince,China|
|Tel.|0755-61368867|0755-61368867|
|Fax|0755-26601139|0755-26601139|
|Emailaddress|szkonka@konka.com|szkonka@konka.com|

III Media forInformation Disclosureand Place where this Report Is Kept
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|Newspapers designated by the Company forinformationdisclosure|SecuritiesTimes,etc.|
|Website designated by CSRC for publication ofthisReport|www.cninfo.com.cn|

KonkaGroupCo.,Ltd. AnnualReport2017
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|PlacewherethisReportiskept|BoardSecretariat, 24/F,KonkaR&D Center,28Keji SouthTwelfth Road,Science and Technology Park, Yuehai Street, Nanshan District, Shenzhen,GuangdongProvince,China|

IVCompany Registered Information andAlterations
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|Unifiedsocialcreditcode|914403006188155783|
|Change in main business scope of theCompanysincegoingpublic(ifany)|Supplychainmanagementwasaddedtomainbusinessscopein2017|
|Changeofcontrollingshareholder(ifany)|Nochange|

V OtherInformation
Independent certified publicaccounting (or “CPA”)firm hired bytheCompany:
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|Name|RuihuaCertifiedPublicAccountants(LLP)|
|Officeaddress|5-11F, West Tower, China Overseas Property Plaza, Building No. 7, Compound No. 8,XibinheRoad,YongdingMen,DongchengDistrict,Beijing,P.R.C.|
|Accountantswritingsignatures|LiuJianhua,ShenLingzhi|

Independent sponsor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
□ Applicable√ Not applicable
Independent financial advisor hired by the Company to exercise constant supervision over the Company in theReporting Period:
□ Applicable√ Not applicable
VI Key Financial Information
Indicate bytick mark whether there isany retrospectively restated datum inthe tablebelow.
□ Yes√ No
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|-|-|-|-|-|
||2017|2016|2017-over-2016change|2015|
|Operatingrevenue(RMB)|31,227,763,249.71|20,299,348,136.21|53.84%|18,395,177,035.98|
|Net income attributable toshareholders of the listed company(RMB)|5,057,025,155.71|95,673,028.03|5,185.74%|-1,256,819,314.51|
|Net income attributable toshareholders of the listed companybefore nonrecurring gains and losses(RMB)|-97,284,945.83|-283,460,349.24|65.68%|-1,129,999,645.94|

KonkaGroupCo.,Ltd. AnnualReport2017
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|Net cash flows from operatingactivities(RMB)|-4,314,257,622.47|-972,135,787.43|-343.79%|1,289,600,482.66|
|Basic earnings per share(RMB/share)|2.1001|0.0397|5,189.92%|-0.52|
|Diluted earnings per share(RMB/share)|2.1001|0.0397|5,189.92%|-0.52|
|Weighted average return on equity(%)|63.26%|3.35%|59.91%|-36.30%|
||December31,2017|December31,2016|ChangeofDecember31,2017overDecember31,2016|December31,2015|
|Totalassets(RMB)|23,558,735,469.78|17,243,119,597.97|36.63%|14,250,367,548.28|
|Equityattributabletoshareholdersofthelistedcompany(RMB)|7,994,145,476.61|2,901,481,607.04|175.52%|2,814,382,870.81|

VII Accounting Data Differences under Chinese Accounting Standards (CAS) and International FinancialReporting Standards(IFRS) andForeign Accounting Standards 1.Net Income andEquity Differences under CAS andIFRS
□ Applicable√ Not applicable
No suchdifferences for theReporting Period.
2.Net Income andEquity Differences under CAS andForeign Accounting Standards
□ Applicable√ Not applicable
No suchdifferences for theReporting Period.
VIII KeyFinancialInformation byQuarter
Unit: RMB
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||Q1|Q2|Q3|Q4|
|Operatingrevenue|4,686,318,957.34|6,719,647,022.09|8,757,653,006.20|11,064,144,264.08|
|Net income attributable toshareholders of the listedcompany|26,245,353.83|4,625,914.03|97,974,481.26|4,928,179,406.59|
|Net income attributable to|-18,772,884.12|-25,683,328.05|-34,435,053.99|-18,393,679.67|

KonkaGroupCo.,Ltd. AnnualReport2017
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|shareholders of the listedcompany before nonrecurringgainsandlosses|||||
|Net cash flows from operatingactivities|-1,629,437,072.94|-634,577,631.94|-1,298,562,951.65|-751,679,965.94|

Indicate by tick mark whether any of the financial data in the table above or their summations differs materially from what have been disclosed in theCompany’s quarterly or semi-annual reports.
□ Yes√ No
IXNonrecurring Gains andLosses
√ Applicable□ Not applicable
Unit: RMB
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|-|-|-|-|-|
|Item|2017|2016|2015|Note|
|Gains and losses on disposal ofnon-current assets (inclusive of offsetallowanceforassetimpairments)|6,470,215,253.82|242,932,907.65|-16,096,434.80||
|Government subsidies charged to currentprofit and loss (exclusive of governmentsubsidiesgivenintheCompany’sordinarycourse of business at fixed quotas oramounts as per government ’s uniformstandards)|178,372,701.34|113,350,808.96|71,499,330.11||
|Gains and losses on investment or assetmanagemententrustmentstootherentities|70,070,846.08|70,849,063.30|20,419,318.35||
|Allowance for asset impairments due toactsofGodsuchasnaturaldisasters||0.00|-144,808,654.70||
|Gains and losses on changes in fair valueoftradingfinancialassetsandliabilities&investment income from disposal oftrading financial assets and liabilities andavailable-for-sale financial assets(exclusive of effective portion of hedgesthat arise in the Company ’ s ordinarycourseofbusiness)|-63,931,276.14|17,953,552.28|32,627,480.23||
|Gainsandlossesonloanentrustment|808,737.50|707,777.79|3,550,666.66||
|Non-operating income and expense otherthanabove|41,449,367.77|22,934,301.50|-104,311,044.28||
|Othergainsandlossesthatmeetdefinitionofnonrecurringgain/loss|87,640,651.87|168,175.52|-419,240.74||

KonkaGroupCo.,Ltd. AnnualReport2017
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|Less:Incometaxeffects|1,603,618,658.08|78,609,375.35|-14,549,153.86||
|Non-controlling interests effects(netoftax)|26,697,522.62|11,153,834.38|3,830,243.26||
|Total|5,154,310,101.54|379,133,377.27|-126,819,668.57|--|

 Explanation of why the Company classifies an item as a nonrecurring gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public— Nonrecurring Gains and Losses, or reclassifies any nonrecurring gain/lossitem listed in thesaid explanatory announcement as arecurring gain/loss:√ Applicable□ Not applicable
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|Item|Amount(RMB)|Reason|
|Taxrebatesonsoftware|56,782,742.21|GovernmentsubsidiesgivenintheCompany’sordinarycourseofbusinessatfixedquotasoramountsaspergovernment’suniformstandards|

KonkaGroupCo.,Ltd. AnnualReport2017 Part III Business Summary
I Main Business ScopeoftheCompany inReporting Period
Is theCompanysubject to any disclosurerequirements for special industries?
No.
Currently, the Company offers, among other things, multimedia products and services, supply chain services, white goods and mobilephones. Its primary business models are specified as follows: (I) MultimediaProducts andServices
The Company provides multimedia products and services, including color TVs and Internet TV services, for both domesticand overseas markets.
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 themargins between thecosts and theselling prices of itscolorTVs.
As for selling its color TVs abroad, the Company mainly relies on B2B. Its color TVs are sold to Asia Pacific, Middle East, Central& SouthAmerica, East Europe, etc.And the main profit source is also thedifferences between thecosts and the sellingprices ofits colorTVs.
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 InternetTVbusiness is key to theCompany’s Internet-oriented transformation and upgrade to a development model of“hardware+ software” and“smartTV+ 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 createa new growth pointfor thefuture.
(III)WhiteGoods
The white goods produced by the Company mainly include refrigerators, washing machines, air
KonkaGroupCo.,Ltd. AnnualReport2017 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) MobilePhones
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 therelated valueadded services.
II Material ChangeinMain Assets
1.Material ChangeinMain Assets
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|Mainassets|Reasonformaterialchangeintheperiod|
|Equityassets|Long-termequityinvestmentsincreased326.29%fromopeningamount,primarilydrivenbyinvestmentsinnewjointstockcompaniessuchasGuangdongChutianDragonSmart CardCo.,Ltd.andShenzhenYaodeTechnologyCo.,Ltd.|
|Property, plantandequipment|Nomaterialchange|
|Intangibleassets|Down32.11%fromopeningamount,primarilydrivenbylanddisposalbyKunshanKonkaElectronicCo.,Ltd.|
|Construction inprogress|Down56.94%fromopeningamount,primarilydrivenbyreclassificationofhotelconstructionofKunshanKangshengInvestmentDevelopmentCo.,Ltd.intoproperty,plantandequipment|

2.Main Assets Overseas
□ Applicable√ Not applicable
III Core Competitiveness Analysis
Is theCompanysubject to any disclosurerequirements for special industries?
No.
TheCompany’s competitive edges include, among other things, itsR&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.
KonkaGroupCo.,Ltd. AnnualReport2017 Part IV Company Performance Discussion and Analysis
I Overview
(I) Key Operating Results ofReporting Period
For the Reporting Period, the Company achieved operating revenue of RMB31.228 billion, up53.84% from the prior year. And the net income attributable to the shareholders of the listed company stoodat RMB5.057billion.These results were attributed to thefollowingreasons:
1. In the Reporting Period, the Company continued to upgrade its development model and organizational structure. It has shifted from a development model relying on the sales of hardware to a development model of “hardware+ software”, “end products+ users” and “investment& holding+ finance”, guided by the vision of “technology+ industry+ urbanization”. Also, it recruited a new senior management team in early 2017 and integrated and restructured its existing business to improveorganizational efficiency.
2. The Company further clarified its development strategy during the Reporting Period. Through vigorously promoting its supply chain management business, accelerating Internet operations, making comprehensive arrangements for the Internet of Things space, rapidly expanding technology park development and encouraging innovation and entrepreneurship platforms to connect with its technology parks, the Company has made breakthroughs in its business structure and achieved fast growth inoperating revenue.
3. Towards the vision of “technology+ industry+ urbanization”, the Company launched its technology park business in 2017, with business development as the core, park development as the vehicle and equity investment as the focus. It is trying to upgrade its development model by launching thisnew business linebased onits existingbusiness.
4. During the Reporting Period, the Company increased itsR&D investment and improved itsR&D team to steadily increase its coreR&D strength. Meanwhile, it independently developed master chip inverter, backlight inverter and screen inverter technologies, and successfully launched a series of new TV products including A1 TV, R1 TV and M1 TV. Highly spoken of on the market, these products are sellingwell.
5. During the Reporting Period, the Company vigorously carried out business integration, strove for betterR&D, manufacturing and supply chain management capabilities, and kept optimizing its product mix. As a result, it saw improvements in its operating results in spite of fierce market competition and rising raw material prices.
6. Non-recurring items generated RMB5.154 billion in the Reporting Period, which was mostly the
KonkaGroupCo.,Ltd. AnnualReport2017 gains on the sale of theCompany’s70% stake in Shenzhen Kangqiao Jiacheng Property Investment Co., Ltd.
(II) Business Highlightsin 2017
In 2017, all of theCompany’s operations were refreshed as its mechanism reforms went further, which ranged from the open recruitment of senior management, the integration and corporatization of its multimedia operations, the incentive mechanism breakthroughs in new business operations and the improvements to its employee compensation architecture. These changes not only effectively improved theCompany’s operating efficiency, but also promoted its rapid development. For 2017, the operating revenue of the Company reached RMB31.228 billion with a net income of RMB5.057 billion. And positive trends were seen in all the business operations of the Company. Business highlights in 2017are summarized as follows:
1.Multimedia business
In 2017, the multimedia business of the Company faced a severe market environment. The overall market scale declined, and the prices of upstream raw materials such as screens and IC rose. However, the multimedia business of the Company recorded growth in revenue and realized profits despite all these unfavorable factors. The following work was done in the multimedia business during theReporting Period:
(1) Business architecture integration: In April 2017, the Company integrated its various multimedia operations into one comprehensive multimedia division with color TVs and display products as its core to compete on the market as a whole, which has improved the operating performance and quality.
(2) Corporatization: Based onthe business architecture integration, at the end of 2017, the Company launched a corporatization program for its multimedia division and established Shenzhen Konka Electronic Technology Co., Ltd. as a non-manufacturing multimedia operating unit to focus on domestic and overseas sales of theCompany’s multimedia and other products, so as to promote deeper strategic cooperation in the multimedia business. A more effective performance appraisal and incentive mechanism has also been formulated to enhance competitiveness. So far, the registration ofthenew company has beencompleted and all work is underprogress.
(3)The strategy of increasingR&D investment and product leading showed its importance: in 2017, the Company invested RMB 260 million inR&D, which was an increase of36% over the same period of last year.R&D team construction was strengthened and thus the overallR&D strength had been steadily improving. Breakthroughs were made in technologies and products, including global general platforms equipped with Netflix applications, data operation platforms based on big data applications, general-purpose modular minimalist TV series, A1 artificial smart TVs, R1 frequency conversion televisions and M1 Music TV etc. It did not only enhance product market competitiveness, increase product gross profit margin steadily, but also laid the foundation for
KonkaGroupCo.,Ltd. AnnualReport2017 product reserves of theCompany in201,so as toensure thesustainable business development. (4) Restructuring of manufacturing: under the guidance of the development mode of “Technology+ Industry+ Urbanization”, the Company gradually clarified the development ideas for promoting the upgrading of manufacturing bases to industrial parks. The restructuring of manufacturing bases has enabled the color TV production capacity of the Company match the marketing volume more effectively and optimized product costs, but also provided land resources and operation space for business development ofthescience.
2.Technology parkbusiness
The technology park business is an important step of the Company towards the development model of"technology+industry+urbanization".
At present, regarding this business, the Company has Konka Dongguan Smart Appliance Industrial Park, Konka Chuzhou Kechuang Center and Yibin Konka Intelligent Terminal Industrial Park, among other industrial parks and land resources. These projects and resources will become a new majorbusiness lineoftheCompany.
3.Supplychain management
In 2017, the revenue of supply chain management reached RMB13.652 billion, an increase of489% year-on-year. With the rapid growth of business scale, business scope was expanded and it now involves avariety of products related to themain business oftheCompany.
4.Internet business
In 2017, the revenue of Internet business of the Company reached RMB 320 million. In addition to performance improvement, the quality of business operations was also improved, mainly in three areas:
(1) Diversification of profit model: in addition to the original revenues from video and advertising, the profit channel of Internet business was expanded to digital entertainment and shopping services, of which the music, education and gaming sectors in the digital entertainment business have developed rapidly,resulting inagreatly improvement ofprofit.
(2) Refinement of user operation: as the user scale grew, the Company gradually pushed the upgrade of the four major systems including advertising, big data, payment and user, and optimized server architecture, so as to provide more stable development of Internet services. In addition, the gradual and iterative optimization of products, the aggregation of high-quality services and refined operational recommendations also effectively ensured a rapid increase in performance and user operation level.
(3) Significant growth in operation: in 2017, both the Migu project and OTT set-top box business of ChinaMobileachieved significant progress.
5.White goods
KonkaGroupCo.,Ltd. AnnualReport2017 There was a severe competition in white goods market in 2017. Under the continuous increase in operating costs, the revenue of white goods of the Company achieved RMB1.737 billion for the year, an increase of2.10% year-on-year, and the business performance and operation quality were improved significantly.
(1) Improvement of product and channel structure: through continuous increase inR&D investment, the implementation of product leading strategy and optimization of product lines, product structure was improved; meanwhile, by promotion of value marketing, sales in e-commerce channels kept improving steadily,and channel structure was optimized.
(2) Product enhancement: by the application of new processes, innovation in industrial modeling and differentiated designs, the Company introduced a series of products with a certain influence into the market, including large-capacity refrigerators 628L, pesticide-free refrigerators, Kmini and cosmetics etc., which were all uniqueproducts in thefield ofhealthy homeappliances.
6.Mobilephone
The mobile phone sector is highly competitive. In 2017, under the pressure of great competition, the Company effectively improved the overall operation performance by active change of channel model of mobile phone business, major adjustment of customer structure, great improvement of brand influence and breakthrough in the model. Moreover, progress had been made in the promotion ofkey projects:
(1) Official launch of the Yibin Intelligent Terminal High-Tech Industrial Park project: this project can not only cut down costs for theCompany’s mobile phone business, but is also the incubation of mobile phone business shift and innovation as well as thedevelopment of supply chain management business. It would form an industrial agglomeration effect in Yibin and create a good industrial ecology.
(2) Breakthrough in the development of self-owned overseas brands: while strengthening the adjustment of customer structure, the Company actively promoted the expansion of its self-owned overseas brands. InAustralia, among other operating segments, Konka achieved good performances under its own brands.
7.Investment
In 2017, the investment business of the Company was greatly improved in personnel establishment, work mechanism innovation, system and process management and professional capacity-building, forming a good base for the industrial layout of the Company. Meanwhile, the Company invested in Guangdong Chutian Dragon Smart Card Co., Ltd., Shenzhen QT-Flex Co., Ltd., Wuhan Tianyuan Environmental ProtectionCo., Ltd. and other companies.
8.Venture investment
In 2017, the Company established Konka Ventures Development (Shenzhen) Co., Ltd. to operate
KonkaGroupCo.,Ltd. AnnualReport2017 business incubators and accelerators, innovation bases, etc. under the brand of “Konka Star”. This is an important step in theCompany’s transformation and upgrading drive. So far, “Konka Star" business incubators have been launched in several cities including Yantai and Chengdu cities in China, as well as theSiliconValley andSan Diego in theU.S., etc.
II Analysisof MainBusiness
1.Summary
See “Part IVCompany PerformanceDiscussion andAnalysis”, “IOverview” herein.
2.Revenue andCost
(1) Breakdownof OperatingRevenue
Unit: RMB
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||2017||2016||Change|
||Revenue|Percentageoftotaloperatingrevenue(%)|Revenue|Percentageoftotaloperatingrevenue(%)||
|Total|31,227,763,249.71|100%|20,299,348,136.21|100%|53.84%|
|Byoperatingdivision||||||
|Electronics|16,148,586,075.45|51.71%|17,167,313,167.21|84.57%|-5.93%|
|Supplychainmanagement|13,652,512,654.75|43.72%|2,317,805,158.77|11.42%|489.03%|
|Other|1,426,664,519.51|4.57%|814,229,810.23|4.01%|75.22%|
|Byproductcategory||||||
|ColorTVs|11,994,950,476.66|38.41%|12,478,427,986.35|61.47%|-3.87%|
|Mobilephones|918,711,012.38|2.94%|970,287,086.42|4.78%|-5.32%|
|Whitegoods|1,737,464,511.08|5.56%|1,701,770,760.58|8.38%|2.10%|
|Supplychainservices|13,652,512,654.75|43.72%|2,317,805,158.77|11.42%|489.03%|
|Other|2,924,124,594.84|9.36%|2,831,057,144.09|13.95%|3.29%|
|Byoperatingsegment||||||
|Domestic|16,031,740,206.40|51.34%|14,282,697,744.63|70.36%|12.25%|
|Overseas|15,196,023,043.31|48.66%|6,016,650,391.58|29.64%|152.57%|

KonkaGroupCo.,Ltd. AnnualReport2017 (2) Operating Division, Product Category or Operating Segment Contributing over10% of Operating Revenue orIncome
√ Applicable□ Not applicable
Is theCompanysubject to any disclosurerequirements for special industries?
No.
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Operatingrevenue|Costofoperatingrevenue|Grossmarginpercentage|YoYchangeinoperatingrevenue|YoYchangeincostofoperatingrevenue|YoYchangeingrossmarginpercentage|
|Byoperatingdivision|||||||
|Electronics|16,148,586,075.45|13,142,913,323.56|18.61%|-5.93%|-10.12%|3.79%|
|Supplychainmanagement|13,652,512,654.75|13,501,073,391.55|1.11%|489.03%|486.84%|0.37%|
|Byproductcategory|||||||
|ColorTVs|11,994,950,476.66|10,062,760,446.56|16.11%|-3.87%|-6.21%|2.09%|
|Supplychainservices|13,652,512,654.75|13,501,073,391.55|1.11%|489.03%|486.84%|0.37%|
|Byoperatingsegment|||||||
|Domestic|16,031,740,206.40|13,670,697,608.30|14.73%|12.25%|51.94%|-22.28%|
|Overseas|15,196,023,043.31|14,118,287,671.50|7.09%|152.57%|150.98%|0.59%|

 Main business data of the prior year restated according to the changed statistical caliber for the Reporting Period:
□ Applicable√ Not applicable
(3) Whether RevenuefromPhysical Sales Is Higherthan Service Revenue
√ Yes□ No
|||||||
|-|-|-|-|-|-|
|Operatingdivision|Item|Unit|2017|2016|Change|
|Electronics|Unitsales|0,000units|1,291|1,219|5.91%|
||Output|0,000units|1,091|983|10.99%|
||Inventory|0,000units|135|127|6.30%|

 Reason forany over30%YoYmovements in thedataabove:
□ Applicable√ Not applicable
(4) Execution Progress ofMajor SignedSales Contracts inReporting Period
□ Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2017 (5) Breakdownof Costof OperatingRevenue
By product category
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|Productcategory|Item|2017||2016||Change|
|||Costofoperatingrevenue|Percentageoftotalcostofoperatingrevenue(%)|Costofoperatingrevenue|Percentageoftotalcostofoperatingrevenue(%)||
|ColorTVs|ColorTVs|10,062,760,446.56|36.21%|10,729,196,625.12|61.25%|-6.21%|
|Mobilephones|Mobilephones|827,228,372.16|2.98%|888,167,026.43|5.07%|-6.86%|
|Whitegoods|Whitegoods|1,404,308,959.94|5.05%|1,354,850,701.01|7.73%|3.65%|
|Supplychainservices|Supplychainservices|13,501,073,391.55|48.58%|2,300,635,459.09|13.13%|486.84%|
|Other|Other|1,993,614,109.59|7.17%|2,245,480,531.34|12.82%|-11.22%|

 (6) ChangeinScopeofConsolidated Financial Statements for Reporting Period
√ Yes□ No
① Shenzhen Kangqiao Jiacheng Property Investment Co., Ltd. has been deconsolidated since November 30,2017when theCompany soldits70% stakein thissubsidiary.
② Kunshan Konka Electronic Co., Ltd. has been deconsolidated since September 26, 2017 when the Companysold its51%stakein thissubsidiary.
③ Konka Ventures Development (Shenzhen) Co., Ltd. was incorporated by the Company and Shenzhen Qianhai TONGGAM Technology Co., Ltd. on Oct. 26, 2017 with a registered capital of RMB 5 million, of which the Company contributed RMB 2.55 million (or51.00%) in cash and Shenzhen Qianhai TONGGAM Technology Co., Ltd. contributed RMB 2.45 million (or49.00%) in cash. For the Company has control over this new subsidiary, it has been included into theCompany’ s consolidation scope sinceOct. 26,2017.
④ Shenzhen Konka Pengrun Technology& Industry Co., Ltd. was incorporated by the Company, Guizhuo Huajinrun Science and Technology Group Co., Ltd. and Shenzhen Henglongtong Electronic Science and Technology Co., Ltd. on Sep. 15, 2017 with a registered capital of RMB 50 million, of which the Company contributed RMB 25.5 million (or51.00%) in cash, Guizhuo Huajinrun Science and Technology Group Co., Ltd. contributed RMB 15 million (or30.00%) in
cash, and Shenzhen Henglongtong Electronic Science and Technology Co., Ltd. contributed RMB
9.5 million (or19.00%) in cash. For the Company has control over this new subsidiary, it has been
KonkaGroupCo.,Ltd. AnnualReport2017 includedintotheCompany’s consolidation scopesince Sep. 15,2017.
⑤ Shenzhen Konka Unifortune Supply Chain Management Co., Ltd. was incorporated by the Company and Shenzhen UNIFORTUNE Supply Chain Management Co., Ltd. on Sep. 15, 2017 with a registered capital of RMB 30 million, of which the Company contributed RMB 15.3 million (or51.00%) in cash, and Shenzhen UNIFORTUNE Supply Chain Management Co., Ltd. contributed RMB 14.7 million (or49.00%) in cash. For the Company has control over this new subsidiary,ithas been included intotheCompany’s consolidation scope sinceSep.15, 2017.
⑥ Shenzhen Konka Investment Holding Co., Ltd. was incorporated by the Company in Shenzhen on Mar.6,2017 with a registered capital of RMB 40million, which will all be paid by the Company. As of the balance sheet date, the Company has not yet actually made the payment. For the Company has control over this new subsidiary, it has been included into theCompany’s consolidation scope since Mar.6,2017.
⑦ Anhui Kangzhi Trade Co., Ltd. was incorporated in Chuzhou, Anhui Province on Mar. 8, 2017 by Anhui Konka Electronic Co., Ltd., a subsidiary of the Company, with a registered capital of RMB 5 million, which will all be paid byAnhui Konka Electronic Co., Ltd.As of the balance sheet date, Anhui Konka Electronic Co., Ltd. has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope sinceMar.8,2017.
⑧ Hainan Konka Material Technology Co., Ltd. was incorporated by Shenzhen Konka Household Appliances Co., Ltd. (a subsidiary of the Company) and Shenzhen Mushen Industrial Co., Ltd. on Jul. 10, 2017 with a registered capital of RMB 10 million, of which Shenzhen Konka Household Appliances Co., Ltd. will contribute RMB 5.1 million (or51.00%) and Shenzhen Mushen Industrial Co., Ltd. will contribute RMB 4.9 million (or49.00%). For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope since Jul. 10, 2017.As ofthe balance sheet date, thecontributions have not yet been actually paid.
⑨ Tianjin Konka Leasing Co., Ltd. was incorporated in Tianjin on Nov. 30, 2017 by Beijing Konka Electronic Co., Ltd. (a subsidiary of the Company) with a registered capital of RMB 170 million, of which all will be paid byBeijing Konka Electronic Co., Ltd.As of the balance sheet date, Beijing Konka Electronic Co., Ltd. has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope since Nov.30,2017.
⑩ Yantai Konka Healthcare Enterprise Service Co., Ltd. was incorporated in Yantai, Shandong Province on Nov. 24, 2017 by Konka Ventures Development (Shenzhen) Co., Ltd. (a subsidiary of the Company) with a registered capital of RMB 5 million, of which all will be paid by Konka Ventures Development (Shenzhen) Co., Ltd. As of the balance sheet date, Konka Ventures Development (Shenzhen) Co., Ltd. has not yet actually made the payment. For the Company has
KonkaGroupCo.,Ltd. AnnualReport2017 control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope since Nov.24,2017.
⑪
Shenzhen Konka Capital Equity Investment Management Co., Ltd. was incorporated in Shenzhen on Nov. 24, 2017 by Shenzhen Konka Investment Holding Co., Ltd. (a subsidiary of the Company) with a registered capital of RMB 10 million, of which all will be paid by Shenzhen Konka Investment Holding Co., Ltd. As of the balance sheet date, Shenzhen Konka Investment Holding Co., Ltd. has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope since Nov. 24, 2017.
⑫ Chain Kingdom (Shenzhen) Co., Ltd. was incorporated in Shenzhen on Jun. 9, 2017 by Chain Kingdom Co., Limited (a subsidiary of the Company) with a registered capital of RMB 5 million, of which all will be paid by Chain Kingdom Co., Limited. As of the balance sheet date, Chain Kingdom Co., Limited has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope since Jun. 9, 2017.
⑬Anhui Konka HouseholdAppliances Co., Ltd. (a subsidiary of the Company) has been cancelled for it has been absorbed by Anhui Konka Tongchuang Household Appliances Co., Ltd. (another subsidiary of theCompany) onMay 17,2017.
⑭ Indonesia Konka Electronics Co., Ltd., a subsidiary of the Company,was liquidated during 2017. As of the balance sheet date, Indonesia Konka Electronics Co., Ltd. has distributed its remaining assets but has not yet completed the cancellation procedure with the industrial and commerce administration.
(7) Major ChangeinBusiness ScopeorProduct orService Rangein Reporting Period√ Applicable□ Not applicable
The Company launched its supply chain management business in2017.
(8) Main Customers andSuppliers
Main customers:
|||
|-|-|
|Totalsalestotopfivecustomers(RMB)|7,077,286,124.31|
|TotalsalestotopfivecustomersasapercentageoftotalsalesofReportingPeriod(%)|22.66%|
|Total sales to related parties among top five customers as apercentageoftotalsalesofReportingPeriod(%)|0.00%|

Information about top fivecustomers:
|||||
|-|-|-|-|
|No.|Customer|Salesrevenuegenerated|PercentageoftotalsalesofReporting|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|||(RMB)|Period(%)|
|1|CustomerA|1,821,173,777.01|5.83%|
|2|CustomerB|1,807,483,385.73|5.79%|
|3|CustomerC|1,427,350,159.69|4.57%|
|4|CustomerD|1,022,560,970.90|3.27%|
|5|CustomerE|998,717,830.98|3.20%|
|Total|--|7,077,286,124.31|22.66%|

 Other information about themain customers:
√ Applicable□ Not applicable
None of the top five customers were related parties of the Company. And none of theCompany’s directors, supervisors, executive officers, core technicians,over5% shareholders, actual controller orany otherrelated parties held equity interests inthemajorcustomers, directly or indirectly. Main suppliers:
|||
|-|-|
|Totalpurchasesfromtopfivesuppliers(RMB)|4,709,162,792.37|
|Total purchasesfromtopfivesuppliersasapercentageoftotalpurchasesofReportingPeriod(%)|18.83%|
|Total purchases from related parties among top fivesuppliers as a percentage of total purchases ofReportingPeriod(%)|0|

Information about top fivesuppliers:
|||||
|-|-|-|-|
|No.|Supplier|Paymentforpurchases(RMB)|PercentageoftotalpurchasesofReportingPeriod(%)|
|1|SupplierA|1,161,757,192.00|4.65%|
|2|SupplierB|990,253,426.27|3.96%|
|3|SupplierC|886,143,489.53|3.54%|
|4|SupplierD|863,394,333.66|3.45%|
|5|SupplierE|807,614,350.91|3.23%|
|Total|--|4,709,162,792.37|18.83%|

 Other information about themain suppliers:
√ Applicable□ Not applicable
None of the top five suppliers were related parties of the Company. And none of theCompany’s directors, supervisors, executive officers, core technicians, over5% shareholders, actual controller orany otherrelated parties held equity interests inthemajorsuppliers, directly orindirectly.
KonkaGroupCo.,Ltd. AnnualReport2017 3.Expense
Unit: RMB
||||||
|-|-|-|-|-|
||2017|2016|Change|Reasonformaterialchange|
|Sellingexpenses|2,141,993,558.11|2,285,998,285.97|-6.30%||
|Administrativeexpenses|777,713,680.46|607,579,115.65|28.00%|enhancetheR&Dinput|
|Financecosts|340,918,550.61|154,764,546.12|120.28%|Greaterbankloanamount|

4.Research andDevelopment Expense
√ Applicable□ Not applicable
TheR&D expenditure in the Reporting Period was RMB0.33 billion. The Company continued to enhance theR&D input and tried to lay a solid foundation for it to carry out product differentiation through constantly developing new products, studying new techniques, altering the existing equipment and continuously enriching the product varieties and series. Meanwhile, it constantly carried out technical innovation and encouraged suggestions to increase its production efficiency and core competitiveness.
Details aboutR&D expense:
|||||
|-|-|-|-|
||2017|2016|Change|
|NumberofR&Dpersonnel|1,353|1,203|12.47%|
|R&Dpersonnelasapercentageoftotalemployees|7.59%|6.92%|0.67%|
|R&Dexpense(RMB)|329,676,982.50|191,650,648.39|72.02%|
|R&D expense as a percentage ofoperatingrevenue|1.06%|0.94%|0.12%|
|CapitalizedR&Dexpense(RMB)|0.00|0.00|0.00%|
|Capitalized R&D expense as apercentageoftotalR&Dexpense|0.00%|0.00%|0.00%|

Reason forany significantYoYchange intheproportionofR&D expensein operating revenue:□ Applicable√ Not applicable
Reason forany sharp variation inthe percentageof thecapitalizedR&D expenseand rationale□ Applicable√ Not applicable
5.Cash Flows
Unit: RMB
|||||
|-|-|-|-|
|Item|2017|2016|Change|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|Subtotal of cash generated byoperatingactivities|40,942,886,533.13|19,077,621,388.76|114.61%|
|Subtotalofcashusedinoperatingactivities|45,257,144,155.60|20,049,757,176.19|125.72%|
|Net cash flows from operatingactivities|-4,314,257,622.47|-972,135,787.43|-343.79%|
|Subtotal of cash generated byinvestingactivities|9,053,115,239.75|9,974,064,791.72|-9.23%|
|Subtotal of cash usedin investingactivities|4,323,599,750.38|9,882,767,942.03|-56.25%|
|Net cash flows from investingactivities|4,729,515,489.37|91,296,849.69|5080.37%|
|Subtotal of cash generated byfinancingactivities|10,526,601,766.42|7,172,728,955.54|46.76%|
|Subtotalofcashusedinfinancingactivities|9,779,757,140.80|5,839,979,604.35|67.46%|
|Net cash flows from financingactivities|746,844,625.62|1,332,749,351.19|-43.96%|
|Net increase in cash and cashequivalents|1,076,996,758.62|532,748,093.79|102.16%|

Explanation of why any of thedataabove varies materially:
√ Applicable□ Not applicable
Accounts receivable and undue notes receivable increased over the Reporting Period, resulting in negative net cash flows from operating activities.
During the Reporting Period, the cash generated by the sale of theCompany’s70% stake in Shenzhen Kangqiao Jiacheng Property Investment Co., Ltd. increased net cash flows from investing activities.
Reason for any material difference between the net operating cash flows and the net income of the Reporting Period:
□Applicable√ Not applicable
III Non-Core Business Analysis
√ Applicable□ Not applicable
Unit: RMB
|||||
|-|-|-|-|
|Amount|Percentageofpretaxincome(%)|Source/Reason|Recurringornot|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Investmentincome|6,587,848,357.88|98.94%|Gains on sale of 70%stake in ShenzhenKangqiao JiachengProperty Investment Co.,Ltd.|Not|
|Gainsandlossesonchangesinfairvalue|-66,221,451.96|-0.99%||Not|
|Assetimpairments|159,703,723.30|2.40%||Not|
|Non-operatingincome|82,832,663.76|1.24%||Taxrebatesonsoftwarearerecurringwhiletheothersareuncertain|
|Non-operatingexpense|16,521,032.68|0.25%||Not|

IVAnalysis ofAssets andLiabilities
1.Material ChangeinAssets andLiabilities
√ Applicable□ Not applicable
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||December31,2017||December31,2016||Changeinpercentage(%)|Reasonformaterialchange|
||Value|Percentageoftotalassets(%)|Value|Percentageoftotalassets(%)|||
|Monetaryassets|3,212,044,851.08|13.63%|2,617,606,256.42|15.18%|-1.55%||
|Accountsreceivable|3,443,095,947.26|14.61%|2,307,965,548.49|13.38%|1.23%||
|Inventories|4,690,363,565.53|19.91%|4,287,413,944.35|24.86%|-4.95%||
|Investmentproperty|216,455,629.99|0.92%|222,086,904.26|1.29%|-0.37%||
|Long-termequityinvestments|1,319,987,343.74|5.60%|309,648,120.37|1.80%|3.80%||
|Property, plantandequipment|1,587,170,348.35|6.74%|1,573,978,914.03|9.13%|-2.39%||
|Constructioninprocess|135,863,821.01|0.58%|315,536,437.05|1.83%|-1.25%||
|Short-term|6,927,472,037.35|29.41%|6,562,834,226.51|38.06%|-8.65%||

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||
|-|-|-|-|-|-|
|borrowings||||||
|Long-termborrowings|167,000,000.00|0.71%|70,000,000.00|0.41%|0.30%|

2.Assets andLiabilities Measured atFairValue
√ Applicable□ Not applicable
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Item|Openingamount|Gains/lossesonfairvaluechangesinReportingPeriod||Cumulativefairvaluechangeschargedtoequity|AllowanceforimpairmentforReportingPeriod|PurchasedinReportingPeriod|SoldinReportingPeriod|Closingamount|
|Financialassets|||||||||
|1. Financialassets at fairvaluethroughprofitorloss|252,084,994.12|-66,221,451.96||||||296,799.53|
|3.Available-for-salefinancialassets|55,777,425.00||31,342.08|||||58,162.76|
|Total ofabove|307,862,419.10|-66,221,451.96|31,342.08|||||354,962.29|
|Financialliabilities|337,263.13|||||||47,482,470.50|

 Material change in themeasurement attributes ofthe main assets in theReporting Period:
□ Yes√ No
3.Restricted Asset Rights asof EndofReporting 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 orcould not beused forrepaying debt.
KonkaGroupCo.,Ltd. AnnualReport2017 V Investments Made
1.Total Investment Amount
√ Applicable□ Not applicable
||||
|-|-|-|
|TotalinvestmentamountofReportingPeriod(RMB)|Totalinvestmentamountoflastyear(RMB)|Change|
|1,185,098,584.39|30,700,000.00|3760.26%|

 2.Material Equity Investments Madein Reporting Period
√ Applicable□ Not applicable
Unit:RMB
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Investee|Mainbusinessscopeofinvestee|Wayofinvestment|Amountofinvestment|TheCompany’sstakeininvestee|Sourceofinvestmentfunds|Jointinvestor|Termofinvestment|Typeofinvestment|Investmentprogressasofbalancesheetdate|Projectedearnings|ReturnoninvestmentinReportingPeriod|Anylegalmatterinvolved|Disclosuredate(ifany)|Indextodisclosedinformation(ifany)|
|GuangdongChutianDragonSmartCardCo.,Ltd.|Manufacturingandmarketingofsmartcard|Jointstock|588,000,000.00|24%|TheCompany’sownfunds|ZhengzhouXiangHongWanEnterpriseManagementCo.,Ltd.andZhengzhouEasternSpiritEnterpriseManagementCenter|||Investmentagreementsignedandownershiptransferwithindustrialandcommercialadministrationcompleted|Unknown|7,504,967.77|Not|06/30/2017|www.cninfo.com.cn|
|Total|--|--|588,000,000.00|--|--|--|--|--|--|Unknown|7,504,967.77|--|--|--|

KonkaGroupCo.,Ltd. AnnualReport2017 3.Material Non-Equity Investments Ongoing inReporting Period
√ Applicable□ Not applicable
Unit: RMB
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Project|Wayofinvestment|Investmentinfixedassetsornot|Industry|InvestmentinReportingPeriod|TotalactualinvestmentasofendofReportingPeriod|Sourceofinvestmentcapital|Projectprogress|TotalearningsasofendofReportingPeriod|Reasonforfallingbehindscheduleornotachievingprojectedearnings|Project|Disclosuredate(ifany)|Indextodisclosedinformation(ifany)|
|KunshanShuiyueZhouzhuangrealestateproject|BuiltbytheCompanyitself|25%isinvestedinfixedassets|Realestate,hotelmanagement|325,160,000|2,011,090,000|TheCompany’sownmoney|71%||223,957,258.74|N/A|07/06/2010|www.cninfo.com.cn|
|KonkaTechnologicalInnovationCenter|BuiltbytheCompanyitself|Yes|Electronics|76,657,814.50|76,657,814.50||17.00%||0.00|N/A|12/30/2016||
|NewplantinDongguancity|BuiltbytheCompanyitself|Yes|Electronics|0.00|0.00||0.00%||0.00|N/A|03/11/2017||
|YibinKonkaSmartTerminalHigh-TechPark|BuiltbytheCompanyitself|Yes|Electronics|0.00|0.00||0.00%||0.00|N/A|12/16/2017||
|Total||||401,817,814.|2,087,747,81||||223,957,258.||||

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|50|4.50|74|

Notes:
(1) Regarding the Kunshan Shuiyue Zhouzhuang real estate project, Phase IV is under construction, and themove-in ofPhase III andthesales ofPhase4.1have been substantiallycompleted.
(2) In regard to the Konka Technological Innovation Center project, the related land use right transferagreement has been signed and planning isunderway.
(3)As for the project of Dongguancity’s new plant, preparations are underway and the Company is waiting for thelocal government to put outtheproject target land for bids.
(4)As for the Yibin Konka Smart Terminal High-Tech Park project, preparations are underway and the Companyis waiting for thelocal government toput out theproject target land forbids.
4.FinancialInvestments
(1) Securities Investments
√ Applicable□ Not applicable
Unit:RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||Symbolofsecurity|Nameofsecurity|Initialinvestmentcost|Accountingmeasurementmethod|Openingcarryingvalue|Gain/LossonfairvaluechangesinReportingPeriod|Accumulatedfairvaluechangeschargedtoequity|PurchasedinReportingPeriod|SoldinReportingPeriod|Gain/lossinReportingPeriod|Closingcarryingvalue|Accountingtitle|Sourceofinvestmentfunds|
|Domestic/Foreignstock|300605|HFXX|4,671.80|Fairvaluemethod|0.00|0.00|0.00|4,671.80|24,601.50|19,929.70|0.00|Available-for-salefinancialasset|TheCompany’sownmoney|
|Ditto|300610|CHGF|3,371.83|Ditto|0.00|0.00|0.00|3,371.83|14,788.84|11,417.01|0.00|Ditto|Ditto|
|Ditto|300609|HNKJ|3,369.80|Ditto|0.00|0.00|0.00|3,369.80|25,605.50|22,235.70|0.00|Ditto|Ditto|
|Ditto|002848|GSBE|4,417.00|Ditto|0.00|0.00|0.00|4,417.00|26,110.00|21,693.00|0.00|Ditto|Ditto|
|Ditto|002849|WXZN|3,575.68|Ditto|0.00|0.00|0.00|3,575.68|19,092.00|15,516.32|0.00|Ditto|Ditto|
|Ditto|300611|MLKJ|3,579.03|Ditto|0.00|0.00|0.00|3,579.03|17,312.10|13,733.07|0.00|Ditto|Ditto|
|Ditto|002850|KDL|22,997.00|Ditto|0.00|0.00|0.00|22,997.00|85,201.70|62,204.70|0.00|Ditto|Ditto|
|Ditto|002851|MGMT|4,016.10|Ditto|0.00|0.00|0.00|4,016.10|26,400.00|22,383.90|0.00|Ditto|Ditto|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Ditto|300616|SPZP|20,109.50|Ditto|0.00|0.00|0.00|20,109.50|68,080.00|47,970.50|0.00|Ditto|Ditto|
|Ditto|300618|HRGY|5,689.65|Ditto|0.00|0.00|0.00|5,689.65|48,583.67|42,894.02|0.00|Ditto|Ditto|
|Ditto|002852|DDQ|17,832.10|Ditto|0.00|0.00|0.00|17,832.10|60,255.60|42,423.50|0.00|Ditto|Ditto|
|Ditto|300620|GKKJ|2,766.06|Ditto|0.00|0.00|0.00|2,766.06|14,648.26|11,882.20|0.00|Ditto|Ditto|
|Ditto|300622|BSYJ|1,916.85|Ditto|0.00|0.00|0.00|1,916.85|9,145.50|7,228.65|0.00|Ditto|Ditto|
|Ditto|300623|JJWD|5,526.00|Ditto|0.00|0.00|0.00|5,526.00|19,200.00|13,674.00|0.00|Ditto|Ditto|
|Ditto|300621|WYGF|4,016.20|Ditto|0.00|0.00|0.00|4,016.20|15,878.00|11,861.80|0.00|Ditto|Ditto|
|Ditto|300625|SXJG|10,885.20|Ditto|0.00|0.00|0.00|10,885.20|32,881.20|21,996.00|0.00|Ditto|Ditto|
|Ditto|002856|MZGF|3,831.30|Ditto|0.00|0.00|0.00|3,831.30|13,530.00|9,698.70|0.00|Ditto|Ditto|
|Ditto|002855|JRJS|3,256.92|Ditto|0.00|0.00|0.00|3,256.92|14,178.06|10,921.14|0.00|Ditto|Ditto|
|Ditto|300626|HRGF|2,362.50|Ditto|0.00|0.00|0.00|2,362.50|11,428.20|9,065.70|0.00|Ditto|Ditto|
|Ditto|300627|HCDH|2,949.87|Ditto|0.00|0.00|0.00|2,949.87|14,666.19|11,716.32|0.00|Ditto|Ditto|
|Ditto|300630|PLZY|4,389.18|Ditto|0.00|0.00|0.00|4,389.18|16,808.00|12,418.82|0.00|Ditto|Ditto|
|Ditto|002774|KYDT|5,124.00|Ditto|0.00|0.00|0.00|5,124.00|18,480.00|13,356.00|0.00|Ditto|Ditto|
|Ditto|002859|JMKJ|6,798.96|Ditto|0.00|0.00|0.00|6,798.96|16,005.60|9,206.64|0.00|Ditto|Ditto|
|Ditto|300635|DAGF|3,605.49|Ditto|0.00|0.00|0.00|3,605.49|10,999.80|7,394.31|0.00|Ditto|Ditto|
|Ditto|300632|GPGF|2,549.55|Ditto|0.00|0.00|0.00|2,549.55|9,487.50|6,937.95|0.00|Ditto|Ditto|
|Ditto|002860|XSE|3,506.37|Ditto|0.00|0.00|0.00|3,506.37|9,522.60|6,016.23|0.00|Ditto|Ditto|
|Ditto|300639|KPSW|2,850.45|Ditto|0.00|0.00|0.00|2,850.45|8,339.00|5,488.55|0.00|Ditto|Ditto|
|Ditto|300637|YFXC|3,316.62|Ditto|0.00|0.00|0.00|3,316.62|9,648.65|6,332.03|0.00|Ditto|Ditto|
|Ditto|002861|YTTX|4,485.00|Ditto|0.00|0.00|0.00|4,485.00|11,960.00|7,475.00|0.00|Ditto|Ditto|
|Ditto|002863|JFKD|3,101.68|Ditto|0.00|0.00|0.00|3,101.68|13,402.88|10,301.20|0.00|Ditto|Ditto|
|Ditto|300641|ZDGF|6,438.00|Ditto|0.00|0.00|0.00|6,438.00|15,600.00|9,162.00|0.00|Ditto|Ditto|
|Ditto|002865|JDGF|2,787.40|Ditto|0.00|0.00|0.00|2,787.40|8,602.44|5,815.04|0.00|Ditto|Ditto|
|Ditto|002866|CYKJ|4,850.80|Ditto|0.00|0.00|0.00|4,850.80|13,140.60|8,289.80|0.00|Ditto|Ditto|
|Ditto|002867|ZDS|9,940.08|Ditto|0.00|0.00|0.00|9,940.08|22,355.20|12,415.12|0.00|Ditto|Ditto|
|Ditto|002868|LKSH|4,286.40|Ditto|0.00|0.00|0.00|4,286.40|12,097.80|7,811.40|0.00|Ditto|Ditto|
|Ditto|300647|CPS|1,711.36|Ditto|0.00|0.00|0.00|1,711.36|6,952.40|5,241.04|0.00|Ditto|Ditto|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Ditto|300643|WTZK|2,119.90|Ditto|0.00|0.00|0.00|2,119.90|9,860.00|7,740.10|0.00|Ditto|Ditto|
|Ditto|002869|JYKJ|4,054.80|Ditto|0.00|0.00|0.00|4,054.80|9,207.00|5,152.20|0.00|Ditto|Ditto|
|Ditto|002870|XSGF|5,518.80|Ditto|0.00|0.00|0.00|5,518.80|11,188.80|5,670.00|0.00|Ditto|Ditto|
|Ditto|300652|LDK|3,985.88|Ditto|0.00|0.00|0.00|3,985.88|9,364.81|5,378.93|0.00|Ditto|Ditto|
|Ditto|002872|TSZY|11,945.58|Ditto|0.00|0.00|0.00|11,945.58|24,350.40|12,404.82|0.00|Ditto|Ditto|
|Ditto|300655|JRGF|1,557.00|Ditto|0.00|0.00|0.00|1,557.00|8,214.75|6,657.75|0.00|Ditto|Ditto|
|Ditto|300657|HXDZ|2,027.97|Ditto|0.00|0.00|0.00|2,027.97|9,839.70|7,811.73|0.00|Ditto|Ditto|
|Ditto|300659|ZFXX|2,659.95|Ditto|0.00|0.00|0.00|2,659.95|8,617.41|5,957.46|0.00|Ditto|Ditto|
|Ditto|300658|YJGF|3,726.72|Ditto|0.00|0.00|0.00|3,726.72|8,361.60|4,634.88|0.00|Ditto|Ditto|
|Ditto|300660|JSLL|13,701.87|Ditto|0.00|0.00|0.00|13,701.87|27,395.55|13,693.68|0.00|Ditto|Ditto|
|Ditto|002877|ZNZK|2,049.60|Ditto|0.00|0.00|0.00|2,049.60|7,654.28|5,604.68|0.00|Ditto|Ditto|
|Ditto|300663|KLRJ|2,617.20|Ditto|0.00|0.00|0.00|2,617.20|10,260.00|7,642.80|0.00|Ditto|Ditto|
|Ditto|300662|KRGJ|3,353.60|Ditto|0.00|0.00|0.00|3,353.60|13,194.24|9,840.64|0.00|Ditto|Ditto|
|Ditto|002879|CLKJ|6,270.96|Ditto|0.00|0.00|0.00|6,270.96|12,841.20|6,570.24|0.00|Ditto|Ditto|
|Ditto|002880|WGSW|6,779.70|Ditto|0.00|0.00|0.00|6,779.70|20,903.40|14,123.70|0.00|Ditto|Ditto|
|Ditto|300666|JFDZ|1,624.00|Ditto|0.00|0.00|0.00|1,624.00|10,850.00|9,226.00|0.00|Ditto|Ditto|
|Ditto|002881|MGZN|2,804.48|Ditto|0.00|0.00|0.00|2,804.48|10,898.66|8,094.18|0.00|Ditto|Ditto|
|Ditto|002882|JLY|5,232.80|Ditto|0.00|0.00|0.00|5,232.80|13,504.00|8,271.20|0.00|Ditto|Ditto|
|Ditto|300669|HNGF|1,551.00|Ditto|0.00|0.00|0.00|1,551.00|4,452.78|2,901.78|0.00|Ditto|Ditto|
|Ditto|300670|DYZN|2,306.23|Ditto|0.00|0.00|0.00|2,306.23|6,093.68|3,787.45|0.00|Ditto|Ditto|
|Ditto|300671|FMDZ|2,132.93|Ditto|0.00|0.00|0.00|2,132.93|6,856.41|4,723.48|0.00|Ditto|Ditto|
|Ditto|300672|GKW|1,958.88|Ditto|0.00|0.00|0.00|1,958.88|5,775.00|3,816.12|0.00|Ditto|Ditto|
|Ditto|300675|JKY|1,277.34|Ditto|0.00|0.00|0.00|1,277.34|6,497.40|5,220.06|0.00|Ditto|Ditto|
|Ditto|300676|HDJY|4,242.04|Ditto|0.00|0.00|0.00|4,242.04|34,147.80|29,905.76|0.00|Ditto|Ditto|
|Ditto|002888|HWKJ|1,148.16|Ditto|0.00|0.00|0.00|1,148.16|3,590.40|2,442.24|0.00|Ditto|Ditto|
|Ditto|300677|YKYL|4,873.21|Ditto|0.00|0.00|0.00|4,873.21|10,475.37|5,602.16|0.00|Ditto|Ditto|
|Ditto|300678|ZKXX|1,208.90|Ditto|0.00|0.00|0.00|1,208.90|3,977.82|2,768.92|0.00|Ditto|Ditto|
|Ditto|002889|DFJS|3,260.88|Ditto|0.00|0.00|0.00|3,260.88|7,401.24|4,140.36|0.00|Ditto|Ditto|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Ditto|300679|DLJS|17,878.08|Ditto|0.00|0.00|0.00|17,878.08|29,568.00|11,689.92|0.00|Ditto|Ditto|
|Ditto|300682|LXKJ|1,790.75|Ditto|0.00|0.00|0.00|1,790.75|4,842.50|3,051.75|0.00|Ditto|Ditto|
|Ditto|300686|ZDL|1,765.32|Ditto|0.00|0.00|0.00|1,765.32|3,838.96|2,073.64|0.00|Ditto|Ditto|
|Ditto|300683|HTSW|8,169.12|Ditto|0.00|0.00|0.00|8,169.12|14,681.60|6,512.48|0.00|Ditto|Ditto|
|Ditto|300691|LHGD|3,192.00|Ditto|0.00|0.00|0.00|3,192.00|14,978.00|11,786.00|0.00|Ditto|Ditto|
|Ditto|002892|KLE|3,810.52|Ditto|0.00|0.00|0.00|3,810.52|14,137.55|10,327.03|0.00|Ditto|Ditto|
|Ditto|300692|ZHHB|2,326.70|Ditto|0.00|0.00|0.00|2,326.70|14,310.00|11,983.30|0.00|Ditto|Ditto|
|Ditto|300693|SHGF|3,316.60|Ditto|0.00|0.00|0.00|3,316.60|11,654.10|8,337.50|0.00|Ditto|Ditto|
|Ditto|002891|ZCGF|2,767.34|Ditto|0.00|0.00|0.00|2,767.34|8,119.44|5,352.10|0.00|Ditto|Ditto|
|Ditto|002895|CHGF|2,776.85|Ditto|0.00|0.00|0.00|2,776.85|12,008.00|9,231.15|0.00|Ditto|Ditto|
|Ditto|300698|WMKJ|1,980.00|Ditto|0.00|0.00|0.00|1,980.00|15,849.90|13,869.90|0.00|Ditto|Ditto|
|Ditto|300699|GWFC|7,623.02|Ditto|0.00|0.00|0.00|7,623.02|48,744.00|41,120.98|0.00|Ditto|Ditto|
|Ditto|300697|DGHJ|1,968.54|Ditto|0.00|0.00|0.00|1,968.54|9,178.06|7,209.52|0.00|Ditto|Ditto|
|Ditto|002898|SLYY|2,999.91|Ditto|0.00|0.00|0.00|2,999.91|11,631.42|8,631.51|0.00|Ditto|Ditto|
|Ditto|002897|YHGF|5,004.56|Ditto|0.00|0.00|0.00|5,004.56|12,888.92|7,884.36|0.00|Ditto|Ditto|
|Ditto|300700|DLXC|1,930.16|Ditto|0.00|0.00|0.00|1,930.16|12,512.00|10,581.84|0.00|Ditto|Ditto|
|Ditto|002899|YPS|3,498.90|Ditto|0.00|0.00|0.00|3,498.90|10,311.40|6,812.50|0.00|Ditto|Ditto|
|Ditto|002893|HTDL|2,602.24|Ditto|0.00|0.00|0.00|2,602.24|10,503.20|7,900.96|0.00|Ditto|Ditto|
|Ditto|300702|TYGF|6,005.88|Ditto|0.00|0.00|0.00|6,005.88|17,714.80|11,708.92|0.00|Ditto|Ditto|
|Ditto|002900|HSL|8,312.20|Ditto|0.00|0.00|0.00|8,312.20|18,078.00|9,765.80|0.00|Ditto|Ditto|
|Ditto|002901|DBYL|3,248.36|Ditto|0.00|0.00|0.00|3,248.36|12,645.00|9,396.64|0.00|Ditto|Ditto|
|Ditto|300654|SJTH|1,542.00|Ditto|0.00|0.00|0.00|1,542.00|7,740.00|6,198.00|0.00|Ditto|Ditto|
|Ditto|002902|MPGC|4,267.26|Ditto|0.00|0.00|0.00|4,267.26|15,402.00|11,134.74|0.00|Ditto|Ditto|
|Ditto|300705|JDZY|2,551.02|Ditto|0.00|0.00|0.00|2,551.02|9,202.86|6,651.84|0.00|Ditto|Ditto|
|Ditto|002903|YHSK|2,632.68|Ditto|0.00|0.00|0.00|2,632.68|12,083.96|9,451.28|0.00|Ditto|Ditto|
|Ditto|002906|HYJT|8,501.49|Ditto|0.00|0.00|0.00|8,501.49|21,294.09|12,792.60|0.00|Ditto|Ditto|
|Ditto|300708|JCGD|1,421.28|Ditto|0.00|0.00|0.00|1,421.28|17,136.00|15,714.72|0.00|Ditto|Ditto|
|Ditto|002905|JYYS|7,384.96|Ditto|0.00|0.00|0.00|7,384.96|18,392.00|11,007.04|0.00|Ditto|Ditto|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Ditto|300709|JYKJ|7,120.80|Ditto|0.00|0.00|0.00|7,120.80|18,160.80|11,040.00|0.00|Ditto|Ditto|
|Ditto|002908|DSKJ|758.00|Ditto|0.00|0.00|0.00|758.00|4,183.00|3,425.00|0.00|Ditto|Ditto|
|Ditto|002907|HSZY|1,408.83|Ditto|0.00|0.00|0.00|1,408.83|8,086.00|6,677.17|0.00|Ditto|Ditto|
|Ditto|002909|JTGF|1,553.76|Ditto|0.00|0.00|0.00|1,553.76|6,052.80|4,499.04|0.00|Ditto|Ditto|
|Ditto|002910|ZYMC|2,804.96|Ditto|0.00|0.00|0.00|2,804.96|9,697.04|6,892.08|0.00|Ditto|Ditto|
|Ditto|300712|YFGF|3,155.94|Ditto|0.00|0.00|0.00|3,155.94|10,159.35|7,003.41|0.00|Ditto|Ditto|
|Ditto|300713|YKR|4,713.93|Ditto|0.00|0.00|0.00|4,713.93|15,035.67|10,321.74|0.00|Ditto|Ditto|
|Ditto|300711|YHTX|2,630.25|Ditto|0.00|0.00|0.00|2,630.25|11,377.80|8,747.55|0.00|Ditto|Ditto|
|Ditto|300718|CSZC|2,635.52|Ditto|0.00|0.00|0.00|2,635.52|7,668.00|5,032.48|0.00|Ditto|Ditto|
|Ditto|300719|ADWE|3,327.87|Ditto|0.00|0.00|0.00|3,327.87|9,295.65|5,967.78|0.00|Ditto|Ditto|
|Ditto|300716|GLKJ|2,561.54|Ditto|0.00|0.00|0.00|2,561.54|6,235.05|3,673.51|0.00|Ditto|Ditto|
|Ditto|002864|PLYY|1,584.74|Ditto|0.00|0.00|0.00|1,584.74|5,040.20|3,455.46|0.00|Ditto|Ditto|
|Ditto|300721|YDGF|2,924.25|Ditto|0.00|0.00|0.00|2,924.25|6,161.75|3,237.50|0.00|Ditto|Ditto|
|Ditto|300723|YPH|3,870.35|Ditto|0.00|0.00|0.00|3,870.35|9,166.26|5,295.91|0.00|Ditto|Ditto|
|Ditto|002911|FYGF|6,746.96|Ditto|0.00|0.00|0.00|6,746.96|12,748.56|6,001.60|0.00|Ditto|Ditto|
|Ditto|300726|HDDZ|2,499.84|Ditto|0.00|0.00|0.00|2,499.84|7,728.00|5,228.16|0.00|Ditto|Ditto|
|Ditto|300727|RHCL|1,551.24|Ditto|0.00|0.00|0.00|1,551.24|5,824.14|4,272.90|0.00|Ditto|Ditto|
|Ditto|002913|ASK|5,924.10|Ditto|0.00|0.00|0.00|5,924.10|10,783.50|4,859.40|0.00|Ditto|Ditto|
|Ditto|300730|KCXX|1,513.16|Ditto|0.00|0.00|0.00|1,513.16|0.00|0.00|7,520.55|Ditto|Ditto|
|Ditto|002915|ZXFC|1,459.61|Ditto|0.00|0.00|0.00|1,459.61|0.00|0.00|7,988.13|Ditto|Ditto|
|Ditto|300731|KCXY|2,436.16|Ditto|0.00|0.00|0.00|2,436.16|6,252.32|3,816.16|0.00|Ditto|Ditto|
|Ditto|002917|JAB|2,374.56|Ditto|0.00|0.00|0.00|2,374.56|5,416.20|3,041.64|0.00|Ditto|Ditto|
|Ditto|002918|MNLS|8,948.94|Ditto|0.00|0.00|0.00|8,948.94|16,702.40|7,753.46|0.00|Ditto|Ditto|
|Ditto|002919|MCJK|1,406.72|Ditto|0.00|0.00|0.00|1,406.72|0.00|0.00|3,949.12|Ditto|Ditto|
|Ditto|002920|DSXW|12,537.88|Ditto|0.00|0.00|0.00|12,537.88|0.00|0.00|24,025.82|Ditto|Ditto|
|Ditto|300684|ZSKJ|1,376.00|Ditto|0.00|0.00|0.00|1,376.00|0.00|0.00|2,397.68|Ditto|Ditto|
|Ditto|300735|GHKJ|5,064.93|Ditto|0.00|0.00|0.00|5,064.93|0.00|0.00|7,295.73|Ditto|Ditto|
|Ditto|002922|YGE|3,462.39|Ditto|0.00|0.00|0.00|3,462.39|0.00|0.00|4,985.73|Ditto|Ditto|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Ditto|300241|RFGD|232,711,950.00|Ditto|212,190,150.00|20,521,800|0.00|0.00|220,794,435.52|8,604,285.52|0.00|Tradingfinancialasset|Ditto|
|Othersecuritiesinvestmentsheldatperiod-end|||0.00|--|0.00|0.00|0.00|0.00|0.00|0.00|0.00|--|--|
|Total|||233,238,443.08|--|212,190,150.00|20,521,800|0.00|526,493.08|222,476,418.26|9,786,595.87|58,162.76|--|--|
|Disclosure date ofannouncement on Board’sconsent for securitiesinvestment|||N/A|||||||||||
|Disclosure date ofannouncement onshareholders’ meeting’sconsent for securitiesinvestment(ifany)|||N/A|||||||||||

