KonkaGroupCo.,Ltd. AnnualReport2018 KONKA GROUP CO., LTD.
ANNUAL REPORT 2018
2019-22
March 2019
KonkaGroupCo.,Ltd. AnnualReport2018 Part I Important Notes, Table of Contents and Definitions The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior management of Konka Group Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of this Report and its summary, and shall be jointly and severally liable for any misrepresentations, misleading statements ormaterial omissions therein.
Liu Fengxi, theCompany’s legal representative, Li Chunlei, theCompany’s Chief Financial Officer (CFO), and Feng Junxiu, head of theCompany’s financial department (equivalent to financial manager) hereby guarantee that the Financial Statements carried in this Report are factual, accurate andcomplete.
All theCompany’s directors have attended the Board meeting for the review of this Report andits summary.
Any plans forthe future or other forward-looking statements mentioned in this Report and its summary shall NOT be considered as absolute promises of the Company to investors. Therefore, investors arereminded to exercisecautionwhen making investmentdecisions. The Board has approved a final dividend plan as follows: based on the 2,407,945,408 shares, a cash dividend of RMB1.00 (tax inclusive) per10 shares is to bedistributed to the shareholders, with no bonusissuefromeitherprofitorcapital reserves.
This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shallprevail.
KonkaGroupCo.,Ltd. AnnualReport2018 Table of Contents
Part I Important Notes,Table ofContents and Definitions...........................................................2 Part II Corporate Information and Key Financial Information...................................................7 Part III Business Summary.............................................................................................................12 Part IVOperating Performance DiscussionandAnalysis............................................................15 PartVSignificantEvents.................................................................................................................45 PartVI ShareChangesand ShareholderInformation.................................................................75 PartVII Preferred Shares................................................................................................................83 PartVIII Directors, Supervisors, SeniorManagement andStaff................................................84 Part IXCorporate Governance.......................................................................................................96 Part XCorporate Bonds................................................................................................................108 Part XI FinancialStatements........................................................................................................112 Part XII DocumentsAvailable forReference...............................................................................390
KonkaGroupCo.,Ltd. AnnualReport2018 Definitions
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|Term|Definition|
|The “Company”, the “Group”, “Konka Group” or“we”|Konka Group Co., Ltd. and its consolidated subsidiaries, except where thecontextotherwiserequires|
|KonkaE-display|ShenzhenKonkaE-displayCo.,Ltd.|
|E-displayService|ShenzhenE-displayServiceCo.,Ltd.|
|KangqiaoEasyChain|ShenzhenKangqiaoEasyChainTechnologyCo.,Ltd.|
|KonkaVentures|KonkaVenturesDevelopment(Shenzhen)Co.,Ltd.|
|YantaiKonka|YantaiKonkaHealthcareEnterpriseServiceCo.,Ltd.|
|ChengduKonkaIncubator|ChengduKonkaIncubatorManagementCo.,Ltd.|
|ChengduAnren|ChengduAnrenKonkaCulturalandCreativeIncubatorManagementCo.,Ltd.|
|KonkaEnterpriseService|GuiyangKonkaEnterpriseServiceCo.,Ltd.|
|ChuanghuiSmart|NanjingChuanghuiSmartTechnologyCo.,Ltd.|
|KonkaEnterpriseManagement|GuizhouKonkaEnterpriseManagementServiceCo.,Ltd.|
|YibinKonkaIncubator|YibinKonkaIncubatorManagementCo.,Ltd.|
|Cross-BorderTechnologicalInnovation|ShenzhenKonkaCross-BorderTechnologicalInnovationServiceCo.,Ltd.|
|AnhuiKonka|AnhuiKonkaElectronicCo.,Ltd.|
|KangzhiTrade|AnhuiKangzhiTradeCo.,Ltd.|
|KonkaFactoring|KonkaFactoring(Shenzhen)Co.,Ltd.|
|YoushiKangrong|YoushiKangrongCultureCommunicationCo.,Ltd.|
|ChuzhouKonkaTID|ChuzhouKonkaTechnology&IndustryDevelopmentCo.,Ltd.|
|KonkaUnifortune|ShenzhenKonkaUnifortuneSupplyChainManagementCo.,Ltd.|
|JialiInternational|JialiInternational(HongKong)Limited|
|Wankaida|ShenzhenWankaidaScienceandTechnologyCo.,Ltd.|
|DongguanKonka|DongguanKonkaElectronicCo.,Ltd.|
|TelecommunicationTechnology|ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd.|
|KonkaElectricalAppliances|ShenzhenKonkaElectricalAppliancesCo.,Ltd.|
|MudanjiangAppliances|MudanjiangArcticOceanAppliancesCo.,Ltd.|
|KonkaEurope|Konka(Europe)Co.,Ltd.|
|CommercialSystemTechnology|ShenzhenKonkaCommercialSystemTechnologyCo.,Ltd.|
|KonkaElectricalAppliances|ShenzhenKonkaElectricalAppliancesCo.,Ltd.|

KonkaGroupCo.,Ltd. AnnualReport2018
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|KonkaMaterial|HainanKonkaMaterialTechnologyCo.,Ltd.|
|ShushidaLogistics|ShenzhenShushidaLogisticsServiceCo.,Ltd.|
|MobileInterconnection|ShenzhenKonkaMobileInterconnectionTechnologyCo.,Ltd.|
|SichuanKonka|SichuanKonkaSmartterminalTechnologyCo.,Ltd|
|AnhuiTongchuang|AnhuiKonkaTongchuangElectricalAppliancesCo.,Ltd.|
|AnhuiElectricalAppliance|AnhuiKonkaElectricalApplianceTechnologyCo.,Ltd.|
|FrestecRefrigeration|HenanFrestecRefrigerationApplianceCo.,Ltd.|
|FrestecElectricalAppliances|HenanFrestecElectricalAppliancesCo.,Ltd.|
|FrestecHouseholdAppliances|HenanFrestecHouseholdAppliancesCo.,Ltd.|
|KonkaPengrun|ShenzhenKonkaPengrunTechnology&IndustryCo.,Ltd.|
|JiaxinTechnology|JiaxinTechnologyCo.,Ltd.|
|E3info|E3info(Hainan)TechnologyCo.,Ltd.|
|YifangTechnology|ShenzhenKonkaYifangTechnologyCo.,Ltd.|
|DongguanPacking|DongguanKonkaPackingMaterialsCo.,Ltd.|
|E2info|ShenzhenE2infoNetworkTechnologyCo.,Ltd.|
|BeijingKonkaElectronic|BeijingKonkaElectronicCo.,Ltd.|
|KonkaLeasing|TianjinKonkaLeasingCo.,Ltd.|
|FittingsTechnology|ShenzhenKonkaElectronicFittingsTechnologyCo.,Ltd.|
|BoluoKonkaPrecision|BoluoKonkaPrecisionTechnologyCo.,Ltd.|
|XiamenDalong|XiamenDalongTradingCo.,Ltd.|
|BoluoKonka|BoluoKonkaPCBCo.,Ltd.|
|ChongqingQingjia|ChongqingQingjiaElectronicsCo.,Ltd.|
|KunshanKangsheng|KunshanKangshengInvestmentDevelopmentCo.,Ltd.|
|KaikaiShijie|AnhuiKaikaiShijieE-commerceCo.,Ltd.|
|HongKongKonka|HongKongKonkaCo.,Ltd.|
|KonkaElectricalAppliancesInvestment|KonkaElectricalAppliancesInvestment&DevelopmentCo.,Ltd.|
|ChainKingdom|ChainKingdomCo.,Limited|
|ChainKingdom(Shenzhen)|ChainKingdom(Shenzhen)Co.,Limited|
|PlasticProducts|ShenzhenKonkaPlasticProductsCo.,Ltd.|
|KonkaSmartTech|KonkaSmartTechLimited|
|Kangjietong|Kangjietong(HongKong)Limited|
|KonkaElectricalAppliancesInternationalTrading|KonkaElectricalAppliancesInternationalTradingCo.,Ltd.|
|KonkaInvestment|ShenzhenKonkaInvestmentHoldingCo.,Ltd.|
|YibinKonkaTechnologyPark|YibinKonkaTechnologyParkOperationCo.,Ltd.|
|IndustrialNewTown|SichuanKonkaIndustrialNewTownDevelopmentCo.,Ltd.|
|KonkaCapital|ShenzhenKonkaCapitalEquityInvestmentManagementCo.,Ltd.|

KonkaGroupCo.,Ltd. AnnualReport2018
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|KonkaSuiyong|KonkaSuiyongInvestment(Shenzhen)Co.,Ltd.|
|HainanTechnology|HainanKonkaTechnologyIndustryDevelopmentCo.,Ltd.|
|KangquanEnterprise|ShenzhenKangquanEnterpriseManagementConsultingCo.,Ltd.|
|ElectronicsTechnology|ShenzhenKonkaElectronicsTechnologyCo.,Ltd.|
|XingDaHongYe|GuangDongXingDaHongYeElectronicCo.,Ltd.|
|ShanghaiXinfeng|ShanghaiXinfengZhuoqunPCBCo.,Ltd.|
|ZhongshanZewei|ZhongshanZeweiKechuangInvestmentManagementCo.,Ltd.|
|NanjingKonka|NanjingKonkaSmartTechnologyCo.,Ltd.|
|AnhuiZhilian|AnhuiKonkaZhilianE-CommerceCo.,Ltd.|
|KonkaHuanjia|KonkaHuanjia(Dalian)EnvironmentalTechnologyCo.,Ltd.|
|ShanghaiKonka|ShanghaiKonkaIndustrialCo.,Ltd.|
|ChuzhouKangyong|ChuzhouKangyongHealthIndustryDevelopmentCo.,Ltd.|
|YantaiKonkaIndustrial|YantaiKonkaIndustrialCo.,Ltd.|
|YantaiKangjin|YantaiKangjinTechnologyDevelopmentCo.,Ltd.|
|ShandongKangxin|ShandongKangxinIndustrialDevelopmentCo.,Ltd.|
|EconTechnology|ShandongEconTechnologyCo.,Ltd.(inclusiveofitsconsolidatedsubsidiaries)|
|JiangxiKonka|JiangxiKonkaNewMaterialTechnologyCo.,Ltd.|
|XinfengMicrocrystalline|JiangxiXinfengMicrocrystallineJadeCo.,Ltd.|
|NanoCrystallizedGlass|JiangxiGoldenPhoenixNanoCrystallizedGlassCo.,Ltd.|
|ShenzhenKangxinwei|ShenzhenKangxinweiSemiconductorCo.,Ltd.|
|ShenzhenMeixin|ShenzhenMeixinSemiconductorTechnologyCo.,Ltd.|
|HefeiKangxinwei|HefeiKangxinweiStorageTechnologyCo.,Ltd.|
|ShenzhenNianhua|ShenzhenNianhuaEnterpriseManagementCo.,Ltd.|
|KonkaEco-Development|ShenzhenKonkaEco-DevelopmentInvestmentCo.,Ltd.|
|KonkaRonghe|KonkaRongheIndustrialTechnology(Foshan)Co.,Ltd.|
|SuiningKonkaIndustrialPark|SuiningKonkaIndustrialParkDevelopmentCo.,Ltd.|
|Kangjiatong|SichuanKangjiatongSupplyChainManagementCo.,Ltd.|
|KonkaSuyuan|ShenzhenKonkaSuyuanInvestmentIndustrialCo.,Ltd.|
|CSRC|TheChinaSecuritiesRegulatoryCommission|
|SZSE|TheShenzhenStockExchange|
|CSRCShenzhen|TheShenzhenBureauoftheChinaSecuritiesRegulatoryCommission|
|RMB,RMB’0,000,RMB’00,000,000|Expressed in the Chinese currency of Renminbi, expressed in tens ofthousandsofRenminbi,expressedinhundredsofmillionsofRenminbi|

KonkaGroupCo.,Ltd. AnnualReport2018 Part II Corporate Information and Key Financial Information I Corporate Information
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|Stockname|Konka Group-A, KonkaGroup-B|Stockcode|000016,200016|
|Changedstockname(ifany)|N/A|||
|Stockexchangeforstocklisting|ShenzhenStockExchange|||
|CompanynameinChinese|康佳集团股份有限公司|||
|Abbr.|康佳集团|||
|Company name in English (ifany)|KONKAGROUPCO.,LTD|||
|Abbr.(ifany)|KONKAGROUP|||
|Legalrepresentative|LiuFengxi|||
|Registeredaddress|15-24/F, Konka R&D Center, 28 Keji South Twelfth Road, Science and Technology Park,YuehaiStreet,NanshanDistrict,Shenzhen,GuangdongProvince,China|||
|Zipcode|518057|||
|Officeaddress|15-24/F, Konka R&D Center, 28 Keji South Twelfth Road, Science and Technology Park,YuehaiStreet,NanshanDistrict,Shenzhen,GuangdongProvince,China|||
|Zipcode|518057|||
|Companywebsite|www.konka.com|||
|Emailaddress|szkonka@konka.com|||

II Contact Information
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||BoardSecretary|SecuritiesRepresentative|
|Name|WuYongjun|MiaoLeiqiang|
|Address|Board Secretariat, 24/F, Konka R&D Center, 28 KejiSouth Twelfth Road, Science and Technology Park,Yuehai Street, Nanshan District, Shenzhen, GuangdongProvince,China|Board Secretariat, 24/F, Konka R&D Center, 28 KejiSouth Twelfth Road, Science and Technology Park,Yuehai Street, Nanshan District, Shenzhen, GuangdongProvince,China|
|Tel.|0755-26609138|0755-26609138|
|Fax|0755-26601139|0755-26601139|
|Emailaddress|szkonka@konka.com|szkonka@konka.com|

III Media forInformation Disclosureand Place where this Report Is Lodged
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|Newspapers designated by the Company forinformationdisclosure|SecuritiesTimes,etc.|

KonkaGroupCo.,Ltd. AnnualReport2018
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|WebsitedesignatedbyCSRCforpublicationofthisReport|http://www.cninfo.com.cn/new/index|
|PlacewherethisReportislodged|Board Secretariat, 24/F, Konka R&D Center, 28 Keji South Twelfth Road,Science and Technology Park, Yuehai Street, Nanshan District, Shenzhen,GuangdongProvince,China|

IVChangeto CompanyRegistered Information
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|Unifiedsocialcreditcode|914403006188155783|
|Change to principal activity of the Companysincegoingpublic(ifany)|SupplychainmanagementandenvironmentalprotectionoperationshavebeenaddedtotheprincipalactivitiesoftheCompany.|
|Every change of controlling shareholder sinceincorporation(ifany)|Nochange|

V OtherInformation
The independent auditfirm hired bytheCompany:
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|Name|RuihuaCertifiedPublicAccountants(LLP)|
|Officeaddress|9F,WestTower,ChinaOverseasPropertyPlaza,BuildingNo.7,CompoundNo.8,XibinheRoad,YongdingMen,DongchengDistrict,Beijing,P.R.C.|
|Accountantswritingsignatures|LiuJianhua,ShenLingzhi|

The independent sponsor hired by the Company to exercise constant supervision over the Company in theReporting Period:
□Applicable√ Not applicable
The independent financial advisor hired by the Company to exercise constant supervision over the Company in theReporting Period:
□Applicable√ Not applicable
VI Key Financial Information
Indicate bytick mark whether there isany retrospectively restated datum inthe tablebelow.
□Yes√No
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||2018|2017|2018-over-2017change(%)|2016|
|Operatingrevenue(RMB)|46,126,797,341.33|31,227,763,249.71|47.71%|20,299,348,136.21|
|Net profit attributable to the listedcompany’sshareholders(RMB)|411,289,744.68|5,057,025,155.71|-91.87%|95,673,028.03|

KonkaGroupCo.,Ltd. AnnualReport2018
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|Net profit attributable to the listedcompany’s shareholders beforeexceptionalitems(RMB)|-795,400,491.44|-97,284,945.83|-717.60%|-283,460,349.24|
|Net cash generated from/used inoperatingactivities(RMB)|-3,229,823,872.66|-4,314,257,622.47|25.14%|-972,135,787.43|
|Basic earnings per share(RMB/share)|0.1708|2.1001|-91.87%|0.0397|
|Diluted earnings per share(RMB/share)|0.1708|2.1001|-91.87%|0.0397|
|Weighted average return on equity(%)|5.11%|63.26%|-58.15%|3.35%|
||31December2018|31December2017|Changeof31December2018over31December2017(%)|31December2016|
|Totalassets(RMB)|32,985,061,889.03|23,558,735,469.78|40.01%|17,243,119,597.97|
|Equity attributable to the listedcompany’sshareholders(RMB)|8,104,736,790.53|7,994,145,476.61|1.38%|2,901,481,607.04|

VII Accounting Data Differences underChina’s Accounting Standards for Business Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign Accounting Standards
1.Net ProfitandEquity under CAS andIFRS
□Applicable√ Not applicable
No difference for theReporting Period.
2.Net ProfitandEquity under CAS andForeign Accounting Standards
□Applicable√ Not applicable
No difference for theReporting Period.
VIII KeyFinancialInformation byQuarter
Unit:RMB
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||Q1|Q2|Q3|Q4|
|Operatingrevenue|7,773,238,729.83|9,852,176,039.99|12,136,315,129.29|16,365,067,442.22|

KonkaGroupCo.,Ltd. AnnualReport2018
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|Net profit attributable to thelistedcompany’sshareholders|55,758,297.40|286,034,741.63|88,041,649.48|-18,544,943.83|
|Net profit attributable to thelisted company’s shareholdersbeforeexceptionalitems|-68,684,426.14|-232,186,186.66|-202,316,654.64|-292,213,224.00|
|Netcashgeneratedfrom/usedinoperatingactivities|-1,019,365,516.72|-818,793,189.14|-1,058,825,594.70|-332,839,572.10|

Indicate by tick mark whether any of the quarterly financial data in the table above or their summations differs materially from what have been disclosed in theCompany’s quarterly or interim reports.
□Yes√No
IXExceptional Gains andLosses
√Applicable□ Not applicable
Unit:RMB
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|Item|2018|2017|2016|Note|
|Gainorlossondisposalofnon-currentassets(inclusive of impairment allowancewrite-offs)|732,818,574.90|6,470,215,253.82|242,932,907.65||
|Government subsidies charged to currentprofit or loss (exclusive of governmentsubsidies given in the Company’s ordinarycourseofbusinessatfixedquotasoramountsasperthegovernment’suniformstandards)|259,609,022.27|178,372,701.34|113,350,808.96||
|Gain equal to the amount by whichinvestment costs for the Company to obtainsubsidiaries, associates andjoint venturesarelower than the Company’s enjoyable fairvalue of identifiable net assets of investeeswhenmakinginvestments|220,045,229.63||||
|Gain or loss on assets entrusted to otherentitiesforinvestmentormanagement|182,022,653.32|70,070,846.08|70,849,063.30||
|Gain or loss on fair-value changes in tradingfinancial assets and liabilities & investmentincome from disposal of trading financialassets and liabilities and available-for-salefinancialassets(exclusiveofeffectiveportionof hedges that arise in the Company’sordinarycourseofbusiness)|39,542,461.74|-63,931,276.14|17,953,552.28||

KonkaGroupCo.,Ltd. AnnualReport2018
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|Gainorlossonloanentrustments|1,389,042.48|808,737.50|707,777.79||
|Non-operating income and expense otherthantheabove|73,907,331.00|41,449,367.77|22,934,301.50||
|Other gains and losses that meet thedefinitionofexceptionalgain/loss|17,974,523.98|87,640,651.87|168,175.52||
|Less:Incometaxeffects|253,497,204.45|1,603,618,658.08|78,609,375.35||
|Non-controllinginterestseffects(netoftax)|67,121,398.75|26,697,522.62|11,153,834.38||
|Total|1,206,690,236.12|5,154,310,101.54|379,133,377.27|--|

 Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities tothePublic—Exceptional Gain/Loss Items:
√Applicable□ Not applicable
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|Item|Amountinvolved(RMB)|Reason|
|Taxrebatesonsoftware|64,656,609.96|GovernmentsubsidiesgivenintheCompany’sordinarycourseofbusinessatfixedquotasoramountsaspergovernment’suniformstandards|

KonkaGroupCo.,Ltd. AnnualReport2018 Part III Business Summary
I Principal Activity oftheCompany inthe Reporting Period
Is theCompanysubject to any industry-specific disclosurerequirements?
No.
Currently, the Company consists of three major business divisions, namely, the consumer electronic division, the supply chain management division and the environmental protection division, which are detailed as follows:
(I)The ConsumerElectronic Division
This division primarily comprises the multimedia sub-division, the white goods sub-division and the mobilephone sub-division,with details as follows:
1.The MultimediaSub-Division
The Company provides multimedia products and services, including colour TVs and Internet TV services, for both domesticand overseas markets.
The domestic sales of theCompany’s colour TVs are realized mainly through B2B (Business-to-Business) and B2C (Business-to-Consumer), with its branch companies, business departments and after-sales maintenance points operating across the country. And the Company profits from themargins between thecosts and theselling prices of itscolourTVs.
As for selling its colour TVs abroad, the Company mainly relies on B2B. Its colour TVs are sold to Asia Pacific, Middle East, Central& South America, East Europe, etc. And operating profit source is also thedifferences between thecosts and theselling prices ofits colourTVs.
The Company offers Internet TV services based on the smart TVs it has sold to end users. Firstly, it works with other Internet companies to provide end users with, among other content, video, educational, music, medical and game content to generate earnings. Secondly, it analyses user behaviours and offer certain free, interactive services to increase attractiveness to users, promote its brand and stimulate desire for its hardware products. Finally, it is trying to build an Internet TV platform with tens of millions of users, on which it will profit through commercial and application distribution.This Internet TVbusiness is key to theCompany’s Internet-oriented transformation and upgrade to a development modelof“hardware+ software” and“smartTV+ end users”.
2.TheWhiteGoods Sub-Division
The white goods produced by the Company mainly include refrigerators, washing machines, air conditioners, freezers, etc., which are sold through B2B and B2C mainly to the domestic market. And the Company profits from the margins between the costs and the selling prices of its white goods.
KonkaGroupCo.,Ltd. AnnualReport2018 3.The MobilePhoneSub-Division
The mobile phones of the Company are sold to both the domestic and overseas markets. The overseas sales mainly rely on B2B and the profit comes from the margins between the costs and the selling prices of the mobile phones. As for the domestic sales of its mobile phones, the Company relies on B2B and B2C, and profits mainly from the costs and the selling prices of its products and slightly from therelated valueadded services.
(II) TheSupplyChain Management Division
In this business, relying on the advantages of the raw material procurement channels, distribution systems and terminal networks of its consumer electronic business, the Company helps upstream and downstream enterprises of the supply chain solve channel problems caused by asymmetric information and improve efficiency. At present, this business runs on two models. In the procurement and distribution supply chain model, the Company benefits from purchasing IC chips, LCD screens, etc. from upstream suppliers and selling them to downstream customers through the supply chain of its traditional core business. Supply chain services are another model. Capitalizing on its years of experience in product quality control, outsourcing partner assessment and international trade, the Company is able to help improve theclient’s supply chain in efficiency and cost through the provision of services including product quality control, warehousing and logistics, customs clearance of imports and exports, documentation, tax handling, outsourcing partner selection, etc. Profit comes from service charges. Additionally, the supply chain management business can help the Company establish good relationships with its upstream suppliers and downstream customers, and keep it informed of prices of the materials used in its production for better cost control over itsexisting products.
(III)TheEnvironmental Protection Division
Currently, this business focuses on water treatment, recycling of renewable resources and the new material of glass ceramic. Water engineering PPP (Public-Private Partnership) projects are undertaken under BOT (Build-Operate-Transfer) or EPC (Energy Performance Contracting) models. Renewable resources are collected, sorted, processed, distributed and sold. And glass ceramic products are developed, produced and marketed.
II SignificantChanges inMajor Assets
1.SignificantChanges in Major Assets
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|Majorassets|Mainreasonforsignificantchanges|
|Equityassets|EquityinvestmentsattheendoftheReportingPeriodrose99.83%comparedtothebeginningamount,primarilydrivenbytheshiftofAnhuiKaikaiShijieE-commerceCo.,Ltd.andKunshanKangshengInvestmentDevelopmentCo.,Ltd.fromconsolidatedsubsidiariestolong-termequityinvestmentsmeasuredattheequitymethod,aswellas|

KonkaGroupCo.,Ltd. AnnualReport2018
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||bynewequityinvestmentsinassociates.|
|Fixedassets|FixedassetsattheendoftheReportingPeriodrose51.86%comparedtothebeginningamount,primarilydrivenbythefixedassetsofthenewlyacquiredsubsidiaries.|
|Intangibleassets|IntangibleassetsattheendoftheReportingPeriodrose259.79%comparedtothebeginningamount,primarilydrivenbytheconsolidatedintangibleassets(landuserights,franchiserights,etc.,attheircarryingamounts)ofacquireesShandongEconTechnologyCo.,Ltd.,GuangDongXingDaHongYeElectronicCo.,Ltd.andJiangxiKonkaNewMaterialTechnologyCo.,Ltd.(formerlyknownas“JiujiangGoldenPhoenixDecorationMaterialCo.,Ltd.”)intheCurrentPeriod.|
|Constructioninprogress|ConstructioninprogressattheendoftheReportingPeriodrose1502.25%comparedtothebeginningamount,primarilydrivenbytheconstructioninprogressofthenewlyacquiredsubsidiaries.|
|Goodwill|GoodwillattheendoftheReportingPeriodrose23,684.69%comparedtothebeginningamount,primarilydrivenbytheCompany’sacquisitionsofa51%interestinShandongEconTechnologyCo.,Ltd.,GuangDongXingDaHongYeElectronicCo.,Ltd.andJiangxiKonkaNewMaterialTechnologyCo.,Ltd.intheCurrentPeriod.|

2.Major Assets Overseas
□Applicable√ Not applicable
III Core Competitiveness Analysis
Is theCompanysubject to any industry-specific disclosurerequirements?
No.
TheCompany’s core competitiveness lies in itsR&D ability, brand, marketing network and human resources. It has developed a three-levelR&D system of “Konka Research Institute-MultimediaR&D Centre-specialized design institutes”, with close to 100 core technologies and approximately 2,000R&D personnel. It also boasts a strong brand presence among consumers, as well as among banks and other financing channels. Additionally, its domestic marketing and service network, including 67 branch companies, over 200 offices and about 3,300 after-sales service stations across the country, directly connect to around 3,000 retail terminals, along with a well-established overseas marketing network. Meanwhile, it has high-level personnel with years of rich management and industry experience, as well as ahigh-quality team withstrong execution capabilities.
KonkaGroupCo.,Ltd. AnnualReport2018 Part IV Operating Performance Discussion and Analysis
I Overview
(I) Key Operating Results ofthe Reporting Period
For 2018, the Company recorded operating revenue of RMB46.127 billion,up47.71% year-on-year. Net profit attributable to the listedcompany’s shareholders stood at RMB0.411 billion, representing a year-on-year drop, as there was no such income during the Reporting Period as the large-amount exceptional gain from the transfer of a70% interest in Shenzhen Kangqiao Jiacheng Property Investment Co., Ltd. in 2017. Excluding the gain from the transfer of the70% interest in Shenzhen Kangqiao Jiacheng Property Investment Co., Ltd., net profit attributable to the listedcompany’s shareholders in 2018 rose22.56% as compared to 2017. What the Company has accomplished in 2018is summarized as follows:
1. Formulated and promoted the new development strategy oriented by transformation and upgrading
In 2018, the Company formulated and promoted the implementation of the new development strategy oriented by transformation and upgrading, defined the core positioning of a platform company driven by scientific and technological innovation and persisted in the development orientation of “Technology+ Industry+ Park” and the development mode of “Hardware+ Software”, “Terminals+ Users” and “Technology+ Holding”. With reform, transformation and upgrading as its strategies, the Company strove to establish four major business groups, including Industrial Product Business Group, Technology Park Business Group, Platform Service Business Group and Investment and Finance Business Group. So far, the Company has gradually realized the implementation ofthetransformation andupgrading strategy.
2.Further promoted themixed-ownership reform
In 2018, the Company promoted the mode of mixed-ownership reform in its four major business groups. The reform was carried out on 17 subsidiaries at all levels throughout the year. In particular, Shenzhen E2info Network Technology Co., Ltd., a holding subsidiary of the Company engaged in the business of Internet user operations, introduced Alibaba (China) Technology Co., Ltd. (holding3.3898% of the shares). According to the agreement, Alibaba would increase its shareholding of E2info through capital increase, with the ultimate shareholding proportion restricted within5%; Anhui Kaikai Shijie E-commerce Co., Ltd., a former holding subsidiary engaged in the operations of KKTV color TV set business has introduced Guangdong South Aishi Entertainment Technology Co., Ltd. (holding10% of the shares) and Alibaba (China) Technology Co., Ltd. (holding3.3898%
KonkaGroupCo.,Ltd. AnnualReport2018 of the shares), which is good for promoting the strategic upgrading and rapid development of theCompany’s Internet business. In addition, the Company diverted its multimedia business such as color TV set to Shenzhen Konka Electronics Technology Co., Ltd. to facilitate the operations of such business by an independent company, laying a foundation for introducing external resources for related businesses and implementing themixed-ownership reform.
3.Carried out industriallayout and theimplementation ofnew businesses
In 2018, the Company formed an industrial layout consisting four major business groups step by step, including Industrial Product Business Group, Technology Park Business Group, Platform Service Business Group and Investment and Finance Business Group, and made great efforts in driving the expansion and implementation of new businesses: First, the Company acquired51% of the equity of Econ Technology, a company engaged in comprehensive water management and was consecutively awarded with a series of comprehensive water management projects. Furthermore, the renewable resource treatment business saw a rapid development. Second, the Company acquired51% of the equity of Jiangxi Konka New Material Technology Co., Ltd., a national hi-tech enterprise engaged in the production of glass ceramic material. Third, the Company completed the overall design and strategic planning for semiconductor business, defined the product orientation for thebusiness and introduced relevant technologies and management teams.
4.Accomplished theimplementationofmultiple technology parks
Technology park business is an important carrier of the development mode of “Technology+ Industry+ Park”. In 2018, the Company made efforts and established the following three business segments by integrating internal and external resources, i.e. headquarters economy, technology parks and logistics parks: Headquarters economy was implemented in Jiangbei New District (Nanjing), the Economic Development Zone (Chuzhou) and Guangming New District (Shenzhen); technology parks were constructed in Suining,Yibin and Chuzhou respectively; logistics parks were implemented in Kunshan (Jiangsu) and other cities, laying a solid foundation for the next step of business development.
5.Acquired Frestecto expand whitegoods business
In June2018, the Company acquired100% ofthe equity ofHenan Frestec ElectricalAppliances Co., Ltd., Henan Frestec Refrigeration Appliance Co., Ltd. and Henan Frestec Household Appliances Co., Ltd. at RMB 455 million yuan through Anhui Konka Electrical Appliance Technology Co., Ltd., and restored the production of Frestec within two months. The acquisition will help the Company to rapidly expand the industrial scale in the field of white goods, form a framework of synergistic development of “Konka+ Frestec” and make theCompany’s white goods business bigger and stronger.
6.IncreasedR&D investment and promoted technological innovation
While promoting mechanism and system reforms, the Company continued to increase investment in
KonkaGroupCo.,Ltd. AnnualReport2018R&D and technological innovation, which has produced positive results. The Company has recently received the National Grade II Prize of Science and Technology Progress for the project of Digital TV Broadcast System and Domestic Production of Core Chips. Additionally, it successfully developed the “8K decode chip” with proprietary intellectual property rights and launched a series of industrial leading products such as OLEDTV,AI face recognitionTV, semiconductor displayTV, wallpaper TV and “K-Fresh” fridges. Meanwhile, the Company was proactively planning the new smart household model. It built a system based on “cloud to cloud interconnection” jointly with third-party platforms including China Mobile and Amazon with a continuous extension from intelligent products to smart household scenarios.
(II) Business Highlightsfor2018
1.Multimediabusiness
In 2018, the Company further optimized the structure of its color TV business, with a year-on-year increase of33% in the sales volume of overseas business. Second, the Company proactively promoted the mechanism reform in colorTV business, such as the independent corporate operations of color TV, channel model reforms and ownership reforms for sales branches. Finally, the Company kept reinforcing innovation-driven for color TV business, increasedR&D investment to further enhance the technological innovation level and took the lead in launching 8K decode chips with proprietary intellectual property rights as well as remote voiceand face recognition.
2.White goods business
In 2018, the scale of white goods business (including Frestec) achieved a growth of22.46%, especially e-commerce business, which increased by33% from the previous year; in addition, the Company acquired Frestec Electrical Appliances and quickly completed reorganization, which enabled the dual-brand operations of “Konka+ Frestec” and synergy of multiple categories and played a significant role in driving the rapid expansion of theCompany’s industrial scale in the field ofwhite goods and enhancing theprofitability and market competitiveness of whitegoods business. 3.Environmental protection business
In terms of comprehensive water management, in 2018, the Company was awarded with a total of eight environmental protection projects in Donggang (Liaoning), Weifang (Shandong) and Laizhou (Shandong) and the amount of awarded contracts reached nearly RMB 8 billion yuan; in respect of renewable resources, the Company made plans for the recycling and processing for reuse of waste paper, scrap metal and waste plastics; in terms of new materials, the Company established strategies in thenew material of glass ceramic.
4.Semiconductor business
In 2018, the Company completed the overall design and strategic planning for semiconductor business, defined the product orientation for the business and introduced relevant technologies and management teams.
KonkaGroupCo.,Ltd. AnnualReport2018 5.MobileInternet business
In 2018, in terms of mobile Internet business, the Company completed relocation of the integrated business to Yibin, Sichuan, and started the exploration and transformation from mobile phone manufacturer toaprovider of integrated solutionsof intelligent terminals.
6.Technology park business
In 2018, the Company vigorously developed the technology park business with industrial development at its core and park development as the carrier by means of equity investment. It implemented a number of projects, including Phase I& II of the Konka Chuzhou Technological Innovation Centre, Yibin Konka Smart Terminals Industrial Park, Chuzhou Konka Smart Appliances and Equipment Industrial Park, Nanjing K-Star Cloud Network Headquarters and Suining Konka Electronic Technology Industrial Park to support the transformation and upgrading oftheCompany’sdevelopment mode.
7.Supply chain management business
In 2018, the Company achieved a year-on-year increase of107.65% in the operating revenue from supply chain management business. Furthermore, it was selected on the list of “National Supply Chain Innovation and Application Pilot Enterprises” through continuous upgrading of business model and enhancement ofrisk control.
8.Internet business
In respect of Internet business, in 2018, the Company introduced Alibaba (China) Technology Co., Ltd. as a strategic investor, with the total number of users reaching 36 million. With a considerable increase in user value and profitability, the Company experienced stable growth in profits and marked improvement inoperating qualitywhile achieving asubstantial increase in revenue.
9.Investment business
In 2018, the Company invested in Econ Technology and Jiangxi Konka New Material Technology Co., Ltd., accomplishing the layout in the new businesses of environmental protection, semiconductors and new materials and promotingtherapid development of theCompany.
10.Venture capital business
In 2018, the Company accomplished global layout for its venture capital business. In respect of domestic market, the Company set up eight incubators in seven cities such as Shenzhen, Yantai, Chengdu and Yibin. In terms of overseas market, the Company established six incubators in six cities such as Silicon Valley, Chicago, London and Helsinki. The newly formed incubation network covering the globe has powerfully enhanced theCompany’s influence in science and technology innovation field.
KonkaGroupCo.,Ltd. AnnualReport2018 II Core Business Analysis
(I) Overview
See “IOverview”above.
(II) Revenueand CostAnalysis
1.Breakdown ofOperating Revenue
Unit:RMB
|||||||
|-|-|-|-|-|-|
||2018||2017||Change(%)|
||Operatingrevenue|As%oftotaloperatingrevenue(%)|Operatingrevenue|As%oftotaloperatingrevenue(%)||
|Total|46,126,797,341.33|100%|31,227,763,249.71|100%|47.71%|
|Byoperatingdivision||||||
|Electronics|13,170,227,703.47|28.55%|16,148,586,075.45|51.71%|-18.44%|
|Supplychainmanagement|28,348,817,442.89|61.46%|13,652,512,654.75|43.72%|107.65%|
|Environmentalprotection|3,020,514,260.13|6.55%|0.00|0.00%||
|Other|1,587,237,934.84|3.44%|1,426,664,519.51|4.57%|11.26%|
|Byproductcategory||||||
|ColourTVs|9,892,486,636.93|21.45%|11,994,950,476.66|38.41%|-17.53%|
|Mobilephones|331,298,592.29|0.72%|918,711,012.38|2.94%|-63.94%|
|Whitegoods|2,127,731,143.29|4.61%|1,737,464,511.08|5.56%|22.46%|
|Supplychainmanagement|28,348,817,442.89|61.46%|13,652,512,654.75|43.72%|107.65%|
|Environmentalprotection|3,020,514,260.13|6.55%|0.00|0.00%||
|Other|2,405,949,265.80|5.22%|2,924,124,594.84|9.36%|-17.72%|
|Byoperatingsegment||||||
|Domestic|16,868,143,462.93|36.57%|16,031,740,206.40|51.34%|5.22%|
|Overseas|29,258,653,878.40|63.43%|15,196,023,043.31|48.66%|92.54%|

 2. Operating Division, Product Category or Operating Segment Contributing over10% of
Operating Revenue orOperating Profit
√Applicable□ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2018 Is theCompanysubject to any industry-specific disclosurerequirements?
No.
Unit:RMB
||||||||
|-|-|-|-|-|-|-|
||Operatingrevenue|Costofsales|Grossprofitmargin|YoYchangeinoperatingrevenue(%)|YoYchangeincostofsales(%)|YoYchangeingrossprofitmargin(%)|
|Byoperatingdivision|||||||
|Electronics|13,170,227,703.47|11,258,550,192.17|14.52%|-18.44%|-14.34%|-4.10%|
|Supplychainmanagement|28,348,817,442.89|28,068,819,224.05|0.99%|107.65%|107.90%|-0.12%|
|Byproductcategory|||||||
|ColourTVs|9,892,486,636.93|8,689,731,404.20|12.16%|-17.53%|-13.64%|-3.95%|
|Supplychainmanagement|28,348,817,442.89|28,068,819,224.05|0.99%|107.65%|107.90%|-0.12%|
|Byoperatingsegment|||||||
|Domestic|16,868,143,462.93|14,643,866,818.13|13.19%|5.22%|7.12%|-1.54%|
|Overseas|29,258,653,878.40|28,583,747,096.32|2.31%|92.54%|102.46%|-4.79%|

 Core business data of the prior year restated according to the changed statistical caliber for the Reporting Period:
□Applicable√ Not applicable
3.Whether Revenue fromPhysical Sales IsHigherthan Service Revenue
√Yes□No
|||||||
|-|-|-|-|-|-|
|Operatingdivision|Item|Unit|2018|2017|Change(%)|
|Electronics|Unitsales|0,000units|1,232|1,291|-4.57%|
||Output|0,000units|1,063|1,091|-2.57%|
||Inventory|0,000units|129|135|-4.44%|

 Anyover30%YoYmovements in thedata above andwhy:
□Applicable√ Not applicable
4.Execution Progress ofMajor Signed SalesContracts in theReporting Period
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2018 5.Breakdown ofCost ofSales
By product category
Unit:RMB
||||||||
|-|-|-|-|-|-|-|
|Productcategory|Item|2018||2017||Change(%)|
|||Costofsales|As%oftotalcostofsales(%)|Costofsales|As%oftotalcostofsales(%)||
|ColorTVs|ColorTVs|8,689,731,404.20|20.10%|10,062,760,446.56|36.21%|-13.64%|
|Mobilephones|Mobilephones|327,425,343.91|0.76%|827,228,372.16|2.98%|-60.42%|
|Whitegoods|Whitegoods|1,767,282,597.98|4.09%|1,404,308,959.94|5.05%|25.85%|
|Supplychainservices|Supplychainservices|28,068,819,224.05|64.93%|13,501,073,391.55|48.58%|107.90%|
|Environmentalprotection|Environmentalprotection|2,634,491,782.63|6.09%|0.00|0.00%||
|Other|Other|1,739,863,561.68|4.02%|1,993,614,109.59|7.17%|-12.73%|

 Note:
N/A
6.Changes inthe ScopeofConsolidated FinancialStatements fortheReporting Period√Yes□No
||||||
|-|-|-|-|-|
|Companyname|Registeredcapital(RMB’0,000)|TheCompany’sinterest(%)|Dateofchange|Reasonforchange|
|EconTechnology(anditssubsidiaries)|16,400.00|51.00|2018-5-4|Addedtotheconsolidatedfinancialstatementsduetoacquisition|
|HenanFrestecRefrigerationApplianceCo.,Ltd.|12,305.11|51.00|2018-8-3||
|HenanFrestecHouseholdAppliancesCo.,Ltd.|9,900.00|51.00|2018-8-3||
|HenanFrestecElectricalAppliancesCo.,Ltd.|66,863.77|51.00|2018-8-3||
|GuangDongXingDaHongYeElectronicCo.,Ltd.(inclusiveofitssubsidiaries)|8,889.00|51.00|2018-6-29||
|JiangxiKonkaNewMaterialTechnologyCo.,Ltd.(inclusiveofitssubsidiaries)|27,272.7273|51.00|2018-8-16||
|ChengduKonkaIncubatorManagementCo.,Ltd.|500.00|51.00|2018-2-5|Addedtotheconsolidatedfinancialstatementsdueto|
|ChengduAnrenKonkaCulturalandCreativeIncubatorManagementCo.,Ltd.|500.00|51.00|2018-8-16||
|GuiyangKonkaEnterpriseServiceCo.,Ltd.|500.00|51.00|2018-9-5||

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|NanjingChuanghuiSmartTechnologyCo.,Ltd.|100.00|40.80|2018-7-26|
|GuizhouKonkaEnterpriseManagementServiceCo.,Ltd.|500.00|51.00|2018-11-8|
|YibinKonkaIncubatorManagementCo.,Ltd.|2,000.00|51.00|2018-10-18|
|ShenzhenKonkaCross-BorderTechnologicalInnovationServiceCo.,Ltd.|100.00|26.01|2018-11-21|
|JialiInternational(HongKong)Limited|HKD500.00|51.00|2018-2-2|
|SichuanKonkaSmartterminalTechnologyCo.,Ltd|10,000.00|51.00|2018-1-15|
|AnhuiKonkaElectricalApplianceTechnologyCo.,Ltd.|10,000.00|51.00|2018-6-12|
|JiaxinTechnologyCo.,Ltd.|HKD1,000.00|51.00|2018-1-25|
|ShenzhenKonkaYifangTechnologyCo.,Ltd.|1,000.00|60.00|2018-12-3|
|Kangjietong(HongKong)Limited|HKD100.00|51.00|2018-1-9|
|YibinKonkaTechnologyParkOperationCo.,Ltd.|10,000.00|100.00|2018-1-15|
|SichuanKonkaIndustrialNewTownDevelopmentCo.,Ltd.|10,000.00|51.00|2018-3-7|
|KonkaSuiyongInvestment(Shenzhen)Co.,Ltd.|5,000.00|51.00|2018-5-11|
|HainanKonkaTechnologyIndustryDevelopmentCo.,Ltd.|10,000.00|51.00|2018-8-9|
|ShenzhenKangquanEnterpriseManagementConsultingCo.,Ltd.|1,000.00|51.00|2018-6-26|
|ShenzhenKonkaElectronicsTechnologyCo.,Ltd.|100,000.00|100.00|2018-1-16|
|NanjingKonkaSmartTechnologyCo.,Ltd.|5,000.00|100.00|2018-12-28|
|AnhuiKonkaZhilianE-CommerceCo.,Ltd.|5,000.00|100.00|2018-9-20|
|KonkaHuanjia(Dalian)EnvironmentalTechnologyCo.,Ltd.|18,000.00|51.00|2018-6-6|
|ShanghaiKonkaIndustrialCo.,Ltd.|10,000.00|100.00|2018-4-11|
|ChuzhouKangyongHealthIndustryDevelopmentCo.,Ltd.|5,000.00|100.00|2018-7-18|
|YantaiKonkaIndustrialCo.,Ltd.|10,000.00|89.71|2018-9-5|
|YantaiKangjinTechnologyDevelopmentCo.,Ltd.|10,000.00|62.80|2018-9-7|
|ShandongKangxinIndustrialDevelopmentCo.,Ltd.|10,000.00|51.00|2018-12-7|
|ShenzhenKangxinweiSemiconductorCo.,Ltd.|10,000.00|100.00|2018-10-19|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|ShenzhenMeixinSemiconductorTechnologyCo.,Ltd.|1,000.00|51.00|2018-10-31||
|HefeiKangxinweiStorageTechnologyCo.,Ltd.|5,000.00|51.00|2018-11-7||
|ShenzhenNianhuaEnterpriseManagementCo.,Ltd.|3,000.00|100.00|2018-8-22||
|ShenzhenKonkaEco-DevelopmentInvestmentCo.,Ltd.|500.00|51.00|2018-12-27||
|KonkaRongheIndustrialTechnology(Foshan)Co.,Ltd.|5,000.00|51.00|2018-12-26||
|SuiningKonkaIndustrialParkDevelopmentCo.,Ltd.|20,000.00|100.00|2018-12-26||
|SichuanKangjiatongSupplyChainManagementCo.,Ltd.|3,000.00|51.00|2018-3-26||
|ShenzhenKonkaSuyuanInvestmentIndustrialCo.,Ltd.|1,000.00|51.00|2018-2-5||
|AnhuiKaikaiShijieE-commerceCo.,Ltd.|3,137.2549|46.00|2018-6-28|Excludedfromtheconsolidatedfinancialstatementsduetoequitytransfer|
|Kunshan Kangsheng Investment DevelopmentCo.,Ltd.|35,000.00|49.00|2018-06-25||
|ShenzhenKonkaSupplyChainManagementHoldingsCo.,Ltd.|1,000.00|100.00|2018-10-15|Excludedfromtheconsolidatedfinancialstatementsduetode-registration|
|ShenzhenKonkaPlasticProductsCo.,Ltd.|950.00|100.00|||
|ChongqingQingjiaElectronicsCo.,Ltd.|1,500.00|40.00|2018-10-25|AsRegentSkyHoldingsLimitedentrustedits20%votingrightinChongqingQingjiatoChongqingMachinery&ElectronicsHolding(Group)Co.,Ltd.formanagement,theCompanyceaseditscontroloverChongqingQingjiaandexcludeditfromtheCompany’sconsolidatedfinancialstatements.|

KonkaGroupCo.,Ltd. AnnualReport2018 7.Major Changes to theBusiness ScopeorProductor Service RangeintheReporting Period√Applicable□ Not applicable
In 2018, the Company entered the environmental protection industry through the acquisition of Shandong EconTechnology Co.,Ltd. and JiangxiKonka New MaterialTechnology Co., Ltd. 8.Major Customers and Suppliers
Major customers:
|||
|-|-|
|Totalsalestotopfivecustomers(RMB)|13,375,164,153.90|
|Totalsalestotopfivecustomersas%oftotalsalesoftheReportingPeriod(%)|29.00%|
|Total sales to related parties among top five customers as % of total sales of theReportingPeriod(%)|0.00%|

Topfive customers:
|||||
|-|-|-|-|
|No.|Customer|SalesrevenuecontributedfortheReportingPeriod(RMB)|As%oftotalsalesrevenue(%)|
|1|CustomerA|3,737,481,105.58|8.10%|
|2|CustomerB|3,595,163,483.38|7.79%|
|3|CustomerC|2,613,661,736.46|5.67%|
|4|CustomerD|1,785,310,036.98|3.87%|
|5|CustomerE|1,643,547,791.50|3.56%|
|Total|--|13,375,164,153.90|29.00%|

 Other information about majorcustomers:
√Applicable□ Not applicable
None of the top five customers were related parties of the Company. And none of theCompany’s directors, supervisors, executive officers, core technicians,over5% shareholders, actual controller orany otherrelated parties held equity interests inthemajorcustomers, directly or indirectly. Major suppliers:
|||
|-|-|
|Totalpurchasesfromtopfivesuppliers(RMB)|14,800,491,686.75|
|Total purchases from top five suppliers as % of total purchases of the ReportingPeriod(%)|33.46%|
|Totalpurchasesfromrelatedpartiesamongtopfivesuppliersas%oftotalpurchasesoftheReportingPeriod(%)|0.00%|

Information about top fivesuppliers:
|||||
|-|-|-|-|
|No.|Supplier|PurchaseintheReportingPeriod(RMB)|As%oftotalpurchases(%)|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|1|Supplier1|4,859,389,472.98|10.99%|
|2|Supplier2|4,697,048,055.43|10.62%|
|3|Supplier3|2,246,973,758.27|5.08%|
|4|Supplier4|1,642,707,211.56|3.71%|
|5|Supplier5|1,354,373,188.51|3.06%|
|Total|--|14,800,491,686.75|33.46%|

 Other information about majorsuppliers:
√Applicable□ Not applicable
None of the top five customers were related parties of the Company. And none of theCompany’s directors, supervisors, executive officers, core technicians, over5% shareholders, actual controller orany otherrelated parties held equity interests inthemajorcustomers, directly or indirectly. 3.Expense
Unit:RMB
||||||
|-|-|-|-|-|
||2018|2017|Change(%)|Reasonforanysignificantchange|
|Sellingexpense|2,282,174,241.64|2,141,993,558.11|6.54%||
|Administrativeexpense|641,892,996.18|448,036,697.96|43.27%|IncreaseinR&Dexpenseduetoincreaseinexpenseofsubsidiariesnewlymergedandincreaseinlaborcost|
|Financecosts|399,165,814.39|340,918,550.61|17.09%||
|R&Dexpense|396,460,145.24|329,676,982.50|20.26%|Increasing R&D investment|

4.R&D Expense
√Applicable□ Not applicable
In the Reporting Period, the Company continued to enhance theR&D input and tried to lay a solid foundation for it to carry out product differentiation through constantly developing new products, studying new techniques, altering the existing equipment and continuously enriching the product varieties and series. Meanwhile, it constantly carried out technical innovation and encouraged suggestions to increase its production efficiency and core competitiveness. In addition, the Company won the second prize of National Scientific and Technological Progress Award in the project of Localization of Digital TV& Broadcasting System and Core Chips the Company participated in recently.
Details aboutR&D expense:
|||||
|-|-|-|-|
||2018|2017|Change(%)|
|NumberofR&Dpersonnel|1,467|1,353|8.43%|
|R&D personnel as % of totalemployees|7.74%|7.59%|0.15%|
|R&Dexpense(RMB)|396,460,145.24|329,676,982.50|20.26%|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|R&D expense as % of operatingrevenue|0.86%|1.06%|-0.20%|
|CapitalizedR&Dexpense(RMB)|0.00|0.00|0.00%|
|Capitalized R&D expense as % oftotalR&Dexpense|0.00%|0.00%|0.00%|

Reasons for any significantYoYchange in thepercentageofR&D expensein operating revenue:□Applicable√ Not applicable
Reason forany sharp variation inthe percentageof capitalizedR&D expenseand rationale:
□Applicable√ Not applicable
5.Cash Flows
Unit:RMB
|||||
|-|-|-|-|
|Item|2018|2017|Change(%)|
|Subtotal of cash generated fromoperatingactivities|50,553,979,675.62|40,942,886,533.13|23.47%|
|Subtotal of cash used in operatingactivities|53,783,803,548.28|45,257,144,155.60|18.84%|
|Net cash generated from/used inoperatingactivities|-3,229,823,872.66|-4,314,257,622.47|25.14%|
|Subtotal of cash generated frominvestingactivities|2,900,532,752.51|9,053,115,239.75|-67.96%|
|Subtotal of cash used in investingactivities|5,152,413,759.55|4,323,599,750.38|19.17%|
|Net cash generated from/used ininvestingactivities|-2,251,881,007.04|4,729,515,489.37|-147.61%|
|Subtotal of cash generated fromfinancingactivities|15,345,431,150.38|10,526,601,766.42|45.78%|
|Subtotal of cash used in financingactivities|9,548,537,823.66|9,779,757,140.80|-2.36%|
|Net cash generated from/used infinancingactivities|5,796,893,326.72|746,844,625.62|676.18%|
|Net increase in cash and cashequivalents|336,249,777.96|1,076,996,758.62|-68.78%|

Explanation of why any of thedataabove varies significantly:
√Applicable□ Not applicable
The net cash generated from/used in investing activities was negative due to the subsidiaries newly merged such as Guangdong Xingda Hongye Electronics Co., Ltd. and joint-stock companies newly added such as Shenzhen RF-LINK PolytronTechnologies Inc. in theReporting Period.
The net cash generated from/used in financing activities increased due to the increase in borrowings
ofthe Company during theReporting Period.
Reason for any big difference between the net operating cash flow and the net profit for this
KonkaGroupCo.,Ltd. AnnualReport2018 Reporting Period
□Applicable√ Not applicable
III Analysisof Non-Core Businesses
√Applicable□ Not applicable
Unit:RMB
||||||
|-|-|-|-|-|
||Amount|As%oftotalprofit|Source/Reason|Exceptionalorrecurrent|
|Investmentincome|927,414,370.96|203.87%|TransferofsomeequityinKaikaiShijieandKunshanKangsheng|Exceptional|
|Gain/loss on changesinfairvalue|50,191,052.64|11.03%||Exceptional|
|Assetimpairments|226,869,220.67|49.87%||Exceptional|
|Non-operatingincome|328,696,140.09|72.26%||Taxrebatesofsoftwareisrecurrentandothersareuncertain|
|Non-operatingexpense|8,037,851.90|1.77%||Exceptional|

IVAnalysis ofAssets andLiabilities
1.SignificantChanges in AssetComposition
Unit:RMB
||||||||
|-|-|-|-|-|-|-|
||31December2018||31December2017||Changeinpercentage(%)|Reasonforanysignificantchange|
||Amount|As%oftotalassets|Amount|As%oftotalassets|||
|Monetarycapital|4,348,144,129.53|13.18%|3,212,044,851.08|13.63%|-0.45%||
|Accountsreceivable|4,458,053,586.42|13.52%|3,443,095,947.26|14.61%|-1.10%||
|Inventories|5,487,605,227.05|16.64%|4,690,363,565.53|19.91%|-3.27%||
|Investmentproperty|210,824,355.72|0.64%|216,455,629.99|0.92%|-0.28%||
|Long-termequityinvestments|2,637,780,825.53|8.00%|1,319,987,343.74|5.60%|2.39%||
|Fixedassets|2,410,226,495.81|7.31%|1,587,170,348.35|6.74%|0.57%||
|Construction inprogress|2,176,871,530.80|6.60%|135,863,821.01|0.58%|6.02%||
|Short-term|13,884,132,931.63|42.09%|6,927,472,037.35|29.41%|12.69%||

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|borrowings||||||
|Long-termborrowings|445,000,000.00|1.35%|167,000,000.00|0.71%|0.64%|

2.Assets andLiabilities atFair Value
√Applicable□ Not applicable
Unit:RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item|Beginningamount|Gain/lossonfair-valuechangesintheReportingPeriod|Cumulativefair-valuechangeschargedtoequity|ImpairmentallowancefortheReportingPeriod|PurchasedintheReportingPeriod|SoldintheReportingPeriod|Endingamount|
|Financialassets||||||||
|1. Financial assets atfair value throughprofit or loss(derivative financialassetsexcluded)|296,799.53|5,168,185.39|||||5,464,984.92|
|3. Available-for-salefinancialassets|58,162.76|||||58,162.76||
|Subtotal of financialassets|354,962.29|5,168,185.39||||58,162.76|5,464,984.92|
|Totaloftheabove|354,962.29||||||5,464,984.92|
|Financialliabilities|47,482,470.50|45,022,867.25|||||2,459,603.25|

 Significant changes to themeasurement attributes of themajorassets intheReporting Period:□Yes√No
3. Restricted Asset Rights asat thePeriod-End
||||
|-|-|-|
|Item|Endingcarryingvalue(RMB)|Reasonforrestriction|
|Monetarycapital|913,994,647.81|Among them, 45,1,609,200 yuan is all kinds of deposit that cannot be withdrawn atany time; 235 million yuan is a time deposit; RMB 20,10.352 billion isthe funds ofthe households under the supervision of repayment; 19.8 million yuan in depositspledged as loans; 4.3466 million yuan is the lawsuit frozen fund; 2,203,600 yuanrestrictedduetootherreasons.|
|Notesreceivable|1,321,454,860.01|As of December 31, 2018, the company has pledged the notes receivable with thebook value of RMB 132,1454,900 for issuing bank acceptancebills, letters of credit,lettersofguarantee,tradefinancingandothercomprehensivefinancingservices.|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Fixedassets|226,955,651.88|Formortgageborrowings.Referto20.Short-termBorrowingsinNoteVI|
|Intangibleassets|57,207,934.40|For mortgage borrowings. Refer to 20. Short-term Borrowings and 28. Long-termBorrowingsinNoteVI|
|Long-termreceivables|349,416,483.56|Note to the financial statements for 2018: "28 long-term loans" in "notes toconsolidatedfinancialstatements"|
|Total|2,869,029,577.66||

V Investments Made
1.Total Investment Amount
√Applicable□ Not applicable
||||
|-|-|-|
|AmountofReportingPeriod(RMB)|Amountofthesameperiodoflastyear(RMB)|Change(%)|
|2,430,495,935.00|1,185,098,584.39|105.09%|

 2.Major Equity Investments Made intheReporting Period
√Applicable□ Not applicable
Unit:RMB
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Investee|Mainbusiness|Investmentmethod|Investmentamount|Shareholdingpercentage|Capitalresources|Partner|Investmentterm|Typeofproducts|Progressasofthebalancesheetdate|Estimatedincome|ProfitsorlossesofinvestmentintheReportingPeriod|Involvinginlawsuitornot|Disclosuredate(ifany)|Disclosureindex(ifany)|
|ChuzhouHuikeIntelligentHouseholdApplianceIndustrialInvestmentPartners|Creditsinvestment|Acquisition|1,000,000,000.00|13..33%|Self-ownedfunds|First ThaiJinxin(Changxing)InvestmentManagement Co.,Ltd.,ChuzhouTongchuangConstructi|Sevenyears|Credits|Completeregistrationchangingprocedures|-|-|Not|25December2018|http://http://www.cninfo.com.cn/new/index/new/index|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|hip(LimitedPartnership)||||||onInvestment Co., Ltd.andGuoYuanSecuritiesCo.,Ltd|||||||||
|OrientalKonkaNo.1(Zhuhai)PrivateEquityInvestmentFund(LimitedPartnership)|Equityinvestment|Newlyestablished|1,001,000,000.00|49.95%|Self-ownedfunds|ShenzhenQianhaiOrientalVentureCapitalHoldingCo.,Ltd.,andOrientalHuijia(Zhuhai)AssetManagementCo.,Ltd.|Fiveyears|Equityinvestment|ThefundhasbeensetupandhasinvestedJiangxiYahuaElectronicMaterialsCo.,Ltd.for11.95%equityandGenewTechnologiesCo.Ltd.for2.07%equityaswellasRoshowScienceandTechnologyCo.,Ltd.for5%equity|-|-|Not|18April2018||
|Total|--|--|2,001,000,000.00|--|--|--|--|--|--|-|-|--|--|--|

3.Major Non-Equity Investments Ongoing inthe Reporting Period
√Applicable□ Not applicable
Unit: RMB
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|Investmentmethod|Fixedassetsinvestmentornot|Industryinvolved|InputamountintheReportingPeriod|Accumulativeactualinputamountasoftheperiod-end|Capitalresources|Progress|Estimatedrevenues|Accumulativerealizedrevenuesasoftheperiod-end|reasonfornotmeetingthescheduleandexpectedrevenues|Disclosuredate(ifany)|Disclosureindex(ifany)|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|KonkaTechnologicalInnovationCenter|Self-build|Yes|Electronicindustry|9,169,900|88,482,900|Self-ownedfunds|7.79%|/|30,000,000|N/A|30December2016|http://http://www.cninfo.com.cn/new/index/new/index）|
|NewplantinDongguancity|Self-build|Yes|Electronicindustry|0|0|Self-ownedfunds|0|/|0|N/A|11March2017||
|YibinKonkaSmartTerminalHigh-TechPark|Self-build|Yes|Electronicindustry|19,250,000|19,250,000|Self-ownedfunds|5.20%|/|0|N/A|22May2018||
|ChengduBeltandRoadHeadquarters|Self-build|Yes|Electronicindustry|0|0|Self-ownedfunds|0|/|0|N/A|27June2018||
|SuiningKonkaElectronictechnologyIndustrialPark|Self-build|Yes|Electronicindustry|0|0|Self-ownedfunds|0|/|0|N/A|17October2018||
|Konka(Chuzhou)SmartAppliancesandEquipmentIndustrialPark|Self-build|Yes|Electronicindustry|76,222,400|76,222,400|Self-ownedfunds|6.76%|/|0|N/A|25December2018||
|Total|--|--|--|104,64|183,95|--|--||0|--|--|--|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|2,300|5,300|

Notes: (1) In regard to the Konka Technological Innovation Centre, the land use right transfer agreement has been signed, theproject isunder planning and bidding.
(2) Concerning the Dongguancity’s new plant, preparations are underway and the Company is waiting for thelocal government to put outtheproject target land for bids.
(3) With respect to the smart terminal high-tech park, the land use right transfer agreement has been signed and thegeneral plan is underway.
(4)As for the Chengdu Belt and Road Headquarters, preparations are underway and the Company is waiting for thelocal government to put outtheproject target land for bids.
(5)As for Suining Konka Electronic technology Industrial Park, a project company has been set up and theCompany is waitingfor thelocal government toput outtheproject target landfor bids. (6) With respect to Konka (Chuzhou) SmartAppliances and Equipment Industrial Park, the land use right transfer agreement has been signed and thegeneral contract forconstruction is underbidding. 4.FinancialInvestments
(1) Securities Investments
√Applicable□ Not applicable
Unit:RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Securitytype|Securitycode|Securityname|Initialinvestmentcost|Measurementmethod|Beginningcarryingamount|Gain/Lossonfair-valuechangesinReportingPeriod|Accumulatedfair-valuechangeschargedtoequity|PurchasedinReportingPeriod|SoldinReportingPeriod|Gain/lossinReportingPeriod|Endingcarryingamount|Accountingtitle|Capitalresource|
|Domestically/Overseaslistedstock|002915|ZXFC|1,459.61|Fairvaluemethod|7,988.13|0.00|0.00|0.00|8,353.60|6,893.99|0.00|Available-for-salefinancialassets|Newstocksubscription|
|Domestically/Overseaslistedstock|300730|KCXX|1,513.16|Fairvaluemethod|7,520.55|0.00|0.00|0.00|8,282.56|6,769.40|0.00|Available-for-salefinancialassets|Newstocksubscription|
|Domestically/Overseaslistedstock|002920|DSXW|12,537.88|Fairvaluemethod|24,025.82|0.00|0.00|0.00|26,420.42|13,882.54|0.00|Available-for-salefinancialassets|Newstocksubscription|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Domestically/Overseaslistedstock|002919|MCJK|1,406.72|Fairvaluemethod|3,949.12|0.00|0.00|0.00|4,715.20|3,308.48|0.00|Available-for-salefinancialassets|Newstocksubscription|
|Domestically/Overseaslistedstock|002922|YGE|3,462.39|Fairvaluemethod|4,985.73|0.00|0.00|0.00|9,466.47|6,004.08|0.00|Available-for-salefinancialassets|Newstocksubscription|
|Domestically/Overseaslistedstock|300735|GHKJ|5,064.93|Fairvaluemethod|7,295.73|0.00|0.00|0.00|14,767.84|9,702.91|0.00|Available-for-salefinancialassets|Newstocksubscription|
|Domestically/Overseaslistedstock|300664|PYHB|5,026.08|Fairvaluemethod|0.00|0.00|0.00|5,026.08|13,668.90|8,642.82|0.00|Available-for-salefinancialassets|Newstocksubscription|
|Domestically/Overseaslistedstock|002923|RDGF|3,129.84|Fairvaluemethod|0.00|0.00|0.00|3,129.84|8,780.48|5,650.64|0.00|Available-for-salefinancialassets|Newstocksubscription|
|Domestically/Overseaslistedstock|300684|ZSKJ|1,376.00|Fairvaluemethod|2,397.68|0.00|0.00|0.00|9,683.60|8,307.60|0.00|Available-for-salefinancialassets|Newstocksubscription|
|Domestically/Overseaslistedstock|300733|XLDL|5,160.00|Fairvaluemethod|0.00|0.00|0.00|5,160.00|12,000.00|6,840.00|0.00|Available-for-salefinancialassets|Newstocksubscription|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Domestically/Overseaslistedstock|002925|YQKJ|13,095.00|Fairvaluemethod|0.00|0.00|0.00|13,095.00|47,724.00|34,629.00|0.00|Available-for-salefinancialassets|Newstocksubscription|
|Othersecuritiesinvestmentsheldatperiod-end|||0.00|--|0.00|0.00|0.00|0.00|0.00|0.00|0.00|--|--|
|Total|||53,231.61|--|58,162.76|0.00|0.00|26,410.92|163,863.07|110,631.46|0.00|--|--|
|DisclosuredateofannouncementonBoard’sconsentforsecuritiesinvestments||||||||N/A||||||
|Disclosure date of announcement on general meeting’s consent for securitiesinvestments(ifany)||||||||N/A||||||

(2) Investments in Derivative FinancialInstruments
√Applicable□ Not applicable
Unit:RMB’0,000
|||
|-|-|
|Funding source for derivativeinvestment|U.S.dollarfinancings|
|Legalmattersinvolved(ifapplicable)|None|
|Disclosure date of board announcementapprovingderivativeinvestment|24May2014|
|Disclosuredateofshareholders’meetingannouncement approving derivativeinvestment|10June2014|
|Analysis of risks and control measuresassociated with derivative investmentsheld in Reporting Period (including butnotlimitedtomarket risk,liquidityrisk,credit risk, operational risk, legal risk,etc.)|We engage in forward forex transactions to reduce the currency risk when securingforeign-currency financing. This is very needed in our routine operation and is incompliance with the applicable laws and regulations. We have formulated theManagementRulesofKonkaGroupCo.,Ltd.forInvestmentInDerivativeFinancialInstruments, making clear the relevant consideration and approval procedure, riskcontrol, etc.. We always sign forward forex contracts with large banks such as theBank of China, which operate steadily and have good credit standing, which couldhelppreventlossonforwardforexcontractsduetobankfailure.|
|Changesinmarketpricesorfairvalueofderivative investments in ReportingPeriod (fair value analysis shouldincludemeasurementmethodandrelatedassumptionsandparameters)|Howweusuallymeasurethefairvalueofderivativefinancialinstruments:BasedontheforwardforexsalesandpurchasecontractsthataresignedbetweentheCompanyandbanksandhavenot expired inaReportingPeriod, we recognizethedifferencesbetweenthequotationsforthesecontractsonthebalancesheetdatesprovidedbythebanksandthecontractualpricesastransactionalfinancialassetsorliabilities,andtheprofit/loss on fair value changes is recognized accordingly. Because these contractshavelockedinexchangerates,nochangeswilloccurwhencomparingthefairvalueonsigningdateswiththatondeliverydates.|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|Material changes in accounting policiesand specific accounting principlesadopted for derivative investments inReporting Period compared to lastreportingperiod|Nomaterialchanges|
|Opinion of independent directors onderivativeinvestmentsandriskcontrol|It is considered necessary for the Company to lock in foreign-currency financingcoststhrough financial instruments, because it could effectively reducethecurrencyrisk when securing foreign-currency financing. The Company has formulated theinternal control mechanism for investment in derivative financial instruments, andthe relevant risk control measures that the Company has taken are consideredeffective.|

Unit:RMB’0,000
||||||
|-|-|-|-|-|
|Typeofderivativefinancialinstrument|Beginningcontractualamount|Endingcontractualamount|Gain/lossinReportingPeriod|EndinginvestmentamountasapercentageoftheCompany’sendingnetassetvalue|
|Forwardforexcontract|224,712.77|61,356.18|426.21|7.57%|

