KonkaGroupCo.,Ltd. InterimReport2018 KONKA GROUP CO., LTD.
INTERIM REPORT 2018
2018-65
August 2018
KonkaGroupCo.,Ltd. InterimReport2018 Part I Important Notes, Table of Contents and Definitions The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior management of Konka Group Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of this Report and its summary, and shall be jointly and severally liable for any misrepresentations, misleading statements ormaterial omissions therein.
Liu Fengxi, theCompany’s legal representative, Li Chunlei, theCompany’s Chief Financial Officer (CFO), and Feng Junxiu, head of theCompany’s financial department (equivalent to financial manager) hereby guarantee that the Financial Statements carried in this Report are factual, accurate andcomplete.
All theCompany’s directors have attended the Board meeting for the review of this Report andits summary.
Any plans forthe future or other forward-looking statements mentioned in this Report and its summary shall NOT be considered as absolute promises of the Company to investors. Therefore, investors arereminded to exercisecautionwhen making investmentdecisions. TheCompany hasno interimdividend plan,eitherinthe formofcash orstock.
This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shallprevail.
KonkaGroupCo.,Ltd. InterimReport2018 Table of Contents
Interim Report 2018...........................................................................................................................1 Part I Important Notes,Table ofContents and Definitions...........................................................2 Part II Corporate Information and Key Financial Information...................................................7 Part III Business Summary.............................................................................................................10 Part IVOperating Performance DiscussionandAnalysis............................................................13 PartVSignificantEvents.................................................................................................................28 PartVI ShareChangesand ShareholderInformation.................................................................45 PartVII Preferred Shares................................................................................................................50 PartVIII Directors, Supervisors andSeniorManagement..........................................................51 Part IXCorporate Bonds.................................................................................................................52 Part XFinancialStatements............................................................................................................53 Part XI DocumentsAvailableforReference................................................................................266
KonkaGroupCo.,Ltd. InterimReport2018 Definitions
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|Term|Definition|
|The “Company”,the “Group”, “KonkaGroup”or “we”|Konka Group Co., Ltd. and its consolidated subsidiaries, except where thecontextotherwiserequires|
|TelecommunicationTechnology|ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd.|
|KonkaElectricalAppliances|ShenzhenKonkaElectricalAppliancesCo.,Ltd.|
|PlasticProducts|ShenzhenKonkaPlasticProductsCo.,Ltd.|
|ElectricalAppliances|ShenzhenKonkaElectricalAppliancesCo.,Ltd.|
|FittingsTechnology|ShenzhenKonkaElectronicFittingsTechnologyCo.,Ltd.|
|MudanjiangAppliances|MudanjiangArcticOceanAppliancesCo.,Ltd.|
|ChongqingQingjia|ChongqingQingjiaElectronicsCo.,Ltd.|
|AnhuiKonka|AnhuiKonkaElectronicCo.,Ltd.|
|DongguanKonka|DongguanKonkaElectronicCo.,Ltd.|
|DongguanPacking|DongguanKonkaPackingMaterialsCo.,Ltd.|
|BoluoKonka|BoluoKonkaPCBCo.,Ltd.|
|BoluoKonkaPrecision|BoluoKonkaPrecisionTechnologyCo.,Ltd.|
|HongKongKonka|HongKongKonkaCo.,Ltd.|
|KonkaElectricalAppliancesInvestment|KonkaElectricalAppliancesInvestment&DevelopmentCo.,Ltd.|
|KonkaElectricalAppliancesInternationalTrading|KonkaElectricalAppliancesInternationalTradingCo.,Ltd.|
|KonkaEurope|Konka(Europe)Co.,Ltd.|
|KonkaFactoring|KonkaFactoring(Shenzhen)Co.,Ltd.|
|Wankaida|ShenzhenWankaidaScienceandTechnologyCo.,Ltd.|
|KunshanKangsheng|KunshanKangshengInvestmentDevelopmentCo.,Ltd.|
|AnhuiTongchuang|AnhuiKonkaTongchuangElectricalAppliancesCo.,Ltd.|
|ShushidaLogistics|ShenzhenShushidaLogisticsServiceCo.,Ltd.|
|BeijingKonkaElectronic|BeijingKonkaElectronicCo.,Ltd.|
|KonkaE-display|ShenzhenKonkaE-displayCo.,Ltd.|
|E-displayService|ShenzhenE-displayServiceCo.,Ltd.|
|XiamenDalong|XiamenDalongTradingCo.,Ltd.|
|YoushiKangrong|YoushiKangrongCultureCommunicationCo.,Ltd.|
|KonkaSmartTech|KonkaSmartTechLimited|
|KaikaiShijie|AnhuiKaikaiShijieE-commerceCo.,Ltd.|
|E2info|ShenzhenE2infoNetworkTechnologyCo.,Ltd.|
|MobileInterconnection|ShenzhenKonkaMobileInterconnectionTechnologyCo.,Ltd.|

KonkaGroupCo.,Ltd. InterimReport2018
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|CommercialSystemTechnology|ShenzhenKonkaCommercialSystemTechnologyCo.,Ltd.|
|ChainKingdom|ChainKingdomCo.,Limited|
|KangqiaoEasyChain|ShenzhenKangqiaoEasyChainTechnologyCo.,Ltd.|
|E3info|E3info(Hainan)TechnologyCo.,Ltd.|
|ChuzhouKonkaTID|ChuzhouKonkaTechnology&IndustryDevelopmentCo.,Ltd.|
|KonkaVentures|KonkaVenturesDevelopment(Shenzhen)Co.,Ltd.|
|KonkaPengrun|ShenzhenKonkaPengrunTechnology&IndustryCo.,Ltd.|
|KonkaUnifortune|ShenzhenKonkaUnifortuneSupplyChainManagementCo.,Ltd.|
|KonkaInvestment|ShenzhenKonkaInvestmentHoldingCo.,Ltd.|
|KangzhiTrade|AnhuiKangzhiTradeCo.,Ltd.|
|KonkaMaterial|HainanKonkaMaterialTechnologyCo.,Ltd.|
|KonkaLeasing|TianjinKonkaLeasingCo.,Ltd.|
|YantaiKonka|YantaiKonkaHealthcareEnterpriseServiceCo.,Ltd.|
|KonkaCapital|ShenzhenKonkaCapitalEquityInvestmentManagementCo.,Ltd.|
|ChainKingdomShenzhen|ChainKingdom(Shenzhen)Co.,Ltd.|
|ElectronicsTechnology|ShenzhenKonkaElectronicsTechnologyCo.,Ltd.|
|SichuanKonka|SichuanKonkaSmartterminalTechnologyCo.,Ltd|
|JiaxinTechnology|JiaxinTechnologyCo.,Ltd.|
|Kangjietong|Kangjietong(HongKong)Limited|
|SichuanKangjiatong|SichuanKangjiatongSupplyChainManagementCo.,Ltd.|
|KonkaHuanjia|KonkaHuanjia(Dalian)EnvironmentalTechnologyCo.,Ltd.|
|ChengduKonka|ChengduKonkaIncubatorManagementCo.,Ltd.|
|YibinKonka|YibinKonkaTechnologyParkOperationCo.,Ltd.|
|KonkaSuiyong|KonkaSuiyongInvestment(Shenzhen)Co.,Ltd.|
|ElectricalApplianceTechnology|AnhuiKonkaElectricalApplianceTechnologyCo.,Ltd.|
|JialiInternational|JialiInternational(HongKong)Limited|
|XingDaHongYe|GuangDongXingDaHongYeElectronicCo.,Ltd.|
|XinfengZhuoqun|ShanghaiXinfengZhuoqunPCBCo.,Ltd.|
|ZeweiKechuang|ZhongshanZeweiKechuangInvestmentManagementCo.,Ltd.|
|EconTechnology|ShandongEconTechnologyCo.,Ltd.|
|BeijingEcon|BeijingEconRunfengTechnologyCo.,Ltd.|
|ShanghaiJiyi|ShanghaiJiyiEnvironmentalTechnologyCo.,Ltd.|
|BinzhouEcon|BinzhouEconZhongkeEnvironmentalTechnologyCo.,Ltd.|
|LairunHoldings|LaizhouLairunHoldingsCo.,Ltd.|

KonkaGroupCo.,Ltd. InterimReport2018
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|EconEnvironmentalEngineering|EconEnvironmentalEngineeringCo.,Ltd.|
|RushanYike|RushanYikeWaterTreatmentCo.,Ltd.|
|BinzhouWeiyijie|BinzhouWeiyijieEnvironmentalTechnologyCo.,Ltd.|
|YantaiChunzhiran|YantaiChunzhiranEnvironmentalTechnologyCo.,Ltd.|
|RushanEcon|RushanEconBeikeTechnologyIncubatorCo.,Ltd.|
|FujianEcon|FujianEconChangrunEnvironmentalProtectionCo.,Ltd.|
|LairunHuayang|LaizhouLairunHuayangHeatingCo.,Ltd.|
|LairunHeating|LaizhouLairunHeatingCo.,Ltd.|
|LairunGreenEnergy|LaizhouLairunGreenEnergyCo.,Ltd.|
|BeihaiJingmai|BinzhouBeihaiJingmaiIndustrialDevelopmentCo.,Ltd.|
|HuanhaiXinze|YantaiHuanhaiXinzeEnterpriseManagementCo.,Ltd.|
|BinzhouWeinengda|BinzhouWeinengdaTransportCo.,Ltd.|
|BinhaiSewageTreatment|LaizhouBinhaiSewageTreatmentCo.,Ltd.|
|LairunEnvironmentalProtection|LaizhouLairunEnvironmentalProtectionCo.,Ltd.|
|CSRC|TheChinaSecuritiesRegulatoryCommission|
|SZSE|TheShenzhenStockExchange|
|CSRCShenzhen|TheShenzhenBureauoftheChinaSecuritiesRegulatoryCommission|
|RMB,RMB’0,000,RMB’00,000,000|ExpressedintheChinesecurrencyofRenminbi,expressedintensofthousandsofRenminbi,expressedinhundredsofmillionsofRenminbi|

KonkaGroupCo.,Ltd. InterimReport2018 Part II Corporate Information and Key Financial Information I Corporate Information
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|Stockname|KonkaGroup-A,KonkaGroup-B|Stockcode|000016,200016|
|Changedstockname(ifany)|N/A|||
|Stockexchangeforstocklisting|ShenzhenStockExchange|||
|CompanynameinChinese|康佳集团股份有限公司|||
|Abbr.(ifany)|康佳集团|||
|CompanynameinEnglish(ifany)|KONKAGROUPCO.,LTD.|||
|Abbr.(ifany)|KONKAGROUP|||
|Legalrepresentative|LiuFengxi|||

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

III Other Information
1.Contact Information of theCompany
Indicate by tick mark whether any change occurred to the registered address, office address and theirzipcodes, website address and email address oftheCompany inthe ReportingPeriod.
□ Applicable√ Not applicable
No change occurred to the said information in the Reporting Period, which can be found in the 2017 Annual Report.
KonkaGroupCo.,Ltd. InterimReport2018 2.Media forInformation Disclosure andPlacewhere thisReport is Kept
Indicate by tick mark whether any change occurred to the information disclosure media and the place for keeping theCompany’s periodic reports inthe ReportingPeriod.
□ Applicable√ Not applicable
The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing theCompany’s periodic reports and the place for keeping such reports did not change in theReporting Period.The said information can befound in the2017Annual Report. IVKey Financial Information
Indicate bytick mark whether there isany retrospectively restated datum inthe tablebelow.
□ Yes√ No
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||H12018|H12017|Change(%)|
|Operatingrevenue(RMB)|17,625,414,769.82|11,405,965,979.43|54.53%|
|Net profit attributable to the listedcompany’sshareholders(RMB)|341,793,039.03|30,871,267.86|1007.16%|
|Net profit attributable to the listedcompany ’ s shareholders beforeexceptionalitems(RMB)|-300,870,612.80|-44,456,212.17|-576.78%|
|Net cash generated from/used inoperatingactivities(RMB)|-1,838,158,705.86|-2,264,014,704.88|18.81%|
|Basicearningspershare(RMB/share)|0.1419|0.0128|1008.59%|
|Dilutedearningspershare(RMB/share)|0.1419|0.0128|1008.59%|
|Weightedaveragereturnonequity(%)|4.19%|1.06%|3.13%|
||30June2018|31December2017|Change(%)|
|Totalassets(RMB)|28,134,003,876.94|23,558,735,469.78|19.42%|
|Equity attributable to the listedcompany’sshareholders(RMB)|7,940,999,540.26|7,994,145,476.61|-0.66%|

V Accounting Data Differences underChina’s Accounting Standards for Business Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign Accounting Standards
1.Net ProfitandEquity Differences under CAS andIFRS
□ Applicable√ Not applicable
KonkaGroupCo.,Ltd. InterimReport2018 No suchdifferences for theReporting Period.
2.Net ProfitandEquity Differences under CAS andForeign Accounting Standards
□ Applicable√ Not applicable
No suchdifferences for theReporting Period.
XI Exceptional Gains andLosses
√ Applicable□ Not applicable
Unit:RMB
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|Item|ReportingPeriod|Note|
|Gainorlossondisposalofnon-currentassets(inclusiveofimpairmentallowancewrite-offs)|109,176,724.28||
|Government subsidies charged to current profit or loss (exclusive of government subsidiesgiven in the Company’s ordinary course of business at fixed quotas or amounts as pergovernment’suniformstandards)|95,673,059.56||
|Gainorlossoninvestmentsorassetsentrustedtootherentitiesformanagement|83,860,015.29||
|Gain or loss on fair-value changes in trading financial assets and liabilities & investmentincomefromdisposaloftradingfinancialassetsandliabilitiesandavailable-for-salefinancialassets(exclusiveofeffectiveportionofhedgesthatariseintheCompany’sordinarycourseofbusiness)|-5,196,666.98||
|Gainorlossonloanentrustments|599,186.29||
|Non-operatingincomeandexpenseotherthanabove|14,941,575.60||
|Othergainsandlossesthatmeetdefinitionofexceptionalgain/loss|445,568,627.45||
|Less:Incometaxeffects|38,310,511.85||
|Non-controllinginterestseffects(netoftax)|63,648,357.81||
|Total|642,663,651.83|--|

 Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities tothePublic—Exceptional Gain/Loss Items:
√ Applicable□ Not applicable
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|Item|Amount(RMB)|Reason|
|Taxrebatesonsoftware|34,848,961.96|RecurrentgovernmentsubsidiesgivenintheCompany’sordinarycourseofbusinessatfixedquotasoramountsaspergovernment’suniformstandards|

KonkaGroupCo.,Ltd. InterimReport2018 Part III Business Summary
I Core Business Scopeofthe Companyin Reporting Period
Is theCompanysubject to any disclosurerequirements for special industries?
No.
Currently, the Company consists of three major business divisions, namely, the consumer electronic division, the supply chain management division and the environmental protection division, which are detailed as follows:
(I)The ConsumerElectronic Division
This division primarily comprises the multimedia sub-division, the white goods sub-division and the mobilephone sub-division,with details as follows:
1.The MultimediaSub-Division
The Company provides multimedia products and services, including colour TVs and Internet TV services, for both domesticand overseas markets.
The domestic sales of the Company’ s colour TVs are realized mainly through B2B (Business-to-Business) and B2C (Business-to-Consumer), with its branch companies, business departments and after-sales maintenance points operating across the country. And the Company profits from themargins between thecosts and theselling prices of itscolourTVs.
As for selling its colour TVs abroad, the Company mainly relies on B2B. Its colour TVs are sold to Asia Pacific, Middle East, Central& South America, East Europe, etc. And operating profit source is also thedifferences between thecosts and theselling prices ofits colourTVs.
The Company offers Internet TV services based on the smart TVs it has sold to end users. Firstly, it works with other Internet companies to provide end users with, among other content, video, educational, music, medical and game content to generate earnings. Secondly, it analyses user behaviours and offer certain free, interactive services to increase attractiveness to users, promote its brand and stimulate desire for its hardware products. Finally, it is trying to build an Internet TV platform with tens of millions of users, on which it will profit through commercial and application distribution.This InternetTVbusiness is key to theCompany’s Internet-oriented transformation and upgrade to a development model of“hardware+ software” and“smartTV+ end users”.
2.TheWhiteGoods Sub-Division
The white goods produced by the Company mainly include refrigerators, washing machines, air conditioners, freezers, etc., which are sold through B2B and B2C mainly to the domestic market. And the Company profits from the margins between the costs and the selling prices of its white goods.
KonkaGroupCo.,Ltd. InterimReport2018 3.The MobilePhoneSub-Division
The mobile phones of the Company are sold to both the domestic and overseas markets. The overseas sales mainly rely on B2B and the profit comes from the margins between the costs and the selling prices of the mobile phones. As for the domestic sales of its mobile phones, the Company relies on B2B and B2C, and profits mainly from the costs and the selling prices of its products and slightly from therelated valueadded services.
(II) TheSupplyChain Management Division
In this business, relying on the advantages of the raw material procurement channels, distribution systems and terminal networks of its consumer electronic business, the Company helps upstream and downstream enterprises of the supply chain solve channel problems caused by asymmetric information and improve efficiency. At present, this business runs on two models. In the procurement and distribution supply chain model, the Company benefits from purchasing IC chips, LCD screens, etc. from upstream suppliers and selling them to downstream customers through the supply chain of its traditional core business. Supply chain services are another model. Capitalizing on its years of experience in product quality control, outsourcing partner assessment and international trade, the Company is able to help improve theclient’s supply chain in efficiency and cost through the provision of services including product quality control, warehousing and logistics, customs clearance of imports and exports, documentation, tax handling, outsourcing partner selection, etc. Profit comes from service charges. Additionally, the supply chain management business can help the Company establish good relationships with its upstream suppliers and downstream customers, and keep it informed of prices of the materials used in its production for better cost control over itsexisting products.
(III)TheEnvironmental Protection Division
Currently, this business focuses on water treatment and recycling of renewable resources. Water engineering PPP (Public-Private Partnership) projects are undertaken under BOT (Build-Operate-Transfer) or EPC (Energy Performance Contracting) models. And renewable resources are collected, sorted, processed, distributedand sold.
II Material Changes inMajor Assets
1.Material Changes in Major Assets
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|Majorassets|Mainreasonformaterialchanges|
|Equityassets|Long-term equity investments rose 65.72% at the end of the Reporting Periodcomparedtothebeginningamount,primarilydrivenbytheshiftofAnhuiKaikaiShijieE-commerceCo.,Ltd.fromaconsolidatedsubsidiarytoalong-termequityinvestmentmeasuredattheequitymethod,aswellasbynewequityinvestmentsinassociates.|

KonkaGroupCo.,Ltd. InterimReport2018
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|Fixedassets|Nomaterialchange|
|Intangibleassets|Up 101.09% at the end of the Reporting Period compared to the beginning amount,primarilydrivenbytheconsolidatedintangibleassets(landuserights,franchiserights,etc.,attheircarryingamounts)ofacquireesShandongEconTechnologyCo.,Ltd.andGuangDongXingDaHongYeElectronicCo.,Ltd.intheCurrentPeriod|
|Constructioninprogress|Nomaterialchange|
|Goodwill|Up13965.55%attheendoftheReportingPeriodcomparedtothebeginningamount,primarily driven by the Company’s acquisitions of a 51% interest in both ShandongEcon Technology Co., Ltd. and GuangDong XingDa HongYe Electronic Co., Ltd. intheCurrentPeriod|

2.Major Assets Overseas
□ Applicable√ Not applicable
III Core Competitiveness Analysis
Is theCompanysubject to any disclosurerequirements for special industries?
No.
TheCompany’s core competitiveness lies in itsR&D ability, brand, marketing network and human resources. It has developed a three-levelR&D system of “Konka Research Institute-MultimediaR&D Centre-specialized design institutes”, with close to 100 core technologies and approximately 2,000R&D personnel. It also boasts a strong brand presence among consumers, as well as among banks and other financing channels. Additionally, its domestic marketing and service network, including 67 branch companies, over 200 offices and about 3,300 after-sales service stations across the country, directly connect to around 3,000 retail terminals, along with a well-established overseas marketing network. Meanwhile, it has high-level personnel with years of rich management and industry experience, as well as ahigh-quality team withstrong execution capabilities.
KonkaGroupCo.,Ltd. InterimReport2018 Part IV Operating Performance Discussion and Analysis
I Overview
(I) In the Reporting Period, in order for faster transformation and upgrade and leapfrog growth, the Company has formulated a strategic plan for its medium- and long-term development, that is, “One Centric Orientation, Two Development Paths, Three Development Strategies and Four Business Divisions”.With the centric orientation to become a platform driven by technological innovation, as well as with industrial products as the basis supported by the composite capabilities of “Technology+ Holding”, the Company will upgrade towards strategic emerging industries, expand its technology park business, and extend its Internet and supply chain service business, so as to formulate four major collaborating businessdivisions—the technology park division, the industrial product division,theplatform service division and theinvestment& finance division.
Focused on its strategic plan, the Company made the following achievements in the Reporting Period:
1. The mixed ownership reform was carried forward for stronger competitiveness in the multimedia business. Shenzhen Konka Electronics Technology Co., Ltd. has been set up in the Reporting Period to run theCompany’s colour TV and other multimedia businesses, which will accelerate theCompany’s platform transformation, and enable a mixed ownership reform on the said business at a proper timing forbetter competitiveness.
Anhui Kaikai Shijie E-commerce Co., Ltd. (“Kaikai Shijie”), one of theCompany’s majority-owned subsidiary, is responsible for operations under theCompany’s online colour TVbrand—KKTV. In order to make up its lack of digital contents and shift from a hardware provider to an Internet company featuring “ digital contents+ hardware+ operation ” , Kaikai Shijie has introduced Guangdong SouthAishi Entertainment Technology Co., Ltd. (“SouthAishi”) as a10% shareholder. South Aishi is a professional Internet company offering Internet TV entertainment services, with fully-licensed jointoperation rights, rich digital contents and years of OTTexperience.
2. The technology park, environmental protection and other businesses have gradually taken shape. In terms of the technology park business, in addition to carrying forward the existing projects including Phase I of the Konka Chuzhou Technological Innovation Centre and the Yibin Konka Smart Terminals Industrial Park, the Company has also newly launched the Konka Belt and Road Headquarters, Phase II of the Konka Chuzhou Technological Innovation Centre, the Zibo High-End Equipment Industrial Park, the Nanjing K-Star Cloud Network Headquarters, etc. Meanwhile, talks are underway for the Konka Smart Appliances and Equipment Industrial Park, the Ankang Smart Plant, Minghu K-CareTownand so on.
KonkaGroupCo.,Ltd. InterimReport2018 In the environmental protection business, the Company acquired a51% interest in Shandong Econ Technology Co., Ltd. (“Econ Technology”), which specializes in water treatment. Recently, one of EconTechnology’s affiliates has won the bids for the RMB1.299 billion urban river comprehensive treatment PPP project for the Donggang city, as well as for the RMB2.849 billion city centre comprehensive improvement project for the Weifang Binhai Economic and Technological Development Zone.
Additionally, the Company has recently acquired a51% stake in Jiujiang Golden Phoenix Decoration Material Co., Ltd. (“Golden Phoenix”), which produces glass ceramic materials, a new green material. This acquisition has great significance for theCompany’s plan in the new material sector.
3. During the Reporting Period, Anhui Konka Electrical Appliance Technology Co., Ltd., a51% indirectly controlled subsidiary of the Company, won the bid of RMB455 million for the100% interests of Henan Frestec Electrical Appliances Co., Ltd., Henan Frestec Refrigeration Appliance Co., Ltd. and Henan Frestec Household Appliances Co., Ltd. (The above three companies are collectively referred to as “Frestec Company”, the asset pool of which mainly includes Frestec brand, patents and related fixed assets).So far Frestec Company has completed the industrial and commercial registration of changes and gradually resumes production.This acquisition can help the Company quickly expand its white goods business under the two collaborating brands of “Konka” and “Frestec” for betterprofitability.
4. During the Reporting Period, four business sub-divisions based on the Internet ecology had taken shape in theCompany’s Internet operation business, including the cross-device user operation sub-division based onKonka’s smart terminal user operation platform, the IoT (Internet of Things) operation sub-division based on Konka’s smart terminal hardware, as well as the other two sub-divisions in planning— the comprehensive healthcare business based on Konka’ s comprehensive healthcare user operation platform and the smart town business based onKonka’s smart town operation platform, so as to build a complete household smart healthcare ecosystem. The Internet operation business was running well in the Reporting Period, with a new high in income.
(II) Due to the rapid growth in the new businesses, the Company is expected to achieve operating revenue of approximately RMB17.625 billion for H1 2018, up around54.53% compared to H1 2017.
(III) Exceptional income was RMB643 million for the Reporting Period, which primarily came from thesaleofcertain interests in Kaikai Shijiefor themixed ownership reform.
II Analysisof Core Businesses
See “IOverview” above.
KonkaGroupCo.,Ltd. InterimReport2018 Year-on-year changes inkey financial data:
Unit:RMB
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|-|-|-|-|-|
||H12018|H12017|Change(%)|Mainreasonforchange|
|Operatingrevenue|17,625,414,769.82|11,405,965,979.43|54.53%|Growthinthesupplychainmanagementbusiness|
|Costofsales|16,442,256,445.26|10,110,191,258.07|62.63%||
|Sellingexpense|1,103,181,074.51|974,003,306.54|13.26%||
|Administrativeexpense|364,827,669.33|264,108,100.97|38.14%|AriseinR&Dandtrialproductionexpense|
|Financecosts|36,292,909.41|110,882,895.46|-67.27%|Ariseinexchangegainsduetoexchangeratefluctuations|
|Incometaxexpense|-17,446,049.13|-3,838,772.97|-354.47%||
|R&Dexpense|137,008,896.76|96,753,027.87|41.61%||
|Net cash generated from/used inoperatingactivities|-1,838,158,705.86|-2,264,014,704.88|18.81%||
|Net cash generated from/used ininvestingactivities|-343,094,565.17|-1,580,867,932.13|78.30%|Adeclineincashpaymentsforwealthmanagementproducts|
|Net cash generated from/used infinancingactivities|2,880,630,318.57|4,161,145,047.39|-30.77%|Adeclineinnetcashgeneratedfrom/usedinborrowings|
|Net increase in cash and cashequivalents|664,088,931.90|305,883,134.09|117.11%||

Material changes to theprofit structure orsources of theCompanyin theReporting Period:
√ Applicable□ Not applicable
Exceptional income was RMB643 million for the Reporting Period, which primarily came from the gain of RMB445.5686 million from remeasuring the remaining46% interest inAnhui Kaikai Shijie E-commerce Co., Ltd. (formerly measured at the equity method) at the fair value method after the cease oftheCompany’s control over Kaikai Shijie upon the sale of some interests in it for themixed ownership reform.
Breakdown of core businesses:
Unit:RMB
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|-|-|-|-|-|-|-|
||Operatingrevenue|Costofsales|Grossprofitmargin|YoYchangeinoperatingrevenue(%)|YoYchangeincostofsales(%)|YoYchangeingrossprofitmargin(%)|
|Byoperatingdivision|||||||

KonkaGroupCo.,Ltd. InterimReport2018
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|-|-|-|-|-|-|-|
|Electronics|6,716,672,638.19|5,811,221,512.70|13.48%|-1.35%|2.07%|-2.90%|
|Supplychainmanagement|10,008,880,630.62|9,925,786,697.58|0.83%|132.37%|133.68%|-0.56%|
|Environmentalprotection|77,951,411.92|52,515,288.25|32.63%||||
|Byproductcategory|||||||
|ColourTVs|4,963,088,596.70|4,352,820,070.48|12.30%|-6.18%|-1.78%|-3.93%|
|Whitegoods|1,084,381,984.51|892,338,557.03|17.71%|21.58%|22.90%|-0.89%|
|Supplychainmanagement|10,008,880,630.62|9,925,786,697.58|0.83%|132.37%|133.68%|-0.56%|
|Environmentalprotection|77,951,411.92|52,515,288.25|32.63%||||
|Other|669,202,056.98|566,062,885.19|15.41%|6.74%|5.68%|0.85%|
|Byoperatingsegment|||||||
|Domestic|4,672,082,285.24|3,847,140,507.59|17.66%|-36.38%|-39.07%|3.64%|
|Overseas|12,131,422,395.49|11,942,382,990.94|1.56%|221.57%|229.28%|-2.31%|

 III Analysisof Non-Core Businesses
√ Applicable□ Not applicable
Unit:RMB
||||||
|-|-|-|-|-|
||Amount|As%oftotalprofit|Source/Reason|Exceptionalorrecurrent|
|Investmentincome|531,758,571.71|135.90%|The gain from remeasuring theremaining interest inAnhui KaikaiShijie E-commerce Co., Ltd. at thefairvaluemethodaftertheceaseoftheCompany’scontroloverKaikaiShijie|Exceptional|
|Gain/loss onchanges infairvalue|59,855,412.48|15.30%|Assessed gains/losses on fair-valuefluctuations of deliverable forwardcontracts|Exceptional|
|Assetimpairments|59,552,100.41|15.22%||Exceptional|
|Non-operatingincome|27,217,492.97|6.96%||Exceptional|
|Non-operatingexpense|5,951,749.57|1.52%||Exceptional|

KonkaGroupCo.,Ltd. InterimReport2018 IVAnalysis ofAssets andLiabilities
1.Material Changes in AssetComposition
Unit:RMB
||||||||
|-|-|-|-|-|-|-|
||30June2018||30June2017||Changeinpercentage(%)|Reasonformaterialchange|
||Amount|As%oftotalassets|Amount|As%oftotalassets|||
|Monetaryassets|3,911,820,154.60|13.90%|2,490,079,604.07|12.05%|1.85%||
|Accountsreceivable|4,428,390,613.21|15.74%|1,966,918,540.02|9.52%|6.22%||
|Inventories|4,854,235,062.74|17.25%|6,374,483,463.58|30.85%|-13.60%||
|Investmentproperty|213,639,992.84|0.76%|219,271,267.11|1.06%|-0.30%||
|Long-termequityinvestments|2,187,539,867.00|7.78%|629,257,019.68|3.04%|4.74%||
|Fixedassets|1,789,101,811.32|6.36%|1,544,239,052.29|7.47%|-1.11%||
|Construction inprogress|120,644,724.53|0.43%|404,450,172.08|1.96%|-1.53%||
|Short-termborrowings|10,397,447,703.32|36.96%|10,744,965,110.13|51.99%|-15.03%||
|Long-termborrowings|501,000,000.00|1.78%|70,000,000.00|0.34%|1.44%||

2.AssetsandLiabilitiesatFairValue
√ Applicable□ Not applicable
Unit:RMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item|Beginningamount|Gain/lossonfair-valuechangesinReportingPeriod|Cumulativefair-valuechangeschargedtoequity|ImpairmentallowanceforReportingPeriod|PurchasedinReportingPeriod|SoldinReportingPeriod|Endingamount|
|Financialassets||||||||
|1. Financial assets atfair value throughprofit or loss(exclusive of|296,799.53||||||14,497,221.94|

KonkaGroupCo.,Ltd. InterimReport2018
|||||
|-|-|-|-|
|derivatives)||||
|3. Available-for-salefinancialassets|712,170,399.09|20,058,162.76|692,112,236.33|
|Subtotal of financialassets|712,467,198.62|20,058,162.76|706,609,458.27|
|Totalofabove|712,467,198.62|20,058,162.76|706,609,458.27|
|Financialliabilities|47,482,470.50||1,827,480.43|

 Material changes in themeasurement attributes of themajorassets intheReporting Period:
□ Yes√ No
3.Restricted Asset Rights asat Period-End
||||
|-|-|-|
|Item|Endingcarryingamount|Reasonforrestriction|
|Monetaryassets|149,831,518.94|Varioussecuritydepositswhereaccessondemandisnotallowed|
|Notesreceivable|1,666,718,524.73|① Upto30June2018,theCompanyhadputRMB1,414,894,166.20(carryingamount)of bank acceptance bills in pledge for various financing activities including bankacceptancebills,lettersofcredit,lettersofguaranteeandtradefinancings. ② Upto30June 2018, a trade acceptance bill of RMB241,824,358.53 (carrying amount) had beendiscounted by a bank with recourse for a short-term loan of RMB227,979,976.51, andanother trade acceptance bill of RMB10,000,000.00 (carrying amount) had beendiscountedbyabankwithrecourseforashort-termloanofRMB9,545,000.00.|
|Fixedassets|5,807,674.32|Propertypreservationunderalawsuit|
||60,288,708.63|Up to 30 June 2018, subsidiary GuangDong XingDa HongYe Electronic Co., Ltd.(“ XingDa HongYe”) had put up building properties of RMB60,288,708.63 (carryingamount) and land use rights of RMB38,617,359.68 (carrying amount) as collateral inordertogetaloanofRMB210,700,000.00.|
|Intangibleassets|38,617,359.68||
|Total|1,921,263,786.30||

KonkaGroupCo.,Ltd. InterimReport2018 V Investments Made
1.Total Investment Amount
√ Applicable□ Not applicable
||||
|-|-|-|
|TotalinvestmentamountinReportingPeriod(RMB)|Totalinvestmentamountinsameperiodoflastyear(RMB)|Change(%)|
|198,399,656.00|326,090,459.58|-39.16%|

 2.SignificantEquity Investments Madein Reporting Period
□ Applicable√ Not applicable
3.SignificantNon-Equity Investments Ongoing inReporting Period
√ Applicable□ Not applicable
Unit: RMB
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Project|Wayofinvestment|Investmentinfixedassetsornot|Industry|InvestmentinReportingPeriod|TotalactualinvestmentasofendofReportingPeriod|Fundingsource|Projectprogress|Expectedincome|TotalincomeasofendofReportingPeriod|Reasonforfallingbehindscheduleornotachievingexpectedincome|Disclosuredate(ifany)|Indextodisclosedinformation(ifany)|
|KonkaTechnologicalInnovationCentreonephaseproject|BuiltbytheCompanyitself|Yes|Electronics|2,612,263.42|79,270,077.92|Self-funded,includingcustomerpayments|17.62%|To beestimated|0|N/A|30 December 2016|www.cninfo.com.cn|
|NewplantinDongguancity|BuiltbytheCompanyitself|Yes|Electronics|0|0|Self-funded|0%|To beestimated|0|N/A|11 March2017||
|YibinSmartTerminal|Builtbythe|Yes|Electronics|18,000,000|18,000,000|Self-funded|4.86%|To beestimated|0|N/A|22 May 2018||

KonkaGroupCo.,Ltd. InterimReport2018
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|High-TechPark|Companyitself||||||||||||
|ChengduBeltandRoadHeadquarters|BuiltbytheCompanyitself|Yes|Electronics|0|0|Self-funded|0%|To beestimated|0|N/A|27 June 2018||
|Total|--|--|--|20,612,263.42|97,270,077.92|--|--||0|--|--|--|

Notes: (1) In regard tothe KonkaTechnological Innovation Centreonephase project ,theland use right transfer agreement has been signed, thegeneral plan and thelandscaping plan are being approved, and theconstruction design for PhaseI has been completed and is being optimized. (2) Concerning theDongguancity’s newplant, preparations are underway and the Companyis waiting for thelocal government to put outtheproject target land for bids.
(3) With respect to the yibin smart terminal high-tech park, the land use right transfer agreement has been signed and thegeneral plan is underway.
(4)As for the Chengdu Belt and Road Headquarters, preparations are underway and the Company is waiting for thelocal government to put outtheproject target land for bids.
4.FinancialInvestments
(1) Securities Investments
√ Applicable□ Not applicable
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Securitytype|Securitycode|Securityname|Initialinvestmentcost|Measurementmethod|Beginningcarryingamount|Gain/Lossonfair-valuechangesinReportingPeriod|Accumulatedfair-valuechangeschargedtoequity|PurchasedinReportingPeriod|SoldinReportingPeriod|Gain/lossinReportingPeriod|Endingcarryingamount|Accountingtitle|Fundingsource|
|Domestically/Overseaslistedstock|002915|ZXFC|1,459.61|Fairvaluemethod|7,988.13|0.00|0.00|0.00|8,353.60|6,893.99|0.00|Available-for-salefinancialassets|Newstocksubscription|
|Ditto|300730|KCXX|1,513.16|Ditto|7,520.55|0.00|0.00|0.00|8,282.56|6,769.40|0.00|Ditto|Ditto|

KonkaGroupCo.,Ltd. InterimReport2018
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Ditto|002920|DSXW|12,537.88|Ditto|24,025.82|0.00|0.00|0.00|26,420.42|13,882.54|0.00|Ditto|Ditto|
|Ditto|002919|MCJK|1,406.72|Ditto|3,949.12|0.00|0.00|0.00|4,715.20|3,308.48|0.00|Ditto|Ditto|
|Ditto|002922|YGE|3,462.39|Ditto|4,985.73|0.00|0.00|0.00|9,466.47|6,004.08|0.00|Ditto|Ditto|
|Ditto|300735|GHKJ|5,064.93|Ditto|7,295.73|0.00|0.00|0.00|14,767.84|9,702.91|0.00|Ditto|Ditto|
|Ditto|300664|PYHB|5,026.08|Ditto|0.00|0.00|0.00|5,026.08|13,668.90|8,642.82|0.00|Ditto|Ditto|
|Ditto|002923|RDGF|3,129.84|Ditto|0.00|0.00|0.00|3,129.84|8,780.48|5,650.64|0.00|Ditto|Ditto|
|Ditto|300684|ZSKJ|1,376.00|Ditto|2,397.68|0.00|0.00|0.00|9,683.60|8,307.60|0.00|Ditto|Ditto|
|Ditto|300733|XLDL|5,160.00|Ditto|0.00|0.00|0.00|5,160.00|12,000.00|6,840.00|0.00|Ditto|Ditto|
|Ditto|002925|YQKJ|13,095.00|Ditto|0.00|0.00|0.00|13,095.00|47,724.00|34,629.00|0.00|Ditto|Ditto|
|Othersecuritiesinvestmentsheldatperiod-end|||0.00|--|0.00|0.00|0.00|0.00|0.00|0.00|0.00|--|--|
|Total|||53,231.61|--|58,162.76|0.00|0.00|26,410.92|163,863.07|110,631.46|0.00|--|--|
|DisclosuredateofannouncementonBoard’sconsentforsecuritiesinvestments||||||||N/A||||||
|Disclosuredateofannouncementongeneralmeeting’sconsentforsecuritiesinvestments(ifany)||||||||N/A||||||

(2) Investments in Derivative FinancialInstruments
√ Applicable□ Not applicable
Unit:RMB’0,000
|||
|-|-|
|Fundingsourceforderivativeinvestment|U.S.dollarfinancings|
|Legalmattersinvolved(ifapplicable)|N/A|
|Disclosure date of board announcementapprovingderivativeinvestment(ifany)|24May2014|
|Disclosure date of shareholders ’ meetingannouncementapprovingderivativeinvestment(ifany)|10June2014|

KonkaGroupCo.,Ltd. InterimReport2018
|||
|-|-|
|Analysis of risks and control measuresassociated with derivative investments held inReporting Period (including but not limited tomarket risk, liquidity risk, credit risk,operationalrisk,legalrisk,etc.)|We engage in forward forex transactions to reduce the currency risk whensecuring foreign-currency financing. This is very needed in our routineoperation and is in compliance with the applicable laws and regulations. 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 the Bank of China, whichoperatesteadilyandhavegoodcreditstanding,whichcouldhelppreventlossonforwardforexcontractsduetobankfailure.|
|Changes in market prices or fair value ofderivative investments in Reporting Period(fair value analysis should includemeasurement method and related assumptionsandparameters)|How we usually measure the fair value of derivative financial instruments:Based on the forward forex sales and purchase contracts that are signedbetween theCompanyandbanksandhavenotexpiredinaReportingPeriod,werecognizethedifferencesbetweenthequotationsforthesecontractsonthebalance 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.|
|Material changes in accounting policies andspecific accounting principles adopted forderivative investments in Reporting Periodcomparedtolastreportingperiod|Nomaterialchanges|
|Opinionofindependentdirectorsonderivativeinvestmentsandriskcontrol|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 inderivativefinancialinstruments,andtherelevantriskcontrolmeasuresthattheCompanyhastakenareconsideredeffective.|

Unit:RMB’0,000
||||||
|-|-|-|-|-|
|Typeofderivativefinancialinstrument|Openingcontractualamount|Closingcontractualamount|Gain/lossinReportingPeriod|ClosinginvestmentamountasapercentageoftheCompany’sclosingnetassetvalue|
|Forwardforexcontract|224,712.77|74,021.85|-2,255.71|9.32%|

VI Saleof Major Assets and EquityInvestments
1.SaleofMajor Assets
□ Applicable√ Not applicable
No suchcases in theReporting Period.
KonkaGroupCo.,Ltd. InterimReport2018 2.SaleofMajor Equity Investments
√ Applicable□ Not applicable
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Counterparty|Equityinterestssold|Dateofsale|Sellingprice(RMB’0,000)|AmountcontributedbytheequityintereststonetincomeoftheCompanyfromperiod-beginningtodateofsale(RMB’0,000)|EffectofthesaleontheCompany|AmountcontributedbythesaletonetincomeoftheCompanyasapercentageoftheCompany’snetincome(%)|Pricingprinciple|Relatedtransactionornot|RelationshipbetweencounterpartyandtheCompany|Ownershipfullytransferredornot|Executedasscheduledornot,ifnot,statereasonandactionstaken|Disclosuredate|Indextodisclosedinformation|
|SuzhouAnzeFuxingVentureCapitalCentre(LimitedPartnership)andGongqingchengLittleCherryInvestmentManagementPartnership|6%interestinShenzhenQianhaiQingsongVentureCapitalFundCompany(LimitedPartnership)|29March2018|3,725|0|OptimizingtheCompany’sallocationofassets,generatingcashinflows,increasingassets’liquidityandimprovingtheCompa|5.04%|Marketprice|Not|Notrelated|Yes|N/A|31March2018|www.cninfo.com.cn|

KonkaGroupCo.,Ltd. InterimReport2018
|||
|-|-|
|Company(LimitedPartnership)|ny’searnings|

VII Major Majority- andMinority-OwnedSubsidiaries
√ Applicable□ Not applicable
Major majority-owned subsidiaries and those minority-owned subsidiaries with an over10% effect ontheCompany’s net profit:
Unit:RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Name|RelationshipwiththeCompany|Corebusiness|Registeredcapital|Totalassets|Netassets|Operatingrevenue|Operatingprofit|Netprofit|
|ShenzhenWankaidaScienceandTechnologyCo.,Ltd.|Subsidiary|Softwaretechnologydevelopmentandmaintenance|RMB10000000|121,816,002.76|85,962,617.71|30,150,200.00|28,889,874.28|23,898,735.60|
|AnhuiKonkaTongchuangHouseholdAppliancesCo.,Ltd.|Subsidiary|Productionandsaleofrefrigerators,washingmachinesandotherhouseholdappliances|RMB502000000|1,227,510,711.48|160,106,404.80|1,260,194,032.54|18,893,764.29|19,115,133.11|
|AnhuiKonkaElectronicCo.,Ltd.|Subsidiary|Productionandsaleofmultimediaproducts|RMB140000000|1,406,749,963.99|364,561,791.99|1,732,222,387.44|-10,344,768.50|-8,851,847.71|
|ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd.|Subsidiary|Productionandsaleofmobilecommunicationproducts|RMB400000000|456,589,040.42|114,374,949.05|236,912,374.91|-7,444,501.78|2,831,121.04|
|Dongguan|Subsidiary|Production|RMB2666||||||

KonkaGroupCo.,Ltd. InterimReport2018
||||||||||
|-|-|-|-|-|-|-|-|-|
|KonkaElectronicCo.,Ltd.||andsaleofmultimediaproducts|70000|763,041,669.55|652,719,539.46|220,128,013.35|3,896,083.70|3,218,716.32|
|HongKongKonkaCo.,Ltd.|Subsidiary|Export&importofelectromechanicalandelectronics|HKD500000|2,062,112,708.48|157,194,765.99|1,902,698,072.57|4,793,554.89|4,851,113.34|
|ChainKingdomCo.,Limited|Subsidiary|Supplychainmanagement|USD1500000|1,405,717,090.58|57,597,008.22|3,256,025,071.58|33,878,617.65|28,291,883.68|
|KonkaElectricalAppliancesInternationalTrading.|Subsidiary|Export&importofelectromechanicalandelectronics|HKD500000|1,500,797,452.01|-221,045,157.93|4,071,108,379.48|16,955,358.10|16,955,358.10|

Subsidiaries obtained or disposed in theReporting Period:
√ Applicable□ Not applicable
||||
|-|-|-|
|Subsidiary|HowsubsidiarywasobtainedordisposedinReportingPeriod|Effectsonoverallproductionandoperatingresults|
|Anhui Kaikai Shijie E-commerce Co.,Ltd.|A5%interestinthissubsidiarywastransferred|AfterthelossofcontroloverAnhuiKaikaijieE-commerceCo.,Ltd.,thesurplusshareswerere-measuredatfairvalue,resultinginalargeamountofprofits.|
|Kangjietong(HongKong)Limited|Incorporatedbyinvestment|Nosignificanteffects|
|YibinKonkaTechnologyParkOperationCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|ShenzhenKonkaElectronicsTechnologyCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|JiaxinTechnologyCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|JialiInternational(HongKong)Limited|Incorporatedbyinvestment|Nosignificanteffects|
|Chengdu Konka Incubator ManagementCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|Sichuan Konka Smart terminalTechnologyCo.,Ltd|Incorporatedbyinvestment|Nosignificanteffects|
|Sichuan Kangjiatong Supply ChainManagementCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|Konka Suiyong Investment (Shenzhen)Co.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Konka Huanjia (Dalian) EnvironmentalTechnologyCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|Anhui Konka Electrical ApplianceTechnologyCo.,Ltd.|Incorporatedbyinvestment|Nosignificanteffects|
|Shandong Econ Technology Co., Ltd.and its subsidiaries, including BeijingEcon Runfeng Technology Co., Ltd.,Shanghai Jiyi EnvironmentalTechnology Co., Ltd., Binzhou EconZhongke Environmental TechnologyCo., Ltd., LaizhouLairun Holdings Co.,Ltd., Econ Environmental EngineeringCo., Ltd., RushanYike Water TreatmentCo., Ltd., Binzhou WeiyijieEnvironmental Technology Co., Ltd.,Yantai Chunzhiran EnvironmentalTechnology Co., Ltd., Rushan EconBeike Technology Incubator Co., Ltd.,Fujian Econ Changrun EnvironmentalProtection Co., Ltd., Laizhou LairunHuayang Heating Co., Ltd., LaizhouLairun Heating Co., Ltd., LaizhouLairunGreen EnergyCo.,Ltd.,BinzhouBeihai Jingmai Industrial DevelopmentCo., Ltd., Yantai Huanhai XinzeEnterprise Management Co., Ltd.,BinzhouWeinengdaTransportCo.,Ltd.,Laizhou Binhai Sewage Treatment Co.,Ltd. and Laizhou Lairun EnvironmentalProtectionCo.,Ltd.|A51%interestinShandongEconTechnologyCo.,Ltd.wasacquired|Nosignificanteffects|
|GuangDong XingDa HongYe ElectronicCo., Ltd. and its subsidiaries, includingShanghai Xinfeng Zhuoqun PCB Co.,Ltd. and Zhongshan Zewei KechuangInvestmentManagementCo.,Ltd.|A51%interestinGuangDongXingDaHongYeElectronicCo.,Ltd.wasacquired|Nosignificanteffects|