(2) Investment inDerivativeFinancialInstruments
√ Applicable□ Not applicable
|||
|-|-|
|Capital source for derivativeinvestment|U.S.dollarfinancings|
|Legal matters involved (ifapplicable)|N/A|
|Disclosure date of boardannouncement approvingderivativeinvestment(ifany)|05/24/2014|
|Disclosure date of shareholders ’meeting announcement approvingderivativeinvestment(ifany)|06/10/2014|
|Analysis of risks and controlmeasuresassociatedwithderivativeinvestments held in ReportingPeriod(includingbutnotlimitedtomarket risk, liquidity risk, creditrisk, operational risk, legal risk,etc.)|We engage in forward forex transactions to reduce the currency risk when securingforeign-currency financing. This is very needed in our routine operation and is incompliance with the applicable laws and regulations. We have formulated theManagement Rules of Konka Group Co., Ltd. for Investment In Derivative FinancialInstruments,makingcleartherelevantconsiderationandapprovalprocedure,riskcontrol,etc..WealwayssignforwardforexcontractswithlargebankssuchastheBankofChina,which operate steadily and have good credit standing, which could help prevent loss onforwardforexcontractsduetobankfailure.|
|Changes in market prices or fairvalue of derivative investments inReporting Period (fair valueanalysis should include|Howwe usuallymeasurethefair value of derivative financial instruments: Based ontheforward forex sales and purchase contracts that are signed between the Company andbanksand have not expired in a ReportingPeriod, we recognize thedifferences betweenthequotationsforthesecontractsonthebalancesheetdatesprovidedbythebanksandthe|

KonkaGroupCo.,Ltd. AnnualReport2017
|||
|-|-|
|measurement method and relatedassumptionsandparameters)|contractualpricesastransactionalfinancial assets orliabilities,andtheprofit/lossonfairvaluechangesisrecognizedaccordingly.Becausethesecontractshavelockedinexchangerates,nochangeswilloccurwhencomparingthefairvalueonsigningdateswiththatondeliverydates.|
|Material changes in accountingpolicies and specific accountingprinciples adopted for derivativeinvestments in Reporting Periodcomparedtolastreportingperiod|Nomaterialchanges|
|Opinion of independent directorson derivative investments and riskcontrol|It is considered necessary for the Company to lock in foreign-currency financing coststhroughfinancial instruments,because it couldeffectively reducethecurrencyrisk whensecuring foreign-currency financing. The Company has formulated the internal controlmechanismforinvestmentinderivativefinancialinstruments,andtherelevantriskcontrolmeasuresthattheCompanyhastakenareconsideredeffective.|

Unit:RMB’0,000
||||||
|-|-|-|-|-|
|Typeofderivativefinancialinstrument|Openingcontractualamount|Closingcontractualamount|Gain/lossinReportingPeriod|ClosinginvestmentamountasapercentageoftheCompany’sclosingnetassetvalue|
|Forwardforexcontract|112,014.55|224,712.77|-9,714.17|28.11%|

5.Use ofFunds Raised
□ Applicable√ Not applicable
No suchcases in theReporting Period.
VI Saleof Major Assets and EquityInterests
1.SaleofMajor Assets
□ Applicable√ Not applicable
No suchcases in theReporting Period.
2.SaleofMajor Equity Interests
√ Applicable□ Not applicable
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Counterparty|Equityinterestssold|Dateofsale|Sellingprice(RMB’0,000)|Amountcontributedbytheequity|EffectofthesaleontheCompany|Amountcontributedbythesaletonet|Pricingprinciple|Relatedtransactionornot|Relationshipbetweencounterparty|Ownershipfullytransferredornot|Executedasscheduledornot,ifnot,|Disclosuredate|Indextodisclosedinformation|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||||intereststonetincomeoftheCompanyfromperiod-beginningtodateofsale(RMB’0,000)||incomeoftheCompanyasapercentageoftheCompany’snetincome(%)|||andtheCompany||statereasonandactionstaken|||
|ShanghaiWanweihuWarehousingServicesCo.,Ltd.|51%stakeinKunshanKonkaElectronicsCo.,Ltd.|09/26/2017|22,440|1,647.46|OptimizingtheCompany’sallocationofassets,generatingcashinflows,increasingassets’liquidityandimprovingtheCompany’searnings|3.33%|Not lower than assessed value|Not|N/A|Yes|Yes|06/30/2017|www.cninfo.com.cn|
|ShenzhenChuangjingInvestmentCo.,Ltd.|70%stakeinShenzhenKangqiaoJiachengPropertyInvestmentCo.,Ltd.|11/30/2017|698,000|-1,155.54||94.16%|Not lower than assessed value|Not|N/A|Yes|Yes|08/25/2017||

VII Main Controlled andJointStock Companies
√ Applicable□ Not applicable
Main subsidiaries and jointstock companies with an over10%effectontheCompany’s net income:
KonkaGroupCo.,Ltd. AnnualReport2017 Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Companyname|RelationshipwiththeCompany|Mainbusinessscope|Registeredcapital|Totalassets|Netassetvalue|Operatingrevenue|Operatingincome|Netincome|
|ShenzhenWankaidaScienceandTechnologyCo.,Ltd.|Subsidiary|Softwaretechnologydevelopmentandmaintenance|RMB10,000,000|500,682,841.12|492,787,962.22|95,937,140.00|113,866,864.97|96,757,860.17|
|AnhuiKonkaTongchuangHouseholdAppliancesCo.,Ltd.|Subsidiary|Productionandsaleofrefrigerators,washingmachinesandotherhouseholdappliances|RMB270,000,000|1,169,711,595.28|140,991,271.69|1,868,161,803.74|25,749,597.14|27,900,435.01|
|AnhuiKonkaElectronicCo.,Ltd.|Subsidiary|Productionandsaleofmultimediaproducts|RMB140,000,000|1,262,224,964.57|373,413,639.70|3,440,965,798.27|24,576,749.10|21,680,920.38|
|ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd.|Subsidiary|Productionandsaleofmobilecommunicationproducts|RMB120,000,000|572,046,843.10|-168,424,829.92|923,842,446.60|23,654,362.17|66,253,590.42|
|DongguanKonkaElectronicCo.,Ltd.|Subsidiary|Productionandsaleofmultimediaproducts|RMB266,670,000|779,999,017.53|649,500,823.14|212,156,300.02|5,938,446.13|12,305,107.32|
|HongKongKonkaCo.,Ltd.|Subsidiary|Export&importofelectromechanicalandelectronics|HKD500,000|1,980,881,885.78|150,713,892.10|3,734,825,819.54|52,290,208.24|42,894,723.45|
|KunshanKangshengInvestmentDevelopmentCo.,Ltd.|Subsidiary|Realestateandhotels|RMB350,000,000|1,368,894,796.05|576,309,979.00|902,098,926.28|276,011,078.68|205,636,642.00|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||||
|-|-|-|-|-|-|-|-|-|
|ChainKingdomCo.,Limited|Subsidiary|Supplychainmanagement|USD1,500,000|1,156,003,026.24|28,370,314.63|5,535,614,456.54|22,421,734.04|18,722,147.92|

 Subsidiaries obtained or disposed in theReporting Period:
√ Applicable□ Not applicable
||||
|-|-|-|
|Subsidiary|HowsubsidiarywasobtainedordisposedinReportingPeriod|Effectsonoverallproductionandoperatingresults|
|ShenzhenKangqiaoJiachengPropertyInvestmentCo.,Ltd.|TheCompany’s70%stakeinthesubsidiarywassold|Greatgainsonthesalefor2017|
|KunshanKonkaElectronicCo.,Ltd.|TheCompany’s51%stakeinthesubsidiarywassold|Nosignificanteffects|
|KonkaVenturesDevelopment(Shenzhen)Co.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|ShenzhenKonkaPengrunTechnology&IndustryCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|ShenzhenKonkaUnifortuneSupplyChainManagementCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|ShenzhenKonkaInvestmentHoldingCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|AnhuiKangzhiTradeCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|HainanKonkaMaterialTechnologyCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|TianjinKonkaLeasingCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|YantaiKonkaHealthcareEnterpriseServiceCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|ShenzhenKonkaCapitalEquityInvestmentManagementCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|ChainKingdom(Shenzhen)Co.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|Anhui Konka Household Appliances Co.,Ltd.|Consolidatedbymerger|Nosignificanteffects|

Information about themain controlled and jointstock companies:
There is no other important information about the controlled and joint stock companies in the Reporting Period of which disclosure isrequired.
VIII Structured BodiesControlled bytheCompany
□ Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2017 IXOutlookforFutureDevelopment oftheCompany
In 2018, the Company will continue to follow the development mode of "technology+ industry+ urbanization" and “hardware+ software”, “end products+ users” and “investment& holding+ finance” to pursue great progress and leapfrog development. TheCompany’s operating strategies for theyear are summarized as follows:
(I)Technology park business
To quickly promote the launch of industrial parks: quickly promote the launch of industrial parks including the Yibin Intelligent Terminal Industrial Park and Dongguan Science and Technology Industrial Park according to thesigned agreements and agreed arrangements.
(II) Multimediabusiness
1. Corporatization of multimedia operations: the Company will finalize specific plans for transaction model, asset allocation and operation model, etc. as soon as possible, and establish a set of fast-response mechanisms to respond to market competition by a completely independent company to improveefficiency effectively.
2. Diversification of product lines and business models: the Company will try to find new opportunities in the areas of channel reuse, new business expansion and introduction of new product lines. It will make expansion with existing business advantages, optimize business landscape and improvebusiness quality.
3. Increase technological innovation and productR&D investment: products are the fundamental of multimedia business. In 2018, the Company will continue to increase investment in technological innovation and productR&D.
(III) Supplychain management
Optimize and upgrade business model: the Company will continuously optimize and upgrade the business model of supply chain management with risk control, and improve business management and gross profit margin while ensuring business operations.
(IV)White goods
1. To promote quality projects, focus on improving product structure, increase the proportion of high-end products, strengthen cooperation with professional colleges and research institutes, push forward healthy+ intelligent products and develop impressive quality models with Konka characteristics.
2. Strengthen promotion and advertisement of white goods brands of the Company, and plan marketing events and other brand promotion activities for differentiated products to increase the visibility,popularity and reputation ofthe Company.
(V) Internet business
KonkaGroupCo.,Ltd. AnnualReport2017 1. To realize the operation of users and diversification of users: on the one hand, expands business to mobile phone users on the basis of traditional smart TVs to earn more backward revenues; on the other hand, realizediversification of channels for acquiring users.
2. Diversify profit model: gradually engage in the content industry and license area in upstream to change theoriginal unitary profit model ofInternet business.
3. Enhance operator business: promote the expansion of multi-modal intelligent terminals by diversified cooperation models, thusto realizerapid growth of operator business.
4. Make breakthroughs in the operation of official mall: further improve the online service quality and user experience of the Company official website, line up online and offline services with multi-level and comprehensive useroperation toachieve rapid development oftheofficial mall. (VI) Mobilephonebusiness
1. To promote the Yibin project as scheduled to ensure the relocation of mobile phone business, enhance operationefficiency and improvetheoperation ofmobilephonebusiness.
2. To take opportunities to expand in terms of new modes, new services and new products based on stabilizing the main mobile phone business and improving operations, integrate new services in smart terminal to create smart terminal platforms, and achieve a successful transition with new business layouts.
(VII) Investment
1. Assist the Company in completing industrial layout and transformation and upgrading with full use of capitals based on the strategic deployment of the Company, and realize enlargement, strengthening and improvement of existing business segments to complete internal industrial upgrading.
2.Accelerate the development model of "investment& holding+ finance" for leapfrog development ofthe Company.
(VIII)Ventureinvestment
1. Build a professional venture investment team and gradually realize the five-in-one operation model of integration of innovation base, venture funds, entrepreneurial media, innovation and cloud service platforms, andbuild adiversified profit system while expandinginfluences.
2. Improve the quality of development, and reserve and incubate high-quality enterprises to lay a foundation fortheCompany’s business expansion.
X VisitsPaid to the CompanyforPurposes ofResearch, Communication, Interview, etc. 1.During Reporting Period
□ Applicable√ Not applicable
No suchcases in theReporting Period.
KonkaGroupCo.,Ltd. AnnualReport2017 Part V Significant Events
I Cash and/orShareDividendPayouts to Common Shareholders
Formulation, execution or adjustments of dividend payout policy, especially cash dividend policy, for common shareholders in theReporting Period:
√ Applicable□ Not applicable
The cash dividend policy of the Company was clearly stated in its Articles of Association, with specific and clear dividend standards and ratios. The relevant decision-making procedure and mechanism were sound; the independent directors faithfully performed their duties and played their due role; and the non-controlling interests were able to fully express their opinion and desire and their legal rights and interests were fully protected. The Company strictly followed the cash dividend policy in itsArticles ofAssociation, and the cash dividend payout of the Company was in linewith itsArticles ofAssociation and therelevant resolution oftheShareholders’ Meeting. According to the requirements of the Listed Company Supervision Guideline No. 3— ListedCompanies’ Cash Dividend issued by the CSRC, the Company has revised the dividend payout policy in its Articles of Association, further clarifying the priority and proportion of cash dividend in dividend payouts. In order to further normalize its shareholder return mechanism, push forward the establishment of a scientific, sustained and stable shareholder return mechanism, enhance the transparency and operability of decision-making for its dividend payout policy, and effectively protect the legal rights and interests of public investors, the Company strictly followed the Shareholder Return Planning for Subsequent Three Years (2016-2018), which was formulated in 2016.
|||
|-|-|
|Explanationoncashdividendpolicy||
|IncompliancewiththeCompany’sArticlesofAssociationandrelevantresolutionofmeetingofshareholders|Yes|
|Specificandcleardividendstandardandratio|Yes|
|Completedecision-makingprocedureandmechanism|Yes|
|Independentdirectorsfaithfullyperformedtheirdutiesandplayedtheirduerole|Yes|
|Non-controlling interests were able to fully express their opinion and desire and their legalrightsandinterestswerefullyprotected|Yes|
|In case of adjusting or changing cash dividend policy, conditions and procedure were incompliancewithapplicableregulationsandtransparent|Yes|

Cash and/or share dividend plans/proposals for common shareholders in the past three years
(including theReporting Period):
KonkaGroupCo.,Ltd. AnnualReport2017 1.Dividend Payout Proposal for 2017
Based on the total shares of 2,407,945,408 as of the end of 2017, a cash dividend of RMB1.62 (tax inclusive) per 10 shares should be distributed to all the shareholders, with the expected total dividend payout reaching RMB390,087,156.10. And the undistributed profits should carry forward for futurepayout.
2.Dividend Payout Plan for 2016
The audited undistributed profits were RMB-427,163,254.63 for 2016. In light of theCompany’s realities and long-term development needs, the Company neither record capital reserves nor distributecash/share dividendfor theyear.
3.Dividend Payout Plan for 2015
The audited net income attributable to the owners of the Parent Company was RMB-1,256,819,314.51 and the undistributed profits were RMB-522,836,282.66 for 2015. In light of theCompany’s realities and long-term development needs, the Company neither record capital reserves nordistributecash/share dividend for theyear.
4.Dividend Payout Plan for H1 2015
Based on the total shares of 1,203,972,704 as of the end of June 2015, the Company distributed a capital-reserves-converted share dividend of 10 shares per 10 shares to its shareholders. The total share dividend was 1,203,972,704 shares, which increased the Company’ s total shares to 2,407,945,408shares.
Cash dividend for common shareholders in thepast three years (including theReporting Period): Unit: RMB
|||||||
|-|-|-|-|-|-|
|Year|Cashdividends(taxincluded)|Netincomeattributabletocommonshareholdersofthelistedcompanyinconsolidatedstatementsfortheyear|Cashdividends(taxincluded)asapercentageofnetincomeattributabletocommonshareholders(%)|Cashdividendsinotherforms|Ratioofcashdividendsinotherforms|
|2017|390,087,156.10|5,057,025,155.71|7.71%|0.00|0.00%|
|2016|0.00|95,673,028.03|0.00%|0.00|0.00%|
|2015|0.00|-1,256,819,314.51|0.00%|0.00|0.00%|

Indicate by tick mark whether the Company fails to put forward a cash dividend proposal for its
common shareholders despite the facts that the Company has made profits in the Reporting Period
and theprofits distributabletothe common shareholders are positive.
KonkaGroupCo.,Ltd. AnnualReport2017□ Applicable√ Not applicable
II Cash and/orShareDividendProposal forReporting Period
√ Applicable□ Not applicable
|||
|-|-|
|Share dividend per 10 shares from retainedearnings(share)|0|
|Cash dividend per 10 shares (RMB) (taxinclusive)|1.62|
|Share dividend per 10 shares from capitalreserves(share)|0|
|Sharebase(share)|2,407,945,408|
|Totalcashdividends(RMB)(taxinclusive)|390,087,156.10|
|Distributableprofits(RMB)|5,057,025,155.71|
|Cashdividendsasapercentageoftotalprofitstobedistributed(%)|100%|
|Typeofcashdividendpayout||
|Other||
|Detailsaboutcashand/orsharedividendproposal||
|The audited net income attributable to the owners of the Parent Company was RMB5,057,025,155.71 and the undistributedprofits were RMB4,260,125,492.57 for 2017. In light of the applicable laws and regulations, the Company’s Articles ofAssociation and its long-term development needs, the 2017 dividend payout plan was proposed as follows: based on the totalsharesof2,407,945,408asoftheendof2017,acashdividendofRMB1.62(taxinclusive)per10sharesshouldbedistributedtoalltheshareholders,withtheexpectedtotaldividendpayoutreachingRMB390,087,156.10;andtheundistributedprofitsshouldcarryforwardforfuturepayout.||

III Fulfillment ofCommitments
1. Commitments of theCompany’s Actual Controller, Shareholders, Related Parties and Acquirer, as well as the Company and Other Commitment Makers, Fulfilled in Reporting Period or Ongoing atPeriod-End
□ Applicable√ Not applicable
No suchcases in theReporting Period.
2. Where there had been an earnings forecast for an asset or project and the Reporting Period was still within the forecast period, explain why the forecast has been reached for the Reporting Period.
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2017 IV Occupation of theCompany’s Funds by Controlling Shareholder or Its Related Parties for Non-Operating Purposes
□ Applicable√ Not applicable
No suchcases in theReporting Period.
V Explanations Given by Board of Directors, Supervisory Board and Independent Directors (If Any)Regarding“IndependentAuditor’s Modified Opinion” forReporting Period
□ Applicable√ Not applicable
VI YoY ChangeinAccounting Policies, Estimates andMethods
√ Applicable□ Not applicable
During 2017, the Ministry of Finance promulgated the Accounting Standard No. 16 for BusinessEnterprises—Government Subsidies (Revised in 2017) (CK[2017] No. 15) (hereinafter referred to as the “ Accounting Standard No. 16 ” ) and the Accounting Standard No. 42 for Business Enterprises— Non-Current Assets and Disposal Groups Classified as Held for Sale and Discontinued Operations (CK[2017] No. 13) (hereinafter referred to as the “Accounting Standard No. 42”). The Accounting Standard No. 16 has become effective since June 12, 2017 with all the enterprises that adopt the Accounting Standards for Business Enterprises (or the Chinese Accounting Standards, “CAS”), and the Accounting Standard No. 42 since May 28, 2017. As per the two Standards, theCompany neededto adjust itsaccounting policies accordingly.
Before the adjustments, the Company adopted the Accounting Standard No. 16 for Business Enterprises— Government Subsidies as mentioned in the Notice of the Ministry of Finance Regarding Issuing 38 Specific Accounting Standards (CK[2006] No. 3) released on February 15, 2006.
After the adjustments, the Company has adopted the Accounting Standard No. 16 for Business Enterprises— Government Subsidies (Revised in 2017) (CK[2017] No. 15). Its government subsidies existing on January 1, 2017 were treated using the prospective application method, and the new government subsidies arising during the period January 1, 2017 through the effective date of the new Accounting Standard No. 16 were adjusted as per the new standard. Additionally, the Company has also adopted theAccounting Standard No. 42 for BusinessEnterprises—Non-Current Assets and Disposal Groups Classified as Held for Sale and Discontinued Operations (CK[2017] No. 13). The non-current assets and disposal groups classified as held for sale and discontinued operations existing on the effective date of the Accounting Standard No. 42 were treated using the prospective application method.
These adjustments only affect the presentation of asset disposal income, other income, non-operating income and non-operating expense in the income statements, and have no impact on
KonkaGroupCo.,Ltd. AnnualReport2017 theCompany’s net asset valueornet income.
VII Retrospective Restatements due to Correction of Material Accounting Errors in Reporting Period
□ Applicable√ Not applicable
No suchcases in theReporting Period.
VIII YoY Changein ScopeofConsolidated Financial Statements
√ Applicable□ Not applicable
① Shenzhen Kangqiao Jiacheng Property Investment Co., Ltd. has been deconsolidated since November 30,2017when theCompany soldits70% stakein thissubsidiary.
② Kunshan Konka Electronic Co., Ltd. has been deconsolidated since September 26, 2017 when the Companysold its51%stakein thissubsidiary.
③ Konka Ventures Development (Shenzhen) Co., Ltd. was incorporated by the Company and Shenzhen Qianhai TONGGAM Technology Co., Ltd. on Oct. 26, 2017 with a registered capital of RMB 5 million, of which the Company contributed RMB 2.55 million (or51.00%) in cash and Shenzhen Qianhai TONGGAM Technology Co., Ltd. contributed RMB 2.45 million (or49.00%) in cash. For the Company has control over this new subsidiary, it has been included into theCompany’ s consolidation scope sinceOct. 26,2017.
④ Shenzhen Konka Pengrun Technology& Industry Co., Ltd. was incorporated by the Company, Guizhuo Huajinrun Science and Technology Group Co., Ltd. and Shenzhen Henglongtong Electronic Science and Technology Co., Ltd. on Sep. 15, 2017 with a registered capital of RMB 50 million, of which the Company contributed RMB 25.5 million (or51.00%) in cash, Guizhuo Huajinrun Science and Technology Group Co., Ltd. contributed RMB 15 million (or30.00%) in cash, and Shenzhen Henglongtong Electronic Science and Technology Co., Ltd. contributed RMB 9.5 million (or19.00%) in cash. For the Company has control over this new subsidiary, it has been includedintotheCompany’s consolidation scopesince Sep. 15,2017.
⑤ Shenzhen Konka Unifortune Supply Chain Management Co., Ltd. was incorporated by the Company and Shenzhen UNIFORTUNE Supply Chain Management Co., Ltd. on Sep. 15, 2017 with a registered capital of RMB 30 million, of which the Company contributed RMB 15.3 million (or51.00%) in cash, and Shenzhen UNIFORTUNE Supply Chain Management Co., Ltd. contributed RMB 14.7 million (or49.00%) in cash. For the Company has control over this new subsidiary,ithas been included intotheCompany’s consolidation scope sinceSep.15, 2017.
⑥ Shenzhen Konka Investment Holding Co., Ltd. was incorporated by the Company in Shenzhen on Mar.6,2017 with a registered capital of RMB 40million, which will all be paid by the Company. As of the balance sheet date, the Company has not yet actually made the payment. For the Company
KonkaGroupCo.,Ltd. AnnualReport2017 has control over this new subsidiary, it has been included into theCompany’s consolidation scope since Mar.6,2017.
⑦ Anhui Kangzhi Trade Co., Ltd. was incorporated in Chuzhou, Anhui Province on Mar. 8, 2017 by Anhui Konka Electronic Co., Ltd., a subsidiary of the Company, with a registered capital of RMB 5 million, which will all be paid byAnhui Konka Electronic Co., Ltd.As of the balance sheet date, Anhui Konka Electronic Co., Ltd. has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope sinceMar.8,2017.
⑧ Hainan Konka Material Technology Co., Ltd. was incorporated by Shenzhen Konka Household Appliances Co., Ltd. (a subsidiary of the Company) and Shenzhen Mushen Industrial Co., Ltd. on Jul. 10, 2017 with a registered capital of RMB 10 million, of which Shenzhen Konka Household Appliances Co., Ltd. will contribute RMB 5.1 million (or51.00%) and Shenzhen Mushen Industrial Co., Ltd. will contribute RMB 4.9 million (or49.00%). For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope since Jul. 10, 2017.As ofthe balance sheet date, thecontributions have not yet been actually paid.
⑨ Tianjin Konka Leasing Co., Ltd. was incorporated in Tianjin on Nov. 30, 2017 by Beijing Konka Electronic Co., Ltd. (a subsidiary of the Company) with a registered capital of RMB 170 million, of which all will be paid byBeijing Konka Electronic Co., Ltd.As of the balance sheet date, Beijing Konka Electronic Co., Ltd. has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope since Nov.30,2017.
⑩ Yantai Konka Healthcare Enterprise Service Co., Ltd. was incorporated in Yantai, Shandong Province on Nov. 24, 2017 by Konka Ventures Development (Shenzhen) Co., Ltd. (a subsidiary of the Company) with a registered capital of RMB 5 million, of which all will be paid by Konka Ventures Development (Shenzhen) Co., Ltd. As of the balance sheet date, Konka Ventures Development (Shenzhen) Co., Ltd. has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope since Nov.24,2017.
⑪
Shenzhen Konka Capital Equity Investment Management Co., Ltd. was incorporated in Shenzhen on Nov. 24, 2017 by Shenzhen Konka Investment Holding Co., Ltd. (a subsidiary of the Company) with a registered capital of RMB 10 million, of which all will be paid by Shenzhen Konka Investment Holding Co., Ltd. As of the balance sheet date, Shenzhen Konka Investment Holding Co., Ltd. has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope since Nov. 24, 2017.
⑫
Chain Kingdom (Shenzhen) Co., Ltd. was incorporated in Shenzhen on Jun. 9, 2017 by Chain
KonkaGroupCo.,Ltd. AnnualReport2017 Kingdom Co., Limited (a subsidiary of the Company) with a registered capital of RMB 5 million, of which all will be paid by Chain Kingdom Co., Limited. As of the balance sheet date, Chain Kingdom Co., Limited has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope since Jun. 9, 2017.
⑬Anhui
Konka HouseholdAppliances Co., Ltd. (a subsidiary of the Company) has been cancelled for it has been absorbed by Anhui Konka Tongchuang Household Appliances Co., Ltd. (another subsidiary of theCompany) onMay 17,2017.
⑭
Indonesia Konka Electronics Co., Ltd., a subsidiary of the Company,was liquidated during 2017. As of the balance sheet date, Indonesia Konka Electronics Co., Ltd. has distributed its remaining assets but has not yet completed the cancellation procedure with the industrial and commerce administration.
IXEngagement andDisengagement ofCPAs Firm
Current CPAsfirm
|||
|-|-|
|NameofthedomesticCPAsfirm|RuihuaCertifiedPublicAccountantsLLP|
|TheCompany’spaymentforthedomesticCPAsfirm(RMB’0,000)|140|
|ConsecutiveyearsoftheauditserviceprovidedbythedomesticCPAsfirm|5Years|
|NamesofthecertifiedpublicaccountantsfromthedomesticCPAsfirm|LiuJianhuaandShenLingzhi|
|NameoftheforeignCPAsfirm(ifany)|Notapplicable|
|Remuneration for foreign CPAs firm for theReportingPeriod(RMB’0,000)(ifany)|0|
|Consecutive years of the audit services providedbyforeignCPAsfirm(ifany)|Notapplicable|
|NameofcertifiedpublicaccountantsfromforeignCPAsfirm(ifany)|Notapplicable|

Indicate bytick mark whether theCPAsfirm was changed in thisReporting Period.
□ Yes√ No
CPAs firm, financial advisor orsponsorengaged for internal control audit
√ Applicable□ Not applicable
During the Reporting Period, as approved by theShareholders’ General Meeting, the Company
continued to engage Ruihua Certified PublicAccountants as the audit firm on internal control of the
KonkaGroupCo.,Ltd. AnnualReport2017 Company for 2017, with the auditing fee for the internal control in 2017 as RMB0.4 million (excluding tax).
X Possibilityof Listing SuspensionorTermination after Disclosureofthis Report
□ Applicable√ Not applicable
XI Bankruptcy andRestructuring
□ Applicable√ Not applicable
No suchcases in thisReporting Period.
XII SignificantLitigations andArbitrations
√ Applicable□ Not applicable
|||||||||
|-|-|-|-|-|-|-|-|
|Basicsituationoflawsuit(arbitration)|Lawsuitamount(RMB’0,000)|Whetherformintoestimatedliabilities|Processoflawsuit(arbitration)|Trialresultsandinfluencesoflawsuit(arbitration)|Situationofexecutionofjudgmentoflawsuit(arbitration)|Disclosuredate|Disclosureindex|
|Asforthedetails,pleaserefertotheNotes2.DescriptionoftheContingenciesoftheCommitmentsandtheContingenciesofChapterXIIoftheNotestotheFinancialReport||||||||

XIII Punishments andRectifications
□ Applicable√ Not applicable
No suchcases in thisReporting Period.
XIV Credit Conditions of the Company as well as its Controlling Shareholder and Actual Controller
□ Applicable√ Not applicable
XV Implementation of any Equity Incentive Plan, Employee Stock Ownership Plan or other Incentive Measures forEmployees
□ Applicable√ Not applicable
No suchcases in thisReporting Period.
XVI SignificantRelated-party Transactions
1.Related-party TransactionsRelevant toRoutineOperation
√ Applicable□ Not applicable
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Related|Relatio|Typeof|Content|Pricing|Transa|Transa|Proport|Appro|Wheth|Settle|Similar|Disclos|Disclo|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|party|nship|therelated-partytransaction|oftherelated-partytransaction|principleoftherelated-partytransaction|ctionprice|ctionamount(RMB’0,000)|ioninsamekindoftransactions|vedtransactionquota(RMB’0,000)|erexceedtheapprovedquota|mentmethodoftherelated-partytransaction|marketprice|uredate|sureindex|
|AnhuiHualiPackingCo.,Ltd.|Underthesameactualcontroller|Purchaseofcommodities|Purchaseofmaterials|Negotiatedprice|Marketprice|3,227|0.32%|4,500|No|Cash|Notapplicable|03/31/2017|www.cninfo.com.cn|
|SuzhouHualiEnvironmentalPackingTechnologyCo.,Ltd|Underthesameactualcontroller|Purchaseofcommodities|Purchaseofmaterials|Negotiatedprice|Marketprice|1,330|0.13%|1,500|No|Cash|Notapplicable|||
|HualiPacking(Huizhou)Co.,Ltd.|Underthesameactualcontroller|Purchaseofcommodities|Purchaseofmaterials|Negotiatedprice|Marketprice|930|0.09%|1,500|No|Cash|Notapplicable|||
|ShenzhenOverseasChineseTownCo.,Ltd.anditsaffiliatedcompanies|Underthesameactualcontroller|Salesofgoods|SalesofgoodsSalesofLCD|Negotiatedprice|Marketprice|2,543|0.27%|2,000|Yes|Cash|Notapplicable|||
|ShenzhenOCTPropertyServiceCo.,Ltd|Underthesameactualcontroller|Providepropertymanagementservices|Providepropertymanagementservices|Negotiatedprice|Marketprice|994|0.10%|1,000|No|Cash|Notapplicable|||
|Shenzhen|Underthe|Provide|Assist|Negoti|Market|1,500|0.15%|2,000|No|Cash|Not|||

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||||
|-|-|-|-|-|-|-|-|-|
|OCTRealEstateCo.,Ltd|sameactualcontroller|services|indevelopingoldheadquarterreconstructionproject|atedprice|price|||applicable|
|Total||||||10,524|12,500||
|Detailsoflargeamountofsalesreturns||||Notapplicable|||||
|Asforthepredictiononthetotalamountofroutine related-party transactions to beoccurred in the Reporting Period byrelevant types, the actual performance intheReportingPeriod(ifany)||||TheCompanyhaspublishedtheForecastingPublicNoticeonRoutineRelatedTransactionforY2017onSecuritiesTimes,ShanghaiSecuritiesNews,ChinaSecuritiesJournalandHongKongTaKungPaoaswellastheInternetwebsitedesignatedbyCSRChttp://www.cninfo.com.cnonMarch31,2017.IntheReportingPeriod,thebasisforpricing,transactionprice,andsettlementmethodsofrawmaterialspurchasedbytheCompany were basically in accordance with the forecast. Due to the influences of market changes andbusinessadjustment ontransactionamount, therewassome difference betweenrelated-partytransactionsand actual situations, which belonged to normal operation. The total amount of routine related-partytransactions didn’t exceed the approved amount, which has fewer impacts on the Company’s routineoperationandperformances.ThetotalamountwasRMB105.24million.|||||
|Reason for significant difference betweenthetransactionpriceandthemarketprice||||Notapplicable|||||

2.RelatedTransactionsRegardingPurchaseorSalesofAssetsorEquityInterests
□ Applicable√ Not applicable
No suchcases in theReporting Period.
3.Related TransactionsRegarding JointInvestments inThirdParties
√ Applicable□ Not applicable
|||||||||
|-|-|-|-|-|-|-|-|
|Jointinvestors|Relation|Nameoftheinvestee|Mainbusinessoftheinvestee|Registeredcapitaloftheinvestee|Totalassetoftheinvestee(RMB’0,000)|Netassetoftheinvestee(RMB’0,000)|Netprofitoftheinvestee(RMB’0,000)|
|OCT(Chengdu)InvestmentCo.,Ltd,SichuanLiangdianRealEstateCo.,Ltd,andChengduSportsIndustryCo.,|OCT(Chengdu)InvestmentCo.,LtdistheindirectholdingcompanyofOverseasChineseTownEnterprisesCo.,whoisthelargestshareholderandtheactualcontrolleroftheCompany.AccordingtotheStockListingRulesofShenzhenStockExchange,thistransactionisthe|YibinOCTSanjiangRealEstateCo.,Ltd|Developmentandoperationofrealestate|RMB0.6billion|79,438.11|59,827.16|-172.83|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Ltd|relatedtransaction.||
|Theprogressofsignificantconstructioninprocessoftheinvestedcompany(ifany)||N/A|

4.Credits andLiabilities with Related Parties
√ Applicable□ Not applicable
Whether thereis non-operating creditsand liabilities with related parties
√ Yes□ No
Liabilities ofparties related toaccount payable
||||||||||
|-|-|-|-|-|-|-|-|-|
|Relatedparty|RelationwiththeCompany|Formationreason|Openingbalance(RMB’0,000)|Amountnewlyaddedincurrentperiod(RMB’0,000)|Amountreturnedincurrentperiod(RMB’0,000)|Interestrate|Currentinterest(RMB’0,000)|Closingbalance(RMB’0,000)|
|OCTEnterprisesCo.,Ltd|Controllingshareholder|Thecompanyappliesforentrustedloantoit|160,000||160,000.00|3.10%-4.35%|5,825.88|0|
|OCTEnterprisesCo.,Ltd|Controllingshareholder||90,000||90,000.00|3.18%-4.35%|3,399.11|0|
|OCTEnterprisesCo.,Ltd|Controllingshareholder||90,000||90,000.00|3.06%-4.35%|2,984.89|0|
|OCTEnterprisesCo.,Ltd|Controllingshareholder||3,000||3,000.00|4.75%|132.21|0|
|OCTEnterprisesCo.,Ltd|Controllingshareholder|||50,000.00|50,000.00|4.52%|532.73|0|
|OCTEnterprisesCo.,Ltd|Controllingshareholder|||154,000.00|154,000.00|6.00%|1,925.00|0|
|Influencesonoperatingresultsandfinancialsituations||MeetingthecapitalneedsoftheexistingbusinessdevelopmentoftheCompanyandeffectivelyreducingthecostoffinancingoftheCompany.|||||||

Note:OverseasChineseTownEnterprises Co.(“OCTGroup” forshort)grantedaloanofRMB0.66billion
to Shenzhen Kangqiao Jiacheng Property Investment Co., Ltd., previously a majority-owned subsidiary of
theCompany,atanannualizedinterestrateof6%(orRMB8.91millioninvalue).
KonkaGroupCo.,Ltd. AnnualReport2017 5.Other SignificantRelated Transactions
□ Applicable√ Not applicable
No suchcases in theReporting Period.
XVII SignificantContracts andExecution
1.Entrustment, Contracting and Leasing
(1) Entrustment
□ Applicable√ Not applicable
No suchcases in theReporting Period.
(2) Contracting
□ Applicable√ Not applicable
No suchcases in theReporting Period.
(3) Leasing
√ Applicable□ Not applicable
Lease description
No suchcases in theReporting Period.
During the Reporting Period, therent paid byKonkaR& DBuilding was approximately RMB 69,289,672.42.
The profits andlosses brought to thecompany toachieve thecompany's total profit in theReporting Period more than10%ofthe project
□ Applicable√ Not applicable
No suchcases in theReporting Period.
2.SignificantGuarantees
√ Applicable□ Not applicable
(1) Listof guarantees
Unit:RMB'0,000
||||||||||
|-|-|-|-|-|-|-|-|-|
|GuaranteesprovidedbytheCompanyanditssubsidiariesforexternalparties(excludingthoseforsubsidiaries)|||||||||
|Guaranteedparty|Disclosuredateofrelevantannouncement|Amountforguarantee|Actualoccurrencedate(dateofagreement)|Actualguaranteeamount|Typeofguarantee|Periodofguarantee|Executedornot|Guaranteeforarelatedpartyor|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||||||||||not||
|N/A|N/A||0|N/A|||0||N/A|0||N/A||N/A||
|Total external guaranteelineapproved duringtheReportingPeriod(A1)||||13,000|Total actual occurred amount of externalguaranteeduringtheReportingPeriod(A2)|||||||||0||
|Total external guarantee line that has beenapproved at the end of the Reporting Period(A3)||||13,000|TotalactualexternalguaranteebalanceattheendoftheReportingPeriod(A4)|||||||||0||
|GuaranteesbetweentheCompanyanditssubsidiaries||||||||||||||||
|Guaranteedparty|Disclosuredateofrelevantannouncement|Amountforguarantee||Actualoccurrencedate(dateofagreement)||Actualguaranteeamount||Typeofguarantee|||Periodofguarantee||Executedornot||Guaranteeforarelatedpartyornot|
|AnhuiTongchuang|03/31/2017|35,000||10/24/2017||6,000||Jointliabilityguaranty|||1year||No||No|
|||||11/06/2017||2,000||Jointliabilityguaranty|||1year||No||No|
|Communicationtechnology||50,000||10/11/2017||50,000||Jointliabilityguaranty|||1year||No||No|
|Yishijie||4,800||07/21/2017||2,000||Jointliabilityguaranty|||1year||No||No|
|HongKongKonka||355,000||09/27/2017||3,267||Jointliabilityguaranty|||1year||No||No|
|||||10/13/2017||22,870||Jointliabilityguaranty|||1year||No||No|
|||||04/24/2017||6,534||Jointliabilityguaranty|||1year||No||No|
|||||05/22/2017||13,068||Jointliabilityguaranty|||1year||No||No|
|||||06/12/2017||6,534||Jointliabilityguaranty|||1year||No||No|
|||||08/28/2017||6,534||Jointliabilityguaranty|||1year||No||No|
|Konka||220,000||10/17/2017||50,000||Jointliability|||1year||No||No|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Factoring||||||||||guaranty|||||||||
|||||10/24/2017||||20,000||Jointliabilityguaranty|||1year||No|||No|
|Total guarantee line approved for the subsidiariesduringtheReportingPeriod(B1)|||||909,800||TotalactualoccurredamountofguaranteeforthesubsidiariesduringtheReportingPeriod(B2)||||||||||188,807||
|Totalguaranteelinethathasbeenapprovedforthesubsidiaries at the end of the Reporting Period(B3)|||||909,800||Total actual guarantee balance for thesubsidiaries at the end of the Reporting Period(B4)||||||||||188,807||
|Guaranteesprovidedbythesubsidiariesfortheirsubsidiaries|||||||||||||||||||
|Guaranteedparty|Disclosuredateofrelevantannouncement|Amountforguarantee|Actualoccurrencedate(dateofagreement)||||Actualguaranteeamount||Typeofguarantee||Periodofguarantee|||Executedornot||Guaranteeforarelatedpartyornot|||
|N/A|N/A|0|N/A||||0||N/A||0|||N/A||N/A|||
|TotalguaranteelineapprovedforthesubsidiariesduringtheReportingPeriod(C1)||||||0|TotalactualoccurredamountofguaranteeforthesubsidiariesduringtheReportingPeriod(C2)|||||||||||0|
|TotalguaranteelinethathasbeenapprovedforthesubsidiariesattheendoftheReportingPeriod(C3)||||||0|TotalactualguaranteebalanceforthesubsidiariesattheendoftheReportingPeriod(C4)|||||||||||0|
|TotalguaranteeamountprovidedbytheCompany(totaloftheabove-mentionedthreekindsofguarantees)|||||||||||||||||||
|TotalguaranteelineapprovedduringtheReportingPeriod(A1+B1+C1)|||||922,800||TotalactualoccurredamountofguaranteeduringtheReportingPeriod(A2+B2+C2)|||||||||188,807|||
|TotalguaranteelinethathasbeenapprovedattheendoftheReportingPeriod(A3+B3+C3)|||||922,800||TotalactualguaranteebalanceattheendoftheReportingPeriod(A4+B4+C4)|||||||||188,807|||
|Proportionoftotalguaranteeamount(A4+B4+C4)tothenetassetsoftheCompany|||||||41.72%||||||||||||
|Ofwhich:|||||||||||||||||||
|Amountofdebtguaranteeprovidedforshareholders,actualcontrollerandtherelated-party(D)||||||||||||0|||||||
|Amountofdebtguaranteeprovidedfortheguaranteedpartywhoseasset-liabilityratioisnotlessthan70%directlyorindirectly(E)||||||||||||188,807|||||||
|Totalguaranteeamountexceeded50%ofthenetassets(F)||||||||||||0|||||||
|Totalamountoftheabovethreeguarantees(D+E+F)||||||||||||188,807|||||||
|Explanationontheoccurredwarrantyliabilityorpossiblebearingjointresponsibilityofliquidationduetoimmatureguarantee(ifany)||||||||||||N/A|||||||
|Explanationonprovisionofguaranteesforexternalpartiesinviolationoftheprescribed||||||||||||N/A|||||||