5.Use ofFunds Raised
□Applicable√ Not applicable
No suchcases in theReporting Period
VI Saleof Major Assets and EquityInterests
1.SaleofMajor Assets
□Applicable√ Notapplicable
No suchcases intheReporting Period.
2.SaleofMajor Equity Interests
√Applicable□ Not applicable
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Counterparty|Equityinterestssold|Dateofsale|Sellingprice(RMB’0,000)|AmountcontributedbytheequityintereststonetincomeoftheCompanyfromperiod-beginni|EffectofthesaleontheCompany|AmountcontributedbythesaletonetincomeoftheCompanyasapercentageoftheCompany’s|Pricingprinciple|Related-partytransactionornot|RelationshipbetweencounterpartyandtheCompany|Ownershipfullytransferredornot|Executedasscheduledornot,ifnot,statereasonandactionstaken|Disclosuredate|Indextodisclosedinformation|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||||ngtodateofsale(RMB’0,000)||netincome(%)||||||||
|SuzhouAnzeFuxingVentureCapitalCentre(LimitedPartnership)andGongqingchengLittleCherryInvestmentManagementPartnershipCompany(LimitedPartnership)|6%interestinShenzhenQianhaiQingsongVentureCapitalFundCompany(LimitedPartnership)|29March2018|3,725|0|OptimizingtheCompany’sallocationofassets,generatingcashinflows,increasingassets’liquidityandimprovingtheCompany’searnings|2.58%|Marketprice|Not|Notrelated|Yes|N/A|31March2018|http://http://www.cninfo.com.cn/new/index/new/index|
|TaizhouOCT|51%sharesoKunshanKangsheng|25June2018|28,068.03|-1,997||29.19%|Marketprice|Yes|Thesameactualcontroller|Yes|N/A|16June2018||

VII Major Subsidiaries
√Applicable□ Not applicable
Major fully/majority-owned subsidiaries and those minority-owned subsidiaries with an over10%
effectontheCompany’s net profit
KonkaGroupCo.,Ltd. AnnualReport2018 Unit:RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Name|RelationshipwiththeCompany|Principalactivity|Registeredcapital|Totalassets|Netassets|Operatingrevenue|Operatingprofit|Netprofit|
|AnhuiKonkaTongchuangHouseholdAppliancesCo.,Ltd.|Subsidiary|Productionandsaleofrefrigerators,washingmachinesandotherhouseholdappliances|RMB502000000|2,497,405,642.84|630,622,484.01|2,712,561,615.72|-35,385,671.10|208,631,212.32|
|AnhuiKonkaElectronicCo.,Ltd.|Subsidiary|Productionandsaleofmultimediaproducts|RMB140000000|1,207,383,538.81|396,051,806.15|2,501,118,245.38|24,658,423.92|22,638,166.45|
|ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd.|Subsidiary|Productionandsaleofmobilecommunicationproducts|RMB400000000|527,827,516.87|131,429,034.06|424,644,976.22|7,559,757.66|19,885,206.05|
|HongKongKonkaCo.,Ltd.|Subsidiary|Export&importofelectromechanicalandelectronics|HKD500000|2,329,894,580.30|220,708,455.97|4,690,713,709.84|72,716,705.17|64,516,609.60|
|ChainKingdomCo.,Limited|Subsidiary|Supplychainmanagement|USD1500000|1,815,415,092.76|76,067,650.05|9,093,158,938.89|52,696,310.44|44,048,413.75|
|EconTechnology(Consolidated)|Subsidiary|Utilities-gasandwater|RMB164000000|2,768,488,596.93|664,938,910.78|1,097,227,129.62|170,548,389.06|146,768,372.61|
|E2info|Subsidiary|Internetandrelatedservices|RMB20000000|292,174,377.67|84,354,433.38|219,157,394.91|66,848,776.43|56,688,972.55|
|KonkaHuanjia|Subsidiary|Popularityand|RMB180000000|794,931,894.26|230,701,241.53|1,925,972,590.36|68,273,527.33|50,701,241.53|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||||||
|-|-|-|-|-|-|-|-|-|
|||applicationoftechnologies|||||||
|JiangxiKonka|Subsidiary|Manufacturingofchemicalrawmaterialsandchemicalproducts|RMB272727273|1,628,018,929.61|576,797,504.44|123,931,769.36|18,744,605.94|47,958,725.00|

Subsidiaries obtained or disposed in theReporting Period:
√Applicable□ Not applicable
||||
|-|-|-|
|Subsidiary|HowsubsidiarywasobtainedordisposedintheReportingPeriod|Effectsonoveralloperationsandoperatingperformance|
|EconTechnology(anditssubsidiaries)|Shareacquisition|MaketheCompanyentertheenvironmentalprotectionfield|
|HenanFrestecRefrigerationApplianceCo.,Ltd.|Shareacquisition|BeneficialtothedevelopmentoftheCompany’shouseholdappliances|
|HenanFrestecHouseholdAppliancesCo.,Ltd.|Shareacquisition|BeneficialtothedevelopmentoftheCompany’shouseholdappliances|
|HenanFrestecElectricalAppliancesCo.,Ltd.|Shareacquisition|BeneficialtothedevelopmentoftheCompany’shouseholdappliances|
|GuangDongXingDaHongYeElectronicCo.,Ltd.(anditssubsidiaries)|Shareacquisition|BeneficialtothedevelopmentoftheCompany’sPCB|
|JiangxiKonkaNewMaterialTechnologyCo.,Ltd.(anditssubsidiaries)|Shareacquisition|MaketheCompanyenterthenewmaterialsfield|
|ChengduKonkaIncubatorManagementCo.,Ltd.|Establishmentbyinvestment|BeneficialtopromotingrapiddevelopmentofrelevantbusinessoftheCompany|
|ChengduAnrenKonkaWenchuangIncubatorManagementCo.,Ltd.|Establishmentbyinvestment||
|GuiyangKonkaEnterpriseServiceCo.,Ltd|Establishmentbyinvestment||
|NanjingChuanghuiIntelligentTechnologyCo.,Ltd|Establishmentbyinvestment||
|GuizhouKonkaEnterprisemanagementServiceCo.,Ltd|Establishmentbyinvestment||

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|YibinkonkaIncubatorManagementCo.,Ltd.|Establishmentbyinvestment|
|ShenzhenKonkaCross-borderKechuangCo.,Ltd|Establishmentbyinvestment|
|JialiInternational(HongKong)Limited|Establishmentbyinvestment|
|SichuanKonkaSmartterminalTechnologyCo.,Ltd|Establishmentbyinvestment|
|AnhuiKonkaElectronicCo.,Ltd.|Establishmentbyinvestment|
|JiaxinTechnologyCo.,Ltd.|Establishmentbyinvestment|
|ShenzhenKonkaYifangTechnologyCo.,Ltd|Establishmentbyinvestment|
|Kangjietong(HongKong)Limited|Establishmentbyinvestment|
|YibinKonkaTechnologyParkOperationCo.,Ltd.|Establishmentbyinvestment|
|SichuanKonkaIndustryNewTownDevelopmentCo.,Ltd|Establishmentbyinvestment|
|KonkaSuiyongInvestment(Shenzhen)Co.,Ltd.|Establishmentbyinvestment|
|HainanKonkaTechnologyIndustryDevelopmentCo.,Ltd|Establishmentbyinvestment|
|ShenzhenKangquanEnterpriseManagementConsultancyCo.,Ltd|Establishmentbyinvestment|
|ShenzhenKonkaElectronicsTechnologyCo.,Ltd.|Establishmentbyinvestment|
|NanjingKonkaIntelligentTechnologyCo.,Ltd|Establishmentbyinvestment|
|AnhuiKonkaZhilianE-commerceCo.,Ltd|Establishmentbyinvestment|
|KonkaHuanjia(Dalian)EnvironmentalTechnologyCo.,Ltd.|Establishmentbyinvestment|
|ShanghaiKonkaIndustryCo.,Ltd|Establishmentbyinvestment|
|ChuzhouKangyongHealthIndustryDevelopmentCo.,Ltd|Establishmentbyinvestment|
|YantaiKonkaIndustryCo.,Ltd|Establishmentbyinvestment|
|YantaikangjinTechnologyDevelopmentCo.,Ltd|Establishmentbyinvestment|
|ShangdongKangxinIndustryDevelopmentCo.,Ltd|Establishmentbyinvestment|
|ShenzhenkangxinweiSemiconductorCo.,Ltd|Establishmentbyinvestment|
|ShenzhenMeixinSemisonductorTechnologyCo.,Ltd|Establishmentbyinvestment|
|HefeikangxinweiStorageTechnologyCo.,Ltd|Establishmentbyinvestment|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|ShenzhenNianhuaEnterpriseManagementCo.,Ltd|Establishmentbyinvestment||
|ShenzhenKonkaEco-developmentInvestmentCo.,Ltd|Establishmentbyinvestment||
|KonkaRongheIndustryTechnology(Foshan)Co.,Ltd|Establishmentbyinvestment||
|SuiningKonkaIndustryParkDevelopmentCo.,Ltd|Establishmentbyinvestment||
|SichuanKangjiatongSupplyChainManagementCo.,Ltd.|Establishmentbyinvestment||
|ShenzhenKonkaSuyuanInvestmentIndustryCo.,Ltd|Establishmentbyinvestment||
|AnhuiKaikaiShijieE-commerceCo.,Ltd.|Transferofpartofshares|Bringaboutgainswithcertainamount|
|KunshanKangshengInvestmentDevelopmentCo.,Ltd.|Transferofpartofshares||
|ShenzhenKonkaSupplyChainManagementHoldingCo.,Ltd.|Cancellation|Nosignificanteffects|
|ShenzhenKonkaPlasticProductsCo.,Ltd.|Cancellation|Nosignificanteffects|
|ChongqingQingjia|RuntianGroupentrustedthe20%votingrightsofChongqingQingjiatoChongqingelectromechanicalHolding(Group)Co.Ltd.formanagement.TheCompanylostthecontrolpoweranditwillnolongerbeincludedintothecombinationscope.|Nosignificanteffects|

Information about majormajority- and minority-owned subsidiaries:
None
VIII Structured BodiesControlled bytheCompany
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2018 IX.Prospect oftheCompany’s FutureDevelopment
The Company will continue the strategic orientation of “Science& technology+ Industry+ Park” in 2019 and take reform, transformation and upgrading as the development strategy to vigorously establish the framework of concerted development of the four key business groups, proactively enhanceR&D capabilities and innovation abilities, promote brand rejuvenation, fully drive leaping development, andbuild aplatform company driven byscientificand technological innovations. TheCompany’s work plan for2019is as follows:
(I) Toproactively implement thestrategy of“Science& technology+ Industry+Park”
In 2019, the Company will further reinforce the promotion and implementation of the strategy of “Science& technology+ Industry+ Park” and establish a system for the implementation from the perspectives of policy culture, business operation, system flow and organization structure to convert strategies and measures into tangible actions and ensure the full implementation of the strategic planning.
(II) To promotethedeep integrated development ofemerging industries
First, the Company will make the emerging industries including environmental protection, semiconductors and new materials bigger and stronger, deepen the comprehensive organization from business scope and business platform to business mode, and gradually form stable business scale and profits. Second, the Company will further enhance its management capabilities and level for emerging industries, promote the synergy of new industries and original industries and accomplish theall-round leaping development ofemerging industries.
(III) To strengthenR&D investment and consolidate scientificand technological innovation driver In 2019, the Company will further increaseR&D investment. While doing that, the Company will focus on the layout of cutting-edge technology fields including Micro LED, new materials, the Internet of Things and semiconductors to achieve the innovation and breakthroughs in key technologies and drive the macro development of the Company. In addition, the Company will proactively promote the efforts for academician and postdoctoral programs and vigorously introduce top talents including academicians and postdoctoral fellows to make breakthroughs in prospective technologies andmajorinnovation areas.
(IV) Toincrease brand investment and promotebrand rejuvenation
The Company will adopt systemic placement strategies to increase brand investment continuously and keep driving brand rejuvenation through innovativemeans.
(V) To enhance capital operation capabilities
KonkaGroupCo.,Ltd. AnnualReport2018 On the basis of strengthening its concentrated management of funds, proactively developing financing channels at low costs, optimizing the debt structure, vitalizing excellent assets and increasing asset liquidity, the Company will reinforce the research on relevant policies, proactively promote the capitalization of enterprises which have completed the mixed ownership reform and enhance itscapital operation capabilities.
(VI) Tofurther boost themixed ownership reform
In 2019, while improving the operation quality of enterprises which have completed the mixed ownership reform, the Company will continue to intensify the reform and fully promote the reform in subsidiaries to realizethe reform comprehensively.
(VII) Majorwork in all business units
1.Multimediabusiness
In 2019, the Company will continue to deepen reforms in the multimedia business to achieve fast growth in the scale of domestic e-commerce business and of overseas business, and prepare adequate technical and team reserves for Micro LED, the new-generation display technology. In addition, the Company will carry out intelligent upgrading and diverse operations for its multimedia manufacturing business to build itself into a manufacturer of electronic products including color TV sets and providerof manufacturing solutions.
2.White goods business
In terms of the white goods business, the Company will achieve substantial increase in the business scale through channel reforms, excellent projects and marketing innovations and step up efforts to promote the deep integration of the dual brand operation of “Konka+ Frestec” to achieve the brand influenceof1+1>2.
3.Environmental protection business
In 2019, the Company will give a comprehensive review on the implemented environmental and new material enterprises from business scope and business platform to business model, proactively boost their rapid development and refine and reinforce the layout in the environmental and new material industries through a combination of approaches. In particular, the Company will advance the material breakthroughs and implementations of glass ceramic materials in the field of electronic business application, further laying a solidfoundation forsustainablebusiness growth.
4.Semiconductor business
In 2019, the Company needs to develop technologies and product routes with proprietary intellectual property rights for its semiconductor business and enable the material implementation of relevant projects as soonas possible.
5.MobileInternet business
KonkaGroupCo.,Ltd. AnnualReport2018 In respect of the mobile Internet business, the Company will keep improving the operation performances by enhancing management abilities and developing new products at the mobile terminal.
6.Science and technology park business
In terms of the science and technology park business, the Company will review and establish the organization structure of business units, strengthen the building of talent echelons and enhance the operation level to accommodate business development, thus further expediting the expansion of new projects whileensuring thesmooth promotionof existingprojects.
7.Supply chain management business
In 2019, the Company will continue to drive the upgrading of business models for its supply chain management business with a gradual shift towards the production stage while achieving the balanced development of all product lines. Furthermore, the Company will further reinforce risk control and forestall various risks during the business operation process by standardizing and refining different business processes.
8.Internet business
In 2019, the Company will review and determine the strategic orientation for its Internet business, promote multiple-scenario user operations and diverse development and make holistic breakthroughs in the business. In addition, the Company will proactively push the cooperation with Ali towards agreater depth and achieve thebreakthroughs incontent and service.
9.Investment business
In 2019, the Company will continue to strengthen industrial layout for its investment business. In addition to the existing industries, the Company will focus on the fields with strong support from the state such as strategic emerging industries and on the fields that are able to form strategic synergy with theCompany’s existing businesses in order to support the leaping development of the Company; additionally, the Company will further intensify post-investment management, keep itselfupdated with theoperation status ofinvestees andachieve thesustainablegrowth of them. 10.Venture capital business
In terms of the venture capital business, on one hand, the Company will achieve the positive operation of implemented innovation centers and promote the industrial synergy with other businesses; on the other hand, the Company will strengthen the expansion, strive to implement 3-5 new innovation centers and increase itsindustrial influence in venture capital.
X Communications with the Investment Community such as Researches, Inquiries and Interviews
1.During theReporting Period
√Applicable□ Not applicable
|||||
|-|-|-|-|
|Date|Wayof|Typeof|Indextomaininformationcommunicated|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
||communication|communicationparty|||
|8June2018|One-on-onemeeting|Individual||http://irm.cninfo.com.cn/ircs/ssgs/companyIrmForSzse.do?stockcode=000016|
|Timesofcommunications|||1||
|Numberofinstitutionscommunicatedwith|||1||
|Numberofindividualscommunicatedwith|||0||
|Numberofothercommunicationparties|||0||
|Tip-offs or leakages of substantialsupposedly-confidential information duringcommunications|||None||

KonkaGroupCo.,Ltd. AnnualReport2018 Part V Significant Events
I ProfitDistributionsto Ordinary Shareholders (in theForm ofCash and/orStock)
How the profit distribution policy, especially the cash dividend policy, for ordinary shareholders was formulated, executed orrevised in theReporting Period:
√Applicable□ Not applicable
The cash dividend policy of the Company was clearly stated in its Articles of Association, with specific and clear dividend standards and ratios. The relevant decision-making procedure and mechanism were sound; the independent directors faithfully performed their duties and played their due role; and the non-controlling interests were able to fully express their opinion and desire and their legal rights and interests were fully protected. The Company strictly followed the cash dividend policy in itsArticles ofAssociation, and the cash dividend payout of the Company was in linewith itsArticles ofAssociation and therelevant resolution oftheShareholders’Meeting. According to the requirements of the Listed Company Supervision Guideline No.3—ListedCompanies’ Cash Dividend issued by the CSRC, the Company has revised the dividend payout policy in its Articles of Association, further clarifying the priority and proportion of cash dividend in dividend payouts. In order to further normalize its shareholder return mechanism, push forward the establishment of a scientific, sustained and stable shareholder return mechanism, enhance the transparency and operability of decision-making for its dividend payout policy, and effectively protect the legal rights and interests of public investors, the Company strictly followed the Shareholder Return Planning for Subsequent Three Years (2016-2018), which was formulated in 2016.
|||
|-|-|
|Specialstatementaboutthecashdividendpolicy||
|IncompliancewiththeCompany’sArticlesofAssociationandresolutionofgeneralmeeting|Yes|
|Specificandcleardividendstandardandratio|Yes|
|Completedecision-makingprocedureandmechanism|Yes|
|Independentdirectorsfaithfullyperformedtheirdutiesandplayedtheirduerole|Yes|
|Non-controlling interests are able to fully express their opinion and desire and their legalrightsandinterestsarefullyprotected|Yes|
|In case of adjusting or changing the cash dividend policy, the conditions and proceduresinvolvedareincompliancewithapplicableregulationsandtransparent|Yes|

The profit distributions to ordinary shareholders, either in the form of cash or stock, in the past three
years (including the ReportingPeriod) are summarized as follows:
1.Dividend Payout Plan for 2018
KonkaGroupCo.,Ltd. AnnualReport2018 Based on the total shares of 2,407,945,408 as of the end of 2018, a cash dividend of RMB1.00 (tax inclusive) per 10 shares was planned to be distributed to all the shareholders, with the total dividend payout reaching RMB240,794,540.80. And the retained earnings should carry forward for future payout withoutbonus issuefrom capital reserves and profit.
2.Dividend Payout Plan for 2017
Based on the total shares of 2,407,945,408 as of the end of 2017, a cash dividend of RMB1.62 (tax inclusive) per 10 shares was distributed to all the shareholders, with the total dividend payout reaching RMB390,087,156.10. And the retained earnings should carry forward for future payout without bonus issuefrom capital reserves and profit.
3.Dividend Payout Plan for 2016
The audited undistributed profits were RMB-427,163,254.63 for 2016. In light of theCompany’s realities and long-term development needs, the Company neither record capital reserves nor distributecash dividend,bonus issuefrom capital reserves and bonusissuefrom profit for theyear. Cash dividend for ordinary shareholders in thepast three years (including theReporting Period) Unit:RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Year|Cashdividends(taxinclusive)(A)|Netprofitattributabletoordinaryshareholdersofthelistedcompanyinconsolidatedstatementsfortheyear(B)|Aas%ofB(%)|Cashdividendsinotherforms(suchassharerepurchase)(C)|Cas%ofB(%)|Totalcashdividends(includingthoseinotherforms)(D)|Das%ofB(%)|
|2018|240,794,540.80|411,289,744.68|58.55%|0.00|0.00%|240,794,540.80|58.55%|
|2017|390,087,156.10|5,057,025,155.71|7.71%|0.00|0.00%|390,087,156.10|7.71%|
|2016|0|95,673,028.03|0.00%|0.00|0.00%|0.00|0.00%|

Indicate by tick mark whether the Company fails to put forward a cash dividend proposal for the ordinary shareholders despite the facts that the Company has made profits in the Reporting Period and theprofits oftheCompany as the parent distributable tothe ordinary shareholders are positive.
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2018 II FinalDividendPlan fortheReporting Period
√Applicable□Not applicable
|||
|-|-|
|Share dividend per 10 shares from retainedearnings(share)|0|
|Cash dividend per 10 shares (RMB) (taxinclusive)|1.00|
|Share dividend per 10 shares from capitalreserves(share)|0|
|Sharebase(share)|2,407,945,408|
|Totalcashdividends(RMB)(taxinclusive)|240,794,540.80|
|Cash dividends in other ways (such as sharerepurchase)(RMB)|0.00|
|Total cash dividends (including other ways)(RMB)|240,794,540.80|
|Distributableprofits(RMB)|411,289,744.68|
|Cashdividendsasapercentageoftotalprofitstobedistributed(%)|100%|
|DetailsofcashdividendfortheReportingPeriod||
|Detailsofplanforprofitdistributionorbonusissuefromcapitalreserves||
|Theauditednetprofit attributabletoownersoftheCompanyastheparentin2018wasRMB411,289,744.68,retainedearningswere RMB4,271,408,192.21. In accordance with relevant laws and regulations, provisions of Articles of Associations anddemand of the Company for sustainable development, the profit distribution plan was supposed to be as follows: based on thetotalsharesof2,407,945,408asoftheendof2018,acashdividendofRMB1.00(taxinclusive)per10shareswasdistributedtoall the shareholders, with the total dividend payout expected reaching RMB240,794,540.80.And the retained earnings shouldcarryforwardforfuturepayoutwithoutbonusissuefromcapitalreservesandprofit.||

III Fulfillment ofCommitments
1. Commitments of theCompany’s Actual Controller, Shareholders, Related Parties and Acquirers, as well as the Company Itself and other Entities Fulfilled in the Reporting Period or Ongoingat thePeriod-end
□Applicable√ Not applicable
No suchcases in theReporting Period.
2. Where there had an earnings forecast for an asset or project and the Reporting Period was still within the forecast period, explain why the forecast has been reached for the Reporting Period.
□Applicable√ Not applicable
IV Occupation of theCompany’s Capital by the Controlling Shareholder or Its Related
Parties forNon-Operating Purposes
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2018 No suchcases in theReporting Period.
V Explanations Given by the Board of Directors, the Supervisory Board and the Independent Directors (if any) Regarding the Independent Auditor's “Modified Opinion” on the Financial Statements oftheReporting Period
□Applicable√ Not applicable
VI YoY Changes toAccounting Policies, Estimates and Methods
√Applicable□Not applicable
On 31 March 2017, the Ministry of Finance revised and released the accounting standards related to financial instruments, including ASBE No. 22- Recognition and Measurement of Financial Instruments, ASBE No. 23- Transfer of Financial Assets, ASBE No. 24-Hedge Accounting. On 2 May 2017, it revised and issued ASBENo.37–Presentation of Financial Instruments. The above four financial instruments (collectively referred to as “New Financial Instruments Standards”) require to be implemented by various listed companies in China from 1 January 2019 on. In addition, the Ministry of Finance issued the Notice on Printing and Distributing the 2018 Annual Financial Statements of General Enterprises on 15 June 2018 (NO. CK[2018] 15), indicating that various enterprises implementing ASBE need to prepare their financial statements in accordance with thesestandards.
After this change, the Company shall formulate the financial statements according to The Format of Financial Statements of General Enterprises (NO. CK[2018] 15) from 1 July 2018 to 1 January 2019 (applied to enterprises that have not yet implemented new financial standards and new income standards). This change in accounting policy only affects the financial statement format and presentation of report items, and will not have a significant impact on theCompany’s 2018 financial position, operating results and cash flow.
From 1 January 2019, the Company will start to implement new financial instruments standards and formulate the financial statements according to The Format of Financial Statements of General Enterprises (applied to enterprises that have implemented new financial standards and new income standards). According to new financial instrument standards, the Company regards the “business model” of financial assets held by the enterprises and the “cash flow characteristics of financial assets contracts” as the basis for judging, classifying and measuring financial instruments (including impairment), and the accounting treatment geared to the financial assets impairment shall be changed from the “incurred loss method” to the “expected loss method”.The difference between the original book value of the financial instrument and the new book value on the date of implementation of the standard is included in the retained earnings at the beginning of 2019 or other comprehensive incomes. Meanwhile, the format of thecompany’s financial statements was adjusted according to The Format of Financial Statements of General Enterprises (No.CK[2018] 15) (applied to enterprises that have implemented new financial standards and new income standards).
KonkaGroupCo.,Ltd. AnnualReport2018 The change in above accounting policy will not have significant impact on theCompany’s financial situation, operating results and cash flow.
VII Retrospective Restatements due to Correction of Material Accounting Errors in the Reporting Period
□Applicable√ Not applicable
No suchcases in theReporting Period.
VIII YoY Changesto theScopeofthe Consolidated Financial Statements
√Applicable□Not applicable
Refer to Part IV-II-2-(6)for details.
IXEngagement andDisengagement ofIndependentAuditor
Current independent auditor:
|||
|-|-|
|Nameofthedomesticindependentauditor|RuihuaCertifiedPublicAccountantsLLP|
|TheCompany’spaymenttothedomesticindependentauditor(RMB’0,000)|254.4|
|HowmanyconsecutiveyearsthedomesticindependentauditorhasprovidedauditservicefortheCompany|Sixyears|
|Namesofthecertifiedpublicaccountantsfromthedomesticindependentauditorwritingsignaturesontheauditor’sreport|LiuJianhuaandShenLingzhi|
|HowmanyconsecutiveyearsthecertifiedpublicaccountantshaveprovidedauditservicefortheCompany|Fouryears|
|Nameoftheoverseasindependentauditor(ifany)|N/A|
|HowmanyconsecutiveyearstheoverseasindependentauditorhasprovidedauditservicefortheCompany(ifany)|N/A|
|Namesofthecertifiedpublicaccountantsfromtheoverseasindependentauditorwritingsignaturesontheauditor’sreport(ifany)|N/A|
|HowmanyconsecutiveyearsthecertifiedpublicaccountantshaveprovidedauditservicefortheCompany(ifany)|N/A|

Indicate bytick mark whether theindependent auditor was changed fortheReporting Period□Yes√No
Independent auditor,financial advisor orsponsor engaged for theaudit of internal controls
□Applicable√ Not applicable
X Possibilityof Listing SuspensionorTermination after Disclosureofthis Report
□Applicable√ Not applicable
XI Insolvency andReorganization
□Applicable√ Not applicable
No suchcases in theReporting Period.
KonkaGroupCo.,Ltd. AnnualReport2018 XII Major LegalMatters
√Applicable□ Not applicable
|||||||||
|-|-|-|-|-|-|-|-|
|Generalinformation|Involvedamount(RMB’0,000)|Provision|Progress|Decisionsandeffects|Executionofdecisions|Disclosuredate|Indextodisclosedinformation|
|As for thedetails, please refer to the Notes 2. Description of the Contingencies of the Commitments and the Contingencies ofChapterXIIoftheNotestotheFinancialReport||||||||

XIII Punishments andRectifications
□Applicable√ Not applicable
No suchcases in theReporting Period.
XIV Credit Quality of the Company as well as Its Controlling Shareholder and Actual Controller
□Applicable√ Not applicable
XV Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures forEmployees
□Applicable√ Not applicable
No suchcases in theReporting Period.
XVI Major Related-Party Transactions
1.Continuing Related-Party Transactions
√Applicable□Not applicable
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Relatedparty|RelationshipwiththeCompany|Typeoftransaction|Specifictransaction|Pricingprinciple|Transactionprice|Totalvalue(RMB’0,000)|As%oftotalvalueofallsame-typetransactions|Approvedtransactionline(RMB’0,000)|Overtheapprovedlineornot|Methodofsettlement|Obtainablemarketpriceforsame-typetransactions|Disclosuredate|Indextodisclosedinformation|
|OCTEnterprisesCo.,Ltdanditssubsidiaries|Underthesameactualcontroller|Purchaseofcommoditiesandservices|Purchaseofmaterials|Negotiatedprice|Marketprice|2,390.81|0.28%|2,500|Not|Cash|N/A|31March2018|http://www.cninfo.com.cn/new/index|
|OCTEnterprisesCo.,|Underthesame|Salesofgoods|SalesofLCD|Negotiated|Marketprice|1,459.22|0.15%|3,000|Not|Cash|N/A|31March||

KonkaGroupCo.,Ltd. AnnualReport2018
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Ltdanditssubsidiaries|actualcontroller|andservices|price||||||||2018||
|Total|||--|--|3,850.03|--|5,500|--|--|--|--|--|
|Large-amountsalesreturnindetail|||N/A||||||||||
|Give the actual situation in the ReportingPeriod(ifany)whereanestimatehadbeenmade for the total value of continuingrelated-party transactions by type to occurintheReportingPeriod|||TheCompanyhaspublishedtheForecastingPublicNoticeonRoutineRelated-partyTransactionforY2018onSecuritiesTimes,ShanghaiSecuritiesNews,ChinaSecuritiesJournalandHongKongTaKungPaoaswellastheInternetwebsitedesignatedbyCSRChttp://http://www.cninfo.com.cn/new/indexon31March2018.Inthe ReportingPeriod, thebasisforpricing, transactionprice,transaction amountandsettlementmethodsofrawmaterialspurchasedbytheCompanywerebasicallyinaccordancewiththeforecast.ThetotalamountwasRMB38.5003million.||||||||||
|Reason for any significant differencebetween the transaction price and themarketreferenceprice(ifapplicable)|||N/A||||||||||

2.Related-Party TransactionsRegarding Purchase orSales ofAssets orEquity Interests√Applicable□ Not applicable
For the specific content, please refer to the relevant content of "5. Other material related transactions" inthis section
3.Related TransactionsRegarding JointInvestments inThirdParties
√Applicable□ Not applicable
For the specific content, please refer to the relevant content of "5. Other material related transactions" inthis section
4.Credits andLiabilities with Related Parties
√Applicable□Not applicable
Indicate by tick mark whether there were any credits and liabilities with related parties for non-operating purposes.
√Yes□No
Credits receivable with related parties:
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Relatedparty|Relatedrelationship|Formingreason|Whetherthereisoccupationonnon-operatingcapitalornot|Beginningbalance(RMB’0,000)|IncreasedintheReportingPeriod(RMB’0,000)|RecoveredintheReportingPeriod(RMB’0,000)|Interestrate|InterestintheReportingPeriod(RMB’0,000)|Endingbalance(RMB’0,000)|
|None|None|None|Not|0|0|0|0|0|0|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|EffectsofcreditswithrelatedpartiesontheCompany’soperatingresultsandfinancialconditions|None|

Liabilities payable with related parties:
||||||||||
|-|-|-|-|-|-|-|-|-|
|Relatedparty|Relatedrelationship|Formingreason|Beginningbalance(RMB’0,000)|IncreasedintheReportingPeriod(RMB’0,000)|RecoveredintheReportingPeriod(RMB’0,000)|Interestrate|InterestintheReportingPeriod(RMB’0,000)|Endingbalance(RMB’0,000)|
|OCTEnterprisesCo.,Ltd.|Controllingshareholder|TheCompanyappliesentrustedloantoit|0|50,000|50,000|4.35%|151|-|
||||0|50,000|50,000|6.00%|1,487|-|
||||0|27,656|-|5.00%|42|27,656|
||||0|50,000|-|5.00%|76|50,000|
||||0|50,000|-|5.00%|104|50,000|
||||0|140,000|-|6.00%|5,413|140,000|
||||0|10,000|-|5.40%|302|10,000|
||||0|48,000|-|6.00%|1,328|48,000|
||||0|100,000|-|6.00%|1,233|100,000|
||||0|2,000|-|5.60%|52|2,000|
||||0|50,000|50,000|3.05%|513|-|
|Effects of liabilities withrelated parties on theCompany’s operatingresults and financialconditions||TheCompanyappliesentrustedloanfromOCTEnterprisesCo.,Ltd.whichmeetstheneedsofthecompany'sexistingbusinessdevelopmentandreducesthefinancingcost.|||||||

5.Other Major Related-Party Transactions
√Applicable□ Not applicable
(1) The Project of Capital Increase to Yibin OCT Sanjiang Real Estate Co., Ltd.: On 3 May 2018, the 1st Extraordinary General Meeting of 2018 passed the Proposal on Capital Increase to Yibin OCT Sanjiang Real Estate Co., Ltd. by voting, and decided to take Shenzhen Konka Telecommunications Technology Co., Ltd., a wholly-owned subsidiary as the main body to contribute RMB80 million to increase capital to Yibin OCT Sanjiang Real Estate Co., Ltd. according to shareholding ratio. At present, Shenzhen Konka Telecommunications Technology Co., Ltd. has completed thecapital increase inYibinOCTSanjiang Real EstateCo.,Ltd.
(2) The Project of Transferring Equity of Kunshan Kangsheng Investment Development Co., Ltd.:
On 14 June 2018, the 44th Meeting of the 8th Board of Directors of the Company deliberated and
passed Proposal on Transferring51% Equity of Kunshan Kangsheng Investment Development Co.,
KonkaGroupCo.,Ltd. AnnualReport2018 and decided that the Company transferred51% equity of Kunshan Kangsheng Investment Development Co., Ltd. to Taizhou Overseas Chinese Town Co., Ltd., with the transfer price of RMB280,680,300. At present, the Company has received the equity transfer fund from Taizhou Overseas Chinese Town Co., Ltd., and Kunshan Kangsheng Investment Development Co., Ltd. has completed industrial and commercial registration of changes.
(3) Venture capital platform service project: Konka Ventures Development (Shenzhen) Co., Ltd., a subsidiary of the Company entered into an agreement with OCT Group to provide venture capital platform services for it. OCT Group has paid a service fee of RMB20 million to Konka Ventures Development (Shenzhen) Co., Ltd. During the Reporting Period, Konka Ventures Development (Shenzhen)Co., Ltd. recognized revenue of RMB19.4175million.
(4) Provided financial aids to Sanjiang Group: On September 18, 2018, the Proposal on the Provision of Financial Aids to Yibin OCT Sanjiang Group was deliberated and approved at theCompany’s 49th Meeting of the Eighth Session of the Board of Directors.According to the proposal, Shenzhen Konka Communications Science and Technology Co., Ltd., a wholly-owned subsidiary of the Company and the other shareholders ofYibin OCT Sanjiang Group would provide financial aids to Yibin OCT Sanjiang Group in their shareholding proportion. So far, Shenzhen Konka Communications Science and Technology Co., Ltd. has provided a borrowing of RMB100 million in its shareholding proportion.
Index tothepublicannouncements about thesaid related-party transactions disclosed
||||
|-|-|-|
|Titleofpublicannouncement|Disclosuredate|Disclosurewebsite|
|AnnouncementonCapitalIncreaseinSanjiangRealEstateandRelated-partyTransactions|18April2018|http://http://www.cninfo.com.cn/new/index|
|AnnouncementontheTransferof51%EquitiesofKunshanKangshengandRelated-partyTransactions|16June2018||
|AnnouncementontheProgressoftheTransferof51%EquitiesofKunshanKangsheng|3July2018||
|AnnouncementonOfferingFinancialAidtoSanjiangRealEstateandRelated-partyTransactions|19September2018||
|AnnouncementonProvidingGuaranteeLineforJoint-stockCompanyandRelated-partyTransactions|19September2018||

XVII Major Contracts andExecution thereof
1.Entrustment, Contracting and Leases
(1) Entrustment
□Applicable√ Not applicable
No suchcases in theReporting Period.
(2) Contracting
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2018 No suchcases in theReporting Period.
(3) Leases
□Applicable√ Not applicable
No suchcases in theReporting Period.
2.Major guarantees
√Applicable□ Not applicable
(1) Guarantees
Unit:RMB'0,000
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|GuaranteesprovidedbytheCompanyanditssubsidiariesforexternalparties(exclusiveofthoseforsubsidiaries)|||||||||||
|Obligor|Disclosuredateoftheguaranteelineannouncement||Lineofguarantee|Actualoccurrencedate(dateofagreementsigning)||Actualguaranteeamount|Typeofguarantee|Termofguarantee|Havingexpiredornot|Guaranteeforarelatedpartyornot|
|JiangxiXinxinJiananEngineeringCo.,Ltd.|||10,000|12December2016||10,000|Joint-liability|TWOyears|Not|Not|
|JiangxiZhongyiDecorationMaterialsCo.,Ltd.|||10,000|12December2016||10,000|Joint-liability|TWOyears|Not|Not|
|JiangxiShanshiTechnologicalDevelopmentCo.,Ltd.|||10,000|12December2016||10,000|Joint-liability|TWOyears|Not|Not|
|TotalapprovedlineforsuchguaranteesintheReportingPeriod(A1)||||177,500|Total actual amount of such guarantees in theReportingPeriod(A2)|||||0|
|TotalapprovedlineforsuchguaranteesattheendoftheReportingPeriod(A3)||||207,500|Total actual balance of such guarantees at theendoftheReportingPeriod(A4)|||||30,000|
|GuaranteesprovidedbetweentheCompanyandsubsidiaries|||||||||||
|Obligor|Disclosuredateoftheguaranteelineannouncement|Lineofguarantee||Actualoccurrencedate(dateofagreementsigning)||Actualguaranteeamount|Typeofguarantee|Termofguarantee|Havingexpiredornot|Guaranteeforarelatedparty|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||||ornot|
|AnhuiTongchuang|31March2017and31March2018|90,000|7November2018|||5,800|Joint-liability|Oneyear|Not||Not|
||||9May2018|||4,500|Joint-liability|Oneyear|Not||Not|
||||20September2018|||5,500|Joint-liability|Oneyear|Not||Not|
||||19June2018|||3,000|Joint-liability|Oneyear|Not||Not|
|Communicationtechnology||50,000|5February2018|||50,000|Joint-liability|Oneyear|Not||Not|
|AnhuiKonka||110,000|2May2018|||20,000|Joint-liability|Oneyear|Not||Not|
||||1June2018|||8,000|Joint-liability|Oneyear|Not||Not|
||||6December2018|||10,000|Joint-liability|Oneyear|Not||Not|
|E-display||8,000|29November2018|||2,000|Joint-liability|Oneyear|Not||Not|
|HongKongKonka||365,258|31May2018|||20,807|Joint-liability|Oneyear|Not||Not|
||||25July2018|||2,427|Joint-liability|Oneyear|Not||Not|
||||7August2018|||10,403|Joint-liability|Oneyear|Not||Not|
|KonkaFactoring||300,000|29September2018|||20,000|Joint-liability|Oneyear|Not||Not|
||||27June2018|||14,000|Joint-liability|Oneyear|Not||Not|
|XingDaHongYe|19September2018|10,000|21November2018|||5,800|Joint-liability|Twoyears|Not||Not|
|EconTechnology|19September2018|120,000|10October2018|||3,135|Joint-liability|Oneyear|Not||Not|
|KonkaMaterial|31October2018|60,000|4December2018|||10,000|Joint-liability|Oneyear|Not||Not|
|Total approved line for such guarantees in theReportingPeriod(B1)||||993,686|Total actual amount of such guarantees in theReportingPeriod(B2)|||||195,372||
|TotalapprovedlineforsuchguaranteesattheendoftheReportingPeriod(B3)||||1,903,486|Total actual balance of such guarantees at theendoftheReportingPeriod(B4)|||||195,372||

KonkaGroupCo.,Ltd. AnnualReport2018
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Guaranteesprovidedbetweensubsidiaries|||||||||||||
|Obligor|Disclosuredateoftheguaranteelineannouncement|Lineofguarantee|Actualoccurrencedate(dateofagreementsigning)|||Actualguaranteeamount|Typeofguarantee||Termofguarantee|Havingexpiredornot||Guaranteeforarelatedpartyornot|
|SichuanKonka||14,000|28May2018|||14,000|Joint-liability||Sevenyears|Not||Not|
|RushanEcon||29,000|29December2016|||29,000|Joint-liability||Tenyears|Not||Not|
|KangzhiTrade||43,300|12December2018|||43,300|Joint-liability|||Not||Not|
|XingDaHongYe||1,000|13November2018|||1,000|Joint-liability||Twoyears|Not||Not|
|Total approved line for such guarantees in theReportingPeriod(C1)|||||58,300|Total actual amount of such guarantees in theReportingPeriod(C2)||||||58,300|
|Total approved line for such guarantees at the endoftheReportingPeriod(C3)|||||87,300|Total actual balance of such guarantees at theendoftheReportingPeriod(C4)||||||87,300|
|Totalguaranteeamount(totalofthethreekindsofguaranteesabove)|||||||||||||
|Total guarantee line approved in the ReportingPeriod(A1+B1+C1)||||1,229,486||Total actual guarantee amount in theReportingPeriod(A2+B2+C2)|||||253,672||
|Total approved guarantee line at the end of theReportingPeriod(A3+B3+C3)||||2,198,286||Total actual guarantee balance at the end oftheReportingPeriod(A4+B4+C4)|||||312,672||
|Total actual guarantee amount (A4+B4+C4) as % of theCompany’snetassets||||||38.58%|||||||
|Ofwhich:|||||||||||||
|Balanceofguaranteesprovidedforshareholders,actualcontrollerandtheirrelatedparties(D)||||||||0|||||
|Balanceofdebtguaranteesprovideddirectlyorindirectlyforobligorswithanover70%debt/assetratio(E)||||||||312,672|||||
|Amountbywhichthetotalguaranteeamountexceeds50%oftheCompany’snetassets(F)||||||||0|||||
|Totalofthethreeamountsabove(D+E+F)||||||||312,672|||||
|JointresponsibilitiespossiblyborneintheReportingPeriodforundueguarantees(ifany)||||||||N/A|||||
|Provisionofexternalguaranteesinbreachoftheprescribedprocedures(ifany)||||||||N/A|||||

 Compound guarantees:
None
(2) Irregularities inProvision ofGuarantees
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2018 No suchcases in theReporting Period.
3.Cash Entrusted to Other EntitiesforManagement
(1) Cash EntrustedforWealth Management
√Applicable□ Not applicable
Overview ofcash entrusted for wealth management
Unit:RMB’0,000
||||||
|-|-|-|-|-|
|Type|Capitalresource|Amount|Outstandingbalance|Overdueamount|
|Trustedfinancialproducts|Self-ownedfunds|3,000|3,000|0|
|Total||3,000|3,000|0|

High-risk entrusted asset management with significant single amount or low security, poor liquidity and nocapital preservation:
□Applicable√ Not applicable
Whether there is the case where the principal cannot be recovered at maturity or other case which may cause impairmentfor entrusted asset management
□Applicable√ Not applicable
(2) Entrusted Loans
√Applicable□ Not applicable
Overview ofentrusted loans
Unit:RMB'0,000
|||||
|-|-|-|-|
|Totalamount|Capitalresource|Outstandingamount|Overdueamount|
|2,000|Self-ownedfunds|2,000|0|

High-risk entrusted loans with significant single amount or low security, poor liquidity and no capital preservation:
□Applicable√ Not applicable
Whether there is the case where the principal cannot be recovered at maturity or other case which may cause impairmentfor entrusted loans
□Applicable√ Not applicable
4.Other Major Contracts
□Applicable√ Not applicable
No suchcases in theReporting Period.
XVIII Corporate SocialResponsibility (CSR)
1.Measures Takento FulfillCSRCommitment
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 of
shareholders’ profits, the Company is active in protecting legal rights of debtors and employees,
KonkaGroupCo.,Ltd. AnnualReport2018 treating suppliers, customers and consumers in good faith, and participating in environmental protection and communityestablishment for harmonious development oftheCompany and society. 1.Toprotect rights ofshareholders andcreditors
(1)TheCompany protects rights ofshareholders
The Company insists protection of rights for all shareholders, especially equal status and legal rights for medium and small shareholders, and make insurance of rights to be informed, participation and vote.
The Company would perform all obligations of information disclosure to ensure timely, accurate and complete information and strictly execute confidential system of registrar and insider information toguarantee justice.
The Company pays attention to repay to shareholders, and insists mutual development with investors. In the previous three years, the Company shares dividends with all shareholders. The Company strict executes dividend policies regulated in Articles of Association. All cash dividends comply with regulations inArticles ofAssociation and requirementsinshareholders’conference. (2)TheCompany protects rights ofcreditors
In full consideration of legal rights of creditors, the Company complies with strict business rules of credit cooperation to guarantee legal rights of creditors. No damages upon rights of creditors happened.
2.The Company performs responsibilitiesto suppliers and customers
(1) It is devoted to improvecustomer service quality.
The Company is insisting philosophy of customer orientation to strengthen customer service management, service consciousness for employees, service levels and to protect rights for customers. Through customer service hot-line, field visit and follow-up service, the Company has set a good corporateimage forcustomers.
(2) Be honest to suppliers
Following the principle of integrity and mutually beneficial cooperation, the Company keeps good cooperative relations with suppliers at each level. The corporate principle is open, fair and impartial to standardize procurement, protectsuppliers’ legal rights and lay solid foundation for further cooperation.
3.Be enthusiastictosocial and publicwelfareundertakings
Based on the principle of appreciating and repaying the society, the Company has participated in all kinds of activities for public welfare, cooperated with society, undertaken social responsibilities actively andpromoted harmonious development between enterpriseand society.
4.Be responsible foremployees
The Company insists the principle of people orientation to improve working environment, promote occupational skills, provide opportunity and platform for development and growth and encourage
KonkaGroupCo.,Ltd. AnnualReport2018 self upgradation and realization for employees. Mutual improvement for employees and enterprise could beachieved.
(1) Be honest and law-abiding to protect legal rightsfor employees
The Company would strictly comply with laws and regulations in Labor Law and Labor Contract Law to sign labor contract with employees with fair treatment in employment, payment, promotion, training, demission and retirement. Also, the Company would pay all kinds of insurances and housing fund for employees. Regular physical examination would be organized for each year. Any problems foundwould require re-examinationand consultation from adoctor.
The Company would improve living quality; enhance cohesive force and sense of belongings through a series of safeguard measures.
(2)Toprotect occupational health for employees
The Company would establish and perfect training, safety assessment by security system to guarantee the safety and occupational health for employees. On the other hand, by promotion of the importance of safety, safety awareness would be rooted in the heart to make all employees abide by safety standards and fully play subjective initiative in protecting self-occupational safety and production safety.
(3)Topromote occupational skills bydiversified professional training
The Company has always paid great attention on diversified training for employees. On the one hand, the Company would be meticulous in training of regular business and occupational skills and carry out all requirements positively to improve professional levels by normal training management. On the other hand, the Company would establish methods of self-training platform, training instructor, theme training and lectures to provide colorful training activities. Besides the work, professional and comprehensive qualitywould be fully promoted.
5.Be responsible forenvironment
The company pays close attention to the changes of the ecological environment and the close relationship between itself and the environment. Through technological innovation, it creates a low-carbon economy, from green manufacturing to green products to green industrial circular economy.The company hopes to contributeto theprotection oftheearth's ecological environment. In the new year, the Company would undertake all social responsibilities by improving strategic management, sustainable development and enterprise economic efficiency. It would reattribute all shareholders and would protect legal rights for creditors and employees. To be honest to suppliers and customers, the Company would serve local economic development and participate in social public welfare activities and environment protection. It would undertake all responsibilities in many fields and make attributions to social, economic, and environmental sustainable development for a socialism harmonious society.
KonkaGroupCo.,Ltd. AnnualReport2018 2.Measures TakenforTargeted Poverty Alleviation
(1) Plans
In accordance with the guiding principles of the state on the development of precision poverty alleviation, the Company has proactively carried out critical work on poverty alleviation and engaged inthetargeted support inSansui County andTianzhuCounty in GuizhouProvince.
The Company and the China Youth Development Foundation (CYDF) have jointly held the large public benefit activity “Heart Journey” since 2013. Five sessions of activities have been held until now. In 2013, we helped thousands of migrant workers to go home. In 2014, we planted tens of thousands of trees nationwide and improved the living conditions of 5,000 needy families by planting the economic and ecological trees. In 2015, we donated nearly 100 music classrooms to the remote regions of China by carrying out “Happy Music Classroom” Project with CYDF. In 2016, we sponsored the professional training of 100 music teachers in remote areas to promote the construction of teaching staff in poverty-stricken areas. In 2017, the activities of “Heart Journey” focused on affectionate care for families of left-behind children in poverty-stricken areas. We helped 100 left-behind children to come to cities to reunite with their parents during the summer vacation, and donated houses named KonkaHeart Journey Family in schools in western areas. (2) Summary of theRelated Work Donein theReporting Period
During the Reporting Period, the Company took active steps to help Sansui County to carry out the marketing work in respect of Sansui ducks, including product sales and package planning, which effectively drove the sales of local subsidiary agricultural products. In 2018, Liu Fengxi, Board Chairman of the Company, led a team to Sansui and Tianzhu for site investigations and proposed new notions for industrial poverty alleviation, laying a solid foundation for the targeted poverty alleviation in 2019.
(3) SubsequentPlans
To fully perform its duties of targeted poverty alleviation, in 2019, the Company plans to donate office supplies of approximately RMB300,000, including television sets and books to the two counties, together with the work on public brand establishment of no more than RMB1.58 million which will be used for the package planning and advertisement promotion of Sansui ducks of Sansui County.
Additionally, the Company plans to continue carrying out the large commonweal event themed with “TheTrip ofHeart”.
3.Issues Related to Environmental Protection
Indicate by tick mark whether the Company or any of its subsidiaries is identified as a major polluterbytheenvironmental protection authorities.
Yes
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Nameofpolluter|Nameofmajor|Wayofdischarge|Numberofdischarge|Distributionofdischarge|Dischargeconcentration|Dischargestandardsimplemented|Totaldischarge|Approvedtotaldischarge|Excessivedischar|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||pollutants||outlets|outlets|||||ge|
|XingDaHongYe|Pollutionsourcesofwastewater:PH、copper、COD、ammonianitrogen、totalnitrogen、totalphosphorus|Dischargeofstationarypollutionsources|1|Maindischargeoutletofthewastewaterstation|PH6-9；copper≤0.5mg/L；COD≤80mg/L；ammonianitrogen≤15mg/L；totalnitrogen≤20mg/L；totalphosphorus≤1mg/L|ElectroplatingwaterpollutantdischargestandardDB44/1597-2015Table1|44.8milliontons/year|Totaldischarge448,500tons/year;pollutantCOD24.891tons/year;ammonianitrogen3.982tons/year;totalnitrogen9.373tons/year;totalphosphorus0.439tons/year|None|
||wastegaspollutants:sulfuricacidfume,hydrogenchloride,formaldehyde,hydrogencyanide,nitrogenoxide,ammonia, benzene,methylbenzene,TVOC,tinanditscompounds,PM(dust),oilfume|Dischargeofstationarypollutionsources|14|Threeontheroofofoneplant,tenontheroofoftwoplantsandoneontheroofofthecanteen|sulfuricacidfume＜30mg/m3；nitrogenoxide＜200mg/m3；hydrogenchloride＜30mg/m3；TVOC＜90mg/m3；benzene＜12mg/m3；methylbenzen＜40mg/m3；dimethylbenzene＜70mg/m3；tinanditscompounds＜8.5mg/m3；|EmissionStandardforElectroplatingPollutantsGB21900-2008AirEmissionLimitsTable5,GuangdongAirPollutantEmissionStandardDB44/27-2001theSecondLevelStandardintheSecondPeriod,EmissionstandardforOdorPollutants(GB14554-1993)Table2Standard,Emissionstandardofcookingfume(GB18483-2001)|2,986,560,000standardcube/year|2,986,560,000standardcube/year(note:thetotaldischargeisnotstatedinthelatestversionofnationaldischargepermitin2018;twoexhausttowerswereaddedin2018;calculatedbasedonairvolumeinenvironmentalimpactassessment)|None|

(1)Theconstruction ofanti-pollution facilities andits operation situation
All production equipment of Guangdong Xingda Hongye Electronics Co., Ltd. has been set up with supporting environmental protection facilities according to the requirements of environmental impact assessment. The discharge of wastewater, waste gas and noise as well as the disposal of all solid wastes in theCompany all met thestandards during theReporting Period.
The sewage treatment centre of Guangdong Xingda Hongye Electronics Co., Ltd. with an investment of about RMB15 million was formally put into production in June 2007, and the
treatment capacity of the sewage treatment facility was 2,566 tons/day.After technical improvement
and expansion, the capacity increased to 2,900 tons/day with the treatment process remaining
KonkaGroupCo.,Ltd. AnnualReport2018 unchanged. Currently, the sewage treatment facilities are functioning well and the main pollutant discharge meets the discharge standards and environmental assessment standards. The pollutants are discharged toFushachong after being treated at theself-built sewage treatment station.
(2) Environmental impact assessment and other environmental protection administrative licenses of the construction project
Guangdong Xingda Hongye Electronics Co., Ltd. obtained the approval from Zhongshan Environmental Protection Bureau (ZHJ[2004] No. 61) for the operations and construction here in 2004. Subsequently, it obtained the documents of ZHJD[2008] No. 06250 and ZHJD[2010] No. 04469 respectively in 2008 and 2010. After the operations of its original project, Guangdong Xingda Hongye Electronics Co., Ltd. passed the two phases of acceptance assessment, including the Phase I acceptance assessment in 2008 (HY[2008] No. 02) and the Phase II acceptance assessment in 2012(ZHYBG[2012]No. 000092).
In December 2012, Guangdong Xingda Hongye Electronics Co., Ltd. commissioned Zhongshan Research Institute of Environmental Protection Science to conduct the assessment of environmental impact for the technical improvement and expansion project of Guangdong Xingda Hongye Electronics Co., Ltd. On December 31, 2012, it obtained the approval document titled Reply to the Report on the Environmental Impact of the Technical Improvement and Expansion Project of Guangdong Xingda Hongye Electronics Co., Ltd. (ZHJS (2012) No. 115) from Zhongshan Environmental Protection Bureau. The document granted the approval for addition of the production of six-layer PCB, eight-layer PCB and above and HDI boards and for reduction of the production of single-sided PCB. After the technical improvement and expansion, the total production capacity of single-sided PCB would be 200,000 m2/year, of double-sided PCB would be 250,000 m2/year, of four-layer PCB would be 300,000 m2/year, of six-layer PCB would be 200,000 m2/year, of eight-layer PCB and above would be 150,000 m2/year and of HDI boards would be 100,000 m2/year. In the project, while the original plating equipment and processes remained unchanged, the brown oxide process was added to the original production process; all the increased plating capacity would be outsourced. The technical improvement and expansion project was commenced in 2013 and completed in January 2018. The commissioning was carried out from February 10, 2018 to July 8, 2018. The construction of the project complied with the requirements for environmental impact assessment and met the criteria for the acceptance of environmental protection for the completion of construction projects. In 2018, the Company obtained the state sewage permit,certificate No.: 91442000768405216J001P.
(3) Contingency plan for emergent environmental incident
In strict accordance with requirements of laws, regulations and relevant documents, such as Law of thePeople’s Republic of China on Emergency Response and Interim Measures on Environmental Emergency Response Plan, Guangdong Xingda Hongye Electronics Co., Ltd. has established risk
KonkaGroupCo.,Ltd. AnnualReport2018 prevention measures and emergency response plans, kept its emergency equipment in a normal state, formulated the Contingency Plan for Emergent Environmental Incident, and put on records at Zhongshan Environmental Protection Bureau, Guangdong Province, record No.: 4420002017044M. In addition, the Company conducts a drill of major environmental pollution incident on its factory to enhanceits emergency response capabilities for emergent environmental pollution incidents. Furthermore, Guangdong Xingda Hongye Electronics Co., Ltd. has built an emergency pool (which is the comprehensive water tank in the sewage treatment station covering an area of 800m3) and set up a fire pool (500m3and located on Floor 1 of Factory Building No. 2), which serve as temporary storage pools for exterior drainage or fire drainage to eradicate accidental discharge of wastewater in the case of failed operation of the sewage transmission pipeline or fire accident due to outage or other special circumstances. The sewage transmission pipeline has been equipped with anti-corrosion and cathodic protection using anti-corrosion pipes and carbon steel pipes. Pursuant to the new discharge standards, the related discharge pipeline has been modified and the production department has been required to discharge strictly in accordance with discharge standards to cut the costs of wastewater treatment. Different types of wastewater are normally and properly treated through fine shunting. Personnel have been specially arranged to manage the chemical liquid warehouse and exert reasonable control and requirements over the liquid discharge by the plant and timely transportation of the liquid by suppliers; emergency tools such as protective masks, boots and immisciblepumps have been equipped;
(4) Environmental self-monitoring plan
According to the requirements of the Environmental ProtectionAdministration, Guangdong Xingda Hongye Electronics Co., Ltd. attaches great importance to environmental monitoring management. Thus, pursuant to the Measures for Self-Monitoring and Information Disclosure of National Key Monitored Enterprises, the Report on the Environmental Impact of the Technical Improvement and Expansion Project of Guangdong Xingda Hongye Electronics Co., Ltd. and the reply opinions for environmental impact assessment, the Company has formulated the Environmental Self-Monitoring Plan and reported to the municipal environmental protection bureau for approval and record. It implements online monitoring for the PH, COD and ammonia nitrogen pollutants discharged in wastewater through real-time monitoring and an automatic frequency of every two hours, entrusts the qualified third-party online monitoring equipment operation and maintenance institute to carry out periodic maintenance on automatic monitoring equipment and monitoring data networking equipment, and entrusts the qualified third-party monitoring unit to carry out the “three wastes” project monitoring. All self-monitoring plan results will be reported and disclosed on public platforms ona periodicbasis.
In the case of normal production, the results will be updated on a daily basis, with online monitoring data disclosed in real time and manual monitoring data disclosed on the next day after
KonkaGroupCo.,Ltd. AnnualReport2018 completion. In the case of public holidays, the operation monitoring data for the holiday period will be disclosed on the first working day after the holiday. Items monitored on a monthly basis will be disclosed by the 25th day of the month. Items inspected on a quarterly basis will be disclosed by the 25th day of the last month of the quarter. The annual self-monitoring report for the previous year will be disclosed at the end of January each year. In the case of shutdown with days off, the number of days off will be indicated in the information bar and related proofs will be submitted to the monitoring center ofthemunicipal environmental bureau forrecord.
The results are disclosed on Guangdong Province Key Pollution Source Regulatory Information Platform and on National Pollution Source Monitoring Information Management and Sharing Platform for publicmonitoring.
(5) Other environmental information that shouldbedisclosed
The environmental protection investment of Guangdong Xingda Hongye Electronics Co., Ltd. for 2018 was approximately RMB17.5 million, mainly used as the environmental engineering investment (approximately RMB8.5 million) and the operation of environmental protection equipment (approximatelyRMB9 million).
(6) Other Environmental Information
According to the examination by the Company, the Company and its other holding subsidiaries are not key pollutant units. All have faithfully implemented the laws and regulations related to environmental protection, such as Environmental Protection Law of the People's Republic of China, Water Pollution Prevention and Control Law of the People's Republic of China, Law of the People's Republic of China on the Prevention and Control of Atmospheric Pollution, Law of the People's Republic of China on Prevention and Control of Pollution From Environmental Noise, Law of the People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste in the daily production and operation, without being punished for violations of laws and regulations during theReporting Period.
XIX OtherSignificantEvents
√Applicable□ Not applicable
(1) The Project of Establishing Company for Multimedia Business: On 17 November 2017, the 37th Meeting of the 8th Board of Directors of the Company deliberated and passed the Proposal on Establishing a Company for Konka Multimedia Business. At present, Shenzhen Konka Electronics Technology Co., Ltd. has been formally established, and the Company is in the process of business switching and asset import.
(2)The Project of Listing Transfer of Shanghai Real Estate: On 23August 2017, the 34th Meeting of the 8th Board of Directors of the Company deliberated and passed the Proposal on Listing Transfer of Part Real Estate on the. At present, the Shanghai Real Estate to be listed for transfer has been officially listed, and is currently in the publicity period. However the project has been terminated
KonkaGroupCo.,Ltd. AnnualReport2018 due to thefailureof solicitingpotential transferees.
(III) Private placement of corporate bonds, asset securitization of commercial factoring and asset securitization of accounts receivable: Currently, the private placement of corporate bonds (Phase I) of RMB2.5 billion has been issued; the asset securitization of commercial factoring and asset securitization ofaccounts receivable are in thedeclaration.
(IV) Strategic cooperation agreement with Chuzhou Municipal Government: Currently, the project land has been awarded for Konka Intelligent Home Appliance and Equipment Industrial Park Project (including Ankang Intelligent Factory) and Science and Technology Innovation Center Project Phase II and preparations are being made for the commencement of construction; in terms of Opto-electronics Industrial Fund Project (namely, Chuzhou Huike Intelligent Home Appliance Industry Investment Partnership (limited partnership)), the investment agreement has been signed and changes in business registration have been completed; in respect of Konka New Retail Headquarters Project, the project company has been established; in terms of Konka Minghu Health&WellnessTownProject, negotiations are being carried out.
(V) The project of Nanjing K-Star Cloud Network Headquarters has signed the land use right transfer agreement and is being reported for approval and piling. The Company has transferred the control power over theproject company recently.
(VI) Disclosureindex ofsignificant information
||||||
|-|-|-|-|-|
|AnnouncementNo.|Date|Title|Pageonnewspaper|Linkonhttp://www.cninfo.com.cn|
|2018-01|3January2018|AnnouncementonReceivingtheGrantsofZombieEnterprises|SecuritiesTimesB5,TaKungPaoB1|http://www.cninfo.com.cn/new/index|
|2018-02|4January2018|AnnouncementonRestructuringandRenamingofControllingShareholdersandtheChangesofRelevantofBusinessRegistrationEvents|SecuritiesTimesB44,TaKungPaoA20||
|2018-03|4January2018|AnnouncementonRecognitionofDisclosureFee|SecuritiesTimesB44,TaKungPaoA20||
|2018-04|4January2018|AnnouncementonMajority-ownedSubsidiary’receivingoftheGovernmentSubsidies|SecuritiesTimesB44,TaKungPaoA20||
|2018-05|19January2018|AnnouncementonthePlannedListingtoTransfer|SecuritiesTimesB148,TaKungPao||

