深康佳B:2020年半年度财务报告(英文版)

                          Konka Group Co., Ltd.
            FINANCIAL REPORT
                         For the Six Months Ended 30 June 2020


                                      (Un-audited)




         Contents
Auditor’s Report

Balance Shhet

Income Statement

Cash Flow Statement

Statement of Changes in Owners' Equity

Notes to Accounting Statements




Legal representative: Liu Fengxi
Head of the accounting work:Li Chunlei
Head of the accounting department: Feng Junxiu


English Translation for Reference Only. Should there be any discrepancy between the two versions,
the Chinese version shall prevail.



                                                 1
                                                               2020 Semi-annual Financlal Report of Konka Group Co., Ltd.



I Independent Auditor’s Report
Are these interim financial statements audited by an independent auditor?
□ Yes √ No
The interim financial statements of the Company have not been audited by an independent auditor.
II Financial Statements
Currency unit for the financial statements and the notes thereto: RMB
1. Consolidated Balance Sheet
Prepared by Konka Group Co., Ltd.
                                                        30 June 2020
                                                                                                              Unit: RMB

                                 Item                                  30 June 2020              31 December 2019

 Current assets:

   Monetary assets                                                        6,417,472,335.73            6,599,360,051.61

   Settlement reserve

   Interbank loans granted

   Held-for-trading financial assets                                                                     61,494,666.97

   Derivative financial assets

   Notes receivable                                                       1,790,831,882.98            2,838,041,432.89

   Accounts receivable                                                    5,723,176,839.47            4,416,179,657.87

   Accounts receivable financing                                             78,865,016.45              143,174,271.82

   Prepayments                                                            2,055,015,964.35            2,072,550,811.86

   Premiums receivable

   Reinsurance receivables

   Receivable reinsurance contract reserve

   Other receivables                                                      2,096,587,670.34            1,772,183,366.49

      Including: Interest receivable                                         20,197,445.29                7,807,400.40

                   Dividends receivable                                         547,848.62                  547,848.62

   Financial assets purchased under resale agreements

   Inventories                                                            5,532,819,450.49            5,318,503,044.69

   Contract assets                                                           30,698,835.93

   Assets held for sale

   Current portion of non-current assets                                    105,802,707.58              108,087,016.22

   Other current assets                                                   1,685,482,577.97            2,093,212,552.25

 Total current assets                                                    25,516,753,281.29           25,422,786,872.67

 Non-current assets:


                                                           2
                                                          2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


  Loans and advances to customers

  Investments in debt obligations

  Investments in other debt obligations

  Long-term receivables                                               406,414,838.42               410,509,555.85

  Long-term equity investments                                       3,515,965,754.73            3,465,541,196.89

  Investments in other equity instruments                               21,642,171.36               21,642,170.36

  Other non-current financial assets                                 1,725,572,108.78            1,753,121,727.83

  Investment property                                                 393,652,901.29               400,197,374.07

  Fixed assets                                                       2,604,608,094.07            2,561,254,191.55

  Construction in progress                                           4,892,296,487.39            4,291,544,368.52

  Productive living assets

  Oil and gas assets

  Right-of-use assets

  Intangible assets                                                  1,175,090,192.24            1,213,271,713.22

  Development costs

  Goodwill                                                            779,260,296.41               779,260,296.41

  Long-term prepaid expense                                           122,914,607.94               107,590,078.88

  Deferred income tax assets                                          977,043,685.78               987,763,182.17

  Other non-current assets                                           1,377,590,246.50            1,172,472,723.85

Total non-current assets                                           17,992,051,384.91            17,164,168,579.60

Total assets                                                       43,508,804,666.20            42,586,955,452.27

Current liabilities:

  Short-term borrowings                                             11,476,582,374.41           10,332,687,239.63

  Borrowings from the central bank

  Interbank loans obtained

  Held-for-trading financial liabilities

  Derivative financial liabilities

  Notes payable                                                       962,487,388.11             1,319,396,374.37

  Accounts payable                                                   5,422,094,873.24            5,797,822,479.60

  Advances from customers                                                                        1,076,856,387.08

  Contract liabilities                                                848,237,128.69

  Financial assets sold under repurchase agreements

  Customer deposits and interbank deposits

  Payables for acting trading of securities



                                                      3
                                                                  2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


  Payables for underwriting of securities

  Employee benefits payable                                                   286,100,155.12               426,870,498.58

  Taxes payable                                                               211,598,176.66               607,845,294.99

  Other payables                                                             2,511,115,136.03            2,374,287,243.20

     Including: Interest payable                                              217,842,648.33               227,831,108.53

                    Dividends payable                                         120,397,270.40

  Handling charges and commissions payable

  Reinsurance payables

  Liabilities directly associated with assets held for sale

  Current portion of non-current liabilities                                  156,936,974.97               210,066,077.13

  Other current liabilities

Total current liabilities                                                  21,875,152,207.23            22,145,831,594.58

Non-current liabilities:

  Insurance contract reserve

  Long-term borrowings                                                       5,700,546,887.07            4,890,315,729.90

  Bonds payable                                                              4,990,461,215.98            4,987,709,643.64

     Including: Preferred shares

                    Perpetual bonds

  Lease liabilities

  Long-term payables                                                          548,489,971.61               383,287,104.62

  Long-term employee benefits payable                                            5,326,969.34                5,565,646.72

  Provisions                                                                    93,742,032.32                  206,591.51

  Deferred income                                                             163,197,764.55               151,874,258.45

  Deferred income tax liabilities                                               90,279,421.81               95,467,096.05

  Other non-current liabilities                                               106,356,896.20

Total non-current liabilities                                               11,698,401,158.88           10,514,426,070.89

Total liabilities                                                           33,573,553,366.11           32,660,257,665.47

Owners’ equity:

  Share capital                                                              2,407,945,408.00            2,407,945,408.00

  Other equity instruments

     Including: Preferred shares

                    Perpetual bonds

  Capital reserves                                                            230,368,577.09               230,368,577.09

  Less: Treasury stock



                                                              4
                                                                        2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


   Other comprehensive income                                                        -21,609,807.99              -21,293,103.52

   Specific reserve

   Surplus reserves                                                                1,211,721,109.67            1,211,721,109.67

   General reserve

   Retained earnings                                                               4,214,068,129.12            4,239,763,606.89

 Total equity attributable to owners of the Company as the parent                  8,042,493,415.89            8,068,505,598.13

 Non-controlling interests                                                         1,892,757,884.20            1,858,192,188.67

 Total owners’ equity                                                             9,935,251,300.09            9,926,697,786.80

 Total liabilities and owners’ equity                                           43,508,804,666.20            42,586,955,452.27

Legal representative: Liu Fengxi                                                                          CFO: Li Chunlei
Head of the financial department: Feng Junxiu
2. Balance Sheet of the Company as the Parent
                                                                                                                       Unit: RMB

                                  Item                                         30 June 2020               31 December 2019

 Current assets:

   Monetary assets                                                                2,744,677,596.72             2,498,077,198.12

   Held-for-trading financial assets                                                                              61,494,666.97

   Derivative financial assets

   Notes receivable                                                               1,421,289,007.19             2,148,312,821.38

   Accounts receivable                                                            5,757,197,738.90             9,564,720,940.39

   Accounts receivable financing                                                                                  66,002,903.68

   Prepayments                                                                      997,574,760.35               911,315,168.95

   Other receivables                                                              9,998,902,666.47            10,552,820,915.47

      Including: Interest receivable                                                   9,652,188.83                7,431,353.86

                   Dividends receivable                                             522,819,271.02               518,580,871.02

   Inventories                                                                      216,310,704.47               218,644,308.47

   Contract assets

   Assets held for sale

   Current portion of non-current assets

   Other current assets                                                             835,821,579.38             1,096,689,897.40

 Total current assets                                                            21,971,774,053.48            27,118,078,820.83

 Non-current assets:

   Investments in debt obligations

   Investments in other debt obligations




                                                                    5
                                                                  2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


  Long-term receivables

  Long-term equity investments                                              8,686,847,379.26             7,712,084,967.88

  Investments in other equity instruments                                      12,940,215.36                12,940,214.36

  Other non-current financial assets                                          250,230,000.00               250,230,000.00

  Investment property                                                         393,652,901.29               400,197,374.07

  Fixed assets                                                                433,937,544.20               444,107,402.57

  Construction in progress                                                     56,971,744.94                40,933,270.51

  Productive living assets

  Oil and gas assets

  Right-of-use assets

  Intangible assets                                                            76,427,525.88                80,470,750.60

  Development costs

  Goodwill

  Long-term prepaid expense                                                    15,403,163.88                39,047,325.68

  Deferred income tax assets                                                  799,639,462.15               883,234,085.45

  Other non-current assets

Total non-current assets                                                   10,726,049,936.96             9,863,245,391.12

Total assets                                                               32,697,823,990.44            36,981,324,211.95

Current liabilities:

  Short-term borrowings                                                     5,351,872,747.45             5,014,312,913.74

  Held-for-trading financial liabilities

  Derivative financial liabilities

  Notes payable                                                             2,088,345,443.40             2,610,991,473.69

  Accounts payable                                                           5,692,768,111.90           11,078,648,690.19

  Advances from customers                                                                                  318,839,961.84

  Contract liabilities                                                        987,888,282.21

  Employee benefits payable                                                    62,326,362.38               125,402,307.95

  Taxes payable                                                                  5,597,829.82                9,305,344.42

  Other payables                                                            3,919,872,978.82             3,193,392,734.69

     Including: Interest payable                                              214,053,062.68               223,847,860.57

                 Dividends payable                                            120,397,270.40

  Liabilities directly associated with assets held for sale

  Current portion of non-current liabilities                                  122,000,000.00               130,512,375.00

  Other current liabilities



                                                              6
                                             2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


Total current liabilities                             18,230,671,755.98            22,481,405,801.52

Non-current liabilities:

  Long-term borrowings                                 3,150,379,401.85             3,438,055,729.90

  Bonds payable                                        4,990,461,215.98             4,987,709,643.64

     Including: Preferred shares

                    Perpetual bonds

  Lease liabilities

  Long-term payables                                      26,432,152.59                21,855,688.19

  Long-term employee benefits payable

  Provisions                                                7,082,379.29                  206,591.51

  Deferred income                                         48,269,020.80                59,545,839.30

  Deferred income tax liabilities

  Other non-current liabilities                           57,672,988.87

Total non-current liabilities                          8,280,297,159.38             8,507,373,492.54

Total liabilities                                     26,510,968,915.36            30,988,779,294.06

Owners’ equity:

  Share capital                                        2,407,945,408.00             2,407,945,408.00

  Other equity instruments

     Including: Preferred shares

                    Perpetual bonds

  Capital reserves                                       114,018,066.79               114,018,066.79

  Less: Treasury stock

  Other comprehensive income                               -2,682,217.31               -2,682,217.31

  Specific reserve

  Surplus reserves                                     1,227,564,785.19             1,227,564,785.19

  Retained earnings                                    2,440,009,032.41             2,245,698,875.22

Total owners’ equity                                  6,186,855,075.08             5,992,544,917.89

Total liabilities and owners’ equity                 32,697,823,990.44            36,981,324,211.95

3. Consolidated Income Statement
                                                                                             Unit: RMB

                                  Item                H1 2020                      H1 2019

1. Revenue                                            17,524,183,896.74            26,036,442,813.84

  Including: Operating revenue                        17,524,183,896.74            26,036,442,813.84

               Interest income




                                         7
                                                                       2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


               Insurance premium income

               Handling charge and commission income

2. Costs and expenses                                                           18,353,408,488.70            26,698,772,822.16

  Including: Cost of sales                                                      16,268,993,432.88            24,674,042,371.13

               Interest expense

               Handling charge and commission expense

               Surrenders

               Net insurance claims paid

               Net amount provided as insurance contract reserve

               Expenditure on policy dividends

               Reinsurance premium expense

               Taxes and surcharges                                                  29,184,440.36               37,389,092.27

               Selling expense                                                     969,224,381.98             1,067,945,914.36

               Administrative expense                                              440,915,780.44               347,924,642.43

               R&D expense                                                         258,049,586.29               157,210,338.94

               Finance costs                                                       387,040,866.75               414,260,463.03

                  Including: Interest expense                                      532,953,584.28               529,683,836.52

                               Interest income                                     124,261,830.72               118,673,531.77

Add: Other income                                                                  318,094,852.34               343,884,971.36

       Return on investment (“-” for loss)                                       598,693,576.59               559,161,027.92

          Including: Share of profit or loss of joint ventures and
                                                                                     44,717,625.76                8,541,274.56
associates
             Income from the derecognition of financial assets at
amortized cost (“-” for loss)

       Exchange gain (“-” for loss)

       Net gain on exposure hedges (“-” for loss)

       Gain on changes in fair value (“-” for loss)                                                            -3,005,381.67

       Credit impairment loss (“-” for loss)                                      -39,887,507.18              -49,476,223.76

       Asset impairment loss (“-” for loss)                                        -1,985,659.95              -11,717,767.29

       Asset disposal income (“-” for loss)                                        98,454,282.86              293,705,840.64

3. Operating profit (“-” for loss)                                               144,144,952.70               470,222,458.88

Add: Non-operating income                                                             8,661,773.48               22,269,442.09

Less: Non-operating expense                                                           7,136,875.35                3,469,741.51

4. Profit before tax (“-” for loss)                                              145,669,850.83               489,022,159.46

Less: Income tax expense                                                             73,425,522.47               10,311,393.19



                                                                   8
                                                                           2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


5. Net profit (“-” for net loss)                                                       72,244,328.36              478,710,766.27

  5.1 By operating continuity

        5.1.1 Net profit from continuing operations (“-” for net loss)                 72,244,328.36              478,710,766.27

        5.1.2 Net profit from discontinued operations (“-” for net
loss)

  5.2 By ownership

        5.2.1 Net profit attributable to owners of the Company as the
                                                                                         94,701,792.63              352,767,020.73
parent

        5.2.1 Net profit attributable to non-controlling interests                      -22,457,464.27              125,943,745.54

6. Other comprehensive income, net of tax                                                 1,158,124.63               -3,108,112.33

  Attributable to owners of the Company as the parent                                      -316,704.47               -3,659,886.69

        6.1 Items that will not be reclassified to profit or loss                                                    -4,800,000.00

          6.1.1 Changes caused by remeasurements on defined
benefit schemes
          6.1.2 Other comprehensive income that will not be
reclassified to profit or loss under the equity method
          6.1.3 Changes in the fair value of investments in other
                                                                                                                     -4,800,000.00
equity instruments
          6.1.4 Changes in the fair value arising from changes in
own credit risk

          6.1.5 Other

        6.2 Items that will be reclassified to profit or loss                              -316,704.47                1,140,113.31

          6.2.1 Other comprehensive income that will be reclassified
to profit or loss under the equity method
          6.2.2 Changes in the fair value of investments in other debt
obligations
          6.2.3 Other comprehensive income arising from the
reclassification of financial assets
          6.2.4 Credit impairment allowance for investments in other
debt obligations

          6.2.5 Reserve for cash flow hedges

          6.2.6 Differences arising from the translation of foreign
                                                                                           -316,704.47                1,140,113.31
currency-denominated financial statements

          6.2.7 Other

  Attributable to non-controlling interests                                               1,474,829.10                  551,774.36

7. Total comprehensive income                                                            73,402,452.99              475,602,653.94

  Attributable to owners of the Company as the parent                                    94,385,088.16              349,107,134.04

  Attributable to non-controlling interests                                             -20,982,635.17              126,495,519.90

8. Earnings per share


                                                                       9
                                                                           2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


   8.1 Basic earnings per share                                                                 0.0393                      0.1465

   8.2 Diluted earnings per share                                                               0.0393                      0.1465

Legal representative: Liu Fengxi                                                                             CFO: Li Chunlei
Head of the financial department: Feng Junxiu
4. Income Statement of the Company as the Parent
                                                                                                                           Unit: RMB

                                      Item                                          H1 2020                      H1 2019

 1. Operating revenue                                                                3,375,446,030.89             5,368,021,710.40

 Less: Cost of sales                                                                 2,951,099,830.85             5,264,149,493.15

      Taxes and surcharges                                                                2,456,004.49                3,050,245.87

      Selling expense                                                                  346,758,543.10               602,937,451.39

      Administrative expense                                                           159,850,052.74               116,641,903.32

      R&D expense                                                                       25,536,247.49                21,884,250.47

      Finance costs                                                                    174,356,605.73               263,815,281.41

         Including: Interest expense                                                   430,353,727.41               484,646,778.75

                       Interest income                                                 242,970,045.01               225,398,798.03

 Add: Other income                                                                      60,280,939.33                25,883,962.58

        Return on investment (“-” for loss)                                          508,865,061.70               185,975,738.88

           Including: Share of profit or loss of joint ventures and
                                                                                           -699,839.38                3,928,528.71
 associates
              Income from the derecognition of financial assets at
 amortized cost (“-” for loss)

        Net gain on exposure hedges (“-” for loss)

        Gain on changes in fair value (“-” for loss)                                                               -3,005,381.67

        Credit impairment loss (“-” for loss)                                         -10,198,271.78               -6,660,947.01

        Asset impairment loss (“-” for loss)                                            5,726,253.37               -3,172,282.22

        Asset disposal income (“-” for loss)                                          98,600,000.00                       200.00

 2. Operating profit (“-” for loss)                                                  378,662,729.11              -705,435,624.65

 Add: Non-operating income                                                                 315,565.50                 1,522,859.81

 Less: Non-operating expense                                                               225,566.38                   957,357.54

 3. Profit before tax (“-” for loss)                                                 378,752,728.23              -704,870,122.38

 Less: Income tax expense                                                               84,301,541.05              -175,447,791.41

 4. Net profit (“-” for net loss)                                                    294,451,187.18              -529,422,330.97

   4.1 Net profit from continuing operations (“-” for net loss)                      294,451,187.18              -529,422,330.97

   4.2 Net profit from discontinued operations (“-” for net loss)



                                                                      10
                                                                      2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


5. Other comprehensive income, net of tax

  5.1 Items that will not be reclassified to profit or loss

     5.1.1 Changes caused by remeasurements on defined benefit
schemes
     5.1.2 Other comprehensive income that will not be
reclassified to profit or loss under the equity method
     5.1.3 Changes in the fair value of investments in other equity
instruments
     5.1.4 Changes in the fair value arising from changes in own
credit risk

     5.1.5 Other

  5.2 Items that will be reclassified to profit or loss

     5.2.1 Other comprehensive income that will be reclassified to
profit or loss under the equity method
     5.2.2 Changes in the fair value of investments in other debt
obligations
     5.2.3 Other comprehensive income arising from the
reclassification of financial assets
     5.2.4 Credit impairment allowance for investments in other
debt obligations

     5.2.5 Reserve for cash flow hedges

     5.2.6 Differences arising from the translation of foreign
currency-denominated financial statements

     5.2.7 Other

6. Total comprehensive income                                                     294,451,187.18              -529,422,330.97

7. Earnings per share

    7.1 Basic earnings per share

    7.2 Diluted earnings per share

5. Consolidated Cash Flow Statement
                                                                                                                      Unit: RMB

                                 Item                                          H1 2020                      H1 2019

1. Cash flows from operating activities:

  Proceeds from sale of commodities and rendering of services                  17,398,919,184.79            25,473,835,784.74

  Net increase in customer deposits and interbank deposits

  Net increase in borrowings from the central bank

  Net increase in loans from other financial institutions

  Premiums received on original insurance contracts

  Net proceeds from reinsurance



                                                                11
                                                                      2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


  Net increase in deposits and investments of policy holders

  Interest, handling charges and commissions received

  Net increase in interbank loans obtained

  Net increase in proceeds from repurchase transactions

  Net proceeds from acting trading of securities

  Tax rebates                                                                     108,772,128.38               507,670,463.23

  Cash generated from other operating activities                                2,067,915,221.82             2,148,795,820.05

Subtotal of cash generated from operating activities                           19,575,606,534.99            28,130,302,068.02

  Payments for commodities and services                                        17,115,676,821.64            26,800,524,727.57

  Net increase in loans and advances to customers

  Net increase in deposits in the central bank and in interbank
loans granted

  Payments for claims on original insurance contracts

  Net increase in interbank loans granted

  Interest, handling charges and commissions paid

  Policy dividends paid

  Cash paid to and for employees                                                  917,713,468.04               926,887,184.41

  Taxes paid                                                                      628,428,831.21               453,909,943.55

  Cash used in other operating activities                                       1,990,154,341.58             1,991,936,384.26

Subtotal of cash used in operating activities                                  20,651,973,462.47            30,173,258,239.79

Net cash generated from/used in operating activities                            -1,076,366,927.48           -2,042,956,171.77

2. Cash flows from investing activities:

  Proceeds from disinvestment                                                     387,119,277.60               221,738,210.00

  Return on investment                                                             80,623,751.66                73,227,388.55

  Net proceeds from the disposal of fixed assets, intangible assets
                                                                                   40,444,106.56               100,441,951.60
and other long-lived assets
  Net proceeds from the disposal of subsidiaries and other
                                                                                    3,287,293.86                32,675,173.25
business units

  Cash generated from other investing activities                                1,208,757,541.14             1,396,866,878.42

Subtotal of cash generated from investing activities                            1,720,231,970.82             1,824,949,601.82

  Payments for the acquisition of fixed assets, intangible assets
                                                                                1,701,324,660.79               642,392,906.08
and other long-lived assets

  Payments for investments                                                          8,670,001.00             1,156,259,360.00

  Net increase in pledged loans granted

  Net payments for the acquisition of subsidiaries and other
business units



                                                               12
                                                                     2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


  Cash used in other investing activities                                        152,930,416.99               700,033,420.00

Subtotal of cash used in investing activities                                  1,862,925,078.78             2,498,685,686.08

Net cash generated from/used in investing activities                            -142,693,107.96              -673,736,084.26

3. Cash flows from financing activities:

  Capital contributions received                                                  94,836,439.00               165,523,493.96

     Including: Capital contributions by non-controlling interests
                                                                                  94,836,439.00               165,523,493.96
to subsidiaries

  Borrowings raised                                                           10,423,573,485.62            15,051,901,964.42

  Cash generated from other financing activities                                 945,876,029.73               350,346,627.50

Subtotal of cash generated from financing activities                          11,464,285,954.35            15,567,772,085.88

  Repayment of borrowings                                                      8,790,985,658.27            11,054,191,049.91

  Interest and dividends paid                                                    383,175,132.72               255,889,282.00

     Including: Dividends paid by subsidiaries to non-controlling
                                                                                  10,513,500.00
interests

  Cash used in other financing activities                                      1,033,904,254.73               264,881,928.72

Subtotal of cash used in financing activities                                 10,208,065,045.72            11,574,962,260.63

Net cash generated from/used in financing activities                           1,256,220,908.63             3,992,809,825.25

4. Effect of foreign exchange rates changes on cash and cash
                                                                                   7,043,028.89                -9,021,516.41
equivalents

5. Net increase in cash and cash equivalents                                      44,203,902.08             1,267,096,052.81

Add: Cash and cash equivalents, beginning of the period                        4,493,701,917.22             3,434,149,481.72

6. Cash and cash equivalents, end of the period                                4,537,905,819.30             4,701,245,534.53

6. Cash Flow Statement of the Company as the Parent
                                                                                                                     Unit: RMB

                                Item                                          H1 2020                      H1 2019

1. Cash flows from operating activities:

  Proceeds from sale of commodities and rendering of services                  3,385,079,007.56            10,761,635,579.27

  Tax rebates                                                                     35,643,807.10                30,608,798.86

  Cash generated from other operating activities                               6,304,828,904.25             6,301,905,413.21

Subtotal of cash generated from operating activities                           9,725,551,718.91            17,094,149,791.34

  Payments for commodities and services                                        2,037,612,946.86             8,915,821,945.44

  Cash paid to and for employees                                                 193,201,951.98               376,948,025.22

  Taxes paid                                                                        7,317,308.11               30,146,084.97

  Cash used in other operating activities                                      7,103,806,174.57             7,232,326,927.95

