2014AnnualReportofKonkaGroupCo.,Ltd.
KONKA GROUP CO., LTD.
2014 ANNUAL REPORT
2015-07
April 2015
2014AnnualReportofKonkaGroupCo.,Ltd.
Section I. Important Reminders, Catalogue& Explanation
The Board of Directors, the Supervisory Committee, directors, supervisors and senior management staff of Konka Group Co., Ltd. (hereinafter referred to as “the Company”) warrant that this report is factual, accurate and complete without any false record, misleading statement or material omission. And they shallbe jointlyand severally liablefor that.
All directors attended theboard session for reviewing thisreport.
TheCompany’s profit distribution preplan upon review and approval of this board session: Based on the total 1,203,972,704 shares of the Company, a cash dividend of RMB 0.10 (tax included) will be distributed for every 10 shares held by shareholders. No bonus shares will be granted and no capital reservewill beturned intoshare capital.
Chen Yuehua, company principal, Huang Zhiqiang, chief of the accounting work, and Xu Youshan, chief of the accounting organ (chief of accounting), hereby confirm that the Financial Report enclosed in this report is factual, accurate andcomplete.
The future plans and some other forward-looking statements involved in this report shall not be considered as virtual promises of the Company to investors. And investors are kindly reminded to pay attention topossiblerisks.
This report is prepared in both Chinese and English. Should there be any understanding discrepancy between thetwo versions, theChineseversion shallprevail.
Catalogue
2014AnnualReportofKonkaGroupCo.,Ltd.
Explanation
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|Term|Refersto|Definition|
|Company,theCompany,theGroup|Refersto|KonkaGroupCo.,Ltd.|
|TelecommunicationTechnology|Refersto|ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd.|
|Video & Communication SystemsEngineering|Refersto|Shenzhen Konka Video & Communication Systems Engineering Co.,Ltd.|
|PrecisionMold|Refersto|ShenzhenKonkaPrecisionMoldManufacturingCo.,Ltd.|
|KonkaHouseholdAppliances|Refersto|ShenzhenKonkaHouseholdAppliancesCo.,Ltd.|
|InformationNetwork|Refersto|ShenzhenKonkaInformationNetworkCo.,Ltd.|
|PlasticProducts|Refersto|ShenzhenKonkaPlasticProductsCo.,Ltd.|
|ElectricalAppliances|Refersto|ShenzhenKonkaElectricalAppliancesCo.,Ltd.|
|FittingsTechnology|Refersto|ShenzhenKonkaElectronicFittingsTechnologyCo.,Ltd.|
|MudanjiangAppliances|Refersto|MudanjiangArcticOceanAppliancesCo.,Ltd.|
|ShanxiKonka|Refersto|ShanxiKonkaElectronicCo.,Ltd.|
|ChongqingKonka|Refersto|ChongqingKonkaElectronicCo.,Ltd.|
|ChongqingElectronic|Refersto|ChongqingKonkaAutomotiveElectronicCo.,Ltd.|
|ChongqingQingjia|Refersto|ChongqingQingjiaElectronicsCo.,Ltd.|
|AnhuiKonka|Refersto|AnhuiKonkaElectronicCo.,Ltd.|
|AnhuiHouseholdAppliances|Refersto|AnhuiKonkaHouseholdAppliancesCo.,Ltd.|
|ChangshuKonka|Refersto|ChangshuKonkaElectronicCo.,Ltd.|
|KunshanKonka|Refersto|KunshanKonkaElectronicCo.,Ltd.|
|DongguanKonka|Refersto|DongguanKonkaElectronicCo.,Ltd.|

2014AnnualReportofKonkaGroupCo.,Ltd.
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|-|-|-|
|DongguanPacking|Refersto|DongguanKonkaPackingMaterialsCo.,Ltd.|
|DongguanMouldPlastic|Refersto|DongguanKonkaMouldPlasticCo.,Ltd.|
|BoluoKonka|Refersto|BoluoKonkaPCBCo.,Ltd.|
|BoluoPrecision|Refersto|BoluoKonkaPrecisionTechnologyCo.,Ltd.|
|NanhaiInstitute|Refersto|Konka(Nanhai)DevelopmentCenter|
|HongKongKonka|Refersto|HongKongKonkaCo.,Ltd.|
|KonkaHouseholdAppliancesInvestment|Refersto|KonkaHouseholdAppliancesInvestment&DevelopmentCo.,Ltd.|
|Konka Household Appliances InternationalTrading|Refersto|KonkaHouseholdAppliancesInternationalTradingCo.,Ltd.|
|KonkaAmerica|Refersto|KonkaAmerica,Inc.|
|KonkaEurope|Refersto|Konka(Europe)Co.,Ltd.|
|Xutongda|Refersto|DongguanXutongdaMouldPlasticCo.,Ltd.|
|KonkaOptoelectronic|Refersto|ShenzhenKonkaOptoelectronicTechnologyCo.,Ltd.|
|Wankaida|Refersto|ShenzhenWankaidaScienceandTechnologyCo.,Ltd.|
|KunshanKangsheng|Refersto|KunshanKangshengInvestmentDevelopmentCo.,Ltd.|
|AnhuiTongchuang|Refersto|AnhuiKonkaTongchuangHouseholdAppliancesCo.,Ltd.|
|IndonesiaKonka|Refersto|IndonesiaKonkaElectronicsCo.,Ltd.|
|ShushidaLogistics|Refersto|ShenzhenShushidaLogisticsServiceCo.,Ltd.|
|BeijingKonkaElectronic|Refersto|BeijingKonkaElectronicCo.,Ltd.|
|KunshanJielunte|Refersto|KunshanJielunteMouldPlasticCo.,Ltd.|
|WuhanJielunte|Refersto|WuhanJielunteMouldPlasticCo.,Ltd.|
|ChuzhouJielunte|Refersto|ChuzhouJielunteMouldPlasticCo.,Ltd.|
|KonkaE-display|Refersto|ShenzhenKonkaE-displayCo.,Ltd.|
|XiamenDalong|Refer|XiamenDalongTradingCo.,Ltd.|

2014AnnualReportofKonkaGroupCo.,Ltd.
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|-|-|-|
||sto||
|TianjinKangrong|Refersto|TianjinYoushiKangrongCultureCommunicationCo.,Ltd.|
|CSRC|Refersto|ChinaSecuritiesRegulationCommission|
|SZSE|Refersto|ShenzhenStockExchange|
|CSRCShenzhenBureau|Refersto|ShenzhenBureauofChinaSecuritiesRegulationCommission|
|Yuan, Ten thousand Yuan, One HundredMillionYuan|Refersto|RMBYuan,RMBTenthousand,RMBOneHundredMillionYuan|

2014AnnualReportofKonkaGroupCo.,Ltd.
Reminder of Major Risks
I. Securities Times, Ta Kung Pao (HK) and www.cninfo.com.cn have been designated by the Company as the media for information disclosure. All information of the Company shall be subject to what is disclosed by the Company on the said media. And Investors are kindly reminded to pay attention to possibleinvestment risks.
II. The Company has described in detail possible risks in this report. Please refer to the possible risks and countermeasures in the discussion and analysis on theCompany’s future development in “Section IV.Report of theBoard of Directors”.
2014AnnualReportofKonkaGroupCo.,Ltd.
Section II. Company Profile
I.Company information
|||||
|-|-|-|-|
|Stockabbreviation|SKJA,SKJB|Stockcode|000016,200016|
|Stockabbreviationafterchange(ifany)|Naught|||
|Stockexchangelistedwith|ShenzhenStockExchange|||
|ChinesenameoftheCompany|康佳集团股份有限公司|||
|Abbr.oftheChinesenameoftheCompany|康佳集团|||
|EnglishnameoftheCompany(ifany)|KONKAGROUPCO.,LTD|||
|Abbr.oftheEnglishnameoftheCompany(ifany)|KONKAGROUP|||
|LegalrepresentativeoftheCompany|ChenYuehua|||
|Registeredaddress|Overseas Chinese Town, Nanshan District, Shenzhen, Guangdong Province,China|||
|Postalcodefortheregisteredaddress|518053|||
|Officeaddress|Overseas Chinese Town, Nanshan District, Shenzhen, Guangdong Province,China|||
|Postalcodefortheofficeaddress|518053|||
|InternetwebsiteoftheCompany|www.konka.com|||
|Emailaddress|szkonka@konka.com|||

II. Contact us
||||
|-|-|-|
||CompanySecretary|SecuritiesAffairsRepresentative|
|Name|XiaoQing|WuYongjun|
|Contactaddress|Secretariat to the Board of Directors, Konka GroupCo., Ltd., Overseas Chinese Town, NanshanDistrict,Shenzhen,GuangdongProvince,China|Secretariat to the Board of Directors, Konka Group Co.,Ltd., Overseas Chinese Town, Nanshan District,Shenzhen,GuangdongProvince,China|
|Tel.|0755-26608866|0755-26608866|
|Fax|0755-26600082|0755-26600082|
|E-mail|szkonka@konka.com|szkonka@konka.com|

III. Aboutinformation disclosure andwhere thisreport isplaced
|||
|-|-|
|NewspapersdesignatedbytheCompanyforinformationdisclosure|SecuritiesTimes,etc.|
|InternetwebsitedesignatedbyCSRCfordisclosingthisreport|www.cninfo.com.cn|

2014AnnualReportofKonkaGroupCo.,Ltd.
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|-|-|
|Wherethisreportisplaced|SecretariattotheBoardofDirectors,KonkaGroupCo.,Ltd.,OverseasChineseTown,NanshanDistrict,Shenzhen,GuangdongProvince,China|

 IV.Changeof theregistered information
|||||||
|-|-|-|-|-|-|
||Registrationdate|Registrationplace|BusinesslicenseNo.|Registrationcodeoftaxation|Organizationalcode|
|Initialregistration|1Oct.1980|Shahe, Shenzhen,GuangdongProvince,China|GSQYS No.190806|440301618815578|-|
|Attheendofthereportingperiod|29Dec.2011|Overseas ChineseTown, NanshanDistrict,Shenzhen,GuangdongProvince,China|440301501121863|440301618815578|618815578|
|Changesofthemainbusinesssincelisting(ifany)||Unchanged||||
|Changesofthecontrollingshareholder(ifany)||Unchanged||||

V. Otherinformation
The CPAsfirm hired bytheCompany:
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|-|-|
|Name|RuihuaCertifiedPublicAccountants|
|Officeaddress|5-11F,WestTower,ChinaOverseasPropertyPlaza,BuildingNo.7,CompoundNo.8,XibinheRoad,YongdingMen,DongchengDistrict,Beijing,P.R.C.|
|Signingaccountants|LiuJianhua,TangQimei|

Sponsorengaged bytheCompany to conduct sustained supervision during thereporting period□Applicable√ Inapplicable
Financial consultantengaged bytheCompany toconduct sustained supervision during thereporting period
□Applicable√ Inapplicable
2014AnnualReportofKonkaGroupCo.,Ltd.
Section III. Accounting& Business Highlights
I.Major accounting data andfinancialindicators
Does the Company adjust retrospectively or restate accounting data of previous years due to change ofthe accounting policyor correction ofany accounting error?
√Yes□No
||||||||
|-|-|-|-|-|-|-|
||2014|2013||Increaseordecreaseofthisyearoverlastyear(%)|2012||
|||Beforeadjustment|Afteradjustment|Afteradjustment|Beforeadjustment|Afteradjustment|
|Operatingrevenue(RMBYuan)|19,423,488,994.07|20,006,736,878.82|20,006,736,878.82|-2.92%|18,337,861,657.29|18,337,861,657.29|
|Net profitattributabletoshareholders of theCompany(RMBYuan)|52,623,527.86|45,163,004.10|45,820,496.73|14.85%|45,829,234.02|50,342,194.51|
|Net profitattributabletoshareholders of theCompanyafterextraordinary gains andlosses(RMBYuan)|-475,481,381.45|-69,014,834.39|-68,357,341.76|-595.58%|-54,088,758.02|-49,575,797.53|
|Net cashflows fromoperating|-640,385,182.05|2,283,254,200.89|2,283,254,200.89|-128.05%|-359,244,914.58|-359,244,914.58|

2014AnnualReportofKonkaGroupCo.,Ltd.
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|-|-|-|-|-|-|-|
|activities(RMBYuan)|||||||
|BasicEPS(RMBYuan/share)|0.0437|0.0375|0.0381|14.70%|0.0381|0.0418|
|DilutedEPS(RMBYuan/share)|0.0437|0.0375|0.0381|14.70%|0.0381|0.0418|
|WeightedaverageROE(%)|1.28%|1.11%|1.13%|0.15%|1.14%|1.25%|
||Asat31Dec.2014|Asat31Dec.2013||Increaseordecreaseofthisyear-endthanlastyear-end(%)|Asat31Dec.2012||
|||Beforeadjustment|Afteradjustment|Afteradjustment|Beforeadjustment|Afteradjustment|
|Total assets(RMBYuan)|16,779,359,276.65|15,743,284,335.49|15,744,099,307.58|6.58%|16,562,917,198.06|16,562,917,198.06|
|Net assetsattributabletoshareholders of theCompany(RMBYuan)|4,103,478,971.07|4,080,458,151.63|4,087,909,132.35|0.38%|4,043,591,538.85|4,048,104,499.34|

II. Differences between accounting data underdomestic andoverseas accounting standards 1. Differences of net profit and net assets disclosed in financial reports prepared under international andChineseaccounting standards
□Applicable√ Inapplicable
No such differences for thereporting period.
2014AnnualReportofKonkaGroupCo.,Ltd.
2. Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chineseaccounting standards
□Applicable√ Inapplicable
No such differences for thereporting period.
III. Items andamounts ofextraordinary gainsandlosses
√Applicable□ Inapplicable
Unit:RMBYuan
||||||
|-|-|-|-|-|
|Item|2014|2013|2012|Note|
|Gains/losses on the disposal ofnon-current assets (including the offsetpartoftheassetimpairmentprovisions)|587,454,101.18|61,547,807.91|6,267,350.97||
|Government grants recognized in thecurrent period, except for those acquiredin the ordinary course of business orgranted at certain quotas or amountsaccording to the government’s unifiedstandards|75,401,093.20|84,343,548.07|79,452,692.05||
|Gain/lossonnon-monetaryassetswap|||71,191.44||
|Gain/loss on entrusting others withinvestmentsorassetmanagement|12,260,439.18||||
|AssetimpairmentprovisionsduetoactsofGodsuchasnaturaldisasters||-1,041,162.02|||
|Gains and losses on change in fair valuefromtradablefinancialassetsandtradablefinancial liabilities, as well as investmentincomefromdisposaloftradablefinancialassetsandtradablefinancialliabilitiesandfinancial assets available for sales exceptfor effective hedging related with normalbusinessesoftheCompany||21,115.80|27,226,435.86||
|Non-operating income and expense otherthantheabove|16,207,940.59|8,508,013.84|4,696,935.93||
|Other gain and loss items that meet thedefinitionofanextraordinarygain/loss|-151,895.48|-1,369,748.77|||
|Less:Incometaxeffects|158,734,972.90|31,336,650.82|11,106,708.03||
|Minorityinterestseffects(aftertax)|4,331,796.46|6,495,085.52|6,689,906.18||
|Total|528,104,909.31|114,177,838.49|99,917,992.04|--|

2014AnnualReportofKonkaGroupCo.,Ltd.
Explain the reasons if the Company classifies an item as an extraordinary gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to thePublic—Extraordinary Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item
√Applicable□ Inapplicable
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|-|-|-|
|Item|Amountinvolved(RMBYuan)|Reason|
|Taxrebatesonsoftware|155,396,179.33|GovernmentgrantscloselyrelatedtotheCompany’snormaloperationandconstantlygivenatcertainquotasoramountsaccordingtothegovernment’spoliciesandstandards|

Section IV. Report of the Board of Directors
I.Overview
In 2014, we continued to follow the guidance of the value operation strategy, seized opportunities arising from the embrace with Internet, followed the two main lines of platform construction and process reform, and focused on solving bottlenecks hindering business development. Through the common efforts of all employees, we fulfilled all theoperating objectives for theyear.
As the sales volume and income of color TVs in China both decreased, our domestic sales income of color TVs also showed a certain drop, leading to a certain drop in our total sales income. For 2014, the Company achieved a sales income of RMB 19.423 billion, down2.92% from the year earlier; and net profit attributable to owners of the Company (without subsidiaries) of RMB 52.6235 million.
II. Main business analysis
1.Summary
TheCompany’s review on progress in the reporting period of development strategies and business plans previously disclosed
In 2014, facing with fierce market competitions, businesses of the Company stood up to the pressure, strived for innovation, and gained a series of achievements with business highlights as below:
(I) Officiallaunchofthestrategy ofinternet transformation
According to the requirement of “Embracing the Internet& Starting New Journey” proposed in the
year-begin by Mr. Wu Siyuan, chairman of the Board, Shenzhen Konka launched the strategy of
2014AnnualReportofKonkaGroupCo.,Ltd.
internet transformation in full swing. On 18 Mar 2014, in the conference for new product release and dealers, of which the theme is “E-dominance”, Shenzhen Konka published the“1+1” strategy, namely the E-strategy combined with E-end and E-platform, presenting the goal of building the first smart TV-Internet operation platform in China. Soon afterwards, under the framework of E-strategy, Shenzhen Konka successively released a series of new smart TV products, and made strategic cooperation with internet enterprises and video websites, such asTencent andYouku.
(II)Theprocess andinformatization construction started speeding upsharply
One of the key assignments for Shenzhen Konka in 2014 was process and informatization construction. In 2014, Shenzhen Konka set out five process transformation projects, including the project of end-to-end inventory, the project of terminal/channel competitiveness improvement (IHS project), the project of CPM operation system, the project of chasing root causes and persistently optimizing mechanism through the complete process for quality issues, and the project of visualizing KPI statements, so as to improve the business capacity and operation efficiency of Shenzhen Konka. The implementation of aforesaid projects have almost accomplished now, bringing about periodic results.
Shenzhen Konka will unswervingly carry forward the application of information systems in real work and, with concrete applications, further reform the information systems of Konka, sustainably raise the informatization level of Konka, as well as constantly optimize the operation and management process ofthe Company.
(III) Rebrandingstepped into afreshsituation
In 2014, the year when Shenzhen Konka invested the largest and made the most actions in brand building as compared with recent years, Shenzhen Konka launched the new VI system, published new brand idea of “Delicacy Products and Wonderful Life” and new brand-advertising commercials, carried out the spokesperson plan, invited Fan Bingbing, the entertainment star, as the brand spokesperson for Shenzhen Konka, and concurrently as the supporting spokesperson for new products of E-TV slim, spread abroad the commercials and meanwhile marketed the products, and comprehensively set upthesmart internet strategy ofShenzhen Konka.
(IV)Approvalon theproject scheme abouturbanrenewal oftheheadquarterbase
With the contribution of two years of efforts, in the SpecialShareholders’General Meeting held on 8 Dec 2014, the scheme about project development for urban renewal of the headquarter base was approved. Shenzhen Konka and the OCT group company would jointly develop the project based on the ratio of 7:3. The headquarter base would be transformed to a complex showing science and technology innovation and covering total floor area of 260,000square meters, which would not only promote the image of the Company, but also powerfully support the sustainable future development of Shenzhen Konka, as well as promote the development of science and technology industry,culture and industry, and modern service industry of Nanshan District and Shenzhen. As a result, the land
2014AnnualReportofKonkaGroupCo.,Ltd.
value will be effectively reflected, the regional and municipal service function will be improved, the territorial and municipal image will be promoted, and the overall industry structure will be optimized and upgraded,which will well benefit thesociety and business.
(V) Steady development ofmain businessesunderpressure
1.Multi-media business
In respect of internal business operation, the Company tightened up quality control and reiterated the lifeline status of quality; tightened up service and put prior emphasis on service control projects among branch companies; tightened up planning, broke through ends from front to back, and interiorized the concept of whole-chain cost control; and tightened up process reformation, and fully launched five projects, including projects of SP1, CPM, IHS, chasing root causes for quality issues, and BI statements.
In respect of external branding, the Company published E-Strategy, promoted E-TV concept, YIUI system, and E-TV slim engaged Fan Bingbing as the spokesperson, deepened the strategic cooperation withYouku,and becamethestrategic cooperator withTencent incolorTVindustry. In respect of marketing innovation, the Company opened up a new situation where the three brands, E-TV, KKTV, and Modern TV of Shenzhen Konka were put into on-line and off-line launch thoroughly.
2.Overseas sales business
On one hand, the Company tightly grasped the opportunity of World Cup held in Brazil and put full efforts into sales. On the other hand, the Company overcame negative factors, such as intense supply chain and raising cost, managed on quality and cost control internally, and expanded supply chain and client coverage externally. The Company not only successfully introduced the brand of Toshibain Brazil, butalso expanded telecom clients in India, and hithistorichigh onsales scale. 3.Mobilebusiness
The Company has accomplished the transformation from B2C to B2B mode by adjusting business models, and realized all-around linkage with clients in dimensions including resource, organization, staff, business process, quality, after-sales, and product definition. The Company reformed the traditional domestic sales channels, centralized main resources to overseas sales and operator business, and achieved rapid growth inoverseas business.
4.White householdappliancebusiness
While getting over difficulties brought by the severe downturn of the industry, the Company pushed forward basic management work in an all-round way, largely intensified basic management work, and not only obtained growth of refrigerators and washing machines in difficult situation, but also successfully marched towards the air conditioner field. The product line of refrigerators was strengthened comprehensively, reflecting on quick supplement of side-by-side combination refrigerators and four-door refrigerators, rapid growth of e-business, and the rank among top five in
2014AnnualReportofKonkaGroupCo.,Ltd.
aspect ofcore channels.
State the reasons why theCompany’s actual business performance is20% lower or higher than the earning forecast forthereporting period which has been publicly disclosed earlier
□Applicable√ Inapplicable
Changes in themain operational mode
□Applicable√ Inapplicable
2.Revenues
Notes:
As the sales volume and income of color TVs in China both decreased, our domestic sales income ofcolorTVs alsoshowed acertain drop, leading to acertain drop inour totalsales income.
Whether thephysical sales revenue oftheCompany is larger than that ofthe service
√Yes□No
Reasons for anyover-30%YoYmovement ofthedata above:
□Applicable√ Inapplicable
Major orders onhand:
□Applicable√ Inapplicable
Significant change oradjustment oftheCompany’s products orservices during thereporting period:□Applicable√ Inapplicable
Major customers:
|||
|-|-|
|Totalsalestothetop5customers(RMBYuan)|3,303,518,733.47|
|Ratioofthetotalsalestothetop5customerstotheannualtotalsales(%)|17.01%|

Information about thetop 5customers:
□Applicable√ Inapplicable
Other information about majorcustomers:
□Applicable√ Inapplicable
3.Costs
Classified byindustry:
Unit:RMBYuan
||||||||
|-|-|-|-|-|-|-|
|Industry|Item|2014||2013||YoY+/-(%)|
|||Amount|Proportioninoperatingcosts|Amount|Proportioninoperating||

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||||
|-|-|-|-|-|-|-|
||||(%)||costs(%)||
|Electronics|Rawmaterials|15,737,054,443.96|94.04%|15,793,215,821.68|94.79%|-0.75%|
|Electronics|Laborcost|668,090,268.67|3.99%|605,504,760.44|3.63%|0.36%|
|Electronics|Depreciation|64,478,575.17|0.39%|62,570,334.60|0.38%|0.01%|

Classified byproduct:
Unit:RMBYuan
||||||||
|-|-|-|-|-|-|-|
|Product|Item|2014||2013||YoY+/-(%)|
|||Amount|Proportioninoperatingcosts(%)|Amount|Proportioninoperatingcosts(%)||
|ColorTVs|ColorTVs|12,516,818,815.26|74.80%|13,072,644,058.73|78.46%|-3.66%|
|Cellphones|Cellphones|1,443,167,712.05|8.62%|1,418,629,105.82|8.51%|0.11%|
|Consumerappliances|Consumerappliances|1,106,574,443.35|6.61%|1,204,755,092.16|7.23%|-0.62%|
|Other|Other|1,403,062,317.14|8.38%|765,262,660.01|4.59%|3.79%|

Notes:
The cost structure of the main products of the Company was basically in accordance with that of 2013.
Major suppliers:
|||
|-|-|
|Totalpurchasesfromthetop5suppliers （RMBYuan）|6,394,961,376.81|
|Ratioofthetotalpurchasesfromthetop5supplierstotheannualtotalpurchases（%）|40.87%|

Information about thetop 5suppliers:
□Applicable√ Inapplicable
Other information about majorsuppliers:
□Applicable√ Inapplicable
4.Expense
5.R&D expenses
In the reporting period, the Company spent RMB 000 onR&D, up000% from 2013. 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
2014AnnualReportofKonkaGroupCo.,Ltd.
constantly carried out technical innovation and rational suggestion to increase the production efficiency,improvethecore competitiveness and continueto keep aleading position in theindustry. 6.Cash flows
Unit:RMBYuan
|||||
|-|-|-|-|
|Item|2014|2013|YoY+/-(%)|
|Subtotal of cash inflows fromoperatingactivities|18,464,400,652.40|19,995,164,215.60|-7.66%|
|Subtotal of cash outflows fromoperatingactivities|19,104,785,834.45|17,711,910,014.71|7.86%|
|Net cash flows from operatingactivities|-640,385,182.05|2,283,254,200.89|-128.05%|
|Subtotal of cash inflows frominvestingactivities|3,104,636,438.39|65,625,565.82|4,630.83%|
|Subtotal of cash outflows frominvestingactivities|3,473,214,203.50|289,680,969.24|1,098.98%|
|Net cash flows from investingactivities|-368,577,765.11|-224,055,403.42|-64.50%|
|Subtotal of cash inflows fromfinancingactivities|4,827,571,410.52|5,819,964,097.43|-17.05%|
|Subtotal of cash outflows fromfinancingactivities|3,947,765,478.96|6,956,511,999.28|-43.25%|
|Net cash flows from financingactivities|879,805,931.56|-1,136,547,901.85|177.41%|
|Net increase in cash and cashequivalents|-131,252,584.13|947,446,251.84|-113.85%|

Reasons for anyover-30%YoYmovement ofthedata above:
√Applicable□ Inapplicable
Reasons for a bigdifference between theoperating cash flows and thenet profit:
√Applicable□ Inapplicable
III. Breakdown ofmain business
Unit:RMBYuan
|||||||
|-|-|-|-|-|-|
|Operatingrevenue|Operatingcost|Grossprofitrate(%)|Increase/decreaseofoperatingrevenueoverlastyear(%)|Increase/decreaseofoperatingcostoverlastyear(%)|Increase/decreaseofgrossprofitrateoverlastyear(%)|

2014AnnualReportofKonkaGroupCo.,Ltd.
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|-|-|-|-|-|-|-|
|Classifiedbyindustry:|||||||
|Electronic|19,075,390,465.68|16,469,623,287.80|13.66%|-3.44%|0.05%|-3.01%|
|Classifiedbyproduct:|||||||
|ColorTVs|14,697,422,135.45|12,516,818,815.26|14.84%|-7.59%|-4.25%|-2.97%|
|Cellphones|1,587,898,794.07|1,443,167,712.05|9.11%|2.36%|1.73%|0.56%|
|Consumerappliances|1,277,294,037.34|1,106,574,443.35|13.37%|-6.76%|-8.15%|1.31%|
|Other|1,512,775,498.82|1,403,062,317.14|7.25%|62.88%|83.34%|-10.35%|
|Classifiedbyregion:|||||||
|China|14,362,851,294.58|11,986,596,367.77|16.54%|-8.96%|-6.41%|-2.27%|
|Othercountries|4,712,539,171.10|4,483,026,920.03|4.87%|18.44%|22.71%|-3.31%|

Where theCompany’s accounting standard of the main business data above changed during the reporting period, give the main business data of the latest year adjusted according to the accounting standard at theend ofthereporting period:
□Applicable√ Inapplicable
IV.Asset andliability analysis
1.Major changes of assetitems
Unit:RMBYuan
||||||||
|-|-|-|-|-|-|-|
||Asat31Dec.2014||Asat31Dec.2013||Proportionchange(%)|Explainanymajorchange|
||Amount|Proportionintotalassets(%)|Amount|Proportionintotalassets(%)|||
|Monetaryfunds|1,703,135,732.18|10.15%|1,843,743,089.94|11.71%|-1.56%||
|Accountsreceivable|2,259,293,207.16|13.46%|2,460,996,984.92|15.63%|-2.17%||
|Inventories|3,904,436,250.33|23.27%|3,582,669,024.26|22.76%|0.51%||
|Investingrealestate|233,349,452.80|1.39%|237,986,524.12|1.51%|-0.12%||
|Long-termequityinvestment|362,765,183.66|2.16%|436,017,471.50|2.77%|-0.61%||
|Fixedassets|1,783,695,548.92|10.63%|1,908,503,979.80|12.12%|-1.49%||

2014AnnualReportofKonkaGroupCo.,Ltd.
|||||||
|-|-|-|-|-|-|
|Constructioninprogress|159,604,884.09|0.95%|49,924,027.97|0.32%|0.63%|

2.Major changes of liability items
Unit:RMBYuan
||||||||
|-|-|-|-|-|-|-|
||2014||2013||Proportionchange(%)|Explainanymajorchange|
||Amount|Proportionintotalassets(%)|Amount|Proportionintotalassets(%)|||
|Short-termborrowings|5,145,712,436.91|30.66%|5,239,069,764.48|33.28%|-2.62%||
|Long-termborrowings|957,541,210.52|5.71%|5,000,000.00|0.03%|5.68%||

3.Assets andliabilities measured atfairvalue
√Applicable□ Inapplicable
Unit:RMBYuan
|||||||||
|-|-|-|-|-|-|-|-|
|Item|Openingamount|Gain/lossonfairvaluechangeinthereportingperiod|Cumulativefairvaluechangerecordedintoequity|Impairmentprovisionsinthereportingperiod|Amountpurchasedinthereportingperiod|Amountsoldinthereportingperiod|Closingamount|
|Financialassets||||||||
|3.Available-for-salefinancialassets|941,999.30|688,609.70|||||1,630,609.00|
|Investingrealestate||||||||
|Productivebiologicalassets||||||||

2014AnnualReportofKonkaGroupCo.,Ltd.
|||||
|-|-|-|-|
|Totaloftheabove|941,999.30|688,609.70|1,630,609.00|
|Financialliabilities||||

Did any significant change occur to the attribute of theCompany’s main asset measurement during the reporting period?
□Yes√No
4.Main assets overseas
□Applicable√ Inapplicable
V. Corecompetitiveness analysis
TheCompany’s capability inR&D, the marketing network and manufacture constitutes its competitive edges. 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 try to enhance the strength and thickness of technical innovations toincrease its overall competitiveness.
VI.Investment analysis
1.Investmentsinequitiesofexternalparties
(1)Investmentsinexternalparties
√Applicable□ Inapplicable
||||
|-|-|-|
|Investmentsinexternalparties|||
|Investmentamountin2014(RMBYuan)|Investmentamountin2013(RMBYuan)|+/-%|
|249,170,764.00|0|Inapplicable|
|Particularsaboutinvestees|||
|Nameofinvestee|Mainbusiness|ProportionoftheCompany’sinvestmentintheinvestee’stotalequityinterests(%)|

(2) Equity-holdingsin financialenterprises
□Applicable√ Inapplicable
No such cases in thereporting period.
(3) Securities investments
√Applicable□ Inapplicable
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Varietyofsecurities|Codeofsecurities|Nameofsecurities|Initialinvestmentcost(RMB|Numberofsharesheldat|Shareholdingpercentageat|Numberofsharesheldat|Shareholdingpercentageat|Closingbookvalue(RMB|Gain/lossforreporting|Accountingtitle|Sourceofstock|

2014AnnualReportofKonkaGroupCo.,Ltd.
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||Yuan)|period-begin|period-begin|period-end|period-end|Yuan)|period(RMBYuan)|||
|Stock|000002|VankeA|2,311,748.07|117,310|0.00%|117,310|0.00%|1,630,609.00|688,609.70|Available-for-salefinancialassets|Subscriptionforadditionallyissuedshares|
|Total|||2,311,748.07|117,310|--|117,310|--|1,630,609.00|688,609.70|--|--|
|Disclosuredateoftheboardannouncementonapprovalofthesecuritiesinvestment|||Inapplicable|||||||||
|Disclosuredateofthegeneralmeetingannouncementonapprovalofthesecuritiesinvestment(ifany)|||Inapplicable|||||||||

(4) Shareholdingsin otherlisted companies
□Applicable√ Inapplicable
No such cases in thereporting period.
2.Wealth management entrustment, derivative investments andentrustment loans
(1) Wealth management entrustment
□Applicable√ Inapplicable
No such cases in thereporting period.
(2) Derivative investments
□Applicable√ Inapplicable
No such cases in thereporting period.
(3) Entrustmentloans
√Applicable□ Inapplicable
Unit:RMBTenThousand
|||||||
|-|-|-|-|-|-|
|Borrower|Relatedpartyornot|Amountofloan|Interestrate|Guarantororpawn|Usageofloanbyborrower|
|Anhui Konka Tongchuang Household AppliancesCo.,Ltd.|No|33,000|6.00%|Naught|Capitalturnover|
|Kunshan Kangsheng Investment Development Co.,|No|27,000|6.00%|Naught|Capitalturnover|

2014AnnualReportofKonkaGroupCo.,Ltd.
|||||||
|-|-|-|-|-|-|
|Ltd.||||||
|Total|--|60,000|--|--|--|
|Expanded,overdueperiodorlawsuitsevents(ifany)|Inapplicable|||||
|Solutionsofexpanded,overdueperiodorlawsuitsevents(ifany)|Inapplicable|||||
|Disclosure date of the board announcementapprovingtheentrustmentloans(ifany)|Inapplicable|||||
|Disclosuredateofthegeneralmeetingannouncementapprovingtheentrustmentloans(ifany)|Inapplicable|||||

3.Use ofraised funds
□Applicable√ Inapplicable
No such cases in thereporting period.
4.Analysisto main subsidiaries andstock-participating companies
√Applicable□ Inapplicable
Particulars about main subsidiaries and stock-participating companies:
Unit:RMBYuan
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Companyname|Companyvariety|Industry|Mainproducts/services|Registeredcapital|Totalassets|Netassets|Operatingrevenues|Operatingprofit|Netprofit|
|ShenzhenRefondOptoelectronicsCo.,Ltd.|Jointstockcompany|Manufacture|ProductionandsaleofLED|RMB219,139,701.00|1,244,151,931.41|640,134,316.09|906,849,275.86|17,643,171.03|23,740,145.68|
|EnRayTekOptoelectronics(Shanghai)Co.,Ltd.|Jointstockcompany|Manufacture|ProductionandsaleofLED|USD50,000,000.00|875,265,958.44|287,232,805.86|150,182,731.09|-76,043,445.09|-30,454,225.45|
|ShenzhenKonkaTelecommunications|Subsidiary|Manufacture|Productionandsaleofmobilecommunication|RMB120,000,000.00|564,208,765.72|-199,249,037.92|1,617,195,917.82|-28,370,219.53|-13,492,187.45|

2014AnnualReportofKonkaGroupCo.,Ltd.
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Technology Co.,Ltd.|||products&saleofmultimediaproducts|||||||
|ShenzhenKonkaPrecisionMoldManufacturingCo.,Ltd.|Subsidiary|Manufacture|Productionandsaleofplasticproductsandmolds|RMB40,000,000.00|244,931,368.82|81,046,083.63|177,708,791.65|1,791,816.79|1,695,078.23|
|AnhuiKonkaElectronic Co.,Ltd.|Subsidiary|Manufacture|Productionandsaleofmultimediaproducts|RMB140,000,000.00|758,703,288.43|281,569,421.56|4,505,390,088.43|-20,153,654.73|1,528,671.19|
|KunshanKonkaElectronic Co.,Ltd.|Subsidiary|Manufacture|Productionandsaleofliquidcrystalmodulesandmultimediaproducts|RMB350,000,000.00|629,588,811.90|360,102,282.86|1,903,833,825.42|-16,178,768.00|-15,384,683.71|
|Dongguan KonkaElectronic Co.,Ltd.|Subsidiary|Manufacture|Productionandsaleofmultimediaproducts|RMB266,670,000.00|915,048,243.03|587,849,523.74|602,744,279.63|300,314,316.52|251,290,951.01|
|DongguanKonkaMouldPlasticCo.,Ltd.|Subsidiary|Manufacture|Productionandsaleofmouldandplasticproducts|RMB10,000,000.00|301,792,841.42|122,502,401.98|280,476,981.47|11,837,289.60|11,391,059.19|
|HongKongKonkaCo.,Ltd.|Subsidiary|Internationaltrade|Importandexportofelectro-mechanicalandelectronicproducts|HKD500,000.00|3,259,825,831.58|115,135,576.35|3,408,213,237.85|3,089,490.44|2,403,438.70|
|KonkaHousehol|Subsidiary|Investment|Investment|HKD500,000.00|198,025,571.05|70,612,197.33|-|-1,758,440.82|-2,048,714.69|

2014AnnualReportofKonkaGroupCo.,Ltd.
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|dAppliancesInvestment &Development Co.,Ltd.||holding||||||||
|KonkaHouseholdAppliancesInternationalTradingCo.,Ltd.|Subsidiary|Internationaltrade|Importandexportofelectronics|HKD500,000.00|5,905,558,999.85|33,779,494.85|4,528,075,110.87|2,709,290.25|2,709,290.25|
|ShenzhenWankaidaScienceandTechnology Co.,Ltd.|Subsidiary|Softwaredevelopment|Developmentandmaintenanceofsoftwaretechnology|RMB10,000,000.00|314,519,265.11|300,326,195.86|137,239,992.45|109,625,750.50|114,118,052.97|
|KunshanKangshengInvestmentDevelopment Co.,Ltd.|Subsidiary|Realestate|Development,operationandinvestmentofrealestate|RMB350,000,000.00|829,476,515.29|273,995,475.59|180,019,436.00|-26,122,765.93|-37,570,363.28|
|AnhuiKonkaTongchuangHouseholdAppliances Co.,Ltd.|Subsidiary|Manufacture|Productionandsaleofrefrigerators,washingmachinesandotherhouseholdappliances|RMB180,000,000.00|866,440,707.04|-14,302,203.73|1,290,271,925.03|-80,379,010.08|-63,699,060.68|

Explain particulars about main subsidiaries andstock-participating companies:
2014AnnualReportofKonkaGroupCo.,Ltd.
Subsidiaries acquired or disposed during thereporting period:
√Applicable□ Inapplicable
|||||
|-|-|-|-|
|Nameofsubsidiary|Purposeforacquiringordisposingthesubsidiaryinthereportingperiod|Wayofacquiringordisposingthesubsidiaryinthereportingperiod|Influenceontheoverallproductionandbusinessperformance|
|ShenzhenKonka Video&Communication SystemsEngineeringCo.,Ltd.|The sale of the equity interests in thissubsidiary was to dispose idle assets andgenerate funds inflows to increase theliquidityoffundsandimprovetheCompany’sgeneralperformance.|Transferred to OCTEnterprises, the majorityshareholderoftheCompany|Will help increase theCompany’s cash inflows andimproveitsfinancialsituation|
|ShaanxiKonka|To further clarify the positions and businessrelations among the subsidiaries and improvetheCompany’soperatingefficiencywithcolorTVs|Listed with an assets andequityexchangefortransfer|Will help increase theCompany’s cash inflows andimproveitsfinancialsituation|

5.Significantprojects invested with non-raised funds
√Applicable□ Inapplicable
Unit: RMB Ten Thousand Yuan
|||||||||
|-|-|-|-|-|-|-|-|
|Projectname|Totalplanedinvestment|Inputforthisperiod|Cumulativeactualinputasattheperiod-end|Projectprogress|Projectearnings|Disclosuredate(ifany)|Disclosureindex(ifany)|
|KunshanShuiyueZhouzhuangProject|200,000|19,005.91|77,808.00|38.90%|Thefirstphaseoftheprojecthasreachedsaleandgeneratedsomeincomes.Andthesecondphaseisnowunderconstruction.|6Jul.2010|www.cninfo.com.cn|