Information about themajormajority- and minority-owned subsidiaries:
None.
VIII Structured BodiesControlled bytheCompany
□ Applicable√ Not applicable
KonkaGroupCo.,Ltd. InterimReport2018 IXPerformance Forecast forJanuary-September2018
Warning of forecast negative net profit for January-September 2018 or considerable YoY change therein, as well as thereasons:
□ Applicable√ Not applicable
X RisksFacing theCompany andCountermeasures
TheCompany’s consumer electronics business is seeing a decreased gross profit margin caused by slow growth in demand and increasingly fierce competition in the colorTV, white goods and mobile phone markets. In response, the Company will adopt measures including adjusting the hardware product mix, strengthening product competitiveness, enhancing professionalism in user operation, improving Internet operations,and improvinginternal management.
As for the environmental protection business, the Company is a new comer in this sector. It still needs some time for the newly acquired and invested enterprises to integrate with the Company in operational and management mechanism, resource and corporate culture. And a great number of reserve projects in this business is making more requirements for human resources. Therefore, the Company has started to work on the relevant operational mechanism, improve its monitoring of the majority-ownedsubsidiaries’ operations, and bring in various resources so as to strengthen its operational capabilitiesin this respect.
KonkaGroupCo.,Ltd. InterimReport2018 Part V Significant Events
I AnnualandExtraordinary General Meetings ConvenedduringReporting Period
1.General MeetingsConvened duringReporting Period
|||||||
|-|-|-|-|-|-|
|Meeting|Type|Investorparticipationratio|Conveneddate|Dateofresolutiondisclosure|Indextodisclosedresolutions|
|2017AnnualGeneralMeeting|Annual|32.80%|23April2018|24April2018|www.cninfo.com.cn|
|The1stExtraordinaryGeneralMeetingof2018|Extraordinary|2.52％|3May2018|4May2018||
|The2ndExtraordinaryGeneralMeetingof2018|Extraordinary|32.85％|7June2018|8June2018||

2. Extraordinary General Meetings Convened at Request of Preferred Shareholders with Resumed Voting Rights
□ Applicable√ Not applicable
II Interim DividendPlan
□ Applicable√ Not applicable
The Company has nointerim dividend plan, eitherin theform ofcash orstock.
III Commitments of theCompany’s Actual Controller, Shareholders, Related Parties and Acquirers, as well as the Company Itself and Other Entities Fulfilled in Reporting Period or Ongoing atPeriod-End
□ Applicable√ Not applicable
No suchcases in theReporting Period.
IVEngagement andDisengagement ofIndependentAuditor
Are theinterim financial statements audited?
□Yes√ No
The interim financial statements are unaudited.
KonkaGroupCo.,Ltd. InterimReport2018 V Explanations Given by Board of Directors and Supervisory Committee Regarding IndependentAuditor's “Modified Opinion” forReporting Period
□ Applicable√ Not applicable
VI Explanations Given by Board of Directors Regarding Independent Auditor's “Modified Opinion” forLastYear
□ Applicable√ Not applicable
VII Insolvency andReorganization
□ Applicable√ Not applicable
No suchcases in theReporting Period.
VIII Legal Matters
Material lawsuits orarbitrations:
√ Applicable□ Not applicable
|||||||||
|-|-|-|-|-|-|-|-|
|Generalinformation|Involvedamount(RMB’0,000)|Provision|Progress|Decisionsandeffects|Executionofdecisions|Disclosuredate|Indextodisclosedinformation|
|Asforthedetails,pleaserefertotheNotes2.DescriptionoftheContingenciesoftheCommitmentsandtheContingenciesofChapterXIIoftheNotestotheFinancialReport.Becausetheinvolvedamountwassmall,therewasnoneedtofulfiltheobligationofinformationdisclosure.||||||||

Other legal matters:
□ Applicable√ Not applicable
IXPunishments andRectifications
□ Applicable√ Not applicable
No suchcases in theReporting Period.
X Credit Quality of the Company as well as Its Controlling Shareholder and Actual Controller
□ Applicable√ Not applicable
XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for Employees
□ Applicable√ Not applicable
KonkaGroupCo.,Ltd. InterimReport2018 No suchcases in theReporting Period.
XII Major Related-Party Transactions
1.Continuing Related-Party Transactions
√ Applicable□ Not applicable
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Relatedparty|RelationshipwiththeCompany|Typeoftransaction|Specifictransaction|Pricingprinciple|Transactionprice|Totalvalue(RMB’0,000)|As%oftotalvalueofallsame-typetransactions|Approvedtransactionline(RMB’0,000)|Overapprovedlineornot|Methodofsettlement|Obtainablemarketpriceforsame-typetransactions|Disclosuredate|Indextodisclosedinformation|
|OCTEnterprisesCo.,Ltdanditssubsidiaries|Underthesameactualcontroller|Purchaseofcommodities|Purchaseofmaterials|Negotiatedprice|Marketprice|1,349.46|0.31%|2,500|No|Cash|Notapplicable|31March2018|www.cninfo.com.cn|
|OCTEnterprisesCo.,Ltdanditssubsidiaries|Underthesameactualcontroller|Salesofgoodsandservices|Sales ofLCD|Negotiatedprice|Marketprice|570.14|0.11%|3,000|No|Cash|Notapplicable|||
|Total||||--|--|1,919.60|--|5,500|--|--|--|--||
|Detailsoflargeamountofsalesreturns||||N/A||||||||||
|As for the prediction on the total amount ofroutine related-party transactions to beoccurred in the Reporting Period by relevanttypes,theactualperformanceintheReportingPeriod(ifany)||||TheCompanyhaspublishedtheForecastingPublicNoticeonRoutineRelatedTransactionforY2018onSecuritiesTimes,ShanghaiSecuritiesNews,ChinaSecuritiesJournalandHongKongTaKungPaoaswellastheInternetwebsitedesignatedbyCSRChttp://www.cninfo.com.cnon31March2018.IntheReportingPeriod,thebasisforpricing,transactionprice,transactionamount||||||||||

KonkaGroupCo.,Ltd. InterimReport2018
|||
|-|-|
||andsettlementmethodsofrawmaterialspurchasedbytheCompanywerebasicallyinaccordancewiththeforecast.ThetotalamountwasRMB19.1960million.|
|Reason for major difference betweentransaction price and reference market price(ifapplicable)|N/A|

2.Related-Party TransactionsRegarding Purchases orSales ofAssets orEquity Interests√ Applicable□ Not applicable
The related-party transactions regarding purchases orsales of assets orequity interests duringtheR eporting Period are shown below.
3.Related-Party TransactionsRegarding JointInvestments in Third Parties
√ Applicable□ Not applicable
The related-party transactions regarding joint investments in third parties during the Reporting Perio dare shown below.
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|Beginningbalance(RMB’0,000)|Amountnewlyaddedincurrentperiod(RMB’0,000)|Amountrecoveredincurrentperiod(RMB’0,000)|Interestrate|Currentinterest(RMB’0,000)|Endingbalance(RMB’0,000)|
|Naught|Naught|Naught|No|0|0|0|0|0|0|
|Impactofrelatedcreditsonthecompany'soperationresultandfinancialcondition||||||Naught||||

Liabilities ofparties related toaccount payable
||||||||||
|-|-|-|-|-|-|-|-|-|
|Relatedparty|RelationwiththeCompany|Formationreason|Beginningbalance(RMB’0,000)|Amountnewlyaddedincurrentperiod(RMB’0,000)|Amountreturnedincurrentperiod(RMB’0,000)|Interestrate|Currentinterest(RMB’0,000)|Endingbalance(RMB’0,000)|
|OCTEnterprisesCo.,Ltd|Controllingshare|Thecompanyappliesentrusted|0|50,000|50,000|4.35%|151|0|
|OCTEnterprises|||0|50,000|0|6.00%|342|50,000|

KonkaGroupCo.,Ltd. InterimReport2018
||||||||||
|-|-|-|-|-|-|-|-|-|
|Co.,Ltd|holder|loantoit|||||||
|OCTEnterprisesCo.,Ltd|||0|140,000|0|6.00%|1,120|140,000|
|OCTEnterprisesCo.,Ltd|||0|10,000|0|5.40%|26|10,000|
|Impactofrelatedliabilitiesonthecompany'soperationresultandfinancialcondition||ThecompanyappliesentrustedloanfromOCTEnterprisesCo.,LTDwhichmeetstheneedsofthecompany'sexistingbusinessdevelopmentandreducesthefinancingcost.|||||||

5.Other Major Related-Party Transactions
√ Applicable□ Not applicable
(1) The Project of Capital Increase to Yibin OCT Sanjiang Real Estate Co., Ltd.: On 3 May 2018, the 1st Extraordinary General Meeting of 2018 passed the Proposal on Capital Increase to Yibin OCT Sanjiang Real Estate Co., Ltd. by voting, and decided to take Shenzhen Konka Telecommunications Technology Co., Ltd., a wholly-owned subsidiary as the main body to contribute RMB80 million to increase capital to Yibin OCT Sanjiang Real Estate Co., Ltd. according toshareholding ratio.
(2) The Project of Transferring Equity of Kunshan Kangsheng Investment Development Co., Ltd.: On 14 June 2018, the 44th Meeting of the 8th Board of Directors of the Company deliberated and passed Proposal on Transferring51% Equity of Kunshan Kangsheng Investment Development Co., and decided that the Company transferred51% equity of Kunshan Kangsheng Investment Development Co., Ltd. to Taizhou Overseas Chinese Town Co., Ltd., with the transfer price of RMB280,680,300. At present, the Company has received the50% equity transfer fund from Taizhou Overseas Chinese Town Co., Ltd., and Kunshan Kangsheng Investment Development Co., Ltd. has completed industrial andcommercial registration of changes.
(3)Project regarding venture capital platform service: KonkaVentures Development (Shenzhen) Co., Ltd., the majority-owned subsidiary of the Company, signed an agreement with OCT Group and provided venture capital platform service for the latter. OCT Group has paid the service charge of RMB20 million to Konka Ventures Development (Shenzhen) Co., Ltd. The income confirmed by Konka Ventures Development (Shenzhen) Co., Ltd. during the Reporting Period was RMB12,944,983.86.
Index tothepublicannouncements about thesaid related-party transactions disclosed
||||
|-|-|-|
|Titleofpublicannouncement|Disclosuredate|Disclosurewebsite|
|AnnouncementaboutCapitalIncreaseinSanjiangRealEstateandRelated-partyTransactions|18April2018|www.cninfo.com.cn|
|AnnouncementabouttheTransferof51%EquitiesofKunshanKangshengandRelated-partyTransactions|16June2018||

KonkaGroupCo.,Ltd. InterimReport2018
|||
|-|-|
|AnnouncementabouttheProgressoftheTransferof51%EquitiesofKunshanKangsheng|3July2018|

XIII Occupation of theCompany’s Capital by Controlling Shareholder or Its Related Parties forNon-Operating Purposes
□ Applicable√ Not applicable
No suchcases in theReporting Period.
XIV Major Contracts andTheirExecution
1.Entrustment, Contracting and Leases
(1) Entrustment
□ Applicable√ Not applicable
No suchcases in theReporting Period.
(2) Contracting
□ Applicable√ Not applicable
No suchcases in theReporting Period.
(3) Leases
□ Applicable√ Not applicable
No suchcases in theReporting Period.
2.Major Guarantees
√ Applicable□ Not applicable
(1) Guarantees
Unit:RMB'0,000
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|GuaranteesprovidedbytheCompanyanditssubsidiariesforexternalparties(excludingthoseforsubsidiaries)||||||||||
|Guaranteedparty|Disclosuredateofrelevantannouncement|Amountforguarantee|Actualoccurrencedate(dateofagreement)||Actualguaranteeamount|Typeofguarantee|Periodofguarantee|Executedornot|Guaranteeforarelated-partyornot|
|Naught|Naught|0|Naught||0|Naught|0|Naught|Naught|
|Total external guaranteelineapproved during|||100,000|Total actual occurred amount of external|||||0|

KonkaGroupCo.,Ltd. InterimReport2018
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|theReportingPeriod(A1)|||||guaranteeduringtheReportingPeriod(A2)|||||||
|Total external guarantee line that has beenapproved at the end of the Reporting Period(A3)|||113,000||TotalactualexternalguaranteebalanceattheendoftheReportingPeriod(A4)|||||0||
|GuaranteesprovidedbytheCompanyforitssubsidiaries||||||||||||
|Guaranteedparty|Disclosuredateofrelevantannouncement|Amountforguarantee|Actualoccurrencedate(dateofagreement)|||Actualguaranteeamount|Typeofguarantee|Periodofguarantee|Executedornot||Guaranteeforarelatedpartyornot|
|AnhuiTongchuang|31March2017and31March2018|70,000|24October2017|||6,000|Jointliability|1year|No||No|
||||9May2018|||4,500|Jointliability|1year|No||No|
||||19June2018|||3,000|Jointliability|1year|No||No|
|Communicationtechnology||50,000|5February2018|||50,000|Jointliability|1year|No||No|
|AnhuiKonka||110,000|2May2018|||20,000|Jointliability|1year|No||No|
||||1June2018|||8,000|Jointliability|1year|No||No|
|E-display||8,000|20July2017|||2,000|Jointliability|1year|No||No|
|HongKongKonka||355,000|28August2017|||7,056|Jointliability|1year|No||No|
||||27September2017|||3,207|Jointliability|1year|No||No|
||||13October2017|||22,450|Jointliability|1year|No||No|
||||31May2018|||19,243|Jointliability|1year|No||No|
|KonkaFactoring||300,000|17October2017|||50,000|Jointliability|1year|No||No|
||||24October2017|||20,000|Jointliability|1year|No||No|
||||27June2018|||14,000|Jointliability|1year|No||No|
|Total guarantee line approved for the subsidiariesduringtheReportingPeriod(B1)||||173,200||Total actual occurred amount of guaranteefor the subsidiaries during the ReportingPeriod(B2)||||118,743||
|Total guarantee line that has been approved for thesubsidiariesattheendoftheReportingPeriod(B3)||||1,118,000||Total actual guarantee balance for thesubsidiaries at the end of the ReportingPeriod(B4)||||229,456||
|Guaranteesprovidedbythesubsidiariesfortheirsubsidiaries||||||||||||

KonkaGroupCo.,Ltd. InterimReport2018
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Guaranteedparty|Disclosuredateofrelevantannouncement|Amountforguarantee|Actualoccurrencedate(dateofagreement)|||Actualguaranteeamount|Typeofguarantee|Periodofguarantee||Executedornot|Guaranteeforarelatedpartyornot||
|SichuanKonka|30May2018|14,000|28May2018|||14,000|Jointliability|7years||No|No||
|RushanEcon||29,000|29Dec2016|||29,000|Jointliability|10years||No|No||
|TotalguaranteelineapprovedforthesubsidiariesduringtheReportingPeriod(C1)|||||14,000|TotalactualoccurredamountofguaranteeforthesubsidiariesduringtheReportingPeriod(C2)||||||14,000|
|TotalguaranteelinethathasbeenapprovedforthesubsidiariesattheendoftheReportingPeriod(C3)|||||43,000|TotalactualguaranteebalanceforthesubsidiariesattheendoftheReportingPeriod(C4)||||||43,000|
|TotalguaranteeamountprovidedbytheCompany(totaloftheabove-mentionedthreekindsofguarantees)|||||||||||||
|TotalguaranteelineapprovedduringtheReportingPeriod(A1+B1+C1)||||287,200||TotalactualoccurredamountofguaranteeduringtheReportingPeriod(A2+B2+C2)|||||132,743||
|TotalguaranteelinethathasbeenapprovedattheendoftheReportingPeriod(A3+B3+C3)||||1,274,000||TotalactualguaranteebalanceattheendoftheReportingPeriod(A4+B4+C4)|||||272,456||
|Proportionoftotalguaranteeamount(A4+B4+C4)tothenetassetsoftheCompany||||||34.31%|||||||
|Ofwhich:|||||||||||||
|Amountofdebtguaranteeprovidedforshareholders,actualcontrollerandtherelated-party(D)|||||||||0||||
|Amountofdebtguaranteeprovidedfortheguaranteedpartywhoseasset-liabilityratioisnotlessthan70%directlyorindirectly(E)|||||||||272,456||||
|Totalguaranteeamountexceeded50%ofthenetassets(F)|||||||||0||||
|Totalamountoftheabovethreeguarantees(D+E+F)|||||||||272,456||||
|Explanationontheoccurredwarrantyliabilityorpossiblebearingjointresponsibilityofliquidationduetoimmatureguarantee(ifany)|||||||||N/A||||
|Explanationonprovisionofguaranteesforexternalpartiesinviolationoftheprescribedprocedure(ifany)|||||||||N/A||||

Note: Shandong Econ Technology Co., Ltd., acquired bytheCompany during the Reporting Period, provided ajoint-liability guaranteefor theRMB0.29 billion project loan for its majority-owned sub sidiary Rushan YikeWater Treatment Co., Ltd. on27December 2016.
Explanation onguarantee that adopts complex method
N/A
KonkaGroupCo.,Ltd. InterimReport2018 (2) IllegalProvisionofGuarantees forExternal Parties
□ Applicable√ Not applicable
No suchcases in theReporting Period.
3.Other Major Contracts
□ Applicable√ Not applicable
No suchcases in theReporting Period.
XV Corporate Social Responsibility(CSR)
1.Material Environmental Issues
Is the Company or any of its subsidiaries is identified as a major polluter by the environmental protection authorities?
Yes
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Name ofCompanyorsubsidiary|NameofMainPollutantandDistinctivePollutant|DischargeMethod|QuantityofEmissionOutlet|DistributionInformationofEmissionOutlet|EmissionConcentration|ExecutedEmissionStandardofPollutant|TotalWeightofEmission|ApprovedTotalWeightofEmission|ExcessiveEmissionCondition|
|GuangdongXingdaHongyeElectronicCo.,Ltd|Pollutionsourcesofwastewater:PH,Copper,COD,andAmmonianitrogen|Dischargedirectly(toFushaSurge)|1|Totaloutletofwastewatertreatmentstation|PH6-9;copper≤0.5mg/L;COD≤80mg/L;ammonianitrogen≤15mg/L|Table1inEmissionstandardofelectroplatingwaterpollutantsDB44/1597-2015|Annualwastewater:448,500t/year|COD27.9t/year;ammonianitrogen6.727t/year|Naught|
||Wastegaspollutants:sulfuricacidmist,chlorinehydride,Formaldehyde,hydrogencyanide,|Dischargeoffixedpollutionsources|14|3outletsontheroofoftheNo.1factory,10outletsontheroofof|sulfuricacidmist＜30mg/m3;NOx＜200mg/m3;chlorinehydride＜30mg/m3;VOCS＜90mg/m3;benzene＜12mg/m3;|EmissionlimitsofairpollutantsTable5inEmissionstandardofelectroplatingpollutantsGB21900-2008,thesecond|3,027,360,000m3/year|2,953,000,000m3/yearinPollutantsDischargeLicenseof2017,nospecific|Naught|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|NOx,Ammonia,benzene,methylbenzene,xylene,andVOCs|theNo.2factory,and1outletontheroofofthecanteen|methylbenzene＜40mg/m3;xylene＜70mg/m3;|levelstandardinphase2ofEmissionstandardofAirPollutantsinGuangdongDB44/27-2001,andstandardinTable2inEmissionstandardofStinkPollutants(GB14554-1993)|detailsinthelatestNationalPollutantsDischargeLicenseof2018|

(1)TheConstruction ofAnti-pollutionFacilities and Its Operation Situation
All production equipment of the Company shall be set up with supporting environmental protection facilities according to the requirements of environmental impact assessment. The discharge of wastewater, waste gas and noise in the Company all met with the standards, as well as the dispose ofall solid wastes, during thereporting period.
The Investment of Guangdong Xingda Hongye Electronics Co., Ltd.: The sewage treatment centre with an investment of about RMB15 million was formally put into production in June 2007, and the treatment capacity of the sewage treatment facility was 2566 tons/day. The wastewater environmental protection facilities have been operated well with the discharge of main pollutants meeting withtheacceptance criteria, during thereporting period.
(2) Environmental ImpactAssessment and Other Environmental ProtectionAdministrative Licenses ofthe Construction Project
The technical innovation and expansion projects of Guangdong Xingda Hongye Electronics Co., Ltd. have been approved by Zhongshan Environmental Protection Bureau, Guangdong on 31 December 2012 (Zhongshan Environmental Protection Bureau Construction Notice[2012] No. 115), and have been checked and accepted by Zhongshan Environmental Protection Bureau, Guangdong on 21 December 2012.(Zhongshan Environmental Protection BureauAcceptance Report[2012] No. 000092), with a sewage permit, certificate No.: 91442000768405216J001P.
(3) Contingency Plan forEmergent Environmental Incident
Guangdong Xingda Hongye Electronics Co., Ltd. has formulated the Contingency Plan for Emergent Environmental Incident strictly abided by requirements of laws and regulations, such as Law of the People's Republic of China on Emergency Response and Interim Measures on
Environmental Emergency Response Plan, and put on records at Zhongshan Environmental
Protection Bureau, Guangdong.
KonkaGroupCo.,Ltd. InterimReport2018 (4) Environmental Self-Monitoring Plan
According to the requirements of the Environmental ProtectionAdministration, Guangdong Xingda Hongye Electronics Co., Ltd. pays high attention to environmental monitoring management, so as to formulate the Environmental Self-Monitoring Plan and report to the municipal environmental protection bureau for approval and record. It implements online monitoring for the PH, COD and ammonia nitrogen pollutants discharged in wastewater with the automatic frequency of every 2 hours and entrusts the qualified third-party institute to carry out regular maintenance on automatic monitoring equipment and monitoring data networking equipment. The self-monitoring results will be reported daily to the public on the national pollution source monitoring information management and sharing platform and monitored bythepublic.
(5) Other Environmental InformationThat ShouldBe Disclosed
The environmental protection investment of Guangdong Xingda Hongye Electronics Co., Ltd. was about RMB6.28 million in the first half of 2018, mainly used as the environmental engineering investment (about RMB3.5 million) and the operation of environmental protection equipment (about RMB2.78 million).
(6) Other Environmental Information
According to the examination by the Company, the Company and its other holding subsidiaries are not key pollutant units. All have faithfully implemented the laws and regulations related to environmental protection, such as Environmental Protection Law of the People's Republic of China, Water Pollution Prevention and Control Law of the People's Republic of China, Law of the People's Republic of China on the Prevention and Control of Atmospheric Pollution, Law of the People's Republic of China on Prevention and Control of Pollution From Environmental Noise, Law of the People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste in the daily production and operation, without being punished for violations of laws and regulations during thereporting period.
2.Measures TakenforTargeted Poverty Alleviation
(1) Plan forTargeted Measures
The Company and the China Youth Development Foundation (CYDF) have jointly held the large public benefit activity “Heart Journey” since 2013. Five sessions of activities have been held until now. In 2013, we helped thousands of migrant workers to go home. In 2014, we planted tens of thousands of trees nationwide and improved the living conditions of 5,000 needy families by planting the economic and ecological trees. In 2015, we donated nearly 100 music classrooms to the remote regions of China by carrying out “Happy Music Classroom” Project with CYDF. In 2016, we sponsored the professional training of 100 music teachers in remote areas to promote the construction of teaching staff in poverty-stricken areas. In 2017, the activities of “Heart Journey” focused on affectionate care for families of left-behind children in poverty-stricken areas. We
KonkaGroupCo.,Ltd. InterimReport2018 helped 100 left-behind children to come to cities to reunite with their parents during the summer vacation, and donated houses named KonkaHeart Journey Family in schools in western areas. (2) Outlineof Targeted Measures inthe Reporting Period
In the first half year of 2018, the activity of “Heart Journey” is still in the planning, and not carried out officially.
(3) Results ofTargeted Measures
Naught
(4) SubsequentTargeted Measure Plans
The Company and the ChinaYouth Development Foundation (CYDF) will continue to hold a series ofpublicbenefit activity “Heart Journey”.
XVI. OtherSignificantEvents
√ Applicable□ Not applicable
(1) Project regarding founding a company for multimedia business: On 17 November 2017, the 37th Meeting of the 8th Board of Directors of the Company reviewed and approved the Proposal on Founding a Company for Multimedia Business of Konka. So far, Shenzhen Konka Electronics Technology Co., Ltd. has been formally established and going into operation. The Company is in the process ofbusiness switchingand asset introduction.
(2) The Project of Working with China Orient Asset Management (International) Holding Limited to Plan to Establish an Industrial Fund and Conduct Strategic Cooperation: On 16 April 2018, the 41st Meeting of the 8th Board of Directors of the Company deliberated and passed the Proposal on Launching the Establishment of China Orient Konka IndustryM&AFund, and the fund is currently in theprocess offiling.
(3)The Project of Listing Transfer of Shanghai Real Estate: On 23August 2017, the 34th Meeting of the 8th Board of Directors of the Company deliberated and passed the Proposal on Listing Transfer of Part Real Estate on the. At present, the Shanghai Real Estate to be listed for transfer has been officially listed, andis currently inthepublicity period.
(4) Signed a Strategic Cooperation Agreement with the Chuzhou Municipal Government: On 27 June 2018, the 45th Meeting of the 8th Board of Directors of the Company deliberated and passed the Proposal on Investment in the Construction of the Second Phase of Konka Science and Technology Innovation Centre in Chuzhou. At present, the second phase of the Science and Technology Centre project has won the bid for the project land and other projects are still under negotiation.
||||||
|-|-|-|-|-|
|AnnouncementNo.|Date|Title|Pageonnewspaper|Link|
|||||Linkonhttp://www.cninfo.com.cn|
|2018-01|3January2018|AnnouncementonReceivingtheGrantsofZombieEnterprises|SecuritiesTimesB5,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2018-01-03/1204299322.PDF|

KonkaGroupCo.,Ltd. InterimReport2018
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|-|-|-|-|-|
|2018-02|4January2018|AnnouncementonRestructuringandRenamingofControllingShareholdersandtheChangesofRelevantofBusinessRegistrationEvents|SecuritiesTimesB44,TaKungPaoA20|http://www.cninfo.com.cn/finalpage/2018-01-04/1204302079.PDF|
|2018-03|4January2018|AnnouncementonRecognitionofDisclosureFee|SecuritiesTimesB44,TaKungPaoA20|http://www.cninfo.com.cn/finalpage/2018-01-04/1204302080.PDF|
|2018-04|4January2018|AnnouncementonMajority-ownedSubsidiary’ receivingoftheGovernmentSubsidies|SecuritiesTimesB44,TaKungPaoA20|http://www.cninfo.com.cn/finalpage/2018-01-04/1204302081.PDF|
|2018-05|19January2018|AnnouncementonthePlannedListingtoTransfertheSharesofQingsongVentureInvestmentFund|SecuritiesTimesB148,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2018-01-19/1204342883.PDF|
|2018-06|25January2018|AnnouncementontheChangesofConsultingTelephoneoftheCompany’sInvestors|SecuritiesTimesB28,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2018-01-25/1204358631.PDF|
|2018-07|26January2018|Announcementonthe2017EarningsForecasts|SecuritiesTimesB25,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2018-01-26/1204362267.PDF|
|2018-08|20March2018|AnnouncementabouttheProgressofthePlannedListingtoTransfertheSharesofQingsongVentureInvestmentFund|SecuritiesTimesB40,TaKungPaoB3|http://www.cninfo.com.cn/finalpage/2018-03-20/1204488812.PDF|
|2018-09|24March2018|AnnouncementonReceivingtheTaxReimbursementEvents|SecuritiesTimesB177,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2018-03-24/1204510528.PDF|
|2018-10|31March2018|Announcementonthe2017AnnualReport||http://www.cninfo.com.cn/finalpage/2018-03-31/1204553590.PDF|
|2018-11|31March2018|AnnouncementontheAbstractofthe2017AnnualReport|SecuritiesTimesB253,TaKungPaoA18|http://www.cninfo.com.cn/finalpage/2018-03-31/1204553579.PDF|
|2018-12|31March2018|AnnouncementontheResolutionofthe40thMeetingofthe8thBoardofDirectors|SecuritiesTimesB253,TaKungPaoA18|http://www.cninfo.com.cn/finalpage/2018-03-31/1204553581.PDF|
|2018-13|31March2018|AnnouncementontheResolutionofthe17thMeetingofthe8thSupervisoryCommittee|SecuritiesTimesB253,TaKungPaoA18|http://www.cninfo.com.cn/finalpage/2018-03-31/1204553582.PDF|
|2018-14|31March2018|AnnouncementontheExpectationofthe2018RoutineRelatedTransaction|SecuritiesTimesB253,TaKungPao|http://www.cninfo.com.cn/finalpage/2018-03-31/1204553583.PDF|

KonkaGroupCo.,Ltd. InterimReport2018
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|-|-|-|-|-|
||||A18||
|2018-15|31March2018|AnnouncementabouttheExternalGuaranteeofKonkaGroupCo.,Ltd.|SecuritiesTimesB253,TaKungPaoA18|http://www.cninfo.com.cn/finalpage/2018-03-31/1204553584.PDF|
|2018-16|31March2018|AnnouncementontheChangesofPartofAccountingPolicies|SecuritiesTimesB254,TaKungPaoA18|http://www.cninfo.com.cn/finalpage/2018-03-31/1204553585.PDF|
|2018-17|31March2018|AnnouncementaboutOfferingEntrustedLoanstoMajority-ownedSubsidiary|SecuritiesTimesB254,TaKungPaoA18|http://www.cninfo.com.cn/finalpage/2018-03-31/1204553586.PDF|
|2018-18|31March2018|NoticeonConveningthe2017AnnualGeneralMeeting|SecuritiesTimesB254,TaKungPaoA19|http://www.cninfo.com.cn/finalpage/2018-03-31/1204553580.PDF|
|2018-19|31March2018|AnnouncementontheCompletionofIndustrialandCommercialRegistrationofChangesofTransferringtheSharesofQingsongVentureInvestmentFund|SecuritiesTimesB254,TaKungPaoA19|http://www.cninfo.com.cn/finalpage/2018-03-31/1204553587.PDF|
|2018-20|10April2018|AnnouncementonMajority-ownedSubsidiary’ receivingoftheGovernmentSubsidies|SecuritiesTimesB40,TaKungPaoB6|http://www.cninfo.com.cn/finalpage/2018-04-10/1204593954.PDF|
|2018-21|14April2018|Announcementonthe2018FirstQuarter EarningsForecasts|SecuritiesTimesB48,TaKungPaoB3|http://www.cninfo.com.cn/finalpage/2018-04-14/1204624897.PDF|
|2018-22|18April2018|AnnouncementontheResolutionofthe41stMeetingofthe8thBoardofDirectors|SecuritiesTimesB37,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2018-04-18/1204646424.PDF|
|2018-23|18April2018|NoticeonConveningthe1stExtraordinaryGeneralMeetingof2018|SecuritiesTimesB37,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2018-04-18/1204646425.PDF|
|2018-24|18April2018|AnnouncementaboutCapitalIncreaseinSanjiangRealEstateandRelated-partyTransactions|SecuritiesTimesB37,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2018-04-18/1204646430.PDF|
|2018-25|18April2018|AnnouncementonSponsoringtheEstablishmentofIndustrialBuyoutFund|SecuritiesTimesB37,TaKungPaoB9|http://www.cninfo.com.cn/finalpage/2018-04-18/1204646426.PDF|
|2018-26|24April2018|AnnouncementontheResolutionofthe2017AnnualGeneralMeeting|SecuritiesTimesB189,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2018-04-24/1204700352.PDF|

KonkaGroupCo.,Ltd. InterimReport2018
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|-|-|-|-|-|
|2018-27|28April2018|2018FirstQuarterReport||http://www.cninfo.com.cn/finalpage/2018-04-28/1204821265.PDF|
|2018-28|28April2018|Textofthe2018FirstQuarterReport|SecuritiesTimesB44,TaKungPaoB14|http://www.cninfo.com.cn/finalpage/2018-04-28/1204821263.PDF|
|2018-29|4May2018|AnnouncementontheResolutionofthe1stExtraordinaryGeneralMeetingof2018|SecuritiesTimesB16,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2018-05-04/1204906066.PDF|
|2018-30|8May2018|AnnouncementabouttheProgressofExternalGuarantee|SecuritiesTimesB28,TaKungPaoB6|http://www.cninfo.com.cn/finalpage/2018-05-08/1204918242.PDF|
|2018-31|22May2018|AnnouncementonSigningtheStrategicCooperationAgreementwithChuzhouMunicipalGovernment|SecuritiesTimesB25,TaKungPaoA17|http://www.cninfo.com.cn/finalpage/2018-05-22/1204979369.PDF|
|2018-32|22May2018|OutlineofMediumandLong-termDevelopmentStrategyProgramming|SecuritiesTimesB25,TaKungPaoA17|http://www.cninfo.com.cn/finalpage/2018-05-22/1204979370.PDF|
|2018-33|23May2018|AnnouncementontheResolutionofthe43rdMeetingofthe8thBoardofDirectors|SecuritiesTimesB17,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2018-05-23/1204981920.PDF|
|2018-34|23May2018|AnnouncementonOfferingGuaranteeLimittotheWholly-ownedSubsidiary|SecuritiesTimesB17,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2018-05-23/1204981921.PDF|
|2018-35|23May2018|AnnouncementonthePrivatePlacementofCorporateBondProgrammingbytheCompany|SecuritiesTimesB17,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2018-05-23/1204981927.PDF|
|2018-36|23May2018|AnnouncementonCarryingouttheBusinessofAssetSecuritizationofBusinessFactoringbythewholly-ownedSubsidiary|SecuritiesTimesB17,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2018-05-23/1204981922.PDF|
|2018-37|23May2018|AnnouncementonCarryingouttheBusinessofAssetSecuritizationofAccountsReceivable|SecuritiesTimesB17,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2018-05-23/1204981923.PDF|
|2018-38|23May2018|NoticeonConveningthe2ndExtraordinaryGeneralMeetingof2018|SecuritiesTimesB17,TaKungPaoB4|http://www.cninfo.com.cn/finalpage/2018-05-23/1204981924.PDF|
|2018-39|25May2018|AnnouncementonSigningtheStrategicCooperationAgreementwithCMSZhiyuanCapital|SecuritiesTimesB32,TaKungPaoB8|http://www.cninfo.com.cn/finalpage/2018-05-25/1204999668.PDF|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|2018-40|29May2018|AnnouncementontheImplementationofDividendPlanof2017|SecuritiesTimesB114,TaKungPaoB14|http://www.cninfo.com.cn/finalpage/2018-05-30/1205014254.PDF|
|2018-41|29May2018|Announcementonthewholly-ownedsubsidiary’sOfferingGuaranteetoMajority-ownedSubsidiary|SecuritiesTimesB114,TaKungPaoB14|http://www.cninfo.com.cn/finalpage/2018-05-30/1205014255.PDF|
|2018-42|31May2018|AnnouncementontheControllingShareholders’ PlanningofProvidingtheBusinessofAssetSecuritizationofBusinessFactoringwiththeDifference|SecuritiesTimesB100,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2018-06-01/1205021832.PDF|
|2018-43|8June2018|AnnouncementontheResolutionofthe2ndExtraordinaryGeneralMeetingof2018|SecuritiesTimesB40,TaKungPaoB5|http://www.cninfo.com.cn/finalpage/2018-06-08/1205044244.PDF|
|2018-44|14June2018|AnnouncementonOfferingOverseasLoanunderDomesticGuaranteetoForeignWholly-ownedSubsidiary|SecuritiesTimesB36,TaKungPaoB2|http://www.cninfo.com.cn/finalpage/2018-06-14/1205057941.PDF|
|2018-45|16June2018|AnnouncementontheResolutionofthe44thMeetingofthe8thBoardofDirectors|SecuritiesTimesB29,TaKungPaoB6|http://www.cninfo.com.cn/finalpage/2018-06-16/1205062957.PDF|
|2018-46|16June2018|AnnouncementabouttheTransferof51%EquitiesofKunshanKangshengandRelated-partyTransactions|SecuritiesTimesB29,TaKungPaoB6|http://www.cninfo.com.cn/finalpage/2018-06-16/1205062958.PDF|
|2018-47|16June2018|IndicativeAnnouncementontheExpectationofWinningtheBidoftheProject|SecuritiesTimesB4,TaKungPaoB6|http://www.cninfo.com.cn/finalpage/2018-06-16/1205064576.PDF|
|2018-48|20June2018|AnnouncementabouttheProgressofOfferingGuaranteestothewholly-ownedsubsidiary|SecuritiesTimesB52,TaKungPaoB1|http://www.cninfo.com.cn/finalpage/2018-06-21/1205077958.PDF|
|2018-49|22June2018|AnnouncementabouttheProgressofOfferingGuaranteestotheMajority-ownedSubsidiary|SecuritiesTimesB29,TaKungPaoB6|http://www.cninfo.com.cn/finalpage/2018-06-22/1205079784.PDF|
|2018-50|28June2018|AnnouncementontheResolutionofthe45thMeetingofthe8thBoardofDirectors|SecuritiesTimesB44,TaKungPaoB7|http://www.cninfo.com.cn/finalpage/2018-06-28/1205099880.PDF|
|2018-51|28June2018|AnnouncementontheInvestmentandEstablishmentofHeadquarterBaseofKonkaOneBeltandOneRoadinChengdu|SecuritiesTimesB44,TaKungPaoB7|http://www.cninfo.com.cn/finalpage/2018-06-28/1205099881.PDF|
|2018-52|28June|AnnouncementonInformation|SecuritiesTimes|http://www.cninfo.com.cn/finalpage/20|

KonkaGroupCo.,Ltd. InterimReport2018
|||||
|-|-|-|-|
|2018|DisclosureofVoluntarinessofReceivingLetterofAcceptance|B44,TaKungPaoB7|18-06-28/1205099882.PDF|

XVII. SignificantEvents ofSubsidiaries
□ Applicable√ Not applicable
KonkaGroupCo.,Ltd. InterimReport2018 Part VI Share Changes and Shareholder Information
I ShareChanges
1.ShareChanges
Unit:share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Before||Increase/decreaseinReportingPeriod(+/-)|||||After||
||Shares|Percentage(%)|Newissues|Sharesasdividendconvertedfromprofit|Sharesasdividendconvertedfromcapitalreserves|Other|Subtotal|Shares|Percentage(%)|
|1.Restrictedshares|19,500|0.00%||||||19,500|0.00%|
|1.3 Shares held byother domesticinvestors|19,500|0.00%||||||19,500|0.00%|
|Amongwhich:Sharesheld by domesticlegalpersons||||||||||
|Sharesheld by domesticnaturalpersons|19,500|0.00%||||||19,500|0.00%|
|2.Unrestrictedshares|2,407,925,908|100%||||||2,407,925,908|100%|
|2.1RMB-denominatedordinaryshares|1,596,574,300|66.31%||||||1,596,574,300|66.31%|
|2.2 Domesticallylistedforeignshares|811,351,608|33.69%||||||811,351,608|33.69%|
|3.Totalshares|2,407,945,408|100%||||||2,407,945,408|100%|

 Reasons for share changes:
□ Applicable√ Not applicable
Approval ofshare changes:
□ Applicable√ Not applicable
KonkaGroupCo.,Ltd. InterimReport2018 Transfer of share ownership:
□ Applicable√ Not applicable
Effects of share changes on the basic earnings per share, diluted earnings per share, equity per share attributable to theCompany’s ordinary shareholders and other financial indicators of the prior year and theprioraccounting period, respectively:
□ Applicable√ Not applicable
Other information that the Company considers necessary or is required by the securities regulator to be disclosed:
□ Applicable√ Not applicable
2.Changes inRestricted Shares
□ Applicable√ Not applicable
II Issuance andListingof Securities
□ Applicable√ Not applicable
III Shareholders andTheirHoldingsatPeriod-End
Unit:share
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Number of ordinaryshareholders||87,774||Number of preferred shareholders with resumed voting rights (ifany)(seenote8)||||||0||
|5%orgreaterordinaryshareholdersortop10ordinaryshareholders||||||||||||
|Nameofshareholder|Natureofshareholder||Shareholdingpercentage||Ordinaryshares|Increase/decreaseinReportingPeriod|Restrictedordinaryshares|Unrestrictedordinaryshares|Sharesinpledgeorfrozen|||
||||||||||Status||Shares|
|OVERSEASCHINESETOWNENTERPRISESCO.,LTD|State-ownedlegalperson||21.75%||523,746,932|0|0|523,746,932||||
|CITIC SECURITIESBROKERAGE (HONGKONG)CO.,LTD.|Foreignlegalperson||7.56%||182,100,202|0|0|182,100,202||||
|HOLYTIMEGROUPLIMITED|Foreignlegalperson||2.33%||56,039,500|-10,324|0|56,039,500||||
|GUOYUANSECURITIESBROKER(HK)CO.,LTD.|Foreignlegalperson||2.25%||54,203,779|-551,366|0|54,203,779||||
|GAOLINGFUND,L.P.|Foreign||2.19%||52,801,250|0|0|52,801,250||||

KonkaGroupCo.,Ltd. InterimReport2018
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||legalperson||||||||||
|WANGLEI|Domesticnaturalperson|1.52%||36,715,300||-9,394,541|0||36,715,300||
|CHINAMERCHANTSSECURITIES(HK)LIMITED|State-ownedlegalperson|0.94%||22,665,024||833,004|0||22,665,024||
|NAMNGAI|Domesticnaturalperson|0.90%||21,712,140||-307,900|0||21,712,140||
|YUNNANINTERNATIONALTRUSTCO.,LTD-JULINO.48SINGLECAPITALTRUST|Other|0.88%||21,145,380||928,520|0||21,145,380||
|ZHANGXIAOYU|Domesticnaturalperson|0.85%||20,476,618||20,476,618|0||20,476,618||
|Strategic investor or general legal personbecoming top-10 ordinary shareholder due torightsissue(ifany)(seenote3)|||N/A||||||||
|Related or acting-in-concert parties amongshareholdersabove|||Jialong Investment Limited, a wholly-funded subsidiary of the Company’sfirst majority shareholder Overseas Chinese Town Enterprises Co. (“OCTGroup” for short), holds180,001,110and 18,360,000 ordinary shares intheCompanyrespectivelythroughCITICSecuritiesBrokerage(HongKong)Co.,Ltd. and China Merchants Securities (HK) Limited. Jialong InvestmentLimited and Overseas Chinese Town Enterprises Co. are parties acting inconcert. Other than that, it is unknown whether the other shareholders arerelatedpartiesoracting-in-concertpartiesornot.||||||||
|Top10unrestrictedordinaryshareholders|||||||||||
|Nameofshareholder|||||Unrestrictedordinaryshares|||Typeofshares|||
|||||||||Type||Shares|
|OVERSEASCHINESETOWNENTERPRISESCO.,LTD|||||523,746,932|||RMB-denominatedordinarystock||523,746,932|
|CITIC SECURITIES BROKERAGE (HONG KONG) CO.,LTD.|||||182,100,202|||Domesticallylisted foreignstock||182,100,202|
|HOLYTIMEGROUPLIMITED|||||56,039,500|||Domesticallylisted foreignstock||56,039,500|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|GUOYUANSECURITIESBROKER(HK)CO.,LTD.||54,203,779|Domesticallylisted foreignstock|54,203,779|
|GAOLINGFUND,L.P.||52,801,250|Domesticallylisted foreignstock|52,801,250|
|WANGLEI||36,715,300|RMB-denominatedordinarystock|36,715,300|
|CHINAMERCHANTSSECURITIES(HK)LIMITED||22,665,024|Domesticallylisted foreignstock|22,665,024|
|NAMNGAI||21,712,140|Domesticallylisted foreignstock|21,712,140|
|YUNNANINTERNATIONALTRUSTCO.,LTD-JULINO.48SINGLECAPITALTRUST||21,145,380|RMB-denominatedordinarystock|21,145,380|
|ZHANGXIAOYU||20,476,618|RMB-denominatedordinarystock|20,476,618|
|Related or acting-in-concert partiesamong top 10 unrestricted ordinaryshareholders,aswellasbetweentop10unrestricted ordinary shareholders andtop10ordinaryshareholders|Jialong Investment Limited, a wholly-funded subsidiary of the Company’s firstmajority shareholder Overseas Chinese Town Enterprises Co. (“OCT Group” forshort), holds 180,001,110 and 18,360,000 common shares in the Companyrespectively through CITIC Securities Brokerage (Hong Kong) Co., Ltd. and ChinaMerchants Securities (HK) Limited. Jialong Investment Limited and OverseasChinese Town Enterprises Co. are parties acting in concert. Other than that, it isunknownwhethertheothershareholdersarerelatedpartiesoracting-in-concertpartiesornot.||||
|Top 10 ordinary shareholdersconductingsecuritiesmargintrading(ifany)(seenote4)|WangLeiholds36,715,300A-sharesintheCompanythroughhisaccountofcollateralsecuritiesformargintradinginGFSecuritiesCo.,Ltd.ZhangXiaoyuholds20,476,618A-sharesintheCompanythroughheraccountofcollateralsecuritiesformargintradinginHuaxiSecuritiesCo.,Ltd.||||