Subtotal of cash used in operating activities                                  9,341,938,381.52            16,555,242,983.58

Net cash generated from/used in operating activities                             383,613,337.39               538,906,807.76


                                                                13
                                                                      2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


2. Cash flows from investing activities:

  Proceeds from disinvestment                                                     395,943,265.00               105,558,710.00

  Return on investment                                                             15,939,575.07                40,874,813.31

  Net proceeds from the disposal of fixed assets, intangible assets
                                                                                       53,456.56                   198,805.64
and other long-lived assets
  Net proceeds from the disposal of subsidiaries and other
business units

  Cash generated from other investing activities                                1,129,057,041.14               672,765,551.82

Subtotal of cash generated from investing activities                            1,540,993,337.77               819,397,880.77

  Payments for the acquisition of fixed assets, intangible assets
                                                                                   44,012,965.74                39,488,957.39
and other long-lived assets

  Payments for investments                                                        966,864,001.00               551,150,000.00

  Net payments for the acquisition of subsidiaries and other
business units

  Cash used in other investing activities                                         112,930,416.99             4,224,938,500.00

Subtotal of cash used in investing activities                                   1,123,807,383.73             4,815,577,457.39

Net cash generated from/used in investing activities                              417,185,954.04            -3,996,179,576.62

3. Cash flows from financing activities:

  Capital contributions received

  Borrowings raised                                                             7,094,864,642.27             7,442,215,982.73

  Cash generated from other financing activities                                  132,563,907.20

Subtotal of cash generated from financing activities                            7,227,428,549.47             7,442,215,982.73

  Repayment of borrowings                                                       6,842,198,610.76             3,053,659,242.73

  Interest and dividends paid                                                     322,326,562.77               204,582,931.37

  Cash used in other financing activities                                         381,866,448.33                 8,079,215.50

Subtotal of cash used in financing activities                                   7,546,391,621.86             3,266,321,389.60

Net cash generated from/used in financing activities                             -318,963,072.39             4,175,894,593.13

4. Effect of foreign exchange rates changes on cash and cash
                                                                                     3,386,774.26               -9,427,666.78
equivalents

5. Net increase in cash and cash equivalents                                      485,222,993.30               709,194,157.49

Add: Cash and cash equivalents, beginning of the period                         1,337,342,186.92             1,497,794,555.85

6. Cash and cash equivalents, end of the period                                 1,822,565,180.22             2,206,988,713.34




                                                               14
                                                                                                                                                                       2020 Semi-annual Financlal Report of Konka Group Co., Ltd.
             7. Consolidated Statements of Changes in Owners’ Equity
             H1 2020
                                                                                                                                                                                                                                 Unit: RMB

                                                                                                                                              H1 2020

                                                                                                 Equity attributable to owners of the Company as the parent

                                                           Other equity

                                                            instruments

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                                                           Pr                                                                                                                              O
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                                                                                                                  Other                                                                    t                      Non-controlling     Total owners’
                                                           efe            O
                                                                 et                                Treas                           cific                       eral
                                        Share capital                         Capital reserves                comprehensive                Surplus reserves           Retained earnings    h     Subtotal            interests            equity
                                                           rre            t
                                                                 ua                                 ury                            rese                        rese
                                                           d              h                                       income                                                                   e
                                                                 l                                 stock                           rve                         rve
                                                           sh             e                                                                                                                r
                                                                 bo
                                                           are            r
                                                                 nd
                                                            s
                                                                 s

1. Balance as at the end of the
                                        2,407,945,408.00                        230,368,577.09                   -21,293,103.52             1,211,721,109.67            4,239,763,606.89       8,068,505,598.13    1,858,192,188.67    9,926,697,786.80
prior year

Add: Adjustment for change in

accounting policy

  Adjustment for correction of

previous error

  Adjustment           for   business

combination        under     common

control

  Other adjustments

2. Balance as at the beginning of
                                        2,407,945,408.00                        230,368,577.09                   -21,293,103.52             1,211,721,109.67            4,239,763,606.89       8,068,505,598.13    1,858,192,188.67    9,926,697,786.80
the year

3. Increase/ decrease in the period
                                                                                                                    -316,704.47                                           -25,695,477.77         -26,012,182.24       34,565,695.53        8,553,513.29
(“-” for decrease)

                                                                                                                              15
                                                       2020 Semi-annual Financlal Report of Konka Group Co., Ltd.

  3.1 Total comprehensive income        -316,704.47       94,701,792.63       94,385,088.16    -20,982,635.17    73,402,452.99

  3.2      Capital    increased   and
                                                                                               66,061,830.70     66,061,830.70
reduced by owners

     3.2.1 Ordinary shares
                                                                                               86,836,439.00     86,836,439.00
increased by owners

     3.2.2 Capital increased by

holders of other equity instruments

     3.2.3 Share-based payments

included in owners’ equity

     3.2.4 Other                                                                               -20,774,608.30    -20,774,608.30


 3.3 Profit distribution                                -120,397,270.40      -120,397,270.40   -10,513,500.00   -130,910,770.40

     3.3.1 Appropriation to surplus

reserves

     3.3.2       Appropriation     to

general reserve

     3.3.3 Appropriation to owners
                                                        -120,397,270.40      -120,397,270.40   -10,513,500.00   -130,910,770.40
(or shareholders)

     3.3.4 Other

  3.4 Transfers within owners’

equity

     3.4.1 Increase in capital (or

share capital) from capital reserves

     3.4.2 Increase in capital (or

share      capital)   from    surplus

reserves

     3.4.3 Loss offset by surplus

reserves

     3.4.4 Changes in defined

benefit schemes transferred to

                                                  16
                                                                                                            2020 Semi-annual Financlal Report of Konka Group Co., Ltd.
retained earnings

    3.4.5 Other comprehensive

income transferred to retained

earnings

    3.4.6 Other

  3.5 Specific reserve

    3.5.1 Increase in the period

    3.5.2 Used in the period

  3.6 Other

4. Balance as at the end of the
                                   2,407,945,408.00   230,368,577.09   -21,609,807.99    1,211,721,109.67    4,214,068,129.12    8,042,493,415.89   1,892,757,884.20   9,935,251,300.09
period




                                                                                    17
                                                                                                                                                                        2020 Semi-annual Financlal Report of Konka Group Co., Ltd.

             H1 2019
                                                                                                                                                                                                                                  Unit: RMB

                                                                                                                                              H1 2019

                                                                                                 Equity attributable to owners of the Company as the parent

                                                           Other equity

                                                            instruments

                                                                 Pe
                                                           Pr                                                                      Spe                                                      O
                 Item                                            rp                                 Less:                                                      Gen
                                                                                                                   Other           cifi                                                     t                      Non-controlling     Total owners’
                                                           efe            O
                                                                 et                                 Treas                                                      eral
                                        Share capital                         Capital reserves                comprehensive         c     Surplus reserves             Retained earnings    h     Subtotal            interests            equity
                                                           rre            t
                                                                 ua                                  ury                                                       reser
                                                           d              h                                       income           rese                                                     e
                                                                  l                                 stock                                                       ve
                                                           sh             e                                                        rve                                                      r
                                                                 bo
                                                           are            r
                                                                 nd
                                                            s
                                                                 s

1. Balance as at the end of the
                                        2,407,945,408.00                        208,356,624.21                    -10,538,219.08            1,227,564,785.19             4,271,408,192.21       8,104,736,790.53    1,346,631,520.26    9,451,368,310.79
prior year

Add: Adjustment for change in
                                                                                                                                                                            -2,884,254.62          -2,884,254.62                           -2,884,254.62
accounting policy

  Adjustment for correction of

previous error

  Adjustment           for   business

combination        under     common

control

  Other adjustments

2. Balance as at the beginning of
                                        2,407,945,408.00                        208,356,624.21                    -10,538,219.08            1,227,564,785.19             4,268,523,937.59       8,101,852,535.91    1,346,631,520.26    9,448,484,056.17
the year

3. Increase/ decrease in the period                                                                                                71,7
                                                                                 29,405,337.77                     -3,659,886.69                                           111,972,479.93        137,789,668.09       247,437,548.62     385,227,216.71
(“-” for decrease)                                                                                                               37.0



                                                                                                                              18
                                                            2020 Semi-annual Financlal Report of Konka Group Co., Ltd.
                                                        8


  3.1 Total comprehensive income        -3,659,886.69         352,767,020.73      349,107,134.04    126,495,519.90   475,602,653.94

  3.2      Capital    increased   and
                                                                                                    120,942,028.72   120,942,028.72
reduced by owners

     3.2.1 Ordinary shares
                                                                                                    118,854,770.64   118,854,770.64
increased by owners

     3.2.2 Capital increased by

holders of other equity instruments

     3.2.3 Share-based payments

included in owners’ equity

     3.2.4 Other                                                                                      2,087,258.08      2,087,258.08


 3.3 Profit distribution                                     -240,794,540.80      -240,794,540.80                    -240,794,540.80

     3.3.1 Appropriation to surplus

reserves

     3.3.2       Appropriation     to

general reserve

     3.3.3 Appropriation to owners
                                                             -240,794,540.80      -240,794,540.80                    -240,794,540.80
(or shareholders)

     3.3.4 Other

  3.4 Transfers within owners’

equity

     3.4.1 Increase in capital (or

share capital) from capital reserves

     3.4.2 Increase in capital (or

share      capital)   from    surplus

reserves

     3.4.3 Loss offset by surplus

reserves



                                                   19
                                                                                                                  2020 Semi-annual Financlal Report of Konka Group Co., Ltd.
    3.4.4 Changes in defined

benefit schemes transferred to

retained earnings

    3.4.5 Other comprehensive

income transferred to retained

earnings

    3.4.6 Other

  3.5 Specific reserve

    3.5.1 Increase in the period

    3.5.2 Used in the period

                                                                                        71,7

  3.6 Other                                            29,405,337.77                    37.0                                             29,477,074.85                         29,477,074.85

                                                                                          8


                                                                                        71,7
4. Balance as at the end of the
                                   2,407,945,408.00   237,761,961.98   -14,198,105.77   37.0   1,227,564,785.19   4,380,496,417.52     8,239,642,204.00   1,594,069,068.88   9,833,711,272.88
period
                                                                                          8




                                                                                   20
                                                                                                                                                        2020 Semi-annual Financlal Report of Konka Group Co., Ltd.
             8. Statements of Changes in Owners’ Equity of the Company as the Parent
             H1 2020
                                                                                                                                                                                                               Unit: RMB

                                                                                                                                H1 2020

                                                               Other equity instruments
                                                                                                                Less:         Other
                 Item                                                                                                                        Specific                                                              Total owners’
                                                             Preferr
                                         Share capital                 Perpetu             Capital reserves    Treasury   comprehensive                     Surplus reserves       Retained earnings       Other
                                                               ed                  Other                                                     reserve                                                                  equity
                                                                       al bonds                                 stock        income
                                                             shares

1. Balance as at the end of the
                                          2,407,945,408.00                                    114,018,066.79                 -2,682,217.31                      1,227,564,785.19       2,245,698,875.22              5,992,544,917.89
prior year

Add: Adjustment for change in

accounting policy

  Adjustment for correction of

previous error

  Other adjustments                                                                                                                                                                       20,256,240.41                20,256,240.41

2. Balance as at the beginning of
                                          2,407,945,408.00                                    114,018,066.79                 -2,682,217.31                      1,227,564,785.19        2,265,955,115.63             6,012,801,158.30
the year

3. Increase/ decrease in the period
                                                                                                                                                                                         174,053,916.78               174,053,916.78
(“-” for decrease)

  3.1 Total comprehensive income                                                                                                                                                         294,451,187.18               294,451,187.18

  3.2      Capital     increased   and

reduced by owners

     3.2.1 Ordinary shares

increased by owners

     3.2.2 Capital increased by

holders of other equity instruments

     3.2.3 Share-based payments

included in owners’ equity



                                                                                                                   21
                                            2020 Semi-annual Financlal Report of Konka Group Co., Ltd.

     3.2.4 Other

  3.3 Profit distribution                                                -120,397,270.40           -120,397,270.40

     3.3.1 Appropriation to surplus

reserves

     3.3.2 Appropriation to owners
                                                                         -120,397,270.40           -120,397,270.40
(or shareholders)

     3.3.3 Other

  3.4 Transfers within owners’

equity

     3.4.1 Increase in capital (or

share capital) from capital reserves

     3.4.2 Increase in capital (or

share      capital)   from   surplus

reserves

     3.4.3 Loss offset by surplus

reserves

     3.4.4 Changes in defined

benefit schemes transferred to

retained earnings

     3.4.5 Other comprehensive

income transferred to retained

earnings

     3.4.6 Other

  3.5 Specific reserve

     3.5.1 Increase in the period

     3.5.2 Used in the period

  3.6 Other



                                       22
                                                                                           2020 Semi-annual Financlal Report of Konka Group Co., Ltd.
4. Balance as at the end of the
                                  2,407,945,408.00   114,018,066.79        -2,682,217.31           1,227,564,785.19    2,440,009,032.41          6,186,855,075.08
period




                                                                      23
                                                                                                                                                            2020 Semi-annual Financlal Report of Konka Group Co., Ltd.

            H1 2019
                                                                                                                                                                                                                  Unit: RMB

                                                                                                                                     H1 2019

                                                                   Other equity instruments
                                                                                                                    Less:         Other
                     Item                                                                                                                        Specific
                                                                 Preferre   Perpetu
                                              Share capital                                    Capital reserves    Treasury   comprehensive                     Surplus reserves       Retained earnings      Other   Total owners’ equity
                                                                    d         al       Other                                                     reserve
                                                                                                                    stock        income
                                                                 shares     bonds

1. Balance as at the end of the prior
                                              2,407,945,408.00                                    114,018,066.79                 -1,182,217.31                      1,227,564,785.19       3,040,171,940.85                6,788,517,983.52
year

Add: Adjustment for change in
                                                                                                                                                                                              -2,127,505.16                   -2,127,505.16
accounting policy

  Adjustment         for    correction   of

previous error

  Other adjustments                                                                                                                                                                            7,971,211.72                    7,971,211.72

2. Balance as at the beginning of the
                                              2,407,945,408.00                                    114,018,066.79                 -1,182,217.31                      1,227,564,785.19       3,046,015,647.41                6,794,361,690.08
year

3. Increase/ decrease in the period
                                                                                                                                                                                            -770,216,871.77                 -770,216,871.77
(“-” for decrease)

  3.1 Total comprehensive income                                                                                                                                                            -529,422,330.97                 -529,422,330.97

  3.2 Capital increased and reduced

by owners

       3.2.1 Ordinary shares increased

by owners

       3.2.2 Capital increased by

holders of other equity instruments

       3.2.3 Share-based payments

included in owners’ equity

       3.2.4 Other


                                                                                                                       24
                                                                                                       2020 Semi-annual Financlal Report of Konka Group Co., Ltd.

  3.3 Profit distribution                                                                                                           -240,794,540.80           -240,794,540.80

     3.3.1 Appropriation to surplus

reserves

     3.3.2 Appropriation to owners
                                                                                                                                    -240,794,540.80           -240,794,540.80
(or shareholders)

     3.3.3 Other

  3.4      Transfers   within      owners’

equity

     3.4.1 Increase in capital (or

share capital) from capital reserves

     3.4.2 Increase in capital (or

share capital) from surplus reserves

     3.4.3 Loss offset by surplus

reserves

     3.4.4     Changes        in   defined

benefit      schemes       transferred   to

retained earnings

     3.4.5     Other       comprehensive

income       transferred     to    retained

earnings

     3.4.6 Other

  3.5 Specific reserve

     3.5.1 Increase in the period

     3.5.2 Used in the period

  3.6 Other

4. Balance as at the end of the period        2,407,945,408.00   114,018,066.79        -1,182,217.31           1,227,564,785.19    2,275,798,775.64          6,024,144,818.31




                                                                                  25
                                                                 2020 Semi-annual Report of Konka Group Co., Ltd.




                                        Konka Group Co., Ltd.
                       Notes to Financial Statements for H1 2020
     (All amounts are expressed, unless otherwise stated, in Renminbi (RMB).)
I. Company Profile
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 the People’s Government of Shenzhen Municipality, and has its ordinary shares
(A-share and B-share) listed on Shenzhen Stock Exchange with prior consent from the People’s Bank
of China Shenzhen Special Economic Zone Branch. On 29 August 1995, the Company was renamed to
“Konka Group Co., Ltd.” (Credibility code: 914403006188155783) with its main business electronic
industry. And now the headquarters locates in No. 28 of No. 12 of Keji South Rd., Science &
Technology Park, Yuehai Street, Nanshan District, Shenzhen, Guangdong Province.
2. Share capital
After the distribution of bonus shares, allotments, increased share capital and new shares issued over
the years, as of 30 June 2020, the company has issued a total of 2,407,945,408.00 shares
(denomination of 1 yuan per share) with a registered capital of 2,407,945,408.00 yuan.
3. The nature of the company's business and main operating activities
The Company and its subsidiaries are mainly engaged in the production and sales of colour TVs, white
goods etc.; trade business, semi-conductor business, environmental protection, etc.
4. The financial statements contained herein have been approved for issue by the Board of Directors
of the Company on 26 August 2020.

II. Consolidation scope
1. As of 30 June 2020, the company has a total of 154 subsidiaries included in the consolidation
scope. For details, please refer to Note 8 "Equity in Other Entities". The consolidation scope of the
company this year increased by 11 households and decreased by 3 households compared to the
previous year. For details, please refer to Note 7 “Changes in the consolidation scope”.

2. A check list of corporate names and their abbreviations mentioned in this Report
                        Corporate name                                            Abbreviation

 Konka Ventures Development (Shenzhen) Co., Ltd.                Konka Ventures

 Yantai Konka Healthcare Enterprise Service Co., Ltd.           Yantai Konka

 Chengdu Konka Incubator Management Co., Ltd.                   Chengdu Konka Incubator
 Chengdu Anren Konka Cultural and Creative Incubator
                                                                Chengdu Anren
 Management Co., Ltd.
 Guiyang Konka Enterprise Service Co., Ltd.                     Konka Enterprise Service

 Nanjing Chuanghui Smart Technology Co., Ltd.                   Chuanghui Smart
 Shenzhen Konka Cross-Border Technological Innovation Service
                                                                Cross-Border Technological Innovation
 Co., Ltd.
 Guizhou Konka Enterprise Management Service Co., Ltd.          Konka Enterprise Management

 Yibin Konka Incubator Management Co., Ltd.                     Yibin Konka Incubator

 Anhui Konka Electronic Co., Ltd.                               Anhui Konka

 Anhui Kangzhi Trade Co., Ltd.                                  Kangzhi Trade

 Konka Factoring (Shenzhen) Co., Ltd.                           Konka Factoring



                                                         26
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                       Corporate name                                                  Abbreviation

Youshi Kangrong Culture Communication Co., Ltd.                  Youshi Kangrong

Shenzhen Konka Unifortune Technology Co., Ltd.                   Konka Unifortune

Jiali International (Hong Kong) Limited                          Jiali International

Shenzhen Wankaida Science and Technology Co., Ltd.               Wankaida

Dongguan Konka Electronic Co., Ltd.                              Dongguan Konka

Shenzhen Konka Telecommunications Technology Co., Ltd.           Telecommunication Technology

Konka Mobility Co., Limited                                      Konka Mobility

Shenzhen Konka Life Electric Appliance Co., Ltd.                 Life Electric Appliance

Konka (Europe) Co., Ltd.                                         Konka Europe

Shenzhen Konka Commercial System Technology Co., Ltd.            Commercial System Technology

Shenzhen Konka Electrical Appliances Co., Ltd.                   Konka Electrical Appliances

Hainan Konka Material Technology Co., Ltd.                       Konka Material

Shenzhen Konka Mobile Interconnection Technology Co., Ltd.       Mobile Interconnection

Sichuan Konka Smart Terminal Technology Co., Ltd                 Sichuan Konka

Yibin Konka Smart Technology Co., Ltd.                           Yibin Smart

Anhui Konka Tongchuang Electrical Appliances Co., Ltd.           Anhui Tongchuang

Anhui Konka Electrical Appliance Technology Co., Ltd.            Anhui Electrical Appliance

Henan Frestec Refrigeration Appliance Co., Ltd.                  Frestec Refrigeration

Henan Frestec Smart Ecological Electrical Appliances Co., Ltd.   Frestec Smart

Henan Frestec Electrical Appliances Co., Ltd.                    Frestec Electrical Appliances

Henan Frestec Household Appliances Co., Ltd.                     Frestec Household Appliances

Shenzhen Konka Pengrun Technology & Industry Co., Ltd.           Konka Pengrun

Jiaxin Technology Co., Ltd.                                      Jiaxin Technology

Dongguan Konka Packing Materials Co., Ltd.                       Dongguan Packing

Shenzhen E2info Network Technology Co., Ltd.                     E2info

E2info (Hainan) Network Technology Co., Ltd.                     E2info (Hainan)

Beijing Konka Electronic Co., Ltd.                               Beijing Konka Electronic

Konka Financial Leasing (Tianjin) Co., Ltd.                      Konka Leasing

Shenzhen Konka Circuit Co., Ltd.                                 Konka Circuit

Boluo Konka Precision Technology Co., Ltd.                       Boluo Konka Precision

Xiamen Dalong Trading Co., Ltd.                                  Xiamen Dalong

Boluo Konka PCB Co., Ltd.                                        Boluo Konka

Hong Kong Konka Limited                                          Hong Kong Konka
Konka Electrical Appliances Investment & Development Co.,
                                                                 Konka Electrical Appliances Investment
Ltd.
Chain Kingdom Memory Technologies Co., Limited                   Chain Kingdom Memory Technologies



                                                         27
                                                              2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




                       Corporate name                                                   Abbreviation

Chain Kingdom Memory Technologies (Shenzhen) Co., Ltd.               Chain Kingdom Memory Technologies (Shenzhen)

Hefei Chain Kingdom Memory Technologies Co., Ltd.                    Hefei Chain Kingdom Memory Technologies

Konka SmartTech Limited                                              Konka SmartTech

Kangjietong (Hong Kong) Limited                                      Kangjietong

Konka Electrical Appliances International Trading Co., Ltd.          Konka Electrical Appliances International Trading

Kanghao Technology Co., Ltd.                                         Kanghao Technology

Yuekang Semiconductor Technology (Yantai) Co., Ltd.                  Yuekang Semiconductor

Konka North America LLC                                              Konka North America

Shenzhen Konka Investment Holding Co., Ltd.                          Konka Investment

Yibin Konka Technology Park Operation Co., Ltd.                      Yibin Konka Technology Park

Sichuan Konka Industrial New Town Development Co., Ltd.              Industrial New Town
Shenzhen Konka Capital Equity Investment Management Co.,
                                                                     Konka Capital
Ltd.
Konka Suiyong Investment (Shenzhen) Co., Ltd.                        Konka Suiyong

Shenzhen Konka Kangxin Technology Co., Ltd.                          Kangxin Technology
Shenzhen Kangquan Enterprise Management Consulting Co.,
                                                                     Kangquan Enterprise
Ltd.
Shenzhen Konka Suyuan Investment Industrial Co., Ltd.                Konka Suyuan

Hainan Konka Technology Industry Development Co., Ltd.               Hainan Technology

Shenzhen Konka Shengxing Industrial Co., Ltd.                        Shengxing Industrial

Shenzhen Konka Industrial Park Development Co., Ltd.                 Industrial Park Development

Shenzhen Konka Zhitong Technology Co., Ltd.                          Zhitong Technology

Sichuan Kangjiatong Technology Co., Ltd.                             Kangjiatong

Shenzhen Konka Electronics Technology Co., Ltd.                      Electronics Technology

GuangDong XingDa HongYe Electronic Co., Ltd.                         XingDa HongYe

Shanghai Xinfeng Zhuoqun PCB Co., Ltd.                               Shanghai Xinfeng

Anhui Konka Zhilian E-Commerce Co., Ltd.                             Anhui Zhilian

Nanjing Konka Smart Technology Co., Ltd.                             Nanjing Konka