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|||theSharesofQingsongVentureInvestmentFund|B2|
|2018-06|25January2018|AnnouncementontheChangesofConsultingTelephoneoftheCompany’sInvestors|SecuritiesTimesB28,TaKungPaoB1|
|2018-07|26January2018|Announcementonthe2017EarningsForecasts|SecuritiesTimesB25,TaKungPaoB5|
|2018-08|20March2018|AnnouncementontheProgressofthePlannedListingtoTransfertheSharesofQingsongVentureInvestmentFund|SecuritiesTimesB40,TaKungPaoB3|
|2018-09|24March2018|AnnouncementonReceivingtheTaxReimbursementEvents|SecuritiesTimesB177,TaKungPaoB1|
|2018-10|31March2018|Announcementonthe2017AnnualReport||
|2018-11|31March2018|AnnouncementontheAbstractofthe2017AnnualReport|SecuritiesTimesB253,TaKungPaoA18|
|2018-12|31March2018|AnnouncementontheResolutionofthe40thMeetingofthe8thBoardofDirectors|SecuritiesTimesB253,TaKungPaoA18|
|2018-13|31March2018|AnnouncementontheResolutionofthe17thMeetingofthe8thSupervisoryCommittee|SecuritiesTimesB253,TaKungPaoA18|
|2018-14|31March2018|AnnouncementontheExpectationofthe2018RoutineRelatedTransaction|SecuritiesTimesB253,TaKungPaoA18|
|2018-15|31March2018|AnnouncementontheExternalGuaranteeofKonkaGroupCo.,Ltd.|SecuritiesTimesB253,TaKungPaoA18|
|2018-16|31March2018|AnnouncementontheChangesofPartofAccountingPolicies|SecuritiesTimesB254,TaKungPaoA18|
|2018-17|31March|AnnouncementonOffering|SecuritiesTimes|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
||2018|EntrustedLoanstoMajority-ownedSubsidiary|B254,TaKungPaoA18|
|2018-18|31March2018|NoticeonConveningthe2017AnnualGeneralMeeting|SecuritiesTimesB254,TaKungPaoA19|
|2018-19|31March2018|AnnouncementontheCompletionofIndustrialandCommercialRegistrationofChangesofTransferringtheSharesofQingsongVentureInvestmentFund|SecuritiesTimesB254,TaKungPaoA19|
|2018-20|10April2018|AnnouncementonMajority-ownedSubsidiary’receivingoftheGovernmentSubsidies|SecuritiesTimesB40,TaKungPaoB6|
|2018-21|14April2018|Announcementonthe2018FirstQuarter EarningsForecasts|SecuritiesTimesB48,TaKungPaoB3|
|2018-22|18April2018|AnnouncementontheResolutionofthe41stMeetingofthe8thBoardofDirectors|SecuritiesTimesB37,TaKungPaoB9|
|2018-23|18April2018|NoticeonConveningthe1stExtraordinaryGeneralMeetingof2018|SecuritiesTimesB37,TaKungPaoB9|
|2018-24|18April2018|AnnouncementonCapitalIncreaseinSanjiangRealEstateandRelated-partyTransactions|SecuritiesTimesB37,TaKungPaoB9|
|2018-25|18April2018|AnnouncementonSponsoringtheEstablishmentofIndustrialBuyoutFund|SecuritiesTimesB37,TaKungPaoB9|
|2018-26|24April2018|AnnouncementontheResolutionofthe2017AnnualGeneralMeeting|SecuritiesTimesB189,TaKungPaoB5|
|2018-27|28April2018|2018FirstQuarterReport||
|2018-28|28April2018|Textofthe2018FirstQuarterReport|SecuritiesTimesB44,TaKungPaoB14|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|2018-29|4May2018|AnnouncementontheResolutionofthe1stExtraordinaryGeneralMeetingof2018|SecuritiesTimesB16,TaKungPaoB5|
|2018-30|8May2018|AnnouncementontheProgressofExternalGuarantee|SecuritiesTimesB28,TaKungPaoB6|
|2018-31|22May2018|AnnouncementonSigningtheStrategicCooperationAgreementwithChuzhouMunicipalGovernment|SecuritiesTimesB25,TaKungPaoA17|
|2018-32|22May2018|OutlineofMediumandLong-termDevelopmentStrategyProgramming|SecuritiesTimesB25,TaKungPaoA17|
|2018-33|23May2018|AnnouncementontheResolutionofthe43rdMeetingofthe8thBoardofDirectors|SecuritiesTimesB17,TaKungPaoB4|
|2018-34|23May2018|AnnouncementonOfferingGuaranteeLimittotheWholly-ownedSubsidiary|SecuritiesTimesB17,TaKungPaoB4|
|2018-35|23May2018|AnnouncementonthePrivatePlacementofCorporateBondProgrammingbytheCompany|SecuritiesTimesB17,TaKungPaoB4|
|2018-36|23May2018|AnnouncementonCarryingouttheBusinessofAssetSecuritizationof BusinessFactoringbythewholly-ownedSubsidiary|SecuritiesTimesB17,TaKungPaoB4|
|2018-37|23May2018|AnnouncementonCarryingouttheBusinessofAssetSecuritizationofAccountsReceivable|SecuritiesTimesB17,TaKungPaoB4|
|2018-38|23May2018|NoticeonConveningthe2ndExtraordinaryGeneralMeetingof2018|SecuritiesTimesB17,TaKungPaoB4|
|2018-39|25May2018|AnnouncementonSigningtheStrategicCooperationAgreementwithCMSZhiyuanCapital|SecuritiesTimesB32,TaKungPaoB8|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|2018-40|29May2018|AnnouncementontheImplementationofDividendPlanof2017|SecuritiesTimesB114,TaKungPaoB14|
|2018-41|29May2018|Announcementonthewholly-ownedsubsidiary’sOfferingGuaranteetoMajority-ownedSubsidiary|SecuritiesTimesB114,TaKungPaoB14|
|2018-42|31May2018|AnnouncementontheControllingShareholders’PlanningofProvidingtheBusinessofAssetSecuritizationof BusinessFactoringwiththeDifference|SecuritiesTimesB100,TaKungPaoB5|
|2018-43|8June2018|AnnouncementontheResolutionofthe2ndExtraordinaryGeneralMeetingof2018|SecuritiesTimesB40,TaKungPaoB5|
|2018-44|14June2018|AnnouncementonOfferingOverseasLoanunderDomesticGuaranteetoForeignWholly-ownedSubsidiary|SecuritiesTimesB36,TaKungPaoB2|
|2018-45|16June2018|AnnouncementontheResolutionofthe44thMeetingofthe8thBoardofDirectors|SecuritiesTimesB29,TaKungPaoB6|
|2018-46|16June2018|AnnouncementontheTransferof51%EquitiesofKunshanKangshengandRelated-partyTransactions|SecuritiesTimesB29,TaKungPaoB6|
|2018-47|16June2018|IndicativeAnnouncementontheExpectationofWinningtheBidoftheProject|SecuritiesTimesB4,TaKungPaoB6|
|2018-48|20June2018|AnnouncementontheProgressofOfferingGuaranteestothewholly-ownedsubsidiary|SecuritiesTimesB52,TaKungPaoB1|
|2018-49|22June2018|AnnouncementontheProgressofOfferingGuaranteestotheMajority-ownedSubsidiary|SecuritiesTimesB29,TaKungPaoB6|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|2018-50|28June2018|AnnouncementontheResolutionofthe45thMeetingofthe8thBoardofDirectors|SecuritiesTimesB44,TaKungPaoB7|
|2018-51|28June2018|AnnouncementontheInvestmentandEstablishmentofHeadquarterBaseofKonkaOneBeltandOneRoadinChengdu|SecuritiesTimesB44,TaKungPaoB7|
|2018-52|28June2018|AnnouncementonInformationDisclosureofVoluntarinessofReceivingLetterofAcceptance|SecuritiesTimesB44,TaKungPaoB7|
|2018-53|3July2018|AnnouncementonProgressofTransferof51%EquitiesofKunshanKangshengandRelated-partyTransactions|SecuritiesTimesB52,TaKungPaoB5|
|2018-54|3July2018|AnnouncementonProgressofProvidingGuaranteesforWholly-ownedSubsidiaries|SecuritiesTimesB52,TaKungPaoB5|
|2018-55|4July2018|AnnouncementontheChangesofConsultingTelephoneoftheCompany’sInvestors|SecuritiesTimesB77,TaKungPaoB6|
|2018-56|14July2018|Announcementonthe2018InterimEarningsForecasts|SecuritiesTimesB21,TaKungPaoA18|
|2018-57|8August2018|AnnouncementonVolunteerInformationDisclosureofPre-winningtheBidforProject|SecuritiesTimesB33,TaKungPaoB7|
|2018-58|9August2018|AnnouncementonProgressofProvidingGuaranteesforOverseasWholly-ownedSubsidiaries|SecuritiesTimesB41,TaKungPaoB2|
|2018-59|11August2018|AnnouncementonJoint-stockCompany’sWinningtheBidforLandUseRight|SecuritiesTimesB33,TaKungPaoB1|
|2018-60|14August2018|AnnouncementonResolutionsofthe47thMeetingofthe8thBoardof|SecuritiesTimesB21,TaKungPaoA18|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|||Directors||
|2018-61|14August2018|IndicativeAnnouncementonConstructionofZiboHigh-EndEquipmentIndustrialParkbyInvesting|SecuritiesTimesB21,TaKungPaoA18|
|2018-62|14August2018|IndicativeAnnouncementonEstablishingNanjingK-StarCloudNetworkHeadquartersbyInvesting|SecuritiesTimesB25,TaKungPaoA18|
|2018-63|21August2018|AnnouncementonOfferingOverseasLoanunderDomesticGuaranteetoForeignWholly-ownedSubsidiary|SecuritiesTimesB60,TaKungPaoB4|
|2018-64|23August2018|AnnouncementonVolunteerInformationDisclosureofReceivingtheLetterofAcceptance|SecuritiesTimesB29,TaKungPaoB6|
|2018-65|31August2018|Announcementonthe2018InterimReport||
|2018-66|31August2018|AnnouncementontheAbstractofthe2018InterimReport|SecuritiesTimesB48,TaKungPaoB4|
|2018-67|7September2018|AnnouncementonCompletionofRecordRegistrationofPrivatePlacementFundfortheIndustrialM&AFundInitiatedbytheCompany|SecuritiesTimesB32,TaKungPaoA18|
|2018-68|19September2018|AnnouncementonResolutionsofthe49thMeetingofthe8thBoardofDirectors|SecuritiesTimesB81,TaKungPaoB4|
|2018-69|19September2018|AnnouncementonProvidingFinancialAidtoSanjiangRealEstateCo.,Ltd.andRelated-partyTransactions|SecuritiesTimesB82,TaKungPaoB4|
|2018-70|19September2018|AnnouncementonProvidingGuaranteeLineforJoint-stockCompaniesandRelated-partyTransactions|SecuritiesTimesB81,TaKungPaoB4|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|2018-71|19September2018|AnnouncementonExternalGuarantees|SecuritiesTimesB81,TaKungPaoB4|
|2018-72|19September2018|NoticeonConveningthe3rdExtraordinaryGeneralMeetingof2018|SecuritiesTimesB82,TaKungPaoB4|
|2018-73|21September2018|AnnouncementonProgressofProvidingGuaranteesforWholly-ownedSubsidiaries|SecuritiesTimesB84,TaKungPaoB6|
|2018-74|22September2018|AnnouncementonReductionofSharesofShareholders|SecuritiesTimesB25,TaKungPaoB5|
|2018-75|26September2018|AnnouncementonSigningStrategicCooperationAgreementwithShenzhenBinhaiFundManagementCo.,Ltd.|SecuritiesTimesB20,TaKungPaoB2|
|2018-76|9October2018|Announcementonthe3rdExtraordinaryGeneralMeetingof2018|SecuritiesTimesB9,TaKungPaoA18|
|2018-77|13October2018|AnnouncementonProgressofProvidingGuaranteesforMajority-ownedSubsidiaries|SecuritiesTimesB45,TaKungPaoB3|
|2018-78|13October2018|Announcementonthe2018FirstQuarter EarningsForecasts|SecuritiesTimesB45,TaKungPaoB3|
|2018-79|17October2018|AnnouncementonResolutionsofthe50thMeetingofthe8thBoardofDirectors|SecuritiesTimesB28,TaKungPaoB5|
|2018-80|17October2018|AnnouncementonExternalInvestments|SecuritiesTimesB28,TaKungPaoB5|
|2018-81|24October2018|AnnouncementonReceivingNoObjectionLetteronthePrivatePlacementoftheCompany’scorporatebondsin2018MeetingtheTransferConditionsofShenzhenStockExchange|SecuritiesTimesB149,TaKungPaoB10|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|2018-82|27October2018|AnnouncementonWinningtheBiddingforLandforProjectofK-StarCloudNetworkHeadquarters|SecuritiesTimesB80,TaKungPaoB5|
|2018-83|31October2018|2018ThirdQuarterReport||
|2018-84|31October2018|Textofthe2018ThirdQuarterReport|SecuritiesTimesB52,TaKungPaoB6|
|2018-85|31October2018|AnnouncementonResolutionsofthe51stMeetingofthe8thBoardofDirectors|SecuritiesTimesB52,TaKungPaoB6|
|2018-86|31October2018|AnnouncementonExternalGuarantees|SecuritiesTimesB52,TaKungPaoB6|
|2018-87|31October2018|AnnouncementonVolunteerInformationDisclosureofProjectPre-concluded|SecuritiesTimesB88,TaKungPaoB6|
|2018-88|13November2018|AnnouncementonVolunteerInformationDisclosureofReceivingNoticeofBusinessConclusion|SecuritiesTimesB24,TaKungPaoB3|
|2018-89|14November2018|AnnouncementonProgressofProvidingGuaranteesforWholly-ownedSubsidiaries|SecuritiesTimesB20,TaKungPaoB5|
|2018-90|17November2018|AnnouncementonResolutionsofthe52ndMeetingofthe8thBoardofDirectors|SecuritiesTimesB33,TaKungPaoB7|
|2018-91|17November2018|AnnouncementonResolutionsofthe21stMeetingofthe8thSupervisoryCommittee|SecuritiesTimesB33,TaKungPaoB7|
|2018-92|17November2018|NoticeonConveningthe4thExtraordinaryGeneralMeetingof2018|SecuritiesTimesB33,TaKungPaoB7|
|2018-93|30November2018|AnnouncementonProgressofProvidingGuaranteesforMajority-ownedSubsidiaries|SecuritiesTimesB32,TaKungPaoA18|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|2018-94|30November2018|AnnouncementonGeneralElectionofEmployeeSupervisors|SecuritiesTimesB32,TaKungPaoA18|
|2018-95|3December2018|AnnouncementonResolutionsofthe4thExtraordinaryGeneralMeetingof2018|SecuritiesTimesB64,TaKungPaoB6|
|2018-96|5December2018|AnnouncementonResolutionsofthe1stMeetingofthe9thBoardofDirectors|SecuritiesTimesB25,TaKungPaoA21|
|2018-97|5December2018|AnnouncementonResolutionsofthe1stMeetingofthe9thSupervisoryCommittee|SecuritiesTimesB25,TaKungPaoA21|
|2018-98|5December2018|AnnouncementonEstablishingKonka(Chuzhou)SmartAppliancesandEquipmentIndustrialParkbyInvestingandGovernment’sIntentiontoAcquirePlantLandofAnhuiKonka|SecuritiesTimesB25,TaKungPaoA21|
|2018-99|5December2018|AnnouncementonProgressofProvidingGuaranteesforMajority-ownedSubsidiaries|SecuritiesTimesB25,TaKungPaoA21|
|2018-100|22December2018|AnnouncementonProgressofProvidingGuaranteesforMajority-ownedSubsidiaries|SecuritiesTimesB17,TaKungPaoB3|
|2018-101|25December2018|AnnouncementonResolutionsofthe2ndMeetingofthe9thBoardofDirectors|SecuritiesTimesB32,TaKungPaoB5|
|2018-102|25December2018|AnnouncementonAssignmentofSharesofChuzhouHuikeIntelligentHouseholdApplianceIndustrialInvestmentPartnership(LimitedPartnership)|SecuritiesTimesB32,TaKungPaoB5|

XX SignificantEvents ofSubsidiaries
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2018 Part VI Share Changes and Shareholder Information
I. ShareChanges
1.ShareChanges
Unit:share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Before||Increase/decreaseintheReportingPeriod(+/-)|||||After||
||Shares|Percentage(%)|Newissues|Sharesasdividendconvertedfromprofit|Sharesasdividendconvertedfromcapitalreserves|Other|Subtotal|Shares|Percentage(%)|
|1.Restrictedshares|19,500|0.00%||||||19,500|0.00%|
|1.3 Shares held byother domesticinvestors|19,500|0.00%||||||19,500|0.00%|
|Amongwhich:Sharesheld by domesticlegalpersons||||||||||
|Sharesheld by domesticnaturalpersons|19,500|0.00%||||||19,500|0.00%|
|2.Unrestrictedshares|2,407,925,908|100%||||||2,407,925,908|100%|
|2.1RMB-denominatedordinaryshares|1,596,574,300|66.31%||||||1,596,574,300|66.31%|
|2.2 Domesticallylistedforeignshares|811,351,608|33.69%||||||811,351,608|33.69%|
|3.Totalshares|2,407,945,408|100%||||||2,407,945,408|100%|

 Reasons for share changes:
□Applicable√ Not applicable
Approval ofshare changes:
KonkaGroupCo.,Ltd. AnnualReport2018□Applicable√ Not applicable
Transfer of share ownership:
□Applicable√ Not applicable
Progress onany share repurchases:
□Applicable√ Not applicable
Progress onreducing therepurchased shares bymeans ofcentralized bidding:
□Applicable√ Not applicable
Effects of share changes on the basic and diluted earnings per share, equity per share attributable to theCompany’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period, respectively:
□Applicable√ Not applicable
Other information that the Company considers necessary or is required by the securities regulator to be disclosed:
□Applicable√ Not applicable
2.ChangesinRestrictedShares
□Applicable√Notapplicable
II. Issuance andListingof Securities
1.Securities (ExclusiveofPreferred Shares) Issued inthe Reporting Period
□Applicable√ Not applicable
2.Changes toTotal Shares,ShareholderStructure andAsset andLiability Structures
□Applicable√ Not applicable
3.ExistingStaff-Held Shares
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2018 III Shareholders andActual Controller
1.Shareholders andTheirShareholdingsat thePeriod-End
Unit:share
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Numberofordinaryshareholders|89,196|Number ofordinaryshareholders atthe month-endprior to thedisclosure of thisReport||88,015||Number of preferredshareholders withresumed voting rights(ifany)||0||Number of preferredshareholders with resumedvoting rights at themonth-end prior to thedisclosure of this Report (ifany)(seenote8)||||0|
|5%orgreatershareholdersortop10shareholders|||||||||||||||
|Nameofshareholder||Natureofshareholder|Shareholdingpercentage||Totalsharesheldattheperiod-end||Increase/decreaseintheReportingPeriod||Restrictedsharesheld||Unrestrictedsharesheld|Sharesinpledgeorfrozen|||
|||||||||||||Status|Shares||
|OVERSEASCHINESETOWNENTERPRISESCO.,LTD||State-ownedlegalperson|21.75%||523,746,932||0||0||523,746,932||||
|CITIC SECURITIESBROKERAGE(HONGKONG) CO.,LTD.||Foreign legalperson|7.56%||182,100,202||0||0||182,100,202||||
|HOLYTIMEGROUPLIMITED||Foreign legalperson|2.33%||56,139,100||89,276||0||56,139,100||||
|GUOYUANSECURITIESBROKER(HK)CO.,LTD.||Foreign legalperson|2.25%||54,203,779||-551,366||0||54,203,779||||
|GAOLINGFUND,L.P.||Foreign legalperson|2.19%||52,801,250||0||0||52,801,250||||
|ZHANGXIAOYU||Domesticnaturalperson|0.99%||23,835,278||23,835,278||0||23,835,278||||
|CHINAMERCHANTSSECURITIES(HK)LIMITED||State-ownedlegalperson|0.93%||22,475,124||643,104||0||22,475,124||||

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|NAMNGAI|Foreignnaturalperson|0.90%|21,712,140||-307,900|0||21,712,140||
|YUNNANINTERNATIONALTRUSTCO.,LTD-JULINO.48SINGLECAPITALTRUST|Other|0.81%|19,530,380||-686,480|0||19,530,380||
|YUNNANINTERNATIONALTRUSTCO.,LTD-JULINO.49SINGLECAPITALTRUST|Other|0.72%|17,408,616||10,272,514|0||17,408,616||
|Strategic investor or general legalperson becoming a top-10 ordinaryshareholder due to rights issue (if any)(seenote3)||N/A||||||||
|Related or acting-in-concert partiesamongtheshareholdersabove||HappyBloomInvestmentLimited,awholly-ownedsubsidiaryoftheCompany’sfirstmajority shareholder Overseas Chinese Town Enterprises Co. (“OCT Group” forshort), holds 180,001,110 and 18,360,000 ordinary shares in the Companyrespectively through CITIC Securities Brokerage (Hong Kong) Co., Ltd. and ChinaMerchantsSecurities(HK) Limited. HappyBloomInvestment Limited andOverseasChinese Town Enterprises Co. are parties acting in concert. Other than that, it isunknown whether the other shareholders are related parties or acting-in-concertpartiesornot.||||||||
|Top10unrestrictedshareholders||||||||||
|Nameofshareholder||||Unrestrictedsharesheldattheperiod-end|||Sharesbytype|||
||||||||Type||Shares|
|OVERSEASCHINESETOWNENTERPRISESCO.,LTD||||523,746,932|||RMB-denominatedordinarystock||523,746,932|
|CITIC SECURITIES BROKERAGE (HONG KONG)CO.,LTD.||||182,100,202|||Domestically listedforeignstock||182,100,202|
|HOLYTIMEGROUPLIMITED||||56,139,100|||Domestically listedforeignstock||56,139,100|
|GUOYUANSECURITIESBROKER(HK)CO.,LTD.||||54,203,779|||Domestically listedforeignstock||54,203,779|
|GAOLINGFUND,L.P.||||52,801,250|||Domestically listedforeignstock||52,801,250|
|ZHANGXIAOYU||||23,835,278|||RMB-denominated||23,835,278|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
||||ordinarystock||
|CHINAMERCHANTSSECURITIES(HK)LIMITED||22,475,124|Domestically listedforeignstock|22,475,124|
|NAM NGAI||21,712,140|Domestically listedforeignstock|21,712,140|
|YUNNANINTERNATIONALTRUSTCO.,LTD-JULINO.48SINGLECAPITALTRUST||19,530,380|RMB-denominatedordinarystock|19,530,380|
|YUNNANINTERNATIONALTRUSTCO.,LTD-JULINO.49SINGLECAPITALTRUST||17,408,616|RMB-denominatedordinarystock|17,408,616|
|Relatedoracting-in-concertpartiesamongtop10unrestrictedpublicshareholders,aswellasbetweentop10unrestrictedpublicshareholdersandtop10shareholders|Happy Bloom Investment Limited, a wholly-owned subsidiary of the Company’sfirst majority shareholder Overseas Chinese Town Enterprises Co. (“OCT Group”for short), holds 180,001,110 and 18,360,000 common shares in the CompanyrespectivelythroughCITICSecuritiesBrokerage(HongKong)Co.,Ltd.andChinaMerchants Securities (HK) Limited. Happy Bloom Investment Limited andOverseas Chinese Town Enterprises Co. are parties acting in concert. Other thanthat, it is unknown whether the other shareholders are related parties oracting-in-concertpartiesornot.||||
|Top 10 ordinary shareholders involved insecuritiesmargintrading(ifany)(seenote4)|ZhangXiaoyuholds23,835,278A-sharesintheCompanythroughheraccountofcollateralsecuritiesformargintradinginHuaxiSecuritiesCo.,Ltd.||||

Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders oftheCompanyconductedanypromissoryrepoduringtheReportingPeriod.
□Yea√ No
No suchcases in theReporting Period.
2.Controlling Shareholder
Nature ofthe controlling shareholder: Controlledbya central state-owned legal person
Type ofthecontrolling shareholder: legal person
||||||
|-|-|-|-|-|
|Nameofactualcontroller|Legalrepresentative/personincharge|Dateofestablishment|Unifiedsocialcreditcode|Principalactivity|
|OverseasChineseTownEnterprisesCo.|DuanXiannian|11November1985|91440300190346175T|Export of textile, lightindustrialproducts,etc;importof self-used goods inShenzhen, mechanicalequipment, light industrialproducts, etc. as approved bythe relevant authorities of|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|||Shenzhen (under GovernmentDocument JMB [92]WJMGTSZZ No. A19024);compensation trade;investment in tourism andrelevant cultural industry(including art performance,entertainment and theirservices, etc), industry, realestate, commerce & trade,packaging, decoration andinvestment in printingindustry. The convert ofexport commodities intodomestic sale and thedomestic sales of importcommodities. Travelling,rental of warehouses, cultureand art, bonded warehouse ofcar donation, convention andexhibition services (theprojects involved in licensemanagement can be operatedafter getting the relevantlicense first ); sales ofautomobile (sedan carincluded)|
|Actualcontroller’sholdingsinotherlistedcompaniesathomeorabroadintheReportingPeriod|As of 31 December 2018, Overseas Chinese Town Enterprises Co. held 47.38% equity ofShenzhenOverseasChineseTownCo.,Ltd.(acompanylistedonthemainBoardofShenzhenStock Exchange, SZ. 000069). Meanwhile, Shenzhen Overseas Chinese Town Co., Ltd.indirectly held 70.94% equity of OCT (Asia) Holdings Ltd. (a company listed on the mainBoard of Hong Kong Stock Exchange, 3366.HK). Overseas Chinese Town Enterprises Co.indirectlyheld49.52%equityofYunnanTourismCo.,Ltd(acompanylistedontheSMEBoardof Shenzhen Stock Exchange, SZ.002059) throughincreasing capital toYunnan ExpoTourismGroupHoldings.,Ltd.||

ChangeofthecontrollingshareholderintheReportingPeriod:
□Applicable√Notapplicable
No suchcases in theReporting Period.
3.Actual Controller and Its Acting-in-ConcertParties
Nature ofthe actual controller: Central institutionfor state-owned assets management
KonkaGroupCo.,Ltd. AnnualReport2018 Type oftheactual controller: legal person
||||||
|-|-|-|-|-|
|Nameofactualcontroller|Legalrepresentative/personincharge|Dateofestablishment|Unifiedsocialcreditcode|Principalactivity|
|State-owned Assets SupervisionandAdministrationCommissionoftheStateCouncil|HaoPeng||Notapplicable|Notapplicable|
|Other listed companiesat home or abroadcontrolled by theactual controller in theReportingPeriod||||Notapplicable|

Change oftheactual controller during theReporting Period:
□Applicable√ Not applicable
No suchcases in theReporting Period.
Ownership and control relations between theactual controller and theCompany:
State-OwnedAssets Supervision andAdministration
Commissionof theStateCouncil
100%
Overseas ChineseTownEnterprises Co.and its
whollyowned subsidiaries
29.999997%
KonkaGroup Co.,Ltd.
Indicate by tick mark whether the actual controller controls the Company via trust or other ways of asset management.
□Applicable√ Not applicable
4.Other10% orGreater Corporate Shareholders
□Applicable√ Not applicable
5. Limitations on Shareholding Decrease by theCompany’s Controlling Shareholder, Actual Controller, Reorganizer andOtherCommitment Makers
√Applicable□ Not applicable
In September 2018, Shenzhen Overseas Chinese Town Capital Investment Management Co., Ltd., a
KonkaGroupCo.,Ltd. AnnualReport2018 wholly-owned subsidiary of OCT Group, the controlling shareholder of the Company, reduced its holding of 7,183,800 shares of the Company through secondary market trading. Before the reduction, OCT Group and its wholly-owned subsidiaries Happy Bloom Investment Limited and Shenzhen Overseas Chinese Town Capital Investment Management Co., Ltd. held a total of 729,567,342 Konka Group-A-shares (000016) and B-shares (200016) (unrestricted ordinary shares), accounting for30.298334% of theCompany’s equity.After the reduction, the aforementioned three shareholders hold a total of 722,383,542 Konka Group-A shares (000016) and B-shares (200016) (unrestricted ordinary shares), accounting for29.999997%oftheCompany’s total share capital.
KonkaGroupCo.,Ltd. AnnualReport2018 Part VII Preferred Shares
□Applicable√Notapplicable
No preferred shares in theReporting Period.
KonkaGroupCo.,Ltd. AnnualReport2018 Part VIII Directors, Supervisors, Senior Management and Staff I ChangeinShareholdings ofDirectors, Supervisors and SeniorManagement
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Name|Officetitle|Incumbent/Former|Gender|Age|Startoftenure|Endoftenure|Beginningshareholding|IncreaseintheReportingPeriod|DecreaseintheReportingPeriod|Otherincrease/decrease|Endingshareholding|
|LiuFengxi|DirectorandChairmanoftheBoard|Incumbent|Male|47|3December2018|3December2021|0|0|0|0|0|
|HeHaibin|Director|Incumbent|Male|45|3December2018|3December2021|0|0|0|0|0|
|ZhangJing|Director|Incumbent|Male|37|3December2018|3December2021|0|0|0|0|0|
|ZhouBin|Director|Incumbent|Male|40|3December2018|3December2021|0|0|0|0|0|
|SunShengdian|Independentdirector|Incumbent|Male|64|3December2018|3December2021|0|0|0|0|0|
|WangShuguang|Independentdirector|Incumbent|Male|48|3December2018|3December2021|0|0|0|0|0|
|DengChunhua|Independentdirector|Incumbent|Female|56|3December2018|3December2021|0|0|0|0|0|
|WangYoulai|Supervisor,chairmanoftheSupervisoryCommittee|Incumbent|Male|58|3December2018|3December2021|0|0|0|0|0|
|YangGuobin|Supervisor|Incumbent|Male|50|3December2018|3December2021|0|0|0|0|0|
|LiJun|Employeesupervisor|Incumbent|Male|48|29November|3December2021|0|0|0|0|0|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||2018|||||||
|ZhouBin|President|Incumbent|Male|40|10March2017|10March2020|0|0|0|0|0|
|HeJianjun|Vicepresident|Incumbent|Male|49|10March2017|10March2020|0|0|0|0|0|
|LiHongtao|Vicepresident|Incumbent|Male|51|10March2017|10March2020|0|0|0|0|0|
|WuYongjun|BoardSecretary|Incumbent|Male|44|10March2017|10March2020|0|0|0|0|0|
|LiChunlei|CFO|Incumbent|Male|46|10March2017|10March2020|0|0|0|0|0|
|YangBo|Vicepresident|Incumbent|Male|49|10March2017|10March2020|0|0|0|0|0|
|CaoShiping|Vicepresident|Incumbent|Male|41|10March2017|10March2020|0|0|0|0|0|
|SunQingyan|Vicepresident|Incumbent|Male|47|18April2017|10March2020|26,000|0|0|0|26,000|
|JinQingjun|Director|Former|Male|62|28May2015|3December2018|0|0|0|0|0|
|XiaoZuhe|Independentdirector|Former|Male|53|28May2015|3December2018|0|0|0|0|0|
|ZhangShuhua|Independentdirector|Former|Male|54|28May2015|3December2018|0|0|0|0|0|
|HaoGang|Supervisor|Former|Male|46|28May2015|3December2018|0|0|0|0|0|
|HaoGang|ChairmanoftheSupervisoryCommittee|Former|Male|46|4June2015|3December2018|0|0|0|0|0|
|Total|--|--|--|--|--|--|26,000|0|0|0|26,000|

 II ChangeofDirectors, Supervisors andSeniorManagement
√Applicable□Not applicable
||||||
|-|-|-|-|-|
|Name|Officetitle|Typeofchange|Dateofchange|Reasonforchange|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|LiuFengxi|Director|Engaged|3December2018|Electedasdirectorthroughshareholdersmeeting|
|LiuFengxi|ChairmanoftheBoard|Engaged|3December2018|ElectedasChairmanoftheBoardthroughBoardofDirectors|
|HeHaibin|Director|Engaged|3December2018|Electedasdirectorthroughshareholdersmeeting|
|ZhangJing|Director|Engaged|3December2018|Electedasdirectorthroughshareholdersmeeting|
|ZhouBin|Director|Engaged|3December2018|Electedasdirectorthroughshareholdersmeeting|
|SunShengdian|Independentdirector|Engaged|3December2018|Electedasindependentdirectorthroughshareholdersmeeting|
|WangShuguang|Independentdirector|Engaged|3December2018|Electedasindependentdirectorthroughshareholdersmeeting|
|DengChunhua|Independentdirector|Engaged|3December2018|Electedasindependentdirectorthroughshareholdersmeeting|
|WangYoulai|Supervisor|Engaged|3December2018|Electedassupervisorthroughshareholdersmeeting|
|WangYoulai|chairmanoftheSupervisoryCommittee|Engaged|3December2018|ElectedaschairmanoftheSupervisoryCommitteethroughtheSupervisoryCommittee|
|YangGuobin|Supervisor|Engaged|3December2018|Electedassupervisorthroughshareholdersmeeting|
|LiJun|Employeesupervisor|Engaged|29November2018|Electedasemployeesupervisorthroughcongressofworksandstaff|
|JinQingjun|Director|Expired|3December2018|Theservicetermwasexpired|
|XiaoZuhe|Independentdirector|Expired|3December2018|Theservicetermwasexpired|
|ZhangShuhua|Independentdirector|Expired|3December2018|Theservicetermwasexpired|
|HaoGang|Supervisor|Expired|3December2018|Theservicetermwasexpired|
|HaoGang|ChairmanoftheSupervisoryCommittee|Expired|3December2018|Theservicetermwasexpired|

KonkaGroupCo.,Ltd. AnnualReport2018 III Biographical Information
Professional backgrounds, major work experience and current duties in the Company of the incumbent directors, supervisors and senior management:
1.Director
Liu Fengxi, male, born in 1972, was the Chairman of the Board with a master degree. He once worked as the marketing GM for the multi-media division of Konka Group,Assistant GM and then Vice GM of Shenzhen Konka Telecommunications Technology Co., Ltd., Chief of the Operation Management Center of Konka Group, Assistant to President and Vice President of Konka Group, etc.And now heis acting as theBoard Chairman and CEOofKonka Group.
He Haibin, male, born in 1974, a senior accountant, was a director of the Company with a master degree. He once worked as the Chief of Audit 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 Chinese Town Group Corporation and as CFO in Overseas Chinese Town Hong Kong Limited, GM of OCT Capital Investment Management Co., Ltd., the Chief Accountant of Shenzhen OCT Co., Ltd., and Chief of Business Management Division in Overseas Chinese Town Enterprises Co. etc. Now he serves as the Standing Committee and Board Secretary the ChiefAccountant of Oversees ChineseTown Group Corporation, and the Chairman of the Board of Shenzhen OCT Capital Investment Management Co., Ltd, director of OCT (Yunnan) Investment Co., Ltd, Executive Director of Overseas Chinese City (Asia) Holding Co., Ltd., as well as a director ofKonka Group.
Zhang Jing, Director, male, was born in 1982, MBA. He served as Manager of theCEO’s Office in OCT Group, Senior Manager of the Strategic Development Department in Shenzhen OCTCo., Ltd., a member of the Preparatory Work Group of Qingdao OCT, Director of the Administration Department (Deputy Director of the Party Committee Office) in Shenzhen OCT Properties Co., Ltd., Deputy Director and Director of the Strategic Development Department in Shenzhen OCT Co., Ltd., General Manager of the Strategic Planning Department in OCT Group, General Manager of the Corporate Management Department in OCT Group, and Director of the Corporate Management Department in Shenzhen OCTCo., Ltd.. Currently, he serves as Executive Deputy General Manager of OCT West Investment Co., Ltd., Chairman and General Manager ofXi’an OCT Industry Co., Ltd., Chairman and General Manager ofXi’an Qujiang OCT Investment Development Co., Ltd., General Manager ofXi’an OCT Land Co., Ltd., General Manager ofXi’an Fengdong OCT Development Co., Ltd., Director of OCT (HK) Co., Ltd., Non-Executive Director of OCT (Asia), Chairman of OCT (Beijing) Business Management Co., Ltd., Vice Chairman of Huawan Healthy Industry Development Co., Ltd., Director of OCT (Yunnan) Investment Co., Ltd. and Director of Konka Group.
Zhou Bin, male, born in 1979, was the director and president of the Company with a bachelor degree. He once served as the director assistant, deputy director and director in Operating Management Center in Konka Group, assistant of the president in the Board of Directors and
KonkaGroupCo.,Ltd. AnnualReport2018 Director in Operating Management Center and others. Now, he acts as the director and president in Konka Group.
2.IndependentDirector
Sun Shengdian, a male senior economist, born in 1955, was the independent director of the Company with a doctor degree in engineering. Formerly vice GM, deputy secretary of the Party committee, GM and president of Shenzhen SEG, Hitachi Color Display Devices Co., Ltd., president, secretary of Party Committee of Shenzhen SEG Group Co., Ltd. director of Shenzhen China Star Optoelectronics Technology Co., Ltd., independent director of Skyworth Holding Ltd., and the head of Shenzhen Electronics Industries Association. Now, he serves as the vice president of Shenzhen Huakong SEG Co., Ltd., the director of China Vanke Co., Ltd, and independent director of Konka Group.
Wang Shuguang, Independent Director, male, was born in 1971, PhD in economics, professor and doctoral supervisor. He served as Independent Director of Yantai Rural Commercial Bank, Jinan Rural Commercial Bank, Ningbo Yuyao Rural Commercial Bank and SDIC Zhonglu, and External Supervisor and Convener of the Board of Supervisors of Industrial Bank Co., Ltd. Currently, he serves as Professor and Doctoral Supervisor in the School of Economics of Peking University, Executive Deputy Director of the Institute for Cultural Industries, Peking University and Independent Director ofKonka Group.
Deng Chunhua, Independent Director, female, ethnic group of Han, born in 1963, MBA, professor andmaster’s supervisor of accounting, Certified Public Accountant in China (non-practicing member). She served as Chief Accountant and Project Manager of WUYIGE Certified Public Accounts LLP, Zhongnan University of Economics and Law, Member of the Fifth Session of the Corporate Special Committee of the Chinese Association of Quantitative Economics and Member of the Professional Jury Committee of HubeiAdministration of Sport. From July 1984 till now, she has been teaching in the School of Accounting of Zhongnan University of Economics and Law as Assistant Lecturer, Lecturer, Associate Professor and Professor. Currently, she serves as Independent Director ofJiangsu Pomlead Co., Ltdand Independent Directorof KonkaGroup. 3.Supervisor
WangYoulai, a male engineer, born in 1961, was the chairman of the Supervisory Committee of the Company with a doctor degree. He formerly worked as the business manager of the Quality Department in Konka Group, assistant GM, vice GM, and vice president of Konka Group, Deputy Director and Director of the Administration Department of Overseas Chinese Town Enterprise Co., and joint party secretary of General Headquarters. Presently he is working as joint party secretary of General Headquarters in Overseas Chinese Town Enterprises Co. and director of Shenzhen Guangming Group Co., Ltd and OCT (Hainan) Group Co., Ltd, and the chairman of the Supervisory Committee ofKonka Group.
Yang Guobin, Supervisor, male, was born in 1969,Bachelor’s Degree, Certified PublicAccountant. He served as Deputy Director of the Finance Department of OCT Group, CFO of Konka Group and Deputy Director of the Corporate Management Department of OCTGroup. Currently, he serves as a full-time Director in OCT Group, Director of Shenzhen Guangming Group and Supervisor of
KonkaGroupCo.,Ltd. AnnualReport2018 Konka Group.
Li Jun, male, born in 1971, member of Communist Party, was an employee supervisor of the Company with a bachelor degree. Formerly worked as the financial manager of Nanchang Branch of Telecommunications Technology Co., Ltd., Senior Manager of the Financial Department in Telecommunications Technology Co., Ltd., the Senior Manager and assistant to the chief and deputy director of Auditing and Legal Affairs Department in Konka Group, leader of discipline inspection commission of Konka Group, and employee supervisor of the 8th Supervisory Committee of konka Group. Presently working as the full-time deputy secretary of discipline inspection commission of Konka Group, the director of Discipline inspection and Supervision Center, vice chief of the Auditing and Legal Affairs Department, GM of the Internal Control and Risk Management Department.
4.SeniorExecutive
Zhou Bin, male, born in 1979, was the director and president of the Company with a bachelor degree. He once served as the director assistant, deputy director and director in Operating Management Center in Konka Group, assistant of the president in the Board of Directors and Director in Operating Management Center and others. Now, he acts as the director and president in Konka Group.
He Jianjun, a male economist, Han nationality,born in 1969, was the vice president of the Company with a bachelor degree. He has served successfully as Deputy Chief of Secretariat of the Board, Deputy Chief and Chief of Strategic Development Dept. and Secretary to the Board as well as vice president in KonkaGroup, etc. He nowis acting asVice President ofKonka Group.
Li Hongtao, male, Han nationality, born in 1968, was the vice president of the Company with a bachelor degree. He successively took the post such as Assistant to GM, GM, Chairman of the Board and GM of Shenzhen Konka Telecommunication Technology Co., Ltd and Assistant to President and vice president of Konka Group etc. He now is acting as Vice President of Konka Group.
Wu Yongjun, male, Han nationality, born in 1975, was the Board Secretary with a master degree. Formerly he worked as the senior manager of Secretariat, assistant to the chief, vice chief, chief, Securities Affairs representative and Board Secretary in Konka Group. Presently he is working as the secretary of theboardof directors ofKonka Group.
Li Chunlei, male, Han nationality, born in 1973, was the CFO of the Company with a master degree. Once served as the director in Real Estate Business Division in Konka Group, vice GM and GM in Kunshan Kangsheng Investment Development Co., Ltd., deputy director (preside the work) and director in Strategic Development Center, GM in Financial Center and GM in Asset Settlement Center andothers, now heacts as theCFO inKonka Group.
Yang Bo, male, Han nationality, born in 1970, was the vice president of the Company with a master
KonkaGroupCo.,Ltd. AnnualReport2018 degree. Once served as the director in Shenzhen Cable Television Education Financial Channel, director in the market sales and support region of US Tailiyang Communications Company, GM in Program Operating Department in Shenzhen Topway Video Communication Co., Ltd., director and GM in Shenzhen Tianhua Century Media Co., Ltd., GM in Market Sales Center in Shenzhen Topway Video Communication Co., Ltd. and others, he acts as the vice president in Konka Group presently.
Cao Shiping, male, Han nationality, born in 1978, was the vice president of the Company with a master degree. Once served as the GM in Jinzhou Branch and Tianjin Branch of Konka Group Multi-media, GM in Multi-media Business Division Customer Cooperation Department, vice GM in Multi-media Marketing Business Division, vice GM in Multi-media Business Division and GM in Marketing Center, GM in Multi-media Business Division, GM in Internet Business Division and others, heacts as thevice president inKonka Group.
Sun Qingyan, a male senior economist, Han nationality, born in 1972, was the vice president of the Company with a doctor degree. Once served as the tutor in Northeast University of Finance and Economies, vice GM in Shenzhen Huaixin Enterprise Investment Consulting Co., Ltd., CEO in Shenzhen Xinheng Lida Capital Management Co., Ltd., vice GM in Shanying Investment Management Co., Ltd., GM in Shenzhen Shenwo Asset Management Co., Ltd. and others, he now acts as thevice president of KonkaGroup.
Offices held concurrently in shareholding entities:
√Applicable□Not applicable
|||||||
|-|-|-|-|-|-|
|Name|Shareholdingentity|Officeheldintheshareholdingentity|Startoftenure|Endoftenure|Remunerationorallowancefromtheshareholdingentity|
|LiuFengxi|OCTEnterprisesCo.|PartyCommitteeStandingCommitteeandviceGM|22February2016||Yes|
|HeHaibin|OCTEnterprisesCo.|PartyCommitteeStandingCommittee,BoardSecretary,andchiefaccountant|30January2018||Yes|
||ShenzhenOCTCapitalInvestmentManagementCo.,Ltd|ChairmanoftheBoard|8February2018|||
||OCT(Yunnan) InvestmentCo.,Ltd|Director|18December2018|||
||OverseasChineseCity(Asia)HoldingCo.,Ltd.|Executivedirector|5JUN2017|||
|Zhang|OverseasChineseTown(Asia)|Non-executivedirector|30March2017||Yes|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Jing|HoldingsLimited||||
||OCT(Beijing)BusinessManagementCo.,Ltd.|ChairmanoftheBoard|31March2017||
||OCT(Yunnan) InvestmentCo.,Ltd|Director|18January2018||
||OCTWestInvestmentCo.,Ltd.|DeputyGeneralManager|14March2019||
||Xi’anOCTIndustryCo.,Ltd.|ChairmanoftheBoard,GM|14March2019||
||Xi’anQujiangOCTInvestmentDevelopmentCo.,Ltd.|ChairmanoftheBoard,GM|14March2019||
||Xi’anOCTLandCo.,Ltd|GM|14March2019||
||Xi’anFengdongOCTDevelopmentCo.,Ltd|GM|14March2019||
||HuawanHealthIndustryDevelopmentCo.,Ltd.|ViceChairman|21September2018||
|WangYoulai|OCTEnterprisesCo.|Full-timedirector|7March2018|Yes|
||ShenzhenGuangmingGroupCo.,Ltd|Director|25April2018||
||OCT(Hainan)GroupCo.,Ltd|Director|29May2018||
|YangGuobin|OCTEnterprisesCo.|Full-timedirectorinBoardOffice|7March2018|Yes|
|Notes|1.Excepttheabovesituation,otherdirectors,supervisorsandseniormanagementdidn’tholdanypositionintheshareholders’units.2.ItisunknowntheendingdateofthepostsofMr.LiuFengxi,Mr.HeHaibin,Mr.ZhangJing,Mr.WangYoulai,andMr.yangGuobinheldintheshareholders’units.||||

Offices held concurrently in otherentities:
√Applicable□Not applicable
|||||||
|-|-|-|-|-|-|
|Name|Otherentity|Officeheldintheentity|Startoftenure|Endoftenure|Remunerationorallowancefromtheentity|
|SunShengdian|ShenzhenHuakongSEGCo.,Ltd|Vicepresident|8April2013|||
|SunShengdian|ChinaVankeCo.,Ltd|Director|30June2018||Yes|
|WangShuguang|SchoolofEconomicsofPekingUniversity|Professor|||Yes|
|WangShuguang|InstituteforCulturalIndustriesofPekingUniversity|Deputydirector||||
|DengChunhua|ZhongnanUniversityofEconomicsandLaw|Professor|||Yes|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|DengChunhua|JiangsuPomleadCo.,Ltd|Independentdirector|

Punishments imposed in the recent three years bythe securities regulator on the incumbent directors, supervisors and senior management as well as thosewho left inthe ReportingPeriod:
□Applicable√ Not applicable
IVRemuneration ofDirectors, Supervisors andSeniorManagement
Decision-making procedure, determination basis and actual payments of remuneration for directors, supervisors and senior management:
1. The salary of directors and supervisors of the Company should be submitted to the shareholders meeting forreview after theapproval and consent bytheBoard ofdirectors.
Referred to the salary level of the Directors and Supervisor of the domestic listed companies of same industry, the salary proposal of the Director and Supervisors of the Company which approved and reviewed by the 2nd Extraordinary General Meeting of 2015 were as follows: (1) the basic annual salary standard of the Board Chairman was of RMB1.2 million, the subsidy standard of other Directors (excluding the Directors serving in the Company) was of RMB0.3 million per person per year and the subsidy standard of the Supervisors (excluding the Employee Supervisors) was of RMB0.2 million per person per year; which was executed since June 2015. (2) the above standards were all pre-tax standard with the individual income tax burdened in person as well as the Company withheld and remitted tax.
Other treatment for independent directors: travel expense when they went to attend the Board sessions, Supervisory sessions orShareholders’General Meetings and the expenses when they were performing their duties as stipulated in the relevant regulations and the Articles of Association and other relevant systems, allthese could bereported fordeletion.
The Board of Directors determined the remuneration of senior management staffs referring to the following factors: a. scope of jobs and responsibility shouldered; b. actual profit of the Company; c. market remuneration level in thesame industryand samearea.
Remuneration of the directors, supervisors and senior management of the Company during the Reporting Period
Unit:RMB'0,000
||||||||
|-|-|-|-|-|-|-|
|Name|Officetitle|Gender|Age|Incumbent/Former|Totalbefore-taxremunerationfromtheCompany|Anyremunerationfromrelatedparty|
|LiuFengxi|ChairmanoftheBoardandCEO|Male|47|Incumbent|7.21|Yes|
|HeHaibin|Director|Male|45|Incumbent|0|No|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||||
|-|-|-|-|-|-|-|
|ZhangJing|Director|Male|37|Incumbent|0|Yes|
|ZhouBin|Directorandpresident|Male|40|Incumbent|395.24|Yes|
|SunShengdian|Independentdirector|Male|64|Incumbent|7.5|No|
|WangShuguang|Independentdirector|Male|48|Incumbent|2.5|No|
|DengChunhua|Independentdirector|Female|56|Incumbent|2.5|No|
|WangYoulai|ChairmanoftheSupervisoryCommittee|Male|58|Incumbent|0|Yes|
|YangGuobin|Supervisor|Male|50|Incumbent|0|Yes|
|LiJun|Employeesupervisor|Male|48|Incumbent|105.49|No|
|HeJianjun|Vicepresident|Male|49|Incumbent|236.13|No|
|LiHongtao|Vicepresident|Male|51|Incumbent|228.64|No|
|WuYongjun|Boardsecretary|Male|44|Incumbent|236.20|No|
|LiChunlei|CFO|Male|46|Incumbent|216.63|No|
|YangBo|Vicepresident|Male|49|Incumbent|189.86|No|
|CaoShiping|Vicepresident|Male|41|Incumbent|251.37|No|
|SunQingyan|Vicepresident|Male|47|Incumbent|171.15|No|
|JinQingjun|Director|Male|62|Former|27.5|No|
|XiaoZuhe|Independentdirector|Male|53|Former|27.5|Yes|
|ZhangShuhua|Independentdirector|Male|54|Former|27.5|No|
|HaoGang|ChairmanoftheSupervisoryCommittee|Male|46|Former|0|No|
|Total|||||2132.92||

Equity incentives for directors, supervisors and seniormanagement in theReporting Period:
□Applicable□Not applicable
V Employees
1.Number, FunctionsandEducational Backgrounds ofEmployees
|||
|-|-|
|Numberofin-serviceemployeesoftheCompanyastheparent|1,826|
|Numberofin-serviceemployeesofmajorsubsidiaries|17,139|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|Totalnumberofin-serviceemployees|18,965|
|TotalnumberofpaidemployeesintheReportingPeriod|18,965|
|NumberofretireestowhomtheCompanyastheparentoritsmajorsubsidiariesneedtopayretirementpensions|0|
|Functions||
|Function|Employees|
|Production|9,286|
|Sales|6,106|
|Technical|1,467|
|Financial|680|
|Administrative|1,426|
|Total|18,965|
|Educationalbackgrounds||
|Educationalbackground|Employees|
|Masterandabove|164|
|Bachelor|2,592|
|Juniorcollege|7,133|
|Highschoolandbelow|9,076|
|Total|18,965|

 2.EmployeeRemunerationPolicy
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 andfulfillment ofthebusiness performance of theemployee.
3.EmployeeTrainingPlans
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 2018, guided by closing to the business needs, the Company centralized the superior resources to
KonkaGroupCo.,Ltd. AnnualReport2018 promote the cultivation of key talents.And it organized and carried out the open class project for all the employees, and organized and carried out the newemployee’s training& cultivation projects respectively for the graduates from campus recruiting and personnel from social recruitment. Meanwhile, it centralized to organize the pointed the training projects of general management skills and post professional knowledge, etc for the personnel from marketing,R&D, manufacturing, financial and human resources systems, so as tobettercomplete its annual training plan.
4.LaborOutsourcing
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2018 Part IX Corporate Governance
I General 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 theArticles ofAssociation andAdministrative Method on Provision of External Financial Aids as well as Management System on Investors Relationship, continuously perfected the corporate governance structure and standardized theCompany’s operation. By the end of the Reporting Period, the actual conditions of corporate governance basically met the requirements of the regulatory documents in respect of corporate governance structure of listed companies issued byCSRC.
(I) Shareholders andtheShareholders’General Meeting
The Company drew up Articles of Association and Rules for Procedure ofShareholders’ General Meeting, ensured that all shareholders, in particular medium and minor shareholders, enjoy legal rights and equal standard. In the Reporting Period, the Company was able to publish announcement onShareholders’ General Meetings in advance, convenedShareholders’ General Meeting with strictly accordance to relevant requirements, so as to enable the shareholders have their rights of information to theCompany’s material issues and the participation rights. In 2018, the Company convened fiveShareholders’ 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 and theinternal departments of theCompany functioned independently.
(III) Directors and theBoard ofDirectors
KonkaGroupCo.,Ltd. AnnualReport2018 The number and structure of the Board Bureau of the Company were in compliance with laws and regulations. The Company drew up Rules for Procedures of the Board Bureau, so as to ensure a high efficient operation and scientific decision-making of the Board Bureau; the Company has set up Independent Director System and engaged three independent directors. In the Reporting Period, the number of directors and composition of the Board of Directors of the Company as well as the procedure of selection was in accordance with the requirements of the rules and laws as well as Articles of Association. The Company set up four special committees, which were Financial Audit Committee, Nomination Committee, Remuneration&Appraisal Committee, Strategy Committee to provide profession opinion for the decision of the Board of Directors. All the directors carried out their work, fulfilled their duties and scrupulously attended the Board sessions in accordance with Rules of Procedure for the Board of Directors, Rules for Independent Directors, etc. 15 Board sessions were convened by the Company during the Reporting Period, which brought the decision-making mechanism ofthe Board ofDirectors intofull play.
(IV) Supervisors and supervisory committee
The Company has established Rules for Procedures of the Supervisory Committee, persons and structure of the Supervisory Committee was in line with relevant laws and statutes, supervisors can earnestly perform their responsibilities, independently and efficiently executed supervision and check responsibilities with a spirit of being responsible to shareholders. In the Reporting Period, the number of supervisors and composition of the Supervisory Committee of the Company as well as their selecting procedure complied with the laws, regulations. In accordance with the requirement of the Rules of Procedure for Supervisory Committee, the supervisors performed their duties in an earnest and responsible manner, and exercised their functions of supervision on the decision-making procedure of the Board of Directors, resolutions and theCompany’s operation by law, and took effective supervision over theCompany’s significant events, related transactions, financial position, as well as the legality and compliance on duty performance by the directors, president and other senior management members.
(V) PerformanceAppraisal and Incentive& RestrictiveMechanism
The senior management staffs of the Company were recruited on an open basis and in compliance with the laws and regulations. The Company has established and gradually improved the performance appraisal standards and incentive& restrictive mechanism for senior management staffs, so as to attract qualified personnel, and ensure the stability ofseniormanagement staffs. (VI) Interested parties
During the Reporting Period, the Company fully respected and maintained the legal rights of the interested parties, and realized the balance of interest among the parties such as society, shareholders and employees, etc. Meanwhile, the Company protected the rights of the employees, promoted the environmental protection, and actively joined in the social benefit and charitable
KonkaGroupCo.,Ltd. AnnualReport2018 cause soas tojointlypromote sustainableand healthy development.
(VII) Information disclosure and transparency
The Company formulated the Management System for Investor Relations and the Management System for Information Disclosure and the Rules on Implementation for Information Disclosure Committee. And the Company designated specially-assigned person to take charge of the information disclosure, and designated specialized department to be responsible for the reception of shareholders and consultation, actively carrying out the work for investor relations management to ensure equal access to information for all shareholders. 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.
(VIII) Non-standard governance
1.Type ofnon-standard governance matterexisted
There was asituation that theCompany disclosed undisclosed information.
2.Types and cycle of undisclosed information provided to theprincipal shareholder
The Company provided monthlyfinancial data to theprincipal shareholder.
3.Reasons for therelated non-standard governance existed
The Company submitted the undisclosed information such as monthly financial data to the substantial shareholder directly administrated by the State-owned Assets Supervision and Administration Commission of State Council in accordance with the managerial demand of SASAC.
4.Impact onCompany independence
After the self-inspection, the Company kept strictly to the requirements of “Notice on Strengthening the Supervision of 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 no impact ontheindependence of theCompany.
(IX) Development ofcompany’s special governance activity, formulation and implementation of registration and management system forthe insiderofinsideinformation
1.Establishment andperfection ofmanagement system for theinsider ofinsideinformation
To further standardize thecompany’s inside information management behavior, strengthen thecompany’s inside information confidential work, and maintain the fair principle of information
KonkaGroupCo.,Ltd. AnnualReport2018 disclosure, the company established Inside Information and Insider Management System in Konka Group Co., Ltd. The company strictly implements the system in the information disclosure work, meanwhile, carefully implements thecompany’s inside information and insider registration and management method, registers the insider of inside information, and report to Shenzhen Stock Exchange and Shenzhen Security Regulatory Bureau according totheprovision.
The company conducted the special inspection on the inside information management during the occurrence of major event in 2018 and the annual report in 2018.After the inspection, the company actually realized that the insider of inside information strictly kept the confidential provision, did not disclose, divulge and spread thecompany’s inside information to the outside, the insider of inside information did not buy and sell thecompany’s share with the inside information before disclosing the major sensitive information influencing thecompany’s share price, there was no investigation and rectification from the regulatory department during the editing, review and disclosure of regular report and major event. Management Rules for Inside Information and Insider Management System was implemented in place and controlled effectively.
2.Establishment andimplementation ofexternal informationuser’s management system
To strengthen the management on the reporting ofcompany’s inside information, the company establishes Inside Information Reporting Management System, and prescribes the inside information reporting range, reporting procedure, responsibility division and other matters according to Security Law inPeople’s Republic of China, Information Disclosure Management Method in Listed Company, Inside Information and Insider Management System in Konka Group Co., Ltd. and other related provisionsin thelaws, regulations andregulatory documents.
The company conducted the special inspection on the inside information reporting status during the occurrence of major event in 2018 and the annual report in 2018. After the inspection, thecompany’s inside information reporting status complies with the requirements in Inside Information Reporting Management System. Inside Information Reporting Management System was implemented in place and controlled effectively.
Indicate by tick market whether there is any material incompliance with the regulatory documents issued bythe CSRCgoverning thegovernance oflisted companies.
□Yes√No
No suchcases in theReporting Period.
II TheCompany’s Independence from Its Controlling Shareholder in Business, Personnel, Asset, Organization andFinancialAffairs
During the Reporting Period, the company was fully separated from the controlling shareholders in terms of business, staff, assets, organs, and finance, which owned independent legal representative and main status in market competition and had independent accounting, as well as possessed complete business and theability ofindependent operation toface themarket.
KonkaGroupCo.,Ltd. AnnualReport2018 (I) Business: the Company owned complete supply,R&D, production and sales system, possessed ability of independent operation to face the market by independent operation, independent accounting& decision-making, independent bearing responsibility& risks,didn’t subject to the interference and control of the controlling shareholders, actual controller and its controlled enterprises.
(II) Staff: the Company was independent of the controlling shareholder with respect to labor, personnel and salaries management. The Company owned independent team of staffs, the senior management staff, financial personnel and business personnel received their remunerations in the Company, and they were full-time staffs of the Company without holding any post, except directors and supervisors, inshareholders’units orother related enterprises.
(III) Assets integrity: the Company had production and operation premises completely separated from the controlling shareholder, and the unaffiliated and integral assets structure, as well as the independent production system, ancillary production system, the ancillary facilities, house property right and other assets, which also possessed independent procurement and sales system.
(IV) Organ: the Company had its own functional organs adapting to the needs of self-development and market competitiveness, all the functional organs were separated from each other in aspects of personnel, office premises and management rules, etc., there existed no particulars about any shareholders, other unitsor individualsinterfering the organ setting oftheCompany.
(V) Finance: the Company established an independent finance department with full-time financial personnel and an independent finance and accounting system, and independently carried out the financial work in line with requirements of relevant accounting rules; the Company promulgated sound financial management system to operate independently without sharing common accounts with the controlling shareholder, related enterprise, other units or individual; the Company independently declared and paid the tax by laws without particulars on paying taxes together withshareholders’units.
III Horizontal Competition
□Applicable√ Not applicable
IVAnnualand Special General Meetings Convened during theReporting Period
1.General Meeting Convenedduringthe Reporting Period
|||||||
|-|-|-|-|-|-|
|Meeting|Type|Investorparticipationratio|Dateofthemeeting|Disclosuredate|Indextodisclosedinformation|
|The2017AnnualGeneralMeeting|AnnualGeneralMeeting|32.80%|23April2018|24April2018|/http://www.cninfo.com.cn/new/index|
|The1stExtraordinaryGeneral|Extraordinary|2.52％|3May2018|4May2018||

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Meetingof2018|GeneralMeeting||||
|The2ndExtraordinaryGeneralMeetingof2018|ExtraordinaryGeneralMeeting|32.85％|7June2018|8June2018|
|The3rdExtraordinaryGeneralMeetingof2018|ExtraordinaryGeneralMeeting|24.30%|8October2018|9October2018|
|The4thExtraordinaryGeneralMeetingof2018|ExtraordinaryGeneralMeeting|32.71%|3December2018|4December2018|

2. Special General Meetings Convened at the Request of Preferred Shareholders with ResumedVoting Rights
□Applicable√ Not applicable
V Performance ofDuty by IndependentDirectors intheReporting Period
1.Attendanceof IndependentDirectors at BoardMeetings andGeneral Meetings
|||||||||
|-|-|-|-|-|-|-|-|
|Attendanceofindependentdirectorsatboardmeetingsandgeneralmeetings||||||||
|Independentdirector|Totalnumberofboardmeetingstheindependentdirectorwaseligibletoattend|Boardmeetingsattendedonsite|Boardmeetingsattendedbywayoftelecommunication|Boardmeetingsattendedthroughaproxy|Boardmeetingstheindependentdirectorfailedtoattend|Theindependentdirectorfailedtoattendtwoconsecutiveboardmeetings(yes/no)|Generalmeetingsattended|
|SunShengdian|15|5|10|0|0|No|2|
|XiaoZuhe|13|4|9|0|0|No|0|
|ZhangShuhua|13|4|9|0|0|No|0|
|WangShuguang|2|1|1|0|0|No|0|
|DengChunhua|2|1|1|0|0|No|0|

 Whyany independent director failed to attend two consecutiveboard meetings:
Not applicable.
2.Objections Raised byIndependentDirectors onMatters ofthe Company
Indicate bytick mark whether any independent directors raised any objections onanymatter ofthe
KonkaGroupCo.,Ltd. AnnualReport2018 Company.
□Yes√No
No suchcases in theReporting Period.
3.Other Information aboutthePerformance ofDuty byIndependentDirectors
Indicate by tick mark whether any suggestions from independent directors were adopted by the Company.
√Yes□No
Suggestions from independent directors adopted ornot adopted bytheCompany:
During the Reporting Period, the Independent Directors of the Company vigorously attended the relevant meetings, carefully reviewed each proposal, objectively stated their own views and opinions, knew of theR&D progress and the operating situation of the Company, the execution situation of the internal control construction and the resolutions of the meetings of the Board of Directors and as well as theAnnual General Meeting.
As the expert of the involved each field, the Independent Directors put forward the constructive advices by use of their own professional knowledge towards the internal management, including: to strengthen the business process management, to strengthen the researches on the cutting-edge technology of the color TV and to strengthen the cash flow and the accounts receivable management and so on.The Company carefully adopted the advices from the Independent Directors and constantly improved and enhanced themanagement level of theCompany.
VI Performance of Duties by Specialized Committees under the Board during this Reporting Period
(I) Summary Report on the Performance of the Audit Committee Subject to the Board of Directors
The Company had constituted the Work Rules for the Financial Audit Committee under the Board which illustrated the exact personnel, obligations and rights and working process of annual report of the FinancialAudit Committee under the Board. In 2018, based on the principle of faithfulness, the majorexecution situationsof theFinancialAuditCommittee under theBoard were as follows: 1. Reviewed financial statements ofAnnual Report 2017, First Quarter Report 2018, Interim Report 2018,and theThird Quarter Report 2018,and had noobjection to theaforesaid financial statements. 2. Submitted the Proposal on Hiring CPA in 2018 to the Board on 29 March 2018 in which proposing to continue to hire Ruihua CPA as the audit institution of financial statements of the Company in 2018.
3.During the preparation ofAnnual Report 2018,the Companyfulfilled the following duties: (1) Issued the Notes of the Events such as the Audit Work Arrangement of the Finanical Audit Committee and approvedthearrangement for 2018annual auditing oftheCompany;
KonkaGroupCo.,Ltd. AnnualReport2018 (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 on2018AnnualAuditingbyRuihuaCertified PublicAccountants; (6) Submitted theResolutionof the2018Annual Financial Statement oftheCompany to theBoard; (7) Submitted theResolutionof engagement oftheCPAs in 2019tothe Board;
4. In 2018, according to the authorization of the Board of Directors, the FinancialAudit Committee accepted the report on the work of theCompany’s Internal Auditing Department and carried out management over theInternalAuditing Department ofthe Companyand itswork.
(II) Summary Report on the Performance of the Remuneration and Appraisal Committee Subject totheBoard ofDirectors
The Company had constituted the Work Rules for the Remuneration and Appraisal Committee under the Board which illustrated the exact personnel, obligations and rights of the Remuneration and Appraisal Committee under the Board. In Y2018, based on the principle of faithfulness, the major execution situations of the Remuneration and Appraisal Committee under the Board were as follows:
1. On 8August 2018, the Remuneration andAppraisal Committee subject to the Board of Directors submitted theAudit Opinion on the Reward Planning for the Management of the Company in 2017 to theBoard.
2. During the preparation of Annual Report 2018, the Remuneration and Appraisal Committee subject to the Board of Directors issued theAudit Opinion on the Disclosed Remuneration Situation of the Directors, Supervisors and Senior Executives of the Company, which considered the condition of the remuneration of the Directors, Supervisors and Senior Executives of the Company disclosed in the 2018 Annual Report was verified. The disclosed remuneration situation of the Directors, Supervisors and Senior Executives of the Company met with the remuneration management system without any situation that violated the remuneration management system of the Company.
(III) Summary Report onthe Performance oftheNominations Committee Subject to the Board ofDirectors
The Company had constituted the Work Rules for the Nominations Committee under the Board which illustrated the exact personnel, obligations and rights of the Nominations Committee under the Board. In line with the principle of diligence and responsibility, the nominating committee of the board of directors of the company submitted the "examination and approval opinions on
KonkaGroupCo.,Ltd. AnnualReport2018 candidates for the general election of the board of directors" to the board of directors on November 15, 2018, and submitted the candidates for the new general election of the board of directors to the board ofdirectors for discussion.
(IV) Summary Report on the Performance of the Strategy Committee Subject to the Board of Directors
The Company had constituted the Work Rules for the Strategy Committee under the Board which illustrated the exact personnel, obligations and rights of the Strategy Committee under the Board. On 16April 2018, the Strategy Committee subject to the Board of Directors issuedAudit opinion of Overall Strategic Planning of Konka Group after discussion, and submitted it to Board Meeting for discussion
VII Performance of Duty bythe Supervisory Committee
Indicate by tick mark whether the Supervisory Committee found any risk to the Company during its supervision in theReporting Period.
□Yes√ No
The Supervisory Committeeraised noobjections intheReporting Period.
VIII Appraisal ofandIncentiveforSeniorManagement
In order to enable the senior management staffs of the Company give better performance of their duties, and clarify their rights and obligations, the Company established and improved a fair, transparent and efficient PerformanceAppraisal Standard and Incentive& Restraint Mechanism for the senior management staffs. The Company assessed the duty performance and completion of business of senior management staffs in terms of professional skills, management level and job performance; took the salary plus bonus as a main incentive way, to improve the incentive of senior management. The senior management staff was appraised by the Board of Directors, which was supervised bytheSupervisory Committee.
IXInternal Control
1.Material Internal Control Weaknesses IdentifiedfortheReporting Period
□Yes√No
2.Internal Control Self-Evaluation Report
|||
|-|-|
|Disclosure date of the internal controlself-evaluationreport|30March2019|
|Index to the disclosed internal controlself-evaluationreport|http://www.cninfo.com.cn/new/index|
|Evaluatedentities’combinedassetsas%|90.00%|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|ofconsolidatedtotalassets|||
|Evaluated entities’ combined operatingrevenue as % of consolidated operatingrevenue|90.00%||
|Identificationstandardsforinternalcontrolweaknesses|||
|Type|Weaknessesininternalcontroloverfinancialreporting|Weaknessesininternalcontrolnotrelatedtofinancialreporting|
|Naturestandard|Those with the following characteristicsshould be recognized as great defect: (1)found out there were malpractices of theDirectors, Supervisors and SeniorExecutives of the Company that formedsignificant influences on the financialreport; (2) the Company revised thepublished financial report and revised thegreat misstatements caused by themalpractices or the mistakes; (3) CPAfound out there was great misstatement ofthe current financial report while didn’tfound during the operating process of theinternal control; (4) the supervision of theinternal control by the Finance AuditCommittee and the internal auditinstitution of the Company was invalid;(5) not yet revised the great defect afterthe reasonable period as which wasdiscovered among the internal controlassessment; (6) the significant businesslacked of systematic control or thesystematic control was invalid.. Thosewith the following characteristics shouldberecognizedassignificantdefect:(1)notyet chosen or applied the accountingpolicesaccordingtothegenerallyacceptedaccounting standards; (2) not yetconstructed the anti-spam process orcontrol measures; (3) as for the accountsdisposal of the unconventional or specialtransactions, there was no correspondingcontrol mechanism or execution or theexistenceofthecorrespondingsupplementcontrol; (4) there was one or multipledefects during the control of the compile|The following signs indicated theremay exist great defect among theinternal control of the non-financialreport; (1) the operating activities ofthe enterprises seriously violated thenational laws and regulations; (2)negative news frequently disclosed bythe media which caused significantharmto theCompany’s reputation; (3)the core management team left theirpositions one after another or theoutflow of the key position personnelwas serious; (4) significant businesslacked of systematic control of thesystem was invalid; (5) great defectdiscovered among the internal controlassessment not yet be revised in time.The following signs indicated theremayexistsignificantdefectamongtheinternal control of the non-financialreport: (1) negative news occurredrather frequently which caused ratherbigharmtotheCompany’sreputation;(2) the outflow of the key positionpersonnel was rather serious; (3) therewas obvious defect among the controlsystem of the significant business; (4)thesignificantdefect foundamongtheinternal control assessment not yet berevised in time. 3. Other defects fromthe internal control hadn’t reached therecognition standards of the greatdefect or significant defect, should berecognizedasgeneraldefect.|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
||of the financial report at the period-endand could not reasonable guarantee thestatement of the compiled financial reportreach the real and accurate target; (5) notyet revised the significant defect after thereasonableperiodaswhichwasdiscoveredamong the internal control assessment. 3.Other defects from the internal controlhadn’t reached the recognition standardsof the great defect or significant defectshouldberecognizedasgeneraldefect.||
|Quantitativestandard|Great defect: potential misstatementamount≥1% of the gross profit margin ofthe 2018 consolidated financial report ofthe Company; significant defect: 0.5% ofthe gross profit margin of the 2018consolidated financial report of theCompany ≤potential misstatement amount＜1% of the gross profit margin of the2018 consolidated financial report of theCompany; general defect: potentialmisstatement amount＜0.5% of the grossprofit margin of the 2018 consolidatedfinancialreportoftheCompany.|Implementinaccordancewiththequantitativecriteriaofinternalcontroldefectevaluationinfinancialstatements|
|Number of material weaknesses ininternal control not related to financialreporting|0||
|Number of serious weaknesses ininternalcontroloverfinancialreporting|0||
|Number of serious weaknesses ininternal control not related to financialreporting|0||

XIndependentAuditor’s Report onInternal Control
√Applicable□ Not applicable
|||
|-|-|
|Opinionparagraphintheindependentauditor’sreportoninternalcontrol||
|Weconsideredthat,inallthesignificantaspects,KonkaGroupmaintainedefficientinternalcontrolofthefinancialreportaccordingtotheC-SOXandtherelevantregulationson31December2018.||
|Independentauditor’sreportoninternalcontroldisclosedornot|Disclosed|
|Disclosuredate|30March2019|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|Indextosuchreportdisclosed|http://www.cninfo.com.cn/new/index|
|Typeoftheauditor’sopinion|Unmodifiedunqualifiedopinion|
|Material weaknesses in internalcontrol not related to financialreporting|None|

Indicate by tick mark whether any modified opinion is expressed in the independentauditor’s report ontheCompany’s internal control.
□Yes√No
Indicate by tick mark whether the independentauditor’s report on theCompany’s internal control is consistent with theinternal control self-evaluation report issuedbytheCompany’s Board.
√Yes□No
KonkaGroupCo.,Ltd. AnnualReport2018 Part X Corporate Bonds
Does the Company have any corporate bonds publicly offered on the stock exchange, which were outstanding before the dateofthisReport’s approval orwere due butcould notbe redeemed in full? Refer to thedisclosure
I. BasicInformation of theCorporate Bonds
|||||||||
|-|-|-|-|-|-|-|-|
|Name|Abbr.|Code|Releasedate|Duedate|Bondsbalance(RMB’0,000)|Interestrate|Wayofredemption|
|Privatelyplacedcorporatebondsin2019ofKonkaGroupCo.,Ltd(PhaseI)(VarietyI)|19Konka01|114418|14January2019|14January2022|100,000|5.00%|Interestsshallbepaideveryyearandtheprincipalsshallberepaidwhenexpired.|
|Privatelyplacedcorporatebondsin2019ofKonkaGroupCo.,Ltd(PhaseI)(VarietyII)|19Konka02|114423|14January2019|14January2022|150,000|5.00%|Interestsshallbepaideveryyearandtheprincipalsshallberepaidwhenexpired.|
|Listed or transferred trading place of theCompanybonds||ShenzhenStockExchange||||||
|Appropriatearrangementoftheinvestors||“19Konka01”and“19Konka02”wasplacedprivatelytoqualifiedinstitutionalinvestors(lessthan200)meetingtherequirementsofManagementmethodforInvestorsEligibilityinBondsMarketofShenzhenStockExchange||||||
|Interest payment during the ReportingPeriod||DuringtheReportingPeriod,“19Konka01”and“19Konka02”werenotissuedyet,withouttheinterestpaymentofcorporatebonds.||||||
|Execution of the relevant regulationsduring the Reporting Period such as theaffiliated option clause of the issuers orinvestors, special clauses such as theexchangeable regulations of the Company||1.Optionforissuertoadjustcouponrate;2.Put-backsoptionforinvestors;therewasnoimplementationofrelevantclauses.||||||

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|bonds(ifapplicable)|

II. ListoftheBondTrustee andthe RatingOrganization
|||||||||
|-|-|-|-|-|-|-|-|
|Bondtrustee:||||||||
|Name|IndustrialSecuritiesCo.,Ltd|Officeaddress|Room801,No.35JinshifangStreet,XichengDistrict,Beijing|Contactperson|PuHang,andZhangHuifang|Contactnumber|010-50911203|
|RatingorganizationexecutedthetrackingratingofthecorporatebondsoftheReportingPeriod:||||||||
|Name|UnitedRatingsCo.,Ltd.|||Officeaddress|No.2JianwaiStreet,ChaoyangDistrict,Beijing|||
|Alternationreasons,executionprocessandinfluencesontheinvestors’interestsetc.iftherewasalternationofthebondtrusteesand thecredit ratingagenciesengaged bytheCompanyduringtheReportingPeriod(ifapplicable)||||||No||