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|procedure(ifany)|

Explanation onguarantee that adopts complex method
N/A
(2) IllegalProvisionofGuarantees forExternal Parties
□ Applicable√ Not applicable
No suchcases in theReporting Period.
3.Entrusted Cash Management
(1) Entrusted CashManagement
√ Applicable□ Not applicable
Overviews of entrusted cash management during theReporting Period
Unit: RMB'0,000
||||||
|-|-|-|-|-|
|Specifictype|Capitalresources|Amountincurred|UndueBalance|Overdueamount|
|Trustedfinancialproducts|Self-ownedfunds|97,900|97,900|0|
|Bankfinancialproducts|Self-ownedfunds|55,000|40,000|0|
|Total||152,900|137,900|0|

 Particulars of entrusted cash management with single significant amount or low security, bad liquidity,and nocapital preservation
Unit:RMB'0,000
||||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Nameofthetrustee|Typeofthetrustee|Typeoftheproduct|Amount|Resourceoffunds|Initialdate|EndedDate|Useoffund|Methodofpaymentdetermination|Annualyieldforreference|Estimateprofit(ifany)|AmountofactualprofitsorlossesinReportingPeriod|ActualrecoveryofprofitsorlossesinReportingPeriod|Amountwithdrawnimpairmentprovision(ifany)|Whethergothroughstatorprocedures|Whetherthereiswealthmanagemententrustmentplanin|Overviewoftheitemandtherelatedindexforinquiring(ifany)|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||||futureornot|
|Bohaitrust|Trust|Trustedfinancialproducts|15,000|Self-ownedfunds|08/29/2017|9.00%|417.95|417.95|0|Yes|Yes|
|Bohaitrust|Trust|Trustedfinancialproducts|50,000|Self-ownedfunds|09/06/2017|9.00%|1294.52|1294.52|0|Yes|Yes|
|Bohaitrust|Trust|Trustedfinancialproducts|7,000|Self-ownedfunds|09/27/2017|9.00%|144.98|144.98|0|Yes|Yes|
|Bohaitrust|Trust|Trustedfinancialproducts|3,850|Self-ownedfunds|10/26/2017|9.00%|52.21|52.21|0|Yes|Yes|
|Bohaitrust|Trust|Trustedfinancialproducts|6,000|Self-ownedfunds|12/07/2017|9.00%|19.23|19.23|0|Yes|Yes|
|Bohaitrust|Trust|Trustedfinancialproducts|16,050|Self-ownedfunds|12/15/2017|9.00%|19.78|19.78|0|Yes|Yes|
|Total|||97,900||||1,948.67||0|||

Whether thereis thecase where theprincipal cannot berecovered at maturity or othercase which may cause impairmentfor entrusted asset management
□ Applicable√ Not applicable
(2) Entrusted Loans
√ Applicable□ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2017 Overviews of entrusted loans during the Reporting Period
Unit: RMB'0,000
|||||
|-|-|-|-|
|Totalamountincurred|Capitalresources|UndueBalance|Overdueamount|
|2,000|Self-ownedfunds|2,000|0|

There was noentrusted loan withsingle significant amount or lowsecurity,bad liquidity,andno capital preservation oftheCompany
Whether thereis thecase where theprincipal cannot berecovered at maturity or othercase which may cause impairmentfor entrusted loans
□ Applicable√ Not applicable
4.Other SignificantContracts
□ Applicable√ Not applicable
No suchcases in thisReporting Period.
XVIII Social Responsibilities
1.Social Responsibilities Taken
The Company insists the principle of health, stability and sustainable development to benefit shareholders and employees and satisfy customers. In pursuit of economic profits and protection ofshareholders’ profits, the Company is active in protecting legal rights of debtors and employees, treating suppliers, customers and consumers in good faith, and participating in environmental protection and communityestablishment for harmonious development oftheCompany and society. 1.Toprotect rights ofshareholders andcreditors
(1)TheCompany protects rights ofshareholders
The Company insists protection of rights for all shareholders, especially equal status and legal rights for medium and small shareholders, and make insurance of rights to be informed, participation and vote.
The Company would perform all obligations of information disclosure to ensure timely, accurate and complete information and strictly execute confidential system of registrar and insider information toguarantee justice.
The Company pays attention to repay to shareholders, and insists mutual development with investors. In the previous three years, the Company shares dividends with all shareholders. The Company strict executes dividend policies regulated in Articles of Association. All cash dividends comply with regulations inArticles ofAssociation and requirementsinshareholders’ conference.
(2)TheCompany protects rights ofcreditors
In full consideration of legal rights of creditors, the Company complies with strict business rules of
KonkaGroupCo.,Ltd. AnnualReport2017 credit cooperation to guarantee legal rights of creditors. No damages upon rights of creditors happened.
2.The Company performs responsibilitiesto suppliers and customers
(1) It is devoted to improvecustomer service quality.
The Company is insisting philosophy of customer orientation to strengthen customer service management, service consciousness for employees, service levels and to protect rights for customers. Through customer service hot-line, field visit and follow-up service, the Company has set a good corporateimage forcustomers.
(2) Be honest to suppliers
Following the principle of integrity and mutually beneficial cooperation, the Company keeps good cooperative relations with suppliers at each level. The corporate principle is open, fair and impartial to standardize procurement, protectsuppliers’ legal rights and lay solid foundation for further cooperation.
3.Be enthusiastictosocial and publicwelfareundertakings
Based on the principle of appreciating and repaying the society, the Company has participated in all kinds of activities for public welfare, cooperated with society, undertaken social responsibilities actively andpromoted harmonious development between enterpriseand society.
4.Be responsible foremployees
The Company insists the principle of people orientation to improve working environment, promote occupational skills, provide opportunity and platform for development and growth and encourage self upgradation and realization for employees. Mutual improvement for employees and enterprise could beachieved.
(1) Be honest and law-abiding to protect legal rightsfor employees
The Company would strictly comply with laws and regulations in Labor Law and Labor Contract Law to sign labor contract with employees with fair treatment in employment, payment, promotion, training, demission and retirement. Also, the Company would pay all kinds of insurances and housing fund for employees. Regular physical examination would be organized for each year. Any problems foundwould require re-examinationand consultation from adoctor.
The Company would improve living quality; enhance cohesive force and sense of belongings through a series of safeguard measures.
(2)Toprotect occupational health for employees
The Company would establish and perfect training, safety assessment by security system to guarantee the safety and occupational health for employees. On the other hand, by promotion of the importance of safety, safety awareness would be rooted in the heart to make all employees abide by safety standards and fully play subjective initiative in protecting self-occupational safety and
KonkaGroupCo.,Ltd. AnnualReport2017 production safety.
(3)Topromote occupational skills bydiversified professional training
The Company has always paid great attention on diversified training for employees. On the one hand, the Company would be meticulous in training of regular business and occupational skills and carry out all requirements positively to improve professional levels by normal training management. On the other hand, the Company would establish methods of self-training platform, training instructor, theme training and lectures to provide colorful training activities. Besides the work, professional and comprehensive qualitywould be fully promoted.
5.Be responsible forenvironment
The Company concerns about environmental changes and close relationships with environment by creating low carbon economy in technical innovation, from green manufacturing, green products to green industry circular economy. The Company would provide efforts in protecting global ecological environment. In June, 2012, subsidized products catalogue had been released jointly by National Development and Reform Commission, Ministry of Industry and Information and Ministry ofFinance.
In the new year, the Company would undertake all social responsibilities by improving strategic management, sustainable development and enterprise economic efficiency. It would retribute all shareholders and would protect legal rights for creditors and employees. To be honest to suppliers and customers, the Company would serve local economic development and participate in social public welfare activities and environment protection. It would undertake all responsibilities in many fields and make attributions to social, economic, and environmental sustainable development for a socialism harmonious society.
2.Targeted Measures Takento Help People Liftthemselves outof Poverty
(1) Plan forTargeted Measures
The Company and the China Youth Development Foundation (CYDF) have jointly held the large public benefit activity “Heart Journey” since 2013. Five sessions of activities have been held until now. In 2013, we helped thousands of migrant workers to go home. In 2014, we 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 donated nearly 100 music classrooms to the remote regions of China by carrying out “Happy Music Classroom” Project with CYDF. In 2016, we sponsored the professional training of 100 music teachers in remote areas to promote the construction ofteaching staffinpoverty-stricken areas.
(2) Outlineof Targeted Measures inthe Reporting Period
In 2017, the activities of “Heart Journey” focused on affectionate care for families of left-behind children in poverty-stricken areas. We helped 100 left-behind children to come to cities to reunite with their parents during the summer vacation, and donated houses named Konka Heart Journey
KonkaGroupCo.,Ltd. AnnualReport2017 Family inschools in western areas.
(3) Results ofTargeted Measures
||||
|-|-|-|
|Indicator|Measurementunit|Number/Progress|
|I. Generalcondition|——|——|
|Ofwhich:1.Capital|Unit:RMB'0,000|50|
|II. Itemizedinvestment|——|——|
|4. Outofpovertybyeducation|——|——|
|4.3improveinvestedamountsofeducationalresourcesinpoverty-strickenareas|Unit:RMB'0,000|50|

(4) SubsequentTargeted Measure Plans
The Company and the ChinaYouth Development Foundation (CYDF) will continue to hold a series ofpublicbenefit activity “Heart Journey”.
3.Particulars Relevantto Environmental Protection
Is the Company or any of its subsidiaries a heavily polluting business identified by the environmental protection authorities of China?
No.
The Company and itsholding subsidiaries are not theheavily polluting business after thecheckof the Company.
The Company and its subsidiaries implement environmental protection laws and regulations such as Environmental Protection Law of the People's Republic of China, Law of the People's Republic of China on the Prevention and Control of Water Pollution, Law of the People's Republic of China on Prevention and Control ofAtmospheric Pollution and Law of the People's Republic of China on the Prevention and Control of Ambient Noise Pollution and Law of the People's Republic of China on the Prevention and Control of Solid Waste Pollution, and did not violate any laws or regulations during thereporting period.
XIX OtherSignificantEvents
√ Applicable□ Not applicable
(I) Project for the establishment of multimedia services company: On November 17, 2017, the 37th meeting of the 8th Board of Directors of the Company reviewed and passed the Proposal on the Establishment of Konka Multimedia Services Company. At present, Shenzhen Konka Electronic
Technology Co., Ltd. has been established. The Company is working in the process of sorting out
transaction mode, asset allocation and operation mode, and will complete the project as soon as
possible.
KonkaGroupCo.,Ltd. AnnualReport2017 (II) Planning and setting up of industrial funds and strategic cooperation projects with China Orient Asset Management (International) Holdings Co., Ltd.: at present, specific plans for the establishment of industrial funds between the Company and China Orient Asset Management (International) Holdings Co.,Ltd. are stillunder negotiation.
(III) Listing transfer of Properties in Shanghai: the 34th meeting of the 8th Board of Directors of the Company passed the “Proposal on the Listing Transfer of Certain Properties” onAugust 23, 2017. At present, the evaluation reports of the properties listed for transfer has already been completed, and the Company is performing the listed transfer procedures of state-owned property rights in accordance with therelevant provisionsfor thetransfer ofstate-owned assets.
(IV) Disclosureindex ofsignificant information
||||||
|-|-|-|-|-|
|AnnouncementNo.|Date|Title|Pageonnewspaper|Linkonhttp://www.cninfo.com.cn|
|2017-01|01/17/2017|AnnouncementabouttheProgressofInvestingandConstructingKonkaScientificCreationCenter|SecuritiesTimesB80,TaKungPaoB3|http://www.cninfo.com.cn/finalpage/2017-01-17/1203018565.PDF|
|2017-02|01/21/2017|Announcement on the 2016 EarningsForecasts|SecuritiesTimesB68,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2017-01-21/1203035594.PDF|
|2017-03|02/18/2017|AnnouncementontheResolutionofthe25th Session of the 8th Board ofDirectors|SecuritiesTimesB49,TaKungPaoA22|http://www.cninfo.com.cn/finalpage/2017-02-18/1203090685.PDF|
|2017-04|02/18/2017|NoticeonConveningthe20171stExtraordinaryGeneralMeeting|SecuritiesTimesB49,TaKungPaoA22|http://www.cninfo.com.cn/finalpage/2017-02-18/1203090686.PDF|
|2017-05|02/18/2017|AnnouncementaboutOfferingEntrustedLoanstojointStockCompany|SecuritiesTimesB49,TaKungPaoA22|http://www.cninfo.com.cn/finalpage/2017-02-18/1203090689.PDF|
|2017-06|03/07/2017|AnnouncementontheResolutionofthe20171stExtraordinaryGeneralMeeting|SecuritiesTimesB57,TaKungPaoB3|http://www.cninfo.com.cn/finalpage/2017-03-07/1203134012.PDF|
|2017-07|03/11/2017|AnnouncementontheResolutionofthe26thSessionofthe8thBoardofDirectors|SecuritiesTimesB45,TaKungPaoA26|http://www.cninfo.com.cn/finalpage/2017-03-11/1203148741.PDF|
|2017-08|03/11/2017|AnnouncementaboutPutForward“threeold” RenovationProjectofWankangFactoryandinvestingandbuildingNewFactoryinDongguan|SecuritiesTimesB45,TaKungPaoA26|http://www.cninfo.com.cn/finalpage/2017-03-11/1203148742.PDF|
|2017-09|03/31/2017|Announcementonthe2016AnnualReport||http://www.cninfo.com.cn/finalpage/2017-03-31/1203237063.PDF|
|2017-10|03/31/2017|Announcement on the Abstract of the2016AnnualReport|SecuritiesTimesB97,TaKungPaoB14|http://www.cninfo.com.cn/finalpage/2017-03-31/1203237062.PDF|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|2017-11|03/31/2017|AnnouncementontheResolutionofthe28thSessionofthe8thBoardofDirectors|SecuritiesTimesB97,TaKungPaoB14|http://www.cninfo.com.cn/finalpage/2017-03-31/1203237057.PDF|
|2017-12|03/31/2017|AnnouncementontheResolutionofthe13thSessionofthe8thBoardofDirectors|SecuritiesTimesB97,TaKungPaoB14|http://www.cninfo.com.cn/finalpage/2017-03-31/1203237042.PDF|
|2017-13|03/31/2017|AnnouncementontheExpectationofthe2017RoutineRelatedTransaction|SecuritiesTimesB97,TaKungPaoB14|http://www.cninfo.com.cn/finalpage/2017-03-31/1203237058.PDF|
|2017-14|03/31/2017|AnnouncementabouttheExternalGuaranteeofKonkaGroupCo.,Ltd.|SecuritiesTimesB97,TaKungPaoB14|http://www.cninfo.com.cn/finalpage/2017-03-31/1203237056.PDF|
|2017-15|03/31/2017|AnnouncementaboutRelatedTransactionofKonkaGroupCo.,Ltd.|SecuritiesTimesB97,TaKungPaoB15|http://www.cninfo.com.cn/finalpage/2017-03-31/1203237059.PDF|
|2017-16|03/31/2017|AnnouncementaboutApplyingfortheLimitofFinancialProductsofKonkaGroupCo.,Ltd.|SecuritiesTimesB97,TaKungPaoB15|http://www.cninfo.com.cn/finalpage/2017-03-31/1203237043.PDF|
|2017-17|03/31/2017|NoticeonConveningthe2016AnnualGeneralMeeting|SecuritiesTimesB97,TaKungPaoB15|http://www.cninfo.com.cn/finalpage/2017-03-31/1203237041.PDF|
|2017-18|04/08/2017|AnnouncementonReceivingtheTaxReimbursementEvents|SecuritiesTimesB40,TaKungPaoA6|http://www.cninfo.com.cn/finalpage/2017-04-08/1203260578.PDF|
|2017-19|04/15/2017|Announcementonthe2017FirstQuarter EarningsForecasts|SecuritiesTimesB61,TaKungPaoA11|http://www.cninfo.com.cn/finalpage/2017-04-15/1203298268.PDF|
|2017-20|04/202017|AnnouncementaboutSomeVicePresidentoftheCompanyofficiallyPerformingDuties|SecuritiesTimesB24,TaKungPaoB7|http://www.cninfo.com.cn/finalpage/2017-04-20/1203331863.PDF|
|2017-21|04/25/2017|AnnouncementontheResolutionofthe2015AnnualGeneralMeeting|SecuritiesTimesB41,TaKungPaoB13|http://www.cninfo.com.cn/finalpage/2017-04-25/1203376714.PDF|
||04/25/2017|LegalOpinionofKonkaGroup2016AnnualGeneralMeeting|SecuritiesTimesB12|http://www.cninfo.com.cn/finalpage/2017-04-25/1203376713.PDF|
|2017-22|04/29/2017|2017FirstQuarterReport||http://www.cninfo.com.cn/finalpage/2017-04-29/1203422671.PDF|
|2017-23|04/29/2017|Textofthe2017FirstQuarterReport|SecuritiesTimesB189,TaKungPaoB6|http://www.cninfo.com.cn/finalpage/2017-04-29/1203422669.PDF|
|2017-24|05/23/2017|AnnouncementontheResolutionofthe30thSessionofthe8thBoardofDirectors|SecuritiesTimesB60,TaKungPaoB10|http://www.cninfo.com.cn/finalpage/2017-05-23/1203553957.PDF|
|2017-25|05/23/2017|AnnouncementontheRelatedTransactions|SecuritiesTimesB60,TaKungPaoB10|http://www.cninfo.com.cn/finalpage/2017-05-23/1203553958.PDF|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|2017-26|05/23/2017|AnnouncementaboutthePlanofListingtoTransferEquityofYingruiPhotoelectric|SecuritiesTimesB60,TaKungPaoB10|http://www.cninfo.com.cn/finalpage/2017-05-23/1203553959.PDF|
|2017-27|05/23/2017|NoticeonConveningthe20172ndExtraordinaryGeneralMeeting|SecuritiesTimesB60,TaKungPaoB10|http://www.cninfo.com.cn/finalpage/2017-05-23/1203553955.PDF|
|2017-28|06/10/2017|AnnouncementontheResolutionofthe20172ndExtraordinaryGeneralMeeting|SecuritiesTimesB48,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2017-06-10/1203606560.PDF|
|2017-29|06/22/2017|AnnouncementabouttheProgressThatPlanofListingtoTransferEquityofYingruiPhotoelectric|SecuritiesTimesB40,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2017-06-22/1203637987.PDF|
|2017-30|06/24/2017|AnnouncementabouttheResignofNon-independentDirectoroftheCompany|SecuritiesTimesB36,TaKungPaoB3|http://www.cninfo.com.cn/finalpage/2017-06-24/1203642993.PDF|
|2017-31|06/27/2017|AnnouncementonReceivingtheTaxReimbursementEvents|SecuritiesTimesB13,TaKungPaoB6|http://www.cninfo.com.cn/finalpage/2017-06-27/1203648572.PDF|
|2017-32|06/30/2017|AnnouncementontheResolutionofthe31thSessionofthe8thBoardofDirectors|SecuritiesTimesB20,TaKungPaoB18|http://www.cninfo.com.cn/finalpage/2017-06-30/1203665192.PDF|
|2017-33|06/30/2017|AnnouncementaboutPlanningtoSetUpIndustryFunds|SecuritiesTimesB20,TaKungPaoB18|http://www.cninfo.com.cn/finalpage/2017-06-30/1203665190.PDF|
|2017-34|06/30/2017|AnnouncementabouttheListingtoTransferPartofEquityofKangqiaoJiachengCompany|SecuritiesTimesB20,TaKungPaoB18|http://www.cninfo.com.cn/finalpage/2017-06-30/1203665200.PDF|
|2017-35|06/30/2017|AnnouncementabouttheListingtoTransferPartofEquityofKunkangCompany|SecuritiesTimesB20,TaKungPaoB18|http://www.cninfo.com.cn/finalpage/2017-06-30/1203665201.PDF|
|2017-36|06/30/2017|AnnouncementaboutInvestingChutianDragon|SecuritiesTimesB20,TaKungPaoB18|http://www.cninfo.com.cn/finalpage/2017-06-30/1203665191.PDF|
|2017-37|06/30/2017|NoticeonConveningthe20173rdExtraordinaryGeneralMeeting|SecuritiesTimesB20,TaKungPaoB18|http://www.cninfo.com.cn/finalpage/2017-06-30/1203665193.PDF|
|2017-38|07/05/2017|AnnouncementontheProgressoftheinvestmentintoChutianlong|SecuritiesTimesB1,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2017-07-05/1203681608.PDF|
|2017-39|07/13/2017||SecuritiesTimesB5,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2017-07-13/1203699941.PDF|
|||Announcementonsigningstrategic|||
|||cooperationagreement|||
|2017-40|07/14/2017|Announcementonthe2017Semi-annualEarningsForecasts|SecuritiesTimesB52,TaKungPaoB11|http://www.cninfo.com.cn/finalpage/2017-07-14/1203703349.PDF|
|2017-41|07/18/2017|AnnouncementontheResolutionofthe20173rdExtraordinaryGeneralMeeting|SecuritiesTimesB73,TaKungPaoB7|http://www.cninfo.com.cn/finalpage/2017-07-18/1203710285.PDF|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
||07/18/2017|LegalOpinionsofthe3rdExtraordinaryGeneralMeetingin2017ofKonkaGroup|SecuritiesTimesB73,TaKungPaoB7|http://www.cninfo.com.cn/finalpage/2017-07-18/1203710284.PDF|
|2017-42|07/20/2017|IndicativeAnnouncementontheincreaseoftheCompany’sStockbysubordinatewholly-ownedsubsidiaryofcontrollingshareholder|SecuritiesTimesB105,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2017-07-20/1203715860.PDF|
||07/21/2017|ReportofEquityChangesofKonkaGroupCo.,Ltd|SecuritiesTimesB96,TaKungPaoB6|http://www.cninfo.com.cn/finalpage/2017-07-21/1203722079.PDF|
|2017-43|08/25/2017|Announcement on the Abstract of the2017Semi-annualReport|SecuritiesTimesB141,TaKungPaoB18|http://www.cninfo.com.cn/finalpage/2017-08-25/1203862787.PDF|
|2017-44|08/25/2017|Announcement on the 2017Semi-annualReport||http://www.cninfo.com.cn/finalpage/2017-08-25/1203862790.PDF|
|2017-45|08/25/2017|AnnouncementontheResolutionofthe34thSessionofthe8thBoardofDirectors|SecuritiesTimesB141,TaKungPaoB18|http://www.cninfo.com.cn/finalpage/2017-08-25/1203862777.PDF|
|2017-46|08/25/2017|AnnouncementaboutthePlanofListingtoTransferEquityofKangqiaoJiacheng|SecuritiesTimesB141,TaKungPaoB18|http://www.cninfo.com.cn/finalpage/2017-08-25/1203862778.PDF|
|2017-47|08/25/2017|AnnouncementaboutthePlanofListingtoTransferPartofRealEstates|SecuritiesTimesB141,TaKungPaoB18|http://www.cninfo.com.cn/finalpage/2017-08-25/1203862779.PDF|
|2017-48|08/25/2017|NoticeonConveningthe20174thExtraordinaryGeneralMeeting|SecuritiesTimesB141,TaKungPaoB18|http://www.cninfo.com.cn/finalpage/2017-08-25/1203862780.PDF|
|2017-49|09/12/2017|AnnouncementontheResolutionofthe20174thExtraordinaryGeneralMeeting|SecuritiesTimesB49,TaKungPaoB14|http://www.cninfo.com.cn/finalpage/2017-09-12/1203964166.PDF|
|2017-50|09/23/2017|AnnouncementabouttheProgressThatPlanofListingtoTransferPartofEquityofKunkangCompany|SecuritiesTimesB41,TaKungPaoB11|http://www.cninfo.com.cn/finalpage/2017-09-23/1203995662.PDF|
|2017-51|09/28/2017|AnnouncementontheComplementof|SecuritiesTimesB21,TaKungPaoA31|http://www.cninfo.com.cn/finalpage/2017-09-28/1204006821.PDF|
|||industrialandcommercialregistration|||
|||ofchangesfortheTransferofPartof|||
|||EquityofKunkangCompany|||
|2017-52|10/14/2017|Announcementonthe2017ThirdQuarterEarningsForecasts|SecuritiesTimesB20,TaKungPaoA18|http://www.cninfo.com.cn/finalpage/2017-10-14/1204039071.PDF|
|2017-53|10/28/2017|Textofthe2017ThirdQuarterReport|SecuritiesTimesB3,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2017-10-28/1204084385.PDF|
|2017-54|10/28/2017|2017ThirdQuarterReport||http://www.cninfo.com.cn/finalpage/2017-10-28/1204084389.PDF|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|2017-55|11/15/2017|AnnouncementabouttheProgressthatPlanofListingtoTransferEquityofKangqiaoJiacheng|SecuritiesTimesB41,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2017-11-15/1204138496.PDF|
|2017-56|11/18/2017|AnnouncementontheResolutionofthe37thSessionofthe8thBoardofDirectors|SecuritiesTimesB4,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2017-11-18/1204147407.PDF|
|2017-57|11/18/2017|AnnouncementontheEstablishmentofCompanyforMultimediaService|SecuritiesTimesB44,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2017-11-18/1204147410.PDF|
|2017-58|11/18/2017|AnnouncementonJointStockoftheProjectofYibinSanjiangkouandRelatedTransaction|SecuritiesTimesB44,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2017-11-18/1204147411.PDF|
|2017-59|11/22/2017|AnnouncementabouttheProgressthatListingtoTransferEquityofKangqiaoJiacheng|SecuritiesTimesB33,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2017-11-22/1204155054.PDF|
|2017-60|11/22/2017|AnnouncementabouttheDeterminationofListingtoTransferEquityofYingruiPhotoelectric|SecuritiesTimesB3,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2017-11-22/1204155057.PDF|
|2017-61|11/30/2017|AnnouncementontheComplementofindustrialandcommercialregistrationofchangesfortheTransferofEquityofKangqiaoJiacheng|SecuritiesTimesB32,TaKungPaoB8|http://www.cninfo.com.cn/finalpage/2017-12-01/1204178169.PDF|
|2017-62|12/16/2017|AnnouncementontheResolutionofthe38thSessionofthe8thBoardofDirectors|SecuritiesTimesB41,TaKungPaoB8|http://www.cninfo.com.cn/finalpage/2017-12-16/1204231583.PDF|
|2017-63|12/16/2017|AnnouncementonInvestingandConstructingIntelligentTerminalHigh-techIndustrialParkinYibin|SecuritiesTimesB41,TaKungPaoB8|http://www.cninfo.com.cn/finalpage/2017-12-16/1204231584.PDF|
|2017-64|12/22/2017|AnnouncementontheResolutionofthe39thSessionofthe8thBoardofDirectors|SecuritiesTimesB33,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2017-12-22/1204246028.PDF|

KonkaGroupCo.,Ltd. AnnualReport2017 Part VI Share Changes and Shareholder Information
I ShareChanges
1.ShareChanges
Unit:share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Before||Increase/decrease(+/-)|||||After||
||Number|Percentage(%)|Newissues|Bonusshares|Increasefromcapitalreserve|Other|Subtotal|Number|Percentage(%)|
|1.Restrictedshares||||||19,500|19,500|19,500|0.00%|
|1.3Sharesheldbyotherdomesticinvestors||||||19,500|19,500|19,500|0.00%|
|Amongwhich:Sharesheld by domesticcorporations||||||||||
|Sharesheld by domesticindividuals||||||19,500|19,500|19,500|0.00%|
|2. Non-restrictedshares|2,407,945,408|100.00%||||-19,500|-19,500|2,407,925,908|100%|
|2.1 RMB commonshares|1,596,593,800|66.31%||||-19,500|-19,500|1,596,574,300|66.31%|
|2.2 Domesticallylistedforeignshares|811,351,608|33.69%||||||811,351,608|33.69%|
|3.Totalshares|2,407,945,408|100.00%||||||2,407,945,408|100%|

Reasons for theshare changes
√ Applicable□ Not applicable
On March 10, 2017, the Company held the 26th meeting of 8th bBoard of dDirectors, 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 ofAstock (000016), and75% of the shares is the limited-sales condition according to therelated provisions.
Approval ofshare changes
KonkaGroupCo.,Ltd. AnnualReport2017□ 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 theCompany and other financial indexes over theprioryear and thepriorperiod□ Applicable√ Not applicable
Other contents that the Company considers necessary or is required by the securities regulatory authorities todisclose
□ Applicable√ Not applicable
2.Changes inRestricted Shares
√ Applicable□ Not applicable
Unit: share
||||||||
|-|-|-|-|-|-|-|
|Nameofshareholder|Openingrestrictedshares|UnlockedintheReportingPeriod|IncreasedintheReportingPeriod|Closingrestrictedshares|Reasonforunlocking|Dateofunlocking|
|SunQingyan|0|0|19,500|19,500|Lockedsharebyseniorexecutives|Undetermined|
|Total|0|0|19,500|19,500|--|--|

 II Issuance andListingof Securities
1.Securities (Excluding PreferenceShares) Issuedinthis Reporting Period
□ Applicable√ Not applicable
2. Changes in Total Shares of the Company and the Shareholder Structure, as well as the Asset andLiability Structures
√ Applicable□ Not applicable
(1) No changes of thetotalnumberoftheCompany’s equity.
(2) On March 10,2017,theCompany held the26thmeeting of8thbBoard ofdDirectors, audited and
passed theBill ontheTerm-changeof SeniorManagers, and agreed to hireMr.SunQingyan as the
vice president. Mr.SunQingyan holds 26,000shares ofAstock (000016), and75% oftheshares is
the limited-sales condition according to therelated provisions.
KonkaGroupCo.,Ltd. AnnualReport2017 (3) No changes of thestructureoftheCompany’s assets and liabilities.
3.ExistingEmployee-held Shares
□ Applicable√ Not applicable
III Shareholders andActual Controller
1.Total Numberof Shareholders and theirShareholdings
Unit: share
|||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|TotalnumberofshareholdersattheendofReportingPeriod|91,577||Totalnumberofshareholdersonthe30thtradingdaybeforethedisclosuredateoftheannualreport||89,197||TotalnumberofpreferredstockholderwithvoterightrestoredattheendofReportingPeriod(ifany)(seeNotes8)||0||Totalnumberofpreferredstockholderwithvoterightrestoredonthe30thtradingdaybeforethedisclosuredateoftheannualreport (ifany)(seeNotes8)||||0|
|Shareholdingofshareholdersholdingmorethan5%shares||||||||||||||||
|Nameofshareholder||Natureofshareholders||Holdingpercentage||NumberofshareholdingattheendoftheReportingPeriod||IncreaseanddecreaseofsharesduringReportingPeriod||Numberofsharesheldsubjecttotradingmoratorium||Numberofsharesheldnotsubjecttotradingmoratorium|Pledgedorfrozenshares|||
||||||||||||||Statusofshares|Amount||
|OVERSEASCHINESETOWNENTERPRISESCO.||State-ownedcorporation||21.75%||523,746,932||0||0||523,746,932||||
|CITICSECURITIESBROKERAGE(HONG KONG)CO.,LTD.||Foreigncorporation||7.56%||182,100,202||0||0||182,100,202||||
|HOLYTIMEGROUPLIMITED||Foreigncorporation||2.33%||56,049,824||0||0||56,049,824||||
|GUOYUANSECURITIES||Foreigncorporation||2.27%||54,755,145||-1,412,800||0||54,755,145||||

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|BROKER(HK)CO.,LTD.||||||||||
|GAOLINGFUND,L.P.|Foreigncorporation|2.19%|52,801,250||0|0||52,801,250||
|WANGLEI|DomesticIndividual|1.91%|46,109,841||46,109,841|0||46,109,841||
|ZHANGYAJIAO|DomesticIndividual|0.92%|22,214,963||22,214,963|0||22,214,963||
|NAMNGAI|ForeignIndividual|0.91%|22,020,040||-1,200,000|0||22,020,040||
|CHINAMERCHANTSSECURITIES(HK)LIMITED|State-ownedcorporation|0.91%|21,832,020||-1,358,600|0||21,832,020||
|YUNNANINTERNATIONALTRUSTCO.,LTD-JULINO.48SINGLECAPITALTRUST|Other|0.84%|20,216,860||20,216,860|0||20,216,860||
|Strategicinvestororgeneralcorporationbecomingatoptenordinaryshareholderduetoplacingofnewshares(ifany)(seeNote3)||N/A||||||||
|Relatedoract-in-concertpartiesamongtheshareholdersabove||JialongInvestmentLimited,awholly-fundedsubsidiaryoftheCompany’sfirstmajorityshareholder Overseas Chinese Town Enterprises Co. (“OCT Group” for short), holds180,001,110 and 18,360,000 common shares in the Company respectively throughCITIC Securities Brokerage (Hong Kong) Co., Ltd. and China Merchants Securities(HK) Limited.JialongInvestmentLimitedandOverseasChineseTownEnterprisesCo.are parties acting in concert. Other than that, it is unknown whether the othershareholdersarerelatedpartiesoract-in-concertpartiesornot.||||||||
|Particularsaboutsharesheldbythetoptencommonshareholdersholdingsharesnotsubjecttotradingmoratorium||||||||||
|Nameofshareholder||||Numberoftradablesharesheldattheperiod-end|||Typeofshares|||
||||||||Type||Number|
|OVERSEASCHINESETOWNENTERPRISESCO.||||523,746,932|||RMBordinaryshare||523,746,932|
|CITIC SECURITIES BROKERAGE (HONG KONG)CO.,LTD.||||182,100,202|||Domesticallylistedforeignshares||182,100,202|
|HOLYTIMEGROUPLIMITED||||56,049,824|||Domesticallylistedforeignshares||56,049,824|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|GUOYUANSECURITIESBROKER(HK)CO.,LTD.||54,755,145|Domesticallylistedforeignshares|54,755,145|
|GAOLINGFUND,L.P.||52,801,250|Domesticallylistedforeignshares|52,801,250|
|WANGLEI||46,109,841|RMBordinaryshare|46,109,841|
|ZHANGYAJIAO||22,214,963|RMBordinaryshare|22,214,963|
|NAMNGAI||22,020,040|Domesticallylistedforeignshares|22,020,040|
|CHINAMERCHANTSSECURITIES(HK)LIMITED||21,832,020|Domesticallylistedforeignshares|21,832,020|
|YUNNANINTERNATIONALTRUSTCO.,LTD-JULINO.48SINGLECAPITALTRUST||20,216,860|RMBordinaryshare|20,216,860|
|Related or act-in-concert parties amongthe top 10 non-restricted ordinaryshareholdersaswellasbetweenthetop10non-restricted ordinary shareholders andthetop10ordinaryshareholders|Jialong Investment Limited, a wholly-funded subsidiary of the Company’s firstmajority shareholder Overseas Chinese Town Enterprises Co. (“OCT Group” forshort), holds 180,001,110 and 18,360,000 common shares in the CompanyrespectivelythroughCITICSecuritiesBrokerage(HongKong)Co.,Ltd.andChinaMerchants Securities (HK) Limited. Jialong Investment Limited and OverseasChinese Town Enterprises Co. are parties acting in concert. Other than that, it isunknownwhethertheothershareholdersarerelatedpartiesoract-in-concertpartiesornot.||||
|Top 10 ordinary shareholders conductingsecurities margin trading (if any) (seeNote4)|Wang Lei and Zhang Yajiao holds 38,044,439 and 18,976,863A-shares,respectively, in the Company through their client accounts of collateral securitiesformargintradinginGFSecuritiesCo.,Ltd.||||

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 this Reporting Period.
□ Yea√ No
No suchcases in thisReporting Period.
2.Information abouttheControlling Shareholder
Nature ofcontrolling shareholder: central state-owned holding
Type ofcontrolling shareholder: legal person
||||||
|-|-|-|-|-|
|Nameofcontrollingshareholder|Legalrepresentative/companyprincipal|Dateofestablishment|Organizationcode|Businessscope|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|OverseasChineseTownEnterprisesCo.|DuanXiannian|11/11/1985|91440300190346175T|Export of textile, light industrial products, etc; import of self-usedgoods in Shenzhen, mechanical equipment, light industrialproducts, etc. as approved by the relevant authorities of Shenzhen(under Government Document JMB [92] WJMGTSZZ No.A19024); compensation trade; investment in tourism and relevantcultural industry (including art performance, entertainment andtheir services, etc), industry, real estate, commerce & trade,packaging, decoration and investment in printing industry. Theconvertofexportcommoditiesintodomesticsaleandthedomesticsales of import commodities. Travelling, rental of warehouses,cultureandart, bondedwarehouseofcar donation,conventionandexhibition services (the projects involved in license managementcan be operated after getting the relevant license first ); sales ofautomobile(sedancarincluded)|
|SharesheldbythecontrollingshareholderinotherlistedcompaniesbyholdingorshareholdingduringtheReportingPeriod||As of December 13, 2017, Overseas Chinese Town Enterprises Co. held 53.47% equity ofShenzhen Overseas Chinese Town Co., Ltd. (a company listed on the main Board of ShenzhenStock Exchange, SZ. 000069),(According to the decision of the SASAC of the State Council,Overseas ChineseTown EnterprisesCo. (“OCTGroup” for short) shall gratuitously transfer itsholdings of 531,728,156 shares in Shenzhen Overseas Chinese Town Co., Ltd. to BeijingChengtong Jinkong Investment Co., Ltd. (265,864,078 shares) and Guoxin Investment Co., Ltd.(265,864,078 shares). The gratuitous transfer agreement has been signed and the transferformalitiesarecurrentlyunderway.)meanwhile, Shenzhen Overseas ChineseTown Co., Ltd. indirectly held 66.66% equity of OCT(Asia) Holdings Ltd. (a company listed on the main Board of Hong Kong Stock Exchange,3366.HK). Overseas Chinese Town Enterprises Co. indirectly held 49.52% equity of YunnanTourismCo.,Ltd(acompanylistedontheSMEBoardofShenzhenStockExchange,SZ.002059)throughincreasingcapitaltoYunnanExpoTourismGroupHoldings.,Ltd.|||

Change ofthecontrolling shareholderduring thisReporting Period
□ Applicable√ Not applicable
No suchcases in thisReporting Period.
3.Information abouttheActual Controller
Nature ofactual controller: central state-owned assets management institutions
Type oftheactual controller: Corporation
||||||
|-|-|-|-|-|
|Nameofactualcontroller|Legalrepresentative/headofunit|Dateoffoundation|Organizationcode|Businessscope|
|State-owned Assets SupervisionandAdministrationCommissionoftheStateCouncil|HaoPeng||Notapplicable|Notapplicable|
|Shares held by the actual controlling shareholder in other listed companies by holding or||||Notapplicable|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|shareholdingduringtheReportingPeriod|

Change oftheactual controller during thisReporting Period
□ Applicable√ Not applicable
No suchcases in thisReporting Period.
Ownership and control relations between theactual controller and theCompany
SASACofthe State Council
100%
Overseas ChineseTown Enterprises Co. and itswholly
owned subsidiaries
30.30%
KonkaGroup Co.,Ltd.
Indicate by tick mark whether the actual controller controls the Company via trust or other ways of asset management.
□ Applicable√ Not applicable
4.10%or Greater Corporate Shareholders
□ Applicable√ Not applicable
5. Limitations on Shareholding Decrease by theCompany’s Controlling Shareholder, Actual Controller, Reorganizer andOtherCommitment Makers
□ Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2017 Part VII Preferred Shares
□ Applicable√ Not applicable
No preferred shares in theReporting Period.
KonkaGroupCo.,Ltd. AnnualReport2017 Part VIII Directors, Supervisors, Senior Management and Staff I Changes inShareholdingsof Directors, Supervisors andExecutive Officers
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Name|Officetitle|Incumbent/former|Gender|Age|Startingdateoftenure|Endingdateoftenure|Openingshareholding(share)|IncreaseinthisReportingPeriod(share)|DecreaseinthisReportingPeriod(share)|Otherincrease/decrease(share)|Closingshareholding(share)|
|LiuFengxi|Director|Incumbent|Male|46|05/28/2015|05/28/2018|0|0|0|0|0|
|LiuFengxi|ChairmanoftheBoard|Incumbent|Male|46|06/18/2015|05/28/2018|0|0|0|0|0|
|JinQingjun|Director|Incumbent|Male|61|05/28/2015|05/28/2018|0|0|0|0|0|
|HeHaibin|Director|Incumbent|Male|43|11/05/2015|05/28/2018|0|0|0|0|0|
|ZhangJing|Director|Incumbent|Male|36|07/17/2017|05/28/2018|0|0|0|0|0|
|SunShengdian|Independentdirector|Incumbent|Male|63|11/05/2015|05/28/2018|0|0|0|0|0|
|XiaoZuhe|Independentdirector|Incumbent|Male|52|05/28/2015|05/28/2018|0|0|0|0|0|
|ZhangShuhua|Independentdirector|Incumbent|Male|53|05/28/2015|05/28/2018|0|0|0|0|0|
|HaoGang|Supervisor|Incumbent|Male|45|05/28/2015|05/28/2018|0|0|0|0|0|
|HaoGang|SupervisoryChairman|Incumbent|Male|45|06/04/2015|05/28/2018|0|0|0|0|0|
|WangYoulai|Supervisor|Incumbent|Male|57|11/05/2015|05/28/2018|0|0|0|0|0|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|LiJun|Employeesupervisor|Incumbent|Male|47|05/25/2015|05/25/2018|0|0|0|0|0|
|ZhouBin|President|Incumbent|Male|39|03/10/2017|03/10/2020|0|0|0|0|0|
|HeJianjun|Vicepresident|Incumbent|Male|48|03/10/2017|03/10/2020|0|0|0|0|0|
|LiHongtao|Vicepresident|Incumbent|Male|50|03/10/2017|03/10/2020|0|0|0|0|0|
|WuYongjun|BoardSecretary|Incumbent|Male|43|03/10/2017|03/10/2020|0|0|0|0|0|
|LiChunlei|CFO|Incumbent|Male|45|03/10/2017|03/10/2020|0|0|0|0|0|
|YangBo|Vicepresident|Incumbent|Male|48|03/10/2017|03/10/2020|0|0|0|0|0|
|CaoShiping|Vicepresident|Incumbent|Male|40|03/10/2017|03/10/2020|0|0|0|0|0|
|SunQingyan|Vicepresident|Incumbent|Male|46|04/18/2017|03/10/2020|0|26,000|0|0|26,000|
|ChenYuehua|Director|Former|Male|55|05/28/2015|06/22/2017|0|0|0|0|0|
|HuangZhongtian|Vicepresident|Former|Male|57|04/04/2014|03/10/2017|0|0|0|0|0|
|LinHongfan|Vicepresident|Former|Male|47|04/04/2014|03/10/2017|0|0|0|0|0|
|Total|--|--|--|--|--|--|0|26,000|0|0|26,000|

 II Changes inDirectors, Supervisors andExecutiveOfficers
√Applicable□Not applicable
||||||
|-|-|-|-|-|
|Name|Position|Type|Date|Reason|
|ZhangJing|Director|Engaged|07/17/2017|Electedasdirectorthroughshareholdersmeeting|
|ChenYuehua|Director|Left|06/22/2017|Resignedowningtothepersonalreasons|
|ZhouBin|President|Engaged|03/10/2017|Engaged by the decision from the|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|||||BoardofDirectors|
|LiChunlei|CFO|Engaged|03/10/2017|Engaged by the decision from theBoardofDirectors|
|YangBo|Vicepresident|Engaged|03/10/2017|Engaged by the decision from theBoardofDirectors|
|CaoShiping|Vicepresident|Engaged|03/10/2017|Engaged by the decision from theBoardofDirectors|
|SunQingyan|Vicepresident|Engaged|04/18/2017|Engaged by the decision from theBoardofDirectors|
|HuangZhongtian|Vicepresident|Expired|03/10/2017|TheservicetermoftheBoardofSupervisorswasexpired|
|LinHongfan|Vicepresident|Expired|03/10/2017|TheservicetermoftheBoardofSupervisorswasexpired|

III BriefBiographies
Professional backgrounds, main working experience and current responsibilities in the Company of the incumbent directors, supervisors and executive officers
1.Director
Liu Fengxi, male, Han nationality, born in 1972, was the Chairman of the Board and CEO of the Company with a master degree. He once worked as the marketing GM for the multi-media division of Konka Group, Assistant GM and then Vice GM of Shenzhen Konka Telecommunications Technology Co., Ltd., Chief of the Operation Management Center of Konka Group, Assistant to President and Vice President of Konka Group, etc.And now he is acting as the Board Chairman and CEOofKonka Group.
He Haibin, male, Han nationality, born in 1974, a senior accountant, was a director of the Company with a master degree. He once worked as the Chief ofAudit Department and Financial Department in Overseas Chinese Town Group Corporation, as Principal of Finance in Planning Department of the Crowne Plaza Shenzhen, as CFO in Shenzhen OCT Seaview Hotel Co., Ltd., as CFO in InterContinental Shenzhen, as Vice CFO in Overseas ChineseTown Group Corporation and as CFO in Overseas Chinese Town Hong Kong Limited, GM of OCT Capital Investment Management Co., Ltd., the Chief Accountant of Shenzhen OCT Co., Ltd., and Chief of Business Management Division in Overseas Chinese Town Enterprises Co. etc. Now he serves as the Standing Committee and Board Secretary the Chief Accountant of Oversees Chinese Town Group Corporation, and the Chairman of the Board of OCT Capital Investment Management Co., Ltd. as well as a director of Konka Group.
in Qingjun, male, Han nationality, born in 1957, was a director of the Company with a master
KonkaGroupCo.,Ltd. AnnualReport2017 degree in law. He once worked as a lawyer in Hong Kong-based law firm and Britain-based law firm, a lawyer of JANG SHINN Law Office and executive partner of Shu Jin Law Firm, the independent director of New China Asset Management Corporation Limited, the independent director of China United Travel Co., Ltd., the independent director of CIMC and the independent director ofTianjin Masterwork Machinery Co., Ltd, and the independent director of Gemdale Group Co., Ltd. Now, he serves as a senior partner of Beijing King& Wood Mallesons Law Firm, the independent director in CSG Holding Co., Ltd., in GuotaiJun’an Securities, and in Invesco Great Wall Fund Management Co., Ltd. as well as the external supervisor of China Merchants Bank Co., Ltd. and a director ofKonka Group Co.,Ltd.
Zhang Jing, male, Han nationality, born in 1982, was a director of the Company with MBA. He once worked as the GM of President Office in Overseas Chinese Town Enterprises Co., the senior manager, deputy commissioner and chief of Strategic Development Division in Shenzhen OCT Co., Ltd., a member of working group for Qingdao OCT and the chief of Administrative Division (Deputy Director of Party Committee Office) in Shenzhen OCT Properties Co., Ltd. Now,he acts as the GM of Strategy Planning Division in Overseas Chinese Town Enterprises Co., the chief of Investment Management Division in Shenzhen OCT Co., Ltd., the director of OCT (HK) Company Limited, and the Non-executive director of OCT (Asia) Holdings Limited, Chairman of the Board ofOCTBusiness Management Co.,Ltd as well as thedirector ofKonka Group.
2.IndependentDirector
Sun Shengdian, a male senior economist, Han nationality, born in 1955, was the independent director of the Company with a doctor degree in engineering. Formerly vice GM, deputy secretary of the Party committee, GM and president of Shenzhen SEG, Hitachi Color Display Devices Co., Ltd., director, president, Party Committee member, vice GM, vice secretary of Party Committee, GM of Shenzhen Electronics Group Co., Ltd. director of Shenzhen China Star Optoelectronics Technology Co., Ltd., independent director of Skyworth Holding Ltd., and the head of Shenzhen Electronics IndustriesAssociation. Now, he serves as the vice president of Shenzhen Huakong SEG Co., Ltd., thedirector ofChinaVankeCo.,Ltd, and independent director ofKonka Group.
Xiao Zuhe, a male CPA, Han nationality, born in 1966, was the independent director of the Company with EMBA. Formerly worked as auditor and department manager in JiangxiAccounting Firm, assistant CFO of Shenzhen Fountain Corporation, auditor in Ho and Ho& Co. in Hong Kong, CFO of Qiaoxing Universal Telephone, Inc. (a company listed in NASDAQ), President of Benefit Capital Limited in Hong Kong. Presently he is working as the chairman of the Board of Tianjin Benefit Equity Investment Fund Management Co., Ltd., chairman of the Board and GM of Tianjin Benefit Equity Investment Fund Partnership (limited partnership), chairman of the Board and GM of Shenzhen Qianhai Benefit Equity Investment Management Co., Ltd., chairman of the Board and
KonkaGroupCo.,Ltd. AnnualReport2017 GM of Shenzhen Benefit Equity Investment Fund Partnership (limited partnership), chairman of the Board and GM of Jiangxi Benefit New Material Venture Investment Fund (Limited Partnership), chairman of the Board and GM of Jian Jingkai Benefit Haojun Industrial Investment Partnership (limited partnership), chairman of the Board and GM of Gongqingcheng Benefit Ruicun Investment Management Partnership (limited partnership) and independent director ofKonkaGroup.
Zhang Shuhua, a male CPA, Han nationality, born in 1965, was the independent director of the Company with a bachelor degree. Formerly worked as the principal staff member of Urban Social and Economic Survey Organization of Sichuan Provincial Bureau of Statistics, accountant in charge of Sichuan Newspaper Press, chief financial officer of TOP Pacific Group Pty. Ltd., CFO of Sichuan Bolan Properties Limited, chief financial officer of Sihuan Hanjia Group, chief financial officer of Chengdu Lishen Industry Co., Ltd. and vice financial manager of Jiutai Industry Co., Ltd. Presently working as the certified public accountant and partner of Sichuan Accounting Firm and independent director ofKonka Group.
3.Supervisor
Hao Gang, male, Han nationality, born in 1973, was the chief supervisor of the Company with a bachelor degree. He once worked as the deputy director and chief of Inspection Office in Overseas Chinese Town Enterprises Corporation. Now, he serves as the deputy secretary of Commission for DisciplineInspection inOCTGroup and chiefsupervisor ofKonka Group.
Wang Youlai, a male engineer, Han nationality, born in 1961, was the supervisor of the Company with a doctor degree. He formerly worked as the business manager of the Quality Department in Konka Group, assistant GM, vice GM, and vice president of Konka Group, Deputy Director and Director of the Administration Department of Overseas Chinese Town Enterprise Co., and joint party secretary of General Headquarters. Presently he is working as joint party secretary of General Headquarters inOverseas ChineseTownEnterprises Co.and the supervisorofKonka Group. Li Jun, a male assistant accountant, Han nationality, born in 1971, was a employee supervisor of the Company with a bachelor degree. Formerly worked as the financial manager of Nanchang Branch of Telecommunications Technology Co., Ltd., Senior Manager of the Financial Department in Telecommunications Technology Co., Ltd., the Senior Manager and assistant to the chief of Auditing and Legal Affairs Department in Konka Group. Presently working as the head of Discipline inspection and Supervision Center, vice chief of the Auditing and Legal Affairs Department, GM of the Internal Control and Risk Management Department, and employee supervisor ofKonka Group.
KonkaGroupCo.,Ltd. AnnualReport2017 4.SeniorExecutive
Zhou Bin, male, Han nationality, born in 1979, was the president of the Company with a bachelor degree. He once served as the director assistant, deputy director and director in Operating Management Center in Konka Group, assistant of the president in the Board of Directors and Director in Operating Management Center and others. Now, he acts as the president in Konka Group.
He Jianjun, a male economist, Han nationality,born in 1969, was the vice president of the Company with a bachelor degree. He has served successfully as Deputy Chief of Secretariat of the Board, Deputy Chief and Chief of Strategic Development Dept. and Secretary to the Board as well as vice president in KonkaGroup, etc. He nowis acting asVice President ofKonka Group.
Li Hongtao, male, Han nationality, born in 1968, was the vice president of the Company with a bachelor degree. He successively took the post such as Assistant to GM, GM, Chairman of the Board and GM of Shenzhen Konka Telecommunication Technology Co., Ltd and Assistant to President and vice president of Konka Group etc. He now is acting as Vice President of Konka Group.
Wu Yongjun, male, Han nationality, born in 1975, was the Board Secretary with a master degree. Formerly he worked as the senior manager of Secretariat, assistant to the chief, vice chief, chief, Securities Affairs representative and Board Secretary in Konka Group. Presently he is working as the secretary of theboardof directors ofKonka Group.
Li Chunlei, male, Han nationality, born in 1973, was the CFO of the Company with a master degree. Once served as the director in Real Estate Business Division in Konka Group, vice GM and GM in Kunshan Kangsheng Investment Development Co., Ltd., deputy director (preside the work) and director in Strategic Development Center, GM in Financial Center and GM in Asset Settlement Center andothers, now heacts as theCFO inKonka Group.
Yang Bo, male, Han nationality, born in 1970, was the vice president of the Company with a master degree. Once served as the director in Shenzhen Cable Television Education Financial Channel, director in the market sales and support region of US Tailiyang Communications Company, GM in Program Operating Department in Shenzhen Topway Video Communication Co., Ltd., director and GM in Shenzhen Tianhua Century Media Co., Ltd., GM in Market Sales Center in Shenzhen Topway Video Communication Co., Ltd. and others, he acts as the vice president in Konka Group presently.
KonkaGroupCo.,Ltd. AnnualReport2017 Cao Shiping, male, Han nationality, born in 1978, was the vice president of the Company with a master degree. Once served as the GM in Jinzhou Branch and Tianjin Branch of Konka Group Multi-media, GM in Multi-media Business Division Customer Cooperation Department, vice GM in Multi-media Marketing Business Division, vice GM in Multi-media Business Division and GM in Marketing Center, GM in Multi-media Business Division, GM in Internet Business Division and others, heacts as thevice president inKonka Group.
Sun Qingyan, a male senior economist, Han nationality, born in 1972, was the vice president of the Company with a doctor degree. Once served as the tutor in Northeast University of Finance and Economies, vice GM in Shenzhen Huaixin Enterprise Investment Consulting Co., Ltd., CEO in Shenzhen Xinheng Lida Capital Management Co., Ltd., vice GM in Shanying Investment Management Co., Ltd., GM in Shenzhen Shenwo Asset Management Co., Ltd. and others, he now acts as thepresident ofKonka Group.
Postsconcurrently held in shareholding entities
√ Applicable□ Not applicable
||||||||
|-|-|-|-|-|-|-|
|Name|Shareholdingentity||Post|Startingdateoftenure|Endingdateoftenure|Allowancefromtheshareholdingentity(yes/no)|
|LiuFengxi|OCTEnterprisesCo.||PartyCommitteeStandingCommitteeandviceGM|02/22/2016||Yes|
|HeHaiBin|OCTEnterprisesCo.||PartyCommitteeStandingCommittee、ChiefaccountantandSecretaryoftheBoard|01/30/2018||Yes|
|ZhangJing|OCTEnterprisesCo.||GMofStrategicPlanningDepartment|03/07/2018||Yes|
|HaoGang|OCTEnterprisesCo.||ChiefofInspectionOffice|03/01/2010||Yes|
|WangYoulai|OCTEnterprisesCo.||Full-timedirector|03/07/2018||Yes|
|Notestopost-holdinginshareholder’sunit||1.Excepttheabovesituation,otherdirectors,supervisorsandseniormanagementdidn’tholdanypositionintheshareholders’ units.2.ItisunknowntheendingdateofthepostsofMr.LiuFengxi,Mr.HeHaibin,Mr.ZhangJing,Mr.HaoGangandMr.WangYoulaiheldintheshareholders’ units.|||||