Shenzhen Youzhihui Technology Co., Ltd.                              Youzhihui

Shenzhen Xiaojia Technology Co., Ltd.                                Xiaojia Technology

Haimen Konka Smart Technology Co., Ltd.                              Haimen Konka

Chengdu Konka Smart Technology Co., Ltd.                             Chengdu Konka Smart

Chengdu Konka Electronics Co., Ltd.                                  Chengdu Konka Electronics

Shandong Econ Technology Co., Ltd.                                   Econ Technology

Beijing Econ Runfeng Technology Co., Ltd.                            Beijing Econ

Shanghai Jiyi Environmental Technology Co., Ltd.                     Shanghai Jiyi




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                       Corporate name                                                Abbreviation

Binzhou Econ Zhongke Environmental Protection Technology
                                                                  Binzhou Econ Zhongke
Co., Ltd.
Laizhou Lairun Holding Co., Ltd.                                  Lairun Holding

Laizhou Lairun Environmental Protection Co., Ltd.                 Lairun Environmental Protection

Laizhou Lairun Sewage Treatment Co., Ltd.                         Lairun Sewage

Laizhou Binhai Sewage Treatment Co., Ltd.                         Binhai Sewage

Econ Environmental Engineering Co., Ltd.                          Econ Environmental Engineering

Rushan Yike Water Environment Management Co., Ltd.                Rushan Yike

Binzhou Weiyijie Environmental Technology Co., Ltd.               Binzhou Weiyijie

Binzhou Beihai Jingmai Industrial Development Co., Ltd.           Binzhou Beihai Jingmai

Yantai Chunzhiran Environmental Technology Co., Ltd.              Chunzhiran

Donggang Kangrun Environment Management Co., Ltd.                 Donggang Kangrun

Kangrunhong Environmental Technology (Yantai) Co., Ltd.           Yantai Kangrun

Dayi Kangrun Water Co., Ltd.                                      Dayi Kangrun Water

Suining Pengxi Kangrun Environment Management Co., Ltd.           Suining Pengxi Kangrun

Subei Mongolian Autonomous County Kangrun Water Co., Ltd.         Subei Kangrun Water

Weifang Sihai Kangrun Investment and Operation Co., Ltd.          Weifang Sihai Kangrun

Lushan Kangrun Environment Mangement Co., Ltd.                    Lushan Kangrun Environment

Funan Kangrun Water Co., Ltd.                                     Funan Kangrun Water

Wuhan Runyuan Sewage Treatment Co., Ltd.                          Wuhan Runyuan Sewage
Tongchuan Kangrun Honghui Environment Management Co.,
                                                                  Tongchuan Kangrun Honghui
Ltd.
Boxing Xingkang Environmental Technology Co., Ltd.                Boxing Xingkang Environmental

Tingyuan Environmental Technology (Shanghai) Co., Ltd.            Tingyuan Environmental

Yantai Kangyun Industry Development Co., Ltd.                     Yantai Kangyun

Yantai Laikang Industry Development Co., Ltd.                     Yantai Laikang

Konka Huanjia (Dalian) Environmental Technology Co., Ltd.         Konka Huanjia

Konka Huanjia (Henan) Environmental Technology Co., Ltd.          Konka Huanjia (Henan)

Shanghai Konka Industrial Co., Ltd.                               Shanghai Konka

Yantai Konka Industrial Co., Ltd.                                 Yantai Konka Industrial

Yantai Kangjin Technology Development Co., Ltd.                   Yantai Kangjin

Shandong Kangxin Industrial Development Co., Ltd.                 Shandong Kangxin

Jiangxi Konka New Material Technology Co., Ltd.                   Jiangxi Konka

Jiangxi Xinfeng Microcrystalline Jade Co., Ltd.                   Xinfeng Microcrystalline

Jiangxi Golden Phoenix Nano Crystallized Glass Co., Ltd.          Nano Crystallized Glass

Shenzhen Nianhua Enterprise Management Co., Ltd.                  Shenzhen Nianhua




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                        Corporate name                                               Abbreviation

Shenzhen KONSEMI Co., Ltd.                                         Shenzhen KONSEMI

Shenzhen Meixin Semiconductor Technology Co., Ltd.                 Shenzhen Meixin

Chongqing Zhengmao Semiconductor Co., Ltd.                         Zhengmao Semiconductor

Hefei KONSEMI Storage Technology Co., Ltd.                         Hefei KONSEMI

Hefei Yihe Electronic Co., Ltd.                                    Yihe Electronic

Chongqing Konka Technology Development Co., Ltd.                   Chongqing Konka

Shenzhen Konka Huiying Technology Co., Ltd.                        Shenzhen Huiying Technology

Chongqing Konka Huiying Technology Co., Ltd.                       Chongqing Huiying Technology

Shenzhen Konka Eco-Development Investment Co., Ltd.                Konka Eco-Development

Suining Konka Industrial Park Development Co., Ltd.                Suining Konka Industrial Park

Konka Ronghe Industrial Technology (Foshan) Co., Ltd.              Konka Ronghe

Suining Konka Electronic Technological Innovation Co., Ltd.        Suining Electronic Technological Innovation

Dongguan Konka Investment Co., Ltd.                                Dongguan Konka Investment

Shenzhen Konka Chuangzhi Electrical Appliances Co., Ltd.           Shenzhen Chuangzhi Electrical Appliances
Kanghong (Yantai) Environmental Protection Technology Co.,
                                                                   Kanghong (Yantai) Environmental Protection
Ltd.
Kanghong (Yantai) Environmental        Protection     Technology   Kanghong (Yantai)       Environmental   Protection
Industrial Park Co., Ltd.                                          Industrial Park
Chongqing Kangxingrui Environmental Protection Technology
                                                                   Chongqing Kangxingrui
Co., Ltd.
Chongqing Konka Optoelectronic Technology Institute Co., Ltd.      Chongqing Optoelectronic Institute

Konka Xinying Semiconductor Technology (Shenzhen) Co., Ltd.        Xinying Semiconductor

Jiangkang (Shanghai) Technology Co., Ltd.                          Jiangkang (Shanghai) Technology

Chongqing Konka Real Estate Development Co., Ltd.                  Chongqing Real Estate Development

Chongqing Konka Xingyi Real Estate Co., Ltd.                       Chongqing Xingyi Real Estate

Chongqing Konka Fuze Real Estate Co., Ltd.                         Chongqing Fuze Real Estate

Ningbo Kanghanrui Electrical Appliances Co., Ltd.                  Ningbo Kanghanrui Electrical Appliances

Shenzhen Konka Zhizao Technology Co., Ltd.                         Konka Zhizao

Anhui Konka Debao New Material Technology Co., Ltd.                Debao New Material Technology

Suining Jiarun Real Estate Co., Ltd.                               Suining Jiarun Real Estate

Chuzhou Kangxin Health Industry Development Co., Ltd.              Chuzhou Kangxin Health Industry

Hubei Kangxinglong Environmental Protection Co., Ltd.              Kangxinglong Environmental Protection

E3info (Hainan) Technology Co., Ltd.                               E3info

Shenzhen Konka Yifang Technology Co., Ltd.                         Yifang Technology

Zhongshan Kangxin Electronic Technology Co., Ltd.                  Zhongshan Kangxin

Liaoyang Kangshun Intelligent Technology Co., Ltd.                 Liaoyang Kangshun

Nanjing Konka Electronics Co., Ltd.                                Nanjing Konka Electronics



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                       Corporate name                                             Abbreviation

 Gaoping Kangrun Environmental Protection & Water Co., Ltd.     Gaoping Kangrun

 Mengcheng Kangrun Anjian Water Co., Ltd.                       Mengcheng Kangrun
 Xixian Kangrun Xijian Water Environment Development Co.,
                                                                Xixian Kangrun
 Ltd.
 Morsemi Semiconductor Technology (Hong Kong) Limited           Morsemi Semiconductor (Hong Kong)

 Chongqing Kangxingrui Scraped Automobile Recycling Co., Ltd.   Kangxingrui Automobile Recycling

 Konka Xinyun Semiconductor Technology (Yancheng) Co., Ltd.     Konka Xinyun

 Chongqing Kanglei Optoelectronic Technology Co., Ltd.          Chongqing Kanglei

 Yibin Kangrun Environmental Technology Co., Ltd.               Yibin Kangrun


III. Basis for the Preparation of Financial Statements
1. Basic for the preparation
With the going-concern assumption as the basis and based on transactions and other events that
actually occurred, the Company prepared financial statements in accordance with The Accounting
Standards for Business Enterprises issued by the Ministry of Finance and other regulations as well as
the accounting policies and estimations stipulated in the Note IV “Significant Accounting Policies
and Estimations”.
2. Going-concern
The Company has the operation history with profits and financial support. Thus, it is reasonable to
prepare the financial statements based on going-concern.

IV. Important Accounting Policies and Estimations
The specific accounting policies and accounting estimates formulated by the company based on the
actual production and operation characteristics include the recognition and measurement of bad debt
provision for receivables, the measurement of issued inventories, the classification of fixed assets
and depreciation methods, amortization of intangible assets, revenue recognition and measurement,
etc.

1. Statement of Compliance with the Accounting Standards for Business Enterprises
The financial statements prepared by the Company are in compliance with in compliance with the
Accounting Standards for Business Enterprises, which factually and completely present the
Company’s financial positions, business results and cash flows, and other relevant information.

2. Fiscal Period
The Company’s fiscal year starts on January 1 and ends on December 31 of every year according to
the Gregorian calendar.

3. Operating Cycle
An operating cycle for the Company is 12 months, which is also the classification criterion for the
liquidity of its assets and liabilities.

4. Recording Currency
The Company adopted Renminbi as the bookkeeping base currency.

5. Accounting Treatment Methods for Business Combinations under the Same Control or not under
the Same Control
As the combining party, the assets and liabilities obtained by the Company in a business combination


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under the same control shall be measured on the basis of their carrying value in the final controlling
party on the combining date. As for the balance between the carrying value of the net assets obtained
and the carrying value of the consideration paid by it, the capital reserve shall be adjusted. If the
capital reserve is not sufficient to be offset, the retained earnings shall be adjusted. The direct costs
incurred by the merging party for the business combination shall be included in the current profit and
loss when incurred.
The identifiable assets, liabilities and contingent liabilities of the acquiree acquired in the business
combination under different control shall be measured at fair value on the acquisition date. The
merger cost is the sum of the fair value of cash or non-cash assets, liabilities issued or assumed,
equity securities issued, etc. paid by the Company on the purchase date to gain control over the
purchased party and all directly related expenses incurred in the business combination (The merge
cost of business combination realized step by step through multiple transactions is the sum of every
single transaction’s cost). The balance that the combined cost greater than the fair value share of the
identifiable net assets of the purchased party obtained in the combination shall be recognized as
goodwill; When the merger cost is less than the fair value share of the identifiable net assets of the
acquiree acquired in the merger, the fair value of all identifiable assets, liabilities and contingent
liabilities acquired in the merger, and non-cash assets of the merger consideration or equity securities
issued, etc. shall be reviewed first. After review, if the merger cost is still less than the fair value
share of the identifiable net assets of the acquiree acquired in the merger, the difference shall be
included in the non-operating income of the merger period. Intermediary expenses such as auditing,
legal services, evaluation and consulting and other management expenses incurred for a business
combination are included in the current profit and loss when incurred.

6. Methods for Preparing Consolidated Financial Statements
The scope of consolidation includes the Company and its all subsidiaries.
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.
All significant internal transactions, current balances and unrealized profits within the scope of
consolidation shall be offset when preparing the consolidated statement. The shares of the
subsidiary's owner's equity that do not belong to the parent company and the shares of minority
shareholders' equity in current net profit and loss, other comprehensive income and total
comprehensive income shall be respectively listed in the consolidated financial statement "Minority
shareholders' equity, minority shareholders' profit and loss, other comprehensive income that belongs
to minority shareholders and total comprehensive income that belongs to minority shareholders".
For subsidiaries acquired through merger of enterprises under the same control, their operating
results and cash flows are included in the consolidated financial statements from the beginning of the
current merger period. When preparing the comparative consolidated financial statements, the
relevant items in the financial statements of the previous year shall be adjusted as if the consolidated
reporting entity had existed since the final controlling party began to control it.
At the occasion of the equity of the investee under the same control is acquired step by step through
multiple transactions, and finally form the business combination, when preparing the consolidated
statement, it shall be deemed as the adjustment is made in the current state when the final controlling
party starts to control. And when compiling the comparative report, the assets and liabilities of the
merged party shall be merged into the comparative statement of the consolidated financial statements
of the consolidated Company without any earlier than the time when the Company and the merged
party are under the control of the ultimate controlling party, and the combined net increased assets
shall be adjusted to the relevant items under owners' equity in the comparative statements. In order to
avoid the re-calculation of the net assets value of the merged party, the long-term equity investment
held by the Company before the merger, the confirmed relevant profit and loss on the same party
with the Company and the merged party on the date of acquisition of the original equity from the
final control date to the merger date, and changes of other comprehensive income and other net


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assets shall offset the beginning retained earnings and current profits and losses of the comparative
statement period respectively.
For subsidiaries acquired through business combination under the different control, the operating
results and cash flow shall be included in the consolidated financial statements from the date when
the Company obtains the control right. When preparing the consolidated financial statements, the
financial statements of the subsidiaries shall be adjusted on the basis of the fair value of the
identifiable assets, liabilities and contingent liabilities determined on the acquisition date.
At the occasion of the equity of the investee under different control is acquired step by step through
multiple transactions and eventually form the business combination, when preparing the consolidated
statement, the equity of the investee held before the purchase date is re-measured according to the
fair value of the equity on the purchase date, and the difference between the fair value and its book
value is included in the current investment income. The equity of the acquiree held before the
relevant purchase date involves other comprehensive income under the equity method and other
changes in owner's equity other than net profit and loss, other comprehensive income and profit
distribution, which are converted into investment profit and loss in the current period of the purchase
date, except for other comprehensive income arising from the remeasurement of defined benefit
plans's net liabilities or changes in net assets by the investee.
The Company partially disposes of long-term equity investments in subsidiaries without losing
control, when preparing the consolidated financial statements, the difference between the disposal
price and the share of net assets that the subsidiaries have continuously calculated since the date of
purchase or the date of consolidation is corresponding to the disposal of long-term equity
investments. The capital premium or equity premium is adjusted. If the capital reserve is insufficient
to offset, the retained earnings are adjusted.
If the Company loses control over the investee due to the disposal of some equity investments and
other reasons, the remaining equity shall be re-measured at its fair value on the date of loss of control
when preparing the consolidated financial statements. The difference between the sum of the
consideration obtained from the disposal of equity and the fair value of the remaining equity, minus
the share of the net assets of the original subsidiary calculated on the basis of the original
shareholding ratio and continuously calculated from the date of purchase or merger, is included in
the investment profit and loss of the current period when the control right is lost, and goodwill is
offset. Other comprehensive income related to the original subsidiary's equity investment, etc., will
be transferred to the current investment profit and loss when the control right is lost.
If the Company disposes of the equity investment in a subsidiary company step by step through
multiple transactions until the loss of control right, if the transactions of the disposal of the equity
investment in a subsidiary company until the loss of control right belong to a package transaction,
the transactions shall be treated as transactions of the disposal of the subsidiary company and the loss
of control right for accounting. However, the difference between the disposal price and the share of
the subsidiary's net assets corresponding to the disposal investment before the loss of control right is
recognized as other comprehensive income in the consolidated financial statements, and is
transferred to the investment profit and loss of the current period when the control right is lost.

7. Classification of Joint Arrangements and Accounting Treatment of Joint Operations
The Company classifies joint arrangements into joint operations and joint ventures. For a joint
operation, the Company, 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 the Company’s stake in the joint operation; recognizes relevant income and expense
according to the Company’s stake in the joint operation. When the Company purchases or sells the
assets not constituting business with the joint operation, the Company only recognized the share of
the other joint operators in the gains and losses arising from the transaction.

8. Cash and Cash Equivalents
In the Company’s understanding, the cash in the cash flow statement includes cash on hand and
deposits that can be used for cover, the cash equivalents in the cash flow statement include high


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circulating investments held within three months which are easily convertible into known amount of
cash and whose risks in change of value are minimal.

9. Foreign Currency Businesses and Translation of Foreign Currency Financial Statements
(1) Conversion method for foreign currency transactions
The foreign currency transactions that occurred in the company are converted into the amount of the
bookkeeping standard currency according to the exchange rate at the beginning of the transaction
day (usually refer to the middle price of the foreign exchange price of the day announced by the
People's Bank of China), but the company's foreign currency exchange business occurs Or
transactions involving foreign currency exchange shall be converted into the amount of the recording
currency in accordance with the exchange rate actually adopted.
(2) Conversion method for foreign currency monetary items and foreign currency non-monetary
items
On the balance sheet date, foreign currency monetary items are converted at the spot exchange rate
on the balance sheet date. The resulting exchange differences, except for: ① The exchange
differences arising from foreign currency special borrowings related to the acquisition and
construction of assets that meet the capitalization requirements are based on The principle of
capitalization of borrowing costs; ② Exchange difference of hedging instruments used for effective
hedge of net investment in overseas operations (the difference is included in other comprehensive
income, and it is not recognized as current profit or loss until the net investment is disposed of); and
③ Foreign currency monetary items for sale, except for amortized costs, the exchange differences
arising from changes in other book balances are included in other comprehensive income, and are
included in the current profit and loss.
If the preparation of consolidated financial statements involves overseas operations, if there is a
foreign currency monetary item that substantially constitutes a net investment in overseas operations,
the exchange difference due to exchange rate changes is included in other comprehensive income;
when disposing of overseas operations, it is transferred to the current profit and loss. .
Non-monetary items denominated in foreign currencies that are measured at historical cost are still
measured using the amount of the recording currency converted at the spot exchange rate on the
transaction date. Foreign currency non-monetary items measured at fair value are translated at the
spot exchange rate on the date when the fair value is determined, and the difference between the
amount of the recording standard currency after conversion and the amount of the original recording
standard currency is treated as a change in fair value (including exchange rate changes) , Included in
the current profit or loss or recognized as other comprehensive income.
(3) Conversion method of foreign currency financial statements
If the preparation of consolidated financial statements involves overseas operations, if there is a
foreign currency monetary item that substantially constitutes a net investment in overseas operations,
the exchange difference arising from changes in exchange rates is recognized as "foreign currency
statement translation difference" as other comprehensive income; disposal of overseas operations At
the time, it is included in the current profit and loss of disposal.
Foreign currency financial statements for overseas operations are converted into RMB statements in
the following ways: Assets and liabilities items in the balance sheet are converted at the spot
exchange rate on the balance sheet date; shareholders ’equity items other than“ undistributed
profits ”items Use the spot exchange rate at the time of conversion. The income and expense items in
the profit statement are translated at the current average exchange rate on the transaction date. The
undistributed profit at the beginning of the period is the undistributed profit at the end of the period
after the previous year's conversion; the undistributed profit at the end of the period is calculated and
presented according to the converted profit distribution items; the total difference between the assets
and liabilities and shareholders' equity items after conversion , As a translation difference in foreign
currency statements, is recognized as other comprehensive income. When disposing of overseas
operations and losing control, the translation differences of foreign currency statements related to the
overseas operations listed in the shareholders ’equity items in the balance sheet shall be transferred


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to the current profit or loss in full or in proportion to the disposal of the overseas operations.
Foreign currency cash flows and cash flows of overseas subsidiaries are translated at the current
average exchange rate on the cash flow date. The impact of exchange rate changes on cash is used as
an adjustment item and is presented separately in the cash flow statement.
The opening amount and the actual number of the previous period are listed based on the amount
converted from the financial statements of the previous period.
When disposing of all the owner's equity of the company's overseas operations or losing control of
overseas operations due to the disposal of part of the equity investment or other reasons, the
shareholders' equity items listed in the balance sheet, related to the overseas operations, are attributed
to the mother. The foreign currency statement translation differences of the company's owner's equity
are all transferred to the current profit and loss disposal.
When the disposal of part of the equity investment or other reasons leads to a reduction in the
proportion of overseas operating equity held but without loss of control over overseas operations, the
foreign currency statement translation difference related to the overseas operating disposal portion
will be vested in minority shareholders ’equity and not transferred to current profit or loss. When
disposing of part of the equity of an overseas operation as an associate or joint venture, the foreign
currency statement translation difference related to the overseas operation is transferred to the
current profit or loss in proportion to the disposal of the overseas operation.

10. Financial Assets and Financial Liabilities
The Company recognizes a financial asset or liability when it becomes a party of the relevant
financial instrument contract.
(1) Financial assets
1) Classification, recognition and measurement of financial assets
The Company classifies the financial assets into financial assets measured at amortized cost, financial
assets measured by the fair value and the changes recorded in other comprehensive income and
financial assets at fair value through profit or loss based on the business model for financial assets
management and characteristics of contractual cash flow of financial assets
The Company classified the financial assets meeting the following conditions at the same time as
financial assets at amortized cost: ①The business mode of the Company to manage the financial
assets targets at collecting the contractual cash flow. ②The contract of the financial assets stipulates
that the cash flow generated in the specific date is the payment of the interest based on the principal
and outstanding principal amount. These financial assets initially measured at fair value and relevant
transaction cost shall be included into the initial recognized amount and subsequently measured at
amortized cost. Except for those designated to be hedge items, the difference between the initial
recognized amount and the amount due shall be amortized at actual interest rate and their
amortization, impairment and exchange gain and loss as well as gains or losses arising from
derecognition shall be recorded into the current profit or loss.
The Company classified the financial assets meeting the following conditions at the same time as
financial assets at fair value through other comprehensive income: ①The Business mode for
managing financial assets of the Company takes contract cash flow collected as target and selling as
target. ②The contract of the financial assets stipulates that the cash flow generated in the specific
date is the payment of the interest based on the principal and outstanding principal amount. These
financial assets initially measured at fair value and relevant transaction cost shall be included into the
initial recognized amount. Except for those designated as hedged items, as for these financial assets,
except for gains or losses on credit impairment, exchange gain and loss and interest of financial
assets measured at actual interest rate, other gains or losses generated shall be recorded into other
comprehensive income. When derecognized, the accumulated gains and losses originally recorded
into other comprehensive income shall be transferred out into the current profit or loss.
The Company recognizes interest income according to the effective interest rate method. Interest
income is calculated and determined according to the book balance of the financial asset multiplied
by the actual interest rate, except for the following circumstances: ① For the financial asset with


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credit impairment that has been purchased or originated, from the initial recognition, the interest
income is calculated and determined according to the amortized cost of the financial asset and the
actual interest rate adjusted by credit. ② For financial assets purchased or originated that have not
suffered credit impairment but have suffered credit impairment in subsequent periods, the interest
income shall be calculated and determined according to the amortized cost and actual interest rate of
the financial assets in subsequent periods.
The Company designates non-transactional investment in equity instruments as financial assets at
fair value through other comprehensive income. Those designated non-transactional investment in
equity instruments by the Company is initially measured at fair value and relevant transaction cost
shall be recorded into the initial recognized amount. Except for dividends (excluding those belonging
to recovery of investment cost) which shall be recorded into the current profit or loss, other relevant
gains and losses (including exchange gains and losses) shall be recorded into other comprehensive
income and cannot be transferred into the current profit or loss subsequently. When derecognized,
the accumulated gains or losses originally recorded into other comprehensive income shall be
transferred out into retained earnings.
The Company classifies financial assets not belonging to above two as financial assets at fair value
through profit or loss which shall be initially measured at fair value and relevant transaction cost
shall be directly recorded into the current profit or loss. Gains or losses arising from these financial
assets shall be recorded into the current profit or loss.
The contingent consideration recognized by the Company in the business combination not under the
same control which constitutes a financial asset shall be classified as the financial asset at fair value
through profit or loss.
2) Recognition and measurement of financial assets transfer
The Company derecognizes a financial asset when one of the following conditions is met:
1) the rights to receive cash flows from the asset have expired; 2) the enterprise has transferred its
rights to receive cash flows from the asset to a third party under a pass-through arrangement; or 3)
the enterprise has transferred its rights to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
If the overall transfer of financial assets fulfills the requirements for derecognition, the difference between
the book value of the transferred financial assets and the sum of the consideration received due to the
transfer and the corresponding derecognition part of the accumulated amount of fair value changes
originally directly included in other comprehensive income (the contract terms involving the transferred
financial assets stipulate that the cash flow generated on a specific date is only the payment of the
principal and interest based on the unpaid principal amount) shall be included in the current profits and
losses.
If the partial transfer of financial assets satisfies the conditions for termination confirmation, the
entire book value of the transferred financial assets will be apportioned between the termination
confirmation portion and the non-termination confirmation portion according to their relative fair
values, and the consideration received for the transfer And the amount corresponding to the
termination of the recognition of the cumulative amount of changes in fair value originally included
in other comprehensive income that should be apportioned to the derecognition part And the
payment of interest based on the outstanding principal amount), and the difference between the total
book value of the aforesaid financial assets allocated is included in the current profit and loss.
(2) Financial liabilities
1) Classification, recognition and measurement of financial liabilities
The Company’s financial liabilities are, on initial recognition, classified into financial liabilities at
fair value through profit or loss and other financial liabilities.