VII. Predict the operatingresults ofJan.-Mar. 2015
Warning of possible loss or considerableYoYchange of the accumulated net profit made during the period-begin to the end of the next reporting period according to prediction, as well as explanations onthe reasons:
□Applicable√ Inapplicable
2014AnnualReportofKonkaGroupCo.,Ltd.
VIII. Entities controlled bytheCompany forspecial purposes
□Applicable√ Inapplicable
IX.OutlookoftheCompany’s future development
Industry trendanalysisin 2015
Viewing from industrial perspective, we can see that Shenzhen Konka will face both advantages and disadvantages in 2015:
(I)Advantages:
In 2015, the market capacity of products will basically stay stable. For color TV, the market capacity in China will basically stay at around 47 million units, and for refrigerators, it will stay at around 37 million units. For color TV, the market capacity in the globe will be around 240 million units, and for smart mobile phones, it will be around 1.4 billion units. Shenzhen Konka will still be in faced witha huge market withenough capacity.
However, the product structure will change a lot. Large-screen, smart, UHD, cambered, ultrathin and ultra light TV will keep possessing larger and larger ratio in color TV products. Mobile phone will still develop with growth cycling period of each generation for around 3-6 months, and the iteration development will be faster. The structural changes will also bring structural developing opportunities.
(II) Disadvantages:
Firstly,with limited gross capacity growth in theindustry,competitionswill befurther fiercer. Secondly, the cross-industry competitions will be more intense. The secondary growth of internet TVbrands, such as LeTVand MI, will bring about more forceful impacts to theindustry.
Thirdly,theemphasis ofKorean brands to Chinamarket has been raised constantly.
Fourthly, the Chinese macro economy has stepped into the “New Normal” status of low growth and to-be-adjusted structure. The depression of related industries, for example, the real estate industry, can also bring great effect onhousehold appliance industry.
(III) Conclusion
Challenges and opportunities concurrently exist. On one hand, the improvement and transformation of structure belongs to opportunity, but on the other hand, it will be disaster if not well handled. On one hand, ferocious competitions belong to disadvantage, but on the other hand, the Company can gain large-degreedevelopment ifitcan win in thebattle.
In all, the Company should take objective review on trends, objectively stand up to challenges, seek for chances in disadvantages, and keep away risks in development.
IV.Business development ideasin 2015
(I) Coreprinciples
In the year of2015, Konka willmake itsall work byfollowing threecore principles:
2014AnnualReportofKonkaGroupCo.,Ltd.
Firstly, value management: commanding the overall situation by profit targets for profit contribution to theCompany.
Secondly, back to the essentials: improving the management by product competitiveness. Shenzhen Konka isa company toproduce products and create brands. It istheessence oftheCompany. Thirdly, coordinating the current situation in the long run: promoting the development and actions to solve the problems of product competitiveness, expense control and inventory control; making plans for thelong-term development measures, such as Internet transformation.
(II) Main missions
Shenzhen Konka will pay attention to following six aspects of the work around above three core principles:
1.Promoting theInternet transformation
It is required to response to Internet transboundary competition in short term and consolidate the survival anddevelopment in thelong term.
Firstly, it is continuously to promote the strategic transformation to be the Internet platform construction project leading ShenzhenKonka.
Secondly, users of smart television in this year should be improved significantly and the assessment index isincluded in theindicators forperformance appraisal of relevant business division.
Thirdly,intelligentizationof refrigerator should bestarted.
Fourthly, sales volume of online brand KKTV should be increased with powerful influence in the market.
2.Improving the operationcapacity andquality ofbusinesses
Firstly, to reinforce the profits. The essential indicator of business performance is profit. Shenzhen Konka would adopt theprofit norm topromotethe achievement ofscale and other health indicators. Secondly,to improvetheproduct management.
i. Product planning. Product planning is responsible by the general manager of the business, which is led and guided by thedirect leader.Planning department shallcarry out themeasures in thisyear. ii. Improvement of cost competitiveness. Compromises on costs are not made regardless of the product positioning.
iii. Technological precedence and differentiation. Technologies should be improved in this year. According to the requirements of technological precedence, products should be defined imitatively with thesupport ofplanning department.
vi. Improvement of holistic strategy operation capability. Multimedia business department should take full advantage of CPM process and information system to establish the most suitable CMP system to Konka. Comprehensive integration includes the planning, channels, promotion, services, marketing, model machine and price structure. Other businesses are for reference and learning for the completeproduct operation and management system.
2014AnnualReportofKonkaGroupCo.,Ltd.
Thirdly,toaccelerate operating speed.
The market is expanding toforce theacceleration ofShenzhen Konka.
Fourthly, to deepen channel construction. On the one hand, with the development of channel construction, mobile phone and international marketing should be deepened to development customers; channel network of multimedia businesses and white goods business should be clarified. On the other hand, channel meshing distributed by Shenzhen Konka in 2014 should be promoted, especially B2C businesses be implemented. And structure of channel should be clarified with powerful new channels and consolidated traditional channel. All channels could be adjusted according to actual situation. Moreover, channel strategies should be clear to match strategies with products.
Fifthly, to improve cost efficiency. Costs should be strictly controlled. It is the fundamental point in 2015. Cost control is not to reduce costs directly, but to analyze comprehensively, which would lower cost, keep thequality andimprovecost efficiency.
Sixthly, to promote the implementation of inventory management and control. With the tool introduced by Shenzhen Konka in 2014 for process change, all measures should be implemented with detailed targets and key times to promote the inventory efficiency and management level of Konka.
3. Consolidating, digesting and continuously promoting the process and informatization reform
Process optimization and informatization reform are two long-term tasks of the Company. The year of 2014 is the first year of large scale initiation by Shenzhen Konka. In this year, Shenzhen Konka is focused on consolidating, digesting and implementing preliminary results in 2014 and functioning all reforms. All works in practical businesses are implemented according to fixed process and system. The system should be optimized depending on actual problems. On the other hand, another task in 2015 is to connect all procedures, eliminate isolation in information system, reduce repeated information entry andimproveinformation utilizationand work efficiency.
4.Improvequality andservices
In this year,thequality and services shouldbefurther strengthened.
Firstly, great efforts are taken for strict treatment of quality problems. Close attentions are paid to product quality with iron hand.
Secondly, it is to fully implement quality management process. Quality management process is revised with latest standards all process should becarried out earnestly.
Thirdly, after-sale services are reinforced, especially to improve cost efficiency, standardize all procedures, strengthen the management, modernizethe toolsand maintainlong-term stability. 5.Promoting project construction ofheadquarterbase
Project of headquarter base represents the image and future of Shenzhen Konka. Shenzhen Konka is
2014AnnualReportofKonkaGroupCo.,Ltd.
to create the project as the new landmark of Shenzhen, which would be the model of technological innovation complex. Therefore, it is to accelerate the work process of joint venture for early delivery andoutput.
6.Otherwork
Besides above basic requirements and main missions, Shenzhen Konka should further carry out the activities of safety production, operation control, human resources, financial planning, quality construction, party-masses work and corporate culture, which would provide solid guarantee for the integral development.
X. Explanation by the Board of Directors and the Supervisory Committee about the “non-standard auditreport”issued by theCPAs firmforthereporting period
□Applicable√ Inapplicable
XI. Explain change of the accounting policy, accounting estimate and measurement methods as compared with thefinancialreporting oflastyear
√Applicable□ Inapplicable
Changes in theaccounting policies due to application ofnew accounting standards:
At the beginning of 2014, the Ministry of Finance unveiled the<Accounting Standard No. 39 for BusinessEnterprises—Fair ValueMeasurement>, the<Accounting Standard No. 30 for BusinessEnterprises—Financial Statement Presentation (Revised in2014)>, the<Accounting Standard No. 9 for BusinessEnterprises—Employees’ Compensation (Revised in2014)>, the<Accounting Standard No. 33 for BusinessEnterprises—Consolidated Financial Statements (Revised in2014)>, the<Accounting Standard No. 40 for BusinessEnterprises—JointArrangements>, the<Accounting Standard No. 2 for BusinessEnterprises—Long-term Equity Investments (Revised in2014)> and the<Accounting Standard No. 41 for BusinessEnterprises—Disclosure of Equities in OtherEntities> with Decree CK[2014] No. 6, 7, 8, 10, 11, 14 and 16, asking all enterprises adopting the accounting standards to execute these new standards from 1 Jul. 2014 and encouraging overseas listed enterprises to execute them at an earlier date. Meanwhile, the Ministry of Finance also unveiled the<Accounting Standard No. 37 for BusinessEnterprises—Financial Instrument Presentation (Revised in2014)> (“the Financial Instrument Presentation Standard” for short) with Decree CK[2014] No. 23, asking enterprises to present their financial instruments in the financial reports for 2014andthefuture periods according to this standard.
Except for the Financial Instrument Presentation Standard whichwasn’t executed until the 2014 Annual Financial Report, we have started to execute the other 7 new or revised accounting standards since 1 Jul. 2014. Relevant adjustments were made according to these new or revised
2014AnnualReportofKonkaGroupCo.,Ltd.
standards. And the influence on the items and amounts in the financial statements for the current and previous periods is as follows:
|||||
|-|-|-|-|
|Accountingstandard|AccountingpolicychangesandtheirinfluenceontheCompany|Influenceonfinancialstatementitemsasat1Jan.2014orasofY2013(RMBYuan)||
|||Item|Influence|
||||+/-|
|<AccountingStandardNo.2forBusinessEnterprises—Long-termEquityInvestments>|According to the <AccountingStandard No. 2 for BusinessEnterprises—Long-term EquityInvestments (Revised in 2014)>anditsapplicationguide|Long-termequityinvestments|-10,138,027.92|
|||Available-for-salefinancialassets|+10,953,000.00|
|||Capitalreserves|+40,003,745.04|
|||Retainedprofits|-32,552,764.33|
|||Minorityinterests|-6,636,008.63|
|||Investmentgains|-1,465,555.51|
|<AccountingStandardNo.30forBusinessEnterprises—FinancialStatementPresentation>|According to the <AccountingStandard No. 30 for BusinessEnterprises—FinancialStatementPresentation(Revisedin 2014)> and its applicationguide|Foreign-currencystatementtranslationdifferences|-16,179,316.17|
|||Othercomprehensiveincomes|+16,179,316.17|
|||Deferredincomes|+131,658,369.11|
|||Othernon-currentliabilities|-131,658,369.11|

XII. Explain retrospective restatement due to correction of significant accounting errors in thereporting period
□Applicable√ Inapplicable
No such cases in thereporting period.
XIII. Explain change of the consolidation scope as compared with the financial reporting of lastyear
√Applicable□ Inapplicable
1.Subsidiary disposal
(1) On 13 Jun. 2014, the Company and OCT Enterprises Co. signed an equity transfer agreement, transferring theCompany’s100% stake in Shenzhen Konka Video& Communication Systems Engineering Co., Ltd. to OCT at the price of RMB 247,687,800. On 23 Jun. 2014, the equity ownership transfer was registered with the Market and Quality Supervision Commission of Shenzhen Municipality. The Company has received the transfer payment in full and its control over
Shenzhen Konka Video& Communication Systems Engineering Co., Ltd. has ceased. As such,
Shenzhen Konka Video& Communication Systems Engineering Co., Ltd. has been deconsolidated
2014AnnualReportofKonkaGroupCo.,Ltd.
since 1Jul. 2014.
(2) On 17 Jul. 2014, the Company and Konka Household Appliances Investment (theCompany’s subsidiary) signed equity transfer agreements with Shaanxi Ruyi Electronic Technology Co., Ltd., transferring their stakes of45% and15% in Shaanxi Konka to Ruyi Electronic at the prices of RMB 34,467,885.00 and RMB 11,489,295.00 respectively. Up to 31 Dec. 2014, the equity transfers have been registered with relevant authorities and theCompany’s control over Shaanxi Konka has ceased. As such, ShaanxiKonkahas been deconsolidated since 1Jan. 2015.
2.Other changes in theconsolidation scope
(1) The Company and Shenzhen Konka Investment Partners (Limited Partnership) incorporated Shenzhen Konka E-display Co., Ltd. on 3 Jun. 2014, with a registered capital of RMB 12 million, of which the Company contributed RMB 7.2 million, representing60% of the registered capital. The Company has control over Konka E-display, which has thus been consolidated since 3 Jun. 2014.
(2) Dongguan Konka (theCompany’s subsidiary), Guo Bing, Cheng Zuben and Dong Ying jointly incorporated Xiamen DalongTrading Co., Ltd. on 5Aug. 2014 with a registered capital of RMB 2.6 million, of which Dongguan Konka contributed RMB 1.8 million, representing69.23% of the registered capital. The Company has control over Xiamen Dalong Trading, which has thus been consolidated since5Aug. 2014.
(3) Konka Optoelectronic (theCompany’s subsidiary) and Charm Communications Inc. jointly incorporated Tianjin Youshi Kangrong Cultural Communication Co., Ltd. on 26 Nov. 2014 with a registered capital of RMB 70 million, of which Konka Optoelectronic contributed RMB 49 million, representing70% of the registered capital. The Company has control over TianjinYoushi Kangrong Cultural Communication, which has thus been consolidated since26Nov.2014.
XIV. Profitallocation anddividend distribution
Formulation, execution or adjustment of theCompany’s profit distribution policy during the reporting period
√Applicable□ Inapplicable
The cash dividend policy of the Company is clearly stated in its Articles of Association, with explicit dividend standards and ratios, as well as sound decision-making procedures and mechanisms. Independent directors have faithfully performed their duties and performed their function well by giving minority shareholders opportunities to express their opinion and demands and effectively safeguarding their lawful interests. The Company has strictly executed the cash dividend policy in the Articles of Association, and cash dividend distribution of the Company is in linewith theArticles ofAssociation and relevant resolutionsoftheShareholders’General Meeting. According to the spirit of the CSRC Notice on Further Implementing Matters Related to Cash Dividend Distribution of Listed Companies (Zheng-Jian-Fa[2012] No. 37) and the CSRC Shenzhen Bureau Notice on Seriously Implementing the CSRC Notice on Further Implementing Matters
2014AnnualReportofKonkaGroupCo.,Ltd.
Related to Cash Dividend Distribution of Listed Companies (Shen-Zheng-Ju-Gong-Si-Zi[2012] No. 43), taking into account its actual situation, the Company communicated with independent directors and some floating share holders on the topic of the planning for returns for shareholders and carried out special discussions in terms of the arrangements for returns for shareholders, profit distribution, especially how to improve the decision-making procedure and mechanism for matters in relation to cash dividends. Meanwhile, it listened to minorityshareholders’ opinions and requirements via hotlines, fax, email, theCompany’s website, etc. so as to decide a proper decision-making procedure for matters in relation to cash dividends that was in line with theCompany’s future development.And a reasoning report was formed.According to the Reasoning Report on Matters in Relation to Returns for Shareholders, the Company revised its Articles of Association and formulated the Return for Shareholder Planning for the Coming ThreeYears (2012-2014) according to the profit distribution plan and its plans for the coming three years. Meanwhile, as required by the said Notice, the Company convened a board session and a general meeting, at which the Reasoning Report on Matters in Relation to Returns for Shareholders, the Return for Shareholder Planning for the Coming Three Years (2012-2014) and the Proposal on Revising the Articles of Association was reviewed and approved. In order to further listen to the opinions of minority shareholders, the voting on the Return for Shareholder Planning for the Coming Three Years (2012-2014) adopted both on-site voting and online voting to protect legal rights and interests of minority shareholders.
According to the requirements of the Listed Company Supervision Guidelines No. 3--Listed Company Cash Dividends issued by CSRC, and as reviewed and approved at the 55th Session of the 7thBoard of Directors and the 2013 AnnualShareholders’ General Meeting, the Company decided to revise the profit distribution policy stipulated by theArticles ofAssociation, further clarifying the priority and proportion ofcash dividends inprofit distribution.
|||
|-|-|
|Specialstatementaboutthecashdividendpolicy||
|IncompliancewiththeCompany’sArticlesofAssociationandtheresolutionofthegeneralmeeting|Yes|
|Specificandcleardividendstandardandratio|Yes|
|Completedecision-makingprocedureandmechanism|Yes|
|Independentdirectorsfulfilledtheirresponsibilitiesandplayedtheirduerole.|Yes|
|Minorityshareholdershadthechancetofullyexpresstheiropinionanddesireandtheirlegalrightsandinterestswerefullyprotected.|Yes|
|Inadjustmentoralterationofthecashdividendpolicy,theconditionsandprocedurewereincompliancewithregulationsandtransparent.|Yes|

Pre-plan orplan forprofit distributionand turning capital reserve intoshare capital in recent 3years (including thereporting period)
1. In 2014, the net profit attributable to owners of the Company was RMB 52,623,527.86 as audited and the retained profit was RMB 746,022,758.89.Based on the actual status and the requirement for long-term development of the Company, the Board of Directors proposed the annual profit
distributionplan 2014 as follows:
Based on theCompany’s total share capital of 1,203,972,704 shares as at the end of 2014, the
Company was proposed to distribute a cash dividend of RMB 0.1 (tax included) to every 10 shares.
2014AnnualReportofKonkaGroupCo.,Ltd.
The distributed profits would aggregate RMB 12,039,727.04 and the retained profit would be carried forward into thenextyear for distribution.
2.TheCompany’s profit allocation plan for 2013:
Based on theCompany’s total share capital of 1,203,972,704 shares as at the end of 2013, the Company distributed a cash dividend of RMB 0.1 (tax included) to every 10 shares. The distributed profits aggregated RMB 12,039,727.04 and the retained profit was carried forward into the next year for distribution.
3.TheCompany’s profit allocation plan for 2012:
Based on theCompany’s total share capital of 1,203,972,704 shares as at the end of 2012, the Company distributed a cash dividend of RMB 0.1 (tax included) to every 10 shares. The distributed profits aggregated RMB 12,039,727.04 and the retained profit was carried forward into the next year for distribution.
Cash dividends in therecent three years
Unit:RMBYuan
|||||||
|-|-|-|-|-|-|
|Year|Cashdividends(taxincluded)|Netprofitattributabletoshareholdersofthelistedcompanyintheconsolidatedstatementintheyear|Ratiotonetprofitattributabletoshareholdersofthelistedcompanyintheconsolidatedstatementintheyear|Cashofferingtobuybacksharesrecordedascashdividends|Ratioofcashofferingtobuybacksharestocashdividends|
|2014|12,039,727.04|52,623,527.86|22.88%|0.00|0.00%|
|2013|12,039,727.04|45,820,496.73|26.28%|0.00|0.00%|
|2012|12,039,727.04|50,342,194.51|23.92%|0.00|0.00%|

 The Company (including its subsidiaries) made profit in the reporting period and the retained profit of the Company (without subsidiaries) was positive, but it did not put forward a preplan for cash dividend distribution:
□Applicable√ Inapplicable
XV. Preplan for profit distribution and turning capital reserve into share capital in the reporting period
√Applicable□ Inapplicable
|||
|-|-|
|Bonussharesforevery10shares(share)|0|
|Dividendforevery10shares(RMBYuan)(taxincluded)|0.10|
|Increasedsharesforevery10shares(share)|0|
|Totalsharesasthebasisfortheallocationpreplan(share)|1,203,972,704|
|Totalcashdividends(RMBYuan)(taxincluded)|12,039,727.04|
|Distributableprofit(RMBYuan)|499,655,859.67|
|Percentageofthecashdividendsinthetotal|100.00%|

2014AnnualReportofKonkaGroupCo.,Ltd.
||
|-|
|distributedprofit(%)|
|Cashdividendpolicy:|
|Other|
|Detailsaboutthepre-planforprofitallocationandturningcapitalreserveintosharecapital|
|Profitallocationpre-planfor2014:BasedontheCompany’stotalsharecapitalof1,203,972,704sharesasattheendof2014,theCompany intended to distribute a cash dividend of RMB 0.1 (tax included) to every 10 shares. The distributed profits wouldaggregate RMB 12,039,727.04 and the retained profit would be carried forward into the next year for distribution. No capitalreserves would be turned into share capital for 2014. This pre-plan still awaits the approval of the 2014 Annual Shareholders’GeneralMeetingbeforeexecution.|

XVI. Socialresponsibilities
√Applicable□ Inapplicable
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. (I)Toprotect rights ofshareholders and creditors
1.The Company protects rights ofshareholders
(1) 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.
(2) 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.
(3) 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.The Company protects rights ofcreditors
In full consideration of legal rights of creditors, the Company complies with strict business rules of credit cooperation to guarantee legal rights of creditors. No damages upon rights of creditors happened.
(II) TheCompany performs responsibilities tosuppliers and customers
1.It is devoted to improvecustomer service quality.
2014AnnualReportofKonkaGroupCo.,Ltd.
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 tosuppliers
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.
(III) Be enthusiasticto social and publicwelfare undertakings
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 and promoted harmonious development between enterpriseand society.
(IV) Beresponsible 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 andlaw-abiding toprotect legal rights foremployees
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 found would 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 production safety.
3.Topromoteoccupational skillsbydiversified professional training
2014AnnualReportofKonkaGroupCo.,Ltd.
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.
(V) Be responsiblefor environment
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 protects 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.
Does the listed company or its subsidiaries belong to the heavily polluting industries stipulated by the environmental protection authorities ofthecountry?
□Yes√No□Inapplicable
Does thelisted company or itssubsidiaries have anyother significant social security problems?□Yes√No□Inapplicable
Any administrative punishment during the reporting period?
√Yes□No□Inapplicable
XVII. Researches,visits andinterviews received in thereporting period
□Applicable√ Inapplicable
No such cases in thereporting period.
2014AnnualReportofKonkaGroupCo.,Ltd.
Section V. Significant Events
I.Significantlitigations andarbitrations
√Applicable□ Inapplicable
|||||||||
|-|-|-|-|-|-|-|-|
|Basicinformationofthelawsuit(arbitration)|Amountinvolvedinthelawsuit(arbitration)(RMBTenthousand)|Formingtheestimatedliabilitiesornot?|Progressofthelawsuit(arbitration)|Trialresultandinfluenceofthelawsuit(arbitration)|Enforcementonthejudgmentofthelawsuit(arbitration)|Disclosuredate|Disclosureindex|
|Arbitrationeventsof“WhetherKonkaGrouphastherighttobetheuniquedevelopmentsubjectofthecityrenewalproject”|Inapplicable|No|Forthenewestprogress,pleaserefertotheAnnouncementonSignificantArbitrationdisclosedon2Aug.2014.|Forthearbitrationresults,pleaserefertotheannouncement|Executed|2Aug.2014|AnnouncementontheResultsofSignificantArbitration,withtheannouncementNo.:2014-39,andthedisclosingwebsite:www.cninfo.com|

II.Media’s doubts
□Applicable√ Inapplicable
No such cases in thereporting period.
III. Occupation of theCompany’s capital by the controlling shareholder or its related parties fornon-operatingpurposes
□Applicable√ Inapplicable
No such cases in thereporting period.
2014AnnualReportofKonkaGroupCo.,Ltd.
IV.Bankruptcy andreorganization
□Applicable√ Inapplicable
No such cases in thereporting period.
V. Assettransactions
1.Acquisitionof assets
□Applicable√ Inapplicable
No such cases in thereporting period.
2.Saleofassets
√Applicable□ Inapplicable
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Transactioncounterparty|Assetsold|Disposaldate|Transactionprice(RMB0’000)|NetprofitcontributedtotheCompanyfromtheperiod-begintothedisposaldate(RMB0’000)|Gainsandlossesarisingfromthesalesofassets(RMB0’000)|RatioofthenetprofitcontributedbytheassettotheCompanytothetotalprofit(%))|Pricingprinciple|Related-partytransactionornot|RelationshipbetweenthetransactionpartyandtheCompany(applicableforrelated-partytransactions)|Whetherornottheownershipoftheassetinvolvedhasbeenfullytransferred|Whetherornotthecreditor’srightandliabilitiesinvolvedhavebeenfullytransferred|Disclosuredate|Disclosureindex|
|OTCEnterprisesCo.|100%equitiesofShenzhenKonkaVideo&Com|23Jun.2014|24,768.78|21.37|Thesaleoftheequityinterestsinthissubsidiarywasto|325.24%|Settledattheevaluatedprice|Yes|Thetransactionpartywasthecontrollingshareholder|Yes|Yes|24May2014|http://www.cninfo.com.cn/information/companyinfo.html|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||
|-|-|-|
|municationSystemsEngineeringCo.|disposeidleassetsandgeneratefundsinflowstoincreasetheliquidityoffundsandimprovetheCompany’sgeneralperformance.|oftheCompany|

3.Business combination
□Applicable√ Inapplicable
No such cases in thereporting period.
VI.Particulars aboutthe implementation ofequity incentiveofthe Companyand its influence□Applicable√ Inapplicable
No such cases in thereporting period.
VII. Significantrelated-party transactions
1.Related-party transactions relevant to routineoperation
√Applicable□ Inapplicable
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Relatedparty|Relationship|Typeoftherelated-partytransactio|Contentoftherelated-partytransaction|Pricingprincipleoftherelated-partytransaction|Transactionprice|Transactionamount(RMBTenthousand)|Proportioninsamekindoftransactio|Settlementmethodoftherelated-partytransaction|SimilarTransactionmarketpricereceivable|Disclosuredate|Disclosureindex|

2014AnnualReportofKonkaGroupCo.,Ltd.
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||n|||||ns(%)|||||
|AnhuiHualiPackingCo.,Ltd.|Subsidiariescontrolledbytheprincipalshareholder|Purchasingmaterialsfromtherelatedparty|Purchasing thepackagingmaterials forcolorTVs|Agreedprice|Marketprice|3041.42||Incash|Inapplicable|4Apr.2014|http://www.cninfo.com.cn/information/companyinfo.html|
|OCTWater&ElectricityCompany||Purchasingmaterialsfromtherelatedparty|Purchasingwater&electricity|Agreedprice|Marketprice|815.16||Incash|Inapplicable|||
|HualiPacking(Huizhou)Co.,Ltd.||Purchasingmaterialsfromtherelatedparty|Purchasing thepackagingmaterials forcolorTVs|Agreedprice|Marketprice|1149.92||Incash|Inapplicable|||
|ShanghaiHualiPackingCo.,Ltd.||Purchasingmaterialsfromtherelatedparty|Purchasing thepackagingmaterials forcolorTVs|Agreedprice|Marketprice|1364.55||Incash|Inapplicable|||

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|ShenzhenKonkaVideo&CommunicationSystemsEngineeringCo.|Purchasingmaterialsfromtherelatedparty|Purchasingrawmaterials|Agreedprice|Marketprice|56.68||Incash|Inapplicable|||
|ShenzhenKonkaVideo&CommunicationSystemsEngineeringCo.|Providinglaborservicestotherelatedparty|Maintenanceservice|Agreedprice|Marketprice|165.38||Incash|Inapplicable|||
|ChengduTianfuOCTIndustrialDevelopmentCo.,Ltd|Sellingproductstotherelatedparty|SellingLCDtotherelatedparty|Agreedprice|Marketprice|1.97||Incash|Inapplicable|||
|TaizhouOCTCo.,Ltd|Sellingproductstotherelatedparty|SellingLCDtotherelatedparty|Agreedprice|Marketprice|3.50||Incash|Inapplicable|||
|Total|||-|-|6,598.58|-|-|-|-|-|
|Detailsoflargeamountofsalesreturns|||Inapplicable||||||||
|Necessity andcontinuityofrelated-partytransactionaswellasreasonofchoosingthe related party (but not othertransaction parties) to conduct the said|||RelatedtransactionsoftheCompanywiththeaboverelatedpartiesoccurredindailyoperationoftheCompany,whichwerenecessary.TheCompanywouldcontinuethecooperation of fairness and mutual benefits with them, given the operation anddevelopment of the Company was stable. The aforesaid related transactions were||||||||

2014AnnualReportofKonkaGroupCo.,Ltd.
|||
|-|-|
|transaction|beneficial for maintaining the long-term cooperation between the Company andrelatedparties.|
|Impacts of related-party transaction onindependencyoftheCompany|The related-party transactionsdid not affect the independence of theCompany,andmain business of the Company would not rely on the related parties due to therelated-partytransactionsabove.|
|Dependant degree of the Company onrelated party and relevant solutions forthedependence(ifany)|Inapplicable|
|Asforthepredictiononthetotalamountofroutinerelated-partytransactionstobeoccurred in the reporting period byrelevanttypes, theactual performanceinthereportingperiod(ifany)|Theexpectedtotalamountfor2014wasRMB98million,andtheactualamountwasRMB65.9858million.|
|Reason for significant differencebetween the transaction price and themarketprice|Thetransactionpricewasfixedbyreferringtothemarketprice,whichhadn’tanysignificantdifferencewiththemarketprice.|

2.Related-party transactions regarding purchaseandsales of assets
√Applicable□ Inapplicable
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Relatedparty|Relation|Typeofrelated-partytransaction|Contents|Pricingprinciple|Bookvalueofthetransferredasset(RMB0,000)|Evaluatedvalueofthetransferredasset(RMB0,000)|Marketfairvalue(RMB0,000)|Transferprice(RMB0,000)|Settlementmode|Gain/Loss(RMB0,000)|Disclosuredate|Disclosureindex|
|OCTEnterprisesCo.|ControllingshareholderoftheCompany|Saleofassetstotherelatedparty|Transferring100%equitiesofShenzhenKonkaVideo&CommunicationSystems|Assessmentprice|-1,464.31|24,768.78|24,768.78|24,768.78|Incash|26,233.09|24May2014|http://www.cninfo.com.cn/information/companyinfo.html|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||
|-|-|-|
||EngineeringCo.,Ltd.heldbytheCompany||
|Reasonforgreatdiscrepancybetweentransfer price and book value orestimatedvalue(ifany)||The book value of the 100% equity interests (after stripping off some assets andliabilities)ofShenzhenKonkaVideo&CommunicationSystemsEngineeringCo.,Ltd.stood at RMB -14.6431 million, the assessed value at RMB 247.6878 million and thetransfer price agreed by both parties at RMB 247.6878 million. The increment in theassessed price was mainly due to the housing properties owned by the enterprise: 6houses in Unit 5, Pangu Plaza, North Fourth Ring Central Road, Chaoyang District,Beijing with a total area of 4,029.30 square meters. But the possible influence ofrelevanttaxes andfares onthosepropertieswhen theywent intotradingonthemarketwasnotincludedintheassessedprice.|
|Information about influence oncorporation business performanceandfinancialsituation||Thesaleoftheequityinterestsinthissubsidiarywastodisposeidleassetsandgeneratefunds inflows to increase the liquidity of funds and improve the Company’s generalperformance. The assessed price of the 100% equity interests (after stripping off someassets and liabilities) of Shenzhen Konka Video & Communication SystemsEngineering Co., Ltd. stood at RMB 247.6878 million.As at 30Apr. 2014, the bookvalueofthe100%equityinterests(afterstrippingoffsomeassetsandliabilities)ofthissubsidiarystoodat RMB-14.6431million.Accordingtotheassessed price,thatis,thetransaction price, this equity transfer generated a premium of RMB 262.3309 million,which would help the Company increase cash inflows and improve its financialsituation.|

3.Significantrelated-party transactions concerningjointinvestment inexternal parties√Applicable□ Inapplicable
||||||||||
|-|-|-|-|-|-|-|-|-|
|Jointinvestor|Relationship|Pricingprinciple|Nameofinvestee|Mainbusinessofinvestee|Registeredcapitalofinvestee|Totalassetsofinvestee(RMB0’000)|Netassetsofinvestee(RMB0’000)|Netprofitofinvestee(RMB0’000)|
|OCTEnterprisesCo.andtheCompany|OCTisthecontrollingshareholderoftheCompany.|Bothcontributedincash.TheCompanycontributedRMB700million,representin|ShenzhenKangqiaoJiachengRealEstateInvestmentCo.,Ltd.|Investment,developmentandoperationoftherealestateprojectsintheplantareaofthe|RMB1billion|RegisteredcapitalatRMB1billion|Inapplicable|Inapplicable|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||
|-|-|-|
||gastakeof70%;andOCTcontributedRMB300million,representingastakeof30%.|KonkaHeadquarters|
|Progressofanysignificantconstructioninprocessoftheinvestee(ifany)|Inapplicable||

4.Credits andliabilities with related parties
√Applicable□ Inapplicable
Was there anynon-operating credit orliabilitywith anyrelated party?
□Yes√No
No such cases in thereporting period.
5.Other related-party transactions
√Applicable□ Inapplicable
On the 55th meeting of the 7th Board of Directors on 2Apr. 2014 (Wednesday), Board of Directors deliberated and approved the Bill about Applying Borrowed Funds Limits to Overseas Chinese Town Holdings Company to satisfy the requirements of financing development and reduce cost of capital. The meeting agreed the application of no more than RMB 3,000,000,000 for borrowed funds limits from Overseas Chinese Town Holdings Company in 2014 and no more than RMB 1,500,000,000 at any point in time. Borrowed funds rate should not exceed the loan rate of financial institution of the corresponding period. Interest amount of above borrowed funds limits at this year should not exceed RMB 90,000,000.
Relevant index for thewebsitedisclosing theinterim announcement onrelated-party transactions
||||
|-|-|-|
|Nameoftheinterimannouncement|Disclosuredateoftheinterimannouncement|Nameofthewebsitedisclosingtheinterimannouncement|
|AnnouncementonRelated-partyTransaction|4Apr.2014|http://www.cninfo.com.cn/|

VIII. Significantcontracts andexecution
1.Particulars abouttrusteeship, contract andlease
2014AnnualReportofKonkaGroupCo.,Ltd.
(1) Trusteeship
□Applicable√ Inapplicable
No such cases in thereporting period.
(2) Contract
□Applicable√ Inapplicable
No such cases in thereporting period.
(3) Lease
□Applicable√ Inapplicable
No such cases in thereporting period.
2.Guarantees providedbytheCompany
√Applicable□ Inapplicable
Unit: RMB Ten Thousand Yuan
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|GuaranteesprovidedbytheCompanyforexternalparties(excludingthoseforsubsidiaries)||||||||||
|Guaranteedparty||Disclosuredateofrelevantannouncementontheguaranteeamount|Amountforguarantee|Actualoccurrencedate(dateofagreement)|Actualguaranteeamount|Typeofguarantee|Periodofguarantee|Executedornot|Guaranteeforarelatedpartyornot|
|DongguanKonkaMouldPlasticCo.,Ltd.||27Apr.2013|4,631||308.69|Joint liability guaranty|6months|No|No|
|KunshanJielunteMouldPlasticCo.,Ltd.|||23,155||713.17|Joint liability guaranty|1year|No|No|
|Totalexternalguaranteelineapprovedduringthereportingperiod(A1)|||0||Totalactualoccurredamountofexternalguaranteeduringthereportingperiod(A2)||1,021.86|||
|Totalexternalguaranteelinethathasbeenapprovedattheendofthereportingperiod(A3)|||27,786||Totalactualexternalguaranteebalanceattheendofthereportingperiod(A4)||1,021.86|||
|GuaranteesprovidedbytheCompanyforitssubsidiaries||||||||||
|Guaranteedparty|Disclosuredateofrelevantannouncementonthe||Amountforguarantee|Actualoccurrencedate(dateofagreement)|Actualguaranteeamount|Typeofguarantee|Periodofguarantee|Executedornot|Guaranteeforarelated|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||||||
|-|-|-|-|-|-|-|-|-|
||guaranteeamount|||||||partyornot|
|AnhuiHouseholdAppliances||2,750|18Sept.2013|2,750.00|Generalguarantee|3years|No|No|
|HongKongKonka|30Sept.2013|307,500|14Mar.2013|28,759.30|Generalguarantee|2years|No|No|
|HongKongKonka|||25Mar.2013|8,627.79|Generalguarantee|2years|No|No|
|HongKongKonka|||17Mar.2014|5,772.57|Generalguarantee|1year|No|No|
|HongKongKonka|||8Oct.2014|29,891.32|Generalguarantee|Halfyear|No|No|
|KonkaHouseholdAppliancesInternationalTrading|||6Mar.2014|2,753.55|Generalguarantee|1year|No|No|
|KonkaHouseholdAppliancesInternationalTrading|||31Jul.2014|8,872.55|Generalguarantee|1year|No|No|
|HongKongKonka|||30Jun.2014|5,507.10|Generalguarantee|1year|No|No|
|HongKongKonka|||7Jul.2014|18,357.00|Generalguarantee|1year|No|No|
|HongKongKonka|||10Oct.2014|6,119.00|Generalguarantee|1year|No|No|
|HongKongKonka|||12Nov.2014|7,434.59|Generalguarantee|1year|No|No|
|HongKongKonka|||17Nov.2014|18,357.00|Generalguarantee|1year|No|No|
|HongKongKonka|||20Nov.2014|27,535.50|Generalguarantee|1year|No|No|
|HongKongKonka|||15Jan.2014|29,677.15|Generalguarantee|2years|No|No|
|HongKongKonka|||28Jul.2014|40,997.30|Generalguarantee|2years|No|No|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||||||
|-|-|-|-|-|-|-|-|-|
|HongKongKonka|||17Sept.2014|18,338.64|Generalguarantee|2years|No|No|
|TelecommunicationNetwork|21Nov.2014|60,000|8Dec.2014|41,564.00|Generalguarantee|3years|No|No|
|AnhuiTongchuang|21Nov.2014|30,000|8Dec.2014|4,100.00|Generalguarantee|3years|No|No|
|KonkaHouseholdAppliances|21Nov.2014|6,000|8Dec.2014|475.00|Generalguarantee|3years|No|No|
|AnhuiKonka|21Nov.2014|20,000|8Dec.2014|7,762.00|Generalguarantee|3years|No|No|
|KunshanKonka|21Nov.2014|30,000|8Dec.2014|10,240.00|Generalguarantee|3years|No|No|
|Totalguaranteelineapprovedforthesubsidiariesduringthereportingperiod(B1)||166,800||Totalactualoccurredamountofguaranteeforthesubsidiariesduringthereportingperiod(B2)||283,754.27|||
|Totalguaranteelinethathasbeenapprovedforthesubsidiariesattheendofthereportingperiod(B3)||477,050||Totalactualguaranteebalanceforthesubsidiariesattheendofthereportingperiod(B4)||323,891.36|||
|TotalguaranteeamountprovidedbytheCompany(totaloftheabove-mentionedtwokindsofguarantees)|||||||||
|Totalguaranteelineapprovedduringthereportingperiod(A1+B1)||166,800||Totalactualoccurredamountofguaranteeduringthereportingperiod(A2+B2)||284,776.13|||
|Totalguaranteelinethathasbeenapprovedattheendofthereportingperiod(A3+B3)||504,836||Totalactualguaranteebalanceattheendofthereportingperiod(A4+B4)||324,913.22|||
|Proportionoftotalguaranteeamount(A4+B4)tothenetassetsoftheCompany||||79.18%|||||
|Ofwhich:|||||||||
|Amountofguaranteeforshareholders,actualcontrollerandrelatedparties(C)||||0|||||
|Amountofdebtguaranteeprovidedfortheguaranteedpartywhoseasset-liabilityratioisnotlessthan70%directlyorindirectly(D)||||324,913.22|||||

2014AnnualReportofKonkaGroupCo.,Ltd.
|||
|-|-|
|Partoftheamountofthetotalguaranteeover50%ofnetassets(E)|119,739.27|
|Totalamountoftheabovethreeguarantees(C+D+E)|444,652.49|
|Explanation on the possibility of fulfilling the jointresponsibility of repayment due to immature guarantees (ifany)|Inapplicable|
|Explanationonprovisionofguaranteesforexternalpartiesinviolationoftheprescribedprocedure(ifany)|Inapplicable|

Details about guarantees provided ina compound way
Nosuch cases in thereporting period.
2.Particulars aboutillegal external guarantees
□Applicable√ Inapplicable
No such cases in thereporting period.
3.Other significantcontracts
□Applicable√ Inapplicable
No such cases in thereporting period.
4.Othersignificanttransactions
□Applicable√ Inapplicable
No such cases in thereporting period.
IX.Performance ofcommitments
1. Commitments made by the Company or shareholders holding over5% of theCompany’s shares inthereporting period orsuchcommitments carried downinto thereporting period□Applicable√ Inapplicable
No such cases in thereporting period.
2. If theCompany’s assets or projects existing earnings prediction, and the reporting period is among the prediction period, it shall explain on whether the assets or projects reach the original earningsprediction andrelevant reason
□Applicable√ Inapplicable
X. Particulars aboutengagementand disengagementofCPAs firm
CPAs firm engaged at present
|||
|-|-|
|NameofdomesticCPAsfirm|RuihuaCertifiedPublicAccountants|
|Remuneration of domestic CPAs firm (RMB TenThousandYuan)|100|
|Consecutive years of the audit services provided|2years|

2014AnnualReportofKonkaGroupCo.,Ltd.
|||
|-|-|
|bydomesticCPAsfirm||
|Name ofthecertified publicaccountantsfromthedomesticCPAsfirm|LiuJianhua,TangQimei|
|NameofoverseasCPAsfirm(ifany)|Inapplicable|
|Remuneration of overseas CPAs firm (RMB TenThousandYuan)(ifany)|0|
|Consecutive years of the audit services providedbyoverseasCPAsfirm(ifany)|Inapplicable|
|Name ofthecertified publicaccountantsfromtheoverseasCPAsfirm(ifany)|Inapplicable|

