KonkaGroupCo.,Ltd. AnnualReport2016
KONKA GROUP CO., LTD.
ANNUAL REPORT 2016
2017-09
March 2017
KonkaGroupCo.,Ltd. AnnualReport2016
Section I Important Statements, Contents and Definitions The board of directors (the “Board”), the supervisory board (the “Supervisory Board”), as well as the directors, supervisors and executive officers of Konka Group Co., Ltd. (the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of this Report, and shall be jointly and severally liable for any false representation, misleading statements ormaterial omissionsin this Report.
Liu Fengxi, head of the Company, and Li Chunlei, accounting head for this Report and head of the accounting department (head of accounting), hereby guarantee that the Financial Report carried in thisReport is factual,accurate andcomplete.
All directors attended theboardmeeting forthereview ofthis Report.
Any plans for the future and other forward-looking statements mentioned in this Report shall NOT be considered as virtual promises of the Company to investors. Therefore, investors are kindly reminded to payattention to possibleinvestment risks.
The Company plans not to distribute cash dividends or bonus shares or convert capital reserve into sharecapital.
ThisAnnual Report and its abstract have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shallprevail.
KonkaGroupCo.,Ltd. AnnualReport2016
Table of Contents
Section I Important Statements, Contents andDefinitions............................................................2 Section II Corporate Profileand Financial Results........................................................................6 Section III Business Profile..............................................................................................................11 Section IVPerformance DiscussionandAnalysis.........................................................................13 SectionVSignificantEvents............................................................................................................32 SectionVIShareChangesandShareholders’Profile...................................................................53 SectionVII Preference Shares.........................................................................................................61 SectionVIIIDirectors, Supervisors, Executive Officers andStaff..............................................62 Section IX Corporate Governance..................................................................................................74 Section XCorporate Bonds.............................................................................................................89 Section XI Financial Report............................................................................................................90 Section XII DocumentsAvailableforReference..........................................................................283
KonkaGroupCo.,Ltd. AnnualReport2016
Definitions
|||
|-|-|
|Term|Definition|
|Company,theCompany,theGroup|KonkaGroupCo.,Ltd.|
|TelecommunicationTechnology|ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd.|
|KonkaHouseholdAppliances|ShenzhenKonkaHouseholdAppliancesCo.,Ltd.|
|PlasticProducts|ShenzhenKonkaPlasticProductsCo.,Ltd.|
|ElectricalAppliances|ShenzhenKonkaElectricalAppliancesCo.,Ltd.|
|FittingsTechnology|ShenzhenKonkaElectronicFittingsTechnologyCo.,Ltd.|
|MudanjiangAppliances|MudanjiangArcticOceanAppliancesCo.,Ltd.|
|ChongqingQingjia|ChongqingQingjiaElectronicsCo.,Ltd.|
|AnhuiKonka|AnhuiKonkaElectronicCo.,Ltd.|
|AnhuiHouseholdAppliances|AnhuiKonkaHouseholdAppliancesCo.,Ltd.|
|KunshanKonka|KunshanKonkaElectronicCo.,Ltd.|
|DongguanKonka|DongguanKonkaElectronicCo.,Ltd.|
|DongguanPacking|DongguanKonkaPackingMaterialsCo.,Ltd.|
|BoluoKonka|BoluoKonkaPCBCo.,Ltd.|
|BoluoKonkaPrecision|BoluoKonkaPrecisionTechnologyCo.,Ltd.|
|HongKongKonka|HongKongKonkaCo.,Ltd.|
|KonkaHouseholdAppliancesInvestment|KonkaHouseholdAppliancesInvestment&DevelopmentCo.,Ltd.|
|Konka Household Appliances InternationalTrading|KonkaHouseholdAppliancesInternationalTradingCo.,Ltd.|
|KonkaEurope|Konka(Europe)Co.,Ltd.|
|KonkaFactoring|KonkaFactoring(Shenzhen)Co.,Ltd.|
|Wankaida|ShenzhenWankaidaScienceandTechnologyCo.,Ltd.|
|KunshanKangsheng|KunshanKangshengInvestmentDevelopmentCo.,Ltd.|
|AnhuiTongchuang|AnhuiKonkaTongchuangHouseholdAppliancesCo.,Ltd.|
|IndonesiaKonka|IndonesiaKonkaElectronicsCo.,Ltd.|
|ShushidaLogistics|ShenzhenShushidaLogisticsServiceCo.,Ltd.|
|BeijingKonkaElectronic|BeijingKonkaElectronicCo.,Ltd.|
|KonkaE-display|ShenzhenKonkaE-displayCo.,Ltd.|
|E-displayService|ShenzhenE-displayServiceCo.,Ltd.|
|XiamenDalong|XiamenDalongTradingCo.,Ltd.|
|YoushiKangrong|YoushiKangrongCultureCommunicationCo.,Ltd.|
|KangqiaoJiacheng|ShenzhenKangqiaoJiachengPropertyInvestmentCo.,Ltd.|
|KonkaSmartTech|KonkaSmartTechLimited|
|KaikaiShijie|AnhuiKaikaiShijieE-commerceCo.,Ltd.|
|Yipingfang|ShenzhenYipingfangNetworkTechnologyCo.,Ltd.|
|MobileInterconnection|ShenzhenKonkaMobileInterconnectionTechnologyCo.,Ltd.|

KonkaGroupCo.,Ltd. AnnualReport2016
|||
|-|-|
|CommercialSystemTechnology|ShenzhenKonkaCommercialSystemTechnologyCo.,Ltd.|
|ZhongkangSupplyChain|ZhongkangSupplyChainManagementCo.,Ltd.|
|KangqiaoEasyChain|ShenzhenKangqiaoEasyChainTechnologyCo.,Ltd.|
|Yilifang|Yilifang(Hainan)TechnologyCo.,Ltd.|
|KonkaTechnology&IndustryDevelopment|ChuzhouKonkaTechnology&IndustryDevelopmentCo.,Ltd.|
|CSRC|ChinaSecuritiesRegulationCommission|
|SZSE|ShenzhenStockExchange|
|CSRCShenzhenBureau|ShenzhenBureauofChinaSecuritiesRegulationCommission|
|Yuan, Ten thousand Yuan, One HundredMillionYuan|RMB,RMBTenthousand,RMBOneHundredMillionYuan|

KonkaGroupCo.,Ltd. AnnualReport2016
Section II Corporate Profile and Financial Results
I Corporate information
|||||
|-|-|-|-|
|Stockname|KonkaA,KonkaB|Stockcode|000016,200016|
|Changedstockname(ifany)|N/A|||
|Stockexchange|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|||
|Email|szkonka@konka.com|||

II Contact information
||||
|-|-|-|
||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,KonkaR&D Center, 28KejiSouth Twelfth Road, Science and Technology Park,Yuehai Street, Nanshan District, Shenzhen,GuangdongProvince,China|
|Tel.|0755-26608866|0755-26608866|
|Fax|0755-26601139|0755-26601139|
|E-mail|szkonka@konka.com|szkonka@konka.com|

III Information disclosureandplacewhere this Report is kept
|||
|-|-|
|Newspapers designated by the Company forinformationdisclosure|SecuritiesTimes,etc.|
|Website designated by the China SecuritiesRegulatory Commission (CSRC) for the|www.cninfo.com.cn|

KonkaGroupCo.,Ltd. AnnualReport2016
|||
|-|-|
|publicationofthisReport||
|PlacewherethisReportiskept|BoardSecretariat, 24/F,KonkaR&D Center,28Keji SouthTwelfth Road,Science and Technology Park, Yuehai Street, Nanshan District, Shenzhen,GuangdongProvince,China|

IVCompany registration andalteration
|||
|-|-|
|Credibilitycode|914403006188155783|
|Changes in main business activities of theCompanyaftergoingpublic(ifany)|Nochanges|
|Changesofcontrollingshareholder(ifany)|Nochanges|

V Otherinformation
The CPAsfirm hired bytheCompany
|||
|-|-|
|Name|RuihuaCertifiedPublicAccountants(LLP)|
|Officeaddress|5-11F, West Tower, China Overseas Property Plaza, Building No. 7, Compound No. 8,XibinheRoad,YongdingMen,DongchengDistrict,Beijing,P.R.C.|
|Accountantswritingsignatures|TangQimei,ShenLingzhi|

Sponsor engaged by the Company to continuously perform its supervisory function during this Reporting Period
□Applicable√ Not applicable
Financial advisor engaged by the Company to continuously perform its supervisory function during this Reporting Period
□Applicable√ Not applicable
VI Accounting and financialresults
Indicate by tick mark whether the Company performed any retroactive adjustments to or restatement of its accounting data due to changes of accounting policies or correction of accounting errors
□Yes√No
||||||
|-|-|-|-|-|
||2016|2015|+/-%|2014|
|Operatingrevenues(RMB)|20,299,348,136.21|18,395,177,035.98|10.35%|19,423,488,994.07|
|NetprofitattributabletoshareholdersoftheCompany(RMB)|95,673,028.03|-1,256,819,314.51|107.61%|52,623,527.86|
|Netprofitattributabletoshareholdersof the Company before exceptionalprofitandloss(RMB)|-283,460,349.24|-1,129,999,645.94|74.92%|-475,481,381.45|
|Net cash flows from operating|-983,256,602.23|1,289,600,482.66|-176.25%|-640,385,182.05|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|activities(RMB)|||||
|Basicearningspershare(RMB/share)|0.0397|-0.52|107.63%|0.02|
|Dilutedearningspershare(RMB/share)|0.0397|-0.52|107.63%|0.02|
|Weightedaveragereturnonequity(%)|3.35%|-36.30%|39.65%|1.28%|
||December31,2016|December31,2015|+/-%|December31,2014|
|Totalassets(RMB)|17,243,119,597.97|14,250,367,548.28|21.00%|16,779,359,276.65|
|Net assets attributable toshareholdersoftheCompany(RMB)|2,901,481,607.04|2,814,382,870.81|3.09%|4,103,478,971.07|

VII Differences in accountingdata underdomestic andforeign accountingstandards
(I) Differences in the net profit and the net assets disclosed in the financial reports prepared under Chineseandinternational accountingstandards
□Applicable√ Not applicable
No suchdifferences for thisReporting Period.
(II) Differences in the net profit and the net assets disclosed in the financial reports prepared under Chineseandforeignaccounting standards
□Applicable√ Not applicable
No suchdifferences for thisReporting Period.
VIII Financialresults byquarter
Unit:RMB
||||||
|-|-|-|-|-|
||1Q|2Q|3Q|4Q|
|Operatingrevenues|4,072,311,262.92|4,536,769,559.32|6,008,160,392.02|5,682,106,921.95|
|Net profit attributable toshareholdersoftheCompany|8,429,549.66|4,405,187.10|-57,165,694.07|140,003,985.34|
|Net profit attributable toshareholders of the Companybefore exceptional profit andloss|27,524,586.04|-56,260,733.24|-93,347,364.40|-161,376,837.63|
|Net cash flows from operatingactivities|295,245,741.81|-420,787,798.23|-285,036,494.71|-572,678,051.10|

Indicate by tick mark whether there are any material differences between the financial indicators
above ortheirsummations and thosewhich have beendisclosed inquarterly orsemi-annual reports
KonkaGroupCo.,Ltd. AnnualReport2016
□Yes√No
IXExceptional profit/loss
√Applicable□ Not applicable
Unit:RMB
||||||
|-|-|-|-|-|
|Item|2016|2015|2014|Note|
|Profit/loss on disposal of non-current assets(includingoffsetassetimpairmentprovisions)|242,932,907.65|-16,096,434.80|587,454,101.18||
|Governmentgrantschargedtotheprofit/lossforthisReporting Period(except for thegovernment grantsclosely related to the business of the Company andgivenatafixedquotaoramountinaccordancewiththeState’suniformstandards)|113,350,808.96|71,499,330.11|75,401,093.20||
|Profit/loss on entrusting others with investments orassetmanagement|70,849,063.30|20,419,318.35|12,260,439.18||
|Asset impairment provisions due to acts of Godsuchasnaturaldisasters|0|-144,808,654.70|0||
|Profit/loss on fair value changes of transactionalfinancial assets and liabilities & investment incomefrom disposal of transactional financial assets andliabilities as well as financial assets available forsale, except for effective hedges related to routineoperationsoftheCompany|17,953,552.28|32,627,480.23|0||
|Impairment provision reversal for accountsreceivable on which the impairment test is carriedoutseparately|707,777.79|3,550,666.66|||
|Profit/lossonentrustedloans|22,934,301.50|-104,311,044.28|16,207,940.59||
|Non-operating income and expense other than theabove|168,175.52|-419,240.74|-151,895.48||
|Other profit/loss that meet the definition ofexceptionalprofit/loss|78,609,375.35|-14,549,153.86|158,734,972.90||
|Less:Corporateincometax|11,153,834.38|3,830,243.26|4,331,796.46||
|Minorityinterests(aftertax)|379,133,377.27|-126,819,668.57|528,104,909.31||
|Total|400,491,687.22|-126,819,668.57|528,104,909.31|--|

 Explanation of why the Company classified an item as exceptional profit/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to thePublic—Exceptional Profit and Loss, or reclassified any exceptional
profit/loss itemgiven as an examplein thesaid explanatory announcement torecurrent profit/loss
√Applicable□ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Item|Amountinvolved(RMB)|Reason|
|Taxrebatesonsoftware|121,451,535.04|Government grants closely related to the Company’s normaloperation and constantly given at certain quotas or amountsaccordingtothegovernment’spoliciesandstandards|

KonkaGroupCo.,Ltd. AnnualReport2016
Section III Business Profile
I Main business scopeforthisReporting Period
Is theCompanysubject to any disclosurerequirements for special industries?
No.
The Company is currently engaged in color TVs, mobile phones and white goods, with its main business models and thesituationsofits business divisions as follows:
(I) ColorTVs
The Company provides colorTVs forboth domestic,overseas markets and the internet business The domestic sales of its color TVs are realized mainly through B2B (Business-to-Business) and B2C (Business-to-Consumer), with its branch companies, business departments and after-sales maintenance points all over the country. And it profits from the margin between the costs and the selling prices ofitscolorTVs.
As for the overseas sales, it mainly relies on B2B and is supported by B2C. The color TVs of the Company are sold toAsia Pacific, Middle East, Central& SouthAmerica, East Europe, etc.And the profit alsocomes from thedifference between thecosts and theselling prices of itscolorTVs. The basis of internet business is the smart TV terminal sold by us. We will cooperate with other internet companies and obtain the benefits by providing the users with video, education, music, medical treatment, games and other services; then increase the adhesiveness of users, publicize the brand and increase the sales opportunities of hardware by providing part of public welfare and interactive services based on the analysis of user behavior data to; finally establish ten million-level user platform and obtain the benefits via advertisement and application distribution. The internet business is essential for our internet transformation and the upgrade of development modes -- “hardware+software” and“terminal+user”.
(II) Mobilephones
The mobile phones of the Company are sold domestically and overseas. The overseas sales mainly rely on B2B and the profit comes from the margin between the costs and the selling prices of the mobile phones. As for the domestic sales of its mobile phones, the Company mainly relies on the telecom operator channel in the recent years. But it has also restarted the retail sales (through B2B and B2C) of its mobile phones in the domestic market since August 2015. It has been active in breaking into the rural markets. And its successful launch of new products in the domestic retail market marks a good start in the domestic retail sales of its mobile phones. In the domestic sales of its mobile phones, the Company profits mainly from the costs and the selling prices of its products, with a smallamount from thevalue added service.
KonkaGroupCo.,Ltd. AnnualReport2016
(III)Whitegoods
The white goods produced by the Company mainly include refrigerators, washing machines, air conditioners, freezers, etc., which are sold through B2B and B2C to the domestic market. And the Company profits from themargin between thecosts and theselling prices of itswhitegoods. II Significantchanges in mainassets
(I) Significantchanges inmain assets
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|-|-|
|Mainasset|Reasonforanysignificantchange|
|Equityassets|Investment on long-term equity assets in the Reporting Period showed a 62.48%year-on-yearincrease,andmainreasonswereasbelow–On31Dec. 2015, theCompany'ssubsidiary,KonkaHouseholdAppliancesInvestmentsigned agreement with Shenzhen Dingshengxin Mould Technology Consultation Co.,Ltd. Since 1 Jan. 2016, Dingshengxin Mould Technology Consultation Co., Ltd. nolonger entrusted Konka Household Appliances Investment to manage its holding of6.18% shares of Precision Mold, and since 1 Jan. 2016, the Precision Mold and itssubsidiaries (Kunshan Jielunte Mould PlasticCo., Ltd, Dongguan Xuda MouldPlasticCo.,Ltd.,ChuzhouJielunteMouldPlasticCo.,Ltd.,AnhuiJiasenPrecisionTechnologyCo.,Ltd.,WuhanJielunteMouldPlasticCo.,Ltd.andDongguanKonkaMouldPlasticCo.,Ltd.),wouldbeexcludedfromconsolidatedstatementsscope.|
|Fixedassets|Fixed assets as at the end of the Reporting Period decreased by 10.75% as comparedwithlastyear,ofwhichthemainreasonwasthesameasabove.|
|Intangibleassets|Intangible assets as at the end of the Reporting Period decreased by 14.34% ascomparedwithlastyear,ofwhichthemainreasonwasthesameasabove.|
|Constructioninprogress|Constructioninprogressas attheendof theReportingPeriodincreased by51.81%ascompared with last year, which was mainly caused by the commencement ofconstructionoftheKunshanZhouzhuangProjectPhaseIIIoftheCompany.|

(II) Main assets overseas
□Applicable√ Not applicable
III Core competitiveness analysis
Is theCompanysubject to any disclosurerequirements for special industries?
No.
TheCompany’s capability inR&D, the marketing network and manufacture constitutes its
competitive edges. Through resource integration, the Company will vigorously try to make
substantial breakthroughs in intelligent products, cloud computing, application of the internet
technology, application software, etc. It will also try to enhance the strength and thickness of
KonkaGroupCo.,Ltd. AnnualReport2016
technical innovations toincrease its overall competitiveness.
KonkaGroupCo.,Ltd. AnnualReport2016
Section IV Performance Discussion and Analysis
I Overview
(I) Operating results ofthis Reporting Period
For this Reporting Period, the Company achieved consolidated operating revenues of RMB20.299 billion, up10.35% from the prior year. And the net profits attributable to the shareholders of the Company stoodat RMB0.096 billion,Themain reasons are as follows:
(I) in 2016, the Company positively integrated resources, thoroughly planned to improve the capability ofR&D, manufacturing, and supply chain of main businesses, ad simultaneously and positively adjusted the product layout and marketing strategies based on market status, which improved the sales structure of theCompany’s main businesses and accelerated the inventory turnover speed in theReporting Period, leading to thebetter profitabilityofmain businesses. (II) In 2016, the Company put forth effort into 5 systems including payment and settlement, user operation, big data, advertisements, and UI (user interface), and made breakthroughs in the profitability of smartTV’s operation by providing users with professional and high-quality internet content service.
(III) In 2016, via positive clearing-up and adjustment, the Company made the business layout more rational, the thoughts more clear, and the resources and energy more concentrated, and as a result, stabilizedtheCompany’s backbone team, and roseupemployees’morale.
(IV) The amount of non-recurring profit and loss in 2015 was RMB-127 million, but it turned to be RMB379 million in 2016, of which the profit of RMB220 million was mainly due to the equity of Shenzhen Refund Optoelectronics Co.,Ltd. partially lessened bytheCompany.
(II) Business highlights in 2016
In 2016, the Company conquered adverse factors such as fierce industry competitions and sharply increased raw material prices, and made up the deficits and got surpluses through allstaffs’ common efforts, and made the profit back to the rising channel. Business highlights of the Company in 2016were as below:
1.Business performance turned around
In 2016, the Company overcame difficulties and ceased to lose and began to turn out a profit. For this Reporting Period, the Company achieved consolidated operating revenues of RMB20.299 billion, up10.35% from the prior year. And the net profits attributable to the shareholders of the Company stoodat RMB0.096 billion.
KonkaGroupCo.,Ltd. AnnualReport2016
2.Breakthroughsin mechanismreform
In 2016, the Company confirmed the reform thoughts of setting the target as establishing an operating system and mechanism that should be highly competitive, fully marketized, and matched with theindustry,and theCompany correspondingly madebreakthroughs:
Firstly, reformation was successfully conducted in theCompany’s business of small household appliances. Strategic investors were introducedwhileemployees’shares were stillheld.
Secondly, strategic investors were introduced to theCompany’s data network business (for example, the settopbox).
Thirdly, the scheme of reforming the mixed ownership mechanism for the internet e-commerce business has beenbasically confirmed, and related work isbeing positively carried forward.
Fourthly, the Company creatively started to publicize and marketize the recruitment of theCompany’s senior management team, and formally engaged the new senior management team on 10 Mar.2017.
3.Business transformation achieved preliminary results
In 2016, the Company started to formally upgrade and transfer its development pattern form single hardware terminal to hardware plus software and terminal plus user. Except for selling out products, the Companydeveloped software service, as well as operation in respect ofusers.
4.Thequality ofbusiness operation was improved
In 2016, core businesses of the Company were adjusted and cleared up, and the overall operation status was approaching toa better condition.
In respect of colorTV, the guidance of “consolidating scale and improving structure” confirmed in the beginning of 2016 played its role. The Company adjusted product planning, intensified the capability construction forchannel and terminal, and themajor highlights were as below:
1. Gross margin rose up. Through rational product planning, the Company improved the sales structure of products while accelerating the product promotion speed, and made the gross margin increased.
2. Quality was steadily improved. The Company ensured the steady improvement of product quality by establishing the mechanism of prevention against abnormal process and quality to advance quality management, ensuring the effective operation of the quality management system, and deeply developing qualityimprovement activities.
3. Manufacturing efficiency was sharply improved. On one hand, the Company effectively mobilized the operation sense and enthusiasm of the grass-roots employees by promoting the system for contracted responsibility in production line. On the other hand, the Company accomplished the construction of 2 smart manufacturing and production lines, directly pushing forward theimprovement ofproduction efficiency.
KonkaGroupCo.,Ltd. AnnualReport2016
4. The business scale of color TV for export sales was improved. Despite the rapidly rising cost, the shipment of complete machines increased by30% as compared with last year, which was mainly caused by theCompany’s measures of consolidating existing clients, vigorously enlarging blank markets, as well as adjusting marketing strategies.
In terms of white household appliances– On one hand, the Company sharply improved gross margin and achieved benefits with a year-on-year income increase of8.41% by product upgrade. On the other hand, a large scope of improvement was realized in white household appliances, and the sales revenue achieved a sharp year-on-yearincrease.
In terms of handset business– In the face of fierce competitions in handset industry, the Company obtained sales growth in handset business by continuous innovation on channel management, enhancing productR&D, as well as the promotion of key models of E1, S1, R3, and so on. In 2016, revenue ofhandset business realized ayear-on-year increaseof22.67%.
In terms of internet business– Not only material breakthroughs were made in smart TVoperation. On one hand, the Company set up 5 systems including payment and settlement, user operation, big data, advertisements, and UI (user interface), and constructed the business system, organization, structure, and commercial mode supportable to rapid business development, laying a solid foundation for theCompany’s development of internet business. On the other hand, the Company basically accomplished the commercial mode construction for smart TV user operation. For example, as for business cooperation, the Company adopted two ways of open cooperation and independent operation, strategically cooperated with IQiyi, Tencent Video, and so on, and continuously set layout in areas covering application distribution, games, education, VR, music, health, etc.
II Analysisof main business
(I) Overview
See “IOverview”in “Performance Discussion andAnalysis”.
(II) Revenues andcosts
1.Breakdown ofoperating revenues
Unit:RMB
||||||
|-|-|-|-|-|
|2016||2015||+/-%|
|Amount|Asapercentageofoperatingrevenues(%)|Amount|Asapercentageofoperatingrevenues(%)||

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||
|-|-|-|-|-|-|
|Operatingrevenues|20,299,348,136.21|100%|18,395,177,035.98|100%|10.35%|
|Bybusinesssegment||||||
|Electronics|17,167,313,167.21|84.57%|17,261,298,403.20|93.84%|-0.54%|
|Others|3,132,034,969.00|15.43%|1,133,878,632.78|6.16%|176.22%|
|Byproduct||||||
|ColorTVs|12,478,427,986.35|61.47%|12,590,931,785.71|68.45%|-0.89%|
|Whitegoods|1,701,770,760.58|8.38%|1,569,786,771.56|8.53%|8.41%|
|Mobilephones|970,287,086.42|4.78%|790,942,197.54|4.30%|22.67%|
|Others|5,148,862,302.86|25.36%|3,443,516,281.17|18.72%|49.52%|
|Bygeographicalsegment||||||
|Domestic|14,282,697,744.63|70.36%|12,466,005,969.45|67.77%|14.57%|
|Overseas|6,016,650,391.58|29.64%|5,929,171,066.53|32.23%|1.48%|

 2. Business segments, products or geographical segments contributing over10% of the operating revenues orprofit
√Applicable□ Not applicable
Is theCompanysubject to any disclosurerequirements for special industries?
No.
Unit:RMB
||||||||
|-|-|-|-|-|-|-|
||Operatingrevenue|Operatingcost|Grossprofitmargin|Operatingrevenue:YoY+/-%|Operatingcost:YoY+/-%|Grossprofitmargin:YoY+/-%|
|Bybusinesssegment|||||||
|Electronics|17,167,313,167.21|14,622,628,859.55|14.82%|-0.54%|-2.64%|1.84%|
|Byproduct|||||||
|ColorTVs|12,478,427,986.35|10,729,196,625.12|14.02%|-0.89%|-2.52%|1.43%|
|Bygeographicalsegment|||||||
|Domestic|14,282,697,744.63|11,893,157,869.41|16.73%|14.57%|26.11%|-7.62%|
|Overseas|6,016,650,391.58|5,625,172,473.58|6.51%|1.48%|0.65%|0.77%|

 Main business data of the prior year restated according to the changed statistical caliber for this Reporting Period
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2016
3.Whether revenuefromphysical sales is higherthan service revenue
√Yes□No
|||||||
|-|-|-|-|-|-|
|Businesssegment|Item|Unit|2016|2015|+/-%|
|Electronics|Salesvolume|0,000units|1219|1,136|7.31%|
||Outputvolume|0,000units|983|914|7.55%|
||Inventory|0,000units|127|129|-1.55%|

 Reason forany over30%YoYmovements in thedataabove
√Applicable□ Not applicable
4.Execution progress ofmajor signedsales contracts in this Reporting Period
□Applicable√ Not applicable
5.Breakdown ofoperating costs
By product
Unit:RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Product|Item|2016||2015|||+/-%|
|||Amount|Asapercentageofoperatingcosts(%)||Amount|Asapercentageofoperatingcosts(%)||
|ColorTVs|ColorTVs|10,729,196,625.12|61.25%||11,006,357,581.37|68.55%|-2.52%|
|Whitegoods|Whitegoods|1,354,850,701.01|7.73%||1,276,893,910.52|7.95%|6.11%|
|Mobilephones|Mobilephones|888,167,026.43|5.07%||748,974,690.95|4.66%|18.58%|
|Others|Others|4,546,115,990.43|25.95%||3,023,271,002.78|18.84%|50.37%|

Notes:
6.Changes inthe scopeofthe consolidated financialstatements for thisReporting Period
√Yes□No
(1) Disposal ofthesubsidiaries
① On 31 May. 2016, the Company written off Changshu Konka Electronic Co., Ltd.. Since then,
KonkaGroupCo.,Ltd. AnnualReport2016
the Companynomore included it in theconsolidated scope.
② On 3 Jan. 2016, the Company written offKONKAAMERICA,INC.，Since then, theCompany nomore included itin theconsolidated scope.
③ On 1 Nov. 2016, the Company listed the transfer of51% equity of Shenzhen Konka Information Network Co., Ltd.. Sincethen, theCompany nomore included itin theconsolidated scope.
(2) Changes of theconsolidated scope ofotherreasons
① On 31 Dec. 2015, the Company's subsidiary, Konka Household Appliances Investment signed agreement with Shenzhen Dingshengxin Mould Technology Consultation Co., Ltd. Since 1 Jan. 2016, Dingshengxin Mould Technology Consultation Co., Ltd. no longer entrusted Konka Household Appliances Investment to manage its holding of6.18% shares of Precision Mold, and since 1 Jan. 2016, the Precision Mold and its subsidiaries (Kunshan Jielunte Mould Plastic Co., Ltd, Dongguan Xuda Mould Plastic Co., Ltd.,Chuzhou Jielunte Mould Plastic Co., Ltd., Anhui Jiasen Precision Technology Co., Ltd., Wuhan Jielunte Mould Plastic Co., Ltd. and Dongguan Konka Mould PlasticCo.,Ltd.), would beexcluded from consolidated statements scope.
② On 17 Jul. 2016, the Company set up Zhongkang Supply Chain Management Co., Ltd. with nature person Wu Guoren and Xiao Yongsong, with registered capital of USD1.5 million, of which Konka Group invested cash USD765,000, and held51% equity, Wu Guoren invested cash USD375,000, and held25% equity, and Xiao Yongsong invested cash USD360,000, and held24% equity. The Company owned the controlling right, and included it into consolidated scope since 15 Jul. 2016.
③ On 30 Sep. 2016, the Company set up Yilifang (Hainan) Science& Technology Co., Ltd., with registered capital of RMB20 million,100% invested by the Company. Since 30 Sep. 2016, it was included intotheconsolidated scope.
④ On 1Apr. 2016, Shenzhen Konka E-display Co., Ltd., a subsidiary of the Company, funded the setup of its fully owned subsidiary, Shenzhen Kangqiao Yilian Science& Technology Co., Ltd., with registered capital of RMB5 million. As at the balance sheet date, the actual investment was RMB5, 000.00. The Company owned the controlling right, and included it into consolidated scope since 1Apr.2016.
⑤ On 31 Oct. 2016, the Company set up the Chuzhou Konka Science& Technology Industry Development Co., Ltd. in Anhui, with registered capital of RMB40 million,100% invested by the Company.The shareholder should pay the capital before 26 Feb. 2017, and has not actually paid out as at the report issuance date. The Company owned the controlling right, and included it into consolidated scopesince 31Oct. 2016.
7.Major changes in thebusiness, products orservices in thisReporting Period
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2016
8.Main customers and suppliers
Main customers
|||
|-|-|
|Totalsalestotopfivecustomers(RMB)|4,731,230,318.90|
|TotalsalestotopfivecustomersasapercentageofthetotalsalesforthisReportingPeriod(%)|23.31%|
|TotalsalestorelatedpartiesamongtopfivecustomersasapercentageofthetotalsalesforthisReportingPeriod(%)|0|

Information about top fivecustomers
|||||
|-|-|-|-|
|No.|Customer|Salesamount(RMB)|AsapercentageofthetotalsalesforthisReportingPeriod(%)|
|1|Customer1|1,508,455,484.54|7.43%|
|2|Customer2|1,390,625,530.80|6.85%|
|3|Customer3|680,316,433.51|3.35%|
|4|Customer4|550,883,797.36|2.71%|
|5|Customer5|600,949,072.69|2.96%|
|Total|--|4,731,230,318.90|23.31%|

 Other information about themain customers
√Applicable□ Not applicable
None of the top five customers were related parties of the Company. And none of theCompany’s directors, supervisors, executive officers, core technicians,over5% shareholders, actual controller orany otherrelated parties held equity interests inthemajorcustomers, directly or indirectly. Main suppliers
|||
|-|-|
|Totalpurchasesfromtopfivesuppliers(RMB)|4,253,121,609.25|
|Total purchases from top five suppliers as a percentage of thetotalpurchasesforthisReportingPeriod(%)|35.44%|
|TotalpurchasesfromrelatedpartiesamongtopfivesuppliersasapercentageofthetotalpurchasesforthisReportingPeriod(%)|0|

Information about top fivesuppliers
|||||
|-|-|-|-|
|No.|Supplier|Purchaseamount(RMB)|AsapercentageofthetotalpurchasesforthisReportingPeriod(%)|
|1|Supplier1|1,162,437,795.00|9.69%|
|2|Supplier2|984,083,817.23|8.20%|
|3|Supplier3|765,741,373.64|6.38%|
|4|Supplier4|683,232,461.33|5.69%|
|5|Supplier5|657,626,162.05|5.48%|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|Total|--|4,253,121,609.25|35.44%|

 Other information about themain suppliers
√Applicable□ Not applicable
None of the top five suppliers were related parties of the Company. And none of theCompany’s directors, supervisors, executive officers, core technicians, over5% shareholders, actual controller orany otherrelated parties held equity interests inthemajorsupp5%liers, directly or indirectly. (III) Expense
Unit:RMB
||||||
|-|-|-|-|-|
||2016|2015|+/-%|Reasonforanysignificantchange|
|Sellingexpenses|2,285,998,285.97|2,448,337,549.43|-6.63%||
|Administrativeexpenses|607,579,115.65|695,731,013.59|-12.67%||
|Financecosts|154,764,546.12|350,616,323.55|-55.86%|Considerabledecreaseinexchangeloss|

(IV)R&D input
√Applicable□ Not applicable
TheR&D expenditure in this Reporting Period was RMB192 million. The Company continued to enhance theR&D input and tried to lay a solid foundation for it to carry out product differentiation through constantly developing new products, studying new techniques, altering the existing equipment and continuously enriching the product varieties and series. Meanwhile, it constantly carried out technical innovation and encouraged suggestions to increase its production efficiency and core competitiveness.
Details aboutR&D input:
|||||
|-|-|-|-|
||2016|2015|+/-%|
|NumberofR&Dpersonnel|1,203|1,213|-0.82%|
|R&D personnel as apercentage in the totalemployees|6.92%|6.54%|0.38%|
|R&Dinput(RMB)|191,650,648.39|229,397,281.19|-16.45%|
|R&Dinputasapercentageinoperatingrevenues|0.94%|1.25%|-0.31%|
|Capitalized R&D input(RMB)|0.00|0.00|0.00%|
|Capitalized R&D input as apercentage in the total R&Dinput|0.00%|0.00%|0.00%|

Reasons for any significant YoY change in the percentage of theR&D input in the operating
KonkaGroupCo.,Ltd. AnnualReport2016
revenues
□Applicable√ Not applicable
Since 1Jan. 2016, the Precision Mold and its subsidiaries (Kunshan Jielunte Mould Plastic Co., Ltd, Dongguan Xuda Mould Plastic Co., Ltd.,Chuzhou Jielunte Mould Plastic Co., Ltd., Anhui Jiasen Precision Technology Co., Ltd., Wuhan Jielunte Mould Plastic Co., Ltd. and Dongguan Konka Mould Plastic Co., Ltd.), would be excluded from consolidated statements scope. Therefore, theR&D expenditure of the aforesaid companies was excluded from the consolidated financial statements.
Reason forany sharp variation inthe percentageof thecapitalizedR&D inputand rationale
□Applicable√ Not applicable
(V) Cash flows
Unit:RMB
|||||
|-|-|-|-|
|Item|2016|2015|+/-%|
|Subtotal of cash inflows fromoperatingactivities|19,092,835,700.32|19,318,005,896.78|-1.17%|
|Subtotal of cash outflows due tooperatingactivities|20,076,092,302.55|18,028,405,414.12|11.36%|
|Net cash flows from operatingactivities|-983,256,602.23|1,289,600,482.66|-176.25%|
|Subtotal of cash inflows frominvestingactivities|9,979,263,572.51|3,818,980,972.35|161.31%|
|Subtotal of cash outflows due toinvestingactivities|9,876,845,908.02|3,970,903,850.94|148.73%|
|Net cash flows from investingactivities|102,417,664.49|-151,922,878.59|167.41%|
|Subtotal of cash inflows fromfinancingactivities|7,172,728,955.54|3,134,261,903.06|128.85%|
|Subtotal of cash outflows due tofinancingactivities|5,839,979,604.35|4,388,415,298.00|33.08%|
|Net cash flows from financingactivities|1,332,749,351.19|-1,254,153,394.94|206.27%|
|Net increase in cash and cashequivalents|532,748,093.79|-152,081,985.73|450.30%|

Explanation of why thedata abovevaried significantly
KonkaGroupCo.,Ltd. AnnualReport2016
√Applicable□ Not applicable
The increased cash paid for goods and the payment for the land of the Headquarters resulted in the decreased net cash flows from operating activities.
The increased investment income and due wealth management amount resulted in the increased net cash flows from investingactivities.
The increased new borrowings and contributions from minority interests resulted in the increased net cash flows from financing activities.
Reason for any big difference between the net operating cash flow and the net profit for this Reporting Period
□Applicable√ Not applicable
III Analysisof non-corebusiness
√Applicable□ Not applicable
Unit:RMB
||||||
|-|-|-|-|-|
||Amount|Asapercentageoftotalprofit(%)|Source/reason|Recurringornot|
|Investmentincome|348,445,927.65|1256.35%|ConsiderableinvestmentincomefromthesaleofRefondstock,aswellasincreasedwealthmanagementincome|No|
|Profit/Loss on fairvaluechanges|-14,617,369.08|-52.70%|Decreasedmarketpriceoftransactionalfinancialassetsheldbysubsidiary|No|
|Assetimpairment|186,776,847.38|673.44%|Pricefallingprovisiononinventoriesuponnetrealizablevaluemeasurement|No|
|Non-operatingrevenue|270,828,423.34|976.49%|Governmentalsubsidiesandtaxrebatesonsoftware|Taxrebatesonsoftwarearerecurringwhiletheothersareuncertain|
|Non-operatingexpense|10,853,641.54|39.13%||No|

IVAnalysis ofassets and liabilities
(I) Significantchanges inthe assetcomposition
Unit:RMB
KonkaGroupCo.,Ltd. AnnualReport2016
||||||||
|-|-|-|-|-|-|-|
||December31,2016||December31,2015||Changeinpercentage(%)|Reasonforanysignificantchange|
||Amount|Asapercentageoftotalassets(%)|Amount|Asapercentageoftotalassets(%)|||
|Monetaryfunds|2,617,606,256.42|15.18%|1,706,446,928.92|11.97%|3.21%||
|Accountsreceivable|2,307,965,548.49|13.38%|2,048,813,439.34|14.38%|-1.00%||
|Inventories|4,287,413,944.35|24.86%|2,882,515,913.28|20.23%|4.63%||
|Investmentproperty|222,086,904.26|1.29%|227,718,178.53|1.60%|-0.31%||
|Long-termequityinvestments|309,648,120.37|1.80%|190,573,524.29|1.34%|0.46%||
|Fixedassets|1,573,978,914.03|9.13%|1,763,503,189.50|12.38%|-3.25%||
|Constructioninprogress|315,536,437.05|1.83%|207,854,180.88|1.46%|0.37%||
|Short-termborrowings|6,562,834,226.51|38.06%|4,150,773,195.76|29.13%|8.93%||
|Long-termborrowings|70,000,000.00|0.41%|23,700,000.00|0.17%|0.24%||

(II) Assets and liabilitiesmeasured atfairvalue
√Applicable□ Not applicable
Unit:RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Item|Openingbalance|Profit/lossonfairvaluechangesinthisReportingPeriod||Cumulativefairvaluechangeschargedtoequity|ImpairmentprovidedinthisReportingPeriod|PurchasedinthisReportingPeriod|SoldinthisReportingPeriod|Closingbalance|
|Financialassets|||||||||
|1. Financialassets at fairvaluethroughprofit/loss(excludingderivativefinancialassets)|33,196,377.28|||||||252,084,994.12|
|3.|2,874,068.30||8,547,425.00|||||55,777,425.00|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|Available-for-salefinancialassets||||
|Total of theabove|36,070,445.58|8,547,425|307,862,419.1|
|Financialliabilities|0||337,263.13|

Significant changes in themeasurement attributes of themain assets in thisReporting Period□Yes√No
(III) Restricted asset rights as oftheend ofthis Reporting Period
As of the end of this Reporting Period, there were no such circumstances where any main assets of the Company were sealed, distrained, frozen, impawned, pledged, conditionally cashable, not cashable orcould not beused for repaying debt.
V. Listof theinvestment
1.Overall condition
√Applicable□ Not applicable
||||
|-|-|-|
|InvestmentamountoftheReportingPeriod(RMB)|Investmentamountofthesameperiodoflastyear(RMB)|Variationamount|
|231,850,384.41|78,306,112.00|196.08%|

 2.Listofthesignificantequity investmentacquired fromtheReporting Period
□Yes√No
3. List of the significant non-equity investment has been executing during the Reporting Period
√Applicable□ Not applicable
Unit:RMB
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Projectname|Investmentmode|Whetheritisfixedassetinvestment|Involvedindustriesofinvestment|AmountofinvestmentinthisReportingPeriod|Actuallyaccumulativeinvestmentamountbytheendof|Fundsource|Projectprogress|Estimatedearnings|AccumulativeearningsbytheendoftheReportingPeriod|Thereasonoffailingtoreachtheprogressof|Disclosuredate(ifexisting)|Disclosureindex(ifexisting)|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||theReportingPeriod|||||planandestimatedearnings|||
|ProjectofKonkaScienceandInnovationCenter|Self-established|Yes|Electronicsindustry|0.00|0.00|Self-collectedfunds|0.00%|Undetermined|0.00|No|30Dec.2016|http://www.cninfo.com.cn/finalpage/201|
|||||||||||||6-12-30/1202973415.PDF|
|Total|--|--|--|0.00|0.00|--|--|0.00|0.00|--|--|--|

4.Investment on thefinancialassets
(1) Listof thesecurities investment
√Applicable□ Not applicable
Unit:RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Varietyofsecurities|Codeofsecurities|Nameofsecurities|Initialinvestmentcost|Accountingmeasurementmode|Openingbookvalue|Gain/lossonfairvaluechangeintheReportingPeriod|Cumulativefairvaluechangerecordedintoequity|PurchasedamountintheReportingPeriod|SoldamountintheReportingPeriod|Gain/lossforReportingPeriod|Closingbookvalue|Accountingtitle|Sourceofstock|
|Domesticandoverseasstock|300548|JouderPrecision|7,515|Measuredbyfairvalue|0|0|0|7,515|47,448.25|39,933.25|0|Available-for-salefinancialassets|Self-ownedfunds|
|Domesticandoverseasstock|002787|HuayuanPackaging|5,685|Measuredbyfairvalue|8,185|0|0|0|21,065.40|15,380.40|0|Available-for-salefinancialassets|Self-ownedfunds|
|Dom|3005|Tus-D|10,455|Measur|0|0|0|10,455|39,778|29,323.|0|Available|Self-ow|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|esticandoverseasstock|00|esign||edbyfairvalue|||||.22|22||-for-salefinancialassets|nedfunds|
|Domesticandoverseasstock|000002|VankeA|2,311,748.07|Measuredbyfairvalue|2,865,883.30|0|0|0|2,346,200|34,451.93|0|Available-for-salefinancialassets|Self-ownedfunds|
|Domesticandoverseasstock|300241|RefondOptoelectronics|243,683,765.60|Measuredbyfairvalue|0|-20,521,800|0|243,683,765.60|11,291,324.36|319,508.73|212,190,150|Available-for-salefinancialassets|Self-ownedfunds|
|Othersecuritiesinvestmentheldattheperiod-end|||0|--|0|0|0|0|0|0|0|--|--|
|Total|||246,019,168.67|--|2,874,068.30|-20,521,800|0|243,701,735.60|13,745,816.23|438,597.53|212,190,150|--|--|
|DisclosuredateoftheBoardannouncementonapprovalofthesecuritiesinvestment|||Notapplicable|||||||||||
|Disclosuredateofthegeneralmeetingannouncementonapprovalofthesecuritiesinvestment(ifany)|||Notapplicable|||||||||||

(2) Listof thederivative financialinstruments
√Applicable□ Not applicable
|||
|-|-|
|Sourceofinvestmentfunds|USDfinancing|
|Lawsuit(ifapplicable)|N/A|
|Disclosure date of the announcement about theboard’sconsentfortheinvestment|24May2014|
|Disclosure date of the announcement about the|10Jun.2014|

KonkaGroupCo.,Ltd. AnnualReport2016
|||
|-|-|
|generalmeeting’sconsentfortheinvestment||
|RiskanalysisandriskcontrolmeasuresforpositionsheldinderivativesintheReportingPeriod|We engage in forward forex transactions to reduce the currency risk whensecuring foreign-currency financing. This is very needed in our routineoperationandisincompliancewiththeapplicablelawsandregulations.Wehave formulated the Management Rules of Konka Group Co., Ltd. forInvestment In Derivative Financial Instruments, making clear the relevantconsideration and approval procedure, risk control, etc.. We always signforward forex contracts with large banks such as theBank of China, whichoperate steadily and have good credit standing, which could help preventlossonforwardforexcontractsduetobankfailure.|
|Changes in market price or fair value ofderivatives invested in the Reporting Period(specific methods used and relevant assumptionand parameter settings shall be disclosed foranalysisoffairvalueofderivatives)|How we usually measure the fair value of derivative financial instruments:Based on the forward forex sales and purchase contracts that are signedbetweentheCompanyandbanksandhavenotexpiredinaReportingPeriod,we recognize the differences between the quotations for these contracts onthe balance sheet dates provided by the banks and the contractual prices astransactional financial assets or liabilities, and the profit/loss on fair valuechanges is recognized accordingly. Because these contracts have locked inexchange rates, no changes will occur when comparing the fair value onsigningdateswiththatondeliverydates.|
|SignificantchangesintheCompany’saccountingpolicies and specific accounting principles forderivatives in the Reporting Period as comparedtothepriorperiod|N/A|
|Special opinions expressed by independentdirectors concerning the Company’s derivativesinvestmentandriskcontrol|It is considered necessary for the Company to lock in foreign-currencyfinancing costs through financial instruments, because it could effectivelyreduce the currency risk when securing foreign-currency financing. TheCompany has formulated the internal control mechanism for investment inderivative financial instruments, and the relevant risk control measures thattheCompanyhastakenareconsideredeffective.|

Unit: RMB Ten Thousand Yuan
||||||
|-|-|-|-|-|
|Typeofderivativefinancialinstrument|Openingcontractualamount|Closingcontractualamount|Profit/lossintheReportingPeriod|ClosinginvestmentamountasapercentageoftheCompany’sclosingnetassets|
|Forwardforexcontract|224,712.77|137,247.18|2,424.21|47.30%|

*Note:Fairvaluechangesofforwardforexcontractssignedin2016generatedprofitofRMB000.
5.Use ofraised funds
□Applicable√ Not applicable
No suchsituationofthe Company duringthe Reporting Period.
KonkaGroupCo.,Ltd. AnnualReport2016
VI.Selling of thesignificantassets andtheequities
1.Listoftheselling ofthe significantassets
□Applicable√ Not applicable
No suchsituationofthe Company duringthe Reporting Period.
2.Listoftheselling ofthe significantequities
□Applicable√ Not applicable
VII. Analysis ofthemajor controlling andstock-participating companies
√Applicable□ Not applicable
List of the stock-participating companies which the influence over10% of the net profits of the Company bythemajor subsidiaries
Unit:RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Name|Type|Mainproductsorservices|Registeredcapital|Totalassets|Netassets|Operatingrevenues|Operatingprofit|Netprofit|
|ShenzhenWankaidaScienceandTechnologyCo.,Ltd.|Subsidiary|Softwaretechnologydevelopmentandmaintenance|RMB10000000|442,644,302.61|428,143,182.10|101,362,000.00|91,390,355.03|88,902,815.12|
|AnhuiKonkaTongchuangHouseholdAppliancesCo.,Ltd.|Subsidiary|Productionandsaleofrefrigerators,washingmachinesandotherhouseholdappliances|RMB180000000|992,836,218.84|-6,503,969.08|1,853,307,611.16|10,612,650.38|38,922,393.22|
|AnhuiKonkaElectronicCo.,Ltd.|Subsidiary|Productionandsaleofmultimediaproducts|RMB140000000|1,119,921,701.25|351,732,719.32|6,179,232,216.41|28,443,976.70|64,421,804.56|
|EnRayTekOptoelectronics(Shanghai)Co.,Ltd.|Jointstockcompany|ProductionandsaleofLED|USD64196600|1,639,066,288.40|250,847,074.84|207,977,609.60|-144,634,650.67|-80,323,704.62|
|ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd.|Subsidiary|Productionandsaleofmobilecommunicationproducts&saleofmultimediaproducts|RMB120000000|474,385,953.88|-234,709,762.41|1,035,301,736.36|-329,237.60|9,846,784.05|
|KunshanKonkaElectronicCo.,Ltd.|Subsidiary|ProductionandsaleofTFT-LCMandmultimedia|RMB350000000|646,857,383.41|313,270,802.21|2,273,507,169.10|-6,728,717.96|1,261,608.07|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||||
|-|-|-|-|-|-|-|-|-|
|||products|||||||
|DongguanKonkaElectronicCo.,Ltd.|Subsidiary|Productionandsaleofmultimediaproducts|RMB266670000|785,778,165.02|637,195,715.82|34,980,993.18|98,800,518.54|82,194,724.90|
|HongKongKonkaCo.,Ltd.|Subsidiary|Export&importofelectromechanicalandelectronics|HKD500000|1,539,004,276.07|112,080,521.02|3,822,857,341.93|60,674,120.47|44,458,558.00|