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Financial liabilities at fair value through profit or loss include held-for-trading financial liabilities
and financial liabilities designated at the initial recognition to be measured by the fair value and their
changes are recorded in the current profit or loss (the relevant classification basis shall be disclosed
referring to the classification basis for financial assets). The subsequent measurement shall be at fair
value and gains or losses arising from changes in fair value and the dividends and interest expense
related to the financial liability shall be the current profit or loss.
Other financial liabilities (disclose relevant details based on actual situation) shall be subsequently
measured at amortized cost with actual interest rate. The Company classifies financial liabilities
except for the following items as financial liabilities at amortized cost: ①Financial liabilities at fair
value through profit or loss including held-for-trading financial liabilities (including the derivative
instruments belonging to financial liabilities) and designated financial liabilities at fair value through
profit or loss. ②Financial liabilities arising from the transfer of financial assets not meeting the
derecognition conditions or continuous involvement in the transferred financial assets. ③Financial
guarantee contract not belonging to cases of above ① or ② and loan commitments at interest rate
lower than the market rate not belonging to the case in ①.
The Company treats the financial liability arising from contingent consideration recognized as the
purchase party in the business combination not under the same control at fair value and changes
thereof shall be recorded into the current profit or loss.
2) Derecognition of financial liabilities
In case of current obligation of financial liabilities (or partial financial liabilities) being terminated,
derecognition of such financial liabilities (or partial financial liabilities) is conducted by the
Company. If the Company (borrower) concludes an agreement with the lender to replace existing
financial liabilities with new ones and contact terms of new financial liabilities are different from
those of existing financial liabilities, derecognition of existing financial liabilities and recognition of
new financial liabilities shall be conducted. In case of material alteration of contract terms of existing
financial liabilities (partial financial liabilities) by the Company, derecognition of existing financial
liabilities and recognition of new financial liabilities as per modified terms shall be conducted. In
case of derecognition of financial liabilities (partial financial liabilities), the Company includes the
balance between its carrying value and payment consideration into the current profit or loss.
(3) Determination of financial assets and liabilities’ fair value
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction. For a financial instrument which has
an active market, the Company uses quoted price in the active market to establish its fair value. The
quoted price in the active market refers to the price that can be regularly obtained from exchange
market, agencies, industry associations, pricing authorities; it represents the fair market trading price
in the actual transaction. For a financial instrument which does not have an active market, the
Company establishes fair value by using a valuation technique. Valuation techniques include using
recent arm’s length market transactions between knowledgeable, willing parties, reference to the
current fair value of another instrument that is substantially the same, discounted cash flow analysis
and option pricing models. The Company measures initially and subsequently the fair value of an
interest rate swap at the value of a competitor’s interest rate swap quoted by a recognized financial
institution as at the Company’s balance sheet date in accordance with the principle of consistency. In
valuation, the Company adopts applicable valuation techniques supported by sufficient utilizable
data and other information in current circumstances, selects input values consistent with asset or
liability characteristics considered in relevant asset or liability transactions of market participators
and prioritizes the applying relevant observable input values. Unobservable input values shall not be
applied unless relevant observable input values are not accessible or feasible.
An equity instrument is any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities. The consideration received from issuing equity instruments, net of
transaction costs, are added to shareholders’ equity. All types of distribution (excluding stock
dividends) made by the Company to holders of equity instruments are deducted from shareholders’


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equity. The Company does not recognize any changes in the fair value of equity instruments.
An equity instrument distributing dividends during the period of continued existence (including the
“interest” generated from those classified as equity instrument) shall be treated as profit distribution.
(4) Offsetting financial assets and financial liabilities
The Company’s financial assets and liabilities shall be separately presented in the balance sheet and
not set off each other. But when meeting the following conditions at the same time, the net amount
after offset shall be presented in the balance sheet: (1) The Company has the statutory right to set off
recognized amount which is currently executable; (2) The Company plans to settle with the net
amount or realize the financial asset and pay off the financial liability simultaneously.
(5) The Distinction between Financial Liabilities and Equity Instruments and Related Treatment
Methods
The Company distinguishes the financial liabilities and equity instruments according to the following
principles: (1) If the Company cannot unconditionally avoid performing a contractual obligation by
delivering cash or other financial assets, the contractual obligation meets the definition of financial
liabilities. Although some financial instruments do not explicitly include the terms and conditions of
the obligation to deliver cash or other financial assets, they may indirectly form contractual
obligations through other terms and conditions. (2) If a financial instrument must be settled with or
can be settled with the Company's own equity instrument, it is necessary to consider whether the
Company's own equity instrument used to settle the instrument is used as a substitute for cash or
other financial assets, or to enable the holder of the instrument to enjoy the residual equity in the
assets of the issuer after deducting all liabilities. If it belongs to the former condition, the instrument
is the financial liability of the issuer; if it belongs to the latter condition, the instrument is the equity
instrument of the issuer. In some cases, a financial instrument contract requires the Company to use
or use its own equity instrument to settle the financial instrument, in which the amount of contractual
rights or contractual obligations is equal to the number of its own equity instruments available or to
be delivered multiplied by its fair value at the time of settlement, regardless of whether the amount
of contractual rights or obligations is fixed, whether it is entirely or partially based on changes in
variables other than the market price of the Company's own equity instruments, the contract shall be
classified as a financial liability.
In classifying financial instruments (or their components) in the consolidated statement, the
Company has taken into account all terms and conditions reached between the Company members
and the holders of financial instruments. If the Company as a whole undertakes the obligation to
deliver cash, other financial assets or settle accounts in other ways that cause the instrument to
become a financial liability due to the instrument, the instrument shall be classified as a financial
liability.
If financial instruments or their components are financial liabilities, the Company will include
interest, dividends (or dividends), gains or losses, and gains or losses arising from redemption or
refinancing, etc. in the current profits and losses.
If financial instruments or their components are equity instruments, when they are issued (including
refinancing), repurchased, sold or cancelled, the Company will treat them as changes in equity and
will not recognize changes in the fair value of equity instruments.

11. Impairment of Financial Assets
The Company needs to confirm that the financial assets subject to the impairment loss are the
financial assets measured based on the amortized cost, the debt instrument investment measured
based on the fair value with its variations included into other comprehensive incomes and the lease
outlay receivable, mainly including notes receivable, account receivable, other receivables,
investment on creditor’s rights, other investments on creditor’s rights and long-term receivables etc.
Besides, in respect of the contract assets and partial financial guarantee contract, corresponding
impairment provisions shall be calculated and withdrawn and corresponding credit impairment losses
recognized according to various accounting policies mentioned in this part.
(1) Methods for the Recognition of Impairment Provisions
For all mentioned items above, the Company shall calculate and withdraw corresponding impairment


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provisions and recognize corresponding credit impairment losses according to applicable expected
credit loss measurement methods (general methods or simplified methods) with the expected credit
loss as the basis.
Credit loss refers to the difference between all receivable contract cash flows and all expected cash
flows that are discounted to the present value based on the original actual interest rate -- the present
value of all cash shortfall. However, for the purchased or original financial assets subject to the credit
impairment, the Company shall realize the discounting based on the actual interest rate subject to the
credit adjustment.
General methods applied to measure the expected credit loss can be described as: the Company shall
evaluate whether the credit risk of the financial assets (including the contract assets and other
applicable items; the same below) increases remarkably after the initial recognition on the balance
sheet day; if the credit risk increases remarkably after the initial recognition, the Company shall
measure the provision for loss based on the specific expected credit loss amount during the entire
period of existence; if not, the Company shall measure the provision for loss based on the specific
expected credit loss amount in the following 12 months. While evaluating the expected credit loss,
the Company shall take all reasonable and well-founded information into consideration, including
the forward-looking information.
For the financial instrument of lower credit risk on the balance sheet day, the Company shall assume
that its credit risk does not increase remarkably after the initial recognition, and corresponding
provision for loss shall be measured according to the expected credit loss in the following 12 months.
(2) Standards for Judging Whether the Credit Risk Increases Remarkably after the Initial Recognition
If any financial assets’ probability of default within the expected period of existence determined on
the balance sheet day is obviously higher than that within the expected period of existence
determined during the initial recognition, it shall indicate the remarkable increase of the financial
assets’ credit risk. Unless it is under special circumstances, the Company shall adopt various
variations in the default risk in the following 12 months as the reasonable basis for estimating
corresponding variations in the default risk within the entire period of existence and determining
whether the credit risk increases remarkably after the initial recognition.
(3) Combined Method for Evaluating the Expected Credit Risk based on Corresponding
Combination
For the financial assets with remarkably different credit risk, the Company shall separately evaluate
its credit risk, including the receivables from related parties, receivables involved in any dispute with
the other party or any lawsuit and arbitration, and receivables with obvious evidence showing that
the debtor cannot fulfill the due payment obligation etc.
Except for the financial assets whose credit risk shall be separately evaluated, the Company shall
divide these financial assets into different combinations based on the specific risk features, on which
basis, corresponding credit risks can be evaluated.
(4) Accounting Treatment Methods Applied to the Impairment of Financial Assets
At the end of the period, the Company shall calculate the expected credit losses of various financial
assets. If the expected credit loss is higher than the carrying amount of its current impairment
provision, the difference shall be recognized as the impairment loss; if lower, the difference shall be
recognized as the gain from the impairment.
(5) Methods for Determining the Credit Loss of Various Financial Assets
① Notes Receivables
For notes receivable, the Company shall measure the provision for loss based on the specific
expected credit loss during the entire period of existence. According to the credit risk characteristics
thereof, except those with separate evaluation of credit risk, notes receivable can be divided into
different combinations:
                       Item                                                   Basis

Bank Acceptance                                         The Accepter shall be the bank with high credit



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                                                     level and low risks
                                                     Classified by credit risk of acceptors (the same
Trade Acceptance                                     as accounts receivable)
②Account Receivable and Contract Assets
For account receivable and contract assets excluding significant financing composition, the
Company shall measure the provision for loss according to the specific expected credit loss amount
within the entire period of existence.
For account receivable, contract assets and lease payment receivable including significant financing
composition, the Company shall always measure the provision for loss according to the specific
expected credit loss amount within the period of existence.
Except the account receivable and contract assets whose credit risks shall be separately evaluated,
the Company shall divide them into different combinations based on the specific credit risks:
                     Item                                                  Basis

                                                 This portfolio is accounts receivable with aging
Aging Combination
                                                 as the credit risk feature.

Project Funds Combination                        This portfolio is the project-related receivables.

                                                 The accounts receivable within the scope of
Related party combination
                                                 consolidation
③Other Receivables
By determining whether the credit risk of other receivables increases remarkably after the initial
recognition, the Company shall measure the impairment loss based on the specific expected credit
loss in the following 12 months or during the entire period of existence. Except other receivables
whose credit risks shall be separately evaluated, the Company shall divide them into different
combinations based on the specific credit risk features:
                     Item                                                  Basis

                                                 This portfolio is accounts receivable with aging
Aging Combination
                                                 as the credit risk feature.

                                                 This combination shall regard other receivables
                                                 of extremely low risk (including the revolving
Low Risk Combination
                                                 fund, the cash deposit and the guarantee
                                                 deposit) as the credit risk feature.

                                                 Other     receivables      within   the   scope    of
Related party combination
                                                 consolidation.
④ Long-term Receivables (except the account receivable and the lease payment receivable
including the significant financing composition)
By determining whether the credit risk of long-term account receivables increases remarkably after
the initial recognition, the Company shall measure the impairment loss based on the specific
expected credit loss in the following 12 months or during the entire period of existence. Except
long-term account receivables whose credit risks shall be separately evaluated, the Company shall



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divide them into different combinations based on the specific credit risk features:
                      Item                                                 Basis
                                                    Regarding the long-term receivables related to
Financing Lease Combination                         the financing lease as the credit risk
                                                    characteristics
                                                    Regarding the long-term receivables related to
Franchise Combination
                                                    the PPP Project as the credit risk characteristics


12. Inventory
(1) Classification
The Company’s inventories mainly include raw materials, goods in process; merchandise on hand,
goods delivered, circulating materials, consigned processing materials and property inventories
(development product, and development cost), and finished but unsettled assets of construction
contract.
① Development product refers to the finished and held-for-sale property.
② Development costs refers to the unfinished property with the development purpose for sale.
③ The finished but unsettled assets of construction contract refers to the excess amount of the sum
of accumulatively incurred costs and recognized gross margin (loss) of contract in process over the
settled amount.
(2) Pricing method for outgoing inventories
 Pricing method of common 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 in the period.
 Pricing method of property inventories
The property inventories are initially measured at the costs, and inventories mainly include materials
in stock, development product in process (development costs), finished development product, and
development product intended to sell but rent temporarily, and etc. The costs of the development
product include the land premium, expenditures for supporting infrastructures, expenditures for
construction and installation projects, the borrowing costs before the completion of the developed
project and other expenses occurred during the development process. When the inventories are
delivered, its actual costs shall be recognized by weighted average method.
 Pricing method of construction contract
The construction contracts shall be measured at actual cost, including all direct and indirect costs
related to the execution of the contract from the time signing the contract to completing the contract.
The expenses such as travel expenses and bidding fees incurred for the purpose of signing the
contract, which can be separately and reliably measured and the contract is likely to be concluded,
are included in the contract cost when the contract is obtained; if the above conditions are not met,
they are included in the 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 in advance.
(3) Recognition basis of net realizable value and withdrawal method of depreciation reserves for



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inventories
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 the effect of events after
balance-sheet-date.
On the balance sheet date, the inventories shall be measured according to the cost or the net
realizable value, whichever is lower. If the net realizable value is lower than the cost, it shall
withdraw the depreciation reserves for inventories, which was withdrawn in accordance with the
balance that the cost of individual inventory item exceeding the net realizable value. The inventories
with various numbers and low unit price shall be made provisions for depreciation reserves of
inventories according to the category of inventories. For inventories that are produced and sold in the
same region with same or similar end use or purposes, and hard to be measured separately from other
items, it shall be made merger provisions for falling price 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 be included in the profits
and losses of the current period.
(4) The perpetual inventory system is maintained for stock system.
(5) Amortization method of the low-value consumption goods and packing articles
The low-value consumption goods should be amortized by one time amortization when acquiring
and the packing articles are amortized by one time amortization when acquiring.

13. Contract Assets
(1) Confirmation methods and standards of contract assets
Contract assets refer to the right of the company to receive consideration after transferring goods to
customers, and this right depends on factors other than the passage of time. If the company sells two
clearly distinguishable products to customers, it has the right to receive payment because one of the
products has been delivered, but the payment is also dependent on the delivery of the other product,
the company has the right to receive payment as a contract assets.
(2) Determination method and accounting treatment method of expected credit loss of contract assets
The method of determining the expected credit loss of contract assets, refer to the description of
“Financial Asset Impairment”.
The company calculates the expected credit loss of contract assets on the balance sheet date. If the
expected credit loss is greater than the book value of the current contract asset impairment provision,
the company will recognize the difference as an impairment loss and debit the "credit impairment
loss". Credited "Contract asset impairment provision". On the contrary, the company recognizes the
difference as an impairment gain and keeps the opposite accounting records.
If the company actually incurs credit losses and determines that the relevant contract assets cannot be
recovered, and the written-off is approved, the "contract asset impairment reserve" is debited and the
"contracted asset" is credited based on the approved write-off amount. If the written-off amount is
greater than the provision for loss that has been withdrawn, the "credit impairment loss" is debited
based on the difference.

14. Contract Costs
(1) The method of determining the amount of assets related to contract costs
The company’s assets related to contract costs include contract performance costs and contract
acquisition costs.
The contract performance cost, that is, the cost incurred by the company for the performance of the
contract, does not fall within the scope of other accounting standards and meets the following
conditions at the same time, as the contract performance cost is recognized as an asset: the cost and a


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current or expected contract Directly related, including direct labor, direct materials, manufacturing
expenses (or similar expenses), clearly the cost borne by the customer, and other costs incurred only
due to the contract; this cost increases the company's future resources for fulfilling its performance
obligations; This cost is expected to be recovered.
The contract acquisition cost, that is, the incremental cost incurred by the company to obtain the
contract is expected to be recovered, and is recognized as an asset as the contract acquisition cost; if
the asset amortization period does not exceed one year, it is included in the current profit and loss
when it occurs. Incremental cost refers to the cost (such as sales commission, etc.) that the company
will not incur without obtaining the contract. The company's expenses incurred in obtaining the
contract, other than the expected incremental cost that can be recovered (such as travel expenses
incurred regardless of whether the contract is obtained, etc.), are included in the current profit and
loss when they are incurred, but it is clearly borne by the customer except.
(2) Amortization of assets related to contract costs
The company’s assets related to contract costs are amortized on the same basis as the commodity
revenue recognition related to the asset and included in the current profit and loss.
(3) Impairment of assets related to contract costs
When the company determines the impairment loss of assets related to contract costs, it first
determines the impairment loss of other assets related to the contract that are confirmed in
accordance with other relevant business accounting standards; then, based on their book value higher
than the company’s transfer and If the difference between the remaining consideration that the
asset-related commodity is expected to obtain and the estimated cost incurred for the transfer of the
relevant commodity, the excess shall be provided for impairment and recognized as an asset
impairment loss.
If the depreciation factors of the previous period have changed, and the aforementioned difference is
higher than the book value of the asset, the original provision for asset impairment shall be reversed
and included in the current profit and loss, but the book value of the asset after the reversal shall not
exceed Assuming no provision for impairment is made, the book value of the asset on the date of
reversal.

15. Long-term Equity Investments
Some of the long-term equity investments referred to by the Company are mainly for subsidiaries.
They refer to the long-term equity investments and joint ventures that the Company has control, joint
control or significant influence over the invested, affiliated enterprises. For long-term equity
investments that the company does not have control, joint control or significant influence on the
invested units, they are accounted for as available-for-sale financial assets or financial assets
measured at fair value and whose changes are included in the profits and losses of the current period
from January 1, 2019. if they are non-tradable, the company may choose to designate them as
financial assets measured at fair value and whose changes are included in other comprehensive
income during initial recognition. please refer to notes 4 and 10 "financial assets and financial
liabilities" for accounting policies.
Joint control refers to the common control of the company over an arrangement according to relevant
agreements, and the relevant activities of the arrangement can only be decided after the participants
sharing the control rights have agreed unanimously. Significant influence refers to the fact that the
company has the power to participate in the decision-making of the financial and operating policies
of the invested entity, but cannot control or jointly control the formulation of these policies with
other parties.
(1) Determination of investment cost
For the long-term equity investment obtained from the merger of enterprises under the same control,
the initial investment cost of the long-term equity investment shall be based on the share of the book
value of the shareholders' equity of the merged party in the consolidated financial statements of the
final controlling party on the merger date. The difference between the initial investment cost of


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long-term equity investment and the cash paid, the non-cash assets transferred and the book value of
the debts undertaken, and the adjustment of capital reserve; If the capital reserve is insufficient to
offset, the retained earnings shall be adjusted. If equity securities are issued as merger consideration,
the capital reserve shall be adjusted on the merger date according to the share of the book value of
the merged party's owner's equity in the final controlling party's consolidated financial statements as
the initial investment cost of the long-term equity investment, and according to the total nominal
value of the issued shares as equity, and the difference between the initial investment cost of the
long-term equity investment and the total nominal value of the issued shares. If the capital reserve
is insufficient to offset, the retained earnings shall be adjusted.
For the long-term equity investment obtained from the merger of enterprises not under the same
control, the initial investment cost of the long-term equity investment shall be taken as the merger
cost on the purchase date. The merger cost includes the sum of the assets paid by the purchaser, the
liabilities incurred or assumed, and the fair value of the equity securities issued.
Intermediary expenses such as auditing, legal services, evaluation and consultation and other related
management expenses incurred by the merging party or the purchaser for the enterprise merger shall
be included in the current profits and losses when incurred.
Other equity investments other than the long-term equity investments formed by the merger of
enterprises are initially measured according to the cost, which is determined according to the actual
cash purchase price paid by the company, the fair value of equity securities issued by the company,
the value agreed in investment contracts or agreements, the fair value or original book value of assets
exchanged in non-monetary asset exchange transactions, and the fair value of the long-term equity
investments themselves, depending on the way the long-term equity investments are obtained.
Expenses, taxes and other necessary expenses directly related to obtaining long-term equity
investment are also included in the investment cost.
(2) Subsequent Measurement and Profit and Loss Recognition Methods
For long-term equity investments that are jointly controlled by the invested units (except those that
constitute joint operators) or have significant impact, the equity method shall be adopted for
accounting. In addition, the company's financial statements use the cost method to account for
long-term equity investments that can control the invested units.
①long-term equity investment accounted for by cost method
When the cost method is used for accounting, the long-term equity investment is priced according to
the initial investment cost, and the cost of the long-term equity investment is adjusted by adding or
recovering the investment. In addition to the actual price paid at the time of obtaining the
investment or the declared but undistributed cash dividends or profits included in the consideration,
the current investment income shall be recognized according to the cash dividends or profits declared
and distributed by the invested entity.
② long-term equity investment accounted for by equity method
If the initial investment cost of the long-term equity investment is greater than the fair value share of
the identifiable net assets of the invested entity when the equity method is used for accounting, the
initial investment cost of the long-term equity investment shall not be adjusted; If the initial
investment cost is less than the fair value share of the identifiable net assets of the investee, the
difference shall be included in the current profits and losses, and the cost of long-term equity
investment shall be adjusted at the same time.
When the equity method is used for accounting, the investment income and other comprehensive
income shall be recognized respectively according to the share of the net profit and loss and other
comprehensive income realized by the invested entity that should be enjoyed or shared, and the book
value of long-term equity investment shall be adjusted at the same time. The book value of
long-term equity investment shall be reduced correspondingly according to the portion of profits or
cash dividends declared and distributed by the invested entity. The book value of long-term equity
investment shall be adjusted and included in the capital reserve for other changes in the owner's
equity of the invested entity other than net profit and loss, other comprehensive income and profit
distribution. When confirming the share of the net profit and loss of the investee, the net profit of


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the investee shall be confirmed after adjustment based on the fair value of the identifiable assets of
the investee at the time of obtaining the investment. If the accounting policies and accounting
periods adopted by the invested entity are inconsistent with the Company, the financial statements of
the invested entity shall be adjusted in accordance with the Company's accounting policies and
accounting periods, and the investment income and other comprehensive income shall be recognized
accordingly. For transactions between the Company, associated enterprises and joint ventures, if
the assets invested or sold do not constitute business, the unrealized gains and losses on internal
transactions shall be offset by the portion attributable to the Company according to the proportion
enjoyed, and the investment gains and losses shall be recognized on this basis. However, the
unrealized internal transaction losses between the Company and the investee shall not be offset if
they are impairment losses of the transferred assets.
When the net loss of the investee is confirmed to be shared, the book value of the long-term equity
investment and other long-term interests that substantially constitute the net investment of the
investee shall be reduced to zero. In addition, if the company has the obligation to bear additional
losses to the investee, the estimated liabilities shall be recognized according to the estimated
obligations and included in the current investment losses. If the invested entity realizes net profit in
the following period, the company will resume the recognition of the profit sharing amount after the
profit sharing amount makes up for the unrecognized loss sharing amount.
③Acquisition of minority shares
In the preparation of consolidated financial statements, if the capital reserve (equity premium) is
adjusted due to the difference between the long-term equity investment added by the purchase of
minority equity and the net asset share that the subsidiary company is entitled to continuously
calculate from the date of purchase (or the date of consolidation) according to the added
shareholding ratio, and the capital reserve (equity premium) is insufficient to offset, the retained
earnings shall be adjusted.④ disposal of long-term equity investment
In the consolidated financial statements, the parent company partially disposes of the long-term
equity investment in the subsidiary company without losing control. The difference between the
disposal price and the net assets of the subsidiary company corresponding to the disposal of the
long-term equity investment is included in the shareholders' equity. If the parent company partially
disposes of the long-term equity investment in the subsidiary company, resulting in the loss of
control over the subsidiary company, it shall be handled according to the relevant accounting policies
mentioned in notes 4 and 6 "methods for preparing consolidated financial statements".
For the disposal of long-term equity investment under other circumstances, the difference between
the book value of the disposed equity and the actual purchase price shall be included in the current
profits and losses.
For long-term equity investments that are accounted for by the equity method and the remaining
equity after disposal are still accounted for by the equity method, other comprehensive income
originally included in shareholders' equity shall be accounted for on the same basis as the direct
disposal of relevant assets or liabilities by the invested entity according to the corresponding
proportion. Owners' equity recognized due to changes in owners' equity other than net profit and
loss, other comprehensive income and profit distribution of the investee shall be transferred to the
current profit and loss in proportion.
For long-term equity investments that are accounted for by the cost method and the remaining equity
is still accounted for by the cost method after disposal, other comprehensive income recognized by
the equity method accounting or financial instrument recognition and measurement standards
accounting before obtaining control over the invested entity shall be accounted for on the same basis
as the direct disposal of related assets or liabilities by the invested entity, and shall be carried forward
to the current profits and losses in proportion. Changes in other owner's equity other than net profit
and loss, other comprehensive income and profit distribution in the net assets of the invested entity
recognized by the equity method are carried forward to the current profit and loss in proportion.