Change theCPAsfirm at current period ornot?
□Yes√No
Particulars onengaging theaudit firm forthe internal control, financial adviser orsponsor
√Applicable□ Inapplicable
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 Company for 2014,withthe auditingfee for theinternal control in 2014as RMB400,000.
XI. Explanation of the Supervisory Committee and Independent Directors (if applicable) on the“Non-standardAuditor’s Report”issuedbytheCPAs firm during thereporting period□Applicable√ Inapplicable
XII. Punishment andrectification
□Applicable√ Inapplicable
No such cases in thereporting period.
XIII. Particulars about trading suspension and termination faced after the disclosure of annual report
□Applicable√ Inapplicable
XIV. Explanationon othersignificantevents
√Applicable□ Inapplicable
(I) Progress oftheurban renewal project in theplant area oftheCompany’s headquarters
In order to push forward the urban renewal of the plant area of the Konka Group Headquarters and fully safeguard the interests of the Company and its investors, as reviewed and approved at the 67th
Session of the 7th Board of Directors and the Second Special General Meeting for 2014, the
Company and OCT Enterprises Co. were to jointly incorporate an enterprise to work on the renewal
project of the plant area of the Konka Group Headquarters. OCT would hold a stake of30% in the
2014AnnualReportofKonkaGroupCo.,Ltd.
joint venture while the Company would hold70%. Up to the disclosure date of this report, the joint venture has been established and is going through relevant formalities.
(II) ProgressoftheCompany’s Kunshan ZhouzhuangProject
After the approval by the 42nd meeting of the 6th Board of Directors, the Company obtained the land use rights of the land in the south of Quanwang Road, Zhouzhuang County, Kunshan. The project covers an area of366,575.8m2fortourism facilities and commercial housing.
The Company is planned to develop the land by stages and determine the annual development plans according to market condition. From March, 2013, the first-phrase residential project has been started for construction and some houses were delivered in 2014. It generated some sales income and produced profits in2014.Meanwhile, the second-phrase residential project started in 2014. (II) Index for significant information disclosed
||||||
|-|-|-|-|-|
|AnnouncementNo.|Date|Title|Pageonnewspaper|Linkonhttp://www.cninfo.com.cn|
|2014-01|2014-1-3|Announcement ofResolutions of the 50thSession of the 7thBoardofDirectors|SecuritiesTimesB52,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2014-01-03/63442676.PDF|
|2014-02|2014-1-11|Announcement on theResignation of VicePresident|SecuritiesTimesB1,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2014-01-11/63473432.PDF|
|2014-03|2014-3-1|Announcement ofsolutions of the 53rdSession of the 7thBoardofDirectors|SecuritiesTimesB25,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2014-03-01/63620067.PDF|
|2014-04|2014-3-1|Announcement onSignificantArbitration|SecuritiesTimesB25,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2014-03-01/63620918.PDF|
|2014-05|2014-3-7|Announcement ofsolutions of the 54thSession of the 7thBoardofDirectors|SecuritiesTimesB16,TaKungPaoB10|http://www.cninfo.com.cn/finalpage/2014-03-07/63645662.PDF|
|2014-06|2014-3-7|Announcement on theProgress of theDeclaration of theUrban Renewal PlanProject|SecuritiesTimesB16,TaKungPaoB10|http://www.cninfo.com.cn/finalpage/2014-03-07/63645661.PDF|
|2014-07|2014-3-27|Announcement onReceiptofTaxRebates|SecuritiesTimesB44,TaKungPaoB3|http://www.cninfo.com.cn/finalpage/2014-03-27/63730510.PDF|
|2014-08|2014-4-4|Announcement ofsolutions of the 11thSession of the 7th|SecuritiesTimesB60,TaKungPaoB16|http://www.cninfo.com.cn/finalpage/2014-04-04/63788608.PDF|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||
|-|-|-|-|-|
|||BoardofSupervisors|||
|2014-09|2014-4-4|Announcement onAuthorizing theManagement Level ofthe Company to Sellthe Shares of theParticipated CompanybyChoosingtheTime|SecuritiesTimesB60,TaKungPaoB16|http://www.cninfo.com.cn/finalpage/2014-04-04/63788621.PDF|
|2014-10|2014-4-4|Announcement onRelated PartyTransaction|SecuritiesTimesB60,TaKungPaoB16|http://www.cninfo.com.cn/finalpage/2014-04-04/63788626.PDF|
|2014-11|2014-4-4|Forecasting PublicNotice on RoutineRelated TransactionforY2014|SecuritiesTimesB60,TaKungPaoB16|http://www.cninfo.com.cn/finalpage/2014-04-04/63788553.PDF|
|2014-12|2014-4-4|Abstract of theAnnualReportforY2013|SecuritiesTimesB60,TaKungPaoB16|http://www.cninfo.com.cn/finalpage/2014-04-04/63788554.PDF|
|2014-13|2014-4-4|Annual Report forY2013|SecuritiesTimesB60,TaKungPaoB16|http://www.cninfo.com.cn/finalpage/2014-04-04/63788613.PDF|
|2014-14|2014-4-4|Notice on Holding the2013 Annual GeneralMeeting|SecuritiesTimesB60,TaKungPaoB16|http://www.cninfo.com.cn/finalpage/2014-04-04/63788592.PDF|
|2014-15|2014-4-4|Announcement on the55th Session of the 7thBoardofDirectors|SecuritiesTimesB60,TaKungPaoB16|http://www.cninfo.com.cn/finalpage/2014-04-04/63788591.PDF|
|2014-16|2014-4-9|Announcement on theProgress of SignificantArbitrationEvents|SecuritiesTimesB12,TaKungPaoA21|http://www.cninfo.com.cn/finalpage/2014-04-09/63805353.PDF|
|2014-17|2014-4-15|Text of 2014 FirstQuarterReport|SecuritiesTimesB76,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-04-15/63837774.PDF|
|2014-18|2014-4-15|Text of 2014 FirstQuarterReport|SecuritiesTimesB76,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-04-15/63837778.PDF|
|2014-19|2014-4-16|Announcement on theChanges in theDicastery ofSignificant ArbitrationEvents|SecuritiesTimesB37,TaKungPaoB14|http://www.cninfo.com.cn/finalpage/2014-04-16/63844382.PDF|
|2014-20|2014-4-22|Announcement on theSecond Session ofTrial of Significant|SecuritiesTimesB29,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2014-04-22/63884605.PDF|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||
|-|-|-|-|-|
|||ArbitrationEvents|||
|2014-21|2014-4-26|Announcement onSolutions of the 2013Annual GeneralMeeting|SecuritiesTimesB20,TaKungPaoB7|http://www.cninfo.com.cn/finalpage/2014-04-26/63924031.PDF|
|2014-22|2014-5-6|Announcement on theThird Session of Trialof SignificantArbitrationEvents|SecuritiesTimesB32,TaKungPaoB15|http://www.cninfo.com.cn/finalpage/2014-05-06/63970668.PDF|
|2014-23|2014-5-22|Announcement on theImplementation of the2013Annual DividendPlan|SecuritiesTimesB33,TaKungPaoB3|http://www.cninfo.com.cn/finalpage/2014-05-22/64052436.PDF|
|2014-24|2014-5-24|Announcement on the57th Session of the 7thBoardofDirectors|SecuritiesTimesB40,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-05-24/64059687.PDF|
|2014-25|2014-5-24|Announcement onPurchasingPrincipal-guaranteedBank financialproducts|SecuritiesTimesB40,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-05-24/64059682.PDF|
|2014-26|2014-5-24|Notice on Holding the2014 FirstExtraordinary GeneralMeeting|SecuritiesTimesB40,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-05-24/64059681.PDF|
|2014-27|2014-5-24|Announcement onUsing the FinancialInstruments forLocking the USDFinancingCost|SecuritiesTimesB40,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-05-24/64059684.PDF|
|2014-28|2014-5-24|Announcement onTransferring 100%Equities of ShenzhenKonka Video &CommunicationSystems EngineeringCo. (After Strippingoff Partly AssetLiabilities) and theRelated-transactions|SecuritiesTimesB40,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-05-24/64059683.PDF|
|2014-29|2014-5-27|Announcement on theResignation of theCFO|SecuritiesTimesB25,TaKungPaoB11|http://www.cninfo.com.cn/finalpage/2014-05-27/64067762.PDF|
|2014-3|2014-5-28|Announcement on theSolutions of the 58th|SecuritiesTimesB28,TaKungPao|http://www.cninfo.com.cn/finalpage/2014-05-28/64072795.P|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||
|-|-|-|-|-|
|0||Session of the 7thBoardofDirectors|B16|DF|
|2014-31|2014-5-30|IndicativeAnnouncement onHolding the2014 FirstExtraordinary GeneralMeeting|SecuritiesTimesB61,TaKungPaoB21|http://www.cninfo.com.cn/finalpage/2014-05-30/64081579.PDF|
|2014-32|2014-6-10|Announcement on theSolutions of the 2014First ExtraordinaryGeneralMeeting|SecuritiesTimesB61,TaKungPaoA19|http://www.cninfo.com.cn/finalpage/2014-06-10/64119389.PDF|
|2014-33|2014-6-12|Announcement on theFourthSessionofTrialof SignificantArbitrationEvents|SecuritiesTimesB41,TaKungPaoB21|http://www.cninfo.com.cn/finalpage/2014-06-12/64127660.PDF|
|2014-34|2014-6-26|Announcement on theProgress ofTransferring 100%Equities of ShenzhenKonka Video &CommunicationSystems EngineeringCo.|SecuritiesTimesB53,TaKungPaoB3|http://www.cninfo.com.cn/finalpage/2014-06-26/1200006958.PDF|
|2014-35|2014-7-2|AnnouncementaboutPostponedDecisiononSignificantArbitration|SecuritiesTimesB32,TaKungPaoB6|http://www.cninfo.com.cn/finalpage/2014-07-02/1200023529.PDF|
|2014-36|2014-7-24|IndicativeAnnouncementonShareholdingIncreasebyControllingShareholder|SecuritiesTimesB24,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-07-24/1200073639.PDF|
||2014-7-26|DetailedReportonEquityChanges|SecuritiesTimesB28,TaKungPaoB10|http://www.cninfo.com.cn/finalpage/2014-07-26/1200078988.PDF|
||2014-7-26|FinancialConsultantReviewOpinionaboutDetailedReportonEquityChanges|SecuritiesTimesB28,TaKungPaoB10|http://www.cninfo.com.cn/finalpage/2014-07-26/1200078987.PDF|
|2014-37|2014-7-30|AnnouncementaboutReceiptofTaxRebates|SecuritiesTimesB24,TaKungPaoB6|http://www.cninfo.com.cn/finalpage/2014-07-30/1200086286.PDF|
|2014-38|2014-8-1|AnnouncementonShareTrading|SecuritiesTimesB33,TaKungPao|http://www.cninfo.com.cn/finalpage/2014-08-01/1200093073.PDF|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||
|-|-|-|-|-|
|||Suspension|B5||
|2014-39|2014-8-2|AnnouncementaboutDecisionofSignificantArbitration|SecuritiesTimesB24,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2014-08-02/1200095744.PDF|
|2014-40|2014-8-6|AnnouncementaboutHoldingOnlineCommunicationMeetingwithInvestors|SecuritiesTimesB32,TaKungPaoA22|http://www.cninfo.com.cn/finalpage/2014-08-06/1200100436.PDF|
|2014-41|2014-8-28|Abstractof2014Semi-annualReport|SecuritiesTimesB40,TaKungPaoB10|http://www.cninfo.com.cn/finalpage/2014-08-28/1200176882.PDF|
|2014-42|2014-8-28|2014Semi-annualReport||http://www.cninfo.com.cn/finalpage/2014-08-28/1200176886.PDF|
|2014-43|2014-8-29|AnnouncementaboutReceiptofTaxRebates|SecuritiesTimesB24,TaKungPaoB23|http://www.cninfo.com.cn/finalpage/2014-08-29/1200184240.PDF|
|2014-44|2014-9-30|AnnouncementaboutResolutionsMadeatthe63rdSessionofthe7thBoardofDirectors|SecuritiesTimes B,TaKungPaoA45|http://www.cninfo.com.cn/finalpage/2014-09-30/1200273838.PDF|
|2014-45|2014-9-30|AnnouncementaboutReceiving<LetterabouttheUrbanRenewalProjectRegardingJointlyDevelopingtheKonkaHeadquarters>fromOCT|SecuritiesTimesB64,TaKungPaoA45|http://www.cninfo.com.cn/finalpage/2014-09-30/1200273836.PDF|
|2014-46|2014-10-28|AbstractoftheReportforthe3rdQuarterof2014|SecuritiesTimesB113,TaKungPaoB7|http://www.cninfo.com.cn/finalpage/2014-10-28/1200340025.PDF|
|2014-47|2014-10-28|Reportforthe3rdQuarterof2014||http://www.cninfo.com.cn/finalpage/2014-10-28/1200340029.PDF|
|2014-48|2014-10-28|AnnouncementaboutResolutionsMadeatthee64thSessionofthe7thBoardofDirectors|SecuritiesTimesB113,TaKungPaoB7|http://www.cninfo.com.cn/finalpage/2014-10-28/1200340027.PDF|
|2014-49|2014-10-28|AnnouncementaboutFinancialInstrument|SecuritiesTimesB113,TaKungPao||

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||
|-|-|-|-|-|
|||PortfolioBusiness|B7||
|2014-50|2014-11-21|AnnouncementaboutResolutionsMadeatthe67thSessionofthe7thBoardofDirectors|SecuritiesTimesB33,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-11-21/1200406347.PDF|
|2014-51|2014-11-21|AnnouncementaboutGuaranteesProvidedforExternalParties|SecuritiesTimesB33,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-11-21/1200406345.PDF|
|2014-52|2014-11-21|AnnouncementaboutIncorporationofJointVenturetoDeveloptheKonkaHeadquartersPlantAreaProject&Related-partyTransaction|SecuritiesTimesB33,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-11-21/1200406344.PDF|
|2014-53|2014-11-21|NoticeoftheSecondSpecialGeneralMeetingfor2014|SecuritiesTimesB33,TaKungPaoB12,B13|http://www.cninfo.com.cn/finalpage/2014-11-21/1200406343.PDF|
|2014-54|2014-11-21|AnnouncementonResignationofDirectorandBoardChairman|SecuritiesTimesB33,TaKungPaoB13|http://www.cninfo.com.cn/finalpage/2014-11-21/1200406342.PDF|
|2014-55|2014-11-21|AnnouncementaboutHoldingOnlineCommunicationMeetingwithInvestors|SecuritiesTimesB33,TaKungPaoB13|http://www.cninfo.com.cn/finalpage/2014-11-21/1200406341.PDF|
|2014-56|2014-12-1|IndicativeAnnouncementabouttheSecondSpecialGeneralMeetingfor2014|SecuritiesTimesB8,TaKungPaoA15|http://www.cninfo.com.cn/finalpage/2014-12-01/1200424714.PDF|
|2014-57|2014-12-1|AnnouncementaboutReceiptofTaxRebates|SecuritiesTimesB8,TaKungPaoA15|http://www.cninfo.com.cn/finalpage/2014-12-01/1200424715.PDF|
|2014-58|2014-12-9|AnnouncementaboutResolutionsMadeattheSecondSpecialGeneralMeetingfor2014|SecuritiesTimesB49,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2014-12-09/1200450721.PDF|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||
|-|-|-|-|-|
|2014-59|2014-12-9|AnnouncementaboutResolutionsMadeatthe68thSessionofthe7thBoardofDirectors|SecuritiesTimesB49,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2014-12-09/1200450723.PDF|

XV. Significantevents ofthesubsidiaries oftheCompany
√Applicable□ Inapplicable
||||||
|-|-|-|-|-|
|AnnouncementNo.|Date|Title|Pageonnewspaper|Linkonhttp://www.cninfo.com.cn|
|2014-28|2014-5-24|Announcement onTransferring 100%Equities of ShenzhenKonka Video &CommunicationSystems EngineeringCo. (After Strippingoff Partly AssetLiabilities) and theRelated-transactions|SecuritiesTimesB40,TaKungPaoB12|http://www.cninfo.com.cn/finalpage/2014-05-24/64059683.PDF|
|2014-34|2014-6-26|Announcement on theProgress ofTransferring 100%Equities of ShenzhenKonka Video &CommunicationSystems EngineeringCo.|SecuritiesTimesB53,TaKungPaoB3|http://www.cninfo.com.cn/finalpage/2014-06-26/1200006958.PDF|

XVI. Particulars aboutissuingcorporate bonds bythe Company
□Applicable√ Inapplicable
2014AnnualReportofKonkaGroupCo.,Ltd.
Section VI. Changes in Share Capital and Particulars about Shareholders
I.Particulars aboutthe changesin sharecapital
1.Particulars aboutthechanges insharecapital
Unit:Share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Beforethechange||Increase/decreaseinthechange(+,-)|||||Afterthechange||
||Number|Proportion|Issuanceofnewshares|Bonusshares|Capitalizationofpublicreservefund|Other|Subtotal|Number|Proportion|
|I. Shares subject totradingtradingmoratorium|198,381,940|16.48%||||||198,381,940|16.48%|
|2.Sharesheldbystate-ownedcorporation|198,381,940|16.48%||||||198,381,940|16.48%|
|II. Shares not subject totradingmoratorium|1,005,590,764|83.52%||||||1,005,590,764|83.52%|
|1.RMBordinaryshares|599,914,960|49.83%||||||599,914,960|49.83%|
|2. Domestically listedforeignshares|405,675,804|33.69%||||||405,675,804|33.69%|
|III.Totalshares|1,203,972,704|100.00%||||||1,203,972,704|100.00%|

 Reason forthechanges in share capital
□Applicable√ Inapplicable
Approval for changes inshare capital
□Applicable√ Inapplicable
Transfer for changes in share capital
□Applicable√ Inapplicable
Effects of changes in share capital on the basic EPS, diluted EPS, net assets per share attributable to common shareholders of theCompany andother financial indexes over thelast year and last period
□Applicable√ Inapplicable
Other contents that the Company considers necessary or required by the securities regulatory
authorities todisclose
2014AnnualReportofKonkaGroupCo.,Ltd.
□Applicable√ Inapplicable
2.Changes inrestricted shares
□Applicable√ Inapplicable
II. Issuance andlistingofsecurities
1.Issuance ofsecurities over thepastthree years
□Applicable√ Inapplicable
2. Explanation on changes in share capital& the structure of shareholders, the structure of assets andliabilities
□Applicable√ Inapplicable
3.Existentshares heldbyinternal staffs ofthe Company
□Applicable√ Inapplicable
III. Particulars aboutthe shareholders andactual controller
1.Total number ofshareholders andtheir shareholdings
Unit:Share
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Totalnumberofcommonshareholdersattheendofthereportingperiod||67,755|||Totalnumberofcommonshareholdersonthefifthtradingdaybeforethedisclosuredateoftheannualreport||63,865||Totalnumberofpreferredshareholderswithresumedvotingrightsattheendofthereportingperiod(ifany)(seeNote8)||0|||
|Particularsaboutsharesheldbyshareholderswithashareholdingpercentageover5%ortheTop5ofthem||||||||||||||
|Nameofshareholder|Natureofshareholder||Shareholdingpercentage(%)|Totalsharesheldattheperiod-end||Increase/decreaseduringthereportingperiod||Numberofnon-tradablesharesheld||Numberoftradablesharesheld||Pledgedorfrozenshares||
|||||||||||||Statusofshares|Numberofshares|
|OCTENTERPRISESCO.|State-ownedcorporation||21.75%|261,873,466||33,118,683||198,381,940||63,491,526||Pledged|0|
|||||||||||||Frozen|0|
|HOLYTIMEGROUPLIMITED|Foreigncorpor||3.87%|46,533,615||-12,373,285||0||46,533,615||Pledged|0|
|||||||||||||Froze|0|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||||||
|-|-|-|-|-|-|-|-|-|
||ation||||||n||
|GAOLINGFUND,L.P.|Foreigncorporation|2.19%|26,400,625|0|0|26,400,625|Pledged|0|
||||||||Frozen|0|
|CHINARESOURCESSCPTRUSTCO.,LTD.－EXTRAORDINARYNO.18CAPITALTRUST|Domesticnon-state-ownedcorporation|1.92%|23,115,868|23,115,868|0|23,115,868|Pledged|0|
||||||||Frozen|0|
|CHINARESOURCESSCPTRUSTCO.,LTD.－EXTRAORDINARYNO.17CAPITALTRUST|Domesticnon-state-ownedcorporation|1.36%|16,422,635|16,422,635|0|16,422,635|Pledged|0|
||||||||Frozen|0|
|GUOTAIJUNANSECURITIES(HONGKONG)LIMITED|Foreigncorporation|1.30%|15,601,843|14,463,243|0|15,601,843|Pledged|0|
||||||||Frozen|0|
|ZHONGRONGINTERNATIONALTRUSTCO.,LTD.－ZHONGRONGSTRENGTHENNO.76|Domesticnon-state-ownedcorporation|1.24%|14,967,808|14,967,808|0|14,967,808|Pledged|0|
||||||||Frozen|0|
|SUNZHENXIANG|Domesticindividual|1.17%|14,093,988|-362,500|0|14,093,988|Pledged|0|
||||||||Frozen|0|
|GUOYUANSECURITIESBROKER(HK)CO.,LTD.|Foreigncorporation|1.17%|14,044,900|14,044,900|0|14,044,900|Pledged|0|
||||||||Frozen|0|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|SHENZHENPINGANUOBWEALTHONE－PINGANBANK－PINGANWEALTHONEHONGYUSPECIFICCLIENTSASSETMANAGEMENTPLANNO.1|Domesticnon-state-ownedcorporation|1.05%|12,688,226||12,688,226|0||12,688,226|Pledged|0|
||||||||||Frozen|0|
|Strategic investor orgeneral corporationbecoming a top tenshareholder due to placingofnewshares(ifany)||Naught|||||||||
|Explanation on associatedrelationshipor/andpersonsacting in concert amongthe above-mentionedshareholders:||The first majority shareholder OVERSEAS CHINESE TOWN ENTERPRISES CO. has norelated-partyrelationshipwithothershareholdersandtheyarenotacting-in-concertparties,either.Exceptforthat,theCompanydoesnotknowwhethertheothershareholdersarerelatedpartiesandwhethertheyareacting-in-concertparties.|||||||||
|Particularsaboutsharesheldbythetoptenshareholdersholdingsharesnotsubjecttotradingmoratorium|||||||||||
|Nameofshareholder||||Numberoftradablesharesheldattheperiod-end|||Typeofshares||||
||||||||Type||Number||
|OCTENTERPRISESCO.||||63,491,526|||RMBordinaryshares||63,491,526||
|HOLYTIMEGROUPLIMITED||||46,533,615|||Domesticallylistedforeignshares||46,533,615||
|GAOLINGFUND,L.P.||||26,400,625|||Domesticallylistedforeignshares||26,400,625||
|CHINARESOURCESSCPTRUSTCO.,LTD.－EXTRAORDINARYNO.18CAPITALTRUST||||23,115,868|||RMBordinaryshares||23,115,868||
|CHINARESOURCESSCPTRUSTCO.,LTD.－EXTRAORDINARYNO.17CAPITALTRUST||||16,422,635|||RMBordinaryshares||16,422,635||
|GUOTAIJUNANSECURITIES(HONGKONG)LIMITED||||15,601,843|||Domesticallylistedforeignshares||15,601,843||
|ZHONGRONGINTERNATIONALTRUSTCO.,LTD.－ZHONGRONGSTRENGTHENNO.76||||14,967,808|||RMBordinaryshares||14,967,808||
|SUNZHENXIANG||||14,093,988|||RMBordinaryshares||14,093,988||

2014AnnualReportofKonkaGroupCo.,Ltd.
|||||
|-|-|-|-|
|GUOYUANSECURITIESBROKER(HK)CO.,LTD.|14,044,900|Domesticallylistedforeignshares|14,044,900|
|SHENZHENPINGANUOBWEALTHONE －PINGANBANK－PINGANWEALTHONEHONGYUSPECIFICCLIENTSASSETMANAGEMENTPLANNO.1|12,688,226|RMBordinaryshares|12,688,226|
|Explanationonassociatedrelationshipor/andpersonsacting in concert among the top ten tradableshareholders and between the top ten tradableshareholdersandthetoptenshareholders|The first majority shareholder OVERSEAS CHINESE TOWNENTERPRISES CO. has no related-party relationship with othershareholdersandtheyarenotacting-in-concertparties,either.Exceptforthat, the Company does not know whether the other shareholders arerelatedpartiesandwhethertheyareacting-in-concertparties.|||
|Explanation ontheTop10shareholdersparticipatinginthemargintradingbusiness(ifany)(seenotes4)|SunZhenxiangholds14,093,988A-sharesthroughaclientcredittradingguaranteesecuritiesaccountofGFSecuritiesCo.,Ltd.|||

Did any of theCompany’s top 10 common shareholders or top 10 non-restricted common shareholders conduct any agreed buy-back in thereporting period?
□Yes√No
Nosuch cases in thereporting period.
2.Particulars aboutthecontrolling shareholder
Corporation
|||||||
|-|-|-|-|-|-|
|Nameofcontrollingshareholder|Legalrepresentative/companyprincipal|Dateofestablishment|Organizationcode|Registeredcapital|Businessscope|
|OCTENTERPRISESCO.|DuanXiannian|11 Nov.1985|19034617-5|RMB 6.3billion|Exportoftextile,lightindustrialproducts,etc;importof self-used goods in Shenzhen, mechanicalequipment,lightindustrialproducts,etc.asapprovedby the relevant authorities of Shenzhen (underGovernment Document JMB [92] WJMGTSZZ No.A19024);compensationtrade;investmentinindustry,tourism, real estate, commerce & trade and financialinsurance.|
|Futuredevelopmentstrategy|Aimed at creating the “aircraft carrier for Chinese cultural tourism industry”, and directed by the value of“Qualified Overseas Chinese Town to Bring Happiness to Thousands of Families”, the Company will activelyadapt to the change of national economic development way, always seize the theme of creative development,furtherdeepenandenrichtheexistingcommercial way,soastopromotethegreat-leap-forwarddevelopmentforvariousmainbusiness,andfurthersolidifyandstrengthentheleadingadvantageinthegatheringdevelopmentandoperationalareaofmodernserviceindustry.|||||
|Operatingresults,|According to the un-audited data for Jan.-Sept. 2014, the total assets of OCT Enterprises Co. stood at RMB111.919 billion, and the equities attributable to owners of OCT without subsidiaries at RMB 17.43 billion. It|||||

2014AnnualReportofKonkaGroupCo.,Ltd.
|||
|-|-|
|financialsituation,cash flows,etc.|achieved operating revenues of RMB 32.896 billion, and net profits attributable to owners of OCT withoutsubsidiariesofRMB1.701billion.ThenetcashflowsfromoperatingactivitiesstoodatRMB-425millionandthenetincreaseincashandcashequivalentsatRMB3.57billion.|
|Shares heldby thecontrollingshareholderin otherlistedcompaniesby holdingorshareholding duringthereportingperiod|OCTENTERPRISESCO.held56.90%equityofShenzhenOverseasChineseTownCo.,Ltd.(acompanylistedonthemainboardofShenzhenStockExchange,SZ.000069),meanwhile,ShenzhenOverseasChineseTownCo.,Ltd.indirectlyheld66.93%equityofOCT(Asia)HoldingsLtd.(acompanylistedonthemainboardofHongKongStockExchange).|

Change ofthecontrolling shareholderduring thereporting period
□ Applicable√ Inapplicable
Nosuch cases in thereporting period.
3.Particulars abouttheactual controller
Corporation
|||||||
|-|-|-|-|-|-|
|Nameoftheactualcontroller|Legalrepresentative/companyprincipal|Dateofestablishment|Organizationcode|Registeredcapital|Businessscope|
|State-ownedAssetsSupervisionandAdministrationCommissionoftheStateCouncil|ZhangYi|||||
|Futuredevelopmentstrategy|Inapplicable|||||
|Operating results, financialsituation,cashflows,etc.|Inapplicable|||||
|Sharesheldbytheactualcontrollingshareholderinotherlistedcompaniesbyholdingorshareholdingduringthereportingperiod|Inapplicable|||||

Change oftheactual controller during thereporting period
2014AnnualReportofKonkaGroupCo.,Ltd.
□Applicable√ Inapplicable
Nosuch cases in thereporting period.
The ownership and controllingrelationship between theactual controllerof theCompany and the Company is detailed as follows:
SASACoftheStateCouncil
100%
OCTEnterprisesCo.
21.75%(Ashares)
KonkaGroupCo.,Ltd.
The actual controllercontrols the Companyviatrust or otherways of asset management
□Applicable√ Inapplicable
4.Particulars aboutothercorporate shareholders withshareholding proportion over10%□Applicable√ Inapplicable
IV. Particulars on shareholding increase scheme during the reporting period proposed or implemented bythe shareholders andact-in-concert persons
□Applicable√ Inapplicable
No such cases in thereporting period to thebest knowledgeof theCompany.
2014AnnualReportofKonkaGroupCo.,Ltd.
Section VII. Preferred Shares
□Applicable√ Inapplicable
Nosuch cases in thereporting period.
2014AnnualReportofKonkaGroupCo.,Ltd.
Section VIII. Directors, Supervisors, Senior Management Staffs and Employees
I.Changes inshareholding ofdirectors, supervisors and seniormanagement staffs
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Name|Officetitle|Tenurestatus|Sex|Age|Startdate|Endingdate|Sharesheldattheyear-begin(share)|Amountofsharesincreasedatthereportingperiod(share)|Amountofsharesdecreasedatthereportingperiod(share)|Amountofsharesheldattheperiod-end(share)|
|ChenYuehua|ChairmanoftheBoard|Current|Male|52|8Dec.2014|-|0|0|0|0|
|SuZheng|Director|Current|Male|58|17Dec.2010|17Dec.2013|0|0|0|0|
|WangXiaowen|Director|Current|Female|45|17Dec.2010|17Dec.2013|0|0|0|0|
|HeHaibin|Director|Current|Male|40|17Dec.2010|17Dec.2013|0|0|0|0|
|FengYutao|IndependentDirector|Current|Male|47|17Dec.2010|17Dec.2013|0|0|0|0|
|YangHaiying|IndependentDirector|Current|Female|47|17Dec.2010|17Dec.2013|0|0|0|0|
|ZhangZhong|IndependentDirector|Current|Male|46|17Dec.2010|17Dec.2013|0|0|0|0|
|DongYaping|ChiefSupervisor|Current|Male|61|17Dec.2010|17Dec.2013|0|0|0|0|
|HaoGang|Supervisors|Current|Male|41|17Dec.2010|17Dec.2013|0|0|0|0|
|LiuYong|Supervisor|Current|Male|43|17Dec.2010|17Dec.2013|0|0|0|0|
|LiuFengxi|President|Current|Male|43|4Apr.2014|4Apr.2017|0|0|0|0|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|ChengDahou|VicePresident|Current|Male|54|4Apr.2014|4Apr.2017|0|0|0|0|
|HuangZhongtian|VicePresident|Current|Male|45|4Apr.2014|4Apr.2017|0|0|0|0|
|HeJianjun|VicePresident|Current|Male|45|4 Apr.2014|4 Apr.2017|0|0|0|0|
|LinGaike|VicePresident|Current|Male|43|4 Apr.2014|4 Apr.2017|0|0|0|0|
|HuangZhiqiang|CFO|Current|Male|49|4 Apr.2014|4 Apr.2017|0|0|0|0|
|LiHongtao|VicePresident|Current|Male|47|4 Apr.2014|4Apr.2017|0|0|0|0|
|WuSiyuan|Boardchairman|Left|Male|51|18 Oct.2013|8 Dec.2014|0|0|0|0|
|ChengDahou|VicePresident|Left|Male|53|25 Apr.2012|10 Jan.2014|0|0|0|0|
|YangRong|CFO|Left|Female|40|4 Apr.2014|26 May2014|0|0|0|0|
|Total|--|--|--|--|--|--|0|0|0|0|

 II. Post-holdingsituation
Main working experience of current directors, supervisors and senior management staffs over the past five years
1.Directors
Chen Yuehua, Chairman of the Board. Male, Han nationality, born in 1963. Master of Business Administration. Senior engineer. Former senior engineer of Konka Group Technological Development Center; former general manager of Konka Electric Appliance Department Technological Development Center; former general manager of President Office of Konka Group; former general manager of Dongguan Konka Electronics Co., Ltd; former vice general manager of Konka Group Multimedia Business Department; former vice president of Konka Group; former president, deputy party secretary of Konka Group; assistant to the president and secretary of the
board of Shenzhen OCT Co., Ltd. Current board chairman of Konka Group; vice president of
Shenzhen OCT Co. Ltd; president of Shenzhen OCT Vision Inc.; and president of Shenzhen Rough
2014AnnualReportofKonkaGroupCo.,Ltd.
DiamondTrading CenterCo.,Ltd.
Su Zheng, Director of the Company, was born in 1956 with the Han nationality; collage degree, a senior engineer. He have served successively as Secretary of the CPC and Vice General Manager in SHENZHEN CASIC GUANGYU LTD., Leader of the Assets Integration Team of Shenzhen Area of ChinaAerospace Science& Industry Corp., Vice Chairman of the Board and as Secretary to the CPC inAerospace Science& Industry Shenzhen (Group) Co., Ltd., as Deputy Secretary to the CPC in 999 Group Corporation (Shenzhen Southern Pharmaceutical Factory), as Chief Supervisor in Yunnan OCT Industrial Co., Ltd. Now he occupies the posts of standing committee of Vice Party Committee, Deputy Secretary to the CPC and Vice General Manager, Director of Konka Group, Director of China International Travel Service Co., Ltd.; Supervisor of Overseas Chinese Town Real Estate Co., Ltd., and Chief Supervisor, Deputy Secretary to the CPC and Secretary of Inspecting Discipline Commission in Shenzhen Overseas Chinese Town Co., Ltd. He now acts as the Deputy Party Secretary, Secretary of Commission of OCT Group, Director of Konka Group and Directorof CITS Co.,Ltd.
Wang Xiaowen, Director of the Company, born in 1969, Han nationality, is a holder of university diploma. She successively took the post of Cadre of Personnel Division of Overseas ChineseAffairs Office of the State Council, Vice General Manager of the Audit Department of Overseas Chinese Town Economic Development Corporation, Chief Financial Officer and Director in Shenzhen Overseas Chinese Town Industry Development Co, Ltd., Vice General Manager, Chief Administrative Officer of President Office, Chief Financial Officer, Supervisor and Assistant to President in Overseas Chinese Town Group Corporation, Director of Shenzhen OCT Real Estate Co., Ltd., Supervisor of Shenzhen Overseas Chinese Town Co., Ltd., Supervisor of Konka Group and Chairman of the Board in Shenzhen Overseas Chinese Town Hotel Group Co., Ltd. Now she serves as Standing Committee member of Party Committee in Overseas Chinese Town Group Corporation, Director in Konka Group Co., Ltd., Chairman of the Board in Overseas Chinese Town (Asia) Holdings Limited and Shenzhen OCT Investment Co., Ltd., Director in Union Developing Group of China, Vice Chairman of the Board of Supervisors of China International Travel Service Co., Ltd., Chairman of the Board in Overseas Chinese Town Hong Kong Limited and Overseas Chinese Town (Asia) Holdings Limited and Shenzhen OCT Investment Co., Ltd., and Vice President, Party Committee of Shenzhen OCT Co., Ltd.He’s also at the same time vice chairman ofCentral EnterpriseYouth Federation andvice chairman oftheAccounting Society ofShenzhen. He Haibin, Director of the Company, born in 1974, Han nationality, holds undergraduate degree, is a senior accountant. He has successively taken the posts as 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
2014AnnualReportofKonkaGroupCo.,Ltd.
as CFO in Overseas Chinese Town Hong Kong Limited, etc.. Now he is the Chief of Enterprise Management Department in Overseas Chinese Town Group Corporation, as well as a director of Konka Group.
2.Independent Director
Feng Yutao, Independent Director of the Company, was born in 1967 with the Han nationality. He graduated from Duke University with doctor of electronics engineering. He ever took senior management staff in C-Cube Microsystems, LSI Logic Inc. and Zoran Corporation. Now he acts as Vice President of Ambarella Inc., General Manager of Ambarella Inc., China and Independent Directorof KonkaGroup.
Yang Haiying, Independent Director of the Company, was born in 1967 with the Han nationality, and she graduated from the department of accounting of Shanghai Maritime University, being a senior accountant. She used to work in Waterway Bureau of Guangzhou as Accountant, and in China Shipping Container Lines Co., Ltd. as senior accountant. Now she serves as Senior Accountant in Hamburg Fritz und Mark Certified Public Accountants and Independent Director of Konka Group.
Zhang Zhong, Independent Director of the Company, was born in 1968 with the Han nationality. He gained Master of Law from Renmin University of China, being a lawyer. He ever took the post of lawyer in Beijing Zhengpingdeng Law Firm. Now he acts as Lawyer and Copartner of Beijing Zhonglun Law Firm and Independent DirectorofKonka Group.
3.Supervisor
Dong Yaping, Chief Supervisor of the Supervisory Committee, born in 1953, Han nationality, diploma of college, is an economist and Senior political officer. He has successively held the posts of Division Chief of Department of Foreign Affairs Financial Supervision under the Ministry of Supervision, Cadre of Overseas Chinese Affairs Office of the State Council, Deputy Secretary of the CPC and Secretary of Inspecting Discipline Commission and Vice President in Overseas Chinese Town Group Corporation, Chief Supervisor of the Supervisory Committee of Shenzhen Overseas Chinese Town Holding Company, Vice Chairman of the Board in Changsha Window of the World Co., Ltd., Director of Chengdu Tianfu Overseas Chinese Town Industrial Development Co., Ltd., Chief Supervisor of the Supervisory Committee in Taizhou OCT Investment Development Co., Ltd., Supervisor in Shenzhen OCT East Co., Ltd., Standing Committee Member of the CPC and Vice GM in Overseas Chinese Town Group Corporation and Vice Chairman of the Board in Shenzhen Overseas Chinese Town Co., Ltd.. Now he is Consultant of the OCT Group and Chief Supervisor of the Supervisory Committee in Konka Group Co., Ltd.; He is also at the same time Vice President of Shenzhen Foundation for Justice and Courage, a member of the Advisory Committee of Shenzhen Municipal Government, a member of the Expert Evaluation Committee for Shenzhen Mayor Quality Award and a member of the presidium of Chinese Culture Promotion Society
Hao Gang, was born in 1973, Han nationality, bachelor degree. He successively took the post such as Vice Chief of the Inspection Office, etc. in Overseas Chinese Town Group Corporation. Now he
2014AnnualReportofKonkaGroupCo.,Ltd.
is the Chief of the Inspection Office in Overseas Chinese Town Group Corporation and a supervisor ofKonka Group.
Liu Yong, Staff Supervisor, Han nationality, born in 1972, bachelor holder of postgraduate, is an assistant to engineer. He successively took posts of Vice Chief ofGM’s Office in Shenzhen Konka Telecommunications Technology Co., Ltd. and Vice Chief of Office of Konka Group. Now he is Office Chiefand a supervisorof KonkaGroup.
4.SeniorExecutives
Liu Fengxi, President, Han nationality, born in 1972, postgraduate. He was once 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 andVicePresident of KonkaGroup, etc.
Huang Zhongtian, Vice President. He is male, Han nationality, born in 1961, bachelor degree and Senior Administration Engineer. He successively took the post such as Assistant to President, Vice General Manager, Vice President, and Deputy Secretary of party Committee and Secretary of Commission etc. ofKonka Group.
He Jianjun, Vice President of the Company, was born in 1969 with the Han nationality; he obtained bachelor degree; being Economist. 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 in Konka Group, etc.
Xiao Qing: Secretary of the Board; was born in 1969 with the Han nationality; he got bachelor degree, being Economist. He used to be Business Assistant to the President and Deputy Chief of Strategic Development Dept. as well as Chief of the Investment Development Center in Konka Group Co., Ltd., etc.
Lin Gaike: Vice President, male and was born in 1972 with the Han nationality; he got bachelor degree, being Engineer.HeusedtobeDirectorofNewType Display Design of Konka Group, Vice GM of Digital Tablet Business Division of Konka Group and Vice GM of Color TV Business Division of Konka Group.
Huang Zhiqiang, CFO. Male, Han nationality, born in 1966, bachelor degree. Former financial manager of HKOCT; former chief inspector of OCT (Asia) Holdings Ltd; former general manager of Zhongshan Huali Packaging Co., Ltd; former chief financial officer and vice general manager of HKOCT; former vice president of OCT (Asia) Holdings Ltd; director of Shanghai Huali Packaging Co., Ltd; vice general manager of Happy Valley Travel Branch of Chengdu Tianfu OCT Industrial Development Co., Ltd; financial officer of Chengdu Tianfu OCT Industrial Development Co., Ltd; vice general manager of HKOCT; vice general manager of OCT (Asia) Holdings Ltd; and vice general manager ofShenzhen Huali Packaging Co.,Ltd, etc.
Li Hongtao, Vice President. He is male, Han nationality, born in 1968; bachelor degree. He
successively took the post such as Assistant to General Manager, General Manager, Director and
2014AnnualReportofKonkaGroupCo.,Ltd.
General Manager of Shenzhen Konka Telecommunication Technology Co., Ltd and Assistant President ofKonkaGroup etc.
Post-holdinginshareholders’units
√Applicable□Inapplicable
|||||||
|-|-|-|-|-|-|
|Nameofthepersonholdinganypostinshareholder’sunit|Nameofshareholder’sunit|Positioninshareholder’sunit|Beginningdateofofficeterm|Endingdateofofficeterm|Receivespaymentfromshareholder’sunit?|
|SuZheng|OCTHoldingsCompany|Standing committee member ofParty Committee, DeputySecretary of Party Committeeand Secretary of InspectingDisciplineCommission|1Mar.2008|Unknown|Yes|
|WangXiaowen|OCTHoldingsCompany|Standing committee member ofPartyCommittee|1Mar.2008|Unknown|No|
|DongYaping|OCTHoldingsCompany|Consultant of OCTENTERPRISESCO|1Mar.2014|Unknown|Yes|
|HeHaibin|OCTHoldingsCompany|Chief of EnterpriseManagementDepartment|1Feb.2010|Unknown|Yes|
|HaoGang|ShenzhenOCTCo.,Ltd.|ChiefofInspectionOffice|1Mar.2010|Unknown|No|
|Notestopost-holdinginshareholder’sunit|1. Except the above situation, other directors, supervisors and senior management didn’t hold any position in theshareholders’units.2.ItisunknowntheendingdateofthepostsofMr.ChenYuehua,Mr.WuSiyuan,Mr.Suzheng,Ms.WangXiaowen,Mr.DongYaping,Mr.HeHaibinandMr.HaoGangheldintheshareholders’units.3.Mr.SuZhenghastaken thepost ofDeputySecretary ofpartyCommitteeandSecretary ofCommissionofOCTENTERPRISESCO.fromMar.2008tonow|||||

Post-holdingin other units
√Applicable□ Inapplicable
|||||||
|-|-|-|-|-|-|
|Nameofthepersonholdinganypostinotherunits|Nameofotherunit|Positioninotherunit|Beginningdateofofficeterm|Endingdateofofficeterm|Receivespaymentfromotherunit?|
|WangXiaowen|CentralEnterpriseYouthFederation|VicePresident|||No|

2014AnnualReportofKonkaGroupCo.,Ltd.
|||||
|-|-|-|-|
|WangXiaowen|AccountingSocietyofShenzhen|ViceChairman|No|
|DongYaping|AdvisoryCommitteeofShenzhenMunicipalGovernment|VicePresident|No|
|DongYaping|ChineseCulturePromotionSociety|Member|No|
|FengYutao|AmbarellaInc.|ViceChairman|Yes|
|YangHaiying|HamburgFritzundMarkCertifiedPublicAccountants|VicePresident,GMofChineseArea|Yes|
|ZhangZhong|BeijingZhonglunLawFirm|SeniorAccountant|Yes|
|Notestopost-holdinginotherunits|Ms.WangXiaowenandMr.DongYapingalltookpart-timejobinotherunits,whileMr.FengYutao,Ms.YangHaiyingandMr.ZhangZhongweretheindependentdirectorsoftheCompany.|||

III. Remuneration fordirectors, supervisors and seniormanagementstaffs
Decision-making procedure, determining basis and actual payment for the remuneration of directors, supervisors and senior management staffs
(I) Remuneration of directors and supervisors of the Company was submitted for review and approval of theShareholders’ General Meeting after the review and approval of the Board of Directors. In the reporting period, the Company did not pay directors (excluding independent directors) or supervisors any remunerations or subsidies. The total remunerations paid to the top three directors that enjoyed the highest amounts were RMB 285,600 that was the total remuneration of three independent directors. Subsidies for each independent director of the Company were RMB 80,000 for every year (tax excluded). Other treatment for independent directors: travel expense when they went to attend the Board sessions orShareholders’General Meetings and the expenses when they were performing their duties as stipulated in the relevant regulations and the Articles of Association andotherrelevant systems, all thesecould be reported for deletion.
(II) The Board of Directors determined the remuneration of senior management staffs, and referred to the following factors: a. scope of jobs and responsibility shouldered; b. actual profit of the Company; c. market remuneration level in thesame industry andsame area.
Remuneration of the directors, supervisors and senior management of the Company during the reporting period
Unit: RMB Ten Thousand Yuan
|||||||||
|-|-|-|-|-|-|-|-|
|Name|Position|Sex|Age|Tenurestatus|TotalremunerationgainedfromtheCompany(RMB0’000)|TotalremunerationgainedfromtheunitsoftheShareholders|Totalactualremunerationgainedfromthereportingperiod|
|ChenYuehua|ChairmanoftheBoard|Male|52|Current|0|||