Postsheldconcurrentlyinotherentities
√Applicable□Notapplicable
|||||||
|-|-|-|-|-|-|
|Name|Otherentity|Post|Startingdateoftenure|Endingdateoftenure|Allowancefromtheentity(yes/no)|
|JinQingju|BeijingKind&WoodMallesons|Seniorpartner||||
||CSGHoldingCo.,Ltd.|Independent||||

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|n||director|
||GuotaiJunanSecuritiesCo.,Ltd|Independentdirector|
||InvescoGreatWallFundManagementCo.,Ltd.|Independentdirector|
||ChinaMerchantsBankCo.,Ltd.|Supervisor|
|HeHaibin|OCTCapitalInvestmentManagementCo.,Ltd.|ChairmanoftheBoard|
|ZhangJing|ShenzhenOCTCo.,Ltd.|Chiefofficer|
||OCT(HK)CompanyLimited|Director|
||OCT(Asia)HoldingCo.,Ltd.|Non-executivedirector|
||OCTBusinessManagementCo.,Ltd|ChairmanoftheBoard|
|XiaoZuhe|TianjinBenefitEquityInvestmentFundManagementCo.,Ltd.|ChairmanoftheBoard|
||TianjinBenefitEquityInvestmentFundParnership(limitedpartnership)|ChairmanoftheBoardandGM|
||ShenzhenQianhaiBenefitEquityInvestmentManagementCo.,Ltd.|ChairmanoftheBoardandGM|
||ShenzhenBenefitEquityInvestmentFundParnership(limitedpartnership)|ChairmanoftheBoardandGM|
||JiangxiBenefitNewMaterialVentureInvestmentFund(LimitedPartnership)|ChairmanoftheBoardandGM|
||JianJingkaiBenefitHaojunIndustrialInvestmentPartnership(limitedpartnership)|ChairmanoftheBoardandGM|
||GongqingchengBenefitRuicunInvestmentManagementPartnership(limitedpartnership)|ChairmanoftheBoardandGM|
|ZhangShuhua|SichuanTanChengCertifiedPublicAccountantsCo.,Ltd.|CPA|
|SunShengdian|ShenzhenHuakongSEGCo.,Ltd.|VicechairmanoftheBoard|
||ChinaVankeCo.,Ltd.|ChairmanoftheBoard|
|Notestopost-holdinginshareholder’sunit||None|

Punishmentsimposedintherecentthreeyearsbythesecuritiesregulatorsontheincumbentdirectors,supervisors
andexecutiveofficersaswellasthosewholeftinthisReportingPeriod
KonkaGroupCo.,Ltd. AnnualReport2017□ Applicable√ Notapplicable
IVRemuneration ofDirectors, Supervisors andExecutive Officers
Decision-making procedure, determination basis and actual remuneration payment of directors, supervisors and executiveofficers
1. The salary of directors and supervisors of the Company should be submitted to the shareholders meeting forreview after theapproval and consent bytheBoard ofdirectors.
Referred to the salary level of the Directors and Supervisor of the domestic listed companies of same industry, the salary proposal of the Director and Supervisors of the Company which approved and reviewed by the 2nd Special Meeting of Shareholders were as follows: (1) the basic annual salary standard of the Board Chairman was of RMB1.2 million, the subsidy standard of other Directors (excluding the Directors serving in the Company) was of RMB0.3 million per person per year and the subsidy standard of the Supervisors (excluding the Employee Supervisors) was of RMB0.2 million per person per year; which was executed since Jun. 2015. (2) the above standards were all pre-tax standard with the individual income tax burdened in person as well as the Company withheld and remitted tax.
Other treatment for independent directors: travel expense when they went to attend the Board sessions, Supervisory sessions orShareholders’ General Meetings and the expenses when they were performing their duties as stipulated in the relevant regulations and theArticles ofAssociation and otherrelevant systems, all thesecouldbe reported fordeletion.
The Board of Directors determined the remuneration of senior management staffs referring to the following factors: a. scope of jobs and responsibility shouldered; b. actual profit of the Company; c. market remuneration level in thesame industryand samearea.
Remuneration of the directors, supervisors and senior management of the Company during the Reporting Period
Unit:RMB'0,000
||||||||
|-|-|-|-|-|-|-|
|Name|Officetitle|Gender|Age|Incumbent/former|Totalbefore-taxremunerationfromtheCompany|RemunerationfromrelatedpartiesoftheCompany(yes/no)|
|LiuFengxi|ChairmanoftheBoardandCEO|Male|46|Incumbent|16.83|Yes|
|JinQingjun|Director|Male|61|Incumbent|30|No|
|HeHaibin|Director|Male|43|Incumbent|0|Yes|
|ZhangJing|Director|Male|36|Incumbent|0|Yes|
|SunShengdian|Independentdirector|Male|63|Incumbent|0|No|
|XiaoZuhe|Independentdirector|Male|52|Incumbent|30|No|
|ZhangShuhua|Independentdirector|Male|53|Incumbent|30|No|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|HaoGang|ChairmanoftheSupervisoryBoard|Male|45|Incumbent|0|Yes|
|WangYoulai|Supervisor|Male|57|Incumbent|0|Yes|
|LiJun|Employeesupervisor|Male|47|Incumbent|73.94|No|
|ZhouBin|president|Male|39|Incumbent|184.69|No|
|HeJianjun|Vicepresident|Male|48|Incumbent|139.3|No|
|LiHongtao|Vicepresident|Male|50|Incumbent|139.3|No|
|WuYongjun|BoardSecretary|Male|43|Incumbent|150.1|No|
|LiChunlei|CFO|Male|45|Incumbent|150.7|No|
|YangBo|Vicepresident|Male|48|Incumbent|66.86|No|
|CaoShiping|Vicepresident|Male|40|Incumbent|169.32|No|
|SunQingyan|Vicepresident|Male|46|Incumbent|57.52|No|
|ChenYuehua|Director|Male|55|Former|0|Yes|
|HuangZhongtian|Vicepresident|Male|57|Former|21.8|No|
|LinHongfan|Vicepresident|Male|47|Former|32.04|No|
|Total|||||1292.40||

Notes: The total before-tax remuneration from the Company by Mr. Huang Zhongtian and Mr. Lin Fan listed above were obtained during the period from Jan. to Mar. in 2017 when they served as the vice president of theCompany.
Equityincentivesfordirectors,supervisorsandexecutiveofficersinthisReportingPeriod
□ Applicable√ Notapplicable
V Employees
1.Number, FunctionsandEducational Backgrounds ofEmployees
|||
|-|-|
|Numberofin-serviceemployeesoftheCompany|2090|
|Numberofin-serviceemployeesofmainsubsidiaries|15732|
|Totalnumberofin-serviceemployees|17822|
|TotalnumberofemployeeswithremunerationinthisReportingPeriod|17822|
|NumberofretireestowhomtheCompanyoritsmainsubsidiariesneedtopayretirementpension|0|
|Functions||
|Function|Numberofemployees|
|Production|10389|
|Sales|4126|

KonkaGroupCo.,Ltd. AnnualReport2017
|||
|-|-|
|Technical|1353|
|Financial|642|
|Administrative|1312|
|Total||
|Educationalbackgrounds|17822|
|Educationalbackground|Numberofemployees|
|Masterandabove|156|
|Bachelor|2498|
|College|6424|
|Highschoolandbelow|8744|
|Total|17822|

 2.Employee Remuneration Policy
The Company promulgated its remuneration system with the operating strategy of serving for the enterprise development and enhancement, and the principle of deciding the remuneration according to the post, business performance and capabilities, as well as the market competitiveness and internal fairness. And it decided the employee’s remuneration level according to its business earnings, theposts andfulfillment ofthebusiness performance of theemployee.
3.Employee TrainingPlans
The Company adhered to the people-oriented and paid special attention to cultivate the talents. Surrounded by the business development and the construction of talent team, the Company actively organized and carried out various training activities, and continuously perfected its talents cultivation system, as well as further enhanced theemployee’s professional skills and overall quality, so as to strengthen the construction of management talents, professional talents and technical talents teams.
In 2017, guided by closing to the business needs, the Company centralized the superior resources to promote the cultivation of key talents.And it organized and carried out the open class project for all the employees, and organized and carried out the newemployee’s training& cultivation projects respectively for the graduates from campus recruiting and personnel from social recruitment. Meanwhile, it centralized to organize the pointed the training projects of general management skills and post professional knowledge, etc for the personnel from marketing,R&D, manufacturing, financial and human resources systems, so as tobettercomplete its annual training plan.
4.LaborOutsourcing
□ Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2017 Part IX Corporate Governance
I BasicSituationofCorporate Governance
In the Reporting Period, strictly in accordance with the Company Law, Securities Law of the PRC, Code of Corporate Governance for Listed Companies, Share Listing Rules of Shenzhen Stock Exchange and the relevant rules and regulations of the CSRC, the Company timely amended the internal control systems such as theArticles ofAssociation andAdministrative Method on Provision of External Financial Aids as well as Management System on Investors Relationship, continuously perfected the corporate governance structure and standardized theCompany’s operation. By the end of the Reporting Period, the actual conditions of corporate governance basically met the requirements of the regulatory documents in respect of corporate governance structure of listed companies issued byCSRC.
(I) Shareholders andtheShareholders’ General Meeting
The Company drew up Articles of Association and Rules for Procedure ofShareholders’ General Meeting, ensured that all shareholders, in particular medium and minor shareholders, enjoy legal rights and equal standard. In the Reporting Period, the Company was able to publish announcement onShareholders’ General Meetings in advance, convenedShareholders’ General Meeting with strictly accordance to relevant requirements, so as to enable the shareholders have their rights of information to theCompany’s material issues and the participation rights. In 2017, the Company convened five Shareholders’ General Meeting in total. The Company seriously did well the registration, arrangement and organization work for theShareholders’ General Meeting before the circular on convening theShareholders’ General Meeting being published at the designated media. The Company convened theShareholders’ General Meeting at the office address of the Company strictly in line with relevant stipulations, which was convenient in traffic, and the shareholders could attend the session in accordance with their actual situation. The Company’s directors, supervisors and senior management staffs made explanations and description for theshareholders’ questions and advices at thesession.
(II) Controlling shareholder and the Company
In the Reporting Period, the controlling shareholders and actual controllers strictly regulated its behavior and complied with laws in exercising their rights and obligations, not bypassed theShareholders’ General Meeting to intervene in theCompany’s decisions and operations directly or indirectly. The Company was separated from the controlling shareholders and actual controllers in aspects of its business, personnel, assets, organ and finance, the Board of Directors, Supervisory Committee and theinternal departments of theCompany functioned independently.
KonkaGroupCo.,Ltd. AnnualReport2017 (III) Directors and theBoard ofDirectors
The number and structure of the Board Bureau of the Company were in compliance with laws and regulations. The Company drew up Rules for Procedures of the Board Bureau, so as to ensure a high efficient operation and scientific decision-making of the Board Bureau; the Company has set up Independent Director System and engaged three independent directors. In the Reporting Period, the number of directors and composition of the Board of Directors of the Company as well as the procedure of selection was in accordance with the requirements of the rules and laws as well as Articles of Association. The Company set up four special committees, which were Financial Audit Committee, Nomination Committee, Remuneration&Appraisal Committee, Strategy Committee to provide profession opinion for the decision of the Board of Directors. All the directors carried out their work, fulfilled their duties and scrupulously attended the Board sessions in accordance with Rules of Procedure for the Board of Directors, Rules for Independent Directors, etc. 15 Board sessions were convened by the Company during the Reporting Period, which brought the decision-making mechanism ofthe Board ofDirectors intofull play.
(IV) Supervisors and supervisory committee
The Company has established Rules for Procedures of the Supervisory Committee, persons and structure of the Supervisory Committee was in line with relevant laws and statutes, supervisors can earnestly perform their responsibilities, independently and efficiently executed supervision and check responsibilities with a spirit of being responsible to shareholders. In the Reporting Period, the number of supervisors and composition of the Supervisory Committee of the Company as well as their selecting procedure complied with the laws, regulations. In accordance with the requirement of the Rules of Procedure for Supervisory Committee, the supervisors performed their duties in an earnest and responsible manner, and exercised their functions of supervision on the decision-making procedure of the Board of Directors, resolutions and theCompany’s operation by law, and took effective supervision over theCompany’s significant events, related transactions, financial position, as well as the legality and compliance on duty performance by the directors, president and other senior management members.
(V) PerformanceAppraisal and Incentive& RestrictiveMechanism
The senior management staffs of the Company were recruited on an open basis and in compliance with the laws and regulations. The Company has established and gradually improved the performance appraisal standards and incentive& restrictive mechanism for senior management staffs, so as to attract qualified personnel, and ensure the stability ofseniormanagement staffs. (VI) Interested parties
During the Reporting Period, the Company fully respected and maintained the legal rights of the interested parties, and realized the balance of interest among the parties such as society, shareholders and employees, etc. Meanwhile, the Company protected the rights of the employees,
KonkaGroupCo.,Ltd. AnnualReport2017 promoted the environmental protection, and actively joined in the social benefit and charitable cause soas tojointlypromote sustainableand healthy development.
(VII) Information disclosure and transparency
The Company strengthened its investor relations management by formulating the Management Rules for Investor Relations and the Management Rules for Information Disclosure and the Rules on Implementation for Information Disclosure Committee. The Company strictly complied with the requirements of the laws, regulations and the Articles of Association to disclose its information as required by the relevant regulations on an timely, honest, complete and accurate basis, to ensure the accurate and timely information disclosure, while ensure equal access to information for all shareholders. Owing to his efforts in promoting the standardized operations of the listed companies, implementing the requirements of regulatory authorities, investor relations management, as well as the information disclosure, Mr. Xiao Qing, the Board Secretary, has won the title “Golden Board Secretary of New Fortune” from the 10th session, and successively gained the title of Board Secretary in Actively Promoting the Standards and Self-discipline for the Listed Companies from Y2008 toY2014 in ShenzhenSecurities Regulatory Bureau.
(VIII) Non-standard governance
1.Type ofnon-standard governance matterexisted
There was asituation that theCompany disclosed undisclosed information.
2.Types and cycle of undisclosed information provided to theprincipal shareholder
The Company provided monthlyfinancial data to theprincipal shareholder.
3.Reasons for therelated non-standard governance existed
The Company submitted the undisclosed information such as monthly financial data to the substantial shareholder directly administrated by the State-owned Assets Supervision and Administration Commission of State Council in accordance with the managerial demand of SASAC.
4.Impact onCompany independence
After the self-inspection, the Company kept strictly to the requirements of “ Notice on Strengthening the Supervision of Listed Company’s Provision of Non-public Information to Substantial Shareholders and Actual Controllers ” , and “ Supplementary Notice Concerning Strengthening the Supervision of the Non-standard Governance Behavior of Listed Company's Provision of Non-public Information to Substantial Shareholders and Actual Controllers”, while stringently performed the necessary procedures. There existed no circumstances of substantialshareholder’s abuse of control and disclosure of undisclosed information for insider trading, and hence, it has noimpact onthe independenceof theCompany.
(IX) Development ofcompany’s special governance activity, formulation and implementation of registration and management system forthe insiderofinsideinformation
KonkaGroupCo.,Ltd. AnnualReport2017 1.Establishment andperfection ofmanagement system for theinsider ofinsideinformation
To further standardize thecompany’s inside information management behavior, strengthen thecompany’s inside information confidential work, and maintain the fair principle of information disclosure, the company established Inside Information and Insider Management System in Konka Group Co., Ltd. The company strictly implements the system in the information disclosure work, meanwhile, carefully implements thecompany’s inside information and insider registration and management method, registers the insider of inside information, and report to Shenzhen Stock Exchange and Shenzhen Security Regulatory Bureau according totheprovision.
The company conducted the special inspection on the inside information management during the occurrence of major event in 2017 and the annual report in 2017.After the inspection, the company actually realized that the insider of inside information strictly kept the confidential provision, did not disclose, divulge and spread thecompany’s inside information to the outside, the insider of inside information did not buy and sell thecompany’s share with the inside information before disclosing the major sensitive information influencing thecompany’s share price, there was no investigation and rectification from the regulatory department during the editing, review and disclosure of regular report and major event. Management Rules for Inside Information and Insider Management System was implemented in place and controlled effectively.
2.Establishment andimplementation ofexternal informationuser’s management system
To strengthen the management on the reporting ofcompany’s inside information, the company establishes Inside Information Reporting Management System, and prescribes the inside information reporting range, reporting procedure, responsibility division and other matters according to Security Law inPeople’s Republic of China, Information Disclosure Management Method in Listed Company, Inside Information and Insider Management System in Konka Group Co., Ltd. and other related provisionsin thelaws, regulations andregulatory documents.
The company conducted the special inspection on the inside information reporting status during the occurrence of major event in 2017 and the annual report in 2017.After the inspection, thecompany’ s inside information reporting status complies with the requirements in Inside Information Reporting Management System. Inside Information Reporting Management System was implemented in place and controlled effectively.
Whether it exist any significant difference between the actual corporate governance and the normative documents related to thegovernment of thelistedcompanies issued byCSRCornot?□ Yes√ No
There is no significant difference between the actual corporate governance and the normative documents related to thegovernment ofthelisted companies issued byCSRC.
KonkaGroupCo.,Ltd. AnnualReport2017 II Independence of Businesses, Personnel, Asset, Organizations and Finance which are Separate fromtheControlling Shareholder
Within the Reporting Period, the company was fully separated from the controlling shareholders in terms of business, staff, assets, organs, and finance, which owned independent legal representative and main status in market competition and had independent accounting, as well as possessed complete business and theability ofindependent operation toface themarket.
(I) Business: the Company owned complete supply,R&D, production and sales system, possessed ability of independent operation to face the market by independent operation, independent accounting& decision-making, independent bearing responsibility& risks,didn’t subject to the interference and control of the controlling shareholders, actual controller and its controlled enterprises.
(II) Staff: the Company was independent of the controlling shareholder with respect to labor, personnel and salaries management. The Company owned independent team of staffs, the senior management staff, financial personnel and business personnel received their remunerations in the Company, and they were full-time staffs of the Company without holding any post, except directors and supervisors, inshareholders’ units orother related enterprises.
(III) Assets integrity: the Company had production and operation premises completely separated from the controlling shareholder, and the unaffiliated and integral assets structure, as well as the independent production system, ancillary production system, the ancillary facilities, house property right and other assets, which also possessed independent procurement and sales system.
(IV) Organ: the Company had its own functional organs adapting to the needs of self-development and market competitiveness, all the functional organs were separated from each other in aspects of personnel, office premises and management rules, etc., there existed no particulars about any shareholders, other unitsor individualsinterfering the organ setting oftheCompany.
(V) Finance: the Company established an independent finance department with full-time financial personnel and an independent finance and accounting system, and independently carried out the financial work in line with requirements of relevant accounting rules; the Company promulgated sound financial management system to operate independently without sharing common accounts with the controlling shareholder, related enterprise, other units or individual; the Company independently declared and paid the tax by laws without particulars on paying taxes together withshareholders’ units.
III Horizontal Competition
□ Applicable√ Not applicable
IVAnnualand Special Meetings ofShareholders Convened duringthis Reporting Period
1.Meetings ofShareholders Convened during thisReporting Period
|||||||
|-|-|-|-|-|-|
|Meeting|Type|Investor|Convened|Disclosure|Indextothedisclosedinformation|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||
|-|-|-|-|-|-|
|||participationratio|date|date||
|TheFirstSpecialMeetingofShareholdersin2017|Special|2.65%|03/06/2017|03/07/2017|http://www.cninfo.com.cn/finalpage/2017-03-07/1203134012.PDF|
|The2016AnnualMeetingofShareholders|Annual|37.09%|04/24/2017|04/25/2017|http://www.cninfo.com.cn/finalpage/2017-04-25/1203376714.PDF|
|TheSecondSpecialMeetingofShareholdersin2017|Special|37.19%|06/09/2017|06/10/2017|http://www.cninfo.com.cn/finalpage/2017-06-10/1203606560.PDF|
|TheThirdSpecialMeetingofShareholdersin2017|Special|40.37%|07/17/2017|07/18/2017|http://www.cninfo.com.cn/finalpage/2017-07-18/1203710285.PDF|
|TheFourthSpecialMeetingofShareholdersin2017|Special|39.17%|09/11/2017|09/12/2017|http://www.cninfo.com.cn/finalpage/2017-09-12/1203964166.PDF|

2. Special Meetings of Shareholders Convened at the Request of Preference Shareholders with Resumed Voting Rights
□ Applicable√ Not applicable
V Performance ofIndependentDirectors inthis Reporting Period
1.Attendanceof IndependentDirectors in BoardMeetings andMeetings ofShareholders
|||||||||
|-|-|-|-|-|-|-|-|
|Attendanceofindependentdirectorsinboardmeetingsandmeetingsofshareholders||||||||
|Independentdirector|DuepresenceinthisReportingPeriodforboardmeetings(times)|Presenceonsiteforboardmeetings(times)|Presencebytelecommunicationforboardmeetings(times)|Presencethroughaproxyforboardmeetings(times)|Absenceforboardmeetings(times)|Absentfortwoconsecutivetimesforboardmeetings|Presenceformeetingsofshareholders(times)|
|SunShengdian|15|3|12|0|0|No|1|
|XiaoZuhe|15|2|13|0|0|No|2|
|ZhangShuhua|15|1|14|0|0|No|2|

Explanation onfailing topresent in person for two consecutivesessions
N/A
KonkaGroupCo.,Ltd. AnnualReport2017 2.Objections Raised byIndependentDirectors onIssues ofthe Company
IndicatebytickmarkwhetheranyindependentdirectorsraisedanyobjectionsonissuesoftheCompany.
□ Yes√ No
No suchcases in thisReporting Period.
3.Other Details aboutthePerformance ofDuties byIndependentDirectors
IndicatebytickmarkwhetheranysuggestionsfromindependentdirectorswereadoptedbytheCompany.√ Yes□ No
Suggestions from independent directors adopted ornot adopted bytheCompany
During the Reporting Period, the Independent Directors of the Company vigorously attended the relevant meetings, carefully reviewed each proposal, objectively stated their own views and opinions, knew of theR&D progress and the operating situation of the Company, the execution situation of the internal control construction and the resolutions of the meetings of the Board of Directors and as well as theAnnual General Meeting.
As the expert of the involved each field, the Independent Directors put forward the constructive advices by use of their own professional knowledge towards the internal management, including: to strengthen the business process management, to strengthen the researches on the cutting-edge technology of the color TV and to strengthen the cash flow and the accounts receivable management and so on.The Company carefully adopted the advices from the Independent Directors and constantly improved and enhanced themanagement level of theCompany.
VI Performance of Duties by Specialized Committees under the Board during this Reporting Period
(I) Summary Report on the Performance of the Audit Committee Subject to the Board of Directors
The company had constituted the Work Rules for the Financial Audit Committee under the Board which illustrated the exact personnel, obligations and rights of the FinancialAudit Committee under the Board. In Y2017, based on the principle of faithfulness, the major execution situations of the FinancialAudit Committeeunder theBoard were as follows:
1. Reviewed financial statements ofAnnual Report 2016, First Quarterly Report 2017, Semi-Annual Report 2017, and the Third Quarterly Report 2017, and had no objection to the aforesaid financial statements.
2. Submitted the Proposal on Hiring CPA in 2017 to the Board in which proposing to continue to hire RuihuaCPAas theaudit institutionof financial statements oftheCompany in 2017.
3.During the preparation ofAnnual Report 2017,the Companyfulfilled the following duties: (1) Issued the Notes of the Events such as the Audit Work Arrangement of the Finanical Audit Committee and approvedthearrangement for 2017annual auditing oftheCompany;
(2) Issued Audit Opinion of the Financial Audit Committee on Financial Accounting Statements
KonkaGroupCo.,Ltd. AnnualReport2017 Prepared bythe Company beforeCPAs’ entry ofAudit;
(3) Communicated and exchanged ideas with the CPAs responsible for annual auditing on the problems occurring during theauditing;
(4) Issued Audit Opinion on Financial Accounting Statements of the Company after CPAs Issued the PreliminaryAudit Opinion;
(5) Issued Summary Report on2017AnnualAuditingbyRuihuaCertified PublicAccountants; (6) Submitted theResolutionof the2017Annual Financial Statement oftheCompany to theBoard; (7) Submitted theResolutionof engagement oftheCPAs in 2018tothe Board;
4. In 2017, according to the authorization of the Board of Directors, the FinancialAudit Committee accepted the report on the work of theCompany’s Internal Auditing Department and carried out management over theInternalAuditing Department ofthe Companyand itswork.
(II) Summary Report on the Performance of the Remuneration and Appraisal Committee Subject totheBoard ofDirectors
The company had constituted the Work Rules for the Remuneration andAppraisal Committee under the Board which illustrated the exact personnel, obligations and rights of the Remuneration and Appraisal Committee under the Board. In Y2017, based on the principle of faithfulness, the major execution situations of the Remuneration andAppraisal Committee under the Board were as follows: 1. On Mar. 27, 2017, the Remuneration and Appraisal Committee subject to the Board of Directors submitted theAudit Opinion ontheReward Planningfor SeniorExecutives in 2017to theBoard. 2. On Jul. 28, 2017, the Remuneration and Appraisal Committee subject to the Board of Directors submitted theAudit Opinion on the Reward Planning for the Management of the Company in 2016 to theBoard.
3. During the preparation of Annual Report 2017, the Remuneration and Appraisal Committee subject to the Board of Directors issued theAudit Opinion on the Disclosed Remuneration Situation of the Directors, Supervisors and Senior Executives of the Company, which considered the condition of the remuneration of the Directors, Supervisors and Senior Executives of the Company disclosed in the 2017 Annual Report was verified. The disclosed remuneration situation of the Directors, Supervisors and Senior Executives of the Company met with the remuneration management system without any situation that violated the remuneration management system of the Company.
(III) Summary Report onthe Performance oftheNominations Committee Subject to the Board ofDirectors
The company had constituted the Work Rules for the Nominations Committee under the Board which illustrated the exact personnel, obligations and rights of the Nominations Committee under the Board. In Y2017, based on the principle of faithfulness, the major execution situations of the Nominations Committeesubject tothe Board were as follows:
KonkaGroupCo.,Ltd. AnnualReport2017 1. On Feb. 28, 2017, the Nominations Committee under the Board submitted the Proposal on Change of Senior Executives to the Board and nominated the candidates of new senior executives for discussion.
2. On Jun. 29, 2017, the Nominations Committee under the Board issued the Audit Opinion on Adding the Director of the 8th Board of Directors, in which Mr. Zhang Jing was agreed to be nominated as the candidate of non-independent director of the 8th Board of Directors and the proposal was agreed tobe submitted totheBoard forreview.
(IV) Summary Report on the Performance of the Strategy Committee Subject to the Board of Directors
The company had constituted the Work Rules for the Strategy Committee under the Board which illustrated the exact personnel, obligations and rights of the Strategy Committee under the Board. In Y2017, the Strategy Committee subject to the Board of Directors actively thought and planned the development strategy of Konkaand discussed many times over thesaidstrategy.
VII Performance of Duties by theSupervisory Board
During the Reporting Period, the Supervisory Committee found whether there was risk in the Company in thesupervisory activity
√ Yes□ No
||||||||
|-|-|-|-|-|-|-|
|Meeting|ConvenedDate|SupervisorsPresent|NameoftheResolutionsoftheMeeting|Resolutions|DisclosureIndexontheSpecifiedWebsitefortheResolutions|DisclosureDate|
|The13thMeetingofthe8thSupervisoryBoard|03/29/2017|Haogang(LiJunandWangYoulaientrustedHaoGangwithvoting)|1.2016AnnualReport2.2016WorkReportoftheSupervisoryBoard3.2016AssessmentReportofInternalControl|Unanimouslyvoted agreedby theparticipants|http://www.cninfo.com.cn/finalpage/2017-03-31/1202150026.PDF|03/31/2017|
|The14thMeetingofthe8thSupervisoryBoard|04/27/2017|HaoGang,LiJunandWangYoulai|TheFirstQuarterReportin2017|Unanimouslyvoted agreedby theparticipants|||
|The15thMeetingofthe8thSupervisoryBoard|08/23/2017|HaoGang,LiJunandWangYoulai|2017Semi-annualReport|Unanimouslyvoted agreedby theparticipants|||
|The16th|10/26/2017|HaoGang,Li|TheThirdQuarter|Unanimously|||

KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|Meetingofthe8thSupervisoryBoard|JunandWangYoulai|Reportin2017|voted agreedby theparticipants|

Brief comments ontherelevant risks oftheCompany from the Board ofSupervisors
Naught
VIII Appraisal andIncentiveforExecutiveOfficers
In order to enable the senior management staffs of the Company give better performance of their duties, and clarify their rights and obligations, the Company established and improved a fair, transparent and efficient PerformanceAppraisal Standard and Incentive& Restraint Mechanism for the senior management staffs. The Company assessed the duty performance and completion of business of senior management staffs in terms of professional skills, management level and job performance; took the salary plus bonus as a main incentive way, to improve the incentive of senior management. The senior management staff was appraised by the Board of Directors, which was supervised bytheSupervisory Committee.
IXInternal Control
1.Serious Internal Control Defects Foundin thisReporting Period
□ Yes√ No
2.Internal Control Self-evaluation Report
||||
|-|-|-|
|Disclosure date of the internal controlself-evaluationreport|03/31/2018||
|Index to the disclosed internal controlself-evaluationreport|www.cninfo.com.cn||
|Theproportion oftotalassetsincludedin evaluation scope entities in theCompany's total assets of theconsolidatedfinancialstatements|Morethan90%||
|The proportion of operationrevenueincludedinevaluationscope entitiesinthe Company's operation revenue of theconsolidatedfinancialstatements|Morethan90%||
|Defectidentificationstandards|||
|Type|Financial-reportrelated|Non-financial-reportrelated|
|Qualitativecriteria|1.Thosewiththefollowingcharacteristicsshould be recognized as great defect: (1)found out there were malpractices of theDirectors, Supervisors and SeniorExecutives of the Company that formedsignificant influences on the financial|1. The following signs indicated theremay exist great defect among theinternal control of the non-financialreport; (1) the operating activities ofthe enterprises seriously violated thenational laws and regulations; (2)|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
||report; (2) the Company revised thepublished financial report and revised thegreat misstatements caused by themalpractices or the mistakes; (3) CPAfound out there was great misstatement ofthe current financial report while didn’tfound during the operating process of theinternal control; (4) the supervision of theinternal control by the Finance AuditCommittee and the internal auditinstitution of the Company was invalid;(5) not yet revised the great defect afterthe reasonable period as which wasdiscovered among the internal controlassessment; (6) the significant businesslacked of systematic control or thesystematic control was invalid. 2. Thosewith the following characteristics shouldberecognizedassignificantdefect:(1)notyet chosen or applied the accountingpolicesaccordingtothegenerallyacceptedaccounting standards; (2) not yetconstructed the anti-spam process orcontrol measures; (3) as for the accountsdisposal of the unconventional or specialtransactions, there was no correspondingcontrol mechanism or execution or theexistenceofthecorrespondingsupplementcontrol; (4) there was one or multipledefects during the control of the compileof the financial report at the period-endand could not reasonable guarantee thestatement of the compiled financial reportreach the real and accurate target; (5) notyet revised the significant defect after thereasonableperiodaswhichwasdiscoveredamong the internal control assessment. 3.Other defects from the internal controlhadn’t reached the recognition standardsof the great defect or significant defectshouldberecognizedasgeneraldefect.|negative news frequently disclosed bythe media which caused significantharmtotheCompany’sreputation;(3)the core management team left theirpositions one after another or theoutflow of the key position personnelwas serious; (4) significant businesslacked of systematic control of thesystem was invalid; (5) great defectdiscovered among the internal controlassessment not yet be revised in time.2. The following signs indicated theremayexistsignificantdefectamongtheinternal control of the non-financialreport: (1) negative news occurredrather frequently which caused ratherbigharmtotheCompany’sreputation;(2) the outflow of the key positionpersonnel was rather serious; (3) therewas obvious defect among the controlsystem of the significant business; (4)thesignificantdefect foundamongtheinternal control assessment not yet berevised in time. 3. Other defects fromtheinternal controlhadn’t reached therecognition standards of the greatdefect or significant defect, should berecognizedasgeneraldefect.|
|Quantitativecriteria|Great defect: potential misstatementamount≥1% of the gross profit margin ofthe 2017 consolidated financial report of|Implementinaccordancewiththequantitativecriteriaofinternalcontroldefectevaluationinfinancial|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
||the Company; significant defect: 0.5% ofthe gross profit margin of the 2017consolidated financial report of theCompany≤potential misstatement amount＜1% of the gross profit margin of the2017 consolidated financial report of theCompany; general defect: potentialmisstatement amount＜0.5% of the grossprofit margin of the 2017 consolidatedfinancialreportoftheCompany.|statements|
|Numberofsignificantdefectsoffinancialreport(Piece)|0||
|Numberofsignificantdefectsofnon-financialreport(Piece)|0||
|Numberofimportantdefectsoffinancialreport(Piece)|0||
|Numberofimportantdefectsofnon-financialreport(Piece)|0||

XAuditor’s Reporton Internal Control
√ Applicable□ Not applicable
|||
|-|-|
|Opinionparagraphintheauditor’sreportoninternalcontrol||
|Weconsideredthat,inallthesignificantaspects,KonkaGroupmaintainedefficientinternalcontrolofthefinancialreportaccordingtotheC-SOXandtherelevantregulationson31Dec.2017||
|Auditor’sreportoninternalcontroldisclosedornot|Disclosed|
|Disclosuredate|03/31/2018|
|Index to the disclosed auditor’sreportoninternalcontrol|www.cninfo.com.cn|
|Typeoftheauditor’sopinion|Standardunqualifiedopinion|
|Seriousnon-financial-report-relateddefects|None|

Indicatebytick mark whetheranymodifiedopinionsare expressedbytheCPAsfirm initsauditor’sreportontheCompany’sinternalcontrol.
□ Yes√ No
Indicate by tick mark whether theauditor’s report on theCompany’s internal control issued by the CPAs firm is
consistentwiththeself-evaluationreportoftheBoard.
√ Yes□ No
KonkaGroupCo.,Ltd. AnnualReport2017 Part X Corporate Bonds
Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the approvaldateofthisReportorwereduebutcouldnotberedeemedinfull?
No.
KonkaGroupCo.,Ltd. AnnualReport2017 Part XI Financial Statements
IIndependentAuditor’s Report
|||
|-|-|
|Typeofindependentauditor’sopinion|Unmodifiedunqualifiedopinion|
|Dateofsigningtheauditor’sreport|03/29/2018|
|Nameofindependentauditor|RuihuaCertifiedPublicAccountants(LLP)|
|No.oftheauditor’sreport|RuihuaAuditReport[2018]No.44040006|
|NameofCPA|LiuJianhua,ShenLingzhi|

Text ofIndependentAuditor’s Report
Ruihua Audit Report[2018] No. 44040006 All shareholders of KonkaGroup Co., Ltd.
I. Opinion
We have audited the accompanying financial statements of Konka Group Co., Ltd. (the “Company”), which comprise theCompany’s and consolidated balance sheets as at December 31, 2017, theCompany’s and consolidated income statements, theCompany’s and consolidated cash flow statements, theCompany’s and consolidated statements of changes inshareholders’ equity for the year then ended, as well as thenotes tothe financial statements.
In our opinion, the financial statements attached were prepared in line with the regulations of Accounting Standards for Business Enterprises in all significant aspects which gave a true and fair view of the consolidated and parent financial position of the Company as at Dec. 31, 2017 and the consolidated and parent business performance and cash flow oftheCompany for2017.
II. BasisforOpinion
We conducted our audit in accordance with Standards onAuditing for Certified PublicAccountants. Our responsibilities under those standards are further described intheAuditor’s Responsibilities for the Audit of the Financial Statements section of our report. In accordance with professional ethics
for certified public accountants, we are independent with Foshan Huaxin Packing Co., Ltd. and we
have fulfilled our other ethical responsibilities. We believe that the audit evidence we have obtained
KonkaGroupCo.,Ltd. AnnualReport2017 is sufficient and appropriate toprovide abasis for ouropinion.
III. Key AuditMatters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the Current Period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We confirm that the following items are the key audit itemswhich shall beprovided in theaudit report.
(I) Income Confirmation
1.Item Description
Please refer to Note 25 ofAnnotation IV ImportantAccounting Policies andAccounting Estimation of the Financial Statement and Note 43 of Annotation VI Notes for Item of Consolidated Financial Statement for related information disclosed.
The operating revenue of Konka Group in 2017 was RMB31,227,763,249.71, including operating revenue of colored TV, black-and-white TV, phone business of RMB14,651,126,000 and trade operating revenue of RMB13.6525127 billion. Compared with the operating revenue of 2016, the operating revenue of 2017 increased by53.84% which was mainly contributed by revenue of trade business. The specific time point of confirmation of revenue of the Company is: Commodities for the domestic market: revenue is confirmed when the commodities are delivered or the commodity right is transferred; Exported commodities: revenue is confirmed after the commodities are transferred to the shipper entrusted by the purchaser after finishing the customs declaration. Since operating revenue is one of the key performance indexes of Konka Group, inherent risk is high during the incorrect calculation period of the operating revenue or under control. Confirmation of operating revenue has significant influences on the financial statement. Thus, we specify the proper and significant misstatement oftherevenueas thekeyaudit items.
2.Countermeasures ofAudit
(1) We have understood, estimated and tested design and implementation of key internal control related to revenue circulation to confirm theeffectiveness ofinternal control;
(2) Based on interview of the management personnel, we have understood and estimated the revenue confirmation methods andtimeof KonkaGroup;
KonkaGroupCo.,Ltd. AnnualReport2017 (3) We analyze the income according to customers, products, and months, and compare them with those of the previous year; compare the income with the income of the same industry and check whether there is any obvious abnormality;
(4) We have carried out spot check for the sales revenue, examined the related sales contracts, and all supporting documents and checked the conformity of the risk and remuneration term and the revenue confirmation principles inthe sales contract;
(5) We chose samples as per features and natures of clients to carry out the letter confirmation procedure to confirm the authenticity of receivables; We confirmed the sales amount for main clients of thecoloredTVbusiness and trade businessinthemodeof letterconfirmation;
(6) We carried out spot check on the sales revenue confirmed before and after the asset liability table, including delivery receipts and the detailed accounts to check whether there were trans-period revenue confirmation situations.
(7) We examine the Company's sales policies and contractual rebates for product sales discounts; review the calculation and withdrawal of discounts and accounting processing; check whether discounts are included inthecorrect accountingperiod;
(8) In the end of the Current Period, we carried out supervision of inventory and expanded the scope of check of inventory. We carried out overall check on the finished products of the spot-check companies and the storage bases to check whether there was the situation that delivery bill has been issued and revenue has been confirmed but products were not dilivered.
(9) We checked the supply chain trade business to confirm whether clients and suppliers had relations. Check whether the income confirmation method is consistent with the contractual terms and tradebackground；We visited the clients and suppliers relating to a large trade amount to understand the background of trade and the basic situation of the counter party of the trade. Check whether there is reasonable commercial logic; Spot check thecustomer’s sales documents, bank transfervouchers, invoices, etc. sold totheircounterparties.
(10) For sales of commercial housing, check the completion acceptance documents of the house, whether the housing payment has been all collected, spot-check part of the sales contract, check the supporting evidence of the delivery of the property such as signing receipt of the delivery house, etc.
KonkaGroupCo.,Ltd. AnnualReport2017 (II)Accounting ofInventory Depreciation Reserves
1.Item Description
Please refer to Note 11 ofAnnotation IV ImportantAccounting Policies andAccounting Estimation of the Financial Statement and Note 9 of Annotation VI Notes for Item of Consolidated Financial Statement for related information disclosed.
On Dec. 31, 2017, the book value of inventory of the Company was RMB5,013,238,400 and the inventory depreciation reserve was RMB322,874,800. The balance of inventory book value is significant. Inventory pricing shall be carried out as per the lower of the cost and the net realizable value. The net realizable value is determined by the amount of estimated selling price of the product deducting the potential cost, estimated selling expense and relative taxes and dues during completion. The management level shall make significant judgement and assumption during the prediction, especially the estimated sales price, production cost, selling expense and related taxes and dues. Since the withdrawing inventory depreciation reserve makes significant influences on the financial statement, and inventory depreciation test relates to significant accounting estimation and judgement, weconfirm the withdrawal ofinventory depreciation reserves as thekey audit item. 2.Countermeasures ofAudit
(1) We have understood, estimated and tested design and implementation of internal key control points of the management level related to the inventory depreciation reserves calculation and withdrawing toconfirm theeffectiveness ofthe internal control;
(2) We analyze the inventory according to the category, age, marketability, and product quality characteristics; compare and analyze the situation of inventory depreciation reserves with that of the previous period and the sameindustry toidentify inventory that may beimpaired;
(3) Integrated with the inventory supervision and check procedure, we Checked the quantity and conditions of inventory, mainly checked the long-term inventory and inventory of bad quality and carried out analysis on sufficiency of depreciation reserve calculation and withdrawing of inventory with adepreciation trend.
(4) We have rechecked the detailed statements of inventory depreciation calculation and withdrawing of the audited unit, estimated related parameters used by the management level in inventory depreciation test, especially the estimated selling price, cost of further production, selling expenses
KonkaGroupCo.,Ltd. AnnualReport2017 and related taxes and dues.
(5) We checked the sales situations after the balance sheet date to verify the reasonability of inventory depreciation calculation and withdrawing.
(III)Accounting ofInvestment Income
1.Item Description
Please refer to Note 13 of Annotation IV Important Accounting Policies and Accounting Estimation of the Financial Statement and Note 12 and Note 50 of Annotation VI Notes for Item of ConsolidationFinancial Statement for related information disclosed.
The investment income of the Company in 2017 was RMB6,587,848,400 mainly generated from the investment income arising from disposal of long-term equity investment, returns on purchase of financial products, and gains arising from remeasurement of residual equity at fair value after losing the controlling rights. Since the amount of investment income has greatly impacts on profits, the recognition of investment income involves complicated accounting treatment and the recognition of the date of losing controlling rights should be based on the professional judgement, we confirm the recognition ofinvestment incomeas thekey audit item.
2.Countermeasures ofAudit
(1) We have understood, estimated and tested design and implementation of key internal control of themanagement level related to theinvestment to confirm theeffectiveness oftheinternal control; (2) We have checked the stock transfer contracts, evaluation reports, changes in industrial and commercial registration, changes in the borad of directors and accounts of stock transfer received to confirm having met therecognition conditionsofinvestment income;
(3) We have reviewed the evaluation reports related to stock transfer to judge the fairness of stock transaction consideration and rationality of the recognition of residual equity by fair value after losingcontrolling rights;
(4)We have rechecked the accounting process of theCompany’s investment income and recalculated the investment income arising from the residual equity at fair value after losing controlling rights to prove therightness ofthe accounting of investmentincome;
(5) We have checked the contracts and bank receipts related to the purchase of financial products; spot checked the accounting documents and checked the recognition of investment income to prove therightness of theinvestment incomeofentrust financial management.
KonkaGroupCo.,Ltd. AnnualReport2017 IV.Other Information
The management of the Company is responsible for the other information. The other information comprises all of the information included in the annual report for 2017 other than the financial statements andourauditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.Wehave nothingto report in thisregard. V. Responsibility of Management and Those Charged with Governance for the Financial Statements
The management of the Company is responsible for the preparation and fair presentation of these financial statements in accordance with Accounting Standards for Business Enterprises to make them a fair presentation and designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the management of the Company is responsible for assessing theCompany’s ability to continue as a going concern, disclosing, if applicable, matters related to going concern and using the going concern basis of accounting unless the management either intends to liquidatetheCompany orto cease operations, orhas norealisticalternativebut to doso. Those charged with governance are responsible for overseeing theCompany’s financial reporting process.
VI.CPA’s Responsibility for theAuditof theFinancialStatements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue anauditor’s report that includes our opinion. We report our opinion solely to you, as a body, and for no other purpose.
KonkaGroupCo.,Ltd. AnnualReport2017 We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken onthe basis ofthesefinancial statements.
As part of an audit in accordance with auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.Wealso:
1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriatein thecircumstances.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made bythemanagement.
4. Conclude on the appropriateness of the management’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in ourauditor’s report to the related disclosures in the financial statements, or if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor’s report. However, future events or conditions may cause the Company to cease to continueas a going concern.
5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
KonkaGroupCo.,Ltd. AnnualReport2017 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that weidentify during ouraudit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the Current Period and are therefore the key audit matters. We describe these matters in ourauditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
RuihuaCertified PublicAccountants (LLP) CPA(Engagement Partner):
Beijing·China CPA:
March 29,2018
II FinancialStatements
Currency unit for thestatements in thenotes to thefinancial statements: RMB
1.Consolidated BalanceSheet
Prepared byKonka Group Co., Ltd.
Unit: RMB
||||
|-|-|-|
|Item|December31,2017|December31,2016|
|Currentassets:|||
|Monetaryassets|3,212,044,851.08|2,617,606,256.42|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Settlementreserve|||
|Interbankloansgranted|||
|Financialassetsatfairvaluethroughprofitorloss|296,799.53|252,084,994.12|
|Derivativefinancialassets|||
|Notesreceivable|5,178,668,988.23|2,871,633,498.82|
|Accountsreceivable|3,443,095,947.26|2,307,965,548.49|
|Prepayments|467,123,091.74|274,810,658.72|
|Premiumsreceivable|||
|Reinsurancereceivables|||
|Receivablereinsurancecontractreserve|||
|Interestreceivable|1,813,256.77|1,342,063.84|
|Dividendsreceivable||10,171,609.48|
|Otherreceivables|182,405,099.39|222,389,921.80|
|Financialassetspurchasedunderresaleagreements|||
|Inventories|4,690,363,565.53|4,287,413,944.35|
|Assetsclassifiedasheldforsale|||
|Currentportionofnon-currentassets|||
|Othercurrentassets|1,715,326,868.81|562,204,116.20|
|Totalcurrentassets|18,891,138,468.34|13,407,622,612.24|
|Non-currentassets:|||
|Loansandadvancestocustomers|||
|Available-for-salefinancialassets|712,170,399.09|314,967,639.36|
|Held-to-maturityinvestments|||
|Long-termreceivables|||
|Long-termequityinvestments|1,319,987,343.74|309,648,120.37|
|Investmentproperty|216,455,629.99|222,086,904.26|
|Property,plantandequipment|1,587,170,348.35|1,573,978,914.03|
|Constructioninprogress|135,863,821.01|315,536,437.05|
|Constructionmaterials|||
|Proceedsfromdisposalofproperty,plantandequipment|||
|Productivelivingassets|||
|Oilandgasassets|||
|Intangibleassets|205,057,773.69|302,045,627.44|
|R&Dexpense|||