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16. Investment Property
The term “investment property” refers to the real estate held for generating rent and/or capital
appreciation. Investment property of the Company 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 the right to use any building which has already been rented.
The initial measurement of the investment property shall be made at its cost. Subsequent
expenditures incurred for an investment property is included in the cost of the investment property
when it is probable that economic benefits associated with the investment property will flow to the
Company and the cost can be reliably measured, otherwise the expenditure is recognized in profit or
loss in the period in which they are incurred.
The Company shall make a follow-up measurement to the investment property by employing the
cost pattern on the date of the balance sheet. An accrual depreciation or amortization shall be made
for the investment property in the light of the accounting policies of the use right of buildings or
lands.
For details of impairment test method and withdrawal method of impairment provision of investment
property, please refer to Note IV. 20. “Long-term assets impairment”.
When owner-occupied real estate or inventories are changed into investment property or investment
property is changed into owner-occupied real estate, of which book value prior to the change shall be
the entry value after the change.
When an investment property 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 property at the date of such change. If the fixed asset or intangible asset is
changed into investment property 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 property measured by adopting the fair value pattern, whose fair value on the date of
such change shall be the entry value after the change
An investment property is derecognized on disposal or when the investment property 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 property less its carrying amount
and related taxes and expenses is recognized in profit or loss in the period in which it is incurred.

17. Fixed Assets
(1) Conditions for recognition of fixed assets
Fixed assets refer to tangible assets held for the production of commodities, the provision of services,
leasing or operation and management, whose service life exceeds one accounting year. Fixed assets
are recognized only when the economic benefits associated with them are likely to flow into the
company and their costs can be reliably measured. Fixed assets are initially measured at cost, taking
into account the impact of expected abandonment costs.
(2) Depreciation methods of 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:
Category of fixed                                                 Expected net         Annual
                          Method          Useful life (Year)
       assets                                                  salvage value (%) deprecation (%)

  Housing and          Straight-line
                                               20-40               5-10.00               2.25-4.75
    building           depreciation

   Machinery           Straight-line
                                               5-10                5-10.00               9.00-19.00


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   equipment           depreciation

   Electronic          Straight-line
                                                 3-5                  5-10.00              18.00-31.67
   equipment           depreciation

 Transportation        Straight-line
                                                 3-5                  5-10.00              18.00-31.67
     vehicle           depreciation

                       Straight-line
Other equipment                                   5                   5-10.00              18.00-19.00
                       depreciation
The “expected net salvage value” refers to the expected amount that the Company may obtain from
the current disposal of a fixed asset after deducting the expected disposal expenses at the expiration
of its expected 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. 22 “Long-term assets impairment”.
(4) Recognition basis, pricing and depreciation method of fixed assets by finance 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 the shorter one of the lease term or its
useful life.
(5) Other explanations
The follow-up expenses related to a fixed asset, if the economic benefits pertinent to this fixed asset
are likely to flow into the enterprise and its cost can be reliably measured, shall be recorded into cost
of fixed assets and ultimately recognized as the carrying value of the replaced part; otherwise, they
shall be included in the current 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 Company
sells, transfers or discards any fixed assets, or when any fixed assets of the Company is damaged or
destroyed, the Company shall deduct the carrying 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 Company 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 of
the accounting estimates.

18. Construction in Progress
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 the
assets are ready for their intended use.
For details of the testing method of impairment and withdraw method of impairment provision on
construction in progress, please refer to Note IV. 22 “Long-term assets impairment”.

19. Borrowing Costs
For incurred borrowing costs, which can be directly attributed to fixed assets, investment real estate
and inventory that need more than one year of purchasing, construction or production activities to


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reach the preset usable or sellable status, shall be capitalized when the asset expenditure has occurred,
the borrowing costs have occurred, and the purchasing, construction or production activities
necessary for the asset to reach the preset usable or sellable status have begun; When the acquisition,
construction or production of assets that meet the capitalization conditions reach the intended usable
or sellable status, capitalization is stopped, and the borrowing costs incurred thereafter are included
in the profits and losses of the current period. If there is an abnormal interruption in the acquisition,
construction or production of assets that meet the capitalization conditions and the interruption lasts
for more than 3 consecutive months, the capitalization of borrowing costs will be suspended until the
acquisition, construction or production of assets starts again.
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 of the weighted average interest rate of the general
borrowing.
During the capitalization period, the exchange differences of foreign currency special loans are fully
capitalized; the exchange differences of foreign currency general loans are included in the current
profit and loss.

20. Intangible Assets
(1) Intangible assets
The term “intangible asset” refers to the identifiable non-monetary assets possessed or controlled by
enterprises which have no physical 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 upon the
occurrence.
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, the whole payment shall
be treated as fixed assets.
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 intangible assets without certain
service life shall not be amortized.
At the end of period, the Company 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 Company 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 intangible assets with finite service life.
(2) R & D expenses
The expenditures for internal research and development projects of an enterprise shall be classified
into research expenditures and development expenditures.
The research expenditures shall be recorded into the profit or loss for the 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 they don’t satisfy the following conditions.


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① It is feasible technically to finish intangible assets for use or sale;
② It is intended to finish and use or sell the intangible 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 intangible assets itself or the
intangible assets will be used 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 The development expenditures of the intangible assets can be reliably measured.
As for expenses that can’t be identified as research expenditures or development expenditures, the
occurred R & D expenses shall be all included in current profits and losses.
(3) Testing method of impairment and withdraw method of impairment provision of intangible assets
For details of the testing method of impairment and withdraw method of impairment provision on
intangible assets, see Notes IV. 22 “Long-term assets impairment”.

21. 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 expenses shall be amortized averagely within benefit period.

22. Impairment of Long-term Assets
For non-current financial Assets of fixed Assets, projects under construction, intangible Assets with
limited service life, investing real estate with cost model, long-term equity investment of subsidiaries,
cooperative enterprises and joint ventures, the Company 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 in value no matter whether it exists.
If the recoverable amount is less than carrying 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 the
Buyer’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 to Assets 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 flow independently.
In impairment test, carrying value of the business reputation in financial report should be shared to
beneficial asset group and asset group combination in collaboration of business merger. It is shown
in the test that if recoverable amounts of shared business reputation asset group or asset group
combination are lower than book value, it should determine the impairment loss. Impairment loss
amount should firstly be deducted and shared to the carrying value of business reputation of asset
group or asset group combination, then deduct carrying value of all assets according to proportions
of other carrying value of above assets in asset group or asset group combination except business
reputation.
After the asset impairment loss is determined, recoverable value amounts would not be returned in
future.




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23. 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 Company should be recognized as liabilities
and is included in the current gains and losses or relevant assets cost. Of which the non-monetary
benefits should be measured according to the fair value.
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 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-term employees’ payrolls.
The inside employee retirement plan is treated by adopting the same principle with the above dismiss
ion welfare. The Company would recorded the salary and the social security insurance fees paid and
so on from the employee’s service termination date to normal retirement date into current profits and
losses (dismission welfare) under the condition that they meet the recognition conditions of
estimated liabilities.
The other long-term welfare that the Company 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 be
disposed according to the setting revenue plan.

24. Provisions
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 provisions in
accordance with the best estimate of the necessary expenses for the performance of the current
obligation.
When all or some of the expenses necessary for the liquidation of an provisions 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 carrying value of the estimated liabilities.

25. Revenue
(1) Principles of revenue recognition
The company has fulfilled the performance obligations in the contract, that is, when the customer
obtains control of the relevant goods or services, revenue is recognized. Obtaining control over


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related goods or services means being able to lead the use of the goods or the provision of such
services and obtain almost all of the economic benefits from it.
On the starting date of the contract, the company evaluates the contract, identifies each individual
performance obligation contained in the contract, and determines whether each individual
performance obligation is performed within a certain period of time or at a certain point in time.
When one of the following conditions is met, it is a performance obligation within a certain period of
time, otherwise, it is a performance obligation at a certain point in time:
①The customer obtains and consumes the economic benefits brought by the company's performance
at the same time the company performs the contract.
②The customer can control the products under construction during the performance of the company.
③The goods produced during the performance of the company have irreplaceable uses, and the
company has the right to collect payments for the cumulative performance of the contract during the
entire contract period.
For performance obligations performed within a certain period of time, the company recognizes
revenue according to the performance progress during that period. When the performance progress
cannot be reasonably determined, if the cost incurred by the company is expected to be compensated,
the revenue shall be recognized according to the amount of the cost incurred until the performance
progress can be reasonably determined.
For performance obligations performed at a certain point in time, the company recognizes revenue at
the point when the customer obtains control of the relevant goods or services. When judging whether
a customer has obtained control of goods or services, the company considers the following signs:
①The company enjoys the current right to receive payment for the goods or services.
②The company has transferred the legal ownership of the product to the customer.
③The company has transferred the goods in kind to the customer.
④The company has transferred the main risks and rewards of the ownership of the product to the
customer.
⑤The customer has accepted the goods or services.
The company has transferred goods or services to customers and the right to receive consideration is
listed as contract assets, and contract assets are devalued on the basis of expected credit losses. The
company's unconditional right to collect consideration from customers is listed as receivables. The
company’s obligation to transfer goods or services to customers due to the consideration received
from customers is listed as contract liabilities.
(2) Principles of income measurement
① If the contract contains two or more performance obligations, at the beginning of the contract, the
company will allocate the transaction price to each individual performance obligation based on the
relative proportion of the stand-alone selling price of the goods or services promised by each
individual performance obligation. Revenue is measured at the transaction price of each individual
performance obligation.
②The transaction price is the amount of consideration that the company expects to be entitled to
receive due to the transfer of goods or services to customers, excluding payments collected on behalf
of third parties and payments expected to be returned to customers. The transaction price confirmed
by the company does not exceed the amount at which the accumulated confirmed income will most
likely not undergo a significant reversal when the relevant uncertainty is eliminated. It is expected
that the money returned to the customer will not be included in the transaction price as a liability.
③If there is variable consideration in the contract, such as cash discounts and price guarantees in
part of the contract between the company and its customers, the company determines the best
estimate of the variable consideration according to the expected value or the most likely amount, but
includes the variable The transaction price of the consideration shall not exceed the amount at which
the accumulated confirmed income is unlikely to be reversed significantly when the relevant
uncertainty is eliminated.
④For the consideration payable to customers, the company offsets the transaction price from the


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consideration payable to customers, and offsets the current income at the time when the relevant
income is recognized and the payment (or promised to pay) the customer consideration is later,
unless the consideration payable is for Obtain other clearly distinguishable products from customers.
⑤For sales with a sales return clause, when the customer obtains control of the relevant product, the
company recognizes revenue based on the amount of consideration expected to be received due to
the transfer of the product to the customer, and the expected return due to the sales return is
recognized as an estimated liability ; At the same time, according to the expected book value of the
returned goods at the time of transfer, the balance after deducting the estimated cost of recovering the
goods (including the value impairment of the returned goods) is recognized as an asset, that is, the
return cost receivable, according to the transferred goods The book value at the time of the transfer,
deducting the net carry-over cost of the aforementioned asset cost. On each balance sheet date, the
company re-estimates the future sales returns and re-measures the aforementioned assets and
liabilities.
⑥ If there is a significant financing component in the contract, the company shall determine the
transaction price based on the amount payable in cash when the customer assumes control of the
goods or services. Using the discount rate that discounts the nominal amount of the contract
consideration into the current commodity price, the difference between the determined transaction
price and the amount of the consideration promised in the contract is amortized by the actual interest
method during the contract period. On the starting date of the contract, the company expects that the
time between the customer's acquisition of control of the goods or services and the customer's
payment of the price will not exceed one year, regardless of the significant financing components in
the contract.
⑦ According to contractual agreements, legal provisions, etc., the company provides quality
assurance for the products sold and the assets built. For guarantee-type quality assurance to assure
customers that the goods sold meet the established standards, the company conducts accounting
treatment in accordance with "contingent events-estimated liabilities". For the service quality
assurance that provides a separate service in order to assure customers that the goods sold meet the
established standards, the company regards it as a single performance obligation, based on the
stand-alone selling price of the quality assurance of goods and services. In a relative proportion, part
of the transaction price is allocated to service quality assurance, and revenue is recognized when the
customer obtains control of the service. When assessing whether the quality assurance provides a
separate service in addition to ensuring that the products sold meet the established standards, the
company considers whether the quality assurance is a legal requirement, the quality assurance period,
and the nature of the company's commitment to perform the tasks.
⑧ When the construction contract between the company and the customer is changed: ①If the
contract change adds clearly distinguishable construction services and contract prices, and the new
contract price reflects the stand-alone selling price of the new construction services, the company
will The contract change shall be treated as a separate contract for accounting treatment; ②If the
contract change does not fall into the above-mentioned circumstance ①, and there is a clear
distinction between the construction services that have been transferred and the construction services
that have not been transferred on the date of the contract change, the company Treat it as the
termination of the original contract, and at the same time, merge the unfulfilled part of the original
contract and the changed part of the contract into a new contract for accounting treatment; ③If the
contract change does not fall into the above situation ①, and the construction service has been
transferred on the date of contract change There is no clear distinction between the construction
service and the untransferred construction service. The company accounts for the changed part of the
contract as a component of the original contract. The resulting impact on the recognized revenue will
be adjusted on the date of contract change.
(3) Specific methods of revenue recognition
① Revenue recognized on time
The company's sales of household appliances, electronic components, etc., belong to the



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performance obligation performed at a certain point in time.
Recognition conditions for income from domestic sales of goods and overseas direct sales of goods:
The company has delivered the product to the customer in accordance with the contract and the
customer has received the product, the payment has been recovered or the receipt of payment has
been obtained, and the relevant economic benefits are likely to flow in. The main risks and rewards
have been transferred, and the legal ownership of the goods has been transferred.
Conditions for confirming the income of exported goods: The company has declared the products for
export according to the contract, obtained the bill of lading, and delivered the goods to the carrier
entrusted by the purchaser. The payment has been recovered or the receipt of payment has been
obtained and relevant economic benefits are likely to flow in. The main risks and rewards of
commodity ownership have been transferred, and the legal ownership of commodities has been
transferred.
②Income confirmed according to the performance progress
The company's business contracts with customers for project construction, online advertising,
operating leases, etc. are performance obligations performed within a certain period of time, and
revenue is recognized according to the progress of the performance.

26. Government Grants
(1) Types of government grants
Government grants refer to monetary or non-monetary assets obtained by the company from the
government for free (but excluding the capital invested by the government as the owner), which are
mainly divided into government grants related to assets and government grants related to income . If
the government grants are a monetary asset, it shall be measured according to the amount received or
receivable. If the government grants are a non-monetary asset, it shall be measured at its fair value; if
its fair value cannot be obtained reliably, it shall be measured at its nominal amount. Government
grants measured in nominal amounts are directly included in the current profit and loss.
(2) Accounting treatment method of government grants
The government grants related to assets refer to the government grants obtained by the company for
the purchase or construction or other forms of long-term assets. The company's asset-related
government grants, offsetting the book value of related assets or recognized as deferred income, and
recognized as deferred income, shall be included in the current profit and loss in installments
according to a reasonable and systematic method within the useful life of the relevant assets;
Government grants related to income refer to government grants obtained by the company in
addition to government grants related to assets. The company's government grants related to income
used to compensate the company's related costs or losses in subsequent periods are recognized as
deferred income, and during the period when the related costs or losses are recognized, they are
included in the current profit or loss or offset related Cost expense or loss; if it is used to compensate
the relevant cost expense or loss incurred by the company, it is directly included in the current profit
and loss or offset the relevant cost expense or loss.
(3) Confirmation timing of government grants
Government grants measured in accordance with the amount receivable are confirmed when there is
solid evidence at the end of the period that they can meet the relevant conditions stipulated by the
financial support policy and it is expected that the financial support funds can be received.
Except for government grants measured in accordance with the receivable amount, the company will
recognize the subsidies when they actually receive the subsidies.

27. Deferred Income Tax Assets/Deferred Income Tax Liabilities
(1) Income tax of the current period
On the balance sheet date, for the current income tax liabilities (or assets) of the current period as
well as the part formed during the previous period, should be measured by the income tax of the
estimated payable (returnable) amount which be calculated according to the regulations of the tax
law. The amount of taxable income on which the current income tax expenses are calculated is



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calculated after making corresponding adjustments to the current pre tax accounting profits in
accordance with the relevant tax laws.
(2) Deferred income tax assets and deferred income tax liabilities
The difference between the carrying value of certain assets and liabilities and their tax assessment
basis, as well as the temporary difference occurs from the difference between the carrying 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 of the balance 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 Company should recognize the
deferred income tax liabilities arising from other taxable temporary difference.
No deferred taxable assets should be recognized for the deductible temporary difference of initial
recognition of assets and liabilities arising from the transaction which is not business combination,
the accounting profits will not be affected, nor will the taxable amount or deductible loss be affected
at the time of transaction. Besides, no deferred taxable assets should be recognized for the deductible
temporary difference related to the investments of the subsidiary companies, associated enterprises
and joint enterprises, which are not likely to be reversed in the expected future or is not likely to
acquire any amount of taxable income tax that may be used for making up such deductible temporary
differences. Otherwise, the Company shall recognize the deferred income tax assets arising from a
deductible temporary difference basing on the extent of the amount of the taxable income that is
likely to be acquired to make up such 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 are expected to be
recovered or the liabilities are expected to be settled.
The carrying 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 carrying 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 taxable
income will be available.
(3) Income tax expenses
Income tax expenses include current income tax 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
the shareholders’ equity which should be included in other comprehensive income or shareholders’
equity as well as the carrying value for adjusting the goodwill of the deferred income tax occurs from
the business combination.
(4) Offset of income tax
The current income tax assets and liabilities of the Company 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 Company 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


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relevant to the different taxpaying bodies but during each period which there is significant reverse of
the deferred income assets and liabilities in the future and among which the involved taxpaying
bodies intend to settle the current income tax and liabilities by net amount or are at the same time
acquire the asset as well as liquidate the liabilities.

28. 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 the financing leasing is operating leasing.
(1) Business of operating leases recorded by the Company as the lessee
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 of the current period in which they
actually arise.
(2) Business of operating leases recorded by the Company as the lessor
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 of the current period in which they
actually arise.
(3) Business of finance leases recorded by the Company as the lessee
On the lease beginning date, the Company 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 within 1
year.
Unrecognized financing charges shall be adopted by the effective interest rate method in the lease
term, so as to calculate and recognize current financing charges. The contingent rents shall be
recorded into the profits and losses of the current period in which they actually arise.
(4) Business of finance leases recorded by the Company as the lessor
On the beginning date of the lease term, the Company 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 due
within 1 year.
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 be
recorded into the profits and losses of the current period in which they actually arise.

29. Other Main Accounting Policies and Estimates
(1)Termination of operation
Termination of operation refers to a separately identifiable constituent part that satisfies one of the


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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 a subsidiary that is
specifically acquired for resale.
(2) Hedging Accounting
To avoid certain risks, the Company carries out hedging of some financial instruments as hedging
tools. The Company treats hedging that meets specified conditions using hedging accounting method.
The Company's hedging is fair -value hedging, and treats the hedging of foreign exchange risk with
definite undertaking at fair value. At the beginning of hedging, the Company records the relationship
between hedging tools and hedged items, risk management objectives and strategies for different
hedging transactions. In addition, at the beginning and after the hedging, the Company conducts
continuous evaluation of the effectiveness of hedging to check whether the hedging is highly
effective during the accounting period in which the hedging relationship is designated.
Fair value hedging is a qualified derivative instrument designated for fair value hedging, and the
gains or losses resulting from its changes in fair value are included in the current profits and losses.
The gains or losses of the hedged items due to hedged risks are also included in the current profits
and losses, and the carrying value of the hedged items is also adjusted. When the Company cancels
the designation of hedging relationship, the hedging instrument expires or is sold, the contract is
terminated or exercised, or the conditions are no longer satisfied, the use of hedging accounting is
terminated.

30. Changes in Main Accounting Policies and Estimates
(1) Changes of accounting policies
In 2017, the Ministry of Finance issued the revised "Accounting Standards for Business Enterprises
No. 14-Revenue" (referred to as the "New Revenue Standards"). The company will begin accounting
treatment in accordance with the newly revised standards from January 1, 2020. According to the
convergence regulations, the comparable period information will not be adjusted. The difference
between the implementation of the new standards and the current standards on the first day will be
adjusted retrospectively. Unallocated at the beginning of the reporting period Profit or other
comprehensive income.
The new revenue standard establishes a new revenue recognition model for regulating revenue
generated from contracts with customers. In order to implement the new revenue standards, the
company reassessed the recognition and measurement, accounting and presentation of main contract
revenue. According to the new revenue standard, the company chooses to adjust only the cumulative
impact of contracts that have not been completed on January 1, 2020, and for contract changes that
occur before the beginning of the earliest comparable period (ie, January 1, 2020) Simplified
processing, that is, according to the final arrangement of the contract change, identify the fulfilled
and unfulfilled performance obligations, determine the transaction price, and allocate the transaction
price between the fulfilled and unfulfilled performance obligations. The cumulative impact amount
of the first implementation adjusts the amount of retained earnings and other related items in the
financial statements at the beginning of the first implementation period (ie January 1, 2020). The
2019 financial statements have not been restated.
The main changes and impacts of the implementation of the new revenue standard on the company
are as follows:
The company reclassified the contract consideration received from customers in advance due to the
transfer of goods from the item of "Accounts received in advance" to the item of "Contract
liabilities" (or other non-current liabilities).
Some of the company's receivables do not meet the conditions for unconditional (that is, only
dependent on the passage of time) to collect consideration from customers, and the company
reclassifies them as "contract assets" (or "other non-current assets"); The company reclassifies the
warranty receivables that have not reached the collection period as "contract assets" (or "other
non-current assets") for presentation.