Indicate by tick mark whether any of the top ten common shareholders or the top ten non-restricted common shareholders of the Company conducted any promissory report during this Reporting Period.
□ Yea√ No
No suchcases in thisReporting Period.
IVChangeof ControllingShareholderorActual Controllerin Reporting Period
Change ofthecontrolling shareholderin theReporting Period:
KonkaGroupCo.,Ltd. InterimReport2018□ Applicable√ Not applicable
The controlling shareholder remained thesamein theReporting Period.
Change oftheactual controller intheReporting Period:
□ Applicable√ Not applicable
The actual controllerremained the sameinthe Reporting Period.
KonkaGroupCo.,Ltd. InterimReport2018 Part VII Preferred Shares
□ Applicable√ Not applicable
No preferred shares in theReporting Period.
KonkaGroupCo.,Ltd. InterimReport2018 Part VIII Directors, Supervisors and Senior Management
I Changes inShareholdingsof Directors, Supervisors andSeniorManagement
□ Applicable√ Not applicable
There was no change in shareholding of Directors, Supervisors, Senior Management Staffs and Employees, fordetails, please refer to2017Annual Report
II ChangeofDirectors, Supervisors andSeniorManagement
□ Applicable√ Not applicable
There was no change in Directors, Supervisors, Senior Management Staffs and Employees, for details, please refer to 2017Annual Report
KonkaGroupCo.,Ltd. InterimReport2018 Part IX Corporate Bonds
Does the Company have any corporate bonds publicly offered on the stock exchange, which were undue before thedate ofthisReport’s approval orwere duebut could not beredeemed infull? No.
KonkaGroupCo.,Ltd. InterimReport2018 Part X Financial Statements
IIndependentAuditor’s Report
Is thisinterim financial report audited byan independent auditor?
□Yes√ No
This interim financial report is unaudited bysuch an auditor.
II FinancialStatements
Currency unit for thefinancial statements and thenotes thereto: RMB
1.Consolidated BalanceSheet
Prepared byKonka Group Co., Ltd.
30June2018
Unit:RMB
||||
|-|-|-|
|Item|30June2018|31December2017|
|Currentassets:|||
|Monetaryassets|3,911,820,154.60|3,212,044,851.08|
|Settlementreserve|||
|Interbankloansgranted|||
|Financialassetsatfairvaluethroughprofitorloss|14,497,221.94|296,799.53|
|Derivativefinancialassets|||
|Notesreceivable|4,615,251,240.57|5,178,668,988.23|
|Accountsreceivable|4,428,390,613.21|3,443,095,947.26|
|Prepayments|901,453,498.53|467,123,091.74|
|Premiumsreceivable|||
|Reinsurancereceivables|||
|Receivablereinsurancecontractreserve|||
|Interestreceivable|5,717,301.31|1,813,256.77|
|Dividendsreceivable|||
|Otherreceivables|602,976,440.35|182,405,099.39|
|Financialassetspurchasedunderresaleagreements|||
|Inventories|4,854,235,062.74|4,690,363,565.53|
|Assetsclassifiedasheldforsale|||
|Currentportionofnon-currentassets|||

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Othercurrentassets|1,845,595,871.52|1,715,326,868.81|
|Totalcurrentassets|21,179,937,404.77|18,891,138,468.34|
|Non-currentassets:|||
|Loansandadvancestocustomers|||
|Available-for-salefinancialassets|692,112,236.33|712,170,399.09|
|Held-to-maturityinvestments|||
|Long-termreceivables|345,206,723.50||
|Long-termequityinvestments|2,187,539,867.00|1,319,987,343.74|
|Investmentproperty|213,639,992.84|216,455,629.99|
|Fixedassets|1,789,101,811.32|1,587,170,348.35|
|Constructioninprogress|120,644,724.53|135,863,821.01|
|Engineeringmaterials|||
|Proceedsfromdisposaloffixedassets|||
|Productivelivingassets|||
|Oilandgasassets|||
|Intangibleassets|412,349,807.84|205,057,773.69|
|R&Dexpense|||
|Goodwill|506,030,181.63|3,597,657.15|
|Long-termprepaidexpense|168,727,536.93|150,060,937.30|
|Deferredincometaxassets|447,191,781.88|307,942,263.12|
|Othernon-currentassets|71,521,808.37|29,290,828.00|
|Totalnon-currentassets|6,954,066,472.17|4,667,597,001.44|
|Totalassets|28,134,003,876.94|23,558,735,469.78|
|Currentliabilities:|||
|Short-termborrowings|10,397,447,703.32|6,927,472,037.35|
|Borrowingsfromcentralbank|||
|Customer deposits and deposits from banks and otherfinancialinstitutions|||
|Interbankloansobtained|||
|Financialliabilitiesatfairvaluethroughprofitorloss|1,827,480.43|47,482,470.50|
|Derivativefinancialliabilities|||
|Notespayable|926,402,659.29|541,175,312.09|
|Accountspayable|3,698,545,344.05|3,612,216,266.59|
|Advancesfromcustomers|936,672,416.32|640,510,784.17|
|Financialassetssoldunderrepurchaseagreements|||

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Handlingchargesandcommissionspayable|||
|Payrollpayable|197,104,499.84|291,370,297.67|
|Taxespayable|198,493,151.37|1,326,569,094.53|
|Interestpayable|44,957,010.99|35,723,963.94|
|Dividendspayable|||
|Otherpayables|2,374,301,159.44|1,608,359,305.87|
|Reinsurancepayables|||
|Insurancecontractreserve|||
|Payablesforactingtradingofsecurities|||
|Payablesforunderwritingofsecurities|||
|Liabilities directly associated with assets classified asheldforsale|||
|Currentportionofnon-currentliabilities|10,165,596.84|374,358.99|
|Othercurrentliabilities|||
|Totalcurrentliabilities|18,785,917,021.89|15,031,253,891.70|
|Non-currentliabilities:|||
|Long-termborrowings|501,000,000.00|167,000,000.00|
|Bondspayable|||
|Including:Preferredshares|||
|Perpetualbonds|||
|Long-termpayables|11,631,339.65|61,538.46|
|Long-termpayrollpayable|11,440,243.54|13,361,821.86|
|Specificpayables|||
|Provisions|1,552,310.49|6,181,865.10|
|Deferredincome|130,861,490.43|130,049,911.87|
|Deferredincometaxliabilities|64,138,889.89|12,636,633.40|
|Othernon-currentliabilities|||
|Totalnon-currentliabilities|720,624,274.00|329,291,770.69|
|Totalliabilities|19,506,541,295.89|15,360,545,662.39|
|Owners’ equity:|||
|Sharecapital|2,407,945,408.00|2,407,945,408.00|
|Otherequityinstruments|||
|Including:Preferredshares|||
|Perpetualbonds|||
|Capitalreserves|104,732,242.30|104,732,242.30|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Less:Treasuryshares|||
|Othercomprehensiveincome|-1,154,381.79|3,697,458.95|
|Specificreserve|||
|Surplusreserves|1,217,644,874.79|1,217,644,874.79|
|Generalreserve|||
|Retainedearnings|4,211,831,396.96|4,260,125,492.57|
|Total equity attributable to owners of the Company as theparent|7,940,999,540.26|7,994,145,476.61|
|Non-controllinginterests|686,463,040.79|204,044,330.78|
|Totalowners’ equity|8,627,462,581.05|8,198,189,807.39|
|Totalliabilitiesandowners’ equity|28,134,003,876.94|23,558,735,469.78|

 Legal representative: Liu Fengxi CFO: Li Chunlei
Head of thefinancial department: FengJunxiu
2.BalanceSheet oftheCompany as theParent
Unit:RMB
||||
|-|-|-|
|Item|30June2018|31December2017|
|Currentassets:|||
|Monetaryassets|1,745,554,700.43|1,760,838,390.83|
|Financialassetsatfairvaluethroughprofitorloss|14,497,221.94|296,799.53|
|Derivativefinancialassets|||
|Notesreceivable|2,497,170,749.31|2,864,064,309.99|
|Accountsreceivable|4,511,624,049.28|4,732,153,992.25|
|Prepayments|1,646,569,512.18|1,066,260,182.37|
|Interestreceivable|2,606,829.77|23,894,771.88|
|Dividendsreceivable||2,690,276.72|
|Otherreceivables|3,487,600,787.78|4,314,882,334.26|
|Inventories|1,584,221,574.12|2,090,697,937.23|
|Assetsclassifiedasheldforsale|||
|Currentportionofnon-currentassets||100,000,000.00|
|Othercurrentassets|1,382,920,586.50|1,547,454,872.74|
|Totalcurrentassets|16,872,766,011.31|18,503,233,867.80|
|Non-currentassets:|||
|Available-for-salefinancialassets|562,612,236.33|562,612,236.33|
|Held-to-maturityinvestments|||
|Long-termreceivables|||

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Long-termequityinvestments|4,617,530,028.77|2,649,074,424.45|
|Investmentproperty|213,639,992.84|216,455,629.99|
|Fixedassets|471,773,144.33|482,020,892.58|
|Constructioninprogress|88,654,150.01|79,927,345.88|
|Engineeringmaterials|||
|Proceedsfromdisposaloffixedassets|||
|Productivelivingassets|||
|Oilandgasassets|||
|Intangibleassets|90,186,303.05|91,718,400.70|
|R&Dexpense|||
|Goodwill|||
|Long-termprepaidexpense|79,293,494.84|78,305,555.97|
|Deferredincometaxassets|393,296,375.06|279,324,511.96|
|Othernon-currentassets|20,000,000.00|20,000,000.00|
|Totalnon-currentassets|6,536,985,725.23|4,459,438,997.86|
|Totalassets|23,409,751,736.54|22,962,672,865.66|
|Currentliabilities:|||
|Short-termborrowings|5,083,795,772.39|3,269,730,888.60|
|Financialliabilitiesatfairvaluethroughprofitorloss|1,827,480.43|47,482,470.50|
|Derivativefinancialliabilities|||
|Notespayable|2,960,886,821.61|2,394,426,158.76|
|Accountspayable|5,114,630,069.06|6,167,204,323.22|
|Advancesfromcustomers|246,705,278.32|601,036,147.76|
|Payrollpayable|103,682,253.17|163,066,135.71|
|Taxespayable|10,460,012.97|1,070,771,570.12|
|Interestpayable|32,598,284.85|50,336,913.53|
|Dividendspayable|||
|Otherpayables|2,061,843,680.86|1,868,073,013.59|
|Liabilities directly associated with assets classified asheldforsale|||
|Currentportionofnon-currentliabilities|||
|Othercurrentliabilities|||
|Totalcurrentliabilities|15,616,429,653.66|15,632,127,621.79|
|Non-currentliabilities:|||
|Long-termborrowings|266,000,000.00|167,000,000.00|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Bondspayable|||
|Including:Preferredshares|||
|Perpetualbonds|||
|Long-termpayables|||
|Long-termpayrollpayable|||
|Specificpayables|||
|Provisions|1,552,310.49|6,181,865.10|
|Deferredincome|88,209,431.31|94,590,560.82|
|Deferredincometaxliabilities|27,308,921.77||
|Othernon-currentliabilities|||
|Totalnon-currentliabilities|383,070,663.57|267,772,425.92|
|Totalliabilities|15,999,500,317.23|15,899,900,047.71|
|Owners’ equity:|||
|Sharecapital|2,407,945,408.00|2,407,945,408.00|
|Otherequityinstruments|||
|Including:Preferredshares|||
|Perpetualbonds|||
|Capitalreserves|111,525,163.22|111,525,163.22|
|Less:Treasuryshares|||
|Othercomprehensiveincome|-1,646,283.60|-1,970,304.62|
|Specificreserve|||
|Surplusreserves|1,217,644,874.79|1,217,644,874.79|
|Retainedearnings|3,674,782,256.90|3,327,627,676.56|
|Totalowners’ equity|7,410,251,419.31|7,062,772,817.95|
|Totalliabilitiesandowners’ equity|23,409,751,736.54|22,962,672,865.66|

 3.Consolidated Income Statement
Unit:RMB
||||
|-|-|-|
|Item|H12018|H12017|
|1.Revenue|17,625,414,769.82|11,405,965,979.43|
|Including:Operatingrevenue|17,625,414,769.82|11,405,965,979.43|
|Interestincome|||
|Premiumincome|||
|Handlingchargeandcommissionincome|||
|2.Operatingcostsandexpenses|18,033,756,773.54|11,495,886,195.84|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Including:Costofsales|16,442,256,445.26|10,110,191,258.07|
|Interestexpense|||
|Handlingchargeandcommissionexpense|||
|Surrenders|||
|Netclaimspaid|||
|Netamountprovidedasinsurancecontractreserve|||
|Expenditureonpolicydividends|||
|Reinsurancepremiumexpense|||
|Taxesandsurtaxes|27,646,574.62|34,429,592.04|
|Sellingexpense|1,103,181,074.51|974,003,306.54|
|Administrativeexpense|364,827,669.33|264,108,100.97|
|Financecosts|36,292,909.41|110,882,895.46|
|Assetimpairmentloss|59,552,100.41|2,271,042.76|
|Add:Gainonchangesinfairvalue(“-” forloss)|59,855,412.48|-103,077,757.73|
|Investmentincome(“-” forloss)|531,758,571.71|67,005,572.06|
|Including:Shareofprofitorlossofjointventuresandassociates|6,075,182.59|-4,574,294.19|
|Foreignexchangegain(“-” forloss)|||
|Assetdisposalincome(“-” forloss)|63,722,105.38||
|Otherincome|123,026,283.50|36,838,391.51|
|3.Operatingprofit(“-” forloss)|370,020,369.35|-89,154,010.57|
|Add:Non-operatingincome|27,217,492.97|123,347,108.29|
|Less:Non-operatingexpense|5,951,749.57|3,635,538.11|
|4.Profitbeforetaxation(“-” forloss)|391,286,112.75|30,557,559.61|
|Less:Incometaxexpense|-17,446,049.13|-3,838,772.97|
|5.Netprofit(“-” fornetloss)|408,732,161.88|34,396,332.58|
|5.1 Net profit from continuing operations (“-” for netloss)|||
|5.2Netprofit fromdiscontinuedoperations(“-” fornetloss)|||
|Net profit attributable to owners of the Company as theparent|341,793,039.03|30,871,267.86|
|Netprofitattributabletonon-controllinginterests|66,939,122.85|3,525,064.72|
|6.Othercomprehensiveincome,netoftax|-4,400,958.71|-2,226,560.59|
|AttributabletoownersoftheCompanyastheparent|-4,851,840.74|-2,249,706.48|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|6.1Itemsthatwillnotbereclassifiedtoprofitorloss|||
|6.1.1 Changes in net liabilities or assets caused byremeasurementsondefinedbenefitpensionschemes|||
|6.1.2 Share of other comprehensive income ofinvesteesthatwillnotbereclassifiedtoprofitorlossunderequitymethod|||
|6.2 Items that may subsequently be reclassified toprofitorloss|-4,851,840.74|-2,249,706.48|
|6.2.1 Share of other comprehensive income ofinvestees that will be reclassified to profit or loss underequitymethod|||
|6.2.2 Gain/Loss on changes in fair value ofavailable-for-salefinancialassets|-31,342.08|-11,347,998.58|
|6.2.3 Gain/Loss arising from reclassification ofheld-to-maturity investments to available-for-sale financialassets|||
|6.2.4Effectivegain/lossoncashflowhedges|||
|6.2.5Differencesarisingfromtranslationofforeigncurrency-denominatedfinancialstatements|-4,820,498.66|9,098,292.10|
|6.2.6Other|||
|Attributabletonon-controllinginterests|450,882.03|23,145.89|
|7.Totalcomprehensiveincome|404,331,203.17|32,169,771.99|
|AttributabletoownersoftheCompanyastheparent|336,941,198.29|28,621,561.38|
|Attributabletonon-controllinginterests|67,390,004.88|3,548,210.61|
|8.Earningspershare|||
|8.1Basicearningspershare|0.1419|0.0128|
|8.2Dilutedearningspershare|0.1419|0.0128|

 Legal representative: Liu Fengxi CFO: Li Chunlei
Head of thefinancial department: FengJunxiu
4.Income Statementofthe Companyas theParent
Unit:RMB
||||
|-|-|-|
|Item|H12018|H12017|
|1.Operatingrevenue|6,556,568,515.30|6,272,712,644.73|
|Less:Costofsales|5,958,024,932.71|5,443,839,907.56|
|Taxesandsurtaxes|10,295,805.36|10,868,803.46|
|Sellingexpense|796,586,717.96|711,874,597.16|
|Administrativeexpense|227,760,646.63|188,310,629.91|
|Financecosts|146,845,768.60|127,560,085.67|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Assetimpairmentloss|36,873,991.62|2,244,928.43|
|Add:Gainonchangesinfairvalue(“-” forloss)|59,855,412.48|-63,255,380.36|
|Investmentincome(“-” forloss)|1,159,447,278.28|77,763,929.57|
|Including: Share of profit or loss of joint venturesandassociates|13,240,183.30|-6,495,694.18|
|Assetdisposalincome(“-” forloss)|18,949.32||
|Otherincome|42,392,110.12|26,416,590.40|
|2.Operatingprofit(“-” forloss)|641,894,402.62|-171,061,167.85|
|Add:Non-operatingincome|13,874,505.45|46,954,770.89|
|Less:Non-operatingexpense|5,440,364.14|2,589,238.41|
|3.Profitbeforetaxation(“-” forloss)|650,328,543.93|-126,695,635.37|
|Less:Incometaxexpense|-86,913,171.05|-38,114,239.37|
|4.Netprofit(“-” fornetloss)|737,241,714.98|-88,581,396.00|
|4.1 Net profit from continuing operations (“-” for netloss)|||
|4.2Netprofit fromdiscontinuedoperations(“-” fornetloss)|||
|5.Othercomprehensiveincome,netoftax|324,021.02|-11,808,114.04|
|5.1Itemsthatwillnotbereclassifiedtoprofitorloss|||
|5.1.1 Changes in net liabilities or assets caused byremeasurementsondefinedbenefitpensionschemes|||
|5.1.2 Share of other comprehensive income ofinvestees that will not be reclassified into profit or lossunderequitymethod|||
|5.2 Items that may subsequently bereclassified to profitorloss|324,021.02|-11,808,114.04|
|5.2.1 Share of other comprehensive income ofinvestees that will be reclassified into profit or loss underequitymethod|||
|5.2.2 Gain/Loss on changes in fair value ofavailable-for-salefinancialassets||-11,358,312.00|
|5.2.3 Gain/Loss arising from reclassification ofheld-to-maturity investments to available-for-sale financialassets|||
|5.2.4Effectivegain/lossoncashflowhedges|||
|5.2.5 Differences arising from translation of foreigncurrency-denominatedfinancialstatements|324,021.02|-449,802.04|
|5.2.6Other|||
|6.Totalcomprehensiveincome|737,565,736.00|-100,389,510.04|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|7.Earningspershare|
|7.1Basicearningspershare|
|7.2Dilutedearningspershare|

5.Consolidated Cash FlowStatement
Unit:RMB
||||
|-|-|-|
|Item|H12018|H12017|
|1.Cashflowsfromoperatingactivities:|||
|Proceeds from sale of commodities and rendering ofservices|17,548,318,013.29|10,702,542,891.56|
|Net increase in customer deposits and deposits frombanksandotherfinancialinstitutions|||
|Netincreaseinloansfromcentralbank|||
|Netincreaseinloansfromotherfinancialinstitutions|||
|Premiumsreceivedonoriginalinsurancecontracts|||
|Netproceedsfromreinsurance|||
|Net increase in deposits and investments of policyholders|||
|Netincreaseinproceedsfromdisposaloffinancialassetsatfairvaluethroughprofitorloss|||
|Interest,handlingchargesandcommissionsreceived|||
|Netincreaseininterbankloansobtained|||
|Netincreaseinproceedsfromrepurchasetransactions|||
|Taxrebates|234,219,656.63|153,594,635.95|
|Cashgeneratedfromotheroperatingactivities|1,477,259,476.38|242,504,590.42|
|Subtotalofcashgeneratedfromoperatingactivities|19,259,797,146.30|11,098,642,117.93|
|Paymentsforcommoditiesandservices|16,457,966,672.41|11,531,432,202.90|
|Netincreaseinloansandadvancestocustomers|||
|Net increaseindepositsincentralbankandininterbankloansgranted|||
|Paymentsforclaimsonoriginalinsurancecontracts|||
|Interest,handlingchargesandcommissionspaid|||
|Policydividendspaid|||
|Cashpaidtoandforemployees|830,723,675.14|810,851,488.87|
|Taxespaid|1,461,811,434.09|264,698,689.66|
|Cashusedinotheroperatingactivities|2,347,454,070.52|755,674,441.38|
|Subtotalofcashusedinoperatingactivities|21,097,955,852.16|13,362,656,822.81|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Netcashgeneratedfrom/usedinoperatingactivities|-1,838,158,705.86|-2,264,014,704.88|
|2.Cashflowsfrominvestingactivities:|||
|Proceedsfromdisinvestment|42,903,231.61|9,766,980.30|
|Investmentincome|72,250,837.30|78,957,443.99|
|Net proceeds from disposal of fixed assets, intangibleassetsandotherlong-livedassets|1,682,604.46|78,716,573.22|
|Net proceeds from disposal of subsidiaries or otherbusinessunits|42,511,059.22||
|Cashgeneratedfromotherinvestingactivities|942,900,000.00|857,901,449.68|
|Subtotalofcashgeneratedfrominvestingactivities|1,102,247,732.59|1,025,342,447.19|
|Payments for acquisition of fixed assets, intangibleassetsandotherlong-livedassets|140,086,476.23|124,051,006.64|
|Paymentsforinvestments|198,399,656.00|326,090,459.58|
|Netincreaseinpledgedloansgranted|||
|Net payments for acquisition of subsidiaries and otherbusinessunits|232,126,165.53||
|Cashusedinotherinvestingactivities|874,730,000.00|2,156,068,913.10|
|Subtotalofcashusedininvestingactivities|1,445,342,297.76|2,606,210,379.32|
|Netcashgeneratedfrom/usedininvestingactivities|-343,094,565.17|-1,580,867,932.13|
|3.Cashflowsfromfinancingactivities:|||
|Capitalcontributionsreceived|115,980,594.60|265,000.00|
|Including: Capital contributions by non-controllingintereststosubsidiaries|115,980,594.60|265,000.00|
|Increaseinborrowingsobtained|6,725,691,416.47|5,023,816,944.90|
|Netproceedsfromissuanceofbonds|||
|Cashgeneratedfromotherfinancingactivities|1,023,076.93|444,475,802.89|
|Subtotalofcashgeneratedfromfinancingactivities|6,842,695,088.00|5,468,557,747.79|
|Repaymentofborrowings|3,377,017,426.30|1,143,869,292.69|
|Paymentsforinterestanddividends|562,435,220.65|162,968,902.94|
|Including: Dividends paid by subsidiaries tonon-controllinginterests||746,714.88|
|Cashusedinotherfinancingactivities|22,612,122.48|574,504.77|
|Subtotalofcashusedinfinancingactivities|3,962,064,769.43|1,307,412,700.40|
|Netcashgeneratedfrom/usedinfinancingactivities|2,880,630,318.57|4,161,145,047.39|
|4.Effectofforeignexchangeratechangesoncashandcashequivalents|-35,288,115.64|-10,379,276.29|
|5.Netincreaseincashandcashequivalents|664,088,931.90|305,883,134.09|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Add:Cashandcashequivalents,beginningoftheperiod|3,097,899,703.76|2,020,902,945.13|
|6.Cashandcashequivalents,endoftheperiod|3,761,988,635.66|2,326,786,079.22|

 6.Cash FlowStatementof theCompany asthe Parent
Unit:RMB
||||
|-|-|-|
|Item|H12018|H12017|
|1.Cashflowsfromoperatingactivities:|||
|Proceeds from sale of commodities and rendering ofservices|8,900,547,132.50|7,169,804,450.63|
|Taxrebates|80,805,268.47|45,615,145.13|
|Cashgeneratedfromotheroperatingactivities|1,231,787,065.42|1,557,443,931.45|
|Subtotalofcashgeneratedfromoperatingactivities|10,213,139,466.39|8,772,863,527.21|
|Paymentsforcommoditiesandservices|6,889,739,101.21|6,398,479,799.13|
|Cashpaidtoandforemployees|508,124,450.52|490,539,972.72|
|Taxespaid|1,139,215,454.64|74,454,460.84|
|Cashusedinotheroperatingactivities|1,847,843,398.55|2,206,102,049.40|
|Subtotalofcashusedinoperatingactivities|10,384,922,404.92|9,169,576,282.09|
|Netcashgeneratedfrom/usedinoperatingactivities|-171,782,938.53|-396,712,754.88|
|2.Cashflowsfrominvestingactivities:|||
|Proceedsfromdisinvestment|55,600,000.00||
|Investmentincome|77,823,977.16|90,904,415.99|
|Net proceeds from disposal of fixed assets, intangibleassetsandotherlong-livedassets|28,777.00|157,331.75|
|Net proceeds from disposal of subsidiaries or otherbusinessunits|||
|Cashgeneratedfromotherinvestingactivities|1,115,044,083.79|857,000,000.00|
|Subtotalofcashgeneratedfrominvestingactivities|1,248,496,837.95|948,061,747.74|
|Payments for acquisition of fixed assets, intangibleassetsandotherlong-livedassets|54,103,982.64|25,893,599.53|
|Paymentsforinvestments|1,222,391,400.00|361,799,598.00|
|Net payments for acquisition of subsidiaries and otherbusinessunits|||
|Cashusedinotherinvestingactivities|861,154,315.32|2,229,985,587.07|
|Subtotalofcashusedininvestingactivities|2,137,649,697.96|2,617,678,784.60|
|Netcashgeneratedfrom/usedininvestingactivities|-889,152,860.01|-1,669,617,036.86|
|3.Cashflowsfromfinancingactivities:|||
|Capitalcontributionsreceived|||

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Increaseinborrowingsobtained|3,216,716,364.16|2,676,935,367.72|
|Netproceedsfromissuanceofbonds|||
|Cashgeneratedfromotherfinancingactivities||141,159,174.39|
|Subtotalofcashgeneratedfromfinancingactivities|3,216,716,364.16|2,818,094,542.11|
|Repaymentofborrowings|1,207,765,069.15|303,221,456.06|
|Paymentsforinterestanddividends|552,129,671.31|155,399,679.20|
|Cashusedinotherfinancingactivities|335,984,291.92|574,504.77|
|Sub-totalofcashusedinfinancingactivities|2,095,879,032.38|459,195,640.03|
|Netcashgeneratedfrom/usedinfinancingactivities|1,120,837,331.78|2,358,898,902.08|
|4.Effectofforeignexchangeratechangesoncashandcashequivalents|-75,185,223.64|2,847,903.92|
|5.Netincreaseincashandcashequivalents|-15,283,690.40|295,417,014.26|
|Add:Cashandcashequivalents,beginningoftheperiod|1,743,269,944.67|973,613,753.40|
|6.Cashandcashequivalents,endoftheperiod|1,727,986,254.27|1,269,030,767.66|

KonkaGroupCo.,Ltd. InterimReport2018
7.Consolidated Statements ofChanges inOwners’ Equity
H12018 Unit:RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|H12018|||||||||||||
||EquityattributabletoownersoftheCompanyastheparent|||||||||||Non-controllinginterests|Totalowners’equity|
||Sharecapital|Otherequityinstruments|||Capitalreserves|Less:Treasuryshares|Othercomprehensiveincome|Specificreserve|Surplusreserves|Generalreserve|Retainedearnings|||
|||Preferredshares|Perpetualbonds|Other||||||||||
|1.Balancesasofendofprioryear|2,407,945,408.00||||104,732,242.30||3,697,458.95||1,217,644,874.79||4,260,125,492.57|204,044,330.78|8,198,189,807.39|
|Add:Adjustmentsforchangedaccountingpolicies||||||||||||||
|Adjustmentsforcorrectionsofpreviouserrors||||||||||||||
|Adjustments for business combinations undercommoncontrol||||||||||||||
|Otheradjustments||||||||||||||
|2.Balancesasofbeginningoftheyear|2,407,945,408.00||||104,732,242.30||3,697,458.95||1,217,644,874.79||4,260,125,492.57|204,044,330.78|8,198,189,807.39|
|3. Increase/ decrease in the period (“-” for|||||||-4,851,840.74||||-48,294,095.61|482,418,710.01|429,272,773.66|
|dec3r.e1aTseo)talcomprehensiveincome|||||||-4,851,840.74||||341,793,039.03|67,390,004.88|404,331,203.17|
|3.2Capitalincreasedandreducedbyowners||||||||||||415,028,705.13|415,028,705.13|
|3.2.1Ordinarysharesincreasedbyshareholders||||||||||||415,028,705.13|415,028,705.13|
|3.2.2Capitalincreasedbyholdersofotherequityinstruments||||||||||||||
|3.2.3Share-basedpaymentsincludedinowners’equity||||||||||||||
|3.2.4Other||||||||||||||
|3.3Profitdistribution|||||||||||-390,087,134.64||-390,087,134.64|
|3.3.1Appropriationtosurplusreserves||||||||||||||
|3.3.2Appropriationtogeneralreserve||||||||||||||

KonkaGroupCo.,Ltd. InterimReport2018
|||||||||
|-|-|-|-|-|-|-|-|
|3.3.3 Appropriation to owners (orshareholders)|||||-390,087,134.64||-390,087,134.64|
|3.3.4Other||||||||
|3.4Carryforwardswithinowners’equity||||||||
|3.4.1Increaseincapital(orsharecapital)fromcapitalreserves||||||||
|3.4.2Increaseincapital(orsharecapital)fromsurplusreserves||||||||
|3.4.3Surplusreservesusedtomakeuplosses||||||||
|3.4.4Other||||||||
|3.5Specificreserve||||||||
|3.5.1Withdrawnfortheperiod||||||||
|3.5.2Usedduringtheperiod||||||||
|3.6Other||||||||
|4.Balancesasofendoftheperiod|2,407,945,408.00|104,732,242.30|-1,154,381.79|1,217,644,874.79|4,211,831,396.96|686,463,040.79|8,627,462,581.05|

 H12017 Unit:RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|H12017|||||||||||||
||EquityattributabletoownersoftheCompanyastheparent|||||||||||Non-controllinginterests|Totalowners’equity|
||Sharecapital|Otherequityinstruments|||Capitalreserves|Less:Treasuryshares|Othercomprehensiveincome|Specificreserve|Surplusreserves|Generalreserve|Retainedearnings|||
|||Preferredshares|Perpetualbonds|Other||||||||||
|1.Balancesasofendofprioryear|2,407,945,408.00||||79,723,092.04||-6,932,104.65||847,908,466.28||-427,163,254.63|417,017,287.63|3,318,498,894.67|
|Add:Adjustmentsforchangedaccountingpolicies||||||||||||||
|Adjustmentsforcorrectionsofpreviouserrors||||||||||||||
|Adjustments for business combinations undercommoncontrol||||||||||||||
|Otheradjustments||||||||||||||
|2.Balancesasofbeginningoftheyear|2,407,945,408.00||||79,723,092.04||-6,932,104.65||847,908,466.28||-427,163,254.63|417,017,287.63|3,318,498,894.67|
|3.Increase/decreaseintheperiod(“-” fordecrease)|||||25,009,150.26||10,629,563.60||369,736,408.51||4,687,288,747.20|-212,972,956.85|4,879,690,912.72|

KonkaGroupCo.,Ltd. InterimReport2018
|||||||||
|-|-|-|-|-|-|-|-|
|3.1Totalcomprehensiveincome|||10,629,563.60||5,057,025,155.71|29,636,931.01|5,097,291,650.32|
|3.2Capitalincreasedandreducedbyowners||||||-241,190,603.80|-241,190,603.80|
|3.2.1Ordinarysharesincreasedbyshareholders||||||-235,037,235.08|-235,037,235.08|
|3.2.2Capitalincreasedbyholdersofotherequityinstruments||||||||
|3.2.3Share-basedpaymentsincludedinowners’equity||||||||
|3.2.4Other||||||-6,153,368.72|-6,153,368.72|
|3.3Profitdistribution||||369,736,408.51|-369,736,408.51|-1,419,284.06|-1,419,284.06|
|3.3.1Appropriationtosurplusreserves||||369,736,408.51|-369,736,408.51|||
|3.3.2Appropriationtogeneralreserve||||||||
|3.3.3Appropriationtoowners(orshareholders)||||||-1,419,284.06|-1,419,284.06|
|3.3.4Other||||||||
|3.4Carryforwardswithinowners’equity||||||||
|3.4.1 Increase in capital (or share capital) fromcapitalreserves||||||||
|3.4.2 Increase in capital (or share capital) fromsurplusreserves||||||||
|3.4.3Surplusreservesusedtomakeuplosses||||||||
|3.4.4Other||||||||
|3.5Specificreserve||||||||
|3.5.1Withdrawnfortheperiod||||||||
|3.5.2Usedduringtheperiod||||||||
|3.6Other||25,009,150.26|||||25,009,150.26|
|4.Balancesasofendoftheperiod|2,407,945,408.00|104,732,242.30|3,697,458.95|1,217,644,874.79|4,260,125,492.57|204,044,330.78|8,198,189,807.39|

 8.Statements ofChangesinOwners’ Equity oftheCompany as the Parent
H12018 Unit:RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|H12018|||||||||||
||Sharecapital|Otherequityinstruments|||Capitalreserves|Less:Treasuryshares|Othercomprehensive|Specificreserve|Surplusreserves|Retainedearnings|Totalowners’equity|
|||Preferred|Perpetual|Other||||||||
|1.Balancesasofendofprioryear|2,407,945,408.00||||111,525,163.22||-1,970,304.62||1,217,644,874.79|3,327,627,676.56|7,062,772,817.95|

KonkaGroupCo.,Ltd. InterimReport2018
||||||||
|-|-|-|-|-|-|-|
|Add:Adjustmentsforchangedaccountingpolicies|||||||
|Adjustmentsforcorrectionsofpreviouserrors|||||||
|Otheradjustments|||||||
|2.Balancesasofbeginningoftheyear|2,407,945,408.00|111,525,163.22|-1,970,304.62|1,217,644,874.79|3,327,627,676.56|7,062,772,817.95|
|3.Increase/decreaseintheperiod(“-” fordecrease)|||324,021.02||347,154,580.34|347,478,601.36|
|3.1Totalcomprehensiveincome|||324,021.02||737,241,714.98|737,565,736.00|
|3.2Capitalincreasedandreducedbyowners|||||||
|3.2.1Ordinarysharesincreasedbyshareholders|||||||
|3.2.2Capitalincreasedbyholdersofotherequityinstruments|||||||
|3.2.3Share-basedpaymentsincludedinowners’equity|||||||
|3.2.4Other|||||||
|3.3Profitdistribution|||||-390,087,134.64|-390,087,134.64|
|3.3.1Appropriationtosurplusreserves|||||||
|3.3.2Appropriationtoowners(orshareholders)|||||-390,087,134.64|-390,087,134.64|
|3.3.3Other|||||||
|3.4Carryforwardswithinowners’equity|||||||
|3.4.1Increaseincapital(orsharecapital)fromcapital reserves|||||||
|3.4.2Increaseincapital(orsharecapital)fromsurplusreserves|||||||
|3.4.3Surplusreservesusedtomakeuplosses|||||||
|3.4.4Other|||||||
|3.5Specificreserve|||||||
|3.5.1Withdrawnfortheperiod|||||||
|3.5.2Usedduringtheperiod|||||||
|3.6Other|||||||
|4.Balancesasofendoftheperiod|2,407,945,408.00|111,525,163.22|-1,646,283.60|1,217,644,874.79|3,674,782,256.90|7,410,251,419.31|

 H12017 Unit:RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|H12017|||||||||||
||Sharecapital|Otherequityinstruments|||Capitalreserves|Less:Treasury|Othercomprehensive|Specificreserve|Surplusreserves|Retainedearnings|Totalowners’equity|
|||Preferred|Perpetual|Other||||||||
|1.Balancesasofendofprioryear|2,407,945,408.00||||64,794,108.39||6,714,437.62||847,908,466.28|-589,696,203.91|2,737,666,216.38|
|Add:Adjustmentsforchangedaccountingpolicies||||||||||||
|Adjustmentsforcorrectionsofpreviouserrors||||||||||||

KonkaGroupCo.,Ltd. InterimReport2018
||||||||
|-|-|-|-|-|-|-|
|Otheradjustments||7,350,000.00|||-25,347,306.92|-17,997,306.92|
|2.Balancesasofbeginningoftheyear|2,407,945,408.00|72,144,108.39|6,714,437.62|847,908,466.28|-615,043,510.83|2,719,668,909.46|
|3.Increase/decreaseintheperiod(“-” fordecrease)||39,381,054.83|-8,684,742.24|369,736,408.51|3,942,671,187.39|4,343,103,908.49|
|3.1Totalcomprehensiveincome|||-8,684,742.24||4,312,407,595.90|4,303,722,853.66|
|3.2Capitalincreasedandreducedbyowners|||||||
|3.2.1Ordinarysharesincreasedbyshareholders|||||||
|3.2.2Capitalincreasedbyholdersofotherequityinstruments|||||||
|3.2.3Share-basedpaymentsincludedinowners’equity|||||||
|3.2.4Other|||||||
|3.3Profitdistribution||||369,736,408.51|-369,736,408.51||
|3.3.1Appropriationtosurplusreserves||||369,736,408.51|-369,736,408.51||
|3.3.2Appropriationtoowners(orshareholders)|||||||
|3.3.3Other|||||||
|3.4Carryforwardswithinowners’equity|||||||
|3.4.1 Increase in capital (or share capital) from capitalreserves|||||||
|3.4.2Increaseincapital(orsharecapital)fromsurplusreserves|||||||
|3.4.3Surplusreservesusedtomakeuplosses|||||||
|3.4.4Other|||||||
|3.5Specificreserve|||||||
|3.5.1Withdrawnfortheperiod|||||||
|3.5.2Usedduringtheperiod|||||||
|3.6Other||39,381,054.83||||39,381,054.83|
|4.Balancesasofendoftheperiod|2,407,945,408.00|111,525,163.22|-1,970,304.62|1,217,644,874.79|3,327,627,676.56|7,062,772,817.95|