III. ListoftheUsage ofthe RaisedFunds ofthe Corporate Bonds
|||
|-|-|
|List oftheusageoftheraisedfundsandthe execution process of the Companybonds|The Company has used the raised funds and disclosed related information in atimely,authentic,accurateandcompletemannerstrictlyinaccordancewiththetermsintheprospectusforthePeriod,relatedprovisionsandrequirementsintheMeasuresfor Issuance and Trading of Corporate Bonds, CSRC Releases No. 2 Guideline forthe Supervision of Listed Companies-Administration of Funds Raised by ListedCompaniesandApplicableSupervisionRequirements,theStockListingRulesoftheShenzhenStockExchangeandtheRulesoftheShenzhenStockExchangeforStockListing on ChiNext. It has not engaged in any violations in respect of the use andmanagementoftheraisedfunds.|
|Endingbalance(RMB’0,000)|0|
|Operating situation of the raised fundsspecialaccount|Theoperationwasingoodconditionwithoutanyviolationsfor relevantregulationsorcapitalsupervisionagreement|
|Whether the usage of the raised fundsmetwiththeusage,usingplanandotheragreementscommittedontheprospectus|Yes|

IV.Rating Situationof theCorporate Bonds Information
In August 2018, the entity of Konka Group Co., Ltd. was first rated as Grade AA by United Credit Ratings Co., Ltd for its long-term credit and as “Stable” for its rating prospect; the bonds “19 Konka 01” and “19 Konka 02” by Konka Group Co., Ltd. issued by Konka Group Co., Ltd. through private offering were rated as GradeAAAfor theircredit and as “Stable”for theirrating prospect.
KonkaGroupCo.,Ltd. AnnualReport2018 V. Credit-adding Mechanism, Repayment Plan and Other Repayment Guarantee Measures of theCorporate Bonds
OCT Group provided the unconditional and irrevocable joint liability guarantee in full amount for the bondsin theReporting Period.
VI.Convene SituationoftheBonds Holders Meeting during theReporting Period
No suchcases in theReporting Period.
VII. Listofthe Duty Execution oftheBonds Trustee during theReporting Period
During the Reporting Period, Industrial Securities Co., Ltd., theCompany’s bond trustee manager, proactively performed its trusteeship, continued to be concerned with theCompany’s routine production and operation and financial conditions, and endeavored to maintain the legitimate rights and interests of the bond holder strictly in accordance with related laws, regulations, the Management Measures for the Issue and Trading of Corporate Bonds, the Prospectus and the Agreement fortheBondTrusteeship Management.
VIII. The Major Accounting Data and the Financial Indicators of the Recent 2 Years of the Company upthe Period-end
Unit:RMB’0,000
|||||
|-|-|-|-|
|Item|2018|2017|Changerateofthesameperiod|
|EBITDA|125,522.52|713,613.81|-82.41%|
|Currentratio|96.33%|125.68%|-29.35%|
|Asset-liabilityratio|71.35%|65.20%|6.15%|
|Quickratio|72.13%|94.47%|-22.34%|
|TotaldebtratioofEBITDA|8.18%|92.88%|-84.70%|
|Timesinterestearned|1.86|23.98|-92.24%|
|Timesinterestearnedofcash|-3.06|-13.51|77.35%|
|Times interest earned ofEBITDA|2.39|24.62|-90.29%|
|Loanrepaymentrate|100.00%|100.00%|0.00%|
|Interestcoverage|100.00%|100.00%|0.00%|

 Main reason ofthe above accounting data andthefinancial indicators withtheYoYchange
exceeded30%
√Applicable□ Not applicable
The main reason for the decrease of EBITDA, total debt ratio of EBITDA, times interest earned, times interest
KonkaGroupCo.,Ltd. AnnualReport2018 earned of EBITDA was that there was no such income in 2018 as the large-amount exceptional gain from the transfer of a70% interest in Shenzhen Kangqiao Jiacheng Property Investment Co., Ltd. in 2017.The increase of times interest earned of cash was because Net cash generated from/used in operating activities and income tax increasedRMB1billionrespectivelyascomparedwithlastyear.
IX. List of the Interest Payment of Other Bonds and Debt Financing Instruments during the Reporting Period
No suchcases in theReporting Period.
X. Listof theAcquired BankCreditLines, Usageand theRepayment oftheBankLoans As of the end of the Reporting Period, the Company acquired bank credit lines of RMB17.999 billion, and used RMB9.759 billion.All bank loans can be repaid on schedule without any overdue situations.
XI. List of the Execution of the Agreements or the Commitments Related to the Company Bonds RaisingSpecification duringthe Reporting Period
During the Reporting Period, theCompany didnot issued corporate bonds.
XII. SignificantEvents Occurring during theReporting Period
As at 31January 2019, the balance of borrowings was RMB17,148 million. The cumulative amount of new borrowings for January 2019 was RMB2,729 million, accounting for28.87% of the net assets as at the end of 2018. The Company has disclosed the information on the cumulative amount of new borrowings pursuant to related regulations such as the Management Measures for the Issue and Trading of Corporate Bonds. For details, see Announcement on Cumulative Amount of New Borrowings (2019-11)disclosed bytheCompany.
XIII. Whether there Was Guarantor oftheCorporate Bonds
√Yes□No
Whether theguarantor ofthecorporate bonds was legal person orother organizations
√Yes□No
Whether separately disclose the financial statements (including Balance Sheet, Income Statement, Cash Flow Statement, and Changes inowners’(shareholders’) Equity, and notes for Financial Statements) of guarantor in the Reporting Period within 4 months from the ending date of every accounting year
√Yes□No
KonkaGroupCo.,Ltd. AnnualReport2018 Part XI Financial Statements
IIndependentAuditor’s Report
|||
|-|-|
|Typeoftheindependentauditor’sopinion|Unmodifiedunqualifiedopinion|
|Dateofsigningthisreport|29March2018|
|Nameoftheindependentauditor|RuihuaCertifiedPublicAccountants(LLP)|
|Referencenumberofauditreport|RHSZ[2019]No.44040004|
|Nameofthecertifiedpublicaccountants|LiuJianhuaandShenLingzhi|

IndependentAuditor’s Report
RuihuaAuditReport[2019]No. No. 44040004 All shareholders of KonkaGroup Co., Ltd.
I. Opinion
We have audited the accompanying financial statements of Konka Group Co., Ltd. (the “Company”), which comprise theCompany’s and consolidated balance sheets as at 31 December 2018, theCompany’s and consolidated income statements, theCompany’s and consolidated cash flow statements, theCompany’s and consolidated statements of changes inshareholders’equity for the year then ended, as well as thenotes tothe financial statements.
In our opinion, the financial statements attached were prepared in line with the regulations of Accounting Standards for Business Enterprises in all significant aspects which gave a true and fair view of the consolidated and parent financial position of the Company as at 31 December 2018 and the consolidated and parent business performance and cash flow oftheCompany for 2018.
II. BasisforOpinion
We conducted our audit in accordance with Standards onAuditing for Certified PublicAccountants. Our responsibilities under those standards are further described intheAuditor’s Responsibilities for the Audit of the Financial Statements section of our report. In accordance with professional ethics for certified public accountants, we are independent with Foshan Huaxin Packing Co., Ltd. and we have fulfilled our other ethical responsibilities. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide abasis for ouropinion.
III. Key AuditMatters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the Current Period. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. We confirm that the following items are the
key audit itemswhich shall beprovided in theaudit report.
KonkaGroupCo.,Ltd. AnnualReport2018 (I) Recognition ofSupplyChainTradeIncome andEnvironmental Protection Income
1.Item Description
Please refer to Note 23 ofAnnotation IV ImportantAccounting Policies andAccounting Estimation of the Financial Statement and Note 38 of Annotation VI Notes for Item of Consolidated Financial Statement for related information disclosed.
Kangjia group's operating income in 2018 was RMB 4,612,679.73 million, an increase of RMB 1,489,903.41 million compared with that in 2017, an increase of47.71%. It is the growth of income of supply chain trade business and environmental protection business mainly. Environmental protection business includes PPP(cooperation between government and social capital), BT (transfer of construction), public infrastructure construction such as environmental protection and sewage treatment, and waste material recycling business.
The Company recognizes revenue from supply chain trade and waste material recycling business based on the following principles:①Commodities for the domestic market: revenue is recognized when the commodities are delivered or the commodity right is transferred;Exported commodities: revenue is recognized after commodities are transferred to the shipper entrusted by the purchaser after finishing customs declaration;③Commodities directly traded abroad: revenue is recognized when customers pick up commodities or commodities are delivered to the places designated by customers.
For public infrastructure construction business such as environmental protection and sewage treatment participated by modes of PPPand BT,revenue from construction services provided during the construction period are recognized according toASBE No. 15 - Construction Contracts based on percentage of completionmethod.
Due tofewer production and processing links and simpletrade form of supply chain trade and waste material recycling business, the percentage of completion method used for the recognition of revenue from PPP project construction services involves significant accounting estimates and judgments of the Management, and there is a risk that the Management manipulates revenue in order to achieve specific objectives or assessment indicators. On this account, we recognized revenue from supply chain trade and environmental protection businessas akey audit matter. 2. Countermeasures ofAudit
(1) We adopted the following countermeasures of audit for supply chain trade and waste material recycling business:
① We have understood and evaluated the effectiveness of key internal control design and operation related to the recognition of revenue from supply chain trade and environmental protection business;
② We have checked up the sales contract and sales support documents, checked whether the risk and reward clauses in sales contracts are consistent with the revenue recognition principle, and evaluated whether theCompany’s principle for revenue recognition based on total business volume method ofsupply chain meets therequirements of enterprise accounting standards;
③ We have implemented an analytical procedure for income and cost, and analysed the fluctuation and causes of sales price in the current year to evaluate the rationality of the changes in gross profit margin ofsales;
④ We have selected samples to execute confirmation procedures for balance of accounts receivable according to the characteristics and nature of customer transactions, and confirmed sales amounts of important customers;
KonkaGroupCo.,Ltd. AnnualReport2018⑤ We have selected samples of customers and suppliers to check business information and background, and evaluated thebusiness rationality oftransactions withcustomers;
⑥ We have entrusted lawyers in Hong Kong to check whether there was any relationship between overseas customers and suppliers, and evaluated lawyers' professional competence, independence and theavailability oflawyers' work;
⑦ We have visited customers and suppliers with large business volume to further understand the background of transactions and basic information of counterparties, and to check whether there was any intentionallyincreased trade linksorfictitious trading parties;
⑧ We have conducted spot checks on documents involved in the process of transactions, such as shipping documents, transfer documents of commodity rights, bank transfer vouchers and invoices, etc.
(2) We adopted the following countermeasures of audit for recognition of revenue from PPP andBTprojects at theconstruction stage:
① We have understood and evaluated the effectiveness of key internal control design and operation related to therecognition ofrevenue from PPPand BTprojects at theconstruction stage;
②Wehave checked the key contract terms of themain construction contract;
③We have reviewed the preparation, review and changing processes of estimated total cost and the related control procedures, and evaluated theeffectiveness ofthe internal control;
④ We have checked the details of estimated total cost of projects, reviewed the calculation of percentage of project completion, and evaluated the rationality of major judgments and estimates made bytheManagement;
⑤ Obtain the mid-term measurement payment certificate of the project, and check whether the progress of the project and the amount of the completed project have been confirmed by the signature andseal ofthecontractor and thesupervisor;
⑥ For major projects, we have conducted on-site inspection of image progress, the use of work of the Institute's cost engineers in the major projects, and assessed whether the actual completion schedule ofprojects is consistent withthe completionschedule confirmed bythe Company.
(II) Non-business income from business combinations not under the same control, initial recognitionand impairmentofbusiness reputation
1.Item Description
Please refer to Note 20 ofAnnotation IV ImportantAccounting Policies andAccounting Estimation of the Financial Statement and Note 16 and 49 of Annotation VI Notes for Item of Consolidated Financial Statement for related information disclosed.
As of December 31, 2018, the amount of goodwill in the consolidated financial statements of kangjia group company is 85,5,691,400 yuan. In the year of 2018, non-operating income is 22,0045,200 yuan due to the fact that the cost of enterprise combination under the non-same control is less than the fair value share of identifiable net assets of the purchaser. The formation of goodwill comes from the acquisition of yikang technology co., LTD., jiangxi kangjia new material technology co., ltd. and guangdong xingda hongye electronics co., ltd. by kangjia group in 2018. The formation of non-operating income is generated by the acquisition of henan xinfei refrigeration appliance co., LTD., henan xinfei electric appliance co., LTD., and henan xinfei home appliance co., LTD., which are not under thesamecontrol, through judicial auction.
The Company Management allocated the combination costs and recognized the acquired identifiable assets, liabilities and contingent liabilities of acquiree on the combination day. The
KonkaGroupCo.,Ltd. AnnualReport2018 acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtained from the acquiree as business reputation. Where the combination costs are less than thefairvalue ofthe identifiablenet assets it obtains from theacquiree:
① The acquirer shall re-examine the measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it obtainsfrom theacquiree as well as thecombination costs;②If, after the re-examination, 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 ofthecurrent period.
The Company Management tested the impairment of business reputation by combining it with related asset groups or portfolios on the balance sheet date. According to the test result, the Company did not sufferany impairment of business reputation.
Because of the fair value of identifiable assets, liabilities and contingent liabilities of the aquiree on the combination date, evaluation work of experts is need for business reputation impairment test on the balance sheet date. The parameters used in the evaluation involve discount rate, future sales growth rate, sustainable growth rate in predictive period and gross interest rate, etc. The evaluation methods used include asset-based method and income method. The evaluation process of fair value on the combination date and impairment test of business reputation on the balance sheet day is complex, and the assumptions based on may change due to the influence of expected future market and economic environment.All of the above mentioned depend on the Management's judgment. On this account, we identify non-business income from business combinations not under the same control, initial recognition and impairment testof business reputation as key auditing items.
2.Countermeasures ofAudit
(1) We have understood and evaluated the effectiveness of the design and operation of key internal controls related to business combinations not under the same control and impairment of business reputation;
(2) We have reviewed the measurement of the fair values of identifiable assets, liabilities and contingent liabilities obtained from theacquiree and thecombination cost;
(3) We have understood the Management's recognition of the asset group or portfolio to which business reputation belongs, the key assumptions and methods used in the impairment test of business reputation, and evaluated the rationality of identification of asset group or portfolio, and related assumptions andmethods;
(4) We have evaluated the competence, professional quality and objectivity of external valuation experts appointed bytheManagement;
(5) We had the asset group valuation method used and assessment reports made by external valuation experts reviewed byinternal valuation experts oftheFirm;
(6) We have reviewed and evaluated the key parameters used by the Management for estimations, including comparative analysis on income growth rate in predictive period and historical income growth rate and income growth rate in the same industry; the comparison between estimated gross interest rate and historical gross interest rate, taking into account of the market trend; and analysis onthe discountrate adopted bytheManagement;
(7) We have obtained and reviewed the calculation table prepared by the Management for the recoverable amount of the asset group to which business reputation belongs, and compared the difference between the book value of the asset group to which business reputation belongs and the recoverable amount toconfirm whether there is any impairment ofbusiness reputation.
KonkaGroupCo.,Ltd. AnnualReport2018 (8) We have checked and evaluated, based on the result of impairment test of business reputation, the accuracy and appropriateness ofpresentation anddisclosureof business reputation.
(III) Recognition ofInvestment Income
1.Item Description
Please refer to Note 13 ofAnnotation IV ImportantAccounting Policies andAccounting Estimation of the Financial Statement and Note11 and 46 of Annotation VI Notes for Item of Consolidated Financial Statement for related information disclosed.
The investment income of the Company in 2018 was RMB927.4144 million, mainly generated from the investment income arising from disposal of long-term equity investment, returns on purchase of financial products, and gains arising from re-measurement of residual equity at fair value after losing the controlling rights. Since the amount of investment income has greatly impacts on profits, the recognition of investment income involves complicated accounting treatment and the recognition of the date of losing controlling rights should be based on the professional judgement, we confirm therecognition ofinvestment income as thekey audit item.
2.Countermeasures ofAudit
(1) We have understood, estimated and tested design and implementation of key internal control of the management level related to theinvestmenttoconfirm theeffectiveness oftheinternal control; (2) We have checked the stock transfer contracts, evaluation reports, changes in industrial and commercial registration, changes in the board of directors and accounts of stock transfer received to confirm having met therecognition conditionsofinvestment income;
(3) We have reviewed the evaluation reports related to stock transfer to judge the fairness of stock transaction consideration and rationality of the recognition of residual equity by fair value after losing controllingrights;
(4) We have rechecked the accounting process of theCompany’s investment income and recalculated the investment income arising from the residual equity at fair value after losing controlling rights to provethe rightness of theaccounting ofinvestment income;
(5) We have checked the contracts and bank receipts related to the purchase of financial products; spot checked the accounting documents and checked the recognition of investment income to prove the rightness of theinvestment incomeofentrust financial management.
IV.Other Information
The management of the Company is responsible for the other information. The other information comprises all of the information included in the annual report for 2018 other than the financial statements andourauditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.Wehave nothingto report in thisregard. V. Responsibility of Management and Those Charged with Governance for the Financial Statements
The management of the Company is responsible for the preparation and fair presentation of these
KonkaGroupCo.,Ltd. AnnualReport2018 financial statements in accordance with Accounting Standards for Business Enterprises to make them a fair presentation and designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the management of the Company is responsible for assessing theCompany’s ability to continue as a going concern, disclosing, if applicable, matters related to going concern and using the going concern basis of accounting unless the management either intends to liquidatetheCompany orto cease operations, orhas norealisticalternativebut to doso. Those charged with governance are responsible for overseeing theCompany’s financial reporting process.
VI.CPA’s Responsibility for theAuditof theFinancialStatements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue anauditor’s report that includes our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken onthe basis ofthesefinancial statements.
As part of an audit in accordance with auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.Wealso:
1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriatein thecircumstances.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made bythemanagement.
4. Conclude on the appropriateness of themanagement’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in ourauditor’s report to the related disclosures in the financial statements, or if such disclosures are inadequate, we shall modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor’s report. However, future events or conditions may cause the Company to cease tocontinue as agoing concern.
5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned
KonkaGroupCo.,Ltd. AnnualReport2018 scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that weidentify during ouraudit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and related safeguards (ifapplicable).
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the Current Period and are therefore the key audit matters. We describe these matters in ourauditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
RuihuaCertified PublicAccountants (LLP) CPA(Engagement Partner):
Liu Jianhua
Beijing·China CPA:
Shen Lingzhi
28March 2019
II FinancialStatements
Currency unit for thefinancial statements and thenotes thereto: RMB
1.Consolidated BalanceSheet
Prepared byKonka Group Co., Ltd.
Unit:RMB
||||
|-|-|-|
|Item|31December2018|31December2017|
|Currentassets:|||
|Monetarycapital|4,348,144,129.53|3,212,044,851.08|
|Settlementreserve|||
|Interbankloansgranted|||
|Financialassetsatfairvaluethroughprofitorloss|5,464,984.92|296,799.53|
|Derivativefinancialassets|||

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Notesandaccountsreceivable|7,787,765,540.57|8,621,764,935.49|
|Including:Notesreceivable|3,329,711,954.15|5,178,668,988.23|
|Accountsreceivable|4,458,053,586.42|3,443,095,947.26|
|Prepayments|1,036,979,167.56|467,123,091.74|
|Premiumsreceivable|||
|Reinsurancereceivables|||
|Receivablereinsurancecontractreserve|||
|Otherreceivables|410,804,180.50|184,218,356.16|
|Including:Interestreceivable|4,059,682.40|1,813,256.77|
|Dividendsreceivable|547,848.62||
|Financialassetspurchasedunderresaleagreements|||
|Inventories|5,487,605,227.05|4,690,363,565.53|
|Assetsclassifiedasheldforsale|||
|Currentportionofnon-currentassets|22,318,208.13||
|Othercurrentassets|2,744,216,141.98|1,715,326,868.81|
|Totalcurrentassets|21,843,297,580.24|18,891,138,468.34|
|Non-currentassets:|||
|Loansandadvancestocustomers|||
|Available-for-salefinancialassets|633,664,881.33|712,170,399.09|
|Held-to-maturityinvestments|||
|Long-termreceivables|390,793,038.05||
|Long-termequityinvestments|2,637,780,825.53|1,319,987,343.74|
|Investmentproperty|210,824,355.72|216,455,629.99|
|Fixedassets|2,410,226,495.81|1,587,170,348.35|
|Constructioninprogress|2,176,871,530.80|135,863,821.01|
|Productivelivingassets|||
|Oilandgasassets|||
|Intangibleassets|737,776,686.34|205,057,773.69|
|R&Dexpense|||
|Goodwill|855,691,423.75|3,597,657.15|
|Long-termprepaidexpense|111,223,426.77|150,060,937.30|
|Deferredincometaxassets|639,433,954.30|307,942,263.12|
|Othernon-currentassets|337,477,690.39|29,290,828.00|
|Totalnon-currentassets|11,141,764,308.79|4,667,597,001.44|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Totalassets|32,985,061,889.03|23,558,735,469.78|
|Currentliabilities:|||
|Short-termborrowings|13,884,132,931.63|6,927,472,037.35|
|Borrowingsfromcentralbank|||
|Customerdepositsandinterbankdeposits|||
|Interbankloansobtained|||
|Financialliabilitiesatfairvaluethroughprofitorloss|2,459,603.25|47,482,470.50|
|Derivativefinancialliabilities|||
|Notesandaccountspayable|5,225,053,739.80|4,153,391,578.68|
|Advancesfromcustomers|723,227,529.20|640,510,784.17|
|Financialassetssoldunderrepurchaseagreements|||
|Handlingchargesandcommissionspayable|||
|Payrollpayable|376,506,567.71|291,370,297.67|
|Taxespayable|288,004,192.44|1,326,569,094.53|
|Otherpayables|2,024,657,277.74|1,644,083,269.81|
|Including:Interestpayable|27,230,631.41|35,723,963.94|
|Dividendspayable|||
|Reinsurancepayables|||
|Insurancecontractreserve|||
|Payablesforactingtradingofsecurities|||
|Payablesforunderwritingofsecurities|||
|Liabilities directly associated with assets classified as held forsale|||
|Currentportionofnon-currentliabilities|151,792,404.13|374,358.99|
|Othercurrentliabilities|||
|Totalcurrentliabilities|22,675,834,245.90|15,031,253,891.70|
|Non-currentliabilities:|||
|Long-termborrowings|445,000,000.00|167,000,000.00|
|Bondspayable|||
|Including:Preferredshares|||
|Perpetualbonds|||
|Long-termpayables|128,374,597.41|61,538.46|
|Long-termpayrollpayable|8,792,614.98|13,361,821.86|
|Provisions|21,772,898.37|6,181,865.10|
|Deferredincome|112,899,128.24|130,049,911.87|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Deferredincometaxliabilities|141,020,093.34|12,636,633.40|
|Othernon-currentliabilities|||
|Totalnon-currentliabilities|857,859,332.34|329,291,770.69|
|Totalliabilities|23,533,693,578.24|15,360,545,662.39|
|Owners’equity:|||
|Sharecapital|2,407,945,408.00|2,407,945,408.00|
|Otherequityinstruments|||
|Including:Preferredshares|||
|Perpetualbonds|||
|Capitalreserves|208,356,624.21|104,732,242.30|
|Less:Treasurystock|||
|Othercomprehensiveincome|-10,538,219.08|3,697,458.95|
|Specificreserve|||
|Surplusreserves|1,227,564,785.19|1,217,644,874.79|
|Generalreserve|||
|Retainedearnings|4,271,408,192.21|4,260,125,492.57|
|TotalequityattributabletoownersoftheCompanyastheparent|8,104,736,790.53|7,994,145,476.61|
|Non-controllinginterests|1,346,631,520.26|204,044,330.78|
|Totalowners’equity|9,451,368,310.79|8,198,189,807.39|
|Totalliabilitiesandowners’equity|32,985,061,889.03|23,558,735,469.78|

 Legal representative: Liu Fengxi CFO: Li Chunlei Head of thefinancial department: FengJunxiu
2.BalanceSheet oftheCompany as theParent
Unit:RMB
||||
|-|-|-|
|Item|31December2018|31December2017|
|Currentassets:|||
|Monetarycapital|2,124,335,536.69|1,760,838,390.83|
|Financialassetsatfairvaluethroughprofitorloss|5,464,984.92|296,799.53|
|Derivativefinancialassets|||
|Notesandaccountsreceivable|9,608,713,113.32|7,596,218,302.24|
|Including:Notesreceivable|2,181,466,683.90|2,864,064,309.99|
|Accountsreceivable|7,427,246,429.42|4,732,153,992.25|
|Prepayments|1,019,335,571.49|1,066,260,182.37|
|Otherreceivables|6,667,463,126.57|4,341,467,382.86|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Including:Interestreceivable|5,769,663.24|23,894,771.88|
|Dividendsreceivable||2,690,276.72|
|Inventories|254,225,716.41|2,090,697,937.23|
|Assetsclassifiedasheldforsale|||
|Currentportionofnon-currentassets||100,000,000.00|
|Othercurrentassets|77,249,216.99|1,547,454,872.74|
|Totalcurrentassets|19,756,787,266.39|18,503,233,867.80|
|Non-currentassets:|||
|Available-for-salefinancialassets|326,164,881.33|562,612,236.33|
|Held-to-maturityinvestments|||
|Long-termreceivables|||
|Long-termequityinvestments|6,182,962,034.71|2,649,074,424.45|
|Investmentproperty|210,824,355.72|216,455,629.99|
|Fixedassets|462,721,018.30|482,020,892.58|
|Constructioninprogress|157,356,696.30|79,927,345.88|
|Productivelivingassets|||
|Oilandgasassets|||
|Intangibleassets|83,593,959.11|91,718,400.70|
|R&Dexpense|||
|Goodwill|||
|Long-termprepaidexpense|80,388,949.97|78,305,555.97|
|Deferredincometaxassets|516,879,201.66|279,324,511.96|
|Othernon-currentassets|20,000,000.00|20,000,000.00|
|Totalnon-currentassets|8,040,891,097.10|4,459,438,997.86|
|Totalassets|27,797,678,363.49|22,962,672,865.66|
|Currentliabilities:|||
|Short-termborrowings|8,179,564,987.70|3,269,730,888.60|
|Financialliabilitiesatfairvaluethroughprofitorloss|2,459,603.25|47,482,470.50|
|Derivativefinancialliabilities|||
|Notesandaccountspayable|9,990,213,911.08|8,561,630,481.98|
|Advancesfromcustomers|306,650,717.69|601,036,147.76|
|Payrollpayable|146,199,496.44|163,066,135.71|
|Taxespayable|10,913,871.30|1,070,771,570.12|
|Otherpayables|2,011,494,378.65|1,918,409,927.12|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Including:Interestpayable|24,158,666.48|50,336,913.53|
|Dividendspayable|||
|Liabilities directly associated with assets classified as held forsale|||
|Currentportionofnon-currentliabilities|40,000,000.00||
|Othercurrentliabilities|||
|Totalcurrentliabilities|20,687,496,966.11|15,632,127,621.79|
|Non-currentliabilities:|||
|Long-termborrowings|245,000,000.00|167,000,000.00|
|Bondspayable|||
|Including:Preferredshares|||
|Perpetualbonds|||
|Long-termpayables|||
|Long-termpayrollpayable|||
|Provisions|206,591.51|6,181,865.10|
|Deferredincome|75,705,476.93|94,590,560.82|
|Deferredincometaxliabilities|751,345.42||
|Othernon-currentliabilities|||
|Totalnon-currentliabilities|321,663,413.86|267,772,425.92|
|Totalliabilities|21,009,160,379.97|15,899,900,047.71|
|Owners’equity:|||
|Sharecapital|2,407,945,408.00|2,407,945,408.00|
|Otherequityinstruments|||
|Including:Preferredshares|||
|Perpetualbonds|||
|Capitalreserves|114,018,066.79|111,525,163.22|
|Less:Treasurystock|||
|Othercomprehensiveincome|-1,182,217.31|-1,970,304.62|
|Specificreserve|||
|Surplusreserves|1,227,564,785.19|1,217,644,874.79|
|Retainedearnings|3,040,171,940.85|3,327,627,676.56|
|Totalowners’equity|6,788,517,983.52|7,062,772,817.95|
|Totalliabilitiesandowners’equity|27,797,678,363.49|22,962,672,865.66|

KonkaGroupCo.,Ltd. AnnualReport2018 3.Consolidated Income Statement
Unit:RMB
||||
|-|-|-|
|Item|2018|2017|
|1.Revenue|46,126,797,341.33|31,227,763,249.71|
|Including:Operatingrevenue|46,126,797,341.33|31,227,763,249.71|
|Interestincome|||
|Premiumincome|||
|Handlingchargeandcommissionincome|||
|2.Costsandexpenses|47,263,866,198.50|31,418,151,525.89|
|Including:Costofsales|43,227,613,914.45|27,788,985,279.80|
|Interestexpense|||
|Handlingchargeandcommissionexpense|||
|Surrenders|||
|Netclaimspaid|||
|Netamountprovidedasinsurancecontractreserve|||
|Expenditureonpolicydividends|||
|Reinsurancepremiumexpense|||
|Taxesandsurcharges|89,689,865.93|208,836,733.61|
|Sellingexpense|2,282,174,241.64|2,141,993,558.11|
|Administrativeexpense|641,892,996.18|448,036,697.96|
|R&Dexpense|396,460,145.24|329,676,982.50|
|Financecosts|399,165,814.39|340,918,550.61|
|Including:Interestexpense|566,070,556.21|352,438,125.53|
|Interestincome|43,630,012.41|62,735,102.89|
|Assetimpairmentloss|226,869,220.67|159,703,723.30|
|Add:Otherincome|294,265,632.23|204,979,443.55|
|Investmentincome(“-”forloss)|927,414,370.96|6,587,848,357.88|
|Including: Share of profit or loss of joint ventures andassociates|19,139,381.20|3,953,094.99|
|Gainonchangesinfairvalue(“-”forloss)|50,191,052.64|-66,221,451.96|
|Foreignexchangegain(“-”forloss)|||
|Assetdisposalincome(“-”forloss)|-563,894.74|55,945,401.39|
|3.Operatingprofit(“-”forloss)|134,238,303.92|6,592,163,474.68|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Add:Non-operatingincome|328,696,140.09|82,832,663.76|
|Less:Non-operatingexpense|8,037,851.90|16,521,032.68|
|4.Profitbeforetax(“-”forloss)|454,896,592.11|6,658,475,105.76|
|Less:Incometaxexpense|-213,721,829.46|1,571,641,005.78|
|5.Netprofit(“-”fornetloss)|668,618,421.57|5,086,834,099.98|
|5.1Netprofitfromcontinuingoperations(“-”fornetloss)|668,618,421.57|5,086,834,099.98|
|5.2Netprofitfromdiscontinuedoperations(“-”fornetloss)|||
|NetprofitattributabletoownersoftheCompanyastheparent|411,289,744.68|5,057,025,155.71|
|Netprofitattributabletonon-controllinginterests|257,328,676.89|29,808,944.27|
|6.Othercomprehensiveincome,netoftax|-12,585,647.54|10,457,550.34|
|AttributabletoownersoftheCompanyastheparent|-14,235,678.03|10,629,563.60|
|6.1Itemsthatwillnotbereclassifiedtoprofitorloss|||
|6.1.1Changescausedbyremeasurementsondefinedbenefitpensionschemes|||
|6.1.2Shareofothercomprehensiveincomeofinvesteesthatwillnotbereclassifiedtoprofitorlossunderequitymethod|||
|6.2Itemsthatmaysubsequentlybereclassifiedtoprofitorloss|-14,235,678.03|10,629,563.60|
|6.2.1Shareofothercomprehensiveincomeofinvesteesthatwillbereclassifiedtoprofitorlossunderequitymethod|740,697.08|-3,138,048.04|
|6.2.2 Gain/Loss on changes in fair value ofavailable-for-salefinancialassets|-31,342.07|-6,379,226.68|
|6.2.3 Gain/Loss arising from reclassification ofheld-to-maturityinvestmentstoavailable-for-salefinancialassets|||
|6.2.4Effectivegain/lossoncashflowhedges|||
|6.2.5 Differences arising from translation of foreigncurrency-denominatedfinancialstatements|-14,945,033.04|20,146,838.32|
|6.2.6Other|||
|Attributabletonon-controllinginterests|1,650,030.49|-172,013.26|
|7.Totalcomprehensiveincome|656,032,774.03|5,097,291,650.32|
|AttributabletoownersoftheCompanyastheparent|397,054,066.65|5,067,654,719.31|
|Attributabletonon-controllinginterests|258,978,707.38|29,636,931.01|
|8.Earningspershare|||
|8.1Basicearningspershare|0.1708|2.1001|
|8.2Dilutedearningspershare|0.1708|2.1001|

 Legal representative: Liu Fengxi CFO: Li Chunlei
Head of thefinancial department: FengJunxiu
KonkaGroupCo.,Ltd. AnnualReport2018 4.Income Statementofthe Companyas theParent
Unit:RMB
||||
|-|-|-|
|Item|2018|2017|
|1.Operatingrevenue|13,377,681,886.45|12,102,478,051.51|
|Less:Costofsales|12,572,129,164.32|10,254,093,606.04|
|Taxesandsurcharges|25,843,072.39|32,773,051.99|
|Sellingexpense|1,511,526,663.59|1,539,608,039.02|
|Administrativeexpense|349,794,611.61|240,683,547.54|
|R&Dexpense|148,115,964.90|329,676,982.50|
|Financecosts|263,729,410.33|275,532,025.79|
|Including:Interestexpense|||
|Interestincome|||
|Assetimpairmentloss|64,312,750.93|133,044,172.18|
|Add:Otherincome|73,925,099.14|69,388,626.62|
|Investmentincome(“-”forloss)|1,247,079,039.64|6,419,712,482.20|
|Including: Share of profit or loss of joint ventures andassociates|33,783,935.14|-2,867,529.72|
|Gainonchangesinfairvalue(“-”forloss)|50,191,052.64|-86,743,251.96|
|Assetdisposalincome(“-”forloss)|-2,560.75|74,187.45|
|2.Operatingprofit(“-”forloss)|-186,577,120.95|5,699,498,670.76|
|Add:Non-operatingincome|51,273,970.95|38,052,635.22|
|Less:Non-operatingexpense|2,556,804.31|10,368,352.12|
|3.Profitbeforetax(“-”forloss)|-137,859,954.31|5,727,182,953.86|
|Less:Incometaxexpense|-237,059,058.30|1,414,775,357.96|
|4.Netprofit(“-”fornetloss)|99,199,103.99|4,312,407,595.90|
|4.1Netprofitfromcontinuingoperations(“-”fornetloss)|99,199,103.99|4,312,407,595.90|
|4.2Netprofitfromdiscontinuedoperations(“-”fornetloss)|||
|5.Othercomprehensiveincome,netoftax|788,087.31|-8,684,742.24|
|5.1Itemsthatwillnotbereclassifiedtoprofitorloss|||
|5.1.1Changesincausedbyremeasurementsondefinedbenefitpensionschemes|||
|5.1.2 Share of other comprehensive income of investees thatwillnotbereclassifiedtoprofitorlossunderequitymethod|||
|5.2Itemsthatmaysubsequentlybereclassifiedtoprofitorloss|788,087.31|-8,684,742.24|
|5.2.1 Share of other comprehensive income of investees thatwillbereclassifiedtoprofitorlossunderequitymethod|788,087.31|-2,274,173.49|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|5.2.2 Gain/Loss on changes in fair value of available-for-salefinancialassets||-6,410,568.75|
|5.2.3 Gain/Loss arising from reclassification ofheld-to-maturityinvestmentstoavailable-for-salefinancialassets|||
|5.2.4Effectivegain/lossoncashflowhedges|||
|5.2.5 Differences arising from translation of foreigncurrency-denominatedfinancialstatements|||
|5.2.6Other|||
|6.Totalcomprehensiveincome|99,987,191.30|4,303,722,853.66|
|7.Earningspershare|||
|7.1Basicearningspershare|||
|7.2Dilutedearningspershare|||

5.Consolidated Cash FlowStatement
Unit:RMB
||||
|-|-|-|
|Item|2018|2017|
|1.Cashflowsfromoperatingactivities:|||
|Proceedsfromsaleofcommoditiesandrenderingofservices|46,363,698,743.08|31,446,609,731.30|
|Netincreaseincustomerdepositsandinterbankdeposits|||
|Netincreaseinborrowingsfromcentralbank|||
|Netincreaseinloansfromotherfinancialinstitutions|||
|Premiumsreceivedonoriginalinsurancecontracts|||
|Netproceedsfromreinsurance|||
|Netincreaseindepositsandinvestmentsofpolicyholders|||
|Net increase in proceeds from disposal of financial assets at fairvaluethroughprofitorloss|||
|Interest,handlingchargesandcommissionsreceived|||
|Netincreaseininterbankloansobtained|||
|Netincreaseinproceedsfromrepurchasetransactions|||
|Taxrebates|475,610,439.41|306,536,483.85|
|Cashgeneratedfromotheroperatingactivities|3,714,670,493.13|9,189,740,317.98|
|Subtotalofcashgeneratedfromoperatingactivities|50,553,979,675.62|40,942,886,533.13|
|Paymentsforcommoditiesandservices|45,867,095,178.07|32,945,586,384.73|
|Netincreaseinloansandadvancestocustomers|||
|Net increase in deposits in central bank and in interbank loansgranted|||
|Paymentsforclaimsonoriginalinsurancecontracts|||

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Interest,handlingchargesandcommissionspaid|||
|Policydividendspaid|||
|Cashpaidtoandforemployees|1,659,612,131.21|1,521,219,551.03|
|Taxespaid|1,648,013,358.42|538,733,487.55|
|Cashusedinotheroperatingactivities|4,609,082,880.58|10,251,604,732.29|
|Subtotalofcashusedinoperatingactivities|53,783,803,548.28|45,257,144,155.60|
|Netcashgeneratedfrom/usedinoperatingactivities|-3,229,823,872.66|-4,314,257,622.47|
|2.Cashflowsfrominvestingactivities:|||
|Proceedsfromdisinvestment|106,597,820.94|72,257,309.01|
|Investmentincome|146,065,795.48|126,829,624.00|
|Net proceedsfrom disposaloffixed assets, intangibleassetsandotherlong-livedassets|2,372,418.53|101,598,096.61|
|Netproceedsfromdisposalofsubsidiariesorotherbusinessunits|252,468,488.60|6,904,949,434.52|
|Cashgeneratedfromotherinvestingactivities|2,393,028,228.96|1,847,480,775.61|
|Subtotalofcashgeneratedfrominvestingactivities|2,900,532,752.51|9,053,115,239.75|
|Payments for acquisition of fixed assets, intangible assets andotherlong-livedassets|486,058,229.18|252,512,252.89|
|Paymentsforinvestments|597,975,935.00|1,185,098,584.39|
|Netincreaseinpledgedloansgranted|||
|Net payments for acquisition of subsidiaries and other businessunits|1,118,860,395.37||
|Cashusedinotherinvestingactivities|2,949,519,200.00|2,885,988,913.10|
|Subtotalofcashusedininvestingactivities|5,152,413,759.55|4,323,599,750.38|
|Netcashgeneratedfrom/usedininvestingactivities|-2,251,881,007.04|4,729,515,489.37|
|3.Cashflowsfromfinancingactivities:|||
|Capitalcontributionsreceived|332,513,927.94|50,430,511.80|
|Including:Capitalcontributionsbynon-controllingintereststosubsidiaries|203,580,594.60|50,430,511.80|
|Increaseinborrowingsobtained|14,681,965,477.02|9,997,566,758.22|
|Netproceedsfromissuanceofbonds|||
|Cashgeneratedfromotherfinancingactivities|330,951,745.42|478,604,496.40|
|Subtotalofcashgeneratedfromfinancingactivities|15,345,431,150.38|10,526,601,766.42|
|Repaymentofborrowings|8,081,422,372.12|9,541,243,861.75|
|Paymentsforinterestanddividends|709,581,026.62|215,250,211.08|
|Including: Dividends paid by subsidiaries to non-controllinginterests|960,052.07|746,714.88|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Cashusedinotherfinancingactivities|757,534,424.92|23,263,067.97|
|Subtotalofcashusedinfinancingactivities|9,548,537,823.66|9,779,757,140.80|
|Netcashgeneratedfrom/usedinfinancingactivities|5,796,893,326.72|746,844,625.62|
|4. Effect of foreign exchange rate changes on cash and cashequivalents|21,061,330.94|-85,105,733.90|
|5.Netincreaseincashandcashequivalents|336,249,777.96|1,076,996,758.62|
|Add:Cashandcashequivalents,beginningoftheperiod|3,097,899,703.76|2,020,902,945.14|
|6.Cashandcashequivalents,endoftheperiod|3,434,149,481.72|3,097,899,703.76|

 6.Cash FlowStatementof theCompany asthe Parent
Unit:RMB
||||
|-|-|-|
|Item|2018|2017|
|1.Cashflowsfromoperatingactivities:|||
|Proceedsfromsaleofcommoditiesandrenderingofservices|10,411,822,006.27|12,663,519,862.71|
|Taxrebates|162,545,714.88|101,117,712.70|
|Cashgeneratedfromotheroperatingactivities|3,664,490,303.85|11,750,343,362.91|
|Subtotalofcashgeneratedfromoperatingactivities|14,238,858,025.00|24,514,980,938.32|
|Paymentsforcommoditiesandservices|8,349,385,730.39|11,671,178,195.40|
|Cashpaidtoandforemployees|917,379,288.04|913,094,001.19|
|Taxespaid|1,163,848,413.52|153,133,718.08|
|Cashusedinotheroperatingactivities|8,371,093,126.27|13,492,237,043.23|
|Subtotalofcashusedinoperatingactivities|18,801,706,558.22|26,229,642,957.90|
|Netcashgeneratedfrom/usedinoperatingactivities|-4,562,848,533.22|-1,714,662,019.58|
|2.Cashflowsfrominvestingactivities:|||
|Proceedsfromdisinvestment|545,729,039.58|7,213,519,480.00|
|Investmentincome|229,742,943.89|157,605,497.94|
|Netproceedsfromdisposaloffixedassets,intangibleassetsandotherlong-livedassets|585,065.19|202,036.88|
|Net proceeds from disposal of subsidiaries or other businessunits|||
|Cashgeneratedfromotherinvestingactivities|2,389,727,049.76|1,771,357,091.35|
|Subtotalofcashgeneratedfrominvestingactivities|3,165,784,098.42|9,142,684,106.17|
|Payments for acquisition of fixed assets, intangible assets andotherlong-livedassets|91,684,045.40|69,689,987.87|
|Paymentsforinvestments|3,064,767,387.50|1,434,196,953.00|
|Net payments for acquisition of subsidiaries and other businessunits|||

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Cashusedinotherinvestingactivities|1,178,410,798.39|2,997,732,417.74|
|Subtotalofcashusedininvestingactivities|4,334,862,231.29|4,501,619,358.61|
|Netcashgeneratedfrom/usedininvestingactivities|-1,169,078,132.87|4,641,064,747.56|
|3.Cashflowsfromfinancingactivities:|||
|Capitalcontributionsreceived|||
|Increaseinborrowingsobtained|14,232,230,155.56|6,424,596,805.22|
|Netproceedsfromissuanceofbonds|||
|Cashgeneratedfromotherfinancingactivities|181,269,884.31|165,396,024.39|
|Subtotalofcashgeneratedfromfinancingactivities|14,413,500,039.87|6,589,992,829.61|
|Repaymentofborrowings|7,474,353,929.91|8,507,218,581.45|
|Paymentsforinterestanddividends|665,807,835.95|199,017,294.57|
|Cashusedinotherfinancingactivities|758,694,935.20|598,314.20|
|Sub-totalofcashusedinfinancingactivities|8,898,856,701.06|8,706,834,190.22|
|Netcashgeneratedfrom/usedinfinancingactivities|5,514,643,338.81|-2,116,841,360.61|
|4. Effect of foreign exchange rate changes on cash and cashequivalents|-28,192,061.54|-39,905,176.10|
|5.Netincreaseincashandcashequivalents|-245,475,388.82|769,656,191.27|
|Add:Cashandcashequivalents,beginningoftheperiod|1,743,269,944.67|973,613,753.40|
|6.Cashandcashequivalents,endoftheperiod|1,497,794,555.85|1,743,269,944.67|

KonkaGroupCo.,Ltd. AnnualReport2018
7.Consolidated Statements ofChanges inOwners’Equity
2018
Unit:RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2018|||||||||||||
||EquityattributabletoownersoftheCompanyastheparent|||||||||||Non-controllinginterests|Totalowners’equity|
||Sharecapital|Otherequityinstruments|||Capitalreserves|Less:Treasurystock|Othercomprehensiveincome|Specificreserve|Surplusreserves|Generalreserve|Retainedearnings|||
|||Preferredshares|Perpetualbonds|Other||||||||||
|1.Balancesasattheend of the prioryear|2,407,945,408.00||||104,732,242.30||3,697,458.95||1,217,644,874.79||4,260,125,492.57|204,044,330.78|8,198,189,807.39|
|Add: Adjustmentsfor changedaccountingpolicies||||||||||||||
|Adjustments forcorrections ofpreviouserrors||||||||||||||
|Adjustments forbusinesscombinations undercommoncontrol||||||||||||||
|Otheradjustments||||||||||||||
|2.Balancesasatthe|2,407,945,408.0||||104,732,242.30||3,697,458.95||1,217,644,874||4,260,125,492|204,044,330.7|8,198,189,807.3|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||||
|-|-|-|-|-|-|-|-|
|beginning of theyear|0|||.79|.57|8|9|
|3. Increase/decrease in theperiod (“-” fordecrease)||103,624,381.91|-14,235,678.03|9,919,910.40|11,282,699.64|1,142,587,189.48|1,253,178,503.40|
|3.1 Totalcomprehensiveincome|||-14,235,678.03||411,289,744.68|258,978,707.38|656,032,774.03|
|3.2 Capitalincreased andreducedbyowners||||||884,568,534.17|884,568,534.17|
|3.2.1Ordinarysharesincreasedbyshareholders||||||204,255,406.70|204,255,406.70|
|3.2.2Capitalincreasedbyholdersofotherequityinstruments||||||||
|3.2.3Share-basedpaymentsincludedinowners’equity||||||||
|3.2.4Other||||||680,313,127.47|680,313,127.47|
|3.3 Profitdistribution||||9,919,910.40|-400,007,045.04|-960,052.07|-391,047,186.71|
|3.3.1Appropriation to||||9,919,910.40|-9,919,910.40|||

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|surplusreserves||||
|3.3.2Appropriation togeneralreserve||||
|3.3.3Appropriation toowners (orshareholders)|-390,087,134.64|-960,052.07|-391,047,186.71|
|3.3.4Other||||
|3.4 Transferswithin owners’equity||||
|3.4.1 Increasein capital (or sharecapital)fromcapitalreserves||||
|3.4.2 Increasein capital (or sharecapital) fromsurplusreserves||||
|3.4.3 Lossoffset by surplusreserves||||
|3.4.4Other||||
|3.5 Specificreserve||||
|3.5.1 Increaseintheperiod||||
|3.5.2 Used in||||

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||||
|-|-|-|-|-|-|-|-|
|theperiod||||||||
|3.6Other||103,624,381.91|||||103,624,381.91|
|4.Balancesasattheendoftheperiod|2,407,945,408.00|208,356,624.21|-10,538,219.08|1,227,564,785.19|4,271,408,192.21|1,346,631,520.26|9,451,368,310.79|

 2017
Unit:RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2017|||||||||||||
||EquityattributabletoownersoftheCompanyastheparent|||||||||||Non-controllinginterests|Totalowners’equity|
||Sharecapital|Otherequityinstruments|||Capitalreserves|Less:Treasurystock|Othercomprehensiveincome|Specificreserve|Surplusreserves|Generalreserve|Retainedearnings|||
|||Preferredshares|Perpetualbonds|Other||||||||||
|1. Balances as attheendoftheprioryear|2,407,945,408.00||||79,723,092.04||-6,932,104.65||847,908,466.28||-427,163,254.63|417,017,287.63|3,318,498,894.67|
|Add: Adjustmentsfor changedaccountingpolicies||||||||||||||
|Adjustments forcorrections ofpreviouserrors||||||||||||||
|Adjustments forbusinesscombinationsunder common||||||||||||||

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||||
|-|-|-|-|-|-|-|-|
|control||||||||
|Otheradjustments||||||||
|2. Balances as atthe beginning oftheyear|2,407,945,408.00|79,723,092.04|-6,932,104.65|847,908,466.28|-427,163,254.63|417,017,287.63|3,318,498,894.67|
|3. Increase/decrease in theperiod (“-” fordecrease)||25,009,150.26|10,629,563.60|369,736,408.51|4,687,288,747.20|-212,972,956.85|4,879,690,912.72|
|3.1 Totalcomprehensiveincome|||10,629,563.60||5,057,025,155.71|29,636,931.01|5,097,291,650.32|
|3.2 Capitalincreased andreducedbyowners||||||-241,190,603.80|-241,190,603.80|
|3.2.1Ordinarysharesincreasedbyshareholders||||||-235,037,235.08|-235,037,235.08|
|3.2.2Capitalincreasedbyholdersofotherequityinstruments||||||||
|3.2.3Share-basedpaymentsincludedinowners’equity||||||-1,419,284.06|-1,419,284.06|
|3.2.4Other||||||||

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|3.3 Profitdistribution|369,736,408.51|-369,736,408.51|-1,419,284.06|-1,419,284.06|
|3.3.1Appropriation tosurplusreserves|369,736,408.51|-369,736,408.51|||
|3.3.2Appropriation togeneralreserve|||||
|3.3.3Appropriation toowners (orshareholders)|||-1,419,284.06|-1,419,284.06|
|3.3.4Other|||||
|3.4 Transferswithin owners’equity|||||
|3.4.1 Increasein capital (or sharecapital) fromcapitalreserves|||||
|3.4.2 Increasein capital (or sharecapital) fromsurplusreserves|||||
|3.4.3 Lossoffset by surplusreserves|||||
|3.4.4Other|||||
|3.5 Specific|||||

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||||
|-|-|-|-|-|-|-|-|
|reserve||||||||
|3.5.1 Increaseintheperiod||||||||
|3.5.2 Used intheperiod||||||||
|3.6Other||25,009,150.26|||||25,009,150.26|
|4. Balances as atthe end of theperiod|2,407,945,408.00|104,732,242.30|3,697,458.95|1,217,644,874.79|4,260,125,492.57|204,044,330.78|8,198,189,807.39|

8.Statements ofChangesinOwners’Equity oftheCompany as the Parent
2018
Unit:RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2018|||||||||||
||Sharecapital|Otherequityinstruments|||Capitalreserves|Less:Treasurystock|Othercomprehensiveincome|Specificreserve|Surplusreserves|Retainedearnings|Totalowners’equity|
|||Preferredshares|Perpetualbonds|Other||||||||
|1. Balances as at the end of theprioryear|2,407,945,408.00||||111,525,163.22||-1,970,304.62||1,217,644,874.79|3,327,627,676.56|7,062,772,817.95|
|Add: Adjustments for changedaccountingpolicies||||||||||||
|Adjustments for corrections ofpreviouserrors||||||||||||
|Otheradjustments|||||8,575,762.89|||||13,352,205.34|21,927,968.23|
|2. Balances as at the beginning oftheyear|2,407,945,408.0||||120,100,926.11||-1,970,304.||1,217,644,874|3,340,979,881.|7,084,700,786.1|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||||
|-|-|-|-|-|-|-|
||0||62|.79|90|8|
|3. Increase/ decrease in the period(“-”fordecrease)||-6,082,859.32|788,087.31|9,919,910.40|-300,807,941.05|-296,182,802.66|
|3.1Totalcomprehensiveincome|||788,087.31||99,199,103.99|99,987,191.30|
|3.2 Capital increased andreducedbyowners|||||||
|3.2.1Ordinarysharesincreasedbyshareholders|||||||
|3.2.2Capitalincreasedbyholdersofotherequityinstruments|||||||
|3.2.3Share-basedpaymentsincludedinowners’equity|||||||
|3.2.4Other|||||||
|3.3Profitdistribution||||9,919,910.40|-400,007,045.04|-390,087,134.64|
|3.3.1 Appropriation to surplusreserves||||9,919,910.40|-9,919,910.40||
|3.3.2 Appropriation to owners(orshareholders)|||||-390,087,134.64|-390,087,134.64|
|3.3.3Other|||||||
|3.4 Transfers within owners’equity|||||||
|3.4.1 Increase in capital (orshare capital) from capitalreserves|||||||
|3.4.2 Increase in capital (orsharecapital)fromsurplusreserves|||||||

KonkaGroupCo.,Ltd. AnnualReport2018
||||||||
|-|-|-|-|-|-|-|
|3.4.3 Loss offset by surplusreserves|||||||
|3.4.4Other|||||||
|3.5Specificreserve|||||||
|3.5.1Increaseintheperiod|||||||
|3.5.2Usedintheperiod|||||||
|3.6Other||-6,082,859.32||||-6,082,859.32|
|4. Balances as at the end of theperiod|2,407,945,408.00|114,018,066.79|-1,182,217.31|1,227,564,785.19|3,040,171,940.85|6,788,517,983.52|

 2017
Unit:RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2017|||||||||||
||Sharecapital|Otherequityinstruments|||Capitalreserves|Less:Treasurystock|Othercomprehensiveincome|Specificreserve|Surplusreserves|Retainedearnings|Totalowners’equity|
|||Preferredshares|Perpetualbonds|Other||||||||
|1.Balancesasattheendoftheprioryear|2,407,945,408.00||||64,794,108.39||6,714,437.62||847,908,466.28|-589,696,203.91|2,737,666,216.38|
|Add: Adjustments for changedaccountingpolicies||||||||||||
|Adjustments for corrections ofpreviouserrors||||||||||||
|Otheradjustments|||||7,350,000.00|||||-25,347,306.92|-17,997,306.92|
|2. Balances as at the beginning of|2,407,945,408.0||||72,144,108.39||6,714,437.6||847,908,466.2|-615,043,510.|2,719,668,909.4|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||||
|-|-|-|-|-|-|-|
|theyear|0||2|8|83|6|
|3. Increase/ decrease in the period(“-”fordecrease)||39,381,054.83|-8,684,742.24|369,736,408.51|3,942,671,187.39|4,343,103,908.49|
|3.1Totalcomprehensiveincome|||-8,684,742.24||4,312,407,595.90|4,303,722,853.66|
|3.2Capitalincreasedandreducedbyowners|||||||
|3.2.1Ordinarysharesincreasedbyshareholders|||||||
|3.2.2Capitalincreasedbyholdersofotherequityinstruments|||||||
|3.2.3Share-basedpaymentsincludedinowners’equity|||||||
|3.2.4Other|||||||
|3.3Profitdistribution||||369,736,408.51|-369,736,408.51||
|3.3.1 Appropriation to surplusreserves||||369,736,408.51|-369,736,408.51||
|3.3.2 Appropriation to owners(orshareholders)|||||||
|3.3.3Other|||||||
|3.4 Transfers within owners’equity|||||||
|3.4.1 Increase in capital (orshare capital) from capitalreserves|||||||
|3.4.2 Increase in capital (orsharecapital)fromsurplusreserves|||||||

KonkaGroupCo.,Ltd. AnnualReport2018
||||||||
|-|-|-|-|-|-|-|
|3.4.3 Loss offset by surplusreserves|||||||
|3.4.4Other|||||||
|3.5Specificreserve|||||||
|3.5.1Increaseintheperiod|||||||
|3.5.2Usedintheperiod|||||||
|3.6Other||39,381,054.83||||39,381,054.83|
|4. Balances as at the end of theperiod|2,407,945,408.00|111,525,163.22|-1,970,304.62|1,217,644,874.79|3,327,627,676.56|7,062,772,817.95|