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The impact of the implementation of the new revenue standard on Influence on consolidated and the
Company’s financial statements is as follows:
                            31 December 2019 (before adjustment)            1 January 2020 (after adjustment)

          Item                                 The Company as the                             The Company as the
                            Consolidated                                  Consolidated
                                                      parent                                         parent

Accounts receivable         4,416,179,657.87      9,564,720,940.39       4,419,658,123.40       9,580,894,472.00

Contract assets                                                             26,655,842.40

Inventories                 5,318,503,044.69        218,644,308.47       5,293,903,309.81          207,949,690.07

Other current assets        2,093,212,552.25      1,096,689,897.40       2,104,218,156.06       1,107,384,515.80

Other         non-current
                            1,172,472,723.85                             1,172,659,348.26
assets

Contract liabilities                                                       959,538,151.80          269,891,156.62

Advances            from
                            1,076,856,387.08        318,839,961.84
customers

Other payables              2,374,287,243.20      3,193,392,734.69       2,289,729,308.18       3,181,261,535.24

Provisions                       206,591.51             206,591.51         101,491,327.80           28,511,322.57

Other         non-current
                                                                           117,318,235.28           48,948,805.22
liabilities

Retained earnings           4,239,763,606.89      2,245,698,875.22       4,239,763,606.89       2,245,698,875.22

Surplus reserves            1,211,721,109.67      1,227,564,785.19       1,211,721,109.67       1,227,564,785.19
(2) Change of accounting estimates
There was no any change of accounting estimate of the Company in the Reporting Period.

31. Critical Accounting Judgments and Estimates
Due to the inside uncertainty of operating activity, the Company needed to make judgments,
estimates and assumption on the carrying 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 Company, 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
carrying value of the affected assets and liabilities.
The Company would check periodically the above judgments, estimates and assumption on the basis
of continuing operation. For the changes in accounting estimates only affected on the current period,
the influence should be recognized at the period of change occurred; for the changes in accounting
estimates affected the current period and also the future period, the influence should be recognized at
the period of change occurred and future period.
On the balance sheet date, the Company needed to make judgments, estimates and assumption on the


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accounts in the following important items:
(1) Revenue Recognition
①Primarily responsible person/agent
When the company judges whether the transfer of goods or services to customers is the main
responsible person or the agent, it is mainly based on the nature of the performance obligation to
determine whether the company's identity in a certain transaction is the main responsible person or
the agent. The company promises to provide products to customers on its own. Before transferring
the products to customers, if the company can control the products, the company is the main
responsible person; if the company arranges for others to provide specific products, it is to provide
assistance to others. The identity is the agent. The company's own provision of specific products to
customers includes entrusting another party (including subcontractors) to provide specific products
on their behalf, and the company that can control the products is the main responsible person.
When the company judges whether it already has the right to control a specific product before
transferring it to a customer, it is not limited to the legal form of the contract, and will
comprehensively consider all relevant facts and circumstances to make the judgment. These facts and
circumstances include but are not limited to: ①The company assumes the main responsibility for
transferring goods to customers. The main responsibility includes taking responsibility for the
acceptability of specific commodities. ② The company assumed the inventory risk of the goods
before or after the transfer of the goods. The company has purchased or promised to purchase
specific products before entering into contracts with customers, and is capable of leading the use of
specific products and obtaining almost all economic benefits from it. ③The company has the right
to independently determine the prices of commodities traded.
②Sales discount
When the company confirms the income from the sales of goods, it estimates the relevant expenses
in accordance with the relevant provisions of the company's sales agreement, accrues sales discounts
to customers, and at the same time offsets the sales income of goods.
③Quality Assurance
Based on contract terms, current knowledge and historical experience, the company estimates and
makes corresponding preparations for product quality assurance and other matters. When these
contingent events have formed a current obligation, and the performance of these current obligations
is likely to cause economic benefits to flow out of the company, the company's best estimate of the
contingent events required to perform the relevant current obligations Recognized as estimated
liabilities. The recognition and measurement of estimated liabilities depend to a large extent on the
judgment of management. In the process of making judgments, the company needs to evaluate the
risks, uncertainties and other factors related to these contingencies.
For contract combinations with similar characteristics, the company will make a reasonable estimate
of the warranty rate based on historical warranty data, current warranty conditions, and after
considering all relevant information such as product improvements and market changes. The
company re-evaluates the warranty rate at least on each balance sheet date and determines the
estimated liabilities based on the re-evaluated warranty rate.
(2) Categorization of leasing
In accordance with Accounting Standards for Enterprises No. 21 – Leasing, the Company
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 Company had already
undertaken all the risk and compensation related with the leased assets.
(3) Financial assets impairment
If the Company adopts the expected credit loss model to evaluate financial instrument impairment,
it's necessary to make significant judgments and estimates on the expected credit loss model, and all
reasonable and well-founded information needs to be taken into account, including forward-looking
information. When such judgments and estimates are made, the expected changes in the debtor's
credit risk are inferred based on historical data in combination with economic policies,


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macroeconomic indicators, industry risks, external market conditions, technological environment,
and changes in customer circumstances.
(4) Provision for falling price of inventories
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 Company
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 carrying value of inventories and
the withdrawal and reversal on provision for bad debts of inventories during the period of estimates
being changed.
(5) The fair value of financial instrument
For the financial instruments without active market, the Company recognized the fair value by
various methods. These evaluation methods included discounted cash flow mode analysis, etc. The
Company 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.
For equity instrument investment or contracts with public offers, the cost will not be taken as the
optimal estimation of the fair value by the Company since 1 January 2019.
(6) Provision for impairment of long-term assets
The Company 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 of impairment indicated that the
carrying value can’t be recoverable.
When the carrying 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 attributable
to the assets disposal.
When estimated the discounted value of future cash flow, the Company 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 Company would adopt all the
available documents, including the prediction for relevant output, selling price and relevant operating
costs arising from reasonable and supportive assumptions.
The Company 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 Company needed to predict the future cash flow of the assets or
assets portfolio, and adopt the property discounted rate to decide the discounted amount of future
cash flow.
(7) Depreciation and amortization
For the investment real estate, fixed assets and intangible assets, the Company withdrew the
depreciation and amortization by adopting the straight-line method during the service life after full
consideration of the salvage value. The Company 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 Company 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, the depreciation and
amortization expenses should be adjusted.
(8) Deferred income tax assets
Within the limit that it was likely to have sufficient taxable profits to offset the losses, the Company


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recognized the deferred income tax assets by all the unused tax losses, which needed the
management level of the Company 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 amount of deferred
income tax assets which should be recognized.
(9) 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 the period of ultimate recognition.
(10) Internal early retirement welfare and supplementary retirement welfare
Amounts of expenditures and liabilities of internal early retirement welfare and supplementary
retirement welfare should be determined according to assumption terms. Assumption terms include
discount rate, average growth rate of medical costs, growth rate of subsidies for early retirement
employees and retirees and other factors. The differences of actual results and assumption should be
confirmed immediately and included into costs of current year. Although the management have
adopted reasonable assumption terms, changes of actual experience value and assumption terms may
affect the internal early retirement welfare, supplementary retirement benefits and balance of
liabilities.
(11) Provisions
The Company made the estimation on product quality guarantee, predicted loss of contract and the
fine for delayed delivery etc. and withdrew the relevant provision for provisions 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 Company, the Company measures the provisions in accordance with the best estimate of
the necessary expenses for the performance of the current duty. The recognition and measurement of
provisions were heavily relied on the judgment of the management team. During the process of
making judgment, the Company needed to appraise the relevant risks, uncertainty and the time value
of money and etc.
Of which, the Company 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 Company
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 the
profits and losses in the future periods.
(12) Measurement for fair 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 in Note X.

V. Taxation
1. Main Taxes and Tax Rate
    Category of taxes                Basis                        Specific situation of the taxes rate

   VAT                  Calculated the output tax at the   3%、5%、6%、9%、13%
                        tax rate and paid the VAT by the


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     Category of taxes                    Basis                             Specific situation of the taxes rate
                            amount after deducting the
                            deductible withholding VAT at
                            current period, of which the VAT
                            applicable to easy collection
                            won’t belong to the deductible
                            withholding VAT.
                                                                    Paid at 7% of the circulating tax actually paid, of
                                                                    which Dongguan Packing, Dongguan Konka, Boluo
                                                                    Konka, Boluo Konka Precision, Chengdu Anren,
                                                                    XingDa HongYe, Dongguan Konka Investment,
                                                                    Xinfeng Microcrystalline, Binzhou Weiyijie, Beihai
                                                                    Jingmai, Binzhou Econ, Suining Pengxi Kangrun
   Urban maintenance                                                Environment Management Co., Ltd., Dayi Kangrun
                            The circulating tax actually paid
   and construction tax                                             Water Co., Ltd., Lushan Kangrun Environmental,
                                                                    Funan Kangrun Water, Tingyuan Environmental,
                                                                    Yibin Kangrun and Ningbo Kanghanrui Electrical
                                                                    Appliances of 5% of actually paid turnover. Subei
                                                                    Mongol Autonomous County Kangrun Water Co.,
                                                                    Ltd. paid by half after paid of 5%, and Jiangxi
                                                                    Konka and Nano Crystallized Glass of 1%.
   Education surtax         The circulating tax actually paid       3%
   Local        education                                           The subsidiary Wuhan Runyuan Sewage:1.5% and
                            The circulating tax actually paid
   surtax                                                           other companies: 2%
   Enterprise     income
                            Taxable income                          25%/ see note (2) for details
   tax

Note: (1) According to regulations of Temporary Provisions of Income Tax of Trans-boundary Tax
Payment Enterprises by State Administration of Taxation, resident enterprises without business
establishment or places of legal persons should be tax payment enterprises with the administrative
measures of income tax of “unified computing, level-to-level administration, local prepayment,
liquidation summary, and finance transfer”. It came into force from 1 January 2008. According to the
above methods, the Company’s sales branch companies in each area will hand in the corporate
income taxes in advance from 1 January 2008 and will be final settled uniformly by the Company at
the year-end.

(2) The main taxpayers of different corporate income tax rates are explained as follows:
                               Name of entity                                                       Income tax rate
Electronics Technology, Anhui Konka, XingDa HongYe, E2info, Xinfeng
                                                                                                                        15%
Microcrystalline, Sichuan Konka, Boluo Konka Precision
Hong Kong Konka, Konka Electrical Appliances International Trading, Jiali
International, Kangjietong, Jiaxin Technology, Jiaxin Technology, Konka                                               16.5%
Electrical Appliances Investment, Konka SmartTech, Konka Mobility
Chain Kingdom Memory Technologies                                                                                8.25%/16.5%

Konka Europe                                                                                                            15%

Chongqing Kangxingrui                                                                                                   15%

Kanghao Technology                                                                                                    22.5%


2. Tax Preference and Approved Documents



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(1) According to Caishui [2019] No. 13: Notice on the implementation of the inclusive tax reduction
and exemption policy for small and micro enterprises, from January 1, 2019 to December 31, 2021,
the annual taxable income of small and profitable enterprises is not The portion exceeding 1 million
yuan will be reduced to 25% of the taxable income, and the corporate income tax will be paid at the
rate of 20%; the portion of the annual taxable income exceeding 1 million yuan but not exceeding 3
million yuan will be reduced by 50% Include the taxable income and pay corporate income tax at a
rate of 20%.

(2) On 16 October 2018, Shenzhen E2info Network Technology Co., Ltd., the subsidiary of this
Company obtained the high-tech enterprise certificate (certificate No.: GR201844201969) jointly
issued by Shenzhen Technology Innovation Committee, Finance Committee of Shenzhen
Municipality, Shenzhen Taxation Bureau of SAT with a valid period of three years. According to
related taxation regulations, the company enjoys related taxation preferential policies as a high-tech
enterprise from 2018 to 2020 and pays the enterprise income tax as per the preferential tax rate of
15%.

(3) On 28 November 2018, the Company’s subsidiary XingDa HongYe received the High-tech
Enterprise Certificate (No.GR201844008446 with the 3-year period of validity) jointly issued by
Department of Science and Technology of Guangdong Province, Department of Finance of
Guangdong Province and State Administration of Taxation (Guangdong Provincial Tax Service).
According to relevant tax regulations, from 2018 to 2020, the enterprise shall be eligible for enjoying
relevant preferential tax policies as a new high-tech enterprise and corresponding corporate income
tax shall be paid based on the preferential tax rate of 15%.

(4) On 9 September 2019, Anhui Konka, the subsidiary of the Company, obtained a certificate of
high-tech enterprise jointly issued by Anhui Science and Technology Department, Anhui Provincial
Department of Finance and Anhui Provincial Tax Bureau of the State Administration of Taxation.
The certificate number is GR201934000966 and is valid for three years. According to relevant tax
regulations, Anhui Konka shall enjoy relevant preferential tax policies for high-tech enterprises for
three consecutive years from 2019 to 2021 and pay the enterprise income tax at a preferential tax rate
of 15%.

(5) On 16 September 2019, Xinfeng Microcrystalline, the subsidiary of the Company, obtained a
high-tech enterprise certificate jointly issued by Jiangxi Science and Technology Department, Jiangxi
Provincial Department of Finance and Jiangxi Provincial Tax Bureau of the State Administration of
Taxation. The certificate number is GR201936000744 and is valid for three years. According to
relevant tax regulations, Xinfeng Microcrystalline shall enjoy relevant preferential tax policies for
high-tech enterprises for three consecutive years from 2019 to 2021 and pay the enterprise income
tax at a preferential tax rate of 15%.



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(6) On 28 November 2019, Sichuan Konka, a subsidiary of the Company, obtained a certificate of
high-tech enterprise jointly issued by Sichuan Science and Technology Department, Sichuan
Provincial Department of Finance and Sichuan Provincial Tax Bureau of the State Administration of
Taxation. The certificate number is GR201951002096 and is valid for three years. According to
relevant tax regulations, Sichuan Konka shall enjoy relevant preferential tax policies for high-tech
enterprises for three consecutive years from 2019 to 2021 and pay the enterprise income tax at a
preferential tax rate of 15%.

(7) On 2 December 2019, Bokang Precision, a subsidiary of the Company, obtained the high-tech
enterprise certificate jointly issued by the Guangdong Provincial Department of Science and
Technology, the Guangdong Provincial Department of Finance, the Guangdong State Taxation
Bureau, and the Guangdong Local Taxation Bureau. The certificate number is GR GR201944007820,
valid for three years, according to relevant tax regulations, Bokang Precision has enjoyed relevant
preferential tax policies for high-tech enterprises for three consecutive years from 2019 to 2021, and
is subject to corporate income tax at a preferential tax rate of 15%.

(8) On 9 December 2019, Electronics Technology, the subsidiary of the Company, obtained a
Certificate of High-tech Enterprise jointly issued by Shenzhen Science and Technology Department,
Shenzhen Provincial Department of Finance and Shenzhen Provincial Tax Bureau of the State
Administration of Taxation. The certificate number is GR201944204287 and is valid for three years.
According to relevant tax regulations, Electronics Technology shall enjoy relevant preferential tax
policies for high-tech enterprises for three consecutive years from 2019 to 2021 and pay the
enterprise income tax at a preferential tax rate of 15%.

(9) According to the Notice on Issues Concerning the Promotion of Energy-Saving Service Industry
Development VAT Business Tax and Corporate Income Tax Policy Issued by the Ministry of Finance
and the State Administration of Taxation (Caishui [2010] No. 110) For the income, the enterprise
enjoys the "three exemptions and three halves" preferential treatment of corporate income tax since
the tax year in which the first production and operation income of the project is obtained. Binhai
Sewage, Lairun Holdings and Rushan Yike, subsidiaries of the Company, enjoy this tax incentive.
Binhai Sewage will be exempt from corporate income tax from 1 March 2017 to 29 February 2020,
and corporate income tax will be levied at half the 25% legal tax rate from 1 March 2020 to 28
February 2023; Lairun Holdings is exempt from corporate income tax from 1 September 2017 to 31
August 2020. From 1 September 2020 to 31 August 2023, corporate income tax is levied in half at
the legal tax rate of 25%; Rushan Yike will be exempt from corporate income tax from 1 May 2019
to 30 April 2022, and corporate income tax will be levied at half the 25% legal tax rate from 1 May
2022 to 30 April 2025.

(10) According to the document Caishui [2013] No.37 issued by the Ministry of Finance and the



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State Administration of Taxation, the general taxpayers among the pilot taxpayers approved by the
People's Bank of China, the CBRC and the Ministry of Commerce to operate financial leasing
business shall provide tangible movable property financial leasing services, and the VAT refund
policy shall be applied to the part where the actual VAT tax burden exceeds 3%. Konka Leasing, the
subsidiary of the Company, shall be qualified to enjoy the tax concession.

(11) According to the fiscal and taxation document [2011] No. 100 published by the Ministry of
Finance and the State Administration of Taxation, for the VAT general taxpayers who sell their
self-developed and produced software products, the VAT shall be levied at the rate of 13%, and then
the part that the actual tax burden on their VAT exceeds 3 will be implemented with the policy of
immediate withdrawal. The Company’s subsidiaries, Wankaida Technology, Youzhihui and
Electronics Technology all enjoy this preferential policy.

(12) 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 and Binhai Sewage, subsidiaries of the Company, belongs to the this
catalogue. Then after it has been levied the VAT at a rate of 13 %, the actual tax burden on the
wastewater treatment income tax will be refunded in accordance with the 70% of the actual tax
burden, and the actual tax burden on the renewable water income VAT will be refunded immediately
at 50%.

(13) According to the Notice on Tax Policy Issues concerning Further Implementing the Western
China Development Strategy (CS[2011] No. 58) of the Ministry of Finance, the General
Administration of Customs and the State Administration of Taxation, enterprises that engage in
industries that are listed in “Encouraged Industries Catalogue for the Western Regions” are entitled
to a preferential corporate income tax rate of 15% from 1 January 2011 till 31 December 2020. The
Company’s subsidiary Chongqing Kangxingrui is entitled to the preferential policy.

VI Notes on Maj or Items in Consolidated Financial Statements of the 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 2020, the period-end
refers to 30 June 2020, this period refers to the period from 1 January 2020 to 30 June 2020 and the
last period refers to the period from 1 January 2019 to 30 June 2019. The monetary unit is renminbi.

1. Monetary Assets

                 Item                            Ending balance                    Beginning balance

Cash on hand                                                      21,245.91                        18,699.99




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                      Item                                  Ending balance                        Beginning balance

Bank deposits                                                        4,537,884,573.39                       4,493,683,217.23


Other monetary assets                                                1,879,566,516.43                       2,105,658,134.39


                      Total                                          6,417,472,335.73                       6,599,360,051.61


Of which: Total amount deposited in overseas                          203,830,131.11                         378,330,661.32


Notes:  The ending balance of other monetary assets was the deposits of each margin deposit not
withdrawn at any time. Refer to NoteVI-61. Assets with restricted ownership or use right for details.

 As of 30 June 2020, the monetary assets deposited in overseas by the Company was
RMB203,830,131.11 (RMB378,330,661.32 on 31 December 2019).

2. Held-for-trading Financial Assets

                                     Item                                     Ending balance            Beginning balance

Financial assets at fair value through profit or loss
  Including: debt instrument investment                                                           -

              Equity instrument investment                                                        -            61,494,666.97

              Other                                                                               -

                                     Total                                                        -            61,494,666.97


3. Notes Receivable

(1) Notes Receivable Listed by Category

                  Item                                  Ending balance                           Beginning balance
Bank acceptance bill                                              1,634,811,363.44                          2,638,629,011.87
Commercial acceptance bill                                         156,020,519.54                            199,412,421.02
                 Total                                            1,790,831,882.98                          2,838,041,432.89


(2) Notes Receivable Pledged by the Company at the period-end

                              Item                                                          Amount
Bank acceptance bill                                                                                        1,429,985,596.82

Total                                                                                                       1,429,985,596.82


(3) Notes Receivable which Had Endorsed by the Company or had Discounted and had not Due on
the Balance Sheet Date at the Period-end

                                             Amount of recognition termination at       Amount of not terminated recognition
                  Item
                                                       the period-end                            at the period-end

Bank acceptance bill                                              1,147,221,514.48




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                                        Amount of recognition termination at          Amount of not terminated recognition
                     Item
                                                  the period-end                               at the period-end

   Commercial acceptance bill                                      13,041,483.52

   Total                                                        1,160,262,998.00


   (4) Notes Transferred to Accounts Receivable because Drawer of the Notes Failed to Execute the
   Contract or Agreement

                                                                 Amount of the notes transferred to accounts receivable at
                                Item
                                                                                     the period-end
   Bank acceptance bill                                                                                     200,000,000.00
   Commercial acceptance bill                                                                               743,240,011.25
   Total                                                                                                    943,240,011.25

    Note: At the end of the period, the bills transferred to the accounts receivable due to the issuer’s
    failure to perform were the overdue bills of the company's factoring business.

   (5) Listed by Withdrawal Methods for Bad Debt Provision

                                                                          Ending balance

                                         Carrying amount                       Bad debt provision
             Category
                                                                                              Withdrawal    Carrying value
                                                            Proporti
                                        Amount                                Amount          proportion
                                                            on (%)
                                                                                                 (%)
Notes receivable with significant
individual amount and        make
independent provision for expected
credit loss
Notes       receivable      withdrawn
expected credit loss according to       1,794,246,554.15        100.00         3,414,671.17          0.19    1,790,831,882.98
credit risks characteristics

Of which: Bank acceptance bill          1,634,811,363.44         91.11                                       1,634,811,363.44

Commercial acceptance bill                159,435,190.71          8.89         3,414,671.17          2.14      156,020,519.54

Notes receivable with insignificant
single amount for which expected
credit loss provision separately
accrued

               Total                    1,794,246,554.15        100.00         3,414,671.17          0.19    1,790,831,882.98


   (Continued)

                                                                         Beginning balance

                                        Carrying amount                       Bad debt provision
             Category
                                                                                             Withdrawal     Carrying value
                                                          Proporti
                                        Amount                              Amount           proportion
                                                          on (%)
                                                                                                (%)




                                                           66
                                                                      2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




                                                                                  Beginning balance

                                                  Carrying amount                      Bad debt provision
               Category
                                                                                                      Withdrawal         Carrying value
                                                                    Proporti
                                                  Amount                             Amount           proportion
                                                                    on (%)
                                                                                                         (%)
 Notes receivable with significant
 individual amount and        make
 independent provision for expected
 credit loss
 Notes      receivable       withdrawn
 expected credit loss according to            2,842,347,510.24       100.00           4,306,077.35               0.15      2,838,041,432.89
 credit risks characteristics

 Of which: Bank acceptance bill               2,638,629,011.87        92.83                                                2,638,629,011.87

 Commercial acceptance bill                       203,718,498.37         7.17         4,306,077.35               2.11       199,412,421.02

 Notes receivable with insignificant
 single amount for which expected
 credit loss provision separately
 accrued

                  Total                       2,842,347,510.24       100.00           4,306,077.35               0.15      2,838,041,432.89


    (6) Bad debt provision for notes receivable withdrawn, collected or reversed during the Reporting
    Period

                                                                      Changed amount
                             Beginning
    Category                                                             Recovered or                                   Ending balance
                              balance              Withdrawn                                       Write-off
                                                                           reversed
    Commercial
                              4,306,077.35             32,729.86                924,136.04                     0.00         3,414,671.17
    acceptance bill

          Total               4,306,077.35             32,729.86                924,136.04                     0.00         3,414,671.17


    4. Accounts Receivable

    (1) Listed by Withdrawal Methods for Expected Credit Loss

                                                                                Ending balance
                                          Carrying amount                            Bad debt provision
        Category
                                                                                                      Withdrawal           Carrying value
                                                           Proportion
                                         Amount                                    Amount             proportion
                                                              (%)
                                                                                                         (%)
Accounts receivable, for
which the independent
                                     1,092,794,983.95          16.85              385,634,035.82               35.29         707,160,948.13
provision for expected
credit losses
Accounts receivable, for
which the provision for
expected credit losses was
withdrawn according to
groups


                                                                    67
                                                             2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




                                                                    Ending balance
                                    Carrying amount                        Bad debt provision
        Category
                                                                                         Withdrawal         Carrying value
                                                    Proportion
                                  Amount                               Amount            proportion
                                                       (%)
                                                                                            (%)
Including: Aging group           3,783,478,326.31        58.32        252,530,805.77             6.67           3,530,947,520.54
         Project payment
                                 1,611,063,500.13        24.83        125,995,129.33             7.82           1,485,068,370.80
          group

Subtotal of groups               5,394,541,826.44        83.15        378,525,935.10             7.02           5,016,015,891.34

Total                            6,487,336,810.39       100.00        764,159,970.92            11.78           5,723,176,839.47


    (Continued)

                                                                  Beginning balance
                                    Carrying amount                        Bad debt provision
        Category
                                                                                         Withdrawal
                                                    Proportion                                              Carrying value
                                 Amount                                Amount            proportion
                                                       (%)
                                                                                            (%)
Accounts receivable, for
which the independent
provision for expected
                              1,093,505,612.71           21.24      384,089,197.98              35.12           709,416,414.73
credit losses
Accounts receivable, for
which the provision for
expected credit losses was                                                                                                    0
withdrawn according to
groups
Including: Aging group        2,820,178,866.87           54.78      236,910,263.28               8.40      2,583,268,603.59
         Project payment
          group
                              1,234,413,460.00           23.98      107,440,354.92               8.70      1,126,973,105.08

Subtotal of groups            4,054,592,326.87           78.76      344,350,618.20               8.49      3,710,241,708.67

Total                         5,148,097,939.58         100.00       728,439,816.18              14.15      4,419,658,123.40


    1) Accounts receivable, for which, the independent provision for expected credit loss is made at the
    period-end

                                                                  Ending balance
   Name                                                                       Withdrawal
                              Carrying amount         Bad debt provision                            Withdrawal reason
                                                                             percentage (%)
   Shanghai          Huaxin
   International      Group        300,018,021.01         150,013,944.92                50.00    Debt default
   Co., Ltd
                                                                                                 Difficulty in working
   Tewoo       Finance
                                   200,000,000.00          30,000,000.00                15.00    capital turnover and debt
   Company Limited
                                                                                                 default
   Hongtu         Santu
                                                                                                 Difficulty in working
   High-tech Technology            200,000,000.00          32,000,000.00                16.00
                                                                                                 capital turnover
   Co., Ltd.