Subsidiaries acquired or disposed during theReporting Period:
√Applicable□ Not applicable
||||
|-|-|-|
|Nameofsubsidiary|PurposeforacquiringordisposingthesubsidiaryintheReportingPeriod|Effectontheoverallproductionandbusinessperformance|
|ChangshuKonkaElectronicCo.,Ltd.|Liquidation|NosignificantinfluenceonachievementduringtheReportingPeriod|
|KONKAAMERICA,INC.|Liquidation||
|ShenzhenKonkaInformationNetworkCo.,Ltd.|Transfer51%stockright||
|ShenzhenKonkaPrecisionMoldManufacturingCo.,Ltd.anditssubsidiarycompanies(KunshanJielunteMouldPlasticCo.,Ltd.,DongguanXudaMouldPlasticCo.,Ltd.,ChuzhouJielunteMouldPlasticCo.,Ltd.,AnhuiJiasenPrecisionTechnologyCo.,Ltd.,WuhanJielunteMouldPlasticCo.,Ltd.,DongguanKonkaMouldPlasticCo.,Ltd.)|SubsidiarycompanyKonkaHouseholdAppliancesInvestment&DevelopmentCo.,Ltd.signedagreementwithShenzhenDingshengxinMouldTechnologyConsultingCo.,Ltd.on31Dec.2015.From1Jan.2016,ShenzhenDingshengxinMouldTechnologyConsultingCo.,Ltd.wouldnotentrustKonkaHouseholdAppliancesInvestment&DevelopmentCo.,Ltd.tomanage6.18%stockrightofprecisemoulds.||
|ZhongkangSupplyChainManagementCo.,Ltd.|Establishmentwithcontributionofcapital||
|Yilifang(Hainan)ScienceandTechnologyCo.,Ltd.|Establishmentwithcontributionofcapital||
|ShenzhenKangQiaoYiLianScienceandTechnologyCo.,Ltd.|Establishmentwithcontributionofcapital||
|ChuzhouKonkaScientificandTechnologicalIndustryDevelopmentCo.,Ltd.|Establishmentwithcontributionofcapital||

List ofthemajor controllingstock-participating companies
There was no information of the major controlling stock-participating companies of the Company
needed tobedisclosed during theReporting Period.
VIII. Listofthe structuredmain bodies controlledby theCompany
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2016
IX.Outlookon futuredevelopmentof thecompany
In 2017, macro-economic situation and industrial environment will be still not promising. Macro-economic growth is still slow.The structural reform of supply will deepen continuously. The permeation of internet into industry intensifies. The integration of different industries further intensifies. Market competition further deteriorates. Meanwhile, new opportunities will constantly emerge.
Thethoughtof business developmentin2017
1.Pushforwardbusinesstransformation
The company will unswervingly upgrade original simplex mode of hardware development to the mode of hardware+ software, terminal+ user and investment control+ finance. Original simplex product thought will transfer tothe thought of software, platform and users. In addition, this thought will be pushed into every link of the whole business chain to rapidly transform the company to be a platform-type enterprise.
2.Achieve scale expansion
In 2017, the company will use the strategy of scale economy and proactive marketing means to push forward the stable, continuous and large-scale development of existing businesses of the company.
3.Structural reform
In 2017, the company will continuously deepen the reform of each business. Businesses of the company will be operated in total marketization as soon as possible. The vitality of businesses will be anew irradiated; operation mechanism will be more reasonable; stimulation will be more effective.
4.Pay attention to key nodes of businesses
Color TV sale in domestic market: input-output ratio will be emphasized in 2017; structure of products will be continuously improved on the basis of guaranteeing scale of market; popularization of intelligent TV products will be accelerated to guarantee the further enhancement of comprehensive ability of making profit. In addition, the company will invest more in brand and development in 2017and layfirm foundation forlong-term development ofthe company.
Color TV manufacture: Efficiency and quality management will be emphasized in 2017. Functions of manufacture base will be reasonably positioned; manufacture upgrade project will be pushed forward; therelationship between efficiency and quality will bestrictly balanced.
ColorTV sale in foreign market: In 2017, the company will actively expand sale channels, intensify the ability of supply chain management and control and enhance the ability of creating value for customers.
Internet business: In 2017,thecompany plans to rapidly increase operation revenue through
KonkaGroupCo.,Ltd. AnnualReport2016
expanding onlineshoppingmall, education, medical treatment, gameand soon.At thesame time, the work ofusers operation will bewell done.
Business of white goods: In 2017, scale will be actively expanded. While maintaining the rapid development of online channels, the stable growth of offline channels will be guaranteed. The company will build a long-term profit-making model with sustainable development, tamp the foundation of the brand of healthy white goods and pursue the virtuous cycle of scale benefits on the premiseofsustainable development.
Business of mobile phone: In 2017, the high-efficiency integration of whole chain will be pushed forward. The company will improve quality and expand operation scale on the premise of comprehensively controlling operation cost, actively explore the opportunities in market segment and seek the development opportunities in the market with differentiation, small scale, low competition intensity and high gross profit.
5.Create real competitiveproducts
“Competitive products, wonderful life” is the core brand concept of the company. Product is the foundation of the company. The company will start from planning and create competitive products with whole-chain spirit of craftsman in the links of product R& D, trial-production, technology, quality control, logistics, sale, propaganda, installationservice and after-saleservice.
X. Listof thereceived researches, visits andinterviews
1.Particulars aboutresearches,visits andinterviews received inthis Reporting Period
□Applicable√ Not applicable
No suchsituationofthe Company duringthe Reporting Period.
KonkaGroupCo.,Ltd. AnnualReport2016
Section V. Significant Events
I. List of the profits distribution of the common shares and turning capital reserve into share capital of theCompany
List of the formulation, execution or adjustment of the profits distribution policies of the common shares, especially thecash dividend policies
√Applicable□ Not applicable
The cash dividend policy of the Company is clearly stated in its Articles of Association, with explicit dividend standards and ratios, as well as sound decision-making procedures and mechanisms. Independent directors have faithfully performed their duties and performed their function well by giving minority shareholders opportunities to express their opinion and demands and effectively safeguarding their lawful interests. The Company has strictly executed the cash dividend policy in the Articles of Association, and cash dividend distribution of the Company is in linewith theArticles ofAssociation and relevant resolutionsoftheShareholders’General Meeting. According to the requirements of the Listed Company Supervision Guidelines No. 3--Listed Company Cash Dividends issued by CSRC, the Company had revised the profit distribution policy stipulated by the Articles of Association, further clarifying the priority and proportion of cash dividends in profit distribution. In 2016, the company will further normalize shareholders return mechanism, push forward the establishment of scientific, sustainable and stable shareholders return mechanism, enhance the transparency and operability of profit distribution policy and decision and practically protect the legal rights and interests of investors. The company has formulated Shareholders Return Planning forthe Subsequent ThreeYears(2016-2018).
|||
|-|-|
|Specialstatementaboutthecashdividendpolicy||
|In compliance with the Company’s Articles of Association and the resolution of the generalmeeting|Yes|
|Specificandcleardividendstandardandratio|Yes|
|Completedecision-makingprocedureandmechanism|Yes|
|Independentdirectorsfulfilledtheirresponsibilitiesandplayedtheirduerole.|Yes|
|Minority shareholders had the chance to fully express their opinion and desire and their legalrightsandinterestswerefullyprotected.|Yes|
|In adjustment or alteration of the cash dividend policy, the conditions and procedure were incompliancewithregulationsandtransparent.|Yes|

Pre-plan or plan for profit distribution and turning capital reserve into share capital in recent 3 years (including theReporting Period)
1.The 2016profits distributionpreplan oftheCompany was as follows:
The 2016 retained earnings after audit of the Company that attributed to the owner of the parent was
of RMB-427,163,254.63 and according to the actual conditions and the long-term development
KonkaGroupCo.,Ltd. AnnualReport2016
demands, the Company adviced not to distribute cash bonus with no bonus share and without executing theturn from reserved funds toshare capital in2016.
2.The 2015profits distributionpreplan oftheCompany was as follows:
The 2015 net profits after audit of the Company that attributed to the owner of the parent was of RMB-1,256,819,314.51 with the retained earnings of RMB-522,836,282.66 and according to the actual conditions and the long-term development demands, the Company adviced not to distribute cash bonus with no bonus share and without executing the turn from reserved funds to share capital in 2015.
3.The 2015semi-annual profits distribution preplan oftheCompany was as follows:
Based on the total share capital of 1,203,972,704 shares at the month-end of Jun. 2015, the Company executed the turning capital reserve into share capital and to increase 10 shares by transferring for every 10 shares to the whole shareholders with the total amount of 1,203,972,704 shares and after which thetotal share capital oftheCompany increased to 2,407,945,408.
4.The 2014profits distributionplan of theCompany was as follows:
Based on theCompany’s total share capital of 1,203,972,704 shares as at the end of 2014, the Company was proposed to distribute a cash dividend of RMB0.1 (tax included) to every 10 shares. The distributed profits would aggregate RMB 12,039,727.04 and the retained profit would be carried forward into thenextyear for distribution.
Cash dividend distribution of the common shares of the Company of the recent 3 years (including the Reporting Period)
Unit:RMB
|||||||
|-|-|-|-|-|-|
|Dividendyear|Amountofcashdividend(includingtax)|Netprofitbelongingtoshareholdersofthelistedcompanyinconsolidatedstatementofdividendyear|Theratioaccountinginnetprofitwhichbelongstoshareholdersofthelistedcompanyinconsolidatedstatement|Amountofthecashdividendbyothermethods|Ratioofthecashdividendbyothermethods|
|2016|0.00|95,673,028.03|0.00%|0.00|0.00%|
|2015|0.00|-1,256,819,314.51|0.00%|0.00|0.00%|
|2014|12,039,727.04|52,623,527.86|22.88%|0.00|0.00%|

 The Company (including its subsidiaries) made profit in the Reporting Period and the profits distribution of the common shares held by the shareholders of the Company (without subsidiaries) was positive, but it did not put forward a preplan for cash dividend distribution of the common shares:
□Applicable√ Not applicable
II. Pre-plan for profit allocation and turning capital reserve into share capital for the
Reporting Period
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2016
The Company planed not to distribute the cash dividend with no bonus share and without executing the turnfrom reserved funds to share capital.
III. Performance ofcommitments
1. Commitments completed by the Company, the shareholders, the actual controllers, the purchasers, the Directors, the Supervisors and the Senior Executives or the other related parties during the Reporting Period and thosehadn’t been completed execution up to the period-end
√Applicable□Not applicable
||||||||
|-|-|-|-|-|-|-|
|Commitment|Commitmentmaker|Commitmenttype|Contentsofcommitment|Dateofcommitment|Periodofcommitment|Execution|
|Commitmentsatthetimeofinitialpublicissuanceorre-financing|KonkaGroupCo.,Ltd.|Othercommitment|Theirregularityactionssuchashadn’tdisclosetheidleland,bidupthelandpricewithpropertyhoardingaswellasbidupthehousingpricesbythesubsidiarieswhichengagedintherealestatebusinessthatsubordinatedtoKonkaGroupCo.,Ltd.causedthelossesforthelistedcompaniesandtheinvestors,thosesubsidiariesshouldburdenthecompensationresponsibility.|12Apr.2016|31Dec.2016|Fulfilled|
||OCTHoldingsCompany|Othercommitment|Theirregularityactionssuchashadn’tdisclosetheidleland,bidupthelandpricewithpropertyhoardingaswellasbidupthehousingpricesbythesubsidiarieswhichengagedintherealestatebusinessthatsubordinatedtoKonkaGroupCo.,Ltd.causedthelossesforthelistedcompaniesandtheinvestors,thosesubsidiariesshouldburdenthecompensationresponsibility.|12Apr.2016|31Dec.2016|Fulfilled|
|Executedtimelyornot?|||||Yes||
|Detailedreasonforfailingtoexecuteandthenextplan(ifany)|||||Notapplicable||

 2. Assets or projects existing profit forecast, which were still in the profit forecast period, the Company madenote andexplainto the assets orproject arrived atoriginalprofitforecast□Applicable√ Not applicable
IV. Occupation of theCompany’s capital by the controlling shareholder or its related parties fornon-operating purposes
□Applicable√ Not applicable
No suchcases in theReporting Period.
V. Explanation by the Board of Directors, the Supervisory Committee and the Independent Directors (if any) about the “non-standard audit report” issued by the CPAs firm for the Reporting Period
□Applicable√ Not applicable
VI. Explanation of the changes of the accounting policy, the accounting estimates and the accounting methods compared to thelastfinancial report
□Applicable√ Not applicable
No suchcases in theReporting Period.
VII. Explain retrospective restatement due to correction of significant accounting errors in the Reporting Period
□Applicable√ Not applicable
No suchcases in theReporting Period.
KonkaGroupCo.,Ltd. AnnualReport2016
VIII. Explain change of the consolidation scope as compared with the financial reporting of lastyear
√Applicable□Not applicable
(I) Subsidiary companies treatment
1. Changshu Konka Electronic Co., Ltd. was canceled on 31 May 2016. Therefore, it will not be in merger from 31May 2016.
2. KONKAAMERICA, INC. was canceled on 3 Jan. 2016. Therefore, it will not be in merger from January 3,2016.
3. On 1 Nov. 2016,51% stock right of Shenzhen Konka Information Network Co., Ltd. was transferred.Therefore, it will not bein merger from November 1,2016.
(II) Changeofmergerinotherreasons
1. Subsidiary company Konka Household Appliances Investment& Development Co., Ltd. signed agreement with Shenzhen Dingshengxin Mould Technology Consulting Co., Ltd. on 31 Dec. 2015. From 1 Jan. 2016, Shenzhen Dingshengxin Mould Technology Consulting Co., Ltd. would not entrust Konka Household Appliances Investment& Development Co., Ltd. to manage6.18% stock right of precise moulds. From 1 Jan. 2016, Shenzhen Konka Precision Mold Manufacturing Co., Ltd. and its subsidiary companies (Kunshan Jielunte Mould Plastic Co., Ltd., Dongguan Xuda Mould Plastic Co., Ltd., Chuzhou Jielunte Mould Plastic Co., Ltd., Anhui Jiasen Precision Technology Co., Ltd., Wuhan Jielunte Mould Plastic Co., Ltd., Dongguan Konka Mould Plastic Co., Ltd.) willnot bein merger.
2. The company and natural persons Wu Guoren and Xiao Yongsong founded Zhongkang Supply Chain Management Co., Ltd. on 15 Jul. 2016 with registered capital USD 1500 thousand. Konka Group contributed cash USD765 thousand dollars holding51% stock right; Wu Guoren contributed cash USD375 thousand dollars holding25% stock right; Xiao Yongsong contributed cash USD 360 thousand dollars holding24% stock right. The company owns control right and brings it into merger from 15Jul.2016.
3. The company registered to set up Yilifang (Hainan) Science and Technology Co., Ltd. in Hainan on 30 Sept. 2016 with registered capital RMB 20 million. The company holds all shares. It is brought into merger from September30,2016.
4. Subsidiary company Shenzhen Konka E-display Co., Ltd. invested to set up wholly-owned subsidiary Shenzhen KangQiaoYiLian Science and Technology Co., Ltd. on 1 Apr. 2016 with registered capital RMB 5 million. By the date of balance sheet, RMB 5,000.00 had been invested. The company had control right and brought it intomerger fromApril 1,2016.
5. The company registered to set up Chuzhou Konka Scientific and Technological Industry Development Co., Ltd. in Anhui on 31 Oct. 2016 with registered capital RMB 40 million. Before the date of report submission, the company had not paid. The company has control right and
KonkaGroupCo.,Ltd. AnnualReport2016
brought it into merger from 31Oct. 2016.
IX.Particulars aboutengagement anddisengagementof CPAsfirm
CPAs firm engaged at present
|||
|-|-|
|NameofdomesticCPAsfirm|RuihuaCertifiedPublicAccountants|
|Remuneration for domestic CPAs firm for theReportingPeriod(RMBTenThousandYuan)|120|
|Consecutive years of the audit services providedbydomesticCPAsfirm|4years|
|NameofdomesticCPAsfirm|TangMeiqi,ShenLingzhi,|
|NameofoverseasCPAsfirm(ifany)|Notapplicable|
|Remuneration for overseas domestic CPAs firmfor the Reporting Period (RMB Ten ThousandYuan)(ifany)|0|
|Consecutive years of the audit services providedbyoverseasCPAsfirm(ifany)|Notapplicable|
|NameofoverseasCPAsfirm(ifany)|Notapplicable|

Reengage theCPAsfirm at current period ornot?
□Yes√No
Reengage theCPAsfirm during auditing period ornot?
√Applicable□ Not applicable
During the Reporting Period, as approved by theShareholders’ General Meeting, the Company continued to engage Ruihua Certified PublicAccountants as the audit firm on internal control of the Company for 2016, with the auditing fee for the internal control in 2016 as RMB0.4 million(Not contain tax).
X. Particulars about trading suspension and termination faced after the disclosure of annual report
□Applicable√ Not applicable
XI.Bankruptcy andreorganization
□Applicable√ Not applicable
There was nosuch situation oftheCompany during theReporting Period.
XII. Significantlawsuitorarbitration
√Applicable□ Not applicable
|||||||||
|-|-|-|-|-|-|-|-|
|Basicsituationoflawsuit(arbitration)|Lawsuitamount(RMBTenThousand)|Whetherformintoestimatedliabilities|Processoflawsuit(arbitration)|Trialresultsandinfluencesoflawsuit(arbitration)|Situationofexecutionofjudgmentoflawsuit(arbitration)|Disclosuredate|Disclosureindex|
|Asforthedetails,pleaserefertotheNotes2.DescriptionoftheContingenciesoftheCommitmentsandtheContingenciesofChapterXIIoftheNotestotheFinancialReport||||||||

XIII. Punishmentand rectification
□Applicable√ Not applicable
No suchcases in theReporting Period.
XIV.Honesty situationsoftheCompany,its controlling shareholders andactual controller
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2016
XV.Listof theexecutionof thestock incentive plan, ESOP,orotherStaffincentives
□Applicable√ Not applicable
No suchcases in theReporting Period.
KonkaGroupCo.,Ltd. AnnualReport2016
XVI. Significantrelated-party transactions
1.Related-party transactions relevantto routine operation
√Applicable□ Not applicable
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Relatedparty|Relationship|Typeoftherelated-partytransaction|Contentoftherelated-partytransaction|Pricingprincipleoftherelated-partytransaction|Transactionprice|Transactionamount(RMBTenThousandYuan)|Proportioninsamekindoftransactions|Approvedtransactionquota(RMBTenThousandYuan)|Whetherexceedtheapprovedquota|Settlementmethodoftherelated-partytransaction|Similarmarketprice|Disclosuredate|Disclosureindex|
|AnhuiHualiPackingCo.,Ltd.|Underthesameactualcontroller|Purchaseofcommodities|Purchaseofmaterials|Negotiatedprice|Marketprice|3,406|0.32%|5,000|No|Cash|Notapplicable|8Apr.2016|http://www.cninfo.com.cn/finalpage/2016-04-08/1202150009.PDF|
|ShanghaiHualiPackingCo.,Ltd.|Underthesameactualcontroller|Purchaseofcommodities|Purchaseofmaterials|Negotiatedprice|Marketprice|1,431|0.13%|2,000|No|Cash|Notapplicable|8Apr.2016||
|HualiPacking(Huizhou)Co.,Ltd.|Underthesameactualcontroller|Purchaseofcommodities|Purchaseofmaterials|Negotiatedprice|Marketprice|1,031|0.10%|2,000|No|Cash|Notapplicable|8Apr.2016||
|OCTCo.,Ltd.anditsaffiliatedcompanies|Underthesameactualcontroller|Salesofgoods|SalesofgoodsSalesofLCD|Negotiatedprice|Marketprice|677|0.05%|1,000|No|Cash|Notapplicable|8Apr.2016||
|ShenzhenOCTPropertyServiceCo.,Ltd|Underthesameactualcontroller|Providepropertymanagementservices|Providepropertymanagementservices|Negotiatedprice|Marketprice|994|0.09%|1,000|No|Cash|Notapplicable|8Apr.2016||

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|ShenzhenOCTRealEstateCo.,Ltd|Underthesameactualcontroller|Provideservices|Assistindevelopment|Negotiatedprice|Marketprice|500|0.05%|1,000|No|Cash|Notapplicable|||
|Total||||--|--|8,039|--|12,000|--|--|--|--|--|
|Detailsoflargeamountofsalesreturns||||Notapplicable||||||||||
|Asforthepredictiononthetotalamountofroutine related-party transactions to beoccurred in the Reporting Period byrelevant types, the actual performance intheReportingPeriod(ifany)||||The Company has published the Forecasting Public Notice on Routine Related Transaction for Y2016(publicnoticeNo.2016-20)onSecuritiesTimes,ShanghaiSecuritiesNews,ChinaSecuritiesJournalandHongKongTaKungPaoaswellastheInternetwebsitedesignatedbyCSRChttp://www.cninfo.com.cnon8 Apr. 2016. In the Reporting Period, the basis for pricing, transaction price, transaction amount andsettlement methods of raw materials purchased by the Company were basically in accordance with theforecast.ThetotalamountwasRMB0.08039 million.||||||||||
|Reason for significant difference betweenthetransactionpriceandthemarketprice||||Notapplicable||||||||||

Note: Shanghai Huali packing Limited company for strategic transformation, the second half of 2016willbestrippedofitspackagingmaterialsbusinesstoSuzhouHualiEnvironmentalProtection Technology Co Ltd. In 2017, the company will no longer purchase color TV packaging materials to Shanghai Hua Sheng packaging Co.,ltd.。
2.Related-party transactions regardingpurchaseandsales of assets
□Applicable√ Not applicable
No suchcases in theReporting Period.
3.Related-party transactions common external investment
□Applicable√ Not applicable
No suchcases in theReporting Period.
4.Credits andliabilities with related parties
√Applicable□ Not applicable
Whether thereis non-operating creditsand liabilities with related parties
√ Applicable□Not applicable
Credits of parties related to account receivable
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Relatedparty|RelationwiththeCompany|Formationreason|Whetherthereisnon-operatingcapitaloccupation|Openingbalance(TenthousandYuan)|Amountnewlyaddedincurrentperiod(TenthousandYuan)|Amountrecoveredincurrentperiod(TenthousandYuan)|Interestrate|Currentinterest(TenthousandYuan)|Closingbalance(TenthousandYuan)|
|N/A|N/A|N/A|No|0|0|0|0%|0|0|
|Impactofrelatedcreditsonthe||Notapplicable||||||||

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|company'soperationresultandfinancialcondition|

Liabilities ofparties related toaccount payable
||||||||||
|-|-|-|-|-|-|-|-|-|
|Relatedparty|RelationwiththeCompany|Formationreason|Openingbalance(TenthousandYuan)|Amountnewlyaddedincurrentperiod(TenthousandYuan)|Amountreturnedincurrentperiod(TenthousandYuan)|Interestrate|Currentinterest(TenthousandYuan)|Closingbalance(TenthousandYuan)|
|OCTEnterprisesCo.|Controllingshareholder|Thecompanyappliesentrustedloantoit|0|160,000|0|3.10%|3596|160,000|
|OCTEnterprisesCo.|Controllingshareholder|Thecompanyappliesentrustedloantoit|0|90,000|0|3.18%|1542|90,000|
|OCTEnterprisesCo.|Controllingshareholder|Thecompanyappliesentrustedloanfromit|0|90,000|0|3.06%|581|90,000|
|OCTEnterprisesCo.|Controllingshareholder|Thecompanyappliesentrustedloanfromit|0|3,000|0|4.75%|7|3,000|
|Impactofrelatedliabilitiesonthecompany'soperationresultandfinancialcondition||ThecompanyappliesentrustedloanfromOCTEnterprisesCo.,whichmeetstheneedsofthecompany'sexistingbusinessdevelopmentandreducesthefinancingcost.|||||||

5.Othersignificantrelated-party transactions
□Applicable√ Not applicable
No suchcases in theReporting Period.
XVII. Significantcontracts andtheirexecution
1.Trusteeship, contractingand leasing
(1)Trusteeship
□Applicable√ Not applicable
No suchcases in theReporting Period.
(2) Contract
□Applicable√ Not applicable
No suchcases in theReporting Period.
KonkaGroupCo.,Ltd. AnnualReport2016
(3) Lease
√Applicable□ Not applicable
Lease description
No suchcases in theReporting Period.
During the Reporting Period, therent paid byKonkaR& DBuilding was approximately RMB 69,734,212.45.
The profits andlosses brought to thecompany toachieve thecompany's total profit in theReporting Period more than10%ofthe project
□Applicable√ Not applicable
No suchcases in theReporting Period.
2.Significantguarantees
√Applicable□ Not applicable
(1) List ofguarantees
Unit:RMBTenThousandYuan
|||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|GuaranteesprovidedbytheCompanyanditssubsidiariesforexternalparties(excludingthoseforsubsidiaries)||||||||||||||||
|Guaranteedparty||Disclosuredateofrelevantannouncement|Amountforguarantee||Actualoccurrencedate(dateofagreement)|Actualguaranteeamount||Typeofguarantee||Periodofguarantee||Executedornot||Guaranteeforarelatedpartyornot||
|N/A||N/A|0||N/A|0||N/A||0||NO||N/A||
|Total external guarantee lineapproved duringtheReportingPeriod(A1)|||||0|Total actual occurred amount of externalguaranteeduringtheReportingPeriod(A2)||||||||0||
|Total external guarantee line that has beenapproved at the end of the Reporting Period(A3)|||||0|Total actual external guarantee balance attheendoftheReportingPeriod(A4)||||||||0||
|GuaranteesprovidedbytheCompanyforitssubsidiaries||||||||||||||||
|Guaranteedparty|Disclosuredateofrelevantannouncement||Amountforguarantee|Actualoccurrencedate(dateofagreement)|||Actualguaranteeamount||Typeofguarantee||Periodofguarantee||Executedornot||Guaranteeforarelatedpartyornot|
|AnhuiTongchuang|21Nov.2014||30,000|1Jul.2016|||6,000||Generalguaranty||1year||No||No|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|AnhuiTongchuang|||||5Jun.2016|||||||2,000||Generalguaranty|1year|No||||No|
|Communicationtechnology|21Nov.2014||60,000||21Sept.2016|||||||50,000||Generalguaranty|1year|No||||No|
|AnhuiKonka|29Apr.2016||80,000||26Oct.2016|||||||10,000||Generalguaranty|1year||||||
|Yishijie|21Nov.2014||4,800||1Jul.2016|||||||2,000||Generalguaranty|1year|No||||No|
|HongKongKonka|8Apr.2016||307,500||Oct.24,2016|||||||3,389||Generalguaranty|1year|No||||No|
|HongKongKonka|||||8Nov.2016|||||||23,674||Generalguaranty|9months|No||||No|
|Total guarantee line approved for the subsidiariesduringtheReportingPeriod(B1)|||||||427,500||Total actual occurred amount ofguaranteeforthe subsidiaries during the Reporting Period(B2)||||||||97,063||||
|Totalguaranteelinethathasbeenapprovedforthesubsidiaries at the end of the Reporting Period(B3)|||||||597,050||Total actual guarantee balance for thesubsidiariesattheendoftheReportingPeriod(B4)||||||||97,063||||
|Guaranteesprovidedbythesubsidiariesfortheirsubsidiaries|||||||||||||||||||||
|Guaranteedparty||Disclosuredateofrelevantannouncement||Amountforguarantee||Actualoccurrencedate(dateofagreement)|||||Actualguaranteeamount||Typeofguarantee||Periodofguarantee|Executedornot|||Guaranteeforarelatedpartyornot||
|N/A||N/A||0||N/A|||||0||N/A||0|N/A|||N/A||
|TotalguaranteelineapprovedforthesubsidiariesduringtheReportingPeriod(C1)||||||||0||TotalactualoccurredamountofguaranteeforthesubsidiariesduringtheReportingPeriod(C2)||||||||0|||
|TotalguaranteelinethathasbeenapprovedforthesubsidiariesattheendoftheReportingPeriod(C3)||||||||0||TotalactualguaranteebalanceforthesubsidiariesattheendoftheReportingPeriod||||||||0|||

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||
|-|-|-|-|-|-|
||||(C4)|||
|TotalguaranteeamountprovidedbytheCompany(totaloftheabove-mentionedthreekindsofguarantees)||||||
|TotalguaranteelineapprovedduringtheReportingPeriod(A1+B1+C1)|427,500|TotalactualoccurredamountofguaranteeduringtheReportingPeriod(A2+B2+C2)|||97,063|
|TotalguaranteelinethathasbeenapprovedattheendoftheReportingPeriod(A3+B3+C3)|597,050|TotalactualguaranteebalanceattheendoftheReportingPeriod(A4+B4+C4)|||97,063|
|Proportionoftotalguaranteeamount(A4+B4+C4)tothenetassetsoftheCompany||33.45%||||
|Ofwhich:||||||
|Amountofdebtguaranteeprovidedforshareholders,actualcontrollerandtherelated-party(D)||||0||
|Amountofdebtguaranteeprovidedfortheguaranteedpartywhoseasset-liabilityratioisnotlessthan70%directlyorindirectly(E)||||97,063||
|Totalguaranteeamountexceeded50%ofthenetassets(F)||||0||
|Totalamountoftheabovethreeguarantees(D+E+F)||||97,063||
|Explanationontheoccurredwarrantyliabilityorpossiblebearingjointresponsibilityofliquidationduetoimmatureguarantee(ifany)||||N/A||
|Explanationonprovisionofguaranteesforexternalpartiesinviolationoftheprescribedprocedure(ifany)||||N/A||

Explanation onguarantee that adopts complex method
N/A
(2) Illegalprovision ofguarantees forexternal parties
□Applicable√ Not applicable
The Company did notillegally provideany guarantee for any external party in theReporting Period. 3.Cash assets management entrustment
(1)Wealthmanagement entrustment
√Applicable□ Not applicable
Unit: RMB Ten Thousand Yuan
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Nameofthetrustee|Whetherwastherelatedtransaction|Productiontype|Trustmanagementamount|Startdate|Expirationdate|Remunerationrecognitionmethod|Actualrecoveredamountofthe|Amountofprovisionforimpairment|Estimatedearnings|ActualgainsandlossesamountoftheReportingPeriod|Actualrecoveredsituationofthe|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||ReportingPeriod|loss(ifany)|||gainsandlossesoftheReportingPeriod|
|ShenzhenbranchofChinaConstructionBank|No|Principal-guaranteed|3,700|2016-6-21|2017-2-13|Principalandinterestguaranteed|0|N/A|72.07|58.98|Unrecovered|
|ShenzhenbranchofChinaConstructionBank|No|Principal-guaranteed|2,000|2016-6-21|2017-2-15|Principalandinterestguaranteed|0|N/A|39.29|31.88||
|ShenzhenbranchofChinaConstructionBank|No|Principal-guaranteed|1,300|2016-9-1|2017-2-13|Principalandinterestguaranteed|0|N/A|17.63|13.04||
|ShenzhenbranchofChinaConstructionBank|No|Principal-guaranteed|700|2016-9-1|2017-1-18|Principalandinterestguaranteed|0|N/A|8.00|7.02||
|PingAnBank|No|Principal-guaranteed|2,000|2016-8-3|2017-2-15|Principalandinterestguaranteed|0|N/A|25.76|19.03||
|ShenzhenbranchofICBC|No|Principal-guaranteed|5,000|2016-4-20|2017-2-16|Principalandinterestguaranteed|0|N/A|150.84|140.82||
|ShenzhenbranchofICBC|No|Principal-guaranteed|15,000|2016-12-30|2017-1-6|Principalandinterest|0|N/A|13.23|3.78||

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||||
|-|-|-|-|-|-|-|-|-|
|||||guaranteed|||||
|Total|29,700|--|--|--|0||326.82|274.55|
|Entrustedfinancialresourcessource||||||Privatecapital|||
|Overdueamountofprincipalandincomerecoverable||||||0|||
|Involvingthesituation(ifapplicable)||||||N/A|||
|DisclosuredateoftheapprovedannouncementoftheBoardofDirectorsofthetrustmanagement(ifany)||||||29Aug.2016|||
|DisclosuredateoftheapprovedannouncementoftheBoardofShareholdersofthetrustmanagement(ifany)||||||N/A|||
|Whetherthereisacontingencyplaninthefuture||||||Yes|||

(2) Entrustmentloans
□Applicable√ Not applicable
4Othersignificantcontracts
□Applicable√ Not applicable
No suchcases in theReporting Period.
XVIII. Social responsibilities
√Applicable□ Not applicable
(I)Fulfill the precise social responsibility of poverty alleviation
（1）Summary ofannual targeted poverty alleviation
We and China Youth Development Foundation (CYDF) have held the large public benefit activity “Heart Journey” since 2013. Four sessions of activities have been held until now. In 2013, we have helped thousands of migrant workers to go home; in 2014, we have planted tens of thousands of trees nationwide and improved the living conditions of 5,000 needy families by planting the economic and ecological trees; in 2015, we have donated nearly 100 music classrooms to the remote regions of Chinaby carrying out “Happy Music Classroom” Project with CYDF; in 2016, we have invested RMB 0.5 million to sponsor the professional training on 5,000 music teachers in the remoteregions ofChinaandpromotetheteacher team construction inpoverty-stricken areas.（2）Annualtargeted poverty alleviation oflisted company
||||
|-|-|-|
|Indicator|Unit|Qty./Progress|
|I.Overallconditions|——|——|
|Wherein: 1.Capital|RMBTenThousandYuan|50|
|2.Equivalentpaymentofgoodsandmaterials|RMBTenThousandYuan||
|3. Number of shake-off-poverty|Person||

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|peopleinarchiving|||
|II.Project-basedinvestment|——|——|
|4.Shakingoffpovertyoneducation|——|——|
|Wherein: 4.1. Financial aid to povertystudents|RMBTenThousandYuan||
|4.2.Numberofpovertystudents|Person||
|4.3.Investmentforimprovingtheeducationsourcesofpoverty-strickenarea|RMBTenThousandYuan|50|

（3）Follow-up targeted poverty alleviationplan
We will continue to hold the large public benefit activity “Heart Journey” with CYDF, and will improve the education and life of the left-behind children in rural areas with RMB 0.5 million in 2017.
（II）Other social responsibilities
The Company insists theprincipleofhealth, stabilityand sustainabledevelopment tobenefit shareholders and employees and satisfy customers. In pursuit ofeconomic profits and protection ofshareholders’profits, theCompany isactive in protecting legal rights of debtors andemployees, treating suppliers, customers and consumers in good faith, and participating in environmental protection and communityestablishment for harmonious development oftheCompany and society. 1. guarantee the rights and interests of shareholders and creditors
(1)The Company protects rights of shareholders
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 to guarantee 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 in Articles of Association and requirements inshareholders’ conference.
(2)The Company protects rights of creditors
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 responsibilities to suppliers and customers
(1)It is devoted to improvecustomer service quality.
KonkaGroupCo.,Ltd. AnnualReport2016
The Company is insisting philosophy of customer orientation to strengthen customer service management, service consciousness for employees, service levels and to protect rights for customers. Through customer service hot-line, field visit and follow-up service, the Company has set a good corporateimage forcustomers.
(2)Be honest tosuppliers
Following the principle of integrity and mutually beneficial cooperation, the Company keeps good cooperative relations with suppliers at each level. The corporate principle is open, fair and impartial to standardize procurement, protectsuppliers’ legal rights and lay solid foundation for further cooperation.
3.Be enthusiastictosocial and publicwelfareundertakings
Based on the principle of appreciating and repaying the society, the Company has participated in all kinds of activities for public welfare, cooperated with society, undertaken social responsibilities actively andpromoted harmonious development between enterpriseand society.
4.Be responsible foremployees
The Company insists the principle of people orientation to improve working environment, promote occupational skills, provide opportunity and platform for development and growth and encourage self upgradation and realization for employees. Mutual improvement for employees and enterprise could beachieved.
(1)Be honest and law-abiding toprotect legal rights foremployees
The Company would strictly comply with laws and regulations in Labor Law and Labor Contract Law to sign labor contract with employees with fair treatment in employment, payment, promotion, training, demission and retirement. Also, the Company would pay all kinds of insurances and housing fund for employees. Regular physical examination would be organized for each year. Any problems 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
KonkaGroupCo.,Ltd. AnnualReport2016
carry out all requirements positively to improve professional levels by normal training management. On the other hand, the Company would establish methods of self-training platform, training instructor, theme training and lectures to provide colorful training activities. Besides the work, professional and comprehensive qualitywould be fully promoted.
5.Be responsible forenvironment
The Company concerns about environmental changes and close relationships with environment by creating low carbon economy in technical innovation, from green manufacturing, green products to green industry circular economy. The Company would provide efforts in protecting global ecological environment. In June, 2012, subsidized products catalogue had been released jointly by National Development and Reform Commission, Ministry of Industry and Information and Ministry ofFinance.
In the new year, the Company would undertake all social responsibilities by improving strategic management, sustainable development and enterprise economic efficiency. It would retribute all shareholders and would protect legal rights for creditors and employees. To be honest to suppliers and customers, the Company would serve local economic development and participate in social public welfare activities and environment protection. It would undertake all responsibilities in many fields and make attributions to social, economic, and environmental sustainable development for a socialism harmonious society.
Does the listed company or its subsidiaries belong to the heavily polluting industries stipulated by the environmental protection authorities ofthecountry?
□Yes√No□Not applicable
XIX. Othersignificantevents
√Applicable□ Not applicable
1.Progress oftheurban renewal project in theplant area oftheCompany’s headquarters
According to the Proposal on the Cooperation Development Plan of the Urban Renewal Projects of the Headquarters Factory of Konka Group which be reviewed and approved by the 2nd Extraordinary General Meeting held on 8 Dec. 2014 by the Company, the Company and the OCT Enterprises Co. set up the Shenzhen Kangqiao Jiacheng Real Estate Investment Co., Ltd. by joint capital, and developed the urban renewal project in the plan area of theCompany’s original headquarters by regarding Shenzhen Kangqiao Jiacheng Real Estate Investment Co., Ltd. as the main body and recently the bidding work of the project planning consulting unit had completed with thework such as the oldfactory land leveling was in promotion.
2.ProgressoftheCompany’s Kunshan Zhouzhuang Project
After the approval by the 42nd meeting of the 6th Board of Directors, the Company obtained the land use rights of the land in the south of Quanwang Road, Zhouzhuang County, Kunshan. The project covers an area of366,575.8m2fortourism facilities and commercial housing.
KonkaGroupCo.,Ltd. AnnualReport2016
The Company is planned to develop the land by stages and determine the annual development plans according to market condition. Recently the residential projects of Phase I and Phase II had both completed and the majority of the residential sales had finished with the Phase III was still in progress.
3.Index for significant information disclosed
||||||
|-|-|-|-|-|
|AnnouncementNo.|Date|Title|Pageonnewspaper|Linkonhttp://www.cninfo.com.cn|
|2016-01|2016-1-23|Announcementonthe2015EarningsForecasts|SecuritiesTimesB32,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2016-01-23/1201934829.PDF|
|2016-02|2016-1-27|AnnouncementontheResolutionofthe11thSessionofthe8thBoardofDirectors|SecuritiesTimesB40,TaKungPaoB7|http://www.cninfo.com.cn/finalpage/2016-01-27/1201943171.PDF|
|2016-03|2016-1-27|AnnouncementontheResolutionofthe7thSessionofthe8thBoardofSupervisors|SecuritiesTimesB40,TaKungPaoB7|http://www.cninfo.com.cn/finalpage/2016-01-27/1201943172.PDF|
|2016-04|2016-2-27|IndicativeAnnouncementontheListingandCirculatingoftheRestrictedShares|SecuritiesTimesB48,TaKungPaoA21|http://www.cninfo.com.cn/finalpage/2016-02-27/1202003527.PDF|
|2016-06|2016-3-3|AnnouncementontheResolutionofthe12thSessionofthe8thBoardofDirectors|SecuritiesTimesB29,TaKungPaoB13|http://www.cninfo.com.cn/finalpage/2016-03-03/1202017481.PDF|
|2016-07|2016-3-3|AnnouncementontheRelatedTransactions|SecuritiesTimesB29,TaKungPaoB13|http://www.cninfo.com.cn/finalpage/2016-03-03/1202017480.PDF|
|2016-08|2016-3-3|NoticeonConveningthe20161stExtraordinaryGeneralMeeting|SecuritiesTimesB29,TaKungPaoB13|http://www.cninfo.com.cn/finalpage/2016-03-03/1202017482.PDF|
|2016-09|2016-3-16|IndicativeAnnouncementonConveningthe20161stExtraordinaryGeneralMeeting|SecuritiesTimesB44,TaKungPaoB10|http://www.cninfo.com.cn/finalpage/2016-03-16/1202045996.PDF|
|2016-10|2016-3-17|AnnouncementontheDelistingowningtoSignificantEvents|SecuritiesTimesB45,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2016-03-17/1202051293.PDF|
|2016-11|2016-3-17|IndicativeAnnouncementontheTemporarilyCeasingoftheListingandTransferringoftheYishijieCompany|SecuritiesTimesB24,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2016-03-17/1202051277.PDF|
|2016-12|2016-3-22|AnnouncementontheResolutionofthe20161stExtraordinaryGeneralMeeting|SecuritiesTimesB64,TaKungPaoB15|http://www.cninfo.com.cn/finalpage/2016-03-22/1202063800.PDF|
|2016-13|2016-3-24|AnnouncementontheProgressoftheSignificantEvents|SecuritiesTimesB25,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2016-03-24/1202068976.PDF|
|2016-14|2016-3-26|AnnouncementonReceivingtheTax||http://www.cninfo.com.cn/finalpage/2016-|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|||ReimbursementEvents|TaKungPaoA21|03-26/1202081746.PDF|
|2016-15|2016-3-31|AnnouncementontheProgressoftheSignificantEvents|SecuritiesTimesB73,TaKungPaoA21|http://www.cninfo.com.cn/finalpage/2016-03-31/1202110076.PDF|
|2016-16|2016-4-8|Announcementonthe2015AnnualReport|SecuritiesTimesB40,TaKungPaoA28|http://www.cninfo.com.cn/finalpage/2016-04-08/1202150039.PDF|
|2016-17|2016-4-8|AnnouncementontheAbstractofthe2015AnnualReport|SecuritiesTimesB40,TaKungPaoA28|http://www.cninfo.com.cn/finalpage/2016-04-08/1202150021.PDF|
|2016-18|2016-4-8|AnnouncementontheResolutionofthe13thSessionofthe8thBoardofDirectors|SecuritiesTimesB40,TaKungPaoA28|http://www.cninfo.com.cn/finalpage/2016-04-08/1202150019.PDF|
|2016-19|2016-4-8|AnnouncementontheResolutionofthe8thSessionofthe8thBoardofSupervisors|SecuritiesTimesB40,TaKungPaoA28|http://www.cninfo.com.cn/finalpage/2016-04-08/1202150026.PDF|
|2016-20|2016-4-8|AnnouncementontheExpectationofthe2016RoutineRelatedTransaction|SecuritiesTimesB40,TaKungPaoA28|http://www.cninfo.com.cn/finalpage/2016-04-08/1202150009.PDF|
|2016-21|2016-4-8|AnnouncementontheExternalGuarantee|SecuritiesTimesB40,TaKungPaoA28|http://www.cninfo.com.cn/finalpage/2016-04-08/1202150010.PDF|
|2016-22|2016-4-8|NoticeonConveningthe2015AnnualGeneralMeeting|SecuritiesTimesB40,TaKungPaoA28|http://www.cninfo.com.cn/finalpage/2016-04-08/1202150020.PDF|
|2016-23|2016-4-8|AnnouncementontheProgressoftheSignificantEvents|SecuritiesTimesB40,TaKungPaoA29|http://www.cninfo.com.cn/finalpage/2016-04-08/1202150011.PDF|
|2016-24|2016-4-13|AnnouncementontheNotestotheNumberoftheSubscriptionEntitiesInvolvedafterthePenetrationoftheSubscriptionTargetofthePrivateOfferingAShares|SecuritiesTimesB11,TaKungPaoB8|http://www.cninfo.com.cn/finalpage/2016-04-13/1202169859.PDF|
|2016-25|2016-4-13|AnnouncementontheRisksRemindersoftheDilutedPromptReturnofthePrivateOfferingSharesandtheFillingUpMeasures|SecuritiesTimesB11,TaKungPaoB8|http://www.cninfo.com.cn/finalpage/2016-04-13/1202169860.PDF|
|2016-26|2016-4-13|AnnouncementontheRelatedTransactionsInvolvedwiththePrivateOfferingASharesoftheCompany|SecuritiesTimesB11,TaKungPaoB8|http://www.cninfo.com.cn/finalpage/2016-04-13/1202169862.PDF|
|2016-27|2016-4-13|AnnouncementontheCompanysignedtheShareSubscriptionContractwithSubConditionewiththeSubscriptionTargetofKonkaGroupCo.,Ltd.|SecuritiesTimesB11,TaKungPaoB8|http://www.cninfo.com.cn/finalpage/2016-04-13/1202169863.PDF|
|2016-28|2016-4-13|NotestotheSpecificReportontheCompanyNeedn’ttoCompilethe||http://www.cninfo.com.cn/finalpage/2016-04-13/1202169864.PDF|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|||PreviousRaiseFundsUsageSituation|||
|2016-29|2016-4-13|AnnouncementontheResolutionofthe14thSessionofthe8thBoardofDirectors|SecuritiesTimesB11,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2016-04-13/1202169865.PDF|
|2016-30|2016-4-13|AnnouncementontheResolutionofthe9thSessionofthe8thBoardofSupervisors|SecuritiesTimesB11,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2016-04-13/1202169866.PDF|
|2016-31|2016-4-13|IndicativeAnnouncementontheResumptionoftheSignificantEvents|SecuritiesTimesB11,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2016-04-13/1202169867.PDF|
|2016-32|2016-4-23|IndicativeAnnouncementonConveningthe2015AnnualGeneralMeeting|SecuritiesTimesB44,TaKungPaoB17|http://www.cninfo.com.cn/finalpage/2016-04-23/1202225330.PDF|
|2016-33|2016-4-292016-4-292016-4-30|2016FirstQuarterReport|SecuritiesTimesB84,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2016-04-29/1202263671.PDF|
|2016-34||Textofthe2016FirstQuarterReport|||
|2016-35||AnnouncementontheResolutionofthe2015AnnualGeneralMeeting|SecuritiesTimesB212,TaKungPaoA10|http://www.cninfo.com.cn/finalpage/2016-04-30/1202282189.PDF|
|2016-36|2016-5-4|AnnouncementontheResolutionofthe16thSessionofthe8thBoardofDirectors|SecuritiesTimesB36,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2016-05-04/1202287814.PDF|
|2016-37|2016-5-11|AnnouncementontheResignoftheVicePresidentoftheCompany|||
|2016-38|2016-5-12|AnnouncementonReceivingtheReplyfromSASACofthePrivateOffering|SecuritiesTimesB56,TaKungPaoA16|http://www.cninfo.com.cn/finalpage/2016-05-12/1202316512.PDF|
|2016-39|2016-5-12|IndicativeAnnouncementonConveningthe20162ndExtraordinaryGeneralMeeting|SecuritiesTimesB56,TaKungPaoA16|http://www.cninfo.com.cn/finalpage/2016-05-12/1202316511.PDF|
|2016-40|2016-5-20|AnnouncementontheResolutionofthe20162ndExtraordinaryGeneralMeeting|SecuritiesTimesB76,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2016-05-20/1202330961.PDF|
|2016-41|2016-6-22|AnnouncementontheReceivingoftheAcceptanceofthePrivateOfferingApplicationfromCSRC|SecuritiesTimesB45,TaKungPaoB3|http://www.cninfo.com.cn/finalpage/2016-06-22/1202380173.PDF|
|2016-42|2016-6-25|AnnouncementonReceivingtheTaxReimbursement|SecuritiesTimesB24,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2016-06-25/1202402692.PDF|
|2016-01|2016-1-23|Announcementonthe2015EarningsForecasts|SecuritiesTimesB32,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2016-01-23/1201934829.PDF|
|2016-43|2016-7-8|AnnouncementontheResolutionofthe||http://www.cninfo.com.cn/finalpage/2016-|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|||19thSessionofthe8thBoardofDirectors|TaKungPaoB7|07-08/1202457827.PDF|
|2016-44|2016-7-14|Announcementonthesemi-annual2016earningsforecasts|SecuritiesTimesB33,TaKungPaoA18|http://www.cninfo.com.cn/finalpage/2016-07-14/1202469363.PDF|
|2016-45|2016-7-22|AnnouncementonReceivingtheNoticeofChinaSecuritiesRegulatoryCommissionontheReviewandFeedbackCommentofAdministrativeLicensingProject|SecuritiesTimesB61,TaKungPaoB11|http://www.cninfo.com.cn/finalpage/2016-07-22/1202496345.PDF|
|2016-46|2016-8-12|AnnouncementonDelayedReplyforFeedbackonApplicationDocumentsofPrivatelyIssuingA-sharesin2016|SecuritiesTimesB41,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2016-08-12/1202557744.PDF|
|2016-47|2016-8-30|Announcementonthe2016SemiAnnualReport||http://www.cninfo.com.cn/finalpage/2016-08-30/1202642330.PDF|
|2016-48|2016-8-30|AnnouncementontheAbstractofthe2016SemiAnnualReport|SecuritiesTimesB10,TaKungPaoB92|http://www.cninfo.com.cn/finalpage/2016-08-30/1202642323.PDF|
|2016-49|2016-9-10|AnnouncementonApplyingtoSuspendtheReviewfortheCompany'sApplicationDocumentsofPrivatelyIssuingA-sharesin2016|SecuritiesTimesB28,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2016-09-10/1202689532.PDF|
|2016-50|2016-10-13|AnnouncementonCompletingtheRenewalRegistrationof"IntegratingThreeLicensesintoOne"|SecuritiesTimesB36,TaKungPaoB3|http://www.cninfo.com.cn/finalpage/2016-10-13/1202753155.PDF|
|2016-51|2016-10-15|AnnouncementonPerformanceForecastsoftheFirstThreeQuartersin2016|SecuritiesTimesB41,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2016-10-15/1202759150.PDF|
||2016-10-25|AnnouncementontheResignoftheVicePresidentoftheCompany|SecuritiesTimesB256,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2016-10-25/1202780130.PDF|
|2016-52|2016-10-29|2016ThirdQuarterReport|||
|2016-53|2016-10-29|Textofthe2016ThirdQuarterReport|SecuritiesTimesB84,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2016-10-29/1202800791.PDF|
|2016-54|2016-10-29|AnnouncementontheResolutionofthe21stSessionofthe8thBoardofDirectors|SecuritiesTimesB84,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2016-10-29/1202800786.PDF|
|2016-55|2016-10-29|AnnouncementontheExternalGuarantee|SecuritiesTimesB84,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2016-10-29/1202800787.PDF|
|2016-56|2016-10-29|AnnouncementonHoldingSubsidiaries'ReceiptoftheNoticeofIncomeand||http://www.cninfo.com.cn/finalpage/2016-10-29/1202800788.PDF|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|||PaymentfortheTransferofUseRightofState-ownedLandinShenzhen|||
|2016-57|2016-11-29|AnnouncementontheResolutionofthe22ndSessionofthe8thBoardofDirectors|SecuritiesTimesB41,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2016-11-29/1202846547.PDF|
|2016-58|2016-11-29|AnnouncementontheTerminationofPrivatelyIssuingA-sharesMatters|SecuritiesTimesB41,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2016-11-29/1202846548.PDF|
|2016-59|2016-11-29|AnnouncementonHoldingSubsidiaries'SigningfortheContractofTransferringtheLandUseRight|SecuritiesTimesB52,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2016-11-29/1202846710.PDF|
|2016-60|2016-12-17|AnnouncementonReceivingtheNoticeofChinaSecuritiesRegulatoryCommissiononTerminatingReviewingtheAdministrativeLicenseApplication|SecuritiesTimesB33,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2016-12-17/1202878743.PDF|
|2016-61|2016-12-27|AnnouncementonReceivingtheTaxReimbursement|SecuritiesTimesB32,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2016-12-27/1202957919.PDF|
|2016-62|2016-12-30|AnnouncementontheResolutionofthe24thSessionofthe8thBoardofDirectors|SecuritiesTimesB48,TaKungPaoB15|http://www.cninfo.com.cn/finalpage/2016-12-30/1202973414.PDF|
|2016-63|2016-12-30|AnnouncementonInvestingandConstructingKonkaScienceandInnovationCenter|SecuritiesTimesB48,TaKungPaoB15|http://www.cninfo.com.cn/finalpage/2016-12-30/1202973415.PDF|