KonkaGroupCo.,Ltd. AnnualReport2018 Konka Group Co., Ltd.
Notes to Financial Statements 2018
(All amounts areexpressed, unlessotherwisestated, inRenminbi (RMB).)
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 29 August 1995, the Company was renamed to “Konka Group Co., Ltd.” (Credibility code: 914403006188155783) with its main business electronic industry.And now the headquarters locates in No. 28 of No. 12 of Keji South Rd., Science& Technology Park, Yuehai Street, Nanshan District, Shenzhen, Guangdong Province.
2.ShareCapital Changes uponEstablishment
On 27 November 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 8 December1991—31 December 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 29 January 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 20 December1991— 31 January 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 10 April 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
KonkaGroupCo.,Ltd. AnnualReport2018 Company began to perform dividend policy for FY 1992 as of 30 April 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 18 April 1994, the Proposal on Profit Distribution and Dividend Payout 1993 was adopted at the third general meeting of shareholders of the Company.With approval from the SZBF No. 115[1994] document as issued by Shenzhen Securities Regulatory Office, the Company began to perform dividend policy for FY1993 as of 10 June 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 2 June 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 6 June 1994, with the prior consent of Shenzhen Securities Regulatory Officeand Shenzhen StockExchange.
On 8 October 1994, the Proposal on Negotiable Bonus Shares of B-Share Corporate Shareholders 1992 was adopted at the interim general meeting of shareholders of the Company. With approval from the SZBF No. 224[1994] document as issued by Shenzhen Securities Regulatory Office, the 16,930,305.00 bonus shares for FY 1992 granted to foreign legal persons were listed and negotiated at B-sharemarket on26October 1994.
On 6 February 1996, the Proposal on Share Allotment Modes 1996 was adopted at the interim general metering of shareholders of the Company. With approval from the SZBF No. 5[1996] document as issued by Shenzhen Securities Regulatory Office, and re-examination from the ZJPSZ No. 16[1996] document and ZJGZ No. 2[1996] document as issued by China Securities Regulatory Commission, on 16 July 1996 and 29 October 1996, all shareholders were respectively allotted three shares for every ten existing shares held at RMB6.28/A-share and HKD5.85/B-share. Corporate shareholders took their respective existing shares as bases for full subscription of the allocable shares. The total capital stock reached 365,572,641.00shares after thisallotment.
On 25 January 1998, the Plan on Share Allotment 1998 was adopted at the interim general meeting of shareholders of the Company. With approval from the ZZBZ No. 29[1998]
KonkaGroupCo.,Ltd. AnnualReport2018 document as issued by Shenzhen Securities Regulatory Office, and ZJSZ No.64[1998] document as issued by China Securities Regulatory Commission, on 15 July 1998, negotiable A-shares were allotted in proportion of 3:10 at RMB10.50/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 cancelled, and the corporate shareholders of the Company waived the preemptive right. The total capital stock reached 389,383,603 shares after this allotment.
On 30 June 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 20 August 1999, the profit distribution for FY 1998 was carried out: all shareholders were presented RMB3.00 in cash for every 10 shares, plus 2 shares capitalized from capital public reserve.The total capital stock reached 467,260,323.00shares after this capitalization.
On 30 June 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 1 November 1999, 80,000,000.00A-shares were additionally issued to the public at RMB15.50/share. The totalcapital stock reached 547,260,323.00 shares after thisadditional issue.
On 30 May 2000, the Plan on Profit Distribution and Dividend Payout 1999 was adopted at the ninth general meeting of shareholders of the Company. On 25 July 2000, the profit distribution for FY 1999 was carried out: all shareholders were distributed RMB4.00 in cash plus 1 bonus shares for every 10 shares. The total capital stock reached 601,986,352.00 shares after thisdistribution.
On 26 May 2008, the 2017 general meeting of shareholders s was convened, during which the following resolutions were discussed and adopted: based on the total capital stock of 601,986,352.00 shares for the year ended 31 December 2007, capitalization from capital public reserve was made to all shareholders at a proportion of 1:1, namely 10 new shares for every 10 existing shares. On 16 December 2008, with approval from the SMGZF No. 2662[2008] document as issued by Shenzhen Bureau of Trade and Industry, the Company was agreed to increase its share capital, and went through the formalities for registration of changes with the administration for industry and commerce on 10 April 2009. The total capital stock reached 1,203,972,704.00shares after change.
According to the regulations of the 2015 1st Extraordinary General Meeting and the revised
KonkaGroupCo.,Ltd. AnnualReport2018 articles of the Company, the Company applied to increase the registered capital of RMB1,203,972,704.00, which totally turned into capital reserve with the altered registered capital of RMB2,407,945,408.00 and managed the industrial and commercial alternation registration on28January 2016with thealtered share capital of2,407,945,408.00shares. 3. Approved business scope: research and development, production and operation of such intelligent household electric appliances as televisions, refrigerators, washing machines, and personal electronic appliances, and kitchen and bathroom electronic appliances; manufacturing and application of home AV, IPTV set-top boxes, OTT terminal products, digital TV receivers (including ground receiving equipment of satellite television broadcasting), digital products, intelligent wearable products, intelligent health products, intelligent electric products, intelligent switch plug, power bank, mobile communication equipments and terminal products, daily-use electronic products, automotive electronic products, satellite navigation systems, intelligent transportation systems, fire-fighting and security systems, office equipments, computers, displays, large screen display systems; LED (OLED) back light, illumination, light-emitting devices, and packaging thereof; Touch TV AIO, wireless broadcasting television transiting equipment; emergency broadcast system equipment, electronic parts and components, moulds, plastic and rubber products, and packing materials, design and in-door installation security products, monitoring products, wireless and cable digital television system and system integration, and technical consultancy and after-sale paid services of related products (except mobile phone, the other products in the above business scope are manufactured in other places outside Shenzhen); Wholesale, retail, import& export and relevant support services of the aforesaid products (including spare parts) (Commodities subject to state trading management are not involved. Products involved in quota, license management and other specified management shall be subject to the relevant state provisions.); sale of self-developed technological achievements; provision of maintenance services, technical consultant service for electronic products; ordinary cargo transportation, domestic freight forwarding, international freight forwarding, and warehousing services; management of supply chain, consultancy on enterprise management; and self-owned property leasing and management services, recovery of waste electrical appliances and electronic products (excluding dissembling) (operated by branch offices); and outsourcing services of information technology and business procedures by means of undertaking services in the way of outsourcing, including management and maintenance of
KonkaGroupCo.,Ltd. AnnualReport2018 system application, management of information technology, bank background service, financial settlement, human resource service, software development, call centre, and data processing. Import& export business: domestic trade; international trade (excluding monopoly, exclusive control, and monopolized commodities); selling security products, intelligent household products, door lock, and hardware; doing various business entrusted by (Mobile, Unicom, Telecom, andBC&TV); Water pollution control, solid waste pollution treatment, hazardous waste pollution control, air pollution control, soil pollution control and remediation;production (excluding mining) and sales of non-metallic mineral products and materials; development, production and sales of specific materials for semiconductor integrated circuits and component; assembly, production and sales of integrated device electronics, design,R&D, manufacturing, testing, packaging and sales of semiconductor integrated circuits, and sales, integrated circuit products and related technical services, technology development, transfer, import and export in the field of
semiconductor integrated circuit technology.
4.The Company and its subsidiaries are mainly engaged in the production and sales of colour TVs, white goods, mobile phones, etc.; trade business of supply chain, environmental protection, commercial factoring, andetc.
5. The financial statements contained herein have been approved for issue by the Board of Directors of theCompany on28March 2018.
6. There were 114 subsidiaries included in the consolidation scope of 2018 of the Company, and please refer to the Notes VIII. “Equities among other entities” for details. There were 68 subsidiaries increased and 6 decreased in the consolidation scope of the Reporting Period over the last period of the Company, for details, see the Notes VII. “Changes of the consolidation scope”.
7.Acheck listofcorporate names and theirabbreviations mentioned in thisReport
Corporatename Abbreviation
ShenzhenKonkaE-displayCo.,Ltd. KonkaE-display
ShenzhenE-displayServiceCo.,Ltd. E-displayService
ShenzhenKangqiaoEasyChainTechnologyCo.,Ltd. KangqiaoEasyChain
KonkaVenturesDevelopment(Shenzhen)Co.,Ltd. KonkaVentures
YantaiKonkaHealthcareEnterpriseServiceCo.,Ltd. YantaiKonka
ChengduKonkaIncubatorManagementCo.,Ltd. ChengduKonkaIncubator
ChengduAnrenKonkaCulturalandCreativeIncubatorManagementCo.,Ltd. ChengduAnren
KonkaGroupCo.,Ltd. AnnualReport2018 Corporatename Abbreviation
GuiyangKonkaEnterpriseServiceCo.,Ltd. KonkaEnterpriseService
NanjingChuanghuiSmartTechnologyCo.,Ltd. ChuanghuiSmart
GuizhouKonkaEnterpriseManagementServiceCo.,Ltd. KonkaEnterpriseManagement
YibinKonkaIncubatorManagementCo.,Ltd. YibinKonkaIncubator
ShenzhenKonkaCross-BorderTechnologicalInnovationServiceCo.,Ltd. Cross-BorderTechnologicalInnovation AnhuiKonkaElectronicCo.,Ltd. AnhuiKonka
AnhuiKangzhiTradeCo.,Ltd. KangzhiTrade
KonkaFactoring(Shenzhen)Co.,Ltd. KonkaFactoring
YoushiKangrongCultureCommunicationCo.,Ltd. YoushiKangrong
ChuzhouKonkaTechnology&IndustryDevelopmentCo.,Ltd. ChuzhouKonkaTID
ShenzhenKonkaUnifortuneSupplyChainManagementCo.,Ltd. KonkaUnifortune
JialiInternational(HongKong)Limited JialiInternational
ShenzhenWankaidaScienceandTechnologyCo.,Ltd. Wankaida
DongguanKonkaElectronicCo.,Ltd. DongguanKonka
ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd. TelecommunicationTechnology ShenzhenKonkaElectricalAppliancesCo.,Ltd. KonkaElectricalAppliances
MudanjiangArcticOceanAppliancesCo.,Ltd. MudanjiangAppliances
Konka(Europe)Co.,Ltd. KonkaEurope
ShenzhenKonkaCommercialSystemTechnologyCo.,Ltd. CommercialSystemTechnology ShenzhenKonkaElectricalAppliancesCo.,Ltd. KonkaElectricalAppliances
HainanKonkaMaterialTechnologyCo.,Ltd. KonkaMaterial
ShenzhenShushidaLogisticsServiceCo.,Ltd. ShushidaLogistics
ShenzhenKonkaMobileInterconnectionTechnologyCo.,Ltd. MobileInterconnection
SichuanKonkaSmartterminalTechnologyCo.,Ltd SichuanKonka
AnhuiKonkaTongchuangElectricalAppliancesCo.,Ltd. AnhuiTongchuang
AnhuiKonkaElectricalApplianceTechnologyCo.,Ltd. AnhuiElectricalAppliance
HenanFrestecRefrigerationApplianceCo.,Ltd. FrestecRefrigeration
HenanFrestecElectricalAppliancesCo.,Ltd. FrestecElectricalAppliances
HenanFrestecHouseholdAppliancesCo.,Ltd. FrestecHouseholdAppliances
ShenzhenKonkaPengrunTechnology&IndustryCo.,Ltd. KonkaPengrun
JiaxinTechnologyCo.,Ltd. JiaxinTechnology
E3info(Hainan)TechnologyCo.,Ltd. E3info
ShenzhenKonkaYifangTechnologyCo.,Ltd. YifangTechnology
DongguanKonkaPackingMaterialsCo.,Ltd. DongguanPacking
KonkaGroupCo.,Ltd. AnnualReport2018 Corporatename Abbreviation
ShenzhenE2infoNetworkTechnologyCo.,Ltd. E2info
BeijingKonkaElectronicCo.,Ltd. BeijingKonkaElectronic
TianjinKonkaLeasingCo.,Ltd. KonkaLeasing
ShenzhenKonkaElectronicFittingsTechnologyCo.,Ltd. FittingsTechnology
BoluoKonkaPrecisionTechnologyCo.,Ltd. BoluoKonkaPrecision
XiamenDalongTradingCo.,Ltd. XiamenDalong
BoluoKonkaPCBCo.,Ltd. BoluoKonka
ChongqingQingjiaElectronicsCo.,Ltd. ChongqingQingjia
KunshanKangshengInvestmentDevelopmentCo.,Ltd. KunshanKangsheng
AnhuiKaikaiShijieE-commerceCo.,Ltd. KaikaiShijie
HongKongKonkaCo.,Ltd. HongKongKonka
Konka Electrical AppliancesKonkaElectricalAppliancesInvestment&DevelopmentCo.,Ltd.
Investment
ChainKingdomCo.,Limited ChainKingdom
ChainKingdom(Shenzhen)Co.,Limited ChainKingdom(Shenzhen)
ShenzhenKonkaPlasticProductsCo.,Ltd. PlasticProducts
KonkaSmartTechLimited KonkaSmartTech
Kangjietong(HongKong)Limited Kangjietong
Konka Electrical Appliances KonkaElectricalAppliancesInternationalTradingCo.,Ltd.
InternationalTrading
ShenzhenKonkaInvestmentHoldingCo.,Ltd. KonkaInvestment
YibinKonkaTechnologyParkOperationCo.,Ltd. YibinKonkaTechnologyPark
SichuanKonkaIndustrialNewTownDevelopmentCo.,Ltd. IndustrialNewTown
ShenzhenKonkaCapitalEquityInvestmentManagementCo.,Ltd. KonkaCapital
KonkaSuiyongInvestment(Shenzhen)Co.,Ltd. KonkaSuiyong
HainanKonkaTechnologyIndustryDevelopmentCo.,Ltd. HainanTechnology
ShenzhenKangquanEnterpriseManagementConsultingCo.,Ltd. KangquanEnterprise
ShenzhenKonkaElectronicsTechnologyCo.,Ltd. ElectronicsTechnology
GuangDongXingDaHongYeElectronicCo.,Ltd. XingDaHongYe
ShanghaiXinfengZhuoqunPCBCo.,Ltd. ShanghaiXinfeng
ZhongshanZeweiKechuangInvestmentManagementCo.,Ltd. ZhongshanZewei
NanjingKonkaSmartTechnologyCo.,Ltd. NanjingKonka
AnhuiKonkaZhilianE-CommerceCo.,Ltd. AnhuiZhilian
KonkaHuanjia(Dalian)EnvironmentalTechnologyCo.,Ltd. KonkaHuanjia
ShanghaiKonkaIndustrialCo.,Ltd. ShanghaiKonka
KonkaGroupCo.,Ltd. AnnualReport2018 Corporatename Abbreviation
ChuzhouKangyongHealthIndustryDevelopmentCo.,Ltd. ChuzhouKangyong
YantaiKonkaIndustrialCo.,Ltd. YantaiKonka
YantaiKangjinTechnologyDevelopmentCo.,Ltd. YantaiKangjin
ShandongKangxinIndustrialDevelopmentCo.,Ltd. ShandongKangxin
ShandongEconTechnologyCo.,Ltd.(inclusiveofitsconsolidatedsubsidiaries) EconTechnology
JiangxiKonkaNewMaterialTechnologyCo.,Ltd. JiangxiKonka
JiangxiXinfengMicrocrystallineJadeCo.,Ltd. XinfengMicrocrystalline
JiangxiGoldenPhoenixNanoCrystallizedGlassCo.,Ltd. NanoCrystallizedGlass
ShenzhenKangxinweiSemiconductorCo.,Ltd. ShenzhenKangxinwei
ShenzhenMeixinSemiconductorTechnologyCo.,Ltd. ShenzhenMeixin
HefeiKangxinweiStorageTechnologyCo.,Ltd. HefeiKangxinwei
ShenzhenNianhuaEnterpriseManagementCo.,Ltd. ShenzhenNianhua
ShenzhenKonkaEco-DevelopmentInvestmentCo.,Ltd. KonkaEco-Development
KonkaRongheIndustrialTechnology(Foshan)Co.,Ltd. KonkaRonghe
SuiningKonkaIndustrialParkDevelopmentCo.,Ltd. SuiningKonkaIndustrialPark
SichuanKangjiatongSupplyChainManagementCo.,Ltd. Kangjiatong
ShenzhenKonkaSuyuanInvestmentIndustrialCo.,Ltd. KonkaSuyuan
II.Basis forthePreparation ofFinancialStatements
With the going-concern assumption as the basis and based on transactions and other events that actually occurred, the Group prepared financial statements in accordance with The Accounting Standards for BusinessEnterprises—Basic Standard issued by the Ministry of Finance with Decree No. 33 and revised with Decree No. 76, the 42 specific accounting standards, the Application Guidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises and other regulations issued and revised from 15 February 2006 onwards (hereinafter jointly referred to as theAccounting Standards for Business Enterprises, China Accounting Standards or “CAS”), as well as the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15– General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory Commission.
In accordance with relevant provisions of theAccounting Standards for Business Enterprises, the Group adopted the accrual basis in accounting. Except for some financial instruments and investment properties, the financial statements are based on historic costs to measure. Non-current assets held for sale is priced by the lower amount between the amounts that fair
KonkaGroupCo.,Ltd. AnnualReport2018 value minus estimated amount and the original book value that meets the held for sale requirement. Where impairment occurred on an asset, an impairment reserve was withdrawn accordinglypursuant to relevant requirements.
III.Statementof Compliancewith theAccounting StandardsforBusiness Enterprises The financial statements prepared by the Group are in compliance with in compliance with the Accounting Standards for Business Enterprises, which factually and completely present theCompany’s financial positions as at 31 December 2018, business results and cash flows for 2018, 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 its subsidiaries are mainly engaged in the production and sales of colour TVs, white goods, mobile phones, etc.; trade business of supply chain, environmental protection, commercial factoring, and etc. The Company and its subsidiaries formulated certain specific accounting policies and accounting estimates according to the actual production and operation characteristics and the regulations of the relevant ASBE on the transactions and events of the revenues recognition, the recognition of completion of construction contract, and research development expenditure. For the details, please refer to each description of Notes IV. 23 “Revenues”. For the notes of the significant accounting judgment and estimations made by the management layer, please refer to Notes IV. 29 “Significant accounting judgment and estimations”.
1.FiscalPeriod
TheGroup’s fiscal periods include fiscal years and fiscal periods shorter than a complete fiscal year. TheGroup’s fiscal year starts on January 1 and ends on December 31 of every yearaccording to theGregorian calendar.
KonkaGroupCo.,Ltd. AnnualReport2018 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. The overseas subsidiaries of the Company should confirm the HK Dollar and Euro a as their recording currency according its major economic environment of their operating address. And the Group adopted Renminbi as the bookkeeping base currency when preparing thefinancial statements for theReporting Year. 4. Accounting Treatment Methods for Business Combinations under the Same Control ornotundertheSame Control
Business combinations, it is refer to two or more separate enterprises merge to form a reporting entity transactions or events. Business combination is divided into under the same control and thosenonunder thesame control.
(1)Business combinations underthe samecontrol
A business combination under the same control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or the same parties both before and after the business combination and on which the control is not temporary. In a business combination under the same control, the party which obtains control of other combining enterprise(s) on the combining date is the combining party, the other combining enterprise(s) is (are) the combined party. The “combining date” refers to the date on which thecombiningparty actually obtains control onthecombined party.
The assets and liabilities that the combining party obtains in a business combination shall be measured on the basis of their carrying amount in the combined party on the combining date. As for the balance between the carrying amount of the net assets obtained by the combining party and the carrying amount of the consideration paid by it (or the total par value of the shares issued), the additional paid-in capital (share premium) shall be adjusted. If the
KonkaGroupCo.,Ltd. AnnualReport2018 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 and losses at thecurrent period.
(2)Business combinations not underthesame control
A business combination not under the same control is a business combination in which the combining enterprises are not ultimately controlled by the same party or the same parties both before and after the business combination. In a business combination not under the same control, the party which obtains the control on other combining enterprise(s) on the purchase dateis theacquirer, andothercombining enterprise(s) is(are) theacquiree.
For a business combination not under the same control, the combination costs shall include the fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equity securities issued by the acquirer in exchange for the control on the acquiree, the expenses for audit, legal services and assessment, and other administrative expenses, which are recorded into the profits and losses in the current period. The trading expenses for the equity securities or debt securities issued by the acquirer as the combination consideration shall be recorded into the amount of initial measurement of the equity securities or debt securities. The involved contingent consideration shall be recorded into the combination costs at its fair value on the acquiring date. Where new or further evidences emerge, within 12 months since the acquiring date, against the existing circumstances on the acquiring date and the contingent consideration thus needs to be adjusted, the combined goodwill shall be adjusted accordingly. The combination costs of the acquirer and the identifiable net assets obtained by it in the combination shall be measured according to their fair values at the acquiring date. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. Where the combination costs are less then the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall re-examine the measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it obtains from the acquiree as well as the combination costs. If, after the re-examination, the combination costs are still less than the fair value of the identifiable net assets it obtains from
KonkaGroupCo.,Ltd. AnnualReport2018 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, theyshall berecorded intotheprofits and losses in thecurrent period.
In a business combination not under same control realized by two or more transactions of exchange, according to about the No. 5 Notice about the Treasury Issuing the Accounting Standards for Enterprises (Finance accounting)[2012] No. 19 and the Article 51 of Accounting Standards for Enterprises No.33—Consolidated Financial Statements Criterion about the “package deal” (see Note IV, 5 (2)), Whether the deals are “package deal” or not, belong to the “package deal”, see the previous paragraphs described in this section and Note IV, 13 “long term equity investment” and conduct accounting treatment, those not belong to the “package deal” distinguish between the individual financial statements and the consolidated financial statements and conduct relevant accounting treatment.
In the individual financial statements, the sum of the book value and new investment cost of the Group holds in the acquiree before the acquiring date shall be considered as initial cost of the investment. Other related comprehensive gains in relation to the equity interests that the Group holds inthe acquiree before the acquiring date shall be treated onthe same basis as the acquiree directly disposes the related assets or liabilities when disposing the investment (that is, except for the corresponding share in the changes in the net liabilities or assets with a defined benefit plan measured at the equity method arising from 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
KonkaGroupCo.,Ltd. AnnualReport2018 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 FinancialStatements
(1)Principlefor determining theconsolidation scope
The consolidation scope for financial statements is determined on the basis of control. The term “control” is the power of the Group upon an investee, with which it can take part in relevant activities of the investee to obtain variable returns and is able to influence the amount of returns. The scope of consolidation includes the Company and its all subsidiaries. Asubsidiary is an enterpriseorentity controlled bytheGroup.
Once any changes in the relevant facts or situations resulted in any changes in the elements involvedintheaforesaid definition of“control”,theCompany shall carry out a reassessment. (2)Methods for preparing theconsolidated financial statements
Subsidiaries are fully consolidated from the date on which the Group obtains control on their net assets and operation decision-making and are de-consolidated from the date when such control ceases. As for a disposed subsidiary, its operating results and cash flows before the disposal date has been appropriately included in the consolidated income statement and cash flow statement; and as for subsidiaries disposed in the current period, the opening items in the consolidated balance sheet are not adjusted. For a subsidiary acquired in a business combination not under the same control, its operating results and cash flows after the acquiring date have been appropriately included in the consolidated income statement and cash flow statement, and the opening items and comparative items in the consolidated financial statements are not adjusted. For a subsidiary acquired in a business combination under the same control, its operating results and cash flows from the beginning of the
KonkaGroupCo.,Ltd. AnnualReport2018 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 itemsin theconsolidated financial statements are adjusted at thesame time.
The financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Group during the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Group and subsidiaries. For a subsidiary acquired from a business combination not under the same control, the individual financial statements of the subsidiary areadjusted based onthefair valueof theidentifiablenet assets at theacquisitiondate.
All significant inter-group balances, transactions and unrealized profits are offset in the consolidated financial statements.
The portion of asubsidiary’sshareholders’ equity and the portion of asubsidiary’s net profits and losses for the period not held by the Group are recognized as minority interests and minority shareholder profits and losses respectively and presented separately undershareholders’ equity and net profits in the consolidation financial statements. The portion of asubsidiary’s net profits and losses for the period that belong to minority interests is presented as the item of “minority shareholder profits and losses” under the bigger item of net profits in the consolidated financial statements. Where the loss of a subsidiary shared by minority shareholders exceeds the portion enjoyed by minority shareholders in thesubsidiary’s openingowners’equity, minorityinterests are offset.
Where the Group losses control on its original subsidiaries due to disposal of some equity investments or other reasons, the residual equity interests are re-measured according to the fair value on the date when such control ceases. The summation of the consideration obtained from the disposal of equity interests and the fair value of the residual equity interests, minus the portion in the originalsubsidiary’s net assets measured on a continuous basis from the acquisition date that is enjoyable by the Group according to the original shareholding percentage in the subsidiary, is recorded in investment gains for the period when theGroup’s control on the subsidiary ceases. Other comprehensive incomes in relation to the equity investment in the original subsidiary are treated on the same accounting basis as the acquiree directly disposes the relevant assets or liabilities (that is, except for the changes in the net
KonkaGroupCo.,Ltd. AnnualReport2018 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 Note IV. 9“financial instruments”.
If the company disposals the equity investment in the subsidiary company until the loss of control through multiple transactions, it is necessary to distinguish whether the transactions disposing the equity investment in the subsidiary company until the loss of control belong to package transactions. 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 condition of not losing control on its subsidiaries” (see Note IV. 13. (2)④) and “Where the Group losses control on its original subsidiaries due to disposal of some equity investments or other reasons” (See the front paragraph) relevant transactions of the Group losses control on its subsidiaries due to disposal of equity investments belonging to a package deal, considered as a transaction and conduct accounting treatment. However, Before losing control, every disposal cost and corresponding net assets balance of subsidiary of disposal investment are confirmed as other comprehensive income in consolidated financial statements, which together transferred into the current profits and losses in the loss of control ,when theGroup losingcontrol onitssubsidiary.
6.Classificationof JointArrangements andAccounting Treatmentof JointOperations A joint arrangement refers to an arrangement jointly controlled by two participants or above. The Group classifies joint arrangements into joint operations and joint ventures according to
KonkaGroupCo.,Ltd. AnnualReport2018 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—Asset Impairment, the Group shall fully recognizes the loss for a transfer or sale of assets to a joint operation; and shall recognize the loss according to its stake in the joint operation for a purchase ofassets from thejointoperation.
7.Recognition Standard for CashandCash Equivalents
In theGroup’s understanding, cash and cash equivalents include cash on hand, any deposit that can be used for cover, and short-term (usually due within 3 months since the day of purchase) and high circulating investments, which are easily convertible into known amount ofcash and whose risksinchange of valueare minimal.
KonkaGroupCo.,Ltd. AnnualReport2018 8. Foreign Currency Businesses and Translation of Foreign Currency Financial Statements
(1)Accounting treatments for translation offoreign currency transactions
As for a foreign currency transaction, the Company shall convert the amount in a foreign currency into amount in its bookkeeping base at the spot exchange rate (usually referring to the central parity rate that day announced by thePeople’s Bank of China, the same below) of the transaction date, while as for such transactions as foreign exchange or involving in foreign exchange, the Company shall converted into amount in the bookkeeping base currency at actual exchange rate thetransaction isoccurred.
(2) Accounting treatments for translation of foreign currency monetary items and non-monetary items
On the balance sheet date, the foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date shall be recorded in the profits and losses in the current period, excluding the following situations:① the exchange difference arising from foreign currency loans related to acquisition of fixed assets shall be treated at the principle of capitalization of borrowing costs;② the exchange difference arising from the hedging instruments used for effective hedging of net overseas operation investments shall be recorded into other comprehensive incomes, and shall be recognized into current gains and losses when the net investments are disposed; and③ the exchange difference arising from change in the book balance of foreign currency monetary items available for sale except the amortized costs shall be recorded into other comprehensive gains and losses.
When it involves overseas business in preparing the consolidated financial statement, for the translation difference of foreign currency monetary items of net investment in overseas business arising from the change in exchange rate, it shall be recorded into the other comprehensive income; and be recorded into disposal gains and losses at current period when disposingoverseas business.
A foreign currency non-monetary item measured at the historical costs shall still be translated
KonkaGroupCo.,Ltd. AnnualReport2018 at the spot exchange rate on the transaction date. Where the foreign non-monetary items measured at the fair value shall be converted into amount in its bookkeeping base currency at spot exchange rate, the exchange gains and losses arising thereof shall be treated as change in fair value, and recorded into the current period gains and losses or as other comprehensive incomes.
(3)Translation of foreign currency financial statements
When it involves overseas business in preparing the consolidated financial statement, for the translation difference of foreign currency monetary items of net investment in overseas business arising from the change in exchange rate, it shall be recorded into the item of “difference of foreign currency financial statement translation” under theowners’ equity; and be recorded into disposal gains and losses at current period when disposing overseas business.
The foreign currency financial statement of overseas business should be translated in to RMB financial statement by the following methods: The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date. Among theowner’s equity items, except for the items as “undistributed profits”, other items shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot exchange rate of the transaction date. The undistributed profits at year-begin is the undistributed profits at the end of last year after the translation; undistributed profits at year-end shall be listed as various distribution items after the translation; after the translation, the balance between assets and the sum of liabilities andshareholders’ 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 theshareholders’ equities in the balance sheet and which arises from the translation of foreign currency financial statements relating to this overseas business, into the disposal profits and losses of the current period by all or proportion of the disposed overseas business.
Foreign cash flow shall be translated at the spot exchange rate of the current period of the date of cash flow incurred. The influence of exchange rate on the cash flow shall be adjustment itemand individually listed inthe cash flowstatement.
KonkaGroupCo.,Ltd. AnnualReport2018 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.
(1)Determination ofthefair valueof main financial assets andfinancial liabilities
Fair value refers to the price that a market participant shall receive for selling an asset or shall pay for transferring a liability in an orderly transaction on the measurement date. As for the financial assets or financial liabilities for which there is an active market, the quoted prices in the active market shall be used to determine the fair values thereof. The quoted prices in the active market refers to the prices available from stock exchange,broker’s agencies, guilds, pricing organization and etc., which represent the actual trading price under equal transaction. Where there is no active market for a financial instrument, the enterprise
KonkaGroupCo.,Ltd. AnnualReport2018 concerned shall adopt value appraisal techniques, including the prices adopted by the parties, who are familiar with the condition, in the latest market transaction upon their own free will, the current fair value obtained by referring to other financial instruments of the same essential nature, the cash flow capitalization method and the option pricing model, etc., to determineits fair value.
(2)Classification, recognitionand measurement offinancial assets
The purchase and sale of financial assets under the normal ways shall be recognized and stopped to be recognized respectively at the price of transaction date. Financial assets shall be classified into the following four categories when they are initially recognized: (a) the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period, (b) the investments which will be held to their maturity; (c) loans and the account receivables; and (d) financial assets available for sale.
① The financial assets which are measured at their fair values and the variation of which is recorded into theprofits and lossesof thecurrent period
Including transactional financial assets and the financial assets which are designated to be measured at their fair value when they are initially recognized and of which the variation is recorded into theprofits and lossesof thecurrent period;
The financial assets meeting any of the following requirements shall be classified as transactional financialassets：A. The purpose to acquire the said financial assets is mainly for selling them in the near future; B. Forming a part of the identifiable combination of financial instruments which are managed in a centralized way and for which there are objective evidences proving that the enterprise may manage the combination by way of short-term profit making in the near future; C. Being a derivative instrument, excluding the designated derivative instruments which are effective hedging instruments, or derivative instruments to financial guarantee contracts, and the derivative instruments which are connected with the equity instrument investments for which there is no quoted price in the active market, whose fair value cannot be reliably measured, and which shall be settled by delivering the said equityinstruments.
KonkaGroupCo.,Ltd. AnnualReport2018 The financial assets meeting any of the following requirements shall be designated as financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period for initial recognition: A. the designation can eliminate or significantly reduce the difference of relevant gains and losses between recognition and measurement causing from different bases for measurement of financial assets; B. The official written documents for risk management and investment strategies of the enterprise have clearly stated that it shall ,manage, evaluate and report to important management personnel based on the fair value, about the financial assets group or the group offinancial assets& liabilities which thefinancial assets are belong to.
For the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period shall continue to be measured by fair value, gains and losses of change in fair value, dividends and interest related with these financial assets shouldbe recorded intogains and losses ofcurrent period.
②Held-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 instalments or interest expenses are calculated in light of the actual interest rates of the financial assets or financial liabilities (including a set of financial assets or financial liabilities). The actual interest rate refers to the interest rate adopted to cash the future cash flow of a financial asset or financial liability within the predicted term of existence or within a shorter applicable term into the current carrying amount of the financial asset orfinancial liability.
KonkaGroupCo.,Ltd. AnnualReport2018 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.
③Loans and theaccounts receivables
Loans and the accounts receivables refer to non-derivative financial assets, which there is no quotation in the active market, with fixed recovery cost or recognizable. Financial assets that are defined as loans and the accounts receivables by the Group including notes receivables, accounts receivables, interest receivable, dividends receivable and other receivables etc.. Loans and the accounts receivables are made follow-up measurement on the basis of post-amortization costs employing the effective interest method. Gains or loss arising from the termination recognition, impairment occurs or amortization shall be recorded into the profits and losses ofthecurrent period.
④Assets availablefor sales
Assets available for sales including non-derivative financial asset that has been assigned as assets available for sales on the initial recognition and financial assets excluded those measured at fair value and of which the variation into profits and losses of the current period, theyare somefinancial assets, loans and accounts receivables, held-to-maturity investment. The cost at the period-end of the available-for-sale liabilities instruments should be confirmed according to its amortized cost method, that is the initially recognized amount which deduct the principal that had been repaid, to plus or minus the accumulative amortization amount formed by the amortization between the difference of the initially recognized amount and the amount on the due date that adopted the actual interest rate method, and at the same time deduct the amount after the impairment loss happened. The cost at theperiod-end ofthe available-for-sale liabilities instruments is itsinitialcost.
KonkaGroupCo.,Ltd. AnnualReport2018 Financial assets available-for-trade are subsequently measured at fair value, and gains or losses arising from changes in the fair value are recognized as other comprehensiveincome， and be carried forward when the said financial assets stopped recognition, then it shall be recorded into the profits and losses of the current period. But, the equity instrument investment which neither have quotation in the active market nor its fair value could not be reliable measured, as well as the derivative financial assets that concern with the equity instruments and should be settled through handing over to its equity instruments, should take thefollow-up measurement according tothe cost.
Interest receive during the holding of assets available for sales and cash dividends with distribution announcement by invested companies, it shall be recorded into the profits and losses ofthecurrent period.
(3)Impairment offinancial assets
The Group assesses at the balance sheet date the carrying amount of every financial asset except for the financial assets that measured by the fair value. If there is objective evidence indicatinga financial asset may be impaired, aprovision is provided for theimpairment. The Group carries out a separate impairment test for every financial asset which is individually significant. As for a financial asset which is individually insignificant, an impairment test is carried out separately or inthe financial asset group with similar credit risk. Where the financial asset (individually significant or insignificant) is found not impaired after the separate impairment test, it is included in the financial asset group with similar credit risk and tested again on the group basis. Where the impairment loss is recognized for an individual financial asset, it is not included in the financial asset group with similar credit risk foran impairmenttest.
①Impairment onheld-to maturity investment, loans andreceivables
The financial assets measured by cost or amortized cost write down their carrying value by the estimated present value of future cash flow. The difference is recorded as impairment loss. If there is objective evidence to indicate the recovery of value of financial assets after impairment, and it is related with subsequent event after recognition of loss, the impairment loss recorded originally can be reversed. The carrying value of financial assets after
KonkaGroupCo.,Ltd. AnnualReport2018 impairment loss reversed shall not exceed the amortized cost of the financial assets without provisionsof impairment lossonthe reserving date.
②Impairment ofavailable-for-sale financial assets
When it judged that the decrease of fair value of the available-for-sale equity instrument investment is serious and not temporarily after comprehensive considering relevant factors, it reflected that the available-for-sale equity instrument investment occurred impairment. Of which, the “serious decline” refers to the accumulative decline range of the fair value over20%; while the “non-temporary decline” refers to the consecutive decline time of the fair valueover 12months.
Where an available-for-sale financial asset is impaired, the accumulative losses arising from the decrease of the fair value of the capital reserve which is directly included are transferred out and recorded in the profits and losses for the current period. The accumulative losses transferred out are the balance obtained from the initially obtained cost of the said financial asset after deducting the principals as taken back, the amortized amount, the current fair valueand theimpairment lossoriginally recorded in theprofits and losses.
Where the impairment loss has been recognized for an available-for-sale financial asset, if, within the accounting periods thereafter, there is any objective evidence proving that the value of the said financial asset has been restored and the restoration is objectively related to the events that occur after the impairment loss was recognized, the originally recognized impairment loss is reversed. The impairment losses on the available-for-sale equity instrument investments are reversed and recognized as other comprehensive incomes, and the impairment losses on the available-for-sale liability instruments are reversed and recorded in theprofits andlosses for thecurrent period.
The impairment loss incurred to an equity instrument investment for which there is no quoted price in the active market and whose fair value cannot be reliably measured, or incurred to a derivative financial asset which is connected with the said equity instrument investment and which must besettled bydelivering thesaid equityinvestment, is not reversed.
(4)Recognition and measurement of financial asset transfers
KonkaGroupCo.,Ltd. AnnualReport2018 Where a financial asset satisfies any of the following requirements, the recognition of it is terminated:① The contractual rights for collecting the cash flow of the said financial asset are terminated;② The said financial asset has been transferred and nearly all of the risks and rewards related to the ownership of the financial asset to the transferee; or③ The said financial asset has been transferred. And the Group has ceased its control on the said financial asset though it neither transfers nor retains nearly all of the risks and rewards related to theownership ofthe financial asset.
Where the Group neither transfers nor retains nearly all of the risks and rewards related to the ownership of a financial asset, and it does not cease its control on the said financial asset, it recognizes the relevant financial asset and liability accordingly according to the extent of its continuous involvement in the transferred financial asset. The term "continuous involvement in the transferred financial asset" refers to the risk level that the enterprise faces resulting from thechange of thevalueof thefinancial asset.
If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the difference between the amounts of the following 2 items is recorded in the profits and losses of the current period: (1) The book value of the transferred financial asset; and (2) The sum of consideration received from the transfer, and the accumulative amount of the changes of thefair valueoriginally recorded in othercomprehensiveincomes.
If the transfer of partial financial asset satisfies the conditions to stop the recognition, the book value of the transferred financial asset is apportioned between the portion whose recognition has been stopped and the portion whose recognition has not been stopped according to their respective relative fair value, and the difference between the amounts of the following 2 items is included into the profits and losses of the current period: (1) The summation of the consideration received from the transfer and the portion of the accumulative amount of changes in the fair value originally recorded in other comprehensive incomes which corresponds to the portion whose recognition has been stopped; and (2) The amortizedcarrying amountsof theaforesaid amounts.
In respect of the assets using recourse to sell or using endorsement to transfer, the Group needs to determine whether almost all of the risks and rewards of the financial asset
KonkaGroupCo.,Ltd. AnnualReport2018 ownership are transferred. If almost all of the risks and rewards of the financial asset ownership had been transferred to the transferee, derecognize the financial assets. For almost all of the risks and rewards of the financial asset ownership retained, do not end to recognize the financial assets. For which neither transfer or retain almost all of the risks and rewards of the financial asset ownership, continuously judge whether the Company retain the control of the assets, and conduct accounting treatment according to the principle of mentioned in the previous paragraphs.
(5)Classification and measurement offinancial liabilities
In the initial recognition, financial liabilities are divided into the financial liabilities measured at fair values and whose changes are recorded in current gains and losses and other financial liabilities. Financial liabilities are initially recognized at their fair values. As for a financial liability measured at fair value and whose changes are recorded in current gains and losses, the relevant trading expense is directly recorded in the profits and losses for the current period. As for other financial liabilities, the relevant trading expenses are recorded in the initially recognized amounts.
① Financial liabilities measured at fair values and whose changes are recorded in current gains and losses
Such financial liabilities are divided into transactional financial liabilities and financial liabilities designated to be measured at fair values and whose changes are recorded in current gains and losses in the initial recognition under the same conditions where such financial assets are divided into transactional financial assets and financial assets designated to be measured at fair values and whose changes are recorded in current gains and losses in the initial recognition.
Financial liabilities measured at fair values and whose changes are recorded in current gains and losses are subsequently measured at their fair values. Gains or losses arising from the fair value changes, as well as the dividend and interest expenses in relation to the said financial liabilities, are recorded inthe profits and losses forthe current period.
②Otherfinancial liabilities
KonkaGroupCo.,Ltd. AnnualReport2018 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.
③Financial guaranteecontract and loan commitment
For the financial guarantee contracts which are not designated as a financial liability measured at its fair value and the variation thereof is recorded into the profits and losses of the current period, or the loan commitment which is not designated as a financial liability measured at its fair value and the variation thereof is recorded into the gains and losses that will be loaned lower than the market interest rate, which shall be initially recognized by fair value, and the subsequent measurement shall be made after they are initially recognized according to the higher one of the following: a. the amount as determined according to the Accounting Standards for Enterprises No. 13– Contingencies; b. the surplus after accumulative amortization as determined according to the principles of the Accounting Standards for Enterprises No. 14 - Revenues is subtracted from the initially recognized amount.
(6)De-recognition of financial liabilities
Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly. Where the Group (debtor) enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is substantially different from that regarding the existing financial liability, it terminates the recognition of the existing financial liability, and at the same time recognizes thenew financial liability.
Where the recognition of a financial liability is totally or partially terminated, the enterprise concerned shall include into the profits and losses of the current period for the gap between the book value which has been terminated from recognition and the considerations it has paid
KonkaGroupCo.,Ltd. AnnualReport2018 (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. Except that derivative instruments designated as arbitrage tool with highly effective hedging whose gains or losses formed by changes in fair value recognized the periods for being recorded into profit or loss according to the nature of hedging relations and requirements of hedging accounting, the fair value changes of other derivative instruments arerecognized into thecurrent profit orloss.
An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not designated as a financial asset or financial liability at fair value though profit or loss, and the treated as a standalone derivative if (a) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; and (b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the Company is unable to measure the embedded derivative separately either at acquisition or at a subsequent balance sheet date, it designates the entire hybrid instrument as a financial asset or financial liability at fair valuethrough profit or loss.
(8)Offsettingfinancial assets and financial liabilities
When the Group has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in thebalance sheet and shall not beoffset.
(9)Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. The Group issues (including refinancing),
KonkaGroupCo.,Ltd. AnnualReport2018 re-purchases, sells or written-offs the equity instrument as the disposing of the changes of the equity. The transaction expenses related to the equity transaction would be deducted from the equity.
All types of distribution (excluding stock dividends) made by the Group to holders of equity instruments are deducted fromshareholders’ equity. The Group does not recognize any changes in thefair value ofequity instruments.
10.Receivables
Receivables includeaccount receivables andother accounts receivables.
(1)Recognition ofprovision for baddebts:
The Group shall test the carrying amount of receivables on the balance sheet date. Where there is any objective evidence proving that such receivables have been impaired, an impairment provision shallbemade.
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;
(2)Withdraw method ofprovision for bad debts
① The recognition criteria and method of individual provision for bad debts of receivables thatare individually significant
The Group recognized the receivables with amount above RMB20 million and other receivables above RMB10 million as receivables with significant single amounts and withdrawn theprovision for bad debts.
The Group made an independent impairment test on receivables with significant single amounts; the financial assets without impairment by independent impairment test should be
KonkaGroupCo.,Ltd. AnnualReport2018 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
Divide the groups according to the credit risks characteristics of the accounts Group1:Aginggroup
receivable
Group 2: Internal related party groups Divide the groups according to the credit risks characteristics of whether the in the scope of consolidation of the creditor is the internal related party in the scope of consolidation of the Company Company
B.Withdrawal method of provision forbad debts recognized bycredit risk group
For the impairment test implemented by groups, the amount of provision for bad debts was appraised and recognized in accordance with the structure of accounts receivable group and similar characteristics of credit risk (thedebtor’s ability to pay off the loans in accordance with the provisions of contract), experience of losses, current economic status and the predicted losses inthe accounts receivable group.
Methods ofmaking provisionsfor bad debt in different groups:
Item Withdrawalmethod
Group1:Aginggroup Aginganalysismethod
Group 2: Internal related party groups To make an independent impairment test and if there was no impairment, in the scope of consolidation of the shouldnotwithdrawthebaddebtsprovision.
KonkaGroupCo.,Ltd. AnnualReport2018 Item Withdrawalmethod
Company
In the group, except subsidiary Econ Technology, adopting aging analysis method to withdrawbad debt provision:
||
|-|
|Withdrawal proportion for accountsreceivable(%)|
|2|
|5|
|20|
|50|
|50|
|100|

In the group, subsidiary Econ Technology adopting aging analysis method to withdraw bad debt provision:
||
|-|
|Withdrawal proportion for accountsreceivable(%)|
|5|
|10|
|30|
|50|
|80|
|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
KonkaGroupCo.,Ltd. AnnualReport2018 receivable has been impaired, impairment loss shall be recognized on the basis of the gap between the current values of the future cash flow lower than its book value so as to withdrawprovision forbad debts:
A.Receivables have disputewiththeother parties or involvinglawsuit and arbitration;
B. Receivables have obvious indication showing that the debtors are likely to fail to perform thedutyof repayment, etc.
C.There isother evidence of impairmentand theimpairment amount can estimated reliably. (3)Reversal ofprovision for bad debts
If there is any objective evidence proving that the value of the said receivables has been restored, and it is objectively related to the events occurred after such loss is recognized, the impairment-related losses as originally recognized shall be reversed and be recorded into the profits and losses of the current period. However, the reversed carrying amount shall not be any more than the post-amortization costs of the said accounts receivable on the day of reverseunder theassumption that noprovisionis made forthe impairment.
if the Company transfers accounts receivable to financial institutions not by right of recourse, the balance between transaction amounts deducting the carrying value of written-off accounts receivableand relevant taxesshall be recorded into thecurrent profit and loss.
11.Inventory
(1)Classification
TheGroup’s inventories mainly include raw materials, goods in process; merchandise on hand, goods delivered, circulating materials, and property inventories (development product, and development cost), and finished but unsettled assets ofconstruction contract.
①Development product refers to thefinished and held-for-sale property.
② Development costs refers to the unfinished property with the development purpose for sale.
 The finished but unsettled assets of construction contract refers to the excess amount of the sum of accumulatively incurred costs and recognized gross margin (loss) of contract in process over thesettled amount.
KonkaGroupCo.,Ltd. AnnualReport2018 (2)Pricing method foroutgoing inventories
Pricingmethod of commoninventories
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.
Pricingmethod of property inventories
The property inventories are initially measured at the costs, and inventories mainly include materials in stock, development product in process (development costs), finished development product, and development product intended to sell but rent temporarily, and etc. The costs of the development product include the land premium, expenditures for supporting infrastructures, expenditures for construction and installation projects, the borrowing costs before the completion of the developed project and other expenses occurred during the development process. When the inventories are delivered, its actual costs shall be recognized byweighted average method.
Pricingmethod of construction contract
The construction contracts shall be measured at actual cost, including all direct and indirect costs related to the execution of the contract from the time signing the contract to completing the contract. The expenses such as travel expenses and bidding fees incurred for the purpose of signing the contract, which can be separately and reliably measured and the contract is likely to be concluded, are included in the contract cost when the contract is obtained; if the above conditionsare not met, theyare included inthe current profit and loss.
The accumulated costs incurred in the contract in progress, the accumulated recognized gross profit (loss) and the settled price are stated in the balance sheet as net offset. The part of the sum of the accumulated costs incurred in the contract in progress and the accumulated recognized gross profit (loss) that exceeds the settled price is stated as the inventory; the part of the settlement costs of the contract in progress that exceeds the sum of the accumulated costs incurred and the accumulated recognized gross profit (loss) are stated as account collected inadvance.
KonkaGroupCo.,Ltd. AnnualReport2018 (3) Recognition basis of net realizable value and withdrawal method of depreciation reserves forinventories
The net realizable value refers, in the ordinary course of business, to the account after deducting the estimated cost of completion, estimated sale expense and relevant taxes from the estimated sale price of inventories. The net realizable value of inventories shall be fixed on the basis of valid evidence as well as under consideration of purpose of inventories and theeffect of events after balance-sheet-date.
On the balance sheet date, the inventories shall be measured according to the cost or the net realizable value, whichever is lower. If the net realizable value is lower than the cost, it shall withdraw the depreciation reserves for inventories, which was withdrawn in accordance with the balance that the cost of individual inventory item exceeding the net realizable value. The inventories with various numbers and low unit price shall be made provisions for depreciation reserves of inventories according to the category of inventories. For inventories that are produced and sold in the same region with same or similar end use or purposes, and hard to be measured separately from other items, it shall be made merger provisions for falling price ofinventories.
After withdrawing the depreciation reserves for inventories, if the factors, which cause any write-down of the inventories, have disappeared, causing the net realizable value of inventories is higher than its carrying amount; the amount of write-down shall be reversed from the original amount of depreciation reserve for inventories. The reversed amount shall beincluded in theprofits and losses ofthecurrent period.
(4)The perpetual inventory system is maintained for stocksystem.
(5)Amortization method ofthelow-value consumption goods and packing articles
The low-value consumption goods should be amortized by one time amortization when acquiring and the packing articles are amortized byonetimeamortization whenacquiring. 12.Assets HeldforSaleandDisposalGroup
When a company relies mainly on selling (including the exchanges of non-monetary assets with commercial substance, similarly hereinafter) instead of continuing to use a non-current asset or disposal group to recover its book value, then the non-current asset or disposal group is classified as assets held for sale. The specific standards are simultaneously meeting the following conditions: assets or disposal groups can be sold immediately under current
KonkaGroupCo.,Ltd. AnnualReport2018 conditions based on the practice of selling such assets or disposal groups in similar transactions; the Company has already made a resolution on the sale plan and obtained a certain purchase commitment, and the sale is expected to be completed within one year. A disposal group refers to a group of assets that are disposed of together as a whole by sale or other means in a transaction and the liabilities directly related to these assets transferred in the transaction. Where the asset group or combination of asset groups to which a disposal group belongs apportions the goodwill acquired in the business combination in accordance with the Accounting Standards for Enterprises No. 8 - Asset Impairment, the disposal group shall includethegoodwill allocated to it.
If there are non-current assets or disposal groups held for sale during initial measurement or on the balance sheet day based on remeasurement of this Company, if the book value is higher than the net amount by deducting the selling expenses with the fair value, the book value shall be written down and be equal to the net amount by deducting the selling expenses with the fair value. The write-down amount shall be confirmed as the loss of depreciation of assets and shall be included into the profits and losses of the current period.At the same time, prepare to calculate and withdraw the assets purchased and under agreements to resell. For the disposal group, deduct the book value of the goodwill in the disposal group with the asset depreciation losses confirmed, then deduct the book value of each non-current asset in the disposal group conforming to the measurement regulations of Accounting Standards for Business Enterprises No. 42-non-current Assets Purchased and under Agreements to Resell, Disposal Group and Operation Termination (herein after referred to as "the Standard for Assets Purchased and under Agreements to Resell"). If the net amount by deducting the selling expenses with the fair value of the disposal group purchased and under agreements to resell on the subsequent balance sheet date, the previous write-down amount shall be recovered and shall be reversed within the asset depreciation losses amount of the non-current confirmed as per regulation of the Standard for Assets Purchased and under Agreements to Resell after being classified into the category purchased and under agreements to resell. The reverse amount shall be included into the current profits and losses, and the bookvalue shall be added as per the proportion of the book value of each non-current asset in the disposal group applicable to the Standard for Assets Purchased and under Agreements to Resell except for the goodwill; The goodwill book value deducted and the asset depreciation losses of the non-current assets applicable to the measurement regulations of the Standard for
KonkaGroupCo.,Ltd. AnnualReport2018 Assets Purchased and under Agreements to Resell before its confirmation of being classified intothecategory purchased and under agreements toresell shall notbe reversed.
Depreciation or amortization in the non-current assets held for sale or the non-current assets in the disposal group shall not be calculated or withdrawn. Interests of liabilities and other expenses in the disposal group purchased and under agreements to resell shall be confirmed continuously.
When a non-current asset or disposal group fail to meet the classification conditions for the category of held-for-sale, the Company will no longer classify a non-current asset or disposal group as held-for-sale or remove out a non-current asset from the held-for-sale disposal group, and it will be measured by one of the followings whichever is lower: (1) The book value before being classified as held for sale will be adjusted according to the depreciation, amortization or impairment that would have been recognized under the assumption that it was not classified as held for sale; (2)The recoverable amount.
13.Long-term Equity Investments
The long-term equity investments of this part refer to the long-term equity investments that the Group has control, joint control or significant influence over the investees. The long-term equity investment that the Group does not have control, joint control or significant influence over the investees, should be recognized as available-for-sale financial assets or be measured by fair value with the changes should be included in the financial assets accounting of the current gains and losses, and please refer the details of the accounting policies to Notes IV 9 “Financial Instrument”.
Joint control, refers to the control jointly owned according to the relevant agreement on an arrangement by the Group and the relevant activities of the arrangement should be decided only after the participants which share the control right make consensus. Significant influence refers to the power of the Group which could anticipate in the finance and the operation polices of the investees, but could not control or jointly control the formulation of thepolicies with theotherparties.
(1)Recognition ofinvestment costs
As for long-term equity investments acquired by enterprise merger, if the merger is under the same control, the share of the book value of theshareholders’equity of the merged enterprise, on the date of merger, is regarded as the initial cost of the long-term equity investment. The
KonkaGroupCo.,Ltd. AnnualReport2018 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 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
KonkaGroupCo.,Ltd. AnnualReport2018 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 and losses.
The commission fees for audit, law services, assessment and consultancy services and other relevant expenses occurred in the business combination by the combining party or the purchase party, shall be recorded into current profits and losses upon their occurrence; the transaction expense from the issuance of equity securities or bonds securities which are as consideration for combination by the combining party, should be recorded as the initial amountof equity securities and bonds securities.
Besides the long-term equity investments formed by business combination, the other long-term equity investments shall be initially measured by cost, the cost is fixed in accordance with the ways of gaining, such as actual cash payment paid by the Group, the fair value of equity securities issued by the Group, the agreed value of the investment contract or agreement, the fair value or original carrying amount of exchanged assets from non-monetary assets exchange transaction, the fair value of the long-term equity investments, etc. The expenses, taxes and other necessary expenditures directly related with gaining the long-term equity investments shall also be recorded into investment cost. The long-term equity investment cost for those could execute significant influences on the investees because of appending the investment or could execute joint control but not form as control, should be as the sum of the fair value of the original held equity investment and the newly added investment cost recognized according to the No. 22 of Accounting Standards for BusinessEnterprises—Recognition and Measurement ofFinancial Instrument.
(2)Subsequent measurement and recognition of gains or losses
KonkaGroupCo.,Ltd. AnnualReport2018 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 methodinthefinancial 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 investment, the initial cost of the long-term equity investment may not be adjusted. If the initial cost of a long-term equity investment is less than the Company's attributable share of the fair value of the invested entity's identifiable net assets for investment, the difference shall be included in the current profits and losses and the cost of the long-term equity investment shall be adjusted simultaneously.
When measured by adopting equity method, respectively recognize investment income and other comprehensive income according to the net gains and losses as well as the portion of other comprehensive income which should be enjoyed or be shared, and at the same time adjust the book value of the long-term equity investment; corresponding reduce the book value of the long-term equity investment according to profits which be declared to distribute by the investees or the portion of the calculation of cash dividends which should be enjoyed; for the other changes except for the net gains and losses, other comprehensive income and theowners’equity except for the profits distribution of the investees, should adjust the book value of the long-term equity investment as well as include in the capital reserve. The investing enterprise shall, on the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the invested entity after it adjusts the net profits of the invested entity. If the accounting policies adopted by the investees are not accord with that of the Group,
KonkaGroupCo.,Ltd. AnnualReport2018 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, which belongs to the Group according to the calculation of the enjoyed proportion, should recognize the investment gains and losses on the basis. But the losses of the unrealized internal transaction happened between the Group and the investees which belongs to the impairment losses of the transferred assets, should not be neutralized. If the assets launched by this Company to the associated enterprise or joint ventures constitute the business, and the investor obtains the long-term equity investment but fails to obtain the control right, the fair value of business launched is taken as the initial investment cost of newly-increased long-term equity investment, and the difference between initial investment cost and book value of business launched will be included in current profit and loss. If the assets sold by this Company to the associated enterprises or joint ventures constitute the business, the difference between consideration and book value of business will be included in current profit and loss. If this Company's assets purchased from the associated enterprises or joint ventures constitute business, accounting treatment shall be conducted in accordance with the provisions of theAccounting Standards for Business Enterprises No. 20 -- Business Combination,fully recognizethegains orlosses related tothe transaction.
The Group shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially from the net investment made to the invested entity are reduced to zero. However, if the Group has the obligation to undertake extra losses, it shall be recognized as the estimated liabilities in accordance with the estimated duties and then recorded into investment losses at current period. If the invested entity realizes any net profits later, the Group shall, after the amount of its attributable share of profits offsets against its attributable share of the un-recognizedlosses, resumerecognizingits attributableshare ofprofits.
For the long-term equity investment held by the Group before the first execution of the new accounting criterion of the associated enterprises and joint ventures, if there is debit difference of the equity investment related to the investment, should be included in the current gains and losses according to the amount of the straight-line amortization during the original remained period.
KonkaGroupCo.,Ltd. AnnualReport2018③Acquiring 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 inNote IV.5 (2) “Method on preparation ofcombined financial statements”.
For other ways on disposal of long-term equity investment, the balance between the book value of the disposed equity and its actual payment gained shall be recorded into current profits and losses.
For the long-term equity investment measured by adopting equity method, if the remained equity after disposal still adopts the equity method for measurement, the other comprehensive income originally recorded intoshareholders’ 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 and losses according tothe proportion.
For the long-term equity investment which adopts the cost method of measurement, if the remained equity still adopt the cost method, the other comprehensive income recognized owning to adopting the equity method for measurement or the recognition and measurement standards of financial instrument before acquiring the control of the investees, should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed
by the investees and should be carried forward into the current gains and losses according to
KonkaGroupCo.,Ltd. AnnualReport2018 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 totheproportion.
For those the Group lost the control of the investees by disposing part of the equity investment as well as the remained equity after disposal could execute joint control or significant influences on the investees, should change to measure by equity method when compiling the individual financial statement and should adjust the measurement of the remained equity to equity method as adopted since the time acquired; if the remained equity after disposal could not execute joint control or significant influences on the investees, should change the accounting disposal according to the relevant regulations of the recognition and measurement standards of financial instrument, and its difference between the fair value and book value on the date lose the control right should be included in the current gains and losses. For the other comprehensive income recognized by adopting equity method for measurement or the recognition and measurement standards of financial instrument before the Group acquired the control of the investees, should execute the accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when lose the control of them, while the changes of the otherowners’equity except for the net gains and losses, other comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity method for measurement, should be carried forward into the current gains and losses according to the proportion. Of which, for the disposed remained equity which adopted the equity method for measurement, the other comprehensive income and the otherowners’equity should be carried forward according to the proportion; for the disposed remained equity which changed to execute the accounting disposal according to the recognition and measurement standards of financial instrument, the other comprehensive incomeand theotherowners’equity shouldbe carried forward in fullamount.
For those the Group lost the control of the investees by disposing part of the equity investment, the disposed remained equity should change to calculate according to the recognition and measurement standards of financial instrument, and difference between the fair value and book value on the date lose the control right should be included in the current gains and losses. For the other comprehensive income recognized from the original equity
KonkaGroupCo.,Ltd. AnnualReport2018 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.
14.InvestmentReal Estates
The term “investment real estate” refers to the real estate held for generating rent and/or capital appreciation. Investment real estates of the Group include the right to use any land which has already been rented; the right to use any land which is held and prepared for transfer after appreciation; and theright touseany buildingwhich has already been rented. The initial measurement of the investment real estate shall be made at its cost. Subsequent expenditures incurred for an investment real estate is included in the cost of the investment real estate when it is probable that economic benefits associated with the investment real estate will flow to the Group and the cost can be reliably measured, otherwise the expenditureis recognized in profit orloss in theperiod in which they are incurred.
The Group shall make a follow-up measurement to the investment real estate by employing the cost pattern on the date of the balance sheet.An accrual depreciation or amortization shall be made for the investment real estates in the light of the accounting policies of the use right ofbuildings or lands.
For details of impairment test method and withdrawal method of impairment provision of investment real estates, please refer toNote IV.20.“Long-term assets impairment”.
When owner-occupied real estate or inventories are changed into investment real estate or
KonkaGroupCo.,Ltd. AnnualReport2018 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 permanently withdrawn from use and no future economic benefits are expected from its disposal. The amount of proceeds on sale, transfer, retirement or damage of an investment real estate less its carrying amount and related taxes and expenses is recognized in profit or lossin theperiod in which it isincurred.
15.FixedAssets
(1)Conditionsfor recognition of fixed assets
The term "fixed assets" refers to the tangible assets that simultaneously possess the features as follows: (a) they are held for the sake of producing commodities, rendering labour service, renting or business management; and (b) their useful life is in excess of one fiscal year. The fixed assets are only recognized when the relevant economic benefits probably flow in the Group and its cost could be reliable measured. The fixed assets should take the initial measurement according to the cost and at the same time consider the influences of the factors oftheestimated discard expenses.
(2)Depreciation methodsof each fixed asset
The fixed assets should be withdrawn and depreciation by straight-line depreciation within the useful life since the next month when the fixed assets reach the estimated available state. The useful life, estimated net salvage and the yearly discounted rate of each fixed asset are as follows:
KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Method|Usefullife(Year)|Expected netsalvage value(%)|
|Straight-linedepreciation|20-40|5-10.00|
|Straight-linedepreciation|5-10|5-10.00|
|Straight-linedepreciation|3-5|5-10.00|
|Straight-linedepreciation|3-5|5-10.00|
|Straight-linedepreciation|5|5-10.00|

The “expected net salvage value” refers to the expected amount that the Group may obtain from the current disposal of a fixed asset after deducting the expected disposal expenses at theexpirationof itsexpected useful life.
(3) Testing method of impairment and withdrawal method of provision for impairment on fixed assets
For details of the testing method of impairment and withdraw method of impairment provision for impairment on fixed assets, please refer to Note IV. 20 “Long-term assets impairment”.
(4)Recognition basis, pricing and depreciation method offixed assets byfinance lease
The “finance lease” shall refer to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. Its ownership may or may not eventually be transferred. The fixed assets by finance lease shall adopt the same depreciation policy for self-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain
the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully
depreciated over theshorter oneof thelease term orits useful life.
KonkaGroupCo.,Ltd. AnnualReport2018 (5)Other explanations
The follow-up expenses related to a fixed asset, if the economic benefits pertinent to this fixed asset are likely to flow into the enterprise and its cost can be reliably measured, shall be recorded into cost of fixed assets and ultimately recognized as the book value of the replaced part; otherwise, they shall beincluded in thecurrent profits and losses.
Terminate to recognize the fixed assets when the fixed assets under the disposing state or be estimated that could not occur any economy benefits through using or disposing. When the Group sells, transfers or discards any fixed assets, or when any fixed assets of the Group is damaged or destroyed, the Group shall deduct the book value of the fixed assets as well as the relevant taxes from the disposal income, and include the amount in the current profits and losses.
The Group shall check the useful life, expected net salvage value and depreciation method of the fixed assets at the end of the year at least, if there is any change, it shall be regarded as a change oftheaccounting estimates.
16.Construction inProgress
Construction in process is measured at actual cost. Actual cost comprises construction costs, borrowing costs that are eligible for capitalization before the fixed assets being ready for their intended us and other relevant costs. Construction in process is transferred to fixed assets when theassets are ready for theirintended use.
For details of the testing method of impairment and withdraw method of impairment provision on construction in progress, please refer to Note IV. 20 “Long-term assets impairment”.
17.BorrowingCosts
The borrowing costs shall include interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. When the borrowing costs can be directly attributable to the construction or production of assets eligible for capitalization, and the asset disbursements or the borrowing costs have already incurred, and the construction or production activities which are necessary to prepare the asset for its intended use or sale have already started, the capitalization of borrowing costs begins. When the asset eligible for capitalization under acquisition and construction or production is ready for the intended use or sale, the capitalization of the
KonkaGroupCo.,Ltd. AnnualReport2018 borrowing costs shall be ceased. Other borrowing costs shall be recognized as expenses when incurred.
The to-be-capitalized amount of interests shall be determined in light of the actual interests incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment; the enterprise shall calculate and determine the to-be-capitalized amount on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be calculated and determined in light ofthe weighted average interest rate ofthe general borrowing.
During the period of capitalization, the exchange balance on foreign currency special borrowings shall be capitalized; the exchange balance on foreign currency general borrowings shall be recorded into current profits andlosses.
The term “assets eligible for capitalization” refers to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may takequitea longtimeto get ready for itsintended useorforsale.
Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall besuspended.
18.IntangibleAssets
(1)Pricing method, useful life andimpairment test
The term “intangible asset” refers to the identifiable non-monetary assets possessed or controlled byenterprises which havenophysical shape.
The intangible assets shall be initially measured according to its cost. The costs related with the intangible assets, if the economic benefits related to intangible assets are likely to flow into the enterprise and the cost of intangible assets can be measured reliably, shall be recorded into the costs of intangible assets; otherwise, it shall be recorded into current profits and losses upontheoccurrence.
The use right of land gained is usually measured as intangible assets. For the self-developed and constructed factories and other constructions, the related expenditures on use right of land and construction costs shall be respectively measured as intangible assets and fixed
KonkaGroupCo.,Ltd. AnnualReport2018 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.
①It isfeasibletechnically to finish intangibleassets foruse orsale;
②It isintended tofinish and use orsell theintangible assets;
③ The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangibleassets itselfortheintangible assets will beused internally;
④ It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other
resources;
KonkaGroupCo.,Ltd. AnnualReport2018⑤Thedevelopment 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.20“Long-term assets impairment”.
19.Amortization Methodof Long-term Deferred Expenses
Long-term deferred expenses refer to general expenses with the apportioned period over one year (one year excluded) that have occurred but attributable to the current and future periods. Long-term deferred expenseshall be amortizedaveragely within benefit period.
20.ImpairmentofLong-termAssets
For non-current financial Assets of fixed Assets, projects under construction, intangible Assets with limited service life, investing real estate with cost model, long-term equity investment of subsidiaries, cooperative enterprises and joint ventures, the Group should judge whether decrease in value exists on the date of balance sheet. Recoverable amounts should be tested for decrease in value if it exists. Other intangible Assets of reputation and uncertain service life and other non-accessible intangible assets should be tested for decrease invalue nomatterwhether it exists.
If the recoverable amount is less than book value in impairment test results, the provision for impairment of differences should include in impairment loss. Recoverable amounts would be the higher of net value of asset fair value deducting disposal charges or present value of predicted cash flow.Asset fair value should be determined according to negotiated sales price of fair trade. If no sales agreement exists but with asset active market, fair value should be determined according to theBuyer’s price of the asset. If no sales agreement or asset active market exists, asset fair value could be acquired on the basis of best information available. Disposal expenses include legal fees, taxes, cartage or other direct expenses of merchantable Assets related to asset disposal. Present value of predicted asset cash flow should be determined by the proper discount rate according toAssets in service and predicted cash flow of final disposal. Asset depreciation reserves should be calculated on the basis of single Assets. If it is difficult to predict the recoverable amounts for single Assets, recoverable
KonkaGroupCo.,Ltd. AnnualReport2018 amounts should be determined according to the belonging asset group. Asset group is the minimum asset combination producing cash flowindependently.
In impairment test, book value of the business reputation in financial report should be shared to beneficial asset group and asset group combination in collaboration of business merger. It is shown in the test that if recoverable amounts of shared business reputation asset group or asset group combination are lower than book value, it should determine the impairment loss. Impairment loss amount should firstly be deducted and shared to the book value of business reputation of asset group or asset group combination, then deduct book value of all assets according to proportions of other book value of above assets in asset group or asset group combinationexcept businessreputation.
After the asset impairment loss is determined, recoverable value amounts would not be returned in future.
21.Employee Compensation
Employee compensation of the Company mainly includes short-term employee compensation, departure benefits, demission benefits and other long-term employee compensation. Of which:
Short-term compensation mainly including salary, bonus, allowances and subsidies, employee services and benefits, medical insurance premiums, birth insurance premium, industrial injury insurance premium, housing fund, labour union expenditure and personnel education fund, non-monetary benefits etc. The short-term compensation actually happened during the accounting period when the active staff offering the service for the Group should be recognized as liabilities and is included in the current gains and losses or relevant assets cost. Ofwhich thenon-monetary benefits shouldbemeasured according tothe fairvalue. Welfare after demission mainly includes setting drawing plan. Defined contribution plans include basic endowment insurance, unemployment insurance and annuity. Deposited amounts are charged to relevant asset costs or current profits and losses during the period in which they are incurred. Defined benefit plan of the Company is internal early retirement plan. According to anticipated accumulative welfare unit, the Company makes estimates by unbiased and consistent actuarial assumption for the demographic variables and financial variables, measures the obligations produced in defined benefit plans, and determines the vesting period. On balance sheet date, the Company will list all obligations in
KonkaGroupCo.,Ltd. AnnualReport2018 defined benefit plans as present value and include current service costs into current profits and losses.
When terminating labour relations before expiration of contract, or layoffs with compensations, and the Company cannot terminate the labour relations unilaterally or reduce the demission welfare, remuneration and liabilities produced from the demission welfare should be determined and included in current profits and losses when determining the costs of demission welfare and recombination. However, demission welfare not fully paid within 12 months after annual Reporting Period should be handled the same as other long-termemployees’payrolls.
The inside employee retirement plan is treated by adopting the same principle with the above dismiss ion welfare. The group would recorded the salary and the social security insurance fees paid and so on from theemployee’s service terminative date to normal retirement date into current profits and losses (dismiss ion welfare) under the condition that they meet the recognition conditionsof estimated liabilities.
The other long-term welfare that the Group offers to the staffs, if met with the setting drawing plan, should be accounting disposed according to the setting drawing plan, while the rest should bedisposed according tothesetting revenueplan.
22.Estimated Liabilities
The company should recognize the related obligation as a provision for liability when the obligation meets the following conditions: (1) That obligation is a present obligation of the enterprise; (2) It is probable that an outflow of economic benefits from the enterprise will be required to settle the obligation; (3) A reliable estimate can be made of the amount of the obligation.
On the balance sheet date, an enterprise shall take into full consideration of the risks, uncertainty, time value of money, and other factors pertinent to the Contingencies to measure the estimated liabilities in accordance with the best estimate of the necessary expenses for the performance ofthecurrent obligation.
When all or some of the expenses necessary for the liquidation of an estimated liabilities of an enterprise is expected to be compensated by a third party, the compensation should be separately recognized as an asset only when it is virtually certain that the reimbursement will be obtained. Besides, the amount recognized for the reimbursement should not exceed the
KonkaGroupCo.,Ltd. AnnualReport2018 bookvalueoftheestimated liabilities.
23.Revenue
(1)Revenue from sellinggoods
No revenue from selling goods may be recognized unless the following conditions are met simultaneously: the significant risks and rewards of ownership of the goods have been transferred to the buyer by the enterprise; the enterprise retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; the relevant amount of revenue can be measured in a reliable way; the relevant economic benefits may flow into the enterprise; and the relevant costs incurred or to beincurred can bemeasured ina reliableway.
The recognition of revenue from commodities for the home market when shipping the goods or transferring property in goods; for goods exported, the revenue shall be recognized once the goods are cleared through customs and delivered to the carrier designated by the purchaser; for goods directly traded in overseas, the revenue shall be recognized when customers pickupthegoods orthe goods are delivered tothe assigned place bycustomers. (2)Providing labourservices
If the Group can reliably estimate the outcome of a transaction concerning the labour 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 labour services shall be decided by the proportion ofthelabour service already provided to thetotallabour service to provide.
The outcome of a transaction concerning the providing of labour services can be measured in a reliable way, means that the following conditions shall be met simultaneously:① The amount of revenue can be measured in a reliable way;② The relevant economic benefits are likely to flow into the enterprise;③ The schedule of completion under the transaction can be confirmed in a reliable way; and④ The costs incurred or to be incurred in the transaction can bemeasured ina reliableway.
If the outcome of a transaction concerning the providing of labour services cannot be measured in a reliable way, the revenue from the providing of labour services shall be recognized in accordance with the amount of the cost of labour services incurred and
KonkaGroupCo.,Ltd. AnnualReport2018 expected to be compensated, and make the cost of labour services incurred as the current expenses. If it is predicted that the cost of labour services incurredcouldn’t be compensated, thusnorevenue shallbe recognized.
Where a contract or agreement signed between Group and other enterprises concerns selling goods and providing of labour services, if the part of sale of goods and the part of providing labour services can be distinguished from each other and can be measured respectively, the part of sale of goods and the part of providing labour services shall be treated respectively. If the part of selling goods and the part of providing labour services cannot be distinguished from each other, or if the part of sale of goods and the part of providing labour services can be distinguished from each other but cannot be measured respectively, both parts shall be conducted as selling goods.
(3)Construction contract income
Under circumstance ofthat the outcome of the construction contract can be reliably estimated, the contract income and costs are confirmed on the balance sheet date in accordance with the percentage of completion method. The completion of the contract is determined by the proportion oftheincurred labor costs to theestimated total costs.
That the result of the construction contract can be reliably estimated refers to that:① the total income of the contract can be reliably measured;②the economic benefits related to the contract are likely to flow into theenterprise;③The actual contract costs can be clearly differentiated and reliably measured;④ the completion of the contract and the costs needed tocomplete thecontract can bereliably determined.
If the result of the construction contract cannot be reliably estimated, but the contract cost can be recovered, the contract income can be confirmed according to the actual contract cost that can be recovered, and the contract cost is confirmed as the contract expense in the current occurring period; for the contract cost that cannot be recovered, it is immediately confirmed as the contract cost but not the contract income when it occurs. If the uncertainties that make the results of the construction contract cannot be reliably estimated are no longer in existence, the income and expenses related to the construction contract are determined according tothe percentage ofcompletion method.
If the estimated total cost of the contract exceeds the total contract income, the estimated loss isconfirmed as thecurrent expense.
The accumulated costs incurred in the contract in progress, the accumulated recognized gross profit (loss) and the settled price are stated in the balance sheet as net offset. The part of the
KonkaGroupCo.,Ltd. AnnualReport2018 sum of the accumulated costs incurred in the contract in progress and the accumulated recognized gross profit (loss) that exceeds the settled price is stated as the inventory; the part of the settlement costs of the contract in progress that exceeds the sum of the accumulated costs incurred and the accumulated recognized gross profit (loss) are stated as account collected inadvance.
(4)Business incomeofBOT andPPP
The Company participates in the construction of public infrastructure by means of BOT and PPP. During the construction period, the Company recognizes the relevant revenue and expenses from providing services in accordance withASBE No. 15 - Construction Contracts. After the completion of infrastructure, the Company recognizes the revenue from related to follow-up services in accordance withASBE No. 14-Revenue.
Revenue from construction contracts is measured at the fair value of collected consideration or consideration receivable (generally the amount of construction contracts), and financial assets or intangible assets are recognized, in the recognition of revenue, in the following circumstances:
① The contract stipulates that within a certain period after the completion of infrastructure, the company undertaken the project may unconditionally collect money or other financial assets of a fixed amount from the party awarding the contract; or, where the services fee charged by the company undertaken the project is lower than a specified amount, and the party awarding the contract is responsible for compensating the relevant price difference to the company undertaken the project in accordance with the contract, in the recognition of revenue, financial assets are recognized and treated in accordance with the provisions of ASBE No.22- Recognitionand Measurement ofFinancial Instruments.
② The contract stipulates that the Company has the right to collect fees from the party receiving services within a certain period of time after the completion of relevant infrastructure. However, if the amount of fees is uncertain, this right does not constitute an unconditional right to collect cash. The Company undertaken the project shall recognize intangibleassets in therecognition ofrevenue.
In case that interest on borrowing occurs in the construction process, it shall be treated in accordancewith theprovisions ofASBE No. 17- Borrowing Costs.
In case that the project company fails to provide actual construction services and contracts
KonkaGroupCo.,Ltd. AnnualReport2018 the infrastructure construction to other parties, there will be no recognition of revenue from construction services, and the project price paid in the construction process is recognized as financial assets orintangible assets inaccordancewith thecontract.
(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.26. (7)Factoring business revenue
Take the paid-in factoring payment as the fair value to carry out initial measurement. Subsequent measurement shall be carried out as per the effective interest method according to the amortized cost. Take the balance between the fair value initially confirmed and transferred amount of accounts receivable or face value of notes receivable as the interest income by effective interests method and amortized costs during the financing period or the rest credit period; interest income shall be recognized by straight-line method if it is due within 1 year. The profits and losses from termination of recognition, impairment, and amortizationshall beincluded intothecurrent profitsand losses.
(8)Finance lease income
As a financial lessor, the Company recognizes, on the beginning date of the lease term, the sum of the minimum rental receivables on the lease start date and the initial direct costs as the entry value of financial lease receivable, and records the unguaranteed residential value. The difference between the sum of minimum rental receivables plus the unguaranteed residential value andthepresent valueis recognized as unrealizedfinancing revenue.
Unrealized financing revenue is measured using the real interest rate method during the lease term and recognized as current financing lease revenue. Contingent rents are included in current profits and losses when they actually occur.
24.Government Subsidies
A government subsidy means the monetary or non-monetary assets obtained free by the Group from the government, but excluding the capital invested by the government as the investor with correspondingowner’s equity. Government subsidies consist of the government
KonkaGroupCo.,Ltd. AnnualReport2018 subsidies pertinent to assets and government subsidies pertinent to income. Government subsidy that is obtained by this Company used for purchasing or acquisition and construction, or forming the long-term assets by other ways, which is confirmed the government subsidy related to assets; Other government subsidies shall be defined as the government subsidy that related with interest. If it does not clear the subsidy object in the government document, the grants will be divided based on the following modes into government subsidy related to earnings and government subsidy related to assets: (1) If the particular project of the grants is clear in the government document, make a division according to the relative proportion of expense amount of the formed assets in the budget of the particular project and the expense amount included in the cost, shall review the division ratio required at each balance sheet date and make changes if necessary; (2) Only make general statements for the application in the government document, for not specifying the particular item, as the governmental subsidy related to earnings. If a government subsidy is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount. The government subsidies measured at their nominalamounts shall bedirectly included inthecurrent profits and losses.
When thisCompany actually received thegovernment subsidy,recognizeand measure as the actual measured amount.
If the government grants related to assets are recognized as deferred income and are included in the profits and losses by instalments in a reasonable and systematic way within the service life of underlying assets. The government grants related to income, using to compensate the relevant expenses or losses in the later period shall be recognized as the deferred income and are included in the current profit or loss in the period of confirming the related expenses or losses; If the government grant is used for compensating the occurred costs or loss, include it inthecurrent profit and loss directly.
At the same time, for the government subsidies related to assets and profits, carry out different accounting processing for different parts; for the governmental subsidy hard to differentiate, the overall governmental subsidies are taken as the governmental subsidy related to revenue.
The government grants related to daily activities of this Company shall be included in other revenues or offset related costs according to the economic business nature; Government subsidiesunrelated to daily activities shall beincluded intothenon-operating profits.
KonkaGroupCo.,Ltd. AnnualReport2018 If the governmental subsidies confirmed needs to be returned and there is the deferred earnings balance concerned, the book balance of relevant deferred earnings shall be offset against, but the excessive part shall be included into current profits and losses; Government subsidies belonging to other situations shall be directly included into current losses and profits.
25.DeferredIncomeTaxAssets/DeferredIncomeTax Liabilities
(1)Income tax ofthe current period
On the balance sheet date, for the current income tax liabilities (or assets) of the current period as well as the part formed during the previous period, should be measured by the income tax of the estimated payable (returnable) amount which be calculated according to the regulations of the tax law. The amount of the income tax payable which is based by the calculation of the current income tax expenses, are according to the result measured from the corresponding adjustment of the pre-tax accounting profit of 2014 which in accord to the relevantregulations ofthetax law.
(2)Deferred income tax assets and deferred incometax liabilities
The difference between the book value of certain assets and liabilities and their tax assessment basis, as well as the temporary difference occurs from the difference between the book value of the items which not be recognized as assets and liabilities but could confirm their tax assessment basis according to the regulations of the tax law, the deferred income tax assets and the deferred income tax liabilities should be recognized by adopting liabilities law ofthebalance sheet.
No deferred tax liability is recognized for a temporary difference arising from the initial recognition of goodwill, the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). Besides, no deferred tax assets is recognized for the taxable temporary differences related to the investments of subsidiary companies, associated enterprises and joint enterprises, and the investing enterprise can control the time of the reverse of temporary differences as well as the temporary differences are unlikely to be reversed in the excepted future. Otherwise, the Group should recognize the deferred income tax liabilities arising from othertaxabletemporary difference.
No deferred taxable assets should be recognized for the deductible temporary difference of
initial recognition of assets and liabilities arising from the transaction which is not business
KonkaGroupCo.,Ltd. AnnualReport2018 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
KonkaGroupCo.,Ltd. AnnualReport2018 net amount which intend to executes the net amount settlement as well as the assets acquiring and liabilities liquidation at the same time while owns the legal rights of settling the net amount.
The deferred income tax assets and liabilities of the Group should be listed as written-off net amount when having the legal rights of settling the current income tax assets and liabilities by net amount and the deferred income tax and liabilities is relevant to the income tax which be collected from the same taxpaying bodies by the same tax collection and administration department or is relevant to the different taxpaying bodies but during each period which there is significant reverse of the deferred income assets and liabilities in the future and among which the involved taxpaying bodies intend to settle the current income tax and liabilities by net amount orare at thesame timeacquire theasset as well as liquidatetheliabilities.
26.Leasing
Financing leasing virtually transferred the whole risks and leasing of the compensation related to the assets ownership and their ownership may eventually be transferred or maybe not.Other leasing except for thefinancing leasing is operating leasing.
(1)Business ofoperating leases recorded bythe Group as thelessee
The rent expenses from operating leases shall be recorded by the lessee in the relevant asset costs or the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs shall be recognized as the profits and losses of the current period. The contingent rents shall be recorded into the profits and losses ofthecurrent period inwhich they actually arise.
(2)Business ofoperating leases recorded bythe Group as thelessor
The rent incomes from operating leases shall be recognized as the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs of great amount shall be capitalized when incurred, and be recorded into current profits and losses in accordance with the same basis for recognition of rent incomes over the whole lease term. The initial direct costs of small amount shall be recorded into current profits and losses when incurred. The contingent rents shall be recorded into the profits and losses ofthecurrent period in which theyactually arise.
(3)Business offinance leases recorded bytheGroup as thelessee
On the lease beginning date, the Group shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning
KonkaGroupCo.,Ltd. AnnualReport2018 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 and long-term claims duewithin 1year.
Unrecognized financing incomes shall be adopted by the effective interest rate method in the lease term, so as to calculate and recognize current financing revenues. The contingent rents shall berecorded intotheprofits and losses ofthecurrent period inwhich they actually arise. 27.OtherMainAccountingPolicies and Estimates
(1)Termination ofoperation
Termination of operation refers to a separately identifiable constituent part that satisfies one of the following conditions that has been disposed of by the Company or is classified as held-for-sale:This constituent part represents an independent main business or a separate main business area; This constituent part is part of an associated plan that is intended to be disposed of in an independent main business or a separate major business area; This constituent part is asubsidiary that is specifically acquired forresale.
For accounting method of termination of operation, please refer to relevant description of
KonkaGroupCo.,Ltd. AnnualReport2018 Notes IV.12“Assets held for saleand disposalgroup”
(1)HedgingAccounting
To avoid certain risks, the Company carries out hedging of some financial instruments as hedging tools. The Company treats hedging that meets specified conditions using hedging accounting method. The Company's hedging is fair -value hedging, and treats the hedging of foreign exchange risk with definite undertaking at fair value. At the beginning of hedging, the Company records the relationship between hedging tools and hedged items, risk management objectives and strategies for different hedging transactions. In addition, at the beginning and after the hedging, the Company conducts continuous evaluation of the effectiveness of hedging to check whether the hedging is highly effective during the accounting period inwhich thehedging relationship is designated.
Fair value hedging is a qualified derivative instrument designated for fair value hedging, and the gains or losses resulting from its changes in fair value are included in the current profits and losses. The gains or losses of the hedged items due to hedged risks are also included in the current profits and losses, and the book value of the hedged items is also adjusted. When the Company cancels the designation of hedging relationship, the hedging instrument expires or is sold, the contract is terminated or exercised, or the conditions are no longer satisfied, the useofhedging accounting is terminated.
28.Changesin MainAccounting Policies andEstimates
(1)Changes ofaccounting policies
In accordance with the Notes on Revising and Printing the Format of 2018 General Enterprises Financial Statement (CK[2018] No. 15) issued by the Ministry of Finance 15 June2018, theCompany revised theformat of Financial Statements as follows:
 Balance sheet: the items of original “Notes receivable” and “Accounts receivable” are incorporated into the item of “Notes and accounts receivable”; the items of original “Interest receivable”, “Dividends receivable” and “Other receivables” are incorporated into the item of “Other receivables”; the items of “Fixed assets” and “Disposal of fixed assets” are incorporated into the item of “Fixed assets”; the items of original “Engineering material” and “Construction in process” are incorporated into the item of “Construction in process”; the items of original “Notes payable” and “Accounts payable” are incorporated into the item of “Notes and accounts payable”; the items of original “Interest payable”, “Dividends payable”, and “Other payables” are incorporated into the item of “Other payables”; the items of
KonkaGroupCo.,Ltd. AnnualReport2018 original “long-term accounts payable” and “specific payable” are incorporated into the item of“long-term accounts payable”.
 Income Statement; the item of “Administrative expense” is divided into “Administrative expense” and“R&D expense” to be presented and listed; the item of “financial cost” in income statement add the items of “interest cost” and “interest income” to be presented and listed.
 Statements of Changes inOwners’ Equity: newly adding the item of “Changes in defined benefit pension schemes transferred to retained earnings”
Theitems of2017financial statements after retroactive adjustmentare as follows:
Unit:RMB
Before After
|||
|-|-|
|Amount|Item|
|5,178,668,988.23|Notesandaccountsreceivable|
|3,443,095,947.26||
|1,813,256.77|Otherreceivables|
|-||
|182,405,099.39||
|1,587,170,348.35|Fixedassets|
|-||
|135,863,821.01|Constructioninprocess|
|-||
|541,175,312.09|Notesandaccountspayable|
|3,612,216,266.59||
|35,723,963.94|Otherpayables|
|-||
|1,608,359,305.87||
|777,713,680.46|Administrativeexpense|
||R&Dexpense|