                                                            68
                                                          2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




                                                               Ending balance
Name                                                                        Withdrawal
                            Carrying amount       Bad debt provision                               Withdrawal reason
                                                                           percentage (%)
China            Nuclear
Engineering                                                                                    Difficulty     in   working
                                 78,000,690.24           7,890,069.02                10.12
Construction      Group
Co., Ltd                                                                                       capital turnover

No.1      Engineering
Company Limited of
                                                                                               Difficulty in working
CCCC First Harbor                65,221,300.00           9,783,195.00                15.00
                                                                                               capital turnover
Engineering Company
Limited
                                                                                               Difficulty in working
Tahoe Group Co. Ltd              50,000,000.00           5,000,000.00                10.00
                                                                                               capital turnover
China Energy Electric                                                                          Difficulty in working
                                 50,000,000.00           7,500,000.00                15.00
Fuel Co., Ltd                                                                                  capital turnover
Empire         Electronic                                                                      Difficulty in working
                                 44,395,169.38         44,395,169.38                100.00
Corp                                                                                           capital turnover
H-BUSTER      DO                                                                               Difficult to recover for
                                 19,470,841.75         19,470,841.75                100.00
BRASIL INDUSTRIA                                                                               bankruptcy
Treeview     Business                                                                          Difficulty in working
                                 11,262,555.50         11,262,555.50                100.00
Registration                                                                                   capital turnover
Other                            74,426,406.07         68,318,260.25                 91.79
Total                         1,092,794,983.95        385,634,035.82                 35.29


2) Withdrawing expected credit loss by groups

① In the group, accounts receivable, for which, the provision for expected credit loss was made
according to aging groups

                                                                        Ending balance

                 Aging                                                                                      Withdrawal
                                          Carrying amount                 Bad debt provision
                                                                                                       proportion (%)

Within 1 year                                    3,433,378,810.01                  69,697,589.85                     2.03


1 to 2 years                                      148,044,952.56                   10,910,913.00                     7.37


2 to 3 years                                       37,878,125.72                    8,390,004.85                    22.15


3 to 4 years                                        1,773,024.89                    1,128,884.94                    63.67


Over 4 years                                      162,403,413.13                  162,403,413.13                   100.00


                 Total                           3,783,478,326.31                 252,530,805.77                     6.67


② In the group, accounts receivable, for which, the provision for expected credit loss was made
according to project payment groups

                  Aging                                                 Ending balance




                                                         69
                                                    2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




                                                                                                Withdrawal
                                      Carrying amount             Bad debt provision
                                                                                              proportion (%)

Within 1 year                             1,326,749,598.38                66,337,479.88                   5.00


1 to 2 years                                153,209,883.34                15,320,988.33                  10.00


2 to 3 years                                120,455,177.55                36,136,553.27                  30.00


3 to 4 years                                  1,063,216.15                   531,608.08                  50.00


Over 4 years                                  9,585,624.71                  7,668,499.77                 80.00


                 Total                     1,611,063,500.13              125,995,129.33                   7.82


(2) Accounts Receivable Listed by Aging

                          Aging                                        Ending balance

  Within 1 year                                                                            4,962,384,670.27

  1 to 2 years                                                                             1,129,432,545.44

  2 to 3 years                                                                              175,545,928.13

  3 to 4 years                                                                                4,363,699.75

  Over 4 years                                                                              215,609,966.80

                         Subtotal                                                          6,487,336,810.39

  Less: Bad debt provision                                                                  764,159,970.92

                          Total                                                            5,723,176,839.47

(3) Bad debt provision for accounts receivable during the Reporting Period

During the period, the actual provision for bad debts amounted to RMB35,516,049.10, the amount of
bad debts increased by RMB1,567,782.76 due to exchange rate fluctuations.Due               to the loss of
control, the amount of bad debt reserves decreased by RMB 1363677.12.

(4) 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
RMB2,088,823,551.25, accounting for 32.20% of total closing balance of account receivable, and
the relevant ending balance of bad debt provision withdrawn was RMB216,643,284.97.

(5) There was no accounts receivable derecognized for transfer of financial assets.

(6) There is no amount of assets and liabilities formed due to the transfer of accounts receivable and

                                                   70
                                                                          2020 Semi-annual Financlal Report of Konka Group Co., Ltd.



        continued involvement in this year.

        5. Accounts Receivable Financing

                                 Ending amount                                                       Beginning balance

  Item                              Change in             Fair value at                                 Change in            Fair value at
                  Cost                                                                 Cost
                                    fair value            period-end                                     fair value          period-end

 Notes

 receiv          78,865,016.45                              78,865,016.45           143,174,271.82                           143,174,271.82

 able

 Total           78,865,016.45                              78,865,016.45           143,174,271.82                           143,174,271.82


        6. Prepayments

                                        Ending amount                                                  Beginning balance

                          Carrying amount                                                     Carrying amount
   Item                                                                                                                          Bad debt
                                          Proportion (     Bad debt provision                                   Proporti
                      Amount                                                               Amount                                provision
                                              %)                                                                on (%)

Within 1
                   1,983,501,863.39               96.36            462,968.20             2,064,712,215.34        99.23          4,772,745.02
year

1 to 2
                      69,799,160.74                3.39             117,079.09                 8,325,251.63           0.40         268,252.73
years

2 to 3
                         3,622,796.03              0.18           2,168,356.28                 4,074,992.31           0.20
years

Over 3
                         1,465,942.36              0.07            625,394.60                  3,470,588.53           0.17       2,991,238.20
years

  Total            2,058,389,762.52              100.00           3,373,798.17            2,080,583,047.81       100.00          8,032,235.95


        Note: ① Top 5 of the ending balance of the prepayment collected according to the prepayment target
        of the Company was RMB1,144,074,517.57, accounting for 55.58% of the total ending balance of
        prepayment.
        ② The amount of bad debt reserves withdrawn in the current period is 44464.58 yuan; the amount of
        recovered or transferred back bad debt reserves is 4551305.88 yuan; the amount of bad debt reserves
        is not written off; the amount of bad debt reserves is increased by 10103.52 Yuan due to the change



                                                                       71
                                                 2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




of exchange rate; and the amount of bad debt reserves is reduced by 161700.00 Yuan due to the loss
of control.

7. Other Receivables

                      Item                   Ending balance                     Beginning balance

Interest receivable                                     20,197,445.29                         7,807,400.40


Dividends receivable                                       547,848.62                           547,848.62


Other receivables                                    2,075,842,376.43                     1,763,828,117.47


                      Total                          2,096,587,670.34                     1,772,183,366.49


7.1 Interest Receivable

                      Item                   Ending balance                     Beginning balance

Fixed time deposit                                     19,626,889.41                          4,807,630.04


Entrusted loans                                                                               2,623,723.82


Factoring income                                          570,555.88                            376,046.54


                       Total                           20,197,445.29                          7,807,400.40


7.2 Dividends Receivable

            Item (or investees)              Ending balance                     Beginning balance

Chongqing Qingjia                                         547,848.62                            547,848.62


7.3 Other Receivables

(1) Classified by Account Nature

                      Nature                 Ending balance                     Beginning balance

Deposit and margin                                   1,360,774,907.30                     1,307,226,302.83
Intercourse    funds   among     minority
shareholders in the business consolidation
                                                      180,793,671.28                        178,968,748.99
not under the same control and related
parties
Energy-saving subsidies                               152,402,680.00                        152,402,680.00

Disposal of non-current assets                        513,799,965.00                        147,256,700.00

Other                                                 276,046,318.36                        376,824,887.60

Total                                                2,483,817,541.94                     2,162,679,319.42


(2) Withdrawal of Bad Debt Provision



                                                72
                                                                  2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




                                    First stage             Second stage             Third stage
                                                        Expected loss in the     Expected loss in the
     Bad debt provision           Expected credit                                                                Total
                                                          duration (credit         duration (credit
                                loss of the next 12
                                                          impairment not             impairment
                                      months
                                                             occurred)                occurred)
Balance of 1 January 2020           15,229,049.09             25,449,941.31             358,172,211.55         398,851,201.95
Carrying amount of 1 January
                                                   -                         -                          -                    -
2020 in the Current Period
--Transfer to Second stage            -570,869.64                   570,869.64                          -                    -
-- Transfer to Third stage                 -200.00                 -524,820.00             525,020.00                        -
-- Reverse to Second stage                         -                         -                          -                    -
-- Reverse to First stage                          -                         -                          -                    -
Withdrawal or reversal of the
                                     3,165,605.18                 4,984,065.61             983,935.57            9,133,606.36
Current Period
Write-offs of the Current
                                                   -                         -                          -                    -
Period
Verification of the Current
                                                   -                         -                          -                    -
Period
Other changes                            -9,642.80                           -                          -           -9,642.80
Balance of 30 June 2020             17,813,941.83             30,480,056.56          359,681,167.12            407,975,165.51


Note: The first stage is that credit risk has not increased significantly since initial recognition. For
other receivables with an aging portfolio and a low-risk portfolio within 1 year, the loss provision is
measured according to the expected credit losses in the next 12 months.

The second stage is that credit risk has increased significantly since initial recognition but credit
impairment has not yet occurred. For other receivables with an aging portfolio and a low-risk
portfolio that exceed 1 year, the loss provision is measured based on the expected credit losses for
the entire duration.

The third stage is the credit impairment after initial confirmation. For other receivables of credit
impairment that have occurred, the loss provision is measured according to the credit losses that have
occurred throughout the duration.

(3) Withdrawal of bad debt provision for other receivables according to group

                                                                       Ending balance

                                   Carrying amount                         Bad debt provision
       Category                                                                             Withdra
                                                       Proporti                                wal          Carrying value
                                 Amount                                   Amount
                                                         on                                 proportio
                                                                                                n
Other receivables with
significant individual          1,117,968,963.17         45.01           359,681,167.12         32.17          758,287,796.05
amount and       make
independent provision



                                                              73
                                                                    2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




                                                                         Ending balance

                                       Carrying amount                       Bad debt provision
       Category                                                                                Withdra
                                                         Proporti                                 wal          Carrying value
                                     Amount                                 Amount
                                                           on                                  proportio
                                                                                                   n
for expected credit loss

Other         receivables
withdrawn bad debt
provision according to
credit              risks
characteristics

Aging group                          567,335,432.56        22.84            34,262,317.70          6.04             533,073,114.86

Low-risk group                       798,513,146.21        32.15            14,031,680.69          1.76             784,481,465.52
Subtotal of groups                  1,365,848,578.77       54.99            48,293,998.39          3.54            1,317,554,580.38

         Total                      2,483,817,541.94      100.00           407,975,165.51         16.43            2,075,842,376.43

(Continued)

                                                                           Beginning balance

       Category                         Carrying amount                           Bad debt provision
                                                                                                   Withdrawal           Carrying value
                                     Amount              Proportion             Amount
                                                                                                   proportion
Other        receivables
with          significant
individual amount and
                                    1,093,025,247.42           50.54           358,172,211.55              32.77             734,853,035.87
make        independent
provision for expected
credit loss
Other        receivables
withdrawn bad debt
provision according to
credit             risks
characteristics

Aging group                          598,266,705.02            27.66            30,392,763.59               5.08             567,873,941.43

Low-risk group                       471,387,366.98            21.80            10,286,226.81               2.18             461,101,140.17
Subtotal of groups                  1,069,654,072.00           49.46            40,678,990.40               3.80           1,028,975,081.60

         Total                      2,162,679,319.42          100.00           398,851,201.95              18.44           1,763,828,117.47


(4) Listed by aging

                            Aging                                                      Ending balance


Within 1 year                                                                                                      2,114,244,415.27


1 to 2 years                                                                                                        108,133,414.79


2 to 3 years                                                                                                         31,533,708.67




                                                                74
                                                     2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




3 to 4 years                                                                                      3,739,421.03


4 to 5 years                                                                                     83,530,383.35


Over 5 years                                                                                    142,636,198.83


                     Subtotal                                                                 2,483,817,541.94


Less: Bad debt provision                                                                        407,975,165.51


                                                                                              2,075,842,376.43
                       Total


(5) Bad Debt Provision for Other Receivables

The amount of bad debt provision withdrawn was RMB14,554,961.35, and the amount reversed or
recovered was RMB5,421,354.97, and the amount of bad debts decreased by RMB11,912.50 due to
the loss of control power to subsidiaries, and the amount of bad debts increased by RMB2,269.68
due to exchange rate fluctuations. There was no actual verified amount in the Reporting Period.

(6) Top 5 Other Receivables in Ending Balance Collected according to the Arrears Party

The total amount of top five of other receivable of ending balance collected by arrears party was
RMB987,763,065.00, accounting for 39.77% of total closing balance of account receivable, and the
relevant ending balance of bad debt provision withdrawn was RMB162,534,751.92.

(7) There were no other receivables derecognized due to transfer of financial assets during the
Reporting Period.

(8) There were no assets and liabilities formed by transferring other receivables and continuing to be
involved in this period.

8. Inventory

(1) Category of Inventory

                                                            Ending balance

                                                  Of which: the
          Item                                     capitalized
                                Carrying amount                    Falling price reserves     Carrying value
                                                  amount of the

                                                   borrowings
Development projects of
the property:

Development cost



                                                    75
                                                         2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




                                                                Ending balance

                                                      Of which: the
            Item                                       capitalized
                                Carrying amount                           Falling price reserves   Carrying value
                                                      amount of the

                                                       borrowings

Land intended to develop

Subtotal

Non-development projects
of the property:
Raw materials                      1,575,365,893.98                              24,774,981.35      1,550,590,912.63
Consigned          processing
                                     21,965,825.24                                             -       21,965,825.24
materials
Semi-finished product               147,746,687.87                               12,407,683.85        135,339,004.02

Inventory goods                    3,956,845,188.02                             159,813,710.70      3,797,031,477.32
Finished but unsettled
assets from construction             27,892,231.28                                                     27,892,231.28
contract
Subtotal                           5,729,815,826.39                   -         196,996,375.90      5,532,819,450.49

           Total                   5,729,815,826.39                   -         196,996,375.90      5,532,819,450.49


(Continued)

                                                              Beginning balance

                                                      Of which: the
            Item                                       capitalized
                                Carrying amount                           Falling price reserves   Carrying value
                                                      amount of the

                                                       borrowings

Development projects of

the property:

Development cost
Land intended to develop
Subtotal
Non-development
projects of the property:
Raw materials                      1,275,228,321.83                              27,122,457.46      1,248,105,864.37
Consigned          processing
                                       3,117,408.28                                                     3,117,408.28
materials
Semi-finished product                85,821,719.87                               12,822,030.37        72,999,689.50



                                                        76
                                                                       2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




                                                                            Beginning balance

                                                                   Of which: the
                Item                                                 capitalized
                                        Carrying amount                                Falling price reserves          Carrying value
                                                                    amount of the

                                                                     borrowings
   Inventory goods                         4,176,189,636.39                                 206,509,288.73              3,969,680,347.66
   Finished but unsettled
   assets from construction                   13,594,131.07                                                               13,594,131.07
   contract
   Subtotal                                5,553,951,217.44                                 246,453,776.56              5,307,497,440.88

                Total                      5,553,951,217.44                                 246,453,776.56              5,307,497,440.88


   (2) Falling Price Reserves of Inventory

                                                 Increase                              Decrease
  Item          Beginning balance                              Ot                                                         Ending balance
                                                                                             Decrease of losing
                                            Withdrawal         he          Write-off
                                                                                              controlling right
                                                                r
Raw
                        27,122,457.46         1,719,467.20                  4,066,943.31                        0.00          24,774,981.35
materials
Goods in
                        12,822,030.37           143,256.65                    557,603.17                        0.00          12,407,683.85
process
Inventory
                      206,509,288.73            675,055.03                 46,935,877.33              434,755.73             159,813,710.70
goods

Total                 246,453,776.56          2,537,778.88                 51,560,423.81              434,755.73             196,996,375.90



   (3) Withdrawal Provision Basis of the Falling Price of the Inventory and the Reasons of the Reversed
   or Write-off

                         Specific basis of withdrawal of falling
         Item                                                         Reasons for reverse              Reasons for write-off
                              price reserves of inventory
                        The realizable net value was lower than
   Raw materials                                                                               Sold or disposed in the current period
                        the carrying value
   Goods         in     The realizable net value was lower than
                                                                                               Sold or disposed in the current period
   process              the carrying value
   Inventory            The realizable net value was lower than
                                                                                                     Sold in the current period
   goods                the carrying value


   (4) Ending balance of the inventory didn’t include capitalized borrowing expenses.

   9. Contract Assets

   (1) Expected credit loss listed by withdrawal method

         Category                                                          Ending balance



                                                                      77
                                                                   2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




                                       Carrying amount                            Bad debt provision
                                                                                                   Withdrawal        Carrying value
                              Amount              Proportion (%)              Amount
                                                                                                 proportion(%)
Contract assets for
which expected loss
withdrawn
separately
Contract assets for
which expected loss
withdrawn by group
Of which: aging
                              31,334,935.11                 100.00               636,099.18                2.03         30,698,835.93
group
Engineering group
Subtotal of group             31,334,935.11                 100.00               636,099.18                2.03         30,698,835.93

       Total                  31,334,935.11                 100.00               636,099.18                2.03         30,698,835.93


(Continued)

                                                                        Beginning balance

     Category                          Carrying amount                            Bad debt provision
                                                                                                   Withdrawal        Carrying value
                              Amount              Proportion (%)              Amount
                                                                                                 proportion(%)
Contract assets for
which expected loss
withdrawn
separately
Contract assets for
which expected loss
withdrawn by group
Of which: Aging
                              13,522,835.74                 100.00               274,500.00                2.03         13,248,335.74
group
Engineering group
Subtotal of group             13,522,835.74                 100.00               274,500.00                2.03         13,248,335.74

       Total                  13,522,835.74                 100.00               274,500.00                2.03         13,248,335.74


①        Among groups, contract assets for which expected credit loss withdrawn by aging group
                                                                              Ending balance
            Aging
                                          Carrying amount                   Bad debt provision            Withdrawal proportion(%)
Within 1 year                                      31,334,935.11                            636,099.18                            2.03

            Total                                  31,334,935.11                            636,099.18                            2.03




10. Current Portion of Non-current Assets

                      Item                                   Ending balance                              Beginning balance

Entrusted loans for associated enterprises                                  60,000,000.00                             60,000,000.00

Current portion of long-term receivable                                     45,802,707.58                             48,087,016.22

                      Total                                                105,802,707.58                            108,087,016.22


11. Other Current Assets




                                                                   78
                                                     2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




                       Item                               Ending balance               Beginning balance
Principal and interest of entrusted loans to joint
                                                                  467,057,437.10              1,323,295,500.40
ventures
Prepayments and deductible taxes, and refund of
                                                                  996,585,114.64                598,034,887.02
tax for export receivable
Temporary difference of input tax                                 143,885,609.41                134,571,124.94
Costs receivable of returning goods                                11,903,456.07                 11,005,603.81
Trust investment                                                   66,050,960.75                 37,311,039.89
Others                                                          1,685,482,577.97              2,104,218,156.06




                                                     79
                                                                                                                                2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




12. Long-term Receivables

(1) List of Long-term Receivables

                                                                                                                                                                                                      Interval of
                                                                                        Ending balance                                                    Beginning balance
                              Item                                                                                                                                                                   discount rate
                                                                                           Bad debt                                                           Bad debt
                                                                 Carrying amount                           Carrying value           Carrying amount                           Carrying value
                                                                                           provision                                                          provision
Finance leasing amount                                                 58,347,993.75                           58,347,993.75              77,783,250.17                         77,783,250.17         4.35%-8.78%
Of which: unrealized financing income                                   9,439,418.60                            9,439,418.60               9,635,891.82                           9,635,891.82        4.35%-8.78%
Cash deposits of long-term receivables                                 44,554,895.81                           44,554,895.81              28,951,495.81                         28,951,495.81
Long-term receivables of projects with franchise tights               349,314,656.44                          349,314,656.44          351,861,826.09                           351,861,826.09
Less: Current portion of long-term receivables (for details,
                                                                       45,802,707.58                           45,802,707.58              48,087,016.22                         48,087,016.22
see Note VI. 10)

                             Total                                    406,414,838.42                          406,414,838.42          410,509,555.85                           410,509,555.85                       —


(2) List of Projects with Franchise Rights

                      Item                                     Type                        Project scale                  Franchise right                 Date of contract        Operation
PPP Project of water supply and sewage                                                                               Right of charge for se                                      Partial trial
                                                               PPP                             452,802,100.00                                               July 2016
Rushan Silver Beach                                                                                                      wage disposal                                            operation


(3) Changes in Long-term Receivables of Projects with Franchise Rights

                                                                                         Increase                                    Decrease
                                                                         Merger                                                                                                           Of which: reclassified
                             Initial invested                                                              Interes     Princi   Interes
         Item                                    Beginning balance      increase       Newly increased                                                               Ending balance       into current portion of
                                 amount                                                                       t          pal       t
                                                                         in the          investment                                          Other decrease                               long-term receivables
                                                                                                           incom       recove   recove
                                                                        Reportin           amount
                                                                                                              e           r        r
                                                                        g Period


                                                                                             80
                                                                                                                          2020 Semi-annual Financlal Report of Konka Group Co., Ltd.