XX. Significantevents ofsubsidiaries
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2016
KonkaGroupCo.,Ltd. AnnualReport2016
Section VI. Change in Shares& Shareholders
I. Changes inshares
Unit:share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Beforethechange||Increase/decrease(+/-)|||||Afterthechange||
||Amount|Proportion|Newlyissueshare|Bonusshares|Capitalizationofpublicreserves|Other|Subtotal|Amount|Proportion|
|I.Sharessubjecttotradingmoratorium|396,932,960|16.48%||||-396,932,960|-396,932,960|0|0.00%|
|2.Sharesheldbystate-ownedcorporation|396,763,880|16.48%||||-396,763,880|-396,763,880|0|0.00%|
|3.Otherdomesticshareholding|169,080|0.00%||||-169,080|-169,080|0|0.00%|
|Sharesheldbythedomesticindividuals|169,080|0.00%||||-169,080|-169,080|0|0.00%|
|II.Sharesnotsubjecttotradingmoratorium|2,011,012,448|83.52%||||396,932,960|396,932,960|2,407,945,408|100.00%|
|1.RMBordinaryshares|1,199,829,920|49.83%||||396,763,880|396,763,880|1,596,593,800|66.31%|
|2.Domesticallylistedforeignshares|811,182,528|33.69%||||169,080|169,080|811,351,608|33.69%|
|III.Totalshares|2,407,945,408|100.00%||||0|0|2,407,945,408|100.00%|

Reason forthechange inshares
KonkaGroupCo.,Ltd. AnnualReport2016
√Applicable□ Not applicable
2 Mar. 2016, 396,763,880 shares of the Company; stocks held by OCT Holdings Company were relieved the restriction. See the details on the Indicative Announcement on the Listing and Circulating of theRestricted Shares disclosed on 27 Feb. 2016 by the Company (Announcement No. 2016-04).
Mr. Zhang Guanghui had resigned the position as a Supervisor officially on 5 Nov. 2015 with the 169,080 shares subject to trading moratorium held by whom of the Company's had all automatically terminated therestriction on5May 2016.
Approval ofthechange inshares
□Applicable√ Not applicable
Reason forthechange inshares
□Applicable√ Not applicable
The changes inshares had completed transfer ownership
Effects of the change in shares on the basic EPS, diluted EPS, net assets per share attributable to common shareholders of theCompany and other financial indexes over thelast year and last period□Applicable√ Not applicable
Other contents that the Company considered necessary or were required by the securities regulatory authorities todisclose
□Applicable√ Not applicable
2.Changes inrestricted shares
√Applicable□ Not applicable
Unit: share
||||||||
|-|-|-|-|-|-|-|
|Nameoftheshareholders|Numberoftherestrictedsharesattheperiod-begin|NumberoftherelievedrestrictedsharesoftheReportingPeriod|NumberoftheincreasedrestrictedsharesoftheReportingPeriod|Numberoftherestrictedsharesattheperiod-end|Restrictedreason|Relievedrestricteddate|
|OCTEnterprisesCo.|396,763,880|396,763,880|0|0|Non-tradablesharesreform|2Mar.2016|
|ZhangGuanghui|169,080|169,080|0|0|On 5 Nov. 2015, Mr. Zhang Guanghuiresigned the position as the Supervisorowning to personal reasons and according tothe regulations of the relevant laws andregulations, within the 6 months after the|5May.2016|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||
|-|-|-|-|-|-|-|
||||||resignation,theholdingshareoftheCompanywere the shares subject to tradingmoratorium.||
|Total|396,932,960|396,932,960|0|0|--|--|

II. Issuance andlistingofsecurities
1.Issuance ofsecurities (excluding preferred stock) inReporting Period
□Applicable√ Not applicable
2. Explanation on changes in share capital& the structure of shareholders, the structure of assets andliabilities
√Applicable□ Not applicable
(1)Thetotal capital stock ofthecompany has nochange.
(2) 2 Mar. 2016, 396,763,880 shares of the Company; stocks held by OCT Holdings Company were relieved the restriction. Mr. Zhang Guanghui had resigned the position as a Supervisor officially on 5 Nov. 2015 with the 169,080 shares subject to trading moratorium held by whom of the Company's had all automatically terminated the restriction on5May 2016.
(3)Thecompany's assets and liabilities have nochange.
3.Existentsharesheld by internalstaffs of theCompany
□Applicable√ Not applicable
III. Particulars aboutthe shareholdersand actual controller
1.Total numberof shareholdersand theirshareholding
Unit:share
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|TotalnumberofshareholdersattheReportingPeriod|134,479||Totalnumberofshareholdersonthe30thtradingdaybeforethedisclosuredateoftheannualreport||130,924||Totalnumberofpreferredstockholderwithvoterightrestored(ifany)(seeNotes8)||0|Totalnumberofpreferredstockholderwithvoterightrestoredonthe30thtradingdaybeforethedisclosuredateoftheannualreport (ifany)(seeNotes8)|||0|
|Shareholdingofshareholdersholdingmorethan5%shares||||||||||||||
|Nameofshareholder||Natureofsharehol||Holdingpercentage||Numberofshareholdingattheendof||Increaseanddecreaseofshares|Numberofsharesheldsubjectto||Numberofsharesheldnotsubject|Pledgedorfrozenshares||

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||||
|-|-|-|-|-|-|-|-|-|
||ders||theReportingPeriod|duringReportingPeriod|tradingmoratorium|totradingmoratorium|Statusofshares|Amount|
|OCTEnterprisesCo.|State-ownedcorporation|21.75%|523,746,932|0|0|523,746,932|Pledged|0|
||||||||Frozen|0|
|CITICSecuritiesBrokerage(HongKong)Co.,Ltd.|Foreigncorporation|7.56%|182,100,202|2,099,092|0|182,100,202|Pledged|0|
||||||||Frozen|0|
|GuoyuanSecuritiesBroker(HK)Co.,Ltd.|Foreigncorporation|2.33%|56,167,945|-3,659,225|0|56,167,945|Pledged|0|
||||||||Frozen|0|
|HolyTimeGroupLimited|Foreigncorporation|2.33%|56,049,824|3,469,470|0|56,049,824|Pledged|0|
||||||||Frozen|0|
|GaolingFund,L.P.|Foreigncorporation|2.19%|52,801,250|0|0|52,801,250|Pledged|0|
||||||||Frozen|0|
|NanhuaFuturesCo.,Ltd.-NanhuaFuturesSilverLeafNo.2AssetsManagementPlan|Other|0.98%|23,505,979|23,505,979|0|23,505,979|Pledged|0|
||||||||Frozen|0|
|NAMNGAI|ForeignIndividual|0.96%|23,220,040|-161,000|0|23,220,040|Pledged|0|
||||||||Frozen|0|
|CMS(HK)|State-ownedcorporation|0.96%|23,190,620|463,816|0|23,190,620|Pledged|0|
||||||||Frozen|0|
|CSICapitalManagementLimited|Other|0.83%|20,050,928|-500,000|0|20,050,928|Pledged|0|
||||||||Froz|0|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||||||en||
|MengDiliang|DomesticIndividual|0.62%|15,000,083||15,000,083|0||15,000,083||Pledged|0|
|||||||||||Frozen|0|
|Strategicinvestororgeneralcorporationbecomingatoptenordinaryshareholderduetoplacingofnewshares(ifany)(seeNote3)||N/A||||||||||
|Relatedoract-in-concertpartiesamongtheshareholdersabove||JialongInvestmentLimited,awholly-fundedsubsidiaryoftheCompany’sfirstmajorityshareholderOCTEnterprisesCo.,holds180,001,110and18,360,000ordinarysharesintheCompanyrespectively throughCITIC SecuritiesBrokerage(HongKong) Co.,Ltd.andCMS(HK).JialongInvestmentLimitedandOCTEnterprisesCo.arepartiesactingin concert. Other than that, it is unknown whether the other shareholders are relatedpartiesoract-in-concertpartiesornot.||||||||||
|Particularsaboutsharesheldbythetoptencommonshareholdersholdingsharesnotsubjecttotradingmoratorium||||||||||||
|Nameofshareholder||||Numberoftradablesharesheldattheperiod-end|||Typeofshares|||||
||||||||Type||Number|||
|OCTEnterprisesCo.||||523,746,932|||RMBordinaryshare||523,746,932|||
|CITICSecuritiesBrokerage(HongKong)Co.,Ltd.||||182,100,202|||Domesticallylistedforeignshares||180,001,110|||
|CITICSecuritiesBrokerage(HongKong)Co.,Ltd.||||56,167,945|||Domesticallylistedforeignshares||56,167,945|||
|HolyTimeGroupLimited||||56,049,824|||Domesticallylistedforeignshares||56,049,824|||
|GaolingFund,L.P.||||52,801,250|||Domesticallylistedforeignshares||52,801,250|||
|Nanhua Futures Co., Ltd. - Nanhua Futures Silver LeafNo.2AssetsManagementPlan||||23,505,979|||RMBordinaryshare||23,505,979|||
|NAMNGAI||||23,220,040|||Domesticallylistedforeignshares||23,220,040|||
|CMS(HK)||||23,190,620|||Domestically||23,190,620|||

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
||||listedforeignshares||
|CSICapitalManagementLimited||20,050,928|Domesticallylistedforeignshares|20,050,928|
|MengDiliang||15,000,083|RMBordinaryshare|15,000,083|
|Relatedoract-in-concertpartiesamongthetop10non-restrictedordinaryshareholdersaswellasbetweenthetop10non-restrictedordinaryshareholdersandthetop10ordinaryshareholders|Jialong Investment Limited, a wholly-funded subsidiary of the Company’s first majorityshareholderOCTEnterprisesCo.,holds180,001,110and18,360,000ordinarysharesintheCompany respectively through CITIC Securities Brokerage (Hong Kong) Co., Ltd. andCMS (HK). Jialong Investment Limited and OCT Enterprises Co. are parties acting inconcert.Otherthanthat,itisunknownwhethertheothershareholdersarerelatedpartiesoract-in-concertpartiesornot.||||
|Top10ordinaryshareholdersconductingsecuritiesmargintrading(ifany)(seeNote4)|Meng Diliang holds 15,000,083 A-shares in the Company through a client account ofcollateralsecuritiesformargintradinginEssenceSecuritiesCo.,Ltd.||||

Did any top ten shareholder of common share and the top ten shareholders not subject to trading moratorium oftheCompany carry out an agreed buy-back inthe Reporting Period?
□Yes√No
Top ten shareholder of common share and the top ten shareholders not subject to trading moratorium oftheCompany did carry out an agreed buy-back in theReporting Period
2.Particulars aboutthecontrollingshareholder
Nature ofcontrolling shareholder: central state-owned holding
Type ofcontrolling shareholder: legal person
|||||||
|-|-|-|-|-|-|
|Nameofcontrollingshareholder|Legalrepresentative/companyprincipal||Dateofestablishment|Organizationcode|Businessscope|
|OCTEnterprisesCo.|DuanXiannian||11Nov.1985|91440300190346175T|Export of textile, light industrial products, etc; import ofself-used goods in Shenzhen, mechanical equipment, lightindustrial products, etc. as approved by the relevantauthorities of Shenzhen (under Government DocumentJMB[92]WJMGTSZZNo.A19024);compensationtrade;investment in industry, tourism, real estate, commerce &tradeandfinancialinsurance.|
|Sharesheldbythecontrollingshareholderinotherlistedcompaniesbyholdingorshareholding||OCT ENTERPRISES CO. held 53.47% equity of Shenzhen Overseas Chinese Town Co., Ltd. (acompany listed on the main Board of Shenzhen Stock Exchange, SZ. 000069), meanwhile,ShenzhenOverseasChineseTownCo.,Ltd.indirectlyheld66.66%equityofOCT(Asia)HoldingsLtd. (a company listed on the main Board of Hong Kong Stock Exchange, 3366.HK) and OCT||||

KonkaGroupCo.,Ltd. AnnualReport2016
|||
|-|-|
|duringtheReportingPeriod|ENTERPRISESCO.held4.08%equityofCITS(acompanylistedonthemainBoardofShanghaiStock Exchange, 601888.SH). OCT ENTERPRISES CO. intends to increase its investment inYunnan Expo Tourism Group Holdings Ltd. to indirectly controlYunnanTourism Co., Ltd. (listedon theSMEsboard of the Shenzhen Stock Exchange, stock code: SZ.002059).The abstract of therelevanttenderofferreporthasbeenreleased,withtherelevantworkunderway.|

Changes in controllingshareholders during theReporting Period
□Applicable√ Not applicable
The controlling shareholder did not change during theReporting Period.
3.Particulars abouttheactual controller
Nature ofactual controller: central state-owned assets management institutions
Type ofactual controller: legal person
||||||
|-|-|-|-|-|
|Nameofactualcontroller|Legalrepresentative/headofunit|Dateoffoundation|Organizationcode|Businessscope|
|State-owned AssetsSupervision andAdministration CommissionoftheStateCouncil|HaoPeng||Notapplicable|Notapplicable|
|Shares held by the actual controlling shareholder in other listed companies by holding orshareholdingduringtheReportingPeriod||||Notapplicable|

Change inactual controller in theReporting Period
□Applicable√ Not applicable
No changein actual controller oftheCompany in theReporting Period.
Diagram ofownership and control relationship between theCompany and its actual controller: SASACoftheStateCouncil
OCTEnterprisesCo.anditswhollyownedsubsidiaries
KonkaGroupCo.,Ltd.
The actual controller controls the Company by the means of trust or other means of assets
management
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2016
4.OtherCorporate Shareholderwithashareholding percentageover10%
□Applicable√ Not applicable
5. Particulars about restriction of reducing holding-shares of controlling shareholders, actual controller,restructuring parties andothercommitment entities
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2016
Section VII. Preference Shares
□Applicable√ Not applicable
There was nopreferred stock during Reporting Period.
KonkaGroupCo.,Ltd. AnnualReport2016
Section VIII. Directors, Supervisors, Senior Management Staff& Employees
I. Changes inshareholding ofdirectors, supervisors and seniormanagement staff
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Name|Title|Incumbentornot|Gender|Age|Startingdateofofficeterm|Closingdateofofficeterm|SharesheldatthebeginningtheReportingPeriod|IncreaseofsharesinthisReportingPeriod(share)|DecreaseofsharesinthisReportingPeriod(share)|Otherincreased/decreasedchange(share)|SharesheldattheendoftheReportingPeriod(share)|
|LiuFengxi|Director|Current|Male|45|28May2015|28May2018|0|0|0|0|0|
|LiuFengxi|BoardChairman|Current|Male|45|18Jun.2015|28May2018|0|0|0|0|0|
|JinQingjun|Director|Current|Male|60|28May2015|28May2018|0|0|0|0|0|
|ChenYuehua|Director|Current|Male|42|28May2015|28May2018|0|0|0|0|0|
|HeHaibin|Director|Current|Male|54|5Nov.2015|28May2018|0|0|0|0|0|
|SunShengdian|IndependentDirector|Current|Male|62|5Nov.2015|28May2018|0|0|0|0|0|
|Xiao|Indepe|Curr|M|51|28May2015|28May2018|0|0|0|0|0|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Zuhe|ndentDirector|ent|ale|||||||||
|ZhangShuhua|IndependentDirector|Current|Male|52|28May2015|28May2018|0|0|0|0|0|
|HaoGang|Supervisor|Current|Male|44|28May2015|28May2018|0|0|0|0|0|
|HaoGang|Supervisory|Current|Male|44|8Jun.2015|28May2018|0|0|0|0|0|
|WangYoulai|Supervisor|Current|Male|56|5Nov.2015|28May2018|0|0|0|0|0|
|LiJun|EmployeeSupervisor|Current|Male|46|25May2015|25May2018|0|0|0|0|0|
|HeJianjun|VicePresident|Current|Male|38|4Apr.2014|4Apr.2017|0|0|0|0|0|
|LiHongtao|VicePresident|Current|Male|48|4Apr.2014|4Apr.2017|0|0|0|0|0|
|YangBo|VicePresident|Current|Male|49|10Mar.2017|10Mar.2020|0|0|0|0|0|
|CaoShiping|VicePresident|Current|Male|47|10Mar.2017|10Mar.2020|0|0|0|0|0|
|SunQingyan|VicePresident|Current|Male|39|determined|10Mar.2020|0|0|0|0|0|
|LiChunlei|CFO|Current|Male|45|10Mar.2017|10Mar.2020|0|0|0|0|0|
|WuYongju|BoardSecreta|Current|Mal|44|27Aug.2015|4Apr.2017|0|0|0|0|0|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|n|ry||e|||||||||
|XiaoQing|ExecutiveVicePresident|Left|Male|42|27Aug.2015|24Oct.2016|0|0|0|0|0|
|HuangZhongtian|VicePresident|Left|Male|47|4Apr.2014|10Mar.2020|0|0|0|0|0|
|LinGaike|VicePresident|Left|Male|56|4Apr.2014|9Mar.2016|0|0|0|0|0|
|LinHongfan|VicePresident|Left|Male|45|4Apr.2014|10Mar.2020|0|0|0|0|0|

Note:ForMr.SunQingyanishandlingthecheck-outprocedureinShenzhenShenwoAssetManagementCo.,Ltd.,hecannottake hispostimmediately,itisexpectedthatMr.SunQingyanwillsignthelaborcontractwithourcompanybefore30Apr.2017served asthevicepresidentofficially.
II. Particulars aboutchanges of Directors, Supervisors andSeniorExecutives
||||||
|-|-|-|-|-|
|Name|Position|Type|Date|Reason|
|ZhouBin|President|Engaged|10Mar.2017|Engaged by the decision from the Board ofDirectors|
|YangBo|VicePresident|Engaged|10Mar.2017|Engaged by the decision from the Board ofDirectors|
|CaoShiping|VicePresident|Engaged|10Mar.2017|Engaged by the decision from the Board ofDirectors|
|SunQingyan|VicePresident|Engaged|Tobedetermined|Engaged by the decision from the Board ofDirectors|
|LiChunlei|CFO|Engaged|10Mar.2017|Engaged by the decision from the Board ofDirectors|
|XiaoQing|ExecutiveVicePresident|Left|24Oct.2016|Resignedowningtothepersonalreasons|
|HuangZhongtian|VicePresident|Expired|10Mar.2017|TheservicetermoftheBoardofSupervisorswasexpired|
|Lingaike|VicePresident|Left|09May2016|Resignedowningtothepersonalreasons|

III. Post-holdingsituation
Professional background, main working experience and the main responsibilities of current
KonkaGroupCo.,Ltd. AnnualReport2016
directors, supervisors and seniormanagement staffof theCompany
Main working experience of current directors, supervisors and senior management staffs over the past five years
1.Directors
Liu Fengxi, Board Chairman and Acting President, he is male, Han nationality, born in 1972, postgraduate. He was once marketing GM for the multi-media division of Konka Group, Assistant GM and then Vice GM of Shenzhen Konka Telecommunications Technology Co., Ltd., Chief of the Operation Management Center of Konka Group,Assistant to President and Vice President of Konka Group, etc.And nowheis acting as theBoard Chairman andActing President of KonkaGroup. Jin Qingjun, is a Director and male, who born in 1957 with the master of laws. Former lawyers in Hong Kong-based law firm and Britain-based law firm, lawyer of JANG SHINN Law Office and executive partner of Shu Jin Law Firm, and at the same time, worked as the adjunct professor of China University of Political Science and Law, and the adjunct professor of the Lawyer College of the Renmin University of China, and graduate student co-tutor in the Law School of Tsinghua University. Former arbitrator of the Shenzhen Court of International Arbitration, Shanghai International Arbitration Center, Arbitration Foundation of Southern Africa, Former mediator of Shenzhen Securities and Futures Dispute Resolution Center, legal counsel of US Court of Appeals-Washington DC. Presently the senior partner of Beijing King& Wood Mallesons Law Firm, independent director of GuotaiJun’an Securities, Gemdale Group Co., Ltd. (a company listed in Shanghai Stock Exchange), Tianjin Masterwork Machinery Co., Ltd. (a company listed in Shenzhen Stock Exchange), Invesco Great Wall Fund Management Co., Ltd. and New ChinaAsset Management Co., Ltd., director ofKonka Group.
He Haibin, Director of the Company, born in 1974, Han nationality, holds undergraduate degree, is a senior accountant. He has successively taken the posts as Chief ofAudit Department and Financial Department in Overseas Chinese Town Group Corporation, as Principal of Finance in Planning Department of the Crowne Plaza Shenzhen, as CFO in Shenzhen OCT Seaview Hotel Co., Ltd., as CFO in InterContinental Shenzhen, as Vice CFO in Overseas ChineseTown Group Corporation and as CFO in Overseas Chinese Town Hong Kong Limited, etc.. Now he is the Chief of Enterprise Management Department in Overseas Chinese Town Group Corporation, as well as a director of Konka Group.
Chen Yuehua, Director, male, Han nationality, born in 1963. He is Master of Business Administration, Senior Engineer, Former senior engineer of Konka Group Technological Development Center; former GM of Konka Electric Appliance Department Technological Development Center; former GM of President Office of Konka Group; former GM of Dongguan Konka Electronics Co., Ltd; former vice GM of Konka Group Multimedia Business Department; former vice president of Konka Group; former president, deputy party secretary of Konka Group;
KonkaGroupCo.,Ltd. AnnualReport2016
assistant to the president and secretary of the Board of Shenzhen OCT Co., Ltd. Current Board chairman of Konka Group; vice president of Shenzhen OCT Co. Ltd; president of Shenzhen OCT Vision Inc.; and president of Shenzhen Rough Diamond Trading Center Co., Ltd. as well as Directorof KonkaGroup.
2.IndependentDirector
Sun Shengdian, independent director, male, Han nationality, born in 1955, doctor of engineering science, sensor economist. Formerly vice GM, deputy secretary of the Party committee, GM and president of Shenzhen SEG, Hitachi Color Display Devices Co., Ltd., director, Party Committee member, vice GM, vice secretary of Party Committee, GM of Shenzhen Electronics Group Co., Ltd. director of Shenzhen China Star Optoelectronics Technology Co., Ltd. and independent director of Skyworth Holding Ltd. Presently working as the president and secretary of party committee of Shenzhen Electronics Group Co., Ltd., President of Shenzhen Electronics Industries Association, Director of Shenzhen SI Semiconductor Co., Ltd., vice president of Shenzhen Huakong SEG Co., Ltd., and independent director ofKonka Group.
Xiao Zuhe, Independent Director, male, Han nationality, born in 1966. EMBA, certified public accountant. Formerly worked as auditor and department manager in Jiangxi Accounting Firm, assistant financial controller of Shenzhen Fountain Corporation, auditor in Ho and Ho& Co. in Hong Kong, financial controller of Qiaoxing Universal Telephone, Inc. (a company listed in NASDAQ), President of Benefit Capital Limited in Hong Kong. Presently he is working as the president and GM of Tianjin Benefit Equity Investment Fund Management Co., Ltd. and independent director ofKonka Group.
Zhang Shuhua, Independent Director, male, Han nationality, born in 1965, a master degree owner, certified public account. Formerly worked as the principal staff member of Urban Social and Economic Survey Organization of Sichuan Provincial Bureau of Statistics, accountant in charge of Sichuan Newspaper Press, chief financial officer of TOP Pacific Group Pty. Ltd., chief financial controller of Sichuan Bolan Properties Limited, chief financial officer of Sihuan Hanjia Group, chief financial officer of Chengdu Lishen Industry Co., Ltd. and vice president of Jiutai Industry Co., Ltd. Presently working as the certified public accountant and partner of Sichuan Accounting Firm, independent director of KonkaGroup.
3.Supervisor
Hao Gang, Supervisory, male, was born in 1973, Han nationality, bachelor degree. He successively took the post such as Vice Chief of the Inspection Office, etc. in Overseas Chinese Town Group Corporation. Now he is the Chief of the Inspection Office in Overseas Chinese Town Group
KonkaGroupCo.,Ltd. AnnualReport2016
Corporation and asupervisory ofKonka Group.
WangYoulai, Supervisor, who is male, Han nationality, born in 1961, doctoral student and engineer. Formerly worked as the business manager ofthe Quality Department in Konka Group, assistant GM, vice GM, and vice president of Konka Group, Deputy Director of theAdministration Department of Overseas Chinese Town Enterprise Co. Presently working as the co-secretary of the party committee in the HQs, and chief director of the Administration Department of Overseas Chinese Town Enterprise Co.,and supervisorofKonka Group.
Li Jun, Employee Supervisor, male, Han nationality, born in 1971,bachelor’s degree owner and assistant accountant. Formerly worked as the financial manager of Nanchang Branch of Telecommunications Technology Co., Ltd., Senior Manager of the Financial Department and the Senior Manager ofAuditing and LegalAffairs Department of Telecommunications Technology Co., Ltd. Presently working as the head of the Discipline Committee Office, assistant supervisor of the Auditing and Legal Affairs Department, GM of the Internal Control and Risk Management Department, and employee supervisor ofKonka Group
4.SeniorExecutives
Zhou Bin, president. Male, Han, born in 1979, undergraduate. 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. Serve as the president in Konka Group now.
He Jianjun, Vice President of the Company, was born in 1969 with the Han nationality; he obtained bachelor degree; being Economist. He has served successfully as Deputy Chief of Secretariat of the Board, Deputy Chief and Chief of Strategic Development Dept. and Secretary to the Board in Konka Group, etc. Henow is acting asVicePresident ofKonka Group.
Li Hongtao, Vice President. He is male, Han nationality, born in 1968; bachelor degree and Senior Engineer. He successively took the post such as Assistant to GM, GM, Director and GM of Shenzhen Konka Telecommunication Technology Co., Ltd andAssistant President of Konka Group etc. Henowis acting asVicePresident ofKonka Group.
Wu Yongjun, secretary of the board of directors, male, Han nationality, born in 1975,master’s degree owner, certified public accountant. Formerly he worked as the senior manager, assistant of chief supervisor, vice supervisor, supervisor of the secretariat of the Board of Directors of Konka Group, Konka Group Securities Affairs representative. Presently he is working as the secretary of the board ofdirectors of KonkaGroup.
Li Chunlei, CFO. Male, Hannationality, born in 1973, master. Served as the director in Real Estate Business Division, Konka Group, vice GM and GM in Kunshan Kangsheng Investment
KonkaGroupCo.,Ltd. AnnualReport2016
Development Co., Ltd., deputy director (preside the work) and director in Strategic Development Center, GM in Financial Center and GM inAsset Settlement Center and others. Serve as the CFO in Konka Group now.
Yang Bo, vice president. Male, Han nationality, born in 1970, master. 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. Serve as thevice president in Konka Group.
Cao Shiping, vice president. Male, Han nationality, born in 1978, master. 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. Serve as the vice president in Konka Group.
Sun Qingyan, vice president. Male, Hannationality, born in 1972, doctor, senior economist. 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 ShenwoAsset Management Co., Ltd. and others.
Employment inshareholders’companies
√Applicable□ Not applicable
|||||||
|-|-|-|-|-|-|
|Nameofemployers|Nameofshareholders’companies|Postsheldinshareholders’companies|Startdateoftenure|ExpirationDateoftenure|Whetherreceivingsubsidiesandremunerationinshareholders’companies|
|LiuFengxi|OCTEnterprisesCo.|PartyCommitteeStandingCommittee|22Feb.2016|Unknown||
|HeHaibin|OCTEnterprisesCo.|ChiefofEnterpriseManagementDepartment|1Feb.2010|Unknown|Yes|
|HaoGang|OCTEnterprisesCo.|ChiefofInspectionOffice|1Mar.2010|Unknown|Yes|
|Wang|OCTEnterprises|Secretaryofthejointcommitteeofthe|1Dec.2014|Unkno|Yes|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|Youlai|Co.||generalheadquarters,administrativemanagementdirector|wn|
|Notestopost-holdinginshareholder’sunit||1. Except the above situation, other directors, supervisors and senior management didn’t hold anypositionintheshareholders’units.2.ItisunknowntheendingdateofthepostsofMr.LiuFengxi,Mr.HeHaibin,Mr.HaoGangandMr.WangYoulaiheldintheshareholders’units.|||

Note:Mr.LiuFengxiin20161-3monthsinthe companytoreceiveremuneration,afterthecontrollingshareholder to receive compensation.
Employment in otherentities
√Applicable□ Not applicable
|||||||
|-|-|-|-|-|-|
|Nameofemployers|Nameofothercompanies|Postsheldinshareholders’companies|Startdateoftenure|ExpirationDateoftenure|Whetherreceivingsubsidiesandremunerationinothercompanies|
|JinQingjun|BeijingKind&WoodMallesons|SeniorPartner|Unknown|Unknown|Yes|
||GuotaiJunanSecuritiesCo.,Ltd|Independentdirector|Unknown|Unknown|Unknown|
||Gemdalea(Group)HoldingCo.,Ltd.|Independentdirector|Unknown|Unknown|Unknown|
||TianjinMasterworkMachineryCo.,Ltd.|Independentdirector|Unknown|Unknown|Unknown|
||InvescoGreatWallFundManagementCo.,Ltd.|Independentdirector|Unknown|Unknown|Unknown|
||NewChinaAssetManagementCo.,Ltd.,|Independentdirector|Unknown|Unknown|Unknown|
|ChenYuehua|ShenzhenOCTCo.,Ltd.|VicePresident|Unknown|Unknown|Yes|
||ShenzhenOCTVisionInc|Director|Unknown|Unknown||
||ShenzhenRoughDiamondTradingCenterCo.,Ltd.|Director|Unknown|Unknown|No|
|HeHaibin|ShenzhenOCTCo.,Ltd|CAO|Unknown|Unknown|No|
|XiaoZuhe|TianjinBaifuyuanEquityInvestmentFundManagementCo.,Ltd.|Director|Unknown|Unknown|Yes|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||
|-|-|-|-|-|-|-|
||ShenzhenQianhaiBaifuyuanEquityInvestmentManagementCo.,Ltd.||Director,GM|Unknown|Unknown||
|ZhangShuhua|SichuanTanChengCertifiedPublicAccountantsCo.,Ltd.||PartnerProjectManager|Unknown|Unknown|Yes|
|SunShengdian|ShenzhenElectronicsGroupCo.,Ltd.||Chairman,SecretaryofthePartyCommittee|Unknown|Unknown|Yes|
||ShenzhenElectronicsIndustriesAssociation||President|Unknown|Unknown||
||ShenzhenSISemiconductorsCo.,Ltd.||Director|Unknown|Unknown||
||ShenzhenHuakongSEGCo.,Ltd.||ViceDirector|Unknown|Unknown||
|Notes to post-holding inshareholder’sunit||Mr.SunShengdian,Mr.XiaoZuheandMr.ZhangShuhuaweretheIndependentDirectorsoftheCompany.Mr.JinQingjunandMr.ChenYuehuaweretheNon-independentDirectorsoftheCompany.|||||

Particulars about theCompany’s current directors, supervisors and seniorexecutives’ punishments from Securities Regulatory Institution ofrecent three years inReporting Period
□Applicable√ Not applicable
IV.Remuneration fordirectors, supervisors and seniormanagement
1. After the approval and the consent by the Board of Directors on the salary of the Directors and Supervisors, shouldsubmitwhich to theAnnual General Meeting for review and decision.
Refered 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 2015 2nd Extraordinary General Meeting were as follows: (1) the basic annual salary standard of the Board Chairman was of RMB1.2 million, the subsidy standard of other Directors (excluding the Directors serving in the Company) was of RMB0.3 million per person per year and the subsidy standard of the Supervisors (excluding the Employee Supervisors) was of RMB0.2 million per person per year; which was executed since Jun. 2015. (2) the above standards were all pre-tax standard with the individual income tax burdened in person as well as the Company withheld and remitted tax.
2. The Board of Directors determined the remuneration of senior management staffs, and referred to the following factors: a. scope of jobs and responsibility shouldered; b. actual profit of the Company; c.market remuneration level in thesame industry andsame area.
Remuneration of the directors, supervisors and senior management of the Company during the
Reporting Period
KonkaGroupCo.,Ltd. AnnualReport2016
Unit:RMBTenThousandYuan
||||||||
|-|-|-|-|-|-|-|
|Name|Title|Gender|Age|Incumbentornot|TotalamountofremunerationreceivedfromtheCompany|Totalamountofremunerationreceivedfromshareholders’companies|
|LiuFengxi|BoardChairman,ActingPresident|Male|45|Current|57.64|No|
|JinQingjun|Director|Male|60|Current|30|No|
|HeHaibin|Director|Male|42|Current|0|Yes|
|ChenYuehua|Director|Male|54|Current|0|Yes|
|SunShengdian|IndependentDirector|Male|62|Current|0|No|
|XiaoZuhe|IndependentDirector|Male|51|Current|30|No|
|ZhangShuhua|IndependentDirector|Male|52|Current|30|No|
|HaoGang|Supervisory|Male|44|Current|0|Yes|
|WangYoulai|Supervisor|Male|56|Current|0|Yes|
|LiJun|EmployeeSupervisor|Male|46|Current|58.45|No|
|HeJianjun|VicePresident|Male|48|Current|106.34|No|
|LiHongtao|VicePresident|Male|49|Current|106.34|No|
|WuYongjun|BoardSecretary|Male|42|Current|110.01|No|
|XiaoQing|ExecutiveVicePresident|Male|47|Current|113.47|No|
|HuangZhongtian|VicePresident|Male|56|Current|106.34|No|
|LinGaike|VicePresident|Male|45|Current|54.38|No|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||
|-|-|-|-|-|-|-|
|LinHongfan|VicePresident|Male|46|Current|160.25|No|
|Total|--|--|--|--|963.22|--|

 Situations of equity incentives awarded to the directors, supervisors and senior management of the Company during the ReportingPeriod
□Applicable√ Not applicable
V. Employees of theCompany
1.Number ofthe employees, componentdifference andeducational background
|||
|-|-|
|Numberoftheservingemployeesoftheparentcompany(person)|2,186|
|Numberoftheservingemployeesofthemajorsubsidiaries(person)|15,204|
|Totalnumberoftheservingemployees(person)|17,390|
|TotalnumberoftheemployeesreceivingthesalaryoftheReportingPeriod(person)|17,390|
|Numberoftheleftandretiredemployeesthattheparentcompanyandthemajorsubsidiariesshouldundertaketheexpenses(person)|0|
|Componentdifference||
|Category|Number(person)|
|Productionpersonnel|10,405|
|Salespersonnel|3,819|
|Technicalpersonnel|1,203|
|Financialpersonnel|622|
|Administrativepersonnel|1,341|
|Total|17,390|
|Educationalbackground||
|Category|Number(person)|
|Masterandabove|158|
|Undergraduate|2,482|
|College|6,247|
|Highschoolandbelow|8,503|
|Total|17,390|

 2.Remuneration policy
The Company promulgated its remuneration system with the operating strategy of serving for the
enterprise development and enhancement, and the principle of deciding the remuneration according
KonkaGroupCo.,Ltd. AnnualReport2016
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.Employee’s trainingplan
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 2016, guided by closing to the business needs, the Company centralized the superior resources to promote the cultivation of key talents.And it organized and carried out the open class project for all the employees, and organized and carried out the newemployee’s training& cultivation projects respectively for the graduates from campus recruiting and personnel from social recruitment. Meanwhile, it centralized to organize the pointed the training projects of general management skills and post professional knowledge, etc for the personnel from marketing,R&D, manufacturing, financial and human resources systems, so as tobettercomplete its annual training plan.
4.Laboroutsourcing
□Applicable√ Not applicable
KonkaGroupCo.,Ltd. AnnualReport2016
Section IX. Corporate Governance
I. Basicinformation ofcorporate governance
In the Reporting Period, strictly in accordance with the Company Law, Securities Law of the PRC, Code of Corporate Governance for Listed Companies, Share Listing Rules of Shenzhen Stock Exchange and the relevant rules and regulations of the CSRC, the Company timely amended the internal control systems such as the Articles of Association and Administrative Method on Provision of External Financial Aids as well as Management System on Investors Relationship, continuously perfected the corporate governance structure and standardized theCompany’s operation. By the end of the Reporting Period, the actual conditions of corporate governance basically met the requirements of the regulatory documents in respect of corporate governance structure oflisted companies issued byCSRC.
(I) Shareholders andtheShareholders’General Meeting
The Company drew up Articles of Association and Rules for Procedure ofShareholders’ General Meeting, ensured that all shareholders, in particular medium and minor shareholders, enjoy legal rights and equal standard. In the Reporting Period, the Company was able to publish announcement onShareholders’ General Meetings in advance, convenedShareholders’ General Meeting with strictly accordance to relevant requirements, so as to enable the shareholders have their rights of information to theCompany’s material issues and the participation rights. In 2016, the Company convened threeShareholders’ General Meeting in total. The Company seriously did well the registration, arrangement and organization work for theShareholders’ General Meeting before the circular on convening theShareholders’ General Meeting being published at the designated media. The Company convened theShareholders’ General Meeting at the office address of the Company strictly in line with relevant stipulations, which was convenient in traffic, and the shareholders could attend the session in accordance with their actual situation. TheCompany’s directors, supervisors and senior management staffs made explanations and description for theshareholders’ questions and advices at thesession.
(II) Controlling shareholder and the Company
In the Reporting Period, the controlling shareholders and actual controllers strictly regulated its behavior and complied with laws in exercising their rights and obligations, not bypassed theShareholders’ General Meeting to intervene in theCompany’s decisions and operations directly or indirectly. The Company was separated from the controlling shareholders and actual controllers in aspects of its business, personnel, assets, organ and finance, the Board of Directors, Supervisory Committee and theinternal departments of theCompany functioned independently.
(III) Directors and theBoard ofDirectors
KonkaGroupCo.,Ltd. AnnualReport2016
The number and structure of the Board Bureau of the Company were in compliance with laws and regulations. The Company drew up Rules for Procedures of the Board Bureau, so as to ensure a high efficient operation and scientific decision-making of the Board Bureau; the Company has set up Independent Director System and engaged three independent directors. In the Reporting Period, the number of directors and composition of the Board of Directors of the Company as well as the procedure of selection was in accordance with the requirements of the rules and laws as well as Articles of Association. The Company set up four special committees, which were Financial Audit Committee, Nomination Committee, Remuneration& Appraisal Committee, Strategy Committee to provide profession opinion for the decision of the Board of Directors. All the directors carried out their work, fulfilled their duties and scrupulously attended the Board sessions in accordance with Rules of Procedure for the Board of Directors, Rules for Independent Directors, etc. 19 Board sessions were convened by the Company during the Reporting Period, which brought the decision-making mechanism ofthe Board ofDirectors intofull play.
(IV) Supervisors 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 andother seniormanagement members.
(V) Performance Appraisal andIncentive& RestrictiveMechanism
The senior management staffs of the Company were recruited on an open basis and in compliance with the laws and regulations. The Company has established and gradually improved the performance appraisal standards and incentive& restrictive mechanism for senior management staffs, soas to attract qualified personnel, and ensure thestabilityof seniormanagement staffs. (VI) Interested parties
KonkaGroupCo.,Ltd. AnnualReport2016
During the Reporting Period, the Company fully respected and maintained the legal rights of the interested parties, and realized the balance of interest among the parties such as society, shareholders and employees, etc. Meanwhile, the Company protected the rights of the employees, promoted the environmental protection, and actively joined in the social benefit and charitable cause soas tojointlypromote sustainableand healthy development.
(VII) Information disclosure and transparency
The Company strengthened its investor relations management by formulating the Management Rules for Investor Relations and the Management Rules for Information Disclosure. The Company strictly complied with the requirements of the laws, regulations and the Articles of Association to disclose its information as required by the relevant regulations on an timely, honest, complete and accurate basis, to ensure the accurate and timely information disclosure, while ensure equal access to information for all shareholders. Owing to his efforts in promoting the standardized operations of the listed companies, implementing the requirements of regulatory authorities, investor relations management, as well as the information disclosure, Mr. Xiao Qing, the Board Secretary, has won the title “Golden Board Secretary of New Fortune” from the 10th session, and successively gained the title of Board Secretary in Actively Promoting the Standards and Self-discipline for the Listed Companies from Y2008 to Y2014 in ShenzhenSecurities Regulatory Bureau.
(VIII) Non-standard governance
1.Type ofnon-standard governance matter existed
There was asituation that theCompany disclosed undisclosed information.
2.Types and cycle ofundisclosed information provided totheprincipal 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
KonkaGroupCo.,Ltd. AnnualReport2016
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 disclosure, the company established Inside Information and Insider Management System in Konka Group Co., Ltd. According to Corporate Law, Security Law, Information Disclosure Management Method for Listed Company, Stock Listing Rule in Shenzhen Stock Exchange and other related provisions in the laws, regulations and regulatory documents; Within the report term, the company amends Inside Information and Insider Management System according to CSRC Provisions on Establishing the Inside Information and Insider Registration Management System in Listed Company, Shenzhen Security Regulatory Bureau Notice to Further Conduct the Inside Information Management Work in Shenzhen Listed Company and other related documents. 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 tothe provision.
The company conducted the special inspection on the inside information management during the occurrence of major event in 2016 and the annual report in 2016.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 2016 and the annual report in 2016. 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
KonkaGroupCo.,Ltd. AnnualReport2016
implemented in place and controlled effectively.
Whether it exist any significant difference between the actual corporate governance and the normative documents related to thegovernment of thelistedcompanies issued byCSRCornot?□Yes√ No
There is no significant difference between the actual corporate governance and the normative documents related to thegovernment ofthelisted companies issued byCSRC.
II. Particulars about theCompany’s separation from the controlling shareholder in respect of business, personnel, assets, organization andfinancial affairs
Within the Reporting Period, the company was fully separated from the controlling shareholders in terms of business, staff, assets, organs, and finance, which owned independent legal representative and main status in market competition and had independent accounting, as well as possessed complete business and theability ofindependent operation toface themarket.
(I) Business: the Company owned complete supply,R&D, production and sales system, possessed ability of independent operation to face the market by independent operation, independent accounting& decision-making, independent bearing responsibility& risks,didn’t subject to the interference and control of the controlling shareholders, actual controller and its controlled enterprises.
(II) Staff: the Company was independent of the controlling shareholder with respect to labor, personnel and salaries management. The Company owned independent team of staffs, the senior management staff, financial personnel and business personnel received their remunerations in the Company, and they were full-time staffs of the Company without holding any post, except directors and supervisors, inshareholders’units orother related enterprises.
(III) Assets integrity: the Company had production and operation premises completely separated from the controlling shareholder, and the unaffiliated and integral assets structure, as well as the independent production system, ancillary production system, the ancillary facilities, house property right and other assets, which also possessed independent procurement and sales system.
(IV) Organ: the Company had its own functional organs adapting to the needs of self-development and market competitiveness, all the functional organs were separated from each other in aspects of personnel, office premises and management rules, etc., there existed no particulars about any shareholders, other unitsor individualsinterfering the organ setting oftheCompany.
(V) Finance: the Company established an independent finance department with full-time financial personnel and an independent finance and accounting system, and independently carried out the financial work in line with requirements of relevant accounting rules; the Company promulgated sound financial management system to operate independently without sharing common accounts with the controlling shareholder, related enterprise, other units or individual; the Company independently declared and paid the tax by laws without particulars on paying taxes together withshareholders’units.
KonkaGroupCo.,Ltd. AnnualReport2016
III. Horizontal competition
□Applicable√ Not applicable
IV. Particulars about annualshareholders’ general meetings and temporaryshareholders’ general meetings heldduringtheReporting Period
1.Particularsaboutannualshareholders’general meetings during theReporting Period
|||||||
|-|-|-|-|-|-|
|Session|Type|Proportionofinvestors'participation|Conveningdate|Disclosuredate|Indextothedisclosed|
|20161stExtraordinaryGeneralMeeting|ExtraordinaryGeneralMeeting|4.83%|21Mar.2016|22Mar.2016|http://www.cninfo.com.cn/finalpage/2016-03-22/1202063800.PDF|
|2014AnnualGeneralMeeting|AnnualGeneralMeeting|30.04%|29Apr.2016|30Apr.2016|http://www.cninfo.com.cn/finalpage/2016-04-30/1202282189.PDF|
|20162ndExtraordinaryGeneralMeeting|ExtraordinaryGeneralMeeting|38.23%|19May2016|20May2016|http://www.cninfo.com.cn/finalpage/2016-05-20/1202330961.PDF|

2. SpecialShareholders’ General Meeting applied by the preferred stockholder with restitution ofvoting right
□Applicable√ Not applicable
V. Performance oftheIndependentDirectors
1. Particulars about the independent directors attending the Board sessions and theshareholders’general meetings
||||||||
|-|-|-|-|-|-|-|
|ParticularsabouttheindependentdirectorsattendingtheBoardsessions|||||||
|Independentdirector|SessionsrequiredtoattendduringtheReportingPeriod|Attendanceinperson|Attendancebywayoftelecommunication|Entrustedpresence(times)|Absencerate|Non-attendanceinpersonfortwoconsecutivetimes|
|SunShengdian|14|1|12|0|1|No|
|XiaoZuhe|14|2|12|0|0|No|
|ZhangShuhua|14|2|12|0|0|No|