KonkaGroupCo.,Ltd. InterimReport2018 Konka Group Co., Ltd.
Notes to Financial Statements for H1 2018
(All amounts areexpressed, unlessotherwisestated, inRenminbi (RMB).)
I. CompanyProfile
1.Establishment
Konka Group Co., Ltd. (hereinafter referred to as “Company” or “the Company”), is a joint-stock limited company reorganized from the former Shenzhen Konka Electronic Co., Ltd. in August 1991 upon approval of thePeople’s Government of Shenzhen Municipality, and has its ordinary shares (A-share and B-share) listed on Shenzhen Stock Exchange with prior consent from thePeople’s Bank of China Shenzhen Special Economic Zone Branch. On 29August 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 27 November 1991, with approval from the SRYFZ No. 102[1991] document as issued by thePeople’s Bank of China Shenzhen Special Economic Zone Branch, Shenzhen Konka Electronic Co., Ltd., during 8 December1991—31 December 1991, has issued 128,869,000 RMB ordinary shares (A-share) at a par value of RMB1.00 per share, of which the original net assets were converted into 98,719,000 state-owned institutional shares, 30,150,000 new shares were issued, including 26,500,000 circulating shares issued to the public and 3,650,000staffshares issued to thestaffoftheCompany.
On 29 January 1992, with approval from the SRYFZ No. 106[1991] document as issued by thePeople’s Bank of China Shenzhen Special Economic Zone Branch, Shenzhen Konka Electronic Co., Ltd., during 20 December1991— 31 January 1992, has issued to investors abroad 58,372,300 RMB special shares (B-share) at a par value of RMB1.00 per share, of which 48,372,300 shares held by the former foreign investor andfounder—Hong Kong Ganghua Electronic Group Co., Ltd. are converted into foreign legalperson’s shares, and 10,000,000B-shares are issued additionally.
On 10 April 1993, the Proposal on Profit Distribution and Dividend Payout 1992 was adopted at the second general meeting of shareholders of the Company. With approval from the SZBF No. 2[1993] document as issued by Shenzhen Securities Regulatory Office, the Company began to perform dividend policy for FY 1992 as of 30 April 1993: distributing
KonkaGroupCo.,Ltd. InterimReport2018 RMB 0.90 in cash plus 3.5 bonus shares for every 10 shares to all shareholders. The total capital stock reached 187,473,150shares after this distribution.
On 18 April 1994, the Proposal on Profit Distribution and Dividend Payout 1993 was adopted at the third general meeting of shareholders of the Company.With approval from the SZBF No. 115[1994] document as issued by Shenzhen Securities Regulatory Office, the Company began to perform dividend policy for FY1993 as of 10 June 1994: distributing RMB 1.10 in cash plus 5 bonus shares (including 4.4 profit bonus shares and 0.6 bonus share capitalized from capital public reserve) for every 10 shares to all shareholders. The total capital stock reached 281,209,724 shares after this distribution and capitalization from capital publicreserve.
On 2 June 1994, in accordance with the provisions that “staff shares could go public and be transferred six months after listing”, as jointly promulgated by the State Commission for Restructuring the Economic System and the StateCouncil’s Securities Commission, the staff shares of the Company was planned to be listed on the flow on 6 June 1994, with the prior consent of Shenzhen Securities Regulatory Officeand Shenzhen StockExchange.
On 8 October 1994, the Proposal on Negotiable Bonus Shares of B-Share Corporate Shareholders 1992 was adopted at the interim general meeting of shareholders of the Company. With approval from the SZBF No. 224[1994] document as issued by Shenzhen Securities Regulatory Office, the 16,930,305.00 bonus shares for FY 1992 granted to foreign legal persons were listed and negotiated at B-sharemarket on26October 1994.
On 6 February 1996, the Proposal on Share Allotment Modes 1996 was adopted at the interim general metering of shareholders of the Company. With approval from the SZBF No. 5[1996] document as issued by Shenzhen Securities Regulatory Office, and re-examination from the ZJPSZ No. 16[1996] document and ZJGZ No. 2[1996] document as issued by China Securities Regulatory Commission, on 16 July 1996 and 29 October 1996, all shareholders were respectively allotted three shares for every ten existing shares held at RMB6.28/A-share and HKD5.85/B-share. Corporate shareholders took their respective existing shares as bases for full subscription of the allocable shares. The total capital stock reached 365,572,641.00shares after thisallotment.
On 25 January 1998, the Plan on Share Allotment 1998 was adopted at the interim general meeting of shareholders of the Company. With approval from the ZZBZ No. 29[1998] document as issued by Shenzhen Securities Regulatory Office, and ZJSZ No.64[1998] document as issued by China Securities Regulatory Commission, on 15 July 1998, negotiable
KonkaGroupCo.,Ltd. InterimReport2018 A-shares were allotted in proportion of 3:10 at RMB10.50/A-share. For such reasons as continued weakness in B-share secondary market (lower than share allotment price), B-share negotiation and allotment plan was cancelled, and the corporate shareholders of the Company waived the preemptive right. The total capital stock reached 389,383,603 shares after this allotment.
On 30 June 1999, the Proposal on Profit Distribution and Capitalization from Capital Public Reserve 1998 was adopted at the eighth general meeting of shareholders of the Company. On 20 August 1999, the profit distribution for FY 1998 was carried out: all shareholders were presented RMB3.00 in cash for every 10 shares, plus 2 shares capitalized from capital public reserve.The total capital stock reached 467,260,323.00shares after this capitalization.
On 30 June 1999, the Plan on A-Share Issue for Capital Increase was adopted at the eighth general meeting of shareholders of the Company. With approval from the ZJFXZ No.140[1999] document as issued by China Securities Regulatory Commission, on 1 November 1999, 80,000,000.00A-shares were additionally issued to the public at RMB15.50/share. The totalcapital stock reached 547,260,323.00 shares after thisadditional issue.
On 30 May 2000, the Plan on Profit Distribution and Dividend Payout 1999 was adopted at the ninth general meeting of shareholders of the Company. On 25 July 2000, the profit distribution for FY 1999 was carried out: all shareholders were distributed RMB4.00 in cash plus 1 bonus shares for every 10 shares. The total capital stock reached 601,986,352.00 shares after thisdistribution.
On 26 May 2008, the 2017 general meeting of shareholders s was convened, during which the following resolutions were discussed and adopted: based on the total capital stock of 601,986,352.00 shares for the year ended 31 December 2007, capitalization from capital public reserve was made to all shareholders at a proportion of 1:1, namely 10 new shares for every 10 existing shares. On 16 December 2008, with approval from the SMGZF No. 2662[2008] document as issued by Shenzhen Bureau of Trade and Industry, the Company was agreed to increase its share capital, and went through the formalities for registration of changes with the administration for industry and commerce on 10 April 2009. The total capital stock reached 1,203,972,704.00shares after change.
According to the regulations of the 2015 1st Extraordinary General Meeting and the revised 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
KonkaGroupCo.,Ltd. InterimReport2018 registration on28January 2016with thealtered share capital of2,407,945,408.00shares. 3. Approved business scope: research and development, production and operation of such intelligent household electric appliances as televisions, refrigerators, washing machines, and personal electronic appliances, and kitchen and bathroom electronic appliances; manufacturing and application of home AV, IPTV set-top boxes, OTT terminal products, digital TV receivers (including ground receiving equipment of satellite television broadcasting), digital products, intelligent wearable products, intelligent health products, intelligent electric products, intelligent switch plug, power bank, mobile communication equipments and terminal products, daily-use electronic products, automotive electronic products, satellite navigation systems, intelligent transportation systems, fire-fighting and security systems, office equipments, computers, displays, large screen display systems; LED (OLED) back light, illumination, light-emitting devices, and packaging thereof; Touch TV AIO, wireless broadcasting television transiting equipment; emergency broadcast system equipment, electronic parts and components, moulds, plastic and rubber products, and packing materials, design and in-door installation security products, monitoring products, wireless and cable digital television system and system integration, and technical consultancy and after-sale paid services of related products (except mobile phone, the other products in the above business scope are manufactured in other places outside Shenzhen); Wholesale, retail, import& export and relevant support services of the aforesaid products (including spare parts) (Commodities subject to state trading management are not involved. Products involved in quota, license management and other specified management shall be subject to the relevant state provisions.); sale of self-developed technological achievements; provision of maintenance services, technical consultant service for electronic products; ordinary cargo transportation, domestic freight forwarding, international freight forwarding, and warehousing services; management of supply chain, consultancy on enterprise management; and self-owned property leasing and management services, recovery of waste electrical appliances and electronic products (excluding dissembling) (operated by branch offices); and outsourcing services of information technology and business procedures by means of undertaking services in the way of outsourcing, including management and maintenance of system application, management of information technology, bank background service, financial settlement, human resource service, software development, call centre, and data processing. Import& export business: domestic trade; international trade (excluding monopoly, exclusive control, and monopolized commodities); selling security products, intelligent household products, door lock, and hardware; doing various business entrusted by (Mobile, Unicom,Telecom, andBC&TV)
KonkaGroupCo.,Ltd. InterimReport2018 4.The Company and its subsidiaries are mainly engaged in the production and sales of colour TVs, white goods, mobile phones, etc.; trade business; environmental protection business; real estate development and marketing; commercial factoring, and etc.
5. The financial statements contained herein have been approved for issue by the Board of Directors of theCompany on29August 2018.
6. There were 77 subsidiaries included in the consolidation scope of 2018 of the Company, and please refer to the NotesVIII. “Equities among other entities” for details. There were 33 subsidiaries increased and 1 decreased in the consolidation scope of the Reporting Period over the last period of the Company, for details, see the Notes VII. “ Changes of the consolidation scope”.
7.Acheck listofcorporate names and theirabbreviations mentioned in thisReport
Corporatename Abbreviation
ShenzhenKonkaTelecommunicationsTechnologyCo.,Ltd. TelecommunicationTechnology
ShenzhenKonkaElectricalAppliancesCo.,Ltd. KonkaElectricalAppliances
ShenzhenKonkaPlasticProductsCo.,Ltd. PlasticProducts
ShenzhenKonkaElectricalAppliancesCo.,Ltd. ElectricalAppliances
ShenzhenKonkaElectronicFittingsTechnologyCo.,Ltd. FittingsTechnology
MudanjiangArcticOceanAppliancesCo.,Ltd. MudanjiangAppliances
ChongqingQingjiaElectronicsCo.,Ltd. ChongqingQingjia
AnhuiKonkaElectronicCo.,Ltd. AnhuiKonka
DongguanKonkaElectronicCo.,Ltd. DongguanKonka
DongguanKonkaPackingMaterialsCo.,Ltd. DongguanPacking
BoluoKonkaPCBCo.,Ltd. BoluoKonka
BoluoKonkaPrecisionTechnologyCo.,Ltd. BoluoKonkaPrecision
HongKongKonkaCo.,Ltd. HongKongKonka
Konka Household AppliancesKonkaHouseholdAppliancesInvestment&DevelopmentCo.,Ltd.
Investment
Konka Household Appliances KonkaHouseholdAppliancesInternationalTradingCo.,Ltd.
InternationalTrading
Konka(Europe)Co.,Ltd. KonkaEurope
KonkaGroupCo.,Ltd. InterimReport2018 Corporatename Abbreviation
KonkaFactoring(Shenzhen)Co.,Ltd. KonkaFactoring
ShenzhenWankaidaScienceandTechnologyCo.,Ltd. Wankaida
KunshanKangshengInvestmentDevelopmentCo.,Ltd. KunshanKangsheng
AnhuiKonkaTongchuangHouseholdAppliancesCo.,Ltd. AnhuiTongchuang
ShenzhenShushidaLogisticsServiceCo.,Ltd. ShushidaLogistics
BeijingKonkaElectronicCo.,Ltd. BeijingKonkaElectronic
ShenzhenKonkaE-displayCo.,Ltd. KonkaE-display
ShenzhenE-displayServiceCo.,Ltd. E-displayService
XiamenDalongTradingCo.,Ltd. XiamenDalong
YoushiKangrongCultureCommunicationCo.,Ltd. YoushiKangrong
KonkaSmartTechLimited KonkaSmartTech
AnhuiKaikaiShijieE-commerceCo.,Ltd. KaikaiShijie
ShenzhenE2infoNetworkTechnologyCo.,Ltd. E2info
ShenzhenKonkaMobileInterconnectionTechnologyCo.,Ltd. MobileInterconnection
ShenzhenKonkaCommercialSystemTechnologyCo.,Ltd. CommercialSystemTechnology
ChainKingdomCo.,Limited ChainKingdom
ShenzhenKangqiaoEasyChainTechnologyCo.,Ltd. KangqiaoEasyChain
E3info(Hainan)TechnologyCo.,Ltd. E3info
ChuzhouKonkaTechnology&IndustryDevelopmentCo.,Ltd. ChuzhouKonkaTID
KonkaVenturesDevelopment(Shenzhen)Co.,Ltd. KonkaVentures
ShenzhenKonkaPengrunTechnology&IndustryCo.,Ltd. KonkaPengrun
ShenzhenKonkaUnifortuneSupplyChainManagementCo.,Ltd. KonkaUnifortune
ShenzhenKonkaInvestmentHoldingCo.,Ltd. KonkaInvestment
AnhuiKangzhiTradeCo.,Ltd. KangzhiTrade
HainanKonkaMaterialTechnologyCo.,Ltd. KonkaMaterial
TianjinKonkaLeasingCo.,Ltd. KonkaLeasing
YantaiKonkaHealthcareEnterpriseServiceCo.,Ltd. YantaiKonka
ShenzhenKonkaCapitalEquityInvestmentManagementCo.,Ltd. KonkaCapital
KonkaGroupCo.,Ltd. InterimReport2018 Corporatename Abbreviation
ChainKingdom(Shenzhen)Co.,Ltd. ChainKingdomShenzhen
ShenzhenKonkaElectronicsTechnologyCo.,Ltd. ElectronicsTechnology
SichuanKonkaSmartterminalTechnologyCo.,Ltd SichuanKonka
JiaxinTechnologyCo.,Ltd. JiaxinTechnology
Kangjietong(HongKong)Limited Kangjietong
SichuanKangjiatongSupplyChainManagementCo.,Ltd. SichuanKangjiatong
KonkaHuanjia(Dalian)EnvironmentalTechnologyCo.,Ltd. KonkaHuanjia
ChengduKonkaIncubatorManagementCo.,Ltd. ChengduKonka
YibinKonkaTechnologyParkOperationCo.,Ltd. YibinKonka
KonkaSuiyongInvestment(Shenzhen)Co.,Ltd. KonkaSuiyong
AnhuiKonkaElectricalApplianceTechnologyCo.,Ltd. ElectricalApplianceTechnology
JialiInternational(HongKong)Limited JialiInternational
GuangDongXingDaHongYeElectronicCo.,Ltd. XingDaHongYe
ShanghaiXinfengZhuoqunPCBCo.,Ltd. XinfengZhuoqun
ZhongshanZeweiKechuangInvestmentManagementCo.,Ltd. ZeweiKechuang
ShandongEconTechnologyCo.,Ltd. EconTechnology
BeijingEconRunfengTechnologyCo.,Ltd. BeijingEcon
ShanghaiJiyiEnvironmentalTechnologyCo.,Ltd. ShanghaiJiyi
BinzhouEconZhongkeEnvironmentalTechnologyCo.,Ltd. BinzhouEcon
LaizhouLairunHoldingsCo.,Ltd. LairunHoldings
EconEnvironmentalEngineeringCo.,Ltd. EconEnvironmentalEngineering RushanYikeWaterTreatmentCo.,Ltd. RushanYike
BinzhouWeiyijieEnvironmentalTechnologyCo.,Ltd. BinzhouWeiyijie
YantaiChunzhiranEnvironmentalTechnologyCo.,Ltd. YantaiChunzhiran
RushanEconBeikeTechnologyIncubatorCo.,Ltd. RushanEcon
FujianEconChangrunEnvironmentalProtectionCo.,Ltd. FujianEcon
LaizhouLairunHuayangHeatingCo.,Ltd. LairunHuayang
LaizhouLairunHeatingCo.,Ltd. LairunHeating
LaizhouLairunGreenEnergyCo.,Ltd. LairunGreenEnergy
BinzhouBeihaiJingmaiIndustrialDevelopmentCo.,Ltd. BeihaiJingmai
YantaiHuanhaiXinzeEnterpriseManagementCo.,Ltd. HuanhaiXinze
BinzhouWeinengdaTransportCo.,Ltd. BinzhouWeinengda
LaizhouBinhaiSewageTreatmentCo.,Ltd. BinhaiSewageTreatment
KonkaGroupCo.,Ltd. InterimReport2018 Corporatename Abbreviation
LaizhouLairunEnvironmentalProtectionCo.,Ltd. LairunEnvironmentalProtection II.Basis forthePreparation ofFinancialStatements
With the going-concern assumption as the basis and based on transactions and other events that actually occurred, the Group prepared financial statements in accordance with The Accounting Standards for BusinessEnterprises—Basic Standard issued by the Ministry of Finance with Decree No. 33 and revised with Decree No. 76, the 42 specific accounting standards, the Application Guidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises and other regulations issued and revised from February15, 2006 onwards (hereinafter jointly referred to as theAccounting Standards for Business Enterprises, China Accounting Standards or “CAS”), as well as the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15– General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory Commission.
In accordance with relevant provisions of theAccounting Standards for Business Enterprises, the Group adopted the accrual basis in accounting. Except for some financial instruments and investment properties, the financial statements are based on historic costs to measure. Non-current assets held for sale is priced by the lower amount between the amounts that fair value minus estimated amount and the original book value that meets the held for sale requirement. Where impairment occurred on an asset, an impairment reserve was withdrawn accordinglypursuant to relevant requirements.
III.Statementof Compliancewith theAccounting StandardsforBusiness Enterprises The financial statements prepared by the Group are in compliance with in compliance with the Accounting Standards for Business Enterprises, which factually and completely present theCompany’s financial positions as at 30 June 2018, business results and cash flows for the first half year of 2018, and other relevant information. In addition, theCompany’s and theGroup’s financial statements meet the requirements of disclosing financial statements and notes thereto stated in the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15– General Regulations for Financial Reporting (revised in 2014) by ChinaSecurities Regulatory Commission.
KonkaGroupCo.,Ltd. InterimReport2018 IV. ImportantAccounting Policies andEstimations
The Company and its subsidiaries formulated certain specific accounting policies and accounting estimates according to the actual production and operation characteristics and the regulations of the relevant ASBE on the transactions and events of the revenues recognition. For the details, please refer to each description of Notes IV. 23 “Revenues”. For the notes of the significant accounting judgment and estimations made by the management layer, please referto Notes IV.29 “Significant accounting judgment and estimations”.
1.FiscalPeriod
TheGroup’s fiscal periods include fiscal years and fiscal periods shorter than a complete fiscal year. TheGroup’s fiscal year starts on January 1 and ends on December 31 of every yearaccording to theGregorian calendar.
2.Operating Cycle
A normal operating cycle refers to a period from the Group purchasing assets for processing to realizing cash or cash equivalents. An operating cycle for the Group is 12 months, which isalso theclassification criterion forthe liquidity ofitsassets and liabilities.
3.RecordingCurrency
Renminbi is the dominant currency used in the economic circumstances where the Group and its domestic subsidiaries are involved. Therefore, the Group and its domestic subsidiaries use Renminbi as their bookkeeping base currency.The Company and its overseas subsidiary-European Konka use Euro as their bookkeeping base currency according to their currency used in the economic circumstances. Subsidiaries such as Hong Kong Konka, Konka Household Appliances Investment, Konka Household Appliances International Trading, Konka Zhisheng, Chain Kingdom, Kangjietong, and Jiaxin Technology and Jiali International 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 ornotundertheSame Control
Business combinations, it is refer to two or more separate enterprises merge to form a
KonkaGroupCo.,Ltd. InterimReport2018 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
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
KonkaGroupCo.,Ltd. InterimReport2018 the equity securities or debt securities issued by the acquirer as the combination consideration shall be recorded into the amount of initial measurement of the equity securities or debt securities. The involved contingent consideration shall be recorded into the combination costs at its fair value on the acquiring date. Where new or further evidences emerge, within 12 months since the acquiring date, against the existing circumstances on the acquiring date and the contingent consideration thus needs to be adjusted, the combined goodwill shall be adjusted accordingly. The combination costs of the acquirer and the identifiable net assets obtained by it in the combination shall be measured according to their fair values at the acquiring date. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. Where the combination costs are less then the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall re-examine the measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it obtains from the acquiree as well as the combination costs. If, after the re-examination, the combination costs are still less than the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall record the balance into the profits and losses of the current period.
As for the deductible temporary differences the acquirer obtains from the acquiree which are not recognized into deferred income tax liabilities due to their not meeting the recognition standards, if new or further information shows that the relevant situation has existed on the acquiring date and the economic benefits brought by the deductible temporary differences the acquirer obtains from the acquiree on the acquiring date can be realized, they shall be recognized into deferred income tax assets and the relevant goodwill shall be reduced. Where the goodwill is not sufficient to be offset, the difference shall be recognized into the profits and losses in the current period. In other circumstances than the above, where the deductible temporary differences are recognized into deferred income tax assets on the acquiring date, theyshall berecorded intotheprofits and losses in thecurrent period.
In a business combination not under same control realized by two or more transactions of exchange, according to about the No. 5 Notice about the Treasury Issuing the Accounting Standards for Enterprises (Finance accounting)[2012] No. 19 and the Article 51 of Accounting Standards for Enterprises No.33—Consolidated Financial Statements Criterion about the “package deal” (see Note IV, 5 (2)), Whether the deals are “package deal” or not,
KonkaGroupCo.,Ltd. InterimReport2018 belong to the “package deal”, see the previous paragraphs described in this section and Note IV, 13 “long term equity investment” and conduct accounting treatment, those not belong to the “ package deal ” distinguish between the individual financial statements and the consolidated financial statements and conduct relevant accounting treatment.
In the individual financial statements, the sum of the book value and new investment cost of the Group holds in the acquiree before the acquiring date shall be considered as initial cost of the investment. Other related comprehensive gains in relation to the equity interests that the Group holds inthe acquiree before the acquiring date shall be treated onthe same basis as the acquiree directly disposes the related assets or liabilities when disposing the investment (that is, except for the corresponding share in the changes in the net liabilities or assets with a defined benefit plan measured at the equity method arising from the acquiree’ s re-measurement, theothers shall be transferred into current investment gains).
In theGroup’s consolidated financial statements, as for the equity interests that the Group holds in the acquiree before the acquiring date, they shall be re-measured according to their fair values at the acquiring date; the positive difference between their fair values and carrying amounts shall be recorded into the investment gains for the period including the acquiring date. Other related comprehensive gains in relation to the equity interests that the Group holds in the acquiree before the acquiring date shall be treated on the same basis as the acquiree directly disposes the related assets or liabilities when disposing the investment (that is, except for the corresponding share in the changes in the net liabilities or assets with a defined benefit plan measured at the equity method arising from the acquiree’ s re-measurement, the others shall be transferred into current investment gains on the acquiring date).
5.Methods forPreparing Consolidated FinancialStatements
(1)Principlefor determining theconsolidation scope
The consolidation scope for financial statements is determined on the basis of control. The term “control” is the power of the Group upon an investee, with which it can take part in relevant activities of the investee to obtain variable returns and is able to influence the amount of returns. The scope of consolidation includes the Company and its all subsidiaries. Asubsidiary is an enterpriseorentity controlled bytheGroup.
Once any changes in the relevant facts or situations resulted in any changes in the elements
KonkaGroupCo.,Ltd. InterimReport2018 involved in the aforesaid definition of “ control ” , the Company shall carry out a reassessment.
(2)Methods for preparing theconsolidated financial statements
Subsidiaries are fully consolidated from the date on which the Group obtains control on their net assets and operation decision-making and are de-consolidated from the date when such control ceases. As for a disposed subsidiary, its operating results and cash flows before the disposal date has been appropriately included in the consolidated income statement and cash flow statement; and as for subsidiaries disposed in the current period, the opening items in the consolidated balance sheet are not adjusted. For a subsidiary acquired in a business combination not under the same control, its operating results and cash flows after the acquiring date have been appropriately included in the consolidated income statement and cash flow statement, and the opening items and comparative items in the consolidated financial statements are not adjusted. For a subsidiary acquired in a business combination under the same control or a combined party obtained in a takeover, its operating results and cash flows from the beginning of the Reporting Period of the combination to the combination date have been appropriately included in the consolidated income statement and cash flow statement, and the comparative items in the consolidated financial statements are adjusted at thesametime.
The financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Group during the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Group and subsidiaries. For a subsidiary acquired from a business combination not under the same control, the individual financial statements of the subsidiary areadjusted based onthefair valueof theidentifiablenet assets at theacquisitiondate.
All significant inter-group balances, transactions and unrealized profits are offset in the consolidated financial statements.
The portion of asubsidiary’sshareholders’ equity and the portion of asubsidiary’s net profits and losses for the period not held by the Group are recognized as minority interests and minority shareholder profits and losses respectively and presented separately undershareholders’ equity and net profits in the consolidation financial statements. The portion of asubsidiary’s net profits and losses for the period that belong to minority interests is
KonkaGroupCo.,Ltd. InterimReport2018 presented as the item of “minority shareholder profits and losses” under the bigger item of net profits in the consolidated financial statements. Where the loss of a subsidiary shared by minority shareholders exceeds the portion enjoyed by minority shareholders in thesubsidiary’s openingowners’ equity, minorityinterests are offset.
Where the Group losses control on its original subsidiaries due to disposal of some equity investments or other reasons, the residual equity interests are re-measured according to the fair value on the date when such control ceases. The summation of the consideration obtained from the disposal of equity interests and the fair value of the residual equity interests, minus the portion in the originalsubsidiary’s net assets measured on a continuous basis from the acquisition date that is enjoyable by the Group according to the original shareholding percentage in the subsidiary, is recorded in investment gains for the period when theGroup’s control on the subsidiary ceases. Other comprehensive incomes in relation to the equity investment in the original subsidiary are treated on the same accounting basis as the acquiree directly disposes the relevant assets or liabilities (that is, except for the changes in the net liabilities or assets with a defined benefit plan resulted from re-measurement of the original subsidiary, the rest shall all be transferred into current investment gains) when such control ceases. And subsequent measurement is conducted on the residual equity interests according to the No. 2 Accounting Standard for Business Enterprises—Long-term Equity Investments or the No. 22 Accounting Standard for BusinessEnterprises—Recognition and Measurement of Financial Instruments. For details, see Note IV. 13 “longterm equity investment” or Note IV. 9 “financial instruments”.
Where the Group losses control on its original subsidiaries due to step by step disposal of equity investments through multiple transactions, it need to distinguish the Group losses control on its subsidiaries due to disposal of equity investments whether belongs to a package deal. All the transaction terms, conditions and economic impact of the disposal of subsidiaries’ equity investment are in accordance with one or more of the following conditions, which usually indicate the multiple transactions, should be considered as a package deal for accounting treatment.① These deals are at the same time or under the condition of considering the influence of each other to concluded;② These transactions only be as a whole can achieve a complete business result;③ The occurrence of a deal depends on at least one othertransactions；④ A deal alone is not economical, it is economical with other trading together. Those not belong to a package deal, each of them a deal depends on circumstances respectively conduct accounting treatment in accordance with
KonkaGroupCo.,Ltd. InterimReport2018 the applicable principles of “part disposal of subsidiaries of a long-term equity investment under the condition of not losing control on its subsidiaries” (see Note IV. 13. (2)④) and “Where the Group losses control on its original subsidiaries due to disposal of some equity investments or other reasons” (See the front paragraph) relevant transactions of the Group losses control on its subsidiaries due to disposal of equity investments belonging to a package deal, considered as a transaction and conduct accounting treatment. However, Before losing control, every disposal cost and corresponding net assets balance of subsidiary of disposal investment are confirmed as other comprehensive income in consolidated financial statements, which together transferred into the current profits and losses in the loss ofcontrol ,when theGroup losingcontrol onits subsidiary.
6.Classificationof JointArrangements andAccounting Treatmentof JointOperations A joint arrangement refers to an arrangement jointly controlled by two participants or above. The Group classifies joint arrangements into joint operations and joint ventures according to its rights and duties in the joint arrangements. A joint operation refers to a joint arrangement where the Group enjoys assets and has to bear liabilities related to the arrangement. A joint venture refers to a joint arrangement where the Group is only entitled to the net assets of the arrangement.
TheGroup’s investments in joint ventures are measured at the equity method according to the accounting policies mentioned in Note IV. 13 (2)② “Long-term equity investments measured at theequity method”.
For a joint operation, the Group, as a joint operator, recognizes the assets and liabilities that it holds and bears in the joint operation, and recognizes the jointly-held assets and jointly-borne liabilities according to theGroup’s stake in the joint operation; recognizes the income from sale of theGroup’s share in the output of the joint operation; recognizes the income from sale of the jointoperation’s outputs according to theGroup’s stake in it; and recognizes the expense solely incurred to the Group and the expense incurred to the joint operation according totheGroup’sstake in it.
When the Group, as a joint operator, transfers or sells assets (the assets not constituting business, the same below) to the joint operation, or purchases assets from the joint operation, before the assets are sold to a third party, the Group only recognizes the share of the other joint operators in the gains and losses arising from the sale. Where impairment occurs to the
KonkaGroupCo.,Ltd. InterimReport2018 assets as prescribed in The Accounting Standard No. 8 for BusinessEnterprises—Asset Impairment, the Group shall fully recognizes the loss for a transfer or sale of assets to a joint operation; and shall recognize the loss according to its stake in the joint operation for a purchase ofassets from thejointoperation.
7.Recognition Standard for CashandCash Equivalents
In theGroup’s understanding, cash and cash equivalents include cash on hand, any deposit that can be used for cover, and short-term (usually due within 3 months since the day of purchase) and high circulating investments, which are easily convertible into known amount ofcash and whose risksinchange of valueare minimal.
8. Foreign Currency Businesses and Translation of Foreign Currency Financial Statements
(1)Accounting treatments for translation offoreign currency transactions
As for a foreign currency transaction, the Company shall convert the amount in a foreign currency into amount in its bookkeeping base at the spot exchange rate (usually referring to the central parity rate that day announced by thePeople’s Bank of China, the same below) of the transaction date, while as for such transactions as foreign exchange or involving in foreign exchange, the Company shall converted into amount in the bookkeeping base currency at actual exchange rate thetransaction isoccurred.
(2) Accounting treatments for translation of foreign currency monetary items and non-monetary items
On the balance sheet date, the foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date shall be recorded in the profits and losses in the current period, excluding the following situations:① the exchange difference arising from foreign currency loans related to acquisition of fixed assets shall be treated at the principle of capitalization of borrowing costs;② the exchange difference arising from the hedging instruments used for effective hedging of net overseas operation investments shall be recorded into other comprehensive incomes, and shall be recognized
KonkaGroupCo.,Ltd. InterimReport2018 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
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
KonkaGroupCo.,Ltd. InterimReport2018 the sum of liabilities andowners’ equities shall be recorded into other comprehensive gains and losses as difference of foreign currency translation. Where an enterprise disposes of an overseas business without the control right, it shall shift the differences, which is presented under the items of theowner’s equities in the balance sheet and which arises from the translation of foreign currency financial statements relating to this overseas business, into the disposal profits and losses of the current period by all or proportion of the disposed overseas business.
Foreign cash flow shall be translated at the spot exchange rate of the current period of the date of cash flow incurred. The influence of exchange rate on the cash flow shall be adjustment itemand individually listed inthe cash flowstatement.
And the opening balance and the actual balance of last year shall be listed at the amounts after translation offoreign currency financial statement inlast year.
Where the control of the Group over an overseas operation ceases due to disposal of all or some of the Group’ s owner’ s equity in the overseas operation or other reasons, the foreign-currency statement translation difference belonging to the parentcompany’sowner’s equity in relation to the overseas operation which is stated under theowner’s equity in the balance sheet shall be all restated as gains and losses of thedisposal period.
Where theGroup’s equity in an overseas operation decreases due to disposal of some equity investment or other reasons but the Group still has control over the overseas operation, the foreign-currency statement translation difference in relation to the disposed part of the overseas operation shall be recorded into minority interests instead of current gains and losses. Ifwhat’s disposed is some equity in an overseas associated enterprise or joint venture, the foreign-currency statement translation difference related to the overseas operation shall be recorded into the gains and losses of the current period of the disposal according to the disposalratio.
9.Financial Instruments
The Group recognizes a financial asset or liability when it becomes a party of the relevant financial instrument contract. Financial assets and liabilities are measured at fair value in initial recognition. As for the financial assets and liabilities measured at fair value of which changes are recorded into current gains and losses, the relevant dealing expenses are directly
KonkaGroupCo.,Ltd. InterimReport2018 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 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
KonkaGroupCo.,Ltd. InterimReport2018 selling them in the near future; B. Forming a part of the identifiable combination of financial instruments which are managed in a centralized way and for which there are objective evidences proving that the enterprise may manage the combination by way of short-term profit making in the near future; C. Being a derivative instrument, excluding the designated derivative instruments which are effective hedging instruments, or derivative instruments to financial guarantee contracts, and the derivative instruments which are connected with the equity instrument investments for which there is no quoted price in the active market, whose fair value cannot be reliably measured, and which shall be settled by delivering the said equityinstruments.
The financial assets meeting any of the following requirements shall be designated as financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period for initial recognition: A. the designation can eliminate or significantly reduce the difference of relevant gains and losses between recognition and measurement causing from different bases for measurement of financial assets; B. The official written documents for risk management and investment strategies of the enterprise have clearly stated that it shall ,manage, evaluate and report to important management personnel based on the fair value, about the financial assets group or the group offinancial assets& liabilities which thefinancial assets are belong to.
For the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period shall continue to be measured by fair value, gains and losses of change in fair value, dividends and interest related with these financial assets shouldbe recorded intogains and losses ofcurrent period.
② Held-to-maturity investment
The term “held-to-maturity investment” refers to a non-derivative financial asset with a fixed date of maturity, a fixed or determinable amount of repo price and which the enterprise holdsfor adefinite purposeor theenterprise is ableto hold untilits maturity.
For the held-to-maturity investment adopting actual interest rate method, which is measured at the post-amortization costs, the profits and losses that arise when such financial assets or financial liabilities are terminated from recognition, or are impaired or amortized, shall be recorded into theprofits and lossesof thecurrent period.
KonkaGroupCo.,Ltd. InterimReport2018 The actual interest rate method refers to the method by which the post-amortization costs and the interest incomes of different instalments or interest expenses are calculated in light of the actual interest rates of the financial assets or financial liabilities (including a set of financial assets or financial liabilities). The actual interest rate refers to the interest rate adopted to cash the future cash flow of a financial asset or financial liability within the predicted term of existence or within a shorter applicable term into the current carrying amount of the financial asset orfinancial liability.
When the actual interest rate is determined, the future cash flow shall be predicted on the basis of taking into account all the contractual provisions concerning the financial asset or financial liability (the future credit losses shall not be taken into account).and also the various fee charges, trading expenses, premiums or reduced values, etc., which are paid or collected by the parties to a financial asset or financial liability contract and which form a part of the actual interest rate.
③ Loans and theaccounts receivables
Loans and the accounts receivables refer to non-derivative financial assets, which there is no quotation in the active market, with fixed recovery cost or recognizable. Financial assets that are defined as loans and the accounts receivables by the Group including notes receivables, accounts receivables, interest receivable, dividends receivable and other receivables etc.. Loans and the accounts receivables are made follow-up measurement on the basis of post-amortization costs employing the effective interest method. Gains or loss arising from the termination recognition, impairment occurs or amortization shall be recorded into the profits and losses ofthecurrent period.
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
KonkaGroupCo.,Ltd. InterimReport2018 which deduct the principal that had been repaid, to plus or minus the accumulative amortization amount formed by the amortization between the difference of the initially recognized amount and the amount on the due date that adopted the actual interest rate method, and at the same time deduct the amount after the impairment loss happened. The cost at theperiod-end ofthe available-for-sale liabilities instruments is itsinitialcost.
Financial assets available-for-trade are subsequently measured at fair value, and gains or losses arising from changes in the fair value are recognized as other comprehensiveincome， and be carried forward when the said financial assets stopped recognition, then it shall be recorded into the profits and losses of the current period. But, the equity instrument investment which neither have quotation in the active market nor its fair value could not be reliable measured, as well as the derivative financial assets that concern with the equity instruments and should be settled through handing over to its equity instruments, should take thefollow-up measurement according tothe cost.
Interest receive during the holding of assets available for sales and cash dividends with distribution announcement by invested companies, it shall be recorded into the profits and losses ofthecurrent period.
(3)Impairment offinancial assets
The Group assesses at the balance sheet date the carrying amount of every financial asset except for the financial assets that measured by the fair value. If there is objective evidence indicatinga financial asset may be impaired, aprovision is provided for theimpairment. The Group carries out a separate impairment test for every financial asset which is individually significant. As for a financial asset which is individually insignificant, an impairment test is carried out separately or 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
KonkaGroupCo.,Ltd. InterimReport2018 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
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
KonkaGroupCo.,Ltd. InterimReport2018 derivative financial asset which is connected with the said equity instrument investment and which must besettled bydelivering thesaid equityinvestment, is not reversed.
(4)Recognition and measurement of financial asset transfers
Where a financial asset satisfies any of the following requirements, the recognition of it is terminated:① The contractual rights for collecting the cash flow of the said financial asset are terminated;② The said financial asset has been transferred and nearly all of the risks and rewards related to the ownership of the financial asset to the transferee; or③ The said financial asset has been transferred. And the Group has ceased its control on the said financial asset though it neither transfers nor retains nearly all of the risks and rewards related to theownership ofthe financial asset.
Where the Group neither transfers nor retains nearly all of the risks and rewards related to the ownership of a financial asset, and it does not cease its control on the said financial asset, it recognizes the relevant financial asset and liability accordingly according to the extent of its 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.
KonkaGroupCo.,Ltd. InterimReport2018 In respect of the assets using recourse to sell or using endorsement to transfer, the Group needs to determine whether almost all of the risks and rewards of the financial asset ownership are transferred. If almost all of the risks and rewards of the financial asset ownership had been transferred to the transferee, derecognize the financial assets. For almost all of the risks and rewards of the financial asset ownership retained, do not end to recognize the financial assets. For which neither transfer or retain almost all of the risks and rewards of the financial asset ownership, continuously judge whether the Company retain the control of the assets, and conduct accounting treatment according to the principle of mentioned in the previous paragraphs.
(5)Classification and measurement offinancial liabilities
In the initial recognition, financial liabilities are divided into the financial liabilities measured at fair values and whose changes are recorded in current gains and losses and other financial liabilities. Financial liabilities are initially recognized at their fair values. As for a financial liability measured at fair value and whose changes are recorded in current gains and losses, the relevant trading expense is directly recorded in the profits and losses for the current period. As for other financial liabilities, the relevant trading expenses are recorded in the initially recognized amounts.
① Financial liabilities measured at fair values and whose changes are recorded in current gains and losses
Such financial liabilities are divided into transactional financial liabilities and financial liabilities designated to be measured at fair values and whose changes are recorded in current gains and losses in the initial recognition under the same conditions where such financial assets are divided into transactional financial assets and financial assets designated to be measured at fair values and whose changes are recorded in current gains and losses in the initial recognition.
Financial liabilities measured at fair values and whose changes are recorded in current gains and losses are subsequently measured at their fair values. Gains or losses arising from the fair value changes, as well as the dividend and interest expenses in relation to the said financial liabilities, are recorded inthe profits and losses forthe current period.
② Otherfinancial liabilities
KonkaGroupCo.,Ltd. InterimReport2018 As for a derivative financial liability connected to an equity instrument for which there is not quoted price in an active market and whose fair value cannot be reliably measured and which must be settled by delivering the equity instrument, it is subsequently measured on the basis of costs. Other financial liabilities are subsequently measured according to the amortized cost using the actual interest rate method. Gains or losses arising from de-recognition or amortization of the said financial liabilities is recorded in the profits and losses for the current period.
③ Financial guaranteecontract and loan commitment
For the financial guarantee contracts which are not designated as a financial liability measured at its fair value and the variation thereof is recorded into the profits and losses of the current period, or the loan commitment which is not designated as a financial liability measured at its fair value and the variation thereof is recorded into the gains and losses that will be loaned lower than the market interest rate, which shall be initially recognized by fair value, and the subsequent measurement shall be made after they are initially recognized according to the higher one of the following: a. the amount as determined according to the Accounting Standards for Enterprises No. 13– Contingencies; b. the surplus after accumulative amortization as determined according to the principles of the Accounting Standards for Enterprises No. 14 - Revenues is subtracted from the initially recognized amount.
(6)De-recognition of financial liabilities
Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly. Where the Group (debtor) enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is substantially different from that regarding the existing financial liability, it terminates the recognition of the existing financial liability, and at the same time recognizes thenew financial liability.
Where the recognition of a financial liability is totally or partially terminated, the enterprise concerned shall include into the profits and losses of the current period for the gap between the book value which has been terminated from recognition and the considerations it has paid
KonkaGroupCo.,Ltd. InterimReport2018 (including the non-cash assets it has transferred out and the new financial liabilities it has assumed)
(7)Derivatives and embedded derivatives
Derivative financial instruments include derivatives are initially measured at fair value at the date when the derivative contracts are entered into and are substantially re-measured at fair value. Theresulting gain and loss is recognized inprofit orloss.
An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not designated as a financial asset or financial liability at fair value though profit or loss, and the treated as a standalone derivative if (a) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; and (b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the Company is unable to measure the embedded derivative separately either at acquisition or at a subsequent balance sheet date, it designates the entire hybrid instrument as a financial asset or financial liability at fair valuethrough profit or loss.
(8)Offsettingfinancial assets and financial liabilities
When the Group has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in thebalance sheet and shall not beoffset.
(9)Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. The Group issues (including refinancing), re-purchases, sells or written-offs the equity instrument as the disposing of the changes of the equity. The Group not recognized the changes of the fair value of the equity instrument. The transaction expenses related to theequity transaction would bededucted from theequity. All types of distribution (excluding stock dividends) made by the Group to holders of equity instruments are deducted fromshareholders’ equity. The Group does not recognize any
KonkaGroupCo.,Ltd. InterimReport2018 changes in thefair value ofequity instruments.
10.Receivables
Receivables includeaccount receivables andother accounts receivables.
(1)Recognition ofprovision for baddebts:
The Group shall test the carrying amount of receivables on the balance sheet date. Where there is any objective evidence proving that such receivables have been impaired, an impairment provision shallbemade.
① Debtorhas serious financial difficult;
② Debtor goes against the contract clause (for instance, breach of faith or overdue paying interests orprincipal);
③ Debtors have agreat probability ofbankruptcy orother financial reorganization;
④ Otherobjective evidence proving such accounts receivablehas been impaired;
(2)Withdraw method ofprovision for bad debts
① The recognition criteria and method of individual provision for bad debts of receivables thatare individually significant
The Group recognized the receivables with amount above RMB20 million and other receivables above RMB10 million as receivables with significant single amounts and withdrawn theprovision for bad debts.
The Group made an independent impairment test on receivables with significant single amounts; the financial assets without impairment by independent impairment test should be included in financial assets portfolio with similar credit risk to take the impairment test. Receivables was recognized with impairment should no longer be included in receivables portfoliowith similarcredit risk to taketheimpairment test.
② The recognition and method of provision for bad debts of receivables by credit risk portfolio
KonkaGroupCo.,Ltd. InterimReport2018 A.Recognition ofcreditrisk group
Receivables that not individually significant and individually significant but without impairment by independent impairment test, are grouped on the basis of similarity and relevance of credit risk. This credit risk usually reflects thedebtor’s ability to repay all the due accounts in accordance with contract for such assets, which also are related with the measurement onfuturecash flowof theexaminedassets.
Recognition basicofdifferent groups:
Item Basic
Divide the groups according to the credit risks characteristics of the accounts Group1:Aginggroup
receivable
Group 2: Internal related party groups Divide the groups according to the credit risks characteristics of whether the in the scope of consolidation of the creditor is the internal related party in the scope of consolidation of the Company Company
B.Withdrawal method of provision forbad debts recognized bycredit risk group
For the impairment test implemented by groups, the amount of provision for bad debts was appraised and recognized in accordance with the structure of accounts receivable group and similar characteristics of credit risk (thedebtor’s ability to pay off the loans in accordance with the provisions of contract), experience of losses, current economic status and the predicted losses inthe accounts receivable group.
Methods ofmaking provisionsfor bad debt in different groups:
Item Withdrawalmethod
Group1:Aginggroup Aginganalysismethod
Group 2: Internal related party groups in the To make an independent impairment test and if there was no scopeofconsolidationoftheCompany impairment,shouldnotwithdrawthebaddebtsprovision.
In thegroup 1,adoptingaging analysis method towithdraw baddebt provision:
||
|-|
|Withdrawal proportion for accountsreceivable(%)|
|2-5|
|5-10|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Withdrawal proportion for accountsreceivable(%)|
|20-30|
|50|
|50-80|
|100|

③ Receivables with insignificant amount but being individually withdrawn the provision for bad debts
The Group made independent impairment test on receivables with insignificant amount but with the following characteristics, if any objective evidence shows that the accounts receivable has been impaired, impairment loss shall be recognized on the basis of the gap between the current values of the future cash flow lower than its book value so as to withdrawprovision forbad debts:
A.Receivables have disputewiththeother parties or involvinglawsuit and arbitration;
B. Receivables have obvious indication showing that the debtors are likely to fail to perform thedutyof repayment, etc.
C.There isother evidence of impairmentand theimpairment amount can estimated reliably. (3)Reversal ofprovision for bad debts
If there is any objective evidence proving that the value of the said receivables has been restored, and it is objectively related to the events occurred after such loss is recognized, the impairment-related losses as originally recognized shall be reversed and be recorded into the profits and losses of the current period. However, the reversed carrying amount shall not be any more than the post-amortization costs of the said accounts receivable on the day of reverseunder theassumption that noprovisionis made forthe impairment.
11.Inventory
(1)Classification
TheGroup’s inventories are classified as non-property inventories and property inventories.
And the non-property inventories include raw materials, goods in process; merchandise on
hand, goods delivered, circulating materials, and engineering constructions, etc; while the
KonkaGroupCo.,Ltd. InterimReport2018 property inventories includeproperty in process and finished property,etc.
① Thefinished property refers tothe finished and held-for-saleproperty.
② The property in process (development costs) refers to the unfinished property with the development purpose forsale.
(2)Pricing method foroutgoing inventories
The inventories shall be measured in light of their cost when obtained. The cost of inventory consists of purchase costs, processing costs and other costs. Inventory is accounted by weight average method upon receiving and giving. For merchandise on hand shall be accounted by planned cost, if the difference between planned cost of and actual cost of raw materials is accounted through the cost variance item, and the planned cost is adjusted to the actual cost according to the cost difference which the carryover and given-out inventory should shoulder intheperiod.
The construction contracts shall be measured at actual cost, including all direct and indirect costs related to the execution of the contract from the time signing the contract to completing the contract. The expenses such as travel expenses and bidding fees incurred for the purpose of signing the contract, which can be separately and reliably measured and the contract is likely to be concluded, are included in the contract cost when the contract is obtained; if the above conditionsare not met, theyare included inthe current profit and loss.
The accumulated costs incurred in the contract in progress, the accumulated recognized gross profit (loss) and the settled price are stated in the balance sheet as net offset. The part of the sum of the accumulated costs incurred in the contract in progress and the accumulated recognized gross profit (loss) that exceeds the settled price is stated as the inventory; the part of the settlement costs of the contract in progress that exceeds the sum of the accumulated costs incurred and the accumulated recognized gross profit (loss) are stated as account collected inadvance.
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
KonkaGroupCo.,Ltd. InterimReport2018 available-for-sale property, while as for the supporting facilities with operating value and beneficiary rights owned by the Group as well as available for individual sale and measurement, which shall berecorded into the “investment property”
② For the accounting policies on borrowing costs occurred for developing property, please referto Note IV.17Pricing of “Borrowing Costs”.
(3) Recognition basis of net realizable value and withdrawal method of depreciation reserves forinventories
The net realizable value refers, in the ordinary course of business, to the account after deducting the estimated cost of completion, estimated sale expense and relevant taxes from the estimated sale price of inventories. The net realizable value of inventories shall be fixed on the basis of valid evidence as well as under consideration of purpose of inventories and theeffect of events after balance-sheet-date.
On the balance sheet date, the inventories shall be measured according to the cost or the net realizable value, whichever is lower. If the net realizable value is lower than the cost, it shall withdraw the depreciation reserves for inventories, which was withdrawn in accordance with the balance that the cost of individual inventory item exceeding the net realizable value. The inventories with various numbers and low unit price shall be made provisions for depreciation reserves of inventories according to thecategory of inventories.
After withdrawing the depreciation reserves for inventories, if the factors, which cause any write-down of the inventories, have disappeared, causing the net realizable value of inventories is higher than its carrying amount; the amount of write-down shall be reversed from the original amount of depreciation reserve for inventories. The reversed amount shall beincluded in theprofits and losses ofthecurrent period.
(4)The perpetual inventory system is maintained for stocksystem.
(5)Amortization method ofthelow-value consumption goods and packing articles
The low-value consumption goods should be amortized by one time amortization when acquiring and the packing articles are amortized byonetimeamortization whenacquiring. 12.Assets HeldforSaleandDisposalGroup
When a company relies mainly on selling (including the exchanges of non-monetary assets with commercial substance, similarly hereinafter) instead of continuing to use a non-current
KonkaGroupCo.,Ltd. InterimReport2018 asset or disposal group to recover its book value, then the non-current asset or disposal group is classified as assets held for sale. The specific standards are simultaneously meeting the following conditions: assets or disposal groups can be sold immediately under current conditions based on the practice of selling such assets or disposal groups in similar transactions; the Company has already made a resolution on the sale plan and obtained a certain purchase commitment, and the sale is expected to be completed within one year. A disposal group refers to a group of assets that are disposed of together as a whole by sale or other means in a transaction and the liabilities directly related to these assets transferred in the transaction. Where the asset group or combination of asset groups to which a disposal group belongs apportions the goodwill acquired in the business combination in accordance with the Accounting Standards for Enterprises No. 8 - Asset Impairment, the disposal group shall includethegoodwill allocated to it.
If there are non-current assets or disposal groups held for sale during initial measurement or on the balance sheet day based on remeasurement of this Company, if the book value is higher than the net amount by deducting the selling expenses with the fair value, the book value shall be written down and be equal to the net amount by deducting the selling expenses with the fair value. The write-down amount shall be confirmed as the loss of depreciation of assets and shall be included into the profits and losses of the current period.At the same time, prepare to calculate and withdraw the assets purchased and under agreements to resell. For the disposal group, deduct the book value of the goodwill in the disposal group with the asset depreciation losses confirmed, then deduct the book value of each non-current asset in the disposal group conforming to the measurement regulations of Accounting Standards for Business Enterprises No. 42-non-current Assets Purchased and under Agreements to Resell, Disposal Group and Operation Termination (herein after referred to as "the Standard for Assets Purchased and under Agreements to Resell"). If the net amount by deducting the selling expenses with the fair value of the disposal group purchased and under agreements to resell on the subsequent balance sheet date, the previous write-down amount shall be recovered and shall be reversed within the asset depreciation losses amount of the non-current confirmed as per regulation of the Standard for Assets Purchased and under Agreements to Resell after being classified into the category purchased and under agreements to resell. The reverse amount shall be included into the current profits and losses, and the bookvalue shall be added as per the proportion of the book value of each non-current asset in
KonkaGroupCo.,Ltd. InterimReport2018 the disposal group applicable to the Standard for Assets Purchased and under Agreements to Resell except for the goodwill; The goodwill book value deducted and the asset depreciation losses of the non-current assets applicable to the measurement regulations of the Standard for Assets Purchased and under Agreements to Resell before its confirmation of being classified intothecategory purchased and under agreements toresell shall notbe reversed.
Depreciation or amortization in the non-current assets held for sale or the non-current assets in the disposal group shall not be calculated or withdrawn. Interests of liabilities and other expenses in the disposal group purchased and under agreements to resell shall be confirmed continuously.
When a non-current asset or disposal group fail to meet the classification conditions for the category of held-for-sale, the Company will no longer classify a non-current asset or disposal group as held-for-sale or remove out a non-current asset from the held-for-sale disposal group, and it will be measured by one of the followings whichever is lower: (1) The book value before being classified as held for sale will be adjusted according to the depreciation, amortization or impairment that would have been recognized under the assumption that it was not classified as held for sale; (2)The recoverable amount.
13.Long-term Equity Investments
The long-term equity investments of this part refer to the long-term equity investments that the Group has control, joint control or significant influence over the investees. The long-term equity investment that the Group does not have control, joint control or significant influence over the investees, should be recognized as available-for-sale financial assets or be measured by fair value with the changes should be included in the financial assets accounting of the current gains and losses, and please refer the details of the accounting policies to Notes IV 9 “Financial Instrument”.
Joint control, refers to the control jointly owned according to the relevant agreement on an arrangement by the Group and the relevant activities of the arrangement should be decided only after the participants which share the control right make consensus. Significant influence refers to the power of the Group which could anticipate in the finance and the operation polices of the investees, but could not control or jointly control the formulation of thepolicies with theotherparties.
(1)Recognition ofinvestment costs
As for long-term equity investments acquired by enterprise merger, if the merger is under the
KonkaGroupCo.,Ltd. InterimReport2018 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.
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
KonkaGroupCo.,Ltd. InterimReport2018 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 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.
KonkaGroupCo.,Ltd. InterimReport2018 (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; 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
KonkaGroupCo.,Ltd. InterimReport2018 the accounting policies adopted by the investees are not accord with that of the Group, should be adjusted according to the accounting policies of the Group and the financial statement of the investees during the accounting period and according which to recognize the investment income as well as other comprehensive income. For the transaction happened between the Group and associated enterprises as well as joint ventures, if the assets launched or sold not form into business, the portion of the unrealized gains and losses of the internal transaction, which belongs to the Group according to the calculation of the enjoyed proportion, should recognize the investment gains and losses on the basis. But the losses of the unrealized internal transaction happened between the Group and the investees which belongs to the impairment losses of the transferred assets, should not be neutralized. If the assets launched by this Company to the associated enterprise or joint ventures constitute the business, and the investor obtains the long-term equity investment but fails to obtain the control right, the fair value of business launched is taken as the initial investment cost of newly-increased long-term equity investment, and the difference between initial investment cost and book value of business launched will be included in current profit and loss. If the assets sold by this Company to the associated enterprises or joint ventures constitute the business, the difference between consideration and book value of business will be included in current profit and loss. If this Company's assets purchased from the associated enterprises or joint ventures constitute business, accounting treatment shall be conducted in accordance with the provisions of theAccounting Standards for Business Enterprises No. 20 -- Business Combination,fully recognizethegains orlosses related tothe transaction.
The Group shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially from the net investment made to the invested entity are reduced to zero. However, if the Group has the obligation to undertake extra losses, it shall be recognized as the estimated liabilities in accordance with the estimated duties and then recorded into investment losses at current period. If the invested entity realizes any net profits later, the Group shall, after the amount of its attributable share of profits offsets against its attributable share of the un-recognizedlosses, resumerecognizingits attributableshare ofprofits.
For the long-term equity investment held by the Group before the first execution of the new accounting criterion of the associated enterprises and joint ventures, if there is debit difference of the equity investment related to the investment, should be included in the current gains and losses according to the amount of the straight-line amortization during the original remained period.
KonkaGroupCo.,Ltd. InterimReport2018③ 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 investees according to the corresponding proportion. Theowners’ equity recognized owning to the changes of the other owners’ equity except for the net gains and losses, other comprehensive income and the profits distribution of the investees, should be transferred into thecurrent gains and losses according tothe proportion.
For the long-term equity investment which adopts the cost method of measurement, if the remained equity still adopt the cost method, the other comprehensive income recognized owning to adopting the equity method for measurement or the recognition and measurement standards of financial instrument before acquiring the control of the investees, should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees and should be carried forward into the current gains and losses according to
KonkaGroupCo.,Ltd. InterimReport2018 the proportion; the changes of the otherowners’ equity except for the net gains and losses, other comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity method for measurement, should be carried forward intothecurrent gainsand losses according totheproportion.
For those the Group lost the control of the investees by disposing part of the equity investment as well as the remained equity after disposal could execute joint control or significant influences on the investees, should change to measure by equity method when compiling the individual financial statement and should adjust the measurement of the remained equity to equity method as adopted since the time acquired; if the remained equity after disposal could not execute joint control or significant influences on the investees, should change the accounting disposal according to the relevant regulations of the recognition and measurement standards of financial instrument, and its difference between the fair value and book value on the date lose the control right should be included in the current gains and losses. For the other comprehensive income recognized by adopting equity method for measurement or the recognition and measurement standards of financial instrument before the Group acquired the control of the investees, should execute the accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when lose the control of them, while the changes of the otherowners’ equity except for the net gains and losses, other comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity method for measurement, should be carried forward into the current gains and losses according to the proportion. Of which, for the disposed remained equity which adopted the equity method for measurement, the other comprehensive income and the otherowners’ equity should be carried forward according to the proportion; for the disposed remained equity which changed to execute the accounting disposal according to the recognition and measurement standards of financial instrument, the other comprehensive incomeand theotherowners’ equity shouldbe carried forward in fullamount.
For those the Group lost the control of the investees by disposing part of the equity investment, the disposed remained equity should change to calculate according to the recognition and measurement standards of financial instrument, and difference between the fair value and book value on the date lose the control right should be included in the current gains and losses. For the other comprehensive income recognized from the original equity
KonkaGroupCo.,Ltd. InterimReport2018 investment by adopting the equity method, should execute the accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when terminate the equity method for measurement, while for theowners’ equity recognized owning to the changes of the otherowner’s equity except for the net gains and losses, other comprehensive income and the profits distribution of the investees, should be transferred into the current investment income with full amount when terminate adoptingthe equitymethod.
The Group respectively disposes the equity investment of the subsidiaries through multiple transactions until lose the control right, if the above transactions belongs to the package deal, should execute the accounting disposal by regarding each transaction as a deal of disposing the equity investment of the subsidiaries until lose the control right, while the difference between each expenses of the disposal and the book value of the long-term equity investment in accord with the disposed equity before losing the control right, should firstly be recognized as other comprehensive income then be transferred into the current gains and losses oflosingthe control right along untilthetimewhen loseit.
14.InvestmentReal Estates
The term “investment real estate” refers to the real estate held for generating rent and/or capital appreciation. Investment real estates of the Group include the right to use any land which has already been rented; the right to use any land which is held and prepared for transfer after appreciation; and theright touseany buildingwhich has already been rented. The initial measurement of the investment real estate shall be made at its cost. Subsequent expenditures incurred for an investment real estate is included in the cost of the investment real estate when it is probable that economic benefits associated with the investment real estate will flow to the Group and the cost can be reliably measured, otherwise the expenditureis recognized in profit orloss in theperiod in which they are incurred.
The Group shall make a follow-up measurement to the investment real estate by employing the cost pattern on the date of the balance sheet.An accrual depreciation or amortization shall be made for the investment real estates in the light of the accounting policies of the use right ofbuildings or lands.
For details of impairment test method and withdrawal method of impairment provision of investment real estates, please refer toNote IV.20. “Long-term assets impairment”.
When owner-occupied real estate or inventories are changed into investment real estate or investment real estate is changed into owner-occupied real estate, of which book value prior
KonkaGroupCo.,Ltd. InterimReport2018 tothechange shallbe theentry valueafter the change.
When an investment real estate is changed to an owner-occupied real estate, it would be transferred to fixed assets or intangible assets at the date of such change. When an owner-occupied real estate is changed to be held to earn rental or for capital appreciation, the fixed asset or intangible asset is transferred to investment real estate at the date of such change. If the fixed asset or intangible asset is changed into investment real estate measured by adopting the cost pattern, whose book value prior to the change shall be the entry value after the change; if the fixed asset or intangible asset is changed into investment real estate measured by adopting the fair value pattern, whose fair value on the date of such change shall betheentry valueafter thechange
An investment real estate is derecognized on disposal or when the investment real estate is permanently withdrawn from use and no future economic benefits are expected from its disposal. The amount of proceeds on sale, transfer, retirement or damage of an investment real estate less its carrying amount and related taxes and expenses is recognized in profit or lossin theperiod in which it isincurred.
15.FixedAssets
(1)Conditionsfor recognition of fixed assets
The term "fixed assets" refers to the tangible assets that simultaneously possess the features as follows: (a) they are held for the sake of producing commodities, rendering labour service, renting or business management; and (b) their useful life is in excess of one fiscal year. The fixed assets are only recognized when the relevant economic benefits probably flow in the Group and its cost could be reliable measured. The fixed assets should take the initial measurement according to the cost and at the same time consider the influences of the factors oftheestimated discard expenses.
(2)Depreciation methodsof each fixed asset
The fixed assets should be withdrawn and depreciation by straight-line depreciation within the useful life since the next month when the fixed assets reach the estimated available state. The useful life, estimated net salvage and the yearly discounted rate of each fixed asset are as follows:
||||
|-|-|-|
|Method|Usefullife(Year)|Expected netsalvage value(%)|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Method|Usefullife(Year)|Expected netsalvage value(%)|
|Straight-linedepreciation|20-40|5.00-10.00|
|Straight-linedepreciation|5-10|5.00-10.00|
|Straight-linedepreciation|3-5|0.00-10.00|
|Straight-linedepreciation|4-5|5.00-10.00|
|Straight-linedepreciation|5-25|5.00-10.00|