             PPP Project of
             water supply and
                                         349,416,483.56         351,861,826.09                                                           2,547,169.65         349,314,656.44
             sewage of Rushan
             Silver Beach
                    Total                349,416,483.56         351,861,826.09                                                           2,547,169.65         349,314,656.44




           13. Long-term Equity Investment

                                                                                                               Change in the Current Period

                  Investee                       Beginning balance                                                                                                  Adjustment to other
                                                                                              Investment          Cost method to       Gain/loss recognized at
                                                                           New investment                                                                             comprehensive
                                                                                                reduced           equity method            equity method
                                                                                                                                                                          income
Konka Ventures Development (Shenzhen)
                                                            2,354,141.80                                                                             -12,081.94
Co., Ltd.
Nanjing      Zhihuiguang         Information
                                                            1,446,968.41                                                                            209,627.54
Technology Research Institute Co., Ltd.
Shenzhen Jielunte Technology Co., Ltd.                     85,665,123.77                                                                           1,663,751.64

Panxu Intelligence Co., Ltd.                               51,084,991.78                                                                          -1,551,143.44

Beijing Konka Jingyuan Technology Co., Ltd.                  763,492.84                                                                                  3,469.27
Dongfang Jiahui (Zhuhai) Asset Management
                                                            2,978,676.27                                                                            -364,039.68
Co., Ltd.
Dongfang Konka No. 1 (Zhuhai) Private
                                                          310,024,401.51                       19,176,012.60                                      -2,312,214.26
Equity Fund (Limited Partnership)
Shenzhen RF-LINK Technology Co., Ltd.                      88,000,000.00                                                                          -1,880,568.13
Guoguang Ruilian (Shenzhen)        Network
                                                             192,323.20                                                                              -94,866.28
Technology Co., Ltd.
Puchuang Jiakang Technology Co., Ltd.                                            400,000.00                                                        1,837,600.86
Weihai Water Environmental        Protection
                                                            2,493,211.96                                                                                30,782.14
Technology Co., Ltd.

Weihai Yiheng Environmental Technology                      4,668,292.89                                                                                48,450.06


                                                                                              81
                                                                                                                 2020 Semi-annual Financlal Report of Konka Group Co., Ltd.



                                                                                                      Change in the Current Period

                  Investee                      Beginning balance                                                                                           Adjustment to other
                                                                                         Investment      Cost method to       Gain/loss recognized at
                                                                      New investment                                                                          comprehensive
                                                                                           reduced       equity method            equity method
                                                                                                                                                                  income
Co., Ltd.

Huoqiu     Kangrun        Kaitian       Water
                                                      32,434,987.50       5,000,000.00                                                                  -
Environmental Protection Co., Ltd.
Huarun Environmental       Protection   Water
                                                      16,018,870.31                                                                        279,756.91
Treatment Co., Ltd.
Binzhou Beihai Weiqiao         Solid    Waste
                                                     133,633,089.95                                                                     55,298,233.02
Treatment Co., Ltd.
Shandong     Bishuiyuan       Environmental
                                                      26,174,621.66                                                                         -81,476.77
Technology Co., Ltd.
Shandong Konka Zhijia Electrical Appliances
                                                       4,052,660.23                                                                      -1,968,177.90
Co., Ltd.
Henan Konka Zhijia Electrical Appliances
                                                         709,634.82                                                                        -487,788.74
Co., Ltd.
Anhui Kaikaishijie E-commerce Co., Ltd.              424,850,308.67                                                                      -6,644,760.80

Kunshan Konka Electronic Co., Ltd.                   182,413,766.51                                                                      -6,694,486.50
Kunshan       Kangsheng           Investment
                                                     269,673,264.00                                                                                     -
Development Co., Ltd.
Chutian Dragon Co., Ltd.                             636,061,636.70                                                                       7,660,244.55
Heilongjiang Longkang Zhijia Technology
                                                       2,380,000.00                                                                        -405,445.45
Co., Ltd.
Konka Green, Konka Technology                         77,342,419.36                                                                        -583,890.18
Shaanxi Silu Yunqi Smart Technology Co.,
                                                      17,202,315.43                                                                      -1,231,233.96
Ltd.
Shenzhen Konka Information Network Co.,
                                                                                                                                                        -
Ltd.
Shenzhen Zhongbing Konka Technology Co.,
                                                       7,273,228.41                                                                      -1,387,373.59
Ltd.


                                                                                         82
                                                                                                                        2020 Semi-annual Financlal Report of Konka Group Co., Ltd.



                                                                                                             Change in the Current Period

                  Investee                      Beginning balance                                                                                                  Adjustment to other
                                                                                           Investment           Cost method to       Gain/loss recognized at
                                                                        New investment                                                                               comprehensive
                                                                                             reduced            equity method            equity method
                                                                                                                                                                         income
Shenzhen Konka Smart Electrical Appliance
                                                       2,882,149.72                                                                               266,725.11
Technology Co., Ltd.
Zhuhai Jinsu Plastic Co., Ltd.                        10,166,404.14                                                                               383,461.05

Shenzhen Bosser New Materials Co., Ltd.               73,600,000.00                                                                             -1,200,098.76

Shenzhen Yaode Technology Co., Ltd.                  229,740,245.47                                                                               145,870.83
Wuhan Tianyuan Environmental Protection
                                                     275,577,332.21                                                                            15,224,245.91
Co., Ltd.
Shenzhen Konka         Yishijie   Commercial
                                                      84,273,594.93                                                                             -2,422,790.72
Display Co., Ltd.
Chuzhou Konka Technology             Industry
                                                      61,029,500.00                                                                             -1,421,124.11
Development Co., Ltd.
Chuzhou Kangjin Healthcare           Industry
                                                     117,460,056.00                                                                               -513,435.79
Development Co., Ltd.
Haimen Kangjian Technology Industrial Park
                                                     131,273,550.00                                                                             -1,511,213.49
Operation and Management Co., Ltd.
Shenzhen Kangyue Industrial Co., Ltd.                 33,856,942.00                                                                               -364,533.48

Feide Technology (Shenzhen) Co., Ltd.                 14,314,621.68                                                                             -1,830,785.23

Chongqing Qingjia Electronic Co., Ltd.                19,168,701.08                                                                               -228,564.40
Nanjing Kangxing Technology Industrial
                                                      32,305,671.68                         32,305,671.68                                                      -
Park Operations and Management Co., Ltd.
Kangjing     Environmental        Technology
                                                                              800,000.00        800,000.00                                                     -
(Shenzhen) Co., Ltd.
Dongguan Konka Electronic Intelligence
                                                                            1,470,000.00                                                          416,116.83
Technology Co., Ltd.

E3info (Hainan) Technology Co., Ltd.                                -                                                56,000,000.00                             -

                    Total                           3,465,541,196.89        7,670,000.00    52,281,684.28            56,000,000.00             48,276,242.12                         -

                                                                                           83
                                                                                                              2020 Semi-annual Financlal Report of Konka Group Co., Ltd.



           (Continued)

                                                                       Change in the Current Period
                                                                                                                                                    Balance of asset
                                                                 Cash dividend or                                          Ending balance
                  Investee                        Other equity                          Impairment                                                   impairment
                                                                 profit distribution                  Other              (carrying amount)
                                                    changes                              allowance                                                    allowance
                                                                      declared
Konka Ventures Development (Shenzhen)
                                                                                                                                   2,342,059.86
Co., Ltd.
Nanjing      Zhihuiguang         Information
                                                                                                                                   1,656,595.95
Technology Research Institute Co., Ltd.
Shenzhen Jielunte Technology Co., Ltd.                                                                                            87,328,875.41

Panxu Intelligence Co., Ltd.                                                                                                      49,533,848.34

Beijing Konka Jingyuan Technology Co., Ltd.                                                                                          766,962.11
Dongfang Jiahui (Zhuhai) Asset Management
                                                                                                                                   2,614,636.59
Co., Ltd.
Dongfang Konka No. 1 (Zhuhai) Private
                                                                                                                                288,536,174.65
Equity Fund (Limited Partnership)
Shenzhen RX-LINK Technology Co., Ltd.                                                                                             86,119,431.87          8,676,821.83
Guoguang Ruilian (Shenzhen)            Network
                                                                                                                                      97,456.92
Technology Co., Ltd.
Puchuang Jiakang Technology Co., Ltd.                                                                                              2,237,600.86
Weihai Water Environmental           Protection
                                                                                                                                   2,523,994.10
Technology Co., Ltd.
Weihai Yiheng Environmental Technology
                                                                                                                                   4,716,742.95
Co., Ltd.
Huoqiu     Kangrun        Kaitian        Water
                                                                                                                                  37,434,987.50
Environmental Protection Co., Ltd.
Huarun Environmental       Protection    Water
                                                                                                                                  16,298,627.22
Treatment Co., Ltd.
Binzhou Beihai Weiqiao         Solid     Waste
                                                                                                                                188,931,322.97
Treatment Co., Ltd.
Shandong     Bishuiyuan        Environmental
                                                                                                                                  26,093,144.89
Technology Co., Ltd.

                                                                                           84
                                                                                                            2020 Semi-annual Financlal Report of Konka Group Co., Ltd.



                                                                     Change in the Current Period
                                                                                                                                                  Balance of asset
                                                               Cash dividend or                                          Ending balance
                  Investee                      Other equity                          Impairment                                                   impairment
                                                               profit distribution                  Other              (carrying amount)
                                                  changes                              allowance                                                    allowance
                                                                    declared
Shandong Konka Zhijia Electrical Appliances
                                                                                                                                 2,084,482.33
Co., Ltd.
Henan Konka Zhijia Electrical Appliances
                                                                                                                                   221,846.08
Co., Ltd.
Anhui Kaikaishijie E-commerce Co., Ltd.                                                                                       418,205,547.87

Kunshan Konka Electronic Co., Ltd.                                                                                            175,719,280.01
Kunshan       Kangsheng            Investment
                                                                                                                              269,673,264.00
Development Co., Ltd.
Chutian Dragon Co., Ltd.                                             9,240,000.00                                             634,481,881.25
Heilongjiang Longkang Zhijia Technology
                                                                                                                                 1,974,554.55          2,470,398.03
Co., Ltd.
Konka Green, Konka Technology                                                                                                   76,758,529.18
Shaanxi Silu Yunqi Smart Technology Co.,
                                                                                                                                15,971,081.47
Ltd.
Shenzhen Konka Information Network Co.,
                                                                                                                                            -         12,660,222.73
Ltd.
Shenzhen Zhongbing Konka Technology Co.,
                                                                                                                                 5,885,854.82
Ltd.
Shenzhen Konka Smart Electrical Appliance
                                                                                                                                 3,148,874.83
Technology Co., Ltd.
Zhuhai Jinsu Plastic Co., Ltd.                                                                                                  10,549,865.19

Shenzhen Bosser New Materials Co., Ltd.                                                                                         72,399,901.24          5,220,857.98

Shenzhen Yaode Technology Co., Ltd.                                                                                            229,886,116.30
Wuhan Tianyuan Environmental Protection
                                                                                                                              290,801,578.12
Co., Ltd.
Shenzhen Konka         Yishijie   Commercial
                                                                                                                                81,850,804.21
Display Co., Ltd.


                                                                                         85
                                                                                                                   2020 Semi-annual Financlal Report of Konka Group Co., Ltd.



                                                                        Change in the Current Period
                                                                                                                                                         Balance of asset
                                                                  Cash dividend or                                              Ending balance
                  Investee                     Other equity                              Impairment                                                       impairment
                                                                  profit distribution                      Other              (carrying amount)
                                                 changes                                  allowance                                                        allowance
                                                                       declared
Chuzhou Konka Technology            Industry
                                                                                                                                       59,608,375.89
Development Co., Ltd.
Chuzhou Kangjin Healthcare          Industry
                                                                                                                                      116,946,620.21
Development Co., Ltd.
Haimen Kangjian Technology Industrial Park
                                                                                                                                     129,762,336.51
Operation and Management Co., Ltd.
Shenzhen Kangyue Industrial Co., Ltd.                                                                                                  33,492,408.52

Feide Technology (Shenzhen) Co., Ltd.                                                                                                  12,483,836.45

Chongqing Qingjia Electronic Co., Ltd.                                                                                                 18,940,136.68
Nanjing Kangxing Technology Industrial
                                                                                                                                                   -
Park Operations and Management Co., Ltd.
Kangjing     Environmental       Technology
                                                                                                                                                   -
(Shenzhen) Co., Ltd.
Dongguan Konka Electronic Intelligence
                                                                                                                                        1,886,116.83
Technology Co., Ltd.
E3info (Hainan) Technology Co., Ltd.                                                                                                   56,000,000.00

                   Total                                      -         9,240,000.00                   -                -           3,515,965,754.73         29,028,300.57




                                                                                            86
                                                               2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


        14. Other Equity Instrument Investment

        (1) Investment in non-trading equity instruments

                            Item                                      Ending balance                     Beginning balance
 Shenzhen Tianyilian Science & Technology Co., Ltd.

 Shenzhen Adopt Network Co., Ltd.

 Beijing Konka Technology Co., Ltd.                                              1,200,000.00                          1,200,000.00
 AVO                                                                             6,000,000.00                          6,000,000.00
 Shaoyang Haishang Ecological Agricultural Technology
                                                                                 1,501,956.00                          1,501,956.00
 Co., Ltd.
 Feihong Electronics Co., Ltd.

 ZAEFI

 Shenzhen Chuangce Investment Development Co., Ltd.

 Shanlian Information Technology Engineering Center                              1,860,809.20                          1,860,809.20

 Shenzhen CIU Science & Technology Co., Ltd.                                         953,000.00                         953,000.00
 Shenzhen Digital TV National Engineering Laboratory
                                                                                 7,726,405.16                          7,726,405.16
 Co., Ltd.
 Shanghai National Engineering Research Center of
                                                                                 2,400,000.00                          2,400,000.00
 Digital TV Co., Ltd.
 Guangdong Bohua UHD Innovation Center Co., Ltd.                                           1.00

                            Total                                               21,642,171.36                         21,642,170.36

        (2) Non-transactional Equity Instrument Investment
                             Dividen                                   Amount of                                        Reason for
                                 d                                       retained                                         retained
                                         Accu                                          Reason for being designated
                              income                                     earnings                                         earnings
                                         mulati                                        to be measured at fair value
           Item              recogniz             Accumulative loss    transferred                                      transferred
                                           ve                                           of which recorded in other
                             ed in the                                 from other                                       from other
                                          gain                                            comprehensive income
                              current                                 comprehensiv                                     comprehensiv
                               period                                   e income                                         e income
Shenzhen   Tianyilian
                                                                                       Long-term holding based on
Science & Technology                                   4,800,000.00
                                                                                       strategic purpose
Co., Ltd.
Shenzhen Adopt Network                                                                 Long-term holding based on
                                                       5,750,000.00
Co., Ltd.                                                                              strategic purpose
Beijing           Konka                                                                Long-term holding based on
                                                       3,500,000.00
Technology Co., Ltd.                                                                   strategic purpose
AVO                                                                                    Long-term holding based on
                                                                                       strategic purpose
Shaoyang       Haishang
                                                                                       Long-term holding based on
Ecological Agricultural
                                                                                       strategic purpose
Technology Co., Ltd.
Feihong Electronics Co.,                                                               Long-term holding based on
                                                       1,300,000.00
Ltd.                                                                                   strategic purpose
ZAEFI                                                                                  Long-term holding based on
                                                        100,000.00
                                                                                       strategic purpose
Shenzhen     Chuangce
                                                                                       Long-term holding based on
Investment Development                                  485,000.00
                                                                                       strategic purpose
Co., Ltd.
Shanlian      Information                              3,139,190.80                    Long-term holding based on

                                                                87
                                                                   2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


                                Dividen                                   Amount of                                        Reason for
                                    d                                       retained                                         retained
                                            Accu                                         Reason for being designated
                                 income                                     earnings                                         earnings
                                            mulati                                       to be measured at fair value
            Item                recogniz             Accumulative loss    transferred                                      transferred
                                              ve                                          of which recorded in other
                                ed in the                                 from other                                       from other
                                             gain                                           comprehensive income
                                 current                                 comprehensiv                                     comprehensiv
                                  period                                   e income                                         e income
 Technology Engineering                                                                  strategic purpose
 Center
 Shenzhen CIU Science &                                                                  Long-term holding based on
                                                           200,000.00
 Technology Co., Ltd.                                                                    strategic purpose
 Shenzhen Digital TV
                                                                                         Long-term holding based on
 National     Engineering                                 1,273,594.84
                                                                                         strategic purpose
 Laboratory Co., Ltd.
 Shanghai          National
 Engineering      Research                                                               Long-term holding based on
 Center of Digital TV Co.,                                                               strategic purpose
 Ltd.
 Guangdong Bohua UHD
                                                                                         Long-term holding based on
 Innovation Center Co.,
                                                                                         strategic purpose
 Ltd.

            Total                                       20,547,785.64


         15. Other Non-current Financial Assets

                         Item                                     Ending balance                         Beginning balance
 Equity investments                                                          540,230,000.00                              540,230,000.00
 Investments in debt obligations                                            1,185,342,108.78                            1,212,891,727.83
                       Total                                                1,725,572,108.78                            1,753,121,727.83


         Note: The debt investment at the end of the year was mainly the Company’s debt fund invested in
         Chuzhou Huike Intelligent Home Appliances Industry Investment Partnership (Limited
         Partnership).

         16. Investment Property

                                     Item                                                      Houses and buildings
I. Original carrying value
     1. Beginning balance                                                                                                  447,413,230.79

     2. Increased amount of the period
    3. Decreased amount of the period
     4. Ending balance                                                                                                     447,413,230.79
II. The accumulative depreciation and accumulative amortization
     1. Beginning balance                                                                                                   47,215,856.72

     2. Increased amount of the period                                                                                       6,544,472.78
    3. Decreased amount of the period
     4. Ending balance                                                                                                      53,760,329.50
III. Impairment provision

     1. Beginning balance


                                                                    88
                                         2020 Semi-annual Financlal Report of Konka Group Co., Ltd.


                                  Item                              Houses and buildings
    2. Increased amount of the period
    3. Decreased amount of the period
    4. Ending balance                                                                                     -
IV. Carrying value
    1. Ending carrying value                                                                 393,652,901.29

    2. Beginning carrying value                                                              400,197,374.07




                                         89
                                                                                                                                      2020 Semi-annual Financlal Report of Konka Group Co., Ltd.




 17. Fixed Assets

                                   Item                                                  Ending carrying value                                         Beginning carrying value

 Fixed assets                                                                                                      2,604,608,094.07                                               2,561,254,191.55
                                   Total                                                                           2,604,608,094.07                                               2,561,254,191.55




 (1) List of Fixed Assets
              Item                 Houses and buildings       Machinery equipment       Electronic equipment       Transportation equipment       Other equipment                   Total

I. Original carrying value

1. Beginning balance                       2,035,218,106.99         2,017,148,345.41           184,064,655.85                  58,063,867.63           241,613,861.33              4,536,108,837.21
2. Increased amount of the
                                              3,338,042.93            151,535,046.93             15,869,439.60                  2,630,281.95             24,942,140.12               198,314,951.53
period
(1) Purchase                                    440,858.83             58,212,647.00             15,755,740.00                  2,630,281.95             24,626,746.06               101,666,273.84
(2) Transfer of construction
                                              2,897,184.10             93,322,399.93                 113,699.60                               -            315,394.06                 96,648,677.69
in progress
(3) Increase for business
combination
3. Decreased amount of the
                                                          -             7,568,777.40                3,708,509.06                1,744,551.32              4,000,661.17                17,022,498.95
period
(1) Disposal or Scrap                                     -             7,568,777.40                2,467,756.57                1,408,692.34              3,758,779.85                15,204,006.16
(2) Decrease for loss of
                                                          -                         -               1,240,752.49                  335,858.98               241,881.32                  1,818,492.79
controlling right
(3)Decrease      for       other
reasons
4. Ending balance                          2,038,556,149.92         2,161,114,614.94           196,225,586.39                  58,949,598.26           262,555,340.28              4,717,401,289.79
II. Accumulative
depreciation




                                                                                               90
                                                                                                                                   2020 Semi-annual Financlal Report of Konka Group Co., Ltd.



            Item                   Houses and buildings       Machinery equipment       Electronic equipment       Transportation equipment       Other equipment             Total
1. Beginning balance                      633,844,572.99              939,156,102.95           139,979,797.13                  39,874,403.17          153,386,011.72          1,906,240,887.96
2. Increased amount of the
                                            35,216,196.42              89,647,559.84                7,347,860.94                2,936,547.21           15,796,664.56           150,944,828.97
period
(1) Withdrawal                              35,216,196.42              89,647,559.84                7,347,860.94                2,936,547.21           15,796,664.56           150,944,828.97
(2) Increase for business
combination
3. Decreased amount of the
                                                          -             5,726,983.77                2,855,618.03                2,484,661.15            1,910,951.29            12,978,214.24
period
(1) Disposal or scrap                                     -             5,726,983.77                2,700,807.11                2,484,661.15            1,859,966.57            12,772,418.60
(2) Decrease for loss of
                                                          -                         -                154,810.92                               -            50,984.72                  205,795.64
controlling right
(3) Decrease       for     other
reasons
4. Ending balance                         669,060,769.41            1,023,076,679.02           144,472,040.04                  40,326,289.23          167,271,724.99          2,044,207,502.69
III. Depreciation reserves
1. Beginning balance                         1,247,805.91              64,023,905.57                1,156,577.28                 820,215.24             1,365,253.70            68,613,757.70
2. Increased amount of the
                                                          -                         -                          -                              -                     -                           -
period
(1) Withdrawal
(2) Increase for business
combination
3. Decreased amount of the
                                                          -                   731.50                   7,330.00                               -            20,003.17                   28,064.67
period
(1) Disposal or Scrap                                     -                   731.50                   7,330.00                               -            20,003.17                   28,064.67
(2) Decrease of loss of
controlling right
4. Ending balance                            1,247,805.91              64,023,174.07                1,149,247.28                 820,215.24             1,345,250.53            68,585,693.03
IV. Carrying value
1. Ending carrying value                 1,368,247,574.60           1,074,014,761.85             50,604,299.07                 17,803,093.79           93,938,364.76          2,604,608,094.07




                                                                                               91
                                                                                                                         2020 Semi-annual Financlal Report of Konka Group Co., Ltd.



           Item               Houses and buildings     Machinery equipment      Electronic equipment     Transportation equipment    Other equipment                Total

2. Beginning carrying value         1,400,125,728.09         1,013,968,336.89            42,928,281.44               17,369,249.22          86,862,595.91           2,561,254,191.55




                                                                                       92
                                                                  2020 Semi-annual Financlal Report of Konka Group Co., Ltd.



     (2) List of Temporarily Idle Fixed Assets

                                      Original carrying         Accumulative            Impairment
            Item                                                                                              Carrying value
                                            value               depreciation             provision

     Mechanical equipment                     8,998,385.06          3,753,926.57             3,248,191.69            1,996,266.80


     Electronic equipment                     1,247,255.09          1,086,708.79                     0.00             160,546.30


     Transportation
                                                  3,247.86                2,825.62                   0.00                 422.24
     equipment

     Other equipment                            400,567.15              329,074.12             44,680.56               26,812.47


             Total                           10,649,455.16          5,172,535.10             3,292,872.25            2,184,047.81


     (3) Fixed Assets Leased in from Financing Lease

                                                                  Accumulative           Impairment
            Item                  Original carrying value                                                    Carrying value
                                                                  depreciation            provision
     Mechanical
                                            725,823,746.70           376,119,900.17                             349,703,846.53
     equipment
     Transportation
                                             10,127,135.80               8,286,417.77                                1,840,718.03
     equipment
     Electronic equipment                    46,755,498.64              39,547,880.45                                7,207,618.19
     Other equipment                         44,462,008.16              33,814,152.90                               10,647,855.26
            Total                           827,168,389.30           457,768,351.29                   -         369,400,038.01


     (4) Fixed Assets Leased out from Operation Lease

                                    Item                                                Ending carrying value

     Mechanical equipment                                                                                            8,939,914.52

     Other equipment                                                                                                  176,886.36

                                    Total                                                                            9,116,800.88


     (5) Details of Fixed Assets Failed to Accomplish Certification of Property

                                     Original carrying       Accumulative       Impairment
                   Item                                                                        Net carrying value        Reason
                                           value             depreciation        provision

                                                                                                                   &ensp