 (2)Changeof accounting estimates
There was noany change ofaccounting estimateoftheCompany in theReporting Period.
29.CriticalAccounting Judgments and Estimates
Due to the inside uncertainty of operating activity, the Group needed to make judgments,
KonkaGroupCo.,Ltd. AnnualReport2018 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)Revenue Recognition -Construction Contract
If the construction contract results can be reliably estimated, the Company adopts the method of completion percentage to confirm the contract income on the balance sheet date. The percentage of contract completion is confirmed in accordance with the method described in Note IV, 233, Revenue, and is cumulatively calculated in each fiscal year in which each construction contract is executed.
Significant judgment is required in determining the percentage of completion, contract costs incurred, estimated total contract income and total cost, and contract recyclability, and the project management personnel usually make judgments mainly based on past experience and work. The estimated total contract income and total cost, as well as estimated changes in contract execution results, may have an impact on operating income, operating costs, and profit or loss for the current or subsequent period of the change, and may have a significant impact.
(2)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
KonkaGroupCo.,Ltd. AnnualReport2018 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. (3)Provision forbad debts
In accordance with the accounting policies of accounts receivable, the Group measured the losses for bad debts by adopting allowance method. The impairment of accounts receivable was based on the appraisal of the recoverability of accounts receivable. The impairment of accounts receivable was dependent on the judgment and estimates. The actual amount and the difference of previous estimates would affect the book value of accounts receivable and the withdrawal and reversal on provision for bad debts of accounts receivable during the period of estimates being changed.
(4)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.
(5)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.
(6)Held-to-maturity investments
The Company classifies the non-derivative financial asset with a fixed or determinable amount of repo price, and a fixed date of maturity, which the enterprise holds for a definite purpose or the enterprise is able to hold until its maturity, to held-to-maturity investment.
KonkaGroupCo.,Ltd. AnnualReport2018 Such classification concerns lots of judgments. During the judgment process, the Company will assess the purpose and capability for holding such kind of investment to maturity. Except for special cases (for example, selling investment with no-large amount when the maturity date is closely to come), if the Companycan’t hold the investment to maturity date, the Company should re-classify all that investment to available-for-sale financial assets, andshouldn’t classify those financial assets into hold-to-maturity investment in the current fiscal year and the next two complete fiscal years. Such cases may have significant impact on related financial assets value stated in financial statements, and may influence the risk management strategy for financial toolsofthe Company.
(7)Impairment ofheld-to-maturity investment
The decision about confirming the impairment of the investment held-to-maturity by the Company depends on the judgment of the management layer to a great extent. The objective evidences of the occurrence of the impairment include there is serious financial difficulties of the issuer which lead the financial assets could not be continued to deal in the active market and could not execute the clauses of the contracts (for example, to pay for the interests or the principal occurs default) and so on. When executing the judgment, the Company should assess the influences of the objective evidences of the occurrence of the impairment on the estimated futurecash flow oftheinvestment.
(8)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.
(9)Provision forimpairment of long-term assets
The Group made a judgment on the non-current assets other than financial assets whether they had any indication of impairment on the balance sheet date. For the intangible assets without finite service life, other than the annual impairment test, they should be subject to the impairment test when there was any indication of impairment. For other non-current
KonkaGroupCo.,Ltd. AnnualReport2018 non-financial assets, which should be subjected to impairment test when there was indication ofimpairment indicated that thebookvaluecan’t berecoverable.
When the book value of the assets or assets portfolio was more than the recoverable amount, which was the higher one between the net amount of fair value after deducting the disposal expenses and the discounted amount of the estimated future cash flow, it means impairment incurred.
The net amount of fair value after deducting the disposal expenses should be fixed the price in the sale agreement for similar assets in the fair transaction minus the increased costs directly attributableto theassets disposal.
When estimated the discounted value of future cash flow, the Group needed to make important judgment on the output, selling price, relevant costs and the discount rate for calculating the discounted amount, etc. When estimated the recoverable amount, the Group would adopt all the available documents, including the prediction for relevant output, selling priceand relevant operating costs arising from reasonable andsupportiveassumptions.
The Group made the impairment test on goodwill at least one time per year, which required to predict the discounted amount of the future cash flow of the assets or assets portfolio with the distributed good will, for which, the Group needed to predict the future cash flow of the assets or assets portfolio, and adopt the property discounted rate to decide the discounted amountof futurecash flow.
(10)Depreciation andamortization
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 andamortization expenses should beadjusted.
(11)Deferred incometax 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
KonkaGroupCo.,Ltd. AnnualReport2018 amountof deferred incometaxassets which shouldberecognized.
(12)Income tax
During the routine operating activities, there were some uncertainty in the ultimate tax treatment and calculation for parts of transactions. Some accounts of such transaction could be listed as pre-tax expenditures only after the approval of taxation authorities. If there were any differences between the ultimate result of recognition for these taxation maters and their initial estimates, the differences would affect the current income tax and deferred income tax at theperiod of ultimaterecognition.
(13)Internal early retirement welfare andsupplementary retirement welfare
Amounts of expenditures and liabilities of internal early retirement welfare and supplementary retirement welfare should be determined according to assumption terms. Assumption terms include discount rate, average growth rate of medical costs, growth rate of subsidies for early retirement employees and retirees and other factors. The differences of actual results and assumption should be confirmed immediately and included into costs of current year. Although the management have adopted reasonable assumption terms, changes of actual experience value and assumption terms may affect the internal early retirement welfare, supplementary retirement benefits and balance of liabilities.
(14)Estimated liabilities
The Group made the estimation on product quality guarantee, predicted loss of contract and the fine for delayed delivery etc. and withdrew the relevant provision for estimated liabilities in accordance the provisions of contract, current knowledge and experience. Under the condition that the contingent event has formed a current duty and fulfilling the duty is likely to cause the economical interest outflow the Group, the Group measures the estimated liabilities in accordance with the best estimate of the necessary expenses for the performance of the current duty. The recognition and measurement of estimated liabilities were heavily relied on the judgment of the management team. During the process of making judgment, the Group needed to 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
KonkaGroupCo.,Ltd. AnnualReport2018 liabilities may affect theprofits andlosses in thefuture periods.
(15)Measurement forfair value
Some assets and liabilities of this Company will be measured at fair value in the financial statements. The board of directors of this Company has established the appraisement committee (led by the CFO of this Company) to confirm appropriate appraisement technology and input value for measurement of fair value. This Company will apply available and observable market data during estimating the fair value of some assets and liabilities. If the input value in Level 1 is not available, this Company will entrust a third qualified appraiser for the estimation. The appraisement committee will closely cooperate with the outside appraiser to determine proper estimation technology and input values of the related models. CFO submits a report to the discoveries of the appraisement committee to the board of directors of this Company to explain the reasons of fluctuation of fair value of related assets and liabilities. Related information of the appraisement technology and input value during the process of confirming the fair value of various assets and liabilities shall be disclosed inNote X.
V.Taxation
1.MainTaxesandTaxRate
Categoryoftaxes Specificsituationofthetaxesrate
VAT Calculatedtheoutputtaxat3%,5%,6%,10%,11%,13%,16%,17%andpaidthe VAT by the amount after deducting the deductible withholding VAT at current period, of which the VAT applicable to easy collectionwon’t belong to the deductiblewithholdingVAT.
Paid at7% of the circulating tax actually paid, of which Dongguan Packing, Urban maintenance and
Dongguan Konka, Boluo Konka, Boluo Konka Precision, and ChengduAnren of constructiontax
5%.
For Hong Kong Konka, Konka Household Appliances Investment, Konka HouseholdAppliances International Trading, Konka Zhisheng, Jiali International, Jiaxin Technology, Kangjietong and Chain Kingdom whose assessable profit did not exceed HKD2,000,000.00, they paid at8.25%, and if their assessable profitexceededHKD2,000,000.00,theypaidat16.5%;AnhuiKonka,E-display, Boluo Enterpriseincometax
Konka Precision, Telecommunication Technology, Wankaida, Jiangxi Konka, Xinfeng Microcrystalline, Nano Crystallized Glass , Commercial System Technology, Dongguan Konka, EconTechnology,E2info, XingDa HongYeandKangqiaoEasyChainof15%;andEuropeKonkaof31.8%.TheCompanyastheparentandtheothersubsidiariespaidat25%ofthetaxableincome.
KonkaGroupCo.,Ltd. AnnualReport2018 Educationsurtax Paidat3%ofthecirculatingtaxactuallypaid.
Localeducationsurtax Paidat2%ofthecirculatingtaxactuallypaid.ShanghaiKonkapaidat1%.
Note: (1) The original tax rate applied by the Company on VAT taxable sales or imported goods was17%/11%. According to the Circular of the Ministry of Finance and the State Administration of Taxation on the Adjustment of VAT Tax Rate (CS[2018] No. 32), the applicable tax rateis adjusted to16%/10%, beingeffective from 1May2018.
(2) In accordance with the Notice on Printing the Administration Method on Charging and Use of the Treatment Funds of Discarded Electronic Appliance and Electric Products issued by the Ministry of Finance, Ministry of Environmental Protection, National Development and Reform Commission, Ministry of Industry and Information, General Administration of Customs and National Taxation Bureau (CZ[2012] No. 34), and the Administration Method on Charging and Use of the Treatment Funds of Discarded 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 volume (trusted processing amount) and relevant charging standards from 1 July 2012. According to the regulations, theGroup’s charging standards were RMB13 per set of TV, RMB12per set ofrefrigeratorand RMB7 per set ofwashing machine.
(3) According to regulations of Temporary Provisions of Income Tax of Trans-boundary Tax Payment Enterprises by State Administration of Taxation, resident enterprises without business establishment or places of legal persons should be tax payment enterprises with the administrative measures of income tax of “unified computing, level-to-level administration, local prepayment, liquidation summary, and finance transfer”. It came into force from 1 January 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 January 2008 and will befinal settled uniformly bytheCompany at the year-end.
2.TaxPreferenceandApprovedDocuments
(1) On 21 October 2016, the subsidiary of the Company, Anhui Konka acquired the certificate of high-technology enterprises joint issued by Anhui Province Science and Technology Department, Department of Finance ofAnhui Province,Anhui Provincial Office, SAT, and Anhui Local Taxation Bureau with the certification number of GR201634000520 and the validity of three years. According to the relevant taxation regulations, the Anhui
Konka could enjoy the relevant preferential tax policy on the high-tech enterprise for
KonkaGroupCo.,Ltd. AnnualReport2018 continuous 3 years from 2016 to 2018, and pay for the corporate income tax according to15%ofthe preferential tax rate.
(2) On 21 November 2016, the subsidiary of the Company, Konka E-display acquired the certificate of high-technology enterprises joint issued by Shenzhen Science and Technology Innovation Committee, Finance Commission of Shenzhen Municipality, Shenzhen Municipal Office, SAT, and Shenzhen Local Taxation Bureau with the certification number of GR201644201332 and the validity of three years. According to the relevant taxation regulations, the Konka E-display could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2016 to 2018, and pay for the corporate incometax according to15%of thepreferential tax rate.
(3) On 30 November 2016, Boluo Konka Precision Technology Co., Ltd., the subsidiary of this Company obtained the High-tech Enterprise Certificate (certificate No.: GR201644001388) jointly issued by Department of Science and Technology of Guangdong Province, Department of Finance of Guangdong Province, Guangdong Provincial Office, SAT, Guangdong Local Taxation Bureau with a valid period of three years. According to related taxation regulations, the company enjoys related taxation preferential policies as a high-tech enterprise from 2016 to 2018 and pays the enterprise income tax as per the preferential tax rateof15%.
(4) On 15 August 2017, Shenzhen Konka Telecommunications Technology Co., Ltd., the subsidiary of this Company obtained the high-tech enterprise certificate (certificate No.: SZ20170142) jointly issued by Shenzhen Technology Innovation Committee, Finance Commission of Shenzhen Municipality, Shenzhen Municipal Office, SAT, Shenzhen Local Taxation Bureau, with a valid period of three years.According to related taxation regulations, Shenzhen Konka Telecommunications Technology Co., Ltd. enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2019 and pays the enterprise incometax as per thepreferential taxrateof15%.
(5) On 31 October 2017, Wankaida, the subsidiary of this Company obtained the High-tech Enterprise Certificate (certificate No.: GR201744204716) joint issued by Shenzhen Technology Innovation Committee, Finance Committee of Shenzhen Municipality, Shenzhen Municipal Office, SAT and Shenzhen Local Taxation Bureau with a valid period of three years. According to related taxation regulations, Wankaida enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2019 and pays the enterprise incometax as per thereferential taxrateof15%.
KonkaGroupCo.,Ltd. AnnualReport2018 (6) On 23August 2017, Jiangxi Konka New Material Technology Co., Ltd., the subsidiary of this Company obtained the High-tech Enterprise Certificate (certificate No.: GR201736000497) jointly issued by Department of Science and Technology of Jiangxi Province, Department of Finance of Jiangxi Province, Jiangxi Provincial Office, SAT, Jiangxi Local Taxation Bureau with a valid period of three years. According to related taxation regulations, the company enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2019 and pays the enterprise income tax as per the preferential tax rateof15%.
(7) On 23 August 2017, Jiangxi Golden Phoenix Nano Crystallized Glass Co., Ltd., the subsidiary of Jiangxi Konka obtained the High-tech Enterprise Certificate (certificate No.: GR201736000110) jointly issued by Department of Science and Technology of Jiangxi Province, Department of Finance of Jiangxi Province, Jiangxi Provincial Office, SAT, Jiangxi Local Taxation Bureau with a valid period of three years. According to related taxation regulations, the company enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2019 and pays the enterprise income tax as per the preferential tax rateof15%.
(8) On 15 November 2016, Jiangxi Xinfeng Microcrystalline Jade Co., Ltd the subsidiary of Jiangxi Konka obtained the High-tech Enterprise Certificate (certificate No.: GR201636000487) jointly issued by Department of Science and Technology of Jiangxi Province, Department of Finance of Jiangxi Province, Jiangxi Provincial Office, SAT, Jiangxi Local Taxation Bureau with a valid period of three years. According to related taxation regulations, the company enjoys related taxation preferential policies as a high-tech enterprise from 2016 to 2018 and pays the enterprise income tax as per the preferential tax rateof15%.
(9) On 31 October 2017, Shenzhen Konka Commercial System Technology Co., Ltd., the subsidiary of this Company obtained the high-tech enterprise certificate (certificate No.: GR201744202349) jointly issued by Shenzhen Technology Innovation Committee, Finance Committee of Shenzhen Municipality, Shenzhen Municipal Office, SAT, Shenzhen Local Taxation Bureau with a valid period of three years.According to related taxation regulations, the company enjoys related taxation preferential policies as a high-tech enterprise from 2017 to2019and pays theenterpriseincome tax as per thepreferential tax rateof15%.
(10) On 1 November 2017, Dongguan Konka Electronic Co., Ltd., the subsidiary of this Company obtained the High-tech Enterprise Certificate (certificate No.: GR201744003812)
KonkaGroupCo.,Ltd. AnnualReport2018 jointly issued by Department of Science and Technology of Guangdong Province, Department of Finance of Guangdong Province, Guangdong Provincial Office, SAT, Guangdong Local Taxation Bureau with a valid period of three years. According to related taxation regulations, the company enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2019 and pays the enterprise income tax as per the preferential tax rateof15%.
(11) On 28 December 2017, Econ Technology, a subsidiary of the Company, obtained the High-tech Enterprise Certificate (certificate No.: GR201737001495) jointly issued by Department of Science and Technology of Shangdong Province, Department of Finance of Shangdong Province, Shangdong Provincial Office, SAT, Shangdong Local Taxation Bureau with a valid period of three years. According to the relevant tax regulations, the company enjoys related tax incentives for high-tech companies for three consecutive years from 2017 to2019,and is subject tocorporate incometax at apreferential rateof15%.
(12) On16 October 2018, Shenzhen E2info Network Technology Co., Ltd., the subsidiary of this Company obtained the high-tech enterprise certificate (certificate No.: GR201844201969) jointly issued by Shenzhen Technology Innovation Committee, Finance Committee of Shenzhen Municipality, Shenzhen Taxation Bureau of SAT with a valid period of three years.According to related taxation regulations, the company enjoys related taxation preferential policies as a high-tech enterprise from 2018 to 2020 and pays the enterprise incometax as per thepreferential taxrateof15%.
(13) On 28 November 2018, GuangDong XingDa HongYe Electronic Co., Ltd., the subsidiary of this Company, was listed in the Second Batch of Name List of Proposed Hi-tech Enterprise in Guangdong Province for Y2018 published by the National Leading Group Office for the Management of High-tech Enterprises Recognition, which has a great possibility of getting the high-tech enterprise certificate. The company shall pay the enterprise incometax as perthe preferential tax rate of15%.
(14) According to the Overall Development Plan on Shenzhen-Hong Kong Cooperation on Modern Service Industries in Qianhai Area approved by the State Council and the Industry Access Catalogue of Modern Service Industry in Qianhai, Shenzhen issued by the National Development and Reform Commission, Shenzhen Kangqiao Easy Chain Technology Co., Ltd., a subsidiary of the Company was established in Qianhai, and enjoyed a15% income tax rate, and theprivileges in Qianhai can besuperimposed with others.
(15) According to the Notice on Promoting the Development of VAT, Business Tax and
KonkaGroupCo.,Ltd. AnnualReport2018 Enterprise Income Tax Policy for Energy-Saving Service Industry issued by the Ministry of Finance and the State Administration of Taxation (Finance and Taxation[2010] No. 110), Lairun Holdings enjoys the preferential policy of tax exemptions for three years and halved in next three years. Lairun Holdings was registered and recorded in 12April 2018 in Laizhou TaxationBureau ofShandong Province.
(16)According to the fiscal and taxation document[2011] No. 100 published by the Ministry of Finance and the StateAdministration of Taxation, for the VAT general taxpayers who sell their self-developed and produced software products, the VAT shall be levied at the rate of17%, and then the part that the actual tax burden on theirVATexceeds 3 will be implemented with the policy of immediate withdrawal. The Company and its subsidiaries, Telecommunication Technology, Wankaida Technology, E-display Service and Electronics Technology all enjoythis preferential policy.
(17)According to the regulations of the Special Catalogue of VAT Concessions for Products and Labors with Comprehensive Utilization of Resources issued by the Ministry of Finance and the State Administration of Taxation (Finance and Taxation[2015] No. 78), the wastewater treatment business operated by Lairun Holdings, a subsidiary of Econ Technology, belongs to the this catalogue. Then after it has been levied the VAT at a rate of 17%, the actual tax burden on the wastewater treatment income tax will be refunded in accordance with the70% of the actual tax burden, and the actual tax burden on the renewable water income VAT will be refunded immediately at50%. That Lairun Holdings enjoyed the tax concession was registered and recorded in 25August 2017 in LaizhouTaxation Bureau of Shandong Province.
VI. Notes on MajorItems in Consolidated FinancialStatements ofthe Company
Unless otherwise noted, the following annotation project (including the mainprojects， annotation of the financial statement of the Company), the period-begin refers to 1 January 2018, the period-end refers to 31 December 2018 and this period refers to Y2018 with the last period ofY2017.
1.Monetary Funds
||
|-|
|Endingbalance|
|130,105.31|
|3,440,007,099.2|
|908,006,925.02|
|4,348,144,129.53|

KonkaGroupCo.,Ltd. AnnualReport2018 Ofwhich: totalamountdepositedinoverseas
518,005,414.06 528,061,190.55 Notes:The ending balance of other monetary fund was the deposits of each margin deposit notwithdrawn at any time.
 As of 31 December 2018, the monetary funds deposited in overseas by the Company was RMB518,005,414.06(RMB535,621,931.96on31December 2017)
2.FinancialAssets atFairValuethroughProfitorLoss
||
|-|
|Endingbalance|
|5,464,984.92|
|5,464,984.92|

 3.Notes andAccounts Receivable
||
|-|
|Endingbalance|
|3,329,711,954.15|
|4,458,053,586.42|
|7,787,765,540.57|

 (1)Notes Receivable
NotesReceivable Listed byCategory
||
|-|
|Endingbalance|
|2,507,070,633.02|
|822,641,321.13|
|3,329,711,954.15|

NotesReceivable Pledged bytheCompany at the Period-end
Item Amount
Bankacceptancebill 1,320,095,737.06 Commercialacceptancebill 1,359,122.95 Total 1,321,454,860.01Notes Receivable which Had Endorsed by the Company or had Discounted and had not Dueonthe BalanceSheet Dateat thePeriod-end
||
|-|
|Amountofrecognitionterminationattheperiod-end|
|4,639,449,373.06|
|64,349,424.18|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Amountofrecognitionterminationattheperiod-end|
|4,703,798,797.24|

Notes Transferred to Accounts Receivable because Drawer of the Notes Failed to Execute theContract orAgreement
Item Amountofthenotestransferredtoaccountsreceivableattheperiod-end Bankacceptancebill
Commercialacceptancebill 940,027,889.84 Total 940,027,889.84 (2)Accounts Receivable
Accounts ReceivableClassified byCategory
Endingbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion|Amount|Withdrawalproportion|
|964,449,440.20|19.79|85,924,060.45|8.91|
|3,833,070,919.30|78.66|275,332,151.06|7.18|
|3,833,070,919.30|78.66|275,332,151.06|7.18|
|75,459,154.80|1.55|53,669,716.37|71.12|
|4,872,979,514.30|100.00|414,925,927.88|8.51|

KonkaGroupCo.,Ltd. AnnualReport2018 (Continued)
Beginningbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion|Amount|Withdrawalproportion|
|23,250,858.84|0.62|23,250,858.84|100.00|
|---|---|---|---|
|3,664,952,156.09|97.62|241,524,112.19|6.59|
|3,664,952,156.09|97.62|241,524,112.19|6.59|
|65,920,181.32|1.76|46,252,277.96|70.16|
|3,754,123,196.25|100.00|311,027,248.99|8.28|

 A. Accounts receivable with significant individual amount and make independent provision forbad debt at theperiod-end
Endingbalance
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion(%)|
|300,027,889.84|27,002,510.09|9.00|
|200,000,000.00|10,000,000.00|5.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|130,000,000.00|6,500,000.00|5.00|
|120,000,000.00|6,000,000.00|5.00|
|90,000,000.00|4,500,000.00|5.00|
|50,000,000.00|2,500,000.00|5.00|
|50,000,000.00|5,000,000.00|10.00|
|24,421,550.36|24,421,550.36|100.00|
|964,449,440.20|85,924,060.45|—|

B. Top five of account receivable with insignificant single amount for which bad debt provisionseparately accrued
Endingbalance
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion(%)|
|18,875,942.72|18,875,942.72|100.00|
|11,801,034.50|1,341,891.83|11.37|
|4,580,000.00|1,374,000.00|30.00|
|3,543,056.03|3,543,056.03|100.00|
|1,708,054.00|546,577.28|32.00|
|40,508,087.25|25,681,467.86|---|

C. In the groups, accounts receivable adopting aging analysis method to withdraw bad debt provision:
Endingbalance
|||
|-|-|
|Accountreceivable|Baddebtprovision|

KonkaGroupCo.,Ltd. AnnualReport2018 Endingbalance
|||
|-|-|
|Accountreceivable|Baddebtprovision|
|3,394,733,686.71|80,508,855.01|
|251,520,114.19|20,648,490.82|
|4,459,922.55|1,104,904.60|
|18,380,302.26|9,190,151.14|
|196,721.54|99,577.45|
|163,780,172.05|163,780,172.05|
|3,833,070,919.30|275,332,151.06|

Accounts ReceivableWithdraw,Reversed or Collected during theReporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB97,556,693.52, and the increased amount of bad debt provision due to combination was of RMB24,919,241.85; the amount of the reversed or collected part during the Reporting Period was of RMB13,371,164.31. The decreased amount was RMB5,206,092.17 due to the lossof controllingright ofsubsidiaries.
 Top 5 of the Ending Balance of the Accounts Receivable Collected according to the Arrears Party
The total amount of top five of account receivable of ending balance collected by arrears party was RMB1,321,080,092.52, accounting for27.11% of total closing balance of account receivable, the relevant ending balance of bad debt provision withdrawn was RMB62,512,522.50.
4.Prepayments
(1)Listby AgingAnalysis
||||||
|-|-|-|-|-|
|Endingamount|||||
|Carryingamount||Baddebtprovision|Carryingamount||
|Amount|Proportion(%)||Amount|Proportion(%)|
|1,029,600,745.72|98.97|57,459.57|466,156,792.72|99.06|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Endingamount|||||
|Carryingamount||Baddebtprovision|Carryingamount||
|Amount|Proportion(%)||Amount|Proportion(%)|
|7,171,926.78|0.69|435,914.85|1,199,279.69|0.25|
|543,662.41|0.05|---|23,736.73|0.01|
|3,034,224.15|0.29|2,878,017.08|3,208,755.30|0.68|
|1,040,350,559.06|100.00|3,371,391.50|470,588,564.44|100.00|

 Notes: (1) Significant prepayment with aging more than 1 year was mainly the prepayment ofcompanies withnocooperation.
(2) The total amount of top five of prepayment of ending balance collected by arrears party was RMB375,850,722.16,accounting for36.13%oftotal ending balance of prepayment. (3) The withdrawal amount of bad debt provision this year was of RMB33,969.26; the collected or reversed bad debt provision was RMB151,142.26 this year; and there was no write-off bad debt provision; the increased amount was of RMB23,091.80 due to changes in exchange rate.
5.OtherReceivables
||
|-|
|Endingbalance|
|4,059,682.40|
|547,848.62|
|406,196,649.48|
|410,804,180.50|

 (1)Interest Receivable
||
|-|
|Endingbalance|
|3,440,237.63|
|48,888.89|
|570,555.88|
|4,059,682.40|

(2)Dividends receivable
KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Endingbalance|
|547,848.62|
|547,848.62|

 (3)OtherReceivables
OtherReceivables Classified byCategory
Endingbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion|Amount|Withdrawalproportion|
|183,915,489.33|29.70|173,300,179.23|94.23|
|434,706,709.91|70.19|39,622,114.57|9.11|
|434,706,709.91|70.19|39,622,114.57|9.11|
|703,518.00|0.11|206,773.96|29.39|
|619,325,717.24|100.00|213,129,067.76|34.41|

 (Continued)
Beginningbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion|Amount|Withdrawalproportion|
|183,915,489.33|47.74|173,320,694.97|94.24|

KonkaGroupCo.,Ltd. AnnualReport2018 Beginningbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion|Amount|Withdrawalproportion|
|198,796,860.68|51.61|28,768,843.02|14.47|
|198,796,860.68|51.61|28,768,843.02|14.47|
|2,516,181.05|0.65|733,893.68|29.17|
|385,228,531.06|100.00|202,823,431.67|52.65|

 A. Other receivables with significant individual amount and make independent provision for bad debt at the period-end
Endingbalance
||||
|-|-|-|
|Otherreceivables|Baddebtprovision|Withdrawalproportion|
|152,402,680.00|152,402,680.00|100.00%|
|18,115,952.51|7,500,642.41|41.40%|
|13,396,856.82|13,396,856.82|100.00%|
|183,915,489.33|173,300,179.23|—|

B. In the groups, other receivables adopting aging analysis method to withdraw bad debt provision:
Endingbalance
Aging
|||
|-|-|
|Otherreceivables|Baddebtprovision|
|282,147,748.63|6,123,073.51|
|111,966,212.63|8,340,278.22|
|8,970,642.49|1,836,551.60|
|5,459,223.01|2,729,611.51|

KonkaGroupCo.,Ltd. AnnualReport2018 Endingbalance
Aging
|||
|-|-|
|Otherreceivables|Baddebtprovision|
|9,940,013.33|4,969,729.92|
|16,222,869.82|16,222,869.82|
|434,706,709.91|39,622,114.57|

② OtherAccount Receivable Classified byAccount Nature
||
|-|
|Endingcarryingamount|
|152,402,680.00|
|51,914,614.91|
|190,535,636.18|
|29,403,385.01|
|53,891,530.62|
|59,252,474.98|
|18,228,687.41|
|3,500,807.51|
|60,195,900.62|
|619,325,717.24|

③ Bad Debt ProvisionWithdrawal, Reversed orRecovered inthe ReportingPeriod
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 6,618,105.76. the amount of the reversed or collected part during the Reporting Period was of RMB 3,788,310.66. The decreased amount was RMB329,503.85 due to the loss of controlling right of subsidiaries. The increased bad debt provision was RMB7,781,717.39 due tosubsidiaries’corporation; the increased bad debt provision was RMB23,627.45 due to changes in exchange rate.
④Top 5 OtherAccounts Receivable in Ending Balance Collected according to theArrears Party
|||||
|-|-|-|-|
|Nature|Endingbalance|Aging|Proportionofendingbalanceofthetotalotheraccountsreceivable|
|Subsidies|152,402,680.00|3-4years,over5years|24.61|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|Nature|Endingbalance|Aging|Proportionofendingbalanceofthetotalotheraccountsreceivable|
|Intercoursefunds|81,450,139.05|Within1year|13.15|
|Intercoursefunds|74,788,640.31|Within1year|12.08|
|Intercoursefunds|48,000,000.00|1-2years|7.75|
|Transferredfunds|18,115,952.51|4-5years|2.93|
|——|374,757,411.87|——|60.52|

 6.Inventory
(1)Category ofInventory
Endingbalance
||||
|-|-|-|
|Carryingamount|Ofwhich: thecapitalizedamountoftheborrowings|Fallingpricereserves|
|85,167,073.18|2,470,133.87|-|
|-|-|-|
|70,855,200.00|-|-|
|156,022,273.18|2,470,133.87|-|
|1,122,370,078.37|-|73,754,748.97|
|89,334,764.13|-|10,260,152.74|

KonkaGroupCo.,Ltd. AnnualReport2018 Endingbalance
||||
|-|-|-|
|Carryingamount|Ofwhich: thecapitalizedamountoftheborrowings|Fallingpricereserves|
|4,518,051,460.16|-|330,081,328.25|
|70,767,724.57|-|-|
|5,800,524,027.23|-|414,096,229.96|
|5,956,546,300.41|2,470,133.87|414,096,229.96|

(Continued)
Beginningbalance
||||
|-|-|-|
|Carryingamount|Ofwhich:thecapitalizedamountoftheborrowings|Fallingpricereserves|
|382,096,368.17|—|—|
|17,203,260.25|94,119.39|—|
|399,299,628.42|94,119.39|—|
|761,148,857.65|—|22,807,431.06|
|112,079,579.22|—|8,475,640.99|
|3,740,419,327.12|—|291,591,777.78|
|291,022.95|—|—|
|4,613,938,786.94|—|322,874,849.83|
|5,013,238,415.36|94,119.39|322,874,849.83|

(2)List oftheDevelopment Cost
KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Startingtime|Expectedcompletiontimeofthenextbatch|Beginningamount|
|2015|Finishingbyphases,PhaseIVisestimatedtobefinishedin2018|304,110,330.47|
|April2018|December2022|77,986,037.70|
|||382,096,368.17|

 (3)List oftheDeveloped Products
||||||
|-|-|-|-|-|
|Completiontime|Beginningamount|Increased|Decreased|Otherdecrease|
|2014|3,955,097.73|-|-|3,955,097.73|
|2015|2,072,508.39|-|-|2,072,508.39|
|2017|11,175,654.13|-|5,473,448.57|5,702,205.56|
||17,203,260.25|-|5,473,448.57|11,729,811.68|

Note: other increase was due to the loss of the controlling right of subsidiaries in the ReportingPeriod.
(4)FallingPrice Reserves ofInventory
||||||
|-|-|-|-|-|
|Beginningbalance|Increasedamount||Decreasedamount||
||Withdrawal|Increaseofmerger|Reverseorwrite-off|Decreaseoflosingcontrollingright|
|22,807,431.06|15,659,755.51|57,178,835.96|21,891,273.56|-|
|8,475,640.99|9,762,469.66|-|7,977,957.91|-|
|291,591,777.78|113,999,616.04|3,004,465.39|70,759,603.19|7,754,927.77|
|322,874,849.83|139,421,841.21|60,183,301.35|100,628,834.66|7,754,927.77|

KonkaGroupCo.,Ltd. AnnualReport2018 (5) Withdrawal Provision Basis of the Falling Price of the Inventory and the Reasons of the Reversed orWrite-off
|||
|-|-|
|Specificbasisofwithdrawaloffallingpricereservesofinventory|Reasonsforreverse|
|Therealizablenetvaluewaslowerthanthecarryingvalue|—|
|Therealizablenetvaluewaslowerthanthecarryingvalue|—|
|Therealizablenetvaluewaslowerthanthecarryingvalue|—|

(6) Ending balance of the inventory which includes capitalized borrowing expenses was RMB2,470,133.87
(7)Finished but UnsettledAssets from Construction Contract
Item Amount
1,059,617,631.78 Accumulativelyincurredcosts
442,360,457.21 Accumulativelyrecognizedgrossmargin
- Less:estimatedloss
1,486,055,207.82 Settledamounts
15,922,881.17 FinishedbutUnsettledAssetsfromConstructionContract
7.CurrentPortion of Non-currentAssets
|||
|-|-|
|Endingbalance|Beginningbalance|
|22,318,208.13|-|
|22,318,208.13|-|

8.OtherCurrentAssets
||
|-|
|Endingbalance|
|-|
|1,824,523,111.11|
|30,000,000.00|
|-|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Endingbalance|
|794,991,256.00|
|75,450,000.00|
|18,900,000.00|
|351,774.87|
|2,744,216,141.98|

KonkaGroupCo.,Ltd. AnnualReport2018
9.Available-for-saleFinancial Assets
(1)List ofAvailable-for-sale FinancialAssets
||||||
|-|-|-|-|-|
|Endingbalance|||||
|Carryingamount|Depreciationreserves|Carryingvalue|Carryingamount|Depreciationreserves|
|644,412,666.97|10,747,785.64|633,664,881.33|722,918,184.73|10,747,785.64|
|-|-|-|58,162.76|-|
|644,412,666.97|10,747,785.64|633,664,881.33|722,860,021.97|10,747,785.64|
|644,412,666.97|10,747,785.64|633,664,881.33|722,918,184.73|10,747,785.64|

 (2)Available-for-saleFinancialAssets Measured byCostat the Period-end
Carryingamount
||||
|-|-|-|
|Period-begin|Increased|Decreased|
|20,000,000.00|-|20,000,000.00|
|4,800,000.00|-|-|
|5,750,000.00|-|-|
|1,300,000.00|-|-|
|100,000.00|-|-|
|485,000.00|-|-|
|5,000,000.00|-|-|
|1,153,000.00|-|-|

KonkaGroupCo.,Ltd. AnnualReport2018
Carryingamount
||||
|-|-|-|
|Period-begin|Increased|Decreased|
|6,000,000.00|3,000,000.00|-|
|2,400,000.00|-|-|
|203,000,000.00|-|-|
|47,230,000.00|-|-|
|4,700,000.00|-|-|
|120,000,000.00|80,000,000.00|-|
|61,494,666.97|-|-|
|239,447,355.00|-|239,447,355.00|
|-|98,000,000.00|-|
|-|-|-|
|722,860,021.97|181,000,000.00|259,447,355.00|

 (Continued)
||||||
|-|-|-|-|-|
|Depreciationreserves||||Shareholdingproportionamongtheinvestees(%)|
|Period-begin|Increased|Decreased|Period-end||
|-|-|-|-|-|
|-|-|-|-|6.10|
|-|-|-|-|12.67|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Depreciationreserves||||Shareholdingproportionamongtheinvestees(%)|
|Period-begin|Increased|Decreased|Period-end||
|5,750,000.00|-|-|5,750,000.00|9.60|
|1,300,000.00|-|-|1,300,000.00|-|
|100,000.00|-|-|100,000.00|1.00|
|485,000.00|-|-|485,000.00|9.62|
|1,639,190.80|-|-|1,639,190.80|11.50|
|200,000.00|-|-|200,000.00|6.00|
|1,273,594.84|-|-|1,273,594.84|4.26|
|-|-|-|-|-|
|-|-|-|-|8.38|
|-|-|-|-|3.23|
|-|-|-|-|20.00|
|-|-|-|-|18.90|
|-|-|-|-|20.02|
|-|-|-|-|13.33|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Depreciationreserves||||Shareholdingproportionamongtheinvestees(%)|
|Period-begin|Increased|Decreased|Period-end||
|-|-|-|-|-|
|10,747,785.64|-|-|10,747,785.64|-|

 Note:① TheShareholding ratio ofWuhanTianyuan Environmental Protection Co.,Ltd inthe Reporting Periodincreaseto20.02%.Andthe Company officiallydispatched members of Board, which had agreat impact ontheWuhanTianyuan Environmental Protection Co., Ltd,soit shall transferred to long-term equity investmentmeasured byequity method.
(4)Changes oftheImpairment oftheAvailable-for-sale FinancialAssets in theReporting Period
Categoryofavailable-for-salefinancialassets Available-for-saleequityinstruments
10,747,785.64 Withdrawnimpairmentbalanceattheperiod-begin
- WithdrawaloftheReportingPeriod
- Ofwhich:transferredfromothercomprehensiveincome
- DecreaseoftheReportingPeriod
- Ofwhich:recoveredorreversedfromthefairvalueafterthePeriod
10,747,785.64 Withdrawnimpairmentbalanceattheperiod-end
KonkaGroupCo.,Ltd. AnnualReport2018 10.Long-term Receivables
(1)List ofLong-term Receivables
|||||||
|-|-|-|-|-|-|
|Endingbalance|||Beginningbalance|||
|Carryingamount|Impairmentprovision|Carryingvalue|Carryingamount|Impairmentprovision|Carryingvalue|
|33,575,058.68|-|33,575,058.68|-|-|-|
|2,045,709.65|-|2,045,709.65|-|-|-|
|22,318,208.13|-|22,318,208.13|-|-|-|
|7,801,495.81|-|7,801,495.81|-|-|-|
|349,416,483.56|-|349,416,483.56|-|-|-|
|390,793,038.05|-|390,793,038.05|-|-|-|

 (2)List ofProjects with Franchise Rights
|||||
|-|-|-|-|
|Type|Projectscale|Franchiseright|Dateofcontract|
|PPP|163,558,100.00|Right of charge forsewage disposal|July 2016|

KonkaGroupCo.,Ltd. AnnualReport2018
(3)Changes in Long-term Receivables ofProjects withFranchise Rights
||||||||||
|-|-|-|-|-|-|-|-|-|
|Initialinvestedamount|Beginningbalance|IncreasedNewlyMergerincreaseincreased InterestintheReportinginvestment incomePeriodamount|||decreased|||Endingbalance|
||||||Principalrecover|Interestrecover|Otherdecrease||
|349,416,483.56|-|344,183,646.57|5,232,836.99|-|-|-|-|349,416,483.56|
|349,416,483.56|-|344,183,646.57|5,232,836.99|-|-|-|-|349,416,483.56|

 11.Long-term Equity Investment
|||||||
|-|-|-|-|-|-|
|Beginningbalance||||||
||Additionalinvestment|Increaseforcombinations|Decreasedinvestment|Investmentprofitandlossrecognized under the equitymethod|Adjustmentofothercomprehensiveincome|
|-|2,450,000.00|-|-|-90,951.96|-|
|-|2,000,000.00|-|-|-394,530.13|-|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance||||||
||Additionalinvestment|Increaseforcombinations|Decreasedinvestment|Investmentprofitandlossrecognized under the equitymethod|Adjustmentofothercomprehensiveincome|
|2,425,262.66|-|-|-|-1,647,306.08|-|
|-|-|-|-|-|-|
|99,562,391.48|-|-|-|-16,232,947.80|-|
|48,417,046.08|-|-|-|800,503.44|-47,390.23|
|-|760,000.00|-|-|-741.06|-|
|-|-|-|-|-|-|
|-|-|-|-|-|-|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance||||||
||Additionalinvestment|Increaseforcombinations|Decreasedinvestment|Investmentprofitandlossrecognized under the equitymethod|Adjustmentofothercomprehensiveincome|
|-|6,000,000.00|-|-|-3,242,442.69|-|
|-|-|-|-|-|-|
|-|6,000,000.00|-|-|-1,131,201.64|-|
|-|51,000,000.00|-|-|-70,570.55|-|
|-|-|2,027,201.88|-|413,231.38|-|
|-|-|4,337,942.19|-|233,530.51|-|
|-|-|100,033,567.26|100,033,567.26|-|-|
|-|-|63,492,789.75|-|-3,820,856.12|-|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance||||||
||Additionalinvestment|Increaseforcombinations|Decreasedinvestment|Investmentprofitandlossrecognized under the equitymethod|Adjustmentofothercomprehensiveincome|
|-|-|22,232,418.57|-|2,512,650.91|-|
|-|98,000,000.00|-|-|2,627,067.11|-|
|26,462,212.34|-|-|-|194,455.24|-|
|210,279,132.55|-|-|-|11,931,702.63|-|
|617,214,571.50|-|-|-|13,423,191.54|-|
|79,729,560.91|-|-|-|-2,107,745.08|788,087.31|
|9,444,160.97|-|-|-|1,596,085.85|-|
|4,927,589.47|-|-|-|-2,640,110.95|-|
|14,317,400.80|-|-|-|-3,699,527.01|-|
|1,523,166.24|-|-|-|-1,523,166.24|-|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance||||||
||Additionalinvestment|Increaseforcombinations|Decreasedinvestment|Investmentprofitandlossrecognized under the equitymethod|Adjustmentofothercomprehensiveincome|
|-|-|-|-|-|-|
|-22,084.12|3,771,400.00|-|-|-156,801.82|-|
|205,706,932.86|-|-|-|-5,012,466.06|-|
|-|-|-|-|-|-|
|-|-|-|35,053,749.75|11,738,814.32|-|
|-|75,000,000.00|-|-|4,859,338.44|-|
|-|7,000,000.00|-|-|-599,519.48|-|
|-|5,400,000.00|-|-|-877,490.67|-|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance||||||
||Additionalinvestment|Increaseforcombinations|Decreasedinvestment|Investmentprofitandlossrecognized under the equitymethod|Adjustmentofothercomprehensiveincome|
|-|-|-|-|12,822,900.47|-|
|1,319,987,343.74|257,381,400.00|192,123,919.65|135,087,317.01|19,905,096.50|740,697.08|

 (Continued)
|||||||
|-|-|-|-|-|-|
|Increase/decreaseintheReportingPeriod|||||Endingbalance|
|Declarationofcashdividendsorprofits|Withdrawnimpairmentprovision|Costmethodconvertedintoequitymethod|Financialassetsconvertedintoequitymethod|Other||
|-|-|-|-|-|2,359,048.04|
|-|-|-|-|-|1,605,469.87|
|-|-|-|-|-|777,956.58|
|-|-|19,750,739.24|-|-|19,750,739.24|
|-|-|-|-|-|83,329,443.68|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Increase/decreaseintheReportingPeriod|||||Endingbalance|
|Declarationofcashdividendsorprofits|Withdrawnimpairmentprovision|Costmethodconvertedintoequitymethod|Financialassetsconvertedintoequitymethod|Other||
|-|-|-|-|-|49,170,159.29|
|-|-|-|-|-|759,258.94|
|-|-|-|-|-|-|
|-|-|-|-|-|-|
|-|-|-|-|-|2,757,557.31|
|-|-|-|-|-|-|
|-|-|-|-|-|4,868,798.36|
|-|-|-|-|-|50,929,429.45|
|-|-|-|-|-|2,440,433.26|
|-|-|-|-|-|4,571,472.70|
|-|-|-|-|-|-|
|-|-|-|-|-|59,671,933.63|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Increase/decreaseintheReportingPeriod|||||Endingbalance|
|Declarationofcashdividendsorprofits|Withdrawnimpairmentprovision|Costmethodconvertedintoequitymethod|Financialassetsconvertedintoequitymethod|Other||
|-|-|-|-|-|24,745,069.48|
|-|-|-|-|-|100,277,552.55|
|-|-|-|-|-|26,656,667.58|
|-|-|-|-|-|222,210,835.18|
|-|-|-|-|-|624,845,604.93|
|-|-|-|-|-|78,409,903.14|
|-|-|-|-|-|11,040,246.82|
|-|-|-|-|-|2,287,478.52|
|-|-|-|-|-|10,617,873.79|
|-|-|-|-|-|-|
|-|-|-|-|-|-|
|-|-|-|-|-|3,592,514.06|
|-|-|-|-|-|200,694,466.80|
|-|-|269,673,264.00|-|-|269,673,264.00|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Increase/decreaseintheReportingPeriod|||||Endingbalance|
|Declarationofcashdividendsorprofits|Withdrawnimpairmentprovision|Costmethodconvertedintoequitymethod|Financialassetsconvertedintoequitymethod|Other||
|-|-|460,000,000.00|-|-|436,685,064.57|
|-|-|-|-|-|79,859,338.44|
|-|-|-|-|-|6,400,480.52|
|-|-|-|-|-|4,522,509.33|
|-|-|-|239,447,355.00|-|252,270,255.47|
|-|-|749,424,003.24|239,447,355.00|-|2,637,780,825.53|

 On 25 October2018, Runtas Group delegated20% of Chongqing Qingjia's voting rights to Chongqing MachineryMechanical& Electronics Holding (Group) Co., Ltd. (CME) for management and exercise. Runtas Group and CME jointly hold60% of Chongqing Qingjia's equity, and theCompany has nocontrol rights thereafter.
② Weihai Water Environmental Protection Technology Co., Ltd., WeihaiYiheng Environmental Technology Co., Ltd., Laizhou Lairun Financial Leasing Co., Ltd., Beihai Weiqiao Solid Waste Disposal Co., Ltd., Shandong Bishuiyuan Environmental Protection Technology Co., Ltd. and YantaiEcon Enterprise Management Centre(Limited Partnership) are included bythe acquisitionof EconTechnology.
KonkaGroupCo.,Ltd. AnnualReport2018 12.InvestmentProperty
Item Housesandbuildings
I.Originalcarryingvalue
1.Beginningbalance 249,923,047.75 2.Increasedamountoftheperiod - 3.Decreasedamountoftheperiod - 4.Endingbalance
249,923,047.75 II.Theaccumulativedepreciationandaccumulativeamortization
1.Beginningbalance 33,467,417.76 2.Increasedamountoftheperiod 5,631,274.27 3.Decreasedamountoftheperiod - 4.Endingbalance
39,098,692.03 III.Impairmentprovision
1.Beginningbalance - 2.Increasedamountoftheperiod - 3.Decreasedamountoftheperiod - 4.Endingbalance
- IV.Carryingvalue - 1.Endingcarryingvalue 210,824,355.72 2.Beginningcarryingvalue 216,455,629.99
KonkaGroupCo.,Ltd. AnnualReport2018
13.FixedAssets
||
|-|
|Endingbalance|
|2,410,226,495.81|
|-|
|2,410,226,495.81|

① List of FixedAssets
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Otherequipment|
|1,559,039,774.48|715,947,835.05|187,109,755.76|49,930,623.13|174,208,488.89|
|878,508,516.33|1,217,123,051.09|10,278,955.72|19,078,735.09|58,839,237.85|
|43,542,282.87|23,350,323.15|7,680,377.27|4,957,588.71|11,673,334.48|
|17,060,762.76|29,253,668.91|-|2,184,602.05|8,610,729.69|
|817,905,470.70|1,164,519,059.03|2,598,578.45|11,936,544.33|38,555,173.68|
|277,466,887.58|85,505,352.10|24,595,294.23|10,349,106.07|34,606,392.44|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Otherequipment|
|715,368.47|24,410,163.74|14,512,579.21|7,536,214.81|8,627,755.03|
|276,751,519.11|61,095,188.36|10,082,715.02|2,812,891.26|25,978,637.41|
|2,160,081,403.23|1,847,565,534.04|172,793,417.25|58,660,252.15|198,441,334.30|
|367,660,000.41|428,143,422.45|129,422,777.12|36,768,297.26|115,293,690.98|
|282,165,213.57|602,360,748.24|15,329,048.32|12,593,260.99|38,233,764.95|
|51,611,558.12|83,338,994.96|13,709,033.18|5,431,201.87|16,443,707.94|
|230,553,655.45|519,021,753.28|1,620,015.14|7,162,059.12|21,790,057.01|
|15,029,283.71|29,175,127.41|8,843,791.51|9,175,013.31|11,795,734.84|
|-|19,302,965.44|5,600,809.43|6,543,813.95|8,113,672.20|
|15,029,283.71|9,872,161.97|3,242,982.08|2,631,199.36|3,682,062.64|
|634,795,930.27|1,001,329,043.28|135,908,033.93|40,186,544.94|141,731,721.09|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Otherequipment|
|1,064,479.47|17,067,824.99|1,249,373.18|862,703.36|1,533,559.74|
|183,326.44|52,635,761.20|43,490.00|-|117,720.40|
|183,326.44|204,691.31|43,490.00|-|117,720.40|
|-|52,431,069.89|-|-|-|
|-|1,093,434.15|77,411.53|42,488.12|180,733.33|
|-|1,093,434.15|77,411.53|21,775.12|176,761.39|
|-|-|-|20,713.00|3,971.94|
|1,247,805.91|68,610,152.04|1,215,451.65|820,215.24|1,470,546.81|
|1,524,037,667.05|777,626,338.72|35,669,931.67|17,653,491.97|55,239,066.40|
|1,190,315,294.60|270,736,587.61|56,437,605.46|12,299,622.51|57,381,238.17|

KonkaGroupCo.,Ltd. AnnualReport2018 (2)List ofTemporarily Idle FixedAssets
||||
|-|-|-|
|Originalcarryingvalue|Accumulativedepreciation|Impairmentprovision|
|18,685,829.77|7,995,125.86|7,850,744.40|
|3,236,737.14|2,890,671.44|—|
|125,981.91|113,383.72|—|
|470,432.84|393,805.77|42,128.24|
|22,518,981.66|11,392,986.79|7,892,872.64|

 (3)FixedAssets Leased in from Financing Lease
||||
|-|-|-|
|Originalcarryingvalue|Accumulativedepreciation|Impairmentprovision|
|9,451,353.39|2,420,688.00||
|205,128.20|157,264.95||
|9,656,481.59|2,577,952.95||

 (4)FixedAssets Leased out from Operation Lease
Item Endingcarryingvalue
Housesandbuildings 59,291,614.06 Total 59,291,614.06 (5)Details ofFixedAssetsFailed toAccomplish Certification of Property
|||||
|-|-|-|-|
|Originalcarryingvalue|Accumulativedepreciation|Impairmentprovision|Netcarryingvalue|
|3,628,629.00|210,914.08|—|3,417,714.92|
|10,189,892.23|1,084,002.58|—|9,105,889.65|
|5,432,239.86|366,676.23|—|5,065,563.63|
|20,018,497.00|8,644,518.56|—|11,373,978.44|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
||33,457,332.77|—|43,153,419.56|
|39,524,551.28|—|—|39,524,551.28|
|112,397,538.12|30,253,765.60|—|82,143,772.52|
|2,653,000.00|1,243,593.75|—|1,409,406.25|

KonkaGroupCo.,Ltd. AnnualReport2018
14.Construction inProgress
||
|-|
|Endingbalance|
|2,176,871,530.80|
|-|
|2,176,871,530.80|

① List of ConstructioninProgress
||||||
|-|-|-|-|-|
|Endingbalance|||||
|Carryingamount|Impairmentprovision|Carryingvalue|Carryingamount|Impairmentprovision|
|451,789,427.70|-|451,789,427.70|-|-|
|552,055,516.50|-|552,055,516.50|-|-|
|261,826,586.30|-|261,826,586.30|-|-|
|365,069,872.84|-|365,069,872.84|-|-|
|303,533,244.21|-|303,533,244.21|-|-|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Endingbalance|||||
|Carryingamount|Impairmentprovision|Carryingvalue|Carryingamount|Impairmentprovision|
|153,577,240.57|-|153,577,240.57|76,514,067.90|-|
|89,019,642.68|-|89,019,642.68|59,349,753.11|-|
|2,176,871,530.80|-|2,176,871,530.80|135,863,821.01|-|

② Changes ofSignificant Construction in Progress
|||||||
|-|-|-|-|-|-|
|Estimatednumber|Beginningbalance|IncreaseAmount|Mergerincreaseamount|Amountthattransferredtolong-termfixedassetsoftheperiod|Otherdecreasedamountoftheperiod|
|RMB952million|-|451,789,427.70|-|-|-|
|RMB810million|-|552,055,516.50|-|-|-|
|RMB404million|-|261,826,586.30|-|-|-|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Estimatednumber|Beginningbalance|IncreaseAmount|Mergerincreaseamount|Amountthattransferredtolong-termfixedassetsoftheperiod|Otherdecreasedamountoftheperiod|
|RMB381million|-|92,065,729.57|273,004,143.27|-|-|
|RMB434million|-|60,247,959.78|243,285,284.43|-|-|
|RMB241million|76,514,067.90|77,063,172.67|-|-|-|
|—|59,349,753.11|75,034,778.61|33,952,139.17|76,403,862.10|2,913,166.11|
||135,863,821.01|1,570,083,171.13|550,241,566.87|76,403,862.10|2,913,166.11|

（Continued）
||||||
|-|-|-|-|-|
|Proportionestimatedoftheprojectaccumulativeinput(%)|Projectprogress|Accumulativeamountofcapitalizedinterests|Ofwhich:theamountofthecapitalizedinterestsoftheperiod|Capitalizationrateoftheinterestsoftheperiod(%)|
|47.57|47.57|-|-|-|
|68.15|68.15|-|-|-|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Proportionestimatedoftheprojectaccumulativeinput(%)|Projectprogress|Accumulativeamountofcapitalizedinterests|Ofwhich:theamountofthecapitalizedinterestsoftheperiod|Capitalizationrateoftheinterestsoftheperiod(%)|
|64.84|64.84|-|-|-|
|95.76|95.76|22,768,437.98|-|-|
|70.00|70.00|26,846,701.03|-|-|
|63.72|63.72|-|-|-|
|-|-|-|-|-|
|-|-|49,615,139.01|-|-|

 15.IntangibleAssets
(1)List ofintangible assets
|||||||
|-|-|-|-|-|-|
|Landuseright|Intellectualproperty|||||
||Trademark right|Patentandknow-how|Franchiserights|Right to usesoftwareandothers|Subtotal|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Landuseright|Intellectualproperty|||||
||Trademark right|Patentandknow-how|Franchiserights|Right to usesoftwareandothers|Subtotal|
|196,989,129.47|3,519,159.61|40,234,111.64|-|66,665,916.59|110,419,187.84|
|331,993,452.03|44,077,946.62|155,333,340.10|111,050,625.01|22,998,965.55|333,460,877.28|
|-|-|-|-|15,416,017.19|15,416,017.19|
|14,220,053.65|-|-|-|3,396,945.27|3,396,945.27|
|317,773,398.38|44,077,946.62|155,333,340.10|111,050,625.01|4,186,003.09|314,647,914.82|
|88,441,823.98|106,944.53|75,600.00|-|9,291,693.11|9,474,237.64|
|-|-|-|-|7,040,396.58|7,040,396.58|
|88,441,823.98|106,944.53|75,600.00|-|2,251,296.53|2,433,841.06|
|440,540,757.52|47,490,161.70|195,491,851.74|111,050,625.01|80,373,189.03|434,405,827.48|
||||||-|
|34,734,302.29|3,519,159.61|34,420,126.84|-|26,775,872.27|64,715,158.72|
|21,976,106.08|1,952,456.42|11,874,182.60|6,663,037.50|9,271,399.44|29,761,075.96|
|7,941,501.90|1,874,509.80|11,855,942.50|2,961,350.00|7,788,411.38|24,480,213.68|
|14,034,604.18|77,946.62|18,240.10|3,701,687.50|1,482,988.06|5,280,862.28|
|16,048,172.82|106,944.54|-|-|762,709.64|869,654.18|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Landuseright|Intellectualproperty|||||
||Trademark right|Patentandknow-how|Franchiserights|Right to usesoftwareandothers|Subtotal|
|-|-|-|-|762,709.64|762,709.64|
|16,048,172.82|106,944.54|-|-|-|106,944.54|
|40,662,235.55|5,364,671.49|46,294,309.44|6,663,037.50|35,284,562.07|93,606,580.50|
||||||-|
|-|-|2,901,082.61|-|-|2,901,082.61|
|-|-|-|-|-|-|
|-|-|-|-|-|-|
|-|-|-|-|-|-|
|-|-|-|-|-|-|
|-|-|-|-|-|-|
|-|-|-|-|-|-|
|-|-|2,901,082.61|-|-|2,901,082.61|
||||||-|
|399,878,521.97|42,125,490.21|146,296,459.69|104,387,587.51|45,088,626.96|337,898,164.37|
|162,254,827.18|-|2,912,902.19|-|39,890,044.32|42,802,946.51|

KonkaGroupCo.,Ltd. AnnualReport2018 (2)LandUse Right with Certificate ofTitleUncompleted
||
|-|
|Carryingvalue|
|9,209,966.67|
|5,456,515.11|

(3)Significant IntangibleAssets
||
|-|
|Endingcarryingvalue|
|104,387,587.51|
|101,647,058.82|
|73,587,031.11|
|39,503,358.75|
|39,866,666.67|

 (4)IntangibleAssets with restricted ownership orusing right
||
|-|
|Endingcarryingvalue|
|38,040,981.20|
|5,065,400.00|
|14,101,553.20|

16.Goodwill
(1)Original CarryingValueofGoodwill
||||||
|-|-|-|-|-|
|Beginningbalance|Increased||Decreased||
||Formedfromthebusinesscombination|Other|Dispose|Other|
|3,597,657.15|-|-|-|-|
|-|470,769,220.06|-|-|-|
|-|340,111,933.01|-|-|-|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|-|44,156,682.25|-|-|-|
|3,597,657.15|855,037,835.32|-|-|-|

 (2)Provisions forGoodwill Impairment
||||||
|-|-|-|-|-|
|Beginningbalance|Increased||Decreased||
||Withdrawal|Other|Dispose|Other|
|-|-|-|-|-|
|-|-|-|-|-|
|-|-|-|-|-|
|-|-|-|-|-|
|-|-|-|-|-|

 (3)Impairment testof business reputation
In the impairment test of business reputation, the whole assets and business of the acquired companies are taken as an asset group for impairment test. The main cash inflow of this asset group is independent of the cash inflow of other assets or asset groups, and this asset group is consistentwith theasset groupconfirmed onthepurchase date.
The recoverable amount of Econ Technology is determined according to the present value of expected future cash flows. Future cash flows are determined based on the financial budget approved by the Management for the period from 2019 to 2023, with a discount rate of14.06%. The cash flows of Econ Technology over 5 years are measured on the basis of a growth rate of0%. Other key assumptions used in measuring future cash flows include estimated sales and gross profit based on the past performance of the asset group and the expectation of the Management on market development. The Management believes that no reasonable change in the above assumptions will lead to a result that the total book value of EconTechnology exceeds its recoverable amount.
The recoverable amount of Jiangxi Konka is determined according to the present value of expected future cash flows. Future cash flows are determined based on the financial budget approved by the Management for the period from 2019 to 2023, with a discount rate of×%. The cash flows of Jiangxi Konka over 5 years are measured on the basis of a growth rate of0%. Other key assumptions used in measuring future cash flows include estimated sales and gross profit based on the past performance of the asset group and the expectation of the
Management on market development. The Management believes that no reasonable change
in the above assumptions will lead to a result that the total book value of Jiangxi Konka
KonkaGroupCo.,Ltd. AnnualReport2018 exceeds its recoverable amount.
The recoverable amount of XingDa HongYe is determined according to the present value of expected future cash flows. Future cash flows are determined based on the financial budget approved by the Management for the period from 2019 to 2023, with a discount rate of11.51%. The cash flows of XingDa HongYe over 5 years are measured on the basis of a growth rate of0%. Other key assumptions used in measuring future cash flows include estimated sales and gross profit based on the past performance of the asset group and the expectation of the Management on market development. The Management believes that no reasonable change in the above assumptions will lead to a result that the total book value of XingDaHongYeexceeds its recoverableamount.
(4)The impact ofimpairment test of businessreputation
According to the result of impairment test of business reputation, the Company did not suffer any impairment ofbusiness reputation inthis current year.
17.Long-term UnamortizedExpenses
|||||
|-|-|-|-|
|Beginningbalance|Increasedamount|Amortizationamount|Otherdecreaseamount|
|23,241,203.51|25,554,662.96|11,216,384.16|2,674,942.19|
|56,402,256.28|58,885,461.34|52,649,531.01|1,270,114.37|
|70,417,477.51|20,180,981.61|11,065,898.43|64,581,746.28|
|150,060,937.30|104,621,105.91|74,931,813.60|68,526,802.84|

 18.DeferredIncomeTaxAssets/DeferredIncomeTax Liabilities
(1)Deferred IncomeTaxAssets withoutOffset
||||
|-|-|-|
|Endingbalance|||
|Deductibletemporarydifference|Deferredincometaxassets|Deductibletemporarydifference|
|1,358,336,470.51|336,401,597.67|2,250,284.11|
|936,009,764.81|226,316,093.63|796,345,288.62|
|85,456,786.55|20,389,065.68|106,943,380.58|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Endingbalance|||
|Deductibletemporarydifference|Deferredincometaxassets|Deductibletemporarydifference|
|72,865,789.50|17,320,299.04|118,441,697.07|
|35,916,413.76|8,979,103.44|32,715,116.95|
|---|---|47,482,470.52|
|123,082,867.34|30,027,794.84|141,409,911.41|
|2,611,668,092.47|639,433,954.30|1,245,588,149.26|

 (2)Lists ofDeferred IncomeTax Liabilities without Offset
||||
|-|-|-|
|Endingbalance|||
|Taxabletemporarydifference|Deferredincometaxliabilities|Taxabletemporarydifference|
|597,961,840.34|119,325,356.84|---|
|71,719,199.88|17,929,799.97|45,386,505.16|
|5,929,959.47|889,493.92|6,889,703.33|
|3,005,381.67|751,345.42|---|
|---|---|1,026,206.42|
|8,496,388.76|2,124,097.19|---|
|687,112,770.12|141,020,093.34|53,302,414.91|

 (3)List ofUnrecognized Deferred IncomeTaxAssets
||
|-|
|Endingbalance|
|2,688,310,555.91|
|294,734,548.10|
|2,983,045,104.01|

19.OtherNon-currentAssets
Item Endingbalance Beginningbalance
KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Endingbalance|
|158,810,750.31|
|120,000,000.00|
|41,410,334.97|
|10,099,279.84|
|6,497,317.32|
|12,193.56|
|337,477,690.39|

 20.Short-termLoans
||
|-|
|Endingbalance|
|12,471,968,199.93|
|1,113,964,731.70|
|30,000,000.00|
|-|
|268,200,000.00|
|13,884,132,931.63|

 Note:① with the book value of RMB 129,749,184.23 as the collateral of the second phase plant, dongguan kangjia obtained the loan of RMB 30,000,000.00 from the dongguan branch ofindustrial bank co., LTD.
②With the book value of RMB 38,965,300.00 for plant and equipment, the land use right of RMB 5,065,400.00 and the equity of jiangxi xinzixin real estate co., ltd. under the name of minority shareholders as collateral, zhu xinming, zeng xiaoying and zhu qingming provide joint and several liability guarantee, and nano-microcrystal and xinfeng microcrystal provide the highest guarantee. The total amount of the loan is RMB 128,500,000.00 from the sales department of jiangxi yongxiu rural commercial bank co., LTD., agricultural bank of China yongxiucounty branch and jiujiangbranch ofbank ofcommunications respectively..
③Xingda hongye to book valueRMB 58241167 indexof the workshop, theland use right of
KonkaGroupCo.,Ltd. AnnualReport2018$38040981.20, RMB 19800000.00 unit certificates of deposit and the minority shareholder's name property as collateral, shenzhen city xingda circuit board co., LTD., ze-hong hu, Jiang Jiezhen, Dai Rongxing, Hu Liying, Dai Yanhua provide maximum amount guarantee, respectively from the bank of guangzhou, zhongshan, the agricultural bank of China zhongshan rural commercial bank branches and mound mound sand sand branch loan borrowing amount RMB 139700000.00.
21.Financial Liabilitiesat FairValuethroughProfitorLoss
||
|-|
|Endingbalance|
|2,459,603.25|
|2,459,603.25|