Explanation onfailing topresent in person for two consecutivesessions
KonkaGroupCo.,Ltd. AnnualReport2016
N/A
2.Particulars aboutIndependentDirectors proposingobjection onrelevant events
Whether Independent Directors propose objection onrelevant events ornot?
√Yes□No
||||
|-|-|-|
|NameoftheIndependentDirectors|EventsoftheIndependentDirectorsproposedobjection|Contentoftheobjection|
|XiaoZuhe|Proposal to Amend the Terms Related with Company’s Articles ofAssociation|Abstentionvote|
|ExplanationoftheIndependentDirectorsproposingobjectiononrelevantevents|Amendments to the provisions of the amendment to the articles relating to the articles of association of thecompany, Mr Shaw thinks that the scheme has its pros and cons, and therefore abstain from voting.Amendments to the provisions of the amendment to the articles relating to the articles of association of thecompany,MrShawthinksthattheschemehasitsprosandcons,andthereforeabstainfromvoting.||

3.Otherexplanations aboutthedutyperformance ofindependentdirectors
Whether advices to theCompany from independent directors were adopted ornot
√Yes□No
Explanation ontheadvices of independent directors fortheCompany being adopted ornot adopted 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 oftheSpecial Committees underthe Boardduring theReporting Period (I) Summary reporton theperformance oftheAuditCommittee subject to the Boardof Directors
The company had constituted the Work Rules for the Financial Audit Committee under the Board
which illustrated the exact personnel, obligations and rights of the FinancialAudit Committee under
KonkaGroupCo.,Ltd. AnnualReport2016
the Board. In Y2016, based on the principle of faithfulness, the major execution situations of the FinancialAudit Committeeunder theBoard were as follows:
1. Reviewed financial statements ofAnnual Report 2015, First Quarterly Report 2016, Semi-Annual Report 2016, and the Third Quarterly Report 2016, and had no objection to the aforesaid financial statements.
2.During the preparation ofAnnual Report 2016,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 2016annual auditing oftheCompany;
(2) Issued Audit Opinion of the Financial Audit Committee on Financial Accounting Statements Prepared bythe Company beforeCPAs’entry ofAudit;
(3) Communicated and exchanged ideas with the CPAs responsible for annual auditing on the pro Blems occurring during theauditing;
(4) Issued Audit Opinion on Financial Accounting Statements of the Company after CPAs Issued the PreliminaryAudit Opinion;
(5) Issued Summary Report on2016AnnualAuditingbyRuihuaCertified PublicAccountants; (6) Submitted theResolutionof the2016Annual Financial Statement oftheCompany to theBoard; (7) Submitted theResolutionof engagement oftheCPAs in 2017tothe Board;
3. In 2016, 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 to the Boardof Directors
The company had constituted the Work Rules for the Remuneration andAppraisal Committee under the Board which illustrated the exact personnel, obligations and rights of the Remuneration and Appraisal Committee under the Board. In Y2016, based on the principle of faithfulness, the major execution situations of the Remuneration andAppraisal Committee under the Board were as follows: During the preparation ofAnnual Report 2016, 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 2016 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 theremuneration management system of theCompany.
(III) Summary report on the performance of the Nominations Committee subject to the Board ofDirectors
The company had constituted the Work Rules for the Nominations Committee under the Board
KonkaGroupCo.,Ltd. AnnualReport2016
which illustrated the exact personnel, obligations and rights of the Nominations Committee under the Board. In Y2016, based on the principle of faithfulness, the Nominations Committee under the Board did notsubmit theproposal.
(IV) Summary report on the performance of the Strategy Committee subject to the Board of Directors
The company had constituted the Work Rules for the Strategy Committee under the Board which illustrated the exact personnel, obligations and rights of the Strategy Committee under the Board. In Y2016, based on the principle of faithfulness, submitted the Proposal on the Developing Strategies ofKonka bytheStrategy Committee.
VII. Performance of theSupervisory Committee
During the Reporting Period, the Supervisory Committee found whether there was risk in the Company in thesupervisory activity
□Yes√ No
||||||||
|-|-|-|-|-|-|-|
|Thesupervisorycommitteemadenoobjection toeventsundersupervisionduringtheReportingPeriod.Meeting|ConvenedDate|SupervisorsPresent|NameoftheResolutionsoftheMeeting|Resolutions|DisclosureIndexontheSpecifiedWebsitefortheResolutions|DisclosureDate|
|7thSessionofthe8thBoardof|26Jan.2016|HaoGang,WangYoulai,LiJun|ProposaltoFormulatetheSpecificationontheBehaviorof|Unanimouslyvotedagreedbytheparticipants|http://www.cninfo.com.cn/finalpage/2016-01-27/1201943172|27Jan.2016|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||
|-|-|-|-|-|-|-|
|Meeting|||Director,SupervisorandSeniorManager||.PDF||
|8thSessionofthe8thBoardofMeeting|6Apr.2016|HaoGang,WangYoulai,LiJun|2015AnnualReport,2015WorkReportoftheBoardofSupervisors,2015Self-AssessmentReportofInternalControl,ProposalontheGeneralElectionoftheNon-employeeSupervisoroftheBoardofSupervisors|Unanimouslyvotedagreedbytheparticipants|http://www.cninfo.com.cn/finalpage/2016-04-08/1202150026.PDF|8Apr.2016|
|9thSessionofthe8thBoardofMeeting|12Apr.2016|HaoGang,WangYoulai,LiJun|ProposalonCompany’sComplyingwiththeconditionforPrivatelyIssuingA-shares;ProposalonCompany’sPrivatelyIssuingA-sharestoSpecificObject;ProposalontheCompany’sNotefornotCompilingtheSpecialReportforPreviousRaisedFundUsingStatus;ProposalonCompany’sFeasibilityAnalysisReportforPrivatelyIssuingA-sharesFundUsage;ProposalontheCompany’sPlanonPrivatelyIssuingA-shares;|Unanimouslyvotedagreedbytheparticipants|http://www.cninfo.com.cn/finalpage/2016-04-13/1202169866.PDF|13Apr.2016|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|ProposaltoInvitetheGeneralMeetingofShareholderstoAuthorizetheBoardofDirectorstohandletherelatedMattersontheMattersrelatedwithPrivatelyIssuingA-shares;ProposalonFormulatingtheShareholderReturnPlanninginFutureThreeYears(2016-2018)inKonkaGroupCo.,Ltd.;ProposaltoAmendRaisingFundManagementSysteminKonkaGroupCo.,Ltd.;ProposalontheCompany’sInvolvedAssociatedTradeMatteronPrivatelyIssuingA-shares;ProposalonAgreeingOverseasChineseTownEnterpriseCo.ToFreefromIncreasingtheStockwithoffer;ProposalonSigningEffectiveShareSubscribingContractAttachedwithConditionbetweentheCompanyandSubscribing|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||
|-|-|-|-|-|-|
||||Object;ProposalonAdoptingFillingMeasuresforDilutedReturnsatSightforPrivatelyIssuingA-shares;ProposalontheCommitmentforAdoptingFillingMeasuresforDilutedReturnsatSightforPrivatelyIssuingA-sharesreleasedbyAllDirectors,SeniorManagersandControllingShareholders.|||
|10thSessionofthe8thBoardofMeeting|27Apr.2016|HaoGang,WangYoulai,LiJun|20161stQuarterReport|Unanimouslyvotedagreedbytheparticipants|N/A|
|11thSessionofthe8thBoardofMeeting|26Aug.2016|HaoGang,WangYoulai,LiJun|2016Semi-annualReport|Unanimouslyvotedagreedbytheparticipants|N/A|
|12thSessionofthe8thBoardofMeeting|28Oct.2016|HaoGang,WangYoulai,LiJun|20163rd QuarterReport|Unanimouslyvotedagreedbytheparticipants|N/A|

VIII.Appraisalandincentivemechanism forseniormanagement staffs
In order to enable the senior management staffs of the Company give better performance of their duties, and clarify their rights and obligations, the Company established and improved a fair, transparent and efficient PerformanceAppraisal Standard and Incentive& Restraint Mechanism for the senior management staffs. The Company assessed the duty performance and completion of
business of senior management staffs in terms of professional skills, management level and jo B
performance; took the salary plus bonus as a main incentive way, to improve the incentive of senior
KonkaGroupCo.,Ltd. AnnualReport2016
management. The senior management staff was appraised by the Board of Directors, which was supervised bytheSupervisory Committee.
IX.Internal Control
1.Particulars aboutsignificantdefects foundin theinternal controlduring Reporting Period□Yes√No
2.Self-appraisal reportoninternal control
|||||
|-|-|-|-|
|Disclosure date of the Self-appraisalReportonInternalControl||31Mar.2017||
|Disclosure index of the Self-appraisalReportonInternalControl||www.cninfo.com.cn||
|Theproportion oftotalassetsincludedin evaluation scope entities in theCompany's total assets of theconsolidatedfinancialstatements||Morethan90%||
|The proportion of operationrevenueincludedinevaluationscope entitiesinthe Company's operation revenue of theconsolidatedfinancialstatements||Morethan90%||
|Defectjudgingstandards||||
|Category|FinancialReport||Non-FinancialReport|
|Qualitativecriteria|I. Those with the following characteristics should berecognized as great defect: 1. found out there weremalpractices of the Directors, Supervisors and SeniorExecutivesoftheCompanythatformedsignificantinfluencesonthefinancial report;2. theCompany revised thepublishedfinancialreportandrevisedthegreatmisstatementscausedbythe malpractices or the mistakes; 3. CPAfound out there wasgreat misstatement of thecurrent financial report whiledidn’tfound during the operating process of the internal control; 4.the supervision of the internal control by the Finance AuditCommittee and the internal audit institution of the Companywas invalid; 5. not yet revised the great defect after thereasonableperiodaswhichwasdiscoveredamongtheinternalcontrol assessment; 6. the significant business lacked ofsystematic control or the systematic control was invalid. II.Thosewiththefollowingcharacteristicsshouldberecognizedas significant defect: 1. not yet chosen or applied theaccounting polices according to the generally acceptedaccounting standards; 2. not yet constructed the anti-spamprocessorcontrolmeasures;3.asfortheaccountsdisposalofthe unconventional or special transactions, there was no||I.Thefollowingsignsindicatedtheremayexist great defect among the internalcontrol of the non-financial report; 1. theoperating activities of the enterprisesseriously violated the national laws andregulations; 2. negative news frequentlydisclosed by the media which causedsignificant harm to the Company’sreputation; 3. the core management teamlefttheirpositionsoneafteranotherortheoutflow of thekey positionpersonnel wasserious; 4. significant business lacked ofsystematic control of the system wasinvalid;greatdefectdiscoveredamongtheinternal control assessment not yet berevised in time. II. The following signsindicatedtheremayexistsignificantdefectamong the internal control of thenon-financial report: 1. negative newsoccurred rather frequently which causedrather big harm to the Company’s|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
||corresponding control mechanism or execution or theexistence of the corresponding supplement control; 4. therewas oneor multipledefects duringthecontrol ofthecompileof the financial report at the period-end and could notreasonable guarantee the statement of the compiled financialreportreachtherealandaccuratetarget;5.notyetrevisedthesignificant defect after the reasonable period as which wasdiscovered among the internal control assessment. III. Otherdefects from the internal control hadn’t reached therecognition standards of the great defect or significant defectshouldberecognizedasgeneraldefect.|reputation; 2. the outflow of the keyposition personnel was rather serious; 3.there was obvious defect among thecontrol system of the significant business;4. the significant defect found among theinternal control assessment not yet berevisedintime.III.Otherdefectsfromtheinternal control hadn’t reached therecognitionstandardsofthegreatdefectorsignificantdefect,shouldberecognizedasgeneraldefect.|
|Quantitativecriteria|Great defect: potential misstatement amount≥1% of the grossprofit margin of the 2015 consolidated financial report of theCompany; significant defect: 0.5% of the gross profit marginof the 2015 consolidated financial report of theCompany≤potential misstatement amount＜1% of the grossprofit margin of the 2015 consolidated financial report of theCompany; general defect: potential misstatement amount＜0.5% of the gross profit margin of the 2015 consolidatedfinancialreportoftheCompany.|Referencetotheimplementationofquantitativestandardsforinternalcontroldefectassessmentoffinancialreporting.|
|Numberofsignificantdefectsoffinancialreport(Piece)|0||
|Numberofsignificantdefectsofnon-financialreport(Piece)|0||
|Numberofimportantdefectsoffinancialreport(Piece)|0||
|Numberofimportantdefectsofnon-financialreport(Piece)|0||

X.Auditreport on internalcontrol
√Applicable□ Not applicable
||
|-|
|AuditopinionparagraphsintheAuditReportonInternalControl|
|We considered that, in all the significant aspects, Konka Group maintained efficient internal control of the financial report|

KonkaGroupCo.,Ltd. AnnualReport2016
|||
|-|-|
|accordingtotheC-SOXandtherelevantregulationson31Dec.2016.||
|Particulars about Audit Report onInternalControl|Disclosure|
|TypeofAuditReportonInternalControl|Unqualifiedauditor’sreport|
|Whether there is significant defect innon-financialreport|No|

Whether the CPAs firm issues an Audit Report on Internal Control with non-standard opinion or not?
□Yes√No
Whether the Audit Report on Internal Control from the CPAs firm is in consistent with the Self-appraisal Report from theBoard ornot?
√Yes□No
KonkaGroupCo.,Ltd. AnnualReport2016
Section X Corporate Bonds
Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the approval dateof thisReport or were duebut couldnot beredeemed in full?
No.
KonkaGroupCo.,Ltd. AnnualReport2016
Section XI Financial Report
IAuditor’s report
|||
|-|-|
|Typeofauditor’sopinion|Standardunqualifiedopinion|
|Dateofsigningtheauditor’sreport|03/29/2017|
|Nameoftheauditor|RuihuaCertifiedPublicAccountants(LLP)|
|No.oftheauditor’sreport|RuihuaAuditReport[2017]No.44050001|
|NameofCPA|TangQimei,ShenLingzhi|

TextoftheAuditor’s Report
Auditor’s Report
|||
|-|-|
|4|4050001|

KonkaGroupCo.,Ltd. AnnualReport2016
have conducted our audit in accordance with the Audit Standards for Chinese Registered Accountants, which require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on theauditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risks assessments, the auditor considers the internal control related to the preparation of the financial statements so as to design proper audit procedures. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation ofthe financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate, which provides a basis for us toexpress auditing opinion.
3.Auditor’s opinion
In our opinion, the financial statements of the Company have been prepared according to the Accounting Standards for Business Enterprises in all material aspects, which give a fair view of theCompany’s and consolidated financial positions as at December 31, 2016 and theCompany’s and consolidated operating results and cashflows forthe year then ended.
RuihuaCertified PublicAccountants (LLP) ChineseCPA:
Beijing·China ChineseCPA:
March 29,2017
II Financialstatements
Currency unit for thefinancial statements: RMB
1.Consolidated balancesheet
KonkaGroupCo.,Ltd. AnnualReport2016
Prepared byKonka Group Co., Ltd.
Unit:RMB
||||
|-|-|-|
|Item|December31,2016|December31,2015|
|Currentassets:|||
|Monetaryfunds|2,617,606,256.42|1,706,446,928.92|
|Settlementreserve|||
|Interbanklendings|||
|Financialassetsatfairvaluethroughprofit/loss|252,084,994.12|33,196,377.28|
|Derivativefinancialassets|||
|Notesreceivable|2,871,633,498.82|2,880,860,750.44|
|Accountsreceivable|2,307,965,548.49|2,048,813,439.34|
|Accountspaidinadvance|274,810,658.72|193,664,620.66|
|Premiumsreceivable|||
|Reinsurancepremiumsreceivable|||
|Receivablereinsurancecontractreserve|||
|Interestreceivable|1,342,063.84|7,426,409.52|
|Dividendsreceivable|10,171,609.48||
|Otheraccountsreceivable|222,389,921.80|160,165,779.82|
|Financialassetspurchasedunderagreementstoresell|||
|Inventories|4,287,413,944.35|2,882,515,913.28|
|Assetsheldforsale|||
|Non-currentassetsduewithinoneyear|||
|Othercurrentassets|562,204,116.20|647,311,938.45|
|Totalcurrentassets|13,407,622,612.24|10,560,402,157.71|
|Non-currentassets:|||
|Loansandadvancestocustomers|||
|Available-for-salefinancialassets|314,967,639.36|311,974,282.66|
|Held-to-maturityinvestments|||
|Long-termaccountsreceivable|||
|Long-termequityinvestments|309,648,120.37|190,573,524.29|
|Investmentproperty|222,086,904.26|227,718,178.53|
|Fixedassets|1,573,978,914.03|1,763,503,189.50|
|Constructioninprogress|315,536,437.05|207,854,180.88|
|Engineeringmaterials|||

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Disposaloffixedassets|||
|Productivelivingassets|||
|Oil-gasassets|||
|Intangibleassets|302,045,627.44|352,591,887.48|
|R&Dexpenses|||
|Goodwill|3,597,657.15|3,597,657.15|
|Long-termdeferredexpenses|91,901,533.39|82,846,982.07|
|Deferredtaxassets|701,734,152.68|549,305,508.01|
|Othernon-currentassets|||
|Totalnon-currentassets|3,835,496,985.73|3,689,965,390.57|
|Totalassets|17,243,119,597.97|14,250,367,548.28|
|Currentliabilities:|||
|Short-termborrowings|6,562,834,226.51|4,150,773,195.76|
|BorrowingsfromtheCentralBank|||
|Moneydepositsacceptedandinter-bankdeposits|||
|Interbankborrowings|||
|Financialliabilitiesatfairvaluethroughprofit/loss|337,263.13||
|Derivativefinancialliabilities|||
|Notespayable|863,709,138.39|929,176,857.06|
|Accountspayable|3,160,073,575.56|2,980,416,983.25|
|Accountsreceivedinadvance|1,201,426,223.70|349,784,807.32|
|Financialassetssoldforrepurchase|||
|Feesandcommissionspayable|||
|Payrollpayable|273,059,516.65|279,631,258.71|
|Taxespayable|121,905,421.18|92,097,951.90|
|Interestpayable|21,344,172.45|20,552,763.14|
|Dividendspayable|||
|Otheraccountspayable|1,444,349,986.74|1,550,931,573.35|
|Reinsurancepremiumspayable|||
|Insurancecontractreserve|||
|Payablesforactingtradingofsecurities|||
|Payablesforactingunderwritingofsecurities|||
|Liabilitiesheldforsale|||
|Non-currentliabilitiesduewithinoneyear|41,025.60|573,398,959.65|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Othercurrentliabilities|||
|Totalcurrentliabilities|13,649,080,549.91|10,926,764,350.14|
|Non-currentliabilities:|||
|Long-termborrowings|70,000,000.00|23,700,000.00|
|Bondspayable|||
|Ofwhich:Preferenceshares|||
|Perpetualbonds|||
|Long-termaccountspayable|30,102,564.14|30,133,333.37|
|Long-termpayrollpayable|18,151,659.90|23,435,856.86|
|Specialpayables|||
|Provisions|7,551,985.10|4,629,554.61|
|Deferredincome|130,571,125.42|162,786,004.20|
|Deferredtaxliabilities|19,162,818.83|3,468,031.97|
|Othernon-currentliabilities|||
|Totalnon-currentliabilities|275,540,153.39|248,152,781.01|
|Totalliabilities|13,924,620,703.30|11,174,917,131.15|
|Owners’equity:|||
|Sharecapital|2,407,945,408.00|2,407,945,408.00|
|Otherequityinstruments|||
|Ofwhich:Preferenceshares|||
|Perpetualbonds|||
|Capitalreserve|79,723,092.04|78,209,535.19|
|Less:Treasuryshares|||
|Othercomprehensiveincome|-6,932,104.65|3,155,744.00|
|Specialreserve|||
|Surplusreserve|847,908,466.28|847,908,466.28|
|Provisionsforgeneralrisks|||
|Retainedearnings|-427,163,254.63|-522,836,282.66|
|EquityattributabletoownersoftheCompany|2,901,481,607.04|2,814,382,870.81|
|Minorityinterests|417,017,287.63|261,067,546.32|
|Totalowners’equity|3,318,498,894.67|3,075,450,417.13|
|Totalliabilitiesandowners’equity|17,243,119,597.97|14,250,367,548.28|

Legal representative: Liu Fengxi Accounting head for thisReport: Li Chunlei
Head of theaccounting department: Li Chunlei
KonkaGroupCo.,Ltd. AnnualReport2016
2.Balancesheet oftheCompany
Unit:RMB
||||
|-|-|-|
|Item|December31,2016|December31,2015|
|Currentassets:|||
|Monetaryfunds|982,562,273.45|502,899,530.83|
|Financialassetsatfairvaluethroughprofit/loss|39,894,844.12|7,184,035.29|
|Derivativefinancialassets|||
|Notesreceivable|2,513,459,083.61|2,635,643,772.62|
|Accountsreceivable|3,145,529,199.35|1,417,915,276.56|
|Accountspaidinadvance|523,905,219.52|372,509,871.77|
|Interestreceivable|4,502,350.43|14,901,123.48|
|Dividendsreceivable|||
|Otheraccountsreceivable|1,725,494,161.08|938,447,798.08|
|Inventories|1,926,824,243.11|1,771,302,947.50|
|Assetsheldforsale|||
|Non-currentassetsduewithinoneyear|||
|Othercurrentassets|505,418,961.79|530,272,796.83|
|Totalcurrentassets|11,367,590,336.46|8,191,077,152.96|
|Non-currentassets:|||
|Available-for-salefinancialassets|270,217,639.36|271,924,282.66|
|Held-to-maturityinvestments|170,000,000.00|352,000,000.00|
|Long-termaccountsreceivable|||
|Long-termequityinvestments|2,383,970,009.87|1,621,195,118.22|
|Investmentproperty|222,086,904.26|227,718,178.53|
|Fixedassets|499,826,176.39|512,933,612.51|
|Constructioninprogress|11,754,885.34|12,619,010.21|
|Engineeringmaterials|||
|Disposaloffixedassets|||
|Productivelivingassets|||
|Oil-gasassets|||
|Intangibleassets|90,880,022.23|88,336,594.02|
|R&Dexpenses|||
|Goodwill|||
|Long-termdeferredexpenses|66,995,753.17|57,865,790.98|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Deferredtaxassets|656,704,805.39|504,252,794.29|
|Othernon-currentassets|||
|Totalnon-currentassets|4,372,436,196.01|3,648,845,381.42|
|Totalassets|15,740,026,532.47|11,839,922,534.38|
|Currentliabilities:|||
|Short-termborrowings|5,436,958,840.80|1,022,612,362.58|
|Financialliabilitiesatfairvaluethroughprofit/loss|337,263.13||
|Derivativefinancialliabilities|||
|Notespayable|1,454,982,347.31|377,002,860.08|
|Accountspayable|3,710,175,718.31|5,173,897,087.35|
|Accountsreceivedinadvance|322,402,357.59|251,204,710.89|
|Payrollpayable|131,415,800.19|118,684,992.99|
|Taxespayable|19,823,949.08|31,360,675.68|
|Interestpayable|23,767,528.97|7,761,519.53|
|Dividendspayable|||
|Otheraccountspayable|1,760,751,455.81|1,667,884,936.14|
|Liabilitiesheldforsale|||
|Non-currentliabilitiesduewithinoneyear|0.00||
|Othercurrentliabilities|||
|Totalcurrentliabilities|12,860,615,261.19|8,650,409,145.24|
|Non-currentliabilities:|||
|Long-termborrowings|40,000,000.00||
|Bondspayable|||
|Ofwhich:Preferenceshares|||
|Perpetualbonds|||
|Long-termpayables|||
|Long-termpayrollpayable|||
|Specialpayables|||
|Provisions|7,551,985.10|4,629,554.61|
|Deferredincome|82,166,818.30|88,668,785.51|
|Deferredtaxliabilities|12,026,251.50|1,935,167.63|
|Othernon-currentliabilities|||
|Totalnon-currentliabilities|141,745,054.90|95,233,507.75|
|Totalliabilities|13,002,360,316.09|8,745,642,652.99|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Owners’equity:|||
|Sharecapital|2,407,945,408.00|2,407,945,408.00|
|Otherequityinstruments|||
|Ofwhich:Preferenceshares|||
|Perpetualbonds|||
|Capitalreserve|64,794,108.39|46,505,607.34|
|Less:Treasuryshares|||
|Othercomprehensiveincome|6,714,437.62|1,803,252.77|
|Specialreserve|||
|Surplusreserve|847,908,466.28|847,908,466.28|
|Retainedearnings|-589,696,203.91|-209,882,853.00|
|Totalowners’equity|2,737,666,216.38|3,094,279,881.39|
|Totalliabilitiesandowners’equity|15,740,026,532.47|11,839,922,534.38|

 3.Consolidated income statement
Unit:RMB
||||
|-|-|-|
|Item|December31,2016|December31,2015|
|1.Operatingrevenues|20,299,348,136.21|18,395,177,035.98|
|Including:Salesincome|20,299,348,136.21|18,395,177,035.98|
|Interestincome|||
|Premiumincome|||
|Feeandcommissionincome|||
|2.Operatingcosts|20,865,416,619.07|20,010,568,582.72|
|Including:Costofsales|17,518,330,342.99|16,055,497,185.62|
|Interestexpenses|||
|Feeandcommissionexpenses|||
|Surrenders|||
|Netclaimspaid|||
|Netamountprovidedasinsurancecontractreserve|||
|Expenditureonpolicydividends|||
|Reinsurancepremium|||
|Taxesandsurtaxes|111,967,480.96|94,523,398.90|
|Sellingexpenses|2,285,998,285.97|2,448,337,549.43|
|Administrativeexpenses|607,579,115.65|695,731,013.59|
|Financecosts|154,764,546.12|350,616,323.55|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Assetimpairmentloss|186,776,847.38|365,863,111.63|
|Add:Profitonfairvaluechanges(“-”meansloss)|-14,617,369.08|32,591,836.13|
|Investmentincome(“-”meansloss)|348,445,927.65|13,574,652.77|
|Including:Shareofprofit/lossofassociatesandjointventures|12,738,812.54|-18,793,708.66|
|Exchangegains(“-”meansloss)|||
|3.Operatingprofit(“-”meansloss)|-232,239,924.29|-1,569,225,057.84|
|Add:Non-operatingincome|270,828,423.34|158,538,297.00|
|Including:Profitondisposalofnon-currentassets|5,205,974.43|1,431,893.68|
|Less:Non-operatingexpense|10,853,641.54|134,780,910.57|
|Including:Lossondisposalofnon-currentassets|2,967,838.13|12,339,287.69|
|4.Totalprofit(“-”meansloss)|27,734,857.51|-1,545,467,671.41|
|Less:Corporateincometax|-64,440,500.57|-269,622,908.76|
|5.Netprofit(“-”meansloss)|92,175,358.08|-1,275,844,762.65|
|NetprofitattributabletoownersoftheCompany|95,673,028.03|-1,256,819,314.51|
|Minorityinterests’income|-3,497,669.95|-19,025,448.14|
|6.Othercomprehensiveincomenetoftax|-10,293,358.91|-12,414,464.72|
|Othercomprehensiveincomenetof taxattributabletoownersoftheCompany|-10,087,848.65|-13,015,733.91|
|6.1 Other comprehensive income that will not bereclassifiedintoprofit/loss|||
|6.1.1 Changes in net liabilities or assets with a definedbenefitplanuponre-measurement|||
|6.1.2 Share of other comprehensive income of investeesthatcannotbereclassifiedintoprofit/lossundertheequitymethod|||
|6.2 Other comprehensive income to be subsequentlyreclassifiedintoprofit/loss|-10,087,848.65|-13,015,733.91|
|6.2.1 Share of other comprehensive income of investeesthatwillbereclassifiedintoprofit/lossundertheequitymethod|||
|6.2.2 Profit/loss on fair value changes ofavailable-for-salefinancialassets|4,965,780.75|928,330.73|
|6.2.3 Profit/loss on reclassifying held-to-maturityinvestmentsintoavailable-for-salefinancialassets|||
|6.2.4Effectiveprofit/lossoncashflowhedges|||
|6.2.5Currencytranslationdifferences|-15,053,629.40|-13,944,064.64|
|6.2.6Other|||
|Other comprehensive income net of tax attributable tominorityinterests|-205,510.26|601,269.19|
|7.Totalcomprehensiveincome|81,881,999.17|-1,288,259,227.37|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|AttributabletoownersoftheCompany|85,585,179.38|-1,269,835,048.42|
|Attributabletominorityinterests|-3,703,180.21|-18,424,178.95|
|8.Earningspershare|||
|8.1Basicearningspershare|0.0397|-0.5219|
|8.2Dilutedearningspershare|0.0397|-0.5219|

 Where business mergers under the same control occurred in this Reporting Period, the net profit achieved by the merged parties before the business mergers was RMB , with the corresponding amount for thelast period being RMB.
Legal representative: Liu Fengxi Accounting head for thisReport: Li Chunlei
Head of theaccounting department: Li Chunlei
4.Income statementof theCompany
Unit:RMB
||||
|-|-|-|
|Item|December31,2016|December31,2015|
|1.Operatingrevenues|13,972,090,704.33|15,799,396,382.50|
|Less:Operatingcosts|12,336,816,440.54|14,456,947,091.06|
|Taxesandsurtaxes|37,856,483.10|35,952,751.61|
|Sellingexpenses|1,655,163,345.34|1,754,767,878.82|
|Administrativeexpenses|418,505,210.84|365,394,474.96|
|Financecosts|222,678,508.21|32,911,021.52|
|Assetimpairmentloss|134,659,777.14|203,549,312.14|
|Add:profitonfairvaluechanges(“-”meansloss)|32,373,545.70|7,184,035.29|
|Investmentincome(“-”meansloss)|146,984,583.30|60,463,823.25|
|Including:Shareofprofit/lossofassociatesandjointventures|29,506,367.44|-4,991,699.40|
|2.Operatingprofit(“-”meansloss)|-654,230,931.84|-982,478,289.07|
|Add:Non-operatingincome|136,056,632.09|128,884,576.48|
|Including:Profitondisposalofnon-currentassets|737,683.92|141,921.85|
|Less:Non-operatingexpense|5,807,098.97|102,453,940.21|
|Including:Lossondisposalofnon-currentassets|487,539.02|3,698,388.83|
|3.Totalprofit(“-”meansloss)|-523,981,398.72|-956,047,652.80|
|Less:Corporateincometax|-144,168,047.81|-258,548,667.17|
|4.Netprofit(“-”meansloss)|-379,813,350.91|-697,498,985.63|
|5.Othercomprehensiveincomenetoftax|4,911,184.85|1,331,425.26|
|5.1Othercomprehensiveincomethatwillnotbereclassifiedintoprofitandloss|||

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|5.1.1Changesinnetliabilitiesorassetswithadefinedbenefitplanuponre-measurement|||
|5.1.2 Share of other comprehensive income of investees thatcannotbereclassifiedintoprofit/lossundertheequitymethod|||
|5.2Othercomprehensiveincometobesubsequentlyreclassifiedintoprofit/loss|4,911,184.85|1,331,425.26|
|5.2.1 Share of other comprehensive income of investees thatwillbereclassifiedintoprofit/lossundertheequitymethod|||
|5.2.2 Profit/loss on fair value changes of available-for-salefinancialassets|4,965,780.75|928,330.73|
|5.2.3 Profit/losson reclassifying held-to-maturity investmentsintoavailable-for-salefinancialassets|||
|5.2.4Effectiveprofit/lossoncashflowhedges|||
|5.2.5Currencytranslationdifferences|-54,595.90|403,094.53|
|5.2.6Other|||
|6.Totalcomprehensiveincome|-374,902,166.06|-696,167,560.37|
|7.Earningspershare|||
|7.1Basicearningspershare|||
|7.2Dilutedearningspershare|||

5.Consolidated cash flowstatement
Unit:RMB
||||
|-|-|-|
|Item|December31,2016|December31,2015|
|1.Cashflowsfromoperatingactivities:|||
|Cashreceivedfromsaleofcommoditiesandrenderingofservice|18,285,259,305.39|18,443,639,036.67|
|Net increase in money deposits from customers and interbankplacements|||
|NetincreaseinloansfromtheCentralBank|||
|Netincreaseinfundsborrowedfromotherfinancialinstitutions|||
|Cashreceivedfrompremiumoforiginalinsurancecontracts|||
|Netcashreceivedfromreinsurancebusiness|||
|Netincreaseindepositsofpolicyholdersandinvestmentfund|||
|Net increase in disposal of financial assets at fair value throughprofit/loss|||
|Interest,feesandcommissionsreceived|||
|Netincreaseininterbankborrowings|||
|Netincreaseinfundsinrepurchasebusiness|||
|Taxrefundsreceived|358,031,487.94|430,680,435.37|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Cashreceivedfromotheroperatingactivities|436,160,333.16|443,686,424.74|
|Subtotalofcashinflowsfromoperatingactivities|19,079,451,126.49|19,318,005,896.78|
|Cashpaidforgoodsandservices|16,509,132,778.70|14,488,034,947.99|
|Netincreaseinloansandadvancestocustomers|||
|Net increase in funds deposited in the Central Bank andinterbankplacements|||
|Cashpaidforclaimsoforiginalinsurancecontracts|||
|Interest,feesandcommissionspaid|||
|Cashpaidaspolicydividends|||
|Cashpaidtoandforemployees|1,649,736,066.93|1,738,319,265.97|
|Taxespaid|656,221,900.55|616,762,165.13|
|Cashpaidforotheroperatingactivities|1,247,616,982.54|1,185,289,035.03|
|Subtotalofcashoutflowsduetooperatingactivities|20,062,707,728.72|18,028,405,414.12|
|Netcashflowsfromoperatingactivities|-983,256,602.23|1,289,600,482.66|
|2.Cashflowsfrominvestingactivities:|||
|Cashreceivedfromretractionofinvestments|31,642,659.96|145,165,277.44|
|Cashreceivedasinvestmentincome|59,446,152.79|23,260,902.17|
|Netcashreceivedfromdisposaloffixedassets,intangibleassetsandotherlong-termassets|4,491,419.45|3,631,054.50|
|Netcashreceivedfromdisposalofsubsidiariesorotherbusinessunits||8,889.24|
|Cashreceivedfromotherinvestingactivities|9,883,683,340.31|3,646,914,849.00|
|Subtotalofcashinflowsfrominvestingactivities|9,979,263,572.51|3,818,980,972.35|
|Cash paid to acquire fixed assets, intangible assets and otherlong-termassets|172,054,580.04|234,096,470.72|
|Cashpaidforinvestment|231,850,384.41|78,306,112.00|
|Netincreaseinpledgedloans|||
|Netcashpaidtoacquiresubsidiariesandotherbusinessunits|||
|Cashpaidforotherinvestingactivities|9,472,940,943.57|3,658,501,268.22|
|Subtotalofcashoutflowsduetoinvestingactivities|9,876,845,908.02|3,970,903,850.94|
|Netcashflowsfrominvestingactivities|102,417,664.49|-151,922,878.59|
|3.Cashflowsfromfinancingactivities:|||
|Cashreceivedfromcapitalcontributions|262,112,331.23|78,701,328.03|
|Including: Cash received from minority shareholderinvestmentsbysubsidiaries|262,112,331.23|71,151,328.03|
|Cashreceivedasborrowings|6,897,808,624.31|2,937,450,105.14|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Cashreceivedfromissuanceofbonds|||
|Cashreceivedfromotherfinancingactivities|12,808,000.00|118,110,469.89|
|Subtotalofcashinflowsfromfinancingactivities|7,172,728,955.54|3,134,261,903.06|
|Repaymentofborrowings|5,256,766,118.99|4,071,657,524.17|
|Cashpaidforinterestexpensesanddistributionofdividendsorprofit|139,915,601.19|140,363,063.80|
|Including:dividendsorprofit paidbysubsidiariestominorityinterests|461,972.51|1,343,265.96|
|Cashpaidforotherfinancingactivities|443,297,884.17|176,394,710.03|
|Sub-totalofcashoutflowsduetofinancingactivities|5,839,979,604.35|4,388,415,298.00|
|Netcashflowsfromfinancingactivities|1,332,749,351.19|-1,254,153,394.94|
|4. Effect of foreign exchange rate changes on cash and cashequivalents|80,837,680.34|-35,606,194.86|
|5.Netincreaseincashandcashequivalents|532,748,093.79|-152,081,985.73|
|Add:Openingbalanceofcashandcashequivalents|1,488,154,851.35|1,640,236,837.08|
|6.Closingbalanceofcashandcashequivalents|2,020,902,945.14|1,488,154,851.35|

 6.Cash flowstatement oftheCompany
Unit:RMB
||||
|-|-|-|
|Item|2016|2015|
|1.Cashflowsfromoperatingactivities:|||
|Cashreceivedfromsaleofcommoditiesandrenderingofservice|11,834,479,194.94|12,246,114,167.03|
|Taxrefundsreceived|160,071,895.68|179,546,436.62|
|Cashreceivedfromotheroperatingactivities|2,128,714,960.22|1,745,067,849.17|
|Subtotalofcashinflowsfromoperatingactivities|14,123,266,050.84|14,170,728,452.82|
|Cashpaidforgoodsandservices|12,638,560,047.48|10,398,532,975.42|
|Cashpaidtoandforemployees|915,901,145.04|923,142,975.45|
|Taxespaid|281,931,582.32|270,882,083.75|
|Cashpaidforotheroperatingactivities|3,263,567,880.24|1,780,957,816.25|
|Subtotalofcashoutflowsduetooperatingactivities|17,099,960,655.08|13,373,515,850.87|
|Netcashflowsfromoperatingactivities|-2,976,694,604.24|797,212,601.95|
|2.Cashflowsfrominvestingactivities:|||
|Cashreceivedfromretractionofinvestments|12,427,433.07|130,102,809.09|
|Cashreceivedasinvestmentincome|51,737,043.81|59,458,173.75|
|Netcashreceivedfromdisposaloffixedassets,intangibleassetsandotherlong-termassets|1,280,614.55|57,765,301.70|
|Netcashreceivedfromdisposalofsubsidiariesorotherbusiness|||

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|units|||
|Cashreceivedfromotherinvestingactivities|10,006,846,873.48|3,522,884,590.00|
|Subtotalofcashinflowsfrominvestingactivities|10,072,291,964.91|3,770,210,874.54|
|Cash paid to acquire fixed assets, intangible assets and otherlong-termassets|41,220,039.50|48,440,040.10|
|Cashpaidforinvestment|642,016,000.00|196,857,096.00|
|Netcashpaidtoacquiresubsidiariesandotherbusinessunits|||
|Cashpaidforotherinvestingactivities|10,501,287,664.77|3,774,884,590.00|
|Subtotalofcashoutflowsduetoinvestingactivities|11,184,523,704.27|4,020,181,726.10|
|Netcashflowsfrominvestingactivities|-1,112,231,739.36|-249,970,851.56|
|3.Cashflowsfromfinancingactivities:|||
|Cashreceivedfromcapitalcontributions|||
|Cashreceivedasborrowings|5,251,690,361.51|61,422,000.00|
|Cashreceivedfromissuanceofbonds|||
|Cashreceivedfromotherfinancingactivities|369,933,493.64|994,745,951.79|
|Subtotalofcashinflowsfromfinancingactivities|5,621,623,855.15|1,056,167,951.79|
|Repaymentofborrowings|626,502,931.51|91,422,000.00|
|Cashpaidforinterestexpensesanddistributionofdividendsorprofit|93,670,105.28|16,842,865.65|
|Cashpaidforotherfinancingactivities|352,371,563.61|2,007,026,133.52|
|Sub-totalofcashoutflowsduetofinancingactivities|1,072,544,600.40|2,115,290,999.17|
|Netcashflowsfromfinancingactivities|4,549,079,254.75|-1,059,123,047.38|
|4. Effect of foreign exchange rate changes on cash and cashequivalents|35,193,217.72|-1,310,869.10|
|5.Netincreaseincashandcashequivalents|495,346,128.87|-513,192,166.09|
|Add:Openingbalanceofcashandcashequivalents|478,267,624.53|991,459,790.62|
|6.Closingbalanceofcashandcashequivalents|973,613,753.40|478,267,624.53|

KonkaGroupCo.,Ltd. AnnualReport2016
7.Consolidated statementof changesinowners’equity
2016
Unit:RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2016|||||||||||||
||EquityattributabletoownersoftheCompany|||||||||||Minorityinterests|Totalowners’equity|
||Sharecapital|Otherequityinstruments|||Capitalreserve|Less:Treasuryshares|Othercomprehensiveincome|Specialreserve|Surplusreserve|Generalriskreserve|Retainedearnings|||
|||Preferenceshares|Perpetualbonds|Other||||||||||
|1. Balance at theend of the prioryear|2,407,945,408.00||||78,209,535.19||3,155,744.00||847,908,466.28||-522,836,282.66|261,067,546.32|3,075,450,417.13|
|Add: Changes inaccountingpolicies||||||||||||||
|Correction oferrors in priorperiods||||||||||||||
|Businessmergers under thesamecontrol||||||||||||||
|Other||||||||||||||
|2. Balance at thebeginning of theyear|2,407,945,408.00||||78,209,535.19||3,155,744.00||847,908,466.28||-522,836,282.66|261,067,546.32|3,075,450,417.13|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||
|-|-|-|-|-|-|
|3. Increase/decrease in theperiod (“-” meansdecrease)|1,513,556.85|-10,087,848.65|95,673,028.03|155,949,741.31|243,048,477.54|
|3.1 Totalcomprehensiveincome||-10,087,848.65|95,673,028.03|-3,703,180.21|81,881,999.17|
|3.2 Capitalincreased andreducedbyowners||||159,564,888.59|159,564,888.59|
|3.2.1Ordinarysharesincreasedbyshareholders||||261,842,331.23|261,842,331.23|
|3.2.2Capitalincreasedbyholdersofotherequityinstruments||||||
|3.2.3Amountsofshare-basedpaymentschargedtoowners’equity||||||
|3.2.4Other||||-102,277,442.64|-102,277,442.64|
|3.3 Profitdistribution||||||
|3.3.1Appropriation tosurplusreserve||||||
|3.3.2Appropriation to||||||

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|general riskprovisions|||
|3.3.3Appropriation toowners (orshareholders)|||
|3.3.4Other|||
|3.4 Internalcarry-forward ofowners’equity|-35,543,805.21|-35,543,805.21|
|3.4.1 Newincrease of capital(or share capital)fromcapitalreserve|||
|3.4.2 Newincrease of capital(or share capital)from surplusreserve|||
|3.4.3 Surplusreserve for makinguploss|||
|3.4.4Other|-35,543,805.21|-35,543,805.21|
|3.5Specialreserve|||
|3.5.1Withdrawn for theperiod|||
|3.5.2 Used intheperiod|||

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||||
|-|-|-|-|-|-|-|-|
|3.6Other||37,057,362.06||||88,032.93|37,145,394.99|
|4.Closingbalance|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|

 2015
Unit:RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2015|||||||||||||
||EquityattributabletoownersoftheCompany|||||||||||Minorityinterests|Totalowners’equity|
||Sharecapital|Otherequityinstruments|||Capitalreserve|Less:Treasuryshares|Othercomprehensiveincome|Specificreserve|Surplusreserve|Generalriskreserve|Retainedearnings|||
|||Preferenceshares|Perpetualbonds|Other||||||||||
|1. Balance at theend of the prioryear|1,203,972,704.00||||1,289,403,563.99||16,171,477.91||847,908,466.28||746,022,758.89|193,977,533.95|4,297,456,505.02|
|Add:Changesinaccountingpolicies||||||||||||||
|Correction oferrors in priorperiods||||||||||||||
|Businessmergers under thesamecontrol||||||||||||||
|Other||||||||||||||
|2. Balance at thebeginning of the|1,203,972,704.00||||1,289,403,563.99||16,171,477.91||847,908,466.28||746,022,758.89|193,977,533.95|4,297,456,505.02|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||
|-|-|-|-|-|-|-|
|year|||||||
|3. Increase/decrease in theperiod (“-” meansdecrease)|1,203,972,704.00|-1,211,194,028.80|-13,015,733.91|-1,268,859,041.55|67,090,012.37|-1,222,006,087.89|
|3.1 Totalcomprehensiveincome|||-13,015,733.91|-1,256,819,314.51|-18,424,178.95|-1,288,259,227.37|
|3.2 Capitalincreased andreducedbyowners|||||65,749,452.92|65,749,452.92|
|3.2.1Ordinarysharesincreasedbyshareholders|||||65,749,452.92|65,749,452.92|
|3.2.2Capitalincreasedbyholdersofotherequityinstruments|||||||
|3.2.3Amountsofshare-basedpaymentschargedtoowners’equity|||||||
|3.2.4Other|||||||
|3.3 Profitdistribution||||-12,039,727.04|19,565,831.91|7,526,104.87|
|3.3.1Appropriation to|||||||

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||
|-|-|-|-|-|-|
|surplusreserve||||||
|3.3.2Appropriation togeneral riskprovisions||||||
|3.3.3Appropriation toowners (orshareholders)|||-12,039,727.04|-1,343,265.96|-13,382,993.00|
|3.3.4Other||||20,909,097.87|20,909,097.87|
|3.4 Internalcarry-forward ofowners’equity|1,203,972,704.00|-1,203,972,704.00||||
|3.4.1 Newincrease of capital(or share capital)from capitalreserve|1,203,972,704.00|-1,203,972,704.00||||
|3.4.2 Newincrease of capital(or share capital)from surplusreserve||||||
|3.4.3 Surplusreserve for makinguploss||||||
|3.4.4Other||||||
|3.5Specialreserve||||||
|3.5.1||||||

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||||
|-|-|-|-|-|-|-|-|
|Withdrawn for theperiod||||||||
|3.5.2 Used intheperiod||||||||
|3.6Other||-7,221,324.80||||198,906.49|-7,022,418.31|
|4.Closingbalance|2,407,945,408.00|78,209,535.19|3,155,744.00|847,908,466.28|-522,836,282.66|261,067,546.32|3,075,450,417.13|

 8.Statementofchanges inowners’equity ofthe Company
2016
Unit:RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2016|||||||||||
||Sharecapital|Otherequityinstruments|||Capitalreserve|Less:Treasuryshares|Othercomprehensiveincome|Specialreserve|Surplusreserve|Retainedearnings|Totalowners’equity|
|||Preferenceshares|Perpetualbonds|Other||||||||
|1. Balance at the end of the prioryear|2,407,945,408.00||||46,505,607.34||1,803,252.77||847,908,466.28|-209,882,853.00|3,094,279,881.39|
|Add: Changes in accountingpolicies|0.00||||0.00||0.00||0.00|0.00||
|Correction of errors in priorperiods|0.00||||0.00||0.00||0.00|0.00||
|Other|0.00||||0.00||0.00||0.00|0.00||
|2. Balance at the beginning of theyear|2,407,945,408.00||||46,505,607.34||1,803,252.77||847,908,466.28|-209,882,853.00|3,094,279,881.39|
|3. Increase/ decrease in the period(“-”meansdecrease)|||||18,288,501.05||4,911,184.85|||-379,813,350.91|-356,613,665.01|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|3.1Totalcomprehensiveincome|4,911,184.85|-379,813,350.91|-374,902,166.06|
|3.2 Capital increased andreducedbyowners||||
|3.2.1Ordinarysharesincreasedbyshareholders||||
|3.2.2Capitalincreasedbyholdersofotherequityinstruments||||
|3.2.3Amountsofshare-basedpaymentschargedtoowners’equity||||
|3.2.4Other||||
|3.3Profitdistribution||||
|3.3.1 Appropriation to surplusreserve||||
|3.3.2 Appropriation to owners(orshareholders)||||
|3.3.3Other||||
|3.4 Internal carry-forward ofowners’equity||||
|3.4.1 New increase of capital(or share capital) from capitalreserve||||
|3.4.2 New increase of capital(or share capital) from surplusreserve||||
|3.4.3 Surplus reserve formakinguploss||||
|3.4.4Other||||

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||
|-|-|-|-|-|-|-|
|3.5Specialreserve|||||||
|3.5.1Withdrawnfortheperiod|||||||
|3.5.2Usedintheperiod|||||||
|3.6Other||18,288,501.05||||18,288,501.05|
|4.Closingbalance|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|

 2015
Unit:RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|2015|||||||||||
||Sharecapital|Otherequityinstruments|||Capitalreserve|Less:Treasuryshares|Othercomprehensiveincome|Specialreserve|Surplusreserve|Retainedearnings|Totalowners’equity|
|||Preferenceshares|Perpetualbonds|Other||||||||
|1. Balance at the end of the prioryear|1,203,972,704.00||||1,250,283,488.79||471,827.51||847,908,466.28|499,655,859.67|3,802,292,346.25|
|Add: Changes in accountingpolicies||||||||||||
|Correction of errors in priorperiods||||||||||||
|Other||||||||||||
|2. Balance at the beginning of theyear|1,203,972,704.00||||1,250,283,488.79||471,827.51||847,908,466.28|499,655,859.67|3,802,292,346.25|
|3. Increase/ decrease in the period(“-”meansdecrease)|1,203,972,704.00||||-1,203,777,881.45||1,331,425.26|||-709,538,712.67|-708,012,464.86|
|3.1Totalcomprehensiveincome|||||||1,331,425.26|||-697,498,985.63|-696,167,560.37|
|3.2Capitalincreasedandreduced|1,203,972,704.00||||-1,203,972,704.00|||||||