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Goodwill|3,597,657.15|3,597,657.15|
|Long-termprepaidexpense|150,060,937.30|91,901,533.39|
|Deferredincometaxassets|307,942,263.12|701,734,152.68|
|Othernon-currentassets|29,290,828.00||
|Totalnon-currentassets|4,667,597,001.44|3,835,496,985.73|
|Totalassets|23,558,735,469.78|17,243,119,597.97|
|Currentliabilities:|||
|Short-termborrowings|6,927,472,037.35|6,562,834,226.51|
|Borrowingsfromcentralbank|||
|Customer deposits and deposits from banks and other financialinstitutions|||
|Interbankloansobtained|||
|Financialliabilitiesatfairvaluethroughprofitorloss|47,482,470.50|337,263.13|
|Derivativefinancialliabilities|||
|Notespayable|541,175,312.09|863,709,138.39|
|Accountspayable|3,612,216,266.59|3,160,073,575.56|
|Advancesfromcustomers|640,510,784.17|1,201,426,223.70|
|Financialassetssoldunderrepurchaseagreements|||
|Handlingchargesandcommissionspayable|||
|Payrollpayable|291,370,297.67|273,059,516.65|
|Taxespayable|1,326,569,094.53|121,905,421.18|
|Interestpayable|35,723,963.94|21,344,172.45|
|Dividendspayable|||
|Otherpayables|1,608,359,305.87|1,444,349,986.74|
|Reinsurancepayables|||
|Insurancecontractreserve|||
|Payablesforactingtradingofsecurities|||
|Payablesforactingunderwritingofsecurities|||
|Liabilitiesdirectlyassociatedwithassetsclassifiedasheldforsale|||
|Currentportionofnon-currentliabilities|374,358.99|41,025.60|
|Othercurrentliabilities|||
|Totalcurrentliabilities|15,031,253,891.70|13,649,080,549.91|
|Non-currentliabilities:|||
|Long-termborrowings|167,000,000.00|70,000,000.00|
|Bondspayable|||

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Including:Preferredshares|||
|Perpetualbonds|||
|Long-termpayables|61,538.46|30,102,564.14|
|Long-termpayrollpayable|13,361,821.86|18,151,659.90|
|Specificpayables|||
|Provisions|6,181,865.10|7,551,985.10|
|Deferredrevenue|130,049,911.87|130,571,125.42|
|Deferredincometaxliabilities|12,636,633.40|19,162,818.83|
|Othernon-currentliabilities|||
|Totalnon-currentliabilities|329,291,770.69|275,540,153.39|
|Totalliabilities|15,360,545,662.39|13,924,620,703.30|
|Owners’ equity:|||
|Sharecapital|2,407,945,408.00|2,407,945,408.00|
|Otherequityinstruments|||
|Including:Preferredshares|||
|Perpetualbonds|||
|Capitalreserves|104,732,242.30|79,723,092.04|
|Less:Treasuryshares|||
|Othercomprehensiveincome|3,697,458.95|-6,932,104.65|
|Specificreserve|||
|Surplusreserves|1,217,644,874.79|847,908,466.28|
|Generalreserve|||
|Retainedearnings|4,260,125,492.57|-427,163,254.63|
|TotalequityattributabletoownersofParentCompany|7,994,145,476.61|2,901,481,607.04|
|Non-controllinginterests|204,044,330.78|417,017,287.63|
|Totalowners’ equity|8,198,189,807.39|3,318,498,894.67|
|Totalliabilitiesandowners’ equity|23,558,735,469.78|17,243,119,597.97|

 Legal representative: Liu Fengxi CFO: Li Chunlei Head of thefinancial department: FengJunxiu
2.Parent Company BalanceSheet
Unit:RMB
||||
|-|-|-|
|Item|December31,2017|December31,2016|
|Currentassets:|||
|Monetaryassets|1,760,838,390.83|982,562,273.45|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Financialassetsatfairvaluethroughprofitorloss|296,799.53|39,894,844.12|
|Derivativefinancialassets|||
|Notesreceivable|2,864,064,309.99|2,513,459,083.61|
|Accountsreceivable|4,732,153,992.25|3,145,529,199.35|
|Prepayments|1,066,260,182.37|523,905,219.52|
|Interestreceivable|23,894,771.88|4,502,350.43|
|Dividendsreceivable|2,690,276.72||
|Otherreceivables|4,314,882,334.26|1,725,494,161.08|
|Inventories|2,090,697,937.23|1,926,824,243.11|
|Assetsclassifiedasheldforsale|||
|Currentportionofnon-currentassets|100,000,000.00||
|Othercurrentassets|1,547,454,872.74|505,418,961.79|
|Totalcurrentassets|18,503,233,867.80|11,367,590,336.46|
|Non-currentassets:|||
|Available-for-salefinancialassets|562,612,236.33|270,217,639.36|
|Held-to-maturityinvestments||170,000,000.00|
|Long-termreceivables|||
|Long-termequityinvestments|2,649,074,424.45|2,383,970,009.87|
|Investmentproperty|216,455,629.99|222,086,904.26|
|Property,plantandequipment|482,020,892.58|499,826,176.39|
|Constructioninprogress|79,927,345.88|11,754,885.34|
|Constructionmaterials|||
|Proceedsfromdisposalofproperty,plantandequipment|||
|Productivelivingassets|||
|Oilandgasassets|||
|Intangibleassets|91,718,400.70|90,880,022.23|
|R&Dexpense|||
|Goodwill|||
|Long-termprepaidexpense|78,305,555.97|66,995,753.17|
|Deferredincometaxassets|279,324,511.96|656,704,805.39|
|Othernon-currentassets|20,000,000.00||
|Totalnon-currentassets|4,459,438,997.86|4,372,436,196.01|
|Totalassets|22,962,672,865.66|15,740,026,532.47|
|Currentliabilities:|||

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Short-termborrowings|3,269,730,888.60|5,436,958,840.80|
|Financialliabilitiesatfairvaluethroughprofitorloss|47,482,470.50|337,263.13|
|Derivativefinancialliabilities|||
|Notespayable|2,394,426,158.76|1,454,982,347.31|
|Accountspayable|6,167,204,323.22|3,710,175,718.31|
|Advancesfromcustomers|601,036,147.76|322,402,357.59|
|Payrollpayable|163,066,135.71|131,415,800.19|
|Taxespayable|1,070,771,570.12|19,823,949.08|
|Interestpayable|50,336,913.53|23,767,528.97|
|Dividendspayable|||
|Otherpayables|1,868,073,013.59|1,760,751,455.81|
|Liabilitiesdirectlyassociatedwithassetsclassifiedasheldforsale|||
|Currentportionofnon-currentliabilities|||
|Othercurrentliabilities|||
|Totalcurrentliabilities|15,632,127,621.79|12,860,615,261.19|
|Non-currentliabilities:|||
|Long-termborrowings|167,000,000.00|40,000,000.00|
|Bondspayable|||
|Including:Preferredshares|||
|Perpetualbonds|||
|Long-termpayables|||
|Long-termpayrollpayable|||
|Specificpayables|||
|Provisions|6,181,865.10|7,551,985.10|
|Deferredrevenue|94,590,560.82|82,166,818.30|
|Deferredincometaxliabilities||12,026,251.50|
|Othernon-currentliabilities|||
|Totalnon-currentliabilities|267,772,425.92|141,745,054.90|
|Totalliabilities|15,899,900,047.71|13,002,360,316.09|
|Owners’ equity:|||
|Sharecapital|2,407,945,408.00|2,407,945,408.00|
|Otherequityinstruments|||
|Including:Preferredshares|||
|Perpetualbonds|||

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Capitalreserves|111,525,163.22|64,794,108.39|
|Less:Treasuryshares|||
|Othercomprehensiveincome|-1,970,304.62|6,714,437.62|
|Specificreserve|||
|Surplusreserves|1,217,644,874.79|847,908,466.28|
|Retainedearnings|3,327,627,676.56|-589,696,203.91|
|Totalowners’ equity|7,062,772,817.95|2,737,666,216.38|
|Totalliabilitiesandowners’ equity|22,962,672,865.66|15,740,026,532.47|

 3.Consolidated Income Statement
Unit:RMB
||||
|-|-|-|
|Item|2017|2016|
|1.Revenue|31,227,763,249.71|20,299,348,136.21|
|Including:Operatingrevenue|31,227,763,249.71|20,299,348,136.21|
|Interestrevenue|||
|Premiumrevenue|||
|Handlingchargeandcommissionrevenue|||
|2.Costofrevenue|31,418,151,525.89|20,865,416,619.07|
|Including:Costofoperatingrevenue|27,788,985,279.80|17,518,330,342.99|
|Interestexpense|||
|Handlingchargeandcommissionexpense|||
|Surrenders|||
|Netclaimspaid|||
|Netamountprovidedasinsurancecontractreserve|||
|Expenditureonpolicydividends|||
|Reinsurancepremiumexpense|||
|Taxesandsurtaxes|208,836,733.61|111,967,480.96|
|Sellingexpense|2,141,993,558.11|2,285,998,285.97|
|Administrativeexpense|777,713,680.46|607,579,115.65|
|Financecosts|340,918,550.61|154,764,546.12|
|Assetimpairmentlosses|159,703,723.30|186,776,847.38|
|Add:Gainsonchangesinfairvalue(“-” forlosses)|-66,221,451.96|-14,617,369.08|
|Investmentincome(“-” forloss)|6,587,848,357.88|348,445,927.65|
|Including: Share of profit or loss of joint ventures andassociates|3,953,094.99|12,738,812.54|
|Foreignexchangegains(“-” forlosses)|||

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Assetdisposalincome(“-” forloss)|55,945,401.39||
|Otherincome|204,979,443.55||
|3.Operatingincome(“-” forloss)|6,592,163,474.68|-232,239,924.29|
|Add:Non-operatingincome|82,832,663.76|270,828,423.34|
|Less:Non-operatingexpense|16,521,032.68|10,853,641.54|
|4.Pretaxincome(“-” forloss)|6,658,475,105.76|27,734,857.51|
|Less:Incometaxexpense|1,571,641,005.78|-64,440,500.57|
|5.Netincome(“-” fornetloss)|5,086,834,099.98|92,175,358.08|
|5.1Netincomefromcontinuingoperations(“-” fornetloss)|5,086,834,099.98|92,175,358.08|
|5.2Netincomefromdiscontinuedoperations(“-” fornetloss)|||
|AttributabletoownersofParentCompany|5,057,025,155.71|95,673,028.03|
|Attributabletonon-controllinginterests|29,808,944.27|-3,497,669.95|
|6.Othercomprehensiveincome,netoftax|10,457,550.34|-10,293,358.91|
|AttributabletoownersofParentCompany|10,629,563.60|-10,087,848.65|
|6.1Itemsthatwillnotbereclassifiedtoprofitorloss|||
|6.1.1 Changes in net liabilities or assets caused byremeasurementsondefinedbenefitpensionschemes|||
|6.1.2 Shareof other comprehensive income of investees thatwillnotbereclassifiedtoprofitorlossunderequitymethod|||
|6.2Itemsthatmaysubsequentlybereclassifiedtoprofitorloss|10,629,563.60|-10,087,848.65|
|6.2.1 Shareof other comprehensive income of investees thatwillbereclassifiedtoprofitorlossunderequitymethod|-3,138,048.04||
|6.2.2 Gains/Losses on changes in fair value ofavailable-for-salefinancialassets|-6,379,226.68|4,965,780.75|
|6.2.3 Gains/Losses arising from reclassification ofheld-to-maturityinvestmentstoavailable-for-salefinancialassets|||
|6.2.4Effectivegains/lossesoncashflowhedges|||
|6.2.5 Differences arising from translation of foreigncurrency-denominatedfinancialstatements|20,146,838.32|-15,053,629.40|
|6.2.6Other|||
|Attributabletonon-controllinginterests|-172,013.26|-205,510.26|
|7.Totalcomprehensiveincome|5,097,291,650.32|81,881,999.17|
|AttributabletoownersofParentCompany|5,067,654,719.31|85,585,179.38|
|Attributabletonon-controllinginterests|29,636,931.01|-3,703,180.21|
|8.Earningspershare|||
|8.1Basicearningspershare|2.1001|0.0397|
|8.2Dilutedearningspershare|2.1001|0.0397|

KonkaGroupCo.,Ltd. AnnualReport2017 Where business mergers under the same control occurred in the current period, the net income achieved by the merged parties before the business mergers was RMB000, with the amount for last year being RMB000.
Legal representative: Liu Fengxi CFO: Li Chunlei Head of thefinancial department: FengJunxiu
4.Parent Company Income Statement
Unit:RMB
||||
|-|-|-|
|Item|2017|2016|
|1.Operatingrevenue|12,102,478,051.51|13,972,090,704.33|
|Less:Costofoperatingrevenue|10,254,093,606.04|12,336,816,440.54|
|Taxesandsurtaxes|32,773,051.99|37,856,483.10|
|Sellingexpense|1,539,608,039.02|1,655,163,345.34|
|Administrativeexpense|570,360,530.04|418,505,210.84|
|Financecosts|275,532,025.79|222,678,508.21|
|Assetimpairmentlosses|133,044,172.18|134,659,777.14|
|Add:Gainsonchangesinfairvalue(“-” forlosses)|-86,743,251.96|32,373,545.70|
|Investmentincome(“-” forloss)|6,419,712,482.20|146,984,583.30|
|Including: Share of profit or loss of joint ventures andassociates|-2,867,529.72|29,506,367.44|
|Assetdisposalincome(“-” forloss)|74,187.45||
|Otherincome|69,388,626.62||
|2.Operatingincome(“-” forloss)|5,699,498,670.76|-654,230,931.84|
|Add:Non-operatingincome|38,052,635.22|136,056,632.09|
|Less:Non-operatingexpense|10,368,352.12|5,807,098.97|
|3.Pretaxincome(“-” forloss)|5,727,182,953.86|-523,981,398.72|
|Less:Incometaxexpense|1,414,775,357.96|-144,168,047.81|
|4.Netincome(“-” fornetloss)|4,312,407,595.90|-379,813,350.91|
|4.1Netincomefromcontinuingoperations(“-” fornetloss)|4,312,407,595.90|-379,813,350.91|
|4.2Netincomefromdiscontinuedoperations(“-” fornetloss)|||
|5.Othercomprehensiveincome,netoftax|-8,684,742.24|4,911,184.85|
|5.1Itemsthatwillnotbereclassifiedtoprofitorloss|||
|5.1.1 Changes in net liabilities or assets caused byremeasurementsondefinedbenefitpensionschemes|||
|5.1.2 Share of other comprehensive income of investees thatwillnotbereclassifiedintoprofitorlossunderequitymethod|||
|5.2Itemsthatmaysubsequentlybereclassifiedtoprofitorloss|-8,684,742.24|4,911,184.85|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|5.2.1 Share of other comprehensive income of investees thatwillbereclassifiedintoprofitorlossunderequitymethod|-2,274,173.49||
|5.2.2Gains/Lossesonchangesinfairvalueofavailable-for-salefinancialassets|-6,410,568.75|4,965,780.75|
|5.2.3 Gains/Losses arising from reclassification ofheld-to-maturityinvestmentstoavailable-for-salefinancialassets|||
|5.2.4Effectivegains/lossesoncashflowhedges|||
|5.2.5 Differences arising from translation of foreigncurrency-denominatedfinancialstatements||-54,595.90|
|5.2.6Other|||
|6.Totalcomprehensiveincome|4,303,722,853.66|-374,902,166.06|
|7.Earningspershare|||
|7.1Basicearningspershare|||
|7.2Dilutedearningspershare|||

5.Consolidated Cash FlowStatement
Unit: RMB
||||
|-|-|-|
|Item|2017|2016|
|1.Cashgeneratedbyorusedinoperatingactivities:|||
|Proceedsfromsaleofcommoditiesandrenderingofservices|31,446,609,731.30|18,283,429,567.66|
|Net increase in customer deposits and deposits from banks andotherfinancialinstitutions|||
|Netincreaseinloansfromcentralbank|||
|Netincreaseinloansfromotherfinancialinstitutions|||
|Premiumsreceivedonoriginalinsurancecontracts|||
|Netproceedsfromreinsurance|||
|Netincreaseindepositsandinvestmentsofpolicyholders|||
|Net increase in proceeds from disposal of financial assets at fairvaluethroughprofitorloss|||
|Interest,handlingchargesandcommissionsreceived|||
|Netincreaseininterbankloansobtained|||
|Netincreaseinproceedsfromrepurchasetransactions|||
|Taxrebatesreceived|306,536,483.85|358,031,487.94|
|Cashgeneratedbyotheroperatingactivities|9,189,740,317.98|436,160,333.16|
|Subtotalofcashgeneratedbyoperatingactivities|40,942,886,533.13|19,077,621,388.76|
|Paymentsforgoodsandservices|32,945,586,384.73|16,509,132,778.70|
|Netincreaseinloansandadvancestocustomers|||
|Net increase in deposits in central bank and in interbank loans|||

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|granted|||
|Paymentsforclaimsonoriginalinsurancecontracts|||
|Interest,handlingchargesandcommissionspaid|||
|Policydividendspaid|||
|Cashpaidtoandforemployees|1,521,219,551.03|1,649,736,066.93|
|Taxespaid|538,733,487.55|656,221,900.55|
|Cashusedinotheroperatingactivities|10,251,604,732.29|1,234,666,430.01|
|Subtotalofcashusedinoperatingactivities|45,257,144,155.60|20,049,757,176.19|
|Netcashflowsfromoperatingactivities|-4,314,257,622.47|-972,135,787.43|
|2.Cashgeneratedbyorusedininvestingactivities:|||
|Proceedsfromdisinvestments|72,257,309.01|59,560,892.50|
|Investmentincomereceived|126,829,624.00|26,329,139.46|
|Net proceeds from disposal of property, plant and equipment,intangibleassetsandotherlong-livedassets|101,598,096.61|4,491,419.45|
|Netproceedsfromdisposalofsubsidiariesorotherbusinessunits|6,904,949,434.52||
|Cashgeneratedbyotherinvestingactivities|1,847,480,775.61|9,883,683,340.31|
|Subtotalofcashgeneratedbyinvestingactivities|9,053,115,239.75|9,974,064,791.72|
|Payments for acquisition of property, plant and equipment,intangibleassetsandotherlong-livedassets|252,512,252.89|172,054,580.04|
|Paymentsforinvestments|1,185,098,584.39|30,700,000.00|
|Netincreaseinpledgedloansgranted|||
|Net payments for acquisition of subsidiaries and other businessunits|||
|Cashusedinotherinvestingactivities|2,885,988,913.10|9,680,013,361.99|
|Subtotalofcashusedininvestingactivities|4,323,599,750.38|9,882,767,942.03|
|Netcashflowsfrominvestingactivities|4,729,515,489.37|91,296,849.69|
|3.Cashgeneratedbyorusedinfinancingactivities:|||
|Capitalcontributionsreceived|50,430,511.80|262,112,331.23|
|Including: Capital contributions by non-controlling interests tosubsidiaries|50,430,511.80|262,112,331.23|
|Increaseinborrowings|9,997,566,758.22|6,897,808,624.31|
|Netproceedsfromissuanceofbonds|||
|Cashgeneratedbyotherfinancingactivities|478,604,496.40|12,808,000.00|
|Subtotalofcashgeneratedbyfinancingactivities|10,526,601,766.42|7,172,728,955.54|
|Repaymentofborrowings|9,541,243,861.75|5,256,766,118.99|
|Paymentsforinterestanddividends|215,250,211.08|139,915,601.19|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Including: Dividends paid by subsidiaries to non-controllinginterests|746,714.88|461,972.51|
|Cashusedinotherfinancingactivities|23,263,067.97|443,297,884.17|
|Subtotalofcashusedinfinancingactivities|9,779,757,140.80|5,839,979,604.35|
|Netcashflowsfromfinancingactivities|746,844,625.62|1,332,749,351.19|
|4. Effect of foreign exchange rate changes on cash and cashequivalents|-85,105,733.90|80,837,680.34|
|5.Netincreaseincashandcashequivalents|1,076,996,758.62|532,748,093.79|
|Add:Cashandcashequivalents,beginningoftheperiod|2,020,902,945.14|1,488,154,851.35|
|6.Cashandcashequivalents,endoftheperiod|3,097,899,703.76|2,020,902,945.14|

 6.Parent Company Cash Flow Statement
Unit:RMB
||||
|-|-|-|
|Item|2017|2016|
|1.Cashgeneratedbyorusedinoperatingactivities:|||
|Proceedsfromsaleofcommoditiesandrenderingofservices|12,663,519,862.71|11,834,479,194.94|
|Taxrebatesreceived|101,117,712.70|160,071,895.68|
|Cashgeneratedbyotheroperatingactivities|11,750,343,362.91|2,128,714,960.22|
|Subtotalofcashgeneratedbyoperatingactivities|24,514,980,938.32|14,123,266,050.84|
|Paymentsforgoodsandservices|11,671,178,195.40|12,638,560,047.48|
|Cashpaidtoandforemployees|913,094,001.19|915,901,145.04|
|Taxespaid|153,133,718.08|281,931,582.32|
|Cashusedinotheroperatingactivities|13,492,237,043.23|3,263,567,880.24|
|Subtotalofcashusedinoperatingactivities|26,229,642,957.90|17,099,960,655.08|
|Netcashflowsfromoperatingactivities|-1,714,662,019.58|-2,976,694,604.24|
|2.Cashgeneratedbyorusedininvestingactivities:|||
|Proceedsfromdisinvestments|7,213,519,480.00|18,331,433.07|
|Investmentincomereceived|157,605,497.94|45,833,043.81|
|Net proceeds from disposal of property, plant and equipment,intangibleassetsandotherlong-livedassets|202,036.88|1,280,614.55|
|Netproceedsfromdisposalofsubsidiariesorotherbusinessunits|||
|Cashgeneratedbyotherinvestingactivities|1,771,357,091.35|10,006,846,873.48|
|Subtotalofcashgeneratedbyinvestingactivities|9,142,684,106.17|10,072,291,964.91|
|Payments for acquisition of property, plant and equipment,intangibleassetsandotherlong-livedassets|69,689,987.87|41,220,039.50|
|Paymentsforinvestments|1,434,196,953.00|642,016,000.00|
|Net payments for acquisition of subsidiaries and other business|||

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|units|||
|Cashusedinotherinvestingactivities|2,997,732,417.74|10,501,287,664.77|
|Subtotalofcashusedininvestingactivities|4,501,619,358.61|11,184,523,704.27|
|Netcashflowsfrominvestingactivities|4,641,064,747.56|-1,112,231,739.36|
|3.Cashgeneratedbyorusedinfinancingactivities:|||
|Capitalcontributionsreceived|||
|Increaseinborrowings|6,424,596,805.22|5,251,690,361.51|
|Netproceedsfromissuanceofbonds|||
|Cashgeneratedbyotherfinancingactivities|165,396,024.39|369,933,493.64|
|Subtotalofcashgeneratedbyfinancingactivities|6,589,992,829.61|5,621,623,855.15|
|Repaymentofborrowings|8,507,218,581.45|626,502,931.51|
|Paymentsforinterestanddividends|199,017,294.57|93,670,105.28|
|Cashusedinotherfinancingactivities|598,314.20|352,371,563.61|
|Sub-totalofcashusedinfinancingactivities|8,706,834,190.22|1,072,544,600.40|
|Netcashflowsfromfinancingactivities|-2,116,841,360.61|4,549,079,254.75|
|4. Effect of foreign exchange rate changes on cash and cashequivalents|-39,905,176.10|35,193,217.72|
|5.Netincreaseincashandcashequivalents|769,656,191.27|495,346,128.87|
|Add:Cashandcashequivalents,beginningoftheperiod|973,613,753.40|478,267,624.53|
|6.Cashandcashequivalents,endoftheperiod|1,743,269,944.67|973,613,753.40|

KonkaGroupCo.,Ltd. AnnualReport2017
7.Consolidated Statements ofChanges inOwners’ Equity
2017
Unit:RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2017|||||||||||||
||EquityattributabletoownersofParentCompany|||||||||||Non-controllinginterests|Totalowners’equity|
||Sharecapital|Otherequityinstruments|||Capitalreserves|Less:Treasuryshares|Othercomprehensiveincome|Specificreserve|Surplusreserves|Generalreserve|Retainedearnings|||
|||Preferredshares|Perpetualbonds|Other||||||||||
|1. Balances as of end ofprioryear|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: Adjustments forchanged accountingpolicies||||||||||||||
|Adjustments forcorrections of previouserrors||||||||||||||
|Adjustmentsforbusinessmergersundersamecontrol||||||||||||||
|Otheradjustments||||||||||||||
|2.Balancesasofbeginningoftheyear|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|
|3.Increase/decreaseintheperiod(“-” fordecrease)|||||25,009,150.26||10,629,563.60||369,736,408.51||4,687,288,747.20|-212,972,956.85|4,879,690,912.72|
|3.1 Total comprehensiveincome|||||||10,629,563.60||||5,057,025,155.71|29,636,931.01|5,097,291,650.32|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|3.2Capitalincreasedandreducedbyowners|||-241,190,603.80|-241,190,603.80|
|3.2.1Commonsharesincreasedbyshareholders|||-235,037,235.08|-235,037,235.08|
|3.2.2Capitalincreasedbyholdersofotherequityinstruments|||||
|3.2.3Share-basedpaymentsincludedinowners’equity|||||
|3.2.4Other|||-6,153,368.72|-6,153,368.72|
|3.3Profitdistribution|369,736,408.51|-369,736,408.51|-1,419,284.06|-1,419,284.06|
|3.3.1Appropriation tosurplusreserves|369,736,408.51|-369,736,408.51|||
|3.3.2Appropriation togeneralreserve|||||
|3.3.3Appropriation toowners(orshareholders)|||-1,419,284.06|-1,419,284.06|
|3.3.4Other|||||
|3.4Carryforwardswithinowners’equity|||||
|3.4.1 Increase incapital (or share capital)fromcapitalreserves|||||
|3.4.2 Increase incapital (or share capital)fromsurplusreserves|||||

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||
|-|-|-|-|-|-|-|-|
|3.4.3 Surplus reservesusedtomakeuplosses||||||||
|3.4.4Other||||||||
|3.5Specificreserve||||||||
|3.5.1 Withdrawn fortheperiod||||||||
|3.5.2 Used during theperiod||||||||
|3.6Other||25,009,150.26|||||25,009,150.26|
|4.Balancesasofendoftheperiod|2,407,945,408.00|104,732,242.30|3,697,458.95|1,217,644,874.79|4,260,125,492.57|204,044,330.78|8,198,189,807.39|

2016
Unit: RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2016|||||||||||||
||EquityattributabletoownersofParentCompany|||||||||||Non-controllinginterests|Totalowners’equity|
||Sharecapital|Otherequityinstruments|||Capitalreserves|Less:Treasuryshares|Othercomprehensiveincome|Specificreserve|Surplusreserves|Generalreserve|Retainedearnings|||
|||Preferredshares|Perpetualbonds|Other||||||||||
|1. Balances as of end ofprioryear|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: Adjustments forchanged accountingpolicies||||||||||||||
|Adjustments forcorrections of previous||||||||||||||

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||
|-|-|-|-|-|-|-|-|
|errors||||||||
|Adjustments forbusiness mergers undersamecontrol||||||||
|Otheradjustments||||||||
|2. Balances as ofbeginningoftheyear|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/decreaseintheperiod(“-” fordecrease)||1,513,556.85|-10,087,848.65||95,673,028.03|155,949,741.31|243,048,477.54|
|3.1Totalcomprehensiveincome|||-10,087,848.65||95,673,028.03|-3,703,180.21|81,881,999.17|
|3.2 Capital increasedandreducedbyowners||||||159,564,888.59|159,564,888.59|
|3.2.1Commonsharesincreasedbyshareholders||||||261,842,331.23|261,842,331.23|
|3.2.2Capitalincreasedbyholdersofotherequityinstruments||||||||
|3.2.3Share-basedpaymentsincludedinowners’equity||||||||
|3.2.4Other||||||-102,277,442.64|-102,277,442.64|
|3.3Profitdistribution||||||||
|3.3.1 Appropriationtosurplusreserves||||||||
|3.3.2 Appropriationtogeneralreserve||||||||

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||
|-|-|-|-|-|-|-|-|
|3.3.3 Appropriationto owners (orshareholders)||||||||
|3.3.4Other||||||||
|3.4 Carryforwardswithinowners’equity||-35,543,805.21|||||-35,543,805.21|
|3.4.1 Increase incapital (or share capital)fromcapitalreserves||||||||
|3.4.2 Increase incapital (or share capital)fromsurplusreserves||||||||
|3.4.3Surplusreservesusedtomakeuplosses||||||||
|3.4.4Other||-35,543,805.21|||||-35,543,805.21|
|3.5Specificreserve||||||||
|3.5.1 Withdrawn fortheperiod||||||||
|3.5.2Usedduringtheperiod||||||||
|3.6Other||37,057,362.06||||88,032.93|37,145,394.99|
|4. Balances as of end oftheperiod|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.Parent CompanyStatements of ChangesinOwners’ Equity
2017
Unit: RMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Item|2017|||||||||
||Sharecapital|Otherequityinstruments|Capitalreserves|Less:|Other|Specific|Surplusreserves|Retainedearnings|Totalowners’equity|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||Preferredshares|Perpetualbonds|Other||Treasuryshares|comprehensiveincome|reserve||||
|1.Balancesasofendofprioryear|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: Adjustments for changed accountingpolicies||||||||||||
|Adjustmentsforcorrectionsofpreviouserrors||||||||||||
|Otheradjustments|||||7,350,000.00|||||-25,347,306.92|-17,997,306.92|
|2.Balancesasofbeginningoftheyear|2,407,945,408.00||||72,144,108.39||6,714,437.62||847,908,466.28|-615,043,510.83|2,719,668,909.46|
|3. Increase/ decrease in the period (“-” fordecrease)|||||39,381,054.83||-8,684,742.24||369,736,408.51|3,942,671,187.39|4,343,103,908.49|
|3.1Totalcomprehensiveincome|||||||-8,684,742.24|||4,312,407,595.90|4,303,722,853.66|
|3.2Capitalincreasedandreducedbyowners||||||||||||
|3.2.1Commonsharesincreasedbyshareholders||||||||||||
|3.2.2Capitalincreasedbyholdersofotherequityinstruments||||||||||||
|3.2.3Share-basedpaymentsincludedinowners’equity||||||||||||
|3.2.4Other||||||||||||
|3.3Profitdistribution|||||||||369,736,408.51|-369,736,408.51||
|3.3.1Appropriationtosurplusreserves|||||||||369,736,408.51|-369,736,408.51||
|3.3.2 Appropriation to owners (orshareholders)||||||||||||

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|3.3.3Other|||||||
|3.4Carry-forwardswithinowners’equity|||||||
|3.4.1 Increase in capital (or share capital)fromcapital reserves|||||||
|3.4.2 Increase in capital (or share capital)fromsurplusreserves|||||||
|3.4.3 Surplus reserves used to make uplosses|||||||
|3.4.4Other|||||||
|3.5Specificreserve|||||||
|3.5.1Withdrawnfortheperiod|||||||
|3.5.2Usedduringtheperiod|||||||
|3.6Other||39,381,054.83||||39,381,054.83|
|4.Balancesasofendoftheperiod|2,407,945,408.00|111,525,163.22|-1,970,304.62|1,217,644,874.79|3,327,627,676.56|7,062,772,817.95|

2016
Unit: RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2016|||||||||||
||Sharecapital|Otherequityinstruments|||Capitalreserves|Less:Treasuryshares|Othercomprehensiveincome|Specificreserve|Surplusreserves|Retainedearnings|Totalowners’equity|
|||Preferredshares|Perpetualbonds|Other||||||||
|1.Balancesasofendofprioryear|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:Adjustmentsforchangedaccountingpolicies||||||||||||
|Adjustmentsforcorrectionsofpreviouserrors||||||||||||

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|Otheradjustments|||||||
|2.Balancesasofbeginningoftheyear|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 (“-” fordecrease)||18,288,501.05|4,911,184.85||-379,813,350.91|-356,613,665.01|
|3.1Totalcomprehensiveincome|||4,911,184.85||-379,813,350.91|-374,902,166.06|
|3.2Capitalincreasedandreducedbyowners|||||||
|3.2.1Commonsharesincreasedbyshareholders|||||||
|3.2.2Capitalincreasedbyholdersofotherequityinstruments|||||||
|3.2.3Share-basedpaymentsincludedinowners’equity|||||||
|3.2.4Other|||||||
|3.3Profitdistribution|||||||
|3.3.1Appropriationtosurplusreserves|||||||
|3.3.2 Appropriation to owners (orshareholders)|||||||
|3.3.3Other|||||||
|3.4Carry-forwardswithinowners’equity|||||||
|3.4.1 Increase in capital (or share capital)fromcapital reserves|||||||
|3.4.2 Increase in capital (or share capital)fromsurplusreserves|||||||
|3.4.3Surplusreservesusedtomakeuplosses|||||||

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|3.4.4Other|||||||
|3.5Specificreserve|||||||
|3.5.1Withdrawnfortheperiod|||||||
|3.5.2Usedduringtheperiod|||||||
|3.6Other||18,288,501.05||||18,288,501.05|
|4.Balancesasofendoftheperiod|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|

KonkaGroupCo.,Ltd. AnnualReport2017 Konka Group Co., Ltd.
Notes to Financial Statements 2017
(Monetary unitis RMB unless otherwisestated)
I. CompanyProfile
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 thePeople’s Government of Shenzhen Municipality, and has its ordinary shares (A-share and B-share) listed on Shenzhen Stock Exchange with prior consent from thePeople’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.ShareCapital Changes uponEstablishment
On November 27, 1991, with approval from the SRYFZ No. 102[1991] document as issued by thePeople’s Bank of China Shenzhen Special Economic Zone Branch, Shenzhen Konka Electronic Co., Ltd., during December8—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 3,650,000staffshares issued to thestaffoftheCompany.
On January 29, 1992, with approval from the SRYFZ No. 106[1991] document as issued by thePeople’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 andfounder—Hong Kong Ganghua Electronic Group Co., Ltd. are converted into foreign legalperson’s shares, and 10,000,000B-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
KonkaGroupCo.,Ltd. AnnualReport2017 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 187,473,150shares 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 publicreserve.
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 StateCouncil’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 Officeand Shenzhen StockExchange.
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-sharemarket onOctober 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 365,572,641.00shares after thisallotment.
On January 25, 1998, the Plan on Share Allotment 1998 was adopted at the interim general
KonkaGroupCo.,Ltd. AnnualReport2017 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 thisallotment.
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 467,260,323.00shares 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, 80,000,000.00A-shares were additionally issued to the public at RMB15.50/share. The totalcapital stock reached 547,260,323.00 shares after thisadditional 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 thisdistribution.
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 1,203,972,704.00shares after change.
KonkaGroupCo.,Ltd. AnnualReport2017 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 onJanuary 28,2016with thealtered share capital of2,407,945,408.00shares. 3. Approved business scope: research and development, production and operation of such intelligent household electric appliances as televisions, refrigerators, washing machines, and personal electronic appliances, and kitchen and bathroom electronic appliances; manufacturing and application of home AV, IPTV set-top boxes, OTT terminal products, digital TV receivers (including ground receiving equipment of satellite television broadcasting), digital products, intelligent wearable products, intelligent health products, intelligent electric products, intelligent switch plug, power bank, 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; emergency broadcast system 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, international freight forwarding, and warehousing services; management of supply chain, 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,
KonkaGroupCo.,Ltd. AnnualReport2017 financial settlement, human resource service, software development, call center, and data processing. Import& export business: domestic trade; international trade (excluding monopoly, exclusive control, and monopolized commodities); selling security products, intelligent household products, door lock, and hardware; doing various business entrusted by (Mobile, Unicom,Telecom, andBC&TV)
4. The Company and its subsidiaries are mainly engaged in the production and sales of color TVs, white goods, mobile phones, etc.; trade business; real estate development and marketing; commercial factoring, and etc.
5. The financial statements contained herein have been approved for issue by the Board of theCompany onMarch 29,2018.
6. There were 45 subsidiaries included in the consolidation scope of 2017 of the Company, and please refer to the NotesVIII. “Equities among other entities” for details. There were 10 subsidiaries increased and 4 decreased in the consolidation scope of the Reporting Period over the last period of the Company, for details, see the Notes VII. “ Changes of the consolidation scope”.
7.Acheck listofcorporate names and theirabbreviations mentioned in thisReport
Corporatename Abbreviation
ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd. TelecommunicationTechnology
ShenzhenKonkaHouseholdAppliancesCo.,Ltd. KonkaHouseholdAppliances
ShenzhenKonkaPlasticProductsCo.,Ltd. PlasticProducts
ShenzhenKonkaElectricalAppliancesCo.,Ltd. ElectricalAppliances
ShenzhenKonkaElectronicFittingsTechnologyCo.,Ltd. FittingsTechnology
MudanjiangArcticOceanAppliancesCo.,Ltd. MudanjiangAppliances
ChongqingQingjiaElectronicsCo.,Ltd. ChongqingQingjia
AnhuiKonkaElectronicCo.,Ltd. AnhuiKonka
AnhuiKonkaHouseholdAppliancesCo.,Ltd. AnhuiHouseholdAppliances
KunshanKonkaElectronicCo.,Ltd. KunshanKonka
DongguanKonkaElectronicCo.,Ltd. DongguanKonka
DongguanKonkaPackingMaterialsCo.,Ltd. DongguanPacking
KonkaGroupCo.,Ltd. AnnualReport2017 Corporatename Abbreviation
BoluoKonkaPCBCo.,Ltd. BoluoKonka
BoluoKonkaPrecisionTechnologyCo.,Ltd. BoluoKonkaPrecision
HongKongKonkaCo.,Ltd. HongKongKonka
Konka Household AppliancesKonkaHouseholdAppliancesInvestment&DevelopmentCo.,Ltd.
Investment
Konka Household Appliances KonkaHouseholdAppliancesInternationalTradingCo.,Ltd.
InternationalTrading
Konka(Europe)Co.,Ltd. KonkaEurope
KonkaFactoring(Shenzhen)Co.,Ltd. KonkaFactoring
ShenzhenWankaidaScienceandTechnologyCo.,Ltd. Wankaida
KunshanKangshengInvestmentDevelopmentCo.,Ltd. KunshanKangsheng
AnhuiKonkaTongchuangHouseholdAppliancesCo.,Ltd. AnhuiTongchuang
IndonesiaKonkaElectronicsCo.,Ltd. IndonesiaKonka
ShenzhenShushidaLogisticsServiceCo.,Ltd. ShushidaLogistics
BeijingKonkaElectronicCo.,Ltd. BeijingKonkaElectronic
ShenzhenKonkaE-displayCo.,Ltd. KonkaE-display
ShenzhenE-displayServiceCo.,Ltd. E-displayService
XiamenDalongTradingCo.,Ltd. XiamenDalong
YoushiKangrongCultureCommunicationCo.,Ltd. YoushiKangrong
ShenzhenKangqiaoJiachengPropertyInvestmentCo.,Ltd. KangqiaoJiacheng
KonkaSmartTechLimited KonkaSmartTech
AnhuiKaikaiShijieE-commerceCo.,Ltd. KaikaiShijie
ShenzhenE2infoNetworkTechnologyCo.,Ltd. E2info
ShenzhenKonkaMobileInterconnectionTechnologyCo.,Ltd. MobileInterconnection
ShenzhenKonkaCommercialSystemTechnologyCo.,Ltd. CommercialSystemTechnology
KonkaGroupCo.,Ltd. AnnualReport2017 Corporatename Abbreviation
ChainKingdomCo.,Limited ChainKingdom
ShenzhenKangqiaoEasyChainTechnologyCo.,Ltd. KangqiaoEasyChain
E3info(Hainan)TechnologyCo.,Ltd. E3info
ChuzhouKonkaTechnology&IndustryDevelopmentCo.,Ltd. ChuzhouKonkaTID
KonkaVenturesDevelopment(Shenzhen)Co.,Ltd. KonkaVentures
ShenzhenKonkaPengrunTechnology&IndustryCo.,Ltd. KonkaPengrun
ShenzhenKonkaUnifortuneSupplyChainManagementCo.,Ltd. KonkaUnifortune
ShenzhenKonkaInvestmentHoldingCo.,Ltd. KonkaInvestment
AnhuiKangzhiTradeCo.,Ltd. KangzhiTrade
HainanKonkaMaterialTechnologyCo.,Ltd. KonkaMaterial
TianjinKonkaLeasingCo.,Ltd. KonkaLeasing
YantaiKonkaHealthcareEnterpriseServiceCo.,Ltd. YantaiKonka
ShenzhenKonkaCapitalEquityInvestmentManagementCo.,Ltd. KonkaCapital
ChainKingdom(Shenzhen)Co.,Ltd. ChainKingdomShenzhen
II.Basis forthePreparation ofFinancialStatements
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 The Accounting Standards for BusinessEnterprises—Basic Standard issued by the Ministry of Finance with Decree No. 33 and revised with Decree No. 76, the 42 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 February15, 2006 onwards (hereinafter jointly referred to as theAccounting 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 theAccounting Standards for Business Enterprises, the Group adopted the accrual basis in accounting. Except for some financial instruments and investment properties, the financial statements are based on historic costs to measure. Non-current assets held for sale is priced by the lower amount between the amounts that fair value minus estimated amount and the original book value that meets the held for sale
KonkaGroupCo.,Ltd. AnnualReport2017 requirement. Where impairment occurred on an asset, an impairment reserve was withdrawn accordinglypursuant to relevant requirements.
III.Statementof Compliancewith theAccounting StandardsforBusiness 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 theCompany’s financial positions as at December 31, 2017, business results and cash flows for the first half year of 2017, and other relevant information. In addition, theCompany’s and theGroup’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 ChinaSecurities Regulatory Commission.
IV. ImportantAccounting Policies andEstimations
The Company and its subsidiaries 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. 25 “Revenues”. For the notes of the significant accounting judgment and estimations made by the management layer, please referto Notes IV.31 “Significant accounting judgment and estimations”.
1.FiscalPeriod
TheGroup’s fiscal periods include fiscal years and fiscal periods shorter than a complete fiscal year. TheGroup’s fiscal year starts on January 1 and ends on December 31 of every yearaccording to theGregorian 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 isalso theclassification criterion forthe liquidity ofitsassets and liabilities.
KonkaGroupCo.,Ltd. AnnualReport2017 3.RecordingCurrency
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-European Konka and Indonesia Konka, should be respectively confirmed the 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 Investment, Konka Household Appliances International Trading, Konka Zhisheng and Chain Kingdom use HK Dollar as their recording currency. And the Group adopted Renminbi as the bookkeeping base currency when preparing the financial statements forthe ReportingYear.
4. Accounting Treatment Methods for Business Combinations under the Same Control ornotundertheSame 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 thosenonunder thesame control.
(1)Business combinations underthe samecontrol
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 thecombiningparty actually obtains control onthecombined 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 beadjusted.
KonkaGroupCo.,Ltd. AnnualReport2017 The direct cost for the business combination of the combining party shall be recorded into the profits and losses at thecurrent period.
(2)Business combinations not underthesame 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 dateis theacquirer, andothercombining enterprise(s) is(are) theacquiree.
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 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 then 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.
KonkaGroupCo.,Ltd. AnnualReport2017 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, theyshall berecorded intotheprofits and losses in thecurrent period.
In a business combination not under same control realized by two or more transactions of exchange, according to about the No. 5 Notice about the Treasury Issuing the Accounting Standards for Enterprises (Finance accounting)[2012] No. 19 Criterion about the “package deal” (see Note 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 Note IV, 13 “long term equity investment ” 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 inthe acquiree before the acquiring date shall be treated onthe 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, theothers shall be transferred into current investment gains).
In theGroup’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
KonkaGroupCo.,Ltd. AnnualReport2017 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 forPreparing Consolidated FinancialStatements
(1)Principlefor determining theconsolidation 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 relevant activities of the investee to obtain variable returns and is able to influence the amount of returns. The scope of consolidation includes the Company and its all subsidiaries. Asubsidiary is an enterpriseorentity controlled bytheGroup.
Once any changes in the relevant facts or situations resulted in any changes in the elements involved in the aforesaid definition of “ control ” , the Company shall carry out a reassessment.
(2)Methods for preparing theconsolidated 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
KonkaGroupCo.,Ltd. AnnualReport2017 statement, and the comparative items in the consolidated financial statements are adjusted at thesametime.
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 areadjusted based onthefair valueof theidentifiablenet assets at theacquisitiondate.
All significant inter-group balances, transactions and unrealized profits are offset in the consolidated financial statements.
The portion of asubsidiary’sshareholders’ equity and the portion of asubsidiary’s net profits and losses for the period not held by the Group are recognized as minority interests and minority shareholder profits and losses respectively and presented separately undershareholders’ equity and net profits in the consolidation financial statements. The portion of asubsidiary’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 thesubsidiary’s openingowners’ equity, minorityinterests 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 originalsubsidiary’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 theGroup’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
KonkaGroupCo.,Ltd. AnnualReport2017 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 BusinessEnterprises—Recognition and Measurement of Financial Instruments. For details, see Note IV. 13 “longterm 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 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 othertransactions；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. 13. (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 ofcontrol ,when theGroup losingcontrol onits subsidiary.
6.Classificationof JointArrangements andAccounting Treatmentof JointOperations 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
KonkaGroupCo.,Ltd. AnnualReport2017 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.
TheGroup’s investments in joint ventures are measured at the equity method according to the accounting policies mentioned in Note IV. 13 (2)② “Long-term equity investments measured at theequity 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 theGroup’s stake in the joint operation; recognizes the income from sale of theGroup’s share in the output of the joint operation; recognizes the income from sale of the jointoperation’s outputs according to theGroup’s stake in it; and recognizes the expense solely incurred to the Group and the expense incurred to the joint operation according totheGroup’sstake 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 The Accounting Standard No. 8 for BusinessEnterprises—Asset 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 ofassets from thejointoperation.
7.Recognition Standard for CashandCash Equivalents
In theGroup’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 ofcash and whose risksinchange of valueare minimal.
KonkaGroupCo.,Ltd. AnnualReport2017 8. Foreign Currency Businesses and Translation of Foreign Currency Financial Statements
(1)Accounting treatments for translation offoreign 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 that day announced by thePeople’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 thetransaction isoccurred.
(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 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; and③ 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 disposingoverseas business.
A foreign currency non-monetary item measured at the historical costs shall still be translated
KonkaGroupCo.,Ltd. AnnualReport2017 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 theowners’ equity; and be recorded into disposal gains and losses at current period when disposing overseas business.
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 theowner’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 andowners’ 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 theowner’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 of the current period of the date of cash flow incurred. The influence of exchange rate on the cash flow shall be adjustment itemand individually listed inthe cash flowstatement.
KonkaGroupCo.,Ltd. AnnualReport2017 And the opening balance and the actual balance of last year shall be listed at the amounts after translation offoreign currency financial statement inlast 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 parentcompany’sowner’s equity in relation to the overseas operation which is stated under theowner’s equity in the balance sheet shall be all restated as gains and losses of thedisposal period.
Where theGroup’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 losses. Ifwhat’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 disposalratio.
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 intheamounts initiallyrecognized.
(1)Determination ofthefair valueof main financial assets andfinancial 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
KonkaGroupCo.,Ltd. AnnualReport2017 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 determineits fair value.
(2)Classification, recognitionand measurement offinancial 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 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 theprofits and lossesof thecurrent 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 theprofits and lossesof thecurrent period;
The financial assets meeting any of the following requirements shall be classified as transactional financialassets：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 equityinstruments.
KonkaGroupCo.,Ltd. AnnualReport2017 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 offinancial assets& liabilities which thefinancial assets are belong to.
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 shouldbe recorded intogains and losses ofcurrent 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 holdsfor adefinite purposeor theenterprise is ableto hold untilits 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 theprofits and lossesof thecurrent 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 orfinancial liability.
KonkaGroupCo.,Ltd. AnnualReport2017 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 theaccounts receivables
Loans and the accounts receivables refer to non-derivative financial assets, which there is no quotationin theactive market, withfixed recovery cost orrecognizable.
Financial assets that 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 ofthecurrent period.
④ Assets availablefor 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, theyare somefinancial 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 theperiod-end ofthe available-for-sale liabilities instruments is itsinitialcost.
KonkaGroupCo.,Ltd. AnnualReport2017 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 comprehensiveincome， 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 thefollow-up measurement according tothe 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 ofthecurrent period.
(3)Impairment offinancial 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 indicatinga financial asset may be impaired, aprovision is provided for theimpairment. 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 inthe 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 foran impairmenttest.
① Impairment onheld-to maturity investment, loans andreceivables
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
KonkaGroupCo.,Ltd. AnnualReport2017 impairment loss reversed shall not exceed the amortized cost of the financial assets without provisionsof impairment lossonthe reserving date.
② Impairment ofavailable-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 over20%; while the “non-temporary decline” refers to the consecutive decline time of the fair valueover 12months.
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 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 valueand theimpairment lossoriginally recorded in theprofits 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 theprofits andlosses for thecurrent 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 besettled bydelivering thesaid equityinvestment, is not reversed.
(4)Recognition and measurement of financial asset transfers
KonkaGroupCo.,Ltd. AnnualReport2017 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; or③ 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 theownership ofthe 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 in the transferred financial asset" refers to the risk level that the enterprise faces resulting from thechange of thevalueof thefinancial 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 thefair valueoriginally recorded in othercomprehensiveincomes.
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 amortizedcarrying amountsof theaforesaid 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
KonkaGroupCo.,Ltd. AnnualReport2017 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 offinancial 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, 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 inthe profits and losses forthe current period.
② Otherfinancial liabilities
KonkaGroupCo.,Ltd. AnnualReport2017 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 guaranteecontract 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 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 thenew 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
KonkaGroupCo.,Ltd. AnnualReport2017 (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. Theresulting gain and loss is recognized inprofit orloss.
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 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 valuethrough profit or loss.
(8)Offsettingfinancial 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 thebalance sheet and shall not beoffset.
(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 theequity transaction would bededucted from theequity. All types of distribution (excluding stock dividends) made by the Group to holders of equity
KonkaGroupCo.,Ltd. AnnualReport2017 instruments are deducted fromshareholders’ equity. The Group does not recognize any changes in thefair value ofequity instruments.
10.Receivables
Receivables includeaccount receivables andother accounts receivables.
(1)Recognition ofprovision for baddebts:
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 shallbemade.
① Debtorhas serious financial difficult;
② Debtor goes against the contract clause (for instance, breach of faith or overdue paying interests orprincipal);
③ Debtors have agreat probability ofbankruptcy orother financial reorganization;
④ Otherobjective evidence proving such accounts receivablehas been impaired;
(2)Withdraw method ofprovision for bad debts
① The recognition criteria and method of individual provision for bad debts of receivables thatare individually significant
The Group recognized the receivables with amount above RMB20 million and other receivables above RMB10 million as receivables with significant single amounts and withdrawn theprovision 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 portfoliowith similarcredit risk to taketheimpairment test.
KonkaGroupCo.,Ltd. AnnualReport2017② The recognition and method of provision for bad debts of receivables by credit risk portfolio
A.Recognition ofcreditrisk 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 thedebtor’s ability to repay all the due accounts in accordance with contract for such assets, which also are related with the measurement onfuturecash flowof theexaminedassets.
Recognition basicofdifferent groups:
Item Basic
Divide the groups according to the credit risks characteristics of the accounts Group1:Aginggroup
receivable
Group 2: Internal related party groups Divide the groups according to the credit risks characteristics of whether the in 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 forbad debts recognized bycredit 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 (thedebtor’s ability to pay off the loans in accordance with the provisions of contract), experience of losses, current economic status and the predicted losses inthe accounts receivable group.
Methods ofmaking provisionsfor bad debt in different groups:
Item Withdrawalmethod
Group1:Aginggroup Aginganalysismethod
Group 2: Internal related party groups in the To make an independent impairment test and if there was no scopeofconsolidationoftheCompany impairment,shouldnotwithdrawthebaddebtsprovision.
In thegroup 1,adoptingaging analysis method towithdraw baddebt provision:
Withdrawal proportion for accountsWithdrawal proportion for other Age
receivable(%) accountsreceivable(%)
KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Withdrawal proportion for accountsreceivable(%)|
|2|
|5|
|20|
|50|
|50|
|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 between the current values of the future cash flow lower than its book value so as to withdrawprovision forbad debts:
A.Receivables have disputewiththeother parties or involvinglawsuit and arbitration;
B. Receivables have obvious indication showing that the debtors are likely to fail to perform thedutyof repayment, etc.
C.There isother evidence of impairmentand theimpairment amount can estimated reliably. (3)Reversal ofprovision 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 reverseunder theassumption that noprovisionis made forthe impairment.
KonkaGroupCo.,Ltd. AnnualReport2017 11.Inventory
(1)Classification
TheGroup’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 inprocess and finished property,etc.
① Thefinished property refers tothe finished and held-for-saleproperty.
② The property in process (development costs) refers to the unfinished property with the development purpose forsale.
(2)Pricing method foroutgoing 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 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 intheperiod.
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 otherexpenses occurred during thedevelopment 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 berecorded into the “investment property”
② For the accounting policies on borrowing costs occurred for developing property, please
KonkaGroupCo.,Ltd. AnnualReport2017 referto Note IV.17Pricing of “Borrowing Costs”.
(3) Recognition basis of net realizable value and withdrawal method of depreciation reserves forinventories
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 theeffect 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. The inventories with various numbers and low unit price shall be made provisions for depreciation reserves of inventories according to thecategory of inventories.
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 beincluded in theprofits and losses ofthecurrent period.
(4)The perpetual inventory system is maintained for stocksystem.
(5)Amortization method ofthelow-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 byonetimeamortization whenacquiring. 12.Assets HeldforSaleandDisposalGroup
When a company relies mainly on selling (including the exchanges of non-monetary assets with commercial substance, similarly hereinafter) instead of continuing to use a non-current asset or disposal group to recover its book value, then the non-current asset or disposal group is classified as assets held for sale. The specific standards are simultaneously meeting the following conditions: assets or disposal groups can be sold immediately under current conditions based on the practice of selling such assets or disposal groups in similar
KonkaGroupCo.,Ltd. AnnualReport2017 transactions; the Company has already made a resolution on the sale plan and obtained a certain purchase commitment, and the sale is expected to be completed within one year. A disposal group refers to a group of assets that are disposed of together as a whole by sale or other means in a transaction and the liabilities directly related to these assets transferred in the transaction. Where the asset group or combination of asset groups to which a disposal group belongs apportions the goodwill acquired in the business combination in accordance with the Accounting Standards for Enterprises No. 8 - Asset Impairment, the disposal group shall includethegoodwill allocated to it.
If there are non-current assets or disposal groups held for sale during initial measurement or on the balance sheet day based on remeasurement of this Company, if the book value is higher than the net amount by deducting the selling expenses with the fair value, the book value shall be written down and be equal to the net amount by deducting the selling expenses with the fair value. The write-down amount shall be confirmed as the loss of depreciation of assets and shall be included into the profits and losses of the current period.At the same time, prepare to calculate and withdraw the assets purchased and under agreements to resell. For the disposal group, deduct the book value of the goodwill in the disposal group with the asset depreciation losses confirmed, then deduct the book value of each non-current asset in the disposal group conforming to the measurement regulations of Accounting Standards for Business Enterprises No. 42-non-current Assets Purchased and under Agreements to Resell, Disposal Group and Operation Termination (herein after referred to as "the Standard for Assets Purchased and under Agreements to Resell"). If the net amount by deducting the selling expenses with the fair value of the disposal group purchased and under agreements to resell on the subsequent balance sheet date, the previous write-down amount shall be recovered and shall be reversed within the asset depreciation losses amount of the non-current confirmed as per regulation of the Standard for Assets Purchased and under Agreements to Resell after being classified into the category purchased and under agreements to resell. The reverse amount shall be included into the current profits and losses, and the bookvalue shall be added as per the proportion of the book value of each non-current asset in the disposal group applicable to the Standard for Assets Purchased and under Agreements to Resell except for the goodwill; The goodwill book value deducted and the asset depreciation losses of the non-current assets applicable to the measurement regulations of the Standard for Assets Purchased and under Agreements to Resell before its confirmation of being classified
KonkaGroupCo.,Ltd. AnnualReport2017 intothecategory purchased and under agreements toresell shall notbe reversed.
Depreciation or amortization in the non-current assets held for sale or the non-current assets in the disposal group shall not be calculated or withdrawn. Interests of liabilities and other expenses in the disposal group purchased and under agreements to resell shall be confirmed continuously.
When a non-current asset or disposal group fail to meet the classification conditions for the category of held-for-sale, the Company will no longer classify a non-current asset or disposal group as held-for-sale or remove out a non-current asset from the held-for-sale disposal group, and it will be measured by one of the followings whichever is lower: (1) The book value before being classified as held for sale will be adjusted according to the depreciation, amortization or impairment that would have been recognized under the assumption that it was not classified as held for sale; (2)The recoverable amount.
13.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 thepolicies with theotherparties.
(1)Recognition ofinvestment 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 theowner’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
KonkaGroupCo.,Ltd. AnnualReport2017 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 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 forthemoment.
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
KonkaGroupCo.,Ltd. AnnualReport2017 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 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 amountof 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 BusinessEnterprises—Recognition and Measurement ofFinancial Instrument.
(2)Subsequent measurement and recognition of gains or losses
A long-term equity investment where the investing enterprise has joint control (except for
KonkaGroupCo.,Ltd. AnnualReport2017 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 methodinthefinancial statements, and which theCompany has control oninvested entity.① Long-term equity investment measured byadopting cost method
The price of a long-term equity investment measured by adopting the cost method shall be 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 intheactual payment orconsideration upongainingthe investment.
② Long-term equity investment measured byadopting 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 theowners’ 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 are not accord with that of the Group, should be adjusted according to the accounting policies of the Group and the financial
KonkaGroupCo.,Ltd. AnnualReport2017 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, 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. If the assets launched by this Company to the associated enterprise or joint ventures constitute the business, and the investor obtains the long-term equity investment but fails to obtain the control right, the fair value of business launched is taken as the initial investment cost of newly-increased long-term equity investment, and the difference between initial investment cost and book value of business launched will be included in current profit and loss. If the assets sold by this Company to the associated enterprises or joint ventures constitute the business, the difference between consideration and book value of business will be included in current profit and loss. If this Company's assets purchased from the associated enterprises or joint ventures constitute business, accounting treatment shall be conducted in accordance with the provisions of theAccounting Standards for Business Enterprises No. 20 -- Business Combination,fully recognizethegains orlosses related tothe transaction.
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-recognizedlosses, resumerecognizingits attributableshare ofprofits.
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 minorityinterest
KonkaGroupCo.,Ltd. AnnualReport2017 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 sufficientto offset, theretained profits shall be adjusted.
④ Disposal oflong-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 intoowners’ 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 onpreparation ofcombined financial statements”.
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 intoowners’ 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. Theowners’ 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 thecurrent gains and losses according tothe 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 otherowners’ equity except for the net gains and losses,
KonkaGroupCo.,Ltd. AnnualReport2017 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 intothecurrent gainsand losses according totheproportion.
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 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 otherowners’ 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 otherowners’ 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 incomeand theotherowners’ equity shouldbe carried forward in fullamount.
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
KonkaGroupCo.,Ltd. AnnualReport2017 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 theowners’ equity recognized owning to the changes of the otherowner’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 adoptingthe equitymethod.
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 losses oflosingthe control right along untilthetimewhen loseit.
14.InvestmentReal 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 theright touseany buildingwhich 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 expenditureis recognized in profit orloss in theperiod 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 ofbuildings or lands.
For details of impairment test method and withdrawal method of impairment provision of investment real estates, please refer toNote IV.20. “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
KonkaGroupCo.,Ltd. AnnualReport2017 tothechange shallbe theentry valueafter 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 betheentry valueafter thechange
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 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 lossin theperiod in which it isincurred.
15.FixedAssets
(1)Conditionsfor 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 oftheestimated discard expenses.
(2)Depreciation methodsof 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:
KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Method|Usefullife(Year)|Expected netsalvage value(%)|
|Straight-linedepreciation|20-40|10.00|
|Straight-linedepreciation|10|10.00|
|Straight-linedepreciation|5|10.00|
|Straight-linedepreciation|5|10.00|
|Straight-linedepreciation|5|10.00|