2014AnnualReportofKonkaGroupCo.,Ltd.
|||||||||
|-|-|-|-|-|-|-|-|
|SuZheng|Director|Male|58|Current|0|71.42|71.42|
|WangXiaowen|Director|Female|45|Current|0|||
|HeHaibin|Director|Male|40|Current|0|71.25|71.25|
|FengYutao|IndependentDirector|Male|47|Current|9.5||9.5|
|YangHaiying|IndependentDirector|Female|47|Current|9.5||9.5|
|ZhangZhong|IndependentDirector|Male|46|Current|9.5||9.5|
|DongYaping|ChiefSupervisor|Male|61|Current|0|||
|HaoGang|Supervisors|Male|41|Current|0|68.57|68.57|
|LiuYong|Supervisor|Male|43|Current|65.2||65.2|
|LiuFengxi|President|Male|43|Current|122.6||122.6|
|HuangZhongtian|VicePresident|Male|54|Current|95.3||95.3|
|HeJianjun|VicePresident|Male|45|Current|95.3||95.3|
|XiaoQing|SecretarytotheBoard|Male|45|Current|95.3||95.3|
|HuangZhiqiang|CFO|Male|49|Current|25.6||25.6|
|LinGaike|VicePresident|Male|43|Current|95.3||95.3|
|LiHongtao|VicePresident|Male|47|Current|74.8||74.8|
|WuSiyuan|ChairmanoftheBoard|Male|51|Left|35.4||35.4|
|ChengDahou|VicePresident|Male|53|Left|0|||
|YangRong|CFO|Female|40|Left|69.6||69.6|
|Total|--|--|--|--|802.9|211.24|1,014.14|

 Particulars about the equity incentives awarded for the directors, supervisors and senior management staffs oftheCompany during thereporting period
□Applicable√ Inapplicable
IV.Particulars aboutchanges ofDirectors, Supervisors and SeniorExecutives
||||||
|-|-|-|-|-|
|Name|Position|Type|Date|Reason|
|WuSiyuan|ChairmanoftheBoard|Left|8Dec.2014|Resignedowningtoworkchanges|

2014AnnualReportofKonkaGroupCo.,Ltd.
||||||
|-|-|-|-|-|
|ChenYuehua|ChairmanoftheBoard|Elected|8Dec.2014|BeelectedastheDirectorbytheAnnualGeneralMeetingandbeelectedasChairmanoftheBoardbythemeetingoftheBoardofDirectors|
|HuangZhiqiang|CFO|Engaged|26May2014|BeengagedbythedecisionofthemeetingoftheBoardofDirectors|
|YangRong|CFO|Left|23May2014|Resignedowningtopersonalreason|
|ChengDahou|VicePresident|Left|10Jan.2014|Resignedowningtopersonalreason|

V. Particulars about changes in core technical team or key technicians during the reporting period (notdirectors, supervisors or seniormanagement staffs)
There were no changes in core technical team or key technicians of the Company during the reporting period.
VI.Aboutemployees
Uptothe period-end, there were 18,776employees ofthe Company in total.
1. Classified by the professional structure: 1,227 technical staffs, 3,718 marketing staffs, 1,715 administration staffs,12,116production and otherstaffs;
Distribution diagram of theserving employees of2014
Technicalstaffs
Marketingstafss
Administrativestaffs
Productionstaffs
2. Classfied according to the education degree: 179 master and above, 2,816
bachelor degree, 6,039 technical secondary and 9,742juniorhigh school and below.
Distribution diagram of theeducation degree ofthe serving employees of 2014
2014AnnualReportofKonkaGroupCo.,Ltd.
Masterandabove
Bachelordegree
Technicalsecondary
Other
(II)Employee’sremuneration 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 theemployee’s remuneration level according to its business earnings, theposts and fulfillment ofthebusiness performance of theemployee.
(III)Employee’s training plan
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 2014, 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 to bettercomplete its annual training plan.
2014AnnualReportofKonkaGroupCo.,Ltd.
Section IX. Corporate Governance
I. Basic information ofcorporate 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 the Articles of Association and Administrative 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 oflisted 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 2014, the Company convened threeShareholders’ 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. TheCompany’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 andtheinternal departments of theCompany functioned independently.
2014AnnualReportofKonkaGroupCo.,Ltd.
(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. 19 Board sessions were convened by the Company during the reporting period, which brought the decision-making mechanism ofthe Board ofDirectors intofull play.
(IV) Supervisors andsupervisory 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, t he 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 seniormanagement members.
(V) Performance Appraisal andIncentive& 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 thestabilityof seniormanagement staffs. (VI) Interested parties
2014AnnualReportofKonkaGroupCo.,Ltd.
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, promoted the environmental protection, and actively joined in the social benefit and charitable cause so as 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. 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 Y2008to Y2014in ShenzhenSecurities Regulatory Bureau.
(VIII) Non-standard governance
1.Type ofnon-standard governance matter existed
There was asituation that theCompany disclosed undisclosed information.
2.Types andcycle ofundisclosed 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 ListedCompany’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.
Whether it exists any difference between the corporate governance and the Company Law and relevant rules ofCSRCornot?
□Yes√ No
2014AnnualReportofKonkaGroupCo.,Ltd.
There is no difference between the corporate governance and the Company Law and relevant rules ofCSRC.
Progress ofcorporategovernance activities, promulgation and implementation ofRegistration System forInformation Insiders
(I) Establishment ofrobust Management System forInformation Insiders
To further standardize the enterprise inside information management, strengthen the confidentiality of the enterprise inside information and maintain the fairness principle of information disclosed, the company has established Konka Group Incorporated Company Management System for Inside Information and Its Insiders in light of such regulations related to laws, regulations and standardized Files as Company Acts, Securities Law, Listing Company Information Disclosure Management Methods and Listing Company Rules in Shenzhen Stock Exchange; the company revised Management System for Inside Information and Its Insiders according to Regulations on establishment Registration Management System for Inside Information and Its Insiders by the listed company and made by CSRC and Notifications on requirements for further management of inside information by Shenzhen SRC within reporting period. The company strictly implements the system during information disclosure. Meanwhile, seriously implement the company registration and management methods for inside information, register the information insiders, and file the registration inShenzhen Securities SZSE andShenzhen SRCaccording to therelevant regulations. Special examination has been taken regarding the inside information management during the period of major projects undertaken and annual reporting in 2014. It is examined that the information insiders did stick to the confidentiality regulations during the period of periodic report, formulation for major projects, examination and disclosure. No inside information was disclosed, revealed or spread to the public, and the information insiders did not utilize the inside information to sell the company shares prior to the disclosure of major and sensitive information that influences the company share price, and the monitoring departments were not inspected and reformed. Management System for Inside Information and Its Insiders was implemented and controlled properly and efficiently.
For details about the Management System for Inside Information and Its Insiders, please refer to the publicnotice disclosed onwww.cninfo.com.cn dated 28Dec. 2011.
(II) Establishment and implementofmanagement system for theuser ofexternal information In order to strengthen the management of the reporting of company inside information, the company has established inside information reporting management system in light of such relevant regulations regarding laws, regulations and standardized files as Securities law of the People's Republic of China, Management methods of information disclosure for listed company, and Konka Group Incorporated Company Management System for Inside Information and Its Insiders, regulating onthereporting scope, procedure and responsibilitydivision ofinsideinformation. Special examination has been taken regarding the reporting situation of inside information management during the period of the major projects undertaken and annual reporting in 2014. It is examined that the inside information reporting is subject to the requirements of inside information reporting management system which is implemented and controlled properly and effectively. II. Particulars about annualshareholders’ general meeting and specialshareholders’ general meeting held duringthe reportingperiod
2014AnnualReportofKonkaGroupCo.,Ltd.
1.Particularsaboutannualshareholders’general meeting heldduringthereporting period
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|Session|Conveningdate|Nameofproposal|Resolution|Disclosuredate|Disclosureindex|
|2013AnnualShareholders’GeneralMeeting|25Apr.2014|1. Work Report of the Board ofDirectorsin2013;2.WorkReportofthe Supervisory Committee in 2013;3. 2013 Annual Report; 4. Proposalon 2013; 5. Annual ProfitsDistribution Plan; 6. Proposal onEngagement of the Audit Firm onFinancial Statements and InternalControl for theCompany in 2013; 7.Proposal on the Appliance for theGeneral Credit Limit of Bank ofChina; 8. Proposal on Authorizingthe Management Layer of theCompany Choosing to Sell theEquityoftheJointStockCompanies;9.ProposalonRevisingtheRelevantRegulations of the Articles ofAssociation|Alltheproposalswerereviewedandapprovedatthesession.|26Apr.2014|Announcement onResolutions Made at the2013 Annual Shareholders’General Meeting(Announcement No:2014-2),http://www.cninfo.com.cn/finalpage/2014-04-26/63924031.PDF|

2.Particularsaboutspecialshareholders’ general meeting heldduringthereporting period
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|Session|Conveningdate|Nameofproposal|Resolution|Disclosuredate|Disclosureindex|
|TheFirstSpecialShareholders’GeneralMeetingfor2014|9Jun.2014|1. Proposal on Applying the ComprehensiveCreditLinetoCCB;2.ProposalonLockingtheUSD Financing cost through Using theFinancial Instruments; 3. Proposal onTransferring the Whole Equity of VideoCompany.|Alltheproposalswerereviewedandapprovedatthesession.|10Jun.2014|Announcement onResolutions Madeat First SpecialShareholders’General Meetingfor 2014(AnnouncementNo: 2014-32),http://www.cninfo.com.cn/finalpage/2014-06-10/64119389.PDF|
|TheSecondSpecialShareholders’GeneralMeetingfor2014|8Dec.2014|1. Proposal on the Cooperation DevelopmentPlan of the Urban Renew Project of theHeadquarters Factory of Konka; 2. Proposal onProviding the Credit Guarantee Quotation for ShenzhenKonka Telecommunication Technology Co., Ltd.; 3. Proposal onProviding Credit Guarantee Quotation for Kunshan KonkaElectronics Co., Ltd.; 4. Proposal on Providing Credit|Alltheproposalswerereviewedandapprovedatthe|9Dec.2014|Announcement onResolutions Madeat Second SpecialShareholders’General Meetingfor 2014(Announcement|

2014AnnualReportofKonkaGroupCo.,Ltd.
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|GuaranteeQuotation for Dongguan Konka ElectronicsCo., Ltd.; 5. ProposalonProvidingCreditGuaranteeQuotationfor Shenzhen Konka Information Internet Co.,Ltd.; 6.Proposal on Providing Credit Guarantee Quotation forAnhui Konka Electronics Co., Ltd.; 7. ProposalonProviding CreditGuaranteeQuotation for Shenzhen KonkaElectrical Appliance Co., Ltd.; 8. Proposal onProviding Credit Guarantee Quotation for YishijieCommercial Display Co., Ltd.; 9. .Proposal onProviding Credit Guarantee Quotation for Anhui KonkaTongchuang Electrical Appliance Co., Ltd.; 10.ProposalonSupplementingMr.ChenYuehuaastheDirectorofthe7thBoardofDirectors.|session.|No: 2014-58),http://www.cninfo.com.cn/finalpage/2014-12-09/1200450721.PDF|

3. Preferred shareholders with recovered voting rights request the holding of the Extraordinary General Meeting
□Applicable√ Inapplicable
III. Performance ofthe IndependentDirectors during theReporting Period
1. Particulars about the independent directors attending the board sessions and theshareholders’general meetings
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|Particularsabouttheindependentdirectorsattendingtheboardsessions|||||||
|Nameofindependentdirectors|Duepresence|Presenceinperson|Presencebytelecommunication|Entrustedpresence|Absence|Failingtopresentinpersonfortwoconsecutivesessionsornot|
|YangHaiying|18|2|16|0|0|No|
|FengYutao|18|1|17|0|0|No|
|ZhangZhong|18|0|18|0|0|No|
|Presenceofindependentdirectorsinshareholders’generalmeeting||5|||||

Explanation onfailing topresent in person for two consecutivesessions:
Inapplicable
2.Particulars aboutindependentdirectors propose objection on relevantevents
Whether independent directors propose objection onrelevant events or not?
√Yes□ No
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|-|-|-|
|Name|Events|Content|
|FengYutao,YangHaiying,|Proposal on the Joint Development of the Urban New Project of theHeadquarters Factory of the Konka Group by OCT Group. The renew|The Independent Directors cannot issue any advice on the|

2014AnnualReportofKonkaGroupCo.,Ltd.
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|-|-|-|
|ZhangZhong|transformationprojectthatOCTGroupCompanyandKonkaGroupjointlyset up the joint venture for developing the headquarters factory of KonkaGroup; the equity proportion of the joint venture was: OCT GroupCompanyof40%andKonkaGroupof60%.|cooperation development planputforwardbyOCTGroup,sohad voted abstention vote ontheproposal.|
|NotesoftheobjectionontherelevanteventsoftheCompanybytheIndependentDirectors|I.AlthoughConsentAwardofShenzhenCourtofInternationalArbitrationmentionedthat:whenOCTGroupput forward to jointly participate in the development of the urban renew project involved with the lawsuitdisputeslandunder reasonableconditions,KonkaGroupnever reject. ButwhentheConsentAwardhadnotmade definite descriptions on the “reasonable conditions”, that also meant there were no any advice andjudgment on the specific cooperation contents and methods of the development of theurban renew project.Fromthesituationknownbymyself,thecooperationdevelopmentproportionheldbythemediumandsmallshareholdersoftheKonkaGrouphadcertaindifferencebetweentheproportionmentionedintheproposalputforward bytheOCTGroupCompany,andtheOCTGroupCompanyhadnot madeanyspecificdescriptiononthecooperationdevelopment proposal.Thus, I can not issueanyadvice on thecooperationdevelopmentproposalputforwardbyOCTGroupCompany,soIcanjustvotetheabstentionvote.II.Inview oftheAnnual General Meetingisrequiringfor theinternet voting,andthevotingmechanism ofthe shareholders is rather perfect, so under the situation of holding the Annual General Meeting, theshareholders would have the opportunity to fully issue the advice on the events submitted to the AnnualGeneralMeeting;forpromotingtheurbanrenewdevelopmentoftheheadquartersfactoryofKonkaGroupassoonaspossible,wesuggesttherelevantshareholderstodirectlysubmittheProposalonJointlyDevelopmentoftheUrbanRenewProjectofKonkaGrouptotheAnnualGeneralMeeting.||

3.Other explanationonperformance of independentdirectors
Whether theadvices ofindependent directors for theCompany were adopted ornot?
√Yes□No
Explanation ontheadvices of independent directors fortheCompany being adopted ornot adopted In the reporting period, independent directors of the Company actively participated in relevant meetings, earnestly reviewed each proposal, and objectively issued their opinions and attitudes and acknowledged operation of the Company, establishment of internal control, and execution of proposals of theBoard Bureau andShareholders’General Meeting.
As the experts of each field, the Independent Directors of the Company actively provided professional suggestions on internal management, which including: reinforced management on business procedure, reinforced establishment of internal control, reinforced research on advanced technology of color TV, reinforced management on cash flow and accounts receivable, etc.. The Company carefully adopted opinions of independent directors, continuously perfected and improved management level oftheCompany.
IV.Performance oftheSpecial Committees undertheBoard duringthe reporting period (I) Summary report on the performance of the Audit Committee subject to the Board of
Directors
1.Establishment and perfection ofrelated working system ofFinancialAuditCommittee
2014AnnualReportofKonkaGroupCo.,Ltd.
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.
The Financial Audit Committee under the Board of the Company was composed of three independent directors, including two independent directors and one non-independent director, and the post of Chairman was held by Ms. Yang Haiying, an independent director with specialty in accounting.
The Financial Audit Committee under the Board of the Company has fulfilled the following duties based on the principle of diligence and responsibility and according to relevant laws and regulations of CSRC and Shenzhen Stock Exchange, as well as relevant provisions in Work Rules for the FinancialAudit Committeeunder theBoard and System ofIndependent Directors:
2.It has fulfilled thefollowing duties during thepreparation ofAnnual Report 2014:
(1) Reviewed and approved thearrangement for 2014annual auditing oftheCompany;
(2) Issued Audit Opinion of the Financial Audit Committee on Financial Accounting Statements 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 onAnnualAuditingbyRuihuaCertified PublicAccountants.
(6) Submitted the decision on the resolution of the annual financial statement of the Company to the Board
(7) Submitted thedecision ontheresolution of engagement ofthe CPAs in 2015totheBoard 3. In 2014, 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.
4. Reviewed financial statements ofAnnual Report 2013, First Quarterly Report 2014, Semi-Annual Report 2014, and the Third Quarterly Report 2014, and had no objection to the aforesaid financial statements.
5. Proposed to engage Ruihua Certified Public Accountants as the audit institution for annual financial statement auditing 2015oftheCompany after investigation.
6. During the preparation of Annual Report 2014, the Company mainly fulfilled the following duties:
(1) Before the CPAs started the annual auditing, the FinancialAudit Committee communicated with the CPAs responsible for the annual auditing face to face, and discussed about the personnel component oftheauditing group, theplan of auditingand thefocus oftheannual auditing.
(2) It deliberated the Financial Accounting Statements prepared by the Company before theCPAs’ entry of Auditing, and issued the Audit Opinion of the Financial Audit Committee on Financial Accounting Statements Prepared by the Company beforeCPAs’ entry of Audit, with details as follows:
A.Weagreed tosubmit theFinancial Statements to theCPAsfor auditing.
B. The intermediary institution for annual auditing engaged by the Company should carry out the
2014AnnualReportofKonkaGroupCo.,Ltd.
audit work stringently according to the requirement of Professional Code ofChina’s CPA in the process of auditing, and duly communicate with the committee if significant problems were discovered.
(3) It reviewed the Arrangement for Annual Auditing 2014 of Konka Group Co., Ltd prepared by the Company before theCPAs’entry ofAuditing, and approved the arrangement for the auditing of annual report 2014.
(4) The Financial Audit Committee communicated with the internal auditing department on the internal auditing.
(5) During the auditing of the annual financial report, the Committee twice sent letters to urge the CPAs responsiblefor annual auditing to completetheauditing as scheduled.
(6) It deliberated the Financial Accounting Statements of the Company after the CPAs issued the preliminary audit opinion, and issued theAudit Opinion on Financial Accounting Statements of the Company after CPAs Issued thePreliminaryAudit Opinion,with details as follows:
The Committee kept in touch with the CPAs when the Financial Statements 2014 of the Company were audited. Weinquired the management of the Company about the events concerned by the audit institution and again reviewed the Financial Statements of the Company as soon as the intermediary institution formed the preliminary opinion. The annual audit institution of the Company gave an explanation to us on the problems which were discovered during auditing and the events, which needed adjusting, and the Company conducted corresponding adjustment based on the opinion of the annual audit institution.
Wedidn’t have objection to the Financial Accounting Statements 2014 of the Company audited preliminarily byRuihuaCertified PublicAccountants.
(7) It deliberated the Financial Statements 2014 after the auditing by annual audit institution, and issued the resolution of the Financial Accounting Statements 2014 of the Company, with details as follows:
After careful checking by members of the Financial Audit Committee, we have no objection to the standard unqualifiedAuditors’ Report 2014 of the Company issued by Ruihua Certified Public Accountants.
(8) It issued the Summery Report on the Annual Auditing 2014 by RSM China Certified Public Accountants.
According to the requirement of relevant documents like Work Rules for the Financial Audit Committee under the Board, it summarizes the annual auditing 2014 of the Company by the CPAs as follows:
Ruihua Certified Public Accountants (hereafter refers to CPA firm) had audited and evaluated the financial condition of Konka Group in 2014, mainly concerning audit assessment on financial condition, annual operation, and cash flows at the end of 2014, as well as special explanation on fund occupation of controlling shareholders of the Company and its related parities. During the annual audit, the Financial Audit Committee followed up and cooperated when necessary.After the annual auditing, the CPA firm issued a standard audit report with clean opinion on paper as to the annual auditing oftheCompany.
A. General information
The CPAs communicated with the Board of Directors and the management team of the Company and signed the audit engagement with the Company.After negotiation between the Committee and
2014AnnualReportofKonkaGroupCo.,Ltd.
CPAs firm, the overall time schedule of audit on Annual Financial Report 2014 was determined. During field audit of the audit team, the Committee fully communicated with the CPAs, and urged the CPAs to submittheaudit report withintheagreed timelimit.
The audit team worked efficiently and conscientiously to accomplish all audit procedures within the time limit according to the schedule of the audit plan, acquired enough and proper audit evidences, and submitted an audit report with standard unqualified opinion.
B. Professional ethics ofaccountants in theCPAsexecuting annual audit
During the audit, except for the payment agreed in the audit contract, the CPAs firm did not obtain any other cash or economic benefit in any other form from the Company.There’s no direct or indirect mutual investment, or close business relationship between the CPAs and the Company, nor there any relation between members of the audit team and decision-making staffs of the Company. During the audit, the CPAs firm and the audit team maintained independence in form and substance, and obeyed requirements concerning keeping independency in basic principles of obeying professional ethics from thebeginning to theend.
The members of the audit team had professional knowledge and relevant professional certificates that were needed to take on the audit, were competent for the audit, and were able to maintain due concern and professional prudence.
C.Opinion about theaudit plan
During the audit of Y2014, the Committee fully negotiated with the CPAs. On that basis, the audit team complied with the overall audit strategy and specific audit plan, which made full preparation for accomplishment ofaudit assignments and reduction of audit risks.
D.Appraisal ontheexecution ofdetailed auditing procedures
Based on appraising the completeness of internal control, rationality of design and effectiveness of operation, the CPAs firm decided the controlling test procedures and substantive test procedures to be implemented, soas to gain thenecessary auditing evidence forissuing theaudit opinion.
E.Communication during theauditing
During the audit, the members of the audit team and the Company kept sustainable and sufficient communication, which resulted in a more mature judgment for the auditor to give a fair audit conclusion.
F.Reply to thesupervision letterand inquiry
During the auditing, the Committee fully communicated and exchanged opinions with the CPAs on the problems occurring during the auditing, and sent the Supervision Letter of Urging the CPAs to SubmittheAuditor’s Report on Time, to urge the CPAs responsible for annual auditing to speed up the pace and improve the efficiency so as to accomplish theauditor’s report as scheduled; The CPAs gave positiveresponseto thesupervision letters and the inquiry.
G.Assessment of audit work executed bytheCPAs
During the period of serving as the audit firm of the Company and providing the audit service, Ruihua Certified Public Accountants adhered to conduct independent audit with objective and fair attitude, and it better executed the responsibilities and duties stipulated in the Business Agreement, as well as completed the audit work timely.TheAudit Committee expressed satisfaction towards the audit work in2014conducted byRuihuaCertified PublicAccountants.
(9) It issued theresolution ofengagement of CPAsin 2015,with detailsas follows:
2014AnnualReportofKonkaGroupCo.,Ltd.
Since Ruihua Certified Public Accountants provided the Company with its professional auditing service based on its approved professional etiquette, rigorous work style and upper occupational level in annual audit of Financial Statements 2014 of the Company, the Committee suggested continuing engaging Ruihua Certified Public Accountants as the audit institution for the Financial Statement 2015oftheCompany.
(II) Summary report on the performance of the Remuneration Committee subject to the Board ofDirectors
The Remuneration and Appraisal Committee under the Board of Directors was composed of three Directors, two Independent Directors and one Non-Independent Director. Mr. Feng Yutao, the Independent Director,held thepost ofChairman.
Within the reporting period, the Remuneration and Appraisal Committee examined the remuneration of Directors, Supervisors and Senior Management Staff, and expressed opinions as follows:
1. The remuneration of Directors, Supervisors and Senior Management Staff of the Company disclosed intheAnnual Report 2014was in linewith theactual situation.
2. The disclosed remuneration of theCompany’s Directors, Supervisors and Senior Management Staff complied with the remuneration management system of the Company, and no breach of the remuneration management system occurred in theCompany.
V. Performance oftheSupervisory Committee
Whether the Supervisory Committee finds the Company existing risks or not in the supervisory activities during the reporting period?
□Yes√No
The Supervisory Committeehas noobjection onthesupervised events during the reporting period VI. Particulars about theCompany’s “five-separation” from the controlling shareholder in respectof business, personnel,assets, organization andfinancing
Within the reporting period, the Company was highly independent in terms of business, staff, assets, organs and finance from its controlling shareholders, which owned independent legal representative and main status in market competition, and had independent accounting, as well as possessed complete business system and theabilityof independent operation to face 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 staffs, financial personnel and business personnel received their remunerations in the Company, they were full-time staffs of the Company without holding any post except directors and supervisorsinshareholders’unitsor otherrelated enterprises.
(III) Assets integrity: the Company had places of production and operation 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
2014AnnualReportofKonkaGroupCo.,Ltd.
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 the common account 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.
VII. Particulars abouthorizontalcompetitions andrelated-party transactions
□Applicable√ Inapplicable
VIII.Appraisalandincentivemechanism forseniormanagement staffs
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.
2014AnnualReportofKonkaGroupCo.,Ltd.
Section X. Internal Control
I.Construction of internal control ofthe Company
As one of the key companies in implementing the pilot for internal control standards in Shenzhen for 2011, the Company carefully understood the basic standards of internal control and relevant guidelines, and actively deployed and carried out the work, as well as implemented detailed requirements. In 2014, based on continuously deepening the construction of internal control system and extending the scope of internal control system, the Company assessed the risks, specially combed the significant risk points and procedures. At current, the Company has completed the construction ofinternal control system and self-appraisal ofinternal control.
In order to increase the quality of the self-appraisal work on internal control, theCompany’s internal control department and internal auditing department appraised the overview of the Company in Oct. 2014 and integrated the construction situation on internal control, the Company drafted the self-appraisal plan on internal control and recognition standards of defects, and promulgated the unified template of the work paper for self-appraisal on internal control to standardize the work. And the self-appraisal team of the internal control appraised relevant units according to the plan and formed the work paper.And theCompany’s internal auditing department summarized the work paper of various business, and issued the Self-appraisal Report on Internal Control for 2014,which was submitted to theBoard ofDirectors for review and approval.
Ruihua Certified Public Accountants audited the internal control of the Company in 2014, and issuedtheAuditor’sReport onInternal ControlofKonka Group Co.,Ltd.
II. Statementof theBoard ofDirectors onits responsibilities towards internalcontrol
According to the regulations of the Internal Control Standard System, it is a responsibility of the Board of Directors to establish, to perfect and to carry out internal control and to evaluate its validity as well as to truthfully disclose the Internal Control Assessment Report; and the Supervisory Committee to conduct supervision to the establishment and execution of internal control by the Board, a responsibility of the management level to in charge of gathering and leading daily operation of internal control. The Board of Directors, the Board of Supervisors, Directors, Supervisors and the Senior Executives of the Company commits that the report does not contain any false or misleading statements or omit any material facts, and ensures the authenticity, accuracy and completeness ofthe report.
The goal of internal control of the Company is reasonably to assure the legality of operation, assets security, truthfulness and completeness of financial report and relevant information, promote efficiency and results of operation, advanced the achievement of development strategy of the Company. In terms of the inborn restriction of internal control, the Company can only provide reasonable guarantee to the above mentioned goals. Moreover, situation changes would result in improper internal control or reducing the execution of controlling policies and procedures. It is risky to predict the effectiveness of future internal control according to evaluation results of internal control.
2014AnnualReportofKonkaGroupCo.,Ltd.
III. Basison establishingthe internal control forfinancialreport
The Company has established the internal control of financial report according to Basic Standard for Enterprise Internal Control and supporting stipulations and other internal control supervision requirements.
IV.Self-appraisal reporton internal control
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|Particularsaboutsignificantdefectsofinternalcontrolfoundduringthereportingperiodintheself-appraisalreportoninternalcontrol||
|According to the affirmation of material weakness in internal control of financial report, on the base date of internal controlevaluation,nomaterialweaknessexistsinfinancialreport.TheBoardofDirectorsconsideredthattheCompanyhasmaintainedeffectiveinternalcontroloffinancialreportaccordingtoenterpriseinternalcontrolnormativesystemandrelevantregulations.Accordingtotheaffirmationofmaterialweaknessininternalcontrolofnon-financialreport,onthebasedateofinternalcontrolevaluation,nomaterialweaknessexistsinnon-financialreport.From the base date of internal control evaluation to the date of issuance of internal control evaluation report, no factors ofevaluationconclusionsexisttoaffecttheeffectivenessofinternalcontrol.||
|Disclosure date of theSelf-appraisal Report on InternalControl|3Apr.2015|
|Disclosure index of theSelf-appraisal Report on InternalControl|http://www.cninfo.com.cn/information/companyinfo.html|

V.Auditor’s report orverification report oninternal control
Internal control auditreport
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|-|-|
|AuditopinionparagraphintheAuditor’sReportfortheInternalControl||
|We considered that, the Konka Group Co., Ltd. maintained effective financial report internal control on all of the significantaspectsaccordingtotheBasicStandardofEnterpriseInternalControlandrelevantregulationson31Dec.2014.||
|Disclosure date of the Auditor’s Report onInternalControl|3Apr.2015|
|DisclosureindexoftheAuditor’sReportonInternalControl|http://www.cninfo.com.cn/information/companyinfo.html|

Whether the CPAs firm issuesanAuditor’s Report on Internal Control with non-standard opinion or not?
□Yes√No
Whether theAuditor’s Report on Internal Control from the CPAs firm is in consistent with the Self-appraisal Report from theBoard ornot?
√Yes□No
VI. Establishment and execution of rules of accountability for significant mistakes in annual
report information disclosure
In order to improve the enterprise standard operating level and increase the accountability for the
responsible persons of annual report information disclosure and improve the quality and increase
2014AnnualReportofKonkaGroupCo.,Ltd.
the transparency of information disclosure, enhance the authenticity, accuracy, completeness and promptness, the Konka Group has determined to formulate Rules of Accountability for Significant Mistakes in Annual Report Information Disclosure of Konka Group Co., Ltd. after examination of the 39thSessionof the6thBoard ofDirectors ofKonka Group Co.,Ltd.
During the reporting period, no major mistakes on information disclosure for the annual report occurred in thecompany.
During the reporting period, noamendment onmajor accounting mistakes occurred.
During the reporting period, noreplenishment onmajor omittinginformation occurred.
During the reporting period, norevision on performance announcement in advanceoccurred.
KonkaGroupCo.,Ltd. Notesof2014FinancialStatement Section XI. Financial Report
I.Auditor’s report
|||
|-|-|
|Typeofauditopinion|Standardunqualifiedauditopinion|
|Dateforsigningtheauditor’sreport|1Apr.2015|
|Nameoftheauditfirm|RuihuaCPAs(LLP)|
|DocumentNumberoftheauditor’sreport|R-H-S-Z[2015]No.44040016|
|NameoftheCPA.|LiuJianhua,TangQimei|

Auditor’sReport
Totheshareholders ofKonka Group Co., Ltd.,
We have audited the accompanying financial statements of Konka Group Co., Ltd. (hereafter referred to as “the Company”) and its subsidiaries (hereafter referred to as “the Group” in general) which comprise the consolidated andcompany’s balance sheets as at 31 Dec. 2014, and the consolidated andcompany’s income statements, the consolidated andcompany’s cash flow statements and the consolidated andcompany’s statements of changes inowners’ equityfor theyear then ended and notes tothese financial statements.
I.Management’s Responsibility fortheFinancial Statements
The management is responsible for the preparation of these financial statements in accordance with the Accounting Standards for Business Enterprises. This responsibility includes: (1) preparing financial statements according to the Accounting Standards for Business Enterprises and make them a fair presentation; and (2) 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.
II.Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the China Standards on Auditing. Those standards require that we comply with ethical requirements of China CPAs and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on theauditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to theentity’s preparation of the financial statements and fair statement in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation ofthefinancial statements.
Webelieve that the audit evidence we have obtained is sufficient and appropriate to provide a
basis forouraudit opinion.
III.Auditopinion
KonkaGroupCo.,Ltd. Notesof2014FinancialStatement In our opinion, the financial statements have been prepared in accordance with the Accounting Standards for Business Enterprises in all material respects and give a fair view of the Company and itssubsidiaries’consolidated financial positions as at 31 Dec. 2014 and the consolidated business results and cash flows for the year then ended, as well as theCompany’s financial positions as at 31 Dec. 2014 and business results and cash flows for the yearthen ended.
CPA: RuihuaCertified PublicAccountants (LLP) CPA:
China·Beijing
1Apr.2015
II.Financialstatements
Monetary unitofnotes to financial statements: RMBYuan
1.Consolidatedbalancesheet
Prepared by KonkaGroup Co., Ltd.
Unit:RMBYuan
||||
|-|-|-|
|Item|31Dec.2014|31Dec.2013|
|CurrentAssets:|||
|Monetaryfunds|1,703,135,732.18|1,843,743,089.94|
|Settlementreserves|||
|Intra-grouplendings|||
|Financial assets measured at fairvalue of which changes are recordedincurrentprofitsandlosses|||
|Derivativefinancialassets|||
|Notesreceivable|3,819,417,076.37|4,150,779,374.32|
|Accountsreceivable|2,259,293,207.16|2,460,996,984.92|
|Accountspaidinadvance|315,150,044.57|164,272,929.59|
|Premiumsreceivable|||
|Reinsurancepremiumsreceivable|||
|Receivable reinsurance contractreserves|||
|Interestreceivable|1,885,727.36|2,898,419.90|
|Dividendreceivable|||
|Otheraccountsreceivable|298,975,391.68|298,749,414.95|
|Financial assets purchased underagreementstoresell|||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|Inventories|3,904,436,250.33|3,582,669,024.26|
|Assetsheldforsale|||
|Non-current assets due within 1year|||
|Othercurrentassets|568,020,200.48||
|Totalcurrentassets|12,870,313,630.13|12,504,109,237.88|
|Non-currentassets:|||
|Loans by mandate and advancesgranted|||
|Available-for-salefinancialassets|245,033,609.00|11,894,999.30|
|Held-to-maturityinvestments|||
|Long-termaccountsreceivable|||
|Long-termequityinvestment|362,765,183.66|436,017,471.50|
|Investingrealestate|233,349,452.80|237,986,524.12|
|Fixedassets|1,783,695,548.92|1,908,503,979.80|
|Constructioninprogress|159,604,884.09|49,924,027.97|
|Engineeringmaterials|||
|Disposaloffixedassets|||
|Productionbiologicalassets|||
|Oil-gasassets|||
|Intangibleassets|347,626,130.58|359,585,571.12|
|R&Dexpense|||
|Goodwill|3,597,657.15|3,943,671.53|
|Long-termdeferredexpenses|25,792,805.06|13,405,084.94|
|Deferredincometaxassets|259,516,396.26|218,728,739.41|
|Othernon-currentassets|488,063,979.00||
|Totalofnon-currentassets|3,909,045,646.52|3,239,990,069.69|
|Totalassets|16,779,359,276.65|15,744,099,307.57|
|Currentliabilities:|||
|Short-termborrowings|5,145,712,436.91|5,239,069,764.48|
|BorrowingsfromCentralBank|||
|Customerbankdepositsandduetobanksandotherfinancialinstitutions|||
|Intra-groupborrowings|||
|Financial liabilities measured atfair value of which changes arerecordedincurrentprofitsandlosses|||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|Derivativefinancialliabilities|||
|Notespayable|911,355,028.47|565,137,790.84|
|Accountspayable|3,144,408,433.93|3,341,804,144.12|
|Accountsreceivedinadvance|302,904,453.86|482,716,035.68|
|Financialassetssoldforrepurchase|||
|Handlingchargesandcommissionspayable|||
|Payrollpayable|299,272,715.05|332,090,987.76|
|Taxpayable|112,557,005.85|-94,670,496.91|
|Interestpayable|22,872,418.43|34,945,870.48|
|Dividendpayable|||
|Otheraccountspayable|1,376,803,381.03|1,391,396,130.97|
|Reinsurancepremiumspayable|||
|Insurancecontractreserves|||
|Payables for acting trading ofsecurities|||
|Payablesforactingunderwritingofsecurities|||
|Liabilitiesheldforsale|||
|Non-currentliabilitiesduewithin1year|1,525,465.53|1,755,444.00|
|Othercurrentliabilities|||
|Totalcurrentliabilities|11,317,411,339.06|11,294,245,671.42|
|Non-currentliabilities:|||
|Long-termborrowings|957,541,210.52|5,000,000.00|
|Bondspayable|||
|Ofwhich:preferredshares|||
|Perpetualbonds|||
|Long-termpayables|30,029,990.10|31,366,530.13|
|Long-termpayrollpayables|28,554,734.16||
|Specificpayables|||
|Estimatedliabilities||911,085.41|
|Deferredincome|147,315,999.02|131,658,369.11|
|Deferredincometaxliabilities|1,049,498.77||
|Othernon-currentliabilities|||
|Totalnon-currentliabilities|1,164,491,432.57|168,935,984.65|
|Totalliabilities|12,481,902,771.63|11,463,181,656.07|

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|Owners’equity:|||
|Sharecapital|1,203,972,704.00|1,203,972,704.00|
|Otherequityinstruments|||
|Ofwhich:preferredshares|||
|Perpetualbonds|||
|Capitalreserves|1,289,403,563.99|1,314,409,687.82|
|Less:Treasurystock|||
|Othercomprehensiveincome|16,171,477.91|16,179,316.17|
|Specificreserves|||
|Surplusreserves|847,908,466.28|847,908,466.28|
|Provisionsforgeneralrisks|||
|Retainedprofits|746,022,758.89|705,438,958.07|
|Total equity attributableto owners oftheCompany|4,103,478,971.07|4,087,909,132.34|
|Minorityinterests|193,977,533.95|193,008,519.16|
|Totalowners’equity|4,297,456,505.02|4,280,917,651.50|
|Totalliabilitiesandowners’equity|16,779,359,276.65|15,744,099,307.57|

 Legal representative: Chen Yuehua Chief of the accounting work: Huang Zhiqiang Chiefoftheaccountingorgan:XuYoushan
2.BalancesheetoftheCompany
Unit:RMBYuan
||||
|-|-|-|
|Item|31Dec.2014|31Dec.2013|
|CurrentAssets:|||
|Monetaryfunds|993,131,773.08|1,118,577,010.98|
|Financial assets measured at fairvalue of which changes are recordedincurrentprofitsandlosses|||
|Derivativefinancialassets|||
|Notesreceivable|3,664,117,423.56|3,963,969,934.07|
|Accountsreceivable|1,539,295,976.29|1,543,050,476.67|
|Accountspaidinadvance|349,343,179.42|239,011,903.60|
|Interestreceivable|14,450,153.53|12,151,753.22|
|Dividendreceivable|||
|Otheraccountsreceivable|988,199,630.05|668,297,184.77|
|Inventories|2,500,537,916.63|2,333,107,085.15|
|Assetsheldforsale|||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|Non-current assets due within 1year|||
|Othercurrentassets|201,280,204.53||
|Totalcurrentassets|10,250,356,257.09|9,878,165,348.46|
|Non-currentassets:|||
|Available-for-salefinancialassets|218,983,609.00|11,894,999.30|
|Held-to-maturityinvestments|600,000,000.00|505,000,000.00|
|Long-termaccountsreceivable|||
|Long-termequityinvestment|1,608,674,456.09|1,664,346,526.82|
|Investingrealestate|233,349,452.80|237,986,524.12|
|Fixedassets|534,363,754.80|599,950,784.99|
|Constructioninprogress|37,567,861.10|8,713,508.63|
|Engineeringmaterials|||
|Disposaloffixedassets|||
|Productionbiologicalassets|||
|Oil-gasassets|||
|Intangibleassets|76,397,532.51|76,133,522.45|
|R&Dexpense|||
|Goodwill|||
|Long-termdeferredexpenses|14,567,206.83|4,597,304.79|
|Deferredincometaxassets|244,080,035.45|183,062,820.76|
|Othernon-currentassets|||
|Totalofnon-currentassets|3,567,983,908.58|3,291,685,991.86|
|Totalassets|13,818,340,165.67|13,169,851,340.32|
|Currentliabilities:|||
|Short-termborrowings|244,808,594.52|1,023,913,426.22|
|Financial liabilities measured atfair value of which changes arerecordedincurrentprofitsandlosses|||
|Derivativefinancialliabilities|||
|Notespayable|367,803,372.65|190,949,990.17|
|Accountspayable|7,871,208,959.66|6,320,384,438.01|
|Accountsreceivedinadvance|190,627,895.21|186,326,967.62|
|Payrollpayable|146,758,331.08|187,697,895.87|
|Taxpayable|5,081,943.95|-92,265,968.33|
|Interestpayable|5,406,211.20|21,189,076.79|
|Dividendpayable|||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|Otheraccountspayable|1,103,672,772.19|1,243,478,983.84|
|Liabilitiesheldforsale|||
|Non-currentliabilitiesduewithin1year|||
|Othercurrentliabilities|||
|Totalcurrentliabilities|9,935,368,080.46|9,081,674,810.19|
|Non-currentliabilities:|||
|Long-termborrowings|||
|Bondspayable|||
|Ofwhich:preferredshares|||
|Perpetualbonds|||
|Long-termpayables|||
|Long-termpayrollpayables|||
|Specificpayables|||
|Estimatedliabilities|||
|Deferredincome|80,679,738.96|74,192,786.56|
|Deferredincometaxliabilities|||
|Othernon-currentliabilities|||
|Totalnon-currentliabilities|80,679,738.96|74,192,786.56|
|Totalliabilities|10,016,047,819.42|9,155,867,596.75|
|Owners’equity:|||
|Sharecapital|1,203,972,704.00|1,203,972,704.00|
|Otherequityinstruments|||
|Ofwhich:preferredshares|||
|Perpetualbonds|||
|Capitalreserves|1,250,283,488.79|1,250,133,590.04|
|Less:Treasurystock|||
|Othercomprehensiveincome|471,827.51||
|Specificreserves|||
|Surplusreserves|847,908,466.28|847,908,466.28|
|Retainedprofits|499,655,859.67|711,968,983.25|
|Totalowners’equity|3,802,292,346.25|4,013,983,743.57|
|Totalliabilitiesandowners’equity|13,818,340,165.67|13,169,851,340.32|