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|byowners|||||
|3.2.1Ordinarysharesincreasedbyshareholders|1,203,972,704.00|-1,203,972,704.00|||
|3.2.2Capitalincreasedbyholdersofotherequityinstruments|||||
|3.2.3Amountsofshare-basedpaymentschargedtoowners’equity|||||
|3.2.4Other|||||
|3.3Profitdistribution|||-12,039,727.04|-12,039,727.04|
|3.3.1 Appropriation to surplusreserve|||||
|3.3.2 Appropriation to owners(orshareholders)|||-12,039,727.04|-12,039,727.04|
|3.3.3Other|||0.00||
|3.4 Internal carry-forward ofowners’equity|||||
|3.4.1 New increase of capital(or share capital) from capitalreserve|||||
|3.4.2 New increase of capital(or share capital) from surplusreserve|||||
|3.4.3 Surplus reserve formakinguploss|||||
|3.4.4Other|||||
|3.5Specialreserve|||||
|3.5.1Withdrawnfortheperiod|||||
|3.5.2Usedintheperiod|||||

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||
|-|-|-|-|-|-|-|
|3.6Other||194,822.55||||194,822.55|
|4.Closingbalance|2,407,945,408.00|46,505,607.34|1,803,252.77|847,908,466.28|-209,882,853.00|3,094,279,881.39|

KonkaGroupCo.,Ltd. AnnualReport2016 Konka Group Co., Ltd.
Notes of 2016 Financial Statement
(Monetary unitis RMB unless otherwisestated)
I. CompanyProfile
1.Establishment
Konka Group Co., Ltd. (hereinafter referred to as “Company” or “the Company”), is a joint-stock limited company reorganized from the former Shenzhen Konka Electronic Co., Ltd. in August 1991 upon approval of thePeople’s Government of Shenzhen Municipality, and has its ordinary shares (A-share and B-share) listed on Shenzhen Stock Exchange with prior consent from thePeople’s Bank of China Shenzhen Special Economic Zone Branch. On August 29, 1995, the Company was renamed to “Konka Group Co., Ltd.” (credibility code: 914403006188155783) with its main business falling into electronic industry. And now the headquarters locates in No. 28 of No. 12 of Keji South Rd., Science& Technology Park, Yuehai Street, Nanshan District,Shenzhen, Guangdong Province.
2.ShareCapital Changes uponEstablishment
On November 27, 1991, with approval from the SRYFZ No. 102[1991] document as issued by thePeople’s Bank of China Shenzhen Special Economic Zone Branch, Shenzhen Konka Electronic Co., Ltd., during December8—December 31, 1991, has issued 128,869,000 RMB ordinary shares (A-share) at a par value of RMB1.00 per share, of which the original net assets were converted into 98,719,000 state-owned institutional shares, 30,150,000 new shares were issued, including 26,500,000 circulating shares issued to the public and 3,650,000staffshares issued to thestaffoftheCompany.
On January 29, 1992, with approval from the SRYFZ No. 106[1991] document as issued by thePeople’s Bank of China Shenzhen Special Economic Zone Branch, Shenzhen Konka Electronic Co., Ltd., during December 20,1991— January 31, 1992, has issued to investors abroad 58,372,300 RMB special shares (B-share) at a par value of RMB1.00 per share, of which 48,372,300 shares held by the former foreign investor andfounder—Hong Kong Ganghua Electronic Group Co., Ltd. are converted into foreign legalperson’s shares, and 10,000,000B-shares are issued additionally.
On April 10, 1993, the Proposal on Profit Distribution and Dividend Payout 1992 was
KonkaGroupCo.,Ltd. AnnualReport2016 adopted at the second general meeting of shareholders of the Company. With approval from the SZBF No. 2[1993] document as issued by Shenzhen Securities Regulatory Office, the Company began to perform dividend policy for FY 1992 as of April 30, 1993: distributing RMB 0.90 in cash plus 3.5 bonus shares for every 10 shares to all shareholders. The total capital stock reached 187,473,150shares after this distribution.
On April 18, 1994, the Proposal on Profit Distribution and Dividend Payout 1993 was adopted at the third general meeting of shareholders of the Company.With approval from the SZBF No. 115[1994] document as issued by Shenzhen Securities Regulatory Office, the Company began to perform dividend policy for FY1993 as of June 10, 1994: distributing RMB 1.10 in cash plus 5 bonus shares (including 4.4 profit bonus shares and 0.6 bonus share capitalized from capital public reserve) for every 10 shares to all shareholders. The total capital stock reached 281,209,724 shares after this distribution and capitalization from capital publicreserve.
On June 2, 1994, in accordance with the provisions that “staff shares could go public and be transferred six months after listing”, as jointly promulgated by the State Commission for Restructuring the Economic System and the StateCouncil’s Securities Commission, the staff shares of the Company was planned to be listed on the flow on June 6, 1994, with the prior consent of Shenzhen Securities Regulatory Officeand Shenzhen StockExchange.
On October 8, 1994, the Proposal on Negotiable Bonus Shares of B-Share Corporate Shareholders 1992 was adopted at the 1994 interim general meeting of shareholders of the Company. With approval from the SZBF No. 224[1994] document as issued by Shenzhen Securities Regulatory Office, the 16,930,305 bonus shares for FY 1992 granted to foreign legal persons were listed and negotiated at B-sharemarket onOctober 26,1994.
On February 6, 1996, the Proposal on ShareAllotment Modes 1996 was adopted at the 1996 interim general metering of shareholders of the Company. With approval from the SZBF No. 5[1996] document as issued by Shenzhen Securities Regulatory Office, and reexamination from the ZJPSZ No. 16[1996] document and ZJGZ No. 2[1996] document as issued by China Securities Regulatory Commission, on July 16, 1996 and October 29, 1996, all shareholders were respectively allotted three shares for every ten existing shares held at RMB 6.28/A-share and HKD 5.85/B-share. Corporate shareholders took their respective existing shares as bases for full subscription of the allocable shares. The total capital stock
KonkaGroupCo.,Ltd. AnnualReport2016 reached 365,572,641shares after thisallotment.
On January 25, 1998, the Plan on Share Allotment 1998 was adopted at the 1998 interim general meeting of shareholders of the Company. With approval from the ZZBZ No. 29[1998] document as issued by Shenzhen Securities Regulatory Office, and ZJSZ No.64[1998] document as issued by China Securities Regulatory Commission, on July 15, 1998, negotiable A-shares were allotted in proportion of 3:10 at RMB 10.50/A-share. For such reasons as continued weakness in B-share secondary market (lower than share allotment price), B-share negotiation and allotment plan was canceled, and the corporate shareholders of the Company waived the preemptive right. The total capital stock reached 389,383,603 shares after thisallotment.
On June 30, 1999, the Proposal on Profit Distribution and Capitalization from Capital Public Reserve 1998 was adopted at the eighth general meeting of shareholders of the Company. On August 20, 1999, the profit distribution for FY 1998 was carried out: all shareholders were presented RMB3.00 in cash for every 10 shares, plus 2 shares capitalized from capital public reserve.The total capital stock reached 467,260,323shares after this capitalization.
On June 30, 1999, the Plan on A-Share Issue for Capital Increase was adopted at the eighth general meeting of shareholders of the Company. With approval from the ZJFXZ No.140[1999] document as issued by China Securities Regulatory Commission, on November 1, 1999, 80,000,000 A-shares were additionally issued to the public at RMB15.50/share. The totalcapital stock reached 547,260,323 shares after thisadditional issue.
On May 30, 2000, the Plan on Profit Distribution and Dividend Payout 1999 was adopted at the ninth general meeting of shareholders of the Company. On July 25, 2000, the profit distribution for FY 1999 was carried out: all shareholders were distributed RMB4.00 in cash plus 1 bonus shares for every 10 shares. The total capital stock reached 601,986,352 shares after thisdistribution.
On April 3, 2008, the 7th meeting of the sixth Board of Directors was convened, during which the following resolutions were discussed and adopted: based on the total capital stock of 601,986,352 shares for the year ended December 31, 2007, capitalization from capital public reserve was made to all shareholders at a proportion of 1:1, namely 10 new shares for every 10 existing shares. And the said resolution was subject to approval by the 2007 annual general meeting of shareholders convened on May 26, 2008. The Company, in June 2008,
KonkaGroupCo.,Ltd. AnnualReport2016 implemented the capitalization from capital public reserve and went through the formalities for transfer registration with China Securities Depository and Clearing Corporation Limited. On December 16, 2008, with approval from the SMGZF No. 2662[2008] document as issued by Shenzhen Bureau of Trade and Industry, the Company was agreed to increase its share capital, and went through the formalities for registration of changes with the administration for industry and commerce onApril 10, 2009. The total capital stock reached 1,203,972,704shares after change.
According to the regulations of the 2015 1st Extraordinary General Meeting and the revised articles of the Company, the Company applied to increase the registered capital of RMB1,203,972,704.00, which totally turned into capital reserve with the altered registered capital of RMB2,407,945,408.00 and managed the industrial and commercial alternation registration on28Jan. 2016with thealtered share capital of2,407,945,408shares.
3. Approved business scope: research and development, production and operation of such household appliances as televisions, refrigerators, washing machines, and personal electronic appliances; manufacturing and application of home AV, IPTV set-top boxes, digital TV receivers (including ground receiving equipment of satellite television broadcasting), digital products, mobile communication equipments and terminal products, daily-use electronic products, automotive electronic products, satellite navigation systems, intelligent transportation systems, fire-fighting and security systems, office equipments, computers, displays, large screen display systems; LED (OLED) back light, illumination, light-emitting devices, and packaging thereof; Touch TV AIO, wireless broadcasting television transiting equipment; electronic parts and components, moulds, plastic and rubber products, and packing materials, design and in-door installation security products, monitoring products, wireless and cable digital television system and system integration, and technical consultancy and after-sale paid services of related products (except mobile phone, the other products in the above business scope are manufactured in other places outside Shenzhen); Wholesale, retail, import& export and relevant support services of the aforesaid products (including spare parts) (Commodities subject to state trading management are not involved. Products involved in quota, license management and other specified management shall be subject to the relevant state provisions.); sale of self-developed technological achievements; provision of maintenance services, technical consultant service for electronic products; ordinary cargo transportation, domestic freight forwarding, warehousing services; consultancy on enterprise
KonkaGroupCo.,Ltd. AnnualReport2016 management; and self-owned property leasing and management services, recovery of waste electrical appliances and electronic products (excluding dissembling) (operated by branch offices); and outsourcing services of information technology and business procedures by means of undertaking services in the way of outsourcing, including management and maintenance of system application, management of information technology, bank background service, financial settlement, human resource service, software development, call center,and data processing.
4. The Company and its subsidiaries are mainly engaged in the production and sales of color TVs,whitegoods, mobilephones, etc.; trading; real estate development and marketing. 5. The financial statements contained herein have been approved for issue by the Board of theCompany onMarch 29,2017.
6. There were 39 subsidiaries included in the consolidation scope of 2016 of the Company, and please refer to the Notes VIII. “Equities among other entities” for details. There were 4 subsidiaries increased and 10 decreased in the consolidation scope of the Reporting Period over the last period of the Company, and the gains and losses as well as the cash flows of 10 decreased subsidiaries before the date losing the control right should be recorded in the consolidation of the Reporting Period and please refer to the Notes VII. “Changes of the consolidation scope” fordetails.
7.Acheck listofcorporate names and theirabbreviations mentioned in thisReport
Corporatename Abbreviation
ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd. TelecommunicationTechnology
ShenzhenKonkaHouseholdAppliancesCo.,Ltd. KonkaHouseholdAppliances
ShenzhenKonkaPlasticProductsCo.,Ltd. PlasticProducts
ShenzhenKonkaElectricalAppliancesCo.,Ltd. ElectricalAppliances
ShenzhenKonkaElectronicFittingsTechnologyCo.,Ltd. FittingsTechnology
MudanjiangArcticOceanAppliancesCo.,Ltd. MudanjiangAppliances
ChongqingQingjiaElectronicsCo.,Ltd. ChongqingQingjia
AnhuiKonkaElectronicCo.,Ltd. AnhuiKonka
AnhuiKonkaHouseholdAppliancesCo.,Ltd. AnhuiHouseholdAppliances
KonkaGroupCo.,Ltd. AnnualReport2016 Corporatename Abbreviation
KunshanKonkaElectronicCo.,Ltd. KunshanKonka
DongguanKonkaElectronicCo.,Ltd. DongguanKonka
DongguanKonkaPackingMaterialsCo.,Ltd. DongguanPacking
BoluoKonkaPCBCo.,Ltd. BoluoKonka
BoluoKonkaPrecisionTechnologyCo.,Ltd. BoluoKonkaPrecision
HongKongKonkaCo.,Ltd. HongKongKonka
KonkaHouseholdAppliancesInvestment&DevelopmentCo.,Ltd. KonkaHouseholdAppliancesInvestment Konka Household Appliances KonkaHouseholdAppliancesInternationalTradingCo.,Ltd.
InternationalTrading
Konka(Europe)Co.,Ltd. KonkaEurope
KonkaFactoring(Shenzhen)Co.,Ltd. KonkaFactoring
ShenzhenWankaidaScienceandTechnologyCo.,Ltd. Wankaida
KunshanKangshengInvestmentDevelopmentCo.,Ltd. KunshanKangsheng
AnhuiKonkaTongchuangHouseholdAppliancesCo.,Ltd. AnhuiTongchuang
IndonesiaKonkaElectronicsCo.,Ltd. IndonesiaKonka
ShenzhenShushidaLogisticsServiceCo.,Ltd. ShushidaLogistics
BeijingKonkaElectronicCo.,Ltd. BeijingKonkaElectronic
ShenzhenKonkaE-displayCo.,Ltd. KonkaE-display
ShenzhenE-displayServiceCo.,Ltd. E-displayService
XiamenDalongTradingCo.,Ltd. XiamenDalong
YoushiKangrongCultureCommunicationCo.,Ltd. YoushiKangrong
ShenzhenKangqiaoJiachengPropertyInvestmentCo.,Ltd. KangqiaoJiacheng
KonkaSmartTechLimited KonkaSmartTech
AnhuiKaikaiShijieE-commerceCo.,Ltd. KaikaiShijie
ShenzhenYipingfangNetworkTechnologyCo.,Ltd. Yipingfang
KonkaGroupCo.,Ltd. AnnualReport2016 Corporatename Abbreviation
ShenzhenKonkaMobileInterconnectionTechnologyCo.,Ltd. MobileInterconnection
ShenzhenKonkaCommercialSystemTechnologyCo.,Ltd. CommercialSystemTechnology
ZhongkangSupplyChainManagementCo.,Ltd. ZhongkangSupplyChain
ShenzhenKangqiaoEasyChainTechnologyCo.,Ltd. KangqiaoEasyChain
Yilifang(Hainan)TechnologyCo.,Ltd. Yilifang
KonkaTechnology&Industry
ChuzhouKonkaTechnology&IndustryDevelopmentCo.,Ltd.
Development
II.Basis forthepreparationoffinancial statements
With the going-concern assumption as the basis and based on transactions and other events that actually occurred, the Group prepared financial statements in accordance with<The Accounting Standards for BusinessEnterprises—BasicStandard> issued by the Ministry of Finance with Decree No. 33 and revised with Decree No. 76, the 41 specific accounting standards, the Application Guidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises and other regulations issued and revised from 15 Feb. 2006 onwards (hereinafter jointly referred to as “the Accounting Standards for Business Enterprises”, “China Accounting Standards” or “CAS”), as well as the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15– General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory Commission.
In accordance with relevant provisions of theAccounting Standards for Business Enterprises, the Group adopted the accrual basis in accounting. Except for some financial instruments, where impairment occurred on an asset, an impairment reserve was withdrawn accordingly pursuant torelevant requirements.
III.Statementof Compliancewith theAccounting StandardsforBusiness Enterprises The financial statements prepared by the Group are in compliance with in compliance with
KonkaGroupCo.,Ltd. AnnualReport2016 the Accounting Standards for Business Enterprises, which factually and completely present theCompany’s financial positions as at 31 Dec. 2016, business results and cash flows for the year of 2016, and other relevant information. In addition, theCompany’s and theGroup’s financial statements meet the requirements of disclosing financial statements and notes thereto stated in the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15– General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory Commission.
IV. Importantaccounting policies andestimations
The Company and each subsidiary formulated certain specific accounting policies and accounting estimates according to the actual production and operation characteristics and the regulations of the relevant ASBE on the transactions and events of the revenues recognition. For the details, please refer to each description of Notes IV. 22 “Revenues”. For the notes of the significant accounting judgment and estimations made by the management layer, please referto Notes IV.27“Significant accounting judgment and estimations”.
1.Fiscalperiod
TheGroup’s fiscal periods include fiscal years and fiscal periods shorter than a complete fiscal year. TheGroup’s fiscal year starts on 1 Jan. and ends on 31 Dec. of every year according tothe Gregorian calendar.
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. As for the overseas subsidiaries of the
KonkaGroupCo.,Ltd. AnnualReport2016 Company-America Konka, European Konka and Indonesia Konka, should be respectively confirmed the US Dollar, Euro and Indonesia Rupiah as their recording currency according its major economic environment of their operating address; subsidiaries such as Hong Kong Konka, Konka Household Appliances International Trading, Konka Zhisheng and Zhongkang Supply Chain use HK Dollar as their recording currency. And the Group adopted Renminbi as the bookkeeping base currency when preparing the financial statements for the reporting year.
4. Accounting treatment methods for business combinations under the same control or notunderthe same control
Business combinations, it is refer to two or more separate enterprises merge to form a reporting entity transactions or events. Business combination is divided into under the same control and thosenonunder thesame control.
(1)Business combinations underthe samecontrol
A business combination under the same control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or the same parties both before and after the business combination and on which the control is not temporary. In a business combination under the same control, the party which obtains control of other combining enterprise(s) on the combining date is the combining party, the other combining enterprise(s) is (are) the combined party. The “combining date” refers to the date on which thecombiningparty actually obtains control onthecombined party.
The assets and liabilities that the combining party obtains in a business combination shall be measured on the basis of their carrying amount in the combined party on the combining date. As for the balance between the carrying amount of the net assets obtained by the combining party and the carrying amount of the consideration paid by it (or the total par value of the shares issued), the additional paid-in capital (share premium) shall be adjusted. If the additional paid-in capital (share premium) is not sufficient to be offset, the retained earnings shall beadjusted.
The direct cost for the business combination of the combining party shall be recorded into the profits and losses at thecurrent period.
(2)Business combinations not underthesame control
KonkaGroupCo.,Ltd. AnnualReport2016 A business combination not under the same control is a business combination in which the combining enterprises are not ultimately controlled by the same party or the same parties both before and after the business combination. In a business combination not under the same control, the party which obtains the control on other combining enterprise(s) on the purchase dateis theacquirer, andothercombining enterprise(s) is(are) theacquiree.
For a business combination not under the same control, the combination costs shall include the fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equity securities issued by the acquirer in exchange for the control on the acquiree, the expenses for audit, legal services and assessment, and other administrative expenses, which are recorded into the profits and losses in the current period. The trading expenses for the equity securities or debt securities issued by the acquirer as the combination consideration shall be recorded into the amount of initial measurement of the equity securities or debt securities. The involved contingent consideration shall be recorded into the combination costs at its fair value on the acquiring date. Where new or further evidences emerge, within 12 months since the acquiring date, against the existing circumstances on the acquiring date and the contingent consideration thus needs to be adjusted, the combined goodwill shall be adjusted accordingly. The combination costs of the acquirer and the identifiable net assets obtained by it in the combination shall be measured according to their fair values at the acquiring date. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. Where the combination costs are less then the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall re-examine the measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it obtains from the acquiree as well as the combination costs. If, after the reexamination, the combination costs are still less than the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall record the balance into the profits and losses of the current period.
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
KonkaGroupCo.,Ltd. AnnualReport2016 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 5th Notice about the Treasury Issuing the Accounting Standards for Enterprises (Finance accounting)[2012] No. 19 Criterion about the “package deal” (see note 4, 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 4, 12 “long term equity investment transaction” and conduct accounting treatment, those not belong to the “package deal” distinguish between the individual financial statements and the consolidated financial statements and conduct relevant accounting treatment.
In the individual financial statements, the sum of the book value and new investment cost of the Group holds in the acquiree before the acquiring date shall be considered as initial cost of the investment. Other related comprehensive gains in relation to the equity interests that the Group holds 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 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
KonkaGroupCo.,Ltd. AnnualReport2016 re-measurement, the others shall be transferred into current investment gains on the acquiring date).
5.Methods forpreparing consolidated financial statements
(1)Principlefor determining theconsolidation scope
The consolidation scope for financial statements is determined on the basis of control. The term “control” is the power of the Group upon an investee, with which it can take part in relevant activities of the investee to obtain variable returns and is able to influence the amountof returns. Asubsidiary is an enterprise orentity controlled bytheGroup.
Once any changes in the relevant facts or situations result 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 or a combined party obtained in a takeover, its operating results and cash flows from the beginning of the Reporting Period of the combination to the combination date have been appropriately included in the consolidated income statement and cash flow statement, and the comparative items in the consolidated financial statements are adjusted at thesametime.
The financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Group during the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are
KonkaGroupCo.,Ltd. AnnualReport2016 inconsistent between the Group and subsidiaries. For a subsidiary acquired from a business combination not under the same control, the individual financial statements of the subsidiary areadjusted based onthefair valueof theidentifiablenet assets at theacquisitiondate.
All significant inter-group balances, transactions and unrealized profits are offset in the consolidated financial statements.
The portion of asubsidiary’sshareholders’ equity and the portion of asubsidiary’s net profits and losses for the period not held by the Group are recognized as minority interests and minority shareholder profits and losses respectively and presented separately undershareholders’ equity and net profits in the consolidation financial statements. The portion of asubsidiary’s net profits and losses for the period that belong to minority interests is presented as the item of “minority shareholder profits and losses” under the bigger item of net profits in the consolidated financial statements. Where the loss of a subsidiary shared by minority shareholders exceeds the portion enjoyed by minority shareholders in thesubsidiary’s openingowners’equity, minorityinterests are offset.
Where the Group losses control on its original subsidiaries due to disposal of some equity investments or other reasons, the residual equity interests are re-measured according to the fair value on the date when such control ceases. The summation of the consideration obtained from the disposal of equity interests and the fair value of the residual equity interests, minus the portion in the originalsubsidiary’s net assets measured on a continuous basis from the acquisition date that is enjoyable by the Group according to the original shareholding percentage in the subsidiary, is recorded in investment gains for the period when theGroup’s control on the subsidiary ceases. Other comprehensive incomes in relation to the equity investment in the original subsidiary are treated on the same accounting basis as the acquiree directly disposes the relevant assets or liabilities (that is, except for the changes in the net liabilities or assets with a defined benefit plan resulted from re-measurement of the original 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, 12 “long term equity investment” or 9 “financial instruments”.
KonkaGroupCo.,Ltd. AnnualReport2016 Where the Group losses control on its original subsidiaries due to step by step disposal of equity investments through multiple transactions, it need to distinguish the Group losses control on its subsidiaries due to disposal of equity investments whether belongs to a package deal. All the transaction terms, conditions and economic impact of the disposal ofsubsidiaries’ equity investment are in accordance with one or more of the following conditions, which usually indicate the multiple transactions, should be considered as a package deal for accounting treatment.① These deals are at the same time or under the condition of considering the influence of each other to concluded;② These transactions only be as a whole can achieve a complete business result;③ The occurrence of a deal depends on at least one othertransactions；④ A deal alone is not economical, it is economical with other trading together. Those not belong to a package deal, each of them a deal depends on circumstances respectively conduct accounting treatment in accordance with the applicable principles of “part disposal of subsidiaries of a long-term equity investment under the condition of not losing control on its subsidiaries” (see note IV 12, (2)④) and “Where the Group losses control on its original subsidiaries due to disposal of some equity investments or other reasons” (See the front paragraph) relevant transactions of the Group losses control on its subsidiaries due to disposal of equity investments belonging to a package deal, considered as a transaction and conduct accounting treatment. However, Before losing control, every disposal cost and corresponding net assets balance of subsidiary of disposal investment are confirmed as other comprehensive income in consolidated financial statements, which together transferred into the current profits and losses in the lose ofcontrol ,when theGroup losingcontrol onits subsidiary.
6.Classificationof jointarrangements andaccounting treatment ofjointoperations A joint arrangement refers to an arrangement jointly controlled by two participants or above. The Group classifies joint arrangements into joint operations and joint ventures according to its rights and duties in the joint arrangements. A joint operation refers to a joint arrangement where the Group enjoys assets and has to bear liabilities related to the arrangement. A joint venture refers to a joint arrangement where the Group is only entitled to the net assets of the arrangement.
KonkaGroupCo.,Ltd. AnnualReport2016TheGroup’s investments injointventures aremeasured at theequity method according to theaccounting policiesmentioned inNote IV. 12(2)② “Long-term equity investments measured at theequity method”.
For a joint operation, the Group, as a joint operator, recognizes the assets and liabilities that it holds and bears in the joint operation, and recognizes the jointly-held assets and jointly-borne liabilities according to theGroup’s stake in the joint operation; recognizes the income from sale of theGroup’s share in the output of the joint operation; recognizes the income from sale of the jointoperation’s outputs according to theGroup’s stake in it; and recognizes the expense solely incurred to the Group and the expense incurred to the joint operation according totheGroup’sstake in it.
When the Group, as a joint operator, transfers or sells assets (the assets not constituting business, the same below) to the joint operation, or purchases assets from the joint operation, before the assets are sold to a third party, the Group only recognizes the share of the other joint operators in the gains and losses arising from the sale. Where impairment occurs to the assets as prescribed in<The Accounting Standard No. 8 for BusinessEnterprises—AssetImpairment>, the Group shall fully recognizes the loss for a transfer or sale of assets to a joint operation; and shall recognize the loss according to its stake in the joint operation for a purchase ofassets from thejointoperation.
7.Recognition standardforcash andcash equivalents
In theGroup’s understanding, cash and cash equivalents include cash on hand, any deposit that can be used for cover, and short-term (usually due within 3 months since the day of purchase) and high circulating investments, which are easily convertible into known amount ofcash and whose risksinchange of valueare minimal.
8.Foreign currency businesses andtranslation offoreign currency financialstatements (1)Accounting treatments for translation offoreign currency transactions
As for a foreign currency transaction, the Company shall convert the amount in a foreign currency into amount in its bookkeeping base at the spot exchange rate (usually referring to the central parity rate announced by thePeople’s Bank of China, the same below) of the
KonkaGroupCo.,Ltd. AnnualReport2016 transaction date, while as for such transactions as foreign exchange or involving in foreign exchange, the Company shall converted into amount in the bookkeeping base currency at actual exchange rate thetransaction is occurred.
(2) Accounting treatments for translation of foreign currency monetary items and non-monetary items
On the balance sheet date, the foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date shall be recorded in the profits and losses in the current period, excluding the following situations:① the exchange difference arising from foreign currency loans related to acquisition of fixed assets shall be treated at the principle of capitalization of borrowing costs;② the exchange difference arising from the hedging instruments used for effective hedging of net overseas operation investments shall be recorded into other comprehensive incomes, and shall be recognized into current gains and losses when the net investments are disposed; and③ the exchange difference arising from change in the book balance of foreign currency monetary items available for sale except the amortized costs shall be recorded into other comprehensive gains 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 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
KonkaGroupCo.,Ltd. AnnualReport2016 When it involves overseas business in preparing the consolidated financial statement, for the translation difference of foreign currency monetary items of net investment in overseas business arising from the change in exchange rate, it shall be recorded into the item of “difference of foreign currency financial statement translation” under theowners’ equity; and be recorded into disposal gains and losses at current period when disposing overseas business.
The foreign currency financial statement of overseas business should be translated in to RMB financial statement by the following methods: The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date. Among theowner’s equity items, except for the items as “undistributed profits”, other items shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot exchange rate of the transaction date. The undistributed profits at year-begin is the undistributed profits at the end of last year after the translation; undistributed profits at year-end shall be listed as various distribution items after the translation; after the translation, the balance between assets and the sum of liabilities andowners’ equities shall be recorded into other comprehensive gains and losses as difference of foreign currency translation. Where an enterprise disposes of an overseas business without the control right, it shall shift the differences, which is presented under the items of theowner’s equities in the balance sheet and which arises from the translation of foreign currency financial statements relating to this overseas business, into the disposal profits and losses of the current period by all or proportion of the disposed overseas business.
Foreign cash flow shall be translated at the spot exchange rate/the weighted average of the exchange rate of the current period of the date of cash flow incurred. The influence of exchange rate on the cash flow shall be adjustment item and individually listed in the cash flowstatement.
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
KonkaGroupCo.,Ltd. AnnualReport2016 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 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
KonkaGroupCo.,Ltd. AnnualReport2016 essential nature, the cash flow capitalization method and the option pricing model, etc., to determineits fair value.
(2)Classification, recognitionand measurement offinancial assets
The purchase and sale of financial assets under the normal ways shall be recognized and stopped to be recognized respectively at the price of transaction date. Financial assets shall be classified into the following four categories when they are initially recognized: (a) the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period, (b) the investments which will be held to their maturity; (c) loans and the account receivables; and (d) financial assets available for sale.
① The financial assets which are measured at their fair values and the variation of which is recorded into theprofits and lossesof thecurrent period
Including transactional financial assets and the financial assets which are designated to be measured at their fair value when they are initially recognized and of which the variation is recorded into theprofits and lossesof thecurrent period;
The financial assets meeting any of the following requirements shall be classified as transactional financialassets：A. The purpose to acquire the said financial assets is mainly for selling them in the near future; B. Forming a part of the identifiable combination of financial instruments which are managed in a centralized way and for which there are objective evidences proving that the enterprise may manage the combination by way of short-term profit making in the near future; C. Being a derivative instrument, excluding the designated derivative instruments which are effective hedging instruments, or derivative instruments to financial guarantee contracts, and the derivative instruments which are connected with the equity instrument investments for which there is no quoted price in the active market, whose fair value cannot be reliably measured, and which shall be settled by delivering the said equityinstruments.
The financial assets meeting any of the following requirements shall be designated as financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period for initial recognition: A. the designation can
KonkaGroupCo.,Ltd. AnnualReport2016 eliminate or significantly reduce the difference of relevant gains and losses between recognition and measurement causing from different bases for measurement of financial assets; B. The official written documents for risk management and investment strategies of the enterprise have clearly stated that it shall ,manage, evaluate and report to important management personnel based on the fair value, about the financial assets group or the group offinancial assets& liabilities which thefinancial assets are belong to.
For the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period shall continue to be measured by fair value, gains and losses of change in fair value, dividends and interest related with these financial assets shouldbe recorded intogains and losses ofcurrent period.
② Held-to-maturity investment
The term “held-to-maturity investment” refers to a non-derivative financial asset with a fixed date of maturity, a fixed or determinable amount of repo price and which the enterprise holds fora definitepurpose ortheenterpriseis able to holduntilits maturity.
For the held-to-maturity investment adopting actual interest rate method, which is measured at the post-amortization costs, the profits and losses that arise when such financial assets or financial liabilities are terminated from recognition, or are impaired or amortized, shall be recorded into theprofits and lossesof thecurrent period.
The actual interest rate method refers to the method by which the post-amortization costs and the interest incomes of different installments or interest expenses are calculated in light of the actual interest rates of the financial assets or financial liabilities (including a set of financial assets or financial liabilities). The actual interest rate refers to the interest rate adopted to cash the future cash flow of a financial asset or financial liability within the predicted term of existence or within a shorter applicable term into the current carrying amount of the financial asset orfinancial liability.
When the actual interest rate is determined, the future cash flow shall be predicted on the basis of taking into account all the contractual provisions concerning the financial asset or financial liability (the future credit losses shall not be taken into account).and also the various fee charges, trading expenses, premiums or reduced values, etc., which are paid or collected
KonkaGroupCo.,Ltd. AnnualReport2016 by the parties to a financial asset or financial liability contract and which form a part of the actual interest rate.
③ Loans and theaccounts receivables
Loans and the accounts receivables refer to non-derivative financial assets, which there is no quotationin theactive market, withfixed recovery cost orrecognizable.
Financial assets that are defined as loans and the accounts receivables by the Group including notes receivables, accounts receivables, interest receivable, dividends receivable and other receivables etc..
Loans and the accounts receivables are made follow-up measurement on the basis of post-amortization costs employing the effective interest method. Gains or loss arising from the termination recognition, impairment occurs or amortization shall be recorded into the profits and losses ofthecurrent period.
④ Assets availablefor sales
Assets available for sales including non-derivative financial asset that has been assigned as assets available for sales on the initial recognition and financial assets excluded those measured at fair value and of which the variation into profits and losses of the current period, theyare somefinancial assets, loans and accounts receivables, held-to-maturity investment. The cost at the period-end of the available-for-sale liabilities instruments should be confirmed according to its amortized cost method, that is the initially recognized amount which deduct the principal that had been repaid, to plus or minus the accumulative amortization amount formed by the amortization between the difference of the initially recognized amount and the amount on the due date that adopted the actual interest rate method, and at the same time deduct the amount after the impairment loss happened. The cost at theperiod-end ofthe available-for-sale liabilities instruments is itsinitialcost.
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
KonkaGroupCo.,Ltd. AnnualReport2016 investment which neither have quotation in the active market nor its fair value could not be reliable measured, as well as the derivative financial assets that concern with the equity instruments and should be settled through handing over to its equity instruments, should take thefollow-up measurement according tothe cost.
Interest receive during the holding of assets available for sales and cash dividends with distribution announcement by invested companies, it shall be recorded into the profits and losses ofthecurrent period.
(3)Impairment offinancial assets
The Group assesses at the balance sheet date the carrying amount of every financial asset except for the financial assets that measured by the fair value. If there is objective evidence indicatinga financial asset may be impaired, aprovision is provided for theimpairment. The Group carries out a separate impairment test for every financial asset which is individually significant. As for a financial asset which is individually insignificant, an impairment test is carried out separately or inthe financial asset group with similar credit risk. Where the financial asset (individually significant or insignificant) is found not impaired after the separate impairment test, it is included in the financial asset group with similar credit risk and tested again on the group basis. Where the impairment loss is recognized for an individual financial asset, it is not included in the financial asset group with similar credit risk foran impairmenttest.
① Impairment onheld-to maturity investment, loans andreceivables
The financial assets measured by cost or amortized cost write down their carrying value by the estimated present value of future cash flow. The difference is recorded as impairment loss. If there is objective evidence to indicate the recovery of value of financial assets after impairment, and it is related with subsequent event after recognition of loss, the impairment loss recorded originally can be reversed. The carrying value of financial assets after impairment loss reversed shall not exceed the amortized cost of the financial assets without provisionsof impairment lossonthe reserving date.
② Impairment ofavailable-for-sale financial assets
KonkaGroupCo.,Ltd. AnnualReport2016 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
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
KonkaGroupCo.,Ltd. AnnualReport2016 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 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
KonkaGroupCo.,Ltd. AnnualReport2016 the assets, and conduct accounting treatment according to the principle of mentioned in the previous paragraphs.
(5)Classification and measurement offinancial liabilities
In the initial recognition, financial liabilities are divided into the financial liabilities measured at fair values and whose changes are recorded in current gains and losses and other financial liabilities. Financial liabilities are initially recognized at their fair values. As for a financial liability measured at fair value and whose changes are recorded in current gains and losses, the relevant trading expense is directly recorded in the profits and losses for the current period. As for other financial liabilities, the relevant trading expenses are recorded in the initially recognized amounts.
① Financial liabilities measured at fair values and whose changes are recorded in current gains and losses
Such financial liabilities are divided into transactional financial liabilities and financial liabilities designated to be measured at fair values and whose changes are recorded in current gains and losses in the initial recognition under the same conditions where such financial assets are divided into transactional financial assets and financial assets designated to be measured at fair values and whose changes are recorded in current gains and losses in the initial recognition.
Financial liabilities measured at fair values and whose changes are recorded in current gains and losses are subsequently measured at their fair values. Gains or losses arising from the fair value changes, as well as the dividend and interest expenses in relation to the said financial liabilities, are recorded inthe profits and losses forthe current period.
② Otherfinancial liabilities
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
KonkaGroupCo.,Ltd. AnnualReport2016 amortization of the said financial liabilities is recorded in the profits and losses for the current period.
③ Financial guaranteecontract and loan commitment
For the financial guarantee contracts which are not designated as a financial liability measured at its fair value and the variation thereof is recorded into the profits and losses of the current period, or the loan commitment which is not designated as a financial liability measured at its fair value and the variation thereof is recorded into the gains and losses that will be loaned lower than the market interest rate, which shall be initially recognized by fair value, and the subsequent measurement shall be made after they are initially recognized according to the higher one of the following: a. the amount as determined according to the Accounting Standards for Enterprises No. 13– Contingencies; b. the surplus after accumulative amortization as determined according to the principles of the Accounting Standards for Enterprises No. 14 - Revenues is subtracted from the initially recognized amount.
(6)De-recognition of financial liabilities
Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly. Where the Group (debtor) enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is substantially different from that regarding the existing financial liability, it terminates the recognition of the existing financial liability, and at the same time recognizes thenew financial liability.
Where the recognition of a financial liability is totally or partially terminated, the enterprise concerned shall include into the profits and losses of the current period for the gap between the book value which has been terminated from recognition and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed)
(7)Derivatives and embedded derivatives
KonkaGroupCo.,Ltd. AnnualReport2016 Derivative financial instruments include derivatives are initially measured at fair value at the date when the derivative contracts are entered into and are substantially re-measured at fair value. Theresulting gain and loss is recognized inprofit orloss.
An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not designated as a financial asset or financial liability at fair value though profit or loss, and the treated as a standalone derivative if (a) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; and (b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the Company is unable to measure the embedded derivative separately either at acquisition or at a subsequent balance sheet date, it designates the entire hybrid instrument as a financial asset or financial liability at fair valuethrough profit or loss.
(8)Offsettingfinancial assets and financial liabilities
When the Group has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in thebalance sheet and shall not beoffset.
(9)Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. The Group issues (including refinancing), re-purchases, sells or written-offs the equity instrument as the disposing of the changes of the equity. The Group not recognized the changes of the fair value of the equity instrument. The transaction expenses related to theequity transaction would bededucted from theequity. All types of distribution (excluding stock dividends) made by the Group to holders of equity instruments are deducted fromshareholders’ equity. The Group does not recognize any changes in thefair value ofequity instruments.
KonkaGroupCo.,Ltd. AnnualReport2016 10.Receivables
Receivables includeaccount receivables andother accounts receivables.
(1)Recognition ofprovision for baddebts:
The Group shall test the carrying amount of receivables on the balance sheet date. Where there is any objective evidence proving that such receivables have been impaired, an impairment provision shallbemade.
① Debtorhas serious financial difficult;
② Debtor goes against the contract clause (for instance, breach of faith or overdue paying interests orprincipal);
③ Debtors have agreat probability ofbankruptcy orother financial reorganization;
④ Otherobjective evidence proving such accounts receivablehas been impaired;
(2)Withdraw method ofprovision for bad debts
① The recognition criteria and method of individual provision for bad debts of receivables thatare individually significant
The Group recognized the receivables with amount above RMB 20 million and other receivables above 10 million as receivables with significant single amounts and withdrawn theprovisionfor bad debts.
The Group made an independent impairment test on receivables with significant single amounts; the financial assets without impairment by independent impairment test should be included in financial assets portfolio with similar credit risk to take the impairment test. Receivables was recognized with impairment should no longer be included in receivables portfoliowith similarcredit risk to taketheimpairment test.
② The recognition and method of provision for bad debts of receivables by credit risk portfolio
A.Recognition ofcreditrisk group
KonkaGroupCo.,Ltd. AnnualReport2016 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 Divide the groups according to the credit risks characteristics of whether the groupsoftheCompany creditoristheinternalrelatedpartyoftheCompany
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.
Item Withdrawalmethod
Group1:Aginggroup Aginganalysismethod
Group 2: Internal related party groups To make an independent impairment test and if there was no impairment, oftheCompany shouldnotwithdrawthebaddebtsprovision.
In thegroups,adopting aging analysis method to withdraw bad debt provision:
||
|-|
|Withdrawalproportionforaccountsreceivable(%)|
|2|
|5|
|20|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|Withdrawalproportionforaccountsreceivable(%)|
|50|
|50|
|100|

③ Receivables with insignificant amount but being individually withdrawn the provision for bad debts
The Group made independent impairment test on receivables with insignificant amount but with the following characteristics, if any objective evidence shows that the accounts receivable has been impaired, impairment loss shall be recognized on the basis of the gap between the current values of the future cash flow lower than its book value so as to withdrawprovision forbad debts:
A.Receivables have disputewiththeother parties or involvinglawsuit and arbitration;
B. Receivables have obvious indication showing that the debtors are likely to fail to perform thedutyof repayment, etc.
C.There is other objective evidence of impairment and the impairment 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.
11.Inventory
(1)Classification
TheGroup’s inventories are classified as non-property inventories and property inventories.
And the non-property inventories include raw materials, goods in process; merchandise on
KonkaGroupCo.,Ltd. AnnualReport2016 hand, goods delivered and circulating materials, etc; while the property inventories include property inprocess and finished property,etc.
① Thefinished property refers tothe finished and held-for-saleproperty.
② The property in process (development costs) refers to the unfinished property with the development purpose forsale.
(2)Pricing method foroutgoinginventories
The inventories shall be measured in light of their cost when obtained. The cost of inventory consists of purchase costs, processing costs and other costs. Inventory is accounted by weight average method upon receiving and giving. For merchandise on hand shall be accounted by planned cost, if the difference between planned cost of and actual cost of raw materials is accounted through the cost variance item, and the planned cost is adjusted to the actual cost according to the cost difference which the carryover and given-out inventory should shoulder intheperiod.
The property inventories are initially measured at the costs, and the costs of the developed property include the land premium, expenditures for supporting infrastructures, expenditures for construction and installation projects, the borrowing costs before the completion of the developed project and otherexpenses occurred during thedevelopment process.
① The public supporting facilities recorded the development costs at the actual costs, the amortization upon completion was transferred to the costs of houses and other available-for-sale property, while as for the supporting facilities with operating value and beneficiary rights owned by the Group as well as available for individual sale and measurement, which shall berecorded into the“investment property”
② For the accounting policies on borrowing costs occurred for developing property, please referto Note IV.17Pricing of“Borrowing Costs”.
(3) Recognition basis of net realizable value and withdrawal method of depreciation reserves forinventories
The net realizable value refers, in the ordinary course of business, to the account after
KonkaGroupCo.,Ltd. AnnualReport2016 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 thebalance that thecost of individual inventory item exceeding the net realizablevalue. After withdrawing the depreciation reserves for inventories, if the factors, which cause any write-down of the inventories, have disappeared, causing the net realizable value of inventories is higher than its carrying amount; the amount of write-down shall be reversed from the original amount of depreciation reserve for inventories. The reversed amount shall beincluded in theprofits and losses ofthecurrent period.
(4)The perpetual inventory system is maintained for stocksystem.
(5)Amortization method ofthelow-value consumption goods and packing articles
The low-value consumption goods should be amortized by one time amortization when acquiring and the packing articles are amortized by one time/gradation amortization when acquiring.
12.Long-term equityinvestments
The long-term equity investments of this part refer to the long-term equity investments that the Group has control, joint control or significant influence over the investees. The long-term equity investment that the Group does not have control, joint control or significant influence over the investees, should be recognized as available-for-sale financial assets or be measured by fair value with the changes should be included in the financial assets accounting of the current gains and losses, and please refer the details of the accounting polices to Notes IV 9 “financial instrument”.
Joint control, refers to the control jointly owned according to the relevant agreement on an arrangement by the Group and the relevant activities of the arrangement should be decided only after the participants which share the control right make consensus. Significant influence refers to the power of the Group which could anticipate in the finance and the
KonkaGroupCo.,Ltd. AnnualReport2016 operation polices of the investees, but could not control or jointly control the formulation of thepolicies with theotherparties.
(1)Recognition ofinvestment costs
As for long-term equity investments acquired by enterprise merger, if the merger is under the same control, the share of the book value of theowner’s equity of the merged enterprise, on the date of merger, is regarded as the initial cost of the long-term equity investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets transferred as well as the book value of the debts borne by the merging party shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. If the consideration of the merging enterprise is that it issues equity securities, it shall, on the date of merger, regard the share of the book value of the shareholder's equity of the merged enterprise on the consolidated financial statement of the ultimate control party as the initial cost of the long-term equity investment. The total face value of the stocks issued shall be regarded as the capital stock, while the difference between 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.
KonkaGroupCo.,Ltd. AnnualReport2016 For the long-term investment required from the business combination under different control, the initial investment cost regarded as long-term equity investment on the purchasing date according to the combination cost, the combination costs shall be the sum of the fair values of the assets paid, the liabilities incurred or assumed and the equity securities issued by the Company. The equities of the acquirees which respectively acquired through multiple transaction that ultimately form into the combination of the enterprises under the different control, should be disposed according whether belongs to package deal; if belongs to package deal, each transaction would be executed accounting treatment by the Company as a transaction of acquiring the control right. If not belongs to package deal, the sum of the book value of the original held equity investment of the acquirees and the newly added investment cost should be regarded as the initial investment cost of the long-term equity investment that changed to be accounted by cost method. If the original held equity is calculated by cost method, the other relevant comprehensive income would not have any accounting disposal for the moment. If the original held equity investment is the financial assets available for sale, its difference between the fair value and the book value as well as the accumulative changes of the fair value that include in the other comprehensive income, should transfer into the current gains 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
KonkaGroupCo.,Ltd. AnnualReport2016 appending the investment or could execute joint control but not form as control, should be as the sum of the fair value of the original held equity investment and the newly added investment cost recognized according to the No.22 of Accounting Standards for BusinessEnterprises—Recognition and Measurement ofFinancial Instrument.
(2)Subsequent measurement and recognition of gains or losses
A long-term equity investment where the investing enterprise has joint control (except for which forms into common operators) or significant influence over the investors should be measured by equity method. Moreover, long-term equity investment adopting the cost methodinthefinancial statements, and which theCompany has control oninvested entity.① Long-term equity investment measured byadopting cost method
The price of a long-term equity investment measured by adopting the cost method shall be included at its initial investment cost and append as well as withdraw the cost of investing and adjusting the long-term equity investment. The return on investment at current period shall be recognized in accordance with the cash dividend or profit announced to distribute by the invested entity, except the announced but not distributed cash dividend or profit included intheactual payment orconsideration upongainingthe investment.
② Long-term equity investment measured byadopting equity method
If the initial cost of a long-term equity investment is more than the Company's attributable share of the fair value of the invested entity's identifiable net assets for investment, the initial cost of the long-term equity investment may not be adjusted. If the initial cost of a long-term equity investment is less than the Company's attributable share of the fair value of the invested entity's identifiable net assets for investment, the difference shall be included in the current profits and losses and the cost of the long-term equity investment shall be adjusted simultaneously.
When measured by adopting equity method, respectively recognize investment income and other comprehensive income according to the net gains and losses as well as the portion of other comprehensive income which should be enjoyed or be shared, and at the same time adjust the book value of the long-term equity investment; corresponding reduce the book value of the long-term equity investment according to profits which be declared to distribute by the investees or the portion of the calculation of cash dividends which should be enjoyed;
KonkaGroupCo.,Ltd. AnnualReport2016 for the other changes except for the net gains and losses, other comprehensive income and theowners’equity except for the profits distribution of the investees, should adjust the book value of the long-term equity investment as well as include in the capital reserve. The investing enterprise shall, on the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the invested entity after it adjusts the net profits of the invested entity. If the accounting polices adopted by the investees is not accord with that of the Group, should be adjusted according to the accounting policies of the Group and the financial statement of the investees during the accounting period and according which to recognize the investment income as well as other comprehensive income. For the transaction happened between the Group and associated enterprises as well as joint ventures, if the assets launched or sold not form into business, the portion of the unrealized gains and losses of the internal transaction, which belongs to the Group according to the calculation of the enjoyed proportion, should recognize the investment gains and losses on the basis. But the losses of the unrealized internal transaction happened between the Group and the investees which belongs to the impairment losses of the transferred assets, should not be neutralized. The assets launched by the Group to the associated enterprises or the joint ventures if could form into business, the long-term equity investment without control right which acquired by the investors, should regard the fair value of the launched business as the initial investment cost the newly added long-term equity investment, and for the difference between the initial investment cost and the book value of the launched business, should be included into the current gains and losses with full amount. The assets sold by the Group to the associated enterprises or the joint ventures if could form into business, the difference between the acquired consideration and the book value of the business should be included in the current gains and losses with full amount. The assets purchased by the Group to the associated enterprises or the joint ventures ifcould form into business, should be accounting disposed according to the regulations of No. 20ofASBE—Business Combination, and should be recognized gains or losses related to the transaction with full amount.
The Group shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially form the net investment made to the invested entity are reduced to zero. However, if the Group has the obligation to undertake extra losses, it shall be recognized as the estimated
KonkaGroupCo.,Ltd. AnnualReport2016 liabilities in accordance with the estimated duties and then recorded into investment losses at current period. If the invested entity realizes any net profits later, the Group shall, after the amount of its attributable share of profits offsets against its attributable share of the un-recognizedlosses, resumerecognizingits attributableshare ofprofits.
For the long-term equity investment held by the Group before the first execution of the new accounting criterion on 1 Jan. 2008 of the associated enterprises and joint ventures, if there is debit difference of the equity investment related to the investment, should be included in the current gains and losses according to the amount of the straight-line amortization during the original remained period.
③ Acquiring 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.
④ Disposal oflong-term equity investment
In the preparation of financial statements, the Company disposed part of the long-term equity investment on subsidiaries without losing its controlling right on them, the balance between the disposed price and attributable net assets of subsidiaries by disposing the long-term equity investment shall be recorded intoowners’ equity; where the Company losses the controlling right by disposing part of long-term equity investment on such subsidiaries, it shall treated in accordance with the relevant accounting policies in Note IV. 5 (2)— Method onpreparation ofcombined financial statements.
For other ways on disposal of long-term equity investment, the balance between the book value of the disposed equity and its actual payment gained shall be recorded into current profits and losses.
For the long-term equity investment measured by adopting equity method, if the remained equity after disposal still adopts the equity method for measurement, the other comprehensive income originally recorded intoowners’ equity should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the
KonkaGroupCo.,Ltd. AnnualReport2016 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 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
KonkaGroupCo.,Ltd. AnnualReport2016 which adopted the equity method for measurement, the other comprehensive income and the otherowners’equity should be carried forward according to the proportion; for the disposed remained equity which changed to execute the accounting disposal according to the recognition and measurement standards of financial instrument, the other comprehensive incomeand theotherowners’equity shouldbe carried forward in fullamount.
For those the Group lost the control of the investees by disposing part of the equity investment, the disposed remained equity should change to calculate according to the recognition and measurement standards of financial instrument, and difference between the fair value and book value on the date lose the control right should be included in the current gains and losses. For the other comprehensive income recognized from the original equity investment by adopting the equity method, should execute the accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when terminate the equity method for measurement, while for theowners’equity recognized owning to the changes of the otherowner’s equity except for the net gains and losses, other comprehensive income and the profits distribution of the investees, should be transferred into the current investment income with full amount when terminate adoptingthe equitymethod.
The Group respectively disposes the equity investment of the subsidiaries through multiple transactions until lose the control right, if the above transactions belongs to the package deal, should execute the accounting disposal by regarding each transaction as a deal of disposing the equity investment of the subsidiaries until lose the control right, while the difference between each expenses of the disposal and the book value of the long-term equity investment in accord with the disposed equity before losing the control right, should firstly be recognized as other comprehensive income then be transferred into the current gains and losses oflosingthe control right along untilthetimewhen loseit.
13.Investmentreal estates
The term “investment real estates” refers to the real 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
KonkaGroupCo.,Ltd. AnnualReport2016 expenditures incurred for an investment real estate is included in the cost of the investment real estate when it is probable that economic benefits associated with the investment real estate will flow to the Group and the cost can be reliably measured, otherwise the expenditureis recognized in profit orloss in theperiod in which they are incurred.
The Group shall make a follow-up measurement to the investment real estates by employing the cost pattern on the date of the balance sheet.An accrual depreciation or amortization shall be made for the investment real estates in the light of the accounting policies of the use right ofbuildings or lands.
For details of impairment test method and withdrawal method of impairment provision of investment real estates, please refer to Note IV. 16. Impairment of Non-current Non-financial Assets.
When owner-occupied real estate or inventories are changed into investment real estate or investment real estate is changed into owner-occupied real estate, of which book value prior tothechange shallbe theentry valueafter the change.
When an investment real estate is changed to an owner-occupied real estate, it would be transferred to fixed assets or intangible assets at the date of such change. When an owner-occupied real estate is changed to be held to earn rental or for capital appreciation, the fixed asset or intangible asset is transferred to investment real estate at the date of such change. If the fixed asset or intangible asset is changed into investment real estate measured by adopting the cost pattern, whose book value prior to the change shall be the entry value after the change; if the fixed asset or intangible asset is changed into investment real estate measured by adopting the fair value pattern, whose fair value on the date of such change shall betheentry valueafter thechange
An investment real estate is derecognized on disposal or when the investment real estate is permanently withdrawn from use and no future economic benefits are expected from its disposal. The amount of proceeds on sale, transfer, retirement or damage of an investment real estate less its carrying amount and related taxes and expenses is recognized in profit or lossin theperiod in which it isincurred.
14.Fixed assets
(1)Conditionsfor recognition of fixed assets
The term "fixed assets" refers to the tangible assets that simultaneously possess the features
KonkaGroupCo.,Ltd. AnnualReport2016 as follows: (a) they are held for the sake of producing commodities, rendering labor service, renting or business management; and (b) their useful life is in excess of one fiscal year. The fixed assets are only recognized when the relevant economic benefits probably flow in the Group and its cost could be reliable measured. The fixed assets should take the initial measurement according to the cost and at the same time consider the influences of the factors oftheestimated discard expenses.
(2)Depreciation methodsof each fixed asset
The fixed assets should be withdrawn and depreciation by straight-line depreciation within the useful life since the next month when the fixed assets reach the estimated available state. The useful life, estimated net salvage and the yearly discounted rate of each fixed asset are as follows:
||||
|-|-|-|
|Method|Usefullife(Year)|Expectednetsalvagevalue(%)|
|Straight-linedepreciation|20-40|10.00|
|Straight-linedepreciation|10|10.00|
|Straight-linedepreciation|5|10.00|
|Straight-linedepreciation|5|10.00|
|Straight-linedepreciation|5|10.00|