The “expected net salvage value” refers to the expected amount that the Group may obtain from the current disposal of a fixed asset after deducting the expected disposal expenses at theexpirationof itsexpected useful life.
(3) Testing method of impairment and withdrawal method of provision for impairment on fixed assets
For details of the testing method of impairment and withdraw method of impairment provision for impairment on fixed assets, please refer to Note IV. 20 “Long-term assets impairment”.
(4)Recognition basis, pricing and depreciation method offixed assets byfinance lease
The “finance lease” shall refer to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. Its ownership may or may not eventually be transferred. The fixed assets by finance lease shall adopt the same depreciation policy for self-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully
depreciated over theshorter oneof thelease term orits useful life.
(5)Other explanations
KonkaGroupCo.,Ltd. InterimReport2018 The follow-up expenses related to a fixed asset, if the economic benefits pertinent to this fixed asset are likely to flow into the enterprise and its cost can be reliably measured, shall be recorded into cost of fixed assets and ultimately recognized as the book value of the replaced part; otherwise, they shall beincluded in thecurrent profits and losses.
Terminate to recognize the fixed assets when the fixed assets under the disposing state or be estimated that could not occur any economy benefits through using or disposing. When the Group sells, transfers or discards any fixed assets, or when any fixed assets of the Group is damaged or destroyed, the Group shall deduct the book value of the fixed assets as well as the relevant taxes from the disposal income, and include the amount in the current profits and losses.
The Group shall check the useful life, expected net salvage value and depreciation method of the fixed assets at the end of the year at least, if there is any change, it shall be regarded as a change oftheaccounting estimates.
16.Construction inProgress
Construction in process is measured at actual cost. Actual cost comprises construction costs, borrowing costs that are eligible for capitalization before the fixed assets being ready for their intended us and other relevant costs. Construction in process is transferred to fixed assets when theassets are ready for theirintended use.
For details of the testing method of impairment and withdraw method of impairment provision on construction in progress, please refer to Note IV. 20 “ Long-term assets impairment”.
17.BorrowingCosts
The borrowing costs shall include interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. When the borrowing costs can be directly attributable to the construction or production of assets eligible for capitalization, and the asset disbursements or the borrowing costs have already incurred, and the construction or production activities which are necessary to prepare the asset for its intended use or sale have already started, the capitalization of borrowing costs begins. When the asset eligible for capitalization under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased. Other borrowing costs shall be recognized as expenses when incurred.
KonkaGroupCo.,Ltd. InterimReport2018 The to-be-capitalized amount of interests shall be determined in light of the actual interests incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment; the enterprise shall calculate and determine the to-be-capitalized amount on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be calculated and determined in light ofthe weighted average interest rate ofthe general borrowing.
During the period of capitalization, the exchange balance on foreign currency special borrowings shall be capitalized; the exchange balance on foreign currency general borrowings shall be recorded into current profits andlosses.
The term “assets eligible for capitalization” refers to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may takequitea longtimeto get ready for itsintended useorforsale.
Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall besuspended.
18.IntangibleAssets
(1)Pricing method, useful life andimpairment test
The term “intangible asset” refers to the identifiable non-monetary assets possessed or controlled byenterprises which havenophysical shape.
The intangible assets shall be initially measured according to its cost. The costs related with the intangible assets, if the economic benefits related to intangible assets are likely to flow into the enterprise and the cost of intangible assets can be measured reliably, shall be recorded into the costs of intangible assets; otherwise, it shall be recorded into current profits and losses upontheoccurrence.
The use right of land gained is usually measured as intangible assets. For the self-developed and constructed factories and other constructions, the related expenditures on use right of land and construction costs shall be respectively measured as intangible assets and fixed 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.
KonkaGroupCo.,Ltd. InterimReport2018 For intangible assets with a finite service life, from the time when it is available for use, the cost after deducting the sum of the expected salvage value and the accumulated impairment provision shall be amortized by straight line method during the service life. While the intangibleassets without certain service lifeshall not beamortized.
At the end of period, the Group shall check the service life and amortization method of intangible assets with finite service life, if there is any change, it shall be regarded as a change of the accounting estimates. Besides, the Group shall check the service life of intangible assets without certain service life, if there is any evidence showing that the period of intangible assets to bring the economic benefits to the enterprise can be prospected, it shall be estimated the service life and amortized in accordance with the amortization policies for intangibleassets with finiteservice life.
(2)R& Dexpenses
The expenditures for internal research and development projects of an enterprise shall be classified into research expenditures and development expenditures.
Theresearch expenditures shall berecorded into theprofit orloss forthe current period. The development expenditures shall be confirmed as intangible assets when they satisfy the following conditions simultaneously, and shall be recorded into profit or loss for the current period when theydon’t satisfy thefollowing conditions.
① It isfeasibletechnically to finish intangibleassets foruse orsale;
② It isintended tofinish and use orsell theintangible assets;
③ The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangibleassets itselfortheintangible assets will beused internally;
④ It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources;
⑤ Thedevelopment expenditures oftheintangible assets can be reliably measured.
As for expenses that can’ t be identified as research expenditures or development expenditures, theoccurred R& Dexpenses shall be all included in current profits and losses.
KonkaGroupCo.,Ltd. InterimReport2018 (3) Testing method of impairment and withdraw method of impairment provision of intangibleassets
For details of the testing method of impairment and withdraw method of impairment provisiononintangible assets, seeNotes IV.20 “Long-term assets impairment”.
19.Amortization Methodof Long-term Deferred Expenses
Long-term deferred expenses refer to general expenses with the apportioned period over one year (one year excluded) that have occurred but attributable to the current and future periods. Long-term deferred expenseshall be amortizedaveragely within benefit period.
20.ImpairmentofLong-termAssets
For non-current financial Assets of fixed Assets, projects under construction, intangible Assets with limited service life, investing real estate with cost model, long-term equity investment of subsidiaries, cooperative enterprises and joint ventures, the Group should judge whether decrease in value exists on the date of balance sheet. Recoverable amounts should be tested for decrease in value if it exists. Other intangible Assets of reputation and uncertain service life and other non-accessible intangible assets should be tested for decrease invalue nomatterwhether it exists.
If the recoverable amount is less than book value in impairment test results, the provision for impairment of differences should include in impairment loss. Recoverable amounts would be the higher of net value of asset fair value deducting disposal charges or present value of predicted cash flow.Asset fair value should be determined according to negotiated sales price of fair trade. If no sales agreement exists but with asset active market, fair value should be determined according to theBuyer’s price of the asset. If no sales agreement or asset active market exists, asset fair value could be acquired on the basis of best information available. Disposal expenses include legal fees, taxes, cartage or other direct expenses of merchantable Assets related to asset disposal. Present value of predicted asset cash flow should be determined by the proper discount rate according toAssets in service and predicted cash flow of final disposal. Asset depreciation reserves should be calculated on the basis of single Assets. If it is difficult to predict the recoverable amounts for single Assets, recoverable 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
KonkaGroupCo.,Ltd. InterimReport2018 is shown in the test that if recoverable amounts of shared business reputation asset group or asset group combination are lower than book value, it should determine the impairment loss. Impairment loss amount should firstly be deducted and shared to the book value of business reputation of asset group or asset group combination, then deduct book value of all assets according to proportions of other book value of above assets in asset group or asset group combinationexcept businessreputation.
After the asset impairment loss is determined, recoverable value amounts would not be returned in future.
21.Employee Compensation
Employee compensation of the Company mainly includes short-term employee compensation, departure benefits, demission benefits and other long-term employee compensation. Of which:
Short-term compensation mainly including salary, bonus, allowances and subsidies, employee services and benefits, medical insurance premiums, birth insurance premium, industrial injury insurance premium, housing fund, labour union expenditure and personnel education fund, non-monetary benefits etc. The short-term compensation actually happened during the accounting period when the active staff offering the service for the Group should be recognized as liabilities and is included in the current gains and losses or relevant assets cost. Ofwhich thenon-monetary benefits shouldbemeasured according tothe fairvalue. Welfare after demission mainly includes setting drawing plan. Defined contribution plans include basic endowment insurance, unemployment insurance and annuity. Deposited amounts are charged to relevant asset costs or current profits and losses during the period in which they are incurred. Defined benefit plan of the Company is internal early retirement plan. According to anticipated accumulative welfare unit, the Company makes estimates by unbiased and consistent actuarial assumption for the demographic variables and financial variables, measures the obligations produced in defined benefit plans, and determines the vesting period. On balance sheet date, the Company will list all obligations in defined benefit plans as present value and include current service costs into current profits and losses.
When terminating labour relations before expiration of contract, or layoffs with compensations, and the Company cannot terminate the labour relations unilaterally or reduce the demission welfare, remuneration and liabilities produced from the demission welfare
KonkaGroupCo.,Ltd. InterimReport2018 should be determined and included in current profits and losses when determining the costs of demission welfare and recombination. However, demission welfare not fully paid within 12 months after annual Reporting Period should be handled the same as other long-termemployees’ payrolls.
The inside employee retirement plan is treated by adopting the same principle with the above dismiss ion welfare. The group would recorded the salary and the social security insurance fees paid and so on from theemployee’s service terminative date to normal retirement date into current profits and losses (dismiss ion welfare) under the condition that they meet the recognition conditionsof estimated liabilities.
The other long-term welfare that the Group offers to the staffs, if met with the setting drawing plan, should be accounting disposed according to the setting drawing plan, while the rest should bedisposed according tothesetting revenueplan.
22.Estimated Liabilities
The company should recognize the related obligation as a provision for liability when the obligation meets the following conditions: (1) That obligation is a present obligation of the enterprise; (2) It is probable that an outflow of economic benefits from the enterprise will be required to settle the obligation; (3) A reliable estimate can be made of the amount of the obligation.
On the balance sheet date, an enterprise shall take into full consideration of the risks, uncertainty, time value of money, and other factors pertinent to the Contingencies to measure the estimated liabilities in accordance with the best estimate of the necessary expenses for the performance ofthecurrent obligation.
When all or some of the expenses necessary for the liquidation of an estimated liabilities of an enterprise is expected to be compensated by a third party, the compensation should be separately recognized as an asset only when it is virtually certain that the reimbursement will be obtained. Besides, the amount recognized for the reimbursement should not exceed the bookvalueoftheestimated liabilities.
23.Revenue
(1)Revenue from sellinggoods
No revenue from selling goods may be recognized unless the following conditions are met simultaneously: the significant risks and rewards of ownership of the goods have been transferred to the buyer by the enterprise; the enterprise retains neither continuous
KonkaGroupCo.,Ltd. InterimReport2018 management right that usually keeps relation with the ownership nor effective control over the sold goods; the relevant amount of revenue can be measured in a reliable way; the relevant economic benefits may flow into the enterprise; and the relevant costs incurred or to beincurred can bemeasured ina reliableway.
The recognition of revenue from commodities for the home market when shipping the goods or transferring property in goods; for goods exported, the revenue shall be recognized once the goods are cleared through customs and delivered to the carrier designated by the purchaser.
(2)Providing labourservices
If the Group can reliably estimate the outcome of a transaction concerning the labour services it provides, it shall recognize the revenue from providing services employing the percentage-of-completion method on the date of the balance sheet. The completed proportion of a transaction concerning the providing of labour services shall be decided by the proportion ofthelabour service already provided to thetotallabour service to provide.
The outcome of a transaction concerning the providing of labour services can be measured in a reliable way, means that the following conditions shall be met simultaneously:① The amount of revenue can be measured in a reliable way;② The relevant economic benefits are likely to flow into the enterprise;③ The schedule of completion under the transaction can be confirmed in a reliable way; and④ The costs incurred or to be incurred in the transaction can bemeasured ina reliableway.
If the outcome of a transaction concerning the providing of labour services cannot be measured in a reliable way, the revenue from the providing of labour services shall be recognized in accordance with the amount of the cost of labour services incurred and expected to be compensated, and make the cost of labour services incurred as the current expenses. If it is predicted that the cost of labour services incurredcouldn’t be compensated, thusnorevenue shallbe recognized.
Where a contract or agreement signed between Group and other enterprises concerns selling goods and providing of labour services, if the part of sale of goods and the part of providing labour services can be distinguished from each other and can be measured respectively, the part of sale of goods and the part of providing labour services shall be treated respectively. If the part of selling goods and the part of providing labour services cannot be distinguished
KonkaGroupCo.,Ltd. InterimReport2018 from each other, or if the part of sale of goods and the part of providing labour services can be distinguished from each other but cannot be measured respectively, both parts shall be conducted as selling goods.
(3)Recognition method ofthe sales revenues of real estate
The Group had signed the sales contract with the real estate had completed and be examined qualified, and reached the referable using conditions agreed by the sales contract as well as at the same time the housing accounts had been recognized the realize of the sales revenues when received with fullamount according to thesales contract.
(4)Royalty revenue
In accordance with relevant contract or agreement, the amount of royalty revenue should be recognized as revenue onaccrual basis.
(5)Interest revenue
The amount of interest revenue should be measured and confirmed in accordance with the length of time for which theGroup’s monetary fund is used by others and the agreed interest rate.
(6)Property leasing revenue
For therecognition method oftheproperty leasing revenue, please refer toNotes IV.26. (7)Factoring business revenue
Take the paid-in factoring payment as the fair value to carry out initial measurement. Subsequent measurement shall be carried out as per the effective interest method according to the amortized cost. Take the balance between the fair value initially confirmed and transferred amount of accounts receivable or face value of notes receivable as the interest income by effective interests method and amortized costs during the financing period or the rest credit period; interest income shall be recognized by straight-line method if it is due within 1 year. The profits and losses from termination of recognition, impairment, and amortizationshall beincluded intothecurrent profitsand losses.
(8)Construction contract income
Under circumstance ofthat the outcome of the construction contract can be reliably estimated, the contract income and costs are confirmed on the balance sheet date in accordance with the percentage of completion method. The completion of the contract is determined by the proportion of the contracted work that has been completed to the estimated total workload of thecontract.
KonkaGroupCo.,Ltd. InterimReport2018 That the result of the construction contract can be reliably estimated refers to that:① the total income of the contract can be reliably measured;②the economic benefits related to the contract are likely to flow into theenterprise;③The actual contract costs can be clearly differentiated and reliably measured;④ the completion of the contract and the costs needed tocomplete thecontract can bereliably determined.
If the result of the construction contract cannot be reliably estimated, but the contract cost can be recovered, the contract income can be confirmed according to the actual contract cost that can be recovered, and the contract cost is confirmed as the contract expense in the current occurring period; for the contract cost that cannot be recovered, it is immediately confirmed as the contract cost but not the contract income when it occurs. If the uncertainties that make the results of the construction contract cannot be reliably estimated are no longer in existence, the income and expenses related to the construction contract are determined according tothe percentage ofcompletion method.
If the estimated total cost of the contract exceeds the total contract income, the estimated loss isconfirmed as thecurrent expense.
The accumulated costs incurred in the contract in progress, the accumulated recognized gross profit (loss) and the settled price are stated in the balance sheet as net offset. The part of the sum of the accumulated costs incurred in the contract in progress and the accumulated recognized gross profit (loss) that exceeds the settled price is stated as the inventory; the part of the settlement costs of the contract in progress that exceeds the sum of the accumulated costs incurred and the accumulated recognized gross profit (loss) are stated as account collected inadvance.
For the provision of business for government and social capital cooperation (PPP) to participate in the public infrastructure construction, the Company confirms the relevant income and expenses for the construction services provided in accordance with the Accounting Standards for Business Enterprises No. 15 - Construction Contract; during the project construction period. After completing the construction of the infrastructure, the Company confirms the income and expenses related to the follow-up business services in accordancewith theAccounting Standards for Business Enterprises No. 14-Income.
(9) The business income of BOT and BT confirms that the Company adopts the BOT to participate in the public infrastructure construction business. And if the infrastructure construction is contracted to other parties without providing the actual construction services, the Companydoesn’t confirm the construction service income, and considers the contract provisions according to the project price paid in construction process and ensures the financial assets orintangible assets.
KonkaGroupCo.,Ltd. InterimReport2018 The contract stipulates that the Company has the right to charge the object of obtaining the service within a certain period of operation after the completion of the relevant infrastructure. If the amount of the fee is determined, it is confirmed as the financial asset; if the amount of thefee is uncertain, itis confirmed as theintangible asset.
The processing principles for BOT business can also be applied to some cases, such as that the Company builds or purchases infrastructure from a third party for the purpose of the service agreement, or the current infrastructure business and BT business that the contractual grantor provides to theCompanybased ontheservice agreement.
For the expenses specified by the relevant service agreement that belong to routine maintenance management fees, the Company will directly include it in the profit and loss during the period of service provision. If the compensation for the relevant maintenance and management fee is sure to be received or is received from the government, it shall be included in the operating income when providing the service, and shall be matched with the relevantexpenses.
The Company mainly provides integrated solutions for water treatment and sells industrial automation products. The income recognition conditions for providing integrated solutions for water treatment: the Company confirms the sales revenue based on the completion schedule approved by both parties and carries down the sales cost. The income recognition conditions for Revenue recognition conditions for selling industrial automation products: the Company has delivered the products to the purchaser according to the contract, and the products that need to be accepted have passed the acceptance of the purchaser, and the amount of sales income of the products has been determined. The relevant economic benefits arelikely toflow in,and therelated costs ofproducts can be reliably measured.
24.Government Subsidies
A government subsidy means the monetary or non-monetary assets obtained free by the Group from the government, but excluding the capital invested by the government as the investor with correspondingowner’s equity. Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to income. Government subsidy that is obtained by this Company used for purchasing or acquisition and construction, or forming the long-term assets by other ways, which is confirmed the government subsidy related to assets; Other government subsidies shall be defined as the government subsidy that related with interest. If it does not clear the subsidy object in the government document, the grants will be divided based on the following modes into government subsidy related to earnings and government subsidy related to assets: (1) If the particular project of the grants is clear in the government document, make a division according to the relative proportion of
KonkaGroupCo.,Ltd. InterimReport2018 expense amount of the formed assets in the budget of the particular project and the expense amount included in the cost, shall review the division ratio required at each balance sheet date and make changes if necessary; (2) Only make general statements for the application in the government document, for not specifying the particular item, as the governmental subsidy related to earnings. If a government subsidy is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount. The government subsidies measured at their nominalamounts shall bedirectly included inthecurrent profits and losses.
When thisCompany actually received thegovernment subsidy,recognizeand measure as the actual measured amount.
If the government grants related to assets are recognized as deferred income and are included in the profits and losses by instalments in a reasonable and systematic way within the service life of underlying assets. The government grants related to income, using to compensate the relevant expenses or losses in the later period shall be recognized as the deferred income and are included in the current profit or loss in the period of confirming the related expenses or losses; If the government grant is used for compensating the occurred costs or loss, include it inthecurrent profit and loss directly.
At the same time, for the government subsidies related to assets and profits, carry out different accounting processing for different parts; for the governmental subsidy hard to differentiate, the overall governmental subsidies are taken as the governmental subsidy related to revenue.
The government grants related to daily activities of this Company shall be included in other revenues or offset related costs according to the economic business nature; Government subsidiesunrelated to daily activities shall beincluded intothenon-operating profits.
If the governmental subsidies confirmed needs to be returned and there is the deferred earnings balance concerned, the book balance of relevant deferred earnings shall be offset against, but the excessive part shall be included into current profits and losses; Government subsidies belonging to other situations shall be directly included into current losses and profits.
25.DeferredIncomeTaxAssets/DeferredIncomeTax Liabilities
(1)Income tax ofthe current period
On the balance sheet date, for the current income tax liabilities (or assets) of the current
KonkaGroupCo.,Ltd. InterimReport2018 period as well as the part formed during the previous period, should be measured by the income tax of the estimated payable (returnable) amount which be calculated according to the regulations of the tax law. The amount of the income tax payable which is based by the calculation of the current income tax expenses, are according to the result measured from the corresponding adjustment of the pre-tax accounting profit of 2014 which in accord to the relevantregulations ofthetax law.
(2)Deferred income tax assets and deferred incometax liabilities
The difference between the book value of certain assets and liabilities and their tax assessment basis, as well as the temporary difference occurs from the difference between the book value of the items which not be recognized as assets and liabilities but could confirm their tax assessment basis according to the regulations of the tax law, the deferred income tax assets and the deferred income tax liabilities should be recognized by adopting liabilities law ofthebalance sheet.
No deferred tax liability is recognized for a temporary difference arising from the initial recognition of goodwill, the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). Besides, no deferred tax assets is recognized for the taxable temporary differences related to the investments of subsidiary companies, associated enterprises and joint enterprises, and the investing enterprise can control the time of the reverse of temporary differences as well as the temporary differences are unlikely to be reversed in the excepted future. Otherwise, the Group should recognize the deferred income tax liabilities arising from othertaxabletemporary difference.
No deferred taxable assets should be recognized for the deductible temporary difference of initial recognition of assets and liabilities arising from the transaction which is not business combination, the accounting profits will not be affected, nor will the taxable amount or deductible loss be affected at the time of transaction. Besides, no deferred taxable assets should be recognized for the deductible temporary difference related to the investments of the subsidiary companies, associated enterprises and joint enterprises, which are not likely to be reversed in the expected future or is not likely to acquire any amount of taxable income tax that may be used for making up such deductible temporary differences. Otherwise, the Company shall recognize the deferred income tax assets arising from a deductible temporary difference basing on the extent of the amount of the taxable income that is likely to be
KonkaGroupCo.,Ltd. InterimReport2018 acquired tomake upsuch deductible temporary differences
For any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax asset shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be likely obtained.
On the balance sheet date, the deferred income tax assets and the deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the assets areexpected to berecovered orthe liabilities are expected to be settled.
The book value of deferred income tax assets shall be reviewed at each balance sheet date. If it is unlikely to obtain sufficient taxable income to offset against the benefit of the deferred income tax asset, the book value of the deferred income tax assets shall be written down.Any such write-down should be subsequently reversed where it becomes probable that sufficient taxableincome willbe available.
(3)Income tax expenses
Incometax expenses includecurrent incometax and deferred income tax.
The rest current income tax and the deferred income tax expenses or revenue should be included into current gains and losses except for the current income tax and the deferred income tax related to the transaction and events that be confirmed as other comprehensive income or be directly included in theshareholders’ equity which should be included in other comprehensive income orshareholders’ equity as well as the book value for adjusting the goodwillof thedeferred incometax occurs from thebusinesscombination.
(4)Offset of incometax
The current income tax assets and liabilities of the Group should be listed by the written-off net amount which intend to executes the net amount settlement as well as the assets acquiring and liabilities liquidation at the same time while owns the legal rights of settling the net amount.
The deferred income tax assets and liabilities of the Group should be listed as written-off net amount when having the legal rights of settling the current income tax assets and liabilities by net amount and the deferred income tax and liabilities is relevant to the income tax which be collected from the same taxpaying bodies by the same tax collection and administration department or is relevant to the different taxpaying bodies but during each period which there is significant reverse of the deferred income assets and liabilities in the future and among
KonkaGroupCo.,Ltd. InterimReport2018 which the involved taxpaying bodies intend to settle the current income tax and liabilities by net amount orare at thesame timeacquire theasset as well as liquidatetheliabilities.
26.Leasing
Financing leasing virtually transferred the whole risks and leasing of the compensation related to the assets ownership and their ownership may eventually be transferred or maybe not.Other leasing except for thefinancing leasing is operating leasing.
(1)Business ofoperating leases recorded bythe Group as thelessee
The rent expenses from operating leases shall be recorded by the lessee in the relevant asset costs or the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs shall be recognized as the profits and losses of the current period. The contingent rents shall be recorded into the profits and losses ofthecurrent period inwhich they actually arise.
(2)Business ofoperating leases recorded bythe Group as thelessor
The rent incomes from operating leases shall be recognized as the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs of great amount shall be capitalized when incurred, and be recorded into current profits and losses in accordance with the same basis for recognition of rent incomes over the whole lease term. The initial direct costs of small amount shall be recorded into current profits and losses when incurred. The contingent rents shall be recorded into the profits and losses ofthecurrent period in which theyactually arise.
(3)Business offinance leases recorded bytheGroup as thelessee
On the lease beginning date, the Group shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. Besides, the initial direct costs directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in the asset value of the current period. The balance through deducting unrecognized financing charges from the minimum lease payments shall be respectively stated in long-term liabilities and long-term liabilities due within1year.
Unrecognized financing charges shall be adopted by the effective interest rate method in the
KonkaGroupCo.,Ltd. InterimReport2018 lease term, so as to calculate and recognize current financing charges. The contingent rents shall berecorded intotheprofits and losses ofthecurrent period inwhich they actually arise. (4)Business offinance leases recorded bytheGroup as thelessor
On the beginning date of the lease term, the Group shall recognize the sum of the minimum lease receipts on the lease beginning date and the initial direct costs as the entering value in an account of the financing lease values receivable, and record the unguaranteed residual value at the same time. The balance between the sum of the minimum lease receipts, the initial direct costs and the unguaranteed residual value and the sum of their present values shall be recognized as unrealized financing income. The balance through deducting unrealized financing incomes from the finance lease accounts receivable shall be respectively stated in long-term claims and long-term claims duewithin 1year.
Unrecognized financing incomes shall be adopted by the effective interest rate method in the lease term, so as to calculate and recognize current financing revenues. The contingent rents shall berecorded intotheprofits and losses ofthecurrent period inwhich they actually arise. 27.OtherMainAccountingPolicies and Estimates
Termination of operation refers to a separately identifiable constituent part that satisfies one of the following conditions that has been disposed of by the Company or is classified as held-for-sale:This constituent part represents an independent main business or a separate main business area; This constituent part is part of an associated plan that is intended to be disposed of in an independent main business or a separate major business area; This constituent part is asubsidiary that is specifically acquired forresale.
For accounting method of termination of operation, please refer to relevant description of Notes IV.12 “Assets held for saleand disposalgroup”
28.Changesin MainAccounting Policies andEstimates
(1)Changes ofaccounting policies
Changes of accounting policies resulted from implementing new Accounting Standards for Business Enterprises:
On 28 April 2017, the Ministry of Finance issued the Accounting Standards for Business Enterprises No. 42 - Non-current Assets and Disposal Groups Held for Sale and Termination of Operations (CaiKuai[2017] No. 13), which is required to be implemented from the date of 28 May 2017. On 10 May 2017, the Ministry of Finance issued the Accounting Standards for Business Enterprises No. 16-Governmental Subsidies (revised in 2017) (CaiKuai[2017] No. 15), which is required to be implemented from the date of 12 June 2017. The Company
KonkaGroupCo.,Ltd. InterimReport2018 began to implement the two above-mentioned accounting standards according to the time required by theMinistryof Finance.
The Accounting Standards for Business Enterprises No. 42 - Non-current Assets and Disposal Groups Held for Sale and Termination of Operations specified the classification, measurement, presentation and disclosure of non-current assets and disposal group held for sale, and the presentation and disclosure of termination of operations. The financial statement has already adjusted the termination of operation existed on the date of implementation (28 May 2017) and presentation of comparative annual financial statement and the disclosure of annotations according to the Standards. The above-mentioned changes of accounting policies had no influences on the data of last year of the Company, so there was no need to retroactively adjust.
Before implementing the Accounting Standards for Business Enterprises No. 16-Governmental Subsidies (revised in 2017), the Company included the obtained governmental subsidies into non-operating income; the governmental subsidies related to assets were recognized as deferred income, which is amortized averagely within the useful life and included into current gains and losses. After implementing the Accounting Standards for Business Enterprises No. 16-Governmental Subsidies (revised in 2017), the governmental subsidies related to routine activities occurred after 1 January 2017 were included into other income; the governmental subsidies have nothing to do with routine activities were included intonon-operating income and expense.
(2)Changeof accounting estimates
There was noany change ofaccounting estimateoftheCompany in theReporting Period. 29.CriticalAccounting Judgments and Estimates
Due to the inside uncertainty of operating activity, the Group needed to make judgments, estimates and assumption on the book value of the accounts without accurate measurement during the employment of accounting policies. And these judgments, estimates and assumption were made basing on the prior experience of the senior executives of the Group, as well as in consideration of other factors. These judgments, estimates and assumption would also affect the report amount of income, costs, assets and liabilities, as well as the disclosure of contingent liabilities on balance sheet date. However, the uncertainty of these estimates was likely to cause significant adjustment on the book value of the affected assets and liabilities.
The Group would check periodically the above judgments, estimates and assumption on the basis of continuing operation. For the changes in accounting estimates only affected on the
KonkaGroupCo.,Ltd. InterimReport2018 current period, the influence should be recognized at the period of change occurred; for the changes in accounting estimates affected the current period and also the future period, the influenceshould be recognized at theperiod ofchange occurred and future period.
On the balance sheet date, the Group needed to make judgments, estimates and assumption ontheaccountsin thefollowing importantitems:
(1)Revenue Recognition -Construction Contract
If the construction contract results can be reliably estimated, the Company adopts the method of completion percentage to confirm the contract income on the balance sheet date. The percentage of contract completion is confirmed in accordance with the method described in Note IV, 23, Revenue, and is cumulatively calculated in each fiscal year in which each construction contract is executed.
Significant judgment is required in determining the percentage of completion, contract costs incurred, estimated total contract income and total cost, and contract recyclability, and the project management personnel usually make judgments mainly based on past experience and work. The estimated total contract income and total cost, as well as estimated changes in contract execution results, may have an impact on operating income, operating costs, and profit or loss for the current or subsequent period of the change, and may have a significant impact.
(2)Categorization ofleasing
In accordance with Accounting Standards for Enterprises No. 21– Leasing, the Group categorized the leasing into operating lease and finance lease. During the categorization, the management level needed to make analysis and judgment on whether all the risk and compensation related with the leased assets had been transferred to the leasee, or whether the Group had already undertaken all therisk and compensation related with theleased assets. (3)Provision forbad debts
In accordance with the accounting policies of accounts receivable, the Group measured the losses for bad debts by adopting allowance method. The impairment of accounts receivable was based on the appraisal of the recoverability of accounts receivable. The impairment of accounts receivable was dependent on the judgment and estimates. The actual amount and the difference of previous estimates would affect the book value of accounts receivable and the withdrawal and reversal on provision for bad debts of accounts receivable during the period of estimates being changed.
(4)Provision forfalling price ofinventories
KonkaGroupCo.,Ltd. InterimReport2018 In accordance with the accounting policies of inventories, for the inventories that the costs were more than the net realizable value as well as out-of-date and dull-sale inventories, the Group withdrawn the provision for falling price of inventories on the lower one between costs and net realizable value. Evaluating the falling price of inventories needed the management level gain the valid evidence and take full consideration of the purpose of inventories, influence of events after balance sheet date and other factors, and then made relevant judgments and estimates. The actual amount and the difference of previous estimates would affect the book value of inventories and the withdrawal and reversal on provision for bad debts of inventories during theperiod of estimates being changed.
(5)The fair valueof financial instrument
For the financial instruments without active market, the Group recognized the fair value by various methods. These evaluation methods included discounted cash flow mode analysis, etc. The Group needed to estimate the future cash flow, credit risk, fluctuation rate of market and relativity and other factors, as well as choose the property discount rate. Due to the uncertainty of relevant assumptions, so their changes would affect the fair value of financial instrument.
(6)Held-to-maturity investments
The Company classifies the non-derivative financial asset with a fixed or determinable amount of repo price, and a fixed date of maturity, which the enterprise holds for a definite purpose or the enterprise is able to hold until its maturity, to held-to-maturity investment. Such classification concerns lots of judgments. During the judgment process, the Company will assess the purpose and capability for holding such kind of investment to maturity. Except for special cases (for example, selling investment with no-large amount when the maturity date is closely to come), if the Companycan’t hold the investment to maturity date, the Company should re-classify all that investment to available-for-sale financial assets, andshouldn’t classify those financial assets into hold-to-maturity investment in the current fiscal year and the next two complete fiscal years. Such cases may have significant impact on related financial assets value stated in financial statements, and may influence the risk management strategy for financial toolsofthe Company.
(7)Impairment ofheld-to-maturity investment
The decision about confirming the impairment of the investment held-to-maturity by the Company depends on the judgment of the management layer to a great extent. The objective
KonkaGroupCo.,Ltd. InterimReport2018 evidences of the occurrence of the impairment include there is serious financial difficulties of the issuer which lead the financial assets could not be continued to deal in the active market and could not execute the clauses of the contracts (for example, to pay for the interests or the principal occurs default) and so on. When executing the judgment, the Company should assess the influences of the objective evidences of the occurrence of the impairment on the estimated futurecash flow oftheinvestment.
(8)The impairment offinancial assets available for sale
The Group judged whether the financial assets available for sale were impaired relying heavily on the judgment and assumption of the management team, so as to decide whether recognized the impairment losses in the income statement. During the process of making the judgment and assumption, the Group needed to appraise the balance of the cost of the investment exceeding its fair value and the continuous period, the financial status and business forecast in a short period, including the industrial situation, technical reform, credit level, defaultrate and risk ofcounterparty.
(9)Provision forimpairment of long-term assets
The Group made a judgment on the non-current assets other than financial assets whether they had any indication of impairment on the balance sheet date. For the intangible assets without finite service life, other than the annual impairment test, they should be subject to the impairment test when there was any indication of impairment. For other non-current non-financial assets, which should be subjected to impairment test when there was indication ofimpairment indicated that thebookvaluecan’t berecoverable.
When the book value of the assets or assets portfolio was more than the recoverable amount, which was the higher one between the net amount of fair value after deducting the disposal expenses and the discounted amount of the estimated future cash flow, it means impairment incurred.
The net amount of fair value after deducting the disposal expenses should be fixed the price in the sale agreement for similar assets in the fair transaction minus the increased costs directly attributableto theassets disposal.
When estimated the discounted value of future cash flow, the Group needed to make important judgment on the output, selling price, relevant costs and the discount rate for calculating the discounted amount, etc. When estimated the recoverable amount, the Group would adopt all the available documents, including the prediction for relevant output, selling
KonkaGroupCo.,Ltd. InterimReport2018 priceand relevant operating costs arising from reasonable andsupportiveassumptions.
The Group made the impairment test on goodwill at least one time per year, which required to predict the discounted amount of the future cash flow of the assets or assets portfolio with the distributed good will, for which, the Group needed to predict the future cash flow of the assets or assets portfolio, and adopt the property discounted rate to decide the discounted amountof futurecash flow.
(10)Depreciation andamortization
For the investment real estate, fixed assets and intangible assets, the Group withdrew the depreciation and amortization by adopting the straight-line method during the service life after full consideration of the salvage value. The Group checked the service life periodically so as to decide the amount of depreciation and amortization at each Reporting Period. The service life was fixed by the Group in accordance with the previous experience of the similar assets and the expected technical update. If there was any significant change on the previous estimates, thedepreciation andamortization expenses should beadjusted.
(11)Deferred incometax assets
Within the limit that it was likely to have sufficient taxable profits to offset the losses, the Group recognized the deferred income tax assets by all the unused tax losses, which needed the management level of the Group to estimate time and amount of the future taxable profits incurred with many judgments, as well as integrate strategy of tax payment, to decide the 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
KonkaGroupCo.,Ltd. InterimReport2018 actual results and assumption should be confirmed immediately and included into costs of current year. Although the management have adopted reasonable assumption terms, changes of actual experience value and assumption terms may affect the internal early retirement welfare, supplementary retirement benefits and balance of liabilities.
(14)Estimated liabilities
The Group made the estimation on product quality guarantee, predicted loss of contract and the fine for delayed delivery etc. and withdrew the relevant provision for estimated liabilities in accordance the provisions of contract, current knowledge and experience. Under the condition that the contingent event has formed a current duty and fulfilling the duty is likely to cause the economical interest outflow the Group, the Group measures the estimated liabilities in accordance with the best estimate of the necessary expenses for the performance of the current duty. The recognition and measurement of estimated liabilities were heavily relied on the judgment of the management team. During the process of making judgment, the Group needed to appraisetherelevant risks,uncertainty and the timevalue ofmoney and etc. Of which, the Group estimated the liabilities basing on the after-sale services commitments to the customers upon the sale, repair and reform of goods. When estimating the liabilities, the Group has fully taken the consideration of the latest repair experience, but which may not reflect the repair situation in the future.Any increase / decrease of the provision for estimated liabilities may affect theprofits andlosses in thefuture periods.
(15)Measurement forfair value
Some assets and liabilities of this Company will be measured at fair value in the financial statements. The board of directors of this Company has established the appraisement committee (led by the CFO of this Company) to confirm appropriate appraisement technology and input value for measurement of fair value. This Company will apply available and observable market data during estimating the fair value of some assets and liabilities. If the input value in Level 1 is not available, this Company will entrust a third qualified appraiser for the estimation. The appraisement committee will closely cooperate with the outside appraiser to determine proper estimation technology and input values of the related models. CFO submits a report to the discoveries of the appraisement committee to the board of directors of this Company to explain the reasons of fluctuation of fair value of related assets and liabilities. Related information of the appraisement technology and input value during the process of confirming the fair value of various assets and liabilities shall be disclosed inNote X.
V.Taxation
KonkaGroupCo.,Ltd. InterimReport2018 1.MainTaxesandTaxRate
Categoryoftaxes Specificsituationofthetaxesrate
Calculatedtheoutputtaxat3%,5%,6%,10%,11%,13%,16%,17%andpaid the VAT by the amount after deducting the deductible withholding VAT at VAT
currentperiod,ofwhichtheVATapplicabletoeasycollectionwon’tbelongto thedeductiblewithholdingVAT.
Paid at7% of the circulating tax actually paid, of which Dongguan Packing, Urban maintenance and construction
Dongguan Konka, Boluo Konka, Boluo Konka Precision, and Kunshan tax
Kangshengof5%.
Hong Kong Konka, Konka Household Appliances Investment, Konka Household Appliances International Trading, Konka Zhisheng, and ChainKingdomof16.5%;TelecommunicationTechnology,DongguanKonka,Anhui Enterpriseincometax
Konka, E-display, Kangqiao Easy Chain, and Wankaida and Chongqing Qingjia, Commercial System Technology, and Econ Technology of15%; and EuropeKonka of31%. The Company as the parent andtheother subsidiariespaidat25%ofthetaxableincome.
Educationsurtax Paidat3%ofthecirculatingtaxactuallypaid.
Localeducationsurtax Paidat2%ofthecirculatingtaxactuallypaid.
Foundationforwaterworks Paidat1%and0.5%ofthecirculatingtaxactuallypaid.
Note: (1) In accordance with the Notice on Printing theAdministration Method on Charging and Use of the Treatment Funds of Discarded Electronic Appliance and Electric Products issued by the Ministry of Finance, Ministry of Environmental Protection, National Development and Reform Commission, Ministry of Industry and Information, General Administration of Customs and National Taxation Bureau (CZ[2012] No. 34), and the Administration Method on Charging and Use of theTreatment Funds of Discarded Electronic Appliance and Electric Products issued by NationalTaxation Bureau (GJSWZJGG[2012]No. 41), the domestic manufacturer of the electrical appliances and electronic products of PRC started to pay the treatment funds for discarded electrical appliance and electronic products according the sales volume (trusted processing amount) and relevant charging standards from 1 July 2012.According to the regulations, theGroup’s charging standards were RMB13 per set ofTV,RMB12 per set ofrefrigeratorand RMB7 perset ofwashing machine.
(2) According to regulations of Temporary Provisions of Income Tax of Trans-boundary Tax Payment Enterprises by State Administration of Taxation, resident enterprises without
KonkaGroupCo.,Ltd. InterimReport2018 business establishment or places of legal persons should be tax payment enterprises with the administrative measures of income tax of “unified computing, level-to-level administration, local prepayment, liquidation summary, and finance transfer”. It came into force from 1 January 2008. According to the above methods, theCompany’s sales branch companies in each area will hand in the corporate income taxes in advance from 1 January 2008 and will befinal settled uniformly bytheCompany at the year-end.
(3) According to the document of Finance and Taxation[2018] No. 32 issued by the Ministry of Finance and the State Administration of Taxation, for the taxpayers who have taxable sales behaviors of VAT, the tax rates shall be adjusted from originally applicable17% and11%to16% and10%respectively from 1May 2018.
2.TaxPreferenceandApprovedDocuments
(1) On 31 October 2017, Shenzhen Konka Telecommunications Technology Co., Ltd., the subsidiary of this Company obtained the high-tech enterprise certificate (certificate No.: GR201444201722) jointly issued by Shenzhen Technology Innovation Committee, Finance Commission of Shenzhen Municipality, Shenzhen Municipal Office, SAT, Shenzhen Local Taxation Bureau, with a valid period of three years.According to related taxation regulations, Shenzhen Konka Telecommunications Technology Co., Ltd. enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2019 and pays the enterprise incometax as per thepreferential taxrateof15%.
(2) On 31 October 2017, Wankaida, the subsidiary of this Company obtained the High-tech Enterprise Certificate (certificate No.: GR201744204716) joint issued by Shenzhen Technology Innovation Committee, Finance Committee of Shenzhen Municipality, Shenzhen Municipal Office, SAT and Shenzhen Local Taxation Bureau with a valid period of three years. According to related taxation regulations, Wankaida enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2019and pays the enterprise incometax as per thereferential taxrateof15%.
(3) On 1 November 2017, Dongguan Konka Electronic Co., Ltd., the subsidiary of this Company obtained the High-tech Enterprise Certificate (certificate No.: GR201744003812) jointly issued by Department of Science and Technology of Guangdong Province, Department of Finance of Guangdong Province, Guangdong Provincial Office, SAT, Guangdong Local Taxation Bureau with a valid period of three years. According to related taxation regulations, the company enjoys related taxation preferential policies as a high-tech enterprise from 2017 to 2019 and pays the enterprise income tax as per the preferential tax rateof15%.
KonkaGroupCo.,Ltd. InterimReport2018 (4) On 21 October 2016, the subsidiary of the Company, Anhui Konka acquired the certificate of high-technology enterprises joint issued by Anhui Province Science and Technology Department, Department of Finance ofAnhui Province,Anhui Provincial Office, SAT, and Anhui Local Taxation Bureau with the certification number of GR201634000520 and the validity of three years. According to the relevant taxation regulations, the Anhui Konka could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2016 to 2018, and pay for the corporate income tax according to15%ofthe preferential tax rate.
(5) On 21 November 2016, the subsidiary of the Company, Konka E-display acquired the certificate of high-technology enterprises joint issued by Shenzhen Science and Technology Innovation Committee, Finance Commission of Shenzhen Municipality, Shenzhen Municipal Office, SAT, and Shenzhen Local Taxation Bureau with the certification number of GR201644201332 and the validity of three years. According to the relevant taxation regulations, the Konka E-display could enjoy the relevant preferential tax policy on the high-tech enterprise for continuous 3 years from 2016 to 2018, and pay for the corporate incometax according to15%of thepreferential tax rate.
(6) On 31 October 2017, Shenzhen Konka Commercial System Technology Co., Ltd., the subsidiary of this Company obtained the high-tech enterprise certificate (certificate No.: GR201744202349) jointly issued by Shenzhen Technology Innovation Committee, Finance Committee of Shenzhen Municipality, Shenzhen Municipal Office, SAT, Shenzhen Local Taxation Bureau with a valid period of three years.According to related taxation regulations, the company enjoys related taxation preferential policies as a high-tech enterprise from 2017 to2019and pays theenterpriseincome tax as per thepreferential tax rateof15%.
(7) According to Notice about Related Taxation Policy Problems of Further Implementation of the Western Development Strategy CS[2011] No. 58, Chongqing Qingjia, the subsidiary of this Company pays the enterprise income tax as per the referential tax rate of15% from 1 January 2011to 31December 2020.
(8) According to the Overall Development Plan on Shenzhen-Hong Kong Cooperation on Modern Service Industries in Qianhai Area approved by the State Council and the Industry Access Catalogue of Modern Service Industry in Qianhai, Shenzhen issued by the National Development and Reform Commission, Shenzhen Kangqiao Easy Chain Technology Co., Ltd., a subsidiary of the Company was established in Qianhai, and enjoyed a15% income tax rate, and theprivileges in Qianhai can besuperimposed with others.
(9)According to the fiscal and taxation document[2011] No. 100 published by the Ministry
KonkaGroupCo.,Ltd. InterimReport2018 of Finance and the StateAdministration of Taxation, for the VAT general taxpayers who sell their self-developed and produced software products, the VAT shall be levied at the rate of17%, and then the part that the actual tax burden on theirVATexceeds 3 will be implemented with the policy of immediate withdrawal. The Company and its subsidiaries, Telecommunication Technology, Wankaida Technology, and E-display Service all enjoy this preferential policy.
(10) On 28 December 2017, Econ Technology, a subsidiary of the Company, obtained the High-tech Enterprise Certificate, certificate No.: GR201737001495, valid for three years. According to the relevant tax regulations, the Telecommunication Technology enjoys related tax incentives for high-tech companies for three consecutive years from 2017 to 2019 and is subject to corporateincometax at apreferential rateof15%.
(11)According to the regulations of the Special Catalogue of VAT Concessions for Products and Labors with Comprehensive Utilization of Resources issued by the Ministry of Finance and the State Administration of Taxation (Finance and Taxation[2015] No. 78), the wastewater treatment business operated by Lairun Holdings belongs to the this catalogue. Then after it has been levied the VAT at a rate of 17%, the actual tax burden on the wastewater treatment income tax will be refunded in accordance with the70% of the actual tax burden, and the actual tax burden on the renewable water income VAT will be refunded immediately at50%. That Lairun Holdings enjoyed the tax concession was registered and recorded inAugust 2017inLaizhouTaxation Bureau of Shandong Province.
(12) As mentioned in (11), Laizhou Binhai Sewage Treatment Co., Ltd. enjoys the policy of immediate withdrawal of VAT levied for the income of sewage treatment. The Binhai Company was registered and recorded in December 2017 in Laizhou Taxation Bureau of Shandong Province.
(13) According to the Notice on Promoting the Development of VAT, Business Tax and Enterprise Income Tax Policy for Energy-Saving Service Industry issued by the Ministry of Finance and the State Administration of Taxation (Finance and Taxation[2010] No. 110), Lairun Holdings enjoys the preferential policy of tax exemptions since 2017 for three years and halved innext threeyears.
(14) As mentioned in (13), Laizhou Binhai Sewage Treatment Co., Ltd. enjoys the preferential policy of tax exemptions since 2017 for three years and halved in next three years.
VI. Notes on MajorItems in Consolidated FinancialStatements ofthe Company
Unless otherwise noted, the following annotation project (including the main projects annotation of the financial statement of the Company), the period-begin refers to 1 January
KonkaGroupCo.,Ltd. InterimReport2018 2018, the period-end refers to 30 June 2018 and this period refers to January– June 2018 withthelast period ofJanuary– June2017.
1.Monetary Funds
||
|-|
|Endingbalance|
|122,746.45|
|3,761,865,889.21|
|149,831,518.94|
|3,911,820,154.60|
|188,007,556.28|