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 theexpirationof itsexpected 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. 20 “Long-term assets impairment”.
(4)Recognition basis, pricing and depreciation method offixed assets byfinance 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 theshorter oneof thelease term orits useful life.
KonkaGroupCo.,Ltd. AnnualReport2017 (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 beincluded in thecurrent 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 oftheaccounting estimates.
16.Construction inProgress
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 theassets are ready for theirintended use.
For details of the testing method of impairment and withdraw method of impairment provision on construction in progress, please refer to Note IV. 20 “ Long-term assets impairment”.
17.BorrowingCosts
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
KonkaGroupCo.,Ltd. AnnualReport2017 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 ofthe weighted average interest rate ofthe 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 andlosses.
The term “assets eligible for capitalization” refers to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may takequitea longtimeto get ready for itsintended useorforsale.
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 besuspended.
18.IntangibleAssets
(1)Pricing method, useful life andimpairment test
The term “intangible asset” refers to the identifiable non-monetary assets possessed or controlled byenterprises which havenophysical 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 upontheoccurrence.
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
KonkaGroupCo.,Ltd. AnnualReport2017 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,thewhole payment shall betreated as fixedassets.
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 intangibleassets without certain service lifeshall not beamortized.
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 intangibleassets with finiteservice life.
(2)R& Dexpenses
The expenditures for internal research and development projects of an enterprise shall be classified into research expenditures and development expenditures.
Theresearch expenditures shall berecorded into theprofit orloss forthe 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 theydon’t satisfy thefollowing conditions.
① It isfeasibletechnically to finish intangibleassets foruse orsale;
② It isintended tofinish and use orsell theintangible 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 intangibleassets itselfortheintangible assets will beused 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;
KonkaGroupCo.,Ltd. AnnualReport2017⑤ Thedevelopment expenditures oftheintangible assets can be reliably measured.
As for expenses that can’ t be identified as research expenditures or development expenditures, theoccurred R& Dexpenses shall be all included in current profits and losses. (3) Testing method of impairment and withdraw method of impairment provision of intangibleassets
For details of the testing method of impairment and withdraw method of impairment provisiononintangible assets, seeNotes IV.20 “Long-term assets impairment”.
19.Amortization Methodof 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 expenseshall be amortizedaveragely within benefit period.
20.ImpairmentofLong-termAssets
For non-current financial Assets of fixed Assets, projects under construction, intangible 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 invalue nomatterwhether 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 theBuyer’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 toAssets 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
KonkaGroupCo.,Ltd. AnnualReport2017 amounts should be determined according to the belonging asset group. Asset group is the minimum asset combination producing cash flowindependently.
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 combinationexcept businessreputation.
After the asset impairment loss is determined, recoverable value amounts would not be returned in future.
21.Employee Compensation
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. Ofwhich thenon-monetary benefits shouldbemeasured according tothe fairvalue. 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
KonkaGroupCo.,Ltd. AnnualReport2017 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-termemployees’ 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 theemployee’s service terminative date to normal retirement date into current profits and losses (dismiss ion welfare) under the condition that they meet the recognition conditionsof 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 bedisposed according tothesetting revenueplan.
22.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 ofthecurrent 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
KonkaGroupCo.,Ltd. AnnualReport2017 bookvalueoftheestimated liabilities.
23.Revenue
(1)Revenue from sellinggoods
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 beincurred can bemeasured ina reliableway.
The recognition of revenue from commodities for the home market when shipping the goods or transferring property in 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.
(2)Providing laborservices
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 ofthelabor service already provided tothe totallaborservice toprovide.
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; and④ The costs incurred or to be incurred in the transaction can bemeasured ina reliableway.
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
KonkaGroupCo.,Ltd. AnnualReport2017 is predicted that the cost of labor services incurredcouldn’t be compensated, thus no revenue shall berecognized.
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 ofthe 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 when received with fullamount according to thesales contract.
(4)Royalty revenue
In accordance with relevant contract or agreement, the amount of royalty revenue should be recognized as revenue onaccrual basis.
(5)Interest revenue
The amount of interest revenue should be measured and confirmed in accordance with the length of time for which theGroup’s monetary fund is used by others and the agreed interest rate.
(6)Property leasing revenue
For therecognition method oftheproperty leasing revenue, please refer toNotes IV.28. (7)Factoring business revenue
Take the paid-in factoring payment as the fair value to carry out initial measurement. Subsequent measurement shall be carried out as per the effective interest method according to the amortized cost. Take the balance between the fair value initially confirmed and transferred amount of accounts receivable or face value of notes receivable as the interest income by effective interests method and amortized costs during the financing period or the rest credit period; interest income shall be recognized by straight-line method if it is due
KonkaGroupCo.,Ltd. AnnualReport2017 within 1 year. The profits and losses from termination of recognition, impairment, and amortizationshall beincluded intothecurrent profitsand losses.
24.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 investor with correspondingowner’s equity. Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to income. Government subsidy that is obtained by this Company used for purchasing or acquisition and construction, or forming the long-term assets by other ways, which is confirmed the government subsidy related to assets; Other government subsidies shall be defined as the government subsidy that related with interest. If it does not clear the subsidy object in the government document, the grants will be divided based on the following modes into government subsidy related to earnings and government subsidy related to assets: (1) If the particular project of the grants is clear in the government document, make a division according to the relative proportion of expense amount of the formed assets in the budget of the particular project and the expense amount included in the cost, shall review the division ratio required at each balance sheet date and make changes if necessary; (2) Only make general statements for the application in the government document, for not specifying the particular item, as the governmental subsidy related to earnings. 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 nominalamounts shall bedirectly included inthecurrent profits and losses.
When this Company actually received the government subsidy, recognize and measure as the actual measured amount. But when there are certain evidence indicate that enable to receive the financial support fund which conforms with the relevant conditions of financial support policy in the end of term, then measure as the receivable amount. The government subsidies measured as the receivable amount shall comply with the following conditions: (1) The amount of the receivable subsidy has been recognized by the competent government department, or may be reasonably calculated according to the relevant provisions of the formally published financial fund management method, and the estimated amount is free of significant uncertainty; (2) The bases are the initiatively published financial support project and its financial fund management method in accordance with the regulations of Regulations
KonkaGroupCo.,Ltd. AnnualReport2017 on Open Government Information, and this management method shall be favorable to the public (any enterprise qualified can apply), not just to the specified companies. (3) The relevant subsidy official documents have definite undertaking of the appropriate period, and the appropriate of this fund shall be safeguarded of the relevant financial budget, therefore thereceiving ofthefund inthespecified period can beensured;
If the government grants related to assets are recognized as deferred income and are included in the profits and losses by installments in a reasonable and systematic way within the service life of underlying assets. The government grants related to income, using to compensate the relevant expenses or losses in the later period shall be recognized as the deferred income and are included in the current profit or loss in the period of confirming the related expenses or losses; If the government grant is used for compensating the occurred costs or loss, include it inthecurrent profit and loss directly.
At the same time, for the government subsidies related to assets and profits, carry out different accounting processing for different parts; for the governmental subsidy hard to differentiate, the overall governmental subsidies are taken as the governmental subsidy related to revenue.
The government grants related to daily activities of this Company shall be included in other revenues or offset related costs according to the economic business nature; Government subsidiesunrelated to daily activities shall beincluded intothenon-operating profits.
If the governmental subsidies confirmed needs to be returned and there is the deferred earnings balance concerned, the book balance of relevant deferred earnings shall be offset against, but the excessive part shall be included into current profits and losses; Government subsidies belonging to other situations shall be directly included into current losses and profits.
25.DeferredIncomeTaxAssets/DeferredIncomeTax Liabilities
(1)Income tax ofthe 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
KonkaGroupCo.,Ltd. AnnualReport2017 corresponding adjustment of the pre-tax accounting profit of 2014 which in accord to the relevantregulations ofthetax law.
(2)Deferred income tax assets and deferred incometax 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 ofthebalance 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 othertaxabletemporary 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 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 tomake upsuch 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
KonkaGroupCo.,Ltd. AnnualReport2017 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 areexpected to berecovered orthe 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 taxableincome willbe available.
(3)Income tax expenses
Incometax expenses includecurrent incometax 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 theshareholders’ equity which should be included in other comprehensive income orshareholders’ equity as well as the book value for adjusting the goodwillof thedeferred incometax occurs from thebusinesscombination.
(4)Offset of incometax
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 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 orare at thesame timeacquire theasset as well as liquidatetheliabilities.
26.Leasing
KonkaGroupCo.,Ltd. AnnualReport2017 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 thefinancing leasing is operating leasing.
(1)Business ofoperating leases recorded bythe Group as thelessee
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 ofthecurrent period inwhich they actually arise.
(2)Business ofoperating leases recorded bythe Group as thelessor
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 ofthecurrent period in which theyactually arise.
(3)Business offinance leases recorded bytheGroup as thelessee
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 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 within1year.
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 berecorded intotheprofits and losses ofthecurrent period inwhich they actually arise.
KonkaGroupCo.,Ltd. AnnualReport2017 (4)Business offinance leases recorded bytheGroup as thelessor
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 duewithin 1year.
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 berecorded intotheprofits and losses ofthecurrent period inwhich they actually arise. 27.OtherMainAccountingPolicies and Estimates
Termination of operation refers to a separately identifiable constituent part that satisfies one of the following conditions that has been disposed of by the Company or is classified as held-for-sale:This constituent part represents an independent main business or a separate main business area; This constituent part is part of an associated plan that is intended to be disposed of in an independent main business or a separate major business area; This constituent part is asubsidiary that is specifically acquired forresale.
For accounting method of termination of operation, please refer to relevant description of Notes IV.12 “Assets held for saleand disposalgroup”
28.Changesin MainAccounting Policies andEstimates
(1)Changes ofaccounting policies
Changes of accounting policies resulted from implementing new Accounting Standards for Business Enterprises:
On April 28, 2017, the Ministry of Finance issued the Accounting Standards for Business Enterprises No. 42 - Non-current Assets and Disposal Groups Held for Sale and Termination of Operations (CaiKuai[2017] No. 13), which is required to be implemented from the date of May 28, 2017. On May 10, 2017, the Ministry of Finance issued the Accounting Standards for Business Enterprises No. 16-Governmental Subsidies (revised in 2017) (CaiKuai[2017] No. 15), which is required to be implemented from the date of June 12, 2017. The Company
KonkaGroupCo.,Ltd. AnnualReport2017 began to implement the two above-mentioned accounting standards according to the time required by theMinistryof Finance.
The Accounting Standards for Business Enterprises No. 42 - Non-current Assets and Disposal Groups Held for Sale and Termination of Operations specified the classification, measurement, presentation and disclosure of non-current assets and disposal group held for sale, and the presentation and disclosure of termination of operations. The financial statement has already adjusted the termination of operation existed on the date of implementation (May 28, 2017) and presentation of comparative annual financial statement and the disclosure of annotations according to the Standards. The aboved-mentioned changes of accounting policies had no influences on the data of last year of the Company, so there was no need to retroactively adjust.
Before implementing the Accounting Standards for Business Enterprises No. 16-Governmental Subsidies (revised in 2017), the Company included the obtained governmental subsidies into non-operating income; the governmental subsidies related to assets were recognized as deferred income, which is amortized averagely within the useful life and included into current gains and losses. After implementing the Accounting Standards for Business Enterprises No. 16-Governmental Subsidies (revised in 2017), the governmental subsidies related to routine activities occurred after January 1, 2017 were included into other income; the governmental subsidies have nothing to do with routine activities were included intonon-operating income and expense.
(2)Changeof accounting estimates
There was noany change ofaccounting estimateoftheCompany in theReporting Period. 29.CriticalAccounting 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 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
KonkaGroupCo.,Ltd. AnnualReport2017 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 influenceshould be recognized at theperiod ofchange occurred and future period.
On the balance sheet date, the Group needed to make judgments, estimates and assumption ontheaccountsin thefollowing importantitems:
(1)Categorization ofleasing
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 therisk and compensation related with theleased assets. (2)Provision forbad 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 forfalling price ofinventories
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 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 theperiod of estimates being changed.
(4)The fair valueof financial instrument
KonkaGroupCo.,Ltd. AnnualReport2017 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 Companycan’t hold the investment to maturity date, the Company should re-classify all that investment to available-for-sale financial assets, andshouldn’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 toolsofthe Company.
(6)Impairment ofheld-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 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 futurecash flow oftheinvestment.
(7)The impairment offinancial 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
KonkaGroupCo.,Ltd. AnnualReport2017 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, defaultrate and risk ofcounterparty.
(8)Provision forimpairment of long-term 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 ofimpairment indicated that thebookvaluecan’t berecoverable.
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 attributableto theassets 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 priceand relevant operating costs arising from reasonable andsupportiveassumptions.
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 amountof futurecash flow.
(9)Depreciation andamortization
For the investment real estate, fixed assets and intangible assets, the Group withdrew the
KonkaGroupCo.,Ltd. AnnualReport2017 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, thedepreciation andamortization expenses should beadjusted.
(10)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 amountof deferred incometaxassets which shouldberecognized.
(11)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 theperiod of ultimaterecognition.
(12)Internal early retirement welfare andsupplementary 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.
(13)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
KonkaGroupCo.,Ltd. AnnualReport2017 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 appraisetherelevant risks,uncertainty and the timevalue ofmoney 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 theprofits andlosses in thefuture periods.
(14)Measurement forfair value
Some assets and liabilities of this Company will be measured at fair value in the financial statements. The board of directors of this Company has established the appraisement committee (led by the CFO of this Company) to confirm appropriate appraisement technology and input value for measurement of fair value. This Company will apply available and observable market data during estimating the fair value of some assets and liabilities. If the input value in Level 1 is not available, this Company will entrust a third qualified appraiser for the estimation. The appraisement committee will closely cooperate with the outside appraiser to determine proper estimation technology and input values of the related models. CFO submits a report to the discoveries of the appraisement committee to the board of directors of this Company to explain the reasons of fluctuation of fair value of related assets and liabilities. Related information of the appraisement technology and input value during the process of confirming the fair value of various assets and liabilities shall be disclosed inNote IX.
V.Taxation
1.MainTaxesandTaxRate
Categoryoftaxes Specificsituationofthetaxesrate
Calculatedtheoutputtaxat3%,5%,6%,11%,13%,17%andpaidtheVATby the amount after deducting the deductible withholding VATat current period, VAT
ofwhichtheVATapplicabletoeasycollectionwon’tbelongtothedeductible withholdingVAT.
Urban maintenance and construction
Paid at7% of the circulating tax actually paid, of which Dongguan Packing,
KonkaGroupCo.,Ltd. AnnualReport2017 Categoryoftaxes Specificsituationofthetaxesrate
tax
Dongguan Konka, Boluo Konka, Boluo Konka Precision, and KunshanKangshengof5%.
Hong Kong Konka, Konka Household Appliances Investment, Konka Household Appliances International Trading, Konka Zhisheng, and Chain Kingdom of16.5%; Telecommunication Technology, Kunshan Konka, Enterpriseincometax
Dongguan Konka, Anhui Konka, E-display, Kangqiao Easy Chain, and Wankaida and Chongqing Qingjia, and Commercial System Technology of15%; and Europe Konka of31%. The Parent Company and the othersubsidiariespaidat25%ofthetaxableincome.
Educationsurtax Paidat3%ofthecirculatingtaxactuallypaid.
Localeducationsurtax Paidat2%ofthecirculatingtaxactuallypaid.
Note: (1) In accordance with the Notice on Printing theAdministration 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 theTreatment Funds of Discarded Electronic Appliance and Electric Products issued by NationalTaxation 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, theGroup’s charging standards were RMB13 per set ofTV,RMB12 per set ofrefrigeratorand RMB7 perset ofwashing machine.
(2) 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, theCompany’s sales branch companies in each area will hand in the corporate income taxes in advance from January 1, 2008 and will befinal settled uniformly bytheCompany at the year-end.
2.TaxPreferenceandApprovedDocuments
KonkaGroupCo.,Ltd. AnnualReport2017 (1) On November 17, 2017, KunshanKonka Electronic Co., Ltd. (losing the controlling right due to the disposal of part of the equity on September 26), the original subsidiary of this Company, obtained the high-tech enterprise certificate (certificate No.: GF201732000709) jointly issued by Jiangsu Technology Department, Department of Finance of Jiangsu Province, Jiangsu Provincial Office, SAT, Jiangsu Local Taxation Bureau with a valid period of three years.According to related taxation regulations, KunshanKonka Electronic Co., Ltd. enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2020 and pays theenterpriseincome tax as per thepreferential taxrateof15%.
(2) On October 31, 2017, Shenzhen Konka Telecommunications Technology Co., Ltd., the subsidiary of this Company obtained the high-tech enterprise certificate (certificate No.: GR201444201722) jointly issued by Shenzhen Technology Innovation Committee, Finance Commission of Shenzhen Municipality, Shenzhen Municipal Office, SAT, Shenzhen Local Taxation Bureau, with a valid period of three years.According to related taxation regulations, Shenzhen Konka Telecommunications Technology Co., Ltd. enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2020 and pays the enterprise incometax as per thepreferential taxrateof15%.
(3) On October 31, 2017, Wankaida, the subsidiary of this Company obtained the High-tech Enterprise Certificate (certificate No.: GR201744204716) joint issued by Shenzhen Technology Innovation Committee, Finance Committee of Shenzhen Municipality, Shenzhen Municipal Office, SAT and Shenzhen Local Taxation Bureau with a valid period of three years. According to related taxation regulations, Wankaida enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2020 and pays the enterprise incometax as per thereferential taxrateof15%.
(4) On November 1, 2017, Dongguan Konka Electronic Co., Ltd., the subsidiary of this Company obtained the High-tech Enterprise Certificate (certificate No.: GR201744003812) jointly issued by Department of Science and Technology of Guangdong Province, Department of Finance of Guangdong Province, Guangdong Provincial Office, SAT, Guangdong Local Taxation Bureau with a valid period of three years. According to related taxation regulations, the company enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2020 and pays the enterprise income tax as per the preferential tax rateof15%.
(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
KonkaGroupCo.,Ltd. AnnualReport2017 Technology Department, Department of Finance ofAnhui 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 to15%ofthe 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 incometax according to15%of thepreferential tax rate.
(7) On October 31, 2017, Shenzhen Konka Commercial System Technology Co., Ltd., the subsidiary of this Company obtained the high-tech enterprise certificate (certificate No.: GR201744202349) jointly issued by Shenzhen Technology Innovation Committee, Finance Committee of Shenzhen Municipality, Shenzhen Municipal Office, SAT, Shenzhen Local Taxation Bureau with a valid period of three years.According to related taxation regulations, the company enjoys related taxation preferential policies as a high-tech enterprise from 2017 to2020and pays theenterpriseincome tax as per thepreferential tax rateof15%.
(8) According to Notice about Related Taxation Policy Problems of Further Implementation of the Western Development Strategy CS[2011] No. 58, Chongqing Qingjia, the subsidiary of this Company pays the enterprise income tax as per the referential tax rate of15% from January 1,2011to December 31,2020.
(9) According to CS[2011] No.100 document issued by the Ministry of Finance of the People's Republic of China and State Administration of Taxation, for the sales of software products independently developed and produced by the ordinary VAT payer, after the VAT is collected as per the tax rate of17%, for the3% part exceeding the actual VAT burden, the immediate collection and refund policy shall be carried out. This Company and its subsidiaries, Shenzhen Konka Telecommunications Technology Co., Ltd., Information Network, Shenzhen Wankaida Science and Technology Co., Ltd. and Shenzhen Konka E-display Co.,Ltd. enjoy thepreferential policy.
KonkaGroupCo.,Ltd. AnnualReport2017 (10) On August 26, 2010, the State Council formally replied the Overall Development Planning of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone. In Mar. 2011, China formally included development Qianhai of Shenzhen into the Outline of 12th Five-Year Plan. In Mar. 2013, National Development and Reform Commission formally issued the Industry Admission Catalog of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen. The Catalog includes 112 industries of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone including six fields of the finance industry, the modern logistics industry, the information service industry, the technology service industry, the professional service industry and the public service industry. Kangqiao Easy Chain Company was registered in Qianhai. It enjoys the income tax rate of15%. The Company can enjoy other preferential rights while enjoying Qianhai preferential rights. Taking the policy of enjoying the exemption in the first two years of gaining operating revenue and paying one half of the taxation from the third year to the fifth year as a high-tech enterprise for example, the Company can enjoy the taxation preferential policy of preferential tax rate while enjoying the regular reduction and exemption. Preferential tax rate can be the optimal tax rate; For example, national key software enterprises can enjoy the preferential tax rate of10%, the Company can enjoy15% preferential tax rate as per the Qianhai policy, so the Company can take the optimal tax rate of10% as the income tax rate of the enterprise. The regular half deduction shall be carried out based on25%. If the regular exemption and deduction and the tax referential policy of15% are enjoyed at the same time, tax deduction shall be carried out based on25% tax rate during the deduction period, namely the tax rate of12.5%.
VI. Notes on MajorItems in Consolidated FinancialStatements ofthe Company
Unless otherwise noted, the following annotation project (including the main projects annotation of the financial statement of the Company), the “year-begin” refers to January 1, 2017, the “year-end” refers to December 31, 2017. “This year” refers to year 2017, and “last year” refers to year 2016.
1.Monetary Funds
||
|-|
|Closingbalance|
|49,343.08|
|3,097,850,360.68|
|114,145,147.32|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Closingbalance|
|3,212,044,851.08|
|535,621,931.96|

 Notes: The closing balance of other monetary fund was the deposits of each margin deposit notwithdrawn at any time.
 On December 31, 2017, the monetary funds deposited in overseas by the Company was RMB535,621,931.96(On December 31,2016,RMB643,590,382.98)
2. FinancialAssets Measured by FairValue and the Changes be Included in the Current Gains andLosses
||
|-|
|Closingbalance|
|296,799.53|
|—|
|296,799.53|

 3.Notes Receivable
(1)Notes receivable listed byItem
||
|-|
|Closingbalance|
|3,324,023,541.23|
|1,854,645,447.00|
|5,178,668,988.23|

 (2)Notes receivable pledged at theperiod-end
Item Amount
Bankacceptancebill
1,529,427,205.37— Tradeacceptancebill
Total
1,529,427,205.37 Notes: Up to December 31, 2017, the Company pledged thebanker’s acceptance bill of the book value of RMB1,529,427,205.37 for the comprehensive financing business such as
handlingthe billing, letterofcredit, letter ofguarantee, and thetrading financing.
(3) Notes receivable which had endorsed by the Company or had discounted and had not due
KonkaGroupCo.,Ltd. AnnualReport2017 onthebalance sheet dateat the year-end
||
|-|
|Amountofrecognitionterminationattheperiod-end|
|7,366,739,337.71|
|14,844,169.30|
|7,381,583,507.01|

 Note: Up to December 31, 2017, the Company used the trade acceptance bill of the book value of RMB409,381,734.73 as discount of bank with right of recourse, getting RMB401,412,156.04ofshort-term borrowings.
4.Accounts Receivable
(1)Accounts receivableclassified byItem
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|23,250,858.84|0.62|23,250,858.84|100.00|
|3,664,952,156.09|97.62|241,524,112.19|6.59|
|3,664,952,156.09|97.62|241,524,112.19|6.59|
|65,920,181.32|1.76|46,252,277.96|70.16|
|3,754,123,196.25|100.00|311,027,248.99|8.28|

(Continued)
Category Openingbalance
KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|24,684,155.33|0.93|24,684,155.33|100.00|
|2,516,341,840.82|94.77|242,313,342.19|9.63|
|2,516,341,840.82|94.77|242,313,342.19|9.63|
|114,253,229.55|4.30|80,316,179.69|70.30|
|2,655,279,225.70|100.00|347,313,677.21|13.08|

① Accounts receivable with significant individual amount and make independent provision forbad debt at theyear-end
Closingbalance
Accountsreceivable(classified
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion(%)|
|23,250,858.84|23,250,858.84|100.00|

②In the groups, accounts receivable adopting aging analysis method to withdraw bad debt provision:
Closingbalance
|||
|-|-|
|Accountreceivable|Baddebtprovision|
|3,464,254,284.95|69,285,085.69|
|12,179,701.92|608,985.10|
|16,520,836.90|3,304,167.38|

KonkaGroupCo.,Ltd. AnnualReport2017 Closingbalance
|||
|-|-|
|Accountreceivable|Baddebtprovision|
|5,325,394.42|2,662,697.21|
|2,017,522.19|1,008,761.10|
|164,654,415.71|164,654,415.71|
|3,664,952,156.09|241,524,112.19|

③ Top five of account receivable with insignificant single amount for which bad debt provisionseparately accrued
Accountsreceivable(classifiedbyunits) Closingbalance
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion(%)|
|17,971,100.60|17,971,100.60|100.00|
|4,580,000.00|1,374,000.00|30.00|
|3,373,215.17|3,373,215.17|100.00|
|2,138,825.00|748,588.75|35.00|
|1,733,797.99|1,733,797.99|100.00|
|29,796,938.76|25,200,702.51||

(2)Baddebt provision withdrawal, reversed orrecovered in theReporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB
KonkaGroupCo.,Ltd. AnnualReport2017 22,339,946.48; the amount of the reversed or collected part during the Reporting Period was of RMB 34,147,437.40. The decreased amount was RMB 18,523,651.91 due to the loss ofcontrolling right ofsubsidiaries.The write-offamount was RMB5,955,285.39.
(3)Top fiveofaccount receivable ofclosing balance collected byarrears party
The total amount of top five of account receivable of closing balance collected by arrears party was RMB1,479,962,894.16,39.42% of total closing balance of account receivable, the relevantclosing balance ofbad debt provision withdrawn was RMB29,599,257.88.
5.Prepayment
(1)List byaging analysis
||||||
|-|-|-|-|-|
|Closingamount|||||
|Bookbalance||Baddebtprovision|Bookbalance||
|Amount|Proportion(%)||Amount|Proportion(%)|
|466,156,792.72|99.06|175,964.90|269,405,925.30|96.52|
|1,199,279.69|0.25|565,892.65|3,335,844.57|1.20|
|23,736.73|0.01|—|2,265,192.49|0.81|
|3,208,755.30|0.68|2,723,615.15|4,099,193.21|1.47|
|470,588,564.44|100.00|3,465,472.70|279,106,155.57|100.00|

 Notes: (1) Significant prepayment with aging more than 1 year was mainly the prepayment ofcompanies withnocooperation.
(2) Top 5 of the closing balance of the prepayment collected according to the prepayment target
The total amount of top five of prepayment of closing balance collected by arrears party was RMB218,823,961.57,accountingfor46.50% oftotal closing balance ofprepayment.
(3) No bad debt provision this year; the collected or reversed bad debt provision was RMB 796,428.79thisyear; and the write-offbad debt provision was RMB33,595.36.
6.InterestReceivable
||
|-|
|Closingbalance|
|1,422,238.38|
|391,018.39|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Closingbalance|
|1,813,256.77|

 7.Dividends Receivable
||
|-|
|Closingbalance|
|—|
|—|

 8.OtherAccounts Receivable
(1)Other account receivable classified byItem
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|183,915,489.33|47.74|173,320,694.97|94.24|
|198,796,860.68|51.61|28,768,843.02|14.47|
|198,796,860.68|51.61|28,768,843.02|14.47|
|2,516,181.05|0.65|733,893.68|29.17|
|385,228,531.06|100.00|202,823,431.67|52.65|

(Continued)
Category Openingbalance
KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|183,915,489.33|43.21|174,186,734.34|94.71|
|234,570,113.10|55.12|26,878,827.62|11.46|
|234,570,113.10|55.12|26,878,827.62|11.46|
|7,101,401.90|1.67|2,131,520.57|30.02|
|425,587,004.33|100.00|203,197,082.53|47.75|

 Other account receivable with significant single amount for which bad debt provision separately accrued at theyear-end
Closingbalance
||||
|-|-|-|
|Otheraccountsreceivable|Baddebtprovision|Withdrawalproportion|
|152,402,680.00|152,402,680.00|100.00%|
|18,115,952.51|7,521,158.15|41.52%|
|13,396,856.82|13,396,856.82|100.00%|
|183,915,489.33|173,320,694.97||

KonkaGroupCo.,Ltd. AnnualReport2017② In the groups, other accounts receivable adopting aging analysis method to withdraw bad debt provision:
Closingbalance
Aging
|||
|-|-|
|Otheraccountsreceivable|Baddebtprovision|
|145,262,558.37|2,905,251.17|
|14,944,132.69|747,206.63|
|8,571,994.74|1,714,398.95|
|8,702,376.98|4,351,188.49|
|4,530,000.24|2,265,000.12|
|16,785,797.66|16,785,797.66|
|198,796,860.68|28,768,843.02|

(2)Baddebt provision withdrawal, reversed orcollected in theReporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 5,534,577.49; the amount of the reversed or collected part during the Reporting Period was of RMB 5,683,708.86. The decreased amount was RMB 220,799.75 due to the loss of controlling right of subsidiaries.Thewrite-offamount was RMB3,719.74.
(3)Other accounts receivableclassifies byaccounts nature
Nature Closingbookbalance
Subsidies 152,402,680.00 Intercoursefundsofunits 112,770,834.83 Depositandmargin 31,270,504.40 Prettycash 5,595,851.91 Transferredfunds 23,715,952.51 Others 59,472,707.41 Total 385,228,531.06 (4)Top 5 of the closing balance of theother accounts receivable collected according to the arrears party
KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|Nature|Closingbalance|Aging|proportion（%）|
|Subsidies|152,402,680.00|1-2years,4-5years,over5years|39.56|
|Taxrebate|19,336,609.25|Within1year|5.02|
|Transferredfunds|18,115,952.51|3-4years|4.70|
|Intercoursefunds|13,396,856.82|2-3years,3-4years,4-5years,over5years|3.48|
|Deposit|9,790,000.00|Within1year|2.54|
|—|213,042,098.58|—|55.30|

 9.Inventory
(1)Category
Closingamount
||||
|-|-|-|
|Bookbalance|Ofwhich: thecapitalizedamountoftheborrowings|Impairmentprovisions|
|382,096,368.17|—|—|
|17,203,260.25|94,119.39|—|
|399,299,628.42|94,119.39|—|

KonkaGroupCo.,Ltd. AnnualReport2017 Closingamount
||||
|-|-|-|
|Bookbalance|Ofwhich: thecapitalizedamountoftheborrowings|Impairmentprovisions|
|761,148,857.65|—|22,807,431.06|
|112,079,579.22|—|8,475,640.99|
|3,740,419,327.12|—|291,591,777.78|
|291,022.95|—|—|
|4,613,938,786.94|—|322,874,849.83|
|5,013,238,415.36|94,119.39|322,874,849.83|

 (Continued)
Openingbalance
||||
|-|-|-|
|Bookbalance|Ofwhich:thecapitalizedamountoftheborrowings|Impairmentprovisions|
|1,394,176,034.85|—|—|
|7,596,482.12|141,378.83|—|
|1,401,772,516.97|141,378.83|—|
|781,934,686.08|—|31,054,247.46|
|83,957,767.23|—|8,872,936.27|
|2,306,460,682.29|—|247,224,025.03|
|439,500.54|—|—|
|3,172,792,636.14|—|287,151,208.76|
|4,574,565,153.11|141,378.83|287,151,208.76|

KonkaGroupCo.,Ltd. AnnualReport2017 (2)List ofthedevelopment cost
||||
|-|-|-|
|Startingtime|Expectedcompletiontimeofthenextbatch|Openingamount|
|2015|Finishingbyphases,PhaseIVisestimatedtobefinishedin2018|449,653,196.40|
|October2015|Transferred|944,522,838.45|
|April2018|December2022|—|
|||1,394,176,034.85|

 (3)List ofthedeveloped products
|||||
|-|-|-|-|
|Completiontime|Openingamount|Increased|Decreased|
|Y2014|3,953,247.18|1,850.55|—|
|Y2015|3,643,234.94|2,419,870.60|3,990,597.15|
|Y2017|—|404,113,772.60|392,938,118.47|
||7,596,482.12|406,535,493.75|396,928,715.62|

 (4)Impairment ofinventories
||||||
|-|-|-|-|-|
|Openingbalance|Increasedamount||Decreasedamount||
||Withdrawal|Other|Reversedorwrite-off|Other|
|31,054,247.46|5,127,616.01|—|11,732,065.95|1,642,366.46|
|8,872,936.27|2,191,915.68|—|2,589,210.96|—|
|247,224,025.03|157,673,428.00|—|112,293,150.19|1,012,525.06|
|287,151,208.76|164,992,959.69|—|126,614,427.10|2,654,891.52|

KonkaGroupCo.,Ltd. AnnualReport2017 Notes: otherdecrease was dueto theloss ofcontrol right to subsidiaries.
(5) Withdrawal provision basis of the falling price of the inventory and the reasons of the reserveorwrite-off
|||
|-|-|
|Specificbasisofwithdrawaloffallingpricereservesofinventory|Reasons for reverse|
|Therealizablenetvaluewaslowerthanthebookvalue|—|
|Therealizablenetvaluewaslowerthanthebookvalue|—|
|Therealizablenetvaluewaslowerthantheibookvalue|—|

The decrease ofinventories’ market price in 2017 resulted into the realizable net value of finished products and relevant rawmaterials value lowerthaninventory cost.
(6) Closing balance of the inventory which includes capitalized borrowing expenses was RMB94,119.39.
10.OtherCurrentAssets
||
|-|
|Closingbalance|
|400,063,013.70|
|979,000,000.00|
|4,401,110.41|
|331,862,744.70|
|1,715,326,868.81|

KonkaGroupCo.,Ltd. AnnualReport2017
11.Available-for-saleFinancialAssets
(1)List ofavailable-for-sale financial assets
||||||
|-|-|-|-|-|
|Closingbalance|||||
|Bookbalance|Depreciationreserves|Bookvalue|Bookbalance|Depreciationreserves|
|722,918,184.73|10,747,785.64|712,170,399.09|319,965,425.00|4,997,785.64|
|58,162.76|-|58,162.76|55,777,425.00|—|
|722,860,021.97|10,747,785.64|712,112,236.33|264,188,000.00|4,997,785.64|
|722,918,184.73|10,747,785.64|712,170,399.09|319,965,425.00|4,997,785.64|

 (2)Available-for-salefinancial assets measured byfair valueat the period-end
Item Available-for-saleequityinstruments Costoftheequityinstruments
26,820.68 Fairvalue
58,162.76 Changedamountofthefairvalueaccumulativelyincludedinothercomprehensiveincome
31,342.08— Withdrawnimpairmentamount
(3)Available-for-salefinancial assets measured bycost at theperiod-end
Bookbalance
Investee
KonkaGroupCo.,Ltd. AnnualReport2017
Year-begin Increased Decreased Year-end
||||
|-|-|-|
|20,000,000.00|—|—|
|4,800,000.00|—|—|
|9,500,000.00|—|9,500,000.00|
|5,750,000.00|—|—|
|1,300,000.00|—|—|
|100,000.00|—|—|
|485,000.00|—|—|
|5,000,000.00|—|—|
|1,153,000.00|—|—|
|6,000,000.00|—|—|
|2,400,000.00|—|—|
|203,000,000.00|—|—|
|—|47,230,000.00|—|
|4,700,000.00|—|—|
|—|120,000,000.00|—|
|—|61,494,666.97|—|
|—|239,447,355.00|—|

KonkaGroupCo.,Ltd. AnnualReport2017
Bookbalance
||||
|-|-|-|
|Year-begin|Increased|Decreased|
|—|—|—|
|264,188,000.00|468,172,021.97|9,500,000.00|

 (Continued)
||||||
|-|-|-|-|-|
|Depreciationreserves||||Shareholdingproportionamongtheinvestees(%)|
|Year-begin|Increased|Decreased|Year-end||
|—|—|—|—|6.00|
|—|—|—|—|6.10|
|—|—|—|—|—|
|—|5,750,000.00|—|5,750,000.00|12.67|
|1,300,000.00|—|—|1,300,000.00|9.60|
|100,000.00|—|—|100,000.00|—|
|485,000.00|—|—|485,000.00|1.00|
|1,639,190.80|—|—|1,639,190.80|9.62|
|200,000.00|—|—|200,000.00|11.50|
|1,273,594.84|—|—|1,273,594.84|6.00|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Depreciationreserves||||Shareholdingproportionamongtheinvestees(%)|
|Year-begin|Increased|Decreased|Year-end||
|—|—|—|—|4.26|
|—|—|—|—|—|
|—|—|—|—|8.38|
|—|—|—|—|3.62|
|—|—|—|—|20.00|
|—|—|—|—|18.90|
|—|—|—|—|15.22|
|—|—|—|—|—|
|4,997,785.64|5,750,000.00|—|10,747,785.64|—|

KonkaGroupCo.,Ltd. AnnualReport2017 (4) Changes of the impairment of the available-for-sale financial assets of the Reporting Period
Categoryofavailable-for-salefinancialassets Available-for-saleequityinstruments
Withdrawnimpairmentbalanceatthe
4,997,785.64 period-begin
WithdrawaloftheReportingPeriod 5,750,000.00 Ofwhich:transferredfromother
— comprehensiveincome
DecreaseoftheReportingPeriod — Ofwhich:recoveredorreversedfromthefair
— valueafterthePeriod
Withdrawnimpairmentbalanceatthe
10,747,785.64 period-end
Note:① Hunan Vary Tech Co., Ltd. is a new over-the-counter market listed company. Its share price does not represent its fair value, so measurement shall be carried out as per the costs rather than thefair value.
② During this current period, since additional contribution of other shareholders of EnrayTek (Shanghai) Co., Ltd., holding share of this Company in EnrayTek (Shanghai) Co., Ltd. has decreased to less than20.00%, this Company will not assign directors and will not have significant influences on EnrayTek (Shanghai) Co., Ltd. This Company transfers it into thefinancial asset available for saletocarry out theaudit.
③ On March 27, 2015, the People's Court of Jiangbei District, Chongqing handled the bankruptcy liquidation application of Chongqing Electronics, the subsidiary of this Company and established the liquidation group. This Company will not own the right of controlling related activities of Chongqing Electronics. After bankruptcy, it will not be included into the consolidation scope. It will be reclassified into the financial asset available for sale with the net valueofzero. Liquidation has notbeen finished in thecurrent period.
KonkaGroupCo.,Ltd. AnnualReport2017
12.Long-term Equity Investment
||||||
|-|-|-|-|-|
|Openingbalance|||||
||Additionalinvestment|Decreasedinvestment|Investmentprofitandlossrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|88,298,590.32|—|—|-3,631,202.02|—|
|3,649,728.08|—|3,649,728.08|—|—|
|85,791,460.71|—|—|-3,787,726.31|-2,274,173.49|
|7,438,647.50|—|—|2,005,513.47|—|
|85,405,031.28|9,722,241.65|—|5,907,850.90|—|
|27,166,487.52|—|27,175,409.62|8,922.10|—|
|—|47,880,000.00|—|1,400,920.63|-863,874.55|
|19,164,691.78|—|—|-4,847,290.98|—|
|6,213,908.63|—|—|-1,286,319.16|—|
|20,426,438.47|—|—|6,035,773.87|—|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Openingbalance|||||
||Additionalinvestment|Decreasedinvestment|Investmentprofitandlossrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|—|171,799,598.00|—|5,681,317.52|—|
|—|588,000,000.00|—|7,014,858.00|—|
|—|2,000,000.00|—|-476,833.76|—|
|—|4,000,000.00|—|-1,574,737.34|—|
|—|—|—|-22,084.12|—|
|—|—|—|-9,553,536.24|—|
|343,554,984.29|823,401,839.65|30,825,137.70|2,875,426.56|-3,138,048.04|

 (Continued)
||||||
|-|-|-|-|-|
|Increase/decreaseinReportingPeriod||||Closingbalance|
|Declarationofcashdividendsorprofits|Withdrawnimpairmentprovision|Costmethodconvertedintoequitymethod|Equitymethodconvertedintofinancialassets||

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
||||availableforsale||
|—|—|—|-84,667,388.30|—|
|—|—|—|—|—|
|—|—|—|—|79,729,560.91|
|—|—|—|—|9,444,160.97|
|—|—|—|—|99,562,391.48|
|—|—|—|—|—|
|—|—|—|—|48,417,046.08|
|—|—|—|—|14,317,400.80|
|—|—|—|—|4,927,589.47|
|—|—|—|—|26,462,212.34|
|—|—|—|—|210,279,132.55|
|—|—|—|—|617,214,571.50|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|—|—|—|—|1,523,166.24|
|—|—|—|—|2,425,262.66|
|—|—|—|—|-22,084.12|
|—|—|215,260,469.100|—|205,706,932.86|
|—|—|215,260,469.100|-84,667,388.30|1,319,987,343.74|

KonkaGroupCo.,Ltd. AnnualReport2017 13.Investment Property
Investment property adopted thecost measurement mode
||
|-|
|Housesandbuildings|
|249,923,047.75|
|—|
|—|
|249,923,047.75|
|—|
|27,836,143.49|
|5,631,274.27|
|5,631,274.27|
|—|
|33,467,417.76|
|—|
|—|
|—|
|—|
|—|
|—|
|216,455,629.99|
|222,086,904.26|

KonkaGroupCo.,Ltd. AnnualReport2017
14.FixedAssets
(1)List offixed assets
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Otherequipment|
|1,585,782,685.49|758,663,226.60|212,512,639.28|53,668,633.02|169,982,040.39|
|235,311,359.73|87,830,571.32|27,200,941.36|4,341,248.30|33,698,281.84|
|—|25,242,248.96|12,466,070.83|3,638,342.32|11,033,064.71|
|235,311,359.73|62,588,322.36|14,734,870.53|702,905.98|22,665,217.13|
|—|—|—|—|—|
|262,054,270.74|130,545,962.87|52,603,824.88|8,079,258.19|29,471,833.34|
|68,807,164.02|14,135,891.95|40,045,994.14|4,367,359.43|5,999,978.65|
|193,247,106.72|116,410,070.92|12,557,830.74|3,711,898.76|23,471,854.69|
|1,559,039,774.48|715,947,835.05|187,109,755.76|49,930,623.13|174,208,488.89|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Otherequipment|
|392,850,477.50|462,360,402.61|163,374,809.37|39,315,097.11|123,516,834.06|
|39,514,244.96|45,483,454.84|12,769,800.26|3,627,151.42|15,258,844.64|
|39,514,244.96|45,483,454.84|12,769,800.26|3,627,151.42|15,258,844.64|
|64,704,722.05|79,700,435.00|46,721,832.51|6,173,951.27|23,481,987.72|
|35,133,954.47|8,857,364.99|36,200,212.56|3,577,593.83|5,310,405.04|
|29,570,767.58|70,843,070.01|10,521,619.95|2,596,357.44|18,171,582.68|
|367,660,000.41|428,143,422.45|129,422,777.12|36,768,297.26|115,293,690.98|
|2,006,749.30|16,777,278.59|3,760,562.66|950,517.86|1,717,581.69|
|—|1,177,357.31|294,819.03|—|241,638.35|
|—|1,177,357.31|294,819.03|—|241,638.35|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Otherequipment|
|942,269.83|886,810.91|2,806,008.51|87,814.50|425,660.30|
|942,269.83|886,810.91|2,806,008.51|87,814.50|279,442.64|
|—|—|—|—|146,217.66|
|1,064,479.47|17,067,824.99|1,249,373.18|862,703.36|1,533,559.74|
|1,190,315,294.60|270,736,587.61|56,437,605.46|12,299,622.51|57,381,238.17|
|1,190,925,458.69|279,525,545.40|45,377,267.25|13,403,018.05|44,747,624.64|

KonkaGroupCo.,Ltd. AnnualReport2017 (2)List ofTemporarily IdleFixedAssets
||||
|-|-|-|
|Originalbookvalue|Accumulativedepreciation|Impairmentprovision|
|17,524,987.37|7,122,279.16|7,616,807.91|
|4,417,917.35|4,417,917.35|—|
|246,153.82|196,025.58|42,128.24|
|157,611.28|157,611.28|—|
|22,346,669.82|11,893,833.37|7,658,936.15|