 3.Consolidatedincomestatement
Unit:RMBYuan
KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|Item|2014|2013|
|I.Totaloperatingrevenues|19,423,488,994.07|20,006,736,878.82|
|Including:Salesincome|19,423,488,994.07|20,006,736,878.82|
|Interestincome|||
|Premiumincome|||
|Handlingchargeandcommissionincome|||
|II.Totaloperatingcosts|20,169,975,385.57|20,131,217,931.64|
|Including:Costofsales|16,733,746,581.45|16,660,981,623.13|
|Interestexpenses|||
|Handlingchargeandcommissionexpenses|||
|Surrenders|||
|Netclaimspaid|||
|Net amount withdrawn for the insurancecontractreserve|||
|Expenditureonpolicydividends|||
|Reinsurancepremium|||
|Taxesandassociatecharges|60,527,648.50|66,486,229.01|
|Sellinganddistributionexpenses|2,414,468,187.73|2,548,603,146.99|
|Administrativeexpenses|686,930,373.50|674,386,382.45|
|Financialexpenses|132,763,824.46|-59,637,103.92|
|Assetimpairmentloss|141,538,769.93|240,397,653.98|
|Add: Gain/(loss) from change in fair value (“-”meansloss)|||
|Gain/(loss)frominvestment(“-”meansloss)|596,873,633.39|53,519,594.98|
|Including: share of profits in associates andjointventures|316,248,002.07|-12,083,013.71|
|Foreignexchangegains(“-”meansloss)|||
|III.Businessprofit(“-”meansloss)|-149,612,758.11|-70,961,457.84|
|Add:non-operatingincome|258,877,423.01|274,574,465.25|
|Including: Gains ondisposal of non-currentassets|4,740,033.90|12,490,980.31|
|Less:non-operatingexpense|16,884,982.71|23,017,661.08|
|Including: Losses on disposal ofnon-currentassets|9,752,806.72|14,360,857.36|
|IV.Totalprofit(“-”meansloss)|92,379,682.19|180,595,346.33|
|Less:Incometaxexpense|31,854,983.02|122,216,964.78|
|V.Netprofit(“-”meansloss)|60,524,699.17|58,378,381.55|

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|Net profit attributable to owners of theCompany|52,623,527.86|45,820,496.73|
|Minorityshareholders’income|7,901,171.31|12,557,884.82|
|VI. After-tax net amount of other comprehensiveincomes|56,503.90|2,555,064.00|
|After-tax net amount of other comprehensiveincomesattributabletoownersoftheCompany|-7,838.26|2,601,149.55|
|(I) Other comprehensive incomes that willnotbereclassifiedintogainsandlosses|||
|1.Changesinnetliabilitiesorassetswithadefinedbenefitplanuponre-measurement|||
|2. Enjoyable shares in othercomprehensive incomesininvestees thatcannotbereclassified into gains and losses under the equitymethod|||
|(II) Other comprehensive incomes that willbereclassifiedintogainsandlosses|-7,838.26|2,601,149.55|
|1. Enjoyable shares in othercomprehensive incomes in investees that will bereclassified into gains and losses under the equitymethod|||
|2.Gainsandlossesonfairvaluechangesofavailable-for-salefinancialassets|516,457.28||
|3. Gains and losses on reclassifyingheld-to-maturity investments into available-for-salefinancialassets|||
|4. Effective hedging gains and losses oncashflows|||
|5. Foreign-currency financial statementtranslationdifference|-524,295.54|2,601,149.55|
|6.Other|||
|After-tax net amount of other comprehensiveincomesattributabletominorityshareholders|64,342.16|-46,085.55|
|VII.Totalcomprehensiveincomes|60,581,203.07|60,933,445.55|
|AttributabletoownersoftheCompany|52,615,689.60|48,421,646.28|
|Attributabletominorityshareholders|7,965,513.47|12,511,799.27|
|VIII.Earningspershare|||
|(I)Basicearningspershare|0.0437|0.0381|
|(II)Dilutedearningspershare|0.0437|0.0381|

Wherebusinessmergersunderthesamecontroloccurredinthisreportingperiod,thenetprofitachievedbythemerged
KonkaGroupCo.,Ltd. Notesof2014FinancialStatement partiesbeforethebusinessmergerswasRMB0,withthecorrespondingamountforthelastperiodbeingRMB0.
Legal representative: Chen Yuehua Chief of the accounting work: Huang Zhiqiang Chiefoftheaccountingorgan:XuYoushan
4.IncomestatementoftheCompany
Unit:RMBYuan
||||
|-|-|-|
|Item|2014|2013|
|I.Totalsales|18,252,320,333.18|21,088,709,589.78|
|Less:costofsales|16,442,313,600.22|18,567,798,472.02|
|Businesstaxesandsurcharges|28,791,258.57|41,392,084.79|
|Distributionexpenses|1,891,815,304.69|1,966,043,135.65|
|Administrativeexpenses|445,985,722.14|391,582,455.68|
|Financialcosts|57,149,270.99|-4,691,473.89|
|Impairmentloss|85,152,922.15|148,223,458.29|
|Add: gain/(loss) from change in fair value(“-”meansloss)|||
|Gain/(loss) from investment (“-” meansloss)|290,855,952.74|101,015,674.49|
|Including: income form investment onassociatesandjointventures|-3,679,122.32|-1,317,643.05|
|II.Businessprofit(“-”meansloss)|-408,031,792.84|79,377,131.73|
|Add:non-operatingincome|157,529,049.56|186,103,507.58|
|Including: Gains on disposal ofnon-currentassets|3,914,114.70|4,610,114.75|
|Less:non-operatingexpense|9,394,570.77|11,123,290.82|
|Including: Losses on disposal ofnon-currentassets|3,786,518.44|4,610,114.75|
|III.Totalprofit(“-”meansloss)|-259,897,314.05|254,357,348.49|
|Less:Incometaxexpense|-59,623,917.51|48,184,760.89|
|IV.Netprofit(“-”meansloss)|-200,273,396.54|206,172,587.60|
|V. After-tax net amount of othercomprehensiveincomes|471,827.51||
|(I) Other comprehensive incomes that willnotbereclassifiedintogainsandlosses|||
|1. Changes in net liabilities or assetswith a defined benefit plan uponre-measurement|||
|2. Enjoyable shares in other|||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|comprehensive incomes in investees thatcannot be reclassified into gains and lossesundertheequitymethod|||
|(II)Othercomprehensiveincomesthatwillbereclassifiedintogainsandlosses|471,827.51||
|1. Enjoyable shares in othercomprehensive incomes ininvestees thatwillbereclassifiedintogainsandlossesundertheequitymethod|||
|2.Gainsandlossesonfairvaluechangesofavailable-for-salefinancialassets|516,457.27||
|3. Gains and losses on reclassifyingheld-to-maturity investments intoavailable-for-salefinancialassets|||
|4.Effective hedginggainsandlossesoncashflows|||
|5. Foreign-currency financial statementtranslationdifference|-44,629.76||
|6.Other|||
|VI.Totalcomprehensiveincomes|-199,801,569.03|206,172,587.60|
|VII.Earningspershare|||
|(I)Basicearningspershare|||
|(II)Dilutedearningspershare|||

5.Consolidatedcashflowstatement
Unit:RMBYuan
||||
|-|-|-|
|Item|2014|2013|
|I.Cashflowsfromoperatingactivities:|||
|Cash received from sale of commodities andrenderingofservice|17,605,044,169.07|19,149,831,826.42|
|Net increase of deposits from customers andduesfrombanks|||
|Netincreaseofloansfromthecentralbank|||
|Net increase of funds borrowed from otherfinancialinstitutions|||
|Cash received from premium of originalinsurancecontracts|||
|Netcashreceivedfromreinsurancebusiness|||
|Net increase of deposits of policy holdersandinvestmentfund|||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|Net increase of disposal of financial assetsmeasured at fair value of which changes arerecordedintocurrentgainsandlosses|||
|Cash received from interest, handlingchargesandcommissions|||
|Netincreaseofintra-groupborrowings|||
|Netincreaseoffundsinrepurchasebusiness|||
|Taxrefundsreceived|467,637,201.00|445,649,913.63|
|Other cash received relating to operatingactivities|391,719,282.33|399,682,475.55|
|Subtotal of cash inflows from operatingactivities|18,464,400,652.40|19,995,164,215.60|
|Cashpaidforgoodsandservices|15,492,774,772.37|13,716,426,040.28|
|Net increase of customer lendings andadvances|||
|Netincreaseoffundsdepositedinthecentralbankandamountduefrombanks|||
|Cash for paying claims of the originalinsurancecontracts|||
|Cash for paying interest, handling chargesandcommissions|||
|Cashforpayingpolicydividends|||
|Cashpaidtoandforemployees|1,747,390,336.65|1,720,868,462.67|
|Varioustaxespaid|685,636,270.36|871,996,380.86|
|Other cash payment relating to operatingactivities|1,178,984,455.07|1,402,619,130.90|
|Subtotal of cash outflows from operatingactivities|19,104,785,834.45|17,711,910,014.71|
|Netcashflowsfromoperatingactivities|-640,385,182.05|2,283,254,200.89|
|II.Cashflowsfrominvestingactivities:|||
|Cash received from withdrawal ofinvestments|50,968,907.04|15,172,260.00|
|Cashreceivedfromreturnoninvestments|334,535,622.04|3,048,179.22|
|Net cash received from disposal of fixedassets, intangible assets and other long-termassets|8,858,019.23|31,815,716.67|
|Net cash received from disposal ofsubsidiariesorotherbusinessunits|285,401,846.77|15,589,409.93|
|Other cash received relating to investingactivities|2,424,872,043.31||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|Subtotal of cash inflows from investingactivities|3,104,636,438.39|65,625,565.82|
|Cash paid to acquire fixed assets, intangibleassetsandotherlong-termassets|750,959,942.15|289,680,969.24|
|Cashpaidforinvestment|249,170,764.00||
|Netincreaseofpledgedloans|||
|Net cash paid to acquire subsidiaries andotherbusinessunits|||
|Other cash payments relating to investingactivities|2,473,083,497.35||
|Subtotal of cash outflows from investingactivities|3,473,214,203.50|289,680,969.24|
|Netcashflowsfrominvestingactivities|-368,577,765.11|-224,055,403.42|
|III.CashFlowsfromFinancingActivities:|||
|Cashreceivedfromcapitalcontributions|15,700,000.00||
|Including: Cash received from minorityshareholderinvestmentsbysubsidiaries|15,700,000.00||
|Cashreceivedfromborrowings|4,234,914,268.82|4,446,790,462.43|
|Cashreceivedfromissuanceofbonds|||
|Other cash received relating to financingactivities|576,957,141.70|1,373,173,635.00|
|Subtotal of cash inflows from financingactivities|4,827,571,410.52|5,819,964,097.43|
|Repaymentofborrowings|3,208,016,241.44|6,328,759,973.89|
|Cash paid for interest expenses anddistributionofdividendsorprofit|116,250,848.36|113,539,680.93|
|Including: dividends or profit paid bysubsidiariestominorityshareholders|||
|Other cash payments relating to financingactivities|623,498,389.16|514,212,344.46|
|Sub-total of cash outflows from financingactivities|3,947,765,478.96|6,956,511,999.28|
|Netcashflowsfromfinancingactivities|879,805,931.56|-1,136,547,901.85|
|IV. Effect of foreign exchange rate changes oncashandcashequivalents|-2,095,568.53|24,795,356.22|
|V.Netincreaseincashandcashequivalents|-131,252,584.13|947,446,251.84|
|Add: Opening balance of cash and cashequivalents|1,771,489,421.21|824,043,169.37|
|VI. Closing balance of cash and cashequivalents|1,640,236,837.08|1,771,489,421.21|

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement 6.CashflowstatementoftheCompany
Unit:RMBYuan
||||
|-|-|-|
|Item|2014|2013|
|I.Cashflowsfromoperatingactivities:|||
|Cash received from sale of commoditiesandrenderingofservice|12,298,684,620.60|15,536,885,920.45|
|Taxrefundsreceived|223,273,103.54|306,475,465.74|
|Other cash received relating to operatingactivities|739,787,761.18|222,292,296.60|
|Subtotal of cash inflows from operatingactivities|13,261,745,485.32|16,065,653,682.79|
|Cashpaidforgoodsandservices|10,722,090,404.58|10,752,636,021.84|
|Cashpaidtoandforemployees|942,834,651.48|899,546,170.04|
|Varioustaxespaid|296,880,208.93|429,678,415.71|
|Other cash payment relating to operatingactivities|1,840,153,779.28|1,240,775,472.49|
|Subtotal of cash outflows from operatingactivities|13,801,959,044.27|13,322,636,080.08|
|Netcashflowsfromoperatingactivities|-540,213,558.95|2,743,017,602.71|
|II.Cashflowsfrominvestingactivities:|||
|Cash received from retraction ofinvestments||20,818,708.75|
|Cashreceivedfromreturnoninvestments|41,767,052.88|20,775,384.81|
|Net cash received from disposal of fixedassets, intangible assets and other long-termassets|7,769,133.70|23,612,029.68|
|Net cash received from disposal ofsubsidiariesorotherbusinessunits|301,267,191.25||
|Other cash received relating to investingactivities|2,403,472,043.31|395,000,000.00|
|Subtotal of cash inflows from investingactivities|2,754,275,421.14|460,206,123.24|
|Cash paid to acquire fixed assets,intangibleassetsandotherlong-termassets|89,183,657.42|127,592,493.28|
|Cashpaidforinvestment|215,523,300.00||
|Net cash paid to acquire subsidiaries andotherbusinessunits|||
|Other cash payments relating to investingactivities|2,496,000,000.00|505,000,000.00|

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|Subtotal of cash outflows from investingactivities|2,800,706,957.42|632,592,493.28|
|Netcashflowsfrominvestingactivities|-46,431,536.28|-172,386,370.04|
|III.CashFlowsfromFinancingActivities:|||
|Cashreceivedfromcapitalcontributions|||
|Cashreceivedfromborrowings||336,991,724.88|
|Cashreceivedfromissuanceofbonds|||
|Other cash received relating to financingactivities|1,094,702,763.15|1,373,173,635.00|
|Subtotal of cash inflows from financingactivities|1,094,702,763.15|1,710,165,359.88|
|Repaymentofborrowings||2,958,578,227.90|
|Cash paid for interest expenses anddistributionofdividendsorprofit|12,852,947.28|73,643,572.75|
|Other cash payments relating tofinancingactivities|617,810,454.06|509,442,099.71|
|Sub-total of cash outflows from financingactivities|630,663,401.34|3,541,663,900.36|
|Netcashflowsfromfinancingactivities|464,039,361.81|-1,831,498,540.48|
|IV. Effect of foreign exchange rate changesoncashandcashequivalents|-3,624,119.12|12,665,335.22|
|V.Netincreaseincashandcashequivalents|-126,229,852.54|751,798,027.41|
|Add: Opening balance of cash and cashequivalents|1,117,689,643.16|365,891,615.75|
|VI. Closing balance of cash and cashequivalents|991,459,790.62|1,117,689,643.16|

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
7.Consolidatedstatementofchangesinowners’equity
2014
Unit:RMBYuan
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2014|||||||||||||
||EquityattributabletoownersoftheCompany|||||||||||Minorityinterests|Totalowners’equity|
||Sharecapital|Otherequityinstruments|||Capitalreserve|Less:treasurystock|Othercomprehensiveincomes|Specificreserve|Surplusreserve|Generalriskreserve|Retainedprofit|||
|||Preferredshares|Perpetualbonds|Other||||||||||
|I. Balance at theend of the previousyear|1,203,972,704.00||||1,314,409,687.82||16,179,316.17||847,908,466.28||705,438,958.07|193,008,519.16|4,280,917,651.50|
|Add: change ofaccountingpolicy||||||||||||||
|Correction oferrors in previousperiods||||||||||||||
|Businessmergers under thesamecontrol||||||||||||||
|Other||||||||||||||
|II. Balance at the|1,203,972,704.00||||1,314,409,687.82||16,179,316.17||847,908,466.28||705,438,958.07|193,008,519.16|4,280,917,651.50|

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
|||||||
|-|-|-|-|-|-|
|beginning of theyear||||||
|III. Increase/decrease in theperiod (“-” meansdecrease)|-25,006,123.83|-7,838.26|40,583,800.82|969,014.79|16,538,853.52|
|(I) Totalcomprehensiveincomes||-7,838.26|52,623,527.86|7,965,513.47|60,581,203.07|
|(II) Capitalincreased andreducedbyowners||||-6,996,498.68|-6,996,498.68|
|1.Commonsharesincreasedbyshareholders||||||
|2.Capitalincreasedbyholdersofotherequityinstruments||||||
|3.Amountsofshare-basedpaymentsrecognizedinowners’equity||||||
|4.Other||||-6,996,498.68|-6,996,498.68|
|(III) Profitdistribution|||-12,039,727.04||-12,039,727.04|
|1.||||||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||
|-|-|-|
|Appropriations tosurplusreserves|||
|2.Appropriations togeneral riskprovisions|||
|3.Appropriations toowners (orshareholders)|-12,039,727.04|-12,039,727.04|
|4.Other|||
|(IV) Internalcarry-forward ofowners’equity|||
|1. Newincrease of capital(or share capital)from capital publicreserves|||
|2. Newincrease of capital(or share capital)from surplusreserves|||
|3. Surplusreserves for makinguplosses|||
|4.Other|||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
|||||||||
|-|-|-|-|-|-|-|-|
|(V)Specificreserve||||||||
|1. Withdrawnfortheperiod||||||||
|2. Used in theperiod||||||||
|(VI)Other||-25,006,123.83|||||-25,006,123.83|
|IV.Closingbalance|1,203,972,704.00|1,289,403,563.99|16,171,477.91|847,908,466.28|746,022,758.89|193,977,533.95|4,297,456,505.02|

 2013
Unit:RMBYuan
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2013|||||||||||||
||EquityattributabletoownersoftheCompany|||||||||||Minorityinterests|Totalowners’equity|
||Sharecapital|Otherequityinstruments|||Capitalreserve|Less:treasurystock|Othercomprehensiveincomes|Specificreserve|Surplusreserve|Generalriskreserve|Retainedprofit|||
|||Preferredshares|Perpetualbonds|Other||||||||||
|I. Balance at theendofthepreviousyear|1,203,972,704.00||||1,272,420,328.47||14,421,594.77||827,291,207.52||725,485,704.10|203,256,243.27|4,246,847,782.13|
|Add: change ofaccountingpolicy|||||38,566,645.60||-843,428.15||||-33,210,256.96|-4,512,960.49|0.00|
|Correction oferrors in previousperiods||||||||||||||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
|||||||||
|-|-|-|-|-|-|-|-|
|Businessmergers under thesamecontrol||||||||
|Other||||||||
|II. Balance at thebeginning of theyear|1,203,972,704.00|1,310,986,974.07|13,578,166.62|827,291,207.52|692,275,447.14|198,743,282.78|4,246,847,782.13|
|III. Increase/decrease in theperiod (“-” meansdecrease)||3,422,713.75|2,601,149.55|20,617,258.76|13,163,510.93|-5,734,763.62|34,069,869.37|
|(I) Totalcomprehensiveincomes|||2,601,149.55||45,820,496.73|12,511,799.27|60,933,445.55|
|(II) Capitalincreased andreducedbyowners||||||-18,246,562.89|-18,246,562.89|
|1.Commonsharesincreasedbyshareholders||||||||
|2.Capitalincreasedbyholdersofotherequityinstruments||||||||
|3.Amountsofshare-basedpaymentsrecognizedin||||||||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||||
|-|-|-|-|-|
|owners’equity|||||
|4.Other|||-18,246,562.89|-18,246,562.89|
|(III) Profitdistribution|20,617,258.76|-32,656,985.80||-12,039,727.04|
|1.Appropriations tosurplusreserves|20,617,258.76|-20,617,258.76|||
|2.Appropriations togeneral riskprovisions|||||
|3.Appropriations toowners (orshareholders)||-12,039,727.04||-12,039,727.04|
|4.Other|||||
|(IV) Internalcarry-forward ofowners’equity|||||
|1. Newincrease of capital(or share capital)from capital publicreserves|||||
|2. Newincrease of capital(or share capital)from surplus|||||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
|||||||||
|-|-|-|-|-|-|-|-|
|reserves||||||||
|3. Surplusreserves formakinguplosses||||||||
|4.Other||||||||
|(V) Specificreserve||||||||
|1. Withdrawnfortheperiod||||||||
|2. Used in theperiod||||||||
|(VI)Other||3,422,713.75|||||3,422,713.75|
|IV. Closingbalance|1,203,972,704.00|1,314,409,687.82|16,179,316.17|847,908,466.28|705,438,958.07|193,008,519.16|4,280,917,651.50|

8.Statementofchangesinowners’equityoftheCompany
2014
Unit:RMBYuan
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2014|||||||||||
||Sharecapital|Otherequityinstruments|||Capitalreserve|Less:treasurystock|Othercomprehensiveincomes|Specificreserve|Surplusreserve|Retainedprofit|Totalowners’equity|
|||Preferredshares|Perpetualbonds|Other||||||||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||||||
|-|-|-|-|-|-|-|
|I.Balanceattheendofthepreviousyear|1,203,972,704.00|1,250,133,590.04||847,908,466.28|711,968,983.25|4,013,983,743.57|
|Add: change of accountingpolicy|||||||
|Correction of errors inpreviousperiods|||||||
|Other|||||||
|II. Balance at the beginning of theyear|1,203,972,704.00|1,250,133,590.04||847,908,466.28|711,968,983.25|4,013,983,743.57|
|III. Increase/ decrease inthe period(“-”meansdecrease)||149,898.75|471,827.51||-212,313,123.58|-211,691,397.32|
|(I)Totalcomprehensiveincomes|||471,827.51||-200,273,396.54|-199,801,569.03|
|(II) Capital increased andreducedbyowners|||||||
|1.Commonsharesincreasedbyshareholders|||||||
|2.Capitalincreasedbyholdersofotherequityinstruments|||||||
|3.Amountsofshare-basedpaymentsrecognizedinowners’equity|||||||
|4.Other|||||||
|(III)Profitdistribution|||||-12,039,727.04|-12,039,727.04|
|1. Appropriations to surplusreserves|||||||
|2. Appropriations to owners|||||-12,039,727.04|-12,039,727.04|

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||||||
|-|-|-|-|-|-|-|
|(orshareholders)|||||||
|3.Other|||||||
|(IV) Internal carry-forward ofowners’equity|||||||
|1. New increase of capital (orshare capital) from capital publicreserves|||||||
|2. New increase of capital (orsharecapital)fromsurplusreserves|||||||
|3.Surplusreservesformakinguplosses|||||||
|4.Other|||||||
|(V)Specificreserve|||||||
|1.Withdrawnfortheperiod|||||||
|2.Usedintheperiod|||||||
|(VI)Other||149,898.75||||149,898.75|
|IV.Closingbalance|1,203,972,704.00|1,250,283,488.79|471,827.51|847,908,466.28|499,655,859.67|3,802,292,346.25|

 2013
Unit:RMBYuan
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2013|||||||||||
||Sharecapital|Otherequityinstruments|||Capitalreserve|Less:treasurystock|Othercomprehensiveincomes|Specificreserve|Surplusreserve|Retainedprofit|Totalowners’equity|
|||Preferredshare|Perpetualbond|Other||||||||

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
||||||||||
|-|-|-|-|-|-|-|-|-|
|||s|s||||||
|I.Balanceattheendofthepreviousyear|1,203,972,704.00|||1,249,290,161.88||827,291,207.52|538,453,381.45|3,819,007,454.85|
|Add:changeofaccountingpolicy||||843,428.16|-843,428.16||||
|Correctionoferrorsinpreviousperiods|||||||||
|Other|||||||||
|II. Balance at the beginning of theyear|1,203,972,704.00|||1,250,133,590.04|-843,428.16|827,291,207.52|538,453,381.45|3,819,007,454.85|
|III. Increase/ decrease in the period(“-”meansdecrease)|||||843,428.16|20,617,258.76|173,515,601.80|194,976,288.72|
|(I)Totalcomprehensiveincomes|||||843,428.16||206,172,587.60|207,016,015.76|
|(II)Capitalincreasedandreducedbyowners|||||||||
|1.Commonsharesincreasedbyshareholders|||||||||
|2.Capitalincreasedbyholdersofotherequityinstruments|||||||||
|3.Amountsofshare-basedpaymentsrecognizedinowners’equity|||||||||
|4.Other|||||||||
|(III)Profitdistribution||||||20,617,258.76|-32,656,985.80|-12,039,727.04|
|1. Appropriations to surplusreserves||||||20,617,258.76|-20,617,258.76||
|2.Appropriationstoowners(or|||||||-12,039,727.04|-12,039,727.04|

KonkaGroupCo.,Ltd. Notesof2014FinancialStatement
|||||||
|-|-|-|-|-|-|
|shareholders)||||||
|3.Other||||||
|(IV) Internal carry-forward ofowners’equity||||||
|1. New increase of capital (orshare capital) from capital publicreserves||||||
|2. New increase of capital (orsharecapital)fromsurplusreserves||||||
|3. Surplus reserves for makinguplosses||||||
|4.Other||||||
|(V)Specificreserve||||||
|1.Withdrawnfortheperiod||||||
|2.Usedintheperiod||||||
|(VI)Other||||||
|IV.Closingbalance|1,203,972,704.00|1,250,133,590.04|847,908,466.28|711,968,983.25|4,013,983,743.57|

KonkaGroupCo.,Ltd. Notesof2014financialstatement Konka Group Co., Ltd.
Notes of 2014 Financial Statement
(Monetary unitis RMBYuanunless 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, renamed to “Konka Group Co., Ltd.”, obtained corporate business license (registration No.: 440301501121863) with its main business falling into electronic industry.
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 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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 1994 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 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 ShareAllotment Modes 1996 was adopted at the 1996 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 shares after thisallotment.
On January 25, 1998, the Plan on Share Allotment 1998 was adopted at the 1998 interim general 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 shares after this capitalization.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 A-shares were additionally issued to the public at RMB15.50/share. The totalcapital stock reached 547,260,323shares 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 shares after thisdistribution.
On April 3, 2008, the 7th meeting of the sixth Board of Directors was convened, during which the following resolutions were discussed and adopted: based on the total capital stock of 601,986,352 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. And the said resolution was subject to approval by the 2007 annual general meeting of shareholders convened on May 26, 2008. The Company, in June 2008, implemented the capitalization from capital public reserve and went through the formalities for transfer registration with China Securities Depository and Clearing Corporation Limited. 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 onApril 10, 2009. The total capital stock reached 1,203,972,704shares after change.
3. Approved business scope: research and development, production and operation of such household appliances as televisions, refrigerators, washing machines, and personal electronic appliances; manufacturing and application of home AV, IPTV set-top boxes, digital TV receivers (including ground receiving equipment of satellite television broadcasting), digital products, mobile communication equipments and terminal products, daily-use electronic products, automotive electronic products, satellite navigation systems, intelligent transportation systems, fire-fighting and security systems, office equipments, computers, displays, large screen display systems; LED (OLED) back light, illumination, light-emitting devices, and packaging thereof; Touch TV AIO, wireless broadcasting television transiting equipment; electronic parts and components, moulds, plastic and rubber products, and packing materials, design and in-door installation security products, monitoring products, wireless and cable digital television system and system integration, and technical consultancy and after-sale paid services of related products (except mobile phone, the other products in the above business scope are manufactured in other places outside Shenzhen); Wholesale, retail, import& export and relevant support services of the aforesaid products (including
KonkaGroupCo.,Ltd. Notesof2014financialstatement spare parts) (Commodities subject to state trading management are not involved. Products involved in quota, license management and other specified management shall be subject to the relevant state provisions.); sale of self-developed technological achievements; provision of maintenance services, technical consultant service for electronic products; ordinary cargo transportation, domestic freight forwarding, warehousing services; consultancy on enterprise management; and self-owned property leasing and management services, recovery of waste electrical appliances and electronic products (excluding dissembling) (operated by branch offices); and outsourcing services of information technology and business procedures by means of undertaking services in the way of outsourcing, including management and maintenance of system application, management of information technology, bank background service, financial settlement, human resource service, software development, call center,and data processing.
4. The parent company, as well as the actual controller of the Company is Overseas Chinese Town Group Co., Ltd., and the ultimate controller is the State-owned Assets Supervision and AdministrationCommission oftheStateCouncil.
5. The financial statements of the Company were submitted upon approval of the Board of Directors on1Apr.2015.
6. There were 39 subsidiaries included in the consolidation scope of 2014 of the Company, and please refer to the Notes VIII. “Equities among other entities” for details. There were 3 subsidiaries increased and 2 decreased in the consolidation scope of 2014 over the last year of the Company, and please refer to the Notes VII. “Changes of the consolidation scope” for details.
7.Acheck listofcorporate names and theirabbreviations mentioned in thisReport
|||
|-|-|
|Corporatename|Abbreviation|
|ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd.|TelecommunicationTechnology|
|ShenzhenKonkaVideo&CommunicationSystemsEngineeringCo.,Ltd.|Video&CommunicationSystemsEngineering|
|ShenzhenKonkaPrecisionMoldManufacturingCo.,Ltd.|PrecisionMold|
|ShenzhenKonkaElectronicCo.,Ltd.|KonkaElectronic|
|ShenzhenKonkaInformationNetworkCo.,Ltd.|InformationNetwork|
|ShenzhenKonkaPlasticProductsCo.,Ltd.|PlasticProducts|
|ShenzhenKonkaHousingAppliancesCo.,Ltd.|HousingAppliances|
|ShenzhenElectronicFittingsTechnologyCo.,Ltd.|FittingsTechnology|
|MudanjiangArcticOceanAppliancesCo.,Ltd.|MudanjiangAppliances|
|ShaanxiKonkaElectronicCo.,Ltd.|ShaanxiKonka|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
|||
|-|-|
|Corporatename|Abbreviation|
|ChongqingKonkaElectronicCo.,Ltd.|ChongqingKonka|
|ChongqingKonkaAutomotiveElectronicCo.,Ltd.|ChongqingElectronic|
|ChongqingQingjiaElectronicsCo.,Ltd.|ChongqingQingjia|
|AnhuiKonkaElectronicCo.,Ltd.|AnhuiKonka|
|AnhuiKonkaHouseholdAppliancesCo.,Ltd.|AnhuiHouseholdAppliances|
|ChangshuKonkaElectronicCo.,Ltd.|ChangshuKonka|
|KunshanKonkaElectronicCo.,Ltd.|KunshanKonka|
|DongguanKonkaElectronicCo.,Ltd.|DongguanKonka|
|DongguanKonkaPackingMaterialsCo.,Ltd.|DongguanPacking|
|DongguanKonkaMouldPlasticCo.,Ltd.|DongguanMouldPlastic|
|BoluoKonkaPCBCo.,Ltd.|BoluoKonka|
|BoluoKonkaPrecisionTechnologyCo.,Ltd.|BoluoPrecision|
|Konka(Nanhai)DevelopmentCenter|NanhaiInstitute|
|HongKongKonkaCo.,Ltd.|HongKongKonka|
|KonkaHouseholdAppliancesInvestment&DevelopmentCo.,Ltd.|KonkaHouseholdAppliancesInvestment|
|KonkaHouseholdAppliancesInternationalTradingCo.,Ltd.|KonkaHouseholdAppliancesInternationalTrading|
|KONKAAMERICA,INC.|KONKAAMERICA|
|Konka(Europe)Co.,Ltd.|KonkaEurope|
|DongguanXutongdaMouldPlasticCo.,Ltd.|Xutongda|
|ShenzhenKonkaOptoelectronicTechnologyCo.,Ltd.|KonkaOptoelectronic|
|ShenzhenWankaidaScienceandTechnologyCo.,Ltd.|Wankaida|
|KunshanKangshengInvestmentDevelopmentCo.,Ltd.|KunshanKangsheng|
|AnhuiKonkaTongchuangHouseholdAppliancesCo.,Ltd.|AnhuiTongchuang|
|IndonesiaKonkaElectronicsCo.,Ltd.|IndonesiaKonka|
|ShenzhenShushidaLogisticsServiceCo.,Ltd.|ShushidaLogistics|
|BeijingKonkaElectronicCo.,Ltd.|BeijingKonkaElectronic|
|KunshanJielunteMouldPlasticCo.,Ltd.|KunshanJielunte|
|WuhanJielunteMouldPlasticCo.,Ltd.|WuhanJielunte|
|ChuzhouJielunteMouldPlasticCo.,Ltd.|ChuzhouJielunte|
|ShenzhenKonkaYishijieCommercialDisplayCo.,Ltd.|KonkaYishijie|
|XiamenDalongTradingCo.,Ltd.|XiamenDalong|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
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|Corporatename|Abbreviation|
|TianjinUseeKangrongCultureCommunicationCo.,Ltd.|TianjinKangrong|

II.Basis forthe preparation 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—BasicStandard> issued by the Ministry of Finance with Decree No. 33 and revised with Decree No. 76, the 41 specific accounting standards, the Application Guidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises and other regulations issued and revised from 15 Feb. 2006 onwards (hereinafter jointly referred to as “the Accounting Standards for Business Enterprises”, “China Accounting Standards” or “CAS”), as well as the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15– General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory Commission.
In accordance with relevant provisions of theAccounting Standards for Business Enterprises, the Group adopted the accrual basis in accounting. Except for some financial instruments, where impairment occurred on an asset, an impairment reserve was withdrawn accordingly pursuant to relevant requirements.
III.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 31 Dec. 2014, business results and cash flows for the year of 2014, 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 China Securities Regulatory Commission.
IV. Importantaccounting policies andestimations
The Company and each subsidiary formulated certain specific accounting policies and accounting estimates according to the actual production and operation characteristics and the regulations of the relevant ASBE on the transactions and events of the revenues recognition. For the details, please refer to each description of Notes IV. 22 “Revenues”. For the notes of the significant accounting judgment and estimations made by the management layer, please referto Notes IV.27“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 1 Jan. and ends on 31 Dec. of every year
according tothe Gregorian calendar.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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.
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. And the Group adopted Renminbi as the bookkeeping base currency whenpreparing thefinancial statements for thereporting year. 4. Accounting treatment methods for business combinations under the same control or notunderthe same control
Business combinations, it is refer to two or more separate enterprises merge to form a reporting entity transactions or events. Business combination is divided into under the same control and 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.
The direct cost for the business combination of the combining party shall be recorded into the profits andlosses 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, and othercombining enterprise(s) is(are) theacquiree.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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.
As for the deductible temporary differences the acquirer obtains from the acquiree which are not recognized into deferred income tax liabilities due to their not meeting the recognition standards, if new or further information shows that the relevant situation has existed on the acquiring date and the economic benefits brought by the deductible temporary differences the acquirer obtains from the acquiree on the acquiring date can be realized, they shall be recognized into deferred income tax assets and the relevant goodwill shall be reduced. Where the goodwill is not sufficient to be offset, the difference shall be recognized into the profits and losses in the current period. In other circumstances than the above, where the deductible temporary differences are recognized into deferred income tax assets on the acquiring date, they shall berecorded intotheprofits andlosses in thecurrent period.
In a business combination not under same control realized by two or more transactions of exchange, according to about the 5th Notice about the Treasury Issuing the Accounting Standards for Enterprises (Finance accounting)[2012] No. 19 Criterion about the “package deal” (see note 4, 4 (2)), Whether the deals are “package deal” or not, belong to the “package deal”, see the previous paragraphs described in this section and note 4, 10 “long term equity investment transaction” and conduct accounting treatment, those not belong to the “package deal” distinguish between the individual financial statements and the consolidated financial statements and conduct relevant accounting treatment.
In the individual financial statements, the sum of the book value and new investment cost of the Group holds in the acquiree before the acquiring date shall be considered as initial cost of the investment. Other related comprehensive gains in relation to the equity interests that the Group holds in the acquiree before the acquiring date shall be treated 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
KonkaGroupCo.,Ltd. Notesof2014financialstatement defined benefit plan measured at the equity method arising from theacquiree’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 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 theacquiree’s re-measurement, the others shall be transferred into current investment gains on the acquiring date).
5.Methods forpreparing consolidated financial statements
(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 consolidated financial statements comprise the financial statements of theGroup and its subsidiaries. A subsidiaryis an enterprise orentity controlled bytheGroup. (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 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.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 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 “long term equity investment” or 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 ofsubsidiaries’ 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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 lose of control ,when theGroup losingcontrol onitssubsidiary.
6.Classificationof jointarrangements andaccounting treatment ofjointoperations A joint arrangement refers to an arrangement jointly controlled by two participants or above. The Group classifies joint arrangements into joint operations and joint ventures according to its rights and duties in the joint arrangements. A joint operation refers to a joint arrangement where the Group enjoys assets and has to bear liabilities related to the arrangement. A joint venture refers to a joint arrangement where the Group is only entitled to the net assets of the arrangement.
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—AssetImpairment>, 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 standardforcash andcash 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 andwhose risksin change of valueare minimal.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 8.Foreign currency businesses andtranslation offoreign currency financialstatements (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 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 is occurred.
(2) Accounting treatments for translation of foreign currency monetary items and non-monetary items
On the balance sheet date, the foreign currency monetary items shall be translated at the spot 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 andlosses.
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 other comprehensive incomes; and be recorded into disposal gains and losses at current period when disposing overseas business.
A foreign currency non-monetary item measured at the historical costs shall still be translated at the spot exchange rate on the transaction date. Where the foreign non-monetary items measured at the fair value shall be converted into amount in its bookkeeping base currency at spot exchange rate, the exchange gains and losses arising thereof shall be treated as change in fair value, and recorded into the current period gains and losses or as other comprehensive incomes.
(3)Translation of foreign currency financial statements
When it involves overseas business in preparing the consolidated financial statement, for the translation difference of foreign currency monetary items of net investment in overseas business arising from the change in exchange rate, it shall be recorded into the item of “difference of foreign currency financial statement translation” under theowners’ equity; and
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 date of cash flow incurred. The influence of exchange rate on the cash flow shall be adjustment item and individuallylistedin thecash flow statement.
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 theGroup’sowner’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 theshareholders’ equity in thebalance sheet shallbe all restated as gains and lossesof 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.
KonkaGroupCo.,Ltd. Notesof2014financialstatement (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 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.
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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 holds fora definitepurpose ortheenterpriseis able to holduntilits 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.
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 andlosses ofthecurrent period.
KonkaGroupCo.,Ltd. Notesof2014financialstatement④ 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, they are 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.
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 in the financial asset group with similar credit risk. Where the financial asset (individually significant or insignificant) is found not impaired after the separate impairment test, it is included in the financial asset group with similar credit risk and tested again on the group basis. Where the impairment loss is recognized for an individual financial asset, it is not included in the financial asset group with similar credit risk foran impairmenttest.
① Impairment onheld-to maturity investment, loans and receivables
The financial assets measured by cost or amortized cost write down their carrying value by the estimated present value of future cash flow. The difference is recorded as impairment loss. If there is objective evidence to indicate the recovery of value of financial assets after impairment, and it is related with subsequent event after recognition of loss, the impairment
KonkaGroupCo.,Ltd. Notesof2014financialstatement loss recorded originally can be reversed. The carrying value of financial assets after impairment loss reversed shall not exceed the amortized cost of the financial assets without 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 andlosses.
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 and losses 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
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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 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 andlosses
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.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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
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 (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 andloss is recognized in profit orloss.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 andshall 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 instruments are deducted fromshareholders’ equity. The Group does not recognize any changes in thefair value ofequity instruments.
10.Receivables
Receivables includeaccount receivables and other accounts receivables.
(1)Recognition ofprovision for bad debts:
The Group shall test the carrying amount of receivables on the balance sheet date. Where there is any objective evidence proving that such receivables have been impaired, an impairment provision shallbemade.
①Debtorhas serious financial difficult;
② Debtor goes against the contract clause (for instance, breach of faith or overdue paying interests orprincipal);
③Debtors have agreat probability ofbankruptcy orother financial reorganization;
④Otherobjective evidence proving such accounts receivablehas been impaired;
KonkaGroupCo.,Ltd. Notesof2014financialstatement (2)Withdraw method ofprovision for baddebts
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 RMB 20 million and other receivables above 10 million as receivables with significant single amounts and withdrawn theprovisionfor 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.
② 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
Dividethegroupsaccordingtothecreditriskscharacteristicsoftheaccounts Aginggroup
receivable
Internalrelatedpartygroupsof Dividethegroupsaccordingtothecreditriskscharacteristicsofwhetherthecreditor theCompany istheinternalrelatedpartyoftheCompany
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.
Withdrawal method ofthebad debts provisionofthe different groups:
Item Withdrawalmethod
Aginggroup Aginganalysismethod
KonkaGroupCo.,Ltd. Notesof2014financialstatement Item Withdrawalmethod
Internal related party groups of the
Notwithdraw
Company
In thegroups, adopting aging analysis method to withdraw bad debt provision:
||
|-|
|Withdrawalproportionforaccountsreceivable(%)|
|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.
(3)Reversal ofprovision for baddebts
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 no provisionis made forthe impairment.
11.Inventory
(1)Classification
TheGroup’s inventories are classified as non-property inventories and property inventories.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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.
①Thefinished property refers tothe finished andheld-for-saleproperty.
② The property in process (development costs) refers to the unfinished property with the development purpose forsale.
(2)Pricing method foroutgoinginventories
Pricing method:weighted average method
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 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.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 thebalance that thecost of individual inventory item exceeding the net realizablevalue. 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 by one time/gradation amortization when acquiring.
12.Long-term equityinvestments
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 polices 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 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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 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 andlosses.
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 andbonds 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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 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 methodin thefinancial statements, and which theCompany has control oninvested entity.①Long-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.
②Long-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 the 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 the 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 polices adopted by the investees is not accord with that of the Group, should be adjusted according to the accounting policies of the Group and the financial statement of the investees during the accounting period and according which to recognize the investment income as well as other comprehensive income. For the transaction happened between the Group and associated enterprises as well as joint ventures, if the assets launched or sold not form into business, the portion of the unrealized gains and losses of the internal transaction,
KonkaGroupCo.,Ltd. Notesof2014financialstatement which belongs to the Group according to the calculation of the enjoyed proportion, should recognize the investment gains and losses on the basis. But the losses of the unrealized internal transaction happened between the Group and the investees which belongs to the impairment losses of the transferred assets, should not be neutralized. The assets launched by the Group to the associated enterprises or the joint ventures if could form into business, the long-term equity investment without control right which acquired by the investors, should regard the fair value of the launched business as the initial investment cost the newly added long-term equity investment, and for the difference between the initial investment cost and the book value of the launched business, should be included into the current gains and losses with full amount. The assets sold by the Group to the associated enterprises or the joint ventures if could form into business, the difference between the acquired consideration and the book value of the business should be included in the current gains and losses with full amount. The assets purchased by the Group to the associated enterprises or the joint ventures ifcould form into business, should be accounting disposed according to the regulations of No. 20ofASBE—Business Combination, and should be recognized gains or losses related to the transaction with full amount.
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 on 1 Jan. 2008 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.
③Acquiring shares of minorityinterest
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.
④Disposal 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
KonkaGroupCo.,Ltd. Notesof2014financialstatement profits andlosses.
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 otherowners’ equity except for the net gains and losses, other comprehensive income and the profits distribution of the investees, should be transferred into thecurrent gains andlosses 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, 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 to theproportion.
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 incomeandtheotherowners’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
KonkaGroupCo.,Ltd. Notesof2014financialstatement investment by adopting the equity method, should execute the accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when terminate the equity method for measurement, while for 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.
13.Investmentreal estates
The term "investment real estates" refers to the real estates 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 estates 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 to Note IV. 16. Impairment of Non-current Non-financial Assets.
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 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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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.
14.Fixed assets
(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:
||||
|-|-|-|
|Method|Usefullife(Year)|Expectednetsalvagevalue(%)|
|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. 19 “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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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.
(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 andlosses.
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.
15.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. 19 “Long-term assets impairment”.
16.Borrowing costs
The borrowing costs shall include interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. When the borrowing costs can be directly attributable to the construction or production of assets eligible for capitalization, and the asset disbursements or the borrowing costs have already incurred, and the construction or production activities which are necessary to prepare the asset for its intended use or sale have already started, the capitalization of borrowing costs begins. When the asset eligible for capitalization under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased. Other borrowing costs shall be recognized as expenses when incurred.
The to-be-capitalized amount of interests shall be determined in light of the actual interests incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment; the enterprise shall calculate and determine the to-be-capitalized amount on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be calculated and determined in
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 and losses.
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.
17.Intangibleassets
(1)Pricing method, useful life and impairment 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 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.
KonkaGroupCo.,Ltd. Notesof2014financialstatement① 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;
⑤ Thedevelopment expenditures oftheintangible assets can be reliably measured.
As for expenses thatcan’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.19“Long-term assets impairment”.
18.Amortizationmethod oflong-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.
19.Impairmentoflong-term assets
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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 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.
20.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 should bemeasured 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 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 can not terminate the labor relations unilaterally or reduce the dimission welfare, remuneration and liabilities produced from the dimission welfare should be determined and included in current profits and losses when determining the costs of dismission welfare and recombination. However, dimission welfare not fully paid within 12 months after annual report 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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 to thesetting revenueplan.
21.Estimated liabilities
The company should recognize the related obligation as a provision for liability when the obligation meets the following conditions: (1) That obligation is a present obligation of the enterprise; (2) It is probable that an outflow of economic benefits from the enterprise will be required to settle the obligation; (3) A reliable estimate can be made of the amount of the obligation.
On the balance sheet date, an enterprise shall take into full consideration of the risks, uncertainty, time value of money, and other factors pertinent to the Contingencies to measure the estimated liabilities in accordance with the best estimate of the necessary expenses for the performance 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 bookvalueoftheestimated liabilities.
22.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 be incurred can be measured in a reliable way. The recognition of revenue from exported goods: For good exported by way of FOB, the revenue shall be recognized once the goods were delivered to the carrier designated by the purchaser; for goods exported by way of CIF, therevenue shall berecognized once thegoods reach the port ofthepurchase.
(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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 can not be measured in a reliable way, the revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred and expected to be compensated, and make the cost of labor services incurred as the current expenses. If it is predicted that the cost of labor services 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 can not 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 can not 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.25. 23.Government subsidies
A government subsidy means the monetary or non-monetary assets obtained free by the Group from the government, but excluding the capital invested by the government as the owner of the enterprise. Government subsidies consist of the government subsidies pertinent toassets andgovernment subsidiespertinent to income.
If a government subsidy is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured
KonkaGroupCo.,Ltd. Notesof2014financialstatement at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount. The government subsidies measured at their nominal amounts shall be directly included in thecurrent profits andlosses.
The government subsidies pertinent to assets shall be recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses. The government subsidies pertinent to incomes shall be treated respectively in accordance with the circumstances as follows: those subsidies used for compensating the related future expenses or losses of the enterprise shall be recognized as deferred income and shall included in the current profits and losses during the period when the relevant expenses are recognized; or those subsidies used for compensating the related expenses or losses incurred to theenterprise shall bedirectly included in thecurrent profits and losses.
Where it is necessary to refund any government subsidy which has been recognized, it shall be treated respectively in accordance with the circumstances as follows: if there is the deferred income concerned, the book balance of the deferred income shall be offset against, but the excessive part shall be included in the current profits and losses; or if there is no deferred income concerned to the government subsidy, it shall be directly included in the current profits andlosses.
24.Deferred income tax assets/deferred income tax 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 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 form othertaxabletemporary difference.
No deferred taxable assets should be recognized for the deductible temporary difference of
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 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.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 25.Leasing
Financing leasing virtually transferred the whole risks and leasing of the compensation related to the assets ownership and their ownership may eventually be transferred or maybe not.Other leasing except for 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 andlosses ofthecurrent period in which they actually 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. (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 andlong-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.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 26.Changesin mainaccounting policies andestimates
(1)Changeof accounting policies
① Alteration of theaccounting polices led byexecuting thenewASBE
At the year-begin of 2014, the Ministry of Finance issued No. 39 ofASBE—Fair Value Measurement, No. 30ofASBE—Presentation of Financial Statements (revised in 2014), No. 9 ofASBE—Employee Compensation (revised in 2014), No. 33 ofASBE—Consolidation Financial Statement (revised in 2014). No. 40 ofASBE—Joint Venture Arrangement, No. 2ofASBE—Long-term Investment (revised in 2014) and No. 41ofASBE—Equity Disclosure of Other Entities which respectively by C-H[2014] No.6, No. 7, No. 8, No. 10, No. 11, No. 14 and No. 16 which be required to execute among the enterprises that applied the ASBE since 1 Jul. 2014 as well as encouraged the enterprises listed overseas to execute in advance. At the same time, the Ministry of Finance issued No. 37ofASBE—Presentation of Financial Instruments (revised in 2014) as C-H[2014] No. 23 (hereinafter referred to Presentation Guidelines of Financial Instruments for short), which be required to present the financial instruments according to the requirements of the guidelines in Y2014 and the following period among thefinancial statement.
The Company began to execute the above 7 new issued or revised enterprises principles except for the presentation guidelines of financial instruments since 1 Jul. 2014 and began to execute the presentation guidelines of financial instruments when compiling the 2014 financial report and adjusted according to the relative requirements of each guidelines, while the influences on the financial statement items during the current period and the earlier stage ofthepresentation as well as theamount were as follows:
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|-|-|
|Notesofthecontentandtheinfluences||
||Nameofitems|
|According to the No. 2 ofASBE–Long-term EquityInvestment (revised in 2014)and the relevant regulations oftheapplicationguide|Long-termequityinvestment|
||Availableforsalefinancialassets|
||Capitalreserve|
||Retainedprofits|
||Equitiesofminorityshareholders|
||Investmentincome|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
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|-|-|
|Notesofthecontentandtheinfluences||
||Nameofitems|
|According to the No. 30 ofASBE–Presentation ofFinancialStatement(revisedin2014) and the relevantregulations of the applicationguide|Discountdifferenceofforeigncurrencystatement|
||Othercomprehensiveincome|
||Deferredincome|
||Othernon-currentliabilities|