 Notes:The ending balance of other monetary fund was the deposits of each margin deposit notwithdrawn at any time.
 On 30 June 2018, the monetary funds deposited in overseas by the Company was RMB188,007,556.28
2.FinancialAssets atFairValuethroughProfitorLoss
||
|-|
|Endingbalance|
|14,497,221.94|
|—|
|14,497,221.94|

 3.Notes Receivable
(1)Notes Receivable Listed byCategory
||
|-|
|Endingbalance|
|2,174,328,097.06|
|2,440,923,143.51|
|4,615,251,240.57|

 (2)Notes Receivable Pledged bytheCompany at thePeriod-end
Item Amount
Bankacceptancebill
1,414,894,166.20 Tradeacceptancebill
-
Total
1,414,894,166.20
Notes: Up to 30 June 2018,the Company pledged thebanker’s acceptance bill of the carrying
KonkaGroupCo.,Ltd. InterimReport2018 value of RMB1,414,894,166.20 for the comprehensive financing business such as handling thebilling, letterofcredit, letter ofguarantee, and thetrading financing.
(3) Notes Receivable Which had Endorsed by the Company or had Discounted and had not Dueonthe BalanceSheet Dateat thePeriod-end
||
|-|
|Amountofrecognitionterminationattheperiod-end|
|-|
|-|
|-|

 Note: Up to 30 June 2018, the Company used the trade acceptance bill of the carrying value of RMB241,824,358.53 as discount of bank with right of recourse, getting RMB227,979,976.51 of short-term borrowings, and used the bank acceptance bill of the carrying value of RMB10,000,000.00 as discount of bank with right of recourse, getting RMB9,545,000.00ofshort-term borrowings.
4.Accounts Receivable
(1)Accounts Receivable Disclosed byCategory
Endingbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|23,544,065.47|0.49|23,544,065.47|100.00|
|-|-|-||
|4,690,073,018.72|97.92|273,671,868.15|5.84|
|4,690,073,018.72|97.92|273,671,868.15|5.84|

KonkaGroupCo.,Ltd. InterimReport2018 Endingbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|76,275,854.05|1.59|64,286,391.41|84.28|
|4,789,892,938.24|100|361,502,325.03|7.55|

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

① Accounts receivable with significant individual amount and make independent
provisionfor bad debt at theperiod-end
Accountsreceivable(classified Endingbalance
byunits)
KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion(%)|
|23,544,065.47|23,544,065.47|100|

② In the groups, accounts receivable adopting aging analysis method to withdraw bad debt provision:
Endingbalance
|||
|-|-|
|Accountreceivable|Baddebtprovision|
|4,431,328,061.98|96,707,915.56|
|59,120,920.84|3,072,750.80|
|31,528,215.41|8,862,752.71|
|3,265,899.42|1,632,949.72|
|2,869,166.34|1,434,744.63|
|161,960,754.73|161,960,754.73|
|4,690,073,018.72|273,671,868.15|

③ Top five of account receivable with insignificant single amount for which bad debt provisionseparately accrued
Endingbalance
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion(%)|
|17,980,150.07|17,980,150.07|100|
|17,433,707.52|17,433,707.52|100|
|4,580,000.00|1,374,000.00|30|
|3,374,913.78|3,374,913.78|100|
|2,138,825.00|748,588.75|35|

KonkaGroupCo.,Ltd. InterimReport2018 Endingbalance
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion(%)|
|45,507,596.37|40,911,360.12||

(2)Accounts ReceivableWithdraw,Reversed or Collected during theReporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB29,523,274.52; the amount of the reversed or collected part during the Reporting Period was of RMB17,339,612.15. The increased amount was RMB30,781,473.78 due to the acquirement of controlling right of subsidiaries. The decreased amount was RMB5,196,395.05 due to the loss of controlling right of subsidiaries. The write-off amount was RMB0.
(3) Top 5 of the Ending Balance of the Accounts Receivable Collected according to the Arrears Party
The total amount of top five of account receivable of ending balance collected by arrears party was RMB1,887,434,278.576,39.40% of total closing balance of account receivable, therelevant closing balance ofbad debt provision withdrawn was RMB37,748,685.57.
5.Prepayment
(1)Listed byAgingAnalysis
||||||
|-|-|-|-|-|
|Endingamount|||||
|Carryingamount||Baddebtprovision|Carryingamount||
|Amount|Proportion(%)||Amount|Proportion(%)|
|897,670,289.17|99.17|340,443.14|466,156,792.72|99.06|
|3,257,733.06|0.36|84,702.50|1,199,279.69|0.25|
|950,621.94|0.11|329,339.03|23,736.73|0.01|
|3,213,629.83|0.36|2,884,290.80|3,208,755.30|0.68|
|905,092,274.00|100.00|3,638,775.47|470,588,564.44|100.00|

 Notes: (1) Significant prepayment with aging more than 1 year was mainly the prepayment ofcompanies withnocooperation.
(2) Top 5 of the ending balance of the prepayment collected according to the prepayment
target
KonkaGroupCo.,Ltd. InterimReport2018 The total amount of top five of prepayment of closing balance collected by arrears party was RMB485,564,872.80,accountingfor53.65% oftotalclosing balance ofprepayment.
(3) The withdrawal amount of bad debt provision this year was of RMB228,596.09; the collected or reversed bad debt provision was RMB59,415.35 this year; and the write-off bad debt provisionwas RMB0.
6.InterestReceivable
||
|-|
|Endingbalance|
|5,506,845.29|
|210,456.02|
|5,717,301.31|

 7.Dividends Receivable
||
|-|
|Endingbalance|
|—|
|—|

 8.OtherAccounts Receivable
(1)OtherAccounts ReceivableDisclosed byCategory
Endingbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|183,915,489.33|22.64|173,320,694.97|94.24|
|0.00|0.00|0.00||
|625,783,203.74|77.05|35,182,845.12|5.62|
|625,783,203.74|77.05|35,182,845.12|5.62|

KonkaGroupCo.,Ltd. InterimReport2018 Endingbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|2,515,181.05|0.31|733,893.68|29.18|
|812,213,874.12|100.00|209,237,433.77|25.76|

 (Continued)
Beginningbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|183,915,489.33|47.74|173,320,694.97|94.24|
|198,796,860.68|51.61|28,768,843.02|14.47|
|198,796,860.68|51.61|28,768,843.02|14.47|
|2,516,181.05|0.65|733,893.68|29.17|
|385,228,531.06|100.00|202,823,431.67|52.65|

 Other account receivable with significant single amount for which bad debt provision
KonkaGroupCo.,Ltd. InterimReport2018 separately accrued at theperiod-end
Endingbalance
||||
|-|-|-|
|Otheraccountsreceivable|Baddebtprovision|Withdrawalproportion|
|152,402,680.00|152,402,680.00|100.00%|
|18,115,952.51|7,521,158.15|41.52%|
|13,396,856.82|13,396,856.82|100.00%|
|183,915,489.33|173,320,694.97||

② In the groups, other accounts receivable adopting aging analysis method to withdraw bad debt provision:
Endingbalance
Aging
|||
|-|-|
|Otheraccountsreceivable|Baddebtprovision|
|578,597,643.16|12,555,416.81|
|16,866,255.09|966,056.61|
|6,551,097.99|1,324,426.95|
|4,418,555.84|2,209,277.92|
|2,443,969.67|1,221,984.84|
|16,905,681.99|16,905,681.99|
|625,783,203.74|35,182,845.12|

(2)BadDebt ProvisionWithdrawal, Reversed orRecovered intheReporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 1,814,413.27. The increased bad debt provision was RMB5,662,913.15 due to merger and acquistion; the amount of the reversed or collected part during the Reporting Period was of RMB 771,614.38. The decreased amount was RMB296,147.88 due to the loss of controlling right ofsubsidiaries.The write-offamount was RMB0.
(3)OtherAccount ReceivableClassified byAccount Nature
Nature Endingcarryingamount
Energy-savingsubsidies 152,402,680.00
KonkaGroupCo.,Ltd. InterimReport2018 Nature Endingcarryingamount
Intercoursefundsofunits 481,171,341.62 Depositandmargin 32,732,734.17 Prettycash 6,811,882.40 Transferredfunds 74,564,442.45 Others 64,530,793.48 Total 812,213,874.12 (4) Top 5 Other Accounts Receivable in Ending Balance Collected according to the Arrears Party
|||||
|-|-|-|-|
|Nature|Endingbalance|Aging|Proportionofendingbalanceofthetotalotheraccountsreceivable|
|Subsidies|152,402,680.00|1-2years,4-5years,over5years|19.81|
|Transferredfunds|61,167,585.63|Within1year|7.95|
|Taxrebate|31,287,301.48|Within1year|4.07|
|Transferredfunds|18,115,952.51|3-4years|2.35|
|Intercoursefunds|13,396,856.82|2-3years,3-4years,4-5years,over5years|1.74|
|—|276,370,376.44||35.92|

 9.Inventory
(1)Category ofInventory
Item Endingbalance
KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Carryingamount|Ofwhich:thecapitalizedamountoftheborrowings|Fallingpricereserves|
|563,064,669.44||0.00|
|11,823,931.07|94,119.39|0.00|
|574,888,600.51|94,119.39|0.00|
|768,744,643.75||30,731,630.56|
|73,309,911.45||10,104,501.08|
|3,785,679,772.30||318,860,184.08|
|43,294.21||0.00|
|11,265,156.24||0.00|
|4,639,042,777.95|0.00|359,696,315.72|
|5,213,931,378.46|94,119.39|359,696,315.72|

 (Continued)
Beginningbalance
||||
|-|-|-|
|Carryingamount|Ofwhich:thecapitalizedamountoftheborrowings|Fallingpricereserves|
|382,096,368.17|—|—|
|17,203,260.25|94,119.39|—|
|399,299,628.42|94,119.39|—|

KonkaGroupCo.,Ltd. InterimReport2018 Beginningbalance
||||
|-|-|-|
|Carryingamount|Ofwhich:thecapitalizedamountoftheborrowings|Fallingpricereserves|
|761,148,857.65|—|22,807,431.06|
|112,079,579.22|—|8,475,640.99|
|3,740,419,327.12|—|291,591,777.78|
|291,022.95|—|—|
|4,613,938,786.94|—|322,874,849.83|
|5,013,238,415.36|94,119.39|322,874,849.83|

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

 (3)List oftheDeveloped Products
|||||
|-|-|-|-|
|Completiontime|Beginningamount|Increased|Decreased|
|Y2014|3,955,097.73|||
|Y2015|2,072,508.39|||
|Y2017|11,175,654.13||5,379,329.18|

KonkaGroupCo.,Ltd. InterimReport2018
|||||
|-|-|-|-|
|Completiontime|Beginningamount|Increased|Decreased|
||17,203,260.25||5,379,329.18|

 (4)FallingPrice Reserves ofInventory
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Increasedamount||Decreasedamount|||
||Withdrawal|Other|Reverse|Write-off|Other|
|22,807,431.06|9,384,807.50|1,257,185.73|399,577.86|2,318,215.87||
|8,475,640.99|2,653,611.25|0.00||1,024,751.16||
|291,591,777.78|34,644,733.04|3,456,305.22|127,115.52|2,950,588.67|7,754,927.77|
|322,874,849.83|46,683,151.79|4,713,490.95|526,693.38|6,293,555.70|7,754,927.77|

 Notes: other increase was due to the acquisition of control right by merging companies, and otherdecrease was duetotheloss ofcontrol right to subsidiaries.
(5) Withdrawal Provision Basis of the Falling Price of the Inventory and the Reasons of the Write-off
|||
|-|-|
|Specificbasisofwithdrawaloffallingpricereservesofinventory|Reasonsforreverse|
|Therealizablenetvaluewaslowerthanthecarryingvalue|—|
|Therealizablenetvaluewaslowerthanthecarryingvalue|—|
|Therealizablenetvaluewaslowerthanthecarryingvalue|—|

The decrease ofinventories’ market price in the first half year of 2018 resulted into the realizable net value of finished products and relevant raw materials value lower than inventory cost.
(6) Ending balance of the inventory which includes capitalized borrowing expenses was
RMB94,119.39.
10.OtherCurrentAssets
KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Endingbalance|
|320,000,000.00|
|887,000,000.00|
|638,595,871.52|
|1,845,595,871.52|

KonkaGroupCo.,Ltd. InterimReport2018 11.Available-for-saleFinancial Assets
(1)List ofAvailable-for-sale FinancialAssets
||||||
|-|-|-|-|-|
|Endingbalance|||||
|Carryingamount|Depreciationreserves|Carryingvalue|Carryingamount|Depreciationreserves|
|702,860,021.97|10,747,785.64|692,112,236.33|722,918,184.73|10,747,785.64|
||||58,162.76|-|
|702,860,021.97|10,747,785.64|692,112,236.33|722,860,021.97|10,747,785.64|
|702,860,021.97|10,747,785.64|692,112,236.33|722,918,184.73|10,747,785.64|

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

KonkaGroupCo.,Ltd. InterimReport2018 Carryingamount
||||
|-|-|-|
|Period-begin|Increased|Decreased|
|6,000,000.00|||
|2,400,000.00|||
|203,000,000.00|||
|47,230,000.00|||
|4,700,000.00|||
|120,000,000.00|||
|61,494,666.97|||
|239,447,355.00|||
|722,860,021.97|0.00|20,000,000.00|

 (Continued)
||||||
|-|-|-|-|-|
|Depreciationreserves||||Shareholdingproportionamongtheinvestees(%)|
|Period-begin|Increased|Decreased|Period-end||
|—|—|—|—|6.00|
|—|—|—|—|6.10|
|5,750,000.00|—|—|5,750,000.00|12.67|
|1,300,000.00|—|—|1,300,000.00|9.60|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Depreciationreserves||||Shareholdingproportionamongtheinvestees(%)|
|Period-begin|Increased|Decreased|Period-end||
|100,000.00|—|—|100,000.00|—|
|485,000.00|—|—|485,000.00|1.00|
|1,639,190.80|—|—|1,639,190.80|9.62|
|200,000.00|—|—|200,000.00|11.50|
|1,273,594.84|—|—|1,273,594.84|6.00|
|—|—|—|—|4.26|
|—|—|—|—|—|
|—|—|—|—|8.38|
|—|—|—|—|3.62|
|—|—|—|—|20.00|
|—|—|—|—|18.90|
|—|—|—|—|15.22|
|—|—|—|—|—|
|10,747,785.64|—|—|10,747,785.64|—|

KonkaGroupCo.,Ltd. InterimReport2018 (3) Changes of the Impairment of the Available-for-sale Financial Assets in the Reporting Period
Categoryofavailable-for-salefinancialassets Available-for-saleequityinstruments
Withdrawnimpairmentbalanceatthe
10,747,785.64 period-begin
WithdrawaloftheReportingPeriod — Ofwhich:transferredfromother
— comprehensiveincome
DecreaseoftheReportingPeriod — Ofwhich:recoveredorreversedfromthefair
— valueafterthePeriod
Withdrawnimpairmentbalanceatthe
10,747,785.64 period-end
Note: On 27 March 2015, the People's Court of Jiangbei District, Chongqing handled the bankruptcy liquidation application of Chongqing Electronics, the subsidiary of this Company and established the liquidation group. This Company will not own the right of controlling related activities of Chongqing Electronics. After bankruptcy, it will not be included into the consolidation scope. It will be reclassified into the financial asset available for sale with the net valueofzero. Liquidation has notbeen finished in thecurrent period.
KonkaGroupCo.,Ltd. InterimReport2018 12.Long-term Equity Investment
||||||
|-|-|-|-|-|
|Beginningbalance|||||
||Additionalinvestment|Decreasedinvestment|Investmentprofitandlossrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|79,729,560.91|||-1,062,323.74|324,021.02|
|9,444,160.97|||627,916.90||
|99,562,391.48|||-6,716,864.96||
|48,417,046.08|||226,132.34||
|14,317,400.80|||-2,208,794.15||
|4,927,589.47|||-2,065,657.20||
|26,462,212.34|||196,728.66||
|210,279,132.55|||3,705,243.63||
|617,214,571.50|||10,226,294.00||
|1,523,166.24|||0.00||
|2,425,262.66|||-939,401.62||

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|||||
||Additionalinvestment|Decreasedinvestment|Investmentprofitandlossrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|-22,084.12|3,771,400.00||0.00||
|205,706,932.86|||3,587,367.82||
||||0.00||
||||0.00||
||75,000,000.00||233,407.38||
||7,000,000.00||0.00||
||5,400,000.00||0.00||

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|||||
||Additionalinvestment|Decreasedinvestment|Investmentprofitandlossrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
||||0.00||
||760,000.00||0.00||
||98,000,000.00||265,133.53||
||2,450,000.00||||
||6,000,000.00||||
|1,319,987,343.74|198,381,400.00|0.00|6,075,182.59|324,021.02|

 (Continued)
||||||
|-|-|-|-|-|
|Increase/decreaseintheReportingPeriod||||Endingbalance|
|Declarationofcashdividendsorprofits|Withdrawnimpairmentprovision|Costmethodconvertedintoequitymethod|Increasedmergerfirms||
|||||78,991,258.19|
|||||10,072,077.87|
|||||92,845,526.52|

KonkaGroupCo.,Ltd. InterimReport2018
|||
|-|-|
||48,643,178.42|
||12,108,606.65|
||2,861,932.27|
||26,658,941.00|
||213,984,376.18|
||627,440,865.50|
||1,523,166.24|
||1,485,861.04|
||3,749,315.88|
||209,294,300.68|
|2,027,201.88|2,027,201.88|
|4,337,942.19|4,337,942.19|
|100,033,567.26|100,033,567.26|
|63,492,789.75|63,492,789.75|
|22,232,418.57|22,232,418.57|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
||||648,000.00|648,000.00|
||||10,000,000.00|10,000,000.00|
|||||75,233,407.38|
|||||7,000,000.00|
|||||5,400,000.00|
|||460,000,000.00||460,000,000.00|
|||||760,000.00|
|||||98,265,133.53|
|||||2,450,000.00|
|||||6,000,000.00|
|0.00|0.00|460,000,000.00|202,771,919.65|2,187,539,867.00|

KonkaGroupCo.,Ltd. InterimReport2018 Note:①Shenzhen Konka Precision Mold Manufacturing Co., Ltd was renamed as Shenzhen JielunteTechnology Co.,Ltd on20April 2018.
13.Investment Property
Investment PropertyAdopted theCostMeasurement Mode
||
|-|
|Housesandbuildings|
|249,923,047.75|
|—|
|—|
|249,923,047.75|
|—|
|33,467,417.76|
|2,815,637.15|
|2,815,637.15|
|—|
|36,283,054.91|
|—|
|—|
|—|
|—|
|—|
|—|
|213,639,992.84|
|216,455,629.99|

KonkaGroupCo.,Ltd. InterimReport2018 14.FixedAssets
(1)List ofFixedAssets
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Otherequipment|
|1,559,039,774.48|715,947,835.05|187,109,755.76|49,930,623.13|174,208,488.89|
|167,412,660.07|202,563,637.23|8,911,081.35|10,120,140.22|49,222,115.30|
|384,266.06|45,787,673.49|7,605,512.75|1,005,292.68|12,075,285.03|
|17,325,661.28|8,871,138.39|15,400.00|1,610,504.29|5,394,043.03|
|149,702,732.73|147,904,825.35|1,290,168.60|7,504,343.25|31,752,787.24|
|3,147,948.27|55,651,559.18|12,340,532.22|2,355,940.70|13,101,858.54|
|3,147,948.27|55,483,214.12|12,340,532.22|2,355,940.70|13,101,858.54|
|0.00|168,345.06|0.00|0.00|0.00|
|1,723,304,486.28|862,859,913.10|183,680,304.89|57,694,822.65|210,328,745.65|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Otherequipment|
|367,660,000.41|428,143,422.45|129,422,777.12|36,768,297.26|115,293,690.98|
|58,501,360.68|117,083,959.55|11,799,023.66|5,407,726.87|22,465,416.81|
|19,721,777.35|52,337,774.41|11,149,709.12|1,864,790.85|14,903,165.88|
|38,779,583.33|64,746,185.14|649,314.54|3,542,936.02|7,562,250.93|
|2,403,761.41|42,556,170.47|8,863,984.18|2,463,354.38|9,771,651.56|
|2,403,761.41|42,556,170.47|8,798,985.45|2,463,354.38|9,771,651.56|
|0.00|0.00|64,998.73|0.00|0.00|
|423,757,599.68|502,671,211.53|132,357,816.60|39,712,669.75|127,987,456.23|
|1,064,479.47|17,067,824.99|1,249,373.18|862,703.36|1,533,559.74|
|-|2,170,185.45|-|-|-|
|-|0.00|0.00|-|0.00|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Housesandbuildings|Machineryequipment|Electronicequipment|Transportationequipment|Otherequipment|
|-|2,170,185.45|0.00|-|0.00|
|0.00|1,037,548.46|425,131.58|21,775.12|183,963.57|
|0.00|1,037,548.46|425,131.58|21,775.12|183,963.57|
|-|-|-|-|0.00|
|1,064,479.47|18,200,461.98|824,241.60|840,928.24|1,349,596.17|
|1,298,482,407.13|341,988,239.59|50,498,246.69|17,141,224.66|80,991,693.25|
|1,190,315,294.60|270,736,587.61|56,437,605.46|12,299,622.51|57,381,238.17|

 (2)List ofTemporarily Idle FixedAssets
||||
|-|-|-|
|Originalcarryingvalue|Accumulativedepreciation|Impairmentprovision|
|17,316,561.19|7,128,572.44|7,419,088.45|
|4,417,917.35|4,417,917.35|0.00|
|157,611.28|157,611.28|0.00|
|21,892,089.82|11,704,101.07|7,419,088.45|

KonkaGroupCo.,Ltd. InterimReport2018 (3)FixedAssets Leased in from Financing Lease
||||
|-|-|-|
|Originalcarryingvalue|Accumulativedepreciation|Impairmentprovision|
|29,163,849.33|5,088,859.14|0.00|
|205,128.20|136,752.13|0.00|
|29,368,977.53|5,225,611.27|0.00|

 (4)FixedAssets Leased out from Operation Lease
Item Endingcarryingvalue
Housesandbuildings
33,819,268.21 Total
33,819,268.21 (5)Details of FixedAssets Failed toAccomplishCertification ofProperty
|||||
|-|-|-|-|
|Originalcarryingvalue|Accumulativedepreciation|Impairmentprovision|Netcarryingvalue|
|21,481,356.96|2,363,211.89|—|19,118,145.07|
|3,628,629.00|129,269.92|—|3,499,359.08|
|10,189,892.23|842,885.68|—|9,347,006.55|
|5,432,239.86|244,450.82|—|5,187,789.04|
|20,018,497.00|8,194,102.38|—|11,824,394.62|
|76,610,752.33|31,733,590.84|—|44,877,161.49|

 15.Construction inProgress
(1)List ofConstruction inProgress
||||||
|-|-|-|-|-|
|Endingbalance|||||
|Carryingamount|Impairmentprovision|Carryingvalue|Carryingamount|Impairmentprovision|
|—|—|0.00|29,125,312.81|—|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Endingbalance|||||
|Carryingamount|Impairmentprovision|Carryingvalue|Carryingamount|Impairmentprovision|
|83,241,261.25|—|83,241,261.25|76,514,067.90|—|
|2,351,789.02|—|2,351,789.02|1,643,881.07|—|
|35,051,674.26|—|35,051,674.26|28,580,559.23|—|
|120,644,724.53|—|120,644,724.53|135,863,821.01|—|

 (2)Changes ofSignificant ConstructioninProgress
||||||
|-|-|-|-|-|
|Estimatednumber|Beginningbalance|IncreaseAmount|Amountthattransferredtolong-termfixedassetsoftheperiod|Otherdecreasedamountoftheperiod|
|RMB241million|76,514,067.90|6,727,193.35|||
|RMB35million|29,125,312.81|0.00|29,125,312.81||
|RMB263million|1,643,881.07|707,907.95|||
||28,580,559.23|20,860,829.46|14,389,714.43||
||135,863,821.01|28,295,930.76|43,515,027.24||

（Continued）
||||||
|-|-|-|-|-|
|Proportionestimatedoftheprojectaccumulativeinput(%)|Projectprogress|Accumulativeamountofcapitalizedinterests|Ofwhich:theamountofthecapitalizedinterestsoftheperiod|Capitalizationrateoftheinterestsoftheperiod(%)|
|34.54|34.54|—|—|—|
|90.63|90.63|—|—|—|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Proportionestimatedoftheprojectaccumulativeinput(%)|Projectprogress|Accumulativeamountofcapitalizedinterests|Ofwhich:theamountofthecapitalizedinterestsoftheperiod|Capitalizationrateoftheinterestsoftheperiod(%)|
|8.81|8.81|—|—|—|

 16.IntangibleAssets
(1)List ofintangible assets
||||||
|-|-|-|-|-|
|Landuseright|Foreignregisteredtrademark|Patentandknow-how|Franchiserights|Other|
|196,989,129.47|3,519,159.61|40,234,111.64||66,665,916.59|
|73,106,270.05|0.00|11,221,785.00|139,050,625.01|4,805,660.47|
|0.00|0.00|0.00||2,753,050.37|
|0.00|0.00|0.00||0.00|
|73,106,270.05|0.00|11,221,785.00|139,050,625.01|2,052,610.10|
|1,170,000.00|0.00|0.00|0.00|0.00|
|1,170,000.00||||0.00|
|0.00|||0.00||
|268,925,399.52|3,519,159.61|51,455,896.64|139,050,625.01|71,471,577.06|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Landuseright|Foreignregisteredtrademark|Patentandknow-how|Franchiserights|Other|
|34,734,302.29|3,519,159.61|34,420,126.84||26,775,872.27|
|11,472,335.15|0.00|276,920.89|4,442,025.00|4,478,725.34|
|2,636,294.83|0.00|276,920.89|740,337.50|3,146,460.46|
|8,836,040.32|0.00|0.00|3,701,687.50|1,332,264.88|
|947,700.00|0.00|0.00|0.00|0.00|
|947,700.00|||||
|—|||||
|45,258,937.44|3,519,159.61|34,697,047.73|4,442,025.00|31,254,597.61|
|||2,901,082.61|||

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Landuseright|Foreignregisteredtrademark|Patentandknow-how|Franchiserights|Other|
|0.00|0.00|2,901,082.61||0.00|
|223,666,462.08|0.00|13,857,766.30|134,608,600.01|40,216,979.45|
|162,254,827.18|0.00|2,912,902.19||39,890,044.32|

17.Goodwill
(1)Original CarryingValueofGoodwill
||||||
|-|-|-|-|-|
|Beginningbalance|Increased||Decreased||
||Formedfromthebusinesscombination|Other|Dispose|Other|
|3,597,657.15||—|—|—|
||460,743,447.02||||
||35,680,773.95||||
||3,208,303.51||||
||2,800,000.00||||
|3,597,657.15|502,432,524.48|—|—|—|

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

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|Increased||Decreased||
||Withdrawal|Other|Dispose|Other|
|—|—|—|—|—|
|—|—|—|—|—|
|—|—|—|—|—|
|—|—|—|—|—|
|—|—|—|—|—|
|—|—|—|—|—|

 18.Long-term UnamortizedExpenses
|||||
|-|-|-|-|
|Beginningbalance|Increasedamount|Amortizationamount|Otherdecreaseamount|
|23,241,203.51|27,609,384.34|5,032,922.46|0.00|
|56,402,256.28|24,554,895.87|22,413,323.85|17,439.56|
|70,417,477.51|6,012,231.03|12,045,640.32|585.42|
|150,060,937.30|58,176,511.24|39,491,886.63|18,024.98|

 Notes: Other decrease included the decreased amount RMB0.00 mainly generated from the lossof control oversubsidiaries.
19.DeferredIncomeTaxAssets/DeferredIncomeTax Liabilities
(1)Deferred IncomeTaxAssets withoutOffset
||||
|-|-|-|
|Endingbalance|||
|Deductibletemporarydifference|Deferredincometaxassets|Deductibletemporarydifference|
|865,728,820.65|211,783,617.94|796,345,288.62|
|54,102,230.48|13,525,557.62|32,715,116.95|
|77,434,022.64|18,633,318.72|118,441,697.07|
|99,261,495.92|23,710,167.52|106,943,380.58|
|552,517,701.19|135,814,854.93|2,250,284.11|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|0.00||47,482,470.52|
|177,909,267.07|43,724,265.15|141,409,911.41|
|1,826,953,537.95|447,191,781.88|1,245,588,149.26|

 (2)Lists ofDeferred IncomeTax Liabilities without Offset
||||
|-|-|-|
|Endingbalance|||
|Taxabletemporarydifference|Deferredincometaxliabilities|Taxabletemporarydifference|
|5,237,869.27|785,680.39|6,889,703.33|
|12,372,942.00|3,093,235.50|---|
||---|---|
|142,724,394.92|35,681,098.73|45,386,505.16|
|1,452,756.00|363,189.00|1,026,206.42|
|96,862,745.08|24,215,686.27||
|258,650,707.27|64,138,889.89|53,302,414.91|

 (3)List ofUnrecognized Deferred IncomeTaxAssets
||
|-|
|Endingbalance|
|135,874,599.56|
|1,055,016,010.25|
|1,190,890,609.81|

 20.Assets ImpairmentProvision
||||||
|-|-|-|-|-|
|Beginningbalance|Increased||Decreased||
||Withdrawal|Increaseofcombinationorother|Reverse|Write-offorothers|
|517,316,153.36|31,566,283.88|49,098,516.01|18,170,641.88|5,431,777.10|
|322,874,849.83|46,683,151.79|4,713,490.95|526,693.38|14,048,483.47|
|10,747,785.64|0.00|0.00|0.00||

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Beginning|Increased||Decreased||
|balance|||||
|21,777,940.74|0.00|2,170,185.45|0.00|1,668,418.73|
|2,901,082.61|0.00|0.00|0.00||
||0.00|0.00|0.00||
|875,617,812.18|78,249,435.67|55,982,192.41|18,697,335.26|21,148,679.30|

 21.OtherNon-currentAssets
||
|-|
|Endingbalance|
|41,422,528.53|
|10,099,279.84|
|20,000,000.00|
|71,521,808.37|

 22.Short-termLoans
||
|-|
|Endingbalance|
|41,422,528.53|
|10,099,279.84|
|20,000,000.00|
|71,521,808.37|
|10,397,447,703.32|

 Note:① Konka Household Appliances International Trading tookUS$72,000,000.00 usance letter of credit with 360 days as pledge, obtaining RMB476,395,071.41 short-term loans.
② Konka Factoring discounted the notes receivable with right of recourse, obtaining RMB237,524,976.51short-term loansinequal amount.
 Xingda Hongye obtained mortgage loan RMB210,700,000.00 by house and building with carrying value of RMB60,288,708.63 and land use rights with carrying value of RMB38,617,359.68
23.Financial Liabilitiesat FairValuethroughProfitorLoss
Item Endingbalance Beginningbalance
KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Endingbalance|
|1,827,480.43|
|1,827,480.43|

 24.Notes Payable
||
|-|
|Endingbalance|
|610,205,567.87|
|316,197,091.42|
|926,402,659.29|

 Notes: The amount of notes payable due during the next accounting period was RMB926,402,659.29.
25.Accounts Payable
(1)List ofAccounts Payable
||
|-|
|Endingbalance|
|3,597,923,005.02|
|57,570,544.64|
|9,634,490.48|
|33,417,303.91|
|3,698,545,344.05|

 (2)SignificantAccounts PayableAging over OneYear
||
|-|
|Endingbalance|
|18,271,970.18|
|17,920,695.44|
|36,192,665.62|

26.Advances fromCustomers
(1)List ofAdvances from Customers
||
|-|
|Endingbalance|
|888,441,204.46|
|9,866,764.66|
|13,858,968.24|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Endingbalance|
|24,505,478.96|
|936,672,416.32|

 (2) The Significant Advances from Customers Aging over One Year Were Mainly the Advances from Customers from Companieswithout ContinuousCooperation.
(3)Advance Receipts of Houses
||
|-|
|Endingbalance|
|2,383,130.00|
|2,559,493.00|
|2,126,839.00|
|115,062,809.00|
|122,132,271.00|

 27.PayrollPayable
(1)List ofPayroll Payable
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Otherincrease|Decrease|Otherdecrease|
|289,046,664.85|639,875,510.00|11,618,430.65|749,247,534.97|2,060,020.02|
|2,323,632.82|58,833,576.00|6,597.36|53,275,816.00|16,540.85|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Otherincrease|Decrease|Otherdecrease|
||1,168,975.44|0.00|1,168,975.44|0.00|
|291,370,297.67|699,878,061.44|11,625,028.01|803,692,326.41|2,076,560.87|

 (2)List ofShort-term Salary
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Otherincrease|Decrease|Otherdecrease|
|275,524,552.33|556,001,754.87|11,310,409.72|674,937,666.70|1,794,961.49|
|4,562,983.10|31,644,919.42|0.00|25,543,116.73|3,235.51|
|2,816,379.51|28,995,101.22|3,199.92|26,185,328.94|128,405.25|
|815,364.61|25,523,063.63|2,529.60|23,805,844.80|127,521.51|
|247,215.23|1,587,821.19|352.80|1,333,628.03|445.00|
|1,753,799.67|1,884,216.40|317.52|1,045,856.11|438.74|
|299,531.17|12,272,740.04|0.00|12,332,139.98|7,204.63|
|3,624,491.64|4,793,354.11|269,437.80|3,106,294.57|126,213.14|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Otherincrease|Decrease|Otherdecrease|
|2,218,727.10|6,167,640.34|35,383.21|7,142,988.05|0.00|
|289,046,664.85|639,875,510.00|11,618,430.65|749,247,534.97|2,060,020.02|

(3)List ofDefined ContributionPlan
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Otherincrease|Decrease|Otherdecrease|
|2,096,931.52|57,401,468.77|6,350.40|51,852,532.03|15,368.97|
|226,701.30|1,432,107.23|246.96|1,423,283.97|1,171.88|
||0.00|0.00|0.00|0.00|
|2,323,632.82|58,833,576.00|6,597.36|53,275,816.00|16,540.85|

 The Company, in line with the requirement, participate the endowment insurance, unemployment insurance scheme and so on, according to the scheme, the Company monthly pay to the scheme in line with requirements of local government, except the monthly payment, the Company no longer shoulder the further payment obligation, the relevant expenseoccurred was recorded intocurrent profits and losses orrelated assets costs.
28.Taxes Payable
||
|-|
|Endingbalance|
|22,655,545.28|
|47,395,613.36|
|10,733,357.08|
|2,043,328.90|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Endingbalance|
|3,876,005.59|
|401,823.10|
|3,240,037.08|
|2,691,802.73|
|1,964,597.39|
|723,813.88|
|1,646,083.02|
|264,623.34|
|98,073,836.96|
|2,782,683.66|
|198,493,151.37|

 29.InterestPayable
||
|-|
|Endingbalance|
|44,957,010.99|
|44,957,010.99|

 30.OtherPayables
(1)Other Payables Listed byNature ofAccount
||
|-|
|Endingbalance|
|915,409,402.16|
|364,632,999.76|
|641,055,203.42|
|1,369,414.67|
|350,500,000.00|
|101,334,139.43|
|2,374,301,159.44|

(2)Significant Other PayablesAging overOneYear
KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Endingbalance|
|123,137,443.40|
|123,137,443.40|

31.CurrentPortion ofNon-currentLiabilities
||
|-|
|Endingbalance|
|10,000,000.00|
|165,596.84|
|10,165,596.84|

 32.Long-term Borrowings
||
|-|
|Period-end|
|316,000,000.00|
|150,000,000.00|
|45,000,000.00|
|10,000,000.00|
|501,000,000.00|

 Note: (1) Rushan Yike Water Treatment Co., Ltd., theCompany’s subsidiary, obtained a borrowing of RMB290 million from Yantai Economic Development Zone Branch of China Everbright Bank with the period of ten years from the date of drawings on. The service charge of Rushan Finance Bureau for Rushan Silver Beach PPP Project was taken as the pledge during the 29 December 2016 to 28 December 2026. In the meanwhile, the Company provided the guarantee and undertook joint several liabilities regarding the aforesaid borrowing.As of30June 2018,theactual borrowing was RMB150 million.
(2) Laizhou Lairun Holdings Co., Ltd., theCompany’s subsidiary, made the sale-lease-back transaction with LaizhouLairun Finance Lease Co., Ltd., theCompany’s joint stock company, with guarantee amount of RMB50 million, pledged by the future charging right of sewage plant of Laizhou Lairun Holdings Co., Ltd. As of 30 June 2018, the ending balance of the pledgeloan was RMB45 million.
33.Long-term Payables
Item Endingbalance Beginningbalance
KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Endingbalance|
|11,796,936.49|
|165,596.84|
|11,631,339.65|

 34.Long-term PayrollPayable
(1)List ofLong-term PayrollPayable
||
|-|
|Endingbalance|
|11,440,243.54|
|—|
|—|
|11,440,243.54|

 (2)Changes in Defined Benefit PensionSchemes
① PresentWorth ofDefined Benefit Pension Schemes Obligation:
||
|-|
|ReportingPeriod|
|13,361,821.86|
|—|
|—|
|—|
|—|
|—|
|—|
|—|
|1,921,578.32|
|—|
|1,921,578.32|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|ReportingPeriod|
|11,440,243.54|

② Notes to the influence of the content and related risk of defined benefit pension schemes tothefuture cash flows, timeand uncertainty of theCompany:
Due to upgrading and reconstruction of current work sites of the subsidiary, communication technology, it is to adjust the labor relations according to Implementation Measures for Accompanying Employees in manufacturing system of Shenzhen Konka Telecommunication Technology Co., Ltd on the premise to balance theCompany’s andemployees’ benefits and voluntary selection, Telecommunication Technology provides early retirement plans for senior employees (employed before 31 December 1990 and signed non-fixed term labor contractwith theCompany orCommunicationTechnology).
The accumulative compensation paid to the internal early retirement pensions in future year is RMB11,440,243.54, 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 Actuarial Assumptions and Sensibility Analysis Result of Defined Benefit PensionSchemes
||
|-|
|Period-endofReportingPeriod|
|Treasurybondrateinsameperiod|
|0%|
|Overlegalemeritusage|
|0%|

35.Provisions
|||
|-|-|
|Endingbalance|Beginningbalance|
|82,042.98|4,711,597.59|
|1,470,267.51|1,470,267.51|

KonkaGroupCo.,Ltd. InterimReport2018
|||
|-|-|
|1,552,310.49|6,181,865.10|

KonkaGroupCo.,Ltd. InterimReport2018 36.Government Subsidies
1.Government Subsidies Initially Recognized during theReporting Period
||||||||
|-|-|-|-|-|-|-|
|Amount|Relatedtoassets||Relatedtoincome||||
||Deferredincome|Offsettingcarryingvalueofassets|Deferredincome|Otherincome|Non-operatingincome|Offsettingcostexpenses|
|28,748,955.99|—|—|—|18,563,333.33|10,185,622.66|—|
|34,848,961.96|—|—|—|34,848,961.96||—|
|48,012,477.79|—|—|—|48,012,477.79||—|
|132,738.00|—|—|—|132,738.00||—|
|3,229,884.31|—|—|—|3,229,884.31||—|
|7,409,880.69|—|—|—|6,133,800.00|1,276,080.69|—|
|10,000,000.00|10,000,000.00|—|—||—|—|
|2,916,666.67|2,916,666.67|—|—|—|—|—|
|135,299,565.41|12,916,666.67|0.00|0.00|110,921,195.39|11,461,703.35|—|

 2.Government Subsidies Recorded into theCurrent ProfitorLoss
||||
|-|-|-|
|Relatedtoassets/income|Recordedintootherincome|Recordedintonon-operatingincome|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Relatedtoassets/income|Recordedintootherincome|Recordedintonon-operatingincome|
|Relatedtoincome|18,563,333.33|10,185,622.66|
|Relatedtoincome|34,848,961.96|—|
|Relatedtoincome|48,012,477.79|—|
|Relatedtoassets/income|12,105,088.11|—|
|Relatedtoincome|132,738.00|—|
|Relatedtoincome|3,229,884.31|—|
|Relatedtoincome|6,133,800.00|1,276,080.69|
||123,026,283.50|11,461,703.35|

 3.Government Subsidies Returned inthe Reporting Period
No such case in theReporting Period.
37.DeferredIncome
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Decrease|Otherdecrease|Endingbalance|
|130,049,911.87|12,916,666.67|12,105,088.11|0.00|130,861,490.43|
|130,049,911.87|12,916,666.67|12,105,088.11|0.00|130,861,490.43|

 Notes: Other decreasein theReporting Period was mainly caused bytheloss ofcontrolling rights over thesubsidiaries.
KonkaGroupCo.,Ltd. InterimReport2018 Ofwhich, itemsrelated to government subsidies:
||||||||
|-|-|-|-|-|-|-|
|Beginningbalance|Increase|Decrease||||Endingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Offsettingcostexpenses|Otherdecrease||
|19,848,500.00|0.00||2,247,000.00|||17,601,500.00|
||10,000,000.00||499,999.98|||9,500,000.02|
|13,300,000.00||||||13,300,000.00|
|7,761,844.66|||990,873.78|||6,770,970.88|
|5,620,000.00||||||5,620,000.00|
|5,256,893.21||||||5,256,893.21|

KonkaGroupCo.,Ltd. InterimReport2018
||||||||
|-|-|-|-|-|-|-|
|Beginningbalance|Increase|Decrease||||Endingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Offsettingcostexpenses|Otherdecrease||
|4,500,000.02|||499,999.98|||4,000,000.04|
|4,500,000.00||||||4,500,000.00|
|3,822,000.00|||409,500.00|||3,412,500.00|
|3,620,000.00||||||3,620,000.00|
|3,281,040.00|||91,684.98|||3,189,355.02|
|3,000,000.00||||||3,000,000.00|

KonkaGroupCo.,Ltd. InterimReport2018
||||||||
|-|-|-|-|-|-|-|
|Beginningbalance|Increase|Decrease||||Endingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Offsettingcostexpenses|Otherdecrease||
|2,809,233.44|||399,999.96|||2,409,233.48|
|2,754,867.45|||267,895.02|||2,486,972.43|
|2,600,000.00||||||2,600,000.00|
|2,400,000.00|||844,812.96|||1,555,187.04|
|2,400,000.00|||5,805.00|||2,394,195.00|
|2,360,000.00|||240,000.00|||2,120,000.00|

KonkaGroupCo.,Ltd. InterimReport2018
||||||||
|-|-|-|-|-|-|-|
|Beginningbalance|Increase|Decrease||||Endingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Offsettingcostexpenses|Otherdecrease||
|2,100,000.00||||||2,100,000.00|
|1,960,000.00||||||1,960,000.00|
|1,951,430.02|||229,579.98|||1,721,850.04|
|1,875,000.00|||150,000.00|||1,725,000.00|
|1,750,000.13|||499,999.98|||1,250,000.15|
|1,680,000.00|||114,610.02|||1,565,389.98|
|1,590,166.71|||202,999.98|||1,387,166.73|