The “expected net salvage value” refers to the expected amount that the Group may obtain from the current disposal of a fixed asset after deducting the expected disposal expenses at theexpirationof itsexpected useful life.
(3) Testing method of impairment and withdrawal method of provision for impairment on
fixed assets
For details of the testing method of impairment and withdraw method of impairment
KonkaGroupCo.,Ltd. AnnualReport2016 provision for impairment on fixed assets, please refer to Note IV. 19 “Long-term assets impairment”.
(4)Recognition basis, pricing and depreciation method offixed assets byfinance lease
The “finance lease” shall refer to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. Its ownership may or may not eventually be transferred. The fixed assets by finance lease shall adopt the same depreciation policy for self-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over theshorter oneof thelease term orits useful life.
(5)Other explanations
The follow-up expenses related to a fixed asset, if the economic benefits pertinent to this fixed asset are likely to flow into the enterprise and its cost can be reliably measured, shall be recorded into cost of fixed assets and ultimately recognized as the book value of the replaced part; otherwise, they shall beincluded in thecurrent profits 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.
15.Construction inprogress
Construction in process is measured at actual cost. Actual cost comprises construction costs, borrowing costs that are eligible for capitalization before the fixed assets being ready for their intended us and other relevant costs. Construction in process is transferred to fixed assets when theassets are ready for theirintended use.
For details of the testing method of impairment and withdraw method of impairment
KonkaGroupCo.,Ltd. AnnualReport2016 provision on construction in progress, please refer to Note IV. 19 “Long-term assets impairment”.
16.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 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.
17.Intangibleassets
KonkaGroupCo.,Ltd. AnnualReport2016 (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 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
KonkaGroupCo.,Ltd. AnnualReport2016 period when theydon’t satisfy thefollowing conditions.
① It isfeasibletechnically to finish intangibleassets foruse orsale;
② It isintended tofinish and use orsell theintangible assets;
③ The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangibleassets itselfortheintangible assets will beused internally;
④ It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources;
⑤ Thedevelopment expenditures oftheintangible assets can be reliably measured.
As for expenses thatcan’t be identified as research expenditures or development expenditures, theoccurred R& Dexpenses shall be all included in current profits and losses. (3) Testing method of impairment and withdraw method of impairment provision of intangibleassets
For details of the testing method of impairment and withdraw method of impairment provisiononintangible assets, seeNotes IV.19“Long-term assets impairment”.
18.Amortization method oflong-term deferred expenses
Long-term deferred expenses refer to general expenses with the apportioned period over one year (one year excluded) that have occurred but attributable to the current and future periods. Long-term deferred expenseshall be amortizedaveragely within benefit period.
19.Impairmentoflong-term assets
For non-current financial Assets of fixed Assets, projects under construction, intangible Assets with limited service life, investing real estate with cost model, long-term equity investment of subsidiaries, cooperative enterprises and joint ventures, the Group should judge whether decrease in value exists on the date of balance sheet. Recoverable amounts should be tested for decrease in value if it exists. Other intangible Assets of reputation and uncertain service life and other non-accessible intangible assets should be tested for decrease invalue nomatterwhether it exists.
KonkaGroupCo.,Ltd. AnnualReport2016 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 amounts should be determined according to the belonging asset group. Asset group is the minimum asset combination producing cash flowindependently.
In impairment test, book value of the business reputation in financial report should be shared to beneficial asset group and asset group combination in collaboration of business merger. It is shown in the test that if recoverable amounts of shared business reputation asset group or asset group combination are lower than book value, it should determine the impairment loss. Impairment loss amount should firstly be deducted and shared to the book value of business reputation of asset group or asset group combination, then deduct book value of all assets according to proportions of other book value of above assets in asset group or asset group combinationexcept businessreputation.
After the asset impairment loss is determined, recoverable value amounts would not be returned in future.
20.Employee compensation
Employee compensation of the Company mainly includes short-term employee compensation, departure benefits, demission benefits and other long-term employee compensation. Of which:
Short-term compensation mainly including salary, bonus, allowances and subsidies, employee services and benefits, medical insurance premiums, birth insurance premium, industrial injury insurance premium, housing fund, labor union expenditure and personnel
KonkaGroupCo.,Ltd. AnnualReport2016 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 defined benefit plans as present value and include current service costs into current profits and losses.
When terminating labor relations before expiration of contract, or layoffs with compensations, and the Company can not terminate the labor relations unilaterally or reduce the dimission welfare, remuneration and liabilities produced from the dimission welfare should be determined and included in current profits and losses when determining the costs of dismission welfare and recombination. However, dimission welfare not fully paid within 12 months after annual 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.
21.Estimated liabilities
The company should recognize the related obligation as a provision for liability when the
KonkaGroupCo.,Ltd. AnnualReport2016 obligation meets the following conditions: (1) That obligation is a present obligation of the enterprise; (2) It is probable that an outflow of economic benefits from the enterprise will be required to settle the obligation; (3) A reliable estimate can be made of the amount of the obligation.
On the balance sheet date, an enterprise shall take into full consideration of the risks, uncertainty, time value of money, and other factors pertinent to the Contingencies to measure the estimated liabilities in accordance with the best estimate of the necessary expenses for the performance ofthecurrent obligation.
When all or some of the expenses necessary for the liquidation of an estimated liabilities of an enterprise is expected to be compensated by a third party, the compensation should be separately recognized as an asset only when it is virtually certain that the reimbursement will be obtained. Besides, the amount recognized for the reimbursement should not exceed the bookvalueoftheestimated liabilities.
22.Revenue
(1)Revenue from sellinggoods
No revenue from selling goods may be recognized unless the following conditions are met simultaneously: the significant risks and rewards of ownership of the goods have been transferred to the buyer by the enterprise; the enterprise retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; the relevant amount of revenue can be measured in a reliable way; the relevant economic benefits may flow into the enterprise; and the relevant costs incurred or to beincurred can bemeasured ina reliableway.
The recognition of revenue from commodities for the home market when shipping the goods: for goods exported, the revenue shall be recognized once the goods are cleared through customsand delivered tothe carrierdesignated bythepurchaser.
(2)Providing laborservices
If the Group can reliably estimate the outcome of a transaction concerning the labor services it provides, it shall recognize the revenue from providing services employing the percentage-of-completion method on the date of the balance sheet. The completed proportion of a transaction concerning the providing of labor services shall be decided by the proportion ofthelabor service already provided tothe totallaborservice toprovide.
KonkaGroupCo.,Ltd. AnnualReport2016 The outcome of a transaction concerning the providing of labor services can be measured in a reliable way, means that the following conditions shall be met simultaneously:① The amount of revenue can be measured in a reliable way;②The relevant economic benefits are likely to flow into the enterprise;③The schedule of completion under the transaction can be confirmed in a reliable way; and④The costs incurred or to be incurred in the transaction can bemeasured in areliable way.
If the outcome of a transaction concerning the providing of labor services cannot be measured in a reliable way, the revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred and expected to be compensated, and make the cost of labor services incurred as the current expenses. If it is predicted that the cost of labor services incurredcouldn’t be compensated, thus no revenue shall berecognized.
Where a contract or agreement signed between Group and other enterprises concerns selling goods and providing of labor services, if the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured respectively, the part of sale of goods and the part of providing labor services shall be treated respectively. If the part of selling goods and the part of providing labor services can not be distinguished from each other, or if the part of sale of goods and the part of providing labor services can be distinguished from each other but can not be measured respectively, both parts shall be conducted as selling goods.
(3)Recognition method ofthe sales revenues of real estate
The Group had signed the sales contract with the real estate had completed and be examined qualified, and reached the referable using conditions agreed by the sales contract as well as at the same time the housing accounts had been recognized the realize of the sales revenues when received with fullamount according to thesales contract.
(4)Royalty revenue
In accordance with relevant contract or agreement, the amount of royalty revenue should be recognized as revenue onaccrual basis.
(5)Interest revenue
The amount of interest revenue should be measured and confirmed in accordance with the
KonkaGroupCo.,Ltd. AnnualReport2016 length of time for which theGroup’s monetary fund is used by others and the agreed interest rate.
(6)Property leasing revenue
For therecognition method oftheproperty leasing revenue, please refer toNotes IV.25. 23.Government subsidies
A government subsidy means the monetary or non-monetary assets obtained free by the Group from the government, but excluding the capital invested by the government as the owner of the enterprise. Government subsidies consist of the government subsidies pertinent toassets and government subsidiespertinent to income.
If a government subsidy is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount. The government subsidies measured at their nominal amounts shall be directly included inthecurrent profits and losses.
The government subsidies pertinent to assets shall be recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses. The government subsidies pertinent to incomes shall be treated respectively in accordance with the circumstances as follows: those subsidies used for compensating the related future expenses or losses of the enterprise shall be recognized as deferred income and shall included in the current profits and losses during the period when the relevant expenses are recognized; or those subsidies used for compensating the related expenses or losses incurred to theenterprise shall bedirectly included in thecurrent profits and losses.
Where it is necessary to refund any government subsidy which has been recognized, it shall be treated respectively in accordance with the circumstances as follows: if there is the deferred income concerned, the book balance of the deferred income shall be offset against, but the excessive part shall be included in the current profits and losses; or if there is no deferred income concerned to the government subsidy, it shall be directly included in the current profits and losses.
24.Deferredincometax assets/deferredincome tax liabilities
(1)Income tax ofthe current period
On the balance sheet date, for the current income tax liabilities (or assets) of the current
KonkaGroupCo.,Ltd. AnnualReport2016 period as well as the part formed during the previous period, should be measured by the income tax of the estimated payable (returnable) amount which be calculated according to the regulations of the tax law. The amount of the income tax payable which is based by the calculation of the current income tax expenses, are according to the result measured from the corresponding adjustment of the pre-tax accounting profit of 2014 which in accord to the relevantregulations ofthetax law.
(2)Deferred income tax assets and deferred incometax liabilities
The difference between the book value of certain assets and liabilities and their tax assessment basis, as well as the temporary difference occurs from the difference between the book value of the items which not be recognized as assets and liabilities but could confirm their tax assessment basis according to the regulations of the tax law, the deferred income tax assets and the deferred income tax liabilities should be recognized by adopting liabilities law ofthebalance sheet.
No deferred tax liability is recognized for a temporary difference arising from the initial recognition of goodwill, the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). Besides, no deferred tax assets is recognized for the taxable temporary differences related to the investments of subsidiary companies, associated enterprises and joint enterprises, and the investing enterprise can control the time of the reverse of temporary differences as well as the temporary differences are unlikely to be reversed in the excepted future. Otherwise, the Group should recognize the deferred income tax liabilities arising form othertaxabletemporary difference.
No deferred taxable assets should be recognized for the deductible temporary difference of initial recognition of assets and liabilities arising from the transaction which is not business combination, the accounting profits will not be affected, nor will the taxable amount or deductible loss be affected at the time of transaction. Besides, no deferred taxable assets should be recognized for the deductible temporary difference related to the investments of the subsidiary companies, associated enterprises and joint enterprises, which are not likely to be reversed in the expected future or is not likely to acquire any amount of taxable income tax that may be used for making up such deductible temporary differences. Otherwise, the Company shall recognize the deferred income tax assets arising from a deductible temporary
KonkaGroupCo.,Ltd. AnnualReport2016 difference basing on the extent of the amount of the taxable income that is likely to be acquired tomake upsuch deductible temporary differences
For any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax asset shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be likely obtained.
On the balance sheet date, the deferred income tax assets and the deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the assets areexpected to berecovered orthe liabilities are expected to be settled.
The book value of deferred income tax assets shall be reviewed at each balance sheet date. If it is unlikely to obtain sufficient taxable income to offset against the benefit of the deferred income tax asset, the book value of the deferred income tax assets shall be written down.Any such write-down should be subsequently reversed where it becomes probable that sufficient taxableincome willbe available.
(3)Income tax expenses
Incometax expenses includecurrent incometax and deferred income tax.
The rest current income tax and the deferred income tax expenses or revenue should be included into current gains and losses except for the current income tax and the deferred income tax related to the transaction and events that be confirmed as other comprehensive income or be directly included in theshareholders’equity which should be included in other comprehensive income orshareholders’ equity as well as the book value for adjusting the goodwillof thedeferred incometax occurs from thebusinesscombination.
(4)Offset of incometax
The current income tax assets and liabilities of the Group should be listed by the written-off net amount which intend to executes the net amount settlement as well as the assets acquiring and liabilities liquidation at the same time while owns the legal rights of settling the net amount.
The deferred income tax assets and liabilities of the Group should be listed as written-off net amount when having the legal rights of settling the current income tax assets and liabilities by net amount and the deferred income tax and liabilities is relevant to the income tax which be collected from the same taxpaying bodies by the same tax collection and administration
KonkaGroupCo.,Ltd. AnnualReport2016 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.
25.Leasing
Financing leasing virtually transferred the whole risks and leasing of the compensation related to the assets ownership and their ownership may eventually be transferred or maybe not.Other leasing except for thefinancing leasing is operating leasing.
(1)Business ofoperating leases recorded bythe Group as thelessee
The rent expenses from operating leases shall be recorded by the lessee in the relevant asset costs or the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs shall be recognized as the profits and losses of the current period. The contingent rents shall be recorded into the profits and losses ofthecurrent period inwhich they actually arise.
(2)Business ofoperating leases recorded bythe Group as thelessor
The rent incomes from operating leases shall be recognized as the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs of great amount shall be capitalized when incurred, and be recorded into current profits and losses in accordance with the same basis for recognition of rent incomes over the whole lease term. The initial direct costs of small amount shall be recorded into current profits and losses when incurred. The contingent rents shall be recorded into the profits and losses ofthecurrent period in which theyactually arise.
(3)Business offinance leases recorded bytheGroup as thelessee
On the lease beginning date, the Group shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. Besides, the initial direct costs directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in the asset value of the current period. The balance through
KonkaGroupCo.,Ltd. AnnualReport2016 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. 26.Changesin mainaccounting policies andestimates
(1)Changeof accounting policies
There was noany change ofaccounting policies oftheCompany in theReporting Period. (2)Changeof accounting estimates
There was noany change ofaccounting estimateoftheCompany in theReporting Period. 27.Critical accounting judgments andestimates
Due to the inside uncertainty of operating activity, the Group needed to make judgments, estimates and assumption on the book value of the accounts without accurate measurement during the employment of accounting policies. And these judgments, estimates and assumption were made basing on the prior experience of the senior executives of the Group, as well as in consideration of other factors. These judgments, estimates and assumption would also affect the report amount of income, costs, assets and liabilities, as well as the disclosure of contingent liabilities on balance sheet date. However, the uncertainty of these estimates was likely to cause significant adjustment on the book value of the affected assets
KonkaGroupCo.,Ltd. AnnualReport2016 and liabilities.
The Group would check periodically the above judgments, estimates and assumption on the basis of continuing operation. For the changes in accounting estimates only affected on the current period, the influence should be recognized at the period of change occurred; for the changes in accounting estimates affected the current period and also the future period, the influenceshould be recognized at theperiod ofchange occurred and future period.
On the balance sheet date, the Group needed to make judgments, estimates and assumption ontheaccountsin thefollowing importantitems:
(1)Categorization ofleasing
In accordance with Accounting Standards for Enterprises No. 21– Leasing, the Group categorized the leasing into operating lease and finance lease. During the categorization, the management level needed to make analysis and judgment on whether all the risk and compensation related with the leased assets had been transferred to the leasee, or whether the Group had already undertaken all therisk and compensation related with theleased assets. (2)Provision forbad debts
In accordance with the accounting policies of accounts receivable, the Group measured the losses for bad debts by adopting allowance method. The impairment of accounts receivable was based on the appraisal of the recoverability of accounts receivable. The impairment of accounts receivable was dependent on the judgment and estimates. The actual amount and the difference of previous estimates would affect the book value of accounts receivable and the withdrawal and reversal on provision for bad debts of accounts receivable during the period of estimates being changed.
(3)Provision forfalling price ofinventories
In accordance with the accounting policies of inventories, for the inventories that the costs were more than the net realizable value as well as out-of-date and dull-sale inventories, the Group withdrawn the provision for falling price of inventories on the lower one between costs and net realizable value. Evaluating the falling price of inventories needed the management level gain the valid evidence and take full consideration of the purpose of inventories, influence of events after balance sheet date and other factors, and then made relevant judgments and estimates. The actual amount and the difference of previous estimates would affect the book value of inventories and the withdrawal and reversal on provision for
KonkaGroupCo.,Ltd. AnnualReport2016 bad debts of inventories during theperiod of estimates being changed.
(4)The fair valueof financial instrument
For the financial instruments without active market, the Group recognized the fair value by various methods. These evaluation methods included discounted cash flow mode analysis, etc. The Group needed to estimate the future cash flow, credit risk, fluctuation rate of market and relativity and other factors, as well as choose the property discount rate. Due to the uncertainty of relevant assumptions, so their changes would affect the fair value of financial instrument.
(5)Held-to-maturity investments
The Company classifies the non-derivative financial asset with a fixed or determinable amount of repo price, and a fixed date of maturity, which the enterprise holds for a definite purpose or the enterprise is able to hold until its maturity, to held-to-maturity investment. Such classification concerns lots of judgments. During the judgment process, the Company will assess the purpose and capability for holding such kind of investment to maturity. Except for special cases (for example, selling investment with no-large amount when the maturity date is closely to come), if the Companycan’t hold the investment to maturity date, the Company should re-classify all that investment to available-for-sale financial assets, andshouldn’t classify those financial assets into hold-to-maturity investment in the current fiscal year and the next two complete fiscal years. Such cases may have significant impact on related financial assets value stated in financial statements, and may influence the risk management strategy for financial toolsofthe Company.
(6)Impairment ofheld-to-maturity investment
The decision about confirming the impairment of the investment held-to-maturity by the Company depends on the judgment of the management layer to a great extent. The objective evidences of the occurrence of the impairment include there is serious financial difficulties of the issuer which lead the financial assets could not be continued to deal in the active market and could not execute the clauses of the contracts (for example, to pay for the interests or the principal occurs default) and so on. When executing the judgment, the Company should assess the influences of the objective evidences of the occurrence of the impairment on the estimated futurecash flow oftheinvestment.
(7)The impairment offinancial assets available for sale
KonkaGroupCo.,Ltd. AnnualReport2016 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.
(8)Provision forimpairment of non-financial non-current assets
The Group made a judgment on the non-current assets other than financial assets whether they had any indication of impairment on the balance sheet date. For the intangible assets without finite service life, other than the annual impairment test, they should be subject to the impairment test when there was any indication of impairment. For other non-current non-financial assets, which should be subjected to impairment test when there was indication ofimpairment indicated that thebookvaluecan’t berecoverable.
When the book value of the assets or assets portfolio was more than the recoverable amount, which was the higher one between the net amount of fair value after deducting the disposal expenses and the discounted amount of the estimated future cash flow, it means impairment incurred.
The net amount of fair value after deducting the disposal expenses should be fixed the price in the sale agreement for similar assets in the fair transaction minus the increased costs directly attributableto theassets disposal.
When estimated the discounted value of future cash flow, the Group needed to make important judgment on the output, selling price, relevant costs and the discount rate for calculating the discounted amount, etc. When estimated the recoverable amount, the Group would adopt all the available documents, including the prediction for relevant output, selling 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.
KonkaGroupCo.,Ltd. AnnualReport2016 (9)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.
(10)Expenditures for development
When fixing the amount of capitalization, the management level of the Group needed to make assumption on the predicted future cash flow, property discounted rate and estimated beneficiary period forrelevant assets.
(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 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
KonkaGroupCo.,Ltd. AnnualReport2016 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 liabilities may affect theprofits andlosses in thefuture periods.
V.Taxation
1.Maintaxes andtax rate
Categoryoftaxes Specificsituationofthetaxesrate
Calculatedtheoutputtaxat3%,5%,6%,11%,13%,17%andpaidtheVATbytheamountafter VAT deductingthedeductiblewithholdingVATatcurrentperiod,ofwhichtheVATapplicabletoeasycollectionwon’tbelongtothedeductiblewithholdingVAT.
Paidby5%of taxablebusinessincome in Jan.toApr.;andVATreplaced thebusiness taxfrom Businesstax
May.
Urbanmaintenanceand Paid at7% of the circulating tax actually paid, of which Dongguan Packing, Dongguan Konka, constructiontax BoluoKonka,BoluoKonkaPrecision,andKunshanKangshengof5%.
Paid at25% of thetaxable income, of which Hong KongKonka, Konka HouseholdAppliances Investment, Konka Household Appliances International Trading, Konka Zhisheng, and Enterpriseincometax
ZhongkangSupplyChainof16.5%;TelecommunicationTechnology,KunshanKonka,DongguanKonka,AnhuiKonka,KonkaE-display,andWankaidaof15%;andEuropeKonkaof31%. Educationsurtax Paidat3%ofthecirculatingtaxactuallypaid.
KonkaGroupCo.,Ltd. AnnualReport2016 Categoryoftaxes Specificsituationofthetaxesrate
Localeducationsurtax Paidat2%ofthecirculatingtaxactuallypaid.
Note: (1) On 23 Mar. 2016, the Ministry of Finance and the StateAdministration of Taxation issued the Notice on Overall Promotion of Pilot Change from Business Tax to VAT (CS[2016)] NO.36). Since 1 May. 2016, the pilot change from business tax to VAT has been overall promoted in nationwide. The industries of construction, real estate, financing, life service, and so on were all included into the pilot range and related business taxpayers will pay VAT instead of business tax. The Company has followed the aforesaid policy for its businesses belonging to the industries of real estate, information service, immovable property leasing, andso on.
(2) In accordance with the Notice on Printing the Administration Method on Charging and Use of the Treatment Funds of Discarded Electronic Appliance and Electric Products issued by the Ministry of Finance, Ministry of Environmental Protection, National Development and Reform Commission, Ministry of Industry and Information, General Administration of Customs and National Taxation Bureau (CZ[2012] No. 34), and the Administration Method on Charging and Use of the Treatment Funds of Discarded 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 Jul. 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 January 1, 2008.According to the above methods, theCompany’s sales branch companies in each area will hand in the corporate income taxes in advance from 1 Jan. 2008 and will be final settled uniformly bytheCompany at theyear-end.
2.Taxpreference andapproved document
(1) On 5 Aug. 2014, the subsidiary of the Company, Kunshan Konka Electronics Co., Ltd.
KonkaGroupCo.,Ltd. AnnualReport2016 acquired the certificate of high-technology enterprises joint issued by Jiangsu Province Science and Technology Department, Department of Finance of Jiangsu Province, Jiangsu Provincial Office, SAT, and Jiangsu Local Taxation Bureau with the certification number of GF201432000413 and the validity of three years. According to the relevant taxation regulations, the Kunshan Konka could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2014 to 2016, and pay for the corporate incometax according to15%of thepreferential tax rate.
(2) On 30 Sep. 2014, the subsidiary of the Company Shenzhen Konka Telecommunication Technology Co., Ltd. acquired the certificate of high-technology enterprises jointly issued by Shenzhen Science and technology Innovation Committee, Shenzhen Finance Committee, Shenzhen Provincial Office, SAT, and Shenzhen Local Taxation Bureau, with the certification number of GR201444201101 and the validity of three years. According to the relevant taxation regulations, the Telecommunication Technology could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2014 to 2016, and pay forthecorporate incometax according to15%of thepreferential taxrate.
(3) On 30 Sep. 2014, theCompany’s subsidiary- Wankaida acquired the certificate of high-technology enterprises joint issued by Shenzhen Science and technology Innovation Committee, Shenzhen Finance Committee, Shenzhen Provincial Office, SAT, and Shenzhen Local Taxation Bureau with the certification number of GR201444201523 and the validity of three years. According to the relevant taxation regulations, the Anhui Tongchuang could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2012 to 2014, and pay for the corporate income tax according to15% of the preferential taxrate.
(4) On 10 Oct. 2014, the subsidiary of the Company, Dongguan Konka acquired the certificate of high-technology enterprises joint issued by Guangdong Province Science and Technology Department, Department of Finance of Guangdong Province, Guangdong Province Municipal Office, SAT, and Guangdong Local Taxation Bureau with the certification number of GF201444001341 and the validity of three years. According to the relevant taxation regulations, the Dongguan Konka could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years since 2014(2014~2016), and pay forthe corporate incometaxaccording to15% ofthepreferential tax rate.
(5) On 21 Oct. 2016, the subsidiary of the Company,Anhui Konka acquired the certificate of
KonkaGroupCo.,Ltd. AnnualReport2016 high-technology enterprises joint issued by Anhui Province Science and Technology Department, Department of Finance of Anhui Province, Anhui Provincial Office, SAT, and Anhui Local Taxation Bureau with the certification number of GR201634000520 and the validity of three years.According to the relevant taxation regulations, theAnhui Konka could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2016 to 2018, and pay for the corporate income tax according to15% of the preferential taxrate.
(6) On 21 Nov. 2016, the subsidiary of the Company, Konka E-display acquired the certificate of high-technology enterprises joint issued by Shenzhen Science and Technology Innovation Committee, Finance Commission of Shenzhen Municipality, Shenzhen Municipal Office, SAT, and Shenzhen Local Taxation Bureau with the certification number of GR201644201332 and the validity of three years. According to the relevant taxation regulations, the Konka E-display could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2016 to 2018, and pay for the corporate incometax according to15%of thepreferential tax rate.
(7)According to the CS No.[2011] 100Article issued by Ministry of Finance and State Administration of Taxation, if the ordinary VAT payer sells software products developed by itself, the VAT is levied at the rate of17% and after that, the part of actual tax burden of VAT which exceeds3% can enjoy the policy of refunding taxes immediately after levying taxes. The subsidiaries of the Company, Shenzhen Konka Telecommunication Technology Co., Ltd., Shenzhen Konka Information Network Co., Ltd., Shenzhen Wankaida Science and Technology Co., Ltd. and Shenzhen Konka Yishijie Commercial Display Co., Ltd. enjoy such favorable policy.
VI. Notes on majoritems inconsolidated financialstatements of theCompany
Unless otherwise noted, the following annotation project (including the main projects annotation of the financial statement of the Company), the year-begin refers to 1 Jan. 2015, theyear-end refers to 31Dec. 2016
1.Monetary funds
||
|-|
|Closingbalance|
|2,354.63|
|2,020,900,590.51|
|596,703,311.28|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|2,617,606,256.42|
|643,590,382.98|

Notes: The closing balance of other monetary fund was the deposits of each margin deposit notwithdrawn at any time.
2. Financial assets measured by fair value and the changes be included in the current gainsandlosses
||
|-|
|Closingbalance|
|39,894,844.12|
|212,190,150.00|
|252,084,994.12|

 3.Notes receivable
(1)Notes receivable listed byItem
||
|-|
|Closingbalance|
|2,866,434,355.03|
|5,199,143.79|
|2,871,633,498.82|

(2)Notes receivable pledged at theperiod-end
Item Amount
Bankacceptancebill 1,480,722,697.16 Total 1,480,722,697.16 Notes: Up to 31 Dec. 2016, the Company pledged thebanker’s acceptance bill of the book value of RMB1, 480,722,697.16 for the comprehensive financing business such as handling thebilling, letterofcredit and thetrading financing.
(3) Notes receivable which had endorsed by the Company or had discounted and had not due onthebalance sheet dateat the year-end
||
|-|
|Amountofrecognitionterminationattheperiod-end|
|1,483,505,103.95|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|20,503,552.63|
|1,504,008,656.58|

4.Accounts receivable
(1)Accounts receivableclassified byItem
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|24,684,155.33|0.93|24,684,155.33|100.00|
|2,516,341,840.82|94.77|242,313,342.19|9.63|
|2,516,341,840.82|94.77|242,313,342.19|9.63|
|114,253,229.55|4.30|80,316,179.69|70.30|
|2,655,279,225.70|100.00|347,313,677.21|13.08|

(Continued)
Openingbalance
|||
|-|-|
|Bookbalance|Baddebtprovision|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|21,847,005.37|0.92|21,847,005.37|100.00|
|2,284,090,249.64|95.88|244,107,868.37|10.69|
|2,284,090,249.64|95.88|244,107,868.37|10.69|
|76,251,927.24|3.20|67,420,869.17|88.42|
|2,382,189,182.25|100.00|333,375,742.91|13.99|

① Accounts receivable with significant single amount for which bad debt provision separately accrued at theyear-end
Closingbalance
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion(%)|
|24,684,155.33|24,684,155.33|100.00|

②In the groups, accounts receivable adopting aging analysis method to withdraw bad debt provision:
Closingbalance
|||
|-|-|
|Accountreceivable|Baddebtprovision|
|2,245,731,435.25|44,914,628.70|

KonkaGroupCo.,Ltd. AnnualReport2016
|||
|-|-|
|62,233,823.40|3,111,691.17|
|15,752,693.25|3,150,538.65|
|2,027,521.41|1,013,760.71|
|947,289.10|473,644.55|
|189,649,078.41|189,649,078.41|
|2,516,341,840.82|242,313,342.19|

③ Top five of account receivable with insignificant single amount for which bad debt provisionseparately accrued
Closingbalance
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion|
|19,076,318.63|19,076,318.63|100.00%|
|18,320,000.00|5,496,000.00|30.00%|
|12,996,777.15|12,996,777.15|100.00%|
|8,223,935.99|4,111,968.00|50.00%|
|5,933,761.14|5,933,761.14|100.00%|
|64,550,792.91|47,614,824.92|73.76%|

(2)Baddebt provision withdrawal, reversed orrecovered in theReporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 29,795,580.26; the amount of the reversed or collected part during the Reporting Period was ofRMB4,088,532.96,other decrease was RMB 11,769,113.00.
(3)Top fiveofaccount receivable ofclosing balance collected byarrears party
The total amount of top five of account receivable of closing balance collected by arrears party was RMB 1,075,949,715.05,40.52% of total closing balance of account receivable, the relevantclosing balance ofbad debt provision withdrawn was RMB 22,050,369.49.
5.Prepayment
(1)List byaging analysis:
KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|Closingamount|||||
|Bookbalance||Baddebtprovision|Bookbalance||
|Amount|Proportion(%)||Amount|Proportion(%)|
|269,405,925.30|96.52|1,461,427.25|192,024,479.90|94.60|
|3,335,844.57|1.20|36,710.13|1,037,032.15|0.51|
|2,265,192.49|0.81|415,058.47|3,154,864.60|1.55|
|4,099,193.21|1.47|2,382,301.00|6,774,559.86|3.34|
|279,106,155.57|100.00|4,295,496.85|202,990,936.51|100.00|

Notes: prepayments of significant amount and aged more than 1 year, of which the amount of RMB 8,146,945.00 was the relevant materials which had quality problems and had not handle the accounts settlement as well as the material warehousing formalities, and the materials purchaseaccount prepaid should be presented as theprepayments.
(2) Top 5 of the closing balance of the prepayment collected according to the prepayment target
The total amount of top five of account receivable of closing balance collected by arrears party wasRMB120,555,664.2,43.19%oftotal closing balance of account receivable.
(3) The accrual bad debt reserve is RMB 545,562.61 this year; the withdrawing or reversing bad debt reserve is RMB 42,410.44 this year; and the bad debt reserve of RMB 5,533,971.17 isdecreased after thereclassification in theperiod.
6.Interestreceivable
(1)Item of interest receivable
||
|-|
|Closingbalance|
|1,342,063.84|
|—|
|1,342,063.84|

7.Dividends receivable
||
|-|
|Closingbalance|
|10,171,609.48|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|Closingbalance|
|10,171,609.48|

 8.Otheraccounts receivable
(1)Other account receivable classified byItem
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion|
|183,915,489.33|43.21|174,186,734.34|94.71|
|234,570,113.10|55.12|26,878,827.62|11.46|
|234,570,113.10|55.12|26,878,827.62|11.46|
|7,101,401.90|1.67|2,131,520.57|30.02|
|425,587,004.33|100.00|203,197,082.53|47.75|

(Continued)
Openingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|183,881,677.62|51.78|171,132,382.98|93.07|
|170,855,404.47|48.11|23,438,919.29|13.72|
|170,855,404.47|48.11|23,438,919.29|13.72|
|402,820.00|0.11|402,820.00|100.00|
|355,139,902.09|100.00|194,974,122.27|54.90|

① Other account receivable with insignificant single amount for which bad debt provision separately accrued
Closingbalance
||||
|-|-|-|
|Otheraccountsreceivable|Baddebtprovision|Withdrawalproportion|
|152,402,680.00|152,402,680.00|100.00%|
|18,115,952.51|8,387,197.52|46.30%|
|13,396,856.82|13,396,856.82|100.00%|
|183,915,489.33|174,186,734.34|94.71%|

②In the groups, other accounts receivable adopting aging analysis method to withdraw bad debt provision:
Closingbalance
|||
|-|-|
|Otheraccountsreceivable|Baddebtprovision|
|188,214,732.47|3,764,294.65|

KonkaGroupCo.,Ltd. AnnualReport2016
|||
|-|-|
|11,199,066.41|559,953.32|
|9,688,182.60|1,937,636.52|
|5,130,382.24|2,565,191.12|
|4,571,994.74|2,285,997.37|
|15,765,754.64|15,765,754.64|
|234,570,113.10|26,878,827.62|

(2)Baddebt provision withdrawal, reversed orrecovered in theReporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 5,412,706.45; the amount of the reversed or collected part during the Reporting Period was of RMB 1,827,353.33; bad-debt provisions were decreased by RMB766,876.87 due to cease of control; bad-debt provisions were decreased by RMB-5,362,432.20 due to reclassification from accounts paid in advance to this item; bad-debt provisions were decreased by RMB-42,051.81 due toother reasons.And there was nowriting off.
(3)Top 5 of the closing balance of theother accounts receivable collected according to the arrears party
|||||
|-|-|-|-|
|Nature|Closingbalance|Aging|ProportionofthetotalClosingbalanceoftheaccountsreceivable(%)|
|Energy-savingsubsidies|152,402,680.00|1-2years,3-4years|35.81|
|Cashdeposit|23,690,000.00|Within1year|5.57|
|Loan|22,260,000.00|Within1year|5.23|
|Transferfund|18,115,952.51|2-3year|4.26|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|Currentaccount|13,396,856.82|Over1-5year(s)|3.15|
|—|229,865,489.33||54.02|

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

(Continued)
Openingamount
||||
|-|-|-|
|Bookbalance|Ofwhich: thecapitalizedamountof|Impairmentofinventories|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
||theborrowings||
|270,136,005.18|—|—|
|194,778,406.05|3,693,784.24|—|
|464,914,411.23|3,693,784.24|—|
|611,138,306.26|—|53,034,708.44|
|152,737,782.18|—|54,853,159.84|
|1,960,267,024.10|—|199,769,581.12|
|1,115,838.91|—|—|
|2,725,258,951.45|—|307,657,449.40|
|3,190,173,362.68|3,693,784.24|307,657,449.40|

(2)List ofthedevelopment cost
||||
|-|-|-|
|Startingtime|Expectedcompletiontimeofthenextbatch|Openingamount|
|Dec.2015|Y2017|268,056,798.18|
|Oct.2015|Y2020|2,079,207.00|
|||270,136,005.18|

(3)List ofthedeveloped products
|||||
|-|-|-|-|
|Completiontime|Openingamount|Increased|Decreased|
|Y2014|79,683,074.34|—|75,729,827.16|
|Y2015|115,095,331.71|4,182,012.12|115,634,108.89|
||194,778,406.05|4,182,012.12|191,363,936.05|

KonkaGroupCo.,Ltd. AnnualReport2016 (4) Impairment of inventories
|||||||
|-|-|-|-|-|-|
|Openingbalance|Increasedamount||Decreasedamount|||
||Withdrawal|Other|Reverse|Write-off|Otherreduction|
|53,034,708.44|11,903,512.67|—|—|26,433,154.42|7,450,819.23|
|54,853,159.84|2,719,890.17|—|—|48,700,113.74|—|
|199,769,581.12|139,147,417.78|—|—|88,533,592.78|3,159,381.09|
|307,657,449.40|153,770,820.62|—|—|163,666,860.94|10,610,200.32|

(5) Withdrawal provision basis of the falling price of the inventory and the reasons of the reserveorwrite-off
||
|-|
|Specificbasisofwithdrawaloffallingpricereservesofinventory|
|Therealizablenetvaluewaslowerthantheinventorycost|
|Therealizablenetvaluewaslowerthantheinventorycost|
|Therealizablenetvaluewaslowerthantheinventorycost|

(6) Closing balance of the inventory which includes capitalized borrowing expenses was RMB141,378.83.
10.Othercurrent assets
||
|-|
|Closingbalance|
|299,745,437.03|
|—|
|—|
|262,458,679.17|

KonkaGroupCo.,Ltd. AnnualReport2016 562,204,116.20 647,311,938.45 Total
KonkaGroupCo.,Ltd. AnnualReport2016
11.Available-for-salefinancialassets
(1)List ofavailable-for-sale financial assets
||||||
|-|-|-|-|-|
|Closingbalance|||||
|Bookbalance|Depreciationreserves|Bookvalue|Bookbalance|Depreciationreserves|
|319,965,425.00|4,997,785.64|314,967,639.36|316,972,068.30|4,997,785.64|
|55,777,425.00|—|55,777,425.00|2,874,068.30|—|
|264,188,000.00|4,997,785.64|259,190,214.36|314,098,000.00|4,997,785.64|
|319,965,425.00|4,997,785.64|314,967,639.36|316,972,068.30|4,997,785.64|

(2)Available-for-salefinancial assets measured byfair valueat the period-end
Item Available-for-saleequityinstruments
Costoftheequityinstruments
47,230,000.00 Fairvalue
55,777,425.00 Changedamountofthefairvalueaccumulativelyincludedinothercomprehensiveincome
8,547,425.00 Withdrawnimpairmentamount — (3)Available-for-salefinancial assets measured bycost at theperiod-end
Bookbalance
||||
|-|-|-|
|Year-begin|Increased|Decreased|
|20,000,000.00|—|—|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|4,800,000.00|—|—|
|9,500,000.00|—|—|
|5,750,000.00|—|—|
|1,300,000.00|—|—|
|100,000.00|—|—|
|485,000.00|—|—|
|5,000,000.00|—|—|
|1,153,000.00|—|—|
|6,000,000.00|—|—|
|2,400,000.00|—|—|
|203,000,000.00|—|—|
|47,230,000.00|—|47,230,000.00|
|7,380,000.00|—|7,380,000.00|
|—|4,700,000.00|—|
|—|—|—|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|314,098,000.00|4,700,000.00|54,610,000.00|

(Continued)
||||||
|-|-|-|-|-|
|Depreciationreserves||||Shareholdingproportionamongtheinvestees|
|Year-begin|Increased|Decreased|Year-end||
|—|—|—|—|6.00|
|—|—|—|—|6.10|
|—|—|—|—|13.57|
|—|—|—|—|12.67|
|1,300,000.00|—|—|1,300,000.00|9.60|
|100,000.00|—|—|100,000.00|—|
|485,000.00|—|—|485,000.00|1.00|
|1,639,190.80|—|—|1,639,190.80|9.62|
|200,000.00|—|—|200,000.00|11.50|
|1,273,594.84|—|—|1,273,594.84|2.40|
|—|—|—|—|4.26|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|—|—|—|—|—|
|—|—|—|—|9.56|
|—|—|—|—|—|
|—|—|—|—|3.62|
|—|—|—|—|—|
|4,997,785.64|—|—|4,997,785.64|—|

Notes:① The measurement method for HunanVaryTech Co.,Ltd. ischanged from thecost method to thefairvalue method.
② On March 27, 2015, the Chongqing Jiangbei court accepted the bankruptcy and liquidation application of subsidiary Chongqing Electronics and appointed a liquidation task group for that. As such, the Company no longer has the right to lead the relevant activities of Chongqing Electronics. As Chongqing Electronics entered the bankruptcy procedure, it was excluded from the consolidation scope and reclassified to financial assets available forsale at thenet value ofzero.
(4)Changes in available-for-salefinancial asset impairment in theCurrentYear
Classificationofavailable-for-salefinancialassets available-for-saleequityinstruments
Openingbalanceofimpairmentprovisions 4,997,785.64 ProvidedforfortheCurrentYear — Including:Fromothercomprehensiveincome — DecreasedintheCurrentYear — Including:Reversalduetopost-periodfairvalueincrease —
KonkaGroupCo.,Ltd. AnnualReport2016
Classificationofavailable-for-salefinancialassets available-for-saleequityinstruments
Closingbalanceofimpairmentprovisions 4,997,785.64 12. Long-term equityinvestment
||||||||
|-|-|-|-|-|-|-|
|Openingbalance|Openingbalanceofimpairmentprovision||||||
|||Additionalinvestment|Costmethodchangedtoequitymethod|Negativeinvestment|Investmentprofitandlossrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|44,317,016.67|—|—|—|4,840,648.16|2,631,682.81|—|
|94,673,758.00|30,257,135.84|—|—|—|-21,992,043.38|—|
|3,649,728.08|3,649,728.08|—|—|—|—|—|
|68,250,273.03|—|—|—|—|14,924,158.23|-54,595.90|
|7,137,424.83|—|—|—|7,137,424.83|—|—|
|6,452,187.60|—|—|—|—|986,459.90|—|
|—|—||76,014,057.31|—|9,390,973.96|—|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||||
|-|-|-|-|-|-|-|
|—|—||24,987,912.64|—|2,178,574.89|—|
|—|—|20,000,000.00|—|—|-835,308.22|—|
|—|—|6,000,000.00|—|—|213,908.63|—|
|—|—|—|12,660,222.73|—|7,766,215.74|—|
|224,480,388.21|33,906,863.92|26,000,000.00|113,662,192.68|11,978,072.99|15,264,622.56|-54,595.90|

 (Continued)
|||||
|-|-|-|-|
|Increase/decreaseinReportingPeriod|||Closingbalance|
|Declarationofcashdividendsorprofits|Withdrawnimpairmentprovision|Other||
|257,796.60|—|60,619,115.73|—|
|—|—|—|88,298,590.32|
|—|—|—|3,649,728.08|
|—|—|—|85,791,460.71|
|—|—|—|—|
|—|—|—|7,438,647.50|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|—|—|—|85,405,031.28|
|—|—|—|27,166,487.52|
|—|—|—|19,164,691.78|
|—|—|—|6,213,908.63|
|—|—|—|20,426,438.47|
|257,796.60|—|60,619,115.73|343,554,984.29|