 (2)Changeof accounting estimates
There was nochange of accounting estimateof theCompany during thereporting period. 27.Critical accounting judgments andestimates
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 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
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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
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)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 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.
(6)Provision forimpairment of non-financial non-current assets
The Group made a judgment on the non-current assets other than financial assets whether they had any indication of impairment on the balance sheet date. For the intangible assets without finite service life, other than the annual impairment test, they should be subject to the impairment test when there was any indication of impairment. For other non-current non-financial assets, which should be subjected to impairment test when there was indication 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
KonkaGroupCo.,Ltd. Notesof2014financialstatement priceand relevant operating costs arising from reasonable and supportiveassumptions.
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.
(7)Depreciation and amortization
For the investment real estate, fixed assets and intangible assets, the Group withdrew the depreciation and amortization by adopting the straight-line method during the service life after full consideration of the salvage value. The Group checked the service life periodically so as to decide the amount of depreciation and amortization at each reporting period. The service life was fixed by the Group in accordance with the previous experience of the similar assets and the expected technical update. If there was any significant change on the previous estimates, thedepreciation and amortization expenses should beadjusted.
(8)Expenditures for development
When fixing the amount of capitalization, the management level of the Group needed to make assumption on the predicted future cash flow, property discounted rate and estimated beneficiary period forrelevant assets.
(9)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 incometax assets which should berecognized.
(10)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.
(11)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 andbalance of liabilities.
(12)Estimated liabilities
The Group made the estimation on product quality guarantee, predicted loss of contract and the fine for delayed delivery etc. and withdrew the relevant provision for estimated liabilities in accordance the provisions of contract, current knowledge and experience. Under the condition that the contingent event has formed a current duty and fulfilling the duty is likely to cause the economical interest outflow the Group, the Group measures the estimated
KonkaGroupCo.,Ltd. Notesof2014financialstatement 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 and losses in thefuture periods.
V. Taxation
1.Maintaxes andtax rate
Categoryoftaxes Specificsituationofthetaxesrate
Calculated the output tax at17% of taxable income and paid the VAT by the amount after deducting the deductible withholding VAT at current period, of VAT
whichEuropeKonkaof21%,TelecommunicationTechnologyof17%,6%andShushidaLogisticsof11%,6%.
Businesstax Paidby5%oftaxablebusinessincome.
Paid at7% of the circulating tax actually paid, of which Dongguan Packing, Urbanmaintenanceandconstruction
DongguanKonka,DongguanMould,BoluoKonka,BoluoKonkaPrecisionand tax
Xutongdaof5%.
Paid at25% of the taxable income, of which Hong Kong Konka, Konka Household Appliances Investment, Konka Household Appliances International Trading of16.5%, Wankaida of12.5%, Telecommunication Technology, Enterpriseincometax
Precision Mould, Information Network, Chongqing Qingjia, Anhui Konka, Kunshan Konka, Dongguan Konka, Dongguan Mould, Xutongda and AnhuiTongchuangof15%,USAKonkaof28%andEuropeKonkaof31%.
Educationsurtax
Paidat3%ofthecirculatingtaxactuallypaid.
Localeducationsurtax
Paidat2%ofthecirculatingtaxactuallypaid.
(1) In accordance with the Notice on Printing the Administration Method on Charging and Use of the Treatment Funds of Discarded Electronic Appliance and Electric Products issued by the Ministry of Finance, Ministry of Environmental Protection, National Development and Reform Commission, Ministry of Industry and Information, General Administration of Customs and National Taxation Bureau (CZ[2012] No. 34), and the Administration Method on Charging and Use of the Treatment Funds of Discarded ElectronicAppliance and Electric Products issued by National Taxation Bureau (GJSWZJGG[2012] No. 41), the domestic manufacturer of the electrical appliances and electronic products of PRC started to pay the treatment funds for discarded electrical appliance and electronic products according the sales
KonkaGroupCo.,Ltd. Notesof2014financialstatement volume (trusted processing amount) and relevant charging standards from 1 Jul. 2012. According to the regulations, theGroup’s charging standards were RMB 13 per set of TV, RMB12per set ofrefrigeratorand RMB7per set 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 1 Jan. 2008 and will be final settled uniformly bytheCompany at theyear-end.
(3) TheCompany’s subsidiary, Shenzhen Konka Communication Technology Co., Ltd, is engaged in value-added services of brand costs. According to Notice of the Ministry of Finance and the StateAdministration of Taxation on the Pilot Work of Levying Value-Added Tax in Lieu of Business Tax in the Transportation Industry and Some Modern Service Industries in Beijing and Other Seven Provinces and Cities(CS[2012] No.71), added-value tax is levied from 1Nov.2012,with tax rateof6%.
(4) As for the transportation revenue of the logistic business of theCompany’s subsidiary Shushida Logistics, in accordance with the Notice on Carrying out the Pilot of Change on Charging the Business Taxes of Transportation Industry and Partial Modern Service Industry to ValueAdded Taxes in Eight Provinces and Cities including Beijing issued by the Ministry of Finance and the National Taxation Bureau (CS[2012] No. 71) and other regulations, it was changed to charge theVATsince 1 Sept. 2012, with the tax rate of3%. From 1 Jun. 2013, Shushida Logistics received the general taxpayer qualification with the VAT rate of the transportation revenueof11%and theotherservice of6%.
2.Taxpreference andapproved document
(1) On 30 Sep. 2014, the subsidiary of the Company Shenzhen Konka Telecommunication Technology Co., Ltd. acquired the certificate of high-technology enterprises jointly issued by Shenzhen Science and technology Innovation Committee, Shenzhen Finance Committee, Shenzhen Provincial Office, SAT, and Shenzhen Local Taxation Bureau, with the certification number of GR201444201101 and the validity of three years. According to the relevant taxation regulations, the Telecommunication Technology could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2014 to 2016, and pay forthecorporate incometax according to15%of thepreferential tax rate.
(2) On 30 Sep. 2014, the subsidiary of the Company Konka Precision Mould Manufacture Co., Ltd. acquired the certificate of high-technology enterprises jointly issued by Shenzhen Science and technology Innovation Committee, Shenzhen Finance Committee, Shenzhen Provincial Office, SAT, and Shenzhen Local Taxation Bureau, with the certification number of GR201444201781 and the validity of three years. According to the relevant taxation regulations, the Precision Mould could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2014 to 2016, and pay for the corporate incometax according to15%of thepreferential tax rate.
(3) On 22 Jul. 2013, the subsidiary of the Company Shenzhen Konka Information Network Co., Ltd. acquired the certificate of high-technology enterprises jointly issued by Shenzhen Science and technology Innovation Committee, Shenzhen Finance Committee, Shenzhen Provincial Office, SAT, and Shenzhen Local Taxation Bureau, with the certification number
KonkaGroupCo.,Ltd. Notesof2014financialstatement of GR201344200179 and the validity of three years. According to the relevant taxation regulations, the Information Network could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2013 to 2015, and pay for the corporate incometax according to15%of thepreferential tax rate.
(4) TheCompany’s subsidiary— Chongqing Qingjia Electronics Co., Ltd. is levied the business income tax at the preferential tariff of15% from 1 Jan. 2011 to 31 Dec. 2020 in accordance with CS (2011) No. 58 Notice on Relevant Tax Policies on Deeply Implementing thewestern development strategy.
(5) On 14 Oct., 2013, the subsidiary of the Company, Anhui Konka, received the certificate of high-technology enterprises (No.: GF2013342000298) awarded by Anhui Science and Technology Department, Anhui Department of Finance, Anhui State Taxation Bureau and Anhui Local Taxation Bureau. The period of validity is three years. According to taxation rules, Anhui Konka would enjoy the preferential tax privileges of high-technology enterprises from 2013 to 2015 and pay the enterprise income tax at the preferential rate of15%.
(6) On 5 Aug. 2014, the subsidiary of the Company, Kunshan Konka Electronics Co., Ltd. acquired the certificate of high-technology enterprises joint issued by Jiangsu Province Science and Technology Department, Department of Finance of Jiangsu Province, Jiangsu Province municipal Office, SAT, and Jiangsu Local Taxation Bureau with the certification number of GF201432000413 and the validity of three years. According to the relevant taxation regulations, the Kunshan Konka could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2014 to 2016, and pay for the corporate incometax according to15%of thepreferential tax rate.
(7) According to the regulations of the Reply on the Filling of the 2014 First and Second Batch of the High-technology Enterprise of Guangdong Province issued by Torch High Technology Industry Development Center of Ministry of Science and Technology (G-K-H-Zi[2015] No. 47), the subsidiary of the Company, Dongguan Konka Electronics Co., Ltd. had passed the qualification recognition of national high-technology enterprises with the number of the certificate of high-technology enterprises of GR201444001341 and the issuance date was 10 Oct. 2014. Up to the report date, Dongguan Konka had not received the certificate of high-technology enterprises and the Company considered that to gain the certificate of high-technology enterprises and be filed by the competent tax authority not exist any uncertainty, and temporarily pay for the corporate income tax according to15% of the preferential tax rate.
(8) On 12 Sept. 2012, theCompany’s subsidiary, Dongguan Konka Mould Plastic acquired the certificate of high-technology enterprises joint issued by Guangdong Province Science and Technology Department, Department of Finance of Guangdong Province, Guangdong Province municipal Office, SAT, and Guangdong Local Taxation Bureau with the certification number of GF201244000053 and the validity of three years. According to the relevant taxation regulations, the Kunshan Konka could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2012 to 2014, and pay for the corporateincometax according to15%ofthepreferential tax rate.
(9) On 26 Nov.2012, theCompany’s subsidiary,Dongguan Xutongda Mould Plastic Co., Ltd. acquired the certificate of high-technology enterprises joint issued by Guangdong Province Science and Technology Department, Department of Finance of Guangdong Province, Guangdong Province municipal Office, SAT,and Guangdong Local Taxation Bureau with the
KonkaGroupCo.,Ltd. Notesof2014financialstatement certification number ofGR201244000555 and the validity of three years. According to the relevant taxation regulations, the Kunshan Konka could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2012 to 2014, and pay for the corporateincometax according to15%ofthepreferential tax rate.
(10) On 3 Jul. 2012, theCompany’s subsidiaryAnhui Tongchuang received the Certificate of Hi-tech Enterprise jointly issued by Department of Science& Technology, Finance Bureau, National Taxation Bureau and Local Taxation Bureau of Anhui Province with the number of GR201234000074 and the valid term of three years. In accordance with relevant stipulations of taxation, Anhui Tongchuang will enjoy relevant preferential policies for high-tech enterprises for successive three years since 2012 and was levied at the preferential enterprise incometax rateof15%.
(11) According to the CS No.[2008] 1 Article issued by Ministry of Finance and State Administration of Taxation, after recognizing the domestic newly set up software production enterprises and since the profit-making year, our country exempted the corporate income tax in the first and second year while the third to fifth years halved the corporate income tax.TheCompany’s subsidiary, Shenzhen Wankaida Science and Technology Co., Ltd. was exempted from the corporate income tax from 2010 to 2011and from 2012to 2014 be halved to pay for thecorporateincome tax with theadapted tax rateof12.5%of 2014.
(12) According to the CS No.[2011] 100 Article issued by Ministry of Finance and State Administration of Taxation, if the ordinary VAT payer sells software products developed by itself, the VAT is levied at the rate of17% and after that, the part of actual tax burden of VAT which exceeds3% can enjoy the policy of refunding taxes immediately after levying taxes. The subsidiaries of the Company,Shenzhen KonkaTelecommunicationTechnology Co., Ltd., Shenzhen Konka Information Network Co., Ltd., and Shenzhen Wankaida Science and Technology Co., Ltd. enjoy such favorable policy.
VI. Notes on major items inconsolidated financial statements 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 1 Jan. 2014, theyear-end refers to 31Dec. 2014andthis year refers toY2014 with thelastyear ofY2013. 1.Monetary funds
||
|-|
|Closingbalance|
|5,118.98|
|1,846,551,209.81|
|62,898,895.10|
|1,909,455,223.89|
|356,036,479.82|

Notes: The closing balance of other monetary funds was the deposits of each margin deposit
notwithdrawn at any time.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 2.Notes receivable
(1)Category ofnotes receivable
||
|-|
|Closingbalance|
|3,785,443,076.37|
|33,974,000.00|
|3,819,417,076.37|

 (2)Notes receivable pledged bytheCompany at theyear-end
Item Amount
Banker’sacceptancebill 1,461,595,341.76 Total 1,461,595,341.76 (3) Notes receivable which had endorsed by the Company or had discounted and had not due onthebalance sheet dateat the year-end
||
|-|
|Amountofrecognitionterminationattheperiod-end|
|1,287,301,779.76|
|1,287,301,779.76|

 Notes: Up to 31 Dec. 2014, the Company pledged thebanker’s acceptance bill of the book value of RMB 1,461,595,341.76 in the Shenzhen Branch of BOC for applying for the RMB 5.3 billion general credit limit, which was used for the domestic or foreign financing business such as handling thebilling,letter ofcredit andthetrading financing.
3.Accounts receivable
(1)Accounts receivabledisclosed by category
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|—|—|—|—|
|2,516,702,016.18|98.95|259,303,584.71|10.30|

KonkaGroupCo.,Ltd. Notesof2014financialstatement Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|26,756,380.18|1.05|24,861,604.49|92.92|
|2,543,458,396.36|100.00|284,165,189.20|11.17|

 (Continued)
Openingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|103,357,300.00|3.76|5,167,865.00|5.00|
|2,616,862,124.57|95.25|256,068,763.63|9.79|
|27,085,525.42|0.99|25,071,336.44|92.56|
|2,747,304,949.99|100.00|286,307,965.07|10.42|

① In the groups, accounts receivable adopting aging analysis method to accrue bad debt provisionat the year-end
Closingbalance
Aging
|||
|-|-|
|Accountsreceivable|Baddebtprovision|
|2,192,990,417.43|45,567,514.25|
|81,201,171.40|4,060,058.57|
|31,114,142.95|6,222,828.59|
|12,545,176.10|6,272,588.05|

KonkaGroupCo.,Ltd. Notesof2014financialstatement Closingbalance
Aging
|||
|-|-|
|Accountsreceivable|Baddebtprovision|
|3,341,026.10|1,670,513.05|
|195,510,082.20|195,510,082.20|
|2,516,702,016.18|259,303,584.71|

②Accounts receivable withinsignificant single amount for which bad debt provision
Accounts receivable (classified by Yearendbalance
||||
|-|-|-|
|Accountsreceivable|Bad debtprovision|Withdrawproportion|
|6,315,918.96|4,421,143.27|70.00%|
|1,223,622.25|1,223,622.25|100.00%|
|1,474,490.47|1,474,490.47|100.00%|
|918,080.45|918,080.45|100.00%|
|16,824,268.05|16,824,268.05|100.00%|
|26,756,380.18|24,861,604.49|—|

(2)Accounts receivablewithdraw,reversed orcollected of2014
Thereversed baddebt provision of2014 was ofRMB2,142,775.87.
(3) Top 5 of the closing balance of the accounts receivable colleted according to the arrears party at theyear-end
The total amount of the Top 5 of the closing balance of the accounts receivable colleted according to the arrears party at the year-end was of RMB 704,588,100.93 that covered the proportion of27.70% in the total amount of the accounts receivable at the year-end, and the totalamount of thecorresponding withdrewbad debt provision was of RMB14,091,762.02.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 4.Prepayment
(1)List byaging analysis:
||||||
|-|-|-|-|-|
|Closingbalance|||||
|Bookvalue||Baddebtprovision|Bookvalue||
|Amount|Proportion(%)||Amount|Proportion(%)|
|312,558,414.85|96.34|863,929.20|163,318,358.04|95.14|
|5,069,017.23|1.56|1,952,958.31|1,573,795.66|0.92|
|735,503.34|0.23|396,003.34|513,493.43|0.30|
|6,086,092.93|1.87|6,086,092.93|6,248,671.39|3.64|
|324,449,028.35|100.00|9,298,983.78|171,654,318.52|100.00|

 Notes: prepayments of significant amount and aged more than 1 year was mainly the prepayments of material purchasing amount of “Shanghai Yongxin Color Picture Tube Co., Ltd.” and “Guobang Group Co., Ltd.” with the amount respectively of RMB 4,108,257.19 and 1,303,324.20, and owning to the quality problem of the relevant materials which led the accounts settlement and the materials warehousing formalities unmanaged till now with the purchase accounts prepaid bepresented as theprepayments.
(2) Top 5 of the closing balance of the prepayment colleted according to the prepayment target
The total amount of the Top 5 of the closing balance of the prepayment colleted according to the prepayment target was of RMB 32,456,636.08, which was of10.00% of the total amount oftheyear-end balance ofthe prepayments.
5.Interest receivable
||
|-|
|Closingbalance|
|1,885,727.36|
|1,885,727.36|

 6.Otheraccounts receivable
(1)Other accounts receivabledisclosed bycategory
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|

KonkaGroupCo.,Ltd. Notesof2014financialstatement Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|18,115,952.51|2.21|5,405,926.42|29.84|
|800,523,541.89|97.55|26,194,197.30|3.27|
|2,000,000.00|0.24|2,000,000.00|100.00|
|820,639,494.40|100.00|33,600,123.72|4.09|

 (Continued)
Openingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|—|—|—|—|
|321,659,003.24|100.00|22,909,588.29|7.12|
|—|—|—|—|
|321,659,003.24|100.00|22,909,588.29|7.12|

① In the groups, other accounts receivable adopting aging analysis method to accrue bad debt provisionat theyear-end
Other accounts receivable (classified Yearendbalance
||||
|-|-|-|
|Accountsreceivable|Bad debtprovision|Withdrawproportion|

KonkaGroupCo.,Ltd. Notesof2014financialstatement Other accounts receivable (classified Yearendbalance
||||
|-|-|-|
|Accountsreceivable|Bad debtprovision|Withdrawproportion|
|18,115,952.51|5,405,926.42|29.84%|
|18,115,952.51|5,405,926.42|—|

② Otheraccounts receivable with insignificant singleamount for which bad debt provision Closingbalance
Aging
|||
|-|-|
|Accountsreceivable|Baddebtprovision|
|612,681,823.36|2,693,093.05|
|168,007,381.83|8,400,369.09|
|4,678,905.30|935,781.06|
|914,912.74|457,456.37|
|1,066,041.86|533,020.93|
|13,174,476.80|13,174,476.80|
|800,523,541.89|26,194,197.30|

(2)Accounts receivablewithdraw,reversed orcollected during thereporting period
Thewithdrawal amount ofthebad debt provision of2014was ofRMB10,690,535.43.
(3) Top 5 of the closing balance of the other accounts receivable colleted according to the arrears party
|||||
|-|-|-|-|
|Nature|Closingbalance|Aging|Proportion of thetotal year endbalance of theaccountsreceivable(%)|
|Matcostsofland-transferringfees|488,063,979.00|Within 1 year|59.47|
|Subsidypaymentsofenergysaving|152,402,680.00|1 to 2 years|18.57|
|Come-and-gomoney|18,115,952.51|Within1year|2.21|
|Margin|14,797,464.00|Within1|1.80|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
|||||
|-|-|-|-|
|Nature|Closingbalance|Aging|Proportion of thetotal year endbalance of theaccountsreceivable(%)|
|||year||
|Margin|2,480,401.90|1to2years|0.30|
|—|675,860,477.41|—|82.35|

 7.Inventory
(1)Category
Closingbalance
|||
|-|-|
|Bookbalance|Impairmentofinventories|
|1,299,997,072.71|331,916,902.96|
|384,479,782.98|175,345,095.16|
|2,347,967,769.03|239,320,721.13|
|854,937.39|—|
|617,719,407.47|—|
|4,651,018,969.58|746,582,719.25|

 (Continued)
Openingbalance
|||
|-|-|
|Bookbalance|Impairmentofinventories|
|1,122,928,416.97|337,943,507.99|
|346,780,797.38|180,414,495.68|
|2,327,973,299.87|258,385,468.08|
|5,144,913.85|1,041,221.03|
|557,626,288.97|—|
|4,360,453,717.04|777,784,692.78|

(2)Impairment ofinventories
KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Openingbalance|Increasedamount||Decreasedamount||
||Withdrawal|Other|Reverseorwrite-off|Other|
|337,943,507.99|40,910,625.20|—|46,937,230.23|—|
|180,414,495.68|16,221,786.40|—|21,291,186.92|—|
|258,385,468.08|30,992,214.88|—|50,056,961.83|—|
|1,041,221.03|—|—|1,041,221.03|—|
|777,784,692.78|88,124,626.48|—|119,326,600.01|—|

 (3) Withdrawal provision basis of the falling price of the inventory and the reasons of the reserveorwrite-off
|||
|-|-|
|Specificbasisofthewithdrawalofthefallingpriceprovisionofinventory|Reasonsofreversingthefallingpriceprovisionoftheinventory|
|Therealizablenetvaluewaslowerthantheinventorycost|Recoveryofthemarketprice|
|Therealizablenetvaluewaslowerthantheinventorycost|Recoveryofthemarketprice|
|Therealizablenetvaluewaslowerthantheinventorycost|Recoveryofthemarketprice|
|Therealizablenetvaluewaslowerthantheinventorycost|Recoveryofthemarketprice|

(4) The capitalized amount of the borrowings among the year-end balance of the inventory was of RMB1,329,348.82.
8.Othercurrentassets
||
|-|
|Closingbalance|
|500,000.00|
|50,000,000.00|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|Closingbalance|
|311,200,708.77|
|361,700,708.77|

 Notes: The entrust loans was the amount of RMB 50,000,000.00 that Anhui Konka Electronics Co., Ltd. lent to ChuzhouTongchuang Construction Investment Co., Ltd. through Chuzhou Branch of BOC, which the both parties had signed the entrust loans contracts with the contract number of C-Z-Y-W-D-Zi[2014] No. 007 with the borrowing time limit of 1 year.
9.Available-for-salefinancial assets
(1)Information ofavailable-for-sale financial assets
||||||
|-|-|-|-|-|
|Closingbalance|||||
|Bookbalance|Depreciationreserves|Bookvalue|Bookbalance|Depreciationreserves|
|247,799,748.07|2,766,139.07|245,033,609.00|15,149,748.07|3,254,748.77|
|2,311,748.07|681,139.07|1,630,609.00|2,311,748.07|1,369,748.77|
|245,488,000.00|2,085,000.00|243,403,000.00|12,838,000.00|1,885,000.00|
|247,799,748.07|2,766,139.07|245,033,609.00|15,149,748.07|3,254,748.77|

 (2)Available-for-sale financial assets measured byfair valueat theyear-end
Available-for-saleequity Categoryofavailable-for-salefinancialassets
instruments
Costoftheequityinstruments 2,311,748.07 Fairvalue 1,630,609.00 Changeamountofthefairvalueaccumulativelyincludedintheothercomprehensive
income 688,609.70 Withdrawnimpairmentamount 681,139.07 (3)Available-for-sale financial assets measured bycost at theyear-end
Bookbalance
||||
|-|-|-|
|Year-begin|Increase|Decrease|
|—|6,000,000.00|—|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||
|-|-|-|
|—|4,800,000.00|—|
|—|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|—|—|
|2,400,000.00|3,600,000.00|—|
|2,400,000.00|—|—|
|—|203,000,000.00|—|
|12,838,000.00|232,650,000.00|—|

 (Continued)
||||||
|-|-|-|-|-|
|Bookbalance||||Shareholdingproportionamongtheinvestees(%)|
|Year-begin|Increase|Decrease|Year-end||
|—|—|—|—||
|—|—|—|—||
|—|—|—|—||
|—|—|—|—||
|1,300,000.00||—|1,300,000.00|8.33|
|100,000.00||—|100,000.00|—|
|485,000.00||—|485,000.00|1.00|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|—|—|—|—|—|
|—|200,000.00|—|200,000.00|11.50|
|—|—|—|—|6.00|
|—|—|—|—|4.26|
|—|—|—|—|—|
|1,885,000.00|200,000.00|—|2,085,000.00|—|

 (4)Changes oftheimpairment oftheavailable-for-sale financial assets of2014
Categoryofavailable-for-salefinancialassets Available-for-saleequityinstruments Withdrawnimpairmentbalanceattheyear-begin
3,254,748.77 Withdrawalof2014
200,000.00 Ofwhich:transferredfromothercomprehensiveincome
— Decreaseof2014
688,609.70 Ofwhich:recoveredorreversedfromthefairvalueaftertheperiod
— Withdrawnimpairmentbalanceattheyear-end
2,766,139.07 (5)Other notes
The Company transferred the long-term equity investment without significant influences and joint control into the available-for-sale financial assets for measurement according to the changes of thenew criterion of 2014.
10.Long-term equityinvestment
||||||
|-|-|-|-|-|
|Openingbalance|||||
||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|—|—|—|—|—|
|115,114,237.42|—|23,515,873.02|-22,743,653.52|—|
|108,633,724.22|—|—|-8,931,285.01|—|
|3,649,728.08|—|—|—|—|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Openingbalance|||||
||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|201,482,356.95|—|—|-3,679,122.32|—|
|7,137,424.83|—|—|—|—|
|436,017,471.50|—|23,515,873.02|-35,354,060.85|—|

 (Continued)
|||||
|-|-|-|-|
|Increase/decrease|||Closingbalance|
|Declarationofcashdividendorprofits|Withdrawbaddebtprovision|Other||
|—|—|—|—|
|—|—|—|43,425,481.67|
|—|—|—|115,139,968.77|
|—|—|—|3,649,728.08|
|—|—|—|197,758,604.87|
|—|—|—|7,137,424.83|
|—|—|—|367,111,208.22|

 11.Investment property
(1)Investment property calculated bycost
||||
|-|-|-|
|Housesandbuildings|Landuseright|constructioninprogress|
|248,881,997.54|—|—|
|1,041,050.21|—|—|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||
|-|-|-|
|Housesandbuildings|Landuseright|constructioninprogress|
|1,041,050.21|—|—|
|—|—|—|
|—|—|—|
|249,923,047.75|—|—|
|10,895,473.42|—|—|
|5,678,121.53|—|—|
|5,678,121.53|—|—|
|—|—|—|
|—|—|—|
|16,573,594.95|—|—|
|—|—|—|
|—|—|—|
|—|—|—|
|—|—|—|
|—|—|—|
|—|—|—|
|233,349,452.80|—|—|
|237,986,524.12|—|—|

 (2)Investment property adopted fair valuemeasurement mode
||
|-|
|Bookvalue|
|233,349,452.80|

KonkaGroupCo.,Ltd. Notesof2014financialstatement 12.Fixed assets
(1)List offixed assets
Unit:RMBYuan
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Other|
|1,697,364,872.78|1,077,095,834.75|252,082,489.37|74,040,180.94|195,513,387.30|
|149,991,354.92|40,359,693.71|18,348,763.09|5,753,850.45|36,902,538.21|
|134,005,689.71|36,235,514.62|18,348,763.09|5,753,850.45|36,844,418.55|
|15,985,665.21|4,124,179.09|—|—|58,119.66|
|180,523,888.42|92,092,978.81|17,790,152.11|5,549,994.89|17,495,085.35|
|43,596,210.24|88,037,291.55|13,597,758.71|3,543,566.66|10,682,472.81|
|1,666,832,339.28|1,025,362,549.65|252,641,100.35|74,244,036.50|214,920,840.16|
|378,833,362.76|606,302,322.73|206,847,412.38|53,846,303.98|128,053,595.91|
|40,210,835.47|58,702,785.27|10,242,305.22|3,425,935.14|27,399,637.99|
|40,759,007.97|59,493,175.20|13,016,906.08|8,340,534.48|18,217,221.94|
|17,617,214.48|74,079,743.07|15,728,018.75|4,769,178.41|14,674,200.87|
|16,590,256.88|73,769,826.19|11,715,741.42|3,189,209.99|9,417,182.01|
|401,426,983.75|590,925,364.93|201,361,698.85|52,503,060.71|140,779,033.03|
|2,451,004.74|6,876,144.66|1,945,464.65|847,673.85|1,589,499.68|
|50,835,348.50|488,575.57|—|51,556.74|—|
|50,835,348.52|488,575.57|—|51,556.74|—|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Other|
|162,036.79|1,166,066.10|317,411.20|—|130,578.55|
|162,036.79|1,166,066.10|317,411.20|—|130,578.55|
|53,124,316.45|6,198,654.13|1,628,053.45|899,230.59|1,458,921.13|
|1,212,281,039.08|428,238,530.59|49,651,348.05|20,841,745.20|72,682,886.00|
|1,316,080,505.28|463,917,367.36|43,289,612.34|19,346,203.11|65,870,291.71|

 Notes: As of 31 Dec. 2014, there was no fixed asset with restricted ownership in theCompany。
(2)List oftemporarily idlefixed assets
|||||
|-|-|-|-|
|Originalbookvalue|Accumulativedepreciation|Impairmentprovision|Bookvalue|
|4,284,173.90|2,458,069.58|—|1,826,104.32|
|10,558,421.64|6,331,219.92|1,228,086.34|2,999,115.38|
|18,124,920.77|16,450,475.78|1,308,670.85|365,774.14|
|1,236,850.00|1,112,484.90|87,259.60|37,105.50|
|3,384,447.56|2,156,029.27|118,753.25|1,109,665.04|
|37,588,813.87|28,508,279.45|2,742,770.04|6,337,764.38|

(3)Fixed assets leased in from financing lease
||||
|-|-|-|
|Originalbookvalue|Accumulativedepreciation|Impairmentprovision|
|5,321,552.85|969,154.03|—|

KonkaGroupCo.,Ltd. Notesof2014financialstatement (4)Fixed assets leased out from operation lease
Item Closingbookvalue
Housesandbuildings 34,649,674.28 Total 34,649,674.28 Note: the rent the self use party of houses and buildings, different usage can not be individuallymeasured.
(5)Details of fixed assets failed to accomplishcertification of property
||
|-|
|Bookvalue|
|12,187,010.26|
|1,826,104.32|
|20,952,377.97|
|13,333,331.93|
|255,447,618.22|
|9,658,088.13|
|3,955,862.23|
|58,791,900.61|

13.Construction inprogress
(1)List ofconstruction in progress
||||||
|-|-|-|-|-|
|Closingamount|||||
|Bookbalance|Impairmentprovision|Bookvalue|Bookbalance|Impairmentprovision|
|57,267,807.74|—|57,267,807.74|18,495,377.38|—|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Closingamount|||||
|Bookbalance|Impairmentprovision|Bookvalue|Bookbalance|Impairmentprovision|
|1,643,881.07|—|1,643,881.07|1,643,881.07|—|
|29,459,670.93|—|29,459,670.93|9,556,522.65|—|
|18,304,006.73|—|18,304,006.73|68,714.00|—|
|873,065.82|—|873,065.82|1,001,759.03|—|
|52,056,451.80|—|52,056,451.80|19,157,773.84|—|
|159,604,884.09|—|159,604,884.09|49,924,027.97|—|

 (2)Changes ofsignificant construction in progress
||||||
|-|-|-|-|-|
|Estimatednumber|Openingbalance|Increasedamountoftheperiod|Amountthattransferredtofixedassetsoftheperiod|Otherdecreasedamountoftheperiod|
|441,600,000.00|18,495,377.38|38,772,430.36|—|—|
|26,320,000.00|1,643,881.07|—|—|—|
|29,500,000.00|9,556,522.65|19,903,148.28|—|—|
|40,000,000.00|68,714.00|18,235,292.73|—|—|
|3,075,000.00|1,001,759.03|596,873.44|725,566.65|—|
|—|19,157,773.84|60,180,946.76|19,442,397.31|7,839,871.49|
|540,495,000.00|49,924,027.97|137,688,691.57|20,167,963.96|7,839,871.49|

 (Continued)
||||||
|-|-|-|-|-|
|ProportionofAccumulativeinvestmentinbudget（%）|Progressofworks|Accumulativeamountofinterestcapitalization|Ofwhich:amountofinterestcapitalizationinreporting period|Rateofinterestcapitalization（%）|
|12.97%|12.97%|2,061,525.49|1,083,967.05|6.00%|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|ProportionofAccumulativeinvestmentinbudget（%）|Progressofworks|Accumulativeamountofinterestcapitalization|Ofwhich:amountofinterestcapitalizationinreporting period|Rateofinterestcapitalization（%）|
|6.25%|6.25%|—|—|—|
|98.13%|98.13%|—|—|—|
|45.76%|45.76%|—|—|—|
|51.99%|51.99%|—|—|—|
|—|—|810,165.16|810,165.16|6.00%|

 14.Intangibleassets
(1)Information
|||||
|-|-|-|-|
|Landuseright|Patent|Trademarkregistrationexpense|Other|
|374,671,561.19|38,668,756.51|3,519,159.61|25,580,029.94|
|—|1,470,983.37|—|4,482,403.29|
|—|1,470,983.37|—|4,482,403.29|
|8,473,627.08|—|—|—|
|8,473,627.08|—|—|—|
|366,197,934.11|40,139,739.88|3,519,159.61|30,062,433.23|
|34,367,987.40|30,935,481.51|3,319,116.47|11,330,268.14|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
|||||
|-|-|-|-|
|Landuseright|Patent|Trademarkregistrationexpense|Other|
|8,490,476.12|1,188,505.89|45,060.42|2,193,377.84|
|8,490,476.12|1,188,505.89|45,060.42|2,193,377.84|
|2,478,220.15|—|—|—|
|2,478,220.15|—|—|—|
|40,380,243.37|32,123,987.40|3,364,176.89|13,523,645.98|
|—|2,901,082.61|—|—|
|—|—|—|—|
|—|—|—|—|
|—|—|—|—|
|—|—|—|—|
|—|2,901,082.61|—|—|
|325,817,690.74|5,114,669.87|154,982.72|16,538,787.25|
|340,303,573.79|4,832,192.39|200,043.14|14,249,761.80|