KonkaGroupCo.,Ltd. InterimReport2018
||||||||
|-|-|-|-|-|-|-|
|Beginningbalance|Increase|Decrease||||Endingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Offsettingcostexpenses|Otherdecrease||
|1,500,000.00||||||1,500,000.00|
|1,500,000.00||||||1,500,000.00|
|1,420,000.00||||||1,420,000.00|
|1,400,000.00||||||1,400,000.00|
|1,375,319.98|||114,610.02|||1,260,709.96|
|1,320,000.00||||||1,320,000.00|
|1,300,000.00||||||1,300,000.00|
|1,199,999.88|||210,000.00|||989,999.88|

KonkaGroupCo.,Ltd. InterimReport2018
||||||||
|-|-|-|-|-|-|-|
|Beginningbalance|Increase|Decrease||||Endingbalance|
|||Recordedintonon-operatingincome|Recordedintootherincome|Offsettingcostexpenses|Otherdecrease||
|1,100,220.00|||0.00|||1,100,220.00|
|1,094,583.35|||18,499.98|||1,076,083.37|
|1,066,666.76|||199,999.98|||866,666.78|
|1,000,000.00||||||1,000,000.00|
|10,602,751.22|2,916,666.67||3,682,968.63|||9,836,449.26|
|128,620,516.83|12,916,666.67|0.00|11,920,840.23|0.00|0.00|129,616,343.27|
|1,429,395.04|||184,247.88|||1,245,147.16|
|1,429,395.04|0.00|0.00|184,247.88|0.00|0.00|1,245,147.16|
|130,049,911.87|12,916,666.67|0.00|12,105,088.11|0.00|0.00|130,861,490.43|

KonkaGroupCo.,Ltd. InterimReport2018 38.ShareCapital
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Increase/decrease(+/-)|||||
||Newsharesissued|Bonusshares|Bonusissuefromprofit|Other|Subtotal|
|2,407,945,408.00|—|—|—|—|—|

39.CapitalReserves
||||
|-|-|-|
|Beginningbalance|Increase|Decrease|
|7,393,378.55|||
|97,338,863.75|||
|104,732,242.30|||

KonkaGroupCo.,Ltd. InterimReport2018 40.OtherComprehensiveIncome
|||||||
|-|-|-|-|-|-|
|Beginningbalance|ReportingPeriod|||||
||IncomebeforetaxationintheCurrentPeriod|Less:recordedinothercomprehensiveincomeinpriorperiodandtransferredinprofitorlossintheCurrentPeriod|Less:Incometaxexpense|AttributabletoownersoftheCompanyastheparentaftertax|Attributabletonon-controllinginterestsaftertax|
|—|—|—|—|—|—|
|3,697,458.95|-4,369,616.63|31,342.08|0.00|-4,851,840.74|450,882.03|
|-3,138,048.04||||||

KonkaGroupCo.,Ltd. InterimReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance|ReportingPeriod|||||
||IncomebeforetaxationintheCurrentPeriod|Less:recordedinothercomprehensiveincomeinpriorperiodandtransferredinprofitorlossintheCurrentPeriod|Less:Incometaxexpense|AttributabletoownersoftheCompanyastheparentaftertax|Attributabletonon-controllinginterestsaftertax|
|31,342.08||31,342.08||-31,342.08||
|6,804,164.91|-4,369,616.63|||-4,820,498.66|450,882.03|

KonkaGroupCo.,Ltd. InterimReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance|ReportingPeriod|||||
||IncomebeforetaxationintheCurrentPeriod|Less:recordedinothercomprehensiveincomeinpriorperiodandtransferredinprofitorlossintheCurrentPeriod|Less:Incometaxexpense|AttributabletoownersoftheCompanyastheparentaftertax|Attributabletonon-controllinginterestsaftertax|
|3,697,458.95|-4,369,616.63|31,342.08|0.00|-4,851,840.74|450,882.03|

KonkaGroupCo.,Ltd. InterimReport2018 41.SurplusReserves
||||
|-|-|-|
|Beginningbalance|Increase|Decrease|
|963,582,609.22|||
|254,062,265.57|||
|1,217,644,874.79|||

 Notes: Based on the regulations of the Corporation Law and Constitution, the Company should withdraw10% of the statutory surplus reserves according to the net profits. If the accumulated amount of the statutory surplus reserves exceeded the50% of the registered capital, theCompany could nomore withdraw.
The Company can withdraw the discretional surplus reserves after withdrawing the statutory surplus reserves. The discretional surplus reserves can be used to make up for the previous losses orto increaseshare capital once approved.
42.Retained Earnings
||
|-|
|Thisyear|
|4,260,125,492.57|
|—|
|4,260,125,492.57|
|341,793,039.03|
|—|
|390,087,134.64|
|—|
|—|
|4,211,831,396.96|

43.Operating RevenueandCost ofSales
(1)Operating Revenue and Cost ofSales
KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|16,803,504,680.73|15,789,523,498.53|11,116,190,367.22|
|821,910,089.09|652,732,946.73|289,775,612.21|
|17,625,414,769.82|16,442,256,445.26|11,405,965,979.43|

 (2)Main Operations (Classified byproduct)
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|4,963,088,596.70|4,352,820,070.48|5,289,992,150.21|
|1,084,381,984.51|892,338,557.03|891,933,843.48|
|10,008,880,630.62|9,925,786,697.58|4,307,330,068.12|
|77,951,411.92|52,515,288.25||
|669,202,056.98|566,062,885.19|626,934,305.41|
|16,803,504,680.73|15,789,523,498.53|11,116,190,367.22|

 (3)Main Operations (Classified byarea)
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|4,672,082,285.24|3,847,140,507.59|7,343,613,290.29|
|12,131,422,395.49|11,942,382,990.94|3,772,577,076.93|
|16,803,504,680.73|15,789,523,498.53|11,116,190,367.22|

 (4)Other Operations (Classified byproduct)
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|461,460,767.54|463,125,455.40|44,655,567.09|
|23,647,020.02|12,451,873.87|17,463,699.51|
|5,528,818.17|885,134.95|2,580,270.82|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|55,541,441.82|7,877,581.44|42,485,581.44|
|275,732,041.54|168,392,901.07|182,590,493.35|
|821,910,089.09|652,732,946.73|289,775,612.21|

 (5)Operating Revenue fromTop 5Customers
||
|-|
|Totaloperatingrevenuefromtop5customers|
|6,013,731,094.97|
|2,662,113,944.10|

 44.Taxes andSurtaxes
||
|-|
|ReportingPeriod|
|0.00|
|7,615,970.19|
|5,471,304.55|
|2,268,252.08|
|4,628,137.36|
|3,403,425.83|
|2,284,037.36|
|0.00|
|162,579.33|
|3,180.00|
|1,809,687.92|
|27,646,574.62|

 Note: Refer to Note VTaxation for details of the measurement standards of various taxes and surtaxes.
45.Selling Expense
||
|-|
|ReportingPeriod|
|144,544,854.91|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|ReportingPeriod|
|339,904,932.61|
|163,966,076.58|
|121,621,614.96|
|161,559,044.17|
|19,599,139.12|
|179,335.16|
|16,371,700.85|
|15,783,834.11|
|7,276,619.77|
|112,373,922.27|
|1,103,181,074.51|

 46.Administrative Expense
||
|-|
|ReportingPeriod|
|137,008,896.76|
|72,498,745.45|
|30,392,140.28|
|17,149,760.33|
|14,494,572.24|
|9,155,485.63|
|883,906.94|
|7,528,524.84|
|7,882,174.11|
|4,538,405.21|
|2,467,456.89|
|60,827,600.65|
|364,827,669.33|

 47.Finance Costs
||
|-|
|ReportingPeriod|
|138,646,255.45|
|49,719,529.94|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|ReportingPeriod|
|-72,148,811.10|
|19,514,995.00|
|36,292,909.41|

 48.Asset Impairment Loss
||
|-|
|ReportingPeriod|
|13,395,642.00|
|46,156,458.41|
|0.00|
|59,552,100.41|

 49.Gain onchanges in fairvalue
||
|-|
|ReportingPeriod|
|59,855,412.48|
|59,855,412.48|
|59,855,412.48|

 50.InvestmentIncome
||
|-|
|ReportingPeriod|
|6,075,182.59|
|47,126,189.12|
|0.00|
|-82,412,478.05|
|13,740,000.00|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|ReportingPeriod|
|17,360,398.59|
|84,300,652.01|
|445,568,627.45|
|531,758,571.71|

 51.AssetDisposal Income
|||
|-|-|
|ReportingPeriod|SamePeriodoflastyear|
|89,814.27|—|
|63,632,291.11|—|
|63,722,105.38|—|

 52.OtherIncome
|||
|-|-|
|ReportingPeriod|SamePeriodoflastyear|
|34,848,961.96|35,115,965.51|
|18,563,333.33|—|
|48,012,477.79|—|
|12,105,088.11|—|
||—|
|132,738.00|—|
|3,229,884.31|—|
|6,133,800.00|1,722,426.00|
|123,026,283.50|36,838,391.51|

53.Non-operating Income
KonkaGroupCo.,Ltd. InterimReport2018
|||
|-|-|
|ReportingPeriod|SamePeriodoflastyear|
|11,461,703.35|79,034,666.86|
|0.00|—|
|870,715.65|3,366,979.21|
|0.00|—|
|94,061.30|33,597,795.57|
|14,791,012.67|7,347,666.65|
|27,217,492.97|123,347,108.29|

 Ofwhich, government subsidies recorded intocurrent profit or loss:
|||
|-|-|
|ReportingPeriod|Sameperiodoflastyear|
|—|—|
|—|40,225,800.00|
|—|11,561,486.48|
|10,185,622.66|21,005,000.00|
|—|—|
|—|1,948,800.00|
|—|—|
|—|—|
|—|—|
|1,276,080.69|4,293,580.38|
|11,461,703.35|79,034,666.86|

54.Non-operating Expense
|||
|-|-|
|ReportingPeriod|SamePeriodoflastyear|

KonkaGroupCo.,Ltd. InterimReport2018
|||
|-|-|
|ReportingPeriod|SamePeriodoflastyear|
|1,671,547.63|1,065,392.90|
|3,500.00|1,531.07|
|20,000.00|13,600.00|
|4,256,701.94|2,555,014.14|
|5,951,749.57|3,635,538.11|

 55.IncomeTaxExpense
(1)Lists ofIncomeTax Expense
||
|-|
|ReportingPeriod|
|59,240,226.94|
|-76,686,276.07|
|-17,446,049.13|

 (2)AdjustmentProcess ofAccounting Profit and IncomeTax Expense
Item ReportingPeriod
Profitbeforetaxation 391,286,112.75 Current income tax expense accounted at
97,821,528.18 statutory/applicabletaxrate
Influenceofapplyingdifferenttaxratesbysubsidiaries -14,964,781.64 Influenceofincometaxbeforeadjustment 748,615.33 Influenceofnon-taxableincome -41,708,898.94 Influenceofnotdeductablecosts,expensesandlosses 9,218,497.91 Influenceofdeductablelossofunrecognizeddeferred
-91,144,150.70 incometaxassetsinpriorperiod
Influenceofdeductabletemporarydifferenceordeductable
lossesofunrecognizeddeferredincometaxinthe 22,583,140.73 ReportingPeriod
Changes in the balance of deferred income tax assets/
--- liabilitiesinpreviousperiodduetoadjustmentoftaxrate
Influenceofplusdeductingcosts
Incometaxexpense -17,446,049.13
KonkaGroupCo.,Ltd. InterimReport2018 56.OtherComprehensiveIncome
Referto NoteVI-40 fordetails.
57.CashFlowStatement
(1)Cash Generated from Other OperatingActivities
||
|-|
|ReportingPeriod|
|1,177,791,975.34|
|87,455,725.93|
|97,520,522.22|
|19,955,669.93|
|6,703,808.76|
|30,537,543.95|
|3,377,283.28|
|2,206,730.89|
|17,717.50|
|245,081.28|
|51,447,417.30|
|1,477,259,476.38|

Note：①The Commercial factoring accounts were referred to the accounts received from the billdiscounting ofthefactoring business bytheCompany.
(2)Cash Used inOther OperatingActivities
||
|-|
|ReportingPeriod|
|1,607,828,551.79|
|643,840,207.45|
|18,580,685.28|
|1,607,828,551.79|
|643,840,207.45|
|18,580,685.28|
|1,607,828,551.79|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|ReportingPeriod|
|643,840,207.45|
|18,580,685.28|
|2,347,454,070.52|

 Note: The commercial factoring payment referred to the accounts paid to the factoring applicant by theCompany’ssubsidiary-KonkaFactoring(Shenzhen)Co.,Ltd.
(3)Cash Generated from Other InvestingActivities
||
|-|
|ReportingPeriod|
|942,900,000.00|
|942,900,000.00|

 (4)Cash Used inOther InvestingActivities
||
|-|
|ReportingPeriod|
|774,730,000.00|
|100,000,000.00|
|874,730,000.00|

 (5)Cash Generated from Other FinancingActivities
||
|-|
|ReportingPeriod|
|1,023,076.93|
|1,023,076.93|

 (6)Cash Used inOther FinancingActivities
||
|-|
|ReportingPeriod|
|22,612,122.48|
|22,612,122.48|

KonkaGroupCo.,Ltd. InterimReport2018 58.Supplemental Information forCash FlowStatement
(1)Supplemental Information forCash Flow Statement
||
|-|
|ReportingPeriod|
|408,732,161.88|
|59,552,100.41|
|99,977,217.61|
|6,800,013.68|
|39,491,886.63|
|-63,722,105.38|
|1,577,486.33|
|-59,855,412.48|
|138,646,255.45|
|-531,929,987.83|
|-139,323,718.64|
|51,576,456.37|
|-200,692,963.10|
|-1,290,880,669.75|
|-358,107,427.04|
|-1,838,158,705.86|
|—|
|—|
|—|
|3,761,988,635.66|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|ReportingPeriod|
|3,097,899,703.76|
|—|
|—|
|664,088,931.90|

 (2)Net Cash Receive from Disposal oftheSubsidiaries
Item Amount
Cashorcashequivalentsreceivedcurrentlyfromthedisposalofsubsidiariesin
theReportingPeriod
Ofwhich:KaikaiShijie
50,000,000.00 Less:cashandcashequivalentsheldbysubsidiariesonthedateoflosingcontrol
— power
Ofwhich:KaikaiShijie
7,488,940.78 Netcashfromdisposalofsubsidiaries
42,511,059.22 (3)Cash and Cash Equivalents
||
|-|
|Endingbalance|
|3,761,988,635.66|
|122,746.45|
|3,761,865,889.21|
|3,761,988,635.66|

 Note:Thecash andcash equivalents excludedother monetary assets with restriction onuse. 59.Assets with Restricted Ownership orRightto Use
||
|-|
|Endingcarryingvalue|
|149,831,518.94|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Endingcarryingvalue|
|1,666,718,524.73|
|5,807,674.32|
|60,288,708.63|
|38,617,359.68|
|1,921,263,786.30|

60.ForeignCurrency Monetary Items
(1)Foreign Currency Monetary Items
|||
|-|-|
|Endingforeigncurrencybalance|Exchangerate|
|112,780,634.54|6.6166|
|5,312.33|7.6515|
|13,029,927.79|0.8431|
|1.11|8.6551|

KonkaGroupCo.,Ltd. InterimReport2018
|||
|-|-|
|Endingforeigncurrencybalance|Exchangerate|
|7,250,355.04|1.75497|
|166,139,933.57|6.6166|
|5,945,102.95|0.8431|
|49,764.00|4.8633|
|238,075,212.16|6.6166|
|2,276,499.71|6.6166|
|9,192,347.10|6.6166|
|603,122.24|0.8431|
|253,872,941.35|6.6166|
|86,065,100.00|0.8431|
|2,909,774.15|6.6166|

 VII. Changesof ConsolidationScope
1.SingleDisposalofInvestment to Subsidiary thatLosing ControlPower
KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Theequitydisposalprice|Equitydisposalproportion(%)|Methodofequitydisposal|Timeoflosingcontrol|Recognitionbasisforthetimeoflosingcontrolpower|
|50,000,000.00|5|Transfer|2018/6/28|Transferofequity,operationandfinancialcontrollingpower|

(Continued)
||||||
|-|-|-|-|-|
|Residualequityproportiononthedateoflosingcontrolpower(%)|Carryingvalueofresidualequityonthedateoflosingcontrolpower|Fairvalueofresidualequityonthedateoflosingcontrolpower|Gainsorlossesfromre-measurementofresidualequityatfairvalue|Recognitionmethodandmainassumption offairvalueofresidualequityonthedateoflosingcontrolpower|
|46%|14,431,372.55|460,000,000.00|445,568,627.45|Markettradingprice|

 2.Changesin CombinationScopeforOtherReasons
(1) Kangjietong (Hong Kong) Limited was incorporated by Konka Electrical Appliances Investment& Development Co., Ltd. (a subsidiary of the Company) and Aujet Industry Limited in Hong Kong on 9 January 2018 with a registered capital of HKD1 million, of which Konka Electrical Appliances Investment& Development Co., Ltd. contributed HKD0.51 million (or51%) and Aujet Industry Limited contributed HKD0.49 million (or49%). Therefore, the Company has the control over Kangjietong (Hong Kong) Limited and it has been included intotheCompany’s consolidation scope since9January 2018.
(2) Sichuan Konka Smart Terminal Technology Co., Ltd. was incorporated by Shenzhen Konka Mobile Interconnection Technology Co., Ltd. (a subsidiary of the Company) on 15 January 2018 with a registered capital of RMB100 million, of which Shenzhen Konka Mobile Interconnection Technology Co., Ltd. contributed RMB100 million (or100%).
Therefore, the Company has the control over Sichuan Konka Smart TerminalTechnology Co.,
Ltd. and it has been included intotheCompany’s consolidation scope since15January 2018.
KonkaGroupCo.,Ltd. InterimReport2018 (3) Yibin Konka Technology Park Operation Co., Ltd. was incorporated by the Company on 15 January 2018 with a registered capital of RMB100 million, of which the Company contributed RMB100 million (or100%). Therefore, the Company has the control over Yibin Konka Technology Park Operation Co., Ltd. and it has been included into theCompany’s consolidation scopesince15January 2018.
(4) Shenzhen Konka Electronics Technology Co., Ltd. was incorporated by the Company on 16 January 2018 with a registered capital of RMB1 billion, of which the Company contributed RMB1 billion (or100%). Therefore, the Company has the control over Shenzhen Konka Electronics Technology Co., Ltd. and it has been included into theCompany’s consolidation scopesince16January 2018.
(5) Jiaxin Technology Co., Ltd. was incorporated by Shenzhen Konka Pengrun Technology& Industry Co., Ltd. (a subsidiary of the Company) in Hong Kong on 25 January 2018 with a registered capital of HKD10 million, of which Shenzhen Konka Pengrun Technology& Industry Co., Ltd. contributed HKD10 million (or100%). Therefore, the Company has the control over Jiaxin Technology Co., Ltd. and it has been included into theCompany’s consolidation scopesince25January 2018.
(6) Jiali International (Hong Kong) Limited was incorporated by Shenzhen Konka Unifortune Supply Chain Management Co., Ltd. (a subsidiary of the Company) in Hong Kong on 2 February 2018 with a registered capital of HKD5 million, of which Shenzhen Konka Unifortune Supply Chain Management Co., Ltd. contributed HKD5 million (or100%). Therefore, the Company has the control over Jiali International (Hong Kong) Limited and ithas been included intotheCompany’s consolidation scope since2February 2018. (7) Chengdu Konka Incubator Management Co., Ltd. was incorporated by Konka Ventures Development (Shenzhen) Co., Ltd. (a subsidiary of the Company) on 5 February 2018 with a registered capital of RMB5 million, of which Konka Ventures Development (Shenzhen) Co., Ltd. contributed RMB5 million (or100%). Therefore, the Company has the control over Chengdu Konka Incubator Management Co., Ltd. and it has been included into theCompany’s consolidation scopesince 5February 2018.
(8) Sichuan Kangjiatong Supply Chain Management Co., Ltd. was incorporated by the Company, Shenzhen Trade Link Supply Chain Management Co., Ltd. and SichuanYibin Port (Group) Co., Ltd. on 26 March 2018 with a registered capital of RMB30 million, of which the Company contributed RMB15.3 million (or51%) in cash, Shenzhen Trade Link Supply Chain Management Co., Ltd. contributed RMB13.2 million (or44%) in cash and Sichuan Yibin Port (Group) Co., Ltd. contributed RMB1.5 million (or5%) in cash. Therefore, the
KonkaGroupCo.,Ltd. InterimReport2018 Company has the control over Sichuan Kangjiatong Supply Chain Management Co., Ltd. and ithas beenincluded intotheCompany’s consolidation scopesince 26March 2018.
(9) Konka Suiyong Investment (Shenzhen) Co., Ltd. was incorporated by Shenzhen Konka Investment Holding Co., Ltd. (a subsidiary of the Company) and Suiyong Rongxin Capital Management Co., Ltd. on 11 May 2018 with a registered capital of RMB50 million, of which Shenzhen Konka Investment Holding Co., Ltd. contributed RMB25.5 million (or51%) in cash and Suiyong Rongxin Capital Management Co., Ltd. contributed RMB24.5 (or49%) in cash. Therefore, the Company has the control over Konka Suiyong Investment (Shenzhen) Co., Ltd. and it has been included into theCompany’s consolidation scope since 11 May 2018.
(10) Konka Huanjia (Dalian) Environmental Technology Co., Ltd. was incorporated by the Company, Huanjia Group and Zhang Yuyin on 6 June 2018 with a registered capital of RMB180 million, of which the Company contributed 91.8 million (or51%) in cash, Huanjia Group contributed RMB70.2 million (or39%) in cash and Zhang Yuyin contributed RMB18 million (or10%) in cash. Therefore, the Company has the control over Konka Huanjia (Dalian) Environmental Technology Co., Ltd. and it has been included into theCompany’s consolidation scopesince6June 2018.
(11) Anhui Konka Electrical Appliance Technology Co., Ltd. was incorporated by Anhui Konka Tongchuang Electrical Appliances Co., Ltd. (a subsidiary of the Company) and Chuzhou Hanshang Electrical Appliance Co., Ltd. on 12 June 2018 with a registered capital of RMB100 million, of which Anhui Konka Tongchuang Electrical Appliances Co., Ltd. contributed RMB51 million (or51%) in cash and Chuzhou Hanshang Electrical Appliance Co., Ltd. contributed RMB49 million (or49%) in cash. Therefore, the Company has the control over Anhui Konka Electrical Appliance Technology Co., Ltd. and it has been includedintotheCompany’s consolidation scope since12June2018.
(12) The Company completed the merger& acquisition of Shandong Econ Technology Co., Ltd. on 4 May 2018 with a registered capital of RMB164 million, of which the Company contributed RMB688.5 million (or51%) in cash. Therefore, the Company has the control over Shandong Econ Technology Co., Ltd. and its following subsidiaries: Beijing Econ Runfeng Technology Co., Ltd., Shanghai Jiyi Environmental Technology Co., Ltd., Binzhou Econ Zhongke Environmental Technology Co., Ltd., Laizhou Lairun Holdings Co., Ltd., Econ Environmental Engineering Co., Ltd., RushanYikeWaterTreatment Co., Ltd., Binzhou Weiyijie Environmental Technology Co., Ltd., Yantai Chunzhiran Environmental Technology Co., Ltd., Rushan Econ Beike Technology Incubator Co., Ltd., Fujian Econ Changrun
KonkaGroupCo.,Ltd. InterimReport2018 Environmental Protection Co., Ltd., Laizhou Lairun Huayang Heating Co., Ltd., Laizhou Lairun Heating Co., Ltd., Laizhou Lairun Green Energy Co., Ltd., Binzhou Beihai Jingmai Industrial Development Co., Ltd., Yantai Huanhai Xinze Enterprise Management Co., Ltd., Binzhou Weinengda Transport Co., Ltd., Laizhou Binhai Sewage Treatment Co., Ltd. and Laizhou Lairun Environmental Protection Co., Ltd. And these acquirees have been includedintotheCompany’s consolidation scopesince 4May 2018.
(13) Shenzhen Konka Electronics Technology Co., Ltd. (a subsidiary of the Company) has completed the merger& acquisition of GuangDong XingDa HongYe Electronic Co., Ltd. on 29 June 2018 with a registered capital of RMB88.89 million, of which the Company contributed RMB99.45 million (or51%) in cash. Therefore, Shenzhen Konka Electronics Technology Co., Ltd. has the control over GuangDong XingDa HongYe Electronic Co., Ltd. and its following subsidiaries: Shanghai Xinfeng Zhuoqun PCB Co., Ltd. and Zhongshan Zewei Kechuang Investment Management Co., Ltd. And these acquirees have been includedintotheCompany’s consolidation scopesince 29June2018.
VIII. Equity inOtherEntities
1.Equity inSubsidiary
(1)Subsidiaries
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|75|25|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry,commerce|100|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|49|51|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|75|25|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Investmentholding|75|25|
|Mudanjiang,Heilongjiang|Mudanjiang,Heilongjiang|Manufacturingindustry|60|—|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Chongqing|Chongqing|Manufacturingindustry|—|40|
|Chuzhou,Anhui|Chuzhou,Anhui|Manufacturingindustry|78|—|
|Dongguan,Guangdong|Dongguan,Guangdong|Manufacturingindustry|75|25|
|Dongguan,Guangdong|Dongguan,Guangdong|Manufacturingindustry|—|100|
|Boluo,Guangdong|Boluo,Guangdong|Manufacturingindustry|—|100|
|Boluo,Guangdong|Boluo,Guangdong|Manufacturingindustry|—|100|
|HongKong,China|HongKong,China|InternationalTrading|100|—|
|HongKong,China|HongKong,China|Investmentholding|—|100|
|HongKong,China|HongKong,China|InternationalTrading|—|100|
|Frankfurt,Germany,Europe|Frankfurt,Germany,Europe|InternationalTrading|100|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Insuranceagents(non-bankfinance)|100|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Softwaredevelopment|100|—|
|Kunshan,Jiangsu|Kunshan,Jiangsu|Realestate|100|—|
|Chuzhou,Anhui|Chuzhou,Anhui|Manufacturingindustry|100|—|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Logistics|100|—|
|Beijing|Beijing|Saleofhomeappliance|100|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|60|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|—|60|
|Xiamen,Fujian|Xiamen,Fujian|Commerce|—|69.23|
|Tianjin|Tianjin|Advertisement|—|70|
|HongKong,China|HongKong,China|Internationaltrading|—|61|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Informationservice|100|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commerce|81|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commerce|51|—|
|HongKong|HongKong|InternationalTrade|—|51|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Commerce|60|—|
|Haikou,Hainan|Haikou,Hainan|Networkplatformdevelopment|60|—|
|Chuzhou,Anhui|Chuzhou,Anhui|Scienceandtechnologyindustry|100|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|SoftwareandITindustry|51|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Retailindustry|51|—|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Retailindustry|51|—|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Capitalmarketsservice|100|—|
|Chuzhou,Anhui|Chuzhou,Anhui|Wholesalebusiness|—|78|
|Haikou,Hainan|Haikou,Hainan|Commercialservice|—|51|
|TianjinpilotFTZ|TianjinpilotFTZ|Leasingindustry|—|100|
|Yantai,Shandong|Yantai,Shandong|Commercialservice|—|51|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Capitalmarketsservice|—|100|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Wholesalebusiness|—|51|
|Shenzhen,Guangdong|Shenzhen,Guangdong|Manufacturingindustry|100||
|Yibin,Sichuan|Yibin,Sichuan|Manufacturingindustry||51|
|HongKong,China|HongKong,China|Wholesalebusiness||51|
|HongKong,China|HongKong,China|Wholesalebusiness||51|
|Yibin,Sichuan|Yibin,Sichuan|Wholesalebusiness|51||
|Dalian,Liaoning|Dalian,Liaoning|Environmentalprotectionindustry|51||
|Chengdu,Sichuan|Chengdu,Sichuan|Commercialservice||51|
|Yibin,Sichuan|Yibin,Sichuan|Scienceandtechnologyindustry|100||
|Shenzhen,Guangdong|Shenzhen,Guangdong|Capitalmarketsservice||51|
|Chuzhou,Anhui|Chuzhou,Anhui|Manufacturingindustry||51|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|HongKong,China|HongKong,China|Wholesalebusiness||51|
|Zhongshan,Guangdong|Zhongshan,Guangdong|Manufacturingindustry||51|
|Shanghai,China|Shanghai,China|Manufacturingindustry||51|
|Zhongshan,Guangdong|Zhongshan,Guangdong|Capitalmarketsservice||25.5|
|Yantai,Shandong|Yantai,Shandong|Environmentalprotectionindustry|51||
|Beijing,China|Beijing,China|Scienceresearchandtechnologicalserviceindustry||51.00|
|Shanghai,China|Shanghai,China|Scienceresearchandtechnologicalserviceindustry||51.00|
|Binzhou,Shandong|Binzhou,Shandong|Scienceresearchandtechnologicalserviceindustry||51.00|
|Laizhou,Shandong|Laizhou,Shandong|Productionandsupplyofelectricpower,heatingpower,gasandwater||30.60|
|Yantai,Shandong|Yantai,Shandong|Architectureindustry||51.00|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Rushan,Shandong|Rushan,Shandong|Managementofwaterconservancy,environmentandpublicfacilities||44.37|
|Binzhou,Shandong|Binzhou,Shandong|informationtransmission,softwareandITserviceindustry||35.70|
|Yantai,Shandong|Yantai,Shandong|Scienceresearchandtechnologicalserviceindustry||35.70|
|Rushan,Shandong|Rushan,Shandong|Managementofwaterconservancy,environmentandpublicfacilities||51.00|
|Changle,Fujian|Changle,Fujian|Productionandsupplyofelectricpower,heatingpower,gasandwater||33.15|
|Laizhou,Shandong|Laizhou,Shandong|Scienceresearchandtechnologicalserviceindustry||26.01|
|Laizhou,Shandong|Laizhou,Shandong|Productionandsupplyofelectricpower,heatingpower,gasandwater||51.00|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Laizhou,Shandong|Laizhou,Shandong|Managementofwaterconservancy,environmentandpublicfacilities||30.60|
|Binzhou,Shandong|Binzhou,Shandong|preparationofprojectoncomprehensiveutilizationofsolidwaste||30.60|
|Yantai,Shandong|Yantai,Shandong|businessadministrationandconsultingservices||51.00|
|Binzhou,Shandong|Binzhou,Shandong|transportationofgoods||37.23|
|Laizhou,Shandong|Laizhou,Shandong|treatmentofsewage,consultingofenvironmentalprotectionengineeringandenvironmentaltechnicalservices||30.60|
|Laizhou,Shandong|Laizhou,Shandong|Managementofwaterconservancy,environmentandpublicfacilities||30.60|

 Notes:①Chongqing Qingjia: the Company holds its40% shares, and all senior executive officers are designated and appointed by the Company; more than half of the members of Board of Director are directly or indirectly designated by the Company who has absolute influence and control over its production and operation, soit’s included into the scope of
consolidated statements.
(2)Significant Non-wholly-owned Subsidiary
KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Shareholdingproportionofnon-controllinginterests|Theprofitorlossattributabletothenon-controllinginterests|Declaringdividendsdistributedtonon-controllinginterests|
|22.00|-1,947,406.50|—|
|49.00|13,863,023.00|—|

KonkaGroupCo.,Ltd. InterimReport2018 (3)TheMain Financial Information ofSignificant Non-wholly-owned Subsidiary
Endingbalance
Name
||||||
|-|-|-|-|-|
|Currentassets|Non-currentassets|Totalassets|Currentliabilities|Non-currentliability|
|1,180,349,696.72|226,400,267.27|1,406,749,963.99|1,030,643,579.13|11,544,592.87|
|1,405,583,233.71|133,856.87|1,405,717,090.58|1,348,120,082.36|0|

(Continued)
Beginningbalance
Name
||||||
|-|-|-|-|-|
|Currentassets|Non-currentassets|Totalassets|Currentliabilities|Non-currentliability|
|1,743,305,524.22|234,515,077.28|1,977,820,601.50|1,589,905,412.55|13,198,499.65|
|1,162,693,203.78|129,592.90|1,162,822,796.68|1,134,435,779.93|—|

||||||||
|-|-|-|-|-|-|-|
|ReportingPeriod||||Sameperiodoflastyear|||
|Operatingrevenue|Netprofit|Totalcomprehensiveincome|Cashflowsfromoperatingactivities|Operatingrevenue|Netprofit|Totalcomprehensiveincome|
|1,732,222,387.44|-8,851,847.71|-8,851,847.71|286,378,066.73|2,399,150,981.00|8,748,900.14|8,748,900.14|

KonkaGroupCo.,Ltd. InterimReport2018
||||||||
|-|-|-|-|-|-|-|
|ReportingPeriod||||Sameperiodoflastyear|||
|3,256,025,071.58|28,291,883.68|28,291,883.68|25,288,584.51|1,909,913,550.33|11,394,229.70|11,394,229.70|

(4)ThereWasNo Significant RestrictiononUsingtheGroup’sAssets and LiquidatingtheGroup’s Liabilities.
(5) There Were No Financial Supports or Other Supports Provided to Structural Entities Incorporated into the Scope of Consolidated Financial Statements
KonkaGroupCo.,Ltd. InterimReport2018 2.Equity inAssociated Enterprises
(1)SignificantAssociated Enterprises
||||||
|-|-|-|-|-|
|Mainoperatingplace|Registrationplace|Natureofbusiness|Holdingpercentage(%)||
||||Directly|Indirectly|
|Shanghai|Shanghai|Productionandsaleofplasticmould|39.00|—|
|Shenzhen|Shenzhen|Productionandsaleoflightemittingdiode|—|42.79|
|Shenzhen|Shenzhen|Manufacturingindustryincomputer,communicationandotherelectronicequipment|20.00|—|
|Dongguan|Dongguan|Manufacturingindustryincomputer,communicationandotherelectronicequipment|22.4513|—|
|Kunshan|Kunshan|Manufacturingindustryincomputer,communicationandotherelectronicequipment|49.00|—|

KonkaGroupCo.,Ltd. InterimReport2018 Note: Shenzhen Konka Precision Mould Manufacturing Co., Ltd. was renamed Shenzhen JielunteTechnology Co., Ltd. on20April 2018.
(2)Main Financial Information ofSignificantAssociated Enterprise
Endingbalance/ReportingPeriod
|||||
|-|-|-|-|
|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|ShenzhenJielunteTechnologyCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|GuangdongChutianDragonSmartCardCo.,Ltd.|
|238,505,916.56|277,297,528.36|716,867,398.25|1,314,638,426.28|
|138,267,820.64|25,052,334.89|520,507,991.35|216,879,312.23|
|331,607,537.58|232,773,836.21|36,493,058.35|234,997,541.23|
|570,113,454.14|510,071,364.57|753,360,456.60|1,549,635,967.51|
|113,208,488.33|266,511,418.86|227,846,560.60|574,363,961.20|
|74,625,997.45|16,855,660.69|3,442,363.70|15,192,263.19|
|187,834,485.78|283,367,079.55|231,288,924.30|589,556,224.39|
|179,737,280.68|9,724,788.60||6,999,542.20|
|202,541,687.68|216,979,496.42|522,071,532.30|953,080,200.92|
|78,991,258.19|92,845,526.52|104,414,306.46|213,978,895.15|

KonkaGroupCo.,Ltd. InterimReport2018
|||||
|-|-|-|-|
|—|—|109,570,069.72|413,461,970.35|
|—|—|—|—|
|—|—|—|—|
|78,991,258.19|92,845,526.52|213,984,376.18|627,440,865.50|
|—|—|—|—|
|188,967,645.42|188,975,170.98|319,742,579.72|486,019,598.26|
|569,432.88|3,668,764.35|7,373,783.33|-3,172,333.74|
|268,388.28|-2,459,079.12|2,534,205.92|13,415,113.49|
|-1,253,334.90|-15,866,759.35|18,526,218.16|64,781,109.89|
|—|—|—|—|
|830,823.12|—|—|—|
|-422,511.78|-15,866,759.35|18,526,218.16|64,781,109.89|
|—|—|—|—|

(Continued)
Item Beginningbalance/Thesameperiodoflastyear
KonkaGroupCo.,Ltd. InterimReport2018
|||||
|-|-|-|-|
|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|ShenzhenKonkaPrecisionMouldManufacturingCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|GuangdongChutianDragonSmartCardCo.,Ltd.|
|277,102,107.32|317,214,657.83|529,254,428.27|1,275,973,644.95|
|102,675,515.63|77,139,577.86|8,909,487.50|520,507,991.35|
|342,856,720.05|229,756,861.75|81,833,013.73|265,717,459.13|
|619,958,827.37|546,971,519.58|611,087,442.00|1,541,691,104.08|
|164,142,536.68|283,150,937.49|102,411,669.34|610,280,220.79|
|58,156,470.99|21,263,925.10|5,130,458.50|14,700,720.45|
|222,299,007.67|304,414,862.59|107,542,127.84|624,980,941.24|
|193,225,048.13|9,879,883.26|—|9,178,745.28|
|204,434,771.57|232,676,773.73|503,545,314.16|907,531,417.56|
|79,729,560.91|99,562,391.48|100,709,062.83|203,752,601.15|
|—|—|109,570,069.72|413,461,970.35|
|—|—|—|—|
|—|—|—|—|

KonkaGroupCo.,Ltd. InterimReport2018 Beginningbalance/Thesameperiodoflastyear
|||||
|-|-|-|-|
|ShanghaiKonkaGreenScience&TechnologyCo.,Ltd.|ShenzhenKonkaPrecisionMouldManufacturingCo.,Ltd.|ShenzhenYaodeTechnologyCo.,Ltd.|GuangdongChutianDragonSmartCardCo.,Ltd.|
|79,729,560.91|99,562,391.48|210,279,132.55|617,214,571.50|
|—|—|—|—|
|510,907,923.27|437,458,462.41|782,641,588.11|927,468,144.67|
|11,748,541.28|6,320,383.30|23,563,857.52|8,182,245.66|
|3,287,206.08|-2,377,582.97|6,679,871.51|12,858,203.25|
|-846,400.27|15,492,439.99|39,929,305.04|91,253,269.69|
|—|—|—|—|
|-2,440,477.18|—|—|—|
|-3,286,877.45|15,492,439.99|39,929,305.04|91,253,269.69|
|—|—|—|—|

IX.TheRiskRelated to FinancialInstruments
KonkaGroupCo.,Ltd. InterimReport2018 The Company's main financial instruments include monetary assets, notes receivable, interest receivable, other receivables, available-for-sale financial assets, other current assets, short-term borrowings, other payables, interest payable, long-term borrowings, etc. Details of the various financial instruments are shown in the relevant notes to Annotation VI. Risks related to these financial instruments, and risk management policies the Company has adopted to reduce these risks are described as follows. The Company management manages and monitors the risk exposure in order to ensure the above risks to be controlled in a limited scope.
The Company use sensitivity analysis technology to analyze the reasonable of risk variables, influence of probable changes to the current profit or loss andStockholders’ equity. Because rarely any risk variables change in isolation, and the correlation between variables for the eventual impact of the change of a risk variables will have a significant effect, thus, the aforesaid content was processing under the assumption of the change of each variable was conducted independently.
(I)Risk Management Objectives andPolicies
The goals of Company engaged in the risk management is to achieve the proper balance between the risks and benefits, reduced the negative impact to the Company operating performance risk to a minimum, maximized the profits of shareholders and other equity investors. Based on the risk management goal, the basic strategy of the Company's risk management is determine and analyze the various risks faced by the Company, set up the bottom line of risk and conducted appropriate risk management, and timely supervised various risks in areliable way and controlled the risk withintherange oflimit.
1.MarketRisk
(1)Foreign Exchange Risk
Foreign exchange risk is referred to the risk incurred due to loss of changes in exchange rate. Foreign exchange risk refers to the risks that may lead to losses due to fluctuation in exchange rate. The foreign exchange risk borne by the Company is related to USD and HKD, except the procurement, sales and financing by US dollars for several subsidiaries such as the Company, Hong Kong Konka, Konka HouseholdAppliances International Trading Co., Ltd., Chain Kingdom (Shenzhen) Co., Ltd., Europe Konka, Kangjietong, Jiaxin Technology and Jiali International which settled by USD for purchase and sale, the other main businesses of the Company and the subsidiaries were settled by RMB. On 30 June 2018, refer to Note. VI-60 Foreign Currency Monetary Items for details of foreign currency monetary items, and
KonkaGroupCo.,Ltd. InterimReport2018 the foreign exchange risks produced by the assets and liabilities balance may affect the business performance oftheCompany.
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 RateRisk-Cash FlowChange Risk
Cash flow change risk caused by financial instruments due to interest rate change is related to bank loans. By establishing good relations with banks and reasonable planning of credit line, credit varieties and credit period, it is to guarantee sufficient band line of credit and satisfy all financial demands. Moreover, it is to reduce risks of interest rate uncertainty by shortening single loan term and establishing repayment terms.
The risk of change in cash flow of financial instruments due to the change of interest rate of the Company is mainly related to the borrowing of banks.As of 30 June 2018, the long-term and short-term borrowings had atotal balance ofRMB10,898,447,703.32.
TheSensitivity analysis to interest rate risk was based onthefollow assumption:
Market interest rates change may affect the interest income or expense of variable rate●
financial instruments;
Based on the above assumptions, if other variables remain the same, the pre-tax impacts of possible reasonable interest rate changes on the profits and losses of the Current Period and theshareholders' equities are as follows:
||
|-|
|Changesininterestrate|
|Up1.00%|
|Down1.00%|

(3)Other PriceRisk
The investment held by the Company classified as available-for-sale financial assets and tradable financial assets, the financial assets at fair value through profit or loss, and the
financial liabilities at fair value through profit or loss shall be accounted at fair value on the
balance sheet date. The management of the Company believed the market price risk facing
KonkaGroupCo.,Ltd. InterimReport2018 those investment activities was acceptable. For details of equity investment in listed companies held by the Company, please refer to Note VI-11. Available-for-sale Financial Assets.
2.CreditRisk
On 30 June 2018, the biggest credit risk exposure may lead to the financial assets losses of the Company was mainly from the one party fail to perform its obligation, which included: carrying amount recognized in consolidated balance sheet. For financial instruments measured at fair value, the carrying value reflect its risk exposure, but not the biggest one, and thebiggest risk exposurewillchange alongwith thechange offuture fair value.
In order the reduce the credit risk, the Company establish a group response for recognizing line of credit, conducting credit approval and other monitor procedures to ensure that the necessary measures were used to recycle expired claims. In addition, the Company at each balance sheet date, review every single receivables recycling situation, to ensure that the money unable to recycle withdrawn provision for bad debt fully. Thus, the Company management believed that have assume the credit risk the Company shouldered had been greatly reduced.
The company's working capital was in bank with higher credit rating, so credit risk of working capital was low.
3.Liquidity Risk
When managing liquidity risk, the Company maintained themanagement’s believe that supervising the sufficient cash and cash equivalents to meet the operating demand of the Company and reduce the influence of the fluctuation of cash flow. The management of the Company monitored the use ofbank’s loans and guaranteed the observance of the borrowing agreements.
The Company took thebank’s loans as the main financing channel. The retained amount of loans of the Company by the end of 30 June 2018 was presented in Note XIV. Other Significant Events-7 indetail.
(II)Offsetbetween FinancialAssets andFinancialLiabilities
The recognized financial assets under the executable general off-set agreement or similar agreement at theend oftheReporting Period were listed as follows:
Period-end
|||
|-|-|
|Totalconfirmedfinancialassets(RMB’0,000)|Amountoffsetofconfirmedfinancialliabilities(RMB’0,000)|

KonkaGroupCo.,Ltd. InterimReport2018
|||
|-|-|
|588,937.54|588,577.74|
|—|—|

X.TheDisclosureof FairValue
1.EndingFairValueofAssets andLiabilities atFairValue
Endingfairvalue
||||
|-|-|-|
|Fairvaluemeasurementitemsatlevel1|Fairvaluemeasurementitemsatlevel2|Fairvaluemeasurementitemsatlevel3|
|14,497,221.94|—|—|
|—|—|—|
|14,497,221.94|—|—|
|—|—|—|
|—|—|—|
|—|—|—|
|—|—|—|
|14,497,221.94|—|—|
|1,827,480.43|—|—|
|1,827,480.43|—|—|
|1,827,480.43|—|—|
|—|—|—|
|—|—|—|

2. Market Price Recognition Basis for Consistent and Inconsistent Fair Value MeasurementItems at Level 1
As of the end of Reporting Period, the Company in line with the difference of DF forward
foreign exchange purchase cost ( DF base price on balance sheet date) on assets balance
KonkaGroupCo.,Ltd. InterimReport2018 sheet and agreement DF forward foreign exchange purchase cost (DF exchange rate agreed) recognized as losses orprofits
XI. Connected Party andConnectedTransaction
1.Information Related to theCompany as theParentofthe Company
|||||
|-|-|-|-|
|Registrationplace|Natureofbusiness|Registeredcapital|ProportionofshareheldbytheCompanyastheparentagainsttheCompany(%)|
|Shenzhen|Tourism,realestate,electronicsindustry|RMB12billion|30.30|