 22.Notes andAccounts Payable
||
|-|
|Endingbalance|
|862,330,689.47|
|4,362,723,050.33|
|5,225,053,739.80|

 (1)Notes Payable
||
|-|
|Endingbalance|
|131,907,909.16|
|730,422,780.31|
|862,330,689.47|

 (2)Accounts Payable
||
|-|
|Endingbalance|
|4,041,645,573.26|
|262,217,987.99|
|12,677,653.94|
|46,181,835.14|
|4,362,723,050.33|

 (3)SignificantAccounts PayableAgingoverOneYear
Item Endingbalance Unpaid/Un-carry-overreason
KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|217,495,088.56|
|217,495,088.56|

23.Advances fromCustomers
(1)List ofAdvances from Customers
||
|-|
|Endingbalance|
|654,982,234.51|
|32,910,085.56|
|13,172,633.37|
|22,162,575.76|
|723,227,529.20|

 (2)SignificantAdvances from CustomersAging overOneYear
||
|-|
|Endingbalance|
|24,974,635.75|
|15,357,854.41|
|40,332,490.16|

KonkaGroupCo.,Ltd. AnnualReport2018
24.PayrollPayable
(1)List ofPayroll Payable
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Increasebymerger|Decrease|Decreasebylosingcontrollingright|
|289,046,664.85|1,629,631,704.71|19,030,255.97|1,553,586,493.74|8,837,938.67|
|2,323,632.82|148,304,799.23|6,597.36|149,084,438.77|328,216.05|
|-|9,207,455.27|-|9,207,455.27|-|
|-|-|-|-|-|
|291,370,297.67|1,787,143,959.21|19,036,853.33|1,711,878,387.78|9,166,154.72|

 (2)List ofShort-term Salary
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Increasebymerger|Decrease|Decreasebylosingcontrollingright|
|275,524,552.33|1,430,621,311.75|18,757,618.25|1,356,836,794.50|8,408,941.91|
|4,562,983.10|60,231,443.27|-|59,170,452.19|3,235.51|
|2,816,379.51|64,388,768.20|3,199.92|63,924,256.44|145,919.69|
|815,364.61|55,260,964.35|2,529.60|55,188,962.37|121,485.35|
|247,215.23|3,785,199.77|352.80|3,857,848.63|14,575.35|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Increasebymerger|Decrease|Decreasebylosingcontrollingright|
|1,753,799.67|5,342,604.08|317.52|4,877,445.44|9,858.99|
|299,531.17|41,957,039.83||41,637,147.87|73,924.63|
|3,624,491.64|11,173,641.63|269,437.80|9,280,552.32|205,916.93|
|-|-|-|-|-|
|-|-|-|-|-|
|2,218,727.10|21,259,500.03|-|22,737,290.42|-|
|289,046,664.85|1,629,631,704.71|19,030,255.97|1,553,586,493.74|8,837,938.67|

 (3)List ofDefined ContributionPlan
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Increasebymerger|Decrease|Decreasebylosingcontrollingright|
|2,096,931.52|144,568,375.95|6,350.40|145,214,564.00|309,294.17|
|226,701.30|3,736,423.28|246.96|3,869,874.77|18,921.88|
|-|-|-|-|-|
|2,323,632.82|148,304,799.23|6,597.36|149,084,438.77|328,216.05|

 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
KonkaGroupCo.,Ltd. AnnualReport2018
longershoulder thefurther payment obligation, therelevant expenseoccurred was recorded intocurrent profits and losses orrelated assets costs. 264
KonkaGroupCo.,Ltd. AnnualReport2018 25.Taxes Payable
||
|-|
|Endingbalance|
|127,267,736.84|
|111,659,382.84|
|9,508,557.03|
|6,842,959.97|
|3,390,503.70|
|3,162,037.00|
|2,867,887.18|
|2,444,284.96|
|1,757,048.49|
|16,496,706.00|
|1,057,937.59|
|401,823.10|
|-|
|1,147,327.74|
|288,004,192.44|

 26.OtherPayables
||
|-|
|Endingbalance|
|27,230,631.41|
|-|
|1,997,426,646.33|
|2,024,657,277.74|

(1)Interest Payable
Item Endingbalance Beginningbalance
KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Endingbalance|
|27,230,631.41|
|27,230,631.41|

 (2)OtherPayables
Listed byNature ofAccount
||
|-|
|Endingbalance|
|971,679,417.48|
|280,592,078.50|
|380,180,000.00|
|196,746,104.46|
|108,233,202.82|
|49,796,310.13|
|10,199,532.94|
|1,997,426,646.33|

②Significant OtherPayablesAging over OneYear
||
|-|
|Endingbalance|
|89,960,000.00|
|83,666,951.46|
|173,626,951.46|

27.CurrentPortion ofNon-currentLiabilities
||
|-|
|Endingbalance|
|40,000,000.00|
|111,792,404.13|
|151,792,404.13|

 28.Long-term Borrowings
||
|-|
|Endingbalance|
|245,000,000.00|
|50,000,000.00|
|150,000,000.00|
|40,000,000.00|
|445,000,000.00|

KonkaGroupCo.,Ltd. AnnualReport2018Note:①Sichuan kangjia took the land use right with the book value of 14,101,553.20 yuan as the mortgage, and communication technology provided joint and several liability guarantee for the loan, and obtained the entrusted loan of 50 million yuan from sichuan gangrong investment and development group co.,LTD.
②YiKang rushan mountain fseko environmental control technology of subsidiary co., LTD. The formation of rushan city bureau of government procurement of pledge of accounts receivable as applies for loan to the bank of China everbright, yantai economic development zone branch limit is ten thousand yuan RMB 29000.00, loan term on December 29 2016 solstice December 28, 2026, during the pledge for 29 December 2016 solstice December 28, 2026; Meanwhile, icom technology will provide joint and several liability guarantee. As of December 31,2018,theactual amount ofthe loan is RMB15,000.00million.
29.Long-term Payables
||
|-|
|Endingbalance|
|240,167,001.54|
|111,792,404.13|
|128,374,597.41|

 30.Long-term PayrollPayable
(1)List ofLong-term PayrollPayable
||
|-|
|Endingbalance|
|8,792,614.98|
|-|
|-|
|8,792,614.98|

 (2)Changes in Defined Benefit Plans
①
Obligationpresentvalueofdefinedbenefitplans:
||
|-|
|Reportingperiod|
|13,361,821.86|
|-|
|-|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Reportingperiod|
|-|
|-|
|-|
|-|
|-|
|4,569,206.88|
|-|
|4,569,206.88|
|8,792,614.98|

② Notes to the influence of the content and related risk of defined benefit pension schemes tothefuture cash flows, timeand uncertainty of theCompany:
Due to upgrading and reconstruction of current work sites of the subsidiary, communication technology, it is to adjust the labor relations according to Implementation Measures for Accompanying Employees in manufacturing system of Shenzhen Konka Telecommunication Technology Co., Ltd on the premise to balance theCompany’s andemployees’ benefits and voluntary selection, Telecommunication Technology provides early retirement plans for senior employees (employed before 31 December 1990 and signed non-fixed term labor contractwith theCompany orCommunicationTechnology).
The accumulative compensation paid to the internal early retirement pensions in future year is RMB34,931,714.55, the Company in line with Agreement of Internal Early Retirement Pension, in line with the standard of salary remaining the same, turnover rate of 0, the mortality rate of, fix standard of social security base payment remaining the same to test the present worth of defined benefit plans. The actual payment for the employee is influence by theactual turnoverrate, death rate and thechanges ofminimumcardinality ofsocial security.③Notes to Actuarial Assumptions and Sensibility Analysis Result of Defined Benefit Pension Schemes
||
|-|
|Period-endofReportingPeriod|
|Treasurybondrateinsameperiod|
|0%|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Overlegalemeritusage|
|0%|

31.Provisions
|||
|-|-|
|Beginningbalance|Endingbalance|
|4,711,597.59|21,566,306.86|
|1,470,267.51|206,591.51|
|6,181,865.10|21,772,898.37|

Note: In 2016, Jiangxi Longji Construction Engineering Co., Ltd. filed a lawsuit with Nanchang Intermediate People's Court against Jiangxi Xinfeng Microcrystalline Jade Co., Ltd. over the dispute arisen from a construction contract. According to the first-instance decision made by Nanchang Intermediate People's Court, Jiangxi Xinfeng Microcrystalline Jade Co., Ltd. should compensate Jiangxi Longji for the loss of RMB 19,741,456.02 and the interest therefrom (Interest was calculated according to the similar lending rate for the same period issued by the People's Bank of China based on the principle of RMB 19,741,456.02 from November 24, 2016 to the date when the principal amount was paid off). Jiangxi Xinfeng Microcrystalline Jade Co., Ltd. appealed to the Higher People's Court of Jiangxi Province.As of December 31, 2018, the expected losses related to the lawsuit suffered by the Company are RMB21,566,306.86.
32.DeferredIncome
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Decrease|Otherdecrease|Endingbalance|
|130,049,911.87|13,283,000.00|29,357,262.38|1,076,521.25|112,899,128.24|
|130,049,911.87|13,283,000.00|29,357,262.38|1,076,521.25|112,899,128.24|

KonkaGroupCo.,Ltd. AnnualReport2018
Ofwhich, itemsrelated to government subsidies:
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Amountofnewlysubsidy|Amountrecordedintonon-operatingincomeintheReportingPeriod|AmountrecordedintootherincomeintheReportingPeriod|Otherchanges|Endingbalance|
|19,848,500.00|-|-|4,494,000.00|-|15,354,500.00|
|13,300,000.00|-|-|-|-|13,300,000.00|
|-|10,000,000.00|-|1,499,999.94|-|8,500,000.06|
|7,761,844.66|-|-|1,981,747.56|-|5,780,097.10|
|5,256,893.21|-|-|3,679,825.38|-|1,577,067.83|
|4,500,000.00|-|-|-|-|4,500,000.00|
|3,620,000.00|-|-|-|-|3,620,000.00|
|4,500,000.02|-|-|999,999.96|-|3,500,000.06|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Amountofnewlysubsidy|Amountrecordedintonon-operatingincomeintheReportingPeriod|AmountrecordedintootherincomeintheReportingPeriod|Otherchanges|Endingbalance|
|3,822,000.00|-|-|819,000.00|-|3,003,000.00|
|3,000,000.00|-|-|-|-|3,000,000.00|
|3,281,040.00|-|-|546,840.00|-|2,734,200.00|
|2,600,000.00|-|-|-|-|2,600,000.00|
|5,620,000.00|-|-|3,184,666.78|-|2,435,333.22|
|2,754,867.45|-|-|535,790.04|-|2,219,077.41|
|2,100,000.00|-|-|-|-|2,100,000.00|
|2,809,233.44|-|-|795,649.92|-|2,013,583.52|
|1,960,000.00|-|-|-|-|1,960,000.00|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Amountofnewlysubsidy|Amountrecordedintonon-operatingincomeintheReportingPeriod|AmountrecordedintootherincomeintheReportingPeriod|Otherchanges|Endingbalance|
|2,360,000.00|-|-|480,000.00|-|1,880,000.00|
|2,400,000.00|-|-|600,000.00|-|1,800,000.00|
|-|1,750,000.00|-|-|-|1,750,000.00|
|1,875,000.00|-|-|300,000.00|-|1,575,000.00|
|1,500,000.00|-|-|-|-|1,500,000.00|
|1,951,430.02|-|-|459,159.96|-|1,492,270.06|
|1,420,000.00|-|-|-|-|1,420,000.00|
|1,400,000.00|-|-|-|-|1,400,000.00|
|1,500,000.00|-|-|125,000.00|-|1,375,000.00|
|1,320,000.00|-|-|-|-|1,320,000.00|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Amountofnewlysubsidy|Amountrecordedintonon-operatingincomeintheReportingPeriod|AmountrecordedintootherincomeintheReportingPeriod|Otherchanges|Endingbalance|
|2,400,000.00|-|-|1,084,812.96|-|1,315,187.04|
|1,300,000.00|-|-|-|-|1,300,000.00|
|1,590,166.71|||405,999.96||1,184,166.75|
|1,680,000.00|-|-|420,000.00|-|1,260,000.00|
|1,375,319.98|-|-|229,220.04|-|1,146,099.94|
|-|1,000,000.00|-|-|-|1,000,000.00|
|1,000,000.00|-|-|-|-|1,000,000.00|
|1,199,999.88|-|-|200,000.04|-|999,999.84|
|1,100,220.00|-|-|183,369.96|-|916,850.04|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Amountofnewlysubsidy|Amountrecordedintonon-operatingincomeintheReportingPeriod|AmountrecordedintootherincomeintheReportingPeriod|Otherchanges|Endingbalance|
|1,750,000.13|-|-|999,999.96|-|750,000.17|
|1,066,666.76|-|-|399,999.96|-|666,666.80|
|-|225,000.00|-|3,750.00|-|221,250.00|
|-|200,000.00|-|-|-|200,000.00|
|-|60,000.00|-|1,000.00|-|59,000.00|
|-|48,000.00|-|800.00|-|47,200.00|
|1,094,583.35|-|-|18,499.98|1,076,083.37|-|
|1,429,395.04|-|-|486,318.96|437.88|942,638.20|
|10,602,751.22|-|-|4,421,811.02|-|6,180,940.20|
|130,049,911.87|13,283,000.00|-|29,357,262.38|1,076,521.25|112,899,128.24|

KonkaGroupCo.,Ltd. AnnualReport2018 33.ShareCapital
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Increase/decrease(+/-)|||||
||Newsharesissued|Bonusshares|Bonusissuefromprofit|Other|Subtotal|
|2,407,945,408.00|-|-|-|-|-|

 34.CapitalReserves
||||
|-|-|-|
|Beginningbalance|Increase|Decrease|
|7,393,378.55|-|-|
|97,338,863.75|120,473,886.76|16,849,504.85|
|104,732,242.30|120,473,886.76|16,849,504.85|

 Note: Due to the loss of control, the disposal of part of the equity of
E2info
resulted in an increase of RMB120,473,886.76 in other capital reserves; due to the disposal of part of the equity of Kaikai Shijie, plastic products and Chongqing Qingjia, the capital reserve was reduced by RMB10,707,832.18; due to changes in other owners' equity other than net profit or loss of Guangdong Chutian Dragon Smart Card Co., Ltd. and Shenzhen RF-LINK Technology Co.,Ltd., othercapital reserves have reduced byRMB6,141,672.67.
KonkaGroupCo.,Ltd. AnnualReport2018
35.OtherComprehensiveIncome
|||||||
|-|-|-|-|-|-|
|Beginningbalance|ReportingPeriod|||||
||IncomebeforetaxationintheCurrentPeriod|Less:recordedinothercomprehensiveincomeinpriorperiodandtransferredinprofitorlossintheCurrentPeriod|Less:Incometaxexpense|AttributabletoownersoftheCompanyastheparentaftertax|Attributabletonon-controllinginterestsaftertax|
|-|-|-|-|-|-|
|3,697,458.95|-12,596,094.90|-|-10,447.36|-14,235,678.03|1,650,030.49|
|-3,138,048.04|740,697.08|-|-|740,697.08|-|
|31,342.08|-41,789.44|-|-10,447.36|-31,342.08|-|
|6,804,164.91|-13,295,002.54|-|-|-14,945,033.03|1,650,030.49|
|3,697,458.95|-12,596,094.90|-|-10,447.36|-14,235,678.03|1,650,030.49|

KonkaGroupCo.,Ltd. AnnualReport2018 36.SurplusReserves
||||
|-|-|-|
|Beginningbalance|Increase|Decrease|
|963,582,609.22|9,919,910.40|-|
|254,062,265.57|-|-|
|1,217,644,874.79|9,919,910.40|-|

 Notes: Based on the regulations of the Corporation Law and Constitution, the Company should withdraw10% of the statutory surplus reserves according to the net profits. If the accumulated amount of the statutory surplus reserves exceeded the50% of the registered capital, theCompany could nomore withdraw.
The Company can withdraw the discretional surplus reserves after withdrawing the statutory surplus reserves. The discretional surplus reserves can be used to make up for the previous losses orto increaseshare capital once approved.
37.Retained Earnings
||
|-|
|2018|
|4,260,125,492.57|
|-|
|4,260,125,492.57|
|411,289,744.68|
|9,919,910.40|
|-|
|390,087,134.64|
|4,271,408,192.21|

 38.Operating RevenueandCost ofSales
(1)Operating Revenue and Cost ofSales
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|44,539,559,406.49|41,961,861,198.85|29,801,098,730.20|
|1,587,237,934.84|1,265,752,715.60|1,426,664,519.51|
|46,126,797,341.33|43,227,613,914.45|31,227,763,249.71|

 (2)Main Operations (Classified byproduct)
Productname ReportingPeriod Sameperiodoflastyear
KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Operatingrevenue|Costofsales|Operatingrevenue|
|9,892,486,636.93|8,689,731,404.20|11,994,950,476.66|
|331,298,592.29|327,425,343.91|918,711,012.38|
|2,127,731,143.29|1,767,282,597.98|1,737,464,511.08|
|3,020,514,260.13|2,634,491,782.63|-|
|28,348,817,442.89|28,068,819,224.05|13,652,512,654.75|
|818,711,330.96|474,110,846.08|1,497,460,075.33|
|44,539,559,406.49|41,961,861,198.85|29,801,098,730.20|

 (3)Main Operations (Classified byarea)
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|15,280,905,528.09|13,378,114,102.53|14,605,075,686.89|
|29,258,653,878.40|28,583,747,096.32|15,196,023,043.31|
|44,539,559,406.49|41,961,861,198.85|29,801,098,730.20|

 (4)Other Operations (Classified byproduct)
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|1,061,823,529.60|1,125,521,149.81|655,914,026.56|
|14,768,368.18|3,339,815.57|8,173,452.85|
|15,009,489.99|666,256.53|11,089,872.64|
|107,020,774.99|19,678,154.79|74,440,747.48|
|388,615,772.08|116,547,338.90|677,046,419.98|
|1,587,237,934.84|1,265,752,715.60|1,426,664,519.51|

 (5)Operating Revenue fromTop 5Customers
||
|-|
|Totaloperatingrevenuefromtop5customers|
|13,375,164,153.90|
|7,077,286,124.31|

39.Taxes andSurtaxes
||
|-|
|ReportingPeriod|
|24,828,107.02|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|ReportingPeriod|
|15,162,609.72|
|14,178,084.66|
|12,019,009.56|
|11,001,522.37|
|7,345,690.22|
|1,309,631.97|
|16,094.66|
|-|
|3,829,115.75|
|89,689,865.93|

 Note: Refer to Note VTaxation for details of the measurement standards of various taxes and surtaxes.
40.Selling Expense
||
|-|
|ReportingPeriod|
|730,468,898.17|
|342,640,120.91|
|337,227,473.98|
|202,084,416.68|
|349,308,929.28|
|53,380,828.00|
|35,211,979.96|
|25,377,016.80|
|23,247,889.18|
|21,055,262.45|
|162,171,426.23|
|2,282,174,241.64|

 41.Administrative Expense
||
|-|
|ReportingPeriod|
|278,758,343.19|
|71,547,932.45|
|42,016,562.62|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|ReportingPeriod|
|23,520,903.01|
|22,609,874.52|
|22,483,701.61|
|22,475,469.34|
|15,390,406.89|
|11,658,004.88|
|10,237,943.20|
|5,597,428.25|
|115,596,426.22|
|641,892,996.18|

42.R&DExpense
||
|-|
|ReportingPeriod|
|176,668,069.66|
|112,453,347.32|
|47,815,656.03|
|11,820,275.57|
|11,555,165.21|
|10,466,824.02|
|5,399,670.34|
|3,309,558.94|
|2,420,847.59|
|14,550,730.56|
|396,460,145.24|

 43.Finance Costs
||
|-|
|ReportingPeriod|
|566,070,556.21|
|43,630,012.41|
|-174,702,042.10|
|51,427,312.69|
|399,165,814.39|

44.Asset Impairment Loss
KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|ReportingPeriod|
|86,898,151.31|
|139,421,841.21|
|-|
|549,228.15|
|226,869,220.67|

 45.OtherIncome
|||
|-|-|
|ReportingPeriod|SamePeriodoflastyear|
|173,850,805.31|53,426,592.80|
|64,656,609.96|56,782,742.21|
|29,357,262.38|29,182,496.49|
|18,108,788.00|49,848,202.23|
|3,821,338.00|2,817,636.00|
|2,248,900.00|8,829,600.00|
|1,796,103.67|2,038,431.45|
|425,824.91|2,053,742.37|
|294,265,632.23|204,979,443.55|

46.InvestmentIncome
||
|-|
|ReportingPeriod|
|19,139,381.20|
|185,587,193.61|
|-|
|-45,928,989.49|
|17,920,000.00|
|17,360,398.59|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|ReportingPeriod|
|551,089,548.47|
|183,411,695.80|
|-|
|-1,164,857.22|
|927,414,370.96|

 47.Gain onChanges inFairValue
||
|-|
|ReportingPeriod|
|5,168,185.39|
|5,168,185.39|
|-|
|45,022,867.25|
|45,022,867.25|
|50,191,052.64|

 48.AssetDisposal Income
|||
|-|-|
|ReportingPeriod|SamePeriodoflastyear|
|-563,894.74|22,576,235.00|
|-|33,369,166.39|
|-563,894.74|55,945,401.39|

 49.Non-operating Income
|||
|-|-|
|ReportingPeriod|SamePeriodoflastyear|
|209,465.30|90,088.16|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|ReportingPeriod|SamePeriodoflastyear|
|30,000,000.00|30,176,000.00|
|46,445,749.23|3,714,592.49|
|55,281.81|449,085.66|
|14,987,008.86|4,378,369.42|
|421,248.97|-|
|220,045,229.63|-|
|16,532,156.29|44,024,528.03|
|328,696,140.09|82,832,663.76|

 Ofwhich, government subsidies recorded intocurrent profit or loss:
|||||||
|-|-|-|-|-|-|
|ReportingPeriod|||Sameperiodoflastyear|||
|Recordedintonon-operatingincome|Recordedintootherincome|Offsetcosts|Recordedintonon-operatingincome|Recordedintootherincome|Offsetcosts|
|30,000,000.00|-|-|30,000,000.00|-|-|
|-|-|-|176,000.00|-|-|
|30,000,000.00|-|-|30,176,000.00|-|-|

50.Non-operating Expense
|||
|-|-|
|ReportingPeriod|SamePeriodoflastyear|
|3,503,737.74|5,408,316.93|
|118,766.24|5,757,816.49|
|177,601.00|437,976.34|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|ReportingPeriod|SamePeriodoflastyear|
|2,727,629.00|-|
|1,049,718.66|-|
|11,658,004.88|-|
|460,399.26|4,916,922.92|
|19,695,856.78|16,521,032.68|

 51.IncomeTaxExpense
(1)Lists ofIncomeTax Expense
||
|-|
|ReportingPeriod|
|145,391,357.02|
|-359,113,186.48|
|-213,721,829.46|

 (2)AdjustmentProcess ofAccounting Profit and IncomeTax Expense
Item ReportingPeriod
Profitbeforetaxation 454,896,592.11 Currentincometaxexpenseaccountedatstatutory/applicabletaxrate 113,724,148.03 Influenceofapplyingdifferenttaxratesbysubsidiaries -54,083,374.50 Influenceofincometaxbeforeadjustment -2,392,637.36 Influenceofnon-taxableincome -56,565,083.87 Influenceofnotdeductablecosts,expensesandlosses 7,573,086.74 Influenceofdeductablelossofunrecognizeddeferredincometaxassetsinpriorperiod -26,901,514.84 Influenceofdeductabletemporarydifferenceordeductablelossesofunrecognized
-17,477,843.08 deferredincometaxintheReportingPeriod
Changesinthebalanceofdeferredincometaxassets/liabilitiesinpreviousperioddue
68,188.24 toadjustmentoftaxrate
Other
-177,666,798.82 Incometaxexpense -213,721,829.46 52.OtherComprehensiveIncome
Referto NoteVI-35fordetails.
53.CashFlowStatement
KonkaGroupCo.,Ltd. AnnualReport2018 (1)Cash Generated from Other OperatingActivities
||
|-|
|ReportingPeriod|
|3,046,250,433.88|
|48,357,936.24|
|240,968,351.06|
|150,767,666.31|
|21,754,813.26|
|6,630,095.00|
|20,958,954.89|
|27,704,625.75|
|1,499,503.30|
|9,721,141.07|
|140,056,972.37|
|3,714,670,493.13|

 (2)Cash Used inOther OperatingActivities
||
|-|
|ReportingPeriod|
|2,925,211,901.01|
|1,150,343,818.19|
|51,369,090.01|
|344,427,373.48|
|27,655,007.55|
|31,199,551.45|
|102,578.10|
|44,675.99|
|78,728,884.80|

 (3)Cash Generated from Other InvestingActivities
Item ReportingPeriod SamePeriodoflastyear
KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|ReportingPeriod|
|2,145,785,000.00|
|-|
|17,600,000.00|
|229,643,228.96|
|2,393,028,228.96|

 (4)Cash Used inOther InvestingActivities
||
|-|
|ReportingPeriod|
|1,028,080,000.00|
|1,819,000,000.00|
|2,439,200.00|
|2,849,519,200.00|

 (5)Cash Generated from Other FinancingActivities
||
|-|
|ReportingPeriod|
|-|
|128,933,333.34|
|298,225,230.01|
|32,726,515.41|
|-|
|459,885,078.76|

 (6)Cash Used inOther FinancingActivities
||
|-|
|ReportingPeriod|
|116,939,471.09|
|226,425,248.50|
|412,777,454.04|
|1,392,251.29|
|757,534,424.92|

54.Supplemental Information forCash FlowStatement
(1)Supplemental Information forCash Flow Statement
KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|ReportingPeriod|
|668,618,421.57|
|226,869,220.67|
|170,534,496.07|
|32,421,715.58|
|74,931,813.60|
|563,894.74|
|3,294,272.44|
|-50,191,052.64|
|544,195,357.06|
|-927,414,370.96|
|-323,517,091.85|
|37,991,934.70|
|-668,140,011.75|
|261,056,969.48|
|-3,251,682,178.99|
|-29,357,262.38|
|-3,229,823,872.66|
|-|
|-|
|-|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|ReportingPeriod|
|3,434,149,481.72|
|3,097,899,703.76|
|-|
|-|
|336,249,777.96|

 (2)Net Cash Paid ForAcquisition ofSubsidiaries
Item Amount
Cash or cash equivalents paid currently for current business combinations in the Reporting
1,531,450,000.00 Period
Ofwhich:Shandong EconTechnology Co.,Ltd.
400,000,000.00 JiangxiKonkaNewMaterialTechnologyCo.,Ltd. 598,000,000.00 Henan FrestecRefrigerationAppliance Co.,Ltd.
455,000,000.00 GuangDongXingDaHongYeElectronicCo.,Ltd. 78,450,000.00 Less:cashandcashequivalentsheldbysubsidiariesonthepurchasedate
414,139,604.63 Ofwhich:Shandong EconTechnology Co.,Ltd.
178,434,322.05 JiangxiKonkaNewMaterialTechnologyCo.,Ltd. 208,815,770.16 Henan FrestecRefrigerationAppliance Co.,Ltd.
- GuangDongXingDaHongYeElectronicCo.,Ltd. 25,339,512.42 Netcashpaidforacquisitionofsubsidiaries
1,118,860,395.37 (3)Net Cash Receive from Disposal oftheSubsidiaries
Item Amount
CashorcashequivalentsreceivedintheReportingPeriodfromdisposalofsubsidiariesinthe
330,680,336.00 CurrentPeriod
Ofwhich:KaikaiShijie 50,000,000.00
KunshanKangsheng 280,680,336.00
KonkaGroupCo.,Ltd. AnnualReport2018 Item Amount
ChongqingQingjia
- ZeweiKechuang - Less:cashandcashequivalentsheldbysubsidiariesonthedateoflosingcontrolpower 78,211,847.40 Ofwhich:KaikaiShijie 7,488,940.78 KunshanKangsheng 69,624,314.96 ChongqingQingjia
1,065,835.71 ZeweiKechuang 32,755.95 Netcashreceivedfromdisposalofsubsidiaries 252,468,488.60 (4)Cash and Cash Equivalents
||
|-|
|Endingbalance|
|3,434,149,481.72|
|130,105.31|
|3,434,019,376.41|
|3,434,149,481.72|

 55. Assets with Restricted OwnershiporRightto Use
||||
|-|-|-|
|Item|Endingcarryingvalue(RMB)|Reasonforrestriction|
|Monetarycapital|91,399.46|Among which: RMB451.6092 million was all kinds of deposit that cannot bewithdrawn at any time; RMB235 million was fixed time deposits; RMB201.0352million was supervised account capital for reimbursement; RMB19.8 million wasdeposits pledged as loans; RMB4.3466 million was frozen capital for lawsuits;RMB2.2036millionwasrestrictedforotherreasons.|
|Notesreceivable|132,145.49|Asof31December2018,theCompanypledgednotesreceivableswithcarryingvalueof RMB1,321,454,900 for conducting comprehensive financing businesses such asopeningofbanker’sacceptancebill,L/C,L/Gandtradefinancing.|
|Fixedassets|22,695.57|Formortgageborrowings.Referto20.Short-termBorrowingsinNoteVI|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Intangibleassets|5,720.79|Formortgageborrowings.Referto20.Short-termBorrowingsinNoteVIFormortgageborrowings.Referto28.Long-termBorrowingsinNoteVI|
|Long-termreceivables|34,941.65|Mortgageborrowings.Referto28.Long-termBorrowingsinNoteVI|
|Total|286,902.96||

56.ForeignCurrency Monetary Items
(1)Foreign Currency Monetary Items
|||
|-|-|
|Endingforeigncurrencybalance|Exchangerate|
|135,723,407.43|6.8632|
|1,817.87|7.8473|
|12,449,667.60|0.8762|
|130,507,627.96|6.8632|
|3,531,401.47|0.8762|
|49,764.00|4.825|
|13,848,369.43|6.8632|
|54,781.10|6.8632|
|21,644,634.75|6.8632|
|529,791,419.53|0.8762|
|23,657,224.69|0.8762|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|Endingforeigncurrencybalance|Exchangerate|
|208,330,389.67|6.8632|
|1,302,303.49|6.8632|

 (2)Notes toOverseas Entities
The significant overseas entities include
Hong Kong Konka, Konka Electrical Appliances International Trading,ChainKingdomShenzhen,KangjietongandJialiInternational.ThemainoverseasoperatingplaceisHongKong.TheCompany’srecordingcurrencyisHKDsincethemaincurrencyincirculationinHongKongisHKD.
57.Arbitrage
Refer to relevant contents in items notes of in 2. FinancialAssets at Fair Value through Profit orLoss in NoteVI.
58.Government Subsidy
(1)Basic Information onGovernment Subsidy
|||
|-|-|
|Amount|Listeditems|
|30,000,000.00|Non-operatingincome|
|173,850,805.31|Otherincome|
|64,656,609.96|Otherincome|
|18,108,788.00|Otherincome|
|3,821,338.00|Otherincome|
|2,248,900.00|Otherincome|
|1,796,103.67|Otherincome|
|425,824.91|Otherincome|
|10,000,000.00|Deferredincome/Otherincome|
|1,750,000.00|Deferredincome|
|1,000,000.00|Deferredincome|
|225,000.00|Deferredincome/Other|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|Amount|Listeditems|
||income|
|200,000.00|Deferredincome|
|60,000.00|Deferredincome/Otherincome|
|48,000.00|Deferredincome/Otherincome|
|308,191,369.85||

 (2)Return ofGovernment Subsidy
Nosuch cases in theReporting Period.
VII. Changesof ConsolidationScope
1.BusinessCombination NotundertheSame Control
(1)Business CombinationNot under theSameControlduring theReporting Period
||||||||
|-|-|-|-|-|-|-|
|Timeandplaceofgainingtheequity|Costofgainingtheequity(RMB’0,000)|Proportionofequity(%)|Waytogaintheequity|Purchasedate|Recognitionbasisofpurchasedate|Incomeofacquireefromthepurchasedatetoperiod-end|
|4 May 2018|68,850.00|51.00|Purchaseincash|4 May 2018|Actualcontrol|109,722.71|
|16 August2018|68,968.00|51.00|Purchaseincash|16 August2018|Actualcontrol|12,393.18|
|29 June 2018|9,945.00|51.00|Purchaseincash|29 June 2018|Actualcontrol|18,272.14|
|3 August 2018|45,500.00|100.00|Purchaseincash|3 August2018|Actualcontrol|12,517.13|

 (2)Combination Costand Goodwill
KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|EconTechnology|JiangxiKonka|XingDaHongYe|
|40,000.00|59,800.00|7,845.00|
|28,850.00|9,168.00|2,100.00|
|68,850.00|68,968.00|9,945.00|
|22,373.91|34,917.24|5,529.33|
|46,476.09|34,050.76|4,415.67|

1. The fair value of the identifiable part of the identifiable assets or liabilities has been determined by the valuation results determined by Shenzhen Pengxin Assets Appraisal Land Real EstateAppraisal Co.,Ltd.
2.Themain reason for theformation of large-value goodwill
The reason for the formation of the above-mentioned large-value goodwill is the acquisition of Econ Technology, Jiangxi Konka and Xingda Hongye not under the same control. It is a market-oriented transaction. The pricing is based on the valuation of the evaluation experts and theresults of negotiationsbetween the two parties.
KonkaGroupCo.,Ltd. AnnualReport2018
(3)TheIdentifiableAssets and LiabilitiesofAcquiree onPurchase Date
||||||||
|-|-|-|-|-|-|-|
|EconTechnology||JiangxiKonka||XingDaHongYe|||
|Fairvalueonpurchasedate|Carryingvalueonpurchasedate|Fairvalueonpurchasedate|Carryingvalueonpurchasedate|Fairvalueonpurchasedate|Carryingvalueonpurchasedate|Fairvalueonpurchasedate|
|17,843.43|17,843.43|23,537.18|23,537.18|6,462.69|6,462.69|-|
|690.08|690.08|10,694.34|10,694.34|4,628.41|4,628.41|-|
|28,624.03|28,624.03|-|-|15,380.36|15,380.36|-|
|1,697.30|1,697.30|62,529.03|55,923.94|22,187.76|16,195.68|33,879.53|
|14,472.32|11,672.32|15,831.87|4,014.75|9,127.53|3,911.13|21,878.87|
|68,372.99|68,973.82|80,340.05|80,340.05|12,060.72|12,060.72|22,501.14|
|18,750.00|18,750.00|21,187.00|21,187.00|21,070.00|21,070.00|-|
|26,604.55|26,604.55|15,832.33|15,832.33|31,218.63|31,218.63|-|
|420.00|-|2,763.33|-|1,681.27|-|9,764.33|
|-|-|-|-|-|-|-|
|32,370.38|32,370.38|84,607.05|84,607.05|4,535.51|4,535.50|990.69|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||||
|-|-|-|-|-|-|-|
|EconTechnology||JiangxiKonka||XingDaHongYe|||
|Fairvalueonpurchasedate|Carryingvalueonpurchasedate|Fairvalueonpurchasedate|Carryingvalueonpurchasedate|Fairvalueonpurchasedate|Carryingvalueonpurchasedate|Fairvalueonpurchasedate|
|53,555.22|51,776.05|68,542.76|52,883.88|11,342.06|1,814.86|67,504.52|
|31,487.74||33,585.95||5,812.73||-|
|22,067.48||34,956.81||5,529.33||67,504.52|

KonkaGroupCo.,Ltd. AnnualReport2018
2.DisposalofSubsidiary
Asingledisposal ofthe investmentto thesubsidiary and lostcontrol
||||||
|-|-|-|-|-|
|Theequitydisposalprice|Equitydisposalproportion(%)|Methodofequitydisposal|Timeoflosingcontrol|Recognitionbasisforthetimeoflosingcontrolpower|
|5,000.00|5|Transfer|28June2018|Transferofequity,operationandfinancialcontrollingpower|
|28,068.03|51|Transfer|25June2018|Transferofequity,operationandfinancialcontrollingpower|

(Continued)
||||||
|-|-|-|-|-|
|Residualequityproportiononthedateoflosingcontrolpower(%)|Carryingvalueofresidualequityonthedateoflosingcontrolpower|Fairvalueofresidualequityonthedateoflosingcontrolpower|Gainsorlossesfromre-measurementofresidualequityatfairvalue|Recognitionmethodandmainassumption offairvalueofresidualequityonthedateoflosingcontrolpower|
|46.00|2,643.91|46,000.00|43,356.09|Markettradingprice|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Residualequityproportiononthedateoflosingcontrolpower(%)|Carryingvalueofresidualequityonthedateoflosingcontrolpower|Fairvalueofresidualequityonthedateoflosingcontrolpower|Gainsorlossesfromre-measurementofresidualequityatfairvalue|Recognitionmethodandmainassumption offairvalueofresidualequityonthedateoflosingcontrolpower|
|51.00|17,525.46|26,967.33|9,441.87|Markettradingprice|

3.Changes inCombinationScopeforOtherReasons
(1)Subsidiaries Established bytheCompany in 2018
||||
|-|-|-|
|Registeredcapital|Shareholdingpercentage(%)|Timeandplaceofobtainingcontrolpower|
|5,000,000.00|51.00|5 February 2018|
|5,000,000.00|51.00|16 August 2018|
|5,000,000.00|51.00|5 September 2018|
|1,000,000.00|40.80|26 July 2018|
|5,000,000.00|51.00|8 November 2018|
|20,000,000.00|51.00|18 October 2018|
|1,000,000.00|26.01|21 November 2018|
|HKD5000000|51.00|2 February 2018|
|100,000,000.00|51.00|15 January 2018|
|100,000,000.00|51.00|12 June 2018|
|HKD10000000|51.00|25 January 2018|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Registeredcapital|Shareholdingpercentage(%)|Timeandplaceofobtainingcontrolpower|
|10,000,000.00|60.00|3 December 2018|
|HKD1000000|51.00|9 January 2018|
|100,000,000.00|100.00|15 January 2018|
|100,000,000.00|51.00|7 March 2018|
|50,000,000.00|51.00|11 May 2018|
|100,000,000.00|51.00|9 August 2018|
|10,000,000.00|51.00|26 June 2018|
|1,000,000,000.00|100.00|16 January 2018|
|50,000,000.00|100.00|28 December 2018|
|50,000,000.00|100.00|20 September 2018|
|180,000,000.00|51.00|6 June 2018|
|100,000,000.00|100.00|11 April 2018|
|50,000,000.00|100.00|18 July 2018|
|100,000,000.00|0.90|5 September 2018|
|100,000,000.00|62.80|7 September 2018|
|100,000,000.00|51.00|7 December 2018|
|100,000,000.00|100.00|19 October 2018|
|10,000,000.00|51.00|31 October 2018|
|50,000,000.00|51.00|7 November 2018|
|30,000,000.00|100.00|22 August 2018|
|5,000,000.00|51.00|27 December 2018|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Registeredcapital|Shareholdingpercentage(%)|Timeandplaceofobtainingcontrolpower|
|50,000,000.00|51.00|26 December 2018|
|200,000,000.00|100.00|26December2018|
|30,000,000.00|51.00|26March2018|
|10,000,000.00|51.00|5 February 2018|

 (2)Changes in Combination Scopefor Other Reasons
The Company's subsidiary,
Shushida Logistics
(formerly known as Shenzhen Shushida Logistics Service Co., Ltd.) and Plastic Products were liquidated during theyear and theremaining assets were distributed.
On 25 October 2018, Runtian Group Co., Ltd. entrusted20% of the equity voting rights of Chongqing Qingjia held by it to Chongqing Electromechanical Holding (Group) Co., Ltd., for management. Runtian Group Co., Ltd. and Chongqing Electromechanical Holding (Group) Co., Ltd. jointly holda60%stakein Chongqing Qingjia, theCompany nolongerhas controlpower.
VIII. Equity inOtherEntities
1.Equity inSubsidiary
(1)Subsidiaries
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|60.00||
|Shenzhen,|Shenzhen,|Manufacturingindustry||60.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Guangdong|Guangdong||||
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commerce||60.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Other organization andmanagementservice|51.00||
|Yantai,Shandong|Yantai,Shandong|Other professionalconsultancy andinvestigation||51.00|
|Chengdu,Sichuan|Chengdu,Sichuan|Commercialservice||51.00|
|Chengdu,Sichuan|Chengdu,Sichuan|Commercialservice||51.00|
|Guiyang,Guizhou|Guiyang,Guizhou|Headquartersmanagement||51.00|
|Nanjing,Jiangsu|Nanjing,Jiangsu|Entrepreneurial spaceservice||40.80|
|Guiyang,Guizhou|Guiyang,Guizhou|Other Commercialservicenotlistedclearly||51.00|
|Yibin,Sichuan|Yibin,Sichuan|Commercialservice||51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Other IT service industrynotlistedclearly||26.01|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Chuzhou,Anhui|Chuzhou,Anhui|Manufacturingindustry|78.00||
|Chuzhou,Anhui|Chuzhou,Anhui|Wholesaleindustry||78.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Insurance agents(non-bankfinance)|100.00||
|Tianjin|Tianjin|Advertisement||70.00|
|Chuzhou,Anhui|Chuzhou,Anhui|Science and technologyindustry|100.00||
|Shenzhen,Guangdong|Shenzhen,Guangdong|Retailindustry|51.00||
|Hong Kong,China|Hong Kong,China|Retailindustry||51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Softwaredevelopment|100.00||
|Dongguan,Guangdong|Dongguan,Guangdong|Manufacturingindustry|75.00|25.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|75.00|25.00|
|Shenzhen,|Shenzhen,|Manufacturingindustry|75.00|25.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Guangdong|Guangdong||||
|Mudanjiang,Heilongjiang|Mudanjiang,Heilongjiang|Manufacturingindustry|60.00||
|Frankfurt,Germany|Frankfurt,Germany|InternationalTrading|100.00||
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commerce|81.00||
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturing industry,commerce|100.00||
|Haikou,Hainan|Haikou,Hainan|Commercialservice||51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commerce|51.00||
|Yibin,Sichuan|Yibin,Sichuan|Manufacturingindustry||51.00|
|Chuzhou,Anhui|Chuzhou,Anhui|Manufacturingindustry|100.00||
|Chuzhou,Anhui|Chuzhou,Anhui|Manufacturingindustry||51.00|
|Xinxiang,Henan|Xinxiang,Henan|Manufacturingindustry||51.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Xinxiang,Henan|Xinxiang,Henan|Manufacturingindustry||51.00|
|Xinxiang,Henan|Xinxiang,Henan|Manufacturingindustry||51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Retailindustry|51.00||
|Hong Kong,China|Hong Kong,China|Retailindustry||51.00|
|Haikou,Hainan|Haikou,Hainan|Network platformdevelopment|60.00||
|Shenzhen,Guangdong|Shenzhen,Guangdong|Network platformdevelopment||60.00|
|Dongguan,Guangdong|Dongguan,Guangdong|Manufacturingindustry|75.00|25.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Information service|96.61||
|Beijing|Beijing|Saleofhomeappliance|100.00||
|Tianjin PilotFree TradeZone|Tianjin PilotFree TradeZone|Leasingindustry||100.00|
|Shenzhen,|Shenzhen,|Investmentholding|75.00|25.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Guangdong|Guangdong||||
|Boluo,Guangdong|Boluo,Guangdong|Manufacturingindustry||100.00|
|Xiamen,Fujian|Xiamen,Fujian|Commerce||69.23|
|Boluo,Guangdong|Boluo,Guangdong|Manufacturingindustry||100.00|
|Chongqing|Chongqing|Manufacturingindustry||40.00|
|Hong Kong,China|Hong Kong,China|InternationalTrading|100.00||
|Hong Kong,China|Hong Kong,China|Investmentholding||100.00|
|Hong Kong,China|Hong Kong,China|InternationalTrading||51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Wholesaleindustry||51.00|
|Hong Kong,China|Hong Kong,China|InternationalTrading||61.00|
|Hong Kong,China|Hong Kong,China|Serviceindustry||51.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Hong Kong,China|Hong Kong,China|InternationalTrading||100.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Capitalmarketsservice|100.00||
|Yibin,Sichuan|Yibin,Sichuan|Development andmanagement of industrialpark||100.00|
|Chengdu,Sichuan|Chengdu,Sichuan|Realestateindustry||51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Capitalmarketsservice||100.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Investment in industry,commercial informationconsultancy andinvestmentadvisor||51.00|
|Haikou,Hainan|Haikou,Hainan|Municipal road,engineeringandbuildings||51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commercialservice||51.00|
|Yibin,|Yibin,|Serviceindustry|51.00||

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Sichuan|Sichuan||||
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|100.00||
|Zhongshan,Guangdong|Zhongshan,Guangdong|Manufacturingindustry||51.00|
|Shanghai|Shanghai|Commerce||51.00|
|Zhongshan,Guangdong|Zhongshan,Guangdong|Manufacturingindustry||25.50|
|Nanjing,Jiangsu|Nanjing,Jiangsu|Wholesaleindustry||100.00|
|Chuzhou,Anhui|Chuzhou,Anhui|e-commerce||100.00|
|Yantai,Shandong|Yantai,Shandong|Environmentaltechnology serviceindustry|51.00||
|Beijing|Beijing|Environmentaltechnology serviceindustry||51.00|
|Weihai,Shandong|Weihai,Shandong|Environmentaltechnology serviceindustry||51.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shanghai|Shanghai|Environmentaltechnology serviceindustry||51.00|
|Binzhou,Shandong|Binzhou,Shandong|Environmentaltechnology serviceindustry||51.00|
|Yantai,Shandong|Yantai,Shandong|Environmentaltechnology serviceindustry||30.60|
|Yantai,Shandong|Yantai,Shandong|Environmentaltechnology serviceindustry||30.60|
|Yantai,Shandong|Yantai,Shandong|Environmentaltechnology serviceindustry||30.60|
|Yantai,Shandong|Yantai,Shandong|Environmentaltechnology serviceindustry||30.60|
|Yantai,Shandong|Yantai,Shandong|Environmentaltechnology serviceindustry||30.60|
|Chengdu,Sichuan|Chengdu,Sichuan|Environmentaltechnology service||51.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|||industry|||
|Qingdao,Shandong|Qingdao,Shandong|Environmentaltechnology serviceindustry||51.00|
|Yantai,Shandong|Yantai,Shandong|Environmentaltechnology serviceindustry||51.00|
|Weihai,Shandong|Weihai,Shandong|Environmentaltechnology serviceindustry||44.37|
|Binzhou,Shandong|Binzhou,Shandong|Environmentaltechnology serviceindustry||35.70|
|Binzhou,Shandong|Binzhou,Shandong|Environmentaltechnology serviceindustry||24.99|
|Yantai,Shandong|Yantai,Shandong|Environmentaltechnology serviceindustry||35.70|
|Yantai,Shandong|Yantai,Shandong|Environmentaltechnology serviceindustry||26.01|
|Yantai,|Yantai,|Environmental||51.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shandong|Shandong|technology serviceindustry|||
|Dandong,Liaoning|Dandong,Liaoning|Environmentaltechnology serviceindustry||50.63|
|Chengdu,Sichuan|Chengdu,Sichuan|Environmentaltechnology serviceindustry||51.00|
|Jiuquan,Gansu|Jiuquan,Gansu|Environmentaltechnology serviceindustry||39.78|
|Suining,Sichuan|Suining,Sichuan|Environmentaltechnology serviceindustry||40.75|
|Weifang,Shandong|Weifang,Shandong|Environmentaltechnology serviceindustry||27.96|
|Dalian,Liaoning|Dalian,Liaoning|Processing of renewableresources|51.00||
|Shanghai|Shanghai|Realestateindustry|100.00||
|Chuzhou,Anhui|Chuzhou,Anhui|Realestateindustry||100.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Yantai,Shandong|Yantai,Shandong|Realestateindustry||89.71|
|Yantai,Shandong|Yantai,Shandong|Realestateindustry||62.80|
|Yantai,Shandong|Yantai,Shandong|Realestateindustry||51.00|
|Jiujiang,Jiangxi|Jiujiang,Jiangxi|Production,manufacturing andprocessing|51.00||
|Nanchang,Jiangxi|Nanchang,Jiangxi|Production,manufacturing andprocessing||51.00|
|Jiujiang,Jiangxi|Jiujiang,Jiangxi|Production,manufacturing andprocessing||51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Semi-conductor|100.00||
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commerce||51.00|
|Hefei,Anhui|Hefei,Anhui|Design of integratedcircuit||51.00|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commercialservice|100.00||

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commercialservice|51.00||
|Foshan,Guangdong|Foshan,Guangdong|Wholesale and retailindustry|51.00||
|Suining,Sichuan|Suining,Sichuan|Development andmanagement of industrialpark|100.00||
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commercialservice||51.00|

(2)Significant Non-wholly-owned Subsidiary
||||
|-|-|-|
|Shareholdingproportionofnon-controllinginterests(%)|Theprofitorlossattributabletothenon-controllinginterests|Declaringdividendsdistributedtonon-controllinginterests|
|49.00|21,583,722.75|-|
|49.00|69,656,420.50|-|

(3)TheMain Financial Information ofSignificant NotWholly-owned Subsidiary
Endingbalance
||||||
|-|-|-|-|-|
|Currentassets|Non-currentassets|Totalassets|Currentliabilities|Non-currentliability|
|1,815,121,230.64|293,862.12|1,815,415,092.76|1,739,347,442.71|-|

KonkaGroupCo.,Ltd. AnnualReport2018
Name Endingbalance
||||||
|-|-|-|-|-|
|917,994,237.75|1,929,339,202.58|2,847,333,440.33|2,005,644,529.55|156,350,000.00|

(Continued)
Beginningbalance
||||||
|-|-|-|-|-|
|Currentassets|Non-currentassets|Totalassets|Currentliabilities|Non-currentliability|
|1,162,693,203.78|129,592.90|1,162,822,796.68|1,134,435,779.93|—|
|-|-|-|-|-|

||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Netprofit|Totalcomprehensiveincome|
|8,838,797,265.88|44,048,413.75|44,048,413.75|
|1,097,227,129.62|143,368,372.61|143,368,372.61|

 (Continued)
||||
|-|-|-|
|Sameperiodoflastyear|||
|Operatingrevenue|Netprofit|Totalcomprehensiveincome|
|5,535,614,456.54|18,722,147.92|17,353,646.69|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Sameperiodoflastyear|||
|-|-|-|

 2.TheTransactionofthe CompanywithItsOwner’s Equity ShareChanged butStillControlling the Subsidiary
(1)Note totheOwner’s Equity ShareChanged in Subsidiary
On 18 December 2018, the Company signed an equity transfer agreement with Alibaba (China) Network Technology Co., Ltd., and the Company will transfer3.3898% equity of
E2info
to at the price of RMB123.33 million to Alibaba (China) Network. Technology Co., Ltd. After completing the above transfer, the Company's shareholding ratio of
E3info
is96.6102%, and it still be controlled by the Company and is still included in thescope ofconsolidation.
(2)TheTransaction’sInfluence ontheEquity ofNon-controlling Interests and the Owner's EquityAttributableto theCompany as theParent Item E2info
Disposalconsideration
-—cash
123,333,333.34—fairvalueofnon-cashassets
- Totaldisposalconsideration
123,333,333.34 Less:Shareofnetassetsaccountedbypercentageofstockrightsdisposed
2,859,446.58 Difference
120,473,886.76 Ofwhich:adjustmentofcapitalreserves
120,473,886.76 Adjustmentofsurplusreserve
- Adjustmentofretainedearnings
-
KonkaGroupCo.,Ltd. AnnualReport2018
3.Equity inJointVentures orAssociated Enterprises
(1)Significant JointVentures orAssociated Enterprises
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Dongguan|Dongguan|Manufacturing industry incomputer,communicationandotherelectronicequipment|21.95||
|Shenzhen|Anhui|E-commerce|42.61||
|Wuhan|Wuhan|Environmental protection andenvironmentmanagement|20.02||
|Shenzhen|Shenzhen|Manufacturing industry incomputer,communicationandotherelectronicequipment|20.00||
|Kunshan|Kunshan|Manufacturing industry incomputer,communicationandotherelectronicequipment|49.00||

(2)Main Financial Information ofSignificantAssociated Enterprise
Endingbalance/ReportingPeriod
|||||
|-|-|-|-|
|ChutianDragonCo.,Ltd.|KaikaiShijie|WuhanTianyuanEnvironmentalProtectionCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|

KonkaGroupCo.,Ltd. AnnualReport2018
Endingbalance/ReportingPeriod
|||||
|-|-|-|-|
|ChutianDragonCo.,Ltd.|KaikaiShijie|WuhanTianyuanEnvironmentalProtectionCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|
|1,222,095,636.91|686,309,035.24|230,469,218.29|698,493,882.82|
|278,261,091.56|3,549,521.27|365,139,896.53|95,652,906.71|
|1,500,356,728.47|689,858,556.51|595,609,114.82|794,146,789.53|
|515,045,146.59|606,863,177.36|83,949,518.05|229,286,124.16|
|16,794,877.63|-|52,271,637.67|1,656,838.09|
|531,840,024.22|606,863,177.36|136,221,155.72|230,942,962.25|
|5,361,673.58|-|1,300,578.22|-|
|963,155,030.67|82,995,379.15|458,087,380.88|563,203,827.28|
|211,383,634.58|35,364,497.05|91,708,111.68|112,640,765.46|

KonkaGroupCo.,Ltd. AnnualReport2018
Endingbalance/ReportingPeriod
|||||
|-|-|-|-|
|ChutianDragonCo.,Ltd.|KaikaiShijie|WuhanTianyuanEnvironmentalProtectionCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|
|413,461,970.35|-|160,562,143.79|109,570,069.72|
|-|-|-|-|
|-|401,320,567.52|-|-|
|624,845,604.93|436,685,064.57|252,270,255.47|222,210,835.18|
|-|-|-|-|
|1,024,123,239.82|1,077,935,788.28|302,542,158.18|788,986,575.09|
|129,755.99|8,481,874.17|1,702,872.19|-6,879,619.57|
|13,562,988.17|9,477,685.35|11,312,091.14|12,318,087.85|
|59,788,036.94|28,069,833.35|64,051,137.74|59,658,513.13|

KonkaGroupCo.,Ltd. AnnualReport2018
Endingbalance/ReportingPeriod
|||||
|-|-|-|-|
|ChutianDragonCo.,Ltd.|KaikaiShijie|WuhanTianyuanEnvironmentalProtectionCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|
|-|-|-|-|
|-|-|-|-|
|59,788,036.94|28,069,833.35|64,051,137.74|59,658,513.13|
|-|-|-|-|

(Continued)
Beginningbalance/Thesameperiodoflastyear
|||||
|-|-|-|-|
|ChutianDragonCo.,Ltd.|KaikaiShijie|WuhanTianyuanEnvironmentalProtectionCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|
|1,275,973,644.95|-|-|529,254,428.27|
|265,717,459.13|-|-|81,833,013.73|
|1,541,691,104.08|-|-|611,087,442.00|
|610,280,220.79|-|-|102,411,669.34|

KonkaGroupCo.,Ltd. AnnualReport2018
Beginningbalance/Thesameperiodoflastyear
|||||
|-|-|-|-|
|ChutianDragonCo.,Ltd.|KaikaiShijie|WuhanTianyuanEnvironmentalProtectionCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|
|14,700,720.45|-|-|5,130,458.50|
|624,980,941.24|-|-|107,542,127.84|
|9,178,745.28|-|-|-|
|907,531,417.56|-|-|503,545,314.16|
|203,752,601.15|-|-|100,709,062.83|
|413,461,970.35|-|-|109,570,069.72|
|-|-|-|-|
|-|-|-|-|

KonkaGroupCo.,Ltd. AnnualReport2018
Beginningbalance/Thesameperiodoflastyear
|||||
|-|-|-|-|
|ChutianDragonCo.,Ltd.|KaikaiShijie|WuhanTianyuanEnvironmentalProtectionCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|
|617,214,571.50|-|-|210,279,132.55|
|-|-|-|-|
|927,468,144.67|-|-|782,641,588.11|
|8,182,245.66|-|-|23,563,857.52|
|12,858,203.25|-|-|6,679,871.51|
|91,253,269.69|-|-|39,929,305.04|
||-|-|-|
||-|-|-|
|91,253,269.69|-|-|39,929,305.04|

KonkaGroupCo.,Ltd. AnnualReport2018
Beginningbalance/Thesameperiodoflastyear
|||||
|-|-|-|-|
|ChutianDragonCo.,Ltd.|KaikaiShijie|WuhanTianyuanEnvironmentalProtectionCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|
||-|-||
|-|-|-|-|

(4)Summary Financial Information ofInsignificant JointVentures orAssociated Enterprises
||
|-|
|Endingbalance/ReportingPeriod|
|1,060,533,163.28|
|-25,764,761.70|
|740,697.08|
|-25,024,064.62|

X.TheRiskRelated to FinancialInstruments
The Company's main financial instruments include equity investment, credit investment, borrowings, accounts receivable, accounts payable, etc. Details of the various financial instruments are shown in the relevant notes to Annotation VI. Risks related to these financial instruments, and risk management policies the Company has adopted to reduce these risks are described as follows. The Company management manages and monitorstherisk exposurein order to ensure theabove risks to becontrolled in a limited scope.
KonkaGroupCo.,Ltd. AnnualReport2018
The Company use sensitivity analysis technology to analyze the reasonable of risk variables, influence of probable changes to the current profit or loss andStockholders’ equity. Because rarely any risk variables change in isolation, and the correlation between variables for the eventual impact of the change of a risk variables will have a significant effect, thus, the aforesaid content was processing under the assumption of the change ofeach variablewas conducted independently.
(I)Risk ManagementObjectives andPolicies
The goals of Company engaged in the risk management is to achieve the proper balance between the risks and benefits, reduced the negative impact to the Company operating performance risk to a minimum, maximized the profits of shareholders and other equity investors. Based on the risk management goal, the basic strategy of the Company's risk management is determine and analyze the various risks faced by the Company, set up the bottom line of risk and conducted appropriate risk management, and timely supervised various risks in a reliable way and controlled therisk within therange oflimit.
1.Market Risk
(1)Foreign Exchange Risk
Foreign exchange risk refers to the risks that may lead to losses due to fluctuation in exchange rate. The foreign exchange risk borne by the Company is related to USD. Except the procurement and sales by US dollars for several subsidiaries of the Company, the other main businesses of the Company were settled by RMB.As of 31 December 2018, except for the assets or liabilities mentioned in the table below, the assets and liabilities of the Company are mainly the balance of RMB. The foreign exchange risks produced by the assets and liabilities balance may affect thebusiness performance of theCompany.
||
|-|
|Period-end|
|135,723,407.43|
|130,507,627.96|
|13,848,369.43|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Period-end|
|54,781.10|
|21,644,634.75|
|208,330,389.67|
|1,302,303.49|

 The Company timely paid attention to the influence of change of the exchange rate to the Company's foreign exchange risk, which required the Group and others which conducted purchase and sale with settlement by foreign currency to purchase foreign currency long-term forward contract to lock thecost ofpurchase onforward date to reduce therisk exposureofforeign exchange.
Foreign exchange risk sensitivity analysis:
The foreign exchange risk sensitivity analysis assumes that all overseas business net investment hedging and cash flow hedging are highly effective. On the basis of the above assumptions, the pre-tax effects of reasonable changes in exchange rates on current profits and losses and shareholders' equity are as follows, with other variables unchanged:
||
|-|
|Changeininterestrate|
|Up1.00%toRMB|
|Down1.00%toRMB|

 (2)Interest Rate Risk-Cash Flow Change Risk
Cash flow change risk caused by financial instruments due to interest rate change is related to bank loans. By establishing good relations with banks and reasonable planning of credit line, credit varieties and credit period, it is to guarantee sufficient band line of credit and satisfy all financial demands. Moreover,it isto reduce risks ofinterest rate uncertainty byshortening single loan term and establishing repayment terms.
KonkaGroupCo.,Ltd. AnnualReport2018
The risk of change in cash flow of financial instruments due to the change of interest rate of the Company is mainly related to the borrowing of banks.As of31December 2018,thelong-term and short-term borrowings had a totalbalance of RMB14,815,132,931.63.
Interest rate risk sensitivity analysis:
TheSensitivity analysis tointerest rate risk was based onthefollow assumption:
Market interest rates change mayaffect theinterest income orexpenseofvariable rate financial instruments;
●
•For fixed-ratefinancial instruments measured at fair value, changes inmarket interest rates onlyaffect theirinterest incomeor expenses;• For derivative financial instruments designated as hedging instruments, changes in market interest rates affect their fair value, and all interest rate hedges are expected tobe highly effective;
• Calculate the fair value changes of derivative financial instruments and other financial assets and liabilities using the discounted cash flow method at themarket interest rate onthebalance sheet date.
On the basis of the above assumptions, the pre-tax effects of reasonable changes in interest rates on current profits and losses and shareholders' equity are as follows, with othervariables unchanged:
|||||
|-|-|-|-|
|Changeininterestrate|ReportingPeriod||Sameperiodoflastyear|
||Influenceonprofits|Influenceonshareholders’equity|Influenceonprofits|
|Up1%|-148,151,329.32|-111,113,496.99|-70,944,720.37|
|Down1%|148,151,329.32|111,113,496.99|70,944,720.37|

KonkaGroupCo.,Ltd. AnnualReport2018
2.CreditRisk
On 30 December 2018, 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: carrying amount recognized in consolidated balance sheet. For financial instruments measured at fair value, the carrying value reflect its risk exposure, but not the biggest one, and the biggest risk exposure will change along with the change of future fairvalue.
In order the reduce the credit risk, the Company establish a group response for recognizing line of credit, conducting credit approval and other monitor procedures to ensure that the necessary measures were used to recycle expired claims. In addition, the Company at each balance sheet date, review every single receivables recycling situation, toensure that the money unable to recycle withdrawn provision for bad debt fully.Thus, theCompany management believed that have assume thecredit risk theCompany shouldered had been greatly reduced.
TheCompany's working capital was in bank withhigher credit rating, so credit risk ofworking capital was low.
An analysis ofa financial asset that has suffered a singleimpairment, including factors that determine theimpairment ofthefinancial asset. The Company has adopted the necessary policies to ensure that all sales customers have a good credit history. Except for the items listed in the tablebelow,thecompany has noother majorcredit concentration risks.
||
|-|
|Endingbalancee|
|300,027,889.84|
|200,000,000.00|
|120,000,000.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|130,000,000.00|
|90,000,000.00|
|50,000,000.00|
|50,000,000.00|
|24,421,550.36|
|152,402,680.00|
|18,115,952.51|
|13,396,856.82|

 3.Liquidity Risk
When managing liquidity risk, the Company maintained themanagement’s believe that supervising the sufficient cash and cash equivalents to meet the operating demand of the Company and reduce the influence of the fluctuation of cash flow. The management of the Company monitored theuseofbank’s loans and guaranteed theobservance oftheborrowing agreements.
The Company took thebank’s loans as the main financing channel. The retained amount of loans of the Company by the end of 30 December 2018was RMB8,240,271,900.
Thematurity ofthe financial liabilities held bytheCompany according to theundiscounted remaining contractual obligations is as follows:
||
|-|
|Within1year|
|4,792,910,963.36|
|295,170,628.74|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Within1year|
|14,370,132,931.63|
|4,039,580,367.14|
|27,230,631.41|

 (II)Offsetbetween FinancialAssets andFinancialLiabilities
At theend of theyear,thestatus ofconfirmed financial assets under an enforceabletotal offset agreement or similar agreement is as follows: Period-end
|||
|-|-|
|Totalconfirmedfinancialassets(RMB’0,000)|Amountoffsetofconfirmedfinancialliabilities(RMB’0,000)|
|Fix time deposit or financial products ofUSD822,9751millionandRMBRMB820million.|Commercial financing of USD89.0451 andRMB5460.8959million|
|FixtimedepositofRMB124,6.0687million|Bank acceptance bill or L/C of RMB1200.87million|

At theend of theyear,thestatus ofconfirmed financial liabilities under anenforceable totaloffset agreement orsimilaragreement is as follows: Period-end
|||
|-|-|
|Totalconfirmedfinancialliabilities(RMB’0,000)|Amountoffsetofconfirmedfinancialliabilities(RMB’0,000)|
|Commercial financing of USD89,045,100 andRMB5,460,895,900|Fix time deposit or financial products ofUSD822,975,100andRMB820million|
|BankacceptancebillorL/CofRMB1200.87million|FixtimedepositofRMB124,6.0687million|

KonkaGroupCo.,Ltd. AnnualReport2018
X.TheDisclosureofFairValue
1.EndingFairValueofAssets andLiabilities atFairValue
Endingfairvalue
||||
|-|-|-|
|Fairvaluemeasurementitemsatlevel1|Fairvaluemeasurementitemsatlevel2|Fairvaluemeasurementitemsatlevel3|
|5,464,984.92|-|-|
|-|-|-|
|5,464,984.92|-|-|
|-|-|-|
|-|-|-|
|-|-|-|
|-|-|-|
|5,464,984.92|||
|2,459,603.25|-|-|
|2,459,603.25|-|-|
|2,459,603.25|||

KonkaGroupCo.,Ltd. AnnualReport2018
Endingfairvalue
||||
|-|-|-|
|Fairvaluemeasurementitemsatlevel1|Fairvaluemeasurementitemsatlevel2|Fairvaluemeasurementitemsatlevel3|
|-|-|-|
|-|-|-|

2.Market Price Recognition BasisforConsistentand InconsistentFairValueMeasurementItems at Level 1
As of the end of Reporting Period, the Company in line with the difference of DF forward foreign exchange purchase cost ( DF base price on balance sheet date) on assets balance sheet and agreement DF forward foreign exchange purchase cost (DF exchange rate agreed) recognized as losses orprofits.
XI. Related Party and Related-partyTransactions
1.Information Related totheCompany as theParentofthe Company
|||||
|-|-|-|-|
|Registrationplace|Natureofbusiness|Registeredcapital|ProportionofshareheldbytheCompanyastheparentagainsttheCompany(%)|
|Shenzhen|Tourism,realestate,electronicsindustry|RMB12billion|29.999997%|