 (3)FixedAssets Leased in from Financing Lease
||||
|-|-|-|
|Originalbookvalue|Accumulativedepreciation|Impairmentprovision|
|5,988,219.52|2,252,794.10|—|
|205,128.20|116,239.31|—|
|6,193,347.72|2,369,033.41||

 (4)FixedAssets Leased out from Operation Lease
Item Closingbookvalue
Housesandbuildings 38,330,146.06 Total 38,330,146.06 (5)Details of FixedAssets Failed toAccomplishCertification ofProperty
|||||
|-|-|-|-|
|Originalbookvalue|Accumulativedepreciation|Impairmentprovision|Netbookvalue|
|21,481,356.96|2,363,211.89|—|19,118,145.07|
|3,628,629.00|129,269.92|—|3,499,359.08|
|10,189,892.23|842,885.68|—|9,347,006.55|

KonkaGroupCo.,Ltd. AnnualReport2017 Shenyang developers
|||||
|-|-|-|-|
|5,432,239.86|244,450.82|—|5,187,789.04|
|20,018,497.00|8,194,102.38|—|11,824,394.62|
|76,610,752.33|31,733,590.84|—|44,877,161.49|

 15.Construction inProgress
(1)List ofConstruction inProgress
||||||
|-|-|-|-|-|
|Closingbalance|||||
|Bookbalance|Impairmentprovision|Bookvalue|Bookbalance|Impairmentprovision|
|—|—|—|286,093,111.12|—|
|29,125,312.81|—|29,125,312.81|8,061,797.71|—|
|76,514,067.90|—|76,514,067.90|6,111,540.55|—|
|1,643,881.07|—|1,643,881.07|1,643,881.07|—|
|28,580,559.23|—|28,580,559.23|13,626,106.60|—|
|135,863,821.01|—|135,863,821.01|315,536,437.05|—|

 (2)Changes ofSignificant ConstructioninProgress
||||||
|-|-|-|-|-|
|Estimatednumber|Openingbalance|IncreaseAmount|Amountthattransferredtolong-termfixedassetsoftheperiod|Otherdecreasedamountoftheperiod|
|RMB241million|6,111,540.55|70,402,527.35|—|—|
|RMB35million|8,061,797.71|21,063,515.10|—|—|
|RMB263million|1,643,881.07|—|—|—|

KonkaGroupCo.,Ltd. AnnualReport2017 Kunshanhotel RMB445
286,093,111.12 73,338,154.78 359,431,265.90 — — million
|||||
|-|-|-|-|
|13,626,106.60|45,201,663.29|30,247,210.66|—|
|315,536,437.05|210,005,860.52|389,678,476.56|—|

（Continued）
||||||
|-|-|-|-|-|
|Proportionestimatedoftheprojectaccumulativeinput(%)|Projectprogress|Accumulativeamountofcapitalizedinterests|Ofwhich:theamountofthecapitalizedinterestsoftheperiod|Capitalizationrateoftheinterestsoftheperiod(%)|
|31.75|31.75|—|—|—|
|83.22|83.22|—|—|—|
|6.25|6.25|—|—|—|
|100.00|100.00|—|—|—|

16.IntangibleAssets
(1)List ofintangible assets
|||||
|-|-|-|-|
|Landuseright|Foreignregisteredtrademark|Patentandknow-how|Other|
|316,997,134.11|3,519,159.61|40,234,111.64|56,205,873.76|
|—|—|—|10,460,042.83|
|—|—|—|4,993,647.22|
|—|—|—|5,466,395.61|
|—|—|—|—|
|120,008,004.64|—|—|—|
|57,971,330.60|—|—|—|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|Landuseright|Foreignregisteredtrademark|Patentandknow-how|Other|
|62,036,674.04|—|—|—|
|196,989,129.47|3,519,159.61|40,234,111.64|66,665,916.59|
|53,371,371.76|3,412,215.10|33,745,464.74|21,480,517.47|
|6,535,445.18|106,944.51|674,662.10|5,295,354.80|
|6,535,445.18|106,944.51|674,662.10|5,295,354.80|
|25,172,514.65|—|—|—|
|9,946,888.86|—|—|—|
|15,225,625.79|—|—|—|
|34,734,302.29|3,519,159.61|34,420,126.84|26,775,872.27|
|—|—|2,901,082.61|—|
|—|—|—|—|
|—|—|—|—|
|—|—|—|—|
|—|—|—|—|
|—|—|—|—|
|—|—|2,901,082.61|—|
|162,254,827.18|—|2,912,902.19|39,890,044.32|
|263,625,762.35|106,944.51|3,587,564.29|34,725,356.29|

KonkaGroupCo.,Ltd. AnnualReport2017 17.Goodwill
(1)Original bookvalue ofgoodwill
||||||
|-|-|-|-|-|
|Openingbalance|Increased||Decreased||
||Formedfromthebusinesscombination|Other|Dispose|Other|
|3,597,657.15|—|—|—|—|
|3,597,657.15|—|—|—|—|

 (2)Provisions forgoodwill impairment
||||||
|-|-|-|-|-|
|Openingbalance|Increased||Decreased||
||Withdrawal|Other|Dispose|Other|
|—|—|—|—|—|
|—|—|—|—|—|

 18.Long-term UnamortizedExpenses
|||||
|-|-|-|-|
|Openingbalance|Increasedamount|Amortizationamount|Decrease|
|16,313,225.16|13,712,508.40|6,365,715.43|418,814.62|
|51,212,313.70|45,463,582.41|35,805,223.23|4,468,416.60|
|24,375,994.53|63,556,941.88|16,523,132.96|992,325.94|
|91,901,533.39|122,733,032.69|58,694,071.62|5,879,557.16|

 Notes: Other decrease included the decreased amount RMB1,113,360.86 mainly generated from theloss ofcontrol over subsidiaries.
19.DeferredIncomeTaxAssets/DeferredIncomeTax Liabilities
(1)Deferred income tax assets without offset
||||
|-|-|-|
|Closingbalance|||
|Deductibletemporary|Deferredincometaxassets|Deductibletemporary|
|796,345,288.62|197,835,345.27|746,292,412.93|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|32,715,116.95|8,178,779.24|100,026,922.96|
|118,441,697.07|28,839,536.61|113,547,244.37|
|106,943,380.58|25,500,563.17|90,555,138.14|
|2,250,284.11|364,943.32|1,622,776,529.02|
|47,482,470.52|11,870,617.63|----|
|141,409,911.41|35,352,477.88|144,068,370.06|
|1,245,588,149.26|307,942,263.12|2,817,266,617.48|

 (2)Lists ofdeferred incometax liabilities withoutoffset
||||
|-|-|-|
|Closingbalance|||
|Taxabletemporarydifference|Deferredincometaxliabilities|Taxabletemporarydifference|
|6,889,703.33|1,033,455.50|6,867,714.25|
|---|---|39,557,580.99|
|---|---|8,547,425.00|
|45,386,505.16|11,346,626.29|14,848,590.56|
|1,026,206.42|256,551.61|9,577,050.20|
|53,302,414.91|12,636,633.40|79,398,361.00|

 (3)List ofunrecognized deferred incometax assets
||
|-|
|Closingbalance|
|132,372,523.56|
|1,085,593,457.20|
|1,217,965,980.76|

 20.Assets ImpairmentProvision
|||||
|-|-|-|-|
|Openingbalance|Withdrawnimpairment|Decreased||
|||Reverse|Write-offorothers|

period-be2gi2n4
KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|Openingbalance|Withdrawn|Decreased||
|554,806,256.59|2i7m,p8a7i4rm,5e2n3t.97|40,627,575.05|24,737,052.15|
|287,151,208.76|balanceatthe164,992,959.69period-begin|—|129,269,318.62|
|4,997,785.64|5,750,000.00|—|—|
|25,212,690.10|1,713,814.69|—|5,148,564.05|
|2,901,082.61|—|—|—|
|33,906,863.92|—|—|33,906,863.92|
|908,975,887.62|200,331,298.35|40,627,575.05|193,061,798.74|

 21.OtherNon-currentAssets
||
|-|
|Closingbalance|
|1,122,880.00|
|8,167,948.00|
|20,000,000.00|
|29,290,828.00|

 22.Short-termLoans
||
|-|
|Closingbalance|
|6,033,663,163.14|
|—|
|893,808,874.21|
|6,927,472,037.35|

 Notes: Chain Kingdom took USD3,356,892.00 offshore margin as pledge, obtaining RMB21,934,332.45short-term loans.
 Konka Household Appliances International Trading took USD72,000,000.00 usance letter ofcredit with360days as pledge, obtaining RMB470,462,385.72 short-term loans.
 Konka Factoring discounted the notes receivable with right of recourse, obtaining RMB401,412,156.04short-term loansinequal amount.
23. Financial Liabilities Measured by Fair Value and the Changes Included in the
CurrentGains andLosses
KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Closingbalance|
|47,482,470.50|
|47,482,470.50|

 24.Notes Payable
||
|-|
|Closingbalance|
|133,211,455.00|
|407,963,857.09|
|541,175,312.09|

 Notes: The amount of notes payable due during the next accounting period was RMB 541,175,312.09.
25.Accounts Payable
(1)List ofAccounts Payable
||
|-|
|Closingbalance|
|3,519,530,711.60|
|53,966,422.15|
|5,991,933.36|
|32,727,199.48|
|3,612,216,266.59|

 (2)Notes of theAccounts PayableAging over OneYear
||
|-|
|Closingbalance|
|30,024,732.95|
|5,471,802.64|
|35,496,535.59|

26.Advancefrom Customers
(1)List ofAdvance from Customers
||
|-|
|Closingbalance|
|571,998,516.53|
|36,662,083.53|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Closingbalance|
|14,937,831.50|
|16,912,352.61|
|640,510,784.17|

 (2) The Significant Advance from CustomersAging over 1 year was Mainly Generated from theAdvance from Customers from Companies without Continuous Cooperation.
(3)Advance Receipts of Houses
||
|-|
|Closingbalance|
|2,383,130.00|
|2,559,493.00|
|11,129,253.00|
|30,861,638.00|
|46,933,514.00|

 27.PayrollPayable
(1)List ofPayroll Payable
|||||
|-|-|-|-|
|Openingbalance|Increase|Decrease|Otherdecreaseoftheyear|
|269,328,946.11|1,471,496,305.40|1,443,874,699.88|7,903,886.78|
|2,067,376.48|133,998,613.15|133,533,164.99|209,191.82|
|1,663,194.06|6,727,284.26|8,390,478.32|—|
|—|—|—|—|
|273,059,516.65|1,612,222,202.81|1,585,798,343.19|8,113,078.60|

(2)List ofShort-term Salary
KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|Openingbalance|Increase|Decrease|Otherdecreaseoftheyear|
|259,948,249.68|1,280,781,512.27|1,257,407,376.76|7,797,832.86|
|1,210,626.63|60,009,252.10|56,656,895.63|—|
|1,799,379.97|63,767,334.01|62,644,280.55|106,053.92|
|894,422.89|54,782,715.76|54,776,076.04|85,698.00|
|180,237.94|4,237,927.94|4,155,953.50|14,997.15|
|724,719.14|4,746,690.31|3,712,251.01|5,358.77|
|1,313,004.12|33,601,337.87|34,614,810.82|—|
|4,314,422.20|12,047,161.99|12,737,092.55|—|
|—|—|—|—|
|—|—|—|—|
|743,263.51|21,289,707.16|19,814,243.57|—|
|269,328,946.11|1,471,496,305.40|1,443,874,699.88|7,903,886.78|

 (3)List ofDrawing Scheme
|||||
|-|-|-|-|
|Openingbalance|Increase|Decrease|Otherdecreaseoftheyear|
|1,929,475.33|130,307,673.08|129,936,684.14|203,532.75|
|137,901.15|3,690,940.07|3,596,480.85|5,659.07|
|—|—|—|—|
|2,067,376.48|133,998,613.15|133,533,164.99|209,191.82|

 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
KonkaGroupCo.,Ltd. AnnualReport2017 expenseoccurred was recorded intocurrent profits and losses orrelated assets costs.
28.Taxes Payable
||
|-|
|Closingbalance|
|47,749,976.31|
|1,124,832,572.96|
|23,666,123.67|
|1,855,882.68|
|4,802,640.61|
|401,823.10|
|3,451,843.43|
|3,570,618.46|
|4,155,984.89|
|1,851,821.21|
|4,749,633.12|
|344,630.28|
|104,967,760.07|
|167,783.74|
|1,326,569,094.53|

 29.InterestPayable
||
|-|
|Closingbalance|
|35,723,963.94|
|35,723,963.94|

 30.OtherAccounts Payable
(1)OtherAccounts Payable Listed byNature oftheAccount
||
|-|
|Closingbalance|
|826,839,671.60|
|472,308,401.08|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Closingbalance|
|222,637,701.31|
|3,606,727.50|
|82,966,804.38|
|1,608,359,305.87|

 (2)Other SignificantAccounts PayablewithAging overOneYear
||
|-|
|Closingbalance|
|82,742,462.44|
|82,742,462.44|

31.Non-currentLiabilities Duewithin 1Year
||
|-|
|Closingbalance|
|374,358.99|
|374,358.99|

 32.Long-term Loan
||
|-|
|Closingbalance|
|167,000,000.00|
|167,000,000.00|

 33.Long-term Payable
||
|-|
|Closingbalance|
|—|
|435,897.45|
|374,358.99|
|61,538.46|

34.Long-term PayrollPayable
(1)List ofLong-term PayrollPayable
KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|ClosingBalance|
|13,361,821.86|
|—|
|—|
|13,361,821.86|

 (2)Changes ofDefined Benefit Plans
① PresentWorth ofDefined Benefit Plans Obligation:
||
|-|
|ReportingPeriod|
|18,151,659.90|
|—|
|—|
|—|
|—|
|—|
|—|
|—|
|4,789,838.04|
|—|
|4,789,838.04|
|13,361,821.86|

②Notes to the Influence of the Content and Related Risk of Defined Benefit Plans to the Future Cash Flows,Timeand Uncertainty of theCompany:
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 theCompany’s andemployees’ benefits and
voluntary selection, Communication Technology provides early retirement plans for senior
KonkaGroupCo.,Ltd. AnnualReport2017 employees (employed before 31 Dec. 1990 and signed non-fixed term labor contract with the Company orCommunicationTechnology).
The accumulative compensation paid to the internal early retirement pensions in future year is RMB 34,931,714.55, 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 theactual turnoverrate, death rate and thechanges ofminimumcardinality ofsocial security.③ Notes to Analysis Results of Actuarial Assumptions and Sensibility of Defined Benefit Plans
||
|-|
|Period-endofReportingPeriod|
|Treasurybondrateinsameperiod|
|0%|
|Overlegalemeritusage|
|0%|

35.Accrued Liabilities
|||
|-|-|
|Openingbalance|Closingbalance|
|4,711,597.59|4,711,597.59|
|2,840,387.51|1,470,267.51|
|7,551,985.10|6,181,865.10|

36.Government Subsidies
1.Government Subsidies InitiallyRecognized at thePeriod-begin
||||||||
|-|-|-|-|-|-|-|
|Amount|Relatedtoassets||Relatedtoincome||||
||Deferredincome|Bookvalueofwrite-downassets|Deferredincome|Otherincome|Non-opeartingincome|Write-downcostexpenses|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|Amount|Relatedtoassets||Relatedtoincome||||
||Deferredincome|Bookvalueofwrite-downassets|Deferredincome|Otherincome|Non-opeartingincome|Write-downcostexpenses|
|83,426,592.80|—|—|—|53,426,592.80|30,000,000.00|—|
|56,782,742.21|—|—|—|56,782,742.21|—|—|
|49,848,202.23|—|—|—|49,848,202.23|—|—|
|8,829,600.00|—|—|—|8,829,600.00|—|—|
|2,817,636.00|—|—|—|2,817,636.00|—|—|
|2,038,431.45|—|—|—|2,038,431.45|—|—|
|2,229,742.37|—|—|—|2,053,742.37|176,000.00|—|
|13,300,000.00|13,300,000.00|—|—|—|—|—|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|Amount|Relatedtoassets||Relatedtoincome||||
||Deferredincome|Bookvalueofwrite-downassets|Deferredincome|Otherincome|Non-opeartingincome|Write-downcostexpenses|
|5,468,400.00|5,468,400.00|—|—|—|—|—|
|4,500,000.00|4,500,000.00|—|—|—|—|—|
|4,095,000.00|4,095,000.00|—|—|—|—|—|
|2,400,000.00|2,400,000.00|—|—|—|—|—|
|2,000,000.00|2,000,000.00|—|—|—|—|—|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|Amount|Relatedtoassets||Relatedtoincome||||
||Deferredincome|Bookvalueofwrite-downassets|Deferredincome|Otherincome|Non-opeartingincome|Write-downcostexpenses|
|2,292,200.00|2,292,200.00|—|—|—|—|—|
|7,120,550.00|7,120,550.00|—|—|—|—|—|
|247,149,097.06|41,176,150.00|—|—|175,796,947.06|30,176,000.00|—|

2.Government Subsidies Recorded intothe Current Gains and Losses
||||
|-|-|-|
|Relatedtoassets/income|Recordedintootherincome|Recordedintonon-operatingincome|
|Relatedtoincome|53,426,592.80|30,000,000.00|
|Relatedtoincome|56,782,742.21|—|
|Relatedtoincome|49,848,202.23|—|
|Relatedtoassets/income|29,182,496.49|—|
|Relatedtoincome|8,829,600.00|—|
|Relatedtoincome|2,817,636.00|—|
|Relatedtoincome|2,038,431.45|—|
|Relatedtoincome|2,053,742.37|176,000.00|
||204,979,443.55|30,176,000.00|

 3.Government Subsidies Returned intheReporting Period
Nosuch case in theReporting Period.
37.DeferredIncome
KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Openingbalance|Increase|Decrease|Otherdecrease|Closingbalance|
|130,571,125.42|41,176,150.00|29,182,496.49|12,514,867.06|130,049,911.87|
|130,571,125.42|41,176,150.00|29,182,496.49|12,514,867.06|130,049,911.87|

 Notes: Other decrease in the Reporting Period was mainly caused by the loss of controlling rights over thesubsidiaries.
KonkaGroupCo.,Ltd. AnnualReport2017
Ofwhich, itemsinvolved in government subsidies:
||||||||
|-|-|-|-|-|-|-|
|Openingbalance|Increased|Decreased||||Closingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Write-downcostexpenses|Otherdecrease||
|22,470,000.00|—|—|2,621,500.00|—|—|19,848,500.00|
|—|13,300,000.00|—|—|—|—|13,300,000.00|
|7,776,925.55|2,000,000.00|—|2,015,080.89|—|—|7,761,844.66|
|5,620,000.00|—|—|—|—|—|5,620,000.00|
|5,256,893.21|—|—|—|—|—|5,256,893.21|
|5,000,000.00|—|—|499,999.98|—|—|4,500,000.02|
|—|4,500,000.00|—|—|—|—|4,500,000.00|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|Openingbalance|Increased|Decreased||||Closingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Write-downcostexpenses|Otherdecrease||
|—|4,095,000.00|—|273,000.00|—|—|3,822,000.00|
|3,620,000.00|—|—|—|—|—|3,620,000.00|
|—|5,468,400.00|—|2,187,360.00|—|—|3,281,040.00|
|3,000,000.00|—|—|—|—|—|3,000,000.00|
|4,000,000.00|—|—|1,190,766.56|—|—|2,809,233.44|
|4,000,000.00|—|—|1,245,132.55|—|—|2,754,867.45|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|Openingbalance|Increased|Decreased||||Closingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Write-downcostexpenses|Otherdecrease||
|2,600,000.00|—|—|—|—|—|2,600,000.00|
|2,400,000.00|—|—|—|—|—|2,400,000.00|
|3,000,000.00|—|—|600,000.00|—|—|2,400,000.00|
|—|2,400,000.00|—|40,000.00|—|—|2,360,000.00|
|2,100,000.00|—|—|—|—|—|2,100,000.00|
|—|1,960,000.00|—|—|—|—|1,960,000.00|
|2,470,000.00|—|—|344,369.98|—|174,200.00|1,951,430.02|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|Openingbalance|Increased|Decreased||||Closingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Write-downcostexpenses|Otherdecrease||
|2,175,000.00|—|—|300,000.00|—|—|1,875,000.00|
|2,750,000.09|—|—|999,999.96|—|—|1,750,000.13|
|2,100,000.00|—|—|420,000.00|—|—|1,680,000.00|
|1,996,166.67|—|—|405,999.96|—|—|1,590,166.71|
|1,500,000.00|—|—|—|—|—|1,500,000.00|
|1,500,000.00|—|—|—|—|—|1,500,000.00|
|1,170,000.00|250,000.00|—|—|—|—|1,420,000.00|
|1,400,000.00|—|—|—|—|—|1,400,000.00|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|Openingbalance|Increased|Decreased||||Closingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Write-downcostexpenses|Otherdecrease||
|—|2,292,200.00|—|916,880.02|—|—|1,375,319.98|
|—|1,320,000.00|—|—|—|—|1,320,000.00|
|1,300,000.00|—|—|—|—|—|1,300,000.00|
|1,400,000.00|—|—|200,000.12|—|—|1,199,999.88|
|—|1,833,700.00|—|733,480.00|—|—|1,100,220.00|
|1,110,000.00|—|—|15,416.65|—|—|1,094,583.35|
|1,466,666.72|—|—|399,999.96|—|—|1,066,666.76|
|1,000,000.00|—|—|—|—|—|1,000,000.00|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|Openingbalance|Increased|Decreased||||Closingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Write-downcostexpenses|Otherdecrease||
|32,907,752.07|1,756,850.00|—|11,721,568.27|—|12,340,282.58|10,602,751.22|
|127,089,404.31|41,176,150.00|—|27,130,554.90|—|12,514,482.58|128,620,516.83|
|3,481,721.11|—|—|2,051,941.59|—|384.48|1,429,395.04|
|3,481,721.11|—|—|2,051,941.59|—|384.48|1,429,395.04|
|130,571,125.42|41,176,150.00|—|29,182,496.49|—|12,514,867.06|130,049,911.87|

KonkaGroupCo.,Ltd. AnnualReport2017 38.ShareCapital
|||||||
|-|-|-|-|-|-|
|Openingbalance|Increase/decrease(+/-)|||||
||Newlyissueshare|Bonusshares|Capitalizationofpublicreserves|Other|Subtotal|
|2,407,945,408.00|—|—|—|—|—|

39.CapitalReserves
||||
|-|-|-|
|Openingbalance|Increase|Decrease|
|7,393,378.55|—|—|
|72,329,713.49|60,876,002.56|35,866,852.30|
|79,723,092.04|60,876,002.56|35,866,852.30|

 Note: The changes in otherowners’ equity excluding the net gains and losses of Guangdong Chutian Dragon Smart Card Co., Ltd., Shenzhen Yaode Technology Co., Ltd. and Shenzhen Konka Precision Mould Manufacturing Co., Ltd. caused the increase in other capital reserves of RMB53,525,198.18. The introduction of small shareholders by Kaikai Shijie caused the theCompany’s decrease in shareholding proportion and the increase in other capital reserves of RMB7,350,804.38. The disposal of some stock of Kunshan Konka caused the decrease in other capital reserves of RMB7,650,000.00. The disposal of some stock of E3info caused the decrease in other capital reserves of RMB1,508,471.60. The Company’s shareholding proportion in Enraytek Optoelectronics Co., Ltd. decreased to less than20.00% due to the investment increase by other shareholders of Enraytek, which caused the Company would no longer delegate directors and lost significant influence on Enraytek. And the reclassification of it as available-for-sale financial assets caused the decrease in other capital reserves of RMB26,708,380.70.
KonkaGroupCo.,Ltd. AnnualReport2017
40.OtherComprehensiveIncome
|||||||
|-|-|-|-|-|-|
|Openingbalance|ReportingPeriod|||||
||Amountincurredbeforeincometax|Less:Amounttransferredintoprofitandlossinthecurrentperiodthatrecognizedintoothercomprehensiveincomeinpriorperiod|Less:incometaxexpense|After-taxattributetotheparentcompany|After-taxattributetominorityshareholder|
|—|—|—|—|—|—|
|-6,932,104.65|8,320,694.09|—|-2,136,856.25|10,629,563.60|-172,013.26|
|—|-3,138,048.04|—|—|-3,138,048.04|—|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||
|-|-|-|-|-|-|
|Openingbalance|ReportingPeriod|||||
||Amountincurredbeforeincometax|Less:Amounttransferredintoprofitandlossinthecurrentperiodthatrecognizedintoothercomprehensiveincomeinpriorperiod|Less:incometaxexpense|After-taxattributetotheparentcompany|After-taxattributetominorityshareholder|
|6,410,568.76|-8,516,082.93|—|-2,136,856.25|-6,379,226.68|—|
|-13,342,673.41|19,974,825.06|—|—|20,146,838.32|-172,013.26|
|-6,932,104.65|8,320,694.09|—|-2,136,856.25|10,629,563.60|-172,013.26|

KonkaGroupCo.,Ltd. AnnualReport2017 41.SurplusReserves
||||
|-|-|-|
|Openingbalance|Increase|Decrease|
|593,846,200.71|369,736,408.51|—|
|254,062,265.57|—|—|
|847,908,466.28|369,736,408.51|—|

 Notes: Based on the regulations of the Corporation Law and Constitution, the Company should withdraw10% of the statutory surplus reserves according to the net profits. If the accumulated amount of the statutory surplus reserves exceeded the50% of the registered capital, theCompany could nomore withdraw.
The Company can withdraw the discretional surplus reserves after withdrawing the statutory surplus reserves. The discretional surplus reserves can be used to make up for the previous losses orto increaseshare capital once approved.
42.Retained Profits
||
|-|
|ReportingPeriod|
|-427,163,254.63|
|—|
|-427,163,254.63|
|5,057,025,155.71|
|369,736,408.51|
|—|
|—|
|—|
|—|
|4,260,125,492.57|

 Notes: Others refer to the excessive losses undertaen for non-wholly-owned subsidiaries which had beenliquidated.
43.RevenueandCost ofSales
(1)Revenue and CostofSales
||||
|-|-|-|
|ReportingPeriod|||
|Salesrevenue|Costofsales|Salesrevenue|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|ReportingPeriod|||
|Salesrevenue|Costofsales|Salesrevenue|
|29,801,098,730.20|26,643,986,715.11|17,167,313,167.21|
|1,426,664,519.51|1,144,998,564.69|3,132,034,969.00|
|31,227,763,249.71|27,788,985,279.80|20,299,348,136.21|

 (2)Main Operations (Classified byproduct)
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|11,994,950,476.66|10,062,760,446.56|12,478,427,986.35|
|918,711,012.38|827,228,372.16|970,287,086.42|
|1,737,464,511.08|1,404,308,959.94|1,701,770,760.58|
|13,652,512,654.75|13,501,073,391.55|—|
|1,497,460,075.33|848,615,544.90|2,016,827,333.86|
|29,801,098,730.20|26,643,986,715.11|17,167,313,167.21|

 Notes: Since this year,theCompany began to take thetrade service as one of main operations. Andtheprevious tradeservice was listed underother operations.
(3)Main Operations (Classified byarea)
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|14,605,075,686.89|12,525,699,043.61|11,150,662,775.63|
|15,196,023,043.31|14,118,287,671.50|6,016,650,391.58|
|29,801,098,730.20|26,643,986,715.11|17,167,313,167.21|

 (4)Other Operations (Classified byproduct)
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|—|—|2,317,805,158.77|
|655,914,026.56|685,360,932.34|245,776,424.97|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|8,173,452.85|5,530,168.79|23,903,702.37|
|11,089,872.64|2,561,519.32|11,975,912.02|
|74,440,747.48|6,447,669.25|81,613,940.77|
|677,046,419.98|445,098,274.99|450,959,830.10|
|1,426,664,519.51|1,144,998,564.69|3,132,034,969.00|

 (5)The Revenue ofSales from theTopFive Customers
||
|-|
|Totalbusinessrevenueofthetopfivecustomers|
|7,077,286,124.31|
|4,731,230,318.90|

 44.BusinessTaxand Surcharges
||
|-|
|ReportingPeriod|
|123,382,509.30|
|22,176,591.33|
|15,520,219.86|
|15,088,906.82|
|9,959,196.22|
|10,051,601.65|
|6,807,461.39|
|2,295,449.95|
|548,589.88|
|341,052.18|
|2,665,155.03|
|208,836,733.61|

 Notes: refer to Note V. Taxes for details of the measurement standards of business tax and
surcharges.
45.SalesExpenses
KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|ReportingPeriod|
|670,929,455.10|
|373,118,418.23|
|321,989,098.63|
|166,475,580.70|
|219,633,787.72|
|103,711,438.83|
|67,614,333.51|
|33,971,957.80|
|23,122,212.30|
|16,528,932.62|
|144,898,342.67|
|2,141,993,558.11|

 46.Administration Expenses
||
|-|
|ReportingPeriod|
|329,676,982.50|
|196,593,346.39|
|39,733,413.81|
|25,807,304.97|
|20,607,523.97|
|18,845,381.77|
|13,634,367.93|
|12,847,093.80|
|10,398,246.45|
|8,758,356.31|
|4,827,139.40|
|4,527,598.77|
|91,456,924.39|
|777,713,680.46|

47.Financial Expenses
Item ReportingPeriod Sameperiodoflastyear
KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|ReportingPeriod|
|352,438,125.53|
|62,735,102.89|
|33,585,873.68|
|17,629,654.29|
|340,918,550.61|

 48.Asset Impairment Loss
||
|-|
|ReportingPeriod|
|-12,753,051.08|
|164,992,959.69|
|5,750,000.00|
|1,713,814.69|
|159,703,723.30|

 49.Gains onthe Changesin theFairValue
||
|-|
|ReportingPeriod|
|-39,598,044.59|
|-39,598,044.59|
|20,521,800.00|
|-47,145,207.37|
|-47,145,207.37|
|-66,221,451.96|

 50.InvestmentIncome
||
|-|
|ReportingPeriod|
|3,953,094.99|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|ReportingPeriod|
|6,419,583,589.12|
|248,207.55|
|-23,444,831.75|
|4,310,000.00|
|25,486,800.02|
|70,070,846.08|
|53,847,856.66|
|33,792,795.21|
|6,587,848,357.88|

 51.Return on DisposalofAssets
|||
|-|-|
|ReportingPeriod|Sameperiodoflastyear|
|22,576,235.00|—|
|33,369,166.39|—|
|55,945,401.39|—|

 52.OtherIncome
|||
|-|-|
|Reportingperiod|Sameperiodoflastyear|
|56,782,742.21|—|
|53,426,592.80|—|
|49,848,202.23|—|
|29,182,496.49|—|
|8,829,600.00|—|
|2,817,636.00|—|

KonkaGroupCo.,Ltd. AnnualReport2017
|||
|-|-|
|Reportingperiod|Sameperiodoflastyear|
|2,038,431.45|—|
|2,053,742.37|—|
|204,979,443.55|—|

 53.Non-operating Gains
|||
|-|-|
|Reportingperiod|Sameperiodoflastyear|
|30,176,000.00|234,802,344.00|
|41,017,674.51|—|
|2,801,304.04|5,274,775.72|
|2,026,151.04|10,884,825.38|
|90,088.16|5,205,974.43|
|6,721,446.01|14,660,503.81|
|82,832,663.76|270,828,423.34|

Ofwhich, government subsidies recorded intocurrent profits and losses
|||
|-|-|
|ReportingPeriod|Sameperiodoflastyear|
|—|121,451,535.04|
|—|40,577,764.60|
|—|23,758,573.37|
|30,000,000.00|13,421,731.12|
|—|12,322,500.00|
|—|9,164,300.00|
|—|4,557,740.52|
|—|2,243,284.00|

KonkaGroupCo.,Ltd. AnnualReport2017
|||
|-|-|
|ReportingPeriod|Sameperiodoflastyear|
|—|520,000.00|
|176,000.00|6,784,915.35|
|30,176,000.00|234,802,344.00|

54.Non-operating Expenses
|||
|-|-|
|ReportingPeriod|Sameperiodoflastyear|
|5,408,316.93|2,967,838.13|
|5,757,816.49|2,307,863.05|
|437,976.34|910,036.49|
|4,916,922.92|4,667,903.87|
|16,521,032.68|10,853,641.54|

 55.IncomeTaxExpense
(1)Lists ofIncomeTax Expense
||
|-|
|ReportingPeriod|
|1,181,682,531.53|
|389,958,474.25|
|1,571,641,005.78|

 (2)AdjustmentProcess ofAccounting Profit and IncomeTax Expense
Item ReportingPeriod
Totalprofits 6,658,475,105.76 Currentincometaxexpenseaccountedbystatutory/suitabletaxrate 1,664,618,776.44 Influenceofdifferenttaxratesuitabletosubsidiary -32,606,001.46 Influenceofincometaxbeforeadjustment -4,575,463.04 Influenceofnontaxableincome -44,568,718.27
Influenceofnotdeductablecosts,expensesandlosses 13,450,964.31
Influence of deductable losses of deferred income tax assets -21,830,451.29
KonkaGroupCo.,Ltd. AnnualReport2017 derecognizedusedinpreviousperiod
Influence of deductible temporary difference or deductible losses of
13,033,416.01 deferredincometaxassetsderecognizedinReportingPeriod.
Changes of the balance of deferred income tax assets/ liabilities in
--- previousperiodduetoadjustmentoftaxrate
Influenceofplusdeductingcosts -15,881,516.92 Incometaxexpense 1,571,641,005.78 56.OtherComprehensiveIncome
Referto NoteVI-40 fordetails.
57.CashFlowStatement
(1)Other Cash Received Relevant to OperatingActivities
||
|-|
|ReportingPeriod|
|6,151,752,072.71|
|2,535,878,629.20|
|205,972,947.06|
|59,127,499.85|
|68,495,305.71|
|1,067,599.66|
|9,724,120.10|
|30,158,139.90|
|7,053,099.89|
|4,378,369.42|
|116,132,534.48|
|9,189,740,317.98|

Note：①The Commercial factoring accounts referred to the accounts received from the bill discountingofthe factoring businessbythe Company.
②Of which, the recovered land transferring fees paid on the behalf of others were of RMB1,540,000,000.00.
(2)Other Cash PaidRelevant to OperatingActivities
Item ReportingPeriod Sameperiodoflastyear
KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|ReportingPeriod|
|8,852,860,166.99|
|1,167,232,783.76|
|27,188,407.90|
|123,627,145.04|
|19,067,788.75|
|18,648,034.00|
|437,976.34|
|119,593.48|
|42,422,836.03|
|10,251,604,732.29|
|10,251,604,732.29|

 Note: The commercial factoring payment referred to the accounts paid to the factoring applicantbytheCompany’s subsidiary- Konka Factoring (Shenzhen) Co.,Ltd.
(3)Other Cash Received Relevant to InvestmentActivities
||
|-|
|ReportingPeriod|
|1,620,800,000.00|
|220,507,387.99|
|---|
|6,173,387.62|
|1,847,480,775.61|

 (4)Other Cash PaidRelevant to InvestmentActivity
||
|-|
|ReportingPeriod|
|2,872,800,000.00|
|---|
|13,188,913.10|
|2,885,988,913.10|

(5)Other Cash Received Relevant to FinancingActivities
Item ReportingPeriod Sameperiodoflastyear
KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|ReportingPeriod|
|41,176,150.00|
|2,400,000.00|
|435,028,346.40|
|478,604,496.40|

 (6)Other Cash PaidRelevant to FinancingActivities
||
|-|
|ReportingPeriod|
|22,664,753.77|
|598,314.20|
|23,263,067.97|

 58.Supplemental Information forCash FlowStatement
(1)Supplemental Information forCash Flow Statement
||
|-|
|ReportingPeriod|
|5,086,834,099.98|
|159,703,723.30|
|116,653,496.12|
|12,612,406.59|
|58,694,071.62|
|-55,945,401.39|
|5,318,228.77|
|66,221,451.96|
|352,438,125.53|
|-6,587,848,357.88|
|393,791,889.56|
|-4,396,482.52|
|-3,657,857,260.85|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|ReportingPeriod|
|-3,952,004,354.33|
|3,720,709,237.56|
|-29,182,496.49|
|-4,314,257,622.47|
|—|
|—|
|—|
|3,097,899,703.76|
|2,020,902,945.14|
|—|
|—|
|1,076,996,758.62|

 (2)Net Cash Receive from Disposal oftheSubsidiary
Item Amount
Cashorcashequivalentsreceivedcurrentlyfromthedisposalofsubsidiaries
Ofwhich:ShenzhenKangqiaoJiachengPropertyInvestmentCo.,Ltd.
6,980,000,000.00 KunshanKonkaElectronicCo.,Ltd. 224,400,000.00 IndonesiaKonkaElectronicsCo.,Ltd. — Less:cashandcashequivalentsheldbysubsidiariesonthedateoflosingcontrollingrights — Ofwhich:ShenzhenKangqiaoJiachengPropertyInvestmentCo.,Ltd.
243,966,412.06 KunshanKonkaElectronicCo.,Ltd. 55,484,153.42 IndonesiaKonkaElectronicsCo.,Ltd. — Netcashreceivedfromdisposalofsubsidiaries 6,904,949,434.52
(3)Cash and Cash Equivalents
KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Closingbalance|
|3,097,899,703.76|
|49,343.08|
|3,097,850,360.68|
|3,097,899,703.76|

 Notes: the cash and cash equivalents exclude the restricted cash and cash equivalents the Company and thesubsidiaries of theGroup used.
59.TheAssets withthe OwnershiporUseRightRestricted
||
|-|
|Closingbookvalue|
|114,145,147.32|
|1,938,808,940.10|
|5,807,674.32|
|2,058,761,761.74|

60.ForeignCurrency Monetary Items
(1)Foreign Currency Monetary Items
|||
|-|-|
|Closingforeigncurrencybalance|Exchangerate|
|215,226,442.86|6.5342|
|83,839.59|7.8023|
|18,644,832.57|0.8359|
|1.32|8.7792|

KonkaGroupCo.,Ltd. AnnualReport2017
|||
|-|-|
|Closingforeigncurrencybalance|Exchangerate|
|21,732.26|0.5358|
|6.96|5.2009|
|225,058,783.20|6.5342|
|5,945,102.95|0.8359|
|49,764.00|5.0928|
|183,857,953.53|6.5342|
|32,570,569.60|6.5342|
|28,232,776.35|0.8359|
|331,453,218.73|6.5342|
|86,065,100.00|0.8359|
|44,195.93|6.5342|
|152,531.63|0.8359|

 VII. Changesof Mergerscope
1.SingleDisposalofInvestment to Subsidiary thatLosing Control
KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Theequitydisposalprice|Equitydisposalproportion(%)|Methodofequitydisposal|Timeoflosingcontrol|Recognitionbasisofthetimeoflosingcontrol|
|6,980,000,000.00|70.00|Transfer|2017-11-30|Transferofequity,operationandfinancialcontrollingpower|
|224,400,000.00|51.00|Transfer|2017-9-26|Transferofequity,operationandfinancialcontrollingpower|

(Continued)
||||||
|-|-|-|-|-|
|Residualequityproportiononthedateoflosingcontrol(%)|Bookvalueofresidualequityonthedateoflosingcontrol|Fairvalueofresidualequityonthedateoflosingcontrol|Profitsorlossesofresidualequityrecalculated inlinewithfairvalue|Recognitionmethodandmainassumption offairvalueofresidualequityonthedateoflosingcontrol|
|-|-|-|-|-|
|49.00|161,412,612.44|215,260,469.10|53,847,856.66|Tradingconsiderationandevaluationreport|

KonkaGroupCo.,Ltd. AnnualReport2017 2.OtherReasons fortheChanges in CombinationScope
(1) Konka Ventures Development (Shenzhen) Co., Ltd. was incorporated by the Company and Shenzhen Qianhai TONGGAM Technology Co., Ltd. on Oct. 26, 2017 with a registered capital of RMB 5 million, of which the Company contributed RMB 2.55 million (or51.00%) in cash and Shenzhen Qianhai TONGGAM Technology Co., Ltd. contributed RMB 2.45 million (or49.00%) in cash. For the Company has control over this new subsidiary, it has been included intotheCompany’s consolidation scopesince Oct. 26,2017.
(2) Shenzhen Konka Pengrun Technology& Industry Co., Ltd. was incorporated by the Company, Guizhuo Huajinrun Science and Technology Group Co., Ltd. and Shenzhen Henglongtong Electronic Science and Technology Co., Ltd. on Sep. 15, 2017 with a registered capital of RMB 50 million, of which the Company contributed RMB 25.5 million (or51.00%) in cash, Guizhuo Huajinrun Science and Technology Group Co., Ltd. contributed RMB 15 million (or30.00%) in cash, and Shenzhen Henglongtong Electronic Science and Technology Co., Ltd. contributed RMB 9.5 million (or19.00%) in cash. For the Company has control over this new subsidiary, it has been included into theCompany’s consolidation scopesinceSep. 15,2017.
(3) Shenzhen Konka Unifortune Supply Chain Management Co., Ltd. was incorporated by the Company and Shenzhen UNIFORTUNE Supply Chain Management Co., Ltd. on Sep. 15, 2017 with a registered capital of RMB 30 million, of which the Company contributed RMB 15.3 million (or51.00%) in cash, and Shenzhen UNIFORTUNE Supply Chain Management Co., Ltd. contributed RMB 14.7 million (or49.00%) in cash. For the Company has control over this new subsidiary, it has been included into theCompany’s consolidation scope since Sep.15, 2017.
(4) Shenzhen Konka Investment Holding Co., Ltd. was incorporated by the Company in Shenzhen on Mar.6, 2017 with a registered capital of RMB 40million, which will all be paid by the Company. As of the balance sheet date, the Company has not yet actually made the payment. For the Company has control over this new subsidiary, it has been included into theCompany’s consolidation scopesince Mar.6,2017.
(5)Anhui Kangzhi Trade Co., Ltd. was incorporated in Chuzhou,Anhui Province on Mar. 8, 2017 by Anhui Konka Electronic Co., Ltd., a subsidiary of the Company, with a registered capital of RMB 5 million, which will all be paid byAnhui Konka Electronic Co., Ltd. As of the balance sheet date, Anhui Konka Electronic Co., Ltd. has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been includedintotheCompany’s consolidation scopesince Mar.8,2017.
(6) Hainan Konka Material Technology Co., Ltd. was incorporated by Shenzhen Konka Household Appliances Co., Ltd. (a subsidiary of the Company) and Shenzhen Mushen Industrial Co., Ltd. on Jul. 10, 2017 with a registered capital of RMB 10 million, of which Shenzhen Konka Household Appliances Co., Ltd. will contribute RMB 5.1 million (or51.00%) and Shenzhen Mushen Industrial Co., Ltd. will contribute RMB 4.9 million (or49.00%). For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scope since Jul. 10, 2017.As of the balance sheet date, the contributionshave not yet been actually paid.
(7) Tianjin Konka Leasing Co., Ltd. was incorporated in Tianjin on Nov. 30, 2017 by Beijing Konka Electronic Co., Ltd. (a subsidiary of the Company) with a registered capital of RMB 170 million, of which all will be paid by Beijing Konka Electronic Co., Ltd. As of the balance sheet date, Beijing Konka Electronic Co., Ltd. has not yet actually made the payment.
KonkaGroupCo.,Ltd. AnnualReport2017 For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scopesince Nov.30,2017.
(8) Yantai Konka Healthcare Enterprise Service Co., Ltd. was incorporated in Yantai, Shandong Province on Nov. 24, 2017 by Konka Ventures Development (Shenzhen) Co., Ltd. (a subsidiary of the Company) with a registered capital of RMB 5 million, of which all will be paid by Konka Ventures Development (Shenzhen) Co., Ltd. As of the balance sheet date, Konka Ventures Development (Shenzhen) Co., Ltd. has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scopesince Nov.24,2017.
(9) Shenzhen Konka Capital Equity Investment Management Co., Ltd. was incorporated in Shenzhen on Nov. 24, 2017 by Shenzhen Konka Investment Holding Co., Ltd. (a subsidiary of the Company) with a registered capital of RMB 10 million, of which all will be paid by Shenzhen Konka Investment Holding Co., Ltd. As of the balance sheet date, Shenzhen Konka Investment Holding Co., Ltd. has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scopesinceNov.24,2017.
(10) Chain Kingdom (Shenzhen) Co., Ltd. was incorporated in Shenzhen on Jun. 9, 2017 by Chain Kingdom Co., Limited (a subsidiary of the Company) with a registered capital of RMB 5 million, of which all will be paid by Chain Kingdom Co., Limited.As of the balance sheet date, Chain Kingdom Co., Limited has not yet actually made the payment. For the Company has control over this new sub-subsidiary, it has been included into theCompany’s consolidation scopesinceJun. 9,2017.
(11) Anhui Konka Household Appliances Co., Ltd. (a subsidiary of the Company) has been cancelled for it has been absorbed by Anhui Konka Tongchuang Household Appliances Co., Ltd. (anothersubsidiary oftheCompany) onMay 17,2017.
(12) Indonesia Konka Electronics Co., Ltd., a subsidiary of the Company, was liquidated during 2017. As of the balance sheet date, Indonesia Konka Electronics Co., Ltd. has distributed its remaining assets but has not yet completed the cancellation procedure with the industrialand commerce administration.
VIII. Equity inOtherEntities
1.Equity inSubsidiary
(1)The Structureof theEnterprise Group
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|75.00|25.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry,commerce|100.00|—|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|49.00|51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|75.00|25.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Investmentholding|75.00|25.00|
|Mudanjiang,Heilongjiang|Mudanjiang,Heilongjiang|Manufacturingindustry|60.00|—|
|Chongqing|Chongqing|Manufacturingindustry|—|40.00|
|Chuzhou,Anhui|Chuzhou,Anhui|Manufacturingindustry|78.00|—|
|Chuzhou,Anhui|Chuzhou,Anhui|Manufacturingindustry|—|100.00|
|Dongguan,Guangdong|Dongguan,Guangdong|Manufacturingindustry|75.00|25.00|
|Dongguan,Guangdong|Dongguan,Guangdong|Manufacturingindustry|—|100.00|
|Boluo,Guangdong|Boluo,Guangdong|Manufacturingindustry|—|100.00|
|Boluo,Guangdong|Boluo,Guangdong|Manufacturingindustry|—|100.00|
|HongKong,China|HongKong,China|InternationalTrading|100.00|—|
|HongKong,China|HongKong,China|Investmentholding|—|100.00|
|HongKong,China|HongKong,China|InternationalTrading|—|100.00|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Frankfurt,Germany,Europe|Frankfurt,Germany,Europe|InternationalTrading|100.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Insuranceagents(non-bankfinance)|100.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Softwaredevelopment|100.00|—|
|Kunshan,Jiangsu|Kunshan,Jiangsu|Realestate|100.00|—|
|Chuzhou,Anhui|Chuzhou,Anhui|Manufacturingindustry|100.00|—|
|Indonesia|Indonesia|InternationalTrading|—|51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Logistics|100.00|—|
|Beijing|Beijing|Saleofhomeappliance|100.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|60.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|—|60.00|
|Xiamen,Fujian|Xiamen,Fujian|Commerce|—|69.23|
|Tianjin|Tianjin|Advertisement|—|70.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Realestate|70.00|—|
|HongKong,China|HongKong,China|Internationaltrading|—|61.00|
|Chuzhou,Anhui|Chuzhou,Anhui|E-commerce|80.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Informationservice|100.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commerce|81.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commerce|51.00|—|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|HongKong|HongKong|InternationalTrade|—|51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commerce|60.00|—|
|Haikou,Hainan|Haikou,Hainan|Networkplatformdevelopment|60.00|—|
|Chuzhou,Anhui|Chuzhou,Anhui|Scienceandtechnologyindustry|100.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|SoftwareandITindustry|51.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Retailindustry|51.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Retailindustry|51.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Capitalmarketsservice|100.00|—|
|Chuzhou,Anhui|Chuzhou,Anhui|Wholesalebusiness|—|78.00|
|Haikou,Hainan|Haikou,Hainan|Commercialservice|—|51.00|
|TianjinpilotFTZ|TianjinpilotFTZ|Leasingindustry|—|100.00|
|Yantai,Shandong|Yantai,Shandong|Commercialservice|—|51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Capitalmarketsservice|—|100.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Wholesalebusiness|—|51.00|

Notes:①The Company holds40.00% 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% to80% 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
KonkaGroupCo.,Ltd. AnnualReport2017 theconsolidated financial statement.
②Anhui Tongchuang is a limited company jointly invested and established by the Company and Chuzhou Tongchuang Construction Investment Co., Ltd. (hereinafter referred to as Tongchuang Investment) with registration capital of RMB270 million. According to contract 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 at2% of actual capital invested bytheGroup annually.
The Company was transferred the whole equity of Tongchuang Investment in RMB30 million in the Reporting Period. In addition, Tongchuang Investment agreed to give up the fixed investment gains at2% of actual capital invested by the Group after the negotiation amongthethree parties.
(2)Significant Non-wholly-owned Subsidiary
||||
|-|-|-|
|Shareholdingproportionofminorityshareholder|Theprofitsandlossesarbitratetotheminorityshareholders|Declaringdividendsdistributetominorityshareholder|
|22.00|5,173,721.78|—|
|49.00|9,182,036.52|—|
|49.00|651,106.04|672,569.18|

KonkaGroupCo.,Ltd. AnnualReport2017
(3)TheMain Financial Information ofSignificant notWholly Owned Subsidiary
Closingbalance
Name
||||||
|-|-|-|-|-|
|Currentassets|Non-currentassets|Totalassets|Currentliabilities|Non-currentliability|
|1,743,305,524.22|234,515,077.28|1,977,820,601.50|1,589,905,412.55|13,198,499.65|
|1,162,693,203.78|129,592.90|1,162,822,796.68|1,134,435,779.93|—|
|657,600,708.10|2,163,391.35|659,764,099.45|604,838,553.65|—|

 (Continued)
Openingbalance
Name
||||||
|-|-|-|-|-|
|Currentassets|Non-currentassets|Totalassets|Currentliabilities|Non-currentliability|
|882,686,223.79|237,235,477.46|1,119,921,701.25|758,810,489.87|9,378,492.06|
|309,960,189.87|—|309,960,189.87|298,943,521.93|—|
|415,460,985.44|1,976,121.55|417,437,106.99|391,209,614.58|—|

||||||||
|-|-|-|-|-|-|-|
|ReportingPeriod||||Sameperiodoflastyear|||
|Operationrevenue|Netprofit|Totalcomprehensiveincome|Operatingcashflow|Operationrevenue|Netprofit|Totalcomprehensiveincome|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||||
|-|-|-|-|-|-|-|
|ReportingPeriod||||Sameperiodoflastyear|||
|4,991,235,459.14|22,983,969.98|22,983,969.98|389,981,063.27|6,179,232,216.41|64,421,804.56|64,421,804.56|
|5,535,614,456.54|18,722,147.92|17,353,646.69|25,288,584.51|203,273,194.95|582,782.78|991,502.17|
|1,049,372,932.78|2,045,387.49|2,045,387.49|54,024,456.06|863,408,156.37|4,387,613.93|4,387,613.93|