Note:Wehave established Zhonggao KonkaIntelligentTechnology (Beijing) Co., Ltd. jointly withBeijing Cybernaut GreenTechnology Investment Management Co.,Ltd. and BeijingZhonggao International Human Resources Co., Ltd. on7Nov.2016,withtheregistered capital of RMB15million. RMB4.5million is paid byus, accountingfor30% oftheregistered capital and exerting great influence.Wehave notpaidand thecompany has not operated by31Dec. 2016.Oursubsidiary and Guoguang Orient Network (Beijing) Co.,Ltd. jointlyincorporated Guoguang Ruilian(Shenzhen) NetworkTechnology Co., Ltd. with aregistered capital ofRMB10 million, of which we contributed RMB4million,40%of itsregistered capital, representing a significant influence onit.As ofDecember 31,2016,theCompany hadnot yet made theactual payment.
KonkaGroupCo.,Ltd. AnnualReport2016 13.Investmentproperty
Investment property adopted thecost measurement mode
||
|-|
|Housesandbuildings|
|249,923,047.75|
|—|
|—|
|249,923,047.75|
|—|
|22,204,869.22|
|5,631,274.27|
|5,631,274.27|
|—|
|27,836,143.49|
|—|
|—|
|—|
|—|
|—|
|—|
|222,086,904.26|
|227,718,178.53|

KonkaGroupCo.,Ltd. AnnualReport2016
14.Fixed assets
(1)List offixed assets
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Other|
|1,610,405,611.03|995,990,722.42|225,934,784.83|64,713,750.93|209,487,021.91|
|18,778,974.18|13,898,021.55|15,341,323.75|2,559,838.48|5,295,369.19|
|9,386,689.90|12,370,485.11|15,341,323.75|2,283,456.93|1,496,290.48|
|9,392,284.28|1,527,536.44|—|276,381.55|3,799,078.71|
|43,401,899.72|251,225,517.37|28,763,469.30|13,604,956.39|44,800,350.71|
|9,508,848.53|81,871,859.83|23,302,128.65|7,191,138.69|14,151,792.70|
|33,893,051.19|169,353,657.54|5,461,340.65|6,413,817.70|30,648,558.01|
|1,585,782,685.49|758,663,226.60|212,512,639.28|53,668,633.02|169,982,040.39|
|365,828,714.85|582,924,576.99|173,954,788.56|45,962,359.91|136,450,040.99|
|31,191,113.90|50,103,043.65|12,984,685.17|3,822,257.05|19,823,899.38|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|31,191,113.90|50,103,043.65|12,984,685.17|3,822,257.05|19,823,899.38|
|4,169,351.25|170,667,218.03|23,564,664.36|10,469,519.85|32,757,106.31|
|3,986,818.16|68,750,847.13|19,773,075.67|6,027,596.66|11,947,211.40|
|182,533.09|101,916,370.90|3,791,588.69|4,441,923.19|20,809,894.91|
|392,850,477.50|462,360,402.61|163,374,809.37|39,315,097.11|123,516,834.06|
|2,006,749.30|26,068,129.89|5,313,847.45|963,345.92|3,556,147.76|
|—|2,489,437.37|610,558.02|26,444.19|84,034.59|
|—|2,489,437.37|610,558.02|26,444.19|84,034.59|
|—|11,780,288.67|2,163,842.81|39,272.25|1,922,600.66|
|—|9,204,909.97|2,135,110.32|6,912.25|1,248,789.70|
|—|2,575,378.70|28,732.49|32,360.00|673,810.96|
|2,006,749.30|16,777,278.59|3,760,562.66|950,517.86|1,717,581.69|
|1,190,925,458.69|279,525,545.40|45,377,267.25|13,403,018.05|44,747,624.64|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|1,242,570,146.88|386,998,015.54|46,666,148.82|17,788,045.10|69,480,833.16|

 Notes: Other payments are decreased dueto losing thecontrol rights to subsidiary.
KonkaGroupCo.,Ltd. AnnualReport2016 (2)List oftemporarily idlefixed assets
|||||
|-|-|-|-|
|Originalbookvalue|Accumulativedepreciation|Depreciationreserves|Bookvalue|
|39,474,322.58|20,230,130.99|542,558.97|18,701,632.62|
|25,177,264.30|11,676,602.76|8,395,124.64|5,105,536.90|
|1,732,582.00|1,595,054.30|100,422.20|37,105.50|
|21,912,503.44|20,568,427.14|1,021,928.09|322,148.21|
|2,247,474.45|1,668,158.58|263,805.28|315,510.59|
|90,544,146.77|55,738,373.77|10,323,839.18|24,481,933.82|

(3)Fixed assets leased in from financing lease
||||
|-|-|-|
|Originalbookvalue|Accumulativedepreciation|Impairmentprovision|
|5,321,552.85|1,693,854.34|—|
|205,128.20|75,213.67|—|
|5,526,681.05|1,769,068.01|—|

 (4)Fixed assets leased out from operation lease
Item Closingbookvalue
Housesandbuildings
13,777,757.13 Total 13,777,757.13 (5)Details of fixed assets failed toaccomplishcertification of property
||
|-|
|Bookvalue|
|46,600,903.42|
|19,854,440.55|
|12,187,010.26|
|12,274,810.80|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|5,310,014.45|
|3,581,003.24|

15.Construction inprogress
(1)List ofconstruction inprogress
KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|Closingbalance|||||
|Bookbalance|Depreciationreserves|Bookvalue|Bookbalance|Depreciationreserves|
|286,093,111.12|—|286,093,111.12|138,816,397.92|—|
|1,643,881.07|—|1,643,881.07|1,643,881.07|—|
|—|—|—|4,801,714.50|—|
|—|—|—|31,032,889.26|—|
|—|—|—|4,035,058.76|—|
|—|—|—|9,613,833.54|—|
|27,799,444.86|—|27,799,444.86|17,910,405.83|—|
|315,536,437.05|—|315,536,437.05|207,854,180.88|—|

KonkaGroupCo.,Ltd. AnnualReport2016
(2)Changes ofsignificant construction inprogress
|||||||
|-|-|-|-|-|-|
|Estimatednumber|Openingbalance|Increasedamount|Amountthattransferredtofixedassetsoftheperiod|Amountthattransferredtointangibleassetsoftheperiod|Otherdecreasedamountoftheperiod|
|444,600,000.00|138,816,397.92|154,188,000.82|6,911,287.62|—||
|26,320,000.00|1,643,881.07|—|—|—||
|37,992,500.00|4,801,714.50|—|—||4,801,714.50|
|40,000,000.00|31,032,889.26|—|—||31,032,889.26|
|4,186,655.78|4,035,058.76|1,469,096.52|5,504,155.28||—|
|—|9,613,833.54|—|—||9,613,833.54|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|—|17,910,405.83|28,656,651.78|15,561,090.42|3,206,522.33|
|553,099,155.78|207,854,180.88|184,313,749.12|27,976,533.32|48,654,959.63|

Notes: Other payments are decreased dueto losing thecontrol rights to subsidiary.
(Continued)
||||||
|-|-|-|-|-|
|Proportionestimatedoftheprojectaccumulativeinput|Projectprogress|Accumulativeamountofcapitalizedinterests|Ofwhich: theamountofthecapitalizedinterestsoftheperiod|Capitalizationrateoftheinterestsoftheperiod|
|6.25|6.25|—|—|—|
|65.90|65.90|832,313.28|22,148.12|5.60|

KonkaGroupCo.,Ltd. AnnualReport2016 16.Intangibleassets
(1)Listofintangibleassets
|||||
|-|-|-|-|
|Landuseright|Patentright|Trademarkregistrationexpense|Other|
|366,197,934.11|40,171,004.84|3,519,159.61|47,885,989.61|
|—|63,106.80|—|8,932,561.80|
|—|63,106.80|—|2,862,597.08|
|—|—|—|6,069,964.72|
|49,200,800.00|—|—|612,677.65|
|—|—|—|464,814.40|
|49,200,800.00|—|—|147,863.25|
|316,997,134.11|40,234,111.64|3,519,159.61|56,205,873.76|
|48,719,074.90|32,955,386.83|3,400,022.14|17,206,634.21|
|7,354,815.53|790,077.91|12,192.96|4,569,175.28|
|7,354,815.53|790,077.91|12,192.96|4,569,175.28|
|2,702,518.67|—|—|295,292.02|
|—|—|—|233,682.33|
|2,702,518.67|—|—|61,609.69|
|53,371,371.76|33,745,464.74|3,412,215.10|21,480,517.47|
|—|2,901,082.61|—|—|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|Landuseright|Patentright|Trademarkregistrationexpense|Other|
|—|—|—|—|
|—|—|—|—|
|—|—|—|—|
|—|—|—|—|
|—|—|—|—|
|—|2,901,082.61|—|—|
|263,625,762.35|3,587,564.29|106,944.51|34,725,356.29|
|317,478,859.21|4,314,535.40|119,137.47|30,679,355.40|

 (2)Details of fixed assets failed toaccomplishcertification of land useright
||
|-|
|Bookvalue|
|3,153,608.13|

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

 (2)The method ofimpairment test andimpairment provision, see note19,IV.
(3)As of31Dec. 2016,there was nobookvalue ofgoodwill higherthan recoverable amount.
18.Long-term unamortized expenses
KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|Openingbalance|Increasedamount|Amortizationamount|Decrease|
|25,781,274.74|984,343.39|7,240,055.93|3,212,337.04|
|33,132,182.48|56,806,325.02|36,231,245.47|2,494,948.33|
|23,933,524.85|11,913,736.28|9,273,514.74|2,197,751.86|
|82,846,982.07|69,704,404.69|52,744,816.14|7,905,037.23|

 Note: otherreductions arecaused by lossofcontrol ofthe subsidiary.
19.Deferredincometax assets/deferredincome tax liabilities
(1)Deferred income tax assets
||||
|-|-|-|
|Closingbalance|||
|Deductibletemporarydifference|Deferredincometaxassets|Deductibletemporarydifference|
|746,292,412.93|184,974,531.80|682,074,474.66|
|100,026,922.96|25,006,730.74|75,656,622.48|
|113,547,244.37|28,241,712.82|114,093,986.59|
|90,555,138.14|21,799,952.55|98,649,185.43|
|1,622,776,529.02|405,694,132.25|1,223,305,795.11|
|144,068,370.06|36,017,092.52|89,960,000.00|
|2,817,266,617.48|701,734,152.68|2,283,740,064.27|

 Note: Other energy-saving subsidies, accrued liabilities, pre-collected housing payments, pre-paid earnest money andemployee compensations that havenot been refunded.
(2)Lists ofdeferred incometax liabilities
||||
|-|-|-|
|Closingbalance|||
|Deductibletemporarydifference|Deferredincometaxliabilities|Deductibletemporarydifference|
|6,867,714.25|1,030,157.14|10,219,095.65|
|39,557,580.99|9,889,395.25|7,184,035.28|
|8,547,425.00|2,136,856.25|556,635.24|

KonkaGroupCo.,Ltd. AnnualReport2016 financialassets
||||
|-|-|-|
|14,848,590.56|3,712,147.64|—|
|9,577,050.20|2,394,262.55|—|
|79,398,361.00|19,162,818.83|17,959,766.17|

 (3)List ofunrecognized deferred incometax assets
||
|-|
|Closingbalance|
|215,783,474.69|
|1,198,447,416.45|
|1,414,230,891.14|

 20.Assets impairmentprovision
|||||
|-|-|-|-|
|Openingbalance|Withdrawnimpairmentbalanceattheperiod-begin|Decreased||
|||Reverse|Write-off|
|537,676,181.03|35,753,849.32|5,958,296.73|12,665,477.03|
|307,657,449.40|153,770,820.62|—|174,277,061.26|
|4,997,785.64|—|—|—|
|37,908,220.32|3,210,474.17|—|15,906,004.39|
|2,901,082.61|—|—|—|
|33,906,863.92|—|—|—|
|925,047,582.92|192,735,144.11|5,958,296.73|202,848,542.68|

KonkaGroupCo.,Ltd. AnnualReport2016 21.Short-termloans
Item ofshort-term loans
||
|-|
|Closingbalance|
|720,088,506.52|
|5,842,745,719.99|
|6,562,834,226.51|

 Note: at the end of the year, the balance of the loan secured by the related party in the loan is RMB 278206762.40 yuan, and the security situation is as detailed in note eleven, 5 (4).
22. Profits of residual equity re-calculated based on fair value after the control right is lost
||
|-|
|Closingbalance|
|337,263.13|
|337,263.13|

 23.Notes payable
||
|-|
|Closingbalance|
|259,499,645.15|
|604,209,493.24|
|863,709,138.39|

 Notes: RMB863,709,138.39will beduein nextfiscal period.
24.Accounts payable
(1)List ofaccounts payable
||
|-|
|Closingbalance|
|3,051,643,650.52|
|53,050,351.35|
|10,532,651.04|
|44,846,922.65|
|3,160,073,575.56|

(2)Notes of theaccounts payable aging over oneyear
KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|Closingbalance|
|51,461,966.09|
|9,543,100.00|
|61,005,066.09|

25.Advancefrom customers
(1)List ofadvance from customers
||
|-|
|Closingbalance|
|1,160,427,420.29|
|19,169,243.24|
|6,518,376.19|
|15,311,183.98|
|1,201,426,223.70|

(2) Significant advance from customers aging over one year was prepayment of goods undelivered.
(3)Advancereceipts ofhouses
||
|-|
|Closingbalance|
|1,345,098.00|
|2,560,000.00|
|890,759,963.00|
|894,665,061.00|

 26.Payrollpayable
(1)List ofPayroll payable
|||||
|-|-|-|-|
|Openingbalance|Increased|Decreased|Otherdecreases|
|271,481,205.46|1,533,586,438.04|1,519,327,532.08|16,411,165.31|
|2,458,579.25|136,454,415.93|136,776,345.72|69,272.98|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|Openingbalance|Increased|Decreased|Otherdecreases|
|5,691,474.00|25,258,310.99|23,603,090.93|5,683,500.00|
|—|1,733,370.44|1,733,370.44|—|
|279,631,258.71|1,697,032,535.40|1,681,440,339.17|22,163,938.29|

 Note: Otherdecreases in theCurrentYear are dueto cease ofcontrol over subsidiaries.
(2)List ofShort-term salary
|||||
|-|-|-|-|
|Openingbalance|Increased|Decreased|Otherdecreases|
|262,158,525.22|1,345,827,276.76|1,331,752,932.76|16,284,619.54|
|1,257,181.26|67,301,868.86|67,348,423.49|—|
|1,937,335.09|60,543,678.29|60,648,498.68|33,134.73|
|1,392,834.34|52,099,831.33|52,572,531.73|25,711.05|
|102,543.07|4,699,645.36|4,616,153.19|5,797.30|
|441,957.68|3,744,201.60|3,459,813.76|1,626.38|
|1,496,698.09|30,878,595.89|31,000,678.86|61,611.00|
|4,219,899.55|10,836,321.24|10,709,998.55|31,800.04|
|—|—|—|—|
|—|—|—|—|
|411,566.25|18,198,697.00|17,866,999.74|—|
|271,481,205.46|1,533,586,438.04|1,519,327,532.08|16,411,165.31|

KonkaGroupCo.,Ltd. AnnualReport2016 Note: Otherdecreases in theCurrentYear are dueto cease ofcontrol over subsidiaries.
(3)List ofdrawing scheme
|||||
|-|-|-|-|
|Openingbalance|Increased|Decreased|Otherdecreases|
|2,129,581.26|131,553,506.23|131,689,315.90|64,296.26|
|328,997.99|4,900,909.70|5,087,029.82|4,976.72|
|—|—|—|—|
|2,458,579.25|136,454,415.93|136,776,345.72|69,272.98|

 Note: Otherdecreases in theCurrentYear are dueto cease ofcontrol over subsidiaries.
27.Taxespayable
||
|-|
|Closingbalance|
|22,004,630.74|
|47,284,465.50|
|22,247,050.00|
|7,665,004.34|
|5,981,502.18|
|5,657,810.54|
|4,840,472.49|
|3,057,758.99|
|1,045,876.46|
|1,038,401.33|
|762,586.83|
|2,661.16|
|317,200.62|
|121,905,421.18|

 28.Interestpayable
||
|-|
|Closingbalance|
|21,344,172.45|

KonkaGroupCo.,Ltd. AnnualReport2016 Total 21,344,172.45 20,552,763.14 29.Otheraccounts payable
(1)Other accounts payable listedbynature oftheaccount
||
|-|
|Closingbalance|
|1,024,955,359.82|
|200,962,374.64|
|140,710,255.05|
|9,468,406.97|
|68,253,590.26|
|1,444,349,986.74|

(2)Other significant accounts payable withaging overone year
||
|-|
|Closingbalance|
|92,682,050.57|
|92,682,050.57|

30.Non-currentliabilities duewithin1year
||
|-|
|Closingbalance|
|—|
|41,025.60|
|41,025.60|

 31.Long-term loan
||
|-|
|Closingbalance|
|—|
|—|
|70,000,000.00|
|—|
|70,000,000.00|

32.Long-term payable
KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|Closingbalance|
|30,000,000.00|
|143,589.74|
|41,025.60|
|30,102,564.14|

 33.Longterm payroll payable
(1)List oflong term payroll payable
||
|-|
|Closingbalance|
|18,151,659.90|
|—|
|—|
|18,151,659.90|

 (2)Changes ofdefined benefit plans
① Present worth of defined benefit plans obligation:
||
|-|
|ReportingPeriod|
|23,435,856.86|
|—|
|—|
|—|
|—|
|5,284,196.96|
|5,284,196.96|
|18,151,659.90|

②Notes to the influence of the content and related risk of defined benefit plans to the future
cashflows, timeand uncertainty of theCompany:
KonkaGroupCo.,Ltd. AnnualReport2016 Due to upgrading and reconstruction of current work sites of the subsidiary, communication technology, it is to adjust the labor relations according to Implementation Measures for Accompanying Employees in manufacturing system of Shenzhen Konka Communication Technology Co., Ltd on the premise to balance theCompany’s andemployees’ benefits and voluntary selection, Communication Technology provides early retirement plans for senior employees (employed before 31 Dec. 1990 and signed non-fixed term labor contract with the Company orCommunicationTechnology).
The accumulative compensation paid to the internal early retirement pensions in future year is RMB 34,931,714.55, the Company in line with Agreement of Internal Early Retirement Pension, in line with the standard of salary remaining the same, turnover rate of 0, the mortality rate of, fix standard of social security base payment remaining the same to test the present worth of defined benefit plans. The actual payment for the employee is influence by theactual turnoverrate, death rate and thechanges ofminimumcardinality ofsocial security.③ Notes to analysis results ofactuarial assumptions and sensibilityof defined benefit plans
||
|-|
|Period-endofReportingPeriod|
|Treasurybondrateinsameperiod|
|0%|
|Overlegalemeritusage|
|0%|

34.Accrued liabilities
|||
|-|-|
|Openingbalance|Closingbalance|
|4,711,597.59|4,629,554.61|
|2,840,387.51|—|
|7,551,985.10|4,629,554.61|

35.Deferredincome
||||||
|-|-|-|-|-|
|Openingbalance|Increased|Decreased|Otherreductionsoftheyear|Closingbalance|
|162,786,004.20|12,808,000.00|23,758,573.37|21,264,305.41|130,571,125.42|
|162,786,004.20|12,808,000.00|23,758,573.37|21,264,305.41|130,571,125.42|

Note: otherreductions inthis year resulted inloss ofcontrol ofthesubsidiary.
KonkaGroupCo.,Ltd. AnnualReport2016
Ofwhich, itemsinvolved in government subsidies:
||||||
|-|-|-|-|-|
|Openingbalance|Additional subsidiesoftheyear|Non-business income oftheyear|Otherchanges|Closingbalance|
|14,040,000.00|—|3,510,000.00|—|10,530,000.00|
|12,800,000.00|—|—|—|12,800,000.00|
|8,170,000.00|—|—|—|8,170,000.00|
|7,908,737.85|—|131,812.30|—|7,776,925.55|
|5,620,000.00|—|—|—|5,620,000.00|
|5,256,893.21|—|—|—|5,256,893.21|
|5,000,000.00|—|—|—|5,000,000.00|
|4,499,999.90|—|2,000,000.00|—|2,499,999.90|
|4,000,000.00|—|—|—|4,000,000.00|
|3,750,000.05|—|1,000,000.00|—|2,750,000.05|
|3,600,000.00|—|600,000.00|—|3,000,000.00|
|3,000,000.00|3,620,000.00|—|—|6,620,000.00|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|Openingbalance|Additional subsidiesoftheyear|Non-business income oftheyear|Otherchanges|Closingbalance|
|2,600,000.00|—|—|—|2,600,000.00|
|2,556,666.66|—|420,000.08|—|2,136,666.58|
|2,478,260.88|—|521,739.12|—|1,956,521.76|
|2,475,000.00|—|300,000.00|—|2,175,000.00|
|2,470,000.00|—|—|—|2,470,000.00|
|2,400,000.00|—|—|—|2,400,000.00|
|2,030,000.00|—|33,833.33|—|1,996,166.67|
|2,000,000.00|—|—|—|2,000,000.00|
|2,000,000.00|—|2,000,000.00|—|—|
|1,866,666.68|—|400,000.00|—|1,466,666.68|
|1,648,133.29|—|420,800.04|—|1,227,333.25|
|1,450,000.00|—|600,000.00|—|850,000.00|
|1,229,999.85|—|1,229,999.85|—|—|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|Openingbalance|Additional subsidiesoftheyear|Non-business income oftheyear|Otherchanges|Closingbalance|
|1,200,000.00|—|1,200,000.00|—|—|
|—|4,000,000.00|—|—|4,000,000.00|
|11,550,000.00|—|—|11,550,000.00|—|
|4,500,000.00|—|—|4,500,000.00|—|
|2,800,000.00|—|—|2,800,000.00|—|
|1,909,920.93|—|—|1,909,920.93|—|
|27,511,134.19|5,188,000.00|5,061,903.53|—|27,637,230.66|
|154,321,413.49|12,808,000.00|19,430,088.25|20,759,920.93|126,939,404.31|
|8,464,590.71|—|4,328,485.12|504,384.48|3,631,721.11|
|8,464,590.71|—|4,328,485.12|504,384.48|3,631,721.11|
|162,786,004.20|12,808,000.00|23,758,573.37|21,264,305.41|130,571,125.42|

KonkaGroupCo.,Ltd. AnnualReport2016
36.Sharecapital
|||||||
|-|-|-|-|-|-|
|Openingbalance|Increase/decreaseinReportingPeriod(+,-)|||||
||Newlyissueshare|Bonusshares|Capitalizationofpublicreserves|Other|Subtotal|
|2,407,945,408.00|—|—|—|—|—|

 37.Capital reserves
||||
|-|-|-|
|Openingbalance|Increased|Decreased|
|7,393,378.55|—|—|
|70,816,156.64|37,057,362.06|35,543,805.21|
|78,209,535.19|37,057,362.06|35,543,805.21|

Notes: Other changes in the owner's equity (excluding net profit or loss) of Shanghai Konka Green Technology Co., Ltd., Enraytek Optoelectronics Co., Ltd. and Shenzhen Ruifeng Optoelectronics Co., Ltd. increase the other capital reserves by RMB 37,057,362.06.The equity disposalof Shenzhen Ruifeng Optoelectronics Co., Ltd. decreases othercapital reserves byRMB35,543,805.21.
38.Othercomprehensiveincome
|||||||
|-|-|-|-|-|-|
|Openingbalance|ReportingPeriod|||||
||Amountincurredbeforeincometax|Less:Amounttransferredintoprofitandlossinthecurrentperiodthatrecognizedintoothercomprehensiveincomeinpriorperiod|Less:incometaxexpense|After-taxattributetotheparentcompany|After-taxattributetominorityshareholder|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||
|-|-|-|-|-|-|
|—|—|—|—|—|—|
|—|—|—|—|—|—|
|—|—|—|—|—|—|
|1,444,788.01|8,547,425.00|1,444,788.00|2,136,856.25|4,965,780.75|—|
|1,710,955.99|-15,259,139.66|—|—|-15,053,629.40|-205,510.26|
|3,155,744.00|-6,711,714.66|1,444,788.00|2,136,856.25|-10,087,848.65|-205,510.26|

KonkaGroupCo.,Ltd. AnnualReport2016 39.Surplusreserves
||||
|-|-|-|
|Openingbalance|Increased|Decreased|
|593,846,200.71|—|—|
|254,062,265.57|—|—|
|847,908,466.28|—|—|

 Notes: Based on the regulations of the Corporation Law and Constitution, the Company should withdraw10% of the statutory surplus reserves according to the net profits. If the accumulated amount of the statutory surplus reserves exceeded the50% of the registered capital, theCompany could nomore withdraw.
40.Retained profits
||
|-|
|ReportingPeriod|
|-522,836,282.66|
|—|
|-522,836,282.66|
|95,673,028.03|
|—|
|—|
|—|
|—|
|-427,163,254.63|

41.Revenues andoperating costs
1.Revenueand Costof Sales
||||
|-|-|-|
|ReportingPeriod|||
|Revenue|Operatingcosts|Revenue|
|17,167,313,167.21|14,622,628,859.55|17,261,298,403.20|
|3,132,034,969.00|2,895,701,483.44|1,133,878,632.78|
|20,299,348,136.21|17,518,330,342.99|18,395,177,035.98|

KonkaGroupCo.,Ltd. AnnualReport2016 (2)Main operations (Classified byproduct)
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|12,478,427,986.35|10,729,196,625.12|12,590,931,785.71|
|1,701,770,760.58|1,354,850,701.01|1,569,786,771.56|
|970,287,086.42|888,167,026.43|790,942,197.54|
|2,016,827,333.86|1,650,414,506.99|2,309,637,648.39|
|17,167,313,167.21|14,622,628,859.55|17,261,298,403.20|

 (3)Main operations (Classified byarea)
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|11,150,662,775.63|8,997,456,385.97|11,332,127,336.67|
|6,016,650,391.58|5,625,172,473.58|5,929,171,066.53|
|17,167,313,167.21|14,622,628,859.55|17,261,298,403.20|

(4)Other operations (Classified byproduct)
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|2,317,805,158.77|2,300,635,459.09|598,960,641.11|
|814,229,810.23|595,066,024.35|534,917,991.67|
|3,132,034,969.00|2,895,701,483.44|1,133,878,632.78|

 (5)The revenue of sales from thetopfive customers
||
|-|
|Mainoperationrevenue|
|4,731,230,318.90|
|3,298,880,853.29|

42.Businesstax andsurcharges
Item ReportingPeriod Lastperiod
KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|ReportingPeriod|
|31,636,994.52|
|17,327,476.12|
|14,137,366.07|
|13,907,406.51|
|9,437,113.58|
|8,899,110.14|
|8,478,117.89|
|7,603,617.22|
|5,760.00|
|1,869.24|
|532,649.67|
|111,967,480.96|

 Note: (1)The item“business tariff and annex”shall be modified to“taxes and additional” after the business tax is replaced with added-value tax based on Regulations on Accounting Treatment of Value-added Tax (CH[2016]-No. 22) issued by Ministry of Finance, which calculates the consumption tax, urban maintenance and construction tax, resource tax, extra charges of education funds, real estate tax, land use tax, vehicle and vessel use tax, stamp tax and other relevant tax incurred in enterprise' s business activities; and the item “business tariffandannex” shall bemodified to “taxes and additional” inincome statement. (2)The measurement standards ofbusiness tax and surcharges see NotesV.Tax.
43.Salesexpenses
||
|-|
|ReportingPeriod|
|642,050,865.73|
|456,194,224.02|
|329,602,119.20|
|247,860,015.44|
|215,372,746.88|
|102,518,097.89|
|79,027,665.46|
|35,131,539.08|
|22,298,840.47|
|18,302,420.37|
|137,639,751.43|

KonkaGroupCo.,Ltd. AnnualReport2016 2,285,998,285.97 2,448,337,549.43 Total
44.Administrative expenses
||
|-|
|ReportingPeriod|
|191,650,648.39|
|184,157,561.77|
|31,293,982.01|
|21,135,641.62|
|18,099,818.89|
|16,727,226.74|
|13,256,107.22|
|12,271,213.92|
|11,585,714.21|
|10,960,120.57|
|9,814,237.66|
|7,652,400.13|
|78,974,442.52|
|607,579,115.65|

45.Financial expenses
||
|-|
|ReportingPeriod|
|198,330,557.12|
|55,199,760.75|
|3,377,513.83|
|8,256,235.92|
|154,764,546.12|

46.Asset impairmentloss
||
|-|
|ReportingPeriod|
|29,795,552.59|
|153,770,820.62|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|—|
|—|
|3,210,474.17|
|186,776,847.38|

47.Gains onthe changes inthefairvalue
||
|-|
|ReportingPeriod|
|-14,617,369.08|
|-14,617,369.08|
|-14,617,369.08|

48. Investmentincome
||
|-|
|ReportingPeriod|
|12,738,812.54|
|21,145,788.55|
|2,136,847.06|
|7,035,083.79|
|1,824,788.16|
|206,303,753.38|
|71,556,841.08|
|25,704,013.09|
|348,445,927.65|
|本年发生额|
|12,738,812.54|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|ReportingPeriod|
|21,145,788.55|
|2,136,847.06|
|7,035,083.79|
|1,824,788.16|
|206,303,753.38|
|71,556,841.08|
|25,704,013.09|
|348,445,927.65|

 49.Non-operating gains
|||
|-|-|
|ReportingPeriod|Lastperiod|
|5,205,974.43|1,431,893.68|
|5,205,974.43|1,431,893.68|
|234,802,344.00|138,975,824.71|
|10,884,825.38|4,620,972.98|
|5,274,775.72|5,753,390.97|
|14,660,503.81|7,756,214.66|
|270,828,423.34|158,538,297.00|

Ofwhich, government subsidies recorded intocurrent profits and losses
|||
|-|-|
|ReportingPeriod|Sameperiodoflastyear|
|121,451,535.04|67,476,494.60|
|40,577,764.60|3,713,042.00|
|23,758,573.37|24,619,013.34|
|13,421,731.12|15,018,153.38|

KonkaGroupCo.,Ltd. AnnualReport2016
|||
|-|-|
|ReportingPeriod|Sameperiodoflastyear|
|12,322,500.00|—|
|9,164,300.00|—|
|4,557,740.52|4,108,800.00|
|2,243,284.00|2,711,014.00|
|520,000.00|16,697,890.80|
|6,784,915.35|4,631,416.59|
|234,802,344.00|138,975,824.71|

50.Non-operating expenses
|||
|-|-|
|ReportingPeriod|Lastperiod|
|2,967,838.13|12,339,287.69|
|2,967,838.13|12,339,287.69|
|1,245,373.01|17,094,119.09|
|1,062,490.04|1,224,158.89|
|910,036.49|1,449,348.77|
|—|89,960,000.00|
|4,667,903.87|12,713,996.13|
|10,853,641.54|134,780,910.57|

 51.Incometax expense
(1)Lists ofincometax expense
||
|-|
|ReportingPeriod|
|79,426,714.19|
|-143,867,214.76|

KonkaGroupCo.,Ltd. AnnualReport2016 -269,622,908.76 Total
-64,440,500.57
(2)Adjustmentprocess of accounting profit and incometaxexpense
Item ReportingPeriod Totalprofits
27,734,857.51 Currentincometaxexpenseaccountedbytaxandrelevantregulations
6,933,714.38 Influenceofdifferenttaxratesuitabletosubsidiary
-45,513,470.03 Influenceofincometaxbeforeadjustment
51,869.62 Influenceofnontaxableincome
-14,697,292.07 Influenceofnotdeductablecosts,expensesandlosses
11,112,344.18 Influence of deductable losses of deferred income tax assets derecognized used in
-30,731,596.04 previousperiod
Influenceofdeductibletemporarydifferenceordeductiblelossesofdeferredincometax
18,835,044.37 assetsderecognizedinReportingPeriod.
Changesofthebalanceofdeferredincometaxassets/liabilitiesinpreviousperioddueto
-1,808.14 adjustmentoftaxrate
Influenceofplusdeductingcosts
-10,429,306.84 Incometaxexpense
-64,440,500.57 52.Othercomprehensiveincome
SeenotesVI. 38
53.Supplementary information to cash flowstatement
(1)Other cash received relevant to operating activities
||
|-|
|ReportingPeriod|
|155,169,679.92|
|89,592,235.59|
|56,272,190.17|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|52,885,730.88|
|13,355,316.08|
|6,084,773.95|
|3,726,746.63|
|3,472,963.01|
|583,683.33|
|55,017,013.60|
|436,160,333.16|

(2)Other cash paid relevant to operating activities
||
|-|
|ReportingPeriod|
|1,005,121,650.16|
|35,082,398.56|
|122,285,418.21|
|23,151,880.41|
|9,389,229.30|
|910,036.49|
|124,386.36|
|38,601,430.52|
|1,234,666,430.01|

(3)Other cash received relevant to investment activity
||
|-|
|ReportingPeriod|
|9,632,843,700.00|
|200,839,640.31|
|50,000,000.00|
|—|
|—|
|9,883,683,340.31|

(4)Other cash paid relevant to investmentactivity
Item ReportingPeriod Lastperiod
KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|9,429,843,700.00|
|201,150,384.41|
|—|
|49,019,277.58|
|9,680,013,361.99|

(5)Other cash received relevant to financing activities
||
|-|
|ReportingPeriod|
|12,808,000.00|
|—|
|—|
|12,808,000.00|

(6)Other cash paid relevant to financing activities
||
|-|
|ReportingPeriod|
|441,980,432.33|
|1,317,451.84|
|443,297,884.17|

54.Supplementary information to cash flowstatement
(1)Information ofnet profit to net cash flows generated from operating activities
||
|-|
|ReportingPeriod|
|92,175,358.08|
|186,776,847.38|
|117,924,999.15|
|12,726,261.68|
|52,744,816.14|
|-2,238,136.30|
|0.00|
|14,617,369.08|
|91,957,039.21|
|-348,445,927.65|

KonkaGroupCo.,Ltd. AnnualReport2016 Decreaseindeferredincometaxassets(gains:negative) -150,430,947.22 -289,789,111.75
||
|-|
|15,694,786.86|
|-1,548,058,651.37|
|-423,090,590.16|
|939,269,945.54|
|-23,758,957.85|
|-972,135,787.43|
|—|
|—|
|—|
|2,020,902,945.14|
|1,488,154,851.35|
|—|
|—|
|532,748,093.79|

 (2) Cash and cash equivalents
Item Openingbalance Cashorcash equivalentsreceivedinthecurrentyearduetodisposalofsubsidiariesinthe
2,730,000.00 currentyear
Ofwhich:ShenzhenKonkaInformationNetworkCo.,Ltd.
2,730,000.00 Less:Cashandcashequivalentsheldbysubsidiariesonthedateofceaseofcontrol
43,068,119.63 Ofwhich:ShenzhenKonkaInformationNetworkCo.,Ltd.
14,735,049.19 ShenzhenKonkaPrecisionMoldManufacturingCo.,Ltd.
28,333,070.44 Netcashreceivedfromdisposalofsubsidiaries
-40,338,119.63
KonkaGroupCo.,Ltd. AnnualReport2016 55.Theassets with theownership oruserightrestricted
||
|-|
|Closingbookvalue|
|596,703,311.28|
|1,480,722,697.16|
|5,807,674.32|
|810,810.00|
|2,084,044,492.76|

56.Foreigncurrency monetary items
Foreign currency monetary items
|||
|-|-|
|Closingforeigncurrencybalance|Exchangerate|
|132,992,443.44|6.9370|
|88,593.03|7.3068|
|2,649,214,623.28|0.0005163|
|1.32|8.5094|
|504,539,497.48|0.8945|
|6.96|5.1406|
|319,479.00|1.6572|
|100,373,729.02|6.9370|
|6,226,313,306.22|0.0005163|
|4,399,516.05|0.8945|
|49,764.00|5.0157|
|469.95|6.9370|
|22,745.23|7.3068|
|42,019.44|0.8945|
|105,752,469.49|0.0005163|

KonkaGroupCo.,Ltd. AnnualReport2016
|||
|-|-|
|Closingforeigncurrencybalance|Exchangerate|
|21,400,000.00|0.05959|
|65,682,043.40|6.9370|
|177,946,155.34|0.0005163|
|1,512,859.47|0.8945|

 VII. Changesof merge scope
1.Thedisposal ofsubsidiary
Singledisposal ofinvestment to subsidiary that losing control
||||||
|-|-|-|-|-|
|Theequitydisposalprice|Equitydisposalproportion(%)|Methodofequitydisposal|Timeoflosingcontrol|Recognitionbasisofthetimeoflosingcontrol|
|—|60.00|Cancellation|2016-5-31|Liquidationcompleted|
|—|100.00|Cancellation|2016-1-3|Cancellation|
|13,820,368.77|51.00|Transfer|2016-11-1|Transfer ofequity,operation andfinancialcontrollingpower|

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

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|—|—|—|—|—|
|—|—|—|—|—|
|49.00|5,060,478.40|13,278,393.51|8,217,915.11|Tradingconsiderationandevaluationreport|

2.Otherreasons forthe changes incombination scope
(1) The subsidiary Kangdian Investment Co., Ltd. signs agreement with Shenzhen Dingshengxin Mould Technology Consultation Co., Ltd. on 31 Dec. 2015. Therefore, Shenzhen Dingshengxin Mould Technology Consultation Co., Ltd. has terminated to entrust Kangdian Investment Co., Ltd. to manage its6.18% of equity of precision mould since 1 Jan. 2016. Shenzhen Konka Precision Mould Manufacturing and its subsidiaries (Kunshan Jielunte Mould Plastic Co., Ltd., Dongguan Xuda Mould Plastic Co., Ltd., Chuzhou Jielunte Mould Plastic Co., Ltd.,Anhui Jiasen Precision Technology Co., Ltd., Wuhan Jielunte Mould Plastic Co., Ltd. and Dongguan Konka Mould Plastic Co., Ltd.) have been excluded in the merge scopesince 1Jan. 2016.
(2)The company and natural Wu Guoren and Xiao Yongsong register and establish Zhongkang Supply Chain Management Co., Ltd. on 15Jul. 2016 with the cash investment of Konka Group Co., Ltd. of USD 765,000 (equity:51%), that of Wu Guoren of USD 375,000 (equity:25%), and that of Xiao Yongsong of USD 360,000 (equity:24%). We have control rights and have included it intomerge scope since15Jul. 2016.
(3) The Company have registered and established Yilifang (Hainan) Technology Co., Ltd. in Hainan Province on 30 Sep. 2016, with the registered capital of RMB 20 million. The Companyholds100% ofshares and has included itinto merge scope since30Sep. 2016. (4)The subsidiary Konka Yishijie Co., Ltd. funds and establishes wholly-owned subsidiary Kangqiao Yilian Co. Ltd. on 1 Apr. 2016, with the registered capital of RMB 5 million, whose actual investment if RMB 5,000.00 by the date of balance sheet. We have control rights and have included it intomerge scope sincethen.
(5) The Company registered and established Chuzhou Konka Technology Industrial Development Co., Ltd. in Anhui Province on 31 Oct. 2016, with the registered capital of RMB 40 million and100% of shares. Our shareholders shall invest before 26 Feb. 2017. We
have not invested by the date of issuing the report. We have control rights and have included
itinto merge scopesince 31Oct. 2016.
KonkaGroupCo.,Ltd. AnnualReport2016 VIII. Equity inotherentities
1.Equity insubsidiary
(1)The structure oftheenterprisegroup
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Guangdong·Shenzhen|Guangdong·Shenzhen|Manufacturing|75.00|25.00|
|Guangdong·Shenzhen|Guangdong·Shenzhen|Manufacturingandtrading|100.00|—|
|Guangdong·Shenzhen|Guangdong·Shenzhen|Manufacturing|49.00|51.00|
|Guangdong·Shenzhen|Guangdong·Shenzhen|Manufacturing|75.00|25.00|
|Guangdong·Shenzhen|Guangdong·Shenzhen|Investmentandholding|75.00|25.00|
|Heilongjiang·Mudanjiang|Heilongjiang·Mudanjiang|Manufacturing|60.00|—|
|Chongqing|Chongqing|Manufacturing|—|40.00|
|Anhui·Chuzhou|Anhui·Chuzhou|Manufacturing|78.00|—|
|Anhui·Chuzhou|Anhui·Chuzhou|Manufacturing|—|100.00|
|Jiangsu·Kunshan|Jiangsu·Kunshan|Manufacturing|100.00|—|
|Guangdong·Dongguan|Guangdong·Dongguan|Manufacturing|75.00|25.00|
|Guangdong·Dongguan|Guangdong·Dongguan|Manufacturing|—|100.00|
|Guangdong·Boluo|Guangdong·Boluo|Manufacturing|—|51.00|
|Guangdong·Boluo|Guangdong·Boluo|Manufacturing|—|100.00|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|China·HongKong|China·HongKong|Internationaltrading|100.00|—|
|China·HongKong|China·HongKong|Investmentandholding|—|100.00|
|China·HongKong|China·HongKong|Internationaltrading|—|100.00|
|FrankfurtofGermany|FrankfurtofGermany|Internationaltrading|100.00|—|
|Guangdong·Shenzhen|Guangdong·Shenzhen|Commercialfactoring(non-bankfinance)|100.00|—|
|Guangdong·Shenzhen|Guangdong·Shenzhen|Softwaredevelopment|100.00|—|
|Jiangsu·Kunshan|Jiangsu·Kunshan|Realestate|100.00|—|
|Anhui·Chuzhou|Anhui·Chuzhou|Manufacturing|100.00|—|
|Indonesia|Indonesia|Internationaltrading|—|51.00|
|GuangdongShenzhen|GuangdongShenzhen|Logistics|100.00|—|
|Beijing|Beijing|Saleofhouseholdappliances|100.00|—|
|Guangdong.Shenzhen|Guangdong.Shenzhen|Manufacturing|60.00|—|
|Guangdong.Shenzhen|Guangdong.Shenzhen|Manufacturing||60.00|
|Fujian.Xiamen|Fujian.Xiamen|Trading|—|69.23|
|Tianjin|Tianjin|Advertising|—|70.00|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Guangdong.Shenzhen|Guangdong.Shenzhen|Realestate|70.00|—|
|China·HongKong|China·HongKong|Internationaltrading|—|61.00|
|Anhui.Chuzhou|Anhui.Chuzhou|e-commerce|80.00|—|
|Guangdong.Shenzhen|Guangdong.Shenzhen|Informationservice|100.00|—|
|Guangdong.Shenzhen|Guangdong.Shenzhen|Commerce|81.00|—|
|Guangdong.Shenzhen|Guangdong.Shenzhen|Commerce|51.00|—|
|China·HongKong|China·HongKong|Internationaltrading|—|51.00|
|Guangdong.Shenzhen|Guangdong.Shenzhen|Commerce|60.00|—|
|Hainan.Haikou|Hainan.Haikou|Networkplatformdevelopment|100.00|—|
|Anhui.Chuzhou|Anhui.Chuzhou|Technologyindustry|100.00|—|

 Notes:
①The Company holds40.00% shares of Chongqing Qingjia Electronic Co., Ltd. that all senior managers of Chongqing Qingjia Electronic Co., Ltd. are appointed and dismissed by the Company. Among the directors, half of them or over half are dispatched directly or indirectly by the Company. Moreover, in Chongqing Qingjia,70% to80% of its products are sold to the Company and thus the Company has absolute influence and control over the production and operation of Chongqing Qingjia Electronic Co., Ltd., which is combined into theconsolidated financial statement.
②Konka Commercial Factoring: Konka Commercial Factoring (Shenzhen) Co., Ltd. (former:
KonkaOptoelectronicsTechnology Co., Ltd.).
③Anhui Tongchuang is a limited company jointly invested and established by the Company
KonkaGroupCo.,Ltd. AnnualReport2016 and Chuzhou Tongchuang Construction Investment Co., Ltd. (hereinafter refer to as “Tongchuang Construction”) with registration capital of RMB 180 million, of which each party invested in RMB 90 million respectively on contract. As to 31 Dec. 2013, Anhui Tongchuang with a paid-up capital of RMB 120 million (including paid-up capital of RMB 90 million of the Company,75.00% of total paid-up capital; and paid-up capital of RMB 30 million of Tongchuang Construction,25.00% of total paid-up capital ). According to contract sign by two parties, Tongchuang Construction has the rights of transferring stock ownership three years after the establishment of Anhui Tongchuang Company. Meanwhile, the Company can repurchase the said stock ownership and contracted with Tongchuang Investment Company that the Company shall receive fixed investment gains at2% of actual capital invested by the Group annually. So the Company can conduct actual control toAnhui TongchuangCompany,and combines it into theconsolidated financial statement.
(2)Significant not wholly ownedsubsidiary
||||
|-|-|-|
|Shareholdingproportionofminorityshareholder|Theprofitsandlossesarbitratetotheminorityshareholders|Dividendsdistributetominorityshareholder|
|22.00|14,287,462.32|—|
|30.00|-2,360,526.74|—|
|20.00|877,522.79|—|
|19.00|608,854.60|—|
|49.00|-4,535,361.92|—|

 (3)The main financial information ofsignificant not wholly owned subsidiary
Closingbalance
||||||
|-|-|-|-|-|
|currentassets|Non-currentassets|Totalassets|Currentliabilities|Non-currentliability|
|882,686,223.79|237,235,477.46|1,119,921,701.25|758,810,489.87|9,378,492.06|
|1,095,944,360.3|823,353.13|1,096,767,713.45|6,986,520.22|100,000,000.0|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|2||||0|
|415,460,985.44|1,976,121.55|417,437,106.99|391,209,614.58|—|
|60,748,150.41|210,589.31|60,958,739.72|49,258,011.04|—|
|51,339,640.20|25,744.89|51,365,385.09|40,620,040.76|—|

(Continued)
Openingbalance
||||||
|-|-|-|-|-|
|currentassets|Non-currentassets|Totalassets|Currentliabilities|Non-currentliability|
|861,543,505.16|246,490,103.64|1,108,033,608.80|811,514,052.71|9,208,641.33|
|160,265,775.57|1,854,349.17|162,120,124.74|4,470,509.04|—|
|150,457,774.00|569,437.47|151,027,211.47|129,187,332.99|—|
|18,242,541.78|102,206.32|18,344,748.10|13,064,517.30|—|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|10,001,184.99|—|10,001,184.99|—|—|

ReportingPeriod
||||
|-|-|-|
|Operationrevenue|Netprofit|Totalcomprehensiveincome|
|6,179,232,216.41|64,421,804.56|64,421,804.56|
|—|-7,868,422.47|-7,868,422.47|
|863,408,156.37|4,387,613.93|4,387,613.93|
|132,498,763.77|3,204,497.88|3,204,497.88|
|303,773,820.22|-9,255,840.66|-9,255,840.66|

 (Continued)
Lastperiod
||||
|-|-|-|
|Operationrevenue|Netprofit|Totalcomprehensiveincome|
|5,226,927,921.25|5,741,493.20|5,741,493.20|
|—|-2,350,384.30|-2,350,384.30|
|606,905,917.99|1,839,878.48|1,839,878.48|
|37,310,898.12|1,743,230.80|1,743,230.80|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|—|1,184.99|1,184.99|

 2.Equity inassociated enterprise
(1)Significant associated enterprise
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shenzhen|Shenzhen|Productionandsaleoflightemittingdiode|—|46.31|
|Shanghai|Shanghai|Productionandsaleoflightemittingdiode|—|23.05|
|Shanghai|Shanghai|Productionandsaleoflightemittingdiode|39.00|—|

(2) Main financial information ofsignificant associated enterprise
||||||
|-|-|-|-|-|
|Closingbalance/ReportingPeriod|||||
|EnraytekOptoelectronicsCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|
|337,520,215.29|738,946,170.94|361,468,348.74|297,773,051.60|643,665,278.09|
|213,358,864.83|900,120,117.46|356,832,999.34|212,779,305.97|693,903,656.72|
|550,879,080.12|1,639,066,288.40|718,301,348.08|510,552,357.57|1,337,568,934.81|
|323,883,050.63|724,812,281.87|254,144,707.10|276,570,255.04|551,431,214.97|
|15,731,811.09|663,406,931.69|71,618,268.97|38,261,432.65|556,666,832.72|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|Closingbalance/ReportingPeriod|||||
|EnraytekOptoelectronicsCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|
|339,614,861.72|1,388,219,213.56|325,762,976.07|314,831,687.69|1,108,098,047.69|
|36,506,895.12|-959,669.10|172,560,267.62|31,578,892.05|-260,290.34|
|174,757,323.28|251,806,743.94|219,978,104.39|164,141,777.83|229,731,177.46|
|80,930,116.41|58,041,454.48|85,791,460.71|76,014,057.31|64,416,622.16|
|—|—|—|—|—|
|—|—|—|—|—|
|4,474,914.87|—|—|—|—|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|Closingbalance/ReportingPeriod|||||
|EnraytekOptoelectronicsCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|
|85,405,031.28|58,041,454.48|85,791,460.71|76,014,057.31|64,416,622.16|
|—|—|—|—|—|
|424,417,240.90|207,977,609.60|474,548,859.80|444,963,605.26|165,482,576.55|
|10,615,545.45|-80,323,704.62|27,916,818.85|-13,867,162.43|-58,648,256.05|
|—|—|—|—|—|
|—|—|—|—|—|