Note: thefinal controller of theCompanyis State-ownedAssetsSupervision andAdministration Commission
KonkaGroupCo.,Ltd. AnnualReport2018
2.Subsidiaries ofthe Company
Refer to NoteVIII-1. Equity in Subsidiaries
3.Information ontheAssociated Enterprises of theCompany
Refer to NoteVIII-3. Equity inAssociated Enterprises for details of significant associated enterprises of the Company. Information on other joint ventures or associated enterprises occurring connected transactions with the Company in Reporting Period, or forming balance due to connected transactionsmade in previous period:
Name RelationshipwiththeCompany
BeijingKonkaTechnologyCo.,Ltd. Associatedenterprise
KunshanKonkaElectronicCo.,Ltd. Associatedenterprise
AnhuiKaikaiShijieE-commerceCo.,Ltd. Associatedenterprise
ShenzhenYaodeTechnology Co.,Ltd. Associatedenterprise
NanjingSmartLightInformationTechnologyResearchInstituteCo.,Ltd. Associatedenterprise
ShenzhenZhongbingKonkaTechnologyCo.,Ltd. Associatedenterprise
Shenzhen RF-LINKTechnology Co., Ltd. Associatedenterprise
ChengduOneBeltCommunicationEquipmentCo.,Ltd. Associatedenterprise
OrientalHuijia(Zhuhai)AssetManagementCo.,Ltd. Associatedenterprise
ZhuhaiJinsuPlasticCo.,Ltd. Associatedenterprise
ShenzhenKonkaIntelligentElectricalApparatusCo.,Ltd. Associatedenterprise
ShenzhenKonkaInformationNetworkCo.,Ltd. Associatedenterprise
ShenzhenKonkaPrecisionMouldManufactoryCo.,Ltd. Associatedenterprise
BinzhouBeihaiWeiqiaoSolidWasteDisposalCo.,Ltd. Associatedenterprise
NanjingSmartLightInformationTechnologyResearchInstituteCo.,Ltd. Associatedenterprise
KonkaGroupCo.,Ltd. AnnualReport2018
Name RelationshipwiththeCompany
HelongjiangLongkangZhijiaTechnologyCo.,Ltd. Associatedenterprise
AnhuiKonkaGreenLightingTechnologyCo.,Ltd. Associatedenterprise
FeidiTechnology(Shenzhen)Co.,Ltd. Associatedenterprise
ChongqingQingjia Associatedenterprise
KonkaVentures Associatedenterprise
AnhuiKonkaGreenLightingTechnologyCo.,Ltd. Associatedenterprise
4.Information onOtherRelated Parties
Name RelationshipwiththeCompany
GuoguangEasternNetwork(Beijing)Co.,Ltd. Shareholderoftheassociatedenterprise
GuanganOuqishiElectronicTechnologyCo.,Ltd. Majority-ownedcompanycontrolledbyminorityshareholder
GuizhouJiaguidaTechnologyCo.,Ltd. Majority-ownedcompanycontrolledbyminorityshareholder
GuoguangRuilian(Shenzhen)InternetTechnologyCo.,Ltd. Associatedenterpriseofsubsidiary
UNIFORTUNE（HK） COMPANYLIMITED Minorityshareholderofsubsidiary
AUJETINDUSTRYLIMITED Minorityshareholderofsubsidiary
ShenzhenTradeLinkSupplyChainManagementCo.,Ltd. Minorityshareholderofsubsidiary
ChuzhouHanshangElectricApplianceCo.,Ltd. Minorityshareholderofsubsidiary
ShenzhenHenglongtongTechnologyCo.,Ltd. Minorityshareholderofsubsidiary
JiangxiMeijiIndustryCo.,Ltd. Minorityshareholderofsubsidiary
ShenzhenShangyongtongInvestmentDevelopmentCo.,Ltd. Minorityshareholderofsubsidiary
ChangrongMediaCo.,Ltd. Finalcontrollerofminorityshareholderofsubsidiary
ShenzhenZhonglianDatongSupplyChainManagementandConsultingCo.,Ltd Controlledbythefinalcontrollerofminorityshareholderofsubsidiary 331
KonkaGroupCo.,Ltd. AnnualReport2018
5.ListofRelated-partyTransactions
(1)Information onAcquisition ofGoods and Reception ofLabor Service
①Informationonacquisition of goods and reception oflabor service
|||
|-|-|
|Content|ReportingPeriod|
|Purchaseofmaterials|240,287,126.86|
|Purchaseofmaterialsandservice|23,908,088.67|
|Commoditypurchase|307,872,053.25|
|Commoditypurchase|2,072,830,346.78|
|Purchaseofmaterialsandcommodity|1,264,029,751.78|
|Purchaseofmobilephones|399,857,353.52|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|Content|ReportingPeriod|
|Purchaseofmaterials|126,942,856.71|
|Commoditypurchase|34,645,938.39|
|Commoditypurchase|19,313,938.76|
|Purchaseofmaterials|4,604,195.82|
|Advertisingagency|3,041,943.35|
|Commoditypurchase|1,812,643.12|
|Commoditypurchase|1,284,602.58|
|Consultancy|1,160,469.47|
|Purchaseofmaterials|930,320.20|
|Purchaseof|228,709.45|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|Content|ReportingPeriod|
|materials||
|Purchaseofmaterials|180,683.76|
|Purchaseofmaterials|151,150.76|
|Advertisingagency|—|
|Commoditypurchase|240,225.43|

②Informationof sales ofgoods and provision oflaborservice
|||
|-|-|
|Content|ReportingPeriod|
|Salesofmaterials|3,595,163,483.38|
|Salesofmaterials|3,543,163,233.52|
|Salesofmaterials|895,011,807.00|
|Commoditysales|534,811,373.44|
|Salesofmaterials|200,316,791.46|
|Salesofmaterialsandprovidingservices|124,076,873.37|
|Salesofmaterials|57,213,274.71|
|Salesofmaterials|52,989,502.78|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|Content|ReportingPeriod|
|Sales of commodity andprovidingservices|38,726,630.10|
|Providinglaborservice|18,596,740.44|
|Commoditysales|15,030,200.64|
|Salesofmaterials|12,952,947.60|
|Advertisingservice|3,487,294.25|
|Providingservice|1,456,310.70|
|Salesofmaterialsandprovidingservices|999,326.31|
|Rentalservice|977,117.64|
|Advertisingservice|793,092.82|
|Rentalservice|593,665.05|
|Commoditysales|564,655.17|
|Rentalservice|191,099.97|
|Providingservice|—|
|Providingservice|—|
|Commoditysales|—|

 (2)Information onRelated-party Lease
|||
|-|-|
|Categoryofleasedassets|TheleasefeeconfirmedintheReportingPeriod|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|Commercial residentialbuildingandofficebuilding|1,541,573.44|

 (3)Information onRelated-party Guarantee
①
TheCompanywasguarantor
|||||
|-|-|-|-|
|Guaranteeamount(RMB’0,000)|Currency|Startdate|Enddate|
|1,410.00|CNY|7November2018|7November2019|
|2,000.00|CNY|9May2018|9May2019|
|2,150.00|CNY|19June2018|12June2019|
|5,000.00|CNY|20September2018|14August2019|
|5,35.46|CNY|5February2018|4February2019|
|13,580.00|CNY|27June2018|26June2019|
|10,000.00|CNY|21September2018|29August2019|
|3,000.00|USD|31May2018|30May2019|
|350.00|USD|25July2018|25March2019|
|1,500.00|USD|7August2018|6August2019|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|Guaranteeamount(RMB’0,000)|Currency|Startdate|Enddate|
|20,000.00|CNY|2May2018|9April2019|
|8,000.00|CNY|1June2018|1June2019|
|10,000.00|CNY|6December2018|6December2019|
|5,000.00|CNY|28May2018|24May2025|
|5,800.00|CNY|21November2018|21November2020|
|950.00|CNY|13November2018|13November2020|
|3,135.00|CNY|10October2018|10October2019|
|10,000.00|CNY|4December2018|31December2019|
|15,000.00|CNY|29December2016|28December2026|
|10,000.00|CNY|16December2016|16December2018|
|10,000.00|CNY|16December2016|16December2018|
|10,000.00|CNY|16December2016|16December2018|

KonkaGroupCo.,Ltd. AnnualReport2018
Refer to Note XII-2.-(2) Contingent Liabilities Generated from Providing Debt Guarantees for Other Entities and Financial Influence thereof for details ofexternal guarantees oftheCompany.
②TheCompany was secured party
|||||
|-|-|-|-|
|Guaranteeamount(RMB’0,000)|Currency|Startdate|Enddate|
|4,400.00|CNY|2May2018|9April2019|
|1,760.00|CNY|1June2018|1June2019|
|2,200.00|CNY|6December2018|6December2019|
|2,450.00|CNY|28May2018|24May2025|
|2,610.00|CNY|21November2018|21November2020|
|465.50|CNY|13November2018|13November2020|
|816.35|CNY|10October2018|10October2019|
|363.03|CNY|10October2018|10October2019|
|333.56|CNY|10October2018|10October2019|
|23.20|CNY|10October2018|10October2019|
|4,900.00|CNY|4December2018|31December2019|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|2,000.00|CNY|5April2017|---|
|75.59|CNY|16April2018|---|
|24,500.00|CNY|7August2018|6August2023|
|245.00|USD|18May2018|17May2019|
|147.00|USD|6August2018|5August2019|
|98.00|USD|14August2018|13August2019|
|147.00|USD|17August2018|16August2019|
|147.00|USD|27August2018|26August2019|
|98.00|USD|14September2018|13September2019|
|245.00|USD|26September2018|25September2019|
|98.00|USD|28September2018|27September2019|
|245.00|USD|9October2018|8October2019|
|686.00|USD|11October2018|10October2019|
|392.00|USD|16October2018|15October2019|
|245.00|USD|23October2018|22October2019|
|49.00|USD|26October2018|25October2019|
|171.50|USD|1November2018|31October2019|
|34.30|USD|28December2018|27December2019|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|1,620.00|USD|9May2018|---|
|9,800.00|CNY|18April2018|18March2019|
|1,470.00|USD|26September2018|29October2019|
|2,940.00|USD|28May2018|29October2019|
|2,000.00|USD|21August2017|31December2018|
|3,500.00|USD|11November2016|17October2018|
|1,000.00|USD|6March2016|31December2018|
|1,000.00|USD|24April2017|31December2018|
|1,000.00|USD|11May2017|31December2018|
|500.00|USD|21June2017|20June2018|
|500.00|USD|3July2017|2July2018|
|500.00|USD|24July2017|24July2018|
|500.00|USD|9August2017|8August2018|
|2,000.00|USD|6September2017|5September2018|

 Note: The reason for theCompany’s acting as the secured party was that the Company was provided with counter guarantee regarding entrusted loans from theCompany to non-wholly-owned subsidiaries byminority shareholders ofaforesaid non-wholly-owned subsidiaries.
(6)Information onInter-bank Lending ofCapital ofRelated Parties
KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|Amount|Startdate|Enddate|Duration|
|10,000.00|25 June 2018|12 April 2023|14June2018to6June2021|
|2,000.00|25June2018|12April2023|19July2018to14June2021|
|140,000.00|25June2018|12April2023|14May2018to13May2019|
|48,000.00|25June2018|12April2023|19July2018to19July2019|
|100,000.00|25June2018|12April2023|19October2018to18October2019|
|50,000.00|22 December 2018|21April2019|22December2018to21April2019|
|27,656.00|26 April 2018|31August2019|26April2018to31August2019|
|50,000.00|17December2018|12December2019|17December2018to12December2019|
|4,395.00|21September|31December|21September2018to|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|Amount|Startdate|Enddate|Duration|
||2018|2018|31December2018|
|6,000.00|17July2018|31December2018|17July2018to31December2018|
|77,600.00|22October2018|21April2019|22October2018to21April2019|
|29,400.00|21December2018|20March2019|21December2018to20March2019|
|54,400.00|22October2018|21April2019|22October2018to21April2019|
|20,500.00|21December2018|20December2019|21December2018to20December2019|
|4,000.00|25October2018|24October2021|25October2018to24October2021|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|Amount|Startdate|Enddate|Duration|
|6,000.00|25October2018|24April2020|25October2018to24April2020|
|2,000.00|16March2017|15March2019|16March2017to15March2019|

Note1: In 2018,theCompany was provided loans byOCTGroup with recognizedinterest expenseofRMB107,474,353.32.
Note 2: In 2018, Chuzhou Hanshang Electric Appliance Co.,Ltd. provided the loan of RMB1,039,500 million for Electrical Appliance Technology with recognized interest expenseof RMB4,284,773.93 recognized byElectricalApplianceTechnology.
Note 3: In 2018, Electronics Technology, theCompany’s subsidiary, provided a loan of RMB776,000,000.00 and a loan of RMB294,000,000.00 for Nanjing Konka Star Technology Industrial Park Management Co., Ltd. with interest income of RMB12,962,222.22 by Electronics Technology.
Note 4: In 2018, Shenzhen Konka Investment Holding Co., Ltd., the subsidiary of the Company, provided a loan of RMB544,000,000.00 and a loan of RMB205,000,000.00 for Nanjing Konka Star Technology Industrial Park Management Co., Ltd. with interest income of RMB9,084,222.23 recognized byKonkaInvestment Holding Co.,Ltd.
Note 5: In 2018, Communication Technology, the subsidiary of the Company, provided a loan of RMB100,000,000.00 for Yibin OCT Sanjiang Real EstateCo., Ltd. with interest income ofRMB1,076,666.66 recognized byCommunicationTechnology.
Note6:Theentrusted loan provided bytheCompany forVary Packing recognized theinvestment incomeof RMB1,389,042.49in 2018. (5)Information onRemuneration for Key Management Personnel
Item Reportingperiod Sameperiodoflastyear
KonkaGroupCo.,Ltd. AnnualReport2018
Remunerationforkeymanagementpersonnel 2,132.92 1,292.40
6.Accounts ReceivableandPayable ofRelated Party
(1)Accounts Receivable
||||
|-|-|-|
|Endingbalance|||
|Carryingamount|Baddebtprovision|Carryingamount|
|498,176,202.82|34,872,334.20|340,827,332.77|
|225,683,544.96|15,797,848.15|—|
|34,560,012.48|2,419,200.87|—|
|20,049,748.74|1,403,482.41|50,237,204.89|
|13,445,059.89|941,154.19|13,685,968.41|
|12,212,400.48|1,606,135.40|12,597,677.70|
|6,096,891.16|426,782.38|—|
|3,696,532.00|258,757.24|—|
|1,500,000.00|105,000.00|—|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Endingbalance|||
|Carryingamount|Baddebtprovision|Carryingamount|
|822,825.15|57,597.76|—|
|430,948.43|30,166.39|889,327.11|
|—|—|2,479.62|
|816,674,166.11|57,918,458.99|418,239,990.50|
|240,100,000.00|—|—|
|—|—|20,000,000.00|
|—|—|657,263.10|
|240,100,000.00|—|20,657,263.10|
|74,788,640.31|1,495,772.81|—|
|20,520,295.97|8,654,793.94|20,335,596.53|
|4,448.00|2,224.00|4,448.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Endingbalance|||
|Carryingamount|Baddebtprovision|Carryingamount|
|—|—|5,600.00|
|95,313,384.28|10,152,790.75|20,345,644.53|
|14,086,876.64|—|—|
|43,476,841.21|—|—|
|57,563,717.85|—|—|
|5,852,304.78|—|—|
|4,673,013.98|—|—|
|4,488,599.93|—|—|
|800,000.00|—|—|
|499,972.16|—|—|
|9,209.28|—|—|
|5,000.00|—|—|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|Endingbalance|||
|Carryingamount|Baddebtprovision|Carryingamount|
|16,328,100.13|—|—|

(2)Accounts Payable
||
|-|
|Endingbalance|
|475,848,121.39|
|209,523,283.33|
|17,153,118.33|
|9,543,100.00|
|1,289,224.82|
|369,488.00|
|128,562.88|
|122,247.47|
|77,602.03|
|55,912.37|
|38,426.68|
|—|
|—|
|—|
|714,149,087.30|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Endingbalance|
|4,290,778.05|
|224,422.12|
|—|
|—|
|—|
|4,515,200.17|
|3,333,333.32|
|—|
|—|
|—|
|—|
|3,333,333.32|
|108,380,202.82|
|5,638,548.27|
|5,100,000.00|
|3,000,000.00|
|2,500,000.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Endingbalance|
|280,218.08|
|100,000.00|
|35,755.00|
|23,695.00|
|20,000.00|
|10,000.00|
|7,000.00|
|—|
|—|
|—|
|—|
|125,095,419.17|
|24,158,666.48|
|24,158,666.48|

 XII. Commitments and Contingency
1.SignificantCommitments
(1)CapitalCommitment
Item Endingbalance Beginningbalance
KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|—|
|1,011,650,352.93|
|—|
|1,011,650,352.93|

(2)OperatingLeaseCommitments
Asofthebalancesheetdate,theirrevocableoperatingleasecommitmentsthattheCompanysignedwereasfollowed:
||
|-|
|Endingbalance|
|21,179,914.81|
|10,038,667.42|
|3,662,167.92|
|3,938,998.40|
|38,819,748.55|

(3)Other Commitments
As of31December 2018,there were noother significant commitments for theCompany to disclose.
KonkaGroupCo.,Ltd. AnnualReport2018
2.Contingency
(1)ContingentLiabilities Generated fromPendingAction andArbitration andFinancialInfluencethereof
① Due to the problems of quality and construction delay in the settlement of intelligent engineering project between the Company and Shenzhen GNG Co., Ltd, theydidn’t agree on the related deductions. On 28 September 2017, Shenzhen GNG Co., Ltd filed a lawsuit toPeople’s Court of Nanshan District, Shenzhen for the payment in project arrears in the Construction Contract of KonkaR&D Building Intelligent Engineering, which required the Company to pay RMB2,770,487.13 for the project arrears and RMB340,761.69 for the interests of the project arrears. Up to theissuancedate ofthis Report,People’s Court ofNanshan District, Shenzhenhasn’t gave judgment.
②Due to the dispute in rent lease contract among theCompany’s subsidiary-Mudanjiang Appliances, Heilongjiang Jinri Optoelectronics Technology Co., Ltd. and Jinyue Group Co., Ltd., the People's Court ofAimin District, Mudanjiang City, Helongjiang Province made the main civil judgment (2016) Hei 1004 Minchu No. 604 on 25 August 2017. The Judgment was as follows: The defendants Heilongjiang Jinri Optoelectronics Technology Co., Ltd. and Jinyue Group Co., Ltd. should jointly pay the plaintiff-Mudanjiang Appliances a total of RMB3,656,910.82 in occupancy fees, rent, andinterest.As of theissuedateof thisreport, ithas notyet been implemented completely.③ According to the civil judgment (2018) GMC No.110 made by the Higher People's Court of Jiangxi Province on September 27, 2018 on the disputes arisen from a loan contract between the minority shareholders of Jiangxi Konka, a subsidiary of the Company, and China Great Wall AMCJiangxi Branch,the100% equity ofNanocrystallineandthe100%equity ofXinfeng Microcrystalineheld byJiangxiKonka were frozen; On September 30, 2018, Jiangxi Konka filed an application for reconsideration, and on October 11, 2018, Jiangxi Konka filed an application for supplementary reconsideration. According to one of the civil judgments (2018) GMC No.110 made by the Higher People's Court of Jiangxi ProvinceonNovember 16,2018,the collateral ofthefirst trial was sealed upordetained.
④ According to the civil judgment (2016) Gan 01 MC No. 628 made by Nanchang Intermediate People's Court on July 25, 2016 on the disputes arisen from the construction contract between Xinfeng Microcrystalline, a subsidiary of Jiangxi Konka, and Jiangxi Longji Construction Engineering Co., Ltd., the defendant Xinfeng Microcrystalline should pay the plaintiff RMB19,741,456.02 for the project and the interest 351
KonkaGroupCo.,Ltd. AnnualReport2018
therefrom within 10 days after the judgment took effect. Interest was calculated according to the similar lending rate for the same period issued by the People's Bank of China based on the principal of RMB 19,741,456.02 from November 24, 2016 to the date when the principal amount was paid off.
Both Xinfeng Microcrystalline and Jiangxi Longji Construction Engineering Co., Ltd. refused to accept the above judgment and filed an appeal. The Higher People's Court of Jiangxi Province made a civil judgment (2018) GMZ No. 519 on November 6, 2018 to maintain the original judgment. On February 21, 2019, Nanchang Intermediate People's Court issued the (2018) Gan 01 Z No. 620 Announcement on the plan of evaluation and auction of the land owned by Xinfeng Microcrystalline, which locates at Fenghuangshan, Anyi County, Jiangxi Province for industrial development. Xinfeng Microcrystalline and the above-ground leaseholders are requested to move out the area within 60 days from the dateof theannouncement posting, and compulsory execution willbe carried out for overstay.
(2)ContingentLiabilities Generated fromProviding DebtGuarantees forOtherEntities andFinancialInfluencethereof
①The Company signed the maximum amount guarantee contract (No. 18czA0012-a-XCYZGBZD2018) with Chuzhou Branch of China Citic Bank on Nov.7, 2018, in which the Company provided the maximum credit guarantee of RMB 58 million to Anhui Konka Tongchuang International Trade Co., Ltd. within three years from the day when the obligation fulfillment period stipulated in the specific business contract expired, and the guarantee mode was the joint liability guaranty. The credit line is mainly used to open and accept the letter of credit of Anhui Tongchuang International Trade Co., Ltd. and obtain the financing credit and other daily businesses from the bank. The guarantee amount has been used RMB14,100,000.00byDec. 31,2018.
②The Company signed the guarantee contract of maximum amount (No. CZZHZGBZ 2018 No.0103) with Chengzhong Branch of Chuzhou Eastern Anhui Rural Commercial Bank on 9 May 2018, in which the Company provided credit guarantee of RMB45,000,000.00 to Anhui Tongchuang from 9 May 2018 to 9 May 2019. The credit line is mainly used to open and accept the letter of credit of Anhui Tongchuang and obtain the financing credit and other daily businesses from the bank. As of 30 June 2018, the guarantee amount has been used RMB 20,000,000.00.
KonkaGroupCo.,Ltd. AnnualReport2018
③The Company signed the maximum amount guarantee contract (No. CZGSBOZGBT20180011) with Chuzhou Branch of China Everbright Bank on June 19, 2018, in which the Company provided the maximum credit guarantee of RMB 30 million to Anhui Konka Tongchuang International Trade Co., Ltd. From June19, 2018 to June 12, 2019, and the guarantee mode was the joint liability guaranty. The credit line is mainly used to open and accept the letter of credit ofAnhui Tongchuang International Trade Co., Ltd. and obtain the financing credit and other daily businesses from thebank.The guarantee amount has been used RMB 21,500,000.00by Dec. 31,2018.
④ The Company signed the maximum amount guarantee contract (No. 00035 ZSYGBZD2018) (361006) with Hefei Branch of China Zheshang Bank on Sep. 20, 2018, in which the Company provided the maximum credit guarantee of RMB 55 million to Anhui Konka Tongchuang International Trade Co., Ltd. within two years from the day when thedebtor’s obligation fulfillment period stipulated in the debt contract signed between Anhui Tongchuang and Hefei Branch of China Zheshang Bank expired, and the guarantee mode was the joint liability guaranty. The credit line is mainly used to open and accept the letter of credit of Anhui Tongchuang International Trade Co., Ltd. and obtain the financing creditand otherdaily businesses from thebank.Theguaranteeamount has been usedRMB50,000,000.00byDec. 31,2018.
⑤The Company signed the credit line agreement (No.1000014 ZZYFEXZD2018)with Bank of China Shenzhen Futian Branch and Shenzhen Konka Telecommunication Technology Co., Ltd. to apply for a credit line of RMB 5,500,000,000.00, and stipulate that the credit line RMB 500,000,000.00 in the comprehensive credit line would be provided to the subsidiary (Telecommunication Technology Company) for use. The credit line type was the acceptance bill, non-financial guarantee and trade financing credit, and the Company assumed joint liability for the repayment. The credit line period shall be valid from the date of the above agreement to February 4, 2019. As of December 31, 2018, theCompany’s guarantee balance for thesubsidiary was RMB5,354,631.23.
⑥ On June 27, 2018, the Company signed Issuing Guarantee/SLC Agreement with Shenzhen Overseas Chinese Town Branch of Agricultural Bank of China to provide the guarantee for Konka Factoring to apply for the financing loan from Agricultural Bank of China (Dubai Branch), and the amount guaranteed is RMB 140,000,000.00 with one-year guarantee period.As of December 31, 2018, Konka Factoring obtained a loan ofRMB135,800,000.00fromAgricultural Bank ofChina(Dubai Branch).
⑦The Company signed Comprehensive Credit Line Contract (No. HXSFZLZZD20180921001) and applied to Shenzhen Branch of Guangdong 353
KonkaGroupCo.,Ltd. AnnualReport2018
Huaxing Bank for comprehensive credit line of RMB 1,000,000,000.00. The guarantee period is from September 21, 2018 to August 29, 2019. The Company has sub-licensed the comprehensive credit line RMB 200,000,000.00 the subsidiary Konka Factoring (Shenzhen), and will assume thejointliabilityfor guarantee.As ofDecember 31,2018,Konka Factoring used RMB100,000,000.00.
⑧The Company signed Issuing Guarantee/SLC Agreement (No.81050120180000032) with Shenzhen Overseas Chinese Town Branch of Agricultural Bank of China and applied for issuing the letter of guarantee of USD 30,000,000.00 on May 31, 2018 for Hong Kong Konka Co., Ltd. to obtain the financing loan from the bank. The guarantee period is from May 31, 2018 to May 30, 2019.As of December 31, 2018, Hong Kong Konka Co.,Ltd. obtained the loanofUSD30,000,000.00from Bank ofChina(Hong Kong) Co., Ltd.
⑨ On July 25, 2018, the Company signed the guarantee contract with Shenzhen Shennan Branch of China Minsheng Bank to provide the joint and several liability guarantee for the debts under the foreign currency loan contract signed by Hong Kong Konka Co., Ltd. and Shenzhen Branch of China Minsheng Bank. The guarantee period is two years from the date of expiration of the debt period, and the amount guaranteed is USD3,500,000.00.
⑩ On July 11, 2018, theCompany applied to Shenzhen Branch of HSBC Bank (China) Co., Ltd. for a letter ofguarantee of USD 15,000,000.00, helping the subsidiary Hong Kong Konka Co., Ltd. to obtain the financing loan from the bank. The guarantee period is from August 7, 2018 to August 6,2019.As ofDecember 31,2018, Hong KongKonka obtained aloan of USD15,000,000from HSBC Limited.
The Company signed the guarantee contract (No.CZYEDBZ006 2018) with Chuzhou Branch of Bank of China, providing the joint and several liability guarantee for the debts under the credit line agreement (No.CZYEDZ006 2018) signed byAnhui Konka and Chuzhou Branch of⑪
Bank of China. The guarantee amount is RMB 200,000,000.00, and the guarantee period is two years from the expiration of the debt settlement period under the credit line agreement. The balance of the guarantee amount provided by the Company toAnhui Konka is RMB 200,000,000.00. AnhuiKonka’another shareholder, Chuzhou State-ownedAssets Operation Co., Ltd. provided the counter-guarantee to the Company for22% of theguaranteeamount.
On June 1, 2018, the Company signed the maximum amount guarantee contract (No.CZZHZGBZD0133 2018) with Chengzhong Branch of⑫
KonkaGroupCo.,Ltd. AnnualReport2018
Chuzhou Wandong Rural Commercial Bank, providing the joint and several liability guarantee for the debts under the comprehensive credit line agreement signed by Anhui Konka and Chengzhong Branch of Chuzhou Wandong Rural Commercial Bank. The guarantee amount is RMB 80,000,000.00, and the guarantee period is two years from the expiration of the debt settlement period under the credit line agreement. The balance of the guarantee amount provided by the Company toAnhui Konka is RMB 80,000,000.00.AnhuiKonka’another shareholder, Chuzhou State-ownedAssets Operation Co., Ltd. provided thecounter-guarantee to theCompanyfor22% oftheguarantee amount.
The Company signed the maximum amount guarantee contract (No.GGBZDDB1800000101834) withMa’anshan Branch of China Minsheng Bank, providing the joint and several liability guarantee for the debts under the comprehensive credit line agreement signed byAnhui⑬
Konka andMa’anshan Branch of China Minsheng Bank. The guarantee amount is RMB 100,000,000.00, and the guarantee period is two years from the expiration of the debt settlement period under the main contract. As of December 31, 2018, the balance of the guarantee amount provided by the Company toAnhui Konka is RMB 100,000,000.00.AnhuiKonka’another shareholder, Chuzhou State-owned Assets Operation Co., Ltd. provided thecounter-guarantee tothe Companyfor22% oftheguaranteeamount.
On May 28, 2018, the Company’s subsidiary Telecommunication Technology signed the guarantee contract (No.(23301)YSHBZ(180525)00001) with Lingang Branch of Yibin Commercial Bank, providing the joint and several liability guarantee for the⑭
debts under the entrusted loan contract jointly signed by its subsidiary Konka Intelligent Terminal, Gloport Group and Lingang Branch of Yibin Commercial Bank. The guarantee amount is RMB 140,000,000.00, and the guarantee period is from May 28, 2018 to May 24, 2025. The guaranteed credit line is mainly used for obtaining the loan from the bank for the production and operation of Konka Intelligent Terminal.As of December 31, 2018, the guarantee amount RMB 50,000,000.00 was used. Konka IntelligentTerminal’another shareholder, Shenzhen Kangwei Investment Partnership (Limited Partnership) provided the counter-guarantee to Telecommunication Technology for49% of the guarantee amount.
On November 21, 2018, the Company signed the guarantee contract (No.1510201811120052BZ-1) with Zhuhai Branch of Xiamen International Bank, providing the joint and several liability guarantee for the debts under the comprehensive credit line contract signed by the⑮
subsidiary Xingye Hongda and Zhuhai Branch of Xiamen International Bank. The guarantee amount is RMB 58,000,000.00, and the guarantee 355
KonkaGroupCo.,Ltd. AnnualReport2018
period is two years from the expiration of the debt settlement period stipulated in the contract. As of December 31, 2018, Xingye Hongda used the guarantee amount RMB 58,000,000.00. XingyeHongda’another shareholder, Hu Zehong provided the counter-guarantee to the Company for49%ofthe guarantee amount.
On October 16, 2018, theCompany’s subsidiary Electronics Technology signed the guarantee contract (No.IFELC18D29PS7Y-U-03) with Far Eastern Leasing, providing the guarantee for the fulfillment of rent payment and other obligations under the after-sales lease back contract⑯
signed by the subsidiary Xingye Hongda and Far Eastern Leasing. The guarantee amount is RMB 10,000,000.00, and the guarantee period is from November 13, 2018 to November 13, 2020. As of December 31, 2018, the guarantee amount RMB 9,500,000.00 was used. XingyeHongda’another shareholder,Hu Zehongprovided thecounter-guarantee tothe Companyfor49%of theguarantee amount.
On August 29, 2018, the Company signed Issuing Guarantee/SLC Agreement with Shenzhen Branch of Bank of China for issuing the letter of guarantee to CTCE Group and providing the pledge guarantee for the capital contribution obligation of Econ Technology in the central urban⑰
upgrading project of Weifang Binhai Economic and Technological Development Zone. The guarantee amount is RMB 31,350,000.00. Other shareholders of Econ Technology including Yantai Baijiangyuan Enterprise Management Center (Limited Partnership), Yantai Fengqingtai Investment Center (Limited Partnership), Yantai Qingrunyuan Enterprise Management Center (Limited Partnership) and Yantai Qingjiangchuan Enterprise Management Center (Limited Partnership) respectively provided the counter-guarantee to the Company for26.04%,11.58%,10.64% and0.74%of themaximumdebt amount.
On December 4, 2018, the Company signed the maximum amount guarantee contract (No. XYGXGBZD20180208) with Nanchang Branch ofChina’s Industrial Bank, providing the credit guarantee for the maximum amount RMB 100,000,000.00 of Jiangxi Konka New Material⑱
Technology Co., Ltd. The guarantee period is two years from the expiration of the debt settlement period stipulated in the main contract, and the guarantee mode is the joint liability guaranty. As of December 31, 2018, the guarantee amount RMB 100,000,000.00 was used. Another shareholder of Jiangxi Konka New Material Technology Co., Ltd., Zhu Xinming provided the counter-guarantee to the Company for49% of the guaranteeamount.
On December 27, 2016, theCompany’s subsidiary Econ Group signed the guarantee contract (No. YKB2016-167) with Yantai Branch of⑲
KonkaGroupCo.,Ltd. AnnualReport2018
China Everbright Bank, providing the guarantee for Rushan Yike. The guarantee amount is RMB 29,000.00, and the guarantee period is from December 29,2016toDecember 28,2026.As ofDecember 31,2018,theguarantee amount RMB15,000.00was used.
On December 19, 2016, thecompany’s subsidiary Jiangxi Konco New Material Technology Co., Ltd. (previously known as Jiujiang Golden Phoenix Decorative Material Co., Ltd.) signed the entrusted loan guarantee contract (No.NNYWBZDB10611201612190004 2016) with⑳
Nanchang Rural Commercial Bank to provide the guarantee for RMB 10,000.00 for Jiangxi XinxinJian’an Engineering Co., Ltd., and the guaranteeperiod istwo years from theexpiration ofthedebt settlement period stipulated in thecontract.
2○1 On December 19, 2016, thecompany’s subsidiary Jiangxi Konco New Material Technology Co., Ltd. (previously known as Jiujiang Golden Phoenix Decorative Material Co., Ltd.) signed the entrusted loan guarantee contract (No.NNYWBZDB10611201612190003 2016) with Nanchang Rural Commercial Bank to provide the guarantee for RMB10,000.00 for Jiangxi Zhongyi Decorative Material Co., Ltd., and the guaranteeperiod istwo years from theexpiration ofthedebt settlement period stipulated in thecontract.
2○2 On December 16, 2016, thecompany’s subsidiary Jiangxi Konco New Material Technology Co., Ltd. (previously known as Jiujiang Golden Phoenix Decorative Material Co., Ltd.) signed the entrusted loan guarantee contract (No.NNYWBZDB10611201612190002 2016) with Nanchang Rural Commercial Bank to provide the guarantee for RMB 10,000.00 for Jiangxi Shanshi Science and Technology Co., Ltd., and the guaranteeperiod istwo years from theexpiration ofthedebt settlement period stipulated in thecontract.
XIII. EventsafterBalanceSheetDate
1.SignificantNon-adjusted Events
|||
|-|-|
|Content|Influencenumbertothefinancialpositionandoperatingresults|
|CompletetheprivateplacementofcorporatebondsofRMB2.5billionon15|IncreaseinbondspayableofRMB2.5billion|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|Content|Influencenumbertothefinancialpositionandoperatingresults|
|January2019||
|Transfer17%sharesofNanjingKangxingTechnologyIndustrialParkOperationandManagementCo.,Ltd.heldbyElectronicsTechnologybylisting|InvestmentincomeconfirmedofRMB0.197billion|
|Aftertheabove-mentionedtransferofshares,theCompanywillprovidefinancialaidnotmorethanRMB1.088billionatannualinterestrateof8%withtermnotlongerthan3yearsforNanjingKangxingTechnologyIndustrialParkOperationandManagementCo.,Ltd.withothershareholdersthroughtheCompany’swholly-ownedsubsidiaryKonkaInvestmentbyshareholdingratio|IncreaseintheCompany’sexternalcreditsat34%|

2.ProfitDistribution
The 7th Meeting of the 9th Board of Directors was held by the Company on 28 March 2019, on which the Profit Distribution Plan in 2018 that distributed RMB240,794,540.80 of cash dividend was approved. The profit distribution plan should be submitted to the 2018 Annual General Meeting for review and approval.
3.InfluenceofImplementation of NewAccounting Standardssince1January2019
The Ministry of Finance issued the following standards on 31 March 2017:Accounting Standards for Business Enterprises No.22-Recognization and Measurement of Financial Instruments (revised in 2017) (CK[2017] No.7), Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets (revised in 2017) (CK[2017] No.8), Accounting Standards for Business Enterprises No.24-Hedge Accounting (revised in
KonkaGroupCo.,Ltd. AnnualReport2018
2017) (CK[2017] No.9), and issued theAccounting Standards for Business Enterprises No.37-Presentation of Financial Instruments (revised in 2017) (CK[2017] No. 14) on 2 May 2017 (the above standards were referred to as “new financial instrument standards” collectively hereafter) and required all domestically listed companies to implement since 1 January 2019.Approved bythe 7th Meeting of the 9th Board of Directors, the Company will carry out the aforesaid new financial instrument standards since 1 January 2019 and made changes in relevant accounting policies pursuant to above newfinancial instrument standards.
Accounting policy changes mainly involvethefollowing:
Under newFinancial Instruments Standards, all recognized financial assets are subsequently measured at amortized cost orfair value. On the date of implementation of new financial instrument standards, the business model of managing financial assets is evaluated on the basis of the existing facts and circumstances of the Company on the same date, the characteristics of contractual cash flow on financial assets are evaluated on the basis of facts and circumstances at the time of initial recognition of the financial assets, and financial assets are classified into three categories: measured at amortized cost, measured at fair value with changes included in other comprehensive income, measured at fair value with changes included in profits and losses. For equity instrument investments measured at fair value with changes included in other comprehensive income, when the recognition of the financial asset is terminated, the accumulated gains or losses previously included in other comprehensive income will be transferred from other comprehensive income to retained income, and not included in the current profits and losses.
Under new financial instrument standards, the Company makes provisions for impairment and recognition of credit impairment losses, based on the expected credit loss, for financial assets measured at amortized cost, investment in debt instruments measured at fair value with changes included in othercomprehensiveincome, lease receivables, contractual assets andfinancial guarantee contracts.
XVI.OtherSignificantEvents
KonkaGroupCo.,Ltd. AnnualReport2018
of Ningbo Bank and thecompany’s holding subsidiary E-DISPLAY. The guarantee amount is RMB 20 million, and the guarantee period is two years from theexpiration ofthedebt performance period agreed in thecredit contract.
2. On January 14, 2019, the Company respectively signed Maximum Amount Guarantee Contract with Chuzhou Branch ofChina’s Industrial Bank and Shenzhen Branch of China Minsheng Bank.According to the contract, the Company respectively provides the joint liability guarantee for thecreditor’s rights arising under the credit contract signed by Chuzhou Branch ofChina’s Industrial Bank and Shenzhen Branch of China Minsheng Bank and thecompany’s wholly-owned subsidiaryAnhui Tongchuang. The guarantee amounts are respectively RMB 100 million and RMB30million, and theguarantee period istwo years from theexpirationof thedebt performance period agreed in thecredit contract. 3. On January 17, 2019, the Company signed Maximum Amount Guarantee Contract with Nanchang Honggutan Branch of Bank of Beijing. According to the contract, the Company provides the joint liability guarantee for thecreditor’s rights arising under the comprehensive credit line contract signed by Nanchang Honggutan Branch of Bank of Beijing and thecompany’s holding subsidiary Jiangxi Konka. The guarantee amount is RMB100million, and theguarantee period is two years from theexpiration ofthedebt performance period agreed inthe credit contract. 4. On January 24, 2019, the Company signed Maximum Amount Guarantee Contract with Huangshan Road Branch of Hefei Science& Technology Commercial Bank. According to the contract, the Company provides the joint liability guarantee for thecreditor’s rights arising under the comprehensive credit line contract signed byAnhui Konka and Huangshan Road Branch of Hefei Science& Technology Commercial Bank. The guarantee amount is RMB 50 million, and the guarantee period is two years from the expiration of the debt performance period agreed in themain contract.
5. On February 21, 2019, the Company signed Guarantee Contract withMa’anshan Branch of China Minsheng Bank.According to the contract, the Company provides the joint liability guarantee for thecreditor’s rights arising under Merger Loan Contract signed by Anhui Electric Appliances andMa’anshan Branch of China Minsheng Bank. The guarantee amount is RMB 130 million, and the guarantee period is two years from theexpiration ofthedebt performance period agreed inthe maincontract.
KonkaGroupCo.,Ltd. AnnualReport2018
the Company provides the joint liability guarantee for the debts arising under Financing Lease-back Contract and all attachments signed by Haitong Unitrust and thecompany’s holding subsidiary Jiangxi Konka. The guarantee amount is RMB 119 million, and the guarantee period is two years from theexpiration ofthedebt performance period agreed in themain contract.
7.Loan bymandate:
(1) The Company, together with Shenzhen Overseas Chinese Town Co., Ltd. and China CITIC Bank Co., Ltd. Shenzhen Branch, has concluded the Sub-agreement for Electronic Loan by Mandate on Cash Management by CITIC Bank, numbered 811038022341. The amount of loan by mandate under theAgreement is RMB 2,000,000,000.00, with a term from the date of entry into force of theAgreement toApril 12, 2023. The annual interest rate of the loan is4% to10%, subject to the confirmation of the borrower and the principal in the electronic loan by mandate on cash management. Subsequently, the three parties signed a Supplementary Agreement to the Sub-agreement for Electronic Loan by Mandate on Cash Management by CITIC Bank, numbered 811038022341-1, in which the amount of loan by mandate was changed to RMB 3,000,000,000.00.As of December 31, 2018, Shenzhen Overseas Chinese Town Co., Ltd. actually provided the Company with a loan balance by mandateof RMB3,000,000,000.00through ChinaCITIC BankShenzhen Branch.
(2) On September 14, 2017, the Company and OCT Group Co., Ltd. and Shenzhen OCT Branch of China Construction Bank jointly signed Entrusted Loan Contract (No. JSWD 2017141). The total entrusted loan amount is RMB 5,000,000,000.00, and the loan term is from September 14, 2017 to December 31, 2018. Later, the three parties signed the entrusted loan extension contract on December 14, 2018 and December 19, 2018, and the total amount subject to such extension is RMB 1,276,560,000.00. As of December 31, 2018, the balance of the entrusted loan provided byOCTGroup Co., Ltd. tothe CompanyviaOCTBranch of ChinaConstruction Bank was RMB1,276,560,000.00.
8.Credit Granting:
(1) The Company, Shenzhen Futian Branch of Bank of China and Shenzhen Konka Telecommunication Technology Co., Ltd. jointly signed the credit line agreement (No. ZZYFEXZD1000014 2018), applying for a credit line of RMB 5,500,000,000.00 for issuing the acceptance bills, the non-financing guarantee and the trade financing. The Company provided RMB 1.3 billion bank acceptance bills for pledge, and agreed to 361
KonkaGroupCo.,Ltd. AnnualReport2018
provide the amount of RMB 500,000,000.00 in the comprehensive credit line to the subsidiary Telecommunication Technology for use. The Company would be jointly and severally liable for the comprehensive credit. The credit line shall be valid from the date of the above credit line agreement to February 4, 2019. As of December 31, 2018, a total of RMB 2,943,479,305.08 was used from the above credit line, and the remaining credit lineis RMB2,556,520,694.92.
(2) The Company signed the credit line extension contract with Shenzhen OCT Branch of Industrial and Commercial Bank of China to apply for the maximum credit line of RMB 1.9 billion and extend the credit line period to September 30, 2019.As of December 31, 2018, a total of RMB 1525.7625million was used from theabove credit line, and theremaining credit lineis RMB374.2375million.
(3) On January 2, 2018, the Company and Shenzhen Branch of Ping An Bank signed the comprehensive credit line contract (No.PYSZZZDA596201711270001), applying for the comprehensive credit line of RMB 400,000,000.00 for loaning working capital, opening the bank acceptance bills, opening the import letters of credit, opening the domestic letters of credit, the import and export documentary credit, the import and export payment withholding, the financing guarantees, and the discounting of commercial bills and other businesses etc. The credit line period is valid within 12 months from the day when the credit line contract becomes effective.As of December 31, 2018, the balance ofthecredit lineis RMB400,000,000.00.
(4) The Company and Shenzhen Branch of China Minsheng Bank signed the comprehensive credit line contract (No.GSXZDJT18006), applying for the maximum credit line of RMB 500,000,000.00 for the loan business based on RMB, bill of exchange acceptance, bill of exchange discount, guarantee; foreign currency loans, guarantees, letters of credit, financing guarantees, and buyer factoring guarantees in relation to the trade financing business. Konka Group Co., Ltd. agreed that its subsidiary, Anhui Konka Tongchuang could use the credit line under the comprehensive credit contract and provided the maximum guarantee for the amount used.It’s also agreed that the Company could use RMB 350,000,000.00 from the above-mentioned credit line, of which, the financing guarantee was limited to USD 50 million, and the guaranteed Hong Kong Konka Co., Ltd. for overseas procurement of raw materials; Anhui Konka Tongchuang could use the above credit line RMB 30 million, and the Company provided the joint liability guarantee. The types of credit line are limited to the draft acceptance, the discount of bill, the redemption limit of commercial bills and the replacement of bills.As of December 31, 2018, a total of RMB 184.2749 million was used from 362
KonkaGroupCo.,Ltd. AnnualReport2018
theabove credit line, and the remaining credit lineis RMB325.7251million.
(5) The Company signed the comprehensive credit line contract with Shenzhen Branch of Bank of Communications, applying for the credit line of RMB 500,000,000.00 for the RMB working fund loan, the bank acceptance, the opening of e-bank acceptance bill, the letter of guarantee, the import letters of credit, and the import documentary bills, the financing of import outward remittance, the opening of domestic letters of credit, and thebuyer’s documentary bills of domestic LC. The credit line is valid from April 11, 2017 to April 11, 2019. As of December 31, 2018, a totalof RMB300,000,000.00was used from theabove credit line, and theremaining credit lineisRMB200,000,000.00.
(6) The Company signed the comprehensive credit line contract (No.SYQHZZD0006 2018) with Shenzhen Branch of China Citic Bank, applying for the comprehensive credit line of RMB 400,000,000.00. The credit line period is from October 12, 2018 to July 27, 2019. As of December 31,2018,atotal ofRMB400,000,000.00 was used from theabovecredit line.
(7) On November 15, 2018, the Company signed the comprehensive credit line contract (No.ZSYZSZD00009 (584600) 2018) with Shenzhen Branch of China Zheshang Bank, applying for the maximum credit line of RMB 1,000,000,000.00. The credit line period is from November 15, 2018 to August 14, 2019. As of December 31, 2018, a total of RMB 300,000,000.00 was used from the above credit line, and the remaining creditlineis RMB700,000,000.00.
(8) The Company signed the Comprehensive Credit Line Contract (No. HXSFZLZZD20180921001) and applied to Shenzhen Branch of Guangdong Huaxing Bank for the comprehensive credit line of RMB 1,000,000,000.00. The guarantee period is from September 21, 2018 to August 29, 2019. The Company has sub-licensed the comprehensive credit line RMB 200,000,000.00 the subsidiary Konka Factoring (Shenzhen). As of December 31, 2018, a total of RMB 600 million was used from the above credit line, and the remaining credit line is RMB 400million.
(9) On May 10, 2018, the Company signed the comprehensive credit line contract (No.BSFZ(2018)9) and the supplementary agreement with Shenzhen Branch of China Bohai Bank, applying for the total credit line of RMB500,000,000.00. The credit line term is one year, and the credit line is used for the working capital loan, the trade bill acceptance, the opening of the import LC, the export LC documentary bills, the import 363
KonkaGroupCo.,Ltd. AnnualReport2018
documentary bills and the opening of domestic LC. As of December 31, 2018, a total of RMB 366,660,000.00 was used from the above credit line, and theremaining credit lineis RMB133,340,000.00.
(10) On November 26, 2018, the Company signed the credit line agreement (No.BY(2018)ZFJGBSXZD1126001) with Shenzhen Nanshan Baosheng Village Bank, applying for the credit line of RMB 20,000,000.00, and the credit line period is from November 26, 2018 to November 26, 2019. The credit line is used for the opening of bank acceptance bills, the working capital loans and the discounting of commercial acceptancebillsetc.Asof December 31,2018,atotal ofRMB 20,000,000.00was usedfrom theabove credit line.
(11) On November 28, 2018, the Company signed the credit line contract (No. XYSHSXZ(2018)D0152) with Shenzhen Branch of China Industrial Bank, applying for the maximum credit line of RMB 2,000,000,000.00, and the credit line could be used to (but not limited to) the working capital loan, the bank acceptance, the non-financing guarantee, and the letters of credit etc. The credit line period is valid from November 28, 2018 to November 28, 2019.As of December 31, 2018, a total of RMB 200,000,000.00 was used from the above credit line, and theremaining credit lineis RMB1,800,000,000.00.
(12) The Company applied the credit line of RMB1,200,000,000.00 via Shenzhen OCT Branch of Agricultural Bank of China which could be used for the loans, the bill acceptance, the notes discounted, the opening of LC, the packing loan, the import bill advance, the export bill purchase and the opening of letters of guarantee. The credit line shall be valid from February 28, 2018 to February 28, 2019.As of December 31, 2018,atotal ofRMB1,057,030,000.00was used from theabove credit line, and theremaining credit lineisRMB 142,970,000.00.
(13) The Company applied the credit line no more than RMB180,000,000.00 via Shenzhen Branch of Ningbo Bank which could be used for the loans, the bill acceptance, the notes discounted, the opening of LC, the packing loan, the import bill advance, the export bill purchase and the opening of letters of guarantee. The credit line shall be valid from November 29, 2018 to November 29, 2019.As of December 31, 2018, a total ofRMB180,000,000.00was used from theabove credit line.
(14) The Company applied the credit line no more than RMB 500,000,000.00 via Shenzhen Branch of Shanghai Pudong Development Bank which could be used for the loans, the bill acceptance, the notes discounted, the opening of LC, and the packing loan etc. The credit line shall be 364
KonkaGroupCo.,Ltd. AnnualReport2018
valid from January 21,2018toJanuary 21,2019.As ofDecember 31,2018,atotal ofRMB500,000,000.00was used from theabovecredit line. (15) The Company applied the credit line no more than RMB 100,000,000.00 via Shenzhen Nantou Branch of Hua Xia Bank which could be used for the loans, the bill acceptance, the notes discounted, and the opening of LC etc. The credit line shall be valid from January 21, 2018 to January 21,2019.As of December31,2018,a totalof RMB100,000,000.00was used from theabovecredit line.
(16) The Company applied the non-commitment combined revolving credit line no more than USD 15,000,000.00 via Shenzhen Nantou Branch of HSBC which could be used for the financial guarantee business.As of December 31, 2018, a total of USD 15,000,000.00 was used from the above credit line.
(17)The Company applied for the credit line of RMB 2,200,000,000.00 via Shenzhen OCT Branch of China Construction Bank, of which, RMB 940,000,000.00 was used as the comprehensive credit line, RMB 200,000,000.00 the financing credit line, RMB 500,000,000.00 the bonds, RMB 40,000,000.00 the working capital loan, RMB 20,000,000.00 the capital transaction credit line and RMB 500,000,000.00 other businesses. As of December 31, 2018, a total of RMB 982.5214 million was used from the above credit line, and the remaining credit line is RMB 1217.4786million.
9.Trust:
OnAugust 17, 2017, the Company entered into the “Project Individual FundTrust Contract for Konka-COS Capital” numbered bitc2017(t)-7335 with the trustee Bohai International Trust Co., Ltd. in Shijiazhuang, instructing the trustee to invest the trust funds in the limited partnership share of Zhuhai Oriental Longchen Capital Management Centre (Limited Partnership) in accordance with the Contract. The partnership business invests the funds in the supply chain financial products approved by clients and debt financing of upstream and downstream enterprises of the Company, and executes the creditor's rights investment or equity investment projects perceived by business partners. Trust funds are delivered in stages with a period of no more than 9 months and a net return on investment of9% per year. Partnership profits are distributed on December 20 of the Gregorian calendar in the duration and the expiration date of the trust.As of December 31, 2018, the investment amount reached RMB30 million.
KonkaGroupCo.,Ltd. AnnualReport2018
10.CCBfinancing trust:
The Company entered into two cooperation agreement on online platform cloud-loan product with CCB Shenzhen Branch, specifically, a quota contract numbered L2018 P1161 Overseas Chinese Town and an agreement numbered C2018 P1161 Overseas Chinese Town. It is a loan transaction developed within the approved maximum cooperation quota for legal or individual business or natural person customers recommended bytheCompany byagreement, withjoint liability guaranty orcompensation commitment oftheCompany.
The cooperation quota approved by CCB Shenzhen Branch is RMB 200,000,000.00, with validity from August 9, 2018 to June 5, 2019. Within the approved cooperation quota, the Company enjoys a self-use quota of RMB 90,000,000.00, within which, RMB 80,000,000.00 was allocated to Shenzhen Konka Electronic Co., Ltd., a subsidiary of the Company, and RMB 30,000,000.00 was allocated to Shenzhen Konka E-display Co., Ltd., another subsidiary of the Company. As of December 31, 2018, an amount of RMB 44,841,523.41 of the financing trust was used by the Company, of which, RMB 35,297,625.17 was used by Shenzhen Konka Electronic Co., Ltd. and RMB 18,494,293.54 was used by Shenzhen KonkaE-display Co.,Ltd.
11.Accounts receivable in GuangdongHuaxing Bank:
The Company entered into the Domestic Factoring Business Contract with Guangdong Huaxing Bank Shenzhen Branch (Contract No. HXSZF20181130001).According to the Contact, Guangdong Huaxing Bank Shenzhen Branch provides the Company with a factoring quota not exceeding RMB500 million, with a validity from November 30, 2018 to November 29, 2019. As of December 31, 2018, the factoring of accounts receivableof theCompany inthe bank amounted to RMB 486,000,000.00.
XVII. Notes ofMain Items intheFinancialStatements oftheCompany
1.Notes ReceivableandAccounts Receivable
||
|-|
|Endingbalance|
|2,181,466,683.90|
|7,427,246,429.42|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Endingbalance|
|9,608,713,113.32|

(1)Notes Receivable
① Notes Receivable Listed byCategory
||
|-|
|Endingbalance|
|2,176,711,080.13|
|4,755,603.77|
|2,181,466,683.90|

② Notes Receivable Pledged bytheCompanyat the Period-end
Item Amount
Bankacceptancebill 1,308,095,737.06
Tradeacceptance 1,359,122.95
Total 1,309,454,860.01
③ Notes Receivable Endorsed bythe Companyor Discounted and not dueontheBalance Sheet Date at thePeriod-end
||
|-|
|DerecognizedAmountattheperiod-end|
|330,783,688.83|
|-|
|330,783,688.83|

KonkaGroupCo.,Ltd. AnnualReport2018
④ NotesTransferred toAccounts Receivable because Drawer oftheNotes Failed toExecutethe Contract orAgreement
Item Amountofthenotestransferredtoaccountsreceivableattheperiod-end
Bankacceptancebill 3,135,022.00
Tradeacceptance 952,561,680.41
Total 955,696,702.41
(2)Accounts Receivable
① Accounts ReceivableClassified byCategory
Endingbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|740,027,889.84|9.64|51,502,510.09|6.96|
|1,029,783,688.54|13.42|177,758,725.88|17.26|
|5,876,525,075.32|76.58|---|---|
|6,906,308,763.86|90.00|177,758,725.88|2.57|
|27,458,788.03|0.36|17,287,776.34|62.96|

KonkaGroupCo.,Ltd. AnnualReport2018
Endingbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|7,673,795,441.73|100.00|246,549,012.31|3.21|

 (Continued)
Beginningbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|---|---|---|---|
|---|---|---|---|
|2,082,823,910.69|42.10|197,902,700.06|9.50|
|2,827,688,037.26|57.16|---|---|
|4,910,511,947.95|99.26|197,902,700.06|4.03|

KonkaGroupCo.,Ltd. AnnualReport2018
Beginningbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|36,839,946.40|0.74|17,295,202.04|46.95|
|4,947,351,894.35|100.00|215,197,902.10|4.35|

 A.Accounts receivable with significant single amount for which baddebt provision separately accrued at theperiod-end
Endingbalance
||||
|-|-|-|
|Accountsreceivable|Baddebtprovision|Withdrawalproportion(%)|
|300,027,889.84|27,002,510.09|9.00|
|200,000,000.00|10,000,000.00|5.00|
|100,000,000.00|5,000,000.00|5.00|
|90,000,000.00|4,500,000.00|5.00|
|50,000,000.00|5,000,000.00|10.00|

KonkaGroupCo.,Ltd. AnnualReport2018
||||
|-|-|-|
|740,027,889.84|51,502,510.09|—|

B.Top 5Accounts receivable with insignificant singleamount for which bad debt provision separately accrued
Endingbalance
||||
|-|-|-|
|Accountsreceivable|Baddebtprovision|Withdrawalproportion(%)|
|4,580,000.00|1,374,000.00|30.00|
|1,708,054.00|546,577.28|32.00|
|1,656,628.91|1,656,628.91|100.00|
|1,430,290.00|430,290.00|30.08|
|1,317,242.76|461,034.97|35.00|
|10,692,215.67|4,468,531.16|---|

C.Among thesegroups, accounts receivable adopting aging analysis method towithdraw baddebt provision
Endingbalance
|||
|-|-|
|Accountsreceivable|Baddebtprovision|

KonkaGroupCo.,Ltd. AnnualReport2018
Endingbalance
|||
|-|-|
|Accountsreceivable|Baddebtprovision|
|832,664,457.75|16,653,289.15|
|37,336,460.30|1,866,823.02|
|416,541.03|83,308.21|
|263,411.99|131,706.00|
|158,435.94|79,217.97|
|158,944,381.53|158,944,381.53|
|1,029,783,688.54|177,758,725.88|

D.Among thesegroups, accounts receivable adopting balance percentage method to withdrawbad debt provision
Endingbalance
|||
|-|-|
|Accountsreceivable|Baddebtprovision|
|5,876,525,075.32|---|
|5,876,525,075.32|---|

② BadDebt ProvisionWithdrawal, Reversed orRecovered intheReporting Period
Thewithdrawal amount ofthebad debt provision during theReporting Period was of31,674,284.72.
③Top5oftheEnding Balance of theAccounts Receivable Collected according toArrears Party
Total amount of Top 5 of ending balance of the accounts receivable collected according to arrears party was RMB6,372,877,322.39 accountingfor83.05% oftotal endingbalance of accounts receivable.Total ending balance ofbad debt provision withdrawn was RMB37,002,510.09.
KonkaGroupCo.,Ltd. AnnualReport2018
2.OtherReceivables
||
|-|
|Endingbalance|
|5,769,663.24|
|-|
|6,661,693,463.33|
|6,667,463,126.57|

(1)Interest Receivable
||
|-|
|Endingbalance|
|3,435,261.69|
|2,328,939.05|
|5,462.50|
|5,769,663.24|

(2)DividendsReceivable
||
|-|
|Endingbalance|
|-|
|-|

(3)OtherReceivables
① Other Receivables Disclosed byCategory
KonkaGroupCo.,Ltd. AnnualReport2018
Endingbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|173,061,959.33|2.53|162,446,649.23|93.87|
|153,289,974.82|2.24|25,171,956.87|16.42|
|6,522,463,391.24|95.22|-|-|
|6,675,753,366.06|97.46|25,171,956.87|0.38|
|703,518.00|0.01|206,773.96|29.39|
|6,849,518,843.39|100.00|187,825,380.06|2.74|

 (Continued)
Beginningbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|173,061,959.33|3.84|162,467,164.97|93.88|

KonkaGroupCo.,Ltd. AnnualReport2018
Beginningbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|121,170,320.79|2.69|24,301,146.90|20.06|
|4,205,636,078.64|93.41|-|-|
|4,326,806,399.43|96.10|24,301,146.90|0.56|
|2,516,181.05|0.06|733,893.68|29.17|
|4,502,384,539.81|100.00|187,502,205.55|4.16|

 Otherreceivables with significant single amount forwhich bad debt provision separately accrued at theend of theperiod
Endingbalance
||||
|-|-|-|
|Otherreceivables|Baddebtprovision|Withdrawalproportion(%)|
|141,549,150.00|141,549,150.00|100.00|
|18,115,952.51|7,500,642.41|41.40|
|13,396,856.82|13,396,856.82|100.00|

KonkaGroupCo.,Ltd. AnnualReport2018
Endingbalance
||||
|-|-|-|
|Otherreceivables|Baddebtprovision|Withdrawalproportion(%)|
|173,061,959.33|162,446,649.23|—|

Among thesegroups, other receivables adopting aging analysis method to withdrawbad debt provision:
Endingbalance
Aging
|||
|-|-|
|Otherreceivables|Baddebtprovision|
|86,586,186.05|1,731,723.72|
|32,418,836.83|1,620,941.84|
|9,081,802.21|1,816,360.44|
|6,783,232.88|3,391,616.44|
|3,617,204.83|1,808,602.41|
|14,802,712.02|14,802,712.02|
|153,289,974.82|25,171,956.87|

②Bad Debt ProvisionWithdrawal, Reversed orRecovered inthe ReportingPeriod
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB323,174.51; the amount of the reversed or collected part during theReporting Period was ofRMB0.00; there was nootherreceivables actually verified in theReporting Period.
③Top5oftheEnding Balance of OtherReceivables Collected according to theArrears Party
|||||
|-|-|-|-|
|Nature|Endingbalance|Aging|Proportiontoendingbalanceoftotalotherreceivables%|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|Nature|Endingbalance|Aging|Proportiontoendingbalanceoftotalotherreceivables%|
|Related-partyborrowings|1,072,615,555.55|Within1year|15.66|
|Related-partyborrowings|962,025,708.34|Within1year|14.05|
|Related-partyborrowings|597,681,244.45|Within1year|8.73|
|Related-partyborrowings|539,227,362.73|Within1year,1to2years|7.87|
|Related-partyborrowings|510,130,555.56|Within1year|7.45|
|—|3,681,680,426.63|—|53.75|

3.Long-term Equity Investment
(1)Category ofLong-term EquityInvestment
||||||
|-|-|-|-|-|
|Endingbalance|||||
|Carryingamount|Depreciationreserve|Carryingvalue|Carryingamount|Depreciationreserve|
|4,562,175,372.51|46,732,484.69|4,515,442,887.82|1,592,732,345.01|46,732,484.69|
|1,672,678,055.95|5,158,909.06|1,667,519,146.89|1,108,233,473.19|5,158,909.06|
|6,234,853,428.46|51,891,393.75|6,182,962,034.71|2,700,965,818.20|51,891,393.75|

KonkaGroupCo.,Ltd. AnnualReport2018
(2)Investment toSubsidiaries
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Decrease|Endingbalance|Depreciationreservewithdrawn|
|36,000,000.00|-|-|36,000,000.00|-|
|122,780,937.98|-|-|122,780,937.98|-|
|274,783,988.91|-|-|274,783,988.91|-|
|781,828.61|-|-|781,828.61|-|
|261,482.50|3,375,987.50|-|3,637,470.00|-|
|4,655,000.00|-|4,655,000.00|-|-|
|10,732,485.69|-|-|10,732,485.69|-|
|90,000,000.00|210,000,000.00|-|300,000,000.00|-|
|31,500,000.00|-|-|31,500,000.00|-|
|48,750,000.00|-|-|48,750,000.00|-|
|350,000,000.00|-|350,000,000.00|-|-|
|200,000,000.00|100,000,000.00|-|300,000,000.00|-|
|10,000,000.00|-|-|10,000,000.00|-|
|249,702,612.22|232,000,000.00|-|481,702,612.22|-|
|10,000,000.00|-|10,000,000.00|-|-|
|30,000,000.00|170,000,000.00|-|200,000,000.00|-|
|7,200,000.00|-|-|7,200,000.00|-|
|16,000,000.00|-|16,000,000.00|-|-|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Decrease|Endingbalance|Depreciationreservewithdrawn|
|5,832,000.00|-|-|5,832,000.00|-|
|10,200,000.00|-|-|10,200,000.00|-|
|-|20,000,000.00|677,960.00|19,322,040.00|-|
|12,000,000.00|-|-|12,000,000.00|-|
|8,602,009.10|-|-|8,602,009.10|-|
|40,000,000.00|-|-|40,000,000.00|-|
|2,550,000.00|-|-|2,550,000.00|-|
|5,100,000.00|20,400,000.00|-|25,500,000.00|-|
|15,300,000.00|-|-|15,300,000.00|-|
|-|40,000,000.00|-|40,000,000.00|-|
|-|689,680,000.00|-|689,680,000.00|-|
|-|1,000,000,000.00|-|1,000,000,000.00|-|
|-|1,020,000.00|-|1,020,000.00|-|
|-|688,500,000.00|-|688,500,000.00|-|
|-|91,800,000.00|-|91,800,000.00|-|
|-|30,000,000.00|-|30,000,000.00|-|
|-|40,000,000.00|-|40,000,000.00|-|
|-|14,000,000.00|-|14,000,000.00|-|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Decrease|Endingbalance|Depreciationreservewithdrawn|
|1,592,732,345.01|3,350,775,987.50|381,332,960.00|4,562,175,372.51|-|

 (2)Investment toJointVentures andAssociated Enterprises
||||||
|-|-|-|-|-|
|Beginningbalance|||||
||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|18,960,898.67|5,158,909.06|-|-|194,455.24|
|210,279,132.55|-|-|-|11,931,702.63|
|617,214,571.50|-|-|-|13,423,191.54|
|79,729,560.91|-|-|-|-2,107,745.08|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|||||
||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|9,444,160.97|-|-|-|1,596,085.85|
|4,927,589.47|-|-|-|-2,640,110.95|
|14,317,400.80|-|-|-|-3,699,527.01|
|1,523,166.24|-|-|-|-1,523,166.24|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|||||
||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|-|-|-|-|-|
|-22,084.12|-|3,771,400.00|-|-156,801.82|
|151,859,076.20|-|-|-|-5,012,466.06|
|-|-|-|-|-|
|-|-|-|2,813,377.36|11,738,814.32|
|-|-|75,000,000.00|-|4,859,338.44|

KonkaGroupCo.,Ltd. AnnualReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|||||
||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|-|-|7,000,000.00|-|-599,519.48|
|-|-|5,400,000.00|-|-877,490.67|
|-|-|-|-|12,822,900.47|
|1,108,233,473.19|5,158,909.06|91,171,400.00|2,813,377.36|39,949,661.18|

 (Continued)
KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|Increase/decrease|||Endingbalance|
|Cashbonusorprofitsannouncedtoissue|Withdrawalofimpairmentprovision|Other||
|-|-|-|19,155,353.91|
|-|-|-|222,210,835.18|
|-|-|-|624,845,604.93|
|-|-|-|78,409,903.14|
|-|-|-|11,040,246.82|
|-|-|-|2,287,478.52|
|-|-|-|10,617,873.79|
|-|-|-|-|
|-|-|-|-|
|-|-|-|3,592,514.06|
|-|-|-|146,846,610.14|
|-|-|175,254,554.65|175,254,554.65|
|-|-|26,439,060.09|35,364,497.05|
|-|-|-|79,859,338.44|

KonkaGroupCo.,Ltd. AnnualReport2018
|||||
|-|-|-|-|
|Increase/decrease|||Endingbalance|
|Cashbonusorprofitsannouncedtoissue|Withdrawalofimpairmentprovision|Other||
|-|-|-|6,400,480.52|
|-|-|-|4,522,509.33|
|-|-|239,447,355.00|252,270,255.47|
|-|-|441,140,969.74|1,672,678,055.95|

KonkaGroupCo.,Ltd. AnnualReport2018 4.Operating RevenueandCost ofSales
(1)Operating Revenue and Cost ofSales
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|10,132,713,516.14|9,524,363,828.80|10,023,055,904.38|
|3,244,968,370.31|3,047,765,335.52|2,079,422,147.13|
|13,377,681,886.45|12,572,129,164.32|12,102,478,051.51|

 (2)Main Operations (Classified byIndustry)
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|10,132,713,516.14|9,524,363,828.80|10,023,055,904.38|
|10,132,713,516.14|9,524,363,828.80|10,023,055,904.38|

 (3)Main Operations (Classified byProduct)
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|9,972,096,889.35|9,375,225,354.05|9,630,486,646.20|
|159,656,497.00|148,343,199.68|257,783,425.06|
|960,129.79|795,275.07|134,785,833.12|
|10,132,713,516.14|9,524,363,828.80|10,023,055,904.38|

 (4)Main Operations (Classified byArea)
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|8,273,508,840.42|7,739,284,541.71|8,939,568,192.59|
|1,859,204,675.72|1,785,079,287.09|1,083,487,711.79|
|10,132,713,516.14|9,524,363,828.80|10,023,055,904.38|

 (5)Operating Revenue from theTop 5Customers
||
|-|
|Totaloperatingrevenuefromthetop5customers|
|2,144,554,134.92|
|3,106,309,264.79|

KonkaGroupCo.,Ltd. AnnualReport2018 5.InvestmentIncome
||
|-|
|ReportingPeriod|
|711,492,879.96|
|33,783,935.14|
|342,201,410.67|
|-45,748,200.91|
|-|
|-|
|17,920,000.00|
|-|
|187,429,014.78|
|-|
|1,247,079,039.64|

Notes:thenumber“+”amongthenon-recurringprofitorlossitemsreferstorevenueandincome,while“-”referredtolosses orexpense.
Therecognition ofthenon-recurring profit orloss items was executed according tothe
regulations ofNo.1 of theInformation DisclosureExplanatory Notice oftheCompanies PublicOffering Securities-Non- recurring Profit orLoss (ZJHAnnouncement[2008]No. 43).
||
|-|
|Amount|
|64,656,609.96|

2.Return on Equity andEarningsPerShare
|||
|-|-|
|WeightedaverageROE(%)||
||EPS-basic|
|5.14|0.1717|

KonkaGroupCo.,Ltd. AnnualReport2018
|||
|-|-|
|WeightedaverageROE(%)||
||EPS-basic|
|-9.74|-0.3255|

XVI. Supplementary Materials
1.Items andAmounts ofNon-recurring Profit orLoss
||
|-|
|Amount|
|732,818,574.90|
|-|
|259,609,022.27|
|-|
|220,045,229.63|
|-|
|182,022,653.32|
|-|
|-|
|-|
|-|
|-|
|-|

KonkaGroupCo.,Ltd. AnnualReport2018
||
|-|
|Amount|
|39,542,461.74|
|-|
|1,389,042.48|
|-|
|-|
|-|
|62,249,326.12|
|17,974,523.98|
|1,515,650,834.44|
|251,343,320.95|
|67,121,398.75|
|1,197,186,114.73|

KonkaGroupCo.,Ltd. AnnualReport2018 Part XII Documents Available for Reference
I. The financial statements with the signatures and seals of theCompany’s legal representative, Chief Financial Officerand head ofthefinancial department;
II. The original copy of the IndependentAuditor’s Report with the seal of the CPAfirm and thesignatures& seals of thecertified publicaccountants;
III. The originals of all theCompany’s documents and announcements disclosed to the public vianewspapers designated bytheCSRCinthe Reporting Period; and
IV. Other relevant materials.
TheBoard of Directors Konka Group Co., Ltd. 28March 2019