Note: the final controller of the Company is State-owned Assets Supervision and AdministrationCommission
2.Subsidiaries ofthe Company
Referto NoteVIII-1. Equity inSubsidiaries
3.Information ontheAssociated Enterprises of theCompany
Refer to Note VIII-2. Equity in Associated Enterprises for details of significant associated enterprises of the Company. Information on other joint ventures or associated enterprises occurring connected transactions with the Company in Reporting Period, or forming balance duetoconnected transactions madein previous period:
Name RelationshipwiththeCompany
ShenzhenJielunteTechnologyCo.,Ltd.① Associatedenterprise
KunshanKonkaElectronicCo.,Ltd. Associatedenterprise
ShenzhenKonkaInformationNetworkCo.,Ltd.
ShenzhenKonkaPrecisionMouldManufactory Associatedenterprise
Co.,Ltd.
ZhuhaiJinsuPlasticCo.,Ltd. Associatedenterprise
ShenzhenKonkaIntelligentElectricalApparatus
Associatedenterprise
Co.,Ltd.
BeijingKonkaTechnologyCo.,Ltd. Associatedenterprise
ShenzhenZhongbingKonkaTechnologyCo.,
Associatedenterprise
Ltd.
AnhuiKonkaGreenLightingTechnologyCo.,
Associatedenterprise
Ltd.
ShenzhenBoshengAdvancedMaterialsCo.,Ltd. Associatedenterprise
KonkaGroupCo.,Ltd. InterimReport2018 Name RelationshipwiththeCompany
Helongjiang Longkang Zhijia Technology Co., Associatedenterprise
Ltd.
ShaanxiSilkRoadCloudSmartTechCo.,Ltd. Associatedenterprise
AnhuiKaikaiShijieE-commerceCo.,Ltd. Associatedenterprise
Note:① Shenzhen Konka Precision Mould Manufacturing Co., Ltd. was renamed Shenzhen JielunteTechnology Co., Ltd.
4.Information onOtherConnected Parties
Name RelationshipwiththeCompany
GuoguangEasternNetwork(Beijing)Co.,Ltd. Shareholderoftheassociatedenterprise
ShenzhenShangyongtongInvestment
Non-controllinginterestofthesubsidiary DevelopmentCo.,Ltd.
GuoguangRuilian(Shenzhen)Internet
Associatedenterpriseofthesubsidiary
TechnologyCo.,Ltd.
Weihai City Water Environmental Protection Associatedenterpriseofthesubsidiary
TechnologyCo.,Ltd.
Weihai Yiheng Environment Technology Co., Associatedenterpriseofthesubsidiary
Ltd.
LaizhouLairunFinancingLeaseCo.,Ltd. Associatedenterpriseofthesubsidiary
Binzhou Beihai Weiqiao Solid Waste Disposal Associatedenterpriseofthesubsidiary
Co.,Ltd.
Shandong Bishuiyuan Environmental Protection Associatedenterpriseofthesubsidiary
TechnologyCo.,Ltd.
YantaiEconBusinessManagementCenter(LLP) Associatedenterpriseofthesubsidiary
SuntransIntelligence&EquipmentCo.,Ltd. Associatedenterpriseofthesubsidiary
BeijingKonkaJingyuanTechnologyCo.,Ltd. Associatedenterpriseofthesubsidiary
ShenzhenRF-LINKPolytronTechnologiesInc Associatedenterpriseofthesubsidiary
Konka Ventures Development (Shenzhen) Co., Associatedenterpriseofthesubsidiary
Ltd.
Oriental Huijia (Zhuhai)Assets Management Co., Associatedenterpriseofthesubsidiary
Ltd.
Thefinalcontrollerofthenon-controllinginterestof ChangrongMediaCo.,Ltd.
thesubsidiary
JiangxiYoushiXinrongCultureCommunication Controlledbythefinalcontrollerofthenon-controlling Co.,Ltd. interestofthesubsidiary
ShenzhenZhonglianDatongSupplyChain Controlledbythefinalcontrollerofthenon-controlling ManagementandConsultingCo.,Ltd interestofthesubsidiary
Wulianfeng Huichuan Internet Technology
Non-controllinginterestofthesubsidiary Partnership(LLP)
5.Listof ConnectedTransactions
(1)Information onAcquisition ofGoods and Reception ofLabor Service
KonkaGroupCo.,Ltd. InterimReport2018①Information onacquisition ofgoods and reception oflabor service
|||
|-|-|
|Content|ReportingPeriod|
|Purchaseofmaterials|165,222,526.85|
|Purchase of materialsandcommodity|576,672,801.38|
|Commoditypurchase|219,735,005.00|
|Purchase of materialsandservices|13,494,613.22|
|Advertisingagency||
|Materialpurchase|4,146,000.00|
|Materialpurchase|289,054.46|
|Consultancy|1,160,469.47|
|Commoditypurchase|1,393,783.09|
|Commoditypurchase|351,361.55|
|Materialpurchase||
|Commoditypurchase|-|
|Advertisingagency|1,660,000.00|
|Engineeringconstruction|7,391,146.29|

②Information of sales ofgoods and provision of laborservice
|||
|-|-|
|Content|ReportingPeriod|
|Salesofmaterials|422,921,017.22|
|Salesofmaterialsandprovidingservice|102,627,704.48|
|Commoditysales,providingservice|18,646,368.89|
|Commercialfactoring|14,485,742.69|
|Commoditysales|1,385,765.21|

KonkaGroupCo.,Ltd. InterimReport2018
|||
|-|-|
|Content|ReportingPeriod|
|materialsales,providingservice|-|
|Commoditysales||
|Providingservice||
|Providingservice|7,901,215.40|
|Commoditysales,|3,235.90|
|Purchasematerial||
|Advertisingagency|—|

 (2)Information onConnected Lease
TheCompany was lessee:
|||
|-|-|
|Categoryofleasedassets|TheleasefeeconfirmedintheReportingPeriod|
|Commercialresidentialbuildingandofficebuilding|0|

(3)Information onInter-bank Lending of Capital ofConnected Parties
||||
|-|-|-|
|Amount|Startdate|Enddate|
|500,000,000.00|26 April 2018|21 May 2018|
|500,000,000.00|21May2018|31 Dec. 2018|
|1,400,000,000.00|14May2018|13May2019|
|100,000,000.00|14June2018|6June2021|

Note:Theinterest confirmed with OCTGroup Co., Ltd. isRMB 16,382,083.32.
(4)Information onConnected Guarantee
TheCompany was guarantor:
||||||
|-|-|-|-|-|
|Currency|Guaranteeamount(RMB’0,000)|Amountactuallyused(RMB’0,000)|Startdate|Enddate|
|CNY|6,000.00|3,930.00|24Oct.2017|24Oct.2018|

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Currency|Guaranteeamount(RMB’0,000)|Amountactuallyused(RMB’0,000)|Startdate|Enddate|
|CNY|4,500.00|4,002.50|9May2018|9May2019|
|CNY|3,000.00|0.00|19June2018|18Jun.2019|
|CNY|50,000.00|5,224.64|5Feb.2018|4Feb.2019|
|CNY|20,000.00|6,774.14|2018/5/2|2019/4/9|
|CNY|8,000.00|8,000.00|1June2018|1June2019|
|CNY|2,000.00|1,081.93|20Jul.2017|20Jul.2018|
|CNY|50,000.00|6,210.85|17Oct.2017|16Oct.2018|
|CNY|20,000.00|17,971.59|24Oct.2017|27Sep.2018|
|CNY|14,000.00|14,000.00|27Jun.2018|26Jun.2019|
|USD|1,100.00|1,100.00|28Oct.2017|27Oct.2018|
|USD|500.00|500.00|27Sep.2017|27Sep.2018|
|USD|3,500.00|3,500.00|13Oct.2017|13Oct.2018|
|USD|3,000.00|3,000.00|31May2018|30May2019|
|CNY|14,000.00|5,000.00|28May2018|24May2025|
|CNY|29,000.00|15,000.00|29Dec.2016|29Dec.2026|

Note: The Company provided a joint liability guarantee for the project financing borrowing of RMB290,000,000.00 on 27 December 2016 by Rushan Yike Water Treatment Co., Ltd. (within the consolidation scope) which was a subsidiary of Econ Technology-a new subsidiary of the Company via merger& acquisition. As of 30 June 2018, there was amount of RMB150,000,000.00 not repaid under the guarantee for RushanYikeWaterTreatment Co., Ltd. The duration of the borrowing in the master contract was from 29 December 2016 to 28 December 2026and theguarantee period was two years from theexpirationof thedebt on. TheCompany was secured party (not approved bytheBoard Secretary,put aside)
|||||
|-|-|-|-|
|Currency|Guaranteeamount(RMB’0,000)|Startdate|Enddate|

KonkaGroupCo.,Ltd. InterimReport2018
|||||
|-|-|-|-|
|Currency|Guaranteeamount(RMB’0,000)|Startdate|Enddate|
|USD|3,500.00|11 Nov. 2016|17 Oct. 2018|
|USD|1,000.00|6 Mar. 2017|31Dec.2018|
|USD|1,000.00|24 Apr. 2017|31Dec.2018|
|USD|1,000.00|11 May 2017|31Dec.2018|
|USD|300.00|20 June 2018|20 June 2019|
|USD|500.00|3 Jul. 2017|2 Jul. 2018|
|USD|500.00|24 Jul. 2017|24 Jul. 2018|
|USD|500.00|9 Aug. 2017|8 Aug. 2018|
|USD|2,000.00|6 Sep. 2017|5 Sep. 2018|
|USD|2,000.00|5 Mar. 2018|4 Apr. 2019|
|USD|1,500.00|6 June 2018|5 June 2019|
|RMB|480.00|13Apr.2015|—|
|RMB|2,000.00|5Apr.2017|—|
|RMB|6,860.00|28 May 2018|27 May 2025|

KonkaGroupCo.,Ltd. InterimReport2018
|||||
|-|-|-|-|
|Currency|Guaranteeamount(RMB’0,000)|Startdate|Enddate|
|RMB|4,400.00|2 May 2018|9 Apr. 2019|
|RMB|1,760.00|1 June 2018|1 June 2019|

Note:①TheCompany’s subsidiary-Hong Kong Konka-provided a short-term borrowing of USD138 million with one-year period. The individual shareholders of Chain Kingdom Co., Ltd. Wu Guosong (holding25% of shares) and Xiao Yongsong (holding24% of shares) provided an equity pledge guarantee jointly taking a total shares of49% they held as the pledgeas well as themortgage guarantee pledged bypersonal properties.
② Konka Group provided a credit guarantee of RMB20,000,000.00 for its controlling subsidiary-Konka E-display-with the period from 20 July 2017 to 20 July 2018. The businesses covered the opening of L/C, bill acceptance and obtainingbanks’ financing credit, etc. The non-controlling interest-Shenzhen Yi Capital Investment Partnership (Limited Partnership)-provided the pledge guarantee taking the40% of shares it held of Konka E-display as thepledge.
③ The Company provided an entrust loan of RMB20 million for the joint-stock company-Hunan Vary Tech Co., Ltd. Hunan Vary Tech Packing Co., Ltd. provided a joint and several guarantee for the principal and interests of the said entrust loan as well as the mortgageguarantee pledged by4.65million shares ofHunanVaryTech Co., Ltd. itheld.④ Shenzhen Konka Telecommunications Technology Co., Ltd., theCompany’s subsidiary, provided a credit guarantee of RMB140,000,000.00 with the period from 28 May 2018 to 27 May 2025 for Sichuan Konka Intelligent Terminal Technology Co., Ltd., its affiliated company, for obtaining the financing credit business from banks by the latter. Sichuan Konka Intelligent Terminal Technology Co., Ltd. is a wholly-owned subsidiary of Shenzhen Konka Mobile Interconnection Technology Co., Ltd. Shenzhen Kangwei Investment Partnership (Limited Partnership), the non-controlling interest of Shenzhen Konka Mobile
Interconnection Technology Co., Ltd., provided a guarantee with49% shares of Shenzhen
KonkaMobileInterconnectionTechnology Co., Ltd. it held.
KonkaGroupCo.,Ltd. InterimReport2018⑤The Company provided a credit guarantee of RMB200,000,000.00 with the period from 2 May 2018 to 9April 2019 for its majority-owned subsidiary-Anhui Konka-for issuing of L/C and acceptance bill and obtaining financing businesses such as financing credit by the latter. The non-controlling interest-Chuzhou State-owned Assets Operation Co., Ltd.-provided a counterguaranteeof22% forthe amount guaranteed bytheCompany.
⑥The Company provided a credit guarantee of RMB80,000,000.00 with the period from 1 June 2018 to 1 June 2019 for its majority-owned subsidiary-Anhui Konka-for issuing of L/C and acceptance bill and obtaining financing businesses such financing credit. The non-controlling interest-Chuzhou State-ownedAssets Operation Co., Ltd.-provided a counterguaranteeof22% forthe amount guaranteed bytheCompany.
(5)Information onRemuneration for Key Management Personnel
||
|-|
|Reportingperiod|
|RMB7.6233 million|

6.Accounts Receivableand Payableof Connected Party
(1)Accounts Receivable
||||
|-|-|-|
|Endingbalance|||
|Carryingamount|Baddebtprovision|Carryingamount|
|893,458,982.03|17,869,179.63|340,827,332.77|
|136,119,685.74|2,722,066.80|50,237,204.89|
|5,850,541.55|117,010.83|13,685,968.41|
|12,872,909.50|565,241.60|12,597,677.70|
|128,115.00|2,562.30|889,327.11|
|-|-|2,479.62|
|—|—|—|
|—|—|—|
|||—|

KonkaGroupCo.,Ltd. InterimReport2018
||||
|-|-|-|
|Endingbalance|||
|Carryingamount|Baddebtprovision|Carryingamount|
|8,647,641.16|432,382.06||
|1,057,077,874.98|21,708,443.22|418,239,990.50|
||—|20,000,000.00|
||—|657,263.10|
||—|20,657,263.10|
|448,000.00|16,250.00|20,335,596.53|
|-|-|5,600.00|
|4,448.00|2,224.00|4,448.00|
|300.00|15.00||
|||—|
|||—|
|452,748.00|18,489.00|20,345,644.53|

 (2)Accounts Payable
||
|-|
|Endingbalance|
|2,478,270.34|
|113,767,615.79|
|1,540,653.48|
|705,683,753.62|
|9,543,100.00|
|-|
|358,929.03|
|170,774.08|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Endingbalance|
|264,307.04|
|—|
|—|
|833,807,403.38|
|2,797,151.22|
|6,423,681.26|
|1,888,881.59|
|-|
|—|
|—|
|11,109,714.07|
|1,294,380.72|
|-|
|-|
|-|
|-|
|14,842,049.31|
|—|
|—|
|16,136,430.03|
|20,000.00|
|0.00|
|350,000.00|
|105,000.00|
|8,955.00|
|-|
|-|
|10,000.00|
|-|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Endingbalance|
|—|
|100,000,000.00|
|100,763,955.00|
|9,151,083.33|
|9,151,083.33|

 XII. Commitments andContingency
1.SignificantCommitments
(1)Capital Commitment
||
|-|
|Endingbalance|
|—|
|384,379,413.35|
|—|
|384,379,413.35|

 (2)Operating Lease Commitments
As of the balance sheet date, the irrevocable operating lease commitments that the Company signed were as followed:
||
|-|
|Endingbalance|
|17,316,803.89|
|2,791,887.31|
|650,463.88|
|148,664.00|
|20,907,819.08|

(3)Other Commitments
As of 30 June 2018, there were no other significant commitments for the Company to
KonkaGroupCo.,Ltd. InterimReport2018 disclose.
2.Contingencies
(1) Contingent Liabilities Generated from PendingAction andArbitration and their Financial Impacts
 Due to the problems of quality and construction delay in the settlement of intelligent engineering project between the Company and Shenzhen GNG Co., Ltd, theydidn’t agree on the related deductions. On 28 September 2017, Shenzhen GNG Co., Ltd filed a lawsuit toPeople’s Court of Nanshan District, Shenzhen for the payment in project arrears in the Construction Contract of KonkaR&D Building Intelligent Engineering, which required the Company to pay RMB2,770,487.13 for the project arrears and RMB340,761.69 for the interests of the project arrears. Up to the issuance date of this Report,People’s Court of Nanshan District, Shenzhenhasn’t gavejudgment.
 Due to the dispute in rent lease contract among theCompany’s subsidiary-Mudanjiang Appliances, Heilongjiang Jinri Optoelectronics Technology Co., Ltd. and Jinyue Group Co., Ltd., the People's Court of Aimin District, Mudanjiang City, Helongjiang Province made the main civil judgment (2016) Hei 1004 Minchu No. 604 on 25 August 2017. The Judgment was as follows: The defendants Heilongjiang Jinri Optoelectronics Technology Co., Ltd. and Jinyue Group Co., Ltd. should jointly pay the plaintiff-Mudanjiang Appliances a total of RMB3,656,910.82 in occupancy fees, rent, and interest. As of the issue date of this report, it has not yet been implemented completely.
There was a dispute among theCompany’s subsidiary-Mudanjiang Appliances, Mudanjiang Wangjiangmian Restaurant Management Co., Ltd., Liu Lixia (the actual controller of Mudanjiang Wangjiangmian Restaurant Management Co., Ltd.), Heilongjiang Jinri Optoelectronics Technology Co., Ltd., and Jinyue Group Co., Ltd over the compensation of RMB4.2 million for the death and losses of Mudanjiang Wangjiangmian Restaurant Management Co., Ltd. Mudanjiang Appliances believed that it should not be held liable for natural disasters, and the RMB4.2 million paid by Mudanjiang Appliances is the advance payment which should be regarded as the accounts paid on the behalf of Mudanjiang Wangjiangmian Restaurant Management Co., Ltd. and Liu Lixia. As of the issue date of this report, the People's Court of Dongan District of Mudanjiang City, Heilongjiang Province had notmade ajudgment yet.
There was a dispute among theCompany’s subsidiary- Mudanjiang Appliances, Zhang Zhiqiang (the plaintiff) and Jinyue Group Co., Ltd. over the loan of RMB6.5 million. The amount was actually generated from the intention acquisition by Jinyue Group Co., Ltd. of
KonkaGroupCo.,Ltd. InterimReport2018 stocks held by the Company and Mudanjiang State-owned Assets Investment Holdings Co., Ltd. due to staff relocation. The main judgments of the (2016) Hei 1004 Minchu No. 223 Civil Judgment issued by thePeople’s Court ofAimin District, Mudajiang City, Helongjiang Province on 29 November 2017 were as follows: the Company and the Municipal State-owned Assets Investment Holding Co., Ltd. should pay the plaintiff-Zhang Zhiqiang RMB765,993.95 and the interest of RMB115,576.77; the subsidiary- MudanjiangAppliances should assume joint and several liquidation liabilities for the above amount; and other claims of Zhang Zhiqiang were rejected. On 12April 2018, the judgment of second instance rejected theappeal ofZhang Zhiqiang and affirmed theoriginal judgment.
(2) Contingent Liabilities Generated from Providing Debt Guarantee for Other Entities and theirFinancial Impacts
①The Company signed the guarantee contract of maximum amount (No. 2017XCYZBZ No.17czA0017-a) with Chuzhou Branch of China Citic Bank on 24 October 2017, in which the Company provided credit guarantee of RMB60 million to Anhui Tongchuang from 24 October 2017 to 24 October 2018.The credit line is mainly used to open and accept the letter of credit of Anhui Tongchuang and obtain the financing credit and other daily businesses from thebank.As of30June 2018,theguarantee amount has been used RMB39,300,000.00.②The Company signed the guarantee contract of maximum amount (No. CZZHZGBZ 2018 No.0103) with Chengzhong Branch of Chuzhou EasternAnhui Rural Commercial Bank on 9 May 2018, in which the Company provided credit guarantee of RMB45,000,000.00 toAnhui Tongchuang from 9 May 2018 to 9 May 2019. The credit line is mainly used to open and accept the letter of credit of Anhui Tongchuang and obtain the financing credit and other daily businesses from the bank. As of 30 June 2018, the guarantee amount has been used RMB40,025,000.00.
③ The Company signed the guarantee contract of maximum amount (No. CZGSB02GBT20180011) with Chuzhou Branch of China Everbright Bank on 19 June 2018, in which the Company provided credit guarantee of RMB30,000,000.00 to Anhui Tongchuang from 19 June 2018 to 18 June 2019. The credit line is mainly used to open and accept the letter of credit of Anhui Tongchuang and obtain the financing credit and other daily businesses from the bank.As of 30 June 2018, the guarantee amount has not been used yet.
④The Company signed theguarantee contract ofmaximum amount (No. 07301KB20178088) with Shenzhen Branch of Bank of Ningbo on 21 July 2017, in which the Company provided credit guarantee of RMB20,000,000.00 to Konka E-display from 20 July 2017 to 20 July
KonkaGroupCo.,Ltd. InterimReport2018 2018. The credit line is mainly used to open and accept the letter of credit of Konka E-display and obtain the financing credit and other daily businesses from the bank. As of 30 June 2018, the guarantee amount has been used RMB10,606,743.10. Shenzhen Konka E Capital Investment Partnership (LLP), the non-controlling interest of Konka E-display, provided40% ofcounter guarantee to theamount.
⑤ The Company signed the Guarantee Contract of Maximum Amount (No. ZB7908201700000042) with Shenzhen Branch of Shanghai Pudong Development Bank for comprehensive credit line of RMB500,000,000.00 on 14 November 2017 used to help Konka Factoring to obtain the financing loan from the bank. The guarantee period is from 17 October 2017 to 16 October 2018. As of 30 June 2018, the amount has been used RMB62,108,473.38.
⑥ The Company signed the Guarantee Contract of Maximum Amount (HXSFZLEBZ No.20171023002001) with Shenzhen Branch of Guangdong Huaxing Bank for comprehensive credit line of RMB200,000,000.00 on 23 October 2017 used to help Konka Factoring to obtain the financing loan from the bank. The guarantee period is from 24 October 2017 to 27 September 2018. As of 30 June 2018, the amount has been used RMB179,715,885.15.
⑦The Company signed Issuing Guarantee/SLC Agreement (No. 81050120180000040) and applied to Shenzhen OCT Branch of ABC for issuing the letter of guarantee of RMB140,000,000.00 on 27 June 2018 for Konka Factoring to obtain the financing loan from the bank. The guarantee period is 27 June 2018 to 26 June 2019. Konka Factoring has obtained theloan ofRMB135,800,000.00 from Dubai Branch ofABC as of30June 2018.⑧The Company signed the Guarantee Contract (2018CZYEDBZNo.006) with Chuzhou Branch of Bank of China on 2 May 2018, in which the Company provided credit guarantee of RMB200,000,000.00 toAnhui Konka from 2 May 2018 to 9April 2019. The credit line is mainly used to open and accept the letter of credit of Anhui Konka and obtain the financing credit and other daily businesses from the bank. As of 30 June 2018, the guarantee amount has been used RMB67,550,000.00. Chuzhou State-owned Assets Operation Co., Ltd., the non-controlling interest ofAnhui Konka, provided22%ofcounter guarantee to theamount.⑨ The Company signed the Guarantee Contract of Maximum Amount (CZZHZGBZ2018No.0133) with Chengzhong Branch of Chuzhou Eastern Anhui Rural Commercial Bank Co., Ltd. on 1 June 2018, in which the Company provided credit guarantee of RMB80,000,000.00 to Anhui Konka from 1 June 2018 to 1 June 2019. The credit line is mainly used to open and accept the letter of credit of Anhui Konka and obtain
KonkaGroupCo.,Ltd. InterimReport2018 the financing credit and other daily businesses from the bank. As of 30 June 2018, the guarantee amount has been used RMB80,000,000.00. Chuzhou State-owned Assets Operation Co., Ltd., the non-controlling interest of Anhui Konka, provided22% of counter guaranteeto theamount.
⑩The Company applied to Shenzhen OCT Branch ofABC for issuing the letter of guarantee of USD11,000,000.00 on 28August 2017 for Hong Kong Konka to obtain the financing loan from the bank. The guarantee period is 28 August 2017 to 27 August 2018. Hong Kong Konka has obtained the loan of USD11,000,000.00 from Bank of China (Hong Kong) Co., Ltd. as of30June 2018.
⑪The
Company signed Issuing Guarantee/SLC Agreement (No.2017SJTZEZNo.008) and applied to Shenzhen Branch of China Mingsheng Bank Corp for issuing the letter of guarantee of USD5,000,000.00 on 25 September 2017 for Hong Kong Konka to obtain the financing loan from the bank. The guarantee period is 27 September 2017 to 27 September 2018. Hong Kong Konka has obtained the loan of USD5,000,000.00 from Bank of China (Hong Kong) Co.,Ltd. as of 30June2018.
⑫The
Company signed Issuing Guarantee/SLC Agreement (No.2017SJTZEZNo.008) and applied to Shenzhen Branch of China Mingsheng Bank Corp for issuing the letter of guarantee of USD35,000,000.00 on 25 September 2017 for Hong Kong Konka to obtain the financing loan from the bank. The guarantee period is 13 October 2017 to 13 October 2018. Hong Kong Konka has obtained the loan of USD35,000,000.00 from Bank of China (Hong Kong)Co.,Ltd. as of30June 2018.
⑬The
Company signed Issuing Guarantee/SLC Agreement (No. 81050120180000032) and applied to Shenzhen OCT Branch of ABC for issuing the letter of guarantee of USD30,000,000.00 on 31 May 2018 for Hong Kong Konka to obtain the financing loan from the bank. The guarantee period is 31 May 2018 to 30 May 2019. Hong Kong Konka has obtained the loan of USD30,000,000.00 from Bank of China (Hong Kong) Co., Ltd. as of 30 June2018.
⑭Shenzhen
KonkaTelecommunications Technology Co., Ltd. signed the Guarantee Contract(No.[23301]YSHBZ[180525]No.00001) with Lingang Branch of Yinbin City Commercial Bank for providing its subsidiary-Sichuan Konka Smart terminal Technology Co., Ltd.-with a credit guarantee of RMB140,000,000.00 on 28 May 2018 used to help Sichuan Konka Smart terminal Technology Co., Ltd. to obtain the financing loan from the bank. The guarantee period is from 28 May 2018 to 27 May 2025.As of 30 June 2018, the amount has been used RMB50,000,000.00. Shenzhen Kangwei Investment Partnership (LLP), the other shareholder
KonkaGroupCo.,Ltd. InterimReport2018 of Sichuan Konka Smart terminal Technology Co., Ltd., provided49% of counter guarantee totheamount guaranteed byTelecommunicationTechnology.
⑮The Company applied a comprehensive credit line of RMB500,000,000.00 to OCT Branch ofBank of Communications.As of 30June2018, theamount has been used RMB300 million. Therest amount of RMB200 million has not been usedyet.
⑯The Company applied a comprehensive credit line of RMB1,000,000,000.00 to Shenzhen Branch of Guangdong Huaxing Bank. As of 30 June 2018, the amount has been used RMB300,000,000.00. Among the rest amount, RMB500,000,000.00 has not been used, and RMB200,000,000.00has been transferred to KonkaFactoring (Shenzhen)Co.,Ltd.
(3)Other Contingent Liabilities and theirFinancial Influence
As of30June2018,there was nosignificant contingent for theCompanytodisclose.
XIII. EventsafterBalanceSheetDate
1. On 8 August 2018, the 8th Board of Directors of Konka Group made decisions on an increased capital of RMB232 million to Anhui Konka Tongchuang Household Appliances Co., Ltd. due to business development, after the resolution of the 46th meeting, with the capital increase price of RMB1 to registered capital of RMB1. Then the registered capital of Anhui KonkaTongchuang HouseholdAppliances Co.,Ltd. willincrease toRMB502 million. 2. As the joint stock company of the Company, Kunshan Kangsheng Investment Development Co., Ltd. (the Company holds49% of its equity), purchased the Kunshan Land Network[2018] No. 5-8 Parcel of Land for RMB590,062 through public auction and obtained the Notice of Online Listing Transfer of State-Owned Construction Land Use Rights issued bytheKunshan Municipal Bureau ofLand and Resources.
3. On 16 August 2018, the Company will complete the merger and acquisition of Jiujiang Golden Phoenix Decoration Material Co., Ltd. with a registered capital of RMB272.7273 million. The Company contributes RMB765 million (or51% shares) and possesses the control power over it.
XIV.OtherSignificantEvents
1. On 22 May 2018, the 8th Board of Directors of the Company deliberated and passed the Proposal on the Company's Compliance with Non-Public Issuance of Corporation Bonds, the Proposal on the Company's Non-Public Issuance of Corporation Bonds, and Proposal on Requesting General Meeting of Stockholders of the Company to Authorize the Board of Directors to Fully Handle Issues Related to Non-public Issuance of Corporation Bonds on the 43rd meeting. In order to widen the financing channels and optimize the debt structure, the Company plans to issue non-public corporation bonds, with the total amount of face
KonkaGroupCo.,Ltd. InterimReport2018 value not exceeding RMB5 billion (including RMB5 billion). The non-public issuance of corporation bonds has been approved by the General Meeting of Stockholders of the Company.
2. On 22 May 2018, the Eighth Board of Directors of the Company deliberated and passed the Proposal on Carrying out the Securitization of Receivables Assets on the 43rd meeting. In order to reduce the occupation of Company funds by accounts receivable, the Company plans to carry out the asset securitization of receivables, which has been approved by the General Meeting ofStockholders ofthe Company andwill beissued according to market conditions. 3. On 22 May 2018, the Eighth Board of Directors of the Company deliberated and passed the Proposal on the Wholly-owned Subsidiary Implementing Commercial Factoring Asset Securitization Business on the 43rd meeting. In order to widen the financing channels, revitalize thestock assets and accelerate the assets turnover,Konka Factoring (Shenzhen) Co., Ltd., a wholly-owned subsidiary of the Company, plans to carry out commercial factoring asset securitization business, which has been deliberated and passed by the General Meeting of Stockholders of the Company as a special plan. It is still necessary to obtain a no objection letter for listing issued by the security exchange and to report to the China Securities Investment FundAssociation for filingafter finishingtheissuance.
4. The 8th Board of Directors of the Company agreed that Konka Group transferred51% equity of Kunshan Kangsheng Investment Development Co., Ltd. to Taizhou Overseas Chinese Town Co., Ltd., with the transfer price of RMB280,680,300 due to business development after the resolution of the 44th meeting.So far, the Company received50% equity transfer fund from Taizhou Overseas Chinese Town Co., Ltd. and completed the equitychange ofKunshan Kangsheng Investment Development Co., Ltd.
5. In order to implement the expansion idea of “Technology+ Industry+ Urbanization”, the Company plans to invest no less than RMB1 billion in the Tianfu New District, Sichuan, via its holding subsidiary to build the headquarters base of the KonkaGroup’s‘Belt andRoad’. The Board of Directors of the Company held the 45th meeting of the Eighth Board of Directors on 27 June 2018, deliberating and passing the Proposal on Investing in the Constructionof theKonkaGroup’s‘BeltandRoad’ Headquarters Basein Chengdu.
6. On 29 June 2018, Anhui Konka Electrical Appliance Technology Co., Ltd., the majority-owned subsidiary of the Company (the Company indirectly holds51% shares), won the100% shares of Henan Frestec Electrical Appliance Co., Ltd., Henan Frestec Refrigeration Appliance Co., Ltd. and Henan Frestec Household Appliance Co., Ltd. at RMB455 million. At present, the three companies are in the process of reorganization and
KonkaGroupCo.,Ltd. InterimReport2018 willformally resume production on28August 2018.
7. In November 2015, the Company and theCompany’s subsidiary E-display signed the Intention Agreement on Equity Transfer with Guangdong Sunwill Precising Plastic Co., Ltd. (hereinafter referred to as the “Sunwill Company”), in which the Company intended to transfer the60% shares in E-display to Sunwill Company. As stipulated in the agreement, Sunwill Company should perform the obligation of information disclosure and reporting to CSRC and corresponding stock exchange within 3 days from the date when its shareholding exceeds5% on, pay the cash deposit and sign the formal agreement in accordance with the agreement and the listing announcement, and compensate for theCompany’s losses (such as the listing expense and expected revenues of Party B etc.) if any defaults were made by it. After the signing of the agreement, the Company has made the preparations for the equity transfer in line with the agreement including entrusting the CPAs to audit and evaluate the corporate appraisal, etc. In January 2016, the Company sold the60% shares of E-display it held on Shanghai United Assets and Equity Exchange pursuant to the agreement. However Sunwill Company had not delisted yet when the listing period expired. Then, the Company sent a notice to Sunwill Company to urge its delisting. And Sunwill Company replied and clearly gave up delisting. In May 2016, the Company and E-display filed a lawsuit to Shenzhen Nanshan DistrictPeople’s Court against thedefault ofSunwillCompany.
In accordance with the civil judgment (2016)Yue 0305MC No. 6421 by Guangdong Shenzhen Nanshan DistrictPeople’s Court, the Intention Agreement on Equity Transfer signed by the Company and E-display with Sunwill Company was terminated on 16 March 2016; Sunwill Company compensated for theCompany’s direct losses of RMB150,880.00 and forE-display’s direct losses of RMB27,576.60; and other claims of the Company and E-display were rejected. The Company appealed toShenzhen IntermediatePeople’s Court for the rejection of the first-instance judgment. Pursuant to the civil judgment (2017)Yue 03 MZ No.: 5299 by Shenzhen IntermediatePeople’s Court made on 7 February 2018, the original judgment was affirmed other than the fourth item-“rejecting other claims of the Company and E-display” in the civil judgment (2016)Yue 0305MC No. 6421 by Guangdong Shenzhen Nanshan DistrictPeople’s Court, and Sunwill Company was requested to compensate for the Company’s losses on acquirable interest of RMB7.2 million. On 16 March 2018, the Company received the compensation paid by Sunwill Company. So far the case has been closed.
8. Chongqing Qingjia Electronics Co., Ltd., a subsidiary of the Company, will conduct the liquidationafter completing land purchasing and storage.
KonkaGroupCo.,Ltd. InterimReport2018 XV.Notes ofMain Items intheFinancialStatements oftheCompany
1.Accounts Receivable
(1)Accounts Receivable Disclosed byCategory
Endingbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|—|—|—|—|
|2,103,437,646.59|44.50|198,119,251.75|9.42|
|2,594,439,350.80|54.89|||
|4,697,876,997.39|99.39|198,119,251.75|4.22|
|28,826,439.50|0.61|16,960,135.86|58.84|
|4,726,703,436.89|100.00|215,079,387.61|4.55|

 (Continued)
Beginningbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|—|—|—|—|

KonkaGroupCo.,Ltd. InterimReport2018 Beginningbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|2,082,823,910.69|42.10|197,902,700.06|9.50|
|2,827,688,037.26|57.16|—|—|
|4,910,511,947.95|99.26|197,902,700.06|4.03|
|36,839,946.40|0.74|17,295,202.04|46.95|
|4,947,351,894.35|100.00|215,197,902.10|4.35|

①In the groups, accounts receivable adopting aging analysis method to accrue bad debt provision:
Endingbalance
Aging
|||
|-|-|
|Accountsreceivable|Baddebtprovision|
|1,894,407,746.72|37,874,274.02|
|46,567,170.20|2,328,358.51|
|2,718,733.96|543,746.79|
|2,251,224.67|1,125,612.34|
|2,491,021.90|1,245,510.95|
|155,001,749.14|155,001,749.14|
|2,103,437,646.59|198,119,251.75|

②In thegroups,accounts receivable adopting other methodsto withdraw baddebt provision: Endingbalance
|||
|-|-|
|Accountsreceivable|Baddebtprovision|
|2,594,439,350.80|—|
|2,594,439,350.80|—|

③ The top 5 accounts receivable with insignificant single amount for which bad debt
KonkaGroupCo.,Ltd. InterimReport2018 provisionseparately accrued
Endingbalance
||||
|-|-|-|
|Accountreceivable|Baddebtprovision|Withdrawalproportion(%)|
|2,138,825.00|748,588.75|35.00|
|4,580,000.00|1,374,000.00|30.00|
|1,708,054.00|546,577.28|32.00|
|1,656,628.91|1,656,628.91|100.00|
|1,430,290.00|230,290.00|16.10|
|11,513,797.91|4,556,084.94||

(2)BadDebt ProvisionWithdrawn, Reversed orRecovered in theReporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB0.00; the amount of the reversed or collected part during the Reporting Period was of RMB118,514.49,theamount of write-offduring the ReportingPeriod was RMB0.00.
(3)Top 5Accounts Receivable in EndingBalance Collected according to theArrears Party The total top 5 accounts receivable in ending balance collected according to the arrears party waas RMB3,143,265,739.53, accounting for66.50% of total ending balance of accounts receivable, the total ending balance of bad debt provision correspondingly withdrawn was RMB2,713,403.37.
2.OtherReceivables
(1)Other Receivables Classified byCategory
KonkaGroupCo.,Ltd. InterimReport2018 Endingbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|173,061,959.33|4.71|162,467,164.97|93.88|
|139,981,486.90|3.81|24,771,476.52|17.70|
|3,360,014,695.66|91.41||0.00|
|3,499,996,182.56|95.22|24,771,476.52|0.71|
|2,515,181.05|0.07|733,893.67|29.18|
|3,675,573,322.94|100.00|187,972,535.16|5.11|

 (Continued)
Beginningbalance
|||||
|-|-|-|-|
|Carryingamount||Baddebtprovision||
|Amount|Proportion(%)|Amount|Withdrawalproportion(%)|
|173,061,959.33|3.84|162,467,164.97|93.88|
||-|||
|121,170,320.79|2.69|24,301,146.90|20.06|

KonkaGroupCo.,Ltd. InterimReport2018
|||||
|-|-|-|-|
|4,205,636,078.64|93.41|—|—|
|4,326,806,399.43|96.10|24,301,146.90|0.56|
|2,516,181.05|0.06|733,893.68|29.17|
|4,502,384,539.81|100.00|187,502,205.55|4.16|

①Other receivables with significant single amount for which bad debt provision separately accrued at theperiod-end
Endingbalance
||||
|-|-|-|
|Otherreceivables|Baddebtprovision|Withdrawalproportion(%)|
|141,549,150.00|141,549,150.00|100.00|
|18,115,952.51|7,521,158.15|41.52|
|13,396,856.82|13,396,856.82|100.00|
|173,061,959.33|162,467,164.97|—|

②In the groups, other receivables adopting aging analysis method to withdraw bad debt provision:
Endingbalance
Aging
|||
|-|-|
|Otherreceivables|Baddebtprovision|
|112,476,602.77|2,249,518.22|

KonkaGroupCo.,Ltd. InterimReport2018 Endingbalance
Aging
|||
|-|-|
|Otherreceivables|Baddebtprovision|
|3,893,887.94|194,694.40|
|877,853.20|175,570.64|
|833,557.46|416,778.74|
|329,342.03|164,671.02|
|21,570,243.50|21,570,243.50|
|139,981,486.90|24,771,476.52|

③In thegroups,other receivables adopting other methods towithdraw bad debt provision: Endingbalance
|||
|-|-|
|Otherreceivables|Baddebtprovision|
|3,360,014,695.66|—|
|3,360,014,695.66|—|

 (2)BadDebt ProvisionWithdrawn, Reversed orRecovered in theReporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB470,329.61; the amount of the reversed or collected part during the Reporting Period was of RMB0.00.
(3)Top 5OtherReceivables inEnding Balance Collected according to theArrears Party
|||||
|-|-|-|-|
|Nature|Endingbalance|Aging|Proportiontototalendingbalanceofotherreceivables(%)|
|Loanandinterest|1,506,771,426.27|Within1year|40.99|
|Loanandinterest|402,848,734.02|Within1year|10.96|
|Loanandinterest|399,745,633.35|Within1year|10.88|
|Loanandinterest|141,549,150.00|Within1year|3.85|
|Loanandinterest|61,129,833.33|Within1year|1.66|
|—|2,512,044,776.97|—|68.34|

KonkaGroupCo.,Ltd. InterimReport2018 3.Long-term Equity Investment
(1)Category ofLong-term EquityInvestment
||||||
|-|-|-|-|-|
|Endingbalance|||||
|Carryingamount|Depreciationreserve|Carryingvalue|Carryingamount|Depreciationreserve|
|2,996,452,345.01|46,732,484.69|2,949,719,860.32|1,592,732,345.01|46,732,484.69|
|1,672,969,077.51|5,158,909.06|1,667,810,168.45|1,108,233,473.19|5,158,909.06|
|4,669,421,422.52|51,891,393.75|4,617,530,028.77|2,700,965,818.20|51,891,393.75|

 (1)Investment tothe Subsidiaries
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Decrease|Endingbalance|Depreciationreservewithdrawn|
|36,000,000.00|||36,000,000.00||
|122,780,937.98|||122,780,937.98||
|274,783,988.91|||274,783,988.91||
|781,828.61|||781,828.61||
|261,482.50|||261,482.50||
||||0.00||
|4,655,000.00|||4,655,000.00||
|10,732,485.69|||10,732,485.69||
|90,000,000.00|210,000,000.00||300,000,000.00||

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Decrease|Endingbalance|Depreciationreservewithdrawn|
||||0.00||
|31,500,000.00|||31,500,000.00||
|48,750,000.00|||48,750,000.00||
|350,000,000.00|||350,000,000.00||
|249,702,612.22|||249,702,612.22||
|200,000,000.00|100,000,000.00||300,000,000.00||
|10,000,000.00|||10,000,000.00||
|30,000,000.00|170,000,000.00||200,000,000.00||
|10,000,000.00|||10,000,000.00||
|7,200,000.00|||7,200,000.00||
|16,000,000.00||16,000,000.00|0.00||
|5,832,000.00|||5,832,000.00||
|10,200,000.00|||10,200,000.00||
|12,000,000.00|||12,000,000.00||
|8,602,009.10|||8,602,009.10||
|40,000,000.00|||40,000,000.00||
|2,550,000.00|||2,550,000.00||

KonkaGroupCo.,Ltd. InterimReport2018
||||||
|-|-|-|-|-|
|Beginningbalance|Increase|Decrease|Endingbalance|Depreciationreservewithdrawn|
|5,100,000.00|20,400,000.00||25,500,000.00||
|15,300,000.00|||15,300,000.00||
||38,000,000.00||38,000,000.00||
||100,000,000.00||100,000,000.00||
||1,020,000.00||1,020,000.00||
||688,500,000.00||688,500,000.00||
||91,800,000.00||91,800,000.00||
|1,592,732,345.01|1,419,720,000.00|16,000,000.00|2,996,452,345.01|0.00|

 (3)Investment toAssociated Enterprises
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Beginningbalanceofdepreciationonreserve|||||
|||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|79,729,560.91|—|||-1,062,323.74|324,021.02|

KonkaGroupCo.,Ltd. InterimReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Beginningbalanceofdepreciationonreserve|||||
|||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|9,444,160.97|—|||627,916.90||
|4,927,589.47|—|||-2,065,657.20||
|14,317,400.80|—|||-2,208,794.15||
|18,960,898.67|5,158,909.06|||196,728.66||

KonkaGroupCo.,Ltd. InterimReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Beginningbalanceofdepreciationonreserve|||||
|||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|210,279,132.55|—|||3,705,243.63||
|617,214,571.50|—|||10,226,294.00||
|1,523,166.24|—|||0.00||
|151,859,076.20|—|||3,587,367.82||
|-22,084.12|—|3,771,400.00||0.00||

KonkaGroupCo.,Ltd. InterimReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Beginningbalanceofdepreciationonreserve|||||
|||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|||75,000,000.00||233,407.38||
|||7,000,000.00||0.00||
|||5,400,000.00||0.00||
|||||0.00||

KonkaGroupCo.,Ltd. InterimReport2018
|||||||
|-|-|-|-|-|-|
|Beginningbalance|Beginningbalanceofdepreciationonreserve|||||
|||Additionalinvestment|Reducedinvestment|Gainsandlossesrecognizedundertheequitymethod|Adjustmentofothercomprehensiveincome|
|1,108,233,473.19|5,158,909.06|91,171,400.00|0.00|13,240,183.30|324,021.02|

(Continued)
|||||
|-|-|-|-|
|Increase/decrease|||Endingbalance|
|Cashbonusorprofitsannouncedtoissue|Withdrawalofimpairmentprovision|Other||
||||78,991,258.19|
||||10,072,077.87|
||||2,861,932.27|
||||12,108,606.65|
||||19,157,627.33|
||||213,984,376.18|
||||627,440,865.50|
||||1,523,166.24|

KonkaGroupCo.,Ltd. InterimReport2018
|||||
|-|-|-|-|
|Increase/decrease|||Endingbalance|
|Cashbonusorprofitsannouncedtoissue|Withdrawalofimpairmentprovision|Other||
||||155,446,444.02|
||||3,749,315.88|
||||75,233,407.38|
||||7,000,000.00|
||||5,400,000.00|
|||460,000,000.00|460,000,000.00|
|0.00|0.00|460,000,000.00|1,672,969,077.51|

KonkaGroupCo.,Ltd. InterimReport2018 4.Operating Revenue andCostof Sales
(1) Operating Revenue andCostof Sales
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|4,519,683,896.29|4,013,358,791.77|4,206,989,260.45|
|2,036,884,619.01|1,944,666,140.94|2,065,723,384.28|
|6,556,568,515.30|5,958,024,932.71|6,272,712,644.73|

 (2) Main Operations (Classified byIndustry)
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|4,519,683,896.29|4,013,358,791.77|4,206,989,260.45|
|4,519,683,896.29|4,013,358,791.77|4,206,989,260.45|

 (3) Main Operations (Classified byProduct)
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|4,224,714,468.42|3,730,979,831.79|4,058,572,854.30|
|100,943,929.96|89,279,454.11|148,212,399.29|
|194,025,497.91|193,099,505.86|204,006.86|
|4,519,683,896.29|4,013,358,791.77|4,206,989,260.45|

 (4) Main Operations (Classified byArea)
||||
|-|-|-|
|ReportingPeriod|||
|Operatingrevenue|Costofsales|Operatingrevenue|
|3,600,826,510.58|3,175,143,251.38|3,822,475,481.58|
|918,857,385.71|838,215,540.39|384,513,778.87|
|4,519,683,896.29|4,013,358,791.77|4,206,989,260.45|

KonkaGroupCo.,Ltd. InterimReport2018 (5) Operating Revenue from theTop5Customers
||
|-|
|Totaloperatingrevenuefromthetop5customers|
|1,421,092,900.82|
|1,153,169,124.71|

 5.Investment Income
||
|-|
|ReportingPeriod|
|634,394,080.11|
|13,240,183.30|
|48,431,372.55|
|0.00|
|-82,412,478.05|
|13,740,000.00|
|445,568,627.45|
|86,485,492.92|
|0.00|
|1,159,447,278.28|

 XVI. Supplementary Materials
1.Items andAmounts ofNon-recurring ProfitorLoss
||
|-|
|Amount|
|109,176,724.28|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Amount|
|0.00|
|95,673,059.56|
|0.00|
|0.00|
|0.00|
|83,860,015.29|
|0.00|
|0.00|
|0.00|
|0.00|
|0.00|
|0.00|
|-5,196,666.98|
|0.00|
|599,186.29|
|0.00|

KonkaGroupCo.,Ltd. InterimReport2018
||
|-|
|Amount|
|0.00|
|0.00|
|14,941,575.60|
|445,568,627.45|
|744,622,521.49|
|38,310,511.85|
|63,648,357.81|
|642,663,651.83|

Notes:thenumber“+” amongthenon-recurringprofit orlossitemsreferstorevenueandincome, while “-”referred tolossesor expense.
The recognition of the non-recurring profit or loss items was executed according to the regulations of No.1 of the Information Disclosure Explanatory Notice of the Companies Public Offering Securities-Non- recurring Profit orLoss (ZJHAnnouncement[2008]No. 43).
||
|-|
|Amount|
|34,848,961.96|

2.Return onEquity and EarningsPerShare
|||
|-|-|
|WeightedaverageROE(%)||
||EPS-basic|
|4.19%|0.1419|
|-3.69%|-0.1249|

Konka Group Co., Ltd. Interim Report 2018 Part XI Documents Available for Reference
I. The financial statements with the signatures and stamps of theCompany’s legal representative, Chief Financial Officerand head ofthefinancial department (equivalent tofinancial manager); II. The originals of all theCompany’s documents and announcements disclosed to the public via newspapers designated bythe CSRCin theReporting Period; and
III. Other relevant materials.
The Board ofDirectors Konka Group Co.,Ltd. 30August 2018