 (2)Details of fixed assets failed to accomplishcertification of land useright
||
|-|
|Bookvalue|
|1,882,510.76|
|3,027,296.17|
|1,085,600.00|

(3)Other notes:
The land use right of book value of intangible assets of theCompany’s subsidiary Kunshan
KonkaGroupCo.,Ltd. Notesof2014financialstatement Konka Electronic Co., Ltd. was RMB 80,299,992.70 which was pledged for long term loan ofRMB51,976,957.13.
15.Goodwill
(1)Original bookvalue ofgoodwill
||||||
|-|-|-|-|-|
|Openingbalance|Increase||Decrease||
||Formedfromthebusinesscombination|Other|Dispose|Other|
|316,980.96|—|—|316,980.96|—|
|29,033.42|—|—|29,033.42|—|
|3,597,657.15|—|—|—|—|
|3,943,671.53|—|—|346,014.38|—|

 (2)The method ofimpairment test and impairment provision, see note19,IV.
(3)As of31 Dec. 2014,there was no bookvalue ofgoodwill higherthan recoverable amount. 16.Long-term unamortized expenses
|||||
|-|-|-|-|
|Openingbalance|Increase|Amortizationamount|Otherdecrease|
|7,014,202.08|5,472,999.56|2,929,767.21|—|
|—|12,452,830.24|2,172,155.17|—|
|6,390,882.86|1,861,915.66|1,900,059.05|398,043.91|
|13,405,084.94|19,787,745.46|7,001,981.43|398,043.91|

 17.Deferred income tax assets/deferred income tax liabilities
(1)Deferred income tax assets had not been off-set
||||
|-|-|-|
|Closingbalance|||
|Deductibletemporarydifference|Deferredincometaxassets|Deductibletemporarydifference|
|680,584,889.73|177,400,270.38|612,813,375.75|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||
|-|-|-|
|11,396,406.89|2,849,101.72|49,119,621.91|
|92,847,148.47|23,119,888.96|59,912,724.40|
|91,852,218.96|21,845,806.74|105,826,076.56|
|137,205,313.83|34,301,328.46|68,030,401.22|
|1,013,885,977.88|259,516,396.26|895,702,199.84|

 (2)Deferred income tax liabilities had not been off-set
||||
|-|-|-|
|Closingbalance|||
|Taxabletemporarydifferences|Deferredincometaxliabilities|Taxabletemporarydifferences|
|6,996,658.49|1,049,498.77|—|
|6,996,658.49|1,049,498.77|—|

 (3)Deferred income tax assets orliabilities listed bynet amount after off-set
||
|-|
|Closingbalance|
|569,915,297.69|
|525,306,805.68|
|1,095,222,103.38|

 Notes: the above statement listing was with uncertainty whether can obtain enough tax or not, thus it was not been recognized as deductable temporary difference or deductible losses of deferred incometax assets
18.Shortterm loan
||
|-|
|Closingbalance|
|10,000,000.00|
|—|
|—|
|5,135,712,436.91|
|5,145,712,436.91|

KonkaGroupCo.,Ltd. Notesof2014financialstatement Notes: theCompany’s controlling subsidiary Dongguan Mould Plastic had sign Domestic factoring contract with recourse right (Contract No.[2014]8800-103-036) with CCB, Dongguan Branch, the contract agreed that the maximum advance amount of factoring was RMB 20 million, The validity of the quota was from Aug. 2014 to Aug. 2015. The account receivable of book balance of Dongguan Mould Plastic of RMB 12,638,637.58 was pledged fora loan ofRMB 10millionin reporting period. .
19.Notes payable
||
|-|
|Closingbalance|
|6,855,587.12|
|904,499,441.35|
|911,355,028.47|

 Notes: RMB911,355,028.47will beduein nextfiscal period.
20.Accounts payable
(1)List ofaccounts payable
||
|-|
|Closingbalance|
|3,006,945,692.52|
|117,095,669.63|
|1,259,084.44|
|19,107,987.34|
|3,144,408,433.93|

(2)Notes of theaccounts payable aging over oneyear
||
|-|
|Amount|
|411,841.60|
|1,968,380.86|
|17,742,618.94|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|528,435.13|
|5,038,769.40|
|25,690,045.93|

21.Advancefromcustomers
(1)List ofadvance from customers
||
|-|
|Closingbalance|
|275,288,665.86|
|11,520,332.44|
|1,574,348.73|
|14,521,106.83|
|302,904,453.86|

 (2)Significant advance from customers aging over oneyear was sale expenseunsettled 22.Payroll payable
(1)List ofPayroll payable
||||
|-|-|-|
|Openingbalance|Increase|Decrease|
|328,300,829.12|1,632,048,035.21|1,663,646,917.54|
|2,943,249.64|140,891,522.57|141,271,977.95|
|846,909.00|5,406,996.45|6,245,931.45|
|—|—|—|
|332,090,987.76|1,778,346,554.23|1,811,164,826.94|

KonkaGroupCo.,Ltd. Notesof2014financialstatement (2)List ofShort-term salary
||||
|-|-|-|
|Openingbalance|Increase|Decrease|
|315,245,828.12|1,433,836,112.49|1,462,706,860.48|
|1,387,563.03|69,014,298.31|69,290,389.21|
|1,577,598.57|54,561,025.60|54,612,597.80|
|1,301,165.25|46,105,637.87|46,121,123.78|
|147,655.54|5,494,346.96|5,550,769.29|
|128,777.78|2,961,040.77|2,940,704.73|
|1,591,150.93|33,117,935.45|33,204,538.03|
|6,346,674.68|14,714,932.50|16,673,348.62|
|—|—|—|
|—|—|—|
|2,152,013.79|26,803,730.86|27,159,183.40|
|328,300,829.12|1,632,048,035.21|1,663,646,917.54|

 (3)List ofdrawing scheme
||||
|-|-|-|
|Openingbalance|Increase|Decrease|
|2,735,016.59|133,408,908.71|133,706,379.06|
|208,233.05|7,482,613.86|7,565,598.89|
|—|—|—|
|2,943,249.64|140,891,522.57|141,271,977.95|

 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
expenseoccurred was recorded intocurrent profits and losses orrelated assets costs.
KonkaGroupCo.,Ltd. Notesof2014financialstatement 23.Taxes payable
||
|-|
|Closingbalance|
|24,559,393.58|
|42,937,116.01|
|1,680,131.18|
|801,349.04|
|4,189,253.27|
|—|
|7,582,506.98|
|4,086,658.32|
|25,495.48|
|675,660.09|
|1,793,004.08|
|548,155.02|
|2,220,266.89|
|21,403,104.00|
|54,911.91|
|112,557,005.85|

 24.Interestpayable
||
|-|
|Closingbalance|
|15,761,623.95|
|4,460,794.48|
|2,650,000.00|
|22,872,418.43|

 25.Otheraccountspayable
(1)Other accounts payable listedby nature oftheaccount
Item Closingbalance Openingbalance
KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|Closingbalance|
|862,532,739.03|
|253,375,271.47|
|109,567,862.89|
|100,800,186.16|
|50,527,321.48|
|1,376,803,381.03|

 (2)Other significant accounts payable withaging overone year
||
|-|
|Closingbalance|
|5,400,000.00|
|4,050,000.00|
|5,000,000.00|
|2,600,000.00|
|2,075,485.15|
|19,125,485.15|

26.Non-currentliabilities duewithin1year
||
|-|
|Closingbalance|
|—|
|1,525,465.53|
|1,525,465.53|

 27.Long-term loan
||
|-|
|Closingbalance|
|51,976,957.13|
|905,564,253.39|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|Closingbalance|
|—|
|957,541,210.52|

 Notes: themortgage asset category and amount ofmortgageloan see note50.
28Long-term payables
||
|-|
|Closingbalance|
|30,000,000.00|
|1,555,455.63|
|1,525,465.53|
|30,029,990.10|

 29.Longtermpayrollpayable
(1)List oflong term payroll payable
||
|-|
|Closingbalance|
|28,554,734.16|
|—|
|—|
|28,554,734.16|

 (2)Changes ofdefined benefit plans
①Present worth of defined benefit plans obligation:
||
|-|
|Reportingperiod|
|—|
|—|
|5,140,521.34|
|23,200,807.83|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|Reportingperiod|
|—-|
|213,404.99|
|28,554,734.16|

② Explanations of contents and related risks of defined benefit plans, and influences to future cash flow,timeanduncertainties
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 employees (employed before December 31, 1990 and signed non-fixed term labor contract withtheCompany orCommunicationTechnology). Content oftheplans includes:
1. Until March 31, 2014, internal early retirement pension for male over 55 years old and female over 45 years old, less than 5 years away from legal retirement age, is 2000 Yuan/ month.It is implemented until formal retirement.
2. Until March 31, 2014, internal early retirement pension for male over 50 years old and female over 40 years old, less than 10 years away from legal retirement age, is 1600 Yuan/ month. It is implemented until above age and internal early retirement pension is adjusted to 2000Yuan/month untilformal retirement.
3. Until March 31, 2014, internal early retirement pension for male under 50 years old and female under 40 years old, more than 10 years away from legal retirement age, is 1000Yuan/ month. In the next month when age in personnel archives is within 5 years to legal retirement age, internal early retirement pension is adjusted to 1600 Yuan/month. It is implementeduntil formal retirement.
4. Internal early retirement pensions include social insurance and housing provident funds bornebyindividuals.Theage is subject to that recorded in personnel archives.
5. Seniority subsidies for internal early retirement are provided as follows: 15 Yuan/year for employees with working age more than 30 years (including 30 years); 10 Yuan/ year for those with working age less than 30 years and more than 25 years (including 25 years); and 6 Yuan/ year for those with working age less than 25 years. Working age is calculated on an annualized basis.
6.Voluntary early retirement should be applied by individuals and approved by the leaders of Communication Technology and the Group. During the period of early retirement, management oftheemployees isresponsible bytheCompany.
It is to analyze from the changes of labor turnover, death and social security payment base. Future cash flowof theCompany is 34,931,714.55.
③Notes to analysis results of major actuarial assumptions and sensibility of defined benefit plans
Majorassumptionsestimated Closingperiod Closingperiodoflastperiod
KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|Treasurybondrateinsameperiod|
|0%|
|Overlegalemeritusage|
|0%|

30Accrued liabilities
|||
|-|-|
|Closingbalance|Openingbalance|
|911,085.41|—|
|911,085.41|—|

31.Deferredincome
|||||
|-|-|-|-|
|Openingbalance|Increase|Decrease|Closingbalance|
|131,658,369.11|42,737,500.00|27,079,870.09|147,315,999.02|
|131,658,369.11|42,737,500.00|27,079,870.09|147,315,999.02|

 Itemsinvolvedingovernmentsubsidies:
||||||
|-|-|-|-|-|
|Openingbalance|Amountofnewlysubsidy|Amountaccruedinnon-businessincome|Otherchanges|Closingbalance|
|6,800,000.00|—|2,400,000.00|—|4,400,000.00|
|2,625,000.00|—|900,000.00|—|1,725,000.00|
|4,509,999.93|—|1,640,000.04|—|2,869,999.89|
|8,499,999.98|—|2,000,000.04|—|6,499,999.94|
|5,000,000.00|—|249,999.99|—|4,750,000.01|
|3,750,000.00|1,870,000.00|—|—|5,620,000.00|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|3,750,000.00|1,870,000.00|—|363,106.79|5,256,893.21|
|2,650,000.00|1,000,000.00|600,000.00|—|3,050,000.00|
|21,060,000.00|—|3,510,000.00|—|17,550,000.00|
|3,000,000.00|—|—|—|3,000,000.00|
|4,800,000.00|—|600,000.00|—|4,200,000.00|
|6,000,000.00|—|2,400,000.00|—|3,600,000.00|
|11,550,000.00|—|—|—|11,550,000.00|
|1,700,000.00|770,000.00|—|—|2,470,000.00|
|2,000,000.00|—|—|—|2,000,000.00|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|8,508,737.85|—|—|—|8,508,737.85|
|—|13,500,000.00|—|700,000.00|12,800,000.00|
|—|2,030,000.00|—|—|2,030,000.00|
|—|2,800,000.00|—|—|2,800,000.00|
|2,306,083.75|427,400.00|473,942.38|—|2,259,541.37|
|—|4,200,000.00|1,260,000.00|—|2,940,000.00|
|—|3,000,000.00|225,000.00|—|2,775,000.00|
|—|2,104,000.00|35,066.67|—|2,068,933.33|
|1,600,000.00|—|—|—|1,600,000.00|
|19,572,338.80|5,256,100.00|4,349,250.74|1,057,600.00|19,421,588.06|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|119,682,160.31|38,827,500.00|20,643,259.86|2,120,706.79|135,745,693.66|
|11,976,208.80|3,910,000.00|2,165,903.44|2,150,000.00|11,570,305.36|
|11,976,208.80|3,910,000.00|2,165,903.44|2,150,000.00|11,570,305.36|
|131,658,369.11|42,737,500.00|22,809,163.30|4,270,706.79|147,315,999.02|

32.Sharecapital
|||||||
|-|-|-|-|-|-|
|Opening balance|Increase/decrease(+/-)|||||
||Issuingnewshares|Bonusshares|Capitalizationofpublicreserves|Other|Subtotal|
|1,203,972,704|—|—|—|—|—|

 33.Capitalreserves
||||
|-|-|-|
|Openingbalance|Increase|Decrease|
|1,211,366,082.55|—|—|
|103,043,605.27|149,898.75|20,809,998.02|
|1,314,409,687.82|149,898.75|20,809,998.02|

 Note: the increase of capital reserve was the income of the sale of odd lots which increase capital reserve of RMB 149,898.75, the decrease of capital reserve were other changes ofowner’s equity of invested associated enterprises except net profit and loss, other comprehensive income and profits allocation, the Company calculated shares should be enjoyed in line with shareholding proportion, adjusted book value of long term equity investment and meanwhile decrease capital reserve (other capital reserve) RMB 9,991,699.59 and decrease capital reserveRMB 10,818,298.43dueto purchase ofminority equity.
KonkaGroupCo.,Ltd. Notesof2014financialstatement
34.Othercomprehensiveincome
|||||||
|-|-|-|-|-|-|
|Openingbalance|Reportingperiod|||||
||Amountincurredbeforeincometax|Less:Amounttransferredintoprofitandlossinthecurrentperiodthatrecognizedintoothercomprehensiveincomeinpriorperiod|Less:incometaxexpense|After-taxattributetotheparentcompany|After-taxattributetominorityshareholder|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
|||||||
|-|-|-|-|-|-|
|Openingbalance|Reportingperiod|||||
||Amountincurredbeforeincometax|Less:Amounttransferredintoprofitandlossinthecurrentperiodthatrecognizedintoothercomprehensiveincomeinpriorperiod|Less:incometaxexpense|After-taxattributetotheparentcompany|After-taxattributetominorityshareholder|
||688,609.70||172,152.42|516,457.28||
|16,179,316.17|-524,295.54|||-588,637.70|64,342.16|
|16,179,316.17|164,314.16||172,152.43|-72,180.43|64,342.16|

KonkaGroupCo.,Ltd. Notesof2014financialstatement 35.Surplusreserves
||||
|-|-|-|
|Openingbalance|Increase|Decrease|
|593,846,200.71|—|—|
|254,062,265.57|—|—|
|847,908,466.28|—|—|

 Notes: Based on the regulations of the Corporation Law and Constitution, the Company should withdraw10% of the statutory surplus reserves according tot the net profits. If the accumulated amount of the statutory surplus reserves exceeded the50% of the registered capital, theCompany could nomore withdraw.
The Company, after withdraw statutory surplus reserves, can withdraw discretional surplus reserves, in line with the approval, the discretional surplus reserves can be used for making uplosses inprevious year orincrease sharecapital
36.Retained profits
||
|-|
|2014|
|737,991,722.40|
|-32,552,764.33|
|705,438,958.07|
|52,623,527.86|
|—|
|—|
|12,039,727.04|
|—|
|746,022,758.89|

 RMB -32,552,764.33 opening retained profits was affected by retrospective adjustment conducted according to the Accounting Standards for Business Enterprises and relevant new regulations.
37.RevenueandCost ofSales
(1)Revenue, Costof Sales
||||
|-|-|-|
|2014|||
|Revenue|Cost|Revenue|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||
|-|-|-|
|2014|||
|Revenue|Cost|Revenue|
|19,075,390,465.68|16,470,276,359.36|19,754,547,950.84|
|348,098,528.39|264,123,293.65|252,188,927.98|
|19,423,488,994.07|16,734,399,653.01|20,006,736,878.82|

 (2)Main business (Classified byindustry)
||||
|-|-|-|
|Reportingperiod|||
|Revenueofsales|Costsofsales|Revenueofsales|
|19,075,390,465.68|16,470,276,359.36|19,754,547,950.84|
|19,075,390,465.68|16,470,276,359.36|19,754,547,950.84|

 (3)Main business (Classified byproduct)
||||
|-|-|-|
|Reportingperiod|||
|Revenueofsales|Costsofsales|Revenueofsales|
|13,925,105,846.46|11,720,606,771.83|15,904,547,663.26|
|1,587,898,794.07|1,443,167,712.05|1,551,294,607.93|
|1,277,294,037.34|1,106,574,443.35|1,369,927,530.08|
|664,281,113.23|661,984,311.79|928,778,149.57|
|1,620,810,674.58|1,537,943,120.34|—|
|19,075,390,465.68|16,470,276,359.36|19,754,547,950.84|

 (4)Main business (Classified byarea)
||||
|-|-|-|
|Reportingperiod|||
|Revenueofsales|Costsofsales|Revenueofsales|
|11,383,700,090.53|9,119,381,976.03|15,775,639,484.85|
|7,691,690,375.15|7,350,894,383.33|3,978,908,465.99|
|19,075,390,465.68|16,470,276,359.36|19,754,547,950.84|

KonkaGroupCo.,Ltd. Notesof2014financialstatement (5)Therevenue ofsales from thetop five customers
||
|-|
|Mainbusinessrevenue|
|3,303,518,733.47|
|3,743,686,942.08|

38.Businesstax andsurcharges
||
|-|
|2014|
|15,402,472.92|
|25,484,992.48|
|11,910,616.10|
|7,161,448.26|
|321,276.71|
|246,842.03|
|60,527,648.50|

 Notes: themeasurement standards ofbusiness tax and surcharges, see noteV.Tax
39.Salesexpenses
||
|-|
|2014|
|338,757,235.53|
|21,422,207.70|
|4,750,527.35|
|343,673.94|
|356,644,116.73|
|10,095,870.01|
|2,709,847.00|
|8,657,457.46|
|48,775,736.17|
|330,079,606.13|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|2014|
|323,941,757.16|
|41,333,299.95|
|3,186,737.08|
|38,657,989.50|
|14,530,898.21|
|43,186,978.81|
|32,972,790.82|
|683,005,077.40|
|55,610,762.72|
|55,805,618.06|
|2,414,468,187.73|

40．Administration expense
||
|-|
|Reportingperiod|
|219,399,363.99|
|165,516,874.48|
|31,024,535.63|
|25,049,605.88|
|22,533,491.49|
|13,691,039.97|
|16,650,316.32|
|16,937,125.45|
|3,498,113.34|
|6,990,854.28|
|20,976,257.96|
|42,924,507.44|
|101,738,287.27|
|686,930,373.50|

 41.Financial expenses
||
|-|
|Reportingperiod|
|143,547,683.34|
|52,265,939.36|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|Reportingperiod|
|35,174,225.81|
|6,307,854.67|
|132,763,824.46|

 42.Asset impairmentloss
||
|-|
|2014|
|13,263,816.09|
|76,797,683.87|
|200,000.00|
|51,277,269.97|
|141,538,769.93|

 43.Investmentincome
||
|-|
|2014|
|-7,901,784.31|
|592,466,874.00|
|—|
|—|
|48,104.52|
|—|
|—|
|12,260,439.18|
|596,873,633.39|

KonkaGroupCo.,Ltd. Notesof2014financialstatement 44.Non-operating gains
|||
|-|-|
|2014|2013|
|4,740,033.90|12,490,980.31|
|4,740,033.90|12,443,064.40|
|—|47,915.91|
|230,797,272.53|244,918,667.38|
|—|2,306,193.90|
|5,782,597.32|3,963,659.46|
|3,459,744.68|—|
|14,097,774.58|10,894,964.20|
|258,877,423.01|274,574,465.25|

 Government subsidies recorded intocurrent profits andlosses
|||
|-|-|
|2014|2013|
|11,685,340.81|18,068,190.84|
|533,000.00|500,000.00|
|4,144,550.38|5,900.00|
|1,701,110.00|1,093,318.99|
|1,163,400.00|—|
|2,400,000.00|2,400,000.00|
|3,510,000.00|3,510,000.00|
|598,800.00|444,000.00|
|155,396,179.33|160,575,119.31|
|—|5,061,200.00|
|17,587,747.00|16,509,000.00|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
|||
|-|-|
|2014|2013|
|2,699,350.00|33,106,397.22|
|206,000.00|105,000.00|
|1,248,573.00|2,677,169.09|
|17,625,000.00|—|
|3,079,200.00|—|
|7,219,022.01|—|
|230,797,272.53|244,918,667.38|

45Non-operating expenses
|||
|-|-|
|Reportingperiod|Sameperiodoflastyear|
|9,752,806.72|14,360,857.36|
|9,752,806.72|9,801,457.36|
|—|4,559,400.00|
|—|—|
|—|—|
|3,697,606.64|2,151,893.23|
|—|4,200,000.00|
|511,646.80|950,173.46|
|2,922,922.55|1,354,737.03|
|16,884,982.71|23,017,661.08|

 46.Incometax expense
(1)Lists ofincometax expense
Item 2014 2013
KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|2014|
|71,438,757.75|
|-40,236,846.29|
|31,201,911.46|

 (2)Adjustmentprocessofaccountingprofitandincometaxexpense
Item 2014
Totalprofits 91,726,610.62 Currentincometaxexpenseaccountedbytaxandrelevantregulations 22,931,652.67 Influenceofdifferenttaxratesuitabletosubsidiary -38,888,194.02 Influenceofincometaxbeforeadjustment 20,965,816.88 Influenceofnontaxableincome 918,030.38 Influenceofnon-deductablecosts,expensesandlosses 10,343,818.75 Influence of deductable losses of deferred income tax assets derecognized
usedinpreviousperiod -2,928,788.05 Influenceofdeductibletemporarydifferenceordeductiblelossesofdeferred
incometaxassetsderecognizedinreportingperiod. 29,830,698.89 Changes of the balance of deferred income tax assets/ liabilities in previous
periodduetoadjustmentoftaxrate 1,656,449.91 Influenceofplusdeductingcosts -13,627,573.95 Deferredincometax 31,201,911.46 47.Othercomprehensiveincome
For details,see note34,VI.
48.Supplementary information to cash flowstatement
(1)Other cash received relevant to operating activities
||
|-|
|2014|
|111,968,538.65|
|94,150,553.85|
|71,752,956.44|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|2014|
|57,755,954.05|
|19,084,574.26|
|12,433,636.17|
|11,943,717.32|
|9,278,645.25|
|1,678,292.56|
|1,672,413.78|
|391,719,282.33|

 (2)Other cash paid relevant to operating activities
||
|-|
|2014|
|945,208,628.95|
|488,063,979.00|
|128,466,550.07|
|32,130,320.70|
|22,984,944.96|
|20,729,008.95|
|25,310,052.38|
|3,965,934.40|
|189,014.66|
|1,667,048,434.07|

 (3)Other cash received relevant to investment activities
||
|-|
|2014|
|2,422,400,000.00|
|2,472,043.31|
|2,424,872,043.31|

KonkaGroupCo.,Ltd. Notesof2014financialstatement (4)Other cash paid relevant to investmentactivity
||
|-|
|2014|
|2,422,900,000.00|
|50,000,000.00|
|183,497.35|
|2,473,083,497.35|

 (5)Other cash received relevant to financing activities
||
|-|
|2014|
|576,549,112.55|
|408,029.15|
|576,957,141.70|

 (6)Other cash paid relevant to financing activities
||
|-|
|2014|
|579,030,740.04|
|1,755,444.00|
|42,712,205.12|
|623,498,389.16|

 49.Supplemental information forCash FlowStatement
(1)Supplemental information for Cash Flow Statement
||
|-|
|Reportingperiod|
|60,524,699.17|
|141,538,769.93|
|148,539,629.67|
|11,917,420.27|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|Reportingperiod|
|7,006,666.45|
|5,012,772.82|
|—|
|—|
|143,547,683.34|
|-596,873,633.39|
|-40,787,656.85|
|1,049,498.77|
|-290,565,252.54|
|-477,515,066.98|
|-81,333,719.59|
|15,657,629.91|
|-952,280,559.02|
|—|
|—|
|—|
|1,846,556,328.79|
|1,771,489,421.21|
|—|
|—|
|75,066,907.58|

KonkaGroupCo.,Ltd. Notesof2014financialstatement (2)Net Cash paid ofobtaining thesubsidiary
Item Amount
Cashandcashequivalentsreceivedfromthedisposalofsubsidiaryinreportingperiod.. 252,687,800.00 Ofwhich:ShanxiKonkaElectronicCo.,Ltd. 5,000,000.00ShenzhenKonkaVideo&CommunicationSystemsEngineeringCo.,Ltd. 247,687,800.00 Less:Cashandcashequivalentsheldbythesubsidiaryonthedatethatlosingcontrol 15,865,344.48 Ofwhich:ShanxiKonkaElectronicCo.,Ltd. 9,069,709.02ShenzhenKonkaVideo&CommunicationSystemsEngineeringCo.,Ltd. 6,795,635.46 Add: Cash and cash equivalents received in reporting period from disposal of subsidiary in 48,579,391.25 previousperiod
Ofwhich:ChongqingKonkaElectronicCo.,Ltd. 48,579,391.25 Netcashreceivedfromdisposalofsubsidiary 285,401,846.77 (3)Cash and cash equivalents
||
|-|
|Closingbalance|
|1,846,556,328.79|
|5,118.98|
|1,846,551,209.81|
|—|
|1,846,556,328.79|

 Note: cash and cash equivalents did not include restricted cash and cash equivalents that Company used
50.Theassets with theownership oruserightrestricted
||
|-|
|Closingbookvalue|
|80,299,992.70|
|80,299,992.70|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||
|-|
|Closingbookvalue|
|1,537,132,874.44|
|62,898,895.10|
|1,461,595,341.76|
|12,638,637.58|
|1,617,432,867.14|

51.Foreigncurrency monetary items
|||
|-|-|
|Closingforeigncurrencybalance|Exchangerate|
|56,081,000.22|6.1190|
|27,136.70|7.4556|
|10,271,569.09|0.7889|
|1.32|9.5437|
|9,990,228,981.24|0.0005|
|6.96|5.2755|
|108,147,100.21|6.1190|
|295,179.37|7.4556|
|9,837,533.65|0.7889|
|49,764.00|5.2755|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
|||
|-|-|
|Closingforeigncurrencybalance|Exchangerate|
|13,548,258,080.79|0.0005|
|454,005.57|6.1190|
|15,338.17|7.4556|
|14,578,970.04|0.7889|
|188,648,034.50|0.0005|
|58,677,113.41|6.1190|
|1,203,581.63|7.4556|
|129,893,490.67|0.7889|
|48,502,001,328.43|0.0005|
|804,170,555.28|6.1190|
|145,470,000.00|6.1190|

 VII. Changesof merge scope
1.Businessmergernotundersamecontrol
Single disposal ofinvestment to subsidiary that losing control
||||||
|-|-|-|-|-|
|Theequitydisposalprice|Equitydisposalproportion(%)|Methodofequitydisposal|Timeoflosingcontrol|Recognitionbasisofthetimeoflosingcontrol|
|247,687,800.00|100.00|Transfer|2014.06.30|Equitytransfer,andhandlethebusinesschanges|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Theequitydisposalprice|Equitydisposalproportion(%)|Methodofequitydisposal|Timeoflosingcontrol|Recognitionbasisofthetimeoflosingcontrol|
|45,957,180.00|60.00|Transfer|2014.12.31|Equitytransfer,andhandlethebusinesschanges|

(Continued)
||||||
|-|-|-|-|-|
|Residualequityproportiononthedateoflosingcontrol(%)|Bookvalueofresidualequityonthedateoflosingcontrol|Fairvalueofresidualequityonthedateoflosingcontrol|Profitsorlossesofresidualequityrecalculatedinlinewithfairvalue|Recognitionmethodandmainassumptionoffairvalueofresidualequityonthedateoflosingcontrol|
|—|—|—|—|—|
|—|—|—|—|—|

 Notes:① On June 13, 2014, the Company signed equity transfer agreement with OCT, transferring100% stock rights of video engineering to OCTwith RMB 147,687,800.On June 23, 2014, equity change was registered in Shenzhen Market Supervisory Authority. The Company had received all payment of equity transfer and would not control the video engineering.Therefore, itwas not included in consolidated scope from July 1,2014.
② On July 17, 2014, the Company and its subsidiary Kangdian Investment signed equity transfer agreement with Shaanxi Ruyi Electronic Technology Co., Ltd, transferring the45% and15% stock rights of Shaanxi Konka with RMB 3,4467,885.00 and RMB 11,489,295.00. Until December 31, 2014, equity change had been registered and the Company would not control the video engineering. Therefore, it was not included in consolidated scope from January 1, 2015.
2.Changesof consolidated scopedueto othercauses
(1) On June 3, 2014, the Company and Shenzhen Konka Capital Investment Partnership
Enterprise (limited partnership) established Shenzhen Konka E-Display Co., Ltd with
KonkaGroupCo.,Ltd. Notesof2014financialstatement registered capital of 12,000,000Yuan, there into 7,200,000Yuan contributed by the Company, occupying60% of registered capital. The Company has the control power.From June 3, 2014, itis included into consolidated scope.
(2) On August 5, 2014, theCompany’s subsidiary, Dongguan Konka, established Xiamen Dalong Trading Co., Ltd with Guo Bing, Cheng Zuben and Dongying with registered capital of 2,600,000 Yuan, there into 1,800,000 Yuan contributed by Dongguan Konka, occupying69.23% of registered capital. The Company has the control power. FromAugust 5, 2014, it is included intoconsolidated scope.
(3) On November 26, 2014, theCompany’s subsidiary, Konka Guangdian established Tianjin Youshi Kangrong Culture Communication Co., Ltd with Beijing Changrong Culture Communication Co., Ltd with registered capital of 70,000,000 Yuan, thereinto 49,000,000 Yuan contributed by Konka Guangdian, occupying70% of registered capital. The Company has thecontrol power.From November 26,2014,it is included into consolidated scope.
KonkaGroupCo.,Ltd. Notesof2014financialstatement
VIII.Equity inother entities
1.Equity insubsidiary
(1)The structure oftheenterprisegroup
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registration place|Natureofbusiness|Proportionofshareholding||
||||Directly|Indirectly|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacture|75.00|25.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacture|100.00|—|
|·Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacture|—|46.31|
|Shenzhen,Guangdong|Shenzhen,Guangdong|ElectricalAppliancesRetail|100.00|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacture|75.00|25.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacture|49.00|51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacture|75.00|25.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Investment|75.00|25.00|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registration place|Natureofbusiness|Proportionofshareholding||
||||Directly|Indirectly|
|||holding|||
|Mudanjiang,Heilongjiang|Mudanjiang,Heilongjiang|Manufacture|60.00|—|
|Xianyang,Shaanxi|Xianyang,Shaanxi|Manufacture|45.00|15.00|
|Chongqing|Chongqing|Manufacture|57.00|—|
|Chongqing|Chongqing|Manufacture|—|40.00|
|Chuzhou,Anhui|Chuzhou,Anhui|Manufacture|78.00|—|
|Chuzhou,Anhui|Chuzhou,Anhui|Manufacture|—|100.00|
|Changshu,Jiangsu|Changshu,Jiangsu|Manufacture|—|60.00|
|Kunshan,Jiangsu|Kunshan,Jiangsu|Manufacture|100.00|—|
|Dongguan,Guangdong|Dongguan,Guangdong|Manufacture|75.00|25.00|
|Dongguan,Guangdong|Dongguan,Guangdong|Manufacture|—|100.00|
|Dongguan,Guangdong|Dongguan,Guangdong|Manufacture|—|59.73|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registration place|Natureofbusiness|Proportionofshareholding||
||||Directly|Indirectly|
|Boluo， Guangdong|Boluo， Guangdong|Manufacture|—|51.00|
|Boluo,Guangdong|Boluo,Guangdong|Manufacture|—|100.00|
|Foshan,Guangdong|Foshan,Guangdong|Softwaredevelopment|100.00|—|
|HongKong,China|HongKong,China|Internationaltrade|100.00|—|
|HongKong,China|HongKong,China|Investmentholding|—|100.00|
|HongKong,China|HongKong,China|Internationaltrade|—|100.00|
|TheUSA|TheUSA|Internationaltrade|100.00|—|
|Frankfurt,Germany,Europe|Frankfurt,Germany,Europe|Internationaltrade|100.00|—|
|DongguanGuangdong|DongguanGuangdong|Manufacture|—|46.31|
|GuangdongShenzhen|GuangdongShenzhen|Softwaredevelopment|100.00|—|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registration place|Natureofbusiness|Proportionofshareholding||
||||Directly|Indirectly|
|GuangdongShenzhen|GuangdongShenzhen|Softwaredevelopment|100.00|—|
|KunshanJiangsu|KunshanJiangsu|Realestate|100.00|—|
|ChuzhouAnhui|ChuzhouAnhui|Manufacture|100.00|—|
|Indonesia|Indonesia|Internationaltrade|—|51.00|
|GuangdongShenzhen|GuangdongShenzhen|Logistics|100.00|—|
|Beijing|Beijing|Saleofhomeappliance|100.00|—|
|KunshanJiangsu|KunshanJiangsu|Manufacture|—|46.31|
|WuhanHubei|WuhanHubei|Manufacture|—|46.31|
|ChuzhouAnhui|ChuzhouAnhui|Manufacture|—|46.31|
|GuangdongShenzhen|GuangdongShenzhen|Manufacture|60.00|—|
|FujianXiamen|FujianXiamen|Commerce|—|69.23|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registration place|Natureofbusiness|Proportionofshareholding||
||||Directly|Indirectly|
|Tianjin|Tianjin|Other|—|70.00|

 Notes:① The Company holds46.31% of shares of Shenzhen Konka Precision Mold Manufacturing Co., Ltd., Konka Household Appliances Investment& Development Co., Ltd, a subsidiary company of the Company, is entrusted to manage6.18% shares held by Shenzhen Dingshengxin Mould Technology Consultation Co., Ltd. After the entrustment, the percentage of voting rights of the Company increases to52.49%. Therefore, the financial statements of Shenzhen Konka Precision Mold Manufacturing Co., Ltd. are combined into the consolidated financial statements. Xutongda is a wholly funded subsidiary of Dongguan Konka Mould Plastic Co., Ltd and is also combined into the consolidated financial statements.
② The 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 the consolidated financial statement.
③ Shenzhen Konka Precision Mold Manufacturing Co., Ltd. held100% equity of Dongguan Xutongda Mould Plastic Co., Ltd., and the Company is the actual controller of Dongguan Xutongda Mould Plastic Co., Ltd., for the Company indirectly held46.31% shares and52.49% votingright ofDongguan Xutongda Mould PlasticCo.,Ltd., which iscombined intotheconsolidated financial statement.
④ Anhui Tongchuang is a limited company jointly invested and established by the Company and Chuzhou Tongchuang Construction Investment Co., Ltd. (hereinafter refer to as “Tongchuang Construction”) with registration capital of RMB 180 million, of which each party invested in RMB 90 million respectively on contract. As to 31 Dec. 2010, Anhui Tongchuang with a paid-up capital of RMB 120 million (including paid-up capital ofRMB90 million oftheCompany,75.00%of total paid-up capital; and paid-up capital of RMB30million of
KonkaGroupCo.,Ltd. Notesof2014financialstatement Tongchuang Construction,25.00% of total paid-up capital ). 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 by the Group annually. So the Company can conduct actual control to Anhui Tongchuang Company,and combines it into theconsolidated financial statement.
⑤ Precision Mould held100% equity of Kunshan Jielunte, Wuhan Jielunte and Chuzhou Jielunte and was actually controlled by the Company.The Company indirectly held46.31% equity of Jielunte and the52.49% voting right of it, which is combined into the consolidated financial statement.
⑥ Shenzhen Konka E-display Co., Ltd was set up by the Company and Shenzhen Konka Capital Investment Partnership Business(Limited partnership), registered capital was RMB 12 million, the both parties agreed that the Company invested 7.2 million,60% of total capital, Shenzhen Konka Capital Investment Partnership Business(Limited partnership) invested 4.8 million40%of totalcapital.
KonkaGroupCo.,Ltd. Notesof2014financialstatement (2)Significant not wholly ownedsubsidiary
||||
|-|-|-|
|Shareholdingproportionofminorityshareholder|Theprofitsandlossesarbitratetotheminorityshareholders|Declaringdividendsdistributetominorityshareholder|
|53.69|910,103.51|—|
|22.00|453,899.37|—|
|40.27|4,586,894.76|—|
|53.69|5,472,661.73|—|

Not considering current offset
(3)Themain financial information ofsignificant not whollyowned subsidiary
Closingbalance
||||||
|-|-|-|-|-|
|Currentassets|Non-currentassets|Total assets|Currentliabilities|Non-currentliability|
|530,345,042.25|228,358,246.18|758,703,288.43|469,762,019.50|7,371,847.37|
|246,221,614.74|55,571,226.68|301,792,841.42|176,470,898.07|2,819,541.37|
|82,414,688.51|10,115,814.00|92,530,502.51|70,336,314.72|—|
|73,933,646.66|170,997,722.16|244,931,368.82|163,885,285.19|—|

(Continued)
Openingbalance
||||||
|-|-|-|-|-|
|Currentassets|Non-currentassets|Total assets|Currentliabilities|Non-currentliability|
|530,345,042.25|228,358,246.18|758,703,288.43|469,762,019.50|7,371,847.37|

KonkaGroupCo.,Ltd. Notesof2014financialstatement Name Openingbalance
||||||
|-|-|-|-|-|
|246,221,614.74|55,571,226.68|301,792,841.42|176,470,898.07|2,819,541.37|
|82,414,688.51|10,115,814.00|92,530,502.51|70,336,314.72|—|
|73,933,646.66|170,997,722.16|244,931,368.82|163,885,285.19|—|

||||
|-|-|-|
|Reportingperiod|||
|Operatingrevenue|Netprofits|Totalcomprehensiveincome|
|4,505,390,088.43|1,528,671.19|1,528,671.19|
|280,476,981.47|11,391,059.19|11,391,059.19|
|154,952,772.16|10,192,895.26|10,192,895.26|
|177,708,791.65|1,695,078.23|1,695,078.23|

||||
|-|-|-|
|Sameperiodoflastyear|||
|Operatingrevenue|Netprofits|Totalcomprehensiveincome|
|3,939,291,643.07|38,984,451.16|38,984,451.16|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||
|-|-|-|
|Sameperiodoflastyear|||
|300,604,788.78|15,586,160.67|15,586,160.67|
|87,452,794.35|56,352.75|56,352.75|
|169,114,864.81|8,933,344.48|8,933,344.48|

2. The transaction of the Company with itsowner’s equity share changed but still controllingthesubsidiary
(1)Note toowner’s equity sharechanged in subsidiary
①Purchase ofminorityinterest ofAnhui KonkaAppliance Co., Ltd.
②Purchase ofminorityinterest ofShenzhen KonkaAppliance Co., Ltd.
(2) Thetransaction’s influence to equity of minority shareholders and attributable to the owner's equity of theparent company
||
|-|
|AnhuiKonkaApplianceCo.,Ltd.|
|4,749,558.74|
|4,749,558.74|
|2,983,577.09|
|1,765,981.65|
|-1,765,981.65|

3Equity injointventure
(1)Significant joint venture
KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Businessnature|Proportion(%)||
||||Directly|Indirectly|
|Shenzhen|Shenzhen|Manufacturing andsellingLEDs|6.79|—|
|Shanghai|Shanghai|Manufacturing andsellingLEDs|28.04|—|
|Shanghai|Shanghai|Manufacturing andsellingLEDs|39.00|—|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
(2)Main financialinformation of significantjointventure
||||||
|-|-|-|-|-|
|Closingbalance/2014|||||
|EnrayTekOptoelectronic(Shanghai)Co.,Ltd.|ShenzhenRefondOptoelectronicsCo.,Ltd.|ShanghaiKonkaGreenScienceandTechnologyCo.,Ltd.|EnrayTekOptoelectronic(Shanghai)Co.,Ltd.|ShenzhenRefondOptoelectronicsCo.,Ltd.|
||649,575,414.28|476,703,490.64||533,986,169.63|
||594,576,517.13|228,455,686.18||378,786,274.60|
||1,244,151,931.41|705,159,176.82||912,772,444.23|
||575,506,963.41|66,932,415.14||289,431,590.05|
||28,510,651.91|119,562,409.62||32,288,784.28|
||604,017,615.32|186,494,824.76||321,720,374.33|
||396,376.69|11,591,006.22||—|
||639,737,939.40|507,073,345.84||591,052,069.90|
||43,425,481.67|197,758,604.87||111,728,834.57|

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Closingbalance/2014|||||
|EnrayTekOptoelectronic(Shanghai)Co.,Ltd.|ShenzhenRefondOptoelectronicsCo.,Ltd.|ShanghaiKonkaGreenScienceandTechnologyCo.,Ltd.|EnrayTekOptoelectronic(Shanghai)Co.,Ltd.|ShenzhenRefondOptoelectronicsCo.,Ltd.|
|||||3,385,402.80|
|115,139,968.77|43,425,481.67|197,758,604.87|108,633,724.22|115,114,237.42|
|150,182,731.09|906,849,275.86|112,916,555.92|90,297,290.72|681,984,216.24|
|-30,454,225.45|23,740,145.68|-17,156,386.16|-56,691,497.61|56,603,840.62|
|||152,885.18|||