KonkaGroupCo.,Ltd. AnnualReport2016
||||||
|-|-|-|-|-|
|Closingbalance/ReportingPeriod|||||
|EnraytekOptoelectronicsCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|EnraytekOptoelectronicsCo.,Ltd.|
|10,615,545.45|-80,323,704.62|27,916,818.85|-13,867,162.43|-58,648,256.05|
|—|—|—|—|—|

IX.Theriskrelated financial instruments
IX.Theriskrelated financial instruments
(I)Risk managementobjectives and policies
The goals of Company engaged in the risk management is to achieve the proper balance between the risks and benefits, reduced the negative impact to the Company operating performance risk to a minimum, maximized the profits of shareholders and other equity investors. Based on the risk management goal, the basic strategy of the Company's risk management is determine and analyze the various risks faced by the Company, set up the bottom line of risk and conducted appropriate risk management, and timely supervised various risks in areliable way and controlled the risk withintherange oflimit.
1.Marketrisk
(1)Foreign exchange risk
Foreign exchange risk is referred to the risk incurred due to loss of changes in exchange rate.
Foreign exchange risk refers to the risks that may lead to losses due to fluctuation in
KonkaGroupCo.,Ltd. AnnualReport2016 exchange rate. The foreign exchange risk borne by the Company is related to USD, EURO and HKD, except the procurement and sales by US dollars for several subsidiaries such as the Company, Hong Kong Konka, American Konka, Konka Trading Europe Konka and Indonesia Konka which settled by USD, HKD and EURO for purchase and sale. Until 31 Dec. 2016 (refer to Note VI 56, foreign monetary items), foreign exchange risks may affect thebusiness performance produced bytheassets and liabilities ofthe balance.
The Company timely paid attention to the influence of change of the exchange rate to the Company's foreign exchange risk, which required the Group and others which conducted purchase and sale with settlement by foreign currency to purchase foreign currency long-term forward contract to lock the cost of purchase on forward date to reduce the risk exposure of foreign exchange.
(2)Interest rate risk-cash flowchange risk
Cash flow change risk caused by financial instruments due to interest rate change is related to floating interest rate of bank loan. By establishing good relations with banks and reasonable planning of credit line, credit varieties and credit period, it is to guarantee sufficient band line of credit and satisfy all financial demands. Moreover, it is to reduce risks of interest rate uncertaintybyshortening single loan term and establishing repayment terms.
(3)Other price risk
For the equity investment of other listed companies holding by the Company, the management considers that the market price risks are acceptable. Refer to Note VI, 11 Available-for-sale financial assets for equity investment of other listed companies holding by theCompany.
2.Creditrisk
On 31 Dec. 2016, the biggest credit risk exposure may lead to the financial assets losses of theCompany was mainly from the oneparty fail toperform itsobligation, which included: Book amount recognized in consolidated balance sheet: for financial instruments measured at fair value, the book value reflect its risk exposure, but not the biggest one, the biggest risk exposurewillchange along with thechange of futurefair value.
In order the reduce the credit risk, the Company establish a group response for recognizing line of credit, conducting credit approval and other monitor procedures to ensure that the necessary measures were used to recycle expired claims. In addition, the Company at each balance sheet date, review every single receivables recycling situation, to ensure that the money unable to recycle withdrawn provision for bad debt fully. Thus, the Company
KonkaGroupCo.,Ltd. AnnualReport2016 management believed that have assume the credit risk the Company shouldered had been greatly reduced.
The company's working capital was in bank with higher credit rating, so credit risk of working capital was low.
3.Liquidity Risk
When managing liquidity risk, the Company maintained themanagement’s believe that supervising the sufficient cash and cash equivalents to meet the operating demand of the Company and reduce theinfluence ofthefluctuation of cash flow.
X.Thedisclosureofthefairvalue
1. Closingfairvalueofassets andliabilities calculated by fairvalue
Closingfairvalue
||||
|-|-|-|
|Fairvaluemeasurementitemsatlevel1|Fairvaluemeasurementitemsatlevel2|Fairvaluemeasurementitemsatlevel3|
|212,190,150.00|—|—|
|39,894,844.12|—|—|
|—|—|—|
|55,777,425.00|—|—|
|—|—|—|
|307,862,419.12|—|—|
|337,263.13|—|—|
|337,263.13|—|—|

KonkaGroupCo.,Ltd. AnnualReport2016 Closingfairvalue
||||
|-|-|-|
|Fairvaluemeasurementitemsatlevel1|Fairvaluemeasurementitemsatlevel2|Fairvaluemeasurementitemsatlevel3|
|—|—|—|
|—|—|—|

2. Market price recognition basis for consistent and inconsistent fair value measurementitems atlevel 1
① As of the end of Reporting Period, the Company in line with thedifference 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
② As of the end of Reporting Period, the Company held 13.1550 million shares of Refond stock, and their fair value at the end of the year was determined to be RMB 212,190,150.00according to closing price of RMB 16.13 for each share and held 6.7609 million shares ofVARYand their fair value at the end of the year was determined to be RMB 55,777,425.00according toclosing priceof RMB8.25for each share on31Dec. 2016.
XI. Related party andrelatedTransaction
1.Information ofparentcompany
|||||
|-|-|-|-|
|Registrationplace|Natureofbusiness|Registeredcapital|ProportionofshareheldbyparentcompanyagainsttheCompany(%)|
|Shenzhen|Tourism,realestate,electronicsindustry|11.3billion|29.99|

Note: the final control party of the Company is State-owned Assets Supervision and AdministrationCommission
2.Information ofsubsidiary oftheCompany
Details ofinformation ofsubsidiary oftheCompany see note1.Equity insubsidiaryVIII
KonkaGroupCo.,Ltd. AnnualReport2016 3.Information onthe jointventures oftheCompany
See Note VIII 2: Rights and Interests in Joint Venture for our major joint ventures. Our transactions with affiliated party, and the introductions of other cooperative enterprise and associated enterprises with balance in these transactions in the earlier stage are as shown below:
Introduction ofour associated enterprises
Name of cooperative enterprise or associated
Relationshipwithus
enterprise
ShenzhenKonkaInformationNetworkCo.,Ltd. Associatedenterprise
Shenzhen Konka Intelligent Electrical Apparatus
Associatedenterprise
Co.,Ltd.
AnhuiKonkaGreenLightingTechnologyCo.,Ltd.
Associatedenterprise
ShenzhenZhongbingKonkaTechnologyCo.,Ltd.
Associatedenterprise
Shenzhen Konka Precision Mould Manufactory
Associatedenterprise
Co.,Ltd.
DongguanKonkaMouldPlasticCo.,Ltd.
Associatedenterprise
DongguanXutongdaMouldPlasticCo.,Ltd.
Associatedenterprise
KunshanJielunteMouldPlasticCo.,Ltd.
Associatedenterprise
ChuzhouJielunteMouldPlasticCo.,Ltd.
Associatedenterprise
DongguanJielunteMouldPlasticCo.,Ltd.
Associatedenterprise
AnhuiJiasenPrecisionTechnologyCo.,Ltd.
Associatedenterprise
4.Information onotherrelated parties oftheCompany
Nameofotheraffiliatedparty Relationshipwithus
ShenzhenOCTEastCo.,Ltd. Sameactualcontrolparty
ShanghaiTianxiangOCTInvestmentCo.,Ltd. Sameactualcontrolparty
AnhuiHualiPackingCo.,Ltd. Sameactualcontrolparty
ShenzhenOCTHydroelectricCo.,Ltd. Sameactualcontrolparty
ShanghaiHualiPackagingCo.,Ltd. Sameactualcontrolparty
ShenzhenHualiPackingTradeCo.,Ltd. Sameactualcontrolparty
KonkaGroupCo.,Ltd. AnnualReport2016 HualiPacking(Huizhou)Co.,Ltd. Sameactualcontrolparty
Suzhou Huali Environmental Protection Packaging
Sameactualcontrolparty
TechnologyCo.,Ltd.
ShenzhenKonkaVideo&CommunicationSystems
Sameactualcontrolparty
EngineeringCo.,Ltd.
TaizhouOCTCo.,Ltd. Sameactualcontrolparty
ShenzhenOCTRealEstateCo.,Ltd. Sameactualcontrolparty
ShenzhenOCTGrandHotelCo.,Ltd. Sameactualcontrolparty
ShenzhenOCTPropertyServicesCo.,Ltd. Sameactualcontrolparty
ShenzhenSplendidChinaDevelopmentCo.,Ltd. Cooperativeenterpriseofparentcompany
Asset Management Branch of Shenzhen OCT Co.,
Sameactualcontrolparty
Ltd.
ShenzhenOCTHakeCultureCo.,Ltd. Sameactualcontrolparty
Shenzhen OCT Fire Installation Engineering Co.,
Sameactualcontrolparty
Ltd.
ShenzhenOCTHydroelectricCo.,Ltd. Sameactualcontrolparty
ShenzhenOCTXinqiaoTechnologyCo.,Ltd. Sameactualcontrolparty
ShenzhenOCTGasStationCo.,Ltd. Sameactualcontrolparty
WindowoftheWorld(Shenzhen)Co.,Ltd. Cooperativeenterpriseofparentcompany
ChangrongMediaCo.,Ltd. Shareholderofsubsidiary
GuoguangEasternNetwork(Beijing)Co.,Ltd. Shareholderofsubsidiary
Jiangxi Youshi Xinrong Culture Communication
Shareholderofsubsidiary
Co.,Ltd.
ChuzhouTongchuangConstructionInvestment Co.,
Shareholderofsubsidiary
Ltd.
ChinaUnimemLimited Shareholderholdingcompanyofsubsidiary
ShenzhenTelenScience&TechnologyCo.,Ltd. Jointstockcompanyofsubsidiary
ChainKingdomCo.,Limited Shareholderholdingcompanyofsubsidiary
5.Listof related-party transactions
KonkaGroupCo.,Ltd. AnnualReport2016 (1) Information on acquisition of goods and reception of labor service (unit: ten thousand Yuan)
①Information onacquisition ofgoods and reception oflabor service
|||
|-|-|
|Affiliatetransactions|Amountofthisyear|
|Materialpurchase|127,562,591.69|
|Materialpurchase|119,612,407.06|
|Goodspurchase|62,535,296.91|
|Materialpurchase|40,158,154.04|
|Packingmaterialpurchase|34,059,064.17|
|Materialpurchase|32,551,963.73|
|Materialpurchase/other|26,236,012.58|
|Materialpurchase|10,305,601.84|
|Materialpurchase|10,138,758.36|
|Materialpurchase|7,182,917.07|
|Materialpurchase|7,128,053.56|
|Commoditypurchase|7,106,561.18|
|Servicefeeofproject|5,000,000.00|
|Utilities|2,957,248.80|
|Materialpurchase|2,709,758.21|
|Servicefee|1,839,168.52|
|Propertyservicefee|1,047,767.59|
|Advertisingfee|775,587.00|
|Materialpurchase|470,000.00|
|Materialpurchase|300,000.00|
|Materialpurchase|155,760.53|
|Servicecharges|65,218.21|

②Information of sales ofgoods and provision of laborservice
|||
|-|-|
|Affiliatetransactions|Amountofthisyear|

KonkaGroupCo.,Ltd. AnnualReport2016
|||
|-|-|
|Affiliatetransactions|Amountofthisyear|
|Commoditysales|C|
|Commoditysales|31,210,383.27|
|Rental service fee, Materialsales|11,634,559.42|
|Advertisingfee|11,320,754.76|
|Service charges andcommoditysales|10,612,812.99|
|Commoditysales|11,057,874.12|
|Rentalservicefee|7,870,164.19|
|Service fee, commoditysales|6,331,604.53|
|Technical service fee,materialsales|3,972,740.29|
|Displayscreensales|2,325,328.21|
|Maintenanceservice|1,029,514.56|
|Displayscreensales|948,717.95|
|Displayscreensales|377,606.84|
|Displayscreensales|305,665.81|
|Displayscreensales|300,256.41|
|Maintenanceservice|294,290.63|
|Maintenanceservice|282,200.68|
|Maintenanceservice|256,410.26|
|Maintenanceservice|206,192.16|
|Maintenanceservice|167,475.73|
|Maintenanceservice|153,721.68|
|Maintenanceservice|106,796.12|
|Maintenanceservice|100,948.71|
|Commoditysales|73,076.92|
|Commoditysales|56,365.06|

KonkaGroupCo.,Ltd. AnnualReport2016
|||
|-|-|
|Affiliatetransactions|Amountofthisyear|
|Displayscreensales|24,271.84|
|Displayscreensales|21,794.87|
|Maintenanceservice|21,359.22|
|Displayscreensales|10,148.00|
|Maintenanceservice|7,604.75|
|Maintenanceservice|4,700.85|
|Displayscreensales|4,273.50|
|Maintenanceservice|3,584.91|
|Maintenanceservice|—|

(2)Related-party guarantee
①TheCompany was guarantor:
|||
|-|-|
|Typeofleasingasset|Rentalfeeconfirmedinthisyear|
|Officebuilding|589,831.55|
|Commercialresidentialbuilding|455,520.00|

(3)Rewards for thekey management personnel
||||
|-|-|-|
|Lendingamount|Startingdate|Expirydate|
|1,600,000,000.00|2016-4-15|2017-1-10|
|900,000,000.00|2016-6-21|2017-3-18|
|900,000,000.00|2016-10-17|2017-7-14|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Lendingamount|Startingdate|Expirydate|
|30,000,000.00|2016-12-14|2019-12-13|

Note:①TheinterestconfirmedwithOCTGroupCo.,Ltd.isRMB57,269,249.98thisyear.
(4).Affiliated guarantee
Weare the guaranteeherein.
||||||
|-|-|-|-|-|
|Currency|Amountguaranteed(RMB10,000)|Actualamount(RMB10,000)|Startingdate|Expirydate|
|RMB|2,000.00|1,300.00|2016-6-5|2017-6-5|
|RMB|6,000.00|2,400.00|2016-7-1|2017-7-1|
|RMB|10,000.00|647.54|2016-10-26|2017-7-13|
|RMB|2,000.00|153.72|2016-7-1|2017-7-1|
|RMB|50,000.00|18,453.42|2016-9-21|2017-9-21|
|USD|500.00|500.00|2016-10-20|2017-10-20|
|USD|3,500.00|3,500.00|2016-11-7|2017-11-7|

Notes:
①The minority shareholders of Anhui Tongchuang, ChuzhouState-owned Assets Operation Co.,Ltd. provided22%counter-guarantee tothe limit amount ofguarantee of theCompany.② Shenzhen E-display Capital Investment Partnership Business (LLP) provided40% counter-guaranteetothelimitamount ofguarantee of theCompany.
③ The subsidiary Hong Kong Konka Co., Ltd. provides the counter guarantee of building property mortgage (USD40million)to thesubsidiary ChainKingdom Co.,Limited.
④ The counter guarantee of Zhongkang Supply Chain Management Co., Ltd. expires when
all debts of Zhongkang Supply Chain Management Co., Ltd. are taken as the building
property mortgage of Hong Kong Konka Co., Ltd. or the third party is specified to take
KonkaGroupCo.,Ltd. AnnualReport2016 chargeof thebuildingproperty mortgageguarantee andhandle theregistration procedures. 6.Accountsreceivable&accounts payableofaffiliated party
(1).Accounts receivable
||||
|-|-|-|
|Closingbalance|||
|Bookbalance|Provisionforbaddebts|Bookbalance|
|61,566,084.52|1,231,321.69|—|
|22,708,250.40|456,890.30|—|
|16,770,384.94|665,277.05|—|
|16,006,373.88|320,127.48|12,116,064.48|
|7,463,614.12|1,627,495.78|10,963,614.12|
|6,236,403.32|124,728.07|—|
|4,376,574.40|179,174.65|—|
|546,416.80|10,928.34|—|
|378,450.00|18,922.50|—|
|287,956.74|5,759.13|—|
|270,000.00|5,400.00|—|
|132,540.00|2,650.80|—|
|89,733.33|1,794.67|—|
|74,880.00|1,497.60|—|
|51,983.78|1,039.68|—|
|36,442.50|728.85|—|
|35,980.00|719.60|—|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Closingbalance|||
|Bookbalance|Provisionforbaddebts|Bookbalance|
|25,500.00|510.00|—|
|13,500.00|270.00|—|
|6,000.00|120.00|150,000.00|
|3,297.39|65.95|—|
|—|—|775,587.00|
|138,179,908.35|4,831,752.86|24,005,265.60|
|2,473,998.29|—|—|
|800,000.00|—|—|
|3,273,998.29|—|—|
|18,115,952.51|8,387,197.52|18,115,952.51|
|13,396,856.82|13,396,856.82|13,396,856.82|
|1,053,706.86|1,033,907.60|1,053,706.86|
|711,006.26|14,220.13|1,198,932.32|
|—|—|440,000.00|
|145,638.00|7,281.90|—|
|130,540.69|2,610.81||
|80,000.00|80,000.00|80,000.00|
|77,402.65|74,929.10|6,491,248.10|
|50,000.00|1,000.00|—|
|49,640.00|992.8|—|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Closingbalance|||
|Bookbalance|Provisionforbaddebts|Bookbalance|
|49,626.92|992.54|—|
|48,670.70|973.41|—|
|17,940.73|358.81|—|
|5,000.00|100|—|
|4,448.00|889.6|—|
|3,000.00|60|—|
|922.33|18.45|—|
|57,269,249.98|23,002,389.49|40,776,696.61|

 (2)Accounts payable
||
|-|
|Closingbalance|
|26,269,575.11|
|25,145,921.64|
|16,125,245.93|
|13,907,425.83|
|9,543,100.00|
|9,238,833.80|
|3,538,318.14|
|2,375,770.85|
|1,708,908.69|
|1,294,334.74|
|1,262,017.84|
|1,017,067.85|
|829,927.13|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|Closingbalance|
|449,367.83|
|358,929.03|
|321,039.97|
|155,760.53|
|64,824.87|
|61,472.60|
|59,320.00|
|113,727,162.38|
|12,369,348.43|
|3,152,101.04|
|3,104,985.16|
|2,801,506.81|
|2,594,086.07|
|1,193,729.59|
|1,000,000.00|
|925,929.70|
|27,141,686.80|
|23,468,903.76|
|15,642,089.07|
|2,730,000.00|
|232,667.70|
|187,888.00|
|35,299.00|
|4,063.72|
|—|
|42,300,911.25|
|1,187,000.00|
|1,073,975.09|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|Closingbalance|
|1,070,875.91|
|992,890.82|
|807,135.00|
|686,375.00|
|222,000.00|
|145,500.00|
|105,000.00|
|19,440.00|
|10,000.00|
|6,320,191.82|
|43,541.67|
|43,541.67|

XII. Commitments andcontingency
1.Significantcommitments
(1)Capital commitment
||
|-|
|Closingbalance|
|—|
|91,710,250.89|
|—|
|91,710,250.89|

 (2)Operating lease commitments
As of the end of balance sheet date, the irrevocable operating lease commitments that the Company signed were as followed:
Item Closingbalance Openingbalance
KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|20,712,196.63|
|10,195,499.08|
|5,192,714.87|
|1,434,105.28|
|37,534,515.86|

 2.Contingency
1.Contingent liabilities and itsfinancial effect arising from unsettled litigation or arbitration①Contingent liabilities and financial effects causedbypending litigation or arbitration
On 4 Feb. 2013, theCompany’s subsidiary Kunshan Konka signed Purchase Order (Hereinafter referred to as "PO") with Italy customer MOTOM ELECTRONICS GROUP SPA(Hereinafter referred to as the"MEG").
The PO payment was 90 days L/C, L/C amount was$1.29744 million. MEG opened L/C which Kunshan Konka was beneficiary on 26 Feb, due to the problems of delivery time and related items, after the agreement of both parties, MEG respectively opened two revisions of L/C on 11 Mar. and 13 May. Then the Kunshan Konka entrusted Ningbo United International Freight Forwarding Co., Ltd. (Hereinafter referred to as the “Ningbo United”) to book space, and Ningbo United signed and issued the carrier's bill of lading of Econolines Ltd. (Hereinafter referred to as the Econolines (No.NGB1305005\GNB1305016\NGB1305034), the whole case handover with Container delivery conditions of CYTO CY) on 5, 14 and 19 May 2013.According to the verification, after the goods arrived to the port of destination in Italy, the empty cargo container had returned to the shipping company, but the full set of original bill of lading was still in Kunshan Konka; Ningbo United andEconolines’s behaviors of delivery of goods without original bill of lading had violated the "maritime law" and other relevant laws and regulations, Kunshan Konka had right to require Econolines return the goods. The total amount of the goods was$ 1,214,780.04, equivalents RMB 7,507,340.65, MEG received the goods but not pay the full amount of the goods to Kunshan Konka, the amount in arrear reached$1,100,000.00.
Kunshan Konka entrusted Shanghai Jiajia Law firm to file a suit from Shanghai Maritime
Court, requested Ningbo United and Econolines compensate for the loss of payment for
goods USD1,099,423.52 and its interest; meanwhile bear the fees for acceptance and
KonkaGroupCo.,Ltd. AnnualReport2016 property preservation application fee on 15Aug. 2013. On 26 May 2014, Shanghai Maritime Court made the first-instance judgment, which ordered Ningbo United and Econolines compensate for the loss of payment for goods USD1,099,423.52 and its interest, and bear the fees for acceptance and property preservation application fee In Jun. 2014 Ningbo United appealed to the Shanghai Higher People's Court against its sentence. On 24 Nov. 2014, the second trial had been made. During the second trial, the Kunshan Konka indicated that as of 31 May 2015, the company had received EUR100000 payment from the oversea receivers which would be deducted from the payment of goods of United and Econolines. Kunshan Konka were willing to give up the interest part of EUR100000 discounted by bank rate on the date of the second trial basing on USD1,099,423.52 in the first trial. On 16 Jul. 2015, Shanghai Higher People's Court made the second-instance judgment, which ordered Econolines compensate for the loss of payment for goods USD990, 253.50 (discounted by the middle of the euro against the dollar exchange rate of People's Bank of China on 16 Jul. 2015) and bear the fees for acceptance, United bear the joint liability.In the execution stage, Kunshan Konka Electronic Co., Ltd. receives the execution funds of RMB 592,200 (USD 17,475) of Ningbo United Group Co., Ltd. required by Ningbo Marine Court. The credit receivable of Kunshan Konka Electronic Co., Ltd. shall be USD 855,378.57 by Dec. 31, 2016.This case isunder compulsory execution.
② Konka (Nanchang) Co., Ltd. applies for property preservation of Tengda Electric Appliance Co., Ltd. due to the contract disputes in 2015. Nanchang Intermediate People's Court decides to freeze the bank deposit of RMB 9,918,725.43 of Tengda ElectricAppliance Co., Ltd. and close down its 5 house properties. In the follow-up stage, we change the add-on interest of the original sue amount to RMB 595,123.50 based on the actual conditions, which is accepted by the court. However,Tengda ElectricAppliance Co., Ltd. is unsatisfied with the judgment result and appeals to Jiangxi Superior People's Court. The court hears, judges the case and affirms the original judgment on Feb. 29, 2016. Konka (Nanchang) Co., Ltd. shall be entitled to collect the credit of RMB 8,223,935.99 from Tengda Electric Appliance Co., Ltd. byDec. 31,2016.
Konka (Nanchang) Co., Ltd. has received the notice that Xinyu Intermediate Court accepts and hears the bankruptcy liquidation case of Tengda Electric Appliance Co., Ltd. and designated the management personnel to take charge of its bankruptcy liquidation on Mar. 1, 2016.The branch receives the notice that the court suspends to hear the case, and submits the creditor's rights declaring information to the management personnel. Tengda Electric Appliance Co.,Ltd. is under thebankruptcy liquidation.
KonkaGroupCo.,Ltd. AnnualReport2016 (2) Possible liabilities formed for providing debt guarantee for other institutions and their financial impacts
① The company sign the guarantee contract (No. 0133-CZZHZGBZ2016) with Urban Branch of Chuzhou Wandong Rural Commercial Bank on 5 Jun. 2016, providing credit guarantee of RMB 20 million toAnhui Tongchuang International Trade Co., Ltd. from 5 Jun. 2016 to 5 Jun. 2017. 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 reached RMB 10,500,000.00 by 31 Dec. 2016. The minority shareholder of Anhui Tongchuang International Trade Co., Ltd. --- Chuzhou Tongchuang Investment Construction Co., Ltd. provides50% of counter guaranteeto theamount.
② The company sign the guarantee contract (No. 16czA0030-a-XCYZBZD2016) with Chuzhou Branch of China Citic Bank on 1 Jul. 2016, providing credit guarantee of RMB 60 million to Anhui Tongchuang International Trade Co., Ltd. from1 Jul. 2016 to 1 Jul. 2017. 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 reached RMB 24,000,000.00 by 31 Dec. 2016. The minority shareholder of Anhui Tongchuang International Trade Co., Ltd. --- Chuzhou Tongchuang Investment Construction Co., Ltd. provides50% of counter guarantee to the amount.
③The company sign the guarantee contract with Chuzhou Branch of Bank of China on 26 Oct. 2016, providing credit guarantee of RMB 0.1 billion toAnhui Tongchuang International Trade Co., Ltd. from 26 Oct. 2016 to 13 Jul. 2017.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 reached RMB 52,965,000.00 by 31 Dec. 2016. The minority shareholder of Anhui Tongchuang International Trade Co., Ltd. --- Chuzhou State-owned Assets Operation Co., Ltd. provides22%ofcounter guarantee tothe amount.
④The company apply for the general credit limit of RMB 6 billion from Futian Branch of Bank of China on 21 Sept. 2016 by taking the bank acceptance of RMB 1.3 billion as the pledge guarantee. We provide the general credit limit of RMB 0.5 billion to Communication Technology Co., Ltd. on 21 Sept. 2016, and this company shall bear the related liability for satisfaction. The guarantee period is 21 Sept. 2016 to 21 Sept. 2017, and the amount is used by the company to obtain the financing credit and other daily operation businesses from the
KonkaGroupCo.,Ltd. AnnualReport2016 bank.The amount has reached RMB184,534,227.73by31Dec. 2016.
⑤The company apply to Shenzhen Branch of China Minsheng Banking Corp . Ltd. for issuing the letter of guarantee of USD 5 million on 20 Oct. 2016 for Hong Kong Konka Co., Ltd. to obtain the financing loan from the bank. The guarantee period is 20 Oct. 2016 to 20 Oct. 2017. Hong Kong Konka Co., Ltd. has obtained the short-term loan of USD 5 million from Bank of China(Hong Kong) Co., Ltd. byDec. 31,2016.
⑥ The company sign the guarantee contract (No. 07308BY20168072) with Longhua Sub-branch of Shenzhen Branch of Bank of Ningbo on Jul. 1, 2016, providing credit guarantee of RMB 20 million to Konka Yishijie Co., Ltd. from Jul. 1, 2016 to Jul. 1, 2017. The credit line is mainly used to open and accept the letter of credit of Konka Yishijie Co., Ltd. and obtain the financing credit and other daily businesses from the bank. The guarantee amount has reached RMB 1,537,231.19 by Dec. 31, 2016. The minority shareholder of Konka Yishijie Co., Ltd. -- Shenzhen Konka Yiziben Investment Partnership Co., Ltd. provides40%of counter guarantee totheamount.
⑦ The Company apply to Shenzhen Branch of China Minsheng Banking Corp . Ltd. for issuing the letter of guarantee of USD 35 million on Nov.7, 2016 for Hong Kong Konka Co., Ltd. to obtain the financing loan from the bank. The guarantee period is Nov. 7, 2016~ Nov. 7, 2017. Hong Kong Konka Co., Ltd. has obtained the short-term loan of USD 35 million from Bank of China(Hong Kong) Co., Ltd. by31Dec. 2016.
XIV.Events afterbalancesheet date
1.Profitdistribution
On 29 Mar. 2017, the Company held 28th Meeting of the 8th Board of Directors; the meeting reviewed and approved the proposal ofnot implementing theallocation ofprofits.
(2)Significant related-party transactions
Our board of directors holds 25th meeting of 8th board of directors on Feb. 16, 2017 (Thursday), and passes Bill on Providing Entrusted Loan to VARYTech. We are intended to provide Hunan VARY Tech Co., Ltd. (hereinafter referred to as “VARY Tech”) with the entrusted loan of no more than RMB 50 million. The corresponding rate shall be15% higher than 1-year benchmark interest rate for loan (RMB) of the current financial institutions released by People's Bank of China. The entrusted loan is mainly used in the daily operation ofVARYTech.
3.Bill onestablishingnew factory in Dongguan City
The board of directors holds 26th meeting of 8th board of directors on Mar. 10, 2017 (Friday)
KonkaGroupCo.,Ltd. AnnualReport2016 and passes Bill on Establishing New Factory in Dongguan City. We are intended to promote the three old transformations of Dongguan Konka Plant, and self-raise RMB 0.8 billion to establish new factory (including color TVR&D building, main production plant, logistics and distribution warehouse and matched staff quarters) in Wulian Village, Fenggang Town, Dongguan City by taking our company (or wholly-owned subsidiary) for theR&D, production and sales of color TV and other electronic products under the negotiation with Dongguan Municipal Government.
XV.Othersignificantevents
1.Lease
(1) The closing original price accumulated depreciation and accumulated impairment provisionof all kindsof therented fixed assets.
Particulars of thefinancing lease of therented fixed assets, please refer to noteVI, 14,(4) (2)Minimumlease payment willbepaid infuture
Theremainingleaseterm Theminimumleasepayment Within1year(including1year) 41,025.60 Over1yearandwithin2years(including2year) 102,564.14 Total 143,589.74 (3)Item of fixed assets leased byoperating lease, please refer to noteVI, 13(4)
2.Oursubsidiary Mudanjiang Konka Co., Ltd. is under liquidation.
3.OursubsidiaryChongqingQingjiaElectronicCo.,Ltd.isunderliquidation.
4. In order to meet the requirements of our current business development and reduce the financing cost, we hold 12th meeting of 8th board of directors on Mar. 2, 2016, pass Bill on Applying OCT Group Co., Ltd. for entrusted loan amount, and agree the company to apply OCTGroup Co., Ltd. for the entrusted loan of no more than RMB 5 billion in 2016.The loan shall be extracted on the frequency and time frame basis of business needs in use. We shall be entitled to sign the entrusted loan contract (limit of no more than RMB 5 billion) with the bank and OCT Group Co., Ltd. According to the requirements of the bill, the interest rate of entrusted loan shall be no more than the benchmark interest rate for loan in the same period of People's Bank of China. In such transaction, we shall pay OCT Group Co., Ltd. with the interest of no more than RMB 0.2 billion, and will carefully determine the actual loan limit basedontheactual fund demand after reasonably measuring thecapital cost.
5. We hold 18th meeting of 8th board of directors on Jun. 15, 2016, decide to invest RMB 1.05
KonkaGroupCo.,Ltd. AnnualReport2016 million (share:35%) and establish the joint venture with Union Voole Technology Co., Ltd. Konka Group Co., Ltd. (investment: RMB 1.95 million, share:65%).The joint venture has not beenestablishedbythedateofissuingthefinancialstatement.
6. Considering the needs of development strategy, our board of directors holds 24th meeting of 8th board of director on Dec. 29, 2016 (Thursday) after the sufficient investigation and argument, passes Bill on Investing and Establishing Konka Scientific Innovation Center in Chuzhou City, plans to establish the wholly-owned subsidiary --- Chuzhou Konka Scientific Industry Development Co., Ltd., self-raise RMB 0.45 billion to invest and establish Konka Scientific Innovation Center (includingR&D technology building, e-commerce and transaction exhibition and experience center and matched commercial facilities) in Chuzhou Economic Development Zone for developing and researching e-commerce platform and otherbusinesses.
7. We and Wenjin Sub-branch of Shenzhen Branch of Shanghai Pudong Development Bank Co., Ltd. apply for the credit line of no more than RMB 0.5 billion under the agreement in May 2016. The credit line expires in May 2017. The comprehensive credit line has not been used byDec. 31,2016.
8. We and Shenzhen Civic Center Branch of China Citic Bank sign Comprehensive Credit Line Contract (No. 0005-SYQHZZ2015) on May 28, 2015, with the credit line of RMB 0.4 billion. The businesses cover loan, bill bearing, bill discounting, LC issuing, packing credit, import documentary credit, export documentary credit and letter of undertaking issuing. The credit period is May 28, 2015~ Apr. 15, 2017. The comprehensive credit line has not been used byDec. 31,2016.
9. We sign Credit Line Contract (No. J2016Z15608HQC) with Shenzhen Branch of China Construction Bank Corporation on Jun. 14, 2016. The total amount of credit line specified in the contract shall be no more than RMB 3.57 billion and the period Jun.14, 2016~ Jun.13, 2019. RMB 642,586,588.97 has been used, and RMB 4,927,413,411.03 has not by Dec. 31, 2016. In addition, we apply Shenzhen Branch of CCB for the low risk credit line of no more thanRMB2billion.Thiscredit linehas not been usedbyDec. 31,2016.
10. We sign Comprehensive Credit Line Contract (No.018-2016NSJTZEZ) with China Minsheng Banking Corp., Ltd. onAug. 11, 2016, and apply for the credit amount of no more than RMB 0.5 billion. The businesses cover RMB business, trade financing business, import& export documentary credit, import paying service, delivery guarantee and packing loan.As the debtor and the bearer of bill, Party A provides bill discount (pledge) service to Party B. The duration of contract shall be Aug. 11, 2016~ Aug. 11, 2017. RMB 268,000,000.00 has
KonkaGroupCo.,Ltd. AnnualReport2016 been usedand RMB 232,000,000.00hasnot byDec. 31,2016.
11. We sign Comprehensive Credit Line Contract (No. CN11002068781-160823) with Shenzhen Branch of HSBC Bank (China) Company Limited on Sep. 12, 2016 and apply for the non-affirmatory combined revolving credit of no more than USD 150,000 million (deadline: Sep. 12,2017).Thecredit amount has not been usedbyDec. 31,2016.
12. We sign Credit Line Agreement (No. 0000719-2016ZZYFEX) with Futian Sub-branch of Shenzhen Branch of Bank of China. We and Konka Communication Science and Technology Co., Ltd. will provide the pledge guarantee for obtaining the comprehensive credit line of no more than RMB 6 billion by means of the bank acceptance of no less than RMB 1.3 billion. We are the credit grantee, Konka Communication Science and Technology Co., Ltd. the withdrawer, and the credit expires on Sep. 21, 2017. RMB 2,278,642,350.78 has been used and RMB3,721,357,649.22has notbyDec. 31,2016.
13. We apply for the credit line of no more than RMB 2.2 billion under the negotiation with Shenzhen OCT Branch of Industrial and Commercial Bank of China on Sep. 30, 2016. The credit expires on Sep. 30, 2017. RMB 2,038,477,300.00 has been used and RMB 161,522,700.00has not byDec. 31,2016.
14.We sign Credit LineAgreement (No.A596201609260001-PY(SZ)ZZ) with Sales Dept. of Head Office of Ping An Bank Co., Ltd. on Oct. 12, 2016, and apply for the credit line of no more than RMB 0.4 billion. The businesses cover working capital loans, bank acceptance issuing, import credit issuing, domestic letter of credit issuing, import& export documentary credit, import& export paying service and financing letter of guarantee issuing. The credit expires onOct. 12,2017.Thecomprehensive credit linehas notbeen usedbyDec. 31,2016. XVI. Notes ofmain items in thefinancial statements ofthe Company
1.Accounts receivable
(1)Accounts receivableclassified byItem
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Proportion(%)|
|—|—|—|—|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|1,457,500,829.10|43.04|204,973,829.53|14.06|
|1,859,065,149.92|54.89|—|—|
|3,316,565,979.02|97.93|204,973,829.53|6.18|
|70,065,431.01|2.07|36,128,381.15|51.56|
|3,386,631,410.03|100.00|241,102,210.68|7.12|

(Continued)
Openingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Proportion(%)|
|—|—|—|—|
|1,126,362,276.00|68.50|202,746,563.72|18.00|
|486,174,280.87|29.56|—|—|
|1,612,536,556.87|98.06|202,746,563.72|12.57|
|31,826,201.74|1.94|23,700,918.33|74.47|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|1,644,362,758.61|100.00|226,447,482.05|13.77|

①In the groups, accounts receivable adopting aging analysis method to withdraw bad debt provision:
Closingbalance
|||
|-|-|
|Accountreceivable|Baddebtprovision|
|1,272,579,360.67|25,451,587.21|
|263,411.99|13,170.60|
|5,554,748.69|1,110,949.74|
|726,749.50|363,374.75|
|683,622.04|341,811.02|
|177,692,936.21|177,692,936.21|
|1,457,500,829.10|204,973,829.53|

②In thegroups,accounts receivable adopting other methodsto withdraw baddebt provision: Balanceatyear-end
|||
|-|-|
|Accountreceivable|Baddebtprovision|
|1,859,065,149.92|—|
|1,859,065,149.92|—|

③ Accounts receivable with insignificant single amount for which bad debt provision separately accrued
Closingbalance
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion|
|18,320,000.00|5,496,000.00|30.00%|
|8,223,935.99|4,111,968.00|50.00%|
|8,687,907.70|3,040,767.70|35.00%|
|2,134,966.00|683,189.12|32.00%|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|2,050,248.88|2,050,248.88|100.00%|
|39,417,058.57|15,382,173.70|—|

(2)Baddebt provision withdrawal, reversed orrecovered in theReporting Period
Bad debt reserve of RMB 14,654,728.63 is accrued this year, and there was no provision for bad debts withdrawing orreversing.
(3)Top fiveofaccount receivable ofclosing balance collected byarrears party
The total amount of top five of account receivable of closing balance collected by arrears party was RMB 1,195,773,194.39,35.31% of total closing balance of account receivable, the relevant closing balance of bad debt provision withdrawn was RMB 15,000,078.77.
2.Otheraccounts receivable
(1)Other account receivable classified byItem
Closingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Proportion(%)|
|173,061,959.33|9.04|163,333,204.34|94.38|
|126,005,125.10|6.58|22,703,322.23|18.02|
|1,607,493,721.89|84.00|—|—|
|1,733,498,846.99|90.59|22,703,322.23|1.31|
|7,101,401.90|0.37|2,131,520.57|30.02|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|1,913,662,208.22|100.00|188,168,047.14|9.83|

(Continued)
Openingbalance
|||||
|-|-|-|-|
|Bookbalance||Baddebtprovision||
|Amount|Proportion(%)|Amount|Proportion(%)|
|173,028,147.62|15.48|160,278,852.98|92.63|
|—|—|—|—|
|75,906,726.27|6.79|19,005,412.74|25.04|
|868,797,189.91|77.73|—|—|
|944,703,916.18|84.52|19,005,412.74|2.01|
|—|—|—|—|
|1,117,732,063.80|100.00|179,284,265.72|16.04|

① Other accounts receivable with insignificant single amount for which bad debt provision separately accrued
Closingbalance
||||
|-|-|-|
|Otheraccountsreceivable|Baddebtprovision|Withdrawalproportion(%)|

KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|141,549,150.00|141,549,150.00|100.00%|
|13,396,856.82|13,396,856.82|100.00%|
|18,115,952.51|8,387,197.52|46.30%|
|173,061,959.33|163,333,204.34|—|

②In the groups, other accounts receivable adopting aging analysis method to withdraw bad debt provision:
Closingbalance
|||
|-|-|
|Otheraccountsreceivable|Baddebtprovision|
|63,357,765.50|1,267,155.31|
|24,801,592.53|1,240,079.63|
|19,043,055.07|3,808,611.01|
|645,459.21|322,729.60|
|4,185,012.22|2,092,506.11|
|13,972,240.57|13,972,240.57|
|126,005,125.10|22,703,322.23|

③In thegroups,accounts receivable adopting other methodsto withdraw baddebt provision: Balanceatyear-end
|||
|-|-|
|Otheraccountsreceivable|Baddebtprovision|
|1,607,493,721.89|—|
|1,607,493,721.89|—|

(2)Baddebt provision withdrawal, reversed orrecovered in theReporting Period
Bad debt reserve of RMB 14,654,728.63 is accrued this year, and there was no provision for bad debts withdrawing orreversing.
(3)Top 5oftheclosing balance ofthe otheraccounts receivable collected according to the arrears party
|||||
|-|-|-|-|
|Nature|Closingbalance|Aging|ProportionofthetotalClosingbalanceofthe|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
||||accountsreceivable(%)|
|Intercoursefunds|385,607,911.07|Within1year,1-2years|20.15|
|Intercoursefunds|342,272,133.15|Within1year|17.89|
|Intercoursefunds|310,338,258.22|Within1year|16.22|
|Intercoursefunds|154,462,602.42|Within1yearyear,1-2years|8.07|
|Intercoursefunds|141,549,150.00|2-3years,3-4years|7.40|
|Energysubsidies|1,334,230,054.86||69.73|

KonkaGroupCo.,Ltd. AnnualReport2016 3.Long-term equityinvestment
1.Long-term equity investment
||||||
|-|-|-|-|-|
|Closingbalance|||||
|Bookbalance|Depreciationreserves|Bookvalue|Bookbalance|Depreciationreserves|
|2,217,782,345.01|46,732,484.69|2,171,049,860.32|1,623,726,835.91|77,294,984.69|
|218,079,058.61|5,158,909.06|212,920,149.55|74,763,267.00|—|
|2,435,861,403.62|51,891,393.75|2,383,970,009.87|1,698,490,102.91|77,294,984.69|

 (2)Investment tothe subsidiary
|||||||
|-|-|-|-|-|-|
|Openingbalance|Increased|Decreased|Closingbalance|Withdrawnimpairmentprovision|Closingbalanceofimpairmentprovision|
|36,000,000.00|—|—|36,000,000.00|36,000,000.00|—|
|122,780,937.98|—|—|122,780,937.98|—|—|
|274,783,988.91|—|—|274,783,988.91|—|—|
|781,828.61|—|—|781,828.61|—|—|
|261,482.50|—|—|261,482.50|—|—|
|350,000,000.00|—|—|350,000,000.00|—|—|
|4,655,000.00|—|—|4,655,000.00|—|—|
|10,732,485.69|—|—|10,732,485.69|10,732,484.69|—|
|90,000,000.|—|—|90,000,000.|—|—|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||
|-|-|-|-|-|-|
|Openingbalance|Increased|Decreased|Closingbalance|Withdrawnimpairmentprovision|Closingbalanceofimpairmentprovision|
|00|||00|||
|8,062,500.00|—|8,062,500.00|—|8,062,500.00|-8,062,500.00|
|22,500,000.00|—|22,500,000.00|—|22,500,000.00|-22,500,000.00|
|31,500,000.00|—|—|31,500,000.00|—|—|
|48,750,000.00|—|—|48,750,000.00|—|—|
|350,000,000.00|—|—|350,000,000.00|—|—|
|69,702,612.22|—|—|69,702,612.22|—|—|
|10,000,000.00|—|—|10,000,000.00|—|—|
|10,000,000.00|—|—|10,000,000.00|—|—|
|30,000,000.00|—|—|30,000,000.00|—|—|
|10,000,000.00|—|—|10,000,000.00|—|—|
|7,200,000.00|—|—|7,200,000.00|—|—|
|16,000,000.00|—|—|16,000,000.00|—|—|
|112,000,000.00|588,000,000.00|—|700,000,000.00|—|—|
|2,916,000.00|2,916,000.00|—|5,832,000.00|—|—|
|5,100,000.00|5,100,000.00|—|10,200,000.00|—|—|
|—|20,000,000.00|—|20,000,000.00|—|—|
|—|8,602,009.10|—|8,602,009.10|—|—|

KonkaGroupCo.,Ltd. AnnualReport2016
|||||||
|-|-|-|-|-|-|
|Openingbalance|Increased|Decreased|Closingbalance|Withdrawnimpairmentprovision|Closingbalanceofimpairmentprovision|
|1,623,726,835.91|624,618,009.10|30,562,500.00|2,217,782,345.01|77,294,984.69|-30,562,500.00|

 (3)Investment tojointventures
|||||||
|-|-|-|-|-|-|
|Openingbalance|Increase/decreaseinReportingPeriod|||||
||Additionalinvestment|Negativeinvestment|Investmentprofitandlossrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|Othercomprehensiveincomeadjustment|
|68,250,273.03|—|—|—|14,924,158.22|-54,595.90|
|6,512,993.97|—|—|—|925,653.53|—|
|—|—|6,000,000.00|—|213,908.63|—|
|—|—|64,416,609.96|—|6,511,739.54|15,616,875.70|
|—|—|20,000,000.00|—|-835,308.22||
|—|5,158,909.06|—|—|7,766,215.74||
|74,763,267.00|5,158,909.06|90,416,609.96|—|29,506,367.44|15,562,279.80|

 (Continued)
|||||
|-|-|-|-|
|Increase/decreaseinReportingPeriod|||Closingbalance|
|Declarationofcash|Withdrawn|Other||

KonkaGroupCo.,Ltd. AnnualReport2016
|||||
|-|-|-|-|
|dividendsorprofits|impairmentprovision|||
|—|—|—|85,791,460.70|
|—|—|—|7,438,647.50|
|—|—|—|6,213,908.63|
|—|—|—|86,545,225.20|
|—|—|—|19,164,691.78|
|—|5,158,909.06|—|12,925,124.80|
|—|5,158,909.06|—|218,079,058.61|

 4.RevenueandCost ofSales
1.Revenueand Costof Sales
||||
|-|-|-|
|ReportingPeriod|||
|Revenue|Operatingcosts|Revenue|
|9,485,317,569.09|8,071,296,885.38|10,542,892,396.23|
|4,486,773,135.24|4,265,519,555.16|5,256,503,986.27|
|13,972,090,704.33|12,336,816,440.54|15,799,396,382.50|

 (2)Main operations (Classified byindustry)
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|9,485,317,569.09|8,071,296,885.38|10,542,892,396.23|
|9,485,317,569.09|8,071,296,885.38|10,542,892,396.23|

(3)Main operations (Classified byproduct)
Product ReportingPeriod Lastperiod
KonkaGroupCo.,Ltd. AnnualReport2016
||||
|-|-|-|
|Operationrevenue|Operationcost|Operationrevenue|
|9,094,696,771.30|7,721,798,476.74|10,063,529,629.38|
|316,518,116.07|278,936,549.04|405,363,485.13|
|74,102,681.72|70,561,859.60|73,999,281.72|
|9,485,317,569.09|8,071,296,885.38|10,542,892,396.23|

(4)Main operations (Classified byarea)
||||
|-|-|-|
|ReportingPeriod|||
|Operationrevenue|Operationcost|Operationrevenue|
|8,224,659,030.55|6,858,384,323.24|9,247,233,574.48|
|1,260,658,538.54|1,212,912,562.14|1,295,658,821.75|
|9,485,317,569.09|8,071,296,885.38|10,542,892,396.23|

 (5)The revenue of sales from thetopfive customers
||
|-|
|Mainoperationrevenue|
|3,056,753,554.52|
|3,735,430,268.71|

 5.Investmentincome
||
|-|
|Amountofthisyear|
|—|
|29,506,367.44|
|4,298,722.50|
|—|
|21,166,497.78|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|Amountofthisyear|
|1,310,000.00|
|6,970,146.58|
|—|
|83,732,849.00|
|146,984,583.30|

KonkaGroupCo.,Ltd. AnnualReport2016 XVII.Supplementary materials
1.Items andamountsof extraordinarygains andlosses
||
|-|
|Amount|
|242,932,907.65|
|—|
|113,350,808.96|
|—|
|—|
|—|
|70,849,063.30|
|—|
|—|
|—|
|—|
|—|
|—|
|17,953,552.28|
|—|
|707,777.79|

KonkaGroupCo.,Ltd. AnnualReport2016
||
|-|
|—|
|—|
|—|
|22,934,301.50|
|168,175.52|
|468,896,587.00|
|78,609,375.35|
|11,153,834.38|
|379,133,377.27|

Notes: the number“+” among the non-current gains and losses items refers to profits and revenues, while“-”referred to lossesor expenditure.
The recognition of the non-current gains and losses items was executed according to the regulations of No.1 of the Information Disclosure Explanatory Notice of the Companies Public Offering Securities-Non-current Gains and losses (Z-J-H-Announcement[2008] No. 43).
||
|-|
|Theamountofleasedassetsinvolved|
|121,451,535.04|

2.Return onequity (ROE)and earnings per share (EPS)
|||
|-|-|
|WeightedaverageROE(%)||
||BasicEPS|
|3.35|0.0397|
|-10.67|-0.1266|

KonkaGroupCo.,Ltd. AnnualReport2016 Section XII Documents Available for Reference
I. Financial statements with the signatures and seals of the company principal, the principal oftheaccounting work and theprincipal ofthe accounting organ (financial manager);
II. Original oftheAuditor’s Report with the seal of the CPAs firm and the signatures& seals ofthecertified publicaccountants;
III. Texts of all theCompany’s documents ever publicly disclosed in newspapers designated bytheCSRCin theReporting Period and theoriginals ofthe publicannouncements.
IV.Other relevant materials.
TheBoard of Directors Konka Group Co., Ltd. March 30, 2017