KonkaGroupCo.,Ltd. AnnualReport2017 (4) No Significant Restrictions of Using theEnterprise’s Group Assets and Paying off theEnterprise’s Group Debt
(5) No Financial Support or Other Supports Provided to Structural Entities Incorporated into theScopeofConsolidated Financial Statements
2. Transactions Caused Changes of the Owners' Equities Share in Subsidiaries, but the SubsidiariesAre StillunderControl
(1)Description ofchanges ofOwners' equitiesshare in subsidiaries
① Information on the fact that the subsidiary of the Company's subsidiary– Kaikai Shijie introduces other shareholders, resulting in a decline in the shareholding ratio without losing control
On Jul. 24, 2017, according to the capital increase agreement signed among the Company, Jiarong Investment (Shenzhen) Partnership (limited partnership), Shanghai Kaiyun Culture Communication Co., Ltd. and Shanghai Bund Investment Consulting Co., Ltd., the among of registered capitals of Open Horizon Company was increased to RMB 31,372,549.00 from RMB 20,000,000.00. The additional registered capitals were subscribed by Shanghai Kaiyun Culture Communication Co., Ltd. and Shanghai Bund Investment Consulting Co., Ltd. The company and Jiarong Investment (Shenzhen) Partnership (limited partnership) voluntarily relinquish the preemptive right to the corresponding new registered capital. After completing the capital increase, the Company held51.00% of Open Horizon Company. The Company stillhas thecontrolling rights.
② Information on the fact that the Company disposes40.00% shares of YILIFANG Company withoutlosing control
The Company signed the equity transfer agreement with Shenzhen Yiyou Technology Co., Ltd. on May 25, 2017. The Company transferred40% equity of YILIFANG Company to Shenzhen Yiyou Technology Co., Ltd. at the price of RMB 8 million. After completing the above transfer, the Company holds60.00% of YILIFANG Company. The Company still has thecontrolling rights.
(2) TheTransaction’s Influence on the Equity of Minority Shareholders and the Owner's EquityAttributabletotheParent Company
||
|-|
|KaikaiShijie|
|24,012,409.44|
|—|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|KaikaiShijie|
|24,012,409.44|
|16,661,605.06|
|7,350,804.38|
|7,350,804.38|
|—|
|—|

 3.Equity inAssociated Enterprise
(1)SignificantAssociated Enterprise
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shanghai|Shanghai|Productionandsaleofplasticmould|39.00|—|
|Shenzhen|Shenzhen|Productionandsaleoflightemittingdiode|—|42.79|
|Shenzhen|Shenzhen|Manufacturingindustryincomputer,communicationandotherelectronicequipment|20.00|—|
|Dongguan|Dongguan|Manufacturingindustryincomputer,communicationandotherelectronicequipment|22.4513|—|
|Kunshan|Kunshan|Manufacturingindustryincomputer,|49.00|—|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|Mainoperating|Registration|Natureofbusiness|Holdingpercentage(%)|
|place|place|communicationandotherelectronicequipment||

 (2)Main Financial Information ofSignificantAssociated Enterprise
Closingbalance/ReportingPeriod
|||||
|-|-|-|-|
|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|ShenzhenKonkaPrecisionMouldManufacturingCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|GuangdongChutianDragonSmartCardCo.,Ltd.|
|277,102,107.32|317,214,657.83|529,254,428.27|1,275,973,644.95|
|102,675,515.63|77,139,577.86|8,909,487.50|520,507,991.35|
|342,856,720.05|229,756,861.75|81,833,013.73|265,717,459.13|
|619,958,827.37|546,971,519.58|611,087,442.00|1,541,691,104.08|
|164,142,536.68|283,150,937.49|102,411,669.34|610,280,220.79|
|58,156,470.99|21,263,925.10|5,130,458.50|14,700,720.45|
|222,299,007.67|304,414,862.59|107,542,127.84|624,980,941.24|
|193,225,048.13|9,879,883.26|—|9,178,745.28|
|204,434,771.57|232,676,773.73|503,545,314.16|907,531,417.56|
|79,729,560.91|99,562,391.48|100,709,062.83|203,752,601.15|

KonkaGroupCo.,Ltd. AnnualReport2017 Closingbalance/ReportingPeriod
|||||
|-|-|-|-|
|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|ShenzhenKonkaPrecisionMouldManufacturingCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|GuangdongChutianDragonSmartCardCo.,Ltd.|
|—|—|109,570,069.72|413,461,970.35|
|—|—|—|—|
|—|—|—|—|
|79,729,560.91|99,562,391.48|210,279,132.55|617,214,571.50|
|—|—|—|—|
|510,907,923.27|437,458,462.41|782,641,588.11|927,468,144.67|
|11,748,541.28|6,320,383.30|23,563,857.52|8,182,245.66|
|3,287,206.08|-2,377,582.97|6,679,871.51|12,858,203.25|
|-846,400.27|15,492,439.99|39,929,305.04|91,253,269.69|

KonkaGroupCo.,Ltd. AnnualReport2017 Closingbalance/ReportingPeriod
|||||
|-|-|-|-|
|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|ShenzhenKonkaPrecisionMouldManufacturingCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|GuangdongChutianDragonSmartCardCo.,Ltd.|
|—|—|—|—|
|-2,440,477.18|—|—|—|
|-3,286,877.45|15,492,439.99|39,929,305.04|91,253,269.69|
|—|—|—|—|

(Continued)
Openingbalance/sameperiodoflastyear
|||||
|-|-|-|-|
|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|ShenzhenKonkaPrecisionMouldManufacturingCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|GuangdongChutianDragonSmartCardCo.,Ltd.|
|361,468,348.74|337,520,215.29|—|—|
|356,832,999.34|223,021,820.71|—|—|
|718,301,348.08|560,542,036.00|—|—|
|254,144,707.10|323,883,050.63|—|—|
|71,618,268.97|15,731,811.09|—|—|

KonkaGroupCo.,Ltd. AnnualReport2017 Openingbalance/sameperiodoflastyear
|||||
|-|-|-|-|
|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|ShenzhenKonkaPrecisionMouldManufacturingCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|GuangdongChutianDragonSmartCardCo.,Ltd.|
|325,762,976.07|339,614,861.72|—|—|
|172,560,267.62|36,506,895.12|—|—|
|219,978,104.39|184,420,279.16|—|—|
|85,791,460.71|85,405,031.28|—|—|
|—|—|—|—|
|—|—|—|—|
|—|—|—|—|
|85,791,460.71|85,405,031.28|—|—|
|—|—|—|—|
|474,548,859.80|424,417,240.90|—|—|
|27,916,818.85|10,615,545.45|—|—|
|—|—|—|—|

KonkaGroupCo.,Ltd. AnnualReport2017 Openingbalance/sameperiodoflastyear
|||||
|-|-|-|-|
|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|ShenzhenKonkaPrecisionMouldManufacturingCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|GuangdongChutianDragonSmartCardCo.,Ltd.|
|27,916,818.85|10,615,545.45|—|—|
|—|—|—|—|

(4)Summary Financial Information ofInsignificant JointVentureorAssociated Enterprise
||
|-|
|Closingbalance/ReportingPeriod|
|107,494,754.44|
|-2,258,909.83|
|-863,874.55|
|-3,122,784.38|

 IX.TheRiskRelated Financial Instruments
The Company's main financial instruments include money funds, notes receivable, interest receivable, other receivables, available-for-sale financial assets, other current assets, short-term loans, other accounts payable, interest payable, long-term loans, etc. Details of the various financial instruments are shown in the relevant notes toAnnotation VI. Risks related to these financial instruments, and risk management policies the Company has adopted to reduce these risks are described as follows. The Company management manages and monitors the risk exposure in order to ensure the above risks to be controlled in a limited scope.
The Company use sensitivity analysis technology to analyze the reasonable of risk variables,
influence of probable changes to the current profits andStockholders’ equity. Because rarely
KonkaGroupCo.,Ltd. AnnualReport2017 any risk variables change in isolation, and the correlation between variables for the eventual impact of the change of a risk variables will have a significant effect, thus, the aforesaid content was processing under the assumption of the change of each variable was conducted independently.
(I)Risk Management Objectives andPolicies
The goals of Company engaged in the risk management is to achieve the proper balance between the risks and benefits, reduced the negative impact to the Company operating performance risk to a minimum, maximized the profits of shareholders and other equity investors. Based on the risk management goal, the basic strategy of the Company's risk management is determine and analyze the various risks faced by the Company, set up the bottom line of risk and conducted appropriate risk management, and timely supervised various risks in areliable way and controlled the risk withintherange oflimit.
1.MarketRisk
(1)Foreign Exchange Risk
Foreign exchange risk is referred to the risk incurred due to loss of changes 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 and HKD, except the procurement, sales and financing by US dollars for several subsidiaries such as the Company, Hong Kong Konka, Konka HouseholdAppliances International Trading Co., Ltd., Chain Kingdom (Shenzhen) Co., Ltd. and Europe Konka which settled by USD for purchase and sale, the other main businesses of the Company and the subsidiaries were settled by RMB. Until 31 Dec. 2017, refer to Note. VI. Foreign Currency Monetary Items for details of foreign currency monetary items, and the foreign exchange risks produced by the assets and liabilities balance may affect thebusiness performance of theCompany.
The Company timely paid attention to the influence of change of the exchange rate to the Company's foreign exchange risk, which required 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.
SensitivityAnalysis to Foreign Exchange Risk
Assumption of sensitivity analysis to foreign exchange risk: All hedges of net investment in overseas operations and cash flow hedges are highly effective. On the basis of the above assumption, and with other variables unchanged, the pre-tax impact of reasonable changes in
KonkaGroupCo.,Ltd. AnnualReport2017 exchange rates onthecurrent profit orlossandshareholders’ equity is as follows:
||
|-|
|Variationofexchangerate|
|Up1.00%againstRMB|
|Down1.00%againstRMB|

 (2)Interest RateRisk-Cash FlowChange Risk
Cash flow change risk caused by financial instruments due to interest rate change is related to bank loans. 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.
The risk of change in cash flow of financial instruments due to the change of interest rate of the Company is mainly related to the borrowing of banks.As of Dec. 31, 2017, the long-term and short-term loanshad atotal balance ofRMB7,094,472,037.35.
TheSensitivity analysis to interest rate risk was based onthefollow assumption:
●
Market interest rates change may affect the interest income or expense of variable rate financial instruments;
Based on the above assumptions, if other variables remain the same, the pre-tax impacts of possible reasonable interest rate changes on the profits and losses of the Current Period and theshareholders' equities are as follows:
||
|-|
|Changesininterestrate|
|Up1.00%|
|Down1.00%|

(3)Other price risk
The investment held by the Company classified as available-for-sale financial assets and
tradable financial assets, the financial assets measured at fair value with the changes recorded
into the current gains and losses, and the financial liabilities measured at fair value with
KonkaGroupCo.,Ltd. AnnualReport2017 changes recorded into the current gains and losses shall be accounted at fair value on the balance sheet date. The management of the Company believed the market price risk facing those investment activities was acceptable. For details of equity investment in listed companies held by the Company, please refer to Note VI-11. Available-for-sale Financial Assets.
2.Creditrisk
On 31 Dec. 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, and the biggest risk exposurewillchange along with thechange of futurefair 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 themanagement’s believe that 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. The management of the Company monitored the use ofbank’s loans and guaranteed the observance of the borrowing agreements.
The Company took thebank’s loans as the main financing channel. The retained amount of loans of the Company by the end of Dec. 31, 2017 was presented in Note XIV. Other Significant Events-7 indetail.
(II)Offsetbetween FinancialAssets andFinancialLiabilities
The recognized financial assets under the executable general off-set agreement or similar agreement at theend oftheReporting Period were listed as follows:
Item Amountatperiod-end
KonkaGroupCo.,Ltd. AnnualReport2017
|||
|-|-|
|Totalconfirmedfinancialassets(RMB’0,000)|Amountoffsetofconfirmedfinancialliabilities(RMB’0,000)|
|1,386,028.43|1,386,028.43|
|602,342.17|602,342.17|

X.TheDisclosureof theFairValue
1.ClosingFairValueofAssets andLiabilities Calculated by FairValue
Closingfairvalue
||||
|-|-|-|
|Fairvaluemeasurementitemsatlevel1|Fairvaluemeasurementitemsatlevel2|Fairvaluemeasurementitemsatlevel3|
|296,799.53|—|—|
|—|—|—|
|296,799.53|—|—|
|—|—|—|
|—|—|—|
|—|—|—|
|—|—|—|
|296,799.53|—|—|
|47,482,470.50|—|—|
|47,482,470.50|—|—|
|47,482,470.50|—|—|
|—|—|—|
|—|—|—|

KonkaGroupCo.,Ltd. AnnualReport2017 2. Market Price Recognition Basis for Consistent and Inconsistent Fair Value MeasurementItems 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 orprofits
XI. Related Partyand RelatedTransaction
1.Information Related to theParentCompany
|||||
|-|-|-|-|
|Registrationplace|Natureofbusiness|Registeredcapital|ProportionofshareheldbyparentcompanyagainsttheCompany(%)|
|Shenzhen|Tourism,realestate,electronicsindustry|RMB12billion|30.30|

Note: the final control party of the Company is State-owned Assets Supervision and AdministrationCommission
2.Subsidiaries ofthe Company
Referto NoteVIII-1. Equity inSubsidiaries
3.Information ontheAssociated Enterprises of theCompany
Refer to Note VIII-3. Equity in Associated Enterprise for details. Our transactions with affiliated parties and the introductions of other joint ventures and associated enterprises with balance in thesetransactions in theearlier stageare as shown below:
Nameofjointventureorassociatedenterprise Relationshipwithus
ShenzhenKonkaInformationNetworkCo.,Ltd. associatedenterprise
ShenzhenKonkaIntelligentElectricalApparatusCo.,Ltd. associatedenterprise
ShenzhenKonkaPrecisionMouldManufactoryCo.,Ltd. associatedenterprise
BeijingKonkaTechnologyCo.,Ltd. associatedenterprise
ShenzhenZhongbingKonkaTechnologyCo.,Ltd. associatedenterprise
ShanghaiKonkaGreenLightingTechnologyCo.,Ltd. associatedenterprise
KunshanKonkaElectronicCo.,Ltd. associatedenterprise
ZhuhaiJinsuPlasticCo.,Ltd. associatedenterprise
ShenzhenRefondOptoelectronicCo.,Ltd.. formerassociatedenterprise
4.Information onOtherRelated Parties oftheCompany
Name Relationship
KonkaGroupCo.,Ltd. AnnualReport2017 GuoguangEasternNetwork(Beijing)Co.,Ltd. Shareholderoftheassociatedenterprise
ShenzhenShangyongtongInvestmentDevelopmentCo.,
Minorityshareholderofsubsidiary
Ltd.
GuoguangRuilian(Shenzhen)InternetTechnologyCo.,
Associatedenterpriseofthesubsidiary
Ltd.
ChangrongMediaCo.,Ltd. Minorityshareholderofsubsidiaryasthefinalcontroller Controlledbythefinalcontrollerofminorityshareholderof JiangxiYoushiXinrongCultureCommunicationCo.,Ltd.
subsidiary
ShenzhenZhonglianDatongSupplyChainManagement Controlledbythefinalcontrollerofminorityshareholderof andConsultingCo.,Ltd subsidiary
5.Listof Related-partyTransactions
(1) Information on Acquisition of Goods and Reception of Labor Service (Unit: Ten ThousandYuan)
①Information onacquisition ofgoods and reception oflabor service
|||
|-|-|
|Content|ReportingPeriod|
|Materialpurchase|284,465,554.74|
|Purchase of materials andcommodity|219,855,232.07|
|Commoditypurchase|162,997,919.05|
|Purchase of materials andservices|77,699,708.46|
|Advertisingagency|19,811,320.75|
|Materialpurchase|15,492,478.63|
|Materialpurchase|4,137,056.47|
|Consultancy|3,784,772.66|
|Commoditypurchase|551,481.65|
|Commoditypurchase|326,074.94|
|Materialpurchase|—|
|Commoditypurchase|—|
|Advertisingagency|—|
|Content|ReportingPeriod|

KonkaGroupCo.,Ltd. AnnualReport2017②Information of sales ofgoods and provision of laborservice
|||
|-|-|
|Content|ReportingPeriod|
|Materialsales|260,670,330.28|
|Salesofmaterialsandprovidingservice|61,695,634.89|
|Commoditysales,providingservice|25,425,675.14|
|Providingservice|18,956,689.52|
|Commoditysales|3,100,030.29|
|materialsales,providingservice|2,568,447.15|
|Commoditysales|940,650.14|
|Providingservice|648,888.41|
|Providingservice|62,966.96|
|Commoditysales,|20,150.77|
|Purchasematerial|—|
|Advertisingfee|—|

 (2)Information ofRelated Lease
TheCompany was lessee:
|||
|-|-|
|Categoryofleasedassets|Theleasefeeconfirmedinthisyear|
|Commercial residentialbuildingandofficebuilding|601,969.48|

(3)Inter-bank Lending ofCapital ofRelated Parties
||||
|-|-|-|
|Lendingamount|Startingdate|Expirydate|
|1,600,000,000.00|2016-4-15|2017-11-29|
|900,000,000.00|2016-6-21|2017-11-29|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Lendingamount|Startingdate|Expirydate|
|900,000,000.00|2016-10-17|2017-11-30|
|300,000,000.00|2016-12-14|2017-11-30|
|660,000,000.00|2017-9-12|2017-11-30|
|1,540,000,000.00|2017-9-14|2017-11-28|

Note:Theinterest confirmed with OCTGroup Co., Ltd. isRMB156,908,200.34.
(4)Related-party Guarantee
TheCompany was guarantee
||||||
|-|-|-|-|-|
|Currency|Amountguaranteed(RMB10,000)|Actualamount(RMB10,000)|Startingdate|Expirydate|
|CNY|6,000.00|5,808.00|2017-10-24|2018-10-24|
|CNY|2,000.00|—|2017-11-6|2018-11-6|
|CNY|2,000.00|540.67|2017-7-20|2018-7-20|
|CNY|50,000.00|20,938.17|2017-10-17|2018-10-16|
|CNY|20,000.00|20,000.00|2017-10-24|2018-9-27|
|USD|1,000.00|1,000.00|2017-4-24|2018-4-23|
|USD|2,000.00|2,000.00|2017-5-22|2018-5-18|
|USD|1,000.00|1,000.00|2017-6-12|2018-6-11|
|USD|1,100.00|1,100.00|2017-8-28|2018-8-27|
|USD|500.00|500.00|2017-9-27|2018-9-27|
|USD|3,500.00|3,500.00|2017-10-13|2018-10-13|

The Company is the obligor
KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|Currency|Amountguaranteed(RMB10,000)|Startingdate|Expirydate|
|USD|2,000.00|2017-8-21|2018-12-31|
|USD|3,500.00|2016-11-11|2018-10-17|
|USD|1,000.00|2017-3-6|2018-12-31|
|USD|1,000.00|2017-4-24|2018-12-31|
|USD|1,000.00|2017-5-11|2018-12-31|
|USD|500.00|2017-6-21|2018-6-20|
|USD|500.00|2017-7-3|2018-7-2|
|USD|500.00|2017-7-24|2018-7-24|
|USD|500.00|2017-8-9|2018-8-8|
|USD|2,000.00|2017-9-6|2018-9-5|
|USD|96.50|—|—|
|RMB|480.00|2015-04-13|—|
|RMB|2,000.00|2017-04-05|—|

Note:① TheCompany’s subsidiary-Kangdian Trading provided a loan of USD20 million for Chain Kingdom (Shenzhen) Co., Ltd. The individual shareholders of Chain Kingdom (Shenzhen) Co., Ltd.Wu Guosong (holding25% of shares) and XiaoYongsong (holding24% of shares) provided an equity pledge guarantee jointly taking a total shares of49% they held as thepledgeas well as the mortgageguarantee pledged bypersonal properties.
②TheCompany’s subsidiary Hong Kong Konka provided a short-term loan of USD105 million with one-year period. The individual shareholders of Chain Kingdom Co., Ltd.Wu
Guosong (holding25% of shares) and Xiao Yongsong (holding24% of shares) provided an
equity pledge guarantee jointly taking a total shares of49% they held as the pledge as well as
themortgageguarantee pledged bypersonal properties.
KonkaGroupCo.,Ltd. AnnualReport2017③The individual shareholders of Chain Kingdom (Shenzhen) Co., Ltd.Wu Guosong (holding25% of shares) and Xiao Yongsong (holding24% of shares) provided a guarantee for theCompany’s prepayment of USD0.965 million.
④ Konka Group provided a credit guarantee of RMB20,000,000.00 for its controlling subsidiary- Konka E-display with the period from July 20, 2017 to July 20, 2018. The businesses covered the opening of L/C, bill acceptance and obtainingbanks’ financing loans, etc. The minority shareholder-Shenzhen Yi Capital Investment Partnership (Limited Partnership) provided a40% of counter guarantee to the amount as well as the equity pledge guaranteetakingthe49% ofshares itheld of KonkaE-display as thepledge.
⑤ The Company provided an entrust loan of RMB20 million for the joint-stock company-Hunan Vary Tech Co., Ltd. Hunan Vary Tech Packing Co., Ltd. provided a joint and several guarantee for the principal and interests of the said entrust loan as well as the mortgageguarantee pledged by4,650shares of HunanVaryTech Co.,Ltd. itheld.
(5)Rewards for theKey Management Personnel
||
|-|
|ReportingPeriod|
|RMB12.924 million|

6.Receivablesand Payables ofRelated Parties
(1)Receivables
||||
|-|-|-|
|Closingbalance|||
|Bookbalance|Baddebtprovision|Bookbalance|
|340,827,332.77|6,816,546.66|—|
|50,237,204.89|1,586,224.62|22,708,250.40|
|13,685,968.41|614,448.23|21,434,916.08|
|12,597,677.70|398,014.48|1,078,291.30|
|889,327.11|17,786.54|61,566,084.52|
|2,479.62|49.59|—|
|—|—|7,463,614.12|

KonkaGroupCo.,Ltd. AnnualReport2017
||||
|-|-|-|
|Closingbalance|||
|Bookbalance|Baddebtprovision|Bookbalance|
|—|—|6,236,403.32|
|—|—|16,006,373.88|
|418,239,990.50|9,433,070.12|136,493,933.62|
|20,000,000.00|—|3,273,998.29|
|657,263.10|—|—|
|20,657,263.10|—|3,273,998.29|
|20,335,596.53|8,752,805.29|20,562,436.22|
|5,600.00|112.00|—|
|4,448.00|2,224.00|4,448.00|
|—|—|17,940.73|
|—|—|22,260,000.00|
|20,345,644.53|8,755,141.29|42,844,824.95|

 Notes: Chongqing Konka Automobile Electronics Co., Ltd. has withdrawn single bad-debt provisionsin full amount, thus was listed as net amount.
(2)Payables
||
|-|
|Closingbalance|
|37,592,153.20|
|31,386,862.99|
|23,738,766.66|
|17,018,441.87|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Closingbalance|
|9,543,100.00|
|1,686,317.71|
|358,929.03|
|326,074.94|
|181,072.00|
|—|
|—|
|121,831,718.40|
|55,513,548.64|
|9,341,980.07|
|2,348,210.23|
|1,000,000.00|
|—|
|—|
|68,203,738.94|
|15,416,818.63|
|7,105,969.56|
|151,922.19|
|38,133.55|
|9,390.72|
|—|
|—|
|—|
|22,722,234.65|
|2,369,781.35|
|1,070,875.91|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Closingbalance|
|590,000.00|
|224,428.80|
|101,885.00|
|100,000.00|
|79,533.29|
|10,000.00|
|3,338.38|
|—|
|—|
|4,549,842.73|
|5,834,416.68|
|5,834,416.68|

 XII. Commitments andContingency
1.SignificantCommitments
(1)Capital Commitment
||
|-|
|Closingbalance|
|—|
|247,552,974.60|
|—|
|247,552,974.60|

 (2)Operating Lease Commitments
As of the balance sheet date, the irrevocable operating lease commitments that the Company
signed were as followed:
Item Closingbalance Openingbalance
KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|19,362,845.58|
|10,257,149.32|
|4,199,375.82|
|2,570,971.55|
|36,390,342.27|

 (3)Other Commitments
As ofDec. 31,2017,theCompany had nosignificant commitmentto disclose.
2.Contingency
①On November 2015, the Company and its Subsidiary E-display signed the Intention Agreement of Share Transfer with Guangdong Sunwill Precising Plastic Co., Ltd. (hereinafter referred to as “Sunwill”), where the Company planned to transfer60% equity of E-display held by the Company to Sunwill. According to the Agreement and listing announcement, Sunwill should raise the paddle, pay the deposit, and sign the formal agreement. If Sunwill breaks the agreement, it should compensate the Company for the losses (such as listing fees of second party, estimated income for listing, and etc). After signing the agreement, the Company did a series of preparatory work before the share transfer according to the agreement, including entrusting CPAs to audit, and Appraisal Company to evaluate. On January 2016, the Company put60% equity of E-display held by the Company up for sale on Shanghai United Assets and Equity Exchange according to the agreement, but Sunwilldidn’t delist it when the listing expired. Then, the Company sent notice to Sunwill to urge it to delist, but Sunwill definitely replied to give up the delisting. The Company and E-display filed a law suit toPeople’s Court of Nanshan District, Shenzhen forthe default ofSunwill onMay 2016.
According to the paper of civil judgment (2016) Yue 0305 Minchu No. 6241 ofPeople’s Court of Nanshan District, Shenzhen, Guangdong Province, the Intention Agreement of Share Transfer signed by the Company, E-display and Sunwill released on March 16, 2016; Sunwill compensated the Company for the direct losses of RMB150,880.00, and compensated E-display for the direct losses of RMB27,576.60, and other claims of the Company and E-display were rejected. After first-instance judgment, the Company was dissatisfied with the result and appealed to Intermediate People’s Court of Shenzhen, Guangdong Province.According to the paper of civil judgment (2017)Yue 03 Minzhong No.
5299 of Intermediate People’ s Court of Shenzhen, Guangdong Province, the original
conviction was upheld except the fourth civil judgment “other claims of the Company and
KonkaGroupCo.,Ltd. AnnualReport2017 E-display were rejected” of civil judgment (2016) Yue 0305 Minchu No. 6241 ofPeople’s Court of Nanshan District, Shenzhen on February 7, 2018, and Sunwill should compensate theCompany forlosses in acquirableinterests RMB7.2 million.
② Due to the problems of quality and construction delay in the settlement of intelligent engineering project between the Company and Shenzhen GNG Co., Ltd, theydidn’t agree on the related deductions. On September 28, 2017, Shenzhen GNG Co., Ltd filed a law suit toPeople’s Court of Nanshan District, Shenzhen for the payment in project arrears in the Construction Contract of KonkaR&D Building Intelligent Engineering, which required the Company to pay RMB2,770,487.13 for the project arrears and RMB340,761.69 for the interests of the project arrears. Up to the issuance date of this Report,People’s Court of Nanshan District, Shenzhenhasn’t gavejudgment.
③Due to the dispute in rent lease contract among theCompany’s subsidiary-Mudanjiang Appliances, Heilongjiang Jinri Optoelectronics Technology Co., Ltd. and Jinyue Group Co., Ltd., the People's Court of Aimin District, Mudanjiang City, Helongjiang Province made the main civil judgment (2016) Hei 1004 Minchu No. 604 on August 25, 2017. The Judgment was as follows: The defendants Heilongjiang Jinri Optoelectronics Technology Co., Ltd. and Jinyue Group Co., Ltd. should jointly pay the plaintiff-Mudanjiang Appliances a total of RMB3,656,910.82 in occupancy fees, rent, and interest. As of the issue date of this report, it has not yet been implemented completedly.
There was a dispute among theCompany’s subsidiary-Mudanjiang Appliances, Mudanjiang Wangjiangmian Restaurant Management Co., Ltd., Liu Lixia (the actual controller of Mudanjiang Wangjiangmian Restaurant Management Co., Ltd.), Heilongjiang Jinri Optoelectronics Technology Co., Ltd., and Jinyue Group Co., Ltd over the compensation of RMB 4.2 million for the death and losses of Mudanjiang Wangjiangmian Restaurant Management Co., Ltd. Mudanjiang Appliances believed that it should not be held liable for natural disasters, and the RMB4.2 million paid by Mudanjiang Appliances is the advance payment which should be regarded as the accounts paid on the behalf of Mudanjiang Wangjiangmian Restaurant Management Co., Ltd. and Liu Lixia. As of the issue date of this report, the People's Court of Dongan District of Mudanjiang City, Heilongjiang Province had notmade ajudgment yet.
There was a dispute among theCompany’s subsidiary- Mudanjiang Appliances, Zhang Zhiqiang (the plaintiff) and Jinyue Group Co., Ltd. over the loan of RMB6.5 million. The amount was actually generated from the intention acquisition by Jinyue Goup Co., Ltd. of stocks held by the Company and Mudanjiang State-owned Assets Investment Holdings Co.,
KonkaGroupCo.,Ltd. AnnualReport2017 Ltd. due to staff relocation. The main judgments of the (2016) Hei 1004 Minchu No. 223 Civil Judgment issued by thePeople’s Court ofAimin District, Mudajiang City, Helongjiang Province on November 29, 2017 were as follows: the Company and the Municipal State-owned Assets Investment Holding Co., Ltd. should pay the plaintiff-Zhang Zhiqiang RMB765,993.95 and the interest of RMB115,576.77; the subsidiary- MudanjiangAppliances should assume joint and several liquidation liabilities for the above amount; and other claims of Zhang Zhiqiang were rejected.At present, the case is in the second instance, the court has notyet been opened.
(2) Possible Liabilities Formed for Providing Debt Guarantee for Other Institutions and Their Financial Impacts
①The company signed the guarantee contract (No. 17czA0017-a-XCYZBZD2017) with Chuzhou Branch of China Citic Bank on Oct. 24, 2017, in which the Company provided credit guarantee of RMB 60 million toAnhui Tongchuang International Trade Co., Ltd. from Oct. 24, 2017 to Oct. 24, 2018. The credit line is mainly used to open and accept the letter of credit ofAnhui Tongchuang International Trade Co., Ltd. and obtain the financing credit and other daily businesses from the bank. The guarantee amount has been used RMB58,080,000.00byDec. 31,2017.
②The company signed the guarantee contract (No. 07301KB20178088) with Shenzhen Branch of Bank of Ningbo on Jul. 1, 2016, providing credit guarantee of RMB20 million to KonkaYishijie Co., Ltd. from Jul. 20, 2017 to Jul. 20, 2018.The credit line is mainly used to open and accept the letter of credit of KonkaYishijie Co., Ltd. and obtain the financing credit and other daily businesses from the bank. The guarantee amount has used RMB 5,406,651.68 by Dec. 31, 2017. The minority shareholder of Konka Yishijie Co., Ltd. -- Shenzhen Konka Yiziben Investment Partnership Co.,Ltd. provides40% ofcounter guarantee totheamount.③ The Company signed Financing Amount Agreement (BC2017102300000749-1) and applied to Shenzhen Branch of Pudong Development Bank for comprehensive credit line of RMB500,000,000.00 on Nov. 14, 2017 used to help Konka Factoring to obtain the financing loan from the bank. The guarantee period is from Oct. 17, 2017 to Oct. 16, 2018.The amount has been used RMB209,381,734.73byDec. 31,2017.
④ The Company signed Guarantee Contract of Maximum Amount (HXSFZLEBZ 20171023002001) and applied to Shenzhen Branch of Guangdong Huaxing Bank for comprehensive credit line of RMB200,000,000.00 on Oct. 23, 2017 used to help Konka Factoring to obtain the financing loan from the bank. The guarantee period is from Oct. 24, 2017toSep. 27,2018.Theamount has been used RMB200,000,000.00 byDec. 31,2017.
KonkaGroupCo.,Ltd. AnnualReport2017⑤The Company applied to Shenzhen OCT Branch ofABC for issuing the letter of guarantee of USD10,000,000.00 on April 24, 2017 for Hong Kong Konka Co., Ltd. to obtain the financing loan from the bank. The guarantee period isApril 24, 2017 toApril 23, 2018. Hong Kong Konka Co., Ltd. has obtained the loan of USD10,000,000.00 from Bank of China (Hong Kong) Co.,Ltd. byDec. 31,2017.
⑥The Company applied to Shenzhen OCT Branch ofABC for issuing the letter of guarantee of USD20,000,000.00 on May 22, 2017 for Hong Kong Konka Co., Ltd. to obtain the financing loan from the bank. The guarantee period is May 22, 2017 to May 18, 2018. Hong Kong Konka Co., Ltd. has obtained the loan of USD20,000,000.00 from Bank of China (Hong Kong) Co.,Ltd. byDec. 31,2017.
⑦The Company applied to Shenzhen OCT Branch ofABC for issuing the letter of guarantee of USD10,000,000.00 on June 12, 2017 for Hong Kong Konka Co., Ltd. to obtain the financing loan from the bank. The guarantee period is June 12, 2017 to June 11, 2018. Hong Kong Konka Co., Ltd. has obtained the loan of USD10,000,000.00 from Bank of China (Hong Kong) Co.,Ltd. byDec. 31,2017.
⑧The Company applied to Shenzhen OCT Branch ofABC for issuing the letter of guarantee of USD11,000,000.00 on Aug. 28, 2017 for Hong Kong Konka Co., Ltd. to obtain the financing loan from the bank. The guarantee period isAug. 28, 2017 toAug. 27, 2018. Hong Kong Konka Co., Ltd. has obtained the loan of USD11,000,000.0 from Bank of China (Hong Kong)Co.,Ltd. byDec. 31,2017.
⑨ The Company signed Issuing Guarantee/SLC Agreement (No. 008SJTZEZ2017) and applied to Shenzhen Branch of CMBC for issuing the letter of guarantee of USD5,000,000.00 on Sep. 25, 2017 for Hong Kong Konka Co., Ltd. to obtain the financing loan from the bank. The guarantee period is Sep. 27, 2017 to Sep. 27, 2018. Hong Kong Konka Co., Ltd. has obtained the loan of USD5,000,000.00 from Bank of China (Hong Kong) Co.,Ltd. byDec. 31,2017.
⑩ The Company signed Issuing Guarantee/SLC Agreement (No. 008SJTZEZ2017) and applied to Shenzhen Branch of CMBC for issuing the letter of guarantee of USD35,000,000.00 on Sep. 25, 2017 for Hong Kong Konka Co., Ltd. to obtain the financing loan from the bank. The guarantee period is Aug. 28, 2017 to Aug. 27, 2018. Hong Kong Konka Co., Ltd. has obtained the loan of USD35,000,000.00 from Bank of China (Hong Kong)Co.,Ltd. byDec. 31,2017.
(3)Other Contingent Liabilities andTheir Financial Impacts
As ofDec. 31,2017,theCompany had nosignificant contingencies to disclose.
KonkaGroupCo.,Ltd. AnnualReport2017 XIII. EventsafterBalanceSheetDate
1.ProfitDistribution
The 40th Meeting of the 8th Board of Directors was held by the Company on March 29, 2018, on which the Profit Distribution Plan in 2017 that distributed RMB390,087,156.10 of cash dividend was approved. The profit distribution plan should be submitted to the 2017Annual Meeting ofShareholders for review and approval.
2.ListingTransferof QingsongVentureInvestment Fund
On Feb. 11, 2018, the Company listed and transferred6.00% shares of Shenzhen Qianhai Qingsong Venture Investment Fund held by Konka Factoring Business (Shenzhen) Co., Ltd. in China Beijing Equity Exchange. According to the rules of state-owned property right transaction and the result of bidding, the Company's wholly-owned subsidiary Konka Factoring Business (Shenzhen) Co., Ltd. signed Property Right Transaction Contract with Suzhou Anze Fuxing Venture Capital Center (limited partnership) and Gongqingcheng Xiaoyingtao Investment Management Partnership (limited partnership).
XIV.OtherSignificantEvents
1.OursubsidiaryMudanjiangKonkaCo.,Ltd.isunderliquidation.
2.OursubsidiaryChongqingQingjiaElectronicCo.,Ltd.isunderliquidation.
3. In order to promote the renovation and intelligent manufacturing upgrading of Dongguan Konka, the Company held the 34th Meeting of the 8th Board of Directors to discuss this issue and finally decided to set up a wholly-owned subsidiary with RMB0.25 billion of registered capitalinDongguanbyitselforitswholly-ownedsubsidiary.
4. According to the Company's development strategy, Konka Group determined to invest in RMB 1 billion to set up Konka Multimedia Co., Ltd. (Tentative name) as the operating entity of multimedia business in Konka Group (except for the manufacturing business) on the 37th session meeting of the 8th Board of Directors; Konka Group Multimedia Co., Ltd. established the domestic sales company and foreign sales company for the internal sales and foreign sales ofmultimediaproductsofKonkaGrouprespectivvely.
5.In ordertoacceleratetherealizationofthestrategicgoalof"investmentandcontrolfinance", promote the establishment of financial leasing company, Konka Group determined to increase capital RMB 170 million to Beijing Konka Company on the 37th session meeting of the 8th BoardofDirectorsofKonkaGroup.
6. Due to business development needs, Konka Group determined to increase the capitals of RMB 280 million and 90 million to Communication Technology Company and Anhui
KonkaGroupCo.,Ltd. AnnualReport2017 Tongchuang Company on the 39th session meeting of the 8th Board of Directors of Konka Group.
7.Otherimportantmattersthathaveanimpactoninvestors'decisions
① The Company signed Konka- Dongfang Cangshan Project List- Fund Trust To Trust Contract with Bohai International Trust Co., Ltd. on Aug.17, 2017. The two parties made an agreement that the funds are used to invest in the supply chain financial products, the debt financing of the upstream and downstream enterprises of Konka Group, as well as the debt investment or equity investment projects that the executive partners consider necessary. Trust funds are to be delivered in installments for no more than 9 months, and the net return on investment is9%/year. The incomes are distributed at regular intervals. The amount invested wasRMB979millionasofDec.31,2017.
XV.Notes ofMain Items intheFinancialStatements oftheParentCompany
1.Accounts Receivable
(1)Accounts Receivable ClassifiedbyCategory
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion（%）|Amount|Proportion（%）|
|—|—|—|—|
|2,082,823,910.69|42.10|197,902,700.06|9.50|
|2,827,688,037.26|57.16|—|—|
|4,910,511,947.95|99.26|197,902,700.06|4.03|
|36,839,946.40|0.74|17,295,202.04|46.95|

KonkaGroupCo.,Ltd. AnnualReport2017 Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion（%）|Amount|Proportion（%）|
|4,947,351,894.35|100.00|215,197,902.10|4.35|

(Continued)
Openingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion（%）|Amount|Proportion（%）|
|—|—|—|—|
|1,457,500,829.10|43.04|204,973,829.53|14.06|
|1,859,065,149.92|54.89|—|—|
|3,316,565,979.02|97.93|204,973,829.53|6.18|
|70,065,431.01|2.07|36,128,381.15|51.56|
|3,386,631,410.03|100|241,102,210.68|7.12|

①In the groups, accounts receivable adopting aging analysis method to accrue bad debt provision:
Closingbalance
Aging
|||
|-|-|
|Accountsreceivable|Baddebtprovision|
|1,902,630,629.98|38,052,612.60|
|20,827,051.25|1,041,352.56|

KonkaGroupCo.,Ltd. AnnualReport2017 Closingbalance
Aging
|||
|-|-|
|Accountsreceivable|Baddebtprovision|
|263,411.99|52,682.40|
|158,435.94|79,217.97|
|535,094.00|267,547.00|
|158,409,287.53|158,409,287.53|
|2,082,823,910.69|197,902,700.06|

②In thegroups,accounts receivable adopting other methodsto withdraw baddebt provision: Closingbalance
Nameofthegroup
|||
|-|-|
|Accountreceivable|Baddebtprovision|
|2,827,688,037.26|—|
|2,827,688,037.26|—|

③ The top 5 accounts receivable with insignificant single amount for which bad debt provisionseparately accrued
Closingbalance
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion|
|4,580,000.00|1,374,000.00|30.00|
|2,138,825.00|748,588.75|35.00|
|1,733,797.99|1,733,797.99|100.00|
|1,708,054.00|546,577.28|32.00|
|1,430,290.00|230,290.00|16.10|

KonkaGroupCo.,Ltd. AnnualReport2017 Closingbalance
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion|
|11,590,966.99|4,633,254.02||

(2)BadDebt ProvisionWithdrawal, Reversed orRecovered intheReporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB13,985,309.75; the amount of the reversed or collected part during the Reporting Period was of RMB36,469,559.87; the amount of the write-off during the Reporting Period was of RMB3,420,058.46.
(3)Top FiveofAccount Receivable ofClosingBalance Collected byArrears Party
The total amount of top five of account receivable of closing balance collected by arrears party was RMB3,388,257,587.39,68.49% of total closing balance of account receivable, the relevantclosing balance ofbad debt provision withdrawn was RMB67,765,151.75.
2.OtherAccounts Receivable
(1)OtherAccount ReceivableClassified byCategory
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion|Amount|Withdrawalproportion|
|173,061,959.33|3.84|162,467,164.97|93.88|
||-|||
|121,170,320.79|2.69|24,301,146.90|20.06|
|4,205,636,078.64|93.41|—|—|
|4,326,806,399.43|96.10|24,301,146.90|0.56|

KonkaGroupCo.,Ltd. AnnualReport2017 Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion|Amount|Withdrawalproportion|
|2,516,181.05|0.06|733,893.68|29.17|
|4,502,384,539.81|100.00|187,502,205.55|4.16|

(Continued)
Openingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion|Amount|Withdrawalproportion|
|173,061,959.33|9.04|163,333,204.34|94.38|
|126,005,125.10|6.58|22,703,322.23|18.02|
|1,607,493,721.89|84.01|—|—|
|1,733,498,846.99|90.59|22,703,322.23|1.31|
|7,101,401.90|0.37|2,131,520.57|30.02|
|1,913,662,208.22|100.00|188,168,047.14|9.83|

① Other receivable with single significant amount and withdrawal bad debt provision
KonkaGroupCo.,Ltd. AnnualReport2017 separately at end of period
Closingbalance
||||
|-|-|-|
|Otheraccountsreceivable|Baddebtprovision|Withdrawalproportion(%)|
|141,549,150.00|141,549,150.00|100.00|
|18,115,952.51|7,521,158.15|41.52|
|13,396,856.82|13,396,856.82|100.00|
|173,061,959.33|162,467,164.97|—|

②In the groups, other accounts receivable adopting aging analysis method to withdraw bad debt provision:
Closingbalance
Aging
|||
|-|-|
|Otheraccountsreceivable|Baddebtprovision|
|63,559,556.66|1,271,191.11|
|18,163,604.42|908,180.17|
|15,601,435.62|3,120,287.17|
|9,043,012.07|4,521,506.04|
|645,459.21|322,729.60|
|14,157,252.81|14,157,252.81|
|121,170,320.79|24,301,146.90|

③In thegroups,accounts receivable adopting other methodsto withdraw baddebt provision: Closingbalance
|||
|-|-|
|Otheraccountsreceivable|Baddebtprovision|
|4,205,636,078.64|—|
|4,205,636,078.64|—|

(2)BadDebt ProvisionWithdrawal, Reversed orRecovered intheReporting Period
KonkaGroupCo.,Ltd. AnnualReport2017 The amount of bad debt provision was RMB3,875,411.49, the amount of reversed or recovered bad debt provision in theReporting Period RMB4,541,253.08.
(3) Top 5 of the Closing Balance of the Other Accounts Receivable Collected according to theArrears Party
|||||
|-|-|-|-|
|Nature|Closingbalance|Aging|ProportionofthetotalClosingbalanceoftheaccountsreceivable(%)|
|Loan|1,662,700,000.00|Within1year|36.93|
|Loan|898,964,353.40|Within1year|19.97|
|Loan|340,000,000.00|Within1year|7.55|
|Loan|307,715,642.99|Within1year|6.83|
|Loan|280,000,000.00|Within1year|6.22|
|—|3,489,379,996.39|—|77.50|

KonkaGroupCo.,Ltd. AnnualReport2017
3.Long-term Equity Investment
(1)Category ofLong-term EquityInvestment
||||||
|-|-|-|-|-|
|Closingbalance|||||
|Bookbalance|Depreciationreserves|Bookvalue|Bookbalance|Depreciationreserves|
|1,592,732,345.01|46,732,484.69|1,545,999,860.32|2,217,782,345.01|46,732,484.69|
|1,108,233,473.19|5,158,909.06|1,103,074,564.13|218,079,058.61|5,158,909.06|
|2,700,965,818.20|51,891,393.75|2,649,074,424.45|2,435,861,403.62|51,891,393.75|

(2)Investment tothe Subsidiary
||||||
|-|-|-|-|-|
|Openingbalance|Increase|Decrease|Closingbalance|WithdrawnimpairmentprovisionintheReportingPeriod|
|36,000,000.00|—|—|36,000,000.00|—|
|122,780,937.98|—|—|122,780,937.98|—|
|274,783,988.91|—|—|274,783,988.91|—|
|781,828.61|—|—|781,828.61|—|
|261,482.50|—|—|261,482.50|—|
|350,000,000.00|—|350,000,000.00|—|—|
|4,655,000.00|—|—|4,655,000.00|—|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Openingbalance|Increase|Decrease|Closingbalance|WithdrawnimpairmentprovisionintheReportingPeriod|
|10,732,485.69|—|—|10,732,485.69|—|
|90,000,000.00|—|—|90,000,000.00|—|
|—|—|—|—|—|
|31,500,000.00|—|—|31,500,000.00|—|
|48,750,000.00|—|—|48,750,000.00|—|
|350,000,000.00|—|—|350,000,000.00|—|
|69,702,612.22|180,000,000.00|—|249,702,612.22|—|
|10,000,000.00|190,000,000.00|—|200,000,000.00|—|
|10,000,000.00|—|—|10,000,000.00|—|
|30,000,000.00|—|—|30,000,000.00|—|
|10,000,000.00|—|—|10,000,000.00|—|
|7,200,000.00|—|—|7,200,000.00|—|
|16,000,000.00|—|—|16,000,000.00|—|
|700,000,000.00|—|700,000,000.00|—|—|
|5,832,000.00|—|—|5,832,000.00|—|

KonkaGroupCo.,Ltd. AnnualReport2017
||||||
|-|-|-|-|-|
|Openingbalance|Increase|Decrease|Closingbalance|WithdrawnimpairmentprovisionintheReportingPeriod|
|10,200,000.00|—|—|10,200,000.00|—|
|20,000,000.00|—|8,000,000.00|12,000,000.00|—|
|8,602,009.10|—|—|8,602,009.10|—|
|—|40,000,000.00|—|40,000,000.00|—|
|—|2,550,000.00|—|2,550,000.00|—|
|—|5,100,000.00|—|5,100,000.00|—|
|—|15,300,000.00|—|15,300,000.00|—|
|—|—|—|—|—|
|2,217,782,345.01|432,950,000.00|1,058,000,000.00|1,592,732,345.01|—|

(3)Investment toAssociated Enterprises
|||||||
|-|-|-|-|-|-|
|Openingbalance|Openingbalanceofimpairmentprovision|||||
|||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|85,791,460.70|—|—|—|-3,787,726.30|-2,274,173.49|
|7,438,647.50|—|—|—|2,005,513.47|—|
|6,213,908.63|—|—|—|-1,286,319.16|—|
|86,545,225.20|—|—|—|-3,631,202.02|—|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||||
|-|-|-|-|-|-|
|Openingbalance|Openingbalanceofimpairmentprovision|||||
|||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|19,164,691.78|—|—|—|-4,847,290.98|—|
|12,925,124.80|5,158,909.06|—|—|6,035,773.87|—|
|—|—|171,799,598.00|—|5,681,317.52|—|
|—|—|588,000,000.00|—|7,014,858.00|—|
|—|—|2,000,000.00|—|-476,833.76|—|
|—|—|—|—|-9,553,536.24|—|
|—|—|—|—|-22,084.12|—|
|218,079,058.61|5,158,909.06|761,799,598.00|-|-2,867,529.72|-2,274,173.49|

 (Continued)
|||||
|-|-|-|-|
|Increase/decrease|||Closingbalance|
|Cashbonusorprofitsannouncedtoissue|Withdrawalofimpairmentprovision|Other||
|—|—|—|79,729,560.91|
|—|—|—|9,444,160.97|
|—|—|—|4,927,589.47|

KonkaGroupCo.,Ltd. AnnualReport2017
|||||
|-|-|-|-|
|Increase/decrease|||Closingbalance|
|Cashbonusorprofitsannouncedtoissue|Withdrawalofimpairmentprovision|Other||
|—|—|-82,914,023.18|—|
|—|—|—|14,317,400.80|
|—|—|—|18,960,898.67|
|—|—|—|210,279,132.55|
|—|—|—|617,214,571.50|
|—|—|—|1,523,166.24|
|—|—|161,412,612.44|151,859,076.20|
|—|—|—|-22,084.12|
|—|—|78,498,589.26|1,108,233,473.19|

KonkaGroupCo.,Ltd. AnnualReport2017 4.Revenues andOperating Costs
(1) Revenues and Operating Costs
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|10,023,055,904.38|8,361,637,131.46|9,485,317,569.09|
|2,079,422,147.13|1,892,456,474.58|4,486,773,135.24|
|12,102,478,051.51|10,254,093,606.04|13,972,090,704.33|

 (2) Main Operations (Classified byIndustry)
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|10,023,055,904.38|8,361,637,131.46|9,485,317,569.09|
|10,023,055,904.38|8,361,637,131.46|9,485,317,569.09|

 (3) Main Operations (Classified byProduct)
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|9,630,486,646.20|8,000,876,316.98|9,094,696,771.30|
|257,783,425.06|227,475,631.58|316,518,116.07|
|134,785,833.12|133,285,182.90|74,102,681.72|
|10,023,055,904.38|8,361,637,131.46|9,485,317,569.09|

 (4) Main Operations (Classified byArea)
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|8,939,568,192.59|7,308,147,553.78|8,224,659,030.55|
|1,083,487,711.79|1,053,489,577.68|1,260,658,538.54|
|10,023,055,904.38|8,361,637,131.46|9,485,317,569.09|

(5)TheRevenue of Sales from theTop FiveCustomers
KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Mainoperationrevenue|
|3,106,309,264.79|
|3,056,753,554.52|

 5.Investment Income
||
|-|
|ReportingPeriod|
|35,923,429.08|
|-2,867,529.72|
|6,325,965,280.00|
|-15,756,828.90|
|—|
|—|
|4,310,000.00|
|—|
|7,909,919.36|
|70,030,692.89|
|-5,802,480.51|
|6,419,712,482.20|

 XVI. Supplementary Materials
1.Non-recurring Gains and Losses during thisReporting Period
||
|-|
|Amount|
|6,470,215,253.82|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Amount|
|-|
|178,372,701.34|
|—|
|—|
|—|
|70,070,846.08|
|—|
|—|
|—|
|—|
|—|
|—|
|-63,931,276.14|
|—|
|808,737.50|
|—|

KonkaGroupCo.,Ltd. AnnualReport2017
||
|-|
|Amount|
|—|
|—|
|41,449,367.77|
|87,640,651.87|
|6,784,626,282.24|
|1,603,618,658.08|
|26,697,522.62|
|5,154,310,101.54|

Notes:thenumber“+” amongthenon-currentgainsandlossesitemsreferstoprofitsandrevenues,while “-”referredtolossesor 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) .
||
|-|
|Theamountofleasedassetsinvolved|
|56,782,742.21|

2.Return onEquity (ROE) andEarningsperShare(EPS)
|||
|-|-|
|WeightedaverageROE(%)||
||EPS-basic|
|63.26%|2.1001|
|-1.22%|-0.0404|

KonkaGroupCo.,Ltd. AnnualReport2017 Part XII Documents Available for Reference
I. The financial statements with the signatures and seals of theCompany’s legal representative, Chief Financial Officerand head ofthefinancial department;
II. The original copy of the IndependentAuditor’s Report with the seal of the CPA firm and the signatures&seals ofthecertified publicaccountants;
III. The originals of all theCompany’s documents and announcements disclosed to the public via newspapers designated bythe CSRCin theReporting Period; and
IV. Otherrelevant materials.
TheBoard of Directors Konka Group Co., Ltd. March 30,2018