KonkaGroupCo.,Ltd. Notesof2014financialstatement
||||||
|-|-|-|-|-|
|Closingbalance/2014|||||
|EnrayTekOptoelectronic(Shanghai)Co.,Ltd.|ShenzhenRefondOptoelectronicsCo.,Ltd.|ShanghaiKonkaGreenScienceandTechnologyCo.,Ltd.|EnrayTekOptoelectronic(Shanghai)Co.,Ltd.|ShenzhenRefondOptoelectronicsCo.,Ltd.|
|-30,454,225.45|23,740,145.68|-17,003,500.98|-56,691,497.61|56,603,840.62|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements IX.Risks related to financialinstruments
Main financial instruments include monetary capital, accounts receivable and accounts payable. Refer to Note XI for the details of all financial instruments. Risks related to financial instruments and risk management policies to reduce risks are as follows. The management should control and monitortherisk exposureto ensure all risks withindefined scope.
The Company uses sensitive analysis to analyze rationality of risk variables and possible influences to current profits and losses or equity interests. Because risk variables are not happened independently, correlation of variables to certain risk variable may affect the final amount. Therefore, the following items are conducted under assumptions of each variable changing independently.
(1) Riskmanagement objectives and policies
Risk management objective of the Company is to balance the risks and profits, minimize the negative effects to business performance and maximize the profits for stockholders and other equity investors. On the basis of risk management objectives, basic strategies of risk management are to determine and analyze all possible risks, establish appropriate risk baseline, control and manage risks and monitorall risks timely andreliably within defined scope.
1.Market risk
(1) Foreign exchangerisk
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 US dollars, except the procurement and sales by US dollars for several subsidiaries. Until December 31, 2014 (refer to Note VI 51, foreign monetary items), foreign exchange risks may affect the business performance produced by the assets and liabilities ofthe balance.
(2) Interest rate risk-cash flowchange risk
Cash flow change risk caused by financial instruments due to interest rate change is related to floating interest rate of bank loan. By establishing good relations with banks and reasonable planning of credit line, credit varieties and credit period, it is to guarantee sufficient band line of credit and satisfy all financial demands. Moreover, it is to reduce risks of interest rate uncertainty by shortening singleloan term and establishing repayment terms.
(3) Other pricerisks
For the equity investment of other listed companies holding by the Company, the management considers that the market price risks are acceptable. Refer to Note VI, 9Available-for-sale financial assets for equity investment ofother listed companies holding bytheCompany.
KonkaGroupCo.,Ltd. Notestothe2014financialstatements 2.Creditrisk
On 31 Dec. 2014, the biggest credit risk exposure may lead to the financial assets losses of the Company was mainly from the one party fail to perform its obligation, which included: book amount recognized in consolidated balance sheet: for financial instruments measured at fair value, the book value reflect its risk exposure, but not the biggest one, the biggest risk exposure will change along with thechange offuture fair value.
In order the reduce the credit risk, the Company establish a group response for recognizing line of credit, conducting credit approval and other monitor procedures to ensure that the necessary measures were used to recycleexpired claims. In addition, the Company,on each balance sheet date, reviews every single receivable recycling situation, to ensure that the money unable to recycle withdraw fully provision for bad debt. Thus, the management of the Company believed that the Company had greatly reduced thecredit risk.
TheCompany’s working capital was deposit in bank with better risk management, thus the 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 supervised the usage ofbank loan and ensured complying with borrowing agreement.
X. Thedisclosureofthefairvalue
1.Closing fairvalueofassets and liabilities calculated by fairvalue
Closingfairvalue
||||
|-|-|-|
|Fairvaluemeasurementitemsatlevel1|Fairvaluemeasurementitemsatlevel2|Fairvaluemeasurementitemsatlevel3|
|—|—|—|
|1,630,609.00|—|—-|
|—|—|—|
|1,630,609.00|—|—|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements Closingfairvalue
||||
|-|-|-|
|Fairvaluemeasurementitemsatlevel1|Fairvaluemeasurementitemsatlevel2|Fairvaluemeasurementitemsatlevel3|
|—|—|—|

2. Market price recognition basis for consistent and inconsistent fair value measurement items atlevel 1
The Company held common shares of VankeAat the end of the reporting period, 117,310.00 shares and the closing fair value was 1,630,609.00 recognized and calculated in line with the closing price RMB 13.90on31Dec. 2014.
XI.Related party andrelatedTransaction
1.Information related to parent company ofthe Company
|||||
|-|-|-|-|
|Registeredplace|Businessscope|Registeredcapital|ProportionofshareheldbyparentcompanyagainsttheCompany(%)|
|Shenzhen|Tourism, real estate,electronicsindustry|6.3billion|21.75|

Notes: The finial control of the Company was the State-owned Assets Supervision and Administration Committee
2.Subsidiaries oftheCompany
Fordetails, see note1.Equity in subsidiary,VIII
3.Information onthejointventures ofthe Company
The details ofsignificant jointventure of theCompany see note10.EquityinvestmentVI
4.Information onother relatedparties ofthe Company
Name Relationship
KonkaGroupCo.,Ltd. Notestothe2014financialstatements ShenzhenOCTEastCo.,Ltd.
Underthesameactualcontroller
ShanghaiOCTInvestmentDevelopmentCo.,Ltd.
Underthesameactualcontroller
ChengduTianfuOCTIndustrialDevelopmentCo.,
Underthesameactualcontroller
Ltd.
ShanghaiTianxiangOCTInvestmentCo.,Ltd.
Underthesameactualcontroller
AnhuiHualiPackagingCo.,Ltd.
Underthesameactualcontroller
ShenzhenOCTWaterandPowerCo.,Ltd
Underthesameactualcontroller
ShanghaiHualiPackagingCo.,Ltd
Underthesameactualcontroller
ShenzhenHuayouPackagingCo.,Ltd
Underthesameactualcontroller
ShenzhenHualiPacking&TradingCo.,Ltd
Underthesameactualcontroller
HualiPackaging(Huizhou)Co.,Ltd.
Underthesameactualcontroller
HuizhouHualiPackagingCo.,Ltd.
Underthesameactualcontroller
ShenzhenOverseasChineseTownGasStationCo.,
Underthesameactualcontroller
Ltd.
ShenzhenKonkaVideo&CommunicationSystems
Underthesameactualcontroller
EngineeringCo.,Ltd.
TaizhouOCTCo.,Ltd
Underthesameactualcontroller
TaizhouOCTCo.,Ltd,SpaHotelBranch
Underthesameactualcontroller
ShenzhenOCT RealEstateCo.,Ltd.
Underthesameactualcontroller
ShenzhentheWindowsoftheworldCo.,Ltd.
Underthesameactualcontroller
TianjinOCTIndustryCo.,Ltd.
Underthesameactualcontroller
YunnanOCTIndustryCo.,Ltd.
Underthesameactualcontroller
ShenzhenOCTHotelCo.,Ltd.
Underthesameactualcontroller
ShenzhenSplendidChinaDevelopmentCo.,Ltd
Underthesameactualcontroller
ShenzhenOCTEastInterlakenHotel
Underthesameactualcontroller
ShenzhenOCTPropertyManagementCo.,Ltd.
Underthesameactualcontroller
5.Listofrelated-party transactions
(1) Information onacquisitionof goods and reception oflabor service
KonkaGroupCo.,Ltd. Notestothe2014financialstatements
|||
|-|-|
|Content|2014|
|Purchasematerials|115,447,444.91|
|Purchasematerials|30,414,202.53|
|Purchasematerials|8,151,649.23|
|Purchasematerials|11,499,212.38|
|Purchasematerials|—|
|Purchasematerials|13,645,510.03|
|Purchasematerials|566,780.36|
|Purchasematerials|11,111.11|

Transactions ofselling commodities and providing laborservices
|||
|-|-|
|Content|2014|
|SellingLCDs|—|
|SellingLCDs|—|
|SellingLCDs|—|
|SellingLCDs|—|
|SellingLCDs|—|
|SellingLCDs,maintenancecost|12,131,664.24|
|Sellingmaterials|16,539,304.45|
|Repairprocessingfeeincome|1,653,832.38|
|SellingLCDs|19,658.12|
|SellingLCDs|35,000.00|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements (2) Related trusteeship/contract
① the Companyas guarantor
||||
|-|-|-|
|Guaranteeamount|Startdate|Enddate|
|2,750.00|18Sep.2013|18Sep.2016|
|28,759.30|14Mar.2013|13Mar.2015|
|8,627.79|25Mar.2013|26Mar.2015|
|5,772.57|17Mar.2014|27Mar.2015|
|29,891.32|8Oct.2014|25Mar.2015|
|2,753.55|6Mar2014年|27Feb.2015|
|8,872.55|31Jul.2014|10Jun.2015|
|5,507.10|30Jun.14|16Jun.2015|
|18,357.00|7Jul.2014|23Jun.2015|
|6,119.00|10Oct.2014|9Oct.2015|
|7,434.59|12Nov.2014|27Oct.2015|
|18,357.00|17Nov.2014|18Nov.2015|
|27,535.50|20Nov.2014|20Nov.2015|
|29,677.15|15Jan.2014|15Jan.2016|
|40,997.30|28Jul.2014|28Jul.2016|
|18,338.64|17Sep.2014|15Sep.2016|
|60,000.00|8Dec.2014|7Dec.2017|
|30,000.00|8Dec.2014|7Dec.2017|
|6,000.00|8Dec.2014|7Dec.2017|
|6,000.00|8Dec.2014|7Dec.2017|
|10,000.00|8Dec.2014|7Dec.2017|
|20,000.00|8Dec.2014|7Dec.2017|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
||||
|-|-|-|
|Guaranteeamount|Startdate|Enddate|
|30,000.00|8Dec.2014|7Dec.2017|
|4,800.00|8Dec.2014|7Dec.2016|

(3) Rewards forthekey management personnel
||
|-|
|2014|
|RMB 8.0290 million|

 6.Receivables andpayables ofrelated parties
(1) Receivables
||||
|-|-|-|
|Closingbalance|||
|Bookbalance|Baddebtprovision|Bookbalance|
|10,963,653.88|219,273.08|5,537,935.26|
|—|—|38,500.00|
|—|—|585,136.00|
|—|—|743,700.00|
|—|—|2,821,500.00|
|—|—|3,024,000.00|
|512.40|512.40|512.40|
|—|—|69,500.00|
|—|—|76,500.00|
|—|—|83,000.00|
|—|—|385,260.00|
|7,478,269.37|149,565.39|—|
|35,000.00|700.00|—|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
||||
|-|-|-|
|Closingbalance|||
|Bookbalance|Baddebtprovision|Bookbalance|
|1,260,956.45|25,219.13|—|
|19,738,392.10|395,270.00|13,365,543.66|
|18,115,952.51|5,405,926.42|—|
|80,000.00|80,000.00|80,000.00|
|1,209,064.86|1,209,064.86|1,209,064.86|
|77,402.65|77,402.65|77,402.65|
|776,572.25|15,531.45|1,069,029.14|
|20,258,992.27|6,787,925.38|2,435,496.65|

 (2)Account payables
||
|-|
|Closingbalance|
|6,531,068.31|
|9,801,227.07|
|1,078,005.09|
|1,782,812.82|
|358,929.03|
|1,050,557.07|
|20,602,599.39|
|1,605,902.13|
|5,143,401.86|
|12,339,062.14|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
||
|-|
|Closingbalance|
|19,088,366.13|
|81,000.00|
|81,000.00|
|1,130,000.00|
|1,530,000.00|
|428,000.00|
|51,135.00|
|3,139,135.00|

 XII.Commitments
1.Significantcommitments
(1) Capital commitment
||
|-|
|Closingbalance|
|—|
|150,424,982.66|
|—|
|150,424,982.66|

 (2) Operating lease commitments
Asof theend of balance sheet date, theirrevocable operating lease commitmentsthat the Company signed were as followed:
||
|-|
|Closingbalance|
|23,767,119.89|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
||
|-|
|11,062,103.32|
|8,442,535.17|
|6,735,380.75|
|50,007,139.13|

 2.Contingency
1.Contingentliabilitiesanditsfinancialeffectarisingfromunsettledlitigationorarbitration
1.Contingent liabilities and financial effects caused bypending litigation orarbitration
On 4 Feb. 2013, theCompany’s subsidiary Kunshan Konka signed Purchase Order (Hereinafter referred to as "PO") with Italy customer MOTOM ELECTRONICS GROUP SPA (Hereinafter referred to as the "MEG"). The PO payment was 90 days L/C, L/C amount was$1.29744 million. MEG opened L/C which Kunshan Konka was beneficiary on 26 Feb, due to the problems of delivery time and related items, after the agreement of both parties, MEG respectively opened two revisions of L/C on 11 Mar. and 13 May. Then the Kunshan Konka entrusted Ningbo United International Freight Forwarding Co., Ltd. (Hereinafter referred to as the “Ningbo United”) to book space, and Ningbo United signed and issued the carrier's bill of lading of Econolines Ltd. (Hereinafter referred to as the “Econolines” (No.NGB1305005\GNB1305016\NGB1305034) The whole case handover with Container delivery conditions of CYTO CY) on 5, 14 and 19 May 2013. According to the verification, after the goods arrived to the port of destination in Italy, the empty cargo container had returned to the shipping company, but the full set of original bill of lading was still in Kunshan Konka; Ningbo United andEconolines’s behaviors of delivery of goods without original bill of lading had violated the "maritime law" and other relevant laws and regulations, Kunshan Konka had right to require Econolines return the goods. The total amount of the goods was$ 1,214,780.04, equivalents RMB 7,507,340.65, MEG received the goods but not pay the full amount ofthe goods to Kunshan Konka ,theamount inarrear reached$1,100,000.00.
Which caused large loss to Kunshan Konka, the payment in arrears of MEG to Kunshan Konka was USD1,099,423.52
Kunshan Konka entrusted Shanghai Jiajia Law firm to file a suit from Shanghai Maritime Court, requested Ningbo United and Econolines compensate for the loss of payment for goods USD 1,099,423.52 and its interest; meanwhile bear the fees for acceptance and property preservation application fee
On 26 May 2014, Shanghai Maritime Court made the first-instance judgment, which ordered Ningbo United and Econolines compensate for the loss of payment for goods USD 1,099,423.52 and itsinterest, and bear thefees for acceptance and property preservation application fee
In Jun. 2014 Ningbo United appealed to the Shanghai Higher People's Court against its sentence. Now the case waits for a second trial. On 24 Nov. 2014, the Second-instance trial, pending at present
(2) Contingent liabilities and its financial effect arising from loan guarantee offered to other
companies
KonkaGroupCo.,Ltd. Notestothe2014financialstatements As of 31Dec. 2014,therewas nosignificant contingency in theCompany.
(3) Contingent liabilities related to theinvestment of jointventure and associated enterprises. As of 31Dec. 2014,therewas nosignificant contingency in theCompany.
(4) Other contingent liabilities and its financial effects.
As of 31Dec. 2014,therewas nosignificant contingency in theCompany.
XIII. Events afterbalance sheetdate
2.Profitdistributionafterbalancesheet date
On 1 Apr. 2015, the Company held the 71st Meeting of the 7th Session of Board of Directors, the meeting reviewed and approved the 2014 profits distribution preplan, which was: on the base of total equity of 1,203,972,704 shares, every 10 shares distribute RMB 0.1 (tax included) the preplan will submitted to thegeneral meeting ofshareholders for approval.
XIV.Othersignificantevents
1.Lease
(1) The closing original price accumulated depreciation and accumulated impairment provision of all kinds ofthe rented fixed assets.
Particulars ofthefinancing lease oftherented fixed assets, please referto noteVI, 12,(3)
(2) Minimumlease payment will bepaid in future
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||The|remaining||lease|term|
|Within|1|year|(including1|||year)||||||
|Within|1|year|and|2|years|(including||2|years)|||

 Total 1,685,948.00 (3) The balance of unrecognized financing charges, and the method used to allocate the unrecognized financing charges.
As of the balance sheet date, the balance of unrecognized financing charges was RMB130, 492.37; amortizationmethod is the actual interest rate method.
Category offixedassets leased byoperating lease, please refer to noteVI, 12(4)
2. On 18 Nov. 2014, the Company and its subsidiary Shenzhen Konka Telecommunications Technology Co., Ltd. signed Credit Limit Agreement No. 2013ZZYEXZ0001005, which agree that the Company and Shenzhen Konka Telecommunications Technology Co., Ltd. gained general credit limit no more than RMB 5,300,000,000 by mortgaging bank acceptance no more than RMB 1,300,000,000, of which the Company performed as accreditor and Shenzhen Konka Telecommunications Technology Co., Ltd. as personnel with drawn right. Due date after extension:
22 Jan. 2015.As of 31 Dec. 2014, the Credit Limit had used RMB3,826,000,000.00，unused RMB
1,474,000,000.00.
KonkaGroupCo.,Ltd. Notestothe2014financialstatements 3. On 11 Jun. 2014, the Company signed Credit Contract No. J2014Z241JTB with CCB Shenzhen Sub-branch and gained general credit limit no more than RMB 5,000,000,000. Period of credit: 10 Jun. 2014 to 2016. 10 Jun.As of 31 Dec. 2014, the Credit Limit had used RMB3,727,893,732.43， unused RMB 1,272,106,267.57.
4. On 21 Jun. 2014, the Company signed Comprehensive Credit Contract No.PYZYZZ 20140626 No. 005 with Ping An Bank Co., Ltd. Shenzhen Sub-branch and gained credit limit no more than RMB 500,000,000 which can be used in more currency credit. Period of credit: 29 Jun. 2014 to 29 Jun.2015,theCredit Limit had usedRMB252,000,000.00，unused RMB248,000,000.00.
5. On 4 Jun. 2014, the Company signed Comprehensive Credit Contract No. 2014 SYQHZZ No. 0006; credit limit was RMB 400,000,000， the specific businesses of credit were: loans, the responsibility for bills, bills discounting, open the L/C, packing loan, import bill advance, export bill advance, open letter ofguarantee, etc
Period of credit: 4 Jun. 2014 to 4 Jun. 2015.As of 31 Dec. 2014, the Credit Limit had not yet been used
6. On 22 Apr. 2014, the Company signed Comprehensive Credit Contract No. CN11002022648-140416 with HSBC Bank (China) Co., Ltd. Shenzhen Sub-branch and gained loan of no more than$ 20 million, the period was 2 years after the withdrawal date.As of 31 Dec. 2014, the Credit Limit hadused$10,000,000.00，unused$10,000,000.00.
7. As of 31 Dec. 2014, the Company opened L/G balance USD 300,000,000.00 and RMB 691,310,000.00 to its subsidiary Hong Kong Konka through credit bank and L/G balance USD 15,000,000.00and RMB 29,058,750.00to its subsidiary Konka Household Appliances International Trading.
8. On 2 Apr. 2014, the Company held 55th Meeting of the 7th Session of the Board of Directors. The meeting reviewed and approved Announcement on Authorizing the Management Level of the Company to Sell the Shares of the Participated Company by Choosing the Time. TheCompany’s wholly own subsidiary Dongguan Konka Electronic Co., Ltd. held restricted A share 40,964,593 shares of Shenzhen Refond Optoelectronics Co. Ltd.(StockNo.300241) in line with the commitment made by Dongguan Konka Electronic Co., Ltd. in the first public issue of Shenzhen Refond Optoelectronics Co. Ltd. theshares would beunlocked on12Jul. 2014.
9. TheCompany’s subsidiaries Mudanjiang Konka, Changshu Konka and Chongqing Electronic were underliquidation.
10. On 4 Aug. 2014, the Company held 60th Meeting of the 7th Session of the Board of Directors, the meeting decided to cancel the subsidiary of the Company Nanhai Research Institution, as of 31 Dec. 2014,thecancellation was under processing.
11.Urban updating projects of Konkaheadquarter plant
According to the application proposed by the Company, Shenzhen Nanshan Reconstruction Office of Urban Village (old village) published the Notice about the Subject of Implementation of Urban Updating Projects of Shenzhen Nanshan Konka Group Headquarter Plant in November, 2012 for the publicity of the subject of implementation of urban updating projects of Konka Group headquarter plant.
InAugust, 2013, Overseas Chinese Town Group submitted the Comment Letter of Opposing Konka Group to be the Only Subject of: Implementation of the Urban Updating Projects of Konka Headquarter Plant” for application to stop the formalities of Konka Group headquarter plant and
KonkaGroupCo.,Ltd. Notestothe2014financialstatements handle it after appropriate discussion between Overseas Chinese Town Group and the Company. According to the Comment Letter, the Shenzhen Nanshan Reconstruction Office of Urban Village (old village) released the Comment Letter of Konka Group to be the Subject of Implementation of Urban Updating Projects of Konka Headquarter Plant in August, 2013 to coordinate the rights and interests of all Parties and make suggestions tothe CommentLetter.
Hereafter, no agreement of Konka Group to be the only subject of implementation of the urban updating projects has been reached after several negotiations.
In order to resolve the differences and promote the implementation of urban updating projects of Konka headquarter plant, according to the 53rd meeting of the 7th Board of Directors, the Company decided to submit the dispute of Konka Group to be the only subject of implementation of the urban updating projects to Shenzhen Court of International Arbitration. In order to promote the implementation of urban updating projects of Konka headquarter plant, according to the resolution of 54th meeting of the 7th Board of Directors, Konka Group shall pay the land funds for the projects in advance before the arbitration result. If the arbitral agency identifies the Company as the only development subject, the Company should continue implementing the project. If the arbitral agent asserts that the Company could not be the only development subject, the development plan should be discussed and agreed by the Company and OCT Group to handle the transfer formalities of the land andshare thepaid prices onland.
On 10 Mar., 2014, the Company has applied to Shenzhen Court of International Arbitration for arbitration of the subject of implementation of urban updating project of Konka headquarter plant to regard Overseas Chinese Town Group as the respondent and the Company as the only subject of implementation to develop the urban updating project of Shenzhen Nanshan Konka Group headquarter plant.
During 16 April, 2014 to 17 June, 2014, four court sessions were held by Shenzhen Court of International Arbitration. Overseas Chinese Group and the Company submitted the request for arbitration, evidence materials, written pleas and defending opinions.
On 31 July, 2014, the Company received the consent award from Shenzhen Court of International Arbitration (No. HNGZC[2014]D97) with decisions:
(1) Rejecting the request of Konka Group to be the only subject of implementation of Urban Updating Projects ofShenzhen Nanshan KonkaGroup Headquarter Plant.
(2) Rejecting therequest about counsel fees from KonkaGroup.
(3) Rejecting thecounterclaim about counsel fees from Overseas ChineseTownGroup.
(4) The arbitration fee of this case is 490,926.54Yuan, totally assuming by Overseas Chinese Town Group. The repaid 29,050 Yuan by Overseas Chinese Town Group could be included in the arbitration fees paid byOverseas ChineseTown Group.
(5) The case with a counterclaim arbitration fee of RMB 29050, shall be borne fully by the OCT Group. OCTGroup prepaid RMB 29050as thearbitration fee thatOCTGroup shall bear.
In order to promote urban updating projects of Konka headquarter plant, fully maintain the interest of the Company and the vast majority of investors, in line with the reviewing and approval of the 67th Meeting of the 7th Session of the Board of Directors and 2014 Second Special Meeting of Shareholders, the Company and OCT Group jointly set up a joint venture to develop the projects of Konka headquarter plant, the equity proportion of joint venture was: OCT Group30%, the Company70%. As of the report issue date, the Company had register and set up, and is rushing to
KonkaGroupCo.,Ltd. Notestothe2014financialstatements deal with relevant formalities
XV.Notes of mainitems in thefinancialstatements oftheCompany
1.Accounts receivable
(1) Accounts receivable
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Provisionforbaddebts||
|Amount|Proportion(%)|Amount|Proportion(%)|
|—|—|—|—|
|1,754,027,708.37|100.00|214,731,732.08|12.24|
|—|—|—|—|
|1,754,027,708.37|100.00|214,731,732.08|12.24|

 (Continued)
Openingbalance
|||||
|-|-|-|-|
|Bookbalance||Provisionforbaddebts||
|Amount|Proportion(%)|Amount|Proportion(%)|
|—|—|—|—|
|1,756,621,157.28|100.00|213,570,680.61|12.16|
|—|—|—|—|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements Openingbalance
|||||
|-|-|-|-|
|Bookbalance||Provisionforbaddebts||
|Amount|Proportion(%)|Amount|Proportion(%)|
|1,756,621,157.28|100.00|213,570,680.61|12.16|

①In the groups, otheraccounts receivable adopting aging analysis method to withdraw bad debt provision:
Closingbalance
Aging
|||
|-|-|
|Accountreceivable|Provisionforbaddebts|
|1,196,564,303.97|23,932,665.90|
|30,174,180.40|1,508,709.02|
|20,625,759.93|4,083,744.48|
|5,494,947.76|2,747,473.88|
|2,288,526.10|1,144,263.05|
|181,314,875.75|181,314,875.75|
|1,436,462,593.91|214,731,732.08|

②In the groups, accounts receivableadopting other methods towithdraw bad debt provision: Balanceatyear-end
Nameofthegroup
|||
|-|-|
|Accountreceivable|Baddebtprovision|
|317,565,114.46|—|
|317,565,114.46|—|

 (2) Baddebtprovisionwithdrawal, reversed or recovered inthe report period
The amount of bad debt provision was RMB 1,161,051.47 the amount of reversed or recovered bad debt provisionin thereport period RMB Yuan
(3)The top fiveother account receivable classified bydebtor at period end
The total amount of the top five account receivable classified by debtor at period end was RMB 631,666,816.05,36.01% of the balance of closing account receivable, the relevant balance of
bad debt provision was RMB 4,651,689.34.
KonkaGroupCo.,Ltd. Notestothe2014financialstatements 2.Other accountreceivable
(1) Otheraccountreceivable classified bycategory
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Provisionforbaddebts||
|Amount|Proportion(%)|Amount|Proportion(%)|
|31,507,969.28|3.07|18,797,943.19|59.66|
|993,962,954.77|96.74|18,473,350.81|3.02|
|2,000,000.00|0.19|2,000,000.00|100.00|
|1,027,470,924.05|100.00|39,271,294.00|3.82|

 (Continued)
Openingbalance
|||||
|-|-|-|-|
|Bookbalance||Provisionforbaddebts||
|Amount|Proportion(%)|Amount|Proportion(%)|
|13,363,045.11|1.91|13,363,045.11|100.00|
|686,601,143.86|98.09|18,303,959.09|2.67|
|—|—|—|—|
|699,964,188.97|100.00|31,667,004.20|4.52|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements① Other accounts receivable with insignificant single amount and individually withdrawn bad debt provision
Closingbalance
||||
|-|-|-|
|Otheraccountsreceivable|Provisionforbaddebts|Withdrawalproportion(%)|
|13,392,016.77|13,392,016.77|100.00%|
|18,115,952.51|5,405,926.42|29.84%|
|31,507,969.28|18,797,943.19|—|

②In the groups, otheraccounts receivable adopting aging analysis method to withdraw bad debt provision:
Closingbalance
Aging
|||
|-|-|
|Otheraccountreceivable|Provisionforbaddebts|
|524,371,657.17|724,566.14|
|69,581,829.20|3,479,091.46|
|3,306,565.65|661,313.13|
|394,772.26|197,386.13|
|452,575.32|226,287.66|
|13,184,706.29|13,184,706.29|
|611,292,105.89|18,473,350.81|

③In the groups, otheraccounts receivable adopting other methodsto withdraw bad debt provision: Balanceatyear-end
Nameofthegroup
|||
|-|-|
|Accountreceivable|Baddebtprovision|
|382,670,848.88|—|
|382,670,848.88|—|

 (2) Baddebtprovisionwithdrawal, reversed or recovered inthe report period
The amount of bad debt provision was RMB 7,604,289.80 the amount of reversed or recovered bad
debt provisionin thereport period RMB Yuan
KonkaGroupCo.,Ltd. Notestothe2014financialstatements (3)Thetop 5otheraccount receivableclassified by debtoratperiod end
|||||
|-|-|-|-|
|Nature|Closingbalance|Aging|Proportion%|
|Guarantee|488,063,979.00|Within1year|47.50|
|Currentamount|112,285,519.15|Within1year|10.93|
|Currentamount|80,952,524.52|Within1year|7.88|
|Currentamount|78,893,470.84|Within1year|7.68|
|Energysavingincentives|62,894,650.00|1-2years|6.12|
|—|823,090,143.51|—|80.11|

 3.Long term equity investment
(1) Category of equity investment
||||||
|-|-|-|-|-|
|Closingbalance|||||
|Bookbalance|Baddebtprovision|Bookvalue|Bookbalance|Baddebtprovision|
|1,505,310,835.91|94,394,984.69|1,410,915,851.22|1,557,259,154.56|94,394,984.69|
|197,758,604.87|—|197,758,604.87|201,482,356.95|—|
|1,703,069,440.78|94,394,984.69|1,608,674,456.09|1,758,741,511.51|94,394,984.69|

 (2) Investment to subsidiaries of theCompany
||||||
|-|-|-|-|-|
|Openingbalance|Increase|Decrease|Closingbalance|Withdrawnimpairmentprovisioninthereportingperiod|
|36,000,000.00|—|—|36,000,000.00|—|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
||||||
|-|-|-|-|-|
|Openingbalance|Increase|Decrease|Closingbalance|Withdrawnimpairmentprovisioninthereportingperiod|
|44,869,809.80|—|44,869,809.80|—|—|
|122,780,937.98|—|—|122,780,937.98|—|
|274,783,988.91|—|—|274,783,988.91|—|
|781,828.61|—|—|781,828.61|—|
|—|—|—|0.00|—|
|5,278,509.85|—|5,278,509.85|0.00|—|
|261,482.50|—|—|261,482.50|—|
|500,000.00|—|—|500,000.00|—|
|350,000,000.00|—|—|350,000,000.00|—|
|4,655,000.00|—|—|4,655,000.00|—|
|10,732,485.69|—|—|10,732,485.69|—|
|90,000,000.00|—|—|90,000,000.00|—|
|8,062,500.00|—|—|8,062,500.00|—|
|22,500,000.00|—|—|22,500,000.00|—|
|31,500,000.00|—|—|31,500,000.00|—|
|9,000,000.00|1,723,300.00|10,723,300.00|—|—|
|17,100,000.00|—|—|17,100,000.00|—|
|48,750,000.00|—|—|48,750,000.00|—|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
||||||
|-|-|-|-|-|
|Openingbalance|Increase|Decrease|Closingbalance|Withdrawnimpairmentprovisioninthereportingperiod|
|350,000,000.00|—|—|350,000,000.00|—|
|69,702,612.22|—|—|69,702,612.22|—|
|10,000,000.00|—|—|10,000,000.00|—|
|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|—|
|1,557,259,155.56|8,923,300.00|60,871,619.65|1,505,310,835.91|—|

 (3) Investment to jointventure and associated enterprise
||||||
|-|-|-|-|-|
|Closingbalance|||||
||additionalinvestment|negativeinvestment|Profitsorlossesrecognizedunderequitymethod.|Adjustmentofothercomprehensiveincome|
|—|—|—|—|—|
|—|—|—|—|—|
|—|—|—|—|—|
|201,482,356.95|—|—|-3,679,122.32|—|
|201,482,356.95|—|—|-3,679,122.32|—|
|201,482,356.95|—|—|-3,679,122.32|—|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements (Continued)
|||||
|-|-|-|-|
|Increase/decrease|||Closingbalance|
|Equitiesorprofitsdeclaretoissue|Baddebtprovision|Other||
|—|—|—|—|
|—|—|—|—|
|—|—|—|—|
|—|—|—|197,758,604.87|
|—|—|—|197,758,604.87|
|—|—|—|197,758,604.87|

 4.Revenue andCost ofSales
(1)Revenue, CostofSales
||||
|-|-|-|
|Reportingperiod|||
|Revenues|Operatingcosts|Revenues|
|12,994,682,247.47|11,233,692,241.60|15,819,472,336.00|
|5,257,638,085.71|5,208,621,358.62|5,269,237,253.78|
|18,252,320,333.18|16,442,313,600.22|21,088,709,589.78|

 (2)Main business (Classified byindustry)
||||
|-|-|-|
|Reportingperiod|||
|Revenueofsales|Costsofsales|Revenueofsales|
|12,994,682,247.47|11,233,692,241.60|15,819,472,336.00|
|12,994,682,247.47|11,233,692,241.60|15,819,472,336.00|

 (3)Main business (Classified byproduct)
||||
|-|-|-|
|Reportingperiod|||
|Revenueofsales|Costsofsales|Revenueofsales|
|12,393,357,463.54|10,693,341,521.15|15,073,485,116.68|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
||||
|-|-|-|
|Reportingperiod|||
|Revenueofsales|Costsofsales|Revenueofsales|
|474,425.20|327,879.94|—|
|501,891,601.26|458,915,261.80|515,704,902.62|
|98,958,757.47|81,107,578.71|230,282,316.70|
|12,994,682,247.47|11,233,692,241.60|15,819,472,336.00|

 (4)Main business (Classified byarea)
||||
|-|-|-|
|Reportingperiod|||
|Revenueofsales|Costsofsales|Revenueofsales|
|11,011,476,670.78|9,284,752,004.46|13,869,592,951.66|
|1,983,205,576.69|1,948,940,237.14|1,949,879,384.34|
|12,994,682,247.47|11,233,692,241.60|15,819,472,336.00|

 (5) Therevenueofsales from thetop fivecustomers
||
|-|
|TotalamountofTop5customersoperatingrevenue|
|3,035,222,295.61|
|3,020,221,085.16|

5.Investment income
||
|-|
|2014|
|—|
|-3,679,122.32|
|248,192,713.43|
|48,104.52|
|46,294,257.11|
|290,855,952.74|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements XVI. Supplementary information
1.Listofnon-currentgains andlosses of2014
||
|-|
|Amount|
|587,454,101.18|
|—|
|75,401,093.20|
|—|
|—|
|—|
|12,260,439.18|
|—|
|—|
|—|
|—|
|—|
|—|
|—|
|—|
|—|
|—|
|—|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
||
|-|
|Amount|
|—|
|16,207,940.59|
|-151,895.48|
|691,171,678.67|
|158,734,972.90|
|4,331,796.46|
|528,104,909.31|

Notes: the number“+” among the non-current gains and losses items refers to profits and revenues, while “-”referred to losses orexpenditure.
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 andlosses (Z-J-H-Announcement[2008]No. 43) .
||
|-|
|Involvedamount|
|155,396,179.33|
|155,396,179.33|

2.Net assets yieldandearnings pershare
|||
|-|-|
|ROEWA(%)||
||BasicEPS|
|1.28%|0.0437|
|-11.57%|-0.3949|

Notes: (1) The corresponding ROEWAof the net profits attributed the common shareholders of the
Company=52,623,527.86/(4,087,909,132.34+52,623,527.86/2-12,039,727.04*6/12+688,609.70*6/1
2-524,295.54*6/12)
KonkaGroupCo.,Ltd. Notestothe2014financialstatements The corresponding ROEWA of the net profits attributed the common shareholders after deducting the non-current gains and losses =(52,623,527.86-528,104,909.31)/(4,087,909,132.34+52,623,527.86/2-12,039,727.04*6/12+688,609.70*6/12-524,295.54*6/12)
3.Relevant supplementary materials ofthechanges ofaccounting policies
The Company changed the relevant accounting policies and executed retroactive restatement of the compared financial statement according to the 8 accounting standards of No. 2 ofASBE-Long-term Equity Investment (revised in 2014) that issued by Ministry of Finance and the consolidation balance sheet on 1Jan. 2013and 31Dec. 2013after therestatement were as follows:
|||||
|-|-|-|-|
|Item|1Jan.2013|31Dec.2013|31Dec.2014|
|CurrentAssets:||||
|Monetaryfunds|1,728,946,511.11|1,843,743,089.94|1,909,455,223.89|
|Settlementreserves||||
|Intra-grouplendings||||
|Financial assetsmeasured at fair value ofwhich changes arerecorded in current profitsandlosses||||
|Derivative financialassets||||
|Notesreceivable|5,033,056,004.97|4,150,779,374.32|3,819,417,076.37|
|Accountsreceivable|1,975,605,771.07|2,460,996,984.92|2,259,293,207.16|
|Accounts paid inadvance|183,008,022.27|164,272,929.59|315,150,044.57|
|Premiumsreceivable||||
|Reinsurance premiumsreceivable||||
|Receivable reinsurancecontractreserves||||
|Interestreceivable|7,171,998.73|2,898,419.90|1,885,727.36|
|Dividendreceivable||||
|Other accountsreceivable|316,590,715.96|298,749,414.95|787,039,370.68|
|Financial assetspurchased underagreementstoresell||||
|Inventories|4,059,339,049.25|3,582,669,024.26|3,904,436,250.33|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
|||||
|-|-|-|-|
|Assetsheldforsale||||
|Non-current assets duewithin1year||||
|Othercurrentassets|||361,700,708.77|
|Totalcurrentassets|13,303,718,073.36|12,504,109,237.88|13,358,377,609.13|
|Non-currentassets:||||
|Loans by mandate andadvancesgranted||||
|Available-for-salefinancialassets|12,140,177.20|11,894,999.30|245,033,609.00|
|Held-to-maturityinvestments||||
|Long-term accountsreceivable||||
|Long-term equityinvestment|461,470,533.19|436,017,471.50|367,111,208.22|
|Investingrealestate|235,680,171.89|237,986,524.12|233,349,452.80|
|Fixedassets|1,887,836,271.02|1,908,503,979.80|1,783,695,548.92|
|Constructioninprogress|50,682,893.85|49,924,027.97|159,604,884.09|
|Engineeringmaterials||||
|Disposaloffixedassets||||
|Production biologicalassets||||
|Oil-gasassets||||
|Intangibleassets|290,280,443.01|359,585,571.12|347,626,130.58|
|R&Dexpense||||
|Goodwill|3,943,671.53|3,943,671.54|3,597,657.15|
|Long-term deferredexpenses|6,261,286.45|13,405,084.94|25,792,805.06|
|Deferred income taxassets|310,903,676.56|218,728,739.41|259,516,396.26|
|Othernon-currentassets||||
|Totalofnon-currentassets|3,259,199,124.70|3,239,990,069.70|3,425,327,692.08|
|Totalassets|16,562,917,198.06|15,744,099,307.58|16,783,705,301.21|
|Currentliabilities:||||
|Short-termborrowings|5,456,351,486.48|5,239,069,764.48|5,145,712,436.91|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
|||||
|-|-|-|-|
|Borrowings fromCentralBank||||
|Customer bank depositsandduetobanksandotherfinancialinstitutions||||
|Intra-groupborrowings||||
|Financial liabilitiesmeasured at fair value ofwhich changes arerecorded in current profitsandlosses||||
|Derivative financialliabilities||||
|Notespayable|846,746,137.62|565,137,790.84|911,355,028.47|
|Accountspayable|2,735,993,787.52|3,341,804,144.12|3,144,408,433.93|
|Accounts received inadvance|441,836,467.09|482,716,035.68|302,904,453.86|
|Financial assets sold forrepurchase||||
|Handling charges andcommissionspayable||||
|Payrollpayable|305,003,416.73|332,090,987.77|299,272,715.05|
|Taxpayable|-231,087,836.60|-94,670,496.91|112,557,005.85|
|Interestpayable|27,651,352.67|34,945,870.48|22,872,418.43|
|Dividendpayable||||
|Otheraccountspayable|1,364,756,260.46|1,391,396,130.97|1,376,803,381.03|
|Reinsurance premiumspayable||||
|Insurance contractreserves||||
|Payables for actingtradingofsecurities||||
|Payables for actingunderwritingofsecurities||||
|Liabilitiesheldforsale||||
|Non-current liabilitiesduewithin1year|810,000,000.00|1,755,444.00|1,525,465.53|
|Othercurrentliabilities||||

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
|||||
|-|-|-|-|
|Totalcurrentliabilities|11,757,251,071.97|11,294,245,671.43|11,317,411,339.06|
|Non-currentliabilities:||||
|Long-termborrowings|400,000,000.00|5,000,000.00|957,541,210.52|
|Bondspayable||||
|Of which: preferredshares||||
|Perpetualbonds||||
|Long-termpayables|30,000,000.00|31,366,530.13|30,029,990.10|
|Long-term payrollpayables|||28,554,734.16|
|Specificpayables||||
|Estimatedliabilities|2,511,814.54|911,085.41||
|Deferredincome|125,743,462.22|131,658,369.11|147,315,999.02|
|Deferred income taxliabilities|563,067.21||1,049,498.77|
|Other non-currentliabilities||||
|Totalnon-currentliabilities|558,818,343.97|168,935,984.65|1,164,491,432.57|
|Totalliabilities|12,316,069,415.94|11,463,181,656.08|12,481,902,771.63|
|Owners’equity:||||
|Sharecapital|1,203,972,704.00|1,203,972,704.00|1,203,972,704.00|
|Otherequityinstruments||||
|Of which: preferredshares||||
|Perpetualbonds||||
|Capitalreserves|1,310,986,974.06|1,314,409,687.82|1,293,749,588.55|
|Less:Treasurystock||||
|Other comprehensiveincome|13,578,166.62|16,179,316.17|16,171,477.91|
|Specificreserves||||
|Surplusreserves|827,291,207.52|847,908,466.28|847,908,466.28|
|Provisions for generalrisks||||
|Retainedprofits|692,275,447.14|705,438,958.08|746,022,758.89|

KonkaGroupCo.,Ltd. Notestothe2014financialstatements
|||||
|-|-|-|-|
|Total equity attributable toownersoftheCompany|4,048,104,499.34|4,087,909,132.35|4,107,824,995.63|
|Minorityinterests|198,743,282.78|193,008,519.16|193,977,533.95|
|Totalowners’equity|4,246,847,782.12|4,280,917,651.51|4,301,802,529.58|
|Total liabilities andowners’equity|16,562,917,198.06|15,744,099,307.59|16,783,705,301.21|

Section XII. Documents Available for Reference
I. Financial statements with the signatures and seals of the company principal, the principal of accounting work andtheprincipal of theaccountingorgan (financial manager);
II. Originals ofAuditors’ Report with the seals of the CPAs firm and the signatures& seals of the certified publicaccountants;
III. Texts of all theCompany’s documents ever publicly disclosed in newspapers designated by CSRCin thereporting period, andthe originals ofthepublicnotices.
IV.Otherrelevant materials.
The Board of Directors
Konka Group Co.,Ltd.
3Apr.2015